NuVasive Investor Relations

NuVasive is a world leader in minimally invasive, procedurally-integrated spine solutions. From complex spinal deformity to degenerative spinal conditions, NuVasive is transforming spine surgery with innovative technologies designed to deliver reproducible and clinically proven surgical outcomes.

Press Release

NuVasive Reports First Quarter 2011 Financial Results

SAN DIEGO, CA, May 04, 2011 (MARKETWIRE via COMTEX) --

NuVasive, Inc. (NASDAQ: NUVA)

-- Total revenue of $124.5 million, up 14.1% over first quarter 2010
-- GAAP earnings of $2.4 million, or $0.06 per share, includes the benefit
   of a change in accounting estimate of $0.02 per share
-- Non-GAAP earnings of $9.5 million, or $0.24 per share, includes the
   benefit of a change in accounting estimate of $0.02 per share
-- Non-GAAP operating margin of 13.3% and GAAP operating margin of 3.7%,
   both include the benefit of a change in accounting estimate of 1.4%
-- Operating cash flow of $14.5 million

NuVasive, Inc. (NASDAQ: NUVA), a medical device company focused on developing minimally disruptive surgical products and procedures for the spine, announced today financial results for the quarter ended March 31, 2011.

NuVasive reported first quarter 2011 revenue of $124.5 million, a 14.1% increase over the $109.1 million for the first quarter 2010 and a 3.7% decrease compared to $129.3 million for the fourth quarter 2010. The sequential deceleration was driven in part by the recognition of approximately $4.0 million in seasonal capital purchases and for back royalties related to a settlement in the fourth quarter 2010.

The financial results announced today reflect a change in accounting estimate for the useful life of certain loaned instrument sets placed into service prior to January 1, 2011. After a thorough review of its available history, the Company concluded that a four year useful life estimate is a more accurate assessment of the economic life of these fixed assets. Under existing accounting literature, this type of change is only adjusted prospectively in the financial statements.

Gross profit for the first quarter 2011 was $100.9 million and gross margin was 81.1%, compared to a gross profit of $89.6 million and a gross margin of 82.2% for the first quarter 2010. For the fourth quarter 2010, gross profit was $106.2 million and gross margin was 82.1%.

Total operating expenses for the first quarter 2011 were $96.3 million compared to $86.7 million in the first quarter 2010 and $94.9 million in the fourth quarter 2010. The higher operating expenses in the first quarter 2011 resulted primarily from additional costs associated with higher revenue and infrastructure expansion.

On a GAAP basis, the Company reported net income of $2.4 million, or $0.06 per share, for the first quarter 2011.

On a Non-GAAP basis, the Company reported net income of $9.5 million, or $0.24 per share, for the first quarter 2011. The Non-GAAP earnings per share calculations for the first quarter exclude (i) non-cash stock-based compensation of $7.9 million; (ii) certain intellectual property litigation expenses of $2.1 million; (iii) amortization of intangible assets of $1.3 million; and (iv) acquisition related items of $571 thousand.

Cash, cash equivalents and short and long-term marketable securities were $225.8 million at March 31, 2011.

Alex Lukianov, Chairman and Chief Executive Officer, said, "Our financial performance in the first quarter of 2011 was excellent across all our key sectors. We generated revenue growth of over 14% and better than expected operating margin improvement in view of challenging spine market growth dynamics. Our performance internationally was a highlight, and is well on track to double this year to approximately 8% of revenue. We are pleased to be able to raise revenue guidance today in light of a marginally improved outlook for our U.S. lumbar business this year. As our focus shifts toward the achievement of our next milestone, the evolution of NuVasive into a $1 billion revenue company, we are laser focused on maintaining the startup mentality that is the very source of NuVasive's success as a prolific new product innovator. With speed as our competitive edge, we expect to continue to sustain industry leading growth."

2011 Full Year Financial Guidance

-- Revenue of $530 million to $540 million; up from previous guidance
   of $525 million to $535 million
-- GAAP EPS of $0.52 to $0.55; up from previous guidance of $0.39 to $0.42
-- Non-GAAP EPS of $1.20 to $1.23; up from previous guidance of $1.07
   to $1.10
-- Non-GAAP Operating Margin of ~17.5%, up from previous guidance
   of ~16.5%
-- GAAP effective tax rate of ~45%, down from previous guidance
   of ~49%
        2011 Non-GAAP Earnings Per Share Full Year Guidance Bridge
                                         Change in
                   Prior      Revenue    Accounting   Tax Rate    Revised
                  Guidance    Increase    Estimate     Change     Guidance
                ----------- ----------- ----------- ----------- -----------
Low Range       $      1.07 $      0.01 $      0.08 $      0.04 $      1.20
High Range      $      1.10 $      0.01 $      0.08 $      0.04 $      1.23
                 Reconciliation of Full Year EPS Guidance
                                2010          2011              2011
                               Pre Tax       Pre Tax         Net of Tax*
                               -------- ----------------- -----------------
                                          Low      High     Low      High
                                Actual    Range    Range    Range    Range
                               -------- -------- -------- -------- --------
GAAP earnings per share**      $   0.64 $   0.94 $   1.00 $   0.52 $   0.55
  Non-cash stock-based
   compensation                    0.70     0.79     0.79     0.47     0.47
  Certain intellectual
   property litigation
   expenses                        0.13     0.13     0.13     0.08     0.08
  Amortization of intangible
   assets                          0.13     0.18     0.18     0.11     0.11
  Acquisition related items        0.07     0.04     0.04     0.02     0.02
                               -------- -------- -------- -------- --------
Non-GAAP earnings per share    $   1.68 $   2.07 $   2.13 $   1.20 $   1.23
                               ======== ======== ======== ======== ========
Weighted shares outstanding -
 Diluted***                      40,373   42,000   42,000   42,000   42,000
                               ======== ======== ======== ======== ========
* Effective Tax Rate of ~45% applied to GAAP earnings and ~40% applied to
Non-GAAP adjustments
** GAAP earnings per share calculated based on consolidated net income
*** 2010 weighted shares outstanding shown as pre "if-converted" method
        2011 Guidance Reconciliation of Non-GAAP Operating Margin %
                                                         FY 11
                                                        Estimate
                                            ------------------------------
                                    FY 10
                                    Actual       Prior          Revised
                                   -------  --------------  --------------
               Gross Margin % [A]     82.2%      ~ 81%           ~ 81%
            Non-GAAP Research and
                  Development [B]      8.0%       ~ 8%            ~ 8%
Non-cash stock-based compensation      0.7%       ~ 1%            ~ 1%
       Acquisition related items*      0.4%   as incurred     as incurred
                                   -------  --------------  --------------
    GAAP research and development      9.1%       ~ 9%            ~ 9%
    Non-GAAP Sales, Marketing and
               Administrative [C]     58.8%     ~ 56.5%         ~ 55.5%
Non-cash stock-based compensation      5.2%       ~ 5%            ~ 5%
    Certain intellectual property
              litigation expenses      1.1%       ~ 1%            ~ 1%
                                              ~ 0.5% & as     ~ 0.5% & as
       Acquisition related items*      0.2%     incurred        incurred
                                   -------  --------------  --------------
        GAAP sales, marketing and
                   administrative     65.3%      ~ 63%           ~ 62%
Amortization of intangible assets      1.1%     ~ 1.5%          ~ 1.5%
                                   -------  --------------  --------------
      Non-GAAP Operating Margin %
                          [A-B-C]     15.4%    ~ 16.5%         ~ 17.5%
                                   -------  --------------  --------------
* Acquisition related items include ~0.5% of revenue for expenses
  associated with prior M&A activity and as incurred

Reconciliation of Non-GAAP Information

Management uses certain Non-GAAP financial measures such as Non-GAAP earnings per share, which exclude non-cash stock-based compensation, certain intellectual property litigation expenses, amortization of intangible assets, and acquisition related items. Management does not consider these costs in evaluating the continuing operations of the Company. Therefore, management calculates the Non-GAAP financial measures provided in this earnings release excluding these costs and uses these Non-GAAP financial measures to enable it to analyze further, and more consistently, the period-to-period financial performance of its core business operations. Management believes that providing investors with these Non-GAAP measures gives them additional important information to enable them to assess, in the same way management assesses, the Company's current and future continuing operations. These Non-GAAP measures are not in accordance with, or an alternative for, GAAP, and may be different from Non-GAAP measures used by other companies. Set forth below are reconciliations of the Non-GAAP financial measures to the comparable GAAP financial measure.

               Reconciliation of First Quarter 2011 Results
                                             Pre-Tax     Net of   Earnings
(in thousands, except per share data)      adjustments     Tax    Per Share
                                           ------------ --------- ---------
GAAP net income                                         $   2,359 $    0.06
  Non-cash stock-based compensation        $      7,946     4,768      0.12
  Certain intellectual property litigation
   expenses                                       2,081     1,249      0.03
  Amortization of intangible assets               1,342       805      0.02
  Acquisition related items                         571       343      0.01
                                                        --------- ---------
Non-GAAP earnings                                       $   9,524 $    0.24
                                                        ========= =========
Weighted shares outstanding - Diluted                                40,511
                                                                  =========

Conference Call

NuVasive will hold a conference call today at 5:30 p.m. ET / 2:30 p.m. PT to discuss the results. The dial-in numbers are 1-877-407-9039 for domestic callers and 1-201-689-8470 for international callers. A live webcast of the conference call will be available online from the investor relations page of the Company's corporate website at www.nuvasive.com.

After the live webcast, the call will remain available on NuVasive's website, www.nuvasive.com, through June 3, 2011. In addition, a telephonic replay of the call will be available until May 18, 2011. The replay dial-in numbers are 1-877-870-5176 for domestic callers and 1-858-384-5517 for international callers. Please use pin number 369959.

About NuVasive

NuVasive is a medical device company focused on developing minimally disruptive surgical products and procedures for the spine. The Company is the 5th largest player in the $7.7 billion global spine market.

NuVasive's principal product offering is based on its Maximum Access Surgery, or MAS(R) platform. The MAS platform combines four categories of products that collectively minimize soft tissue disruption during spine surgery with maximum visualization and safe, easy reproducibility for the surgeon: a proprietary software-driven nerve avoidance system; MaXcess(R), a unique split-blade retractor system; a wide variety of specialized implants; and several biologic fusion enhancers. MAS significantly reduces surgery time and returns patients to activities of daily living much faster than conventional approaches. Having redefined spine surgery with the MAS platform's lateral approach, known as eXtreme Lateral Interbody Fusion, or XLIF(R), NuVasive has built an entire spine franchise. With over 65 products today spanning lumbar, thoracic and cervical applications, the Company will continue to expand and evolve its offering predicated on its R&D focus and dedication to outstanding service levels supported by a culture of Absolute Responsiveness(R).

NuVasive cautions you that statements included in this press release that are not a description of historical facts are forward-looking statements that involve risks, uncertainties, assumptions and other factors which, if they do not materialize or prove correct, could cause NuVasive's results to differ materially from historical results or those expressed or implied by such forward-looking statements. The potential risks and uncertainties that could cause actual growth and results to differ materially include, but are not limited to: the risk that NuVasive's revenue or earnings projections may turn out to be inaccurate because of the preliminary nature of the forecasts and the risk of further adjustment, or unanticipated difficulty in selling products or generating expected profitability; the uncertain process of seeking regulatory approval or clearance for NuVasive's products or devices, including risks that such process could be significantly delayed; the possibility that the FDA may require significant changes to NuVasive's products or clinical studies; the risk that products may not perform as intended and may therefore not achieve commercial success; the risk that competitors may develop superior products or may have a greater market position enabling more successful commercialization; the risk that additional clinical data may call into question the benefits of NuVasive's products to patients, hospitals and surgeons; and other risks and uncertainties more fully described in NuVasive's press releases and periodic filings with the Securities and Exchange Commission. NuVasive's public filings with the Securities and Exchange Commission are available at www.sec.gov. NuVasive assumes no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which it was made.

                             NuVasive, Inc.
           Unaudited Condensed Consolidated Statement of Operations
                 (in thousands, except per share data)
                                                     Three Months Ended
                                                          March 31,
                                                  ------------------------
                                                      2011         2010
                                                  -----------  -----------
Revenue                                           $   124,466  $   109,087
Cost of goods sold (excluding amortization of
 purchased technology)                                 23,526       19,443
                                                  -----------  -----------
Gross profit                                          100,940       89,644
Operating expenses:
  Sales, marketing and administrative                  84,220       74,661
  Research and development                             10,769       10,699
  Amortization of intangible assets                     1,342        1,350
                                                  -----------  -----------
Total operating expenses                               96,331       86,710
Interest and other expense, net:
  Interest income                                         183          189
  Interest expense                                     (1,771)      (1,669)
  Other income, net                                       497          117
                                                  -----------  -----------
Total interest and other expense, net                  (1,091)      (1,363)
                                                  -----------  -----------
Income before income taxes                              3,518        1,571
Income tax expense                                      1,540          865
                                                  -----------  -----------
Consolidated net income                           $     1,978  $       706
                                                  ===========  ===========
Net loss attributable to noncontrolling interests $      (381) $      (382)
                                                  ===========  ===========
Net income attributable to NuVasive, Inc.         $     2,359  $     1,088
                                                  ===========  ===========
Net income per share attributable to
 NuVasive, Inc.:
  Basic and diluted                               $      0.06  $      0.03
                                                  ===========  ===========
Weighted average shares outstanding:
  Basic                                                39,616       38,898
                                                  ===========  ===========
  Diluted                                              40,511       40,061
                                                  ===========  ===========
Stock-based compensation is included in operating
 expenses in the following categories:
 Sales, marketing and administrative              $     7,335  $     5,680
 Research and development                                 611          754
                                                  -----------  -----------
                                                  $     7,946  $     6,434
                                                  ===========  ===========
                             NuVasive, Inc.
           Unaudited Condensed Consolidated Balance Sheets
                             (in thousands)
                                                   March 31,   December 31,
                                                      2011        2010
                                                  -----------  -----------
                                                  (Unaudited)
ASSETS
Current assets:
  Cash and cash equivalents                       $   134,101  $    92,597
  Short-term marketable securities                     58,876       86,458
  Accounts receivable, net                             75,952       76,632
  Inventory                                           114,388      107,577
  Deferred tax assets                                   4,425        4,425
  Prepaid expenses and other current assets             4,750        4,082
                                                  -----------  -----------
Total current assets                                  392,492      371,771
Property and equipment, net                           105,066      102,165
Long-term marketable securities                        32,814       50,635
Intangible assets, net                                105,817      107,121
Goodwill                                              103,070      103,070
Deferred tax assets, non-current                       52,033       52,033
Other assets                                           15,438       15,234
                                                  -----------  -----------
Total assets                                      $   806,730  $   802,029
                                                  ===========  ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued liabilities        $    54,899  $    58,995
  Accrued payroll and related expenses                 14,643       17,266
  Acquisition-related liabilities                      33,155       32,715
                                                  -----------  -----------
Total current liabilities                             102,697      108,976
Senior convertible notes                              230,000      230,000
Long-term acquisition-related liabilities                 339          326
Deferred tax liabilities                                3,685        3,685
Other long-term liabilities                            12,729       12,810
Commitments and contingencies
Noncontrolling interests                               11,496       11,877
Stockholders' equity:
    Common stock                                           40           40
    Additional paid-in capital                        553,484      545,114
    Accumulated other comprehensive income              1,316          616
    Accumulated deficit                              (109,056)    (111,415)
                                                  -----------  -----------
Total stockholders' equity                            445,784      434,355
                                                  -----------  -----------
Total liabilities and stockholders' equity        $   806,730  $   802,029
                                                  ===========  ===========
                             NuVasive, Inc.
        Unaudited Condensed Consolidated Statements of Cash Flows
                             (in thousands)
                                                     Three Months Ended
                                                          March 31,
                                                  ------------------------
                                                      2011         2010
                                                  -----------  -----------
Operating activities:
  Consolidated net income                         $     1,978  $       706
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation and amortization                       7,781        8,104
    Stock-based compensation                            7,946        6,434
    Allowance for excess and obsolete inventory           216          736
    Allowance for doubtful accounts and sales
     return reserve, net of write-offs                      6         (657)
    Other non-cash adjustments                          1,795        1,454
  Changes in operating assets and liabilities,
   net of effects from acquisitions:
    Accounts receivable                                   942       (3,100)
    Inventory                                          (6,658)      (1,237)
    Prepaid expenses and other current assets            (751)      (1,570)
    Accounts payable and accrued liabilities            3,959        4,780
    Accrued payroll and related expenses               (2,670)      (6,512)
                                                  -----------  -----------
  Net cash provided by operating activities            14,544        9,138
Investing activities:
    Purchases of property and equipment               (10,000)      (8,402)
    Purchases of marketable securities                (26,018)     (45,525)
    Sales of marketable securities                     71,185       54,016
    Payment for specific rights in connection with
     supply agreement                                  (8,000)           -
                                                  -----------  -----------
  Net cash provided by investing activities            27,167           89
Financing activities:
    Issuance of common stock                              425        6,628
    Other assets                                         (709)      (4,408)
    Tax benefits related to stock-based
     compensation awards                                    -          882
                                                  -----------  -----------
  Net cash (used in) provided by financing
   activities                                            (284)       3,102
Effect of exchange rate changes on cash                    77          (78)
                                                  -----------  -----------
Increase in cash and cash equivalents                  41,504       12,251
Cash and cash equivalents at beginning of period       92,597       65,413
                                                  -----------  -----------
Cash and cash equivalents at end of period        $   134,101  $    77,664
                                                  ===========  ===========

Contact:
Michael J. Lambert
EVP & Chief Financial Officer
NuVasive, Inc.
858-909-3394
Email Contact

Investors:
Patrick F. Williams
Vice President, Industry & Investor Relations
NuVasive, Inc.
858-638-5511
Email Contact

Media:
Jason Rando
The Ruth Group
646-536-7025
Email Contact


SOURCE: NuVasive, Inc.

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