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 2012 Financial Results

SAN DIEGO, CA, Apr 30, 2012 (MARKETWIRE via COMTEX) --NuVasive, Inc. (NASDAQ: NUVA)

  • First quarter 2012 total revenue of $151.7 million; up 21.9% from first quarter 2011 and up 1.0% from fourth quarter 2011
  • GAAP net income of $673 thousand, or $0.02 per share
  • Non-GAAP net income of $8.8 million, or $0.20 per share

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, 2012.

Alex Lukianov, Chairman and Chief Executive Officer, said, "Our financial performance in the first quarter of 2012 attests to excellent execution of our market-share taking strategy, and gives us increased confidence in our ability to achieve our full year revenue and profitability guidance. As we focus on execution toward our 2012 objectives, we are also making the necessary investments into NuVasive's differentiation and share taking strategy. Our commitment to maintain NuVasive's innovative prowess, to drive superior clinical outcomes, and to nurture our Absolute Responsiveness culture are the drivers of our success to date and will carry us beyond $1 billion in revenue. Looking forward, we expect our top line to grow in conjunction with an improving profitability profile and continual improvements in free cash flow. We are laying the groundwork today to become the #3 spine company in the world."

NuVasive reported first quarter 2012 revenue of $151.7 million, a 21.9% increase over the $124.5 million for the first quarter 2011 and a 1.0% increase over the $150.2 million reported for the fourth quarter 2011.

Gross profit for the first quarter 2012 was $114.8 million and gross margin was 75.7%, compared to a gross profit of $100.9 million and a gross margin of 81.1% for the first quarter 2011. For the fourth quarter 2011, gross profit was $113.1 million and gross margin was 75.3%.

Total operating expenses for the first quarter 2012 were $107.5 million compared to $96.3 million in the first quarter 2011 and $122.9 million in the fourth quarter 2011. The higher operating expenses in the first quarter 2012 compared to the prior year resulted primarily from additional costs associated with higher revenue and infrastructure expansion.

On a GAAP basis, the Company reported net income of $673 thousand, or $0.02 per share, for the first quarter 2012.

On a Non-GAAP basis, the Company reported net income of $8.8 million, or $0.20 per share, for the first quarter 2012. The Non-GAAP earnings per share calculations for the first quarter exclude, (i) non-cash stock-based compensation of $6.6 million; (ii) certain intellectual property litigation expenses of $524 thousand; (iii) amortization of intangible assets of $2.8 million; (iv) acquisition related items of $448 thousand; and (v) non-cash interest expense on convertible notes of $3.1 million.

Cash, cash equivalents and short and long-term marketable securities were $363.6 million at March 31, 2012.

2012 Full Year Financial Guidance

Remains unchanged and when compared to 2011 financial results, reflects the full year impacts of convertible note activity, the Impulse Monitoring business, an accrual for estimated patent litigation royalties, and a tax expense rate in comparison to a tax benefit rate.

--  Revenue of approximately $615 million
--  GAAP EPS of approximately $0.09
--  Non-GAAP EPS of approximately $0.93
--  Non-GAAP Operating Margin of approximately 14%
--  GAAP effective tax expense rate of approximately 60%
--  Non-GAAP effective tax expense rate of approximately 40%
                  Reconciliation of Full Year EPS Guidance
                                                                    2012
                                                                Guidance (1)
                                                               -------------
GAAP earnings per share guidance                               $        0.09
  Non-cash stock-based compensation                                     0.46
  Certain intellectual property litigation expenses                     0.03
  Amortization of intangible assets                                     0.16
  Acquisition related items (2)                                         0.02
  Non-cash interest expense on convertible notes                        0.17
                                                               -------------
Non-GAAP earnings per share guidance                           $        0.93
                                                               =============
Weighted shares outstanding - basic                                   43,500
                                                               =============
Weighted shares outstanding - diluted                                 45,000
                                                               =============
(1) Effective tax rate of ~60% applied to GAAP earnings and ~40% applied to
    Non-GAAP adjustments
(2) Acquisition related items include expenses associated with prior M&A
    activity and as incurred

        2012 Guidance Reconciliation of Non-GAAP Operating Margin %
                                                                   FY 12
                                                                 Guidance
                                                               ------------
Gross Margin % [A]                                                    ~76.0%
Non-GAAP Operating Expenses [B]                                       ~62.0%
  Non-cash stock-based compensation                                    ~5.5%
  Certain intellectual property litigation expenses                    ~0.5%
  Amortization of intangible assets                                    ~2.0%
  Acquisition related items*                                           ~0.2%
                                                               ------------
  GAAP Operating Expenses                                             ~70.2%
                                                               ------------
Non-GAAP Operating Margin % [A-B]                                     ~14.0%
                                                               ============
* Acquisition related items include 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 operating margin and Non-GAAP earnings per share, which exclude such items as non-cash stock-based compensation, certain intellectual property litigation expenses, amortization of intangible assets, acquisition related items, and non-cash interest expense on convertible notes. 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 2012 Results
                                           Pre-Tax                 Earnings
(in thousands, except per share data)    Adjustments  Net of Tax  Per Share
                                         ----------- ----------- -----------
GAAP net income                                              673 $      0.02
  Non-cash stock-based compensation      $     6,621       3,973 $      0.09
  Certain intellectual property
   litigation expenses                           524         314 $      0.01
  Amortization of intangible assets            2,846       1,708 $      0.04
  Acquisition related items                      448         269 $      0.01
  Non-cash interest expense on
   convertible notes                           3,088       1,853 $      0.04
                                                     ----------- -----------
Non-GAAP earnings                                          8,790 $      0.20
                                                     =========== ===========
Weighted shares outstanding - diluted                                 43,397
                                                                 ===========

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 May 31, 2012. In addition, a telephonic replay of the call will be available until May 14, 2012. 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 390330.

About NuVasive NuVasive is a medical device company focused on developing minimally disruptive surgical products and procedurally integrated solutions for the spine. The Company is the 5th largest player in the $7.6 billion global spine market.

NuVasive's principal product offering is based on its Maximum Access Surgery, or MAS(R) platform. The MAS platform combines several categories of solutions 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 and intra-operative monitoring support; 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 70 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 Statements of Operations
                    (in thousands, except per share data)

                                                     Three Months Ended
                                                          March 31,
                                                 --------------------------
                                                     2012          2011
                                                 ------------  ------------
Revenue                                          $    151,691  $    124,466
Cost of goods sold (excluding amortization of
 purchased technology)                                 36,933        23,526
                                                 ------------  ------------
Gross profit                                          114,758       100,940
Operating expenses:
  Sales, marketing and administrative                  94,271        84,220
  Research and development                             10,395        10,769
  Amortization of intangible assets                     2,846         1,342
                                                 ------------  ------------
Total operating expenses                              107,512        96,331
Interest and other expense, net:
  Interest income                                         208           183
  Interest expense                                     (6,825)       (1,771)
  Other income, net                                       437           497
                                                 ------------  ------------
Total interest and other expense, net                  (6,180)       (1,091)
                                                 ------------  ------------
Income before income taxes                              1,066         3,518
Income tax expense                                        597         1,540
                                                 ------------  ------------
Consolidated net income                          $        469  $      1,978
                                                 ============  ============
Net loss attributable to noncontrolling
 interests                                       $       (204) $       (381)
                                                 ============  ============
Net income attributable to NuVasive, Inc.        $        673  $      2,359
                                                 ============  ============
Net income per share attributable to NuVasive,
 Inc.:
  Basic and diluted                              $       0.02  $       0.06
                                                 ============  ============
Weighted average shares outstanding:
  Basic                                                42,844        39,616
                                                 ============  ============
  Diluted                                              43,397        40,511
                                                 ============  ============
Stock-based compensation is included in expenses
 in the following categories:
  Sales, marketing and administrative            $      6,142  $      7,335
  Research and development                                465           611
  Cost of goods sold                                       14             -
                                                 ------------  ------------
                                                 $      6,621  $      7,946
                                                 ============  ============

                               NuVasive, Inc.
                    Condensed Consolidated Balance Sheets
                               (in thousands)

                                                   March 31,   December 31,
                                                     2012          2011
                                                 ------------  ------------
                                                  (Unaudited)
ASSETS
Current assets:
  Cash and cash equivalents                      $    270,180  $    163,492
  Short-term marketable securities                     88,417       146,228
  Accounts receivable, net                             85,570        88,350
  Inventory                                           122,027       119,313
  Deferred tax assets, current                         54,550        54,550
  Prepaid expenses and other current assets             9,209        19,904
                                                 ------------  ------------
Total current assets                                  629,953       591,837
Property and equipment, net                           131,041       124,754
Long-term marketable securities                         4,999        32,503
Intangible assets, net                                105,307       108,140
Goodwill                                              160,745       159,349
Deferred tax assets                                    19,857        19,857
Restricted cash and investments                        68,547        68,600
Other assets                                           28,690        18,522
                                                 ------------  ------------
Total assets                                     $  1,149,139  $  1,123,562
                                                 ============  ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued liabilities       $     61,470  $     51,744
  Accrued payroll and related expenses                 18,582        22,215
  Litigation liability                                101,200       101,200
  Acquisition-related liabilities                      32,089        32,221
  Senior Convertible Notes, current                    74,311             -
                                                 ------------  ------------
Total current liabilities                             287,652       207,380
Senior Convertible Notes                              322,796       394,019
Deferred tax liabilities                                3,952         3,952
Other long-term liabilities                            14,693        13,461
Commitments and contingencies
Noncontrolling interests                               10,501        10,705
Stockholders' equity:
    Preferred stock                                         -             -
    Common stock                                           43            42
    Additional paid-in capital                        688,992       674,790
    Accumulated other comprehensive income              1,101           477
    Accumulated deficit                              (180,591)     (181,264)
                                                 ------------  ------------
Total stockholders' equity                            509,545       494,045
                                                 ------------  ------------
Total liabilities and stockholders' equity       $  1,149,139  $  1,123,562
                                                 ============  ============

                               NuVasive, Inc.
          Unaudited Condensed Consolidated Statements of Cash Flows
                               (in thousands)

                                                     Three Months Ended
                                                          March 31,
                                                 --------------------------
                                                     2012          2011
                                                 ------------  ------------
Operating activities:
  Consolidated net income                        $        469  $      1,978
  Adjustments to reconcile net income to net
   cash provided by operating activities:
    Depreciation and amortization                      12,087         7,781
    Amortization of debt discount                       3,088             -
    Amortization of debt issuance costs                   451           373
    Stock-based compensation                            6,621         7,946
    Allowance for excess and obsolete inventory,
     net of write-offs                                  1,200           216
    Allowance for doubtful accounts and sales
     return reserve                                       663             6
    Other non-cash adjustments                          1,843         1,422
  Changes in operating assets and liabilities,
   net of effects from acquisitions:
    Accounts receivable                                 2,193           942
    Inventory                                          (3,502)       (6,658)
    Prepaid expenses and other current assets          10,959          (751)
    Accounts payable and accrued liabilities            7,834         3,959
    Accrued payroll and related expenses               (4,166)       (2,670)
                                                 ------------  ------------
  Net cash provided by operating activities            39,740        14,544
Investing activities:
    Cash paid for business and asset
     acquisitions                                      (3,667)            -
    Purchases of property and equipment               (14,567)      (10,000)
    Purchases of marketable securities                      -       (26,018)
    Sales of marketable securities                     84,831        71,185
    Payment for specific rights in connection
     with supply agreement                                  -        (8,000)
                                                 ------------  ------------
  Net cash provided by investing activities            66,597        27,167
Financing activities:
    Proceeds from the issuance of common stock            314           425
    Other assets                                           76          (709)
                                                 ------------  ------------
  Net cash provided by (used in) financing
   activities                                             390          (284)
    Effect of exchange rate changes on cash               (39)           77
                                                 ------------  ------------
  Increase in cash and cash equivalents               106,688        41,504
Cash and cash equivalents at beginning of period      163,492        92,597
                                                 ------------  ------------
Cash and cash equivalents at end of period       $    270,180  $    134,101
                                                 ============  ============

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

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

Media:
Nicholas S. Laudico
The Ruth Group
646-536-7030
Email Contact

SOURCE: NuVasive, Inc.