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 Fourth Quarter 2011 Financial Results

SAN DIEGO, CA, Feb 22, 2012 (MARKETWIRE via COMTEX) --NuVasive, Inc. (NASDAQ: NUVA)

--  Fourth quarter 2011 total revenue of $150.2 million; up 16.2% from
    fourth quarter 2010 and up 13.0% from third quarter 2011

--  Full year 2011 total revenue of $540.5 million; up 13.0% from the full
    year 2010

--  GAAP net loss of $10.0 million, or $0.24 per share, for the fourth
    quarter 2011 and $69.8 million, or $1.73 per share, for the full year
    2011

--  Non-GAAP earnings of $11.4 million, or $0.27 per share, for the fourth
    quarter 2011 and $43.9 million, or $1.07 per share, for the full year
    2011

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 and for the full year ended December 31, 2011.

Alex Lukianov, Chairman and Chief Executive Officer, said, "Our financial performance in 2011 attests to the exceptional execution of our market-share taking strategy, which drove revenue growth of 13% within a challenged US spine market that did not grow. I am very proud of the NuVasive family's accomplishments to establish us as one of the top global spine companies with innovative surgical solutions that address the entire spine."

Mr. Lukianov continued, "As the spine market shifts toward more minimally invasive procedures, NuVasive is ready to further penetrate the market and we expect to again lead the industry in market share gains in 2012. Normalized for the full year impacts of certain 2011 events, we expect to improve the operating profile of our business in 2012, with a pre-tax earnings growth rate nearly two times the rate of revenue growth. Through the breadth of our procedural offerings, increased global expansion, and continued focus on superior clinical outcomes, we are well positioned to achieve our longer term goal of becoming the #3 company in spine with $1 billion in revenue and a greatly improved profitability profile."

NuVasive reported fourth quarter 2011 revenue of $150.2 million, a 16.2% increase over the $129.3 million for the fourth quarter 2010 and a 13.0% increase over the $132.9 million reported for the third quarter 2011.

Gross profit for the fourth quarter 2011 was $113.1 million and gross margin was 75.3%, compared to a gross profit of $106.2 million and a gross margin of 82.1% for the fourth quarter 2010. For the third quarter 2011, gross profit was $106.9 million and gross margin was 80.4%. Gross profit for the full year 2011 was $428.4 million and gross margin was 79.3%, compared to a gross profit of $393.1 million and gross margin of 82.2% for the full year 2010.

Total operating expenses for the fourth quarter 2011 were $122.9 million compared to $94.9 million in the fourth quarter 2010 and $198.3 million in the third quarter 2011. The higher operating expenses in the fourth quarter 2011 compared to the prior year resulted primarily from an intangible asset impairment charge and additional costs associated with higher revenue and infrastructure expansion. Full year 2011 operating expenses were $513.4 million compared to $361.0 million reported for the full year 2010. The higher operating expenses in 2011 resulted primarily from a charge related to intellectual property litigation, an intangible asset impairment charge, and additional costs associated with higher revenue and infrastructure expansion.

On a GAAP basis, the Company reported a net loss of $10.0 million, or $0.24 per share, for the fourth quarter 2011, and a net loss of $69.8 million, or $1.73 per share for the full year 2011.

On a Non-GAAP basis, the Company reported net income of $11.4 million, or $0.27 per share, for the fourth quarter 2011, and net income of $43.9 million, or $1.07 per share, for the full year 2011. The Non-GAAP earnings per share calculations for the fourth quarter and full year exclude, respectively, (i) non-cash stock-based compensation of $8.3 million and $32.1 million; (ii) certain intellectual property litigation expenses of $1.3 million and $7.0 million; (iii) litigation award expense of nil and $101.2 million; (iv) amortization of intangible assets of $2.4 million and $6.6 million; (v) acquisition related items of $1.4 million and $3.8 million; (vi) non-cash interest expense on convertible notes of $3.0 million and $6.1 million; (vii) the positive impact from certain transactions associated with convertible notes activity of $0.4 million and $2.1 million; (viii) certain discrete tax items of $0.3 million and $6.6 million; and (ix) an intangible asset impairment charge of $18.2 million and $18.2 million.

Cash, cash equivalents and short and long-term marketable securities were $342.2 million at December 31, 2011.

2012 Full Year Financial Guidance

Compared to 2011 financial results, 2012 guidance 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 (3)               43,500
                                               =============
Weighted shares outstanding - diluted (3)             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
(3)Weighted shares outstanding shown as pre "if-converted"
 method

        2012 Guidance Reconciliation of Non-GAAP Operating Margin %
                                                        FY 11       FY 12
                                                       Actual     Guidance
                                                     ----------  ----------
                                  Gross Margin % [A]       79.3%      ~76.0%
                     Non-GAAP Operating Expenses [B]       63.8%      ~62.0%
                   Non-cash stock-based compensation        5.9%       ~5.5%
   Certain intellectual property litigation expenses        1.3%       ~0.5%
                                    Litigation award       18.7%          -
                   Amortization of intangible assets        1.2%       ~2.0%
                          Acquisition related items*        0.7%       ~0.2%
                  Intangible asset impairment charge        3.4%          -
                                                     ----------  ----------
                             GAAP Operating Expenses       95.0%      ~70.2%
                                                     ----------  ----------
                   Non-GAAP Operating Margin % [A-B]       15.5%      ~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 earnings per share, which exclude non-cash stock-based compensation, certain intellectual property litigation expenses, a litigation award expense, amortization of intangible assets, acquisition related items, non-cash interest expense on convertible notes, a positive impact from certain transactions associated with convertible notes activity, certain discrete tax items, and an intangible asset impairment charge. 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 Fourth Quarter 2011 Results
                                                                   (Loss)
                                        Pre-Tax                   Earnings
(in thousands, except per share data) Adjustments   Net of Tax   Per Share
                                      -----------  -----------  -----------
GAAP net loss                                      $   (10,036) $     (0.24)
Impact of change from basic to
 diluted share count                                                      -
                                                   -----------  -----------
GAAP net loss, adjusted to diluted
 share count                                       $   (10,036) $     (0.24)
  Non-cash stock-based compensation   $     8,281        5,134         0.12
  Certain intellectual property
   litigation expenses                      1,254          777         0.02
  Amortization of intangible assets         2,368        1,468         0.04
  Acquisition related items                 1,437          891         0.02
  Non-cash interest expense on
   convertible notes                        3,033        1,880         0.04
  Certain transactions associated
   with convertible notes activity           (390)        (242)       (0.01)
  Certain discrete tax items                  300          300         0.01
  Intangible asset impairment charge       18,167       11,264         0.26
                                                   -----------  -----------
Non-GAAP earnings                                  $    11,437  $      0.27
                                                   ===========  ===========
GAAP weighted shares outstanding -
 basic and diluted                                                   42,172
                                                                ===========
Non-GAAP weighted shares outstanding
 - diluted                                                           42,690
                                                                ===========

                  Reconciliation of Full Year 2011 Results
                                                                   (Loss)
                                        Pre-Tax                   Earnings
(in thousands, except per share data) Adjustments   Net of Tax   Per Share
                                      -----------  -----------  -----------
GAAP net loss                                      $   (69,849) $     (1.73)
Impact of change from basic to
 diluted share count                                                   0.04
                                                   -----------  -----------
GAAP net loss, adjusted to diluted
 share count                                       $   (69,849) $     (1.69)
  Non-cash stock-based compensation   $    32,070       19,883         0.48
  Certain intellectual property
   litigation expenses                      6,974        4,324         0.10
  Litigation award                        101,200       62,744         1.52
  Amortization of intangible assets         6,609        4,098         0.10
  Acquisition related items                 3,774        2,340         0.06
  Non-cash interest expense on
   convertible notes                        6,108        3,787         0.09
  Certain transactions associated
   with convertible notes activity         (2,056)      (1,275)       (0.03)
  Certain discrete tax items                6,616        6,616         0.16
  Intangible asset impairment charge       18,167       11,264         0.27
                                                   -----------  -----------
Non-GAAP earnings                                  $    43,932  $      1.07
                                                   ===========  ===========
GAAP weighted shares outstanding -
 basic and diluted                                                   40,372
                                                                ===========
Non-GAAP weighted shares outstanding
 - diluted                                                           41,231
                                                                ===========

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 March 23, 2012. In addition, a telephonic replay of the call will be available until March 7, 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 385036.

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 $7.8 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
                                December 31,        Year Ended December 31,
                           ----------------------  ------------------------
                              2011        2010         2011         2010
                           ----------  ----------  -----------  -----------
Revenue                    $  150,194  $  129,304  $   540,506  $   478,237
Cost of goods sold
 (excluding amortization
 of purchased technology)      37,062      23,102      112,111       85,139
                           ----------  ----------  -----------  -----------
Gross profit                  113,132     106,202      428,395      393,098
Operating expenses:
  Sales, marketing and
   administrative              92,732      82,018      346,757      312,122
  Research and development      9,584      11,490       40,703       43,479
  Amortization of
   intangible assets            2,368       1,360        6,609        5,407
  Intangible asset
   impairment charge           18,167           -       18,167            -
  Litigation award                  -           -      101,200            -
                           ----------  ----------  -----------  -----------
Total operating expenses      122,851      94,868      513,436      361,008
Interest and other
 expense, net:
  Interest income                 241         193          832          760
  Interest expense             (6,971)     (1,667)     (17,933)      (6,672)
  Other (expense) income,
   net                           (225)       (345)       2,078         (264)
                           ----------  ----------  -----------  -----------
Total interest and other
 expense, net                  (6,955)     (1,819)     (15,023)      (6,176)
                           ----------  ----------  -----------  -----------
(Loss) income before
 income taxes                 (16,674)      9,515     (100,064)      25,914
Income tax (benefit)
 expense                       (6,328)    (52,018)     (29,043)     (50,619)
                           ----------  ----------  -----------  -----------
Consolidated net (loss)
 income                    $  (10,346) $   61,533  $   (71,021) $    76,533
                           ==========  ==========  ===========  ===========
Net loss attributable to
 noncontrolling interests  $     (310) $     (399) $    (1,172) $    (1,752)
                           ==========  ==========  ===========  ===========
Net (loss) income
 attributable to NuVasive,
 Inc.                      $  (10,036) $   61,932  $   (69,849) $    78,285
                           ==========  ==========  ===========  ===========
Net (loss) income per
 share attributable to
 NuVasive, Inc.:
  Basic                    $    (0.24) $     1.57  $     (1.73) $      1.99
                           ==========  ==========  ===========  ===========
  Diluted                  $    (0.24) $     1.39  $     (1.73) $      1.85
                           ==========  ==========  ===========  ===========
Weighted average shares
 outstanding:
  Basic                        42,172      39,486       40,372       39,251
                           ==========  ==========  ===========  ===========
  Diluted                      42,172      45,488       40,372       45,514
                           ==========  ==========  ===========  ===========
Stock-based compensation is included
 in operating expenses in the
 following categories:
  Sales, marketing and
   administrative          $    7,627  $    6,099  $    29,583  $    24,945
  Research and development        654         822        2,487        3,280
                           ----------  ----------  -----------  -----------
                           $    8,281  $    6,921  $    32,070  $    28,225
                           ==========  ==========  ===========  ===========
                               NuVasive, Inc.
              Unaudited Condensed Consolidated Balance Sheets
                               (in thousands)
                                                         December 31,
                                                   ------------------------
                                                       2011         2010
                                                   -----------  -----------
ASSETS
Current assets:
  Cash and cash equivalents                        $   163,492  $    92,597
  Short-term marketable securities                     146,228       86,458
  Accounts receivable, net                              88,350       74,361
  Inventory                                            119,313      107,577
  Deferred tax assets                                   54,550        4,425
  Prepaid expenses and other current assets             19,904        6,353
                                                   -----------  -----------
Total current assets                                   591,837      371,771
Property and equipment, net                            124,754      102,165
Long-term marketable securities                         32,503       50,635
Intangible assets, net                                 108,140      107,121
Goodwill                                               159,349      103,070
Deferred tax assets, non-current                        19,857       52,033
Restricted cash and investments                         68,600        5,529
Other assets                                            18,522        9,705
                                                   -----------  -----------
Total assets                                       $ 1,123,562  $   802,029
                                                   ===========  ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued liabilities         $    51,744  $    58,995
  Accrued payroll and related expenses                  22,215       17,266
  Litigation liability                                 101,200            -
  Acquisition-related liabilities                       32,221       32,715
                                                   -----------  -----------
Total current liabilities                              207,380      108,976
Senior Convertible Notes                               394,019      230,000
Long-term acquisition-related liabilities                    -          326
Deferred tax liabilities                                 3,952        3,685
Other long-term liabilities                             13,461       12,810
Commitments and contingencies
Noncontrolling interests                                10,705       11,877
Stockholders' equity:
  Common stock                                              42           40
  Additional paid-in capital                           674,790      545,114
  Accumulated other comprehensive income                   477          616
  Accumulated deficit                                 (181,264)    (111,415)
                                                   -----------  -----------
Total stockholders' equity                             494,045      434,355
                                                   -----------  -----------
Total liabilities and stockholders' equity         $ 1,123,562  $   802,029
                                                   -----------  -----------
                               NuVasive, Inc.
         Unaudited Condensed Consolidated Statements of Cash Flows
                               (in thousands)
                                               Year Ended December 31,
                                         ----------------------------------
                                            2011        2010        2009
                                         ----------  ----------  ----------
Operating activities:
  Consolidated net (loss) income         $  (71,021) $   76,533  $    4,437
  Adjustments to reconcile net (loss)
   income to net cash provided by
   operating activities:
    Depreciation and amortization            36,242      36,737      29,841
    Deferred income tax benefit             (30,967)    (53,664)          -
    Amortization of debt discount             6,108           -           -
    Amortization of debt issuance costs       1,816       1,493       1,493
    Stock-based compensation                 32,070      28,225      23,793
    Intangible asset impairment charge       18,167           -           -
    Loss on repurchase of Senior
     Convertible Notes, net                     332           -           -
    Gain recognized on change in fair
     value of derivatives                    (2,387)          -           -
    Leasehold abandonment (reversal)              -           -      (1,997)
    Allowance for doubtful accounts and
     sales return reserve                     1,345        (995)      2,211
    Allowance for excess and obsolete
     inventory, net of write-offs             6,028       1,607       2,297
    Accretion of contingent
     consideration                              980         962           5
    Other non-cash adjustments                5,247       3,844       1,861
  Changes in operating assets and
   liabilities, net of effects from
   acquisitions:
    Accounts receivable                      (9,929)    (17,865)     (7,828)
    Inventory                               (17,170)    (18,664)    (23,133)
    Prepaid expenses and other current
     assets                                 (14,396)     (2,105)          6
    Accounts payable and accrued
     liabilities                             (3,385)     11,596       5,932
    Litigation liability                    101,200                       -
    Accrued payroll and related expenses      2,685      (1,877)      7,501
                                         ----------  ----------  ----------
  Net cash provided by operating
   activities                                62,965      65,827      46,419
Investing activities:
    Cash paid for acquisitions and
     investments                            (35,375)       (973)    (46,055)
    Purchases of property and equipment     (53,370)    (45,846)    (32,878)
    Purchases of marketable securities     (253,210)   (203,415)   (157,278)
    Sales of marketable securities          151,966     204,439     108,308
    Purchases of restricted investment       (4,536)          -           -
    Payment for specific rights in
     connection with supply agreement,
     net of refund received                  (5,000)          -           -
    Other assets                             (2,199)          -           -
                                         ----------  ----------  ----------
  Net cash used in investing activities    (201,724)    (45,795)   (127,903)
Financing activities:
    Proceeds from the sale of warrants       47,898           -           -
    Proceeds from the issuance of
     convertible debt, net of issuance
     costs                                  391,445           -           -
    Purchase of convertible note hedges     (80,097)          -           -
    Repurchase of 2013 Senior
     Convertible Notes                     (154,164)          -           -
    Tax benefits related to stock-based
     compensation awards                        463         186       1,902
    Proceeds from the issuance of common
     stock                                    6,852      14,831      12,556
    Payment of contingent consideration      (1,800)          -           -
    Other assets                               (718)     (7,935)          -
                                         ----------  ----------  ----------
  Net cash provided by financing
   activities                               209,879       7,082      14,458
    Effect of exchange rate changes on
     cash                                      (225)         70         121
                                         ----------  ----------  ----------
  Increase (decrease) in cash and cash
   equivalents                               70,895      27,184     (66,905)
Cash and cash equivalents at beginning
 of year                                     92,597      65,413     132,318
                                         ----------  ----------  ----------
Cash and cash equivalents at end of year $  163,492  $   92,597  $   65,413
                                         ==========  ==========  ==========

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

SOURCE: NuVasive, Inc.