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 and Full Year 2006 Financial Results

- Achieved Fourth Quarter Revenue of $30.5 Million and Non-GAAP Earnings Per Share of $0.02; Full Year Revenue of $98.1 Million -

- Announces 2007 Revenue Guidance of $136 Million to $141 Million -

Fourth Quarter 2006 Highlights:

* Total revenues increased to $30.5 million; up 62.0% from the fourth quarter of 2005

* Gross profit increased to $25.3 million; up 63.1% from the fourth quarter of 2005

* Gross margin was 83.1%; up from 82.5% in the fourth quarter of 2005

* GAAP loss per share for the quarter was $(0.08); on a non-GAAP basis, earnings per share was $0.02

* Surgeons trained on MAS Platform was 109, for a total of 569 in 2006

* Percentage of vertically integrated hospitals increased to 45%; up from 39% at September 30, 2006

* Exclusive sales force increased to 200 sales professionals from 175 at the end of the third quarter of 2006.

SAN DIEGO, Feb. 20 /PRNewswire-FirstCall/ -- NuVasive, Inc. (Nasdaq: NUVA), a medical device company focused on developing products for minimally disruptive surgical treatments for the spine, announced today fourth quarter and full year financial results for the period ended December 31, 2006.

The Company reported fourth quarter revenues of $30.5 million, a 62.0% increase over the $18.8 million for the fourth quarter of 2005 and a 21% increase over the $25.2 million for the third quarter of 2006. For the full year 2006, the Company reported revenue of $98.1 million, a 56.7% increase over the $62.6 million for the full year 2005.

Gross profit, on a GAAP basis, for the fourth quarter of 2006 was $25.3 million and gross margin was 83.1%, compared to a gross profit of $15.5 million and a gross margin of 82.5% in the fourth quarter of 2005. For the full year 2006, gross profit was $79.1 million and gross margin was 80.6%, compared to full year 2005 gross profit of $50.2 million and a gross margin of 80.2%. For the third quarter of 2006, gross profit was $20.3 million and gross margin was 80.5%.

Total operating expenses on a GAAP basis for the fourth quarter of 2006 were $29.5 million, compared with $40.8 million in the third quarter of 2006 and $19.9 million in the fourth quarter of 2005. The 2006 sequential quarter decrease is the result of expenses incurred in the third quarter of 2006 that did not recur in the fourth quarter; specifically, (i) $9.6 million of the amounts paid under the NeoDisc buyout agreement described below and (ii) costs related to development efforts related to products launched at the end of the third quarter. In addition, much of the cost associated with the Company's transition to an exclusive sales force was incurred prior to the fourth quarter. As a result, the Company began to realize the synergies associated with this exclusive sales force.

On a GAAP basis for the fourth quarter of 2006, the Company reported a net loss of $2.7 million or $(0.08) per share. On a non-GAAP basis, the Company reported net income of $631,000 or $0.02 per share. The non-GAAP earnings per share calculation in the fourth quarter of 2006 excludes (i) stock based compensation of $3.2 million and (ii) amortization of acquired intangible assets of $135,000.

Cash, cash equivalents and investments were $117.4 million at December 31, 2006.

In the third quarter of 2006, the Company completed an accelerated buyout agreement with Pearsalls Limited related to the NeoDisc investigational device and related embroidery technology. The Company incurred total costs of $20.1 million in 2006 for this buyout, resulting in a total acquisition cost of $33.1 million. By completing this buyout, the Company eliminated certain royalty obligations as well as $12 million in potential milestone payments.

Alexis V. Lukianov, Chairman and Chief Executive Officer, said, "2006 marked a successful year highlighting several key milestones that should contribute to long-term growth and increased operating efficiencies. Most important was the completion of the transition to an exclusive sales force which is now 200 strong. A direct result of this transition was the increase we have seen in the vertical integration of hospitals using NuVasive products. 45% of hospitals using our products are now vertically integrated, which we believe demonstrates the increased traction of our sales force. We believe their expanding knowledge of our full product line and continuing momentum in deepening our product penetration will result in robust revenue growth and a profitable 2007 on a non-GAAP basis."

Mr. Lukianov continued, "The strategy of bringing to market differentiated products to further our penetration of the minimally invasive spine surgery marketplace has, and will continue to be, a key initiative for NuVasive. Building on our nine product launches in 2006, we plan to execute a host of launches in 2007. These launches will, of course, focus on our MAS technology platform, but will also significantly increase the breadth of our cervical and motion preservation product offerings. Balancing our opportunities with the drive to increase our operating efficiencies is also a top priority."

Guidance

NuVasive also announced its first quarter and full year 2007 financial guidance.

Full Year 2007 Guidance:
Revenue: $136 million to $141 million
Gross margin: 81% to 82%
Stock-based compensation: $15.7 million to $16.5 million
GAAP loss per share: $(0.47) to $(0.46)
Non-GAAP earnings per share: $0.03 to $0.07

First Quarter 2007 Guidance:
Revenue: $31 million to $32 million
Gross margin: 81% to 82%
Stock-based compensation: $3.8 million to $4.0 million
GAAP loss per share: $(0.21) to $(0.19)
Non-GAAP loss per share: $(0.08) to $(0.07)

The first quarter guidance takes into consideration costs associated with the following activities: (i) the Company's annual sales meeting and related activities; and (ii) additional marketing and development costs associated with product launches planned for the second quarter of 2007. In the first quarter of 2007, we also expect to begin incurring significant costs associated with the NeoDisc clinical trail. The Company expects a return to profitability, on a non-GAAP basis, in the third quarter of 2007.

Reconciliation of Non-GAAP Information

Management uses certain non-GAAP financial measures, such as non-GAAP gross margin, non-GAAP operating expenses, non-GAAP earnings per share and non-GAAP net loss per share, which exclude the following charges: (i) stock based compensation; (ii) charges directly related to acquisition transactions such as in-process research and development, milestone payments, amortization of the acquired technology assets and certain other non-recurring internal costs incurred as a result of the transaction; and (iii) certain other amounts related to non-recurring events (such as our obsolescence charges in the second and third quarter of 2006). Management does not consider these costs in evaluating the continuing operations of the Company because management believes they are not indicative of the ongoing business operations. 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 a 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 2006 Results         Three Months Ended
    (in thousands, except per share amounts)              December 31, 2006

    GAAP net loss (A)                                         $  (2,683)
     Stock based compensation (B)                                 3,179
     Amortization of acquired intangible assets (C)                 135
    Non-GAAP net income (A)                                   $     631

    GAAP net loss per share (A)                               $   (0.08)
     Stock based compensation (B)                                  0.10
     Amortization of acquired intangible assets (C)                   -
    Non-GAAP earnings per share per share (A)                 $    0.02
    Shares used in computing GAAP net loss per share (A)         33,864
    Share used in computing non-GAAP net loss per share (A)      35,225



    Reconciliation of First Quarter and Full Year 2007 Guidance
    (in thousands, except per share amounts)

                                     Range for Three
                                     Months Ending       Range for Year Ending
                                     March 31, 2007        December 31, 2007
                                     Low       High        Low          High

    GAAP net loss per share (A)    $(0.21)   $(0.19)      $(0.47)      $(0.46)
     Stock based compensation (B)    0.12      0.11         0.45         0.48
     Amortization of acquired
      intangible assets (C)          0.01      0.01         0.05         0.05
    Non-GAAP earnings
     per share (A)                 $(0.08)   $(0.07)       $0.03        $0.07
    Shares used in computing
     GAAP net loss per share (A)   34,280    34,280       34,650       34,650
    Share used in computing
     non-GAAP net loss
     per share (A)                 34,280    34,280       36,092       36,092

    A - GAAP net loss per share is calculated using basic weighted shares
        outstanding;  Non-GAAP earnings per share for the full year 2007 is
        calculated using diluted weighted shares outstanding,
    B - Non-cash stock-based compensation.
    C - Amortization of technology assets purchased in 2005.

    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 1-877-407-4018 for domestic callers and 1-201-689-8471 for international. A live Web cast of the conference call will be available online from the investor relations page of the Company's corporate Web site at www.nuvasive.com.

After the live Web cast, the call will remain available on NuVasive's Web site, www.nuvasive.com, through March 20, 2007. In addition, a telephonic replay of the call will be available until March 13, 2007. The replay dial-in numbers are 1-877-660-6853 for domestic callers and 1-201-612-7415 for international callers. Please use account number 3055 and conference ID number 227564.

About NuVasive

NuVasive is a medical device company focused on the design, development and marketing of products for the surgical treatment of spine disorders. The Company's product portfolio is focused on applications in the over $3.6 billion U.S. spine fusion market. The Company's current principal product offering includes a minimally disruptive surgical platform called Maximum Access Surgery, or MAS(TM), as well as a growing offering of cervical and motion preservation products.

The MAS platform offers advantages for both patients and surgeons such as reduced surgery and hospitalization time and faster recovery. MAS combines three categories of current product offerings-NeuroVision(R), a proprietary software-driven nerve avoidance system; MaXcess(R), a unique split-blade design retraction system; and specialized implants, like SpheRx(R) and CoRoent(R)-that collectively minimize soft tissue disruption during spine surgery while allowing maximum visualization and surgical reproducibility. NuVasive's product offering is also focused on cervical internal fixation products and its R&D pipeline emphasizes both MAS and motion preservation.

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 uncertain process of seeking regulatory approval or clearance for NuVasive's products or devices, including risks that such process could be significantly delayed; the uncertain process of administering a clinical trial such as that underway for NeoDisc, including the risk that the trial is delayed or produces data suggesting that the device is not sufficiently safe or effective; 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 the Company's financial projections may prove incorrect because of unexpected difficulty in generating sales or achieving anticipated profitability; 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.


    Contact:
    Kevin C. O'Boyle
    EVP & Chief Financial Officer
    NuVasive, Inc.
    858-909-1800
    investorrelations@nuvasive.com

    Investors:
    Carol Ruth/Nick Laudico
    The Ruth Group
    646-536-7004/7030
    cruth@theruthgroup.com
    nlaudico@theruthgroup.com

    Media:
    Jason Rando
    The Ruth Group
    646-536-7025
    jrando@theruthgroup.com



                                NUVASIVE, INC.
          UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share data)

                            Three Months Ended       Twelve Months Ended
                                December 31,              December 31,
                             2006         2005         2006         2005
    Revenue                $30,488      $18,820      $98,091      $62,606
    Cost of goods sold       5,156        3,285       19,028       12,392

    Gross profit            25,332       15,535       79,063       50,214

    Operating expenses:
     Sales, marketing and
      administrative        25,285       16,769       95,426       57,020
     Research and
      development            4,242        3,170       17,747       11,791
     In-process research
      and development            -            -            -       12,897
     NeoDisc technology
      costs                      -            -       20,116            -
       Total operating
        expenses            29,527       19,939      133,289       81,708
    Interest and other
     income (expense), net   1,512          206        6,316        1,155
    Net loss               $(2,683)     $(4,198)    $(47,910)    $(30,339)

    Historical net loss
     per share:

      Basic and diluted    $ (0.08)     $ (0.17)     $ (1.47)     $ (1.24)
      Weighted average
       shares - basic and
       diluted              33,864       24,940       32,501       24,473



                                NUVASIVE, INC.
               UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
                                (in thousands)
                                                   December 31,   December 31,
                                                       2006           2005
    Assets
    Current assets:
     Cash and cash equivalents                       $41,476        $12,545
     Short-term investments                           73,930          6,945
     Accounts receivable, net                         18,960         11,662
     Inventory, net                                   18,636         11,870
     Prepaid expenses and other current assets         1,716          1,496
    Total current assets                             154,718         44,518
    Property and equipment, net                       30,573         17,974
    Intangible assets, net                             8,441          8,894
    Long-term investments                              1,996              -

    Other assets                                         456            104
    Total Assets                                   $ 196,184        $71,490

    Liabilities and Stockholders' Equity
    Current liabilities:
     Accounts payable and accrued liabilities         $8,589         $5,258
     Accrued payroll and related expenses              8,825          6,031
     Royalties payable                                 1,068           $400
    Total current liabilities                         18,482         11,689
    Long-term liabilities                              1,399          1,665
    Stockholders equity:
     Common stock                                         34             25
     Additional paid-in capital                      333,009        168,143
     Deferred compensation                                 -         (1,195)
     Accumulated other comprehensive loss                (25)           (32)
     Accumulated deficit                            (156,715)      (108,805)
    Total stockholders' equity                       176,303         58,136
    Total liabilities and stockholders' equity      $196,184        $71,490



                                NUVASIVE, INC.
          UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in thousands)

                                 Three Months Ended       Twelve Months Ended
                                    December 31,              December 31,
                                 2006         2005         2006         2005
    Operating activities:
    Net loss                  $(2,683)     $(4,198)    $(47,910)   $ (30,339)
    Add back non-cash expenses
     Depreciation and
      amortization              2,337        1,718        8,350        4,359
     Stock-based compensation   3,179          585       13,345        3,040
     Non-Cash NeoDisc
      technology costs              -            -        8,060            -
     Write-off of assets to be
      retired in connection
      with planned 2006 product
      introductions and
      enhancements                  -            -          343            -

     Write-off of NuVasive
      assets in connection with
      acquisition of
      RSB Spine LLC                 -            -            -          497
     In-process research and
      development                   -            -            -       12,897
     Other non-cash adjustments   643          113        1,946        1,020
     Changes in operating
      assets and liabilities:

       Accounts receivable     (3,962)      (2,188)      (7,422)      (5,219)
       Inventory               (2,155)       1,386       (8,878)      (6,864)
       Prepaid expenses and
        other current assets     (362)        (138)        (220)        (370)
       Accounts payable and
        accrued liabilities    (1,676)      (1,334)       3,987       (1,303)
       Accrued payroll and
        related expenses        1,948        1,266        2,794        2,427
    Net cash used in operating
     activities                (2,731)      (2,790)     (25,605)     (19,855)

    Investing activities:

    Cash paid for RSB Spine LLC     -            -            -       (8,800)
    Purchases of property
     and equipment             (3,691)      (3,353)     (20,396)     (12,675)
    Sales of short-term
     investments, net          31,604       11,036       63,525       88,566
    Purchases of short-term
     investments, net         (36,949)      (1,971)    (130,510)     (44,918)
    Purchase of long-term
     investments                    -            -      (1,996)            -
    Other assets                  (90)         (86)       (452)          (75)
    Net cash (used in)
     provided by investing
     activities                (9,126)       5,626     (89,829)       22,098

    Financing activities:

    Payment of long-term
     liabilities                    -            -        (300)          (18)
    Issuance of common stock      972          693     144,665         1,760
    Net cash provided by
     financing activities         972          693     144,365         1,742

    (Decrease) Increase in
      cash and cash
      equivalents             (10,885)       3,529      28,931         3,985

    Cash and cash equivalents
     at beginning of period    52,361        9,016      12,545         8,560
    Cash and cash equivalents
    at end of period         $ 41,476      $12,545     $41,476       $12,545

SOURCE NuVasive, Inc.
02/20/2007
CONTACT: Kevin C. O'Boyle, EVP & Chief Financial Officer of NuVasive, Inc., +1-858-909-1800, investorrelations@nuvasive.com; or Investors, Carol Ruth, +1-646-536-7004, cruth@theruthgroup.com, or Nick Laudico, +1-646-536-7030, nlaudico@theruthgroup.com, or Media, Jason Rando, +1-646-536-7025, jrando@theruthgroup.com, all of The Ruth Group for NuVasive, Inc.
Web site: http://www.nuvasive.com