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 2010 Financial Results

SAN DIEGO, CA, Feb 23, 2011 (MARKETWIRE via COMTEX) --NuVasive, Inc. (NASDAQ: NUVA)

--  Full year 2010 total revenue of $478.2 million; up 29.1% from the full
    year 2009
--  Fourth quarter 2010 total revenue of $129.3 million; up 20.9% from
    fourth quarter 2009 and up 7.5% from third quarter 2010
--  GAAP earnings of $61.9 million, or $1.39 per share, for the fourth
    quarter 2010 and $78.3 million, or $1.85 per share, for the full year
    2010
--  Non-GAAP earnings of $19.3 million, or $0.46 per share, for the fourth
    quarter 2010 and $63.0 million, or $1.52 per share, for the full year
    2010
--  Operating cash flow of $65.8 million for the full year 2010; up from
    $46.4 million for the full year 2009

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, 2010.

NuVasive reported fourth quarter 2010 revenue of $129.3 million, a 20.9% increase over the $106.9 million for the fourth quarter 2009 and a 7.5% increase over the $120.3 million for the third quarter 2010. Full year 2010 revenue was $478.2 million, a 29.1% increase over the $370.3 million reported for the full year 2009.

Gross profit for the fourth quarter 2010 was $106.2 million and gross margin was 82.1%, compared to a gross profit of $88.9 million and a gross margin of 83.2% for the fourth quarter 2009. For the third quarter 2010, gross profit was $98.7 million and gross margin was 82.1%. Gross profit for the full year 2010 was $393.1 million and gross margin was 82.2%, compared to a gross profit of $309.2 million and gross margin of 83.5% for the full year 2009.

Total operating expenses for the fourth quarter 2010 were $94.9 million compared to $84.7 million in the fourth quarter 2009 and $89.1 million in the third quarter 2010. Full year 2010 operating expenses were $361.0 million compared to $297.9 million reported for the full year 2009. The higher operating expenses in 2010 resulted primarily from additional costs associated with higher revenue, infrastructure expansion, and research and development.

On a GAAP basis, the Company reported net income of $61.9 million, or $1.39 per share, for the fourth quarter 2010, and net income of $78.3 million, or $1.85 per share for the full year 2010.

On a Non-GAAP basis, the Company reported net income of $19.3 million, or $0.46 per share, for the fourth quarter 2010, and net income of $63.0 million, or $1.52 per share, for the full year 2010. The Non-GAAP earnings per share calculations for the fourth quarter and full year exclude, respectively, (i) non-cash stock-based compensation of $6.9 million and $28.2 million; (ii) certain intellectual property litigation expenses of $1.5 million and $5.1 million; (iii) amortization of intangible assets of $1.4 million and $5.4 million; (iv) acquisition related items of $1.4 million and $3.0 million; and (v) the reversal of an income tax valuation allowance of $53.4 million and $53.4 million.

Cash, cash equivalents and short and long-term marketable securities were $229.7 million at December 31, 2010.

Alex Lukianov, Chairman and Chief Executive Officer, said, "We achieved revenue growth of nearly 30%, a record non-GAAP operating margin well over 15% and more than $65 million in operating cash flow in 2010, despite challenging spine market dynamics. We made great strides in building the body of scientific evidence in support of our unique XLIF technology to demonstrate superior clinical outcomes together with long term follow up. As our focus shifts from achieving $500 million in revenue 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 will rely on creativity and resourcefulness and our culture of accountability to bring more game changing innovation to our surgeon customers and deliver exceptional results to our share holders."

2011 Full Year Financial Guidance

      --  Revenue of $525 million to $535 million
      --  GAAP EPS of $0.39 to $0.42
      --  Non-GAAP EPS of $1.07 to $1.10
      --  Non-GAAP Operating Margin of ~16.5%
        2011 Guidance Reconciliation of Non-GAAP Operating Margin %
                                               FY 10          FY 11
                                              Actual        Estimate
                                              ------   --------------------
                          Gross Margin % [A]   82.2%          ~ 81%
       Non-GAAP Research and Development [B]    8.0%           ~ 8%
       Non-cash stock-based compensation        0.7%           ~ 1%
              Acquisition related items*        0.4%        as incurred
                                              ------   --------------------
               GAAP research and development    9.1%           ~ 9%
                             Non-GAAP Sales,
            Marketing and Administrative [C]   58.8%         ~ 56.5%
           Non-cash stock-based compensation    5.2%           ~ 5%
                        Certain intellectual
                property litigation expenses    1.1%           ~ 1%
                  Acquisition related items*    0.2%   ~ 0.5% & as incurred
                                              ------   --------------------
    GAAP sales, marketing and administrative   65.3%          ~ 63%
           Amortization of intangible assets    1.1%         ~ 1.5%
                                              ------   --------------------
         Non-GAAP Operating Margin % [A-B-C]   15.4%        ~ 16.5%
                                              ------   --------------------
* Acquisition related items include ~0.5% of revenue for expenses
  associated with prior M&A activity and as incurred
                Reconciliation of Full Year EPS Guidance
                                    2010
                                   Pre-Tax   2011 Pre-Tax  2011 Net of Tax*
                                    ------  --------------  --------------
                                             Low     High    Low     High
                                    Actual  Range   Range   Range   Range
                                    ------  ------  ------  ------  ------
GAAP earnings per share**           $ 0.64  $ 0.77  $ 0.82  $ 0.39  $ 0.42
  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  $ 1.91  $ 1.96  $ 1.07  $ 1.10
                                    ======  ======  ======  ======  ======
Weighted average shares -
 Diluted***                         40,373  42,000  42,000  42,000  42,000
                                    ======  ======  ======  ======  ======
* Effective Tax Rate of ~49% applied to GAAP earnings and ~40% applied to
  Non-GAAP adjustments
** GAAP earnings per share calculated on consolidated net income
*** 2010 weighted average shares outstanding shown as pre "if-converted"
    method

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, acquisition related items, and the reversal of an income tax valuation allowance. 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 2010 Results
                                                       Earnings Per Share
                                                      --------------------
                                                       Pre "If    Post "If
(in thousands, except          Pre-Tax                Converted" Converted"
 per share data)             adjustments  Net of Tax   Method     Method
                              ----------  ----------  ---------  ---------
GAAP net income *                         $   61,932  $    1.53  $    1.39
  Non-cash stock-based
   compensation                    6,921       6,641       0.16       0.15
  Certain intellectual
   property litigation
   expenses                        1,549       1,486       0.04       0.03
  Amortization of intangible
   assets                          1,360       1,305       0.03       0.03
  Acquisition related items        1,440       1,382       0.03       0.03
  Reversal of remaining
   income tax valuation
   allowance                                 (53,425)     (1.32)     (1.17)
                                          ----------  ---------  ---------
Non-GAAP earnings                         $   19,321  $    0.48  $    0.46
                                          ==========  =========  =========
Weighted average shares -
 Diluted                                                 40,347     45,488
                                                      =========  =========
* "if-converted" method assumes add back of $1.5M net of tax ($1.7M pretax)
  of interest and debt issuance costs to GAAP net income
              Reconciliation of Full Year 2010 Results
                                                       Earnings Per Share
                                                      --------------------
                                                       Pre "If    Post "If
(in thousands, except          Pre-Tax                Converted" Converted"
 per share data)             adjustments  Net of Tax   Method     Method
                              ----------  ----------  ---------  ---------
GAAP net income *                         $   78,285  $    1.94  $    1.85
  Non-cash stock-based
   compensation                   28,225      25,815       0.64       0.57
  Certain intellectual
   property litigation
   expenses                        5,123       4,685       0.12       0.10
  Amortization of intangible
   assets                          5,407       4,945       0.12       0.11
  Acquisition related items        2,982       2,727       0.07       0.06
  Reversal of remaining
   income tax valuation
   allowance                                 (53,425)     (1.32)     (1.17)
                                          ----------  ---------  ---------
Non-GAAP earnings                         $   63,032  $    1.56  $    1.52
                                          ==========  =========  =========
Weighted average shares - Diluted                        40,373     45,514
                                                      =========  =========
* "if-converted" method assumes add back of $6.0M net of tax ($6.7M pretax)
  of interest and debt issuance costs to GAAP net income

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 25, 2011. In addition, a telephonic replay of the call will be available until March 9, 2011. The replay dial-in numbers are 1-877-870-5176 for domestic callers and 1-858-384-5517 for international callers. Please use replay pin number 365288.

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        Year Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ---------
Revenue                         $ 129,304  $ 106,935  $ 478,237  $ 370,340
Cost of goods sold (excluding
 amortization of purchased
 technology)                       23,102     18,002     85,139     61,110
                                ---------  ---------  ---------  ---------
Gross profit                      106,202     88,933    393,098    309,230
Operating expenses:
  Sales, marketing and
   administrative                  82,018     72,476    312,122    254,997
  Research and development         11,490     10,943     43,479     37,581
  Amortization of intangible
   assets                           1,360      1,263      5,407      5,335
                                ---------  ---------  ---------  ---------
Total operating expenses           94,868     84,682    361,008    297,913
Interest and other (expense)
 income, net:
  Interest income                     193        189        760      1,507
  Interest expense                 (1,667)    (1,676)    (6,672)    (7,116)
  Other (expense) income, net        (345)       136       (264)       461
                                ---------  ---------  ---------  ---------
Total interest and other
 (expense) income, net             (1,819)    (1,351)    (6,176)    (5,148)
                                ---------  ---------  ---------  ---------
Income before income taxes          9,515      2,900     25,914      6,169
Income tax (benefit) expense      (52,018)       679    (50,619)     1,732
                                ---------  ---------  ---------  ---------
Consolidated net income         $  61,533  $   2,221  $  76,533  $   4,437
                                =========  =========  =========  =========
Net loss attributable to
 noncontrolling interests       $    (399) $     (60) $  (1,752) $  (1,371)
                                =========  =========  =========  =========
Net income attributable to
 NuVasive, Inc.                 $  61,932  $   2,281  $  78,285  $   5,808
                                =========  =========  =========  =========
Net income per share attributable
 to NuVasive, Inc.:
  Basic                         $    1.57  $    0.06  $    1.99  $    0.16
                                =========  =========  =========  =========
  Diluted                       $    1.39  $    0.06  $    1.85  $    0.15
                                =========  =========  =========  =========
Weighted average shares
 outstanding:
  Basic                            39,486     38,645     39,251     37,426
                                =========  =========  =========  =========
  Diluted                          45,488     39,813     45,514     38,751
                                =========  =========  =========  =========
Stock-based compensation is
 included in operating expenses
 in the following categories:
  Sales, marketing and
   administrative               $   6,099  $   4,800  $  24,945  $  19,549
  Research and development            822        828      3,280      4,244
                                ---------  ---------  ---------  ---------
                                $   6,921  $   5,628  $  28,225  $  23,793
                                =========  =========  =========  =========
                             NuVasive, Inc.
             Unaudited Condensed Consolidated Balance Sheets
                             (in thousands)
                                                          December 31,
                                                      --------------------
                                                        2010       2009
                                                      ---------  ---------
ASSETS
Current assets:
  Cash and cash equivalents                           $  92,597  $  65,413
  Short-term marketable securities                       86,458     99,279
  Accounts receivable, net                               76,632     58,462
  Inventory                                             107,577     90,191
  Deferred tax assets                                     4,425          -
  Prepaid expenses and other current assets               4,082      3,757
                                                      ---------  ---------
Total current assets                                    371,771    317,102
Property and equipment, net                             102,165     82,602
Long-term marketable securities                          50,635     39,968
Intangible assets, net                                  107,121    103,338
Goodwill                                                103,070    101,938
Deferred tax assets, non-current                         52,033        612
Other assets                                             15,234      7,260
                                                      ---------  ---------
Total assets                                          $ 802,029  $ 652,820
                                                      =========  =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued liabilities            $  58,995  $  35,636
  Accrued payroll and related expenses                   17,266     19,111
  Acquisition-related liabilities                        32,715          -
                                                      ---------  ---------
Total current liabilities                               108,976     54,747
Senior convertible notes                                230,000    230,000
Long-term acquisition related liabilities                   326     30,694
Deferred tax liabilities                                  3,685     16,756
Other long-term liabilities                              12,810     10,772
Commitments and contingencies
Noncontrolling interests                                 11,877     13,629
Stockholders' equity:
    Common stock                                             40         39
    Additional paid-in capital                          545,114    485,757
    Accumulated other comprehensive income                  616        126
    Accumulated deficit                                (111,415)  (189,700)
                                                      ---------  ---------
Total stockholders' equity                              434,355    296,222
                                                      ---------  ---------
Total liabilities and stockholders' equity            $ 802,029  $ 652,820
                                                      =========  =========
                             NuVasive, Inc.
        Unaudited Condensed Consolidated Statements of Cash Flows
                             (in thousands)
                                               Year Ended December 31,
                                           -------------------------------
                                             2010       2009       2008
                                           ---------  ---------  ---------
Operating activities:
  Consolidated net income (loss)           $  76,533  $   4,437  $ (27,528)
  Adjustments to reconcile net income
   (loss) to net cash provided by (used
   in) operating activities:
    Depreciation and amortization             36,737     29,841     23,105
    Deferred income tax benefit              (53,664)         -          -
    In-process research and development            -          -     20,876
    Stock-based compensation                  28,225     23,793     20,947
    Leasehold abandonment (reversal)               -     (1,997)     4,403
    Allowance for doubtful accounts and
     sales return reserve, net of
     write-offs                                 (995)     2,211      1,026
    Allowance for excess and obsolete
     inventory                                 1,607      2,297       (836)
    Other non-cash adjustments                 6,299      3,359        179
  Changes in operating assets and
   liabilities, net of effects from
   acquisitions:
    Accounts receivable                      (16,411)    (8,582)   (25,152)
    Inventory                                (18,664)   (23,133)   (32,451)
    Prepaid expenses and other current
     assets                                   (3,559)       760        274
    Accounts payable and accrued
     liabilities                              11,596      5,932      5,098
    Accrued payroll and related expenses      (1,877)     7,501      5,057
                                           ---------  ---------  ---------
  Net cash provided by (used in) operating
   activities                                 65,827     46,419     (5,002)
Investing activities:
    Cash paid for acquisitions and
     investments                                (973)   (46,055)   (41,256)
    Purchases of property and equipment      (45,846)   (32,878)   (39,795)
    Purchases of marketable securities      (203,415)  (157,278)  (159,186)
    Sales of marketable securities           204,439    108,308     95,926
    Other assets                                   -          -       (304)
                                           ---------  ---------  ---------
  Net cash used in investing activities      (45,795)  (127,903)  (144,615)
Financing activities:
    Payments of long-term liabilities              -          -       (300)
    Issuance of convertible debt, net of
     costs                                         -          -    222,442
    Purchase of convertible note hedges            -          -    (45,758)
    Sale of warrants                               -          -     31,786
    Tax benefits related to stock-based
     compensation awards                         186      1,902          -
    Issuance of common stock                  14,831     12,556     11,850
    Other assets                              (7,935)         -          -
                                           ---------  ---------  ---------
  Net cash provided by financing
   activities                                  7,082     14,458    220,020
    Effect of exchange rate changes
     on cash                                      70        121          -
                                           ---------  ---------  ---------
  Increase (decrease) in cash and cash
   equivalents                                27,184    (66,905)    70,403
Cash and cash equivalents at beginning of
 year                                         65,413    132,318     61,915
                                           ---------  ---------  ---------
Cash and cash equivalents at end of year   $  92,597  $  65,413  $ 132,318
                                           =========  =========  =========

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

Investors:
Patrick F. Williams
Vice President, Finance & 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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