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 Second Quarter 2015 Financial Results

SAN DIEGO, CA -- (Marketwired) -- 07/28/15 -- Second Quarter 2015 Highlights:

  • Revenue increased 6.4% to $202.9 million, or 8.5% on a constant currency basis;
  • Non-GAAP operating profit margin of 15.3%; GAAP operating profit margin of 12.7%;
  • Adjusted EBITDA margin of 24.9%;
  • Non-GAAP net income of $15.7 million; GAAP net income of $10.3 million;
  • Non-GAAP earnings per share of $0.31; GAAP earnings per share of $0.20; and
  • Co mpany increases guidance for full year 2015 for non-GAAP operating margin, adjusted EBITDA and earnings per share.

NuVasive, Inc.(NASDAQ: NUVA), a leading medical device company focused on transforming spine surgery with minimally disruptive, procedurally-integrated solutions, announced today financial results for the quarter ended June 30, 2015.

"We are pleased to report another strong quarter that resulted in revenue growth of more than 8% and an impressive 460 basis point increase in profitability, as we continued to take market share and gain momentum in our efforts to improve operational efficiencies," said Gregory T. Lucier, Chairman and Chief Executive Officer of NuVasive. "We are laser-focused on increasing our market share by rapidly developing disruptive technologies and services for spine surgery, expanding our global footprint in existing and new markets, and positioning NuVasive as a commercial powerhouse with integrated sales, service and specialized customer marketing programs. With these efforts underway, we look to move even faster to drive NuVasive's next phase of growth and success, while generating enhanced long-term value for our shareholders."

A full reconciliation of non-GAAP to GAAP measures can be found in the tables of this news release.

Second Quarter 2015 Results

NuVasive reported second quarter 2015 total revenue of $202.9 million, a 6.4% increase compared to $190.7 million for the second quarter 2014. On a constant currency basis, second quarter 2015 total revenue increased 8.5% compared to the same period last year.

GAAP gross profit for the second quarter 2015 was $154.5 million and gross margin was 76.1% compared to a gross profit of $145.8 million and a gross margin of 76.5% for the second quarter 2014. Total GAAP operating expenses for the second quarter 2015 were $128.6 million compared to $141.2 million in the second quarter 2014.

The Company reported a GAAP net income of $10.3 million, or $0.20 per share, for the second quarter 2015 compared to a GAAP net loss of $(4.1) million, or $(0.09) per share, for the second quarter 2014.

On a non-GAAP basis, the Company reported net income of $15.7 million, or $0.31 per share, for the second quarter 2015 compared to net income of $7.6 million, or $0.15 per share, for the second quarter 2014.

Cash, cash equivalents and short and long-term marketable securities were approximately $306.6 million at June 30, 2015.

Annual Guidance for 2015

The Company provided the following updated projections to its full year 2015 guidance:

  • Revenue of approximately $810.0 million, which includes an approximate $13.0 million of currency headwinds, or approximately 6.2% growth compared to revenue of $762.4 million for 2014; on a constant currency basis revenue is expected to grow approximately 7.9%; versus a prior expectation of 7.8% for 2015;
  • GAAP earnings per share of approximately $1.18 compared to GAAP loss per share of ($0.36) for 2014; versus a prior expectation of $1.12 for 2015;
  • Non-GAAP earnings per share of approximately $1.17, an increase of approximately 74.2% compared to non-GAAP earnings of $0.67 for 2014; versus a prior expectation of $1.10 for 2015;
  • Non-GAAP operating margin of approximately 15.0%, an increase of approximately 360 basis points compared to 11.4% for 2014; versus a prior expectation of 14.4% for 2015;
  • Adjusted EBITDA margin of approximately 25.2%, an increase of approximately 330 basis points compared to 21.9% for 2014; versus a prior expectation of 24.6% for 2015;
  • GAAP effective tax expense rate of approximately 45.0%; versus a prior expectation of 46.0% for 2015; and
  • Non-GAAP effective tax expense rate of approximately 45.0%; versus a prior expectation of 46.0% for 2015.

Supplementary Financial Information

For additional financial detail, please visit the Investor Relations section of the Company's website at www.nuvasive.com to access Supplementary Financial Information.

   
Reconciliation of Full Year EPS Guidance  
          2015 Guidance  
 
 
 
 
2014
Actuals
 
 
 
 
Prior  1
 
 
 
 
Current 2
 
 
GAAP earnings (loss) per share   $ (0.36 )   $ 1.12     $ 1.18  
Impact of change from basic to diluted share count     0.02       -       -  
Impact of treasury method on convertible notes 3     -       0.03       0.03  
Adjusted GAAP earnings (loss) per share, adjusted to diluted share count   $ (0.34 )   $ 1.15     $ 1.21  
  Amortization of intangible assets     0.16       0.14       0.14  
  Leasehold related charges     0.13       0.03       0.03  
  Litigation liability     0.36       (0.50 )     (0.49 )
  Intangible asset impairment     0.13       -       -  
  CEO transition related costs     -       0.04       0.04  
  One-time and acquisition related items 4     0.05       0.05       0.05  
  Non-cash interest expense on convertible notes     0.18       0.19       0.19  
Non-GAAP earnings per share   $ 0.67     $ 1.10     $ 1.17  
                         
GAAP Weighted shares outstanding - basic     46,715       48,593       48,593  
GAAP Weighted shares outstanding - diluted     46,715       52,607       52,607  
Non-GAAP Weighted shares outstanding - diluted 3
    49,676       51,431       51,431  
                         
1   Effective tax expense rate of ~46% applied to GAAP earnings and ~40% applied to Non-GAAP adjustments 
2   Effective tax expense rate of ~45% applied to GAAP earnings and ~40% applied to Non-GAAP adjustments 
3   Excludes the impact of share dilution of the convertible bond for which the Company has a hedge in place but is considered anti-dilutive under US GAAP in weighted average shares outstanding 
4   Acquisition related items include expenses associated with M&A related activity and as incurred 
      
      
   
Reconciliation of Non-GAAP Operating Margin %  
   
          2015 Guidance  

(in thousands, except %)
  2014
Actuals
    Prior
    Current
 
Non-GAAP Gross Margin % [A]   76.1 %   77.3 %   76.7 %
GAAP Gross Margin [D]   76.1 %   77.3 %   76.7 %
                   
Non-GAAP Sales, Marketing & Administrative Expense [B]   59.9 %   57.9 %   56.9 %
Leasehold related charges   1.4 %   0.4 %   0.4 %
CEO transition related costs   -     0.4 %   0.4 %
One-time and acquisition related items 1   0.3 %   0.5 %   0.5 %
GAAP Sales, Marketing & Administrative Expense [E]   61.6 %   59.2 %   58.2 %
                   
Non-GAAP Research & Development Expense [C]   4.8 %   5.0 %   4.8 %
One-time and acquisition related items 1   0.2 %   -     -  
GAAP Research & Development Expense [F]   5.0 %   5.0 %   4.8 %
                   
Litigation liability [G]   3.9 %   -5.3 %   -5.2 %
Intangible asset impairment [H]   1.4 %   -     -  
Amortization of intangible assets [I]   1.8 %   1.5 %   1.5 %
                   
Non-GAAP Operating Margin % [A-B-C]   11.4 %   14.4 %   15.0 %
                   
GAAP Operating Margin % [D-E-F-G-H-I]   2.4 %   16.9 %   17.4 %
                   
Acquisition related items include expenses associated with M&A related activity and as incurred
        
Reconciliation of EBITDA %       
 
          2015 Guidance  
(in thousands, except %)
  2014
Actuals
    Prior
    Current
 
Net Income/ (Loss)   -2.2 %   7.3 %   7.7 %
  Interest (income) / expense, net   3.5 %   3.5 %   3.6 %
  Provision for income taxes   0.8 %   6.0 %   6.1 %
  Depreciation and amortization 1   8.1 %   7.5 %   7.8 %
EBITDA   10.2 %   24.3 %   25.2 %
  Non-cash stock based compensation   4.4 %   4.2 %   3.9 %
  Leasehold related charges   1.4 %   0.4 %   0.4 %
  Litigation liability   3.9 %   -5.3 %   -5.2 %
  Intangible asset impairment   1.4 %   -     -  
  CEO transition related costs 2   -     0.4 %   0.4 %
  One-time and acquisition related items 3   0.5 %   0.5 %   0.5 %
Adjusted EBITDA   21.9 %   24.6 %   25.2 %
                   
 
1 Included in leasehold related charges are accelerated depreciation as a result of early leasehold terminations, which thereby were excluded from the depreciation line
2 Included in CEO transition related costs are $I.2m of stock based compensation charges, which thereby were excluded from the non-cash stock based compensation lines 
3 Acquisition related items include expenses associated with M&A related activity and as incurred 
 
 

Reconciliation of Non-GAAP Information

Management uses certain non-GAAP financial measures such as non-GAAP earnings per share, non-GAAP net income, non-GAAP operating expenses and non-GAAP operating margin, which exclude amortization of intangible assets, leasehold related charges, one-time restructuring and acquisition related items, CEO transition related costs, certain litigation charges and non-cash interest expense on convertible notes. Management also uses certain non-GAAP measures which are intended to exclude the impact of foreign exchange currency fluctuations. The measure constant currency is the use of an exchange rate that eliminates fluctuations when calculating financial performance numbers.

The Company also uses measures such as free cash flow, which represents cash flow from operations less cash used in the acquisition and disposition of capital. Additionally, the Company uses an adjusted EBITDA measure which represents earnings before interest, taxes, depreciation and amortization and excludes the impact of stock-based compensation, leasehold related charges, CEO transition related costs, certain litigation liabilities, acquisition related items and other significant one-time items. 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 further and more consistently analyze the period-to-period financial performance of its core business operations. Management believes that providing investors with these non-GAAP measures gives them additional 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 Second Quarter 2015 Results  
GAAP Earnings per Share to Non-GAAP Earnings per Share  
   

(in thousands, except per share data)
  Pre-Tax
Adjustments
 

Net of Tax
 

Earnings Per Share
 
GAAP net income       $ 10,268   $ 0.21  
GAAP impact of change from basic to diluted share count               (0.01 )
GAAP net income, adjusted to diluted share count               0.20  
                   
  Impact of treasury method on convertible notes 1               0.00  
  Amortization of intangible assets   2,974     1,784     0.04  
  Leasehold related charges   159     95     0.00  
  Litigation liability   568     341     0.01  
  CEO transition related costs   110     66     0.00  
  One-time and acquisition related items 2   1,366     820     0.02  
  Non-cash interest expense on convertible notes   3,912     2,347     0.05  
                   
Non-GAAP earnings       $ 15,721     0.31  
                   
                   
GAAP weighted shares outstanding - basic               48,545  
GAAP weighted shares outstanding - diluted               51,681  
Non-GAAP weighted shares outstanding - diluted 1               50,740  
                     
1 Excludes the impact of share dilution of the convertible bond for which the Company has a hedge in place but is considered anti-dilutive under US GAAP in weighted average shares outstanding (941k shares)
2  Acquisition related items include expenses associated with M&A related activity and as incurred
 
 
   
Reconciliation of Year To Date 2015 Results  
GAAP Earnings per Share to Non-GAAP Earnings per Share  
   

(in thousands, except per share data)
  Pre-Tax
Adjustments
   
Net of Tax
   
Earnings Per Share
 
GAAP net income           41,828     $ 0.87  
GAAP impact of change from basic to diluted share count                   (0.06 )
GAAP net income, adjusted to diluted share count                   0.81  
                       
  Impact of treasury method on convertible notes 1                   0.01  
  Amortization of intangible assets   5,970       3,582       0.07  
  Leasehold related charges   3,040       1,824       0.04  
  Litigation liability   (42,007 )     (25,204 )     (0.50 )
  CEO transition related costs   3,470       2,082       0.04  
  One-time and acquisition related items 2   3,385       2,031       0.04  
  Non-cash interest expense on convertible notes   7,754       4,652       0.09  
                       
Non-GAAP earnings         $ 30,795     $ 0.61  
                       
                       
GAAP weighted shares outstanding - basic                   48,269  
GAAP weighted shares outstanding - diluted                   51,700  
Non-GAAP weighted shares outstanding - diluted 1                   50,784  
                       
1  Excludes the impact of share dilution of the convertible bond for which the Company has a hedge in place but is considered anti-dilutive under US GAAP in weighted average shares outstanding (916k shares)
2  Acquisition related items include expenses associated with M&A related activity and as incurred
 
 
 
 
Reconciliation of Second Quarter and Six Months 2015 Results GAAP net income to Adjusted EBITDA
             
             
    Three months ended     Six months ended  
(in thousands, except per share data)   June 30, 2015     June 30, 2015  
GAAP net income   $ 10,268     $ 41,828  
  Interest (income) / expense, net     6,897       13,604  
  Provision for income taxes     8,644       26,529  
  Depreciation and amortization     16,553       32,630  
EBITDA   $ 42,362     $ 114,591  
  Non-cash stock based compensation 1     5,883       12,261  
  Leasehold related charges     159       3,040  
  Litigation liability     568       (42,007 )
  CEO related transition costs     110       3,470  
  One-time and acquisition related items     1,366       3,385  
Adjusted EBITDA   $ 50,448     $ 94,740  
As a percentage of revenue     24.9 %     24.0 %
                 
                 
 
1 Included in CEO related transition costs are $1.2m of stock based compensation charges, which thereby were excluded from the non-cash stock based compensation line in the six months ended
 
 

Investor Conference Call

The Company will hold a conference call today at 4:30 p.m. ET / 1:30 p.m. PT to discuss the results of its second quarter 2015 financial performance. 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 website at www.nuvasive.com.

After the live webcast, the call will remain available on NuVasive's website through August 28, 2015. In addition, a telephone replay of the call will be available until August 4, 2015. 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: 13612991.

About NuVasive

NuVasive is an innovative global medical device company that is changing spine surgery with minimally disruptive surgical products and procedurally-integrated solutions for the spine. NuVasive has emerged from a small startup to become the #3 player in the $9 billion global spine market and remains focused on market share-taking strategies as the Company continues on its path to become the industry's leading spine company. NuVasive offers a comprehensive spine portfolio of more than 90 unique products developed to improve spine surgery and patient outcomes. The Company's principal procedural solution is its Maximum Access Surgery, or MAS®, platform for lateral spine fusion. MAS was designed to provide safe, reproducible, and clinically proven outcomes, and is a highly differentiated solution with fully integrated neuromonitoring, customizable exposure, and a broad offering of application-specific implants and fixation devices designed to address a variety of pathologies.

NuVasive cautions you that statements included in this news release or made on the investor conference call referenced herein 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. In addition, this news release contains selected financial results from the second quarter 2015, as well as financial projections for 2015. The numbers for second quarter 2015 are prior to the completion of review and audit procedures by the Company's external auditors and are subject to adjustment. In addition, the Company's projections for 2015 represent its initial estimates, and are subject to the risk of being inaccurate because of the preliminary nature of the forecasts, the risk of further adjustment, or unanticipated difficulty in selling products or generating expected profitability. 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; the risk of further adjustment to financial results or future financial expectations; unanticipated difficulty in selling products, generating revenue or producing expected profitability; and those other risks and uncertainties more fully described in the Company's news 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.  
Consolidated Statements of Operations  
(in thousands, except per share data)  
   
    Three Months Ended June 30,     Six Months Ended June 30,  
(unaudited)   2015     2014     2015     2014  
Revenue   $ 202,910     $ 190,677     $ 395,293     $ 368,172  
Cost of goods sold (excluding below amortization of intangible assets)     48,415       44,836       94,079       88,130  
Gross profit     154,495       145,841       301,214       280,042  
Operating expenses:                                
  Sales, marketing and administrative     115,317       116,970       231,413       235,074  
  Research and development     8,782       10,067       18,046       19,522  
  Amortization of intangible assets     2,974       3,473       5,970       7,470  
  Impairment of intangible assets     -       10,708       -       10,708  
  Litigation liability (gain) loss     568       -       (42,007 )     30,000  
  Business transition costs     991       -       6,364       -  
Total operating expenses     128,632       141,218       219,786       302,774  
  Interest and other expense, net:                                
  Interest income     344       233       763       450  
  Interest expense     (7,242 )     (6,979 )     (14,368 )     (13,844 )
Other income (expense), net     (281 )     (205 )     143       171  
Total interest and other expense, net     (7,179 )     (6,951 )     (13,462 )     (13,223 )
Income (loss) before income taxes     18,684       (2,328 )     67,966       (35,955 )
Income tax (expense) benefit     (8,644 )     (1,942 )     (26,529 )     13,153  
Consolidated net income (loss)   $ 10,040     $ (4,270 )   $ 41,437     $ (22,802 )
Add back net loss attributable to non-controlling interests   $ (228 )   $ (182 )   $ (391 )   $ (438 )
Net income (loss) attributable to NuVasive, Inc.   $ 10,268     $ (4,088 )   $ 41,828     $ (22,364 )
                                 
Net income (loss) per share attributable to NuVasive, Inc.:                                
  Basic   $ 0.21     $ (0.09 )   $ 0.87     $ (0.48 )
  Diluted   $ 0.20     $ (0.09 )   $ 0.81     $ (0.48 )
Weighted average shares outstanding:                                
  Basic     48,545       46,832       48,269       46,320  
  Diluted     51,681       46,832       51,700       46,320  
                                   
                                   
   
   
NuVasive, Inc.  
Consolidated Balance Sheets  
(in thousands, except par values and share amounts)  
   
   
    June 30,     December 31,  
    2015     2014  
ASSETS   (Unaudited)        
Current assets:            
  Cash and cash equivalents   $ 78,637     $ 142,387  
  Short-term marketable securities     200,052       220,329  
  Restricted cash and investments     32,755       -  
  Accounts receivable, net of allowances of $6,251 and $5,844, respectively     116,835       118,959  
  Inventory, net     163,651       154,638  
  Deferred and prepaid taxes     83,978       59,233  
  Prepaid expenses and other current assets     8,423       10,325  
Total current assets     684,331       705,871  
Property and equipment, net     142,076       128,565  
Long-term marketable securities     27,921       43,042  
Intangible assets, net     89,978       96,555  
Goodwill     154,305       154,443  
Deferred tax assets, non-current     42,035       65,330  
Restricted cash and investments     119,731       123,233  
Other assets     25,388       26,420  
Total assets   $ 1,285,765     $ 1,343,459  
LIABILITIES AND EQUITY                
Current liabilities:                
  Accounts payable and accrued liabilities   $ 61,099     $ 133,324  
  Accrued payroll and related expenses     29,490       38,032  
  Litigation liabilities     41,065       30,000  
  Deferred and income tax liabilities     785       13,543  
Total current liabilities     132,439       214,899  
Senior Convertible Notes     368,501       360,746  
Deferred and income tax liabilities, non-current     9,289       12,526  
Non-current litigation liabilities     87,495       93,700  
Other long-term liabilities     12,679       13,230  
Commitments and contingencies                
Stockholders' equity:                
  Preferred stock, $0.001 par value; 5,000,000 shares authorized, none outstanding     -       -  
  Common stock, $0.001 par value; 120,000,000 shares authorized at June 30, 2015 and December 31, 2014, 51,299,463 and 47,691,744 issued and outstanding at June 30, 2015 and December 31, 2014, respectively    

51
     

48
 
  Additional paid-in capital     940,765       847,145  
  Accumulated other comprehensive loss     (10,970 )     (9,670 )
  Accumulated deficit     (145,110 )     (186,938 )
  Treasury stock at cost; 2,468,592 shares and 233,369 shares at June 30, 2015 and December 31, 2014, respectively    
(117,293
)    
(10,537
)
Total NuVasive, Inc. stockholders' equity     667,443       640,048  
Non-controlling interests     7,919       8,310  
Total equity   $ 675,362     $ 648,358  
Total liabilities and equity   $ 1,285,765     $ 1,343,459  
                 
                 
   
   
NuVasive, Inc.  
Consolidated Statements of Cash Flows  
(in thousands)  
   
    Six Months Ended June 30,  
(Unaudited)   2015     2014  
Operating activities:                
Consolidated net income (loss)   $ 41,437     $ (22,802 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                
  Depreciation and amortization     32,630       31,043  
  Amortization of non-cash interest     8,749       8,081  
  Stock-based compensation     13,493       16,549  
  Impairment of intangible assets     -       10,708  
  Deferred income taxes     19,996       -  
  Reserves on current assets     4,083       2,383  
  Other non-cash adjustments     10,669       4,114  
Changes in operating assets and liabilities, net of effects from acquisitions:                
  Accounts receivable     637       (8,603 )
  Inventory     (15,181 )     (20,930 )
  Prepaid expenses and other current assets     1,182       (2,839 )
  Accounts payable and accrued liabilities     6,841       12,999  
  Income taxes     (38,666 )     (15,111 )
  Accrued royalties     (47,112 )     7,192  
  Litigation liability     4,795       30,000  
  Accrued payroll and related expenses     (8,370 )     (4,473 )
Net cash provided by operating activities     35,183       48,311  
Investing activities:                
Cash paid for acquisitions and investments     (1,357 )     (59 )
Purchase of intangible assets     (28,589 )     -  
Purchases of property and equipment     (47,976 )     (32,560 )
Purchases of marketable securities     (129,549 )     (129,080 )
Sales of marketable securities     164,147       103,650  
Purchases of restricted investments     (62,625 )     -  
Sales of restricted investments     33,809       -  
Net cash used in investing activities     (72,140 )     (58,049 )
Financing activities:                
Incremental tax benefits related to stock-based compensation awards     9,928       -  
Proceeds from the issuance of common stock     8,360       14,193  
Payment of contingent consideration     (514 )     (498 )
Purchase of treasury stock     (43,937 )     (44 )
Other financing activities     (87 )     (644 )
Net cash (used in) provided by financing activities     (26,250 )     13,007  
Effect of exchange rate changes on cash     (543 )     367  
(Decrease) increase in cash and cash equivalents     (63,750 )     3,636  
Cash and cash equivalents at beginning of period     142,387       102,825  
Cash and cash equivalents at end of period   $ 78,637     $ 106,461  

Investor/Media Contact:
Stacy Roughan
NuVasive, Inc.
1-858-909-1812
Email contact

Source: NuVasive, Inc.