nuva-8k_20190331.htm

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 1, 2019

 

NuVasive, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

000-50744

33-0768598

(State or Other Jurisdiction

of Incorporation)

(Commission

File Number)

(I.R.S. Employer

Identification Number)

 

 

 

7475 Lusk Boulevard, San Diego, California 92121

(Address of principal executive offices) (Zip Code)

 

 

 

(858) 909-1800

(Registrant’s telephone number, including area code)

 

 

 

Not Applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 



Item 2.02

Results of Operations and Financial Condition.

 

On May 1, 2019, NuVasive, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended March 31, 2019. A copy of this press release is furnished as Exhibit 99.1 to this Current Report.

 

Item 7.01

Regulation FD Disclosure.

 

During a conference call scheduled to be held at 1:30 p.m. Pacific Time on May 1, 2019, the Company’s Chief Executive Officer and Chief Financial Officer will discuss the Company’s results for the quarter ended March 31, 2019 and the Company’s outlook for the year ending December 31, 2019.

The information contained in this Current Report and the Exhibits hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

 

Item 9.01

Financial Statements and Exhibits.

 

 

(d)

Exhibits.

 

 

Exhibit No.

Description

99.1

Press release issued by NuVasive, Inc. on May 1, 2019

 



SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

NUVASIVE, INC.

 

 

 

Date: May 1, 2019

 

/s/ Rajesh Asarpota

 

 

Rajesh Asarpota

 

 

Executive Vice President and Chief Financial Officer

 

 

nuva-ex991_6.htm

Exhibit 99.1


 

NEWS RELEASE

 

NUVASIVE ANNOUNCES FIRST QUARTER 2019 FINANCIAL RESULTS


SAN DIEGO May 1, 2019 – NuVasive, Inc. (NASDAQ: NUVA), the leader in spine technology innovation, focused on transforming spine surgery with minimally disruptive, procedurally integrated solutions, today announced financial results for the quarter ended March 31, 2019.

First Quarter 2019 Highlights

 

Revenue increased 5.5% to $274.8 million, or 6.4% on a constant currency basis;

 

GAAP operating profit margin of 7.3%; Non-GAAP operating profit margin of 14.9%; and

 

GAAP diluted earnings per share of $0.18; Non-GAAP diluted earnings per share of $0.53.

 

“In the first quarter 2019, NuVasive delivered a solid start to the year with focused execution across our U.S. Spinal Hardware, U.S. Surgical Support and International businesses,” said Chris Barry, chief executive officer of NuVasive. “Coupled with these financial results, we continued to operate the business with rigor and discipline to drive profitability while strategically investing in key growth areas. This includes the recently launched X360 System for lateral single-position surgery integrated with Surgical Intelligence, further differentiation of our Advanced Materials Science portfolio and upcoming launch of the Pulse platform—all which enable our surgeon partners to provide better, more reproducible clinical outcomes for their patients through minimally invasive surgery.”

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

First Quarter 2019 Results

NuVasive reported first quarter 2019 total revenue of $274.8 million, a 5.5% increase compared to $260.5 million for the first quarter 2018. On a constant currency basis, first quarter 2019 total revenue increased 6.4% compared to the same period last year.

For the first quarter 2019, both GAAP and non-GAAP gross profit was $200.3 million and GAAP and non-GAAP gross margin was 72.9%. These results compared to GAAP and non-GAAP gross profit of $186.7 million and $187.1 million, respectively, and GAAP and non-GAAP gross margin of 71.7% and 71.8%, respectively, for the first quarter 2018.

The Company reported GAAP net income of $9.4 million, or diluted earnings per share of $0.18, for the first quarter 2019 compared to a GAAP net loss of $(27.1) million, or diluted loss per share of $(0.53), for the first quarter 2018. On a non-GAAP basis, the Company reported net income of $27.6 million, or diluted earnings per share of $0.53 per share, for the first quarter 2019 compared to net income of $20.6 million, or diluted earnings per share of $0.40 per share, for the first quarter 2018.

Annual Financial Guidance for 2019

The Company reiterated its full-year 2019 guidance:


 

 

 

 

 

 

2019 Guidance Range 1

 

 

 

 

Prior

 

Current

 

 

 

 

GAAP

Non-GAAP

 

GAAP

Non-GAAP

 

 

 

Revenue

$1.14B - $1.16B

 

$1.14B - $1.16B

 

$1.14B - $1.16B

 

$1.14B - $1.16B

 

 

 

  % Growth - Reported

3.5% - 5.5%

 

3.5% - 5.5%

 

3.5% - 5.5%

 

3.5% - 5.5%

 

 

 

% Growth - Constant Currency 2

 

 

3.8% - 5.8%

 

 

 

3.8% - 5.8%

 

 

 

Operating margin

9.5% - 10.0%

 

15.0% - 15.5%

 

9.0% - 9.5%

 

15.0% - 15.5%

 

 

 

Earnings per share

$1.00 - $1.10

 

$2.20 - $2.30

 

$0.95 - $1.05

 

$2.20 - $2.30

 

 

 

EBITDA margin

21.2% - 21.7%

 

25.2% - 25.7%

 

20.9% - 21.3%

 

25.2% - 25.7%

 

 

 

Tax Rate

~24%

 

~23%

 

~22%

 

~23%

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Prior guidance reflects the range provided February 20, 2019. Current guidance reflects the range provided May 1, 2019.

 

2

 

Constant currency is a measure that adjusts US GAAP revenue for the impact of currency over the same period in the prior year.

 

 

The Company estimates revenue for full year 2019 to be in the range of $1.14 billion to $1.16 billion, reflecting reported growth in the range of 3.5% to 5.5%;

 

Non-GAAP earnings per share in a range of $2.20 to $2.30;

 

Non-GAAP operating profit margin of 15.0% to 15.5%;

 

EBITDA margin of 25.2% to 25.7%; and

 

Non-GAAP effective tax expense rate of approximately 23%.

 

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

 

 

 

 

 

 

 

 

 

 

2019 Guidance Range  1, 2

 

 

 

 

 

2018 Actuals 1

 

Prior 3

 

 

Current 4

 

 

 

 

GAAP net income per share

$0.24

 

 

 

$1.00 - 1.10

 

 

$0.95 - 1.05

 

 

 

 

Impact of change to diluted share count

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income per share, adjusted to diluted Non-GAAP share count

$0.24

 

 

 

$1.00 - 1.10

 

 

$0.95 - 1.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business transition costs 5

 

0.22

 

 

 

 

 

 

 

0.10

 

 

 

 

Non-cash purchase accounting adjustments on acquisitions 6

 

0.02

 

 

 

 

 

 

 

 

 

 

 

Non-cash interest expense on convertible notes

 

0.32

 

 

 

 

0.30

 

 

 

0.30

 

 

 

 

Litigation related expenses and settlements 7

 

0.65

 

 

 

 

0.20

 

 

 

0.20

 

 

 

 

Non-recurring consulting fees 8

 

0.12

 

 

 

 

 

 

 

 

 

 

 

Net loss on strategic investments

 

0.07

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

0.97

 

 

 

 

0.90

 

 

 

0.95

 

 

 

 

Purchase of in-process research and development 9

 

0.17

 

 

 

 

 

 

 

 

 

 

 

European medical device regulation 10

 

0.01

 

 

 

 

0.10

 

 

 

0.10

 

 

 

 

Tax effect of adjustments 11

 

(0.56

)

 

 

 

(0.30

)

 

 

(0.40

)

 

 

 

Non-GAAP earnings per share

$2.23

 

 

 

$2.20 - 2.30

 

 

$2.20 - 2.30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Weighted shares outstanding - basic

 

51,382

 

 

 

 

52,017

 

 

 

51,999

 

 

 

 

GAAP Weighted shares outstanding - diluted

 

52,355

 

 

 

 

52,938

 

 

 

52,991

 

 

 

 

Non-GAAP Weighted shares outstanding - diluted 12

 

52,178

 

 

 

 

52,714

 

 

 

52,718

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Items may not foot due to rounding.

 

 

2

 

Prior guidance reflects the range provided February 20, 2019. Current guidance reflects the range provided May 1, 2019.

 

 

3

 

Effective tax expense rate of ~24% applied to GAAP earnings and ~23% applied to Non-GAAP earnings.

 

 

4

 

Effective tax expense rate of ~22% applied to GAAP earnings and ~23% applied to Non-GAAP earnings.

 

 

5

 

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.

 

 

6

 

Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.

 

 

7

 

Represents the loss recorded in connection with the settlement of the Madsen Medical, Inc. litigation matter, as well as expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company’s intellectual property.

 

 

8

 

Non-recurring consulting fees associated with the implementation of our state tax-planning strategy.

 

 

9

 

Purchase of an in-process research and development asset which had no future alternative use.

 

 

10

 

Represents costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.

 

 

11

 

The impact on results from taxes include tax effecting the adjustments above at the statutory rate as well as taking into account discrete items and including those discrete items in the annual effective tax rate calculation. The Company also includes those adjustments that would have benefited the tax rate in lieu of the above adjustments as part of the Company’s tax filings. The impact of the changes to the tax rate results in an annual rate of ~43% benefit on a GAAP basis and ~18% on a non-GAAP basis in 2018.

 

 

12

 

Adjusted non-GAAP diluted WASO excludes the impact of dilutive convertible notes and warrants for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.

 

 

 


 

Reconciliation of Non-GAAP Operating Margin %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019 Guidance Range 1, 2

 

 

 

 

(in thousands, except %)

 

2018 Actuals 1

 

 

Prior

 

 

Current

 

 

 

 

Non-GAAP Gross Margin % [A]

 

71.9%

 

 

72.5% - 73.0%

 

 

72.5% - 73.0%

 

 

 

 

Non-cash purchase accounting adjustments on acquisitions 3

 

(0.1%)

 

 

0.0%

 

 

0.0%

 

 

 

 

GAAP Gross Margin [B]

 

71.8%

 

 

72.5% - 73.0%

 

 

72.5% - 73.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Sales, Marketing & Administrative Expense [C]

 

51.1%

 

 

51.0% - 52.0%

 

 

51.0% - 52.0%

 

 

 

 

Non-recurring consulting fees 4

 

0.6%

 

 

0.0%

 

 

0.0%

 

 

 

 

Litigation related expenses 5

 

0.6%

 

 

0.7%

 

 

0.7%

 

 

 

 

GAAP Sales, Marketing & Administrative Expense [D]

 

52.3%

 

 

51.7% - 52.7%

 

 

51.7% - 52.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP and Non-GAAP Research & Development Expense [E]

 

5.6%

 

 

6.0%

 

 

6.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Litigation related settlements [F] 6

 

2.5%

 

 

0.0%

 

 

0.0%

 

 

 

 

Amortization of intangible assets [G]

 

4.6%

 

 

4.2%

 

 

4.3%

 

 

 

 

Purchase of in-process research and development [H] 7

 

0.8%

 

 

0.0%

 

 

0.0%

 

 

 

 

European medical device regulation [I] 8

 

0.0%

 

 

0.6%

 

 

0.6%

 

 

 

 

Business transition costs [J] 9

 

1.0%

 

 

0.0%

 

 

0.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Operating Margin % [A - C - E]

 

15.1%

 

 

15.0% - 15.5%

 

 

15.0% - 15.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Operating Margin % [B - D - E - F - G - H - I - J]

 

4.9%

 

 

9.5% - 10.0%

 

 

9.0% - 9.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Items may not foot due to rounding.

 

 

2

 

Prior guidance reflects the range provided February 20, 2019. Current guidance reflects the range provided May 1, 2019.

 

 

3

 

Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.

 

 

4

 

Non-recurring consulting fees associated with the implementation of our state tax-planning strategy.

 

 

5

 

Expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company’s intellectual property.

 

 

6

 

Represents the loss recorded in connection with the settlement of the Madsen Medical, Inc. litigation matter.

 

 

7

 

Purchase of an in-process research and development asset which had no future alternative use.

 

 

8

 

Represents costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.

 

 

9

 

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.

 

 

 


 

Reconciliation of EBITDA Margin %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019 Guidance Range 1, 5

 

 

 

 

(in thousands, except %)

2018 Actuals 1, 2

 

 

Prior 3

 

 

Current 4

 

 

 

 

Net Income

1.1%

 

 

4.6% - 5.0%

 

 

4.3% - 4.8%

 

 

 

 

Interest income / expense, net

3.4%

 

 

3.3%

 

 

3.3%

 

 

 

 

Income tax benefit / (expense)

(0.3%)

 

 

1.5%

 

 

1.3%

 

 

 

 

Depreciation and amortization

11.8%

 

 

11.7%

 

 

12.0%

 

 

 

 

EBITDA Margin

16.0%

 

 

21.2% - 21.7%

 

 

20.9% - 21.3%

 

 

 

 

Non-cash stock based compensation

2.3%

 

 

2.7%

 

 

2.6%

 

 

 

 

Business transition costs 6

1.0%

 

 

0.0%

 

 

0.4%

 

 

 

 

Non-cash purchase accounting adjustments on acquisitions 7

0.1%

 

 

0.0%

 

 

0.0%

 

 

 

 

Litigation related expenses and settlements 8

3.1%

 

 

0.7%

 

 

0.7%

 

 

 

 

Non-recurring consulting fees 9

0.6%

 

 

0.0%

 

 

0.0%

 

 

 

 

In-process research and development 10

0.8%

 

 

0.0%

 

 

0.0%

 

 

 

 

European medical device regulation 11

0.0%

 

 

0.6%

 

 

0.6%

 

 

 

 

Net loss on strategic investments

0.3%

 

 

0.0%

 

 

0.0%

 

 

 

 

Adjusted EBITDA Margin

24.3%

 

 

25.2% - 25.7%

 

 

25.2% - 25.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Items may not foot due to rounding.

 

 

 

 

 

 

 

 

 

 

 

 

2

 

Effective tax expense rate of ~43% benefit applied to GAAP earnings and ~18% applied to Non-GAAP earnings.

 

 

3

 

Effective tax expense rate of ~24% applied to GAAP earnings and ~23% applied to Non-GAAP earnings.

 

 

4

 

Effective tax expense rate of ~22% applied to GAAP earnings and ~23% applied to Non-GAAP earnings.

 

 

5

 

Prior guidance reflects the range provided February 20, 2019. Current guidance reflects the range provided May 1, 2019.

 

 

6

 

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.

 

 

7

 

Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.

 

 

8

 

Represents the loss recorded in connection with the settlement of the Madsen Medical, Inc. litigation matter, as well as expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company’s intellectual property.

 

 

9

 

Non-recurring consulting fees associated with the implementation of our state tax-planning strategy.

 

 

10

 

Purchase of an in-process research and development asset which had no future alternative use.

 

 

11

 

Represents costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.

 

 


 

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 profit margin, which exclude amortization of intangible assets, business transition costs, purchased in-process research and development, one-time restructuring and related items in connection with acquisitions, investments and divestitures, non-recurring consulting fees, certain litigation expenses and settlements, certain European medical device regulation costs, gains and losses from strategic investments, and non-cash interest expense (excluding debt issuance cost). Management also uses certain non-GAAP measures which are intended to exclude the impact of foreign exchange currency fluctuations. The measure constant currency utilizes 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, business transition costs, purchased in-process research and development, one-time restructuring and related items in connection with acquisitions, investments and divestitures, non-recurring consulting fees, certain litigation expenses and settlements, certain European medical device regulation costs, gains and losses on strategic investments, 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.

During the quarter ended June 30, 2018, the Company began excluding from its non-GAAP financial results certain litigation related expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company's intellectual property. For consistency and comparability, the Company has re-casted non-GAAP financial results for each of the quarters ended Dec. 31, 2017 and March 31, 2018 to exclude these litigation expenses in such periods, which were $0.4 million and $0.6 million, respectively.

 


 

 

 

For the Three Months Ended March 31, 2019

 

 

 

 

Reconciliation of GAAP to Non-GAAP Financial Measures

 

 

 

 

(Unaudited - in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

Operating Profit

 

Net Income

 

Diluted EPS

 

Diluted WASO 5

 

Net Income to Adjusted EBITDA

 

 

 

 

Reported GAAP

$

200,282

 

$

20,173

 

$

9,386

 

$

0.18

 

 

52,480

 

$

9,386

 

 

 

 

% of revenue

 

72.9

%

 

7.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

 

 

13,625

 

 

13,625

 

 

 

 

 

 

 

 

 

 

 

 

 

Litigation related expenses and settlements 1

 

 

 

 

3,046

 

 

3,046

 

 

 

 

 

 

 

 

3,046

 

 

 

 

Business transition costs 2

 

 

 

 

3,833

 

 

3,833

 

 

 

 

 

 

 

 

3,833

 

 

 

 

European medical device regulation 3

 

 

 

 

332

 

 

332

 

 

 

 

 

 

 

 

332

 

 

 

 

Non-cash interest expense on convertible notes

 

 

 

 

 

 

 

4,319

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax effect of adjustments 4

 

 

 

 

 

 

 

(6,933

)

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense/(income), net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,104

 

 

 

 

Income tax expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,317

 

 

 

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34,054

 

 

 

 

Non-cash stock based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,717

 

 

 

 

Adjusted Non-GAAP

$

200,282

 

$

41,009

 

$

27,608

 

$

0.53

 

 

52,480

 

$

66,789

 

 

 

 

% of revenue

 

72.9

%

 

14.9

%

 

 

 

 

 

 

 

 

 

 

24.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Represents expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company’s intellectual property.

 

 

2

 

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.

 

 

3

 

Represents costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.

 

 

4

 

Represents the impact from tax affecting the adjustments above at their statutory tax rate. As of May 1, 2019, the Company estimated an annual tax rate of ~22% on a GAAP basis and ~23% on a non-GAAP basis.

 

 

5

 

Adjusted non-GAAP diluted WASO excludes the impact of dilutive convertible notes and warrants for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.

 

 

 


 

 

 

For the Three Months Ended March 31, 2018

 

 

 

 

Reconciliation of GAAP to Non-GAAP Financial Measures

 

 

 

 

(Unaudited - in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

Operating Profit (Loss)

 

Net Income (Loss)

 

Diluted EPS

 

Diluted WASO 6

 

Net Income (Loss) to Adjusted EBITDA

 

 

 

 

Reported GAAP

$

186,708

 

$

(18,222

)

$

(27,132

)

$

(0.53

)

 

51,226

 

$

(27,132

)

 

 

 

% of revenue

 

71.7

%

 

(7.0

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash purchase accounting adjustments on acquisitions 1

 

405

 

 

405

 

 

405

 

 

 

 

 

 

 

 

405

 

 

 

 

Non-recurring consulting fees 2

 

 

 

 

6,084

 

 

6,084

 

 

 

 

 

 

 

 

6,084

 

 

 

 

Amortization of intangible assets

 

 

 

 

12,425

 

 

12,425

 

 

 

 

 

 

 

 

 

 

 

 

 

Litigation related expenses and settlements 3

 

 

 

 

29,586

 

 

29,586

 

 

 

 

 

 

 

 

29,586

 

 

 

 

Business transition costs 4

 

 

 

 

2,253

 

 

2,253

 

 

 

 

 

 

 

 

2,253

 

 

 

 

Non-cash interest expense on convertible notes

 

 

 

 

 

 

 

4,099

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss on strategic investments

 

 

 

 

 

 

 

9,004

 

 

 

 

 

 

 

 

9,004

 

 

 

 

Tax effect of adjustments 5

 

 

 

 

 

 

 

(16,109

)

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense/(income), net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,333

 

 

 

 

Income tax benefit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,126

)

 

 

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32,090

 

 

 

 

Non-cash stock based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,134

 

 

 

 

Adjusted Non-GAAP

$

187,113

 

$

32,531

 

$

20,615

 

$

0.40

 

 

51,742

 

$

55,631

 

 

 

 

% of revenue

 

71.8

%

 

12.5

%

 

 

 

 

 

 

 

 

 

 

21.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.

 

 

2

 

Non-recurring consulting fees associated with the implementation of our state tax-planning strategy.

 

 

3

 

Represents the loss recorded in connection with the settlement of the Madsen Medical, Inc. litigation matter, as well as expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company’s intellectual property.

 

 

4

 

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.

 

 

5

 

Represents the impact from tax affecting the adjustments above at their statutory tax rate. As of May 1, 2018, the Company estimated an annual tax rate of ~31% on a GAAP basis and ~23% on a non-GAAP basis.

 

 

6

 

Adjusted non-GAAP diluted WASO excludes the impact of dilutive convertible notes and warrants for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.

 

 

 


 

Investor Conference Call

NuVasive will hold a conference call today at 4:30 p.m. ET / 1:30 p.m. PT to discuss the results of its financial performance for the first quarter 2019. 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 May 31, 2019. In addition, a telephone replay of the call will be available until May 8, 2019. The replay dial-in numbers are 1-844-512-2921 for domestic callers and 1-412-317-6671 for international callers. Please use pin number: 13689332.

About NuVasive

NuVasive, Inc. (NASDAQ: NUVA) is the leader in spine technology innovation, focused on transforming spine surgery and beyond with minimally disruptive, procedurally integrated solutions designed to deliver reproducible and clinically-proven surgical outcomes. The Company's portfolio includes access instruments, implantable hardware, biologics, software systems for surgical planning, navigation and imaging solutions, magnetically adjustable implant systems for spine and orthopedics, and intraoperative monitoring service offerings. With more than $1 billion in revenues, NuVasive has approximately 2,600 employees and operates in more than 50 countries serving surgeons, hospitals and patients. For more information, please visit www.nuvasive.com.

Forward-Looking Statements

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 first quarter 2019, as well as projections for 2019 financial guidance and longer-term financial performance goals. The Company's results for the first quarter 2019 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 2019 financial guidance and longer-term financial performance goals represent 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 which contribute to the uncertain nature of these statements include, among others, risks associated with acceptance of the Company's surgical products and procedures by spine surgeons, development and acceptance of new products or product enhancements, clinical and statistical verification of the benefits achieved via the use of NuVasive's products (including the iGA® platform), the Company's ability to effectually manage inventory as it continues to release new products, its ability to recruit and retain management and key personnel, and the 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 March 31,

 

(unaudited)

 

2019

 

 

2018

 

Revenue

 

 

 

 

 

 

 

 

Product revenue

 

$

243,823

 

 

$

233,515

 

Service revenue

 

 

30,953

 

 

 

27,007

 

Total revenue

 

 

274,776

 

 

 

260,522

 

Cost of revenue (excluding below amortization of intangible assets)

 

 

 

 

 

 

 

 

Cost of products sold

 

 

54,486

 

 

 

55,191

 

Cost of services

 

 

20,008

 

 

 

18,623

 

Total cost of revenue

 

 

74,494

 

 

 

73,814

 

Gross profit

 

 

200,282

 

 

 

186,708

 

Operating expenses:

 

 

 

 

 

 

 

 

Sales, marketing and administrative

 

 

145,076

 

 

 

146,766

 

Research and development

 

 

17,575

 

 

 

14,491

 

Amortization of intangible assets

 

 

13,625

 

 

 

12,425

 

Litigation liability loss

 

 

 

 

 

28,995

 

Business transition costs

 

 

3,833

 

 

 

2,253

 

Total operating expenses

 

 

180,109

 

 

 

204,930

 

Interest and other expense, net:

 

 

 

 

 

 

 

 

Interest income

 

 

409

 

 

 

134

 

Interest expense

 

 

(9,513

)

 

 

(9,467

)

Other (expense) income, net

 

 

(366

)

 

 

(9,703

)

Total interest and other expense, net

 

 

(9,470

)

 

 

(19,036

)

Income (loss) before income taxes

 

 

10,703

 

 

 

(37,258

)

Income tax (expense) benefit

 

 

(1,317

)

 

 

10,126

 

Consolidated net income (loss)

 

$

9,386

 

 

$

(27,132

)

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.18

 

 

$

(0.53

)

Diluted

 

$

0.18

 

 

$

(0.53

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

51,675

 

 

 

51,226

 

Diluted

 

 

52,480

 

 

 

51,226

 

 


 

NuVasive, Inc.

 

Consolidated Balance Sheets

 

(in thousands, except par values and share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019

 

 

December 31, 2018

 

ASSETS

 

(unaudited)

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

93,391

 

 

$

117,840

 

Accounts receivable, net of allowances of $16,125 and $16,171, respectively

 

 

194,358

 

 

 

196,487

 

Inventory, net

 

 

288,539

 

 

 

273,244

 

Prepaid income taxes

 

 

16,484

 

 

 

16,905

 

Prepaid expenses and other current assets

 

 

13,555