nuva-10q_20190630.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                 to                

Commission File Number: 000-50744

 

 

NUVASIVE, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

33-0768598

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

7475 Lusk Boulevard

San Diego, CA 92121

(Address of principal executive offices)

(858) 909-1800

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

NUVA

The NASDAQ Stock Market LLC

(NASDAQ Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period than the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

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. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of July 26, 2019 there were 52,045,996 shares of the registrant’s common stock (par value $0.001 per share) outstanding.

 

 

NuVasive, Inc.

Quarterly Report on Form 10-Q

June 30, 2019

 

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

3

 

Consolidated Balance Sheets

3

 

Consolidated Statements of Operations

4

 

Consolidated Statements of Comprehensive Income (Loss)

5

 

Consolidated Statements of Equity

6

 

Consolidated Statements of Cash Flows

8

 

Notes to Unaudited Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

35

 

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

36

Item 3.

Defaults Upon Senior Securities

36

Item 4.

Mine Safety Disclosures

36

Item 5.

Other Information

36

Item 6.

Exhibits

37

 

SIGNATURES

38

 

 

 

2


Table of Contents

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NUVASIVE, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except par values and share amounts)

 

 

June 30, 2019

 

 

December 31, 2018

 

ASSETS

 

(Unaudited)

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

128,377

 

 

$

117,840

 

Accounts receivable, net of allowances of $16,400 and $16,171, respectively

 

 

207,992

 

 

 

196,487

 

Inventory, net

 

 

297,136

 

 

 

273,244

 

Prepaid income taxes

 

 

16,188

 

 

 

16,905

 

Prepaid expenses and other current assets

 

 

14,617

 

 

 

13,733

 

Total current assets

 

 

664,310

 

 

 

618,209

 

Property and equipment, net

 

 

257,438

 

 

 

238,841

 

Intangible assets, net

 

 

227,545

 

 

 

252,048

 

Goodwill

 

 

561,420

 

 

 

561,366

 

Operating lease right-of-use assets

 

 

62,424

 

 

 

 

Deferred tax assets

 

 

4,885

 

 

 

5,263

 

Restricted cash and investments

 

 

2,394

 

 

 

2,395

 

Other assets

 

 

24,894

 

 

 

29,737

 

Total assets

 

$

1,805,310

 

 

$

1,707,859

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

105,710

 

 

$

105,877

 

Contingent consideration liabilities

 

 

7,892

 

 

 

7,560

 

Accrued payroll and related expenses

 

 

58,492

 

 

 

59,960

 

Operating lease liabilities

 

 

6,471

 

 

 

 

Litigation liabilities

 

 

3,250

 

 

 

1,415

 

Income tax liabilities

 

 

2,823

 

 

 

4,648

 

Total current liabilities

 

 

184,638

 

 

 

179,460

 

Senior convertible notes

 

 

612,762

 

 

 

602,526

 

Deferred and income tax liabilities

 

 

10,269

 

 

 

4,964

 

Operating lease liabilities

 

 

67,753

 

 

 

 

Other long-term liabilities

 

 

67,164

 

 

 

86,384

 

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, 2019 and December 31, 2018, 57,357,083 and 56,648,077 issued and outstanding at June 30, 2019 and December 31, 2018, respectively

 

 

62

 

 

 

61

 

Additional paid-in capital

 

 

1,413,934

 

 

 

1,397,829

 

Accumulated other comprehensive loss

 

 

(8,552

)

 

 

(8,628

)

Retained earnings

 

 

41,589

 

 

 

17,241

 

Treasury stock at cost; 5,327,656 shares and 5,116,496 shares at June 30, 2019 and December 31, 2018, respectively

 

 

(584,309

)

 

 

(571,978

)

Total equity

 

 

862,724

 

 

 

834,525

 

Total liabilities and equity

 

$

1,805,310

 

 

$

1,707,859

 

 

 

See accompanying Notes to Unaudited Consolidated Financial Statements.

 

 

3


Table of Contents

 

NUVASIVE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(unaudited)

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue

 

$

261,381

 

 

$

252,687

 

 

$

505,204

 

 

$

486,202

 

Service revenue

 

 

30,724

 

 

 

28,877

 

 

 

61,677

 

 

 

55,884

 

Total revenue

 

 

292,105

 

 

 

281,564

 

 

 

566,881

 

 

 

542,086

 

Cost of revenue (excluding below amortization of intangible assets)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of products sold

 

 

57,613

 

 

 

58,202

 

 

 

112,099

 

 

 

113,393

 

Cost of services

 

 

19,966

 

 

 

18,854

 

 

 

39,974

 

 

 

37,477

 

Total cost of revenue

 

 

77,579

 

 

 

77,056

 

 

 

152,073

 

 

 

150,870

 

Gross profit

 

 

214,526

 

 

 

204,508

 

 

 

414,808

 

 

 

391,216

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales, marketing and administrative

 

 

152,853

 

 

 

145,658

 

 

 

297,929

 

 

 

292,424

 

Research and development

 

 

17,553

 

 

 

14,856

 

 

 

35,128

 

 

 

29,347

 

Amortization of intangible assets

 

 

12,277

 

 

 

12,628

 

 

 

25,902

 

 

 

25,053

 

Litigation liability (gain) loss

 

 

 

 

 

(1,195

)

 

 

 

 

 

27,800

 

Business transition costs

 

 

1,646

 

 

 

3,998

 

 

 

5,479

 

 

 

6,251

 

Total operating expenses

 

 

184,329

 

 

 

175,945

 

 

 

364,438

 

 

 

380,875

 

Interest and other expense, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

327

 

 

 

116

 

 

 

736

 

 

 

250

 

Interest expense

 

 

(9,650

)

 

 

(9,956

)

 

 

(19,163

)

 

 

(19,423

)

Other income (expense), net

 

 

9

 

 

 

(2,379

)

 

 

(357

)

 

 

(12,082

)

Total interest and other expense, net

 

 

(9,314

)

 

 

(12,219

)

 

 

(18,784

)

 

 

(31,255

)

Income (loss) before income taxes

 

 

20,883

 

 

 

16,344

 

 

 

31,586

 

 

 

(20,914

)

Income tax (expense) benefit

 

 

(5,921

)

 

 

(4,813

)

 

 

(7,238

)

 

 

5,313

 

Consolidated net income (loss)

 

$

14,962

 

 

$

11,531

 

 

$

24,348

 

 

$

(15,601

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.29

 

 

$

0.22

 

 

$

0.47

 

 

$

(0.30

)

Diluted

 

$

0.29

 

 

$

0.22

 

 

$

0.46

 

 

$

(0.30

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

51,967

 

 

 

51,356

 

 

 

51,822

 

 

 

51,292

 

Diluted

 

 

52,460

 

 

 

51,956

 

 

 

52,471

 

 

 

51,292

 

 

See accompanying Notes to Unaudited Consolidated Financial Statements.

 

 

 

4


Table of Contents

 

NUVASIVE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(unaudited)

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Consolidated net income (loss)

 

$

14,962

 

 

$

11,531

 

 

$

24,348

 

 

$

(15,601

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Translation adjustments, net of tax

 

 

570

 

 

 

(4,522

)

 

 

76

 

 

 

(1,943

)

Other comprehensive income (loss)

 

 

570

 

 

 

(4,522

)

 

 

76

 

 

 

(1,943

)

Total consolidated comprehensive income (loss)

 

$

15,532

 

 

$

7,009

 

 

$

24,424

 

 

$

(17,544

)

 

See accompanying Notes to Unaudited Consolidated Financial Statements.

 

5


Table of Contents

 

 

NUVASIVE, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

 

 

 

 

Treasury Stock

 

 

Stockholders'

 

(unaudited)

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Retained Earnings

 

 

Shares

 

 

Amount

 

 

Equity

 

Balance at December 31, 2018

 

 

56,648

 

 

$

61

 

 

$

1,397,829

 

 

$

(8,628

)

 

$

17,241

 

 

 

(5,116

)

 

$

(571,978

)

 

$

834,525

 

Issuance of common stock under employee and director equity option and purchase plans

 

 

399

 

 

 

 

 

 

202

 

 

 

 

 

 

 

 

 

(146

)

 

 

(8,379

)

 

 

(8,177

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,766

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,766

 

Issuance of common stock in connection with royalty milestone achievement

 

 

72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,386

 

 

 

 

 

 

 

 

 

9,386

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(494

)

 

 

 

 

 

 

 

 

 

 

 

(494

)

Balance at March 31, 2019

 

 

57,119

 

 

$

61

 

 

$

1,402,797

 

 

$

(9,122

)

 

$

26,627

 

 

 

(5,262

)

 

$

(580,357

)

 

$

840,006

 

Issuance of common stock under employee and director equity option and purchase plans

 

 

238

 

 

 

1

 

 

 

4,315

 

 

 

 

 

 

 

 

 

(66

)

 

 

(3,952

)

 

 

364

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

6,822

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,822

 

Consolidated net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,962

 

 

 

 

 

 

 

 

 

14,962

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

570

 

 

 

 

 

 

 

 

 

 

 

 

570

 

Balance at June 30, 2019

 

 

57,357

 

 

$

62

 

 

$

1,413,934

 

 

$

(8,552

)

 

$

41,589

 

 

 

(5,328

)

 

$

(584,309

)

 

$

862,724

 

 

See accompanying Notes to Unaudited Consolidated Financial Statements.

6


Table of Contents

 

 

NUVASIVE, INC.

CONSOLIDATED STATEMENTS OF EQUITY – (Continued)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NuVasive, Inc.

 

 

Non-

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Retained Earnings

 

 

Treasury Stock

 

 

Stockholders'

 

 

Controlling

 

 

Total

 

(unaudited)

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

(Accumulated Deficit)

 

 

Shares

 

 

Amount

 

 

Equity

 

 

Interests

 

 

Equity

 

Balance at December 31, 2017

 

 

56,164

 

 

$

60

 

 

$

1,363,549

 

 

$

(6,933

)

 

$

4,762

 

 

 

(5,002

)

 

$

(565,867

)

 

$

795,571

 

 

$

3,845

 

 

$

799,416

 

Issuance of common stock under employee and director equity option and purchase plans

 

 

172

 

 

 

 

 

 

2,012

 

 

 

 

 

 

 

 

 

(76

)

 

 

(3,833

)

 

 

(1,821

)

 

 

 

 

 

(1,821

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,419

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,419

 

 

 

 

 

 

5,419

 

Consolidated net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,132

)

 

 

 

 

 

 

 

 

(27,132

)

 

 

 

 

 

(27,132

)

Consideration paid in excess of non-controlling interests

 

 

 

 

 

 

 

 

(12,221

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,221

)

 

 

 

 

 

(12,221

)

Non-controlling interests