Press Release
- Third quarter 2013 revenue of
$169.2 million ; up 14.0% from third quarter 2012
- Non-GAAP operating margin of 15.4%
- GAAP net income of
$7.5 million , or$0.16 per share
- Non-GAAP net income of
$18.3 million , or$0.39 per share
- Increases 2013 guidance for revenue, non-GAAP operating margin, and non-GAAP earnings per share
Gross profit for the third quarter 2013 was
Total operating expenses for the third quarter 2013 were
On a GAAP basis, the Company reported net income of
On a Non-GAAP basis, the Company reported net income of
Cash, cash equivalents and short and long-term marketable securities were
2013 Full Year Financial Guidance:
- Revenue of approximately
$670 million , up from prior guidance of$655 million - GAAP earnings per share of approximately
$0.07 , up from prior guidance of a loss per share of($0.09) - Non-GAAP EPS of approximately
$1.14 , up from prior guidance of$1.00 - Non-GAAP Operating Margin of approximately 14.5%, up from prior guidance of 14%
- GAAP effective tax expense rate of approximately 40%, compared to a tax benefit rate of approximately 30% previously
| Reconciliation of Full Year EPS Guidance | ||||||||
| 2013 Guidance | ||||||||
| Prior 1 | Revised 2 | |||||||
| GAAP (loss) earnings per share guidance | $ | (0.09 | ) | $ | 0.07 | |||
| Impact of change from basic to diluted share count | $ | 0.00 | $ | 0.00 | ||||
| GAAP (loss) earnings per share, adjusted to diluted share count | $ | (0.09 | ) | $ | 0.07 | |||
| Non-cash stock based compensation | $ | 0.45 | $ | 0.44 | ||||
| Certain intellectual property litigation expenses | $ | 0.06 | $ | 0.06 | ||||
| Amortization of intangible assets | $ | 0.27 | $ | 0.26 | ||||
| Acquisition related items 3 | $ | 0.03 | $ | 0.03 | ||||
| Non-cash interest expense on convertible notes | $ | 0.18 | $ | 0.18 | ||||
| Out-of-period royalty expense charge | $ | 0.10 | $ | 0.10 | ||||
| Non-GAAP earnings per share guidance | $ | 1.00 | $ | 1.14 | ||||
| Weighted shares outstanding - basic | 45,500 | 44,500 | ||||||
| Weighted shares outstanding - diluted | 46,500 | 46,500 | ||||||
| 1 | Effective tax benefit rate of ~30% applied to GAAP earnings and ~40% expense rate applied to Non-GAAP adjustments |
| 2 | Effective tax expense rate of ~40% applied to GAAP earnings and ~40% expense rate applied to Non-GAAP adjustments |
| 3 | Acquisition related items include expenses associated with prior M&A activity and as incurred |
| Reconciliation of Non-GAAP Operating Margin % | |||||
| 2013 Guidance | |||||
| 2012 Actuals |
Prior | Revised | |||
| Non-GAAP Gross Margin % [A] | 75.3% | ~75.0% | ~75.0% | ||
| Out-of-period royalty expense charge | - | ~(1.2%) | ~(1.2%) | ||
| GAAP Gross Margin [B] | 75.3% | ~73.8% | ~73.8% | ||
| Non-GAAP Operating Expenses [C] | 60.8% | ~61.0% | ~60.5% | ||
| Non-cash stock-based compensation | 4.2% | ~5.5% | ~5.0% | ||
| Certain intellectual property litigation expenses | 0.4% | ~1.0% | ~1.0% | ||
| Amortization of intangible assets | 2.0% | ~3.0% | ~3.0% | ||
| Intangible asset and goodwill impairment charge | 1.5% | - | - | ||
| Acquisition related items* | 0.3% | ~0.3% | ~0.3% | ||
| GAAP Operating Expenses [D] | 69.3% | ~70.8% | ~69.8% | ||
| Non-GAAP Operating Margin % [A-C] | 14.5% | ~14.0% | ~14.5% | ||
| GAAP Operating Margin % [B-D] | 6.0% | ~3.0% | ~4.0% | ||
| * Acquisition related items include expenses associated with prior M&A activity and as incurred |
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, intangible asset and goodwill impairment charges, acquisition related items, non-cash interest expense on convertible notes, and an out-of-period royalty expense charge. 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 Third Quarter 2013 Results | ||||||||||
| (in thousands, except per share data) | Pre-Tax Adjustments | Net of Tax | Earnings Per Share | |||||||
| GAAP net income | $ | 7,511 | $ | 0.16 | ||||||
| Non-cash stock-based compensation | $ | 8,454 | 5,073 | $ | 0.11 | |||||
| Certain intellectual property litigation expenses | 1,074 | 644 | $ | 0.01 | ||||||
| Amortization of intangible assets | 4,974 | 2,985 | $ | 0.06 | ||||||
| Acquisition related items | 17 | 10 | $ | - | ||||||
| Non-cash interest expense on convertible notes | 3,444 | 2,066 | $ | 0.04 | ||||||
| Non-GAAP earnings | $ | 18,289 | $ | 0.39 | ||||||
| Weighted shares outstanding - diluted | 47,220 | |||||||||
| Reconciliation of Year To Date 2013 Results | ||||||||||
| (in thousands, except per share data) | Pre-Tax Adjustments | Net of Tax | Earnings Per Share | |||||||
| GAAP net income | $ | 1,893 | $ | 0.04 | ||||||
| Non-cash stock-based compensation | $ | 24,002 | 14,401 | $ | 0.31 | |||||
| Certain intellectual property litigation expenses | 3,963 | 2,378 | $ | 0.05 | ||||||
| Amortization of intangible assets | 14,263 | 8,558 | $ | 0.18 | ||||||
| Acquisition related items | 2,534 | 1,520 | $ | 0.03 | ||||||
| Non-cash interest expense on convertible notes | 10,148 | 6,089 | $ | 0.13 | ||||||
| Out-of-period royalty expense charge | 7,901 | 4,741 | $ | 0.10 | ||||||
| Non-GAAP earnings | $ | 39,580 | $ | 0.85 | ||||||
| Weighted shares outstanding - diluted | 46,387 | |||||||||
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About
Having pioneered the lateral approach to spine fusion,
| NuVasive, Inc. | |||||||||||||||||
| Unaudited Condensed Consolidated Statements of Operations | |||||||||||||||||
| (in thousands, except per share amounts) | |||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||||||
| Revenue | $ | 169,156 | $ | 148,391 | $ | 494,358 | $ | 454,501 | |||||||||
| Cost of goods sold (excluding amortization of purchased technology) | 43,291 | 37,746 | 131,131 | 111,213 | |||||||||||||
| Gross profit | 125,865 | 110,645 | 363,227 | 343,288 | |||||||||||||
| Operating expenses: | |||||||||||||||||
| Sales, marketing and administrative | 102,085 | 87,410 | 306,243 | 274,703 | |||||||||||||
| Research and development | 7,248 | 7,575 | 24,654 | 26,898 | |||||||||||||
| Amortization of intangible assets | 4,974 | 3,081 | 14,263 | 8,830 | |||||||||||||
| Total operating expenses | 114,307 | 98,066 | 345,160 | 310,431 | |||||||||||||
| Interest and other expense, net: | |||||||||||||||||
| Interest income | 157 | 249 | 560 | 661 | |||||||||||||
| Interest expense | (6,712 | ) | (6,885 | ) | (20,396 | ) | (20,682 | ) | |||||||||
| Other income, net | 3,137 | 260 | 2,937 | 146 | |||||||||||||
| Total interest and other expense, net | (3,418 | ) | (6,376 | ) | (16,899 | ) | (19,875 | ) | |||||||||
| Income before income taxes | 8,140 | 6,203 | 1,168 | 12,982 | |||||||||||||
| Income tax expense | 860 | 4,064 | 20 | 7,764 | |||||||||||||
| Consolidated net income | $ | 7,280 | $ | 2,139 | $ | 1,148 | $ | 5,218 | |||||||||
| Net loss attributable to noncontrolling interests | $ | (231 | ) | $ | (215 | ) | $ | (745 | ) | $ | (672 | ) | |||||
| Net income attributable to NuVasive, Inc. | $ | 7,511 | $ | 2,354 | $ | 1,893 | $ | 5,890 | |||||||||
| Net income per share attributable to NuVasive, Inc.: | |||||||||||||||||
| Basic | $ | 0.17 | $ | 0.05 | $ | 0.04 | $ | 0.14 | |||||||||
| Diluted | $ | 0.16 | $ | 0.05 | $ | 0.04 | $ | 0.13 | |||||||||
| Weighted average shares outstanding: | |||||||||||||||||
| Basic | 44,572 | 43,488 | 44,339 | 43,227 | |||||||||||||
| Diluted | 47,220 | 44,735 | 46,387 | 44,151 | |||||||||||||
| Stock-based compensation is included in expenses in the following categories: | |||||||||||||||||
| Sales, marketing and administrative | $ | 7,965 | $ | 4,844 | $ | 22,667 | $ | 18,723 | |||||||||
| Research and development | 448 | 567 | 1,239 | 1,624 | |||||||||||||
| Cost of goods sold | 41 | 23 | 96 | 53 | |||||||||||||
| $ | 8,454 | $ | 5,434 | $ | 24,002 | $ | 20,400 | ||||||||||
| NuVasive, Inc. | |||||||||
| Condensed Consolidated Balance Sheets | |||||||||
| (in thousands) | |||||||||
| September 30, 2013 | December 31, 2012 | ||||||||
| (Unaudited) | |||||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 100,616 | $ | 123,299 | |||||
| Short-term marketable securities | 109,214 | 138,405 | |||||||
| Accounts receivable, net | 96,208 | 88,958 | |||||||
| Inventory | 140,709 | 126,335 | |||||||
| Deferred tax assets, current | 31,136 | 28,236 | |||||||
| Prepaid expenses and other current assets | 10,100 | 8,516 | |||||||
| Total current assets | 487,983 | 513,749 | |||||||
| Property and equipment, net | 130,796 | 125,123 | |||||||
| Long-term marketable securities | 92,999 | 84,412 | |||||||
| Intangible assets, net | 93,037 | 101,362 | |||||||
| Goodwill | 154,913 | 154,106 | |||||||
| Deferred tax assets | 39,719 | 40,575 | |||||||
| Restricted cash and investments | 119,168 | 118,995 | |||||||
| Other assets | 21,624 | 25,463 | |||||||
| Total assets | $ | 1,140,239 | $ | 1,163,785 | |||||
| LIABILITIES AND EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable and accrued liabilities | $ | 81,820 | $ | 62,048 | |||||
| Accrued payroll and related expenses | 26,117 | 27,916 | |||||||
| Senior Convertible Notes, current | - | 74,311 | |||||||
| Total current liabilities | 107,937 | 164,275 | |||||||
| Senior Convertible Notes | 342,552 | 332,404 | |||||||
| Deferred tax liabilities | 3,143 | 3,129 | |||||||
| Litigation liability | 93,700 | 101,200 | |||||||
| Other long-term liabilities | 14,789 | 15,199 | |||||||
| Commitments and contingencies | |||||||||
| Noncontrolling interests | - | 10,003 | |||||||
| Stockholders' equity: | |||||||||
| Preferred stock | - | - | |||||||
| Common stock | 45 | 44 | |||||||
| Additional paid-in capital | 746,518 | 714,865 | |||||||
| Accumulated other comprehensive (loss) income | (1,476 | ) | 786 | ||||||
| Accumulated deficit | (176,227 | ) | (178,120 | ) | |||||
| Total NuVasive, Inc. stockholders' equity | 568,860 | 537,575 | |||||||
| Noncontrolling interests | 9,258 | - | |||||||
| Total equity | 578,118 | 537,575 | |||||||
| Total liabilities and equity | $ | 1,140,239 | $ | 1,163,785 | |||||
| NuVasive, Inc. | |||||||||
| Unaudited Condensed Consolidated Statements of Cash Flows | |||||||||
| (in thousands) | |||||||||
| Nine Months Ended September 30, | |||||||||
| 2013 | 2012 | ||||||||
| Operating activities: | |||||||||
| Consolidated net income | $ | 1,148 | $ | 5,218 | |||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
| Depreciation and amortization | 46,289 | 38,237 | |||||||
| Amortization of debt discount | 10,148 | 9,435 | |||||||
| Amortization of debt issuance costs | 1,265 | 1,386 | |||||||
| Stock-based compensation | 24,002 | 20,400 | |||||||
| Allowance for doubtful accounts and sales return reserves | 665 | 816 | |||||||
| Allowance for excess and obsolete inventory, net of write-offs | 1,984 | 2,000 | |||||||
| Other non-cash adjustments | 3,881 | 5,002 | |||||||
| Changes in operating assets and liabilities, net of effects from acquisitions: | |||||||||
| Accounts receivable | (8,253 | ) | 8,421 | ||||||
| Inventory | (16,749 | ) | (14,222 | ) | |||||
| Prepaid expenses and other current assets | (2,838 | ) | 13,582 | ||||||
| Accounts payable and accrued liabilities | 10,415 | 9,480 | |||||||
| Accrued payroll and related expenses | (1,824 | ) | (269 | ) | |||||
| Net cash provided by operating activities | 70,133 | 99,486 | |||||||
| Investing activities: | |||||||||
| Cash paid for business and asset acquisitions | (8,019 | ) | (9,838 | ) | |||||
| Purchases of property and equipment | (38,018 | ) | (35,706 | ) | |||||
| Purchases of marketable securities | (164,338 | ) | (192,759 | ) | |||||
| Sales of marketable securities | 183,756 | 193,035 | |||||||
| Purchases of restricted investments | - | (113,331 | ) | ||||||
| Net cash used in investing activities | (26,619 | ) | (158,599 | ) | |||||
| Financing activities: | |||||||||
| Principal payment of 2013 Senior Convertible Notes | (74,311 | ) | - | ||||||
| Tax benefits related to stock-based compensation awards | 5,247 | - | |||||||
| Proceeds from the issuance of common stock | 3,492 | 3,183 | |||||||
| Other assets | (72 | ) | 132 | ||||||
| Net cash (used in) provided by financing activities | (65,644 | ) | 3,315 | ||||||
| Effect of exchange rate changes on cash | (553 | ) | 37 | ||||||
| Decrease in cash and cash equivalents | (22,683 | ) | (55,761 | ) | |||||
| Cash and cash equivalents at beginning of period | 123,299 | 163,492 | |||||||
| Cash and cash equivalents at end of period | $ | 100,616 | $ | 107,731 | |||||
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