Press Release
First Quarter 2016 Highlights
- Revenue increased 11.8% to
$215.1 million , or 12.3% on a constant currency basis; - Non-GAAP operating profit margin up 150 basis points to 14.1%; GAAP operating profit margin of 5.7%;
- Non-GAAP diluted earnings per share of
$0.31 ; GAAP diluted loss per share of$0.18 ; - Free cash flow generation of
$39.1 million ; - Completed acquisitions of
Ellipse Technologies and Mega Surgical; and - Enhanced capital structure with convertible notes issuance.
A full reconciliation of GAAP to non-GAAP measures can be found in the tables of this news release.
First Quarter 2016 Results
For the first quarter 2016, GAAP and non-GAAP gross profit was
The Company reported a GAAP net loss of
On a non-GAAP basis, the Company reported net income of
Cash, cash equivalents and short and long-term marketable securities were approximately
Annual Guidance for 2016
The Company provided the following updated projections to its full year 2016 guidance, which contemplates the impact of the
- Revenue of approximately
$928.0 million , or approximately 14.4% growth compared to revenue of$811.1 million for 2015, which includes approximately$53 million of revenue contribution fromEllipse Technologies ; - Non-GAAP diluted earnings per share of approximately
$1.48 , an increase of approximately 12.7% compared to non-GAAP diluted earnings per share of$1.31 for 2015; - Non-GAAP operating profit margin of approximately 15.8%, an increase of approximately 40 basis points compared to 15.4% for 2015;
- Adjusted EBITDA margin of approximately 25.4%, an increase of approximately 20 basis points compared to 25.2% for 2015; and
- Non-GAAP effective tax expense rate of approximately 41.0%.
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 | |||||||||||||
| 2016 Guidance | |||||||||||||
|
2015 Actuals |
Prior 1, 2 | Current 1, 3 | |||||||||||
| GAAP net income per share | $ | 1.26 | $ | 1.02 | $ | 0.20 | |||||||
| Impact of change from basic to diluted share count | 0.03 | 0.05 | - | ||||||||||
| GAAP net income per share, adjusted to diluted Non-GAAP share count | $ | 1.30 | $ | 1.07 | $ | 0.20 | |||||||
| Loss on extinguishment of debt | - | - | 0.34 | ||||||||||
| Non-cash interest expense on convertible notes | 0.31 | 0.32 | 0.38 | ||||||||||
| Amortization of intangible assets | 0.24 | 0.25 | 0.76 | ||||||||||
| One-time and acquisition related items 4 | 0.15 | 0.08 | 0.19 | ||||||||||
| Non-cash purchase accounting adjustments on acquisitions 5 | - | - | 0.29 | ||||||||||
| Leasehold related charges | 0.07 | - | - | ||||||||||
| CEO transition related costs | 0.07 | - | - | ||||||||||
| Litigation liability | (0.82 | ) | - | - | |||||||||
| Tax effect of adjustments 6 | (0.01 | ) | (0.24 | ) | (0.69 | ) | |||||||
| Non-GAAP earnings per share | $ | 1.31 | $ | 1.48 | $ | 1.48 | |||||||
| GAAP Weighted shares outstanding - basic | 48,687 | 49,984 | 49,984 | ||||||||||
| Non-GAAP Weighted shares outstanding - diluted 7 | 51,110 | 52,616 | 51,335 | ||||||||||
| 1 | Prior guidance provided February 11, 2016. Current guidance reflects guidance provided April 26, 2016, as updated for the anticipated impact of the Ellipse Technologies and Mega Surgical acquisitions, the convertible notes issuance (and convertible notes repurchases), as well as expected changes in currency | |
| 2 | Effective tax expense rate of ~42% applied to GAAP earnings and ~41% applied to Non-GAAP earnings | |
| 3 | Effective tax expense rate of ~63% applied to GAAP earnings and ~41% applied to Non-GAAP earnings | |
| 4 | Acquisition related items include expenses associated with M&A related activity and as incurred | |
| 5 | Purchase accounting related items include items which are GAAP related fair value adjustments which are recognized at the time of acquistion and amortized over a reasonable period of time. | |
| 6 | 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 estimated rate of ~41% on a non- GAAP basis. | |
| 7 | 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 | |
| Reconciliation of Non-GAAP Operating Margin % | ||||||
| 2016 Guidance | ||||||
| (in thousands, except %) | 2015 Actuals | Prior 1 | Current 1 | |||
| Non-GAAP Gross Margin % [A] | 76.0% | 76.9% | 77.4% | |||
| Non-cash purchase accounting adjustments on acquisitions 2 | 0.0% | 0.0% | (1.6%) | |||
| GAAP Gross Margin [D] | 76.0% | 76.9% | 75.8% | |||
| Non-GAAP Sales, Marketing & Administrative Expense [B] | 56.4% | 55.5% | 56.0% | |||
| Leasehold related charges | 0.5% | 0.0% | 0.0% | |||
| CEO transition related costs | 0.4% | 0.0% | 0.0% | |||
| One-time and acquisition related items 3 | 0.8% | 0.4% | 1.1% | |||
| GAAP Sales, Marketing & Administrative Expense [E] | 58.1% | 55.9% | 57.2% | |||
| Non-GAAP Research & Development Expense [C] | 4.3% | 5.6% | 5.6% | |||
| One-time and acquisition related items 3 | 0.1% | 0.0% | 0.0% | |||
| GAAP Research & Development Expense [F] | 4.4% | 5.6% | 5.6% | |||
| Litigation liability [G] | (5.2%) | 0.0% | 0.0% | |||
| Amortization of intangible assets [H] | 1.5% | 1.4% | 4.2% | |||
| Non-GAAP Operating Margin % [A-B-C] | 15.4% | 15.8% | 15.8% | |||
| GAAP Operating Margin % [D-E-F-G-H] | 17.1% | 13.8% | 8.7% | |||
| 1 | Prior guidance provided February 11, 2016. Current guidance reflects guidance provided April 26, 2016, as updated for the anticipated impact of the Ellipse Technologies and Mega Surgical acquisitions, the convertible notes issuance (and convertible notes repurchases), as well as expected changes in currency | |
| 2 | Purchase accounting related items include items which are GAAP related fair value adjustments which are recognized at the time of acquistion and amortized over a reasonable period of time. | |
| 3 | Acquisition related items include expenses associated with M&A related activity and as incurred | |
| Reconciliation of EBITDA % | |||||||
| 2016 Guidance | |||||||
|
(in thousands, except %) |
2015 Actuals |
Prior 1 | Current 1 | ||||
| Net Income / (Loss) | 8.2% | 6.1% | 1.1% | ||||
| Interest (income) / expense, net | 3.4% | 3.5% | 6.1% | ||||
| Provision for income taxes | 5.8% | 4.4% | 1.7% | ||||
| Depreciation and amortization 2 | 8.1% | 8.0% | 10.9% | ||||
| EBITDA | 25.4% | 21.9% | 19.8% | ||||
| Non-cash stock based compensation | 3.1% | 3.0% | 3.0% | ||||
| One-time and acquisition related items 3 | 0.9% | 0.4% | 1.1% | ||||
| Non-cash purchase accounting adjustments on acquisitions 4 | 0.0% | 0.0% | 1.6% | ||||
| Leasehold related charges 2 | 0.5% | 0.0% | 0.0% | ||||
| CEO transition related costs 5 | 0.4% | 0.0% | 0.0% | ||||
| Litigation liability | (5.2%) | 0.0% | 0.0% | ||||
| Adjusted EBITDA | 25.2% | 25.4% | 25.4% | ||||
| 1 | Prior guidance provided February 11, 2016. Current guidance reflects guidance provided April 26, 2016, as updated for the anticipated impact of the Ellipse Technologies and Mega Surgical acquisitions, the convertible notes issuance (and convertible notes repurchases), as well as expected changes in currency | |
| 2 | Included in leasehold related charges are accelerated depreciation as a result of early leasehold terminations, which thereby were excluded from the depreciation line | |
| 3 | Acquisition related items include expenses associated with M&A related activity and as incurred | |
| 4 | Purchase accounting related items include items which are GAAP related fair value adjustments which are recognized at the time of acquistion and amortized over a reasonable period of time. | |
| 5 | 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 | |
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, purchase accounting related charges, leasehold related charges, integration related expenses associated with acquired businesses, one-time restructuring and acquisition related items, CEO transition related costs, certain litigation charges, non-cash interest expense and/or losses on convertible notes, and the impact from taxes related to these items, including those taxes that would have occurred in lieu of these items. 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, purchase accounting related changes, leasehold related charges, integration related expenses associated with acquired businesses, 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 First Quarter 2016 Results | |||||||||
| GAAP Net Loss per Share to Non-GAAP Earnings per Share | |||||||||
| (in thousands, except per share data) | Adjustments | Earnings Per Share | |||||||
| GAAP net loss | $ | (8,886 | ) | $ | (0.18 | ) | |||
| GAAP impact of change from basic to diluted share count | 0.01 | ||||||||
| GAAP net loss, adjusted to diluted Non-GAAP share count | $ | (0.17 | ) | ||||||
| Loss on extinguishment of debt | 17,444 | ||||||||
| Non-cash interest expense on convertible notes | 4,310 | ||||||||
| Amortization of intangible assets | 7,549 | ||||||||
| One-time and acquisition related items 1 | 5,257 | ||||||||
| Non-cash purchase accounting adjustments on acquisitions 2 | 4,916 | ||||||||
| Leasehold related charges | 50 | ||||||||
| Tax effect of adjustments 3 | (14,595 | ) | |||||||
| Adjustments to GAAP net loss | 24,931 | 0.49 | |||||||
| Non-GAAP earnings | $ | 16,045 | $ | 0.31 | |||||
| GAAP weighted shares outstanding - basic and diluted | 49,617 | ||||||||
| Non-GAAP weighted shares outstanding - diluted 4 | 50,974 | ||||||||
| 1 | Acquisition related items include expenses associated with M&A related activity which are expensed as incurred. | |
| 2 | 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 | |
| 3 | 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 estimated rate of 40.6% on a non-GAAP basis. The result of these adjustments is a change in the quarterly effective tax rate from 29.8% to 40.6% | |
| 4 | As non-GAAP results are net income, the non-GAAP weighted shares outstanding includes dilution related to the Company's options, employee stock purchase plan and restricted stock units in the amount of1,357k shares that are considered non-dilutive for the net loss under US GAAP | |
| Reconciliation of First Quarter 2016 Results | |||||
| GAAP net loss to Adjusted EBITDA | |||||
| Three months ended | |||||
| (in thousands, except per share data) | March 31, 2016 | ||||
| GAAP net loss | $ | (8,886 | ) | ||
| Interest Expense/(Income), net 1 | 25,588 | ||||
| Provision for income taxes | (3,962 | ) | |||
| Depreciation and Amortization | 20,894 | ||||
| EBITDA | $ | 33,634 | |||
| Non-cash stock based compensation | 4,492 | ||||
| Leasehold realted charges | 50 | ||||
| One-time and acquisition related items | 5,257 | ||||
| Non-cash purchase accounting related charges 2 | 4,916 | ||||
| Adjusted EBITDA | $ | 48,349 | |||
| As a percentage of revenue | 22.5 | % | |||
| 1 | Included in Interest (income) / expense, net is loss on extinguishment of debt for $17.4 million. | |
| 2 | 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 | |
Investor Conference Call
About
| NuVasive, Inc. | ||||||||||
| Consolidated Statements of Operations | ||||||||||
| (in thousands, except per share data) | ||||||||||
| Three Months Ended March 31, | ||||||||||
| (unaudited) | 2016 | 2015 | ||||||||
| Revenue | $ | 215,104 | $ | 192,383 | ||||||
| Cost of goods sold (excluding below amortization of intangible assets) | 54,226 | 45,664 | ||||||||
| Gross profit | 160,878 | 146,719 | ||||||||
| Operating expenses: | ||||||||||
| Sales, marketing and administrative | 130,195 | 116,096 | ||||||||
| Research and development | 10,629 | 9,264 | ||||||||
| Amortization of intangible assets | 7,871 | 2,996 | ||||||||
| Litigation liability (gain) | - | (42,575 | ) | |||||||
| Business transition costs | (50 | ) | 5,373 | |||||||
| Total operating expenses | 148,645 | 91,154 | ||||||||
| Interest and other expense, net: | ||||||||||
| Interest income | 328 | 419 | ||||||||
| Interest expense | (8,472 | ) | (7,126 | ) | ||||||
| Loss on repurchases of convertible notes | (17,444 | ) | - | |||||||
| Other income, net | 50 | 424 | ||||||||
| Total interest and other expense, net | (25,538 | ) | (6,283 | ) | ||||||
| (Loss) income before income taxes | (13,305 | ) | 49,282 | |||||||
| Income tax benefit (expense) | 3,962 | (17,885 | ) | |||||||
| Consolidated net (loss) income | $ | (9,343 | ) | $ | 31,397 | |||||
| Add back net loss attributable to non-controlling interests | $ | (457 | ) | $ | (163 | ) | ||||
| Net (loss) income attributable to NuVasive, Inc. | $ | (8,886 | ) | $ | 31,560 | |||||
| NuVasive, Inc. | ||||||||||
| Consolidated Balance Sheets | ||||||||||
| (in thousands, except par values and share amounts) | ||||||||||
| March 31, 2016 | December 31, 2015 | |||||||||
| ASSETS | (Unaudited) | |||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 270,105 | $ | 192,339 | ||||||
| Short-term marketable securities | 42,495 | 165,423 | ||||||||
| Accounts receivable, net of allowances of $5,856 and $5,320, respectively | 126,088 | 127,595 | ||||||||
| Inventory, net | 200,711 | 168,140 | ||||||||
| Prepaid income taxes | 44,921 | 40,540 | ||||||||
| Prepaid expenses and other current assets | 7,844 | 8,790 | ||||||||
| Total current assets | 692,164 | 702,827 | ||||||||
| Property and equipment, net | 152,988 | 141,441 | ||||||||
| Long-term marketable securities | 18,381 | 112,332 | ||||||||
| Intangible assets, net | 266,089 | 85,076 | ||||||||
| Goodwill | 404,307 | 154,281 | ||||||||
| Deferred tax assets | 8,176 | 67,051 | ||||||||
| Restricted cash and investments | 7,316 | 5,615 | ||||||||
| Other assets | 19,698 | 17,404 | ||||||||
| Total assets | $ | 1,569,119 | $ | 1,286,027 | ||||||
| LIABILITIES AND EQUITY | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable and accrued liabilities | $ | 77,357 | $ | 60,986 | ||||||
| Accrued payroll and related expenses | 30,276 | 37,641 | ||||||||
| Contingent liabilities | 19,497 | - | ||||||||
| Income tax liabilities | 930 | 990 | ||||||||
| Total current liabilities | 128,060 | 99,617 | ||||||||
| Senior convertible notes | 669,398 | 372,920 | ||||||||
| Deferred and income tax liabilities, non-current | 11,496 | 8,602 | ||||||||
| Non-current litigation liabilities | 88,310 | 88,261 | ||||||||
| Other long-term liabilities | 20,170 | 14,425 | ||||||||
| 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 March 31, 2016 and December 31, 2015, 53,418,900 and 52,616,471 issued and outstanding at March 31, 2016 and December 31, 2015, respectively |
53 |
53 |
||||||||
| Additional paid-in capital | 961,206 | 989,387 | ||||||||
| Accumulated other comprehensive loss | (9,079 | ) | (12,112 | ) | ||||||
| Accumulated deficit | (129,533 | ) | (120,647 | ) | ||||||
| Treasury stock at cost; 3,647,690 shares and 3,316,794 shares at March 31, 2016 and December 31, 2015, respectively |
(177,814 |
) |
(161,788 |
) | ||||||
| Total NuVasive, Inc. stockholders' equity | 644,833 | 694,893 | ||||||||
| Non-controlling interests | 6,852 | 7,309 | ||||||||
| Total equity | $ | 651,685 | $ | 702,202 | ||||||
| Total liabilities and equity | $ | 1,569,119 | $ | 1,286,027 | ||||||
| NuVasive, Inc. | ||||||||||||
| Consolidated Statements of Cash Flows | ||||||||||||
| (in thousands) | ||||||||||||
| Three Months Ended March 31, | ||||||||||||
| (unaudited) | 2016 | 2015 | ||||||||||
| Operating activities: | ||||||||||||
| Consolidated net (loss) income | $ | (9,343 | ) | $ | 31,397 | |||||||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||||||
| Depreciation and amortization | 21,224 | 16,051 | ||||||||||
| Loss on repurchases of convertible notes | 17,444 | - | ||||||||||
| Amortization of non-cash interest | 5,112 | 4,331 | ||||||||||
| Stock-based compensation | 4,492 | 7,611 | ||||||||||
| Reserves on current assets | 4,162 | 633 | ||||||||||
| Other non-cash adjustments | 3,491 | 6,172 | ||||||||||
| Deferred income taxes | 1,794 | 11,015 | ||||||||||
| Changes in operating assets and liabilities, net of effects from acquisitions: | ||||||||||||
| Accounts receivable | 6,939 | 5,931 | ||||||||||
| Inventory | (9,449 | ) | (11,367 | ) | ||||||||
| Prepaid expenses and other current assets | 1,303 | 444 | ||||||||||
| Accounts payable and accrued liabilities | 10,040 | 17,428 | ||||||||||
| Accrued royalties | (19 | ) | (47,459 | ) | ||||||||
| Accrued payroll and related expenses | (9,219 | ) | (10,163 | ) | ||||||||
| Litigation liability | - | 7,730 | ||||||||||
| Income taxes | 9,421 | (13,731 | ) | |||||||||
| Net cash provided by operating activities | 57,392 | 26,023 | ||||||||||
| Investing activities: | ||||||||||||
| Acquisition of Ellipse Technologies, net of cash acquired | (380,674 | ) | - | |||||||||
| Other acquisitions and investments | (8,079 | ) | (1,357 | ) | ||||||||
| Purchases of intangible assets | (1,027 | ) | (27,389 | ) | ||||||||
| Purchases of property and equipment | (18,279 | ) | (30,694 | ) | ||||||||
| Purchases of marketable securities | (36,096 | ) | (71,129 | ) | ||||||||
| Proceeds from sales of marketable securities | 253,435 | 105,794 | ||||||||||
| Purchases of restricted investments | - | (32,616 | ) | |||||||||
| Net cash used in investing activities | (190,720 | ) | (57,391 | ) | ||||||||
| Financing activities: | ||||||||||||
| Incremental tax benefits related to stock-based compensation awards | - | 8,092 | ||||||||||
| Proceeds from the issuance of common stock | 444 | 1,403 | ||||||||||
| Payment of contingent consideration | - | (514 | ) | |||||||||
| Purchase of treasury stock | (12,599 | ) | (30,944 | ) | ||||||||
| Proceeds from issuance of convertible debt, net of issuance costs | 634,140 | - | ||||||||||
| Proceeds from sale of warrants | 44,850 | - | ||||||||||
| Purchase of convertible note hedge | (111,150 | ) | - | |||||||||
| Repurchases of convertible notes | (343,835 | ) | - | |||||||||
| Proceeds from revolving line of credit | 50,000 | - | ||||||||||
| Repayments on revolving line of credit | (50,000 | ) | - | |||||||||
| Other financing activities | (1,442 | ) | (45 | ) | ||||||||
| Net cash provided by (used in) financing activities | 210,408 | (22,008 | ) | |||||||||
| Effect of exchange rate changes on cash | 686 | (517 | ) | |||||||||
| Increase (decrease) in cash and cash equivalents | 77,766 | (53,893 | ) | |||||||||
| Cash and cash equivalents at beginning of period | 192,339 | 142,387 | ||||||||||
| Cash and cash equivalents at end of period | $ | 270,105 | $ | 88,494 | ||||||||
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