Press Release
- Second quarter total revenue increased 15.1% to
$190.7 million , movingNuVasive into the #3 spot in the global spine market; - Non-GAAP operating profit margin of 16.0%; GAAP operating margin of 2.4%;
- Non-GAAP earnings of
$13.6 million , or$0.28 per share; GAAP net loss of($4.1) million , or($0.09) per share; - Company increases guidance for full year 2014 revenue, non-GAAP operating profit margin, and non-GAAP earnings per share.
"We are pleased to report results that exceeded our expectations for both revenue and earnings and demonstrated strong progress toward our commitment to increase operational efficiency within
Lukianov continued, "I am exceptionally proud of our ability to maintain the nimbleness that has propelled
A full reconciliation of non-GAAP to GAAP measures can be found in the tables of today's press release.
Second Quarter 2014
GAAP gross profit for the second quarter 2014 was
Total GAAP operating expenses for the second quarter 2014 were
With this intangible asset impairment charge, 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 2014
The Company provided the following updated projections to its full year 2014 guidance:
- Revenue of approximately
$745 million or 9% growth over 2013 revenue of$685 million ; increased from approximately$725 million previously - GAAP Loss per Share of approximately
($0.38) ; compared to Loss per Share of approximately($0.27) previously - Non-GAAP EPS of approximately
$1.11 ; increased from approximately$1.06 previously - Non-GAAP Operating Margin of approximately 16.5%; increased from approximately 16% previously
- GAAP effective tax expense of approximately
$6.0 million ; compared to approximately$6.5 million previously
Supplementary Financial Information
For additional financial detail, please CLICK HERE to access Supplementary Financial Information or visit the Investor Relations section of our website at www.nuvasive.com.
| Reconciliation of Full Year EPS Guidance | ||||||||
| 2014 Guidance | ||||||||
| Prior 1 | Current 2 | |||||||
| GAAP earnings (loss) per share guidance | $ | (0.27 | ) | $ | (0.38 | ) | ||
| Impact of change from basic to diluted share count | 0.01 | 0.02 | ||||||
| GAAP earnings (loss) per share, adjusted to diluted share count | $ | (0.26 | ) | $ | (0.36 | ) | ||
| Non-cash stock based compensation | 0.43 | 0.43 | ||||||
| Litigation liability expense | 0.36 | 0.36 | ||||||
| Amortization of intangible assets | 0.19 | 0.19 | ||||||
| Non-cash interest expense on convertible notes | 0.18 | 0.18 | ||||||
| Intangible asset impairment | - | 0.13 | ||||||
| Leasehold related charges | 0.08 | 0.09 | ||||||
| Certain intellectual property litigation expenses | 0.06 | 0.06 | ||||||
| Acquisition related items 3 | 0.02 | 0.03 | ||||||
| Non-GAAP earnings per share guidance | $ | 1.06 | $ | 1.11 | ||||
| Weighted shares outstanding - basic | 47,500 | 47,500 | ||||||
| Weighted shares outstanding - diluted | 50,000 | 50,000 | ||||||
| 1 | Effective tax expense rate of ~85% 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 | Acquisition related items include expenses associated with prior M&A related activity and as incurred |
| Reconciliation of Non-GAAP Operating Margin % | |||||||||
| 2013 | 2014 Guidance | ||||||||
| Actuals | Prior | Current | |||||||
| Non-GAAP Gross Margin % [A] | 74.8 | % | 76.0 | % | 76.0 | % | |||
| Non-cash stock based compensation | 0.0 | % | 0.0 | % | 0.0 | % | |||
| Out-of-period royalty expense charge | -1.2 | % | 0.0 | % | 0.0 | % | |||
| GAAP Gross Margin [D] | 73.7 | % | 76.0 | % | 76.0 | % | |||
| Non-GAAP Sales, Marketing & Administrative Expense [B] | 55.9 | % | 54.5 | % | 54.5 | % | |||
| Non-cash stock based compensation | 4.6 | % | 4.8 | % | 4.6 | % | |||
| Certain intellectual property litigation expenses | 0.8 | % | 0.7 | % | 0.7 | % | |||
| Leasehold related charges | 0.0 | % | 0.9 | % | 0.9 | % | |||
| Acquisition related items* | 0.0 | % | 0.2 | % | 0.2 | % | |||
| GAAP Sales, Marketing & Administrative Expense [E] | 61.3 | % | 61.1 | % | 60.9 | % | |||
| Non-GAAP Research & Development Expense [C] | 4.1 | % | 5.5 | % | 5.0 | % | |||
| Non-cash stock based compensation | 0.2 | % | 0.2 | % | 0.2 | % | |||
| Acquisition related items* | 0.4 | % | 0.1 | % | 0.2 | % | |||
| GAAP Research & Development Expense [F] | 4.7 | % | 5.8 | % | 5.4 | % | |||
| Litigation liability expense [G] | 0.0 | % | 4.1 | % | 4.1 | % | |||
| Intangible asset impairment [H] | 0.0 | % | 0.0 | % | 1.4 | % | |||
| Amortization of intangible assets [I] | 2.8 | % | 2.2 | % | 2.2 | % | |||
| Non-GAAP Operating Margin % [A-B-C] | 14.9 | % | 16.0 | % | 16.5 | % | |||
| GAAP Operating Margin % [D-E-F-G-H-I] | 4.8 | % | 2.8 | % | 2.0 | % | |||
| * 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, Non-GAAP gross margin, Non-GAAP operating expenses, and Non-GAAP operating margin, which exclude non-cash stock-based compensation, certain intellectual property litigation expenses, amortization of intangible assets, a leasehold related charge, acquisition related items, non-cash interest expense on convertible notes, a litigation liability expense, an out-of-period royalty expense charge, and an intangible asset impairment 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 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 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 Second Quarter 2014 Results | ||||||||||||
| (in thousands, except per share data) | Pre-Tax Adjustments | Net of Tax | Earnings Per Share | |||||||||
| GAAP net loss | $ | (4,088 | ) | $ | (0.09 | ) | ||||||
| Impact of change from basic to diluted share count | 0.01 | |||||||||||
| GAAP net loss, adjusted to diluted share count | $ | (4,088 | ) | (0.08 | ) | |||||||
| Non-cash stock-based compensation | $ | 8,785 | 5,271 | 0.11 | ||||||||
| Certain intellectual property litigation expenses | 1,224 | 734 | 0.02 | |||||||||
| Amortization of intangible assets | 3,473 | 2,084 | 0.04 | |||||||||
| Intangible asset impairment charge | 10,708 | 6,425 | 0.13 | |||||||||
| Leasehold related charges | 524 | 314 | 0.01 | |||||||||
| One-time and acquisition related items | 1,147 | 688 | 0.01 | |||||||||
| Non-cash interest expense on convertible notes | 3,638 | 2,183 | 0.04 | |||||||||
| Non-GAAP earnings | $ | 13,611 | 0.28 | |||||||||
| GAAP weighted shares outstanding - basic and diluted | 46,832 | |||||||||||
| Non-GAAP weighted shares outstanding - diluted | 49,301 | |||||||||||
| Reconciliation of Year To Date 2014 Results | ||||||||||||
| (in thousands, except per share data) | Pre-Tax Adjustments | Net of Tax | Earnings Per Share | |||||||||
| GAAP net loss | $ | (22,364 | ) | $ | (0.49 | ) | ||||||
| Impact of change from basic to diluted share count | 0.04 | |||||||||||
| GAAP net loss, adjusted to diluted share count | $ | (22,364 | ) | (0.45 | ) | |||||||
| Non-cash stock-based compensation | $ | 16,549 | 9,929 | 0.20 | ||||||||
| Certain intellectual property litigation expenses | 2,547 | 1,528 | 0.03 | |||||||||
| Amortization of intangible assets | 7,471 | 4,483 | 0.09 | |||||||||
| Intangible asset impairment charge | 10,708 | 6,425 | 0.13 | |||||||||
| Leasehold related charges | 6,932 | 4,159 | 0.08 | |||||||||
| One-time and acquisition related items | 2,391 | 1,435 | 0.03 | |||||||||
| Non-cash interest expense on convertible notes | 7,210 | 4,326 | 0.09 | |||||||||
| Litigation liability expense | 30,000 | 18,000 | 0.37 | |||||||||
| Non-GAAP earnings | $ | 27,921 | 0.57 | |||||||||
| GAAP weighted shares outstanding - basic and diluted | 46,320 | |||||||||||
| Non-GAAP weighted shares outstanding - diluted | 49,154 | |||||||||||
Conference Call
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About
As the 3rd largest player in the
Having pioneered the lateral approach to spine fusion with our groundbreaking XLIF® procedures,
| NuVasive, Inc. | |||||||||||||||||
| Condensed Consolidated Statements of Operations | |||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
| Revenue | $ | 190,677 | $ | 165,698 | $ | 368,172 | $ | 325,202 | |||||||||
| Cost of goods sold (excluding amortization and impairment of intangible assets) | 44,836 | 48,744 | 88,130 | 87,840 | |||||||||||||
| Gross profit | 145,841 | 116,954 | 280,042 | 237,362 | |||||||||||||
| Operating expenses: | |||||||||||||||||
| Sales, marketing and administrative | 116,970 | 104,272 | 235,074 | 204,158 | |||||||||||||
| Research and development | 10,067 | 7,712 | 19,522 | 17,407 | |||||||||||||
| Amortization of intangible assets | 3,473 | 4,913 | 7,470 | 9,288 | |||||||||||||
| Impairment of intangible assets | 10,708 | - | 10,708 | - | |||||||||||||
| Litigation liability | - | - | 30,000 | - | |||||||||||||
| Total operating expenses | 141,218 | 116,897 | 302,774 | 230,853 | |||||||||||||
| Interest and other expense, net: | |||||||||||||||||
| Interest income | 233 | 231 | 450 | 403 | |||||||||||||
| Interest expense | (6,979 | ) | (6,652 | ) | (13,844 | ) | (13,685 | ) | |||||||||
| Other (expense) income, net | (205 | ) | (440 | ) | 171 | (199 | ) | ||||||||||
| Total interest and other expense, net | (6,951 | ) | (6,861 | ) | (13,223 | ) | (13,481 | ) | |||||||||
| Loss before income taxes | (2,328 | ) | (6,804 | ) | (35,955 | ) | (6,972 | ) | |||||||||
| Income tax expense (benefit) | 1,942 | (76 | ) | (13,153 | ) | (840 | ) | ||||||||||
| Consolidated net loss | $ | (4,270 | ) | $ | (6,728 | ) | $ | (22,802 | ) | $ | (6,132 | ) | |||||
| Net loss attributable to noncontrolling interests | $ | (182 | ) | $ | (259 | ) | $ | (438 | ) | $ | (514 | ) | |||||
| Net loss attributable to NuVasive, Inc. | $ | (4,088 | ) | $ | (6,469 | ) | $ | (22,364 | ) | $ | (5,618 | ) | |||||
| Net loss per share attributable to NuVasive, Inc.: | |||||||||||||||||
| Basic | $ | (0.09 | ) | $ | (0.15 | ) | $ | (0.48 | ) | $ | (0.13 | ) | |||||
| Diluted | $ | (0.09 | ) | $ | (0.15 | ) | $ | (0.48 | ) | $ | (0.13 | ) | |||||
| Weighted average shares outstanding: | |||||||||||||||||
| Basic | 46,832 | 44,412 | 46,320 | 44,220 | |||||||||||||
| Diluted | 46,832 | 44,412 | 46,320 | 44,220 | |||||||||||||
| NuVasive, Inc. | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (in thousands, except par values and share amounts) | ||||||||
| June 30, | December 31, | |||||||
| 2014 | 2013 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 106,461 | $ | 102,825 | ||||
| Short-term marketable securities | 140,849 | 143,449 | ||||||
| Accounts receivable, net of allowances of $4,495 and $3,481, respectively | 112,572 | 104,774 | ||||||
| Inventory, net | 157,361 | 136,937 | ||||||
| Deferred tax assets, current | 37,105 | 37,076 | ||||||
| Income taxes receivable | 21,013 | - | ||||||
| Prepaid expenses and other current assets | 11,774 | 10,947 | ||||||
| Total current assets | 587,135 | 536,008 | ||||||
| Property and equipment, net | 134,863 | 128,064 | ||||||
| Long-term marketable securities | 102,920 | 79,829 | ||||||
| Intangible assets, net | 75,312 | 93,986 | ||||||
| Goodwill | 154,637 | 154,944 | ||||||
| Deferred tax assets, non-current | 46,886 | 42,863 | ||||||
| Restricted cash and investments | 123,140 | 119,195 | ||||||
| Other assets | 29,231 | 24,679 | ||||||
| Total assets | $ | 1,254,124 | $ | 1,179,568 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 102,224 | $ | 86,057 | ||||
| Accrued payroll and related expenses | 26,966 | 31,095 | ||||||
| Current litigation liability | 30,000 | - | ||||||
| Total current liabilities | 159,190 | 117,152 | ||||||
| Senior Convertible Notes | 353,269 | 346,060 | ||||||
| Deferred tax liabilities, non-current | 2,980 | 2,934 | ||||||
| Litigation liability | 93,700 | 93,700 | ||||||
| Other long-term liabilities | 16,674 | 14,844 | ||||||
| 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, 2014 and December 31, 2013, respectively, 46,941,192 and 44,943,233 issued and outstanding at June 30, 2014 and December 31, 2013, respectively | 47 | 45 | ||||||
| Additional paid-in capital | 813,541 | 769,203 | ||||||
| Accumulated other comprehensive loss | (1,299 | ) | (3,238 | ) | ||||
| Accumulated deficit | (192,582 | ) | (170,218 | ) | ||||
| Treasury stock, at cost; 1,285 shares and no shares at June 30, 2014 and December 31, 2013, respectively | (44 | ) | - | |||||
| Total NuVasive, Inc. stockholders' equity | 619,663 | 595,792 | ||||||
| Noncontrolling interests | 8,648 | 9,086 | ||||||
| Total equity | 628,311 | 604,878 | ||||||
| Total liabilities and stockholders' equity | $ | 1,254,124 | $ | 1,179,568 | ||||
| NuVasive, Inc. | |||||||||
| Condensed Consolidated Statements of Cash Flows | |||||||||
| (in thousands) | |||||||||
| Six Months Ended June 30, | |||||||||
| 2014 | 2013 | ||||||||
| (Unaudited) | (Unaudited) | ||||||||
| Operating activities: | |||||||||
| Consolidated net loss | $ | (22,802 | ) | $ | (6,132 | ) | |||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||
| Depreciation and amortization | 31,043 | 30,341 | |||||||
| Amortization of non-cash interest | 8,081 | 7,569 | |||||||
| Stock-based compensation | 16,549 | 15,548 | |||||||
| Impairment of intangible assets | 10,708 | - | |||||||
| Reserves | 2,383 | 1,783 | |||||||
| Other non-cash adjustments | 4,114 | 4,175 | |||||||
| Changes in operating assets and liabilities, net of effects from acquisitions: | |||||||||
| Accounts receivable | (8,603 | ) | (8,443 | ) | |||||
| Inventory | (20,930 | ) | (13,680 | ) | |||||
| Prepaid expenses and other current assets | (2,839 | ) | (1,722 | ) | |||||
| Accounts payable and accrued liabilities | 5,080 | 8,830 | |||||||
| Litigation liability | 30,000 | - | |||||||
| Accrued payroll and related expenses | (4,473 | ) | (5,885 | ) | |||||
| Net cash provided by operating activities | 48,311 | 32,384 | |||||||
| Investing activities: | |||||||||
| Cash paid for business and asset acquisitions | (59 | ) | (7,719 | ) | |||||
| Purchases of property and equipment | (32,560 | ) | (26,209 | ) | |||||
| Purchases of marketable securities | (129,080 | ) | (136,988 | ) | |||||
| Sales of marketable securities | 103,650 | 145,014 | |||||||
| Net cash used in investing activities | (58,049 | ) | (25,902 | ) | |||||
| Financing activities: | |||||||||
| Principal payment of 2013 Senior Convertible Notes | - | (74,311 | ) | ||||||
| Tax benefits related to stock-based compensation awards | - | 1,261 | |||||||
| Proceeds from the issuance of common stock | 14,193 | 3,123 | |||||||
| Purchases of treasury stock | (44 | ) | - | ||||||
| Other financing activities | (1,142 | ) | 26 | ||||||
| Net cash provided by (used in) financing activities | 13,007 | (69,901 | ) | ||||||
| Effect of exchange rate changes on cash | 367 | (1,000 | ) | ||||||
| Increase (decrease) in cash and cash equivalents | 3,636 | (64,419 | ) | ||||||
| Cash and cash equivalents at beginning of year | 102,825 | 123,299 | |||||||
| Cash and cash equivalents at end of year | $ | 106,461 | $ | 58,880 | |||||
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