NuVasive Reports Second Quarter 2015 Financial Results

Press Release

SAN DIEGO, CA -- (Marketwired) -- 07/28/15 -- Second Quarter 2015 Highlights:

Revenue increased 6.4% to $202.9 million, or 8.5% on a constant currency basis;
Non-GAAP operating profit margin of 15.3%; GAAP operating profit margin of 12.7%;
Adjusted EBITDA margin of 24.9%;
Non-GAAP net income of $15.7 million; GAAP net income of $10.3 million;
Non-GAAP earnings per share of $0.31; GAAP earnings per share of $0.20; and
Co mpany increases guidance for full year 2015 for non-GAAP operating margin, adjusted EBITDA and earnings per share.

NuVasive, Inc.(NASDAQ: NUVA), a leading medical device company focused on transforming spine surgery with minimally disruptive, procedurally-integrated solutions, announced today financial results for the quarter ended June 30, 2015.

"We are pleased to report another strong quarter that resulted in revenue growth of more than 8% and an impressive 460 basis point increase in profitability, as we continued to take market share and gain momentum in our efforts to improve operational efficiencies," said Gregory T. Lucier, Chairman and Chief Executive Officer of NuVasive. "We are laser-focused on increasing our market share by rapidly developing disruptive technologies and services for spine surgery, expanding our global footprint in existing and new markets, and positioning NuVasive as a commercial powerhouse with integrated sales, service and specialized customer marketing programs. With these efforts underway, we look to move even faster to drive NuVasive's next phase of growth and success, while generating enhanced long-term value for our shareholders."

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

Second Quarter 2015 Results

NuVasive reported second quarter 2015 total revenue of $202.9 million, a 6.4% increase compared to $190.7 million for the second quarter 2014. On a constant currency basis, second quarter 2015 total revenue increased 8.5% compared to the same period last year.

GAAP gross profit for the second quarter 2015 was $154.5 million and gross margin was 76.1% compared to a gross profit of $145.8 million and a gross margin of 76.5% for the second quarter 2014. Total GAAP operating expenses for the second quarter 2015 were $128.6 million compared to $141.2 million in the second quarter 2014.

The Company reported a GAAP net income of $10.3 million, or $0.20 per share, for the second quarter 2015 compared to a GAAP net loss of $(4.1) million, or $(0.09) per share, for the second quarter 2014.

On a non-GAAP basis, the Company reported net income of $15.7 million, or $0.31 per share, for the second quarter 2015 compared to net income of $7.6 million, or $0.15 per share, for the second quarter 2014.

Cash, cash equivalents and short and long-term marketable securities were approximately $306.6 million at June 30, 2015.

Annual Guidance for 2015

The Company provided the following updated projections to its full year 2015 guidance:

Revenue of approximately $810.0 million, which includes an approximate $13.0 million of currency headwinds, or approximately 6.2% growth compared to revenue of $762.4 million for 2014; on a constant currency basis revenue is expected to grow approximately 7.9%; versus a prior expectation of 7.8% for 2015;
GAAP earnings per share of approximately $1.18 compared to GAAP loss per share of ($0.36) for 2014; versus a prior expectation of $1.12 for 2015;
Non-GAAP earnings per share of approximately $1.17, an increase of approximately 74.2% compared to non-GAAP earnings of $0.67 for 2014; versus a prior expectation of $1.10 for 2015;
Non-GAAP operating margin of approximately 15.0%, an increase of approximately 360 basis points compared to 11.4% for 2014; versus a prior expectation of 14.4% for 2015;
Adjusted EBITDA margin of approximately 25.2%, an increase of approximately 330 basis points compared to 21.9% for 2014; versus a prior expectation of 24.6% for 2015;
GAAP effective tax expense rate of approximately 45.0%; versus a prior expectation of 46.0% for 2015; and
Non-GAAP effective tax expense rate of approximately 45.0%; versus a prior expectation of 46.0% for 2015.

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
					2015 Guidance
		2014 Actuals			Prior ¹			Current ²
GAAP earnings (loss) per share		$	(0.36	)	$	1.12		$	1.18
Impact of change from basic to diluted share count			0.02			-			-
Impact of treasury method on convertible notes ³			-			0.03			0.03
Adjusted GAAP earnings (loss) per share, adjusted to diluted share count		$	(0.34	)	$	1.15		$	1.21
	Amortization of intangible assets		0.16			0.14			0.14
	Leasehold related charges		0.13			0.03			0.03
	Litigation liability		0.36			(0.50	)		(0.49	)
	Intangible asset impairment		0.13			-			-
	CEO transition related costs		-			0.04			0.04
	One-time and acquisition related items ⁴		0.05			0.05			0.05
	Non-cash interest expense on convertible notes		0.18			0.19			0.19
Non-GAAP earnings per share		$	0.67		$	1.10		$	1.17

GAAP Weighted shares outstanding - basic			46,715			48,593			48,593
GAAP Weighted shares outstanding - diluted			46,715			52,607			52,607
Non-GAAP Weighted shares outstanding - diluted ³			49,676			51,431			51,431

¹ Effective tax expense rate of ~46% 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 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

⁴ Acquisition related items include expenses associated with M&A related activity and as incurred


Reconciliation of Non-GAAP Operating Margin %

			2015 Guidance
(in thousands, except %)	2014 Actuals		Prior		Current
Non-GAAP Gross Margin % [A]	76.1	%	77.3	%	76.7	%
GAAP Gross Margin [D]	76.1	%	77.3	%	76.7	%

Non-GAAP Sales, Marketing & Administrative Expense [B]	59.9	%	57.9	%	56.9	%
Leasehold related charges	1.4	%	0.4	%	0.4	%
CEO transition related costs	-		0.4	%	0.4	%
One-time and acquisition related items ¹	0.3	%	0.5	%	0.5	%
GAAP Sales, Marketing & Administrative Expense [E]	61.6	%	59.2	%	58.2	%

Non-GAAP Research & Development Expense [C]	4.8	%	5.0	%	4.8	%
One-time and acquisition related items ¹	0.2	%	-		-
GAAP Research & Development Expense [F]	5.0	%	5.0	%	4.8	%

Litigation liability [G]	3.9	%	-5.3	%	-5.2	%
Intangible asset impairment [H]	1.4	%	-		-
Amortization of intangible assets [I]	1.8	%	1.5	%	1.5	%

Non-GAAP Operating Margin % [A-B-C]	11.4	%	14.4	%	15.0	%

GAAP Operating Margin % [D-E-F-G-H-I]	2.4	%	16.9	%	17.4	%

¹ Acquisition related items include expenses associated with M&A related activity and as incurred


Reconciliation of EBITDA %

				2015 Guidance
(in thousands, except %)		2014 Actuals		Prior		Current
Net Income/ (Loss)		-2.2	%	7.3	%	7.7	%
	Interest (income) / expense, net	3.5	%	3.5	%	3.6	%
	Provision for income taxes	0.8	%	6.0	%	6.1	%
	Depreciation and amortization ¹	8.1	%	7.5	%	7.8	%
EBITDA		10.2	%	24.3	%	25.2	%
	Non-cash stock based compensation	4.4	%	4.2	%	3.9	%
	Leasehold related charges	1.4	%	0.4	%	0.4	%
	Litigation liability	3.9	%	-5.3	%	-5.2	%
	Intangible asset impairment	1.4	%	-		-
	CEO transition related costs ²	-		0.4	%	0.4	%
	One-time and acquisition related items ³	0.5	%	0.5	%	0.5	%
Adjusted EBITDA		21.9	%	24.6	%	25.2	%

¹ Included in leasehold related charges are accelerated depreciation as a result of early leasehold terminations, which thereby were excluded from the depreciation line

² Included in CEO transition related costs are $I.2m of stock based compensation charges, which thereby were excluded from the non-cash stock based compensation lines

³ Acquisition related items include expenses associated with M&A related 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 net income, non-GAAP operating expenses and non-GAAP operating margin, which exclude amortization of intangible assets, leasehold related charges, one-time restructuring and acquisition related items, CEO transition related costs, certain litigation charges and non-cash interest expense on convertible notes. 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, leasehold related charges, 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 Second Quarter 2015 Results
GAAP Earnings per Share to Non-GAAP Earnings per Share

(in thousands, except per share data)		Pre-Tax Adjustments	Net of Tax		Earnings Per Share
GAAP net income			$	10,268	$	0.21
GAAP impact of change from basic to diluted share count						(0.01	)
GAAP net income, adjusted to diluted share count						0.20

	Impact of treasury method on convertible notes ¹					0.00
	Amortization of intangible assets	2,974		1,784		0.04
	Leasehold related charges	159		95		0.00
	Litigation liability	568		341		0.01
	CEO transition related costs	110		66		0.00
	One-time and acquisition related items ²	1,366		820		0.02
	Non-cash interest expense on convertible notes	3,912		2,347		0.05

Non-GAAP earnings			$	15,721		0.31


GAAP weighted shares outstanding - basic						48,545
GAAP weighted shares outstanding - diluted						51,681
Non-GAAP weighted shares outstanding - diluted ¹						50,740

¹ 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 (941k shares)

² Acquisition related items include expenses associated with M&A related activity and as incurred


Reconciliation of Year To Date 2015 Results
GAAP Earnings per Share to Non-GAAP Earnings per Share

(in thousands, except per share data)		Pre-Tax Adjustments		Net of Tax			Earnings Per Share
GAAP net income					41,828		$	0.87
GAAP impact of change from basic to diluted share count								(0.06	)
GAAP net income, adjusted to diluted share count								0.81

	Impact of treasury method on convertible notes ¹							0.01
	Amortization of intangible assets	5,970			3,582			0.07
	Leasehold related charges	3,040			1,824			0.04
	Litigation liability	(42,007	)		(25,204	)		(0.50	)
	CEO transition related costs	3,470			2,082			0.04
	One-time and acquisition related items ²	3,385			2,031			0.04
	Non-cash interest expense on convertible notes	7,754			4,652			0.09

Non-GAAP earnings				$	30,795		$	0.61


GAAP weighted shares outstanding - basic								48,269
GAAP weighted shares outstanding - diluted								51,700
Non-GAAP weighted shares outstanding - diluted ¹								50,784

² Acquisition related items include expenses associated with M&A related activity and as incurred



Reconciliation of Second Quarter and Six Months 2015 Results GAAP net income to Adjusted EBITDA


		Three months ended			Six months ended
(in thousands, except per share data)		June 30, 2015			June 30, 2015
GAAP net income		$	10,268		$	41,828
	Interest (income) / expense, net		6,897			13,604
	Provision for income taxes		8,644			26,529
	Depreciation and amortization		16,553			32,630
EBITDA		$	42,362		$	114,591
	Non-cash stock based compensation ¹		5,883			12,261
	Leasehold related charges		159			3,040
	Litigation liability		568			(42,007	)
	CEO related transition costs		110			3,470
	One-time and acquisition related items		1,366			3,385
Adjusted EBITDA		$	50,448		$	94,740
As a percentage of revenue			24.9	%		24.0	%

¹ 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 in the six months ended

Investor Conference Call

The Company will hold a conference call today at 4:30 p.m. ET / 1:30 p.m. PT to discuss the results of its second quarter 2015 financial performance. 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 August 28, 2015. In addition, a telephone replay of the call will be available until August 4, 2015. The replay dial-in numbers are 1-877-870-5176 for domestic callers and 1-858-384-5517 for international callers. Please use pin number: 13612991.

About NuVasive

NuVasive is an innovative global medical device company that is changing spine surgery with minimally disruptive surgical products and procedurally-integrated solutions for the spine. NuVasive has emerged from a small startup to become the #3 player in the $9 billion global spine market and remains focused on market share-taking strategies as the Company continues on its path to become the industry's leading spine company. NuVasive offers a comprehensive spine portfolio of more than 90 unique products developed to improve spine surgery and patient outcomes. The Company's principal procedural solution is its Maximum Access Surgery, or MAS®, platform for lateral spine fusion. MAS was designed to provide safe, reproducible, and clinically proven outcomes, and is a highly differentiated solution with fully integrated neuromonitoring, customizable exposure, and a broad offering of application-specific implants and fixation devices designed to address a variety of pathologies.

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 second quarter 2015, as well as financial projections for 2015. The numbers for second quarter 2015 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 2015 represent its 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 that could cause actual growth and results to differ materially include, but are not limited to: the risk that NuVasive's revenue or earnings projections may turn out to be inaccurate because of the preliminary nature of the forecasts; the risk of further adjustment to financial results or future financial expectations; unanticipated difficulty in selling products, generating revenue or producing expected profitability; and those 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 June 30,						Six Months Ended June 30,
(unaudited)		2015			2014			2015			2014
Revenue		$	202,910		$	190,677		$	395,293		$	368,172
Cost of goods sold (excluding below amortization of intangible assets)			48,415			44,836			94,079			88,130
Gross profit			154,495			145,841			301,214			280,042
Operating expenses:
	Sales, marketing and administrative		115,317			116,970			231,413			235,074
	Research and development		8,782			10,067			18,046			19,522
	Amortization of intangible assets		2,974			3,473			5,970			7,470
	Impairment of intangible assets		-			10,708			-			10,708
	Litigation liability (gain) loss		568			-			(42,007	)		30,000
	Business transition costs		991			-			6,364			-
Total operating expenses			128,632			141,218			219,786			302,774
	Interest and other expense, net:
	Interest income		344			233			763			450
	Interest expense		(7,242	)		(6,979	)		(14,368	)		(13,844	)
Other income (expense), net			(281	)		(205	)		143			171
Total interest and other expense, net			(7,179	)		(6,951	)		(13,462	)		(13,223	)
Income (loss) before income taxes			18,684			(2,328	)		67,966			(35,955	)
Income tax (expense) benefit			(8,644	)		(1,942	)		(26,529	)		13,153
Consolidated net income (loss)		$	10,040		$	(4,270	)	$	41,437		$	(22,802	)
Add back net loss attributable to non-controlling interests		$	(228	)	$	(182	)	$	(391	)	$	(438	)
Net income (loss) attributable to NuVasive, Inc.		$	10,268		$	(4,088	)	$	41,828		$	(22,364	)

Net income (loss) per share attributable to NuVasive, Inc.:
	Basic	$	0.21		$	(0.09	)	$	0.87		$	(0.48	)
	Diluted	$	0.20		$	(0.09	)	$	0.81		$	(0.48	)
Weighted average shares outstanding:
	Basic		48,545			46,832			48,269			46,320
	Diluted		51,681			46,832			51,700			46,320



NuVasive, Inc.
Consolidated Balance Sheets
(in thousands, except par values and share amounts)


		June 30,			December 31,
		2015			2014
ASSETS		(Unaudited)
Current assets:
	Cash and cash equivalents	$	78,637		$	142,387
	Short-term marketable securities		200,052			220,329
	Restricted cash and investments		32,755			-
	Accounts receivable, net of allowances of $6,251 and $5,844, respectively		116,835			118,959
	Inventory, net		163,651			154,638
	Deferred and prepaid taxes		83,978			59,233
	Prepaid expenses and other current assets		8,423			10,325
Total current assets			684,331			705,871
Property and equipment, net			142,076			128,565
Long-term marketable securities			27,921			43,042
Intangible assets, net			89,978			96,555
Goodwill			154,305			154,443
Deferred tax assets, non-current			42,035			65,330
Restricted cash and investments			119,731			123,233
Other assets			25,388			26,420
Total assets		$	1,285,765		$	1,343,459
LIABILITIES AND EQUITY
Current liabilities:
	Accounts payable and accrued liabilities	$	61,099		$	133,324
	Accrued payroll and related expenses		29,490			38,032
	Litigation liabilities		41,065			30,000
	Deferred and income tax liabilities		785			13,543
Total current liabilities			132,439			214,899
Senior Convertible Notes			368,501			360,746
Deferred and income tax liabilities, non-current			9,289			12,526
Non-current litigation liabilities			87,495			93,700
Other long-term liabilities			12,679			13,230
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, 2015 and December 31, 2014, 51,299,463 and 47,691,744 issued and outstanding at June 30, 2015 and December 31, 2014, respectively		51			48
	Additional paid-in capital		940,765			847,145
	Accumulated other comprehensive loss		(10,970	)		(9,670	)
	Accumulated deficit		(145,110	)		(186,938	)
	Treasury stock at cost; 2,468,592 shares and 233,369 shares at June 30, 2015 and December 31, 2014, respectively		(117,293	)		(10,537	)
Total NuVasive, Inc. stockholders' equity			667,443			640,048
Non-controlling interests			7,919			8,310
Total equity		$	675,362		$	648,358
Total liabilities and equity		$	1,285,765		$	1,343,459



NuVasive, Inc.
Consolidated Statements of Cash Flows
(in thousands)

		Six Months Ended June 30,
(Unaudited)		2015			2014
Operating activities:
Consolidated net income (loss)		$	41,437		$	(22,802	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Depreciation and amortization		32,630			31,043
	Amortization of non-cash interest		8,749			8,081
	Stock-based compensation		13,493			16,549
	Impairment of intangible assets		-			10,708
	Deferred income taxes		19,996			-
	Reserves on current assets		4,083			2,383
	Other non-cash adjustments		10,669			4,114
Changes in operating assets and liabilities, net of effects from acquisitions:
	Accounts receivable		637			(8,603	)
	Inventory		(15,181	)		(20,930	)
	Prepaid expenses and other current assets		1,182			(2,839	)
	Accounts payable and accrued liabilities		6,841			12,999
	Income taxes		(38,666	)		(15,111	)
	Accrued royalties		(47,112	)		7,192
	Litigation liability		4,795			30,000
	Accrued payroll and related expenses		(8,370	)		(4,473	)
Net cash provided by operating activities			35,183			48,311
Investing activities:
Cash paid for acquisitions and investments			(1,357	)		(59	)
Purchase of intangible assets			(28,589	)		-
Purchases of property and equipment			(47,976	)		(32,560	)
Purchases of marketable securities			(129,549	)		(129,080	)
Sales of marketable securities			164,147			103,650
Purchases of restricted investments			(62,625	)		-
Sales of restricted investments			33,809			-
Net cash used in investing activities			(72,140	)		(58,049	)
Financing activities:
Incremental tax benefits related to stock-based compensation awards			9,928			-
Proceeds from the issuance of common stock			8,360			14,193
Payment of contingent consideration			(514	)		(498	)
Purchase of treasury stock			(43,937	)		(44	)
Other financing activities			(87	)		(644	)
Net cash (used in) provided by financing activities			(26,250	)		13,007
Effect of exchange rate changes on cash			(543	)		367
(Decrease) increase in cash and cash equivalents			(63,750	)		3,636
Cash and cash equivalents at beginning of period			142,387			102,825
Cash and cash equivalents at end of period		$	78,637		$	106,461

Investor/Media Contact:
Stacy Roughan
NuVasive, Inc.
1-858-909-1812
Email contact

Source: NuVasive, Inc.

NuVasive Investor Relations

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Alert type
NuVasive, Inc. End-of-Day Stock Quote Alert
NuVasive, Inc. SEC Filing Alert
NuVasive, Inc. Event Alert
NuVasive, Inc. All News Alert
NuVasive, Inc. Annual Report Alert