Press Release
SAN DIEGO, CA, Oct 28, 2010 (MARKETWIRE via COMTEX) --
NuVasive, Inc. (NASDAQ: NUVA)
-- Total revenue of $120.3 million, up 27% over third quarter 2009
-- GAAP earnings of $8.5 million, or $0.21 per share; Non-GAAP earnings of
$18.4 million, or $0.46 per share
-- Non-GAAP operating margin of 16.6%, up from 15.8% for second quarter
2010
NuVasive, Inc. (NASDAQ: NUVA), a medical device company focused on developing products for minimally disruptive surgical treatments for the spine, announced today financial results for the quarter ended September 30, 2010.
NuVasive reported third quarter revenue of $120.3 million, a 26.7% increase over the $94.9 million for the third quarter 2009 and a 0.6% increase over the $119.6 million for the second quarter 2010.
Gross profit for the third quarter 2010 was $98.7 million and gross margin was 82.1%, compared to a gross profit of $79.0 million and a gross margin of 83.3% for the third quarter 2009. For the second quarter 2010, gross profit was $98.6 million and gross margin was 82.4%.
Total GAAP operating expenses for the third quarter 2010 were $89.1 million compared to $73.0 million in the third quarter 2009 and $90.3 million in the second quarter 2010.
On a GAAP basis, the Company reported net income of $8.5 million, or $0.21 per share, for the third quarter 2010.
On a Non-GAAP basis, the Company reported net income of $18.4 million, or $0.46 per share, for the third quarter 2010. The Non-GAAP earnings per share calculations for the third quarter exclude on a pre-tax basis (i) intellectual property litigation costs of $1.2 million; (ii) acquisition related costs of $0.6 million; (iii) stock-based compensation of $7.3 million; and (iv) amortization of intangible assets of $1.3 million.
Cash, cash equivalents and short and long-term marketable securities were $216.8 million at September 30, 2010. Operating cash flow was $18.5 million for the third quarter 2010.
Alex Lukianov, Chairman and Chief Executive Officer, said, "We achieved revenue growth of over 25% and excellent profit margin expansion in spite of very challenging conditions in the spine market. Although the procedural slowdown in the spine market had a greater impact on our results than we anticipated, we are optimistic that the factors pressuring volumes will be transitory in nature, and that the procedures being delayed will ultimately be performed. As we navigate through this downturn, we will continue to grow at multiples of the market by remaining laser focused on being the most creative spine technology company in the world and achieving exceptional results through speed of innovation, Absolute Responsiveness(R), and superior clinical outcomes. We have the team, the vision, and the determination to achieve our goal of $1 billion in revenue with increasing profitability."
Updated Full Year 2010 Financial Guidance:
-- Revenue of $470 to $475 million; down from $485 to $495 million
previously
-- GAAP EPS, net of tax and "If-converted" method, of $1.61 to $1.64;
down from $1.77 to $1.87 previously
-- Non-GAAP EPS, net of tax and "If-converted" method, of $1.42 to $1.45;
down from $1.50 to $1.60 previously
-- Non-GAAP Operating Margin of approximately 15.5%; down from
approximately 17% previously
Reconciliation of Full Year 2010 Guidance
(Net of Tax, "If Converted" method)
Range for Year Ending
December 31, 2010
------------------------
(in thousands, except per share amounts) Low High
GAAP earnings per share $ 1.61 $ 1.64
Non-cash stock-based compensation 0.55 0.55
Intellectual property litigation expenses 0.10 0.10
Acquisition related items 0.03 0.03
Amortization of intangible assets 0.11 0.11
Reversal of remaining valuation allowance (0.98) (0.98)
----------- -----------
Non-GAAP earnings per share $ 1.42 $ 1.45
=========== ===========
Weighted shares outstanding - Diluted 46,000 46,000
=========== ===========
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, intellectual property litigation expenses, acquisition related items, and the amortization of intangible assets. 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 2010 Results
pre-tax
(in thousands, except per share) adjustments $ (net of tax) per share
------------- ------------- -------------
GAAP net income $ 8,542 $ 0.21
Non-cash stock-based
compensation $ 7,321 6,882 0.17
Intellectual property
litigation expenses 1,175 1,105 0.03
Acquisition related items 629 591 0.01
Amortization of intangible
assets 1,342 1,261 0.03
------------- -------------
Non-GAAP earnings $ 18,381 $ 0.46
============= =============
Weighted average shares - Diluted 40,396
=============
Reconciliation of Non-GAAP Operating Margin %
Guidance
FY 10
-----------
Gross Margin % [A] ~ 82%
Non-GAAP Research and Development [B] ~ 8%
Non-cash stock-based compensation ~ 1%
-----------
Total research and development ~ 9%
Non-GAAP Sales, Marketing and Administrative [C] ~ 58.5%
Non-cash stock-based compensation ~ 5%
Intellectual property litigation expenses ~ 1%
Acquisition related items as incurred
-----------
Total sales, marketing and administrative ~ 64%
Amortization of intangible assets ~ 1%
-----------
Non-GAAP Operating Margin % [A-B-C] ~ 15.5%
-----------
2010 Tax Adjustments & WASO Guidance (millions)
Q1 - Q3 Q4 FY10
---------- ---------- ----------
Effective Tax Rate (ETR)* ~ 8.5% ~ 12% ~ 12%
Reversal of remaining valution
allowance ~($ 45.0) ~($ 45.0)
Weighted average shares - Diluted 41.0 ~ 46.0 ~ 46.0
* ETR to be used on a pre-tax income prior to reversal of remaining
valuation allowance
Conference Call
NuVasive will hold a conference call today at 5:30 p.m. ET / 2:30 p.m. PT to discuss the results. The dial-in numbers are 1-877-407-4018 for domestic callers and 1-201-689-8471 for international callers. A live webcast of the conference call will be available online from the investor relations page of the Company's corporate website at www.nuvasive.com.
After the live webcast, the call will remain available on NuVasive's website, www.nuvasive.com, through November 27, 2010. In addition, a telephonic replay of the call will be available until November 11, 2010. The replay dial-in numbers are 1-877-870-5176 for domestic callers and 1-858-384-5517 for international callers. Please use replay pin number 357132.
About NuVasive
NuVasive is a medical device company focused on the design, development, and marketing of products for the surgical treatment of spine disorders. The Company's product portfolio is focused primarily on the $5.1 billion U.S. spine implant market. Additionally, the Company has expanded into the $1.7 billion global biologics market, the $1.7 billion international market, and is developing products for the emerging motion preservation market.
NuVasive's principal product offering is based on its Maximum Access Surgery, or MAS(R) platform. The MAS platform combines four categories of products that collectively minimize soft tissue disruption during spine surgery with maximum visualization and safe, easy reproducibility for the surgeon: NeuroVision(R), a proprietary software-driven nerve avoidance system; MaXcess(R), a unique split-blade retractor system; a wide variety of specialized implants; and several biologic fusion enhancers. MAS significantly reduces surgery time and returns patients to activities of daily living much faster than conventional approaches. Having redefined spine surgery with the MAS platform's lateral approach, known as eXtreme Lateral Interbody Fusion, or XLIF(R), NuVasive has built an entire spine franchise. With over 65 products today spanning lumbar, thoracic and cervical applications, the Company will continue to expand and evolve its offering predicated on its R&D focus and dedication to outstanding service levels supported by a culture of Absolute Responsiveness(R).
NuVasive cautions you that statements included in this press release 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. 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 and the risk of further adjustment, or unanticipated difficulty in selling products or generating expected profitability; the risk that NuVasive may not be successful appealing the verdict related to the brand name NeuroVision; the uncertain process of seeking regulatory approval or clearance for NuVasive's products or devices, including risks that such process could be significantly delayed; the possibility that the FDA may require significant changes to NuVasive's products or clinical studies; the risk that products may not perform as intended and may therefore not achieve commercial success; the risk that competitors may develop superior products or may have a greater market position enabling more successful commercialization; the risk that additional clinical data may call into question the benefits of NuVasive's products to patients, hospitals and surgeons; and other risks and uncertainties more fully described in NuVasive's press 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.
Unaudited Condensed Consolidated Statement of Operations
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Revenue $ 120,262 $ 94,916 $ 348,933 $ 263,405
Cost of goods sold (excluding
amortization of purchased
technology) 21,580 15,874 62,037 43,108
--------- --------- --------- ---------
Gross profit 98,682 79,042 286,896 220,297
Operating expenses:
Sales, marketing and
administrative 77,717 61,720 230,104 182,521
Research and development 10,085 9,874 31,989 26,638
Amortization of intangible
assets 1,342 1,364 4,047 4,072
--------- --------- --------- ---------
Total operating expenses 89,144 72,958 266,140 213,231
Interest and other income
(expense), net:
Interest income 200 203 567 1,318
Interest expense (1,668) (1,609) (5,005) (5,439)
Other income (expense), net (6) 188 81 324
--------- --------- --------- ---------
Total interest and other income
(expense), net (1,474) (1,218) (4,357) (3,797)
--------- --------- --------- ---------
Income before income taxes 8,064 4,866 16,399 3,269
Income tax (benefit) expense (40) 430 1,399 1,053
--------- --------- --------- ---------
Consolidated net income $ 8,104 $ 4,436 $ 15,000 $ 2,216
========= ========= ========= =========
Net loss attributable to
noncontrolling interests $ (438) $ (628) $ (1,353) $ (1,311)
========= ========= ========= =========
Net income attributable to
NuVasive, Inc. $ 8,542 $ 5,064 $ 16,353 $ 3,527
========= ========= ========= =========
Net income per share
attributable to NuVasive,
Inc.:
Basic $ 0.22 $ 0.13 $ 0.42 $ 0.10
========= ========= ========= =========
Diluted $ 0.21 $ 0.13 $ 0.40 $ 0.09
========= ========= ========= =========
Weighted average shares:
Basic 39,394 37,733 39,180 37,008
========= ========= ========= =========
Diluted 40,396 39,216 40,389 38,384
========= ========= ========= =========
Stock-based compensation is
included in operating expenses
in the following categories:
Sales, marketing and
administrative $ 6,494 $ 4,265 $ 18,846 $ 14,748
Research and development 827 901 2,458 3,417
--------- --------- --------- ---------
$ 7,321 $ 5,166 $ 21,304 $ 18,165
========= ========= ========= =========
NuVasive, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
September 30, December 31,
2010 2009
------------- -------------
ASSETS Unaudited
Current assets:
Cash and cash equivalents $ 70,590 $ 65,413
Short-term marketable securities 106,546 99,279
Accounts receivable, net 71,617 58,462
Inventory 98,789 90,191
Prepaid expenses and other current assets 4,520 3,757
------------- -------------
Total current assets 352,062 317,102
Property and equipment, net 101,120 82,602
Long-term marketable securities 39,629 39,968
Intangible assets, net 101,670 103,338
Goodwill 101,938 101,938
Other assets 14,470 7,872
------------- -------------
Total assets $ 710,889 $ 652,820
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 43,798 $ 33,302
Accrued payroll and related expenses 13,191 19,111
Royalties payable 2,619 2,334
------------- -------------
Total current liabilities 59,608 54,747
Senior convertible notes 230,000 230,000
Long-term acquisition related liabilities 31,264 30,694
Other long-term liabilities 29,480 27,528
Commitments and contingencies
Noncontrolling interests 12,276 13,629
Stockholders' equity:
Common stock 39 39
Additional paid-in capital 520,948 485,757
Accumulated other comprehensive income 621 126
Accumulated deficit (173,347) (189,700)
------------- -------------
Total stockholders' equity 348,261 296,222
------------- -------------
Total liabilities and stockholders' equity $ 710,889 $ 652,820
============= =============
NuVasive, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Nine Months Ended
September 30,
--------------------
2010 2009
--------- ---------
Operating activities:
Consolidated net income $ 15,000 $ 2,216
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 27,404 22,005
Stock-based compensation 21,304 18,165
Lease abandonment charge reversal - (1,997)
Amortization of debt issuance costs 1,120 1,065
Allowance for doubtful accounts and sales return
reserve, net of write offs (1,039) 1,175
Allowance for excess and obsolete inventory 1,682 2,470
Amortization of premium/discount on marketable
securities 890 62
Other non-cash adjustments 2,604 1,121
Changes in operating assets and liabilities, net
of effects from acquisitions:
Accounts receivable (11,465) (329)
Inventory (10,043) (19,027)
Prepaid expenses and other current assets (3,878) 788
Accounts payable and accrued liabilities 6,316 7,361
Accrued payroll and related expenses (5,973) (2,209)
--------- ---------
Net cash provided by operating activities 43,922 32,866
Investing activities:
Cash paid for acquisitions and investments - (44,055)
Purchases of property and equipment (36,622) (21,250)
Purchases of marketable securities (150,045) (64,642)
Sales of marketable securities 142,313 89,336
Other assets (659) -
--------- ---------
Net cash used in investing activities (45,013) (40,611)
Financing activities:
Issuance of common stock 12,768 9,618
Other assets (7,722) -
Tax benefits related to stock based
compensation awards 1,118 -
--------- ---------
Net cash provided by financing activities 6,164 9,618
Effect of exchange rate changes on cash 104 85
--------- ---------
Increase in cash and cash equivalents 5,177 1,958
Cash and cash equivalents at beginning of period 65,413 132,318
--------- ---------
Cash and cash equivalents at end of period $ 70,590 $ 134,276
========= =========
Contact: Michael J. Lambert EVP & Chief Financial Officer NuVasive, Inc. 858-909-1998 Email Contact Investors: Patrick F. Williams Vice President, Finance & Investor Relations NuVasive, Inc. 858-638-5511 Email Contact Media: Jason Rando The Ruth Group 646-536-7025 Email Contact
SOURCE: NuVasive, Inc.
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