Press Release
Third Quarter 2015 Highlights:
-
Revenue increased 5.6% to
$200.5 million , or 7.8% on a constant currency basis; - Non-GAAP operating profit margin increased 460 basis points to 16.3%; GAAP operating profit margin of 14.0%;
- Adjusted EBITDA margin increased 540 basis points to 26.7%;
-
Non-GAAP net income of
$18.1 million ; GAAP net income of$13.0 million ; -
Non-GAAP diluted earnings per share of
$0.35 ; GAAP diluted earnings per share of$0.24 ; and - Company reiterates 2015 revenue outlook and increases non-GAAP operating profit margin, adjusted EBITDA and EPS guidance
"We are pleased to report another strong quarter in which we achieved revenue growth of nearly 8% on a constant currency basis in line with our mid to high single-digit growth goal and profitability that once again significantly outperformed our expectations," said
"Our performance for the quarter was driven by continued strength in
A full reconciliation of non-GAAP to GAAP measures can be found in the tables of this news release.
Third Quarter 2015 Results
GAAP gross profit for the third quarter 2015 was
The Company reported a GAAP 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 approximately
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%; - GAAP diluted earnings per share of approximately
$1.24 compared to GAAP loss per diluted share of$(0.36) for 2014; versus a prior expectation of$1.18 for 2015; - Non-GAAP diluted earnings per share of approximately
$1.25 , an increase of approximately 86.6% compared to non-GAAP diluted earnings of$0.67 for 2014; versus a prior expectation of$1.17 for 2015; - Non-GAAP operating profit margin of approximately 15.2%, an increase of approximately 380 basis points compared to 11.4% for 2014; versus a prior expectation of 15.0% for 2015;
- Adjusted EBITDA margin of approximately 25.4%, an increase of approximately 350 basis points compared to 21.9% for 2014; versus a prior expectation of 25.2% for 2015;
- GAAP effective tax expense rate of approximately 43.0%; versus a prior expectation of approximately 45.0% for 2015; and
- Non-GAAP effective tax expense rate of approximately 43.0%; versus a prior expectation of approximately 45.0% 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 | ) | $ | 1.18 | $ | 1.24 | ||||||
| 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 | ) | $ | 1.21 | $ | 1.27 | ||||||
| Amortization of intangible assets | 0.16 | 0.14 | 0.14 | ||||||||||
| Leasehold related charges | 0.13 | 0.03 | 0.04 | ||||||||||
| Litigation liability | 0.36 | (0.49 | ) | (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 | 0.06 | ||||||||||
| Non-cash interest expense on convertible notes | 0.18 | 0.19 | 0.19 | ||||||||||
| Non-GAAP earnings per share | $ | 0.67 | $ | 1.17 | $ | 1.25 | |||||||
| 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 ~45% applied to GAAP earnings and ~40% applied to Non-GAAP adjustments
2 Effective tax expense rate of ~43% 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% | 76.7% | 76.3% | |||
| GAAP Gross Margin [D] | 76.1% | 76.7% | 76.3% | |||
| Non-GAAP Sales, Marketing & Administrative Expense [B] | 59.9% | 56.9% | 56.6% | |||
| Leasehold related charges | 1.4% | 0.4% | 0.4% | |||
| CEO transition related costs | 0.0% | 0.4% | 0.4% | |||
| One-time and acquisition related items 1 | 0.3% | 0.5% | 0.7% | |||
| GAAP Sales, Marketing & Administrative Expense [E] | 61.6% | 58.2% | 58.1% | |||
| Non-GAAP Research & Development Expense [C] | 4.8% | 4.8% | 4.5% | |||
| One-time and acquisition related items 1 | 0.2% | 0.0% | 0.0% | |||
| GAAP Research & Development Expense [F] | 5.0% | 4.8% | 4.5% | |||
| Litigation liability [G] | 3.9% | (5.2%) | (5.2%) | |||
| Intangible asset impairment [H] | 1.4% | 0.0% | 0.0% | |||
| Amortization of intangible assets [I] | 1.8% | 1.5% | 1.5% | |||
| Non-GAAP Operating Margin % [A-B-C] | 11.4% | 15.0% | 15.2% | |||
| GAAP Operating Margin % [D-E-F-G-H-I] | 2.4% | 17.4% | 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%) | 7.7% | 8.2% | ||||
| Interest (income) / expense, net | 3.5% | 3.6% | 3.5% | ||||
| Provision for income taxes | 0.8% | 6.1% | 5.8% | ||||
| Depreciation and amortization 1 | 8.1% | 7.8% | 8.0% | ||||
| EBITDA | 10.2% | 25.2% | 25.6% | ||||
| Non-cash stock based compensation | 4.4% | 3.9% | 3.6% | ||||
| Leasehold related charges | 1.4% | 0.4% | 0.4% | ||||
| Litigation liability | 3.9% | (5.2%) | (5.2%) | ||||
| Intangible asset impairment | 1.4% | 0.0% | 0.0% | ||||
| CEO transition related costs 2 | 0.0% | 0.4% | 0.4% | ||||
| One-time and acquisition related items 3 | 0.5% | 0.5% | 0.7% | ||||
| Adjusted EBITDA | 21.9% | 25.2% | 25.4% | ||||
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 related transition costs are
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 Third 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 | 12,960 | $ | 0.26 | |||||||||
| GAAP impact of change from basic to diluted share count | (0.02 | ) | ||||||||||
| GAAP net income, adjusted to diluted share count | 0.24 | |||||||||||
| Impact of treasury method on convertible notes 1 | 0.01 | |||||||||||
| Amortization of intangible assets | 3,067 | 1,840 | 0.04 | |||||||||
| Leasehold related charges | (5 | ) | (3 | ) | (0.00 | ) | ||||||
| Litigation liability | (500 | ) | (300 | ) | (0.01 | ) | ||||||
| CEO transition related costs | 93 | 56 | 0.00 | |||||||||
| One-time and acquisition related items 2 | 1,862 | 1,117 | 0.02 | |||||||||
| Non-cash interest expense on convertible notes | 3,984 | 2,390 | 0.05 | |||||||||
| Non-GAAP earnings | $ | 18,061 | 0.35 | |||||||||
| GAAP weighted shares outstanding - basic | 48,993 | |||||||||||
| GAAP weighted shares outstanding - diluted | 53,199 | |||||||||||
| Non-GAAP weighted shares outstanding - diluted 1 | 51,434 | |||||||||||
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 U.S. GAAP in weighted average shares outstanding (916k shares)
2 Acquisition related items include expenses associated with M&A related activity and as incurred non-recurring items
|
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 | 54,788 | $ | 1.13 | |||||||||
| GAAP impact of change from basic to diluted share count | (0.08 | ) | ||||||||||
| GAAP net income, adjusted to diluted share count | 1.05 | |||||||||||
| Impact of treasury method on convertible notes 1 | 0.02 | |||||||||||
| Amortization of intangible assets | 9,037 | 5,422 | 0.11 | |||||||||
| Leasehold related charges | 3,035 | 1,821 | 0.04 | |||||||||
| Litigation liability | (42,507 | ) | (25,504 | ) | (0.50 | ) | ||||||
| CEO transition related costs | 3,563 | 2,138 | 0.04 | |||||||||
| One-time and acquisition related items 2 | 5,247 | 3,148 | 0.06 | |||||||||
| Non-cash interest expense on convertible notes | 11,738 | 7,043 | 0.14 | |||||||||
| Non-GAAP earnings | $ | 48,856 | $ | 0.96 | ||||||||
| GAAP weighted shares outstanding - basic | 48,513 | |||||||||||
| GAAP weighted shares outstanding - diluted | 52,202 | |||||||||||
| Non-GAAP weighted shares outstanding - diluted 1 | 51,003 | |||||||||||
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 U.S. GAAP in weighted average shares outstanding (916k shares)
2 Acquisition related items include expenses associated with M&A related activity and as incurred non-recurring items
|
Reconciliation of Third Quarter and Nine Months 2015 Results GAAP net income to Adjusted EBITDA |
|||||||||
| Three months ended | Nine months ended | ||||||||
| (in thousands, except per share data) | September 30, 2015 | September 30, 2015 | |||||||
| GAAP net income | $ | 12,960 | $ | 54,788 | |||||
| Interest (income) / expense, net | 6,946 | 20,550 | |||||||
| Provision for income taxes | 8,803 | 35,332 | |||||||
| Depreciation and amortization | 16,375 | 49,005 | |||||||
| EBITDA | $ | 45,084 | $ | 159,675 | |||||
| Non-cash stock based compensation 1 | 7,076 | 19,337 | |||||||
| Leasehold related charges | (5 | ) | 3,035 | ||||||
| Litigation liability | (500 | ) | (42,507 | ) | |||||
| CEO related transition costs | 93 | 3,563 | |||||||
| One-time and acquisition related items | 1,862 | 5,247 | |||||||
| Adjusted EBITDA | $ | 53,610 | $ | 148,350 | |||||
| As a percentage of revenue | 26.7 | % | 24.9 | % | |||||
1 Included in CEO related transition costs are
Investor Conference Call
The Company will hold a conference call today at
After the live webcast, the call will remain available on
About
|
NuVasive, Inc. Consolidated Statements of Operations (in thousands, except per share data) |
|||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
| (unaudited) | 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Revenue | $ | 200,538 | $ | 189,918 | $ | 595,831 | $ | 558,090 | |||||||||
| Cost of goods sold (excluding below amortization of intangible assets) | 49,167 | 47,719 | 143,246 | 135,849 | |||||||||||||
| Gross profit | 151,371 | 142,199 | 452,585 | 422,241 | |||||||||||||
| Operating expenses: | |||||||||||||||||
| Sales, marketing and administrative | 111,384 | 113,746 | 342,797 | 348,820 | |||||||||||||
| Research and development | 9,199 | 9,068 | 27,245 | 28,590 | |||||||||||||
| Amortization of intangible assets | 3,067 | 3,071 | 9,037 | 10,541 | |||||||||||||
| Impairment of intangible assets | - | - | - | 10,708 | |||||||||||||
| Litigation liability (gain) loss | (500 | ) | - | (42,507 | ) | 30,000 | |||||||||||
| Business transition costs | 110 | - | 6,474 | - | |||||||||||||
| Total operating expenses | 123,260 | 125,885 | 343,046 | 428,659 | |||||||||||||
| Interest and other expense, net: | |||||||||||||||||
| Interest income | 362 | 241 | 1,125 | 691 | |||||||||||||
| Interest expense | (7,307 | ) | (6,965 | ) | (21,675 | ) | (20,809 | ) | |||||||||
| Other income (expense), net | 387 | (2,489 | ) | 530 | (2,318 | ) | |||||||||||
| Total interest and other expense, net | (6,558 | ) | (9,213 | ) | (20,020 | ) | (22,436 | ) | |||||||||
| Income (loss) before income taxes | 21,553 | 7,101 | 89,519 | (28,854 | ) | ||||||||||||
| Income tax (expense) benefit | (8,803 | ) | (9,088 | ) | (35,332 | ) | 4,065 | ||||||||||
| Consolidated net income (loss) | $ | 12,750 | $ | (1,987 | ) | $ | 54,187 | $ | (24,789 | ) | |||||||
| Add back net loss attributable to non-controlling interests | $ | (210 | ) | $ | (157 | ) | $ | (601 | ) | $ | (595 | ) | |||||
| Net income (loss) attributable to NuVasive, Inc. | $ | 12,960 | $ | (1,830 | ) | $ | 54,788 | $ | (24,194 | ) | |||||||
| Net income (loss) per share attributable to NuVasive, Inc.: | |||||||||||||||||
| Basic | $ | 0.26 | $ | (0.04 | ) | $ | 1.13 | $ | (0.52 | ) | |||||||
| Diluted | $ | 0.24 | $ | (0.04 | ) | $ | 1.05 | $ | (0.52 | ) | |||||||
| Weighted average shares outstanding: | |||||||||||||||||
| Basic | 48,993 | 46,990 | 48,513 | 46,546 | |||||||||||||
| Diluted | 53,199 | 46,990 | 52,202 | 46,546 | |||||||||||||
|
NuVasive, Inc.
Consolidated Balance Sheets (in thousands, except par values and share amounts) |
|||||||||
| September 30, | December 31, | ||||||||
| 2015 | 2014 | ||||||||
| ASSETS | (Unaudited) | ||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 141,328 | $ | 142,387 | |||||
| Short-term marketable securities | 196,037 | 220,329 | |||||||
| Accounts receivable, net of allowances of $5,849 and $5,844, respectively | 115,579 | 118,959 | |||||||
| Inventory, net | 164,867 | 154,638 | |||||||
| Deferred and prepaid taxes | 73,420 | 59,233 | |||||||
| Prepaid expenses and other current assets | 7,279 | 10,325 | |||||||
| Total current assets | 698,510 | 705,871 | |||||||
| Property and equipment, net | 140,474 | 128,565 | |||||||
| Long-term marketable securities | 113,793 | 43,042 | |||||||
| Intangible assets, net | 86,190 | 96,555 | |||||||
| Goodwill | 154,324 | 154,443 | |||||||
| Deferred tax assets, non-current | 49,614 | 65,330 | |||||||
| Restricted cash and investments | 5,615 | 123,233 | |||||||
| Other assets | 23,444 | 26,420 | |||||||
| Total assets | $ | 1,271,964 | $ | 1,343,459 | |||||
| LIABILITIES AND EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable and accrued liabilities | $ | 63,545 | $ | 133,324 | |||||
| Accrued payroll and related expenses | 32,767 | 38,032 | |||||||
| Litigation liabilities | 937 | 30,000 | |||||||
| Deferred and income tax liabilities | 2,066 | 13,543 | |||||||
| Total current liabilities | 99,315 | 214,899 | |||||||
| Senior Convertible Notes | 372,485 | 360,746 | |||||||
| Deferred and income tax liabilities, non-current | 8,177 | 12,526 | |||||||
| Non-current litigation liabilities | 87,553 | 93,700 | |||||||
| Other long-term liabilities | 12,742 | 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 September 30, 2015 and December 31, 2014, 52,099,475 and 47,691,744 issued and outstanding at September 30, 2015 and December 31, 2014, respectively | 52 | 48 | |||||||
| Additional paid-in capital | 973,481 | 847,145 | |||||||
| Accumulated other comprehensive loss | (11,323 | ) | (9,670 | ) | |||||
| Accumulated deficit | (132,150 | ) | (186,938 | ) | |||||
| Treasury stock at cost; 3,015,033 shares and 233,369 shares at September 30, 2015 and December 31, 2014, respectively | (146,077 | ) | (10,537 | ) | |||||
| Total NuVasive, Inc. stockholders' equity | 683,983 | 640,048 | |||||||
| Non-controlling interests | 7,709 | 8,310 | |||||||
| Total equity | $ | 691,692 | $ | 648,358 | |||||
| Total liabilities and equity | $ | 1,271,964 | $ | 1,343,459 | |||||
|
NuVasive, Inc.
Consolidated Statements of Cash Flows (in thousands) |
|||||||||
| Nine Months Ended September 30, | |||||||||
| (Unaudited) | 2015 | 2014 | |||||||
| Operating activities: | |||||||||
| Consolidated net income (loss) | $ | 54,187 | $ | (24,789 | ) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||
| Depreciation and amortization | 49,006 | 46,521 | |||||||
| Amortization of non-cash interest | 13,255 | 12,244 | |||||||
| Stock-based compensation | 20,570 | 24,779 | |||||||
| Impairment of intangible assets | - | 10,708 | |||||||
| Deferred income taxes | 37,047 | - | |||||||
| Reserves on current assets | 7,232 | 4,062 | |||||||
| Other non-cash adjustments | 13,127 | 11,317 | |||||||
| Changes in operating assets and liabilities, net of effects from acquisitions: | |||||||||
| Accounts receivable | 2,163 | (5,519 | ) | ||||||
| Inventory | (19,768 | ) | (27,190 | ) | |||||
| Prepaid expenses and other current assets | 2,512 | (1,837 | ) | ||||||
| Accounts payable and accrued liabilities | 8,828 | 11,485 | |||||||
| Income taxes | (52,739 | ) | (7,898 | ) | |||||
| Accrued royalties | (46,999 | ) | 12,450 | ||||||
| Litigation liability | (35,333 | ) | 30,000 | ||||||
| Accrued payroll and related expenses | (5,080 | ) | 151 | ||||||
| Net cash provided by operating activities | 48,008 | 96,484 | |||||||
| Investing activities: | |||||||||
| Acquisitions and other investments | (1,357 | ) | (59 | ) | |||||
| Purchases of intangible assets | (28,589 | ) | - | ||||||
| Purchases of property and equipment | (59,905 | ) | (45,692 | ) | |||||
| Proceeds from sales of property and equipment | 40 | - | |||||||
| Purchases of marketable securities | (320,177 | ) | (177,850 | ) | |||||
| Proceeds from sales of marketable securities | 272,666 | 142,051 | |||||||
| Purchases of restricted investments | (62,625 | ) | - | ||||||
| Proceeds from sales of restricted investments | 180,694 | - | |||||||
| Net cash used in investing activities | (19,253 | ) | (81,550 | ) | |||||
| Financing activities: | |||||||||
| Incremental tax benefits related to stock-based compensation awards | 15,185 | - | |||||||
| Proceeds from the issuance of common stock | 9,040 | 15,341 | |||||||
| Payment of contingent consideration | (514 | ) | (498 | ) | |||||
| Purchase of treasury stock | (52,532 | ) | (664 | ) | |||||
| Other financing activities | (131 | ) | (668 | ) | |||||
| Net cash (used in) provided by financing activities | (28,952 | ) | 13,511 | ||||||
| Effect of exchange rate changes on cash | (862 | ) | (613 | ) | |||||
| (Decrease) increase in cash and cash equivalents | (1,059 | ) | 27,832 | ||||||
| Cash and cash equivalents at beginning of period | 142,387 | 102,825 | |||||||
| Cash and cash equivalents at end of period | $ | 141,328 | $ | 130,657 | |||||
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