SOURCE: NuVasive, Inc.

NuVasive, Inc.

October 29, 2013 16:30 ET

NuVasive Announces Third Quarter 2013 Financial Results

SAN DIEGO, CA--(Marketwired - Oct 29, 2013) - NuVasive, Inc. (NASDAQ: NUVA)

  • Third quarter 2013 revenue of $169.2 million; up 14.0% from third quarter 2012
  • Non-GAAP operating margin of 15.4%
  • GAAP net income of $7.5 million, or $0.16 per share
  • Non-GAAP net income of $18.3 million, or $0.39 per share
  • Increases 2013 guidance for revenue, non-GAAP operating margin, and non-GAAP earnings per share

NuVasive, Inc. (NASDAQ: NUVA), a medical device company focused on developing minimally disruptive surgical products and procedures for the spine, announced today financial results for the quarter ended September 30, 2013.

NuVasive reported third quarter 2013 revenue of $169.2 million, a 14.0% increase over the $148.4 million for the third quarter 2012.

Gross profit for the third quarter 2013 was $125.9 million and gross margin was 74.4%, compared to a gross profit of $110.6 million and a gross margin of 74.6% for the third quarter 2012. 

Total operating expenses for the third quarter 2013 were $114.3 million compared to $98.1 million for the third quarter 2012. The higher operating expenses in the third quarter 2013 resulted primarily from additional costs associated with international infrastructure expansion and higher revenue.

On a GAAP basis, the Company reported net income of $7.5 million, or $0.16 per share, for the third quarter 2013. 

On a Non-GAAP basis, the Company reported net income of $18.3 million, or $0.39 per share, for the third quarter 2013. The Non-GAAP earnings per share calculations for the third quarter exclude: (i) non-cash stock-based compensation of $8.5 million; (ii) certain intellectual property litigation expenses of $1.1 million; (iii) amortization of intangible assets of $5.0 million; (iv) acquisition related items of $17 thousand; and (v) non-cash interest expense on convertible notes of $3.4 million.

Cash, cash equivalents and short and long-term marketable securities were $303 million at September 30, 2013.

Alex Lukianov, Chairman and Chief Executive Officer, said, "The execution of our market share taking strategy has been outstanding through the first three quarters of 2013, and we are pleased to be increasing full year revenue and non-GAAP operating margin guidance to reflect solid outperformance. We are building on the momentum established at Eurospine and at NASS to close this year well and kick off 2014 with continued strategic execution!"

2013 Full Year Financial Guidance:

  • Revenue of approximately $670 million, up from prior guidance of $655 million
  • GAAP earnings per share of approximately $0.07, up from prior guidance of a loss per share of ($0.09)
  • Non-GAAP EPS of approximately $1.14, up from prior guidance of $1.00
  • Non-GAAP Operating Margin of approximately 14.5%, up from prior guidance of 14%
  • GAAP effective tax expense rate of approximately 40%, compared to a tax benefit rate of approximately 30% previously
           
 
Reconciliation of Full Year EPS Guidance
           
    2013 Guidance
    Prior 1     Revised 2
GAAP (loss) earnings per share guidance   $ (0.09 )   $ 0.07
Impact of change from basic to diluted share count   $ 0.00     $ 0.00
GAAP (loss) earnings per share, adjusted to diluted share count   $ (0.09 )   $ 0.07
  Non-cash stock based compensation   $ 0.45     $ 0.44
  Certain intellectual property litigation expenses   $ 0.06     $ 0.06
  Amortization of intangible assets   $ 0.27     $ 0.26
  Acquisition related items 3   $ 0.03     $ 0.03
  Non-cash interest expense on convertible notes   $ 0.18     $ 0.18
  Out-of-period royalty expense charge   $ 0.10     $ 0.10
Non-GAAP earnings per share guidance   $ 1.00     $ 1.14
               
Weighted shares outstanding - basic     45,500       44,500
Weighted shares outstanding - diluted     46,500       46,500
               
   
1 Effective tax benefit rate of ~30% applied to GAAP earnings and ~40% expense rate applied to Non-GAAP adjustments
2 Effective tax expense rate of ~40% applied to GAAP earnings and ~40% expense rate applied to Non-GAAP adjustments
3 Acquisition related items include expenses associated with prior M&A activity and as incurred
   
   
Reconciliation of Non-GAAP Operating Margin %
           
      2013 Guidance
  2012 
Actuals
Prior   Revised
Non-GAAP Gross Margin % [A] 75.3%   ~75.0%   ~75.0%
Out-of-period royalty expense charge -   ~(1.2%)   ~(1.2%)
GAAP Gross Margin [B] 75.3%   ~73.8%   ~73.8%
           
Non-GAAP Operating Expenses [C] 60.8%   ~61.0%   ~60.5%
Non-cash stock-based compensation 4.2%   ~5.5%   ~5.0%
Certain intellectual property litigation expenses 0.4%   ~1.0%   ~1.0%
Amortization of intangible assets 2.0%   ~3.0%   ~3.0%
Intangible asset and goodwill impairment charge 1.5%   -   -
Acquisition related items* 0.3%   ~0.3%   ~0.3%
GAAP Operating Expenses [D] 69.3%   ~70.8%   ~69.8%
           
Non-GAAP Operating Margin % [A-C] 14.5%   ~14.0%   ~14.5%
GAAP Operating Margin % [B-D] 6.0%   ~3.0%   ~4.0%
 
* 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, which exclude non-cash stock-based compensation, certain intellectual property litigation expenses, amortization of intangible assets, intangible asset and goodwill impairment charges, acquisition related items, non-cash interest expense on convertible notes, and an out-of-period royalty expense 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 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 2013 Results
             
(in thousands, except per share data)   Pre-Tax Adjustments   Net of Tax   Earnings Per Share
GAAP net income         $ 7,511   $ 0.16
  Non-cash stock-based compensation   $ 8,454     5,073   $ 0.11
  Certain intellectual property litigation expenses     1,074     644   $ 0.01
  Amortization of intangible assets     4,974     2,985   $ 0.06
  Acquisition related items     17     10   $ -
  Non-cash interest expense on convertible notes     3,444     2,066   $ 0.04
                   
Non-GAAP earnings         $ 18,289   $ 0.39
                   
                   
Weighted shares outstanding - diluted                 47,220
                   
                   
     
             
Reconciliation of Year To Date 2013 Results
             
(in thousands, except per share data)   Pre-Tax Adjustments   Net of Tax   Earnings Per Share
GAAP net income         $ 1,893   $ 0.04
  Non-cash stock-based compensation   $ 24,002     14,401   $ 0.31
  Certain intellectual property litigation expenses     3,963     2,378   $ 0.05
  Amortization of intangible assets     14,263     8,558   $ 0.18
  Acquisition related items     2,534     1,520   $ 0.03
  Non-cash interest expense on convertible notes     10,148     6,089   $ 0.13
  Out-of-period royalty expense charge     7,901     4,741   $ 0.10
                   
Non-GAAP earnings         $ 39,580   $ 0.85
                   
Weighted shares outstanding - diluted                 46,387
                   
                   

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 1-877-407-9039 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 corporate website at www.nuvasive.com.

After the live webcast, the call will remain available on NuVasive's website, www.nuvasive.com through November 28, 2013. In addition, a telephone replay of the call will be available until November 12, 2013. 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: 419918.

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. The Company is the 4th largest player in the $8.2 billion global spine market.

NuVasive offers a comprehensive spine portfolio of over 80 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 provides 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.

Having pioneered the lateral approach to spine fusion, NuVasive continues to be at the forefront of the spine industry's shift toward less invasive solutions. The Company's dedication to innovation continues to spawn game changing technology such as the PCM® motion preserving disc for the cervical spine, XLIF® Corpectomy for tumor and trauma, and Armada®, which treats adult degenerative scoliosis in a less invasive fashion. The Company has also developed procedural solutions that completely redefine and improve upon traditional procedures like TLIF, PLIF, Posterior Fixation, and ALIF. NuVasive's solutions are increasingly being adopted internationally, as the Company lays the groundwork to continue growing as a global business and to offer industry-leading, Absolutely Responsive customer service to surgeons world-wide. NuVasive is focused on becoming a $1 Billion Start-Up™; taking market share by maintaining a commitment to Superior Clinical Outcomes, Speed of Innovation®, and Absolute Responsiveness®.

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; the risk of further adjustment to financial results or future financial expectations; unanticipated difficulty in selling products, generating revenue or producing expected profitability; 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 Statements of Operations  
(in thousands, except per share amounts)  
   
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2013     2012     2013     2012  
                         
Revenue   $ 169,156     $ 148,391     $ 494,358     $ 454,501  
Cost of goods sold (excluding amortization of purchased technology)     43,291       37,746       131,131       111,213  
Gross profit     125,865       110,645       363,227       343,288  
                                 
Operating expenses:                                
  Sales, marketing and administrative     102,085       87,410       306,243       274,703  
  Research and development     7,248       7,575       24,654       26,898  
  Amortization of intangible assets     4,974       3,081       14,263       8,830  
Total operating expenses     114,307       98,066       345,160       310,431  
                                 
Interest and other expense, net:                                
  Interest income     157       249       560       661  
  Interest expense     (6,712 )     (6,885 )     (20,396 )     (20,682 )
  Other income, net     3,137       260       2,937       146  
Total interest and other expense, net     (3,418 )     (6,376 )     (16,899 )     (19,875 )
                                 
Income before income taxes     8,140       6,203       1,168       12,982  
Income tax expense     860       4,064       20       7,764  
Consolidated net income   $ 7,280     $ 2,139     $ 1,148     $ 5,218  
Net loss attributable to noncontrolling interests   $ (231 )   $ (215 )   $ (745 )   $ (672 )
Net income attributable to NuVasive, Inc.   $ 7,511     $ 2,354     $ 1,893     $ 5,890  
                                 
Net income per share attributable to NuVasive, Inc.:                                
  Basic   $ 0.17     $ 0.05     $ 0.04     $ 0.14  
  Diluted   $ 0.16     $ 0.05     $ 0.04     $ 0.13  
Weighted average shares outstanding:                                
  Basic     44,572       43,488       44,339       43,227  
  Diluted     47,220       44,735       46,387       44,151  
                                 
Stock-based compensation is included in expenses in the following categories:                                
  Sales, marketing and administrative   $ 7,965     $ 4,844     $ 22,667     $ 18,723  
  Research and development     448       567       1,239       1,624  
  Cost of goods sold     41       23       96       53  
    $ 8,454     $ 5,434     $ 24,002     $ 20,400  
                                 
                                 
   
NuVasive, Inc.  
Condensed Consolidated Balance Sheets  
(in thousands)  
   
    September 30, 2013     December 31, 2012  
    (Unaudited)        
ASSETS      
Current assets:            
  Cash and cash equivalents   $ 100,616     $ 123,299  
  Short-term marketable securities     109,214       138,405  
  Accounts receivable, net     96,208       88,958  
  Inventory     140,709       126,335  
  Deferred tax assets, current     31,136       28,236  
  Prepaid expenses and other current assets     10,100       8,516  
Total current assets     487,983       513,749  
Property and equipment, net     130,796       125,123  
Long-term marketable securities     92,999       84,412  
Intangible assets, net     93,037       101,362  
Goodwill     154,913       154,106  
Deferred tax assets     39,719       40,575  
Restricted cash and investments     119,168       118,995  
Other assets     21,624       25,463  
Total assets   $ 1,140,239     $ 1,163,785  
LIABILITIES AND EQUITY                
Current liabilities:                
  Accounts payable and accrued liabilities   $ 81,820     $ 62,048  
  Accrued payroll and related expenses     26,117       27,916  
  Senior Convertible Notes, current     -       74,311  
Total current liabilities     107,937       164,275  
Senior Convertible Notes     342,552       332,404  
Deferred tax liabilities     3,143       3,129  
Litigation liability     93,700       101,200  
Other long-term liabilities     14,789       15,199  
Commitments and contingencies                
Noncontrolling interests     -       10,003  
Stockholders' equity:                
  Preferred stock     -       -  
  Common stock     45       44  
  Additional paid-in capital     746,518       714,865  
  Accumulated other comprehensive (loss) income     (1,476 )     786  
  Accumulated deficit     (176,227 )     (178,120 )
Total NuVasive, Inc. stockholders' equity     568,860       537,575  
Noncontrolling interests     9,258       -  
Total equity     578,118       537,575  
Total liabilities and equity   $ 1,140,239     $ 1,163,785  
                 
                 
   
   
NuVasive, Inc.  
Unaudited Condensed Consolidated Statements of Cash Flows  
(in thousands)  
   
    Nine Months Ended September 30,  
    2013     2012  
             
Operating activities:            
Consolidated net income   $ 1,148     $ 5,218  
Adjustments to reconcile net income to net cash provided by operating activities:                
  Depreciation and amortization     46,289       38,237  
  Amortization of debt discount     10,148       9,435  
  Amortization of debt issuance costs     1,265       1,386  
  Stock-based compensation     24,002       20,400  
  Allowance for doubtful accounts and sales return reserves     665       816  
  Allowance for excess and obsolete inventory, net of write-offs     1,984       2,000  
  Other non-cash adjustments     3,881       5,002  
Changes in operating assets and liabilities, net of effects from acquisitions:                
  Accounts receivable     (8,253 )     8,421  
  Inventory     (16,749 )     (14,222 )
  Prepaid expenses and other current assets     (2,838 )     13,582  
  Accounts payable and accrued liabilities     10,415       9,480  
  Accrued payroll and related expenses     (1,824 )     (269 )
Net cash provided by operating activities     70,133       99,486  
Investing activities:                
Cash paid for business and asset acquisitions     (8,019 )     (9,838 )
Purchases of property and equipment     (38,018 )     (35,706 )
Purchases of marketable securities     (164,338 )     (192,759 )
Sales of marketable securities     183,756       193,035  
Purchases of restricted investments     -       (113,331 )
Net cash used in investing activities     (26,619 )     (158,599 )
Financing activities:                
Principal payment of 2013 Senior Convertible Notes     (74,311 )     -  
Tax benefits related to stock-based compensation awards     5,247       -  
Proceeds from the issuance of common stock     3,492       3,183  
Other assets     (72 )     132  
Net cash (used in) provided by financing activities     (65,644 )     3,315  
Effect of exchange rate changes on cash     (553 )     37  
Decrease in cash and cash equivalents     (22,683 )     (55,761 )
Cash and cash equivalents at beginning of period     123,299       163,492  
Cash and cash equivalents at end of period   $ 100,616     $ 107,731  
                 
                 

Contact Information

  • Investor Contact:
    Tina Jacobsen
    NuVasive, Inc.
    858-320-5215
    Email Contact

    Media Contact:
    Nicole Collins
    NuVasive, Inc.
    858-909-1907
    Email Contact