SOURCE: NuVasive, Inc.

NuVasive, Inc.

April 29, 2014 16:30 ET

NuVasive Reports First Quarter 2014 Financial Results

SAN DIEGO, CA--(Marketwired - Apr 29, 2014) - NuVasive, Inc. (NASDAQ: NUVA)

  • First quarter 2014 total revenue of $177.5 million; up 11.3% from first quarter 2013;

  • $30 million litigation liability recognized due to a recent jury verdict, which remains subject to potential reversal or appeal;

  • GAAP operating loss margin of (15.4%); 

  • Non-GAAP operating profit margin of 13.2%;

  • GAAP net loss of ($18.3) million, or ($0.40) per share; 

  • Non-GAAP earnings of $14.3 million, or $0.29 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 March 31, 2014.

Alex Lukianov, Chairman and Chief Executive Officer, said, "Results in the first quarter of 2014 were solidly in line with our expectations, and place us on track to achieve full year guidance by continuing to execute our share-taking strategy. While staying true to NuVasive's core philosophy of driving innovation to improve spine patient outcomes, we are evolving our organization to maintain a start-up mentality and to continue to lead spine innovation as a much larger, and increasingly profitable, global organization."

NuVasive reported first quarter 2014 revenue of $177.5 million, an 11.3% increase over the $159.5 million for the first quarter 2013. 

Gross profit for the first quarter 2014 was $134.2 million and gross margin was 75.6%, compared to a gross profit of $120.4 million and a gross margin of 75.5% for the first quarter 2013.

Total operating expenses for the first quarter 2014 were $161.6 million compared to $114.0 million in the first quarter 2013. The higher operating costs for the first quarter 2014 resulted primarily from the recognition of a litigation liability and a facility abandonment charge, as well as from spending to support international infrastructure expansion. 

On a GAAP basis, the Company reported a net loss of ($18.3) million, or ($0.40) per share, for the first quarter 2014. 

On a Non-GAAP basis, the Company reported net income of $14.3 million, or $0.29 per share, for the first quarter 2014. The Non-GAAP earnings per share calculations for the first quarter 2014 exclude the following amounts pre-tax: (i) non-cash stock-based compensation of $7.8 million; (ii) certain intellectual property litigation expenses of $1.3 million; (iii) amortization of intangible assets of $4.0 million; (iv) leasehold termination charge of $6.4 million; (v) one-time and acquisition related items of $1.2 million; (vi) non-cash interest expense on convertible notes of $3.6 million; and (vii) a litigation liability of $30.0 million. 

A full reconciliation of the non-GAAP measures to GAAP can be found below.

Cash, cash equivalents and short and long-term marketable securities were approximately $339.6 million at March 31, 2014.

2014 Full Year Financial Guidance (Updated to Reflect First Quarter Litigation Liability):

  • Revenue of approximately $725 million; unchanged from prior guidance
  • GAAP Loss per Share of approximately ($0.27); compared to Earnings per Share of $0.11 previously
  • Non-GAAP EPS of approximately $1.06; unchanged from prior guidance
  • Non-GAAP Operating Margin of approximately 16%; unchanged from prior guidance
  • GAAP effective tax expense of approximately $6.5 million; compared to $19 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   $ 0.11   $ (0.27 )
Impact of change from basic to diluted share count     -     0.01  
GAAP earnings (loss) per share, adjusted to diluted share count   $ 0.11   $ (0.26 )
  Non-cash stock based compensation     0.43     0.43  
  Litigation Liability     -     0.36  
  Amortization of intangible assets     0.19     0.19  
  Non-cash interest expense on convertible notes     0.18     0.18  
  Leasehold Termination Charge     0.08     0.08  
  Certain intellectual property litigation expenses     0.06     0.06  
  One-time and acquisition related items 3     0.01     0.02  
Non-GAAP earnings per share guidance   $ 1.06   $ 1.06  
               
Weighted shares outstanding - basic     47,500     47,500  
Weighted shares outstanding - diluted     50,000     50,000  
 
1Effective tax expense rate of ~80% applied to GAAP earnings and ~40% applied to Non-GAAP adjustments
2Effective tax expense rate of ~85% applied to GAAP earnings and ~40% applied to Non-GAAP adjustments
3Acquisition related items include expenses associated with prior M&A related activity and as incurred 
 
 
   
Reconciliation of Non-GAAP Operating Margin %  
   
          2014 Guidance  
    2013 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 %   4.8 %
Certain intellectual property litigation expenses   0.8 %   0.7 %   0.7 %
Leasehold termination charge   0.0 %   0.9 %   0.9 %
One-time and acquisition related items*   0.0 %   0.1 %   0.2 %
GAAP Sales, Marketing & Administrative Expense [E]   61.3 %   61.0 %   61.1 %
                   
Non-GAAP Research & Development Expense [C]   4.1 %   5.5 %   5.5 %
Non-cash stock based compensation   0.2 %   0.2 %   0.2 %
Acquisition related items*   0.4 %   0.1 %   0.1 %
GAAP Research & Development Expense [F]   4.7 %   5.8 %   5.8 %
                   
Litigation Liability [G]   0.0 %   0.0 %   4.1 %
Amortization of intangible assets [H]   2.8 %   2.2 %   2.2 %
                   
Non-GAAP Operating Margin % [A-B-C]   14.9 %   16.0 %   16.0 %
                   
GAAP Operating Margin % [D-E-F-G-H]   4.8 %   7.0 %   2.8 %
                   
* 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 termination charge, acquisition related items, non-cash interest expense on convertible notes, and a litigation liability. 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 First Quarter 2014 Results  
                 
(in thousands, except per share data)   Pre-Tax Adjustments   Net of Tax     Earnings Per Share  
GAAP net loss         $ (18,276 )   $ (0.40 )
Impact of change from basic to diluted share count                   0.03  
GAAP net loss, adjusted to diluted share count         $ (18,276 )     (0.37 )
  Non-cash stock-based compensation   $ 7,764     4,658       0.10  
  Certain intellectual property litigation expenses     1,323     794       0.02  
  Amortization of intangible assets     3,998     2,399       0.05  
  Leasehold termination charge     6,408     3,845       0.07  
  One-time and acquisition related items     1,244     746       0.01  
  Non-cash interest expense on convertible notes     3,572     2,143       0.04  
  Litigation liability     30,000     18,000       0.37  
                       
Non-GAAP earnings           14,309       0.29  
                       
GAAP weighted shares outstanding - basic and diluted                   45,798  
Non-GAAP weighted shares outstanding - diluted                   48,996  
                       

Conference Call

NuVasive will hold a conference call on Tuesday, April 29, 2014 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 May 29, 2014. In addition, a telephone replay of the call will be available until May 12, 2014. 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: 13576243.

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 $8.7 billion global spine market.

NuVasive offers a comprehensive spine portfolio of over 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 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 Decade Plate for single approach fixation through a lateral incision, 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 procedurally integrated solutions that completely redefine and improve upon traditional techniques 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 or made on the earnings 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. 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.   
 Condensed Consolidated Statements of Operations  
(in thousands, except per share data)   
   
    Three Months Ended March 31,  
    2014     2013  
    (Unaudited)     (Unaudited)  
                 
Revenue   $ 177,496     $ 159,504  
Cost of goods sold (excluding amortization of purchased technology)     43,294       39,096  
Gross profit     134,202       120,408  
                 
Operating expenses:                
  Sales, marketing and administrative     118,104       99,886  
  Research and development     9,455       9,694  
  Amortization of intangible assets     3,998       4,376  
  Litigation Liability     30,000       -  
Total operating expenses     161,557       113,956  
                 
Interest and other expense, net:                
  Interest income     217       172  
  Interest expense     (6,865 )     (7,032 )
  Other income, net     375       240  
Total interest and other expense, net     (6,273 )     (6,620 )
                 
Loss before income taxes     (33,628 )     (168 )
Income tax benefit     (15,095 )     (764 )
Consolidated net (loss) income   $ (18,533 )   $ 596  
Net loss attributable to noncontrolling interests   $ (257 )   $ (255 )
Net (loss) income attributable to NuVasive, Inc.   $ (18,276 )   $ 851  
                 
Net (loss) income per share attributable to NuVasive, Inc.:                
  Basic   $ (0.40 )   $ 0.02  
  Diluted   $ (0.40 )   $ 0.02  
Weighted average shares outstanding:                
  Basic     45,798       44,025  
  Diluted     45,798       45,316  
                   
   
   
NuVasive, Inc.  
Condensed Consolidated Balance Sheets  
(in thousands)  
   
       
    March 31, 2014     December 31, 2013  
    (Unaudited)        
ASSETS            
Current assets:                
  Cash and cash equivalents   $ 110,777     $ 102,825  
  Short-term marketable securities     176,608       143,449  
  Accounts receivable, net of allowances of $3,343 and $3,481, respectively     106,269       104,774  
  Inventory, net     147,721       136,937  
  Deferred tax assets, current     37,091       37,076  
  Income tax receivable     16,512       -  
  Prepaid expenses and other current assets     11,273       10,947  
Total current assets     606,251       536,008  
Property and equipment, net     128,857       128,064  
Long-term marketable securities     52,209       79,829  
Intangible assets, net     89,593       93,986  
Goodwill     154,650       154,944  
Deferred tax assets, non-current     42,874       42,863  
Restricted cash and investments     123,068       119,195  
Other assets     27,586       24,679  
Total assets   $ 1,225,088     $ 1,179,568  
LIABILITIES AND EQUITY                
Current liabilities:                
  Accounts payable and accrued liabilities   $ 102,571     $ 86,057  
  Accrued payroll and related expenses     24,219       31,095  
  Current litigation liability     30,000       -  
Total current liabilities     156,790       117,152  
Senior Convertible Notes     349,632       346,060  
Deferred tax liabilities, non-current     2,933       2,934  
Litigation liability     93,700       93,700  
Other long-term liabilities     17,545       14,844  
Commitments and contingencies                
Stockholders' equity:                
  Preferred stock, $0.001 par value; 5,000 shares authorized, none outstanding     -       -  
  Common stock, $0.001 par value; 120,000 shares authorized at March 31, 2014 and December 31, 2013, respectively, 46,540 and 44,943 issued and outstanding at March 31, 2014 and December 31, 2013, respectively     47       45  
  Additional paid-in capital     786,285       769,203  
  Accumulated other comprehensive income     (2,179 )     (3,238 )
  Accumulated deficit     (188,494 )     (170,218 )
Total NuVasive, Inc. stockholders' equity     595,659       595,792  
Noncontrolling interests     8,829       9,086  
Total equity     604,488       604,878  
Total liabilities and equity   $ 1,225,088     $ 1,179,568  
                 
   
   
NuVasive, Inc.  
Condensed Consolidated Statements of Cash Flows  
(in thousands)  
   
    Three Months Ended March 31,  
    2014     2013  
    (Unaudited)     (Unaudited)  
Operating activities:                
Consolidated net (loss) income   $ (18,533 )   $ 596  
Adjustments to reconcile net (loss) income to net cash provided by operating activities:                
  Depreciation and amortization     15,363       14,581  
  Amortization of non-cash interest     4,000       3,800  
  Stock-based compensation     7,764       6,787  
  Reserves     1,366       28  
  Other non-cash adjustments     1,661       1,410  
Changes in operating assets and liabilities, net of effects from acquisitions:                
  Accounts receivable     (1,194 )     (1,619 )
  Inventory     (11,743 )     (4,098 )
  Prepaid expenses and other current assets     (2,807 )     (929 )
  Accounts payable and accrued liabilities     4,491       10,373  
  Litigation liability     30,000       -  
  Accrued payroll and related expenses     (7,068 )     (6,823 )
Net cash provided by operating activities     23,300       24,106  
Investing activities:                
Cash paid for business and asset acquisitions     -       (5,031 )
Purchases of property and equipment     (13,390 )     (9,200 )
Purchases of marketable securities     (46,126 )     (48,916 )
Sales of marketable securities     36,257       68,621  
Net cash (used in) provided by investing activities     (23,259 )     5,474  
Financing activities:                
Principal payment of 2013 Senior Convertible Notes     -       (74,311 )
Proceeds from the issuance of common stock     8,749       36  
Other financing activities     (1,094 )     100  
Net cash provided by (used in) financing activities     7,655       (74,175 )
Effect of exchange rate changes on cash     256       (232 )
Increase (decrease) in cash and cash equivalents     7,952       (44,827 )
Cash and cash equivalents at beginning of period     102,825       123,299  
Cash and cash equivalents at end of period   $ 110,777     $ 78,472  

Contact Information

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

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