SOURCE: NuVasive, Inc.

NuVasive, Inc.

July 29, 2014 16:30 ET

NuVasive Reports Second Quarter 2014 Financial Results and Increases Full Year Guidance

SAN DIEGO, CA--(Marketwired - Jul 29, 2014) -

  • Second quarter total revenue increased 15.1% to $190.7 million, moving NuVasive into the #3 spot in the global spine market;
  • Non-GAAP operating profit margin of 16.0%; GAAP operating margin of 2.4%; 
  • Non-GAAP earnings of $13.6 million, or $0.28 per share; GAAP net loss of ($4.1) million, or ($0.09) per share;
  • Company increases guidance for full year 2014 revenue, non-GAAP operating profit 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, today announced financial results for the quarter ended June 30, 2014.

"We are pleased to report results that exceeded our expectations for both revenue and earnings and demonstrated strong progress toward our commitment to increase operational efficiency within NuVasive," said Alex Lukianov, Chairman and Chief Executive Officer of NuVasive. "Strength across our lumbar and biologics products in the U.S. and the continued healthy growth of our international geographies drove results for the quarter as we continued to solidly execute our share-taking strategy. Based on the greater than expected second quarter results and the strong momentum of our minimally invasive lumbar solutions, we are increasing our full year revenue, operating margin and earnings guidance for the year."

Lukianov continued, "I am exceptionally proud of our ability to maintain the nimbleness that has propelled NuVasive into the #3 spot in the global spine market. Our focus on championing innovation to improve patient outcomes while increasing profitability will continue to foster our evolution into a larger, more profitable, global organization."

A full reconciliation of non-GAAP to GAAP measures can be found in the tables of today's press release.

Second Quarter 2014

NuVasive reported second quarter 2014 revenue of $190.7 million, a 15.1% increase over the $165.7 million for the second quarter 2013. 

GAAP gross profit for the second quarter 2014 was $145.8 million and gross margin was 76.5%, compared to a gross profit of $117.0 million and a gross margin of 70.6% for the second quarter 2013. Second quarter 2013 gross profit results reflected the impact of a one-time $7.9 million charge related to royalty accruals in connection with Phase I of the Company's patent litigation with Medtronic. Excluding the charge, gross profit for the second quarter 2013 was $124.9 million and gross margin was 75.4%.

Total GAAP operating expenses for the second quarter 2014 were $141.2 million compared to $116.9 million in the second quarter 2013. The higher operating costs for the second quarter 2014 resulted primarily from an intangible asset impairment charge of $10.7 million related to the developed technology for the PCM® device acquired from Cervitech in 2009, and from investment to support international expansion. 

With this intangible asset impairment charge, the Company reported 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 $13.6 million, or $0.28 per share, for the second quarter 2014. The Non-GAAP earnings per share calculations for the second quarter 2014 exclude the following amounts pre-tax: (i) non-cash stock-based compensation of $8.8 million; (ii) certain intellectual property litigation expenses of $1.2 million; (iii) amortization of intangible assets of $3.5 million; (iv) a leasehold related charge of $0.5 million; (v) one-time and acquisition related items of $1.1 million; (vi) non-cash interest expense on convertible notes of $3.6 million; and (vii) an intangible asset impairment charge of $10.7 million.

Cash, cash equivalents and short and long-term marketable securities were approximately $350.2 million at June 30, 2014.

Annual Guidance for 2014

The Company provided the following updated projections to its full year 2014 guidance:

  • Revenue of approximately $745 million or 9% growth over 2013 revenue of $685 million; increased from approximately $725 million previously
  • GAAP Loss per Share of approximately ($0.38); compared to Loss per Share of approximately ($0.27) previously
  • Non-GAAP EPS of approximately $1.11; increased from approximately $1.06 previously
  • Non-GAAP Operating Margin of approximately 16.5%; increased from approximately 16% previously
  • GAAP effective tax expense of approximately $6.0 million; compared to approximately $6.5 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 $ (0.27 )   $ (0.38 )
Impact of change from basic to diluted share count   0.01       0.02  
GAAP earnings (loss) per share, adjusted to diluted share count $ (0.26 )   $ (0.36 )
  Non-cash stock based compensation   0.43       0.43  
  Litigation liability expense   0.36       0.36  
  Amortization of intangible assets   0.19       0.19  
  Non-cash interest expense on convertible notes   0.18       0.18  
  Intangible asset impairment   -       0.13  
  Leasehold related charges   0.08       0.09  
  Certain intellectual property litigation expenses   0.06       0.06  
  Acquisition related items 3   0.02       0.03  
Non-GAAP earnings per share guidance $ 1.06     $ 1.11  
               
Weighted shares outstanding - basic   47,500       47,500  
Weighted shares outstanding - diluted   50,000       50,000  
   
1 Effective tax expense rate of ~85% 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 Acquisition related items include expenses associated with prior M&A related activity and as incurred
   
   
   
   
Reconciliation of Non-GAAP Operating Margin %  
   
    2013     2014 Guidance  
    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 %   4.6 %
Certain intellectual property litigation expenses   0.8 %   0.7 %   0.7 %
Leasehold related charges   0.0 %   0.9 %   0.9 %
Acquisition related items*   0.0 %   0.2 %   0.2 %
GAAP Sales, Marketing & Administrative Expense [E]   61.3 %   61.1 %   60.9 %
                   
Non-GAAP Research & Development Expense [C]   4.1 %   5.5 %   5.0 %
Non-cash stock based compensation   0.2 %   0.2 %   0.2 %
Acquisition related items*   0.4 %   0.1 %   0.2 %
GAAP Research & Development Expense [F]   4.7 %   5.8 %   5.4 %
                   
Litigation liability expense [G]   0.0 %   4.1 %   4.1 %
Intangible asset impairment [H]   0.0 %   0.0 %   1.4 %
Amortization of intangible assets [I]   2.8 %   2.2 %   2.2 %
                   
Non-GAAP Operating Margin % [A-B-C]   14.9 %   16.0 %   16.5 %
                   
GAAP Operating Margin % [D-E-F-G-H-I]   4.8 %   2.8 %   2.0 %
                   
* 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, 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 related charge, acquisition related items, non-cash interest expense on convertible notes, a litigation liability expense, an out-of-period royalty expense charge, and an intangible asset impairment 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 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 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 Second Quarter 2014 Results  
                 
(in thousands, except per share data)   Pre-Tax Adjustments   Net of Tax     Earnings Per Share  
GAAP net loss         $ (4,088 )   $ (0.09 )
Impact of change from basic to diluted share count                   0.01  
GAAP net loss, adjusted to diluted share count         $ (4,088 )     (0.08 )
  Non-cash stock-based compensation   $ 8,785     5,271       0.11  
  Certain intellectual property litigation expenses     1,224     734       0.02  
  Amortization of intangible assets     3,473     2,084       0.04  
  Intangible asset impairment charge     10,708     6,425       0.13  
  Leasehold related charges     524     314       0.01  
  One-time and acquisition related items     1,147     688       0.01  
  Non-cash interest expense on convertible notes     3,638     2,183       0.04  
                       
Non-GAAP earnings         $ 13,611       0.28  
                       
                       
GAAP weighted shares outstanding - basic and diluted                   46,832  
Non-GAAP weighted shares outstanding - diluted                   49,301  
                       
                       
                 
                 
Reconciliation of Year To Date 2014 Results  
                 
(in thousands, except per share data)   Pre-Tax Adjustments   Net of Tax     Earnings Per Share  
GAAP net loss         $ (22,364 )   $ (0.49 )
Impact of change from basic to diluted share count                   0.04  
GAAP net loss, adjusted to diluted share count         $ (22,364 )     (0.45 )
  Non-cash stock-based compensation   $ 16,549     9,929       0.20  
  Certain intellectual property litigation expenses     2,547     1,528       0.03  
  Amortization of intangible assets     7,471     4,483       0.09  
  Intangible asset impairment charge     10,708     6,425       0.13  
  Leasehold related charges     6,932     4,159       0.08  
  One-time and acquisition related items     2,391     1,435       0.03  
  Non-cash interest expense on convertible notes     7,210     4,326       0.09  
  Litigation liability expense     30,000     18,000       0.37  
                       
Non-GAAP earnings         $ 27,921       0.57  
                       
                       
GAAP weighted shares outstanding - basic and diluted                   46,320  
Non-GAAP weighted shares outstanding - diluted                   49,154  
                       
                       

Conference Call

NuVasive will hold a conference call today at 5:30 p.m. ET / 2:30 p.m. PT to discuss these 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 August 28, 2014. In addition, a telephone replay of the call will be available until August 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: 13583165.

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.

As the 3rd largest player in the $8.7 billion global spine market, 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 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 with our groundbreaking XLIF® procedures, NuVasive continues to be at the forefront of the spine industry's shift toward less invasive solutions. The Company has 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 it continues to expand its international footprint 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 those 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 June 30,    Six Months Ended June 30, 
    2014     2013     2014     2013  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
                         
Revenue   $ 190,677     $ 165,698     $ 368,172     $ 325,202  
Cost of goods sold (excluding amortization and impairment of intangible assets)     44,836       48,744       88,130       87,840  
Gross profit     145,841       116,954       280,042       237,362  
                                 
Operating expenses:                                
  Sales, marketing and administrative     116,970       104,272       235,074       204,158  
  Research and development     10,067       7,712       19,522       17,407  
  Amortization of intangible assets     3,473       4,913       7,470       9,288  
  Impairment of intangible assets     10,708       -       10,708       -  
  Litigation liability     -       -       30,000       -  
Total operating expenses     141,218       116,897       302,774       230,853  
                                 
Interest and other expense, net:                                
  Interest income     233       231       450       403  
  Interest expense     (6,979 )     (6,652 )     (13,844 )     (13,685 )
  Other (expense) income, net     (205 )     (440 )     171       (199 )
Total interest and other expense, net     (6,951 )     (6,861 )     (13,223 )     (13,481 )
                                 
Loss before income taxes     (2,328 )     (6,804 )     (35,955 )     (6,972 )
Income tax expense (benefit)     1,942       (76 )     (13,153 )     (840 )
Consolidated net loss   $ (4,270 )   $ (6,728 )   $ (22,802 )   $ (6,132 )
Net loss attributable to noncontrolling interests   $ (182 )   $ (259 )   $ (438 )   $ (514 )
Net loss attributable to NuVasive, Inc.   $ (4,088 )   $ (6,469 )   $ (22,364 )   $ (5,618 )
                                 
Net loss per share attributable to NuVasive, Inc.:                                
  Basic   $ (0.09 )   $ (0.15 )   $ (0.48 )   $ (0.13 )
  Diluted   $ (0.09 )   $ (0.15 )   $ (0.48 )   $ (0.13 )
Weighted average shares outstanding:                                
  Basic     46,832       44,412       46,320       44,220  
  Diluted     46,832       44,412       46,320       44,220  
                                 
                                 
   
   
NuVasive, Inc.  
Condensed Consolidated Balance Sheets  
(in thousands, except par values and share amounts)  
   
  June 30,     December 31,  
  2014     2013  
  (Unaudited)        
ASSETS          
Current assets:          
  Cash and cash equivalents $ 106,461     $ 102,825  
  Short-term marketable securities   140,849       143,449  
  Accounts receivable, net of allowances of $4,495 and $3,481, respectively   112,572       104,774  
  Inventory, net   157,361       136,937  
  Deferred tax assets, current   37,105       37,076  
  Income taxes receivable   21,013       -  
  Prepaid expenses and other current assets   11,774       10,947  
Total current assets   587,135       536,008  
Property and equipment, net   134,863       128,064  
Long-term marketable securities   102,920       79,829  
Intangible assets, net   75,312       93,986  
Goodwill   154,637       154,944  
Deferred tax assets, non-current   46,886       42,863  
Restricted cash and investments   123,140       119,195  
Other assets   29,231       24,679  
Total assets $ 1,254,124     $ 1,179,568  
LIABILITIES AND EQUITY              
Current liabilities:              
  Accounts payable and accrued liabilities $ 102,224     $ 86,057  
  Accrued payroll and related expenses   26,966       31,095  
  Current litigation liability   30,000       -  
Total current liabilities   159,190       117,152  
Senior Convertible Notes   353,269       346,060  
Deferred tax liabilities, non-current   2,980       2,934  
Litigation liability   93,700       93,700  
Other long-term liabilities   16,674       14,844  
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, 2014 and December 31, 2013, respectively, 46,941,192 and 44,943,233 issued and outstanding at June 30, 2014 and December 31, 2013, respectively   47       45  
  Additional paid-in capital   813,541       769,203  
  Accumulated other comprehensive loss   (1,299 )     (3,238 )
  Accumulated deficit   (192,582 )     (170,218 )
  Treasury stock, at cost; 1,285 shares and no shares at June 30, 2014 and December 31, 2013, respectively   (44 )     -  
Total NuVasive, Inc. stockholders' equity   619,663       595,792  
Noncontrolling interests   8,648       9,086  
Total equity   628,311       604,878  
Total liabilities and stockholders' equity $ 1,254,124     $ 1,179,568  
               
               
   
   
NuVasive, Inc.  
Condensed Consolidated Statements of Cash Flows  
(in thousands)  
   
    Six Months Ended June 30,  
    2014     2013  
    (Unaudited)     (Unaudited)  
Operating activities:            
Consolidated net loss   $ (22,802 )   $ (6,132 )
Adjustments to reconcile net loss to net cash provided by operating activities:                
  Depreciation and amortization     31,043       30,341  
  Amortization of non-cash interest     8,081       7,569  
  Stock-based compensation     16,549       15,548  
  Impairment of intangible assets     10,708       -  
  Reserves     2,383       1,783  
  Other non-cash adjustments     4,114       4,175  
Changes in operating assets and liabilities, net of effects from acquisitions:                
  Accounts receivable     (8,603 )     (8,443 )
  Inventory     (20,930 )     (13,680 )
  Prepaid expenses and other current assets     (2,839 )     (1,722 )
  Accounts payable and accrued liabilities     5,080       8,830  
  Litigation liability     30,000       -  
  Accrued payroll and related expenses     (4,473 )     (5,885 )
Net cash provided by operating activities     48,311       32,384  
Investing activities:                
Cash paid for business and asset acquisitions     (59 )     (7,719 )
Purchases of property and equipment     (32,560 )     (26,209 )
Purchases of marketable securities     (129,080 )     (136,988 )
Sales of marketable securities     103,650       145,014  
Net cash used in investing activities     (58,049 )     (25,902 )
Financing activities:                
Principal payment of 2013 Senior Convertible Notes     -       (74,311 )
Tax benefits related to stock-based compensation awards     -       1,261  
Proceeds from the issuance of common stock     14,193       3,123  
Purchases of treasury stock     (44 )     -  
Other financing activities     (1,142 )     26  
Net cash provided by (used in) financing activities     13,007       (69,901 )
Effect of exchange rate changes on cash     367       (1,000 )
Increase (decrease) in cash and cash equivalents     3,636       (64,419 )
Cash and cash equivalents at beginning of year     102,825       123,299  
Cash and cash equivalents at end of year   $ 106,461     $ 58,880  
                 
                 

Contact Information

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

    Media Contact:
    Margie Elsesser
    NuVasive, Inc.
    858-638-5516
    Email Contact