NuVasive Reports Fourth Quarter and Full Year 2012 Financial Results

NuVasive Reports Fourth Quarter and Full Year 2012 Financial Results 
SAN DIEGO, CA -- (Marketwire) -- 02/26/13 --  NuVasive, Inc. (NASDAQ:
NUVA)  


 
--  Fourth quarter 2012 total revenue of $165.8 million; up 10.4% from
    fourth quarter 2011 and up 11.7% from third quarter 2012
    
    
--  Full year 2012 total revenue of $620.3 million; up 14.8% from the full
    year 2011
    
    
--  GAAP operating margin of 2.5% for the fourth quarter 2012 and 6.0% for
    the full year 2012
    
    
--  Non-GAAP operating margin of 15.0% for the fourth quarter 2012 and
    14.5% for the full year 2012
    
    
--  GAAP net loss of $2.7 million, or $0.06 per share, for the fourth
    quarter 2012 and GAAP net earnings of $3.1 million, or $0.07 per
    share, for the full year 2012
    
    
--  Non-GAAP earnings of $15.0 million, or $0.34 per share, for the fourth
    quarter 2012 and $45.8 million, or $1.04 per share, for the full year
    2012

  
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 and for
the full year ended December 31, 2012. 
Alex Lukianov, Chairman and Chief Executive Officer, said, "We are
very proud of our strong close to 2012 and excellent revenue growth
of 15% with profit translation. As we embark on 2013, we are excited
to build upon our momentum with growing clinical evidence,
game-changing new product launches, an energized sales force, and our
expansion into new international markets. Over the last decade,
NuVasive has positively changed the lives of over 100,000 spine
patients through minimally invasive surgery with our XLIF procedure.
We are highly focused on continually disrupting the global spine
industry through innovation with advanced procedural solutions and
executing to a long term plan of evolving into a $1 billion company
with steadily increasing profitability. Our proven, three pillar
market share taking strategy of Superior Outcomes, Absolute
Responsiveness, and Speed of Innovation will sustain our future
growth toward the #3 position within the global spine industry." 
NuVasive reported fourth quarter 2012 revenue of $165.8 million, a
10.4% increase
 over the $150.2 million for the fourth quarter 2011
and an 11.7% increase over the $148.4 million reported for the third
quarter 2012.  
Gross profit for the fourth quarter 2012 was $123.6 million and gross
margin was 74.5%, compared to a gross profit of $113.1 million and a
gross margin of 75.3% for the fourth quarter 2011. For the third
quarter 2012, gross profit was $110.6 million and gross margin was
74.6%. Gross profit for the full year 2012 was $466.8 million and
gross margin was 75.3%, compared to a gross profit of $428.4 million
and gross margin of 79.3% for the full year 2011. 
Total operating expenses for the fourth quarter 2012 were $119.4
million compared to $122.9 million in the fourth quarter 2011 and
$98.1 million in the third quarter 2012. The higher operating
expenses in the fourth quarter 2011 resulted from a higher 2011 asset
impairment charge. Full year 2012 operating expenses were $429.8
million compared to $513.4 million reported for the full year 2011.
The higher operating expenses for the full year 2011 resulted
primarily from a 2011 charge related to a litigation liability. 
On a GAAP basis, the Company reported a net loss of $2.7 million, or
$0.06 per share, for the fourth quarter 2012, and net income of $3.1
million, or $0.07 per share for the full year 2012.  
On a Non-GAAP basis, the Company reported net income of $15.0
million, or $0.34 per share, for the fourth quarter 2012, and net
income of $45.8 million, or $1.04 per share, for the full year 2012.
The Non-GAAP earnings per share calculations for the fourth quarter
and full year exclude, respectively, (i) non-cash stock-based
compensation of $5.9 million and $26.3 million; (ii) certain
intellectual property litigation expenses of $852,000 and $2.4
million; (iii) amortization of intangible assets of $3.6 million and
$12.4 million; (iv) acquisition related items of $639,000 and $2.1
million; (v) non-cash interest expense on convertible notes of $3.3
million and $12.7 million; and (vi) intangible asset and goodwill
impairment charges of $9.7 million and $9.7 million. 
Cash, cash equivalents and short and long-term marketable securities
were $346.1 million at December 31, 2012. 
2013 Full Year Financial Guidance 


 
--  Revenue of approximately $655 million
--  GAAP EPS of approximately $0.07
--  Non-GAAP EPS of approximately $1.00
--  Non-GAAP Operating Margin of approximately 14%
--  GAAP effective tax expense rate of approximately 60%

 
                                                                            
                                                                            
                  Reconciliation of Full Year EPS Guidance                  
                                                                            
                                                                    2013    
                                                                Guidance (2)
                                                               -------------
GAAP earnings per share guidance (1)                           $        0.07
  Non-cash stock based compensation                                     0.39
  Certain intellectual property litigation expenses                     0.06
  Amortization of intangible assets                                     0.27
  Acquisition related items (3)                                         0.03
  Non-cash interest expense on convertible notes                        0.18
                                                               -------------
Non-GAAP earnings per share guidance (1)                       $        1.00
                                                               =============
                                                                            
Weighted shares outstanding - basic                                   45,500
                                                               =============
Weighted shares outstanding - diluted                                 46,500
                                                               =============
                                                                            
(1) Includes negative impact of Medical Device Excise Tax of ~$0.13         
(2) Effective tax rate of ~60% applied to GAAP earnings and ~40% 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 %               
                                                                            
                                                 2012 Actuals        2013   
                                            ---------------------           
                                              Fourth      Full     Full Year
                                              Quarter     Year     Guidance 
                                  
          ---------- ---------- ----------
                         Gross Margin % [A]    74.5%      75.3%   ~74.0% (1)
                                                                            
            Non-GAAP Operating Expenses [B]    59.5%      60.8%     ~60.0%  
          Non-cash stock-based compensation    3.5%       4.2%       ~5.0%  
   Certain intellectual property litigation                                 
                                   expenses    0.5%       0.4%       ~1.0%  
          Amortization of intangible assets    2.2%       2.0%       ~3.0%  
   Intangible asset and goodwill impairment                                 
                                     charge    5.9%       1.5%         -    
              Acquisition related items (2)    0.4%       0.3%       ~0.3%  
                                            ---------- ---------- ----------
                    GAAP Operating Expenses    72.0%      69.3%     ~69.3%  
                                                                            
                                            ---------- ---------- ----------
          Non-GAAP Operating Margin % [A-B]    15.0%      14.5%   ~14.0% (1)
                                            ---------- ---------- ----------
                                                                            
(1) Includes negative impact of Medical Device Excise                       
 Tax of ~1.5%, or ~150bps                                                   
(2) 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, acquisition related items, non-cash interest
expense on convertible notes, and intangible asset and goodwill
impairment charges. 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 Fourth Quarter 2012 Results                
                                                                            
                                                                   (Loss)   
                              
          Pre-Tax     Net of Tax    Earnings  
(in thousands, except per share data) Adjustments      (1)       Per Share  
                                      -----------  -----------  ----------- 
GAAP net income                                    $    (2,746) $     (0.06)
Impact of change from basic to                                              
 diluted share count                                                      - 
                                                   -----------  ----------- 
GAAP net loss, adjusted to diluted                                          
 share count                                       $    (2,746) $     (0.06)
  Non-cash stock-based compensation   $     5,912        3,547         0.08 
  Certain intellectual property                                             
   litigation expenses                        852          511         0.01 
  Amortization of intangible assets         3,600        2,160         0.05 
  Acquisition related items                   639          383         0.01 
  Non-cash interest expense on                                              
   convertible notes                        3,262        1,957         0.04 
  Intangible asset impairment charge        1,400          840         0.02 
  Goodwill impairment charge                8,300        8,300         0.19 
                                                   -----------  ----------- 
Non-GAAP earnings                                  $    14,953  $      0.34 
                                                   ===========  =========== 
                                                                            
GAAP weighted shares outstanding - basic and                                
 diluted                                                             43,628 
                                                                =========== 
Non-GAAP weighted shares outstanding                                        
 - diluted                                                           44,634 
                                                                =========== 
                                                                            
(1) 40% tax rate applied to Non-GAAP adjustments, except for non-deductible 
 goodwill impairment charge                                                 
                                                                            
                                                                            
                  Reconciliation of Full Year 2012 Results                  
                                                                            
                                                                   Earnings 
                                         Pre-Tax     Net of Tax      Per    
(in thousands, except per share data)  Adjustments      (1)         Share   
                                       -----------  -----------  -----------
GAAP net income                                     $     3,144  $      0.07
  Non-cash stock-based compensation    $    26,312       15,787         0.36
  Certain intellectual property                                             
   litigation expenses                       2,419        1,451         0.03
  Amortization of intangible assets         12,430        7,458         0.17
  Acquisition related items                  2,059        1,235         0.03
  Non-cash interest expense on                                              
   convertible notes                        12,697        7,618         0.17
  Intangible asset impairment charge         1,400          840         0.02
  Goodwill impairment charge                 8,300        8,300         0.19
                                                    -----------  -----------
Non-GAAP earnings                                   $    45,834  $      1.04
                                                    ===========  ===========
                                                                            
Weighted shares outstanding - diluted                                 44,272
                                                                 ===========
                                                                            
(1) 40% tax rate applied to Non-GAAP adjustments, except for non-deductible 
 goodwill impairment charge                                                 

 
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 March 26, 2013. In addition, a
telephonic replay of the call will be available until March 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
406960. 
About NuVasive 
NuVasive is a medical device company focused on developing 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's principal product offering is based on its Maximum Access
Surgery, or MAS(R) platform. The MAS platform combines several
categories of solutions that collectively may minimize soft tissue
disruption during spine surgery with maximum visualization and safe,
easy reproducibility for the surgeon: a proprietary software-driven
nerve avoidance system and intra-operative monitoring support;
MaXcess(R), a unique split-blade retractor system; a wide variety of
specialized implants; and several biologic fusion enhancers. MAS may
significantly improve surgical outcomes 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 a complete
portfolio of products spanning lumbar, thoracic, and cervical
applications, the Company will continue to expand and evolve its
offering predicated on its focus on innovation 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; the
risk of further adjustment, or unanticipated difficulty in selling
products or generating 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 data)                    
                                                                            
                                  Three Months Ended        Year Ended      
                                     December 31,          December 31,     
                                 --------------------  -------------------- 
                                    2012       2011       2012       2011   
                                 ---------  ---------  ---------  --------- 
                                                                            
Revenue                          $ 165,754  $ 150,194  $ 620,255  $ 540,506 
Cost of goods sold (excluding                                               
 amortization of purchased                                                  
 technology)                        42,196     37,062    153,409    112,111 
                                 ---------  ---------  ---------  --------- 
Gross profit                       123,558    113,132    466,846    428,395 
                
                                                            
Operating expenses:                                                         
  Sales, marketing and                                                      
   administrative                   97,713     93,428    372,416    349,052 
  Research and development           8,398      8,888     35,296     38,408 
  Amortization of intangible                                                
   assets                            3,600      2,368     12,430      6,609 
  Impairment of goodwill and                                                
   intangible assets                 9,700     18,167      9,700     18,167 
  Litigation award                       -          -          -    101,200 
                                 ---------  ---------  ---------  --------- 
Total operating expenses           119,411    122,851    429,842    513,436 
                                                                            
Interest and other expense, net:                                            
  Interest income                      254        241        915        832 
  Interest expense                  (7,028)    (6,971)   (27,710)   (17,933)
  Other income (expense), net          901       (225)     1,047      2,078 
                                 ---------  ---------  ---------  --------- 
Total interest and other                                                    
 expense, net                       (5,873)    (6,955)   (25,748)   (15,023)
                                 ---------  ---------  ---------  --------- 
                                                                            
(Loss) income before income                                                 
 taxes                              (1,726)   (16,674)    11,256   (100,064)
Income tax expense (benefit)         1,050     (6,328)     8,814    (29,043)
                                 ---------  ---------  ---------  --------- 
Consolidated net (loss) income   $  (2,776) $ (10,346) $   2,442  $ (71,021)
                                 =========  =========  =========  ========= 
Net loss attributable to                                                    
 noncontrolling interests        $     (30) $    (310) $    (702) $  (1,172)
                                 =========  =========  =========  ========= 
Net (loss) income attributable                                              
 to NuVasive, Inc.               $  (2,746) $ (10,036) $   3,144  $ (69,849)
                                 =========  =========  =========  ========= 
                                                                            
Net (loss) income per share                                                 
 attributable to NuVasive, Inc.:                                            
  Basic                          $   (0.06) $   (0.24) $    0.07  $   (1.73)
                                 =========  =========  =========  ========= 
  Diluted                        $   (0.06) $   (0.24) $    0.07  $   (1.73)
                                 =========  =========  =========  ========= 
Weighted average shares                                                     
 outstanding:                                                               
  Basic                             43,628     42,172     43,328     40,372 
                                 =========  =========  =========  ========= 
  Diluted                           43,628     42,172     44,272     40,372 
                                 =========  =========  =========  ========= 
                                                                            
Stock-based compensation is included in                                     
 expenses in the following categories:                                      
  Sales, marketing and                                                      
   administrative                $   5,373  $   7,627  $  24,096  $  29,583 
  Research and development             514        654      2,138      2,487 
  Cost of goods sold                    25          -         78          - 
                                 ---------  ---------  ---------  --------- 
                                 $   5,912  $   8,281  $  26,312  $  32,070 
                                 =========  =========  =========  ========= 
                                                                            
                                                                            
                               NuVasive, Inc.                               
              Unaudited Condensed Consolidated Balance Sheets               
                               (in thousands)                               
                                                                            
                                                December 31,   December 31, 
                                                    2012           2011     
                                               -------------  ------------- 
ASSETS                                                                      
Current assets:                                                             
  Cash and cash equivalents                    $     123,299  $     163,492 
  Short-term marketable securities                   138,405        146,228 
  Accounts receivable, net                            88,958         87,736 
  Inventory                                          126,335        119,313 
  Deferred tax assets, current                        28,236         54,550 
  Prepaid expenses and other current assets            8,516         20,518 
                                               -------------  ------------- 
Total current assets                                 513,749        591,837 
Property and equipment, net                          125,123        124,754 
Long-term marketable securities                       84,412         32,503 
Intangible assets, net                               101,362        108,140 
Goodwill                                             154,106        159,349 
Deferred tax assets                                   40,575         19,857 
Restricted cash and investments                      118,995         68,600 
Other assets                                          25,463         18,522 
                                               -------------  ------------- 
Total assets                    
               $   1,163,785  $   1,123,562 
                                               =============  ============= 
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
Current liabilities:                                                        
  Accounts payable and accrued liabilities     $      62,048  $      51,744 
  Accrued payroll and related expenses                27,916         22,215 
  Litigation liability                                     -        101,200 
  Acquisition-related liabilities                          -         32,221 
  Senior Convertible Notes, current                   74,311              - 
                                               -------------  ------------- 
Total current liabilities                            164,275        207,380 
Senior Convertible Notes                             332,404        394,019 
Deferred tax liabilities                               3,129          3,952 
Litigation liability                                 101,200              - 
Other long-term liabilities                           15,199         13,461 
Commitments and contingencies                                               
Noncontrolling interests                              10,003         10,705 
Stockholders' equity:                                                       
  Preferred stock                                          -              - 
  Common stock                                            44             42 
  Additional paid-in capital                         714,865        674,790 
  Accumulated other comprehensive income                 786            477 
  Accumulated deficit                               (178,120)      (181,264)
                                               -------------  ------------- 
Total stockholders' equity                           537,575        494,045 
                                               -------------  ------------- 
Total liabilities and stockholders' equity     $   1,163,785  $   1,123,562 
                                               =============  ============= 
                                                                            
                                                                            
                               NuVasive, Inc.                               
         Unaudited Condensed Consolidated Statements of Cash Flows          
                               (in thousands)                               
                                                                            
                                                Year Ended December 31,     
                                            ------------------------------- 
                                               2012       2011       2010   
                                            ---------  ---------  --------- 
                                                                            
Operating activities:                                                       
  Consolidated net income (loss)            $   2,442  $ (71,021) $  76,533 
  Adjustments to reconcile net income                                       
   (loss) to net cash provided by operating                                 
   activities:                                                              
    Depreciation and amortization              51,909     36,242     36,737 
    Deferred income tax expense (benefit)       4,525    (30,967)   (53,664)
    Amortization of debt discount              12,697      6,108          - 
    Amortization of debt issuance costs         1,872      1,816      1,493 
    Stock-based compensation                   26,312     32,070     28,225 
    Impairment of goodwill and intangible                                   
     assets                                     9,700     18,167          - 
    Loss on repurchase of Senior                                            
     Convertible Notes, net                         -        332          - 
    Gain recognized on change in fair value                                 
     of derivatives                                 -     (2,387)         - 
    Allowance for doubtful accounts and                                     
     sales return reserve                         103      1,345       (995)
    Allowance for excess and obsolete                                       
     inventory, net of write-offs               5,475      6,028      1,607 
    Accretion of contingent consideration       1,364        980        962 
    Other non-cash adjustments                  5,919      5,247      3,844 
  Changes in operating assets and                                           
   liabilities, net of effects from                                         
   acquisitions:                                                            
    Accounts receivable                        (2,005)    (9,929)   (17,865)
    Inventory                                 (11,022)   (17,170)   (18,664)
    Prepaid expenses and other current                                      
     assets                                    12,725    (14,396)    (2,105)
    Accounts payable and accrued                                            
     liabilities                                2,938     (3,385)    11,596 
    Litigation liability                            -    101,200          - 
    Accrued payroll and related expenses        5,128      2,685     (1,877)
                                            ---------  ---------  --------- 
Net cash provided by operating activities     130,082     62,965     65,827 
Investing activities:                                                       
    Cash paid for business and asset                                        
     acquisitions                             (11,088)   (37,574)      (973)
    Purchases of property and equipment       (41,189)   (53,370)   (45,846)
    Purchases of marketable securities       (235,919)  (253,210)  (203,415)
    Sales of marketable securities            246,504    151,966    204,439 
    Purchases of restricted investments      (113,281)    (4,536)         - 
    Sales of restricted investments             7,079          -          - 
    Payment for specific rights in                                          
     connection with supply agreement, net                                  
     of refund received                             -     (5,000)         - 
                                            ---------  ---------  --------- 
Net cash used in investing activities        (147,894)  (201,724)   (45,795)
Financing activities:                                                       
    Proceeds from the sale of warrants              -     47,898          - 
    Proceeds from the issuance of                                           
     convertible debt, net of issuance                                      
     costs                                          -    391,445          - 
    Purchase of convertible note hedges             -    (80,097)         - 
    Repurchase of 2013 Senior Convertible                                   
     Notes                                          -   (154,164)         - 
    Tax benefits related to stock-based                                     
     compensation awards                        3,003        463        186 
    Proceeds from the issuance of common                                    
     stock                                      4,884      6,852     14,831 
    Payment of contingent consideration       (29,722)    (1,800)         - 
    Other assets                                 (721)      (718)    (7,935)
                                            ---------  ---------  --------- 
Net cash (used in) provided by financing                                    
 activities                                   (22,556)   209,879      7,082 
Effect of exchange rate changes on cash           175       (225)        70 
                                            ---------  ---------  --------- 
(Decrease) increase in cash and cash                                        
 equivalents                                  (40,193)    70,895     27,184 
Cash and cash equivalents at beginning of                                   
 year                                         163,492     92,597     65,413 
                                            ---------  ---------  --------- 
Cash and cash equivalents at end of year    $ 123,299  $ 163,492  $  92,597 
                                            =========  =========  ========= 

  
Contact:
Michael J. Lambert
EVP & Chief Financial Officer
NuVasive, Inc.
858-909-3394
investorrelations@nuvasive.com 
Investors:
Stephan Ogilvie 
VP, Corporate Development & Investor Relations
NuVasive, Inc.
201-322-6515
investorrelations@nuvasive.com 
Media:
Nicholas S. Laudico
The Ruth Group
646-536-7030
nlaudico@theruthgroup.com