NuVasive Announces First Quarter 2013 Financial Results

NuVasive Announces First Quarter 2013 Financial Results 
SAN DIEGO, CA -- (Marketwired) -- 04/30/13 --  NuVasive, Inc.
(NASDAQ: NUVA) 


 
--  First quarter 2013 revenue of $159.5 million; up 5.2% from first
    quarter 2012
--  GAAP operating margin of 4.0%
--  Non-GAAP operating margin of 13.5%
--  GAAP net income of $851 thousand, or $0.02 per share
--  Non-GAAP earnings of $11.9 million, or $0.26 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, 2013. 
NuVasive reported first quarter 2013 revenue of $159.5 million, a
5.2% increase over the $151.7 million for the first quarter 2012.  
Gross profit for the first quarter 2013 was $120.4 million and gross
margin was 75.5%, compared to a gross profit of $114.8 million and a
gross margin of 75.7% for the first quarter 2012.  
Total operating expenses for the first quarter 2013 were $114.0
million compared to $107.5 million in the first quarter 2012. The
higher operating expenses in the first quarter 2013 resulted
primarily from additional costs associated with higher revenue and
international infrastructure expansion.  
On a GAAP basis, the Company reported net income of $851 thousand, or
$0.02 per share, for the first quarter 2013.  
On a Non-GAAP basis, the Company reported net income of $11.9
million, or $0.26 per share, for the first quarter 2013. The Non-GAAP
earnings per share calculations for the first quarter exclude: (i)
non-cash stock-based compensation of $6.8 million; (ii) certain
intellectual property litigation expenses of $1.4 million; (iii)
amortization of intangible assets of $4.4 million; (iv) acquisition
related items of $2.5 million; and (v) non-cash interest expense on
convertible notes of $3.3 million. 
Cash, cash equivalents and short and long-term marketable securities
were $281.2 million at March 31, 2013. 
The Company also announced a partial settlement in the ongoing patent
litigation with Medtronic. The settlement resolves all disputes
related to cervical plate patents and affords NuVasive broad access
to Medtronic's portfolio of cervical plate patents. In exchange,
NuVasive agreed to a $7.5 million up-front payment to Medtronic to
settle Phase II of the litigation, all of which will be offset
against any damage award ultimately paid in connection with Phase I.
As well, NuVasive will assume an effective go-forward royalty rate of
3% on certain cervical plates that rely on the patents licensed.  
Alex Lukianov, Chairman and Chief Executive Officer, said, "Results
in the first quarter demonstrate solid execution against our
multiyear plan and are in line with our expectations for annual
performance in 2013. Several positive developments in the form of
strong clinical data to support fusions for Degenerative Disc
Disease, in conjunction with the ongoing formulation of new clinical
guidelines have the potential to improve long term US spine market
growth. And regardless of what U.S. market growth ultimately looks
like, NuVasive has massive opportunities to drive sustainable top and
bottom line growth globally. Our proven, share taking strategy of
Superior Outcomes, Absolute Responsiveness, and Speed of Innovation
will enable us to execute our plan for growth toward $1 billion in
revenue with an improved profitability profile." 
2013 Full Year Financial Guidance: 


 
--  Revenue of approximately $655 million, unchanged from prior guidance
--  GAAP EPS of approximately $0.02, compared to $0.07 previously
--  Non-GAAP EPS of approximately $1.00, unchanged from prior guidance
--  Non-GAAP Operating Margin of approximately 14%, unchanged from prior
    guidance
--  GAAP effective tax expense rate of approximately 80%, compared to 60%
    previously

 
                                                                            
                  Reconciliation of Full Year EPS Guidance                  
                                                                            
                                                          2013 Guidance     
                                                     -----------------------
                                                      Prior (1)  Revised (2)
                                                     ----------- -----------
GAAP earnings per share guidance                     $      0.07 $      0.02
  Non-cash stock based compensation                         0.39        0.45
  Certain intellectual property litigation expenses         0.06        0.06
  Amortization of intangible assets                         0.27        0.27
  Acquisition related items (3)                             0.03        0.03
  Non-cash interest expense on convertible notes            0.18        0.18
                                                      ----------  ----------
Non-GAAP earnings per share guidance                 $      1.00 $      1.00
                                                      ==========  ==========
                                                                            
Weighted shares outstanding - basic                       45,500      45,500
                                                      ==========  ==========
Weighted shares outstanding - diluted                     46,500      46,500
                                                      ==========  ==========
                                                                            
                                                                            
 (1)  Effective tax rate of ~60% applied to GAAP earnings and ~40% applied  
      to Non-GAAP adjustments                                               
 (2)  Effective tax rate of ~80% 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        2013 Guidance    
                                                       ---------------------
                                             Actuals      Prior     Revised 
                                            ---------- ---------- ----------
                         Gross Margin % [A]    75.3%     ~74.0%     ~74.0%  
                                                                            
            Non-GAAP Operating Expenses [B]    60.8%     ~60.0%     ~60.0%  
          Non-cash stock-based compensation    4.2%       ~5.0%      ~5.5%  
   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    69.3%     ~69.3%     ~69.8%  
                                                                            
          Non-GAAP Operating Margin % [A-B]    14.5%     ~14.0%     ~14.0%  
                                                                            
                                                                            
* 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, 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 First Quarter 2013 Results                
                                                                            
                                              Pre-Tax               Earnings
(in thousands, except per share data)       Adjustments Net of Tax Per Share
                                            ----------- ---------- ---------
GAAP net income                                              $ 851    $ 0.02
  Non-cash stock-based compensation             $ 6,787      4,072      0.09
  Certain intellectual property litigation                                  
   expenses                                       1,409        845      0.02
  Amortization of intangible assets               4,376      2,626      0.06
  Acquisition related items                       2,461      1,477      0.03
  Non-cash interest expense on convertible                                  
   notes                                          3,322      1,993      0.04
                                                                            
                                                        ---------- ---------
Non-GAAP earnings                                         $ 11,864    $ 0.26
                                                        ========== =========
                                                                            
Weighted shares outstanding - diluted                                 45,316
                                                                   =========

 
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 May 31, 2013. In addition, a
telephone replay of the call will be available until May 14, 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:
410865. 
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(R) 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 places a large focus on clinical
research and support of the Society of Lateral Access Surgery, or
SOLAS(R), to expand the body of clinical evidence in support of
NuVasive's minimally disruptive solutions and to drive adoption of
its techniques. The Company's dedication to innovation continues to
spawn game changing technology such as the PCM(R) motion preserving
disc for the cervical spine, XLIF(R) Corpectomy for tumor and trauma,
and Armada(R), 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(TM); taking market share by maintaining a commitment to
Superior Clinical Outcomes, Speed of Innovation, and 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 amounts)                   
                                                                            
                                                       Three Months Ended   
                                                            March 31,       
                                                     ---------------------- 
                                                        2013        2012    
                                                     ----------  ---------- 
                                                                            
Revenue                                              $  159,504  $  151,691 
Cost of goods sold (excluding amortization of                               
 purchased technology)                                   39,096      36,933 
                                                     ----------  ---------- 
Gross profit                                            120,408     114,758 
                                                                            
Operating expenses:                                                         
  Sales, marketing and administrative                    99,886      94,678 
  Research and development                                9,694       9,988 
  Amortization of intangible assets                       4,376       2,846 
                                                     ----------  ---------- 
Total operating expenses                                113,956     107,512 
                                                                            
Interest and other expense, net:                                            
  Interest income                                           172         208 
  Interest expense                                       (7,032)     (6,825)
  Other income, net                                         240         437 
                                                     ----------  ---------- 
Total interest and other expense, net                    (6,620)     (6,180)
                                                     ----------  ---------- 
                                                                            
(Loss) income before income taxes                          (168)      1,066 
Income tax (benefit) expense                               (764)        597 
                                                     ----------  ---------- 
Consolidated net income                              $      596  $      469 
                                                     ==========  ========== 
Net loss attributable to noncontrolling interests    $     (255) $     (204)
                                                     ==========  ========== 
Net income attributable to NuVasive, Inc.            $      851  $      673 
                                                     ==========  ========== 
                                                                            
Net income per share attributable to NuVasive, Inc.:                        
  Basic and diluted                                  $     0.02  $     0.02 
                                                     ==========  ========== 
Weighted average shares outstanding:                                        
  Basic                                                  44,025      42,844 
                                                     ==========  ========== 
  Diluted                                                45,316      43,397 
                                                     ==========  ========== 
                                                                            
Stock-based compensation is included in expenses in                         
 the following categories:                                                  
  Sales, marketing and administrative                $    6,424  $    6,142 
  Research and development                                  342         465 
  Cost of goods sold                                         21          14 
                                                     ----------  ---------- 
                                                     $    6,787  $    6,621 
                                                     ==========  ========== 
                                                                            
                                                                            
                                                                            
                               NuVasive, Inc.                               
                   Condensed Consolidated Balance Sheets                    
                               (in thousands)                               
                                                                            
                                                 March 31,     December 31, 
                                                    2013           2012     
                                               -------------  ------------- 
                                                (Unaudited)                 
ASSETS                                                                      
Current assets:                                                             
  Cash and cash equivalents                    $      78,472  $     123,299 
  Short-term marketable securities                   121,897        138,405 
  Accounts receivable, net                            90,410         88,958 
  Inventory                                          129,583        126,335 
  Deferred tax assets, current                        31,136         28,236 
  Prepaid expenses and other current assets            9,078          8,516 
                                               -------------  ------------- 
Total current assets                                 460,576        513,749 
Property and equipment, net                          122,897        125,123 
Long-term marketable securities                       80,829         84,412 
Intangible assets, net                               101,992        101,362 
Goodwill                                             154,056        154,106 
Deferred tax assets                                   37,676         40,575 
Restricted cash and investments                      119,046        118,995 
Other assets                                          24,380         25,463 
                                               -------------  ------------- 
Total assets                                   $   1,101,452  $   1,163,785 
                                               =============  ============= 
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
Current liabilities:                                                        
  Accounts payable and accrued liabilities     $      72,227  $      62,048 
  Accrued payroll and related expenses                20,952         27,916 
  Litigation liability                                 7,500              - 
  Senior Convertible Notes, current                        -         74,311 
                                               -------------  ------------- 
Total current liabilities                            100,679        164,275 
Senior Convertible Notes                             335,726        332,404 
Deferred tax liabilities                               3,123          3,129 
Litigation liability                                  93,700        101,200 
Other long-term liabilities                           15,056         15,199 
Commitments and contingencies                                               
Noncontrolling interests                               9,748         10,003 
Stockholders' equity:                                                       
  Preferred stock                                          -              - 
  Common stock                                            44             44 
  Additional paid-in capital                         721,688        714,865 
  Accumulated other comprehensive (loss)                                    
   income                                             (1,043)           786 
  Accumulated deficit                               (177,269)      (178,120)
                                               -------------  ------------- 
Total stockholders' equity                           543,420        537,575 
                                               -------------  ------------- 
Total liabilities and stockholders' equity     $   1,101,452  $   1,163,785 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
                               NuVasive, Inc.                               
          Unaudited Condensed Consolidated Statements of Cash Flows         
                               (in thousands)                               
                                                                            
                                                         Three Months Ended 
                                                              March 31,     
                                                         ------------------ 
                                                           2013      2012   
                                                         --------  -------- 
                                                                            
Operating activities:                                                       
Consolidated net income                                  $    596  $    469 
  Adjustments to reconcile net income to net cash                           
   provided by operating activities:                                        
  Depreciation and amortization                            14,581    12,087 
  Amortization of debt discount                             3,322     3,088 
  Amortization of debt issuance costs                         478       451 
  Stock-based compensation                                  6,787     6,621 
  Allowance for doubtful accounts and sales return                          
   reserve                                                   (129)      663 
  Allowance for excess and obsolete inventory, net of                       
   write-offs                                                 157     1,200 
  Accretion of contingent consideration                        17       397 
  Other non-cash adjustments                                1,393     1,446 
  Changes in operating assets and liabilities, net of                       
   effects from acquisitions:                                               
  Accounts receivable                                      (1,619)    2,193 
  Inventory                                                (4,098)   (3,502)
  Prepaid expenses and other current assets                  (929)   10,959 
  Accounts payable and accrued liabilities                 10,373     7,834 
  Accrued payroll and related expenses                     (6,823)   (4,166)
                                                         --------  -------- 
Net cash provided by operating activities                  24,106    39,740 
Investing activities:                                                       
  Cash paid for business and asset acquisitions            (5,031)   (3,667)
  Purchases of property and equipment                      (9,200)  (14,567)
  Purchases of marketable securities                      (48,916)        - 
  Sales of marketable securities                           68,621    84,831 
                                                         --------  -------- 
Net cash provided by investing activities                   5,474    66,597 
Financing activities:                                                       
  Principal payment of 2013 Senior Convertible Notes      (74,311)        - 
  Proceeds from the issuance of common stock                   36       314 
  Other assets                                                100        76 
                                                         --------  -------- 
Net cash (used in) provided by financing activities       (74,175)      390 
Effect of exchange rate changes on cash                      (232)      (39)
                                                         --------  -------- 
(Decrease) increase in cash and cash equivalents          (44,827)  106,688 
Cash and cash equivalents at beginning of period          123,299   163,492 
                                                         --------  -------- 
Cash and cash equivalents at end of period               $ 78,472  $270,180 
                                                         ========  ======== 

  
Investor Contact:
Tina Jacobsen
NuVasive, Inc.
858-320-5215
investorrelations@nuvasive.com 
Media Contact: 
Nicole Collins
NuVasive, Inc.
858-909-1907
media@nuvasive.com 
 
 
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