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NuVasive Announces Second Quarter 2018 Financial Results

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NuVasive Announces Second Quarter 2018 Financial Results

PR Newswire

SAN DIEGO, July 31, 2018 /PRNewswire/ -- NuVasive, Inc. (NASDAQ:NUVA), the leader in spine technology innovation, focused on transforming spine surgery with minimally disruptive, procedurally-integrated solutions, today announced financial results for the quarter ended June 30, 2018. 

NuVasive Logo

Second Quarter 2018 Highlights

  • Revenue increased 8.5% to $281.6 million, or 7.7% on a constant currency basis;
  • GAAP operating profit margin of 10.1%; Non-GAAP operating profit margin of 16.3%; and
  • GAAP diluted earnings per share increase of 5% to $0.22; Non-GAAP diluted earnings per share increase of 29% to $0.58.

"We are pleased with our second quarter total revenue growth of 8.5% year-over-year driven by momentum in our U.S. Spinal Hardware business where we saw spine case volumes up nearly 7% versus prior year," said Gregory T. Lucier, chairman and chief executive officer of NuVasive. "We continue to see strong demand for new product introductions from late last year and positive surgeon conversion efforts as our new Lateral Single-Position Surgery procedure gains traction in the market. Our International business also delivered a solid performance with 21% year-over-year growth."

A full reconciliation of GAAP to non-GAAP measures can be found in the tables of this news release.

Second Quarter 2018 Results
NuVasive reported second quarter 2018 total revenue of $281.6 million, an 8.5% increase compared to $259.4 million for the second quarter 2017. On a constant currency basis, second quarter 2018 total revenue increased 7.7% compared to the same period last year. 

For the second quarter 2018, GAAP and non-GAAP gross profit was $204.5 million and $204.9 million, respectively, and GAAP and non-GAAP gross margin was 72.6% and 72.8%, respectively. These results compared to both GAAP and non-GAAP gross profit of $193.2 million, and both GAAP and non-GAAP gross margin of 74.5% for the second quarter 2017. Gross margins for the second quarter 2018 were impacted by the Company's in-source manufacturing efforts at the West Carrollton facility, which are expected to improve over the second half of 2018.

The Company reported GAAP net income of $11.5 million, or $0.22 per share, for the second quarter 2018 compared to GAAP net income of $12.2 million, or $0.21 per share, for the second quarter 2017. On a non-GAAP basis, the Company reported net income of $30.3 million, or $0.58 per share, for the second quarter 2018 compared to net income of $23.6 million, or $0.45 per share, for the second quarter 2017.

Annual Financial Guidance for 2018
The Company updated its full-year 2018 guidance as follows:





















2018 Guidance Range 1




Prior


Current



(in million's; except %'s and EPS)

 GAAP 


 Non-GAAP 


 GAAP 


 Non-GAAP 



Revenue

$    1,095


$    1,105


$ 1,095


$    1,105


$ 1,095


$ 1,105


$ 1,095


$ 1,105



  % Growth - Reported 2

6.7%


7.6%


6.7%


7.6%


6.7%


7.6%


6.7%


7.6%



% Growth - Constant Currency 2, 3





5.7%


6.6%






6.3%


7.3%



Operating margin

9.6%


9.7%


17.6%


17.6%


8.0%


8.1%


16.7%


16.7%



Earnings per share

$      0.71


$      0.74


$   2.44


$      2.47


$   0.45


$   0.48


$   2.37


$   2.40



EBITDA

19.5%


19.5%


26.9%


26.9%


18.7%


18.7%


25.9%


25.9%



Tax Rate

~31%


~31%


~23%


~23%


~33%


~33%


~21%


~21%




















  1

Prior guidance reflects the range provided May 1, 2018. Current guidance reflects the range provided July 31, 2018.


  2

2017 has been recasted and presented based on our full retrospective method of adoption of ASC 606.


 3

Constant currency is a measure that adjusts US GAAP revenue for the impact of currency over the same period in the prior year.




















 

  • Full-year 2018 revenue remains in the range of $1,095 million to $1,105 million reflecting reported growth of 6.7% to 7.6%, and growth in the range of 4.7% to 5.7%, exclusive of the SafePassage acquisition;
  • Non-GAAP diluted earnings per share in a range of $2.37 to $2.40 compared with the prior expectation of $2.44 to $2.47;
  • Non-GAAP operating profit margin of approximately 16.7% compared with the prior expectation of 17.6%;
  • Adjusted EBITDA margin of approximately 25.9% compared with the prior expectation of 26.9%;
  • Non-GAAP effective tax expense rate of approximately 21%, compared with the prior expectation of approximately 23%;
  • The Company expects currency to have a positive impact on revenue in 2018 of approximately $3 million compared with the prior expectation of $10 million; and
  • The Company expects to drive an adjusted EBITDA of approximately $283 million to $293 million.

The above guidance assumes a full-year benefit of U.S. tax reform, suspension of the medical device tax and the SafePassage acquisition. 

Supplementary Financial Information
For additional financial detail, please visit the Investor Relations section of the Company's website at www.nuvasive.com to access Supplementary Financial Information.













Reconciliation of Full Year EPS Guidance



2017
Actuals1, 2


2018 Guidance Range





Prior1, 3, 4


Current  1, 3, 5



GAAP net income per share

$       1.48


$  0.71


$  0.74


$  0.45


$  0.48



Impact of change to diluted share count

0.08


0.01


0.01


-


-



GAAP net income per share, adjusted to diluted Non-GAAP share count

$       1.56


$  0.72


$  0.75


$  0.45


$  0.48















Business transition costs 6

0.08


0.07


0.07


0.13


0.13



Non-cash purchase accounting adjustments on acquisitions 7

0.01


0.02


0.02


0.02


0.02



Non-cash interest expense on convertible notes

0.33


0.32


0.32


0.32


0.32



Litigation related expenses and settlements 8

0.09


0.55


0.55


0.60


0.60



Non-recurring consulting fees 9

-


0.12


0.12


0.13


0.13



Impairment of strategic investment

-


0.17


0.17


0.17


0.17



Amortization of intangible assets 10

0.89


0.89


0.89


0.95


0.95



Tax effect of adjustments 11

(1.08)


(0.42)


(0.42)


(0.40)


(0.40)



Non-GAAP earnings per share

$       1.89


$  2.44


$  2.47


$  2.37


$  2.40















GAAP Weighted shares outstanding - basic

50,874


51,025


51,025


51,397


51,397



GAAP Weighted shares outstanding - diluted

55,193


52,647


52,647


52,131


52,131



Non-GAAP Weighted shares outstanding - diluted 12

52,345


52,185


52,185


52,131


52,131














1

Items may not foot due to rounding.





2

2017 has been recasted and presented based on our full retrospective method of adoption of ASC 606 as well as for expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company's intellectual property.





3

Prior guidance reflects the range provided May 1, 2018. Current guidance reflects the range provided July 31, 2018.





4

Effective tax expense rate of ~31% applied to GAAP earnings and ~23% applied to Non-GAAP earnings.





5

Effective tax expense rate of ~33% applied to GAAP earnings and ~21% applied to Non-GAAP earnings.





6

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.





7

Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.





8

Related to the Medtronic litigation matter for fiscal year 2017. Represents the settlement loss in connection with the Madsen Medical, Inc. litigation matter as well as expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company's intellectual property for fiscal year 2018.





9

Non-recurring consulting fees associated with the implementation of our state tax-planning strategy.





10

2017 results exclude the amortization associated with non-controlling interest.





11

The impact on results from taxes include tax effecting the adjustments above at the statutory rate as well as taking into account discrete items and including those discrete items in the annual effective tax rate calculation. The Company also includes those adjustments that would have benefited the tax rate in lieu of the above adjustments as part of the Company's tax filings. The impact of the changes to the tax rate results in an annual estimated rate of ~33% on a GAAP basis and ~21% on a non-GAAP basis.





12

Adjusted non-GAAP diluted WASO excludes the impact of dilutive convertible notes and warrants for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.














 


 

Reconciliation of Non-GAAP Operating Margin %
















2018 Guidance2, 3




(in thousands, except %)


2017
Actuals 1, 2


Prior


Current




Non-GAAP Gross Margin %[A]


73.9%


73.5%


72.6%




Non-cash purchase accounting adjustments on acquisitions 4


(0.1%)


(0.1%)


(0.1%)




GAAP Gross Margin [B]


73.9%


73.4%


72.5%














Non-GAAP Sales, Marketing & Administrative Expense [C]


52.5%


50.6%


50.6%




Non-recurring consulting fees5


0.0%


0.6%


0.6%




GAAP Sales, Marketing & Administrative Expense [D]


52.5%


51.2%


51.2%














Non-GAAP Research & Development Expense [E]


4.9%


5.3%


5.3%




In-process research & development


0.0%


0.0%


0.0%




GAAP Research & Development Expense [F]


4.9%


5.3%


5.3%














Litigation related expenses and settlements [G] 6


0.5%


2.6%


2.9%




Amortization of intangible assets [H] 7


4.7%


4.3%


4.5%




Business transition costs [I] 8


0.5%


0.4%


0.6%














Non-GAAP Operating Margin % [A - C - E]


16.5%


17.6%


16.7%














GAAP Operating Margin % [B - D - F - G - H - I]


10.9%


9.6%


8.0%













1

2017 has been recasted and presented based on our full retrospective method of adoption of ASC 606 as well as for expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company's intellectual property.







2

Items may not foot due to rounding.







  3

Prior guidance reflects the range provided May 1, 2018. Current guidance reflects the range provided July 31, 2018.







  4

Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.







  5

Non-recurring consulting fees associated with the implementation of our state tax-planning strategy.







  6

Related to the Medtronic litigation matter, settlement loss in connection with the Madsen Medical, Inc. litigation matter as well as expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company's intellectual property.







  7

For fiscal year 2017 amortization includes the amortization attributable to non-controlling interest. In January 2018, the Company completed the acquisition of the non-controlling interest.







  8

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.

















 










Reconciliation of EBITDA %























2018 Guidance2, 3




(in thousands, except %)

2017
Actuals 1, 2


Prior


Current




Net Income / (Loss)

7.9%


3.4%


2.2%




Interest (income) / expense, net 

3.7%


3.6%


3.5%




Provision for income taxes

(0.7%)


1.6%


1.1%




Depreciation and amortization 4

11.7%


10.9%


11.5%




EBITDA

22.6%


19.5%


18.3%




Non-cash stock based compensation

2.2%


3.0%


2.6%




Business transition costs 5

0.4%


0.3%


0.6%




Non-cash purchase accounting adjustments on acquisitions 6

0.1%


0.1%


0.1%




Litigation related expenses and settlements 7

0.5%


2.6%


2.9%




Non-recurring consulting fees 8

0.0%


0.6%


0.6%




Impairment of strategic investment

0.0%


0.8%


0.8%




Adjusted EBITDA

25.7%


26.9%


25.9%












1

2017 has been recasted and presented based on our full retrospective method of adoption of ASC 606 as well as for expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company's intellectual property.



2

Items may not foot due to rounding.

















3

Prior guidance reflects the range provided May 1, 2018. Current guidance reflects the range provided July 31, 2018.



4

2017 results exclude the amortization associated with non-controlling interest.







5

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.







6

Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.







7

Related to the Medtronic litigation matter, settlement loss in connection with the Madsen Medical, Inc. litigation matter as well as expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company's intellectual property.





8

Non-recurring consulting fees associated with the implementation of our state tax-planning strategy.
















Reconciliation of Non-GAAP Information
Management uses certain non-GAAP financial measures such as non-GAAP earnings per share, non-GAAP net income, non-GAAP operating expenses and non-GAAP operating profit margin, which exclude amortization of intangible assets, business transition costs, one-time restructuring and related items in connection with acquisitions, investments and divestitures, non-recurring consulting fees, certain litigation expenses and settlements, and non-cash interest expense (excluding debt issuance cost) and or losses on convertible notes. Management also uses certain non-GAAP measures which are intended to exclude the impact of foreign exchange currency fluctuations. The measure constant currency is the use of an exchange rate that eliminates fluctuations when calculating financial performance numbers. The Company also uses measures such as free cash flow, which represents cash flow from operations less cash used in the acquisition and disposition of capital. Additionally, the Company uses an adjusted EBITDA measure which represents earnings before interest, taxes, depreciation and amortization and excludes the impact of stock-based compensation, business transition costs, one-time restructuring and related items in connection with acquisitions, investments and divestitures, non-recurring consulting fees, certain litigation expenses and settlements, and other significant one-time items.

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 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.

During the quarter ended June 30, 2018, the Company began excluding from its non-GAAP financial results certain litigation related expenses, in addition to litigation charges associated with significant legal settlements. As previously disclosed, the Company is pursuing various legal claims against a former member of the Company's Board of Directors for violations of his contractual obligations to the Company and breach of his fiduciary duties. The Company has also filed lawsuits against his current employer for tort claims and intellectual property infringement. The Company began excluding litigation expenses associated with these and related legal matters in the quarter ended June 30, 2018. Expenses for these legal matters significantly increased during the quarter ended June 30, 2018, and based on developments in these legal matters, expenses are expected to be significant throughout 2018. The Company believes that these litigation expenses are unusual in nature and not reflective of the Company's normal course of business or the financial performance of the Company's core business operations. These expenses are included in the line item "Litigation related expenses and settlements" in the non-GAAP reconciliations below. For consistency and comparability, the Company has re-casted its non-GAAP financial results for each of the quarters ended December 31, 2017 and March 31, 2018 to exclude these litigation expenses in such periods, which were $0.4 million and $0.6 million, respectively.


For the Three Months Ended June 30, 2018



Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures



(Unaudited - in thousands, except per share data)













Gross Profit

Operating
Profit

Net Income 

Diluted EPS

Diluted WASO

Net Income to
Adjusted EBITDA



Reported GAAP

$      204,508

$    28,563

$      11,531

$           0.22

51,956

$                  11,531












% of revenue

72.6%

10.1%
















Non-cash purchase accounting adjustments on acquisitions 1

405

405

405



405












Amortization of intangible assets


12,628

12,628















Litigation related expenses and settlements 2


383

383



383












Business transition costs3


3,998

3,998



3,998












Non-cash interest expense on convertible notes



4,153















Tax effect of adjustments 4



(2,775)















Interest expense/(income), net






9,840












Income tax expense






4,813












Depreciation and amortization






32,061












Non-cash stock based compensation






6,860












Adjusted Non-GAAP

$      204,913

$    45,977

$      30,323

$           0.58

51,956

$                  69,891












% of revenue

72.8%

16.3%




24.8%











1

Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.





2

Represents the change in the estimated loss contingency recorded in connection with the settlement of the Madsen Medical, Inc. litigation matter, as well as expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company's intellectual property.





3

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.





4

The impact on results from taxes include tax effecting the adjustments above at the statutory rate as well as taking into account discrete items and including those discrete items in the annual effective tax rate calculation. The Company also includes those adjustments that would have benefited the tax rate in lieu of the above adjustments as part of the Company's tax filings. The impact of the changes to the tax rate results in an annual estimated rate of ~32.6% on a GAAP basis and ~21.0% on a non-GAAP basis.


 


For the Six Months Ended June 30, 2018



Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures



(Unaudited - in thousands, except per share data)













Gross Profit

Operating
Profit

Net (Loss)
Income

Diluted EPS

Diluted WASO 6

Net Loss to
Adjusted EBITDA



Reported GAAP

$      391,216

$    10,341

$    (15,601)

$          (0.30)

51,292

$                (15,601)












% of revenue

72.2%

1.9%
















Non-cash purchase accounting adjustments on acquisitions 1

810

810

810



810












Non-recurring consulting fees 2


6,084

6,084



6,084












Amortization of intangible assets


25,053

25,053















Litigation related expenses and settlements 3


29,969

29,969



29,969












Business transition costs4


6,251

6,251



6,251












Non-cash interest expense on convertible notes



8,252















Impairment of strategic investment



9,004



9,004












Tax effect of adjustments 5



(18,884)















Interest expense/(income), net






19,173












Income tax benefit






(5,313)












Depreciation and amortization






64,151












Non-cash stock based compensation






10,994












Adjusted Non-GAAP

$      392,026

$    78,508

$      50,938

$           0.98

51,849

$                125,522












% of revenue

72.3%

14.5%




23.2%




















1

Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.





2

Non-recurring consulting fees associated with the implementation of our state tax-planning strategy.





3

Represents the loss recorded in connection with the settlement of the Madsen Medical, Inc. litigation matter, as well as expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company's intellectual property.





4

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.





5

The impact on results from taxes include tax effecting the adjustments above at the statutory rate as well as taking into account discrete items and including those discrete items in the annual effective tax rate calculation. The Company also includes those adjustments that would have benefited the tax rate in lieu of the above adjustments as part of the Company's tax filings. The impact of the changes to the tax rate results in an annual estimated rate of ~32.6% on a GAAP basis and ~21.0% on a non-GAAP basis.





6

The Company had a GAAP net loss for the six months ended June 30, 2018, and therefore the loss per share was calculated using the basic weighted average shares outstanding. The non-GAAP earnings per share for the six months ending June 30, 2018 was calculated using the diluted weighted average shares outstanding.


 


For the Three Months Ended June 30, 2017



Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures



(Unaudited - in thousands, except per share data)













Gross Profit

Operating
Profit

Net Income

Diluted EPS

Diluted WASO 5

Net Income to
Adjusted EBITDA



Reported GAAP1

$      193,213

$    28,956

$      12,167

$           0.21

58,330

$                  12,167












% of revenue

74.5%

11.2%
















Amortization of intangible assets 2


11,349

11,028















Business transition costs 3


1,369

1,369



1,369












Non-cash interest expense on convertible notes



4,665















Tax effect of adjustments 4



(5,664)















Interest expense/(income), net






9,944












Income tax expense






6,776












Depreciation and amortization 2






28,856












Non-cash stock based compensation






8,394












Adjusted Non-GAAP

$      193,213

$    41,674

$      23,565

$           0.45

52,743

$                  67,506












% of revenue

74.5%

16.1%




26.0%











1

Reported GAAP figures for 2017 have been recasted and presented based on the full retrospective method of adoption of ASC 606.





2

When reconciling from reported GAAP net income, the adjustment for amortization of intangible assets excludes the amortization associated with non-controlling interest. In January 2018, the Company completed the acquisition of the non-controlling interest.





3

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.





4

The impact on results from taxes include tax effecting the adjustments above at the statutory rate as well as taking into account discrete items and including those discrete items in the annual effective tax rate calculation. The Company also includes those adjustments that would have benefited the tax rate in lieu of the above adjustments as part of the Company's tax filings. The impact of the changes to the tax rate results in an annual estimated rate of ~32.7% benefit on a GAAP basis and ~35.0% on a non-GAAP basis.





5

Adjusted non-GAAP diluted WASO excludes the impact of dilutive convertible notes and warrants for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.


 


For the Six Months Ended June 30, 2017



Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures



(Unaudited - in thousands, except per share data)













Gross Profit

Operating
Profit

Net Income

Diluted EPS

Diluted WASO 5

Net Income to
Adjusted EBITDA



Reported GAAP1

$      380,783

$    51,628

$      24,593

$           0.42

58,059

$                  24,593












% of revenue

74.9%

10.2%
















Amortization of intangible assets 2


23,410

22,766















Business transition costs 3


1,424

1,424



1,424












Non-cash interest expense on convertible notes



9,264















Tax effect of adjustments 4



(14,790)















Interest expense/(income), net






19,606












Income tax expense






8,061












Depreciation and amortization 2






58,014












Non-cash stock based compensation






15,411












Adjusted Non-GAAP

$      380,783

$    76,462

$      43,257

$           0.82

52,713

$                127,109












% of revenue

74.9%

15.0%




25.0%











1

Reported GAAP figures for 2017 have been recasted and presented based on the full retrospective method of adoption of ASC 606.





2

When reconciling from reported GAAP net income, the adjustment for amortization of intangible assets excludes the amortization associated with non-controlling interest. In January 2018, the Company completed the acquisition of the non-controlling interest.





3

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.





4

The impact on results from taxes include tax effecting the adjustments above at the statutory rate as well as taking into account discrete items and including those discrete items in the annual effective tax rate calculation. The Company also includes those adjustments that would have benefited the tax rate in lieu of the above adjustments as part of the Company's tax filings. The impact of the changes to the tax rate results in an annual estimated rate of ~32.7% benefit on a GAAP basis and ~35.0% on a non-GAAP basis.





5

Adjusted non-GAAP diluted WASO excludes the impact of dilutive convertible notes and warrants for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.


Investor Conference Call
NuVasive will hold a conference call today at 4:30 p.m. ET / 1:30 p.m. PT to discuss the results of its financial performance for the second quarter 2018. 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 website at www.nuvasive.com. After the live webcast, the call will remain available on NuVasive's website through August 28, 2018. In addition, a telephone replay of the call will be available until August 7, 2018. The replay dial-in numbers are 1-844-512-2921 for domestic callers and 1-412-317-6671 for international callers. Please use pin number: 13681479.

About NuVasive
NuVasive, Inc. (NASDAQ:NUVA) is the leader in spine technology innovation, focused on transforming spine surgery and beyond with minimally disruptive, procedurally-integrated solutions designed to deliver reproducible and clinically-proven surgical outcomes. The Company's portfolio includes access instruments, implantable hardware, biologics, software systems for surgical planning, navigation and imaging solutions, magnetically adjustable implant systems for spine and orthopedics, and intraoperative monitoring service offerings. With over $1 billion in revenues, NuVasive has an approximate 2,400 person workforce in more than 40 countries serving surgeons, hospitals and patients. For more information, please visit www.nuvasive.com.

Forward-Looking Statements
NuVasive cautions you that statements included in this news release or made on the investor conference 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. In addition, this news release contains selected financial results from the second quarter 2018, as well as projections for 2018 financial guidance and longer-term financial performance goals. The Company's results for the second quarter 2018 are prior to the completion of review and audit procedures by the Company's external auditors and are subject to adjustment. In addition, the Company's projections for 2018 financial guidance and longer-term financial performance goals represent initial estimates, and are subject to the risk of being inaccurate because of the preliminary nature of the forecasts, the risk of further adjustment, or unanticipated difficulty in selling products or generating expected profitability. The potential risks and uncertainties which contribute to the uncertain nature of these statements include, among others, risks associated with acceptance of the Company's surgical products and procedures by spine surgeons, spine surgeons, development and acceptance of new products or product enhancements, clinical and statistical verification of the benefits achieved via the use of NuVasive's products (including the iGA™ platform), the Company's ability to effectually manage inventory as it continues to release new products, its ability to recruit and retain management and key personnel, and the other risks and uncertainties more fully described in the Company's news 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. 

Consolidated Statements of Operations 

(in thousands, except per share data)












Three Months Ended June 30,


Six Months Ended June 30,

(unaudited)


2018


2017


2018


2017

Revenue









Product revenue


$ 252,687


$ 237,824


$ 486,202


$ 462,779

Service revenue


28,877


21,575


55,884


45,633

Total revenue


281,564


259,399


542,086


508,412

Cost of revenue (excluding below amortization of intangible assets)









Cost of products sold 


58,202


50,535


113,393


96,436

Cost of services


18,854


15,651


37,477


31,193

Total cost of revenue


77,056


66,186


150,870


127,629

Gross profit


204,508


193,213


391,216


380,783

Operating expenses:









Sales, marketing and administrative


145,658


138,967


292,424


279,335

Research and development


14,856


12,572


29,347


24,986

Amortization of intangible assets


12,628


11,349


25,053


23,410

Litigation liability (gain) loss


(1,195)



27,800


Business transition costs


3,998


1,369


6,251


1,424

Total operating expenses


175,945


164,257


380,875


329,155

Interest and other expense, net:









Interest income


116


139


250


276

Interest expense


(9,956)


(10,083)


(19,423)


(19,882)

Other expense, net


(2,379)


(501)


(12,082)


(243)

Total interest and other expense, net


(12,219)


(10,445)


(31,255)


(19,849)

Income (loss) before income taxes


16,344


18,511


(20,914)


31,779

Income tax (expense) benefit


(4,813)


(6,776)


5,313


(8,061)

Consolidated net income (loss)


$   11,531


$   11,735


$ (15,601)


$   23,718

Add back net loss attributable to non-controlling interest


$          —


$      (432)


$          —


$      (875)

Net income (loss) attributable to NuVasive, Inc.


$   11,531


$   12,167


$ (15,601)


$   24,593










Net income (loss) per share attributable to NuVasive, Inc.:









Basic


$       0.22


$       0.24


$     (0.30)


$       0.48

Diluted


$       0.22


$       0.21


$     (0.30)


$       0.42

Weighted average shares outstanding:









Basic


51,356


51,082


51,292


50,825

Diluted


51,956


58,330


51,292


58,059

 

NuVasive, Inc. 

Consolidated Balance Sheets 

(in thousands, except par values and share amounts) 








June 30, 2018


December 31, 2017

ASSETS


(Unaudited)



Current assets:





Cash and cash equivalents


$                    70,078


$                  72,803

Restricted cash and investments



3,901

Accounts receivable, net of allowances of $16,782 and $13,026, respectively


199,907


200,220

Inventory, net


259,819


247,138

Prepaid income taxes


18,187


17,209

Prepaid expenses and other current assets


23,588


18,792

Total current assets


571,579


560,063

Property and equipment, net


231,733


215,326

Intangible assets, net


276,318


280,774

Goodwill


560,751


536,926

Deferred tax assets


4,955


6,440

Restricted cash and investments


2,394


1,494

Other assets


24,607


39,117

Total assets


$               1,672,337


$             1,640,140

LIABILITIES AND EQUITY





Current liabilities:





Accounts payable and accrued liabilities


89,534


$                  75,767

Contingent consideration liabilities


12,214


18,952

Accrued payroll and related expenses


51,128


55,618

Litigation liabilities


10,300


8,150

Short-term borrowings


37,000


Income tax liabilities


3,825


2,908

Total current liabilities


204,001


161,395

Long-term senior convertible notes


592,581


582,920

Deferred and income tax liabilities, non-current


9,525


18,870

Other long-term liabilities


85,067


77,539

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, 2018 and December 31, 2017, 56,511,851and 56,164,060 issued and outstanding at June 30, 2018 and December 31, 2017, respectively


61


60

Additional paid-in capital


1,371,436


1,363,549

Accumulated other comprehensive loss


(8,875)


(6,933)

(Accumulated deficit) retained earnings


(10,839)


4,762

Treasury stock at cost; 5,095,290shares and 5,001,886 shares at June 30, 2018 and December 31, 2017, respectively


(570,620)


(565,867)

Total NuVasive, Inc. stockholders' equity


781,163


795,571

Non-controlling interest



3,845

Total equity


781,163


799,416

Total liabilities and equity


$               1,672,337


$             1,640,140

 

NuVasive, Inc. 

Consolidated Statements of Cash Flows 

(in thousands) 








Six Months Ended June 30,

(unaudited)


2018


2017

Operating activities:





Consolidated net (loss) income


$ (15,601)


$   23,718

Adjustments to reconcile net (loss) income to net cash provided by operating activities:





Depreciation and amortization


64,151


58,688

Impairment of strategic investment


9,004


Amortization of non-cash interest


9,920


10,882

Stock-based compensation


10,994


15,411

Reserves on current assets


9,444


64

Other non-cash adjustments


12,133


7,380

Deferred income taxes


(6,593)


(3,077)

Changes in operating assets and liabilities, net of effects from acquisitions:





Accounts receivable


852


(15,823)

Inventory


(19,615)


(29,417)

Contingent consideration liabilities


(100)


(11,200)

Prepaid expenses and other current assets


(2,141)


(2,543)

Accounts payable and accrued liabilities


9,031


4,868

Accrued payroll and related expenses


(6,358)


(2,059)

Litigation liability


2,150


Income taxes


(53)


10,172

Net cash provided by operating activities


77,218


67,064

Investing activities:





Acquisitions and investments


(52,081)


(14,417)

Purchases of intangible assets


(7,682)


(1,695)

Purchases of property and equipment


(53,388)


(68,690)

Net cash used in investing activities


(113,151)


(84,802)

Financing activities:





Proceeds from the issuance of common stock


5,312


5,369

Purchase of treasury stock


(2,222)


(10,844)

Payment of contingent consideration


(8,900)


(18,800)

Proceeds from revolving line of credit


82,000


20,000

Repayments on revolving line of credit


(45,000)


Other financing activities


(146)


(2,205)

Net cash provided by (used in) financing activities


31,044


(6,480)

Effect of exchange rate changes on cash


(837)


1,449

Decrease in cash, cash equivalents, restricted cash and investments


(5,726)


(22,769)

Cash, cash equivalents, restricted cash and investments at beginning of period


78,198


161,048

Cash, cash equivalents, restricted cash and investments at end of period


$  72,472


$ 138,279

    

 

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SOURCE NuVasive, Inc.

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