Sunday, February 7, 2016 Last update: 2:03 PM
FreshNews.com - Covering Large & Obscure Tech Companies Since 1996

NuVasive Reports Fourth Quarter and Full Year 2013 Financial Results

Companies mentioned in this article: NuVasive, Inc.

SAN DIEGO, CA -- (Marketwired) -- 03/03/14 -- NuVasive, Inc. (NASDAQ: NUVA)

  • Fourth quarter 2013 total revenue of $190.8 million; up 15.1% from fourth quarter 2012

  • Full year 2013 total revenue of $685.2 million; up 10.5% from full year 2012

  • GAAP operating margin of 7.9% for the fourth quarter 2013 and 4.8% for the full year 2013

  • Non-GAAP operating margin of 16.3% for the fourth quarter 2013 and 14.9% for the full year 2013

  • GAAP net earnings of $6.0 million, or $0.13 per share, for the fourth quarter 2013 and GAAP net earnings of $7.9 million, or $0.17 per share, for the full year 2013

  • Non-GAAP earnings of $17.8 million, or $0.37 per share, for the fourth quarter 2013 and $57.4 million, or $1.23 per share, for the full year 2013

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, 2013.

Alex Lukianov, Chairman and Chief Executive Officer, said, "2013 results clearly demonstrate that NuVasive's market share taking strategy is thriving. Importantly, we are cultivating the drivers that will support top and bottom line growth for many years to come. We are leveraging our unrivaled years of experience and research to continue championing the global market conversion toward less invasive spine solutions. And our commitment to innovation has conceived a pipeline that may dwarf all that we have accomplished so far. Onward and Upward!"

NuVasive reported fourth quarter 2013 revenue of $190.8 million, a 15.1% increase over the $165.8 million for the fourth quarter 2012 and a 12.8% increase over the $169.2 million reported for the third quarter 2013. The Company reported full year 2013 revenue of $685.2 million, a 10.5% increase over the $620.3 million reported for full year 2012.

Gross profit for the fourth quarter 2013 was $141.5 million and gross margin was 74.1%, compared to a gross profit of $123.6 million and a gross margin of 74.5% for the fourth quarter 2012. For the third quarter 2013, gross profit was $125.9 million and gross margin was 74.4%. Gross profit for the full year 2013 was $504.7 million and gross margin was 73.7%, compared to a gross profit of $466.8 million and gross margin of 75.3% for the full year 2012.

Total operating expenses for the fourth quarter 2013 were $126.4 million compared to $119.4 million in the fourth quarter 2012 and $114.3 million in the third quarter 2013. Full year 2013 operating expenses were $471.6 million compared to $429.8 million reported for the full year 2012. The higher operating costs for the fourth quarter and full year 2013 resulted primarily from spending to support international infrastructure expansion and higher revenue.

On a GAAP basis, the Company reported net income of $6.0 million, or $0.13 per share, for the fourth quarter 2013, and net income of $7.9 million, or $0.17 per share for the full year 2013.

On a Non-GAAP basis, the Company reported net income of $17.8 million, or $0.37 per share, for the fourth quarter 2013, and net income of $57.4 million, or $1.23 per share, for the full year 2013. The Non-GAAP earnings per share calculations for the fourth quarter and full year exclude, respectively, (i) non-cash stock-based compensation of $9.2 million and $33.2 million; (ii) certain intellectual property litigation expenses of $1.8 million and $5.7 million; (iii) amortization of intangible assets of $5.1 million and $19.3 million; (iv) acquisition related items of $42 thousand and $2.6 million; (v) non-cash interest expense on convertible notes of $3.5 million and $13.7 million; and (vi) a one-time out of period royalty expense charge related to royalty accruals in connection with Phase I of the company's patent litigation with Medtronic of $7.9 million recorded in the second quarter 2013.

Cash, cash equivalents and short and long-term marketable securities were approximately $326 million at December 31, 2013.

2014 Full Year Financial Guidance

  • Revenue of approximately $725 million;
  • GAAP EPS of approximately $0.11;
  • Non-GAAP EPS of approximately $1.06;
  • Non-GAAP Operating Margin of approximately 16%;
  • GAAP effective tax expense of approximately $19 million, which includes the impact of our Globalization Initiative

Supplementary Financial Information

For additional financial detail, please refer to the Supplementary Financial Information provided by CLICKING HERE or by visiting the Investor Relations section of our website at www.nuvasive.com.


                  Reconciliation of Full Year EPS Guidance

                                                           2014 Guidance (1)
                                                           -----------------

GAAP earnings per share                                    $            0.11
Non-cash stock based compensation                                       0.43
Certain intellectual property litigation expenses                       0.06
Amortization of intangible assets                                       0.19
Leasehold termination charge                                            0.08
Acquisition related items (2)                                           0.01
Non-cash interest expense on convertible notes                          0.18
                                                           -----------------
Non-GAAP earnings per share                                $            1.06
                                                           =================

Weighted shares outstanding - basic                                   47,500
                                                           =================
Weighted shares outstanding - diluted                                 50,000
                                                           =================

(1)Effective tax expense rate of ~80% applied to GAAP earnings and 40%
applied to Non-GAAP adjustments
(2)Acquisition related items include expenses associated with prior M&A
related activity and as incurred



               Reconciliation of Non-GAAP Operating Margin %

                                                           2013      2014
                                                          Actuals  Guidance
                                                         --------  --------

Non-GAAP Gross Margin % [A]                                  74.8%     76.0%
Non-cash stock based compensation                             0.0%      0.0%
Out-of-period royalty expense charge                         -1.1%      0.0%
                                                         --------  --------
GAAP Gross Margin [D]                                        73.7%     76.0%

Non-GAAP Sales, Marketing & Administrative Expense [B]       55.9%     54.5%
Non-cash stock based compensation                             4.6%      4.8%
Certain intellectual property litigation expenses             0.8%      0.7%
Leasehold termination charge                                  0.0%      0.9%
Acquisition related items*                                    0.0%      0.1%
                                                         --------  --------
GAAP Sales, Marketing & Administrative Expense [E]           61.3%     61.0%

Non-GAAP Research & Development Expense [C]                   4.1%      5.5%
Non-cash stock based compensation                             0.2%      0.2%
Acquisition related items*                                    0.4%      0.1%
                                                         --------  --------
GAAP Research & Development Expense [F]                       4.7%      5.8%

Amortization of intangible assets [G]                         2.8%      2.2%

                                                         --------  --------
Non-GAAP Operating Margin % [A-B-C]                          14.9%     16.0%
                                                         ========  ========

                                                         --------  --------
GAAP Operating Margin % [D-E-F-G]                             4.8%      7.0%
                                                         ========  ========


* 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, leasehold termination charge, acquisition related items, non-cash interest expense on convertible notes, and an out of period royalty expense charge. Management does not consider these costs in evaluating the continuing operations of the Company. Therefore, management calculates the Non-GAAP financial measures provided in this earnings release excluding these costs and uses these Non-GAAP financial measures to enable it to 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 2013 Results

                                             Pre-Tax               Earnings
(in thousands, except per share data)      Adjustments Net of Tax  Per Share
                                           ----------- ---------- ----------
GAAP net income                                        $    6,009 $     0.13
  Non-cash stock-based compensation        $     9,238      5,542       0.12
  Certain intellectual property litigation
   expenses                                      1,765      1,060       0.02
  Amortization of intangible assets              5,063      3,037       0.06
  Acquisition related items                         42         24       0.00
  Non-cash interest expense on convertible
   notes                                         3,508      2,106       0.04

                                                       ---------- ----------
Non-GAAP earnings                                      $   17,778 $     0.37
                                                       ========== ==========


Weighted shares outstanding - diluted                                 47,947
                                                                  ==========





                  Reconciliation of Full Year 2013 Results

                                         Pre-Tax                Earnings Per
(in thousands, except per share data)  Adjustments  Net of Tax      Share
                                      ------------ ------------ ------------
GAAP net income                                    $      7,902 $       0.17
  Non-cash stock-based compensation   $     33,240       19,944         0.43
  Certain intellectual property
   litigation expenses                       5,728        3,437         0.07
  Amortization of intangible assets         19,326       11,596         0.25
  Acquisition related items                  2,576        1,545         0.03
  Non-cash interest expense on
   convertible notes                        13,656        8,194         0.18
  Out-of-period royalty expense
   charge                                    7,901        4,741         0.10

                                                   ------------ ------------
Non-GAAP earnings                                  $     57,358 $       1.23
                                                   ============ ============

Weighted shares outstanding - diluted                                 46,786
                                                                ============


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 on our website, at www.nuvasive.com in the Investor Relations Section.

After the live webcast, the call will remain available on NuVasive's website through April 2, 2014. In addition, a telephonic replay of the call will be available until March 17, 2014. The replay dial-in numbers are 1-877-870-5176 for domestic callers and 1-858-384-5517 for international callers. Please use pin number 13574396.

About NuVasive

NuVasive is an innovative global medical device company that is changing spine surgery with minimally disruptive surgical products and procedurally integrated solutions for the spine. The Company is the 4th largest player in the $8.7 billion global spine market.

NuVasive offers a comprehensive spine portfolio of over 90 unique products developed to improve spine surgery and patient outcomes. The Company's principal procedural solution is its Maximum Access Surgery, or MAS® platform for lateral spine fusion. MAS provides safe, reproducible, and clinically proven outcomes, and is a highly differentiated solution with fully integrated neuromonitoring, customizable exposure, and a broad offering of application-specific implants and fixation devices designed to address a variety of pathologies.

Having pioneered the lateral approach to spine fusion, NuVasive continues to be at the forefront of the spine industry's shift toward less invasive solutions. The Company's dedication to innovation continues to spawn game changing technology such as the PCM® motion preserving disc for the cervical spine, XLIF® Corpectomy for tumor and trauma, and Armada®, which treats adult degenerative scoliosis in a less invasive fashion. The Company has also developed 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™; taking market share by maintaining a commitment to Superior Clinical Outcomes, Speed of Innovation®, and Absolute Responsiveness®.

NuVasive cautions you that statements included in this press release that are not a description of historical facts are forward-looking statements that involve risks, uncertainties, assumptions and other factors which, if they do not materialize or prove correct, could cause NuVasive's results to differ materially from historical results or those expressed or implied by such forward-looking statements. The potential risks and uncertainties that could cause actual growth and results to differ materially include, but are not limited to: the risk that NuVasive's revenue or earnings projections may turn out to be inaccurate because of the preliminary nature of the forecasts; the risk of further adjustment to financial results or future financial expectations; unanticipated difficulty in selling products, generating revenue or producing expected profitability; and other risks and uncertainties more fully described in NuVasive's press releases and periodic filings with the Securities and Exchange Commission. NuVasive's public filings with the Securities and Exchange Commission are available at www.sec.gov. NuVasive assumes no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which it was made.


                               NuVasive, Inc.
               Condensed Consolidated Statements of Operations
                    (in thousands, except per share data)


                             Three Months Ended
                                December 31,        Year Ended December 31,
                          ------------------------  -----------------------
                              2013         2012         2013        2012
                          -----------  -----------  -----------  ----------
                          (Unaudited)  (Unaudited)  (Unaudited)
Revenue                   $   190,815  $   165,754  $   685,173  $  620,255
Cost of goods sold
 (excluding amortization
 of purchased technology)      49,353       42,196      180,484     153,409
                          -----------  -----------  -----------  ----------
Gross profit                  141,462      123,558      504,689     466,846

Operating expenses:
  Sales, marketing and
   administrative             113,821       97,713      420,064     372,416
  Research and
   development                  7,555        8,398       32,209      35,296
  Amortization of
   intangible assets            5,063        3,600       19,326      12,430
  Impairment of goodwill
   and intangible assets            -        9,700            -       9,700
                          -----------  -----------  -----------  ----------
Total operating expenses      126,439      119,411      471,599     429,842

Interest and other
 expense, net:
  Interest income                 195          254          755         915
  Interest expense             (6,782)      (7,028)     (27,178)    (27,710)
  Other income, net               164          901        3,101       1,047
                          -----------  -----------  -----------  ----------
Total interest and other
 expense, net                  (6,423)      (5,873)     (23,322)    (25,748)
                          -----------  -----------  -----------  ----------

Income (loss) before
 income taxes                   8,600       (1,726)       9,768      11,256
Income tax expense              2,763        1,050        2,783       8,814
                          -----------  -----------  -----------  ----------
Consolidated net income
 (loss)                   $     5,837  $    (2,776) $     6,985  $    2,442
                          ===========  ===========  ===========  ==========
Net loss attributable to
 noncontrolling interests $      (172) $       (30) $      (917) $     (702)
                          ===========  ===========  ===========  ==========
Net income (loss)
 attributable to
 NuVasive, Inc.           $     6,009  $    (2,746) $     7,902  $    3,144
                          ===========  ===========  ===========  ==========

Net income (loss) per
 share attributable to
 NuVasive, Inc.:
  Basic                   $      0.13  $     (0.06) $      0.18  $     0.07
                          ===========  ===========  ===========  ==========
  Diluted                 $      0.13  $     (0.06) $      0.17  $     0.07
                          ===========  ===========  ===========  ==========
Weighted average shares
 outstanding:
  Basic                        44,820       43,628       44,461      43,328
                          ===========  ===========  ===========  ==========
  Diluted                      47,947       43,628       46,786      44,272
                          ===========  ===========  ===========  ==========



                               NuVasive, Inc.
                    Condensed Consolidated Balance Sheets
                               (in thousands)

                                                         December 31,
                                                   ------------------------
                                                       2013         2012
                                                   -----------  -----------
                      ASSETS                       (Unaudited)
Current assets:
  Cash and cash equivalents                        $   102,825  $   123,299
  Short-term marketable securities                     143,449      138,405
  Accounts receivable, net                             104,774       88,958
  Inventory                                            136,937      126,364
  Deferred tax assets, current                          37,076       28,236
  Prepaid expenses and other current assets             10,947        8,487
                                                   -----------  -----------
Total current assets                                   536,008      513,749
Property and equipment, net                            128,064      125,123
Long-term marketable securities                         79,829       84,412
Intangible assets, net                                  93,986      101,362
Goodwill                                               154,944      154,106
Deferred tax assets                                     42,863       40,575
Restricted cash and investments                        119,195      118,995
Other assets                                            24,679       25,463
                                                   -----------  -----------
Total assets                                       $ 1,179,568  $ 1,163,785
                                                   ===========  ===========
              LIABILITIES AND EQUITY
Current liabilities:
  Accounts payable and accrued liabilities         $    86,057  $    62,048
  Accrued payroll and related expenses                  31,095       27,916
  Senior Convertible Notes, current                          -       74,311
                                                   -----------  -----------
Total current liabilities                              117,152      164,275
Senior Convertible Notes                               346,060      332,404
Deferred tax liabilities                                 2,934        3,129
Litigation liability                                    93,700      101,200
Other long-term liabilities                             14,844       15,199
Commitments and contingencies
Noncontrolling interests                                     -       10,003
Stockholders' equity:
  Preferred stock                                            -            -
  Common stock                                              45           44
  Additional paid-in capital                           769,203      714,865
  Accumulated other comprehensive (loss) income         (3,238)         786
  Accumulated deficit                                 (170,218)    (178,120)
                                                   -----------  -----------
Total Nuvasive, Inc. stockholders' equity              595,792      537,575
Noncontrolling interests                                 9,086            -
                                                   -----------  -----------
Total equity                                           604,878      537,575
                                                   -----------  -----------
Total liabilities and equity                       $ 1,179,568  $ 1,163,785
                                                   ===========  ===========



                               NuVasive, Inc.
               Condensed Consolidated Statements of Cash Flows
                               (in thousands)

                                             Year Ended December 31,
                                      -------------------------------------
                                          2013         2012         2011
                                      -----------  -----------  -----------
                                      (Unaudited)
Operating activities:
Consolidated net income (loss)        $     6,985  $     2,442  $   (71,021)
Adjustments to reconcile net income
 (loss) to net cash provided by
 operating activities:
  Depreciation and amortization            63,106       51,909       36,242
  Deferred income tax (benefit)
   expense                                (11,341)       4,525      (30,967)
  Amortization of debt discount            13,656       12,697        6,108
  Amortization of debt issuance costs       1,680        1,872        1,816
  Stock-based compensation                 33,240       26,312       32,070
  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 reserves                      959          103        1,345
  Allowance for excess and obsolete
   inventory, net of write-offs             6,509        5,475        6,028
  Other non-cash adjustments                7,116        7,283        6,227
Changes in operating assets and
 liabilities, net of effects from
 acquisitions:
  Accounts receivable                     (17,384)      (2,005)      (9,929)
  Inventory                               (21,002)     (11,022)     (17,170)
  Prepaid expenses and other current
   assets                                  (3,608)      12,725      (14,396)
  Accounts payable and accrued
   liabilities                             21,803        2,938       (3,385)
  Litigation liability                     (7,500)           -      101,200
  Accrued payroll and related
   expenses                                 3,220        5,128        2,685
                                      -----------  -----------  -----------
Net cash provided by operating
 activities                                97,439      130,082       62,965
Investing activities:
Cash paid for business and asset
 acquisitions                             (14,818)     (11,088)     (37,574)
Purchases of property and equipment       (47,597)     (41,189)     (53,370)
Purchases of marketable securities       (218,454)    (235,919)    (253,210)
Sales of marketable securities            216,299      246,504      151,966
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     (64,570)    (147,894)    (201,724)
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)
Principal payment of 2013 Senior
 Convertible Notes                        (74,311)           -            -
Repurchase of 2013 Senior Convertible
 Notes                                          -            -     (154,164)
Tax benefits related to stock-based
 compensation awards                       13,569        3,003          463
Proceeds from the issuance of common
 stock                                      8,422        4,884        6,852
Payment of contingent consideration             -      (29,722)      (1,800)
Other assets                                 (162)        (721)        (718)
                                      -----------  -----------  -----------
Net cash (used in) provided by
 financing activities                     (52,482)     (22,556)     209,879
Effect of exchange rate changes on
 cash                                        (861)         175         (225)
                                      -----------  -----------  -----------
(Decrease) increase in cash and cash
 equivalents                              (20,474)     (40,193)      70,895
Cash and cash equivalents at
 beginning of year                        123,299      163,492       92,597
                                      -----------  -----------  -----------
Cash and cash equivalents at end of
 year                                 $   102,825  $   123,299  $   163,492
                                      ===========  ===========  ===========


Contact:

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

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