SAN DIEGO, July 30, 2019 /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,
2019.
Second Quarter 2019 Highlights
- Revenue increased 3.7% to $292.1
million, or 4.7% on a constant currency basis;
- GAAP operating profit margin of 10.3%; Non-GAAP operating
profit margin of 16.3%; and
- GAAP diluted earnings per share of $0.29; Non-GAAP diluted earnings per share of
$0.63.
"NuVasive continued to deliver consistent revenue growth in the
second quarter 2019, with a notably solid performance from the U.S.
Hardware business," said J. Christopher
Barry, chief executive officer of NuVasive. "We saw
meaningful case volume growth driven by increased surgeon adoption
of lateral single-position surgery and NuVasive's innovative X360
system. Our strong profitability results over the first half of the
year demonstrate the clear initiatives and focused execution
throughout the business and are reflected in our raised full-year
2019 non-GAAP guidance for operating margin and earnings per
share."
A full reconciliation of GAAP to non-GAAP financial measures can
be found in the tables of this news release.
Second Quarter 2019 Results
NuVasive reported
second quarter 2019 total revenue of $292.1
million, a 3.7% increase compared to $281.6 million for the second quarter 2018. On a
constant currency basis, second quarter 2019 total revenue
increased 4.7% compared to the same period last year.
For the second quarter 2019, both GAAP and non-GAAP gross profit
was $214.5 million and GAAP and
non-GAAP gross margin was 73.4%. These results compared to the
second quarter 2018 GAAP and non-GAAP gross profit of $204.5 million and $204.9
million, respectively, and GAAP and non-GAAP gross margin of
72.6% and 72.8%, respectively.
On a GAAP basis, the Company reported net income of $15.0 million, or diluted earnings per share of
$0.29, for the second quarter 2019
compared to a net income of $11.5
million, or diluted earnings per share of $0.22, for the second quarter 2018. On a non-GAAP
basis, the Company reported net income of $32.8 million, or diluted earnings per share of
$0.63 per share, for the second
quarter 2019 compared to net income of $30.3
million, or diluted earnings per share of $0.58 per share, for the second quarter 2018.
Annual Financial Guidance for 2019
The Company
updated its full-year 2019 financial guidance to reflect first-half
2019 results.
|
2019 Guidance
Range 1
|
|
Prior
|
|
Current
|
|
GAAP
|
Non-GAAP
|
|
GAAP
|
Non-GAAP
|
|
Revenue
|
$1.14B -
$1.16B
|
|
$1.14B -
$1.16B
|
|
$1.14B -
$1.16B
|
|
$1.14B -
$1.16B
|
|
% Growth -
Reported
|
3.5% -
5.5%
|
|
3.5% -
5.5%
|
|
3.4% -
5.4%
|
|
3.4% -
5.4%
|
|
% Growth - Constant
Currency2
|
|
|
3.8% -
5.8%
|
|
|
|
3.8% -
5.8%
|
|
Operating
margin
|
9.0% -
9.5%
|
|
15.0% -
15.5%
|
|
9.1% -
9.5%
|
|
15.3% -
15.7%
|
|
Earnings per
share
|
$0.95 -
$1.05
|
|
$2.20 -
$2.30
|
|
$0.93 -
$1.03
|
|
$2.25 -
$2.35
|
|
EBITDA
margin
|
20.9% -
21.3%
|
|
25.2% -
25.7%
|
|
21.2% -
21.5%
|
|
25.5% -
25.9%
|
|
Tax
Rate
|
~22%
|
|
~23%
|
|
~24%
|
|
~23%
|
|
|
|
1
|
Prior guidance
reflects the range provided May 1, 2019. Current guidance reflects
the range provided July 30, 2019.
|
|
2
|
Constant currency
is a measure that adjusts US GAAP revenue for the impact of
currency over the same period in the prior year.
|
- The Company maintains full-year 2019 revenue guidance to be in
the range of $1.14 billion to
$1.16 billion, which now includes
approximately $5 million in
year-over-year currency headwinds compared to prior guidance of
$4 million. This reflects reported
growth in the range of 3.4% to 5.4%, compared with prior guidance
of 3.5% to 5.5%. Revenue growth on a constant currency basis
remains unchanged at 3.8% to 5.8%;
- Non-GAAP diluted earnings per share in a range of $2.25 to $2.35,
compared with prior guidance of $2.20
to $2.30;
- Non-GAAP operating profit margin of 15.3% to 15.7%, compared
with prior guidance of 15.0% to 15.5%;
- EBITDA margin of 25.5% to 25.9%, compared with prior guidance
of 25.2% to 25.7%; and
- Non-GAAP effective tax expense rate of approximately 23%.
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
|
|
|
|
2019 Guidance
Range 1, 2
|
|
2018 Actuals
1
|
|
Prior
3
|
|
Current
4
|
|
GAAP net income
per share
|
$0.24
|
|
$0.95 -
1.05
|
|
$0.93 -
1.03
|
|
Impact of change to
diluted share count
|
—
|
|
—
|
|
—
|
|
GAAP net income
per share, adjusted to diluted Non-GAAP share count
|
$0.24
|
|
$0.95 -
1.05
|
|
$0.93 -
1.03
|
|
|
|
|
|
|
|
Business transition
costs 5
|
0.22
|
|
0.10
|
|
0.11
|
|
Non-cash purchase
accounting adjustments on acquisitions 6
|
0.02
|
|
—
|
|
—
|
|
Non-cash interest
expense on convertible notes
|
0.32
|
|
0.30
|
|
0.34
|
|
Litigation related
expenses and settlements 7
|
0.65
|
|
0.20
|
|
0.18
|
|
Non-recurring
consulting fees 8
|
0.12
|
|
—
|
|
—
|
|
Net loss on strategic
investments
|
0.07
|
|
—
|
|
—
|
|
Amortization of
intangible assets
|
0.97
|
|
0.95
|
|
0.96
|
|
Purchase of
in-process research and development 9
|
0.17
|
|
—
|
|
—
|
|
European medical
device regulation10
|
0.01
|
|
0.10
|
|
0.11
|
|
Tax effect of
adjustments11
|
(0.56)
|
|
(0.40)
|
|
(0.38)
|
|
Non-GAAP earnings
per share
|
$2.23
|
|
$2.20 -
2.30
|
|
$2.25 -
2.35
|
|
|
|
|
|
|
|
GAAP Weighted shares
outstanding - basic
|
51,382
|
|
51,999
|
|
51,954
|
|
GAAP Weighted shares
outstanding - diluted
|
52,355
|
|
52,991
|
|
52,898
|
|
Non-GAAP Weighted
shares outstanding - diluted 12
|
52,178
|
|
52,718
|
|
52,586
|
|
|
|
|
1
|
Items may not foot
due to rounding.
|
|
2
|
Prior guidance
reflects the range provided May 1, 2019. Current guidance reflects
the range provided July 30, 2019.
|
|
3
|
Effective tax
expense rate of ~22% applied to GAAP earnings and ~23% applied to
Non-GAAP earnings.
|
|
4
|
Effective tax
expense rate of ~24% applied to GAAP earnings and ~23% applied to
Non-GAAP earnings.
|
|
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
|
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.
|
|
8
|
Non-recurring
consulting fees associated with the implementation of our state
tax-planning strategy.
|
|
9
|
Purchase of an
in-process research and development asset which had no future
alternative use.
|
|
10
|
Costs related to
updating our quality system, product labeling, asset write-offs and
product remanufacturing to comply with European medical device
regulation.
|
|
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 rate of ~43% benefit on a GAAP basis
and ~18% on a non-GAAP basis in 2018.
|
|
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 %
|
|
|
|
|
|
|
|
|
|
2019 Guidance
Range 1, 2
|
|
(in thousands,
except %)
|
2018 Actuals
1
|
|
Prior
|
|
Current
|
|
Non-GAAP Gross
Margin % [A]
|
71.9%
|
|
72.5% -
73.0%
|
|
72.5% -
73.0%
|
|
Non-cash purchase
accounting adjustments on acquisitions 3
|
(0.1%)
|
|
0.0%
|
|
0.0%
|
|
GAAP Gross Margin
[B]
|
71.8%
|
|
72.5% -
73.0%
|
|
72.5% -
73.0%
|
|
|
|
|
|
|
|
Non-GAAP Sales,
Marketing & Administrative Expense [C]
|
51.1%
|
|
51.0% -
52.0%
|
|
50.8% -
51.7%
|
|
Non-recurring
consulting fees4
|
0.6%
|
|
0.0%
|
|
0.0%
|
|
Litigation related
expenses5
|
0.6%
|
|
0.7%
|
|
0.8%
|
|
GAAP Sales, Marketing
& Administrative Expense [D]
|
52.3%
|
|
51.7% -
52.7%
|
|
51.6% -
52.5%
|
|
|
|
|
|
|
|
GAAP and Non-GAAP
Research & Development Expense [E]
|
5.6%
|
|
6.0%
|
|
6.0%
|
|
|
|
|
|
|
|
Litigation related
settlements [F]6
|
2.5%
|
|
0.0%
|
|
0.0%
|
|
Amortization of
intangible assets [G]
|
4.6%
|
|
4.3%
|
|
4.4%
|
|
Purchase of
in-process research and development [H]7
|
0.8%
|
|
0.0%
|
|
0.0%
|
|
European medical
device regulation [I]8
|
0.0%
|
|
0.6%
|
|
0.5%
|
|
Business transition
costs [J] 9
|
1.0%
|
|
0.4%
|
|
0.5%
|
|
|
|
|
|
|
|
Non-GAAP Operating
Margin % [A - C - E]
|
15.1%
|
|
15.0% -
15.5%
|
|
15.3% -
15.7%
|
|
|
|
|
|
|
|
GAAP Operating Margin
% [B - D - E - F - G - H - I - J]
|
4.9%
|
|
9.0% -
9.5%
|
|
9.1% -
9.5%
|
|
|
|
1
|
Items may not foot
due to rounding.
|
|
2
|
Prior guidance
reflects the range provided May 1, 2019. Current guidance reflects
the range provided July 30, 2019.
|
|
3
|
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.
|
|
4
|
Non-recurring
consulting fees associated with the implementation of our state
tax-planning strategy.
|
|
5
|
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.
|
|
6
|
Represents the
loss recorded in connection with the settlement of the Madsen
Medical, Inc. litigation matter.
|
|
7
|
Purchase of an
in-process research and development asset which had no future
alternative use.
|
|
8
|
Costs related to
updating our quality system, product labeling, asset write-offs and
product remanufacturing to comply with European medical device
regulation.
|
|
9
|
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 Margin %
|
|
|
|
|
|
|
|
|
|
2019 Guidance
Range1, 5
|
|
(in thousands,
except %)
|
2018 Actuals
1, 2
|
|
Prior
3
|
|
Current4
|
|
Net
Income
|
1.1%
|
|
4.3% -
4.8%
|
|
4.3% -
4.7%
|
|
Interest income /
expense, net
|
3.4%
|
|
3.3%
|
|
3.3%
|
|
Income tax benefit /
(expense)
|
(0.3%)
|
|
1.3%
|
|
1.5%
|
|
Depreciation and
amortization
|
11.8%
|
|
12.0%
|
|
11.9%
|
|
EBITDA
Margin
|
16.0%
|
|
20.9% -
21.3%
|
|
21.2% -
21.5%
|
|
Non-cash stock based
compensation
|
2.3%
|
|
2.6%
|
|
2.5%
|
|
Business transition
costs6
|
1.0%
|
|
0.4%
|
|
0.5%
|
|
Non-cash purchase
accounting adjustments on acquisitions7
|
0.1%
|
|
0.0%
|
|
0.0%
|
|
Litigation related
expenses and settlements 8
|
3.1%
|
|
0.7%
|
|
0.8%
|
|
Non-recurring
consulting fees 9
|
0.6%
|
|
0.0%
|
|
0.0%
|
|
In-process research
and development10
|
0.8%
|
|
0.0%
|
|
0.0%
|
|
European medical
device regulation11
|
0.0%
|
|
0.6%
|
|
0.5%
|
|
Net loss on strategic
investments
|
0.3%
|
|
0.0%
|
|
0.0%
|
|
Adjusted EBITDA
Margin
|
24.3%
|
|
25.2% -
25.7%
|
|
25.5% -
25.9%
|
|
|
|
1
|
Items may not foot
due to rounding.
|
|
2
|
Effective tax
expense rate of ~43% benefit applied to GAAP earnings and ~18%
applied to Non-GAAP earnings.
|
|
3
|
Effective tax
expense rate of ~22% applied to GAAP earnings and ~23% applied to
Non-GAAP earnings.
|
|
4
|
Effective tax
expense rate of ~24% applied to GAAP earnings and ~23% applied to
Non-GAAP earnings.
|
|
5
|
Prior guidance
reflects the range provided May 1, 2019. Current guidance reflects
the range provided July 30, 2019.
|
|
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
|
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.
|
|
9
|
Non-recurring
consulting fees associated with the implementation of our state
tax-planning strategy.
|
|
10
|
Purchase of an
in-process research and development asset which had no future
alternative use.
|
|
11
|
Charges represent
the costs specific to updating our quality system, product
labeling, asset write-offs and product remanufacturing to comply
with European medical device regulation.
|
Reconciliation of GAAP to Non-GAAP Financial
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, purchased in-process research and development,
one-time restructuring and related items in connection with
acquisitions, investments and divestitures, non-recurring
consulting fees, certain litigation expenses and settlements,
certain European medical device regulation costs, gains and losses
from strategic investments, and non-cash interest expense
(excluding debt issuance cost). Management also uses certain
non-GAAP financial measures which are intended to exclude the
impact of foreign exchange currency fluctuations. The measure
constant currency utilizes 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, purchased
in-process research and development, one-time restructuring and
related items in connection with acquisitions, investments and
divestitures, non-recurring consulting fees, certain litigation
expenses and settlements, certain European medical device
regulation costs, gains and losses on strategic investments, 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 financial 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 financial measures are not in accordance
with, or an alternative for, GAAP, and may be different from
non-GAAP financial measures used by other companies. Set forth
below are reconciliations of the GAAP to non-GAAP financial
measures.
|
For the Three
Months Ended June 30, 2019
|
|
Reconciliation of
GAAP to Non-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
GAAP
|
$
214,526
|
$
30,197
|
$
14,962
|
$
0.29
|
52,460
|
$
14,962
|
|
% of
revenue
|
73.4%
|
10.3%
|
|
|
|
|
|
Amortization of
intangible assets
|
|
12,277
|
12,277
|
|
|
|
|
Litigation related
expenses and settlements1
|
|
2,031
|
2,031
|
|
|
2,031
|
|
Business transition
costs2
|
|
1,646
|
1,646
|
|
|
1,646
|
|
European medical
device regulation3
|
|
1,400
|
1,400
|
|
|
1,400
|
|
Non-cash interest
expense on convertible notes
|
|
|
4,374
|
|
|
|
|
Tax effect of
adjustments 4
|
|
|
(3,881)
|
|
|
|
|
Interest
expense/(income), net
|
|
|
|
|
|
9,323
|
|
Income tax
expense
|
|
|
|
|
|
5,921
|
|
Depreciation and
amortization
|
|
|
|
|
|
33,560
|
|
Non-cash stock based
compensation
|
|
|
|
|
|
6,901
|
|
Adjusted
Non-GAAP
|
$
214,526
|
$
47,551
|
$
32,809
|
$
0.63
|
52,460
|
$
75,744
|
|
% of
revenue
|
73.4%
|
16.3%
|
|
|
|
25.9%
|
|
|
|
1
|
Represents
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
|
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.
|
|
3
|
Represents costs
specific to updating our quality system, product labeling, asset
write-offs and product remanufacturing to comply with European
medical device regulation.
|
|
4
|
Represents the
impact from tax affecting the adjustments above at their statutory
tax rate. As of July 30, 2019, the Company estimated an annual tax
rate of ~24% on a GAAP basis and ~23% 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, 2019
|
|
Reconciliation of
GAAP to Non-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
GAAP
|
$
414,808
|
$
50,370
|
$
24,348
|
$
0.46
|
52,471
|
$
24,348
|
|
% of
revenue
|
73.2%
|
8.9%
|
|
|
|
|
|
Amortization of
intangible assets
|
|
25,902
|
25,902
|
|
|
|
|
Litigation related
expenses and settlements 1
|
|
5,077
|
5,077
|
|
|
5,077
|
|
Business transition
costs2
|
|
5,479
|
5,479
|
|
|
5,479
|
|
European medical
device regulation3
|
|
1,732
|
1,732
|
|
|
1,732
|
|
Non-cash interest
expense on convertible notes
|
|
|
8,693
|
|
|
|
|
Tax effect of
adjustments4
|
|
|
(10,814)
|
|
|
|
|
Interest
expense/(income), net
|
|
|
|
|
|
18,427
|
|
Income tax
expense
|
|
|
|
|
|
7,238
|
|
Depreciation and
amortization
|
|
|
|
|
|
67,614
|
|
Non-cash stock based
compensation
|
|
|
|
|
|
12,618
|
|
Adjusted
Non-GAAP
|
$
414,808
|
$
88,560
|
$
60,417
|
$
1.15
|
52,471
|
$
142,533
|
|
% of
revenue
|
73.2%
|
15.6%
|
|
|
|
25.1%
|
|
|
|
1
|
Represents
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
|
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.
|
|
3
|
Represents costs
specific to updating our quality system, product labeling, asset
write-offs and product remanufacturing to comply with European
medical device regulation.
|
|
4
|
Represents the
impact from tax affecting the adjustments above at their statutory
tax rate. As of July 30, 2019, the Company estimated an annual tax
rate of ~24% on a GAAP basis and ~23% 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 Three
Months Ended June 30, 2018
|
|
Reconciliation of
GAAP to Non-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
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
costs 3
|
|
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
|
Represents the
impact from tax affecting the adjustments above at their statutory
tax rate. As of July 31, 2018, the Company estimated an annual tax
rate of ~33% on a GAAP basis and ~21% 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, 2018
|
|
Reconciliation of
GAAP to Non-GAAP Financial Measures
|
|
(Unaudited - in
thousands, except per share data)
|
|
|
|
|
|
|
|
|
Gross
Profit
|
Operating
Profit
|
Net (Loss)
Income
|
Diluted
EPS
|
Diluted
WASO 6,7
|
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
costs 4
|
|
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
|
Represents the
impact from tax affecting the adjustments above at their statutory
tax rate. As of July 30, 2018, the Company estimated an annual tax
rate of ~33% on a GAAP basis and ~21% 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 31, 2018 was calculated using the diluted
weighted average shares outstanding.
|
|
7
|
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 2019. 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 30, 2019. In addition, a telephone replay
of the call will be available until August
6, 2019. 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: 13691950.
NuVasive Investor Day 2019
NuVasive will discuss its corporate strategy, including its
innovation roadmap and long-term financial outlook, at its Investor
Day on August 8, 2019. A live webcast
of NuVasive's Investor Day will be available online from the
Investor Relations page of the Company's website at
www.nuvasive.com. After the live webcast, a replay of the event and
the presentation materials will be available on NuVasive's
website.
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
more than $1 billion in revenues,
NuVasive has approximately 2,600 employees and operates in more
than 50 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 2019, as well as projections for 2019
financial guidance and longer-term financial performance goals. The
Company's results for the second quarter 2019 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 2019 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, 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)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Revenue
|
|
|
|
|
|
|
|
|
Product
revenue
|
$ 261,381
|
|
$ 252,687
|
|
$ 505,204
|
|
$ 486,202
|
|
Service
revenue
|
30,724
|
|
28,877
|
|
61,677
|
|
55,884
|
|
Total
revenue
|
292,105
|
|
281,564
|
|
566,881
|
|
542,086
|
|
Cost of revenue
(excluding below amortization of intangible assets)
|
|
|
|
|
|
|
|
|
Cost of products
sold
|
57,613
|
|
58,202
|
|
112,099
|
|
113,393
|
|
Cost of
services
|
19,966
|
|
18,854
|
|
39,974
|
|
37,477
|
|
Total cost of
revenue
|
77,579
|
|
77,056
|
|
152,073
|
|
150,870
|
|
Gross
profit
|
214,526
|
|
204,508
|
|
414,808
|
|
391,216
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Sales, marketing and
administrative
|
152,853
|
|
145,658
|
|
297,929
|
|
292,424
|
|
Research and
development
|
17,553
|
|
14,856
|
|
35,128
|
|
29,347
|
|
Amortization of
intangible assets
|
12,277
|
|
12,628
|
|
25,902
|
|
25,053
|
|
Litigation liability
(gain) loss
|
—
|
|
(1,195)
|
|
—
|
|
27,800
|
|
Business transition
costs
|
1,646
|
|
3,998
|
|
5,479
|
|
6,251
|
|
Total operating
expenses
|
184,329
|
|
175,945
|
|
364,438
|
|
380,875
|
|
Interest and other
expense, net:
|
|
|
|
|
|
|
|
|
Interest
income
|
327
|
|
116
|
|
736
|
|
250
|
|
Interest
expense
|
(9,650)
|
|
(9,956)
|
|
(19,163)
|
|
(19,423)
|
|
Other income
(expense), net
|
9
|
|
(2,379)
|
|
(357)
|
|
(12,082)
|
|
Total interest and
other expense, net
|
(9,314)
|
|
(12,219)
|
|
(18,784)
|
|
(31,255)
|
|
Income (loss) before
income taxes
|
20,883
|
|
16,344
|
|
31,586
|
|
(20,914)
|
|
Income tax (expense)
benefit
|
(5,921)
|
|
(4,813)
|
|
(7,238)
|
|
5,313
|
|
Consolidated net
income (loss)
|
$
14,962
|
|
$
11,531
|
|
$
24,348
|
|
$ (15,601)
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share:
|
|
|
|
|
|
|
|
|
Basic
|
$
0.29
|
|
$
0.22
|
|
$
0.47
|
|
$
(0.30)
|
|
Diluted
|
$
0.29
|
|
$
0.22
|
|
$
0.46
|
|
$
(0.30)
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
51,967
|
|
51,356
|
|
51,822
|
|
51,292
|
|
Diluted
|
52,460
|
|
51,956
|
|
52,471
|
|
51,292
|
|
NuVasive,
Inc.
|
|
Consolidated
Balance Sheets
|
|
(in thousands,
except par values and share amounts)
|
|
|
|
|
|
June 30,
2019
|
|
December 31,
2018
|
|
ASSETS
|
(Unaudited)
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
128,377
|
|
$
117,840
|
|
Accounts receivable,
net of allowances of $16,400 and $16,171, respectively
|
207,992
|
|
196,487
|
|
Inventory,
net
|
297,136
|
|
273,244
|
|
Prepaid income
taxes
|
16,188
|
|
16,905
|
|
Prepaid expenses and
other current assets
|
14,617
|
|
13,733
|
|
Total current
assets
|
664,310
|
|
618,209
|
|
Property and
equipment, net
|
257,438
|
|
238,841
|
|
Intangible assets,
net
|
227,545
|
|
252,048
|
|
Goodwill
|
561,420
|
|
561,366
|
|
Operating lease
right-of-use assets
|
62,424
|
|
—
|
|
Deferred tax
assets
|
4,885
|
|
5,263
|
|
Restricted cash and
investments
|
2,394
|
|
2,395
|
|
Other
assets
|
24,894
|
|
29,737
|
|
Total
assets
|
$
1,805,310
|
|
$
1,707,859
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts payable and
accrued liabilities
|
$
105,710
|
|
$
105,877
|
|
Contingent
consideration liabilities
|
7,892
|
|
7,560
|
|
Accrued payroll and
related expenses
|
58,492
|
|
59,960
|
|
Operating lease
liabilities
|
6,471
|
|
—
|
|
Litigation
liabilities
|
3,250
|
|
1,415
|
|
Income tax
liabilities
|
2,823
|
|
4,648
|
|
Total current
liabilities
|
184,638
|
|
179,460
|
|
Senior convertible
notes
|
612,762
|
|
602,526
|
|
Deferred and income
tax liabilities
|
10,269
|
|
4,964
|
|
Operating lease
liabilities
|
67,753
|
|
—
|
|
Other long-term
liabilities
|
67,164
|
|
86,384
|
|
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,
2019 and December 31, 2018, 57,357,083and 56,648,077 issued and
outstanding at June 30, 2019 and December 31, 2018,
respectively
|
62
|
|
61
|
|
Additional paid-in
capital
|
1,413,934
|
|
1,397,829
|
|
Accumulated other
comprehensive loss
|
(8,552)
|
|
(8,628)
|
|
Retained
earnings
|
41,589
|
|
17,241
|
|
Treasury stock at
cost; 5,327,656shares and 5,116,496 shares at June 30, 2019 and
December 31, 2018, respectively
|
(584,309)
|
|
(571,978)
|
|
Total
equity
|
862,724
|
|
834,525
|
|
Total liabilities and
equity
|
$
1,805,310
|
|
$
1,707,859
|
|
NuVasive,
Inc.
|
|
Consolidated
Statements of Cash Flows
|
|
(in
thousands)
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
(unaudited)
|
2019
|
|
2018
|
|
Operating
activities:
|
|
|
|
|
Consolidated net
income (loss)
|
$
24,348
|
|
$ (15,601)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
67,614
|
|
64,151
|
|
Impairment of
strategic investment
|
—
|
|
9,004
|
|
Amortization of
non-cash interest
|
10,494
|
|
9,920
|
|
Stock-based
compensation
|
12,618
|
|
10,994
|
|
Reserves on current
assets
|
8,267
|
|
9,444
|
|
Other non-cash
adjustments
|
4,329
|
|
12,133
|
|
Deferred income
taxes
|
5,721
|
|
(6,593)
|
|
Changes in operating
assets and liabilities, net of effects from
acquisitions:
|
|
|
|
|
Accounts
receivable
|
(11,602)
|
|
852
|
|
Inventory
|
(31,856)
|
|
(19,615)
|
|
Prepaid expenses and
other current assets
|
(2,811)
|
|
(2,141)
|
|
Accounts payable and
accrued liabilities
|
9,301
|
|
8,931
|
|
Accrued payroll and
related expenses
|
(3,699)
|
|
(6,358)
|
|
Litigation
liability
|
1,835
|
|
2,150
|
|
Income
taxes
|
(1,128)
|
|
(53)
|
|
Net cash provided by
operating activities
|
93,431
|
|
77,218
|
|
Investing
activities:
|
|
|
|
|
Acquisitions and
investments
|
(4,100)
|
|
(52,081)
|
|
Purchases of
intangible assets
|
(6,827)
|
|
(7,682)
|
|
Purchases of property
and equipment
|
(65,385)
|
|
(53,388)
|
|
Net cash used in
investing activities
|
(76,312)
|
|
(113,151)
|
|
Financing
activities:
|
|
|
|
|
Proceeds from the
issuance of common stock
|
3,888
|
|
5,312
|
|
Purchases of treasury
stock
|
(11,702)
|
|
(2,222)
|
|
Payment of contingent
consideration
|
(809)
|
|
(8,900)
|
|
Proceeds from
revolving line of credit
|
—
|
|
100,000
|
|
Repayments on
revolving line of credit
|
—
|
|
(63,000)
|
|
Other financing
activities
|
1,769
|
|
(146)
|
|
Net cash (used in)
provided by financing activities
|
(6,854)
|
|
31,044
|
|
Effect of exchange
rate changes on cash
|
271
|
|
(837)
|
|
Increase (decrease)
in cash, cash equivalents and restricted cash
|
10,536
|
|
(5,726)
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
120,235
|
|
78,198
|
|
Cash, cash
equivalents and restricted cash at end of period
|
$ 130,771
|
|
$
72,472
|
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SOURCE NuVasive, Inc.