NuVasive Announces Second Quarter 2018 Financial Results
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.
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 2018 Guidance Range
Actuals1, 2
-----------
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.
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
(2) 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.
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
8 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.
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
11 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 Prior Current
Actuals 1, 2
------------
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 Prior Current
Actuals 1, 2
------------
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 Net Income Diluted EPS Diluted WASO Net Income to
Profit 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 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 Net (Loss) Diluted EPS Diluted WASO 6 Net Loss to
Profit Income 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 Net Income Diluted EPS Diluted WASO 5 Net Income to
Profit Adjusted EBITDA
------ ---------------
Reported GAAP(1) $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 Net Income Diluted EPS Diluted WASO 5 Net Income to
Profit Adjusted EBITDA
------ ---------------
Reported GAAP(1) $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(TM) 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
======= ========
View original content with multimedia:http://www.prnewswire.com/news-releases/nuvasive-announces-second-quarter-2018-financial-results-300689601.html
SOURCE NuVasive, Inc.
