NuVasive Reports Fourth Quarter And Full Year 2018 Financial Results
SAN DIEGO, Feb. 20, 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 and full year ended Dec. 31, 2018.
Fourth Quarter 2018 Highlights:
-- Revenue increased 6.3% to $288.3 million, or 6.9% on a constant currency
basis;
-- GAAP operating profit margin of 9.0%; Non-GAAP operating profit margin
of 16.0%; and
-- GAAP diluted earnings per share of $0.23; Non-GAAP diluted earnings per
share of $0.69.
Full Year 2018 Highlights:
-- Revenue increased 7.3% to $1,101.7 million, or 7.1% on a constant
currency basis;
-- GAAP operating profit margin of 4.9%; Non-GAAP operating profit margin
of 15.1%; and
-- GAAP diluted earnings per share of $0.24; Non-GAAP diluted earnings per
share of $2.23.
"NuVasive delivered strong year-over-year revenue growth of more than 7% in 2018, demonstrating the Company's ability to take share in a stable but relatively flat U.S. spine market. Additionally, we made significant progress at our West Carrollton manufacturing facility, exiting the year at 70% SKU rationalization. Collectively, these achievements serve to advance our mission to bring disruptive technology to surgeon partners to enable better, more predictable patient outcomes," said J. Christopher Barry, chief executive officer of NuVasive. "In 2019, NuVasive will focus on continuing to deliver above market revenue growth, while balancing operating leverage with reinvestment opportunities. We will demonstrate a disciplined approach toward funding key areas for long-term Company growth--furthering our product leadership in global implant systems, accelerating our Surgical Intelligence platform, and investing in surgeon training and education with an ongoing focus on globalization efforts."
A full reconciliation of non-GAAP to GAAP measures can be found in the tables of this news release.
Fourth Quarter 2018 Results
NuVasive reported fourth quarter 2018 total revenue of $288.3 million, a 6.3% increase on a reported basis and 6.9% increase on a constant currency basis, compared to $271.2 million for the fourth quarter 2017.
For the fourth quarter 2018, GAAP and non-GAAP gross profit was $202.2 million, and GAAP and non-GAAP gross margin was 70.1%. These results compared to GAAP and non-GAAP gross profit of $195.9 million and $196.3 million, respectively, and GAAP and non-GAAP gross margin of 72.2% and 72.4%, respectively for the fourth quarter 2017. Total GAAP and non-GAAP operating expenses for the fourth quarter 2018 were $176.3 million and $156.2 million, respectively. These results compared to GAAP and non-GAAP operating expenses of $166.5 million and $146.9 million, respectively, for the fourth quarter 2017.
The Company reported GAAP net income of $12.2 million, or $0.23 per share, for the fourth quarter 2018 compared to GAAP net income of $23.5 million, or $0.45 per share, for the fourth quarter 2017. On a non-GAAP basis, the Company reported net income of $36.1 million, or $0.69 per share, for the fourth quarter 2018 compared to net income of $29.1 million, or $0.56 per share, for the fourth quarter 2017.
Full Year 2018 Results
NuVasive reported full year 2018 total revenue of $1,101.7 million, a 7.3% increase on a reported basis and 7.1% increase on a constant currency basis, compared to $1,026.7 million for the full year 2017.
Total GAAP and non-GAAP gross profit for the full year 2018 was $790.6 million and $791.6 million, respectively, and GAAP and non-GAAP gross margin was 71.8% and 71.9%, respectively. These results compared to gross profit of $758.2 million and $758.8 million on a GAAP and non-GAAP basis, respectively, and a GAAP and non-GAAP gross margin of 73.9% for the full year 2017. Total GAAP and non-GAAP operating expenses for the full year 2018 were $736.4 million and $624.8 million, respectively. These results compared to GAAP and non-GAAP operating expenses of $646.8 million and $589.5 million, respectively, for the full year 2017.
The Company reported GAAP net income of $12.5 million, or $0.24 per share, for the full year 2018 compared to GAAP net income of $81.6 million, or $1.48 per share, for the full year 2017. On a non-GAAP basis, the Company reported net income of $116.6 million, or $2.23 per share, for the full year 2018 compared to net income of $99.0 million, or $1.89 per share, for the full year 2017.
Annual Financial Guidance for 2019
The Company estimates revenue for full year 2019 to be in the range of $1.14 billion to $1.16 billion, reflecting reported growth in the range of 3.5% to 5.5%. The Company expects currency to have a negative impact in 2019 of approximately $4 million. The Company estimates full year 2019 net income on a GAAP basis in the range of $1.00 to $1.10 per share and non-GAAP earnings per share in the range of $2.20 to $2.30.
2019 Guidance Range (1)
GAAP
Non-GAAP
Revenue
$1.14B - $1.16B
$1.14B - $1.16B
%
Growth
-
Reported 3.5% - 5.5% 3.5% - 5.5%
%
Growth
-
Constant
Currency(2) 3.8% - 5.8%
Operating
margin 9.5% - 10.0% 15.0% - 15.5%
Earnings
per
share
$1.00 - $1.10
$2.20 - $2.30
EBITDA
margin 21.2% - 21.7% 25.2% - 25.7%
Tax
Rate ~24% ~23%
1 Guidance
reflects
the range
provided
on
February
20, 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.
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
2018 Actuals
(1)
2019 Guidance Range
1, 2, 3
GAAP diluted net income
per share $0.24
$1.00 - 1.10
Impact of change to
diluted share count
GAAP net income per
share, adjusted to
diluted Non-GAAP share
count $0.24
$1.00 - 1.10
Business transition
costs 4 0.22
Non-cash purchase
accounting adjustments
on acquisitions 5 0.02
Non-cash interest
expense on convertible
notes 0.32 0.30
Litigation related
expenses and
settlements 6 0.65 0.20
Non-recurring
consulting fees 7 0.12
Net loss on strategic
investments 0.07
Amortization of
intangible assets 0.97 0.90
Purchase of in-process
research and
development 8 0.17
European medical device
regulation9 0.01 0.10
Tax effect of
adjustments10 (0.56) (0.30)
Non-GAAP earnings per
share $2.23
$2.20 - 2.30
GAAP Weighted shares
outstanding -basic 51,382 52,017
GAAP Weighted shares
outstanding -diluted 52,355 52,938
Non-GAAP Weighted
shares outstanding -
diluted 11 52,178 52,714
1 Items may not
foot due to
rounding.
2 Guidance
reflects the
range provided
on February 20,
2019.
3 Effective tax
expense rate of
~24% applied to
GAAP earnings
and ~23%
applied to Non-
GAAP earnings.
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 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.
6 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.
7 Non-recurring
consulting fees
associated with
the
implementation
of our state
tax-planning
strategy.
8 Purchase of an
in-process
research and
development
asset which had
no future
alternative
use.
9 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.
10 The impact on
results from
taxes include
tax affecting
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.
11 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 %
(in thousands, except
%) 2018 2019
Actuals (1) Guidance 1, 2
Non-GAAP Gross Margin
% [A] 71.9% 72.5% - 73.0%
Non-cash purchase
accounting adjustments
on acquisitions (3) (0.1%) 0.0%
GAAP Gross Margin [B] 71.8% 72.5% - 73.0%
Non-GAAP Sales,
Marketing &
Administrative Expense
[C] 51.1% 51.0% - 52.0%
Non-recurring
consulting fees4 0.6% 0.0%
Litigation related
expenses5 0.6% 0.7%
GAAP Sales, Marketing &
Administrative Expense
[D] 52.3% 51.7% - 52.7%
GAAP and Non-GAAP
Research & Development
Expense [E] 5.6% 6.0%
Litigation related
settlements [F]6 2.5% 0.0%
Amortization of
intangible assets [G] 4.6% 4.2%
Purchase of in-process
research and
development [H]7 0.8% 0.0%
European medical device
regulation [I]8 0.0% 0.6%
Business transition
costs [J] 9 1.0% 0.0%
Non-GAAP Operating
Margin % [A - C - E] 15.1% 15.0% - 15.5%
GAAP Operating Margin %
[B -D -E -F -G -H
-I -J] 4.9% 9.5% - 10.0%
1 Items may not
foot due to
rounding.
2 Guidance
reflects the
range provided
on February 20,
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 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.
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 %
(in thousands, except %)
2018 Actuals 1, 2
2019 Guidance Range1, 3, 4
Net Income 1.1% 4.6% - 5.0%
Interest income /
expense, net 3.4% 3.3%
Income tax benefit /
(expense) (0.3%) 1.5%
Depreciation and
amortization 11.8% 11.7%
EBITDA Margin 16.0% 21.2% - 21.7%
Non-cash stock based
compensation 2.3% 2.7%
Business transition
costs5 1.0% 0.0%
Non-cash purchase
accounting adjustments
on acquisitions6 0.1% 0.0%
Litigation related
expenses and
settlements 7 3.1% 0.7%
Non-recurring
consulting fees 8 0.6% 0.0%
In-process research and
development9 0.8% 0.0%
European medical device
regulation10 0.0% 0.6%
Net loss on strategic
investments 0.3% 0.0%
Adjusted EBITDA Margin 24.3% 25.2% - 25.7%
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
~24% applied to
GAAP earnings
and ~23%
applied to Non-
GAAP earnings.
4 Guidance
reflects the
range provided
on February 20,
2019.
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 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 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, 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 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 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 associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company's intellectual property. For consistency and comparability, the Company has re-casted non-GAAP financial results for each of the quarters ended Dec. 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 December 31, 2018
Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures
(Unaudited - in thousands, except per share data)
Gross Operating
Net Diluted Diluted
Net
Profit Profit Income EPS WASO 5 Income to
Adjusted
EBITDA
---
Reported GAAP $202,198 $25,856 $12,157 $0.23 52,530 $12,157
% of revenue 70.1% 9.0%
---
Amortization of intangible assets 13,268 13,268
Litigation related expenses and settlements(1) 2,750 2,750 2,750
Business transition costs(2) 3,779 3,779 3,779
European medical device regulation(3) 373 373 373
Non-cash interest expense on convertible notes 4,262
Net gain on strategic investments (30) (30)
Tax effect of adjustments 4 (444)
Interest expense/(income), net 9,193
Income tax expense 4,175
Depreciation and amortization 33,356
Non-cash stock based compensation 3,699
---
Adjusted Non-GAAP $202,198 $46,026 $36,115 $0.69 52,471 $69,452
---
% of revenue 70.1% 16.0% 24.1%
---
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 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.
4 The impact on
results from
taxes include
tax affecting
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.
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 Year Ended December 31, 2018
Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures
(Unaudited - in thousands, except per share data)
Gross Operating
Net Diluted Diluted
Net
Profit Profit Income EPS WASO 8 Income to
Adjusted
EBITDA
---
Reported GAAP $790,555 $54,168 $12,479 $0.24 52,355 $12,479
% of revenue 71.8% 4.9%
---
Non-cash purchase
accounting
adjustments on
acquisitions (1) 1,080 1,080 1,080 1,080
Non-recurring consulting fees (2) 6,084 6,084 6,084
Amortization of intangible assets 50,670 50,670
Litigation related expenses and settlements (3) 34,052 34,052 34,052
Business transition costs4 11,473 11,473 11,473
Purchase of in-process research and development 5 8,913 8,913 8,913
European medical device regulation6 373 373 373
Non-cash interest expense on convertible notes 16,722
Net loss on strategic investments 3,837 3,837
Tax effect of adjustments7 (29,126)
Interest expense/(income), net 37,271
Income tax benefit (3,756)
Depreciation and amortization 129,765
Non-cash stock based compensation 25,761
---
Adjusted Non-GAAP $791,635 $166,813 $116,557 $2.23 52,178 $267,332
---
% of revenue 71.9% 15.1% 24.3%
---
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 Purchase of an
in-process
research and
development
asset which had
no future
alternative
use.
6 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.
7 The impact on
results from
taxes include
tax affecting
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.
8 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 December 31, 2017
Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures
(Unaudited - in thousands, except per share data)
Gross Operating
Net Diluted Diluted
Net
Profit Profit Income EPS WASO 6 Income to
Adjusted
EBITDA
---
Reported GAAP(1) $195,917 $29,408 $23,477 $0.45 51,857 $23,477
% of revenue 72.2% 10.8%
---
Non-cash purchase
accounting
adjustments on
acquisitions (2) 404 404 404 404
Amortization of intangible assets (3) 12,999 12,677
Litigation related expenses and settlements 4,133 4,133 4,133
Business transition costs 4 2,518 2,518 2,518
Non-cash interest expense on convertible notes 4,046
Tax effect of adjustments 5 (18,155)
Interest expense/(income), net 9,156
Income tax benefit (3,949)
Depreciation and amortization(3) 32,055
Non-cash stock based compensation 7,407
---
Adjusted Non-GAAP $196,321 $49,462 $29,100 $0.56 51,857 $75,201
--- ---
% of revenue 72.4% 18.2% 27.7%
---
1 Reported GAAP
figures for
2017 have
been recasted
and presented
based on the
full
retrospective
method of
adoption of
ASC 606.
2 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.
3 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.
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 affecting
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
~10% benefit
on a GAAP
basis and ~33%
on a non-GAAP
basis.
6 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 Year Ended December 31, 2017
Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures
(Unaudited - in thousands, except per share data)
Gross Operating
Net Diluted Diluted
Net
Profit Profit Income EPS WASO6 Income to
Adjusted
EBITDA
---
Reported GAAP(1) $758,244 $111,486 $81,598 $1.48 55,193 $81,598
% of revenue 73.9% 10.9%
---
Non-cash purchase
accounting
adjustments on
acquisitions (2) 540 540 540 540
Amortization of intangible assets (3) 48,039 46,750
Litigation related expenses and settlements 4,883 4,883 4,883
Business transition costs 4 4,287 4,287 4,287
Non-cash interest expense on convertible notes 17,290
Tax effect of adjustments 5 (56,357)
Interest expense/(income), net 37,581
Income tax benefit (7,492)
Depreciation and amortization(3) 119,927
Non-cash stock based compensation 22,391
---
Adjusted Non-GAAP $758,784 $169,235 $98,991 $1.89 52,345 $263,715
--- ---
% of revenue 73.9% 16.5% 25.7%
---
1 Reported GAAP
figures for
2017 have
been recasted
and presented
based on the
full
retrospective
method of
adoption of
ASC 606.
2 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.
3 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.
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 affecting
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
~10% benefit
on a GAAP
basis and ~33%
on a non-GAAP
basis.
6 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
The Company will hold a conference call today at 4:30 p.m. ET / 1:30 p.m. PT to discuss the results of its fourth quarter and full year 2018 financial performance. 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 March 20, 2019. In addition, a telephone replay of the call will be available until Feb. 27, 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: 13686677.
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 fourth quarter and full year 2018, as well as projections for 2019 financial guidance and longer-term financial performance goals. The Company's results for the fourth quarter and full year 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 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(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 Year Ended December 31,
December 31,
2018 2017 2018 2017
(Unaudited)
(Unaudited)
Revenue
Product revenue $258,226 $248,881 $986,458 $938,981
Service revenue 30,101 22,341 115,256 87,704
Total revenue 288,327 271,222 1,101,714 1,026,685
Cost of revenue (excluding below
amortization of intangible assets)
Cost of products sold 66,375 60,015 234,509 207,307
Cost of services 19,754 15,290 76,650 61,134
Total cost of revenue 86,129 75,305 311,159 268,441
Gross profit 202,198 195,917 790,555 758,244
Operating expenses:
Sales, marketing and administrative 142,201 134,523 575,836 539,507
Research and development 17,094 12,719 61,695 50,425
Amortization of intangible assets 13,268 12,999 50,670 48,039
Purchase of in-process research
and development 8,913
Litigation liability loss 3,750 27,800 4,500
Business transition costs 3,779 2,518 11,473 4,287
Total operating expenses 176,342 166,509 736,387 646,758
Interest and other expense, net:
Interest income 206 85 586 440
Interest expense (9,399) (9,241) (37,857) (38,021)
Other (expense) income, net (331) (1,160) (8,174) (1,542)
Total interest and other expense,
net (9,524) (10,316) (45,445) (39,123)
Income before income taxes 16,332 19,092 8,723 72,363
Income tax benefit (expense) (4,175) 3,949 3,756 7,492
Consolidated net income $12,157 $23,041 $12,479 $79,855
Add back net loss attributable to
non-controlling interests $(436) $(1,743)
Net income attributable to
NuVasive, Inc. $12,157 $23,477 $12,479 $81,598
Net income per share attributable
to NuVasive, Inc.:
Basic $0.24 $0.46 $0.24 $1.60
Diluted $0.23 $0.45 $0.24 $1.48
Weighted average shares
outstanding:
Basic 51,504 51,094 51,382 50,874
Diluted 52,530 51,857 52,355 55,193
NuVasive, Inc.
Consolidated Balance Sheets
(in thousands, except par values and share amounts)
December 31,
2018 2017
ASSETS
Current assets:
Cash and cash equivalents $117,840 $72,803
Restricted cash and investments 3,901
Accounts receivable, net of allowances of
$16,171 and $13,026, respectively 196,487 200,220
Inventory, net 273,244 247,138
Prepaid income taxes 16,905 17,209
Prepaid expenses and other current assets 13,733 18,792
Total current assets 618,209 560,063
Property and equipment, net 238,841 215,326
Intangible assets, net 252,048 280,774
Goodwill 561,366 536,926
Deferred tax assets 5,263 6,440
Restricted cash and investments 2,395 1,494
Other assets 29,737 39,117
Total assets $1,707,859 $1,640,140
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities $105,877 $75,767
Contingent consideration liabilities 7,560 18,952
Accrued payroll and related expenses 59,960 55,618
Litigation liabilities 1,415 8,150
Income tax liabilities 4,648 2,908
Total current liabilities 179,460 161,395
Long-term senior convertible notes 602,526 582,920
Deferred and income tax liabilities, non-
current 4,964 18,870
Other long-term liabilities 86,384 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 December 31, 2018 and
December 31, 2017, 56,648,077 and
56,164,060 issued and outstanding at
December 31, 2018 and December 31, 2017,
respectively 61 60
Additional paid-in capital 1,397,829 1,363,549
Accumulated other comprehensive loss (8,628) (6,933)
Retained earnings 17,241 4,762
Treasury stock at cost; 5,116,496 shares and
5,001,886 shares at December 31, 2018 and
December 31, 2017, respectively (571,978) (565,867)
Total NuVasive, Inc. stockholders' equity 834,525 795,571
Non-controlling interests 3,845
Total equity 834,525 799,416
Total liabilities and equity $1,707,859 $1,640,140
NuVasive, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Year Ended December 31,
2018 2017
Operating activities:
Consolidated net income $12,479 $79,855
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 129,765 121,176
Purchase of in-process research and development 8,913
Deferred income taxes (11,396) (12,838)
Amortization of non-cash interest 20,123 20,538
Stock-based compensation 25,673 22,391
Net loss on strategic investments 4,421
Reserves on current assets 14,834 5,622
Other non-cash adjustments 23,703 16,561
Changes in operating assets and liabilities, net of effects from
acquisitions:
Accounts receivable 4,562 (26,610)
Inventory (38,646) (35,867)
Prepaid expenses and other current assets (1,280) (12,681)
Accounts payable and accrued liabilities 20,518 (5,558)
Contingent consideration liabilities (300) (11,200)
Accrued payroll and related expenses 2,595 3,975
Litigation liability 1,165 8,150
Income taxes 2,054 3,455
Net cash provided by operating activities 219,183 176,969
Investing activities:
Other acquisitions and investments (55,266) (62,370)
Proceeds from other investments 3,584
Purchases of intangible assets (7,682) (2,270)
Purchases of property and equipment (101,921) (110,221)
Net cash used in investing activities (161,285) (174,861)
Financing activities:
Proceeds from the issuance of common stock 8,127 9,991
Payment of contingent consideration (19,450) (19,400)
Purchase of treasury stock (2,928) (11,860)
Repurchases of convertible notes (63,317)
Proceeds from revolving line of credit 100,000 60,000
Repayments on revolving line of credit (100,000) (60,000)
Other financing activities (327) (2,442)
Net cash used in financing activities (14,578) (87,028)
Effect of exchange rate changes on cash (1,283) 2,070
Increase (decrease) in cash, cash equivalents and restricted cash 42,037 (82,850)
Cash, cash equivalents and restricted cash at beginning of period 78,198 161,048
Cash, cash equivalents and restricted cash at end of period $120,235 $78,198
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SOURCE NuVasive, Inc.
