NuVasive Announces Third Quarter 2019 Financial Results
SAN DIEGO, Oct. 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 September 30, 2019.
Third Quarter 2019 Highlights
-- Revenue increased 7.2% to $290.8 million, or 7.5% on a constant currency
basis;
-- GAAP operating profit margin of 10.5%; Non-GAAP operating profit margin
of 15.7%;
-- GAAP diluted earnings per share of $0.21; Non-GAAP diluted earnings per
share of $0.59; and
-- Company raises full-year 2019 financial guidance.
"In the third quarter 2019, NuVasive grew at multiples of market, with revenue increasing 7.2% driven by nearly double-digit organic growth within U.S. Hardware," said J. Christopher Barry, chief executive officer of NuVasive. "In addition to strong topline results, our margin expansion demonstrates the ability to improve profitability with continued commitment to driving operational excellence. Based on the Company's performance year to date, we are raising full-year 2019 financial guidance to reflect continued growth and confidence in the business."
A full reconciliation of GAAP to non-GAAP financial measures can be found in the tables of this news release.
Third Quarter 2019 Results
NuVasive reported third quarter 2019 total revenue of $290.8 million, a 7.2% increase compared to $271.3 million for the third quarter 2018. On a constant currency basis, third quarter 2019 total revenue increased 7.5% compared to the same period last year.
For the third quarter 2019, both GAAP and non-GAAP gross profit was $213.8 million and GAAP and non-GAAP gross margin was 73.5%. These results compared to GAAP and non-GAAP gross profit of $197.1 million and $197.4 million, respectively, and GAAP and non-GAAP gross margin of 72.7% and 72.8%, respectively, for the third quarter 2018.
The Company reported GAAP net income of $11.0 million, or diluted earnings per share of $0.21, for the third quarter 2019 compared to a GAAP net income of $15.9 million, or diluted earnings per share of $0.30, for the third quarter 2018. On a non-GAAP basis, the Company reported net income of $30.9 million, or diluted earnings per share of $0.59, for the third quarter 2019 compared to net income of $29.5 million, or diluted earnings per share of $0.56, for the third quarter 2018.
Annual Financial Guidance for 2019
The Company raised its full-year 2019 financial guidance as a result of strong financial performance to date.
2019 Guidance Range (1)
Prior
Current
GAAP
Non-GAAP GAAP
Non-GAAP
Revenue
$1.14B - $1.16B
$1.14B - $1.16B
~$1.16B
~$1.16B
% Growth -
Reported 3.4% - 5.4% 3.4% - 5.4% 5.1% - 5.8% 5.1% - 5.8%
% Growth -
Constant
Currency
(2) 3.8% - 5.8% 5.6% - 6.3%
Operating
margin 9.1% - 9.5% 15.3% - 15.7% 9.4% - 9.8% 15.5% - 15.9%
Earnings
per share
$0.93 - $1.03
$2.25 - $2.35
$0.95 - $1.00
$2.35- $2.40
EBITDA
margin 21.2% - 21.5% 25.5% - 25.9% 20.6% - 21.0% 25.0% - 25.4%
Tax Rate ~24% ~23% ~26% ~23%
1 Prior
guidance
reflects
the range
provided
July 30,
2019.
Current
guidance
reflects
the range
provided
October
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 updates full-year 2019 revenue to approximately $1.16
billion, compared with prior guidance of $1.14 billion to $1.16 billion,
which now includes approximately $6 million in year-over-year currency
headwinds compared with prior guidance of $5 million. This reflects
reported growth in the range of 5.1% to 5.8%, compared with prior
guidance of 3.4% to 5.4%. Revenue growth on a constant currency basis is
in the range of 5.6% to 6.3%, compared with prior guidance of 3.8% to
5.8%;
-- Non-GAAP operating profit margin of 15.5% to 15.9%, compared with prior
guidance of 15.3% to 15.7%;
-- Non-GAAP diluted earnings per share in a range of $2.35 to $2.40,
compared with prior guidance of $2.25 to $2.35;
-- Adjusted EBITDA margin of 25.0% to 25.4%, compared with prior guidance
of 25.5% to 25.9%; and
-- Non-GAAP effective tax expense rate of approximately 23%.
Organizational Structure
NuVasive announced today a new organizational structure, effective January 1, 2020, to further build upon its success and advance the Company's five-year strategic plan.
"We are implementing organizational structure changes to bring together the commercial, product and technology teams under one function and to establish a new global operations function focused on supply chain and logistics," continued Barry. "This is a natural progression aligned with our recently announced five-year strategy and our purpose to transform surgery, advance care and change lives."
The new organizational structure combines customer-facing and innovation activities under a single function led by the Company's president, Matt Link. A new global operations function, including supply chain, distribution, manufacturing, quality assurance and real estate & facilities, will be led by Dale Wolf, NuVasive's current head of manufacturing.
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
$0.93 - 1.03
$0.95- 1.00
Impact of change to
diluted share count
GAAP net income per
share, adjusted to
diluted Non-GAAP
share count $0.24
$0.93 - 1.03
$0.95 - 1.00
Business transition
costs 5 0.22 0.11 0.10
Non-cash purchase
accounting
adjustments on
acquisitions 6 0.02
Non-cash interest
expense on
convertible notes 0.32 0.34 0.34
Litigation related
expenses and
settlements 7 0.65 0.18 0.19
Non-recurring
consulting fees 8 0.12
Net loss on strategic
investments 0.07 0.09
Amortization of
intangible assets 0.97 0.96 0.97
Purchase of in-
process research and
development 9 0.17
European medical
device regulation 10 0.01 0.11 0.09
Tax effect of
adjustments 11 (0.56) (0.38) (0.38)
Non-GAAP earnings per
share $2.23
$2.25 - 2.35
$2.35 - 2.40
GAAP Weighted shares
outstanding -basic 51,382 51,954 51,959
GAAP Weighted shares
outstanding -diluted 52,355 52,898 52,948
Non-GAAP Weighted
shares outstanding -
diluted 12 52,178 52,586 52,578
1 Items may not
foot due to
rounding.
2 Prior guidance
reflects the
range provided
July 30, 2019.
Current
guidance
reflects the
range provided
October 30,
2019.
3 Effective tax
expense rate of
~24% applied to
GAAP earnings
and ~23%
applied to Non-
GAAP earnings.
4 Effective tax
expense rate of
~26% 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 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.
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% 72.8% - 73.2%
Non-cash purchase accounting adjustments on acquisitions (3) (0.1%) 0.0% 0.0%
GAAP Gross Margin [B] 71.8% 72.5% - 73.0% 72.8% - 73.2%
Non-GAAP Sales, Marketing & Administrative Expense [C] 51.1% 50.8% - 51.7% 50.9% - 51.7%
Non-recurring consulting fees 4 0.6% 0.0% 0.0%
Litigation related expenses 5 0.6% 0.8% 0.8%
GAAP Sales, Marketing & Administrative Expense [D] 52.3% 51.6% - 52.5% 51.7% - 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% 4.4% 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% 0.5% 0.4%
Business transition costs [J] 9 1.0% 0.5% 0.5%
Non-GAAP Operating Margin % [A - C - E] 15.1% 15.3% - 15.7% 15.5% - 15.9%
GAAP Operating Margin % [B - D - E - F - G - H - I - J] 4.9% 9.1% - 9.5% 9.4% - 9.8%
1 Items may not
foot due to
rounding.
2 Prior guidance
reflects the
range provided
July 30, 2019.
Current
guidance
reflects the
range provided
October 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 Range 1, 5
(in thousands, except %)
2018 Actuals 1, 2
Prior (3)
Current4
Net Income 1.1% 4.3% - 4.7% 4.2% - 4.6%
Interest income /
expense, net 3.4% 3.3% 3.2%
Income tax benefit /
(expense) (0.3%) 1.5% 1.5%
Depreciation and
amortization 11.8% 11.9% 11.7%
EBITDA Margin 16.0% 21.2% - 21.5% 20.6% - 21.0%
Non-cash stock based
compensation 2.3% 2.5% 2.3%
Business transition
costs 6 1.0% 0.5% 0.4%
Non-cash purchase
accounting adjustments
on acquisitions 7 0.1% 0.0% 0.0%
Litigation related
expenses and
settlements 8 3.1% 0.8% 0.9%
Non-recurring
consulting fees 9 0.6% 0.0% 0.0%
In-process research and
development 10 0.8% 0.0% 0.0%
European medical device
regulation 11 0.0% 0.5% 0.4%
Net loss on strategic
investments 0.3% 0.0% 0.4%
Adjusted EBITDA Margin 24.3% 25.5% - 25.9% 25.0% - 25.4%
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 Effective tax
expense rate of
~26% applied to
GAAP earnings
and ~23%
applied to Non-
GAAP earnings.
5 Prior guidance
reflects the
range provided
July 30, 2019.
Current
guidance
reflects the
range provided
October 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 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.
For the Three Months Ended September 30, 2019
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited - in thousands, except per share data)
Gross Profit Operating
Net Income Diluted Diluted
Net Income to
Profit EPS WASO 5 Adjusted EBITDA
---
Reported GAAP $213,807 $30,514 $11,010 $0.21 53,056 $11,010
% of revenue 73.5% 10.5%
---
Amortization of intangible assets 12,596 12,596
Litigation related expenses and settlements (1) 1,899 1,899 1,899
Business transition costs (2) (333) (333) (333)
European medical device regulation (3) 953 953 953
Non-cash interest expense on convertible notes 4,432
Net loss on strategic investments 4,767 4,767
Tax effect of adjustments 4 (4,455)
Interest expense/(income), net 9,034
Income tax expense 4,774
Depreciation and amortization 33,631
Non-cash stock based compensation 7,829
---
Adjusted Non-GAAP $213,807 $45,629 $30,869 $0.59 52,590 $73,564
--- ---
% of revenue 73.5% 15.7% 25.3%
---
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
October 30,
2019, the
Company
estimated an
annual tax rate
of ~26% 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 Nine Months Ended September 30, 2019
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited - in thousands, except per share data)
Gross Profit Operating
Net Income Diluted Diluted
Net Income to
Profit EPS WASO 5 Adjusted EBITDA
---
Reported GAAP $628,615 $80,884 $35,358 $0.67 52,667 $35,358
% of revenue 73.3% 9.4%
---
Amortization of intangible assets 38,498 38,498
Litigation related expenses and settlements (1) 6,976 6,976 6,976
Business transition costs (2) 5,146 5,146 5,146
European medical device regulation (3) 2,685 2,685 2,685
Non-cash interest expense on convertible notes 13,125
Net loss on strategic investments 4,767 4,767
Tax effect of adjustments 4 (15,269)
Interest expense/(income), net 27,461
Income tax expense 12,012
Depreciation and amortization 101,245
Non-cash stock based compensation 20,447
---
Adjusted Non-GAAP $628,615 $134,189 $91,286 $1.74 52,512 $216,097
---
% of revenue 73.3% 15.6% 25.2%
---
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
October 30,
2019, the
Company
estimated an
annual tax rate
of ~26% 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 September 30, 2018
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited - in thousands, except per share data)
Gross Profit Operating
Net Income Diluted Diluted
Net Income to
Profit EPS WASO 6 Adjusted EBITDA
---
Reported GAAP $197,141 $17,971 $15,923 $0.30 53,189 $15,923
% of revenue 72.7% 6.6%
---
Non-cash purchase
accounting
adjustments on
acquisitions (1) 270 270 270 270
Amortization of intangible assets 12,349 12,349
Litigation related expenses and settlements (2) 1,333 1,333 1,333
Business transition costs (3) 1,443 1,443 1,443
Purchase of in-process research and development 4 8,913 8,913 8,913
Non-cash interest expense on convertible notes 4,208
Net gain on strategic investments (5,137) (5,137)
Tax effect of adjustments 5 (9,798)
Interest expense/(income), net 8,905
Income tax benefit (2,618)
Depreciation and amortization 32,258
Non-cash stock based compensation 11,068
---
Adjusted Non-GAAP $197,411 $42,279 $29,504 $0.56 52,539 $72,358
--- ---
% of revenue 72.8% 15.6% 26.7%
---
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
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 Purchase of an
in-process
research and
development
asset which
had no future
alternative
use.
5 Represents the
impact from
tax affecting
the
adjustments
above at their
statutory tax
rate. As of
October 30,
2018, the
Company
estimated an
annual tax
rate of ~18%
on a GAAP
basis and ~21%
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 Nine Months Ended September 30, 2018
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited - in thousands, except per share data)
Gross Profit Operating
Net Income Diluted EPS Diluted
Net Income to
Profit WASO 7 Adjusted EBITDA
---
Reported GAAP $588,357 $28,312 $322 $0.01 52,296 $322
% of revenue 72.3% 3.5%
---
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 37,402 37,402
Litigation related expenses and settlements (3) 31,302 31,302 31,302
Business transition costs 4 7,694 7,694 7,694
Purchase of in-process research and development 5 8,913 8,913 8,913
Non-cash interest expense on convertible notes 12,460
Net loss on strategic investments 3,867 3,867
Tax effect of adjustments 6 (28,682)
Interest expense/(income), net 28,078
Income tax benefit (7,931)
Depreciation and amortization 96,409
Non-cash stock based compensation 22,062
---
Adjusted Non-GAAP $589,437 $120,787 $80,442 $1.54 52,079 $197,880
--- ---
% of revenue 72.5% 14.8% 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 Represents the
impact from
tax affecting
the
adjustments
above at their
statutory tax
rate. As of
October 30,
2018, the
Company
estimated an
annual tax
rate of ~18%
on a GAAP
basis and ~21%
on a non-GAAP
basis.
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 third 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 November 29, 2019. In addition, a telephone replay of the call will be available until November 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: 13695343.
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 third quarter 2019, as well as projections for 2019 financial guidance and longer-term financial performance goals. The Company's results for the third 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 September 30, Nine Months Ended September 30,
(unaudited) 2019 2018 2019 2018
Revenue
Product revenue $260,173 $242,030 $765,377 $728,232
Service revenue 30,662 29,271 92,339 85,155
Total revenue 290,835 271,301 857,716 813,387
Cost of revenue (excluding below
amortization of intangible assets)
Cost of products sold 57,164 54,741 169,263 168,134
Cost of services 19,864 19,419 59,838 56,896
Total cost of revenue 77,028 74,160 229,101 225,030
Gross profit 213,807 197,141 628,615 588,357
Operating expenses:
Sales, marketing and administrative 152,887 141,211 450,816 433,635
Research and development 18,143 15,254 53,271 44,601
Amortization of intangible assets 12,596 12,349 38,498 37,402
Purchase of in-process research and
development 8,913 8,913
Litigation liability loss 27,800
Business transition costs (333) 1,443 5,146 7,694
Total operating expenses 183,293 179,170 547,731 560,045
Interest and other expense, net:
Interest income 620 130 1,356 380
Interest expense (9,654) (9,035) (28,817) (28,458)
Other (expense) income, net (5,696) 4,239 (6,053) (7,843)
Total interest and other expense, net (14,730) (4,666) (33,514) (35,921)
Income (loss) before income taxes 15,784 13,305 47,370 (7,609)
Income tax (expense) benefit (4,774) 2,618 (12,012) 7,931
Consolidated net income $11,010 $15,923 $35,358 $322
Net income per share:
Basic $0.21 $0.31 $0.68 $0.01
Diluted $0.21 $0.30 $0.67 $0.01
Weighted average shares outstanding:
Basic 52,057 51,439 51,901 51,341
Diluted 53,056 53,189 52,667 52,296
NuVasive, Inc.
Consolidated Balance Sheets
(in thousands, except par values and share amounts)
September 30, 2019
December 31, 2018
ASSETS
(Unaudited)
Current assets:
Cash and cash equivalents $163,399 $117,840
Accounts receivable, net of allowances of
$16,444 and $16,171, respectively 203,611 196,487
Inventory, net 308,893 273,244
Prepaid income taxes 20,328 16,905
Prepaid expenses and other current assets 14,610 13,733
Total current assets 710,841 618,209
Property and equipment, net 263,135 238,841
Intangible assets, net 214,492 252,048
Goodwill 560,744 561,366
Operating lease right-of-use assets 67,128
Deferred tax assets 4,023 5,263
Restricted cash and investments 2,395 2,395
Other assets 17,094 29,737
Total assets $1,839,852 $1,707,859
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities $105,944 $105,877
Contingent consideration liabilities 7,774 7,560
Accrued payroll and related expenses 66,044 59,960
Operating lease liabilities 5,792
Litigation liabilities 2,065 1,415
Income tax liabilities 5,496 4,648
Total current liabilities 193,115 179,460
Senior convertible notes 617,992 602,526
Deferred and income tax liabilities 13,491 4,964
Operating lease liabilities 72,713
Other long-term liabilities 65,927 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 September 30, 2019
and December 31, 2018, 57,420,854 and
56,648,077 issued and outstanding at
September 30, 2019 and December 31, 2018,
respectively 62 61
Additional paid-in capital 1,421,235 1,397,829
Accumulated other comprehensive loss (11,332) (8,628)
Retained earnings 52,599 17,241
Treasury stock at cost; 5,354,355 shares
and 5,116,496 shares at September 30, 2019
and December 31, 2018, respectively (585,950) (571,978)
Total equity 876,614 834,525
Total liabilities and equity $1,839,852 $1,707,859
NuVasive, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Nine Months Ended September 30,
(unaudited) 2019 2018
Operating activities:
Consolidated net income $35,358 $322
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 101,245 96,409
Purchase of in-process research and development 8,913
Amortization of non-cash interest 15,853 14,986
Stock-based compensation 20,447 22,062
Reserves on current assets 11,539 11,116
Net loss on strategic investments 4,767 3,867
Other non-cash adjustments 8,733 16,560
Deferred income taxes 9,810 (9,938)
Changes in operating assets and liabilities, net of effects from
acquisitions:
Accounts receivable (8,645) 8,622
Inventory (45,571) (33,491)
Prepaid expenses and other current assets (2,499) (1,047)
Accounts payable and accrued liabilities 7,378 21,400
Accrued payroll and related expenses 4,108 (9,566)
Litigation liability 650 166
Income taxes (2,588) 108
Net cash provided by operating activities 160,585 150,489
Investing activities:
Acquisitions and investments (4,100) (52,555)
Purchases of intangible assets (7,501) (7,682)
Purchases of property and equipment (94,430) (78,405)
Net cash used in investing activities (106,031) (138,642)
Financing activities:
Proceeds from the issuance of common stock 3,888 5,563
Purchases of treasury stock (13,343) (2,817)
Payment of contingent consideration (809) (18,700)
Proceeds from revolving line of credit 100,000
Repayments on revolving line of credit (95,000)
Other financing activities 2,283 (236)
Net cash used in financing activities (7,981) (11,190)
Effect of exchange rate changes on cash (1,014) (1,349)
Increase (decrease) in cash, cash equivalents and restricted cash 45,559 (692)
Cash, cash equivalents and restricted cash at beginning of period 120,235 78,198
Cash, cash equivalents and restricted cash at end of period $165,794 $77,506
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SOURCE NuVasive, Inc.
