NuVasive Reports Fourth Quarter and Full Year 2012 Financial Results

Marketwired

SAN DIEGO, CA--(Marketwire - Feb 26, 2013) - NuVasive, Inc. (NASDAQ: NUVA)

  • Fourth quarter 2012 total revenue of $165.8 million; up 10.4% from fourth quarter 2011 and up 11.7% from third quarter 2012

  • Full year 2012 total revenue of $620.3 million; up 14.8% from the full year 2011

  • GAAP operating margin of 2.5% for the fourth quarter 2012 and 6.0% for the full year 2012

  • Non-GAAP operating margin of 15.0% for the fourth quarter 2012 and 14.5% for the full year 2012

  • GAAP net loss of $2.7 million, or $0.06 per share, for the fourth quarter 2012 and GAAP net earnings of $3.1 million, or $0.07 per share, for the full year 2012

  • Non-GAAP earnings of $15.0 million, or $0.34 per share, for the fourth quarter 2012 and $45.8 million, or $1.04 per share, for the full year 2012

NuVasive, Inc. (NASDAQ: NUVA) a medical device company focused on developing minimally disruptive surgical products and procedures for the spine, announced today financial results for the quarter and for the full year ended December 31, 2012.

Alex Lukianov, Chairman and Chief Executive Officer, said, "We are very proud of our strong close to 2012 and excellent revenue growth of 15% with profit translation. As we embark on 2013, we are excited to build upon our momentum with growing clinical evidence, game-changing new product launches, an energized sales force, and our expansion into new international markets. Over the last decade, NuVasive has positively changed the lives of over 100,000 spine patients through minimally invasive surgery with our XLIF procedure. We are highly focused on continually disrupting the global spine industry through innovation with advanced procedural solutions and executing to a long term plan of evolving into a $1 billion company with steadily increasing profitability. Our proven, three pillar market share taking strategy of Superior Outcomes, Absolute Responsiveness, and Speed of Innovation will sustain our future growth toward the #3 position within the global spine industry."

NuVasive reported fourth quarter 2012 revenue of $165.8 million, a 10.4% increase over the $150.2 million for the fourth quarter 2011 and an 11.7% increase over the $148.4 million reported for the third quarter 2012. 

Gross profit for the fourth quarter 2012 was $123.6 million and gross margin was 74.5%, compared to a gross profit of $113.1 million and a gross margin of 75.3% for the fourth quarter 2011. For the third quarter 2012, gross profit was $110.6 million and gross margin was 74.6%. Gross profit for the full year 2012 was $466.8 million and gross margin was 75.3%, compared to a gross profit of $428.4 million and gross margin of 79.3% for the full year 2011.

Total operating expenses for the fourth quarter 2012 were $119.4 million compared to $122.9 million in the fourth quarter 2011 and $98.1 million in the third quarter 2012. The higher operating expenses in the fourth quarter 2011 resulted from a higher 2011 asset impairment charge. Full year 2012 operating expenses were $429.8 million compared to $513.4 million reported for the full year 2011. The higher operating expenses for the full year 2011 resulted primarily from a 2011 charge related to a litigation liability.

On a GAAP basis, the Company reported a net loss of $2.7 million, or $0.06 per share, for the fourth quarter 2012, and net income of $3.1 million, or $0.07 per share for the full year 2012. 

On a Non-GAAP basis, the Company reported net income of $15.0 million, or $0.34 per share, for the fourth quarter 2012, and net income of $45.8 million, or $1.04 per share, for the full year 2012. The Non-GAAP earnings per share calculations for the fourth quarter and full year exclude, respectively, (i) non-cash stock-based compensation of $5.9 million and $26.3 million; (ii) certain intellectual property litigation expenses of $852,000 and $2.4 million; (iii) amortization of intangible assets of $3.6 million and $12.4 million; (iv) acquisition related items of $639,000 and $2.1 million; (v) non-cash interest expense on convertible notes of $3.3 million and $12.7 million; and (vi) intangible asset and goodwill impairment charges of $9.7 million and $9.7 million.

Cash, cash equivalents and short and long-term marketable securities were $346.1 million at December 31, 2012.

2013 Full Year Financial Guidance

  • Revenue of approximately $655 million
  • GAAP EPS of approximately $0.07
  • Non-GAAP EPS of approximately $1.00
  • Non-GAAP Operating Margin of approximately 14%
  • GAAP effective tax expense rate of approximately 60%
     
     
Reconciliation of Full Year EPS Guidance
     
    2013
    Guidance 2
GAAP earnings per share guidance 1   $ 0.07
  Non-cash stock based compensation     0.39
  Certain intellectual property litigation expenses     0.06
  Amortization of intangible assets     0.27
  Acquisition related items 3     0.03
  Non-cash interest expense on convertible notes     0.18
Non-GAAP earnings per share guidance 1   $ 1.00
       
Weighted shares outstanding - basic     45,500
Weighted shares outstanding - diluted     46,500
       
1 Includes negative impact of Medical Device Excise Tax of ~$0.13
2 Effective tax rate of ~60% applied to GAAP earnings and ~40% applied to Non-GAAP adjustments
3 Acquisition related items include expenses associated with prior M&A activity and as incurred
             
             
             
Reconciliation of Non-GAAP Operating Margin %
             
    2012 Actuals   2013
    Fourth   Full   Full Year
    Quarter   Year   Guidance
Gross Margin % [A]   74.5%   75.3%   ~74.0% 1
             
Non-GAAP Operating Expenses [B]   59.5%   60.8%   ~60.0%
Non-cash stock-based compensation   3.5%   4.2%   ~5.0%
Certain intellectual property litigation expenses   0.5%   0.4%   ~1.0%
Amortization of intangible assets   2.2%   2.0%   ~3.0%
Intangible asset and goodwill impairment charge   5.9%   1.5%   -
Acquisition related items 2   0.4%   0.3%   ~0.3%
GAAP Operating Expenses   72.0%   69.3%   ~69.3%
             
Non-GAAP Operating Margin % [A-B]   15.0%   14.5%   ~14.0% 1
             
1 Includes negative impact of Medical Device Excise Tax of ~1.5%, or ~150bps        
2 Acquisition related items include expenses associated with prior M&A activity and as incurred    

Reconciliation of Non-GAAP Information

Management uses certain Non-GAAP financial measures such as Non-GAAP earnings per share, which exclude non-cash stock-based compensation, certain intellectual property litigation expenses, amortization of intangible assets, acquisition related items, non-cash interest expense on convertible notes, and intangible asset and goodwill impairment charges. Management does not consider these costs in evaluating the continuing operations of the Company. Therefore, management calculates the Non-GAAP financial measures provided in this earnings release excluding these costs and uses these Non-GAAP financial measures to enable it to analyze further, and more consistently, the period-to-period financial performance of its core business operations. Management believes that providing investors with these Non-GAAP measures gives them additional important information to enable them to assess, in the same way management assesses, the Company's current and future continuing operations. These Non-GAAP measures are not in accordance with, or an alternative for, GAAP, and may be different from Non-GAAP measures used by other companies. Set forth below are reconciliations of the Non-GAAP financial measures to the comparable GAAP financial measure.

                 
                 
Reconciliation of Fourth Quarter 2012 Results  
                 
(in thousands, except per share data)   Pre-Tax
Adjustments
  Net of Tax 1     (Loss) Earnings
Per Share
 
GAAP net income         $ (2,746 )   $ (0.06 )
Impact of change from basic to diluted share count                   -  
GAAP net loss, adjusted to diluted share count         $ (2,746 )   $ (0.06 )
  Non-cash stock-based compensation   $ 5,912     3,547       0.08  
  Certain intellectual property litigation expenses     852     511       0.01  
  Amortization of intangible assets     3,600     2,160       0.05  
  Acquisition related items     639     383       0.01  
  Non-cash interest expense on convertible notes     3,262     1,957       0.04  
  Intangible asset impairment charge     1,400     840       0.02  
  Goodwill impairment charge     8,300     8,300       0.19  
Non-GAAP earnings         $ 14,953     $ 0.34  
                       
GAAP weighted shares outstanding - basic and diluted             43,628  
Non-GAAP weighted shares outstanding - diluted                   44,634  
                       
1 40% tax rate applied to Non-GAAP adjustments, except for non-deductible goodwill impairment charge  
             
             
Reconciliation of Full Year 2012 Results
             
(in thousands, except per share data)   Pre-Tax
Adjustments
  Net of Tax 1   Earnings Per
Share
GAAP net income         $ 3,144   $ 0.07
  Non-cash stock-based compensation   $ 26,312     15,787     0.36
  Certain intellectual property litigation expenses     2,419     1,451     0.03
  Amortization of intangible assets     12,430     7,458     0.17
  Acquisition related items     2,059     1,235     0.03
  Non-cash interest expense on convertible notes     12,697     7,618     0.17
  Intangible asset impairment charge     1,400     840     0.02
  Goodwill impairment charge     8,300     8,300     0.19
Non-GAAP earnings         $ 45,834   $ 1.04
                   
Weighted shares outstanding - diluted                 44,272
                   
1 40% tax rate applied to Non-GAAP adjustments, except for non-deductible goodwill impairment charge

Conference Call

NuVasive will hold a conference call today at 5:30 p.m. ET / 2:30 p.m. PT to discuss the results. The dial-in numbers are 1-877-407-9039 for domestic callers and 1-201-689-8470 for international callers. A live webcast of the conference call will be available online from the investor relations page of the Company's corporate website at www.nuvasive.com.

After the live webcast, the call will remain available on NuVasive's website, www.nuvasive.com, through March 26, 2013. In addition, a telephonic replay of the call will be available until March 12, 2013. The replay dial-in numbers are 1-877-870-5176 for domestic callers and 1-858-384-5517 for international callers. Please use pin number 406960.

About NuVasive

NuVasive is a medical device company focused on developing minimally disruptive surgical products and procedurally integrated solutions for the spine. The Company is the 4th largest player in the $8.2 billion global spine market.

NuVasive's principal product offering is based on its Maximum Access Surgery, or MAS® platform. The MAS platform combines several categories of solutions that collectively may minimize soft tissue disruption during spine surgery with maximum visualization and safe, easy reproducibility for the surgeon: a proprietary software-driven nerve avoidance system and intra-operative monitoring support; MaXcess®, a unique split-blade retractor system; a wide variety of specialized implants; and several biologic fusion enhancers. MAS may significantly improve surgical outcomes and returns patients to activities of daily living much faster than conventional approaches. Having redefined spine surgery with the MAS platform's lateral approach, known as eXtreme Lateral Interbody Fusion, or XLIF®, NuVasive has built an entire spine franchise. With a complete portfolio of products spanning lumbar, thoracic, and cervical applications, the Company will continue to expand and evolve its offering predicated on its focus on innovation and dedication to outstanding service levels supported by a culture of Absolute Responsiveness®.

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

   
NuVasive, Inc.  
Unaudited Condensed Consolidated Statements of Operations  
(in thousands, except per share data)  
   
    Three Months Ended
December 31,
    Year Ended
December 31,
 
    2012     2011     2012     2011  
                                 
Revenue   $ 165,754     $ 150,194     $ 620,255     $ 540,506  
Cost of goods sold (excluding amortization of purchased technology)     42,196       37,062       153,409       112,111  
Gross profit     123,558       113,132       466,846       428,395  
                                 
Operating expenses:                                
  Sales, marketing and administrative     97,713       93,428       372,416       349,052  
  Research and development     8,398       8,888       35,296       38,408  
  Amortization of intangible assets     3,600       2,368       12,430       6,609  
  Impairment of goodwill and intangible assets     9,700       18,167       9,700       18,167  
  Litigation award     -       -       -       101,200  
Total operating expenses     119,411       122,851       429,842       513,436  
                                 
Interest and other expense, net:                                
  Interest income     254       241       915       832  
  Interest expense     (7,028 )     (6,971 )     (27,710 )     (17,933 )
  Other income (expense), net     901       (225 )     1,047       2,078  
Total interest and other expense, net     (5,873 )     (6,955 )     (25,748 )     (15,023 )
                                 
(Loss) income before income taxes     (1,726 )     (16,674 )     11,256       (100,064 )
Income tax expense (benefit)     1,050       (6,328 )     8,814       (29,043 )
Consolidated net (loss) income   $ (2,776 )   $ (10,346 )   $ 2,442     $ (71,021 )
Net loss attributable to noncontrolling interests   $ (30 )   $ (310 )   $ (702 )   $ (1,172 )
Net (loss) income attributable to NuVasive, Inc.   $ (2,746 )   $ (10,036 )   $ 3,144     $ (69,849 )
                                 
Net (loss) income per share attributable to NuVasive, Inc.:                                
  Basic   $ (0.06 )   $ (0.24 )   $ 0.07     $ (1.73 )
  Diluted   $ (0.06 )   $ (0.24 )   $ 0.07     $ (1.73 )
Weighted average shares outstanding:                                
  Basic     43,628       42,172       43,328       40,372  
  Diluted     43,628       42,172       44,272       40,372  
                                 
Stock-based compensation is included in expenses in the following categories:                          
  Sales, marketing and administrative   $ 5,373     $ 7,627     $ 24,096     $ 29,583  
  Research and development     514       654       2,138       2,487  
  Cost of goods sold     25       -       78       -  
    $ 5,912     $ 8,281     $ 26,312     $ 32,070  
   
   
NuVasive, Inc.  
Unaudited Condensed Consolidated Balance Sheets  
(in thousands)  
   
    December 31, 2012     December 31, 2011  
ASSETS        
Current assets:                
  Cash and cash equivalents   $ 123,299     $ 163,492  
  Short-term marketable securities     138,405       146,228  
  Accounts receivable, net     88,958       87,736  
  Inventory     126,335       119,313  
  Deferred tax assets, current     28,236       54,550  
  Prepaid expenses and other current assets     8,516       20,518  
Total current assets     513,749       591,837  
Property and equipment, net     125,123       124,754  
Long-term marketable securities     84,412       32,503  
Intangible assets, net     101,362       108,140  
Goodwill     154,106       159,349  
Deferred tax assets     40,575       19,857  
Restricted cash and investments     118,995       68,600  
Other assets     25,463       18,522  
Total assets   $ 1,163,785     $ 1,123,562  
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Accounts payable and accrued liabilities   $ 62,048     $ 51,744  
  Accrued payroll and related expenses     27,916       22,215  
  Litigation liability     -       101,200  
  Acquisition-related liabilities     -       32,221  
  Senior Convertible Notes, current     74,311       -  
Total current liabilities     164,275       207,380  
Senior Convertible Notes     332,404       394,019  
Deferred tax liabilities     3,129       3,952  
Litigation liability     101,200       -  
Other long-term liabilities     15,199       13,461  
Commitments and contingencies                
Noncontrolling interests     10,003       10,705  
Stockholders' equity:                
  Preferred stock     -       -  
  Common stock     44       42  
  Additional paid-in capital     714,865       674,790  
  Accumulated other comprehensive income     786       477  
  Accumulated deficit     (178,120 )     (181,264 )
Total stockholders' equity     537,575       494,045  
Total liabilities and stockholders' equity   $ 1,163,785     $ 1,123,562  
   
   
NuVasive, Inc.  
Unaudited Condensed Consolidated Statements of Cash Flows  
(in thousands)  
   
    Year Ended December 31,  
    2012     2011     2010  
                         
Operating activities:                        
  Consolidated net income (loss)   $ 2,442     $ (71,021 )   $ 76,533  
  Adjustments to reconcile net income (loss) to net cash provided by operating activities:                        
    Depreciation and amortization     51,909       36,242       36,737  
    Deferred income tax expense (benefit)     4,525       (30,967 )     (53,664 )
    Amortization of debt discount     12,697       6,108       -  
    Amortization of debt issuance costs     1,872       1,816       1,493  
    Stock-based compensation     26,312       32,070       28,225  
    Impairment of goodwill and intangible assets     9,700       18,167       -  
    Loss on repurchase of Senior Convertible Notes, net     -       332       -  
    Gain recognized on change in fair value of derivatives     -       (2,387 )     -  
    Allowance for doubtful accounts and sales return reserve     103       1,345       (995 )
    Allowance for excess and obsolete inventory, net of write-offs     5,475       6,028       1,607  
    Accretion of contingent consideration     1,364       980       962  
    Other non-cash adjustments     5,919       5,247       3,844  
  Changes in operating assets and liabilities, net of effects from acquisitions:                        
    Accounts receivable     (2,005 )     (9,929 )     (17,865 )
    Inventory     (11,022 )     (17,170 )     (18,664 )
    Prepaid expenses and other current assets     12,725       (14,396 )     (2,105 )
    Accounts payable and accrued liabilities     2,938       (3,385 )     11,596  
    Litigation liability     -       101,200       -  
    Accrued payroll and related expenses     5,128       2,685       (1,877 )
Net cash provided by operating activities     130,082       62,965       65,827  
Investing activities:                        
    Cash paid for business and asset acquisitions     (11,088 )     (37,574 )     (973 )
    Purchases of property and equipment     (41,189 )     (53,370 )     (45,846 )
    Purchases of marketable securities     (235,919 )     (253,210 )     (203,415 )
    Sales of marketable securities     246,504       151,966       204,439  
    Purchases of restricted investments     (113,281 )     (4,536 )     -  
    Sales of restricted investments     7,079       -       -  
    Payment for specific rights in connection with supply agreement, net of refund received     -       (5,000 )     -  
Net cash used in investing activities     (147,894 )     (201,724 )     (45,795 )
Financing activities:                        
    Proceeds from the sale of warrants     -       47,898       -  
    Proceeds from the issuance of convertible debt, net of issuance costs     -       391,445       -  
    Purchase of convertible note hedges     -       (80,097 )     -  
    Repurchase of 2013 Senior Convertible Notes     -       (154,164 )     -  
    Tax benefits related to stock-based compensation awards     3,003       463       186  
    Proceeds from the issuance of common stock     4,884       6,852       14,831  
    Payment of contingent consideration     (29,722 )     (1,800 )     -  
    Other assets     (721 )     (718 )     (7,935 )
Net cash (used in) provided by financing activities     (22,556 )     209,879       7,082  
Effect of exchange rate changes on cash     175       (225 )     70  
(Decrease) increase in cash and cash equivalents     (40,193 )     70,895       27,184  
Cash and cash equivalents at beginning of year     163,492       92,597       65,413  
Cash and cash equivalents at end of year   $ 123,299     $ 163,492     $ 92,597  
Contact:

Michael J. Lambert
EVP & Chief Financial Officer
NuVasive, Inc.
858-909-3394
Email Contact

Investors:
Stephan Ogilvie
VP, Corporate Development & Investor Relations
NuVasive, Inc.
201-322-6515
Email Contact

Media:
Nicholas S. Laudico
The Ruth Group
646-536-7030
Email Contact
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