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Exhibit 99.1
(NUVASIVE LOGO)
PRESS RELEASE
     
Contact:
  Investors:
Michael J. Lambert
  Patrick F. Williams
EVP & Chief Financial Officer
  Vice President, Finance & Investor Relations
NuVasive, Inc.
  NuVasive, Inc.
858-909-1998
  858-638-5511
investorrelations@nuvasive.com
  investorrelations@nuvasive.com
 
   
 
  Media:
 
  Jason Rando
 
  The Ruth Group
 
  646-536-7025
 
  jrando@theruthgroup.com
NUVASIVE REPORTS THIRD QUARTER 2010 FINANCIAL RESULTS
    Total revenue of $120.3 million, up 27% over third quarter 2009
 
    GAAP earnings of $8.5 million, or $0.21 per share; Non-GAAP earnings of $18.4 million, or $0.46 per share
 
    Non-GAAP operating margin of 16.6%, up from 15.8% for second quarter 2010
SAN DIEGO, October 28, 2010 — NuVasive, Inc. (Nasdaq: NUVA), a medical device company focused on developing products for minimally disruptive surgical treatments for the spine, announced today financial results for the quarter ended September 30, 2010.
NuVasive reported third quarter revenue of $120.3 million, a 26.7% increase over the $94.9 million for the third quarter 2009 and a 0.6% increase over the $119.6 million for the second quarter 2010.
Gross profit for the third quarter 2010 was $98.7 million and gross margin was 82.1%, compared to a gross profit of $79.0 million and a gross margin of 83.3% for the third quarter 2009. For the second quarter 2010, gross profit was $98.6 million and gross margin was 82.4%.
Total GAAP operating expenses for the third quarter 2010 were $89.1 million compared to $73.0 million in the third quarter 2009 and $90.3 million in the second quarter 2010.
On a GAAP basis, the Company reported net income of $8.5 million, or $0.21 per share, for the third quarter 2010.

 


 

On a Non-GAAP basis, the Company reported net income of $18.4 million, or $0.46 per share, for the third quarter 2010. The Non-GAAP earnings per share calculations for the third quarter exclude on a pre-tax basis (i) intellectual property litigation costs of $1.2 million; (ii) acquisition related costs of $0.6 million; (iii) stock-based compensation of $7.3 million; and (iv) amortization of intangible assets of $1.3 million.
Cash, cash equivalents and short and long-term marketable securities were $216.8 million at September 30, 2010. Operating cash flow was $18.5 million for the third quarter 2010.
Alex Lukianov, Chairman and Chief Executive Officer, said, “We achieved revenue growth of over 25% and excellent profit margin expansion in spite of very challenging conditions in the spine market. Although the procedural slowdown in the spine market had a greater impact on our results than we anticipated, we are optimistic that the factors pressuring volumes will be transitory in nature, and that the procedures being delayed will ultimately be performed. As we navigate through this downturn, we will continue to grow at multiples of the market by remaining laser focused on being the most creative spine technology company in the world and achieving exceptional results through speed of innovation, Absolute Responsiveness®, and superior clinical outcomes. We have the team, the vision, and the determination to achieve our goal of $1 billion in revenue with increasing profitability.”
Updated Full Year 2010 Financial Guidance:
    Revenue of $470 to $475 million; down from $485 to $495 million previously
 
    GAAP EPS, net of tax and “If-converted” method, of $1.61 to $1.64; down from $1.77 to $1.87 previously
 
    Non-GAAP EPS, net of tax and “If-converted” method, of $1.42 to $1.45; down from $1.50 to $1.60 previously
 
    Non-GAAP Operating Margin of approximately 15.5%; down from approximately 17% previously

Reconciliation of Full Year 2010 Guidance
(Net of Tax, “If Converted” method)
                 
    Range for Year Ending  
    December 31, 2010  
(in thousands, except per share amounts)   Low     High  
GAAP earnings per share
  $ 1.61     $ 1.64  
Non-cash stock-based compensation
    0.55       0.55  
Intellectual property litigation expenses
    0.10       0.10  
Acquisition related items
    0.03       0.03  
Amortization of intangible assets
    0.11       0.11  
Reversal of remaining valuation allowance
    (0.98 )     (0.98 )
 
           
Non-GAAP earnings per share
  $ 1.42     $ 1.45  
 
           
 
               
Weighted shares outstanding — Diluted
    46,000       46,000  
 
           

 


 

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, intellectual property litigation expenses, acquisition related items, and the amortization of intangible assets. 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 Third Quarter 2010 Results
                         
    pre-tax              
(in thousands, except per share data)   adjustments     $ (net of tax)     per share  
GAAP net income
          $ 8,542     $ 0.21  
Non-cash stock-based compensation
  $ 7,321       6,882       0.17  
Intellectual property litigation expenses
    1,175       1,105       0.03  
Acquisition related items
    629       591       0.01  
Amortization of intangible assets
    1,342       1,261       0.03  
 
                   
 
                       
Non-GAAP earnings
          $ 18,381     $ 0.46  
 
                   
Weighted average shares — Diluted
                    40,396  
 
                     
Reconciliation Non-GAAP Operating Margin %
         
    Guidance
    FY 10
Gross Margin % [A]
    ~ 82 %
 
       
Non-GAAP Research and Development [B]
    ~ 8 %
Non-cash stock-based compensation
    ~ 1 %
 
       
Total research and development
    ~ 9 %
 
       
Non-GAAP Sales, Marketing and Administrative [C]
    ~ 58.5 %
Non-cash stock-based compensation
    ~ 5 %
Intellectual property litigation expenses
    ~ 1 %
Acquisition related items
  as incurred
 
       
Total sales, marketing and administrative
    ~ 64 %
 
       
Amortization of intangible assets
    ~ 1 %
 
       
 
       
Non-GAAP Operating Income % [A-B-C]
    ~ 15.5 %
 
       

 


 

2010 Tax Adjustments & WASO Guidance (millions)
                         
    Q1 - Q3     Q4     FY10  
Effective Tax Rate (ETR)*
    ~ 8.5 %     ~ 15.5 %     ~ 12 %
Reversal of remaining valution allowance
            ~ $ (45.0 )     ~ $ (45.0 )
 
                       
Weighted average shares — Diluted
    41.0       ~ 46.0       ~ 46.0  
 
*   ETR to be used on a pre-tax income prior to reversal of remaining valuation allowance
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 1-877-407-4018 for domestic callers and 1-201-689-8471 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 November 27, 2010. In addition, a telephonic replay of the call will be available until November 11, 2010. The replay dial-in numbers are 1-877-870-5176 for domestic callers and 1-858-384-5517 for international callers. Please use replay pin number 357132.
About NuVasive
NuVasive is a medical device company focused on the design, development, and marketing of products for the surgical treatment of spine disorders. The Company’s product portfolio is focused primarily on the $5.1 billion U.S. spine implant market. Additionally, the Company has expanded into the $1.7 billion global biologics market, the $1.7 billion international market, and is developing products for the emerging motion preservation market.
NuVasive’s principal product offering is based on its Maximum Access Surgery, or MAS® platform. The MAS platform combines four categories of products that collectively minimize soft tissue disruption during spine surgery with maximum visualization and safe, easy reproducibility for the surgeon: NeuroVision®, a proprietary software-driven nerve avoidance system; MaXcess®, a unique split-blade retractor system; a wide variety of specialized implants; and several biologic fusion enhancers. MAS significantly reduces surgery time 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 over 65 products today spanning lumbar, thoracic and cervical applications, the Company will continue to expand and evolve its offering predicated on its R&D focus 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 and the risk of further adjustment, or unanticipated difficulty in selling products or generating expected profitability; the risk that NuVasive may not be successful appealing the verdict related to the brand name NeuroVision; the uncertain process of seeking regulatory approval or clearance for NuVasive’s products or devices, including risks

 


 

that such process could be significantly delayed; the possibility that the FDA may require significant changes to NuVasive’s products or clinical studies; the risk that products may not perform as intended and may therefore not achieve commercial success; the risk that competitors may develop superior products or may have a greater market position enabling more successful commercialization; the risk that additional clinical data may call into question the benefits of NuVasive’s products to patients, hospitals and surgeons; 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 Statement of Operations
(
in thousands, except per share data)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2010     2009     2010     2009  
Revenue
  $ 120,262     $ 94,916     $ 348,933     $ 263,405  
Cost of goods sold (excluding amortization of purchased technology)
    21,580       15,874       62,037       43,108  
 
                       
Gross profit
    98,682       79,042       286,896       220,297  
 
                               
Operating expenses:
                               
Sales, marketing and administrative
    77,717       61,720       230,104       182,521  
Research and development
    10,085       9,874       31,989       26,638  
Amortization of intangible assets
    1,342       1,364       4,047       4,072  
 
                       
Total operating expenses
    89,144       72,958       266,140       213,231  
 
                               
Interest and other income (expense), net:
                               
Interest income
    200       203       567       1,318  
Interest expense
    (1,668 )     (1,609 )     (5,005 )     (5,439 )
Other income (expense), net
    (6 )     188       81       324  
 
                       
Total interest and other income (expense), net
    (1,474 )     (1,218 )     (4,357 )     (3,797 )
 
                       
 
                               
Income (loss) before income taxes
    8,064       4,866       16,399       3,269  
Income tax (benefit) expense
    (40 )     430       1,399       1,053  
 
                       
Consolidated net income
  $ 8,104     $ 4,436     $ 15,000     $ 2,216  
 
                       
Net loss attributable to noncontrolling interests
  $ (438 )   $ (628 )   $ (1,353 )   $ (1,311 )
 
                       
Net income attributable to NuVasive, Inc.
  $ 8,542     $ 5,064     $ 16,353     $ 3,527  
 
                       
 
                               
Net income per share attributable to NuVasive, Inc.:
                               
Basic
  $ 0.22     $ 0.13     $ 0.42     $ 0.10  
 
                       
Diluted
  $ 0.21     $ 0.13     $ 0.40     $ 0.09  
 
                       
Weighted average shares:
                               
Basic
    39,394       37,733       39,180       37,008  
 
                       
Diluted
    40,396       39,216       40,389       38,384  
 
                       
 
                               
Stock-based compensation is included in operating expenses in the following categories:
  $ 6,494     $ 4,265     $ 18,846     $ 14,748  
Sales, marketing and administrative
    827       901       2,458       3,417  
 
                       
Research and development
  $ 7,321     $ 5,166     $ 21,304     $ 18,165  
 
                       

 


 

NuVasive, Inc.
Condensed Consolidated Balance Sheets
(
in thousands)
                 
    September 30, 2010     December 31, 2009  
    Unaudited          
ASSETS
               
Current assets:
               
Cash and cash equivalents
  $ 70,590     $ 65,413  
Short-term marketable securities
    106,546       99,279  
Accounts receivable, net
    71,617       58,462  
Inventory
    98,789       90,191  
Prepaid expenses and other current assets
    4,520       3,757  
 
           
Total current assets
    352,062       317,102  
Property and equipment, net
    101,120       82,602  
Long-term marketable securities
    39,629       39,968  
Intangible assets, net
    101,670       103,338  
Goodwill
    101,938       101,938  
Other assets
    14,470       7,872  
 
           
Total assets
  $ 710,889     $ 652,820  
 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Accounts payable and accrued liabilities
  $ 43,798     $ 33,302  
Accrued payroll and related expenses
    13,191       19,111  
Royalties payable
    2,619       2,334  
 
           
Total current liabilities
    59,608       54,747  
Senior convertible notes
    230,000       230,000  
Long-term acquisition related liabilities
    31,264       30,694  
Other long-term liabilities
    29,480       27,528  
Commitments and contingencies
               
 
               
Noncontrolling interests
    12,276       13,629  
 
               
Stockholders’ equity:
               
Common stock
    39       39  
Additional paid-in capital
    520,948       485,757  
Accumulated other comprehensive income
    621       126  
Accumulated deficit
    (173,347 )     (189,700 )
 
           
Total stockholders’ equity
    348,261       296,222  
 
           
Total liabilities and stockholders’ equity
  $ 710,889     $ 652,820  
 
           

 


 

NuVasive, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)
                 
    Nine Months Ended September 30,  
    2010     2009  
Operating activities:
               
Consolidated net income
  $ 15,000     $ 2,216  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    27,404       22,005  
Stock-based compensation
    21,304       18,165  
Lease abandonment charge reversal
          (1,997 )
Amotization of debt issuance costs
    1,120       1,065  
Allowance for doubtful accounts and sales return reserve, net of write offs
    (1,039 )     1,175  
Allowance for excess and obsolete inventory
    1,682       2,470  
Amortization of premium/discount on marketable securities
    890       62  
Other non-cash adjustments
    2,604       1,121  
Changes in operating assets and liabilities, net of effects from acquisitions:
               
Accounts receivable
    (11,465 )     (329 )
Inventory
    (10,043 )     (19,027 )
Prepaid expenses and other current assets
    (3,878 )     788  
Accounts payable and accrued liabilities
    6,316       7,361  
Accrued payroll and related expenses
    (5,973 )     (2,209 )
 
           
Net cash provided by operating activities
    43,922       32,866  
Investing activities:
               
Cash paid for acquisitions and investments
          (44,055 )
Purchases of property and equipment
    (36,622 )     (21,250 )
Purchases of marketable securities
    (150,045 )     (64,642 )
Sales of marketable securities
    142,313       89,336  
Other assets
    (659 )      
 
           
Net cash used in investing activities
    (45,013 )     (40,611 )
Financing activities:
               
Issuance of common stock
    12,768       9,618  
Other assets
    (7,722 )      
Tax benefits related to stock based compensation awards
    1,118        
 
           
Net cash provided by financing activities
    6,164       9,618  
Effect of exchange rate changes on cash
    104       85  
 
           
Increase in cash and cash equivalents
    5,177       1,958  
Cash and cash equivalents at beginning of period
    65,413       132,318  
 
           
Cash and cash equivalents at end of period
  $ 70,590     $ 134,276