News

NuVasive Reports Fourth Quarter And Full Year 2018 Financial Results

By February 21, 2019 No Comments

Company provides 2019 financial performance guidance

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 – Reported3.5% – 5.5%3.5% – 5.5%
 % Growth – Constant Currency23.8% – 5.8%
Operating margin9.5% – 10.0%15.0% – 15.5%
Earnings per share $1.00 – $1.10  $2.20 – $2.30 
EBITDA margin21.2% – 21.7%25.2% – 25.7%
Tax Rate~24%~23%
    1Guidance reflects the range provided on February 20, 2019.
    2Constant 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.comto access Supplementary Financial Information.

Reconciliation of Full Year EPS Guidance
2018 Actuals 12019 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 $1.00 – 1.10 
Business transition costs 40.22
Non-cash purchase accounting adjustments on acquisitions 50.02
Non-cash interest expense on convertible notes0.320.30
Litigation related expenses and settlements 60.650.20
Non-recurring consulting fees 70.12
Net loss on strategic investments0.07
Amortization of intangible assets0.970.90
Purchase of in-process research and development 80.17
European medical device regulation90.010.10
Tax effect of adjustments10(0.56)(0.30)
Non-GAAP earnings per share$    2.23 $2.20 – 2.30 
GAAP Weighted shares outstanding – basic51,38252,017
GAAP Weighted shares outstanding – diluted52,35552,938
Non-GAAP Weighted shares outstanding – diluted 1152,17852,714
1Items may not foot due to rounding.
2Guidance reflects the range provided on February 20, 2019.
3Effective tax expense rate of ~24% applied to GAAP earnings and ~23% applied to Non-GAAP earnings.
4Costs 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.
5Represents 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.
6Represents 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.
7Non-recurring consulting fees associated with the implementation of our state tax-planning strategy.
8Purchase of an in-process research and development asset which had no future alternative use.
9Charges represent the costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.
10The 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.
11Adjusted 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
Actuals 1
2019
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 fees40.6%0.0%
Litigation related expenses50.6%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]62.5%0.0%
Amortization of intangible assets [G]4.6%4.2%
Purchase of in-process research and development [H]70.8%0.0%
European medical device regulation [I]80.0%0.6%
Business transition costs [J] 91.0%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%
1Items may not foot due to rounding.
2Guidance reflects the range provided on February 20, 2019.
3Represents 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.
4Non-recurring consulting fees associated with the implementation of our state tax-planning strategy.
5Expenses 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.
6Represents the loss recorded in connection with the settlement of the Madsen Medical, Inc. litigation matter.
7Purchase of an in-process research and development asset which had no future alternative use.
8Charges represent the costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.
9Costs 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, 22019 Guidance Range1, 3, 4
Net Income1.1%4.6% – 5.0%
Interest income / expense, net 3.4%3.3%
Income tax benefit / (expense)(0.3%)1.5%
Depreciation and amortization11.8%11.7%
EBITDA Margin16.0%21.2% – 21.7%
Non-cash stock based compensation2.3%2.7%
Business transition costs51.0%0.0%
Non-cash purchase accounting adjustments on acquisitions60.1%0.0%
Litigation related expenses and settlements 73.1%0.7%
Non-recurring consulting fees 80.6%0.0%
In-process research and development90.8%0.0%
European medical device regulation100.0%0.6%
Net loss on strategic investments0.3%0.0%
Adjusted EBITDA Margin24.3%25.2% – 25.7%
1Items may not foot due to rounding.
2Effective tax expense rate of ~43% benefit applied to GAAP earnings and ~18% applied to Non-GAAP earnings.
 3Effective tax expense rate of ~24% applied to GAAP earnings and ~23% applied to Non-GAAP earnings.
4Guidance reflects the range provided on February 20, 2019.
5Costs 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.
6Represents 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.
7Represents 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.
8Non-recurring consulting fees associated with the implementation of our state tax-planning strategy.
9Purchase of an in-process research and development asset which had no future alternative use.
10Charges 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
Profit
Operating
Profit
Net
Income 
Diluted
EPS
Diluted
WASO 5
Net
Income to
Adjusted
EBITDA
Reported GAAP$      202,198$    25,856$      12,157$   0.2352,530$          12,157
% of revenue70.1%9.0%
Amortization of intangible assets13,26813,268
Litigation related expenses and settlements12,7502,7502,750
Business transition costs23,7793,7793,779
European medical device regulation3373373373
Non-cash interest expense on convertible notes4,262
Net gain on strategic investments(30)(30)
Tax effect of adjustments 4(444)
Interest expense/(income), net9,193
Income tax expense4,175
Depreciation and amortization33,356
Non-cash stock based compensation3,699
Adjusted Non-GAAP$      202,198$    46,026$      36,115$   0.6952,471$          69,452
% of revenue70.1%16.0%24.1%
  1Represents 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.
2Costs 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.
3Charges represent the costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.
4The 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.
 5Adjusted 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
Profit
Operating
Profit
Net
Income
Diluted
EPS
Diluted
WASO 8
Net
Income to
Adjusted
EBITDA
Reported GAAP$      790,555$    54,168$      12,479$   0.2452,355$          12,479
% of revenue71.8%4.9%
Non-cash purchase accounting adjustments on acquisitions 11,0801,0801,0801,080
Non-recurring consulting fees 26,0846,0846,084
Amortization of intangible assets50,67050,670
Litigation related expenses and settlements 334,05234,05234,052
Business transition costs411,47311,47311,473
Purchase of in-process research and development 58,9138,9138,913
European medical device regulation6373373373
Non-cash interest expense on convertible notes16,722
Net loss on strategic investments3,8373,837
Tax effect of adjustments7(29,126)
Interest expense/(income), net37,271
Income tax benefit(3,756)
Depreciation and amortization129,765
Non-cash stock based compensation25,761
Adjusted Non-GAAP$      791,635$  166,813$    116,557$   2.2352,178$        267,332
% of revenue71.9%15.1%24.3%
1Represents 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.
2Non-recurring consulting fees associated with the implementation of our state tax-planning strategy.
3Represents 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.
4Costs 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.
  5Purchase of an in-process research and development asset which had no future alternative use.
  6Charges represent the costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.
 7The 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.
8Adjusted 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
Profit
Operating
Profit
Net
Income 
Diluted
EPS
Diluted
WASO 6
Net
Income to
Adjusted
EBITDA
Reported GAAP1$      195,917$    29,408$      23,477$   0.4551,857$          23,477
% of revenue72.2%10.8%
Non-cash purchase accounting adjustments on acquisitions 2404404404404
Amortization of intangible assets 312,99912,677
Litigation related expenses and settlements 4,1334,1334,133
Business transition costs 42,5182,5182,518
Non-cash interest expense on convertible notes4,046
Tax effect of adjustments 5(18,155)
Interest expense/(income), net9,156
Income tax benefit(3,949)
Depreciation and amortization332,055
Non-cash stock based compensation7,407
Adjusted Non-GAAP$      196,321$    49,462$      29,100$   0.5651,857$          75,201
% of revenue72.4%18.2%27.7%
   1Reported GAAP figures for 2017 have been recasted and presented based on the full retrospective method of adoption of ASC 606.
 2Represents 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.
 3When 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.
 4Costs 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.
 5The 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.
  6Adjusted 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
Profit
Operating
Profit
Net
Income 
Diluted
EPS
Diluted
WASO6
Net
Income to
Adjusted
EBITDA
Reported GAAP1$      758,244$  111,486$      81,598$   1.4855,193$          81,598
% of revenue73.9%10.9%
Non-cash purchase accounting adjustments on acquisitions 2540540540540
Amortization of intangible assets 348,03946,750
Litigation related expenses and settlements 4,8834,8834,883
Business transition costs 44,2874,2874,287
Non-cash interest expense on convertible notes17,290
Tax effect of adjustments 5(56,357)
Interest expense/(income), net37,581
Income tax benefit(7,492)
Depreciation and amortization3119,927
Non-cash stock based compensation22,391
Adjusted Non-GAAP$      758,784$  169,235$      98,991$   1.8952,345$        263,715
% of revenue73.9%16.5%25.7%
  1Reported GAAP figures for 2017 have been recasted and presented based on the full retrospective method of adoption of ASC 606.
 2Represents 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.
3When 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.
 4Costs 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.
5The 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.
6Adjusted 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™ 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
December 31,
Year Ended December 31,
2018201720182017
(Unaudited)(Unaudited)
Revenue
Product revenue$ 258,226$ 248,881$  986,458$  938,981
Service revenue30,10122,341115,25687,704
Total revenue288,327271,2221,101,7141,026,685
Cost of revenue (excluding below amortization of intangible assets)
Cost of products sold66,37560,015234,509207,307
Cost of services19,75415,29076,65061,134
Total cost of revenue86,12975,305311,159268,441
Gross profit202,198195,917790,555758,244
Operating expenses:
   Sales, marketing and administrative142,201134,523575,836539,507
   Research and development17,09412,71961,69550,425
   Amortization of intangible assets13,26812,99950,67048,039
   Purchase of in-process research and development8,913
   Litigation liability loss3,75027,8004,500
   Business transition costs3,7792,51811,4734,287
Total operating expenses176,342166,509736,387646,758
Interest and other expense, net:
   Interest income20685586440
   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 taxes16,33219,0928,72372,363
Income tax benefit (expense)(4,175)3,9493,7567,492
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:
   Basic51,50451,09451,38250,874
   Diluted52,53051,85752,35555,193
NuVasive, Inc. 
Consolidated Balance Sheets 
(in thousands, except par values and share amounts) 
December 31,
20182017
ASSETS
Current assets:
Cash and cash equivalents$          117,840$            72,803
Restricted cash and investments3,901
Accounts receivable, net of allowances of $16,171 and $13,026, respectively196,487200,220
Inventory, net273,244247,138
Prepaid income taxes16,90517,209
Prepaid expenses and other current assets13,73318,792
Total current assets618,209560,063
Property and equipment, net238,841215,326
Intangible assets, net252,048280,774
Goodwill561,366536,926
Deferred tax assets5,2636,440
Restricted cash and investments2,3951,494
Other assets29,73739,117
Total assets$       1,707,859$       1,640,140
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities$          105,877$            75,767
Contingent consideration liabilities7,56018,952
Accrued payroll and related expenses59,96055,618
Litigation liabilities1,4158,150
Income tax liabilities4,6482,908
Total current liabilities179,460161,395
Long-term senior convertible notes602,526582,920
Deferred and income tax liabilities, non-current4,96418,870
Other long-term liabilities86,38477,539
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized, none outstanding
Common stock, $0.001 par value; 120,000,000 shares authorized at December 31, 2018 and December 31, 2017, 56,648,077 and 56,164,060 issued and outstanding at December 31, 2018 and December 31, 2017, respectively6160
Additional paid-in capital1,397,8291,363,549
Accumulated other comprehensive loss(8,628)(6,933)
Retained earnings17,2414,762
Treasury stock at cost; 5,116,496 shares and 5,001,886  shares at December 31, 2018 and December 31, 2017, respectively(571,978)(565,867)
Total NuVasive, Inc. stockholders’ equity834,525795,571
Non-controlling interests3,845
Total equity834,525799,416
Total liabilities and equity$ 1,707,859$ 1,640,140
NuVasive, Inc. 
Consolidated Statements of Cash Flows 
(in thousands) 
Year Ended December 31,
20182017
Operating activities:
Consolidated net income$   12,479$  79,855
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization129,765121,176
Purchase of in-process research and development8,913
Deferred income taxes(11,396)(12,838)
Amortization of non-cash interest20,12320,538
Stock-based compensation25,67322,391
Net loss on strategic investments4,421
Reserves on current assets14,8345,622
Other non-cash adjustments23,70316,561
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable4,562(26,610)
Inventory(38,646)(35,867)
Prepaid expenses and other current assets(1,280)(12,681)
Accounts payable and accrued liabilities20,518(5,558)
Contingent consideration liabilities(300)(11,200)
Accrued payroll and related expenses2,5953,975
Litigation liability1,1658,150
Income taxes2,0543,455
Net cash provided by operating activities219,183176,969
Investing activities:
Other acquisitions and investments(55,266)(62,370)
Proceeds from other investments3,584
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 stock8,1279,991
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 credit100,00060,000
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 cash42,037(82,850)
Cash, cash equivalents and restricted cash at beginning of period78,198161,048
Cash, cash equivalents and restricted cash at end of period$ 120,235$  78,198

SOURCE NuVasive, Inc., PR Newswire Feb 20 2019

Related Links

http://www.nuvasive.com
Andrew Dubowski

Author Andrew Dubowski

Head of International Business Development

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