NuVasive announced today financial results for the quarter ended September 30, 2017.
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SAN DIEGO, Oct. 24, 2017 /PRNewswire/ -- NuVasive, Inc., the leader in spine technology innovation, focused on transforming spine surgery with minimally disruptive, procedurally-integrated solutions, announced today financial results for the quarter ended September 30, 2017. Third Quarter 2017 Highlights
"Our results for the third quarter reflect continued strength in our International business with 46% growth on a constant currency basis year over year, representing the fourth consecutive quarter with growth in excess of 20%," said Gregory T. Lucier, NuVasive's chairman and chief executive officer. "In the U.S., we are making significant inroads in the deformity market with our RELINE® posterior fixation system and have launched multiple spinal hardware technologies over the last quarter that continue to enhance our differentiated and procedurally-focused portfolio." Lucier continued, "Disruptions from the recent hurricanes in our U.S. and International business negatively affected third quarter total revenue results by approximately $5 million. Excluding the impact of the hurricanes and one less selling day, revenue growth would have been approximately 6%." A full reconciliation of GAAP to non-GAAP measures can be found in the tables of this news release. Third Quarter 2017 Results For the third quarter 2017, GAAP and non-GAAP gross profit was $181.8 million and $182.0 million, respectively, while both GAAP and non-GAAP gross margin was 73.5%. These results compared to GAAP and non-GAAP gross profit of $180.5 million and $182.9 million, respectively, and GAAP and non-GAAP gross margin of 75.3% and 76.3%, respectively, for the third quarter 2016. Total GAAP and non-GAAP operating expenses were $151.2 million and $138.5 million, respectively, for the third quarter of 2017. These results compared to GAAP and non-GAAP operating expenses of $159.3 million and $144.4 million, respectively, for the third quarter 2016. NuVasive reported a GAAP net income of $33.6 million, or $0.64 per diluted share, for the third quarter 2017 compared to $3.9 million, or $0.07 per diluted share, for the third quarter 2016. On a non-GAAP basis, the Company reported net income of $26.7 million, or $0.52 per diluted share, for the third quarter 2017 compared to $21.1 million, or $0.40 per diluted share, for the third quarter 2016. Cash and cash equivalents were approximately $62.2 million at September 30, 2017. Updated Full Year Guidance for 2017
2017 Guidance
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Prior (1) Current (1)
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(in Million's; except %'s and EPS) GAAP Non-GAAP GAAP Non-GAAP
---- -------- ---- --------
Revenue $1,065 $1,065 $1,030 $1,030
% Growth - Reported 10.7% 10.7% 7.1% 7.1%
% Growth - Constant Currency (2) 11.1% 7.2%
Operating margin 12.4% 17.1% 11.5% 16.6%
Earnings per share $1.13 $2.00 $1.37 $1.91
EBITDA 23.6% 26.7% 23.3% 25.9%
Tax Rate ~33% ~35% ~7% ~34%
1 Prior guidance provided July 27, 2017. Current guidance reflects guidance provided October 24, 2017.
2 Constant currency is a measure that adjusts US GAAP revenue for the impact of currency over the same period
in the prior year.
Supplementary Financial Information
Reconciliation of Full Year EPS Guidance
2017 Guidance(1)
---------------
2016 Actuals Prior 2, 3 Current 2,4
------------ ---------- -----------
GAAP net income per share $0.69 $1.13 $1.37
Impact of change to diluted share count 0.02 0.09 0.07
---- ---- ----
GAAP net income per share, adjusted to diluted Non-GAAP share count $0.71 $1.22 $1.44
Litigation liability (0.83) - 0.01
Business transition costs 5 0.35 0.05 0.04
Non-cash interest expense on convertible notes 0.38 0.33 0.33
Non-cash purchase accounting adjustments on acquisitions 6 0.28 - 0.01
Loss on repurchase of convertible notes 0.37 - -
Amortization of intangible assets 7 0.78 0.88 0.92
Tax effect of adjustments 8 (0.38) (0.48) (0.85)
Non-GAAP earnings per share $1.66 $2.00 $1.91
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GAAP Weighted shares outstanding - basic 50,077 50,864 50,867
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GAAP Weighted shares outstanding - diluted 54,102 56,617 55,237
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Non-GAAP Weighted shares outstanding - diluted 9 51,981 52,738 52,390
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1 Items may not foot due to rounding.
2 Prior guidance provided July 27, 2017. Current guidance reflects guidance
provided October 24, 2017.
3 Effective tax expense rate of ~33% applied to GAAP earnings and ~35%
applied to Non-GAAP earnings.
4 Effective tax expense rate of ~7% applied to GAAP earnings and ~34% 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 Excludes the amortization associated with non-controlling interest.
8 The impact on results from taxes include tax effecting 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 estimated rate of ~34% on a non-GAAP basis.
9 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 %
2017 Guidance(1)
---------------
(in thousands, except %) 2016 Actuals Prior (2) Current (2)
------------ -------- ----------
Non-GAAP Gross Margin %[A] 76.6% 75.6% 74.2%
Non-cash purchase accounting adjustments on acquisitions (3) (1.5%) 0.0% (0.1%)
----- --- -----
GAAP Gross Margin [B] 75.0% 75.6% 74.2%
GAAP & Non-GAAP Sales, Marketing & Administrative Expense [C] 55.5% 53.5% 52.7%
Non-GAAP Research & Development Expense [D] 5.0% 5.0% 5.0%
In-process research & development 0.0% 0.0% 0.0%
--- --- ---
GAAP Research & Development Expense [E] 5.0% 5.0% 5.0%
Litigation liability [F] (4.5%) 0.0% 0.1%
Amortization of intangible assets [G] 4 4.4% 4.5% 4.8%
Business transition costs [H] 5 1.9% 0.2% 0.2%
Non-GAAP Operating Margin % [A - C - D] 16.1% 17.1% 16.6%
==== ==== ====
GAAP Operating Margin % [B - C - E - F - G - H] 12.8% 12.4% 11.5%
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1 Items may not foot due to rounding.
(2) Prior guidance provided July 27, 2017. Current guidance reflects guidance provided
October 24, 2017.
(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 Excludes the amortization associated with non-controlling interest.
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.
Reconciliation of EBITDA %
2017 Guidance(1)
---------------
(in thousands, except %) 2016 Actuals Prior (2) Current (2)
------------ -------- ----------
Net Income / (Loss) 3.9% 6.0% 7.3%
Interest (income) / expense, net (3) 6.1% 3.6% 3.7%
Provision for income taxes 3.0% 2.9% 0.5%
Depreciation and amortization 4 10.5% 11.0% 11.8%
---- ---- ----
EBITDA 23.5% 23.6% 23.3%
Non-cash stock based compensation 2.8% 3.0% 2.3%
Business transition costs 5 1.9% 0.2% 0.2%
Non-cash purchase accounting adjustments on acquisitions 6 1.5% 0.0% 0.1%
In-process research & development 0.0% 0.0% 0.0%
Litigation liability (4.5%) 0.0% 0.1%
Adjusted EBITDA 25.2% 26.7% 25.9%
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1 Items may not foot due to rounding.
2 Prior guidance provided July 27, 2017. Current guidance reflects guidance
provided October 24, 2017.
3 Interest (income) /expense, net for the quarter and year ended December
31, 2016 includes loss on extinguishment of debt for $1.6 million and
$19.1 million, respectively.
4 Excludes the amortization associated with non-controlling interest.
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.
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, non-cash purchase accounting adjustments on acquisitions, business transition costs, CEO transition related costs, certain litigation charges, significant one-time items, non-cash interest expense and/or losses on repurchase of convertible notes, and the impact from taxes related to these items, including those taxes that would have occurred in lieu of these items. Management also uses certain non-GAAP measures which are intended to exclude the impact of foreign exchange currency fluctuations. The measure constant currency is the use of 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, non-cash purchase accounting adjustments on acquisition, business transition costs, CEO transition related costs, certain litigation charges, 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.
Reconciliation of Third Quarter 2017 Results
GAAP Net Income per Share to Non-GAAP Earnings per Share
(in thousands, except per share data) Adjustments Diluted Earnings Per
Share
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GAAP net income $33,617 $0.64
Business transition costs (1) 345
Non-cash purchase accounting adjustments on acquisitions (2) 136
Litigation liability 750
Non-cash interest expense on convertible notes 3,980
Amortization of intangible assets (3) 11,307
Tax effect of adjustments 4 (23,413)
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Adjustments to GAAP net income (6,895)
Non-GAAP earnings $26,722 $0.52
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GAAP weighted shares outstanding - diluted 52,794
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Non-GAAP weighted shares outstanding - diluted 5 51,751
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1 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.
(2) Represents costs associated with non-cash purchase accounting adjustments, such as acquired
inventory fair market value adjustments, which are amortized over the period in which underlying
products are sold.
(3) Excludes the amortization associated with non-controlling interest.
4 The impact on results from taxes include tax effecting 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 estimated rate of ~34% on a non-GAAP
basis.
5 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 Year To Date 2017 Results
GAAP Net Income per Share to Non-GAAP Earnings per Share
(in thousands, except per share data) Adjustments Diluted Earnings Per
Share
-----
GAAP net income $59,046 $1.05
Business transition costs (1) 1,769
Non-cash purchase accounting adjustments on acquisitions (2) 136
Litigation liability 750
Non-cash interest expense on convertible notes 13,244
Amortization of intangible assets (3) 34,073
Tax effect of adjustments 4 (38,197)
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Adjustments to GAAP net income 11,775
Non-GAAP earnings $70,821 $1.35
======= =====
GAAP weighted shares outstanding - diluted 56,304
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Non-GAAP weighted shares outstanding - diluted 5 52,507
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1 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.
(2) Represents costs associated with non-cash purchase accounting adjustments, such as acquired
inventory fair market value adjustments, which are amortized over the period in which underlying
products are sold.
(3) Excludes the amortization associated with non-controlling interest.
4 The impact on results from taxes include tax effecting 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 estimated rate of ~34% on a non-GAAP
basis.
5 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 Third Quarter and Nine Months 2017 Results
GAAP net income to Adjusted EBITDA
Three months ended Nine months ended
(in thousands, except per share data) September 30, 2017 September 30, 2017
------------------ ------------------
GAAP net income $33,617 $59,046
Interest (income) / expense, net 8,819 28,425
Provision for income taxes (11,540) (2,971)
Depreciation and amortization (1) 29,858 87,872
EBITDA $60,754 $172,372
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Business transition costs(2) 345 1,769
Non-cash purchase accounting adjustments on acquisitions (3) 136 136
Litigation liability 750 750
Non-cash stock based compensation (427) 14,984
Adjusted EBITDA $61,558 $190,011
======= ========
As a percentage of revenue 24.9% 25.1%
1 Excludes the amortization associated with non-controlling interest.
(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 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.
Investor Conference Call About NuVasive Forward-Looking Statements
NuVasive, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
(unaudited) 2017 2016 2017 2016
---- ---- ---- ----
Revenue $247,431 $239,649 $757,868 $690,963
Cost of goods sold (excluding below
amortization of intangible assets) 65,583 59,196 193,617 173,167
------ ------ ------- -------
Gross profit 181,848 180,453 564,251 517,796
Operating expenses:
Sales, marketing and administrative 125,800 131,886 405,411 391,211
Research and development 12,720 12,516 37,706 35,016
Amortization of intangible assets 11,630 11,438 35,040 29,912
Litigation liability loss (gain) 750 - 750 (43,310)
Business transition costs 345 3,451 1,769 11,514
--- ----- ----- ------
Total operating expenses 151,245 159,291 480,676 424,343
Interest and other expense, net:
Interest income 79 190 355 924
Interest expense (8,898) (10,979) (28,780) (29,988)
Loss on repurchases of convertible
notes - - - (17,444)
Other expense, net (139) 94 (382) (102)
---- --- ---- ----
Total interest and other expense, net (8,958) (10,695) (28,807) (46,610)
Income before income taxes 21,645 10,467 54,768 46,843
Income tax expense 11,540 (6,972) 2,971 (17,383)
------ ------ ----- -------
Consolidated net income $33,185 $3,495 $57,739 $29,460
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Add back net loss attributable to
non-controlling interest $(432) $(431) $(1,307) $(1,311)
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Net income attributable to NuVasive,
Inc. $33,617 $3,926 $59,046 $30,771
======= ====== ======= =======
Net income per share attributable to
NuVasive, Inc.:
Basic $0.66 $0.08 $1.16 $0.62
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Diluted $0.64 $0.07 $1.05 $0.58
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Weighted average shares outstanding:
Basic 50,747 50,264 50,799 49,970
====== ====== ====== ======
Diluted 52,794 55,782 56,304 53,498
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NuVasive, Inc.
Consolidated Balance Sheets
(in thousands, except par values and share amounts)
September 30, 2017 December 31, 2016
------------------ -----------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $62,200 $153,643
Restricted cash and investments 2,402 -
Accounts receivable, net of allowances of
$10,708 and $8,912, respectively 187,247 171,595
Inventory, net 249,003 208,249
Prepaid income taxes 19,817 31,926
Prepaid expenses and other current assets 9,184 10,030
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Total current assets 529,853 575,443
Property and equipment, net 220,809 181,524
Intangible assets, net 294,445 291,143
Goodwill 538,310 485,685
Deferred tax assets 6,093 5,810
Restricted cash and investments 4,946 7,405
Other assets 34,460 23,794
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Total assets $1,628,916 $1,570,804
========== ==========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities $73,552 $77,585
Contingent consideration liabilities 19,275 49,742
Accrued payroll and related expenses 51,965 51,000
Income tax liabilities 857 2,469
Short-term borrowings 40,000 -
Senior convertible notes - 61,701
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Total current liabilities 185,649 242,497
Long-term senior convertible notes 578,192 564,412
Deferred and income tax liabilities, non-
current 29,667 18,607
Other long-term liabilities 75,213 44,764
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, 2017
and December 31, 2016, 55,959,798 and
55,184,660 issued and outstanding at
September 30, 2017 and December 31, 2016,
respectively 60 55
Additional paid-in capital 1,347,482 1,010,238
Accumulated other comprehensive loss (6,855) (10,631)
Accumulated deficit (19,460) (66,859)
Treasury stock at cost; 4,992,333 shares
and 4,758,828 shares at September 30, 2017
and December 31, 2016, respectively (565,313) (237,867)
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Total NuVasive, Inc. stockholders' equity 755,914 694,936
Non-controlling interest 4,281 5,588
Total equity 760,195 700,524
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Total liabilities and equity $1,628,916 $1,570,804
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NuVasive, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Nine Months Ended September 30,
-------------------------------
(unaudited) 2017 2016
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Operating activities:
Consolidated net income $57,739 $29,460
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 88,922 73,765
Loss on repurchases of convertible notes - 17,444
Amortization of non-cash interest 15,676 16,906
Stock-based compensation 14,984 19,645
Reserves on current assets 1,741 9,027
Other non-cash adjustments 11,029 11,369
Deferred income taxes (3,705) 24,810
Changes in operating assets and liabilities, net of effects from
acquisitions:
Accounts receivable (14,796) (3,038)
Inventory (36,180) (22,423)
Prepaid expenses and other current assets 226 (3,457)
Contingent consideration liabilities (11,200) -
Accounts payable and accrued liabilities (5,857) 5,854
Litigation liability 1,000 (88,450)
Accrued payroll and related expenses 502 (1,670)
Income taxes (1,195) 6,778
------ -----
Net cash provided by operating activities 118,886 96,020
Investing activities:
Acquisition of Ellipse Technologies, net of cash acquired - (380,080)
Other acquisitions and investments (62,371) (108,150)
Purchases of intangible assets (2,270) (5,918)
Purchases of property and equipment (97,030) (73,882)
Purchases of marketable securities - (128,956)
Proceeds from sales of marketable securities - 407,032
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Net cash used in investing activities (161,671) (289,954)
Financing activities:
Proceeds from the issuance of common stock 5,517 6,668
Purchase of treasury stock (11,709) (24,441)
Payment of contingent consideration (18,800) -
Proceeds from issuance of convertible debt, net of issuance costs - 634,140
Proceeds from sale of warrants - 44,850
Purchase of convertible note hedge - (111,150)
Repurchases of convertible notes (63,317) (343,835)
Proceeds from revolving line of credit 60,000 50,000
Repayments on revolving line of credit (20,000) (50,000)
Other financing activities (2,316) (1,701)
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Net cash (used in)provided by financing activities (50,625) 204,531
Effect of exchange rate changes on cash 1,967 882
----- ---
(Decrease) increase in cash and cash equivalents (91,443) 11,479
Cash and cash equivalents at beginning of period 153,643 192,339
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Cash and cash equivalents at end of period $62,200 $203,818
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Company Codes: NASDAQ-NMS:NUVA |
