Le Lézard
Classified in: Health, Business, Covid-19 virus
Subjects: ERN, CCA

NuVasive Announces Third Quarter 2020 Financial Results


SAN DIEGO, Oct. 29, 2020 /PRNewswire/ -- NuVasive, Inc. (NASDAQ: NUVA), the leader in spine technology innovation, focused on transforming spine surgery with minimally disruptive, procedurally integrated solutions, today announced financial results for the quarter ended September 30, 2020.

Third Quarter 2020 Highlights

"In the third quarter, NuVasive experienced faster-than-anticipated recovery from the impact of COVID-19 with net sales increasing year over year driven by high-single digit growth in our International business and further stability of the US spine market," said J. Christopher Barry, chief executive officer of NuVasive. "The Company remains focused in the fourth quarter on executing against its innovation roadmap, including the launch of our re-designed cervical portfolio, the furthering of our Advanced Materials Science implant portfolio with multiple new implants and executing on key Pulse milestones." 

A full reconciliation of GAAP to non-GAAP financial measures can be found in the tables of this news release. NuVasive announced in April 2020 that it had withdrawn its annual financial guidance due to the uncertainty related to COVID-19, and is not reinstituting its annual financial guidance for the remainder of the year.

Third Quarter 2020 Results
NuVasive reported third quarter 2020 total net sales of $295.3 million, a 1.5% increase compared to $290.8 million for the third quarter 2019. On a constant currency basis, third quarter 2020 total net sales increased 1.2% compared to the same period last year.

For the third quarter 2020, both GAAP and non-GAAP gross profit was $210.6 million and GAAP and non-GAAP gross margin was 71.3%. These results compared to GAAP and non-GAAP gross profit of $213.8 million and GAAP and non-GAAP gross margin of 73.5%, for the third quarter 2019.

The Company reported GAAP net income of $5.9 million, or diluted earnings per share of $0.11, for the third quarter 2020, compared to GAAP net income of $11.0 million, or diluted earnings per share of $0.21, for the third quarter 2019. On a non-GAAP basis, the Company reported net income of $28.3 million, or diluted earnings per share of $0.55, for the third quarter 2020, compared to non-GAAP net income of $30.9 million, or diluted earnings per share of $0.59, for the third quarter 2019.

The Company ended the quarter with $982.1 million in cash and cash equivalents, and short term investments.  

Supplementary Financial Information
For additional financial detail, please visit the Investor Relations section of the Company's website at www.nuvasive.com to access Supplementary Financial Information.

Reconciliation of GAAP to Non-GAAP Information
Management uses certain non-GAAP financial measures such as non-GAAP diluted earnings per share, non-GAAP net income, non-GAAP operating expenses and non-GAAP operating 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, gains and losses from changes in fair value of derivatives 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, gains and losses from changes in fair value of derivatives and other significant one-time items.

Management calculates the non-GAAP financial measures provided in this earnings release excluding these costs and uses these non-GAAP financial measures to enable it to further and more consistently analyze the period-to-period financial performance of its core business operations. Management believes that providing investors with these non-GAAP measures gives them additional information to enable them to assess, in the same way management assesses, the Company's current and future continuing operations. These non-GAAP measures are not in accordance with, or an alternative for, GAAP, and may be different from non-GAAP measures used by other companies. Set forth below are reconciliations of the non-GAAP financial measures to the comparable GAAP financial measure.

For the Three Months Ended September 30, 2020

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited - in thousands, except per share data)









Gross Profit

Operating
Profit

Net Income

Diluted
EPS

Diluted
WASO5

Net Income to
Adjusted EBITDA

Reported GAAP

$   210,649

$   27,052

$   5,872

$   0.11

51,805

$   5,872

% of revenue

71.3%

9.2%





Amortization of intangible assets


13,826

13,826




Litigation related expenses and settlements1


1,396

1,396



1,396

Business transition costs2


3,107

3,107



3,107

European medical device regulation3


1,149

1,149



1,149

Non-cash interest expense on convertible notes



12,683




Net gain on strategic investments



(1,132)



(1,132)

Tax effect of adjustments4



(8,575)




Interest expense/(income), net






20,852

Income tax expense






579

Depreciation and amortization






35,959

Non-cash stock-based compensation






7,572

Adjusted Non-GAAP

$   210,649

$   46,530

$   28,326

$   0.55

51,805

$   75,354

% of revenue

71.3%

15.8%




25.5%



1

Represents expenses associated with certain ongoing litigation matters, including infringement of the Company's intellectual property.

2

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.

3

Represents costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.

4

Represents the impact from tax affecting the adjustments above at their statutory tax rate.

5

Adjusted non-GAAP diluted WASO excludes the impact of all dilutive securities, including convertible notes for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.

 

For the Nine Months Ended September 30, 2020

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited - in thousands, except per share data)









Gross Profit

Operating
Profit

Net (Loss)
Income

Diluted
EPS

Diluted
WASO7

Net (Loss) to
Adjusted EBITDA

Reported GAAP

$   521,772

$   18,068

$   (38,845)

$   (0.76)

51,440

$   (38,845)

% of revenue

68.8%

2.4%





Amortization of intangible assets


39,150

39,150




Litigation related expenses and settlements1


5,686

5,686



5,686

Business transition costs2


2,541

2,541



2,541

Purchase of in-process research and development3


1,011

1,011



1,011

European medical device regulation4


4,079

4,079



4,079

Non-cash interest expense on convertible notes



28,022




Net loss on strategic investments



278



278

Net loss recognized on change in fair value of derivatives5



12,301



12,301

Tax effect of adjustments6



(20,834)




Interest expense/(income), net






47,858

Income tax benefit






(9,764)

Depreciation and amortization






106,097

Non-cash stock-based compensation






9,751

Adjusted Non-GAAP

$   521,772

$   70,535

$   33,389

$   0.64

52,033

$   140,993

% of revenue

68.8%

9.3%




18.6%



1

Represents expenses associated with certain ongoing litigation matters, including infringement of the Company's intellectual property.

2

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.

3

Purchase of an in-process research and development asset which had no future alternative use.

4

Represents costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.

5

Represents the net change in fair value of the Company's derivative asset and liability associated with the 2023 Notes.

6

Represents the impact from tax affecting the adjustments above at their statutory tax rate.

7

Adjusted non-GAAP diluted WASO excludes the impact of dilutive convertible notes for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.

 

For the Three Months Ended September 30, 2019

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited - in thousands, except per share data)









Gross Profit

Operating
Profit

Net Income

Diluted
EPS

Diluted
WASO5

Net Income to
Adjusted EBITDA

Reported GAAP

$   213,807

$   30,514

$   11,010

$   0.21

53,056

$   11,010

% of revenue

73.5%

10.5%





Amortization of intangible assets


12,596

12,596




Litigation related expenses and settlements1


1,899

1,899



1,899

Business transition costs2


(333)

(333)



(333)

European medical device regulation3


953

953



953

Non-cash interest expense on convertible notes



4,432




Net loss on strategic investments



4,767



4,767

Tax effect of adjustments4



(4,455)




Interest expense/(income), net






9,034

Income tax expense






4,774

Depreciation and amortization






33,631

Non-cash stock-based compensation






7,829

Adjusted Non-GAAP

$   213,807

$   45,629

$   30,869

$   0.59

52,590

$   73,564

% of revenue

73.5%

15.7%




25.3%



1

Represents expenses associated with certain ongoing litigation matters, including infringement of the Company's intellectual property.

2

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.

3

Represents costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.

4

Represents the impact from tax affecting the adjustments above at their statutory tax rate. As of October 30, 2019, the Company estimated an annual tax rate of ~26% on a GAAP basis and ~23% on a non-GAAP basis.

5

Adjusted non-GAAP diluted WASO excludes the impact of dilutive convertible notes for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.

 

For the Nine Months Ended September 30, 2019

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited - in thousands, except per share data)









Gross Profit

Operating
Profit

Net Income

Diluted
EPS

Diluted
WASO5

Net Income to
Adjusted EBITDA

Reported GAAP

$   628,615

$   80,884

$   35,358

$   0.67

52,667

$   35,358

% of revenue

73.3%

9.4%





Amortization of intangible assets


38,498

38,498




Litigation related expenses and settlements1


6,976

6,976



6,976

Business transition costs2


5,146

5,146



5,146

European medical device regulation3


2,685

2,685



2,685

Non-cash interest expense on convertible notes



13,125




Net loss on strategic investments



4,767



4,767

Tax effect of adjustments4



(15,269)




Interest expense/(income), net






27,461

Income tax expense






12,012

Depreciation and amortization






101,245

Non-cash stock-based compensation






20,447

Adjusted Non-GAAP

$   628,615

$   134,189

$   91,286

$   1.74

52,512

$   216,097

% of revenue

73.3%

15.6%




25.2%



1

Represents expenses associated with certain ongoing litigation matters, including infringement of the Company's intellectual property.

2

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.

3

Represents costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.

4

Represents the impact from tax affecting the adjustments above at their statutory tax rate. As of October 30, 2019, the Company estimated an annual tax rate of ~26% on a GAAP basis and ~23% on a non-GAAP basis.

5

Adjusted non-GAAP diluted WASO excludes the impact of dilutive convertible notes for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.

Investor Conference Call
NuVasive will hold a conference call today at 4:30 p.m. ET / 1:30 p.m. PT to discuss the results of its financial performance for the third quarter 2020. The dial-in numbers are 1-877-407-9039 for domestic callers and 1-201-689-8470 for international callers. A live webcast of the conference call will be available online from the Investor Relations page of the Company's website at www.nuvasive.com. After the live webcast, the call will remain available on NuVasive's website through November 29, 2020. In addition, a telephone replay of the call will be available until November 5, 2020. 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: 13708396.

About NuVasive
NuVasive, Inc. (NASDAQ: NUVA) is the leader in spine technology innovation, with a mission to transform surgery, advance care and change lives. The Company's less invasive, procedurally integrated surgical solutions are designed to deliver reproducible and clinically proven outcomes. The Company's comprehensive procedural portfolio includes access, implants and fixation systems, biologics, software 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 net sales, NuVasive has approximately 2,800 employees and operates in more than 50 countries serving surgeons, hospitals and patients. For more information, please visit www.nuvasive.com.

Forward-Looking Statements
NuVasive cautions you that statements included in this news release or made on the investor conference call referenced herein that are not a description of historical facts are forward-looking statements that involve risks, uncertainties, assumptions and other factors which, if they do not materialize or prove correct, could cause NuVasive's results to differ materially from historical results or those expressed or implied by such forward-looking statements. In addition, this news release contains selected financial results from the third quarter 2020. The Company's results for the third quarter 2020 are prior to the completion of review and audit procedures by the Company's external auditors and are subject to adjustment. The potential risks and uncertainties which contribute to the uncertain nature of these statements include, among others, the impact of the COVID-19 pandemic on the Company's business and financial results; the Company's ability to maintain operations to support its customers and patients in the near-term and to capitalize on future growth opportunities; risks associated with acceptance of the Company's surgical products and procedures by spine surgeons and hospitals, development and acceptance of new products or product enhancements, clinical and statistical verification of the benefits achieved via the use of NuVasive's products, the Company's ability to adequately manage inventory as it continues to release new products, its ability to recruit and retain management and key personnel, and the other risks and uncertainties more fully described in the Company's news releases and periodic filings with the Securities and Exchange Commission. NuVasive's public filings with the Securities and Exchange Commission are available at www.sec.gov. NuVasive assumes no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which it was made.

 

NuVasive, Inc. 

Consolidated Statements of Operations 

(in thousands, except per share data)












Three Months Ended September 30,


Nine Months Ended September 30,

(unaudited)


2020


2019


2020


2019

Net sales:









Products


$   267,571


$   260,173


$   685,922


$   765,377

Services


27,711


30,662


72,853


92,339

Total net sales


295,282


290,835


758,775


857,716

Cost of sales (excluding below amortization of intangible assets):









Products


66,049


57,164


182,067


169,263

Services


18,584


19,864


54,936


59,838

Total cost of sales


84,633


77,028


237,003


229,101

Gross profit


210,649


213,807


521,772


628,615

Operating expenses:









Selling, general and administrative


146,260


152,887


402,935


450,816

Research and development


20,404


18,143


58,067


53,271

Amortization of intangible assets


13,826


12,596


39,150


38,498

Purchase of in-process research and development


?


?


1,011


?

Business transition costs


3,107


(333)


2,541


5,146

Total operating expenses


183,597


183,293


503,704


547,731

Interest and other expense, net:









Interest income


271


620


1,306


1,356

Interest expense


(21,123)


(9,654)


(49,164)


(28,817)

Other income (expense), net


251


(5,696)


(18,819)


(6,053)

Total interest and other expense, net


(20,601)


(14,730)


(66,677)


(33,514)

Income (loss) before income taxes


6,451


15,784


(48,609)


47,370

Income tax (expense) benefit


(579)


(4,774)


9,764


(12,012)

Consolidated net income (loss)


$   5,872


$   11,010


$   (38,845)


$   35,358










Net income (loss) per share:









Basic


$   0.11


$   0.21


$   (0.76)


$   0.68

Diluted


$   0.11


$   0.21


$   (0.76)


$   0.67

Weighted average shares outstanding:









Basic


51,261


52,057


51,440


51,901

Diluted


51,805


53,056


51,440


52,667

 

NuVasive, Inc. 

Consolidated Balance Sheets 

(in thousands, except par values and share amounts) 








September 30, 2020


December 31, 2019

ASSETS


(Unaudited)



Current assets:





Cash and cash equivalents


$   774,544


$   213,034

Short-term marketable securities


207,605


?

Accounts receivable, net of allowances of $20,924 and $17,019, respectively


205,255


211,532

Inventory, net


305,634


312,419

Prepaid income taxes


13,322


10,434

Prepaid expenses and other current assets


15,576


16,917

Total current assets


1,521,936


764,336

Property and equipment, net


281,339


266,318

Intangible assets, net


165,499


201,092

Goodwill


558,985


561,064

Operating lease right-of-use assets


103,994


66,932

Deferred tax assets


9,291


9,162

Restricted cash and investments


1,494


1,494

Other assets


14,033


14,892

Total assets


$   2,656,571


$   1,885,290

LIABILITIES AND EQUITY





Current liabilities:





Accounts payable and accrued liabilities


$   112,392


$   97,160

Contingent consideration liabilities


7,275


15,727

Accrued payroll and related expenses


53,005


86,458

Operating lease liabilities


7,513


5,567

Income tax liabilities


760


2,005

Senior convertible notes


639,682


?

Total current liabilities


820,627


206,917

Long-term senior convertible notes


756,167


623,298

Deferred and income tax liabilities


8,236


14,655

Operating lease liabilities


113,105


73,153

Other long-term liabilities


48,734


52,060

Commitments and contingencies





Redeemable equity component of senior convertible notes


10,318


?

Stockholders' equity:





Preferred stock, $0.001 par value; 5,000,000 shares authorized, none outstanding


?


?

Common stock, $0.001 par value; 150,000,000 and 120,000,000 shares authorized at September 30, 2020 and December 31, 2019, respectively; 57,813,261 and 57,524,658 issued and outstanding at September 30, 2020 and December 31, 2019, respectively


62


62

Additional paid-in capital


1,533,409


1,429,854

Accumulated other comprehensive loss


(10,152)


(9,418)

Retained earnings


43,630


82,475

Treasury stock at cost; 6,540,526 shares and 5,379,536 shares at September 30, 2020 and December 31, 2019, respectively


(667,565)


(587,766)

Total equity


899,384


915,207

Total liabilities and equity


$   2,656,571


$   1,885,290

 

NuVasive, Inc. 

Consolidated Statements of Cash Flows 

(in thousands) 








Nine Months Ended September 30,

(unaudited)


2020


2019

Operating activities:





Consolidated net (loss) income


$   (38,845)


$   35,358

Adjustments to reconcile net (loss) income to net cash provided by operating activities:





Depreciation and amortization


106,097


101,245

Amortization of non-cash interest


33,714


15,853

Stock-based compensation


9,806


20,447

Reserves on current assets


44,927


11,539

Purchase of in-process research and development


1,011


?

Net loss on strategic investments


278


4,767

Net loss recognized on change in fair value of derivatives


12,301


?

Other non-cash adjustments


13,899


10,168

Deferred income taxes


(6,257)


9,810

Changes in operating assets and liabilities, net of effects from acquisitions:





Accounts receivable


2,388


(8,645)

Inventory


(37,523)


(45,571)

Prepaid expenses and other current assets


(1,620)


(2,499)

Accounts payable and accrued liabilities


10,176


6,593

Accrued payroll and related expenses


(33,529)


4,108

Income taxes


(3,625)


(2,588)

Net cash provided by operating activities


113,198


160,585

Investing activities:





Acquisitions and investments


?


(4,100)

Proceeds from other investments


1,132


?

Purchases of intangible assets


(3,810)


(7,501)

Purchases of property and equipment


(77,857)


(94,430)

Purchases of marketable securities


(207,695)


?

Net cash used in investing activities


(288,230)


(106,031)

Financing activities:





Proceeds from the issuance of common stock


3,871


3,888

Purchases of treasury stock


(79,680)


(13,343)

Payment of contingent consideration


(7,053)


(809)

Proceeds from issuance of convertible debt, net of issuance costs


873,890


?

Proceeds from sale of warrants


93,915


?

Purchases of convertible note hedges


(147,825)


?

Other financing activities


(1,405)


2,283

Net cash provided by (used in) financing activities


735,713


(7,981)

Effect of exchange rate changes on cash


829


(1,014)

Increase in cash, cash equivalents and restricted cash


561,510


45,559

Cash, cash equivalents and restricted cash at beginning of period


214,528


120,235

Cash, cash equivalents and restricted cash at end of period


$   776,038


$   165,794

 

SOURCE NuVasive, Inc.


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