PR Newswire | May 5, 2021 04:03PM EDT

05/05 15:03 CDT

NuVasive Announces First Quarter 2021 Financial Results-- Net sales increase driven by U.S. procedural volume improvement throughout the quarter and strong international growth --- Simplify Cervical Artificial Disc receives FDA approval for two-level cervical total disc replacement --- R&D investment increase year over year to advance spine procedural segments and enabling technology roadmap -- SAN DIEGO, May 5, 2021

SAN DIEGO, May 5, 2021 /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 March 31, 2021.

First Quarter 2021 Highlights

* Net sales increased 4.4% to $271.2 million, or 3.1% on a constant currency basis; * GAAP operating margin of 4.5%; Non-GAAP operating margin of 13.0%; and * GAAP diluted loss per share of $0.15; Non-GAAP diluted earnings per share of $0.37.

"NuVasive delivered year-over-year growth in the U.S. and international markets, and I am encouraged by the continued recovery of elective surgical procedures and momentum in the business," said J. Christopher Barry, chief executive officer of NuVasive. "Our commitment to R&D investment furthers our ability to deliver the strongest innovation pipeline in spine that drives proceduralization across all spine segments. The positive surgeon feedback on NuVasive's acquisition of Simplify Medical, the Simplify Disc's recent FDA approval for two-level cervical total disc replacement, and the upcoming Pulse platform launch reinforces our dedication to outcome driven innovation that benefits the surgeon, provider, and-most importantly-the patient."

A full reconciliation of GAAP to non-GAAP financial measures can be found in the tables of this news release.

First Quarter 2021 Results

NuVasive reported first quarter 2021 total net sales of $271.2 million, a 4.4% increase compared to $259.9 million for the first quarter 2020. On a constant currency basis, first quarter 2021 total net sales increased 3.1% compared to the same period last year. The increase in net sales was a result of month-over-month improvement in U.S. procedural volumes and low double-digit international growth on a reported basis as the impact of COVID-19 on elective surgeries continues to lessen.

For the first quarter 2021, GAAP and non-GAAP gross profit was $199.4 million and $199.6 million, respectively, and GAAP and non-GAAP gross margin was 73.5% and 73.6%, respectively. These results compared to GAAP and non-GAAP gross profit of $188.0 million and GAAP and non-GAAP gross margin of 72.3% for the first quarter 2020. GAAP and non-GAAP gross margin improvement was a result of the continued operational efficiencies gained throughout the NuVasive supply chain.

The Company reported GAAP net loss of $7.5 million, or diluted loss per share of $0.15, for the first quarter 2021 compared to GAAP net income of $5.3 million, or diluted earnings per share of $0.10, for the first quarter 2020. On a non-GAAP basis, the Company reported net income of $19.0 million, or diluted earnings per share of $0.37, for the first quarter 2021 compared to non-GAAP net income of $25.4 million, or diluted earnings per share of $0.48, for the first quarter 2020.

Cash, cash equivalents, and investments were $233.9 million as of March 31, 2021. Within the quarter, the Company retired $650 million of convertible debt at maturity and funded the $150 million upfront payment for the Simplify Medical acquisition utilizing cash on hand.

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 gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating margin, non-GAAP net income (loss), and non-GAAP diluted earnings (loss) per share. These non-GAAP financial measures exclude amortization of intangible assets, business transition costs, purchased in-process research and development, one-time restructuring, non-cash purchase accounting adjustments, certain foreign currency impacts and related items in connection with acquisitions, investments and divestitures, 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, non-cash interest expense (excluding debt issuance cost) and other significant one-time items. 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, non-cash purchase accounting adjustments, certain foreign currency impacts and related items in connection with acquisitions, investments and divestitures, 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 March 31, 2021

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited - in thousands, except per share data)

Gross Profit Operating Net (Loss) Diluted Diluted Net (Loss) to Profit Income EPS WASO^7 Adjusted EBITDA

Reported GAAP $ 199,438 $ 12,339 $ (7,510) $ (0.15) 51,379 $ (7,510)

% of net sales 73.5% 4.5%

Non-cash purchase accounting 186 186 186 186 adjustments on acquisitions^1

Amortization of 13,337 13,337 intangible assets

Litigation related expenses and 1,961 1,961 1,961 settlements^2

Business transition 5,584 5,584 5,584 costs^3

European medical 1,875 1,875 1,875 device regulation^4

Non-cash acquisition-related 9,848 9,848 foreign currency impacts^5

Tax effect of (6,251) adjustments^6

Interest expense/ 7,943 (income), net

Income tax benefit (620)

Depreciation and 36,432 amortization

Non-cash stock-based 7,709 compensation

Adjusted Non-GAAP $ 199,624 $ 35,282 $ 19,030 $ 0.37 52,069 $ 63,408

% of net sales 73.6% 13.0% 23.4%

Represents costs associated with non-cash purchase accounting adjustments, 1 such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.

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

Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit 3 costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.

Represents costs specific to updating our quality system, product labeling, 4 asset write-offs and product remanufacturing to comply with European medical device regulation.

Represents non-cash adjustments to acquisition-related intercompany 5 balances and contingent consideration liabilities held in a foreign currency.

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

Adjusted non-GAAP diluted WASO excludes the impact of dilutive convertible 7 notes for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.

For the Three Months Ended March 31, 2020

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited - in thousands, except per share data)

Gross Profit Operating Net Income Diluted Diluted Net Income to Profit EPS WASO^5 Adjusted EBITDA

Reported $ 188,016 $ 28,319 $ 5,298 $ 0.10 53,727 $ 5,298 GAAP

% of net 72.3% 10.9% sales

Amortization of 12,649 12,649 intangible assets

Litigation related expenses and 3,103 3,103 3,103 settlements^ 1

Business transition (1,440) (1,440) (1,440) costs^2

European medical 1,247 1,247 1,247 device regulation^3

Non-cash interest expense on 5,724 convertible notes

Net loss on strategic 1,411 1,411 investments

Tax effect of (2,562) adjustments^ 4

Interest expense/ 10,786 (income), net

Income tax 4,827 expense

Depreciation and 34,972 amortization

Non-cash stock-based (2,858) compensation

Adjusted $ 188,016 $ 43,878 $ 25,430 $ 0.48 52,532 $ 57,346 Non-GAAP

% of net 72.3% 16.9% 22.1% sales

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

Costs related to acquisition, integration and business transition activities 2 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.

Represents costs specific to updating our quality system, product labeling, 3 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.

Adjusted non-GAAP diluted WASO excludes the impact of dilutive convertible 5 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 first quarter 2021. 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 June 5, 2021. In addition, a telephone replay of the call will be available until May 12, 2021. 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: 13718015.

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 surgical access instruments, spinal implants, fixation systems, biologics, software for surgical planning, navigation and imaging solutions, magnetically adjustable implant systems for spine and orthopedics, and intraoperative neuromonitoring technology and service offerings. With more than $1 billion in net sales, NuVasive has approximately 2,700 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 first quarter 2021. The Company's results for the first quarter 2021 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 March 31,

(unaudited) 2021 2020

Net sales:

Products $ 245,451 $ 234,687

Services 25,798 25,194

Total net sales 271,249 259,881

Cost of sales (excluding below amortization ofintangible assets):

Products 53,302 51,645

Services 18,509 20,220

Total cost of sales 71,811 71,865

Gross profit 199,438 188,016

Operating expenses:

Selling, general and administrative 145,954 130,231

Research and development 22,224 18,257

Amortization of intangible assets 13,337 12,649

Business transition costs 5,584 (1,440)

Total operating expenses 187,099 159,697

Interest and other expense, net:

Interest income 87 731

Interest expense (8,030) (11,517)

Other (expense) income, net (12,526) (7,408)

Total interest and other expense, net (20,469) (18,194)

(Loss) income before income taxes (8,130) 10,125

Income tax benefit (expense) 620 (4,827)

Consolidated net (loss) income $ $ (7,510) 5,298

Net (loss) income per share:

Basic $ $ (0.15) 0.10

Diluted $ $ (0.15) 0.10

Weighted average shares outstanding:

Basic 51,379 51,837

Diluted 51,379 53,727

NuVasive, Inc.

Consolidated Balance Sheets

(in thousands, except par value data)

March 31, 2021 December 31, 2020

ASSETS (Unaudited)

Current assets:

Cash and cash equivalents $ 233,857 $ 856,869

Short-term marketable securities - 173,145

Accounts receivable, net ofallowances of $22,011 and 205,026 207,071$20,631, respectively

Inventory, net 315,749 300,623

Prepaid income taxes 5,033 4,727

Prepaid expenses and other 21,895 19,749current assets

Total current assets 781,560 1,562,184

Property and equipment, net 286,156 286,369

Intangible assets, net 296,514 152,264

Goodwill 636,422 559,553

Operating lease right-of-use 101,980 102,270assets

Deferred tax assets 47,301 15,755

Restricted cash and investments 1,494 1,494

Other assets 13,358 13,193

Total assets $ 2,164,785 $ 2,693,082

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable and accrued $ 106,576 $ 110,401liabilities

Contingent consideration 50,166 7,289liabilities

Accrued payroll and related 58,620 63,421expenses

Operating lease liabilities 8,288 7,875

Income tax liabilities 1,226 2,073

Senior convertible notes - 645,303

Total current liabilities 224,876 836,362

Long-term senior convertible 879,473 766,226notes

Deferred tax liabilities 3,042 2,807

Operating lease liabilities 111,200 111,634

Contingent consideration 91,000 29,752liabilities

Other long-term liabilities 19,807 22,686

Commitments and contingencies

Redeemable equity component of - 4,697senior convertible notes

Stockholders' equity:

Preferred stock, $0.001 parvalue; 5,000 shares authorized, - -none outstanding

Common stock, $0.001 par value;150,000 shares authorized atMarch 31, 2021 and December 31,2020; 57,949 shares issued and 62 6251,379 outstanding at March 31,2021; 57,945 shares issued and51,376 outstanding at December31, 2020

Additional paid-in capital 1,411,170 1,550,001

Accumulated other comprehensive (9,139) (7,585)loss

Retained earnings 102,284 45,322

Treasury stock at cost;6,570shares and 6,569 shares at (668,990) (668,882)March 31, 2021 and December 31,2020, respectively

Total equity 835,387 918,918

Total liabilities and equity $ 2,164,785 $ 2,693,082

NuVasive, Inc.

Consolidated Statements of Cash Flows

(in thousands)

Three Months Ended March 31,

(unaudited) 2021 2020

Operating activities:

Consolidated net (loss) income $ (7,510) $ 5,298

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

Depreciation and amortization 36,432 34,972

Amortization of non-cash interest 2,660 7,143

Stock-based compensation 7,709 (2,858)

Reserves on current assets 4,002 5,232

Net loss on strategic investments - 1,411

Net loss from foreign currency adjustments 12,547 5,858

Other non-cash adjustments 6,397 (455)

Deferred income taxes (3,535) 9,105

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

Accounts receivable (1,544) 22,409

Inventory (12,464) (21,135)

Prepaid expenses and other current assets (2,057) (2,042)

Accounts payable and accrued liabilities (5,663) (5,271)

Accrued payroll and related expenses (4,271) (45,927)

Income taxes (1,064) (8,515)

Net cash provided by operating activities 31,639 5,225

Investing activities:

Acquisition of Simplify Medical, net of cash (149,408) -acquired

Purchases of intangible assets (1,200) (2,490)

Purchases of property and equipment (25,070) (28,116)

Proceeds from sales and maturities of 173,023 -marketable securities

Net cash used in investing activities (2,655) (30,606)

Financing activities:

Purchases of treasury stock (55) (78,818)

Payment of contingent consideration (3) (346)

Proceeds from issuance of convertible debt, - 437,686net of issuance costs

Proceeds from sale of warrants - 47,070

Purchases of convertible note hedges - (78,300)

Payments upon settlement of senior convertible (649,426) -notes

Other financing activities (341) (1,233)

Net cash (used in) provided by financing (649,825) 326,059activities

Effect of exchange rate changes on cash (2,171) (1,736)

(Decrease) increase in cash, cash equivalents (623,012) 298,942and restricted cash

Cash, cash equivalents and restricted cash at 858,363 214,528beginning of period

Cash, cash equivalents and restricted cash at $ 235,351 $ 513,470end of period

View original content to download multimedia: http://www.prnewswire.com/news-releases/nuvasive-announces-first-quarter-2021-financial-results-301284663.html

SOURCE NuVasive, Inc.