PR Newswire | Nov 9, 2021 04:10PM EST

11/09 15:10 CST

NuVasive Announces Third Quarter 2021 Financial Results-- Company updates full-year 2021 financial guidance --- Pulse platform launches and completes first commercial cases --- Cervical portfolio delivers double-digit, year-over-year growth in U.S. led by Simplify Cervical Disc -- SAN DIEGO, Nov. 9, 2021

SAN DIEGO, Nov. 9, 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 September 30, 2021.

Third Quarter 2021

* Net sales decreased 8.3% to $270.8 million, on a reported and constant currency basis, compared to the prior year period; * GAAP operating margin of (2.4%); Non-GAAP operating margin of 11.2%; and * GAAP diluted loss per share of $0.42; Non-GAAP diluted earnings per share of $0.32.

"The third quarter presented unexpected challenges for elective surgical procedures due to the negative impact from the resurgence of COVID-19 and healthcare staffing shortages," said J. Christopher Barry, chief executive officer of NuVasive. "Despite these external factors, our strategy remains unchanged. The Company is well-positioned with multiple vectors of growth to create increased value for our stakeholders in 2022 and beyond. With the recent Pulse commercial launch and continued adoption of our C360 portfolio-highlighted by the Simplify Cervical Disc-I am confident in our ability to further transform surgery, advance care, and change patient lives around the world."

Third Quarter 2021 ResultsNuVasive reported third quarter 2021 total net sales of $270.8 million, an 8.3% decrease on a reported and constant currency basis, compared to $295.3 million in the prior year period. Third quarter 2021 total net sales were driven by new product introductions in the spine portfolio and International performance. These third quarter results were negatively impacted by the COVID-19 global pandemic, healthcare staffing shortages, and NuVasive Specialized Orthopedics product availability.

For the third quarter of 2021, GAAP gross profit was $182.2 million and $197.0 million on a non-GAAP basis, compared to GAAP and non-GAAP gross profit of $210.6 million in the prior year period. GAAP gross margin was 67.3% and 72.7% on a non-GAAP basis, compared to GAAP and non-GAAP gross margin of 71.3% in the prior year period.

For the third quarter of 2021, GAAP net loss was $21.6 million or diluted loss per share of $0.42, compared to GAAP net income of $5.9 million or diluted earnings per share of $0.11 in the prior year period. Non-GAAP net income was $16.9 million or diluted earnings per share of $0.32, compared to non-GAAP net income of $28.3 million or diluted earnings per share of $0.55 in the prior year period.

Cash, cash equivalents, and investments were $234.6 million as of September 30, 2021.

A full reconciliation of GAAP to non-GAAP financial measures can be found in the tables of this press release and in the Investor Relations section of the Company's website.

Updated Financial GuidanceThe Company lowered its full-year 2021 financial guidance based on year-to-date performance and as a result of the unanticipated variability in elective surgical volumes due to the impact of COVID-19 and healthcare staffing shortages:

2021 financial guidance range^*

Current guidance Prior guidance

Net sales $1.132 billion-$1.142 $1.190 billion-$1.210 billion billion

Non-GAAP operating 12.5%-12.9% 14.4%-14.9% margin

Non-GAAP diluted EPS $1.73-$1.83 $2.25-$2.35

*Prior guidance reflects the range provided July 28, 2021. Current guidance reflects the range provided November 9, 2021.

Please see our Reconciliation of Non-GAAP Financial Guidance included in this release for a reconciliation of the GAAP and non-GAAP financial measures.

Share Repurchase Program Extension and IncreaseThe NuVasive Board of Directors has approved a one-year extension of the Company's previously announced share repurchase program and increased the share repurchase authorization. As a result, the Company is now authorized to repurchase up to $100.0 million dollars of its common stock through December 31, 2022. Under this program, the Company may repurchase stock from time to time, in amounts, at prices, and at such times the Company deems appropriate, subject to market conditions, legal requirements, and other considerations.

Conference Call and WebcastThe Company will hold a conference call today, November 9, 2021, at 4:30 p.m. ET / 1:30 p.m. PT to discuss the results of its financial performance for the third quarter of 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 and supplemental financial information of the Company's third quarter financial results will be available on the Investor Relations page of the Company's website at www.nuvasive.com.

After the live event, the webcast will remain available on NuVasive's website for future reference. In addition, an audio replay of the call will be available until November 16, 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: 13722935.

About NuVasiveNuVasive, 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.

Reconciliation of GAAP to Non-GAAP InformationManagement 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 charges, non-cash purchase accounting adjustments, inventory charges associated with product withdrawals, 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 charges, non-cash purchase accounting adjustments, inventory charges associated with product withdrawals, 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 in the financial tables accompanying this press release are reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measure.

Forward-Looking StatementsNuVasive 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 2021, as well as projections for 2021 financial guidance and expectations regarding longer-term financial performance. The Company's results for the third quarter 2021 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 2021 financial guidance and expectations regarding longer-term financial performance 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, 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) 2021 2020 2021 2020

Net sales:

Products $ 247,061 $ 267,571 $ 759,275 $ 685,922

Services 23,775 27,711 77,638 72,853

Total net sales 270,836 295,282 836,913 758,775

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

Products 69,609 66,049 181,495 182,067

Services 19,043 18,584 57,248 54,936

Total cost of sales 88,652 84,633 238,743 237,003

Gross profit 182,184 210,649 598,170 521,772

Operating expenses:

Selling, general and administrative 146,056 146,260 449,407 402,935

Research and development 23,405 20,404 67,393 58,067

Amortization of intangible assets 14,805 13,826 43,230 39,150

Purchase of in-process research and development - - - 1,011

Business transition costs 4,551 3,107 21,688 2,541

Total operating expenses 188,817 183,597 581,718 503,704

Interest and other expense, net:

Interest income 23 271 119 1,306

Interest expense (4,320) (21,123) (16,738) (49,164)

Other (expense) income, net (13,082) 251 (24,339) (18,819)

Total interest and other expense, net (17,379) (20,601) (40,958) (66,677)

(Loss) income before income taxes (24,012) 6,451 (24,506) (48,609)

Income tax benefit (expense) 2,373 (579) (2,844) 9,764

Consolidated net (loss) income $ (21,639) $ 5,872 $ (27,350) $ (38,845)

Net (loss) income per share:

Basic $ (0.42) $ 0.11 $ (0.53) $ (0.76)

Diluted $ (0.42) $ 0.11 $ (0.53) $ (0.76)

Weighted average shares outstanding:

Basic 51,669 51,261 51,539 51,440

Diluted 51,669 51,805 51,539 51,440

NuVasive, Inc.

Consolidated Balance Sheets

(in thousands, except par value data)

September 30, 2021 December 31, 2020

ASSETS (Unaudited)

Current assets:

Cash and cash equivalents $ 234,578 $ 856,869

Short-term marketable securities - 173,145

Accounts receivable, net of allowances of $21,756 and $20,631, respectively 199,366 207,071

Inventory, net 311,414 300,623

Prepaid income taxes 5,623 4,727

Prepaid expenses and other current assets 19,380 19,749

Total current assets 770,361 1,562,184

Property and equipment, net 302,195 286,369

Intangible assets, net 256,416 152,264

Goodwill 633,121 559,553

Operating lease right-of-use assets 104,590 102,270

Deferred tax assets 48,851 15,755

Restricted cash and investments 1,494 1,494

Other assets 17,005 13,193

Total assets $ 2,134,033 $ 2,693,082

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable and accrued liabilities $ 110,796 $ 110,401

Contingent consideration liabilities 7,468 7,289

Accrued payroll and related expenses 65,741 63,421

Operating lease liabilities 9,627 7,875

Income tax liabilities 1,730 2,073

Senior convertible notes - 645,303

Total current liabilities 195,362 836,362

Long-term senior convertible notes 883,180 766,226

Deferred tax liabilities 2,683 2,807

Operating lease liabilities 113,128 111,634

Contingent consideration liabilities 93,584 29,752

Other long-term liabilities 21,900 22,686

Commitments and contingencies

Redeemable equity component of senior convertible notes - 4,697

Stockholders' equity:

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

Common stock, $0.001 par value; 150,000 shares authorized at September 30, 2021and December 31, 2020; 58,349 shares issued and 51,677 outstanding at September 63 6230, 2021;57,945 shares issued and 51,376 outstanding at December 31, 2020

Additional paid-in capital 1,425,242 1,550,001

Accumulated other comprehensive loss (7,309) (7,585)

Retained earnings 82,444 45,322

Treasury stock at cost; 6,672 shares and 6,569 shares at September 30, 2021 andDecember 31, 2020, (676,244) (668,882)respectively

Total equity 824,196 918,918

Total liabilities and equity $ 2,134,033 $ 2,693,082

NuVasive, Inc.

Consolidated Statements of Cash Flows

(in thousands)

Nine Months Ended September 30,

(unaudited) 2021 2020

Operating activities:

Consolidated net loss $ (27,350) $ (38,845)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization 111,818 106,097

Amortization of non-cash interest 6,672 33,714

Stock-based compensation 17,972 9,806

Reserves on current assets 25,418 44,927

Purchase of in-process research and development - 1,011

Net (gain) loss on strategic investments (2,101) 278

Net loss on change in fair value of derivatives - 12,301

Net loss from foreign currency adjustments 26,572 6,207

Other non-cash adjustments 15,396 7,692

Deferred income taxes (5,211) (6,257)

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

Accounts receivable 4,142 2,388

Inventory (29,266) (37,523)

Prepaid expenses and other current assets (367) (1,620)

Accounts payable and accrued liabilities (779) 10,176

Accrued payroll and related expenses 3,021 (33,529)

Income taxes (1,167) (3,625)

Net cash provided by operating activities 144,770 113,198

Investing activities:

Acquisition of Simplify Medical, net of cash acquired (149,463) -

Payment of contingent consideration for Simplify Medical (45,850) -

Acquisitions and investments (500) 1,132

Purchases of intangible assets (1,200) (3,810)

Purchases of property and equipment (85,630) (77,857)

Purchases of marketable securities - (207,695)

Proceeds from sales of marketable securities 127,023 -

Proceeds from maturities of marketable securities 46,000 -

Other investing activities (819) -

Net cash used in investing activities (110,439) (288,230)

Financing activities:

Proceeds from the issuance of common stock 3,803 3,871

Purchases of treasury stock (7,309) (79,680)

Payment of contingent consideration (3) (7,053)

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)

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

Other financing activities (1,038) (1,405)

Net cash (used in) provided by financing activities (653,973) 735,713

Effect of exchange rate changes on cash (2,649) 829

(Decrease) increase in cash, cash equivalents and restricted cash (622,291) 561,510

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

Cash, cash equivalents and restricted cash at end of period $ 236,072 $ 776,038

For the Three Months Ended September 30, 2021

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited - in thousands, except per share data)

Gross Profit Operating (Loss) Profit Net (Loss) Income Diluted EPS Diluted WASO^8 Net (Loss) to Adjusted EBITDA

Reported GAAP $ 182,184 $ (6,633) $ (21,639) $ (0.42) 51,669 $ (21,639)

% of net sales 67.3% (2.4%)

Non-cash purchase accounting adjustments on acquisitions^1 557 557 557 557

Inventory charges associated with product withdrawals^2 14,215 14,215 14,215 14,215

Amortization of intangible assets 14,805 14,805

Litigation related expenses and settlements^3 762 762 762

Business transition costs^4 4,551 4,551 4,551

European medical device regulation^5 2,132 2,132 2,132

Non-cash acquisition-related foreign currency impacts^6 10,280 10,280

Tax effect of adjustments^7 (8,775)

Interest expense/(income), net 4,297

Income tax benefit (2,373)

Depreciation and amortization 37,864

Non-cash stock-based compensation 4,965

Adjusted Non-GAAP $ 196,956 $ 30,389 $ 16,888 $ 0.32 52,268 $ 55,611

% of net sales 72.7% 11.2% 20.5%

^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.

^2Represents charges for inventory write-offs associated with the Company's product withdrawals. During the three months ended September 30, 2021, the Company made a determination to withdraw certain products marketed and sold by its wholly-owned subsidiary, NuVasive Specialized Orthopedics.

^3Represents expenses associated with certain ongoing litigation 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.

^5Represents costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.

^6Represents non-cash adjustments to acquisition-related intercompany balances and contingent consideration liabilities held in a foreign currency.

^7Represents the impact from tax affecting the adjustments above at their statutory tax rate.

^8Adjusted 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, 2021

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 WASO^8 Net (Loss) to Adjusted EBITDA

Reported GAAP $ 598,170 $ 16,452 $ (27,350) $ (0.53) 51,539 $ (27,350)

% of net sales 71.5% 2.0%

Non-cash purchase accounting adjustments on acquisitions^1 1,299 1,299 1,299 1,299

Inventory charges associated with product withdrawals^2 14,215 14,215 14,215 14,215

Amortization of intangible assets 43,230 43,230

Litigation related expenses and settlements^3 4,010 4,010 4,010

Business transition costs^4 21,688 21,688 21,688

European medical device regulation^5 5,696 5,696 5,696

Net gain on strategic investments (2,101) (2,101)

Non-cash acquisition-related foreign currency impacts^6 23,673 23,673

Tax effect of adjustments^7 (17,269)

Interest expense/(income), net 16,619

Income tax expense 2,844

Depreciation and amortization 111,818

Non-cash stock-based compensation 17,972

Adjusted Non-GAAP $ 613,684 $ 106,590 $ 67,091 $ 1.29 52,184 $ 190,383

% of net sales 73.3% 12.7% 22.7%

^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.

^2Represents charges for inventory write-offs associated with the Company's product withdrawals. During the three months ended September 30, 2021, the Company made a determination to withdraw certain products marketed and sold by its wholly-owned subsidiary, NuVasive Specialized Orthopedics.

^3Represents expenses associated with certain ongoing litigation 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.

^5Represents costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.

^6Represents non-cash adjustments to acquisition-related intercompany balances and contingent consideration liabilities held in a foreign currency.

^7Represents the impact from tax affecting the adjustments above at their statutory tax rate.

^8Adjusted 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, 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 WASO^5 Net Income to Adjusted EBITDA

Reported GAAP $ 210,649 $ 27,052 $ 5,872 $ 0.11 51,805 $ 5,872

% of net sales 71.3% 9.2%

Amortization of intangible assets 13,826 13,826

Litigation related expenses and settlements^1 1,396 1,396 1,396

Business transition costs^2 3,107 3,107 3,107

European medical device regulation^3 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 adjustments^4 (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 net sales 71.3% 15.8% 25.5%

^1Represents expenses associated with certain ongoing litigation 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.

^3Represents costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.

^4Represents the impact from tax affecting the adjustments above at their statutory tax rate.

^5Adjusted 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, 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 WASO^7 Net (Loss) to Adjusted EBITDA

Reported GAAP $ 521,772 $ 18,068 $ (38,845) $ (0.76) 51,440 $ (38,845)

% of net sales 68.8% 2.4%

Amortization of intangible assets 39,150 39,150

Litigation related expenses and settlements^1 5,686 5,686 5,686

Business transition costs^2 2,541 2,541 2,541

Purchase of in-process research and development^3 1,011 1,011 1,011

European medical device regulation^4 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 derivatives^5 12,301 12,301

Tax effect of adjustments^6 (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 net sales 68.8% 9.3% 18.6%

^1Represents expenses associated with certain ongoing litigation 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.

^3Purchase of an in-process research and development asset which had no future alternative use.

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

^5Represents the net change in fair value of the Company's derivative asset and liability associated with the 2023 Notes.

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

^7Adjusted 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.

Full-Year 2021 Financial Guidance

Reconciliation of GAAP to Non-GAAP EPS

2021 Guidance Range^1,2

2020 Actuals^1 Prior Current

GAAP diluted earnings (loss) per share $(0.72) $ 0.54 - 0.64 $ (0.40) - (0.30)

Impact of change to diluted share count^3 0.01 0.00 - 0.05 0.00 - 0.05

Amortization of intangible assets 0.99 1.09 - 1.14 1.09 - 1.14

Non-cash interest expense on convertible notes^4 0.79 - -

European medical device regulation^5 0.15 0.17 - 0.22 0.17 - 0.22

Inventory charges associated with product withdrawals^6 - - 0.27

Other^7 0.60 0.72 - 0.77 0.95 - 1.00

Tax effect of adjustments^8 (0.59) (0.38) - (0.33) (0.47) - (0.42)

Non-GAAP diluted earnings per share $1.23 $ 2.25 - 2.35 $ 1.73 - 1.83

^1Data has been intentionally rounded and may not sum.

^2Prior guidance reflects the range provided July 28, 2021. Current guidance reflects the range provided November 9, 2021.

^3Adjusted 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.

^4Discontinuation of debt discount accretion for our Senior Convertible Notes resulting from adopting ASU 2020-06 on January 1, 2021.

^5Represents costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.

^6Represents charges for inventory write-offs associated with the Company's product withdrawals. During the three months ended September 30, 2021, the Company made a determination to withdraw certain products marketed and sold by its wholly-owned subsidiary, NuVasive Specialized Orthopedics.

^7Include costs primarily associated with litigation related expenses and settlements, non-cash acquisition-related foreign currency impacts, net loss recognized on change in fair value of derivatives and business transition costs. See Reconciliation of GAAP to Non-GAAP Financial Measures tables within respective earnings releases for further detail.

^8Represents the impact from tax affecting the adjustments above at their statutory tax rate.

Full-Year 2021 Financial Guidance

Reconciliation of GAAP to non-GAAP Operating Margin %

2021 Guidance Range^1,2

2020 Actuals^1 Prior Current

GAAP Operating Margin % 3.7% 6.5% - 7.0% 2.8% - 3.2%

Amortization of intangible assets 4.9% 4.7% - 4.9% 5.0% - 5.2%

European medical device regulation^3 0.7% 0.7% - 0.9% 0.7% - 0.9%

Inventory charges associated with product withdrawals^4 - - 1.2%

Other^5 1.8% 2.2% - 2.4% 2.5% - 2.7%

Non-GAAP Operating Margin % 11.1% 14.4% - 14.9% 12.5% - 12.9%

^1Data has been intentionally rounded and may not sum.

^2Prior guidance reflects the range provided July 28, 2021. Current guidance reflects the range provided November 9, 2021.

^3Represents costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.

^4Represents charges for inventory write-offs associated with the Company's product withdrawals. During the three months ended September 30, 2021, the Company made a determination to withdraw certain products marketed and sold by its wholly-owned subsidiary, NuVasive Specialized Orthopedics.

^5Include costs primarily associated with litigation related expenses and settlements, purchase of in-process research and development, and business transition costs. See Reconciliation of GAAP to Non-GAAP Financial Measures tables within respective earnings releases for further detail.

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SOURCE NuVasive, Inc.