NUVA Nuvasive Inc

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 24, 2015

 

 

NUVASIVE, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		000-50744		33-0768598
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

7475 Lusk Boulevard, San Diego, California 92121

(Address of principal executive offices) (Zip Code)

(858) 909-1800

(Registrant’s telephone number, including area code)

n/a

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02

Results of Operations and Financial Condition.

On February 24, 2015, NuVasive, Inc. (“NuVasive”) issued a press release announcing its financial results for the quarter and full year ended December 31, 2014. A copy of this press release is furnished as Exhibit 99.1 hereto.

 

Item 8.01

Other Events.

On February 24, 2015, NuVasive issued a press release announcing its implementation of an updated non-GAAP definition in the first quarter 2015 along with a related presentation. A copy of this press release is furnished as Exhibit 99.2 hereto and a copy of the related presentation is furnished as Exhibit 99.3 hereto.

The information contained in this Current Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as may be expressly set forth by specific reference in such a filing.

 

Item 9.01

Financial Statements and Exhibits.

 

(d)

Exhibits.

 

99.1		Press release issued by NuVasive, Inc. on February 24, 2015 announcing its financial results for the quarter and full year ended December 31, 2014.
99.2		Press release issued by NuVasive, Inc. on February 24, 2015 announcing its implementation of an updated non-GAAP definition.
99.3		Presentation regarding updated non-GAAP definition issued by NuVasive, Inc. on February 24, 2015.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: February 24, 2015

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EXHIBIT INDEX

 

Exhibit Number		Description
99.1		Press release issued by NuVasive, Inc. on February 24, 2015 announcing its financial results for the quarter and full year ended December 31, 2014.
99.2		Press release issued by NuVasive, Inc. on February 24, 2015 announcing its implementation of an updated non-GAAP definition.
99.3		Presentation regarding updated non-GAAP definition issued by NuVasive, Inc. on February 24, 2015.

Exhibit 99.1

 

NEWS RELEASE

Investor/Media Contact:

Stacy Roughan

NuVasive, Inc.

1-858-909-1812

sroughan@nuvasive.com

NUVASIVE REPORTS FOURTH QUARTER AND FULL YEAR 2014 FINANCIAL RESULTS

Company Provides 2015 Financial Performance Guidance Reflective of

Updated Non-GAAP Definition

Fourth Quarter 2014 Highlights:

 

•

Revenue increased 7.1% to $204.3 million;

 

•

Non-GAAP operating profit margin of 20.3%; GAAP operating profit margin of 12.0%;

 

•

Non-GAAP net income of $20.0 million, or $0.39 per share; GAAP net income of $7.5 million, or $0.15 per share; and

 

•

Free cash flow of $6.3 million

Full Year 2014 Highlights:

 

•

Revenue increased 11.3% to $762.4 million;

 

•

Non-GAAP operating profit margin of 16.7%; GAAP operating profit margin of 2.4%;

 

•

Non-GAAP net income of $57.5 million, or $1.16 per share; GAAP net loss of ($16.7) million, or $(0.36) per share; and

 

•

Free cash flow of $57.4 million

SAN DIEGO, February 24, 2015 - NuVasive, Inc. (Nasdaq: NUVA) (“NuVasive” or the “Company”), a medical device company focused on developing minimally disruptive surgical products and procedures for the spine, today announced financial results for the quarter ended December 31, 2014.

“We are pleased to report strong results for 2014 that include double-digit revenue growth and operating margin expansion well above our target. These results clearly demonstrate our ability to execute against our global market share-taking strategy and deliver on our commitment to increase operating efficiencies across the business. Additionally, in 2014, we generated strong free cash flow approaching $60 million and ended the year with more than $400 million in cash, which greatly adds to our financial flexibility,” said Alex Lukianov, Chairman and Chief Executive Officer of NuVasive. “We have the right strategy in place with an exceptionally strong portfolio and innovation pipeline, which positions NuVasive well as we look to drive continued strong momentum in our business and enhance shareholder value throughout 2015 and beyond.”

 

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

Fourth Quarter and Full Year 2014 Results

NuVasive reported fourth quarter 2014 total revenue of $204.3 million, a 7.1% increase compared to $190.8 million for the fourth quarter 2013. Full year 2014 total revenue was $762.4 million, an increase of 11.3%, compared to the $685.2 million reported for the full year 2013. On a constant currency basis, full year 2014 total revenue increased 11.6% compared to the full year 2013.

GAAP gross profit for the fourth quarter 2014 was $157.8 million and gross margin was 77.2% compared to a gross profit of $141.5 million and a gross margin of 74.1% for the fourth quarter 2013. GAAP gross profit for the full year 2014 was $580.1 million and gross margin was 76.1% compared to a gross profit of $504.7 million and a gross margin of 73.7% for the full year 2013.

Total GAAP operating expenses for the fourth quarter 2014 were $133.3 million compared to $126.4 million in the fourth quarter 2013. Total GAAP operating expenses for the full year 2014 were $561.9 million compared to $471.6 million for the full year 2013.

The Company reported a GAAP net income of $7.5 million, or $0.15 per share, for the fourth quarter 2014 compared to a GAAP net income of $6.0 million, or $0.13 per share, for the fourth quarter 2013. The Company reported a GAAP net loss of $(16.7) million, or $(0.36) per share for the full year 2014 compared to a GAAP net income of $7.9 million, or $0.17 per share, for the full year 2013.

On a non-GAAP basis, the Company reported net income of $20.0 million, or $0.39 per share, for the fourth quarter 2014 compared to net income of $17.8 million, or $0.37 per share, for the fourth quarter 2013. The Non-GAAP earnings per share calculations for the fourth quarter 2014 exclude the following amounts pre-tax: (i) non-cash stock-based compensation of $8.9 million; (ii) certain intellectual property litigation expenses of $2.7 million; (iii) amortization of intangible assets of $3.0 million; (iv) leasehold related charges of $1.5 million; (v) one-time and acquisition related items of $0.9 million; and (vi) non-cash interest expense on convertible notes of $3.8 million.

On a non-GAAP basis, the Company reported net income of $57.5 million, or $1.16 per share, for the full year 2014 compared to net income of $57.4 million, or $1.23 per share, for the full year 2013. The Non-GAAP earnings per share calculations for the full year 2014 exclude the following amounts pre-tax: (i) non-cash stock-based compensation of $33.7 million; (ii) litigation liability expense of $30.0 million; (iii) certain intellectual property litigation expenses of $6.5 million; (iv) amortization of intangible assets of $13.6 million; (v) intangible asset impairment charge of $10.7 million; (vi) leasehold related charges of $10.7 million; (vii) one-time and acquisition related items of $3.8 million; and (viii) non-cash interest expense on convertible notes of $14.7 million.

Cash, cash equivalents and short and long-term marketable securities were approximately $405.8 million at December 31, 2014. The Company generated $19.1 million in cash flows from operations and invested $12.7 million in capital expenditures, yielding $6.3 million for the fourth quarter 2014 in free cash flow, defined as operating cash flow less capital expenditures. The Company generated $115.5 million in cash flows from operations and invested $58.2 million in capital expenditures, yielding $57.4 million for the full year 2014 in free cash flow, defined as operating cash flow less capital expenditures.

 

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Updated Non-GAAP Definition

The Company announced in a separate news release today that it would be implementing an updated non-GAAP definition beginning in the first quarter 2015. Under the updated definition, NuVasive is redefining its non-GAAP cost of goods sold, gross margin, operating expenses, operating margin and earnings per share financial measures to include the impact of non-cash stock-based compensation and certain intellectual property related litigation expenses, both of which had previously been excluded in the Company’s calculation of these non-GAAP financial measures.

The updated non-GAAP definition will not impact reported revenue results. However, the updated non-GAAP definition will impact NuVasive’s go-forward non-GAAP operating results, presenting an updated basis from which the Company will execute its strategy to deliver annual operating improvements as it continues to increase scale and profitability. To ensure that operating results can be evaluated on a comparable basis, historic non-GAAP reported operating results have been adjusted to match this updated go-forward definition. The news release detailing this change, along with supplemental financial information, can be found on the Investor Relations page of the Company’s website at www.nuvasive.com.

Annual Guidance for 2015

The Company provided the following projections for its full year 2015 guidance, which is based on its updated non-GAAP definition in the first quarter 2015. The 2014 results listed below are also adjusted to reflect the updated non-GAAP definition and, therefore, the non-GAAP earnings per share and operating margin results do not match those stated earlier in the news release under the section entitled “Fourth Quarter and Full Year 2014 Results.”

 

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Revenue of approximately $810.0 million, which includes an approximate $10.0 million of currency headwinds, or 6.0% growth compared to 2014 revenue of $762.4 million; on a constant currency basis revenue is expected to grow 7.5%;

 

•

GAAP earnings per share of approximately $0.67 compared to 2014 GAAP loss per share of ($0.36);

 

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Non-GAAP earnings per share of approximately $1.10, an increase of approximately 64.0% compared to non-GAAP earnings of $0.67 for 2014;

 

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Non-GAAP operating margin of approximately 14.4%, an increase of approximately 300 basis points compared to 11.4% for 2014; this is an increase of 50 basis points from previous expectations of an approximate 250 basis point improvement expected in 2015;

 

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Non-GAAP EBITDA margin of approximately 24.6%, an increase of approximately 270 basis points compared to 21.9% for 2014;

 

•

GAAP effective tax expense rate of approximately 49%; and

 

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Non-GAAP effective tax expense rate of approximately 46%.

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.

 

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Reconciliation of Full Year EPS Guidance

 

		2014 Actuals 1				2015 Guidance 2
GAAP earnings (loss) per share		$	(0.36	)		$	0.67
Impact of change from basic to diluted share count			0.02				—
Impact of treasury method on convertible notes 5			—				0.02
Adjusted GAAP earnings (loss) per share, adjusted to diluted share count		$	(0.34	)		$	0.69
Litigation liability expense			0.36				—
Amortization of intangible assets			0.16				0.14
Non-cash interest expense on convertible notes			0.18				0.19
Intangible asset impairment			0.13				—
Leasehold related charges			0.13				0.03
One-time and acquisition related items 3			0.05				0.05
Updated non-GAAP earnings per share 4		$	0.67			$	1.10
GAAP Weighted shares outstanding - basic			46,715				48,593
GAAP Weighted shares outstanding - diluted			46,715				52,607
Non-GAAP Weighted shares outstanding - diluted 5			49,676				51,431

 

1	Effective tax expense rate of ~56% applied to GAAP earnings and ~40% applied to Non-GAAP adjustments

2	Effective tax expense rate of ~49% applied to GAAP earnings and ~40% applied to Non-GAAP adjustments

3	Acquisition related items include expenses associated with M&A related activity and as incurred

4	Includes non-cash stock based compensation and certain intellectual property litigation expenses

5	Excludes the impact of share dilution of the convertible bond for which the Company has a hedge in place but is considered anti-dilutive under US GAAP in weighted average shares outstanding

 

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Reconciliation of Updated non-GAAP Operating Margin %

 

(in thousands, except %)		2014 Actuals				2015 Guidance
Updated non-GAAP Gross Margin % [A]			76.1	%			77.6	%
GAAP Gross Margin [D]			76.1	%			77.6	%
Updated non-GAAP Sales, Marketing & Administrative Expense [B]			59.9	%			58.2	%
Leasehold related charges			1.4	%			0.4	%
One-time and acquisition related items 1			0.5	%			0.5	%
GAAP Sales, Marketing & Administrative Expense [E]			61.8	%			59.1	%
Updated non-GAAP Research & Development Expense [C]			4.8	%			5.0	%
GAAP Research & Development Expense [F]			4.8	%			5.0	%
Litigation liability expense [G]			3.9	%			—
Intangible asset impairment [H]			1.4	%			—
Amortization of intangible assets [I]			1.8	%			1.5	%
Updated non-GAAP Operating Margin % [A-B-C] 2			11.4	%			14.4	%
GAAP Operating Margin % [D-E-F-G-H-I]			2.4	%			12.0	%

 

1	Acquisition related items include expenses associated with M&A related activity and as incurred

2	Includes non-cash stock based compensation and certain intellectual property litigation expenses

 

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Reconciliation of EBITDA %

 

(in thousands, except %)		2014 Actuals				2015 Guidance
Net Income / (Loss)			-2.2	%			4.4	%
Interest (income) / expense, net			3.5	%			3.5	%
Provision for income taxes			0.8	%			4.1	%
Depreciation and amortization			8.1	%			7.5	%
EBITDA			10.3	%			19.5	%
Non-cash stock based compensation			4.4	%			4.2	%
Leasehold related charges			1.4	%			0.4	%
Litigation liability expense			3.9	%			—
Intangible asset impairment			1.4	%			—
One-time and acquisition related items 1			0.5	%			0.5	%
Adjusted EBITDA			21.9	%			24.6	%

 

1	Acquisition related items include expenses associated with M&A related activity and as incurred

Reconciliation of Non-GAAP Information

Management uses certain non-GAAP financial measures such as non-GAAP earnings per share, non-GAAP gross margin, non-GAAP operating expenses, and non-GAAP operating margin, which, through December 31, 2014 results, exclude non-cash stock-based compensation, certain intellectual property litigation expenses, amortization of intangible assets, leasehold related charges, certain acquisition related items, non-cash interest expense on convertible notes, a litigation liability expense, an out-of-period royalty expense charge, and an intangible asset impairment charge. Beginning on January 1, 2015, management has updated the above definition of non-GAAP to include the impact of non-cash stock-based compensation as well as certain intellectual property expenses. Both measures are discussed in this earnings release, with the definition of the Company’s non-GAAP financial measures through the end of 2014 referred to as “non-GAAP” while the 2015 and beyond definition is referred to as “updated non-GAAP.”

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, a leasehold related charge, acquisition related items and an intangible asset impairment charge. 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

 

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companies. Set forth below are reconciliations of the non-GAAP financial measures to the comparable GAAP financial measure.

Reconciliation of Fourth Quarter 2014 Results

 

(in thousands, except per share data)		Pre-Tax Adjustments				Net of Tax				Earnings Per Share
GAAP net income						$	7,473			$	0.16
Impact of change from basic to diluted share count											(0.01	)
GAAP net income, adjusted to diluted share count						$	7,473			$	0.15
Non-cash stock-based compensation		$	8,907				5,344				0.10
Certain intellectual property litigation expenses			2,728				1,637				0.03
Amortization of intangible assets			3,030				1,818				0.04
Leasehold related charges			1,512				907				0.02
One-time and acquisition related items			879				527				0.01
Non-cash interest expense on convertible notes			3,773				2,264				0.04
Non-GAAP earnings						$	19,970			$	0.39
Adjustments from non-GAAP earnings to updated non-GAAP earnings
Adjustment: Non-cash stock-based compensation		$	(8,907	)		$	(5,344	)		$	(0.10	)
Adjustment: Certain intellectual property litigation expenses			(2,728	)			(1,637	)			(0.03	)
Updated non-GAAP earnings						$	12,989			$	0.26
Weighted shares outstanding - diluted											50,621

 

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Reconciliation of Year To Date 2014 Results

 

(in thousands, except per share data)		Pre-Tax Adjustments				Net of Tax				Earnings Per Share
GAAP net loss						$	(16,720	)		$	(0.36	)
Impact of change from basic to diluted share count											0.02
GAAP net loss, adjusted to diluted share count						$	(16,720	)		$	(0.34	)
Non-cash stock-based compensation		$	33,687				20,212				0.41
Certain intellectual property litigation expenses			6,498				3,899				0.08
Amortization of intangible assets			13,571				8,143				0.16
Intangible asset impairment charge			10,708				6,425				0.13
Leasehold related charges			10,676				6,406				0.13
One-time and acquisition related items			3,845				2,307				0.05
Non-cash interest expense on convertible notes			14,687				8,812				0.18
Litigation liability expense			30,000				18,000				0.36
Non-GAAP earnings						$	57,483			$	1.16
Adjustments from non-GAAP earnings to updated non-GAAP earnings
Adjustment: Non-cash stock-based compensation		$	(33,687	)		$	(20,212	)		$	(0.41	)
Adjustment: Certain intellectual property litigation expenses			(6,498	)			(3,899	)			(0.08	)
Updated non-GAAP earnings						$	33,372			$	0.67
GAAP weighted shares outstanding - basic and diluted											46,715
Non-GAAP weighted shares outstanding - diluted											49,676

Investor Conference Call

The Company will hold a conference call today at 5:30 p.m. ET (2:30 p.m. PT). 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, www.nuvasive.com, through March 24, 2015. In addition, a telephone replay of the call will be available until March 10, 2015. The replay dial-in numbers are 1-877-870-5176 for domestic callers and 1-858-384-5517 for international callers. Please use pin number: 13598479.

About NuVasive

NuVasive is an innovative global medical device company that is changing spine surgery with minimally disruptive surgical products and procedurally-integrated solutions for the spine. The Company is the third largest player in the $9.0 billion global spine market. NuVasive offers a comprehensive spine portfolio of more than 90 unique products developed to improve spine surgery and patient outcomes.

 

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The Company’s principal procedural solution is its Maximum Access Surgery, or MAS^®, platform for lateral spine fusion. MAS was designed to provide safe, reproducible, and clinically proven outcomes, and is a highly differentiated solution with fully integrated neuromonitoring, customizable exposure, and a broad offering of application-specific implants and fixation devices designed to address a variety of pathologies.

NuVasive cautions you that statements included in this news release or made on the investor conference call referenced herein that are not a description of historical facts are forward-looking statements that involve risks, uncertainties, assumptions and other factors which, if they do not materialize or prove correct, could cause NuVasive’s results to differ materially from historical results or those expressed or implied by such forward-looking statements. In addition, this news release contains selected financial results from the fourth quarter and full year 2014, as well as financial projections for 2015. The Company’s projections for 2015 represent its 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 that could cause actual growth and results to differ materially include, but are not limited to: the risk that NuVasive’s revenue or earnings projections may turn out to be inaccurate because of the preliminary nature of the forecasts; the risk of further adjustment to financial results or future financial expectations; unanticipated difficulty in selling products, generating revenue or producing expected profitability; and those other risks and uncertainties more fully described in NuVasive’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.

 

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NuVasive, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

 

		Three Months Ended
		December 31,								Year Ended December 31,
		2014				2013				2014				2013
		(Unaudited)				(Unaudited)
Revenue		$	204,324			$	190,815			$	762,415			$	685,173
Cost of goods sold (excl. amortization and impairment of intangible assets)			46,509				49,353				182,358				180,484
Gross profit			157,815				141,462				580,057				504,689
Gross profit %			77.2	%			74.1	%			76.1	%			73.7	%
Operating expenses:
Sales, marketing and administrative			120,828				113,821				469,648				420,064
Research and development			9,396				7,555				37,986				32,209
Amortization of intangible assets			3,030				5,063				13,571				19,326
Impairment of intangible assets			—				—				10,708				—
Litigation liability			—				—				30,000				—
Total operating expenses			133,254				126,439				561,913				471,599
Operating margin			24,561				15,023				18,144				33,090
Operating margin %			12.0	%			7.9	%			2.4	%			4.8	%
Interest and other expense, net:
Interest income			277				195				968				755
Interest expense			(7,102	)			(6,782	)			(27,911	)			(27,178	)
Other (expense) income, net			(93	)			164				(2,411	)			3,101
Total interest and other expense, net			(6,918	)			(6,423	)			(29,354	)			(23,322	)
Income (loss) before income taxes			17,643				8,600				(11,210	)			9,768
Income tax expense			(10,351	)			(2,763	)			(6,286	)			(2,783	)
Consolidated net income (loss)		$	7,292			$	5,837			$	(17,496	)		$	6,985
Net loss attributable to noncontrolling interests		$	(181	)		$	(172	)		$	(776	)		$	(917	)
Net Income (loss) attributable to NuVasive, Inc.		$	7,473			$	6,009			$	(16,720	)		$	7,902
Net (loss) income per share attributable to NuVasive, Inc.:
Basic		$	0.16			$	0.13			$	(0.36	)		$	0.18
Diluted		$	0.15			$	0.13			$	(0.36	)		$	0.17
Weighted average shares outstanding:
Basic			47,249				44,820				46,715				44,461
Diluted			50,621				47,947				46,715				46,786

 

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NuVasive, Inc.

Consolidated Balance Sheets

(in thousands, except par values and share amounts)

 

		December 31,				December 31,
		2014				2013
ASSETS
Current assets:
Cash and cash equivalents		$	142,387			$	102,825
Short-term marketable securities			220,329				143,449
Accounts receivable, net of allowances of $5,844 and $3,481, respectively			118,959				104,774
Inventory, net			154,638				136,937
Deferred tax assets, current			47,912				37,076
Prepaid expenses and other current assets			21,646				10,947
Total current assets			705,871				536,008
Property and equipment, net			128,565				128,064
Long-term marketable securities			43,042				79,829
Intangible assets, net			96,555				93,986
Goodwill			154,443				154,944
Deferred tax assets, non-current			65,330				42,863
Restricted cash and investments			123,233				119,195
Other assets			26,420				24,679
Total assets		$	1,343,459			$	1,179,568
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	146,867			$	86,057
Accrued payroll and related expenses			38,032				31,095
Current litigation liability			30,000				—
Total current liabilities			214,899				117,152
Senior Convertible Notes			360,746				346,060
Deferred tax liabilities, non-current			3,879				2,934
Litigation liability			93,700				93,700
Other long-term liabilities			21,877				14,844
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized, none outstanding			—				—
Common stock, $0.001 par value; 120,000,000 shares authorized at December 31, 2014 and December 31, 2013, respectively, 47,691,744 and 44,943,422 issued and outstanding at December 31, 2014 and December 31, 2013, respectively			48				45
Additional paid-in capital			847,145				769,203
Accumulated other comprehensive income			(9,670	)			(3,238	)
Accumulated deficit			(186,938	)			(170,218	)
Treasury stock at cost; 233,369 shares and no shares at December 31, 2014 and 2013, respectively			(10,537	)			—
Total NuVasive, Inc. stockholders’ equity			640,048				595,792
Noncontrolling interests			8,310				9,086
Total equity			648,358				604,878
Total liabilities and stockholders’ equity		$	1,343,459			$	1,179,568

 

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NuVasive, Inc.

Consolidated Statements of Cash Flows

(in thousands)

 

		Year Ended December 31,
		2014				2013
Operating activities:
Consolidated net (loss) income		$	(17,496	)		$	6,985
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization			65,837				63,106
Deferred income tax benefit			(23,231	)			(11,341	)
Amortization of non-cash interest			16,490				15,336
Stock-based compensation			33,687				33,240
Impairment of intangible assets and goodwill			10,708				—
Reserves on current assets			1,856				7,468
Other non-cash adjustments			13,191				7,116
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable			(18,465	)			(17,384	)
Inventory			(21,343	)			(21,002	)
Prepaid expenses and other current assets			(5,183	)			(3,608	)
Accounts payable and accrued liabilities			22,318				21,803
Litigation liability			30,000				(7,500	)
Accrued payroll and related expenses			7,179				3,220
Net cash provided by operating activities			115,548				97,439
Investing activities:
Cash paid for acquisitions and investments			(500	)			(14,818	)
Proceeds from disposal of assets			241				—
Purchases of property and equipment			(58,424	)			(47,597	)
Purchases of marketable securities			(217,158	)			(218,454	)
Sales of marketable securities			174,816				216,299
Purchases of restricted investments			(3,800	)			—
Net cash used in investing activities			(104,825	)			(64,570	)
Financing activities:
Principal payment of 2013 Senior Convertible Notes			—				(74,311	)
Tax benefits related to stock-based compensation awards			11,896				13,569
Proceeds from the issuance of common stock			23,354				8,422
Payment of contingent consideration			(498	)			—
Purchase of treasury stock			(3,782	)
Other assets			(693	)			(162	)
Net cash provided by (used in) financing activities			30,277				(52,482	)
Effect of exchange rate changes on cash			(1,438	)			(861	)
Increase (decrease) in cash and cash equivalents			39,562				(20,474	)
Cash and cash equivalents at beginning of year			102,825				123,299
Cash and cash equivalents at end of year		$	142,387			$	102,825
Net cash provided by operating activities		$	115,548			$	97,439
Purchases of property and equipment			(58,424	)			(47,597	)
Proceeds from disposal of assets			241				—
Free cash flow		$	57,365			$	49,842

 

12

Exhibit 99.2

 

 

NEWS RELEASE
		Investor/Media Contact:
		Stacy Roughan
		NuVasive, Inc.
		1-858-909-1812
		sroughan@nuvasive.com

NUVASIVE ANNOUNCES UPDATED NON-GAAP DEFINITION

SAN DIEGO, CA – February 24, 2015 – NuVasive, Inc. (NASDAQ: NUVA) (“NuVasive” or the “Company”), a medical device company focused on developing minimally disruptive surgical products and procedures for the spine, today announced that it will implement an updated non-GAAP definition in the first quarter 2015. NuVasive will redefine its non-GAAP cost of goods sold, gross margin, operating expenses, operating margin and earnings per share financial measures from its existing non-GAAP definition to include the impact of non-cash stock-based compensation and certain intellectual property related litigation expenses, both of which had previously been excluded in the Company’s calculation of these non-GAAP financial measures. In addition to GAAP results, these non-GAAP measures are intended to provide additional information to enable investors to assess the Company’s operations in the same way management assesses operations. Management uses non-GAAP measures to budget, evaluate and measure the Company’s performance and sees these results as an indicator of the Company’s ongoing business performance. The Company believes these changes in non-GAAP reporting increase transparency and better reflect the underlying financial performance of the business.

“As NuVasive accelerates to drive beyond $1 billion in revenue with increasing scale and profitability, our business has reached a state of maturity where we believe it is appropriate to shift our non-GAAP reporting to reflect the impact of ongoing stock-based compensation, as well as certain IP-related litigation expenses as we work to enhance shareholder value,” said Quentin Blackford, NuVasive’s Executive Vice President and Chief Financial Officer. “Most recently, in the fourth quarter 2014, we demonstrated the ability to achieve our goal of delivering a 20% non-GAAP operating margin, and believe that it is the right time to update our non-GAAP definition to be inclusive of these ongoing expenses.”

Blackford continued, “This update allows us to provide investors with a meaningful non-GAAP measurement that represents the performance of our core business on a more inclusive, comprehensive basis. Importantly, this change does not impact NuVasive’s plan to deliver at least 100 basis points of operating margin expansion each year, as well as improved EBITDA margins for the next several years as we rapidly scale the business in the U.S. and internationally and capture well-identified opportunities to drive profitability.”

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Recast Historical Financial Results

The updated non-GAAP definition will not impact reported revenue results and does not change the Company’s previously communicated operating margin improvement plan. However, the updated non-GAAP definition will impact NuVasive’s go-forward operating results, presenting a new basis from which the Company will execute its strategy to deliver annual operating improvements as it continues to increase scale and profitability. To ensure that operating results can be evaluated on a comparable basis, historic non-GAAP reported operating results will be adjusted to match this new go-forward definition.

In conjunction with this change, NuVasive is providing adjusted financial results in line with the updated non-GAAP definition for full years 2012, 2013 and 2014. Additionally, the Company has provided a presentation that details the key highlights of this change and its impact on longer-term performance goals. These supplemental documents are available online at the Investor Relations page of the Company’s website at www.nuvasive.com.

About NuVasive

NuVasive is an innovative global medical device company that is changing spine surgery with minimally disruptive surgical products and procedurally-integrated solutions for the spine. The Company is the third largest player in the $9.0 billion global spine market. NuVasive offers a comprehensive spine portfolio of more than 90 unique products developed to improve spine surgery and patient outcomes. The Company’s principal procedural solution is its Maximum Access Surgery, or MAS^®, platform for lateral spine fusion. MAS was designed to provide safe, reproducible, and clinically proven outcomes, and is a highly differentiated solution with fully integrated neuromonitoring, customizable exposure, and a broad offering of application-specific implants and fixation devices designed to address a variety of pathologies.

NuVasive cautions you that statements included in this news release 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. The potential risks and uncertainties that could cause actual growth and results to differ materially include, but are not limited to: the risk that NuVasive’s revenue or earnings projections may turn out to be inaccurate because of the preliminary nature of the forecasts; the risk of further adjustment to financial results or future financial expectations; unanticipated difficulty in selling products, generating revenue or producing expected profitability; and those other risks and uncertainties more fully described in NuVasive’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.

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