Financial

NuVasive Announces First Quarter 2018 Financial Results

SAN DIEGOMay 1, 2018 /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, 2018.

First Quarter 2018 Highlights

  • Revenue increased 4.6% to $260.5 million, or 3.4% on a constant currency basis;
  • GAAP operating profit margin of (7.0%); Non-GAAP operating profit margin of 12.3%; and
  • GAAP diluted loss per share of ($0.53); Non-GAAP diluted earnings per share increase of 5.4% to $0.39.

“In the first quarter 2018, NuVasive’s International business continued its momentum of 20% growth year over year on a constant currency basis, with our core U.S. hardware business showing solid case volume growth,” said Gregory T. Lucier, chairman and chief executive officer of NuVasive. “As we look forward to the remainder of the year, we expect our continued innovation—including the expansion of our lateral procedural solutions with the integration of Lateral Single-Position Surgery, further build out of our Advanced Materials Science portfolio and the initial launch of our Surgical Intelligence platform—to drive further differentiation of NuVasive technologies with surgeon partners. We also anticipate our Ohio manufacturing facility production ramping up in the second half of the year and we begin to realize the 400 basis point improvement in gross margins through this in-sourcing manufacturing effort.”

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

First Quarter 2018 Results
NuVasive reported first quarter 2018 total revenue of $260.5 million, a 4.6% increase compared to $249.0 million for the first quarter 2017. On a constant currency basis, first quarter 2018 total revenue increased 3.4% compared to the same period last year.

For the first quarter 2018, GAAP and non-GAAP gross profit was $186.7 million and $187.1 million, respectively, and GAAP and non-GAAP gross margin was 71.7% and 71.8%, respectively. These results compared to both GAAP and non-GAAP gross profit of $187.6 million, and both GAAP and non-GAAP gross margin of 75.3% for the first quarter 2017.

The Company reported a GAAP net loss of ($27.1) million, or ($0.53) per share, for the first quarter 2018 compared to a GAAP net income of $12.4 million, or $0.22 per share, for the first quarter 2017. On a non-GAAP basis, the Company reported net income of $20.2 million, or $0.39 per share, for the first quarter 2018 compared to net income of $19.7 million, or $0.37 per share, for the first quarter 2017. The GAAP net loss for the quarter was driven primarily by an increase in litigation liability of $29.0 million related to the Company’s previously disclosed lawsuit with a former sales agent, which has been ongoing since 2013.

During the quarter ended March 31, 2018, the Company obtained a favorable tax ruling with respect to its operations in Tennessee. The Company modified its local operations to obtain the ruling, which provides for tax exemptions for property, sales and use taxes specific to the state. With the Company’s primary distribution facility based in Memphis, the Company expects this tax ruling to yield in excess of $100 million in tax savings over the next 15 years. The Company engaged a specialized tax consultant to assist with these efforts and the Company recorded a non-recurring, success-based fee of $6.1 million in its first quarter 2018 financials.

Annual Financial Guidance for 2018
The Company reiterated its full-year 2018 guidance, and assumes a full-year benefit of U.S. tax reform, suspension of the medical device tax and the recent acquisition of SafePassage.

2018 Guidance Range 1

Prior

Current

(in Million’s; except %’s and EPS)

 GAAP 

 Non-GAAP 

 GAAP 

 Non-GAAP 

Revenue

$    1,095

$    1,105

$    1,095

$    1,105

$    1,095

$    1,105

$    1,095

$    1,105

  % Growth – Reported 2

6.4%

7.3%

6.4%

7.3%

6.7%

7.6%

6.7%

7.6%

% Growth – Constant Currency 2, 3

5.9%

6.9%

5.7%

6.6%

Operating margin

13.0%

13.0%

17.6%

17.6%

9.6%

9.7%

17.6%

17.6%

Earnings per share

$      1.56

$      1.59

$      2.44

$      2.47

$      0.71

$      0.74

$      2.44

$2.47

EBITDA

23.4%

23.4%

26.9%

26.9%

19.5%

19.5%

26.9%

26.9%

Tax Rate

~19%

~19%

~24%

~24%

~31%

~31%

~23%

~23%

 1

Prior guidance reflects the range provided February 26, 2018. Current guidance reflects the range provided May 1, 2018.

2

2017 has been recasted and presented based on our full retrospective method of adoption of ASC 606.

3

Constant currency is a measure that adjusts US GAAP revenue for the impact of currency over the same period in the prior year.

 

  • Full-year 2018 revenue in the range of $1,095 million to $1,105 million reflecting organic growth in the range of 4.7% to 5.7% and reported growth of 6.7% to 7.6%, inclusive of the recent acquisition of SafePassage;
  • Non-GAAP diluted earnings per share in a range of $2.44 to $2.47;
  • Non-GAAP operating profit margin of approximately 17.6%;
  • Adjusted EBITDA margin of approximately 26.9%;
  • Non-GAAP effective tax expense rate of approximately 23%, compared with the prior expectation of approximately 24%;
  • The Company now expects currency to have a positive impact in 2018 of approximately $10 million, compared with the prior expectation of approximately $5 million; and
  • The Company continues to expect to drive at least 100 basis points in non-GAAP operating margin expansion and adjusted EBITDA of approximately $295 million to $305 million.

 

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Josh Sandberg

Josh Sandberg is the President of Ortho Sales Partners and Partner for The De Angelis Group. He also serves as Co-Founder and Editor of OrthoSpineNews.

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