NuVasive Reports First Quarter 2010 Financial Results

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NuVasive, Inc. , a medical device company focused on developing products for minimally disruptive surgical treatments for the spine, announced today financial results for the quarter ended March 31, 2010.

NuVasive reported first quarter revenue of $109.1 million, a 36.3% increase over the $80.0 million for the first quarter 2009 and a 2.0% increase over the $106.9 million for the fourth quarter 2009.

Gross profit for the first quarter 2010 was $89.6 million and gross margin was 82.2%, compared to a gross profit of $67.0 million and a gross margin of 83.8% for the first quarter 2009. For the fourth quarter 2009, gross profit was $88.9 million and gross margin was 83.2%.

Total operating expenses for the first quarter 2010 were $86.7 million compared to $70.4 million in the first quarter 2009 and $84.7 million in the fourth quarter 2009.

On a GAAP basis, the Company reported net income of $1.1 million, or $0.03 per share, for the first quarter 2010.

On a Non-GAAP basis, the Company reported net income of $8.3 million, or $0.21 per share, for the first quarter 2010. The Non-GAAP earnings per share calculations for the first quarter exclude on a pre-tax basis (i) intellectual property litigation costs of $1.3 million; (ii) acquisition related costs of $0.4 million; (iii) stock-based compensation of $6.4 million; and (iv) amortization of intangible assets of $1.4 million.

Cash, cash equivalents and short and long-term marketable securities were $208.1 million at March 31, 2010.

Alex Lukianov, Chairman and Chief Executive Officer, said, “We exceeded our expectations, achieving revenue growth of over 35%, driven by continued adoption of the XLIF® technology, stronger traction from our new product launches, and aided in part by the positive reimbursement progress during the quarter. Our financial performance across earnings and operating cash flow signal a great start to what will be another outstanding year. Today’s results mark NuVasive’s 24th quarter, and 6th year, of consecutively meeting or exceeding expectations as a public company. Our keen focus on being the most creative spine technology company in the world and achieving exceptional results through speed of innovation, Absolute Responsiveness®, and superior clinical outcomes will continue to drive us toward our goal of becoming the #4 global spine company.”

  Full Year 2010 Financial Guidance:
  --  Revenue of $480 million to $500 million
  --  GAAP EPS, net of tax and "If-converted" method, of $1.58 to $1.70
  --  Non-GAAP EPS, net of tax and "If-converted" method, of $1.13 to $1.25
  --  Non-GAAP Operating Margin of ~17%

  Reconciliation of Non-GAAP Information

Management uses certain Non-GAAP financial measures such as Non-GAAP earnings per share, which exclude intellectual property litigation expenses, acquisition related items, non-cash stock-based compensation, and the amortization of intangible assets. Management does not consider these costs in evaluating the continuing operations of the Company. Therefore, 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 analyze further, and more consistently, the period-to-period financial performance of its core business operations. Management believes that providing investors with these Non-GAAP measures gives them additional important 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.

              Reconciliation of First Quarter 2010 Results

  (in thousands, except per       pre-
   share data)                     tax     $(net of tax) per Share
                                   ----     ------------ ---------
                               adjustments
                               -----------
  GAAP net income                                 $1,088      $0.03
    Intellectual property
     litigation expenses             1,295           991       0.02
    Acquisition related items          355           272       0.01
    Non-cash stock-based
     compensation                    6,434         4,922       0.12
    Amortization of intangible
     assets                          1,350         1,032       0.03
                                                   -----       ----
  Non-GAAP earnings                               $8,305      $0.21
                                                  ======      =====
  Weighted average shares
   outstanding -Diluted                                      40,061
                                                             ======

       Reconciliation of Full Year 2010 EPS Guidance
            (Net of Tax, "If Converted" method)

                                             Range for Year
                                                 Ending
                                             --------------
                                           December 31, 2010
                                           -----------------
  (in thousands, except per share
   data)                                   Low         High
  GAAP earnings per share                  $1.58        $1.70
    Intellectual property litigation
     expenses                               0.07         0.07
    Non-cash stock-based compensation       0.42         0.42
    Amortization of intangible assets       0.08         0.08
    Reversal of remaining valuation
     allowance                             (1.02)       (1.02)
  Non-GAAP earnings per share              $1.13        $1.25
                                           =====        =====

  Weighted average shares outstanding
   -Diluted                               46,000       46,000
                                          ======       ======

  Conference Call

NuVasive will hold a conference call today at 5:30 p.m. ET / 2:30 p.m. PT to discuss the results. The dial-in numbers are 1-877-407-4018 for domestic callers and 1-201-689-8471 for international callers. A live webcast of the conference call will be available online from the investor relations page of the Company’s corporate website at www.nuvasive.com.

After the live webcast, the call will remain available on NuVasive’s website, www.nuvasive.com, through May 20, 2010. In addition, a telephonic replay of the call will be available until May 4, 2010. The replay dial-in numbers are 1-877-660-6853 for domestic callers and 1-201-612-7415 for international callers. Please use account number 3055 and conference ID number 348544.

About NuVasive

NuVasive is a medical device company focused on the design, development, and marketing of products for the surgical treatment of spine disorders. The Company’s product portfolio is focused primarily on the $5.1 billion U.S. spine implant market. Additionally, the Company has expanded into the $1.7 billion global biologics market, the $1.7 billion international market, and is developing products for the emerging motion preservation market.

NuVasive’s principal product offering is based on its Maximum Access Surgery, or MAS® platform. The MAS platform combines four categories of products that collectively minimize soft tissue disruption during spine surgery with maximum visualization and safe, easy reproducibility for the surgeon: NeuroVision®, a proprietary software-driven nerve avoidance system; MaXcess®, a unique split-blade retractor system; a wide variety of specialized implants; and several biologic fusion enhancers. MAS significantly reduces surgery time and returns patients to activities of daily living much faster than conventional approaches. Having redefined spine surgery with the MAS platform’s lateral approach, known as eXtreme Lateral Interbody Fusion, or XLIF®, NuVasive has built an entire spine franchise. With over 55 products today spanning lumbar, thoracic and cervical applications, the Company will continue to expand and evolve its offering predicated on its R&D focus and dedication to outstanding service levels supported by a culture of Absolute Responsiveness®.

NuVasive cautions you that statements included in this press 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 and the risk of further adjustment, or unanticipated difficulty in selling products or generating expected profitability; the uncertain process of seeking regulatory approval or clearance for NuVasive’s products or devices, including risks that such process could be significantly delayed; the possibility that the FDA may require significant changes to NuVasive’s products or clinical studies; the risk that products may not perform as intended and may therefore not achieve commercial success; the risk that competitors may develop superior products or may have a greater market position enabling more successful commercialization; the risk that additional clinical data may call into question the benefits of NuVasive’s products to patients, hospitals and surgeons; and other risks and uncertainties more fully described in NuVasive’s press 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.

  Contact:                             Investors:
  Michael J. Lambert                   Patrick F. Williams
                                        Vice President, Finance & Investor
  EVP & Chief Financial Officer         Relations
  NuVasive, Inc.                       NuVasive, Inc.
  858-909-1998                         858-638-5511
  investorrelations@nuvasive.com       investorrelations@nuvasive.com

  Media:
  Jason Rando
  The Ruth Group
  646-536-7025
  jrando@theruthgroup.com

                                NuVasive, Inc.
           Unaudited Condensed Consolidated Statement of Operations
                    (in thousands, except per share data)

                                                  Three Months Ended
                                                       March 31,
                                                   ------------------
                                                 2010              2009
                                                 ----              ----

  Revenue                                    $109,087           $80,008
  Cost of goods sold (excluding amortization
   of purchased technology)                    19,443            12,999
  Gross profit                                 89,644            67,009

  Operating expenses:
    Sales, marketing and administrative        74,661            60,527
    Research and development                   10,699             8,586
    Amortization of intangible assets           1,350             1,336
  Total operating expenses                     86,710            70,449

  Interest and other income (expense), net:
    Interest income                               189               732
    Interest expense                           (1,669)           (1,771)
    Other income, net                             117                44
                                                  ---               ---
  Total interest and other income (expense),
   net                                         (1,363)             (995)
                                               ------              ----

  Income (loss) before income taxes             1,571            (4,435)
  Income tax expense                              865                97
                                                  ---               ---
  Consolidated net income (loss)                 $706           $(4,532)
                                                 ====           =======
  Net loss attributable to noncontrolling
   interests                                    $(382)            $(230)
                                                =====             =====
  Net income (loss) attributable to
   NuVasive, Inc.                              $1,088           $(4,302)
                                               ======           =======

  Net income (loss) per share attributable
   to NuVasive, Inc.:
    Basic                                       $0.03            $(0.12)
                                                =====            ======
    Diluted                                     $0.03            $(0.12)
                                                =====            ======
  Weighted average shares outstanding:
    Basic                                      38,898            36,365
                                               ======            ======
    Diluted                                    40,061            36,365
                                               ======            ======

  Stock-based compensation is included in
   operating expenses in the following
   categories:
    Sales, marketing and administrative        $5,680            $5,241
    Research and development                      754             1,441
                                               $6,434            $6,682
                                               ======            ======

                            NuVasive, Inc.
                Condensed Consolidated Balance Sheets
                            (in thousands)

                                          March 31,          December 31,
                                             2010                 2009
                                          ---------          ------------
  ASSETS                                 (Unaudited)
  Current assets:
    Cash and cash equivalents                $77,664               $65,413
    Short-term marketable securities         100,349                99,279
    Accounts receivable, net                  62,185                58,462
    Inventory                                 90,553                90,191
    Prepaid expenses and other current
     assets                                    4,237                 3,757
  Total current assets                       334,988               317,102
  Property and equipment, net                 83,816                82,602
  Long-term marketable securities             30,059                39,968
  Intangible assets, net                     101,989               103,338
  Goodwill                                   102,882               102,882
  Other assets                                12,540                 7,872
  Total assets                              $666,274              $653,764
                                            ========              ========
  LIABILITIES AND STOCKHOLDERS'
   EQUITY
  Current liabilities:
    Accounts payable and accrued
     liabilities                             $38,180               $33,302
    Accrued payroll and related
     expenses                                 12,154                19,111
    Royalties payable                          2,659                 2,334
  Total current liabilities                   52,993                54,747
  Senior convertible notes                   230,000               230,000
  Long-term acquisition related
   liabilities                                30,694                30,694
  Other long-term liabilities                 28,504                28,472
  Commitments and contingencies

  Noncontrolling interests                    13,247                13,629

  Stockholders' equity:
      Common stock                                39                    39
      Additional paid-in capital             499,701               485,757
      Accumulated other comprehensive
       income (loss)                            (292)                  126
      Accumulated deficit                   (188,612)             (189,700)
  Total stockholders' equity                 310,836               296,222
  Total liabilities and
   stockholders' equity                     $666,274              $653,764
                                            ========              ========

                               NuVasive, Inc.
         Unaudited Condensed Consolidated Statements of Cash Flows
                               (in thousands)

                                              Three Months Ended March
                                                         31,
                                              ------------------------
                                                 2010               2009
                                                  ---                ---

   Operating activities:
     Consolidated net income (loss)              $706            $(4,532)
     Adjustments to reconcile net income
      (loss) to net cash provided by
      operating activities:
       Depreciation and amortization            8,104              5,488
       Stock-based compensation                 6,434              6,682
       Allowance for doubtful accounts and
        sales return reserve, net of write
        offs                                     (657)               205
       Allowance for excess and obsolete
        inventory                                 736                652
       Other non-cash adjustments               1,454                (15)
     Changes in operating assets and
      liabilities, net of effects from
      acquisitions:
         Accounts receivable                   (3,100)             1,361
         Inventory                             (1,237)           (14,100)
         Prepaid expenses and other assets     (1,570)               609
         Accounts payable and accrued
          liabilities                           4,780             10,875
         Accrued payroll and related expenses  (6,512)            (2,600)
                                               ------             ------
     Net cash provided by operating
      activities                                9,138              4,625
   Investing activities:
       Cash paid for acquisitions and
        investments                                 -            (20,000)
       Purchases of property and equipment     (8,402)            (5,567)
       Purchases of short-term marketable
        securities                            (31,990)            (7,658)
       Sales of short-term marketable
        securities                             45,013             27,725
       Purchases of long-term marketable
        securities                            (13,535)            (6,758)
       Sales of long-term marketable
        securities                              9,003             18,975
                                                -----             ------
     Net cash provided by investing
      activities                                   89              6,717
   Financing activities:
       Issuance of common stock                 6,628              1,160
       Other assets                            (4,408)                 -
       Tax benefits related to stock-based
        compensation awards                       882                  -
     Net cash provided by financing
      activities                                3,102              1,160
       Effect of exchange rate changes on
        cash                                      (78)               (59)
                                                  ---                ---
     Increase in cash and cash equivalents     12,251             12,443
   Cash and cash equivalents at
    beginning of year                          65,413            132,318
                                               ------            -------
   Cash and cash equivalents at end of
    year                                      $77,664           $144,761
                                              =======           ========

Source: NuVasive, Inc.

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