NuVasive Announces Fourth Quarter and Full Year 2020 Financial Results

SAN DIEGO, Feb. 25, 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 and full year ended Dec. 31, 2020.

NuVasive Logo

Fourth Quarter 2020

  • Net sales decreased 6.0% to $291.8 million, or 6.7% on a constant currency basis;
  • GAAP operating margin of 6.9%; Non-GAAP operating margin of 15.8%; and
  • GAAP diluted earnings per share of $0.03; Non-GAAP diluted earnings per share of $0.59.

Full Year 2020

  • Net sales decreased 10.1% to $1.051 billion, or 10.2% on a constant currency basis;
  • GAAP operating margin of 3.7%; Non-GAAP operating margin of 11.1%; and
  • GAAP diluted loss per share of $0.72; Non-GAAP diluted earnings per share of $1.23.

"NuVasive continues to see significant impact from COVID-19 on elective surgical procedures and patient sentiment, particularly within the U.S. market, which increased late in the fourth quarter," said J. Christopher Barry, chief executive officer of NuVasive. "Against a challenging 2020, we made key investments in infrastructure, talent, and innovation to unlock our ability to fulfill our long-term strategy. We are excited about the acquisition of Simplify Medical to advance our C360 portfolio and the 510(k) submission for the Pulse platform. We remain committed to delivering enhanced value to shareholders, surgeons, and employees, while helping change the lives of patients around the globe."

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

Fourth Quarter 2020 Results
NuVasive reported fourth quarter 2020 total net sales of $291.8 million, a 6.0% decrease compared to $310.4 million for the fourth quarter 2019. On a constant currency basis, fourth quarter 2020 total net sales decreased 6.7% compared to the same period last year driven by the impact of COVID-19 on elective surgeries.

For the fourth quarter 2020, GAAP and non-GAAP gross profit was $207.2 million and $208.9 million, respectively, and GAAP and non-GAAP gross margin was 71.0% and 71.6%, respectively. These results compared to GAAP and non-GAAP gross profit of $227.1 million and GAAP and non-GAAP gross margin of 73.2%, for the fourth quarter 2019. The decline in GAAP and non-GAAP gross margin was primarily due to the decrease in net sales and incremental reserves for inventory.

The Company reported GAAP net income of $1.7 million, or diluted earnings per share of $0.03, for the fourth quarter 2020 compared to GAAP net income of $29.9 million, or diluted earnings per share of $0.55, for the fourth quarter 2019. On a non-GAAP basis, the Company reported net income of $30.4 million, or diluted earnings per share of $0.59, for the fourth quarter 2020 compared to non-GAAP net income of $38.5 million, or diluted earnings per share of $0.73, for the fourth quarter 2019.

Free cash flow for the quarter ended Dec. 31, 2020, was $44.8 million compared to $46.3 million in the prior year period.

Full Year 2020 Results
NuVasive reported full year 2020 total net sales of $1.051 billion, a 10.1% decrease compared to $1.168 billion for the full year 2019. On a constant currency basis, full year 2020 total net sales decreased 10.2% compared to the full year 2019, which reflects the impact of the COVID-19 pandemic.

For the full year 2020, GAAP and non-GAAP gross profit was $729.0 million and $730.7 million, respectively, and GAAP and non-GAAP gross margin was 69.4% and 69.5%, respectively. These results compared to GAAP and non-GAAP gross profit of $855.7 million, and GAAP and non-GAAP gross margin of 73.3% for the full year 2019. The decrease in GAAP and non-GAAP gross margin was primarily a result of incremental reserves for inventory attributed to projected demand for certain spinal hardware products impacted by COVID-19.

The Company reported GAAP net loss of $37.2 million, or diluted loss per share of $0.72, for the full year 2020 compared to GAAP net income of $65.2 million, or diluted earnings per share of $1.23, for the full year 2019. On a non-GAAP basis, the Company reported net income of $63.8 million, or diluted earnings per share of $1.23, for the full year 2020 compared to non-GAAP net income of $129.8 million, or diluted earnings per share of $2.47, for the full year 2019. See the "Reconciliation of GAAP to Non-GAAP Financial Measures" table for a reconciliation of these GAAP and non-GAAP financial measures.

Cash, cash equivalents, and investments were $1.030 billion as of Dec. 31, 2020, compared to $213 million reported as of Dec. 31, 2019.

Simplify Medical
In a separate news release, NuVasive announced it has acquired Simplify Medical, a privately held company and developer of the Simplify® Cervical Artificial Disc for cervical total disc replacement (cTDR), as of Feb. 24, 2021. The transaction provides NuVasive with the most clinically effective technology in the cTDR procedure segment and further distinguishes NuVasive's C360 cervical portfolio in the market.

Supplementary Financial Information
For additional financial detail, please visit the Investor Relations section of the Company's website at www.nuvasive.com to access Supplementary Financial Information.

Reconciliation of GAAP to Non-GAAP Information
Management uses certain non-GAAP financial measures such as non-GAAP diluted earnings (loss) per share, non-GAAP net income, non-GAAP operating expenses and non-GAAP operating margin, which exclude amortization of intangible assets, business transition costs, purchased in-process research and development, one-time restructuring and related items in connection with acquisitions, investments and divestitures, non-recurring consulting fees, 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 and non-cash interest expense (excluding debt issuance cost). 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 and related items in connection with acquisitions, investments and divestitures, non-recurring consulting fees, certain litigation expenses and settlements, certain European medical device regulation costs, gains and losses on strategic investments, gains and losses from changes in fair value of derivatives and other significant one-time items.

Management calculates the non-GAAP financial measures provided in this earnings release excluding these costs and uses these non-GAAP financial measures to enable it to further and more consistently analyze the period-to-period financial performance of its core business operations. Management believes that providing investors with these non-GAAP measures gives them additional information to enable them to assess, in the same way management assesses, the Company's current and future continuing operations. These non-GAAP measures are not in accordance with, or an alternative for, GAAP, and may be different from non-GAAP measures used by other companies. Set forth below are reconciliations of the non-GAAP financial measures to the comparable GAAP financial measure.


For the Three Months Ended December 31, 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
WASO5

Net Income to
Adjusted EBITDA


Reported GAAP

$        207,179

$          20,235

$            1,692

$          0.03

51,870

$                           1,692


% of net sales

71.0%

6.9%






Amortization of intangible assets


12,576

12,576





Litigation related expenses and settlements1


1,310

1,310



1,310


Business transition costs2


8,337

8,337



8,337


European medical device regulation3

1,706

3,614

3,614



3,614


Non-cash interest expense on convertible notes



12,844





Net gain on strategic investments



(10)



(10)


Tax effect of adjustments4



(9,989)





Interest expense/(income), net






21,136


Income tax benefit






(628)


Depreciation and amortization






34,840


Non-cash stock-based compensation






7,706


Adjusted Non-GAAP

$        208,885

$          46,072

$          30,374

$          0.59

51,870

$                         77,997


% of net sales

71.6%

15.8%




26.7%









1

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

2

Costs 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.

3

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

4

Represents the impact from tax affecting the adjustments above at their statutory tax rate. The impact of these adjustments to the tax rate results in an annual tax rate of ~22% on a GAAP basis and ~24% on a non-GAAP basis.

5

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




For the Year Ended December 31, 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
WASO7

Net (Loss) to
Adjusted EBITDA


Reported GAAP

$        728,951

$          38,303

$        (37,153)

$        (0.72)

51,416

$                       (37,153)


% of net sales

69.4%

3.7%






Amortization of intangible assets


51,726

51,726





Litigation related expenses and settlements1


6,996

6,996



6,996


Business transition costs2


10,878

10,878



10,878


Purchase of in-process research and development3


1,011

1,011



1,011


European medical device regulation4

1,706

7,693

7,693



7,693


Non-cash interest expense on convertible notes



40,866





Net loss on strategic investments



268



268


Net loss recognized on change in fair value of derivatives5



12,301



12,301


Tax effect of adjustments6



(30,823)





Interest expense/(income), net






68,994


Income tax benefit






(10,392)


Depreciation and amortization






140,937


Non-cash stock-based compensation






17,457


Adjusted Non-GAAP

$        730,657

$        116,607

$          63,763

$          1.23

51,992

$                       218,990


% of net sales

69.5%

11.1%




20.8%









1

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

2

Costs 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.

3

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

4

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

5

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

6

Represents the impact from tax affecting the adjustments above at their statutory tax rate. The impact of these adjustments to the tax rate results in an annual tax rate of ~22% on a GAAP basis and ~24% on a non-GAAP basis.

7

Adjusted 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 December 31, 2019


Reconciliation of GAAP to Non-GAAP Financial Measures


(Unaudited - in thousands, except per share data)











Gross Profit

Operating
Profit

Net Income

Diluted
EPS

Diluted
WASO5

Net Income to
Adjusted EBITDA


Reported GAAP

$        227,098

$          42,166

$          29,876

$          0.55

54,638

$                         29,876


% of net sales

73.2%

13.6%






Amortization of intangible assets


12,599

12,599





Litigation related expenses and settlements1


818

818



818


Business transition costs2


(7,141)

(7,141)



(7,141)


European medical device regulation3


2,384

2,384



2,384


Non-cash interest expense on convertible notes



4,492





Tax effect of adjustments4



(4,513)





Interest expense/(income), net






9,147


Income tax expense






3,271


Depreciation and amortization






34,348


Non-cash stock-based compensation






10,285


Adjusted Non-GAAP

$        227,098

$          50,826

$          38,515

$          0.73

52,979

$                         82,988


% of net sales

73.2%

16.4%




26.7%









1

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

2

Costs 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.

3

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

4

Represents the impact from tax affecting the adjustments above at their statutory tax rate. The impact of these adjustments to the tax rate results in an annual tax rate of ~19% on a GAAP basis and ~21% on a non-GAAP basis.

5

Adjusted 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 Year Ended December 31, 2019


Reconciliation of GAAP to Non-GAAP Financial Measures


(Unaudited - in thousands, except per share data)











Gross Profit

Operating
Profit

Net Income

Diluted
EPS

Diluted
WASO5

Net Income to
Adjusted EBITDA


Reported GAAP

$        855,713

$        123,050

$          65,234

$          1.23

53,160

$                         65,234


% of net sales

73.3%

10.5%






Amortization of intangible assets


51,097

51,097





Litigation related expenses and settlements1


7,794

7,794



7,794


Business transition costs2


(1,995)

(1,995)



(1,995)


European medical device regulation3


5,069

5,069



5,069


Non-cash interest expense on convertible notes



17,617





Net loss on strategic investments



4,767



4,767


Tax effect of adjustments4



(19,782)





Interest expense/(income), net






36,608


Income tax expense






15,283


Depreciation and amortization






135,593


Non-cash stock-based compensation






30,732


Adjusted Non-GAAP

$        855,713

$        185,015

$        129,801

$          2.47

52,629

$                       299,085


% of net sales

73.3%

15.8%




25.6%









1

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

2

Costs 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.

3

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

4

Represents the impact from tax affecting the adjustments above at their statutory tax rate. The impact of these adjustments to the tax rate results in an annual tax rate of ~19% on a GAAP basis and ~21% on a non-GAAP basis.

5

Adjusted 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.









Investor Conference Call
NuVasive will hold a conference call today at 4:30 p.m. ET / 1:30 p.m. PT to discuss the results of its financial performance for the fourth quarter and full year ended Dec. 31, 2020, as well as its acquisition of Simplify Medical. The dial-in numbers are 1-800-954-0604 for domestic callers and 1-312-281-1210 for international callers. A live webcast of the conference call will be available online from the Investor Relations page of the Company's website at www.nuvasive.com. After the live webcast, the call will remain available on NuVasive's website through March 25, 2021. In addition, a telephone replay of the call will be available until March 4, 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: 21990639.

About NuVasive
NuVasive, Inc. (NASDAQ: NUVA) is the leader in spine technology innovation, with a mission to transform surgery, advance care, and change lives. The Company's less-invasive, procedurally integrated surgical solutions are designed to deliver reproducible and clinically proven outcomes. The Company's comprehensive procedural portfolio includes surgical access instruments, spinal implants, fixation systems, biologics, software for surgical planning, navigation and imaging solutions, magnetically adjustable implant systems for spine and orthopedics, and intraoperative neuromonitoring technology and service offerings. With more than $1 billion in net sales, NuVasive has approximately 2,700 employees and operates in more than 50 countries serving surgeons, hospitals, and patients. For more information, please visit www.nuvasive.com.

Forward-Looking Statements
NuVasive cautions you that statements included in this news release or made on the investor conference call referenced herein that are not a description of historical facts are forward-looking statements that involve risks, uncertainties, assumptions and other factors which, if they do not materialize or prove correct, could cause NuVasive's results to differ materially from historical results or those expressed or implied by such forward-looking statements. Forward-looking statements include, but are not limited to, statements about the potential benefits of the acquisition of Simplify Medical, including the expected impact on future financial and operating results, and post-acquisition plans and intentions. In addition, this news release contains selected financial results from the fourth quarter and full year 2020. The Company's results for the fourth quarter and full year 2020 are prior to the completion of review and audit procedures by the Company's external auditors and are subject to adjustment. The potential risks and uncertainties which contribute to the uncertain nature of these statements include, among others, the impact of the COVID-19 pandemic on the Company's business and financial results; the Company's ability to maintain operations to support its customers and patients in the near-term and to capitalize on future growth opportunities; the risk that Simplify Medical will not be integrated successfully and that benefits from the acquisition may not be fully realized or may take longer to realize than expected; 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. Additional risks and uncertainties that may affect future results are 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 December 31,


Year Ended December 31,



2020


2019


2020


2019



(Unaudited)


(Unaudited)





Net sales:









Products


$  264,267


$  279,234


$   950,189


$  1,044,569

Services


27,540


31,120


100,393


123,501

Total net sales


291,807


310,354


1,050,582


1,168,070

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









Products


65,742


63,211


247,809


232,474

Services


18,886


20,045


73,822


79,883

Total cost of sales


84,628


83,256


321,631


312,357

Gross profit


207,179


227,098


728,951


855,713

Operating expenses:









Selling, general and administrative


144,260


160,365


547,195


611,181

Research and development


21,771


19,109


79,838


72,380

Amortization of intangible assets


12,576


12,599


51,726


51,097

Purchase of in-process research and development




1,011


Business transition costs


8,337


(7,141)


10,878


(1,995)

Total operating expenses


186,944


184,932


690,648


732,663

Interest and other expense, net:









Interest income


166


561


1,472


1,917

Interest expense


(21,302)


(9,708)


(70,466)


(38,525)

Other income (expense), net


1,965


128


(16,854)


(5,925)

Total interest and other expense, net


(19,171)


(9,019)


(85,848)


(42,533)

Income (loss) before income taxes


1,064


33,147


(47,545)


80,517

Income tax benefit (expense)


628


(3,271)


10,392


(15,283)

Consolidated net income (loss)


$      1,692


$    29,876


$   (37,153)


$       65,234










Net income (loss) per share:









Basic


$        0.03


$        0.57


$       (0.72)


$           1.26

Diluted


$        0.03


$        0.55


$       (0.72)


$           1.23

Weighted average shares outstanding:









Basic


51,343


52,117


51,416


51,956

Diluted


51,870


54,638


51,416


53,160

 

NuVasive, Inc. 

Consolidated Balance Sheets 

(in thousands, except par value data) 



December 31,



2020


2019

ASSETS





Current assets:





Cash and cash equivalents


$     856,869


$     213,034

Short-term marketable securities


173,145


Accounts receivable, net of allowances of $20,631and $17,019, respectively


207,071


211,532

Inventory, net


300,623


312,419

Prepaid income taxes


4,727


10,434

Prepaid expenses and other current assets


19,749


16,917

Total current assets


1,562,184


764,336

Property and equipment, net


286,369


266,318

Intangible assets, net


152,264


201,092

Goodwill


559,553


561,064

Operating lease right-of-use assets


102,270


66,932

Deferred tax assets


15,755


9,162

Restricted cash and investments


1,494


1,494

Other assets


13,193


14,892

Total assets


$  2,693,082


$  1,885,290

LIABILITIES AND EQUITY





Current liabilities:





Accounts payable and accrued liabilities


$     110,401


$       97,160

Contingent consideration liabilities


7,289


15,727

Accrued payroll and related expenses


63,421


86,458

Operating lease liabilities


7,875


5,567

Income tax liabilities


2,073


2,005

Senior convertible notes


645,303


Total current liabilities


836,362


206,917

Long-term senior convertible notes


766,226


623,298

Deferred tax liabilities


2,807


14,655

Operating lease liabilities


111,634


73,153

Other long-term liabilities


52,438


52,060

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 and 120,000 shares authorized at December 31, 2020 and December 31, 2019, respectively; 57,945 shares issued and 51,376 outstanding at December 31, 2020; 57,525 issued and 52,145 outstanding at December 31, 2019


62


62

Additional paid-in capital


1,550,001


1,429,854

Accumulated other comprehensive loss


(7,585)


(9,418)

Retained earnings


45,322


82,475

Treasury stock at cost; 6,569 shares and 5,380 shares at December 31, 2020 and December 31, 2019, respectively


(668,882)


(587,766)

Total equity


918,918


915,207

Total liabilities and equity


$  2,693,082


$  1,885,290






 

NuVasive, Inc. 

Consolidated Statements of Cash Flows 

(in thousands) 








Year Ended December 31,



2020


2019

Operating activities:





Consolidated net (loss) income


$  (37,153)


$    65,234

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





Depreciation and amortization


140,937


135,593

Purchase of in-process research and development


1,011


Deferred income taxes


(18,007)


5,844

Amortization of non-cash interest


48,986


21,288

Stock-based compensation


18,145


30,297

Net loss on strategic investments


268


4,767

Net loss recognized on change in fair value of derivatives


12,301


Reserves on current assets


53,902


18,382

Other non-cash adjustments


16,876


5,650

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





Accounts receivable


3,030


(16,407)

Inventory


(40,765)


(54,872)

Prepaid expenses and other current assets


(4,986)


(4,622)

Accounts payable and accrued liabilities


8,756


(3,924)

Accrued payroll and related expenses


(23,654)


24,256

Income taxes


6,264


3,804

Net cash provided by operating activities


185,911


235,290

Investing activities:





Acquisitions and investments



(4,100)

Proceeds from other investments


1,143


Purchases of intangible assets


(3,860)


(7,501)

Purchases of property and equipment


(105,729)


(122,883)

Purchases of marketable securities


(233,488)


Proceeds from sales and maturities of marketable securities


60,000


Net cash used in investing activities


(281,934)


(134,484)

Financing activities:





Proceeds from the issuance of common stock


6,170


6,415

Payment of contingent consideration


(7,053)


(809)

Purchase of treasury stock


(80,665)


(14,478)

Proceeds from issuance of convertible debt, net of issuance costs


873,848


Proceeds from sale of warrants


93,915


Purchases of convertible note hedges


(147,825)


Other financing activities


(1,734)


2,228

Net cash provided by (used in) financing activities


736,656


(6,644)

Effect of exchange rate changes on cash


3,202


131

Increase in cash, cash equivalents and restricted cash


643,835


94,293

Cash, cash equivalents and restricted cash at beginning of period


214,528


120,235

Cash, cash equivalents and restricted cash at end of period


$  858,363


$  214,528






 

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SOURCE NuVasive, Inc.

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