NuVasive Announces Fourth Quarter and Full Year 2020 Financial Results
02/25/2021 - 04:03 PM
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 .
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.