SAN DIEGO, CA--(Marketwire - Feb 22, 2012) - NuVasive, Inc. (NASDAQ: NUVA)

• Fourth quarter 2011 total revenue of $150.2 million; up 16.2% from fourth quarter 2010 and up 13.0% from third quarter 2011

• Full year 2011 total revenue of $540.5 million; up 13.0% from the full year 2010

• GAAP net loss of $10.0 million, or $0.24 per share, for the fourth quarter 2011 and $69.8 million, or $1.73 per share, for the full year 2011

• Non-GAAP earnings of $11.4 million, or $0.27 per share, for the fourth quarter 2011 and $43.9 million, or $1.07 per share, for the full year 2011

NuVasive, Inc. (NASDAQ: NUVA), a medical device company focused on developing minimally disruptive surgical products and procedures for the spine, announced today financial results for the quarter and for the full year ended December 31, 2011.
Alex Lukianov, Chairman and Chief Executive Officer, said, "Our financial performance in 2011 attests to the exceptional execution of our market-share taking strategy, which drove revenue growth of 13% within a challenged US spine market that did not grow. I am very proud of the NuVasive family's accomplishments to establish us as one of the top global spine companies with innovative surgical solutions that address the entire spine."
Mr. Lukianov continued, "As the spine market shifts toward more minimally invasive procedures, NuVasive is ready to further penetrate the market and we expect to again lead the industry in market share gains in 2012. Normalized for the full year impacts of certain 2011 events, we expect to improve the operating profile of our business in 2012, with a pre-tax earnings growth rate nearly two times the rate of revenue growth. Through the breadth of our procedural offerings, increased global expansion, and continued focus on superior clinical outcomes, we are well positioned to achieve our longer term goal of becoming the #3 company in spine with $1 billion in revenue and a greatly improved profitability profile."
NuVasive reported fourth quarter 2011 revenue of $150.2 million, a 16.2% increase over the $129.3 million for the fourth quarter 2010 and a 13.0% increase over the $132.9 million reported for the third quarter 2011.
Gross profit for the fourth quarter 2011 was $113.1 million and gross margin was 75.3%, compared to a gross profit of $106.2 million and a gross margin of 82.1% for the fourth quarter 2010. For the third quarter 2011, gross profit was $106.9 million and gross margin was 80.4%. Gross profit for the full year 2011 was $428.4 million and gross margin was 79.3%, compared to a gross profit of $393.1 million and gross margin of 82.2% for the full year 2010.
Total operating expenses for the fourth quarter 2011 were $122.9 million compared to $94.9 million in the fourth quarter 2010 and $198.3 million in the third quarter 2011. The higher operating expenses in the fourth quarter 2011 compared to the prior year resulted primarily from an intangible asset impairment charge and additional costs associated with higher revenue and infrastructure expansion. Full year 2011 operating expenses were $513.4 million compared to $361.0 million reported for the full year 2010. The higher operating expenses in 2011 resulted primarily from a charge related to intellectual property litigation, an intangible asset impairment charge, and additional costs associated with higher revenue and infrastructure expansion.
On a GAAP basis, the Company reported a net loss of $10.0 million, or $0.24 per share, for the fourth quarter 2011, and a net loss of $69.8 million, or $1.73 per share for the full year 2011.
On a Non-GAAP basis, the Company reported net income of $11.4 million, or $0.27 per share, for the fourth quarter 2011, and net income of $43.9 million, or $1.07 per share, for the full year 2011. The Non-GAAP earnings per share calculations for the fourth quarter and full year exclude, respectively, (i) non-cash stock-based compensation of $8.3 million and $32.1 million; (ii) certain intellectual property litigation expenses of $1.3 million and $7.0 million; (iii) litigation award expense of nil and $101.2 million; (iv) amortization of intangible assets of $2.4 million and $6.6 million; (v) acquisition related items of $1.4 million and $3.8 million; (vi) non-cash interest expense on convertible notes of $3.0 million and $6.1 million; (vii) the positive impact from certain transactions associated with convertible notes activity of $0.4 million and $2.1 million; (viii) certain discrete tax items of $0.3 million and $6.6 million; and (ix) an intangible asset impairment charge of $18.2 million and $18.2 million.
Cash, cash equivalents and short and long-term marketable securities were $342.2 million at December 31, 2011.
2012 Full Year Financial Guidance
Compared to 2011 financial results, 2012 guidance reflects the full year impacts of convertible note activity, the Impulse Monitoring business, an accrual for estimated patent litigation royalties, and a tax expense rate in comparison to a tax benefit rate.

• Revenue of approximately $615 million
• GAAP EPS of approximately $0.09
• Non-GAAP EPS of approximately $0.93
• Non-GAAP Operating Margin of approximately 14%
• GAAP effective tax expense rate of approximately 60%
• Non-GAAP effective tax expense rate of approximately 40%

Reconciliation of Full Year EPS Guidance

2012

Guidance 1

GAAP earnings per share guidance

$
0.09

Non-cash stock-based compensation

0.46

Certain intellectual property litigation expenses

0.03

Amortization of intangible assets

0.16

Acquisition related items 2

0.02

Non-cash interest expense on convertible notes

0.17

Non-GAAP earnings per share guidance

$
0.93

Weighted shares outstanding - basic 3

43,500

Weighted shares outstanding - diluted 3

45,000

1Effective tax rate of ~60% applied to GAAP earnings and ~40% applied to Non-GAAP adjustments

2Acquisition related items include expenses associated with prior M&A activity and as incurred

3Weighted shares outstanding shown as pre "if-converted" method

2012 Guidance Reconciliation of Non-GAAP Operating Margin %

FY 11 Actual

FY 12 Guidance

Gross Margin % [A]

79.3
%

~76.0
%

Non-GAAP Operating Expenses [B]

63.8
%

~62.0
%

Non-cash stock-based compensation

5.9
%

~5.5
%

Certain intellectual property litigation expenses

1.3
%

~0.5
%

Litigation award

18.7
%

-

Amortization of intangible assets

1.2
%

~2.0
%

Acquisition related items*

0.7
%

~0.2
%

Intangible asset impairment charge

3.4
%

-

GAAP Operating Expenses

95.0
%

~70.2
%

Non-GAAP Operating Margin % [A-B]

15.5
%

~14.0
%

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

Reconciliation of Non-GAAP Information
Management uses certain Non-GAAP financial measures such as Non-GAAP earnings per share, which exclude non-cash stock-based compensation, certain intellectual property litigation expenses, a litigation award expense, amortization of intangible assets, acquisition related items, non-cash interest expense on convertible notes, a positive impact from certain transactions associated with convertible notes activity, certain discrete tax items, and an intangible asset impairment charge. 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 Fourth Quarter 2011 Results

(in thousands, except per share data)

Pre-Tax Adjustments

Net of Tax

(Loss) Earnings Per Share

GAAP net loss

$
(10,036
)

$
(0.24
)

Impact of change from basic to diluted share count

-

GAAP net loss, adjusted to diluted share count

$
(10,036
)

$
(0.24
)

Non-cash stock-based compensation

$
8,281

5,134

0.12

Certain intellectual property litigation expenses

1,254

777

0.02

Amortization of intangible assets

2,368

1,468

0.04

Acquisition related items

1,437

891

0.02

Non-cash interest expense on convertible notes

3,033

1,880

0.04

Certain transactions associated with convertible notes activity

(390
)

(242
)

(0.01
)

Certain discrete tax items

300

300

0.01

Intangible asset impairment charge

18,167

11,264

0.26

Non-GAAP earnings

$
11,437

$
0.27

GAAP weighted shares outstanding - basic and diluted

42,172

Non-GAAP weighted shares outstanding - diluted

42,690

Reconciliation of Full Year 2011 Results

(in thousands, except per share data)

Pre-Tax Adjustments

Net of Tax

(Loss) Earnings Per Share

GAAP net loss

$
(69,849
)

$
(1.73
)

Impact of change from basic to diluted share count

0.04

GAAP net loss, adjusted to diluted share count

$
(69,849
)

$
(1.69
)

Non-cash stock-based compensation

$
32,070

19,883

0.48

Certain intellectual property litigation expenses

6,974

4,324

0.10

Litigation award

101,200

62,744

1.52

Amortization of intangible assets

6,609

4,098

0.10

Acquisition related items

3,774

2,340

0.06

Non-cash interest expense on convertible notes

6,108

3,787

0.09

Certain transactions associated with convertible notes activity

(2,056
)

(1,275
)

(0.03
)

Certain discrete tax items

6,616

6,616

0.16

Intangible asset impairment charge

18,167

11,264

0.27

Non-GAAP earnings

$
43,932

$
1.07

GAAP weighted shares outstanding - basic and diluted

40,372

Non-GAAP weighted shares outstanding - diluted

41,231

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 1-877-407-9039 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 corporate website at www.nuvasive.com.
After the live webcast, the call will remain available on NuVasive's website, www.nuvasive.com, through March 23, 2012. In addition, a telephonic replay of the call will be available until March 7, 2012. 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 385036.
About NuVasive
NuVasive is a medical device company focused on developing minimally disruptive surgical products and procedurally integrated solutions for the spine. The Company is the 5th largest player in the $7.8 billion global spine market.
NuVasive's principal product offering is based on its Maximum Access Surgery, or MAS® platform. The MAS platform combines several categories of solutions that collectively minimize soft tissue disruption during spine surgery with maximum visualization and safe, easy reproducibility for the surgeon: a proprietary software-driven nerve avoidance system and intra-operative monitoring support; 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 70 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.

NuVasive, Inc.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share data)

Three Months Ended December 31,

Year Ended December 31,

2011

2010

2011

2010

Revenue

$
150,194

$
129,304

$
540,506

$
478,237

Cost of goods sold (excluding amortization of purchased technology)

37,062

23,102

112,111

85,139

Gross profit

113,132

106,202

428,395

393,098

Operating expenses:

Sales, marketing and administrative

92,732

82,018

346,757

312,122

Research and development

9,584

11,490

40,703

43,479

Amortization of intangible assets

2,368

1,360

6,609

5,407

Intangible asset impairment charge

18,167

-

18,167

-

Litigation award

-

-

101,200

-

Total operating expenses

122,851

94,868

513,436

361,008

Interest and other expense, net:

Interest income

241

193

832

760

Interest expense

(6,971
)

(1,667
)

(17,933
)

(6,672
)

Other (expense) income, net

(225
)

(345
)

2,078

(264
)

Total interest and other expense, net

(6,955
)

(1,819
)

(15,023
)

(6,176
)

(Loss) income before income taxes

(16,674
)

9,515

(100,064
)

25,914

Income tax (benefit) expense

(6,328
)

(52,018
)

(29,043
)

(50,619
)

Consolidated net (loss) income

$
(10,346
)

$
61,533

$
(71,021
)

$
76,533

Net loss attributable to noncontrolling interests

$
(310
)

$
(399
)

$
(1,172
)

$
(1,752
)

Net (loss) income attributable to NuVasive, Inc.

$
(10,036
)

$
61,932

$
(69,849
)

$
78,285

Net (loss) income per share attributable to NuVasive, Inc.:

Basic

$
(0.24
)

$
1.57

$
(1.73
)

$
1.99

Diluted

$
(0.24
)

$
1.39

$
(1.73
)

$
1.85

Weighted average shares outstanding:

Basic

42,172

39,486

40,372

39,251

Diluted

42,172

45,488

40,372

45,514

Stock-based compensation is included in operating expenses in the following categories:

Sales, marketing and administrative

$
7,627

$
6,099

$
29,583

$
24,945

Research and development

654

822

2,487

3,280

$
8,281

$
6,921

$
32,070

$ 28,225

NuVasive, Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

December 31,

2011

2010

ASSETS

Current assets:

Cash and cash equivalents

$
163,492

$
92,597

Short-term marketable securities

146,228

86,458

Accounts receivable, net

88,350

74,361

Inventory

119,313

107,577

Deferred tax assets

54,550

4,425

Prepaid expenses and other current assets

19,904

6,353

Total current assets

591,837

371,771

Property and equipment, net

124,754

102,165

Long-term marketable securities

32,503

50,635

Intangible assets, net

108,140

107,121

Goodwill

159,349

103,070

Deferred tax assets, non-current

19,857

52,033

Restricted cash and investments

68,600

5,529

Other assets

18,522

9,705

Total assets

$
1,123,562

$
802,029

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$
51,744

$
58,995

Accrued payroll and related expenses

22,215

17,266

Litigation liability

101,200

-

Acquisition-related liabilities

32,221

32,715

Total current liabilities

207,380

108,976

Senior Convertible Notes

394,019

230,000

Long-term acquisition-related liabilities

-

326

Deferred tax liabilities

3,952

3,685

Other long-term liabilities

13,461

12,810

Commitments and contingencies

Noncontrolling interests

10,705

11,877

Stockholders' equity:

Common stock

42

40

Additional paid-in capital

674,790

545,114

Accumulated other comprehensive income

477

616

Accumulated deficit

(181,264
)

(111,415
)

Total stockholders' equity

494,045

434,355

Total liabilities and stockholders' equity

$
1,123,562

$
802,029

NuVasive, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

Year Ended December 31,

2011

2010

2009

Operating activities:

Consolidated net (loss) income

$
(71,021
)

$
76,533

$
4,437

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

Depreciation and amortization

36,242

36,737

29,841

Deferred income tax benefit

(30,967
)

(53,664
)

-

Amortization of debt discount

6,108

-

-

Amortization of debt issuance costs

1,816

1,493

1,493

Stock-based compensation

32,070

28,225

23,793

Intangible asset impairment charge

18,167

-

-

Loss on repurchase of Senior Convertible Notes, net

332

-

-

Gain recognized on change in fair value of derivatives

(2,387
)

-

-

Leasehold abandonment (reversal)

-

-

(1,997
)

Allowance for doubtful accounts and sales return reserve

1,345

(995
)

2,211

Allowance for excess and obsolete inventory, net of write-offs

6,028

1,607

2,297

Accretion of contingent consideration

980

962

5

Other non-cash adjustments

5,247

3,844

1,861

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

Accounts receivable

(9,929
)

(17,865
)

(7,828
)

Inventory

(17,170
)

(18,664
)

(23,133
)

Prepaid expenses and other current assets

(14,396
)

(2,105
)

6

Accounts payable and accrued liabilities

(3,385
)

11,596

5,932

Litigation liability

101,200

-

Accrued payroll and related expenses

2,685

(1,877
)

7,501

Net cash provided by operating activities

62,965

65,827

46,419

Investing activities:

Cash paid for acquisitions and investments

(35,375
)

(973
)

(46,055
)

Purchases of property and equipment

(53,370
)

(45,846
)

(32,878
)

Purchases of marketable securities

(253,210
)

(203,415
)

(157,278
)

Sales of marketable securities

151,966

204,439

108,308

Purchases of restricted investment

(4,536
)

-

-

Payment for specific rights in connection with supply agreement, net of refund received

(5,000
)

-

-

Other assets

(2,199
)

-

-

Net cash used in investing activities

(201,724
)

(45,795
)

(127,903
)

Financing activities:

Proceeds from the sale of warrants

47,898

-

-

Proceeds from the issuance of convertible debt, net of issuance costs

391,445

-

-

Purchase of convertible note hedges

(80,097
)

-

-

Repurchase of 2013 Senior Convertible Notes

(154,164
)

-

-

Tax benefits related to stock-based compensation awards

463

186

1,902

Proceeds from the issuance of common stock

6,852

14,831

12,556

Payment of contingent consideration

(1,800
)

-

-

Other assets

(718
)

(7,935
)

-

Net cash provided by financing activities

209,879

7,082

14,458

Effect of exchange rate changes on cash

(225 )

70

121

Increase (decrease) in cash and cash equivalents

70,895

27,184

(66,905
)

Cash and cash equivalents at beginning of year

92,597

65,413

132,318

Cash and cash equivalents at end of year

$
163,492

$
92,597

$
65,413