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NuVasive Reports Second Quarter 2009 Financial Results
Date:7/23/2009

SAN DIEGO, July 23 /PRNewswire-FirstCall/ -- NuVasive, Inc. (Nasdaq: NUVA), a medical device company focused on developing products for minimally disruptive surgical treatments for the spine, announced today financial results for the quarter ended June 30, 2009.

NuVasive reported second quarter revenue of $88.5 million, a 54.1% increase over the $57.4 million for the second quarter 2008 and a 10.6% increase over the $80.0 million for the first quarter 2009.

Gross profit for the second quarter 2009 was $71.8 million and gross margin was 81.1%, compared to a gross profit of $47.8 million and a gross margin of 83.3% for the second quarter 2008. For first quarter 2009, gross profit was $65.2 million and gross margin was 81.5%.

Total operating expenses for the second quarter 2009 were $67.3 million compared to $48.5 million in the second quarter 2008 and $68.7 million in the first quarter 2009. Operating expenses include $0.6 million for Progentix and Cervitech acquisition costs and $1.0 million related to intellectual property litigation.

On a GAAP basis, the Company reported net income of $2.8 million, or $0.07 per share, for the second quarter 2009.

On a non-GAAP basis, the Company reported net income of $12.0 million, or $0.31 per share, for the second quarter 2009. The non-GAAP earnings per share calculations for the second quarter exclude (i) stock based compensation of $6.3 million; (ii) amortization of acquired intangible assets of $1.4 million; (iii) acquisition related costs of $0.6 million; and (iv) intellectual property litigation costs of $1.0 million.

Cash, cash equivalents and short and long-term marketable securities were $180.8 million at June 30, 2009.

Alex Lukianov, Chairman and Chief Executive Officer, said, "Our proprietary XLIF(R) procedure, along with NuVasive's full complementary product suite, is gaining adoption and utilization because it provides significant benefits to patients, doctors and hospitals. We are pleased with our financial performance in the second quarter of 2009 and we look forward to continued market share gains driving revenue growth and increased profitability. We are determined to become the #4 global spine company by developing innovative products and by proliferating a corporate culture of speed that generates results."

Updated 2009 Financial Guidance

NuVasive is updating its full year 2009 financial guidance as follows:

Revenue:

  • $360 million to $365 million; up from previous guidance of $355 million to $360 million

Gross Margin:

  • Gross Margin of approximately 81%

EPS:

  • GAAP: earnings per share of $0.06 to $0.08; up from previous guidance of $(0.07) to $(0.05)

  • Non-GAAP: earnings per share of $1.03 to $1.05; up from previous guidance of $0.94 to $0.96

  • Earnings per share of $0.25 to $0.27 excluding intellectual property litigation and acquisition related costs per enclosed table; up from previous guidance of $0.11 to $0.13

Reconciliation of Non-GAAP Information

Management uses certain non-GAAP financial measures such as non-GAAP earnings per share, which exclude stock-based compensation, amortization of acquired intangible assets, intellectual property litigation expenses, and acquisition related costs. 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 Second Quarter 2009 Results

      (in thousands, except per share amounts)           $   Per Share
                                                        --- -----------
      GAAP net earnings                             $2,765        $0.07
      IP litigation costs                              995         0.03
      Acquisition related costs                        563         0.01
                                                       ---         ----
      Earnings excluding other adjustments           4,323         0.11
      Non-cash stock-based compensation              6,317         0.16
      Amortization of acquired intangible assets     1,372         0.04
                                                     -----         ----
      Non-GAAP earnings                            $12,012        $0.31
                                                   =======        =====
      Diluted weighted shares outstanding                        38,301
                                                                 ======


                  Reconciliation of Year-to-Date 2009 Results

      (in thousands, except per share amounts)           $   Per Share
                                                        --- -----------
      GAAP net loss (A)                            $(1,537)      $(0.04)
      IP litigation costs                            2,624         0.07
      Acquisition related costs                      2,476         0.07
                                                     -----         ----
      Earnings excluding other adjustments           3,563         0.09
      Non-cash stock-based compensation             12,999         0.34
      Amortization of acquired intangible assets     2,708         0.07
                                                     -----         ----
      Non-GAAP earnings (A)                        $19,270        $0.51
                                                   =======        =====
      Basic weighted shares outstanding                          36,639
                                                                 ======
      Diluted weighted shares outstanding                        37,996
                                                                 ======

    A-  GAAP loss per share is calculated using basic weighted shares
        outstanding;  Non-GAAP earnings per share is calculated using
        diluted weighted shares outstanding.



                Reconciliation of Full Year 2009 Guidance

                                                  Range for Year Ending
                                                    December 31, 2009
                                                  ---------------------
      (in thousands, except per share amounts)           Low    High
      GAAP net earnings per share                      $0.06   $0.08
      IP litigation costs                               0.13    0.13
      Acquisition related costs                         0.06    0.06
                                                        ----    ----
      Earnings per share excluding other adjustments    0.25    0.27
      Non-cash stock-based compensation                 0.65    0.65
      Amortization of acquired intangible assets        0.13    0.13
                                                        ----    ----
      Non-GAAP earnings per share                      $1.03   $1.05
                                                       =====   =====
      Diluted weighted shares outstanding             38,500  38,500
                                                      ======  ======

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. 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 August 24. In addition, a telephonic replay of the call will be available until August 6, 2009. 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 327689.

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 $4.6 billion U.S. spine implant market. Additionally, the Company has expanded into the $1.5 billion global biologics market, the $1.5 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(R) 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(R), a proprietary software-driven nerve avoidance system; MaXcess(R), 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(R), NuVasive has built an entire spine franchise. With nearly 50 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(R).

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 the Company's revenue or profitability projections may prove incorrect because of unexpected difficulty in generating sales or achieving anticipated 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:
    Kevin C. O'Boyle
    EVP & Chief Financial Officer
    NuVasive, Inc.
    858-909-1998
    investorrelations@nuvasive.com

    Investors:
    Patrick F. Williams
    Vice President, Finance & Investor Relations
    NuVasive, Inc.
    858-638-5511
    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  Six Months Ended
                                               June 30,           June 30,
                                          ------------------  ----------------
                                            2009     2008      2009      2008
                                            ----     ----      ----      ----

    Revenues                             $88,481  $57,417  $168,490  $108,601
    Cost of goods sold                    16,710    9,571    31,484    18,666
                                          ------    -----    ------    ------
    Gross Profit                          71,771   47,846   137,006    89,935

    Operating expenses:
      Sales, marketing and
       administrative                     58,149   42,099   116,630    81,416
      Research and development             9,200    6,426    19,393    13,402
      In-process research and development      -        -         -     4,176
                                              --       --        --     -----
    Total operating expenses              67,349   48,525   136,023    98,994

    Interest income (expense) and
     other, net                           (2,110)     184    (3,203)      910
    Net loss attributable to
     noncontrolling interest                 453        -       683         -
                                             ---        -       ---         -
    Total other income (expense)          (1,657)     184    (2,520)      910

                                          ------    -----   -------   -------
    Net earnings (loss) attributable to
     NuVasive, Inc.                       $2,765    $(495)  $(1,537)  $(8,149)
                                          ======    =====   =======   =======


    Net income (loss) per share:
      Basic and diluted net income
       (loss) per share                    $0.07   $(0.01)   $(0.04)   $(0.23)
                                           =====   ======    ======    ======
      Weighted average shares - basic     36,910   35,663    36,639    35,543
                                          ======   ======    ======    ======
      Weighted average shares - diluted   38,301   35,663    36,639    35,543
                                          ======   ======    ======    ======

    Stock-based compensation is included
     in operating expenses in the
     following categories:
      Sales, marketing and
       administrative                     $5,243   $4,538   $10,484    $9,042
      Research and development             1,074      610     2,515     1,256
                                           -----      ---     -----     -----
                                          $6,317   $5,148   $12,999   $10,298
                                          ======   ======   =======   =======



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


                                          June 30, 2009    December 31, 2008
                                         ---------------   -----------------
    ASSETS
    Current assets:
      Cash and cash equivalents                 $136,326           $132,318
      Short-term marketable securities            25,100             45,738
      Accounts receivable, net                    48,528             51,622
      Inventory, net                              87,130             68,834
      Prepaid expenses and other current assets    3,825              3,466
                                                   -----              -----
    Total current assets                         300,909            301,978
    Property and equipment, net                   77,830             73,686
    Long-term marketable securities               19,351             45,305
    Goodwill                                      87,265              2,332
    Intangible assets, net                       105,965             54,767
    Other assets                                   7,674              9,338
                                                   -----              -----
    Total assets                                $598,994           $487,406
                                                ========           ========
    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable and accrued liabilities   $21,381            $26,633
      Accrued payroll and related expenses        16,464             17,132
      Acquisition milestone liabilities           12,350                  -
      Royalties payable                            2,255              1,722
                                                   -----              -----
    Total current liabilities                     52,450             45,487
    Senior convertible notes                     230,000            230,000
    Other long-term liabilities                   59,958             24,288
    Commitments and contingencies

    Noncontrolling interests                      14,317                  -

    Stockholders' equity:
        Common stock                                  38                 36
        Additional paid-in capital               439,303            383,293
        Accumulated other comprehensive loss         (27)              (190)
        Accumulated deficit                     (197,045)          (195,508)
                                                --------           --------
    Total stockholders' equity                   242,269            187,631
                                                 -------            -------
    Total liabilities and stockholders' equity  $598,994           $487,406
                                                ========           ========



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

                                                          Six Months Ended
                                                              June 30,
                                                         -----------------
                                                           2009      2008
                                                           ----      ----

     Operating activities:
       Net loss                                          $(1,537)  $(8,149)
       Adjustments to reconcile net loss to net cash
        used in operating activities:
         Depreciation and amortization                    12,811     8,449
         In-process research and development                   -     4,176
         Stock-based compensation                         12,999    10,298
         NeoDisc technology costs                              -         -
         Other non-cash adjustments                        3,328       312
         Noncontrolling interest                            (683)        -
         Changes in operating assets and liabilities:
           Accounts receivable                             2,221    (5,044)
           Inventory                                     (19,939)  (16,496)
           Prepaid expenses and other current assets        (694)   (1,707)
           Accounts payable and accrued liabilities         (288)    3,361
           Accrued payroll and related expenses             (652)   (1,282)
                                                            ----    ------
       Net cash used in operating activities               7,566    (6,082)
     Investing activities:
         Cash paid for acquisitions                            -    (6,256)
         Cash paid for Cervitech acquisition             (24,055)        -
         Investment in Progentix                         (10,000)        -
         Acquisition related milestone payments          (10,000)        -
         Purchases of property and equipment             (12,440)  (25,686)
         Purchases of short-term marketable securities   (12,004)  (72,799)
         Sales of short-term marketable securities        49,295    19,300
         Purchases of long-term marketable securities    (17,674)  (51,709)
         Sales of long-term marketable securities         26,975     3,500
         Other assets                                          -       543
                                                              --       ---
        Net cash provided by / (used in) investing
         activities                                       (9,903) (133,107)
     Financing activities:
         Payments of long-term liabilities                     -      (300)
         Issuance of convertible debt,  net of costs           -   222,414
         Purchase of convertible note hedges                   -   (45,758)
         Sale of warrants                                      -    31,786
         Issuance of common stock                          6,297     5,356
                                                           -----     -----
       Net cash provided by financing activities           6,297   213,498
         Effect of exchange rate changes on cash              48         -
                                                              --         -
       Increase in cash and cash equivalents               4,008    74,309
     Cash and cash equivalents at beginning of year      132,318    61,915
                                                         -------    ------
     Cash and cash equivalents at end of year           $136,326  $136,224
                                                        ========  ========
     Supplemental disclosure of non-cash transactions:
     Leasehold improvements paid by lessor                          $2,848


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SOURCE NuVasive, Inc.
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