8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 26, 2016

NUVASIVE, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-50744	33-0768598
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

7475 Lusk Boulevard, San Diego, California 92121

(Address of principal executive offices) (Zip Code)

(858) 909-1800

(Registrant’s telephone number, including area code)

n/a

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On July 26, 2016, NuVasive, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2016. A copy of this press release is furnished as Exhibit 99.1 to this Current Report.

Item 7.01 Regulation FD Disclosure.

During a conference call scheduled to be held at 1:30 p.m. Pacific Time on July 26, 2016, the Company’s Chairman and Chief Executive Officer, Chief Financial Officer, and President and Chief Operating Officer will discuss the Company’s results for the quarter ended June 30, 2016 and the Company’s outlook for the year ending December 31, 2016. The slide presentation for the conference call is furnished as Exhibit 99.2 to this Current Report.

The information contained in this Current Report and the Exhibits hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

99.1	Press release issued by NuVasive, Inc. on July 26, 2016
99.2	Slide presentation

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

NUVASIVE, INC.
By:	/s/ Quentin Blackford
	Quentin Blackford
	Executive Vice President and Chief Financial Officer

Date: July 26, 2016

EXHIBIT INDEX

Exhibit Number	Description
99.1	Press release issued by NuVasive, Inc. on July 26, 2016
99.2	Slide presentation

EX-99.1

Exhibit 99.1

NEWS RELEASE

NUVASIVE REPORTS SECOND QUARTER 2016 FINANCIAL RESULTS

Company Delivers Double-Digit Revenue Growth and Increases Full Year 2016 Guidance

SAN DIEGO, CA – July 26, 2016 - NuVasive, Inc. (Nasdaq: NUVA), a leading medical device company focused on transforming spine surgery with minimally disruptive, procedurally-integrated solutions, announced today financial results for the quarter ended June 30, 2016.

Second Quarter 2016 Highlights

• Revenue increased 16.4% to $236.2 million, or 16.1% on a constant currency basis;

• GAAP operating profit margin of 25.4%; Non-GAAP operating profit margin up 60 basis points from prior year to 15.9%;

• GAAP diluted earnings per share of $0.57; Non-GAAP diluted earnings per share up 28% from prior year to $0.40; and

• Acquired Biotronic NeuroNetwork to support spine service line partnership offerings.

“NuVasive delivered another strong quarter, outperforming the spine market to deliver double-digit revenue growth, expanding our operating profitability year-over-year and delivering earnings growth of 28%,” said Gregory T. Lucier, chairman and chief executive officer of NuVasive. “Our results were driven by strong growth in our international business, which benefitted from our continued revitalization efforts, and strength in our U.S. spinal hardware business, where adoption of our integrated Global Alignment platform drove momentum in sales of our procedurally integrated solutions. With this growth in our geographies and businesses for the first half of the year, and the addition of the Biotronic NeuroNetwork business, we are raising our full year guidance for 2016.”

NuVasive achieved several strategic milestones in the second quarter. The Company completed the acquisition of Biotronic NeuroNetwork on July 1, and combined the service offerings of Biotronic with its Impulse Monitoring business to form NuVasive Clinical Services. This new division doubles the Company’s service line footprint and will provide intraoperative neurophysiological monitoring services to surgeons and healthcare facilities in more than 75,000 U.S. cases annually. Also, the Company reached a definitive agreement with Medtronic to settle more than eight years of ongoing patent litigation between the two companies, removing the associated expense of legal proceedings and providing a clear protocol for resolution of potential patent disputes in the future.

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

Second Quarter 2016 Results

NuVasive’s financial results for the second quarter 2016 are inclusive of results from Ellipse Technologies, Inc. and Mega Surgical, as both of these previously disclosed acquisitions were completed in the first quarter 2016. Ellipse Technologies now operates as a wholly owned subsidiary under the renamed legal entity NuVasive Specialized Orthopedics, Inc. (NSO).

1

NuVasive reported second quarter 2016 total revenue of $236.2 million, a 16.4% increase compared to $202.9 million for the second quarter 2015. On a constant currency basis, second quarter 2016 total revenue increased 16.1% compared to the same period last year.

For the second quarter 2016, GAAP and non-GAAP gross profit was $176.5 million and $183.8 million, respectively, while GAAP and non-GAAP gross margin was 74.7% and 77.8%, respectively. These results compared to GAAP and non-GAAP gross profit of $154.5 million and GAAP and non-GAAP gross margin of 76.1% for the second quarter 2015. Total GAAP and non-GAAP operating expenses were $116.4 million and $146.4 million, respectively, for the second quarter of 2016. These results compared to GAAP and non-GAAP operating expenses of $128.6 million and $123.5 million, respectively, for the second quarter 2015.

During the second quarter, the Company elected to early adopt the new FASB Accounting Standards Update (ASU) for employee share-based payment accounting ahead of the mandatory 2017 effective date for all U.S. public companies. The Company adopted the ASU in the second quarter 2016, effective from January 1, 2016. In connection with the adoption, the Company recast its first quarter 2016 results. The impact of the adoption had a favorable impact to the first and second quarter results, and will be favorable for full year 2016. The adoption of the ASU, together with the Company’s ongoing tax planning initiatives, are expected to drive significant improvements in the Company’s effective tax rate over time.

NuVasive reported a GAAP net income of $30.2 million, or $0.57 per share, for the second quarter 2016 compared to $10.3 million, or $0.20 per share, for the second quarter 2015.

On a non-GAAP basis, the Company reported net income of $20.6 million, or $0.40 per share for the second quarter 2016 compared to $15.7 million, or $0.31 per share, for the second quarter 2015.

Cash, cash equivalents and short and long-term marketable securities were approximately $331.0 million at June 30, 2016.

Annual Guidance for 2016

The Company provided the following updated projections to its full year 2016 guidance, which contemplates the impact of the Company’s performance for the first half of 2016, the acquisition of Biotronic NeuroNetwork and the impact from the adoption of the ASU for employee share-based payment accounting, as well as expected changes in foreign currency rates:

• Revenue of approximately $962.0 million, which includes a $1 million benefit from currency or approximately 18.6% growth compared to revenue of $811.1 million for 2015; versus a prior expectation of $928.0 million for 2016;

• Non-GAAP diluted earnings per share of approximately $1.64, an increase of approximately 25.0% compared to non-GAAP diluted earnings per share of $1.31 for 2015; versus a prior expectation of $1.48 for 2016;

• Non-GAAP operating profit margin of approximately 16.0%, an increase of 60 basis points compared to 15.4% for 2015; versus a prior expectation of approximately 15.8% for 2016;

• Adjusted EBITDA margin of approximately 25.4%, an increase of approximately 20 basis points, in line with the prior expectation, compared to 25.2% for 2015; and

• Non-GAAP effective tax expense rate of approximately 37%; versus a prior expectation of approximately 41% for 2016.

Supplementary Financial Information

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

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Reconciliation of Full Year EPS Guidance

				2016 Guidance
	2015
	Actuals			Prior 1, 2			Current 1, 3
GAAP net income per share	$	1.26		$	0.20		$	0.84
Impact of change from basic to diluted share count		0.03			—			0.03
GAAP net income per share, adjusted to diluted Non-GAAP share count	$	1.30		$	0.20		$	0.88
Litigation liability gain		(0.82	)		—			(0.83	)
Business transition costs 4		0.27			0.19			0.20
Non-cash interest expense on convertible notes		0.31			0.38			0.38
Non-cash purchase accounting adjustments on acquisitions 5		—			0.29			0.28
Loss on repurchase of convertible notes		—			0.34			0.34
Amortization of intangible assets		0.24			0.76			0.73
In-process research & development		0.02			—			—
Tax effect of adjustments 6		(0.01	)		(0.69	)		(0.34	)
Non-GAAP earnings per share	$	1.31		$	1.48		$	1.64
GAAP Weighted shares outstanding - basic		48,687			49,984			50,004
Non-GAAP Weighted shares outstanding - diluted		51,110			51,335			52,000

¹  Prior guidance provided April 26, 2016. Current guidance reflects guidance provided July 26, 2016, as updated for the anticipated impact of the Biotronic Neuronetwork acquisition, the adoption of ASU 2016-09 Stock Compensation, as well as expected changes in currency.

²  Effective tax expense rate of ~63% applied to GAAP earnings and ~41% applied to Non-GAAP earnings.

³  Effective tax expense rate of ~41% applied to GAAP earnings and ~37% applied to Non-GAAP earnings.

⁴  Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs and other costs directly associated with such activities.

⁵  Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.

⁶  The impact on results from taxes include tax effecting the adjustments above at the statutory rate as well as taking into account discrete items and including those discrete items in the annual effective tax rate calculation. The Company also includes those adjustments that would have benefited the tax rate in lieu of the above adjustments as part of the Company’s tax filings. The impact of the changes to the tax rate results in an annual estimated rate of ~37% on a non-GAAP basis. The Company adopted ASU 2016-09 Stock Compensation in Q2 2016 which was effective as of January 1, 2016 with retrospective adjustment. The result of the retrospective adjustment resulted in a change in the Q1 2016 quarterly effective tax rate on a non-GAAP basis from 41% to 36%.

3

Reconciliation of Non-GAAP Operating Margin %

				2016 Guidance
(in thousands, except %)	2015 Actuals			Prior 1			Current 1
Non-GAAP Gross Margin % [A]		76.0	%		77.4	%		76.4	%
Non-cash purchase accounting adjustments on acquisitions 2		0.0	%		(1.6	%)		(1.5	%)
GAAP Gross Margin [B]		76.0	%		75.8	%		74.9	%
GAAP & Non-GAAP Sales, Marketing & Administrative Expense [C]		56.4	%		56.0	%		55.4	%
Non-GAAP Research & Development Expense [D]		4.3	%		5.6	%		5.1	%
In-process research & development		0.1	%		0.0	%		0.0	%
GAAP Research & Development Expense [E]		4.4	%		5.6	%		5.1	%
Litigation liability [F]		(5.2	%)		0.0	%		(4.5	%)
Amortization of intangible assets [G]		1.5	%		4.2	%		4.0	%
Business transition costs [H] 3		1.7	%		1.3	%		1.2	%
Non-GAAP Operating Margin % [A - C - D]		15.4	%		15.8	%		16.0	%
GAAP Operating Margin % [B - C - E - F - G - H]		17.1	%		8.7	%		13.7	%

¹  Prior guidance provided April 26, 2016. Current guidance reflects guidance provided July 26, 2016, as updated for the anticipated impact of the Biotronic Neuronetwork acquisition, the adoption of ASU 2016-09 Stock Compensation, as well as expected changes in currency.

²  Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.

³  Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs and other costs directly associated with such activities.

4

Reconciliation of EBITDA %

				2016 Guidance
(in thousands, except %)	2015			Prior 1			Current 1
	Actuals
Net Income / (Loss)		8.2	%		1.1	%		4.7	%
Interest (income) / expense, net		3.4	%		6.1	%		5.9	%
Provision for income taxes		5.8	%		1.7	%		3.2	%
Depreciation and amortization 2		8.1	%		10.9	%		10.5	%
EBITDA		25.5	%		19.8	%		24.3	%
Non-cash stock based compensation		3.1	%		3.0	%		2.9	%
Business transition costs 2		1.7	%		1.1	%		1.1	%
Non-cash purchase accounting adjustments on acquisitions 3		0.0	%		1.6	%		1.5	%
In-process research & development		0.1	%		0.0	%		0.0	%
Litigation liability gain		(5.2	%)		0.0	%		(4.5	%)
Adjusted EBITDA		25.2	%		25.4	%		25.4	%

¹  Prior guidance provided April 26, 2016. Current guidance reflects guidance provided July 26, 2016, as updated for the anticipated impact of the Biotronic Neuronetwork acquisition, the adoption of ASU 2016-09 Stock Compensation, as well as expected changes in currency.

²  Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs and other costs directly associated with such activities.

³  Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.

Reconciliation of Non-GAAP Information

Management uses certain non-GAAP financial measures such as non-GAAP earnings per share, non-GAAP net income, non-GAAP operating expenses and non-GAAP operating profit margin, which exclude amortization of intangible assets, purchase accounting related charges, leasehold related charges, integration related expenses associated with acquired businesses, one-time restructuring and acquisition related items, CEO transition related costs, certain litigation charges, non-cash interest expense and/or losses on convertible notes, and the impact from taxes related to these items, including those taxes that would have occurred in lieu of these items. Management also uses certain non-GAAP measures which are intended to exclude the impact of foreign exchange currency fluctuations. The measure constant currency is the use of 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, purchase accounting related changes, leasehold related charges, integration related expenses associated with acquired businesses, CEO transition related costs, certain litigation liabilities, acquisition related items 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.

5

Reconciliation of Second Quarter 2016 Results

GAAP Net Income per Share to Non-GAAP Earnings per Share

(in thousands, except per share data)	Adjustments			Diluted Earnings Per Share
GAAP net income	$	30,213		$	0.57
Litigation liability gain		(43,310	)
Business transition costs 1		2,756
Non-cash interest expense on convertible notes		5,051
Non-cash purchase accounting adjustments on acquisitions 2		7,374
Amortization of intangible assets		10,281
Tax effect of adjustments 3		8,255
Adjustments to GAAP net income		(9,593	)		(0.17	)
Non-GAAP earnings	$	20,620			0.40
GAAP weighted shares outstanding - diluted					53,159
Non-GAAP weighted shares outstanding - diluted					51,928

¹ Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs and other costs directly associated with such activities.

² Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.

³ The impact on results from taxes include tax effecting the adjustments above at the statutory rate as well as taking into account discrete items and including those discrete items in the annual effective tax rate calculation. The Company also includes those adjustments that would have benefited the tax rate in lieu of the above adjustments as part of the Company’s tax filings. The impact of the changes to the tax rate results in an annual estimated rate of 36.5% on a non-GAAP basis. The result of these adjustments is a change in the quarterly effective tax rate from 40% to 37%.

6

Reconciliation of Year To Date 2016 Results

GAAP Net Income per Share to Non-GAAP Earnings per Share

(in thousands, except per share data)	Adjustments			Diluted Earnings Per Share
GAAP net income	$	26,845		$	0.51
Litigation liability gain		(43,310	)
Business transition costs 1		8,063
Non-cash interest expense on convertible notes		9,361
Non-cash purchase accounting adjustments on acquisitions 2		12,290
Loss on repurchases of convertible notes		17,444
Amortization of intangible assets		17,830
Tax effect of adjustments 3		(10,749	)
Adjustments to GAAP net income		10,929			0.22
Non-GAAP earnings	$	37,774		$	0.73
GAAP weighted shares outstanding - diluted					52,354
Non-GAAP weighted shares outstanding - diluted					51,443

¹  Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs and other costs directly associated with such activities.

²  Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.

³ The impact on results from taxes include tax effecting the adjustments above at the statutory rate as well as taking into account discrete items and including those discrete items in the annual effective tax rate calculation. The Company also includes those adjustments that would have benefited the tax rate in lieu of the above adjustments as part of the Company’s tax filings. The impact of the changes to the tax rate results in an annual estimated rate of 36.5% on a non-GAAP basis. The result of these adjustments is a change in the annual effective tax rate from 29% to 36.5%. The Company adopted ASU 2016-09 Stock Compensation in Q2 2016 which was effective as of January 1, 2016 with retrospective adjustment. The result of the retrospective adjustment resulted in a change in the Q1 2016 quarterly effective tax rate on a non-GAAP basis from 41% to 36%.

7

Reconciliation of Second Quarter and Six Months 2016 Results

GAAP net income to Adjusted EBITDA

(in thousands, except per share data)	Three months ended June 30, 2016			Six months ended June 30, 2016
GAAP net income	$	30,213		$	26,845
Interest (income) / expense, net 1		10,131			35,719
Provision for income taxes		19,891			10,411
Depreciation and amortization		24,813			45,707
EBITDA	$	85,048		$	118,682
Litigation liability gain		(43,310	)		(43,310	)
Business transition costs 2		2,756			8,063
Non-cash purchase accounting related charges 3		7,374			12,290
Non-cash stock based compensation		7,865			12,357
Adjusted EBITDA	$	59,733		$	108,082
As a percentage of revenue		25.3	%		23.9	%

¹  Included in Interest (income) / expense, net for the six months ended June 30, 2016 is loss on extinguishment of debt for $17.4 million.

² Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs and other costs directly associated with such activities.

³  Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.

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 second quarter 2016. 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 website at www.nuvasive.com. After the live webcast, the call will remain available on NuVasive’s website through August 26, 2016. In addition, a telephone replay of the call will be available until August 5, 2016. 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: 13640365.

About NuVasive

NuVasive, Inc. (NASDAQ: NUVA) is a world leader in minimally invasive, procedurally-integrated spine solutions. From complex spinal deformity to degenerative spinal conditions, NuVasive is transforming spine surgery with innovative technologies designed to deliver reproducible and clinically proven surgical outcomes. NuVasive’s highly differentiated, procedurally-integrated solutions include access instruments, implantable hardware and software systems for surgical planning and reconciliation technology that centers on achieving the global alignment of the spine. With $811 million in revenues (2015), NuVasive has an approximate 1,900 person workforce in more than 40 countries around the world. For more information, please visit www.nuvasive.com.

8

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. In addition, this news release contains selected financial results from the second quarter 2016, as well as projections for 2016 financial guidance and longer-term financial performance goals. The numbers for the second quarter 2016 are prior to the completion of review procedures by the Company’s external auditors and are subject to adjustment. In addition, the Company’s projections for 2016 financial guidance and longer-term financial performance goals represent current estimates, including initial estimates of the potential benefits, synergies and cost savings associated with acquisitions, which are subject to the risk of being inaccurate because of the preliminary nature of the forecasts, the risk of further adjustment, or unanticipated difficulty in selling products or generating expected profitability. 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; the risk of further adjustment to financial results or future financial expectations; unanticipated difficulty in selling products, generating revenue or producing expected profitability; the risk that acquisitions will not be integrated successfully or that the benefits and synergies from the acquisition may not be fully realized or may take longer to realize than expected; and those other risks and uncertainties more fully 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. The forward-looking statements contained herein are based on the current expectations and assumptions of NuVasive and not on historical facts. NuVasive assumes no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which it was made.

9

NuVasive, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
(unaudited)	2016			2015			2016			2015
Revenue	$	236,210		$	202,910		$	451,314		$	395,293
Cost of goods sold (excluding below amortization of intangible assets)		59,745			48,415			113,971			94,079
Gross profit		176,465			154,495			337,343			301,214
Operating expenses:
Sales, marketing and administrative		134,487			114,680			259,325			227,889
Research and development		11,871			8,774			22,500			18,038
Amortization of intangible assets		10,603			2,974			18,474			5,970
Litigation liability (gain) loss		(43,310	)		568			(43,310	)		(42,007	)
Business transition costs		2,756			1,636			8,063			9,896
Total operating expenses		116,407			128,632			265,052			219,786
Interest and other expense, net:
Interest income		406			344			734			763
Interest expense		(10,537	)		(7,242	)		(19,009	)		(14,368	)
Loss on repurchases of convertible notes		—			—			(17,444	)		—
Other (loss) income, net		(246	)		(281	)		(196	)		143
Total interest and other expense, net		(10,377	)		(7,179	)		(35,915	)		(13,462	)
Income before income taxes		49,681			18,684			36,376			67,966
Income tax expense		(19,891	)		(8,644	)		(10,411	)		(26,529	)
Consolidated net income	$	29,790		$	10,040		$	25,965		$	41,437
Add back net loss attributable to non-controlling interests	$	(423	)	$	(228	)	$	(880	)	$	(391	)
Net income attributable to NuVasive, Inc.	$	30,213		$	10,268		$	26,845		$	41,828
Net income per share attributable to NuVasive, Inc.:
Basic	$	0.60		$	0.21		$	0.54		$	0.87
Diluted	$	0.57		$	0.20		$	0.51		$	0.81
Weighted average shares outstanding:
Basic		50,027			48,545			49,822			48,269
Diluted		53,159			51,681			52,354			51,700

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NuVasive, Inc.

Consolidated Balance Sheets

(in thousands, except par values and share amounts)

	June 30, 2016			December 31, 2015
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	263,082		$	192,339
Short-term marketable securities		54,081			165,423
Accounts receivable, net of allowances of $6,066 and $5,320, respectively		141,917			127,595
Inventory, net		201,901			168,140
Prepaid income taxes		42,852			40,540
Prepaid expenses and other current assets		8,141			8,790
Total current assets		711,974			702,827
Property and equipment, net		171,291			141,441
Long-term marketable securities		13,654			112,332
Intangible assets, net		263,607			85,076
Goodwill		405,569			154,281
Deferred tax assets		14,698			83,691
Restricted cash and investments		7,403			5,615
Other assets		17,714			17,404
Total assets	$	1,605,910		$	1,302,667
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	100,791		$	60,985
Accrued payroll and related expenses		35,268			37,641
Litigation liabilities		45,140			—
Income tax liabilities		1,083			990
Short term senior convertible notes		119,451			—
Total current liabilities		301,733			99,616
Long term senior convertible notes		555,493			372,920
Long-term acquisition-related liabilities					—
Deferred and income tax liabilities, non-current		14,288			8,602
Non-current litigation liabilities		—			88,261
Other long-term liabilities		26,541			14,425
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized, none outstanding		—			—
Common stock, $0.001 par value; 120,000,000 shares authorized at June 30, 2016 and December 31, 2015, 54,868,373 and 52,616,471 issued and outstanding at June 30, 2016 and December 31, 2015, respectively		55			53
Additional paid-in capital		1,017,902			989,387
Accumulated other comprehensive loss		(6,351	)		(12,112	)
Accumulated deficit		(77,161	)		(104,006	)
Treasury stock at cost; 4,681,346 shares and 3,316,794 shares at June 30, 2016 and December 31, 2015, respectively		(233,019	)		(161,788	)
Total NuVasive, Inc. stockholders’ equity		701,426			711,534
Non-controlling interests		6,429			7,309
Total equity	$	707,855		$	718,843
Total liabilities and equity	$	1,605,910		$	1,302,667

11

NuVasive, Inc.

Consolidated Statements of Cash Flows

(in thousands)

	Six Months Ended June 30,
	2016			2015
(unaudited)
Operating activities:
Consolidated net income	$	25,965		$	41,437
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		46,329			32,630
Loss on repurchases of convertible notes		17,444			—
Amortization of non-cash interest		10,943			8,749
Stock-based compensation		12,357			13,493
Reserves on current assets		6,751			4,083
Other non-cash adjustments		8,387			10,669
Deferred income taxes		14,691			19,996
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable		(8,615	)		637
Inventory		(12,019	)		(15,181	)
Prepaid expenses and other current assets		728			1,182
Accounts payable and accrued liabilities		14,273			6,841
Accrued royalties		111			(47,112	)
Accrued payroll and related expenses		(4,356	)		(8,370	)
Litigation liability		(43,310	)		4,795
Income taxes		10,534			(38,666	)
Net cash provided by operating activities		100,213			35,183
Investing activities:
Acquisition of Ellipse Technologies, net of cash acquired		(380,080	)		—
Other acquisitions and investments		(8,079	)		(1,357	)
Purchases of intangible assets		(5,918	)		(28,589	)
Purchases of property and equipment		(52,566	)		(47,976	)
Purchases of marketable securities		(128,956	)		(129,549	)
Proceeds from sales of marketable securities		339,320			164,147
Sales of restricted investments		—			33,809
Purchases of restricted investments		—			(62,625	)
Net cash used in investing activities		(236,279	)		(72,140	)
Financing activities:
Incremental tax benefits related to stock-based compensation awards		—			9,928
Proceeds from the issuance of common stock		6,150			8,360
Payment of contingent consideration		—			(514	)
Purchase of treasury stock		(22,549	)		(43,937	)
Proceeds from issuance of convertible debt, net of issuance costs		634,140			—
Proceeds from sale of warrants		44,850			—
Purchase of convertible note hedge		(111,150	)		—
Repurchases of convertible notes		(343,835	)		—
Proceeds from revolving line of credit		50,000			—
Repayments on revolving line of credit		(50,000	)		—
Other financing activities		(1,545	)		(87	)
Net cash provided by (used in) financing activities		206,061			(26,250	)
Effect of exchange rate changes on cash		748			(543	)
Increase (decrease) in cash and cash equivalents		70,743			(63,750	)
Cash and cash equivalents at beginning of period		192,339			142,387
Cash and cash equivalents at end of period	$	263,082		$	78,637

12

Investor Contact:

Suzanne Hatcher

NuVasive, Inc.

1-858-458-2240

shatcher@nuvasive.com

Media Contact:

Michael Farrington

NuVasive, Inc.

1-858-909-1940

media@nuvasive.com

13

EX-99.2

NuVasive, Inc.

Second Quarter 2016 Results

Supplemental Presentation to Earnings Press Release

July 26, 2016

Exhibit 99.2

©2016 NuVasive®, Inc.

©2016 NuVasive®, Inc.

Forward-Looking Statements

NuVasive

cautions

you

that

statements

included

in

this

presentation

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.

In

addition,

this

presentation

contains

selected

financial

results

from

the

second

quarter

2016,

as

well

as

projections

for

2016

financial

guidance

and

longer-term

financial

performance

goals.

The

numbers

for

the

second

quarter

2016

are

prior

to

the

completion

of

review

procedures

by

the

Company’s

external

auditors

and

are

subject

to

adjustment.

In

addition,

the

Company’s

projections

for

2016

financial

guidance

and

longer-term

financial

performance

goals

represent

current

estimates,

including

initial

estimates

of

the

potential

benefits,

synergies

and

cost

savings

associated

with

acquisitions,

which

are

subject

to

the

risk

of

being

inaccurate

because

of

the

preliminary

nature

of

the

forecasts,

the

risk

of

further

adjustment,

or

unanticipated

difficulty

in

selling

products

or

generating

expected

profitability.

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;

the

risk

of

further

adjustment

to

financial

results

or

future

financial

expectations;

unanticipated

difficulty

in

selling

products,

generating

revenue

or

producing

expected

profitability;

the

risk

that

acquisitions

will

not

be

integrated

successfully

or

that

the

benefits

and

synergies

from

the

acquisition

may

not

be

fully

realized

or

may

take

longer

to

realize

than

expected;

and

those

other

risks

and

uncertainties

more

fully

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.

The

forward-

looking

statements

contained

herein

are

based

on

the

current

expectations

and

assumptions

of

NuVasive

and

not

on

historical

facts.

NuVasive

assumes

no

obligation

to

update

any

forward-looking

statement

to

reflect

events

or

circumstances

arising

after

the

date

on

which

it

was

made.

2

©2016 NuVasive®, Inc.

©2016 NuVasive®, Inc.

Non-GAAP Financial Measures

Management

uses

certain

non-GAAP

financial

measures

such

as

non-GAAP

earnings

per

share,

non-GAAP

net

income,

non-GAAP

operating

expenses

and

non-GAAP

operating

profit

margin,

which

exclude

amortization

of

intangible

assets,

purchase

accounting

related

charges,

leasehold

related

charges,

integration

related

expenses

associated

with

acquired

businesses,

one-time

restructuring

and

acquisition

related

items,

CEO

transition

related

costs,

certain

litigation

charges,

non-cash

interest

expense

and/or

losses

on

convertible

notes,

and

the

impact

from

taxes

related

to

these

items,

including

those

taxes

that

would

have

occurred

in

lieu

of

these

items.

Management

also

uses

certain

non-GAAP

measures

which

are

intended

to

exclude

the

impact

of

foreign

exchange

currency

fluctuations.

The

measure

constant

currency

is

the

use

of

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,

purchase

accounting

related

changes,

leasehold

related

charges,

integration

related

expenses

associated

with

acquired

businesses,

CEO

transition

related

costs,

certain

litigation

liabilities,

acquisition

related

items

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.

This

presentation

is

intended

to

accompany

the

Company’s

second

quarter

2016

earnings

announcement,

which

includes

financial

results

reported

on

a

GAAP

and

non-GAAP

basis.

For

reconciliations

of

non-GAAP

financial

measures

to

the

comparable

GAAP

financial

measure,

please

refer

to

the

earnings

announcement,

as

well

as

supplemental

financial

information

posted

on

the

Investor

Relations

section

of

the

Company’s

corporate

website

at

www.nuvasive.com.

3

©2016 NuVasive®, Inc.

©2016 NuVasive®, Inc.

Double-digit revenue growth and increase in full year 2016 guidance

Second Quarter 2016 Performance Highlights*

Reported double-digit revenue growth of 16.4% to $236.2M, or 16.1%

constant

currency;

excluding

NuVasive

Specialized

Orthopedics,

Inc

(NSO),

core revenue grew 9.0%, or 8.6% constant currency

Delivered ongoing profitability improvement with GAAP operating profit

margin of 25.4%; non-GAAP operating profit margin expansion to 15.9% or 60

bps; excluding NSO impact, non-GAAP operating profit margin was 16.2%

Drove GAAP diluted earnings per share of $0.57; non-GAAP diluted earnings

per share up 28% to $0.40

Increased full year 2016 guidance: revenue growth of 18.6% to $962.0M, or

~18.5% constant currency; non-GAAP operating profit margin to ~16.0%;

adjusted EBITDA margin to ~25.4%; and non-GAAP diluted earnings per share

of $1.64, a 25.0% increase

4

Another strong quarter, outperforming the spine market and delivering double-

digit revenue growth while expanding our operating profitability year over year

*Performance growth reflects comparison to prior year period; for additional details regarding full year 2016 guidance, see slide 14.

©2016 NuVasive®, Inc.

Operational excellence

delivering significant

margin expansion

Driving organic growth

with numerous inorganic

opportunities available

Industry disruptor

adding value and

addressing unmet needs

NuVasive’s

Formula for Success

Fueling 2016 strategic agenda with proven approach to win

©2016 NuVasive®, Inc.

5

©2016 NuVasive®, Inc.

Second Quarter 2016 Revenue Highlights

U.S. SPINAL HARDWARE

Includes All Implants, Fixation, MAGEC®

& PRECICE®

Up 18.3% in 2Q16

Key Performance Factors:

Continued Adoption of Core Product

Areas within iGA

Platform, Strength

Across All Procedural Categories, and

Addition of NSO Portfolio

U.S. SURGICAL SUPPORT

Up 3.5% in 2Q16

Key Performance Factors:

Driven By Growth in M5

Neuromonitoring

Disposables

INTERNATIONAL

Up 33.3%

*

in 2Q16

Includes Puerto Rico

Key Performance Factors:

Strong Growth In EMEA and

AsiaPac

Regions

Strong revenue performance in key growth areas

*Constant currency basis

Includes Biologics, IOM Services

& Disposables

©2016 NuVasive®, Inc.

6

©2016 NuVasive®, Inc.

Non-GAAP Measures

2Q16

Actuals

2Q16 YoY

Performance Factors

Gross Margin

77.8%

170

bps driven

by med device tax repeal &

favorable contribution from NSO

Sales, Marketing

& Admin.

56.9%

40

bps driven by addition of NSO

Results included ~70 bps headwind from

non-cash share-based compensation

Research & Development

5.0%

70

bps driven by investments

in core

NUVA platform, NSO

technology

&

procedural offerings

Operating Profit Margin

15.9%

60 bps improvement from prior year while

increasing investment in R&D by ~70 bps.

Results included ~70 bps headwind from

non-cash share-based compensation

EPS

$0.40

$0.09; ~28% YoY

growth

Adjusted

EBITDA Margin

25.3%

40 bps

Operating leverage story continues to play out

Second Quarter 2016 P&L Performance

©2016 NuVasive®, Inc.

7

Driving Improved Financial Profile

Disciplined approach to driving profitability

resulting in meaningful improvements in

Adjusted EBITDA profile

Future initiatives

•

Significantly reducing inventory days

on hand

•

Reducing CapEx

burn from ~9% to

~6% of revenue over time through

better set configuration and

utilization

Incremental focus on improving the

working capital profile and CapEx

spending will drive incremental

gains in the free cash profile of the

company

*NuVasive financial performance guidance as of July 26, 2016

*

Improving Adjusted EBITDA profile

©2016 NuVasive®, Inc.

8

$144

$167

$204

~$236

~$244

$125

$145

$165

$185

$205

$225

$245

$265

2013

2014

2015

2016E

Adjusted EBITDA

(In Millions)

©2016 NuVasive®, Inc.

Improving Non-GAAP Operating Profit Margin

Driving Improved Financial Profile

FY13-16: 680 bps improvement

•

Long term commitment to drive at

least 100 bps of improvement

annually in the core business

•

Longer term goal of 25% with key

levers identified

–

Sales force efficiencies

–

International scalability

–

In-house manufacturing

–

Asset efficiencies

*Includes 100 bps of headwinds due to NSO acquisition

Increased focus on driving improved

profitability through disciplined

spending and improved efficiencies in

core business while adding acquired

businesses that complement the

overall financial goals

9.2%

11.4%

15.4%

15.8%

~16%

©2016 NuVasive®, Inc.

9

0%

5%

10%

15%

20%

2013

2014

2015

2016E

Non-GAAP Operating

Profit Margin

*

©2016 NuVasive®, Inc.

©2016 NuVasive®, Inc.

Driving Improved Tax Rate

10

Increased focus on driving improved tax rate through international scale and domestic

tax planning

*NuVasive financial performance guidance as of July 26, 2016

42%

37%

34%

32%

30%

28%

25%

27%

29%

31%

33%

35%

37%

39%

41%

43%

2015

2016E

2017E

2018E

2019E

2020E

Long Term Tax Rate Goals

Operational Improvements

Taking Hold

•

Global tax planning initiatives are

playing through

•

International scale being realized

•

IP migration plans being deployed

•

Building localized capabilities in

country

•

In addition, adoption of Accounting

Policy Changes benefiting rate in

near term

Opportunity to drive non-GAAP

effective tax rate lower by

~1,400 bps over 5 years

*

©2016 NuVasive®, Inc.

©2016 NuVasive®, Inc.

Accelerates

NuVasive’s

transition

from

a

spine

implant

company

to

a

spine

solutions

company

offering

a

broad

range

of

integrated

capabilities

to

deliver

robust

improved

clinical and economic outcomes for patients and hospitals.

•

Delivers

Clinical

Fulfillment:

Enhances

NuVasive’s

spine

service

line

partnership

offering for health system customers, by supporting clinical fulfillment through

enhanced surgical monitoring and oversight capabilities

•

Doubles U.S. Service Footprint: Grows coverage and capabilities in key, complementary

market.

Moves from 45,000+ cases to 75,000 cases annually

•

Creates the Standard of Care:

Able to further deliver high standard of care and

increase the breadth of differentiated products and services offered to health systems

as they seek to build out their spine service line, improving the clinical and economic

value of our procedurally-integrated offerings

•

Attractive financial profile: Expected to be immediately accretive to non-GAAP

earnings per share (EPS) in 2016 and significantly accretive in 2017 and beyond

Strategic Milestone: Completed Biotronic

NeuroNetwork

Acquisition

11

Biotronic, combined with IMI, creates NuVasive Clinical Services – the nation’s

leading intraoperative neuromonitoring services provider

©2016 NuVasive®, Inc.

©2016 NuVasive®, Inc.

Strategic Milestone: Medtronic Settlement

General

•

Reached a definitive agreement with Medtronic to settle over 8 years of

ongoing patent litigation between the two companies

•

Removes associated expense of the legal proceedings and provides a clear

protocol for resolution of potential patent disputes in the future

•

Removes the overhang of the litigation, allowing NuVasive to operate freely

in the marketplace, covering our current portfolio and providing for a

standstill for future potential products, such as imaging and navigation

Financial

•

NuVasive

agreed to pay Medtronic $45 million, which is significantly lower

than the Company’s reserve of $88.3 million (as of last quarter); sufficient

liquidity to cover payment

•

Settlement payment to be made in Q3

•

Reduces the risk of on-going litigation as well as the incurred costs of this

type of patent litigation

12

The remaining

~$0.08/share impact on non-

GAAP EPS will be recorded in

the second half of 2016

(~$0.04 each in Q3/Q4)

ASU 2016-09 –

Share-Based Compensation

Background:

New

FASB

guidance

issued

in

March

2016

that

requires

mandatory

adoption

in

2017,

with early adoption permitted. The Company chose to adopt in the second quarter of 2016, which

requires adoption effective as of January 1, 2016. The adoption resulted in a recast of previously

reported first quarter 2016 results and will have an impact on full-year 2016 results.

The primary impact is on the incremental tax benefit/expense from share-based compensation,

which historically would be booked to equity and now impacts the income tax rate. The Company’s

GAAP and non-GAAP financial results are impacted by the adoption.

Q1

$5.5m

$0.11/share

$1.1m

$0.02/share

Q2

$2.7m

$0.05/share

$2.5m

$0.05/share

Financial Impact

For

the three months ended March 31, 2016

As Previously Reported

As Recast

GAAP

diluted loss per share

$(0.18)

$(0.07)

Non-GAAP diluted earnings per share

$0.31

$0.34

GAAP

*

*

Per

share

amounts

reflect

impact

of

rounding

©2016 NuVasive®, Inc.

13

Non-GAAP

©2016 NuVasive®, Inc.

©2016 NuVasive®, Inc.

FY16 Guidance

Performance

Drivers

Revenues

•

As reported

~$962.0M, ~18.5%

YoY

growth^

~$53M NSO contribution, ~$27M Biotronic; ~$1M currency impact

•

U.S. Spinal Hardware

•

U.S. Surgical

Support

•

International

~16.6% YoY

growth

~14.2% YoY

growth

~37.7% YoY

growth

Strong expected lumbar, cervical and NSO product performance

Biotronic

contribution as of July

1, 2016

~36% constant currency impact; comprised

of core NuVasive

growth

of ~20%,

NSO product growth of ~17%

Non-GAAP

Gross Margin

~76.4%

~40 bps increase due to 2-year suspension of med device tax,

partially offset by the lower gross margin profile

of Biotronic

Non-GAAP Sales, Marketing

&

Admin.

~55.4%

~100 bps improvement driven

by core NuVasive asset and

sales

force efficiencies,

support function management, International

scale; partial

improvement related to SM&A profile of Biotronic

Non-GAAP Research &

Development

~5.1%

~80 bps increase in

organic and inorganic investment in innovation

Non-GAAP Operating Profit

Margin

~16.0%

~150 bps

of core NuVasive margin improvement,

primarily offset

by NSO investment

Non-GAAP Earnings Per Share

~$1.64

~25% YoY

growth

Adjusted

EBITDA Margin

~25.4%

~20 bps

increase

Non-GAAP Effective Tax Rate

~37.0%

~500

bps improvement from 42% in 2015; ASU adoption 2016-09

Non-GAAP

diluted WASO

~52.0M shares

Increased from ~51.3M shares due to higher share price impact on

remaining 2017 convertible note dilution;

ASU adoption

2016-09

Reflects impact of acquisitions, convertible note issuance, note repurchases, expected

currency rates & adoption of the ASU

Full Year 2016 Financial Performance Guidance*

14

*NuVasive

financial

performance

guidance

as

of

July

26,

2016;

^Constant

currency

as

reported

©2016 NuVasive®, Inc.

©2016 NuVasive®, Inc.

Relentless focus on driving shareholder value

Why Invest in NuVasive

Industry-leading innovation and

integrated procedural solutions

enables share-taking and

premium pricing

Drive surgeon conversion,

increase service line

partnerships and expand

services integration

Double International revenue

contribution in coming years

Competitively positioned in large and growing global spine market with

favorable transformative dynamics playing to NuVasive strengths

Grow revenues at

multiples of

market in high

single-digit

range*

Achieve ~25%

long-term non-

GAAP operating

profit margin and

~32% adjusted

EBITDA goals*

Optimize tax

structure to help

drive EPS growth

2x the rate of

revenue growth*

Disciplined capital

deployment for

strategic M&A

and partnerships

Set to generate

significant

increases in free

cash flow

*NuVasive financial performance guidance as of July 26, 2016

©2016 NuVasive®, Inc.

15