10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                

Commission File Number: 000-50744

NUVASIVE, INC.

(Exact name of registrant as specified in its charter)

Delaware	33-0768598
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

7475 Lusk Boulevard

San Diego, CA 92121

(Address of principal executive offices)

(858) 909-1800

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period than the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐  (Do not check if a small reporting company)	Small reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of April 29, 2018 there were 51,259,919 shares of the registrant’s common stock (par value $0.001 per share) outstanding.

NuVasive, Inc.

Quarterly Report on Form 10-Q

March 31, 2018

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Cash Flows	6
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
SIGNATURES		40

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NUVASIVE, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except par values and share amounts)

	March 31, 2018			December 31, 2017
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	73,741		$	72,803
Restricted cash and investments		—			3,901
Accounts receivable, net of allowances of $14,734 and $13,026, respectively		188,107			200,220
Inventory, net		257,982			247,138
Prepaid income taxes		16,877			17,209
Prepaid expenses and other current assets		21,102			18,792
Total current assets		557,809			560,063
Property and equipment, net		227,573			215,326
Intangible assets, net		287,600			280,774
Goodwill		563,046			536,926
Deferred tax assets		5,277			6,440
Restricted cash and investments		2,394			1,494
Other assets		27,433			39,117
Total assets	$	1,671,132		$	1,640,140
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	83,136		$	75,767
Contingent consideration liabilities		11,670			18,952
Accrued payroll and related expenses		39,369			55,618
Litigation liabilities		38,190			8,150
Short-term borrowings		55,000			—
Income tax liabilities		3,899			2,908
Total current liabilities		231,264			161,395
Long-term senior convertible notes		587,716			582,920
Deferred and income tax liabilities, non-current		4,900			18,870
Other long-term liabilities		84,856			77,539
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 March 31, 2018 and December 31, 2017, 56,335,550 and 56,164,060 issued and outstanding at March 31, 2018 and December 31, 2017, respectively		60			60
Additional paid-in capital		1,358,759			1,363,549
Accumulated other comprehensive loss		(4,353	)		(6,933	)
(Accumulated deficit) retained earnings		(22,370	)		4,762
Treasury stock at cost; 5,077,543 shares and 5,001,886 shares at March 31, 2018 and December 31, 2017, respectively		(569,700	)		(565,867	)
Total NuVasive, Inc. stockholders’ equity		762,396			795,571
Non-controlling interest		—			3,845
Total equity		762,396			799,416
Total liabilities and equity	$	1,671,132		$	1,640,140

See accompanying Notes to Unaudited Consolidated Financial Statements.

3

NUVASIVE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Three Months Ended March 31,
(unaudited)	2018			2017
Revenue
Product revenue	$	233,515		$	224,955
Service revenue		27,007			24,058
Total revenue		260,522			249,013
Cost of revenue (excluding below amortization of intangible assets)
Cost of products sold		55,191			45,901
Cost of services		18,623			15,542
Total cost of revenue		73,814			61,443
Gross profit		186,708			187,570
Operating expenses:
Sales, marketing and administrative		146,766			140,368
Research and development		14,491			12,414
Amortization of intangible assets		12,425			12,061
Litigation liability loss		28,995			—
Business transition costs		2,253			55
Total operating expenses		204,930			164,898
Interest and other expense, net:
Interest income		134			137
Interest expense		(9,467	)		(9,799	)
Other (expense) income, net		(9,703	)		258
Total interest and other expense, net		(19,036	)		(9,404	)
(Loss) income before income taxes		(37,258	)		13,268
Income tax benefit (expense)		10,126			(1,285	)
Consolidated net (loss) income	$	(27,132	)	$	11,983
Add back net loss attributable to non-controlling interest	$	—		$	(443	)
Net (loss) income attributable to NuVasive, Inc.	$	(27,132	)	$	12,426
Net (loss) income per share attributable to NuVasive, Inc.:
Basic	$	(0.53	)	$	0.25
Diluted	$	(0.53	)	$	0.22
Weighted average shares outstanding:
Basic		51,226			50,566
Diluted		51,226			57,786

See accompanying Notes to Unaudited Consolidated Financial Statements.

4

NUVASIVE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

	Three Months Ended March 31,
(unaudited)	2018			2017
Consolidated net (loss) income	$	(27,132	)	$	11,983
Other comprehensive income:
Unrealized loss on marketable securities, net of tax		—			(2	)
Translation adjustments, net of tax		2,579			1,859
Other comprehensive income		2,579			1,857
Total consolidated comprehensive (loss) income		(24,553	)		13,840
Net loss attributable to non-controlling interest		—			(443	)
Comprehensive (loss) income attributable to NuVasive, Inc.	$	(24,553	)	$	14,283

See accompanying Notes to Unaudited Consolidated Financial Statements.

5

NUVASIVE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Three Months Ended March 31,
(unaudited)	2018			2017
Operating activities:
Consolidated net (loss) income	$	(27,132	)	$	11,983
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		32,090			29,510
Impairment of strategic investment		9,003			—
Amortization of non-cash interest		4,925			5,369
Stock-based compensation		4,134			7,017
Reserves on current assets		4,080			(1,998	)
Other non-cash adjustments		4,456			3,013
Deferred income taxes		(12,671	)		1,440
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable		16,933			1,719
Inventory		(12,126	)		(13,800	)
Prepaid expenses and other current assets		(1,737	)		(2,614	)
Accounts payable and accrued liabilities		1,579			550
Accrued payroll and related expenses		(18,493	)		(12,721	)
Litigation liability		30,040			—
Income taxes		1,294			(1,298	)
Net cash provided by operating activities		36,375			28,170
Investing activities:
Acquisitions and investments		(51,794	)		(2,500	)
Purchases of intangible assets		(2,657	)		(1,249	)
Purchases of property and equipment		(29,109	)		(34,545	)
Net cash used in investing activities		(83,560	)		(38,294	)
Financing activities:
Proceeds from the issuance of common stock		336			410
Purchase of treasury stock		(2,155	)		(10,356	)
Payment of contingent consideration		(8,900	)		—
Proceeds from revolving line of credit		65,000			—
Repayments on revolving line of credit		(10,000	)		—
Other financing activities		(141	)		(181	)
Net cash provided by (used in) financing activities		44,140			(10,127	)
Effect of exchange rate changes on cash		982			758
Decrease in cash, cash equivalents and restricted cash		(2,063	)		(19,493	)
Cash, cash equivalents and restricted cash at beginning of period		78,198			161,048
Cash, cash equivalents and restricted cash at end of period	$	76,135		$	141,555

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on our Unaudited Consolidated Statements of Cash Flows for the periods presented:

	Three Months Ended March 31,
	2018		2017
Cash and cash equivalents	$	73,741	$	134,008
Restricted cash and investments		2,394		7,547
Total cash, cash equivalents and restricted cash shown in the Unaudited Consolidated Statement of Cash Flows	$	76,135	$	141,555

See accompanying Notes to Unaudited Consolidated Financial Statements.

6

NUVASIVE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.    Description of Business and Basis of Presentation

Description of Business

NuVasive, Inc. (the “Company” or “NuVasive”) was incorporated in Delaware on July 21, 1997, and began commercializing its products in 2001. The Company’s principal product offering includes a minimally-disruptive surgical platform called Maximum Access Surgery, or MAS. The MAS platform combines three categories of solutions that collectively minimize soft tissue disruption during spine fusion surgery, provide maximum visualization and are designed to enable safe and reproducible outcomes for the surgeon and the patient. The platform includes the Company’s proprietary software-driven nerve detection and avoidance systems and Intraoperative Monitoring (“IOM”) services and support; MaXcess, an integrated split-blade retractor system; and a wide variety of specialized implants and biologics. To assist with surgical procedures the Company offers a technology platform called Integrated Global Alignment (“iGA”); in which products and computer assisted technology under the MAS platform help achieve more precise spinal alignment. The individual components of the MAS platform, and many of the Company’s products, can also be used in open or traditional spine surgery. The Company continues to focus research and development efforts to expand its MAS product platform and advance the applications of its unique technology into procedurally-integrated surgical solutions. The Company dedicates significant resources toward training spine surgeons on its unique technology and products.

The Company’s primary business model is to loan its MAS systems to surgeons and hospitals that purchase implants, biologics and disposables for use in individual procedures. In addition, for larger customers, the Company’s proprietary nerve monitoring systems, MaXcess and surgical instrument sets are placed with hospitals for an extended period at no up-front cost to them. The Company also offers a range of bone allograft in patented saline packaging, disposables and spine implants, which include its branded CoRoent products and fixation devices such as rods, plates and screws. The Company sells MAS instrument sets, MaXcess and nerve monitoring systems to hospitals, however, such sales are immaterial to the Company’s results of operations.

The Company also designs and sells expandable growing rod implant systems that can be non-invasively lengthened following implantation with precise, incremental adjustments via an external remote controller using magnetic technology called MAGnetic External Control, or MAGEC, which allows for the minimally invasive treatment of early-onset and adolescent scoliosis. This technology is also the basis for the Company’s PRECICE limb lengthening system, which allows for the correction of long bone limb length discrepancy, as well as enhanced bone healing in patients that have experienced traumatic injury.

The Company intends to continue development on a wide variety of projects intended to broaden surgical applications for greater procedural integration of its MAS techniques and additional applications of the MAGEC technology. Such applications include tumor, trauma, and deformity, as well as increased fixation options, sagittal alignment products, imaging and navigation. The Company also expects to continue expanding its other product and services offerings as it executes on its strategy to offer customers an end-to-end, integrated procedural solution for spine surgery. The Company intends to continue to pursue business and technology acquisition targets and strategic partnerships.

Basis of Presentation and Principles of Consolidation

The accompanying Unaudited Consolidated Financial Statements include the accounts of the Company and its majority-owned or controlled subsidiaries, collectively referred to as either NuVasive or the Company. The Company translates the financial statements of its foreign subsidiaries using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations. When there is a portion of equity in an acquired subsidiary not attributable, directly or indirectly, to the respective parent entity, the Company records the fair value of the non-controlling interest at the acquisition date and classifies the amounts attributable to non-controlling interest separately in equity in the Company's Consolidated Financial Statements. Any subsequent changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary are accounted for as equity transactions. All significant intercompany balances and transactions have been eliminated in consolidation.

The accompanying Unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Pursuant to these rules and regulations, the Company has condensed or omitted certain information and footnote disclosures it normally includes in its annual Consolidated Financial Statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for any other interim period or for the full year. These Unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K filed with the SEC. In the opinion of management, the Unaudited Consolidated Financial Statements and notes thereto include all adjustments that are of a normal and recurring nature that are necessary for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the periods presented.

7

The Company has reclassified historically presented revenue and cost of revenue to conform to the current year presentation, which now reflects revenue and costs allocated to the Company’s product and service offerings. These reclassifications had no impact on previously reported results of operations. Additionally, as required by Accounting Standards Update 2014-09 Revenue from Contracts with Customers (“ASU 2014-09”), on January 1, 2018 the Company adopted Accounting Standards Codification 606 Revenue from Contracts with Customers (“ASC 606”), electing full retrospective method of adoption.

Use of Estimates

To prepare financial statements in conformity with GAAP, management must make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Recent Accounting Pronouncements Not Yet Adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-02, Leases, which outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new accounting standard requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than twelve months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new accounting standard must be adopted using the modified retrospective approach and will be effective for the Company starting in the first quarter of fiscal 2019. Early adoption is permitted. The Company believes the adoption will modify its analyses and disclosures of lease agreements considering operating leases are a significant portion of the Company’s total lease commitments. The Company is in the process of determining the impact the adoption will have on its Consolidated Financial Statements.

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses, which changes the accounting for recognizing impairments of financial assets. Under the new guidance, credit losses for certain types of financial instruments will be estimated based on expected losses. The new guidance also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. The new guidance will be effective for the Company starting in the first quarter of fiscal 2021. Early adoption is permitted starting in the first quarter of fiscal 2020. The Company believes the adoption will modify the way the Company analyzes financial instruments, but it does not anticipate a material impact on results of operations. The Company is in the process of determining the effects the adoption will have on its Consolidated Financial Statements as well as whether to early adopt the new guidance.

In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles – Goodwill and Other, which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The standard has tiered effective dates, starting in 2020 for calendar-year public business entities that meet the definition of an SEC filer. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company is in the process of determining the effects the adoption will have on its Consolidated Financial Statements as well as whether to early adopt the new guidance.

In July 2017, the FASB issued Accounting Standards Update No. 2017-11, Earnings Per Share, Distinguishing Liabilities from Equity, Derivatives and Hedging, which changes the accounting treatment and the earnings per share calculation for certain instruments with down round features. The amendments in this update should be applied using a cumulative-effect adjustment as of the beginning of the fiscal year of adoption or retrospective adjustment to each period presented. This update is effective for annual periods beginning after December 15, 2018, and interim periods within those periods and early adoption is permitted. The Company is in the process of determining the impact the adoption will have on its Consolidated Financial Statements as well as whether to early adopt the new guidance.

In August 2017, the FASB issued Accounting Standards Update No. 2017-12, Derivatives and Hedging, which is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting and increase transparency as to the scope and results of hedging programs. The amendments in this update will be applied using a cumulative-effect adjustment as of the beginning of the fiscal year of adoption. This update is effective for annual periods beginning after December 15, 2018, and interim periods within those periods and early adoption is permitted. The Company is in the process of determining the impact the adoption will have on its Consolidated Financial Statements as well as whether to early adopt the new guidance.

8

Recently Adopted Accounting Standards

In May 2014, the FASB issued Accounting Standard Update No. 2014-09 Revenue from Contracts with Customers (“ASU 2014-09”), an updated standard on revenue recognition. The standard effectively replaces Accounting Standards Codification 605 Revenue Recognition (“ASC 605”) with Accounting Standards Codification 606 Revenue from Contracts with Customers (“ASC 606”). In summary, the changes to the guidance in revenue recognition under ASC 606 focuses on the existence of a contract with the customer (whether written, oral, or implied by an entity’s customary business practices), the concept that the performance obligation is fulfilled when the customer obtains control of the asset/service, versus the transfer of risk and reward, and the requirement that variable consideration (including rebates, discounts, etc.) and incremental costs must be estimated and recognized in the amount that is expected or most likely to be realized over the term of the contract fulfillment.

Prior to the adoption of ASC 606, the Company recognized revenue in accordance with ASC 605 when all four of the following criteria were met: (i) persuasive evidence that an arrangement exists; (ii) delivery of the products and/or services has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured. Specifically, revenue from the sale of implants, biologics and disposables was generally recognized upon a purchase order from the hospital or acknowledgment from the hospital indicating product use or implantation or upon shipment to third-party customers who immediately accepted title. Revenue from the sale of instrument sets was recognized upon receipt of a purchase order and the subsequent shipment to customers who immediately accepted title. Revenue from neuromonitoring services was recognized in the period the service was performed for the amount of payment expected to be received.

The Company adopted ASC 606 as of January 1, 2018, electing full retrospective method of adoption, which resulted in a change in its accounting policy for revenue recognition and related adjustments to the Consolidated Financial Statements for all periods presented. The Company applied the practical expedients permitted under ASC 606 for which (i) contracts with customers originating prior to January 1, 2016 do not require disclosure for the amount of consideration allocated to remaining performance obligations or an explanation of when the Company expects to recognize that amount as revenue; (ii) contracts beginning and completing in the same annual reporting period need not be restated; and (iii) hindsight for estimating variable consideration for completed contracts is permitted.

The Company recognizes revenue from spinal surgery hardware and ancillary products at a point in time in two types of transactions: (i) procedural based transactions with products used during surgery defined as “charge sheet orders”, and (ii) shipping transactions which represent the stocking of product or the purchase of instrumentation to support future surgeries defined as “stocking and capital orders”. The Company also recognizes revenue at a point in time associated with surgical-related servicing procedures, including neuromonitoring services which are defined as “surgical-related services”. Other sources of revenue, such as leasing revenue and royalties, are immaterial to the Consolidated Financial Statements.

For charge sheet orders, the sale occurs when the surgery is performed and a charge sheet is submitted to the Company by its sales representative identifying the products consumed during the surgery. The Company obtains an authorization or acknowledgment from the hospital to complete the invoicing process. Under ASC 605, persuasive evidence of an arrangement and delivery of product was deemed to have occurred once the charge sheet was processed, and an associated authorization or acknowledgement from the customer was received. Under ASC 606, the Company’s charge sheet orders are considered to be a contract with a customer when the Company agrees to attend a scheduled surgery with its products as requested by the hospital or surgeon. The performance obligation is considered to be complete once the hospital takes control of the product, it is implanted into a patient and there is sufficient evidence regarding the specific usage and pricing of the product used. The scheduling of the surgery and the usage of Company products is determined to be a contract, and recognition of revenue under ASC 606 occurs upon the completion of the surgical event and consumption of product. In the event that information related to the surgical event and consumption of product is not readily available the Company recognizes revenue upon a purchase order from the hospital or acknowledgment from the hospital indicating product use.

For stocking and capital orders, under ASC 605, delivery was deemed to have occurred when the title, including all risks and rewards of ownership of the products specified in the sales agreement had passed to the buyer. Accordingly, title, including all risks and rewards of ownership, passed based on the shipping terms. Under ASC 606, the Company’s stocking and capital order performance obligation is considered to be satisfied when the hospital assumes control of the asset, either upon shipment or delivery depending on the terms, and ability to direct the use of the asset as appropriate without the Company’s consent.

9

Under ASC 605, revenue from surgical-related services, such as neuromonitoring services, was recognized in the period the service was performed based on the delivery of a services report to the customer. The Company recognized revenue for the amount of payment expected to be received. In accordance with ASC 606, the Company enters into a contract with a customer when the hospital or surgeon requests the Company to attend a scheduled surgery with its products and services. The Company recognizes revenue at the time of the surgical procedure (when service and control is transferred to the customer), and bills either hospitals or insurance companies for different aspects of the service, as applicable. Revenue from insurance companies is recognized using the expected value method, as the Company bills at a gross rate which is generally not the rate ultimately collected. A contract is deemed to be in place for the expected amount of consideration to be received for the services with respect to hospitals and insurance companies, each of which are deemed to have the ability to pay for the services rendered.

Under ASC 605, the Company has historically estimated the amounts of returns, trade-ins, discounts, rebates, credits or incentives as offsets to the total transaction price or revenue associated with the sale. In limited situations, when historical information was not available or reliable, the Company would defer revenue recognition until completion of all performance obligations. Under ASC 606, the Company analyzes sales that could include variable consideration, and estimates the expected or most likely amount of revenue after returns, trade-ins, discounts, rebates, credits, and incentives. In making these estimates, the Company considers whether the amount of variable consideration is constrained and is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The Company earns sales-based royalty revenue over time from sales of products using existing biologics intellectual property (“IP”) that is out-licensed to certain companies. Under ASC 605, royalty revenue was recognized as earned and when collection was reasonably assured and was generally estimated and recorded in the same period as the sales that generated the royalty obligation. ASC 606 provides an exception for sales or usage-based royalties from the guidance for accounting for variable consideration, allowing the royalty revenue from the license of IP to be recognized when the performance obligation has been satisfied and the subsequent sale has occurred. Therefore, the Company estimates monthly royalty revenue as its performance obligation is satisfied. The Company does not expect a significant impact to royalty revenue under the adoption of ASC 606 as it has historically estimated and accrued royalty revenue in the period earned.

The Company historically expensed incremental costs, such as commissions associated with sales contracts, as incurred. Under ASU 2014-09, ASC 340-40 Other Assets and Deferred Costs was added along with ASC 606 to codify accounting guidance for the incremental costs to obtain or fulfill a contract with a customer. Under the guidance, the incremental costs must be deferred and recorded over the period in which the contract revenue is recognized. The Company typically does not associate quarterly or annual sales bonuses directly with a sale or master contract; however, commissions are directly associated with individual sales and expensed in the same period as the related contract revenue. The associated commissionable sales would not typically have a future benefit unless the revenue is recognized over time. The Company does not typically have situations where revenue is deferred in excess of one year. Given the practical expedient for contracts completing within one year, the Company does not expect these capitalized costs to be material in a given period.

10

The cumulative effect of the change on retained earnings for the full retrospective method of adoption of ASC 606 was $0.3 million as of December 31, 2017. The following tables summarize in a condensed presentation the impact of the adoption of ASC 606 on the Company’s previously reported Consolidated Balance Sheet as of December 31, 2017 and the Unaudited Consolidated Statement of Operations and Comprehensive Income and the Unaudited Consolidated Statement of Cash Flows for the three months ended March 31, 2017.

NUVASIVE, INC.
CONSOLIDATED BALANCE SHEET
(in thousands)
				(Unaudited)				(Unaudited)
As of December 31, 2017	As reported			Adjustments				As Adjusted
Accounts receivable, gross	$	212,709		$	537		[a]	$	213,246
Allowances on accounts receivable		(13,669	)		643		[b]		(13,026	)
Inventory, net		247,245			(107	)	[c]		247,138
Other current assets		112,705			—				112,705
Total current assets		558,990			1,073				560,063
Remaining other assets		1,080,077			—				1,080,077
Total assets	$	1,639,067		$	1,073			$	1,640,140
Accounts payable and accrued liabilities		75,076			691		[d]		75,767
Accrued payroll and related expenses		55,582			36		[e]		55,618
Other current liabilities		30,010			—				30,010
Total current liabilities		160,668			727				161,395
Deferred and income tax liabilities, non-current		18,786			84		[f]		18,870
Other long-term liabilities		660,459			—				660,459
Total NuVasive, Inc. stockholders’ equity		795,309			262		[g]		795,571
Non-controlling interests		3,845			—				3,845
Total equity		799,154			262				799,416
Total liabilities and equity	$	1,639,067		$	1,073			$	1,640,140
[a]  Represents cumulative impact from January 1, 2016 to the period presented on accounts receivable for the full retrospective method of adoption of ASC 606.
[b]  Represents cumulative impact from January 1, 2016 to the period presented on allowances on accounts receivable for the full retrospective method of adoption of ASC 606.
[c]  Represents cumulative impact from January 1, 2016 to the period presented on inventory for the full retrospective method of adoption of ASC 606.
[d]  Represents cumulative impact from January 1, 2016 to the period presented on commissions payable and accrued returns for the full retrospective method of adoption of ASC 606.
[e]  Represents cumulative impact from January 1, 2016 to the period presented on commissions payable for the full retrospective method of adoption of ASC 606.
[f]  Represents cumulative impact from January 1, 2016 to the period presented on deferred tax liabilities for the full retrospective method of adoption of ASC 606.
[g]  Represents cumulative impact from January 1, 2016 to the period presented on retained earnings for the full retrospective method of adoption of ASC 606.

11

NUVASIVE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except per share amounts)
(Unaudited)	As reported			Adjustments				As adjusted
Three months ended March 31, 2017
Revenue
Product revenue	$	225,806		$	(851	)	[a]	$	224,955
Service revenue		24,058			—				24,058
Total revenue		249,864			(851	)			249,013
Cost of revenue (excluding amortization of intangible assets)
Cost of products sold		46,071			(170	)	[b]		45,901
Cost of services		15,542			—				15,542
Total cost of revenue		61,613			(170	)			61,443
Gross profit		188,251			(681	)			187,570
Operating expenses:
Sales, marketing and administrative		140,502			(134	)	[c]		140,368
Other operating expenses		24,530			—				24,530
Total operating expenses		165,032			(134	)			164,898
Total interest and other expense, net		(9,404	)		—				(9,404	)
Income tax (expense) benefit		(1,490	)		205		[d]		(1,285	)
Consolidated net income	$	12,325		$	(342	)	[e]	$	11,983
Add back net loss attributable to non-controlling interests	$	(443	)	$	—			$	(443	)
Net income attributable to NuVasive, Inc.	$	12,768		$	(342	)	[e]	$	12,426
Net income per share attributable to NuVasive, Inc.:
Basic	$	0.25		$	0.00		[f]	$	0.25
Diluted	$	0.22		$	0.00		[f]	$	0.22
Comprehensive income attributable to NuVasive, Inc.	$	14,625		$	(342	)	[e]	$	14,283
[a]  Represents net change in sales revenue for charge sheet orders recognized under ASC 606.
[b]  Represents net change in cost of products sold for charge sheet orders recognized under ASC 606.
[c]  Represents net change in accrued sales commissions for charge sheet orders recognized under ASC 606.
[d]  Represents deferred income tax liability on net change associated with charge sheet orders recognized under ASC 606.
[e]  Represents net income and comprehensive income resulting from net change in charge sheet orders recognized under ASC 606.
[f]  Represents earnings per share impact resulting from net change in charge sheet orders recognized under ASC 606.

12

NUVASIVE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
Three months ended March 31, 2017	As reported			Adjustments				As adjusted
Consolidated net income	$	12,325		$	(342	)	[a]	$	11,983
Adjustments to reconcile net income to net cash provided by operating activities:
Reserves on current assets		(2,153	)		155		[b]		(1,998	)
Deferred income tax expense (benefit)		1,645			(205	)	[c]		1,440
Other adjustments to reconcile net income		44,909			—				44,909
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable		924			795		[d]		1,719
Inventory		(13,630	)		(170	)	[e]		(13,800	)
Prepaid expenses and other current assets		(2,614	)		—				(2,614	)
Accounts payable and accrued liabilities		593			(43	)	[f]		550
Accrued payroll and related expenses		(12,531	)		(190	)	[f]		(12,721	)
Income taxes		(1,298	)		—				(1,298	)
Net cash provided by operating activities		28,170			—				28,170
Net cash used in investing activities		(38,294	)		—				(38,294	)
Net cash used in financing activities		(10,127	)		—				(10,127	)
Effect of exchange rate changes on cash		758			—				758
Decrease in cash, cash equivalents and restricted cash	$	(19,493	)	$	—			$	(19,493	)
[a]  Represents net income resulting from charge sheet orders recognized under ASC 606.
[b]  Represents net change in allowances on accounts receivable for charge sheet orders recognized under ASC 606.
[c]  Represents deferred income tax liability on net change associated with charge sheet orders recognized under ASC 606.
[d]  Represents net change in accounts receivable for charge sheet orders recognized under ASC 606.
[e]  Represents net change in inventory for charge sheet orders recognized under ASC 606.
[f]  Represents net change in accrued sales commissions for charge sheet orders recognized under ASC 606.

13

In January 2016, the FASB issued Accounting Standards Update No. 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which requires that (i) all equity investments, other than equity-method investments, in unconsolidated entities generally be measured at fair value through earnings and (ii) when the fair value option has been elected for financial liabilities, changes in fair value due to instrument-specific credit risk will be recognized separately in other comprehensive income. Additionally, ASU 2016-01 changes the disclosure requirements for financial instruments. ASU 2016-01 provides a practicability exception for investments that do not have readily determinable fair values, which allows investments to be measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. The Company adopted ASU 2016-01 as of January 1, 2018 and elected to apply the practicability exception for measuring equity investments that do not have readily determinable fair market. The adoption did not have any impact on its Consolidated Financial Statements.

In August 2016, the FASB issued Accounting Standards Update No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which eliminates the diversity in practice related to the classification of certain cash receipts and payments for debt prepayment or extinguishment costs, the maturing of a zero coupon bond, the settlement of contingent liabilities arising from a business combination, proceeds from insurance settlements, distributions from certain equity method investees and beneficial interests obtained in a financial asset securitization. ASU 2016-15 designates the appropriate cash flow classification, including requirements to allocate certain components of these cash receipts and payments among operating, investing and financing activities. The retrospective transition method, requiring adjustment to all comparative periods presented, is required unless it is impracticable for some of the amendments, in which case those amendments would be made prospectively as of the earliest date practicable. The Company adopted ASU 2016-15 as of January 1, 2018. The adoption did not have any significant impact on its Consolidated Financial Statements.

In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Restricted Cash (“ASU 2016-18”), which requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. The amendments in this update will be applied using a retrospective transition method to each period presented. The Company adopted ASU 2016-18 as of January 1, 2018 and adjusted the presentation of its Statement of Cash Flows for the periods presented. The adoption did not have any significant impact on its Consolidated Financial Statements.

In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Clarifying the Definition of a Business (“ASU 2017-01”), which clarifies and provides a more robust framework to use in determining when a set of assets and activities is a business. The amendments in this update should be applied prospectively on or after the effective date. The Company adopted ASU 2017-01 as of January 1, 2018.

In February 2017, the FASB issued Accounting Standards Update No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (“ASU 2017-05”), which clarifies the scope of asset derecognition and adds guidance for partial sales and nonfinancial assets. An entity is required to apply the amendments in this update at the same time that it applies the amendments in ASU 2014-09. The Company adopted ASU 2017-05 as of January 1, 2018. The adoption did not have any significant impact on its Consolidated Financial Statements.

In May 2017, the FASB issued Accounting Standards Update No. 2017-09, Compensation – Stock Compensation (“ASU 2017-09”), which clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as a modification. Entities will apply the modification accounting guidance if the value, vesting conditions, or classification of the award changes. The Company adopted ASU 2017-09 as of January 1, 2018. The adoption did not have any significant impact on its Consolidated Financial Statements.

14

Revenue Recognition

In accordance with ASC 606 guidance, the Company recognizes revenue upon the transfer of goods or services to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services. The principles in ASC 606 are applied using the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the Company satisfies its performance obligation(s). Specifically, revenue from the sale of implants and disposables is generally recognized at an amount that reflects the expected consideration upon notice that the Company’s products have been used in a surgical procedure or upon shipment to a third-party customer assuming control of the products. Revenue from neuromonitoring services is recognized in the period the service is performed for the amount of consideration expected to be received. Revenue from the sale of instrument sets is generally recognized upon receipt of a purchase order and the subsequent shipment to a customer who assumes control. In certain cases, the Company does offer the ability for customers to lease instrumentation primarily on a non-sales type basis. Instrument sales and leasing revenue represent an immaterial amount of the Company’s total revenue in all periods presented. Revenue associated with products holding rights of return or trade-in are recognized when the Company concludes there is not a risk of significant revenue reversal in future periods for the expected consideration in the transaction. Costs incurred by the Company associated with sales contracts with customers are deferred over the performance obligation period and recognized in the same period as the related revenue, with the exception of contracts that complete within one year or less, in which case the associated costs are expensed as incurred.

Inventory

Net inventory primarily consisted of $245.1 million of finished goods, $8.0 million of work in progress and $4.9 million of raw materials as of March 31, 2018. Net inventory as of December 31, 2017 consisted of $232.4 million of finished goods, $9.8 million of work in progress and $5.0 million of raw materials. Finished goods include specialized implants and disposables and are stated at the lower of cost or market determined by utilizing a standard cost method, which includes assessment of capitalized variances, which approximates the weighted average cost. Work in progress and raw materials represent the underlying material, and labor for work in progress, that ultimately yield finished goods upon completion and are subject to lower of cost or market. The Company reviews the components of its inventory on a periodic basis for excess and obsolescence and adjusts inventory to its net realizable value as necessary.

Comprehensive Income

Comprehensive income is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income includes net of tax, unrealized gains or losses on the Company’s marketable securities and foreign currency translation adjustments. The cumulative translation adjustments included in accumulated other comprehensive loss were $4.4 million and $6.9 million at March 31, 2018 and December 31, 2017, respectively.

Product Shipment Costs

Product shipment costs, included in sales, marketing and administrative expense in the accompanying Consolidated Statements of Operations, were $5.9 million for both the three months ended March 31, 2018 and March 31, 2017. The majority of the Company’s shipping costs are related to the loaning of instrument sets, which are not typically sold as part of the Company’s core sales offering. Amounts billed to customers for shipping and handling of products are reflected in revenues and are not material for any period presented.

Business Transition Costs

The Company incurs certain costs related to acquisition, integration and business transition activities, which include severance, relocation, consulting, leasehold exit costs, third-party merger and acquisition costs, contingent consideration fair value adjustments and other costs directly associated with such activities.

During the three months ended March 31, 2018, the Company incurred $2.3 million of such costs, which consisted primarily of acquisition, integration and business transition activities, and $0.1 million of fair value adjustments on contingent consideration liabilities associated with the Company’s 2017 and 2016 acquisitions. During the three months ended March 31, 2017, the business transition costs were immaterial to the results of operations.

15

2.    Net (Loss) Income Per Share

The following table sets forth the computation of basic and diluted net (loss) income per share attributable to the Company:

	Three Months Ended March 31,
(in thousands, except per share data)	2018			2017
Numerator:
Net (loss) income attributable to NuVasive, Inc.	$	(27,132	)	$	12,426
Denominator for basic and diluted net (loss) income per share:
Weighted average common shares outstanding for basic		51,226			50,566
Dilutive potential common stock outstanding:
Stock options and employee stock purchase plan		—			221
Restricted stock units		—			1,416
Warrants		—			3,046
Senior Convertible Notes		—			2,537
Weighted average common shares outstanding for diluted		51,226			57,786
Basic net (loss) income per share attributable to NuVasive, Inc.	$	(0.53	)	$	0.25
Diluted net (loss) income per share attributable to NuVasive, Inc.	$	(0.53	)	$	0.22

The following weighted-average outstanding common stock equivalents were not included in the calculation of net (loss) income per diluted share because their effects were anti-dilutive: 

	Three Months Ended March 31,
(in thousands)	2018		2017
Stock options, employee stock purchase plan, and restricted stock units		1,056		102
Warrants		10,865		10,865
Senior Convertible Notes		10,865		—
Total		22,786		10,967

3.    Financial Instruments and Fair Value Measurements

Foreign Currency and Derivative Financial Instruments

The Company translates the financial statements of its foreign subsidiaries using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations.

Some of the Company’s reporting entities conduct a portion of their business in currencies other than the entity’s functional currency. These transactions give rise to receivables and payables that are denominated in currencies other than the entity’s functional currency. The value of these receivables and payables is subject to changes in currency exchange rates from the point at which the transactions are originated until the settlement in cash. Both realized and unrealized gains and losses in the value of these receivables and payables are included in the determination of net income. Net currency exchange (losses) gains, which include gains and losses from derivative instruments, were $(0.3) million and $0.2 million for the three months ended March 31, 2018 and March 31, 2017, respectively, and are included in other (expense) income, net in the Consolidated Statements of Operations.

To manage foreign currency exposure risks, the Company uses derivatives for activities in entities that have short-term intercompany receivables and payables denominated in a currency other than the entity’s functional currency. The fair value is based on a quoted market price (Level 1). As of March 31, 2018 and December 31, 2017 a notional principal amount of $11.7 million and $14.3 million, respectively, was outstanding to hedge currency risk relative to the Company’s foreign receivables and payables. Derivative instrument net losses on the Company’s forward exchange contracts were $0.4 million for both the three months ended March 31, 2018 and March 31, 2017 and are included in other (expense) income, net in the Consolidated Statements of Operations. The fair value of the forward contract exchange derivative instrument liability was de minimis as of March 31, 2018 and $(0.1) million as of December 31, 2017. The derivative instruments are recorded in other current assets or other current liabilities in the Consolidated Balance Sheets commensurate with the nature of the instrument at period end.

16

Fair Value Measurements

The Company measures certain assets and liabilities in accordance with authoritative guidance which requires fair value measurements be classified and disclosed in one of the following three categories:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available.

Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain assets or liabilities within the fair value hierarchy. The Company did not have any transfers of assets and liabilities between the levels of the fair value measurement hierarchy during the three months ended March 31, 2018.

The fair values of the Company’s assets and liabilities, including cash equivalents, marketable securities, restricted investments, derivatives, and contingent obligations are measured at fair value on a recurring basis. As of March 31, 2018 and December 31, 2017, the Company held investments in securities classified as cash equivalents. During the periods presented, the Company did not hold any investments that were in a significant unrealized loss position and no impairment charges were recorded. Realized gains and losses and interest income related to marketable securities were immaterial during all periods presented. Cash equivalents are determined under the fair value categories as follows:

			Quoted Price in		Significant Other		Significant
			Active Market		Observable Inputs		Unobservable
(in thousands)	Total		(Level 1)		(Level 2)		Inputs (Level 3)
March 31, 2018:
Cash equivalents:
Money market funds	$	22,000	$	22,000	$	—	$	—
Total cash equivalents	$	22,000	$	22,000	$	—	$	—
December 31, 2017:
Cash equivalents:
Money market funds	$	27,000	$	27,000	$	—	$	—
Total cash equivalents	$	27,000	$	27,000	$	—	$	—

The carrying amounts of certain financial instruments such as cash equivalents, accounts receivable, prepaid expenses, other current assets, accounts payable, accrued expenses, and other current liabilities as of March 31, 2018 and December 31, 2017 approximate their related fair values due to the short-term maturities of these instruments.

The fair value of certain financial instruments was measured and classified within Level 1 of the fair value hierarchy based on quoted prices. Certain financial instruments classified within Level 2 of the fair value hierarchy include the types of instruments that trade in markets that are not considered to be active, but are valued based on quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

Fair Value of Senior Convertible Notes

The fair value, based on a quoted market price (Level 1), of the Company’s outstanding Senior Convertible Notes due 2021 at March 31, 2018 and December 31, 2017, was $716.3 million and $779.5 million, respectively. See Note 6 to the Unaudited Consolidated Financial Statements for further discussion on the carrying value of the notes.

Contingent Consideration Liabilities

The fair value of contingent consideration liabilities assumed in business combinations is recorded as part of the purchase price consideration of the acquisition, and is determined using a discounted cash flow model or probability simulation model. The significant inputs of such models are not observable in the market, such as certain financial metric growth rates, volatility rates, projections associated with the applicable milestone, the interest rate, and the related probabilities and payment structure in the contingent consideration arrangement. Fair value adjustments to contingent consideration liabilities are recorded through operating expenses in the Consolidated Statement of Operations. Contingent consideration arrangements assumed by an asset purchase will be measured and accrued when such contingency is resolved.

17

Contingent consideration liabilities were $65.8 million and $67.9 million as of March 31, 2018 and December 31, 2017, respectively, and were recorded in the Consolidated Balance Sheet commensurate with the respective payment terms. The following table sets forth the changes in the estimated fair value of the Company’s liabilities measured on a recurring basis using significant unobservable inputs (Level 3): 

	Three Months Ended March 31,
(in thousands)	2018			2017
Fair value measurement at beginning of period	$	67,941		$	67,501
Contingent consideration liability recorded upon acquisition		6,663			—
Change in fair value measurement		149			(1,352	)
Changes resulting from foreign currency fluctuations		72			12
Contingent consideration paid or settled		(9,000	)		—
Fair value measurement at end of period	$	65,825		$	66,161

Non-financial assets and liabilities measured on a nonrecurring basis

Certain non-financial assets and liabilities are measured at fair value, usually with Level 3 inputs including the discounted cash flow method or cost method, on a nonrecurring basis in accordance with authoritative guidance. These include items such as non-financial assets and liabilities initially measured at fair value in a business combination and non-financial long-lived assets measured at fair value for an impairment assessment. In general, non-financial assets, including goodwill, intangible assets and property and equipment, are measured at fair value when there is an indication of impairment and are recorded at fair value only when any impairment is recognized. The carrying values of the Company’s capital lease obligations approximated their estimated fair value as of March 31, 2018 and December 31, 2017.

During the three months ended March 31, 2018, the Company recorded an impairment charge of $9.0 million on a strategic investment. The impairment was recorded in other (expense) income, net in the Unaudited Consolidated Statement of Operations.

4.    Goodwill and Intangible Assets

Goodwill and intangible assets consisted of the following:

	Weighted-
	Average
	Amortization
(in thousands, except years)	Period	Gross		Accumulated			Intangible
March 31, 2018:	(in years)	Amount		Amortization			Assets, net
Intangible assets subject to amortization:
Developed technology	8	$	271,748	$	(107,068	)	$	164,680
Manufacturing know-how and trade secrets	13		30,881		(16,168	)		14,713
Trade name and trademarks	9		25,500		(11,376	)		14,124
Customer relationships	9		141,928		(47,845	)		94,083
Total intangible assets subject to amortization	9	$	470,057	$	(182,457	)	$	287,600
Intangible assets not subject to amortization:
Goodwill							$	563,046
Total goodwill and intangible assets, net							$	850,646

18

	Weighted-
	Average
	Amortization
	Period	Gross		Accumulated			Intangible
December 31, 2017:	(in years)	Amount		Amortization			Assets, net
Intangible assets subject to amortization:
Developed technology	8	$	271,748	$	(98,693	)	$	173,055
Manufacturing know-how and trade secrets	13		30,653		(15,542	)		15,111
Trade name and trademarks	9		25,200		(10,559	)		14,641
Customer relationships	9		122,249		(44,282	)		77,967
Total intangible assets subject to amortization	9	$	449,850	$	(169,076	)	$	280,774
Intangible assets not subject to amortization:
Goodwill							$	536,926
Total goodwill and intangible assets, net							$	817,700

The following table summarizes the changes in the carrying value of the Company’s goodwill:

(in thousands)
December 31, 2017
Gross goodwill	$	545,226
Accumulated impairment loss		(8,300	)
		536,926
Changes to gross goodwill
Increases recorded in business combinations		25,956
Changes in purchase price allocation		75
Changes resulting from foreign currency fluctuations		89
		26,120
March 31, 2018
Gross goodwill		571,346
Accumulated impairment loss		(8,300	)
	$	563,046

Total expense related to the amortization of intangible assets, which is recorded in both cost of revenue and operating expenses in the Consolidated Statements of Operations depending on the functional nature of the intangible asset, was $13.3 million and $13.0 million for the three months ended March 31, 2018 and March 31, 2017, respectively.

Total future amortization expense related to intangible assets subject to amortization at March 31, 2018 is set forth in the table below:

(in thousands)
Remaining 2018	$	39,561
2019		51,263
2020		50,640
2021		48,580
2022		41,169
Thereafter through 2031		56,387
Total future amortization expense	$	287,600

19

5.    Business Combinations

The Company recognizes the assets acquired, liabilities assumed, and any non-controlling interest at fair value at the date of acquisition. Certain acquisitions contained contingent consideration arrangements that required the Company to assess the acquisition date fair value of the contingent consideration liabilities, which was recorded as part of the purchase price allocation of the acquisition, with subsequent fair value adjustments to the contingent consideration recorded in the Consolidated Statements of Operations. See Note 3 to the Unaudited Consolidated Financial Statements for further discussion on contingent consideration liabilities.

Acquisitions

In January 2018, the Company acquired SafePassage, a privately-held provider of IOM services, which now operates as a wholly-owned subsidiary of the Company. The acquisition was not considered material to the overall Unaudited Consolidated Financial Statements. The Company’s NuVasive Clinical Services division (including SafePassage) represents the reported service revenue on the Unaudited Consolidated Statement of Operations.

The Company has completed other acquisitions that were not considered material to the overall Unaudited Consolidated Financial Statements during the periods presented. These acquisitions have been included in the Unaudited Consolidated Financial Statements from the respective dates of acquisition. The Company does not believe that collectively the acquisitions made during the periods presented are material to the overall financial statements.

For certain acquisitions completed during the periods presented, the Company is still in the process of finalizing the purchase price allocation given the timing of the acquisitions and the size and scope of the assets and liabilities subject to valuation. While the Company does not expect material changes in the valuation outcome, certain assumptions and findings that were in place at the date of acquisition could result in changes in the purchase price allocation.

Variable Interest Entities

Progentix Orthobiology B.V.

In 2009, the Company purchased forty percent (40%) of the capital stock of Progentix Orthobiology B.V. (“Progentix”), a company organized under the laws of the Netherlands, from existing shareholders pursuant to a Preferred Stock Purchase Agreement for $10.0 million in cash (the “Initial Investment”). The Company also loaned Progentix cumulatively a total of $5.3 million at an interest rate of 6% per year (the “Loan”). Concurrently, with the Initial Investment, the Company and Progentix entered into a Distribution Agreement (as amended, the “Distribution Agreement”) for a term of ten years, whereby Progentix appointed the Company as its exclusive distributor for certain Progentix products.

Following the Initial Investment, in accordance with authoritative guidance, the Company determined that Progentix was a variable interest entity (“VIE”), as it did not have the ability to finance its activities without additional subordinated financial support and its equity investors would not absorb their proportionate share of expected losses and would be limited in the receipt of the potential residual returns of Progentix.

In January 2018, the Company completed the acquisition of the remaining 60% of the capital stock of Progentix (the “Non-Controlling Interest Acquisition”). Subsequent to the Non-Controlling Interest Acquisition, the Company owns 100% of the capital stock of Progentix, which now operates as its wholly-owned subsidiary and is no longer accounted for as a VIE or a separate reporting unit as of the date of the Non-Controlling Interest Acquisition. In accordance with authoritative guidance, the non-controlling interest associated with Progentix was reclassified to additional paid-in capital, including the difference between the non-controlling interest and consideration paid. The Loan plus accrued interest and the related receivable between the Company and Progentix is still outstanding as of March 31, 2018.

The following is a reconciliation of equity (net assets) attributable to the non-controlling interest:

	Three Months Ended March 31,
(in thousands)	2018			2017
Non-controlling interest at beginning of period	$	3,845		$	5,588
Acquired non-controlling interest reclassified to additional paid-in capital		(3,845	)		—
Less: Net loss attributable to the non-controlling interest		—			(443	)
Non-controlling interest at end of period	$	—		$	5,145

20

Total assets and liabilities of Progentix as a VIE included in the accompanying Consolidated Balance Sheets are as follows:

(in thousands)	March 31, 2018		December 31, 2017
Total current assets	$	—	$	670
Identifiable intangible assets, net		—		8,752
Goodwill		—		12,654
Accounts payable and accrued expenses		—		562
Deferred tax liabilities, net		—		331
Non-controlling interest		—		3,845

NuVasive Clinical Services and Physician Practices

The Company’s NuVasive Clinical Services division (including SafePassage), which provides IOM services to surgeons and healthcare facilities across the U.S., maintain contractual relationships with several physician practices (“PCs”). In accordance with authoritative guidance, the Company has determined that the PCs are VIEs and therefore, the accompanying Unaudited Consolidated Financial Statements include the accounts of the PCs from the date of acquisition. During the periods presented, the results of the PCs were immaterial to the Company’s financials. The creditors of the PCs have claims only on the assets of the PCs, which are not material, and the assets of the PCs are not available to the Company.

6.    Indebtedness

The carrying values of the Company’s Senior Convertible Notes due 2021 are as follows:

(in thousands)	March 31, 2018			December 31, 2017
2.25% Senior Convertible Notes due 2021:
Principal amount		650,000			650,000
Unamortized debt discount		(52,740	)		(56,839	)
Unamortized debt issuance costs		(9,544	)		(10,241	)
Total Senior Convertible Notes	$	587,716		$	582,920

2.25% Senior Convertible Notes due 2021

In March 2016, the Company issued $650.0 million principal amount of unsecured Senior Convertible Notes with a stated interest rate of 2.25% and a maturity date of March 15, 2021 (the "2021 Notes"). The net proceeds from the offering, after deducting initial purchasers' discounts and costs directly related to the offering, were approximately $634.1 million. The 2021 Notes may be settled in cash, stock, or a combination thereof, solely at the Company's discretion. It is the Company's current intent and policy to settle all conversions through combination settlement, which involves satisfying the principal amount outstanding with cash and any note conversion value over the principal amount in shares of the Company's common stock. The initial conversion rate of the 2021 Notes is 16.7158 shares per $1,000 principal amount, which is equivalent to a conversion price of approximately $59.82 per share, subject to adjustments. The Company uses the treasury share method for assumed conversion of the 2021 Notes to compute the weighted average shares of common stock outstanding for diluted earnings per share. The Company also entered into transactions for a convertible note hedge (the "2021 Hedge") and warrants (the "2021 Warrants") concurrently with the issuance of the 2021 Notes.

The cash conversion feature of the 2021 Notes required bifurcation from the notes and was initially accounted for as an equity instrument classified to stockholders’ equity, which resulted in recognizing $84.8 million in additional paid-in-capital during 2016.

The interest expense recognized on the 2021 Notes during the three months ended March 31, 2018 includes $3.7 million, $4.1 million and $0.7 million for the contractual coupon interest, the accretion of the debt discount and the amortization of the debt issuance costs, respectively. The interest expense recognized on the 2021 Notes during the three months ended March 31, 2017 includes $3.7 million, $3.9 million and $0.6 million for the contractual coupon interest, the accretion of the debt discount and the amortization of the debt issuance costs, respectively. The effective interest rate on the 2021 Notes is 5.8%, which includes the interest on the notes, amortization of the debt discount and debt issuance costs. Interest on the 2021 Notes began accruing upon issuance and is payable semi-annually.

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Prior to September 15, 2020, holders may convert their 2021 Notes only under the following conditions: (a) during any calendar quarter beginning June 30, 2016, if the reported sale price of the Company's common stock for at least 20 days out of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than 130% of the conversion price on each applicable trading day; (b) during the five business day period in which the trading price of the 2021 Notes falls below 98% of the product of (i) the last reported sale price of the Company's common stock and (ii) the conversion rate on that date; and (c) upon the occurrence of specified corporate events, as defined in the 2021 Notes. From September 15, 2020 and until the close of business on the second scheduled trading day immediately preceding March 15, 2021, holders may convert their 2021 Notes at any time (regardless of the foregoing circumstances). The Company may not redeem the 2021 Notes prior to March 20, 2019. The Company may redeem the 2021 Notes, at its option, in whole or in part on or after March 20, 2019 until the close of business on the business day immediately preceding September 15, 2020 if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company delivers written notice of a redemption. The redemption price will be equal to 100% of the principal amount of such 2021 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date. No principal payments are due on the 2021 Notes prior to maturity. Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the 2021 Notes do not contain any financial covenants and do not restrict the Company from paying dividends or issuing or repurchasing any of its other securities. The Company is unaware of any current events or market conditions that would allow holders to convert the 2021 Notes.

2021 Hedge

In connection with the offering of the 2021 Notes, the Company entered into the hedge transaction with the initial purchasers of the 2021 Notes and/or their affiliates (the "2021 Counterparties") entitling the Company to purchase up to 10,865,270 shares of the Company's common stock at an initial stock price of $59.82 per share, each of which is subject to adjustment. The cost of the 2021 Hedge was $111.2 million and accounted for as an equity instrument by recognizing $111.2 million in additional paid-in-capital during 2016. The 2021 Hedge will expire on March 15, 2021. The 2021 Hedge is expected to reduce the potential equity dilution upon conversion of the 2021 Notes if the daily volume-weighted average price per share of the Company's common stock exceeds the strike price of the 2021 Hedge. An assumed exercise of the 2021 Hedge by the Company is considered anti-dilutive since the effect of the inclusion would always be anti-dilutive with respect to the calculation of diluted earnings per share.

2021 Warrants

The Company sold warrants to the 2021 Counterparties to acquire up to 10,865,270 shares of the Company’s common stock. The 2021 Warrants will expire on various dates from June 2021 through December 2021 and may be settled in cash or net shares. It is the Company's current intent and policy to settle all conversions in shares of the Company’s common stock. The Company received $44.9 million in cash proceeds from the sale of the 2021 Warrants, which was recorded in additional paid-in-capital. The 2021 Warrants could have a dilutive effect on the Company's earnings per share to the extent that the price of the Company's common stock during a given measurement period exceeds the strike price of the 2021 Warrants, which is $80.00 per share. The Company uses the treasury share method for assumed conversion of its 2021 Warrants to compute the weighted average common shares outstanding for diluted earnings per share.

2.75% Senior Convertible Notes due 2017

In June 2011, the Company issued $402.5 million principal amount of the unsecured Senior Convertible Notes with a stated interest rate of 2.75% and a maturity date of July 1, 2017 (the “2017 Notes”). The 2017 Notes provided for settlement in cash, stock, or a combination thereof, solely at the Company’s discretion. The initial conversion rate of the 2017 Notes was 23.7344 shares per $1,000 principal amount, which is equivalent to a conversion price of approximately $42.13 per share, subject to adjustments. The Company used the treasury share method for assumed conversion of the 2017 Notes to compute the weighted average shares of common stock outstanding for diluted earnings per share.

During 2016, the Company repurchased a majority of the 2017 Notes, which resulted in a cumulative loss of approximately $19.1 million recorded in other expense on the accompanying Consolidated Statements of Operations for the year ended December 31, 2016. In July 2017, the Company settled the remaining 2017 Notes upon maturity via combination settlement, which involved satisfying the principal amount outstanding with cash and any note conversion value over the principal amount in shares of the Company’s common stock.

The interest expense recognized on the 2017 Notes during the three months ended March 31, 2017 includes $0.4 million, $0.7 million and $0.1 million for the contractual coupon interest, the accretion of the debt discount and the amortization of the debt issuance costs, respectively. The effective interest rate on the 2017 Notes was 8.0%, which includes the interest on the notes, amortization of the debt discount and debt issuance costs. Interest on the 2017 Notes began accruing upon issuance and was payable semi-annually.

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Concurrently, with the offering of the 2017 Notes the Company also entered into transactions for a convertible note hedge (the “2017 Hedge”) and warrants (the “2017 Warrants”). The 2017 Hedge entitled the Company to purchase up to 9,553,096 shares of the Company’s common stock at an initial price of $42.13 per share. Prior to its maturity, an assumed exercise of the 2017 Hedge by the Company was considered anti-dilutive since the effect of inclusion would always be anti-dilutive with respect to the calculation of diluted earnings per share. The 2017 Warrants entitled its holders to acquire up to 477,654 shares of the Company’s Series A Participating Preferred Stock at an initial strike price of $988.51 per share. Each share of Series A Participating Preferred Stock was convertible into 20 shares of the Company’s common stock, or up to 9,553,080 common shares in total. The 2017 Warrants were scheduled to expire on various dates from September 2017 through January 2018 with settlement in cash or net shares. The Company used the treasury share method for assumed conversion of its 2017 Warrants to compute the weighted average common shares outstanding for diluted earnings per share. In 2017, the Company exercised the 2017 Hedge and also entered into warrant termination agreements which settled the 2017 Warrants on a net share basis.

Revolving Senior Credit Facility

In April 2017, the Company entered into an Amended and Restated Credit Agreement (the “2017 Credit Agreement”) for a revolving senior credit facility (the “2017 Facility”), which replaced the previous Credit Agreement the Company had entered into in February 2016.  The 2017 Credit Agreement provides for secured revolving loans, multicurrency loan options and letters of credit in an aggregate amount of up to $500.0 million. The 2017 Credit Agreement also contains an expansion feature, which allows the Company to increase the aggregate principal amount of the 2017 Facility provided the Company remains in compliance with the underlying financial covenants, including but not limited to, compliance with the consolidated interest coverage ratio and certain consolidated leverage ratios. The 2017 Facility matures in April 2022 (subject to an earlier springing maturity date), and includes a sublimit of $100.0 million for multicurrency borrowings, a sublimit of $50.0 million for the issuance of standby letters of credit, and a sublimit of $5.0 million for swingline loans. All assets of the Company and its material domestic subsidiaries are pledged as collateral under the 2017 Facility (subject to customary exceptions) pursuant to the term set forth in the Amended and Restated Security and Pledge Agreement (the “2017 Security Agreement”) executed in favor of the administrative agent by the Company. Each of the Company’s material domestic subsidiaries guarantees the 2017 Facility. In connection with the 2017 Facility, the Company incurred issuance costs which will be amortized over the term of the 2017 Facility. As of March 31, 2018, the Company had $55.0 million outstanding under the 2017 Facility, at an interest rate of 3.44% (one month LIBOR plus 1.75%).

Borrowings under the 2017 Facility are used by the Company to provide financing for working capital and other general corporate purposes, including potential mergers and acquisitions. Borrowings under the 2017 Facility bear interest, at the Company’s option, at a rate equal to an applicable margin plus: (a) the applicable Eurocurrency Rate (as defined in the 2017 Credit Agreement), or (b) a base rate determined by reference to the highest of (1) the federal funds effective rate plus 0.50%, (2) the Bank of America prime rate, and (3) LIBOR for an interest period of one month plus 1.00%. The margin for the 2017 Facility ranges, based on the Company’s consolidated leverage ratio, from 0.00% to 1.00% in the case of base rate loans and from 1.00% to 2.00% in the case of Eurocurrency Rate loans. The 2017 Facility includes an unused line fee ranging, based on the Company’s consolidated leverage ratio, from 0.20% to 0.35% per annum on the revolving commitment.

The 2017 Credit Agreement contains affirmative, negative, permitted acquisition and financial covenants, and events of default customary for financings of this type. The financial covenants require the Company to maintain ratios of consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) in relation to consolidated interest expense and consolidated debt, respectively, as defined in the 2017 Credit Agreement. The 2017 Facility grants the lenders preferred first priority liens and security interests in capital stock, intercompany debt and all of the present and future property and assets of the Company and each guarantor. The Company is currently in compliance with the 2017 Credit Agreement covenants.

7.   Stock-Based Compensation

The compensation cost that has been included in the Consolidated Statements of Operations for all stock-based compensation arrangements was as follows: 

	Three Months Ended March 31,
(in thousands)	2018			2017
Sales, marketing and administrative expense	$	3,515		$	6,795
Research and development expense		500			139
Cost of revenue		119			83
Stock-based compensation expense before taxes		4,134			7,017
Related income tax benefits		(1,034	)		(2,666	)
Stock-based compensation expense, net of taxes	$	3,100		$	4,351

At March 31, 2018, there was $39.6 million of unamortized compensation expense for restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”) to be recognized over a weighted average period of 2.1 years.

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Restricted Stock Units

The Company issued approximately 112,000 shares of common stock, before net share settlement, upon vesting of RSUs (including PRSUs) during the three months ended March 31, 2018 and issued approximately 359,000 shares of common stock in settlement of RSUs (including PRSUs) upon their vesting during the year ended December 31, 2017.

Stock Options and Purchase Rights

The weighted average assumptions used to estimate the fair value of stock purchase rights under the employee stock purchase plan (“ESPP”) are as follows:

	Three Months Ended March 31,
	2018			2017
ESPP
Volatility		36	%		25	%
Expected term (years)		0.5			0.5
Risk free interest rate		1.2	%		0.5	%
Expected dividend yield		—	%		—	%

Under the terms of the ESPP, the Company’s employees (referred to as “shareowners”) can elect to have up to 15% of their annual compensation, up to a maximum of $21,250 per year, withheld to purchase shares of the Company’s common stock for a purchase price equal to 85% of the lower of the fair market value per share (at closing) of the Company’s common stock on (i) the commencement date of the  six-month offering period, or (ii) the respective purchase date.

The Company has not granted any options since 2011. The Company issued approximately 59,000 shares of common stock, before net share settlement, upon the exercise of outstanding stock options during the three months ended March 31, 2018 and issued approximately 232,000 shares of common stock, before net share settlement, upon the exercise of outstanding stock options during the year ended December 31, 2017.

8.    Income Taxes

Income taxes are determined using an estimated annual effective tax rate applied against income, and then adjusted for the tax impacts of certain significant and discrete items. For the three months ended March 31, 2018, the Company treated the tax impact of the following as discrete events for which the tax effect was recognized separately from the application of the annual effective tax rate: tax expense related to shortfalls on share-based payments, return to provision adjustments, and limitations on certain officer’s compensation. The Company’s effective tax rate recorded for the three months ended March 31, 2018 was 27%.

On December 22, 2017, President Trump signed U.S. tax reform legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Act”), which became effective January 1, 2018. Due to insufficient guidance on certain aspects of the Act, such as officer’s compensation, as well as uncertainty around the GAAP treatment associated with many other parts of the Act, such as the implementation of certain international provisions, the Company recorded certain provisional amounts related to the revaluation and realization of its deferred taxes in its December 31, 2017 tax provision. In the first quarter of 2018, the Company further analyzed the impact of the Act on certain executive compensation related deferred taxes and determined that a write-down of approximately $0.2 million was required, which would have increased the full year effective tax rate by 0.3% and the fourth quarter effective tax rate by 1.1%. This Company is continuing to analyze the impact of the Act during which adjustments to the 2017 year-end provisional calculation will be subject to change during the Staff Accounting Bulletin No. 118 measurement period. As the Company finalizes its analysis and adjusts its tax balances accordingly, it will describe the issue and impact on previously recorded provisional amounts. At March 31, 2018, the Company has not completed its accounting for the tax effects of the global intangible low-taxed income (“GILTI”), foreign derived intangible income (“FDII”), and base erosion and anti-abuse tax (“BEAT”) provisions of the Act on current year tax expense; however, the Company has made a reasonable estimate and determined that these provisions will have no impact on its 2018 results. Because the Company continues to evaluate the impact of the Act’s GILTI provisions, it has yet to elect an accounting policy to treat the tax impact as either a future period charge or as a current component of deferred taxes.

In accordance with the disclosure requirements as described in ASC Topic 740, Income Taxes, the Company has classified unrecognized tax benefits as non-current income tax liabilities, or a reduction in deferred tax assets, unless expected to be paid within one year. The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had an increase in gross unrecognized tax benefits of approximately $0.3 million during the three months ended March 31, 2018, primarily related to research and development credits. The Company believes it is reasonably possible that approximately $6.5 million of its remaining unrecognized tax positions may be recognized within the next twelve months as certain statute of limitations expire, the amount of which is primarily attributable to tax positions involving the valuation of intercompany transactions.

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The Company is subject to routine compliance reviews on various tax matters around the world in the ordinary course of business. Currently, income tax audits are being conducted in the state of New York, the state of Louisiana, and Germany. U.S. and most foreign jurisdictions remain subject to examination in all years due to prior year net operating losses and R&D credits.

9.    Business Segment, Product and Geographic Information

The Company operates in one segment based upon the Company’s organizational structure, the way in which the operations and investments are managed and evaluated by the chief operating decision maker (“CODM”) as well as the lack of availability of discrete financial information at a lower level. The Company’s CODM reviews revenue at the product line offering level, and manufacturing, operating income and expenses, and net income at the Company wide level to allocate resources and assess the Company’s overall performance. The Company shares common, centralized support functions, including finance, human resources, legal, information technology, and corporate marketing, all of which report directly to the CODM. Accordingly, decision-making regarding the Company’s overall operating performance and allocation of Company resources is assessed on a consolidated basis. As such, the Company operates as one reporting segment. The Company has disclosed the revenues for each of its product line offerings to provide the reader of the financial statements transparency into the operations of the Company.

The Company reports under two distinct product lines; spinal hardware and surgical support. The Company’s spinal hardware product line offerings include implants and fixation products. The Company’s surgical support product offerings include IOM services, disposables and biologics, all of which are used to aid spinal surgery.

The Company has reclassified historically presented product line revenue to conform to the current period presentation. The reclassification had no impact on previously reported results of operations.

Revenue by product line was as follows:

	Three Months Ended March 31,
(in thousands)	2018		2017
Spinal hardware	$	185,901	$	175,086
Surgical support		74,621		73,927
Total revenue	$	260,522	$	249,013

Revenue and property and equipment, net, by geographic area were as follows: 

	Revenue				Property and Equipment, Net
	Three Months Ended March 31,				March 31,		December 31,
(in thousands)	2018		2017		2018		2017
United States	$	213,303	$	213,356	$	192,326	$	179,891
International (excludes Puerto Rico)		47,219		35,657		35,247		35,435
Total	$	260,522	$	249,013	$	227,573	$	215,326

10.    Commitments

Licensing and Purchasing Agreements

As of March 31, 2018 the Company has obligations under certain consulting arrangements to pay up to approximately $45.2 million in the aggregate in the event that specified revenue-based milestones are achieved prior to 2027.  Any such payment will be made in a combination of cash and the Company’s common shares as provided in the agreements.  Any payments in satisfaction of these contingent obligations are considered either a research and development expense or a cost of revenue depending on the nature of the arrangement and are recognized ratably as and if milestones are achieved. These agreements expire on various dates through 2027.

Executive Severance Plans

 The Company has employment contracts with key executives and maintains severance plans that provide for the payment of severance and other benefits if such executives are terminated for reasons other than cause, as defined in those agreements and plans. Certain agreements call for payments that are based on historical compensation, and accordingly, the amount of the contractual commitment will change over time commensurate with the executive’s earnings. At March 31, 2018, future commitments for such key executives were approximately $40.0 million. In certain circumstances, the agreements call for the acceleration of equity vesting. Those figures are not reflected in the above information.

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11.    Contingencies

The Company is subject to potential liabilities under government regulations and various claims and legal actions that are pending or may be asserted from time-to-time. These matters arise in the ordinary course and conduct of the Company’s business and include, for example, commercial, intellectual property, environmental, securities and employment matters. The Company intends to continue to defend itself vigorously in such matters and when warranted, take legal action against others. Furthermore, the Company regularly assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in its financial statements.

An estimated loss contingency is accrued in the Company’s financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Based on the Company’s assessment, it has adequately accrued an amount for contingent liabilities currently in existence. The Company does not accrue amounts for liabilities that it does not believe are probable or that it considers immaterial to its overall financial position. Litigation is inherently unpredictable, and unfavorable resolutions could occur. As a result, assessing contingencies is highly subjective and requires judgment about future events. The amount of ultimate loss may exceed the Company’s current accruals, and it is possible that its cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies.

Legal Proceedings

Securities Litigation

On August 28, 2013, a purported securities class action lawsuit was filed in the U.S. District Court for the Southern District of California naming the Company and certain of its current and former executive officers for allegedly making false and materially misleading statements regarding the Company’s business and financial results, specifically relating to the purported improper submission of false claims to Medicare and Medicaid. The operative complaint asserts a putative class period stemming from October 22, 2008 to July 30, 2013. The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder and seeks unspecified monetary relief, interest, and attorneys’ fees. On February 13, 2014, Brad Mauss, the lead plaintiff in the case, filed an Amended Class Action Complaint for Violations of the Federal Securities Laws. The Company answered the complaint on August 25, 2016, and discovery commenced. The plaintiffs filed motions for class certification on October 28, 2016 and the Company’s opposition papers were filed on January 9, 2017. On March 22, 2017, the court issued an order granting class certification. The Company filed a petition to appeal the order granting class certification with the U.S. Court of Appeals for the Ninth Circuit (the “Ninth Circuit”) on April 5, 2017 and the plaintiffs filed an opposition to the petition. On August 15, 2017, the Ninth Circuit denied the Company’s petition. The Company filed a motion for summary judgment on September 8, 2017. On February 1, 2018, the court entered an order denying the Company’s motion for summary judgment. On February 13, 2018, the Company entered into a memorandum of understanding with the plaintiffs to settle the case for $7.9 million. The Company expects the settlement will be fully funded by insurance proceeds. The settlement includes the dismissal of all claims against the Company and the named individuals in the lawsuit without any liability or wrongdoing attributed to them. The settlement is subject to formal documentation, court approval and other customary conditions. There can be no assurance that a settlement will be finalized and approved or as to the ultimate outcome of this litigation. However, in connection with the proposed settlement and in accordance with authoritative guidance, the Company has recorded the loss contingency of $7.9 million as a current litigation liability and the expected insurance proceeds of $7.9 million as a current receivable in the Consolidated Balance Sheet as of March 31, 2018 and December 31, 2017.

Shareholder Derivative Litigation

On September 28, 2016, a shareholder derivative complaint was filed by James Borta in the Superior Court of California for the County of San Diego naming certain of the Company’s current and former executive officers and directors for allegedly breaching their fiduciary duties by, among other things, making allegedly false and misleading statements about the Company’s business, operations, and prospects. The derivative complaint is based upon the same factual allegations as the securities class action litigation and names the Company as a nominal defendant. The plaintiff filed an Amended Complaint on March 1, 2017. The Company demurred to the Amended Complaint on April 7, 2017 and the court sustained the Company’s demurrer and provided the plaintiff thirty days to file an amended complaint. On June 30, 2017 the plaintiff filed a Second Amended Derivative Complaint, to which the Company demurred. On September 29, 2017 the court sustained the Company’s demurrer and dismissed the case with prejudice, entering judgment. On October 10, 2017, the plaintiff filed a motion for reconsideration and to vacate the judgment. The court denied the motion on December 15, 2017. On March 2, 2018, the plaintiff filed a Notice of Appeal which the plaintiff subsequently abandoned on March 21, 2018. The Company believes this matter is now concluded and at March 31, 2018, in accordance with authoritative guidance on the evaluation of loss contingencies, the Company has not recorded an accrual related to this litigation.  

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Madsen Medical, Inc. Litigation

On February 19, 2016, an unfavorable jury verdict was delivered against the Company in its litigation in the U.S. District Court for the Southern District of California against Madsen Medical, Inc. (“MMI”), a former sales agent. Specifically, the jury awarded MMI $7.5 million in lost profits for tortious interference, $14.0 million for unjust enrichment, $20.0 million in punitive damages, and approximately $0.3 million in damages for breach of contract. On March 18, 2016, the trial court entered judgment in favor of MMI in the amount of $27.8 million, which amount excluded the $14.0 million disgorgement awarded by the jury. On July 5, 2016, the trial court also awarded MMI attorney’s fees and costs of approximately $1.1 million. The Company’s post-trial motions for judgment as a matter of law and/or for a new trial were denied, and the Company has appealed both the verdict and the court’s subsequent award of attorney’s fees and costs. However, the Company did not appeal the judgment with respect to breach of contract and accordingly accrued the $0.3 million in damages during the year ended December 31, 2017. The U.S. Court of Appeals for the Ninth Circuit held oral argument on April 12, 2018. During pendency of any appeals, the Company has secured a bond to cover the amount of the judgment and attorneys’ fees and costs.

As of December 31, 2017, the Company believed that the outcome of the case did not constitute a probable nor an estimable loss associated with the litigation, but rather a reasonably possible loss. The Company, based on its own assessment as well as that of outside counsel, believed that it was probable upon appeal the judgment would be vacated. Accordingly, the Company did not record a loss contingency at December 31, 2017, but assessed a reasonable range of potential loss, which would be from zero to the current amount entered as a judgment, as well as attorney’s fees and interest. While the Company continues to believe in the underlying facts of the case, following the April 12, 2018 oral argument, the Company now believes that the prior judgments against it, in part or as a whole, may be upheld. Accordingly, at March 31, 2018, the Company believes that the outcome of the case now constitutes a probable loss. While the actual amount of the probable loss is not known, the Company has assessed a range of potential loss in accordance with Accounting Standards Codification 450, Contingencies, which would be from zero to $29.0 million, and has recorded an estimated loss contingency in the amount of $29.0 million as a current litigation liability in the Unaudited Consolidated Balance Sheet as of March 31, 2018. The estimated loss contingency is based on the aforementioned update and is the Company’s best estimate in the range of potential loss. The Company cannot at this time predict the ultimate outcome of this matter or the possible additional loss, if any.

12.    Regulatory Matters

On August 31, 2015, the Company received a civil investigative demand (“CID”) issued by the Department of Justice (“DOJ”) pursuant to the federal False Claims Act. The CID requires the delivery of a wide range of documents and information related to an investigation by the DOJ concerning allegations that the Company assisted a physician group customer in submitting improper claims for reimbursement and made improper payments to the physician group in violation of the Anti-Kickback Statute. The Company is cooperating with the DOJ. No assurance can be given as to the timing or outcome of this investigation. At March 31, 2018, the probable outcome of this matter cannot be determined, nor can the Company estimate a range of potential loss. In accordance with authoritative guidance on the evaluation of loss contingencies, the Company has not recorded an accrual related to this matter.

On June 9, 2017, the Company received a subpoena from the Office of the Inspector General of the U.S. Department of Health and Human Services (“OIG”) in connection with an investigation into possible false or otherwise improper claims submitted to Medicare and Medicaid.  The subpoena seeks discovery of documents for the period January 2014 through June 2017, primarily associated with sales to a particular customer and relationships related to that customer account. The Company is working with the OIG to understand the scope of the subpoena and its request for documents, and the Company intends to fully cooperate with the OIG's request.  No assurance can be given as to the timing or outcome of this investigation. At March 31, 2018, the probable outcome of this matter cannot be determined, nor can the Company estimate a range of potential loss. In accordance with authoritative guidance on the evaluation of loss contingencies, the Company has not recorded an accrual related to this matter.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements May Prove Inaccurate

This quarterly report on Form 10-Q (“Quarterly Report”), including the following discussion and analysis, may contain forward-looking statements that involve risks, uncertainties, assumptions and other factors which, if they do not materialize or prove correct, could cause our results to differ from historical results or those expressed or implied by such forward-looking statements. In some cases, you can identify these forward-looking statements by words like “may”, “will”, “should”, “could”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”,  “intends” , or “continues” (or the negative of those words and other comparable words). Forward-looking statements include, but are not limited to, statements about:

• our intentions, beliefs and expectations regarding our expenses, sales, operations and future financial performance;

• our operating results;

• our plans for future products and enhancements of existing products;

• anticipated growth and trends in our business;

• the timing of and our ability to maintain and obtain regulatory clearances or approvals;

• our belief that our cash and cash equivalents and investments will be sufficient to satisfy our anticipated cash requirements;

• our expectations regarding our revenues, customers and distributors;

• our beliefs and expectations regarding our market penetration and expansion efforts;

• our expectations regarding the benefits and integration of recently-acquired businesses and our ability to make future acquisitions and successfully integrate any such future-acquired businesses;

• our anticipated trends and challenges in the markets in which we operate; and

• our expectations and beliefs regarding and the impact of investigations, claims and litigation.

These statements are not guarantees of future performance or events. Our actual results may differ materially from those discussed here. The potential risks and uncertainties that could cause actual results to differ materially include, but are not limited to those set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017, and this Quarterly Report on Form 10-Q, and similar discussions in our other Securities and Exchange Commission filings. We assume no obligation to update any forward looking statements to reflect new information, future events or circumstances or otherwise.

This information should be read in conjunction with the Unaudited Consolidated Financial Statements and the notes thereto included in Part I, Item 1 of this Quarterly Report and with Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended  December 31, 2017 contained in our 2017 Annual Report on Form 10-K.

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Overview

We are a leading medical device company in the global spine surgery market, focused on developing minimally-disruptive surgical products and procedurally-integrated solutions for spine surgery. Our currently-marketed product portfolio is focused on applications for spine fusion surgery, including ancillary products and services used to aid in the surgical procedure.

Our principal product offering includes a minimally-disruptive surgical platform called Maximum Access Surgery, or MAS. The MAS platform combines three categories of solutions that collectively minimize soft tissue disruption during spine fusion surgery, provide maximum visualization and are designed to enable safe and reproducible outcomes for the surgeon and the patient. The platform includes our proprietary software-driven nerve detection and avoidance systems, NVM5, and Intraoperative Monitoring, or IOM, services and support offered by our NuVasive Clinical Services division; MaXcess, an integrated split-blade retractor system; and a wide variety of specialized implants and biologics. Many of our products, including the individual components of our MAS platform can also be used in open or traditional spine surgery. Our spine surgery product line offerings, which include products for the thoracolumbar and the cervical spine, are primarily used to enable surgeon access to the spine to perform restorative and fusion procedures in a minimally-disruptive fashion. To assist with surgical procedures we offer a platform called Integrated Global Alignment, or iGA, in which products and computer assisted technology under our MAS platform help achieve more precise spinal alignment.

Our MAS platform and its related offerings are designed to provide a unique and comprehensive solution for the safe and reproducible minimally-disruptive surgical treatment of spine disorders by enabling surgeons to access the spine in a manner that affords both direct visualization and detection and avoidance of critical nerves along with intraoperative reconciliation. The fundamental difference between our MAS platform, which is sometimes referred to in the industry as “minimally invasive surgery” or “MIS”, is the ability to customize safe and reproducible access to the spine while allowing surgeons to continue to use instruments that are familiar to them and effective during surgery. Accordingly, the MAS platform does not force surgeons to reinvent or learn new approaches that add complexity and undermine safety, ease of use and/or efficacy. We have dedicated and continue to dedicate significant resources toward training spine surgeons around the world; both those who are new to our MAS and other product platforms, as well as ongoing education for MAS-trained surgeons attending advanced courses. An important ongoing objective of ours has been to maintain a leading position in access and nerve avoidance, as well as to pioneer and remain the ongoing leader in minimally invasive spine surgery. Our MAS platform, with the unique advantages provided by our nerve monitoring systems, enables an innovative lateral procedure known as eXtreme Lateral Interbody Fusion, or XLIF, in which surgeons access the spine for a fusion procedure from the side of the patient’s body, rather than from the front or back. It has been demonstrated clinically that XLIF and other procedures facilitated by our MAS platform decrease trauma and blood loss, and lead to faster overall patient recovery times compared to open spine surgery.

We offer a comprehensive portfolio of implants and fixation devices designed to be used with the MAS platform. Our portfolio of implants used for interbody disc height restoration include implants made from allograft, titanium, and polyetheretherketone, or PEEK. Our fixation products include specialized pedicle screws, rods and plates. Our biologics products, which are used to aid in the spinal fusion process or bone healing process, include allograft (donated human tissue) and synthetic offerings. We also design and sell expandable growing rod implant systems that can be non-invasively lengthened following implantation with precise, incremental adjustments via an external remote controller using magnetic technology called MAGnetic External Control, or MAGEC, which allows for the minimally invasive treatment of early-onset and adolescent scoliosis. This technology is also the basis for our PRECICE limb lengthening system, which allows for the correction of long bone limb length discrepancy, as well as enhanced bone healing in patients that have experienced traumatic injury. The PRECICE limb lengthening system is sold by our NuVasive Specialized Orthopedics division.

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We intend to continue development on a wide variety of projects intended to broaden surgical applications for greater procedural integration of our MAS techniques and additional applications of the MAGEC technology. Such applications include tumor, trauma, and deformity, as well as increased fixation options, sagittal alignment products, imaging and navigation. We also expect to continue expanding our other product and services offerings as we execute on our strategy to offer customers an end-to-end, integrated procedural solution for spine surgery. We intend to continue to pursue business and technology acquisition targets and strategic partnerships.

Revenues and Operations

The majority of our revenues are derived from the sale of implants, biologics and disposables and we expect this trend to continue for the foreseeable future. Additionally, with our recent acquisitions of IOM service providers, we expect our IOM service and support revenue to increase compared to previous periods. We loan our proprietary software-driven nerve monitoring systems and surgical instrument sets at no cost to surgeons and hospitals that purchase disposables and implants for use in individual procedures. In addition, we often place our proprietary software-driven nerve monitoring systems, MaXcess and other MAS instrument sets with hospitals for an extended period at no up-front cost to them. Our implants, biologics and disposables are currently sold and shipped from our distribution and warehousing operations. We generally recognize revenue for implants, biologics and disposables upon notice that our products have been used in a surgical procedure or upon shipment to a third-party customer assuming control of the products. Revenue from IOM services is recognized in the period the service is performed for the amount of payment we expect to receive. We sell MAS instrument sets, MaXcess devices, and our proprietary software-driven nerve monitoring systems, however this does not make up a material part of our business. Currently, sales and leases of capital equipment, including our LessRay software technology suite, represent a small portion of our consolidated revenues.

The majority of our operations are located and the majority of our sales have been generated in the United States. We sell our products in the United States through a sales force comprised primarily of independent sales agents and directly-employed sales representatives. Our sales force provides a delivery and consultative service to our surgeon and hospital customers and is compensated based on sales and product placements in their territories. Sales force commissions are reflected in the sales, marketing and administrative operating expense line item within our Statement of Operations. We continue to invest in international expansion with a focus on European, Asia-Pacific and Latin American markets. Our international sales force is comprised of directly-employed sales personnel, independent sales agents, as well as exclusive and non-exclusive independent third-party distributors.

Results of Operations

Revenue

	March 31,
(in thousands, except %)	2018		2017		$ Change		% Change
Three Months Ended
Revenue
Spinal hardware	$	185,901	$	175,086	$	10,815		6	%
Surgical support		74,621		73,927		694		1	%
Total revenue	$	260,522	$	249,013	$	11,509		5	%

Our spinal hardware product line offerings include our implants and fixation products. Our surgical support product line offerings include IOM services, disposables and biologics, all of which are used to aid spinal surgery.

The continued adoption of minimally invasive procedures for spine has led to the expansion of our procedure volume. In addition, increased market acceptance in our international markets contributed to the increase in revenues for the periods presented. We expect continued adoption of our innovative minimally invasive procedures and deeper penetration into existing accounts and international markets as our sales force executes on our strategy of selling the full mix of our products and services. However, the continued consolidation and increased purchasing power of our hospital customers and group purchasing organizations, the continued existence of physician-owned distributorships, recent changes in the public and private insurance markets regarding reimbursement, and ongoing policy and legislative changes in the United States have created less predictability in the lumbar portion of the spine market. Although the market for procedurally-integrated spine surgery solutions should continue to grow over the long term, economic, political and regulatory influences are subjecting our industry to significant changes that may slow the growth rate of the spine surgery market. Our growth in revenue in 2018 should come primarily from market share gains in the shift toward less invasive spinal surgery, revenue from new products and services, and international growth.

Revenue from our spinal hardware product line offerings increased $10.8 million, or 6% during the three months ended March 31, 2018 compared to the same period in 2017. Product volume and foreign currency fluctuation in spinal hardware increased our revenue by approximately 7% and 1%, respectively, for the three months ended March 31, 2018, offset by unfavorable pricing impacts of approximately 2% for the three months ended March 31, 2018, as compared to the same period in 2017.

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Revenue from our surgical support product line offerings increased $0.7 million, or 1% during the three months ended March 31, 2018 compared to the same period in 2017. Excluding the impact from our 2018 acquisitions, the three months ended March 31, 2018 included decreases in surgical support volume of 4% and unfavorable pricing impacts of 1%, as compared to the same period in 2017. Revenue associated with our 2018 acquisitions accounted for approximately 6% of the increase in surgical support revenue for the three months ended March 31, 2018, as compared to the same period in 2017. Foreign currency fluctuation had an insignificant impact on revenue from surgical support for the periods presented.

Cost of Revenue, Excluding Below Amortization of Intangible Assets

	March 31,
(in thousands, except %)	2018			2017			$ Change		% Change
Three Months Ended
Cost of revenue	$	73,814		$	61,443		$	12,371		20	%
% of total revenue		28	%		25	%

Cost of revenue consists primarily of purchased goods, raw materials, labor and overhead associated with product manufacturing, inventory-related costs and royalty expenses, as well as the cost of providing IOM services, which includes personnel and physician oversight costs. We primarily procure and manufacture our goods in the United States, and accordingly, foreign currency fluctuations have not materially impacted our cost of revenue.

Cost of revenue increased $12.4 million, or 20%, during the three months ended March 31, 2018 compared to the same period in 2017. The cost of revenue associated with the operations of our 2018 acquisitions accounted for approximately 5% of the total increase during the three months ended March 31, 2018 compared to the same period in 2017. Cost of revenue for our business, excluding our 2018 acquisitions, increased primarily due to growth in volume, but also includes product mix and shifts in production costs, for an overall increase of approximately 12% during the three months ended March 31, 2018 compared to the same period in 2017. Additionally, royalty obligations for certain product lines and other non-recurring inventory related items, including write-offs and reserves from both manufacturing and obsolescing products, accounted for approximately 3% of the total increase to cost of revenue for the three ended March 31, 2018 compared to the same period in 2017.

Cost of revenue as a percentage of revenue increased for the three ended March 31, 2018 compared to the same period in 2017. On a long-term basis, we expect cost of revenue, as a percentage of revenue, to decrease moderately.

Operating Expenses

	Three Months Ended
	March 31,
(in thousands, except %)	2018			2017			$ Change		% Change
Sales, marketing and administrative	$	146,766			140,368		$	6,398		5	%
% of total revenue		56	%		56	%
Research and development		14,491			12,414			2,077		17	%
% of total revenue		6	%		5	%
Amortization of intangible assets		12,425			12,061			364		3	%
Litigation liability loss		28,995			—			28,995	*
Business transition costs		2,253			55			2,198		3,996	%

Sales, Marketing and Administrative

Sales, marketing and administrative expenses consist primarily of compensation costs, commissions and training costs for our employees (who we refer to as “shareowners”) engaged in sales, marketing and customer support functions. The expense also includes commissions to sales representatives, freight expenses, surgeon training costs, depreciation expense for property and equipment such as surgical instrument sets, and administrative expenses for both shareowners and third party service providers.  

Sales, marketing and administrative expenses increased by $6.4 million, or 5%, during the three months ended March 31, 2018 compared to the same period in 2017, primarily due to increases in shareowner compensation and other expenses resulting from increased headcount as compared to the same period in 2017. Other costs that increased as a function of the increase in revenue and expansion included consulting, travel and equipment, which were partially offset by decreased distributor commissions due to increased sales mix to our direct sales force in 2018 as compared to 2017 and the reversal of stock-based compensation expense previously recognized for certain performance awards that we mark-to-market every quarter. Sales, marketing and administrative expenses associated with our 2018 acquisitions, which is included in the results discussed herein, accounted for approximately 1% of the increase in sales, marketing and administrative expenses compared to the same period in 2017.

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Sales, marketing and administrative expenses as a percentage of revenue remained constant during the three months ended March 31, 2018 compared to the same period in 2017. On a long-term basis, we expect total sales, marketing and administrative costs, as a percentage of revenue, to decrease moderately. To date, foreign currency fluctuations have not materially impacted our sales, marketing, and administrative expense.

Research and Development

Research and development expense consists primarily of product research and development, clinical trial and study costs, regulatory and clinical functions, and compensation and other shareowner related expenses. In the last several years, we have introduced numerous new products and product enhancements that have significantly expanded our MAS platform, including iGA, and our comprehensive product portfolio. We have also acquired complementary and strategic assets and technology, particularly in the area of spinal hardware products. We continue to invest in research and development programs.

Research and development expense increased by $2.1 million, or 17%, during the three months ended March 31, 2018, compared to the same period in 2017. The increase in spending is primarily due to increased headcount and increased spending for further enhancement and functionality of our product offerings.

Research and development costs as a percentage of revenue slightly increased during the three months ended March 31, 2018 compared to the same period in 2017. On a long-term basis, we expect total research and development costs as a percentage of revenue to increase moderately in support of our ongoing development and regulatory approval efforts.

Litigation Liability Loss

On April 12, 2018, the U.S. Court of Appeals for the Ninth Circuit held oral argument on our litigation with Madsen Medical, Inc. While we continue to believe in the underlying facts of the case, following oral argument, we now believe that the prior judgments against us, in part or as a whole, may be upheld. Accordingly, at March 31, 2018, we believe that the outcome of the case now constitutes a probable loss and have recorded an estimated loss contingency in the amount of $29.0 million as a current litigation liability in the Unaudited Consolidated Balance Sheet as of March 31, 2018. See Note 11 to the Unaudited Consolidated Financial Statements for further discussion.

Interest and Other Expense, Net

	March 31,
(in thousands, except %)	2018			2017			$ Change			% Change
Three Months Ended
Interest income	$	134		$	137			(3	)		(2	)%
Interest expense		(9,467	)		(9,799	)		332			(3	)%
Other (expense) income, net		(9,703	)		258			(9,961	)		(3,861	)%
Total interest and other expense, net	$	(19,036	)	$	(9,404	)	$	(9,632	)		102	%

Total interest and other expense, net for the three months ended March 31, 2018 increased $9.6 million compared to the same period in 2017 primarily due to an impairment charge of $9.0 million on a strategic investment and our pro rata allocation of net income or loss from our equity method investments. Total interest and other expense, net for the periods presented also included gains and losses from derivative instruments.

Income Tax (Benefit) Expense

	March 31,
(in thousands, except %)	2018			2017
Three Months Ended
Income tax (benefit) expense	$	(10,126	)	$	1,285
Effective income tax rate		27	%		10	%

The income tax (benefit) as a percentage of pre-tax loss from continuing operations was 27% for the three months ended March 31, 2018 compared with an income tax expense as a percentage of pre-tax income of 10% for the three months ended March 31, 2017. The increased rate for the three months ended March 31, 2018 was primarily due to reduced benefits associated with share-based payments and increases in tax expense due to the impact of tax reform on meals and entertainment and certain officer’s compensation deductions, as well as an increase in valuation allowance associated with the impairment of a strategic investment.

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On December 22, 2017, President Trump signed U.S. tax reform legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Act”), which became effective January 1, 2018. Due to insufficient guidance on certain aspects of the Act, such as officer’s compensation, as well as uncertainty around the GAAP treatment associated with many other parts of the Act, such as the implementation of certain international provisions, we recorded certain provisional amounts related to the revaluation and realization of our deferred taxes in our December 31, 2017 tax provision. In the first quarter of 2018, we further analyzed the impact of the Act on certain executive compensation related deferred taxes and determined that a write-down of approximately $0.2 million was required, which would have increased the full year effective tax rate by 0.3% and the fourth quarter effective tax rate by 1.1%. We are continuing to analyze the impact of the Act during which adjustments to the 2017 year-end provisional calculation will be subject to change during the Staff Accounting Bulletin No. 118 measurement period. As we finalize our analysis and adjust our tax balances accordingly, we will describe the issue and impact on previously recorded provisional amounts. At March 31, 2018, we have not completed our accounting for the tax effects of the global intangible low-taxed income (“GILTI”), foreign derived intangible income (“FDII”), and base erosion and anti-abuse tax (“BEAT”) provisions of the Act on current year tax expense; however, we have made a reasonable estimate and determined that these provisions will have no impact on our 2018 results. Because we continue to evaluate the impact of the Act’s GILTI provisions, we have yet to elect an accounting policy to treat the tax impact as either a future period charge or as a current component of deferred taxes.

Liquidity, Cash Flows and Capital Resources

Liquidity and Capital Resources

Our principal sources of liquidity are our existing cash, cash equivalents and marketable securities, cash generated from operations, proceeds from our convertible notes issuances, and access to our revolving line of credit. We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, working capital requirements and capital deployment decisions. We have historically invested our cash primarily in the U.S. treasuries and government agencies, corporate debt, and money market funds. Certain of these investments are subject to general credit, liquidity and other market risks. The general condition of the financial markets and the economy may increase those risks and may affect the value and liquidity of investments and restrict our ability to access the capital markets.

Our future capital requirements will depend on many factors including our rate of revenue growth, the timing and extent of spending to support development efforts, the expansion of sales, marketing and administrative activities, the timing of introductions of new products and enhancements to existing products, successful vertical integration of our manufacturing process, the continuing market acceptance of our products, the expenditures associated with possible future acquisitions or other business combination transactions, the outcome of current and future litigation, the evolution of our globalization initiative, and continuous international expansions of our business. Our cash flow from operations and growing operations should continue to fund the ongoing core business.  As current borrowing sources become due, we may be required to access the capital markets for additional funding. As we assess inorganic growth strategies, we may need to supplement our internally generated cash flow with outside sources. In the event that we are required to access the debt market, we should be able to secure reasonable borrowing rates. As part of our liquidity strategy, we will continue to monitor our current level of earnings and cash flow generation as well as our ability to access the market in light of those earning levels.

A substantial portion of our operations are located in the United States, and the majority of our sales and cash generation since inception have been made in the United States. Accordingly, we do not have material net cash flow exposures to foreign currency rate fluctuations. However, as our business in markets outside of the United States continues to increase, we will be exposed to foreign currency exchange risk related to our foreign operations. Fluctuations in the rate of exchange between the United States dollar and foreign currencies, primarily in the pound sterling, the euro, the Australian dollar, the Singapore dollar, and the yen, could adversely affect our financial results, including our revenues, revenue growth rates, gross margins, income and losses as well as assets and liabilities. We enter into forward currency contracts to partially offset the impact from fluctuations of the foreign currency rates on our third party and short-term intercompany receivables and payables between our domestic and international operations. We currently do not hedge future forecasted transactions but will continue to assess whether that strategy is appropriate. At March 31, 2018, the cash balance held by our foreign subsidiaries with currencies other than the United States dollar was approximately $33.5 million and it is our intention to indefinitely reinvest all of current foreign earnings in order to partially support foreign working capital and to expand our existing operations outside the United States.  As of March 31, 2018, our account receivable balance held by our foreign subsidiaries with currencies other than the United States dollar was approximately $36.6 million. We have operations in markets in which there is governmental financial instability which could impact funds that flow into the medical reimbursement system. In addition, loss of financial stability within these markets could lead to delays in reimbursement or inability to remit payment due to currency controls.  Specifically, we have operations and/or sales in Puerto Rico, Brazil, Argentina and Venezuela. We do not have any material financial exposure to one customer or one country that would significantly hinder our liquidity. Although our sales and operational activities located in the United States and Puerto Rico were affected by inclement weather during the year ended December 31, 2017, we do not anticipate the disruption will have a material impact to our liquidity.

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On August 31, 2015, we received a civil investigative demand, or CID, issued by the Department of Justice, or DOJ, pursuant to the federal False Claims Act. The CID requires the delivery of a wide range of documents and information related to an investigation by the DOJ concerning allegations that we assisted a physician group customer in submitting improper claims for reimbursement and made improper payments to the physician group in violation of the Anti-Kickback Statute. We are cooperating with the DOJ. No assurance can be given as to the timing or outcome of this investigation, and the probable outcome of this matter cannot be determined.

On June 9, 2017, we received a subpoena from the Office of the Inspector General of the U.S. Department of Health and Human Services, or OIG, in connection with an investigation into possible false or otherwise improper claims submitted to Medicare and Medicaid. The subpoena seeks discovery of documents for the period January 2014 through June 2017, primarily associated with sales to a particular customer and relationships related to that customer account. We are working with the OIG to understand the scope of the subpoena and its request for documents, and we intend to fully cooperate with the OIG's request.  No assurance can be given as to the timing or outcome of this investigation, and the probable outcome of this matter cannot be determined.

On April 12, 2018, the U.S. Court of Appeals for the Ninth Circuit held oral argument on our litigation with Madsen Medical, Inc. While we continue to believe in the underlying facts of the case, following oral argument, we now believe that the prior judgments against us, in part or as a whole, may be upheld. Accordingly, at March 31, 2018, we believe that the outcome of the case now constitutes a probable loss and have recorded an estimated loss contingency in the amount of $29.0 million as a current litigation liability in the Unaudited Consolidated Balance Sheet as of March 31, 2018. In the event that we have a significant cash outflow related to the litigation, the payment will be made using cash on hand or will be funded through our available liquidity. See Note 11 to the Unaudited Consolidated Financial Statements for further discussion.

We are involved in a number of legal actions and investigations arising out of the normal course of our business as discussed in Note 11 of the Unaudited Consolidated Financial Statements. Due to the inherent uncertainties associated with pending legal actions and investigations, we cannot predict the outcome, and, with respect to certain pending litigation or claims where no liability has been accrued, to make a meaningful estimate of the reasonably possible loss or range of loss that could result from an unfavorable outcome, other than those matters disclosed in this Quarterly Report. We have no material accruals for pending litigation or claims for which accrual amounts are not disclosed in our Unaudited Consolidated Financial Statements. It is reasonably possible, however, that an unfavorable outcome that exceeds our current accrual estimate, if any, for one or more of the matters described in our Unaudited Consolidated Financial Statements could have a material adverse effect on our liquidity and access to capital resources.  Additionally, it is possible that as part of the ongoing legal appeals process, regardless of our assessment of the probability of a loss, we could be required to set aside funds in an escrow or purchase a performance bond. These requirements to escrow funding could have an adverse impact on our ability to access our current liquidity or impact our access to additional capital resources.

In January 2018, we drew $50.0 million from our $500.0 million revolving senior credit facility to be used for working capital, general corporate purposes, and strategic investments and acquisitions, including the acquisition of SafePassage, a privately-held provider of IOM services.

On September 7, 2017, we completed an acquisition of a medical device company that developed interbody implants for spinal fusion using patented porous PEEK technology. In connection with the acquisition we recorded a purchase accounting fair value estimate of $31.4 million for contingent consideration liabilities related to the achievement of certain manufacturing and commercial milestones. We anticipate these milestones will become payable at varying times between 2019 and 2021, but are subject to change based on the achievement of those manufacturing and commercial milestones.

On September 12, 2016, we completed an acquisition of an imaging software and technology platform known as LessRay. In connection with the acquisition we recorded a purchase accounting fair value estimate of $34.1 million for contingent consideration liabilities related to the achievement of certain regulatory and commercial milestones. In January 2018, we paid $9.0 million of the outstanding contingent consideration liabilities for the achievement of a commercial milestone. We anticipate the remaining milestones will become payable at varying times between 2018 and 2022. We expect the imaging software and technology platform to be incorporated into our MAS platform to form a foundational element in our imaging, navigation and automation platform development strategy.

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Cash and cash equivalents were $73.7 million and $72.8 million at March 31, 2018 and December 31, 2017, respectively. We believe that our existing cash, cash equivalents, marketable securities and available liquidity will be sufficient to meet our anticipated cash needs for the next twelve months. We could have varying needs for cash as a result of the achievement of certain acquisition related milestones. We anticipate funding these milestones from cash on hand and operations, however, we also have the ability to fund these from our existing line of credit if necessary. The change in liquidity during the three months ended March 31, 2018 of $0.9 million was mainly driven by $54.5 million in cash used for business combinations, strategic investments and intangible assets, $29.1 million in cash used for purchases of property and equipment, and $9.0 million in cash used for payment of contingent consideration, offset by a net $55.0 million draw on the line of credit and $36.5 million from cash inflow from operations. At March 31, 2018, we have cash totaling $2.4 million in restricted accounts which are not available to us to meet any ongoing capital requirements if and when needed. Future litigation or requirements to escrow funds could materially impact our liquidity and our ability to invest in and run our business on an ongoing basis.

Cash Flows from Operating Activities

Cash provided by operating activities was $36.4 million for the three months ended March 31, 2018, compared to $28.2 million for the same period in 2017. The $8.2 million increase in cash provided by operating activities was primarily due to increased operational cash flows in 2018 related to timing of spending and cash receipts.

Cash Flows from Investing Activities

Cash used in investing activities was $83.6 million for the three months ended March 31, 2018, compared to $38.3 million used for the same period in 2017. The $45.3 million increase in cash used in investing activities was primarily due to an increase of $50.7 million in cash used for business combinations, strategic investments and intangible assets, offset by a $5.4 million decrease in cash used for purchases of property and equipment during the three months ended March 31, 2018 as compared to the same period in 2017.

Cash Flows from Financing Activities

Cash provided by financing activities was $44.1 million for the three months ended March 31, 2018, compared to $10.1 million cash used for the same period in 2017. The $54.3 million increase in cash provided by financing activities was primarily due to a net $55.0 million draw on the line of credit during the three months ended March 31, 2018.

Treasury stock purchases related to equity award vesting and stock option exercises totaled $2.2 million during the three months ended March 31, 2018. We use net share settlement on stock issuances, which results in cash tax payments we make on behalf of shareowners and a decrease in the cash receipt from the issuance of common stock upon the exercising of stock options. Net share settlement is generally used in lieu of cash payments by shareowners for minimum tax withholding or exercise costs for equity awards. The net share settlement is accounted for as a treasury share repurchase transaction, with the cost of any deemed repurchased shares included in treasury stock and reported as a reduction in total equity at the time of settlement. Additionally, net share settlement for tax withholding requires us to fund a significant amount of cash for certain tax payment obligations from time-to-time with respect to the shareowner tax obligations for vested equity awards. We anticipate using cash generated from operating activities to fund such payments.

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Senior Convertible Notes

2.25% Senior Convertible Notes due 2021

In March 2016, we issued $650.0 million principal amount of unsecured senior convertible notes with a stated interest rate of 2.25% and a maturity date of March 15, 2021, which we refer to as the 2021 Notes. The net proceeds from the offering, after deducting initial purchasers' discounts and costs directly related to the offering, were approximately $634.1 million. Interest on the 2021 Notes began accruing upon issuance and is payable semi-annually. The 2021 Notes may be settled in cash, stock, or a combination thereof, solely at our discretion. It is our current intent and policy to settle all conversions through combination settlement, which involves satisfying the principal amount outstanding with cash and any note conversion value over the principal amount in shares of our common stock. The initial conversion rate of the 2021 Notes is 16.7158 shares per $1,000 principal amount, which is equivalent to a conversion price of approximately $59.82 per share, subject to adjustments. Prior to September 15, 2020, holders may convert their 2021 Notes only under the following conditions: (a) during any calendar quarter beginning June 30, 2016, if the reported sale price of our common stock for at least 20 days out of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than 130% of the conversion price on each applicable trading day; (b) during the five business day period in which the trading price of the 2021 Notes falls below 98% of the product of (i) the last reported sale price of our common stock and (ii) the conversion rate on that date; and (c) upon the occurrence of specified corporate events, as defined in the 2021 Notes. From September 15, 2020 and until the close of business on the second scheduled trading day immediately preceding March 15, 2021, holders may convert their 2021 Notes at any time (regardless of the foregoing circumstances). We may not redeem the 2021 Notes prior to March 20, 2019. We may redeem the 2021 Notes, at our option, in whole or in part on or after March 20, 2019 until the close of business on the business day immediately preceding September 15, 2020 if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we deliver written notice of a redemption. The redemption price will be equal to 100% of the principal amount of such 2021 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date. No principal payments are due on the 2021 Notes prior to maturity. Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the 2021 Notes do not contain any financial covenants and do not restrict us from paying dividends or issuing or repurchasing any of our other securities. We are unaware of any current events or market conditions that would allow holders to convert the 2021 Notes. The impact of the convertible feature will be dilutive to our earnings per share when our average stock price for the period is greater than the conversion price.

In connection with the offering of the 2021 Notes, we entered into transactions for convertible notes hedge, which we refer to as the 2021 Hedge, and warrants, which we refer to as the 2021 Warrants. The 2021 Hedge was entered into with the initial purchasers of the 2021 Notes and/or their affiliates, which we refer to as the 2021 Counterparties, entitling us to purchase up to 10,865,270 shares of our own common stock at an initial stock price of $59.82 per share, each of which is subject to adjustment. The cost of the 2021 Hedge was $111.2 million. The 2021 Hedge will expire on March 15, 2021. The 2021 Hedge is expected to reduce the potential equity dilution upon conversion of the 2021 Notes if the daily volume-weighted average price per share of our common stock exceeds the strike price of the 2021 Hedge. Our assumed exercise of the 2021 Hedge is considered anti-dilutive since the effect of the inclusion would always be anti-dilutive with respect to the calculation of diluted earnings per share.

In addition, we sold the 2021 Warrants to the 2021 Counterparties to acquire up to 10,865,270 common shares of our stock. The 2021 Warrants will expire on various dates from June 2021 through December 2021 and may be settled in cash or net shares. It is our current intent and policy to settle all conversions in shares of our common stock. We received $44.9 million in cash proceeds from the sale of the 2021 Warrants. The 2021 Warrants could have a dilutive effect on our earnings per share to the extent that the price of our common stock during a given measurement period exceeds the strike price of the 2021 Warrants, which is $80.00 per share.

Revolving Senior Credit Facility

In April 2017, we entered into an Amended and Restated Credit Agreement (the “2017 Credit Agreement”) for a revolving senior credit facility (the “2017 Facility”), which replaced the previous credit agreement we had entered into in February 2016.  The 2017 Credit Agreement provides for secured revolving loans, multicurrency loan options and letters of credit in an aggregate amount of up to $500.0 million. The 2017 Credit Agreement also contains an accordion feature, which allows us to increase the aggregate principal amount of the 2017 Facility provided we remain in compliance with the underlying financial covenants, including but not limited to, compliance with the consolidated interest coverage ratio and certain consolidated leverage ratios. The 2017 Facility matures in April 2022 (subject to an earlier springing maturity date), and includes a sublimit of $100.0 million for multicurrency borrowings, a sublimit of $50.0 million for the issuance of standby letters of credit, and a sublimit of $5.0 million for swingline loans. All of our assets including the assets of our material domestic subsidiaries are pledged as collateral under the 2017 Facility (subject to customary exceptions) pursuant to the term set forth in the Amended and Restated Security and Pledge Agreement (the “2017 Security Agreement”) executed in favor of the administrative agent. Each of our material domestic subsidiaries guarantees the 2017 Facility. In connection with the 2017 Facility, we incurred issuance costs which will be amortized over the term of the 2017 Facility. As of March 31, 2018, we had $55.0 million outstanding under the 2017 Facility, at an interest rate of 3.44% (one month LIBOR plus 1.75%).

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Borrowings under the 2017 Facility bear interest, at our option, at a rate equal to an applicable margin plus: (a) the applicable Eurocurrency Rate (as defined in the 2017 Credit Agreement), or (b) a base rate determined by reference to the highest of (1) the federal funds effective rate plus 0.50%, (2) the Bank of America prime rate, and (3) LIBOR for an interest period of one month plus 1.00%. The margin for the 2017 Facility ranges, based on our consolidated leverage ratio, from 0.00% to 1.00% in the case of base rate loans and from 1.00% to 2.00% in the case of Eurocurrency Rate loans. The 2017 Facility includes an unused line fee ranging, based on our consolidated leverage ratio, from 0.20% to 0.35% per annum on the revolving commitment.

The 2017 Credit Agreement contains affirmative, negative, permitted acquisition and financial covenants, and events of default customary for financings of this type. The financial covenants require us to maintain ratios of consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) in relation to consolidated interest expense and consolidated debt, respectively, as defined in the 2017 Credit Agreement. The 2017 Facility grants the lenders preferred first priority liens and security interests in capital stock, intercompany debt and all of our present and future property and assets including each guarantor. We are currently in compliance with the Credit Agreement covenants.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based upon our Unaudited Consolidated Financial Statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our estimates including those related to bad debts, inventories, valuation of goodwill, intangibles, other long-term assets, stock-based compensation, income taxes, and legal proceedings. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other sources. Actual results may differ from these estimates. Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and there have been no material changes, other than the adoption of Accounting Standards Codification 606 Revenue from Contracts with Customers during the three months ended March 31, 2018.

Off-Balance Sheet Arrangements

As of March 31, 2018, we did not have any off-balance sheet arrangements.

Contractual Obligations and Commitments

During the first quarter of 2018, we increased our obligations for certain consulting arrangements by approximately $37.6 million in the aggregate in the event that specified revenue-based milestones are achieved prior to 2027. Any such payment will be made in a combination of cash and common shares as provided in the agreements. There were no other material changes outside of the ordinary course of business, in our outstanding contractual obligations from those disclosed within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of March 31, 2018, there has been no material change in our assessment of our sensitivity to market risk since our presentation set forth in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.  

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time lines specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in SEC Rules 13a - 15(e) and 15d - 15(e)) as of March 31, 2018. Based on such evaluation, our management has concluded that as of March 31, 2018, the Company’s disclosure controls and procedures are effective.

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Changes in Internal Control Over Financial Reporting

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we carried out an evaluation of any potential changes in our internal control over financial reporting during the fiscal quarter covered by this Quarterly Report.

There has been no change to our internal control over financial reporting during our most recent fiscal quarter that our certifying officers concluded materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For a description of our material pending legal proceedings, refer to Note 11 “Contingencies” of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report, which is incorporated herein by reference.

Item 1A. Risk Factors

There were no material changes to the risk factors previously disclosed and included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017. An investment in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described under Item 1A of Part I of our Annual Report on Form 10-K, together with all other information contained or incorporated by reference in this report before you decide to invest in our common stock. If any of the Risk Factors were to actually occur, our business, financial condition, results of operations and our future growth prospects could be materially and adversely affected. Under the circumstances, the trading price of our common stock could decline, and you may lose all or part of your investment.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit Number   Description  

3.1	Restated Certificate of Incorporation (incorporated by reference to our Quarterly Report on Form 10-Q filed with the SEC on August 13, 2004)
3.2	Certificate of Amendment to the Restated Certificate of Incorporation (incorporated by reference to our Current Report on Form 8-K filed with the SEC on September 28, 2011)
3.3	Restated Bylaws (incorporated by reference to our Current Report on Form 8-K filed with the SEC on January 6, 2012)
3.4	Amendment No. 1 to the Restated Bylaws (incorporated by reference to our Current Report on Form 8-K filed with the SEC on May 19, 2014)
3.5	Amendment No. 2 to the Restated Bylaws (incorporated by reference to our Current Report on Form 8-K filed with the SEC on August 1, 2016)
10.1#	Form of Performance Restricted Stock Unit Agreement (with accompanying Notice of Grant) for grants on or after April 30, 2018
10.2#	Form of Executive Restricted Stock Unit Agreement (with accompanying Form Notice of Grant) for grants on or after April 30, 2018
10.3#	Form of Performance Cash Award Agreement (with accompanying Form Notice of Grant) for grants on or after April 30, 2018
31.1*	Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. section 1350
31.2*	Certification of the Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. section 1350
32.1*	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase
#	Indicates management contract or compensatory plan.
*	These certifications are being furnished solely to accompany this annual report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of NuVasive, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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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, thereunto duly authorized.

		NUVASIVE, INC.
Date: May 1, 2018	By:	/s/ Gregory T. Lucier
		Gregory T. Lucier
		Chairman and Chief Executive Officer
Date: May 1, 2018	By:	/s/ Rajesh J. Asarpota
		Rajesh J. Asarpota
		Executive Vice President and Chief Financial Officer

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EX-10.1

Exhibit 10.1

[FORM OF] NUVASIVE, INC.

NOTICE OF GRANT OF PERFORMANCE RESTRICTED STOCK UNITS

NuVasive, Inc. (the “Company”) has granted to the participant identified below (the “Participant”) an award (the “Award”) of the number of performance restricted stock units specified below in this Grant Notice (each, a “PerformanceRestricted Stock Unit” or “PRSU”) pursuant to the [2014 Equity Incentive Plan of NuVasive, Inc.][Ellipse Technologies, Inc. 2015 Incentive Award Plan] (the “Plan”).  This Award is subject to all of the terms and conditions set forth in the Performance Restricted Stock Unit Agreement attached hereto (together with this Notice of Grant, the “Agreement”) and the Plan, each of which is incorporated herein by reference.  Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Plan or the Agreement, as appropriate[, and, in the event of any inconsistency between the Plan and the Agreement, the terms of the Plan shall control].

Participant:	[FIRST_NAME, LAST_NAME]
Participant ID:	[EMPLOYEE_IDENTIFIER]
Date of Grant:	[April 30, 2018]
Number of PRSUs:	[TOTAL_SHARES_GRANTED], subject to adjustment as provided by the Agreement.
Initial Performance Period:	January 1, 2018 – December 31, 2018 (or, in the event of a Change in Control, through the last day of the Company’s last fiscal quarter ending after January 1, 2018, and before the date of a Change in Control).
Initial Performance Measure:	The Company’s earnings per share (“EPS”), as listed in [Section 10.4(a)(xvi)][Section 11.28] of the Plan, determined in accordance with generally accepted accounting principles in the United States (“GAAP”), adjusted to reflect the impact of the change from a basic to diluted share count, and determined excluding (1) litigation liability gain/expense; (2) amortization of intangible assets; (3) non-cash interest expense and gains/losses on convertible notes; (4) intangible asset impairment; (5) leasehold related charges; (6) acquisition related items (including expenses associated with prior mergers-and-acquisitions-related activity and as incurred); (7) integration related charges associated with the integration of acquired businesses; (8) one-time and business transition costs; and (9) the related tax charges and benefits associated with the exclusions(“Non-GAAP EPS”).
Initial Performance Target:	$1.50 or more of Non-GAAP EPS if the Initial Performance Period ends on December 31, 2018, and $0.10 or more of Non-GAAP EPS if the Initial Performance Period ends on the last day of the Company’s last fiscal quarter ending after January 1, 2018, and before the date of a Change in Control.
Maximum Payment:	In the event the Committee determines and certifies that the Initial Performance Target is satisfied, the maximum payment that may be made to the Participant is equal to 200% of the Number of PRSUs.  If the Committee determines and certifies that the Initial Performance Target is not satisfied, no amounts are payable pursuant to this Award.
Actual Payment:	In the event the Committee determines and certifies that the Initial Performance Target is satisfied, the actual amount of any payment made pursuant to this Award shall be determined pursuant to Section 3 of the Performance Restricted Stock Unit Agreement.

Vesting Date: Subject to the terms and conditions of the Agreement (including, without limitation, conditions requiring continued Service with the Company through the applicable date), this Award vests on [April 30, 2021] (the “Scheduled Vesting Date”).

By electronically accepting the Award according to the instructions in the Participant’s E*TRADE account (pursuant to which the Participant received this Notice of Grant), the Participant agrees that the Award is governed by this Notice of Grant and by the provisions of the Plan and the Agreement, both of which are made a part of this document.

The Participant acknowledges that copies of the Plan, the Agreement, and the prospectus for the Plan are available via the Participant’s E*TRADE account.

The Participant represents that the Participant has read and is familiar with the provisions of the Plan and the Agreement, and hereby accepts the Award subject to all of their terms and conditions.

[FORM OF] NUVASIVE, INC.

PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT

NuVasive, Inc. has granted to the Participant named in the Notice of Grant of Performance Restricted Stock Units (the “Grant Notice”) to which this Performance Restricted Stock Unit Agreement is attached (together, the Performance Restricted Stock Unit Agreement and the Grant Notice being referred to collectively herein as this “Agreement”) an Award consisting of Performance Restricted Stock Units (“PRSUs”) subject to the terms and conditions set forth in this Agreement.  The Award has been granted pursuant to the terms and conditions of the [2014 Equity Incentive Plan of NuVasive, Inc.][Ellipse Technologies, Inc. 2015 Incentive Award Plan] (the “Plan”), as amended from time-to-time, the provisions of which are incorporated herein by reference.  By electronically accepting the Award, the Participant: (a) acknowledges receipt of, and represents that the Participant has read and is familiar with, this Agreement, the Plan and the prospectus for the Plan prepared in connection with the registration with the Securities and Exchange Commission of the shares of Stock issuable pursuant to the Award (the “Plan Prospectus”), (b) accepts the Award subject to all of the terms and conditions of this Agreement and the Plan, and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee or its delegate (to the extent delegation is permitted under the Plan) in the event any questions arise (and/or interpretation may be required) regarding this Agreement or the Plan.

1.Definitions and Construction.

1.1Definitions.  Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Grant Notice or the [Plan][2014 Equity Incentive Plan of NuVasive, Inc.].

(a)“Baseline Non-GAAP Operating Margin” means 16.6%.

(b)“Non-GAAP Operating Margin” means the Company’s non-GAAP operating margin as publicly reported by the Company in its earnings press release for a completed fiscal year, consistent with the Company’s non-GAAP policy.  

(c)“Non-GAAP Operating Margin Improvement” means the amount of improvement, measured in basis points, in the Company’s Non-GAAP Operating Margin for a completed fiscal year as compared to the prior completed fiscal year.  

(d)“Non-GAAP Operating Margin Performance Multiplier” means the percentage calculated based on the respective Non-GAAP Operating Margin Improvement set forth in the table below:

Non-GAAP Operating Margin Improvement	Non-GAAP Operating Margin Performance Multiplier
Threshold 0.00 bps	0%
25.00 bps	25%
50.00 bps	50%
75.00 bps	75%
Target 100.00 bps	100%
118.75 bps	125%
137.50 bps	150%
156.25 bps	175%
Maximum 175.00 bps	200%

If the Company achieves a Non-GAAP Operating Margin Improvement that falls between the foregoing levels, the Non-GAAP Operating Margin Performance Multiplier will be determined by linear interpolation between the applicable levels noted above and using the following guiding principles:

• a 1.0% decrease in funding for every 1 bps of goal achieved below target; and

• a 1.33% incremental increase in funding for every 1 bps of goal achieved above 100%, up to a maximum of 200% of target.

When calculating Non-GAAP Operating Margin Improvement relative to two completed fiscal periods, the Committee shall have the authority to make appropriate adjustments to Non-GAAP Operating Margin to account for changes in accounting standards and adopted changes in accounting principles issued by the accounting bodies.  In each case, the Non-GAAP Operating Margin Improvement shall be rounded up to the nearest one hundredth of a percent and the Non-GAAP Operating Margin Performance Multiplier shall be rounded up to the nearest tenth of a percent.

1.2Construction.  Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement.  Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular.  Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.

2.Administration.

2.1Committee Actions.  TheCommittee shall be responsible for determining and certifying whether the performance conditions associated with the Award have been achieved; provided, however, that in the event of a Change in Control, the Committee shall make such determination and certification no later than the date immediately preceding the date of the Change in Control.  All questions of interpretation concerning this Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration of the Plan or the Award shall be determined by the Committee or its delegate.  All such determinations by the Committee or its delegate shall be final, binding and conclusive upon all persons having an interest in the Award, unless fraudulent or made in bad faith.  Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or the Award or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Award.  

2.2Express Authority Required.  Only individuals expressly designated by the Committee shall have the authority to act on behalf of the Committee with respect to certain of the matters, rights, obligations, modifications, or elections allocated to the Company herein (or in the Plan).

3.The Award; Payment.

3.1Grant of PRSUs.  On the Date of Grant, the Participant shall acquire, subject to the provisions of this Agreement, the Number of PRSUs set forth in the Grant Notice, subject to (a) determination as set forth in Section 3.2, Section 3.3 or Section 3.4 of this Agreement, as applicable, and (b) adjustment as provided in [Section 4.4 (Adjustments for Changes in Capital Structure)][Article VIII (Adjustments for Changes in Common Stock and Certain Other Events)] or [Section 4.5 (Assumption or Substitution of Awards)][Section 4.4 (Substitute Awards)] of the Plan.

3.2Amount of Payment.  Subject to satisfaction of the Initial Performance Target and the vesting requirements of Section 4 of this Agreement, and except as otherwise specified in Section 3.3 or Section 3.4 below, the number of shares of Stock that shall be issued in settlement of this Award on the date specified in Section 5.1 of this Agreement, shall be equal to the Aggregate PRSU Payout, calculated as follows:

(a)2018 Financial Performance Component.  Following the completion of the preparation of the Company’s annual financial statements for the fiscal year ended December 31, 2018, the Company will compare the Non-GAAP Operating Margin for the fiscal year ended December 31, 2018 (“2018 Non-GAAP Operating Margin”) against the Baseline Non-GAAP Operating Margin.  To the extent the 2018 Non-GAAP Operating Margin improves such that it exceeds the Baseline Non-GAAP Operating Margin, the 2018 financial performance component will be equal to the Number of PRSUs set forth in the Grant Notice

multiplied by the Non-GAAP Operating Margin Performance Multiplier associated with such Non-GAAP Operating Margin Improvement, and further multiplied by a weighting of 50%, rounding up to the nearest whole share of Stock (the “2018 Component”).  If such Non-GAAP Operating Margin Improvement is zero (or negative), the 2018 Component shall be zero.

(b)2019 Financial Performance Component.  Following the completion of the preparation of the Company’s annual financial statements for the fiscal year ended December 31, 2019, the Company will compare the Non-GAAP Operating Margin for the fiscal year ended December 31, 2019 (“2019 Non-GAAP Operating Margin”) against the 2018 Non-GAAP Operating Margin.  To the extent the 2019 Non-GAAP Operating Margin improves such that it exceeds the 2018 Non-GAAP Operating Margin, the 2019 financial performance component will be equal to the Number of PRSUs set forth in the Grant Notice multiplied by the Non-GAAP Operating Margin Performance Multiplier associated with such Non-GAAP Operating Margin Improvement, and further multiplied by a weighting of 30%, rounding up to the nearest whole share of Stock (the “2019 Component”).  If such Non-GAAP Operating Margin Improvement is zero (or negative), the 2019 Component shall be zero.

(c)2020 Financial Performance Component.  Following the completion of the preparation of the Company’s annual financial statements for the fiscal year ended December 31, 2020, the Company will compare the Non-GAAP Operating Margin for the fiscal year ended December 31, 2020 (“2020 Non-GAAP Operating Margin”) against the 2019 Non-GAAP Operating Margin.  To the extent the 2020 Non-GAAP Operating Margin improves such that it exceeds the 2019 Non-GAAP Operating Margin, the 2019 financial performance component will be equal to the Number of PRSUs set forth in the Grant Notice multiplied by the Non-GAAP Operating Margin Performance Multiplier associated with such Non-GAAP Operating Margin Improvement, and further multiplied by a weighting of 20%, rounding up to the nearest whole share of Stock  (the “2020 Component”).  If such Non-GAAP Operating Margin Improvement is zero (or negative), the 2020 Component shall be zero.

For purposes hereof, the “Aggregate PRSU Payout” shall mean the sum of the 2018 Component, the 2019 Component and the 2020 Component; provided that, in no event shall the Aggregate PRSU Payout exceed 200% of the Number of PRSUs set forth in the Grant Notice.  

3.3Death or Disability.  Notwithstanding any other provision of this Section 3 to the contrary, upon the Participant’s death or termination of Service due to Disability, the number of shares of Stock that shall be issued in settlement of this Award shall be the Number of PRSUs (as set forth in the Grant Notice), without regard to the Non-GAAP Operating Margin Performance Multiplier.

3.4Change in Control.  Notwithstanding any other provision of this Section 3 to the contrary, in the event of a Change in Control, the number of shares of Stock that shall be issued in settlement of this Award shall be the greater of (i) the Number of PRSUs (as set forth in the Grant Notice) without regard to the Non-GAAP Operating Performance Multiplier and (ii) the Aggregate PRSU Payout; provided, however, that in the event that one or more of the 2018 Component, the 2019 Component and the 2020 Component has not yet been determined because the associated Non-GAAP Operating Margin Improvement Multiplier has not yet been calculated, the Aggregate PRSU Payout for purposes of this Section 3.4 shall be equal to the sum of all such components that have been determined plus, for any components that have not yet been determined, the amount of any such component calculated using a Non-GAAP Operating Margin Performance Multiplier of 100%.  In the event of a Change in Control, this Award shall continue to vest subject to the terms and conditions of this Agreement, with respect to the number of shares of Stock determined pursuant to this Section 3.4.  If the Participant’s Service by the Company (or Company’s successor) is terminated without Cause (as defined in Section 4.1 below) after a Change in Control, then this Award shall become vested upon such termination.

3.5No Monetary Payment Required.  The Participant is not required to make any monetary payment (other than applicable tax withholding, if any) as a condition to receiving the PRSUs or any shares of Stock issued upon settlement of Vested PRSUs (as defined in Section 4.1 of this Agreement), the

consideration for which shall be the Participant rendering Service as provided in this Agreement to a Participating Company or for its benefit.

3.6Dividend Equivalent Units.  On the date that the Company pays a cash dividend to holders of Stock generally, if any, the Participant shall be credited with a number of additional whole Dividend Equivalent Units determined by dividing (a) the product of (i) the dollar amount of the cash dividend paid per share of Stock on such date, and (ii) the number of PRSUs which have not been settled as of such date, by (b) the Fair Market Value per share of Stock on such date.  Any resulting fractional Dividend Equivalent Unit shall be rounded to the nearest whole number.  Any such additional Dividend Equivalent Units shall be added to the Number of PRSUs specified in the Grant Notice and shall be subject to the same terms and conditions, and shall be settled or forfeited in the same manner and at the same time, as the PRSUs with respect to which they have been credited.

4.Vesting; Forfeiture.

4.1Vesting of PRSUs.  Provided that the Initial Performance Measure equals or exceeds the Initial Performance Target for the Initial Performance Period and the Participant’s Service has not terminated prior to the applicable date, any PRSUs subject to this Award shall become vested upon the earliest date to occur of the following (the “Vesting Date”) (such PRSUs, when so vested, being referred to herein as “Vested PRSUs”):

(a)the Scheduled Vesting Date (as provided in the Grant Notice);

(b)the Participant’s death;

(c)termination of the Participant’s Service due to Disability;

(d)immediately before any Change in Control in which the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be, elects not to assume or substitute for this Award; and

(e)termination of the Participant’s Service by the Company (or Company’s successor) without Cause (as defined below) after a Change in Control.

For purposes hereof, “Cause” shall mean the following: (A) the Participant’s repeated failure to satisfactorily perform the Participant’s job duties; (B) refusal or failure to follow the lawful directions of the Participant’s direct supervisor, the Company’s Chief Executive Officer or the Board, as applicable; (C) conviction of a crime involving moral turpitude; or (D) engaging in acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of the Participant with respect to the Participant’s obligations or otherwise relating to the business of the Company, its Affiliates or customers; except that if the Participant is a party to a Change in Control Agreement with the Company, the definition of “Cause” therein shall apply.  Notwithstanding the foregoing, following a Change in Control, any determination as to whether “Cause” exists under the terms of this Agreement shall be subject to de novo review by a court of competent jurisdiction.

4.2Leaves of Absence.

(a)If Participant takes an approved medical, FMLA (or other statutorily protected leave), or military leave (each, an “Approved Leave”) and returns from such leave for at least thirty calendar days, then Participant shall be treated as if the period of such Approved Leave had been a period of continuous Service with the Company or Affiliate, and such Vested PRSUs shall be settled in accordance with Section 5 of this Agreement.

(b)In the event the Participant takes a leave of absence other than an Approved Leave, any shares of Stock that are determined to be payable pursuant to Section 3 aboveshall be prorated by multiplying the Vested PRSUs by a fraction, the numerator of which is the number of whole months during the

period commencing on January 1, 2018, and ending on the earlier of the date of a Change in Control or December 31, 2020, as applicable (the “Vesting Period”), that Participant had been in continuous Service with the Company or an Affiliate, and the denominator of which is the number of months the Vesting Period spans, rounding up to the nearest whole number.

(c)In the event of Participant’s termination of Service during any leave of absence, then the PRSUs shall expire in accordance with the provisions set forth in Section 4.4 below.

4.3Vesting of Dividend Equivalent Units.  Any Dividend Equivalent Units shall become vested (and also constitute Vested PRSUs) at the same time as the PRSUs with respect to which they have been credited.

4.4Forfeiture of PRSUs That Are Not Vested PRSUs Upon Termination of Service.  Except as otherwise provided in Section 4.1 above, any PRSUs that are not Vested PRSUs will terminate automatically without any further action by the Company and be forfeited without further notice and at no cost to the Company upon Participant’s termination of Service.

5.Settlement of Vested PRSUs.

5.1Distribution of Shares in Settlement of Vested PRSUs.

(a)Subject to the terms and conditions of the Plan and this Agreement, any shares of Stock that are determined to be payable pursuant to Section 3 above shall be distributed to Participant (or Participant’s estate in the event of death) with respect to Participant’s Vested PRSUs within 30 days following the Vesting Date for such PRSUs, except as otherwise provided in Section 6.3 or Section 9.1 of this Agreement (the “Settlement Date”).

(b)All distributions of shares of Stock with respect to Participant’s Vested PRSUs shall be made by the Company in the form of whole shares.  In lieu of any fractional share of Stock, the Company shall make a cash payment to Participant equal to the Fair Market Value of such fractional share on the date the PRSUs are settled as provided herein.  The Company shall not be required to issue fractional shares of Stock upon the settlement of Vested PRSUs.

(c)Shares of Stock issued in settlement of Vested PRSUs shall not be subject to any restriction on transfer other than any such restriction as may be required pursuant to Section 5.3 of this Agreement or the Company’s Insider Trading Policy.

5.2Certificate Registration.  The Participant hereby authorizes the Company, in its sole discretion, to deposit any or all shares of Stock acquired by the Participant pursuant to the settlement of Vested PRSUs with the Company’s transfer agent, including any successor transfer agent, to be held in book entry form, or to deposit such shares for the benefit of the Participant with any broker with which the Participant has an account relationship of which the Company has notice.  Except as provided by the foregoing, a certificate for the shares of Stock acquired by the Participant shall be registered in the name of the Participant, or, if applicable, in the name of the Participant’s estate.

5.3Restrictions on Grant of the Award and Issuance of Shares.  The grant of the Award and issuance of shares of Stock upon settlement of Vested PRSUs shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities.  No shares of Stock may be issued hereunder if the issuance of such shares would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed.  The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance of any shares of Stock subject to the Award shall relieve the Company of any liability in respect of the failure to issue such shares as to which such requisite authority shall not have been obtained.  As a condition to

the settlement of Vested PRSUs, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.

6.Tax Withholding.

6.1In General.  By electronically accepting the Award (as provided in the Grant Notice), the Participant hereby authorizes withholding from payroll and any other amounts payable to the Participant, including withholding of shares of Stock otherwise issuable to the Participant in settlement of Vested PRSUs, and otherwise agrees to make adequate provision for, any sums required to satisfy the federal, state, local and foreign tax (including any social insurance) withholding obligations of the Participating Company, if any, which arise in connection with the Award, the vesting of PRSUs or the issuance of shares of Stock in settlement of Vested PRSUs.  The Company shall have no obligation to deliver shares of Stock until the tax withholding obligations of the Participating Company have been satisfied by the Participant.

6.2Withholding in Shares.  The Company shall have the right, but not the obligation, to require the Participant to satisfy all or any portion of a Participating Company’s tax withholding obligations by deducting from the shares of Stock otherwise deliverable to the Participant in settlement of Vested PRSUs a number of whole shares of Stock having a Fair Market Value, as determined by the Company as of the date on which the tax withholding obligations arise, not in excess of the amount of such tax withholding obligations determined by the applicable minimum statutory withholding rates (and subsequently making a payment of Company cash equal to the amount of any such tax obligation to the respective tax authorities).

6.3Assignment of Sale Proceeds.  Subject to compliance with applicable law and the Company’s Insider Trading Policy, if permitted by the Company, the Participant may satisfy the Participating Company’s tax withholding obligations in accordance with procedures established by the Company providing for delivery by the Participant to the Company or a broker approved by the Company of properly executed instructions, in a form approved by the Company, providing for the assignment to the Company of the proceeds of a sale with respect to some or all of the shares of Stock being acquired upon settlement of Vested PRSUs.  If the Settlement Date would occur on a date on which a sale of the shares of Stock by the Participant would violate the Insider Trading Policy of the Company, the Settlement Date for such Vested PRSUs shall be deferred until the earlier of (a) the next day on which the sale of shares by the Participant would not violate the Insider Trading Policy, or (b) the 15^th day of the third calendar month following calendar year of the Settlement Date.

7.Rights as a Stockholder, Director, Employee or Consultant.

The Participant shall have no rights as a stockholder with respect to any shares of Stock which may be issued in settlement of Vested PRSUs until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company).  No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date the shares of Stock are issued, except as provided in Section 3.6 of this Agreement and [Section 4.4 (Adjustments for Changes in Capital Structure)][Article VIII (Adjustment for Changes in Common Stock and Certain Other Events)] of the Plan.  If the Participant is an Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Participant, the Participant’s employment is “at will” and is for no specified term.  Nothing in this Agreement shall confer upon the Participant any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Participant’s Service at any time.

8.Legends.

The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates representing shares of Stock issued pursuant to this Agreement.  The

Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares of Stock acquired pursuant to this Award in the possession of the Participant in order to carry out the provisions of this Section.

9.Compliance with Section 409A.

It is intended that the settlement of Vested PRSUs as set forth in this Agreement qualify for exemption from, or comply with, the requirements of Section 409A, and any ambiguities herein will be interpreted to so qualify or comply.  Notwithstanding the foregoing, if it is determined that the PRSUs fail to satisfy the requirements of the “short-term deferral” exemption and are otherwise Section 409A Deferred Compensation, it is intended that any payment or benefit which is made or provided pursuant to or in connection with this Award shall comply in all respects with the applicable requirements of Section 409A (including applicable regulations or other administrative guidance thereunder, as determined by the Committee in good faith) to avoid the unfavorable tax consequences provided therein for non‑compliance.  In connection with effecting such compliance with Section 409A, the following shall apply:

9.1Separation from Service; Required Delay in Payment to Specified Employee.  Notwithstanding anything set forth herein to the contrary, no amount payable pursuant to this Agreement on account of the Participant’s termination of Service which constitutes a “deferral of compensation” within the meaning of the Treasury Regulations issued pursuant to Section 409A of the Code (the “Section 409A Regulations”) shall be paid unless and until the Participant has incurred a “separation from service” within the meaning of the Section 409A Regulations.  Furthermore, to the extent that the Participant is a “specified employee” within the meaning of the Section 409A Regulations as of the date of the Participant’s separation from service, no amount that constitutes a deferral of compensation which is payable on account of the Participant’s separation from service shall be paid to the Participant before the date (the “Delayed Payment Date”) which is first day of the seventh month after the date of the Participant’s separation from service or, if earlier, the date of the Participant’s death following such separation from service.  All such amounts that would, but for this Section, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date.

9.2Other Changes in Time of Payment.  Neither the Participant nor the Company shall take any action to accelerate or delay the payment of any benefits under this Agreement in any manner which would not be in compliance with the Section 409A Regulations.

9.3Amendments to Comply with Section 409A; Indemnification.  Notwithstanding any other provision of this Agreement to the contrary, the Company is authorized to amend this Agreement, to void or amend any election made by the Participant under this Agreement and/or to delay the payment of any monies and/or provision of any benefits in such manner as may be determined by the Company, in its discretion, to be necessary or appropriate to comply with the Section 409A Regulations without prior notice to or consent of the Participant.  The Participant hereby releases and holds harmless the Company, its directors, officers and stockholders from any and all claims that may arise from or relate to any tax liability, penalties, interest, costs, fees or other liability incurred by the Participant in connection with the Award, including as a result of the application of Section 409A.

9.4Advice of Independent Tax Advisor.  The Company has not obtained a tax ruling or other confirmation from the Internal Revenue Service with regard to the application of Section 409A to the Award, and the Company does not represent or warrant that this Agreement will avoid adverse tax consequences to the Participant, including as a result of the application of Section 409A to the Award.  The Participant hereby acknowledges that he or she has been advised to seek the advice of his or her own independent tax advisor prior to entering into this Agreement and is not relying upon any representations of the Company or any of its agents as to the effect of or the advisability of entering into this Agreement.

10.Miscellaneous Provisions.

10.1Termination or Amendment.  The Committee may terminate or amend the Plan or this Agreement at any time; provided, however, that no such termination or amendment may have a materially adverse effect on the Participant’s rights under this Agreement without the consent of the Participant unless such termination or amendment is necessary to comply with applicable law or government regulation, including, but not limited to, Section 409A.  No amendment or addition to this Agreement shall be effective unless in writing.

10.2Nontransferability of the Award.  Prior to the issuance of shares of Stock on the applicable Settlement Date, neither this Award nor any PRSUs subject to this Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution.  All rights with respect to the Award shall be exercisable during the Participant’s lifetime only by the Participant or the Participant’s guardian or legal representative.

10.3Repayment/Forfeiture.  By accepting this Award, the Participant specifically agrees that any and all payments or benefits the Participant or any other person may be entitled to receive under or as a result of this Award shall be immediately forfeited, and that the aggregate amount of any payments or benefits the Participant or any other person has received under or as a result of this Award (determined without regard to any taxes or other amounts withheld from such payments or benefits), shall be repaid to the Company within 30 days following written notice from the Company (or such shorter period as may be required by applicable law), (1) as the Company in its discretion determines may be required to comply with any applicable listing standards of a national securities exchange adopted in accordance with Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (regarding recovery of erroneously awarded compensation) and any implementing rules and regulations of the U.S. Securities and Exchange Commission adopted thereunder or similar rules under the laws of any other jurisdiction, (2) to the extent provided pursuant to the Company’s Incentive Compensation Recoupment Policy, and (3) in the event the Committee or its delegate determines that the Participant has engaged in Prohibited Conduct (as defined below) at any time during the Recoupment Period (as defined below).  For purposes of this Section 10.3,

(a)“Prohibited Conduct” means (1) violation of the Company’s Code of Ethical Business Conduct, Insider Trading Policy, or any Proprietary Information, Inventions Agreement, Non-Compete Agreement (or similar agreement) signed by the Participant; (2) unethical behavior (such as, without limitation, fraud, dishonesty, or misrepresentation of product benefits); (3) engaging in Competition; (4) disclosing or using in any capacity other than as necessary in the performance of duties assigned by the Company or its Affiliates any confidential information, trade secrets or other business sensitive information or material concerning the Company or its Affiliates, customers, suppliers or partners; (5) directly or indirectly employing, contacting concerning employment, or participating in any way in the recruitment for employment of (whether as an employee, officer, director, agent, consultant or independent contractor), any person who was or is an employee, representative, officer or director of the Company or any of its Affiliates at any time within the 12 months prior to termination of Participant’s employment; (6) any action or statement by Participant and/or his or her representatives that either does or could reasonably be expected to disparage the Company, its Affiliates, or their officers, employees, or directors, or undermines, diminishes or otherwise damages the relationship between the Company or any of its Affiliates and any of their respective customers, potential customers, vendors and/or suppliers that were known to Participant; or (7) breach of any provision of any employment or severance agreement with the Company or any Affiliate.  Any determination of Prohibited Conduct shall be made by the Committee or its delegate in its sole discretion and shall be binding on all parties.  Notwithstanding anything contained herein to the contrary, Prohibited Conduct shall not include communication by Participant with any government agency, commission or regulator or participation by Participant in any investigation or proceeding that may be conducted by any government agency, commission or regulator, but only to the extent that such communication is required or permitted by law.

(b)“Competition” means, either during Participant’s employment with the Company or any of its Affiliates, or within 12 months following termination of such employment, accepting employment with, or serving as a consultant or advisor or in any other capacity to a competitor of the Company, including but not limited to the DePuy Synthes division of Johnson & Johnson, Stryker Corporation, Globus Medical, Inc., Medtronic, Inc., K2M Holdings, Inc., Zimmer Biomet Holdings, Inc., Alphatec Holdings, Inc., Titan Spine, LLC.  or any subsidiary or Affiliate of the foregoing (a “Competitor”), including, but not limited to, employment or another business relationship with any Competitor if Participant has been introduced to trade secrets, confidential information or business sensitive information during Participant’s employment with the Company or any of its Affiliates and such information would aid the Competitor because the threat of disclosure of such information is so great that it must be assumed that such disclosure would occur.

(c)“Recoupment Period”means the period beginning on the Date of Grant and ending on the date that is 12 months after the date on which the Participant or any other person received any payment or benefit pursuant to this Award, provided, however, that if the Prohibited Conduct resulted in the Participant or any other person receiving any payment or benefit pursuant to this Award in excess of the payment or benefit that would have been received absent such Prohibited Conduct, the Recoupment Period shall end on the date that is 36 months after the date on which such payment or benefit was received.  

10.4Further Instruments.  The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.

10.5Binding Effect.  This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participant’s heirs, executors, administrators, successors and assigns.  If all or any part of any section or clause of this Agreement is determined to be invalid or unenforceable in any respect or to any degree, that section or clause shall be interpreted and enforced to the maximum extent allowed by law and shall not invalidate or impact any other sections and/or clauses that remain.

10.6Delivery of Documents and Notices.  Any document relating to participation in the Plan or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by a Participating Company, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writing from time to time to the other party.

(a)Description of Electronic Delivery.  The Plan documents, which may include but do not necessarily include: the Plan, this Agreement, the Plan Prospectus, and any reports of the Company provided generally to the Company’s stockholders, may be delivered to the Participant electronically.  In addition, if permitted by the Company, the Participant may deliver electronically the Grant Notice to the Company or to such third party involved in administering the Plan as the Company may designate from time to time.  Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the Internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company.

(b)Consent to Electronic Delivery.  The Participant acknowledges that the Participant has read Section 10.6(a) of this Agreement and consents to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of the Grant Notice, as described in Section 10.6(a). The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing.  The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails.  Similarly, the Participant understands that the Participant

must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails.  The Participant may revoke his or her consent to the electronic delivery of documents described in Section 10.6(a) or may change the electronic mail address to which such documents are to be delivered (if Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail.  Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 10.6(a) but has nevertheless knowingly and voluntarily chosen to do so by electronically accepting the Award (as provided in the Grant Notice).

10.7Integrated Agreement.  This Agreement and the Plan shall constitute the entire understanding and agreement of the Participant and the Participating Company Group with respect to the subject matter contained herein or therein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company Group with respect to such subject matter.  To the extent contemplated herein or therein, the provisions of this Agreement and the Plan shall survive any settlement of Vested PRSUs and shall remain in full force and effect.

10.8Applicable Law.  This Agreement shall be governed by the laws of the State of Delaware as such laws are applied to agreements between Delaware residents entered into and to be performed entirely within the State of Delaware.

10.9Terms and Conditions Subject to Change in the Event the Participant Transfers Outside of the United States.  Should the Participant transfer his or her residence and/or employment with the Company to another country, the Company, in its sole discretion, shall determine whether application of certain additional and/or supplemental terms and conditions is necessary or advisable in order to comply with respective laws, rules and regulations or to facilitate the operation and administration of the Award and the Plan.  In all circumstances, the Company will provide the Participant with its ordinary-course terms and conditions for such country(ies) in the form of an amendment and/or addendum, which shall thereafter be part of this Agreement.

EX-10.2

Exhibit 10.2

[FORM OF] NUVASIVE, INC.

NOTICE OF GRANT OF EXECUTIVE RESTRICTED STOCK UNITS

NuVasive, Inc. (the “Company”) has granted to the participant identified below (the “Participant”) an award (the “Award”) of the number of restricted stock units specified below in this Grant Notice (each, a “Restricted Stock Unit” or an “RSU”) pursuant to the [2014 Equity Incentive Plan of NuVasive, Inc.][Ellipse Technologies, Inc. 2015 Incentive Award Plan] (the “Plan”), each of which represents the right to receive - on the Settlement Date provided in the Restricted Stock Unit Agreement attached hereto (together with this Notice of Grant, the “Agreement”) - one (1) share of Stock as set forth in, and subject to the terms and conditions of, this Agreement.  This Award is subject to all of the terms and conditions set forth in the Agreement and the Plan, each of which is incorporated herein by reference.  Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the [Plan][2014 Equity Incentive Plan of NuVasive, Inc.] or the Agreement, as appropriate [, and, in the event of any inconsistency between the Plan and the Agreement, the terms of the Plan shall control].

Participant:	[FIRST_NAME, LAST_NAME]
Participant ID:	[EMPLOYEE_IDENTIFIER]
Date  of Grant:	[April 30, 2018]
Total Number of RSUs:	[TOTAL_SHARES_GRANTED], subject to adjustment as provided by the Agreement.
Performance Period:	January 1, 2018 – December 31, 2018 (or, in the event of a Change in Control, through the last day of the Company’s last fiscal quarter ending after January 1, 2018, and before the date of a Change in Control).
Performance Measure:	The Company’s earnings per share (“EPS”), as listed in Section [10.4(a)(xvi)][Section 11.28] of the Plan, determined in accordance with generally accepted accounting principles in the United States (“GAAP”), adjusted to reflect the impact of the change from a basic to diluted share count, and determined excluding (1) litigation liability gain/expense; (2) amortization of intangible assets; (3) non-cash interest expense and gains/losses on convertible notes; (4) intangible asset impairment; (5) leasehold related charges; (6) acquisition related items (including expenses associated with prior mergers-and-acquisitions-related activity and as incurred); (7) integration related charges associated with the integration of acquired businesses; (8) one-time and business transition costs; and (9) the related tax charges and benefits associated with the exclusions(“Non-GAAP EPS”).
Performance Target:	$1.50 or more of Non-GAAP EPS if the Performance Period ends on December 31, 2018, and $0.10 or more of Non-GAAP EPS if the Performance Period ends on the last day of the Company’s last fiscal quarter ending after January 1, 2018, and before the date of a Change in Control.
Vesting Start Date:	[April 30, 2018]
Vesting Schedule:	Subject to the terms and conditions of the Agreement (including, without limitation, conditions requiring continued Service with the Company through the applicable date), if the Performance Measure equals or exceeds the Performance Target for the Performance Period, determined pursuant to written certification of the Committee as specified in Section 4.1 of the Restricted Stock Unit Agreement, the RSUs shall vest as follows:   100% of the RSUs shall vest on the third (3rd) anniversary of the Vesting Start Date (such anniversary, the “Scheduled Vesting Date”).

By electronically accepting the Award according to the instructions in the Participant’s E*TRADE account (pursuant to which the Participant received this Notice of Grant), the Participant agrees that the Award is governed by this Notice of Grant and by the provisions of the Plan and the Agreement, both of which are made a part of this document.

The Participant acknowledges that copies of the Plan, the Agreement, and the prospectus for the Plan are available via the Participant’s E*TRADE account.

The Participant represents that the Participant has read and is familiar with the provisions of the Plan and the Agreement, and hereby accepts the Award subject to all of their terms and conditions.

[FORM OF] NUVASIVE, INC.

EXECUTIVE RESTRICTED STOCK UNIT AGREEMENT

NuVasive, Inc. has granted to the Participant named in the Notice of Grant of Restricted Stock Units (the “Grant Notice”) to which this Restricted Stock Unit Agreement is attached (together with the Grant Notice, this “Agreement”) an Award consisting of Restricted Stock Units (“RSUs”) subject to the terms and conditions set forth in this Agreement.  The Award has been granted pursuant to the terms and conditions of the [2014 Equity Incentive Plan of NuVasive, Inc.][Ellipse Technologies, Inc. 2015 Incentive Award Plan] (the “Plan”), as amended from time-to-time, the provisions of which are incorporated herein by reference.  By electronically accepting the Award, the Participant: (a) acknowledges receipt of, and represents that the Participant has read and is familiar with, this Agreement, the Plan and the prospectus for the Plan prepared in connection with the registration with the Securities and Exchange Commission of the shares of Stock issuable pursuant to the Award (the “Plan Prospectus”), (b) accepts the Award subject to all of the terms and conditions of this Agreement and the Plan, and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee or its delegate (to the extent delegation is permitted under the Plan) in the event any questions arise (and/or interpretation may be required) regarding this Agreement or the Plan.

1.Definitions and Construction.

1.1Definitions.  Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Grant Notice or the [Plan][2014 Equity Incentive Plan of NuVasive, Inc.].

(a)“Dividend Equivalent Units” mean additional Restricted Stock Units as may be credited pursuant to Section 3.3 of this Agreement.

(b)“RSUs” mean the Restricted Stock Units originally granted pursuant to the Award and any Dividend Equivalent Units credited pursuant to the Award, as each may be adjusted from time-to-time pursuant to [Section 4.4 (Adjustments for Changes in Capital Structure)][Article VIII (Adjustments for Changes in Common Stock and Certain Other Events)] or [Section 4.5 (Assumption or Substitution of Awards)][Section 4.4 (Substitute Awards)] of the Plan.

1.2Construction.  Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement.  Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular.  Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.

2.Administration.

2.1Committee Actions.  All questions of interpretation concerning this Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration of the Plan or the Award shall be determined by the Committee or its delegate.  All such determinations by the Committee or its delegate shall be final, binding and conclusive upon all persons having an interest in the Award, unless fraudulent or made in bad faith.  Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or the Award or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Award.  

2.2Express Authority Required.  Only individuals expressly designated by the Committee shall have the authority to act on behalf of the Committee with respect to certain of the matters, rights, obligations, modifications, or elections allocated to the Company herein (or in the Plan).

3.The Award.

3.1Grant of RSUs.  On the Date of Grant, the Participant shall acquire, subject to the provisions of this Agreement, the Total Number of RSUs set forth in the Grant Notice, subject to adjustment as provided in [Section 4.4 (Adjustments for Changes in Capital Structure)][Article VIII (Adjustments for Changes in Common Stock and Certain Other Events)] or [Section 4.5 (Assumption or Substitution of Awards)][Section 4.4 (Substitute Awards)] of the Plan.  Each RSU represents a conditional right to receive, subject and pursuant to the terms and conditions of the Plan and this Agreement, one (1) share of Stock.

3.2No Monetary Payment Required.  The Participant is not required to make any monetary payment (other than applicable tax withholding, if any) as a condition to receiving the RSUs or shares of Stock issued upon settlement of Vested RSUs (as defined in Section 4.1 of this Agreement), the consideration for which shall be the Participant rendering Service as provided in this Agreement to a Participating Company or for its benefit.

3.3Dividend Equivalent Units.  On the date that the Company pays a cash dividend to holders of Stock generally, if any, the Participant shall be credited with a number of additional whole Dividend Equivalent Units determined by dividing (a) the product of (i) the dollar amount of the cash dividend paid per share of Stock on such date, and (ii) the number of RSUs which have not been settled as of such date, by (b) the Fair Market Value per share of Stock on such date.  Any resulting fractional Dividend Equivalent Unit shall be rounded to the nearest whole number.  Any such additional Dividend Equivalent Units shall be subject to the same terms and conditions, and shall be settled or forfeited in the same manner and at the same time, as the RSUs with respect to which they have been credited.

4.Vesting; Forfeiture.

4.1Vesting of RSUs.  Provided that the Performance Measure equals or exceeds the Performance Target for the Performance Period and the Participant’s Service has not terminated prior to the applicable date, RSUs acquired pursuant to the Award shall become vested upon the earliest to occur of the following (such RSUs, when so vested, being referred to herein as “Vested RSUs”):

(a)the Scheduled Vesting Date (as provided in the Grant Notice);

(b)the Participant’s death;

(c)termination of the Participant’s Service due to Disability;

(d)immediately before any Change in Control in which the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be, elects not to assume or substitute for this Award; and

(e)termination of the Participant’s Service by the Company (or Company’s successor) without Cause (as defined below) after a Change in Control.

Any determination that the Performance Measure equals or exceeds the Performance Target for the Performance Period shall be certified by the Committee in writing no later than the February 28th that next follows the end of the Performance Period, provided, however, that if the Performance Period ends on the last day of the Company’s last fiscal quarter ending after January 1, 2018, and before the date of a Change in Control, the Committee shall make such determination and certification no later than the date immediately preceding the date of the Change in Control.

For purposes hereof, “Cause” shall mean the following: (A) the Participant’s repeated failure to satisfactorily perform the Participant’s job duties; (B) refusal or failure to follow the lawful directions of the Participant’s direct supervisor, the Company’s Chief Executive Officer or the Board, as applicable; (C) conviction of a crime involving moral turpitude; or (D) engaging in acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of the Participant with respect to the Participant’s

obligations or otherwise relating to the business of the Company, its Affiliates or customers; except that if the Participant is a party to a Change in Control Agreement with the Company, the definition of “Cause” therein shall apply.  Notwithstanding the foregoing, following a Change in Control, any determination as to whether “Cause” exists under the terms of this Agreement shall be subject to de novo review by a court of competent jurisdiction.

4.2Leaves of Absence.

(a)Unless otherwise required by applicable law, the RSUs will cease vesting during a leave of absence.  If, however, Participant takes an approved medical, FMLA (or other statutorily protected leave), or military leave (each, an “Approved Leave”) and returns from such leave for at least thirty calendar days, then (i) Participant shall be treated as if the period of such Approved Leave had been a period of continuous Service with the Company or Affiliate, and (ii) such number of RSUs as would have vested pursuant to the vesting schedule set forth in the Grant Notice during such Approved Leave and the foregoing thirty calendar day-period shall be considered vested as of the end of such thirty calendar day-period (which shall be considered the Scheduled Vesting Date), and such Vested RSUs shall be settled in accordance with Section 5 of this Agreement.

(b)In the event the Participant takes a leave of absence other than an Approved Leave, the vesting of RSUs will be tolled during the period of such leave.  Upon return from such leave of absence, the RSUs shall again commence vesting but the period of such leave shall be respectively added to the vesting schedule set forth in the Grant Notice.

(c)In the event of Participant’s termination of Service during any leave of absence, then the RSUs shall expire in accordance with the provisions set forth in Section 4.4 below.

4.3Vesting of Dividend Equivalents Units.  Any Dividend Equivalent Units shall become vested (and also constitute “Vested RSUs”) at the same time as the RSUs with respect to which they have been credited.

4.4Forfeiture of RSUs That Are Not Vested RSUs Upon Termination of Service.  Except as otherwise provided in Section 4.1 above, any RSUs that are not Vested RSUs (“Unvested RSUs”) will terminate automatically without any further action by the Company and be forfeited without further notice and at no cost to the Company upon Participant’s termination of Service.

5.Settlement of Vested RSUs.

5.1Distribution of Shares in Settlement of Vested RSUs.

(a)Subject to the terms and conditions of the Plan and this Agreement, shares of Stock shall be distributed to Participant (or Participant’s estate in the event of death) with respect to Participant’s Vested RSUs within thirty days following the Scheduled Vesting Date for such RSUs, except as otherwise provided in Section 6.3 or Section 9.1 of this Agreement (the “Settlement Date”).

(b)All distributions of shares of Stock with respect to Participant’s Vested RSUs shall be made by the Company in the form of whole shares.  In lieu of any fractional share of Stock, the Company shall make a cash payment to Participant equal to the Fair Market Value of such fractional share on the date the RSUs are settled as provided herein.  The Company shall not be required to issue fractional shares of Stock upon the settlement of Vested RSUs.

(c)Shares of Stock issued in settlement of Vested RSUs shall not be subject to any restriction on transfer other than any such restriction as may be required pursuant to Section 5.3 of this Agreement or the Company’s Insider Trading Policy.

5.2Certificate Registration.  The Participant hereby authorizes the Company, in its sole discretion, to deposit any or all shares of Stock acquired by the Participant pursuant to the settlement of Vested RSUs with the Company’s transfer agent, including any successor transfer agent, to be held in book entry form, or to deposit such shares for the benefit of the Participant with any broker with which the Participant has an account relationship of which the Company has notice.  Except as provided by the foregoing, a certificate for the shares of Stock acquired by the Participant shall be registered in the name of the Participant, or, if applicable, in the name of the Participant’s estate.

5.3Restrictions on Grant of the Award and Issuance of Shares.  The grant of the Award and issuance of shares of Stock upon settlement of Vested RSUs shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities.  No shares of Stock may be issued hereunder if the issuance of such shares would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed.  The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance of any shares of Stock subject to the Award shall relieve the Company of any liability in respect of the failure to issue such shares as to which such requisite authority shall not have been obtained.  As a condition to the settlement of Vested RSUs, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.

6.Tax Withholding.

6.1In General.  By electronically accepting the Award (as provided in the Grant Notice), the Participant hereby authorizes withholding from payroll and any other amounts payable to the Participant, including withholding of shares of Stock otherwise issuable to the Participant in settlement of Vested RSUs, and otherwise agrees to make adequate provision for, any sums required to satisfy the federal, state, local and foreign tax (including any social insurance) withholding obligations of the Participating Company, if any, which arise in connection with the Award, the vesting of RSUs or the issuance of shares of Stock in settlement of Vested RSUs.  The Company shall have no obligation to deliver shares of Stock until the tax withholding obligations of the Participating Company have been satisfied by the Participant.

6.2Withholding in Shares.  The Company shall have the right, but not the obligation, to require the Participant to satisfy all or any portion of a Participating Company’s tax withholding obligations by deducting from the shares of Stock otherwise deliverable to the Participant in settlement of Vested RSUs a number of whole shares of Stock having a Fair Market Value, as determined by the Company as of the date on which the tax withholding obligations arise, not in excess of the amount of such tax withholding obligations determined by the applicable minimum statutory withholding rates (and subsequently making a payment of Company cash equal to the amount of any such tax obligation to the respective tax authorities).

6.3Assignment of Sale Proceeds.  Subject to compliance with applicable law and the Company’s Insider Trading Policy, if permitted by the Company, the Participant may satisfy the Participating Company’s tax withholding obligations in accordance with procedures established by the Company providing for delivery by the Participant to the Company or a broker approved by the Company of properly executed instructions, in a form approved by the Company, providing for the assignment to the Company of the proceeds of a sale with respect to some or all of the shares of Stock being acquired upon settlement of Vested RSUs.  If the Settlement Date would occur on a date on which a sale of the shares of Stock by the Participant would violate the Insider Trading Policy of the Company, the Settlement Date for such Vested RSUs shall be deferred until the earlier of (a) the next day on which the sale of shares by the Participant would not violate the Insider Trading Policy, or (b) the 15^th day of the third calendar month following calendar year of the Settlement Date.

7.Rights as a Stockholder, Director, Employee or Consultant.

7.1The Participant shall have no rights as a stockholder with respect to any shares of Stock which may be issued in settlement of Vested RSUs until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company).  No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date the shares of Stock are issued, except as provided in Section 3.3 of this Agreement and [Section 4.4 (Adjustments for Changes in Capital Structure)][Article VIII (Adjustments for Changes in Common Stock and Certain Other Events)] of the Plan.  If the Participant is an Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Participant, the Participant’s employment is “at will” and is for no specified term.  Nothing in this Agreement shall confer upon the Participant any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Participant’s Service at any time.

8.Legends.

The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates representing shares of Stock issued pursuant to this Agreement.  The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares of Stock acquired pursuant to this Award in the possession of the Participant in order to carry out the provisions of this Section.

9.Compliance with Section 409A.

It is intended that the settlement of Vested RSUs as set forth in this Agreement qualify for exemption from, or comply with, the requirements of Section 409A, and any ambiguities herein will be interpreted to so qualify or comply.  Notwithstanding the foregoing, if it is determined that the RSUs fail to satisfy the requirements of the “short-term deferral” exemption and are otherwise Section 409A Deferred Compensation, it is intended that any payment or benefit which is made or provided pursuant to or in connection with this Award shall comply in all respects with the applicable requirements of Section 409A (including applicable regulations or other administrative guidance thereunder, as determined by the Committee in good faith) to avoid the unfavorable tax consequences provided therein for non‑compliance.  In connection with effecting such compliance with Section 409A, the following shall apply:

9.1Separation from Service; Required Delay in Payment to Specified Employee.  Notwithstanding anything set forth herein to the contrary, no amount payable pursuant to this Agreement on account of the Participant’s termination of Service which constitutes a “deferral of compensation” within the meaning of the Treasury Regulations issued pursuant to Section 409A of the Code (the “Section 409A Regulations”) shall be paid unless and until the Participant has incurred a “separation from service” within the meaning of the Section 409A Regulations.  Furthermore, to the extent that the Participant is a “specified employee” within the meaning of the Section 409A Regulations as of the date of the Participant’s separation from service, no amount that constitutes a deferral of compensation which is payable on account of the Participant’s separation from service shall be paid to the Participant before the date (the “Delayed Payment Date”) which is first day of the seventh month after the date of the Participant’s separation from service or, if earlier, the date of the Participant’s death following such separation from service.  All such amounts that would, but for this Section, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date.

9.2Other Changes in Time of Payment.  Neither the Participant nor the Company shall take any action to accelerate or delay the payment of any benefits under this Agreement in any manner which would not be in compliance with the Section 409A Regulations.

9.3Amendments to Comply with Section 409A; Indemnification.  Notwithstanding any other provision of this Agreement to the contrary, the Company is authorized to amend this Agreement, to void or amend any election made by the Participant under this Agreement and/or to delay the payment of any monies and/or provision of any benefits in such manner as may be determined by the Company, in its discretion, to be necessary or appropriate to comply with the Section 409A Regulations without prior notice to or consent of the Participant.  The Participant hereby releases and holds harmless the Company, its directors, officers and stockholders from any and all claims that may arise from or relate to any tax liability, penalties, interest, costs, fees or other liability incurred by the Participant in connection with the Award, including as a result of the application of Section 409A.

9.4Advice of Independent Tax Advisor.  The Company has not obtained a tax ruling or other confirmation from the Internal Revenue Service with regard to the application of Section 409A to the Award, and the Company does not represent or warrant that this Agreement will avoid adverse tax consequences to the Participant, including as a result of the application of Section 409A to the Award.  The Participant hereby acknowledges that he or she has been advised to seek the advice of his or her own independent tax advisor prior to entering into this Agreement and is not relying upon any representations of the Company or any of its agents as to the effect of or the advisability of entering into this Agreement.

10.Miscellaneous Provisions.

10.1Termination or Amendment.  The Committee may terminate or amend the Plan or this Agreement at any time; provided, however, that no such termination or amendment may have a materially adverse effect on the Participant’s rights under this Agreement without the consent of the Participant unless such termination or amendment is necessary to comply with applicable law or government regulation, including, but not limited to, Section 409A.  No amendment or addition to this Agreement shall be effective unless in writing.

10.2Nontransferability of the Award.  Prior to the issuance of shares of Stock on the applicable Settlement Date, neither this Award nor any RSUs subject to this Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution.  All rights with respect to the Award shall be exercisable during the Participant’s lifetime only by the Participant or the Participant’s guardian or legal representative.

10.3Repayment/Forfeiture.  By accepting this Award, the Participant specifically agrees that any and all payments or benefits the Participant or any other person may be entitled to receive under or as a result of this Award shall be immediately forfeited, and that the aggregate amount of any payments or benefits the Participant or any other person has received under or as a result of this Award (determined without regard to any taxes or other amounts withheld from such payments or benefits), shall be repaid to the Company within 30 days following written notice from the Company (or such shorter period as may be required by applicable law), (1) as the Company in its discretion determines may be required to comply with any applicable listing standards of a national securities exchange adopted in accordance with Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (regarding recovery of erroneously awarded compensation) and any implementing rules and regulations of the U.S. Securities and Exchange Commission adopted thereunder or similar rules under the laws of any other jurisdiction, (2) to the extent provided pursuant to the Company’s Incentive Compensation Recoupment Policy, and (3) in the event the Committee or its delegate determines that the Participant has engaged in Prohibited Conduct (as defined below) at any time during the Recoupment Period (as defined below).  For purposes of this Section 10.3,

(a)“Prohibited Conduct” means (1) violation of the Company’s Code of Ethical Business Conduct, Insider Trading Policy, or any Proprietary Information, Inventions Agreement, Non-Compete Agreement (or similar agreement) signed by the Participant; (2) unethical behavior (such as, without limitation, fraud, dishonesty, or misrepresentation of product benefits); (3) engaging in Competition; (4) disclosing or using in any capacity other than as necessary in the performance of duties assigned by the Company or its Affiliates

any confidential information, trade secrets or other business sensitive information or material concerning the Company or its Affiliates, customers, suppliers or partners; (5) directly or indirectly employing, contacting concerning employment, or participating in any way in the recruitment for employment of (whether as an employee, officer, director, agent, consultant or independent contractor), any person who was or is an employee, representative, officer or director of the Company or any of its Affiliates at any time within the 12 months prior to termination of Participant’s employment; (6) any action or statement by Participant and/or his or her representatives that either does or could reasonably be expected to disparage the Company, its Affiliates, or their officers, employees, or directors, or undermines, diminishes or otherwise damages the relationship between the Company or any of its Affiliates and any of their respective customers, potential customers, vendors and/or suppliers that were known to Participant; or (7) breach of any provision of any employment or severance agreement with the Company or any Affiliate.  Any determination of Prohibited Conduct shall be made by the Committee or its delegate in its sole discretion and shall be binding on all parties.  Notwithstanding anything contained herein to the contrary, Prohibited Conduct shall not include communication by Participant with any government agency, commission or regulator or participation by Participant in any investigation or proceeding that may be conducted by any government agency, commission or regulator, but only to the extent that such communication is required or permitted by law.

(b) “Competition” means, either during Participant’s employment with the Company or any of its Affiliates, or within 12 months following termination of such employment, accepting employment with, or serving as a consultant or advisor or in any other capacity to a competitor of the Company, including but not limited to the DePuy Synthes division of Johnson & Johnson, Stryker Corporation, Globus Medical, Inc., Medtronic, Inc., K2M Holdings, Inc., Zimmer Biomet Holdings, Inc., Alphatec Holdings, Inc. or any subsidiary or Affiliate of the foregoing (a “Competitor”), including, but not limited to, employment or another business relationship with any Competitor if Participant has been introduced to trade secrets, confidential information or business sensitive information during Participant’s employment with the Company or any of its Affiliates and such information would aid the Competitor because the threat of disclosure of such information is so great that it must be assumed that such disclosure would occur.

(c)“Recoupment Period”means the period beginning on the Date of Grant and ending on the date that is 12 months after the date on which the Participant or any other person received any payment or benefit pursuant to this Award, provided, however, that if the Prohibited Conduct resulted in the Participant or any other person receiving any payment or benefit pursuant to this Award in excess of the payment or benefit that would have been received absent such Prohibited Conduct, the Recoupment Period shall end on the date that is 36 months after the date on which such payment or benefit was received.  

10.4Further Instruments.  The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.

10.5Binding Effect.  This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participant’s heirs, executors, administrators, successors and assigns.  If all or any part of any section or clause of this Agreement is determined to be invalid or unenforceable in any respect or to any degree, that section or clause shall be interpreted and enforced to the maximum extent allowed by law and shall not invalidate or impact any other sections and/or clauses that remain.

10.6Delivery of Documents and Notices.  Any document relating to participation in the Plan or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by a Participating Company, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writing from time to time to the other party.

(a)Description of Electronic Delivery.  The Plan documents, which may include but do not necessarily include: the Plan, this Agreement, the Plan Prospectus, and any reports of the Company provided generally to the Company’s stockholders, may be delivered to the Participant electronically.  In addition, if permitted by the Company, the Participant may deliver electronically the Grant Notice to the Company or to such third party involved in administering the Plan as the Company may designate from time to time.  Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the Internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company.

(b)Consent to Electronic Delivery.  The Participant acknowledges that the Participant has read Section 10.6(a) of this Agreement and consents to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of the Grant Notice, as described in Section 10.6(a).  The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing.  The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails.  The Participant may revoke his or her consent to the electronic delivery of documents described in Section 10.6(a) or may change the electronic mail address to which such documents are to be delivered (if Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail.  Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 10.6(a), but has nevertheless knowingly and voluntarily chosen to do so by electronically accepting the Award (as provided in the Grant Notice).

10.7Integrated Agreement.  This Agreement and the Plan shall constitute the entire understanding and agreement of the Participant and the Participating Company Group with respect to the subject matter contained herein or therein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company Group with respect to such subject matter.  To the extent contemplated herein or therein, the provisions of this Agreement and the Plan shall survive any settlement of Vested RSUs and shall remain in full force and effect.

10.8Applicable Law.  This Agreement shall be governed by the laws of the State of Delaware as such laws are applied to agreements between Delaware residents entered into and to be performed entirely within the State of Delaware.

10.9Terms and Conditions Subject to Change in the Event the Participant Transfers Outside of the United States.  Should the Participant transfer his or her residence and/or employment with the Company to another country, the Company, in its sole discretion, shall determine whether application of certain additional and/or supplemental terms and conditions is necessary or advisable in order to comply with respective laws, rules and regulations or to facilitate the operation and administration of the Award and the Plan.  In all circumstances, the Company will provide the Participant with its ordinary-course terms and conditions for such country(ies) in the form of an amendment and/or addendum, which shall thereafter be part of this Agreement.

EX-10.3

Exhibit 10.3

[FORM OF] NUVASIVE, INC.

NOTICE OF GRANT OF PERFORMANCE CASH AWARD

NuVasive, Inc. (the “Company”) has granted to the participant identified below (the “Participant”) a performance cash award (the “Award”) pursuant to the NuVasive, Inc. 2014 Executive Incentive Compensation Plan (the “Plan”), which represents the right to receive – on the Settlement Date provided in the Performance Cash Award Agreement attached hereto (together with this Notice of Grant, the “Agreement”) – a cash amount as set forth in, and subject to the terms and conditions of, this Agreement.  This Award is subject to all of the terms and conditions set forth in the Agreement and the Plan, each of which is incorporated herein by reference.  Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Plan or the Agreement, as appropriate, and, in the event of any inconsistency between the Plan and the Agreement, the terms of the Plan shall control.

Participant:[FIRST_NAME, LAST_NAME]
Participant ID:	[EMPLOYEE_IDENTIFIER]
Date of Grant:	[April 30, 2018]
Base Cash Amount:	$[TOTAL_AMOUNT_GRANTED], subject to adjustment as provided by the Agreement.
Initial Performance Period:	January 1, 2018 – December 31, 2018 (or, in the event of a Change in Control, through the last day of the Company’s last fiscal quarter ending after January 1, 2018, and before the date of a Change in Control).
Initial Performance Measure:	The Company’s earnings per share (“EPS”), as listed in Section 2(t) of the Plan, determined in accordance with generally accepted accounting principles in the United States (“GAAP”), adjusted to reflect the impact of the change from a basic to diluted share count, and determined excluding (1) litigation liability gain/expense; (2) amortization of intangible assets; (3) non-cash interest expense and gains/losses on convertible notes; (4) intangible asset impairment; (5) leasehold related charges; (6) acquisition related items (including expenses associated with prior mergers-and-acquisitions-related activity and as incurred); (7) integration related charges associated with the integration of acquired businesses; (8) one-time and business transition costs; and (9) the related tax charges and benefits associated with the exclusions(“Non-GAAP EPS”).
Initial Performance Target:	$1.50 or more of Non-GAAP EPS if the Initial Performance Period ends on December 31, 2018, and $0.10 or more of Non-GAAP EPS if the Initial Performance Period ends on the last day of the Company’s last fiscal quarter ending after January 1, 2018, and before the date of a Change in Control.
Maximum Payment:	In the event the Committee determines and certifies that the Initial Performance Target is satisfied, the maximum payment that may be made to the Participant is equal to 200% of the Base Cash Amount.  If the Committee determines and certifies that the Initial Performance Target is not satisfied, no amounts are payable pursuant to this Award.
Actual Payment:	In the event the Committee determines and certifies that the Initial Performance Target is satisfied, the actual payment made pursuant to this Award shall be determined pursuant to Section 3 of the Performance Cash Award Agreement.
Vesting Date:	Subject to the terms and conditions of the Agreement (including, without limitation, conditions requiring continued Service with the Company through the applicable date), this Award vests on [April 30, 2021] (the “Scheduled Vesting Date”).

By electronically accepting the Award according to the instructions in the Participant’s E*TRADE account (pursuant to which the Participant received this Notice of Grant), the Participant agrees that the Award is governed by this Notice of Grant and by the provisions of the Plan and the Agreement, both of which are made a part of this document.

The Participant acknowledges that copies of the Plan and the Agreement are available via the Participant’s E*TRADE account.

The Participant represents that the Participant has read and is familiar with the provisions of the Plan and the Agreement, and hereby accepts the Award subject to all of their terms and conditions.

[FORM OF] NUVASIVE, INC.

PERFORMANCE CASH AWARD AGREEMENT

NuVasive, Inc. has granted to the Participant named in the Notice of Grant of Performance Cash Award (the “Grant Notice”) to which this Performance Cash Award Agreement is attached (together, the Performance Cash Award Agreement and the Grant Notice being referred to collectively herein as this “Agreement”) an Award subject to the terms and conditions set forth in this Agreement.  The Award has been granted pursuant to the terms and conditions of the NuVasive, Inc. 2014 Executive Incentive Compensation Plan (the “Plan”), as amended from time-to-time, the provisions of which are incorporated herein by reference.  By accepting the Award, the Participant: (a) acknowledges receipt of, and represents that the Participant has read and is familiar with, this Agreement and the Plan, (b) accepts the Award subject to all of the terms and conditions of this Agreement and the Plan, and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee or its delegate (to the extent delegation is permitted under the Plan) in the event any questions arise (and/or interpretation may be required) regarding this Agreement or the Plan.

1.Definitions and Construction.

1.1Definitions.  Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Grant Notice or the Plan.

(a)“Baseline Revenue” means $1,030 million.

(b)“Revenue” means the Company’s GAAP revenue as publicly reported by the Company in its earnings press release for a completed fiscal year, adjusted to exclude the effect of currency fluctuations.  

(c)“Revenue Growth” means the amount of growth, measured as a percentage, in the Company’s Revenue for a completed fiscal year as compared to the prior completed fiscal year; provided, however, that when determining Revenue Growth, the Revenue impact of any acquisition and divestiture transaction (a “Transaction”) shall be treated as follows:  (i) for the first four fiscal quarters following the closing of a Transaction, the Revenue impact of the Transaction shall be excluded from the calculation of Revenue Growth (except for any Transaction with less than $4.0 million in annualized run rate Revenue that is deemed de minimis and not excluded; provided that the aggregate value of all Transactions deemed de minimis does not exceed $5.0 million in annualized run rate revenue), and (ii) commencing with the fifth fiscal quarter following the closing of a Transaction and thereafter, the Revenue impact of any Transaction shall be included in all financial periods (i.e., the current year and the prior year).

(d)“Revenue Performance Multiplier” means the percentage calculated based on the respective Revenue Growth set forth in the table below:

Revenue Growth	Revenue Performance Multiplier
Threshold 0.00%	0.00%
1.00%	20.0%
2.00%	40.0%
3.00%	60.0%
4.00%	80.0%
Target 5.00%	100.0%
5.75%	125.0%
6.50%	150.0%
7.25%	175.0%
Maximum 8.00%	200.0%

If the Company achieves Revenue Growth that falls between the foregoing levels, the Revenue Performance Multiplier will be determined by linear interpolation between the applicable levels noted above and using the following guiding principles:

• a 20% decrease in funding for every 1% of Revenue Growth achieved below Target; and

• a 25% incremental increase in funding for every .75% of Revenue Growth achieved above 100%, up to a maximum funding of 200% of target.

When calculating Revenue Growth relative to two completed fiscal periods, the Committee shall have the authority to make appropriate adjustments to Revenue to account for changes in accounting standards and adopted changes in accounting principles.  In each case, the Revenue Growth shall be rounded up to the nearest hundredth of a percent and the Revenue Performance Multiplier shall be rounded up to the nearest tenth of a percent.

1.2Construction.  Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement.  Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular.  Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.

2.Administration.

2.1Committee Actions.  TheCommittee shall be responsible for determining and certifying whether the performance conditions associated with the Award have been achieved; provided, however, that in the event of a Change in Control, the Committee shall make such determination and certification no later than the date immediately preceding the date of the Change in Control.  All questions of interpretation concerning this Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration of the Plan or the Award shall be determined by the Committee or its delegate.  All such determinations by the Committee or its delegate shall be final, binding and conclusive upon all persons having an interest in the Award, unless fraudulent or made in bad faith.  Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or the Award or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Award.  

2.2Express Authority Required.  Only individuals expressly designated by the Committee shall have the authority to act on behalf of the Committee with respect to certain of the matters, rights, obligations, modifications, or elections allocated to the Company herein (or in the Plan).

3.Payment.  

3.1Amount of Payment.  Subject to satisfaction of the Initial Performance Target and the vesting requirements of Section 4 of this Agreement, and except as otherwise specified in Section 3.2 or Section 3.3 below, the cash amount that shall be payable in settlement of this Award on the date specified in Section 5 of this Agreement shall be equal to the Aggregate PCASH Payout, calculated as follows:

(a)2018 Financial Performance Component.  Following the completion of the preparation of the Company’s annual financial statements for the fiscal year ended December 31, 2018, the Company will compare Revenue for the fiscal year ended December 31, 2018 (“2018 Revenue”) against the Baseline Revenue.  To the extent the 2018 Revenue grows such that it exceeds the Baseline Revenue, the 2018 financial performance component will be equal to the Base Cash Amount set

forth in the Grant Notice multiplied by the Revenue Performance Multiplier associated with such Revenue Growth, and further multiplied by a weighting of 50%, rounding up to the nearest whole dollar (the “2018 Component”).  If such Revenue Growth is zero (or negative), the 2018 Component shall be zero.

(b)2019 Financial Performance Component.  Following the completion of the preparation of the Company’s annual financial statements for the fiscal year ended December 31, 2019, the Company will compare Revenue for the fiscal year ended December 31, 2019 (“2019 Revenue”) against the 2018 Revenue.  To the extent the 2019 Revenue grows such that it exceeds the 2018 Revenue, the 2019 financial performance component will be equal to the Base Cash Amount set forth in the Grant Notice multiplied by the Revenue Performance Multiplier associated with such Revenue Growth, and further multiplied by a weighting of 30%, rounding up to the nearest whole dollar (the “2019 Component”).  If such Revenue Growth is zero (or negative), the 2019 Component shall be zero.

(c)2020 Financial Performance Component.  Following the completion of the preparation of the Company’s annual financial statements for the fiscal year ended December 31, 2020, the Company will compare Revenue for the fiscal year ended December 31, 2020 (“2020 Revenue”) against the 2019 Revenue.  To the extent the 2020 Revenue grows such that it exceeds the 2019 Revenue, the 2018 financial performance component will be equal to the Base Cash Amount set forth in the Grant Notice multiplied by the Revenue Multiplier associated with such Revenue Growth, and further multiplied by a weighting of 20%, rounding up to the nearest whole dollar (the “2020 Component”).  If such Revenue Growth is zero (or negative), the 2020 Component shall be zero.

For purposes hereof, the “Aggregate PCASH Payout” shall mean the sum of the 2018 Component, the 2019 Component and the 2020 Component; provided that, in no event shall the Aggregate PCASH Payout exceed 200% of the Base Cash Amount set forth in the Grant Notice.

3.2Death or Disability.  Notwithstanding any other provision of this Section 3 to the contrary, upon the Participant’s death or termination of Service due to Disability, the cash amount that shall be payable in settlement of this Award shall be the Base Cash Amount (as set forth in the Grant Notice), without regard to the Revenue Performance Multiplier.

3.3Change in Control.  Notwithstanding any other provision of this Section 3 to the contrary, upon any Change in Control, the amount of cash that shall be paid in settlement of this Award shall be the greater of (i) the Base Cash Amount (as set forth in the Grant Notice) without regard to the Revenue Performance Multiplier and (ii) the Aggregate PCASH Payout; provided, however, that in the event that one or more of the 2018 Component, the 2019 Component and the 2020 Component has not yet been determined because the associated Revenue Multiplier has not yet been calculated, the Aggregate PCASH Payout for purposes of this Section 3.3 shall be equal to the sum of all such components that have been determined plus, for any components that have not yet been determined, the amount of any such component calculated using a Revenue Multiplier of 100%.  In the event of a Change in Control, this Award shall continue to vest subject to the terms and conditions of this Agreement, with respect to the amount of cash determined pursuant to this Section 3.3.  If the Participant’s Service by the Company (or Company’s successor) is terminated without Cause (as defined in Section 4.1 below) after a Change in Control, then this Award shall become vested upon such termination.

4.Vesting; Forfeiture.

4.1Vesting of Award.  Provided that the Initial Performance Measure equals or exceeds the Initial Performance Target for the Initial Performance Period and the Participant’s Service has

not terminated prior to the applicable date, the Award shall become vested upon the earliest date to occur of the following (the “Vesting Date”):

(a)the Scheduled Vesting Date (as provided in the Grant Notice);

(b)the Participant’s death;

(c)termination of the Participant’s Service due to Disability;

(d)immediately before any Change in Control in which the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be, elects not to assume or substitute for this Award; and

(e)termination of the Participant’s Service by the Company (or Company’s successor) without Cause (as defined below) after a Change in Control.

For purposes hereof, “Cause” shall mean the following: (A) the Participant’s repeated failure to satisfactorily perform the Participant’s job duties; (B) refusal or failure to follow the lawful directions of the Participant’s direct supervisor, the Company’s Chief Executive Officer or the Board, as applicable; (C) conviction of a crime involving moral turpitude; or (D) engaging in acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of the Participant with respect to the Participant’s obligations or otherwise relating to the business of the Company, its Affiliates or customers; except that if the Participant is a party to a Change in Control Agreement with the Company, the definition of “Cause” therein shall apply.  Notwithstanding the foregoing, following a Change in Control, any determination as to whether “Cause” exists under the terms of this Agreement shall be subject to de novo review by a court of competent jurisdiction.

4.2Leaves of Absence.

(a)If Participant takes an approved medical, FMLA (or other statutorily protected leave), or military leave (each, an “Approved Leave”) and returns from such leave for at least thirty calendar days, then Participant shall be treated as if the period of such Approved Leave had been a period of continuous Service with the Company or Affiliate, and the Award shall be settled in accordance with Section 5 of this Agreement.

(b)In the event the Participant takes a leave of absence other than an Approved Leave, the cash amount payable as determined under Section 3 above, shall be prorated by multiplying such amount by a fraction the numerator of which is the number of whole months during the period commencing on January 1, 2018, and ending on the earlier of the date of a Change in Control or December 31, 2020 (the “Vesting Period”), that Participant had been in continuous Service with the Company or an Affiliate, and the denominator of which is the number of months the Vesting Period spans, rounding up to the nearest whole number.

(c)In the event of Participant’s termination of Service during any leave of absence, then the Award shall expire in accordance with the provisions set forth in Section 4.3 below.

4.3Forfeiture of Award Upon Termination of Service.  Except as otherwise provided in Section 4.1 above, the Award will terminate automatically without any further action by the Company and be forfeited without further notice and at no cost to the Company upon Participant’s termination of Service.

5.Settlement of Award.  Subject to the terms and conditions of the Plan and this Agreement, any cash amount that is determined to be payable pursuant to Section 3 above shall be distributed to Participant (or Participant’s estate in the event of death) with respect to Participant’s Award

within 30 days following the Vesting Date for such Award, except as otherwise provided in Section 8.1 of this Agreement (the “Settlement Date”).

6.Tax Withholding.  By accepting the Award (as provided in the Grant Notice), the Participant hereby authorizes withholding from payroll and any other amounts payable to the Participant, including withholding of a portion of the cash amount otherwise payable to the Participant in settlement of the Award, and otherwise agrees to make adequate provision for, any sums required to satisfy the federal, state, local and foreign tax (including any social insurance) withholding obligations of the Participating Company, if any, which arise in connection with the Award, the vesting of the Award or the payment of cash in settlement of the Award.

7.Rights as a Director, Employee or Consultant.

If the Participant is an Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Participant, the Participant’s employment is “at will” and is for no specified term.  Nothing in this Agreement shall confer upon the Participant any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Participant’s Service at any time.

8.Compliance with Section 409A.

It is intended that the settlement of the Award as set forth in this Agreement qualify for exemption from, or comply with, the requirements of Section 409A, and any ambiguities herein will be interpreted to so qualify or comply.  Notwithstanding the foregoing, if it is determined that the Award fails to satisfy the requirements of the “short-term deferral” exemption and are otherwise Section 409A Deferred Compensation, it is intended that any payment or benefit which is made or provided pursuant to or in connection with this Award shall comply in all respects with the applicable requirements of Section 409A (including applicable regulations or other administrative guidance thereunder, as determined by the Committee in good faith) to avoid the unfavorable tax consequences provided therein for non‑compliance.  In connection with effecting such compliance with Section 409A, the following shall apply:

8.1Separation from Service; Required Delay in Payment to Specified Employee.  Notwithstanding anything set forth herein to the contrary, no amount payable pursuant to this Agreement on account of the Participant’s termination of Service which constitutes a “deferral of compensation” within the meaning of the Treasury Regulations issued pursuant to Section 409A of the Code (the “Section 409A Regulations”) shall be paid unless and until the Participant has incurred a “separation from service” within the meaning of the Section 409A Regulations.  Furthermore, to the extent that the Participant is a “specified employee” within the meaning of the Section 409A Regulations as of the date of the Participant’s separation from service, no amount that constitutes a deferral of compensation which is payable on account of the Participant’s separation from service shall be paid to the Participant before the date (the “Delayed Payment Date”) which is first day of the seventh month after the date of the Participant’s separation from service or, if earlier, the date of the Participant’s death following such separation from service.  All such amounts that would, but for this Section, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date.

8.2Other Changes in Time of Payment.  Neither the Participant nor the Company shall take any action to accelerate or delay the payment of any benefits under this Agreement in any manner which would not be in compliance with the Section 409A Regulations.

8.3Amendments to Comply with Section 409A; Indemnification.  Notwithstanding any other provision of this Agreement to the contrary, the Company is authorized to

amend this Agreement, to void or amend any election made by the Participant under this Agreement and/or to delay the payment of any monies and/or provision of any benefits in such manner as may be determined by the Company, in its discretion, to be necessary or appropriate to comply with the Section 409A Regulations without prior notice to or consent of the Participant.  The Participant hereby releases and holds harmless the Company, its directors, officers and stockholders from any and all claims that may arise from or relate to any tax liability, penalties, interest, costs, fees or other liability incurred by the Participant in connection with the Award, including as a result of the application of Section 409A.

8.4Advice of Independent Tax Advisor.  The Company has not obtained a tax ruling or other confirmation from the Internal Revenue Service with regard to the application of Section 409A to the Award, and the Company does not represent or warrant that this Agreement will avoid adverse tax consequences to the Participant, including as a result of the application of Section 409A to the Award.  The Participant hereby acknowledges that he or she has been advised to seek the advice of his or her own independent tax advisor prior to entering into this Agreement and is not relying upon any representations of the Company or any of its agents as to the effect of or the advisability of entering into this Agreement.

9.Miscellaneous Provisions.

9.1Termination or Amendment.  The Committee may terminate or amend the Plan or this Agreement at any time; provided, however, that no such termination or amendment may have a materially adverse effect on the Participant’s rights under this Agreement without the consent of the Participant unless such termination or amendment is necessary to comply with applicable law or government regulation, including, but not limited to, Section 409A.  No amendment or addition to this Agreement shall be effective unless in writing.

9.2Nontransferability of the Award.  Prior to the payment of cash on the applicable Settlement Date, neither this Award nor any cash amount payable under this Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution.  All rights with respect to the Award shall be exercisable during the Participant’s lifetime only by the Participant or the Participant’s guardian or legal representative.

9.3Repayment/Forfeiture.  By accepting this Award, the Participant specifically agrees that any and all payments or benefits the Participant or any other person may be entitled to receive under or as a result of this Award shall be immediately forfeited, and that the aggregate amount of any payments or benefits the Participant or any other person has received under or as a result of this Award (determined without regard to any taxes or other amounts withheld from such payments or benefits), shall be repaid to the Company within 30 days following written notice from the Company (or such shorter period as may be required by applicable law), (1) as the Company in its discretion determines may be required to comply with any applicable listing standards of a national securities exchange adopted in accordance with Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (regarding recovery of erroneously awarded compensation) and any implementing rules and regulations of the U.S. Securities and Exchange Commission adopted thereunder or similar rules under the laws of any other jurisdiction, (2) to the extent provided pursuant to the Company’s Incentive Compensation Recoupment Policy, and (3) in the event the Committee or its delegate determines that the Participant has engaged in Prohibited Conduct (as defined below) at any time during the Recoupment Period (as defined below).  For purposes of this Section 9.3,

(a)“Prohibited Conduct” means (1) violation of the Company’s Code of Ethical Business Conduct, Insider Trading Policy, or any Proprietary Information, Inventions Agreement,

Non-Compete Agreement (or similar agreement) signed by the Participant; (2) unethical behavior (such as, without limitation, fraud, dishonesty, or misrepresentation of product benefits); (3) engaging in Competition; (4) disclosing or using in any capacity other than as necessary in the performance of duties assigned by the Company or its Affiliates any confidential information, trade secrets or other business sensitive information or material concerning the Company or its Affiliates, customers, suppliers or partners; (5) directly or indirectly employing, contacting concerning employment, or participating in any way in the recruitment for employment of (whether as an employee, officer, director, agent, consultant or independent contractor), any person who was or is an employee, representative, officer or director of the Company or any of its Affiliates at any time within the 12 months prior to termination of Participant’s employment; (6) any action or statement by Participant and/or his or her representatives that either does or could reasonably be expected to disparage the Company, its Affiliates, or their officers, employees, or directors, or undermines, diminishes or otherwise damages the relationship between the Company or any of its Affiliates and any of their respective customers, potential customers, vendors and/or suppliers that were known to Participant; or (7) breach of any provision of any employment or severance agreement with the Company or any Affiliate.  Any determination of Prohibited Conduct shall be made by the Committee or its delegate in its sole discretion and shall be binding on all parties.  Notwithstanding anything contained herein to the contrary, Prohibited Conduct shall not include communication by Participant with any government agency, commission or regulator or participation by Participant in any investigation or proceeding that may be conducted by any government agency, commission or regulator, but only to the extent that such communication is required or permitted by law.

(b)“Competition” means, either during Participant’s employment with the Company or any of its Affiliates, or within 12 months following termination of such employment, accepting employment with, or serving as a consultant or advisor or in any other capacity to a competitor of the Company, including but not limited to the DePuy Synthes division of Johnson & Johnson, Stryker Corporation, Globus Medical, Inc., Medtronic, Inc., K2M Holdings, Inc., Zimmer Biomet Holdings, Inc., Alphatec Holdings, Inc., Titan Spine, LLC or any subsidiary or Affiliate of the foregoing (a “Competitor”), including, but not limited to, employment or another business relationship with any Competitor if Participant has been introduced to trade secrets, confidential information or business sensitive information during Participant’s employment with the Company or any of its Affiliates and such information would aid the Competitor because the threat of disclosure of such information is so great that it must be assumed that such disclosure would occur.

(c)“Recoupment Period”means the period beginning on the Date of Grant and ending on the date that is 12 months after the date on which the Participant or any other person received any payment or benefit pursuant to this Award, provided, however, that if the Prohibited Conduct resulted in the Participant or any other person receiving any payment or benefit pursuant to this Award in excess of the payment or benefit that would have been received absent such Prohibited Conduct, the Recoupment Period shall end on the date that is 36 months after the date on which such payment or benefit was received.  

9.4Further Instruments.  The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.

9.5Binding Effect.  This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participant’s heirs, executors, administrators, successors and assigns.  If all or any part of any section or clause of this Agreement is determined to be invalid or unenforceable in any respect or to any degree, that section or clause shall be interpreted and enforced to the maximum extent allowed by law and shall not invalidate or impact any other sections and/or clauses that remain.

9.6Delivery of Documents and Notices.  Any document relating to participation in the Plan or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by a Participating Company, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writing from time to time to the other party.

(a)Description of Electronic Delivery.  The Plan documents, which may include but do not necessarily include: the Plan, this Agreement, and any reports of the Company provided generally to the Company’s stockholders, may be delivered to the Participant electronically.  In addition, if permitted by the Company, the Participant may deliver electronically the Grant Notice to the Company or to such third party involved in administering the Plan as the Company may designate from time to time.  Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the Internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company.

(b)Consent to Electronic Delivery.  The Participant acknowledges that the Participant has read Section 9.6(a) of this Agreement and consents to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of the Grant Notice, as described in Section 9.6(a). The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing.  The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails.  Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails.  The Participant may revoke his or her consent to the electronic delivery of documents described in Section 9.6(a) or may change the electronic mail address to which such documents are to be delivered (if Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail.  Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 9.6(a), but has nevertheless knowingly and voluntarily chosen to do so by accepting the Award (as provided in the Grant Notice).

9.7Integrated Agreement.  This Agreement and the Plan shall constitute the entire understanding and agreement of the Participant and the Participating Company Group with respect to the subject matter contained herein or therein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company Group with respect to such subject matter.  To the extent contemplated herein or therein, the provisions of this Agreement and the Plan shall survive any settlement of the Award and shall remain in full force and effect.

9.8Applicable Law.  This Agreement shall be governed by the laws of the State of Delaware as such laws are applied to agreements between Delaware residents entered into and to be performed entirely within the State of Delaware.

9.9Terms and Conditions Subject to Change in the Event the Participant Transfers Outside of the United States.  Should the Participant transfer his or her residence and/or employment with the Company to another country, the Company, in its sole discretion, shall determine whether application of certain additional and/or supplemental terms and conditions is necessary or

advisable in order to comply with respective laws, rules and regulations or to facilitate the operation and administration of the Award and the Plan.  In all circumstances, the Company will provide the Participant with its ordinary-course terms and conditions for such country(ies) in the form of an amendment and/or addendum, which shall thereafter be part of this Agreement.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Gregory T. Lucier, certify that:

1. I have reviewed this Form 10-Q of NuVasive, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 1, 2018	By:	/s/ Gregory T. Lucier
		Gregory T. Lucier
		Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Rajesh J. Asarpota, certify that:

1. I have reviewed this 10-Q of NuVasive, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 1, 2018	By:	/s/ Rajesh J. Asarpota
		Rajesh J. Asarpota
		Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of NuVasive, Inc. (the “Company”) on Form 10-Q for the three months ended March 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Quarterly Report”), I, Gregory T. Lucier, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.      The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.      The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 1, 2018	By:	/s/ Gregory T. Lucier
		Gregory T. Lucier
		Chairman and Chief Executive Officer

In connection with the Quarterly Report, I, Rajesh J. Asarpota, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.      The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.      The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 1, 2018	By:	/s/ Rajesh J. Asarpota
		Rajesh J. Asarpota
		Executive Vice President and Chief Financial Officer

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2018	Apr. 29, 2018
Document And Entity Information [Abstract]
Entity Registrant Name	NUVASIVE INC
Entity Central Index Key	0001142596
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Amendment Flag	false
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Trading Symbol	NUVA
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		51,259,919

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 73,741	$ 72,803
Restricted cash and investments		3,901
Accounts receivable, net of allowances of $14,734 and $13,026, respectively	188,107	200,220
Inventory, net	257,982	247,138
Prepaid income taxes	16,877	17,209
Prepaid expenses and other current assets	21,102	18,792
Total current assets	557,809	560,063
Property and equipment, net	227,573	215,326
Intangible assets, net	287,600	280,774
Goodwill	563,046	536,926
Deferred tax assets	5,277	6,440
Restricted cash and investments	2,394	1,494
Other assets	27,433	39,117
Total assets	1,671,132	1,640,140
Current liabilities:
Accounts payable and accrued liabilities	83,136	75,767
Contingent consideration liabilities	11,670	18,952
Accrued payroll and related expenses	39,369	55,618
Litigation liabilities	38,190	8,150
Short-term borrowings	55,000
Income tax liabilities	3,899	2,908
Total current liabilities	231,264	161,395
Long-term senior convertible notes	587,716	582,920
Deferred and income tax liabilities, non-current	4,900	18,870
Other long-term liabilities	84,856	77,539
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 March 31, 2018 and December 31, 2017, 56,335,550 and 56,164,060 issued and outstanding at March 31, 2018 and December 31, 2017, respectively	60	60
Additional paid-in capital	1,358,759	1,363,549
Accumulated other comprehensive loss	(4,353)	(6,933)
(Accumulated deficit) retained earnings	(22,370)	4,762
Treasury stock at cost; 5,077,543 shares and 5,001,886 shares at March 31, 2018 and December 31, 2017, respectively	(569,700)	(565,867)
Total NuVasive, Inc. stockholders’ equity	762,396	795,571
Non-controlling interest		3,845
Total equity	762,396	799,416
Total liabilities and equity	$ 1,671,132	$ 1,640,140

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Statement Of Financial Position [Abstract]
Accounts receivable, allowances	$ 14,734	$ 13,026
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	120,000,000	120,000,000
Common stock, shares issued	56,335,550	56,164,060
Common stock, shares outstanding	56,335,550	56,164,060
Treasury stock at cost, shares	5,077,543	5,001,886

XML

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Revenue
Product revenue	$ 233,515	$ 224,955
Service revenue	27,007	24,058
Total revenue	260,522	249,013
Cost of revenue (excluding below amortization of intangible assets)
Cost of products sold	55,191	45,901
Cost of services	18,623	15,542
Total cost of revenue	73,814	61,443
Gross profit	186,708	187,570
Operating expenses:
Sales, marketing and administrative	146,766	140,368
Research and development	14,491	12,414
Amortization of intangible assets	12,425	12,061
Litigation liability loss	28,995
Business transition costs	2,253	55
Total operating expenses	204,930	164,898
Interest and other expense, net:
Interest income	134	137
Interest expense	(9,467)	(9,799)
Other (expense) income, net	(9,703)	258
Total interest and other expense, net	(19,036)	(9,404)
(Loss) income before income taxes	(37,258)	13,268
Income tax benefit (expense)	10,126	(1,285)
Consolidated net (loss) income	(27,132)	11,983
Add back net loss attributable to non-controlling interest		(443)
Net (loss) income attributable to NuVasive, Inc.	$ (27,132)	$ 12,426
Net (loss) income per share attributable to NuVasive, Inc.:
Basic	$ (0.53)	$ 0.25
Diluted	$ (0.53)	$ 0.22
Weighted average shares outstanding:
Basic	51,226	50,566
Diluted	51,226	57,786

XML

Consolidated Statements of Comprehensive (Loss) Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Statement Of Income And Comprehensive Income [Abstract]
Consolidated net (loss) income	$ (27,132)	$ 11,983
Other comprehensive income:
Unrealized loss on marketable securities, net of tax		(2)
Translation adjustments, net of tax	2,579	1,859
Other comprehensive income	2,579	1,857
Total consolidated comprehensive (loss) income	(24,553)	13,840
Net loss attributable to non-controlling interest		(443)
Comprehensive (loss) income attributable to NuVasive, Inc.	$ (24,553)	$ 14,283

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Operating activities:
Consolidated net (loss) income	$ (27,132)	$ 11,983
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	32,090	29,510
Impairment of strategic investment	9,003
Amortization of non-cash interest	4,925	5,369
Stock-based compensation	4,134	7,017
Reserves on current assets	4,080	(1,998)
Other non-cash adjustments	4,456	3,013
Deferred income taxes	(12,671)	1,440
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable	16,933	1,719
Inventory	(12,126)	(13,800)
Prepaid expenses and other current assets	(1,737)	(2,614)
Accounts payable and accrued liabilities	1,579	550
Accrued payroll and related expenses	(18,493)	(12,721)
Litigation liability	30,040
Income taxes	1,294	(1,298)
Net cash provided by operating activities	36,375	28,170
Investing activities:
Acquisitions and investments	(51,794)	(2,500)
Purchases of intangible assets	(2,657)	(1,249)
Purchases of property and equipment	(29,109)	(34,545)
Net cash used in investing activities	(83,560)	(38,294)
Financing activities:
Proceeds from the issuance of common stock	336	410
Purchase of treasury stock	(2,155)	(10,356)
Payment of contingent consideration	(8,900)
Proceeds from revolving line of credit	65,000
Repayments on revolving line of credit	(10,000)
Other financing activities	(141)	(181)
Net cash provided by (used in) financing activities	44,140	(10,127)
Effect of exchange rate changes on cash	982	758
Decrease in cash, cash equivalents and restricted cash	(2,063)	(19,493)
Cash, cash equivalents and restricted cash at beginning of period	78,198	161,048
Cash, cash equivalents and restricted cash at end of period	$ 76,135	$ 141,555

XML

Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Statement Of Cash Flows [Abstract]
Cash and cash equivalents	$ 73,741	$ 72,803	$ 134,008
Restricted cash and investments	2,394	1,494	7,547
Total cash, cash equivalents and restricted cash shown in the Unaudited Consolidated Statement of Cash Flows	$ 76,135	$ 78,198	$ 141,555	$ 161,048

XML

Description of Business and Basis of Presentation

3 Months Ended

Mar. 31, 2018

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Description of Business and Basis of Presentation

1.    Description of Business and Basis of Presentation

Description of Business

NuVasive, Inc. (the “Company” or “NuVasive”) was incorporated in Delaware on July 21, 1997, and began commercializing its products in 2001. The Company’s principal product offering includes a minimally-disruptive surgical platform called Maximum Access Surgery, or MAS. The MAS platform combines three categories of solutions that collectively minimize soft tissue disruption during spine fusion surgery, provide maximum visualization and are designed to enable safe and reproducible outcomes for the surgeon and the patient. The platform includes the Company’s proprietary software-driven nerve detection and avoidance systems and Intraoperative Monitoring (“IOM”) services and support; MaXcess, an integrated split-blade retractor system; and a wide variety of specialized implants and biologics. To assist with surgical procedures the Company offers a technology platform called Integrated Global Alignment (“iGA”); in which products and computer assisted technology under the MAS platform help achieve more precise spinal alignment. The individual components of the MAS platform, and many of the Company’s products, can also be used in open or traditional spine surgery. The Company continues to focus research and development efforts to expand its MAS product platform and advance the applications of its unique technology into procedurally-integrated surgical solutions. The Company dedicates significant resources toward training spine surgeons on its unique technology and products.

The Company’s primary business model is to loan its MAS systems to surgeons and hospitals that purchase implants, biologics and disposables for use in individual procedures. In addition, for larger customers, the Company’s proprietary nerve monitoring systems, MaXcess and surgical instrument sets are placed with hospitals for an extended period at no up-front cost to them. The Company also offers a range of bone allograft in patented saline packaging, disposables and spine implants, which include its branded CoRoent products and fixation devices such as rods, plates and screws. The Company sells MAS instrument sets, MaXcess and nerve monitoring systems to hospitals, however, such sales are immaterial to the Company’s results of operations.

The Company also designs and sells expandable growing rod implant systems that can be non-invasively lengthened following implantation with precise, incremental adjustments via an external remote controller using magnetic technology called MAGnetic External Control, or MAGEC, which allows for the minimally invasive treatment of early-onset and adolescent scoliosis. This technology is also the basis for the Company’s PRECICE limb lengthening system, which allows for the correction of long bone limb length discrepancy, as well as enhanced bone healing in patients that have experienced traumatic injury.

The Company intends to continue development on a wide variety of projects intended to broaden surgical applications for greater procedural integration of its MAS techniques and additional applications of the MAGEC technology. Such applications include tumor, trauma, and deformity, as well as increased fixation options, sagittal alignment products, imaging and navigation. The Company also expects to continue expanding its other product and services offerings as it executes on its strategy to offer customers an end-to-end, integrated procedural solution for spine surgery. The Company intends to continue to pursue business and technology acquisition targets and strategic partnerships.

Basis of Presentation and Principles of Consolidation

The accompanying Unaudited Consolidated Financial Statements include the accounts of the Company and its majority-owned or controlled subsidiaries, collectively referred to as either NuVasive or the Company. The Company translates the financial statements of its foreign subsidiaries using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations. When there is a portion of equity in an acquired subsidiary not attributable, directly or indirectly, to the respective parent entity, the Company records the fair value of the non-controlling interest at the acquisition date and classifies the amounts attributable to non-controlling interest separately in equity in the Company's Consolidated Financial Statements. Any subsequent changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary are accounted for as equity transactions. All significant intercompany balances and transactions have been eliminated in consolidation.

The accompanying Unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Pursuant to these rules and regulations, the Company has condensed or omitted certain information and footnote disclosures it normally includes in its annual Consolidated Financial Statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for any other interim period or for the full year. These Unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K filed with the SEC. In the opinion of management, the Unaudited Consolidated Financial Statements and notes thereto include all adjustments that are of a normal and recurring nature that are necessary for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the periods presented.

The Company has reclassified historically presented revenue and cost of revenue to conform to the current year presentation, which now reflects revenue and costs allocated to the Company’s product and service offerings. These reclassifications had no impact on previously reported results of operations. Additionally, as required by Accounting Standards Update 2014-09 Revenue from Contracts with Customers (“ASU 2014-09”), on January 1, 2018 the Company adopted Accounting Standards Codification 606 Revenue from Contracts with Customers (“ASC 606”), electing full retrospective method of adoption.

Use of Estimates

To prepare financial statements in conformity with GAAP, management must make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Recent Accounting Pronouncements Not Yet Adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-02, Leases, which outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new accounting standard requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than twelve months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new accounting standard must be adopted using the modified retrospective approach and will be effective for the Company starting in the first quarter of fiscal 2019. Early adoption is permitted. The Company believes the adoption will modify its analyses and disclosures of lease agreements considering operating leases are a significant portion of the Company’s total lease commitments. The Company is in the process of determining the impact the adoption will have on its Consolidated Financial Statements.

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses, which changes the accounting for recognizing impairments of financial assets. Under the new guidance, credit losses for certain types of financial instruments will be estimated based on expected losses. The new guidance also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. The new guidance will be effective for the Company starting in the first quarter of fiscal 2021. Early adoption is permitted starting in the first quarter of fiscal 2020. The Company believes the adoption will modify the way the Company analyzes financial instruments, but it does not anticipate a material impact on results of operations. The Company is in the process of determining the effects the adoption will have on its Consolidated Financial Statements as well as whether to early adopt the new guidance.

In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles – Goodwill and Other, which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The standard has tiered effective dates, starting in 2020 for calendar-year public business entities that meet the definition of an SEC filer. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company is in the process of determining the effects the adoption will have on its Consolidated Financial Statements as well as whether to early adopt the new guidance.

In July 2017, the FASB issued Accounting Standards Update No. 2017-11, Earnings Per Share, Distinguishing Liabilities from Equity, Derivatives and Hedging, which changes the accounting treatment and the earnings per share calculation for certain instruments with down round features. The amendments in this update should be applied using a cumulative-effect adjustment as of the beginning of the fiscal year of adoption or retrospective adjustment to each period presented. This update is effective for annual periods beginning after December 15, 2018, and interim periods within those periods and early adoption is permitted. The Company is in the process of determining the impact the adoption will have on its Consolidated Financial Statements as well as whether to early adopt the new guidance.

In August 2017, the FASB issued Accounting Standards Update No. 2017-12, Derivatives and Hedging, which is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting and increase transparency as to the scope and results of hedging programs. The amendments in this update will be applied using a cumulative-effect adjustment as of the beginning of the fiscal year of adoption. This update is effective for annual periods beginning after December 15, 2018, and interim periods within those periods and early adoption is permitted. The Company is in the process of determining the impact the adoption will have on its Consolidated Financial Statements as well as whether to early adopt the new guidance.

Recently Adopted Accounting Standards

In May 2014, the FASB issued Accounting Standard Update No. 2014-09 Revenue from Contracts with Customers (“ASU 2014-09”), an updated standard on revenue recognition. The standard effectively replaces Accounting Standards Codification 605 Revenue Recognition (“ASC 605”) with Accounting Standards Codification 606 Revenue from Contracts with Customers (“ASC 606”). In summary, the changes to the guidance in revenue recognition under ASC 606 focuses on the existence of a contract with the customer (whether written, oral, or implied by an entity’s customary business practices), the concept that the performance obligation is fulfilled when the customer obtains control of the asset/service, versus the transfer of risk and reward, and the requirement that variable consideration (including rebates, discounts, etc.) and incremental costs must be estimated and recognized in the amount that is expected or most likely to be realized over the term of the contract fulfillment.

Prior to the adoption of ASC 606, the Company recognized revenue in accordance with ASC 605 when all four of the following criteria were met: (i) persuasive evidence that an arrangement exists; (ii) delivery of the products and/or services has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured. Specifically, revenue from the sale of implants, biologics and disposables was generally recognized upon a purchase order from the hospital or acknowledgment from the hospital indicating product use or implantation or upon shipment to third-party customers who immediately accepted title. Revenue from the sale of instrument sets was recognized upon receipt of a purchase order and the subsequent shipment to customers who immediately accepted title. Revenue from neuromonitoring services was recognized in the period the service was performed for the amount of payment expected to be received.

The Company adopted ASC 606 as of January 1, 2018, electing full retrospective method of adoption, which resulted in a change in its accounting policy for revenue recognition and related adjustments to the Consolidated Financial Statements for all periods presented. The Company applied the practical expedients permitted under ASC 606 for which (i) contracts with customers originating prior to January 1, 2016 do not require disclosure for the amount of consideration allocated to remaining performance obligations or an explanation of when the Company expects to recognize that amount as revenue; (ii) contracts beginning and completing in the same annual reporting period need not be restated; and (iii) hindsight for estimating variable consideration for completed contracts is permitted.

The Company recognizes revenue from spinal surgery hardware and ancillary products at a point in time in two types of transactions: (i) procedural based transactions with products used during surgery defined as “charge sheet orders”, and (ii) shipping transactions which represent the stocking of product or the purchase of instrumentation to support future surgeries defined as “stocking and capital orders”. The Company also recognizes revenue at a point in time associated with surgical-related servicing procedures, including neuromonitoring services which are defined as “surgical-related services”. Other sources of revenue, such as leasing revenue and royalties, are immaterial to the Consolidated Financial Statements.

For charge sheet orders, the sale occurs when the surgery is performed and a charge sheet is submitted to the Company by its sales representative identifying the products consumed during the surgery. The Company obtains an authorization or acknowledgment from the hospital to complete the invoicing process. Under ASC 605, persuasive evidence of an arrangement and delivery of product was deemed to have occurred once the charge sheet was processed, and an associated authorization or acknowledgement from the customer was received. Under ASC 606, the Company’s charge sheet orders are considered to be a contract with a customer when the Company agrees to attend a scheduled surgery with its products as requested by the hospital or surgeon. The performance obligation is considered to be complete once the hospital takes control of the product, it is implanted into a patient and there is sufficient evidence regarding the specific usage and pricing of the product used. The scheduling of the surgery and the usage of Company products is determined to be a contract, and recognition of revenue under ASC 606 occurs upon the completion of the surgical event and consumption of product. In the event that information related to the surgical event and consumption of product is not readily available the Company recognizes revenue upon a purchase order from the hospital or acknowledgment from the hospital indicating product use.

For stocking and capital orders, under ASC 605, delivery was deemed to have occurred when the title, including all risks and rewards of ownership of the products specified in the sales agreement had passed to the buyer. Accordingly, title, including all risks and rewards of ownership, passed based on the shipping terms. Under ASC 606, the Company’s stocking and capital order performance obligation is considered to be satisfied when the hospital assumes control of the asset, either upon shipment or delivery depending on the terms, and ability to direct the use of the asset as appropriate without the Company’s consent.

Under ASC 605, revenue from surgical-related services, such as neuromonitoring services, was recognized in the period the service was performed based on the delivery of a services report to the customer. The Company recognized revenue for the amount of payment expected to be received. In accordance with ASC 606, the Company enters into a contract with a customer when the hospital or surgeon requests the Company to attend a scheduled surgery with its products and services. The Company recognizes revenue at the time of the surgical procedure (when service and control is transferred to the customer), and bills either hospitals or insurance companies for different aspects of the service, as applicable. Revenue from insurance companies is recognized using the expected value method, as the Company bills at a gross rate which is generally not the rate ultimately collected. A contract is deemed to be in place for the expected amount of consideration to be received for the services with respect to hospitals and insurance companies, each of which are deemed to have the ability to pay for the services rendered.

Under ASC 605, the Company has historically estimated the amounts of returns, trade-ins, discounts, rebates, credits or incentives as offsets to the total transaction price or revenue associated with the sale. In limited situations, when historical information was not available or reliable, the Company would defer revenue recognition until completion of all performance obligations. Under ASC 606, the Company analyzes sales that could include variable consideration, and estimates the expected or most likely amount of revenue after returns, trade-ins, discounts, rebates, credits, and incentives. In making these estimates, the Company considers whether the amount of variable consideration is constrained and is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The Company earns sales-based royalty revenue over time from sales of products using existing biologics intellectual property (“IP”) that is out-licensed to certain companies. Under ASC 605, royalty revenue was recognized as earned and when collection was reasonably assured and was generally estimated and recorded in the same period as the sales that generated the royalty obligation. ASC 606 provides an exception for sales or usage-based royalties from the guidance for accounting for variable consideration, allowing the royalty revenue from the license of IP to be recognized when the performance obligation has been satisfied and the subsequent sale has occurred. Therefore, the Company estimates monthly royalty revenue as its performance obligation is satisfied. The Company does not expect a significant impact to royalty revenue under the adoption of ASC 606 as it has historically estimated and accrued royalty revenue in the period earned.

The Company historically expensed incremental costs, such as commissions associated with sales contracts, as incurred. Under ASU 2014-09, ASC 340-40 Other Assets and Deferred Costs was added along with ASC 606 to codify accounting guidance for the incremental costs to obtain or fulfill a contract with a customer. Under the guidance, the incremental costs must be deferred and recorded over the period in which the contract revenue is recognized. The Company typically does not associate quarterly or annual sales bonuses directly with a sale or master contract; however, commissions are directly associated with individual sales and expensed in the same period as the related contract revenue. The associated commissionable sales would not typically have a future benefit unless the revenue is recognized over time. The Company does not typically have situations where revenue is deferred in excess of one year. Given the practical expedient for contracts completing within one year, the Company does not expect these capitalized costs to be material in a given period.

The cumulative effect of the change on retained earnings for the full retrospective method of adoption of ASC 606 was $0.3 million as of December 31, 2017. The following tables summarize in a condensed presentation the impact of the adoption of ASC 606 on the Company’s previously reported Consolidated Balance Sheet as of December 31, 2017 and the Unaudited Consolidated Statement of Operations and Comprehensive Income and the Unaudited Consolidated Statement of Cash Flows for the three months ended March 31, 2017.

NUVASIVE, INC.
CONSOLIDATED BALANCE SHEET
(in thousands)
				(Unaudited)				(Unaudited)
As of December 31, 2017	As reported			Adjustments				As Adjusted
Accounts receivable, gross	$	212,709		$	537		[a]	$	213,246
Allowances on accounts receivable		(13,669	)		643		[b]		(13,026	)
Inventory, net		247,245			(107	)	[c]		247,138
Other current assets		112,705			—				112,705
Total current assets		558,990			1,073				560,063
Remaining other assets		1,080,077			—				1,080,077
Total assets	$	1,639,067		$	1,073			$	1,640,140
Accounts payable and accrued liabilities		75,076			691		[d]		75,767
Accrued payroll and related expenses		55,582			36		[e]		55,618
Other current liabilities		30,010			—				30,010
Total current liabilities		160,668			727				161,395
Deferred and income tax liabilities, non-current		18,786			84		[f]		18,870
Other long-term liabilities		660,459			—				660,459
Total NuVasive, Inc. stockholders’ equity		795,309			262		[g]		795,571
Non-controlling interests		3,845			—				3,845
Total equity		799,154			262				799,416
Total liabilities and equity	$	1,639,067		$	1,073			$	1,640,140
[a]  Represents cumulative impact from January 1, 2016 to the period presented on accounts receivable for the full retrospective method of adoption of ASC 606.
[b]  Represents cumulative impact from January 1, 2016 to the period presented on allowances on accounts receivable for the full retrospective method of adoption of ASC 606.
[c]  Represents cumulative impact from January 1, 2016 to the period presented on inventory for the full retrospective method of adoption of ASC 606.
[d]  Represents cumulative impact from January 1, 2016 to the period presented on commissions payable and accrued returns for the full retrospective method of adoption of ASC 606.
[e]  Represents cumulative impact from January 1, 2016 to the period presented on commissions payable for the full retrospective method of adoption of ASC 606.
[f]  Represents cumulative impact from January 1, 2016 to the period presented on deferred tax liabilities for the full retrospective method of adoption of ASC 606.
[g]  Represents cumulative impact from January 1, 2016 to the period presented on retained earnings for the full retrospective method of adoption of ASC 606.

NUVASIVE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except per share amounts)
(Unaudited)	As reported			Adjustments				As adjusted
Three months ended March 31, 2017
Revenue
Product revenue	$	225,806		$	(851	)	[a]	$	224,955
Service revenue		24,058			—				24,058
Total revenue		249,864			(851	)			249,013
Cost of revenue (excluding amortization of intangible assets)
Cost of products sold		46,071			(170	)	[b]		45,901
Cost of services		15,542			—				15,542
Total cost of revenue		61,613			(170	)			61,443
Gross profit		188,251			(681	)			187,570
Operating expenses:
Sales, marketing and administrative		140,502			(134	)	[c]		140,368
Other operating expenses		24,530			—				24,530
Total operating expenses		165,032			(134	)			164,898
Total interest and other expense, net		(9,404	)		—				(9,404	)
Income tax (expense) benefit		(1,490	)		205		[d]		(1,285	)
Consolidated net income	$	12,325		$	(342	)	[e]	$	11,983
Add back net loss attributable to non-controlling interests	$	(443	)	$	—			$	(443	)
Net income attributable to NuVasive, Inc.	$	12,768		$	(342	)	[e]	$	12,426
Net income per share attributable to NuVasive, Inc.:
Basic	$	0.25		$	0.00		[f]	$	0.25
Diluted	$	0.22		$	0.00		[f]	$	0.22
Comprehensive income attributable to NuVasive, Inc.	$	14,625		$	(342	)	[e]	$	14,283
[a]  Represents net change in sales revenue for charge sheet orders recognized under ASC 606.
[b]  Represents net change in cost of products sold for charge sheet orders recognized under ASC 606.
[c]  Represents net change in accrued sales commissions for charge sheet orders recognized under ASC 606.
[d]  Represents deferred income tax liability on net change associated with charge sheet orders recognized under ASC 606.
[e]  Represents net income and comprehensive income resulting from net change in charge sheet orders recognized under ASC 606.
[f]  Represents earnings per share impact resulting from net change in charge sheet orders recognized under ASC 606.

NUVASIVE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
Three months ended March 31, 2017	As reported			Adjustments				As adjusted
Consolidated net income	$	12,325		$	(342	)	[a]	$	11,983
Adjustments to reconcile net income to net cash provided by operating activities:
Reserves on current assets		(2,153	)		155		[b]		(1,998	)
Deferred income tax expense (benefit)		1,645			(205	)	[c]		1,440
Other adjustments to reconcile net income		44,909			—				44,909
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable		924			795		[d]		1,719
Inventory		(13,630	)		(170	)	[e]		(13,800	)
Prepaid expenses and other current assets		(2,614	)		—				(2,614	)
Accounts payable and accrued liabilities		593			(43	)	[f]		550
Accrued payroll and related expenses		(12,531	)		(190	)	[f]		(12,721	)
Income taxes		(1,298	)		—				(1,298	)
Net cash provided by operating activities		28,170			—				28,170
Net cash used in investing activities		(38,294	)		—				(38,294	)
Net cash used in financing activities		(10,127	)		—				(10,127	)
Effect of exchange rate changes on cash		758			—				758
Decrease in cash, cash equivalents and restricted cash	$	(19,493	)	$	—			$	(19,493	)
[a]  Represents net income resulting from charge sheet orders recognized under ASC 606.
[b]  Represents net change in allowances on accounts receivable for charge sheet orders recognized under ASC 606.
[c]  Represents deferred income tax liability on net change associated with charge sheet orders recognized under ASC 606.
[d]  Represents net change in accounts receivable for charge sheet orders recognized under ASC 606.
[e]  Represents net change in inventory for charge sheet orders recognized under ASC 606.
[f]  Represents net change in accrued sales commissions for charge sheet orders recognized under ASC 606.

In January 2016, the FASB issued Accounting Standards Update No. 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which requires that (i) all equity investments, other than equity-method investments, in unconsolidated entities generally be measured at fair value through earnings and (ii) when the fair value option has been elected for financial liabilities, changes in fair value due to instrument-specific credit risk will be recognized separately in other comprehensive income. Additionally, ASU 2016-01 changes the disclosure requirements for financial instruments. ASU 2016-01 provides a practicability exception for investments that do not have readily determinable fair values, which allows investments to be measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. The Company adopted ASU 2016-01 as of January 1, 2018 and elected to apply the practicability exception for measuring equity investments that do not have readily determinable fair market. The adoption did not have any impact on its Consolidated Financial Statements.

In August 2016, the FASB issued Accounting Standards Update No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which eliminates the diversity in practice related to the classification of certain cash receipts and payments for debt prepayment or extinguishment costs, the maturing of a zero coupon bond, the settlement of contingent liabilities arising from a business combination, proceeds from insurance settlements, distributions from certain equity method investees and beneficial interests obtained in a financial asset securitization. ASU 2016-15 designates the appropriate cash flow classification, including requirements to allocate certain components of these cash receipts and payments among operating, investing and financing activities. The retrospective transition method, requiring adjustment to all comparative periods presented, is required unless it is impracticable for some of the amendments, in which case those amendments would be made prospectively as of the earliest date practicable. The Company adopted ASU 2016-15 as of January 1, 2018. The adoption did not have any significant impact on its Consolidated Financial Statements.

In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Restricted Cash (“ASU 2016-18”), which requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. The amendments in this update will be applied using a retrospective transition method to each period presented. The Company adopted ASU 2016-18 as of January 1, 2018 and adjusted the presentation of its Statement of Cash Flows for the periods presented. The adoption did not have any significant impact on its Consolidated Financial Statements.

In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Clarifying the Definition of a Business (“ASU 2017-01”), which clarifies and provides a more robust framework to use in determining when a set of assets and activities is a business. The amendments in this update should be applied prospectively on or after the effective date. The Company adopted ASU 2017-01 as of January 1, 2018.

In February 2017, the FASB issued Accounting Standards Update No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (“ASU 2017-05”), which clarifies the scope of asset derecognition and adds guidance for partial sales and nonfinancial assets. An entity is required to apply the amendments in this update at the same time that it applies the amendments in ASU 2014-09. The Company adopted ASU 2017-05 as of January 1, 2018. The adoption did not have any significant impact on its Consolidated Financial Statements.

In May 2017, the FASB issued Accounting Standards Update No. 2017-09, Compensation – Stock Compensation (“ASU 2017-09”), which clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as a modification. Entities will apply the modification accounting guidance if the value, vesting conditions, or classification of the award changes. The Company adopted ASU 2017-09 as of January 1, 2018. The adoption did not have any significant impact on its Consolidated Financial Statements.

Revenue Recognition

In accordance with ASC 606 guidance, the Company recognizes revenue upon the transfer of goods or services to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services. The principles in ASC 606 are applied using the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the Company satisfies its performance obligation(s). Specifically, revenue from the sale of implants and disposables is generally recognized at an amount that reflects the expected consideration upon notice that the Company’s products have been used in a surgical procedure or upon shipment to a third-party customer assuming control of the products. Revenue from neuromonitoring services is recognized in the period the service is performed for the amount of consideration expected to be received. Revenue from the sale of instrument sets is generally recognized upon receipt of a purchase order and the subsequent shipment to a customer who assumes control. In certain cases, the Company does offer the ability for customers to lease instrumentation primarily on a non-sales type basis. Instrument sales and leasing revenue represent an immaterial amount of the Company’s total revenue in all periods presented. Revenue associated with products holding rights of return or trade-in are recognized when the Company concludes there is not a risk of significant revenue reversal in future periods for the expected consideration in the transaction. Costs incurred by the Company associated with sales contracts with customers are deferred over the performance obligation period and recognized in the same period as the related revenue, with the exception of contracts that complete within one year or less, in which case the associated costs are expensed as incurred.

Inventory

Net inventory primarily consisted of $245.1 million of finished goods, $8.0 million of work in progress and $4.9 million of raw materials as of March 31, 2018. Net inventory as of December 31, 2017 consisted of $232.4 million of finished goods, $9.8 million of work in progress and $5.0 million of raw materials. Finished goods include specialized implants and disposables and are stated at the lower of cost or market determined by utilizing a standard cost method, which includes assessment of capitalized variances, which approximates the weighted average cost. Work in progress and raw materials represent the underlying material, and labor for work in progress, that ultimately yield finished goods upon completion and are subject to lower of cost or market. The Company reviews the components of its inventory on a periodic basis for excess and obsolescence and adjusts inventory to its net realizable value as necessary.

Comprehensive Income

Comprehensive income is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income includes net of tax, unrealized gains or losses on the Company’s marketable securities and foreign currency translation adjustments. The cumulative translation adjustments included in accumulated other comprehensive loss were $4.4 million and $6.9 million at March 31, 2018 and December 31, 2017, respectively.

Product Shipment Costs

Product shipment costs, included in sales, marketing and administrative expense in the accompanying Consolidated Statements of Operations, were $5.9 million for both the three months ended March 31, 2018 and March 31, 2017. The majority of the Company’s shipping costs are related to the loaning of instrument sets, which are not typically sold as part of the Company’s core sales offering. Amounts billed to customers for shipping and handling of products are reflected in revenues and are not material for any period presented.

Business Transition Costs

The Company incurs certain costs related to acquisition, integration and business transition activities, which include severance, relocation, consulting, leasehold exit costs, third-party merger and acquisition costs, contingent consideration fair value adjustments and other costs directly associated with such activities.

During the three months ended March 31, 2018, the Company incurred $2.3 million of such costs, which consisted primarily of acquisition, integration and business transition activities, and $0.1 million of fair value adjustments on contingent consideration liabilities associated with the Company’s 2017 and 2016 acquisitions. During the three months ended March 31, 2017, the business transition costs were immaterial to the results of operations.

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Net (Loss) Income Per Share

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

Net (Loss) Income Per Share

2.    Net (Loss) Income Per Share

The following table sets forth the computation of basic and diluted net (loss) income per share attributable to the Company:

	Three Months Ended March 31,
(in thousands, except per share data)	2018			2017
Numerator:
Net (loss) income attributable to NuVasive, Inc.	$	(27,132	)	$	12,426
Denominator for basic and diluted net (loss) income per share:
Weighted average common shares outstanding for basic		51,226			50,566
Dilutive potential common stock outstanding:
Stock options and employee stock purchase plan		—			221
Restricted stock units		—			1,416
Warrants		—			3,046
Senior Convertible Notes		—			2,537
Weighted average common shares outstanding for diluted		51,226			57,786
Basic net (loss) income per share attributable to NuVasive, Inc.	$	(0.53	)	$	0.25
Diluted net (loss) income per share attributable to NuVasive, Inc.	$	(0.53	)	$	0.22

The following weighted-average outstanding common stock equivalents were not included in the calculation of net (loss) income per diluted share because their effects were anti-dilutive: 

	Three Months Ended March 31,
(in thousands)	2018		2017
Stock options, employee stock purchase plan, and restricted stock units		1,056		102
Warrants		10,865		10,865
Senior Convertible Notes		10,865		—
Total		22,786		10,967

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Financial Instruments and Fair Value Measurements

3 Months Ended

Mar. 31, 2018

Investments Debt And Equity Securities [Abstract]

Financial Instruments and Fair Value Measurements

3.    Financial Instruments and Fair Value Measurements

Foreign Currency and Derivative Financial Instruments

The Company translates the financial statements of its foreign subsidiaries using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations.

Some of the Company’s reporting entities conduct a portion of their business in currencies other than the entity’s functional currency. These transactions give rise to receivables and payables that are denominated in currencies other than the entity’s functional currency. The value of these receivables and payables is subject to changes in currency exchange rates from the point at which the transactions are originated until the settlement in cash. Both realized and unrealized gains and losses in the value of these receivables and payables are included in the determination of net income. Net currency exchange (losses) gains, which include gains and losses from derivative instruments, were $(0.3) million and $0.2 million for the three months ended March 31, 2018 and March 31, 2017, respectively, and are included in other (expense) income, net in the Consolidated Statements of Operations.

To manage foreign currency exposure risks, the Company uses derivatives for activities in entities that have short-term intercompany receivables and payables denominated in a currency other than the entity’s functional currency. The fair value is based on a quoted market price (Level 1). As of March 31, 2018 and December 31, 2017 a notional principal amount of $11.7 million and $14.3 million, respectively, was outstanding to hedge currency risk relative to the Company’s foreign receivables and payables. Derivative instrument net losses on the Company’s forward exchange contracts were $0.4 million for both the three months ended March 31, 2018 and March 31, 2017 and are included in other (expense) income, net in the Consolidated Statements of Operations. The fair value of the forward contract exchange derivative instrument liability was de minimis as of March 31, 2018 and $(0.1) million as of December 31, 2017. The derivative instruments are recorded in other current assets or other current liabilities in the Consolidated Balance Sheets commensurate with the nature of the instrument at period end.

Fair Value Measurements

The Company measures certain assets and liabilities in accordance with authoritative guidance which requires fair value measurements be classified and disclosed in one of the following three categories:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available.

Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain assets or liabilities within the fair value hierarchy. The Company did not have any transfers of assets and liabilities between the levels of the fair value measurement hierarchy during the three months ended March 31, 2018.

The fair values of the Company’s assets and liabilities, including cash equivalents, marketable securities, restricted investments, derivatives, and contingent obligations are measured at fair value on a recurring basis. As of March 31, 2018 and December 31, 2017, the Company held investments in securities classified as cash equivalents. During the periods presented, the Company did not hold any investments that were in a significant unrealized loss position and no impairment charges were recorded. Realized gains and losses and interest income related to marketable securities were immaterial during all periods presented. Cash equivalents are determined under the fair value categories as follows:

			Quoted Price in		Significant Other		Significant
			Active Market		Observable Inputs		Unobservable
(in thousands)	Total		(Level 1)		(Level 2)		Inputs (Level 3)
March 31, 2018:
Cash equivalents:
Money market funds	$	22,000	$	22,000	$	—	$	—
Total cash equivalents	$	22,000	$	22,000	$	—	$	—
December 31, 2017:
Cash equivalents:
Money market funds	$	27,000	$	27,000	$	—	$	—
Total cash equivalents	$	27,000	$	27,000	$	—	$	—

The carrying amounts of certain financial instruments such as cash equivalents, accounts receivable, prepaid expenses, other current assets, accounts payable, accrued expenses, and other current liabilities as of March 31, 2018 and December 31, 2017 approximate their related fair values due to the short-term maturities of these instruments.

The fair value of certain financial instruments was measured and classified within Level 1 of the fair value hierarchy based on quoted prices. Certain financial instruments classified within Level 2 of the fair value hierarchy include the types of instruments that trade in markets that are not considered to be active, but are valued based on quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

Fair Value of Senior Convertible Notes

The fair value, based on a quoted market price (Level 1), of the Company’s outstanding Senior Convertible Notes due 2021 at March 31, 2018 and December 31, 2017, was $716.3 million and $779.5 million, respectively. See Note 6 to the Unaudited Consolidated Financial Statements for further discussion on the carrying value of the notes.

Contingent Consideration Liabilities

The fair value of contingent consideration liabilities assumed in business combinations is recorded as part of the purchase price consideration of the acquisition, and is determined using a discounted cash flow model or probability simulation model. The significant inputs of such models are not observable in the market, such as certain financial metric growth rates, volatility rates, projections associated with the applicable milestone, the interest rate, and the related probabilities and payment structure in the contingent consideration arrangement. Fair value adjustments to contingent consideration liabilities are recorded through operating expenses in the Consolidated Statement of Operations. Contingent consideration arrangements assumed by an asset purchase will be measured and accrued when such contingency is resolved.

Contingent consideration liabilities were $65.8 million and $67.9 million as of March 31, 2018 and December 31, 2017, respectively, and were recorded in the Consolidated Balance Sheet commensurate with the respective payment terms. The following table sets forth the changes in the estimated fair value of the Company’s liabilities measured on a recurring basis using significant unobservable inputs (Level 3): 

	Three Months Ended March 31,
(in thousands)	2018			2017
Fair value measurement at beginning of period	$	67,941		$	67,501
Contingent consideration liability recorded upon acquisition		6,663			—
Change in fair value measurement		149			(1,352	)
Changes resulting from foreign currency fluctuations		72			12
Contingent consideration paid or settled		(9,000	)		—
Fair value measurement at end of period	$	65,825		$	66,161

Non-financial assets and liabilities measured on a nonrecurring basis

Certain non-financial assets and liabilities are measured at fair value, usually with Level 3 inputs including the discounted cash flow method or cost method, on a nonrecurring basis in accordance with authoritative guidance. These include items such as non-financial assets and liabilities initially measured at fair value in a business combination and non-financial long-lived assets measured at fair value for an impairment assessment. In general, non-financial assets, including goodwill, intangible assets and property and equipment, are measured at fair value when there is an indication of impairment and are recorded at fair value only when any impairment is recognized. The carrying values of the Company’s capital lease obligations approximated their estimated fair value as of March 31, 2018 and December 31, 2017.

During the three months ended March 31, 2018, the Company recorded an impairment charge of $9.0 million on a strategic investment. The impairment was recorded in other (expense) income, net in the Unaudited Consolidated Statement of Operations.

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Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2018

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and intangible assets

4.    Goodwill and Intangible Assets

Goodwill and intangible assets consisted of the following:

	Weighted-
	Average
	Amortization
(in thousands, except years)	Period	Gross		Accumulated			Intangible
March 31, 2018:	(in years)	Amount		Amortization			Assets, net
Intangible assets subject to amortization:
Developed technology	8	$	271,748	$	(107,068	)	$	164,680
Manufacturing know-how and trade secrets	13		30,881		(16,168	)		14,713
Trade name and trademarks	9		25,500		(11,376	)		14,124
Customer relationships	9		141,928		(47,845	)		94,083
Total intangible assets subject to amortization	9	$	470,057	$	(182,457	)	$	287,600
Intangible assets not subject to amortization:
Goodwill							$	563,046
Total goodwill and intangible assets, net							$	850,646

	Weighted-
	Average
	Amortization
	Period	Gross		Accumulated			Intangible
December 31, 2017:	(in years)	Amount		Amortization			Assets, net
Intangible assets subject to amortization:
Developed technology	8	$	271,748	$	(98,693	)	$	173,055
Manufacturing know-how and trade secrets	13		30,653		(15,542	)		15,111
Trade name and trademarks	9		25,200		(10,559	)		14,641
Customer relationships	9		122,249		(44,282	)		77,967
Total intangible assets subject to amortization	9	$	449,850	$	(169,076	)	$	280,774
Intangible assets not subject to amortization:
Goodwill							$	536,926
Total goodwill and intangible assets, net							$	817,700

The following table summarizes the changes in the carrying value of the Company’s goodwill:

(in thousands)
December 31, 2017
Gross goodwill	$	545,226
Accumulated impairment loss		(8,300	)
		536,926
Changes to gross goodwill
Increases recorded in business combinations		25,956
Changes in purchase price allocation		75
Changes resulting from foreign currency fluctuations		89
		26,120
March 31, 2018
Gross goodwill		571,346
Accumulated impairment loss		(8,300	)
	$	563,046

Total expense related to the amortization of intangible assets, which is recorded in both cost of revenue and operating expenses in the Consolidated Statements of Operations depending on the functional nature of the intangible asset, was $13.3 million and $13.0 million for the three months ended March 31, 2018 and March 31, 2017, respectively.

Total future amortization expense related to intangible assets subject to amortization at March 31, 2018 is set forth in the table below:

(in thousands)
Remaining 2018	$	39,561
2019		51,263
2020		50,640
2021		48,580
2022		41,169
Thereafter through 2031		56,387
Total future amortization expense	$	287,600

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Business Combinations

3 Months Ended

Mar. 31, 2018

Business Combination Description [Abstract]

Business Combinations

5.    Business Combinations

The Company recognizes the assets acquired, liabilities assumed, and any non-controlling interest at fair value at the date of acquisition. Certain acquisitions contained contingent consideration arrangements that required the Company to assess the acquisition date fair value of the contingent consideration liabilities, which was recorded as part of the purchase price allocation of the acquisition, with subsequent fair value adjustments to the contingent consideration recorded in the Consolidated Statements of Operations. See Note 3 to the Unaudited Consolidated Financial Statements for further discussion on contingent consideration liabilities.

Acquisitions

In January 2018, the Company acquired SafePassage, a privately-held provider of IOM services, which now operates as a wholly-owned subsidiary of the Company. The acquisition was not considered material to the overall Unaudited Consolidated Financial Statements. The Company’s NuVasive Clinical Services division (including SafePassage) represents the reported service revenue on the Unaudited Consolidated Statement of Operations.

The Company has completed other acquisitions that were not considered material to the overall Unaudited Consolidated Financial Statements during the periods presented. These acquisitions have been included in the Unaudited Consolidated Financial Statements from the respective dates of acquisition. The Company does not believe that collectively the acquisitions made during the periods presented are material to the overall financial statements.

For certain acquisitions completed during the periods presented, the Company is still in the process of finalizing the purchase price allocation given the timing of the acquisitions and the size and scope of the assets and liabilities subject to valuation. While the Company does not expect material changes in the valuation outcome, certain assumptions and findings that were in place at the date of acquisition could result in changes in the purchase price allocation.

Variable Interest Entities

Progentix Orthobiology B.V.

In 2009, the Company purchased forty percent (40%) of the capital stock of Progentix Orthobiology B.V. (“Progentix”), a company organized under the laws of the Netherlands, from existing shareholders pursuant to a Preferred Stock Purchase Agreement for $10.0 million in cash (the “Initial Investment”). The Company also loaned Progentix cumulatively a total of $5.3 million at an interest rate of 6% per year (the “Loan”). Concurrently, with the Initial Investment, the Company and Progentix entered into a Distribution Agreement (as amended, the “Distribution Agreement”) for a term of ten years, whereby Progentix appointed the Company as its exclusive distributor for certain Progentix products.

Following the Initial Investment, in accordance with authoritative guidance, the Company determined that Progentix was a variable interest entity (“VIE”), as it did not have the ability to finance its activities without additional subordinated financial support and its equity investors would not absorb their proportionate share of expected losses and would be limited in the receipt of the potential residual returns of Progentix.

In January 2018, the Company completed the acquisition of the remaining 60% of the capital stock of Progentix (the “Non-Controlling Interest Acquisition”). Subsequent to the Non-Controlling Interest Acquisition, the Company owns 100% of the capital stock of Progentix, which now operates as its wholly-owned subsidiary and is no longer accounted for as a VIE or a separate reporting unit as of the date of the Non-Controlling Interest Acquisition. In accordance with authoritative guidance, the non-controlling interest associated with Progentix was reclassified to additional paid-in capital, including the difference between the non-controlling interest and consideration paid. The Loan plus accrued interest and the related receivable between the Company and Progentix is still outstanding as of March 31, 2018.

The following is a reconciliation of equity (net assets) attributable to the non-controlling interest:

	Three Months Ended March 31,
(in thousands)	2018			2017
Non-controlling interest at beginning of period	$	3,845		$	5,588
Acquired non-controlling interest reclassified to additional paid-in capital		(3,845	)		—
Less: Net loss attributable to the non-controlling interest		—			(443	)
Non-controlling interest at end of period	$	—		$	5,145

Total assets and liabilities of Progentix as a VIE included in the accompanying Consolidated Balance Sheets are as follows:

(in thousands)	March 31, 2018		December 31, 2017
Total current assets	$	—	$	670
Identifiable intangible assets, net		—		8,752
Goodwill		—		12,654
Accounts payable and accrued expenses		—		562
Deferred tax liabilities, net		—		331
Non-controlling interest		—		3,845

NuVasive Clinical Services and Physician Practices

The Company’s NuVasive Clinical Services division (including SafePassage), which provides IOM services to surgeons and healthcare facilities across the U.S., maintain contractual relationships with several physician practices (“PCs”). In accordance with authoritative guidance, the Company has determined that the PCs are VIEs and therefore, the accompanying Unaudited Consolidated Financial Statements include the accounts of the PCs from the date of acquisition. During the periods presented, the results of the PCs were immaterial to the Company’s financials. The creditors of the PCs have claims only on the assets of the PCs, which are not material, and the assets of the PCs are not available to the Company.

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Indebtedness

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Indebtedness

6.    Indebtedness

The carrying values of the Company’s Senior Convertible Notes due 2021 are as follows:

(in thousands)	March 31, 2018			December 31, 2017
2.25% Senior Convertible Notes due 2021:
Principal amount		650,000			650,000
Unamortized debt discount		(52,740	)		(56,839	)
Unamortized debt issuance costs		(9,544	)		(10,241	)
Total Senior Convertible Notes	$	587,716		$	582,920

2.25% Senior Convertible Notes due 2021

In March 2016, the Company issued $650.0 million principal amount of unsecured Senior Convertible Notes with a stated interest rate of 2.25% and a maturity date of March 15, 2021 (the "2021 Notes"). The net proceeds from the offering, after deducting initial purchasers' discounts and costs directly related to the offering, were approximately $634.1 million. The 2021 Notes may be settled in cash, stock, or a combination thereof, solely at the Company's discretion. It is the Company's current intent and policy to settle all conversions through combination settlement, which involves satisfying the principal amount outstanding with cash and any note conversion value over the principal amount in shares of the Company's common stock. The initial conversion rate of the 2021 Notes is 16.7158 shares per $1,000 principal amount, which is equivalent to a conversion price of approximately $59.82 per share, subject to adjustments. The Company uses the treasury share method for assumed conversion of the 2021 Notes to compute the weighted average shares of common stock outstanding for diluted earnings per share. The Company also entered into transactions for a convertible note hedge (the "2021 Hedge") and warrants (the "2021 Warrants") concurrently with the issuance of the 2021 Notes.

The cash conversion feature of the 2021 Notes required bifurcation from the notes and was initially accounted for as an equity instrument classified to stockholders’ equity, which resulted in recognizing $84.8 million in additional paid-in-capital during 2016.

The interest expense recognized on the 2021 Notes during the three months ended March 31, 2018 includes $3.7 million, $4.1 million and $0.7 million for the contractual coupon interest, the accretion of the debt discount and the amortization of the debt issuance costs, respectively. The interest expense recognized on the 2021 Notes during the three months ended March 31, 2017 includes $3.7 million, $3.9 million and $0.6 million for the contractual coupon interest, the accretion of the debt discount and the amortization of the debt issuance costs, respectively. The effective interest rate on the 2021 Notes is 5.8%, which includes the interest on the notes, amortization of the debt discount and debt issuance costs. Interest on the 2021 Notes began accruing upon issuance and is payable semi-annually.

Prior to September 15, 2020, holders may convert their 2021 Notes only under the following conditions: (a) during any calendar quarter beginning June 30, 2016, if the reported sale price of the Company's common stock for at least 20 days out of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than 130% of the conversion price on each applicable trading day; (b) during the five business day period in which the trading price of the 2021 Notes falls below 98% of the product of (i) the last reported sale price of the Company's common stock and (ii) the conversion rate on that date; and (c) upon the occurrence of specified corporate events, as defined in the 2021 Notes. From September 15, 2020 and until the close of business on the second scheduled trading day immediately preceding March 15, 2021, holders may convert their 2021 Notes at any time (regardless of the foregoing circumstances). The Company may not redeem the 2021 Notes prior to March 20, 2019. The Company may redeem the 2021 Notes, at its option, in whole or in part on or after March 20, 2019 until the close of business on the business day immediately preceding September 15, 2020 if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company delivers written notice of a redemption. The redemption price will be equal to 100% of the principal amount of such 2021 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date. No principal payments are due on the 2021 Notes prior to maturity. Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the 2021 Notes do not contain any financial covenants and do not restrict the Company from paying dividends or issuing or repurchasing any of its other securities. The Company is unaware of any current events or market conditions that would allow holders to convert the 2021 Notes.

2021 Hedge

In connection with the offering of the 2021 Notes, the Company entered into the hedge transaction with the initial purchasers of the 2021 Notes and/or their affiliates (the "2021 Counterparties") entitling the Company to purchase up to 10,865,270 shares of the Company's common stock at an initial stock price of $59.82 per share, each of which is subject to adjustment. The cost of the 2021 Hedge was $111.2 million and accounted for as an equity instrument by recognizing $111.2 million in additional paid-in-capital during 2016. The 2021 Hedge will expire on March 15, 2021. The 2021 Hedge is expected to reduce the potential equity dilution upon conversion of the 2021 Notes if the daily volume-weighted average price per share of the Company's common stock exceeds the strike price of the 2021 Hedge. An assumed exercise of the 2021 Hedge by the Company is considered anti-dilutive since the effect of the inclusion would always be anti-dilutive with respect to the calculation of diluted earnings per share.

2021 Warrants

The Company sold warrants to the 2021 Counterparties to acquire up to 10,865,270 shares of the Company’s common stock. The 2021 Warrants will expire on various dates from June 2021 through December 2021 and may be settled in cash or net shares. It is the Company's current intent and policy to settle all conversions in shares of the Company’s common stock. The Company received $44.9 million in cash proceeds from the sale of the 2021 Warrants, which was recorded in additional paid-in-capital. The 2021 Warrants could have a dilutive effect on the Company's earnings per share to the extent that the price of the Company's common stock during a given measurement period exceeds the strike price of the 2021 Warrants, which is $80.00 per share. The Company uses the treasury share method for assumed conversion of its 2021 Warrants to compute the weighted average common shares outstanding for diluted earnings per share.

2.75% Senior Convertible Notes due 2017

In June 2011, the Company issued $402.5 million principal amount of the unsecured Senior Convertible Notes with a stated interest rate of 2.75% and a maturity date of July 1, 2017 (the “2017 Notes”). The 2017 Notes provided for settlement in cash, stock, or a combination thereof, solely at the Company’s discretion. The initial conversion rate of the 2017 Notes was 23.7344 shares per $1,000 principal amount, which is equivalent to a conversion price of approximately $42.13 per share, subject to adjustments. The Company used the treasury share method for assumed conversion of the 2017 Notes to compute the weighted average shares of common stock outstanding for diluted earnings per share.

During 2016, the Company repurchased a majority of the 2017 Notes, which resulted in a cumulative loss of approximately $19.1 million recorded in other expense on the accompanying Consolidated Statements of Operations for the year ended December 31, 2016. In July 2017, the Company settled the remaining 2017 Notes upon maturity via combination settlement, which involved satisfying the principal amount outstanding with cash and any note conversion value over the principal amount in shares of the Company’s common stock.

The interest expense recognized on the 2017 Notes during the three months ended March 31, 2017 includes $0.4 million, $0.7 million and $0.1 million for the contractual coupon interest, the accretion of the debt discount and the amortization of the debt issuance costs, respectively. The effective interest rate on the 2017 Notes was 8.0%, which includes the interest on the notes, amortization of the debt discount and debt issuance costs. Interest on the 2017 Notes began accruing upon issuance and was payable semi-annually.

Concurrently, with the offering of the 2017 Notes the Company also entered into transactions for a convertible note hedge (the “2017 Hedge”) and warrants (the “2017 Warrants”). The 2017 Hedge entitled the Company to purchase up to 9,553,096 shares of the Company’s common stock at an initial price of $42.13 per share. Prior to its maturity, an assumed exercise of the 2017 Hedge by the Company was considered anti-dilutive since the effect of inclusion would always be anti-dilutive with respect to the calculation of diluted earnings per share. The 2017 Warrants entitled its holders to acquire up to 477,654 shares of the Company’s Series A Participating Preferred Stock at an initial strike price of $988.51 per share. Each share of Series A Participating Preferred Stock was convertible into 20 shares of the Company’s common stock, or up to 9,553,080 common shares in total. The 2017 Warrants were scheduled to expire on various dates from September 2017 through January 2018 with settlement in cash or net shares. The Company used the treasury share method for assumed conversion of its 2017 Warrants to compute the weighted average common shares outstanding for diluted earnings per share. In 2017, the Company exercised the 2017 Hedge and also entered into warrant termination agreements which settled the 2017 Warrants on a net share basis.

Revolving Senior Credit Facility

In April 2017, the Company entered into an Amended and Restated Credit Agreement (the “2017 Credit Agreement”) for a revolving senior credit facility (the “2017 Facility”), which replaced the previous Credit Agreement the Company had entered into in February 2016.  The 2017 Credit Agreement provides for secured revolving loans, multicurrency loan options and letters of credit in an aggregate amount of up to $500.0 million. The 2017 Credit Agreement also contains an expansion feature, which allows the Company to increase the aggregate principal amount of the 2017 Facility provided the Company remains in compliance with the underlying financial covenants, including but not limited to, compliance with the consolidated interest coverage ratio and certain consolidated leverage ratios. The 2017 Facility matures in April 2022 (subject to an earlier springing maturity date), and includes a sublimit of $100.0 million for multicurrency borrowings, a sublimit of $50.0 million for the issuance of standby letters of credit, and a sublimit of $5.0 million for swingline loans. All assets of the Company and its material domestic subsidiaries are pledged as collateral under the 2017 Facility (subject to customary exceptions) pursuant to the term set forth in the Amended and Restated Security and Pledge Agreement (the “2017 Security Agreement”) executed in favor of the administrative agent by the Company. Each of the Company’s material domestic subsidiaries guarantees the 2017 Facility. In connection with the 2017 Facility, the Company incurred issuance costs which will be amortized over the term of the 2017 Facility. As of March 31, 2018, the Company had $55.0 million outstanding under the 2017 Facility, at an interest rate of 3.44% (one month LIBOR plus 1.75%).

Borrowings under the 2017 Facility are used by the Company to provide financing for working capital and other general corporate purposes, including potential mergers and acquisitions. Borrowings under the 2017 Facility bear interest, at the Company’s option, at a rate equal to an applicable margin plus: (a) the applicable Eurocurrency Rate (as defined in the 2017 Credit Agreement), or (b) a base rate determined by reference to the highest of (1) the federal funds effective rate plus 0.50%, (2) the Bank of America prime rate, and (3) LIBOR for an interest period of one month plus 1.00%. The margin for the 2017 Facility ranges, based on the Company’s consolidated leverage ratio, from 0.00% to 1.00% in the case of base rate loans and from 1.00% to 2.00% in the case of Eurocurrency Rate loans. The 2017 Facility includes an unused line fee ranging, based on the Company’s consolidated leverage ratio, from 0.20% to 0.35% per annum on the revolving commitment.

The 2017 Credit Agreement contains affirmative, negative, permitted acquisition and financial covenants, and events of default customary for financings of this type. The financial covenants require the Company to maintain ratios of consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) in relation to consolidated interest expense and consolidated debt, respectively, as defined in the 2017 Credit Agreement. The 2017 Facility grants the lenders preferred first priority liens and security interests in capital stock, intercompany debt and all of the present and future property and assets of the Company and each guarantor. The Company is currently in compliance with the 2017 Credit Agreement covenants.

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2018

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

7.   Stock-Based Compensation

The compensation cost that has been included in the Consolidated Statements of Operations for all stock-based compensation arrangements was as follows: 

	Three Months Ended March 31,
(in thousands)	2018			2017
Sales, marketing and administrative expense	$	3,515		$	6,795
Research and development expense		500			139
Cost of revenue		119			83
Stock-based compensation expense before taxes		4,134			7,017
Related income tax benefits		(1,034	)		(2,666	)
Stock-based compensation expense, net of taxes	$	3,100		$	4,351

At March 31, 2018, there was $39.6 million of unamortized compensation expense for restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”) to be recognized over a weighted average period of 2.1 years.

Restricted Stock Units

The Company issued approximately 112,000 shares of common stock, before net share settlement, upon vesting of RSUs (including PRSUs) during the three months ended March 31, 2018 and issued approximately 359,000 shares of common stock in settlement of RSUs (including PRSUs) upon their vesting during the year ended December 31, 2017.

Stock Options and Purchase Rights

The weighted average assumptions used to estimate the fair value of stock purchase rights under the employee stock purchase plan (“ESPP”) are as follows:

	Three Months Ended March 31,
	2018			2017
ESPP
Volatility		36	%		25	%
Expected term (years)		0.5			0.5
Risk free interest rate		1.2	%		0.5	%
Expected dividend yield		—	%		—	%

Under the terms of the ESPP, the Company’s employees (referred to as “shareowners”) can elect to have up to 15% of their annual compensation, up to a maximum of $21,250 per year, withheld to purchase shares of the Company’s common stock for a purchase price equal to 85% of the lower of the fair market value per share (at closing) of the Company’s common stock on (i) the commencement date of the  six-month offering period, or (ii) the respective purchase date.

The Company has not granted any options since 2011. The Company issued approximately 59,000 shares of common stock, before net share settlement, upon the exercise of outstanding stock options during the three months ended March 31, 2018 and issued approximately 232,000 shares of common stock, before net share settlement, upon the exercise of outstanding stock options during the year ended December 31, 2017.

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Income Taxes

3 Months Ended

Mar. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

8.    Income Taxes

Income taxes are determined using an estimated annual effective tax rate applied against income, and then adjusted for the tax impacts of certain significant and discrete items. For the three months ended March 31, 2018, the Company treated the tax impact of the following as discrete events for which the tax effect was recognized separately from the application of the annual effective tax rate: tax expense related to shortfalls on share-based payments, return to provision adjustments, and limitations on certain officer’s compensation. The Company’s effective tax rate recorded for the three months ended March 31, 2018 was 27%.

On December 22, 2017, President Trump signed U.S. tax reform legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Act”), which became effective January 1, 2018. Due to insufficient guidance on certain aspects of the Act, such as officer’s compensation, as well as uncertainty around the GAAP treatment associated with many other parts of the Act, such as the implementation of certain international provisions, the Company recorded certain provisional amounts related to the revaluation and realization of its deferred taxes in its December 31, 2017 tax provision. In the first quarter of 2018, the Company further analyzed the impact of the Act on certain executive compensation related deferred taxes and determined that a write-down of approximately $0.2 million was required, which would have increased the full year effective tax rate by 0.3% and the fourth quarter effective tax rate by 1.1%. This Company is continuing to analyze the impact of the Act during which adjustments to the 2017 year-end provisional calculation will be subject to change during the Staff Accounting Bulletin No. 118 measurement period. As the Company finalizes its analysis and adjusts its tax balances accordingly, it will describe the issue and impact on previously recorded provisional amounts. At March 31, 2018, the Company has not completed its accounting for the tax effects of the global intangible low-taxed income (“GILTI”), foreign derived intangible income (“FDII”), and base erosion and anti-abuse tax (“BEAT”) provisions of the Act on current year tax expense; however, the Company has made a reasonable estimate and determined that these provisions will have no impact on its 2018 results. Because the Company continues to evaluate the impact of the Act’s GILTI provisions, it has yet to elect an accounting policy to treat the tax impact as either a future period charge or as a current component of deferred taxes.

In accordance with the disclosure requirements as described in ASC Topic 740, Income Taxes, the Company has classified unrecognized tax benefits as non-current income tax liabilities, or a reduction in deferred tax assets, unless expected to be paid within one year. The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had an increase in gross unrecognized tax benefits of approximately $0.3 million during the three months ended March 31, 2018, primarily related to research and development credits. The Company believes it is reasonably possible that approximately $6.5 million of its remaining unrecognized tax positions may be recognized within the next twelve months as certain statute of limitations expire, the amount of which is primarily attributable to tax positions involving the valuation of intercompany transactions.

The Company is subject to routine compliance reviews on various tax matters around the world in the ordinary course of business. Currently, income tax audits are being conducted in the state of New York, the state of Louisiana, and Germany. U.S. and most foreign jurisdictions remain subject to examination in all years due to prior year net operating losses and R&D credits.

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Business Segment, Product, and Geographic Information

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

Business Segment, Product and Geographic Information

9.    Business Segment, Product and Geographic Information

The Company operates in one segment based upon the Company’s organizational structure, the way in which the operations and investments are managed and evaluated by the chief operating decision maker (“CODM”) as well as the lack of availability of discrete financial information at a lower level. The Company’s CODM reviews revenue at the product line offering level, and manufacturing, operating income and expenses, and net income at the Company wide level to allocate resources and assess the Company’s overall performance. The Company shares common, centralized support functions, including finance, human resources, legal, information technology, and corporate marketing, all of which report directly to the CODM. Accordingly, decision-making regarding the Company’s overall operating performance and allocation of Company resources is assessed on a consolidated basis. As such, the Company operates as one reporting segment. The Company has disclosed the revenues for each of its product line offerings to provide the reader of the financial statements transparency into the operations of the Company.

The Company reports under two distinct product lines; spinal hardware and surgical support. The Company’s spinal hardware product line offerings include implants and fixation products. The Company’s surgical support product offerings include IOM services, disposables and biologics, all of which are used to aid spinal surgery.

The Company has reclassified historically presented product line revenue to conform to the current period presentation. The reclassification had no impact on previously reported results of operations.

Revenue by product line was as follows:

	Three Months Ended March 31,
(in thousands)	2018		2017
Spinal hardware	$	185,901	$	175,086
Surgical support		74,621		73,927
Total revenue	$	260,522	$	249,013

Revenue and property and equipment, net, by geographic area were as follows: 

	Revenue				Property and Equipment, Net
	Three Months Ended March 31,				March 31,		December 31,
(in thousands)	2018		2017		2018		2017
United States	$	213,303	$	213,356	$	192,326	$	179,891
International (excludes Puerto Rico)		47,219		35,657		35,247		35,435
Total	$	260,522	$	249,013	$	227,573	$	215,326

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Commitments

3 Months Ended

Mar. 31, 2018

Commitments And Contingencies Disclosure [Abstract]

Commitments

10.    Commitments

Licensing and Purchasing Agreements

As of March 31, 2018 the Company has obligations under certain consulting arrangements to pay up to approximately $45.2 million in the aggregate in the event that specified revenue-based milestones are achieved prior to 2027.  Any such payment will be made in a combination of cash and the Company’s common shares as provided in the agreements.  Any payments in satisfaction of these contingent obligations are considered either a research and development expense or a cost of revenue depending on the nature of the arrangement and are recognized ratably as and if milestones are achieved. These agreements expire on various dates through 2027.

Executive Severance Plans

 The Company has employment contracts with key executives and maintains severance plans that provide for the payment of severance and other benefits if such executives are terminated for reasons other than cause, as defined in those agreements and plans. Certain agreements call for payments that are based on historical compensation, and accordingly, the amount of the contractual commitment will change over time commensurate with the executive’s earnings. At March 31, 2018, future commitments for such key executives were approximately $40.0 million. In certain circumstances, the agreements call for the acceleration of equity vesting. Those figures are not reflected in the above information.

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Contingencies

3 Months Ended

Mar. 31, 2018

Contingencies [Abstract]

Contingencies

11.    Contingencies

The Company is subject to potential liabilities under government regulations and various claims and legal actions that are pending or may be asserted from time-to-time. These matters arise in the ordinary course and conduct of the Company’s business and include, for example, commercial, intellectual property, environmental, securities and employment matters. The Company intends to continue to defend itself vigorously in such matters and when warranted, take legal action against others. Furthermore, the Company regularly assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in its financial statements.

An estimated loss contingency is accrued in the Company’s financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Based on the Company’s assessment, it has adequately accrued an amount for contingent liabilities currently in existence. The Company does not accrue amounts for liabilities that it does not believe are probable or that it considers immaterial to its overall financial position. Litigation is inherently unpredictable, and unfavorable resolutions could occur. As a result, assessing contingencies is highly subjective and requires judgment about future events. The amount of ultimate loss may exceed the Company’s current accruals, and it is possible that its cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies.

Legal Proceedings

Securities Litigation

On August 28, 2013, a purported securities class action lawsuit was filed in the U.S. District Court for the Southern District of California naming the Company and certain of its current and former executive officers for allegedly making false and materially misleading statements regarding the Company’s business and financial results, specifically relating to the purported improper submission of false claims to Medicare and Medicaid. The operative complaint asserts a putative class period stemming from October 22, 2008 to July 30, 2013. The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder and seeks unspecified monetary relief, interest, and attorneys’ fees. On February 13, 2014, Brad Mauss, the lead plaintiff in the case, filed an Amended Class Action Complaint for Violations of the Federal Securities Laws. The Company answered the complaint on August 25, 2016, and discovery commenced. The plaintiffs filed motions for class certification on October 28, 2016 and the Company’s opposition papers were filed on January 9, 2017. On March 22, 2017, the court issued an order granting class certification. The Company filed a petition to appeal the order granting class certification with the U.S. Court of Appeals for the Ninth Circuit (the “Ninth Circuit”) on April 5, 2017 and the plaintiffs filed an opposition to the petition. On August 15, 2017, the Ninth Circuit denied the Company’s petition. The Company filed a motion for summary judgment on September 8, 2017. On February 1, 2018, the court entered an order denying the Company’s motion for summary judgment. On February 13, 2018, the Company entered into a memorandum of understanding with the plaintiffs to settle the case for $7.9 million. The Company expects the settlement will be fully funded by insurance proceeds. The settlement includes the dismissal of all claims against the Company and the named individuals in the lawsuit without any liability or wrongdoing attributed to them. The settlement is subject to formal documentation, court approval and other customary conditions. There can be no assurance that a settlement will be finalized and approved or as to the ultimate outcome of this litigation. However, in connection with the proposed settlement and in accordance with authoritative guidance, the Company has recorded the loss contingency of $7.9 million as a current litigation liability and the expected insurance proceeds of $7.9 million as a current receivable in the Consolidated Balance Sheet as of March 31, 2018 and December 31, 2017.

Shareholder Derivative Litigation

On September 28, 2016, a shareholder derivative complaint was filed by James Borta in the Superior Court of California for the County of San Diego naming certain of the Company’s current and former executive officers and directors for allegedly breaching their fiduciary duties by, among other things, making allegedly false and misleading statements about the Company’s business, operations, and prospects. The derivative complaint is based upon the same factual allegations as the securities class action litigation and names the Company as a nominal defendant. The plaintiff filed an Amended Complaint on March 1, 2017. The Company demurred to the Amended Complaint on April 7, 2017 and the court sustained the Company’s demurrer and provided the plaintiff thirty days to file an amended complaint. On June 30, 2017 the plaintiff filed a Second Amended Derivative Complaint, to which the Company demurred. On September 29, 2017 the court sustained the Company’s demurrer and dismissed the case with prejudice, entering judgment. On October 10, 2017, the plaintiff filed a motion for reconsideration and to vacate the judgment. The court denied the motion on December 15, 2017. On March 2, 2018, the plaintiff filed a Notice of Appeal which the plaintiff subsequently abandoned on March 21, 2018. The Company believes this matter is now concluded and at March 31, 2018, in accordance with authoritative guidance on the evaluation of loss contingencies, the Company has not recorded an accrual related to this litigation.  

Madsen Medical, Inc. Litigation

On February 19, 2016, an unfavorable jury verdict was delivered against the Company in its litigation in the U.S. District Court for the Southern District of California against Madsen Medical, Inc. (“MMI”), a former sales agent. Specifically, the jury awarded MMI $7.5 million in lost profits for tortious interference, $14.0 million for unjust enrichment, $20.0 million in punitive damages, and approximately $0.3 million in damages for breach of contract. On March 18, 2016, the trial court entered judgment in favor of MMI in the amount of $27.8 million, which amount excluded the $14.0 million disgorgement awarded by the jury. On July 5, 2016, the trial court also awarded MMI attorney’s fees and costs of approximately $1.1 million. The Company’s post-trial motions for judgment as a matter of law and/or for a new trial were denied, and the Company has appealed both the verdict and the court’s subsequent award of attorney’s fees and costs. However, the Company did not appeal the judgment with respect to breach of contract and accordingly accrued the $0.3 million in damages during the year ended December 31, 2017. The U.S. Court of Appeals for the Ninth Circuit held oral argument on April 12, 2018. During pendency of any appeals, the Company has secured a bond to cover the amount of the judgment and attorneys’ fees and costs.

As of December 31, 2017, the Company believed that the outcome of the case did not constitute a probable nor an estimable loss associated with the litigation, but rather a reasonably possible loss. The Company, based on its own assessment as well as that of outside counsel, believed that it was probable upon appeal the judgment would be vacated. Accordingly, the Company did not record a loss contingency at December 31, 2017, but assessed a reasonable range of potential loss, which would be from zero to the current amount entered as a judgment, as well as attorney’s fees and interest. While the Company continues to believe in the underlying facts of the case, following the April 12, 2018 oral argument, the Company now believes that the prior judgments against it, in part or as a whole, may be upheld. Accordingly, at March 31, 2018, the Company believes that the outcome of the case now constitutes a probable loss. While the actual amount of the probable loss is not known, the Company has assessed a range of potential loss in accordance with Accounting Standards Codification 450, Contingencies, which would be from zero to $29.0 million, and has recorded an estimated loss contingency in the amount of $29.0 million as a current litigation liability in the Unaudited Consolidated Balance Sheet as of March 31, 2018. The estimated loss contingency is based on the aforementioned update and is the Company’s best estimate in the range of potential loss. The Company cannot at this time predict the ultimate outcome of this matter or the possible additional loss, if any.

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Regulatory Matters

3 Months Ended

Mar. 31, 2018

Regulatory Matter [Abstract]

Regulatory Matters

12.    Regulatory Matters

On August 31, 2015, the Company received a civil investigative demand (“CID”) issued by the Department of Justice (“DOJ”) pursuant to the federal False Claims Act. The CID requires the delivery of a wide range of documents and information related to an investigation by the DOJ concerning allegations that the Company assisted a physician group customer in submitting improper claims for reimbursement and made improper payments to the physician group in violation of the Anti-Kickback Statute. The Company is cooperating with the DOJ. No assurance can be given as to the timing or outcome of this investigation. At March 31, 2018, the probable outcome of this matter cannot be determined, nor can the Company estimate a range of potential loss. In accordance with authoritative guidance on the evaluation of loss contingencies, the Company has not recorded an accrual related to this matter.

On June 9, 2017, the Company received a subpoena from the Office of the Inspector General of the U.S. Department of Health and Human Services (“OIG”) in connection with an investigation into possible false or otherwise improper claims submitted to Medicare and Medicaid.  The subpoena seeks discovery of documents for the period January 2014 through June 2017, primarily associated with sales to a particular customer and relationships related to that customer account. The Company is working with the OIG to understand the scope of the subpoena and its request for documents, and the Company intends to fully cooperate with the OIG's request.  No assurance can be given as to the timing or outcome of this investigation. At March 31, 2018, the probable outcome of this matter cannot be determined, nor can the Company estimate a range of potential loss. In accordance with authoritative guidance on the evaluation of loss contingencies, the Company has not recorded an accrual related to this matter.

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Description of Business and Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2018

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Description of Business

Description of Business

NuVasive, Inc. (the “Company” or “NuVasive”) was incorporated in Delaware on July 21, 1997, and began commercializing its products in 2001. The Company’s principal product offering includes a minimally-disruptive surgical platform called Maximum Access Surgery, or MAS. The MAS platform combines three categories of solutions that collectively minimize soft tissue disruption during spine fusion surgery, provide maximum visualization and are designed to enable safe and reproducible outcomes for the surgeon and the patient. The platform includes the Company’s proprietary software-driven nerve detection and avoidance systems and Intraoperative Monitoring (“IOM”) services and support; MaXcess, an integrated split-blade retractor system; and a wide variety of specialized implants and biologics. To assist with surgical procedures the Company offers a technology platform called Integrated Global Alignment (“iGA”); in which products and computer assisted technology under the MAS platform help achieve more precise spinal alignment. The individual components of the MAS platform, and many of the Company’s products, can also be used in open or traditional spine surgery. The Company continues to focus research and development efforts to expand its MAS product platform and advance the applications of its unique technology into procedurally-integrated surgical solutions. The Company dedicates significant resources toward training spine surgeons on its unique technology and products.

The Company’s primary business model is to loan its MAS systems to surgeons and hospitals that purchase implants, biologics and disposables for use in individual procedures. In addition, for larger customers, the Company’s proprietary nerve monitoring systems, MaXcess and surgical instrument sets are placed with hospitals for an extended period at no up-front cost to them. The Company also offers a range of bone allograft in patented saline packaging, disposables and spine implants, which include its branded CoRoent products and fixation devices such as rods, plates and screws. The Company sells MAS instrument sets, MaXcess and nerve monitoring systems to hospitals, however, such sales are immaterial to the Company’s results of operations.

The Company also designs and sells expandable growing rod implant systems that can be non-invasively lengthened following implantation with precise, incremental adjustments via an external remote controller using magnetic technology called MAGnetic External Control, or MAGEC, which allows for the minimally invasive treatment of early-onset and adolescent scoliosis. This technology is also the basis for the Company’s PRECICE limb lengthening system, which allows for the correction of long bone limb length discrepancy, as well as enhanced bone healing in patients that have experienced traumatic injury.

The Company intends to continue development on a wide variety of projects intended to broaden surgical applications for greater procedural integration of its MAS techniques and additional applications of the MAGEC technology. Such applications include tumor, trauma, and deformity, as well as increased fixation options, sagittal alignment products, imaging and navigation. The Company also expects to continue expanding its other product and services offerings as it executes on its strategy to offer customers an end-to-end, integrated procedural solution for spine surgery. The Company intends to continue to pursue business and technology acquisition targets and strategic partnerships.

Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation

The accompanying Unaudited Consolidated Financial Statements include the accounts of the Company and its majority-owned or controlled subsidiaries, collectively referred to as either NuVasive or the Company. The Company translates the financial statements of its foreign subsidiaries using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations. When there is a portion of equity in an acquired subsidiary not attributable, directly or indirectly, to the respective parent entity, the Company records the fair value of the non-controlling interest at the acquisition date and classifies the amounts attributable to non-controlling interest separately in equity in the Company's Consolidated Financial Statements. Any subsequent changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary are accounted for as equity transactions. All significant intercompany balances and transactions have been eliminated in consolidation.

The accompanying Unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Pursuant to these rules and regulations, the Company has condensed or omitted certain information and footnote disclosures it normally includes in its annual Consolidated Financial Statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for any other interim period or for the full year. These Unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K filed with the SEC. In the opinion of management, the Unaudited Consolidated Financial Statements and notes thereto include all adjustments that are of a normal and recurring nature that are necessary for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the periods presented.

The Company has reclassified historically presented revenue and cost of revenue to conform to the current year presentation, which now reflects revenue and costs allocated to the Company’s product and service offerings. These reclassifications had no impact on previously reported results of operations. Additionally, as required by Accounting Standards Update 2014-09 Revenue from Contracts with Customers (“ASU 2014-09”), on January 1, 2018 the Company adopted Accounting Standards Codification 606 Revenue from Contracts with Customers (“ASC 606”), electing full retrospective method of adoption.

Use of Estimates

Use of Estimates

To prepare financial statements in conformity with GAAP, management must make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Recently Accounting Pronouncements Not Yet Adopted And Recently Adopted Accounting Standards

Recent Accounting Pronouncements Not Yet Adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-02, Leases, which outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new accounting standard requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than twelve months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new accounting standard must be adopted using the modified retrospective approach and will be effective for the Company starting in the first quarter of fiscal 2019. Early adoption is permitted. The Company believes the adoption will modify its analyses and disclosures of lease agreements considering operating leases are a significant portion of the Company’s total lease commitments. The Company is in the process of determining the impact the adoption will have on its Consolidated Financial Statements.

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses, which changes the accounting for recognizing impairments of financial assets. Under the new guidance, credit losses for certain types of financial instruments will be estimated based on expected losses. The new guidance also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. The new guidance will be effective for the Company starting in the first quarter of fiscal 2021. Early adoption is permitted starting in the first quarter of fiscal 2020. The Company believes the adoption will modify the way the Company analyzes financial instruments, but it does not anticipate a material impact on results of operations. The Company is in the process of determining the effects the adoption will have on its Consolidated Financial Statements as well as whether to early adopt the new guidance.

In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles – Goodwill and Other, which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The standard has tiered effective dates, starting in 2020 for calendar-year public business entities that meet the definition of an SEC filer. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company is in the process of determining the effects the adoption will have on its Consolidated Financial Statements as well as whether to early adopt the new guidance.

In July 2017, the FASB issued Accounting Standards Update No. 2017-11, Earnings Per Share, Distinguishing Liabilities from Equity, Derivatives and Hedging, which changes the accounting treatment and the earnings per share calculation for certain instruments with down round features. The amendments in this update should be applied using a cumulative-effect adjustment as of the beginning of the fiscal year of adoption or retrospective adjustment to each period presented. This update is effective for annual periods beginning after December 15, 2018, and interim periods within those periods and early adoption is permitted. The Company is in the process of determining the impact the adoption will have on its Consolidated Financial Statements as well as whether to early adopt the new guidance.

In August 2017, the FASB issued Accounting Standards Update No. 2017-12, Derivatives and Hedging, which is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting and increase transparency as to the scope and results of hedging programs. The amendments in this update will be applied using a cumulative-effect adjustment as of the beginning of the fiscal year of adoption. This update is effective for annual periods beginning after December 15, 2018, and interim periods within those periods and early adoption is permitted. The Company is in the process of determining the impact the adoption will have on its Consolidated Financial Statements as well as whether to early adopt the new guidance.

Recently Adopted Accounting Standards

In May 2014, the FASB issued Accounting Standard Update No. 2014-09 Revenue from Contracts with Customers (“ASU 2014-09”), an updated standard on revenue recognition. The standard effectively replaces Accounting Standards Codification 605 Revenue Recognition (“ASC 605”) with Accounting Standards Codification 606 Revenue from Contracts with Customers (“ASC 606”). In summary, the changes to the guidance in revenue recognition under ASC 606 focuses on the existence of a contract with the customer (whether written, oral, or implied by an entity’s customary business practices), the concept that the performance obligation is fulfilled when the customer obtains control of the asset/service, versus the transfer of risk and reward, and the requirement that variable consideration (including rebates, discounts, etc.) and incremental costs must be estimated and recognized in the amount that is expected or most likely to be realized over the term of the contract fulfillment.

Prior to the adoption of ASC 606, the Company recognized revenue in accordance with ASC 605 when all four of the following criteria were met: (i) persuasive evidence that an arrangement exists; (ii) delivery of the products and/or services has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured. Specifically, revenue from the sale of implants, biologics and disposables was generally recognized upon a purchase order from the hospital or acknowledgment from the hospital indicating product use or implantation or upon shipment to third-party customers who immediately accepted title. Revenue from the sale of instrument sets was recognized upon receipt of a purchase order and the subsequent shipment to customers who immediately accepted title. Revenue from neuromonitoring services was recognized in the period the service was performed for the amount of payment expected to be received.

The Company adopted ASC 606 as of January 1, 2018, electing full retrospective method of adoption, which resulted in a change in its accounting policy for revenue recognition and related adjustments to the Consolidated Financial Statements for all periods presented. The Company applied the practical expedients permitted under ASC 606 for which (i) contracts with customers originating prior to January 1, 2016 do not require disclosure for the amount of consideration allocated to remaining performance obligations or an explanation of when the Company expects to recognize that amount as revenue; (ii) contracts beginning and completing in the same annual reporting period need not be restated; and (iii) hindsight for estimating variable consideration for completed contracts is permitted.

The Company recognizes revenue from spinal surgery hardware and ancillary products at a point in time in two types of transactions: (i) procedural based transactions with products used during surgery defined as “charge sheet orders”, and (ii) shipping transactions which represent the stocking of product or the purchase of instrumentation to support future surgeries defined as “stocking and capital orders”. The Company also recognizes revenue at a point in time associated with surgical-related servicing procedures, including neuromonitoring services which are defined as “surgical-related services”. Other sources of revenue, such as leasing revenue and royalties, are immaterial to the Consolidated Financial Statements.

For charge sheet orders, the sale occurs when the surgery is performed and a charge sheet is submitted to the Company by its sales representative identifying the products consumed during the surgery. The Company obtains an authorization or acknowledgment from the hospital to complete the invoicing process. Under ASC 605, persuasive evidence of an arrangement and delivery of product was deemed to have occurred once the charge sheet was processed, and an associated authorization or acknowledgement from the customer was received. Under ASC 606, the Company’s charge sheet orders are considered to be a contract with a customer when the Company agrees to attend a scheduled surgery with its products as requested by the hospital or surgeon. The performance obligation is considered to be complete once the hospital takes control of the product, it is implanted into a patient and there is sufficient evidence regarding the specific usage and pricing of the product used. The scheduling of the surgery and the usage of Company products is determined to be a contract, and recognition of revenue under ASC 606 occurs upon the completion of the surgical event and consumption of product. In the event that information related to the surgical event and consumption of product is not readily available the Company recognizes revenue upon a purchase order from the hospital or acknowledgment from the hospital indicating product use.

For stocking and capital orders, under ASC 605, delivery was deemed to have occurred when the title, including all risks and rewards of ownership of the products specified in the sales agreement had passed to the buyer. Accordingly, title, including all risks and rewards of ownership, passed based on the shipping terms. Under ASC 606, the Company’s stocking and capital order performance obligation is considered to be satisfied when the hospital assumes control of the asset, either upon shipment or delivery depending on the terms, and ability to direct the use of the asset as appropriate without the Company’s consent.

Under ASC 605, revenue from surgical-related services, such as neuromonitoring services, was recognized in the period the service was performed based on the delivery of a services report to the customer. The Company recognized revenue for the amount of payment expected to be received. In accordance with ASC 606, the Company enters into a contract with a customer when the hospital or surgeon requests the Company to attend a scheduled surgery with its products and services. The Company recognizes revenue at the time of the surgical procedure (when service and control is transferred to the customer), and bills either hospitals or insurance companies for different aspects of the service, as applicable. Revenue from insurance companies is recognized using the expected value method, as the Company bills at a gross rate which is generally not the rate ultimately collected. A contract is deemed to be in place for the expected amount of consideration to be received for the services with respect to hospitals and insurance companies, each of which are deemed to have the ability to pay for the services rendered.

Under ASC 605, the Company has historically estimated the amounts of returns, trade-ins, discounts, rebates, credits or incentives as offsets to the total transaction price or revenue associated with the sale. In limited situations, when historical information was not available or reliable, the Company would defer revenue recognition until completion of all performance obligations. Under ASC 606, the Company analyzes sales that could include variable consideration, and estimates the expected or most likely amount of revenue after returns, trade-ins, discounts, rebates, credits, and incentives. In making these estimates, the Company considers whether the amount of variable consideration is constrained and is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The Company earns sales-based royalty revenue over time from sales of products using existing biologics intellectual property (“IP”) that is out-licensed to certain companies. Under ASC 605, royalty revenue was recognized as earned and when collection was reasonably assured and was generally estimated and recorded in the same period as the sales that generated the royalty obligation. ASC 606 provides an exception for sales or usage-based royalties from the guidance for accounting for variable consideration, allowing the royalty revenue from the license of IP to be recognized when the performance obligation has been satisfied and the subsequent sale has occurred. Therefore, the Company estimates monthly royalty revenue as its performance obligation is satisfied. The Company does not expect a significant impact to royalty revenue under the adoption of ASC 606 as it has historically estimated and accrued royalty revenue in the period earned.

The Company historically expensed incremental costs, such as commissions associated with sales contracts, as incurred. Under ASU 2014-09, ASC 340-40 Other Assets and Deferred Costs was added along with ASC 606 to codify accounting guidance for the incremental costs to obtain or fulfill a contract with a customer. Under the guidance, the incremental costs must be deferred and recorded over the period in which the contract revenue is recognized. The Company typically does not associate quarterly or annual sales bonuses directly with a sale or master contract; however, commissions are directly associated with individual sales and expensed in the same period as the related contract revenue. The associated commissionable sales would not typically have a future benefit unless the revenue is recognized over time. The Company does not typically have situations where revenue is deferred in excess of one year. Given the practical expedient for contracts completing within one year, the Company does not expect these capitalized costs to be material in a given period.

The cumulative effect of the change on retained earnings for the full retrospective method of adoption of ASC 606 was $0.3 million as of December 31, 2017. The following tables summarize in a condensed presentation the impact of the adoption of ASC 606 on the Company’s previously reported Consolidated Balance Sheet as of December 31, 2017 and the Unaudited Consolidated Statement of Operations and Comprehensive Income and the Unaudited Consolidated Statement of Cash Flows for the three months ended March 31, 2017.

NUVASIVE, INC.
CONSOLIDATED BALANCE SHEET
(in thousands)
				(Unaudited)				(Unaudited)
As of December 31, 2017	As reported			Adjustments				As Adjusted
Accounts receivable, gross	$	212,709		$	537		[a]	$	213,246
Allowances on accounts receivable		(13,669	)		643		[b]		(13,026	)
Inventory, net		247,245			(107	)	[c]		247,138
Other current assets		112,705			—				112,705
Total current assets		558,990			1,073				560,063
Remaining other assets		1,080,077			—				1,080,077
Total assets	$	1,639,067		$	1,073			$	1,640,140
Accounts payable and accrued liabilities		75,076			691		[d]		75,767
Accrued payroll and related expenses		55,582			36		[e]		55,618
Other current liabilities		30,010			—				30,010
Total current liabilities		160,668			727				161,395
Deferred and income tax liabilities, non-current		18,786			84		[f]		18,870
Other long-term liabilities		660,459			—				660,459
Total NuVasive, Inc. stockholders’ equity		795,309			262		[g]		795,571
Non-controlling interests		3,845			—				3,845
Total equity		799,154			262				799,416
Total liabilities and equity	$	1,639,067		$	1,073			$	1,640,140
[a]  Represents cumulative impact from January 1, 2016 to the period presented on accounts receivable for the full retrospective method of adoption of ASC 606.
[b]  Represents cumulative impact from January 1, 2016 to the period presented on allowances on accounts receivable for the full retrospective method of adoption of ASC 606.
[c]  Represents cumulative impact from January 1, 2016 to the period presented on inventory for the full retrospective method of adoption of ASC 606.
[d]  Represents cumulative impact from January 1, 2016 to the period presented on commissions payable and accrued returns for the full retrospective method of adoption of ASC 606.
[e]  Represents cumulative impact from January 1, 2016 to the period presented on commissions payable for the full retrospective method of adoption of ASC 606.
[f]  Represents cumulative impact from January 1, 2016 to the period presented on deferred tax liabilities for the full retrospective method of adoption of ASC 606.
[g]  Represents cumulative impact from January 1, 2016 to the period presented on retained earnings for the full retrospective method of adoption of ASC 606.

NUVASIVE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except per share amounts)
(Unaudited)	As reported			Adjustments				As adjusted
Three months ended March 31, 2017
Revenue
Product revenue	$	225,806		$	(851	)	[a]	$	224,955
Service revenue		24,058			—				24,058
Total revenue		249,864			(851	)			249,013
Cost of revenue (excluding amortization of intangible assets)
Cost of products sold		46,071			(170	)	[b]		45,901
Cost of services		15,542			—				15,542
Total cost of revenue		61,613			(170	)			61,443
Gross profit		188,251			(681	)			187,570
Operating expenses:
Sales, marketing and administrative		140,502			(134	)	[c]		140,368
Other operating expenses		24,530			—				24,530
Total operating expenses		165,032			(134	)			164,898
Total interest and other expense, net		(9,404	)		—				(9,404	)
Income tax (expense) benefit		(1,490	)		205		[d]		(1,285	)
Consolidated net income	$	12,325		$	(342	)	[e]	$	11,983
Add back net loss attributable to non-controlling interests	$	(443	)	$	—			$	(443	)
Net income attributable to NuVasive, Inc.	$	12,768		$	(342	)	[e]	$	12,426
Net income per share attributable to NuVasive, Inc.:
Basic	$	0.25		$	0.00		[f]	$	0.25
Diluted	$	0.22		$	0.00		[f]	$	0.22
Comprehensive income attributable to NuVasive, Inc.	$	14,625		$	(342	)	[e]	$	14,283
[a]  Represents net change in sales revenue for charge sheet orders recognized under ASC 606.
[b]  Represents net change in cost of products sold for charge sheet orders recognized under ASC 606.
[c]  Represents net change in accrued sales commissions for charge sheet orders recognized under ASC 606.
[d]  Represents deferred income tax liability on net change associated with charge sheet orders recognized under ASC 606.
[e]  Represents net income and comprehensive income resulting from net change in charge sheet orders recognized under ASC 606.
[f]  Represents earnings per share impact resulting from net change in charge sheet orders recognized under ASC 606.

NUVASIVE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
Three months ended March 31, 2017	As reported			Adjustments				As adjusted
Consolidated net income	$	12,325		$	(342	)	[a]	$	11,983
Adjustments to reconcile net income to net cash provided by operating activities:
Reserves on current assets		(2,153	)		155		[b]		(1,998	)
Deferred income tax expense (benefit)		1,645			(205	)	[c]		1,440
Other adjustments to reconcile net income		44,909			—				44,909
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable		924			795		[d]		1,719
Inventory		(13,630	)		(170	)	[e]		(13,800	)
Prepaid expenses and other current assets		(2,614	)		—				(2,614	)
Accounts payable and accrued liabilities		593			(43	)	[f]		550
Accrued payroll and related expenses		(12,531	)		(190	)	[f]		(12,721	)
Income taxes		(1,298	)		—				(1,298	)
Net cash provided by operating activities		28,170			—				28,170
Net cash used in investing activities		(38,294	)		—				(38,294	)
Net cash used in financing activities		(10,127	)		—				(10,127	)
Effect of exchange rate changes on cash		758			—				758
Decrease in cash, cash equivalents and restricted cash	$	(19,493	)	$	—			$	(19,493	)
[a]  Represents net income resulting from charge sheet orders recognized under ASC 606.
[b]  Represents net change in allowances on accounts receivable for charge sheet orders recognized under ASC 606.
[c]  Represents deferred income tax liability on net change associated with charge sheet orders recognized under ASC 606.
[d]  Represents net change in accounts receivable for charge sheet orders recognized under ASC 606.
[e]  Represents net change in inventory for charge sheet orders recognized under ASC 606.
[f]  Represents net change in accrued sales commissions for charge sheet orders recognized under ASC 606.

In January 2016, the FASB issued Accounting Standards Update No. 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which requires that (i) all equity investments, other than equity-method investments, in unconsolidated entities generally be measured at fair value through earnings and (ii) when the fair value option has been elected for financial liabilities, changes in fair value due to instrument-specific credit risk will be recognized separately in other comprehensive income. Additionally, ASU 2016-01 changes the disclosure requirements for financial instruments. ASU 2016-01 provides a practicability exception for investments that do not have readily determinable fair values, which allows investments to be measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. The Company adopted ASU 2016-01 as of January 1, 2018 and elected to apply the practicability exception for measuring equity investments that do not have readily determinable fair market. The adoption did not have any impact on its Consolidated Financial Statements.

In August 2016, the FASB issued Accounting Standards Update No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which eliminates the diversity in practice related to the classification of certain cash receipts and payments for debt prepayment or extinguishment costs, the maturing of a zero coupon bond, the settlement of contingent liabilities arising from a business combination, proceeds from insurance settlements, distributions from certain equity method investees and beneficial interests obtained in a financial asset securitization. ASU 2016-15 designates the appropriate cash flow classification, including requirements to allocate certain components of these cash receipts and payments among operating, investing and financing activities. The retrospective transition method, requiring adjustment to all comparative periods presented, is required unless it is impracticable for some of the amendments, in which case those amendments would be made prospectively as of the earliest date practicable. The Company adopted ASU 2016-15 as of January 1, 2018. The adoption did not have any significant impact on its Consolidated Financial Statements.

In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Restricted Cash (“ASU 2016-18”), which requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. The amendments in this update will be applied using a retrospective transition method to each period presented. The Company adopted ASU 2016-18 as of January 1, 2018 and adjusted the presentation of its Statement of Cash Flows for the periods presented. The adoption did not have any significant impact on its Consolidated Financial Statements.

In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Clarifying the Definition of a Business (“ASU 2017-01”), which clarifies and provides a more robust framework to use in determining when a set of assets and activities is a business. The amendments in this update should be applied prospectively on or after the effective date. The Company adopted ASU 2017-01 as of January 1, 2018.

In February 2017, the FASB issued Accounting Standards Update No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (“ASU 2017-05”), which clarifies the scope of asset derecognition and adds guidance for partial sales and nonfinancial assets. An entity is required to apply the amendments in this update at the same time that it applies the amendments in ASU 2014-09. The Company adopted ASU 2017-05 as of January 1, 2018. The adoption did not have any significant impact on its Consolidated Financial Statements.

In May 2017, the FASB issued Accounting Standards Update No. 2017-09, Compensation – Stock Compensation (“ASU 2017-09”), which clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as a modification. Entities will apply the modification accounting guidance if the value, vesting conditions, or classification of the award changes. The Company adopted ASU 2017-09 as of January 1, 2018. The adoption did not have any significant impact on its Consolidated Financial Statements.

Revenue Recognition

Revenue Recognition

In accordance with ASC 606 guidance, the Company recognizes revenue upon the transfer of goods or services to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services. The principles in ASC 606 are applied using the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the Company satisfies its performance obligation(s). Specifically, revenue from the sale of implants and disposables is generally recognized at an amount that reflects the expected consideration upon notice that the Company’s products have been used in a surgical procedure or upon shipment to a third-party customer assuming control of the products. Revenue from neuromonitoring services is recognized in the period the service is performed for the amount of consideration expected to be received. Revenue from the sale of instrument sets is generally recognized upon receipt of a purchase order and the subsequent shipment to a customer who assumes control. In certain cases, the Company does offer the ability for customers to lease instrumentation primarily on a non-sales type basis. Instrument sales and leasing revenue represent an immaterial amount of the Company’s total revenue in all periods presented. Revenue associated with products holding rights of return or trade-in are recognized when the Company concludes there is not a risk of significant revenue reversal in future periods for the expected consideration in the transaction. Costs incurred by the Company associated with sales contracts with customers are deferred over the performance obligation period and recognized in the same period as the related revenue, with the exception of contracts that complete within one year or less, in which case the associated costs are expensed as incurred.

Inventory

Inventory

Net inventory primarily consisted of $245.1 million of finished goods, $8.0 million of work in progress and $4.9 million of raw materials as of March 31, 2018. Net inventory as of December 31, 2017 consisted of $232.4 million of finished goods, $9.8 million of work in progress and $5.0 million of raw materials. Finished goods include specialized implants and disposables and are stated at the lower of cost or market determined by utilizing a standard cost method, which includes assessment of capitalized variances, which approximates the weighted average cost. Work in progress and raw materials represent the underlying material, and labor for work in progress, that ultimately yield finished goods upon completion and are subject to lower of cost or market. The Company reviews the components of its inventory on a periodic basis for excess and obsolescence and adjusts inventory to its net realizable value as necessary.

Comprehensive Income

Comprehensive Income

Comprehensive income is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income includes net of tax, unrealized gains or losses on the Company’s marketable securities and foreign currency translation adjustments. The cumulative translation adjustments included in accumulated other comprehensive loss were $4.4 million and $6.9 million at March 31, 2018 and December 31, 2017, respectively.

Product Shipment Costs

Product Shipment Costs

Product shipment costs, included in sales, marketing and administrative expense in the accompanying Consolidated Statements of Operations, were $5.9 million for both the three months ended March 31, 2018 and March 31, 2017. The majority of the Company’s shipping costs are related to the loaning of instrument sets, which are not typically sold as part of the Company’s core sales offering. Amounts billed to customers for shipping and handling of products are reflected in revenues and are not material for any period presented.

Business Transition Costs

Business Transition Costs

The Company incurs certain costs related to acquisition, integration and business transition activities, which include severance, relocation, consulting, leasehold exit costs, third-party merger and acquisition costs, contingent consideration fair value adjustments and other costs directly associated with such activities.

During the three months ended March 31, 2018, the Company incurred $2.3 million of such costs, which consisted primarily of acquisition, integration and business transition activities, and $0.1 million of fair value adjustments on contingent consideration liabilities associated with the Company’s 2017 and 2016 acquisitions. During the three months ended March 31, 2017, the business transition costs were immaterial to the results of operations.

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Description of Business and Basis of Presentation (Tables)

3 Months Ended

Mar. 31, 2018

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Summary of Impacts of ASC 606 Adoption on the Company's Previously Filed Unaudited Consolidated Financial Statements

The following tables summarize in a condensed presentation the impact of the adoption of ASC 606 on the Company’s previously reported Consolidated Balance Sheet as of December 31, 2017 and the Unaudited Consolidated Statement of Operations and Comprehensive Income and the Unaudited Consolidated Statement of Cash Flows for the three months ended March 31, 2017.

NUVASIVE, INC.
CONSOLIDATED BALANCE SHEET
(in thousands)
				(Unaudited)				(Unaudited)
As of December 31, 2017	As reported			Adjustments				As Adjusted
Accounts receivable, gross	$	212,709		$	537		[a]	$	213,246
Allowances on accounts receivable		(13,669	)		643		[b]		(13,026	)
Inventory, net		247,245			(107	)	[c]		247,138
Other current assets		112,705			—				112,705
Total current assets		558,990			1,073				560,063
Remaining other assets		1,080,077			—				1,080,077
Total assets	$	1,639,067		$	1,073			$	1,640,140
Accounts payable and accrued liabilities		75,076			691		[d]		75,767
Accrued payroll and related expenses		55,582			36		[e]		55,618
Other current liabilities		30,010			—				30,010
Total current liabilities		160,668			727				161,395
Deferred and income tax liabilities, non-current		18,786			84		[f]		18,870
Other long-term liabilities		660,459			—				660,459
Total NuVasive, Inc. stockholders’ equity		795,309			262		[g]		795,571
Non-controlling interests		3,845			—				3,845
Total equity		799,154			262				799,416
Total liabilities and equity	$	1,639,067		$	1,073			$	1,640,140
[a]  Represents cumulative impact from January 1, 2016 to the period presented on accounts receivable for the full retrospective method of adoption of ASC 606.
[b]  Represents cumulative impact from January 1, 2016 to the period presented on allowances on accounts receivable for the full retrospective method of adoption of ASC 606.
[c]  Represents cumulative impact from January 1, 2016 to the period presented on inventory for the full retrospective method of adoption of ASC 606.
[d]  Represents cumulative impact from January 1, 2016 to the period presented on commissions payable and accrued returns for the full retrospective method of adoption of ASC 606.
[e]  Represents cumulative impact from January 1, 2016 to the period presented on commissions payable for the full retrospective method of adoption of ASC 606.
[f]  Represents cumulative impact from January 1, 2016 to the period presented on deferred tax liabilities for the full retrospective method of adoption of ASC 606.
[g]  Represents cumulative impact from January 1, 2016 to the period presented on retained earnings for the full retrospective method of adoption of ASC 606.

NUVASIVE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except per share amounts)
(Unaudited)	As reported			Adjustments				As adjusted
Three months ended March 31, 2017
Revenue
Product revenue	$	225,806		$	(851	)	[a]	$	224,955
Service revenue		24,058			—				24,058
Total revenue		249,864			(851	)			249,013
Cost of revenue (excluding amortization of intangible assets)
Cost of products sold		46,071			(170	)	[b]		45,901
Cost of services		15,542			—				15,542
Total cost of revenue		61,613			(170	)			61,443
Gross profit		188,251			(681	)			187,570
Operating expenses:
Sales, marketing and administrative		140,502			(134	)	[c]		140,368
Other operating expenses		24,530			—				24,530
Total operating expenses		165,032			(134	)			164,898
Total interest and other expense, net		(9,404	)		—				(9,404	)
Income tax (expense) benefit		(1,490	)		205		[d]		(1,285	)
Consolidated net income	$	12,325		$	(342	)	[e]	$	11,983
Add back net loss attributable to non-controlling interests	$	(443	)	$	—			$	(443	)
Net income attributable to NuVasive, Inc.	$	12,768		$	(342	)	[e]	$	12,426
Net income per share attributable to NuVasive, Inc.:
Basic	$	0.25		$	0.00		[f]	$	0.25
Diluted	$	0.22		$	0.00		[f]	$	0.22
Comprehensive income attributable to NuVasive, Inc.	$	14,625		$	(342	)	[e]	$	14,283
[a]  Represents net change in sales revenue for charge sheet orders recognized under ASC 606.
[b]  Represents net change in cost of products sold for charge sheet orders recognized under ASC 606.
[c]  Represents net change in accrued sales commissions for charge sheet orders recognized under ASC 606.
[d]  Represents deferred income tax liability on net change associated with charge sheet orders recognized under ASC 606.
[e]  Represents net income and comprehensive income resulting from net change in charge sheet orders recognized under ASC 606.
[f]  Represents earnings per share impact resulting from net change in charge sheet orders recognized under ASC 606.

NUVASIVE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
Three months ended March 31, 2017	As reported			Adjustments				As adjusted
Consolidated net income	$	12,325		$	(342	)	[a]	$	11,983
Adjustments to reconcile net income to net cash provided by operating activities:
Reserves on current assets		(2,153	)		155		[b]		(1,998	)
Deferred income tax expense (benefit)		1,645			(205	)	[c]		1,440
Other adjustments to reconcile net income		44,909			—				44,909
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable		924			795		[d]		1,719
Inventory		(13,630	)		(170	)	[e]		(13,800	)
Prepaid expenses and other current assets		(2,614	)		—				(2,614	)
Accounts payable and accrued liabilities		593			(43	)	[f]		550
Accrued payroll and related expenses		(12,531	)		(190	)	[f]		(12,721	)
Income taxes		(1,298	)		—				(1,298	)
Net cash provided by operating activities		28,170			—				28,170
Net cash used in investing activities		(38,294	)		—				(38,294	)
Net cash used in financing activities		(10,127	)		—				(10,127	)
Effect of exchange rate changes on cash		758			—				758
Decrease in cash, cash equivalents and restricted cash	$	(19,493	)	$	—			$	(19,493	)
[a]  Represents net income resulting from charge sheet orders recognized under ASC 606.
[b]  Represents net change in allowances on accounts receivable for charge sheet orders recognized under ASC 606.
[c]  Represents deferred income tax liability on net change associated with charge sheet orders recognized under ASC 606.
[d]  Represents net change in accounts receivable for charge sheet orders recognized under ASC 606.
[e]  Represents net change in inventory for charge sheet orders recognized under ASC 606.
[f]  Represents net change in accrued sales commissions for charge sheet orders recognized under ASC 606.

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Net (Loss) Income Per Share (Tables)

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

Computation of Basic and Diluted Net (Loss) Income Per Share

The following table sets forth the computation of basic and diluted net (loss) income per share attributable to the Company:

	Three Months Ended March 31,
(in thousands, except per share data)	2018			2017
Numerator:
Net (loss) income attributable to NuVasive, Inc.	$	(27,132	)	$	12,426
Denominator for basic and diluted net (loss) income per share:
Weighted average common shares outstanding for basic		51,226			50,566
Dilutive potential common stock outstanding:
Stock options and employee stock purchase plan		—			221
Restricted stock units		—			1,416
Warrants		—			3,046
Senior Convertible Notes		—			2,537
Weighted average common shares outstanding for diluted		51,226			57,786
Basic net (loss) income per share attributable to NuVasive, Inc.	$	(0.53	)	$	0.25
Diluted net (loss) income per share attributable to NuVasive, Inc.	$	(0.53	)	$	0.22

Anti-dilutive Common Stock Equivalents Not Included in Calculation of Net (Loss) Income Per Diluted Share

The following weighted-average outstanding common stock equivalents were not included in the calculation of net (loss) income per diluted share because their effects were anti-dilutive: 

	Three Months Ended March 31,
(in thousands)	2018		2017
Stock options, employee stock purchase plan, and restricted stock units		1,056		102
Warrants		10,865		10,865
Senior Convertible Notes		10,865		—
Total		22,786		10,967

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Financial Instruments and Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Schedule of Fair Value of Assets and Liabilities Measured on Recurring Basis

Cash equivalents are determined under the fair value categories as follows:

			Quoted Price in		Significant Other		Significant
			Active Market		Observable Inputs		Unobservable
(in thousands)	Total		(Level 1)		(Level 2)		Inputs (Level 3)
March 31, 2018:
Cash equivalents:
Money market funds	$	22,000	$	22,000	$	—	$	—
Total cash equivalents	$	22,000	$	22,000	$	—	$	—
December 31, 2017:
Cash equivalents:
Money market funds	$	27,000	$	27,000	$	—	$	—
Total cash equivalents	$	27,000	$	27,000	$	—	$	—

Schedule of Fair Value of Liabilities Measured on Recurring Basis Using Unobservable Inputs

. The following table sets forth the changes in the estimated fair value of the Company’s liabilities measured on a recurring basis using significant unobservable inputs (Level 3): 

	Three Months Ended March 31,
(in thousands)	2018			2017
Fair value measurement at beginning of period	$	67,941		$	67,501
Contingent consideration liability recorded upon acquisition		6,663			—
Change in fair value measurement		149			(1,352	)
Changes resulting from foreign currency fluctuations		72			12
Contingent consideration paid or settled		(9,000	)		—
Fair value measurement at end of period	$	65,825		$	66,161

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Goodwill and Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2018

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and intangible assets

Goodwill and intangible assets consisted of the following:

	Weighted-
	Average
	Amortization
(in thousands, except years)	Period	Gross		Accumulated			Intangible
March 31, 2018:	(in years)	Amount		Amortization			Assets, net
Intangible assets subject to amortization:
Developed technology	8	$	271,748	$	(107,068	)	$	164,680
Manufacturing know-how and trade secrets	13		30,881		(16,168	)		14,713
Trade name and trademarks	9		25,500		(11,376	)		14,124
Customer relationships	9		141,928		(47,845	)		94,083
Total intangible assets subject to amortization	9	$	470,057	$	(182,457	)	$	287,600
Intangible assets not subject to amortization:
Goodwill							$	563,046
Total goodwill and intangible assets, net							$	850,646

	Weighted-
	Average
	Amortization
	Period	Gross		Accumulated			Intangible
December 31, 2017:	(in years)	Amount		Amortization			Assets, net
Intangible assets subject to amortization:
Developed technology	8	$	271,748	$	(98,693	)	$	173,055
Manufacturing know-how and trade secrets	13		30,653		(15,542	)		15,111
Trade name and trademarks	9		25,200		(10,559	)		14,641
Customer relationships	9		122,249		(44,282	)		77,967
Total intangible assets subject to amortization	9	$	449,850	$	(169,076	)	$	280,774
Intangible assets not subject to amortization:
Goodwill							$	536,926
Total goodwill and intangible assets, net							$	817,700

Schedule of changes in the carrying value of goodwill

The following table summarizes the changes in the carrying value of the Company’s goodwill:

(in thousands)
December 31, 2017
Gross goodwill	$	545,226
Accumulated impairment loss		(8,300	)
		536,926
Changes to gross goodwill
Increases recorded in business combinations		25,956
Changes in purchase price allocation		75
Changes resulting from foreign currency fluctuations		89
		26,120
March 31, 2018
Gross goodwill		571,346
Accumulated impairment loss		(8,300	)
	$	563,046

Future amortization expense related to intangible assets

Total future amortization expense related to intangible assets subject to amortization at March 31, 2018 is set forth in the table below:

(in thousands)
Remaining 2018	$	39,561
2019		51,263
2020		50,640
2021		48,580
2022		41,169
Thereafter through 2031		56,387
Total future amortization expense	$	287,600

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Business Combinations (Tables)

3 Months Ended

Mar. 31, 2018

Business Combination Description [Abstract]

Reconciliation of equity attributable to the non-controlling interests

The following is a reconciliation of equity (net assets) attributable to the non-controlling interest:

	Three Months Ended March 31,
(in thousands)	2018			2017
Non-controlling interest at beginning of period	$	3,845		$	5,588
Acquired non-controlling interest reclassified to additional paid-in capital		(3,845	)		—
Less: Net loss attributable to the non-controlling interest		—			(443	)
Non-controlling interest at end of period	$	—		$	5,145

Summary of assets and liabilities included in the accompanying consolidated balance sheet

Total assets and liabilities of Progentix as a VIE included in the accompanying Consolidated Balance Sheets are as follows:

(in thousands)	March 31, 2018		December 31, 2017
Total current assets	$	—	$	670
Identifiable intangible assets, net		—		8,752
Goodwill		—		12,654
Accounts payable and accrued expenses		—		562
Deferred tax liabilities, net		—		331
Non-controlling interest		—		3,845

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Indebtedness (Tables)

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Carrying Value of Senior Convertible Notes

The carrying values of the Company’s Senior Convertible Notes due 2021 are as follows:

(in thousands)	March 31, 2018			December 31, 2017
2.25% Senior Convertible Notes due 2021:
Principal amount		650,000			650,000
Unamortized debt discount		(52,740	)		(56,839	)
Unamortized debt issuance costs		(9,544	)		(10,241	)
Total Senior Convertible Notes	$	587,716		$	582,920

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2018

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Compensation Costs Included in Statement of Income for all Stock-based Compensation Arrangements

The compensation cost that has been included in the Consolidated Statements of Operations for all stock-based compensation arrangements was as follows: 

	Three Months Ended March 31,
(in thousands)	2018			2017
Sales, marketing and administrative expense	$	3,515		$	6,795
Research and development expense		500			139
Cost of revenue		119			83
Stock-based compensation expense before taxes		4,134			7,017
Related income tax benefits		(1,034	)		(2,666	)
Stock-based compensation expense, net of taxes	$	3,100		$	4,351

Weighted Average Assumptions Used to Estimate Fair Value of Stock Purchase Rights under ESPP

The weighted average assumptions used to estimate the fair value of stock purchase rights under the employee stock purchase plan (“ESPP”) are as follows:

	Three Months Ended March 31,
	2018			2017
ESPP
Volatility		36	%		25	%
Expected term (years)		0.5			0.5
Risk free interest rate		1.2	%		0.5	%
Expected dividend yield		—	%		—	%

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Business Segment, Product and Geographic Information (Tables)

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

Schedule of Revenue by Product Lines

Revenue by product line was as follows:

	Three Months Ended March 31,
(in thousands)	2018		2017
Spinal hardware	$	185,901	$	175,086
Surgical support		74,621		73,927
Total revenue	$	260,522	$	249,013

Schedule of Revenue and Net Property and Equipment by Geographical Area

Revenue and property and equipment, net, by geographic area were as follows: 

	Revenue				Property and Equipment, Net
	Three Months Ended March 31,				March 31,		December 31,
(in thousands)	2018		2017		2018		2017
United States	$	213,303	$	213,356	$	192,326	$	179,891
International (excludes Puerto Rico)		47,219		35,657		35,247		35,435
Total	$	260,522	$	249,013	$	227,573	$	215,326

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Description of Business and Basis of Presentation (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Schedule Of Description Of Business And Basis Of Presentation [Line Items]
Cumulative effect of change on retained earnings	$ (22,370)		$ 4,762
Inventory, finished goods	245,100		232,400
Inventory, work in progress	8,000		9,800
Inventory, raw materials	4,900		5,000
Translation Adjustment Functional to Reporting Currency, Net of Tax	4,400		6,900
Product shipment costs	5,900	$ 5,900
Business transition costs	2,253	$ 55
2017 and 2016 Acquisitions [Member]
Schedule Of Description Of Business And Basis Of Presentation [Line Items]
Business transition costs	$ 100
Accounting Standards Update 2014-09 [Member] | Difference between Revenue Guidance in Effect before and after Topic 606 [Member]
Schedule Of Description Of Business And Basis Of Presentation [Line Items]
Cumulative effect of change on retained earnings			$ 300

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Description of Business and Basis of Presentation - Summary of Condensed Presentation Impact of Adoption of ASC 606 Adoption on the Company's Previously Reported Consolidated Balance Sheet (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Allowances on accounts receivable	$ (14,734)	$ (13,026)
Inventory, net	257,982	247,138
Total current assets	557,809	560,063
Other assets	27,433	39,117
Total assets	1,671,132	1,640,140
Accounts payable and accrued liabilities	83,136	75,767
Accrued payroll and related expenses	39,369	55,618
Total current liabilities	231,264	161,395
Deferred and income tax liabilities, non-current	4,900	18,870
Other long-term liabilities	84,856	77,539
Total NuVasive, Inc. stockholders’ equity	762,396	795,571
Non-controlling interest		3,845
Total equity	762,396	799,416
Total liabilities and equity	$ 1,671,132	1,640,140
Accounting Standards Update 2014-09 [Member]
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Accounts receivable, gross		213,246
Allowances on accounts receivable		(13,026)
Inventory, net		247,138
Other current assets		112,705
Total current assets		560,063
Other assets		1,080,077
Total assets		1,640,140
Accounts payable and accrued liabilities		75,767
Accrued payroll and related expenses		55,618
Other current liabilities		30,010
Total current liabilities		161,395
Deferred and income tax liabilities, non-current		18,870
Other long-term liabilities		660,459
Total NuVasive, Inc. stockholders’ equity		795,571
Non-controlling interest		3,845
Total equity		799,416
Total liabilities and equity		1,640,140
Accounting Standards Update 2014-09 [Member] | Scenario, Previously Reported [Member]
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Accounts receivable, gross		212,709
Allowances on accounts receivable		(13,669)
Inventory, net		247,245
Other current assets		112,705
Total current assets		558,990
Other assets		1,080,077
Total assets		1,639,067
Accounts payable and accrued liabilities		75,076
Accrued payroll and related expenses		55,582
Other current liabilities		30,010
Total current liabilities		160,668
Deferred and income tax liabilities, non-current		18,786
Other long-term liabilities		660,459
Total NuVasive, Inc. stockholders’ equity		795,309
Non-controlling interest		3,845
Total equity		799,154
Total liabilities and equity		1,639,067
Accounting Standards Update 2014-09 [Member] | Restatement Adjustment [Member]
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Accounts receivable, gross		537
Allowances on accounts receivable		643
Inventory, net		(107)
Total current assets		1,073
Total assets		1,073
Accounts payable and accrued liabilities		691
Accrued payroll and related expenses		36
Total current liabilities		727
Deferred and income tax liabilities, non-current		84
Total NuVasive, Inc. stockholders’ equity		262
Total equity		262
Total liabilities and equity		$ 1,073

XML

Description of Business and Basis of Presentation - Summary of Condensed Presentation Impact of Adoption of ASC 606 on the Company's Previously Reported Unaudited Consolidated Statement of Operations and Comprehensive Income (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Revenue
Product revenue	$ 233,515	$ 224,955
Service revenue	27,007	24,058
Total revenue	260,522	249,013
Cost of revenue (excluding below amortization of intangible assets)
Cost of products sold	55,191	45,901
Cost of services	18,623	15,542
Total cost of revenue	73,814	61,443
Gross profit	186,708	187,570
Operating expenses:
Sales, marketing and administrative	146,766	140,368
Total operating expenses	204,930	164,898
Total interest and other expense, net	(19,036)	(9,404)
Income tax benefit (expense)	10,126	(1,285)
Consolidated net (loss) income	(27,132)	11,983
Add back net loss attributable to non-controlling interest		(443)
Net (loss) income attributable to NuVasive, Inc.	$ (27,132)	$ 12,426
Net (loss) income per share attributable to NuVasive, Inc.:
Basic	$ (0.53)	$ 0.25
Diluted	$ (0.53)	$ 0.22
Comprehensive income attributable to NuVasive, Inc.	$ (24,553)	$ 14,283
Accounting Standards Update 2014-09 [Member]
Revenue
Product revenue		224,955
Service revenue		24,058
Total revenue		249,013
Cost of revenue (excluding below amortization of intangible assets)
Cost of products sold		45,901
Cost of services		15,542
Total cost of revenue		61,443
Gross profit		187,570
Operating expenses:
Sales, marketing and administrative		140,368
Other operating expenses		24,530
Total operating expenses		164,898
Total interest and other expense, net		(9,404)
Income tax benefit (expense)		(1,285)
Consolidated net (loss) income		11,983
Add back net loss attributable to non-controlling interest		(443)
Net (loss) income attributable to NuVasive, Inc.		$ 12,426
Net (loss) income per share attributable to NuVasive, Inc.:
Basic		$ 0.25
Diluted		$ 0.22
Comprehensive income attributable to NuVasive, Inc.		$ 14,283
Accounting Standards Update 2014-09 [Member] | Scenario, Previously Reported [Member]
Revenue
Product revenue		225,806
Service revenue		24,058
Total revenue		249,864
Cost of revenue (excluding below amortization of intangible assets)
Cost of products sold		46,071
Cost of services		15,542
Total cost of revenue		61,613
Gross profit		188,251
Operating expenses:
Sales, marketing and administrative		140,502
Other operating expenses		24,530
Total operating expenses		165,032
Total interest and other expense, net		(9,404)
Income tax benefit (expense)		(1,490)
Consolidated net (loss) income		12,325
Add back net loss attributable to non-controlling interest		(443)
Net (loss) income attributable to NuVasive, Inc.		$ 12,768
Net (loss) income per share attributable to NuVasive, Inc.:
Basic		$ 0.25
Diluted		$ 0.22
Comprehensive income attributable to NuVasive, Inc.		$ 14,625
Accounting Standards Update 2014-09 [Member] | Restatement Adjustment [Member]
Revenue
Product revenue		(851)
Total revenue		(851)
Cost of revenue (excluding below amortization of intangible assets)
Cost of products sold		(170)
Total cost of revenue		(170)
Gross profit		(681)
Operating expenses:
Sales, marketing and administrative		(134)
Total operating expenses		(134)
Income tax benefit (expense)		205
Consolidated net (loss) income		(342)
Net (loss) income attributable to NuVasive, Inc.		$ (342)
Net (loss) income per share attributable to NuVasive, Inc.:
Basic		$ 0.00
Diluted		$ 0.00
Comprehensive income attributable to NuVasive, Inc.		$ (342)

XML

Description of Business and Basis of Presentation - Summary of Condensed Presentation Impact of Adoption of ASC 606 Adoption on the Company's Previously Reported Unaudited Consolidated Statement of Cash Flows (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Consolidated net income	$ (27,132)	$ 11,983
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Reserves on current assets	4,080	(1,998)
Deferred income tax expense (benefit)	(12,671)	1,440
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable	16,933	1,719
Inventory	(12,126)	(13,800)
Prepaid expenses and other current assets	(1,737)	(2,614)
Accounts payable and accrued liabilities	1,579	550
Accrued payroll and related expenses	(18,493)	(12,721)
Income taxes	1,294	(1,298)
Net cash provided by operating activities	36,375	28,170
Net cash used in investing activities	(83,560)	(38,294)
Net cash used in financing activities	44,140	(10,127)
Effect of exchange rate changes on cash	982	758
Decrease in cash, cash equivalents and restricted cash	$ (2,063)	(19,493)
Accounting Standards Update 2014-09 [Member]
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Consolidated net income		11,983
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Reserves on current assets		(1,998)
Deferred income tax expense (benefit)		1,440
Other adjustments to reconcile net income		44,909
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable		1,719
Inventory		(13,800)
Prepaid expenses and other current assets		(2,614)
Accounts payable and accrued liabilities		550
Accrued payroll and related expenses		(12,721)
Income taxes		(1,298)
Net cash provided by operating activities		28,170
Net cash used in investing activities		(38,294)
Net cash used in financing activities		(10,127)
Effect of exchange rate changes on cash		758
Decrease in cash, cash equivalents and restricted cash		(19,493)
Accounting Standards Update 2014-09 [Member] | Scenario, Previously Reported [Member]
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Consolidated net income		12,325
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Reserves on current assets		(2,153)
Deferred income tax expense (benefit)		1,645
Other adjustments to reconcile net income		44,909
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable		924
Inventory		(13,630)
Prepaid expenses and other current assets		(2,614)
Accounts payable and accrued liabilities		593
Accrued payroll and related expenses		(12,531)
Income taxes		(1,298)
Net cash provided by operating activities		28,170
Net cash used in investing activities		(38,294)
Net cash used in financing activities		(10,127)
Effect of exchange rate changes on cash		758
Decrease in cash, cash equivalents and restricted cash		(19,493)
Accounting Standards Update 2014-09 [Member] | Restatement Adjustment [Member]
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Consolidated net income		(342)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Reserves on current assets		155
Deferred income tax expense (benefit)		(205)
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable		795
Inventory		(170)
Accounts payable and accrued liabilities		(43)
Accrued payroll and related expenses		$ (190)

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Net (Loss) Income Per Share - Computation of Basic and Diluted Net (Loss) Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Numerator:
Net (loss) income attributable to NuVasive, Inc.	$ (27,132)	$ 12,426
Denominator for basic and diluted net (loss) income per share:
Weighted average common shares outstanding for basic	51,226	50,566
Dilutive potential common stock outstanding:
Warrants		3,046
Senior Convertible Notes		2,537
Weighted average common shares outstanding for diluted	51,226	57,786
Basic net (loss) income per share attributable to NuVasive, Inc.	$ (0.53)	$ 0.25
Diluted net (loss) income per share attributable to NuVasive, Inc.	$ (0.53)	$ 0.22
Stock Options and Employee Stock Purchase Plan [Member]
Dilutive potential common stock outstanding:
Stock options and employee stock purchase plan		221
Restricted Stock Units [Member]
Dilutive potential common stock outstanding:
Stock options and employee stock purchase plan		1,416

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Net (Loss) Income Per Share - Anti-dilutive Common Stock Equivalents Not Included in Calculation of Net (Loss) Income Per Diluted Share (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share	22,786	10,967
Stock Options, Employee Stock Purchase Plan, and Restricted Stock Units [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share	1,056	102
Warrants [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share	10,865	10,865
Senior Convertible Notes [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share	10,865

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Financial Instruments and Fair Value Measurements (Details Textual)	3 Months Ended		12 Months Ended
	Mar. 31, 2018 USD ($) investment	Mar. 31, 2017 USD ($)	Dec. 31, 2017 USD ($) investment
Business Acquisition [Line Items]
Net currency exchange gains (losses) from derivatives instruments	$ (300,000)	$ 200,000
Unrealized loss position investment | investment	0		0
Impairment charges recorded for earnings	$ 0		$ 0
Contingent consideration liability	11,670,000		18,952,000
Impairment charge on strategic investment	9,003,000
Contingent Consideration Liabilities [Member]
Business Acquisition [Line Items]
Contingent consideration liability	65,800,000		67,900,000
Quoted Price in Active Market (Level 1) [Member] | Senior Convertible Notes due 2021 [Member]
Business Acquisition [Line Items]
Debt instrument, fair value disclosure	716,300,000		779,500,000
Foreign Exchange Forward [Member]
Business Acquisition [Line Items]
Notional principal amount	11,700,000		14,300,000
Foreign Exchange Forward [Member] | Other Current Assets or Other Current Liabilities [Member]
Business Acquisition [Line Items]
Fair value of derivative instrument asset (liability)			$ (100,000)
Foreign Exchange Forward [Member] | Other (Expense) Income [Member]
Business Acquisition [Line Items]
Net losses recognized on derivative instruments	$ 400,000	$ 400,000

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Financial Instruments and Fair Value Measurements - Schedule of Fair Value of Assets and Liabilities Measured on Recurring Basis (Details) - Fair Value Measurements on Recurring Basis [Member] - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Cash Equivalents and Marketable Securities
Total cash equivalents and marketable securities	$ 22,000	$ 27,000
Money Market Funds [Member]
Cash Equivalents and Marketable Securities
Total cash equivalents and marketable securities	22,000	27,000
Quoted Price in Active Market (Level 1) [Member]
Cash Equivalents and Marketable Securities
Total cash equivalents and marketable securities	22,000	27,000
Quoted Price in Active Market (Level 1) [Member] | Money Market Funds [Member]
Cash Equivalents and Marketable Securities
Total cash equivalents and marketable securities	$ 22,000	$ 27,000

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Financial Instruments and Fair Value Measurements - Schedule of Fair Value of Liabilities Measured on Recurring Basis Using Unobservable Inputs (Details) - Contingent Consideration Liabilities [Member] - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value measurement at beginning of period	$ 67,941	$ 67,501
Contingent consideration liability recorded upon acquisition	6,663
Change in fair value measurement	149	(1,352)
Changes resulting from foreign currency fluctuations	72	12
Contingent consideration paid or settled	(9,000)
Fair value measurement at end of period	$ 65,825	$ 66,161

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Goodwill and Intangible Assets - Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Intangible assets subject to amortization:
Weighted Average Amortization Period	9 years	9 years
Gross Amount	$ 470,057	$ 449,850
Accumulated Amortization	(182,457)	(169,076)
Intangible Assets, net	287,600	280,774
Intangible assets not subject to amortization:
Goodwill	563,046	536,926
Total goodwill and intangible assets, net	$ 850,646	$ 817,700
Developed Technology [Member]
Intangible assets subject to amortization:
Weighted Average Amortization Period	8 years	8 years
Gross Amount	$ 271,748	$ 271,748
Accumulated Amortization	(107,068)	(98,693)
Intangible Assets, net	$ 164,680	$ 173,055
Manufacturing know-how and trade secrets [Member]
Intangible assets subject to amortization:
Weighted Average Amortization Period	13 years	13 years
Gross Amount	$ 30,881	$ 30,653
Accumulated Amortization	(16,168)	(15,542)
Intangible Assets, net	$ 14,713	$ 15,111
Trade name and trademarks [Member]
Intangible assets subject to amortization:
Weighted Average Amortization Period	9 years	9 years
Gross Amount	$ 25,500	$ 25,200
Accumulated Amortization	(11,376)	(10,559)
Intangible Assets, net	$ 14,124	$ 14,641
Customer relationships [Member]
Intangible assets subject to amortization:
Weighted Average Amortization Period	9 years	9 years
Gross Amount	$ 141,928	$ 122,249
Accumulated Amortization	(47,845)	(44,282)
Intangible Assets, net	$ 94,083	$ 77,967

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Goodwill and Intangible Assets - Schedule of Changes in the Carrying Value of Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Goodwill And Intangible Assets Disclosure [Abstract]
Gross goodwill	$ 571,346	$ 545,226
Accumulated impairment loss	(8,300)	(8,300)
Goodwill	563,046	$ 536,926
Changes to gross goodwill
Increases recorded in business combinations	25,956
Changes in purchase price allocation	75
Changes resulting from foreign currency fluctuations	89
Goodwill period increase (decrease)	$ 26,120

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Goodwill and Intangible Assets (Details Textual) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Goodwill And Intangible Assets Disclosure [Abstract]
Amortization expense related to intangible assets	$ 13.3	$ 13.0

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Goodwill and Intangible Assets - Future Amortization Expense Related to Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Future amortization expense related to intangible assets
Remaining 2018	$ 39,561
2019	51,263
2020	50,640
2021	48,580
2022	41,169
Thereafter through 2031	56,387
Intangible Assets, net	$ 287,600	$ 280,774

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Business Combinations (Details Textual) - Progentix Orthobiology [Member] - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2009	Jan. 31, 2018
Business Acquisition [Line Items]
Percentage of ownership Interests acquired			60.00%
Advanced loan accordance to loan agreement	$ 5,300,000
Accrued interest rate of loan	6.00%
Ownership percentage	100.00%
Preferred Stock Purchase Agreement [Member]
Business Acquisition [Line Items]
Percentage of ownership Interests acquired		40.00%
Cash payment on purchase of outstanding shares		$ 10,000,000

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Reconciliation of Equity Attributable to the Non-controlling Interests (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Reconciliation of equity attributable to the non-controlling interests
Non-controlling interest at beginning of period	$ 3,845
Less: Net loss attributable to the non-controlling interest		$ (443)
Variable Interest Entity [Member]
Reconciliation of equity attributable to the non-controlling interests
Non-controlling interest at beginning of period	3,845	5,588
Acquired non-controlling interest reclassified to additional paid-in capital	$ (3,845)
Less: Net loss attributable to the non-controlling interest		(443)
Non-controlling interest at end of period		$ 5,145

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Business Combinations Total assets and liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Business Acquisition [Line Items]
Total current assets	$ 557,809	$ 560,063
Goodwill	$ 563,046	536,926
Non-controlling interest		3,845
Variable Interest Entity [Member]
Business Acquisition [Line Items]
Non-controlling interest		3,845	$ 5,145	$ 5,588
Variable Interest Entity [Member] | Progentix Orthobiology [Member]
Business Acquisition [Line Items]
Total current assets		670
Identifiable intangible assets, net		8,752
Goodwill		12,654
Accounts payable and accrued expenses		562
Deferred tax liabilities, net		331
Non-controlling interest		$ 3,845

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Carrying Value of Senior Convertible Notes Due 2021 (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2016
Debt Instrument [Line Items]
Total Senior Convertible Notes	$ 587,716,000	$ 582,920,000
2.25% Senior Convertible Notes [Member] | Convertible Notes due 2021 [Member]
Debt Instrument [Line Items]
Principal amount	650,000,000	650,000,000	$ 650,000,000
Unamortized debt discount	(52,740,000)	(56,839,000)
Unamortized debt issuance costs	$ (9,544,000)	$ (10,241,000)

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Carrying Value of Senior Convertible Notes Due 2021 (Parenthetical) (Details)	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2016
2.25% Senior Convertible Notes [Member] | Convertible Notes due 2021 [Member]
Debt Instrument [Line Items]
Interest rate on convertible notes	2.25%	2.25%	2.25%

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Indebtedness (Details Textual)	1 Months Ended			3 Months Ended		9 Months Ended	12 Months Ended
	Apr. 30, 2017 USD ($)	Mar. 31, 2016 USD ($) $ / shares	Jun. 30, 2011 USD ($) $ / shares	Mar. 31, 2018 USD ($) d $ / shares shares	Mar. 31, 2017 USD ($)	Sep. 30, 2017 USD ($) shares	Dec. 31, 2016 USD ($)	Dec. 31, 2011 $ / shares shares	Dec. 31, 2017 USD ($)
Revolving Senior Credit Facility [Member]
Debt Instrument [Line Items]
Interest rate on convertible notes				3.44%
Credit facility, maximum borrowing capacity	$ 500,000,000
Credit facility, expiration date				2022-04
Loan outstanding				$ 55,000,000
Revolving Senior Credit Facility [Member] | LIBOR [Member]
Debt Instrument [Line Items]
Credit facility bear interest rate	1.00%			1.75%
Revolving Senior Credit Facility [Member] | Federal Funds Effective Rate [Member]
Debt Instrument [Line Items]
Credit facility bear interest rate	0.50%
Multicurrency Borrowings [Member]
Debt Instrument [Line Items]
Credit facility, maximum borrowing capacity	$ 100,000,000
Standby Letters of Credit [Member]
Debt Instrument [Line Items]
Credit facility, maximum borrowing capacity	50,000,000
Swing Line Loans [Member]
Debt Instrument [Line Items]
Credit facility, maximum borrowing capacity	$ 5,000,000
2021 Warrants [Member]
Debt Instrument [Line Items]
Cash proceeds from the sale of warrants		$ 44,900,000
Warrant strike price | $ / shares		$ 80.00
Warrants Two Thousand Seventeen
Debt Instrument [Line Items]
Class of warrant or rights expiry month and year				2017-09
Warrant strike price | $ / shares				$ 988.51
Warrants Two Thousand Seventeen | Series A Convertible Participating Preferred Stock [Member]
Debt Instrument [Line Items]
Number of common stock shares preferred stock convertible into | shares				20
2021 Hedge [Member]
Debt Instrument [Line Items]
Number of common stock to be purchased | shares				10,865,270
Stock price | $ / shares		$ 59.82
Derivative, maturity date						Mar. 15, 2021
2017 Hedge [Member]
Debt Instrument [Line Items]
Number of common stock to be purchased | shares								9,553,096
Stock price | $ / shares								$ 42.13
Minimum [Member] | Revolving Senior Credit Facility [Member]
Debt Instrument [Line Items]
Unused line fee	0.20%
Minimum [Member] | Revolving Senior Credit Facility [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Credit facility bear interest rate	0.00%
Minimum [Member] | Revolving Senior Credit Facility [Member] | Eurocurrency [Member]
Debt Instrument [Line Items]
Credit facility bear interest rate	1.00%
Minimum [Member] | 2021 Warrants [Member]
Debt Instrument [Line Items]
Class of warrant or rights expiry month and year						2021-06
Maximum [Member] | Revolving Senior Credit Facility [Member]
Debt Instrument [Line Items]
Unused line fee	0.35%
Maximum [Member] | Revolving Senior Credit Facility [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Credit facility bear interest rate	1.00%
Maximum [Member] | Revolving Senior Credit Facility [Member] | Eurocurrency [Member]
Debt Instrument [Line Items]
Credit facility bear interest rate	2.00%
Maximum [Member] | 2021 Warrants [Member]
Debt Instrument [Line Items]
Class of warrant or rights expiry month and year						2021-12
Maximum [Member] | Warrants Two Thousand Seventeen
Debt Instrument [Line Items]
Class of warrant or rights expiry month and year				2018-01
Maximum [Member] | Warrants Two Thousand Seventeen | Series A Convertible Participating Preferred Stock [Member]
Debt Instrument [Line Items]
Number of preferred or common stock into which the warrants is converted | shares				477,654
Additional Paid-in Capital [Member] | 2021 Hedge [Member]
Debt Instrument [Line Items]
Cost of hedge transaction							$ 111,200,000
Common Shares [Member] | Maximum [Member] | 2021 Warrants [Member]
Debt Instrument [Line Items]
Number of preferred or common stock into which the warrants is converted | shares						10,865,270
Common Shares [Member] | Maximum [Member] | Warrants Two Thousand Seventeen
Debt Instrument [Line Items]
Number of preferred or common stock into which the warrants is converted | shares				9,553,080
2.25% Senior Convertible Notes [Member] | Convertible Notes due 2021 [Member]
Debt Instrument [Line Items]
Principal amount		$ 650,000,000		$ 650,000,000					$ 650,000,000
Proceeds from issuance of convertible debt, net of issuance costs		$ 634,100,000
Interest rate on convertible notes		2.25%		2.25%					2.25%
Debt instrument, maturity date						Mar. 15, 2021
Initial conversion rate adjustment, shares		16.7158
Principal amount of debt considered for conversion rate		$ 1,000
Initial conversion price of convertible notes | $ / shares		$ 59.82
Contractual coupon interest expense				$ 3,700,000	$ 3,700,000
Amortization of debt discount (premium)				4,100,000	3,900,000
Amortization of debt issuance costs				$ 700,000	600,000
Effective interest rate				5.80%
Debt redemption price percentage				100.00%
Principal payments due						$ 0
2.25% Senior Convertible Notes [Member] | Convertible Notes due 2021 [Member] | Scenario Two [Member]
Debt Instrument [Line Items]
Consecutive trading days considered for debt conversion | d				5
2.25% Senior Convertible Notes [Member] | Convertible Notes due 2021 [Member] | Minimum [Member]
Debt Instrument [Line Items]
Percentage of conversion price				130.00%
2.25% Senior Convertible Notes [Member] | Convertible Notes due 2021 [Member] | Minimum [Member] | Scenario One [Member]
Debt Instrument [Line Items]
Consecutive trading days considered for debt conversion | d				20
2.25% Senior Convertible Notes [Member] | Convertible Notes due 2021 [Member] | Maximum [Member]
Debt Instrument [Line Items]
Percentage of conversion price				98.00%
2.25% Senior Convertible Notes [Member] | Convertible Notes due 2021 [Member] | Maximum [Member] | Scenario One [Member]
Debt Instrument [Line Items]
Consecutive trading days considered for debt conversion | d				30
2.25% Senior Convertible Notes [Member] | Convertible Notes due 2021 [Member] | Additional Paid-in Capital [Member]
Debt Instrument [Line Items]
Amount reclassified to stockholders' equity							84,800,000
2.75% Senior Convertible Notes [Member] | Convertible Notes due 2017 [Member]
Debt Instrument [Line Items]
Principal amount			$ 402,500,000
Interest rate on convertible notes			2.75%
Debt instrument, maturity date						Jul. 01, 2017
Initial conversion rate adjustment, shares			23.7344
Principal amount of debt considered for conversion rate			$ 1,000
Initial conversion price of convertible notes | $ / shares			$ 42.13
Contractual coupon interest expense					400,000
Amortization of debt discount (premium)					700,000
Amortization of debt issuance costs					$ 100,000
Effective interest rate						8.00%
2.75% Senior Convertible Notes [Member] | Convertible Notes due 2017 [Member] | Other Expense [Member]
Debt Instrument [Line Items]
Cumulative loss on repurchase of senior convertible notes							$ 19,100,000

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Stock-Based Compensation - Compensation Costs Included in Statement of Income for all Stock-based Compensation Arrangements (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense before taxes	$ 4,134	$ 7,017
Related income tax benefits	(1,034)	(2,666)
Stock-based compensation expense, net of taxes	3,100	4,351
Sales, Marketing and Administrative Expense [Member]
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense before taxes	3,515	6,795
Research and Development Expense [Member]
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense before taxes	500	139
Cost of Revenue [Member]
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense before taxes	$ 119	$ 83

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Stock-Based Compensation (Details Textual) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options granted	0
Number of common stock issued to exercise stock options	59,000	232,000
ESPP [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Maximum percentage of annual compensation	15.00%
Maximum amount withheld to purchase shares of the company	$ 21,250
Percentage of issuance price of stock under the stock issuance program	85.00%
ESPP offering period	6 months
Performance Based Restricted Stock Units (PRSUs) [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unamortized cost related to share-based compensation	$ 39,600,000
Weighted average contractual term	2 years 1 month 6 days
Restricted Stock Units [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unamortized cost related to share-based compensation	$ 39,600,000
Weighted average contractual term	2 years 1 month 6 days
Number of shares of common stock issued upon vesting of RSUs	112,000	359,000

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Stock-Based Compensation - Weighted Average Assumptions Used to Estimate Fair Value of Stock Purchase Rights under ESPP (Details) - ESPP [Member]	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Weighted average assumptions used to estimate fair value of stock options granted and stock purchase rights under ESPP
Volatility	36.00%	25.00%
Expected term (years)	6 months	6 months
Risk free interest rate	1.20%	0.50%

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Income Taxes (Details Textual) - USD ($) $ in Millions	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 2017
Income Tax Disclosure [Abstract]
Effective Income Tax Rate Reconciliation, Change in Deferred Tax Assets Valuation Allowance, Percent	27.00%
Tax cuts and jobs act 2017, executive compensation related deferred taxes write-down	$ 0.2
Tax cuts and jobs act 2017, increase in effective income tax rate due to deferred tax write-down		1.10%	0.30%
Deferred tax assets, in process research and development	0.3
Remaining unrecognized tax positions	$ 6.5

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Business Segment, Product and Geographic Information (Details Textual)	3 Months Ended
	Mar. 31, 2018 segment
Segment Reporting [Abstract]
Number of operating segments	1
Number of reportable segments	1

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Business Segment, Product and Geographic Information - Schedule of Revenue by Product Lines (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Entity Wide Information Revenue From External Customer [Line Items]
Total Revenue	$ 260,522	$ 249,013
Spinal Hardware [Member]
Entity Wide Information Revenue From External Customer [Line Items]
Total Revenue	185,901	175,086
Surgical Support [Member]
Entity Wide Information Revenue From External Customer [Line Items]
Total Revenue	$ 74,621	$ 73,927

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Business Segment, Product and Geographic Information - Schedule of Revenue and Net Property and Equipment by Geographical Area (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Revenues and Net Property and Equipment by Geographical Areas [Line Items]
Revenue	$ 260,522	$ 249,013
Property and Equipment, Net	227,573		$ 215,326
United States
Revenues and Net Property and Equipment by Geographical Areas [Line Items]
Revenue	213,303	213,356
Property and Equipment, Net	192,326		179,891
International [Member]
Revenues and Net Property and Equipment by Geographical Areas [Line Items]
Revenue	47,219	$ 35,657
Property and Equipment, Net	$ 35,247		$ 35,435

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Commitments (Details Textual) $ in Millions	3 Months Ended
	Mar. 31, 2018 USD ($)
Licensing and Purchasing Agreements [Member]
Commitments And Contingencies Disclosure [Line Items]
Obligation under consultancy arrangements	$ 45.2
Revenue-based milestone period	achieved prior to 2027
Executive Severance Plans [Member]
Commitments And Contingencies Disclosure [Line Items]
Other commitments, future minimum payments, remainder of fiscal year	$ 40.0

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Contingencies (Details) - USD ($)					3 Months Ended	9 Months Ended	12 Months Ended
	Feb. 13, 2018	Jul. 05, 2016	Mar. 18, 2016	Feb. 19, 2016	Mar. 31, 2018	Sep. 30, 2017	Dec. 31, 2017
Loss Contingencies [Line Items]
Litigation accrual					$ 38,190,000		$ 8,150,000
Litigation case description					the court sustained the Company’s demurrer and dismissed the case with prejudice, entering judgment.
Securities Litigation [Member]
Loss Contingencies [Line Items]
Settlement agreement, consideration	$ 7,900,000
Litigation accrual					$ 7,900,000		7,900,000
Expected insurance proceeds					7,900,000		7,900,000
Madsen Medical, Inc. Litigation [Member]
Loss Contingencies [Line Items]
Litigation accrual					29,000,000
Jury award			$ 27,800,000
Loss contingency, settlement agreement, court						On March 18, 2016, the trial court entered judgment in favor of MMI in the amount of $27.8 million, which amount excluded the $14.0 million disgorgement awarded by the jury.
Damages accrued for breach of contract							300,000
Madsen Medical, Inc. Litigation [Member] | Minimum [Member]
Loss Contingencies [Line Items]
Loss contingency, estimate of possible loss					0		$ 0
Madsen Medical, Inc. Litigation [Member] | Maximum [Member]
Loss Contingencies [Line Items]
Loss contingency, estimate of possible loss					$ 29,000,000
Madsen Medical, Inc. Litigation [Member] | Loss Profits for Tortious Interference [Member]
Loss Contingencies [Line Items]
Jury award				$ 7,500,000
Madsen Medical, Inc. Litigation [Member] | Unjust Enrichment [Member]
Loss Contingencies [Line Items]
Jury award				14,000,000
Madsen Medical, Inc. Litigation [Member] | Punitive Damages [Member]
Loss Contingencies [Line Items]
Jury award				20,000,000
Madsen Medical, Inc. Litigation [Member] | Damages for Breach of Contract [Member]
Loss Contingencies [Line Items]
Jury award				$ 300,000
Madsen Medical, Inc. Litigation [Member] | Attorney Fees And Costs [Member]
Loss Contingencies [Line Items]
Jury award		$ 1,100,000