nuva-ex991

SAN DIEGO – July 30, 2019 – NuVasive, Inc. (NASDAQ: NUVA), the leader in spine technology innovation, focused on transforming spine surgery with minimally disruptive, procedurally integrated solutions, today announced financial results for the quarter ended June 30, 2019.

“NuVasive continued to deliver consistent revenue growth in the second quarter 2019, with a notably solid performance from the U.S. Hardware business,” said J. Christopher Barry, chief executive officer of NuVasive. “We saw meaningful case volume growth driven by increased surgeon adoption of lateral single-position surgery and NuVasive’s innovative X360 system. Our strong profitability results over the first half of the year demonstrate the clear initiatives and focused execution throughout the business and are reflected in our raised full-year 2019 non-GAAP guidance for operating margin and earnings per share.”

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

NuVasive reported second quarter 2019 total revenue of $292.1 million, a 3.7% increase compared to $281.6 million for the second quarter 2018. On a constant currency basis, second quarter 2019 total revenue increased 4.7% compared to the same period last year.

For the second quarter 2019, both GAAP and non-GAAP gross profit was $214.5 million and GAAP and non-GAAP gross margin was 73.4%. These results compared to the second quarter 2018 GAAP and non-GAAP gross profit of $204.5 million and $204.9 million, respectively, and GAAP and non-GAAP gross margin of 72.6% and 72.8%, respectively.

On a GAAP basis, the Company reported net income of $15.0 million, or diluted earnings per share of $0.29, for the second quarter 2019 compared to a net income of $11.5 million, or diluted earnings per share of $0.22, for the second quarter 2018. On a non-GAAP basis, the Company reported net income of $32.8 million, or diluted earnings per share of $0.63 per share, for the second quarter 2019 compared to net income of $30.3 million, or diluted earnings per share of $0.58 per share, for the second quarter 2018.

The Company updated its full-year 2019 financial guidance to reflect first-half 2019 results.

		2019 Guidance Range ¹
		Prior		Current
		GAAP	Non-GAAP	GAAP	Non-GAAP
	Revenue	$1.14B - $1.16B	$1.14B - $1.16B	$1.14B - $1.16B	$1.14B - $1.16B
	% Growth - Reported	3.5% - 5.5%	3.5% - 5.5%	3.4% - 5.4%	3.4% - 5.4%
	% Growth - Constant Currency²		3.8% - 5.8%		3.8% - 5.8%
	Operating margin	9.0% - 9.5%	15.0% - 15.5%	9.1% - 9.5%	15.3% - 15.7%
	Earnings per share	$0.95 - $1.05	$2.20 - $2.30	$0.93 - $1.03	$2.25 - $2.35
	EBITDA margin	20.9% - 21.3%	25.2% - 25.7%	21.2% - 21.5%	25.5% - 25.9%
	Tax Rate	~22%	~23%	~24%	~23%

¹	Prior guidance reflects the range provided May 1, 2019. Current guidance reflects the range provided July 30, 2019.
²	Constant currency is a measure that adjusts US GAAP revenue for the impact of currency over the same period in the prior year.

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

Reconciliation of Full Year EPS Guidance

						2019 Guidance Range ^{1, 2}
			2018 Actuals ¹			Prior ³			Current ⁴
		GAAP net income per share	$0.24			$0.95 - 1.05			$0.93 - 1.03
		Impact of change to diluted share count		—			—			—
		GAAP net income per share, adjusted to diluted Non-GAAP share count	$0.24			$0.95 - 1.05			$0.93 - 1.03

		Business transition costs ⁵		0.22			0.10			0.11
		Non-cash purchase accounting adjustments on acquisitions ⁶		0.02			—			—
		Non-cash interest expense on convertible notes		0.32			0.30			0.34
		Litigation related expenses and settlements ⁷		0.65			0.20			0.18
		Non-recurring consulting fees ⁸		0.12			—			—
		Net loss on strategic investments		0.07			—			—
		Amortization of intangible assets		0.97			0.95			0.96
		Purchase of in-process research and development ⁹		0.17			—			—
		European medical device regulation¹⁰		0.01			0.10			0.11
		Tax effect of adjustments¹¹		(0.56	)		(0.40	)		(0.38	)
		Non-GAAP earnings per share	$2.23			$2.20 - 2.30			$2.25 - 2.35

		GAAP Weighted shares outstanding - basic		51,382			51,999			51,954
		GAAP Weighted shares outstanding - diluted		52,355			52,991			52,898
		Non-GAAP Weighted shares outstanding - diluted ¹²		52,178			52,718			52,586

	¹	Items may not foot due to rounding.
	²	Prior guidance reflects the range provided May 1, 2019. Current guidance reflects the range provided July 30, 2019.
	³	Effective tax expense rate of ~22% applied to GAAP earnings and ~23% applied to Non-GAAP earnings.
	⁴	Effective tax expense rate of ~24% applied to GAAP earnings and ~23% applied to Non-GAAP earnings.
	⁵	Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.
	⁶	Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.
	⁷	Represents the loss recorded in connection with the settlement of the Madsen Medical, Inc. litigation matter, as well as expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company’s intellectual property.
	⁸	Non-recurring consulting fees associated with the implementation of our state tax-planning strategy.
	⁹	Purchase of an in-process research and development asset which had no future alternative use.
	¹⁰	Costs related to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.
	¹¹	The impact on results from taxes include tax effecting the adjustments above at the statutory rate as well as taking into account discrete items and including those discrete items in the annual effective tax rate calculation. The Company also includes those adjustments that would have benefited the tax rate in lieu of the above adjustments as part of the Company’s tax filings. The impact of the changes to the tax rate results in an annual rate of ~43% benefit on a GAAP basis and ~18% on a non-GAAP basis in 2018.
	¹²	Adjusted non-GAAP diluted WASO excludes the impact of dilutive convertible notes and warrants for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.

Reconciliation of Non-GAAP Operating Margin %

				2019 Guidance Range ^{1, 2}
		(in thousands, except %)	2018 Actuals ¹	Prior	Current
		Non-GAAP Gross Margin % [A]	71.9%	72.5% - 73.0%	72.5% - 73.0%
		Non-cash purchase accounting adjustments on acquisitions ³	(0.1%)	0.0%	0.0%
		GAAP Gross Margin [B]	71.8%	72.5% - 73.0%	72.5% - 73.0%

		Non-GAAP Sales, Marketing & Administrative Expense [C]	51.1%	51.0% - 52.0%	50.8% - 51.7%
		Non-recurring consulting fees⁴	0.6%	0.0%	0.0%
		Litigation related expenses⁵	0.6%	0.7%	0.8%
		GAAP Sales, Marketing & Administrative Expense [D]	52.3%	51.7% - 52.7%	51.6% - 52.5%

		GAAP and Non-GAAP Research & Development Expense [E]	5.6%	6.0%	6.0%

		Litigation related settlements [F]⁶	2.5%	0.0%	0.0%
		Amortization of intangible assets [G]	4.6%	4.3%	4.4%
		Purchase of in-process research and development [H]⁷	0.8%	0.0%	0.0%
		European medical device regulation [I]⁸	0.0%	0.6%	0.5%
		Business transition costs [J] ⁹	1.0%	0.4%	0.5%

		Non-GAAP Operating Margin % [A - C - E]	15.1%	15.0% - 15.5%	15.3% - 15.7%

		GAAP Operating Margin % [B - D - E - F - G - H - I - J]	4.9%	9.0% - 9.5%	9.1% - 9.5%

	¹	Items may not foot due to rounding.
	²	Prior guidance reflects the range provided May 1, 2019. Current guidance reflects the range provided July 30, 2019.
	³	Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.
	⁴	Non-recurring consulting fees associated with the implementation of our state tax-planning strategy.
	⁵	Expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company’s intellectual property.
	⁶	Represents the loss recorded in connection with the settlement of the Madsen Medical, Inc. litigation matter.
	⁷	Purchase of an in-process research and development asset which had no future alternative use.
	⁸	Costs related to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.
	⁹	Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.

Reconciliation of EBITDA Margin %

				2019 Guidance Range^{1, 5}
		(in thousands, except %)	2018 Actuals ^{1, 2}	Prior ³	Current⁴
		Net Income	1.1%	4.3% - 4.8%	4.3% - 4.7%
		Interest income / expense, net	3.4%	3.3%	3.3%
		Income tax benefit / (expense)	(0.3%)	1.3%	1.5%
		Depreciation and amortization	11.8%	12.0%	11.9%
		EBITDA Margin	16.0%	20.9% - 21.3%	21.2% - 21.5%
		Non-cash stock based compensation	2.3%	2.6%	2.5%
		Business transition costs⁶	1.0%	0.4%	0.5%
		Non-cash purchase accounting adjustments on acquisitions⁷	0.1%	0.0%	0.0%
		Litigation related expenses and settlements ⁸	3.1%	0.7%	0.8%
		Non-recurring consulting fees ⁹	0.6%	0.0%	0.0%
		In-process research and development¹⁰	0.8%	0.0%	0.0%
		European medical device regulation¹¹	0.0%	0.6%	0.5%
		Net loss on strategic investments	0.3%	0.0%	0.0%
		Adjusted EBITDA Margin	24.3%	25.2% - 25.7%	25.5% - 25.9%

	¹	Items may not foot due to rounding.
	²	Effective tax expense rate of ~43% benefit applied to GAAP earnings and ~18% applied to Non-GAAP earnings.
	³	Effective tax expense rate of ~22% applied to GAAP earnings and ~23% applied to Non-GAAP earnings.
	⁴	Effective tax expense rate of ~24% applied to GAAP earnings and ~23% applied to Non-GAAP earnings.
	⁵	Prior guidance reflects the range provided May 1, 2019. Current guidance reflects the range provided July 30, 2019.
	⁶	Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.
	⁷	Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.
	⁸	Represents the loss recorded in connection with the settlement of the Madsen Medical, Inc. litigation matter, as well as expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company’s intellectual property.
	⁹	Non-recurring consulting fees associated with the implementation of our state tax-planning strategy.
	¹⁰	Purchase of an in-process research and development asset which had no future alternative use.
	¹¹	Charges represent the costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.

Management uses certain non-GAAP financial measures such as non-GAAP earnings per share, non-GAAP net income, non-GAAP operating expenses and non-GAAP operating profit margin, which exclude amortization of intangible assets, business transition costs, purchased in-process research and development, one-time restructuring and related items in connection with acquisitions, investments and divestitures, non-recurring consulting fees, certain litigation expenses and settlements, certain European medical device regulation costs, gains and losses from strategic investments, and non-cash interest expense (excluding debt issuance cost). Management also uses certain non-GAAP financial measures which are intended to exclude the impact of foreign exchange currency fluctuations. The measure constant currency utilizes an exchange rate that eliminates fluctuations when calculating financial performance numbers. The Company also uses measures such as free cash flow, which represents cash flow from operations less cash used in the acquisition and disposition of capital. Additionally, the Company uses an adjusted EBITDA measure which represents earnings before interest, taxes, depreciation and amortization and excludes the impact of stock-based compensation, business transition costs, purchased in-process research and development, one-time restructuring and related items in connection with acquisitions, investments and divestitures, non-recurring consulting fees, certain litigation expenses and settlements, certain European medical device regulation costs, gains and losses on strategic investments, and other significant one-time items.

Management calculates the non-GAAP financial measures provided in this earnings release excluding these costs and uses these non-GAAP financial measures to enable it to further and more consistently analyze the period-to-period financial performance of its core business operations. Management believes that providing investors with these non-GAAP financial measures gives them additional information to enable them to assess, in the same way management assesses, the Company's current and future continuing operations. These non-GAAP financial measures are not in accordance with, or an alternative for, GAAP, and may be different from non-GAAP financial measures used by other companies. Set forth below are reconciliations of the GAAP to non-GAAP financial measures.

	For the Three Months Ended June 30, 2019
	Reconciliation of GAAP to Non-GAAP Financial Measures
	(Unaudited - in thousands, except per share data)

		Gross Profit			Operating Profit			Net Income			Diluted EPS		Diluted WASO ⁵		Net Income to Adjusted EBITDA
	Reported GAAP	$	214,526		$	30,197		$	14,962		$	0.29		52,460	$	14,962
	% of revenue		73.4	%		10.3	%
	Amortization of intangible assets					12,277			12,277
	Litigation related expenses and settlements¹					2,031			2,031							2,031
	Business transition costs²					1,646			1,646							1,646
	European medical device regulation ³					1,400			1,400							1,400
	Non-cash interest expense on convertible notes								4,374
	Tax effect of adjustments ⁴								(3,881	)
	Interest expense/(income), net															9,323
	Income tax expense															5,921
	Depreciation and amortization															33,560
	Non-cash stock based compensation															6,901
	Adjusted Non-GAAP	$	214,526		$	47,551		$	32,809		$	0.63		52,460	$	75,744
	% of revenue		73.4	%		16.3	%									25.9	%

¹	Represents expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company’s intellectual property.
²	Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.
³	Represents costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.
⁴	Represents the impact from tax affecting the adjustments above at their statutory tax rate. As of July 30, 2019, the Company estimated an annual tax rate of ~24% on a GAAP basis and ~23% on a non-GAAP basis.
⁵	Adjusted non-GAAP diluted WASO excludes the impact of dilutive convertible notes and warrants for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.

	For the Six Months Ended June 30, 2019
	Reconciliation of GAAP to Non-GAAP Financial Measures
	(Unaudited - in thousands, except per share data)

		Gross Profit			Operating Profit			Net Income			Diluted EPS		Diluted WASO ⁵		Net Income to Adjusted EBITDA
	Reported GAAP	$	414,808		$	50,370		$	24,348		$	0.46		52,471	$	24,348
	% of revenue		73.2	%		8.9	%
	Amortization of intangible assets					25,902			25,902
	Litigation related expenses and settlements ¹					5,077			5,077							5,077
	Business transition costs²					5,479			5,479							5,479
	European medical device regulation ³					1,732			1,732							1,732
	Non-cash interest expense on convertible notes								8,693
	Tax effect of adjustments ⁴								(10,814	)
	Interest expense/(income), net															18,427
	Income tax expense															7,238
	Depreciation and amortization															67,614
	Non-cash stock based compensation															12,618
	Adjusted Non-GAAP	$	414,808		$	88,560		$	60,417		$	1.15		52,471	$	142,533
	% of revenue		73.2	%		15.6	%									25.1	%

¹	Represents expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company’s intellectual property.
²	Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.
³	Represents costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with European medical device regulation.
⁴	Represents the impact from tax affecting the adjustments above at their statutory tax rate. As of July 30, 2019, the Company estimated an annual tax rate of ~24% on a GAAP basis and ~23% on a non-GAAP basis.
⁵	Adjusted non-GAAP diluted WASO excludes the impact of dilutive convertible notes and warrants for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.

	For the Three Months Ended June 30, 2018
	Reconciliation of GAAP to Non-GAAP Financial Measures
	(Unaudited - in thousands, except per share data)

		Gross Profit			Operating Profit			Net Income			Diluted EPS		Diluted WASO ⁵		Net Income to Adjusted EBITDA
	Reported GAAP	$	204,508		$	28,563		$	11,531		$	0.22		51,956	$	11,531
	% of revenue		72.6	%		10.1	%
	Non-cash purchase accounting adjustments on acquisitions ¹		405			405			405							405
	Amortization of intangible assets					12,628			12,628
	Litigation related expenses and settlements ²					383			383							383
	Business transition costs ³					3,998			3,998							3,998
	Non-cash interest expense on convertible notes								4,153
	Tax effect of adjustments ⁴								(2,775	)
	Interest expense/(income), net															9,840
	Income tax expense															4,813
	Depreciation and amortization															32,061
	Non-cash stock based compensation															6,860
	Adjusted Non-GAAP	$	204,913		$	45,977		$	30,323		$	0.58		51,956	$	69,891
	% of revenue		72.8	%		16.3	%									24.8	%

¹	Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.
²	Represents the change in the estimated loss contingency recorded in connection with the settlement of the Madsen Medical, Inc. litigation matter, as well as expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company’s intellectual property.
³	Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.
⁴	Represents the impact from tax affecting the adjustments above at their statutory tax rate. As of July 31, 2018, the Company estimated an annual tax rate of ~33% on a GAAP basis and ~21% on a non-GAAP basis.
⁵	Adjusted non-GAAP diluted WASO excludes the impact of dilutive convertible notes and warrants for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.

	For the Six Months Ended June 30, 2018
	Reconciliation of GAAP to Non-GAAP Financial Measures
	(Unaudited - in thousands, except per share data)

		Gross Profit			Operating Profit			Net (Loss) Income			Diluted EPS			Diluted WASO ^6,7		Net Loss to Adjusted EBITDA
	Reported GAAP	$	391,216		$	10,341		$	(15,601	)	$	(0.30	)		51,292	$	(15,601	)
	% of revenue		72.2	%		1.9	%
	Non-cash purchase accounting adjustments on acquisitions ¹		810			810			810								810
	Non-recurring consulting fees ²					6,084			6,084								6,084
	Amortization of intangible assets					25,053			25,053
	Litigation related expenses and settlements ³					29,969			29,969								29,969
	Business transition costs ⁴					6,251			6,251								6,251
	Non-cash interest expense on convertible notes								8,252
	Impairment of strategic investment								9,004								9,004
	Tax effect of adjustments ⁵								(18,884	)
	Interest expense/(income), net																19,173
	Income tax benefit																(5,313	)
	Depreciation and amortization																64,151
	Non-cash stock based compensation																10,994
	Adjusted Non-GAAP	$	392,026		$	78,508		$	50,938		$	0.98			51,849	$	125,522
	% of revenue		72.3	%		14.5	%										23.2	%

¹	Represents costs associated with non-cash purchase accounting adjustments, such as acquired inventory fair market value adjustments, which are amortized over the period in which underlying products are sold.
²	Non-recurring consulting fees associated with the implementation of our state tax-planning strategy.
³	Represents the loss recorded in connection with the settlement of the Madsen Medical, Inc. litigation matter, as well as expenses associated with ongoing litigation with a former Board member and his current employer related to various matters, including infringement of the Company’s intellectual property.
⁴	Costs related to acquisition, integration and business transition activities which include severance, relocation, consulting, leasehold exit costs, third party merger and acquisitions costs, contingent consideration fair value adjustments, and other costs directly associated with such activities.
⁵	Represents the impact from tax affecting the adjustments above at their statutory tax rate. As of July 30, 2018, the Company estimated an annual tax rate of ~33% on a GAAP basis and ~21% on a non-GAAP basis.
⁶	The Company had a GAAP net loss for the six months ended June 30, 2018, and therefore the loss per share was calculated using the basic weighted average shares outstanding. The non-GAAP earnings per share for the six months ending June 31, 2018 was calculated using the diluted weighted average shares outstanding.
⁷	Adjusted non-GAAP diluted WASO excludes the impact of dilutive convertible notes and warrants for which the Company is economically hedged through its anti-dilutive bond hedge arrangements.

NuVasive will hold a conference call today at 4:30 p.m. ET / 1:30 p.m. PT to discuss the results of its financial performance for the second quarter 2019. The dial-in numbers are 1-877-407-9039 for domestic callers and 1-201-689-8470 for international callers. A live webcast of the conference call will be available online from the Investor Relations page of the Company’s website at www.nuvasive.com. After the live webcast, the call will remain available on NuVasive’s website through August 30, 2019. In addition, a telephone replay of the call will be available until August 6, 2019. The replay dial-in numbers are 1-844-512-2921 for domestic callers and 1-412-317-6671 for international callers. Please use pin number: 13691950.

NuVasive will discuss its corporate strategy, including its innovation roadmap and long-term financial outlook, at its Investor Day on August 8, 2019. A live webcast of NuVasive’s Investor Day will be available online from the Investor Relations page of the Company’s website at www.nuvasive.com. After the live webcast, a replay of the event and the presentation materials will be available on NuVasive’s website.

NuVasive, Inc. (NASDAQ: NUVA) is the leader in spine technology innovation, focused on transforming spine surgery and beyond with minimally disruptive, procedurally integrated solutions designed to deliver reproducible and clinically-proven surgical outcomes. The Company's portfolio includes access instruments, implantable hardware, biologics, software systems for surgical planning, navigation and imaging solutions, magnetically adjustable implant systems for spine and orthopedics, and intraoperative monitoring service offerings. With more than $1 billion in revenues, NuVasive has approximately 2,600 employees and operates in more than 50 countries serving surgeons, hospitals and patients. For more information, please visit www.nuvasive.com.

NuVasive cautions you that statements included in this news release or made on the investor conference call referenced herein that are not a description of historical facts are forward-looking statements that involve risks, uncertainties, assumptions and other factors which, if they do not materialize or prove correct, could cause NuVasive's results to differ materially from historical results or those expressed or implied by such forward looking statements. In addition, this news release contains selected financial results from the second quarter 2019, as well as projections for 2019 financial guidance and longer-term financial performance goals. The Company's results for the second quarter 2019 are prior to the completion of review and audit procedures by the Company's external auditors and are subject to adjustment. In addition, the Company's projections for 2019 financial guidance and longer-term financial performance goals represent initial estimates, and are subject to the risk of being inaccurate because of the preliminary nature of the forecasts, the risk of further adjustment, or unanticipated difficulty in selling products or generating expected profitability. The potential risks and uncertainties which contribute to the uncertain nature of these statements include, among others, risks associated with acceptance of the Company's surgical products and procedures by spine surgeons, development and acceptance of new products or product enhancements, clinical and statistical verification of the benefits achieved via the use of NuVasive's products (including the iGA® platform), the Company's ability to effectually manage inventory as it continues to release new products, its ability to recruit and retain management and key personnel, and the other risks and uncertainties more fully described in the Company's news releases and periodic filings with the Securities and Exchange Commission. NuVasive's public filings with the Securities and Exchange Commission are available at www.sec.gov. NuVasive assumes no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which it was made.

NuVasive, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
(unaudited)	2019			2018			2019			2018
Revenue
Product revenue	$	261,381		$	252,687		$	505,204		$	486,202
Service revenue		30,724			28,877			61,677			55,884
Total revenue		292,105			281,564			566,881			542,086
Cost of revenue (excluding below amortization of intangible assets)
Cost of products sold		57,613			58,202			112,099			113,393
Cost of services		19,966			18,854			39,974			37,477
Total cost of revenue		77,579			77,056			152,073			150,870
Gross profit		214,526			204,508			414,808			391,216
Operating expenses:
Sales, marketing and administrative		152,853			145,658			297,929			292,424
Research and development		17,553			14,856			35,128			29,347
Amortization of intangible assets		12,277			12,628			25,902			25,053
Litigation liability (gain) loss		—			(1,195	)		—			27,800
Business transition costs		1,646			3,998			5,479			6,251
Total operating expenses		184,329			175,945			364,438			380,875
Interest and other expense, net:
Interest income		327			116			736			250
Interest expense		(9,650	)		(9,956	)		(19,163	)		(19,423	)
Other income (expense), net		9			(2,379	)		(357	)		(12,082	)
Total interest and other expense, net		(9,314	)		(12,219	)		(18,784	)		(31,255	)
Income (loss) before income taxes		20,883			16,344			31,586			(20,914	)
Income tax (expense) benefit		(5,921	)		(4,813	)		(7,238	)		5,313
Consolidated net income (loss)	$	14,962		$	11,531		$	24,348		$	(15,601	)

Net income (loss) per share:
Basic	$	0.29		$	0.22		$	0.47		$	(0.30	)
Diluted	$	0.29		$	0.22		$	0.46		$	(0.30	)
Weighted average shares outstanding:
Basic		51,967			51,356			51,822			51,292
Diluted		52,460			51,956			52,471			51,292

NuVasive, Inc.
Consolidated Balance Sheets
(in thousands, except par values and share amounts)

	June 30, 2019			December 31, 2018
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	128,377		$	117,840
Accounts receivable, net of allowances of $16,400 and $16,171, respectively		207,992			196,487
Inventory, net		297,136			273,244
Prepaid income taxes		16,188			16,905
Prepaid expenses and other current assets		14,617			13,733
Total current assets		664,310			618,209
Property and equipment, net		257,438			238,841
Intangible assets, net		227,545			252,048
Goodwill		561,420			561,366
Operating lease right-of-use assets		62,424			—
Deferred tax assets		4,885			5,263
Restricted cash and investments		2,394			2,395
Other assets		24,894			29,737
Total assets	$	1,805,310		$	1,707,859
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	105,710		$	105,877
Contingent consideration liabilities		7,892			7,560
Accrued payroll and related expenses		58,492			59,960
Operating lease liabilities		6,471			—
Litigation liabilities		3,250			1,415
Income tax liabilities		2,823			4,648
Total current liabilities		184,638			179,460
Senior convertible notes		612,762			602,526
Deferred and income tax liabilities		10,269			4,964
Operating lease liabilities		67,753			—
Other long-term liabilities		67,164			86,384
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized, none outstanding		—			—
Common stock, $0.001 par value; 120,000,000 shares authorized at June 30, 2019 and December 31, 2018, 57,357,083 and 56,648,077 issued and outstanding at June 30, 2019 and December 31, 2018, respectively		62			61
Additional paid-in capital		1,413,934			1,397,829
Accumulated other comprehensive loss		(8,552	)		(8,628	)
Retained earnings		41,589			17,241
Treasury stock at cost; 5,327,656 shares and 5,116,496 shares at June 30, 2019 and December 31, 2018, respectively		(584,309	)		(571,978	)
Total equity		862,724			834,525
Total liabilities and equity	$	1,805,310		$	1,707,859

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

	Six Months Ended June 30,
(unaudited)	2019			2018
Operating activities:
Consolidated net income (loss)	$	24,348		$	(15,601	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		67,614			64,151
Impairment of strategic investment		—			9,004
Amortization of non-cash interest		10,494			9,920
Stock-based compensation		12,618			10,994
Reserves on current assets		8,267			9,444
Other non-cash adjustments		4,329			12,133
Deferred income taxes		5,721			(6,593	)
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable		(11,602	)		852
Inventory		(31,856	)		(19,615	)
Prepaid expenses and other current assets		(2,811	)		(2,141	)
Accounts payable and accrued liabilities		9,301			8,931
Accrued payroll and related expenses		(3,699	)		(6,358	)
Litigation liability		1,835			2,150
Income taxes		(1,128	)		(53	)
Net cash provided by operating activities		93,431			77,218
Investing activities:
Acquisitions and investments		(4,100	)		(52,081	)
Purchases of intangible assets		(6,827	)		(7,682	)
Purchases of property and equipment		(65,385	)		(53,388	)
Net cash used in investing activities		(76,312	)		(113,151	)
Financing activities:
Proceeds from the issuance of common stock		3,888			5,312
Purchases of treasury stock		(11,702	)		(2,222	)
Payment of contingent consideration		(809	)		(8,900	)
Proceeds from revolving line of credit		—			100,000
Repayments on revolving line of credit		—			(63,000	)
Other financing activities		1,769			(146	)
Net cash (used in) provided by financing activities		(6,854	)		31,044
Effect of exchange rate changes on cash		271			(837	)
Increase (decrease) in cash, cash equivalents and restricted cash		10,536			(5,726	)
Cash, cash equivalents and restricted cash at beginning of period		120,235			78,198
Cash, cash equivalents and restricted cash at end of period	$	130,771		$	72,472