NUVASIVE ANNOUNCES SECOND QUARTER 2018 FINANCIAL RESULTS

Transcription

1 NEWS RELEASE NUVASIVE ANNOUNCES SECOND QUARTER 08 FINANCIAL RESULTS SAN DIEGO July, 08 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 0, 08. Second Quarter 08 Highlights Revenue increased 8.5% to $8.6 million, or 7.7% on a constant currency basis; GAAP operating profit margin of 0.%; Non GAAP operating profit margin of 6.%; and GAAP diluted earnings per share increase of 5% to $0.; Non GAAP diluted earnings per share increase of 9% to $0.58. We are pleased with our second quarter total revenue growth of 8.5% year over year driven by momentum in our U.S. Spinal Hardware business where we saw spine case volumes up nearly 7% versus prior year, said Gregory T. Lucier, chairman and chief executive officer of NuVasive. We continue to see strong demand for new product introductions from late last year and positive surgeon conversion efforts as our new Lateral Single Position Surgery procedure gains traction in the market. Our International business also delivered a solid performance with % year over year growth. A full reconciliation of GAAP to non GAAP measures can be found in the tables of this news release. Second Quarter 08 Results NuVasive reported second quarter 08 total revenue of $8.6 million, an 8.5% increase compared to $59. million for the second quarter 07. On a constant currency basis, second quarter 08 total revenue increased 7.7% compared to the same period last year. For the second quarter 08, GAAP and non GAAP gross profit was $0.5 million and $0.9 million, respectively, and GAAP and non GAAP gross margin was 7.6% and 7.8%, respectively. These results compared to both GAAP and non GAAP gross profit of $9. million, and both GAAP and non GAAP gross margin of 7.5% for the second quarter 07. Gross margins for the second quarter 08 were impacted by the Company s in source manufacturing efforts at the West Carrollton facility, which are expected to improve over the second half of 08. The Company reported GAAP net income of $.5 million, or $0. per share, for the second quarter 08 compared to GAAP net income of $. million, or $0. per share, for the second quarter 07. On a non GAAP basis, the Company reported net income of $0. million, or $0.58 per share, for the second quarter 08 compared to net income of $.6 million, or $0.5 per share, for the second quarter 07. Annual Financial Guidance for 08 The Company updated its full year 08 guidance as follows:

2 08 Guidance Range (in million's; except %'s and EPS) GAAP Non-GAAP GAAP Non-GAAP Revenue $,095 $,05 $,095 $,05 $,095 $,05 $,095 $,05 % Growth - Reported 6.7% 7.6% 6.7% 7.6% 6.7% 7.6% 6.7% 7.6% % Growth - Constant Currency, 5.7% 6.6% 6.% 7.% Operating margin 9.6% 9.7% 7.6% 7.6% 8.0% 8.% 6.7% 6.7% Earnings per share $ 0.7 $ 0.7 $. $.7 $ 0.5 $ 0.8 $.7 $.0 EBITDA 9.5% 9.5% 6.9% 6.9% 8.7% 8.7% 5.9% 5.9% Tax Rate ~% ~% ~% ~% ~% ~% ~% ~% Prior guidance reflects the range provided May, 08. Current guidance reflects the range provided July, 08. Prior Current 07 has been recasted and presented based on our full retrospective method of adoption of ASC 606. Constant currency is a measure that adjusts US GAAP revenue for the impact of currency over the same period in the prior year. Full year 08 revenue remains in the range of $,095 million to $,05 million reflecting reported growth of 6.7% to 7.6%, and growth in the range of.7% to 5.7%, exclusive of the SafePassage acquisition; Non GAAP diluted earnings per share in a range of $.7 to $.0 compared with the prior expectation of $. to $.7; Non GAAP operating profit margin of approximately 6.7% compared with the prior expectation of 7.6%; Adjusted EBITDA margin of approximately 5.9% compared with the prior expectation of 6.9%; Non GAAP effective tax expense rate of approximately %, compared with the prior expectation of approximately %; The Company expects currency to have a positive impact on revenue in 08 of approximately $ million compared with the prior expectation of $0 million; and The Company expects to drive an adjusted EBITDA of approximately $8 million to $9 million. The above guidance assumes a full year benefit of U.S. tax reform, suspension of the medical device tax and the SafePassage acquisition. Supplementary Financial Information For additional financial detail, please visit the Investor Relations section of the Company s website at to access Supplementary Financial Information.

3 Reconciliation of Full Year EPS Guidance 07 Actuals, 08 Guidance Range Prior,, Current GAAP net income per share $.8 $ 0.7 $ 0.7 $ 0.5 $ 0.8 Impact of change to diluted share count GAAP net income per share, adjusted to diluted Non-GAAP share count $.56 $ 0.7 $ 0.75 $ 0.5 $ 0.8,, 5 Business transition costs Non-cash purchase accounting adjustments on acquisitions Non-cash interest expense on convertible notes Litigation related expenses and settlements Non-recurring consulting fees Impairment of strategic investment Amortization of intangible assets Tax effect of adjustments (.08) (0.) (0.) (0.0) (0.0) Non-GAAP earnings per share $.89 $. $.7 $.7 $.0 GAAP Weighted shares outstanding - basic 50,87 5,05 5,05 5,97 5,97 GAAP Weighted shares outstanding - diluted 55,9 5,67 5,67 5, 5, Non-GAAP Weighted shares outstanding - diluted 5,5 5,85 5,85 5, 5, Items may not foot due to rounding. 07 has been recasted and presented based on our full retrospective method of adoption of ASC 606 as well as for 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. Prior guidance reflects the range provided May, 08. Current guidance reflects the range provided July, 08. Effective tax expense rate of ~% applied to GAAP earnings and ~% applied to Non-GAAP earnings. Effective tax expense rate of ~% applied to GAAP earnings and ~% applied to Non-GAAP earnings. 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. 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. Related to the Medtronic litigation matter for fiscal year 07. Represents the settlement loss in connection with 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 for fiscal year 08. Non-recurring consulting fees associated with the implementation of our state tax-planning strategy. 07 results exclude the amortization associated with non-controlling interest. The impact on results from taxes include tax effecting the adjustments above at the statutory rate as well as taking into account discrete items and including those discrete items in the annual effective tax rate calculation. The Company also includes those adjustments that would have benefited the tax rate in lieu of the above adjustments as part of the Company s tax filings. The impact of the changes to the tax rate results in an annual estimated rate of ~% on a GAAP basis and ~% on a non-gaap basis. 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.

4 Reconciliation of Non-GAAP Operating Margin % 08 Guidance, (in thousands, except %) 07 Actuals, Prior Current Non-GAAP Gross Margin % [A] 7.9% 7.5% 7.6% Non-cash purchase accounting adjustments on acquisitions (0.%) (0.%) (0.%) GAAP Gross Margin [B] 7.9% 7.% 7.5% Non-GAAP Sales, Marketing & Administrative Expense [C] 5.5% 50.6% 50.6% Non-recurring consulting fees 5 0.0% 0.6% 0.6% GAAP Sales, Marketing & Administrative Expense [D] 5.5% 5.% 5.% Non-GAAP Research & Development Expense [E].9% 5.% 5.% In-process research & development 0.0% 0.0% 0.0% GAAP Research & Development Expense [F].9% 5.% 5.% Litigation related expenses and settlements [G] 6 0.5%.6%.9% Amortization of intangible assets [H] 7.7%.%.5% Business transition costs [I] 8 0.5% 0.% 0.6% Non-GAAP Operating Margin % [A - C - E] 6.5% 7.6% 6.7% GAAP Operating Margin % [B - D - F - G - H - I] 0.9% 9.6% 8.0% has been recasted and presented based on our full retrospective method of adoption of ASC 606 as well as for 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. Items may not foot due to rounding. Prior guidance reflects the range provided May, 08. Current guidance reflects the range provided July, 08. 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. Non-recurring consulting fees associated with the implementation of our state tax-planning strategy. Related to the Medtronic litigation matter, settlement loss in connection with 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. For fiscal year 07 amortization includes the amortization attributable to non-controlling interest. In January 08, the Company completed the acquisition of the non-controlling interest. 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 Reconciliation of EBITDA % 08 Guidance, (in thousands, except %), 07 Actuals Prior Current Net Income / (Loss) 7.9%.%.% Interest (income) / expense, net.7%.6%.5% Provision for income taxes (0.7%).6%.% Depreciation and amortization.7% 0.9%.5% EBITDA.6% 9.5% 8.% Non-cash stock based compensation.%.0%.6% Business transition costs 5 0.% 0.% 0.6% Non-cash purchase accounting adjustments on acquisitions 6 0.% 0.% 0.% Litigation related expenses and settlements 7 0.5%.6%.9% Non-recurring consulting fees 8 0.0% 0.6% 0.6% Impairment of strategic investment 0.0% 0.8% 0.8% Adjusted EBITDA 5.7% 6.9% 5.9% 07 has been recasted and presented based on our full retrospective method of adoption of ASC 606 as well as for 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. Items may not foot due to rounding. Prior guidance reflects the range provided May, 08. Current guidance reflects the range provided July, results exclude the amortization associated with non-controlling interest. 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 Related to the Medtronic litigation matter, settlement loss in connection with 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. Reconciliation of Non GAAP Information Management uses certain non GAAP financial measures such as non GAAP earnings per share, non GAAP net income, non GAAP operating expenses and non GAAP operating profit margin, which exclude amortization of intangible assets, business transition costs, one time restructuring and related items in connection with acquisitions, investments and divestitures, non recurring consulting fees, certain litigation expenses and settlements, and non cash interest expense (excluding debt issuance cost) and or losses on convertible notes. Management also uses certain non GAAP measures which are intended to exclude the impact of foreign exchange currency fluctuations. The measure constant currency is the use of an exchange rate that eliminates fluctuations when calculating financial performance numbers. The Company also uses measures such as free cash flow, which represents cash flow from operations less cash used in the acquisition and disposition of capital. Additionally, the Company uses an adjusted EBITDA measure which represents earnings before interest, taxes, depreciation and amortization and excludes the impact of stockbased compensation, business transition costs, one time restructuring and related items in connection with acquisitions, investments and divestitures, non recurring consulting fees, certain litigation expenses and settlements, and other significant one time items. Management calculates the non GAAP financial measures provided in this earnings release excluding these costs and uses these non GAAP financial measures to enable it to further and more consistently analyze the period to period financial performance of its core business operations. Management believes that providing investors with these non GAAP measures gives them additional information to enable them to assess, in the same way management assesses, the Company s current and future continuing operations. 5

6 These non GAAP measures are not in accordance with, or an alternative for, GAAP, and may be different from non GAAP measures used by other companies. Set forth below are reconciliations of the non GAAP financial measures to the comparable GAAP financial measure. During the quarter ended June 0, 08, the Company began excluding from its non GAAP financial results certain litigation related expenses, in addition to litigation charges associated with significant legal settlements. As previously disclosed, the Company is pursuing various legal claims against a former member of the Company s Board of Directors for violations of his contractual obligations to the Company and breach of his fiduciary duties. The Company has also filed lawsuits against his current employer for tort claims and intellectual property infringement. The Company began excluding litigation expenses associated with these and related legal matters in the quarter ended June 0, 08. Expenses for these legal matters significantly increased during the quarter ended June 0, 08, and based on developments in these legal matters, expenses are expected to be significant throughout 08. The Company believes that these litigation expenses are unusual in nature and not reflective of the Company s normal course of business or the financial performance of the Company s core business operations. These expenses are included in the line item Litigation related expenses and settlements in the non GAAP reconciliations below. For consistency and comparability, the Company has re casted its non GAAP financial results for each of the quarters ended December, 07 and March, 08 to exclude these litigation expenses in such periods, which were $0. million and $0.6 million, respectively. For the Three Months Ended June 0, 08 Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures (Unaudited - in thousands, except per share data) Gross Profit Operating Profit Net Income Diluted EPS Diluted WASO Net Income to Adjusted EBITDA Reported GAAP $ 0,508 $ 8,56 $,5 $ 0. 5,956 $,5 % of revenue 7.6% 0.% Non-cash purchase accounting adjustments on acquisitions Amortization of intangible assets,68,68 Litigation related expenses and settlements Business transition costs,998,998,998 Non-cash interest expense on convertible notes,5 Tax effect of adjustments (,775) Interest expense/(income), net 9,80 Income tax expense,8 Depreciation and amortization,06 Non-cash stock based compensation 6,860 Adjusted Non-GAAP $ 0,9 $ 5,977 $ 0, $ ,956 $ 69,89 % of revenue 7.8% 6.%.8% 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. 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. 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. The impact on results from taxes include tax effecting the adjustments above at the statutory rate as well as taking into account discrete items and including those discrete items in the annual effective tax rate calculation. The Company also includes those adjustments that would have benefited the tax rate in lieu of the above adjustments as part of the Company s tax filings. The impact of the changes to the tax rate results in an annual estimated rate of ~.6% on a GAAP basis and ~.0% on a non-gaap basis. 6

7 For the Six Months Ended June 0, 08 Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures (Unaudited - in thousands, except per share data) Gross Profit Operating Profit Net (Loss) Net Loss to Income Diluted EPS Diluted WASO 6 Adjusted EBITDA Reported GAAP $ 9,6 $ 0, $ (5,60) $ (0.0) 5,9 $ (5,60) % of revenue 7.%.9% Non-cash purchase accounting adjustments on acquisitions Non-recurring consulting fees 6,08 6,08 6,08 Amortization of intangible assets 5,05 5,05 Litigation related expenses and settlements 9,969 9,969 9,969 Business transition costs 6,5 6,5 6,5 Non-cash interest expense on convertible notes 8,5 Impairment of strategic investment 9,00 9,00 Tax effect of adjustments 5 (8,88) Interest expense/(income), net 9,7 Income tax benefit (5,) Depreciation and amortization 6,5 Non-cash stock based compensation 0,99 Adjusted Non-GAAP $ 9,06 $ 78,508 $ 50,98 $ ,89 $ 5,5 % of revenue 7.%.5%.% 5 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. Non-recurring consulting fees associated with the implementation of our state tax-planning strategy. 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. 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. The impact on results from taxes include tax effecting the adjustments above at the statutory rate as well as taking into account discrete items and including those discrete items in the annual effective tax rate calculation. The Company also includes those adjustments that would have benefited the tax rate in lieu of the above adjustments as part of the Company s tax filings. The impact of the changes to the tax rate results in an annual estimated rate of ~.6% on a GAAP basis and ~.0% on a non-gaap basis. The Company had a GAAP net loss for the six months ended June 0, 08, 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 0, 08 was calculated using the diluted weighted average shares outstanding. 7

8 For the Three Months Ended June 0, 07 Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures (Unaudited - in thousands, except per share data) Gross Profit Operating Net Income to Profit Net Income Diluted EPS Diluted WASO 5 Adjusted EBITDA Reported GAAP $ 9, $ 8,956 $,67 $ 0. 58,0 $,67 % of revenue 7.5%.% Amortization of intangible assets,9,08 Business transition costs,69,69,69 Non-cash interest expense on convertible notes,665 Tax effect of adjustments (5,66) Interest expense/(income), net 9,9 Income tax expense 6,776 Depreciation and amortization 8,856 Non-cash stock based compensation 8,9 Adjusted Non-GAAP $ 9, $,67 $,565 $ 0.5 5,7 $ 67,506 % of revenue 7.5% 6.% 6.0% Reported GAAP figures for 07 have been recasted and presented based on the full retrospective method of adoption of ASC 606. When reconciling from reported GAAP net income, the adjustment for amortization of intangible assets excludes the amortization associated with non-controlling interest. In January 08, the Company completed the acquisition of the non-controlling interest. 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. The impact on results from taxes include tax effecting the adjustments above at the statutory rate as well as taking into account discrete items and including those discrete items in the annual effective tax rate calculation. The Company also includes those adjustments that would have benefited the tax rate in lieu of the above adjustments as part of the Company s tax filings. The impact of the changes to the tax rate results in an annual estimated rate of ~.7% benefit on a GAAP basis and ~5.0% 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 antidilutive bond hedge arrangements. For the Six Months Ended June 0, 07 Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures (Unaudited - in thousands, except per share data) Gross Profit Operating Net Income to Profit Net Income Diluted EPS Diluted WASO 5 Adjusted EBITDA Reported GAAP $ 80,78 $ 5,68 $,59 $ 0. 58,059 $,59 % of revenue 7.9% 0.% Amortization of intangible assets,0,766 Business transition costs,,, Non-cash interest expense on convertible notes 9,6 Tax effect of adjustments (,790) Interest expense/(income), net 9,606 Income tax expense 8,06 Depreciation and amortization 58,0 Non-cash stock based compensation 5, Adjusted Non-GAAP $ 80,78 $ 76,6 $,57 $ 0.8 5,7 $ 7,09 % of revenue 7.9% 5.0% 5.0% 5 Reported GAAP figures for 07 have been recasted and presented based on the full retrospective method of adoption of ASC 606. When reconciling from reported GAAP net income, the adjustment for amortization of intangible assets excludes the amortization associated with non-controlling interest. In January 08, the Company completed the acquisition of the non-controlling interest. 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. The impact on results from taxes include tax effecting the adjustments above at the statutory rate as well as taking into account discrete items and including those discrete items in the annual effective tax rate calculation. The Company also includes those adjustments that would have benefited the tax rate in lieu of the above adjustments as part of the Company s tax filings. The impact of the changes to the tax rate results in an annual estimated rate of ~.7% benefit on a GAAP basis and ~5.0% on a non-gaap basis. Adjusted non-gaap diluted WASO excludes the impact of dilutive convertible notes and warrants for which the Company is economically hedged through its antidilutive bond hedge arrangements. 8

9 Investor Conference Call NuVasive will hold a conference call today at :0 p.m. ET / :0 p.m. PT to discuss the results of its financial performance for the second quarter 08. The dial in numbers are for domestic callers and 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 After the live webcast, the call will remain available on NuVasive's website through August 8, 08. In addition, a telephone replay of the call will be available until August 7, 08. The replay dial in numbers are for domestic callers and for international callers. Please use pin number: About NuVasive 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 over $ billion in revenues, NuVasive has an approximate,00 person workforce in more than 0 countries serving surgeons, hospitals and patients. For more information, please visit Forward Looking Statements 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 08, as well as projections for 08 financial guidance and longer term financial performance goals. The Company s results for the second quarter 08 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 08 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, 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 NuVasive assumes no obligation to update any forward looking statement to reflect events or circumstances arising after the date on which it was made. 9

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11 NuVasive, Inc. Consolidated Statements of Operations (in thousands, except per share data) Three Months Ended June 0, Six Months Ended June 0, (unaudited) Revenue Product revenue $ 5,687 $ 7,8 $ 86,0 $ 6,779 Service revenue 8,877,575 55,88 5,6 Total revenue 8,56 59,99 5, , Cost of revenue (excluding below amortization of intangible assets) Cost of products sold 58,0 50,55,9 96,6 Cost of services 8,85 5,65 7,77,9 Total cost of revenue 77,056 66,86 50,870 7,69 Gross profit 0,508 9, 9,6 80,78 Operating expenses: Sales, marketing and administrative 5,658 8,967 9, 79,5 Research and development,856,57 9,7,986 Amortization of intangible assets,68,9 5,05,0 Litigation liability (gain) loss (,95) 7,800 Business transition costs,998,69 6,5, Total operating expenses 75,95 6,57 80,875 9,55 Interest and other expense, net: Interest income Interest expense (9,956) (0,08) (9,) (9,88) Other expense, net (,79) (50) (,08) () Total interest and other expense, net (,9) (0,5) (,55) (9,89) Income (loss) before income taxes 6, 8,5 (0,9),779 Income tax (expens e) benefit (,8) (6,776) 5, (8,06) Consolidated net income (loss) $,5 $,75 $ (5,60) $,78 Add back net loss attributable to non-controlling interest $ $ () $ $ (875) Net income (loss) attributable to NuVasive, Inc. $,5 $,67 $ (5,60) $,59 Net income (loss) per share attributable to NuVasive, Inc.: Basic $ 0. $ 0. $ (0.0) $ 0.8 Diluted $ 0. $ 0. $ (0.0) $ 0. Weighted average shares outstanding: Basic 5,56 5,08 5,9 50,85 Diluted 5,956 58,0 5,9 58,059

12 NuVasive, Inc. Consolidated Balance Sheets (in thousands, except par values and share amounts) June 0, 08 December, 07 ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 70,078 $ 7,80 Restricted cash and investments,90 Accounts receivable, net of allowances of $6,78 and $,06, respectively 99,907 00,0 Inventory, net 59,89 7,8 Prepaid income taxes 8,87 7,09 Prepaid expenses and other current assets,588 8,79 Total current assets 57, ,06 Property and equipment, net,7 5,6 Intangible assets, net 76,8 80,77 Goodwill 560,75 56,96 Deferred tax assets,955 6,0 Restricted cash and investments,9,9 Other assets,607 9,7 Total assets $,67,7 $,60,0 LIABILITIES AND EQUITY Current liabilities: Accounts payable and accrued liabilities 89,5 $ 75,767 Contingent consideration liabilities, 8,95 Accrued payroll and related expenses 5,8 55,68 Litigation liabilities 0,00 8,50 Short-term borrowings 7,000 Income tax liabilities,85,908 Total current liabilities 0,00 6,95 Long-term senior convertible notes 59,58 58,90 Deferred and income tax liabilities, non-current 9,55 8,870 Other long-term liabilities 85,067 77,59 Commitments and contingencies Stockholders equity: Preferred stock, $0.00 par value; 5,000,000 shares authorized, none outstanding Common stock, $0.00 par value; 0,000,000 shares authorized at June 0, 08 and December, 07, 56,5,85 and 56,6,060 issued and outstanding at June 0, 08 and December, 07, respectively 6 60 Additional paid-in capital,7,6,6,59 Accumulated other comprehensive loss (8,875) (6,9) (Accumulated deficit) retained earnings (0,89),76 Treasury stock at cost; 5,095,90 shares and 5,00,886 shares at June 0, 08 and December, 07, respectively (570,60) (565,867) Total NuVasive, Inc. stockholders equity 78,6 795,57 Non-controlling interest,85 Total equity 78,6 799,6 Total liabilities and equity $,67,7 $,60,0

13 NuVasive, Inc. Consolidated Statements of Cash Flows (in thousands) Six Months Ended June 0, (unaudited) Operating activities: Consolidated net (loss) income $ (5,60) $,78 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 6,5 58,688 Impairment of strategic investment 9,00 Amortization of non-cash interest 9,90 0,88 Stock-based compensation 0,99 5, Reserves on current assets 9, 6 Other non-cash adjustments, 7,80 Deferred income taxes (6,59) (,077) Changes in operating assets and liabilities, net of effects from acquisitions: Accounts receivable 85 (5,8) Inventory (9,65) (9,7) Contingent consideration liabilities (00) (,00) Prepaid expenses and other current assets (,) (,5) Accounts payable and accrued liabilities 9,0,868 Accrued payroll and related expenses (6,58) (,059) Litigation liability,50 Income taxes (5) 0,7 Net cash provided by operating activities 77,8 67,06 Investing activities : Acquisitions and investments (5,08) (,7) Purchases of intangible assets (7,68) (,695) Purchases of property and equipment (5,88) (68,690) Net cash used in investing activities (,5) (8,80) Financing activities: Proceeds from the issuance of common stock 5, 5,69 Purchase of treasury stock (,) (0,8) Payment of contingent consideration (8,900) (8,800) Proceeds from revolving line of credit 8,000 0,000 Repayments on revolving line of credit (5,000) Other financing activities (6) (,05) Net cash provided by (used in) financing activities,0 (6,80) Effect of exchange rate changes on cash (87),9 Decrease in cash, cash equivalents, restricted cash and investments (5,76) (,769) Cash, cash equivalents, restricted cash and investments at beginning of period 78,98 6,08 Cash, cash equivalents, restricted cash and investments at end of period $ 7,7 $ 8,79 Investor Contact: Suzanne Hatcher NuVasive, Inc investorrelations@nuvasive.com Media Contact: Scott Nyberg NuVasive, Inc media@nuvasive.com