NuVasive (NASDAQ:NUVA) has been an innovator in the surgical realm, focusing most of its attention on minimally disruptive spinal surgical procedures that make it easier for patients to recover quickly. Demand for better surgical solutions has been strong in the medical community, and NuVasive has positioned itself to take maximum advantage of that trend. Yet like many high-growth stocks, NuVasive has made some investors nervous about how long it could sustain strong growth that would justify relatively expensive valuations for the shares.

Coming into Tuesday's first-quarter financial report, NuVasive investors were prepared for relatively slow revenue gains, but they wanted to see solid performance on the bottom line. NuVasive actually lost money during the quarter due to a one-time item, and even when you make allowances for that extraordinary provision, the company's slow profit growth didn't do everything it could to inspire confidence among its shareholders.

Operating room with multiple surgical setups, including operating table, imaging equipment, and monitoring devices.

Image source: NuVasive.

NuVasive posts a loss

NuVasive's first-quarter results weren't perfect. Revenue climbed 4.6% to $260.5 million, slightly outpacing the consensus forecast among those following the stock. The company lost $27.1 million during the quarter, and even after accounting for the main cause of the loss, adjusted net income of $20.2 million were higher by just 3% from year-ago levels. That worked out to adjusted earnings of $0.39 per share, missing the $0.45 per share that investors had wanted to see.

The primary cause of the GAAP loss for the quarter was NuVasive's decision to increase its accrual of litigation liability in connection with a lawsuit between the company and one of its former sales agents. NuVasive was quick to note that the lawsuit is still under appeal, with the accounting move not reflecting any final resolution of the dispute, which has been ongoing for several years.

Fundamentally, NuVasive continued to take strides toward seeking growth, but its success was mixed. Internationally, the company managed to produce 20% gains after taking currency impacts into account. Yet its revenue in the U.S. was essentially flat, as the expected decline in NuVasive's biologics business and weaker volume in its clinical services division weighed against volume gains in hardware and strength from new product introductions. Also, shifts in the mix of products that NuVasive sold caused headwinds for the spinal surgical specialist as well.

Can NuVasive keep growing?

CEO Greg Lucier has high hopes that the rest of the year will produce continued growth opportunities. "As we look forward to the remainder of the year," Lucier said, "we expect our continued innovation -- including the expansion of our lateral procedural solutions with the integration of Lateral Single-Position Surgery, further build-out of our Advanced Materials Science portfolio, and the initial launch of our Surgical Intelligence platform -- to drive further differentiation of NuVasive technologies with surgeon partners." The CEO also noted that the ramp-up of production at a manufacturing facility in Ohio should help to boost margin figures and make the company more profitable.

NuVasive also won a significant legal victory of its own. During the quarter, the surgical device maker successfully gained a favorable ruling in Tennessee to obtain key tax exemptions for property, sales, and use taxes. The company estimates that the ruling will save it $100 million in tax liability over the next 15 years, making it well worth the roughly $6 million investment in consulting fees it paid toward its efforts to get the ruling.

Looking ahead, NuVasive didn't make any major changes to its guidance. It still believes 2018 revenue will be between $1.095 billion and $1.105 billion, with adjusted earnings per share coming in between $2.44 and $2.47.

NuVasive investors weren't entirely happy about the report, and the stock fell almost 4% in pre-market trade Wednesday following the Tuesday night announcement. The litigation line item doesn't reflect on NuVasive's core business, so investors shouldn't worry overly about it. More important is that in order to reassure its shareholders, NuVasive needs to take stronger action to keep itself growing and demonstrate its ability to move forward on key initiatives designed to boost its success.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends NuVasive. The Motley Fool has a disclosure policy.