Alphatec Holdings Inc

Previous wording

Revenue from products and services increased $28.6 million, or 25%, and $58.0 million, or 26%, during the three and six months ended June 30, 2024, respectively, compared to the same period in 2023. The increase was primarily due to an increase in product volume that was due to the increase in our surgeon user base, continued expansion of our new product portfolio, and increasing adoption of our technology.

Current wording

Revenue from products and services increased $32.5 million, or 27%, and $90.5 million, or 26%, during the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023. The increase was primarily due to an increase in product volume that was due to the increase in our surgeon user base, continued expansion of our new product portfolio, and increasing adoption of our technology.

Previous wording

Cost of sales decreased $9.4 million, or 18%, and $7.0 million, or 8%, for the three and six months ended June 30, 2024, respectively, compared to the same period in 2023. The decrease was primarily due to a decrease in stock-based compensation offset by an increase in product volume. We have entered into Development Service Agreements for the development of a wide variety of potential products and intellectual property. Under these agreements, future royalty payments for product and/or intellectual property rights may be paid in either cash or restricted shares of our common stock at the election of the developer, depending on the terms of the agreement. Certain of these agreements were amended to remove the cash royalty option and require settlement in restricted shares of our common stock. During the three and six months ended June 30, 2023, the vesting conditions of certain of these amended awards were deemed probable. There were no such vesting conditions met during the three and six months ended June 30, 2024 resulting in a decrease in stock-based compensation for the period.

Current wording

Cost of sales increased $9.8 million, or 26%, and $2.8 million, or 2%, for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023. The increase was primarily due to an increase in product volume offset by a decrease in stock-based compensation. We have entered into Development Service Agreements for the development of a wide variety of potential products and intellectual property. Under these agreements, future royalty payments for product and/or intellectual property rights may be paid in either cash or restricted shares of our common stock at the election of the developer, depending on the terms of the agreement. Certain of these agreements were amended to remove the cash royalty option and require settlement in restricted shares of our common stock. Stock-based compensation associated with these awards was higher during the nine months ended September 30, 2023 than the other periods presented as the vesting conditions of certain of these amended awards were deemed probable at that time.

Previous wording

Research and development expenses. Research and development expenses increased $4.5 million, or 31%, and $9.3 million, or 33%, for the three and six months ended June 30, 2024, respectively, compared to the same period in 2023. The increase was primarily due to an increase in personnel to support the expansion of our new product portfolio.

Current wording

Research and development expenses. Research and development expenses increased $0.4 million, or 2%, and $9.6 million, or 20%, for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023. The increase during the nine months ended September 30, 2024 was primarily due to an increase in stock-based compensation related to our Development Service Agreements and due to an increase in personnel to support the expansion of our new product portfolio.

Previous wording

Sales, general and administrative expenses. Sales, general and administrative expenses increased $25.4 million, or 29%, and $47.9 million, or 27%, during the three and six months ended June 30, 2024, respectively, compared to the same period in 2023. The increase was primarily due to higher compensation-related costs and variable selling expenses associated with the increase in revenue, and our continued investment in building our strategic distribution channel. Additionally, we continued to increase our investment in our sales and marketing functions by increasing headcount to support the growth of our business, as well as necessary administrative support.

Current wording

Sales, general and administrative expenses. Sales, general and administrative expenses increased $17.8 million, or 19%, and $65.7 million, or 24%, during the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023. The increase was primarily due to higher compensation-related costs and variable selling expenses associated with the increase in revenue, and our continued investment in building our strategic distribution channel. Additionally, we continued to increase our investment in our sales and marketing functions by increasing headcount to support the growth of our business, as well as necessary administrative support.

Previous wording

Litigation-related expenses. Litigation expenses decreased $4.8 million, or 70%, and $3.6 million, or 35%, for the three and six months ended June 30, 2024, respectively, compared to the same period in 2023. The decrease was primarily related to settled litigation matters.

Current wording

Litigation-related expenses. Litigation expenses decreased $0.6 million, or 23%, and $4.2 million, or 33%, for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023. The decrease was primarily related to resolved litigation matters.

Previous wording

Amortization of acquired intangible assets. Amortization expense increased $1.1 million, or 17%, during the six months ended June 30, 2024, compared to the same period in 2023. The increase in amortization of acquired intangible assets is primarily due to amortization of intangible assets acquired in the acquisition of the navigation-enabled robotics platform ("Valence") in April 2023.

Current wording

Amortization of acquired intangible assets. Amortization expense increased $1.1 million, or 10%, during the nine months ended September 30, 2024, compared to the same period in 2023. The increase in amortization of acquired intangible assets is primarily due to amortization of intangible assets acquired in the acquisition of the navigation-enabled robotics platform ("Valence") in April 2023.

Previous wording

Transaction-related expenses. Transaction-related expense decreased $1.9 million, or 100%, and $2.0 million, or 106%, during the three and six months ended June 30, 2024, respectively, compared to the same period in 2023. The decrease in transaction-related expenses is due to the Valence acquisition in April 2023.

Current wording

Transaction-related expenses. Transaction-related expense decreased $0.3 million, or 100%, and $2.3 million, or 105%, during the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023. The decrease in transaction-related expenses is due to the Valence acquisition in April 2023.

Previous wording

Restructuring expenses. The increase in restructuring expenses for the three and six months ended June 30, 2024 is primarily due to costs associated with the relocation of office facilities in Paris, France.

Current wording

Restructuring expenses. Restructuring expenses increased $0.8 million, or 624%, and $1.5 million, or 459%, during the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023. The increase in restructuring expenses is primarily due to costs associated with the relocation of office facilities in Paris, France and personnel related expenses.

Previous wording

Interest expense, net, increased $1.9 million, or 49%, and $3.4 million, or 44%, during the three and six months ended June 30, 2024, respectively, compared to the same period in 2023. The increase in interest expense, net, was primarily due to drawing an additional $50.0 million on the Braidwell Term Loan in September 2023 and higher interest rates related to our Revolving Credit Facility and Braidwell Term Loan.

Current wording

Interest expense, net, increased $2.1 million, or 47%, and $5.5 million, or 45%, during the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023. The increase in interest expense, net, was primarily due to drawing an additional $50.0 million on the Braidwell Term Loan in September 2023 and higher interest rates related to our Revolving Credit Facility and Braidwell Term Loan.

Previous wording

Other income, net, decreased $2.2 million, or 93%, and $2.8 million, or 91%, during the three and six months ended June 30, 2024, respectively, compared to the same period in 2023. The change in other income, net, was primarily due to an employee retention credit received during the three months ended June 30, 2023.

Current wording

Other income, net, increased $0.6 million, or 1,226%, and decreased $2.2 million, or 71%, during the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023. The increase in other income, net, during the three months ended September 30, 2024, was primarily due to fluctuations in foreign currency rates. The decrease in other income, net, during the nine months ended September 30, 2024, was primarily due to an employee retention credit received during the nine months ended September 30, 2023.

Previous wording

The change in the income tax provision for the three and six months ended June 30, 2024, respectively, compared to the same period in 2023, was primarily related to the recognition of income tax benefits in several jurisdictions.

Current wording

The change in the income tax benefit for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023, was primarily related to the recognition of income tax benefits in several jurisdictions.

Previous wording

Our principal sources of liquidity are our existing cash and cash equivalents, our Revolving Credit Facility and cash from operations. Our liquidity and capital structure are evaluated regularly within the context of our annual operating and strategic planning process. We consider the liquidity necessary to fund our operations, which includes working capital needs, investments in research and development, investments in inventory and instrument sets to support our customers, as well as other operating costs. 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, and the international expansions of our business.

Current wording

Our principal sources of liquidity are our existing cash and cash equivalents, our Revolving Credit Facility and cash from operations. On October 29, 2024, the Company entered into an amendment of the Braidwell Term Loan, which provides for an additional term loan of $50.0 million. Our liquidity and capital structure are evaluated regularly within the context of our annual operating and strategic planning process. We consider the liquidity necessary to fund our operations, which includes working capital needs, investments in research and development, investments in inventory and instrument sets to support our customers, as well as other operating costs. 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, and the international expansions of our business.

Previous wording

We do not have any material financial exposure to one customer or one country that would significantly hinder our liquidity. We are and may become involved in various legal proceedings arising from our business activities. While we have no material, undisclosed accruals for pending litigation or claims, litigation is inherently unpredictable, and depending on the nature and timing of a proceeding, an unfavorable resolution could materially affect our future consolidated results of operations, cash flows or financial position in a particular period. We assess contingencies to determine the degree of probability and range of possible loss for potential accrual or disclosure in our condensed consolidated financial statements. An estimated loss contingency is accrued in our condensed consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Assessing contingencies is highly subjective and requires judgments about future events because litigation is inherently unpredictable, and unfavorable resolutions could occur. When evaluating contingencies, we may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters. In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated, or unrelated to reasonably possible outcomes, and as such are not meaningful indicators of our potential liability. We have disclosed all material accruals for pending litigation or investigations in Note 9, Commitments and Contingencies, in the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Current wording

We do not have any material financial exposure to one customer or one country, outside of the United States, that would significantly hinder our liquidity. We are and may become involved in various legal proceedings arising from our business activities. While we have no material, undisclosed accruals for pending litigation or claims, litigation is inherently unpredictable, and depending on the nature and timing of a proceeding, an unfavorable resolution could materially affect our future consolidated results of operations, cash flows or financial position in a particular period. We assess contingencies to determine the degree of probability and range of possible loss for potential accrual or disclosure in our condensed consolidated financial statements. An estimated loss contingency is accrued in our condensed consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Assessing contingencies is highly subjective and requires judgments about future events because litigation is inherently unpredictable, and unfavorable resolutions could occur. When evaluating contingencies, we may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters. In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated, or unrelated to reasonably possible outcomes, and as such are not meaningful indicators of our potential liability. We have disclosed all material accruals for pending litigation or investigations in Note 9, Commitments and Contingencies, in the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Previous wording

Cash and cash equivalents were $99.8 million and $221.0 million at June 30, 2024, and December 31, 2023, respectively. We believe that our existing funds, cash generated from our operations and our existing sources of and access to financing are adequate to satisfy our needs for working capital, capital expenditure and debt service requirements, and other business initiatives we plan to strategically pursue.

Current wording

Cash and cash equivalents were $81.0 million and $221.0 million at September 30, 2024, and December 31, 2023, respectively. We believe that our existing funds, cash generated from our operations and our existing sources of and access to financing are adequate to satisfy our needs for working capital, capital expenditure and debt service requirements, and other business initiatives we plan to strategically pursue.

Previous wording

We used cash of $49.8 million from operating activities for the six months ended June 30, 2024, which is primarily related to inventory purchases to support the growth of our business and commercial launch of new products, offset by the timing of cash payments and receipts.

Current wording

We used cash of $55.2 million from operating activities for the nine months ended September 30, 2024, which is primarily related to inventory purchases to support the growth of our business and commercial launch of new products, offset by the timing of cash payments and receipts.

Previous wording

We used cash of $69.5 million in investing activities for the six months ended June 30, 2024, which is primarily related to the purchase of surgical instruments to support the growth of our business and commercial launch of new products.

Current wording

We used cash of $89.4 million in investing activities for the nine months ended September 30, 2024, which is primarily related to the purchase of surgical instruments to support the growth of our business and commercial launch of new products.

Previous wording

We used cash of $1.1 million in financing activities for the six months ended June 30, 2024, which is primarily related to cash paid for net tax withholdings associated with employee stock awards offset by net draws on our revolving line of credit.

Current wording

Financing activities provided cash of $5.6 million for the nine months ended September 30, 2024, which is primarily related to net draws on our revolving line of credit.

Previous wording

As of June 30, 2024, we had $54.9 million outstanding under the Revolving Credit Facility. The outstanding loans under the Revolving Credit Facility bear interest at the sum of Term SOFR plus 3.5% per annum. The Revolving Credit Facility matures on the earlier of September 29, 2027, or 90 days prior to the final maturity date of any of our 2026 Notes.

Current wording

As of September 30, 2024, we had $63.2 million outstanding under the Revolving Credit Facility. The outstanding loans under the Revolving Credit Facility bear interest at the sum of Term SOFR plus 3.5% per annum. The Revolving Credit Facility matures on the earlier of September 29, 2027, or 90 days prior to the final maturity date of any of our 2026 Notes.

Previous wording

As of June 30, 2024, we had $4.0 million in other debts that are due in monthly and quarterly installments through maturity in 2027.

Current wording

As of September 30, 2024, we had $3.6 million in other debts that are due in monthly and quarterly installments through maturity in 2027.

Previous wording

We have an inventory purchase commitment agreement with a third-party supplier, where we are obligated to meet certain minimum purchase commitment requirements through December 2026. As of June 30, 2024, the remaining minimum purchase commitment under the agreement was $9.8 million.

Current wording

We have an inventory purchase commitment agreement with a third-party supplier, where we are obligated to meet certain minimum purchase commitment requirements through December 2026. As of September 30, 2024, the remaining minimum purchase commitment under the agreement was $8.9 million.

Previous wording

Aside from the changes disclosed in Note 1 to the Notes to Condensed Consolidated Financial Statements (Unaudited) under the heading “Recently Issued Accounting Pronouncements,” if any, there have been no new accounting pronouncements or changes to accounting pronouncements during the six months ended June 30, 2024, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2023, that was filed with the SEC.

Current wording

Aside from the changes disclosed in Note 1 to the Notes to Condensed Consolidated Financial Statements (Unaudited) under the heading “Recently Issued Accounting Pronouncements,” if any, there have been no new accounting pronouncements or changes to accounting pronouncements during the nine months ended September 30, 2024, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2023, that was filed with the SEC.