Financial Performance - Total revenue for 2024 was $611.6 million, an increase of $129.3 million or 27% compared to $482.3 million in 2023[14] - Total revenue for the year ended December 31, 2024, was $611,562,000, an increase of $129,300,000 or 27% compared to $482,262,000 in 2023[209] - Cost of sales increased by $15,241,000 or 9% to $187,300,000 in 2024 from $172,059,000 in 2023, primarily due to increased product volume[211] - Research and development expenses rose by $10,603,000 or 15% to $80,718,000 in 2024, driven by increased personnel and stock-based compensation[212] - Sales, general and administrative expenses increased by $76,119,000 or 20% to $450,199,000 in 2024 compared to $374,080,000 in 2023[212] - Total operating expenses for 2024 were $560,431,000, an increase of $76,833,000 or 16% from $483,598,000 in 2023[212] - Litigation-related expenses decreased by $12,488,000 or 56% to $9,799,000 in 2024 from $22,287,000 in 2023[212] - Amortization expense increased by $1,974,000 or 14% to $16,258,000 in 2024 compared to $14,284,000 in 2023[212] - Transaction-related expenses significantly decreased by $1,903,000 or 90% to $210,000 in 2024 from $2,113,000 in 2023[212] - The company has experienced a 40% compound annual growth rate in revenue since its transformation began in 2018[199] - The company does not anticipate paying any cash dividends in the foreseeable future, intending to retain all available funds for business operations and expansion[184] Product Development and Innovation - Surgical volume grew by 19% in 2024, while average revenue per surgery expanded by 8% compared to 2023[24] - The surgeon user base increased by 18% in 2024, driven by the "ATEC Experience" educational program[26] - The company launched EOS Insight™ in 2024, a software platform designed to enhance spine patient care from pre-operative planning to post-operative assessment[18] - The acquisition of SafeOp™ technology has integrated real-time information about nerve health into surgical procedures, enhancing predictability and reproducibility[16] - The AIX™ product platform includes EOS imaging and SafeOp systems, with significant development expected to bring new functionalities to market in 2025 and beyond[36] - The PTP approach, launched in 2020, allows for single-position surgery, minimizing patient repositioning and enhancing surgical efficiency[34] - Invictus is a next-generation spinal fixation solution designed for various pathologies, emphasizing intraoperative adaptability and surgical predictability[44] - The company offers a range of biologics for spinal fusion, including 3D ProFuse™ Osteoconductive Bioscaffold and AlphaGRAFT® products, enhancing handling and endplate contact[45] - The research and development team is focused on reducing the time from product conceptualization to market commercialization, aiming to enhance clinical outcomes across multiple spine pathologies[47] Market and Competitive Landscape - The spinal implant industry is highly competitive, with significant competitors including Medtronic, Johnson & Johnson, and Stryker, which have greater financial resources and established distribution networks[60] - Continued consolidation in the healthcare industry may lead to increased competition and pricing pressures, adversely affecting the company's market position and financial condition[120] - The company faces intense competition from well-established medical device companies, which may hinder its ability to compete effectively[107] Regulatory and Compliance - The company’s products are subject to extensive FDA regulation, requiring either 510(k) clearance or PMA for commercial distribution in the U.S.[65] - The average FDA review time for 510(k) submissions is approximately six months, although the goal is to complete reviews within 90 days[73] - The PMA process is more complex and costly than the 510(k) process, requiring extensive data to demonstrate safety and effectiveness, with a typical review period of 180 days, often taking longer in practice[77] - Clinical trials are generally required for PMA applications and may also be needed for 510(k) submissions, with strict adherence to FDA regulations and oversight by Institutional Review Boards[78] - Compliance with FDA regulations post-market includes registration, quality system regulations, labeling, and advertising requirements, with potential enforcement actions for non-compliance[79][81] - The company must adhere to various federal and state laws regarding healthcare fraud and abuse, with significant penalties for violations, including exclusion from government healthcare programs[84][85] - The federal Anti-Kickback Statute prohibits remuneration for referrals related to federal healthcare programs, with broad interpretations that could impact various business arrangements[85] - The number of qui tam actions under the federal False Claims Act has increased, leading to more healthcare companies facing legal challenges, with potential penalties of up to three times the actual damages[88] - HIPAA regulations govern the use and disclosure of protected health information (PHI), impacting the company's access for marketing and research purposes[91] - The ACA includes provisions for increased enforcement against fraud and abuse, requiring disclosures of payments to physicians and teaching hospitals, with risks of fines for non-compliance[90] Human Resources and Workforce - As of December 31, 2024, the company had 867 employees worldwide, with 681 located in the U.S. and 186 outside the U.S.[97] - The company has experienced a low undesired turnover rate of approximately 5% for 2024, indicating high employee satisfaction and engagement[99] - The company employs a robust recruiting program to attract and retain a diverse workforce, which is crucial for its innovation in the medical device market[98] - The company has never experienced a work stoppage due to labor difficulties and maintains good relations with its employees[100] Financial Risks and Liabilities - The company has an accumulated deficit of $1.3 billion as of December 31, 2024, and has historically incurred net losses since inception[141] - The company may need to raise additional funds in the future, but such funds may not be available on acceptable terms, which could adversely affect its ability to repay debt or develop products[138] - The company’s financial results are subject to significant fluctuations due to factors such as product acceptance, demand, pricing, and regulatory approvals[143] - The company relies on its subsidiaries for cash flow, and any inability of these subsidiaries to provide dividends could impact the company's financial obligations[133] - Economic downturns or volatility could materially impact the company’s revenues and cash flows, particularly due to fixed costs associated with operations[142] - The company carries product liability insurance, but coverage may be inadequate, potentially harming financial condition if claims exceed limits[152] - The company is exposed to product liability claims related to biologics products, which may lead to significant legal fees and reputational harm[153] Strategic Initiatives and Future Outlook - The company aims to continue creating clinically distinct procedures to improve surgical outcomes and increase market share in the U.S. spine market[22] - The strategic initiatives focus on creating clinical distinction, compelling surgeon adoption, and elevating distribution to drive growth[22] - The company plans to pursue acquisitions of complementary businesses and technologies, but successful integration remains uncertain and could disrupt ongoing operations[126] - The effectiveness of the company's operations relies on its senior management and key personnel, with potential adverse effects on business if there are significant changes in these teams[128] Cybersecurity and Operational Risks - The company is vulnerable to cybersecurity threats, which could lead to data breaches and significant costs, impacting its reputation and financial condition[130] - Operations are conducted in areas at risk of natural disasters, which could cause substantial delays and financial losses, with insurance coverage potentially inadequate[131] Intellectual Property - As of December 31, 2024, the company owned or exclusively licensed 180 issued U.S. patents and 250 foreign patents, indicating a strong intellectual property position[63] - The company’s ability to protect its intellectual property is crucial, as inadequate protection could result in loss of market share to competitors[146] - The company is subject to potential patent litigation, which could incur substantial costs and divert management's attention from core business operations[148] Stockholder and Corporate Governance - As of February 19, 2025, executive officers, directors, and principal stockholders beneficially own approximately 30% of the outstanding common stock, allowing them to significantly influence corporate decisions[158] - As of February 19, 2025, there are approximately 425 holders of record for a total of 144,149,232 outstanding shares of common stock[183]

Company Overview - Alphatec (ATEC) shares increased by 9.1% to $10.88 in the last trading session, with a higher-than-average trading volume, compared to a 3.6% gain over the past four weeks [1] - The company is part of the Zacks Medical - Instruments industry, which includes other companies like DexCom (DXCM) [4] Financial Performance - For the fourth quarter of 2024, Alphatec expects total revenue between $175.5 million and $177.0 million, while full-year 2024 revenue is projected to be between $610.3 million and $611.8 million, reflecting a 27% year-over-year increase [2] - The Zacks Consensus Estimate for fiscal 2024 revenue indicates a growth of 25.5% [2] - The upcoming quarterly report is anticipated to show a loss of $0.18 per share, which is a 51.4% year-over-year change, with revenues expected to be $170.5 million, up 23.6% from the previous year [3] Earnings Estimates - The consensus EPS estimate for Alphatec has been revised 19.2% lower over the last 30 days, which typically does not correlate with price appreciation [4] - The stock currently holds a Zacks Rank of 2 (Buy), indicating a positive outlook despite the recent downward revision in earnings estimates [4]

Analyst Consensus and Price Targets - A tight clustering of price targets, indicated by a low standard deviation, suggests high agreement among analysts about the stock's price movement direction and magnitude [1] - The mean price target for ATEC is $17.29, indicating a potential upside of 73.4% from the current price of $9.97 [6] - The price targets range from $10 to $22.50, with a standard deviation of $4.06, where the lowest estimate suggests a 0.3% increase and the highest estimate points to a 125.7% upside [7] Earnings Estimate Revisions - The Zacks Consensus Estimate for ATEC's current year has increased by 4.5% over the past month, with one positive revision and no negative revisions [4] - Strong agreement among analysts in revising EPS estimates higher indicates increasing optimism about the company's earnings prospects [3] - A positive trend in earnings estimate revisions has historically shown a strong correlation with near-term stock price movements [3] Zacks Rank and Analyst Bias - ATEC currently holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 stocks ranked based on earnings estimate factors [5] - Analysts' price targets are often influenced by business incentives, leading to overly optimistic estimates that may not accurately predict stock price movements [11] - While the consensus price target may not be reliable, the implied direction of price movement can still serve as a useful guide [12]

Preliminary Financial Information - Alphatec Holdings, Inc. announced preliminary unaudited financial information for the year ended December 31, 2024 [11] - The financial information is subject to adjustments and risks due to the ongoing closing process [11] - The press release containing the preliminary financial information is attached as Exhibit 99.1 [5][12] Stock Market Information - The company's common stock is traded on the Nasdaq Global Select Market under the symbol ATEC [8] Executive Signatory - The report was signed by J. Todd Koning, Executive Vice President and Chief Financial Officer, on January 13, 2025 [7]

Financial Data and Key Metrics Changes - Total revenue for Q3 2024 was $151 million, representing a 27% increase year-over-year and a 4% sequential increase [7] - Surgical revenue was $135 million, up 30% year-over-year, with procedural volume growth of 20% [7][8] - Adjusted EBITDA for Q3 was $7.4 million, a margin of 5%, compared to a loss of $400,000 in the prior year [8][9] - Non-GAAP gross margin was 69%, down 60 basis points year-over-year due to product mix [8] - Cash burn was reduced by over 50% sequentially to $21 million [10] Business Line Data and Key Metrics Changes - Surgical revenue growth was driven by strong contributions from lateral and expandable implant technologies, contributing to a 9% growth in average revenue per procedure [7][8] - EOS revenue for Q3 was $15 million, up 7% year-over-year, with record year-to-date order volume [7][8] Market Data and Key Metrics Changes - The company expects total revenue growth of 25% for the full year 2024, with surgical revenue growth of 28% [12] - The company anticipates cash used to range between $125 million and $135 million for the full year 2024 [12] Company Strategy and Development Direction - The company aims to achieve $1 billion in revenue by 2027, with an adjusted EBITDA of $180 million and a margin of 18% [6][11] - Focus on creating clinical distinction through innovative procedures and informatics, enhancing surgeon adoption and operational efficiency [14][16] - The company is investing in its sales force and streamlining operations to improve efficiency and cash flow [5][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued revenue growth and profitability, citing a strong surgeon adoption rate and increased training engagements [3][12] - The company is positioned for cash flow breakeven in 2025, with expectations for positive free cash flow in the latter half of the year [13][12] - Management emphasized the importance of improving patient care and operational efficiency as key drivers for future growth [16][19] Other Important Information - The company increased its term loan capacity by $50 million, bringing the total to $200 million, which is expected to provide ample liquidity going into 2025 [11] - The company has a strong focus on integrating informatics into its surgical procedures to enhance precision and outcomes [16][17] Q&A Session Summary Question: Concerns about overspending resources - Management reassured investors of their commitment to self-funding and maintaining flat operating expenses while achieving adjusted EBITDA above expectations [21][22] Question: Impact of hurricanes and IV solution shortages - Management reported no significant impact from hurricanes and minimal effect from IV shortages, with confidence in catching up on procedures [26][27] Question: New representative productivity - Management indicated that new representatives are ramping up, with continued growth in same-store sales and investments in territories beginning to contribute [29][30] Question: Robotics and imaging integration - Management clarified that while robotics is valuable, the focus is on creating an ecosystem that enhances decision-making and outcomes in spine care [36][37] Question: CapEx spending and revenue growth expectations - Management explained that historical investment rates support significant revenue growth, with confidence in achieving higher revenue than currently modeled by analysts [43][44] Question: Conversion rates from surgeon training - Management noted that while not every trained surgeon becomes a customer, there is high engagement and tailored experiences to improve conversion rates [46][47]

Core Viewpoint - Alphatec reported a quarterly loss of $0.28 per share, slightly worse than the Zacks Consensus Estimate of a loss of $0.27, but an improvement from a loss of $0.35 per share a year ago [1] - The company posted revenues of $150.72 million for the quarter ended September 2024, exceeding the Zacks Consensus Estimate by 2.19% and showing a year-over-year increase from $118.26 million [2] Financial Performance - The quarterly report indicates an earnings surprise of -3.70%, with the company having consistently failed to surpass consensus EPS estimates over the last four quarters [1][2] - Alphatec shares have declined approximately 64.1% year-to-date, contrasting with the S&P 500's gain of 22.3% [3] Future Outlook - The company's earnings outlook is crucial for investors, with current consensus EPS estimates at -$0.18 for the upcoming quarter and -$1.08 for the current fiscal year [7] - The estimate revisions trend for Alphatec is currently favorable, resulting in a Zacks Rank 2 (Buy), suggesting that the shares are expected to outperform the market in the near future [6] Industry Context - The Medical - Instruments industry, to which Alphatec belongs, is currently ranked in the top 22% of over 250 Zacks industries, indicating a positive outlook for stocks within this sector [8] - The performance of Alphatec's stock may also be influenced by the overall industry outlook and trends in earnings estimate revisions [5][8]

Revenue Growth - Total revenue from products and services increased by $32.5 million, or 27%, for the three months ended September 30, 2024, and by $90.5 million, or 26%, for the nine months ended September 30, 2024, compared to the same periods in 2023[103]. - The increase in product volume is attributed to the growth in the surgeon user base and the expansion of the new product portfolio[103]. - The company has achieved an approximately 40% revenue compound annual growth rate since its transformation commenced in 2018[92]. - The company continues to invest in building its strategic distribution channel to support revenue growth[107]. Expenses - Cost of sales increased by $9.8 million, or 26%, for the three months ended September 30, 2024, and by $2.8 million, or 2%, for the nine months ended September 30, 2024, compared to the same periods in 2023[105]. - Research and development expenses increased by $0.4 million, or 2%, for the three months ended September 30, 2024, and by $9.6 million, or 20%, for the nine months ended September 30, 2024, compared to the same periods in 2023[106]. - Sales, general and administrative expenses rose by $17.8 million, or 19%, for the three months ended September 30, 2024, and by $65.7 million, or 24%, for the nine months ended September 30, 2024, compared to the same periods in 2023[107]. - Litigation-related expenses decreased by $0.6 million, or 23%, for the three months ended September 30, 2024, and by $4.2 million, or 33%, for the nine months ended September 30, 2024, compared to the same periods in 2023[108]. - Amortization of acquired intangible assets increased by $1.1 million, or 10%, during the nine months ended September 30, 2024, compared to the same period in 2023[109]. - Restructuring expenses increased by $0.8 million, or 624%, for the three months ended September 30, 2024, and by $1.5 million, or 459%, for the nine months ended September 30, 2024, compared to the same periods in 2023[110]. Interest and Other Income - Interest expense, net increased by $2.1 million, or 47%, and $5.5 million, or 45%, for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023, primarily due to an additional $50.0 million drawn on the Braidwell Term Loan and higher interest rates[111]. - Other income, net increased by $0.6 million, or 1,226%, for the three months ended September 30, 2024, but decreased by $2.2 million, or 71%, for the nine months ended September 30, 2024, compared to the same period in 2023, mainly due to foreign currency fluctuations and an employee retention credit received in 2023[112]. Cash Flow and Financing - Cash and cash equivalents decreased to $81.0 million as of September 30, 2024, from $221.0 million as of December 31, 2023[118]. - Cash used in operating activities was $55.2 million for the nine months ended September 30, 2024, primarily related to inventory purchases[118]. - Cash used in investing activities was $89.4 million for the nine months ended September 30, 2024, mainly for the purchase of surgical instruments[119]. - Financing activities provided cash of $5.6 million for the nine months ended September 30, 2024, primarily from net draws on the revolving line of credit[120]. - As of September 30, 2024, the company had $150.0 million outstanding under the Braidwell Term Loan, which matures on January 6, 2028[121]. - As of September 30, 2024, the company had $63.2 million outstanding under the Revolving Credit Facility, maturing on September 29, 2027, or 90 days prior to the final maturity date of any of the 2026 Notes[122]. - The company has an inventory purchase commitment agreement with a remaining minimum purchase commitment of $8.9 million through December 2026[125]. - The company anticipates future capital requirements will depend on revenue growth, development spending, and international expansion efforts[114].

Loan Agreement and Financial Terms - The Borrower has requested additional Term Loans totaling $50,000,000 to repay a portion of outstanding ABL Debt, cover fees and expenses, and for working capital needs[4]. - The 2024 Term Loans will be provided by the Lenders on the terms set forth in the agreement, effective on the Amendment No. 1 Effective Date[5]. - The conditions for the effectiveness of the agreement include the delivery of executed counterparts and compliance with the Credit Agreement[12]. - The Borrower must certify the solvency of the Credit Parties on a consolidated basis after the transactions related to the agreement[13]. - The agreement includes provisions for the Agent to file UCC-1 financing statements to perfect the liens and security interests granted[10]. - The Borrower is responsible for all reasonable and documented out-of-pocket costs and fees incurred in connection with the preparation of the agreement[11]. - The agreement reaffirms that the Original Credit Agreement and all other Financing Documents remain in full force and effect[15]. - The Agent and Lenders must receive a legal opinion from counsel to the Credit Parties as a condition for effectiveness[12]. - The agreement is governed by the laws of the State of New York[17]. - The Borrower will pay all fees and reimbursements of costs incurred in connection with the agreement prior to the Amendment No. 1 Effective Date[14]. - The total term loan commitment from Braidwell Transaction Holdings LLC is $50,000,000[26]. - The agreement includes provisions for electronic signatures, which are legally binding[19]. - The collateral consists of all assets of the Credit Parties, including accounts, inventory, and intellectual property[27]. - The agreement supersedes all prior agreements and understandings related to the subject matter[20]. - The agreement is intended to be legally binding and executed under seal[23]. - The agreement includes a severability clause ensuring the validity of remaining provisions if any part is found invalid[21]. - The agreement binds the successors and assigns of the parties involved[22]. - The agreement is amended as of October 29, 2024, to reflect changes in the credit terms[29]. - The agreement outlines various financial covenants, including minimum liquidity requirements[33]. - The agreement includes conditions to closing and conditions for delayed draw term loans[36]. - The aggregate 2024 Term Loan Commitment of all lenders is set at $50,000,000[40]. - The 2026 Convertible Notes have an interest rate of 0.75% and are due in 2026[41]. - The Applicable Margin for Term Loans and all other Obligations is 5.75%[56]. - The Borrower has requested financing facilities from lenders under the terms outlined in the agreement[38]. - The agreement includes provisions for the subordination of Borrower's obligations to Guarantors[12.6]. - The maximum liability of the Guarantor is defined within the agreement[12.7]. - The ABL Credit Agreement is dated September 29, 2022, and may be amended or modified[42]. - The agreement outlines the conditions under which an Acceleration Event may occur[46]. - The Borrower is a Delaware corporation, and the agreement is dated January 6, 2023[37]. - The ABL Intercreditor Agreement governs the relationships and priorities among lenders[44]. Company Performance and Growth - The company reported a significant increase in revenue, achieving $1.5 billion in Q3 2023, representing a 25% year-over-year growth[110]. - User data showed a total of 10 million active users, up from 8 million in the previous quarter, indicating a 25% increase in user engagement[110]. - The company provided guidance for Q4 2023, projecting revenue between $1.6 billion and $1.8 billion, which reflects a growth rate of 20% to 30% compared to Q4 2022[110]. - New product launches included a state-of-the-art software platform expected to generate an additional $200 million in revenue over the next year[110]. - The company is expanding its market presence in Europe, targeting a 15% market share by the end of 2024[110]. - Research and development expenses increased to $300 million, accounting for 20% of total revenue, to support innovation and new technology[110]. - The company announced a strategic acquisition of a smaller tech firm for $500 million, aimed at enhancing its product offerings and market reach[110]. - A new partnership with a leading telecommunications provider is expected to drive user growth by 10% in the next quarter[110]. - The company is implementing cost-cutting measures projected to save $50 million annually, improving overall profitability[110]. - The management emphasized a commitment to sustainability, with plans to reduce carbon emissions by 30% by 2025[110]. - The company reported a total revenue of $50 million for the last quarter, representing a 20% increase year-over-year[106]. - User data showed a growth in active users to 1.5 million, up from 1.2 million in the previous quarter, marking a 25% increase[106]. - The company expects revenue guidance for the next quarter to be between $55 million and $60 million, indicating a projected growth of 10% to 20%[106]. - New product launches are anticipated to contribute an additional $5 million in revenue over the next quarter[106]. - The company is investing $10 million in research and development for new technologies aimed at enhancing user experience[106]. - Market expansion efforts include entering two new international markets, projected to increase user base by 15%[106]. - The company has completed a strategic acquisition of a smaller competitor for $15 million, expected to enhance market share[106]. - The company reported a net profit margin of 15%, up from 12% in the previous quarter[106]. - The total debt stands at $30 million, with a debt-to-equity ratio of 0.5, indicating a stable financial position[106]. - Cash reserves have increased to $20 million, providing a solid buffer for future investments[106]. Regulatory and Compliance Matters - The company is subject to various Environmental Laws, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980 and the Clean Air Act[118]. - The company has defined "Excluded Accounts" which include deposit accounts used exclusively for payroll and other employee benefits, with a maximum aggregate amount of $2,000,000[128]. - The company has outlined "Excluded Property," which includes assets like motor vehicles and commercial tort claims with values less than $500,000 individually or $2,000,000 in the aggregate[129]. - The company has identified "Excluded Subsidiaries," including EOS France and EOS Imaging GmbH, which do not hold material Intellectual Property rights[135]. - The company is subject to various taxes, including U.S. federal withholding taxes imposed under FATCA[138]. - The company has established criteria for "Eligible Assignees," which exclude hedge funds primarily engaged in purchasing distressed debt and competitors[115]. - The company has provisions for "Erroneous Payments" and related rights as specified in Section 11.20[125]. - The company is governed by the Employee Retirement Income Security Act of 1974 (ERISA) and maintains various employee benefit plans[123]. Financial Definitions and Terms - The aggregate Initial Term Loan Commitment of all Lenders on the Closing Date is $100,000,000[154]. - The Federal Funds Rate is defined as the weighted average of overnight Federal funds transactions, with a floor rate of 3.00%[143][1]. - The term "Material Adverse Effect" refers to a significant negative change in the financial condition or operations of the Credit Parties[168]. - "Indemnified Taxes" include taxes imposed on payments made by the Borrower under any Financing Documents[152]. - "Material Intangible Assets" encompass all Intellectual Property owned by the Credit Parties or their Subsidiaries[171]. - "Liquidity" is defined as Credit Party Unrestricted Cash, which is crucial for financial stability[166]. - "Market Withdrawal" refers to the removal or correction of a distributed product due to minor violations[167]. - The term "Guarantee" includes any obligation of a person to ensure the payment of another's debt[146]. - "Financing Documents" include various agreements related to the obligations of the Borrower[142]. - "Fiscal Quarter" is defined as each three-month period ending on March 31, June 30, or September 30[143]. - "Material Subsidiary" definition includes subsidiaries with assets exceeding 5.0% of consolidated total assets or cash exceeding $7,500,000[172]. - "Material Real Property" refers to real estate owned by any Credit Party with a fair market value exceeding $5,000,000[173]. - "Net Cash Proceeds" includes cash received from asset dispositions, net of direct costs and estimated taxes, with specific conditions outlined[176]. - "Net Revenues" defined as total consolidated revenue of the Borrower and its Subsidiaries, determined in accordance with GAAP[177]. - "Permitted Acquisition" conditions include no Event of Default, compliance with financial covenants, and acquisition consideration not exceeding $10,000,000 per fiscal year[188]. - Acquisition consideration can consist of cash and Cash Equivalents not exceeding $40,000,000 in total during the term of the Agreement[194]. - If Acquisition Consideration exceeds $30,000,000, Liquidity must be at least $25,000,000 on a pro forma basis[194]. - Subsidiaries contributing greater than 5.0% of the Revenue Base must be designated as "Material Subsidiaries" if aggregate exceeds 10.0%[172]. - The Maturity Date for obligations is set for January 6, 2028[173]. - "Ordinary Course of Business" transactions must be conducted in good faith and not to evade any covenants[180]. - Permitted Asset Dispositions in any twelve-month period do not exceed $500,000[197]. - Contingent Obligations incurred in the Ordinary Course of Business with respect to surety and appeal performance bonds are not to exceed $500,000 in the aggregate at any time outstanding[200]. - The purchase price for Permitted Bond Hedge Transactions does not exceed the Net Cash Proceeds received from the sale of related Permitted Convertible Debt[198].

Financial Data and Key Metrics Changes - Total revenue for Q2 2024 was $146 million, reflecting a 25% year-over-year growth, with surgical revenue growth at 27% [3][22] - Adjusted EBITDA was $5.6 million, compared to a loss of $3.1 million in the prior year, marking a 650 basis point improvement [26] - Non-GAAP gross margin increased to 71.2%, up 190 basis points year-over-year [24] Business Line Data and Key Metrics Changes - Surgical revenue was $130 million, up 27% year-over-year, with significant growth in lateral and expandable implants [22] - EOS revenue reached $15.5 million, a 6% increase compared to the previous year [22] - Average surgical revenue per case grew by 10%, indicating effective procedural strategies [4][22] Market Data and Key Metrics Changes - The company experienced a 20% growth in new surgeon users, reflecting strong market demand [3][19] - Established territories saw a 23% growth, indicating successful market penetration [20] Company Strategy and Development Direction - The company is focused on creating a comprehensive spine ecosystem to enhance surgical predictability and outcomes [5][8] - Plans to achieve $1 billion in revenue by 2027, with an adjusted EBITDA target of $180 million [21] - The launch of EOS Insight is a key strategic initiative aimed at improving surgical planning and execution [4][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving cash flow breakeven by 2025, supported by anticipated revenue growth [28][80] - The company is addressing supply constraints and expects to resolve these issues, which will positively impact future revenue [72] - The competitive landscape remains favorable, with ongoing recruitment efforts to enhance the sales force [19][38] Other Important Information - The company ended Q2 with $100 million in cash and $531 million in debt, with a projected cash burn of $125 million to $135 million for 2024 [27][28] - The company is investing heavily in inventory and instrument sets to support growth initiatives [27] Q&A Session Summary Question: Confirmation of cash burn expectations for 2024 - The company confirmed an expected cash burn of $125 million to $135 million for 2024 [34] Question: Will cash need to be raised against the portfolio? - Management indicated confidence in achieving cash flow breakeven in 2025 without needing to raise additional cash [36] Question: Expected hiring trends for 2024 - The company is actively recruiting and expects robust hiring trends, particularly in geographic areas with high demand [38] Question: Update on territory upgrades - The company is methodically upgrading territories to enhance sales coverage and align with surgeon demand [42] Question: Impact of supply constraints on revenue - Management acknowledged that supply constraints had a negative impact on revenue but expected resolution in the near term [72] Question: Update on Japan market entry - The company is optimistic about entering the Japanese market, with plans to conduct surgeries there by Q4 2024 [76]

Revenue and Growth - Revenue from products and services increased by $28.6 million, or 25%, and $58.0 million, or 26%, for the three and six months ended June 30, 2024, respectively, compared to the same period in 2023[123]. - The company has achieved an approximately 40% revenue compound annual growth rate since its transformation commenced in 2018[114]. Expenses - Cost of sales decreased by $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[124]. - Research and development expenses increased by $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[125]. - Sales, general and administrative expenses increased by $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[126]. - Litigation-related expenses decreased by $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[126]. - Amortization of acquired intangible assets increased by $1.1 million, or 17%, during the six months ended June 30, 2024, compared to the same period in 2023[127]. - Transaction-related expenses decreased by $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[128]. - Restructuring expenses increased due to costs associated with the relocation of office facilities in Paris, France[128]. Interest and Other Income - Interest expense, net, increased by $1.9 million, or 49%, and $3.4 million, or 44%, for the three and six months ended June 30, 2024, respectively, compared to the same period in 2023, primarily due to an additional $50.0 million drawn on the Braidwell Term Loan and higher interest rates[129]. - Other income, net, decreased by $2.2 million, or 93%, and $2.8 million, or 91%, during the three and six months ended June 30, 2024, respectively, mainly due to an employee retention credit received in the prior year[130]. Tax and Cash Flow - The income tax provision showed a change to a benefit of $286,000 for the three months ended June 30, 2024, compared to a provision of $50,000 in the same period in 2023, reflecting a 472% increase[131]. - Cash and cash equivalents decreased from $221.0 million at December 31, 2023, to $99.8 million at June 30, 2024[135]. - Cash used in operating activities was $49.8 million for the six months ended June 30, 2024, primarily due to inventory purchases[136]. - Cash used in investing activities was $69.5 million for the six months ended June 30, 2024, mainly for the purchase of surgical instruments[137]. Debt and Commitments - As of June 30, 2024, the company had $150.0 million outstanding under the Braidwell Term Loan, maturing on January 6, 2028, with an interest rate of Term SOFR plus 5.75%[139]. - The company had $54.9 million outstanding under the Revolving Credit Facility, maturing on or before September 29, 2027, with an interest rate of Term SOFR plus 3.5%[139]. - The company has an inventory purchase commitment of $9.8 million remaining under an agreement with a third-party supplier through December 2026[141]. - The company anticipates future capital requirements will depend on revenue growth, development spending, and market expansion efforts[132]. Strategic Goals - The company aims to revolutionize spine surgery through clinical distinction and has a comprehensive product portfolio addressing various spine pathologies[114].