Revenue and Growth - Revenue from products and services for the year ended December 31, 2021, was $242.3 million, an increase of $101.2 million, or 72%, compared to $141.1 million for the year ended December 31, 2020[11]. - The percentage of revenue contribution from new products was 82% for the year ended December 31, 2021, compared to 67% in the prior year[21]. - Revenue from the strategic sales channel grew by 59% in 2021, with 97% of U.S. revenue driven by strategic independent distributors, up from 92% in 2020[25]. - The average revenue per surgeon and average revenue per surgery increased in 2021, driven by the growth in surgeon participation in the ATEC Experience program[24]. - Net sales of systems including polyaxial pedicle screws accounted for approximately 47% of total net sales for both 2021 and 2020, indicating their continued significance for future revenue[121]. Product Development and Innovation - The company launched a total of 10 new products and procedures in 2021, contributing to a comprehensive portfolio of over 80 products[21]. - The company plans to launch 8-10 new solutions each year going forward, building on the success of its recent product launches[30]. - The company expects to launch 8-10 new products during 2022 to enhance clinical outcomes across multiple pathologies[57]. - The research and development team is focused on increasing penetration in the U.S. spine market by developing technology platforms and products addressing degenerative and deformity spine pathologies[58]. - The company has transformed its development process to reduce the time frame from product concept to market commercialization, leveraging integrated teams[58]. Regulatory Compliance and Risks - The company’s products are subject to FDA regulation, requiring either 510(k) clearance or PMA approval for commercial distribution in the U.S.[77]. - The average FDA review time for 510(k) submissions is approximately six months, although the goal is to act within 90 days[81]. - The PMA process is more complex and costly than the 510(k) process, requiring extensive data to demonstrate safety and effectiveness, with a review period that can take up to several years[84]. - Compliance with FDA regulations post-market includes stringent quality system regulations, labeling requirements, and medical device reporting obligations[87]. - Non-compliance with FDA regulations can lead to significant penalties, including fines, recalls, and potential criminal prosecution[89]. Market Competition and Challenges - The spinal implant industry is highly competitive, with significant competitors including Medtronic, Johnson & Johnson, and Stryker, many of which have greater financial resources[71]. - The company operates in a highly competitive market with significant competition from established firms like Medtronic and Johnson & Johnson, which may affect its market position[118]. - The company must convince spine surgeons of the superiority of its products over competitors to drive sales and achieve growth[126]. - The company faces ongoing pressures from third-party payors, which may deny reimbursement for procedures involving its products if deemed not medically necessary[105]. Financial Position and Funding - As of December 31, 2021, Alphatec Holdings had cash and cash equivalents of $187.2 million, which is expected to be sufficient to fund planned expenditures for at least 12 months[158]. - The company has an accumulated deficit of $782.4 million as of December 31, 2021, indicating a history of net losses since inception[164]. - The company may need to raise additional funds in the future, which may not be available on acceptable terms, impacting its ability to fulfill cash obligations[159]. - The integration of the EOS business combination may incur significant transaction-related and restructuring costs, potentially affecting cash flows and operating results[155]. Employee and Corporate Governance - The company had 561 employees worldwide as of December 31, 2021, with 451 located in the U.S. and 110 outside the U.S.[108]. - Employee satisfaction was high, with over 95% of respondents in a December 2021 survey indicating a willingness to recommend the company as a desirable workplace[111]. - The company has approximately 30% of its outstanding common stock beneficially owned by executive officers, directors, and principal stockholders, allowing them to exert significant control over corporate decisions[186]. - The company has never declared or paid cash dividends on its capital stock and intends to retain all available funds for business operations and expansion[202]. Legal and Compliance Issues - The company is currently involved in patent litigation with NuVasive, Inc., which could result in liability for past damages and hinder the marketing of certain products if the outcome is unfavorable[176]. - An adverse outcome in the patent litigation may significantly harm the company's business operations and financial results, potentially affecting customer relationships and leading to negative publicity[177]. - The company faces potential product liability claims related to its medical devices, which could exceed insurance coverage and impact financial condition if claims are successful[178]. - The company is subject to fluctuations in stock price due to various factors, including product orders, quarterly results, and announcements regarding new products or strategic investments[182]. Strategic Initiatives and Future Outlook - The company aims to revolutionize spine surgery through clinical distinction and innovative approaches[207]. - Future growth will be driven by investment in research and development to differentiate solutions and improve spine surgery[208]. - The company is well-positioned to capitalize on current dynamics in the spine market[208].

Alphatec Holdings, Inc. (NASDAQ:ATEC) Q3 2021 Earnings Conference Call November 4, 2021 4:30 PM ET Company Participants Patrick Miles - Executive Chairman, CEO & President Todd Koning - CFO Conference Call Participants Brooks O'Neil - Lake Street Capital Markets Mathew Blackman - Stifel, Nicolaus & Company David Saxon - Needham & Company Matthew O'Brien - Piper Sandler & Co. Joshua Jennings - Cowen and Company Jason Wittes - Loop Capital Markets Kyle Rose - Canaccord Genuity Operator Good afternoon, everyon ...

Alphatec Holdings, Inc. (NASDAQ:ATEC) Q2 2021 Earnings Conference Call August 3, 2021 4:30 PM ET Company Participants Patrick Miles - Executive Chairman, CEO & President Todd Koning - CFO Conference Call Participants Brooks O'Neil - Lake Street Capital Markets Kyle Rose - Canaccord Genuity Joshua Jennings - Cowen and Company Matthew O'Brien - Piper Sandler & Co. Jason Wittes - Northland Capital Markets Sean Lee - H.C. Wainwright & Co. Operator Good afternoon, everyone, and welcome to the webcast of ATEC's S ...

PART I – FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Alphatec Holdings, Inc. as of June 30, 2021, and for the three and six-month periods then ended [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a significant increase in total assets to $441.0 million as of June 30, 2021, from $261.2 million at December 31, 2020 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $76,581 | $107,765 | | Inventories, net | $86,715 | $46,001 | | Total current assets | $206,359 | $184,160 | | Goodwill | $45,189 | $13,897 | | Intangible assets, net | $92,981 | $24,720 | | **Total assets** | **$441,027** | **$261,223** | | **Liabilities & Equity** | | | | Total current liabilities | $107,565 | $58,312 | | Long-term debt | $55,789 | $37,999 | | **Total liabilities** | **$203,910** | **$107,740** | | **Total stockholders' equity** | **$213,514** | **$129,880** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the second quarter of 2021, total revenue more than doubled to $62.2 million from $29.6 million in Q2 2020 Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $62,249 | $29,629 | $106,370 | $59,744 | | Gross profit | $41,065 | $20,842 | $72,923 | $41,873 | | Operating loss | ($35,752) | ($11,158) | ($54,798) | ($28,966) | | Net loss | ($38,205) | ($15,805) | ($61,108) | ($36,527) | | Net loss per share | ($0.39) | ($0.25) | ($0.66) | ($0.58) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2021, net cash used in operating activities was $35.1 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($35,110) | ($30,145) | | Net cash used in investing activities | ($124,847) | ($6,978) | | Net cash provided by financing activities | $128,769 | $21,098 | | **Net decrease in cash** | **($31,184)** | **($15,950)** | | Cash at beginning of period | $107,765 | $47,113 | | **Cash at end of period** | **$76,581** | **$31,163** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed information supporting the financial statements, including the EOS acquisition, revenue recognition, debt structure, and legal proceedings - The company is a medical technology firm focused on designing, developing, and marketing technology for treating spinal disorders[35](index=35&type=chunk) - On May 13, 2021, the company acquired a controlling interest in EOS imaging S.A. ("EOS"), a global medical device company specializing in low dose 2D/3D imaging and surgical planning, which now operates as a wholly owned subsidiary[37](index=37&type=chunk) - The company early adopted ASU 2020-06 on January 1, 2021, which simplifies accounting for convertible instruments, with no material impact on the financial statements[57](index=57&type=chunk) - In July 2021, subsequent to the reporting period, the company received confirmation from the SBA that its entire **$4.3 million PPP Loan was forgiven**[157](index=157&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, highlighting a 110% revenue increase in Q2 2021 driven by the EOS acquisition and organic growth from new products and an expanded sales network [Overview](index=28&type=section&id=Overview) The company is a medical technology firm focused on advancing technology for the surgical treatment of spinal disorders - The company's vision is to revolutionize spine surgery through clinical distinction and become the standard bearer in the field[160](index=160&type=chunk) - Growth is driven by introducing market-shifting innovation and expanding the sales network with high-quality exclusive and dedicated distributors[161](index=161&type=chunk)[162](index=162&type=chunk) [Recent Developments](index=28&type=section&id=Recent%20Developments) Key recent developments include the acquisition of EOS imaging S.A. on May 13, 2021, and the ongoing navigation of COVID-19 pandemic impacts on sales - Acquired EOS imaging S.A. on May 13, 2021, to integrate its low dose 2D/3D imaging and surgical planning technology into the company's procedural approach to spine surgery[163](index=163&type=chunk) - The COVID-19 pandemic has caused volatility in sales trends due to its impact on elective surgeries, with demand recovering as local conditions improve[164](index=164&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) For Q2 2021, total revenue grew 110% year-over-year to $62.2 million, with the EOS acquisition contributing 21% and organic product volume growth contributing 89% Comparison of Operating Results (in thousands) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | % Change | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total revenue | $62,249 | $29,629 | 110% | $106,370 | $59,744 | 78% | | Gross profit | $41,065 | $20,842 | 97% | $72,923 | $41,873 | 74% | | Total operating expenses | $76,817 | $32,000 | 140% | $127,721 | $70,839 | 80% | | Operating loss | ($35,752) | ($11,158) | 220% | ($54,798) | ($28,966) | 89% | | Net loss | ($38,205) | ($15,805) | 142% | ($61,108) | ($36,527) | 67% | - Revenue growth was primarily driven by the expansion of the new product portfolio, an increased surgeon user base, and the transformation of the sales network, supplemented by revenue from the EOS acquisition[176](index=176&type=chunk) - The increase in Sales, General and Administrative expenses was primarily due to higher compensation-related costs, variable selling expenses tied to revenue growth, and continued investment in the strategic distribution channel and sales and marketing functions[181](index=181&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) The company's cash position decreased by $31.2 million to $76.6 million as of June 30, 2021, primarily due to cash used for the EOS acquisition, partially offset by $131.8 million in net proceeds from a private placement - Cash decreased from **$107.8 million** at year-end 2020 to **$76.6 million** at June 30, 2021[185](index=185&type=chunk) - The primary use of cash was the acquisition of EOS, offset by **$131.8 million** in net proceeds from a private placement in March 2021[185](index=185&type=chunk) - The company has an **$85.0 million** Term Loan with Squadron Medical, with **$45.0 million** outstanding and **$40.0 million** available as of June 30, 2021[186](index=186&type=chunk)[187](index=187&type=chunk) - The **$4.3 million PPP Loan** was fully forgiven by the SBA in July 2021[188](index=188&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate risk from its $49.3 million in floating-rate debt, where a 100-basis point increase would decrease pre-tax income by approximately $0.5 million annually - The company has **$49.3 million** in outstanding floating-rate debt. A **100-basis point increase** in interest rates would decrease pre-tax income and cash flow by about **$0.5 million annually**[206](index=206&type=chunk) - The company is exposed to commodity price risk for materials like titanium and stainless steel, but a **10% price change** is not expected to have a material impact on operations[207](index=207&type=chunk) - The planned discontinuation of LIBOR after 2021 poses a risk, as it could lead to interest rate increases on the company's funding arrangements[214](index=214&type=chunk) [Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2021[208](index=208&type=chunk) - There were no material changes to internal control over financial reporting in the second quarter of 2021[209](index=209&type=chunk) - Due to the timing of the acquisition, the internal controls of EOS were excluded from the evaluation of effectiveness for this reporting period[209](index=209&type=chunk) PART II – OTHER INFORMATION [Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, most notably ongoing litigation with NuVasive, Inc., with no material accruals recorded as a loss is not considered probable - The company is involved in various legal proceedings arising from its business activities, with litigation being inherently unpredictable[210](index=210&type=chunk) - The company has not recorded a contingent liability for the ongoing litigation with NuVasive, Inc., as a loss is considered possible but not probable, and a range of potential charges cannot be reasonably estimated[118](index=118&type=chunk)[211](index=211&type=chunk) [Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) The company highlights new material risks following the EOS acquisition, including integration challenges, global operational risks, and potential interest rate increases due to LIBOR discontinuation - Significant management attention and resources will be required to integrate the business practices and operations of EOS, with transaction and restructuring costs potentially reducing near-term synergies[212](index=212&type=chunk) - Global operations are subject to risks including currency fluctuations, political or economic instability, trade restrictions, and compliance with regulations like the U.S. Foreign Corrupt Practices Act[213](index=213&type=chunk) - The planned discontinuation of the LIBOR benchmark rate after 2021 could result in interest rate increases on the company's funding arrangements, adversely affecting cash flows[214](index=214&type=chunk) [Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer and financial statements in iXBRL format - Lists filed exhibits, including certifications by the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk) - Includes the financial statements and notes formatted in iXBRL (Inline eXtensible Business Reporting Language)[221](index=221&type=chunk)

Financial Data and Key Metrics Changes - In Q1 2021, U.S. revenue reached $43.7 million, reflecting a 50% growth year-over-year, while total revenue was $44.1 million, up 47% compared to the prior year [21][22] - Non-GAAP U.S. gross margin was 77.9%, consistent with the prior year, while operating expenses increased to $42 million, approximately 95% of sales, reflecting investments in growth [22][24] - Cash usage was approximately $34 million in Q1, primarily driven by capital expenditures, which accounted for over 62% of cash burn [25] Business Line Data and Key Metrics Changes - The company reported a 50% year-over-year growth in revenue, with 77% of revenue coming from new product contributions [4][20] - Average revenue per surgeon grew by 17% year-over-year, and average revenue per case increased by 13% [4][14] - The average products sold per surgery slightly increased to above 1.9 categories [13] Market Data and Key Metrics Changes - The company noted a slight dip in surgical volumes early in Q1, but March showed a breakout month, indicating a potential backlog of procedures [32][33] - The company is focused on expanding its geographical presence, with significant opportunities in major metro areas where it currently lacks representation [46][19] Company Strategy and Development Direction - The company aims to revolutionize spine surgery through the launch of new products like PTP and InVictus, emphasizing clinical distinction and surgeon adoption [4][10] - The strategy includes revitalizing the sales force and expanding the distribution network to enhance market coverage [18][19] - The company is committed to organic innovation and developing a comprehensive product portfolio to address various surgical needs [12][15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's growth trajectory, citing a strong start to 2021 and an increase in full-year revenue guidance to approximately $188 million, implying a 33% year-over-year growth [26][27] - The management highlighted the importance of clinical outcomes and predictive analytics in driving future growth and improving surgical procedures [16][60] - The company is focused on integrating EOS technology to enhance preoperative planning and improve surgical outcomes [60][75] Other Important Information - The company secured approximately $132 million through PIPE funding, ending the quarter with over $190 million in cash, with plans to invest in growth initiatives [24] - The EOS transaction is progressing as planned, with expectations to close during the current quarter [25][26] Q&A Session Summary Question: What is the current marketplace activity and backlog of procedures? - Management noted softness in January and February, with March showing improvement and a potential backlog of procedures to capture [32][33] Question: What is the status of PTP and its adoption? - Management indicated that PTP is in the early phases of adoption, with surgeons starting with simpler procedures and gradually moving to more complex surgeries [40][41] Question: Can you elaborate on the distribution channel and exclusivity? - Management emphasized the need for strong clinical acumen in the distribution network and highlighted significant geographical gaps that need to be filled [46][19] Question: What is the value proposition for EOS? - Management stated that EOS offers immediate value with its new imaging technology, which significantly improves surgical decision-making [75][76]

Financial Performance - U.S product revenue increased by 50% year-over-year, reaching $43.7 million in Q1 2021 compared to $29.1 million in Q1 2020[58] - Total revenue grew by 47% year-over-year, amounting to $44.1 million in Q1 2021 versus $30.1 million in Q1 2020[59] - U.S gross profit increased by 50% year-over-year, reaching $34.1 million in Q1 2021 compared to $22.7 million in Q1 2020[62] - The company maintains a positive net cash position, with $191 million in cash and $60 million in debt[63] Growth Drivers - New product revenue contributed 17% in Q1 2021, compared to 56% in Q1 2020 and less than 10% in FY2018[8] - Revenue per surgeon increased by 17% year-over-year[8,39] - Average revenue per case grew by 13% year-over-year[8] - U.S revenue growth from strategic distribution was 60%[53] Future Outlook - The company anticipates U.S revenue of approximately $188 million, representing a 33% year-over-year increase for FY 2021[68] - Total revenue for FY 2021 is projected to be around $190 million, indicating a 31% year-over-year growth[69] - International revenue is expected to be approximately $2 million, a decrease of 47% year-over-year for FY 2021[69]

[PART I – FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements and MD&A for Q1 2021 [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited condensed consolidated financial statements for Q1 2021, covering balance sheets, operations, cash flows, and key event notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets rose to **$404.5 million** by March 31, 2021, driven by a **$191.1 million** cash increase from a private placement | Metric | March 31, 2021 (in thousands) | Dec 31, 2020 (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash | $191,137 | $107,765 | | Inventories, net | $57,376 | $46,001 | | Total Assets | $404,503 | $261,223 | | **Liabilities & Equity** | | | | Total Current Liabilities | $70,149 | $58,312 | | Long-term debt, less current portion | $38,580 | $38,034 | | Contingently redeemable common stock | $131,838 | $0 | | Total Stockholders' Equity | $108,292 | $129,880 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2021 total revenue grew **47%** to **$44.1 million**, gross profit up **51%**, but net loss widened to **$22.9 million** due to higher expenses | Metric | Q1 2021 (in thousands) | Q1 2020 (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue from U.S. products | $43,716 | $29,070 | +50.4% | | Total revenue | $44,121 | $30,115 | +46.5% | | Gross profit | $31,858 | $21,031 | +51.5% | | Operating loss | ($19,046) | ($17,808) | +7.0% | | Net loss | ($22,903) | ($20,722) | +10.5% | | Net loss per share | ($0.26) | ($0.33) | N/A | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2021 cash flows: **$18.6 million** used in operations, **$26.0 million** in investing, **$130.8 million** from financing, resulting in **$191.1 million** cash balance | Cash Flow Activity | Q1 2021 (in thousands) | Q1 2020 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | ($18,604) | ($17,048) | | Net cash used in investing activities | ($25,994) | ($2,629) | | Net cash provided by (used in) financing activities | $130,776 | ($39) | | Net increase (decrease) in cash | $83,372 | ($19,647) | | Cash at end of period | $191,137 | $27,466 | - Financing activities were dominated by **$131.8 million** in proceeds from a public offering (private placement)[27](index=27&type=chunk) - Investing activities included **$15.2 million** for purchases of property and equipment and **$9.1 million** in cash paid for the investment in EOS[27](index=27&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the **$116.9 million** EOS acquisition, **$138.0 million** private placement, **$45.0 million** Term Loan, **$4.3 million** PPP Loan, and NuVasive litigation - The company initiated a tender offer to acquire EOS imaging S.A. for up to **$116.9 million**, with the transaction expected to close in Q2 2021[32](index=32&type=chunk)[141](index=141&type=chunk) - A private placement of **12,421,242** shares at **$11.11** per share closed on March 1, 2021, raising gross proceeds of **$138.0 million**. These shares are contingently redeemable if the EOS acquisition does not close by July 31, 2021, and are therefore classified outside of stockholders' equity[112](index=112&type=chunk) - As of March 31, 2021, the company had **$45.0 million** in principal outstanding under its Term Loan with Squadron Medical and a **$4.3 million** PPP Loan for which a forgiveness application was under review[66](index=66&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) - The company is engaged in ongoing patent litigation with NuVasive, Inc. Management believes the claims lack merit and has not recorded an accrual for a contingent liability, as a loss is not considered probable or reasonably estimable[85](index=85&type=chunk)[92](index=92&type=chunk) | Metric | Q1 2021 (in thousands) | Q1 2020 (in thousands) | | :--- | :--- | :--- | | Total Revenue | $44,121 | $30,115 | | Gross Profit | $31,858 | $21,031 | | Operating Loss | ($19,046) | ($17,808) | | Net Loss | ($22,903) | ($20,722) | | Metric | March 31, 2021 (in thousands) | Dec 31, 2020 (in thousands) | | :--- | :--- | :--- | | Total Assets | $404,503 | $261,223 | | Total Liabilities | $140,770 | $107,739 | | Total Stockholders' Equity | $108,292 | $129,880 | | Cash Flow Activity | Q1 2021 (in thousands) | Q1 2020 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | ($18,604) | ($17,048) | | Net cash used in investing activities | ($25,994) | ($2,629) | | Net cash provided by financing activities | $130,776 | ($39) | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A highlights Q1 2021 **47%** revenue growth to **$44.1 million** from U.S. product sales and new product adoption, covering EOS acquisition, COVID-19 impact, and liquidity - The company's growth strategy focuses on product innovation and transitioning to a more dedicated and loyal sales channel[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) - The strategic distribution channel's contribution to U.S. revenue increased to **95%** in Q1 2021 from **89%** in Q1 2020, demonstrating progress in sales network transformation[140](index=140&type=chunk)[157](index=157&type=chunk) - Management believes its existing cash of **$191.1 million** (including **$103.3 million** in escrow for the EOS acquisition) and available borrowings are adequate to fund operations, capital needs, and strategic initiatives[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) [Overview](index=25&type=section&id=Overview) Alphatec focuses on spine surgery innovation and sales channel expansion, with the EOS acquisition expected in Q2 2021 and recovering demand post-COVID-19 volatility - The company's primary focus is on designing, developing, and advancing technology for the surgical treatment of spinal disorders[137](index=137&type=chunk) - A public tender offer was commenced to acquire EOS imaging S.A. for a total purchase price of up to **$116.9 million**, funded in part by a private placement that raised net proceeds of **$131.8 million**[141](index=141&type=chunk)[143](index=143&type=chunk) - The COVID-19 pandemic caused volatility in sales trends due to the impact on elective surgeries, but demand has since recovered to varying degrees[144](index=144&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Q1 2021 total revenue grew **47%** to **$44.1 million**, U.S. product revenue up **50%** from new products, gross margin improved to **72.2%**, operating expenses rose **31%** | Metric | Q1 2021 (in thousands) | Q1 2020 (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $44,121 | $30,115 | +47% | | U.S. Product Revenue | $43,716 | $29,070 | +50% | | Gross Profit | $31,858 | $21,031 | +51% | | Gross Margin | 72.2% | 69.8% | +2.4 p.p. | - Revenue from new products increased to approximately **77%** of U.S. product revenue, up from **56%** in the prior-year period[157](index=157&type=chunk) - Sales, general and administrative (SG&A) expenses increased by **$12.8 million** (**47%**) due to higher compensation-related costs and variable selling expenses tied to revenue growth[162](index=162&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) Cash increased to **$191.1 million** by March 31, 2021, due to a **$131.8 million** private placement, providing sufficient liquidity with **$45.0 million** Term Loan outstanding - Cash increased to **$191.1 million** at March 31, 2021, from **$107.8 million** at Dec 31, 2020, mainly due to a **$131.8 million** private placement[167](index=167&type=chunk) - The company has an **$85.0 million** Term Loan with Squadron Medical, with **$45.0 million** outstanding and **$40.0 million** available in additional borrowings[168](index=168&type=chunk)[169](index=169&type=chunk) - The company received a **$4.3 million** PPP loan in April 2020 and submitted an application for forgiveness in November 2020, which was still under review[170](index=170&type=chunk)[171](index=171&type=chunk) | Obligation Type | Total (in thousands) | | :--- | :--- | | Squadron Medical Term Loan | $45,000 | | Facility lease obligations | $35,034 | | Litigation settlement obligations, gross | $11,733 | | **Total Contractual Obligations** | **$134,746** | [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Interest rate risk on **$49.3 million** floating-rate debt could reduce pre-tax income by **$0.5 million** annually with a **100-basis point** increase, commodity risk is immaterial - The company is exposed to interest rate risk on **$49.3 million** of outstanding floating-rate debt. A **100-basis point (1%)** increase in interest rates would decrease pre-tax income and cash flow by approximately **$0.5 million** annually[188](index=188&type=chunk) - Commodity price risk from raw materials such as titanium and stainless steel is not considered to have a material impact on results of operations[190](index=190&type=chunk) [Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 31, 2021, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[191](index=191&type=chunk) - No material changes were made to the internal control over financial reporting during the first quarter of 2021[192](index=192&type=chunk) [PART II – OTHER INFORMATION](index=35&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, unregistered equity sales, other information, and exhibits [Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) Refers to Note 6 for details on ongoing NuVasive, Inc. litigation, with no material accruals as loss is not probable or estimable - The company refers to Note 6 for details regarding the NuVasive, Inc. litigation[195](index=195&type=chunk) - The company has not accrued an estimated loss contingency for litigation, as it is not considered probable that a liability has been incurred and the amount cannot be reasonably estimated[194](index=194&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from 2020 Annual Report, except for LIBOR discontinuation risk which could increase funding interest rates - There have been no material changes to risk factors from the 2020 Annual Report on Form 10-K, except for the risk related to LIBOR discontinuation[196](index=196&type=chunk) - The discontinuation of LIBOR after 2021 could result in interest rate increases on the company's funding arrangements, which could adversely affect cash flows and operating results[196](index=196&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Report indicates 'None' for this item, meaning no unregistered equity sales or use of proceeds beyond prior disclosures - The company reported 'None' for this item[197](index=197&type=chunk) [Other Information](index=35&type=section&id=Item%205.%20Other%20Information) Report indicates 'None' for this item, meaning no other material information required disclosure was not already covered - The company reported 'None' for this item[197](index=197&type=chunk) [Exhibits](index=36&type=section&id=Item%206.%20Exhibits) Exhibits filed with the 10-Q report include an employment agreement, CEO/CFO certifications, and iXBRL financial data files - Exhibits filed include an employment agreement, CEO and CFO certifications pursuant to the Sarbanes-Oxley Act, and iXBRL data files[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk)