Alphatec (ATEC) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's financial analysis Item 1. Financial Statements This section presents Alphatec Holdings' unaudited condensed consolidated financial statements and detailed notes for Q2 2025 and prior periods Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets (in thousands) | Asset/Liability/Equity | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :------------------ | | Assets | | | | Cash and cash equivalents | $157,063 | $138,840 | | Accounts receivable, net | $95,919 | $82,987 | | Inventories | $169,760 | $175,264 | | Total current assets | $443,326 | $417,399 | | Property and equipment, net | $139,729 | $156,394 | | Goodwill | $75,218 | $70,976 | | Intangible assets, net | $95,593 | $93,518 | | Total assets | $790,293 | $775,710 | | Liabilities | | | | Accounts payable | $47,240 | $52,984 | | Accrued expenses and other current liabilities | $87,013 | $81,466 | | Total current liabilities | $154,184 | $153,026 | | Long-term debt | $551,988 | $574,522 | | Total liabilities and stockholders' equity (deficit) | $790,293 | $775,710 | | Stockholders' Equity (Deficit) | | | | Total stockholders' equity (deficit) | $23,771 | $(14,169) | - Total assets increased by $14.583 million from $775.710 million at December 31, 2024, to $790.293 million at June 30, 2025[11] - Total stockholders' equity (deficit) significantly improved from a deficit of $(14.169) million to a positive $23.771 million[11] Condensed Consolidated Statements of Operations This section outlines the company's financial performance over specific periods, including revenue, costs, and net loss Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue from products and services | $185,544 | $145,573 | $354,724 | $284,050 | | Cost of sales | $56,443 | $42,979 | $109,627 | $84,105 | | Gross profit | $129,101 | $102,594 | $245,097 | $199,945 | | Operating loss | $(13,085) | $(35,307) | $(57,376) | $(78,648) | | Net loss | $(41,144) | $(40,680) | $(93,051) | $(89,175) | | Net loss per share, basic and diluted | $(0.27) | $(0.29) | $(0.63) | $(0.63) | - Revenue from products and services increased by 27% for the three months ended June 30, 2025, and by 25% for the six months ended June 30, 2025, compared to the same periods in 2024[14] - Operating loss significantly narrowed for both periods, indicating improved operational efficiency[14] Condensed Consolidated Statements of Comprehensive Loss This section details the company's comprehensive loss, including net loss and other comprehensive income/loss items Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(41,144) | $(40,680) | $(93,051) | $(89,175) | | Foreign currency translation adjustments | $6,208 | $(742) | $9,423 | $(3,206) | | Comprehensive loss | $(34,936) | $(41,422) | $(83,628) | $(92,381) | - The comprehensive loss decreased for both the three and six months ended June 30, 2025, primarily due to positive foreign currency translation adjustments, which offset the net loss[16] Condensed Consolidated Statements of Stockholders' Equity (Deficit) This section tracks changes in stockholders' equity (deficit) over time, reflecting transactions and comprehensive loss Key Changes in Stockholders' Equity (Deficit) (in thousands) | Item | Six Months Ended June 30, 2025 Impact | Six Months Ended June 30, 2024 Impact | | :--------------------------------------- | :------------------------------------ | :------------------------------------ | | Balance at December 31, 2024/2023 | $(14,169) (2024) | $78,116 (2023) | | Stock-based compensation | $37,942 | $34,282 | | Common stock issued for stock option exercises | $505 | $156 | | Common stock issued for vesting of performance and restricted stock awards, net of shares retained for tax liability | $(3,515) | $(7,825) | | Purchase of capped calls | $(42,485) | — | | Foreign currency translation adjustments | $9,423 | $(3,206) | | Net loss | $(93,051) | $(89,175) | | Reclassification of equity-based liability | $123,441 | $1,839 | | Common stock issued for warrant exercises | $52 | $150 | | Common stock issued for employee stock purchase plan and stock option exercises | $2,326 | $2,524 | | Common stock issued for asset acquisition | $1,000 | $250 | | Warrant modification | $2,301 | — | | Balance at June 30, 2025/2024 | $23,771 | $17,111 | - Total stockholders' equity (deficit) improved significantly from a deficit of $(14.169) million at December 31, 2024, to a positive $23.771 million at June 30, 2025[18] - This was primarily driven by a large reclassification of equity-based liability ($123.441 million) and stock-based compensation, partially offset by net loss and the purchase of capped calls[18] Condensed Consolidated Statements of Cash Flows This section summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------- | :----------------------------- | :----------------------------- | | Operating activities | $10,509 | $(49,832) | | Investing activities | $(23,785) | $(69,512) | | Financing activities | $31,125 | $(1,128) | | Effect of exchange rate changes on cash | $374 | $(670) | | Net change in cash and cash equivalents | $18,223 | $(121,142) | | Cash and cash equivalents at end of period | $157,063 | $99,828 | - The company generated $10.509 million in cash from operating activities for the six months ended June 30, 2025, a significant improvement from a cash usage of $(49.832) million in the prior year[22] - Financing activities provided $31.125 million, primarily from convertible notes issuance, leading to a net increase in cash and cash equivalents of $18.223 million[22] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. Organization and Significant Accounting Policies This note details Alphatec Holdings' business, consolidation principles, key accounting policies, and recent accounting pronouncement assessments - The Company is a medical technology company specializing in spinal disorder treatment, marketing products in the U.S. and internationally[23] - Revenue is primarily derived from sales of spinal implant products, imaging equipment, and related services, recognized when control transfers to customers[33] - The FASB issued ASU No. 2023-09 (Income Taxes) effective for fiscal years after December 15, 2024, and ASU No. 2024-03/2025-01 (Expense Disaggregation Disclosures) effective for fiscal years after December 15, 2026, both of which the Company is assessing for impact[38][39] 2. Fair Value Measurements The company measures certain assets and liabilities at fair value on a recurring basis, primarily cash equivalents (money market funds) and long-term debt (convertible notes). Money market funds are classified as Level 2, while the 2026 and 2030 Senior Convertible Notes are valued using Level 1 inputs (quoted market prices) Fair Value Measurements (in thousands) | Asset | June 30, 2025 (Level 2) | December 31, 2024 (Level 2) | | :------------------ | :---------------------- | :-------------------------- | | Money market funds | $15,547 | $57,006 | | Debt Instrument | June 30, 2025 (Level 1) | December 31, 2024 (Level 1) | | :-------------------------- | :---------------------- | :-------------------------- | | 2026 Notes | $62,300 | $299,600 | | 2030 Notes | $415,000 | — | 3. Inventories Inventories are reported at the lower of cost or net realizable value, consisting of raw materials and finished goods. Total inventories decreased from $175.264 million at December 31, 2024, to $169.760 million at June 30, 2025 Inventories (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :------------------ | | Raw materials | $21,470 | $19,378 | | Finished goods | $148,290 | $155,886 | | Total Inventories | $169,760 | $175,264 | 4. Property and Equipment, net Property and equipment, net, decreased from $156.394 million at December 31, 2024, to $139.729 million at June 30, 2025. This change is primarily due to accumulated depreciation, which totaled $30.8 million for the six months ended June 30, 2025 Property and Equipment, net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :------------------ | | Surgical instruments | $291,363 | $283,597 | | Machinery and equipment | $13,040 | $12,710 | | Computer equipment | $32,183 | $32,082 | | Office furniture and equipment | $6,519 | $6,759 | | Leasehold improvements | $4,399 | $4,321 | | Construction in progress | $598 | $541 | | Less: accumulated depreciation and amortization | $(208,373) | $(183,616) | | Property and equipment, net | $139,729 | $156,394 | - Total depreciation and amortization expense was $30.8 million for the six months ended June 30, 2025, compared to $29.5 million for the same period in 2024[43] 5. Goodwill and Intangible Assets Goodwill increased to $75.218 million at June 30, 2025, primarily due to foreign currency fluctuations. Intangible assets, net, also increased to $95.593 million, with developed product technology being the largest component. Amortization expense for intangible assets was $8.5 million for the six months ended June 30, 2025 Goodwill (in thousands) | Date | Amount | | :---------------- | :------- | | December 31, 2024 | $70,976 | | Foreign currency fluctuation | $4,242 | | June 30, 2025 | $75,218 | Intangible Assets, net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :------------------ | | Developed product technology | $62,044 | $64,357 | | Internally developed software | $11,131 | $2,768 | | Trademarks and trade names | $3,472 | $3,276 | | Customer relationships | $3,744 | $3,902 | | Software in development | $6,917 | $12,927 | | In-process research and development | $8,285 | $6,285 | | Total intangible assets, net | $95,593 | $93,518 | - Total amortization expense attributed to intangible assets was $8.5 million for the six months ended June 30, 2025, compared to $8.3 million for the same period in 2024[45] 6. Contract Assets and Contract Liabilities Contract assets, representing revenue recognized but contingent on further performance, decreased from $5.678 million at December 31, 2024, to $3.968 million at June 30, 2025. Contract liabilities, or deferred revenue, increased slightly to $14.055 million, with $11.497 million classified as current Contract Assets and Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :------------------ | | Contract assets | $3,968 | $5,678 | | Total Contract liabilities | $14,055 | $13,598 | | Current portion of contract liabilities | $11,497 | $10,467 | - The Company recognized $7.8 million of revenue from the opening contract liabilities balance for the six months ended June 30, 2025[48] 7. Debt This note details the issuance of $405.0 million in 2030 Convertible Notes, repurchase of 2026 Notes, and other debt obligations - Issued $405.0 million aggregate principal amount of 0.75% Convertible Senior Notes due 2030 in March 2025, with an initial conversion price of approximately $15.54 per share[49][50] - Repurchased 80% of the 2026 Convertible Notes for $268.4 million in March 2025, leading to a $17.6 million loss on debt extinguishment for the six months ended June 30, 2025[74] Outstanding Debt Balances and Key Terms (in thousands) | Debt Instrument | Principal Outstanding (June 30, 2025) | Interest Rate (June 30, 2025) | Maturity Date | Net Carrying Value (June 30, 2025) | | :-------------------------------- | :------------------------------------ | :---------------------------- | :------------ | :--------------------------------- | | 2030 Convertible Senior Notes | $405,000 | 0.75% (effective 9.1%) | March 15, 2030 | $275,069 | | Braidwell Term Loan | $200,000 | 10.19% (effective 11.7%) | January 6, 2028 | $200,000 (principal) | | Revolving Credit Facility | $15,000 | 7.94% | Sept 29, 2027 (or earlier) | $15,000 (principal) | | 2026 Convertible Senior Notes | $63,250 | 0.75% (effective 1.4%) | August 1, 2026 | $62,801 | | Other Debt (PGE loans) | $2,800 | 0.98% - 1.25% | 2027 | $2,800 (principal) | Future Principal Payments on Debt (in thousands) | Period | Amount | | :---------------- | :------- | | Remainder of 2025 | $1,259 | | 2026 | $64,689 | | 2027 | $15,600 | | 2028 | $206,500 | | 2029 | — | | Thereafter | $405,000 | | Total Principal | $693,048 | 8. Derivative Liability The embedded conversion option of the 2030 Notes was initially accounted for as a derivative liability. However, in June 2025, the conditions for separate accounting were no longer met, leading to its reclassification to additional paid-in capital. The change in fair value of this derivative liability resulted in a $16.780 million loss for the three months ended June 30, 2025, and a $0.620 million gain for the six months ended June 30, 2025 Change in Conversion Option Derivative Liability (in thousands) | Item | Amount | | :-------------------------------- | :------- | | December 31, 2024 | $— | | Addition of derivative liability | $124,062 | | Change in fair value (Q1 2025) | $(17,400) | | March 31, 2025 | $106,661 | | Change in fair value (Q2 2025) | $16,780 | | Reclassification to shareholders' equity | $(123,441) | | June 30, 2025 | $— | - A loss of $16.780 million on derivative liability was recognized for the three months ended June 30, 2025, while a gain of $620 thousand was recognized for the six months ended June 30, 2025, due to changes in valuation and subsequent reclassification[14][83] 9. Commitments and Contingencies The company has various operating lease agreements, a minimum purchase commitment, and is involved in legal proceedings, including a recent litigation settlement Future Minimum Annual Lease Payments (in thousands) | Period | Amount | | :---------------------- | :------- | | Remainder of 2025 | $3,666 | | 2026 | $6,864 | | 2027 | $6,736 | | 2028 | $6,208 | | 2029 | $6,123 | | Thereafter | $10,698 | | Total undiscounted lease payments | $40,295 | - The company has a remaining minimum purchase commitment of $7.5 million with a third-party supplier through December 2026[88] - A litigation settlement was recorded in May 2025, contributing to litigation-related expenses for the six months ended June 30, 2025[90] 10. Stock-Benefit Plans and Equity Transactions This note details stock-based compensation, outstanding warrants, and a new salary-to-equity conversion program for executive officers Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :-------------------------- | :------------------------------- | :----------------------------- | | Cost of sales | $553 | $3,596 | | Research and development | $4,159 | $7,803 | | Sales, general and administrative | $10,912 | $26,543 | | Total | $15,624 | $37,942 | - As of June 30, 2025, there was $75.1 million of unrecognized compensation expense for RSUs and PRSUs, to be recognized over a weighted average period of 1.83 years[94] Outstanding Warrants for Common Stock (as of June 30, 2025, in thousands, except strike price) | Warrant Type | Number of Warrants | Strike Price | Expiration | | :-------------------------- | :----------------- | :----------- | :----------------------- | | 2018 Squadron Medical Warrants | 845 | $3.15 | May 2027 | | 2019 Squadron Medical Warrants | 4,839 | $2.17 | May 2027 | | 2020 Squadron Medical Warrants | 1,076 | $4.88 | May 2027 | | Executive Warrants | 1,327 | $5.00 | December 2026 | | Other | 90 | $12.15 | Various through June 2026 | - A salary conversion plan was adopted on March 31, 2025, reducing cash base salaries for certain executive officers by 10% to 50% in exchange for RSUs[103] 11. Business Segment and Geographic Information The company operates as a single business segment, with revenue primarily generated in the United States - The Company operates in one business segment, with consolidated net loss as the measure of segment profit or loss[104] Net Revenue and Property and Equipment, net, by Geographic Region (in thousands) | Region | Revenue (Six Months Ended June 30, 2025) | Property and equipment, net (June 30, 2025) | | :------------- | :--------------------------------------- | :------------------------------------------ | | United States | $334,138 | $137,940 | | International | $20,586 | $1,789 | | Total | $354,724 | $139,729 | 12. Net Loss Per Share Basic and diluted net loss per share were $(0.27) and $(0.63) for the three and six months ended June 30, 2025, respectively, with anti-dilutive shares excluded Net Loss Per Share (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--------------------------------- | :------------------------------- | :----------------------------- | | Net loss | $(41,144) | $(93,051) | | Weighted average common shares outstanding | 149,907 | 148,337 | | Net loss per share, basic and diluted | $(0.27) | $(0.63) | Potentially Dilutive Shares Excluded from Diluted EPS (as of June 30, 2025, in thousands) | Category | Amount | | :--------------------------------------- | :------- | | Options to purchase common stock and ESPP | 2,050 | | Unvested restricted stock unit awards | 8,911 | | Warrants to purchase common stock | 8,177 | | 2026 Notes | 3,449 | | 2030 Notes | 34,527 | | Total | 57,114 | 13. Income Taxes The company's effective tax rate was significantly lower than the federal statutory rate due to its net loss position and valuation allowance Effective Tax Rate from Operations | Period | Effective Tax Rate (2025) | Effective Tax Rate (2024) | | :-------------------------- | :------------------------ | :------------------------ | | Three Months Ended June 30 | 0.09% | 0.70% | | Six Months Ended June 30 | 0.11% | 0.40% | - The effective tax rate differs from the federal statutory rate of 21% primarily due to the Company's net loss position and valuation allowance[109] 14. Related Party Transactions The company purchases inventory from a Squadron Supplier Affiliate, with $5.1 million in purchases for the six months ended June 30, 2025 Inventory Purchases from Squadron Supplier Affiliate (in thousands) | Period | 2025 Purchases | 2024 Purchases | | :-------------------------- | :------------- | :------------- | | Three Months Ended June 30 | $2,300 | $3,200 | | Six Months Ended June 30 | $5,100 | $8,000 | | Amount due as of June 30, 2025 | $2,900 | $1,800 (Dec 31, 2024) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operating results, liquidity, and capital resources, including recent debt transactions and forward-looking statements Overview Alphatec Holdings is a medical technology company focused on advancing spine disorder treatment through its InformatiX™ platform - Alphatec Holdings, Inc. is a medical technology company focused on designing, developing, and advancing technology for surgical treatment of spine disorders[112] - The company aims to revolutionize spine surgery through clinical distinction and integrate technologies into its InformatiX™ product platform[112] - Achieved approximately 40% revenue compound annual growth rate since its transformation commenced in 2018, driven by surgeon and sales talent adoption[113] Recent Developments This section highlights the issuance of $405.0 million in 2030 Convertible Notes and the repurchase of 80% of 2026 Notes - In March 2025, the company issued $405.0 million principal amount of 0.75% Senior Convertible Notes due 2030, with net proceeds of approximately $392.9 million[115] - Used $42.5 million of the proceeds to enter into capped call instruments to reduce potential dilution from the 2030 Notes[115] - Repurchased 80% of the 2026 convertible notes for approximately $268.4 million[115] Revenue and Expense Components This section details the primary sources of revenue from products and services and the various categories of operating expenses - Revenue is primarily from sales of spinal surgery implants and medical imaging equipment (EOS full-body and weight-bearing x-ray imaging devices), and related services[116] - Cost of sales includes direct product costs, royalties, service labor, and parts, with product costs comprising raw materials, components, direct labor, and overhead[117][118] - Operating expenses include Research and development, Sales, general and administrative, Litigation-related expenses, Amortization of acquired intangible assets, and Restructuring expenses[119][120][121][122] Critical Accounting Policies and Estimates Management confirms no material changes to critical accounting policies since the 2024 Annual Report on Form 10-K - Management believes there have been no material changes during the three months ended June 30, 2025, to the critical accounting policies discussed in the Annual Report on Form 10-K for the year ended December 31, 2024[126] Results of Operations This section provides a detailed analysis of the company's financial performance, including revenue, cost of sales, and operating expenses Total revenue Revenue from products and services increased by 27% for the three months and 25% for the six months ended June 30, 2025 Revenue from products and services (in thousands, except %) | Period | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------- | :------- | :------- | :--------- | :--------- | | Three Months Ended June 30 | $185,544 | $145,573 | $39,971 | 27% | | Six Months Ended June 30 | $354,724 | $284,050 | $70,674 | 25% | - The increase in revenue was primarily due to an expanded surgeon user base, continued growth of the new product portfolio, and increasing adoption of the company's technology[127] Cost of sales Cost of sales increased by 31% and 30% for the three and six months ended June 30, 2025, respectively, driven by higher product volume Cost of sales (in thousands, except %) | Period | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------- | :------- | :------- | :--------- | :--------- | | Three Months Ended June 30 | $56,443 | $42,979 | $13,464 | 31% | | Six Months Ended June 30 | $109,627 | $84,105 | $25,522 | 30% | - The increase in cost of sales was primarily driven by higher product volume, aligning with the increase in revenue[128] Operating expenses Operating expenses increased by 3% and 9% for the three and six months ended June 30, 2025, influenced by litigation and compensation Operating Expenses (in thousands, except %) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :--------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Research and development | $18,276 | $19,105 | $(829) | (4)% | $35,308 | $37,117 | $(1,809) | (5)% | | Sales, general and administrative | $118,507 | $112,731 | $5,776 | 5% | $245,524 | $226,341 | $19,183 | 8% | | Litigation-related expenses | $1,593 | $2,090 | $(497) | (24)% | $13,807 | $6,518 | $7,289 | 112% | | Amortization of acquired intangible assets | $3,803 | $3,836 | $(33) | (1)% | $7,456 | $7,690 | $(234) | (3)% | | Restructuring expenses | $7 | $139 | $(132) | (95)% | $378 | $927 | $(549) | (59)% | | Total operating expenses | $142,186 | $137,901 | $4,285 | 3% | $302,473 | $278,593 | $23,880 | 9% | - Research and development expenses decreased due to lower stock-based compensation[129] - Sales, general and administrative expenses increased due to higher compensation and variable selling expenses tied to revenue growth and strategic distribution channel investment[130] - Litigation-related expenses increased significantly for the six-month period due to a settlement[131] Total interest expense and other expense, net Interest expense and other expenses increased significantly due to new debt, debt extinguishment loss, and derivative liability changes Total Interest Expense and Other Expense, Net (in thousands, except %) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :--------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Interest expense, net | $(12,309) | $(5,815) | $(6,494) | 112% | $(20,150) | $(11,156) | $(8,994) | 81% | | Loss on debt extinguishment | — | — | — | 100% | $(17,576) | — | $(17,576) | 100% | | (Loss) gain on derivative liability | $(16,780) | — | $(16,780) | 100% | $620 | — | $620 | 100% | | Other income, net | $993 | $156 | $837 | 537% | $1,330 | $274 | $1,056 | 385% | | Total other expense, net | $(28,096) | $(5,659) | $(22,437) | 396% | $(35,776) | $(10,882) | $(24,894) | 229% | - Interest expense increased significantly due to an additional draw on the Braidwell Term Loan and amortization of debt discount from the 2030 Notes[135] - A $17.6 million loss on debt extinguishment was recorded for the six-month period due to the repurchase of 2026 Notes[136] - Other income, net, increased substantially due to employee retention credit and foreign currency fluctuations[138] Income tax provision The income tax benefit decreased for both periods, primarily due to the recognition of income tax benefits in various jurisdictions Income Tax Benefit (in thousands, except %) | Period | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------- | :------- | :------- | :--------- | :--------- | | Three Months Ended June 30 | $(37) | $(286) | $249 | (87)% | | Six Months Ended June 30 | $(101) | $(355) | $254 | (72)% | - The change in income tax benefit was primarily related to the recognition of income tax benefits in several jurisdictions[139] Liquidity and Capital Resources This section analyzes the company's cash flows, debt structure, and commitments, highlighting sources and uses of capital Summary of Cash Flows This section provides a summary of cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 Summary of Cash Flows (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Operating activities | $10,509 | $(49,832) | | Investing activities | $(23,785) | $(69,512) | | Financing activities | $31,125 | $(1,128) | | Effect of exchange rate changes on cash | $374 | $(670) | | Net increase (decrease) in cash and cash equivalents | $18,223 | $(121,142) | Operating Activities Cash provided by operating activities significantly improved to $10.5 million for the six months ended June 30, 2025 - Cash provided by operating activities was $10.5 million for the six months ended June 30, 2025, primarily due to favorable working capital changes, partially offset by inventory purchases[145] Investing Activities Cash used in investing activities was $23.8 million, primarily for surgical instruments to support business growth - Cash used in investing activities was $23.8 million for the six months ended June 30, 2025, mainly for the purchase of surgical instruments to support business growth and new product launches[146] Financing Activities Cash provided by financing activities was $31.1 million, driven by 2030 Notes proceeds, offset by 2026 Notes repurchase - Cash provided by financing activities was $31.1 million for the six months ended June 30, 2025, driven by proceeds from 2030 Notes, offset by the repurchase of 2026 Notes, purchase of capped calls, and revolving credit facility payments[147] Debt and Commitments This section details outstanding debt, including term loans, revolving credit, and convertible notes, along with purchase commitments - As of June 30, 2025, the company had $200.0 million outstanding under the Braidwell Term Loan (Term SOFR + 5.75%, matures Jan 2028) and $15.0 million under the Revolving Credit Facility (Term SOFR + 3.5%, matures Sept 2027 or earlier)[148][149] - Outstanding 2026 Notes totaled $63.3 million (0.75% interest, matures Aug 2026) and 2030 Notes totaled $405.0 million (0.75% interest, matures Mar 2030)[150][151] - A remaining minimum inventory purchase commitment of $7.5 million exists through December 2026[152] Contractual obligations and commercial commitments No material changes to outstanding contractual obligations outside the normal course of business since December 31, 2024 - No material changes to outstanding contractual obligations outside the normal course of business since December 31, 2024[153] Off-Balance Sheet Arrangements The company confirms it does not have any off-balance sheet arrangements - The company does not have any off-balance sheet arrangements[154] Recent Accounting Pronouncements No new material accounting pronouncements or changes during the six months ended June 30, 2025, beyond Note 1 disclosures - No new accounting pronouncements or changes to accounting pronouncements during the six months ended June 30, 2025, other than those disclosed in Note 1[155] Forward Looking Statements This section outlines forward-looking statements regarding future financial performance and market acceptance, subject to risks and uncertainties - The report contains forward-looking statements regarding anticipated operating losses, future revenue, expenses, capital requirements, liquidity, profitability, and market acceptance of products[156] - Forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from expectations[158][159] Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no significant changes to the market risk disclosures previously reported in the Annual Report on Form 10-K for the year ended December 31, 2024 - No significant changes to quantitative and qualitative disclosures about market risk since the Annual Report on Form 10-K for the year ended December 31, 2024[161] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025. There have been no material changes to internal control over financial reporting during the three months ended June 30, 2025 Disclosure Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025 - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[162] Changes in Internal Control over Financial Reporting No material changes to internal control over financial reporting occurred during the three months ended June 30, 2025 - No changes materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the three months ended June 30, 2025[163] PART II – OTHER INFORMATION This section includes information on legal proceedings, risk factors, equity sales, trading arrangements, and exhibits Item 1. Legal Proceedings Information regarding material legal proceedings is incorporated by reference from Note 9 of the Notes to Condensed Consolidated Financial Statements - Material legal proceedings are described in Note 9 of the Notes to Condensed Consolidated Financial Statements[165] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K, except for the addition of a new risk factor concerning the adverse effects of tariffs and other trade measures on the company's business, results of operations, financial position, and cash flows - A new risk factor has been added regarding the potential adverse effects of tariffs and other trade measures on the company's business, including impacts on suppliers and international sales[166] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended June 30, 2025, the company issued unregistered shares of common stock totaling 134,842 shares for consulting services, asset purchases, and development services, relying on the Section 4(a)(2) exemption from registration Unregistered Sales of Equity Securities (Three Months Ended June 30, 2025) | Date Issued | Number of Shares | Grant Date Fair Value per Share | | :------------ | :--------------- | :------------------------------ | | April 1, 2025 | 4,246 | $10.08 | | April 1, 2025 | 74,405 | $10.08 | | April 9, 2025 | 10,000 | $10.05 | | April 17, 2025 | 947 | $10.56 | | May 1, 2025 | 24,375 | $11.06 | | May 5, 2025 | 20,869 | $11.98 | | Total | 134,842 | | - Shares were issued for consulting services, purchase of assets from a third party, and development services agreements[167][168] Item 5. Other Information This section details the adoption of Rule 10b5-1 trading arrangements by the company's Chairman and CEO, Pat Miles, and Executive Vice President, Sales, David Sponsel, during the three months ended June 30, 2025, for the purchase or sale of securities Rule 10b5-1 Trading Arrangements Adopted (Three Months Ended June 30, 2025) | Name | Title | Action | Date | Total Shares to be Sold | Expiration Date | | :----------- | :-------------------------------- | :----- | :--------- | :---------------------- | :-------------- | | Pat Miles | Chairman and Chief Executive Officer | Adopt | 6/3/2025 | 1,200,000 | 6/30/2026 | | David Sponsel | Executive Vice President, Sales | Adopt | 6/12/2025 | 74,784 | 9/2/2026 | - These plans are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) and comply with the company's insider trading policy[170][171] Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including amendments to the certificate of incorporation, equity incentive plans, certifications under Sarbanes-Oxley Act, and interactive data files (iXBRL) for financial statements - Exhibits include amendments to the certificate of incorporation and equity incentive plans, certifications (302 and 906), and iXBRL financial data[174][176] SIGNATURES The report is duly signed on behalf of Alphatec Holdings, Inc. by its Chairman and Chief Executive Officer, Patrick S. Miles, and Executive Vice President and Chief Financial Officer, J. Todd Koning, as of July 31, 2025 - The report was signed by Patrick S. Miles, Chairman and Chief Executive Officer, and J. Todd Koning, Executive Vice President and Chief Financial Officer, on July 31, 2025[180]