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Item 2 — Management's Discussion and Analysis
Alphatec Holdings, Inc. · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
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You should read the following management's discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto that appear elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”). In addition to historical information, the following management’s discussion and analysis of our financial condition and results of operations includes forward-looking information that involves risks, uncertainties, and assumptions. Our actual results and the timing of events could differ materially from those anticipated by these forward-looking statements as a result of many factors, such as those set forth under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, and any updates to those risk factors filed from time to time in our subsequent periodic and current reports filed with the SEC.
Overview
We are a medical technology company, headquartered in Carlsbad, California, focused on the design, development, and advancement of technology for better surgical treatment of spine disorders. By applying our unique, 100% spine focus and deep, collective industry know-how, we aim to revolutionize the approach to spine surgery through clinical distinction. The sophisticated approaches that we create from the ground up are designed to integrate with our expanding InformatiX™ product platform to objectively inform surgery and achieve the goals of spine surgery more predictably and more reproducibly. We have a comprehensive product portfolio designed to address the spine’s various pathologies, and are perpetually innovating to accomplish our ultimate vision, which is to be the standard bearer in spine.
The application of our team’s deep spine know-how, coupled with a willingness to invest holistically in the technologies integrated into our procedural approaches continues to increasingly compel surgeons and sales talent to partner with us. That adoption-driven validation has been the source of industry-leading market share expansion, which has delivered an approximately 35% revenue compound annual growth rate since our transformation commenced in 2018.
We market and sell our products through a network of independent sales agents and direct sales representatives. To deliver consistent, predictable growth, we have added, and intend to continue to add, clinically astute and exclusive sales team members to reach untapped surgeons, hospitals, and national accounts and better penetrate existing accounts and territories.
Recent Developments
JP Morgan Credit Agreement
In May 2026, we entered into a senior secured credit agreement (the "Credit Agreement") with JP Morgan Chase Bank, N.A., consisting of a $175.0 million term loan facility (the "JPM Term Loan") and a $125.0 million revolving credit facility (the "JPM Revolving Credit Facility" and, together with the JPM Term Loan, the "JPM Credit Facilities"), each maturing on May 1, 2031. On May 1, 2026, we borrowed $175.0 million under the term loan and $40.0 million under the revolving credit facility. We used the proceeds, together with cash on hand, to repay in full all outstanding obligations under our prior Braidwell term loan and MidCap revolving credit facility, which were concurrently terminated. The new credit facilities bear interest at variable rates based on Term SOFR or an alternate base rate, plus an applicable margin, and are subject to customary financial maintenance covenants and other terms.
Revenue and Expense Components
The following is a description of the primary components of our revenue and expenses:
Revenue. We derive our revenue primarily from the sale of spinal surgery implants used in the treatment of spine disorders as well as the sale of medical imaging equipment which is used for surgical planning and post-operative assessment. Spinal implant products include pedicle screws and complementary implants, interbody devices, plates, and tissue-based materials. Medical imaging equipment includes our EOS full-body and weight-bearing x-ray imaging devices, and related services. Our revenue is generated by our direct sales force and independent sales agents. Our products are shipped and invoiced to hospitals and surgical centers. Currently, most of our business is conducted with customers within markets in which we have experience and with payment terms that are customary to our business. We may defer revenue until the time of collection if circumstances related to payment terms, regional market risk or customer history indicate that collectability is not certain.
Cost of sales. Cost of sales consists primarily of direct product costs, royalties, service labor hours, and parts. Our product costs consist primarily of raw materials, component parts, direct labor, and overhead. The product costs of certain of our biologics products include the cost of procuring and processing human tissue. We incur royalties related to the technologies that we license from others and the products that are developed in part by surgeons with whom we collaborate in the product development process.
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Research and development expenses. Research and development expenses consist of costs associated with the design, development, testing, and enhancement of our products. Research and development expenses also include salaries and related employee benefits, research-related overhead expenses, and fees paid to external service providers and development consultants in the form of both cash and equity.
Sales, general and administrative expenses. Sales, general and administrative expenses consist primarily of salaries and related employee benefits, sales commissions and other variable costs, depreciation of our surgical instruments, regulatory affairs, quality assurance costs, professional service fees, travel, medical education, trade show and marketing costs, and insurance expenses.
Litigation-related expenses. Litigation-related expenses consist of costs incurred for our ongoing and settled litigation.
Amortization of acquired intangible assets. Amortization of acquired intangible assets consists of intangible assets acquired in business combinations and asset acquisitions.
Restructuring expenses. Restructuring expenses are primarily associated with the realignment of our operations and geographical footprint to achieve synergies, in which we incur one-time costs related to exiting and/or relocating our facilities, and personnel related expenses including severance and other costs.
Total interest expense and other expense, net. Total interest expense and other expense, net includes interest income, interest expense, gains and losses from foreign currency exchanges, loss on debt extinguishment, gain on derivative liability, and other non-operating gains and losses.
Income tax provision (benefit). Income tax provision (benefit) primarily consists of an estimate of federal, state, and foreign income taxes based on enacted state and foreign tax rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. On an on-going basis, we evaluate our estimates and assumptions, including those related to revenue recognition, allowances for accounts receivable, inventories, intangible assets, stock-based compensation, and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumption conditions.
Critical accounting policies are those that, in management’s view, are most important in the portrayal of our financial condition and results of operations. Management believes there have been no material changes during the three months ended June 30, 2026, to the critical accounting policies discussed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC.
Results of Operations
Total revenue
Three Months Ended June 30, Change Six Months Ended June 30, Change
(in thousands, except %) 2026 2025 $ % 2026 2025 $ %
Revenue from products and services $ 213,513 $ 185,544 $ 27,969 15 % $ 405,621 $ 354,724 $ 50,897 14 %
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Revenue from products and services increased $28.0 million, or 15%, and $50.9 million, or 14%, for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increase was primarily due to an increase in product volume that was due to the increase in our surgeon user base, continued expansion of our new product portfolio, and increasing adoption of our technology.
Cost of sales
Three Months Ended June 30, Change Six Months Ended June 30, Change
(in thousands, except %) 2026 2025 $ % 2026 2025 $ %
Cost of sales $ 59,415 $ 56,443 $ 2,972 5 % $ 115,047 $ 109,627 $ 5,420 5 %
Cost of sales increased $3.0 million, or 5%, and $5.4 million, or 5% for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increase was primarily due to an increase in product volume.
Operating expenses
Three Months Ended June 30, Change Six Months Ended June 30, Change
(in thousands, except %) 2026 2025 $ % 2026 2025 $ %
Operating expenses:
Research and development $ 18,174 $ 18,276 $ (102 ) (1 )% $ 35,734 $ 35,308 $ 426 1 %
Sales, general and administrative 134,001 118,507 15,494 13 % 271,058 245,524 25,534 10 %
Litigation-related expenses (86 ) 1,593 (1,679 ) (105 )% 439 13,807 (13,368 ) (97 )%
Amortization of acquired intangible assets 3,917 3,803 114 3 % 7,832 7,456 376 5 %
Restructuring expenses — 7 (7 ) (100 )% — 378 (378 ) (100 )%
Total operating expenses $ 156,006 $ 142,186 $ 13,820 10 % $ 315,063 $ 302,473 $ 12,590 4 %
Research and development expenses. Research and development expenses remained consistent for the three and six months ended June 30, 2026, compared to the same periods in 2025.
Sales, general and administrative expenses. Sales, general and administrative expenses increased $15.5 million, or 13%, and $25.5 million, or 10%, for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increase was primarily due to higher compensation-related costs and variable selling expenses associated with the increase in revenue, and our continued investment in building our strategic distribution channel.
Litigation-related expenses. Litigation-related expenses decreased $1.7 million, or 105%, and $13.4, or 97%, for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The decrease was primarily related to a litigation settlement during the six months ended June 30, 2025.
Amortization of acquired intangible assets. Amortization of acquired intangible assets remained consistent for the three and six months ended June 30, 2026, compared to the same periods in 2025.
Restructuring expenses. Restructuring expenses decreased $0.4 million, or 100%, for the six months ended June 30, 2026, compared to the same period in 2025. The decrease in restructuring expenses is primarily due to personnel related expenses in the prior period that did not recur.
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Total interest expense and other expense, net
Three Months Ended June 30, Change Six Months Ended June 30, Change
(in thousands, except %) 2026 2025 $ % 2026 2025 $ %
Other expense, net:
Interest expense, net $ (10,964 ) $ (12,309 ) $ 1,345 (11 )% $ (22,685 ) $ (20,150 ) $ (2,535 ) 13 %
Loss on debt extinguishment (11,883 ) — (11,883 ) 100 % (11,883 ) (17,576 ) $ 5,693 (32 )%
(Loss) gain on derivative liability — (16,780 ) 16,780 (100 )% — 620 $ (620 ) (100 )%
Other (expense) income, net (870 ) 993 (1,863 ) (188 )% (424 ) 1,330 (1,754 ) (132 )%
Total other expense, net $ (23,717 ) $ (28,096 ) $ 4,379 (16 )% $ (34,992 ) $ (35,776 ) $ 784 (2 )%
Interest expense, net, decreased $1.3 million, or 11%, and increased $2.5 million, or 13%, for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The decrease in interest expense, net, for the three months ended June 30, 2026, was primarily due to a decrease in cash interest expense. The increase in interest expense, net, for the six months ended June 30, 2026 was primarily due to the amortization of debt discount associated with the 2030 Notes. Net cash interest was $4.3 million and $9.3 million for the three and six months ended June 30, 2026, respectively. Net non-cash interest was $6.6 million and $13.4 million for the three and six months ended June 30, 2026, respectively.
Loss on debt extinguishment decreased $11.9 million, or 100%, and $5.7 million, or 32%, for the three and six months ended June 30, 2026, compared to the same periods in 2025. The decrease in loss on debt extinguishment relates to the redemption of 80% of the 2026 Notes in March 2025 offset by the extinguishment of the Braidwell Term loan and MidCap Revolving credit facilities during the three months ended June 30, 2026.
(Loss) gain on derivative liability decreased $16.8 million, or 100%, and $0.6 million, or 100%, for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The decrease in (loss) gain on derivative liability relates to the change in the valuation of the derivative liability associated with 2030 Notes from inception to June 30, 2025. As of June 12, 2025 the conditions necessary for separate accounting of the conversion option as a derivative liability were no longer met.
Other (expense) income, net, increased $1.9 million, or 188%, and $1.8 million, or 132%, for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increase in other income, net, during the six months ended June 30, 2026, was primarily due to fluctuations in foreign currency rates.
Income tax provision
Three Months Ended June 30, Change Six Months Ended June 30, Change
(in thousands, except %) 2026 2025 $ % 2026 2025 $ %
Income tax provision (benefit) $ 156 $ (37 ) $ 193 (522 )% $ 206 $ (101 ) $ 307 (304 )%
The change in the income tax provision (benefit) for the three and six months ended June 30, 2026, compared to the same period in 2025, was primarily related to the recognition of income taxes in several jurisdictions.
Liquidity and Capital Resources
Our principal sources of liquidity are our existing cash and cash equivalents, our JPM Revolving Credit Facility and cash from operations. Our liquidity and capital structure are evaluated regularly within the context of our annual operating and strategic planning process. We consider the liquidity necessary to fund our operations, which includes working capital needs, investments in research and development, investments in inventory and instrument sets to support our customers, as well as other operating costs. Our future capital requirements will depend on many factors including our rate of revenue growth, the timing and extent of spending to support development efforts, the expansion of sales, marketing and administrative activities, the timing of introductions of new products and enhancements to existing products, and the international expansions of our business.
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As current borrowing sources become due, we may be required to access the capital markets for additional funding. If we are required to access the debt markets, we expect to be able to secure reasonable borrowing rates. As part of our liquidity strategy, we will continue to monitor our current level of spending and cash use as well as our ability to secure additional credit facilities, term loans, or other similar arrangements in light of our spending levels and general financial market conditions.
A substantial portion of our operations are in the United States ("U.S."), and most of our net sales have been made in the U.S. Accordingly, we do not have material exposures to foreign currency rate fluctuations from operations. However, as our business in markets outside of the U.S. continues to increase, we will be exposed to foreign currency exchange risk related to our foreign operations.
We do not have any material financial exposure to one customer or one country, outside of the United States, that would significantly hinder our liquidity. We are and may become involved in various legal proceedings arising from our business activities. While we have no material, undisclosed accruals for pending litigation or claims, litigation is inherently unpredictable, and depending on the nature and timing of a proceeding, an unfavorable resolution could materially affect our future consolidated results of operations, cash flows or financial position in a particular period. We assess contingencies to determine the degree of probability and range of possible loss for potential accrual or disclosure in our condensed consolidated financial statements. An estimated loss contingency is accrued in our condensed consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Assessing contingencies is highly subjective and requires judgments about future events because litigation is inherently unpredictable, and unfavorable resolutions could occur. When evaluating contingencies, we may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters. In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated, or unrelated to reasonably possible outcomes, and as such are not meaningful indicators of our potential liability. We have disclosed all material accruals for pending litigation or investigations in Note 8, Commitments and Contingencies, in the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Cash and cash equivalents were 118.7 million and $160.8 million at June 30, 2026, and December 31, 2025, respectively. We believe that our existing funds, cash generated from our operations and our existing sources of and access to financing are adequate to satisfy our needs for working capital, capital expenditure and debt service requirements, and other business initiatives we plan to strategically pursue.
Summary of Cash Flows
Six Months Ended June 30,
(in thousands) 2026 2025
Cash (used in) provided by:
Operating activities $ 21,803 $ 10,509
Investing activities (42,609 ) (23,785 )
Financing activities (21,302 ) 31,125
Effect of exchange rate changes on cash (36 ) 374
Net change in cash and cash equivalents $ (42,144 ) $ 18,223
Operating Activities
Operating activities provided net cash of $21.8 million for the six months ended June 30, 2026, which is primarily related to cash collections offset by costs associated with the continued expansion of our business and inventory purchases.
Investing Activities
We used cash of $42.6 million in investing activities for the six months ended June 30, 2026, which is primarily related to the purchase of surgical instruments to support the growth of our business and commercial launch of new products and a $5.0 million note receivable.
Financing Activities
Financing activities used cash of $21.3 million for the six months ended June 30, 2026, which is primarily related to proceeds from issuance of term and revolving credit facilities, offset by repayment of term and revolving credit facilities.
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Debt and Commitments
As of June 30, 2026, we had $175.0 million outstanding under the JPM Term Loan. The outstanding loans under the JPM Term Loan bear interest at the sum of Term SOFR plus an applicable margin determined by reference to the Company’s Senior Secured Net Leverage Ratio. The JPM Term Loan Matures on May 1, 2031.
As of June 30, 2026, we had $40.0 million outstanding under the JPM Revolving Credit Facility. The outstanding loans under the JPM Revolving Credit Facility bear interest at the sum of Term SOFR plus an applicable margin determined by reference to the Company’s Senior Secured Net Leverage Ratio. The JPM Revolving Credit Facility matures on May 1, 2031.
As of June 30, 2026, we had $63.3 million outstanding under the 2026 Notes. The 2026 Notes accrue interest at a rate of 0.75%, payable semi-annually in arrears on February 1 and August 1 of each year. Prior to maturity in August 2026, the holders of the 2026 Notes may, under certain circumstances, choose to convert their notes into shares of our common stock. Based on the terms we have the option to pay or deliver cash, shares of our common stock, or a combination thereof, when a conversion notice is received.
As of June 30, 2026, we had $405.0 million outstanding under the 2030 Notes. The 2030 Notes accrue interest at a rate of 0.75%, payable semi-annually in arrears on March 15 and September 15 of each year. Prior to maturity in March 2030, the holders of the 2030 Notes may, under certain circumstances, choose to convert their notes into shares of our common stock. Based on the terms we have the option to pay or deliver cash, shares of our common stock, or a combination thereof, when a conversion notice is received.
As of June 30, 2026, we had $1.3 million in other debts that are due in monthly and quarterly installments through maturity in 2027.
We have an inventory purchase commitment agreement with a third-party supplier, where we are obligated to meet certain minimum purchase commitment requirements through December 2026. As of June 30, 2026, the remaining minimum purchase commitment under the agreement was $2.4 million.
Contractual obligations and commercial commitments
As of June 30, 2026, there have been no material changes, outside the normal course of business, in our outstanding contractual obligations from those disclosed within the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Recent Accounting Pronouncements
Aside from the changes disclosed in Note 1 to the Notes to Condensed Consolidated Financial Statements (Unaudited) under the heading “Recently Issued Accounting Pronouncements,” if any, there have been no new accounting pronouncements or changes to accounting pronouncements during the six months ended June 30, 2026, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2025, that was filed with the SEC.
Forward Looking Statements
This Quarterly Report on Form 10-Q incorporates a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements regarding:
•our estimates regarding anticipated operating losses, future revenue, expenses, capital requirements, uses and sources of cash and liquidity, including our anticipated revenue growth and cost savings;
•our ability to achieve profitability, and the potential need to raise additional funding;
•our ability to ensure that we have effective disclosure controls and procedures;
•our ability to meet, and potential liability from not meeting, any outstanding commitments and contractual obligations;
•our ability to maintain compliance with the quality requirements of the U.S. Food and Drug Administration and similar foreign regulatory requirements;
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•our ability to market, improve, grow, commercialize and achieve market acceptance of any of our products or any product candidates that we are developing or may develop in the future;
•our ability to continue to enhance our product offerings, and to commercialize and achieve market acceptance of any of our products or product candidates;
•the effect of any existing or future federal, state or international regulations on our ability to effectively conduct our business;
•our business strategy and our underlying assumptions about market data, demographic trends, reimbursement trends and pricing trends;
•our ability to maintain an adequate global sales network for our products, including to attract and retain independent sales agents and direct sales representatives;
•our ability to increase the use and promotion of our products by training and educating spine surgeons and our global sales network;
•our ability to attract and retain a qualified management team, as well as other qualified personnel and advisors;
•our ability to enter into licensing and business combination agreements with third parties and to successfully integrate the acquired technology and/or businesses;
•the impact of global economic and political conditions and public health crises on our business and industry; and
•other factors discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 or any document incorporated by reference herein or therein.
Any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be wrong. They can be affected by inaccurate assumptions and/or by known or unknown risks and uncertainties. Many factors mentioned in our discussion in this Quarterly Report on Form 10-Q will be important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially from expected results.
We also provide a cautionary discussion of risks and uncertainties under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, and any updates to those risk factors filed from time to time in our subsequent periodic and current reports filed with the SEC. These are factors that we think could cause our actual results to differ materially from expected results. Other factors besides those listed there could also adversely affect us.
Without limiting the foregoing, the words “believe,” “anticipate,” “plan,” “expect,” “estimate,” “may,” “will,” “should,” “could,” “would,” “seek,” “intend,” “continue,” “project,” and similar expressions are intended to identify forward-looking statements. There are a number of factors and uncertainties that could cause actual events or results to differ materially from those indicated by such forward-looking statements, many of which are beyond our control, including the factors set forth under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 and any updates to those risk factors filed from time to time in our subsequent periodic and current reports filed with the SEC. In addition, the forward-looking statements contained herein represent our estimate only as of the date of this filing and should not be relied upon as representing our estimate as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements.
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