GLOBUS MEDICAL INC 10-K

Item 8. Financial Statements and Supplementary Data GLOBUS MEDICAL, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Reports of Independent Registered Public Accounting Firm ( Deloitte & Touche LLP , Philadelphia, Pennsylvania , PCAOB ID No. 34 ) 62 Consolidated Balance Sheets 65 Consolidated Statements of Operations and Comprehensive Income 66 Consolidated Statements of Equity 67 Consolidated Statements of Cash Flows 68 Notes to Consolidated Financial Statements 69 ‎ 61 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Globus Medical, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Globus Medical, Inc. and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and the schedule listed in the Index at Item 15(a)(2) (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 20, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Inventories Valuation – Refer to Notes 2 and 7 to the financial statements Critical Audit Matter Description Inventories are recorded at the lower of cost or net realizable value. Management periodically evaluates the carrying value of inventories in relation to the forecasts of product demand, which takes into consideration the estimated life cycle of product releases. When quantities on hand exceed sales forecasts, a write-down is recorded for such excess inventories. Changes in assumptions of product demand could have a significant impact on the amount of write-down recorded. Given the inherent uncertainty in forecasting product demand, including the impact of product releases, auditing the reasonableness of management’s estimates and assumptions required a high degree of auditor judgment and an increased extent of effort. How the Critical Audit Matter Was Addressed in the Audit Our procedures related to management’s forecasts of product demand used to record a write-down for excess and obsolete inventories included the following, among others: 62 Table of Contents • We tested the effectiveness of controls over management’s inventory valuation model, including those over management’s development and approval of product demand forecasts. • We evaluated management’s ability to accurately forecast product demand by comparing actual results to management’s historical estimates. • We selected a sample of products and verified that the product demand forecasts were supported by historical sales data and other current information. • We performed corroborative inquiries with the personnel responsible for product development and sales forecasting to evaluate the reasonableness of the product demand forecasts. • We tested the mathematical accuracy of management’s calculations. Business Combinations – NuVasive Merger — Refer to Notes 1 and 3 to the financial statements Critical Audit Matter Description On September 1, 2023, the Company completed its merger with NuVasive, Inc. with NuVasive, Inc. surviving as a wholly owned subsidiary of the Company, for total consideration of approximately $2.604 billion. Management accounted for the acquisition as a business combination using the acquisition method of accounting. The most significant items recorded included intangible assets of $899.0 million, inventories of $558.0 million, senior convertible notes of $409.5 million, and resulting goodwill of $1,234 million. Management utilized third-party valuation specialists to assist in the determination of the fair value of the assets acquired. The methods used to estimate the fair value involved significant assumption. The principal considerations for our determination that performing procedures relating to the accounting for this transition is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of the assets acquired; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management's fair value estimates of the assets acquired; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the NuVasive Merger included the following, among others: • We read the agreement and plan of merger. • We tested the effectiveness of controls relating to the purchase price allocation, including controls over management’s valuation of the assets acquired and liabilities acquired. • We evaluated the appropriateness of the valuation methods and completeness and accuracy of significant inputs for fair value measurements used to develop estimates of assets and liabilities acquired. • We tested the accuracy of the purchase price allocation and goodwill recorded. • We utilized professionals with specialized skill and knowledge to assist in evaluating the appropriateness of the valuation methods and the reasonableness of the significant inputs for fair value measurements. /s/ DELOITTE & TOUCHE LLP Philadelphia, Pennsylvania February 20, 2024 We have served as the Company’s auditor since 2017. ‎ 63 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Globus Medical, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Globus Medical, Inc. and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 20, 2024, expressed an unqualified opinion on those financial statements. As described in Management’s Annual Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at NuVasive, Inc., which was acquired on September 1, 2023 and whose financial statements constitute 26% of total assets and 26% of revenues of the consolidated financial statement amounts as of and for the year ended December 31, 2023. Accordingly, our audit did not include the internal control over financial reporting at NuVasive, Inc. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate . /s/ DELOITTE & TOUCHE LLP Philadelphia, Pennsylvania February 20, 2024 64 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, December 31, (In thousands, except share and per share values) 2023 2022 ASSETS Current assets: Cash and cash equivalents $ 467,292 $ 150,466 Short-term marketable securities 50,497 295,592 Accounts receivable, net of allowances of $ 8,934 and $ 4,724 , respectively 503,235 213,247 Inventories 848,135 298,981 Prepaid expenses and other current assets 44,580 20,997 Income taxes receivable 1,635 4,061 Total current assets 1,915,374 983,344 Property and equipment, net of accumulated depreciation of $ 425,695 and $ 343,036 , respectively 586,932 243,729 Operating lease right of use assets 59,931 5,988 Long-term marketable securities 75,428 495,852 Intangible assets, net 924,603 63,574 Goodwill 1,434,540 197,471 Other assets 78,590 37,323 Deferred income taxes 10,685 48,845 Total assets $ 5,086,083 $ 2,076,126 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 56,671 $ 36,101 Accrued expenses 240,460 92,169 Operating lease liabilities 11,967 2,536 Income taxes payable 3,845 990 Business acquisition liabilities 61,035 13,308 Deferred revenue 18,369 14,100 Total current liabilities 392,347 159,204 Business acquisition liabilities, net of current portion 78,323 54,950 Operating lease liabilities 91,037 3,475 Senior convertible notes 417,400 — Deferred income taxes and other tax liabilities 84,421 1,779 Other liabilities 24,596 10,345 Total liabilities 1,088,124 229,753 Commitments and contingencies (Note 16) Equity: Class A common stock; $ 0.001 par value. Authorized 500,000,000 shares; issued and outstanding 113,905,565 and 77,762,282 shares at December 31, 2023 and December 31, 2022, respectively 114 78 Class B common stock; $ 0.001 par value. Authorized 275,000,000 shares; issued and outstanding 22,430,097 and 22,430,097 shares at December 31, 2023 and December 31, 2022, respectively 22 22 Additional paid-in capital 2,870,749 630,952 Accumulated other comprehensive income/(loss) ( 10,192 ) ( 24,630 ) Retained earnings 1,137,266 1,239,951 Total equity 3,997,959 1,846,373 Total liabilities and equity $ 5,086,083 $ 2,076,126 See accompanying notes to consolidated financial statements. ‎ 65 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME Year Ended December 31, (In thousands, except per share amounts) 2023 2022 2021 Net sales $ 1,568,476 $ 1,022,843 $ 958,102 Cost of sales 548,174 263,725 239,223 Gross profit 1,020,302 759,118 718,879 Operating expenses: Research and development 124,010 73,015 97,346 Selling, general and administrative 643,410 432,117 408,149 Provision for litigation, net 434 2,341 5,921 Amortization of intangibles 51,032 17,735 18,526 Acquisition-related costs 68,274 5,959 16,984 Total operating expenses 887,160 531,167 546,926 Operating income/(loss) 133,142 227,951 171,953 Other income/(expense), net Interest income/(expense), net 20,130 14,233 9,297 Foreign currency transaction gain/(loss) 14,259 ( 1,020 ) ( 1,423 ) Other income/(expense) ( 2,138 ) 1,855 580 Total other income/(expense), net 32,251 15,068 8,454 Income/(loss) before income taxes 165,393 243,019 180,407 Income tax provision 42,520 52,850 31,216 Net income/(loss) $ 122,873 $ 190,169 $ 149,191 Other comprehensive income/(loss), net of tax: Unrealized gain/(loss) on marketable securities 13,231 ( 14,040 ) ( 6,054 ) Foreign currency translation gain/(loss) 1,207 ( 3,818 ) ( 4,673 ) Total other comprehensive income/(loss), net of tax 14,438 ( 17,858 ) ( 10,727 ) Comprehensive income/(loss) $ 137,311 $ 172,311 $ 138,464 Earnings per share: Basic $ 1.09 $ 1.89 $ 1.48 Diluted $ 1.07 $ 1.85 $ 1.44 Weighted average shares outstanding: Basic 113,087 100,469 100,734 Diluted 114,630 102,643 103,623 See accompanying notes to consolidated financial statements. ‎ 66 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY Class A ‎ Common Stock Class B ‎ Common Stock Additional paid-in Accumulated other comprehensive Retained (In thousands) Shares $ Shares $ capital income/(loss) earnings Total Balance at December 31, 2022 77,762 $ 78 22,430 $ 22 $ 630,952 $ ( 24,630 ) $ 1,239,951 $ 1,846,373 Stock-based compensation — — — — 52,773 — — 52,773 Grant of contingent restricted stock units — — — — 1,925 — — 1,925 Exercise of stock options 387 0 — — 12,396 — — 12,396 Issuance of Class A common stock under employee and director equity option plans, net 273 0 — — ( 11,409 ) — — ( 11,409 ) Issuance of equity for NuVasive Merger 39,813 40 — — 2,184,112 — — 2,184,152 Comprehensive income/(loss) — — — — — 14,438 122,873 137,311 Repurchase and retirement of common stock ( 4,329 ) ( 4 ) — — — — ( 225,558 ) ( 225,562 ) Balance at December 31, 2023 113,906 $ 114 22,430 $ 22 $ 2,870,749 $ ( 10,192 ) $ 1,137,266 $ 3,997,959 See accompanying notes to consolidated financial statements. Class A ‎ Common Stock Class B ‎ Common Stock Additional paid-in Accumulated other comprehensive Retained (In thousands) Shares $ Shares $ capital income/(loss) earnings Total Balance at December 31, 2021 79,114 $ 79 22,430 $ 22 $ 553,787 $ ( 6,772 ) $ 1,194,272 $ 1,741,388 Stock-based compensation — — — — 33,466 — — 33,466 Grant of contingent restricted stock units — — — — 1,985 — — 1,985 Exercise of stock options 999 1 — — 41,714 — — 41,715 Comprehensive income/(loss) — — — — — ( 17,858 ) 190,169 172,311 Repurchase and retirement of common stock ( 2,351 ) ( 2 ) — — — — ( 144,491 ) ( 144,493 ) Balance at December 31, 2022 77,762 $ 78 22,430 $ 22 $ 630,952 $ ( 24,630 ) $ 1,239,951 $ 1,846,373 See accompanying notes to consolidated financial statements. Class A ‎ Common Stock Class B ‎ Common Stock Additional paid-in Accumulated other comprehensive Retained (In thousands) Shares $ Shares $ capital income/(loss) earnings Total Balance at December 31, 2020 77,284 $ 77 22,430 $ 22 $ 457,161 $ 3,955 $ 1,045,082 $ 1,506,297 Stock-based compensation — — — — 31,254 — — 31,254 Grant of contingent restricted stock units — — — — 1,878 — — 1,878 Exercise of stock options 1,830 2 — — 63,494 — — 63,496 Comprehensive income/(loss) — — — — — ( 10,727 ) 149,191 138,464 Balance at December 31, 2021 79,114 $ 79 22,430 $ 22 $ 553,787 $ ( 6,772 ) $ 1,194,272 $ 1,741,388 See accompanying notes to consolidated financial statements. ‎ 67 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, (In thousands) 2023 2022 2021 Cash flows from operating activities: Net income $ 122,873 $ 190,169 $ 149,191 Adjustments to reconcile net income to net cash provided by operating activities: Acquired in-process research and development — 150 34,312 Depreciation and amortization 144,733 68,252 69,867 Amortization of premiums on marketable securities 793 5,389 2,781 Provision for excess and obsolete inventory 10,959 6,400 6,143 Amortization of inventory fair value step up 71,656 — — Amortization of 2025 Note fair value step up 8,176 — — Stock-based compensation expense 52,742 32,810 30,586 Allowance for doubtful accounts 3,658 ( 1 ) 1,200 Change in fair value of business acquisition liabilities 17,434 5,132 16,807 Change in deferred income taxes ( 57,789 ) ( 22,223 ) ( 17,615 ) (Gain)/loss on disposal of assets, net 1,541 299 464 Payment of business acquisition related liabilities ( 3,005 ) ( 2,647 ) ( 210 ) Net (gain)/loss from foreign currency adjustment ( 13,674 ) — — (Increase) decrease in: Accounts receivable ( 49,914 ) ( 50,843 ) ( 25,895 ) Inventories ( 70,328 ) ( 61,745 ) ( 11,971 ) Prepaid expenses and other assets 1,148 ( 10,292 ) ( 6,178 ) Increase (decrease) in: Accounts payable ( 14,223 ) 14,418 3,684 Accrued expenses and other liabilities 17,127 6,087 17,896 Income taxes payable/receivable ( 408 ) ( 2,887 ) 5,212 Net cash provided by/(used in) operating activities 243,499 178,468 276,274 Cash flows from investing activities: Purchases of marketable securities ( 100,643 ) ( 419,534 ) ( 622,359 ) Maturities of marketable securities 240,190 312,221 227,908 Sales of marketable securities 537,723 102,433 109,898 Purchases of property and equipment ( 78,274 ) ( 74,047 ) ( 56,898 ) Acquisition of businesses, net of cash acquired and purchases of intangible and other assets ( 296,028 ) ( 31,435 ) ( 34,488 ) Net cash provided by/(used in) investing activities 302,968 ( 110,362 ) ( 375,939 ) Cash flows from financing activities: Payment of business acquisition-related liabilities ( 8,039 ) ( 7,185 ) ( 9,349 ) Net proceeds from exercise of stock options 12,397 41,716 63,496 Payments related to tax withholdings for share-based compensation ( 10,617 ) — — Repurchase of common stock ( 225,562 ) ( 144,493 ) — Net cash provided by/(used in) financing activities ( 231,821 ) ( 109,962 ) 54,147 Effect of foreign exchange rates on cash 2,180 ( 747 ) ( 810 ) Net increase/(decrease) in cash and cash equivalents 316,826 ( 42,603 ) ( 46,328 ) Cash and cash equivalents at beginning of period 150,466 193,069 239,397 Cash and cash equivalents at end of period $ 467,292 $ 150,466 $ 193,069 Supplemental disclosures of cash flow information: Income taxes paid, net $ 100,593 $ 77,823 $ 45,027 Non-cash investing and financing activities: Equity issued in conjunction with the NuVasive Merger $ 2,153,860 $ — — Accrued purchases of property and equipment $ 7,100 $ 7,423 $ 4,551 See accompanying notes to consolidated financial statements. 68 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. BACKGROUND (a) The Company Globus Medical, Inc., together with its majority-owned or controlled subsidiaries , is a medical device company that develops and commercializes healthcare solutions with a mission to improve the quality of life of patients with musculoskeletal disorders. We are primarily focused on implants that promote healing in patients with musculoskeletal disorders, including the use of a robotic guidance and navigation system and products to treat patients who have experienced orthopedic traumas. We are an engineering-driven company with a history of rapidly developing and commercializing advanced products and procedures to assist surgeons in effectively treating their patients and to address new treatment options. With numerous products launched since the founding of the Company, including 10 products launched in 2023, we offer a comprehensive portfolio of innovative and differentiated technologies that address a variety of musculoskeletal pathologies, anatomies, and surgical approaches. We are headquartered in Audubon, Pennsylvania, and market and sell our products through our exclusive sales force in the United States, as well as within North, Central & South America, Europe, Asia, Africa and Australia. The sales force consists of direct sales representatives and distributor sales representatives employed by exclusive independent distributors. The terms the “Company,” “Globus,” “we,” “us” and “our” refer to Globus Medical, Inc. and, where applicable, our consolidated subsidiaries. (b) NuVasive Merger On September 1, 2023, pursuant to that certain merger agreement (the “Merger Agreement”) with NuVasive, Inc. (“NuVasive”) and Zebra Merger Sub, Inc. (“Merger Sub”), Merger Sub, a wholly owned subsidiary of the Company, merged with and into NuVasive, with NuVasive surviving as a wholly owned subsidiary of the Company (the “Merger”). Under the Merger Agreement, each share of common stock, par value $ 0.001 per share, of NuVasive issued and outstanding immediately prior to the effective time of the Merger (other than certain excluded shares as described in the Merger Agreement) was cancelled and converted into the right to receive 0.75 fully paid and non-assessable shares of Class A common stock of Globus, $ 0.001 par value per share, and the right to receive cash in lieu of fractional shares. Globus was deemed to be the accounting acquirer of NuVasive for accounting purposes under U.S. generally accepted accounting principles (“U.S. GAAP”). Accordingly, prior periods within these consolidated financial statements may not be comparable. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Presentation The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP. (b) Prior Period Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. “Operating lease right of use assets” were reclassified out of “Other assets”, and “Operating lease liabilities” were reclassified out of “Accrued expenses” and “Other liabilities”, respectively, depending on the short-term and long-term nature, on our consolidated balance sheets. (c) Principles of Consolidation The accompanying consolidated financial statements include the accounts of Globus and its majority-owned or controlled subsidiaries . All intercompany balances and transactions are eliminated in consolidation. Variable Interest Entities We provide intraoperative neuromonitoring (“IONM”) services through various majority owned or controlled subsidiaries, which collectively conduct business as NuVasive Clinical Services. In providing IONM services to surgeons and healthcare facilities across the U.S., the Company maintains contractual relationships with several physician practices (“PCs”). In accordance with authoritative guidance, the Company has determined that the PCs are variable interest entities and therefore, the accompanying consolidated financial statements include the accounts of the PCs from the date of acquisition. During the periods presented, the results of the PCs were immaterial to the Company’s 69 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) financial statements. The creditors of the PCs have claims only to the assets of the PCs, which are not material, and the assets of the PCs are not available to the Company. (d) Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. We base our estimates, in part, on historical experience that management believes to be reasonable under the circumstances. Actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Significant areas that require estimates include revenue recognition, intangible assets, business acquisition liabilities, allowance for doubtful accounts, stock-based compensation, reserves for excess and obsolete inventory, fair value measurements, useful lives of assets, the outcome of litigation, recoverability of intangible assets and income taxes. We are subject to risks and uncertainties due to changes in the healthcare environment, regulatory oversight, competition, and legislation that may cause actual results to differ from estimated results. (e) Revenue Recognition In accordance with Accounting Standards Codification 606 Revenue from Contracts with Customers, (“ASC 606”), the Company recognizes revenue upon the transfer of goods or services to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services. The principles in ASC 606 are applied using the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the Company satisfies its performance obligation(s). Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. Sales and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. For purposes of disclosure, we disaggregate our revenue into two categories, Musculoskeletal Solutions and Enabling Technologies. Our Musculoskeletal Solutions products consist primarily of the implantable devices, disposables, unique instruments, and neuromonitoring services, used in an expansive range of spine, orthopedic trauma, hip, knee and extremity procedures. The majority of our Musculoskeletal Solutions contracts have a single performance obligation and revenue is recognized at a point in time. For our IONM services, revenue is recognized in the period the service is performed, which can be either point in time or over time, depending how the performance obligation is defined for the amount of consideration expected to be received. Our policy is to classify shipping and handling costs billed to customers as sales and the related expenses as cost of sales. Our Enabling Technologies products are advanced hardware and software systems, and related technologies, that are designed to enhance a surgeon’s capabilities and streamline surgical procedures by making them less invasive, more accurate, and more reproducible to improve patient care. The majority of our Enabling Technologies product contracts contain multiple performance obligations, including maintenance and support, and revenue is recognized as we fulfill each performance obligation, generally at the point in time in which the obligation is fulfilled. When contracts have multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract . Nature of Products and Services A significant portion of our Musculoskeletal Solutions product revenue is generated from consigned inventory maintained at hospitals or with sales representatives. Revenue from the sale of consigned musculoskeletal products is recognized when we transfer control, which occurs at the time the product is used or implanted. For all other Musculoskeletal Solutions product transactions, we recognize revenue when we transfer control, which is generally when we transfer the title to the goods, provided there are no remaining performance obligations that can affect the customer’s final acceptance of the sale. For Musculoskeletal Solutions service transactions, we recognize revenue in the period the service is performed for the amount of consideration expected to be received. In certain cases, we offer the ability for customers to lease surgical instrumentation primarily on a non-sales type basis. The majority of Enabling Technologies product contracts contain multiple performance obligations, including maintenance and support, and revenue is recognized as we fulfill each performance obligation. When contracts have multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using an observable price to determine the standalone selling price of each distinct good or service in the contract. Revenue for the performance obligations recognized at a point of time is recognized when we transfer control to the customer, which is generally at the point of shipment, but can also be at either delivery or installation, depending on the terms of the arrangement . 70 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Contract Balances Timing of revenue recognition may differ from the timing of invoicing to customers. We record a receivable when revenue is recognized prior to invoicing, or deferred revenue when revenue is recognized subsequent to invoicing. Deferred revenue is comprised mainly of unearned revenue related to the sales of certain Enabling Technologies products, which includes maintenance and support services. Maintenance and support services are generally invoiced annually, at the beginning of each contract period, and revenue is recognized ratably over the maintenance period. For the years ended December 31, 2023, 2022, and 2021, there was an immaterial amount of revenue recognized from previously deferred revenue. (f) Concentrations of Credit Risk Financial instruments, which potentially subject us to concentrations of credit risk, are primarily marketable securities and accounts receivable. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of entities comprising our customer base. We perform ongoing credit evaluations of our customers and generally do not require collateral. There was no customer that accounted for 10% or more of sales for the years ended December 31, 2023, 2022, and 2021 , respectively. (g) Cash and Cash Equivalents The Company considers all short-term, highly liquid investments with original maturities of 90 days or less at acquisition date to be cash equivalents. Cash equivalents, which consist of money market accounts, commercial paper and corporate debt securities are stated at fair value. (h) Marketable Securities Our marketable securities include municipal bonds, corporate debt securities, commercial paper, asset-backed securities, and securities of government, federal agency, and other sovereign obligations, and are classified as available-for-sale as of December 31, 2023 and 2022. Short-term and long-term marketable securities are recorded at fair value on our consolidated balance sheets. Any change in fair value for available-for-sale securities, that do not result in recognition or reversal of an allowance for credit loss or write down, is recorded, net of taxes, as a component of accumulated other comprehensive income or loss on our consolidated balance sheets. Premiums and discounts are recognized over the life of the related security as an adjustment to yield using the straight-line method. Realized gains or losses from the sale of marketable securities are determined on a specific identification basis. Realized gains and losses, interest income and the amortization/accretion of premiums/discounts are included as a component of other income/(expense), net, on our consolidated statements of operations and comprehensive income. Interest receivable is recorded as a component of prepaid expenses and other current assets on our consolidated balance sheets. We invest in securities that meet or exceed standards as defined in our investment policy. Our policy also limits the amount of credit exposure to any one issue, issuer or type of security. We review declines in the fair value of our securities to determine whether they are resulting from expected credit losses or other factors. If the assessment indicates a credit loss exists, we recognize any measured impairment as an allowance for credit loss in our consolidated statements of operations. Any other impairments not recorded through allowance for credit losses is recognized in our other comprehensive income. (i) Fair Value Measurements Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or the liability in an orderly transaction between market participants on the measurement date. Additionally, a fair value hierarchy was established that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Our assets and liabilities measured at fair value on a recurring basis are classified and disclosed in one of the following three categories: Level 1—quoted prices (unadjusted) in active markets for identical assets and liabilities; Level 2—observable inputs other than quoted prices in active markets for identical assets and liabilities; and Level 3—unobservable inputs in which there is little or no market data available, which require the reporting entity to use significant unobservable inputs or valuation techniques. 71 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Contingent consideration represents contingent milestone, performance and revenue-sharing payment obligations related to acquisitions and is measured at fair value, based on significant inputs that are not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions we believe would be made by a market participant. We assess these assumptions on an ongoing basis as additional data impacting the assumptions is obtained. The fair value of contingent consideration is recorded in business acquisition liabilities on our consolidated balance sheets, and changes in the fair value of contingent consideration is recognized in acquisition-related costs in the consolidated statements of operations and comprehensive income. The fair value of contingent restricted stock unit grants (“RSUs”) are recorded as additional paid-in capital in the consolidated balance sheet on the day of the grant due to the remote likelihood of forfeiture. The purchase price of business acquisitions is primarily allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date, with the excess recorded as goodwill. We utilize Level 3 inputs in the determination of the initial fair value. (j) Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis. The majority of our inventory is finished goods and we utilize both in-house manufacturing and third-party suppliers to produce our products. We periodically evaluate the carrying value of our inventories in relation to estimated forecasts of product demand, which takes into consideration the life cycle of product releases. When quantities on hand exceed estimated sales forecasts, we record a write-down for such excess inventories. Once inventory has been written down, it creates a new cost basis for inventory that is not subsequently written up. (k) Property and Equipment Property and equipment is recorded at cost less accumulated depreciation. Additions or improvements are capitalized, while repairs and maintenance are expensed as incurred. Depreciation is recognized using the straight-line method over the related useful lives of the assets. When assets are sold or otherwise disposed of, the related property, equipment, and accumulated depreciation amounts are relieved from the accounts, and any gain or loss is recorded in the consolidated statements of operations and comprehensive income. (l) Goodwill and Intangible Assets Goodwill represents the excess of purchase price over the fair values of the identifiable assets acquired less the liabilities assumed in the acquisition of a business. Goodwill is tested for impairment at least annually or whenever events or circumstances indicate that a carrying amount may be impaired. We perform our goodwill impairment analysis at the reporting unit level. We perform our annual impairment analysis by either comparing a reporting unit’s estimated fair value to its carrying amount or doing a qualitative assessment of a reporting unit’s fair value from the last quantitative assessment to determine if there is potential impairment. We may do a qualitative assessment when the results of the previous quantitative test indicated the reporting unit’s estimated fair value was significantly in excess of the carrying value of its net assets and we do not believe there have been significant changes in the reporting unit’s operations that would significantly decrease its estimated fair value or significantly increase its net assets. If a quantitative assessment is performed, the evaluation includes management estimates of discounted cash flow projections based on internal future projections and/or use of a market approach by looking at market values of comparable companies. We perform our annual impairment test of goodwill in the fourth quarter of each year. Intangible assets consist of purchased in-process research and development (“IPR&D”), developed technology, supplier network, patents, customer relationships, re-acquired rights, and non-compete agreements. Intangible assets with finite useful lives are amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from one to twenty-one years . Intangible assets with finite useful lives are tested whenever events or circumstances indicate that a carrying amount of an asset (asset group) more likely than not is not recoverable. If an impairment is indicated, we measure the amount of the impairment loss as the amount by which the carrying amount exceeds the fair value of the asset. Fair value is generally determined using a discounted future cash flow analysis. IPR&D has an indefinite life and is not amortized until completion of the project at which time the IPR&D becomes an amortizable asset. Intangible assets with indefinite useful lives are tested for impairment annually or whenever events or circumstances indicate that a carrying amount of an asset (asset group) may not be recoverable. If the related project is not completed in a timely manner, we may have an impairment related to the IPR&D, calculated as the excess of the asset’s carrying value over its fair value. During the twelve months ended December 31, 2023, there were no impairments in goodwill, finite-lived intangible assets, or IPR&D. 72 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (m) Impairment of Long-Lived Assets We periodically evaluate the recoverability of the carrying amount of long-lived assets, which include property and equipment, as well as whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be fully recoverable. An impairment is assessed when the undiscounted future cash flows from the use and eventual disposition of an asset group are less than its carrying value. If an impairment is indicated, we measure the amount of the impairment loss as the amount by which the carrying amount exceeds the fair value of the asset group. Our fair value methodology is based on quoted market prices, if available. If quoted market prices are not available, an estimate of fair value is made based on prices of similar assets or other valuation techniques including present value techniques. During the years ended December 31, 2023, 2022, and 2021 , we did no t record any impairment charges related to long-lived assets. (n) Cost of Sales Cost of sales consists primarily of costs from our manufacturing operations, costs of products purchased from third-party suppliers, reserves for excess and obsolete inventory, depreciation of surgical instruments and cases, royalties, shipping, inspection and related costs incurred in making our products available for sale or use. (o) Research and Development Research and development costs are expensed as incurred. Research and development costs include salaries, employee benefits, supplies, consulting services, clinical services and clinical trial costs, and facilities costs. Costs incurred in obtaining technology licenses and patents are charged immediately to research and development expense if the technology licensed has not reached technological feasibility and has no alternative future use. (p) Stock -Based Compensation The cost of employee and non-employee director awards is measured at the grant date fair value of the award and is recognized as expense over the requisite service period, which is generally the vesting period of the equity award. Expense for performance-based restricted stock units is recognized when the performance condition is deemed to be probable. Compensation expense for awards includes the impact of forfeiture in the period when they occur. We estimate the fair value of stock options utilizing the Black-Scholes option-pricing model. Inputs to the Black-Scholes model include our stock price, expected volatility, expected term, risk-free interest rate and expected dividends. Expected volatility is based on the historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected term of the Company’s stock options offering period which is derived from historical experience. The risk-free interest rate assumption is based on observed interest rates of U.S. Treasury securities appropriate for the expected terms of the stock options. The dividend yield assumption is based on the history and expectation of no dividend payouts. The respective fair values of restricted stock units and performance restricted stock units are estimated on the day of grant based on the closing price of the Company’s common stock. We assumed equity-classified awards for certain NuVasive RSUs, and performance restricted stock units (“PRSUs”), as part of the Merger. These RSUs and PRSUs are measured at the grant date based on the estimated fair value of the award. The fair value of equity instruments that are expected to vest is recognized and amortized over the requisite service period. The Company has granted awards with up to five year graded or cliff vesting terms (in each case, with service through the date of vesting being required). No exercise price or other monetary payment is required for receipt of the shares issued in settlement of the respective award; instead, consideration is furnished in the form of the participant’s service to the Company. The fair value of RSUs including PRSUs with pre-defined performance criteria is based on the stock price on the date of grant whereas the expense for PRSUs with pre-defined performance criteria is adjusted with the probability of achievement of such performance criteria at each period end. (q) Derivative Financial Instruments The Company recognizes all derivative instruments as assets or liabilities in its Consolidated Balance Sheets and measures these instruments at fair value by revaluing these assets and liabilities at the end of each reporting period. Gains and losses are recorded as a component of other expense, net in the consolidated statements of operations and comprehensive income. The effects of these derivative instruments are immaterial to the Company’s financial statements. 73 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (r) Other Comprehensive Income (Loss) Other comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Other comprehensive income (loss) includes net of tax, unrealized gains or losses on the Company’s marketable debt securities and foreign currency translation adjustments. (s) Provision for Litigation We are involved in a number of proceedings, legal actions, and claims. Such matters are subject to many uncertainties, and the outcomes of these matters are not within our control and may not be known for prolonged periods of time. In some actions, the claimants seek damages, as well as other relief, including injunctions prohibiting us from engaging in certain activities, which, if granted, could require significant expenditures and/or result in lost revenues. We record a liability in the consolidated financial statements for these actions when a loss is considered probable and the amount can be reasonably estimated. If the reasonable estimate of a probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed. In most cases, significant judgment is required to estimate the amount and timing of a loss to be recorded. We expense legal costs related to loss contingencies as incurred. (t) Acquisition-Related Costs Acquisition-related costs represents the change in fair value of business acquisition-related contingent consideration and specific costs related to the consummation of the acquisition process such as banker fees, legal fees and other acquisition-related professional fees. (u ) Foreign Currency Translation The functional currency of our foreign subsidiaries is generally their local currency. Assets and liabilities of the foreign subsidiaries, and intercompany receivables and payables of a long-term investment nature, are translated at the period end currency exchange rate and revenues and expenses are translated at an average currency exchange rate for the period. The resulting foreign currency translation gains and losses are included as a component of accumulated other comprehensive income. Gains and losses arising from intercompany foreign transactions are included in other income, net on the consolidated statements of operations and comprehensive income. (v) Accounts Receivable and Related Valuation Accounts Accounts receivable in the accompanying consolidated balance sheets are presented net of allowances for expected credit losses. We maintain an allowance for expected credit losses resulting from the inability of its customers, including hospitals, ambulatory surgery centers, and distributors, to make required payments. The allowance for credit losses is calculated quarterly and is estimated on a region-by-region basis considering a number of factors including age of account balances, collection history, historical account write-offs, third-party credit reports, identified trends, current economic conditions, and supportable forecasted economic expectations. The allowance is adjusted on a specific identification basis for certain accounts as well as pooling of accounts with similar characteristics. An increase in the provision for credit losses may be required when the financial condition of our customers or their collection experience deteriorates. Our exposure to credit losses may also increase if its customers are adversely affected by changes in healthcare laws, coverage and reimbursement, macroeconomic pressures or uncertainty associated with local or global economic recessions, disruption associated with pandemics, or other customer-specific factors. (w) Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which such items are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. A valuation allowance is established to offset any deferred tax assets if, based upon available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Significant judgment is required in determining income tax provisions and in evaluating tax positions. We will establish additional provisions for income taxes when, despite the belief that tax positions are fully supportable, there remain certain positions that do not meet the minimum probability threshold that a tax position is more likely than not to be sustained upon examination by the taxing authority. In the normal course of business, we and our subsidiaries are examined by various federal, state, and foreign tax authorities. We regularly assess the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of the provision for income taxes. We periodically assess the likelihood and amount of potential adjustments and adjust the income tax provision, the current tax liability, and deferred taxes in the period in which the facts that give rise to a revision become known. 74 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (x) Recently Issued Accounting Pronouncements In December 2023, the Financial Accounting Standards Board (the “FASB”), issued Accounting Standards Update (“ASU”) No. 2023-09 , Income Taxes (Topic 740), Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures. The enhancement will provide information to better assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. Investors currently rely on the rate reconciliation table and other disclosures, including total income taxes paid, to evaluate income tax risks and opportunities. This update is effective for fiscal years beginning after December 15, 2024 and early adoption is permitted. The amendments should be applied prospectively with retrospective applications also permitted. The Company is currently evaluating the impact the standard will have on its consolidated financial statements and related disclosures. In November 2023, the FASB, issued ASU No. 2023-07 , Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures , to improve reportable segment disclosure requirements. The amendment introduced new requirementd to disclose significant segment expenses regularly provided to the chief operating decision maker (“CODM”), extend certain annual disclosures to interim periods, clarify single reportable segment entities must apply ASC 280 in its entirety, permit more than one measure of segment profit or loss to be reported under certain conditions, and require disclosure of the title and position of the CODM. This update is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years after December 15, 2024, early adoption is permitted. The amendments should be applied retrospectively. The Company is currently evaluating the impact the standard will have on its consolidated financial statements and related disclosures. In June 2022, the FASB issued ASU No. 2022-03 , Fair Value Measurement (Topic 820), Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions , which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The ASU introduces new disclosure requirements to provide investors with information about contractual restrictions, including the nature and remaining duration of such restrictions. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The amendments should be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. The Company is currently evaluating the impact the standard will have on its consolidated financial statements . (y) Recently Adopted Accounting Pronouncements In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires an entity (acquirer) to recognize and measure contract assets and liabilities acquired in a business combination in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). This update is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted. The amendments should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The Company adopted ASU No. 2021-08 as of January 1, 2023. The adoption did not have a material impact on the Company’s consolidated financial statements. On March 12, 2020, the FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The ASU is effective for all entities as of March 12, 2020, and will apply, as later extended by ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 , through December 31, 2024. To date, we have had no impacts on our investment portfolio or our credit agreement with Citizens Bank, N.A. related to reference rate reform. We will continue to evaluate the impact this guidance could have on our consolidated financial statements and related disclosures. 75 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 3. ASSET ACQUISITIONS AND BUSINESS COMBINATIONS Asset Acquisitions During the fourth quarter of 2021, the Company acquired substantially all the assets of Capstone Surgical Technologies, LLC, which engages in the business of advanced drill and robotic surgery platforms. The Company determined the transaction was an asset acquisition, by an analysis of the screen test in accordance with ASU No. 2017-01 in which substantially all of the value was concentrated in a single identifiable asset or a group of similar identifiable assets. The purchase price consisted of $ 24.5 million of cash paid at closing, subject to net working capital and other post-closing adjustments, if applicable. The transaction also provides for additional consideration contingent upon the developed products obtaining approval from the FDA of up to $ 15.0 million, and additional consideration contingent upon the achievement of certain performance obligations of up to $ 10.0 million. Contingent consideration is not recorded in an asset acquisition until the milestone is met. Also during the fourth quarter of 2021, the Company acquired substantially all the assets of a company that engages in the development of technology for use in robotic surgery platforms which was not considered material to the consolidated financial statements during the periods presented. The Company determined the transaction was an asset acquisition, by an analysis of the screen test in accordance with ASU No. 2017-01 in which substantially all of the value was concentrated in a single identifiable asset or a group of similar identifiable assets. The purchase price consisted of $ 10.0 million of cash paid at closing and also provides for additional consideration contingent upon the achievement of certain performance obligations of $ 5.0 million. Contingent consideration is not recorded in an asset acquisition until the milestone is met. Business Combinations During the fourth quarter of 2022, the Company acquired the membership interests of Harvest Biologics LLC (the “Harvest Acquisition”), which engages in the business of selling systems that produce autologous biologics. The purchase price was a cash payment of $ 30 million, subject to post-closing adjustments, if applicable. The Company has included the financial results from the Harvest Acquisition in our consolidated financial statements from the acquisition date. At acquisition date, the preliminary fair value of the net assets acquired was $ 30.1 million. The purchase price consisted of approximately $ 30.0 million of cash paid at closing, plus $ 0.1 million of preliminary post-closing adjustments. The Company recorded identifiable net assets, based on their estimated fair values, for inventory of $ 3.0 million, goodwill of $ 14.2 million, customer relationships and other intangibles of $ 10.5 million with a weighted average useful life of 20 years, and developed technology of $ 2.4 million with a weighted average useful life of 8 years. The Company has finalized the purchase price allocation of the assets and liabilities acquired. During the second quarter of 2022, the Company completed one acquisition that was not considered material to the consolidated financial statements during the periods presented. This acquisition has been included in the consolidated financial statements from the date of acquisition. The purchase price consisted of approximately $ 0.2 million of cash paid at closing and $ 4.4 million of contingent consideration payments, resulting in goodwill of $ 4.6 million based on the estimated fair values. The contingent payments for this acquisition are based upon achieving various performance milestones over a period of 10 years and are payable in a combination of cash and RSUs. During 2021, the Company completed three acquisitions that were not considered material, individually or collectively, to the consolidated financial statements during the periods presented. Two acquisitions were completed in the third quarter, while the third acquisition was completed in the fourth quarter. These acquisitions have been included in the consolidated financial statements from the date of acquisition. The purchase price of the acquisition in the fourth quarter consisted of approximately $ 0.3 million of cash paid at closing and $ 13.0 million of contingent consideration payments, resulting in goodwill of $ 13.3 million based on the estimated fair values. The combined purchase price of the two acquisitions in the third quarter consisted of approximately $ 12.6 million of contingent consideration payments. The Company recorded other intangible assets of $ 1.6 million, with a weighted average useful life of 3.8 years, and goodwill of $ 11.0 million based on their estimated fair values. The contingent payments for all three acquisitions are based upon achieving various performance obligations over a period of 10 years and are payable in a combination of cash and RSUs. NuVasive Merger On September 1, 2023, pursuant to that certain Merger Agreement with NuVasive and Merger Sub, Merger Sub, a wholly owned subsidiary of the Company, merged with and into NuVasive, with NuVasive surviving as a wholly owned subsidiary of the Company. Under the Merger Agreement, each share of common stock, par value $ 0.001 per share, of NuVasive issued and outstanding immediately prior to the effective time of the Merger (other than certain excluded shares as described in the Merger Agreement) was cancelled and converted into the right to receive 0.75 fully paid and non-assessable shares of Class A common stock of Globus, $ 0.001 par value per share, and the right to receive cash in lieu of fractional shares. NuVasive has a comprehensive procedural portfolio including surgical access instruments, spinal implants, fixation systems, biologics, software for surgical planning, navigation and imaging solutions, magnetically adjustable implant systems for spine and orthopedics, and IONM technology and service offerings. 76 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) As part of the Merger, the Company assumed equity awards for certain NuVasive RSUs and NuVasive PRSUs in accordance with the terms of the Merger Agreement. Certain awards included a change in control provision (single trigger) which accelerated the vesting of the awards on the closing date of the Merger. These awards were considered as part of the total purchase price. The unvested awards will continue to vest in accordance with the terms of the original award agreement, except for certain PRSUs that were converted into RSUs. Once vested, the holders will receive shares of the Company’s Class A common stock. Of the total consideration for the assumed equity awards, $ 28.6 million was allocated to the purchase price and $ 42.3 million was deemed compensatory as it was attributable to post acquisition vesting. Of the $ 42.3 million of total compensation related to the assumed awards, $ 12.9 million was expensed on the acquisition date due to accelerated vesting of the awards, recognized as Merger-related costs, and $ 29.4 million relates to future services and will be expensed over the remaining service periods of the unvested awards on a straight-line basis. Of the $ 29.4 million related to future services, $ 4.9 million of expense was recognized for the year ended December 31, 2023. Concurrently with the Merger, the Company repaid the outstanding $ 420.8 million under NuVasive’s revolving senior credit facility in addition to assuming the 0.375 % Senior Convertible Notes due 2025 (“2025 Notes”), the privately negotiated call options (“2025 Hedge”) and the privately negotiated warrants (“2025 Warrants”). The aggregate consideration in connection with the closing of the Merger was as follows: (In thousands) NuVasive shares outstanding as of September 1, 2023 52,451 NuVasive accelerated equity awards 632 Globus exchange ratio 0.75 Globus Class A Common Stock issued in exchange for NuVasive shares 39,813 Globus closing share price $ 54.10 Total Value Class A Common Stock $ 2,153,860 2025 Warrants 579 Repayment of revolving credit facility 420,762 Fair value of assumed equity awards 28,635 Total purchase price $ 2,603,836 We accounted for the Merger using the acquisition method of accounting, which requires the NuVasive assets and liabilities to be recorded on our balance sheet at fair value as of the acquisition date. We will complete a final determination of the fair value of certain assets and liabilities within the one-year measurement period from the date of the acquisition as required by FASB ASC Topic 805, “Business Combinations”. The preliminary fair value estimates for the assets acquired and liabilities assumed were based upon preliminary calculations, valuations, and assumptions that are subject to change as the Company obtains additional information during the measurement period. ‎ 77 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (In thousands) Preliminary Purchase Price Allocation as of September 30, 2023 Measurement Period and Other Adjustments Purchase Price Allocation as of December 31, 2023 (as adjusted) Current assets (excluding accounts receivable and inventories) $ 158,112 $ 38 $ 158,150 Accounts receivable 249,591 ( 6,912 ) 242,679 Inventories 570,300 ( 12,266 ) 558,034 Property, plant, and equipment 361,118 598 361,716 Operating lease ROU asset 90,457 ( 32,174 ) 58,283 Intangible assets 1,222,000 ( 323,000 ) 899,000 Other long-term assets 25,973 13,111 39,084 Deferred income taxes 4,837 977 5,814 Total Assets $ 2,682,388 $ ( 359,628 ) $ 2,322,760 Current Liabilities 185,175 ( 1,718 ) 183,457 Operating lease liabilities, including current portion 109,110 ( 7,758 ) 101,352 Business acquisition liabilities, including current portion 66,873 — 66,873 Senior convertible notes 409,500 — 409,500 Deferred income taxes and other tax liabilities 194,553 ( 16,035 ) 178,518 Other liabilities 37,496 ( 23,797 ) 13,699 Total liabilities $ 1,002,707 $ ( 49,308 ) $ 953,399 Fair value of acquired identifiable assets and liabilities $ 1,679,681 $ ( 310,320 ) $ 1,369,362 Purchase price $ 2,603,836 $ 2,603,836 Less: Fair value of acquired identifiable assets and liabilities $ ( 1,679,681 ) $ ( 1,369,362 ) Goodwill $ 924,155 $ 1,234,475 The excess of the purchase price over the net tangible and intangible assets is recorded to Goodwill and primarily reflects the assembled workforce and expected synergies. The majority of goodwill is non-deductible for tax purposes. During the year ended December 31, 2023, total transaction costs incurred in connection with the Merger were $ 49.8 million. These transaction costs were recognized as acquisition-related costs in the consolidated statements of operations and comprehensive income. Details of our valuation methodology and significant inputs for fair value measurements are included below. The fair value measurements for property, plant and equipment and intangible assets are based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements. The preliminary fair value of work-in-process and finished goods inventory utilizes a sales comparison approach which estimates the selling price of the inventory in completed condition less costs of disposal and a reasonable profit allowance for the selling effort. The preliminary fair value of property and equipment utilizes a combination of the cost approach, income approach, and sales comparison approach less amounts for capitalized research and development costs existing on NuVasive’s closing balance sheet. The preliminary fair value of the identifiable intangible assets was determined using variations of the income approach, namely the multi-period excess earnings and relief from royalty methodologies. The most significant assumptions applied in the development of the intangible asset fair values include: the amount and timing of future cash flows, the selection of discount and royalty rates, and the assessment of the asset’s economic life. The preliminary fair value of the operating lease ROU asset utilizes a market approach in determination of the measured asset. The preliminary fair value of the operating lease liability utilizes a discounted cost approach in determination of the measured liability. 78 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The identifiable intangible assets acquired are amortized on a straight-line basis over their estimated useful lives. The following table summarizes the estimated fair value of NuVasive’s identifiable intangible assets acquired and their remaining amortization period (in years): Fair Value as of (In thousands) December 31, 2023 Useful Life Developed Technology $ 607,000 8 Customer Relationships 292,000 11 Preliminary fair value of the 2025 Notes was determined using the publicly traded price. NuVasive’s results have been included in the Company’s financial statements for the period subsequent to the date of the acquisition on September 1, 2023. NuVasive contributed revenues of $ 414.9 million, for the period from September 1, 2023 to December 31, 2023. Due to the continuing integration of NuVasive’s operations into the Company, it is impractical to determine NuVasive’s net income/loss during the period, which is included in the Company’s Net Income. Supplemental Unaudited Pro Forma Information The following are the supplemental consolidated financial results of Globus and NuVasive on an unaudited pro forma basis, as if the acquisitions had been consummated as of the beginning of fiscal year 2022. Year Ended December 31, (In thousands) 2023 2022 Pro forma net sales $ 2,395,812 $ 2,224,785 Pro forma net income 121,017 ( 27,281 ) The unaudited pro forma net income for the year ended December 31, 2023 was adjusted to exclude $ 111.4 million of acquisition-related costs incurred in 2023. The unaudited pro forma net income for the year ended December 31, 2022, was adjusted to include the aforementioned charges. NOTE 4. NET SALES The following table represents net sales by product category: Year Ended December 31, (In thousands) 2023 2022 2021 Musculoskeletal Solutions $ 1,448,260 $ 926,703 $ 876,780 Enabling Technologies 120,216 96,140 81,322 Total net sales $ 1,568,476 $ 1,022,843 $ 958,102 79 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 5. MARKETABLE SECURITIES The composition of our short-term and long-term marketable securities is as follows: December 31, 2023 (In thousands) Amortized ‎ Cost Gross ‎ Unrealized ‎ Gains Gross Unrealized Losses Fair ‎ Value Short-term: Municipal bonds $ 11,210 $ — $ ( 224 ) $ 10,986 Corporate debt securities 38,416 — ( 853 ) 37,563 Government, federal agency, and other sovereign obligations 2,004 — ( 56 ) 1,948 Total short-term marketable securities $ 51,630 $ — $ ( 1,133 ) $ 50,497 Long-term: Municipal bonds $ 7,180 $ — $ ( 109 ) $ 7,071 Corporate debt securities 21,707 — ( 432 ) 21,275 Asset-backed securities 17,499 — ( 338 ) 17,161 Government, federal agency, and other sovereign obligations 30,363 — ( 442 ) 29,921 Total long-term marketable securities $ 76,749 $ — $ ( 1,321 ) $ 75,428 December 31, 2022 (In thousands) Amortized ‎ Cost Gross ‎ Unrealized ‎ Gains Gross ‎ Unrealized ‎ Losses Fair ‎ Value Short-term: Municipal bonds $ 83,279 $ 9 $ ( 1,680 ) $ 81,608 Corporate debt securities 187,174 2 ( 3,438 ) 183,738 Commercial paper 5,583 — ( 1 ) 5,582 Asset-backed securities 4,200 — ( 181 ) 4,019 Government, federal agency, and other sovereign obligations 21,102 1 ( 458 ) 20,645 Total short-term marketable securities $ 301,338 $ 12 $ ( 5,758 ) $ 295,592 Long-term: Municipal bonds $ 61,986 $ 44 $ ( 1,549 ) $ 60,481 Corporate debt securities 268,524 72 ( 8,947 ) 259,649 Asset-backed securities 120,929 217 ( 2,795 ) 118,351 Government, federal agency, and other sovereign obligations 58,453 18 ( 1,100 ) 57,371 Total long-term marketable securities $ 509,892 $ 351 $ ( 14,391 ) $ 495,852 The short-term marketable securities have effective maturity dates of less than one year and the long-term marketable securities have effective maturity dates ranging from one to three years as of December 31, 2023 and 2022, respectively. NOTE 6. FAIR VALUE MEASUREMENTS The following table represents the fair value of assets and liabilities, as of December 31, 2023 and 2022, respectively included the following: 80 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (In thousands) Balance at ‎ December 31, ‎ 2023 Level 1 Level 2 Level 3 Assets: Cash equivalents $ 203,689 $ 203,689 $ — $ — Municipal bonds 18,057 — 18,057 — Corporate debt securities 58,838 — 58,838 — Asset-backed securities 17,161 — 17,161 — Government, federal agency, and other sovereign obligations 31,869 2,928 28,941 — 2025 Hedge 687 — 687 — Liabilities: Senior Convertible Notes due 2025 417,363 417,363 — — Bifurcated Conversion Option of the Senior Convertible Notes due 2025 687 — 687 — Business acquisition liabilities 139,358 — — 139,358 (In thousands) Balance at ‎ December 31, ‎ 2022 Level 1 Level 2 Level 3 Assets: Cash equivalents $ 17,655 $ 17,655 $ — $ — Municipal bonds 142,089 — 142,089 — Corporate debt securities 443,387 — 443,387 — Commercial paper 5,582 — 5,582 — Asset-backed securities 122,370 — 122,370 — Government, federal agency, and other sovereign obligations 78,016 — 78,016 — Liabilities: Business acquisition liabilities 68,258 — — 68,258 Our marketable securities are classified as Level 2 within the fair value hierarchy, as we measure their fair value using quoted market prices for similar instruments and inputs such as actual trade data, benchmark yields, broker/dealer quotes and other similar data obtained from quoted market prices or independent pricing vendors . The bifurcated conversion option and 2025 Hedge are classified as Level 2 within the fair value hierarchy, based on implied equity volatility. The estimated fair value of the 2025 Notes, inclusive of the embedded conversion option, at December 31, 2023 was $ 418.0 million. The fair value was determined based on the quoted price of the 2025 Notes in an active market on the last trading day of the reporting period and has been classified as Level 1 within the fair value hierarchy. 81 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Fair value of the revenue-based business acquisition liabilities was determined using a discounted cash flow model and an option pricing methodology. The significant inputs of such models are not observable in the market, such as certain financial metric growth rates, volatility and discount rates, market price risk adjustment, projections associated with the applicable milestone, the interest rate, and the related probabilities and payment structure in the contingent consideration arrangement. The following are the significant unobservable inputs used in the two valuation techniques: Unobservable input Range Weighted Average* Revenue risk premium 2.0 % - 5.5 % 2.7 % Revenue volatility 12.5 % - 15.8 % 13.9 % Discount rate 5.9 % - 8.5 % 6.6 % Projected year of payment 2024 - 2032 * The weighted average rates were calculated based on the relative fair value of each business acquisition liability. The change in the carrying value of the business acquisition liabilities during the years ended December 31, 2023 and 2022, respectively included the following: Year Ended December 31, (In thousands) 2023 2022 Beginning balance $ 68,258 $ 70,525 Purchase price contingent consideration 66,873 4,414 Contingent cash payments ( 11,044 ) ( 9,787 ) Contingent RSU grants ( 1,925 ) ( 1,986 ) Changes in fair value of business acquisition liabilities 17,434 5,132 Contractual payable reclassification ( 238 ) ( 40 ) Ending balance $ 139,358 $ 68,258 We translate the financial statements of our foreign subsidiaries with functional currencies other than the U.S. dollar into the U.S. dollar for consolidation using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations. Some of our reporting entities conduct a portion of their business in currencies other than the entity’s functional currency. These transactions give rise to receivables and payables that are denominated in currencies other than the entity’s functional currency. The value of these receivables and payables is subject to changes in currency exchange rates from the point at which the transactions are originated until the settlement in cash. Both realized and unrealized gains and losses in the value of these receivables and payables are included in the determination of net income or loss. Net currency exchange gains/(losses), which include gains and losses from derivative instruments, were $ 14.1 million and ($ 1.0 ) million for the year ended December 31, 2023 and December 31, 2022, respectively, and are included in other expense, net in the Consolidated Statements of Operations and Comprehensive Income. To manage foreign currency exposure risks, we may use derivatives for activities in entities that have short-term intercompany receivables and payables denominated in a currency other than the entity’s functional currency. The fair value is based on a quoted market price (Level 1). As of December 31, 2023, a notional principal amount of $ 10.0 million was outstanding to hedge currency risk relative to our foreign currency-denominated receivables and payables. Derivative instrument net losses on our forward exchange contracts were $ 0.1 million as of December 31, 2023 and are included in other expense, net in the Consolidated Statements of Operations and Comprehensive Income. The fair value of the forward exchange contract derivative instrument asset (liability) was di minimis as of December 31, 2023. The derivative instruments are recorded in other current assets or other current liabilities in the Consolidated Balance Sheets commensurate with the nature of the instrument at period end. NOTE 7. INVENTORIES Inventories as of December 31, 2023 and 2022, respectively included the following: December 31, (In thousands) 2023 2022 Raw materials $ 103,349 $ 60,324 Work in process 37,321 18,699 Finished goods 707,465 219,958 Total inventories $ 848,135 $ 298,981 82 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) As part of the NuVasive Merger, a step-up in the value of inventory of $ 202.6 million was recorded, which was composed of $ 3.0 million for work in process and $ 199.6 million for finished goods. The amortization of the inventory step-up recorded in product cost of sales was $ 71.7 million for the year ended December 31, 2023, respectively. As of December 31, 2023, the total remaining balance of inventory step-up was $ 131.1 million. During years ended December 31, 2023, 2022, and 2021, net adjustments to cost of sales related to excess and obsolete inventory were $ 10.9 million, $ 6.4 million, and $ 6.1 million, respectively. The net adjustments for the years ended December 31, 2023, 2022, and 2021 reflect a combination of additional expense for excess and obsolete related provisions ($ 18.1 million, $ 18.5 million, and $ 20.2 million, respectively) offset by sales and disposals ($ 7.2 million, $ 12.1 million, and $ 14.1 million, respectively) of inventory for which an excess and obsolete provision was previously recorded. NOTE 8. PROPERTY AND EQUIPMENT Property and equipment as of December 31, 2023 and 2022, respectively included the following: Useful December 31, December 31, (In thousands) Life 2023 2022 Land — $ 9,748 $ 8,277 Buildings and improvements 31.5 102,449 51,510 Equipment 5 - 15 206,392 148,803 Instruments, modules, and cases 5 672,018 360,078 Other property and equipment 3 - 5 22,020 18,097 1,012,627 586,765 Less: accumulated depreciation and amortization ( 425,695 ) ( 343,036 ) Total $ 586,932 $ 243,729 Instruments are hand-held devices used by surgeons to install implants during surgery. Modules and cases are used to store and transport the instruments and implants. Depreciation expense related to property and equipment was as follows: Year Ended December 31, (In thousands) 2023 2022 2021 Depreciation $ 93,702 $ 50,517 $ 51,342 NOTE 9. GOODWILL AND INTANGIBLE ASSETS The change in the carrying amount of goodwill during the years ended December 31, 2023 and 2022, respectively included the following: (In thousands) December 31, 2021 $ 179,708 Additions and adjustments 18,799 Foreign exchange ( 1,036 ) December 31, 2022 197,471 Additions and adjustments 1,235,890 Foreign exchange 1,179 December 31, 2023 $ 1,434,540 83 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Intangible assets as of December 31, 2023 included the following: December 31, 2023 (In thousands) Weighted Average Amortization Period (in years) Gross ‎ Carrying ‎ Amount Accumulated ‎ Amortization Intangible ‎ Assets, ‎ net Supplier network 10.0 $ 4,000 $ ( 3,667 ) $ 333 Customer relationships & other intangibles 10.6 353,849 ( 54,871 ) 298,978 Developed technology 8.0 695,226 ( 74,636 ) 620,590 Patents 16.1 9,266 ( 4,564 ) 4,702 Total intangible assets $ 1,062,341 $ ( 137,738 ) $ 924,603 Intangible assets as of December 31, 2022 included the following: December 31, 2022 (In thousands) Weighted Average Amortization Period (in years) Gross ‎ Carrying ‎ Amount Accumulated ‎ Amortization Intangible ‎ Assets, ‎ net Supplier network 10.0 $ 4,000 $ ( 3,267 ) $ 733 Customer relationships & other intangibles 8.7 62,324 ( 41,651 ) 20,673 Developed technology 8.0 75,087 ( 37,984 ) 37,103 Patents 16.1 8,885 ( 3,820 ) 5,065 Total intangible assets $ 150,296 $ ( 86,722 ) $ 63,574 The following table summarizes amortization of intangible assets for future periods as of December 31, 2023: (In thousands) Annual ‎ Amortization 2024 $ 118,084 2025 113,798 2026 110,354 2027 109,249 2028 105,783 Thereafter 367,336 Total $ 924,603 NOTE 10. ACCRUED EXPENSES Accrued expenses as of December 31, 2023 and 2022, respectively included the following: December 31, (In thousands) 2023 2022 Compensation and other employee-related costs $ 140,817 $ 53,352 Legal and other settlements and expenses 9,335 5,564 Accrued non-income taxes 23,726 10,029 Royalties 10,130 4,375 Rebates 27,605 10,501 Other 28,847 8,348 Total accrued expenses $ 240,460 $ 92,169 NOTE 11. DEBT The carrying values of the Company’s 2025 Notes, acquired in the Merger, as of December 31, 2023, were as follows: 84 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, (In thousands) 2023 0.375% Senior Convertible Notes due 2025: Principal $ 449,987 Unamortized fair value adjustment for acquisition accounting 33,275 0.375% Senior Convertible Notes due 2025 416,712 Embedded Conversion Option 687 Debt, net of unamortized fair value adjustments for acquisition accounting $ 417,400 December 31, 2023 Interest expense: Contractual coupon interest $ 364 Amortization of fair value adjustments for acquisition accounting 9,076 Total interest expense recognized on Senior Convertible Notes due 2025 $ 9,439 Effective interest rates: Senior Convertible Notes due 2025 6.8 % Line of Credit In September 2023, we entered into an unsecured credit agreement with U.S. Bank National Association, as administrative agent, Citizens Bank, N.A., as syndication agent, Royal Bank of Canada, as documentation agent, U.S. Bank National Association and Citizens Bank, N.A., as joint lead arrangers and joint book runners, and the other lenders referred to therein (the “September 2023 Credit Agreement”), that provides a revolving credit facility permitting borrowings up to $ 400.0 million and has a termination date of September 27, 2028 . We may request an increase in the revolving commitments in an aggregate amount not to exceed (i) $ 200 million or (ii) so long as the Leverage Ratio (as defined in the September 2023 Credit Agreement) is at least 0.25 to 1.00 less than the applicable Leverage Ratio then required under the September 2023 Credit Agreement, an unlimited amount. Revolving Loans under the September 2023 Credit Agreement bear interest at either a base rate or the Term SOFR Rate (as defined in the Revolving Credit Facility) plus, in each case, an applicable margin, as determined in accordance with the provisions of the September 2023 Credit Agreement. The Applicable Margin ranges from 0.125 % to 0.625 % for the Base Rate and 1.125 % to 1.625 % for the Term SOFR Rate. We may also request Swingline Loans (as defined in the September 2023 Credit Agreement) at either the Base Rate or the Daily Term SOFR Rate. The September 2023 Credit Agreement is guaranteed by certain direct or indirect wholly owned subsidiaries of the Company. The September 2023 Credit Agreement contains financial and other customary covenants, including a funded net indebtedness to adjusted EBITDA ratio. As of December 31, 2023, we have no t borrowed under the September 2023 Credit Agreement and we are compliance with all covenants. 0.375% Senior Convertible Notes due 2025 On September 1, 2023, in connection with the closing of the Merger, the Company, NuVasive and Wilmington Trust National Association, as trustee (the “Trustee”) entered into a supplemental agreement (the “First Supplemental Indenture”) to the Indenture, dated March 2, 2020 (the “Base Indenture”), by and between NuVasive and the Trustee, relating to NuVasive’s $ 450.0 million in aggregate principal amount of 0.375 % Convertible Senior Notes due 2025. As of the closing date of the Merger, $ 450 million of aggregate principal amount of the 2025 Notes were outstanding. Pursuant to the First Supplemental Indenture, the 2025 Notes are convertible into the Company’s Class A common stock at a conversion rate of 8.0399 shares per $ 1,000 principal amount of 2025 Notes, which is equivalent to a conversion price of approximately $ 124.38 per share, subject to adjustments. The 2025 Notes may be settled in cash, stock, or a combination thereof, solely at the Company’s discretion. Pursuant to the terms of the First Supplemental Indenture, Globus agreed to guarantee NuVasive’s obligations under the Indenture. The 2025 Notes bear interest at a rate of 0.375 % per annum, payable semi-annually in arrears on March 15 and September 15 of each year. The 2025 Notes mature on March 15, 2025 , unless earlier converted, redeemed, or repurchased in accordance with their terms. The Merger constituted a Merger Event as defined in the Base Indenture. In the event of a Merger Event, the Company is required to execute a supplemental indenture providing for (i) each holder of 2025 Notes with the right to convert each $ 1,000 principal amount of 2025 Notes into the same type of consideration that holders would have been entitled to receive if such holders had held a number of shares of NuVasive Common Stock equal to the applicable conversion rate in effect immediately prior to such Merger Event, and (ii) subsequent adjustments to the conversion rate set forth in the Base Indenture. 85 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Prior to September 15, 2024, holders may convert their 2025 Notes only under the following conditions: (a) during any calendar quarter commencing after the calendar quarter ending on June 30, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day; (b) during the five business day period after any five consecutive trading day period, or the measurement period, in which the trading price of the 2025 Notes per $ 1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the conversion rate on such trading day; (c) if the Company calls any or all of the 2025 Notes for redemption, at any time prior to the close of business on the second scheduled trading day preceding the redemption date; or (d) upon the occurrence of specified corporate events, as defined in the 2025 Notes. On or after September 15, 2024, until the close of business on the second scheduled trading day immediately preceding March 15, 2025, holders may convert their 2025 Notes at any time, regardless of the foregoing conditions. In addition, following certain corporate events that occur prior to the maturity date or if the Company issues a notice of redemption, the Company will increase the conversion rate for a holder who elects to convert its 2025 Notes in connection with such a corporate event or in connection with such redemption in certain circumstances. The Company may redeem the 2025 Notes, at its option, in whole or in part, until the close of business on the business day immediately preceding September 15, 2024, if the last reported sale price of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company delivers written notice of a redemption. The redemption price will be equal to 100 % of the principal amount of such 2025 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date. No principal payments are due on the 2025 Notes prior to maturity. Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the 2025 Notes do not contain any financial covenants and do not restrict the Company from conducting significant restructurings, paying dividends or issuing or repurchasing any of its other securities. Upon the initial recognition of the 2025 Notes pursuant to the purchase accounting for the Merger, the embedded conversion feature does not meet the equity scope exception described in ASC 815-40, Contracts in Entity’s Own Equity. The embedded conversion feature is bifurcated and presented as a liability on the consolidated balance sheet with subsequent measurement at fair value with changes in fair value recognized as other income/(expense). The Company recognized, at Merger closing, the embedded conversion feature at fair value of $ 1.7 million and allocated the residual $ 407.8 million of the 2025 Notes fair value to the host debt instrument. As of the December 31, 2023, the fair value of the embedded conversion feature was $ 0.7 million. As a result of the Merger and recognizing the fair value of the 2025 Notes, along with the embedded conversion feature, as of the acquisition date, the Company recorded $ 42.2 million debt discount to be accreted as interest expense over the life of the notes. 2025 Hedge On September 1, 2023, in connection with the closing of the Merger, the Company, NuVasive, and certain dealers entered into amendment and guarantee agreements with respect to 2025 Hedge pursuant to which NuVasive purchased options from such dealers exercisable into its own common stock in connection with the sale of the 2025 Notes. Pursuant to such amendment and guarantee agreements, the 2025 Hedge is exercisable into Globus Class A common stock in certain circumstances and the Company guaranteed NuVasive’s obligations under the 2025 Hedge. Subject to the amended 2025 Hedge, the Company is entitled to purchase up to 3,617,955 shares of the Company’s Class A common stock at a strike price of $ 124.38 . The 2025 Hedge will expire on the second scheduled trading day immediately preceding March 15, 2025 and is expected to reduce the potential equity dilution upon conversion of the 2025 Notes if the daily volume-weighted average price per share of the Company’s common stock exceeds the strike price of the 2025 Hedge. In accordance with ASC 805, the Company recognized the 2025 Hedge at an acquisition date fair value of $ 1.7 million. The 2025 Hedge does not meet the equity scope exception described in ASC 815-40, Contract in Entity’s Own Equity, and will be presented as asset on the consolidated balance sheet with subsequent measurement at fair value with changes in fair value recognized as other income/(expense). As of December 31, 2023, the fair value of the 2025 Hedge is $ 0.7 million recorded within the Other Assets with the consolidated balance sheet. An assumed exercise of the 2025 Hedge by NuVasive is considered anti-dilutive since the effect of the inclusion would always be anti-dilutive with respect to the calculation of diluted earnings per share. 86 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2025 Warrants On September 1, 2023, in connection with the closing of the Merger, the Company, NuVasive, and certain dealers entered into amendment and guarantee agreements with respect to the 2025 Warrants, pursuant to which NuVasive sold warrants to such dealers for its own common stock in connection with the initial sale of the 2025 Notes. Pursuant to such amendment and guarantee agreements, the warrants are exercisable into Globus Class A common stock in certain circumstances and the Company guaranteed NuVasive’s obligations under the 2025 Warrants. Subject to the amended 2025 Warrants, the holders of the 2025 Warrants are entitled to purchase up to 3,617,955 shares of the Company’s common stock at a strike price of $ 170.45 . The 2025 Warrants will expire on various dates from June 2025 through October 2025 and may be settled in net shares or cash, at the Company’s election. In accordance with ASC 805, the Company recognized the 2025 Warrants at an acquisition date fair value of $ 0.6 million within additional paid-in capital. The 2025 Warrants could have a dilutive effect on the Company’s earnings per share to the extent that the price of the Company’s common stock during a given measurement period exceeds the strike price of the 2025 Warrants, which is $ 170.45 per share. The Company uses the treasury share method for assumed exercise of its 2025 Warrants to compute the weighted average common shares outstanding for diluted earnings per share. NOTE 12. EQUITY Stock Repurchases On March 11, 2020, the Company announced a share repurchase program, which authorized the Company to repurchase up to $ 200.0 million of the Company’s Class A common stock (“Class A Common”). On March 4, 2022, the share repurchase program was expanded by authorizing the Company to repurchase an additional $ 200.0 million of the Company’s Class A Common. On September 27, 2023, the share repurchase program was expanded by authorizing the Company to repurchase an additional $ 350.0 million of the Company’s Class A Common. The repurchase program has no time limit and may be suspended for periods or discontinued at any time. During the year ended December 31, 2023, the Company repurchased a total of 4.3 million shares under this program at an average price of $ 52.11 , for a dollar amount of $ 225.6 million. As of December 31, 2023, the Company has approximately $ 275.2 million remaining under the share repurchase program authorized of Class A Common. The timing and actual number of shares repurchased will depend on various factors including price, corporate and regulatory requirements, debt covenant requirements, alternative investment opportunities and other market conditions. Funding of share repurchases is expected to come from operating cash flows and excess cash. Shares repurchased by the Company are accounted for under the constructive retirement method, in which the shares repurchased, are immediately retired, as there is no plan to reissue the shares. The Company made an accounting policy election to charge the excess of repurchase price over par value entirely to retained earnings. Common Stock Our amended and restated Certificate of Incorporation provides for a total of 775,000,000 authorized shares of common stock. Of the authorized number of shares of common stock, 500,000,000 shares are designated as Class A Common and 275,000,000 shares are designated as Class B common stock (“Class B Common”). The holders of Class A Common are entitled to one vote for each share of Class A Common held. Each share of our Class B common stock is convertible at any time at the option of the holder into one share of our Class A Common. In addition, each share of our Class B common stock will convert automatically into one share of our Class A common stock upon any transfer, whether or not for value, except for permitted transfers. For more details relating to the conversion of our Class B common stock please see “Exhibit 4.2, Description of Securities of the Registrant” filed herein. The holders of Class B Common are entitled to 10 votes for each share of Class B Common held. The holders of Class A Common and Class B Common vote together as one class of common stock. Except for voting rights, the Class A Common and Class B Common have the same rights and privileges. Accumulated Other Comprehensive Income (Loss) The tables below present the changes in each component of accumulated other comprehensive income/(loss), including current period other comprehensive income/(loss) and reclassifications out of accumulated other comprehensive income/(loss) for the years ended December 31, 2023 and 2022, respectively: 87 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (In thousands) Unrealized loss on marketable securities, net of tax Foreign currency translation adjustments Accumulated other comprehensive loss Accumulated other comprehensive income/(loss), net of tax, at December 31, 2022 $ ( 15,093 ) $ ( 9,537 ) $ ( 24,630 ) Other comprehensive income/(loss) before reclassifications 17,420 1,207 18,627 Amounts reclassified from accumulated other comprehensive income/(loss), net of tax ( 4,189 ) — ( 4,189 ) Other comprehensive income/(loss), net of tax 13,231 1,207 14,438 Accumulated other comprehensive income/(loss), net of tax, at December 31, 2023 $ ( 1,862 ) $ ( 8,330 ) $ ( 10,192 ) (In thousands) Unrealized loss on marketable securities, net of tax Foreign currency translation adjustments Accumulated other comprehensive loss Accumulated other comprehensive income/(loss), net of tax, at December 31, 2021 $ ( 1,053 ) $ ( 5,719 ) $ ( 6,772 ) Other comprehensive income/(loss) before reclassifications ( 18,494 ) ( 3,818 ) ( 22,312 ) Amounts reclassified from accumulated other comprehensive income/(loss), net of tax 4,454 — 4,454 Other comprehensive income/(loss), net of tax ( 14,040 ) ( 3,818 ) ( 17,858 ) Accumulated other comprehensive income/(loss), net of tax, at December 31, 2022 $ ( 15,093 ) $ ( 9,537 ) $ ( 24,630 ) Amounts reclassified from accumulated other comprehensive loss, net of tax, related to unrealized gains/losses on marketable securities were released to other income, net in our consolidated statements of operations and comprehensive income. 88 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Earnings Per Common Share The Company computes basic earnings per share using the weighted-average number of common shares outstanding during the period. Diluted earnings per share assumes the conversion, exercise or issuance of all potential common stock equivalents, unless the effect of inclusion would be anti-dilutive. For purposes of this calculation, common stock equivalents include the Company’s stock options, unvested RSUs, and PRSUs. These are included in basic net income per share as of the date that all necessary conditions have been satisfied and are included in the denominator for dilutive calculation for the entire period if such shares would be issuable as of the end of the reporting period assuming the end of the reporting period was the end of the contingency period. The following table sets forth the computation of basic and diluted earnings per share: Year Ended December 31, (In thousands, except per share amounts) 2023 2022 2021 Numerator: Net income/(loss) for basic: $ 122,873 $ 190,169 $ 149,191 Dilutive potential net income (loss): Adjusted net income (loss) for diluted $ 122,873 $ 190,169 $ 149,191 Denominator for basic and diluted net income per share: Weighted average shares outstanding for basic 113,087 100,469 100,734 Dilutive stock options, RSUs, and PRSUs 1,543 2,174 2,889 Weighted average shares outstanding for diluted 114,630 102,643 103,623 Earnings per share: Basic $ 1.09 $ 1.89 $ 1.48 Diluted $ 1.07 $ 1.85 $ 1.44 Anti-dilutive stock options and RSUs excluded from the calculation 6,295 3,851 2,139 Anti-dilutive warrants excluded from the calculation 3,618 — — Anti-dilutive Senior Convertible Notes due 2025 excluded from the calculation 3,618 — — Total 13,531 3,851 2,139 In accordance with ASU No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20), the Company applies the if-converted method in computing the effect of the Company's 2025 Notes on diluted net income per share. For periods in which the Company reports net income, the numerator of the diluted per share computation is adjusted for interest expense and amortization of debt issuance costs, net of tax, and the denominator is adjusted for the weighted average number of shares into which each of the Company’s 2025 Notes could be converted. The effect is only included in the calculation of diluted net income per share for those 2025 Notes which reduce net income per share. NOTE 13. STOCK-BASED AWARDS We have four stock plans: our 2012 Equity Incentive Plan (the “2012 Plan”) and our 2021 Equity Incentive Plan (the “2021 Plan”), the NuVasive 2014 Equity Incentive Plan (the “NuVasive 2014 Plan”), and the Ellipse Technologies 2015 Incentive Award Plan (the “Ellipse 2015 Plan”). The 2021 Plan, the NuVasive 2014 Plan and the Ellipse 2015 Plan are the only active stock plans. The purpose of the 2012 Plan was, and of the 2021 Plan is, to provide incentive to employees, directors, and consultants of Globus. The 2012 Plan, 2021 Plan, NuVasive 2014 Plan, and Ellipse 2015 Plan are administered by the Board of Directors of Globus (the “Board”) or its delegates. The number, type of option, exercise price, and vesting terms are determined by the Board or its delegates in accordance with the terms of the 2012 Plan and 2021 Plan. The options granted expire on a date specified by the Board, which is ten years from the grant date. Options granted to employees vest in varying installments over a four -year period. The 2012 Plan was approved by our Board in March 2012, and by our stockholders in June 2012. The 2012 Plan terminated as to new awards pursuant to its terms in 2022. Following effectiveness of the 2021 Plan, we have no t issued any additional awards under the 2012 Plan; however, awards previously granted under the 2012 Plan remain outstanding and are administered by our Board under the terms and conditions of the 2012 Plan. Under the 2012 Plan, the aggregate number of shares of Class A Common stock that were able to be issued subject to options and other awards is equal to the sum of (i) 3,076,923 shares, (ii) any shares available for issuance under the 2008 Plan as of March 13, 2012, (iii) any shares underlying awards outstanding under the 2008 Plan as of March 13, 2012 that, on or after that date, are forfeited, terminated, 89 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) expired or lapse for any reason, or are settled for cash without delivery of shares and (iv) starting January 1, 2013, an annual increase in the number of shares available under the 2012 Plan equal to up to 3 % of the number of shares of our common and preferred stock outstanding at the end of the previous year, as determined by our Board. The number of shares that were able to be issued or transferred pursuant to incentive stock options under the 2012 Plan was limited to 10,769,230 shares. The shares of Class A Common covered by the 2012 Plan included authorized but unissued shares, treasury shares or shares of common stock purchased on the open market. The 2021 Plan was approved by our Board in March 2021, and by our stockholders in June 2021. Under the 2021 Plan, as amended to date, the aggregate number of shares of Class A Common that were able to be issued subject to options and other awards is equal to the sum of (i) 8,000,000 shares, (ii) any shares available for issuance under the 2012 Plan as of June 3, 2021 and (iii) any shares underlying awards outstanding under the 2012 Plan or 2021 Plan as of June 3, 2021 that, on or after that date, are forfeited, terminated, expired or lapse for any reason, or are settled for cash without delivery of shares. The number of shares that could be issued or transferred pursuant to incentive stock options under the 2021 Plan is limited to 8,000,000 shares. The shares of Class A Common covered by the 2021 Plan include authorized but unissued shares, treasury shares or shares of common stock purchased on the open market. In connection with the Merger, the Company assumed outstanding awards for the RSUs and PRSUs under the NuVasive 2014 Plan and the Ellipse 2015 Plan in accordance with the terms in the Merger Agreement. The PRSUs ultimate issuance amount is determined by the Company’s Compensation Committee. Share payout levels range from 0 % to 100 % depending on the respective terms of an award. As of December 31, 2023, pursuant to the 2021 Plan, the NuVasive 2014 Plan, and the Ellipse 2015 Plan, there were 9,799,141 shares 2,271,633 shares, and 423,886 shares of Class A Common stock reserved, respectively and 5,152,998 shares, 1,625,088 shares, and 241,048 shares of Class A Common stock available, respectively, for future grants. Stock Options Stock option activity during the year ended December 31, 2023 is summarized as follows: Option ‎ Shares (thousands) Weighted average exercise price Weighted ‎ average ‎ remaining ‎ contractual ‎ life (years) Aggregate ‎ intrinsic ‎ value ‎ (thousands) Outstanding at December 31, 2022 10,338 $ 51.86 Granted 1,897 57.51 Exercised ( 387 ) 32.31 Forfeited ( 447 ) 62.92 Outstanding at December 31, 2023 11,401 53.02 6.4 $ 61,489 Exercisable at December 31, 2023 7,103 49.20 5.3 52,537 Expected to vest at December 31, 2023 4,292 $ 59.35 8.2 $ 8,952 The total intrinsic value of stock options exercised was $ 10.8 million, $ 26.3 million, and $ 71.3 million, during the years ended December 31, 2023, 2022, and 2021, respectively. The fair value of the options was estimated on the date of the grant using a Black-Scholes option pricing model with the following assumptions: Year Ended December 31, 2023 2022 2021 Risk-free interest rate 3.45 % - 4.77 % 1.46 % - 4.04 % 0.40 % - 1.14 % Expected term (years) 4.7 - 4.8 4.7 - 9.9 4.8 Expected volatility 35.0 % - 38.0 % 33.0 % - 35.0 % 33.0 % - 34.0 % Expected dividend yield —% —% —% The weighted average grant date fair value of stock options granted during the years ended December 31, 2023, 2022, and 2021 was $ 21.47 , $ 22.10 , and $ 20.34 per share, respectively. 90 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Restricted Stock Units Restricted stock unit activity during the year ended December 31, 2023 is summarized as follows: Restricted Stock ‎ Units (thousands) Weighted ‎ average ‎ grant date fair value ‎ per share Weighted ‎ average ‎ remaining ‎ contractual ‎ life (years) Outstanding at December 31, 2022 60 $ 67.40 Granted 1,271 54.04 Vested ( 477 ) — Forfeited ( 34 ) — Outstanding at December 31, 2023 820 $ 54.98 2.47 Performance-Based Restricted Stock Units Performance-based restricted stock unit activity during the year ended December 31, 2023 is summarized as follows: Performance-Based Restricted Stock ‎ Units (thousands) Weighted ‎ average ‎ grant date fair value ‎ per share Weighted ‎ average ‎ remaining ‎ contractual ‎ life (years) Outstanding at December 31, 2022 — $ — Granted 108 53.61 Vested ( 2 ) 54.10 Forfeited — — Outstanding at December 31, 2023 106 $ 53.61 2.47 Stock-Based Compensation Compensation expense related to stock options granted to employees and non-employees under the Plans and the intrinsic value of stock options exercised was as follows: Year Ended December 31, (In thousands) 2023 2022 2021 Stock-based compensation expense $ 38,995 $ 32,810 $ 30,586 Stock-based compensation expense classified in Acquisition-Related Costs 13,747 — — Net stock-based compensation capitalized into inventory 31 657 667 Total stock-based compensation cost $ 52,773 $ 33,467 $ 31,253 As of December 31, 2023, there was $ 96.1 million of unrecognized compensation expense related to unvested employee stock options that vest over a weighted average period of three years . NOTE 14. INCOME TAXES The components of income before income taxes are as follows: Year Ended December 31, (In thousands) 2023 2022 2021 Domestic $ 181,752 $ 247,260 $ 184,819 Foreign ( 16,359 ) ( 4,241 ) ( 4,412 ) Total $ 165,393 $ 243,019 $ 180,407 91 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The components of the provision for income taxes are as follows: Year Ended December 31, (In thousands) 2023 2022 2021 Current: Federal $ 81,504 $ 60,927 $ 37,436 State 15,190 12,408 7,688 Foreign 4,075 1,845 3,741 100,769 75,180 48,865 Deferred: Federal ( 46,217 ) ( 16,429 ) ( 13,535 ) State ( 6,421 ) ( 3,142 ) ( 2,265 ) Foreign ( 5,611 ) ( 2,759 ) ( 1,849 ) ( 58,249 ) ( 22,330 ) ( 17,649 ) Total $ 42,520 $ 52,850 $ 31,216 A reconciliation of the statutory U.S. federal tax rate to our effective rate is as follows: Year Ended December 31, 2023 2022 2021 Statutory U.S. federal tax rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal benefit 4.1 3.0 2.7 Foreign taxes ( 0.6 ) 0.7 1.6 Valuation allowance 0.4 ( 0.5 ) 0.1 Domestic production activities deduction — — ( 0.3 ) Tax credits ( 3.4 ) ( 1.3 ) ( 1.5 ) Compensation expense ( 0.9 ) ( 1.2 ) ( 6.6 ) Nondeductible expenses 1.3 — 0.5 Foreign inclusions ( 0.9 ) — — Acquisition related charges 4.9 — — Other ( 0.2 ) — ( 0.2 ) Effective tax rate 25.7 % 21.7 % 17.3 % Deferred income taxes reflect the tax effects of temporary differences between the basis of assets and liabilities recognized for financial reporting purposes and tax purposes. Significant components of our deferred income taxes are as follows: 92 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, (In thousands) 2023 2022 Deferred tax assets: Inventory reserve $ 27,228 $ 29,649 Accruals, reserves, and other currently not deductible 37,798 27,608 Stock-based compensation 39,715 20,554 Capitalized R&E 68,832 14,279 Net operating loss carryforwards 128,810 4,182 General business and other credit carryforwards 42,569 — Lease Liability 22,887 — Other 30,948 — Total deferred tax assets 398,787 96,272 Valuation allowance ( 190,762 ) ( 5,488 ) Total deferred tax assets, net of valuation allowance 208,025 90,784 Deferred tax liabilities: Depreciation and amortization ( 244,348 ) ( 43,718 ) Right of Use Asset ( 12,370 ) — Total deferred tax liabilities ( 256,718 ) ( 43,718 ) Net deferred tax assets/(liabilities) $ ( 48,693 ) $ 47,066 In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that we will realize a portion of the benefits of these deductible differences at December 31, 2023 and 2022. The Company has established valuation allowances of $ 190.8 million and $ 5.5 million at December 31, 2023 and 2022, respectively, primarily related to the uncertainty of the utilization of certain deferred tax assets comprised of tax loss carryforwards in various jurisdictions. The increase in the valuation allowance during 2023 is primarily driven by acquired foreign deferred tax assets from the Merger that are not expected to be realized. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. At December 31, 2023, the Company had $ 1.3 million, $ 51.7 million and $ 376.8 million of federal, state and foreign net operating loss carryforwards, respectively. Federal net operating loss carryforwards begin to expire in 2026, state net operating loss carryforwards begin to expire in 2023, and foreign net operating losses carry forward indefinitely. The Company has California research and development income tax credit carryforwards of $ 41.9 million. The California credits can be carried forward indefinitely. The Company has foreign tax credit carryforwards of $ 2.8 million which expire beginning in 2027 . Due to the “change of ownership” provision of the Tax Reform Act of 1986, utilization of the Company’s net operating loss and credit carryforwards may be subject to an annual limitation against taxable income in future periods. As a result of any future ownership changes, the annual limitation of loss and credit carryforwards may cause them to expire before ultimately becoming available to reduce future income tax liabilities. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: Year Ended December 31, (In thousands) 2023 2022 2021 Unrecognized tax benefits at the beginning of the year $ 986 $ 1,052 $ 1,600 Additions related to current year tax positions 853 — — Additions related to prior year tax positions 32,045 50 160 Reductions related to prior year tax positions ( 127 ) ( 116 ) ( 708 ) Unrecognized tax benefits at the end of the year $ 33,757 $ 986 $ 1,052 The additions related to current year tax positions for the year ended December 31, 2023 of $ 0.9 million are primarily related to additional current year reserves. The additions related to the prior year tax positions for the year ended December 31, 2023 of $ 32.0 million 93 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) are related to the historical positions from the Merger, and recorded using the acquisition method of accounting. The reduction s related to prior year tax positions for the year ended December 31, 2023 of $ 0.1 million are primarily related to the resolution of certain foreign tax positions. The impact of our unrecognized tax benefits to the effective income tax rate is as follows: December 31, (In thousands) 2023 2022 2021 Portion of total unrecognized tax benefits that, if recognized, would affect the effective income tax rate $ 27,601 $ 1,355 $ 1,471 The undistributed earnings of our foreign subsidiaries as of December 31, 2023 are immaterial. Due to recent tax reform in the U.S. and favorable treaties between the U.S. and countries in which the Company’s controlled foreign corporations operate, the Company has the ability to repatriate earnings without incurring additional tax liabilities. Accordingly, the Company has not recorded a liability for taxes associated with any future distributions of these undistributed earnings. Interest and penalties are recorded in the statement of income as provision for income taxes. The total interest and penalties recorded in the statement of income was immaterial for the years ended December 31, 2023, 2022, and 2021. We do not expect a significant change in our uncertain tax benefits in the next twelve months. We are subject to federal income tax as well as income tax of multiple state and foreign jurisdictions. With few exceptions, we are no longer subject to income tax examination by tax authorities in major jurisdictions for years prior to 2018 as of December 31, 2023. NOTE 15. COMMITMENTS AND CONTINGENCIES We are involved in a number of proceedings, legal actions, and claims arising in the ordinary course of business. Such matters are subject to many uncertainties, and the outcomes of these matters are not within our control and may not be known for prolonged periods of time. In some actions, the claimants seek damages, as well as other relief, including injunctions prohibiting us from engaging in certain activities, which, if granted, could require significant expenditures and/or result in lost revenues. We record a liability in the consolidated financial statements for these actions when a loss is considered probable and the amount can be reasonably estimated. If the reasonable estimate of a probable loss is a range, and no amount in the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed. In most cases, significant judgment is required to estimate the amount and timing of a loss to be recorded. While it is not possible to predict the outcome for most of the matters discussed, we believe it is possible that costs associated with them could have a material adverse impact on our consolidated earnings, financial position or cash flows. Moskowitz Family LLC Litigation On November 20, 2019, Moskowitz Family LLC filed suit against us in the U.S. District Court for the Western District of Texas for patent infringement. Moskowitz, a non-practicing entity, alleges that Globus willfully infringes one or more claims of six patents by making, using, offering for sale or selling the COALITION ® , COALITION MIS ® , COALITION AGX ® , CORBEL ® , MONUMENT ® , MAGNIFY ® -S, HEDRON IATM, HEDRON IC ® , INDEPENDENCE ® , INDEPENDENCE MIS ® , INDEPENDENCE MIS AGX ® , FORTIFY ® and XPAND ® families, SABLE ® , RISE ® , RISE ® INTRALIF, RISE ® -L, ELSA ® , ELSA ® ATP, ALTERA ® , ARIEL ® , CALIBER ® and CALIBER ® -L products. Moskowitz seeks monetary damages and injunctive relief. On July 2, 2020, this suit was transferred from the U.S. District Court for the Western District of Texas to the U.S. District Court for the Eastern District of Pennsylvania. On December 14, 2023, a jury returned a defense verdict in favor of Globus. As such, we have no t recorded a liability, outside of counsel fees, related to this litigation as of December 31, 2023. NOTE 16. LEASES The Company leases certain equipment, vehicles, office and storage facilities via various operating and financing lease agreements. Our leases have initial lease terms ranging from one year to seventeen years . Certain lease agreements require the Company to pay taxes, insurance, and maintenance, and provide for options to extend the term beyond the initial lease termination date. We use judgment to determine whether it is reasonably possible that we will extend the lease beyond the initial term and the length of the possible extension. Leases that have terms of less than 12 months are treated as short-term and we do not recognize right-of-use assets or lease liabilities for such leases. We generally estimate discount rates using our incremental borrowing rate, and based on other information available, at commencement date of a lease when determining the present value of future payments, as most of our leases do not provide an implicit rate. The Company has security deposits recorded and maintained in Other Assets totaling $ 1.5 million as of December 31, 2023. The Company includes financing lease right-of-use assets in other assets , short-term financing lease liabilities in accrued expenses , and long-term financing lease liabilities in other liabilities on the consolidated balance sheet. Operating lease expense is recognized on a 94 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) straight-line basis over the term of the lease as a component of operating income on the consolidated statement of operations and comprehensive income. Finance leases amortize the right-of-use assets and amortize the interest on the lease liability over the term of the lease. Amounts reported in the consolidated balance sheet were as follows: December 31, December 31, (In thousands) 2023 2022 Asset: Operating lease right-of-use asset $ 59,931 $ 5,988 Finance lease right-of-use asset 797 - Total leased assets $ 60,728 $ 5,988 Liabilities: Current: Operating lease liability 11,967 2,536 Finance lease liability 475 - Long-term: Operating lease liability 91,037 3,475 Finance lease liability 337 - Total lease liabilities $ 103,816 $ 6,011 The table below summarizes the Company’s lease costs arising from the operating and financing lease obligations: Twelve Months Ended December 30, (In thousands) 2023 2022 Lease expense: Operating lease expense $ 19,471 $ 2,588 Finance lease expense: Depreciation of right-of-use asset 903 - Interest expense on lease liabilities 67 - Total lease expense $ 20,441 $ 2,588 Future minimum lease payments under non-cancellable leases as of December 31, 2023 are as follows: (In thousands) Finance ‎ Leases Operating ‎ Leases 2024 $ 498 $ 18,336 2025 182 14,931 2026 170 13,431 2027 — 12,352 2028 — 11,281 Thereafter — 74,018 Total minimum lease payments $ 850 $ 144,350 Less: amount representing interest ( 38 ) ( 41,346 ) Present value of obligations under leases 812 103,004 Less: current portion ( 475 ) ( 11,967 ) Long-term lease obligations $ 337 $ 91,037 95 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The table below summarizes the Company’s supplemental cash flow information and assumptions used: December 31, December 31, December 31, (In thousands, except weighted average lease term and discount rate) 2023 2022 2021 Other supplemental cash flow information: Cash paid for amounts included in measurement of lease liabilities Operating cash flows from operating leases $ 19,773 $ 2,545 $ 1,743 Operating cash flows for finance leases 67 — — Financing cash flows for finance leases 913 — — Total cash paid for amounts included in the measurement of lease liabilities $ 20,753 $ 2,545 $ 1,743 Right-of-use assets obtained in exchange for lease obligations Operating leases $ 9,043 $ 1,915 $ 1,436 Financing leases $ - $ - $ - Weighted-average remaining lease term Operating leases 14.9 2.4 1.8 Financing leases 2.6 - - Weighted-average discount rate Operating leases 8.3 % 3.5 % 2.7 % Financing leases 4.4 % - - NOTE 17. RETIREMENT BENEFIT PLANS We sponsor 401(k) Plans covering all eligible U.S. employees, and a retirement plan for all eligible Puerto Rico employees. Under the 401(k) Plans, we make matching contributions ranging from 3 % to 4 % of the employee’s compensation for the period. Additionally, we contribute to various foreign retirement benefit plans required by local law or coordinated with government sponsored plans which cover many of our international employees. The benefits offered under these plans are reflective of local customs and practices in the countries concerned. Company contributions to these retirement plans were as follows: Year Ended December 31, (In thousands) 2023 2022 2021 401(k) and other retirement plan contributions $ 10,525 $ 7,154 $ 6,588 NOTE 18. SEGMENT AND GEOGRAPHIC INFORMATION Operating segments are defined as components of an organization for which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. We have identified two operating segments, Musculoskeletal Solutions and Enabling Technologies, based on how management reviews the business, makes investing and resource allocation decisions and assesses operating performance. We aggregate these operating segments into one reportable segment, based on conclusions reached after considering the factors including economic similarity, customer base, regulatory environment, production processes, nature of services and products provided, and our comprehensive approach to product development and offerings targeting patient needs through procedural-based solutions. 96 Table of Contents GLOBUS MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table represents total net sales and property and equipment, net by geographic area, based on the location of the customer for the years ended December 31, 2023, 2022 and 2021, respectively: Net Sales Property and Equipment, Net Year Ended Year Ended December 31, December 31, (In thousands) 2023 2022 2021 2023 2022 United States $ 1,279,765 $ 871,939 $ 819,571 $ 527,332 $ 237,680 International 288,711 150,904 138,531 59,600 6,049 Total $ 1,568,476 $ 1,022,843 $ 958,102 $ 586,932 $ 243,729 97 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.