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Item 7. Management’s Discussion and Analysis

2026-02-24 compared with 2025-02-20 · 107 added, 93 removed, 243 unchanged (45% of the section changed)

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Certain amounts and percentages in this discussion and analysis have been rounded for convenience of presentation.

We are an engineering-driven company with a history of rapidly developing and commercializing advanced products and procedures to address treatment challenges.

With numerous products launched since the founding of the Company, we offer a comprehensive portfolio of innovative and differentiated technologies that treat a variety of musculoskeletal conditions.

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” generally discusses the fiscal years ended December 31, 2025 and 2024 and provides year-to-year comparisons between the fiscal years ended December 31, 2025 and 2024.

Discussions of the fiscal year ended December 31, 2024 and year-to-year comparisons between the fiscal years ended December 31, 2024 and 2023 that are not included in this Annual Report can be found in “Part II.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed on February 20, 2025 .

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, we offer a comprehensive portfolio of innovative and differentiated technologies that address a variety of musculoskeletal pathologies, anatomies, and surgical approaches.

We separate our products and services into two major categories:

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NuVasive Merger

On September 1, 2023, pursuant to that certain merger agreement (the “Merger Agreement”) with NuVasive, Inc.

On September 1, 2023, pursuant to that certain merger agreement (the “NuVasive 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 “NuVasive 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 (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 of Globus, $0.001 par value per share, and the right to receive cash in lieu of fractional shares.

a wholly owned subsidiary of the Company (“Zebra Merger Sub”), Zebra Merger Sub merged with and into NuVasive, with NuVasive surviving as a wholly owned subsidiary of the Company (the “NuVasive Merger”).

Under the NuVasive 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 NuVasive Merger (other than certain excluded shares as described in the NuVasive 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.

On April 3, 2025, pursuant to the terms of that certain merger agreement (the “Nevro Merger Agreement”) with Nevro Corp.

(“Nevro”) and Palmer Merger Sub, Inc., a wholly owned subsidiary of the Company (“Palmer Merger Sub”), Palmer Merger Sub merged with and into Nevro (the “Nevro Merger” and, together with the NuVasive Merger, th e “NuVasive and Nevro Mergers”), wit h Nevro surviving as a wholly owned subsidiary of the Company.

Upon the consummation of the Nevro Merger, each issued and outstanding share of common stock of Nevro, $0.001 par value per share, was cancelled and converted into the right to receive cash in an amount equal to $5.85 per share of common stock of Nevro, without interest and subject to any applicable withholding taxes.

Product & Service Categories

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Musculoskeletal Solutions

Our Musculoskeletal Solutions consist primarily of implantable devices, biologics, accessories, unique surgical instruments, and neuromonitoring services, used in an expansive range of spinal, orthopedic and neurosurgical procedures.

Our Musculoskeletal Solutions consist primarily of implantable devices, biologics, accessories, unique surgical instruments, spinal cord stimulation treatment therapy, and neuromonitoring services, used in an expansive range of spinal, orthopedic and neurosurgical procedures.

Musculoskeletal disorders are a leading driver of healthcare costs worldwide.

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Surgical treatments for musculoskeletal disorders can be instrumented, which include the use of implants, or non-instrumented, which forego the use of hardware but may include biologics.

Our neuromonitoring services use proprietary software-driven nerve detection and avoidance technology and include IONM to aid spine surgery.

Our spinal cord stimulation treatment therapy uses neuromodulation technology delivered by an implantable device that delivers electrical impulses to

treat chronic pain.

Our neuromonitoring services use proprietary software-driven nerve detection and avoidance technology and include intraoperative neuromonitoring (“IONM”) services to aid spine surgery.

Enabling Technologies

Our Enabling Technologies are comprised of imaging, navigation and robotics (“INR”) solutions for assisted surgery which are advanced computer-assisted intelligent systems designed to enhance a surgeon’s capabilities, and ultimately improve patient care and reduce radiation exposure for all involved by streamlining surgical procedures to be safer, less invasive, and more accurate.

The market for our Enabling Technologies in spine and orthopedic surgery is still in its infancy stage and consists primarily of imaging, navigation and robotic systems.

The market for our Enabling Technologies in spine, cranial and orthopedic surgery is still in its infancy stage and consists primarily of INR systems.

In spine, a majority of these technologies are limited to surgical planning and assistance in implant placement for increased accuracy and time savings with less intraoperative radiation exposure to the patient and surgical staff.

As our Enabling Technologies become more fully integrated with our Musculoskeletal Solutions, a continued rise in adoption is expected.

Furthermore, we believe as new technologies such as augmented reality and artificial intelligence are introduced, Enabling Technologies have the potential to transform the way surgery is performed and most importantly, continue to improve patient outcomes.

Furthermore, we believe as new technologies are introduced, Enabling Technologies have the potential to transform the way surgery is performed and most importantly, continue to improve patient outcomes.

Geographic Information

To date, the primary market for our products and services has been within the United States (“U.S.”) , where we sell our products and services through a combination of direct sales representatives employed by us and distributor sales representatives employed by exclusive independent distributors, who distribute our products for a commission that is generally based on a percentage of sales.

To date, the primary market for our products and services has been within the U.S., where we sell our products and services through a combination of direct sales representatives employed by us and distributor sales representatives employed by exclusive independent distributors, who distribute our products for a commission that is generally based on a percentage of sales.

We believe there is significant opportunity to strengthen our position in the U.S.

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Substantially all of our suppliers manufacture our products in the U.S.

Our cost of sales consists primarily of costs from our in-house manufacturing, costs of products purchased from third-party suppliers, excess and obsolete inventory charges, depreciation of surgical instruments and cases, royalties, shipping, inspection and related costs incurred in making our products available for sale or use.

Our cost of sales consists primarily of costs from our in-house manufacturing, costs of products purchased from third-party suppliers,

excess and obsolete inventory charges, depreciation of surgical instruments and cases, royalties, shipping, inspection and related costs incurred in making our products available for sale or use.

Research and Development Expenses

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Selling, general and administrative expenses primarily consist of salaries, benefits and other related costs, including stock-based compensation, for personnel employed in sales, marketing, finance, legal, compliance, administrative, information technology, medical education and training, quality and human resource departments.

Additionally, provision for litigation is included within selling, general and administrative expenses and is recorded when a loss is known or considered probable and the amount can be reasonably estimated and in the case of a favorable settlement, income when realized.

Our selling, general and administrative expenses also include commissions, generally based on a percentage of sales, to direct sales representatives and distributors.

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We plan to hire more personnel to support the growth of our business.

Provision for Litigation

We record a provision for litigation settlements when a loss is known or considered probable and the amount can be reasonably estimated and in the case of a favorable settlement, income when realized.

Amortization of Intangibles

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Acquisition-related costs represent 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.

Restructuring Costs

Restructuring costs represent costs associated with the Company’s plans to optimize the organizational structure, merge synergies and leverage the strength of both commercial organizations.

Income Tax Provision

We are taxed at the rates applicable within each jurisdiction.

The composite income tax rate, tax provisions, deferred tax assets and deferred tax liabilities will vary according to the jurisdiction in which profits arise.

The composite income tax rate, tax provisions, deferred tax assets and deferred tax liabilities vary according to the jurisdiction in which profits arise.

Tax laws are complex and subject to different interpretations by management and the respective governmental taxing authorities, and require us to exercise judgment in determining our income tax provision, our deferred tax assets and liabilities, and the valuation allowance recorded against our net deferred tax assets.

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A valuation allowance is established when it is more likely than not that the future realization of all or some of the deferred tax assets will not be achieved.

Critical Accounting Policies and Estimates

Critical Accounting Estimates

The preparation of the consolidated financial statements requires us to make assumptions, estimates and judgments that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities as of the date of the consolidated financial statements, and the reported amounts of sales and expenses during the reporting periods.

Certain of our more critical accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates.

Certain of our more critical accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for

calculating financial estimates.

By their nature, these judgments are subject to an inherent degree of uncertainty.

On an ongoing basis, we evaluate our judgments, including but not limited to those related to inventories, recoverability of long-lived assets and the fair value of our common stock.

On an ongoing basis, we evaluate our judgments, including but not limited to those related to inventories, recoverability of long-lived assets and the fair value of our Class A common stock.

We use historical experience and other assumptions as the basis for our judgments and making these estimates.

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The critical accounting policies addressed below reflect our most significant judgments and estimates used in the preparation of our consolidated financial statements.

We have reviewed these critical accounting policies with the audit committee of our Board.

We have reviewed these critical accounting policies with the audit committee of our Board of Directors.

Revenue Recognition .

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The need to maintain substantial levels of inventory increases the risk of carrying excess inventory.

Many of our Musculoskeletal Solutions products come in sets which feature components in a variety of sizes so that the implant or device may be customized to the patient’s needs.

Many of our Musculoskeletal Solutions products come in sets that feature components in a variety of sizes so that the implant or device may be customized to the patient’s needs.

In order to market our Musculoskeletal Solutions products effectively, we must often maintain and provide surgeons and hospitals with surgical sets, back-up products and products of different sizes.

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Level 2—observable inputs other than quoted prices in active markets for identical assets and liabilities;

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.

Level 3—unobservable inputs for which there is little or no market data available, which require the reporting entity to use significant unobservable inputs or valuation techniques.

Contingent consideration represents contingent milestone, performance or 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.

The valuation of contingent consideration uses assumptions that 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 are recognized in acquisition-related costs in the consolidated statements of operations and comprehensive income.

The fair value of contingent restricted stock unit grants (“RSUs”) is 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.

The fair value of contingent restricted stock unit (“RSUs”) grants is 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 prices of business acquisitions are primarily allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the applicable acquisition date, with the excess recorded as goodwill.

If the estimated fair values of the liabilities assumed on the acquisition date exceed the tangible and identifiable intangible assets acquired, the excess will be recorded to bargain purchase gain.We utilize Level 3 inputs in the determination of the initial fair value.

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.

Goodwill is tested for impairment at least annually or whenever events or circumstances indicate that a carrying amount may not be recoverable.

We perform our goodwill impairment analysis at the reporting unit level.

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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 consist of purchased developed technology, customer relationships, in-process research and development (“IPR&D”), trade names and patents.

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 are tested for impairment annually or whenever events or circumstances indicate that a carrying amount of an asset (asset group) may not be recoverable.

Intangible assets are tested for impairment whenever events or circumstances indicate that a carrying amount of an asset (asset group) may not be 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.

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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, 2024, there were no impairments in goodwill, finite-lived intangible assets, or IPR&D.

During the year ended December 31, 2025, there were no impairments in goodwill, finite-lived intangible assets, or IPR&D.

Long-Lived Assets .

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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.

Expected volatility is based on the historical volatility of the Company’s Class A 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.

Treasury securities appropriate for the expected terms of the stock

The dividend yield assumption is based on the history and expectation of no dividend payouts.

The fair value of restricted stock units is estimated on the day of grant based on the closing price of the Company’s common stock.

The fair value of RSUs is estimated on the day of grant based on the closing price of the Company’s Class A common stock.

We assumed equity-classified awards for certain NuVasive RSUs, and performance restricted stock units (“PRSUs”), as part of the NuVasive Merger.

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The following table sets forth, for the periods indicated, our net sales by geography expressed as dollar amounts and the changes in net sales between the specified periods expressed in dollar amounts and as percentages:

December 31, Change

(In thousands, except percentages) 2025 2024 $ %

United States

$ 2,367,596 $ 2,000,067 $ 367,529 18.4 %

International 571,335 519,288 52,047 10.0 %

Total net sales $ 2,938,931 $ 2,519,355 $ 419,576 16.7 %

net sales increased by $720.3 million, or 56.3%, for the year ended December 31, 2024 and were significantly driven by the NuVasive Merger.

From a product standpoint, domestic musculoskeletal solutions sales increased by $685.8 million, mainly driven by sales increases in spine products by $564.6 million, and neuromonitoring solution product and services of $73.7 million.

Domestic enabling technology sales increased by $36.2 million compared to the prior year, driven by higher unit placement.

International net sales increased by $230.6 million, or 79.9% for the year ended December 31, 2024 and were significantly driven by the NuVasive Merger.

From a product standpoint, the increase was mainly due to musculoskeletal solutions sales increases of $231.3 million, primarily due to spine products.

Regionally, the increase was driven by sales growth in the Europe and Middle East region by $116.9 million, the Latin America region by $26.8 million and the Asia Pacific region by $87.2 million.

In the U.S., net sales increased by $367.5 million, or 18.4%, for the year ended December 31, 2025.

From a product standpoint, the increase was primarily driven by Nevro sales of $254.2 million, increased Musculoskeletal Solutions sales of $125.7 million.

Further, there was a decrease in domestic Enabling Technology sales of $17.3 million compared to the same period in the prior year, primarily driven by lower unit placement.

International net sales increased by $52.0 million, or 10.0%, for the year ended December 31, 2025.

From a product standpoint, the increase was primarily driven by Nevro sales of $39.4 million.

From a geographic standpoint, sales in the Europe and Middle East region increased by $49.9 million, and sales in the Asia Pacific region increased by $4.6 million.

This increase was partially offset by a decrease in sales in the Latin America region of $2.4 million.

Enabling Technology sales increased by $4.3 million compared to the same period in the prior year, primarily driven by increased unit placement.

Cost of Sales

December 31, Change

(In thousands, except percentages) 2025 2024 $ %

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Percentage of net sales 32.6 % 41.1 %

The $487.3 million or 88.9% increase in cost of sales was primarily driven by increases to inventory product costs of $221.0 million from increased volume, significantly due to the NuVasive Merger.

Additionally, there was increased amortization of inventory fair value step-up of $143.8 million, due to a full year of post-acquisition amortization occurring in the current period as compared to four months in the prior period.

Further, increases in costs of sales were also impacted by depreciation of $29.2 million and increased changes in excess and obsolete inventory reserves by $12.4 million.

The $77.7 million, or 7.5%, decrease in cost of sales for the year ended December 31, 2025 was primarily driven by the NuVasive amortization of inventory fair value step-up of $215.4 million included within the December 31, 2024 balance as compared to the Nevro amortization of inventory fair value step-up of $19.3 million included within the year ended December 31, 2025.

This was partially offset by an increase due to the cost of sales from Nevro products of $91.2 million, and an increase in depreciation of $18.3 million.

Research and Development Expenses

December 31, Change

(In thousands, except percentages) 2025 2024 $ %

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Percentage of net sales 5.0 % 6.5 %

The $39.7 million or 32.0% increase in research and development expenses shows our continued investment in product development.

This increase was primarily driven by increased personnel-related expenses of $24.0 million due to increased headcount and $12.6 of IPR&D expense recorded in the current period from an acquisition.

The $16.5 million, or 10.1%, decrease in research and development expenses for the year ended December 31, 2025 was primarily driven by a decrease of $21.9 million in employee-related expenses, excluding Nevro employee-related expenses, and a decrease o f $12.6 million in acquired intellectual property research and development.

This d ecrease was partially offset by an increase of $15.2 million for Nevro research and development expenses.

Selling, General and Administrative Expenses

December 31, Change

(In thousands, except percentages) 2025 2024 $ %

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Percentage of net sales 40.1 % 39.0 %

The increase of $337.6 million or 52.5% in selling, general and administrative expenses was primarily driven by increases to personnel-related expenses of $251.1 million due to increased headcount primarily from the NuVasive Merger, as well as increases to professional fees of $23.8 million, consulting and outside service expenses of $13.6 million, and rent expenses of $14.3 million.

Provision for Litigation

(In thousands, except percentages)

Provision for litigation, net

Percentage of net sales

The provision for litigation was consistent for the year ended December 31, 2024, as compared to the provision expense recorded during the year ended December 31, 2023.

The increase of $197.1 million, or 20.1%, in selling, general and administrative expenses for the year ended December 31, 2025 was primarily driven by an increase of $160.2 million for Nevro expenses.

Additionally, there was an increase of $37.4 million in provision for litigation driven by the accrual of $43.1 million in the third quarter of the year ended December 31, 2025 related to the Pimenta Litigation (as defined in Note 15, Commitments and Contingencies in “Item 8.

Financial Statements and Supplementary Data” ) offset by $5.7 million of various net settlements received.

Amortization of Intangibles

December 31, Change

(In thousands, except percentages) 2025 2024 $ %

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Percentage of net sales 4.0 % 4.7 %

Amortization of intangibles increased by $68.3 million or 133.9% for the year ended December 31, 2024 compared to the year ended December 31, 2023, due to the impact of the intangibles acquired from the NuVasive Merger.

They contributed $103.1 million in amortization expense in the current period as compared to $34.1 million in amortization expense for the year ended December 31, 2023.

Amortization of intangibles decreased by $1.2 million, or 1.0%, for the year ended December 31, 2025 compared to the year ended December 31, 2024.

Acquisition-Related Costs

December 31, Change

(In thousands, except percentages) 2025 2024 $ %

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Percentage of net sales 1.4 % 1.2 %

The decrease of $38.7 million in acquisition-related costs compared to the prior year was due primarily to the closing of the merger with NuVasive during the period ended December 31, 2023.

During the current period, the expense was primarily driven by the change to the fair value of business acquisition liabilities recorded as a net charge of $26.5 million resulting from changes in contract terms, market conditions and the achievement of certain performance conditions.

During the prior period, costs incurred were primarily related to the closing of the NuVasive Merger, including personnel-related charges for fees and severance of $34.7 million and banking and legal fees related to the NuVasive Merger of $12.1 million.

The increase of $12.7 million, or 42.9%, in acquisition-related costs compared to the prior year was primarily driven by $28.9 million of costs associated with the Nevro Merger, partially offset by changes in the fair value of business acquisition liabilities.

For the year ended December 31, 2025, acquisition-related costs also included $13.5 million of charges recorded from changes in the fair value of business acquisition liabilities driven by changes in market conditions and the achievement of certain performance conditions, compared to the $26.5 million recorded for the year ended December 31, 2024.

Restructuring Costs

December 31, Change

(In thousands, except percentages) 2025 2024 $ %

Restructuring costs $ 15,049 $ 23,773 $ (8,724) (36.7 %)

Percentage of net sales 0.5 % 0.9 %

The decrease in restructuring costs of $8.7 million compared to the same period of the prior year was primarily due to lower employee termination benefit expenses from the 2024 Synergy Plan and the 2025 Strategic Integration Plan (each as defined in Note 16, Restructuring And Other Costs in “Item 8.

Financial Statements and Supplementary Data” ) during the year ended December 31, 2025 compared to the expenses from the 2024 Synergy Plan for the year ended December 31, 2024.

Bargain Purchase Gain

December 31, Change

(In thousands, except percentages) 2025 2024 $ %

Bargain purchase gain $ 117,704 $ — $ 117,704 100.0 %

Percentage of net sales 4.0 % — %

The increase of $117.7 million was due to the bargain purchase gain related to the Nevro Merger as of December 31, 2025.

Other Income/(Expense), Net

December 31, Change

(In thousands, except percentages) 2025 2024 $ %

Other income, net

Other income/(expense), net $ 7,548 $ (45,269) $ 52,817 (116.7 %)

Percentage of net sales 0.3 % (1.8 %)

The decrease of $77.5 million in other income/(expense), was primarily due to $43.3 million of foreign currency loss and increases in interest expense of $29.4 million from amortization of the fair value adjustment on the 2025 Notes from acquisition accounting and other contractual interest incurred.

Additionally, interest income decreased by $8.2 million which was driven by a lower average marketable securities portfolio size and lower market-related yields in the current period.

The increase of $52.8 million, or 116.7%, in other income/(expense), was primarily due to a $3.0 million of foreign currency loss in the current period compared to a $43.2 million loss in the prior period.

Additionally, there was a $19.5 million decrease in

interest expense due to a shorter outstanding period of the 2025 Notes (as defined in “Item 7A.

Quantitative and Qualitative Disclosure About Market Risk” ) in the current period compared to the prior period.

Further, there was an increase of $2.4 million from gain on cost method investments.

This was partially offset by a decrease in interest income of $8.2 million due to a lower average balance across the Company’s marketable securities, cash and cash equivalents in the current period as compared to the prior period.

Income Tax Provision

December 31, Change

(In thousands, except percentages) 2025 2024 $ %

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Effective income tax rate 11.1 % 14.7 %

The decrease in the effective tax rate is primarily due to windfall benefits, reserve releases, and internal reorganization, as a percentage of pretax earnings.

A discussion of our Results of Operations for the year ended December 31, 2023 can be found in “ Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations:

Results of Operations;

Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022.

” on our Form 10-K filed on February 20, 2024 .

For the year ended December 31, 2025, the decrease in the effective tax rate was primarily due to the release of valuation allowances on certain deferred tax assets of $46.3 million and the impact of the non-taxable bargain purchase gain of $117.7 million in the second quarter of the year ended December 31, 2025, with no comparable event in the prior period.

Liquidity and Capital Resources

Our principal source of liquidity is cash flow from operating activities, as well as our cash and cash equivalents and marketable securities, which we believe will provide sufficient funding for us to meet our liquidity requirements for the foreseeable future.

Our principal liquidity requirements are to fund working capital, research and development, including clinical trials, capital expenditures primarily related to investment in surgical sets required to maintain and expand our business, contingent consideration achievement obligations, potential future business or intellectual property acquisitions, and to service our 2025 Notes.

We expect to continue to make investments in surgical sets as we launch new products, increase the size of our U.S.

sales force, and expand into international markets.

Our Senior Convertible Notes, with a principal balance of $450 million, are due March 2025.

We anticipate being able to support this need through existing or new sources of liquidity.

Future litigation or requirements to escrow funds could also materially impact our liquidity and our ability to invest in and operate our business on an ongoing basis.

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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.

We may request an increase in the revolving commitments in an aggregate amount not to exceed (i) $200 million or (ii) an unlimited amount, 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.

Revolving loans under the September 2023 Credit Agreement bear interest at either a base rate or the Term SOFR Rate (as defined in the September 2023 Credit Agreement) 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 Applicable Margin ranges from 0.125% to 0.625% for the Base Rate (as defined in the September 2023 Credit Agreement) and 1.125% to 1.625% for the Term SOFR Rate.

We may also request Swingline Loans at either the Base Rate or the Daily Term SOFR Rate (each as defined in the September 2023 Credit Agreement).

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, 2024, we have not borrowed under the September 2023 Credit Agreement and are in compliance with all covenants.

As of December 31, 2025, we had no outstanding borrowings under the September 2023 Credit Agreement, and we were in compliance with all covenants.

Contractual Obligations and Commitments

In connection with the NuVasive Merger, the Company acquired additional obligations and commitments, including, but not limited to (i) the 2025 Notes, with a principal balance of $450.0 million, (ii) contingent consideration arrangements associated with certain historical NuVasive acquisitions, and (iii) operating lease and finance lease obligations.

Refer to the Notes to the consolidated financial statements for further description of our 2025 Notes (Note 11), contingent consideration arrangements (Notes 6 and 15), and lease obligations (Note 17).

The following table summarizes our outstanding contractual obligations as of December 31, 2025.

Payments Due by Period

(In thousands)

Less than 1 Year

More than 5 Years

Convertible Notes

Operating leases

Financing Leases

Contingent consideration

(In thousands) Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years

Purchase obligations (1)

$ 36,147 $ 34,756 $ 1,035 $ 356 $ —

(1) Reflects minimum annual volume commitments to purchase inventory under certain of our supplier contracts.

In connection with certain acquisitions completed in 2011 through 2024, we have certain contingent consideration obligations payable to the sellers in these transactions upon the achievement of certain regulatory and sales milestones.

For further information, see Notes 3 , and 6 to the consolidated financial statements in “ Part II;

Financial Statements and Supplementary Data.

Excludes contributions to pension and other post-employment benefit plans, uncertain tax positions, non-current tax liabilities and royalty obligations for which we cannot make a reliable estimate of the period of cash settlement.

* Excludes contributions to pension and other post-employment benefit plans, uncertain tax positions, non-current tax liabilities, lease liabilities, business acquisition liabilities and royalty obligations for which we cannot make a reliable estimate of the period of cash settlement.

For further information, see Notes 6, 14, 17 and 18 to the consolidated financial statements in “ Part II;

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The following table summarizes, for the periods indicated, cash flows from operating, investing and financing activities:

December 31, 2025-2024

Change 2024-2023

(In thousands) 2025 2024 2023 $ $

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Cash Provided by Operating Activities

The higher net cash provided by operating activities for the year ended December 31, 2024 was primarily the result of higher net income after adjusting out non-cash add-backs and non-cash expenses, primarily due to the NuVasive Merger.

These include increased amortization of purchase accounting related fair value step-up of inventory of $143.7 million, increased depreciation and amortization of $109.3 million, a favorable change in inventory of $40.5 million, and increased amortization of the fair value step-up with respect to our 2025 Notes of $18.5 million, partially offset by unfavorable changes in deferred income taxes of $80.7 million and in accounts receivable of $28.1 million.

The higher net cash provided by operating activities for the year ended December 31, 2025 was primarily the result of higher net income of $434.9 million, favorable changes in deferred income taxes of $144.5 million and favorable changes in accounts receivable of $25.9 million.

This increase was partially offset by non-cash expense add backs of $358.7 million and a decrease in income taxes payable of $37.5 million.

The non-cash expense was primarily a result of a decrease in amortization of inventory fair value step-up of $196.0 million, the bargain purchase gain of $117.7 million, and a $37.8 million increase in net gain from foreign currency adjustments.

Cash Used in Investing Activities

The higher cash used in investing activities for the year ended December 31, 2024 was due primarily to decreases in marketable securities net inflows of $720.3 million as we manage our liquidity, as well as increased purchases of property and equipment of $37.2 million primarily driven by increased production resulting from the NuVasive Merger.

These were partially offset by decreased outflows for the acquisition of businesses, net of cash acquired of $278.4 million, with individually immaterial acquisitions occurring in the current period as compared to the prior period that was primarily driven by the NuVasive Merger.

The higher cash used in investing activities for the year ended December 31, 2025 was primarily due to an increased outflow of $234.9 million in acquisition of businesses and an increase in purchases of property and equipment of $49.3 million, partially offset by increased sales of marketable securities of $103.8 million.

Cash Used in by Financing Activities

The lower net cash used in financing activities for the year ended December 31, 2024 was primarily the result of decreased repurchases of Class A Common of $139.8 million, and higher proceeds from the exercise of stock options of $98.0 million partially offset by increased payments of business acquisition-related liabilities of $37.6 million.

A discussion of our cash flows for the year ended December 31, 2023 can be found in “ Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations:

Results of Operations;

” On our Form 10-K filed on February 20, 2024 .

The lower net cash used in financing activities for the year ended December 31, 2025 was primarily the result of the repayment of the 2025 Notes for $450.0 million and increased repurchases of Class A common stock of $214.7 million, partially offset by decreased payments of business acquisition-related liabilities of $30.0 million.

Recently Issued Accounting Pronouncements

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Summary of Significant Accounting Policies;

(v) Recently Issued Accounting Pronouncements.”

(w) Recently Issued Accounting Pronouncements.”

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis