Quantitative and Qualitative Disclosure About Market Risk
+Added: The following quantitative and qualitative disclosure about market risk should be read together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
+Added: This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.
+Added: You should review the “Risk Factors” and “Cautionary Note Concerning Forward-Looking Statements” sections of this Annual Report on Form 10-K for a discussion of certain of the important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements described in the following quantitative and qualitative disclosures about market risk.
Market risk is the potential loss arising from adverse changes in the financial markets.
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We do not enter into derivatives or other financial instruments for trading or speculative purposes and do not believe we are exposed to material market risk with respect to our cash, cash equivalents and marketable debt securities.
+Added: There were no changes in these risks from the previous fiscal year.
Market Price Risk
−Removed: In order to reduce the potential equity dilution associated with our convertible notes, we entered into transactions for convertible notes hedge (the “2025 Hedges”) in connection with the issuance in March 2020 of $450.0 million principal amount of unsecured senior convertible notes with a stated interest rate of 0.375% and a maturity date of March 15, 2025 (the “2025 Notes”), entitling us to purchase our common stock.
−Removed: Upon conversion of our convertible notes, the 2025 Hedges are expected to reduce the equity dilution if the daily volume-weighted average price per share of our common stock exceeds the strike price of the applicable hedge.
−Removed: We also entered into warrant transactions with the counterparties of the 2025 Hedges entitling them to acquire shares of our common stock.
−Removed: The warrant transactions could have a dilutive effect on our earnings per share to the extent that the price of our common stock during a given measurement period (the quarter or year to date period) exceeds the strike price of the warrants.
−Removed: See Note 11, Debt, in the Notes to Consolidated Financial Statements included in this Annual Report for further discussion.
+Added: In order to reduce the potential equity dilution associated with our convertible notes, we entered into transactions for convertible notes hedge (the “2025 Hedges”) in connection with the issuance in March 2020 of $450.0 million principal amount of unsecured senior convertible notes with a stated interest rate of 0.375% and a maturity date of March 15, 2025 (the “2025 Notes”), entitling us to purchase our Class A common stock.
+Added: During the first quarter of 2025, we paid off the remaining balance of the 2025 Notes and the 2025 Hedges expired.
+Added: We also entered into warrant transactions with the counterparties of the 2025 Hedges entitling them to acquire shares of our Class A common stock.
+Added: The warrant transactions could have had a dilutive effect on our earnings per share to the extent that the price of our Class A common stock during a given measurement period (the quarter or year to date period) exceeds the strike price of the warrants.
+Added: Those warrant transactions expired throughout 2025 with the final trance of warrants expiring in October 2025.
+Added: For further discussion, see Note 11 to the consolidated financial statements in “Part II;
+Added: Financial Statements and Supplementary Data.
Interest Rate Risk
−Removed: Our exposure to interest rate risk at December 31, 2024 is related to our investment portfolio which consists of municipal bonds, corporate debt securities, commercial paper, asset-backed securities, and securities of government, federal agency, and other sovereign obligations of high quality financial institutions.
+Added: Our exposure to interest rate risk at December 31, 2025 is related to our cash equivalents and investment portfolio which consists of money market mutual funds, municipal bonds, corporate debt securities, commercial paper, asset-backed securities, and securities of government, federal agency, and other sovereign obligations of high-quality financial institutions.
Due to the short-term nature of these investments, we have assessed that there is no material exposure to interest rate risk arising from our investments.
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Our policy also limits the amount of credit exposure to any one issue, issuer and type of instrument.
−Removed: As of December 31, 2024, we only held investments in securities classified as cash equivalents and marketable equity securities.
During the periods presented, we did not hold any investments that were in a significant unrealized loss position and no impairment charges were recorded.
−Removed: Realized gains and losses and interest income related to cash equivalents were immaterial during all periods presented.
Foreign Exchange Risk
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dollar and foreign currencies, primarily the Australian dollar, the Brazilian real, the British pound sterling, the Colombian peso, the euro, the Japanese yen, and the Singapore dollar, has had and could continue to have an adverse effect on our financial results, including our net sales, net sales growth rates, gross margins, income and losses as well as assets and liabilities.
−Removed: In particular, as a result of NuVasive’s acquisition of Simplify Medical, we have additional exposure to fluctuations in the Australian dollar.
−Removed: We also have future contingent consideration liabilities denominated in U.S.
−Removed: dollars, in connection with the acquisition of Simplify Medical, which are the financial obligation of our subsidiary, NuVasive (AUST/NZ) Pty Limited , an Australian dollar denominated company.
In addition, loss of financial stability within these markets could lead to delays in reimbursement or inability to remit payment due to currency controls.
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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.
−Removed: Net gains or losses resulting from the translation of foreign financial statements and the effect of exchange rate changes on intercompany receivables and payables of a long-term investment nature are recorded as a separate component of stockholders’ equity.
+Added: Net gains or losses resulting from the translation of foreign financial statements and the effect of exchange rate changes on intercompany receivables and payables of a long-term investment nature are recorded as a separate
+Added: component of stockholders’ equity.
These adjustments will affect net income only upon sale or liquidation of the underlying investment in foreign subsidiaries.
−Removed: Exchange rate fluctuations resulting from the translation of all other intercompany balances between domestic entities and our foreign subsidiaries are recorded as foreign currency transaction gains or losses and are included in other expense, net
−Removed: in the Consolidated Statements of Operations.
+Added: Exchange rate fluctuations resulting from the translation of all other intercompany balances between domestic entities and our foreign subsidiaries are recorded as foreign currency transaction gains or losses and are included in other expense, net in the Consolidated Statements of Operations.
For certain intercompany balances, we may enter into foreign currency forward contracts to partially offset the impact from fluctuation of the foreign currency rates.
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The amounts ultimately realized upon settlement of these financial instruments, together with the gains and losses on the underlying exposures, will depend on actual market conditions during the remaining life of the instruments.
+Added: A sensitivity analysis of changes in the fair value of all currency rate derivative contracts at December 31, 2025 and 2024, indicates that if the U.S.
+Added: dollar uniformly strengthened/weakened by 10 percent against all currencies, the fair value of these contracts would not increase/decrease by a material amount.
+Added: Any gains and losses on the fair value of the derivative contracts would generally be offset by gains and losses on underlying transactions.
The financial exposures by exchange rate fluctuations are monitored and managed by us as an integral part of our overall risk management program, which recognizes the unpredictability of financial markets and seeks to reduce potentially adverse effects on our results.
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