UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended March 31, ~~2022~~2023


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from to

Commission File Number: 000-50744

NUVASIVE, INC.

(Exact name of registrant as specified in its charter)


Delaware			33-0768598
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

12101 Airport Way

Broomfield, CO 80021

(Address of principal executive offices)

(800) 455-1476

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	NUVA	The NASDAQ Stock Market LLC (NASDAQ Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period than the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of May ~~2, 2022,~~8, 2023, there were ~~52,041,030~~52,449,167 shares of the registrant’s common stock (par value $0.001 per share) outstanding.

NuVasive, Inc.

Quarterly Report on Form 10-Q

March 31, ~~2022~~2023

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NUVASIVE, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value data)

March 31, 2022 December 31, 2021
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 205,312 $ 246,091
Accounts receivable, net of allowances of $20,707 and $21,064, respectively 231,425 214,398
Inventory, net 324,403 315,845
Prepaid income taxes 5,536 5,425
Prepaid expenses and other current assets 25,538 20,665
Total current assets 792,214 802,424
Property and equipment, net 313,689 303,664
Intangible assets, net 233,301 242,675
Goodwill 636,703 633,467
Operating lease right-of-use assets 100,656 102,987
Deferred tax assets 61,294 48,003
Restricted cash and investments 1,494 1,494
Other assets 21,150 19,361
Total assets $ 2,160,501 $ 2,154,075
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 115,674 $ 115,614
Contingent consideration liabilities 66,054 7,986
Accrued payroll and related expenses 55,848 66,596
Operating lease liabilities 10,043 9,867
Income tax liabilities 1,110 828
Total current liabilities 248,729 200,891
Long-term senior convertible notes 886,793 884,984
Deferred tax liabilities 12,807 3,049
Operating lease liabilities 109,093 111,592
Contingent consideration liabilities 73,762 139,824
Other long-term liabilities 17,396 18,528
Commitments and contingencies 0 0
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000 shares authorized, none outstanding — —
Common stock, $0.001 par value; 150,000 shares authorized at March 31, 2022 and December 31, 2021; 58,747 shares issued and 51,949 outstanding at March 31, 2022; 58,469 shares issued and 51,769 outstanding at December 31, 2021 63 63
Additional paid-in capital 1,441,783 1,434,976
Accumulated other comprehensive loss (11,741) (7,792)
Retained earnings 64,909 45,708
Treasury stock at cost; 6,798 shares and 6,700 shares at March 31, 2022 and December 31, 2021, respectively (683,093) (677,748)
Total equity 811,921 795,207
Total liabilities and equity $ 2,160,501 $ 2,154,075


	March 31, 2023		December 31, 2022
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	181,199	$	248,663
Accounts receivable, net of allowances of $20,317 and $19,601, respectively	250,023		249,373
Inventory, net	345,945		338,601
Prepaid income taxes	8,782		7,118
Prepaid expenses and other current assets	20,409		21,457
Total current assets	806,358		865,212
Property and equipment, net	355,473		346,510
Intangible assets, net	174,341		184,289
Goodwill	638,686		639,663
Operating lease right-of-use assets	93,273		95,112
Deferred tax assets	74,575		68,273
Restricted cash and investments	1,494		1,494
Other assets	22,954		23,952
Total assets	$	2,167,154	$	2,224,505
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	122,277	$	120,333
Contingent consideration liabilities	27,218		66,975
Accrued payroll and related expenses	50,102		58,448
Operating lease liabilities	10,193		10,019
Income tax liabilities	15,786		12,217
Senior convertible notes	449,220		448,056
Total current liabilities	674,796		716,048
Long-term senior convertible notes	444,871		444,202
Deferred and other tax liabilities	14,219		13,088
Operating lease liabilities	101,606		103,806
Contingent consideration liabilities	41,461		63,640
Other long-term liabilities	16,521		14,831
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000 shares authorized, none outstanding	—		—
Common stock, $0.001 par value; 150,000 shares authorized at March 31, 2023 and December 31, 2022; 59,223 shares issued and 52,349 outstanding at March 31, 2023; 58,939 shares issued and 52,134 outstanding at December 31, 2022	63		63
Additional paid-in capital	1,476,318		1,469,411
Accumulated other comprehensive loss	(1,392)		(3,249)
Retained earnings	85,102		86,115
Treasury stock at cost; 6,874 shares and 6,805 shares at March 31, 2023 and December 31, 2022, respectively	(686,411)		(683,450)
Total equity	873,680		868,890
Total liabilities and equity	$	2,167,154	$	2,224,505

See accompanying Notes to ~~Unaudited~~unaudited Consolidated Financial Statements.

Table of Contents

NUVASIVE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

Three Months Ended March 31,
(unaudited) 2022 2021
Net sales:
Products $ 265,973 $ 245,451
Services 24,789 25,798
Total net sales 290,762 271,249
Cost of sales (excluding below amortization of intangible assets):
Products 57,183 53,302
Services 21,914 18,509
Total cost of sales 79,097 71,811
Gross profit 211,665 199,438
Operating expenses:
Selling, general and administrative 160,281 145,954
Research and development 23,358 22,224
Amortization of intangible assets 13,032 13,337
Business transition costs 3,060 5,584
Total operating expenses 199,731 187,099
Interest and other income (expense), net:
Interest income 43 87
Interest expense (4,379) (8,030)
Other income (expense), net 16,244 (12,526)
Total interest and other income (expense), net 11,908 (20,469)
Income (loss) before income taxes 23,842 (8,130)
Income tax (expense) benefit (4,641) 620
Consolidated net income (loss) $ 19,201 $ (7,510)
Net income (loss) per share:
Basic $ 0.37 $ (0.15)
Diluted $ 0.35 $ (0.15)
Weighted average shares outstanding:
Basic 51,829 51,379
Diluted 62,579 51,379


	Three Months Ended March 31,
(unaudited)	2023		2022
Net sales:
Products	$	279,370	$	265,973
Services	28,341		24,789
Total net sales	307,711		290,762
Cost of sales (excluding below amortization of intangible assets):
Products	64,877		57,183
Services	21,493		21,914
Total cost of sales	86,370		79,097
Gross profit	221,341		211,665
Operating expenses:
Selling, general and administrative	176,192		160,281
Research and development	24,573		23,358
Amortization of intangible assets	8,796		13,032
Business transition costs	4,614		3,060
Total operating expenses	214,175		199,731
Interest and other (expense) income, net:
Interest income	1,828		43
Interest expense	(4,378)		(4,379)
Other (expense) income, net	(4,436)		16,244
Total interest and other (expense) income, net	(6,986)		11,908
Income before income taxes	180		23,842
Income tax expense	(1,193)		(4,641)
Consolidated net (loss) income	$	(1,013)	$	19,201

Net (loss) income per share:
Basic	$	(0.02)	$	0.37
Diluted	$	(0.02)	$	0.35
Weighted average shares outstanding:
Basic	52,242		51,829
Diluted	52,242		62,579

See accompanying Notes to ~~Unaudited~~unaudited Consolidated Financial Statements.

Table of Contents

NUVASIVE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

(in thousands)

Three Months Ended March 31, 2022
(unaudited) 2022 2021
Consolidated net income (loss) $ 19,201 $ (7,510)
Other comprehensive loss:
Unrealized loss on marketable securities, net of tax — (13)
Translation adjustments, net of tax (3,949) (1,541)
Other comprehensive loss (3,949) (1,554)
Total consolidated comprehensive income (loss) $ 15,252 $ (9,064)


	Three Months Ended March 31,
(unaudited)	2023		2022
Consolidated net (loss) income	$	(1,013)	$	19,201
Other comprehensive income (loss):
Translation adjustments, net of tax	1,857		(3,949)
Other comprehensive income (loss)	1,857		(3,949)
Total consolidated comprehensive income	$	844	$	15,252

See accompanying Notes to ~~Unaudited~~unaudited Consolidated Financial Statements.

Table of Contents

NUVASIVE, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(in thousands)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock			Total Stockholders' Equity
(unaudited)	Shares	Amount								Shares	Amount
Balance at December 31, 2021	58,469	$	63	$	1,434,976	$	(7,792)	$	45,708	(6,700)	$	(677,748)	$	795,207
Issuance of common stock under employee and director equity option and purchase plans	278	—		—		—		—		(98)	(5,345)		(5,345)
Stock-based compensation expense	—	—		6,807		—		—		—	—		6,807
Consolidated net income	—	—		—		—		19,201		—	—		19,201
Other comprehensive loss	—	—		—		(3,949)		—		—	—		(3,949)
Balance at March 31, 2022	58,747	$	63	$	1,441,783	$	(11,741)	$	64,909	(6,798)	$	(683,093)	$	811,921

See accompanying Notes to ~~Unaudited~~unaudited Consolidated Financial Statements.

Table of Contents

NUVASIVE, INC.

CONSOLIDATED STATEMENTS OF EQUITY – (Continued)

(in thousands)

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings Treasury Stock Total Stockholders' Equity
(unaudited) Shares Amount Shares Amount
Balance at December 31, 2020 57,945 $ 62 $ 1,550,001 $ (7,585) $ 45,322 (6,569) $ (668,882) $ 918,918
Adjustment for modified retrospective adoption of accounting standard — — (147,161) — 64,472 — — (82,689)
Issuance of common stock under employee and director equity option and purchase plans 4 — (6) — — (1) (55) (61)
Stock-based compensation expense — — 7,709 — — — — 7,709
Settlement of convertible note hedge (1) — 53 — — — (53) —
Equity component of convertible note settlement 1 — 574 — — — — 574
Consolidated net loss — — — — (7,510) — — (7,510)
Other comprehensive loss — — — (1,554) — — — (1,554)
Balance at March 31, 2021 57,949 $ 62 $ 1,411,170 $ (9,139) $ 102,284 (6,570) $ (668,990) $ 835,387


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock			Total Stockholders' Equity
(unaudited)	Shares	Amount								Shares	Amount
Balance at December 31, 2022	58,939	$	63	$	1,469,411	$	(3,249)	$	86,115	(6,805)	$	(683,450)	$	868,890
Issuance of common stock under employee and director equity option and purchase plans	284	—		—		—		—		(69)	(2,961)		(2,961)
Stock-based compensation expense	—	—		6,907		—		—		—	—		6,907
Consolidated net loss	—	—		—		—		(1,013)		—	—		(1,013)
Other comprehensive income	—	—		—		1,857		—		—	—		1,857
Balance at March 31, 2023	59,223	$	63	$	1,476,318	$	(1,392)	$	85,102	(6,874)	$	(686,411)	$	873,680

See accompanying Notes to ~~Unaudited~~unaudited Consolidated Financial Statements.

Table of Contents

NUVASIVE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Three Months ended March 31,
(unaudited) 2022 2021
Operating activities:
Consolidated net income (loss) $ 19,201 $ (7,510)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 36,801 36,432
Deferred income taxes (3,891) (3,535)
Amortization of non-cash interest 1,963 2,660
Stock-based compensation 6,807 7,709
Net (gain) loss from foreign currency adjustments (15,988) 12,547
Reserves on current assets (1,864) 4,002
Other non-cash adjustments 1,365 6,397
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable (17,216) (1,544)
Inventory (3,215) (12,464)
Prepaid expenses and other current assets 805 (2,057)
Accounts payable and accrued liabilities (7,956) (5,663)
Accrued payroll and related expenses (10,491) (4,271)
Income taxes 218 (1,064)
Net cash provided by operating activities 6,539 31,639
Investing activities:
Acquisition of Simplify Medical, net of cash acquired — (149,408)
Purchases of intangible assets — (1,200)
Purchases of property and equipment (33,223) (25,070)
Proceeds from sales of marketable securities — 127,023
Proceeds from maturities of marketable securities — 46,000
Other investing activities (947) —
Net cash used in investing activities (34,170) (2,655)
Financing activities:
Payment of contingent consideration (6,839) (3)
Purchases of treasury stock (5,345) (55)
Payments upon settlement of senior convertible notes — (649,426)
Other financing activities (521) (341)
Net cash used in financing activities (12,705) (649,825)
Effect of exchange rate changes on cash (443) (2,171)
Decrease in cash, cash equivalents and restricted cash (40,779) (623,012)
Cash, cash equivalents and restricted cash at beginning of period 247,585 858,363
Cash, cash equivalents and restricted cash at end of period $ 206,806 $ 235,351


	Three Months Ended March 31,
(unaudited)	2023		2022
Operating activities:
Consolidated net (loss) income	$	(1,013)	$	19,201
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	33,467		36,801
Deferred income taxes	(5,209)		(3,891)
Amortization of non-cash interest	1,986		1,963
Stock-based compensation	6,907		6,807
Changes in fair value of contingent consideration	(4,799)		39
Net gain on strategic investments	(310)		—
Net loss (gain) from foreign currency adjustments	4,787		(15,988)
Reserves on current assets	1,959		(1,864)
Other non-cash adjustments	968		1,326
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable	(729)		(17,216)
Inventory	(7,657)		(3,215)
Prepaid expenses and other current assets	1,192		805
Payment of contingent consideration	(25,462)		(1,198)
Accounts payable and accrued liabilities	2,438		(6,758)
Accrued payroll and related expenses	(8,420)		(10,491)
Income taxes	1,865		218
Net cash provided by operating activities	1,970		6,539
Investing activities:
Purchases of property and equipment	(35,148)		(33,223)
Other investing activities	—		(947)
Net cash used in investing activities	(35,148)		(34,170)
Financing activities:
Payment of contingent consideration	(31,671)		(6,839)
Purchases of treasury stock	(2,961)		(5,345)
Other financing activities	(270)		(521)
Net cash used in financing activities	(34,902)		(12,705)
Effect of exchange rate changes on cash	616		(443)
Decrease in cash, cash equivalents and restricted cash	(67,464)		(40,779)
Cash, cash equivalents and restricted cash at beginning of period	250,157		247,585
Cash, cash equivalents and restricted cash at end of period	$	182,693	$	206,806

See accompanying Notes to ~~Unaudited~~unaudited Consolidated Financial Statements.

Table of Contents

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on ~~our Unaudited~~the Company's unaudited Consolidated Statements of Cash Flows for the periods presented:


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
Cash and cash equivalents	Cash and cash equivalents	$	205,312	$	233,857	Cash and cash equivalents	$	181,199	$	205,312
Restricted cash	Restricted cash	1,494		1,494		Restricted cash	1,494		1,494
Total cash, cash equivalents and restricted cash shown in the Unaudited Consolidated Statements of Cash Flows		$	206,806	$	235,351
Total cash, cash equivalents and restricted cash shown in the unaudited Consolidated Statements of Cash Flows						Total cash, cash equivalents and restricted cash shown in the unaudited Consolidated Statements of Cash Flows	$	182,693	$	206,806

See accompanying Notes to ~~Unaudited~~unaudited Consolidated Financial Statements.

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NUVASIVE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business and Basis of Presentation

Description of Business

NuVasive, Inc., or the Company, or NuVasive, was incorporated in Delaware on July 21, 1997, and began commercializing its products in 2001. Since its incorporation in 1997, the Company has grown from a small developer of specialty spinal implants into a global medical technology company delivering procedurally integrated solutions for spine surgery. Underlying the Company’s procedurally integrated solutions for spine surgery are technologies designed to enable better clinical, financial, and operational outcomes, including:

•its surgical access instruments, including its integrated split-blade retractor system, designed to enable less-invasive surgical techniques by minimizing soft tissue disruption during spine surgery;

•its Advanced Materials Science portfolio of specialized spinal implants, designed to advance spinal fusion by enhancing the osseointegration and biomechanical properties of implant materials, including porous titanium and porous polyetheretherketone;

•its fixation systems, designed to facilitate the preservation and restoration of patient alignment, while addressing a vast array of spinal pathologies from an open or less-invasive approach across all spinal procedures;

•its cervical total disc replacement, or cTDR, technology, which complements the Company’s portfolio of products and services for cervical spinal fusion surgery and is designed to offer surgeons capabilities across key performance functions—anatomic, physiologic motion, and radiologic design;

•its neuromonitoring systems, which use proprietary software-driven nerve detection and avoidance technology, and the ~~Company’s~~Company's intraoperative neuromonitoring, or IONM, services and support; and

•its Pulse platform, a software ecosystem that integrates multiple hardware technologies into a single, condensed footprint in the operating room, including: radiation reduction, imaging enhancement, rod bending, navigation, IONM, and spinal alignment tools.

In addition, the Company also designs and sells expandable growing rod implant systems for the treatment of early-onset scoliosis that can be non-invasively lengthened following implantation with precise, incremental adjustments via an external remote controller using magnetic technology called MAGnetic External Control, or MAGEC. This technology is also the basis for the Company’s Precice line of products which is designed to support complex orthopedic reconstruction, such as trauma and limb length discrepancy. Precice is an intramedullary device that, once implanted, utilizes the MAGEC technology to non-invasively lengthen the femur and tibia.

Proposed Merger with Globus Medical

On February 8, 2023, the Company entered into an Agreement and Plan of Merger, or the Merger Agreement, with Globus Medical, Inc., or Globus Medical, and Zebra Merger Sub, Inc., a wholly owned subsidiary of Globus Medical, or Merger Sub. The Merger Agreement provides, among other things, that subject to the satisfaction or waiver of the conditions set forth therein, Merger Sub will merge with and into NuVasive, referred to as the Merger, with NuVasive surviving the merger as a wholly owned subsidiary of Globus Medical.

Under the Merger Agreement, at the effective time of the Merger, or the Effective Time, each share of common stock of the Company issued and outstanding immediately prior to the Effective Time (other than certain excluded shares as described in the Merger Agreement) will be cancelled and converted into the right to receive 0.75 fully paid and non-assessable shares of Class A common stock of Globus Medical, and cash in lieu of fractional shares.

On April 27, 2023, the Company and Globus Medical announced that the stockholders of each company had approved all proposals related to the Merger at each company’s respective special meeting of stockholders. Completion of the Merger is subject to the satisfaction of the remaining customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

The foregoing description of the Merger Agreement is qualified in its entirety by reference to the full text of the Merger Agreement attached as Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission, or SEC, on February 9, 2023.

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Impact of COVID-19 and Global Macroeconomic Conditions on the Company's Business

The COVID-19 pandemic significantly impacted the Company’s business and results of operations during the years ~~ended December 31,~~ 2020 and 2021, as well as the three months ended March 31, 2022. Many government agencies, in conjunction with hospitals and healthcare systems have, to varying degrees, deferred, reduced, or suspended elective surgical procedures due to the COVID-19 pandemic. While certain spine surgeries are deemed essential and certain surgeries, like in cases of trauma, cannot be delayed, the Company has seenthrough 2022 and may continue to ~~see a significant reduction in procedural volumes as hospital systems and/or patients elect to defer spine surgery procedures.~~

During the three months ended March 31, 2022, procedural volume rates for elective surgeries steadily recovered in the U.S. and certain international regions as government restrictions eased and hospital systems resumed more elective surgical procedures. The COVID-19 pandemic continues to evolve and itsnegatively impact on the Company’s business, ~~will depend on several factors that are highly uncertain~~results of operations, financial condition and ~~unpredictable, including,~~cash flows. Additionally, the ~~efficacy~~COVID-19 pandemic and ~~adoption~~general macroeconomic conditions have led to disruptions in the global supply chain. The Company has experienced challenges associated with material and component availability for certain product lines, longer shipping and delivery times for raw materials and components, constrained logistics capacity related to the movement of ~~vaccines, future resurgences~~products, availability of skilled labor and increased costs of raw materials, components, labor, and freight and courier services. Net sales and profitability from our foreign operations have also been negatively affected by the unfavorable foreign currency exchange impact of the ~~virus and its variants, the imposition~~strengthened U.S. dollar against a number of governmental lockdowns, quarantine and physical distancing requirements, patient capacity at hospitals and healthcare systems, the duration and severity of healthcare worker shortages, and the willingness and ability of patients to seek care and treatment due to safety concerns or financial hardship.

~~Table of~~ ~~Contents~~

currencies.

Basis of Presentation and Principles of Consolidation

The accompanying ~~Unaudited~~unaudited Consolidated Financial Statements include the accounts of the Company and its majority-owned or controlled subsidiaries, collectively referred to as either NuVasive or the Company. The Company translates the financial statements of its foreign subsidiaries using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations. When there is a portion of equity in an acquired subsidiary not attributable, directly or indirectly, to the respective parent entity, the Company records the fair value of the non-controlling interest at the acquisition date and classifies the amounts attributable to the non-controlling interest separately in equity in the Company's Consolidated Financial Statements. Any subsequent changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary are accounted for as equity transactions. All significant intercompany balances and transactions have been eliminated in consolidation.

The accompanying ~~Unaudited~~unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of ~~the Securities and Exchange Commission, or~~ the SEC. Pursuant to these rules and regulations, the Company has condensed or omitted certain information and footnote disclosures it normally includes in its annual Consolidated Financial Statements prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. Operating results for the three months ended March 31, ~~2022~~2023 are not necessarily indicative of the results that may be expected for any other interim period or for the full year. These ~~Unaudited~~unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended December 31, ~~2021~~2022 included in the Company’s Annual Report on Form 10-K filed with the SEC. In the opinion of management, the ~~Unaudited~~unaudited Consolidated Financial Statements and notes thereto include all adjustments that are of a normal and recurring nature that are necessary for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the periods presented.

Use of Estimates

To prepare financial statements in conformity with U.S. GAAP, management must make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions involve judgments with respect to numerous factors that are difficult to predict. As a result, actual amounts could be materially different from these estimates.

Recent Accounting Pronouncements Not Yet Adopted

In ~~October 2021,~~June 2022, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or 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.

Recently Adopted Accounting Standards

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 Topic 606, Revenue from Contracts with ~~Customers.~~Customers, or 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 ~~is currently evaluating~~adopted ASU 2021-08 as of January 1, 2023. The adoption did not have a material impact on the ~~impact the standard will have on our~~Company’s Consolidated Financial Statements.

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Revenue Recognition

In accordance with ~~Accounting Standards Codification 606 Revenue from Contracts with Customers, or~~ 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). Specifically, revenue from the sale of implants, fixation products and disposables is generally recognized at an amount that reflects the expected consideration upon notice that the Company’s products have been used in a surgical procedure or upon shipment to a third-party customer assuming control of the products. Revenue from IONM services is recognized in the period the service is performed for the amount of consideration expected to be received. Revenue from the sale of surgical instrument sets is generally recognized upon receipt of a purchase order and the subsequent shipment to a customer who assumes control. In certain cases, the Company does offer the ability for customers to lease surgical instrumentation primarily on a non-sales type basis. Revenue from the sale or lease of capital equipment is recognized when the Company transfers control to the customer, which is generally at the point when acceptance occurs that indicates customer acknowledgment of delivery or installation, depending on the terms of the arrangement. Selling and leasing of surgical instrument sets and capital equipment represents an immaterial amount of the Company’s total net sales in all periods presented. Revenue associated with products holding rights of return or trade-in are recognized when the Company concludes there is not a risk of significant revenue reversal in future periods for the expected consideration in the transaction. Costs incurred by the Company associated with sales contracts with customers are deferred over the performance obligation period and recognized in the same period as the related revenue, with the exception of contracts that complete within one year or less, in which case the associated costs are expensed as incurred.

Accounts Receivable and Related Valuation Accounts

Accounts receivable in the accompanying ~~Unaudited~~unaudited Consolidated Balance Sheets are presented net of allowances for credit losses. The Company maintains an allowance for 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 the Company’s customers or its collection experience deteriorates. An increase to the allowance for credit losses results in a corresponding charge to selling, general and administrative expenses. The Company has a diverse customer base and no single customer represented greater than ten percent of net sales or accounts receivable. Historically, the Company’s reserves have been adequate to cover credit losses.

The Company's exposure to credit losses may increase if its customers are adversely affected by changes in healthcare laws, coverage and reimbursement, ~~economic~~macroeconomic pressures or uncertainty associated with local or global economic recessions, disruption associated with the current COVID-19 pandemic, or other customer-specific factors. It is possible that there could be a significant adverse impact from potential adjustments to the carrying amount of trade receivables as customers’ cash flows are impacted by their response to the COVID-19 pandemic and the deferral of elective surgical ~~procedures.~~procedures and other macroeconomic challenges.

The following table summarizes the changes in the allowance for credit losses:


(in thousands)	(in thousands)	March 31, 2022		December 31, 2021		(in thousands)	March 31, 2023		December 31, 2022
Allowance for credit losses at January 1	Allowance for credit losses at January 1	$	10,928	$	9,646	Allowance for credit losses at January 1	$	11,404	$	10,928
Current-period provision for expected losses	Current-period provision for expected losses	337		2,165		Current-period provision for expected losses	950		748
Write-offs charged against the allowance	Write-offs charged against the allowance	(102)		(743)		Write-offs charged against the allowance	(56)		(196)
Recoveries of amounts previously written off	Recoveries of amounts previously written off	3		42		Recoveries of amounts previously written off	12		31
Changes resulting from foreign currency fluctuations	Changes resulting from foreign currency fluctuations	(6)		(182)		Changes resulting from foreign currency fluctuations	40		(107)
Allowance for credit losses at end of period	Allowance for credit losses at end of period	$	11,160	$	10,928	Allowance for credit losses at end of period	$	12,350	$	11,404

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Inventory, ~~Net~~net

Net inventory as of March 31, ~~2022~~2023 consisted of ~~$307.6~~$330.6 million of finished goods, ~~$10.6~~$6.7 million of work in progress and ~~$6.2~~$8.6 million of raw materials. Net inventory as of December 31, ~~2021~~2022 consisted of ~~$301.3~~$326.1 million of finished goods, ~~$8.1~~$5.8 million of work in progress and ~~$6.4~~$6.7 million of raw materials.

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Finished goods primarily consists of specialized implants, fixation products and disposables and are stated at the lower of cost or net realizable value determined by utilizing a standard cost method, which includes capitalized variances, which approximates the weighted average cost. Work in progress and raw materials represent the underlying material, and labor for work in progress, that ultimately yield finished goods upon completion and are recorded at the lower of cost or net realizable value. The Company reviews the components of its inventory on a periodic basis for excess and obsolescence and adjusts inventory to its net realizable value as necessary.

The Company records an inventory reserve for estimated excess and obsolete inventory based upon historical turnover and assumptions about future demand for its products and market conditions, such as product life cycles and timing of the introduction and development of new or enhanced products. The Company’s allograft products have shelf lives ranging from two years to five years and are subject to demand fluctuations based on the availability and demand for alternative products. The Company’s inventory, which consists primarily of disposables, specialized implants and fixation products, is at risk of obsolescence following the introduction and development of new or enhanced products. One of the Company’s strategic objectives is to continue to rapidly develop and commercialize new products and product enhancements which increases the risk that products will become obsolete prior to the end of their anticipated useful life. The Company’s estimates and assumptions for excess and obsolete inventory are reviewed and updated on a quarterly basis. The estimates the Company uses for demand are also used for near-term capacity planning and inventory purchasing and are consistent with its net sales forecasts. Increases in the reserve for excess and obsolete inventory result in a corresponding charge to cost of sales.

Derivative Financial Instruments

The Company recognizes all derivative instruments as assets or liabilities in its ~~Unaudited~~unaudited 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 ~~income (expense),~~expense, net in the ~~Unaudited~~unaudited Consolidated Statements of Operations.

Other Comprehensive Income (Loss)

~~Comprehensive~~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. ~~Comprehensive~~Other comprehensive income (loss) includes net of tax, unrealized gains or losses on the Company’s marketable debt securities and foreign currency translation adjustments. The ~~cumulative translation adjustments included in~~ accumulated other comprehensive ~~loss were $11.7~~income (loss) was $(1.4) million and ~~$7.8~~$(3.2) million ~~for~~as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Product Shipment Costs

Product shipment costs, included in selling, general and administrative expense in the accompanying ~~Unaudited~~unaudited Consolidated Statements of Operations, were ~~$8.1~~$8.7 million and ~~$7.1~~$8.1 million for the three months ended March 31, ~~2022~~2023 and March 31, ~~2021,~~2022, respectively. The majority of the Company’s shipping costs are associated with providing instrument sets to hospitals for use in individual surgical procedures. Amounts billed to customers for shipping and handling of products are reflected in net sales and are not material for any period presented.

Business Transition Costs

The Company incurs certain costs related to acquisition, integration and business transition activities, which include severance, relocation, consulting, leasehold exit costs, ~~third-party~~costs related to the proposed merger ~~and~~with Globus Medical, third-party acquisition costs and contingent consideration fair value adjustments and other costs directly associated with such activities. Contingent consideration is accrued based on the fair value of the expected payment, and such accruals are subject to increase or decrease based on the assessment of the likelihood that the contingent milestones will be achieved resulting in payment. If an accrual for contingent consideration decreases based upon the assessment during a particular period, it results in a reduction of costs during such ~~period.~~period, which the Company records as a benefit.

During the three months ended March 31, 2023, the Company recorded $4.6 million of costs related to acquisition, integration and business transition activities, which includes $7.4 million related to costs for the proposed merger with Globus Medical, offset by a $(4.8) million benefit related to fair value adjustments on contingent consideration liabilities associated with the Company’s 2022, 2021, 2018 and 2016 acquisitions.

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During the three months ended March 31, 2022, the Company recorded $3.1 million of costs related to acquisition, integration and business transition activities, which included de minimis fair value adjustments on contingent consideration liabilities associated with the Company’s 2021, 2017 and 2016 acquisitions.

During the three months ended March 31, 2021, the Company recorded $5.6 million of costs related to acquisition, integration and business transition activities, which included $0.9 million of fair value adjustments on contingent consideration liabilities associated with the Company’s 2017 and 2016 acquisitions and $3.9 million of costs associated with the 2021 acquisition of Simplify Medical Pty Limited, or Simplify Medical.

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2. Net (Loss) Income ~~(Loss)~~ Per Share

The following table sets forth the computation of basic and diluted consolidated net (loss) income ~~(loss)~~ per share:


		Three Months Ended March 31,				Three Months Ended March 31,
(in thousands, except per share data)	(in thousands, except per share data)	2022		2021			(in thousands, except per share data)	2023		2022
Numerator:	Numerator:						Numerator:
Net income (loss) for basic		$	19,201	$	(7,510)
Dilutive potential net income (loss):
Net (loss) income for basic							Net (loss) income for basic	$	(1,013)	$	19,201
Dilutive potential net (loss) income:							Dilutive potential net (loss) income:
Interest and debt issuance costs on the 1.00% Senior Convertible Notes due 2023, net of tax	Interest and debt issuance costs on the 1.00% Senior Convertible Notes due 2023, net of tax	$	1,705	$	—		Interest and debt issuance costs on the 1.00% Senior Convertible Notes due 2023, net of tax	$	—	$	1,705
Interest and debt issuance costs on the 0.375% Senior Convertible Notes due 2025, net of tax	Interest and debt issuance costs on the 0.375% Senior Convertible Notes due 2025, net of tax	821		—			Interest and debt issuance costs on the 0.375% Senior Convertible Notes due 2025, net of tax	—		821
Net income (loss) for diluted		$	21,727	$	(7,510)
Denominator for basic and diluted net income (loss) per share:
Net (loss) income for diluted							Net (loss) income for diluted	$	(1,013)	$	21,727
Denominator for basic and diluted net (loss) income per share:							Denominator for basic and diluted net (loss) income per share:
Weighted average common shares outstanding for basic	Weighted average common shares outstanding for basic	51,829		51,379			Weighted average common shares outstanding for basic	52,242		51,829
Dilutive potential common stock outstanding:	Dilutive potential common stock outstanding:						Dilutive potential common stock outstanding:
Employee stock purchase plan (ESPP)	Employee stock purchase plan (ESPP)	3		—			Employee stock purchase plan (ESPP)	—		3
Restricted stock units (RSUs) and performance restricted stock units (PRSUs)	Restricted stock units (RSUs) and performance restricted stock units (PRSUs)	578		—			Restricted stock units (RSUs) and performance restricted stock units (PRSUs)	—		578
1.00% Senior Convertible Notes due 2023	1.00% Senior Convertible Notes due 2023	5,345		—			1.00% Senior Convertible Notes due 2023	—		5,345
0.375% Senior Convertible Notes due 2025	0.375% Senior Convertible Notes due 2025	4,824		—			0.375% Senior Convertible Notes due 2025	—		4,824
Weighted average common shares outstanding for diluted	Weighted average common shares outstanding for diluted	62,579		51,379			Weighted average common shares outstanding for diluted	52,242		62,579
Basic net income (loss) per share		$	0.37	$	(0.15)
Diluted net income (loss) per share		$	0.35	$	(0.15)
Basic net (loss) income per share							Basic net (loss) income per share	$	(0.02)	$	0.37
Diluted net (loss) income per share							Diluted net (loss) income per share	$	(0.02)	$	0.35

In accordance with ASU No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20), or ASU 2020-06, the Company applies the if-converted method in computing the effect of the Company's senior convertible notes on diluted net income ~~(loss)~~ per share. ~~The~~For periods in which the Company reports net income, the numerator of the diluted ~~net income (loss)~~ 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 senior convertible notes could be converted. The effect is only included in the calculation of diluted net income ~~(loss)~~ per share for those senior convertible notes which reduce net income ~~(loss)~~ per share.

The following weighted average outstanding common stock equivalents were not included in the calculation of net (loss) income ~~(loss)~~ per diluted share because their effects were anti-dilutive:


		Three Months Ended March 31,		Three Months Ended March 31,
(in thousands)	(in thousands)	2022	2021		(in thousands)	2023	2022
ESPP, RSUs and PRSUs	ESPP, RSUs and PRSUs	239	1,355		ESPP, RSUs and PRSUs	1,795	239
Warrants	Warrants	10,169	21,034		Warrants	10,169	10,169
Senior convertible notes	Senior convertible notes	—	10,169		Senior convertible notes	10,169	—
Total	Total	10,408	32,558		Total	22,133	10,408

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3. ~~Business Combinations~~

The Company recognizes the assets acquired, liabilities assumed, and any non-controlling interest at fair value at the date of acquisition. Certain acquisitions contain contingent consideration arrangements that require the Company to assess the acquisition date fair value of the contingent consideration liabilities. Such liabilities are recorded as part of the purchase price allocation of the acquisition, with subsequent fair value adjustments to the contingent consideration recorded in the Unaudited Consolidated Statements of Operations. See Note 4, Financial Instruments and Fair Value Measurements, in the Notes to Unaudited Consolidated Financial Statements included in this Quarterly Report for further discussion on contingent consideration liabilities.

~~Acquisition of~~ ~~Simplify Medical Pty Limited~~

~~On February 24, 2021, the Company, through its indirect wholly-owned subsidiary, NuVasive (AUST/NZ) Pty Limited, acquired all of the stock interest in Simplify Medical,~~ a developer of cervical disc technology for cervical total disc replacement procedures. Simplify Medical now operates as a wholly-owned subsidiary of the Company. The Company agreed to make an upfront payment ~~of $150.0 million, subject to customary purchase price adjustments, plus additional future~~ ~~payments contingent upon milestones related to regulatory approval and net sales from products incorporating the Simplify Medical cervical disc technology.~~ In April 2021, the Simplify Cervical Disc received approval from the U.S. Food and Drug Administration, or FDA, for two-level cervical total disc replacement, resulting in the Company’s payment of $45.8 million for the achievement of the regulatory milestone. Additional milestone payments, which are uncapped and contingent upon net sales from products incorporating the Simplify Medical cervical disc technology, will become payable in calendar years 2023, 2024 and 2025. ~~In connection with the closing, the Company paid $151.0 million, which included additional amounts for customary purchase price adjustments, using available cash on hand.~~

~~The allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values is as follows:~~


~~(in thousands)~~
~~Cash paid for purchase~~	$	~~151,026~~

~~Cash~~	~~1,563~~
~~Accounts receivable~~	~~203~~
~~Inventory~~	~~6,710~~
~~Other current assets~~	~~568~~
~~Property, plant and equipment, net~~	~~381~~
~~Definite-lived intangible assets:~~
~~Developed technology~~	~~141,700~~
~~Patents~~	~~19,000~~
~~Trade names~~	~~3,500~~
~~Goodwill~~	~~81,125~~
~~Other assets~~	7
~~Contingent consideration liabilities~~	~~(103,400)~~
~~Accounts payable, accrued expenses and other~~	~~(331)~~
	$	~~151,026~~

~~Goodwill recognized in this transaction is not deductible for tax purposes. Goodwill largely consists of expected net sales synergies resulting from the combination of product portfolios,~~ ~~use of the Company’s existing commercial infrastructure to expand sales of Simplify Medical’s products,~~ and the assembled workforce. The intangible assets acquired are being amortized on a straight-line basis over useful lives of seventeen years, ten years, and fifteen years for developed technology-based intangible assets, patent-related intangible assets, and trade name related intangible assets, respectively. The estimated fair values of the intangible assets acquired were primarily determined using the income approach based on significant inputs that were not observable.

In connection with the acquisition, contingent consideration liabilities of $103.4 million were recorded for the potential regulatory and net sales-based milestone payments. The fair value of the contingent liability related to the regulatory milestone payment was determined using the probability approach based on the probability of the approval being achieved as of various periods. The fair value of the contingent liability relating to the net sales-based milestone payments was determined using a Monte Carlo simulation model based on forecast net sales, volatility factors associated with those forecast net sales and discount rates.

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~~The Company’s results of operations for the three months ended March 31, 2021 include the operating results of~~ ~~Simplify Medical~~ since the date of acquisition. Acquisition costs of $3.9 million were included in the Unaudited Consolidated Statements of Operations as business transition costs for the three months ended March 31, 2021.

~~Variable Interest Entities~~

The Company provides IONM services through various subsidiaries, which conduct business as NuVasive Clinical Services. In providing IONM services to surgeons and healthcare facilities across the United States, the Company maintains contractual relationships with several physician practices, or PCs. In accordance with authoritative guidance, the Company has determined that the PCs are variable interest entities and therefore, the accompanying Unaudited 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 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.

4. Financial Instruments and Fair Value Measurements

Foreign Currency and Derivative Financial Instruments

The Company translates the financial statements of its foreign subsidiaries using end-of-period exchange rates for assets and liabilities, and average exchange rates during each reporting period for results of operations.

Some of the Company’s 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 (losses) gains, ~~(losses),~~ which include gains and losses from derivative instruments, were ~~$16.0~~$(4.8) million and ~~$(2.7)~~$16.0 million for the three months ended March 31, ~~2022~~2023 and March 31, ~~2021,~~2022, respectively, and are included in other (expense) income, ~~(expense),~~ net in the ~~Unaudited~~unaudited Consolidated Statements of Operations.

To manage foreign currency exposure risks, the Company uses 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). AsAs of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, a notional principal amount of ~~$17.6~~$18.0 million and ~~$12.2~~$15.0 million, respectively, was outstanding to hedge currency risk relative to the Company’s foreign currency-denominated receivables and ~~payables~~. payables. Derivative instrument net gains on the Company’s forward exchange contracts were ~~$0.8~~$0.2 million and ~~$1.3~~$0.8 million for the three months ended March 31, ~~2022~~2023 and March 31, ~~2021,~~2022, respectively, and are included in other (expense) income, ~~(expense),~~ net in the ~~Unaudited~~unaudited Consolidated Statements of Operations. The fair value of the forward contract exchange derivative instrument asset (liability) was ~~de minimis~~$0.1 million and $(0.2) million as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022, respectively. The derivative instruments are recorded in other current assets or other current liabilities in the ~~Unaudited~~unaudited Consolidated Balance Sheets commensurate with the nature of the instrument at period end.

Fair Value Measurements

The Company measures certain assets and liabilities in accordance with authoritative guidance, which requires fair value measurements be classified and disclosed in one of the following three categories:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available.

Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain assets or liabilities within the fair value hierarchy. The Company did not have any transfers of assets and liabilities between the levels of the fair value measurement hierarchy during the periods presented.

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The fair values of the Company’s assets and liabilities, including cash equivalents, marketable debt and equity securities, restricted investments, derivatives, and contingent consideration are measured at fair value on a recurring basis. The fair value of the securities classified as cash equivalents and marketable equity securities are based on quoted market prices in active markets (Level 1). As of March 31, ~~2022 and December 31, 2021,~~2023, the Company held investments in securities classified as cash ~~equivalents.~~equivalents and marketable equity securities. Unrealized gains for marketable equity securities was $0.3 million for the three months ended March 31, 2023 and included in other (expense) income, net in the unaudited Consolidated Statement of Operations. As of December 31, 2022, the Company held investments in securities classified as cash equivalents and marketable equity securities. During the periods presented, the Company did not hold any such investments that were in a significant unrealized loss position and no impairment charges were recorded on such investments. Realized and unrealized gains and losses and interest income related to marketable debt securities were immaterial during all periods presented. The Company’s assets that are measured at fair value were based on the following fair value categories:


(in thousands)	(in thousands)	Total		Quoted Price in Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		(in thousands)	Total		Quoted Price in Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
																			(in thousands)	Total	Quoted Price in Active Market (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)

March 31, 2022:
March 31, 2023:										March 31, 2023:
Cash equivalents:	Cash equivalents:									Cash equivalents:
Money market funds	Money market funds	$	130,651	$	130,651	$	—	$	—	Money market funds	$	105,354	$	105,354	$	—	$	—
Total cash equivalents		$	130,651	$	130,651	$	—	$	—
Other assets:										Other assets:
Marketable equity securities										Marketable equity securities	3,793		3,793		—		—
Total cash equivalents and other assets										Total cash equivalents and other assets	$	109,147	$	109,147	$	—	$	—

December 31, 2021:
December 31, 2022:										December 31, 2022:
Cash equivalents:	Cash equivalents:									Cash equivalents:
Money market funds	Money market funds	$	179,451	$	179,451	$	—	$	—	Money market funds	$	176,344	$	176,344	$	—	$	—
Total cash equivalents		179,451		179,451		—		—
Other assets:										Other assets:
Marketable equity securities										Marketable equity securities	3,483		3,483		—		—
Total cash equivalents and other assets										Total cash equivalents and other assets	$	179,827	$	179,827	$	—	$	—

The carrying amounts of certain financial instruments such as cash and cash equivalents, accounts receivable, prepaid expenses, other current assets, accounts payable, accrued expenses, and other current liabilities as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 approximate their related fair values due to the short-term maturities of these instruments.

The fair value of certain financial instruments was measured and classified within Level 1 of the fair value hierarchy based on quoted prices.

Fair Value of Senior Convertible Notes

The fair value, based on a quoted market price (Level 1), of the Company’s outstanding $450.0 million principal amount of Senior Convertible Notes due 2023 at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 was approximately ~~$447.2~~$445.5 million and ~~$450.6~~$441.6 million, respectively. The fair value, based on a quoted market price (Level 1), of the Company’s outstanding $450.0 million principal amount of Senior Convertible Notes due 2025 at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 was approximately ~~$425.0~~$393.8 million and ~~$433.5~~$394.9 million, respectively. See Note 6,5, Indebtedness, in the Notes to ~~Unaudited~~unaudited Consolidated Financial Statements included in this Quarterly Report for further discussion on the carrying value of the Company’s outstanding senior convertible notes.

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Contingent Consideration Liabilities

The fair value of contingent consideration liabilities assumed in business combinations is recorded as part of the purchase price consideration of the acquisition, and is determined using a discounted cash flow model, probability model or Monte Carlo simulation model. The significant inputs of such models are not observable in the market, such as certain financial metric growth rates, volatility rates, projections associated with the applicable milestone, the interest rate, and the related probabilities and payment structure in the contingent consideration arrangement. Fair value adjustments to contingent consideration liabilities are recorded through operating expenses in the ~~Unaudited~~unaudited Consolidated Statements of Operations. Contingent consideration arrangements assumed by an asset purchase will be measured and accrued when such contingency is resolved.

The recurring Level 3 fair value measurements of contingent consideration liabilities associated with commercial sales milestones include the following significant unobservable inputs as of March 31, ~~2022:~~2023:


			~~2022~~2023
Valuation ~~Technique~~Techniques			Discounted cash flow, probability, Monte Carlo
Discount Rate Range			~~4.0%~~6.2% - ~~5.9%~~8.0%
Weighted Average Discount Rate			~~4.5%~~6.9%
Expected Years			2023 - ~~2027~~2028

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Contingent consideration liabilities at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 were ~~$139.8~~$68.7 million and ~~$147.8~~$130.6 million, respectively, and were recorded in the ~~Unaudited~~unaudited Consolidated Balance Sheets commensurate with the respective payment terms. The following table sets forth the changes in the estimated fair value of the Company's contingent consideration liabilities measured on a recurring basis using significant unobservable inputs (Level 3):


		Three Months Ended March 31,					Three Months Ended March 31,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Beginning balance at January 1	Beginning balance at January 1	$	147,810	$	37,041	Beginning balance at January 1	$	130,615	$	147,810
Contingent consideration liability recorded upon acquisition		—		103,400

Change in fair value measurement	Change in fair value measurement	39		881		Change in fair value measurement	(4,799)		39
Contingent consideration paid or settled	Contingent consideration paid or settled	(8,037)		(156)		Contingent consideration paid or settled	(57,133)		(8,037)
Changes resulting from foreign currency fluctuations	Changes resulting from foreign currency fluctuations	4		—		Changes resulting from foreign currency fluctuations	(4)		4
Balance at end of period	Balance at end of period	$	139,816	$	141,166	Balance at end of period	$	68,679	$	139,816

During the first quarter of 2021, the Company recorded $103.4 million in contingent consideration liabilities as part of the Simplify Medical acquisition, of which $42.8 million and $60.6 million relate to the regulatory approval and net sales milestones, respectively. In the second quarter of 2021, the Simplify Cervical Disc received approval from the Food and Drug Administration, or FDA, for two-level cervical total disc replacement which resulted in the payment of $45.8 million for the achievement of the regulatory milestone. As a result of the milestone achievement, the Company recorded a $3.0 million increase in the fair value of the contingent consideration liability, which has been recorded within ~~Business Transition Costs~~business transition costs in the Company’s Consolidated Statements of Operations in the year ended December 31, 2021. Additional milestone payments, which are uncapped and contingent upon net sales from products incorporating the Simplify Medical cervical disc technology, are payable in the calendar years 2023, 2024 and 2025. The first net sales milestone payment in the amount of $56.5 million was paid in March 2023. For the ~~quarter~~three months ended March 31, ~~2022~~2023 and year ended December 31, ~~2021,~~2022, the Company ~~increased~~decreased the contingent consideration ~~liabilities related to the net sales milestones~~liability by ~~$0.1~~$5.6 million, and ~~$47.9~~$12.2 million, respectively, ~~which resulted from~~as a result of updates to the ~~Company’s~~Company's forecasted net sales ~~assumptions.~~assumptions and significant unobservable inputs. The remaining contingent consideration liabilities for the Simplify Medical acquisition totaled ~~$108.6~~$34.2 million and ~~$108.5~~$96.3 million as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Changes in fair value measurement of the contingent consideration liabilities are recorded in the unaudited Consolidated Statements of Operations within the ~~Business Transition Costs~~business transition costs line item.

Non-financial assets and liabilities measured on a nonrecurring basis

Certain non-financial assets and liabilities are measured at fair value, usually with Level 3 inputs including the discounted cash flow method or cost method, on a nonrecurring basis in accordance with authoritative guidance. These include items such as non-financial assets and liabilities initially measured at fair value in a business combination and non-financial long-lived assets measured at fair value for an impairment assessment. In general, non-financial assets, including goodwill, intangible assets and property and equipment, are measured at fair value when there is an indication of impairment and are recorded at fair value only when any impairment is recognized. The carrying values of the Company’s financing lease obligations approximated their estimated fair value as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

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5.4. Goodwill and Intangible Assets

Goodwill and intangible assets consisted of the following:

(in thousands, except years) Weighted-
Average
Amortization
Period
(in years) Gross
Amount Accumulated
Amortization Intangible
Assets, net
March 31, 2022:
Intangible assets subject to amortization:
Developed technology 11 $ 378,541 $ (217,914) $ 160,627
Patents 10 58,330 (33,436) 24,894
Manufacturing know-how and trade secrets 12 21,394 (21,394) —
Trade name and trademarks 9 25,264 (20,260) 5,004
Customer relationships 9 156,743 (113,967) 42,776
Total intangible assets subject to amortization 10 $ 640,272 $ (406,971) $ 233,301
Intangible assets not subject to amortization:
Goodwill $ 636,703
Total goodwill and intangible assets, net $ 870,004

(in thousands, except years)
Weighted-
Average
Amortization
Period
(in years)
Gross
Amount
Accumulated
Amortization
Intangible
Assets, net
December 31, 2021:
Intangible assets subject to amortization:
Developed technology 11 $ 374,457 $ (209,283) $ 165,174
Patents 10 57,783 (31,903) 25,880
Manufacturing know-how and trade secrets 12 21,412 (21,387) 25
Trade name and trademarks 9 25,163 (19,621) 5,542
Customer relationships 9 156,208 (110,154) 46,054
Total intangible assets subject to amortization 10 $ 635,023 $ (392,348) $ 242,675
Intangible assets not subject to amortization:
Goodwill $ 633,467
Total goodwill and intangible assets, net $ 876,142


(in thousands, except years)	Weighted- Average Amortization Period (in years)	Gross Amount		Accumulated Amortization		Intangible Assets, net

March 31, 2023:
Intangible assets subject to amortization:
Developed technology	11	$	364,354	$	(245,647)	$	118,707
Patents	10	56,428		(37,943)		18,485
Manufacturing know-how and trade secrets	12	21,378		(21,378)		—
Trade name and trademarks	9	24,914		(22,360)		2,554
Customer relationships	9	157,666		(125,571)		32,095
Total intangible assets subject to amortization	10	$	624,740	$	(452,899)	$	171,841
In-process research and development		$	2,500	$	—	$	2,500
Total intangible assets, net		$	627,240	$	(452,899)	$	174,341


(in thousands, except years)	Weighted- Average Amortization Period (in years)	Gross Amount		Accumulated Amortization		Intangible Assets, net

December 31, 2022:
Intangible assets subject to amortization:
Developed technology	11	$	366,521	$	(241,119)	$	125,402
Patents	10	56,719		(37,420)		19,299
Manufacturing know-how and trade secrets	12	21,364		(21,364)		—
Trade name and trademarks	9	24,967		(22,124)		2,843
Customer relationships	9	156,681		(122,436)		34,245
Total intangible assets subject to amortization	10	$	626,252	$	(444,463)	$	181,789
In-process research and development		$	2,500	$	—	$	2,500
Total intangible assets, net		$	628,752	$	(444,463)	$	184,289

The changes to goodwill are comprised of the following:


(in thousands)
December 31, ~~2021~~2022
Gross goodwill	$	~~641,767~~647,963
Accumulated impairment loss	(8,300)
	~~633,467~~639,663
Changes to gross goodwill

Changes resulting from foreign currency fluctuations	~~3,236~~ (977)

March 31, ~~2022~~2023
Gross goodwill	~~645,003~~646,986
Accumulated impairment loss	(8,300)
	$	~~636,703~~638,686

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Total expense related to the amortization of intangible assets, which is recorded in both cost of sales and operating expenses in the ~~Unaudited~~unaudited Consolidated Statements of Operations depending on the functional nature of the intangible asset, was ~~$13.9~~$8.8 million and ~~$14.2~~$13.9 million for the three months ended March 31, ~~2022~~2023 and March 31, ~~2021,~~2022, respectively.

Total future amortization expense related to intangible assets subject to amortization at March 31, ~~2022~~2023 is set forth in the table below:


(in thousands)	(in thousands)			(in thousands)
Remaining 2022		$	39,169
2023		27,441
Remaining 2023				Remaining 2023	$	18,734
2024	2024	21,628		2024	21,023
2025	2025	20,782		2025	20,100
2026	2026	15,984		2026	14,973
2027				2027	12,215
Thereafter through 2038	Thereafter through 2038	108,297		Thereafter through 2038	84,796
Total future amortization expense	Total future amortization expense	$	233,301	Total future amortization expense	$	171,841

6.5. Indebtedness

The carrying values of the Company’s Senior Convertible Notes are as follows:


(in thousands)	(in thousands)	March 31, 2022		December 31, 2021		(in thousands)	March 31, 2023		December 31, 2022
1.00% Senior Convertible Notes due 2023:	1.00% Senior Convertible Notes due 2023:					1.00% Senior Convertible Notes due 2023:
Principal amount	Principal amount	$	450,000	$	450,000	Principal amount	$	450,000	$	450,000
Unamortized debt issuance costs	Unamortized debt issuance costs	(5,402)		(6,543)		Unamortized debt issuance costs	(780)		(1,944)
		444,598		443,457			449,220		448,056
0.375% Senior Convertible Notes due 2025:	0.375% Senior Convertible Notes due 2025:					0.375% Senior Convertible Notes due 2025:
Principal amount	Principal amount	450,000		450,000		Principal amount	450,000		450,000
Unamortized debt issuance costs	Unamortized debt issuance costs	(7,805)		(8,473)		Unamortized debt issuance costs	(5,129)		(5,798)
		442,195		441,527			444,871		444,202
Total Senior Convertible Notes	Total Senior Convertible Notes	$	886,793	$	884,984	Total Senior Convertible Notes	$	894,091	$	892,258

Less: Current portion of Senior Convertible Notes						Less: Current portion of Senior Convertible Notes	$	(449,220)	$	(448,056)
Long-term Senior Convertible Notes						Long-term Senior Convertible Notes	$	444,871	$	444,202


		Three Months Ended March 31,							Three Months Ended March 31,
(in thousands)	(in thousands)	2022			2021			(in thousands)	2023			2022
Interest expense:	Interest expense:							Interest expense:
Contractual coupon interest	Contractual coupon interest	$	1,547		$	4,594		Contractual coupon interest	$	1,547		$	1,547
Amortization of debt issuance costs	Amortization of debt issuance costs	1,810			2,507			Amortization of debt issuance costs	1,833			1,810
Total interest expense recognized on Senior Convertible Notes	Total interest expense recognized on Senior Convertible Notes	$	3,357		$	7,101		Total interest expense recognized on Senior Convertible Notes	$	3,380		$	3,357

Effective interest rates:	Effective interest rates:							Effective interest rates:
Senior Convertible Notes due 2021 (1)		—		%	2.9		%
Senior Convertible Notes due 2023(2)		2.0		%	2.0		%
Senior Convertible Notes due 2025(2)		1.0		%	1.0		%
(1) Senior Convertible Notes due 2021 settled in full on March 15, 2021.
(2) Interest on Senior Convertible Notes due 2023 and 2025 began accruing upon issuance and is payable semi-annually.
Senior Convertible Notes due 2023(1)								Senior Convertible Notes due 2023(1)	2.0		%	2.0		%
Senior Convertible Notes due 2025(1)								Senior Convertible Notes due 2025(1)	1.0		%	1.0		%
(1) Interest on Senior Convertible Notes due 2023 and 2025 began accruing upon issuance and is payable semi-annually.								(1) Interest on Senior Convertible Notes due 2023 and 2025 began accruing upon issuance and is payable semi-annually.

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1.00% Senior Convertible Notes due 2023

In June 2020, the Company issued $450.0 million principal amount of unsecured Senior Convertible Notes with a stated interest rate of 1.00% and a maturity date of June 1, 2023, or the 2023 Notes. The net proceeds from the offering of the 2023 Notes, after deducting initial purchasers’ discounts and costs directly related to the offering, were approximately $436.7 million. The 2023 Notes were initially required to be settled in cash as the Company did not have sufficient reserved shares. On September 10, 2020, the Company held a Special Meeting of Stockholders and received stockholder approval to amend the Company’s Restated Certificate of Incorporation to increase the number of shares of its common stock authorized for issuance from 120,000,000 shares to 150,000,000 shares. As a result of the increase in the number of shares of the Company’s common stock authorized for issuance, as of September 10, 2020 and as of December 31, 2020, 2021 and ~~December 31, 2021,~~2022, respectively, the Company had sufficient reserved ~~shares and therefore may~~shares. The 2023 Notes permit the Company to settle conversions of the 2023 Notes in cash, stock, or a combination thereof, solely at the Company’s ~~discretion. It is~~discretion, and the ~~Company’s current intent and policy~~Company has elected to settle all conversions ~~through combination settlement, which involves satisfying~~in cash. Accordingly, the Company will satisfy the principal amount outstanding ~~with cash~~ and any note conversion value over the principal amount ~~in shares of the Company’s common stock.~~with cash. The initial conversion rate of the 2023 Notes is 11.8778 shares per $1,000 principal amount, which is equivalent to a conversion price of approximately $84.19 per share, subject to adjustments. In addition, following certain corporate events that occur prior to the maturity date, the Company will increase the conversion rate for a holder who elects to convert its 2023 Notes in connection with such a corporate event in certain circumstances. As of December 31, 2020, the Company uses the treasury share method for assumed conversion of the 2023 Notes to compute the weighted average shares of common stock outstanding for diluted earnings per share. The Company also entered into transactions for a convertible notes hedge and warrants concurrently with the issuance of the 2023 Notes.

At the time of issuance, the cash conversion feature of the 2023 Notes required bifurcation from the 2023 Notes and was initially accounted for as a derivative liability (the "Embedded Conversion Derivative"), which was included in long-term liabilities in the Company’s ~~Unaudited~~unaudited Consolidated Balance Sheets. The fair value of the 2023 Notes Embedded Conversion Derivative was $57.2 million, and was recorded as the original debt discount for purposes of accounting for the debt component of the 2023 Notes. On September 10, 2020, as a result of the increase in the number of shares of the Company’s common stock authorized for issuance, the Company had sufficient reserved shares to settle conversions of the 2023 Notes in cash, stock, or a combination thereof, and in accordance with authoritative literature, the Embedded Conversion Derivative was marked to fair value and reclassified to stockholders’ equity, which resulted in recognizing $37.3 million in additional paid-in-capital during 2020. The original issue discount was recognized as interest expense using the effective interest method.

As of January 1, 2021, the Company early adopted ASU 2020-06, which removed the requirement of separating the embedded conversion feature classified within stockholders’ equity from the 2023 Notes. Accordingly, the Company reclassified the unamortized debt discount from its additional paid-in capital to its senior convertible notes within long-term liabilities in the ~~Unaudited~~unaudited Consolidated Balance Sheets. The impact of the adoption of ASU 2020-06 as of January 1, 2021 resulted in an increase in senior convertible notes and retained earnings of $46.8 million and $7.9 million, respectively, and a decrease in deferred tax liabilities and additional paid-in capital by $11.2 million and $43.5 million, respectively.

Prior to February 1, 2023, holders ~~may convert~~could have converted their 2023 Notes only under the following conditions: (a) during any calendar quarter commencing after the calendar quarter ending on September 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 5five business day period after any five consecutive trading day period, or the measurement period, in which the trading price of the 2023 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; or (c) upon the occurrence of specified corporate events, as defined in the 2023 Notes. On or after February 1, 2023, until the close of business on the second scheduled trading day immediately preceding June 1, 2023, holders may convert their 2023 Notes at any time, regardless of the foregoing conditions.

The Company may not redeem the 2023 Notes prior to the maturity date and no principal payments are due on the 2023 Notes prior to maturity. Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the 2023 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. As of March 31, ~~2022, the Company is unaware of any current events or market conditions that would allow holders to convert~~2023, the 2023 ~~Notes.~~Notes are included within current liabilities in the Company’s unaudited Consolidated Balance Sheets.

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2023 Hedge

In connection with the sale of the 2023 Notes, the Company entered into privately negotiated call option transactions with certain dealers, which included affiliates of certain of the initial purchasers of the 2023 Notes and other financial institutions, or the 2023 Counterparties, entitling the Company to purchase up to 5,345,010 shares of the Company’s common stock at an initial stock price of $84.19 per share, each of which is subject to adjustment. The 2023 Hedge was initially required to be settled in cash as the Company did not have sufficient reserved shares with respect to the 2023 Notes. As a result, the 2023 Hedge was accounted for as a derivative asset, which was included in long-term assets in the Company’s ~~Unaudited~~unaudited Consolidated Balance Sheets. The cost of the 2023 Hedge was $69.5 million. On September 10, 2020, as a result of the increase in the number of shares of the Company’s common stock authorized for issuance, the Company had sufficient reserved shares to settle the 2023 Notes, which therefore allows for the 2023 Hedge to be settled in cash, stock, or a combination thereof. In accordance with authoritative literature, the Convertible Note Hedge Derivative was marked to fair value and reclassified to stockholders’ equity, which resulted in recognizing a reduction of $37.3 million in additional paid-in-capital during 2020. The 2023 Hedge will expire on the second scheduled trading day immediately preceding June 1, 2023. The 2023 Hedge is expected to reduce the potential equity dilution upon conversion of the 2023 Notes if the daily volume-weighted average price per share of the Company’s common stock exceeds the strike price of the 2023 Hedge. An assumed exercise of the 2023 Hedge by the Company 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.

2023 Warrants

In connection with the sale of the 2023 Notes, the Company sold warrants to the 2023 Counterparties, or the 2023 Warrants, to acquire up to 5,345,010 shares of the Company’s common stock. The 2023 Warrants initially limited the amount of shares the Company was required to reserve for issuance under the 2023 Warrants to an aggregate of 3,093,500 shares of the Company’s common stock, subject to adjustment upon the Company having a sufficient amount of authorized and unissued shares which are not reserved for other transactions. As a result of the Company receiving stockholder approval to increase the number of shares of the Company’s common stock authorized for issuance on September 10, 2020, the Company subsequently entered into amendment agreements with each of the 2023 Counterparties to increase the number of authorized shares of the Company’s common stock required to be reserved under the 2023 Warrants to the aggregate amount of 6,948,512 shares. The 2023 Warrants will expire on various dates from September 2023 through November 2023 and may be settled in net shares or cash, subject to certain conditions. It is the Company’s current intent and policy to settle all conversions in shares of the Company’s common stock. The Company received $46.8 million in cash proceeds from the sale of the 2023 Warrants, which was recorded in additional paid-in-capital. The 2023 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 2023 Warrants, which is $104.84 per share. The Company uses the treasury share method for assumed conversion of its 2023 Warrants to compute the weighted average common shares outstanding for diluted earnings per share.

0.375% Senior Convertible Notes due 2025

In March 2020, the Company issued $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, or the 2025 Notes. The net proceeds from the offering of the 2025 Notes, after deducting initial purchasers’ discounts and costs directly related to the offering, were approximately $437.0 million. The 2025 Notes may be settled in cash, stock, or a combination thereof, solely at the Company’s discretion. It is the Company's current intent and policy to settle all conversions through combination settlement, which involves satisfying the principal amount outstanding with cash and any note conversion value over the principal amount in shares of the Company’s common stock. The initial conversion rate of the 2025 Notes is 10.7198 shares per $1,000 principal amount, which is equivalent to a conversion price of approximately $93.29 per share, subject to adjustments. 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. For the year ended December 31, 2020, the Company used the treasury share method for assumed conversion of the 2025 Notes to compute the weighted average shares of common stock outstanding for diluted earnings per share. The Company also entered into transactions for a convertible notes hedge, or the 2025 Hedge, and warrants, or the 2025 Warrants, concurrently with the issuance of the 2025 Notes.

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At the time of issuance and in accordance with Accounting Standards Codification Topic 470, the embedded conversion feature of the 2025 Notes required bifurcation from the notes and was initially accounted for as an equity instrument classified to stockholders’ equity, which resulted in recognizing $78.3 million in additional paid-in-capital during 2020. As of January 1, 2021, the Company early adopted ASU 2020-06, which removed the requirement of separating the embedded conversion feature classified within stockholders’ equity from the 2025 Notes. Accordingly, the Company reclassified the unamortized debt discount and corresponding debt issuance costs from its additional paid-in capital to its senior convertible notes within long-term liabilities in the ~~Unaudited~~unaudited Consolidated Balance Sheets. The impact of the adoption of ASU 2020-06 as of January 1, 2021 resulted in an increase in senior convertible notes and retained earnings of $64.7 million and $8.8 million, respectively, and a decrease in deferred tax liabilities and additional paid-in capital by $15.9 million and $57.6 million, respectively.

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 5five 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.

The Company may not redeem the 2025 Notes prior to March 20, 2023. The Company may redeem the 2025 Notes, at its option, in whole or in part, on or after March 20, 2023 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~~.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. ~~As of March 31, 2022, the Company is unaware of any current events or market conditions that would allow holders to convert the 2025 Notes.~~

~~Table of~~ ~~Contents~~

2025 Hedge

In connection with the sale of the 2025 Notes, the Company entered into privately negotiated call option transactions with certain dealers, which included affiliates of certain of the initial purchasers of the 2025 Notes and other financial institutions, or the 2025 Counterparties, entitling the Company to purchase up to 4,823,910 shares of the Company’s common stock at an initial stock price of $93.29 per share, each of which is subject to adjustment. The cost of the 2025 Hedge was $78.3 million and accounted for as an equity instrument by recognizing $78.3 million in additional paid-in-capital during 2020. The 2025 Hedge will expire on the second scheduled trading day immediately preceding March 15, 2025. The 2025 Hedge 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. An assumed exercise of the 2025 Hedge by the Company 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.

2025 Warrants

The Company sold warrants to the 2025 Counterparties to acquire up to 4,823,910 shares of the Company’s common stock. The 2025 Warrants will expire on various dates from June 2025 through October 2025 and may be settled in net shares or cash, subject to certain conditions. It is the Company’s current intent and policy to settle all conversions in shares of the Company’s common stock. The Company received $47.1 million in cash proceeds from the sale of the 2025 Warrants, which was recorded in 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 $127.84 per share. The Company uses the treasury share method for assumed conversion of its 2025 Warrants to compute the weighted average common shares outstanding for diluted earnings per share.

~~2.25% Senior Convertible Notes due 2021~~

In March 2016, the Company issued $650.0 million principal amount of unsecured Senior Convertible Notes with a stated interest rate of 2.25% and a maturity date of March 15, 2021, or the 2021 Notes. Interest on the 2021 Notes began accruing upon issuance and was payable semi-annually. On March 15, 2021 the Company settled in full the 2021 Notes at their scheduled maturity as further discussed below.

The net proceeds from the offering of the 2021 Notes, after deducting initial purchasers' discounts and costs directly related to the offering, were approximately $634.1 million. Prior to September 14, 2020, the 2021 Notes provided for settlement in cash, stock, or a combination thereof, solely at the Company’s discretion. As of September 14, 2020, combination settlement was deemed to have been elected by the Company. The initial conversion rate of the 2021 Notes was 16.7158 shares per $1,000 principal amount, which was equivalent to a conversion price of approximately $59.82 per share, subject to adjustments. For the year ended December 31, 2020, the Company used the treasury share method for assumed conversion of the 2021 Notes to compute the weighted average shares of common stock outstanding for diluted earnings per share. The Company also entered into transactions for a convertible notes hedge, or the 2021 Hedge, and warrants, or the 2021 Warrants, concurrently with the issuance of the 2021 Notes.

At the time of issuance and in accordance with Accounting Standards Codification Topic 470, the embedded conversion feature of the 2021 Notes required bifurcation from the notes and was accounted for as an equity instrument classified to stockholders’ equity, which resulted in recognizing $84.8 million in additional paid-in-capital during 2016. As of January 1, 2021, the Company early adopted ASU 2020-06, which removed the requirement of separating the embedded conversion feature classified within stockholders’ equity from the 2021 Notes. Accordingly, the Company reclassified the unamortized debt discount and corresponding debt issuance costs from its additional paid-in capital to its senior convertible notes within current liabilities in the Consolidated Balance Sheets. The impact of the adoption of ASU 2020-06 as of January 1, 2021, resulted in an increase in senior convertible notes and retained earnings of $3.9 million and $47.8 million, respectively, and a decrease in deferred tax liabilities and additional paid-in capital by $0.9 million and $46.1 million, respectively.

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Table of ~~Contents~~

Prior to September 15, 2020, holders could have converted their 2021 Notes only under the following conditions: (a) during any calendar quarter beginning June 30, 2016, if the reported sale price of the Company's common stock for at least 20 days out of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter was greater than 130% of the conversion price on each applicable trading day; (b) during the 5 business day period in which the trading price of the 2021 Notes fell below 98% of the product of (i) the last reported sale price of the Company's common stock and (ii) the conversion rate on that date; and (c) upon the occurrence of specified corporate events, as defined in the 2021 Notes. From September 15, 2020 and until the close of business on the second scheduled trading day immediately preceding March 15, 2021, holders could have converted their 2021 Notes at any time (regardless of the foregoing circumstances). The Company had the ability to redeem the 2021 Notes, at its option, in whole or in part beginning on March 20, 2019 until the close of business on the business day immediately preceding September 15, 2020 if the last reported sale price of the Company’s common stock had 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. No principal payments were due on the 2021 Notes prior to maturity. Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the 2021 Notes did not contain any financial covenants and did not restrict the Company from paying dividends or issuing or repurchasing any of its other securities.

As of September 15, 2020, holders could have converted their 2021 Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date. As a result, the 2021 Notes were considered redeemable as of December 31, 2020. A portion of the equity component that was recorded upon the issuance of the 2021 Notes was reclassified to temporary equity in the Consolidated Balance Sheets as of December 31, 2020. Such amount was determined based on the cash consideration to be paid upon conversion and the carrying amount of the debt. The reclassification into temporary equity as of December 31, 2020 was $4.7 million based on the 2021 Notes principal of $650.0 million and the carrying value of $645.3 million.

~~2021 Hedge~~

In connection with the offering of the 2021 Notes, the Company entered into the hedge transaction with the initial purchasers of the 2021 Notes and/or their affiliates, or the 2021 Counterparties, entitling the Company to purchase up to 10,865,270 shares of the Company's common stock at an initial stock price of $59.82 per share, each of which was subject to adjustment. The cost of the 2021 Hedge was $111.2 million and accounted for as an equity instrument by recognizing $111.2 million in additional paid-in-capital during 2016. The 2021 Hedge expired on March 15, 2021 and was put in place to reduce the potential equity dilution upon conversion of the 2021 Notes if the daily volume-weighted average price per share of the Company's common stock exceeded the strike price of the 2021 Hedge. Prior to its expiration, an assumed exercise of the 2021 Hedge by the Company was considered anti-dilutive since the effect of the inclusion would always be anti-dilutive with respect to the calculation of diluted earnings per share.

~~2021 Warrants~~

The Company sold warrants to the 2021 Counterparties to acquire up to 10,865,270 shares of the Company’s common stock. The 2021 Warrants expired on various dates from June 2021 through December 2021 and could have only be settled in cash or net shares. As of December 31, 2021, all of the warrants expired unexercised. The Company received $44.9 million in cash proceeds from the sale of the 2021 Warrants, which was recorded in additional paid-in-capital. Prior to their expiration and termination, the 2021 Warrants could have had 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 exceeded the strike price of the 2021 Warrants, which was$80.00 per share. The Company used the treasury share method for assumed conversion of the 2021 Warrants to compute the weighted average common shares outstanding for diluted earnings per share.

~~Settlement of the 2021 Notes and 2021 Hedge~~

On March 15, 2021, the 2021 Notes reached maturity and the Company settled in full the 2021 Notes. The Company received conversion notices from the holders of 1.4% of the 2021 Notes, representing $9.1 million outstanding principal amount thereof, or the Conversions. The Company paid an aggregate of $649.4 million in cash for the settlement of the 2021 Notes, which included $640.9 million in satisfaction of the outstanding principal of the 2021 Notes and $8.5 million in cash in connection with the settlement of the Conversions. Additionally, in satisfaction of the Conversions, and pursuant to combination settlement, the Company issued 837 shares of common stock in the aggregate to the holders who elected to convert their outstanding notes. The Company funded the repayment of the outstanding principal amount of the 2021 Notes, accrued interest thereon, and the cash component of the Conversions using available cash on hand.

In connection with the settlement of the 2021 Notes, the Company exercised its rights under the convertible note hedge transactions with the 2021 Counterparties on March 15, 2021 and received 842 shares of its own common stock.

~~Table of~~ Contents

Revolving Senior Credit Facility

In February 2020, the Company entered into a Second Amended and Restated Credit Agreement, or the 2020 Credit Agreement, for a revolving senior credit facility, or the 2020 Facility, which replaced the previous Amended and Restated Credit Agreement the Company had entered into in April 2017. The 2020 Credit Agreement was ~~further~~ amended in May 2020 to, among other things, provide additional flexibility in determining the financial covenant leverage ratios for the second and third fiscal quarters of 2020 and to adjust certain margin and benchmark rates used to determine interest under the 2020 Facility. The 2020 Credit Agreement was further amended in May 2023 to replace the LIBOR-based rates with a SOFR-based rate (including a customary spread adjustment) and other rates for “Alternate Currencies” including, Australian dollars (BBSY), British pound sterling (SONIA), Euros (EURIBOR) and Japanese yen (TIBOR) and adjusts certain other provisions to reflect current documentation standards and other agreed modifications. The 2020 Credit Agreement provides for secured revolving loans, multicurrency loan options and letters of credit in an aggregate amount of up to $550.0 million. The 2020 Credit Agreement also contains an expansion feature, which allows the Company to increase the aggregate principal amount of the 2020 Facility provided the Company remains in compliance with the underlying financial covenants on a pro forma basis, including but not limited to, compliance with the consolidated interest coverage ratio and certain consolidated leverage ratios.

The 2020 Facility matures in February 2025 (subject to an earlier springing maturity date), and includes a sublimit of $50.0 million for standby letters of credit, a sublimit of $250.0 million for multicurrency borrowings, and a sublimit of $5.0 million for swingline loans. All assets of the Company and its material domestic subsidiaries continue to be pledged as collateral under the 2020 Facility (subject to customary exceptions) pursuant to the terms set forth in the Second Amended and Restated Security and Pledge Agreement executed in favor of the administrative agent by the Company. Each of the Company’s material domestic subsidiaries guarantee the 2020 Facility. In connection with the 2020 Facility, the Company incurred issuance costs which will be amortized over the term of the 2020 Facility. The Company did not carry any outstanding revolving loans under the 2020 Facility as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

Any borrowings under the 2020 Facility are intended to be used by the Company to provide financing for working capital and other general corporate purposes, including potential mergers and acquisitions and to refinance indebtedness. Borrowings under the 2020 Facility bear interest, at the Company’s option, at a rate equal to an applicable margin plus: (a) the applicable Eurocurrency Rate (as defined in the 2020 Credit Agreement), or (b) a base rate determined by reference to the highest of (1) the federal funds effective rate plus 0.50%, (2) the Bank of America prime rate, and (3) the Eurocurrency Rate ~~for an interest period of one month~~ plus 1.00%. The margin for the 2020 Facility ranges, based on the Company’s consolidated total net leverage ratio, from 0.50% to 1.25% in the case of base rate loans and from 1.50% to 2.25% in the case of Eurocurrency Rate loans. The 2020 Facility includes an unused line fee ranging, based on the Company’s consolidated total net leverage ratio, from 0.35% to 0.50% per annum on the revolving commitment.

The 2020 Credit Agreement contains affirmative, negative, permitted acquisition and financial covenants, and events of default customary for financings of this type. The financial covenants require the Company to maintain a consolidated interest coverage ratio and certain consolidated leverage ratios, which are measured on a quarterly basis. The 2020 Facility grants the lenders preferred first priority liens and security interests in capital stock, intercompany debt and all of the present and future property and assets of the Company and each guarantor. The Company is currently in compliance with the 2020 Credit Agreement covenants.

6. Business Combinations

The Company recognizes the assets acquired, liabilities assumed, and any non-controlling interest at fair value at the date of acquisition. Certain acquisitions contain contingent consideration arrangements that require the Company to assess the acquisition date fair value of the contingent consideration liabilities. Such liabilities are recorded as part of the purchase price allocation of the acquisition, with subsequent fair value adjustments to the contingent consideration recorded in the unaudited Consolidated Statements of Operations. See Note 3, Financial Instruments and Fair Value Measurements, in the Notes to unaudited Consolidated Financial Statements included in this Quarterly Report for further discussion on contingent consideration liabilities.

Variable Interest Entities

The Company provides IONM services through various subsidiaries, which 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, or PCs. In accordance with authoritative guidance, the Company has determined that the PCs are variable interest entities and therefore, the accompanying unaudited 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 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.

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7. Stockholders’ Equity

In October 2017, the Company announced that the Board of Directors approved a share repurchase program authorizing the repurchase of up to $100 million of the Company’s common stock over a three-year period. In February 2020, the Company announced that the Board of Directors approved an increase in the share repurchase authorization from $100 million to $150 million of the Company’s common stock and extended the authorization through December 31, 2021. In March 2020, in connection with the issuance of the 2025 Notes, the Company repurchased approximately 1,085,000 shares of its common stock for $75 million. On November 3, 2021, the Board of Directors approved an increase in the share repurchase authorization by $25 million and extended the authorization through December 31, 2022. Accordingly, as of March 31, 2022, theThe Company is authorized to repurchase up to $100 million of its common stock ~~under the share repurchase program.~~through December 31, 2023. Under this program, the Company is authorized to repurchase its shares in open market purchases, privately negotiated purchases or other transactions. The Company did not repurchase any ~~shares of~~ common stock ~~under the repurchase program~~ during the three months ended March 31, ~~2022.~~2023.

~~Table of~~ ~~Contents~~

8. Stock-Based Compensation

The compensation cost that has been included in the ~~Unaudited~~unaudited Consolidated Statements of Operations for the Company’s stock-based compensation plans was as follows:


		Three Months Ended March 31,				Three Months Ended March 31,
(in thousands)	(in thousands)	2022		2021			(in thousands)	2023		2022
Selling, general and administrative expense	Selling, general and administrative expense	$	6,442	$	5,975		Selling, general and administrative expense	$	6,362	$	6,442
Research and development expense	Research and development expense	329		1,651			Research and development expense	509		329
Cost of sales	Cost of sales	36		83			Cost of sales	36		36
Stock-based compensation expense before taxes	Stock-based compensation expense before taxes	6,807		7,709			Stock-based compensation expense before taxes	6,907		6,807
Related income tax benefit	Related income tax benefit	(988)		(1,409)			Related income tax benefit	(1,002)		(988)
Stock-based compensation expense, net of taxes	Stock-based compensation expense, net of taxes	$	5,819	$	6,300		Stock-based compensation expense, net of taxes	$	5,905	$	5,819

As of March 31, ~~2022,~~2023, there was ~~$68.8~~$67.5 million of unrecognized compensation expense for restricted stock units, or RSUs, and performance-based restricted stock units, or PRSUs, to be recognized over a weighted average period of ~~2.6~~2.5 years.

Restricted Stock Units and Performance-Based Restricted Stock Units

The Company issued approximately ~~216,000 and 63,000~~284,000 shares of common stock, before net share settlement, upon vesting of RSUs and PRSUs during the three months ended March 31, ~~2022, respectively,~~2023, and issued approximately ~~371,000~~329,000 shares of common stock, before net share settlement, upon vesting of RSUs and PRSUs during the year ended December 31, ~~2021.~~2022.

Employee Stock Purchase Plan

The weighted average assumptions used to estimate the fair value of stock purchase rights under the employee stock purchase plan, or ESPP, are as follows:


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
ESPP	ESPP						ESPP
Volatility	Volatility	27	%	49	%		Volatility	42	%	27	%
Expected term (years)	Expected term (years)	0.5		0.5			Expected term (years)	0.5		0.5
Risk free interest rate	Risk free interest rate	0.1	%	0.1	%		Risk free interest rate	4.6	%	0.1	%
Expected dividend yield	Expected dividend yield	—	%	—	%		Expected dividend yield	—	%	—	%

Under the terms of the ESPP, employees can elect to have up to 15% of their annual compensation, up to a maximum of $21,250 per year, withheld to purchase shares of Company common stock for a purchase price equal to 85% of the lower of the fair market value per share (at closing) of Company common stock on (i) the commencement date of the six-month offering period, or (ii) the respective purchase date.

9. Income Taxes

Income taxes are determined using an estimated annual effective tax rate applied against income, and then adjusted for the tax impacts of certain significant and discrete items. For the three months ended March 31, ~~2022,~~2023, the Company treated the tax impact of the following as discrete events for which the tax effect was recognized separately from the application of the annual effective tax rate: ~~state tax credit benefits,~~ tax expense related to ~~share-based compensation and uncertain tax reserves.~~shortfalls on stock-based compensation. The Company’s effective tax rate recorded for the three months ended March 31, ~~2022~~2023 was ~~20%.~~663%, primarily due to the size of discrete items of tax expense related to shortfalls on stock-based compensation relative to year-to-date pretax income.

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In accordance with the disclosure requirements as described in ~~ASC~~Accounting Standards Codification 740, Income Taxes, the Company has classified unrecognized tax benefits as non-current income tax liabilities, or a reduction in deferred tax assets, unless expected to be paid within one year. The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. ~~The Company had~~During the three months ended March 31, 2023, there was an increase in gross unrecognized tax benefits of approximately $2.2 million ~~during the three months ended March 31, 2022,~~ primarily related to research and development credits. The Company believes it is reasonably possible that approximately $0.1 million of its remaining unrecognized tax positions may be recognized within the next twelve months as certain statute of limitations expire, the amount of which is primarily attributable to tax positions involving the valuation of intercompany transactions.

~~Table of~~ ~~Contents~~

The Company is subject to routine compliance reviews on various tax matters around the world in the ordinary course of business. Currently, the only active audits are with the U.S. Internal Revenue Service for the 2014 – 2016 tax years, ~~and New York~~Illinois State for the ~~2018 –~~2019 and 2020 tax years, the Netherlands for the 2019 tax ~~years.~~year, and Italy for the 2017 tax year. California income tax returns are subject to examination in all years due to prior year net operating losses and research and development credits. Income tax returns of other major state and foreign jurisdictions remain subject to examination from ~~2017~~2018 and ~~2014~~2017 forward, respectively.

10. Business Segment, Product and Geographic Information

The Company operates in 1one segment based upon the Company’s organizational structure, the way in which the operations and investments are managed and evaluated by the chief operating decision maker, or the CODM, as well as the lack of availability of discrete financial information at a lower level. The Company’s CODM reviews net sales at the product line offering level, and manufacturing, operating income and expenses, and net income at the Company wide level to allocate resources and assess the Company’s overall performance. The Company shares common, centralized support functions, including finance, human resources, legal, information technology, and corporate marketing, all of which report directly to the CODM. Accordingly, decision-making regarding the Company’s overall operating performance and allocation of Company resources is assessed on a consolidated basis. The Company has disclosed the net sales for each of its product line offerings to provide the reader of the financial statements transparency into the operations of the Company.

The Company reports under 2two distinct product lines; spinal hardware and surgical support. The Company’s spinal hardware product line offerings include implants and fixation products. The Company’s surgical support product offerings include IONM services and disposables, ~~and~~ biologics, and capital equipment, all of which are used to aid spinal surgery.

Net sales by product line was as follows:


		Three Months Ended March 31,				Three Months Ended March 31,
(in thousands)	(in thousands)	2022		2021			(in thousands)	2023		2022
Spinal hardware	Spinal hardware	$	220,796	$	204,558		Spinal hardware	$	234,300	$	220,796
Surgical support	Surgical support	69,966		66,691			Surgical support	73,411		69,966
Total net sales	Total net sales	$	290,762	$	271,249		Total net sales	$	307,711	$	290,762

Net sales and property and equipment, net, by geographic area were as follows:


		Net Sales				Property and Equipment, Net		Net Sales										Property and Equipment, Net
		Three Months Ended March 31,					March 31, 2022		December 31, 2021				Three Months Ended March 31,									March 31, 2023			December 31, 2022
(in thousands)	(in thousands)	2022		2021							(in thousands)		2023											December 31, 2022
United States	United States	$	220,829	$	208,098						$	266,309				$	256,688		United States	$	237,414				$	220,829	$	303,651
International (excludes Puerto Rico)	International (excludes Puerto Rico)	69,933		63,151					47,380					46,976		International (excludes Puerto Rico)		70,297				69,933			51,822		50,596
Total	Total	$	290,762	$	271,249				$	313,689				$	303,664	Total		$	307,711			$	290,762		$	355,473	$	346,510

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11. Commitments

Leases

At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. If both criteria are met, the Company records the associated lease liability and corresponding right-of-use asset upon commencement of the lease using a discount rate based on a credit-adjusted secured borrowing rate commensurate with the term of the lease.

The Company records lease liabilities within current liabilities or long-term liabilities based upon the length of time associated with the lease payments. The Company records its operating lease right-of-use assets as long-term assets. Right-of-use assets for financing leases are recorded within property and equipment, net in the ~~Unaudited~~unaudited Consolidated Balance Sheets. Leases with an initial term of 12 months or less are not recorded in the ~~Unaudited~~unaudited Consolidated Balance Sheets. The Company recognizes lease expense on a straight-line basis over the lease term. In connection with certain operating leases, the Company has security deposits recorded and maintained as restricted cash totaling $1.5 million as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

~~Table of~~ ~~Contents~~

The Company leases office and storage facilities and equipment under various operating and financing lease agreements. The initial terms of these leases range from 1 to 17 years and generally provide for periodic rent increases, and renewal and termination options. The Company’s lease agreements do not contain any material variable lease payments, residual value guarantees or material restrictive covenants.

Certain leases require the Company to pay taxes, insurance, and maintenance. Payments for the transfer of goods or services such as common area maintenance and utilities represent non-lease components. The Company elected the package of practical expedients and therefore does not separate non-lease components from lease components.

The table below summarizes the Company’s right-of-use assets and lease liabilities as of March 31, ~~2022~~2023 and December 31, ~~2021:~~2022:


(in thousands, except years and rates)	(in thousands, except years and rates)	March 31, 2022			December 31, 2021			(in thousands, except years and rates)	March 31, 2023			December 31, 2022
Assets	Assets							Assets
Operating	Operating	$	100,656		$	102,987		Operating	$	93,273		$	95,112
Financing	Financing	2,414			2,276			Financing	1,903			1,893
Total leased assets	Total leased assets	$	103,070		$	105,263		Total leased assets	$	95,176		$	97,005

Liabilities	Liabilities							Liabilities
Current:	Current:							Current:
Operating	Operating	$	10,043		$	9,867		Operating	$	10,193		$	10,019
Financing	Financing	1,750			1,546			Financing	971			1,084
Long-term:	Long-term:							Long-term:
Operating	Operating	109,093			111,592			Operating	101,606			103,806
Financing	Financing	800			885			Financing	968			872
Total lease liabilities	Total lease liabilities	$	121,686		$	123,890		Total lease liabilities	$	113,738		$	115,781

Supplemental non-cash information:	Supplemental non-cash information:							Supplemental non-cash information:
Weighted-average remaining lease term (years) - operating leases	Weighted-average remaining lease term (years) - operating leases	11.4			11.6			Weighted-average remaining lease term (years) - operating leases	10.7			10.9
Weighted-average remaining lease term (years) - finance leases	Weighted-average remaining lease term (years) - finance leases	2.5			2.1			Weighted-average remaining lease term (years) - finance leases	2.7			2.6
Weighted-average discount rate - operating leases	Weighted-average discount rate - operating leases	5.3		%	5.3		%	Weighted-average discount rate - operating leases	5.3		%	5.3		%
Weighted-average discount rate - finance leases	Weighted-average discount rate - finance leases	3.5		%	4.7		%	Weighted-average discount rate - finance leases	4.0		%	3.7		%

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The table below summarizes the Company’s lease costs, cash payments, and operating lease liabilities arising from obtaining right-of-use assets under its operating and financing lease obligations:


		Three Months Ended March 31,				Three Months Ended March 31,
(in thousands)	(in thousands)	2022		2021			(in thousands)	2023		2022
Lease expense:	Lease expense:						Lease expense:
Operating lease expense	Operating lease expense	$	4,107	$	3,911		Operating lease expense	$	4,190	$	4,107
Finance lease expense:	Finance lease expense:						Finance lease expense:
Depreciation of right-of-use assets	Depreciation of right-of-use assets	397		327			Depreciation of right-of-use assets	258		397
Interest expense on lease liabilities	Interest expense on lease liabilities	30		32			Interest expense on lease liabilities	21		30
Total lease expense	Total lease expense	$	4,534	$	4,270		Total lease expense	$	4,469	$	4,534

Consolidated Statements of Cash Flows information:	Consolidated Statements of Cash Flows information:						Consolidated Statements of Cash Flows information:
Operating cash flows used for operating leases	Operating cash flows used for operating leases	$	4,153	$	3,619		Operating cash flows used for operating leases	$	4,294	$	4,153
Operating cash flows used for financing leases	Operating cash flows used for financing leases	30		32			Operating cash flows used for financing leases	21		30
Financing cash flows used for financing leases	Financing cash flows used for financing leases	521		334			Financing cash flows used for financing leases	270		521
Total cash paid for amounts included in the measurement of lease liabilities	Total cash paid for amounts included in the measurement of lease liabilities	$	4,704	$	3,985		Total cash paid for amounts included in the measurement of lease liabilities	$	4,585	$	4,704

Supplemental non-cash information:	Supplemental non-cash information:						Supplemental non-cash information:
Operating lease liabilities arising from obtaining right-of-use assets	Operating lease liabilities arising from obtaining right-of-use assets	$	498	$	2,231		Operating lease liabilities arising from obtaining right-of-use assets	$	797	$	498

The Company’s future minimum annual lease payments under operating and financing leases at March 31, ~~2022~~2023 are as follows:


(in thousands)	(in thousands)	Financing Leases		Operating Leases		(in thousands)	Financing Leases		Operating Leases
Remaining 2022		$	1,329	$	12,095
2023		870		15,159
Remaining 2023						Remaining 2023	$	841	$	12,000
2024	2024	329		13,911		2024	680		14,777
2025	2025	80		12,529		2025	365		13,029
2026	2026	26		12,306		2026	156		12,676
2027						2027	4		11,920
Thereafter	Thereafter	—		96,568		Thereafter	—		85,153
Total minimum lease payments	Total minimum lease payments	$	2,634	$	162,568	Total minimum lease payments	$	2,046	$	149,555
Less: amount representing interest	Less: amount representing interest	(84)		(43,432)		Less: amount representing interest	(107)		(37,756)
Present value of obligations under leases	Present value of obligations under leases	2,550		119,136		Present value of obligations under leases	1,939		111,799
Less: current portion	Less: current portion	(1,750)		(10,043)		Less: current portion	(971)		(10,193)
Long-term lease obligations	Long-term lease obligations	$	800	$	109,093	Long-term lease obligations	$	968	$	101,606

Executive Severance Plans

The Company has employment contracts with key executives and maintains severance plans that provide for the payment of severance and other benefits if such executives are terminated for reasons other than cause, as defined in those agreements and plans. Certain agreements call for payments that are based on historical compensation, and accordingly, the amount of the contractual commitment will change over time commensurate with the executive’s applicable earnings. At March 31, ~~2022,~~2023, future commitments for such key executives were approximately ~~$14.8~~$11.9 million. In certain circumstances, the agreements call for the acceleration of equity vesting. Those figures are not reflected in the above information.

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12. Contingencies

The Company is subject to potential liabilities under government regulations and various claims and legal actions that are pending or may be asserted from time-to-time. These matters arise in the ordinary course and conduct of the Company’s business and include, for example, commercial, intellectual property, environmental, securities and employment matters. The Company intends to continue to defend itself vigorously in such matters and when warranted, take legal action against others. Furthermore, the Company regularly assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in its financial statements.

An estimated loss contingency is accrued in the Company’s financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Based on the Company’s assessment, it has adequately accrued an amount for contingent liabilities currently in existence. The Company does not accrue amounts for liabilities that it does not believe are probable. Litigation is inherently unpredictable, and unfavorable resolutions could occur. As a result, assessing contingencies is highly subjective and requires judgment about future events. The amount of ultimate loss may exceed the Company’s current accruals, and it is possible that its cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements May Prove Inaccurate

This quarterly report on Form 10-Q, or Quarterly Report, including the following discussion and analysis, may contain forward-looking statements that involve risks, uncertainties, assumptions and other factors which, if they do not materialize or prove correct, could cause our results to differ from historical results or those expressed or implied by such forward-looking statements. In some cases, you can identify these forward-looking statements by words like “may”, “will”, “should”, “could”, “expect”, “plan”, “anticipate”, “believes”, “estimates”, “predicts”, “potential”, “intends”, or “continues” (or the negative of those words and other comparable words). Forward-looking statements include, but are not limited to, statements about:

•the proposed merger with Globus Medical, Inc., or Globus Medical;

•the value proposition of our products ~~services,~~ and procedural solutions;

•our intentions, beliefs and expectations regarding our net sales, expenses, operations and future financial performance;

•our operating results;

•our plans for future product developments and enhancements of existing ~~products;~~products and solutions;

•anticipated growth and trends in our business;

•third party reimbursement policies and practices;

•the timing of and our ability to maintain and obtain regulatory clearances or approvals;

•our belief that our cash, cash equivalents and investments will be sufficient to satisfy our anticipated obligations;

•the impact of global economic conditions and public health crises and epidemics, such as inflation and the COVID-19 pandemic, on our business and industry;

•our expectations regarding our customers and the adoption of our products and procedures;

•our beliefs and expectations regarding our market penetration and expansion efforts;

•our expectations regarding the benefits and integration of recently-acquired businesses and our ability to make future acquisitions and successfully integrate any such future-acquired businesses;

•our anticipated trends, product pricing pressure, competitive tactics and other challenges in the markets in which we operate; and

•our expectations and beliefs regarding and the impact of policy changes, investigations, claims and litigation.

These statements are not guarantees of future performance or events. Our actual results may differ materially from those discussed here. The potential risks and uncertainties that could cause actual results to differ materially include, but are not limited to those set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 and this Quarterly Report on Form 10-Q, and similar discussions in our other Securities and Exchange Commission, or the SEC, filings. We assume no obligation to update any forward-looking statements to reflect new information, future events or circumstances or otherwise, except as required by law.

This information should be read in conjunction with the ~~Unaudited~~unaudited Consolidated Financial Statements and the notes thereto included in Part I, Item 1 of this Quarterly Report and with Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, ~~2021~~2022 contained in our ~~2021~~2022 Annual Report on Form 10-K.

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Overview

We are a global medical technology company focused on developing, manufacturing, selling and providing procedural solutions for spine surgery, with a guiding purpose to transform surgery, advance care and change lives. We offer a comprehensive portfolio of procedurally integrated spine surgery solutions, including surgical access instruments, spinal implants, fixation systems, biologics, and enabling technologies, as well as systems and services for intraoperative ~~neuromonitoring, or IONM.~~neuromonitoring. In addition, we develop and sell magnetically adjustable implant systems for spine and specialized orthopedic procedures.

Since our incorporation in 1997, we have grown from a small developer of specialty spinal implants into a leading medical technology company delivering procedurally integrated solutions for spine surgery. A key driver of our growth has been our focus on innovative products and technologies that drive reproducible outcomes for patients, surgeons and providers. In 2003, we introduced the eXtreme Lateral Interbody Fusion procedure, or XLIF, a lateral access spine surgery technique that is less invasive than traditional, open surgical procedures and clinically proven to enable better patient outcomes. Building off the success of XLIF, we have continued to develop innovative less-invasive techniques and technologies for spine surgery, and we have broadened our portfolio of solutions for traditional, open surgical procedures. Our comprehensive portfolio of solutions can be utilized in procedures for the cervical, thoracic and lumbar spine, supporting surgical approaches from the anterior, including lateral, and posterior. Our solutions are used to treat degenerative conditions and for complex spinal surgery, including adult and pediatric deformities, as well as trauma and tumors.

Underlying our procedurally integrated solutions for spine surgery are innovative technologies designed to enable better clinical, financial, and operational outcomes, including:

•our differentiated surgical access instruments, including our integrated split-blade retractor system, designed to enable less-invasive surgical techniques by minimizing soft tissue disruption during spine surgery;

•our Advanced Materials Science portfolio of specialized spinal implants, designed to advance spinal fusion by enhancing the osseointegration and biomechanical properties of implant materials, including porous titanium and porous polyetheretherketone, or PEEK;

•our comprehensive fixation ~~system,~~systems, designed to facilitate the preservation and restoration of patient alignment, while addressing a vast array of spinal pathologies from an open or less-invasive approach across all spinal procedures;

•our cervical total disc replacement, or cTDR, technology, which complements our portfolio of products and services for cervical spinal fusion surgery and is designed to offer surgeons best-in-class capabilities across key performance functions—anatomic, physiologic motion, and radiologic design;

•our neuromonitoring systems, which use proprietary software-driven nerve detection and avoidance technology, and our intraoperative neuromonitoring, or IONM, services and support; and

•our Pulse platform, a software ecosystem that integrates multiple hardware technologies into a single, condensed footprint in the operating room, including: radiation reduction, imaging enhancement, rod bending, navigation, IONM, and spinal alignment tools.

In addition, we also design and sell expandable growing rod implant systems for the treatment of early-onset scoliosis that can be non-invasively lengthened following implantation with precise, incremental adjustments via an external remote controller using magnetic technology called MAGnetic External Control, or MAGEC. This technology is also the basis for our Precice line of products, which are designed to support complex orthopedic reconstruction, such as trauma and limb length discrepancy. Precice is an intramedullary device that, once implanted, utilizes the MAGEC technology to non-invasively lengthen the femur and tibia.

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We intend to continue development on a wide variety of innovation projects to advance our leadership position in less-invasive spine surgery, increase our product offerings and solutions for traditional spine surgery procedures, and further our enabling technologies portfolio. We expect to continue to invest in the Pulse platform to support our global commercialization plan for the technology and to build-out the platform to enable further improvement of the spine care pathway. Our goal is to use technology and data to make spine surgery more intelligent, and we are investing to develop and expand ~~its application offerings, including investments related~~the Pulse platform to include applications and technologies designed to improve pre-operative treatment selection and planning and post-operative workflow and analytics, as well as intra-operative surgical automation and robotics. In addition, we expect to continue to pursue business and technology acquisition targets and strategic relationships to identify opportunities to broaden our participation along the spine care ~~continuum.~~continuum, as well as opportunities outside of traditional spine. Top priorities include opportunities that complement our technology leadership position in spine, targeted geographic expansion, technology that makes procedures even safer, as well as opportunities ~~for surgical automation.~~which advance our strategy to make spine surgery more intelligent.

Proposed Merger with Globus Medical

~~Table~~On February 8, 2023, we entered into an Agreement and Plan of ~~Contents~~Merger, or the Merger Agreement, with Globus Medical and Zebra Merger Sub, Inc., a wholly owned subsidiary of Globus Medical, or Merger Sub. The Merger Agreement provides, among other things, that subject to the satisfaction or waiver of the conditions set forth therein, Merger Sub will merge with and into NuVasive, referred to as the Merger, with NuVasive surviving the Merger as a wholly owned subsidiary of Globus Medical.

On April 27, 2023, NuVasive and Globus Medical announced that the stockholders of each company had approved all proposals related to the Merger at each company’s respective special meeting of stockholders. Completion of the Merger is subject to the satisfaction of the remaining customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

For more information, see Note 1, Description of Business and Basis of Presentation, in the Notes to unaudited Consolidated Financial Statements included in this Quarterly Report.

Impact of COVID-19 and Global Macroeconomic Conditions on Our Business

The COVID-19 pandemic significantly impacted our business and results of operations during the years ~~ended December 31,~~ 2020 and 2021, as well as the three months ended March 31, 2022. Many government agencies, in conjunction with hospitals and healthcare systems have, to varying degrees, deferred, reduced, or suspended elective surgical procedures due to the COVID-19 pandemic. While certain spine surgeries are deemed essential and certain surgeries, like in cases of trauma, cannot be delayed, we have seenthrough 2022 and may continue to ~~see a significant reduction in procedural volumes as hospital systems and/or patients elect to defer spine surgery procedures.~~

~~Despite the~~negatively impact ~~COVID-19 has had on~~ our business, ~~we continue~~results of operations, financial condition and cash flows. Additionally, the COVID-19 pandemic and general macroeconomic conditions have led to ~~invest~~disruptions in ~~research~~the global supply chain. We have experienced challenges associated with material and ~~development, invest in~~component availability for certain product lines, longer shipping and delivery times for raw materials and components, constrained logistics capacity related to the movement of our ~~people, improve operating processes,~~products, availability of skilled labor and ~~take steps to position ourselves for long-term success.~~ increased costs of raw materials, components, labor, and freight and courier services. Our net sales and profitability from our foreign operations have also been negatively affected by the unfavorable foreign currency exchange impact of the strengthened U.S. dollar against a number of currencies.

During the three months ended March 31, ~~2022,~~2023, procedural volume rates for elective surgeries ~~steadily recovered~~increased in the U.S. and certain international regions compared to the same period in 2022 as ~~government restrictions eased and~~ hospital systems ~~resumed more elective surgical procedures. The~~continue to mitigate healthcare worker shortages and other supply chain disruptions. While many countries have removed or reduced the restrictions initially implemented in response to COVID-19, the pandemic continues to evolve, and its impact on our business will depend on several factors that are highly uncertain and unpredictable, including, the efficacy and adoption of vaccines and treatments, future resurgences of the virus and its variants, the imposition of ~~governmental~~government lockdowns, quarantine and physical distancing requirements, patient capacity at hospitals and healthcare systems, the duration and severity of healthcare worker shortages, and the willingness and ability of patients to seek care and treatment due to safety concerns or financial hardship. Additionally, due to the significant uncertainty that exists relative to the duration and overall impact of the macroeconomic factors discussed above, our future operating results may be negatively impacted. Further discussion of the potential impacts on our business from the COVID-19 pandemic isand global macroeconomic conditions provided under Item 1A – Risk Factors of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

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Net Sales and Operations

The majority of our net sales are derived from the sale of implants and fixation products, biologics, disposables and IONM services and we expect this trend to continue for the foreseeable future. Our implants and fixation products, biologics, and disposables are currently sold and shipped from our distribution and warehousing operations. We generally recognize net sales from implants and fixation products, biologics and disposables upon notice that our products have been used in a surgical procedure or upon shipment to a third-party customer who has assumed control of the products. Net sales from IONM services are recognized in the period the service is performed for the amount of payment we expect to receive. We make available surgical instrument sets and neuromonitoring systems to hospitals to facilitate surgeon access to the spine to perform restorative and fusion procedures using our implants and fixation products. We sell surgical instrument sets and our proprietary software-driven neuromonitoring systems, however this does not make up a material part of our business. While selling or leasing of capital equipment has not historically made up a material portion of our total net sales, selling and leasing of capital equipment ~~will likely~~is expected to continue to increase over time as a result of our commercialization of the Pulse ~~platform.~~platform in 2021.

A substantial portion of our operations are located in the U.S., and the majority of our net sales and cash generation have been made in the U.S. We sell our products in the U.S. through a sales force comprised primarily of directly employed and independent sales ~~representatives~~.representatives. Our sales force provides a delivery and consultative service to surgeon and hospital customers and is compensated based on sales and product placements in their territories. Sales force commissions are reflected in the selling, general and administrative operating expense line item within our Consolidated Statements of Operations. We continue to invest in international expansion with a focus on European, Asia-Pacific and Latin American markets. Our international sales force is comprised of directly-employed sales personnel, independent sales representatives, as well as exclusive and non-exclusive independent third-party distributors.

Results of Operations

Net Sales


	March 31,
(in thousands, except %)	2023		2022		$ Change		% Change
Three Months Ended
Net sales
Spinal hardware	$	234,300	$	220,796	$	13,504	6	%
Surgical support	73,411		69,966		3,445		5	%
Total net sales	$	307,711	$	290,762	$	16,949	6	%

March 31,
(in thousands, except %) 2022 2021 $ Change % Change
Three Months Ended
Net sales
Spinal hardware $ 220,796 $ 204,558 $ 16,238 8 %
Surgical support 69,966 66,691 3,275 5 %
Total net sales $ 290,762 $ 271,249 $ 19,513 7 %

Our spinal hardware product line offerings include our implants and fixation products. Our surgical support product line offerings include IONM services and disposables, ~~and~~ biologics, and our capital equipment, all of which are used to aid spine ~~surgery.~~

surger~~Table of~~ ~~Contents~~y.

We expect continued adoption of our innovative less-invasive procedures and deeper penetration into existing accounts and international markets as our sales force executes on our strategy of selling the full mix of our products and services. However, the continued consolidation and increased purchasing power of our hospital customers and group purchasing organizations, continued changes in the public and private insurance markets regarding reimbursement, and ongoing policy and legislative changes in the U.S. have created less predictability. Although the market for procedurally-integrated spine surgery solutions is expected to continue to grow over the long term, economic, political and regulatory influences are subjecting our industry to significant changes that may slow the growth rate of the spine surgery market. Additionally, the COVID-19 pandemic ~~has~~and global macroeconomic conditions have had and may continue to have, an adverse effect on our business. While procedural volume rates for elective surgeries did recover in the U.S. and certain international regions during the three months ended March 31, 2022, the COVID-19 pandemic continues to evolve and it is not possible to accurately predict the length or severity of the COVID-19 pandemic or the timing for a broad and sustained resumption of elective surgical procedures.

Net sales from our spinal hardware product line offerings increased ~~$16.2~~$13.5 million,, or 8%6%, during the three months ended March 31, ~~2022,~~2023, compared to the same period in ~~2021.~~2022. Product volume within spinal hardware increased our net sales by approximately ~~11%~~9% during the three months ended March 31, ~~2022~~,2023, compared to the same period in ~~2021~~, 2022, primarily due to ~~the steady rate of recovery of elective surgeries~~increased spine procedural volumes throughout the three months ended March 31, ~~2022.~~2023. There were unfavorable pricing changes of approximately 1% during the three months ended March 31, ~~2022~~,2023, compared to the same period in ~~2021. Foreign~~2022. Foreign currency fluctuations decreased our spinal hardware net sales by approximately 2% ~~for~~during the three months ended March 31, ~~2022~~,2023, compared to the same period in 2022.

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Net sales from our surgical support product line offerings increased ~~$3.3~~$3.4 million, or 5%, during the three months ended March 31, ~~2022,~~2023, compared to the same period in ~~2021.~~2022. Product and service volume within surgical support increased our net sales by approximately 7%6% during the three months ended March 31, ~~2022,~~2023, compared to the same period in ~~2021,~~2022, primarily due to ~~the steady rate of recovery of elective surgeries~~increased IONM service and surgical procedural volumes throughout the three months ended March 31, 2023. There was a de minimis pricing impacts during the three months ended March 31, 2023, compared to the same period in 2022. ~~There were unfavorable pricing changes of~~Foreign currency fluctuations decreased our surgical support net sales by approximately 1% during the three months ended March 31, ~~2022,~~2023, compared to the same period in ~~2021. Foreign currency fluctuations also decreased our surgical support net sales by approximately 1% for the three months ended March 31, 2022, compared to the same period in 2021.~~2022.

Cost of Sales, Excluding Below Amortization of Intangible Assets


		March 31,											March 31,
(in thousands, except %)	(in thousands, except %)	2021			2020			$ Change		% Change		(in thousands, except %)	2023			2022			$ Change		% Change
Three Months Ended	Three Months Ended											Three Months Ended
Cost of sales	Cost of sales	$	79,097		$	71,811		$	7,286	10	%	Cost of sales	$	86,370		$	79,097		$	7,273	9	%
% of total net sales	% of total net sales	27		%	26		%			1	%	% of total net sales	28		%	27		%			1	%

Cost of sales consists primarily of purchased goods, raw materials, labor and overhead associated with product manufacturing, inventory-related costs and royalty expenses, as well as the cost of providing IONM services, which includes personnel and physician oversight costs. We primarily procure and manufacture our products in the ~~United States,~~U.S., and accordingly, foreign currency fluctuations have not materially impacted our cost of sales.

Cost of sales increased $7.3 million, or ~~10%~~9%, during the three months ended March 31, ~~2022,~~2023, compared to the same period in ~~2021~~.2022. Cost of sales as a percentage of net sales for the three months ended March 31, ~~2022~~2023 increased by 1%, compared to the same period in ~~2021~~.2022. The increase in cost of sales for the three months ended March 31, ~~2022~~2023 is primarily associated with proportional higher net sales, compared to the prior year period.

Operating Expenses

(in thousands, except %) Three Months Ended
March 31, 2022
2022 2021 $ Change % Change
Selling, general and administrative $ 160,281 $ 145,954 $ 14,327 10 %
% of total net sales 55 % 54 %
Research and development 23,358 22,224 1,134 5 %
% of total net sales 8 % 8 %
Amortization of intangible assets 13,032 13,337 (305) (2 %)
Business transition costs 3,060 5,584 (2,524) (45 %)

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(in thousands, except %)	Three Months Ended March 31,
	2023			2022			$ Change		% Change
Selling, general and administrative	$	176,192		$	160,281		$	15,911	10	%
% of total net sales	57		%	55		%
Research and development	24,573			23,358			1,215		5	%
% of total net sales	8		%	8		%
Amortization of intangible assets	8,796			13,032			(4,236)		(33	%)
Business transition costs	4,614			3,060			1,554		51	%

Selling, General and Administrative

Selling, general and administrative expenses consist primarily of compensation costs, commissions and training costs for our employees engaged in sales, marketing and customer support functions. The expense also includes commissions to sales representatives, freight expenses, surgeon training costs, depreciation expense for property and equipment such as surgical instrument sets, and administrative expenses for both employees and third-party service providers.

Selling, general and administrative expenses increased by ~~$14.3~~$15.9 million, or 10%, during the three months ended March 31, ~~2022,~~2023, compared to the same period in ~~2021.~~2022. The increase during the three months ended March 31, 2023, compared to the same period in 2022, is primarily due to ~~an increase in compensation~~ increased sales commissions and depreciation costs ~~including commissions as a result of increased~~for surgical sets associated with higher net sales, ~~legal expenses associated with certain ongoing litigation matters,~~increased travel expenses coinciding with the easing of COVID-19 related restrictions, and ~~higher freight costs~~increased legal expenses associated with ~~increased net sales and~~certain ongoing litigation matters. During the three months ended March 31, 2023, we have continued to experience macroeconomic inflationary pressures ~~from higher fuel surcharges, compared to the same period in 2021.~~within our selling, general and administrative expenses.

Research and Development

Research and development expense consists primarily of product research and development, clinical trial and study costs, regulatory and clinical functions, and compensation and other employee related expenses. In the last several years, we have introduced numerous new products and product enhancements that have significantly expanded our technology platforms and our comprehensive product portfolio. We have also acquired complementary and strategic assets and technology, particularly in the area of spinal hardware products. We continue to invest in research and development programs related to our core product portfolio, as well as in our capital equipment.

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Research and development expense increased by ~~$1.1~~$1.2 million, or 5%, during the three months ended March 31, ~~2022,~~2023, compared to the same period in ~~2021.~~2022. The increase in spending for the period is primarily due to higher headcount-related costs and further development, enhancement and functionality of our current and future product offerings, including capital ~~equipment and the Simplify Cervical Disc acquired during the first quarter of 2021.~~equipment. Over the course of the ~~ongoing~~ COVID-19 pandemic, we have stayed committed to our investment in research and development in order to further advance our leadership position in spine surgery and our enabling technologies portfolio.

Amortization of Intangible Assets

Amortization of intangible assets relates to the amortization of finite-lived intangible assets acquired. Amortization expense decreased by $4.2 million, or 33% in 2023 compared to 2022 primarily due to the completion of amortization associated with certain acquisition-related intangible assets during 2022 and the three months ended March 31, 2023.

Business Transition Costs

We incur certain costs related to acquisition, integration and business transition activities, which include severance, relocation, consulting, leasehold exit costs, ~~third-party~~costs related to the proposed merger ~~and~~with Globus Medical, third-party acquisition costs, contingent consideration fair value adjustments and other costs directly associated with such activities. Contingent consideration is accrued based on the fair value of the expected payment, and such accruals are subject to increase or decrease based on the assessment of the likelihood and amount of contingent consideration achievement resulting in ~~payment~~. payment. If an accrual for contingent consideration decreases during a particular period, it results in a reduction of costs during such ~~period.~~period, which we record as a benefit.

During the three months ended March 31, 2023, we recorded $4.6 million of costs related to acquisition, integration and business transition activities, which includes $7.4 million related to costs incurred associated with the proposed merger with Globus Medical, offset by a $(4.8) million benefit related to fair value adjustments on contingent consideration liabilities associated with our 2022, 2021, 2018 and 2016 acquisitions.

During the three months ended March 31, 2022, we recorded $3.1 million of costs related to acquisition, integration and business transition activities, which included de minimis fair value adjustments on contingent consideration liabilities associated with our 2021, 2017 and 2016 acquisitions.

During the three months ended March 31, 2021, we recorded $5.6 million of costs related to acquisition, integration and business transition activities, which included $0.9 million of fair value adjustments on contingent consideration liabilities associated with our 2017 and 2016 acquisitions. We incurred $3.9 million of costs associated with the acquisition of Simplify Medical in the first quarter of 2021.

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Interest and Other (Expense) Income, ~~(Expense),~~ Net

(in thousands, except %) March 31,
2022 2021 $ Change % Change
Three Months Ended
Interest income $ 43 $ 87 $ (44) (51) %
Interest expense (4,379) (8,030) 3,651 (45) %
Other income (expense), net 16,244 (12,526) 28,770 (230) %
Total interest and other income (expense), net $ 11,908 $ (20,469) $ 32,377 (158) %


(in thousands, except %)	March 31,
	2023		2022		$ Change		% Change
Three Months Ended
Interest income	$	1,828	$	43	$	1,785	4,151	%
Interest expense	(4,378)		(4,379)		1		—	%
Other (expense) income, net	(4,436)		16,244		(20,680)		(127)	%
Total interest and other (expense) income, net	$	(6,986)	$	11,908	$	(18,894)	(159)	%

Total interest and other (expense) income, ~~(expense),~~ net for the periods presented included gains and losses from strategic investments and net foreign currency exchange gains and losses.

Total interest and other (expense) income, ~~(expense),~~ net was $(7.0) million of expense during the three months ended March 31, 2023, as compared to $11.9 million of income during the same period in 2022. Interest income increased by ~~$32.4~~$1.8 million, during the three months ended March 31, ~~2022~~2023 as compared to the same period in ~~2021. Interest expense decreased by $3.7 million period over period~~2022, primarily due to ~~the Senior Convertible Notes due 2021 which were settled in March 2021.~~higher interest amounts earned on our money market funds. Other (expense) income, ~~(expense),~~ net increased by ~~$28.8~~$(20.7) million of expense during the three months ended March 31, 2023, as compared to the same period in 2022. The change in other (expense) income, net is primarily due to net foreign currency exchange losses of $(4.8) million during the three months ended March 31, ~~2022,~~2023, as compared to ~~the same period in 2021, due primarily to~~ net ~~unrealized~~ foreign currency exchange gains of $16.0 million during the three months ended March 31, ~~2022, as compared to $12.5 million~~2022.

Table of net unrealized foreign currency exchange losses in the same period in 2021. We established intercompany receivables and payables and contingent consideration liabilities in connection with the acquisition of Simplify Medical, which are subject to foreign currency remeasurement.Contents

Income Tax ~~(Expense) Benefit~~

(in thousands, except %) March 31,
2022 2021
Three Months Ended
Income tax (expense) benefit $ (4,641) $ 620
Effective income tax rate 20 % (8) %
Expense


(in thousands, except %)	March 31,
	2023			2022
Three Months Ended
Income tax expense	$	(1,193)		$	(4,641)
Effective income tax rate	663		%	20		%

The provision for income tax expense ~~as a percentage of pre-tax income~~ was 663% for the three months ended March 31, 2023, compared with 20% for the three months ended March 31, ~~2022, compared with a benefit of 8% on pre-tax losses for the three months ended March 31, 2021.~~2022. The increased rate during the three months ended March 31, ~~2022~~2023, was primarily due to the size of discrete items of tax expense related to shortfalls on stock-based compensation relative to year-to-date pretax income and increased valuation allowances, offset by increased tax credits, reduced foreign income ~~inclusion, offset by reduced valuation allowances, reduced nondeductible acquisition costs,~~inclusions and reduced limitations on ~~officer's compensation deductions, and increased tax credits.~~officer’s compensation.

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Liquidity, Cash Flows and Capital Resources

Liquidity and Capital Resources

Our principal sources of liquidity are our existing cash and cash equivalents, ~~and marketable securities,~~ cash generated from operations, proceeds from our convertible notes issuances, and access to our revolving line of credit. We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, which include impacts from the COVID-19 pandemic and general macroeconomic conditions, working capital requirements and capital deployment decisions. We have historically invested our cash primarily in U.S. treasuries and government agencies, corporate debt, and money market funds. Certain of these investments are subject to general credit, liquidity and other market risks. The general condition of the financial markets and the economy may increase those risks and may affect the value and liquidity of investments and restrict our ability to access the capital markets. Additionally, the COVID-19 pandemic and general macroeconomic conditions have led to disruptions in the global supply chain. While we have largely been able to mitigate the impact, we have experienced challenges associated with material and component availability for certain product lines, longer shipping and delivery times for raw materials and components, constrained logistics capacity related to the movement of our products, availability of skilled labor and increased costs of raw materials, components, labor, and freight and courier services.

Our future capital requirements will depend on many factors including our growth rate in net sales, the timing and extent of spending to support development efforts, the expansion of selling, general and administrative activities, the timing of introductions of new products and enhancements to existing products, successful insourcing of our manufacturing process, the continuing market acceptance of our products, the expenditures associated with possible future acquisitions or other business combination transactions, the outcome of current and future litigation, international expansions of our business, and impacts from the COVID-19 ~~pandemic.~~pandemic and global macroeconomic factors. We expect our cash flows from operations to continue to fund the ongoing core business. As borrowings become due, we may be required to access the capital markets or draw upon our line of credit for additional funding. We intend to draw upon our senior credit facility and use available cash on hand to repay the Senior Convertible Notes due June 2023. As we assess inorganic growth strategies, we may need to supplement our internally generated cash flow with outside sources. As part of our liquidity strategy, we will continue to monitor our current level of earnings and cash flow generation as well as our ability to secure additional credit facilities, term loans, or other similar arrangements and access the capital markets in light of those earning levels and general financial market conditions.

A substantial portion of our operations are located in the U.S., and the majority of our net sales and cash generation have been made in the U.S. ~~Accordingly, we do not have material net cash flow exposures to foreign currency rate fluctuations from operations.~~ However, as our business in markets outside of the U.S. continues to increase, ~~we will be exposed~~our exposure to foreign currency exchange risk related to our foreign ~~operations.~~operations will increase. Fluctuations in the rate of exchange between the U.S. dollar and foreign currencies, primarily in the ~~pound sterling, the euro, the~~ Australian dollar, the Brazilian real, the British pound sterling, the Colombian peso, the euro, the Japanese yen and the Singapore dollar, has and ~~the yen,~~ could continue to adversely affect our financial results, including our net sales, growth rates in net sales, gross margins, gains and losses as well as assets and liabilities. In particular, as a result of our acquisition of Simplify Medical, we have additional exposure to fluctuations in the Australian dollar. We established intercompany receivables and payables in Australian dollars in connection with the acquisition of Simplify Medical, a proprietary limited company registered in Australia. Additionally, we have future contingent consideration liabilities denominated in U.S. dollars, in connection with the acquisition of Simplify Medical, which are the financial obligation of NuVasive (AUST/NZ) Pty Limited, an Australian dollar denominated company. Both the intercompany receivables and payables and contingent consideration liabilities are subject to foreign currency remeasurement. While we enter into forward currency contracts for certain currencies to partially offset the impact from fluctuations of the foreign currency rates on our third-party and short-term intercompany receivables and payables between our domestic and international operations, we have not entered into hedges with respect to the Australian dollar. In addition, we currently do not hedge future forecasted transactions but will continue to assess whether that strategy is appropriate. As of March 31, ~~2022~~,2023, the cash balance held by our foreign subsidiaries with currencies other than the U.S. dollar was approximately ~~$49.5~~ $55.7 million and it is our intention to indefinitely reinvest all of our current foreign earnings to increase working capital within our international business and to expand our existing operations outside the U.S. As of March 31, ~~2022~~,2023, our account receivable balance held by our foreign subsidiaries with currencies other than the U.S. dollar was approximately ~~$62.4~~$69.4 million. We have operations in markets in which there is governmental financial instability which could impact funds that flow into the medical reimbursement system. In addition, loss of financial stability within these markets could lead to delays in reimbursement or inability to remit payment due to currency controls. Specifically, we have operations and/or sales in Puerto Rico, Brazil and Argentina. We do not have any material financial exposure to one customer or one country that would significantly hinder our liquidity.

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Under the terms of the Merger Agreement with Globus Medical, we have agreed to various covenants and agreements, including, among others, agreements to use commercially reasonable efforts to conduct our business in the ordinary course during the period between the execution of the Merger Agreement and the closing of the Merger. Subject to certain exceptions, we may not take, commit or agree to take certain actions without Globus Medical’s consent, including, but not limited to, making material acquisitions, disposing of material assets, making capital expenditures in excess of specified amounts, issuing additional capital stock or other equity securities, or incurring additional indebtedness (subject to certain exceptions). We do not believe these restrictions will prevent us from meeting our ongoing operating expenses, working capital needs or capital expenditure requirements.

We are currently, and in the future could be, involved in legal actions and investigations arising out of the normal course of our business. Due to the inherent uncertainties associated with pending legal actions and investigations, we cannot predict the outcome, and, with respect to certain pending litigation or claims where no liability has been accrued, to make a meaningful estimate of the reasonably possible loss or range of loss that could result from an unfavorable outcome, other than those matters disclosed in this Quarterly Report. We have no material accruals for pending litigation or claims that are not disclosed in our ~~Unaudited~~unaudited Consolidated Financial Statements. It is reasonably possible, however, that an unfavorable outcome that exceeds our accrual estimate for a particular legal proceeding or investigation could have a material adverse effect on our liquidity and access to capital resources. Additionally, it is possible that in connection with a legal proceeding or investigation we are required to pay fees and expenses of the other party or set aside funds in an escrow or purchase a performance bond, regardless of our assessment of the probability of a loss. These requirements to pay fees and expenses or escrow funding in connection with a legal proceeding or investigation could have an adverse impact on our liquidity or affect our access to additional capital resources. We have disclosed all material accruals for pending litigation or investigations in Note 12, Contingencies, in the Notes to ~~Unaudited~~unaudited Consolidated Financial Statements included in this Quarterly Report.

On September 12, 2016, we completed an acquisition of an imaging software and technology platform known as Lessray. In connection with the acquisition, we recorded a purchase accounting fair value estimate of $34.1 million for contingent consideration liabilities related to the achievement of certain regulatory and commercial milestones. In January 2018, we paid $9.0 million of the outstanding contingent consideration liabilities for the achievement of a commercial milestone. In July 2018, we paid $10.0 million of the outstanding contingent consideration liabilities for the achievement of a regulatory approval milestone. WeAs of March 31, 2023, we anticipate the remaining sales-based milestones will become payable ~~at varying times~~ by ~~2024.~~2024 but this date is subject to change based on the achievement of those commercial milestones.

On September 7, 2017, we completed an acquisition of a medical device company that developed interbody implants for spinal fusion using patented porous PEEK technology. In connection with the acquisition, we recorded a purchase accounting fair value estimate of $31.4 million for contingent consideration liabilities related to the achievement of certain manufacturing and commercial milestones. In May 2020, we paid $7.5 million toward the successful achievement of a milestone. In March 2022, we paid $7.5 million toward the successful achievement of a second milestone. WeAs of March 31, 2023, there are two remaining milestones, and we anticipate the ~~remaining milestones~~next milestone will become payable ~~at varying times between~~in 2023 ~~and 2027 but~~with the final milestone anticipated no earlier than 2027. These dates are subject to change based on the achievement of those manufacturing and commercial milestones.

On February 24, 2021, we completed the acquisition of Simplify Medical, a developer of cervical disc technology for cTDRprocedures. In connection with the acquisition, we recorded a purchase accounting fair value estimate of $103.4 million for contingent consideration liabilities related to the achievement of milestones related to regulatory approval and net sales from products incorporating the Simplify Medical cervical disc technology. On April 1, 2021, the Simplify Cervical Disc received approval from the Food and Drug Administration, or FDA, for two-level cervical total disc replacement, resulting in the achievement of the regulatory milestone. We made a payment of $45.8 million on April 20, 2021 for the regulatory milestone using available cash. Additional milestone payments, which are uncapped and contingent upon net sales from products incorporating the Simplify Medical cervical disc technology, ~~will become~~are payable in the calendar years 2023, 2024 and ~~2025,~~2025. The first net sales milestone payment in the amount of $56.5 million was paid in March 2023.

On December 6, 2022, we completed the acquisition of certain intellectual property and other assets from a developer of implantable sensor technology for orthopedic procedures. In connection with the ~~first payment anticipated~~acquisition, we recorded a purchase accounting fair value estimate of $5.5 million for contingent consideration liabilities related to ~~be made during~~ the ~~first quarter~~successful achievement of ~~2023.~~development, regulatory and commercial milestones. We anticipate the milestones will become payable between 2024 and 2028. These dates are subject to change based on the achievement of those milestones.

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Cash and cash equivalents ~~and short-term investments~~ were ~~$205.3~~$181.2 million and ~~$246.1~~$248.7 million at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. While the efforts to contain and manage the spread and impact of COVID-19 have created significant disruptions to the healthcare system and the global economy, as of the filing date of this report, we believe our existing cash and cash equivalents, ~~short-term investments,~~ projected future cash flows from operations and access to external financing sources are sufficient to satisfy our current and reasonably anticipated requirements for funds to conduct our operations in the ordinary course of our business and pay our obligation as they become due for the next twelve months. Additionally, we have varying needs for cash in connection with our Senior Convertible Notes, ~~and also~~of which $450 million of Senior Convertible Notes are due June 2023, as ~~a result of~~well as for certain acquisition-related obligations and contingent consideration achievements. 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. Although we have no cash borrowings under our existing revolving senior credit facility as of the date of this report, we expect to use our cash resources or cash borrowings under our senior credit facility to support our business within the context of prevailing market and economic conditions, which, given the continued unpredictability of the COVID-19 pandemic and global macroeconomic conditions, could rapidly and materially deteriorate or otherwise change. During this time, we may seek other sources of liquidity through capital market or bank loan transactions to support our business needs. In addition, we may seek to further adjust or amend the terms of and/or expand the capacity of our existing senior credit facility, or enter into additional credit facilities, term loans, or other similar arrangements. However, with ~~the~~ continued uncertainty surrounding the COVID-19 pandemic and the macroeconomic conditions discussed above, our ability to engage in such transactions may be constrained by volatile financial market conditions, unfavorable lending terms, reduced investor and/or lender interest or capacity, as well as our liquidity, leverage, and general creditworthiness and we can provide no assurance as to successfully completing such transactions. Furthermore, our ability to borrow under our existing revolving senior credit facility is subject to remaining in compliance with underlying financial covenants which may be difficult to satisfy if our business experiences additional disruptions as a result of the COVID-19 ~~pandemic.~~pandemic or global macroeconomic conditions. Further discussion of the potential impacts on our business from the COVID-19 pandemic and global macroeconomics conditions is provided under Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

On January 1, 2022, a provision of the Tax Cuts and Jobs Act of 2017 went into effect which eliminates the option to deduct research and development expenditures in the year incurred and requires taxpayers to capitalize and amortize domestic expenditures over five years and foreign expenditures over fifteen years. Although Congress is considering legislation that would defer the amortization requirement to later years, it is uncertain whether the provision will be repealed or otherwise modified. IfAs of March 31, 2023, there has been no ~~new~~ legislation is passed to repeal or modify the provision. This provision ~~is expected to~~has adversely ~~impact~~impacted cash flows from operations ~~beginning~~during 2022 and for the three months ended March 31, 2023, and is expected to continue to adversely impact future cash flows from operations unless the provision is repealed or modified.

As of February 2023, the Internal Revenue Service is offering relief to certain tax filers in ~~2022.~~Federal Emergency Management Agency designated disaster areas related to severe winter storms. As our San Diego corporate office is located in one of these designated areas, we are eligible to defer certain tax payments due prior to October 16, 2023.We have elected to defer the extension payment for our 2022 U.S. federal income taxes, as well as our quarterly estimated U.S. federal income tax payment for first quarter, and we intend to defer future quarterly estimated U.S. federal income tax payments due prior to October 16, 2023, until October 16, 2023.

The decrease in liquidity during the three months ended March 31, ~~2022~~2023 of ~~$40.8~~$67.5 million was primarily driven by ~~timing associated with our operating cash flows, $33.2~~$56.5 million in cash outflows for the first net sales milestone payment related to the Simplify Medical acquisition and $35.1 million in cash outflows for purchases of property and equipment, ~~as well as $7.5 million for the successful achievement of the commercial milestone related to the September 2017 acquisition.~~offset by operating cash flows. At March 31, ~~2022,~~2023, we had cash totaling ~~$1.5~~$1.5 million in restricted accounts which is not available to us to meet any ongoing capital requirements if and when needed.

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Cash Flows

The following table summarizes our unaudited Consolidated Statements of Cash Flows:


(in thousands, except %)	(in thousands, except %)	Three Months Ended March 31, 2022				2021 to 2022				(in thousands, except %)	Three Months Ended March 31,				2022 to 2023
		2022		2021		$ Change		% Change			2023		2022		$ Change		% Change
Net cash provided by operating activities	Net cash provided by operating activities	$	6,539	$	31,639	$	(25,100)	(79)	%	Net cash provided by operating activities	$	1,970	$	6,539	$	(4,569)	(70)	%
Net cash used in investing activities	Net cash used in investing activities	(34,170)		(2,655)		(31,515)		1187	%	Net cash used in investing activities	(35,148)		(34,170)		(978)		3	%
Net cash used in financing activities	Net cash used in financing activities	(12,705)		(649,825)		637,120		(98)	%	Net cash used in financing activities	(34,902)		(12,705)		(22,197)		175	%
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(443)		(2,171)		1,728		(80)	%	Effect of exchange rate changes on cash	616		(443)		1,059		(239)	%
Decrease in cash, cash equivalents and restricted cash	Decrease in cash, cash equivalents and restricted cash	$	(40,779)	$	(623,012)	$	582,233	(93)	%	Decrease in cash, cash equivalents and restricted cash	$	(67,464)	$	(40,779)	$	(26,685)	65	%

Cash Flows from Operating Activities

Cash provided by operating activities was ~~$6.5~~$2.0 million for the three months ended March 31, ~~2022~~,2023, compared to ~~$31.6~~$6.5 million for the same period in ~~2021.~~2022. The ~~$25.1~~$4.6 million decrease in cash provided by operating activities was primarily due to the payment of $56.5 million for the first net sales milestone related to the Simplify Medical acquisition, of which $25.5 million was reflected within our operating activities, and the timing of spending for inventory purchases. This decrease was partially offset by the timing of collections and payments associated with our accounts receivable and accounts payable and accrued liabilities ~~as well as an increase in payments for compensation related accruals~~ during the three months ended March 31, ~~2022,~~2023, compared to the same period in ~~2021.~~2022.

Cash Flows from Investing Activities

Cash used in investing activities was ~~$34.2~~$35.1 million for the three months ended March 31, ~~2022~~,2023, compared to ~~$2.7~~$34.2 million ~~used~~ for the same period in ~~2021. The $31.5 million increase in~~2022. In both periods, cash used in investing activities was ~~due~~primarily related to ~~an increase of $8.2 million for~~ purchases of property and ~~equipment. Additionally, during the first quarter of 2021, we received~~ ~~proceeds of $173.0 million from the sales and maturities of marketable securities, of which $149.4 million net, was used to acquire Simplify Medical.~~equipment.

Cash Flows from Financing Activities

Cash used in financing activities was ~~$12.7~~$34.9 million for the three months ended March 31, ~~2022~~,2023, compared to ~~$649.8~~$12.7 million ~~used in financing activities~~ for the same period in ~~2021.~~2022. The ~~$637.1~~$22.2 million ~~decrease~~increase in cash used in financing activities was primarily due to the ~~$649.4~~payment of $56.5 million for the first net sales milestone payment related to ~~settle~~the Simplify Medical acquisition, of which $31.7 million was reflected within our ~~Senior Convertible Notes due 2021 during~~financing activities. This amount was offset by the~~three~~ ~~months ended March 31, 2021. Additionally, during the three months ended~~ ~~March 31, 2022, we made a~~ $7.5 million payment relating to ~~contingent consideration,~~a milestone payment related to our 2017 acquisition, of which $6.8 million is reflected within our financing activities, ~~with~~and the remainder allocated to our operating ~~activities.~~activities during the three months ended March 31, 2022.

Treasury stock purchases related to equity award vesting totaled ~~$5.3~~$3.0 million during the three months ended March 31, ~~2022~~.2023. We use net share settlement on stock issuances, which results in cash tax payments. Net share settlement is generally used in lieu of cash payments by employees for minimum tax withholding for equity awards. The net share settlement is accounted for as a treasury share repurchase transaction, with the cost of any deemed repurchased shares included in treasury stock and reported as a reduction in total equity at the time of settlement. Additionally, net share settlement for tax withholding requires us to fund a significant amount of cash for certain tax payment obligations from time-to-time with respect to the employee tax obligations for vested equity awards. We anticipate using cash generated from operating activities to fund such ~~payments~~.payments.

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Senior Convertible Notes

1.00% Senior Convertible Notes due 2023

In June 2020, we issued $450.0 million principal amount of unsecured senior convertible notes with a stated interest rate of 1.00% and a maturity date of June 1, 2023, which we refer to as the 2023 Notes. The net proceeds from the offering, after deducting initial purchasers’ discounts and costs directly related to the offering, were approximately $436.7 million. Interest on the 2023 Notes began accruing upon issuance and is payable semi-annually. ~~We may~~The 2023 Notes permit us to settle conversions of the 2023 Notes in cash, stock, or a combination thereof, solely at our ~~discretion. It is our current intent~~discretion, and ~~policy~~we have elected to settle all conversions ~~through combination settlement, which involves satisfying~~in cash. Accordingly, we will satisfy the principal amount outstanding ~~with cash~~ and any note conversion value over the principal amount ~~in shares of our common stock.~~with cash. We may not redeem the 2023 Notes prior to the maturity date. No principal payments are due on the 2023 Notes prior to maturity. Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the 2023 Notes do not contain any financial covenants and do not restrict us from conducting significant restructurings, paying dividends or issuing or repurchasing any of our other securities. AsPrior to the close of ~~March 31, 2022, we are unaware of any current events or market conditions that would allow holders to convert~~business on the business day immediately preceding February 1, 2023, the 2023 ~~Notes.~~Notes were convertible at the option of holders only upon the satisfaction of specified conditions and during certain periods. On or after February 1, 2023, until the close of business on the second scheduled trading day immediately preceding June 1, 2023, holders may convert their 2023 Notes at any time, regardless of these conditions. The 2023 Notes are included within current liabilities in the unaudited Consolidated Balance Sheets.

In connection with the sale of the 2023 Notes, we entered into transactions for convertible notes hedge, which we refer to as the 2023 Hedge, and warrants, which we refer to as the 2023 Warrants. The 2023 Hedge was entered into with certain dealers, which included affiliates of certain of the initial purchasers of the 2023 Notes and other financial institutions, which we refer to as the 2023 Counterparties, entitling us to purchase up to 5,345,010 shares of our own common stock at an initial price of $84.19 per share, each of which is subject to adjustment. The cost of the 2023 Hedge was $69.5 million. The 2023 Hedge will expire on the second scheduled trading day immediately preceding June 1, 2023. The 2023 Hedge is expected to reduce the potential equity dilution upon conversion of the 2023 Notes if the daily volume-weighted average price per share of our common stock exceeds the strike price of the 2023 Hedge. Our assumed exercise of the 2023 Hedge 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.

In addition, we sold the 2023 Warrants to the 2023 Counterparties to acquire up to 5,345,010 common shares of our stock. The 2023 Warrants will expire on various dates from September 2023 through November 2023 and may be settled in net shares or cash, subject to certain conditions. It is our current intent and policy to settle all conversions in shares of our common stock. We received $46.8 million in cash proceeds from the sale of the 2023 Warrants. The 2023 Warrants 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 exceeds the strike price of the 2023 Warrants, which is $104.84 per share.

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0.375% Senior Convertible Notes due 2025

In March 2020, we issued $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, which we refer to as the 2025 Notes. The net proceeds from the offering, after deducting initial purchasers’ discounts and costs directly related to the offering, were approximately $437.0 million. Interest on the 2025 Notes began accruing upon issuance and is payable semi-annually. The 2025 Notes may be settled in cash, stock, or a combination thereof, solely at our discretion. It is our current intent and policy to settle all conversions through combination settlement, which involves satisfying the principal amount outstanding with cash and any note conversion value over the principal amount in shares of our common stock. 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.

We may not redeem the 2025 Notes prior to March 20, 2023. We may redeem the 2025 Notes, at our option, in whole or in part, on or after March 20, 2023 until the close of business on the business day immediately preceding September 15, 2024, if the last reported sale price of our 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 we deliver 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 us from conducting significant restructurings, paying dividends or issuing or repurchasing any of our other securities. As

Table of Contents~~March 31, 2022, we are unaware of any current events or market conditions that would allow holders to convert the 2025 Notes.~~

In connection with the sale of the 2025 Notes, we entered into transactions for convertible notes hedge, which we refer to as the 2025 Hedge, and warrants, which we refer to as the 2025 Warrants. The 2025 Hedge was entered into with certain dealers, which included affiliates of certain of the initial purchasers of the 2025 Notes and other financial institutions, which we refer to as the 2025 Counterparties, entitling us to purchase up to 4,823,910 shares of our own common stock at an initial stock price of $93.29 per share, each of which is subject to adjustment. The cost of the 2025 Hedge was $78.3 million. The 2025 Hedge will expire on the second scheduled trading day immediately preceding March 15, 2025. The 2025 Hedge is expected to reduce the potential equity dilution upon conversion of the 2025 Notes if the daily volume-weighted average price per share of our common stock exceeds the strike price of the 2025 Hedge. Our assumed exercise of the 2025 Hedge 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.

In addition, we sold the 2025 Warrants to the 2025 Counterparties to acquire up to 4,823,910 common shares of our stock. The 2025 Warrants will expire on various dates from June 2025 through October 2025 and may be settled in net shares or cash, subject to certain conditions. It is our current intent and policy to settle all conversions in shares of our common stock. We received $47.1 million in cash proceeds from the sale of the 2025 Warrants. The 2025 Warrants 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 exceeds the strike price of the 2025 Warrants, which is $127.84 per share.

Revolving Senior Credit Facility

In February 2020, we entered into a Second Amended and Restated Credit Agreement, or the 2020 Credit Agreement, for a revolving senior credit facility, referred to as the 2020 Facility, which replaced the previous Amended and Restated Credit Agreement we had entered into in April 2017. The 2020 Credit Agreement was ~~further~~ amended in May 2020 to, among other things, provide additional flexibility in determining the financial covenant leverage ratios for the second and third fiscal quarters of 2020 and to adjust certain margin and benchmark rates used to determine interest under the 2020 Facility. The 2020 Credit Agreement was further amended in May 2023 to replace the LIBOR-based rates with a SOFR-based rate (including a customary spread adjustment) and other rates for “Alternate Currencies” including, Australian dollars (BBSY), British pound sterling (SONIA), Euros (EURIBOR) and Japanese yen (TIBOR) and adjusts certain other provisions to reflect current documentation standards and other agreed modifications. The 2020 Credit Agreement provides for secured revolving loans, multicurrency loan options and letters of credit in an aggregate amount of up to $550.0 million. We did not carry any outstanding revolving loans under the 2020 Facility as of March 31, 2023 and December 31, ~~2021 and~~ ~~March 31, 2022~~.2022.

Any borrowings under the 2020 Facility are intended to be used to provide financing for working capital and other general corporate purposes, including potential mergers and acquisitions and to refinance indebtedness. Borrowings under the 2020 Facility bear interest, at our option, at a rate equal to an applicable margin plus: (a) the applicable Eurocurrency Rate (as defined in the 2020 Credit Agreement), or (b) a base rate determined by reference to the highest of (1) the federal funds effective rate plus 0.50%, (2) the Bank of America prime rate, and (3) the Eurocurrency Rate ~~for an interest period of one month~~ plus 1.00%. The margin for the 2020 Facility ranges, based on our consolidated total net leverage ratio, from 0.50% to 1.25% in the case of base rate loans and from 1.50% to 2.25% in the case of Eurocurrency Rate loans. The 2020 Facility includes an unused line fee ranging, based on our consolidated total net leverage ratio, from 0.35% to 0.50% per annum on the revolving commitment.

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The 2020 Credit Agreement contains affirmative, negative, permitted acquisition and financial covenants, and events of default customary for financings of this type. The financial covenants require us to maintain a consolidated interest coverage ratio and certain consolidated leverage ratios, which are measured on a quarterly basis. The 2020 Facility grants the lenders preferred first priority liens and security interests in capital stock, intercompany debt and all of our present and future property and assets including each guarantor. As of March 31, ~~2022~~,2023, we are in compliance with the 2020 Credit Agreement covenants.

See Note 6,5, Indebtedness, in the Notes to ~~Unaudited~~unaudited Consolidated Financial Statements included in this Quarterly Report for more information about the terms of the 2023 Notes, the 2023 Hedge, the 2023 Warrants, the 2025 Notes, the 2025 Hedge, the 2025 Warrants and the 2020 Credit Agreement.

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Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our ~~Unaudited~~unaudited Consolidated Financial Statements, which have been prepared in accordance with generally accepted accounting principles in the ~~United States.~~U.S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, net sales and expenses. On an ongoing basis, we evaluate our estimates including those related to credit losses, inventories, valuation of goodwill, intangibles, other long-term assets, stock-based compensation, income taxes, and legal proceedings. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other sources. Actual results may differ from these estimates. Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 and there have been no material changes during the three months ended March 31, ~~2022.~~2023.

Off-Balance Sheet Arrangements

As of March 31, ~~2022,~~2023, we did not have any off-balance sheet arrangements.

Contractual Obligations and Commitments

As of March 31, ~~2022,~~2023, there were no material changes outside of the ordinary course of business, in our outstanding contractual obligations from those disclosed within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Sensitivity and Risk

Our exposure to interest rate risk at March 31, 2023 is related to our investment portfolio which consists largely of money market funds 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. Fixed rate investments and borrowings may have their fair market value adversely impacted from changes in interest rates. At March 31, 2023, we do not hold any material asset-backed investment securities and as of March 31, 2023, we did not realize any losses related to asset-backed investment securities. Based upon our overall interest rate exposure as of March 31, 2023, a change of 10 percent in interest rates, assuming the amount of our investment portfolio and overall economic environment remains constant, would not have a material effect on interest income.

The primary objective of our investment activities is to preserve the principal while at the same time maximizing yields without significantly increasing the risk. To achieve this objective, we maintain our portfolio of cash equivalents and investments in instruments that meet high credit quality standards, as specified in our investment policy. None of our investments are held for trading purposes. Our policy also limits the amount of credit exposure to any one issue, issuer and type of instrument.

As of March 31, ~~2022, there~~2023, we only held investments in securities of a short-term nature classified as cash equivalents. During the periods presented, we did not hold any investments that were in a significant unrealized loss position and no impairment charges were recorded. Realized gains and losses related to these investments were immaterial during the periods presented. Interest income of $1.8 million was recognized during the three months ended March 31, 2023.

Market Price Sensitive Instruments

In order to reduce the potential equity dilution associated with our convertible notes, we entered into the 2023 Hedge and 2025 Hedge in connection with the issuances of 2023 Notes and 2025 Notes, respectively, entitling us to purchase our common stock. Upon conversion of our convertible notes, the 2023 Hedge and 2025 Hedge 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. We also entered into warrant transactions with the counterparties of the 2023 Hedge and 2025 Hedge entitling them to acquire shares of our common stock. 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. See Note 5, Indebtedness, in the Notes to unaudited Consolidated Financial Statements included in this Quarterly Report for further discussion.

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Foreign Currency Exchange Risk

A substantial portion of our operations are located in the U.S., and the majority of our sales since inception have been made in the U.S. dollars. However, as our business in markets outside of the U.S. continues to increase, our exposure to foreign currency exchange risk related to our foreign operations will continue to grow. Fluctuations in the rate of exchange between the U.S. 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 ~~been no material~~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. In particular, as a result of our acquisition of Simplify Medical, we have additional exposure to fluctuations in the Australian dollar. We established intercompany receivables and payables in Australian dollars in connection with the acquisition of Simplify Medical, a proprietary limited company registered in Australia. We also have future contingent consideration liabilities denominated in U.S. dollars, in connection with the acquisition of Simplify Medical, which are the financial obligation of 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. Specifically, we have operations in Puerto Rico, Brazil, and Argentina that have financial instability or currency controls.

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. 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. These adjustments will affect net income only upon sale or liquidation of the underlying investment in foreign subsidiaries. Exchange rate fluctuations resulting from the translation of the short-term 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 unaudited Consolidated Statements of Operations. For those short-term intercompany balances, we enter into the foreign currency forward contracts to partially offset the impact from fluctuation of the foreign currency rates. The notional amount of the outstanding foreign currency forward contracts was $18.0 million as of March 31, 2023. During the three months ended March 31, 2023, a gain of $0.2 million was recognized in other (expense) income, net due to the change in the fair value of the derivative instruments, and the fair value of the hedge contracts we held was $0.1 million on our ~~assessment~~unaudited Consolidated Balance Sheets as of March 31, 2023. The derivative instruments are recorded in other current assets or other current liabilities in the unaudited Consolidated Balance Sheets commensurate with the nature of the instrument at period end. The notional principal amounts provide one measure of the transaction volume outstanding as of period end, but do not represent the amount of our ~~sensitivity~~exposure to market loss. The estimates of fair value are based on applicable and commonly used pricing models using prevailing financial market information. 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. The financial exposures by exchange rate fluctuations are monitored and managed by us as an integral part of our overall risk ~~since~~management program, which recognizes the unpredictability of financial markets and seeks to reduce potentially adverse effects on our ~~presentation set forth in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.~~results.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time lines specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in SEC Rules 13a - 15(e) and 15d - 15(e)) as of March 31, ~~2022.~~2023. Based on such evaluation, our management has concluded that as of March 31, ~~2022,~~2023, the Company’s disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we carried out an evaluation of any potential changes in our internal control over financial reporting during the fiscal quarter covered by this Quarterly Report.

There has been no change to our internal control over financial reporting during our most recent fiscal quarter that our certifying officers concluded materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

As a result of the COVID-19 pandemic, certain employees began working remotely and we expect our employees may continue to work remotely or in a hybrid work structure for the foreseeable future. We have not identified any material changes in our internal control over financial reporting as a result of these changes to the working environment. We are continually monitoring and assessing the COVID-19 situation to determine any potential impacts on the design and operating effectiveness of our internal controls over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For a description of our material pending legal proceedings, refer to Note 12, Contingencies, in the Notes to ~~Unaudited~~unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report, which is incorporated herein by reference.

Item 1A. Risk Factors

There were no material changes to the risk factors previously disclosed and included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022. An investment in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described under Item 1A of Part I of our Annual Report on Form 10-K, together with all other information contained or incorporated by reference in this report before you decide to invest in our common stock. If any of the Risk Factors were to actually occur, our business, financial condition, results of operations and our future growth prospects could be materially and adversely affected. Under the circumstances, the trading price of our common stock could decline, and you may lose all or part of your investment.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

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Item 6. Exhibits


Exhibit Number			Description
2.1†			Agreement and Plan of Merger, dated as of February 8, 2023, by and among NuVasive, Inc., Globus Medical, Inc. and Zebra Merger Sub, Inc. (incorporated by reference to our Current Report on Form 8-K filed with the Commission on February 9, 2023)
3.1			Restated Certificate of Incorporation (incorporated by reference to our Quarterly Report on Form 10-Q filed with the SEC on August 13, 2004)
3.2			Certificate of Amendment to the Restated Certificate of Incorporation (incorporated by reference to our Current Report on Form 8-K filed with the SEC on September 28, 2011)
3.3			Certificate of Amendment to the Restated Certificate of Incorporation (incorporated by reference to our Current Report on Form 8-K filed with the SEC on September 10, 2020)
3.4			Restated Bylaws (incorporated by reference to our Current Report on Form 8-K filed with the SEC on January 6, 2012)
3.5			Amendment No. 1 to the Restated Bylaws (incorporated by reference to our Current Report on Form 8-K filed with the SEC on May 19, 2014)
3.6			Amendment No. 2 to the Restated Bylaws (incorporated by reference to our Current Report on Form 8-K filed with the SEC on August 1, 2016)
~~10.1#~~3.7			~~Employment Letter dated January 14, 2022 between~~Amendment No. 3 to the ~~Company and Andrew C. Morton~~Restated Bylaws (incorporated by reference to our ~~Annual~~Current Report on Form ~~10-K~~8-K filed with the Commission on February ~~23, 2022)~~
~~10.2#~~			~~Form of Performance Restricted Stock Unit Agreement (with accompanying Notice of Grant) for grants on or after March 1, 202~~2
~~10.3#~~			~~Form of Restricted Stock Unit Agreement (with accompanying Form Notice of Grant) for grants on or after March 1, 202~~29, 2023)
31.1*			Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. section 1350
31.2*			Certification of the Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. section 1350
32.1*			Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
10.1			Voting and Support Agreement, dated as of February 8, 2023, by and among NuVasive, Inc., Globus Medical, Inc., David Paul and Sonali Paul. (incorporated by reference to our Current Report on Form 8-K filed with the Commission on February 9, 2023)
10.2			Amendment No. 2 to Credit Agreement, dated as of May 8, 2023, by and among NuVasive, Inc., certain of its material subsidiaries, as guarantors, Bank of America, N.A., as administrative agent, and each of those additional lenders that are a party to such agreement. (incorporated by reference to our Current Report on Form 8-K filed with the Commission on May 10, 2023)
10.3#			First Amendment to the NuVasive, Inc. Amended and Restated Executive Severance Plan
10.4#			NuVasive, Inc. Excise Tax Gross-Up Plan
10.5#			Form of Restricted Stock Unit Agreement (with accompanying Form Notice of Grant) for grants on or after March 1, 2023
101.INS			Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			Inline XBRL Taxonomy Extension Schema
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase
104			Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibit 101.INS)

†			Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish supplemental copies of any of the omitted schedules upon request by the U.S. Securities and Exchange Commission; provided, that the Company may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedules so furnished.

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#			Indicates management contract or compensatory plan.
*			These certifications are being furnished solely to accompany this annual report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of NuVasive, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		NUVASIVE, INC.

Date: May ~~4, 2022~~10, 2023	By:	/s/ J. Christopher Barry
		J. Christopher Barry
		Chief Executive Officer


Date: May ~~4, 2022~~10, 2023	By:	/s/ Matthew K. Harbaugh
		Matthew K. Harbaugh
		Executive Vice President and Chief Financial Officer

4847


PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Comprehensive Income ~~(Loss)~~	5
	Consolidated Statements of Equity	6
	Consolidated Statements of Cash Flows	8
	Notes to Unaudited Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3229
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4542
Item 4.	Controls and Procedures	4543

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	4644
Item 1A.	Risk Factors	4644
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4644
Item 3.	Defaults Upon Senior Securities	4644
Item 4.	Mine Safety Disclosures	4644
Item 5.	Other Information	4644
Item 6.	Exhibits	4745

SIGNATURES		4847


(in thousands, except %)	Three Months Ended March 31, 2022
	2022			2021			$ Change		% Change
Selling, general and administrative	$	160,281		$	145,954		$	14,327	10	%
% of total net sales	55		%	54		%
Research and development	23,358			22,224			1,134		5	%
% of total net sales	8		%	8		%
Amortization of intangible assets	13,032			13,337			(305)		(2	%)
Business transition costs	3,060			5,584			(2,524)		(45	%)