0001142596-23-000013 | 10-K | XBRL Viewer

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Stockholders' Equity	12 Months Ended
Stockholders' Equity	Dec. 31, 2022
Stockholders' Equity Note [Abstract]
Stockholders' Equity	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 $75.0 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. On November 2, 2022, the Board of Directors approved a one-year extension of the Company’s share repurchase program. Accordingly, as of November 2, 2022, the Company is authorized to repurchase up to $100 million of its common stock 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 common stock during the year ended December 31, 2022. On September 10, 2020, upon obtaining stockholder approval, the Company filed a Certificate of Amendment to its Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to increase the number of authorized shares of the Company’s common stock from 120,000,000 shares to 150,000,000 shares.

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

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+ Details

Financial Instruments and Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2022

Fair Value Disclosures [Abstract]

Schedule of Fair Value of Assets and Liabilities Measured on Recurring Basis

The Company’s assets that are measured at fair value were based on the following fair value categories:


(in thousands)	Total		Quoted Price in Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2022:
Cash equivalents:
Money market funds	$	176,344	$	176,344	$	—	$	—
Other assets:
Marketable equity securities	3,483		3,483		—		—
Total cash equivalents	$	179,827	$	179,827	$	—	$	—

December 31, 2021:
Cash equivalents:
Money market funds	$	179,451	$	179,451	$	—	$	—
Total cash equivalents	$	179,451	$	179,451	$	—	$	—

Schedule of Inputs and Valuation Techniques Used in Recurring Level 3 Fair Value Measurements

The recurring Level 3 fair value measurements of contingent consideration liabilities associated with commercial sales milestones include the following significant unobservable inputs:


	December 31,
	2022	2021
Valuation Techniques	Discounted cash flow, probability, Monte Carlo	Discounted cash flow, Monte Carlo
Discount Rate Range	6.7% - 7.9%	2.7% - 5.8%
Weighted Average Discount Rate	7.0%	3.8%
Expected Years	2023 - 2028	2021 - 2027

Schedule of Fair Value of Liabilities Measured on Recurring Basis Using Unobservable Inputs

The following table sets forth the changes in the estimated fair value of the Company’s liabilities measured on a recurring basis using significant unobservable inputs (Level 3):


(in thousands)	2022		2021
Beginning balance at January 1	$	147,810	$	37,041
Contingent consideration liability recorded upon acquisition	5,550		103,400
Change in fair value measurement	(14,712)		53,404
Contingent consideration paid or settled	(8,037)		(46,006)
Changes resulting from foreign currency fluctuations	4		(29)
Balance at end of period at December 31	$	130,615	$	147,810

Commitments

12 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

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 Consolidated Balance Sheets. Leases with an initial term of 12 months or less are not recorded in the 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 and investments totaling $1.5 million as of December 31, 2022 and December 31, 2021.

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:


(in thousands, except years and rates)	December 31, 2022			December 31, 2021
Assets
Operating	$	95,112		$	102,987
Financing	1,893			2,276
Total leased assets	$	97,005		$	105,263

Liabilities
Current:
Operating	$	10,019		$	9,867
Financing	1,084			1,546
Long-term:
Operating	103,806			111,592
Financing	872			885
Total lease liabilities	$	115,781		$	123,890

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

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:


(in thousands)	December 31, 2022		December 31, 2021
Lease expense:
Operating lease expense	$	16,277	$	16,088
Finance lease expense:
Amortization of right-of-use assets	1,698		1,374
Interest expense on lease liabilities	100		112
Total lease expense	$	18,075	$	17,574

Consolidated Statements of Cash Flows information:
Operating cash flows used for operating leases	$	16,599	$	15,394
Operating cash flows used for financing leases	100		102
Financing cash flows used for financing leases	1,889		1,325
Total cash paid for amounts included in the measurement of lease liabilities	$	18,588	$	16,821

Supplemental non-cash information:
Operating lease liabilities arising from obtaining right-of-use assets	$	3,495	$	11,871

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


(in thousands)	Financing Leases		Operating Leases
2023	$	1,139	$	15,817
2024	599		14,496
2025	254		12,983
2026	48		12,688
2027	4		11,932
Thereafter	—		85,155
Total minimum lease payments	$	2,044	$	153,071
Less: amount representing interest	(88)		(39,246)
Present value of obligations under leases	1,956		113,825
Less: current portion	(1,084)		(10,019)
Long-term lease obligations	$	872	$	103,806

Licensing and Purchasing Agreements

The Company has both minimum and contingent obligations to make payments of up to $67.1 million if specified future events occur or conditions are met as provided in certain net sales based, consulting, purchase and/or product development agreements. Not all of the respective agreements specify milestone payment timelines. Certain payments will be made in a combination of cash and the Company’s common shares as provided in the agreements. Any payments in satisfaction of these obligations are considered either a research and development expense or a cost of sales depending on the nature of the arrangement and are recognized ratably as and if milestones are achieved.

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 December 31, 2022, future commitments for such key executives were approximately $16.2 million. In certain circumstances, the agreements call for the acceleration of equity vesting. Those figures are not reflected in the above information.

Balance Sheet Details

12 Months Ended

Dec. 31, 2022

Condensed Financial Information Disclosure [Abstract]

Balance Sheet Details

Property and Equipment, net

Property and equipment, net, consisted of the following:


(in thousands, except years)	Useful Life	December 31,
		2022		2021
Instrument sets	4	$	556,584	$	472,247
Machinery and equipment	3 to 7	81,156		73,086
Computer equipment and software	2 to 10	208,477		188,960
Leasehold improvements	2 to 15	40,098		38,987
Furniture and fixtures	3 to 7	8,772		8,941
Building and improvements	5 to 20	23,349		22,681
Land	—	1,277		1,277
		919,713		806,179
Less: accumulated depreciation and amortization		(573,203)		(502,515)
		$	346,510	$	303,664

Property and equipment mainly consisted of instrument sets, which are made available to surgeons and hospitals that purchase implants, biologics and disposables for use in individual surgical procedures.

Depreciation expense was $90.8 million, $87.5 million, and $85.9 million for the years ended December 31, 2022, 2021 and 2020, respectively. The Company depreciates leasehold improvements over their estimated useful lives or the term of the applicable lease, whichever is shorter.

Capitalized software costs includes both internally developed and purchased computer software. At December 31, 2022 and 2021, the Company had $76.0 million and $67.5 million in unamortized capitalized software costs, respectively. Amortization expense related to capitalized software costs was $12.3 million, $12.2 million and $10.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Goodwill and Intangible Assets

Intangible assets as of December 31, 2022 consisted of the following:


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

Intangible assets as of December 31, 2021 consisted of the following:


(in thousands, except years)	Weighted- Average Amortization Period (in years)	Gross Amount		Accumulated Amortization		Intangible Assets, net
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, net	10	$	635,023	$	(392,348)	$	242,675

Total expense related to the amortization of intangible assets which is recorded in either cost of sales or operating expenses in the Consolidated Statements of Operations depending on the functional nature of the intangible, was $52.6 million, $60.6 million and $55.0 million for the years ended December 31, 2022, 2021 and 2020, respectively.

The changes to goodwill are comprised of the following:


(in thousands)
Gross goodwill	$	641,767
Accumulated impairment loss	(8,300)
December 31, 2021	633,467

Changes to gross goodwill:
Increases recorded related to business combinations	10,550
Changes resulting from foreign currency fluctuations	(4,354)
	6,196

Gross goodwill	647,963
Accumulated impairment loss	(8,300)
December 31, 2022	$	639,663

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


(in thousands)
2023	$	27,096
2024	20,846
2025	19,927
2026	15,132
2027	12,374
Thereafter through 2038	86,414
Total future amortization expense	$	181,789

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consisted of the following:


	December 31,
(in thousands)	2022		2021
Accrued expenses	$	70,487	$	69,054
Accounts payable	20,323		16,192
Distributor commissions payable	11,187		12,546
Other taxes payable	6,998		6,764
Litigation liability	1,931		1,744
Debt interest payable	937		937
Royalties payable	5,337		5,297
Other	3,133		3,080
Accounts payable and accrued liabilities	$	120,333	$	115,614

Income Taxes - Components of Income Tax Provision (Benefit) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Current:
Federal	$ 26,133	$ 3,607	$ (35)
State	4,682	2,989	2,309
Foreign	1,597	3,268	4,675
Total current provision	32,412	9,864	6,949
Deferred:
Federal	(17,429)	(902)	(13,800)
State	(6,129)	(6,573)	(8,315)
Foreign	(1,791)	(23,040)	(3,849)
Total deferred provision	(25,349)	(30,515)	(25,964)
Changes in tax rate	(303)	47	(579)
Changes in valuation allowance	5,155	26,306	9,202
Total provision (benefit)	$ 11,915	$ 5,702	$ (10,392)

Business Combinations

12 Months Ended

Dec. 31, 2022

Business Combination and Asset Acquisition [Abstract]

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 Consolidated Statements of Operations. See Note 4, Financial Instruments and Fair Value Measurements, in the Notes to Consolidated Financial Statements included in this Annual 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 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. The first net sales milestone payment, based on 2022 net sales, is expected be paid in the first quarter of 2023. 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. During the third quarter of 2022, the Company made an additional payment of $0.8 million relating to a holdback associated with the acquisition.

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 forecasted net sales, volatility factors associated with those forecasted net sales and discount rates. Changes in fair value of the contingent liabilities over the measurement period will be recorded in operating expenses in the Consolidated Statements of Operations. See Note 4, Financial Instruments and Fair Value Measurements, in the Notes to Consolidated Financial Statements included in this Annual Report for further discussion on contingent consideration liabilities.

Acquisition costs of $4.0 million were included as business transition costs in the Consolidated Statements of Operations. The Company’s results of operations for the year ended December 31, 2021 include the operating results of Simplify Medical since the date of acquisition, within the Consolidated Statements of Operations. Net sales of acquired products represent an immaterial amount of the Company’s total net sales for the year ended December 31, 2021.

The following table presents the unaudited pro forma results for the years ended December 31, 2021 and December 31, 2020. The unaudited pro forma financial information combines the results of operations of the Company and Simplify Medical as though the companies had been combined as of January 1, 2020. The unaudited pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at such time. The unaudited pro forma results presented include non-recurring adjustments directly attributable to the business combination. The adjustments relating to amortization charges for acquired intangible assets were $1.7 million and $9.1 million for the years ended December 31, 2021 and December 31, 2020, respectively. Adjustments for increased fair value of acquired inventory were $0.4 million for the year ended December 31, 2021. The year ended December 31, 2020 also includes an adjustment of $17.5 million for acquisition related expenses. All periods presented include related tax effects to pre-tax loss. Simplify Medical’s net sales represent an immaterial amount of the combined net sales for the years ended December 31, 2021 and December 31, 2020. The pre-acquisition accounting policies of Simplify Medical were materially similar to the Company.


(unaudited) (in thousands, except per share amounts)	Years Ended December 31,
	2021		2020
Net loss	$	(67,630)	$	(69,764)
Net loss per share:
Basic	$	(1.31)	$	(1.36)
Diluted	$	(1.31)	$	(1.36)

The Company has completed an acquisition that was not considered material, individually or collectively, to the overall Consolidated Financial Statements during the year ended December 31, 2022. This acquisitions has been included in the Consolidated Financial Statements from the date of the acquisition.

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 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.

Stock-Based Compensation - Additional Information (Details) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Sep. 10, 2020	Sep. 09, 2020
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock, shares authorized (in shares)	150,000,000	150,000,000		150,000,000	120,000,000
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Number of common stock issued to exercise stock options (in shares)			16,000
Closing price of stock (in dollars per share)			$ 56.33
Proceeds from exercise of stock options			$ 0
Total intrinsic value			$ 400,000
Total stock options vested (in shares)	0	0	0
Outstanding stock options (in shares)	0	0
Employee Stock [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized cost related to share-based compensation	$ 800,000
Maximum percentage of annual compensation	15.00%
Maximum amount withheld to purchase shares of the company	21,250
Percentage of issuance price of stock under the stock issuance program	85.00%
ESPP offering period	6 months
Number of share purchased under ESPP (in shares)	142,000	153,000	136,000
Restricted Stock Units (RSUs) [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized cost related to share-based compensation	$ 22,700,000
Weighted average contractual term	1 year 9 months 18 days
Fair value of restricted stock units vested	$ 13,800,000	$ 18,000,000	$ 12,100,000
Total shares withheld related to statutory tax (in shares)	84,000	91,000	71,000
Payments of employees tax obligations	$ 4,600,000	$ 6,100,000	$ 4,100,000
Shares issuable pursuant to vested RSUs (in shares)	118,000
Vested during the period (in shares)	256,000
Performance Based Restricted Stock Units (PRSUs) [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized cost related to share-based compensation	$ 21,500,000
Weighted average contractual term	2 years 4 months 24 days
Fair value of restricted stock units vested	$ 3,900,000	$ 7,100,000	$ 3,800,000
Total shares withheld related to statutory tax (in shares)	20,000	41,000	25,000
Payments of employees tax obligations	$ 1,100,000	$ 2,800,000	$ 1,600,000
Vested during the period (in shares)	73,000	105,000	61,000
Performance Based Restricted Stock Units (PRSUs) [Member] \| Minimum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share payout levels	0.00%
Performance Based Restricted Stock Units (PRSUs) [Member] \| Maximum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share payout levels	200.00%
Stock Options [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized cost related to share-based compensation	$ 0

Business Combinations (Tables)

12 Months Ended

Dec. 31, 2022

Business Combination and Asset Acquisition [Abstract]

Summary of Preliminary Allocation of Purchase Price to Assets Acquired and Liabilities Assumed

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

Schedule of Unaudited Pro Forma Information


(unaudited) (in thousands, except per share amounts)	Years Ended December 31,
	2021		2020
Net loss	$	(67,630)	$	(69,764)
Net loss per share:
Basic	$	(1.31)	$	(1.36)
Diluted	$	(1.31)	$	(1.36)

Business Combination - Summary of Preliminary Allocation of Purchase Price to Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Feb. 24, 2021	Dec. 31, 2022	Dec. 31, 2021
Definite-lived intangible assets:
Goodwill		$ 639,663	$ 633,467
Simplify Medical [Member]
Business Acquisition [Line Items]
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:
Goodwill	81,125
Other assets	7
Contingent consideration liabilities	(103,400)
Accounts payable, accrued expenses and other	(331)
Purchase price	151,026
Patents [Member] \| Simplify Medical [Member]
Definite-lived intangible assets:
Definite-lived intangible assets	19,000
Trade Names [Member] \| Simplify Medical [Member]
Definite-lived intangible assets:
Definite-lived intangible assets	3,500
Developed Technology [Member] \| Simplify Medical [Member]
Definite-lived intangible assets:
Definite-lived intangible assets	$ 141,700

Subsequent Events	12 Months Ended
Subsequent Events	Dec. 31, 2022
Subsequent Events [Abstract]
Subsequent Events	Subsequent Events Proposed Merger with Globus Medical On February 8, 2023, the Company entered into 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 the Company, referred to as the Merger, with the Company surviving the merger as a wholly owned subsidiary of Globus Medical, referred to as the Combination. 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. The respective obligations of the Company and Globus Medical to consummate the transactions contemplated by the Merger Agreement are subject to the satisfaction or waiver of a number of conditions, including: (1) the adoption of the Merger Agreement by the Company’s stockholders; (2) approval by Globus Medical’s stockholders of the issuance of shares of Globus Medical Class A common stock in connection with the Merger; (3) the absence of any law or order prohibiting consummation of the Merger; (4) Globus Medical’s registration statement on Form S-4 with respect to the Globus Medical Class A common stock to be issued in connection with the Merger having been declared effective by the U.S. Securities and Exchange Commission; (5) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (6) accuracy of the other party’s representations and warranties, subject to certain materiality standards set forth in the Merger Agreement; (7) compliance by the other party in all material respects with such other party’s obligations under the Merger Agreement; and (8) the absence of a material adverse effect on the other party since February 8, 2023. If the Merger Agreement is terminated under specified circumstances, the Company may be required to pay Globus Medical a termination fee of up to $120 million, and if the Merger Agreement is terminated under certain other circumstances, Globus Medical may be required to pay the Company a termination fee of up to $120 million. For additional information related to the Merger Agreement, please refer to our Current Report on Form 8-K filed with the SEC on February 9, 2023 (the “February 9th Form 8-K”). 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 February 9th Form 8-K. Amendment to Bylaws On February 8, 2023, the Company’s Board of Directors approved and adopted “Amendment No. 3 to the Restated Bylaws of NuVasive, Inc.” which adopts an exclusive forum bylaw designating (i) a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware) as the sole and exclusive forum for certain types of actions and proceedings, and (ii) the federal district courts of the United States of America as the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, against the Company or any director or officer of the Company.

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Statement of Comprehensive Income [Abstract]
Consolidated net income (loss)	$ 40,407	$ (64,086)	$ (37,153)
Other comprehensive income (loss):
Unrealized (loss) gain on marketable securities, net of tax	0	(13)	13
Translation adjustments, net of tax	4,543	(194)	1,820
Other comprehensive income (loss):	4,543	(207)	1,833
Total consolidated comprehensive income (loss)	$ 44,950	$ (64,293)	$ (35,320)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

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+ Details

Organization and Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Summary of Changes in Allowance for Credit Losses

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


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

Computation of Basic and Diluted Earnings Per Share

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


	Year Ended December 31,
(in thousands, except per share data)	2022		2021		2020
Numerator:
Net income (loss)	$	40,407	$	(64,086)	$	(37,153)
Interest and debt issuance costs on the 1.00% Senior Convertible Notes due 2023, net of tax	$	—	$	—	$	—
Interest and debt issuance costs on the 0.375% Senior Convertible Notes due 2025, net of tax	3,283		—		—
Net income (loss) for diluted	$	43,690	$	(64,086)	$	(37,153)
Denominator for basic and diluted net income (loss) per share:
Weighted average common shares outstanding for basic	52,009		51,589		51,416
Dilutive potential common stock outstanding:
ESPP	3		—		—
RSUs and PRSUs	523		—		—
1.00% Senior Convertible Notes due 2023	—		—		—
0.375% Senior Convertible Notes due 2025	4,824		—		—
Weighted average common shares outstanding for diluted	57,359		51,589		51,416
Basic net income (loss) per share	$	0.78	$	(1.24)	$	(0.72)
Diluted net income (loss) per share	$	0.76	$	(1.24)	$	(0.72)

Anti-dilutive Common Stock Equivalents Not Included in Calculation of Net Income Per Diluted Share

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


	Year Ended December 31,
(in thousands)	2022	2021	2020
Stock options, ESPP, RSUs and PRSUs	262	1,022	1,095
Warrants	10,169	17,665	21,034
Senior Convertible Notes	5,345	10,169	21,034
Total	15,776	28,856	43,163

Business Combination - Additional Information (Details) - USD ($) $ in Thousands				1 Months Ended	3 Months Ended	12 Months Ended
	Mar. 15, 2021	Feb. 24, 2021	Feb. 24, 2021	Apr. 30, 2021	Sep. 30, 2022	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Business Acquisition [Line Items]
Payment related to holdback						$ 750	$ 149,463	$ 0
Maximum [Member]
Business Acquisition [Line Items]
Intangible assets useful life						17 years
Senior Convertible Notes due 2021 [Member]
Business Acquisition [Line Items]
Cash payments for settlement of conversions	$ 8,500						4,000
Simplify Medical [Member]
Business Acquisition [Line Items]
Upfront payment		$ 150,000	$ 150,000
Regulatory milestone, payment				$ 45,800
Cash paid for purchase		151,026
Payment related to holdback					$ 800
Contingent consideration liabilities		$ 103,400	$ 103,400
Amortization charges for acquired intangible assets							1,700	9,100
Increased fair value of acquired inventory							$ 400
Acquisition related expenses								$ 17,500
Simplify Medical [Member] \| Developed Technology [Member]
Business Acquisition [Line Items]
Intangible assets useful life			17 years
Simplify Medical [Member] \| Patents [Member]
Business Acquisition [Line Items]
Intangible assets useful life			10 years
Simplify Medical [Member] \| Trade Names [Member]
Business Acquisition [Line Items]
Intangible assets useful life			15 years

Income Taxes - Summary of Unrecognized Tax Benefits (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
Gross unrecognized tax benefits at January 1	$ 19,743	$ 18,316	$ 20,328
Increases in tax positions for prior years	488	165	1,758
Increases in tax positions for current year relating to ongoing operations	2,159	2,087	2,159
Decreases in tax positions as a result of a lapse of statute of limitations	(44)	(769)	(5,929)
Decreases in tax positions due to settlements with taxing authorities	(63)	(56)	0
Gross unrecognized tax benefits at December 31	$ 22,283	$ 19,743	$ 18,316

Organization and Significant Accounting Policies - Summary of Changes in Allowance for Credit Losses (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for credit losses at January 1	$ 10,928	$ 9,646
Current-period provision for expected losses	748	2,165
Write-offs charged against the allowance	(196)	(743)
Recoveries of amounts previously written off	31	42
Changes resulting from foreign currency fluctuations	(107)	(182)
Allowance for credit losses at end of period	$ 11,404	$ 10,928

Balance Sheet Details - Additional Information (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Condensed Financial Information Disclosure [Abstract]
Depreciation expense	$ 90.8	$ 87.5	$ 85.9
Capitalized internal use software development costs	76.0	67.5
Capitalized internal use software amortization	12.3	12.2	10.4
Amortization expense related to intangible assets	$ 52.6	$ 60.6	$ 55.0

Balance Sheet Details - Changes to Goodwill (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Condensed Financial Information Disclosure [Abstract]
Gross goodwill	$ 647,963	$ 641,767
Accumulated impairment loss	(8,300)	(8,300)
Goodwill	639,663	$ 633,467
Changes to gross goodwill:
Increases recorded related to business combinations	10,550
Changes resulting from foreign currency fluctuations	(4,354)
Goodwill period increase (decrease)	$ 6,196

- Definition

Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

+ References + Details

Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Total income (loss) before income taxes summarized by region was as follows:


(in thousands)	Year Ended December 31,
	2022		2021		2020
United States	$	45,037	$	21,096	$	(45,534)
Foreign	7,285		(79,480)		(2,011)
Total income (loss) before income taxes	$	52,322	$	(58,384)	$	(47,545)

The income tax provision (benefit) was as follows:


(in thousands)	Year Ended December 31,
	2022		2021		2020
Current:
Federal	$	26,133	$	3,607	$	(35)
State	4,682		2,989		2,309
Foreign	1,597		3,268		4,675
Total current provision	32,412		9,864		6,949
Deferred:
Federal	(17,429)		(902)		(13,800)
State	(6,129)		(6,573)		(8,315)
Foreign	(1,791)		(23,040)		(3,849)
Total deferred provision	(25,349)		(30,515)		(25,964)
Changes in tax rate	(303)		47		(579)
Changes in valuation allowance	5,155		26,306		9,202
Total provision (benefit)	$	11,915	$	5,702	$	(10,392)

The differences between the income tax provision (benefit) at the U.S. federal statutory tax rate and the Company’s effective tax rate were as follows:


(in thousands)	Year Ended December 31,
	2022		2021		2020
Tax provision (benefit) at federal statutory rate	$	10,988	$	(12,261)	$	(9,984)
Valuation allowance	5,155		26,306		9,202
Compensation expense	2,570		2,153		3,314
Acquisition related charges	(551)		1,338		687
State income tax	2,357		979		(1,243)
Nondeductible meals and entertainment	247		171		351
Return to provision adjustments	(2,737)		116		(881)
Change in tax rates	(303)		47		(579)
Income tax reserves	950		(447)		(4,217)
Foreign tax rate differences from federal statutory rate	564		(7,166)		(1,215)
Income tax credits and incentives	(7,012)		(7,286)		(7,155)
Other	(313)		1,752		1,328
Total provision (benefit)	$	11,915	$	5,702	$	(10,392)

Significant components of the Company’s deferred tax assets and liabilities were as follows:


(in thousands)	December 31,
	2022		2021
Deferred tax assets:
Net operating loss carryforwards	$	102,383	$	87,671
Amortization	42,215		66,482
Inventory	40,502		48,244
Lease liability	26,718		28,402
General business and other credit carryforwards	30,111		25,913
Capitalized research and development costs	22,827		—
Original issue discount	12,303		22,130
Stock-based compensation	11,692		10,042
Foreign currency exchange gains and losses	12,025		5,967
Other	27,174		28,699
Gross deferred tax assets	327,950		323,550
Less valuation allowance	(167,919)		(168,409)
Net deferred tax assets	160,031		155,141
Deferred tax liabilities:
Depreciation	(43,815)		(46,597)
Acquired intangibles	(23,848)		(34,181)
Right-of-use assets	(22,211)		(23,904)
Other	(2,338)		(3,137)
Total deferred tax liabilities	(92,212)		(107,819)
Net deferred tax assets	$	67,819	$	47,322

The Company consolidates subsidiaries in foreign jurisdictions which use the local currency as their functional currency. Since income taxes for these subsidiaries are assessed in their local currency, deferred tax balances are translated into the Company’s reporting currency and adjusted for changes in the exchange rates over time through the cumulative translation account. During 2021, as a result of the adoption of ASU 2020-06, net decreases in deferred tax liabilities of $28.9 million and valuation allowance of $0.9 million were recorded against stockholders’ equity. Additionally, during 2021, as a result of the Simplify Medical acquisition, the Company recorded an increase in deferred tax assets of $10.7 million and an offsetting increase in valuation allowance of the same amount against goodwill. Accordingly, these changes in deferred tax balances are not reflected in income tax expense and create differences between changes in net deferred tax assets and deferred tax expense for the years presented.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:


(in thousands)	Year Ended December 31,
	2022		2021		2020
Gross unrecognized tax benefits at January 1	$	19,743	$	18,316	$	20,328
Increases in tax positions for prior years	488		165		1,758
Increases in tax positions for current year relating to ongoing operations	2,159		2,087		2,159
Decreases in tax positions as a result of a lapse of statute of limitations	(44)		(769)		(5,929)
Decreases in tax positions due to settlements with taxing authorities	(63)		(56)		—
Gross unrecognized tax benefits at December 31	$	22,283	$	19,743	$	18,316

At December 31, 2022, 2021, and 2020, $20.1 million, $17.8 million, and $16.5 million, respectively, of the Company’s total unrecognized tax benefits, if recognized, would impact the effective income tax rate.

In accordance with the disclosure requirements as described in ASC Topic 740, Income Taxes, the Company classified uncertain tax positions as non-current income tax liabilities unless expected to be paid in one year. The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. For the years ended December 31, 2022, 2021, and 2020, the Company recognized approximately $0.4 million, $0.1 million, and $(0.1) million, respectively, in interest and penalties as income tax (expense) benefit in the Consolidated Statements of Operations. The Company had approximately $0.6 million and $0.1 million accrued for interest and penalties at December 31, 2022 and 2021, respectively, in the Consolidated Balance Sheets.

The Company believes there are no significant unrecognized tax positions that are expected to reverse by the end of 2023.

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 2014 – 2016 tax years, Illinois State for the 2019 tax year, the Netherlands for the 2018 tax year, and Italy for the 2017 tax year. California is subject to examination in all years due to prior year net operating losses and research and development credits. Other major state and foreign jurisdictions remain subject to examination from 2018 and 2017 forward, respectively.

The Company made the accounting policy election to treat taxes due on U.S. inclusions in taxable income related to Global Intangible Low-Taxed Income as a current period expense when incurred (the "period cost method").

The Company has $9.0 million of undistributed earnings attributable to operations in its controlled foreign corporations as of December 31, 2022. Additionally, due to recent tax reform in the U.S. and favorable treaties between the U.S. and countries in which its controlled foreign corporations operate, the Company has the ability to repatriate earnings without incurring additional tax liabilities. Accordingly, the Company has not recorded a liability for taxes associated with any future distributions of these undistributed earnings.

At December 31, 2022, the Company had $1.6 million, $51.7 million and $292.6 million of federal, state and foreign net operating loss carryforwards, respectively. Federal net operating loss carryforwards begin to expire in 2026, state net operating loss carryforwards begin to expire in 2023, and foreign net operating losses carry forward indefinitely.

The Company has California research and development income tax credit carryforwards of $46.8 million. The California credits can be carried forward indefinitely. The Company has foreign tax credit carryforwards of $0.9 million which expire beginning in 2027. Additionally, there are other state tax jobs credit carryforwards of $0.3 million which begin to expire in 2034.

Due to the “change of ownership” provision of the Tax Reform Act of 1986, utilization of the Company’s net operating loss and credit carryforwards may be subject to an annual limitation against taxable income in future periods. As a result of any future ownership changes, the annual limitation of loss and credit carryforwards may cause them to expire before ultimately becoming available to reduce future income tax liabilities.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 21
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-Subparagraph (SAB TOPIC 6.I.5.Q1)
-URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 14
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 270
-Section 50
-Paragraph 1
-URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-URI https://asc.fasb.org/topic&trid=2144680

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 30
-Section 50
-Paragraph 2
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-URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

+ Details

Organization and Significant Accounting Policies

12 Months Ended

Dec. 31, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Significant Accounting Policies

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 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. Refer to Note 12, Subsequent Events, in the Notes to Consolidated Financial Statements included in this Annual Report for further background on the combination.

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 in fiscal years 2020, 2021 and 2022. At the height of the COVID-19 pandemic, governments implemented extraordinary measures to slow the spread of the virus, which included the mandatory closure of businesses, restrictions on travel and gatherings, quarantine and physical distancing requirements, and vaccine mandates. In addition, many government agencies in conjunction with hospitals and healthcare systems deferred, reduced, or suspended elective surgical procedures due to COVID-19. While certain spine surgeries are deemed essential and certain surgeries, like in cases of trauma, cannot be delayed, the Company experienced a significant reduction in procedural volumes as hospital systems and/or patients deferred spine surgery procedures. 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 the Company's 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 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, the COVID-19 pandemic and general macroeconomic conditions have led to disruptions in the global supply chain. While the Company has largely been able to mitigate the impact, it 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 products, availability of skilled labor and increased costs of raw materials, components, labor, and freight and courier services. The Company's net sales and profitability from its 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.

Basis of Presentation and Principles of Consolidation

The accompanying 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 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.

Use of Estimates

To prepare financial statements in conformity with generally accepted accounting principles, or U.S. GAAP, accepted in the U.S., 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, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or 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 Topic 606, Revenue from Contracts with Customers. 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 will adopt ASU 2021-08 on January 1, 2023, using a prospective transition method, and does not expect a material impact to its Consolidated Financial Statements.

In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement (Topic 820), Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. This guidance 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 August 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), or ASU 2020-06, which simplifies the accounting for convertible instruments. The guidance removes certain accounting models that separate the embedded conversion features from the host contract for convertible instruments. The guidance also modifies how certain convertible instruments, that may be settled in cash or shares, impact the calculation of diluted earnings per share. ASU 2020-06 allows for a modified or full retrospective method of transition. This update is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, and early adoption is permitted. The Company early adopted ASU 2020-06 on January 1, 2021, electing the modified transition method that allows for a cumulative-effect adjustment in the period of adoption, and did not restate prior periods. As a result of the adoption, the Company increased its senior convertible debt liabilities and retained earnings on January 1, 2021 by $115.4 million and $64.5 million, respectively, and decreased its deferred tax liabilities and additional paid-in capital by $28.0 million and $147.2 million, respectively. As a result of the adoption of ASU 2020-06, diluted loss per share decreased by $0.54 for the year ended December 31, 2021. See Note 5, Indebtedness, in the Notes to Consolidated Financial Statements included in this Annual Report for further discussion on the adoption of ASU 2020-06.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions for applying U.S. GAAP on contracts, hedging relationships and other transactions subject to modification due to the expected discontinuance of the London Interbank Offered Rate, or LIBOR, and other reference rate reform changes to ease the potential accounting and financial burdens related to the expected transition in market reference rates. This guidance permits entities to elect not to apply certain modification accounting requirements to contracts affected by reference rate transition, if certain criteria are met. An entity that makes this election would not be required to remeasure modified contracts at the modification date or reassess a previous accounting determination. The guidance was effective upon issuance on March 12, 2020, and can generally be applied through December 31, 2022. On December 21, 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extends the period of time entities can utilize the reference rate reform relief guidance under ASU 2020-04 from December 31, 2022 to December 31, 2024. The adoption did not have a material impact on the Company’s Consolidated Financial Statements.

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 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. The Company has a diverse customer base and no single customer represented greater than ten percent of net sales or accounts receivable. An increase to the allowance for credit losses results in a corresponding charge to selling, general and administrative expenses. 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, 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 and other macroeconomic challenges.

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


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

In addition, the Company establishes a liability for estimated sales returns and a reserve for price adjustments that are recorded as a reduction to net sales. The liability and reserve are maintained to account for the future product returns and price adjustments of products sold in the current period.

Concentration of Credit Risk and Significant Customers

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents and accounts receivable. The Company limits its exposure to credit loss by placing its cash and investments with high credit quality financial institutions. Additionally, the Company has established guidelines regarding diversification of its investments and their maturities, which are designed to maintain principal and maximize liquidity. The Company has a diverse customer base and no single customer represented greater than ten percent of sales or accounts receivable for any of the periods presented.

Fair Value of Financial Instruments

The Company’s financial instruments consist principally of cash and cash equivalents, restricted investments, derivatives, contingent consideration liabilities, accounts receivable, accounts payable, accrued expenses, and Senior Convertible Notes.

The Company measures certain assets and liabilities in accordance with authoritative guidance which requires fair value measurements to 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 years presented.

Cash and Cash Equivalents

The Company considers all highly liquid investments that are readily convertible into cash and have an original maturity of three months or less at the time of purchase to be cash equivalents.

Inventory, net

Net inventory as of December 31, 2022 consisted of $326.1 million of finished goods, $5.8 million of work in progress and $6.7 million of raw materials. Net inventory as of December 31, 2021 consisted of $301.3 million of finished goods, $8.1 million of work in progress and $6.4 million of raw materials.

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 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.

For the year ended December 31, 2022 and 2021, the Company recorded a reserve for excess and obsolete inventory of $0.7 million and $25.6 million, respectively. The decrease is attributable to updates to the Company’s estimates and assumptions about future product demand and product life cycles which have been affected by multiple factors, including the COVID-19 pandemic and general market conditions. Additionally, during the third quarter of 2021, the Company made a determination to withdraw certain products manufactured by its NuVasive Specialized Orthopedic, or NSO, subsidiary from the market and discontinue sales of the products. As a result, the Company recorded a charge of $14.2 million.

Goodwill and Intangible Assets

The Company’s goodwill represents the excess of the cost over the fair value of net assets acquired from its business combinations. The determination of the value of goodwill and intangible assets arising from business combinations and asset acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of the net tangible and intangible assets acquired, including capitalized in-process research and development, or IPR&D. Intangible assets acquired in a business combination that are used for IPR&D activities are considered indefinite lived until the completion or abandonment of the associated research and development efforts. Upon reaching the end of the relevant research and development project, the Company will amortize the acquired IPR&D over its estimated useful life or expense the acquired in-process research and development should the research and development project be unsuccessful with no future alternative use.

Goodwill and IPR&D are not amortized; however, they are assessed for impairment using fair value measurement techniques on an annual basis or more frequently if facts and circumstance warrant such a review. The goodwill or IPR&D are considered to be impaired if the Company determines that the carrying value of the reporting unit or IPR&D exceeds its respective fair value.

The Company performs its goodwill impairment analysis at the reporting unit level, which aligns with the Company’s reporting structure and availability of discrete financial information. The Company performs its annual impairment analysis by either comparing a reporting unit’s estimated fair value to its carrying amount or doing a qualitative assessment of a reporting unit’s fair value from the last quantitative assessment to determine if there is potential impairment. The Company may do a qualitative assessment when the results of the previous quantitative test indicated the reporting unit’s estimated fair value was significantly in excess of the carrying value of its net assets and it does not believe there have been significant changes in the reporting unit’s operations that would significantly decrease its estimated fair value or significantly increase its net assets. If a quantitative assessment is performed the evaluation includes management estimates of cash flow projections based on internal future projections and/or use of a market approach by looking at market values of comparable companies. Key assumptions for these projections include net sales growth, future gross and operating margin growth, and its weighted cost of capital and terminal growth rates. The net sales and margin growth is based on increased sales of new and existing products as the Company maintains investments in research and development. Additional assumed value creators may include increased efficiencies from capital spending. The resulting cash flows are discounted using a weighted average cost of capital. Operating mechanisms and requirements to ensure that growth and efficiency assumptions will ultimately be realized are also considered in the evaluation, including timing and probability of regulatory approvals for Company products to be commercialized. The Company’s market capitalization is also considered as a part of its analysis.

The Company's annual evaluation for impairment of goodwill consists of one reporting unit. In accordance with the Company's policy, the Company completed its most recent annual evaluation for impairment as of October 1, 2022 using the qualitative assessment and determined that no impairment existed. In addition, no indicators of impairment were noted through December 31, 2022 and consequently, no impairment charge was recorded during the year.

Intangible assets with a finite life, such as acquired technology, customer relationships, manufacturing know-how, licensed technology, supply agreements and certain trade names and trademarks, are amortized on a straight-line basis over their estimated useful life, ranging from 2 to 17 years. In determining the useful lives of intangible assets, the Company considers the expected use of the assets and the effects of obsolescence, demand, competition, anticipated technological advances, changes in surgical techniques, market influences and other economic factors. For technology based intangible assets, the Company considers the expected life cycles of products which incorporate the corresponding technology. Trademarks and trade names that are related to products are assigned lives consistent with the period in which the products bearing each brand are expected to be sold.

The Company evaluates its intangible assets with finite lives for indications of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that could trigger an impairment review include significant under-performance relative to expected historical or projected future operating results, significant changes in the manner of the Company’s use of the acquired assets or the strategy for the Company’s overall business or significant negative industry or economic trends. If this evaluation indicates that the value of the intangible asset may be impaired, the Company makes an assessment of the recoverability of the net carrying value of the asset over its remaining useful life. If this assessment indicates that the intangible asset is not recoverable, based on the estimated undiscounted future cash flows of the technology over the remaining amortization period, the Company reduces the net carrying value of the related intangible asset to fair value and may adjust the remaining amortization period.

See Note 2, Balance Sheet Details, in the Notes to Consolidated Financial Statements included in this Annual Report for further disclosure on goodwill and intangible assets.

Property and Equipment

Property and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, ranging from 2 to 20 years. The Company depreciates leasehold improvements over their estimated useful lives or the term of the applicable lease, whichever is shorter. Leased property meeting certain financing lease criteria is capitalized under property and equipment, and the net present value of the related lease payments is recorded as a liability. Amortization of assets under financing leases is recorded using the straight-line method over the shorter of the estimated useful lives or the lease terms. Maintenance and repairs are expensed as incurred.

The Company reviews property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be recognized when estimated future undiscounted cash flows relating to the asset are less than its carrying amount. An impairment loss is measured as the amount by which the carrying amount of an asset exceeds its fair value.

Income Taxes

The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Tax law and rate changes are reflected in income in the period such changes are enacted. The Company includes interest and penalties related to income taxes, including unrecognized tax benefits, within income tax expense.

The Company’s income tax returns are based on calculations and assumptions that are subject to examination by the Internal Revenue Service and other tax authorities. In addition, the calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcomes of examinations by tax authorities in determining the adequacy of its provision for income taxes. The Company continually assesses the likelihood and amount of potential revisions and adjusts the income tax provision, income taxes payable and deferred taxes in the period in which the facts that give rise to a revision become known.

Significant judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities and the valuation allowance recorded against deferred tax assets. Deferred tax assets and liabilities are determined using the enacted tax rates in effect for the years in which those tax assets and liabilities are expected to be realized. A valuation allowance is established when it is more likely than not the future realization of all or some of the deferred tax assets will not be achieved. The evaluation of the need for a valuation allowance is performed on a jurisdiction-by-jurisdiction basis and includes a review of all available positive and negative evidence. Factors reviewed include projections of pre-tax book income for the foreseeable future, determination of cumulative pre-tax book income after permanent differences, earnings history, and reliability of forecasting.

Based on the Company’s review, it concluded that it was more likely than not that it would be able to realize the future benefits of its domestic and foreign deferred tax assets, with the exceptions of California, Australia, Brazil, Colombia, Malta and Mexico. This conclusion was based on historical and projected operating performance, as well as the Company’s expectation that its operations will generate sufficient taxable income in future periods to realize the tax benefits associated with the deferred tax assets well within the statutory carryover periods, other than those related to the jurisdictions cited above. Due to low state apportionment and the carryforward of net operating losses and sizeable research credits in California, the Company concluded that it is not more likely than not that it will be able to utilize its California deferred tax assets. Therefore, the Company has maintained a full valuation allowance on its California deferred tax assets as of December 31, 2022. Due to a history of losses and or the lack of certain sources of future taxable income, the Company has established a full valuation allowance against deferred tax assets in Australia, Brazil, Colombia, Malta and Mexico as of December 31, 2022.

The Company will continue to assess the need for a valuation allowance on its deferred tax assets by evaluating both positive and negative evidence that may exist. Any adjustment to the net deferred tax asset valuation allowance would be recorded in the statement of operations for the period that the adjustment is determined to be required.

See Note 9, Incomes Taxes, in the Notes to Consolidated Financial Statements included in this Annual Report for further discussion on income taxes.

Loss Contingencies

An estimated loss contingency is accrued and disclosed in the Company’s financial statements if it is probable or disclosed if it is reasonably possible 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 and only discloses those matters it considers material to its overall financial position. In most cases, significant judgment is required to estimate the amount and timing of a loss to be recorded.

The Company is involved in a number of legal actions arising in the normal course of business. The outcomes of these legal actions are not within the Company’s complete control and may not be known for prolonged periods of time. In some actions, the claimants seek damages as well as other relief, including injunctions barring the sale of products that are the subject of the lawsuit, that could require significant expenditures or result in lost net sales. 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.

See Note 11, Contingences, in the Notes to Consolidated Financial Statements included in this Annual Report for further discussion on legal proceedings and investigations.

Other Comprehensive Income (Loss)

Other comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Other comprehensive income (loss) includes net of tax, unrealized gains or losses on the Company’s marketable debt securities and foreign currency translation adjustments. The accumulated other comprehensive loss was $3.2 million, $7.8 million, and $7.6 million at December 31, 2022, 2021, and 2020, respectively.

Research and Development

Research and development costs are expensed as incurred. To the extent the Company purchases research and development assets with a future alternative use the Company will capitalize and amortize the assets over its useful life.

Product Shipment Costs

Product shipment costs, included in selling, general and administrative expense in the accompanying Consolidated Statements of Operations, were $37.3 million, $30.9 million, and $27.4 million for the years ended December 31, 2022, 2021, and 2020, 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 (Benefit) Costs

The Company incurs certain costs related to acquisition, integration and business transition activities, which include severance, relocation, consulting, leasehold exit costs, third-party merger and 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 that the contingent milestones will be achieved resulting in payment. If an accrual for contingent consideration decreases during a particular period, it results in a reduction of costs during such period, which the Company records as a benefit.

During the year ended December 31, 2022, the Company recorded a benefit of $(5.0) million related to acquisition, integration and business transition activities, which included $(14.7) million of fair value adjustments on contingent consideration liabilities associated with the Company’s 2021, 2018, 2017 and 2016 acquisitions.

During the year ended December 31, 2021, the Company recorded $68.7 million of costs related to acquisition, integration and business transition activities, which included $53.4 million of fair value adjustments on contingent consideration liabilities associated with the Company’s 2021, 2018, 2017 and 2016 acquisitions as well as $4.0 million of costs associated with the 2021 acquisition of Simplify Medical.

During the year ended December 31, 2020, the Company recorded $10.9 million of costs related to acquisition, integration and business transition activities, which included $2.3 million of fair value adjustments on contingent consideration liabilities associated with the Company’s 2018, 2017 and 2016 acquisitions.

Stock-based Compensation

Stock-based compensation expense for equity-classified awards, principally related to restricted stock units, or RSUs, and performance restricted stock units, or PRSUs, is measured at the grant date based on the estimated fair value of the award. The fair value of equity instruments that are expected to vest is recognized and amortized over the requisite service period. The Company has granted awards with up to five year graded or cliff vesting terms (in each case, with service through the date of vesting being required). No exercise price or other monetary payment is required for receipt of the shares issued in settlement of the respective award; instead, consideration is furnished in the form of the participant’s service to the Company.

The fair value of RSUs including PRSUs with pre-defined performance criteria is based on the stock price on the date of grant whereas the expense for PRSUs with pre-defined performance criteria is adjusted with the probability of achievement of such performance criteria at each period end.

Stock-based compensation expense is adjusted from the grant date to exclude expense for awards that are expected to be forfeited. The forfeiture estimate is adjusted as necessary through the vesting date so that full compensation cost is recognized only for awards that vest. The Company assesses the reasonableness of the estimated forfeiture rate at least annually, with any change to be made on a cumulative basis in the period the estimated forfeiture rates change. The Company considered its historical experience of pre-vesting forfeitures on awards by each homogenous group of employees as the basis to arrive at its estimated annual pre-vesting forfeiture rates.

The Company estimates the fair value of stock options issued under its equity incentive plans and shares issued to employees under its employee stock purchase plan, or ESPP, using a Black-Scholes option-pricing model on the date of grant. The Black-Scholes option-pricing model incorporates various assumptions including expected volatility, expected term and risk-free interest rates. The expected volatility is based on the historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected term of the Company’s stock options and ESPP offering period which is derived from historical experience. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield in effect at the time of grant. The Company has never declared or paid dividends and has no plans to do so in the foreseeable future.

See Note 8, Stock-Based Compensation, in the Notes to Consolidated Financial Statements included in this Annual Report for further discussion on stock-based compensation.

Net Income (Loss) Per Share

The Company computes basic net income per share using the weighted-average number of common shares outstanding during the period. Diluted net income per share assumes the conversion, exercise or issuance of all potential common stock equivalents, unless the effect of inclusion would be anti-dilutive. For purposes of this calculation, common stock equivalents include the Company’s stock options, unvested RSUs, PRSUs (including those with performance and market conditions), warrants, and the shares to be issued upon the conversion of the Senior Convertible Notes. The contingently issuable shares are included in basic net income per share as of the date that all necessary conditions have been satisfied and are included in the denominator for dilutive calculation for the entire period if such shares would be issuable as of the end of the reporting period assuming the end of the reporting period was the end of the contingency period. Since the Company incurred a net loss in each of the years ended December 31, 2021 and 2020, basic and diluted net loss per share were the same.

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


	Year Ended December 31,
(in thousands, except per share data)	2022		2021		2020
Numerator:
Net income (loss)	$	40,407	$	(64,086)	$	(37,153)
Interest and debt issuance costs on the 1.00% Senior Convertible Notes due 2023, net of tax	$	—	$	—	$	—
Interest and debt issuance costs on the 0.375% Senior Convertible Notes due 2025, net of tax	3,283		—		—
Net income (loss) for diluted	$	43,690	$	(64,086)	$	(37,153)
Denominator for basic and diluted net income (loss) per share:
Weighted average common shares outstanding for basic	52,009		51,589		51,416
Dilutive potential common stock outstanding:
ESPP	3		—		—
RSUs and PRSUs	523		—		—
1.00% Senior Convertible Notes due 2023	—		—		—
0.375% Senior Convertible Notes due 2025	4,824		—		—
Weighted average common shares outstanding for diluted	57,359		51,589		51,416
Basic net income (loss) per share	$	0.78	$	(1.24)	$	(0.72)
Diluted net income (loss) per share	$	0.76	$	(1.24)	$	(0.72)

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


	Year Ended December 31,
(in thousands)	2022	2021	2020
Stock options, ESPP, RSUs and PRSUs	262	1,022	1,095
Warrants	10,169	17,665	21,034
Senior Convertible Notes	5,345	10,169	21,034
Total	15,776	28,856	43,163

Stock-Based Compensation

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

Common Stock

There were 150,000,000 shares of common stock authorized for both December 31, 2022 and 2021.

Preferred Stock

There are 5,000,000 shares of preferred stock authorized and none issued or outstanding at December 31, 2022 and 2021.

Stock-based Compensation

In March 2014, the Compensation Committee, or the Compensation Committee, of the Board of Directors of the Company adopted the 2014 Equity Incentive Plan of NuVasive, Inc., or the 2014 EIP, replacing the 2004 Amended and Restated Equity Incentive Plan, or the 2004 EIP. The 2004 EIP terminated in February 2014, upon the tenth anniversary of its effective date, and no further awards may be granted or are outstanding under the 2004 EIP as of December 31, 2022. The 2014 EIP provides the Company with the ability to grant various types of equity awards to its workforce (including, without limitation, restricted stock units, or RSUs, performance awards, and deferred stock awards). The 2014 EIP also provides for the issuance of performance RSUs, or PRSUs, to be granted subject to time- and/or performance-based vesting requirements.

The 2014 EIP allows for “net share settlement” of certain equity awards whereby, in lieu of (i) making cash payments in satisfaction of the exercise price owed respective to non-qualified stock option awards, or (ii) open market selling award shares to generate cash proceeds for use in satisfaction of statutory tax obligations respective to an award’s settlement or exercise, the company offsets the award shares being settled in a respective transaction by the number of shares of company stock with a value equal to the respective obligation, and, in the case of taxes, making a cash payment to the respective taxing authority on behalf of the employee using Company cash. The net share settlement is accounted for with the cost of any award shares that are net settled being included in treasury stock and reported as a reduction in total equity at the time of settlement.

In connection with the acquisition of Ellipse Technologies in February 2016, the Company assumed the Ellipse Technologies, Inc. 2015 Incentive Award Plan and the shares thereunder, subject to an equity exchange adjustment, for future awards by the Company.

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


(in thousands)	Year Ended December 31,
	2022		2021		2020
Selling, general and administrative expense	$	22,778	$	18,924	$	12,622
Research and development expense	5,620		6,112		5,259
Cost of sales	198		256		264
Stock-based compensation expense before taxes	28,596		25,292		18,145
Related income tax benefits	(4,532)		(4,391)		(3,088)
Stock-based compensation expense, net of taxes	$	24,064	$	20,901	$	15,057

As of December 31, 2022, there was $22.7 million and $21.5 million of unrecognized compensation expense for RSUs and PRSUs, respectively, which is expected to be recognized over a weighted-average period of approximately 1.8 years and 2.4 years, respectively. In addition, as of December 31, 2022, there was $0.8 million of unrecognized compensation expense for shares expected to be issued under the ESPP which is expected to be recognized through April 2023. There was no unamortized expense for stock options as of December 31, 2022.

Restricted Stock Units

The total fair value of RSUs that vested during the year ended December 31, 2022, 2021, and 2020 was $13.8 million, $18.0 million and $12.1 million, respectively.

Following is a summary of RSU activity for the year ended December 31, 2022:


(in thousands, except per share amounts)	Number of Shares	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2021	997	$	60.91
Granted	483	53.67
Vested	(256)	59.14
Forfeited	(137)	59.97
Outstanding at December 31, 2022	1,087	$	58.23

For the majority of RSUs, shares are issued on the vesting dates net of the amount of shares needed to satisfy statutory tax withholding requirements to be paid by the Company on behalf of the employees. The total shares withheld related to vested RSUs were approximately 84,000, 91,000, and 71,000, in 2022, 2021, and 2020, respectively, and were based on the value of the awards on their vesting dates as determined by the Company’s closing stock price. Total payments for the employees’ tax obligations to the taxing authorities related to vesting RSUs were $4.6 million, $6.1 million and $4.1 million in 2022, 2021 and 2020, respectively. Further, within RSUs outstanding at December 31, 2022, there were 118,000 shares issuable pursuant to vested RSUs for which delivery has been deferred by non-employee directors.

Performance-Based Restricted Stock Units

The Company has granted PRSUs since 2012 for which the ultimate issuance amount is determined by the Company’s Compensation Committee upon its certification of Company performance against a pre-determined matrix, which have included targets for net sales, operating margin, earnings per share and total shareholder return over pre-determined periods of time. Share payout levels range from 0% to 200% depending on the respective terms of an award. Based upon the Company’s actual performance against the performance conditions, approximately 73,000, 105,000 and 61,000 shares of common stock vested pursuant to PRSUs in 2022, 2021 and 2020, respectively.

The total fair value of PRSUs vested during 2022, 2021, 2020 and was $3.9 million, $7.1 million and $3.8 million, respectively.

Following is a summary of PRSU activity for the year ended December 31, 2022:


(in thousands, except per share amounts)	Shares	Maximum Number of Shares Eligible to be Issued	Average Grant Date Fair Value
Outstanding at December 31, 2021	681	941	$	58.95
Awarded	350	514	52.49
Vested	(73)	(73)	59.12
Forfeited	(121)	(240)	58.40
Outstanding at December 31, 2022	837	1,142	$	56.47

For the majority of PRSUs, shares are issued on the vesting dates net of the amount of shares needed to satisfy statutory tax withholding requirements to be paid by the Company on behalf of the employees. The total shares withheld related to vesting PRSUs were approximately 20,000, 41,000, and 25,000 in 2022, 2021 and 2020 respectively, and were based on the value of the awards on their vesting dates as determined by the Company’s closing stock price. Total payments for the employees’ tax obligations to the taxing authorities related to vesting PRSUs were $1.1 million, $2.8 million, and $1.6 million in 2022, 2021, and 2020, respectively.

Stock Options

The Company has not granted any stock options since 2011. The stock options previously granted were exercisable for a period of up to ten years after the date of grant.

The Company issued approximately 16,000 shares of common stock, before net share settlement, upon the exercise of outstanding stock options during the year ended December 31, 2020. The aggregate intrinsic value of outstanding stock options at December 31, 2020 is based on the Company’s closing stock price on December 31, 2020 of $56.33. Stock option exercises during the year ended December 31, 2020 were primarily all executed with net share settlements, for which the Company did not receive any cash proceeds. The total intrinsic value of stock options exercised was $0.4 million during the year ended December 31, 2020. There were no stock options that vested during the years ended December 31, 2022, 2021 or 2020. As of December 31, 2022 and 2021, the Company did not have any outstanding stock options.

Employee Stock Purchase Plan

The NuVasive, Inc. 2004 Amended and Restated Employee Stock Purchase Plan, or the ESPP, provides eligible employees with a means of acquiring equity in the Company at a discounted purchase price using their own accumulated payroll deductions. 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. In the years ended December 31, 2022, 2021 and 2020, 142,000, 153,000, and 136,000 shares, respectively, were purchased under the ESPP.

The weighted average assumptions used to estimate the fair value of stock options granted and stock purchase rights under the ESPP are as follows:


	Year Ended December 31,
	2022		2021		2020
ESPP
Volatility	40	%	39	%	56	%
Expected term (years)	0.5		0.5		0.5
Risk free interest rate	1.7	%	0.1	%	0.5	%
Expected dividend yield	—	%	—	%	—	%

Common Stock Reserved for Future Issuance

The following table summarizes common shares reserved for issuance on exercise or conversion at December 31, 2022:


(in thousands)
Issued and outstanding RSUs and PRSUs			1,924
Available for issuance under the ESPP			534
Available for future grant			2,889
2023 Notes			7,082
2023 Warrants			6,949
2025 Notes			6,512
2025 Warrants			6,271
Total shares reserved for future issuance			32,161

Stock-Based Compensation - Performance-Based Restricted Stock Award Activity (Details) - Performance Based Restricted Stock Units (PRSUs) [Member] - $ / shares	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Shares
Outstanding at December 31, 2021 (in shares)	681,000
Awarded at target (in shares)	350,000
Vested (in shares)	(73,000)	(105,000)	(61,000)
Forfeited (in shares)	(121,000)
Outstanding at December 31, 2022 (in shares)	837,000	681,000
Maximum Number of Shares Eligible to be Issued
Beginning balance, maximum number of shares eligible to be issued, outstanding (in shares)	941,000
Awarded at target, maximum number of shares eligible to be issued (in shares)	514,000
Vested, maximum number of shares eligible to be issued (in shares)	(73,000)
Forfeited, maximum number of shares eligible to be issued (in shares)	(240,000)
Ending balance, maximum number of shares eligible to be issued, outstanding (in shares)	1,142,000	941,000
Average Grant Date Fair Value
Beginning balance, average grant date fair value, outstanding (in dollars per share)	$ 58.95
Awarded at target, average grant date fair value (in dollars per share)	52.49
Vested, average grant date fair value (in dollars per share)	59.12
Forfeited, average grant date fair value (in dollars per share)	58.40
Ending balance, average grant date fair value, outstanding (in dollars per share)	$ 56.47	$ 58.95

Organization and Significant Accounting Policies - Computation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Jun. 30, 2020	Mar. 31, 2020
Numerator:
Net income (loss)	$ 40,407	$ (64,086)	$ (37,153)
Net income (loss) for diluted	$ 43,690	$ (64,086)	$ (37,153)
Denominator for basic and diluted net income (loss) per share:
Weighted average common shares outstanding for basic (in shares)	52,009	51,589	51,416
Dilutive potential common stock outstanding:
Weighted average common shares outstanding for diluted (in shares)	57,359	51,589	51,416
Basic net (loss) income per share (in dollars per share)	$ 0.78	$ (1.24)	$ (0.72)
Diluted net (loss) income per share (in dollars per share)	$ 0.76	$ (1.24)	$ (0.72)
Senior Convertible Notes due 2023 [Member]
Numerator:
Interest on convertible debt, net of tax	$ 0	$ 0	$ 0
Dilutive potential common stock outstanding:
Convertible notes (in shares)	0	0	0
Interest rate on convertible notes	1.00%			1.00%
Senior Convertible Notes due 2025 [Member]
Numerator:
Interest on convertible debt, net of tax	$ 3,283	$ 0	$ 0
Dilutive potential common stock outstanding:
Convertible notes (in shares)	4,824	0	0
Interest rate on convertible notes	0.375%				0.375%
Employee Stock [Member]
Dilutive potential common stock outstanding:
Incremental common shares from share based payments (in shares)	3	0	0
Restricted Stock Units And Performance Based Restricted Stock Units [Member]
Dilutive potential common stock outstanding:
Incremental common shares from share based payments (in shares)	523	0	0

Balance Sheet Details - Property and Equipment Net (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Property and equipment net
Property and equipment, gross	$ 919,713	$ 806,179
Less: accumulated depreciation and amortization	(573,203)	(502,515)
Property and equipment, net	$ 346,510	303,664
Minimum [Member]
Property and equipment net
Property and equipment, useful life	2 years
Maximum [Member]
Property and equipment net
Property and equipment, useful life	20 years
Instrument sets [Member]
Property and equipment net
Property and equipment, useful life	4 years
Property and equipment, gross	$ 556,584	472,247
Machinery and equipment [Member]
Property and equipment net
Property and equipment, gross	$ 81,156	73,086
Machinery and equipment [Member] \| Minimum [Member]
Property and equipment net
Property and equipment, useful life	3 years
Machinery and equipment [Member] \| Maximum [Member]
Property and equipment net
Property and equipment, useful life	7 years
Computer equipment and software [Member]
Property and equipment net
Property and equipment, gross	$ 208,477	188,960
Computer equipment and software [Member] \| Minimum [Member]
Property and equipment net
Property and equipment, useful life	2 years
Computer equipment and software [Member] \| Maximum [Member]
Property and equipment net
Property and equipment, useful life	10 years
Leasehold improvements [Member]
Property and equipment net
Property and equipment, gross	$ 40,098	38,987
Leasehold improvements [Member] \| Minimum [Member]
Property and equipment net
Property and equipment, useful life	2 years
Leasehold improvements [Member] \| Maximum [Member]
Property and equipment net
Property and equipment, useful life	15 years
Furniture and fixtures [Member]
Property and equipment net
Property and equipment, gross	$ 8,772	8,941
Furniture and fixtures [Member] \| Minimum [Member]
Property and equipment net
Property and equipment, useful life	3 years
Furniture and fixtures [Member] \| Maximum [Member]
Property and equipment net
Property and equipment, useful life	7 years
Building and improvements [Member]
Property and equipment net
Property and equipment, gross	$ 23,349	22,681
Building and improvements [Member] \| Minimum [Member]
Property and equipment net
Property and equipment, useful life	5 years
Building and improvements [Member] \| Maximum [Member]
Property and equipment net
Property and equipment, useful life	20 years
Land [Member]
Property and equipment net
Property and equipment, gross	$ 1,277	$ 1,277

Subsequent Events (Details) - Subsequent Event - Globus Medical $ in Millions	Feb. 08, 2023 USD ($)
Subsequent Event [Line Items]
Termination fee	$ 120.0
Globus Medical
Subsequent Event [Line Items]
Termination fee	$ 120.0
Common Class A
Subsequent Event [Line Items]
Merger agreement, exchange ratio	0.75