DOCUMENT AND ENTITY INFORMATION
DOCUMENT AND ENTITY INFORMATION DOCUMENT AND ENTITY INFORMATION - shares | 9 Months Ended | |
Sep. 30, 2016 | Oct. 27, 2016 | |
Entity [Abstract] | ||
Entity Registrant Name | K2M Group Holdings, Inc. | |
Entity Central Index Key | 1,499,807 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 42,197,647 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 46,117 | $ 34,646 |
Accounts receivable, net | 43,215 | 38,773 |
Inventory, net | 66,737 | 62,002 |
Prepaid expenses and other current assets | 6,443 | 19,820 |
Total current assets | 162,512 | 155,241 |
Property, plant and equipment, net | 51,021 | 38,318 |
Goodwill | 121,814 | 121,814 |
Intangible assets, net | 25,340 | 33,123 |
Other assets, net | 30,579 | 26,016 |
Total assets | 391,266 | 374,512 |
Current liabilities: | ||
Current maturities under capital lease obligation | 937 | 284 |
Accounts payable | 14,528 | 22,483 |
Accrued expenses | 13,789 | 13,559 |
Accrued payroll liabilities | 12,318 | 11,507 |
Total current liabilities | 41,572 | 47,833 |
Convertible senior notes | 36,383 | 0 |
Capital lease obligation, net of current maturities | 35,187 | 34,140 |
Deferred income taxes, net | 5,009 | 5,042 |
Other liabilities | 820 | 835 |
Total liabilities | 118,971 | 87,850 |
Commitments and contingencies | ||
Stockholders’ equity: | ||
Common stock, $0.001 par value, 750,000,000 shares authorized; 42,206,258 and 41,337,692 shares issued and 42,197,647 and 41,337,692 shares outstanding, respectively. | 42 | 41 |
Additional paid-in capital | 471,915 | 454,153 |
Accumulated deficit | (198,614) | (169,421) |
Accumulated other comprehensive (loss) income | (914) | 1,889 |
Treasury stock, at cost, 8,611 and 0 shares, respectively. | (134) | 0 |
Total stockholders’ equity | 272,295 | 286,662 |
Total liabilities and stockholders’ equity | $ 391,266 | $ 374,512 |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Sep. 30, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Common stock, par value per share (in usd per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 750,000,000 | 750,000,000 |
Common stock, shares issued (in shares) | 42,206,258 | 41,337,692 |
Common stock, shares outstanding (in shares) | 42,197,647 | 41,337,692 |
Treasury stock, (in shares) | 8,611 | 0 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Income Statement [Abstract] | ||||
Revenue | $ 59,310 | $ 55,009 | $ 174,843 | $ 161,787 |
Cost of revenue | 19,512 | 17,390 | 58,747 | 53,507 |
Gross profit | 39,798 | 37,619 | 116,096 | 108,280 |
Operating expenses: | ||||
Research and development | 5,199 | 5,154 | 15,989 | 14,808 |
Sales and marketing | 27,384 | 26,808 | 84,132 | 79,588 |
General and administrative | 13,312 | 15,667 | 41,343 | 42,575 |
Total operating expenses | 45,895 | 47,629 | 141,464 | 136,971 |
Loss from operations | (6,097) | (10,010) | (25,368) | (28,691) |
Other expense, net: | ||||
Foreign currency transaction loss | (547) | (12) | (1,099) | (1,552) |
Interest expense | (1,319) | (110) | (2,705) | (354) |
Total other expense, net | (1,866) | (122) | (3,804) | (1,906) |
Loss before income taxes | (7,963) | (10,132) | (29,172) | (30,597) |
Income tax (benefit) expense | (53) | 83 | 21 | 125 |
Net loss | $ (7,910) | $ (10,215) | $ (29,193) | $ (30,722) |
Basic and diluted (in dollars per share) | $ (0.19) | $ (0.25) | $ (0.70) | $ (0.77) |
Weighted average shares outstanding: | ||||
Basic and diluted (in shares) | 41,940,370 | 41,074,245 | 41,639,609 | 39,892,068 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (7,910) | $ (10,215) | $ (29,193) | $ (30,722) |
Other comprehensive (loss) income: | ||||
Foreign currency translation adjustment | (608) | (951) | (2,803) | 719 |
Other comprehensive (loss) income | (608) | (951) | (2,803) | 719 |
Comprehensive loss | $ (8,518) | $ (11,166) | $ (31,996) | $ (30,003) |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited) - 9 months ended Sep. 30, 2016 - USD ($) $ in Thousands | Total | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Accumulated Other Comprehensive Loss [Member] | Treasury Stock [Member] |
Beginning Balance (in shares) at Dec. 31, 2015 | 41,337,692 | 41,337,692 | ||||
Beginning Balance at Dec. 31, 2015 | $ 286,662 | $ 41 | $ 454,153 | $ (169,421) | $ 1,889 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net loss | (29,193) | (29,193) | ||||
Other comprehensive loss | (2,803) | (2,803) | ||||
Stock-based compensation expense | 5,381 | 5,381 | ||||
Convertible senior notes equity conversion option | 11,666 | 11,666 | ||||
Debt issuance costs allocated to equity | $ (680) | (680) | ||||
Issuances and exercise of stock-based compensation benefit plans, net of income tax (in shares) | 367,328 | 859,955 | ||||
Issuances and exercise of stock-based compensation benefit plans, net of income tax | $ 1,262 | $ 1 | 1,395 | $ (134) | ||
Ending Balance (in shares) at Sep. 30, 2016 | 42,197,647 | 42,197,647 | ||||
Ending Balance at Sep. 30, 2016 | $ 272,295 | $ 42 | $ 471,915 | $ (198,614) | $ (914) | $ (134) |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Operating activities | ||
Net loss | $ (29,193) | $ (30,722) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 21,452 | 18,396 |
Provision for allowance for doubtful accounts | (18) | 177 |
Provision for inventory reserves | 2,817 | 1,128 |
Stock-based compensation expense | 5,381 | 8,863 |
Accretion of discounts and amortization of issuance costs of convertible senior notes | 558 | 0 |
Deferred income taxes | (33) | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (5,292) | (7,729) |
Inventory | (6,466) | (6,839) |
Prepaid expenses and other assets | (7,636) | (5,262) |
Accounts payable, accrued expenses, and accrued payroll liabilities | 3,442 | 8,795 |
Net cash used in operating activities | (14,988) | (13,193) |
Investing activities | ||
Purchase of surgical instruments | (10,986) | (6,595) |
Purchase of property, plant and equipment | (16,338) | (2,424) |
Changes in cash restricted for leasehold improvements | 6,153 | 0 |
Purchase of intangible assets | (1,282) | (538) |
Net cash used in investing activities | (22,453) | (9,557) |
Financing activities | ||
Borrowings on bank line of credit | 19,500 | 25,000 |
Payments on bank line of credit | (19,500) | (25,000) |
Proceeds from issuance of convertible senior notes, net of issuance costs | 47,575 | 0 |
Proceeds from issuances of common stock, net of issuance costs | 0 | 54,401 |
Issuances and exercise of stock-based compensation benefit plans, net of income tax | 1,262 | 925 |
Net cash provided by financing activities | 48,837 | 55,326 |
Effect of exchange rate changes on cash and cash equivalents | 75 | (311) |
Net increase in cash and cash equivalents | 11,471 | 32,265 |
Cash and cash equivalents at beginning of period | 34,646 | 11,411 |
Cash and cash equivalents at end of period | 46,117 | 43,676 |
Significant non-cash investing and financing activities | ||
Leasehold improvements, including property under capital lease | 598 | 0 |
Deferred convertible senior notes issuance costs | 486 | 0 |
Common stock offering costs | 0 | 244 |
Cash paid for: | ||
Income taxes | 177 | 93 |
Interest | $ 339 | $ 91 |
GENERAL AND SUMMARY OF SIGNIFIC
GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES In this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to “K2M,” “the Company,” “we,” “us” and “our,” refer to K2M Group Holdings, Inc. together with its consolidated subsidiaries. We are a global medical device company focused on designing, developing and commercializing innovative complex spine and minimally invasive technologies and techniques. Our complex spine products are used by spine surgeons to treat some of the most difficult and challenging spinal pathologies, such as deformity (primarily scoliosis), trauma and tumor. We have applied our product development expertise in innovating complex spine technologies and techniques to the design, development, and commercialization of an expanding number of proprietary minimally invasive surgery, or MIS, products. Our MIS products are designed to allow for less invasive access to the spine and faster patient recovery times as compared to traditional open access surgical approaches for both complex spine and degenerative spine pathologies. We have leveraged these core competencies in the design, development and commercialization of an increasing number of products for patients suffering from degenerative spinal conditions. Unaudited Interim Results The accompanying condensed consolidated balance sheets as of September 30, 2016 and December 31, 2015 , the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive loss for the three and nine months ended September 30, 2016 and 2015 , the condensed consolidated statement of changes in stockholders’ equity as of September 30, 2016 , and the condensed consolidated statements of cash flows for the nine months ended September 30, 2016 and 2015 are unaudited. The unaudited interim consolidated financial statements have been prepared on the same basis of accounting as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary to present fairly our financial position and results of operations and cash flows for the periods presented. The results for the three and nine months ended September 30, 2016 are not necessarily indicative of future results. All information as of September 30, 2016 and for the three and nine month periods ending September 30, 2016 and 2015 within these notes to the condensed consolidated financial statements is unaudited. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States or US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Net Loss per Share Basic net loss per common share is determined by dividing the net loss allocable to common stockholders by the weighted average number of common shares outstanding during the periods presented, without consideration of common stock equivalents. Diluted loss per share is computed by dividing the net loss allocable to common stockholders by the weighted average number of shares of common stock and common stock equivalents outstanding for the period. The treasury stock method is used to determine the dilutive effect of our stock option grants and the if-converted method is used to determine the dilutive effect of the convertible senior notes. The weighted average shares used to calculate both basic and diluted loss per share are the same because common stock equivalents were excluded in the calculation of diluted loss per share because their effect would be anti-dilutive. Although included in our outstanding shares total as of September 30, 2016 , shares of restricted stock contingently issuable until their restrictions lapse and have been excluded from the weighted average shares outstanding. Foreign Currency Translation and Other Comprehensive Loss Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. Our reporting currency is the U.S. dollar, which is also the functional currency of our domestic entities, while the functional currency of our foreign subsidiaries are the British Pound, Euro and Swiss Franc. Assets and liabilities denominated in foreign currencies are translated at the rate of exchange on the balance sheet date. Revenues and expenses are translated using the average exchange rate for the period. Net gains and losses resulting from the translation of foreign financial statements are recorded in other comprehensive income (loss). Net foreign currency gains or losses resulting from transactions in currencies other than the functional currencies are included in other expense, net on the consolidated statements of operations. Recent Accounting Pronouncements We qualify as an “emerging growth company” (EGC) pursuant to the provisions of the JOBS Act and elected to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act which permits EGCs to defer compliance with new or revised accounting standards (the EGC extension) until non-issuers are required to comply with such standards. Accordingly, so long as we continue to qualify as an EGC, we will not have to adopt or comply with new or revised accounting standards until non-issuers are required to comply with such standards. In March 2016, the Financial Accounting Standards Board, or FASB issued ASU 2016-06, Contingent Put and Call Options in Debt Instruments (Topic 815) , which addresses the accounting for embedded derivatives related to debt contracts. The update clarifies that determining whether the economic characteristics of a put or call are clearly and closely related to its debt host requires only an assessment of the four-step decision sequence. It also indicates that entities are not required to separately assess whether the contingency itself is clearly and closely related. For public entities the guidance will be effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. All other entities, such as EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance for fiscal years beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018. The guidance may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of the initial application. Early adoption is permitted in any annual or interim period for which financial statements have not been issued or made available for issuance. We are currently assessing the impact of this guidance. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) , which addresses principal versus agent considerations, reporting revenue gross versus net in the new revenue recognition standard. The guidance clarifies how an entity should evaluate the unit of accounting to determine whether it is a specified good or service and how it should apply the control principle to certain types of arrangements. The guidance will be effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted for reporting periods beginning after December 15, 2016. All other entities, such as EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance for annual reporting periods beginning after December 15, 2018. The guidance may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of the initial application. We are currently assessing the impact of this guidance. In March 2016, the FASB issued ASU No. 2016-09, Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting , which is intended to improve employee share-based payment accounting for companies that issue share-based awards to their employees. This guidance simplifies the accounting for share-based payment transactions, including consequences of income tax award, classification as either equity or liability, treatment of forfeitures, and classification on statement of cash flows. The recognition, measurement and reporting for share-based payments will be affected by this new guidance. For public entities other than EGCs that have elected the EGC extension, the guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. All other entities, such as EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance for fiscal years beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018. Early adoption is permitted in any annual or interim period for which financial statements have not been issued or made available for issuance, but all of the guidance must be adopted in the same period. We are currently evaluating the impact of this guidance. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing , which includes final amendments to clarify the guidance on identifying performance obligations and accounting for licenses of intellectual property ("IP") in its new revenue recognition standard. The amendment allows entities to disregard goods or services that are immaterial in the context of a contract, assess whether the performance obligation is separately identifiable and whether the shipping and handling activities are a promised service in a contract. This guidance also clarifies how an entity should evaluate the nature of its promise in granting an IP license and when a promised good or service is distinct within the context of a contract. The guidance will be effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted for reporting periods beginning after December 15, 2016. All other entities, such as EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance for annual reporting periods beginning after December 15, 2018. We are currently assessing the impact of this guidance. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients , which clarifies that for a contract to be considered completed the entity should evaluate the collectability threshold or probability of collecting revenue. It provides that the fair value of noncash consideration such as equity should be measured at contract inception when determining the transaction price and any subsequent changes must be recorded as a gain or loss, not as revenue. The entity has the option to make an accounting policy election to exclude from the transaction price certain types of taxes such as sales tax, value-added tax and excise tax in lieu of evaluating such taxes they collect in all jurisdictions to determine whether a tax is levied to the entity or the customer. The guidance will be effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted for reporting periods beginning after December 15, 2016. All other entities, such as EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance for annual reporting periods beginning after December 15, 2018. We are currently assessing the impact of this guidance. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This guidance eliminates the diversity in practice related to the classification of certain cash receipts and payments for debt prepayment or extinguishment costs, the maturing of a zero coupon bond, the settlement of contingent liabilities arising from a business combination, proceeds from insurance settlements, distributions from certain equity method investees, and beneficial interests obtained in a financial asset securitization. It also provides clarifications related to separately identifiable cash-flows and application of the predominance principle based on evaluating the source and nature of the underlying cash flows when determining whether it is a financing, investing, operating or a combination of cash flow classifications. For public entities the guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. All other entities, such as EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted in any annual or interim period for which financial statements have not been issued or made available for issuance, but all of the guidance must be adopted in the same period. We are currently assessing the impact of this guidance. |
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE | 9 Months Ended |
Sep. 30, 2016 | |
Receivables [Abstract] | |
ACCOUNTS RECEIVABLE | ACCOUNTS RECEIVABLE The following table summarizes the accounts receivables, net of allowances: September 30, December 31, Accounts receivable $ 45,395 $ 41,210 Allowances (2,180 ) (2,437 ) Accounts receivable, net $ 43,215 $ 38,773 |
INVENTORY
INVENTORY | 9 Months Ended |
Sep. 30, 2016 | |
Inventory Disclosure [Abstract] | |
INVENTORY | INVENTORY The following table summarizes the inventory, net of allowances: September 30, December 31, Finished goods $ 99,478 $ 90,226 Inventory allowances (32,741 ) (28,224 ) Inventory, net $ 66,737 $ 62,002 Inventory includes surgical instruments available for sale with a carrying value of $ 10,499 and $ 8,946 at September 30, 2016 and December 31, 2015 , respectively. |
PREPAID AND OTHER CURRENT ASSET
PREPAID AND OTHER CURRENT ASSETS (Notes) | 9 Months Ended |
Sep. 30, 2016 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
PREPAIDS AND OTHER CURRENT ASSETS | PREPAID EXPENSES AND OTHER CURRENT ASSETS The following table summarizes prepaid expenses and other current assets: September 30, December 31, Restricted cash $ 517 $ 6,669 Landlord incentives for leasehold improvements — 6,454 Prepaid expenses 2,522 2,408 Other 3,404 4,289 Total $ 6,443 $ 19,820 Restricted cash represents funds designated for tenant improvements related to the new headquarters and operations facilities. Landlord incentives for leasehold improvements represents incentives to be provided by the Landlord of our new headquarters and operations facilities under the capital lease agreement, which commenced in October 2015. Such incentives were received from our landlord upon the completion of actual improvements. |
PROPERTY, PLANT AND EQUIPMENT (
PROPERTY, PLANT AND EQUIPMENT (Notes) | 9 Months Ended |
Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY, PLANT AND EQUIPMENT | PROPERTY, PLANT AND EQUIPMENT The following table summarizes property, plant and equipment: Estimated Useful Lives September 30, December 31, Buildings under capital lease 16 years $ 26,469 $ 26,469 Leasehold improvements, including property under capital lease 15 years 19,317 9,717 Equipment 3-5 years 3,754 3,054 Software 3 years 4,644 4,231 Computer equipment 3 years 1,050 1,493 Furniture and office equipment 5-7 years 3,678 1,050 Vehicles and other 3 years 749 795 Total 59,661 46,809 Less accumulated depreciation and amortization (8,640 ) (8,491 ) Property, plant and equipment, net $ 51,021 $ 38,318 Depreciation and amortization expense for property, plant and equipment was $ 1,374 and $ 423 for the three months ended September 30, 2016 and 2015 , respectively, and $ 3,526 and $ 1,513 for the nine months ended September 30, 2016 and 2015 , respectively. Included in this total is amortization expense for buildings under capital lease, for which occupancy commenced in October 2015, of $ 416 and $ 1,247 for the three and nine months ended September 30, 2016 . Interest expense on the capital lease obligation was $ 554 and $ 1,700 for the three and nine months ended September 30, 2016 . As of September 30, 2016 and December 31, 2015 , we had leasehold improvements of approximately $ 18,745 and $ 8,242 , respectively, for our new headquarters and operations facilities which were completed and placed in service in May 2016, following our occupancy of the new premises. Furniture and equipment at September 30, 2016 includes $ 4,059 of furniture and other capital equipment acquired for use in our new headquarters and operations facilities, which we began to depreciate in May 2016. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS | INTANGIBLE ASSETS Intangible assets, net comprise the following: September 30, 2016 Estimated Useful Lives Gross Accumulated Amortization Net Indefinite-lived intangible assets: Trademarks — $ 12,900 $ — $ 12,900 In-process research and development — 900 — 900 Other — 233 — 233 Subtotal 14,033 — 14,033 Subject to amortization Developed technology 4 - 6 years 62,000 (56,581 ) 5,419 Licensed technology 4 - 6 years 52,600 (52,437 ) 163 Customer relationships 4 - 7 years 29,700 (25,988 ) 3,712 Patents and other 2 - 17 years 3,277 (1,264 ) 2,013 Subtotal 147,577 (136,270 ) 11,307 Intangible assets, net $ 161,610 $ (136,270 ) $ 25,340 December 31, 2015 Estimated Useful Lives Gross Accumulated Amortization Net Indefinite-lived intangible assets: Trademarks — $ 12,900 $ — $ 12,900 In-process research and development — 900 — 900 Other — 266 — 266 Subtotal 14,066 — 14,066 Subject to amortization Developed technology 4 - 6 years 62,000 (52,243 ) 9,757 Licensed technology 4 - 6 years 52,600 (52,325 ) 275 Customer relationships 4 - 7 years 29,700 (22,805 ) 6,895 Patents and other 2 - 17 years 3,245 (1,115 ) 2,130 Subtotal 147,545 (128,488 ) 19,057 Intangible assets, net $ 161,611 $ (128,488 ) $ 33,123 Amortization expense of intangible assets was $ 2,594 and $ 2,560 for the three months ended September 30, 2016 and 2015 , respectively, and $ 7,781 and $ 7,733 for the nine months ended September 30, 2016 and 2015 , respectively. As of September 30, 2016 , the expected amortization expense for the remainder of 2016 and the following four years and thereafter is as follows: September 30, 2016 2016 $ 2,594 2017 6,763 2018 267 2019 257 2020 232 Thereafter 1,194 Total $ 11,307 |
OTHER ASSETS
OTHER ASSETS | 9 Months Ended |
Sep. 30, 2016 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
OTHER ASSETS | OTHER ASSETS Other assets consist of the following: September 30, December 31, Surgical instruments, net $ 26,936 $ 23,945 Restricted cash 2,411 1,298 Other 1,232 773 Total $ 30,579 $ 26,016 Surgical instruments are stated net of accumulated amortization and allowances of $ 31,603 and $ 26,609 at September 30, 2016 and December 31, 2015 , respectively. Amortization expense was $ 2,517 and $ 2,304 for the three months ended September 30, 2016 and 2015 , respectively, and $ 7,431 and $ 6,688 for the nine months ended September 30, 2016 and 2015 , respectively. Restricted cash balances includes deposits made on pending bids or contracts with customers. |
ACCRUED EXPENSES
ACCRUED EXPENSES | 9 Months Ended |
Sep. 30, 2016 | |
Payables and Accruals [Abstract] | |
ACCRUED EXPENSES | ACCRUED EXPENSES Accrued expenses consist of the following: September 30, December 31, Accrued commissions $ 5,834 $ 5,336 Accrued royalties 3,081 2,704 Other 4,874 5,519 Total $ 13,789 $ 13,559 |
DEBT (Notes)
DEBT (Notes) | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
DEBT | DEBT Convertible Senior Notes On August 11, 2016, we issued $ 50,000 aggregate principal amount of convertible senior notes (the “Notes”). The Notes pay interest at an annual rate of 4.125% , payable semi-annually in arrears on February 15 and August 15 of each year beginning on February 15, 2017 and mature on August 15, 2036, unless earlier converted, redeemed or repurchased by us. We received net proceeds from the sale of the Notes of $ 47,091 , after deducting underwriting discounts and commissions and offering expenses of $ 2,909 . The Notes are governed by an indenture (the “Indenture”) between the Company and the Bank of New York Mellon dated August 11, 2016. The Notes are senior, unsecured obligations of the Company and are equal in right of payment with our existing and future senior, unsecured indebtedness, senior in right of payment to our existing and future indebtedness that is expressly subordinated to the Notes, and effectively subordinated to our existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness. The Notes are structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent we are not a holder thereof) preferred equity, if any, of our subsidiaries. Noteholders may convert their notes at their option only in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2016, if the last reported sale price per share of our common stock for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter exceeds 130% of the conversion price on such trading day; (2) during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “measurement period”) in which the trading price per $ 1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on our common stock; (4) if we call the Notes for redemption; and (5) at any time from, and including, February 15, 2036 until the close of business on the second scheduled trading day immediately before the maturity date. We will settle conversions by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, based on the applicable conversion rate. The initial conversion rate is 45.7603 shares per $ 1,000 principal amount of Notes, which represents an initial conversion price of approximately $ 21.85 per share, and is subject to adjustment. If a “make-whole fundamental change” occurs on or before August 15, 2021, then we will in certain circumstances increase the conversion rate for a specified period of time. The Notes are redeemable, in whole or in part, at our option at any time, and from time to time, on or after August 15, 2021, at a cash redemption price equal to the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any. If a “fundamental change” occurs prior to the stated maturity date, then noteholders may require us to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any. In addition, the Indenture contains customary terms and covenants and events of default with respect to the Notes. Pursuant to ASC 470, we have bifurcated the debt and equity components of the Notes. The separation was performed by determining the fair value of a similar debt instrument without the associated equity component. That amount was then deducted from the initial gross proceeds of the Notes to arrive at a residual amount which was allocated to the conversion feature that is classified as equity. The difference between the principal amount of the Notes and estimated fair value of the liability component without the embedded equity component (representing the fair value of the embedded equity component) is recorded as a debt discount and an increase to additional paid in capital on the issuance date of the Notes. The initial fair value of the indebtedness and the embedded conversion option was $ 38,334 and $ 11,666 , respectively. The embedded conversion option was recorded in stockholders’ equity and as debt discount, to be subsequently accreted to interest expense over the term of the Notes. The initial purchaser discounts and commissions and offering expenses totaled $ 2,909 and were allocated between the liability and the equity component in proportion to the allocation of proceeds and accounted for as debt issuance costs and equity issuance costs, respectively. As a result, $ 2,228 attributable to the indebtedness was recorded as a reduction to the carrying value of the Notes, in accordance with our early adoption of ASU 2015-03 Simplifying the Presentation of Debt Issuance Costs , to be subsequently amortized as interest expense over the term of Notes, and $ 681 attributable to the equity component was recorded a reduction to additional paid-in-capital in stockholders’ equity. For the three and nine months ended September 30, 2016 , we recognized $ 558 of interest expense related to the Notes, of which $ 281 was accrued and will be paid in cash and $ 277 was non-cash accretion of the debt discounts recorded. The Notes have been classified as long-term debt on our condensed consolidated balance sheet. As of September 30, 2016 , the fair value of the Notes was $ 38,648 . Revolving Credit Facility We maintain a senior secured credit facilities credit agreement (as amended from time to time) with Silicon Valley Bank and Comerica Bank as Lenders, which is secured primarily by the assets of our operating subsidiaries in the United States and United Kingdom. On August 8, 2016, we entered into an amendment to the credit agreement, which extended its maturity date to April 26, 2018. As amended, the credit facility consists of a revolving credit facility ("Bank Line of Credit") of $ 55,000 with a sub-facility for letters of credit in the aggregate availability amount of $ 10,000 and a swingline sub-facility in the aggregate availability amount of $ 5,000 . In addition, the agreement was amended to permit us to make certain cash distributions for interest and other payments due under the Notes, distribute up to $ 4,000 in aggregate for interest payments on the Notes and up to $ 1,500 in aggregate for cash payments in connection with any conversions of the Notes. We were in compliance with all the financial and other covenants of the credit facility at September 30, 2016 . On August 31, 2016, we used a portion of the proceeds from the Notes offering to prepay all $ 19,500 aggregate principal amounts outstanding under the bank line of credit. For the three and nine months ended September 30, 2016 , we recorded interest expense of $ 143 and $ 263 , respectively. and amounts of $ 51 and $ 143 , respectively, related to the amortization of loan issuance fees. Our average interest rate on borrowings under the bank line of credit was 4.25% . As of September 30, 2016 , we had $ 46,558 of unused borrowing capacity under the revolving credit facility which is net of an issued but undrawn letter of credit for $ 6,000 representing a security deposit on the corporate headquarters and operations facilities lease. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION As of September 30, 2016 , there was a total of 2,004,755 shares of common stock available for future grants under our stock purchase and equity award or incentive plans. The following table summarizes the stock-based compensation expense by financial statement line item, employees and non-employees and type of award: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Cost of revenue $ 44 $ 200 $ 124 $ 517 Research and development 85 374 396 673 Sales and marketing 341 1,672 1,283 3,143 General and administrative 1,057 2,709 3,578 4,530 Total $ 1,527 $ 4,955 $ 5,381 $ 8,863 Employees $ 1,519 $ 4,907 $ 5,367 $ 8,638 Non-employees 8 48 14 225 Total $ 1,527 $ 4,955 $ 5,381 $ 8,863 Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Stock options $ 819 $ 3,279 $ 2,135 $ 4,388 Restricted stock 346 — 692 — Restricted stock units ("RSUs") 262 1,590 2,261 4,259 Employee Stock Purchase Plan 100 86 293 216 Total $ 1,527 $ 4,955 $ 5,381 $ 8,863 The following table summarizes stock option plans activity: Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (years) Aggregate Intrinsic Value (1) Outstanding at December 31, 2015 3,682,019 $ 11.51 5.98 $ 31,586 Granted 466,566 14.42 Exercised (367,328 ) 6.27 Expired (5,771 ) 5.73 Forfeited (33,707 ) 10.54 Outstanding at September 30, 2016 (2) 3,741,779 $ 12.40 6.27 $ 22,150 Vested or expected to vest: At September 30, 2016 (2) (3) 3,461,891 $ 12.57 6.36 $ 19,995 Vested: At September 30, 2016 1,743,949 $ 11.73 5.76 $ 11,205 (1) Calculated using the estimated per-share fair market value of our common stock on September 30, 2016 and December 31, 2015 , which was $ 17.78 , and $ 19.74 , respectively. (2) The total includes 993,740 performance-based options at September 30, 2016 . (3) Outstanding options, net of expected forfeitures. A summary of RSU and restricted stock activity during the nine months ended September 30, 2016 is as follows: RSUs Shares of Restricted Stock Outstanding at December 31, 2015 414,001 79,940 Granted 15,101 165,217 Vested (1) (2) (351,029 ) (26,652 ) Outstanding at September 30, 2016 78,073 218,505 (1) Represents RSUs vested in 2016 . These were net settled, which resulted in our withholding of 52,638 RSUs in lieu of withholding taxes during the nine months ended September 30, 2016 , and are included in this total. (2) Represents shares of restricted stock vested in 2016 . 8,611 shares were returned to us in lieu of withholding taxes during the nine months ended September 30, 2016 and are reflected as Treasury Stock. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Intellectual Property In the normal course of business, we enter into agreements to obtain the rights to certain intellectual property. These agreements may require an up-front payment, milestone payments and/or royalties. Typically, we have certain rights to cancel these agreements, with notice, without additional payments due other than the amount due at the time of cancellation. As of September 30, 2016 , the aggregate amount of these future payments, assuming achievement of applicable milestones and non-cancellation, was $ 1,418 over a period not less than five years. Royalties ranging from 2% to 10% of net sales may be due on the sales of related products. Some of the agreements contain minimum annual royalty amounts. In November 2011, we entered into an agreement to purchase certain proprietary technology which could require us to make additional aggregate payments of up to $ 13,350 should certain milestones be met, including milestones related to regulatory applications and approvals. Cumulative payments under this agreement totaled $ 1,350 through September 30, 2016 . In addition, milestone payments of $ 500 , $ 2,000 and $ 4,000 are due upon the achievement of net sales of related products of $ 10,000 , $ 25,000 and $ 50,000 , respectively. A royalty payment of 7% of net sales of related products may be due until such sales reaches $ 20,000 . The medical device industry is characterized by frequent claims and litigation, including claims regarding patent and other intellectual property rights as well as improper hiring practices. We are not aware of any pending or threatened legal proceeding against us that would have a material adverse effect on our business, operating results or financial condition. However, we are a party in multiple legal actions involving claimants seeking various remedies, including monetary damages, and none of the outcomes are certain or entirely within our control. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The provision for income taxes for the three and nine months ended September 30, 2016 and 2015 includes both domestic and foreign minimum income taxes and changes in the valuation allowance. For the three months ended September 30, 2016 and 2015 , the income tax (benefit) expense was $ (53) and $ 83 , resulting in an effective tax rate of 0.7% and (0.8)% , respectively. For the nine months ended September 30, 2016 and 2015 , income tax expense was $ 21 and $ 125 , resulting in an effective tax rate of (0.1)% and (0.4)% , respectively. The effective tax rate differs from the statutory rate due to minimum income taxes, permanent differences and changes in valuation allowances. |
NET LOSS PER SHARE
NET LOSS PER SHARE | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
NET LOSS PER SHARE | NET LOSS PER SHARE The following table sets forth the computation of basic and diluted loss per share: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Net loss per common share: Net loss $ (7,910 ) $ (10,215 ) $ (29,193 ) $ (30,722 ) Basic and diluted loss per common share: Basic and diluted weighted average common shares outstanding 41,940,370 41,074,245 41,639,609 39,892,068 Basic and diluted loss per common share $ (0.19 ) $ (0.25 ) $ (0.70 ) $ (0.77 ) The following outstanding Company securities, using the treasury stock method, were excluded from the above computations of net loss per share because their impact would be antidilutive due to the net losses during the three months ended September 30, 2016 and 2015 : Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Stock options 3,741,779 3,750,830 3,741,779 3,750,830 RSUs 78,073 414,001 78,073 414,001 Restricted stock 218,505 79,940 218,505 79,940 As discussed in Note 9, in August 2016, we issued $50,000 aggregate principal amount of Notes. The Notes may be settled, at our election, in cash, shares of our common stock or combination of cash and shares of our common stock. For purposes of calculating the maximum dilutive impact, it is presumed that the Notes will be settled in common stock with the resulting potential common shares included in diluted earnings per share if the effect is more dilutive. The effect of the conversion of Notes is excluded from the calculation of diluted loss per share because the net loss for the three and nine months ended September 30, 2016 causes such securities to be antidilutive. The potential dilutive effect of these securities is shown in the table below: Three Months Ended Nine Months Ended September 30, 2016 September 30, 2016 Conversion of Notes 2,917,165 2,917,165 |
SEGMENT AND GEOGRAPHICAL CONCEN
SEGMENT AND GEOGRAPHICAL CONCENTRATION | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting [Abstract] | |
SEGMENT AND GEOGRAPHICAL CONCENTRATION | SEGMENT AND GEOGRAPHICAL CONCENTRATION Operating segments are defined as components of an enterprise for which separate discrete financial information is available and evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. We manage the business globally within one reporting segment. Segment information is consistent with how management reviews the business, makes investing and resource allocation decisions and assesses operating performance. Products are sold principally in the United States. International revenue represented 22.5% and 23.7% of total revenue for the three and nine months ended September 30, 2016 ; however, revenue earned in any individual foreign country is below 10% of our consolidated revenue. The following table represents total revenue by geographic area, based on the location of the customer: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 United States $ 45,978 $ 39,459 $ 133,409 $ 116,055 International 13,332 15,550 41,434 45,732 Total $ 59,310 $ 55,009 $ 174,843 $ 161,787 We classify sales within the United States into three categories: complex spine pathologies, minimally invasive procedures and degenerative and other conditions. A significant portion of our international revenue is derived from our distributor partners who do not report their product usage at the surgeon or hospital level, which prevents us from providing a specific breakdown for our international revenue among its three product categories. These sales transactions are settled when we ship the product to the agent. In the fourth quarter of 2015, we refined our reporting of procedure revenue that included the sale of certain single-use MIS products which are sold in support of degenerative surgical procedures as degenerative revenue. Historically these sales were reflected in the MIS product category. As a result of this reclassification, our historically reported MIS revenue has decreased and our degenerative revenue has increased $ 1,057 and $ 2,358 for the three and nine months ended September 30, 2015 to conform to the current year presentation. The following table represents domestic revenue by current procedure category: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Complex spine $ 19,516 $ 16,852 $ 53,981 $ 48,204 Minimally invasive 6,767 6,344 20,653 17,766 Degenerative 19,695 16,263 58,775 50,085 45,978 39,459 133,409 116,055 International 13,332 15,550 41,434 45,732 Total $ 59,310 $ 55,009 $ 174,843 $ 161,787 |
GENERAL AND SUMMARY OF SIGNIF22
GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States or US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates |
Net Loss per Share | Net Loss per Share Basic net loss per common share is determined by dividing the net loss allocable to common stockholders by the weighted average number of common shares outstanding during the periods presented, without consideration of common stock equivalents. Diluted loss per share is computed by dividing the net loss allocable to common stockholders by the weighted average number of shares of common stock and common stock equivalents outstanding for the period. The treasury stock method is used to determine the dilutive effect of our stock option grants and the if-converted method is used to determine the dilutive effect of the convertible senior notes. The weighted average shares used to calculate both basic and diluted loss per share are the same because common stock equivalents were excluded in the calculation of diluted loss per share because their effect would be anti-dilutive. Although included in our outstanding shares total as of September 30, 2016 , shares of restricted stock contingently issuable until their restrictions lapse and have been excluded from the weighted average shares outstanding. |
Foreign Currency Translation and Other Comprehensive Loss | Foreign Currency Translation and Other Comprehensive Loss Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. Our reporting currency is the U.S. dollar, which is also the functional currency of our domestic entities, while the functional currency of our foreign subsidiaries are the British Pound, Euro and Swiss Franc. Assets and liabilities denominated in foreign currencies are translated at the rate of exchange on the balance sheet date. Revenues and expenses are translated using the average exchange rate for the period. Net gains and losses resulting from the translation of foreign financial statements are recorded in other comprehensive income (loss). Net foreign currency gains or losses resulting from transactions in currencies other than the functional currencies are included in other expense, net on the consolidated statements of operations. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements We qualify as an “emerging growth company” (EGC) pursuant to the provisions of the JOBS Act and elected to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act which permits EGCs to defer compliance with new or revised accounting standards (the EGC extension) until non-issuers are required to comply with such standards. Accordingly, so long as we continue to qualify as an EGC, we will not have to adopt or comply with new or revised accounting standards until non-issuers are required to comply with such standards. In March 2016, the Financial Accounting Standards Board, or FASB issued ASU 2016-06, Contingent Put and Call Options in Debt Instruments (Topic 815) , which addresses the accounting for embedded derivatives related to debt contracts. The update clarifies that determining whether the economic characteristics of a put or call are clearly and closely related to its debt host requires only an assessment of the four-step decision sequence. It also indicates that entities are not required to separately assess whether the contingency itself is clearly and closely related. For public entities the guidance will be effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. All other entities, such as EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance for fiscal years beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018. The guidance may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of the initial application. Early adoption is permitted in any annual or interim period for which financial statements have not been issued or made available for issuance. We are currently assessing the impact of this guidance. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) , which addresses principal versus agent considerations, reporting revenue gross versus net in the new revenue recognition standard. The guidance clarifies how an entity should evaluate the unit of accounting to determine whether it is a specified good or service and how it should apply the control principle to certain types of arrangements. The guidance will be effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted for reporting periods beginning after December 15, 2016. All other entities, such as EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance for annual reporting periods beginning after December 15, 2018. The guidance may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of the initial application. We are currently assessing the impact of this guidance. In March 2016, the FASB issued ASU No. 2016-09, Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting , which is intended to improve employee share-based payment accounting for companies that issue share-based awards to their employees. This guidance simplifies the accounting for share-based payment transactions, including consequences of income tax award, classification as either equity or liability, treatment of forfeitures, and classification on statement of cash flows. The recognition, measurement and reporting for share-based payments will be affected by this new guidance. For public entities other than EGCs that have elected the EGC extension, the guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. All other entities, such as EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance for fiscal years beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018. Early adoption is permitted in any annual or interim period for which financial statements have not been issued or made available for issuance, but all of the guidance must be adopted in the same period. We are currently evaluating the impact of this guidance. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing , which includes final amendments to clarify the guidance on identifying performance obligations and accounting for licenses of intellectual property ("IP") in its new revenue recognition standard. The amendment allows entities to disregard goods or services that are immaterial in the context of a contract, assess whether the performance obligation is separately identifiable and whether the shipping and handling activities are a promised service in a contract. This guidance also clarifies how an entity should evaluate the nature of its promise in granting an IP license and when a promised good or service is distinct within the context of a contract. The guidance will be effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted for reporting periods beginning after December 15, 2016. All other entities, such as EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance for annual reporting periods beginning after December 15, 2018. We are currently assessing the impact of this guidance. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients , which clarifies that for a contract to be considered completed the entity should evaluate the collectability threshold or probability of collecting revenue. It provides that the fair value of noncash consideration such as equity should be measured at contract inception when determining the transaction price and any subsequent changes must be recorded as a gain or loss, not as revenue. The entity has the option to make an accounting policy election to exclude from the transaction price certain types of taxes such as sales tax, value-added tax and excise tax in lieu of evaluating such taxes they collect in all jurisdictions to determine whether a tax is levied to the entity or the customer. The guidance will be effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted for reporting periods beginning after December 15, 2016. All other entities, such as EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance for annual reporting periods beginning after December 15, 2018. We are currently assessing the impact of this guidance. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This guidance eliminates the diversity in practice related to the classification of certain cash receipts and payments for debt prepayment or extinguishment costs, the maturing of a zero coupon bond, the settlement of contingent liabilities arising from a business combination, proceeds from insurance settlements, distributions from certain equity method investees, and beneficial interests obtained in a financial asset securitization. It also provides clarifications related to separately identifiable cash-flows and application of the predominance principle based on evaluating the source and nature of the underlying cash flows when determining whether it is a financing, investing, operating or a combination of cash flow classifications. For public entities the guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. All other entities, such as EGCs that have elected the EGC extension, including us, and non-public entities will be required to comply with the guidance for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted in any annual or interim period for which financial statements have not been issued or made available for issuance, but all of the guidance must be adopted in the same period. We are currently assessing the impact of this guidance. |
ACCOUNTS RECEIVABLE - (Tables)
ACCOUNTS RECEIVABLE - (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Receivables [Abstract] | |
Schedule of Accounts Receivable | The following table summarizes the accounts receivables, net of allowances: September 30, December 31, Accounts receivable $ 45,395 $ 41,210 Allowances (2,180 ) (2,437 ) Accounts receivable, net $ 43,215 $ 38,773 |
INVENTORY - (Tables)
INVENTORY - (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Inventory Disclosure [Abstract] | |
Schedule of Current Inventory | The following table summarizes the inventory, net of allowances: September 30, December 31, Finished goods $ 99,478 $ 90,226 Inventory allowances (32,741 ) (28,224 ) Inventory, net $ 66,737 $ 62,002 |
PREPAID AND OTHER CURRENT ASS25
PREPAID AND OTHER CURRENT ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of prepaid expenses and other current assets | The following table summarizes prepaid expenses and other current assets: September 30, December 31, Restricted cash $ 517 $ 6,669 Landlord incentives for leasehold improvements — 6,454 Prepaid expenses 2,522 2,408 Other 3,404 4,289 Total $ 6,443 $ 19,820 |
PROPERTY, PLANT AND EQUIPMENT26
PROPERTY, PLANT AND EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment [Table Text Block] | The following table summarizes property, plant and equipment: Estimated Useful Lives September 30, December 31, Buildings under capital lease 16 years $ 26,469 $ 26,469 Leasehold improvements, including property under capital lease 15 years 19,317 9,717 Equipment 3-5 years 3,754 3,054 Software 3 years 4,644 4,231 Computer equipment 3 years 1,050 1,493 Furniture and office equipment 5-7 years 3,678 1,050 Vehicles and other 3 years 749 795 Total 59,661 46,809 Less accumulated depreciation and amortization (8,640 ) (8,491 ) Property, plant and equipment, net $ 51,021 $ 38,318 |
INTANGIBLE ASSETS - (Tables)
INTANGIBLE ASSETS - (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets and Goodwill | 6. INTANGIBLE ASSETS Intangible assets, net comprise the following: September 30, 2016 Estimated Useful Lives Gross Accumulated Amortization Net Indefinite-lived intangible assets: Trademarks — $ 12,900 $ — $ 12,900 In-process research and development — 900 — 900 Other — 233 — 233 Subtotal 14,033 — 14,033 Subject to amortization Developed technology 4 - 6 years 62,000 (56,581 ) 5,419 Licensed technology 4 - 6 years 52,600 (52,437 ) 163 Customer relationships 4 - 7 years 29,700 (25,988 ) 3,712 Patents and other 2 - 17 years 3,277 (1,264 ) 2,013 Subtotal 147,577 (136,270 ) 11,307 Intangible assets, net $ 161,610 $ (136,270 ) $ 25,340 December 31, 2015 Estimated Useful Lives Gross Accumulated Amortization Net Indefinite-lived intangible assets: Trademarks — $ 12,900 $ — $ 12,900 In-process research and development — 900 — 900 Other — 266 — 266 Subtotal 14,066 — 14,066 Subject to amortization Developed technology 4 - 6 years 62,000 (52,243 ) 9,757 Licensed technology 4 - 6 years 52,600 (52,325 ) 275 Customer relationships 4 - 7 years 29,700 (22,805 ) 6,895 Patents and other 2 - 17 years 3,245 (1,115 ) 2,130 Subtotal 147,545 (128,488 ) 19,057 Intangible assets, net $ 161,611 $ (128,488 ) $ 33,123 |
Schedule of Expected Amortization Expense | As of September 30, 2016 , the expected amortization expense for the remainder of 2016 and the following four years and thereafter is as follows: September 30, 2016 2016 $ 2,594 2017 6,763 2018 267 2019 257 2020 232 Thereafter 1,194 Total $ 11,307 |
OTHER ASSETS - (Tables)
OTHER ASSETS - (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of Other Assets | Other assets consist of the following: September 30, December 31, Surgical instruments, net $ 26,936 $ 23,945 Restricted cash 2,411 1,298 Other 1,232 773 Total $ 30,579 $ 26,016 |
ACCRUED EXPENSES - (Tables)
ACCRUED EXPENSES - (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Expenses | Accrued expenses consist of the following: September 30, December 31, Accrued commissions $ 5,834 $ 5,336 Accrued royalties 3,081 2,704 Other 4,874 5,519 Total $ 13,789 $ 13,559 |
STOCK-BASED COMPENSATION - (Tab
STOCK-BASED COMPENSATION - (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of stock-based compensation expense | The following table summarizes the stock-based compensation expense by financial statement line item, employees and non-employees and type of award: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Cost of revenue $ 44 $ 200 $ 124 $ 517 Research and development 85 374 396 673 Sales and marketing 341 1,672 1,283 3,143 General and administrative 1,057 2,709 3,578 4,530 Total $ 1,527 $ 4,955 $ 5,381 $ 8,863 Employees $ 1,519 $ 4,907 $ 5,367 $ 8,638 Non-employees 8 48 14 225 Total $ 1,527 $ 4,955 $ 5,381 $ 8,863 Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Stock options $ 819 $ 3,279 $ 2,135 $ 4,388 Restricted stock 346 — 692 — Restricted stock units ("RSUs") 262 1,590 2,261 4,259 Employee Stock Purchase Plan 100 86 293 216 Total $ 1,527 $ 4,955 $ 5,381 $ 8,863 |
Schedule of employee stock option plan activity | The following table summarizes stock option plans activity: Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (years) Aggregate Intrinsic Value (1) Outstanding at December 31, 2015 3,682,019 $ 11.51 5.98 $ 31,586 Granted 466,566 14.42 Exercised (367,328 ) 6.27 Expired (5,771 ) 5.73 Forfeited (33,707 ) 10.54 Outstanding at September 30, 2016 (2) 3,741,779 $ 12.40 6.27 $ 22,150 Vested or expected to vest: At September 30, 2016 (2) (3) 3,461,891 $ 12.57 6.36 $ 19,995 Vested: At September 30, 2016 1,743,949 $ 11.73 5.76 $ 11,205 (1) Calculated using the estimated per-share fair market value of our common stock on September 30, 2016 and December 31, 2015 , which was $ 17.78 , and $ 19.74 , respectively. (2) The total includes 993,740 performance-based options at September 30, 2016 . (3) Outstanding options, net of expected forfeitures. |
Schedule of restricted stock and RSU activity | A summary of RSU and restricted stock activity during the nine months ended September 30, 2016 is as follows: RSUs Shares of Restricted Stock Outstanding at December 31, 2015 414,001 79,940 Granted 15,101 165,217 Vested (1) (2) (351,029 ) (26,652 ) Outstanding at September 30, 2016 78,073 218,505 (1) Represents RSUs vested in 2016 . These were net settled, which resulted in our withholding of 52,638 RSUs in lieu of withholding taxes during the nine months ended September 30, 2016 , and are included in this total. (2) Represents shares of restricted stock vested in 2016 . 8,611 shares were returned to us in lieu of withholding taxes during the nine months ended September 30, 2016 and are reflected as Treasury Stock. |
NET LOSS PER SHARE - (Tables)
NET LOSS PER SHARE - (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Schedule of Basic and Diluted Earnings Per Share | The following table sets forth the computation of basic and diluted loss per share: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Net loss per common share: Net loss $ (7,910 ) $ (10,215 ) $ (29,193 ) $ (30,722 ) Basic and diluted loss per common share: Basic and diluted weighted average common shares outstanding 41,940,370 41,074,245 41,639,609 39,892,068 Basic and diluted loss per common share $ (0.19 ) $ (0.25 ) $ (0.70 ) $ (0.77 ) |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The following outstanding Company securities, using the treasury stock method, were excluded from the above computations of net loss per share because their impact would be antidilutive due to the net losses during the three months ended September 30, 2016 and 2015 : Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Stock options 3,741,779 3,750,830 3,741,779 3,750,830 RSUs 78,073 414,001 78,073 414,001 Restricted stock 218,505 79,940 218,505 79,940 As discussed in Note 9, in August 2016, we issued $50,000 aggregate principal amount of Notes. The Notes may be settled, at our election, in cash, shares of our common stock or combination of cash and shares of our common stock. For purposes of calculating the maximum dilutive impact, it is presumed that the Notes will be settled in common stock with the resulting potential common shares included in diluted earnings per share if the effect is more dilutive. The effect of the conversion of Notes is excluded from the calculation of diluted loss per share because the net loss for the three and nine months ended September 30, 2016 causes such securities to be antidilutive. The potential dilutive effect of these securities is shown in the table below: Three Months Ended Nine Months Ended September 30, 2016 September 30, 2016 Conversion of Notes 2,917,165 2,917,165 |
SEGMENT AND GEOGRAPHICAL CONC32
SEGMENT AND GEOGRAPHICAL CONCENTRATION - (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting [Abstract] | |
Schedule of Revenue by Geographic Area | The following table represents total revenue by geographic area, based on the location of the customer: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 United States $ 45,978 $ 39,459 $ 133,409 $ 116,055 International 13,332 15,550 41,434 45,732 Total $ 59,310 $ 55,009 $ 174,843 $ 161,787 |
Schedule of Revenue by Products | The following table represents domestic revenue by current procedure category: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Complex spine $ 19,516 $ 16,852 $ 53,981 $ 48,204 Minimally invasive 6,767 6,344 20,653 17,766 Degenerative 19,695 16,263 58,775 50,085 45,978 39,459 133,409 116,055 International 13,332 15,550 41,434 45,732 Total $ 59,310 $ 55,009 $ 174,843 $ 161,787 |
ACCOUNTS RECEIVABLE - (Details)
ACCOUNTS RECEIVABLE - (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Receivables [Abstract] | ||
Accounts receivable | $ 45,395 | $ 41,210 |
Allowances | (2,180) | (2,437) |
Accounts receivable, net | $ 43,215 | $ 38,773 |
INVENTORY - (Details)
INVENTORY - (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Inventory [Line Items] | ||
Finished goods | $ 99,478 | $ 90,226 |
Inventory allowances | (32,741) | (28,224) |
Inventory, net | 66,737 | 62,002 |
Surgical and Medical Instruments | ||
Inventory [Line Items] | ||
Inventory, net | $ 10,499 | $ 8,946 |
PREPAID AND OTHER CURRENT ASS35
PREPAID AND OTHER CURRENT ASSETS (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Restricted cash | $ 517 | $ 6,669 |
Landlord incentives for leasehold improvements | 0 | 6,454 |
Prepaid expenses | 2,522 | 2,408 |
Other | 3,404 | 4,289 |
Total | $ 6,443 | $ 19,820 |
PROPERTY, PLANT AND EQUIPMENT36
PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Dec. 31, 2015 | |
Property, Plant and Equipment [Line Items] | ||
Total | $ 59,661 | $ 46,809 |
Less accumulated depreciation and amortization | (8,640) | (8,491) |
Property, plant and equipment, net | $ 51,021 | 38,318 |
Buildings under capital lease | ||
Property, Plant and Equipment [Line Items] | ||
Estimated Useful Lives | 16 years | |
Total | $ 26,469 | 26,469 |
Leasehold improvements, including property under capital lease | ||
Property, Plant and Equipment [Line Items] | ||
Estimated Useful Lives | 15 years | |
Total | $ 19,317 | 9,717 |
Equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total | $ 3,754 | 3,054 |
Software | ||
Property, Plant and Equipment [Line Items] | ||
Estimated Useful Lives | 3 years | |
Total | $ 4,644 | 4,231 |
Computer equipment | ||
Property, Plant and Equipment [Line Items] | ||
Estimated Useful Lives | 3 years | |
Total | $ 1,050 | 1,493 |
Furniture and office equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total | $ 3,678 | 1,050 |
Vehicles and other | ||
Property, Plant and Equipment [Line Items] | ||
Estimated Useful Lives | 3 years | |
Total | $ 749 | $ 795 |
Minimum | Equipment | ||
Property, Plant and Equipment [Line Items] | ||
Estimated Useful Lives | 3 years | |
Minimum | Furniture and office equipment | ||
Property, Plant and Equipment [Line Items] | ||
Estimated Useful Lives | 5 years | |
Maximum | Equipment | ||
Property, Plant and Equipment [Line Items] | ||
Estimated Useful Lives | 5 years | |
Maximum | Furniture and office equipment | ||
Property, Plant and Equipment [Line Items] | ||
Estimated Useful Lives | 7 years |
PROPERTY, PLANT AND EQUIPMENT P
PROPERTY, PLANT AND EQUIPMENT PPE narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Property, Plant and Equipment [Line Items] | |||||
Depreciation | $ 1,374 | $ 423 | $ 3,526 | $ 1,513 | |
Capital Leases, Income Statement, Amortization Expense | 416 | 1,247 | |||
Interest Expense, Lessee, Assets under Capital Lease | 554 | 1,700 | |||
Total | 59,661 | 59,661 | $ 46,809 | ||
Construction in Progress | |||||
Property, Plant and Equipment [Line Items] | |||||
Leasehold Improvements, Gross | 18,745 | 18,745 | 8,242 | ||
Furniture and office equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Total | 3,678 | 3,678 | $ 1,050 | ||
Corporate Headquarters and Other Operational Facilities | Furniture and office equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Total | $ 4,059 | $ 4,059 |
INTANGIBLE ASSETS - (Details)
INTANGIBLE ASSETS - (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Schedule of Intangible Asset by Major Class [Line Items] | |||||
Indefinite-lived intangible assets | $ 14,033 | $ 14,033 | $ 14,066 | ||
Subject to amortization, Gross | 147,577 | 147,577 | 147,545 | ||
Accumulated Amortization | (136,270) | (136,270) | (128,488) | ||
Total | 11,307 | 11,307 | 19,057 | ||
Intangible Assets, Gross | 161,610 | 161,610 | 161,611 | ||
Intangible Assets, Net | 25,340 | 25,340 | 33,123 | ||
Amortization expense | 2,594 | $ 2,560 | 7,781 | $ 7,733 | |
Developed technology | |||||
Schedule of Intangible Asset by Major Class [Line Items] | |||||
Subject to amortization, Gross | 62,000 | 62,000 | 62,000 | ||
Accumulated Amortization | (56,581) | (56,581) | (52,243) | ||
Total | 5,419 | 5,419 | 9,757 | ||
Licensed technology | |||||
Schedule of Intangible Asset by Major Class [Line Items] | |||||
Subject to amortization, Gross | 52,600 | 52,600 | 52,600 | ||
Accumulated Amortization | (52,437) | (52,437) | (52,325) | ||
Total | 163 | 163 | 275 | ||
Customer relationships | |||||
Schedule of Intangible Asset by Major Class [Line Items] | |||||
Subject to amortization, Gross | 29,700 | 29,700 | 29,700 | ||
Accumulated Amortization | (25,988) | (25,988) | (22,805) | ||
Total | 3,712 | 3,712 | 6,895 | ||
Patents and other | |||||
Schedule of Intangible Asset by Major Class [Line Items] | |||||
Subject to amortization, Gross | 3,277 | 3,277 | 3,245 | ||
Accumulated Amortization | (1,264) | (1,264) | (1,115) | ||
Total | 2,013 | 2,013 | 2,130 | ||
Trademarks | |||||
Schedule of Intangible Asset by Major Class [Line Items] | |||||
Indefinite-lived intangible assets | 12,900 | 12,900 | 12,900 | ||
In-process research and development | |||||
Schedule of Intangible Asset by Major Class [Line Items] | |||||
Indefinite-lived intangible assets | 900 | 900 | 900 | ||
Other | |||||
Schedule of Intangible Asset by Major Class [Line Items] | |||||
Indefinite-lived intangible assets | $ 233 | $ 233 | $ 266 | ||
Minimum | Developed technology | |||||
Schedule of Intangible Asset by Major Class [Line Items] | |||||
Estimated Useful Lives | 4 years | 4 years | |||
Minimum | Licensed technology | |||||
Schedule of Intangible Asset by Major Class [Line Items] | |||||
Estimated Useful Lives | 4 years | 4 years | |||
Minimum | Customer relationships | |||||
Schedule of Intangible Asset by Major Class [Line Items] | |||||
Estimated Useful Lives | 4 years | 4 years | |||
Minimum | Patents and other | |||||
Schedule of Intangible Asset by Major Class [Line Items] | |||||
Estimated Useful Lives | 2 years | 2 years | |||
Maximum | Developed technology | |||||
Schedule of Intangible Asset by Major Class [Line Items] | |||||
Estimated Useful Lives | 6 years | 6 years | |||
Maximum | Licensed technology | |||||
Schedule of Intangible Asset by Major Class [Line Items] | |||||
Estimated Useful Lives | 6 years | 6 years | |||
Maximum | Customer relationships | |||||
Schedule of Intangible Asset by Major Class [Line Items] | |||||
Estimated Useful Lives | 7 years | 7 years | |||
Maximum | Patents and other | |||||
Schedule of Intangible Asset by Major Class [Line Items] | |||||
Estimated Useful Lives | 17 years | 17 years |
INTANGIBLE ASSETS Schedule of E
INTANGIBLE ASSETS Schedule of Expected Amortization Expense (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2,016 | $ 2,594 | |
2,017 | 6,763 | |
2,018 | 267 | |
2,019 | 257 | |
2,020 | 232 | |
Thereafter | 1,194 | |
Total | $ 11,307 | $ 19,057 |
OTHER ASSETS - (Details)
OTHER ASSETS - (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||
Surgical instruments, net | $ 26,936 | $ 26,936 | $ 23,945 | ||
Restricted cash | 2,411 | 2,411 | 1,298 | ||
Other | 1,232 | 1,232 | 773 | ||
Total | 30,579 | 30,579 | 26,016 | ||
Surgical instruments accumulated amortization | 31,603 | 31,603 | $ 26,609 | ||
Amortization expense | $ 2,517 | $ 2,304 | $ 7,431 | $ 6,688 |
ACCRUED EXPENSES - (Details)
ACCRUED EXPENSES - (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Payables and Accruals [Abstract] | ||
Accrued commissions | $ 5,834 | $ 5,336 |
Accrued royalties | 3,081 | 2,704 |
Other | 4,874 | 5,519 |
Total | $ 13,789 | $ 13,559 |
DEBT (Details)
DEBT (Details) | Aug. 11, 2016USD ($) | Sep. 30, 2016USD ($)$ / shares | Sep. 30, 2015USD ($) | Sep. 30, 2016USD ($)trading_day$ / shares | Sep. 30, 2015USD ($) | Aug. 31, 2016USD ($) |
Debt Instrument [Line Items] | ||||||
Proceeds from issuance of convertible senior notes, net of issuance costs | $ 47,575,000 | $ 0 | ||||
Deferred convertible senior notes issuance costs | 486,000 | 0 | ||||
Repayments of Lines of Credit | 19,500,000 | 25,000,000 | ||||
Interest Expense | $ 1,319,000 | $ 110,000 | 2,705,000 | $ 354,000 | ||
Letter of credit | $ 6,000,000 | 6,000,000 | ||||
Convertible Senior Notes Due 2036 | ||||||
Debt Instrument [Line Items] | ||||||
Principal amounts of debt | $ 50,000,000 | $ 50,000,000 | ||||
Interest rate (as a percent) | 4.125% | |||||
Proceeds from issuance of convertible senior notes, net of issuance costs | 47,091,000 | |||||
Deferred convertible senior notes issuance costs | $ 2,909,000 | |||||
Convertible debt, threshold trading days | trading_day | 20 | |||||
Convertible debt, threshold consecutive trading days | 30 days | |||||
Convertible debt, threshold percentage of stock price trigger | 130.00% | |||||
Convertible debt, measurement period (in trading days) | 5 days | |||||
Convertible debt, maximum percentage of trading price per $1,000 principal amount trigger | 98.00% | |||||
Convertible debt, conversion ratio | 0.0457603 | |||||
Convertible debt, conversion price (in usd per share) | $ / shares | $ 21.85 | $ 21.85 | ||||
Fair value of long term debt | $ 38,334,000 | $ 36,352,000 | $ 36,352,000 | |||
Fair value of embedded conversion option | $ 11,666,000 | |||||
Interest expense | 558,000 | 558,000 | ||||
Interest expense to be paid in cash | 281,000 | 281,000 | ||||
Interest expense, non cash accretion of debt discount | 277,000 | 277,000 | ||||
Long-term debt | $ 38,648,000 | $ 38,648,000 | ||||
Revolving Credit Facility | ||||||
Debt Instrument [Line Items] | ||||||
Long-term debt, average interest rate (as a percent) | 4.25% | 4.25% | ||||
Unused borrowing capacity | $ 46,558,000 | $ 46,558,000 | ||||
Revolving Credit Facility | October 2015 Amendment | ||||||
Debt Instrument [Line Items] | ||||||
Line of Credit Facility, Maximum Borrowing Capacity | 55,000,000 | 55,000,000 | ||||
Revolving Credit Facility | Credit Agreement 2012 | ||||||
Debt Instrument [Line Items] | ||||||
Interest Expense | 143,000 | 263,000 | ||||
Revolving Credit Facility | Line of Credit | Amended Credit Agreement 2012 | ||||||
Debt Instrument [Line Items] | ||||||
Maximum amount of distributions for interest payments | 4,000,000 | |||||
Maximum amount of distributions for cash payments | $ 1,500,000 | |||||
Revolving Credit Facility | Line of Credit | Credit Agreement 2012 | ||||||
Debt Instrument [Line Items] | ||||||
Amortization of Financing Costs | 51,000 | 143,000 | ||||
Letter of Credit | Line of Credit | Amended Credit Agreement 2012 | ||||||
Debt Instrument [Line Items] | ||||||
Line of Credit Facility, Maximum Borrowing Capacity | 10,000,000 | 10,000,000 | ||||
Revolving Credit Facility, Swing Line Loan | Line of Credit | Amended Credit Agreement 2012 | ||||||
Debt Instrument [Line Items] | ||||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 5,000,000 | 5,000,000 | ||||
Accounting Standards Update 2015-03 | Long-term Debt | Convertible Senior Notes Due 2036 | ||||||
Debt Instrument [Line Items] | ||||||
Deferred convertible senior notes issuance costs | (2,228,000) | |||||
Accounting Standards Update 2015-03 | Additional Paid-in Capital | Convertible Senior Notes Due 2036 | ||||||
Debt Instrument [Line Items] | ||||||
Deferred convertible senior notes issuance costs | $ (681,000) |
STOCK-BASED COMPENSATION - Narr
STOCK-BASED COMPENSATION - Narrative (Details) | Sep. 30, 2016shares |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant | 2,004,755 |
STOCK-BASED COMPENSATION - Allo
STOCK-BASED COMPENSATION - Allocation of Share-based Compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Allocated stock-based compensation expense | $ 1,527 | $ 4,955 | $ 5,381 | $ 8,863 |
Cost of revenue | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Allocated stock-based compensation expense | 44 | 200 | 124 | 517 |
Research and development | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Allocated stock-based compensation expense | 85 | 374 | 396 | 673 |
Sales and marketing | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Allocated stock-based compensation expense | 341 | 1,672 | 1,283 | 3,143 |
General and administrative | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Allocated stock-based compensation expense | 1,057 | 2,709 | 3,578 | 4,530 |
Employees | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Allocated stock-based compensation expense | 1,519 | 4,907 | 5,367 | 8,638 |
Non-employees | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Allocated stock-based compensation expense | 8 | 48 | 14 | 225 |
Stock options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Allocated stock-based compensation expense | 819 | 3,279 | 2,135 | 4,388 |
Restricted stock | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Allocated stock-based compensation expense | 346 | 0 | 692 | 0 |
Restricted stock units (RSUs) | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Allocated stock-based compensation expense | 262 | 1,590 | 2,261 | 4,259 |
Employee Stock Purchase Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Allocated stock-based compensation expense | $ 100 | $ 86 | $ 293 | $ 216 |
STOCK-BASED COMPENSATION - Summ
STOCK-BASED COMPENSATION - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2016 | Dec. 31, 2015 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||||
Outstanding Beginning Balance, Shares | 3,682,019 | |||
Granted, Shares | 466,566 | |||
Exercised, Shares | (367,328) | |||
Expired, Shares | (5,771) | |||
Forfeited, Shares | (33,707) | |||
Outstanding Ending Balance, Shares | 3,741,779 | [1] | 3,682,019 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract] | ||||
Beginning, Weighted-Average Exercise Price (in usd per share) | $ 11.51 | |||
Granted, Weighted-Average Exercise Price (in usd per share) | 14.42 | |||
Exercised, Weighted-Average Exercise Price (in usd per share) | 6.27 | |||
Expired, Weighted-Average Exercise Price (in usd per share) | 5.73 | |||
Forfeited, Weighted-Average Exercise Price (in usd per share) | 10.54 | |||
Ending, Weighted-Average Exercise Price (in usd per share) | $ 12.40 | $ 11.51 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract] | ||||
Outstanding, Weighted- Average Remaining Contractual Term (years) | 6 years 3 months 7 days | 5 years 11 months 23 days | ||
Outstanding, Aggregate Intrinsic Value | [2] | $ 31,586 | ||
Outstanding, Aggregate Intrinsic Value | [2] | $ 22,150 | $ 31,586 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest [Abstract] | ||||
Vested or expected to vest, shares | [1],[3] | 3,461,891 | ||
Vested or expected to vest, Weighted-Average Exercise Price (in usd per share) | $ 12.57 | |||
Vested and Expected to Vest, Outstanding, Weighted Average Remaining Contractual Term | 6 years 4 months 9 days | |||
Vested or expected to vest, Aggregate Intrinsic Value | [2] | $ 19,995 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested [Abstract] | ||||
Vested, shares | 1,743,949 | |||
Vested, Weighted-Average Exercise Price (in usd per share) | $ 11.73 | |||
Vested, Weighted-Average Remaining Contractual Term | 5 years 9 months 3 days | |||
Vested, Aggregate Intrinsic Value | [2] | $ 11,205 | ||
Fair value valuation, estimated fair market value of stock (in dollars per share) | $ 17.78 | $ 19.74 | ||
Performance Shares | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||||
Outstanding Ending Balance, Shares | 993,740 | |||
[1] | The total includes 993,740 performance-based options at September 30, 2016. | |||
[2] | Calculated using the estimated per-share fair market value of our common stock on September 30, 2016 and December 31, 2015, which was $17.78, and $19.74, respectively. | |||
[3] | Outstanding options, net of expected forfeitures. |
STOCK-BASED COMPENSATION RSU an
STOCK-BASED COMPENSATION RSU and restricted stock table (Details) | 9 Months Ended | |
Sep. 30, 2016shares | ||
Restricted Stock and Restricted Stock Units | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | ||
Outstanding Beginning Balance, Shares | 414,001 | |
Granted (in shares) | 15,101 | |
Vested (in shares) | (351,029) | [1] |
Outstanding Ending Balance, Shares | 78,073 | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period | 52,638 | |
Restricted stock | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | ||
Outstanding Beginning Balance, Shares | 79,940 | |
Granted (in shares) | 165,217 | |
Vested (in shares) | (26,652) | [2] |
Outstanding Ending Balance, Shares | 218,505 | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period | 8,611 | |
[1] | Represents RSUs vested in 2016. These were net settled, which resulted in our withholding of 52,638 RSUs in lieu of withholding taxes during the nine months ended September 30, 2016, and are included in this total. | |
[2] | Represents shares of restricted stock vested in 2016. 8,611 shares were returned to us in lieu of withholding taxes during the nine months ended September 30, 2016 and are reflected as Treasury Stock. |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - (Details) - USD ($) | 1 Months Ended | 9 Months Ended | |
Nov. 30, 2011 | Sep. 30, 2016 | Sep. 30, 2015 | |
Long-term Purchase Commitment [Line Items] | |||
Initial payment to acquire proprietary technology | $ 1,282,000 | $ 538,000 | |
Licensed technology | |||
Long-term Purchase Commitment [Line Items] | |||
Other Commitment | $ 1,418,000 | ||
Minimum contractual term | 5 years | ||
Licensed technology | Minimum | |||
Long-term Purchase Commitment [Line Items] | |||
Future maximum royalty payments | 2.00% | ||
Licensed technology | Maximum | |||
Long-term Purchase Commitment [Line Items] | |||
Future maximum royalty payments | 10.00% | ||
Patents and other | |||
Long-term Purchase Commitment [Line Items] | |||
Future maximum royalty payments | 7.00% | ||
Initial payment to acquire proprietary technology | $ 1,350,000 | ||
Milestone payment one | $ 500,000 | ||
Milestone payment two | 2,000,000 | ||
Milestone payment three | 4,000,000 | ||
Milestone for milestone payment one | 10,000,000 | ||
Milestone for milestone payment two | 25,000,000 | ||
Milestone for milestone payment three | 50,000,000 | ||
Milestone for ending royalty payments, cumulative sales | 20,000,000 | ||
Patents and other | Maximum | |||
Long-term Purchase Commitment [Line Items] | |||
Other Commitment | $ 13,350,000 |
INCOME TAXES - (Details)
INCOME TAXES - (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Income Tax Disclosure [Abstract] | ||||
Income tax (benefit) expense | $ (53) | $ 83 | $ 21 | $ 125 |
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Percent | 0.70% | (0.80%) | (0.10%) | (0.40%) |
NET LOSS PER SHARE - (Details)
NET LOSS PER SHARE - (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Earnings Per Share [Abstract] | ||||
Net loss | $ (7,910) | $ (10,215) | $ (29,193) | $ (30,722) |
Basic and diluted weighted average common shares outstanding | 41,940,370 | 41,074,245 | 41,639,609 | 39,892,068 |
Basic and diluted loss per common share (in dollars per share) | $ (0.19) | $ (0.25) | $ (0.70) | $ (0.77) |
NET LOSS PER SHARE - Antidiluti
NET LOSS PER SHARE - Antidilutive Shares (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Aug. 31, 2016 | Aug. 11, 2016 | |
Convertible Senior Notes Due 2036 | ||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||
Antidilutive Securities Excluded from Earnings Per Share (in shares) | 2,917,165 | 2,917,165 | ||||
Stock options | ||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||
Antidilutive Securities Excluded from Earnings Per Share (in shares) | 3,741,779 | 3,750,830 | 3,741,779 | 3,750,830 | ||
Restricted stock units (RSUs) | ||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||
Antidilutive Securities Excluded from Earnings Per Share (in shares) | 78,073 | 414,001 | 78,073 | 414,001 | ||
Restricted stock | ||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||
Antidilutive Securities Excluded from Earnings Per Share (in shares) | 218,505 | 79,940 | 218,505 | 79,940 | ||
Convertible Senior Notes Due 2036 | ||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||
Principal amounts of debt | $ 50,000,000 | $ 50,000,000 |
SEGMENT AND GEOGRAPHICAL CONC51
SEGMENT AND GEOGRAPHICAL CONCENTRATION - Narrative (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016USD ($) | Sep. 30, 2015USD ($) | Sep. 30, 2016USD ($)Segment | Sep. 30, 2015USD ($) | |
Segment Reporting Information [Line Items] | ||||
Number of reportable segments | Segment | 1 | |||
Revenue | $ 59,310 | $ 55,009 | $ 174,843 | $ 161,787 |
United States | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 45,978 | 39,459 | 133,409 | 116,055 |
Sales Revenue, Net | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 59,310 | 55,009 | 174,843 | 161,787 |
Sales Revenue, Net | International | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 13,332 | 15,550 | 41,434 | 45,732 |
Sales Revenue, Net | United States | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | $ 45,978 | 39,459 | $ 133,409 | 116,055 |
Sales Revenue, Net | Geographic Concentration Risk | International | ||||
Segment Reporting Information [Line Items] | ||||
International revenue as a percentage of total revenue | 22.50% | 23.70% | ||
Sales Revenue, Net | Geographic Concentration Risk | United States | ||||
Segment Reporting Information [Line Items] | ||||
International revenue as a percentage of total revenue | 10.00% | 10.00% | ||
Minimally invasive | United States | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | $ 6,767 | 6,344 | $ 20,653 | 17,766 |
Minimally invasive | Scenario, Adjustment | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | $ (1,057) | $ (2,358) |
SEGMENT AND GEOGRAPHICAL CONC52
SEGMENT AND GEOGRAPHICAL CONCENTRATION - Revenues by Geographic Area (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Segment Reporting Information [Line Items] | ||||
Revenue | $ 59,310 | $ 55,009 | $ 174,843 | $ 161,787 |
Sales Revenue, Net | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 59,310 | 55,009 | 174,843 | 161,787 |
United States | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 45,978 | 39,459 | 133,409 | 116,055 |
United States | Sales Revenue, Net | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 45,978 | 39,459 | 133,409 | 116,055 |
International | Sales Revenue, Net | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | $ 13,332 | $ 15,550 | $ 41,434 | $ 45,732 |
SEGMENT AND GEOGRAPHICAL CONC53
SEGMENT AND GEOGRAPHICAL CONCENTRATION - Revenues by Product (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Revenue from External Customer [Line Items] | ||||
Revenue | $ 59,310 | $ 55,009 | $ 174,843 | $ 161,787 |
United States | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 45,978 | 39,459 | 133,409 | 116,055 |
United States | Complex spine | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 19,516 | 16,852 | 53,981 | 48,204 |
United States | Minimally invasive | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 6,767 | 6,344 | 20,653 | 17,766 |
United States | Degenerative | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 19,695 | 16,263 | 58,775 | 50,085 |
International | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | $ 13,332 | $ 15,550 | $ 41,434 | $ 45,732 |