Alphatec cuts 2026 revenue outlook to $862M, though cases grew 20%

Alphatec Holdings is based in Carlsbad, California, and describes itself as a provider of solutions for spine surgery.¹ It works through three subsidiaries, Alphatec Spine, EOS imaging and SafeOp Surgical, and reports them as one business segment.² Its products span EOS imaging, surgical planning, Valence navigation and robotics, SafeOp nerve monitoring and patient-specific solutions.³

Most sales are in the United States: $206.3 million of the third quarter's $221.2 million.¹ Its main rivals are Medtronic, Johnson & Johnson's DePuy Spine and Globus Medical, and most of its inventory is finished goods made by outside suppliers.²

The company has grown fast while still losing money. In 2025 revenue rose 25% to $764 million, but the net loss was $143 million, adjusted EBITDA was $93 million and free cash flow was only $3 million.

This year's outlook has slipped in steps. In February the company expected about $890 million of 2026 revenue, made up of about $805 million from surgery and about $85 million from EOS imaging machines.¹ In May it cut EOS to about $77 million, taking total revenue to about $882 million, while keeping the surgical figure.²

A plaintiff law firm that later announced an investigation says the stock fell 31.7% to $6.99 on May 6, 2026, after that first cut.¹ On August 4 the company kept its $882 million revenue target and raised adjusted EBITDA guidance to about $140 million from about $134 million.²

The company also rebuilt its debt this year. On May 1 it closed a bank deal led by JP Morgan with a $175.0 million term loan and a $125.0 million revolving credit line, a borrowing limit it can draw and repay.¹ It drew the full term loan and $40.0 million of the revolver, and its old Braidwell and MidCap loans were repaid and ended.²

Its largest debt is $405.0 million of convertible notes, which can be swapped for shares, paying 0.75% interest and due on March 15, 2030.¹ Before the release the stock had climbed about 15%, from $9.92 on September 24 to $11.45 on October 28.² At $11.37 it was about 63% above the $6.99 close of May 6; our price file starts in mid-September, so we cannot confirm the one-year range.³

The new outlook lowers every line. Revenue falls to about $862 million from about $882 million, a cut of $20 million or about 2.3%.¹ Surgical revenue drops to about $789 million from about $805 million, the first cut to that line this year, and EOS falls again to about $73 million from about $77 million.² Adjusted EBITDA falls to about $137 million from about $140 million, still above the $134 million guided before August, and free cash flow falls to about $10 million from at least $20 million.³

The company now sees about 13% revenue growth and about 15% surgical growth for the year, down from about 15% and about 17% in August.

Third-quarter revenue was $221.2 million, up 13%, slower than the second quarter's 15%.¹ Surgical revenue was $202 million, up 14%, against 17% growth in the second quarter.² Surgical hardware added $26 million and grew 17%, while total surgical revenue grew $25 million, so the rest of the surgical line, which includes biologics, shrank by about $1 million.³

Chairman and Chief Executive Pat Miles said revenue fell short of expectations, primarily due to lower biologics attachment, and the release calls improving biologics performance a clear priority.¹ The company lists its possible inability to improve biologics performance and product mix as a risk, and names OsteoAdapt, from Theradaptive, as a longer-term biologics opportunity.²

Reported profit did improve. Under standard accounting rules (GAAP), third-quarter operating income was $3.2 million against a $15.9 million loss a year earlier, and the net loss narrowed to $5.5 million from $28.6 million.¹ Some of that came from litigation costs falling to $0.6 million from $6.5 million and a $2.0 million tax benefit, mainly from a partial release of a tax valuation allowance tied to an asset purchase rather than from operations.²

The adjusted figures remove more costs. EBITDA is earnings before interest, taxes, depreciation and amortization, and adjusted EBITDA also leaves out items such as stock-based pay.¹ Third-quarter adjusted EBITDA was $38.3 million, up about 46% from $26.1 million, a 17.3% margin that widened 400 basis points from a year earlier.² Non-GAAP net income was $14.8 million against the $5.5 million GAAP loss: the company adds back $14.0 million of stock-based pay, $6.5 million of non-cash interest and other items, then applies a 26% long-term tax rate that took off $4.9 million.³

From January through September the company also wrote down $11.2 million of excess and obsolete inventory, about the same as the $11.3 million a year earlier, and booked an $11.9 million loss on paying off debt early.

Free cash flow, in the company's definition, is cash from operations minus capital spending. It was $6 million in the third quarter.¹ From January through September, the cash-flow statement shows $40.7 million from operations and $45.3 million spent on property and equipment, about $4.7 million of outflow on our reading, after a first-quarter use of $11 million.² To reach about $10 million for the year, the fourth quarter would need to bring in about $15 million, against $8 million in the fourth quarter of 2025.³

Two cash drains stand out. Building inventory used $49.3 million of cash from January through September, against $1.5 million a year earlier.¹ And $14.4 million of equipment purchases sat unpaid in payables and accrued expenses at September 30, cash that has yet to go out.²

Cash fell $38.7 million in the third quarter alone, to $79.9 million from $118.7 million at the end of the second quarter.¹ The largest single payment came on July 30, when the company repaid the last $63.3 million of its 2026 convertible notes in cash.² It owed $70.0 million on its revolver at September 30, up from $40.0 million drawn at the May closing, leaving $55 million of the $125.0 million line undrawn.³

Little debt comes due soon: $1.4 million in the rest of 2026 and $3.9 million in 2027.¹ The bank loans run to May 1, 2031, but come due early if, as of December 14, 2029, the company fails liquidity tests tied to the 2030 notes.² The loan conditions, called covenants, cap secured net leverage at 3.00 times and require a fixed charge coverage ratio of at least 2.00 times, tested each quarter from September 30, 2026, and the company says it met all of them.³

Management says its cash, operating cash and access to financing are adequate, but it also warns it may be required to access the capital markets as borrowings come due.

Debt principal totals $649.8 million, or about $570 million net of cash.¹ Against trailing adjusted EBITDA of about $128 million, January through September 2026 plus the $33 million of the fourth quarter of 2025, that is about 4.5 times.² The bank debt is secured by substantially all assets, while the notes are unsecured; on the same rough math, secured net debt is about 1.3 times adjusted EBITDA, under the 3.00 cap, though the bank's own EBITDA definition may differ.³

On a GAAP basis, interest is not yet covered: third-quarter operating income of $3.2 million was below about $10.6 million of net interest expense.¹ Third-quarter cash interest of $4.1 million was covered about 9 times by adjusted EBITDA.² The bank loans carried effective rates of 6.4% and 6.8%, while the notes pay a 0.75% coupon but carry a 9.1% effective rate once the accounting discount is counted.³

There were 155,139,824 shares outstanding on October 22.¹ Another 54.8 million shares could be issued, which the company left out of its diluted per-share figures: 34.5 million tied to the 2030 notes (the $15.54 conversion price alone implies about 26.1 million, the company may settle conversions in cash, and capped calls offset dilution up to $23.46 a share), 8.2 million under warrants and 10.5 million under unvested stock units, among others, for at most about 210 million in all.² The capped calls cost the company $42.5 million.³

The notes convert at about $15.54 a share, about 37% above the $11.37 close, and none of the early conversion triggers had been met at September 30.

In line for repayment, the secured bank lenders come first, then the unsecured notes, which carry no financial covenants, then $23.6 million of redeemable preferred stock, then common holders.¹ Book equity is already a deficit of $2.3 million.²

In August the company extended its 1.3 million executive warrants, which carry a $5.00 strike and had been due to expire in December 2026, to December 2030, and EVP of Sales David Sponsel adopted a trading plan to sell 159,879 shares.¹ Director David Pelizzon heads Squadron Capital, whose affiliate sold the company $6.7 million of inventory in the third quarter.²

At the $11.37 close, the 155,139,824 shares were worth about $1.76 billion.¹ Adding net debt gives an enterprise value of about $2.33 billion, about 17 times the new adjusted EBITDA target.²

The bull case is that demand is intact. Case volumes grew 20%, net new surgeon users 25% and hardware 17%, and the 10-Q credits growth to more product volume from a larger surgeon base.¹ Margins are widening, and GAAP operating income turned positive in the third quarter.² The new target asks for about 10% fourth-quarter growth over $212.9 million a year earlier, slower than the third quarter's 13%, and surgical revenue of roughly $213 million, up about 12% from $190 million.³

Near-term maturities are small, the covenants were met, and the convertible notes are not due until 2030.

The bear case, strongest point first. This is the second revenue cut since May, and this time it reaches the surgical core, not just EOS.¹ Cash is thin next to $649.8 million of debt principal: $79.9 million on hand plus $55 million of undrawn revolver, with free cash flow from January through September still negative.² The full-year cash target rests on a fourth quarter much stronger than last year's, while inventory keeps rising and $14.4 million of equipment bills are unpaid.³

Net debt is about 4.5 times trailing adjusted EBITDA, GAAP operating income does not yet cover interest, and the company gives no reconciliation of its EBITDA and cash flow targets to GAAP.

Management's own goals, which are targets and not results, are about $862 million of revenue, about $789 million of it surgical, about $137 million of adjusted EBITDA and about $10 million of free cash flow.¹ It says disciplined execution of biologics is required to realize full procedural revenue translation, and it hired Tommy Carls as EVP of Data Intelligence & Strategy.² It also points to about 35% yearly revenue growth since its turnaround began in 2018.³

The dated checkpoints: the first full trading days after the October 29 release show the market's verdict, the covenants are tested every quarter, and fourth-quarter results should come in late February, since last year's annual report was filed on February 24.¹ Squadron Medical warrants on 4.8 million shares at $2.17 expire in May 2027, and the bank debt's early-maturity test falls on December 14, 2029.²

What would prove the bear case wrong is fourth-quarter revenue of about $235 million or more, adjusted EBITDA near $42 million and free cash flow near $15 million without more revolver borrowing.¹ What would prove the bull case wrong is another surgical shortfall, a fourth-quarter cash outflow or revolver borrowing above $70 million.²

The release gives no biologics revenue in dollars. The only clue is that hardware added $26 million while total surgical revenue grew $25 million.

The company held a webcast at 4:30 p.m. ET on October 29, but we found no transcript, so any detail given there on biologics, EOS or cash is not in this report.

The results came after the market close, and our price data have no trade since, so the reaction is not known.

The 10-Q gives the covenant limits and says the company met them, but not its actual leverage or coverage ratios.

The 10-Q gives the $70.0 million drawn but not any letters of credit that would reduce what is left to borrow.

The company gives no capital spending outlook and no reconciliation for its free cash flow target, so it is unclear how the $14.4 million of unpaid equipment bills fit in.