Alphatec Holdings, Inc. (“ATEC” or the “Company”) (Nasdaq: ATEC), a
provider of innovative spine surgery solutions dedicated to
revolutionizing the approach to spine surgery, today announced
financial results for the quarter ended March 31, 2020, and recent
corporate highlights.
First Quarter 2020 Financial
Results
- Total revenue of $30.1
million; U.S. revenue of $29.1 million, up 27% year over
year;
- U.S. gross margin of 72.1%;
and
- Cash and cash equivalents
of $27.5 million as of March 31, 2020; pro forma
cash of $47.5 million, including recent draw against credit
facility.
Recent Corporate Highlights
- Increased contribution from new
products to 56% of Q1 2020 U.S. revenue up from 22% in Q1 2019 and
48% in Q4 2019;
- Grew Q1 2020 revenue per case by
15% over Q1 2019;
- Continued progress transforming the
sales network with Q1 2020 U.S. revenue growth from strategic
distribution up 34% compared to Q1 2019 and significant sales
talent additions in key geographies;
- Completed three FDA 510K new
product regulatory submissions; and
- Secured an additional $35 million
capital commitment from Squadron Capital.
“During the first quarter, we saw continued
solid business momentum,” said Pat Miles, Chairman and Chief
Executive Officer. “While that momentum was interrupted by
circumstances outside of our control, we will navigate through the
current challenges with the same focus and execution that has
driven our success to date. We are bringing clinical distinction to
a market that yearns for it by fulfilling our commitment to launch
8 to 10 new products this year and continuing to expand our sales
network with savvy distributors who know that the future of spine
innovation is at ATEC. This company has faced and overcome a
lot of adversity over the last few years. We are confident that we
have the proven team and resilient culture to not only weather this
crisis, but to emerge as the leader in spine innovation.”
Comparison of Selected GAAP and Non-GAAP Financial
Results
Revenue from U.S. products for the first quarter
2020 was $29.1 million, up 27% compared to $23.0 million in the
first quarter 2019. Revenue growth was generated by new products
and the strategic distribution channel, which continues to drive
increases in average revenue per case and the number of product
categories sold per case.
Gross profit and gross margin from U.S. products
for the first quarter 2020 were $21.0 million and 72.1%,
respectively, compared to $16.4 million and 71.4%, respectively,
for the first quarter 2019. U.S. gross margin continues to be
impacted by non-cash excess and obsolete write-offs related to
legacy products. On a non-GAAP basis, excluding non-cash excess and
obsolete charges, U.S. gross margin was 78% in the first quarter
2020, compared to 80% in the first quarter 2019. The
year-over-year decrease in non-GAAP gross margin was attributable
to non-cash amortization and product mix.
Total operating expenses for the first quarter
2020 were $38.8 million compared to $27.3 million in the first
quarter 2019. On a non-GAAP basis, excluding stock-based
compensation, fair value adjustments, litigation-related expenses,
restructuring and transaction-related expenses, total operating
expenses increased to $28.5 million from $22.8 million in 2019,
reflecting increased selling costs related to U.S. revenue growth,
as well as increased investments in organic product development to
support new product launches.
Non-GAAP adjusted operating loss, which excludes
stock-based compensation, fair value adjustments,
litigation-related expenses, restructuring, transaction-related
expenses and excess and obsolescence charges, was $5.6 million for
the first quarter 2020, compared to a loss of $4.2 million for the
first quarter 2019.
Non-GAAP adjusted EBITDA, which excludes
stock-based compensation, fair value adjustments,
litigation-related expenses, restructuring, transaction-related
expenses and excess and obsolescence charges in the first quarter
2020 was a loss of $3.1 million, compared to a loss of $2.4 million
in the first quarter 2019.
For more detailed information on non-GAAP
operating expenses, non-GAAP adjusted operating loss and non-GAAP
adjusted EBITDA, please refer to the table, “Alphatec Holdings,
Inc. Reconciliation of Non-GAAP Financial Measures,” that
follows.
Current and long-term debt at face value at
March 31, 2020 includes $45 million in term debt with Squadron and
$11.9 million outstanding under the Company’s revolving credit
facility at March 31, 2020, with cash and cash equivalents of $27.5
million. To extend its cash runway, the Company completed a draw of
$20 million under its credit facility with Squadron Capital on
April 2, 2020. Including this draw, the Company’s pro forma term
debt with Squadron was $65.0 million at March 31, 2020, with pro
forma cash and cash equivalents of $47.5 million.
Expanded Credit Facility
On May 9, 2020, ATEC secured a commitment for
$35 million in additional secured financing from Squadron.
This capital will be made available under the same material terms
and conditions as the existing term loan with Squadron, subject to
customary closing conditions. Under the terms of the amended
facility, the maturity date on the entire term loan will be
extended to May 2025. A portion of the proceeds from the expanded
facility will be used to retire the Company’s outstanding
obligation under its working capital revolver with MidCap
Funding.
In connection with the additional commitment,
ATEC will issue warrants to purchase 1.076 million shares of ATEC
common stock at an exercise price of $4.88 per share. ATEC expects
this transaction to close before the end of May 2020.
2020 Financial Outlook
As a result of hospitals globally postponing
elective procedures to preserve capacity for COVID-19 patients,
ATEC suspended its previously announced 2020 revenue guidance on
April 8, 2020. The Company cannot yet determine the extent or
duration of deferred surgeries, nor the requirements or the timing
of the recovery once operating room and other pandemic-related
constraints have been lifted.
Investor Conference Call
ATEC will present the results via a live webcast
today at 1:30 p.m. PT / 4:30 p.m. ET to discuss the results. At
that time, please click here to access the live webcast. An
audiocast of the presentation will also be available
domestically at (877) 556-5251 and internationally at (720)
545-0036. The conference ID number is 2684098.
A replay of the webcast will remain available on
ATEC’s corporate website at www.atecspine.com until the
Company releases second quarter financial results. In addition, a
replay of the audiocast will be available until May 19, 2020.
The replay dial-in numbers are (855) 859-2056 for domestic callers
and (404) 537-3406 for international callers. Please use the replay
conference ID number 2684098.
Non-GAAP Financial
Information
To supplement the Company’s financial statements
presented in accordance with U.S. generally accepted accounting
principles (GAAP), the Company reports certain non-GAAP financial
measures, including non-GAAP U.S. gross margin, non-GAAP operating
expenses, non-GAAP operating loss, and non-GAAP Adjusted
EBITDA. The Company believes that these non-GAAP financial
measures provide investors with an additional tool for evaluating
the Company's core performance, which management uses in its own
evaluation of continuing operating performance, and a baseline for
assessing the future earnings potential of the Company. The
Company’s non-GAAP financial measures may not provide information
that is directly comparable to that provided by other companies in
the Company’s industry, as other companies in the industry may
calculate non-GAAP financial results differently, particularly
related to non-recurring, unusual items. Non-GAAP financial results
should be considered in addition to, and not as a substitute for,
or superior to, financial measures calculated in accordance with
GAAP. Included below are reconciliations of the non-GAAP financial
measures to the comparable GAAP financial measures.
About Alphatec Holdings,
Inc.
Alphatec Holdings, Inc. (“ATEC”), through
its wholly-owned subsidiaries, Alphatec Spine,
Inc. and SafeOp Surgical, Inc., is a medical device
company dedicated to revolutionizing the approach to spine surgery
through clinical distinction. ATEC architects and commercializes
approach-based technology that integrates seamlessly with the
SafeOp Neural InformatiX System to provide real-time, objective
nerve information that can enhance the safety and reproducibility
of spine surgery. Additional information can be found
at www.atecspine.com.
About Squadron Medical Finance
Solutions, LLC, a division of Squadron Capital
Squadron Capital seeks to acquire and invest in
operating companies located both in the US and
abroad. Squadron’s mission is long-term investment
(multi-generational) and assistance to the portfolio companies’
leadership teams in the execution of their business plans. Squadron
Medical Finance Solutions assists orthopedic OEMs in achieving
their business objectives by offering financing of surgical
instruments and implant sets, or by providing debt financing to
support the broader capital requirements of growing companies.
Squadron is a strategic investor in a broad range of companies in
the orthopedic space, both public and private.
Forward Looking Statements
Alphatec cautions you that statements included
in this press release, or made during the investor conference call
referenced herein, that are not a description of historical facts
are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 that involve risks and
uncertainty. Such statements are based on management’s current
expectations and are subject to a number of assumptions, risks and
uncertainties that could cause actual results to differ materially
from those described in the forward-looking
statements. The Company cautions investors that there
can be no assurance that actual results will not differ materially
from those projected or suggested in such forward-looking
statements as a result of various factors. Forward-looking
statements include, but are not limited to: references to the
Company’s revenue and future outlook; planned product launches,
introductions, regulatory submissions or clearances; efforts to
transform sales and distribution channels; and the Company’s future
ability to finance its operations. The important factors that
could cause actual operating results to differ significantly from
those expressed or implied by such forward-looking statements
include, but are not limited to: the uncertainty of success in
developing new products or products currently in the pipeline; the
uncertainties in the Company’s ability to execute upon its
strategic operating plan; the uncertainties regarding the ability
to successfully license or acquire new products, and the commercial
success of such products; failure to achieve acceptance of the
Company’s products by the surgeon community; failure to
obtain FDA or other regulatory clearance or approval or
unexpected or prolonged delays in the process; continuation of
favorable third party reimbursement; unanticipated expenses or
liabilities or other adverse events affecting cash flow or the
Company’s ability to control its costs or achieve profitability;
uncertainty of additional funding; the Company’s ability to compete
with other products or with emerging technologies; product
liability exposure; an unsuccessful outcome in any litigation;
patent infringement claims; claims related to the Company’s
intellectual property; the Company’s ability to meet its financial
obligations; future strategic and/or
financing collaborations between the Company and any
third-party and potential benefits or synergies resulting
therefrom; and the impact of the COVID-19 pandemic on the Company’s
business and financial results. A further list and
description of these and other factors, risks and uncertainties can
be found in the Company's most recent annual report, and any
subsequent quarterly and current reports, filed with
the Securities and Exchange Commission. ATEC disclaims any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events,
or otherwise, unless required by law.
Investor/Media
Contact:
Josh BergInvestor Relations(760) 494-6790ir@atecspine.com
Company Contact:
Jeff Black Chief Financial Officer Alphatec Holdings, Inc.
ir@atecspine.com
ALPHATEC
HOLDINGS, INC. |
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS |
(in
thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
March 31, |
|
|
2020 |
|
|
|
2019 |
|
|
(unaudited) |
|
(unaudited) |
Revenues: |
|
|
|
Revenue from U.S. products |
$ |
29,070 |
|
|
$ |
22,955 |
|
Revenue from international supply agreement |
|
1,045 |
|
|
|
1,600 |
|
Total revenues |
|
30,115 |
|
|
|
24,555 |
|
Cost of
revenues |
|
9,084 |
|
|
|
7,987 |
|
Gross
profit |
|
21,031 |
|
|
|
16,568 |
|
|
|
|
|
Operating
expenses: |
|
|
|
Research and development |
|
3,749 |
|
|
|
3,372 |
|
Sales, general and administrative |
|
28,003 |
|
|
|
21,097 |
|
Litigation-related |
|
2,643 |
|
|
|
2,623 |
|
Amortization of intangible assets |
|
172 |
|
|
|
182 |
|
Transaction-related |
|
4,272 |
|
|
|
— |
|
Restructuring |
|
— |
|
|
|
60 |
|
Total
operating expenses |
|
38,839 |
|
|
|
27,334 |
|
Operating
loss |
|
(17,808 |
) |
|
|
(10,766 |
) |
Total other expenses, net |
|
(2,874 |
) |
|
|
(2,119 |
) |
Loss from
continuing operations before taxes |
|
(20,682 |
) |
|
|
(12,885 |
) |
Income tax provision |
|
40 |
|
|
|
31 |
|
Loss from
continuing operations |
|
(20,722 |
) |
|
|
(12,916 |
) |
Loss from discontinued operations |
|
— |
|
|
|
(52 |
) |
Net
loss |
$ |
(20,722 |
) |
|
$ |
(12,968 |
) |
|
|
|
|
|
|
|
|
Net
loss per share, basic and diluted: |
|
|
|
Continuing operations |
$ |
(0.33 |
) |
|
$ |
(0.29 |
) |
Discontinued operations |
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
Net loss per
share, basic and diluted |
$ |
(0.33 |
) |
|
$ |
(0.29 |
) |
|
|
|
|
Shares used
in calculating basic and diluted net loss per share |
|
62,568 |
|
|
|
45,020 |
|
|
|
|
|
Stock-based compensation included in: |
|
|
|
Cost of
revenue |
$ |
107 |
|
|
$ |
28 |
|
Research and
development |
|
291 |
|
|
|
143 |
|
Sales,
general and administrative |
|
3,170 |
|
|
|
1,441 |
|
|
$ |
3,568 |
|
|
$ |
1,612 |
|
|
|
|
|
ALPHATEC
HOLDINGS, INC. |
CONDENSED
CONSOLIDATED BALANCE SHEETS |
(in
thousands) |
|
|
|
|
|
|
|
|
|
March
31, |
|
December
31, |
|
|
2020 |
|
|
2019 |
|
(unaudited) |
|
|
ASSETS |
Current
assets: |
|
|
|
Cash |
$ |
27,466 |
|
|
$ |
47,113 |
Accounts receivable, net |
|
15,375 |
|
|
|
16,150 |
Inventories, net |
|
37,872 |
|
|
|
34,854 |
Prepaid expenses and other current assets |
|
10,646 |
|
|
|
9,880 |
Current assets of discontinued operations |
|
353 |
|
|
|
321 |
Total
current assets |
|
91,712 |
|
|
108,318 |
|
|
|
|
Property and
equipment, net |
|
20,919 |
|
|
|
19,722 |
Right-of-use
asset |
|
1,601 |
|
|
1,860 |
Goodwill |
|
13,897 |
|
|
|
13,897 |
Intangibles,
net |
|
25,165 |
|
|
|
25,605 |
Other
assets |
|
493 |
|
|
|
493 |
Noncurrent
assets of discontinued operations |
|
52 |
|
|
|
53 |
Total
assets |
$ |
153,839 |
|
$ |
169,948 |
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY |
Current
liabilities: |
|
|
|
Accounts payable |
$ |
11,800 |
|
$ |
7,772 |
Accrued expenses |
|
23,772 |
|
|
26,416 |
Current portion of long-term debt |
|
916 |
|
|
489 |
Current portion of lease liability |
|
1,356 |
|
|
1,314 |
Current liabilities of discontinued operations |
|
399 |
|
|
399 |
Total
current liabilities |
|
38,243 |
|
|
36,390 |
|
|
|
|
Total long term liabilities |
|
64,563 |
|
|
66,324 |
|
|
|
|
Redeemable preferred stock |
|
23,603 |
|
|
23,603 |
Stockholders' equity |
|
27,430 |
|
|
43,631 |
Total
liabilities and stockholders' equity |
$ |
153,839 |
|
$ |
169,948 |
|
|
|
|
ALPHATEC
HOLDINGS, INC. |
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
(in
thousands) |
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
March 31, |
|
|
2020 |
|
|
|
2019 |
|
|
(unaudited) |
|
(unaudited) |
|
|
|
|
Operating
expenses |
|
38,839 |
|
|
|
27,334 |
|
Adjustments: |
|
|
|
Stock-based compensation |
|
(3,461 |
) |
|
|
(1,584 |
) |
Contingent consideration fair value adjustment |
|
— |
|
|
|
(289 |
) |
Litigation-related expenses |
|
(2,643 |
) |
|
|
(2,623 |
) |
Restructuring |
|
— |
|
|
|
(60 |
) |
Transaction-related expenses |
|
(4,272 |
) |
|
|
— |
|
Non-GAAP
operating expenses |
$ |
28,463 |
|
|
$ |
22,778 |
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
March 31, |
|
|
2020 |
|
|
|
2019 |
|
|
(unaudited) |
|
(unaudited) |
Operating
loss, as reported |
$ |
(17,808 |
) |
|
$ |
(10,766 |
) |
Add back
significant items: |
|
|
|
Stock-based compensation |
|
3,568 |
|
|
|
1,612 |
|
Contingent consideration fair value adjustment |
|
— |
|
|
|
289 |
|
Litigation-related expenses |
|
2,643 |
|
|
|
2,623 |
|
Restructuring |
|
— |
|
|
|
60 |
|
Transaction-related expenses |
|
4,272 |
|
|
|
— |
|
Excess & obsolete charges |
|
1,722 |
|
|
|
1,976 |
|
Adjusted
operating loss |
|
(5,603 |
) |
|
|
(4,206 |
) |
|
|
|
|
|
|
|
|
Operating
loss, as reported |
$ |
(17,808 |
) |
|
$ |
(10,766 |
) |
Depreciation |
|
2,014 |
|
|
|
1,603 |
|
Amortization of intangible assets |
|
440 |
|
|
|
182 |
|
EBITDA |
|
(15,354 |
) |
|
|
(8,981 |
) |
Add back
significant items: |
|
|
|
Stock-based compensation |
|
3,568 |
|
|
|
1,612 |
|
Contingent consideration fair value adjustment |
|
— |
|
|
|
289 |
|
Litigation-related expenses |
|
2,643 |
|
|
|
2,623 |
|
Restructuring |
|
— |
|
|
|
60 |
|
Transaction-related expenses |
|
4,272 |
|
|
|
— |
|
Excess & obsolete charges |
|
1,722 |
|
|
|
1,976 |
|
Adjusted
EBITDA |
$ |
(3,149 |
) |
|
$ |
(2,421 |
) |
|
|
|
|
ALPHATEC
HOLDINGS, INC. |
RECONCILIATION OF GEOGRAPHIC SEGMENT REVENUES AND GROSS
PROFIT |
(in
thousands, except percentages) |
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
March 31, |
|
|
2020 |
|
|
|
2019 |
|
Revenues by
source |
(unaudited) |
|
(unaudited) |
Revenue from
U.S. products |
$ |
29,070 |
|
|
$ |
22,955 |
|
Revenue from
international supply agreement |
|
1,045 |
|
|
|
1,600 |
|
Total
revenues |
$ |
30,115 |
|
|
$ |
24,555 |
|
|
|
|
|
Gross profit
by source |
|
|
|
Revenue from
U.S. products |
$ |
20,954 |
|
|
$ |
16,394 |
|
Revenue from
international supply agreement |
|
77 |
|
|
|
174 |
|
Total gross
profit |
$ |
21,031 |
|
|
$ |
16,568 |
|
|
|
|
|
Gross profit
margin by source |
|
|
|
Revenue from
U.S. products |
|
72.1 |
% |
|
|
71.4 |
% |
Revenue from
international supply agreement |
|
7.4 |
% |
|
|
10.9 |
% |
Total gross
profit margin |
|
69.8 |
% |
|
|
67.5 |
% |
|
|
|
|
|
|
|
|
RECONCILIATION OF GAAP TO NON-GAAP GROSS PROFIT AND GROSS
MARGIN FROM U.S. PRODUCTS |
(in
thousands, except percentages) |
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
March 31, |
|
|
2020 |
|
|
|
2019 |
|
|
(unaudited) |
|
(unaudited) |
GAAP-based
gross profit from U.S. products |
$ |
20,954 |
|
|
$ |
16,394 |
|
Add:
non-cash excess and obsolete charges |
|
1,722 |
|
|
|
1,976 |
|
Non-GAAP
gross profit from U.S. products |
$ |
22,676 |
|
|
$ |
18,370 |
|
|
|
|
|
GAAP-based
gross margin from U.S. products |
|
72.1 |
% |
|
|
71.4 |
% |
Add:
non-cash excess and obsolete charges |
|
5.9 |
% |
|
|
8.6 |
% |
Non-GAAP
gross margin from U.S. products |
|
78.0 |
% |
|
|
80.0 |
% |
|
|
|
|
Alphatec (NASDAQ:ATEC)
Historical Stock Chart
From Apr 2024 to May 2024
Alphatec (NASDAQ:ATEC)
Historical Stock Chart
From May 2023 to May 2024