Full Press Release Details
ATEC Reports Second Quarter 2023 Financial Results and Raises Full Year 2023 Revenue and Adjusted EBITDA Guidance
Total revenue grew 39% to $117 million
Surgical revenue grew 41% to $102 million and EOS revenue grew 24% to $15 million
Delivered positive adjusted EBITDA of over $1 million
CARLSBAD, Calif., August 3, 2023 Alphatec Holdings, Inc. (Nasdaq: ATEC), a provider of innovative solutions dedicated to revolutionizing the approach to spine surgery, today announced financial results for the quarter ended June 30, 2023, and recent corporate highlights.
Second Quarter 2023 Financial Results
| Quarter Ended June 30, 2023 | |
| Total revenue | $117 million |
| GAAP gross margin | 55% |
| Non-GAAP gross margin | 73% |
| GAAP operating expenses | $114 million |
| Non-GAAP operating expenses | $94 million |
| GAAP operating loss | ($50) million |
| Adjusted EBITDA | $1 million |
| Ending cash balance | $101 million |
-Continued to advance the clinical procedural experience through PTPTM (Prone TransPsoas) and launch of LTPTM (Lateral TransPsoas), the strongest contributors to Q2 revenue growth;
-Launched ALIF access system to further LTP with midline ALIF approach for L3 to S1;
-Acquired navigation-enabled robotics platform, which will integrate into ATEC's procedural workflow, improving precision, clinical predictability and efficiency, while minimizing radiation;
-Drove 32% increase in surgical volume and 7% increase in average revenue per procedure;
-Expanded adjusted EBITDA margin by 1,110 basis points.
ATEC's 100% spine focus gives us a unique ability to create comprehensive, ground-up procedures that directly improve spine care, said Pat Miles, Chairman and Chief Executive Officer. Our long-held thesis - that good surgery is good business - is proving out. We are delivering unmatched clinical distinction, which is compelling strong surgeon adoption, attracting some of spine's most talented sales professionals, and fueling industry-leading procedural volume growth. But we're still just getting started. We are focused on developing the most actionable informatics ecosystem in spine, which will use EOS and navigation-enabled robotics to address spine surgery's biggest challenges. With the knowhow we have assembled at ATEC, I love our chances.
Financial Outlook for the Full Year 2023
The Company now expects total revenue to grow 32% to $462 million for the fiscal year ended December 31, 2023. This includes surgical revenue growth of approximately 33% and $58 million of EOS revenue. The Company also now expects non-GAAP adjusted EBITDA of approximately $2 million for the full year 2023.
Financial Results Webcast
ATEC will present these results via a live webcast today at 1:30 p.m. PT / 4:30 p.m. ET. The live webcast can be accessed by visiting the Investor Relations Section of ATEC's Corporate Website.
To dial in to the webcast, please register via this link.
A replay of the webcast will remain available through the Investor Relations Section of ATEC's Corporate Website for twelve months. In addition, a dial-in replay will be available beginning about two hours after the webcast's completion through August 10, 2023. Access the replay by dialing (800) 770-2030 and referencing conference ID number 97241.
Inducement Awards Granted
As an inducement material to accepting employment with the Company, and in accordance with Nasdaq Listing Rule 5635(c)(4), ATEC today announced that the independent Compensation Committee of the Board of Directors has approved aggregate grants to seventeen new employees (who are not executive officers) of, collectively, 12,772 restricted stock units ( RSUs ) under the Company's 2016 Employment Inducement Award Plan. The RSUs will vest in equal annual installments on each of the first four anniversaries of the grant date, provided that the recipient remains continuously employed by ATEC as of such vesting date. In addition, the RSUs will vest fully upon a change of control of ATEC.
Non-GAAP Financial Information
To supplement the Company's financial statements presented in accordance with generally accepted accounting principles in the United States of America (GAAP), the Company reports certain non-GAAP financial measures, including non-GAAP 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.
ATEC, through its wholly owned subsidiaries, Alphatec Spine, Inc., EOS imaging S.A.S. and SafeOp Surgical, Inc., is a medical device company dedicated to revolutionizing the approach to spine surgery through clinical distinction. ATEC's Organic Innovation MachineTM is focused on developing new approaches that integrate seamlessly with the Company's expanding AlphaInformatiX Platform to better inform surgery and more safely and reproducibly achieve the goals of spine surgery. ATEC's vision is to be the Standard Bearer in Spine. For more information, visit us at www.atecspine.com.
Forward Looking Statements
This press release contains 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 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, balance sheet, growth and financial outlook; planned product launches and introductions; and the Company's ability to compel surgeon adoption. 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 Second-party reimbursement; unanticipated expenses or liabilities or other adverse events affecting cash flow or the Company's ability to achieve profitability; uncertainty of additional funding; product liability exposure; an unsuccessful outcome in any litigation; patent infringement claims; claims related to the Company's intellectual property; and the Company's ability to meet its financial obligations. 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:
Chief Financial Officer
ALPHATEC HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (unaudited) | ||||||||||||||||
| Revenue: | ||||||||||||||||
| Revenue from products and services | $ | 116,920 | $ | 84,151 | $ | 226,030 | $ | 155,069 | ||||||||
| Revenue from international supply agreement | 15 | |||||||||||||||
| Total revenue | 116,920 | 84,151 | 226,030 | 155,084 | ||||||||||||
| Cost of sales | 52,379 | 28,675 | 91,064 | 50,392 | ||||||||||||
| Gross profit | 64,541 | 55,476 | 134,966 | 104,692 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 14,571 | 10,596 | 27,831 | 20,318 | ||||||||||||
| Sales, general and administrative | 87,287 | 72,668 | 178,549 | 142,139 | ||||||||||||
| Litigation-related expenses | 6,908 | 5,495 | 10,100 | 13,027 | ||||||||||||
| Amortization of acquired intangible assets | 3,705 | 2,177 | 6,588 | 4,407 | ||||||||||||
| Transaction-related expenses | 1,900 | 1,900 | 120 | |||||||||||||
| Restructuring expenses | 29 | 289 | 204 | 1,659 | ||||||||||||
| Total operating expenses | 114,400 | 91,225 | 225,172 | 181,670 | ||||||||||||
| Operating loss | (49,859 | ) | (35,749 | ) | (90,206 | ) | (76,978 | ) | ||||||||
| Interest expense and other income, net: | ||||||||||||||||
| Interest expense, net | (3,892 | ) | (1,435 | ) | (7,766 | ) | (2,891 | ) | ||||||||
| Other income, net | 2,324 | 67 | 3,030 | 37 | ||||||||||||
| Total interest expense and other income, net | (1,568 | ) | (1,368 | ) | (4,736 | ) | (2,854 | ) | ||||||||
| Net loss before taxes | (51,427 | ) | (37,117 | ) | (94,942 | ) | (79,832 | ) | ||||||||
| Income tax benefit | (50 | ) | (16 | ) | (36 | ) | (115 | ) | ||||||||
| Net loss | $ | (51,377 | ) | $ | (37,101 | ) | $ | (94,906 | ) | $ | (79,717 | ) | ||||
| Net loss per share, basic and diluted | $ | (0.43 | ) | $ | (0.36 | ) | $ | (0.83 | ) | $ | (0.79 | ) | ||||
| Weighted average shares outstanding, basic and diluted | 118,719 | 102,849 | 114,260 | 101,422 | ||||||||||||
| Stock-based compensation included in: | ||||||||||||||||
| Cost of sales | $ | 16,226 | $ | 449 | $ | 22,232 | $ | 705 | ||||||||
| Research and development | 1,480 | 1,362 | 2,797 | 2,334 | ||||||||||||
| Sales, general and administrative | 6,488 | 7,392 | 15,627 | 16,348 | ||||||||||||
| $ | 24,194 | $ | 9,203 | $ | 40,656 | $ | 19,387 |
ALPHATEC HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2023 | December 31, 2022 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 101,020 | $ | 84,696 | ||||
| Accounts receivable, net | 59,932 | 60,060 | ||||||
| Inventories | 119,957 | 101,521 | ||||||
| Prepaid expenses and other current assets | 18,758 | 9,357 | ||||||
| Total current assets | 299,667 | 255,634 | ||||||
| Property and equipment, net | 119,372 | 101,952 | ||||||
| Right-of-use assets | 27,421 | 28,360 | ||||||
| Goodwill | 72,527 | 47,367 | ||||||
| Intangible assets, net | 105,508 | 82,781 | ||||||
| Other assets | 3,739 | 4,874 | ||||||
| Total assets | $ | 628,234 | $ | 520,968 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 43,698 | $ | 34,742 | ||||
| Accrued expenses and other current liabilities | 74,123 | 72,382 | ||||||
| Contract liabilities | 13,895 | 11,956 | ||||||
| Short-term debt | 2,207 | 14,948 | ||||||
| Current portion of operating lease liabilities | 4,824 | 4,842 | ||||||
| Total current liabilities | 138,747 | 138,870 | ||||||
| Total long-term liabilities | 494,037 | 393,162 | ||||||
| Redeemable preferred stock | 23,603 | 23,603 | ||||||
| Stockholders' deficit | (28,153 | ) | (34,667 | ) | ||||
| Total liabilities and stockholders' deficit | $ | 628,234 | $ | 520,968 |
ALPHATEC HOLDINGS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
| Three Months Ended | Six Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| (unaudited) | |||||||||||||||||
| Gross profit, GAAP | $ | 64,541 | $ | 55,476 | $ | 134,966 | $ | 104,692 | |||||||||
| Add: amortization of intangible assets | 220 | 9 | 440 | 9 | |||||||||||||
| Add: stock-based compensation | 16,226 | 449 | 22,232 | 705 | |||||||||||||
| Add: purchase accounting adjustments on acquisitions | 437 | 195 | 437 | ||||||||||||||
| Add: excess and obsolete write-down | 4,636 | 2,394 | 6,734 | 4,100 | |||||||||||||
| Non-GAAP gross profit | $ | 85,623 | $ | 58,765 | $ | 164,567 | $ | 109,943 | |||||||||
| Gross margin, GAAP | 55.2 | % | 65.9 | % | 59.7 | % | 67.5 | % | |||||||||
| Add: amortization of intangible assets | 0.2 | % | 0.0 | % | 0.2 | % | 0.0 | % | |||||||||
| Add: stock-based compensation | 13.9 | % | 0.5 | % | 9.8 | % | 0.5 | % | |||||||||
| Add: purchase accounting adjustments on acquisitions | 0.0 | % | 0.5 | % | 0.1 | % | 0.3 | % | |||||||||
| Add: excess and obsolete write-down | 4.0 | % | 2.8 | % | 3.0 | % | 2.6 | % | |||||||||
| Non-GAAP gross margin | 73.2 | % | 69.8 | % | 72.8 | % | 70.9 | % | |||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| (unaudited) | |||||||||||||||||
| Operating expenses, GAAP | $ | 114,400 | $ | 91,225 | $ | 225,172 | $ | 181,670 | |||||||||
| Adjustments: | |||||||||||||||||
| Stock-based compensation | (7,968 | ) | (8,754 | ) | (18,424 | ) | (18,682 | ) | |||||||||
| Litigation-related expenses | (6,908 | ) | (5,495 | ) | (10,100 | ) | (13,027 | ) | |||||||||
| Amortization of intangible assets | (3,705 | ) | (2,177 | ) | (6,588 | ) | (4,407 | ) | |||||||||
| Transaction-related expenses | (1,900 | ) | (1,900 | ) | (120 | ) | |||||||||||
| Restructuring expenses | (29 | ) | (289 | ) | (204 | ) | (1,659 | ) | |||||||||
| Other non-recurring expenses 1 | (1,349 | ) | |||||||||||||||
| Non-GAAP operating expenses | $ | 93,890 | $ | 74,510 | $ | 186,607 | $ | 143,775 | |||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| (unaudited) | |||||||||||||||||
| Operating loss, GAAP | $ | (49,859 | ) | $ | (35,749 | ) | $ | (90,206 | ) | $ | (76,978 | ) | |||||
| Depreciation | 9,758 | 7,506 | 18,347 | 14,591 | |||||||||||||
| Amortization of intangible assets | 3,925 | 2,186 | 7,028 | 4,416 | |||||||||||||
| EBITDA | (36,176 | ) | (26,057 | ) | (64,831 | ) | (57,971 | ) | |||||||||
| Add back significant items: | |||||||||||||||||
| Stock-based compensation | 24,194 | 9,203 | 40,656 | 19,387 | |||||||||||||
| Purchase accounting adjustments on acquisitions | 437 | 195 | 437 | ||||||||||||||
| Excess & obsolete write-down | 4,636 | 2,394 | 6,734 | 4,100 | |||||||||||||
| Litigation-related expenses | 6,908 | 5,495 | 10,100 | 13,027 | |||||||||||||
| Transaction-related expenses | 1,900 | 1,900 | 120 | ||||||||||||||
| Restructuring expenses | 29 | 289 | 204 | 1,659 | |||||||||||||
| Other non-recurring expenses 1 | 1,349 | ||||||||||||||||
| Adjusted EBITDA | $ | 1,491 | $ | (8,239 | ) | $ | (3,693 | ) | $ | (19,241 | ) | ||||||
| 1 | Non-recurring consulting fees associated with the implementation of our state tax-planning strategy |