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ATEC Reports First Quarter 2023 Financial Results

  • Total revenue grew 54% to $109 million, including surgical revenue growth of 55%
  • EOS revenue grew to $15 million
  • Adjusted EBITDA margin improved 1,080 basis points year-over-year

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 March 31, 2023, and recent corporate highlights.

First-Quarter 2023 Financial Results

 

Quarter Ended

March 31, 2023

Total revenue

$109 million

GAAP gross margin

65%

Non-GAAP gross margin

72%

GAAP operating expenses

$111 million

Non-GAAP operating expenses

$93 million

GAAP operating loss

($40) million

Adjusted EBITDA

($5) million

Ending cash balance

$117 million

Recent Highlights

  • Extended momentum of PTPTM (Prone TransPsoas) procedure, the strongest contributor to Q1 revenue growth;
  • Advanced lateral sophistication with full commercial release of LTPTM (Lateral TransPsoas) procedure;
  • Introduced ATEC AIS (Adolescent Idiopathic Scoliosis) Approach, with adaptable InVictusTM instrumentation designed to streamline and optimize de-rotation;
  • Drove 40% increase in surgical volume and 11% increase in average revenue per procedure;
  • Acquired navigation-enabled robotics platform to enhance precision of ATEC’s procedural strategy.

“We continue to execute against our mission to revolutionize the approach to spine surgery,” said Pat Miles, Chairman and Chief Executive Officer. “As many in our industry capitulate, or seek to drive growth through acquired revenues, ATEC is content to be the outlier: methodically applying our 100% spine focus and unmatched know-how to integrate and evolve technologies that improve the predictability and reproducibility of spine care. ATEC's innovation is not only driving rapid adoption today, it will also set new clinical standards for years to come.”

Financial Outlook for the Full-Year 2023

The Company continues to expect total revenue to grow 28% to $450 million for the fiscal year ended December 31, 2023, in line with expectations shared in conjunction with the release of preliminary first-quarter financial results. This includes surgical revenue growth of approximately 30% and $57 million of EOS revenue. The Company continues to expect to achieve non-GAAP adjusted EBITDA break-even 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 May 11, 2022. Access the replay by dialing (800) 770-2030 and referencing conference ID number 97241.

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. 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 first-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.

Alphatec Holdings, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

Three Months Ended

March 31,

2023

2022

(unaudited)
Revenue:
Revenue from products and services

$

109,110

 

$

70,918

 

Revenue from international supply agreement

 

 

 

15

 

Total revenue

 

109,110

 

 

70,933

 

Cost of sales

 

38,685

 

 

21,717

 

Gross profit

 

70,425

 

 

49,216

 

Operating expenses:
Research and development

 

13,260

 

 

9,722

 

Sales, general and administrative

 

91,262

 

 

69,471

 

Litigation-related expenses

 

3,192

 

 

7,532

 

Amortization of acquired intangible assets

 

2,883

 

 

2,230

 

Transaction-related expenses

 

 

 

120

 

Restructuring expenses

 

175

 

 

1,370

 

Total operating expenses

 

110,772

 

 

90,445

 

Operating loss

 

(40,347

)

 

(41,229

)

Interest and other expense, net:
Interest expense, net

 

(3,874

)

 

(1,456

)

Other (expense) income, net

 

706

 

 

(30

)

Total interest and other expense, net

 

(3,168

)

 

(1,486

)

Net loss before taxes

 

(43,515

)

 

(42,715

)

Income tax (benefit) provision

 

14

 

 

(99

)

Net loss

$

(43,529

)

$

(42,616

)

Net loss per share, basic and diluted

$

(0.40

)

$

(0.43

)

Weighted average shares outstanding, basic and diluted

 

109,751

 

 

99,978

 

Stock-based compensation included in:
Cost of sales

$

6,006

 

$

256

 

Research and development

 

1,317

 

 

972

 

Sales, general and administrative

 

9,139

 

 

8,956

 

$

16,462

 

$

10,184

 

ALPHATEC HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31,

2023
December 31,

2022

(unaudited)

ASSETS
Current assets:
Cash and cash equivalents

$

116,698

 

$

84,696

 

Accounts receivable, net

 

62,415

 

 

60,060

 

Inventories

 

108,242

 

 

101,521

 

Prepaid expenses and other current assets

 

11,798

 

 

9,357

 

Total current assets

 

299,153

 

 

255,634

 

Property and equipment, net

 

109,750

 

 

101,952

 

Right-of-use assets

 

28,063

 

 

28,360

 

Goodwill

 

47,924

 

 

47,367

 

Intangible assets, net

 

81,079

 

 

82,781

 

Other assets

 

3,724

 

 

4,874

 

Total assets

$

569,693

 

$

520,968

 

 
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable

$

39,070

 

$

34,742

 

Accrued expenses and other current liabilities

 

69,032

 

 

72,382

 

Contract liabilities

 

13,938

 

 

11,956

 

Short-term debt

 

16,068

 

 

14,948

 

Current portion of operating lease liabilities

 

4,796

 

 

4,842

 

Total current liabilities

 

142,904

 

 

138,870

 

Total long-term liabilities

 

461,548

 

 

393,162

 

Redeemable preferred stock

 

23,603

 

 

23,603

 

Stockholders' (deficit) equity

 

(58,362

)

 

(34,667

)

Total liabilities and stockholders' (deficit) equity

$

569,693

 

$

520,968

 

Alphatec Holdings, Inc.
Reconciliation of Non-GAAP Financial Measures
(in thousands)
Three Months Ended
March 31,

2023

2022

(unaudited)
Gross profit, GAAP

$

70,425

 

$

49,216

 

Add: amortization of intangible assets

 

220

 

 

-

 

Add: stock-based compensation

 

6,006

 

 

256

 

Add: purchase accounting adjustments on acquisitions

 

195

 

 

-

 

Add: excess and obsolete write-down

 

2,098

 

 

1,706

 

Non-GAAP gross profit

$

78,944

 

$

51,178

 

Gross margin, GAAP

 

64.5

%

 

69.4

%

Add: amortization of intangible assets

 

0.2

%

 

0.0

%

Add: stock-based compensation

 

5.5

%

 

0.4

%

Add: purchase accounting adjustments on acquisitions

 

0.2

%

 

0.0

%

Add: excess and obsolete write-down

 

1.9

%

 

2.4

%

Non-GAAP gross margin

 

72.3

%

 

72.1

%

 
Three Months Ended
March 31,

2023

2022

(unaudited)
Operating expenses, GAAP

$

110,772

 

$

90,445

 

Adjustments:
Stock-based compensation

 

(10,456

)

 

(9,928

)

Litigation-related expenses

 

(3,192

)

 

(7,532

)

Amortization of intangible assets

 

(2,883

)

 

(2,230

)

Transaction-related expenses

 

-

 

 

(120

)

Restructuring expenses

 

(175

)

 

(1,370

)

Other non-recurring expenses1

 

(1,349

)

 

-

 

Non-GAAP operating expenses

$

92,717

 

$

69,265

 

 
Three Months Ended
March 31,

2023

2022

(unaudited)
Operating loss, GAAP

$

(40,347

)

$

(41,229

)

Depreciation

 

8,589

 

 

7,085

 

Amortization of intangible assets

 

3,103

 

 

2,230

 

EBITDA

 

(28,655

)

 

(31,914

)

Add back significant items:
Stock-based compensation

 

16,462

 

 

10,184

 

Purchase accounting adjustments on acquisitions

 

195

 

 

-

 

Excess & obsolete write-down

 

2,098

 

 

1,706

 

Litigation-related expenses

 

3,192

 

 

7,532

 

Transaction-related expenses

 

-

 

 

120

 

Restructuring expenses

 

175

 

 

1,370

 

Other non-recurring expenses1

 

1,349

 

 

-

 

Adjusted EBITDA

$

(5,184

)

$

(11,002

)

1

Non-recurring consulting fees associated with the implementation of our state tax-planning strategy

 

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