Alphatec Holdings, Inc. (Nasdaq:ATEC), the parent company of
Alphatec Spine, Inc., a provider of spinal fusion technologies,
announced today recent corporate highlights and financial results
for first quarter ended March 31, 2017.
First Quarter 2017 Highlights and Recent
Accomplishments
Financial Highlights
- Total net revenues of $28.0 million; revenue from the Company's
U.S. commercial business of $23.4 million
- U.S. commercial gross margin of 68%
- Gross proceeds of $18.9 million from private placement
- Cash balance of $25.5 million at March 31, 2017
Organizational and Product Highlights
- Completed its seven-person senior leadership team with
appointments of Chief Financial Officer and Executive Vice
President of Strategic Marketing and Product Development.
- Initiated transition of sales organization from non-exclusive
to dedicated.
- Added three new Area Vice Presidents with a history of building
strong, dedicated distribution channels in spine.
- Reduced headcount from 195 in September 2016 to approximately
140 today, and implemented cost-control measures, including
consolidating the Company’s operations into one building.
- Completed a limited user release of Arsenal™ Deformity
Adolescent Idiopathic Scoliosis (AIS) System, and introduced a
limited user release of Battalion™ Lateral System, both which have
been well-received by surgeons.
“We are very pleased with our progress in
evolving the Alphatec organization over the past few months,” said
Terry Rich, CEO of Alphatec. “Our strategy for the Company
centers on combining our broad product portfolio with new
leadership, dedicated distribution partners, and a high-performance
culture in order to significantly re-position the Alphatec brand to
customers, investors, employees, and business partners. In the
short time that our new team has been together, we have taken many
important steps to provide a solid base to return Alphatec to a
growth organization.”
Financial Results for the First Quarter Ended March 31,
2017
As a result of the sale of the Company’s international business
in September 2016, the financial results and related assets and
liabilities of the former international business have been excluded
from continuing operations for all periods herein and reported as
discontinued operations.
U.S. commercial revenues for the first quarter
of 2017 were $23.4 million, down 19.8%, compared to $29.2 million
reported for the first quarter of 2016. On a sequential basis, U.S.
commercial revenues in the first quarter of 2017 were down $1.1
million, or 4.3%, compared to $24.5 million in the fourth quarter
of 2016.
These decreases are largely the result of
financial and operational challenges the Company faced in 2016,
which led to the sale of the Company’s international business in
order to sustain operations. This resulted in a reduction in
volume from several distributors and surgeons. Revenue was also
impacted by the Company’s decision to exit the stocking distributor
and terminate distributor relationships that are not representative
of the Company’s long-term business and rebranding strategy.
U.S. gross profit and gross margin for the first
quarter of 2017 were $16.0 million and 68.3%, respectively,
compared to $23.5 million and 80.6%, respectively, for the first
quarter of 2016. Gross margins declined primarily as a result of
increased supply costs from reduced sourcing and manufacturing
volumes, and an increase in inventory kit write-offs due to
distributor turnover.
On a sequential basis, U.S. gross margin of
68.3% in the first quarter of 2017 increased from 62.2% in the
fourth quarter of 2016.
Total operating expenses for the first quarter
of 2017 were $20.2 million, reflecting a decrease of $7.8 million,
an approximate 28% improvement over the first quarter of 2016. On a
non-GAAP basis, excluding restructuring charges, total operating
expenses in the first quarter of 2017 decreased $8.9 million, or
approximately 32%, compared to the first quarter of 2016.
These decreases reflect the impact of cost reduction initiatives,
including the workforce reductions the Company implemented in
October 2016 and February 2017.
On a sequential basis, total operating expenses
in the first quarter of 2017 were down $1.5 million, or
approximately 7%, compared to $21.7 million in the fourth quarter
of 2016. On a non-GAAP basis, excluding restructuring
charges, total operating expenses in the first quarter of 2017
decreased $2.2 million, or approximately 11%, compared to the
fourth quarter of 2016.
GAAP loss from continuing operations for the
first quarter of 2017 was $5.4 million, compared to a loss of $4.2
million for the first quarter of 2016, and a loss of $10.2 million
for the fourth quarter of 2016.
Adjusted EBITDA in the first quarter of 2017 was
$0.5 million, compared to $71,000 in for the first quarter of 2016
and a loss of $2.2 million for the fourth quarter of 2016. Please
refer to the table, "Alphatec Holdings, Inc. Reconciliation of
Non-GAAP Financial Measures" that follows for more detailed
information.
Total Current and Long-term debt, includes $34.2
million in term debt and $10.3 million outstanding under the
Company’s revolving credit facility at March 31, 2017. This
compares to $34.8 million in term debt and $12.5 million
outstanding under the Company’s revolving credit facility at
December 31, 2016.
Cash and cash equivalents were $25.5 million at
March 31, 2017, compared to $19.6 million reported at December 31,
2016. In March, the Company raised gross proceeds of $18.9 million
in a private placement of common stock, Series A Convertible
Preferred Stock and warrants exercisable for common stock.
Non-GAAP 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 such as Adjusted EBITDA. Adjusted EBITDA included in
this press release is a non-GAAP financial measure that represents
net income (loss), excluding the effects of interest, taxes,
depreciation, amortization, stock-based compensation expenses, and
other non-recurring income or expense items, such as impairments,
restructuring expenses, severance expenses and transaction-related
expenses. The Company believes that non-GAAP Adjusted EBITDA
provides 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. For
completeness, management uses non-GAAP Adjusted EBITDA in
conjunction with GAAP earnings and earnings per common share
measures. The Company’s Adjusted EBITDA measure 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. Adjusted
EBITDA 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 measure.
About Alphatec Holdings, Inc.
Alphatec Holdings, Inc., through its
wholly-owned subsidiary Alphatec Spine, Inc., is a medical device
company that designs, develops and markets spinal fusion technology
products and solutions for the treatment of spinal disorders
associated with disease and degeneration, congenital deformities
and trauma. The Company's mission is to improve lives by delivering
advancements in spinal fusion technologies. The Company
markets its products in the U.S. via independent sales agents and a
direct sales force.
Additional information can be found at
www.alphatecspine.com.
Forward Looking Statements
This press release may contain "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 or business
conditions will not differ materially from those projected or
suggested in such forward-looking statements as a result of various
factors. Forward looking statements include the references to the
Company’s strategy in significantly re-positioning the Alphatec
brand and turning the Company into a growth organization. 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 Company’s 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, including Battalion and Arsenal Deformity;
failure to obtain FDA clearance or approval or international
regulatory approvals for new products, or unexpected or prolonged
delays in the process; continuation of favorable third party
reimbursement for procedures performed using the Company’s
products; unanticipated expenses or liabilities or other adverse
events affecting cash flow or the Company’s ability to successfully
control its costs or achieve profitability; uncertainty of
additional funding; the Company’s ability to compete with other
competing products and with emerging new technologies; product
liability exposure; an unsuccessful outcome in any litigation in
which the Company is a defendant; patent infringement claims;
claims related to the Company’s intellectual property and the
Company’s ability to meet its financial obligations under its
credit agreements and the Orthotec settlement agreement. The words
“believe,” “will,” “should,” “expect,” “intend,” “estimate” and
“anticipate,” variations of such words and similar expressions
identify forward-looking statements, but their absence does not
mean that a statement is not a forward-looking statement. 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 periodic reports, filed
with the Securities and Exchange Commission. Alphatec
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 - unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
March 31, |
|
|
|
|
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
27,978 |
|
|
$ |
34,206 |
|
|
|
|
|
Cost of revenues |
|
11,199 |
|
|
|
9,719 |
|
|
|
|
|
Gross profit |
|
16,779 |
|
|
|
24,487 |
|
|
|
|
|
|
|
60.0 |
% |
|
|
71.6 |
% |
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
Research
and development |
|
1,449 |
|
|
|
3,641 |
|
|
|
|
|
Sales and
marketing |
|
11,103 |
|
|
|
14,940 |
|
|
|
|
|
General
and administrative |
|
6,223 |
|
|
|
9,004 |
|
|
|
|
|
Amortization of intangible assets |
|
172 |
|
|
|
255 |
|
|
|
|
|
Restructuring expenses |
|
1,231 |
|
|
|
89 |
|
|
|
|
|
Total
operating expenses |
|
20,178 |
|
|
|
27,929 |
|
|
|
|
|
Operating loss |
|
(3,399 |
) |
|
|
(3,442 |
) |
|
|
|
|
Interest
and other expense, net |
|
(1,976 |
) |
|
|
(783 |
) |
|
|
|
|
Loss from continuing
operations before taxes |
|
(5,375 |
) |
|
|
(4,225 |
) |
|
|
|
|
Income
tax provision |
|
49 |
|
|
|
23 |
|
|
|
|
|
Loss from continuing
operations |
|
(5,424 |
) |
|
|
(4,248 |
) |
|
|
|
|
Loss from discontinued
operations |
|
(91 |
) |
|
|
(2,369 |
) |
|
|
|
|
Net loss |
$ |
(5,515 |
) |
|
$ |
(6,617 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
continuing operations |
$ |
(0.60 |
) |
|
$ |
(0.50 |
) |
|
|
|
|
Net loss per share
discontinued operations |
|
(0.01 |
) |
|
|
(0.28 |
) |
|
|
|
|
Net loss per
share - basic and diluted |
$ |
(0.61 |
) |
|
$ |
(0.78 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
- basic and diluted |
|
9,005 |
|
|
|
8,466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
ALPHATEC HOLDINGS, INC. |
|
|
CONDENSED CONSOLIDATED BALANCE
SHEETS |
|
|
(in
thousands) |
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
|
2017 |
|
2016 |
|
|
|
(unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and
cash equivalents |
$ |
25,485 |
|
|
$ |
19,593 |
|
|
|
Accounts
receivable, net |
|
14,212 |
|
|
|
18,512 |
|
|
|
Inventories, net |
|
30,088 |
|
|
|
30,093 |
|
|
|
Prepaid
expenses and other current assets |
|
2,451 |
|
|
|
4,262 |
|
|
|
Current
assets of discontinued operations |
|
170 |
|
|
|
364 |
|
|
|
Total current
assets |
|
72,406 |
|
|
|
72,824 |
|
|
|
|
|
|
|
|
|
Property and equipment,
net |
|
15,408 |
|
|
|
15,076 |
|
|
|
Intangibles, net |
|
5,477 |
|
|
|
5,711 |
|
|
|
Other assets |
|
222 |
|
|
|
516 |
|
|
|
Noncurrent assets of
discontinued operations |
|
58 |
|
|
|
61 |
|
|
|
Total assets |
$ |
93,571 |
|
|
$ |
94,188 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
Accounts
payable |
$ |
4,245 |
|
|
$ |
8,701 |
|
|
|
Accrued
expenses |
|
26,173 |
|
|
|
27,589 |
|
|
|
Current
portion of long-term debt |
|
2,616 |
|
|
|
3,113 |
|
|
|
Current
liabilities of discontinued operations |
|
293 |
|
|
|
732 |
|
|
|
Total current
liabilities |
|
33,327 |
|
|
|
40,135 |
|
|
|
|
|
|
|
|
|
Total
long term liabilities |
|
65,774 |
|
|
|
71,954 |
|
|
|
Redeemable preferred stock |
|
23,603 |
|
|
|
23,603 |
|
|
|
Stockholders' deficit |
|
(29,133 |
) |
|
|
(41,504 |
) |
|
|
Total liabilities and
stockholders' deficit |
$ |
93,571 |
|
|
$ |
94,188 |
|
|
|
|
|
|
|
|
ALPHATEC HOLDINGS, INC. |
|
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES |
|
(in thousands, except per share amounts -
unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
March 31, |
|
|
|
|
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss, as
reported |
$ |
(3,399 |
) |
|
$ |
(3,442 |
) |
|
|
|
|
Add back: |
|
|
|
|
|
|
|
Depreciation |
|
1,634 |
|
|
|
2,254 |
|
|
|
|
|
Amortization of intangible assets |
|
234 |
|
|
|
306 |
|
|
|
|
|
Total EBITDA |
|
(1,531 |
) |
|
|
(882 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Add back significant
items: |
|
|
|
|
|
|
|
Stock-based compensation |
|
516 |
|
|
|
58 |
|
|
|
|
|
Stock
price guarantee |
|
292 |
|
|
|
806 |
|
|
|
|
|
Restructuring and other charges |
|
1,231 |
|
|
|
89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA, as adjusted for
significant items |
$ |
508 |
|
|
$ |
71 |
|
|
|
|
|
|
|
|
|
|
|
|
ALPHATEC HOLDINGS, INC. |
RECONCILIATION OF GEOGRAPHIC SEGMENT REVENUES
AND GROSS PROFIT |
(in thousands, except percentages -
unaudited) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
March 31, |
|
% Change |
|
|
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by source |
|
|
|
|
|
|
|
U.S. commercial
revenue |
$ |
23,437 |
|
|
$ |
29,233 |
|
|
(19.8 |
%) |
|
|
Other |
|
4,541 |
|
|
|
4,973 |
|
|
(8.7 |
%) |
|
|
Total revenues |
$ |
27,978 |
|
|
$ |
34,206 |
|
|
(18.2 |
%) |
|
|
|
|
|
|
|
|
|
|
Gross profit by
source |
|
|
|
|
|
|
|
U.S. |
$ |
16,015 |
|
|
$ |
23,548 |
|
|
|
|
|
Other |
|
764 |
|
|
|
939 |
|
|
|
|
|
Total gross profit |
$ |
16,779 |
|
|
$ |
24,487 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit margin by
source |
|
|
|
|
|
|
|
U.S. |
|
68.3 |
% |
|
|
80.6 |
% |
|
|
|
|
Other |
|
16.8 |
% |
|
|
18.9 |
% |
|
|
|
|
Total gross profit
margin |
|
60.0 |
% |
|
|
71.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
Investor/Media Contact:
Nick Laudico or Zack Kubow
The Ruth Group
(646) 536-7000
alphatec@theruthgroup.com
Company Contact:
Jeff Black
Executive Vice President and Chief Financial Officer
Alphatec Holdings, Inc.
(760) 431-9286
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