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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

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

Recent Highlights

  • Continued to advance the clinical procedural experience through PTP(Prone TransPsoas) and launch of LTP (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 Machine 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.

 

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

(in thousands)

 
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

(in thousands)

 
 

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 expenses1

 

 

 

 

 

(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 expenses1

 

 

 

 

 

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

 

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