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ATEC Reports Second Quarter Financial Results and Recent Corporate Highlights

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Organic revenue growth accelerates to 93%

Revenue 2-year CAGR of 46%

Full year 2021 total revenue now expected to grow ~64% to ~$238 million

CARLSBAD, Calif., August 03, 2021--(BUSINESS WIRE)--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, 2021, and recent corporate highlights.

Second Quarter 2021 Financial Results

Quarter Ended June 30, 2021

Total revenues

$62.2 M

GAAP gross margin

66.0%

Non-GAAP gross margin

73.2%

Operating expenses

$76.8 M

Non-GAAP operating expenses

$57.2 M

GAAP Operating loss

$(35.8) M

Non-Gaap adjusted EBITDA

$(6.6) M

Ending cash balance

76.6

Recent Highlights

  • Expanded contribution from new products to 84% of revenue, up from 61% in Q2 2020;

  • Continued elevation of the sales team, delivering 106% year-over-year revenue growth from strategic distribution;

  • Closed acquisition of EOS imaging, S.A. ("EOS"), and commenced integration to advance ATEC clinical prowess with improved information from diagnosis to follow-up.

"We are accelerating revenue through sound execution of our growth priorities," said Pat Miles, Chairman and Chief Executive Officer. "But this is just the first inning; we intend to become the dominant force in the industry by significantly improving the clinical experience in spine. We channeled decades of spine experience as the pioneers of lateral surgery to create the PTP technique in order to improve the optionality and predictability of the lateral approach. PTP adoption is accelerating and utilization is increasing among both new and existing surgeon customers. In a few short years, we have created surgical approaches and products that are unrivaled. With the close of the EOS transaction, we intend to extend our prowess by equipping the AlphaInformatiX platform with unprecedented imaging information throughout the entire continuum of care, bringing the standards relied on by the world’s most prestigious academic centers to spine surgery. Our early success has driven excitement within these walls that is palpable – we know the opportunity ahead of us and are confident we have what it takes to win in the innings ahead."

Financial Outlook for the Full Year 2021

The Company now expects total revenue for the fiscal year ended December 31, 2021, to approximate $238 million, reflecting growth of approximately 64% compared to the prior full year. This includes an organic revenue contribution of approximately $212 million, or 50% growth compared to the prior full year. The Company anticipates about $25 million of revenue related to EOS imaging. Total revenue guidance for the full year 2021 also includes a $1 million contribution from the Company’s international supply agreement, which will terminate on August 31, 2021.

Investor Conference Call

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 at investors.alphatecspine.com/quarterly-results. Participants should go to the website at least 15 minutes before the event to register, and download and install any necessary software.

To dial-in to the webcast, registration may be completed by visiting the following registration link: http://www.directeventreg.com/registration/event/4976259. Once registered, each dial-in participant will be provided access details and a registrant ID.

A replay of the webcast will remain available through the Investor Relations section of ATEC’s Corporate Website at investors.alphatecspine.com/quarterly-results for twelve months. In addition, a replay of the audiocast will be available beginning two hours after the call’s completion until August 10, 2021. The replay dial-in numbers are (800) 585-8367 for domestic callers and (416) 621-4642 for international callers. Please use the replay conference ID number 4976259.

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.

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 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 become 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 and growth outlook; planned product launches, introductions, regulatory submissions or clearances; efforts to transform sales and distribution channels; the Company’s ability to compel surgeon adoption; the Company’s future ability to finance its operations and sufficiency of its cash runway; and statements about the potential benefits and synergies of the acquisition of EOS imaging, S.A. (including expected impact on future financial and operating results and post-acquisition plans and intentions). 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 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; the impact of the COVID-19 pandemic on the Company and economy; and uncertainties and risks related to the integration of EOS imaging, S.A. 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,

2021

2020

2021

2020

unaudited

Revenues:

Revenue from products and services

$

61,885

$

28,834

$

105,601

$

57,904

Revenue from international supply agreement

364

795

769

1,840

Total revenues

62,249

29,629

106,370

59,744

Cost of revenues

21,184

8,787

33,447

17,871

Gross profit

41,065

20,842

72,923

41,873

Operating expenses:

Research and development

7,839

4,237

13,640

8,406

Sales, general and administrative

60,659

26,468

101,085

54,051

Litigation-related

1,167

1,304

4,502

3,947

Amortization of acquired intangible assets

1,208

172

1,380

344

Transaction-related

4,771

(181)

5,783

4,091

Restructuring

1,173

1,331

Total operating expenses

76,817

32,000

127,721

70,839

Operating loss

(35,752)

(11,158)

(54,798)

(28,966)

Interest and other expense, net:

Interest expense, net

(2,394)

(3,032)

(4,332)

(5,906)

Other expenses

(16)

(1,555)

(1,905)

(1,555)

Total interest and other expenses, net

(2,410)

(4,587)

(6,237)

(7,461)

Loss from continuing operations before taxes

(38,162)

(15,745)

(61,035)

(36,427)

Income tax provision

43

60

73

100

Net loss

$

(38,205)

$

(15,805)

$

(61,108)

$

(36,527)

Net loss per share, basic and diluted

$

(0.39)

$

(0.25)

$

(0.66)

$

(0.58)

Shares used in calculating basic and diluted net loss per share

98,541

63,713

92,912

63,140

Stock-based compensation included in:

Cost of revenues

$

235

$

128

$

330

$

235

Research and development

664

563

1,162

954

Sales, general and administrative

10,597

3,884

14,478

6,954

$

11,496

$

4,575

$

15,970

$

8,143

ALPHATEC HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

June 30, 2021

December 31, 2020

(unaudited)

ASSETS

Current assets:

Cash

$ 76,581

$ 107,765

Accounts receivable, net

33,743

23,527

Inventories, net

86,715

46,001

Prepaid expenses and other current assets

8,108

5,439

Withholding tax receivable from Officer

1,076

1,076

Current assets of discontinued operations

136

352

Total current assets

206,359

184,160

Property and equipment, net

66,051

36,670

Right-of-use asset

26,604

1,177

Goodwill

45,189

13,897

Intangible assets, net

92,981

24,720

Other assets

3,786

541

Noncurrent assets of discontinued operations

57

58

Total assets

$ 441,027

$ 261,223

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$ 29,812

$ 17,599

Accrued expenses and other current liabilities

43,455

35,264

Contract liability

20,392

Short-term debt

10,988

4,167

Current portion of operating lease liability

2,777

885

Current liabilities of discontinued operations

141

397

Total current liabilities

107,565

58,312

Total long term liabilities

96,345

49,428

Redeemable preferred stock

23,603

23,603

Stockholders' equity

213,514

129,880

Total liabilities and stockholders' equity

$ 441,027

$ 261,223

ALPHATEC HOLDINGS, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

unaudited

Gross profit, GAAP

$

41,065

$

20,842

$

72,923

$

41,873

Add: amortization of intangible assets

268

268

536

536

Add: stock-based compensation

235

128

330

235

Add: Purchase accounting adjustments on acquisitions

1,763

1,763

Add: non-cash excess and obsolete charges

2,221

1,712

4,317

3,434

Non-GAAP gross profit

$

45,552

$

22,950

$

79,869

$

46,078

Gross margin, GAAP

66.0

%

70.3

%

68.6

%

70.1

%

Add: amortization of intangible assets

0.4

%

0.9

%

0.5

%

0.9

%

Add: stock-based compensation

0.4

%

0.4

%

0.3

%

0.4

%

Add: Purchase accounting adjustments on acquisitions

2.8

%

0.0

%

1.7

%

0.0

%

Add: non-cash excess and obsolete charges

3.6

%

5.8

%

4.1

%

5.7

%

Non-GAAP gross margin

73.2

%

77.5

%

75.1

%

77.1

%

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

unaudited

Operating expenses, GAAP

$

76,817

$

32,000

$

127,721

$

70,839

Adjustments:

Stock-based compensation

(11,261

)

(4,447

)

(15,640

)

(7,908

)

Litigation-related expenses

(1,167

)

(1,304

)

(4,502

)

(3,947

)

Amortization of intangible assets

(1,208

)

(172

)

(1,380

)

(344

)

Transaction-related expenses

(4,771

)

181

(5,783

)

(4,091

)

Restructuring expenses

(1,173

)

(1,331

)

Non-GAAP operating expenses

$

57,237

$

26,258

$

99,085

$

54,549

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

unaudited

Operating loss, GAAP

$

(35,752

)

$

(11,158

)

$

(54,798

)

$

(28,966

)

Depreciation

5,068

2,161

8,477

4,175

Amortization of intangible assets

1,476

441

1,917

881

EBITDA

(29,208

)

(8,556

)

(44,404

)

(23,910

)

Add back significant items:

Stock-based compensation

11,496

4,575

15,970

8,143

Purchase accounting adjustments on acquisitions

1,763

1,763

Excess & obsolete charges

2,221

1,712

4,317

3,434

Litigation-related expenses

1,167

1,304

4,502

3,947

Transaction-related expenses

4,771

(181

)

5,783

4,091

Restructuring expenses

1,173

1,331

Adjusted EBITDA

$

(6,617

)

$

(1,146

)

$

(10,738

)

$

(4,295

)

View source version on businesswire.com: https://www.businesswire.com/news/home/20210803005994/en/

Contacts

Investor/Media Contact:
Tina Jacobsen, CFA
Investor Relations
(760) 494-6790
investorrelations@atecspine.com

Company Contact:
J. Todd Koning
Chief Financial Officer
investorrelations@atecspine.com