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ATEC Reports Third Quarter 2022 Financial Results

  • Total revenue grew 43% to $90 million, including surgical revenue growth of 53%

  • EOS revenue of $11 million

  • Adjusted EBITDA improved significantly, both year-over-year and sequentially

CARLSBAD, Calif., November 03, 2022--(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 September 30, 2022, and recent corporate highlights.

Third-Quarter and Full-Year 2022 Financial Results

Quarter Ended September 30, 2022

Total revenue

$90 million

GAAP gross margin

66%

Non-GAAP gross margin

71%

Operating expenses

$94 million

Non-GAAP operating expenses

$78 million

GAAP operating loss

($35) million

Non-GAAP adjusted EBITDA

($6) million

Ending cash balance

$106 million

Recent Highlights

  • Enhanced lateral sophistication from L3 to S1, applying learnings from the prone transpoas (PTP) approach to evolve the lateral transpsoas (LTP) procedure and develop a Midline ALIF approach;

  • Launched ATEC’s first expandable interbody and Sigma Medialized access technology to advance the minimally-invasive (MIS) posterior approach, which can integrate with PTP to address L5-S1;

  • Drove a 32% increase in surgical volume and a 22% increase in users compared to prior year, and hosted approximately 150 surgeons at training events;

  • Achieved operating cost leverage with adjusted EBITDA margin increasing approximately 870 basis points compared to prior year and approximately 290 basis points sequentially;

  • Closed $50 million revolving credit facility with $25 million accordion feature.

"We are executing on our innovation and financial commitments and I am confident we can continue to do so in the years ahead," said Pat Miles, Chairman and Chief Executive Officer. "During the third quarter, ATEC’s Organic Innovation Machine introduced multiple outcome-improving approaches and technologies, which were enthusiastically received. It is increasingly clear: surgeons are buying in to our clinical thesis which will go well beyond lateral."

Financial Outlook for the Full-Year 2022

The Company expects total revenue of $340 million for the fiscal year ended December 31, 2022, in line with the 40% full-year growth rate previewed in conjunction with the release of preliminary third quarter financial results. This includes surgical revenue growth of approximately 39% and $46 million of EOS revenue.

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 two hours after the webcast’s completion through November 10, 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 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, balance sheet, growth and financial outlook; planned product launches, introductions, regulatory submissions or clearances; efforts to transform sales and distribution channels; the Company’s ability to compel surgeon adoption; and the Company’s future ability to finance its operations and sufficiency of its cash runway. 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; 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

Nine Months Ended

September 30,

September 30,

2022

2021

2022

2021

(unaudited)

Revenue:

Revenue from products and services

$

89,839

$

62,735

$

244,908

$

168,336

Revenue from international supply agreement

145

15

914

Total revenue

89,839

62,880

244,923

169,250

Cost of sales

30,323

23,266

80,715

56,713

Gross profit

59,516

39,614

164,208

112,537

Operating expenses:

Research and development

12,111

9,391

32,429

23,031

Sales, general and administrative

75,954

61,494

218,093

162,578

Litigation-related expenses

3,602

1,209

16,629

5,711

Amortization of acquired intangible assets

2,774

2,012

7,181

3,392

Transaction-related expenses

373

120

6,156

Restructuring expenses

45

256

1,704

1,587

Total operating expenses

94,486

74,735

276,156

202,455

Operating loss

(34,970

)

(35,121

)

(111,948

)

(89,918

)

Interest and other expense, net:

Interest expense, net

(1,285

)

(1,272

)

(4,176

)

(5,604

)

Loss on debt extinguishment, net

(7,434

)

(7,434

)

Other (expense) income, net

(615

)

886

(578

)

(1,020

)

Total interest and other expense, net

(1,900

)

(7,820

)

(4,754

)

(14,058

)

Net loss before taxes

(36,870

)

(42,941

)

(116,702

)

(103,976

)

Income tax provision

129

90

461

163

Net loss

$

(36,999

)

$

(43,031

)

$

(117,163

)

$

(104,139

)

Net loss per share, basic and diluted

$

(0.35

)

$

(0.43

)

$

(1.14

)

$

(1.09

)

Weighted average shares outstanding, basic and diluted

104,804

99,571

102,561

95,204

Stock-based compensation included in:

Cost of sales

$

735

$

310

$

1,440

$

489

Research and development

1,653

1,440

3,987

2,602

Sales, general and administrative

8,689

9,004

25,037

23,633

$

11,077

$

10,754

$

30,464

$

26,724

ALPHATEC HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

September 30,
2022

December 31,
2021

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

106,112

$

187,248

Accounts receivable, net

50,723

41,893

Inventories

102,159

91,703

Prepaid expenses and other current assets

9,718

10,313

Total current assets

268,712

331,157

Property and equipment, net

98,908

87,401

Right-of-use assets

28,451

25,283

Goodwill

37,593

39,689

Intangible assets, net

79,738

85,274

Other assets

2,881

3,249

Total assets

$

516,283

$

572,053

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

33,374

$

25,737

Accrued expenses and other current liabilities

59,877

55,549

Contract liabilities

12,293

15,255

Short-term debt

13,550

342

Current portion of operating lease liabilities

4,529

4,212

Total current liabilities

123,623

101,095

Total long-term liabilities

389,762

367,933

Redeemable preferred stock

23,603

23,603

Stockholders' (deficit) equity

(20,705

)

79,422

Total liabilities and stockholders' (deficit) equity

$

516,283

$

572,053

ALPHATEC HOLDINGS, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(in thousands)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2022

2021

2022

2021

(unaudited)

Gross profit, GAAP

$

59,516

$

39,614

$

164,208

$

112,537

Add: amortization of intangible assets

28

270

37

806

Add: stock-based compensation

735

310

1,440

489

Add: purchase accounting adjustments on acquisitions

347

2,577

784

4,340

Add: excess and obsolete write-down

2,923

2,525

7,023

6,842

Non-GAAP gross profit

$

63,549

$

45,296

$

173,492

$

125,014

Gross margin, GAAP

66.2

%

63.0

%

67.0

%

66.5

%

Add: amortization of intangible assets

0.0

%

0.4

%

0.0

%

0.5

%

Add: stock-based compensation

0.8

%

0.5

%

0.6

%

0.3

%

Add: purchase accounting adjustments on acquisitions

0.4

%

4.1

%

0.3

%

2.6

%

Add: excess and obsolete write-down

3.3

%

4.0

%

2.9

%

4.0

%

Non-GAAP gross margin

70.7

%

72.0

%

70.8

%

73.9

%

Three Months Ended

Nine Months Ended

September 30,

September 30,

2022

2021

2022

2021

(unaudited)

Operating expenses, GAAP

$

94,486

$

74,735

$

276,156

$

202,455

Adjustments:

Stock-based compensation

(10,342

)

(10,444

)

(29,024

)

(26,235

)

Litigation-related expenses

(3,602

)

(1,209

)

(16,629

)

(5,711

)

Amortization of intangible assets

(2,774

)

(2,012

)

(7,181

)

(3,392

)

Transaction-related expenses

(373

)

(120

)

(6,156

)

Restructuring expenses

(45

)

(256

)

(1,704

)

(1,587

)

Non-GAAP operating expenses

$

77,723

$

60,441

$

221,498

$

159,374

Three Months Ended

Nine Months Ended

September 30,

September 30,

2022

2021

2022

2021

(unaudited)

Operating loss, GAAP

$

(34,970

)

$

(35,121

)

$

(111,948

)

$

(89,918

)

Depreciation

8,010

5,311

22,601

13,788

Amortization of intangible assets

2,802

2,281

7,218

4,198

EBITDA

(24,158

)

(27,529

)

(82,129

)

(71,932

)

Add back significant items:

Stock-based compensation

11,077

10,754

30,464

26,724

Purchase accounting adjustments on acquisitions

347

2,577

784

4,340

Excess & obsolete write-down

2,923

2,525

7,023

6,842

Litigation-related expenses

3,602

1,209

16,629

5,711

Transaction-related expenses

373

120

6,156

Restructuring expenses

45

256

1,704

1,587

Adjusted EBITDA

$

(6,164

)

$

(9,835

)

$

(25,405

)

$

(20,572

)

View source version on businesswire.com: https://www.businesswire.com/news/home/20221103006210/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