* Revenue Grows 133% over Prior Year CARLSBAD, Calif., July 27
/PRNewswire-FirstCall/ -- Alphatec Holdings, Inc. (NASDAQ:ATEC), a
medical device company that provides customized spinal products and
a broad offering of spine fusion solutions, today reported that
increasing surgeon utilization, a broadening product line and
strengthening sales channels drove a revenue increase of 133
percent to $19.4 million for the second quarter ended June 30,
2006, from the prior year's second quarter revenue of $8.3 million
and an 8 percent increase over the $18.0 million in the first
quarter of 2006. Gross profit for the second quarter of 2006 was
$12.9 million with a gross margin of 66.2 percent, compared with a
gross profit of $4.5 million with a gross margin of 54.3 percent in
the second quarter of 2005. For the first quarter of 2006, gross
profit was $11.6 million with a gross margin of 64.4 percent.
Alphatec President and Chief Executive Officer Ronald G. Hiscock
said, "Achieving both exceptional revenue growth and delivering
improved operating efficiencies during a period in which management
and staff were actively participating in an IPO financing is a
tribute to the entire organization and the soundness of the
business model at Alphatec Spine. I am especially pleased with the
productivity of the sales organization and with the ability of the
manufacturing and operational groups to maintain our trademark high
level of customer service during this period of rapid growth."
Total operating expenses were $16.7 million in the second quarter
of 2006, compared to $6.3 million in the 2005 second quarter and
$14.7 million in the 2006 first quarter. The increases were due
principally to higher selling expenses from greater revenue and to
investments in sales, marketing, research and development
infrastructure. Approximately $1.3 million of the current quarter's
expenditures are considered non-recurring in nature and were
substantially related to stock-based compensation costs. The net
loss for the second quarter of 2006 was $4.7 million or $0.20 loss
per share, compared to the $3.0 million or $0.17 loss per share in
the second quarter of 2005 and, sequentially, down from the $7.8
million or $0.42 loss per share in the first quarter of 2006. "The
first half of 2006 has been remarkably productive on many fronts,"
continued Hiscock. "We have established each of the principal
elements of a corporate platform designed to support both growth
and innovation. We added significant breadth to our management
team, scientific advisory board and product line. Our operations
team improved our manufacturing abilities and efficiency,
contributing to higher margins. We also made product-line additions
that allow surgeons to perform a growing number of procedures with
Alphatec alone, strengthening our surgeon relationships in the
process." Revenue for the six months ended June 30, 2006 was $37.5
million compared to $15.2 million for the same period in 2005. Net
loss for the six months ended June 30, 2006 was $12.5 million, or
$0.60 loss per share, compared to a net loss of $7.9 million, or
$0.45 loss per share, for the six months of 2005. The six months
ended June 30, 2005 include the results of the predecessor,
Alphatec Manufacturing, Inc., for the period from January 1, 2005
through March 17, 2005. The cash balance at June 30, 2006 was $25
million, which includes proceeds from the company's initial public
offering during the second quarter. The net proceeds of the
offering was $35.2 million, before debt retirement, and the company
intends to use the remaining proceeds to expand its sales and
marketing activities, to support its research and development
efforts, and to fund the clearance and commercialization of new
products, among other uses. Non-GAAP Information Earnings before
interest, taxes, depreciation, and amortization ("EBITDA") included
in this press release is a non-GAAP (generally accepted accounting
principles) financial measure which represents net income (loss)
excluding the effects of interest, taxes, depreciation,
amortization and stock based compensation costs. EBITDA, as defined
above, may not be similar to EBITDA measures used by other
companies and is not a measurement under generally accepted
accounting principles. The company believes that EBITDA provides
useful information to investors about the company's performance
because it eliminates the effects of period to period changes in
costs that are not directly attributable to the underlying
performance of the company's business operations. Management uses
EBITDA in evaluating the overall performance of the company's
business operations. Though management finds EBITDA useful for
evaluating aspects of the company's business, its reliance on this
measure is limited because excluded items often have a material
effect on the company's earnings and earnings per common share
calculated in accordance with GAAP. Therefore, management always
uses EBITDA in conjunction with GAAP earnings and earnings per
common share measures. The company believes that EBITDA provides
investors with an additional tool for evaluating the company's core
performance, which management uses in its own evaluation of
performance, and a base-line for assessing the future earnings
potential of the company. While the GAAP results are more complete,
the company prefers to allow investors to have this supplemental
metric since, with a reconciliation to GAAP, it may provide greater
insight into the company's financial results. Conference Call
Alphatec will hold a conference call today at 11:30 a.m. ET / 8:30
a.m. PT to discuss the results. A live Web cast of the conference
call will be available online from the investor relations page of
the company's corporate Web site at http://www.alphatecspine.com/.
After the live Web cast, the call will remain available on
Alphatec's Web site, http://www.alphatecspine.com/, through the
company's next earnings conference call. About Alphatec Alphatec is
a medical device company focused on the design, development,
manufacturing and marketing of products for the surgical treatment
of spine disorders. Alphatec's principal product offerings are
primarily focused on the U.S. spine fusion market, which is
estimated to approach $3 billion in 2007, through its wholly-owned
subsidiary, Alphatec Spine, Inc., and include a variety of spinal
implant products and systems comprised of components such as spine
screws, spinal spacers, and plates that offer multiple solutions to
address patients' needs. In addition to Alphatec's U.S. presence,
it also participates in the Japanese spine fusion and orthopedic
trauma markets through its subsidiary, Alphatec Pacific, Inc. Our
mission is to be a value based leader in the spinal market by
providing unmatched service to and taking scientific direction from
our physician customers. We do so through our unique in-house
manufacturing facility in Carlsbad, California that allows us to
respond quickly and to customize innovative products needed for
spine fusion surgery. Forward Looking Statements This press release
may contain forward-looking statements that involve risks and
uncertainty, including statements that the added breadth to our
management team, scientific advisory board and product line,
position the company for continued growth in the coming periods and
to succeed in the execution of our business model and that recent
product line additions make it possible for surgeons to perform a
growing number of procedures with Alphatec alone, eliminating the
need for other product options while strengthening our surgeon
relationships in the process. 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.
Alphatec 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, including, but not
limited to, the following: Alphatec's ability to develop and expand
its spine fusion business in the United States and Japan,
Alphatec's ability to expand and maintain a successful sales and
marketing organization, continuation of favorable third party payor
reimbursement for procedures performed using our products,
unanticipated expenses or liabilities or other adverse events
affecting cash flow or Alphatec's ability to achieve profitability,
uncertainty of additional funding, uncertainty of success in
developing any new products, failure to successfully introduce and
develop new products, including products related to license
agreements, failure to obtain FDA clearance or approval for
particular devices, Alphatec's ability to compete with other
competing products and with emerging new technologies within and
outside of spinal fusion, product liability exposure and patent
infringement claims. Please refer to the risks detailed in
Alphatec's Form S-1 on file with the SEC, as well as the risks
detailed from time to time in Alphatec's SEC reports, including
quarterly reports on Form 10-Q, reports on Form 8-K and annual
reports on Form 10-K. We disclaim 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. Investors: Alphatec Holdings, Inc.: Matt Clawson
Stephen T.D. Dixon Allen & Caron, Inc. Vice President and CFO
(949) 474-4300 (760) 431-9286 ALPHATEC HOLDINGS, INC. UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands,
except per share data) Three Months Ended Six Months Ended June 30,
June 30, 2006 2005 2006 2005 Revenues $19,422 $8,320 $37,451
$15,221 Cost of revenues 6,567 3,805 12,977 5,806 Gross profit
12,855 4,515 24,474 9,415 % revenue 66.2% 54.3% 65.3% 61.9%
Operating expenses: Research & development 856 177 1,560 470
In-process research & development 0 0 0 3,100 Sales &
marketing 7,998 3,297 14,543 6,728 General and administrative 7,811
2,856 15,292 5,355 Total operating expenses 16,665 6,330 31,395
15,653 Operating loss (3,810) (1,815) (6,921) (6,238) Interest and
other income (expense), net (706) (69) (2,197) (180) Loss before
taxes (4,516) (1,884) (9,118) (6,418) Income taxes (1,338) (607)
(64) (457) Net loss (3,178) (1,277) (9,054) (5,961) Accretion to
redemption value of redeemable convertible preferred (1,508)
(1,709) (3,450) (1,940) Net loss applicable to common stockholders'
$(4,686) $(2,986) $(12,504) $(7,901) Net loss per common share:
Basic $(0.20) $(0.17) $(0.60) $(0.45) Diluted $(0.20) $(0.17)
$(0.60) $(0.45) Weighted-average shares: Basic 23,044,621
17,809,294 20,855,548 17,499,690 Diluted 23,044,621 17,809,294
20,855,548 17,499,690 Non-GAAP information: EBITDA: Net loss
(3,178) (1,277) (9,054) (5,961) Addback: Interest expense 740 76
2,292 185 Stock-based compensation 2,204 0 3,525 1,328 Income tax
provision (1,338) (607) (64) (457) Depreciation 835 182 1,488 330
Amortization of intangibles 859 691 1,671 685 Total EBITDA 122
(935) (142) (3,890) ALPHATEC HOLDINGS, INC. UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS (in thousands) June 30, December 31,
2006 2005 (unaudited) ASSETS Current assets: Cash and cash
equivalents $25,020 $2,180 Accounts receivable, net 13,537 9,361
Inventories, net 10,625 8,458 Prepaid expenses and other assets
2,279 1,050 Deferred income taxes 3,057 3,057 Total current assets
54,518 24,106 Property and equipment, net 11,469 7,206 Goodwill
60,897 60,946 Intangibles, net 11,974 13,644 Other assets 621 3,237
Total assets $139,479 $109,139 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Accounts payable $4,103 $4,103 Accrued
expenses 9,705 8,736 Income taxes payable 35 96 Lines of credit
1,719 3,942 Current portion of long-term debt 2,471 2,980 Total
current liabilities 18,033 19,857 Total long term liabilities 7,971
7,276 Minority Interest 3,377 1,914 Total equity 110,098 80,092
Total liabilities and stockholders' equity $139,479 $109,139
DATASOURCE: Alphatec Holdings, Inc. CONTACT: Investors, Matt
Clawson of Allen & Caron, Inc., +1-949-474-4300, , for Alphatec
Holdings, Inc.; or Stephen T.D. Dixon, Vice President and CFO of
Alphatec Holdings, Inc., +1-760-431-9286 Web site:
http://www.alphatecspine.com/
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