Alphatec Holdings, Inc. (Nasdaq:ATEC), the parent company of
Alphatec Spine, Inc., a medical device company that designs,
develops, manufactures and markets products for the surgical
treatment of spine disorders, with a focus on treating conditions
related to the aging spine, announced today financial results for
the first quarter March 31, 2010.
First Quarter 2010 Financial Highlights
-
Adjusted EBITDA of $5.4 million reported in the first quarter
2010 compared to $1.4 million reported for the first quarter 2009,
representing strong operating leverage with continued investment in
product development.
-
Non-GAAP net loss was $0.2 million for the first quarter 2010,
excluding Scient'x acquisition-related transaction and
restructuring costs of $4.0 million and in-process research and
development expenses of $0.5 million. Non-GAAP EPS was $0.00 per
share for first quarter 2010 compared to non-GAAP EPS of ($0.06)
per share reported in first quarter 2009.
First Quarter 2010 Performance Highlights
-
As of March 31, 2010, over 900 patients have been treated in the
EU with the Company's OsseoFix Spinal Fracture Reduction System, a
minimally invasive device that stabilizes the vertebral body
following a vertebral compression fracture.
-
OsseoScrew, the Company's proprietary expandable pedicle screw
system, designed for use in patients that require additional
fixation, was approved and launched in the EU in the first quarter
2010.
"Today we are pleased to announce our eleventh consecutive
quarter of record revenues and continued strong year-over-year
growth. With the closing of the Scient'x acquisition and the
completion of the equity follow-on offering, Alphatec Spine has
become a leading pure-play spine company that is truly global, with
scale to address the spine market in the U.S., Asia, Europe and
Latin America," stated Dirk Kuyper, Alphatec Spine's President and
Chief Executive Officer. Mr. Kuyper continued, "We are
particularly pleased with our ability to demonstrate operating
leverage, as evidenced by adjusted EBITDA of more than $5.0 million
reported in the first quarter of 2010. We look forward to
leveraging our broad-based international distribution network to
drive long-term growth and profitability."
Mr. Kuyper continued, "Lastly, I am pleased with the progress we
have made with the U.S. integration of Scient'x into Alphatec
Spine. As of April 30th, Scient'x's U.S. operations have
been consolidated into Alphatec Spine, and we remain on track to
realize at least $5 million of savings by eliminating redundancies
in Scient'x's operating expenses."
First Quarter 2010 Financial Results
The effective date of the Scient'x acquisition for accounting
purposes is March 31, 2010. The Company's reported
consolidated balance sheet includes the fair value of Scient'x's
acquired assets and assumed liabilities, in accordance with the
acquisition method of accounting. The first quarter 2010
reported consolidated statement of operations and consolidated
statement of cash flows does not include the operating performance
of Scient'x.
Consolidated revenues for the first quarter 2010 were $38.4
million, an increase of 25.6% from the $30.6 million reported for
the first quarter 2009. U.S. revenues for the first quarter
2010 were $28.4 million, an increase of 19.4% from the $23.8
million reported for the first quarter 2009. Asian revenues
for the first quarter 2010 were $6.1 million, an increase of 4.6%
from the $5.8 million reported for the first quarter 2009. European
revenues for the first quarter 2010 were $3.9 million, a
significant increase over the $1.0 million reported for the first
quarter 2009.
Gross profit for the first quarter 2010 was $24.0 million, an
increase of $4.2 million over first quarter 2009 of $19.8 million.
First quarter 2010 gross margin of 62.4% was below first quarter
2009 gross margin of 64.6%. The decrease in gross margin of
220 basis points is primarily due to geographic sales mix,
increased surgical instrument depreciation and modest U.S. hospital
price erosion, partially offset by improving manufacturing
efficiencies and reduced royalty burden.
Total operating expenses for the first quarter 2010 were $27.6
million, an increase of $4.7 million compared to first quarter 2009
of $22.9 million. The first quarter 2010 includes $4.0 million in
acquisition-related restructuring and transaction expenses.
Excluding the acquisition-related expenses, total operating expense
increased $0.7 million compared to first quarter 2009, primarily
related to an increase in research and development and sales and
marketing expenses.
Research and development expenses for the first quarter 2010
were $3.7 million, an increase of $0.8 million compared to the
first quarter 2009 of $2.9 million.
In-process research and development expenses for the first
quarter 2010 were $0.5 million, a decrease of $0.8 million compared
to the first quarter 2009 of $1.3 million.
Sales and marketing expenses for the first quarter 2010 were
$13.8 million, an increase of $1.0 million compared to the first
quarter 2009 of $12.8 million.
General and administrative expenses for the first quarter 2010
were $5.6 million, a decrease of $0.4 million, compared to the
first quarter 2009 of $6.0 million.
Adjusted EBITDA was $5.4 million in the first quarter 2010, an
increase of $4.0 million compared to the $1.4 million reported for
the first quarter 2009. Adjusted EBITDA growth represents increased
operating leverage while driving year-over-year revenue growth of
$7.8 million in the first quarter 2010.
Net loss for the first quarter 2010 was $4.7 million, or ($0.09)
per share (basic and diluted), compared with a net loss of $4.4
million, or ($0.09) per share (basic and diluted) for the first
quarter 2009.
Non-GAAP EPS for first quarter 2010 was $0.00 per share compared
to ($0.06) per share reported first quarter 2009. Non-GAAP net
earnings or (loss) excludes in-process research and development
expenses and Scient'x acquisition-related transaction and
restructuring expenses.
2010 Financial Guidance
Reaffirming full year 2010 financial guidance, the Company
anticipates pro forma combined revenues of $220 million to $225
million, $32 million to $35 million in pro forma combined adjusted
EBITDA and positive non-GAAP EPS for the full year 2010, excluding
amortization of acquired intangible assets, acquisition-related
transaction and restructuring expenses. The Company reiterates this
guidance to reflect the 2010 pro forma combined affect on a
12-month basis, as if the acquisition closed January 1, 2010.
On a financial reporting basis, the Company expects full year
2010 consolidated revenues in the range of $208 million to $213
million, adjusted EBITDA to be in the range of $32 million to $35
million, and positive non-GAAP EPS, excluding amortization of
acquired intangible assets, and acquisition-related transaction and
restructuring expenses. The financial reporting basis guidance
reflects the actual closing of the Scient'x acquisition at the end
of March 2010 and the inclusion of Scient'x's actual operating
results, effective April 1, 2010, into the Company's consolidated
statement of operations and consolidated statement of cash
flows.
As previously announced, the Scient'x transaction closed on
March 26, 2010. The Company has absorbed acquisition-related
expenses that had a negative impact to GAAP EPS in the first
quarter of 2010 and expects to absorb additional
acquisition-related expenses in second quarter 2010.
Conference Call
Alphatec Spine will host a conference call today at 1:30 p.m. PT
/ 4:30 p.m. ET to discuss the results. To participate in the
conference call, please visit the investor relations section of the
Alphatec Spine website at www.alphatecspine.com. The dial-in
numbers are (877) 556-5251 for domestic callers and (720) 545-0036
for international. A live webcast of the conference call will be
available online from the investor relations section of the
Alphatec Spine website at www.alphatecspine.com. The webcast will
be recorded and will remain available on the investor relations
section of Alphatec Spine's website, for at least 30 days.
About Alphatec Spine
Alphatec Spine, Inc. is a wholly owned subsidiary of Alphatec
Holdings, Inc. (Nasdaq:ATEC). Alphatec Spine is a medical device
company that designs, develops, manufactures and markets products
for the surgical treatment of spine disorders, primarily focused on
the aging spine. The Company's mission is to combine world-class
customer service with innovative, surgeon-driven design that will
help improve the aging patient's quality of life. The Company is
poised to achieve its goal through new solutions for patients with
osteoporosis, stenosis and other aging spine deformities, improved
minimally invasive products and techniques and integrated biologics
solutions. In addition to its U.S. operations, the Company also
markets its products in over 50 international markets through its
subsidiary, Scient'x SA, via a direct sales force in France, Italy
and the United Kingdom and via independent distributors in the rest
of Europe, the Middle East and Africa, South America and Latin
America. In Asia and Australia, the Company markets its products
through its subsidiary, Alphatec Pacific, Inc, and through
Scient'x's distributors in China, Korea and Australia.
Also visit the Aging Spine Center, www.agingspine.com, a
web-based information portal for healthcare providers and patients
regarding aging spine disorders and their treatment. Alphatec Spine
is working with the National Osteoporosis Foundation as well as
other clinical portals that provide peer-reviewed content, to
populate the Aging Spine Center. The interactive website will
enable patients to review pertinent information about all the key
disorders that affect the aging spine in an easy-to-understand
format that includes videos, graphics and questions that should be
asked of caregivers. Medical information will include published
abstracts regarding the aging spine.
The Alphatec Holdings, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=3520
Non-GAAP Information for non-GAAP earnings and Adjusted
EBITDA
Non-GAAP earnings included in this press release is a non-GAAP
(generally accepted accounting principles) financial measure that
represents net income (loss) excluding the effects of in-process
research and development expenses, acquisition related expenses and
litigation settlement expenses. Management does not consider these
expenses when it makes certain evaluations of the operations of the
Company. Non-GAAP earnings, as defined above, may not be similar to
non-GAAP earnings measures used by other companies and is not a
measurement under GAAP.
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 costs, and other income or expense items, such as
in-process research and development expense and acquisition-related
expenses. Adjusted EBITDA, as defined above, may not be similar to
adjusted EBITDA measures used by other companies and is not a
measurement under GAAP.
Though management finds GAAP-based earnings or loss and adjusted
EBITDA useful for evaluating aspects of the Company's business, its
reliance on these measures are 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 uses non-GAAP earnings and adjusted EBITDA in
conjunction with GAAP earnings and earnings per common share
measures. The Company believes that non-GAAP earnings and 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 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 these supplemental metrics since, with
reconciliation to GAAP, they may provide greater insight into the
Company's financial results.
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. These forward-looking statements include, but are not
limited to: Alphatec Spine's ability to accelerate new product
momentum, bring to market differentiated products and commercialize
its product pipeline. Alphatec Spine 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 Spine's
ability to meet its 2010 revenue, adjusted EBITDA, and earnings
projections, the ability to successfully integrate Scient'x and
Alphatec Spine, the growth rate of the spine market related to
aging and elderly patients, uncertainty of success in developing
new products or products currently in Alphatec Spine's pipeline,
the successful global launch of the Company's new products and the
products in its development pipeline including OsseoFix, and the
OsseoScrew, and the failure to achieve acceptance of Alphatec
Spine's products by the surgeon community, failure to obtain FDA
clearance or approval for new products, or unexpected or prolonged
delays in the process, Alphatec Spine's ability to develop and
expand its business in the United States, Asia, Europe, the Middle
East and Africa and Latin America, continuation of favorable third
party payor reimbursement for procedures performed using Alphatec
Spine's products, unanticipated expenses or liabilities or other
adverse events affecting cash flow or Alphatec Spine's ability to
successfully control its costs or achieve profitability,
uncertainty of additional funding, Alphatec Spine's ability to
compete with other competing products and with emerging new
technologies, product liability exposure, patent infringement
claims and claims related to Alphatec Spine's or a third party's
intellectual property. Please refer to the risks detailed from time
to time in Alphatec Spine's SEC reports, including quarterly
reports on Form 10-Q, reports on Form 8-K and annual reports on
Form 10-K. Alphatec Spine 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,
|
|
2010
|
2009
|
|
|
|
Revenues
|
$ 38,431
|
$ 30,610
|
Cost of revenues
|
14,465
|
10,830
|
Gross profit
|
23,966
|
19,780
|
|
|
|
Operating expenses:
|
|
|
Research and development
|
3,687
|
2,867
|
In-process research and development
|
450
|
1,290
|
Sales and marketing
|
13,780
|
12,784
|
General and administrative
|
5,646
|
5,963
|
Transaction related expenses
|
3,152
|
--
|
Restructuring expenses
|
882
|
--
|
Total operating expenses
|
27,597
|
22,904
|
Operating loss
|
(3,631)
|
(3,124)
|
Interest and other income (expense), net
|
(967)
|
(1,143)
|
Loss before taxes
|
(4,598)
|
(4,267)
|
Income tax provision
|
112
|
116
|
|
|
|
Net loss
|
$ (4,710)
|
$ (4,383)
|
|
|
|
|
|
|
Net loss per common share - basic and diluted
|
$ (0.09)
|
$ (0.09)
|
|
|
|
Weighted-average shares - basic and diluted
|
54,153
|
46,503
|
ALPHATEC HOLDINGS, INC.
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(in thousands - unaudited)
|
|
|
|
|
|
|
|
March 31,
|
December 31,
|
|
2010
|
2009
|
ASSETS
|
|
|
Current assets:
|
|
|
Cash and cash equivalents
|
$ 12,662
|
$ 10,085
|
Accounts receivable, net
|
39,268
|
24,766
|
Inventories, net
|
46,702
|
29,515
|
Prepaid expenses and other current assets
|
5,057
|
3,128
|
Deferred income tax assets
|
1,427
|
128
|
Total current assets
|
105,116
|
67,622
|
|
|
|
Property and equipment, net
|
36,116
|
30,356
|
Goodwill
|
172,631
|
60,113
|
Intangibles, net
|
40,822
|
2,296
|
Other assets
|
2,520
|
1,501
|
Total assets
|
$ 357,205
|
$ 161,888
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
Current liabilities:
|
|
|
Accounts payable
|
$ 23,073
|
$ 12,781
|
Accrued expenses
|
23,423
|
16,439
|
Deferred revenue
|
1,618
|
2,135
|
Other current liabilities
|
2,864
|
--
|
Current portion of long-term debt
|
10,055
|
6,724
|
Total current liabilities
|
61,033
|
38,079
|
|
|
|
Total other long term liabilities
|
42,020
|
25,377
|
Redeemable preferred stock
|
23,603
|
23,603
|
Total stockholders' equity
|
230,549
|
74,829
|
Total liabilities and stockholders' equity
|
$ 357,205
|
$ 161,888
|
ALPHATEC HOLDINGS, INC.
|
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
|
(in thousands - unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 31,
|
|
2010
|
2009
|
|
|
|
Operating loss, as reported
|
$ (3,631)
|
$ (3,124)
|
Add back:
|
|
|
Depreciation
|
2,642
|
1,822
|
Amortization of intangibles
|
920
|
779
|
Total EBITDA
|
(69)
|
(523)
|
|
|
|
Add back significant items:
|
|
|
Stock-based compensation
|
981
|
634
|
In-process research and development
|
450
|
1,290
|
Transaction related expenses
|
3,152
|
--
|
Restructuring expenses
|
882
|
--
|
|
|
|
EBITDA, as adjusted for significant items
|
$ 5,396
|
$ 1,401
|
|
|
|
|
|
|
Net loss, as reported
|
$ (4,710)
|
$ (4,383)
|
Add back:
|
|
|
In-process research and development
|
450
|
1,290
|
Transaction related expenses
|
3,152
|
--
|
Restructuring expenses
|
882
|
--
|
|
|
|
Net loss, as adjusted for significant items
|
$ (226)
|
$ (3,093)
|
|
|
|
|
|
|
Net loss per common share - basic and diluted
|
$ (0.09)
|
$ (0.09)
|
Add back:
|
|
|
In-process research and development
|
0.01
|
0.03
|
Transaction related expenses
|
0.06
|
--
|
Restructuring expenses
|
0.02
|
--
|
|
|
|
Net income/(loss) per common share - basic and diluted, as
adjusted for significant items
|
$ 0.00
|
$ (0.06)
|
ALPHATEC HOLDINGS, INC.
|
RECONCILIATION OF GEOGRAPHIC SEGMENT REVENUES AND GROSS
PROFIT
|
(in thousands, except gross profit margin percentages -
unaudited)
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 31,
|
|
2010
|
2009
|
|
|
|
Revenues by geographic segment
|
|
|
U.S.
|
$ 28,436
|
$ 23,813
|
Asia
|
6,096
|
5,830
|
Europe
|
3,899
|
967
|
Total revenues
|
$ 38,431
|
$ 30,610
|
|
|
|
Gross profit by geographic segment
|
|
|
U.S.
|
$ 19,868
|
$ 16,863
|
Asia
|
2,150
|
2,525
|
Europe
|
1,948
|
392
|
Total gross profit
|
$ 23,966
|
$ 19,780
|
|
|
|
Gross profit margin by geographic segment
|
|
|
U.S.
|
69.9%
|
70.8%
|
Asia
|
35.3%
|
43.3%
|
Europe
|
50.0%
|
40.5%
|
Total gross profit margin
|
62.4%
|
64.6%
|
CONTACT: Alphatec Spine, Inc.
Peter C. Wulff, Chief Financial Officer
(760) 494-6746
investorrelations@alphatecspine.com
Westwicke Partners
Lynn C. Pieper
(415) 202-5678
lynn.pieper@westwicke.com
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