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 of fiscal 2012, ended March 31, 2012.
First Quarter 2012 Highlights
- Sales levels in core U.S. Hospital business remains strong and
grew sequentially from Q411
- Sales growth in select international markets, most notably
Japan and Latin America, remains strong
- Gross margin improves 140 basis points vs. Q111 to 65.7%
- Gross profit margin improvement and operating expense control
drives record Adjusted EBITDA of $6.2 million
First Quarter 2012 Financial Results
Consolidated revenues for the first quarter of 2012 were $48.5
million compared to $49.7 million reported for the first quarter of
2011. U.S. revenues for the first quarter 2012 were $32.6 million,
compared to $33.9 million reported for the first quarter of 2011.
International revenues in the first quarter of 2012 were $15.9
million, which is equal to the amount reported for the first
quarter of 2011. International revenue continued to benefit from
growth in Japan and Latin America.
Gross profit and gross margin for the first quarter of 2012 was
$31.8 million and 65.7 percent, respectively, compared to $32.0
million and 64.3 percent, respectively, for the first quarter of
2011. Gross profit in the first quarter of 2012 was reduced by $1.0
million for the amortization of a licensed intangible asset as part
of the Cross Medical settlement that will be recorded in the first
quarter of 2012 and the subsequent six quarters, as noted below.
Excluding this amount, gross profit and gross profit margin would
have been $32.9 million and 67.8 percent, respectively.
As previously reported in January 2012, the Company announced
that it had reached a global settlement agreement with Cross
Medical Products regarding a license agreement dispute initiated by
Cross Medical and a patent infringement suit initiated by the
Company. As part of the settlement, the Company agreed to pay Cross
Medical $18 million. An initial payment of $5 million dollars was
made in January 2012. The Company expensed $9.8 million in the
fourth quarter of 2011, which was charged to operating expenses as
a legal settlement adjustment. With respect to the remaining $8.2
million, $8.0 million will be recorded as a licensed intangible
asset to be amortized over the first quarter of 2012 and the
subsequent six quarters in 2012 and 2013, plus imputed interest of
$0.2 million.
Total operating expenses for the first quarter of 2012 were
$31.9 million, or 65.9 percent of revenues, reflecting a decrease
of $2.4 million, compared to the first quarter of 2011.
Net loss for the first quarter of 2012 was $1.3 million, or
($0.01) per share (basic and diluted), compared to a net loss of
$1.9 million, or ($0.02) per share (basic and diluted) for the
first quarter of 2011.
Adjusted EBITDA in the first quarter of 2012 was $6.2 million,
or 12.8 percent of revenues, compared to $4.4 million, or 8.8
percent reported for the first quarter of 2011. Adjusted EBITDA in
the first quarter of 2012 was the highest result since the
Company's initial public offering in 2006.
Cash and cash equivalents were $16.9 million at March 31, 2012,
reflecting a decrease of $3.8 million, compared to the cash
position as of December 31, 2011. The Company's cash position at
March 31, 2012 reflects a payment of $5.0 million to Cross Medical
as part of the settlement noted above.
"Considering the ongoing headwinds in the spine market and the
difficult comparison we faced with the first quarter of 2011, our
first quarter of 2012 was respectable," said Les Cross, chairman
and chief executive officer. "We are pleased with the improved
operating performance for the Company that helped drive strong
Adjusted EBITDA growth.
"Pricing and lower procedure volumes continue to challenge
global spine markets and contributed to lower first quarter revenue
of about $1.3 million compared to the first quarter of 2011.
"In our U.S. Hospital channel, our primary domestic business,
sales were in line with the first quarter of 2011. Excluding our
Xenon pedicle screw system, U.S. Hospital sales grew about 3% over
the first quarter of 2011 and about 1% sequentially from the fourth
quarter of last year, in spite of market pressures. U.S. Hospital
sales were driven by Biologics and our MIS products.
"Sales in our U.S. Stocking Distributor channel were lower by
about $1 million, compared to Q1 2011. The first quarter of 2011
benefitted from several initial large stocking orders that we did
not replicate in Q1 2012. Additionally, we believe many of our
Stocking Distributors are reducing their on-hand inventory levels
in response to lower procedure volumes.
"International revenue continues to be driven by strong growth
in Japan and Latin America. Sales in Europe and the Middle East
continue to struggle as political and economic conditions as well
as government healthcare spending remain challenging.
"On the operational side of our business, we made good progress
in the first quarter with our performance improvement initiatives.
Our initial efforts have been focused on those initiatives that
support near-term revenue generation and enhance our customers'
experience.
"To help strengthen gross margins, we plan to begin in-house
manufacturing of certain products currently manufactured by
third-parties. Our first product will be Trestle Luxe® and we are
nearing the completion of the manufacturing validation for this
product.
"We are also implementing lean practices in our manufacturing
operations. We have recently mapped many of our current processes
and identified significant opportunities to reduce work-in-process
(WIP), shorten cycle times, improve fill rates and lower shipping
costs. Collectively, we believe these streamlining activities
should contribute to our cost savings goal of approximately $2
million in annualized benefit once fully implemented."
Mr. Cross finished by saying, "While we still have a lot more
work to do to implement our sales productivity initiatives,
strengthen our gross profit margins and reduce our global operating
expense profile, we are pleased with our progress and the benefit
this has had on our margin structure and on our long-term goal of
achieving 20%-plus non-GAAP Adjusted EBITDA margins. Additionally,
today's 8K filing of a new equity line of credit arrangement for
Alphatec Spine should strengthen our balance sheet and enable us to
accelerate investment in our product commercialization efforts. You
have our commitment that Alphatec Spine will remain dedicated to
conducting its business with a sense of urgency, accountability and
excellence."
2012 Financial Guidance
Financial guidance for the remainder of 2012 is as follows: For
full year 2012 annual revenue guidance will be in the range of $204
million to $209 million, or 3% to 6% growth over 2011. Adjusted
EBITDA guidance will be in the range of $23 million to $27 million
(or 11% to 13% of sales). The Company expects to generate positive
cash flow for the full year 2012 after fulfilling its banking and
legal settlement obligations. Revenue accumulation throughout 2012
will be biased towards the second half of the year.
Conference Call Information
Alphatec Spine has scheduled a conference call to discuss its
financial results beginning today, May 8, 2012, at 2:00 p.m.
Pacific Time / 5:00 p.m. Eastern Time. Individuals interested in
listening to the conference call may do so by dialing (877)
556-5251 for domestic callers and (720) 545-0036 for international
callers. 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 products 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
affiliate, Scient'x S.A.S., 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. In Latin America,
the Company conducts its business through its subsidiary, Cibramed
Produtos Medicos. In Japan, the Company markets its products
through its subsidiary, Alphatec Pacific, Inc. In the rest of Asia
and Australia, the Company sells its and Scient'x's products
through it's and Scient'x's distributors.
The Alphatec Holdings, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=3520
Non-GAAP Information
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 expenses, and other non-recurring income or expense
items, such as in-process research and development expense and
transaction-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 non-GAAP-based earnings or loss and EBITDA useful for
evaluating aspects of the Company's business, its reliance on these
measures 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 uses
non-GAAP adjusted EBITDA in conjunction with GAAP earnings and
earnings per common share measures. The Company believes that
non-GAAP 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 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. 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. Forward
looking statements include references to Alphatec Spine's 2012
revenue, adjusted EBITDA, free cash flow and earnings projections;
new product development and market success of those products; and
reductions in the Company's manufacturing costs and operating
expenses. The words "believe," "will," "should," "expect,"
"intend," "estimate" and "anticipate," variations of such words and
similar expressions identify forward-looking statements, but their
absence does not mean that a statement is not a forward-looking
statement. The 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 Alphatec Spine's pipeline; the successful global
launch of the Company's new products and the products in its
development pipeline; ; failure to achieve acceptance of Alphatec
Spine's products by the surgeon community, including Trestle Luxe;
failure to successfully implement streamlining activities to create
anticipated savings; failure to successfully begin in-house
manufacturing of certain products; 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
U.S. and/or global revenues; 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; failure to meet all
financial obligations in the Cross Medical Settlement; patent
infringement claims and claims related to Alphatec Spine's
intellectual property. Please refer to the risks detailed from time
to time in Alphatec Spine's SEC reports, including its Annual
Report Form 10-K for the year ended December 31, 2011, filed on
March 5, 2012 with the Securities and Exchange Commission, as well
as other filings on Form 10-Q and periodic filings on Form 8-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
BALANCE SHEETS |
(in thousands -
unaudited) |
|
|
|
|
March 31, |
December 31, |
|
2012 |
2011 |
ASSETS |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 16,859 |
$ 20,666 |
Accounts receivable, net |
40,570 |
41,711 |
Inventories, net |
48,155 |
45,916 |
Prepaid expenses and other current
assets |
5,901 |
6,888 |
Deferred income tax assets |
1,401 |
1,248 |
Total current assets |
112,886 |
116,429 |
|
|
|
Property and equipment, net |
32,089 |
31,476 |
Goodwill |
171,386 |
168,609 |
Intangibles, net |
45,628 |
47,144 |
Other assets |
2,693 |
3,034 |
Total assets |
$ 364,682 |
$ 366,692 |
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
Current liabilities: |
|
|
Accounts payable |
$ 14,431 |
$ 17,390 |
Accrued expenses |
28,359 |
32,583 |
Deferred revenue |
3,124 |
2,768 |
Current portion of long-term
debt |
3,653 |
4,396 |
Total current liabilities |
49,567 |
57,137 |
|
|
|
Total long term liabilities |
42,637 |
40,624 |
Redeemable preferred stock |
23,603 |
23,603 |
Stockholders' equity |
248,875 |
245,328 |
Total liabilities and stockholders'
equity |
$ 364,682 |
$ 366,692 |
|
|
ALPHATEC HOLDINGS,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(in thousands,
except per share amounts - unaudited) |
|
|
|
|
Three Months Ended |
|
March 31, |
|
2012 |
2011 |
|
|
|
Revenues |
$ 48,461 |
$ 49,720 |
Cost of revenues |
16,263 |
17,373 |
Amortization of acquired intangible
assets |
379 |
396 |
Total cost of revenues |
16,642 |
17,769 |
Gross profit |
31,819 |
31,951 |
|
|
|
Operating expenses: |
|
|
Research and development |
4,010 |
5,413 |
Sales and marketing |
18,536 |
18,629 |
General and administrative |
8,825 |
9,142 |
Amortization of acquired intangible
assets |
574 |
530 |
Restructuring expenses |
-- |
599 |
Total operating expenses |
31,945 |
34,313 |
Operating loss |
(126) |
(2,362) |
Interest and other income (expense),
net |
(928) |
(254) |
Loss before taxes |
(1,054) |
(2,616) |
Income tax provision (benefit) |
207 |
(749) |
|
|
|
Net loss |
$ (1,261) |
$ (1,867) |
|
|
|
Net loss per common share: |
|
|
Basic and diluted net loss per share |
$ (0.01) |
$ (0.02) |
|
|
|
Weighted-average shares - basic and
diluted |
88,938 |
88,697 |
|
|
ALPHATEC HOLDINGS,
INC. |
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES |
(in thousands, except
per share amounts - unaudited) |
|
|
|
|
Three Months Ended |
|
March 31, |
|
2012 |
2011 |
|
|
|
Operating loss, as reported |
$ (126) |
$ (2,362) |
Add back: |
|
|
Depreciation |
3,456 |
3,772 |
Amortization of intangible assets |
1,394 |
305 |
Amortization of acquired intangible
assets |
953 |
926 |
Total EBITDA |
5,677 |
2,641 |
|
|
|
Add back significant items: |
|
|
Stock-based compensation |
547 |
714 |
Acquisition-related inventory
step-up |
-- |
430 |
Restructuring expenses |
-- |
599 |
|
|
|
EBITDA, as adjusted for significant
items |
$ 6,224 |
$ 4,384 |
|
|
ALPHATEC HOLDINGS,
INC. |
RECONCILIATION OF
GEOGRAPHIC SEGMENT REVENUES AND GROSS PROFIT |
(in thousands, except
percentages - unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Impact from |
|
March 31, |
|
Foreign |
|
2012 |
2011 |
% Change |
Currency |
|
|
|
|
|
Revenues by geographic segment |
|
|
|
|
U.S. |
$ 32,561 |
$ 33,860 |
-3.8% |
0.0% |
International |
15,900 |
15,860 |
0.3% |
-0.7% |
Total revenues |
$ 48,461 |
$ 49,720 |
-2.5% |
-0.2% |
|
|
|
|
|
Gross profit by geographic segment |
|
|
|
|
U.S. |
$ 22,847 |
$ 24,420 |
|
|
International |
8,972 |
7,531 |
|
|
Total gross profit |
$ 31,819 |
$ 31,951 |
|
|
|
|
|
|
|
Gross profit margin by geographic
segment |
|
|
|
|
U.S. |
70.2% |
72.1% |
|
|
International |
56.4% |
47.5% |
|
|
Total gross profit margin |
65.7% |
64.3% |
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes: |
|
|
|
|
1) The impact from foreign
currency represents the percentage change in 2011 revenues due to
the change in foreign exchange rates for the periods
presented. |
CONTACT: Investor/Media Contact:
Mark Francois
Senior Director, Investor Relations
Alphatec Spine, Inc.
(760) 494-6610
mfrancois@alphatecspine.com
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