Alphatec Holdings, Inc. (Nasdaq:ATEC), the parent company of
Alphatec Spine, Inc., a medical device company that provides
physician-inspired solutions for patients with spinal disorders,
announced today financial results for the first quarter ended March
31, 2014.
- First quarter consolidated net revenues of $49.2 million.
- First quarter adjusted EBITDA of $6.7 million, 13.6% of
revenue.
- Reiterates 2014 revenue guidance of $208 million to $215
million and adjusted EBITDA guidance of $30 million to $33
million.
Highlights of Alphatec's First Quarter 2014
- U.S. hospital non-biologics implant volume grew 15% over the
first quarter of 2013, driven primarily by increased uptake of
interbody solutions such as Novel and Alphatec Solus, as well as
Zodiac Deformity.
- Sales from less-invasive product solutions increased
approximately 10% from the first quarter of 2013, driven primarily
by strong uptake of Illico MIS in Japan.
- Solid international business accounted for 35% of total
revenues.
- Arsenal™ U.S. FDA 510(k) clearance received –
a new spinal fixation system providing a comprehensive solution for
complex degenerative conditions.
- CoreX™ launched – a minimally invasive
biologics product for harvesting and providing autologous bone,
which is the gold standard for achieving a solid spine fusion.
- DiscoCerv® cervical disc prosthesis approved and
launched in China – first patient successfully treated in
March.
- Gross margin improvement of 280 basis points over the first
quarter of 2013 to 67.7%.
"We are pleased with our bottom line results in the first
quarter given that revenues were affected by our planned exit from
the French market, loss of revenue contributions from PureGen in Q1
2013, and the effect of severe weather across the U.S.," said Les
Cross, Chairman and CEO of Alphatec. "Our strong adjusted EBITDA
and margin expansion in the first quarter represents our continued
focus on driving operational efficiencies and fiscal discipline
across the organization. We remain focused on building a track
record of operational execution and advancing our long-term
strategy of delivering 20% non-GAAP adjusted EBITDA margin and
continued gross margin expansion."
"A key lever in delivering on this strategy is growing the
topline through surgeon uptake of our innovative technologies," Mr.
Cross added. "I am very pleased with the progress we have made in
the first quarter to expand our portfolio globally. Our strategic
focus on driving the adoption of our less-invasive solutions,
combined with the demonstrated benefits of our biologics offerings,
will be further advanced through these new additions to our
comprehensive portfolio and recent approvals in certain key
markets. In the coming weeks we will refocus our efforts to
reinvigorate growth in our U.S. business. We look forward to
training surgeons on the unique value and benefits of our new and
existing products that can help patients across the world regain
their active lifestyles and live better."
Quarter Ended March 31, 2014
Consolidated net revenues for the first quarter of 2014 were
$49.2 million, down 2.5% compared to $50.4 million reported for the
first quarter of 2013, or down approximately 1% on a constant
currency basis. The Company's exit of the French market, lack of
revenue contributions from PureGen, which the Company discontinued
selling in the first quarter of 2013, and higher-than-normal
surgical procedure cancellations due to poor weather in the U.S.
were the key contributors to the decline. When adjusted for revenue
contributions from both the French market and PureGen, consolidated
net revenue grew by approximately 3%.
U.S. net revenues for the first quarter of 2014 were $32.1
million, down approximately 3%, compared to $33.1 million reported
for the first quarter of 2013. Excluding revenue contributions from
PureGen in the first quarter of 2013, U.S. net revenues were
relatively flat over the same period in 2013. U.S. hospital implant
volumes came in strong, but were offset by continued industry
pricing pressures.
International net revenues for the first quarter of 2013 were
$17.1 million, down 1.5% compared to $17.4 million for the first
quarter of 2013, or up approximately 3% on a constant currency
basis. International sales were impacted by an anticipated decline
in French revenue after our decision to exit the French market was
announced in the third quarter of 2013. Excluding revenues from the
cessation of sales in France, international revenues grew
approximately 8% over the same period in 2013 on a constant
currency basis.
Gross profit and gross margin for the first quarter of 2014 were
$33.3 million and 67.7%, respectively, compared to $32.7 million
and 64.9%, respectively, for the first quarter of 2013. Gross
margin improvement reflects the ending of the Cross Medical
settlement amortization combined with continued improvement at
managing costs and streamlining operations.
Total operating expenses for the first quarter of 2014 were
$38.0 million, reflecting an increase of approximately $3.9 million
compared to the first quarter of 2013. This variance is driven
primarily by $4.8 million of trial-related expenses related to the
OrthoTec legal matter, $0.8 million of expenses associated with the
restructuring of the Company's French operations, offset by
improvements in general and administrative expenses.
GAAP net loss for the first quarter of 2014 was $6.7 million or
($0.07) per share (basic and diluted), compared to a net loss of
$2.6 million, or ($0.03) per share (basic and diluted) for the
first quarter of 2013. Non-GAAP EPS, when adjusted for the
OrthoTec trial-related expense items, as well as expenses
associated with the ongoing restructuring of the Company's French
operations, was $0.01 per share (basic), compared to $0.00 per
share (basic) for the first quarter of 2013.
Adjusted EBITDA in the first quarter of 2014 was $6.7 million,
or 13.6% of revenues, compared to $6.1 million, or 12.1% of
revenues reported in the first quarter of 2013. First quarter
2014 adjusted EBITDA represents net income excluding effects of
interest, taxes, depreciation, amortization, stock-based
compensation and the following items: $4.8 million in OrthoTec
trial-related litigation expenses and $0.8 million of expenses
related to restructuring of the Company's French
operations. Please refer to the table, "Alphatec Holdings,
Inc. Reconciliation of Non-GAAP Financial Measures" that follows
for more detailed information.
Cash and cash equivalents were $23.8 million at March 31, 2014,
compared to $21.3 million reported at December 31,
2013. Additionally, the Company has reported $17.8 million of
restricted cash resulting from the draw-down of $20.0 million from
the Deerfield credit facility on March 20, 2014, which must be used
for payment obligations associated with the OrthoTec
settlement.
2014 Financial Guidance
The Company reiterates annual 2014 revenue guidance of $208
million to $215 million, representing approximately 1.6% to 5%
growth over 2013, or 4.5% to 8% when adjusted for prior year
contributions associated with sales in France. The Company
reaffirms guidance expectations for annual adjusted EBITDA of $30
million to $33 million in 2014, representing 19% to 31% growth over
2013, and representing approximately 14.4% to 15.3% of annual
revenue.
Executive Leadership Changes
In a separate press release issued today, the Company announced
that its board of directors has appointed James M. Corbett
President, Chief Executive Officer and member of the board of
directors, effective May 1, 2014. Mr. Corbett succeeds Les
Cross, who has decided to retire as CEO, effective May 1,
2014. Mr. Cross will continue to serve as Chairman of the
board of directors.
Conference Call
Alphatec Spine will webcast its Quarterly Update Call today at
5:00 p.m. EDT / 2:00 p.m. PDT. Les Cross, Alphatec's Chairman
and CEO will lead the call. During the call the Company plans
to provide further details underlying its first quarter 2014
financial results.
To access the webcast, please log on to www.alphatecspine.com
approximately fifteen minutes prior to the call to register,
download and install any necessary audio software. For those
without access to the internet, the live call may be accessed by
phone by calling toll-free (877) 556-5251 (U.S. / Canada) or (720)
545-0036 (international), participant passcode number
30647906. A replay of the call will also be available on the
investor relations section of Alphatec Spine's website for at least
30 days.
Non-GAAP Information
Alphatec Spine reports certain non-GAAP financial measures such
as non-GAAP earnings and earnings per share, adjusted for effects
of amortization and other non-recurring or expense items, such as
loss on extinguishment of debt, restructuring expenses and
transaction-related expenses. 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 severance
expense, trial-related litigation expenses, damages associated with
ongoing litigation, restructuring expenses and transaction-related
expenses. 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. For
completeness, Management uses non-GAAP adjusted EBITDA in
conjunction with GAAP earnings and earnings per common share
measures. These non-GAPP financial measures 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 measure.
About Alphatec Spine
Alphatec Spine, Inc., a wholly owned subsidiary of Alphatec
Holdings, Inc., is a medical device company that designs, develops,
manufactures and markets physician-inspired products and solutions
for the treatment of spinal disorders associated with trauma,
congenital deformities, disease and degeneration. The Company's
mission is to combine innovative surgical solutions with
world-class customer service to improve outcomes and patient
quality of life. The Company and its affiliates market products in
the U.S. and in over 50 countries internationally via a direct
sales force and independent distributors.
Additional information can be found at
www.alphatecspine.com.
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 the references to Alphatec Spine's 2014
revenue and adjusted EBITDA guidance; the success of the Company to
achieve the gross margin, profitability and adjusted EBITDA
improvements; the success of the Company's initiatives to drive
global sales growth, increase margins and increase operating
efficiencies. 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,
including without limitation the Arsenal system; the uncertainties
regarding the ability to successfully license or acquire new
products and the commercial success of such products; failure to
achieve acceptance of Alphatec Spine's products by the surgeon
community, including without limitation the Arsenal system, CoreX,
Illico, Novel, Alphatec Solus, Zodiac Deformity and DiscoCerv
products discussed in this press release; failure to successfully
implement streamlining activities to create anticipated savings;
failure to obtain FDA clearance or approval or international
regulatory approvals for new products, including the products
discussed in this press release, or unexpected or prolonged delays
in the process; continuation of favorable third party payor
reimbursement for procedures performed using the Company's
products; unanticipated expenses or liabilities or other adverse
events affecting cash flow or the Company's ability to successfully
control its costs or achieve profitability; uncertainty of
additional funding; the Company's ability to compete with other
competing products and with emerging new technologies; product
liability exposure; an unsuccessful outcome in any material
litigation in which the Company is a defendant; patent infringement
claims and claims related to the Company's intellectual property.
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. 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, 2013, filed on March 20,
2014 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
STATEMENTS OF OPERATIONS |
(in thousands,
except per share amounts - unaudited) |
|
|
|
|
Three Months Ended |
|
March 31, |
|
2014 |
2013 |
|
|
|
Revenues |
$ 49,173 |
$ 50,443 |
Cost of revenues |
15,433 |
17,270 |
Amortization of acquired intangible
assets |
446 |
431 |
Total cost of revenues |
15,879 |
17,701 |
Gross profit |
33,294 |
32,742 |
|
67.7% |
64.9% |
Operating expenses: |
|
|
Research and development |
4,181 |
3,682 |
Sales and marketing |
18,059 |
18,495 |
General and administrative |
14,222 |
11,130 |
Amortization of acquired intangible
assets |
758 |
793 |
Restructuring expenses |
776 |
-- |
Total operating expenses |
37,996 |
34,100 |
Operating loss |
(4,702) |
(1,358) |
Interest and other income (expense),
net |
(1,302) |
(1,343) |
Loss from continuing operations before
taxes |
(6,004) |
(2,701) |
Income tax provision (benefit) |
669 |
(52) |
Net loss |
$ (6,673) |
$ (2,649) |
|
|
|
Net loss per common share: |
|
|
Basic and diluted net loss per share |
$ (0.07) |
$ (0.03) |
|
|
|
Weighted-average shares - basic and
diluted |
96,838 |
95,826 |
|
|
ALPHATEC HOLDINGS,
INC. |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(in thousands -
unaudited) |
|
|
|
|
March 31, |
December 31, |
|
2014 |
2013 |
ASSETS |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 23,764 |
$ 21,345 |
Restricted Cash |
17,750 |
-- |
Accounts receivable, net |
38,838 |
41,395 |
Inventories, net |
42,542 |
41,939 |
Prepaid expenses and other current
assets |
11,168 |
7,694 |
Deferred income tax assets |
1,388 |
1,372 |
Total current assets |
135,450 |
113,745 |
|
|
|
Property and equipment, net |
28,136 |
28,030 |
Goodwill |
183,088 |
183,004 |
Intangibles, net |
37,176 |
39,064 |
Other assets |
2,432 |
1,787 |
Total assets |
$ 386,282 |
$ 365,630 |
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
Current liabilities: |
|
|
Accounts payable |
$ 16,462 |
$ 10,790 |
Accrued expenses |
62,454 |
62,996 |
Deferred revenue |
1,044 |
1,009 |
Common stock warrant
liabilities |
10,250 |
-- |
Current portion of long-term
debt |
4,189 |
4,924 |
Total current liabilities |
94,399 |
79,719 |
|
|
|
Total long term liabilities |
102,152 |
90,632 |
Redeemable preferred stock |
23,603 |
23,603 |
Stockholders' equity |
166,128 |
171,676 |
Total liabilities and stockholders'
equity |
$ 386,282 |
$ 365,630 |
|
|
ALPHATEC HOLDINGS,
INC. |
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES |
(in thousands, except
per share amounts - unaudited) |
|
|
|
|
Three Months Ended |
|
March 31, |
|
2014 |
2013 |
|
|
|
Operating loss, as reported |
$ (4,702) |
$ (1,358) |
Add back: |
|
|
Depreciation |
3,250 |
3,521 |
Amortization of intangible assets |
397 |
1,514 |
Amortization of acquired intangible
assets |
1,204 |
1,224 |
Total EBITDA |
149 |
4,901 |
|
|
|
Add back significant items: |
|
|
Stock-based compensation |
944 |
1,184 |
Litigation settlement and trial
costs |
4,779 |
-- |
Restructuring and other charges |
812 |
-- |
|
|
|
EBITDA, as adjusted for significant
items |
$ 6,684 |
$ 6,085 |
|
|
|
|
|
|
Net loss, as reported |
$ (6,673) |
$ (2,649) |
Add back: |
|
|
Amortization of acquired intangible
assets |
1,204 |
1,224 |
Amortization of intangible assets |
397 |
1,514 |
Litigation settlement and trial
costs |
4,779 |
-- |
Restructuring and other charges |
812 |
-- |
|
|
|
Net income (loss), as adjusted for
significant items |
$ 519 |
$ 89 |
|
|
|
|
|
|
Net loss per common share - basic and
diluted |
$ (0.07) |
$ (0.03) |
Add back: |
|
|
Amortization of acquired intangible
assets |
0.01 |
0.01 |
Amortization of intangible assets |
0.00 |
0.02 |
Litigation settlement and trial costs |
0.05 |
-- |
Restructuring and other charges |
0.01 |
-- |
|
|
|
Net income (loss) per common share - basic,
as adjusted for significant items |
$ 0.01 |
$ 0.00 |
|
|
|
Weighted-average shares - basic and
diluted |
96,838 |
95,826 |
|
|
ALPHATEC HOLDINGS,
INC. |
RECONCILIATION OF
GEOGRAPHIC SEGMENT REVENUES AND GROSS PROFIT |
(in thousands, except
percentages - unaudited) |
|
|
|
|
|
|
|
Three Months Ended |
|
|
% Change |
|
March 31, |
% Change |
% Change |
Foreign |
|
2014 |
2013 |
As Reported |
Operations |
Currency |
|
|
|
|
|
|
Revenues by geographic segment |
|
|
|
|
|
U.S. |
$ 32,050 |
$ 33,062 |
-3.1% |
-3.1% |
0.0% |
International |
17,123 |
17,381 |
-1.5% |
2.6% |
-4.1% |
Total revenues |
$ 49,173 |
$ 50,443 |
-2.5% |
-1.1% |
-1.4% |
|
|
|
|
|
|
Gross profit by geographic segment |
|
|
|
|
|
U.S. |
$ 23,050 |
$ 22,417 |
|
|
|
International |
10,244 |
10,325 |
|
|
|
Total gross profit |
$ 33,294 |
$ 32,742 |
|
|
|
|
|
|
|
|
|
Gross profit margin by geographic
segment |
|
|
|
|
|
U.S. |
71.9% |
67.8% |
|
|
|
International |
59.8% |
59.4% |
|
|
|
Total gross profit margin |
67.7% |
64.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes: |
|
|
|
|
|
1) The impact from foreign
currency represents the percentage change in 2014 revenues due to
the change in foreign exchange rates for the periods
presented. |
|
|
|
|
|
|
|
ALPHATEC HOLDINGS,
INC. |
NON-GAAP CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS |
(in thousands, except
per share amounts - unaudited) |
|
|
|
|
|
|
Three Months Ended March
31, 2014 |
|
|
Non-GAAP |
|
|
|
GAAP |
Adjustments |
|
Non-GAAP |
|
|
|
|
|
Revenues |
$ 49,173 |
$ -- |
|
$ 49,173 |
Cost of revenues |
15,433 |
-- |
|
15,433 |
Amortization of acquired intangible
assets |
446 |
-- |
|
446 |
Total cost of revenues |
15,879 |
-- |
|
15,879 |
Gross profit |
33,294 |
-- |
|
33,294 |
|
67.7% |
|
|
67.7% |
Operating expenses: |
|
|
|
|
Research and development |
4,181 |
-- |
|
4,181 |
Sales and marketing |
18,059 |
-- |
|
18,059 |
General and administrative |
14,222 |
(4,779) |
(a) |
9,443 |
Amortization of acquired intangible
assets |
758 |
-- |
|
758 |
Restructuring expenses |
776 |
(776) |
(b) |
-- |
Total operating expenses |
37,996 |
(5,555) |
|
32,441 |
Operating (loss) income |
(4,702) |
5,555 |
|
853 |
Interest and other income (expense),
net |
(1,302) |
-- |
|
(1,302) |
Loss from continuing operations before
taxes |
(6,004) |
5,555 |
|
(449) |
Income tax provision |
669 |
-- |
|
669 |
Net loss |
$ (6,673) |
$ 5,555 |
|
$ (1,118) |
|
|
|
|
|
|
|
|
|
|
Notes: |
|
|
|
|
(a) Amount consists of Orthotec
litigation trial related costs of $4.8 million. |
(b) Employee severance and
facility closing costs accrued for the restructuring of the
Company's French operations. |
CONTACT: Investor/Media Contact:
Christine Zedelmayer
Investor Relations
Alphatec Spine, Inc.
(760) 494-6610
czedelmayer@alphatecspine.com
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