ATEC Alphatec Holdings Inc

• Total revenue grew 32% to $118 million
• Surgical revenue grew 32% to $104 million and EOS revenue grew 30% to $14 million
• Delivered positive adjusted EBITDA of over $2 million

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, 2023, and recent corporate highlights.

Third Quarter 2023 Financial Results

 

Quarter Ended September 30, 2023

Total revenue

$118 million

GAAP gross margin

68%

Non-GAAP gross margin

72%

GAAP operating expenses

$118 million

Non-GAAP operating expenses

$94 million

GAAP operating loss

($38) million

Adjusted EBITDA

$2 million

Ending cash balance

$123 million

Recent Highlights

• Advanced ATEC lateral procedures PTPTM (Prone TransPsoas) and LTPTM (Lateral TransPsoas) with the launch of Calibrate LTXTM, a lateral expandable implant system;
• Drove 24% increase in surgical volume and 6% increase in average revenue per procedure;
• Delivered second quarter of positive adjusted EBITDA with 860 basis points of margin expansion;
• Secured $150 million in capital to accelerate investment in revenue-generating assets (implants and instrument sets) while executing to profitability and free cash flow commitments;
• Enhanced Board of Directors with deep spine expertise.

“We’re pleased with our achievements in the third quarter, and even more excited about what’s ahead for ATEC,” said Pat Miles, Chairman and Chief Executive Officer. “The field’s most discerning talent recognizes that only ATEC has the procedural sophistication, spine focus and spine knowhow to create and continually elevate an end-to-end ecosystem of technologies that will set the standards in spine care. Our recent capital raise positions us exceptionally well to exploit the momentum that unprecedented industry disruption is unleashing. We are boldly leaning into the opportunity ahead, accelerating investment to equip our new teams of tenured sales professionals to serve surgeries with the operational excellence that ATEC is renowned for. Our best is yet to come.”

Financial Outlook for the Full Year 2023

The Company continues to expect total revenue to grow 35% to $472 million for the fiscal year ended December 31, 2023, in line with the expectations previewed in conjunction with the release of preliminary third quarter financial results. This includes surgical revenue of $414 million and EOS revenue of $58 million. The Company now expects non-GAAP adjusted EBITDA of approximately $3 million for the full year 2023.

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 about two hours after the webcast’s completion through November 13, 2023. Access the replay by dialing (800) 770-2030 and referencing conference ID number 97241.

Inducement Awards Granted

As an inducement material to accepting employment with the Company, and in accordance with Nasdaq Listing Rule 5635(c)(4), ATEC today announced that the independent Compensation Committee of the Board of Directors has approved aggregate grants to thirteen new employees (who are not executive officers) of, collectively, 24,296 restricted stock units (“RSUs”) under the Company’s 2016 Employment Inducement Award Plan. The RSUs will vest in equal annual installments on each of the first four anniversaries of the grant date, provided that the recipient remains continuously employed by ATEC as of such vesting date. In addition, the RSUs will vest fully upon a change of control of ATEC.

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.S. and SafeOp Surgical, Inc., is a medical device company dedicated to revolutionizing the approach to spine surgery through clinical distinction. ATEC’s Organic Innovation MachineTM 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 be 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 and commitments; planned product launches and introductions; and the Company's ability to compel surgeon adoption and transform the sales channel. 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; 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,

2023

2022

2023

2022

(unaudited) Revenue: Revenue from products and services

$

118,262

 

$

89,839

 

$

344,292

 

$

244,908

 

Revenue from international supply agreement

 

—

 

 

—

 

 

—

 

 

15

 

Total revenue

 

118,262

 

 

89,839

 

 

344,292

 

 

244,923

 

Cost of sales

 

38,215

 

 

30,323

 

 

129,279

 

 

80,715

 

Gross profit

 

80,047

 

 

59,516

 

 

215,013

 

 

164,208

 

Operating expenses: Research and development

 

20,000

 

 

12,111

 

 

47,831

 

 

32,429

 

Sales, general and administrative

 

91,411

 

 

75,954

 

 

269,960

 

 

218,093

 

Litigation-related expenses

 

2,715

 

 

3,602

 

 

12,815

 

 

16,629

 

Amortization of acquired intangible assets

 

3,873

 

 

2,774

 

 

10,461

 

 

7,181

 

Transaction-related expenses

 

278

 

 

—

 

 

2,178

 

 

120

 

Restructuring expenses

 

129

 

 

45

 

 

333

 

 

1,704

 

Total operating expenses

 

118,406

 

 

94,486

 

 

343,578

 

 

276,156

 

Operating loss

 

(38,359

)

 

(34,970

)

 

(128,565

)

 

(111,948

)

Interest expense and other expense, net: Interest expense, net

 

(4,459

)

 

(1,285

)

 

(12,225

)

 

(4,176

)

Other income (expense), net

 

47

 

 

(615

)

 

3,077

 

 

(578

)

Total interest expense and other expense, net

 

(4,412

)

 

(1,900

)

 

(9,148

)

 

(4,754

)

Net loss before taxes

 

(42,771

)

 

(36,870

)

 

(137,713

)

 

(116,702

)

Income tax benefit

 

(117

)

 

(77

)

 

(153

)

 

(192

)

Net loss

$

(42,654

)

$

(36,793

)

$

(137,560

)

$

(116,510

)

Net loss per share, basic and diluted

$

(0.35

)

$

(0.35

)

$

(1.18

)

$

(1.14

)

Weighted average shares outstanding, basic and diluted

 

122,468

 

 

104,804

 

 

117,026

 

 

102,561

 

Stock-based compensation included in: Cost of sales

$

2,369

 

$

735

 

$

24,601

 

$

1,440

 

Research and development

$

6,790

 

$

1,653

 

$

9,587

 

$

3,987

 

Sales, general and administrative

 

10,914

 

 

8,689

 

 

26,541

 

 

25,037

 

$

20,073

 

$

11,077

 

$

60,729

 

$

30,464

 

Alphatec Holdings, Inc. Condensed Consolidated Balance Sheets (in thousands)

  September 30,2023 December 31,2022 (unaudited) ASSETS Current assets: Cash and cash equivalents

$

122,526

 

$

84,696

 

Accounts receivable, net

 

64,519

 

 

60,060

 

Inventories

 

130,672

 

 

101,521

 

Prepaid expenses and other current assets

 

15,841

 

 

9,357

 

Total current assets

 

333,558

 

 

255,634

 

Property and equipment, net

 

133,785

 

 

101,952

 

Right-of-use assets

 

27,086

 

 

28,360

 

Goodwill

 

71,555

 

 

47,367

 

Intangible assets, net

 

102,196

 

 

82,781

 

Other assets

 

2,041

 

 

4,874

 

Total assets

$

670,221

 

$

520,968

 

  LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable

$

50,104

 

$

34,742

 

Accrued expenses and other current liabilities

 

77,251

 

 

72,382

 

Contract liabilities

 

13,833

 

 

11,956

 

Short-term debt

 

1,766

 

 

14,948

 

Current portion of operating lease liabilities

 

5,090

 

 

4,842

 

Total current liabilities

 

148,044

 

 

138,870

 

Total long-term liabilities

 

542,735

 

 

393,162

 

Redeemable preferred stock

 

23,603

 

 

23,603

 

Stockholders' deficit

 

(44,161

)

 

(34,667

)

Total liabilities and stockholders' deficit

$

670,221

 

$

520,968

 

Alphatec Holdings, Inc. Reconciliation of Non-GAAP Financial Measures (in thousands)

  Three Months Ended Nine Months Ended September 30, September 30,

2023

2022

2023

2022

(unaudited) Gross profit, GAAP

$

80,047

 

$

59,516

 

$

215,013

 

$

164,208

 

Add: amortization of intangible assets

 

221

 

 

28

 

 

661

 

 

37

 

Add: stock-based compensation

 

2,369

 

 

735

 

 

24,601

 

 

1,440

 

Add: purchase accounting adjustments on acquisitions

 

—

 

 

347

 

 

195

 

 

784

 

Add: excess and obsolete write-down

 

2,454

 

 

2,923

 

 

9,188

 

 

7,023

 

Non-GAAP gross profit

$

85,091

 

$

63,549

 

$

249,658

 

$

173,492

 

Gross margin, GAAP

 

67.7

%

 

66.2

%

 

62.5

%

 

67.0

%

Add: amortization of intangible assets

 

0.2

%

 

0.0

%

 

0.2

%

 

0.0

%

Add: stock-based compensation

 

2.0

%

 

0.8

%

 

7.1

%

 

0.6

%

Add: purchase accounting adjustments on acquisitions

 

0.0

%

 

0.4

%

 

0.1

%

 

0.3

%

Add: excess and obsolete write-down

 

2.1

%

 

3.3

%

 

2.7

%

 

2.9

%

Non-GAAP gross margin

 

72.0

%

 

70.7

%

 

72.5

%

 

70.8

%

  Three Months Ended Nine Months Ended September 30, September 30,

2023

 

2022

 

2023

 

2022

(unaudited) Operating expenses, GAAP

$

118,406

 

$

94,486

 

$

343,578

 

$

276,156

 

Adjustments: Stock-based compensation

 

(17,704

)

 

(10,342

)

 

(36,128

)

 

(29,024

)

Litigation-related expenses

 

(2,715

)

 

(3,602

)

 

(12,815

)

 

(16,629

)

Amortization of intangible assets

 

(3,873

)

 

(2,774

)

 

(10,461

)

 

(7,181

)

Transaction-related expenses

 

(278

)

 

—

 

 

(2,178

)

 

(120

)

Restructuring expenses

 

(129

)

 

(45

)

 

(333

)

 

(1,704

)

Other non-recurring expenses1

 

—

 

 

—

 

 

(1,349

)

 

—

 

Non-GAAP operating expenses

$

93,707

 

$

77,723

 

$

280,314

 

$

221,498

 

  Three Months Ended Nine Months Ended September 30, September 30,

2023

2022

2023

2022

(unaudited) Operating loss, GAAP

$

(38,359

)

$

(34,970

)

$

(128,565

)

$

(111,948

)

Depreciation

 

10,651

 

 

8,010

 

 

28,998

 

 

22,601

 

Amortization of intangible assets

 

4,094

 

 

2,802

 

 

11,122

 

 

7,218

 

EBITDA

 

(23,614

)

 

(24,158

)

 

(88,445

)

 

(82,129

)

Add back significant items: Stock-based compensation

 

20,073

 

 

11,077

 

 

60,729

 

 

30,464

 

Purchase accounting adjustments on acquisitions

 

—

 

 

347

 

 

195

 

 

784

 

Excess & obsolete write-down

 

2,454

 

 

2,923

 

 

9,188

 

 

7,023

 

Litigation-related expenses

 

2,715

 

 

3,602

 

 

12,815

 

 

16,629

 

Transaction-related expenses

 

278

 

 

—

 

 

2,178

 

 

120

 

Restructuring expenses

 

129

 

 

45

 

 

333

 

 

1,704

 

Other non-recurring expenses1

 

—

 

 

—

 

 

1,349

 

 

—

 

Adjusted EBITDA

$

2,035

 

$

(6,164

)

$

(1,658

)

$

(25,405

)

Non-recurring consulting fees associated with the implementation of our state tax-planning strategy

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231106434967/en/

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