Financial

ATEC Reports Fourth Quarter and Full Year 2019 Financial Results

CARLSBAD, Calif., March 05, 2020 (GLOBE NEWSWIRE) — Alphatec Holdings, Inc. (“ATEC” or the “Company”) (Nasdaq: ATEC), today announced financial results for the fourth quarter and full year ended December 31, 2019, and recent corporate highlights.

Fourth Quarter and Full Year 2019 Financial Highlights

 Quarter Ended
 December 31, 2019
Year Ended
December 31, 2019
    
Total revenues$ 32.4 million $ 113.4 million
U.S. product revenue$ 31.1 million $ 108.2 million
U.S. gross margin71.1% 71.4%
Operating expenses$ 36.7 million $ 124.9 million
Non-GAAP operating expenses$ 29.2 million $ 105.2 million
Operating loss$ (14.5) million $ (47.3) million
Non-GAAP Adjusted EBITDA$ (2.6) million $ (11.2) million
 

2019 and Recent Commercial and Product Highlights

  • Increased the percent of revenue driven by new products to 48% in the fourth quarter of 2019 and 37% for the full year 2019
  • Advanced clinical distinction with 12 new product launches
  • Grew revenue per case by over 20% year-over-year in the fourth quarter 2019 and by 17% year-over-year in the full year 2019
  • Continued to make significant progress transforming the sales network, generating revenue growth from strategic distribution partners of over 40% compared to fourth quarter 2018
  • Launched the SafeOp Neural Monitoring System, the first reflection of the AlphaInformatiX platform
  • Received FDA 510(k) clearance for 6 products
  • Announced an agreement to acquire EOS Imaging, S.A. (“EOS”), adding unprecedented spine imaging and anatomical modeling proficiencies to the AlphaInformatiX platform
  • Secured a new capital commitment of up to $160 million to refinance existing debt and fund the proposed acquisition of EOS

2019 was a strong year of execution,” said Pat Miles, Chairman and Chief Executive Officer. “We drove nearly 30% U.S. revenue growth by delivering on our commitments to create clinical distinction, revitalize the sales channel and compel surgeon adoption.”

“We are building on that momentum in 2020,” Miles added. “With our recently announced agreement to acquire EOS imaging, we are significantly enhancing our ability to inform spine surgery, improve clinical decisions and drive better patient-specific outcomes. The future is exceptionally bright for spine’s Organic Innovation Machine!”

Comparison of 2019 Financial Results to 2018

U.S. product revenue for the fourth quarter 2019 was $31.1 million, up 35% compared to $23.0 million in the fourth quarter 2018. U.S. product revenue for the full year 2019 was $108.2 million, up 29% compared to $83.7 million in the full year 2018. Growth was driven by the strength of new product introductions and the expansion of the strategic distribution channel, which generated 88% of U.S. revenue in 2019, up from 80% in 2018.  Revenue growth generated by strategic distributors continues to offset revenue impacts associated with transitioning or discontinuing legacy distributor relationships.

U.S. gross profit and gross margin for the fourth quarter 2019 were $22.1 million and 71.1%, respectively, compared to $16.5 million and 71.6%, respectively, for the fourth quarter 2018.  U.S. gross profit and gross margin the full year 2019 were $77.2 million and 71.4%, respectively, compared to $62.7 million and 75.0%, respectively, for the full year 2018.  U.S. gross margin was impacted by increased non-cash excess and obsolete write-offs related to legacy products. On a non-GAAP basis, excluding non-cash excess and obsolete charges, U.S. gross margin was 78.1% in the fourth quarter of 2019, compared to 79.1% in the fourth quarter of 2018, and 79.3% for the full year 2019, compared to 79.5% in 2018.

Total operating expenses for the fourth quarter 2019 were $36.7 million, reflecting an increase of $12.4 million compared to $24.3 million in the fourth quarter 2018. Total operating expenses for the full year 2019 were $124.9 million, reflecting an increase of $39.2 million compared to $85.7 million in the full year 2018. 

On a non-GAAP basis, excluding restructuring charges, stock-based compensation, transaction-related expenses, litigation-related expenses, fair value adjustments, and a 2018 gain on settlement, total operating expenses in the fourth quarter 2019 increased to $29.2 million from $20.1 million in 2018, and increased to $105.2 million for the full year 2019 from $77.2 million in 2018.  The increases were attributable to increased organic product development, the support of new product launches, variable selling expenses and continued investment in the sales channel.

GAAP Operating loss for the fourth quarter 2019 was $14.5 million, compared to a loss of $7.7 million for the fourth quarter 2018, an increase of $6.8 million. The increase includes $3.5 million attributable to non-cash stock-based compensation, litigation-related expenses, and restructuring.  GAAP operating loss for the full year 2019 was $47.3 million, compared to a loss of $22.4 million for the full year 2018, an increase of $24.8 million. The increase includes $7.2 million attributable to non-cash stock-based compensation, litigation-related expenses, and restructuring.

Non-GAAP Adjusted EBITDA, which excludes stock-based compensation, fair value adjustments, litigation-related expenses, restructuring, transaction-related expenses, non-cash excess and obsolescence charges and a 2018 gain on settlement, was a loss of $2.6 million in the fourth quarter 2019, compared to earnings of $0.04 million in the fourth quarter 2018, and a loss of $11.2 million for the full year 2019, compared to a loss of $3.3 million in the full year 2018.

For more detailed information on non-GAAP operating expenses, non-GAAP adjusted operating loss and non-GAAP adjusted EBITDA, please refer to the table, “Alphatec Holdings, Inc. Reconciliation of Non-GAAP Financial Measures,” that follows.

Current and long-term debt includes $45.0 million in term debt and $12.8 million outstanding under the Company’s revolving credit facility at December 31, 2019 compared to $35.0 million in term debt and $11.0 million outstanding under the Company’s revolving credit facility at December 31, 2018.

Cash and cash equivalents were $47.1 million at December 31, 2019, compared to $29.1 million reported at December 31, 2018.

2020 Financial Outlook

ATEC expects total 2020 revenue between $130.0 million and $134.0 million, with expected U.S. product revenue between $128.0 and $131.0 million.  Guidance contemplates U.S. revenue growth of 19% to 21% compared to 2019.  The company will update guidance to reflect the impact of the proposed acquisition of EOS when the transaction closes, which is expected in the third quarter of 2020.

Investor Conference Call

Alphatec will host a live webcast and conference call today at 1:30 p.m. PT / 4:30 p.m. ET to discuss the results. At that time, please click here to access the webcast.  The conference call will be available domestically at (877) 556-5251 and internationally at (720) 545-0036. The conference ID number is 5166856.  During today’s webcast, management will be referring to a presentation, viewable via the live webcast or through the Investor Relations section of the Company’s website.

Non-GAAP Financial Information

To supplement the Company’s financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), the Company reports certain non-GAAP financial measures, including non-GAAP U.S. 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.

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Mike Adams

Mike Adams is a medical device sales leader with extensive clinical experience in spine and biologics and a nationwide distribution network built over the last 10+ years in the industry. He has held various leadership positions in healthcare and device including Distributor Partner, Hospital COO and Spine VP of Sales. He currently leads the commercialization strategy for OrthoSpine Partners and is a Distributor Principal at Novel Medical. Because of his unique career path, Mike has the ability to see the healthcare business from multiple perspectives making him passionate about building strategic partnerships that help reduce overall costs, drive innovation, and cultivate growth for new markets.

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