ATEC Alphatec Holdings Inc

• Surgical revenue grew 30%; total revenue grew 27%
• Full-year revenue and profitability guidance increased
• Enhanced balance sheet flexibility with $50 million expansion of existing term loan facility

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, 2024, and recent corporate highlights.

Third Quarter 2024 Financial Results

 

Quarter Ended September 30, 2024

Total revenue

$151 million

GAAP gross margin

68%

Non-GAAP gross margin

69%

GAAP operating expenses

$136 million

Non-GAAP operating expenses

$114 million

GAAP net loss

($40) million

Adjusted EBITDA

$7.4 million

Adjusted EBITDA margin

5%

Ending cash balance

$81 million

Recent Highlights

• Drove 20% procedural volume growth on continued momentum of PTPTM and LTPTM;
• Achieved 19% growth in new surgeon adoption, a key leading indicator of future growth;
• Continued to expand U.S. footprint, which fueled over 200 surgeon training engagements;
• Reduced free cash use to $21 million as accelerated investment phase nears completion.

“At ATEC, our commitment continues to be to enhance spine care through innovation,” said Pat Miles, Chairman and Chief Executive Officer. “That commitment has fueled growth at multiples of our industry for over five years. We recognize the importance of converting growth to expand profitability so we can support our long-term vision, and we are actively executing internal initiatives to impact cash flow. Our view of the opportunity ahead is unchanged: we are building a special company that is uniquely positioned to revolutionize spine care."

Increased Existing Term Debt Facility

The Company reached an agreement with Braidwell LP, and Pharmakon Advisors, LP, to expand the Company’s existing term loan by $50 million, availing total capacity of up to $200 million. With the close of the transaction, the Company has pro-forma cash of approximately $128 million.

Pedro Gonzalez de Cosio, Co-Founder, Principal and CEO of Pharmakon Advisors, said, “ATEC’s mission to improve spine care is fueling exceptional growth. We are excited to partner with the team in support of that important mission as the company continues to expand profitability and inflects to positive cash flow.”

Additional details regarding the financing will be included in a Current Report on Form 8-K, which ATEC will file with the Securities and Exchange Commission today.

Financial Outlook for the Full-Year 2024

For the fiscal year ended December 31, 2024, the Company now expects total revenue to grow 25% to $605 million compared to the previous expectation of $602 million. This includes surgical revenue of $540 million and EOS revenue of $65 million. The Company now expects non-GAAP adjusted EBITDA of approximately $27 million compared to the previous expectation of $25.5 million.

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 into the live webcast, please register at this link. Access details will be shared via email.

A replay of the webcast will remain available through the Investor Relations Section of ATEC’s Corporate Website for twelve months.

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; and the Company's ability to compel surgeon adoption, drive procedural growth 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 and the form of such 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.

Non-GAAP Definitions

Amortization of intangible assets: Represents amortization expense associated with intangible assets including, but not limited to customer relationships, intellectual property, and trade names acquired in business combinations and asset acquisitions.

Litigation-related expenses: We are involved in various litigation matters that from time-to-time result in settlements. Litigation matters can vary in their characteristics, frequency and significance to our operating results and core business operations. We review litigation matters from both a qualitative and quantitative perspective to determine whether such matters are a normal and recurring part of our business. We include in our GAAP financial statements litigation fees and settlement expenses that we determine to be normal, recurring and routine to our business. When we determine that certain litigation matters are not normal and recurring to our core business operations, we believe excluding these expenses will provide our management and investors with useful incremental information. Litigation fees and settlement expenses excluded from our non-GAAP financial measures in the periods presented relate primarily to patent litigation and other litigation matters that relate directly to the business transformation that we started in 2018 and are discussed more fully in our periodic reports filed with the Securities Exchange Commission.

Other non-recurring expenses: These expenses represent non-recurring expenses that we consider to be one-time in nature.

Purchase accounting adjustments on acquisitions: Includes non-cash expenses incurred as a result of fair value asset step-ups associated with tangible assets acquired from business combinations or asset acquisitions.

Restructuring expenses: From time-to-time, in order to realign the Company’s operations or to achieve synergies associated with an acquisition, the Company may eliminate roles or restructure its operations and footprint. In such cases the Company may incur one-time severance and personnel costs associated with workforce reductions, or costs associated with exiting and/or relocating facilities. We exclude these costs as we do not consider such amounts to be part of the ongoing operations.

Stock-based compensation: Stock-based compensation is charged to cost of revenue and operating expenses. We exclude stock-based compensation from certain of our non-GAAP financial measures because we believe that excluding these non-cash expenses provides meaningful supplemental information regarding operational performance. Because of the variety of equity awards used by companies, the varying methodologies for determining stock-based compensation expense, the subjective assumptions involved in those determinations, and the volatility in valuations that can be driven by market conditions outside the Company’s control, the Company believes excluding stock-based compensation expense enhances the ability of management and investors to understand and assess the underlying performance of its business over time.

Transaction-related expenses: These expenses represent one-time costs associated with business combinations and asset acquisitions. These items may include but are not limited to consulting and legal fees, contract termination costs and other related deal costs.

Adjusted EBITDA: Represents earnings before non-operating income/expense, taxes, depreciation and amortization, as adjusted for the applicable non-GAAP adjustments previously described.

Alphatec Holdings, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

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

 

2024

 

 

2023

 

 

2024

 

 

2023

 

(unaudited) (unaudited) Revenue from products and services

$

150,719

 

$

118,262

 

$

434,769

 

$

344,292

 

Cost of sales

 

47,990

 

 

38,215

 

 

132,095

 

 

129,279

 

Gross profit

 

102,729

 

 

80,047

 

 

302,674

 

 

215,013

 

Operating expenses: Research and development

 

20,357

 

 

20,000

 

 

57,474

 

 

47,831

 

Sales, general and administrative

 

109,200

 

 

91,411

 

 

335,658

 

 

269,960

 

Litigation-related expenses

 

2,093

 

 

2,715

 

 

8,611

 

 

12,815

 

Amortization of acquired intangible assets

 

3,848

 

 

3,873

 

 

11,538

 

 

10,461

 

Transaction-related expenses

 

—

 

 

278

 

 

(117

)

 

2,178

 

Restructuring expenses

 

934

 

 

129

 

 

1,861

 

 

333

 

Total operating expenses

 

136,432

 

 

118,406

 

 

415,025

 

 

343,578

 

Operating loss

 

(33,703

)

 

(38,359

)

 

(112,351

)

 

(128,565

)

Other expense, net: Interest expense, net

 

(6,572

)

 

(4,459

)

 

(17,728

)

 

(12,225

)

Other income, net

 

623

 

 

47

 

 

897

 

 

3,077

 

Total other expense, net

 

(5,949

)

 

(4,412

)

 

(16,831

)

 

(9,148

)

Net loss before taxes

 

(39,652

)

 

(42,771

)

 

(129,182

)

 

(137,713

)

Income tax benefit

 

(36

)

 

(117

)

 

(391

)

 

(153

)

Net loss

$

(39,616

)

$

(42,654

)

$

(128,791

)

$

(137,560

)

Net loss per share, basic and diluted

$

(0.28

)

$

(0.35

)

$

(0.90

)

$

(1.18

)

Weighted average shares outstanding, basic and diluted

 

143,492

 

 

122,468

 

 

142,400

 

 

117,026

 

Stock-based compensation included in: Cost of sales

$

1,439

 

$

2,369

 

$

2,476

 

$

24,601

 

Research and development

 

7,207

 

 

6,790

 

 

17,137

 

 

9,587

 

Sales, general and administrative

 

8,816

 

 

10,914

 

 

32,131

 

 

26,541

 

$

17,462

 

$

20,073

 

$

51,744

 

$

60,729

 

Alphatec Holdings, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

  September 30,2024 December 31,2023 (unaudited) ASSETS Current assets: Cash and cash equivalents

$

80,976

 

$

220,970

Accounts receivable, net

 

78,452

 

 

72,613

Inventories

 

183,111

 

 

136,842

Prepaid expenses and other current assets

 

19,886

 

 

20,666

Total current assets

 

362,425

 

 

451,091

Property and equipment, net

 

171,430

 

 

149,835

Right-of-use assets

 

37,015

 

 

26,410

Goodwill

 

73,397

 

 

73,003

Intangible assets, net

 

98,785

 

 

102,451

Other assets

 

2,843

 

 

2,418

Total assets

$

745,895

 

$

805,208

  LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable

$

59,578

 

$

48,985

Accrued expenses and other current liabilities

 

76,262

 

 

87,712

Contract liabilities

 

11,602

 

 

13,910

Short-term debt

 

1,790

 

 

1,808

Current portion of operating lease liabilities

 

6,989

 

 

5,159

Total current liabilities

 

156,221

 

 

157,574

Total long-term liabilities

 

567,433

 

 

545,915

Redeemable preferred stock

 

23,603

 

 

23,603

Stockholders' equity

 

(1,362

)

 

78,116

Total liabilities and stockholders' equity

$

745,895

 

$

805,208

Alphatec Holdings, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands)

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

 

2024

 

 

2023

 

 

2024

 

 

2023

 

(unaudited) Gross profit, GAAP

$

102,729

 

$

80,047

 

$

302,674

 

$

215,013

 

Add: amortization of intangible assets

 

308

 

 

221

 

 

922

 

 

661

 

Add: stock-based compensation

 

1,439

 

 

2,369

 

 

2,476

 

 

24,601

 

Add: purchase accounting adjustments on acquisitions

 

—

 

 

—

 

 

197

 

 

195

 

Non-GAAP gross profit

$

104,476

 

$

82,637

 

$

306,269

 

$

240,470

 

Gross margin, GAAP

 

68.2

%

 

67.7

%

 

69.6

%

 

62.5

%

Add: amortization of intangible assets

 

0.2

%

 

0.2

%

 

0.2

%

 

0.2

%

Add: stock-based compensation

 

1.0

%

 

2.0

%

 

0.6

%

 

7.1

%

Add: purchase accounting adjustments on acquisitions

 

0.0

%

 

0.0

%

 

0.0

%

 

0.1

%

Non-GAAP gross margin

 

69.3

%

 

69.9

%

 

70.4

%

 

69.8

%

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

 

2024

 

 

2023

 

 

2024

 

 

2023

 

(unaudited) Operating expenses, GAAP

$

136,432

 

$

118,406

 

$

415,025

 

$

343,578

 

Adjustments: Stock-based compensation

 

(16,023

)

 

(17,704

)

 

(49,268

)

 

(36,128

)

Litigation-related expenses

 

(2,093

)

 

(2,715

)

 

(8,611

)

 

(12,815

)

Amortization of intangible assets

 

(3,848

)

 

(3,873

)

 

(11,538

)

 

(10,461

)

Transaction-related expenses

 

—

 

 

(278

)

 

117

 

 

(2,178

)

Restructuring expenses

 

(934

)

 

(129

)

 

(1,861

)

 

(333

)

Other non-recurring expenses1, 2

 

—

 

 

—

 

 

(1,608

)

 

(1,349

)

Non-GAAP operating expenses

$

113,534

 

$

93,707

 

$

342,256

 

$

280,314

 

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

 

2024

 

 

2023

 

 

2024

 

 

2023

 

(unaudited) Net loss, GAAP

$

(39,616

)

$

(42,654

)

$

(128,791

)

$

(137,560

)

Other expense, net

 

5,949

 

 

4,412

 

 

16,831

 

 

9,148

 

Income tax benefit

 

(36

)

 

(117

)

 

(391

)

 

(153

)

Depreciation

 

16,491

 

 

10,651

 

 

45,950

 

 

28,998

 

Amortization of intangible assets

 

4,156

 

 

4,094

 

 

12,460

 

 

11,122

 

EBITDA

 

(13,056

)

 

(23,614

)

 

(53,941

)

 

(88,445

)

Add back significant items: Stock-based compensation

 

17,462

 

 

20,073

 

 

51,744

 

 

60,729

 

Purchase accounting adjustments on acquisitions

 

—

 

 

—

 

 

197

 

 

195

 

Litigation-related expenses

 

2,093

 

 

2,715

 

 

8,611

 

 

12,815

 

Transaction-related expenses

 

—

 

 

278

 

 

(117

)

 

2,178

 

Restructuring expenses

 

934

 

 

129

 

 

1,861

 

 

333

 

Other non-recurring expenses1, 2

 

—

 

 

—

 

 

1,608

 

 

1,349

 

Adjusted EBITDA

$

7,433

 

$

(419

)

$

9,963

 

$

(10,846

)

  Adjusted EBITDA margin

 

4.9

%

 

(0.4

%)

 

2.3

%

 

(3.2

%)

Adjusted EBITDA margin expansion 530 bps   1. Non-recurring net charges on assets and liabilities associated with customer plan of reorganization 2. 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/20241030811157/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