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8-K - FORM 8-K - Alphatec Holdings, Inc.d581017d8k.htm

Exhibit 99.1

Investor/Media Contact:

Mark Francois

Senior Director, Investor Relations

Alphatec Spine, Inc.

(760) 494-6610

mfrancois@AlphatecSpine.com

ALPHATEC SPINE ANNOUNCES SECOND QUARTER 2013

REVENUE AND FINANCIAL RESULTS

CARLSBAD, CA, August 6, 2013 – Alphatec Holdings, Inc. (Nasdaq: ATEC), the parent company of Alphatec Spine, Inc., announced today financial results for the second quarter of fiscal year 2013, ended June 30, 2013.

Second Quarter 2013 Highlights

 

   

Total revenue of $51.0 million; up 5.8% as reported from Q212, or 8.8% on a constant currency basis

 

   

International revenue of $18.5 million; up 20.7% as reported from Q212, or 30.2% on a constant currency basis

 

   

U.S. revenue of $32.5 million; down 1.2% from Q212 due to the loss of PureGen® and ongoing price declines

 

   

Implant unit sales to U.S. hospitals up 10.2% from Q212 due to growing physician adoption

 

   

Full launch of Alphatec Solus® and Pegasus™ expected to strengthen U.S. revenue in H2 2013

“Our second quarter 2013 results reflect another strong revenue quarter for Alphatec Spine. With the first six months of 2013 completed and revenue of approximately $101.5 million, we are on track to achieve our 2013 revenue guidance,” said Les Cross, Chairman and CEO of Alphatec Spine.

“Our international business was particularly strong with solid growth in each of Europe, Asia/Pacific, Latin America, the Middle East/Africa and Japan, despite significant currency headwinds from the Japanese Yen. Excluding the impact of foreign currency conversion, international revenue was a new record for the Company. We look forward to receiving key product registration approvals for Alphatec-branded products in Brazil, China and certain Asia Pacific geographies in the second half of this year. Our international business represented over 36% of total revenues in the second quarter.

“Essentially flat year-over-year growth in our U.S. business reflects the full-quarter loss of our biologic product, PureGen, ongoing pricing pressures, which remain a mid-single digit headwind in the U.S., and a planned reduction in business with certain physician-owned stocking distributors. Combined, these three impacts offset strong implant unit sales growth in our core U.S. hospital channel for Alphatec products. As we look to the second half of 2013, we anticipate full-market launches of two new interbody devices, Alphatec Solus, which is used in anterior lumbar fusion procedures, and Pegasus, which is used in anterior cervical fusion procedures. We are also pleased with the performance of our minimally invasive surgery products, including our ILLICO Multi-Level System, which is designed to be used in longer lumbar constructs.

 

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“On the operations side of our business, we continue to progress with our lean-practice implementation to streamline processes that should drive further cost reductions in our manufacturing, supply chain and inventory systems.

“Finally, I would like to thank all Alphatec Spine employees who continue to work hard to make Alphatec Spine a world class company.”

Second Quarter 2013 Financial Results

Consolidated net revenues for the second quarter of 2013 were $51.0 million, representing growth of approximately 5.8 percent compared to $48.2 million reported for the second quarter of 2012. Excluding the effect of foreign currency conversion, net revenues increased 8.8 percent during the quarter.

U.S. net revenues for the second quarter of 2013 were $32.5 million, a reduction of 1.2 percent, compared to $32.9 million reported for U.S. net revenues in the second quarter of 2012.

International net revenues for the second quarter of 2013 were $18.5 million, representing growth of 20.7 percent compared to $15.3 million reported for the second quarter of 2012. Excluding the effect of foreign currency conversion, international net revenues increased 30.2 percent.

Gross profit and gross margin for the second quarter of 2013 were $32.1 million and 62.9 percent, respectively, compared to $30.2 million and 62.6 percent, respectively, for the second quarter of 2012. Gross margin in the second quarter of 2013 was negatively impacted by regional revenue mix of a larger percentage of sales from lower-margin international revenues and from ongoing pricing pressures in the U.S. spine market. Additionally, gross margin in the second quarter of 2013 was impacted by the Cross Medical settlement, which continues to reduce quarterly gross profit by approximately $1.0 million per quarter for the amortization of a licensed intangible asset. This represents approximately 200 basis points of margin in each of the first and second quarters of 2013.

Total operating expenses for the second quarter of 2013 were $35.0 million, or 68.6 percent of revenues, reflecting an increase of approximately $1.0 million, compared to the second quarter of 2012. Operating expenses for the second quarter of 2013 included higher R&D expenses, legal expenses associated with current litigation matters, and higher amortization and non-recurring expenses related to the Phygen acquisition.

GAAP Net loss for the second quarter of 2013 was $4.7 million or ($0.05) per share (basic and diluted), compared to a net loss of $6.4 million, or ($0.07) per share (basic and diluted) for the second quarter of 2012.

Adjusted EBITDA in the second quarter of 2013 was $4.9 million, or 9.6 percent of revenues, compared to $2.7 million, or 5.7 percent of revenues reported for the second quarter of 2012. Adjusted EBITDA represents net income or loss excluding the effects of interest, taxes, depreciation, amortization, stock-based compensation, and other non-recurring items, such as restructuring expenses, IPR&D and transaction-related expenses.

Cash and cash equivalents were $12.9 million at June 30, 2013, compared to $22.2 million reported at December 31, 2012 and has been driven by cash payments for the Phygen acquisition and ongoing quarterly payments to Cross Medical.

 

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2013 Financial Guidance

The Company continues to expect revenue for 2013 to be in a range between $204 million and $210 million on a constant currency basis, or approximately 4% to 7% growth over 2012. The significant devaluation of the Japanese Yen impacted Alphatec Spine’s second quarter revenue by over $1.6 million, and with the expectation that the Japanese Yen’s exchange rate will not substantially improve in 2013, the aggregate revenue impact to the second half of 2013 could potentially be as high as $3 million. The Company expects adjusted EBITDA for 2013 to be in a range of $24 million to $27 million, or approximately 21% to 36% growth over 2012, representing approximately 12% and 13% of expected revenue. As previously stated, this guidance assumes only modest contributions for PureGen, all of which were realized in the first quarter of 2013.

Conference Call Information

Alphatec Spine has scheduled a conference call for today, August 6, 2013, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to discuss its second quarter 2013 financial results. The conference call ID is 20625218 and the dial-in number is (877) 556-5251. 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., 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.

Non-GAAP Information

Non-GAAP earnings and earnings per share included in this press release are non-GAAP (generally accepted accounting principles) financial measures that represents net income (loss) excluding the effects of amortization and other non-recurring or expense items, such as loss on extinguishment of debt, restructuring expenses and transaction-related expenses. Management does not consider these expenses when it makes certain evaluations of the operations of the Company. Non-GAAP earnings and earnings per share, as defined above, may not be similar to non-GAAP earnings measures used by other companies and is not a measurement under GAAP. 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 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

 

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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 2013 revenue, adjusted EBITDA projections; the success of the Company’s initiative to drive global sales growth, increase margins and increase operating efficiencies, the ability to achieve benefits in connection with the Phygen acquisition 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 success of the integration and revenue increases due to the Phygen acquisition and realize the benefits of such transaction; the uncertainty of success in developing new products or products currently in Alphatec Spine’s pipeline; the uncertainties regarding the ability to successfully license or acquire new products, and the commercial success of such products; uncertainties regarding the regulatory status of the Company’s PureGen product, and the ability to keep such product on the market; failure to achieve acceptance of Alphatec Spine’s products by the surgeon community, including the Alphatec Solus, Pegasus and Illico Multi-Level systems discussed in this press release; 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 or international regulatory approvals for new products, including the products discussed in this press release, 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 or its credit agreement; 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, 2012, filed on March 4, 2013 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.

 

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ALPHATEC HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands - unaudited)

 

     June 30,      December 31,  
     2013      2012  
ASSETS      

Current assets:

     

Cash and cash equivalents

   $ 12,948       $ 22,241   

Accounts receivable, net

     41,031         41,012   

Inventories, net

     50,614         49,855   

Prepaid expenses and other current assets

     5,619         5,953   

Deferred income tax assets

     2,835         2,991   
  

 

 

    

 

 

 

Total current assets

     113,047         122,052   

Property and equipment, net

     30,471         30,403   

Goodwill

     177,832         180,838   

Intangibles, net

     43,611         46,856   

Other assets

     1,710         1,978   
  

 

 

    

 

 

 

Total assets

   $ 366,671       $ 382,127   
  

 

 

    

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY      

Current liabilities:

     

Accounts payable

   $ 18,329       $ 15,237   

Accrued expenses

     29,597         38,490   

Deferred revenue

     1,176         1,361   

Current portion of long-term debt

     709         1,700   
  

 

 

    

 

 

 

Total current liabilities

     49,811         56,788   

Total long term liabilities

     55,375         55,920   

Redeemable preferred stock

     23,603         23,603   

Stockholders’ equity

     237,882         245,816   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 366,671       $ 382,127   
  

 

 

    

 

 

 

 

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ALPHATEC HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts - unaudited)

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2013     2012     2013     2012  

Revenues

   $ 51,020      $ 48,235      $ 101,463      $ 96,696   

Cost of revenues

     18,501        17,666        35,771        33,929   

Amortization of acquired intangible assets

     426        373        857        752   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenues

     18,927        18,039        36,628        34,681   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     32,093        30,196        64,835        62,015   

Operating expenses:

        

Research and development

     3,666        3,777        7,348        7,787   

Sales and marketing

     19,160        19,529        37,655        38,065   

General and administrative

     11,445        10,132        22,575        18,957   

Amortization of acquired intangible assets

     721        509        1,514        1,083   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     34,992        33,947        69,092        65,892   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

     (2,899     (3,751     (4,257     (3,877

Interest and other income (expense), net

     (1,327     (3,551     (2,670     (4,479
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations before taxes

     (4,226     (7,302     (6,927     (8,356

Income tax provision (benefit)

     435        (928     383        (721
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (4,661   $ (6,374   $ (7,310   $ (7,635
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per common share:

        

Basic and diluted net loss per share

   $ (0.05   $ (0.07   $ (0.08   $ (0.09
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares - basic and diluted

     95,926        89,218        95,876        89,078   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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ALPHATEC HOLDINGS, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(in thousands, except per share amounts - unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2013     2012     2013     2012  

Operating loss, as reported

   $ (2,899   $ (3,751   $ (4,257   $ (3,877

Add back:

        

Depreciation

     3,654        3,539        7,175        6,995   

Amortization of intangible assets

     1,529        1,399        3,043        2,793   

Amortization of acquired intangible assets

     1,147        882        2,371        1,835   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total EBITDA

     3,431        2,069        8,332        7,746   

Add back significant items:

        

Stock-based compensation

     795        663        1,979        1,210   

Restructuring and other charges

     655        —          655        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA, as adjusted for significant items

   $ 4,881      $ 2,732      $ 10,966      $ 8,956   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss, as reported

   $ (4,661   $ (6,374   $ (7,310   $ (7,635

Add back:

        

Amortization of acquired intangible assets

     1,147        882        2,371        1,835   

Amortization of intangible assets

     1,529        1,399        3,043        2,793   

Loss on extinguishment of debt

     —          2,911        —          2,911   

Restructuring and other charges

     655        —          655        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss, as adjusted for significant items

   $ (1,330   $ (1,182   $ (1,241   $ (96
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per common share - basic and diluted

   $ (0.05   $ (0.07   $ (0.08   $ (0.09

Add back:

        

Amortization of acquired intangible assets

     0.01        0.01        0.02        0.02   

Amortization of intangible assets

     0.02        0.02        0.03        0.03   

Loss on extinguishment of debt

     —          0.03        —          0.04   

Transaction related expense

     0.01        —          0.01        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per common share - basic and diluted, as adjusted for significant items

   $ (0.01   $ (0.01   $ (0.01   $ (0.00
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares - basic and diluted

     95,926        89,218        95,876        89,078   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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ALPHATEC HOLDINGS, INC.

RECONCILIATION OF GEOGRAPHIC SEGMENT REVENUES AND GROSS PROFIT

(in thousands, except percentages - unaudited)

 

     Three Months Ended
June 30,
    % Change     % Change     % Change
Foreign
 
     2013     2012     As Reported     Operations     Currency  

Revenues by geographic segment

          

U.S.

   $ 32,491      $ 32,888        -1.2     -1.2     0.0

International

     18,529        15,347        20.7     30.2     -9.5
  

 

 

   

 

 

       

Total revenues

   $ 51,020      $ 48,235        5.8     8.8     -3.0
  

 

 

   

 

 

       

Gross profit by geographic segment

          

U.S.

   $ 21,973      $ 22,577         

International

     10,120        7,619         
  

 

 

   

 

 

       

Total gross profit

   $ 32,093      $ 30,196         
  

 

 

   

 

 

       

Gross profit margin by geographic segment

          

U.S.

     67.6     68.6      

International

     54.6     49.6      
  

 

 

   

 

 

       

Total gross profit margin

     62.9     62.6      
  

 

 

   

 

 

       

 

     Six Months Ended
June 30,
    % Change     % Change     % Change
Foreign
 
     2013     2012     As Reported     Operations     Currency  

Revenues by geographic segment

          

U.S.

   $ 65,553      $ 65,449        0.2     0.2     0.0

International

     35,910        31,247        14.9     23.8     -8.8
  

 

 

   

 

 

       

Total revenues

   $ 101,463      $ 96,696        4.9     7.8     -2.9
  

 

 

   

 

 

       

Gross profit by geographic segment

          

U.S.

   $ 45,024      $ 45,424         

International

     19,811        16,591         
  

 

 

   

 

 

       

Total gross profit

   $ 64,835      $ 62,015         
  

 

 

   

 

 

       

Gross profit margin by geographic segment

          

U.S.

     68.7     69.4      

International

     55.2     53.1      
  

 

 

   

 

 

       

Total gross profit margin

     63.9     64.1      
  

 

 

   

 

 

       

Footnotes:

 

1) The impact from foreign currency represents the percentage change in 2013 revenues due to the change in foreign exchange rates for the periods presented.

 

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