Alphatec Holdings, Inc. (Nasdaq:ATEC), the parent company of
Alphatec Spine, Inc., a global provider of spinal fusion
technologies, announced today financial results for the first
quarter ended March 31, 2015.
- First quarter consolidated net revenues up 5% in constant
currency over 2014.
- First quarter adjusted EBITDA of $6.5 million, 13.4% of
revenue.
- Reiterates 2015 constant currency revenue growth of
approximately 4% to 7% over 2014 and adjusted EBITDA guidance of
$34 million to $37 million.
Highlights of the First Quarter 2015 and Recent
Activities
Positive Progress Made Towards Alphatec's Corporate Strategic
Objectives
Financial
- Consolidated revenues of $48.6 million as reported, $51.8
million in constant currency.
- Consolidated revenues were impacted by $3.2 million of foreign
currency headwinds.
- International revenues grew 25% in constant currency over the
first quarter of 2014 and represent 37% of global revenues as
reported.
Strategic Pillar #1: Refocus Product Portfolio and R&D
Pipeline
- Arsenal™ spinal fixation system commercially launched in the
U.S. - February 2015. We continue to receive positive feedback from
surgeons on the speed, strength and simplicity of the system.
- Arsenal approved in Japan and launch planning
well-underway.
- Zodiac® and Illico® MIS launched in Brazil – April 2015.
"We were very pleased to receive early approval for Arsenal in
Japan, our strongest share position in the world," said Mike
O'Neill, Chief Financial Officer. "And we're expecting strong
performance of Arsenal throughout 2015."
Strategic Pillar #2: Expand Global Commercial Participation
- U.S. sales force expansion into new metro areas over 75%
complete – May 1, 2015.
- European Union sales distribution expansion 50% complete – May
1, 2015.
Strategic Pillar #3: Transform Manufacturing and Distribution
Operations
- Arsenal instrument sets for commercial launch achieved targeted
50% cost reduction.
- Piloting novel physical distribution strategy for improving set
turn utilization.
"Alphatec is beginning the transformation of the organization,
actively executing against our strategy that is focused on
improving the fundamental quality of the business by accelerating
global growth and managing for profitability," said Jim Corbett,
President and Chief Executive Officer of Alphatec Spine. "Our team
is aligned and confident in our strategy and we are executing our
plan with a sense of urgency. This plan will enable us to take
significant steps to compete more effectively in the marketplace,
expand our global commercial participation and improve our
operations."
Quarter Ended March 31, 2015
Consolidated net revenues for the first quarter of 2015 were
$48.6 million as reported, down 1.1% compared to $49.2 million
reported for the first quarter of 2014, or up 5.4% on a constant
currency basis due to the strengthening of the U.S. Dollar.
Consolidated revenues were impacted by $3.2 million in the first
quarter due to declines in the valuation of the Japanese Yen and
Euro against the U.S. Dollar.
U.S. net revenues for the first quarter of 2015 were $30.5
million, down 4.9%, compared to $32.1 million reported for the
first quarter of 2014.
International net revenues for the first quarter of 2015 were
$18.2 million, up 6.2% compared to $17.1 million for the first
quarter of 2014, or up 24.6% on a constant currency basis.
Consolidated gross profit and gross margin for the first quarter
of 2015 were $32.9 million and 67.7%, respectively, compared to
$33.3 million and 67.7%, respectively, for the first quarter of
2014.
Gross profit declined 1.1% from the first quarter of 2014
primarily due to lower U.S. sales volume.
Gross margin was unchanged compared to prior year as margin
improvements realized as a result of continued operational
diligence were offset by unfavorable variation in regional and
product mix.
Total operating expenses for the first quarter of 2015 were
$31.8 million, reflecting a decrease of approximately $6.2 million
compared to the first quarter of 2014. This decrease is primarily
attributable to the expenses related to the Orthotec legal matter
and restructuring of the Company's French operations incurred in
the first quarter of 2014. Total operating expenses for the
first quarter of 2015 decreased by $0.5 million when compared with
non-GAAP operating expense adjustments for the first quarter of
2014.
GAAP net loss for the first quarter of 2015 was $4.6 million or
($0.05) per share (basic and diluted), compared to a net loss of
$6.7 million, or ($0.07) per share (basic and diluted) for the
first quarter of 2014.
Adjusted EBITDA in the first quarter of 2015 was $6.5 million,
or 13.4% of revenues, compared to $6.7 million, or 13.6% of
revenues reported in the first quarter of 2014. First quarter
2015 adjusted EBITDA represents net income excluding effects of
interest, taxes, depreciation, amortization and stock-based
compensation. Adjusted EBITDA was unfavorably impacted by
fluctuations in foreign currency during the first quarter 2015 when
compared to prior year.
Cash and cash equivalents were $11.4 million at March 31, 2015,
compared to $19.7 million reported at December 31,
2014. Additionally, the Company has reported $5.7 million of
current and non-current restricted cash, which must be used for
future payment obligations associated with the Orthotec
settlement.
2015 Financial Guidance
"Given the progress we are making on our commercial expansion
along with planned product launches for 2015, we expect to see
momentum for the second half of the year," said Mr.
Corbett. "We are reiterating our 2015 full year guidance and
we remain confident in our strategy and approach towards reaching
our goal of 20% adjusted EBITDA in the next three years."
The Company reiterates full year 2015 constant currency revenue
growth guidance of approximately 4% to 7% over 2014, which
represents a range of revenue in constant currency of $215 million
to $222 million. Additionally, the Company reaffirms guidance
expectations for annual adjusted EBITDA of $34 million to $37
million in 2015, representing a range of approximately 10% to 20%
growth over 2014.
Conference Call
Alphatec Spine will webcast its Quarterly Update Call today at
5:00 p.m. EDT / 2:00 p.m. PDT. Jim Corbett, President and CEO
of Alphatec Spine, will lead the call. During the call the
Company plans to provide further details underlying its first
quarter 2015 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
30370732. 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, in
process research and development (IPR&D) expenses and other
non-recurring income or expense items, such as severance expenses,
litigation expenses, damages associated with ongoing litigation 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 global medical device company that designs,
develops, manufactures and markets spinal fusion technology
products and solutions for the treatment of spinal disorders
associated with disease and degeneration, congenital deformities
and trauma. The Company's mission is to improve lives by delivering
advancements in spinal fusion technologies. The Company and its
affiliates market products in the U.S. and 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 2015
revenue guidance and 2015 adjusted EBITDA guidance; the success of
the Company's initiatives to drive global sales growth, increase
margins and increase operating efficiencies; and the success of the
Company in achieving its three strategic pillars, and the Company's
ability to implement a plan that will ensure that it competes more
effectively in the marketplace, expands global participation, and
improves operations. 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; the uncertainties in the Company's ability to execute
upon is 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 Alphatec Spine's products by the surgeon community, including
Arsenal, Zodiac and Illico and the Company's biologics products;
failure to successfully implement streamlining and lean 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; claims related to the Company's intellectual property and
the Company's ability to meet its financial obligations under its
credit agreements and the Orthotec and Cross Medical settlement
agreements. 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, 2014, filed on February
27, 2015 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, |
|
2015 |
2014 |
|
|
|
Revenues |
$ 48,647 |
$ 49,173 |
Cost of revenues |
15,335 |
15,433 |
Amortization of acquired intangible
assets |
369 |
446 |
Total cost of revenues |
15,704 |
15,879 |
Gross profit |
32,943 |
33,294 |
|
67.7% |
67.7% |
Operating expenses: |
|
|
Research and development |
3,851 |
4,181 |
Sales and marketing |
18,195 |
18,059 |
General and administrative |
9,138 |
14,222 |
Amortization of acquired intangible
assets |
677 |
758 |
Restructuring expenses |
(60) |
776 |
Total operating expenses |
31,801 |
37,996 |
Operating income (loss) |
1,142 |
(4,702) |
Interest and other income (expense),
net |
(4,801) |
(1,302) |
Loss from continuing operations before
taxes |
(3,659) |
(6,004) |
Income tax provision |
902 |
669 |
Net loss |
$ (4,561) |
$ (6,673) |
|
|
|
|
|
|
Net loss per common share: |
|
|
Basic and diluted net loss per share |
$ (0.05) |
$ (0.07) |
|
|
|
Weighted-average shares - basic and
diluted |
99,020 |
96,838 |
|
|
ALPHATEC HOLDINGS,
INC. |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(in thousands -
unaudited) |
|
|
|
|
March 31, |
December 31, |
|
2015 |
2014 |
ASSETS |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 11,400 |
$ 19,735 |
Restricted Cash |
4,400 |
4,400 |
Accounts receivable, net |
38,914 |
40,440 |
Inventories, net |
41,772 |
41,747 |
Prepaid expenses and other current
assets |
4,734 |
5,466 |
Deferred income tax assets |
1,248 |
1,324 |
Total current assets |
102,468 |
113,112 |
|
|
|
Property and equipment, net |
25,913 |
26,040 |
Goodwill |
161,702 |
171,333 |
Intangibles, net |
27,114 |
30,259 |
Other assets |
2,909 |
4,179 |
Total assets |
$ 320,106 |
$ 344,923 |
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
Current liabilities: |
|
|
Accounts payable |
$ 8,909 |
$ 10,130 |
Accrued expenses |
30,380 |
35,393 |
Deferred revenue |
1,351 |
1,300 |
Common stock warrant
liabilities |
8,817 |
8,702 |
Current portion of long-term
debt |
7,256 |
8,076 |
Total current liabilities |
56,713 |
63,601 |
|
|
|
Total long term liabilities |
105,346 |
108,765 |
Redeemable preferred stock |
23,603 |
23,603 |
Stockholders' equity |
134,444 |
148,954 |
Total liabilities and stockholders'
equity |
$ 320,106 |
$ 344,923 |
|
|
ALPHATEC HOLDINGS,
INC. |
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES |
(in thousands, except
per share amounts - unaudited) |
|
|
|
|
Three Months Ended |
|
March 31, |
|
2015 |
2014 |
|
|
|
Operating income (loss), as reported |
$ 1,142 |
$ (4,702) |
Add back: |
|
|
Depreciation |
2,791 |
3,250 |
Amortization of intangible assets |
325 |
397 |
Amortization of acquired intangible
assets |
1,046 |
1,204 |
Total EBITDA |
5,304 |
149 |
|
|
|
Add back significant items: |
|
|
Stock-based compensation |
1,253 |
944 |
Litigation settlement and trial
costs |
-- |
4,779 |
Restructuring and other charges |
(60) |
812 |
|
|
|
EBITDA, as adjusted for significant
items |
$ 6,497 |
$ 6,684 |
|
|
|
|
|
|
Net loss, as reported |
$ (4,561) |
$ (6,673) |
Add back: |
|
|
Amortization of acquired intangible
assets |
1,046 |
1,204 |
Amortization of intangible assets |
325 |
397 |
Warrant fair value adjustment |
115 |
-- |
Litigation settlement and trial
costs |
-- |
4,779 |
Restructuring and other charges |
(60) |
812 |
|
|
|
Net income (loss), as adjusted for
significant items |
$ (3,135) |
$ 519 |
|
|
|
|
|
|
Net loss per common share - basic and
diluted |
$ (0.05) |
$ (0.07) |
Add back: |
|
|
Amortization of acquired intangible
assets |
0.01 |
0.01 |
Amortization of intangible
assets |
0.00 |
0.00 |
Warrant fair value adjustment |
0.00 |
-- |
Litigation settlement and trial
costs |
-- |
0.05 |
Restructuring and other
charges |
(0.00) |
0.01 |
|
|
|
Net income (loss) per common share -
basic, as adjusted for significant items |
$ (0.03) |
$ 0.01 |
|
|
|
Weighted-average shares - basic and
diluted |
99,020 |
96,838 |
|
|
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 |
|
2015 |
2014 |
As Reported |
Operations |
Currency |
|
|
|
|
|
|
Revenues by geographic segment |
|
|
|
|
|
U.S. |
$ 30,467 |
$ 32,050 |
-4.9% |
-4.9% |
0.0% |
International |
18,180 |
17,123 |
6.2% |
24.6% |
-18.4% |
Total revenues |
$ 48,647 |
$ 49,173 |
-1.1% |
5.4% |
-6.5% |
|
|
|
|
|
|
Gross profit by geographic segment |
|
|
|
|
|
U.S. |
$ 21,579 |
$ 23,050 |
|
|
|
International |
11,364 |
10,244 |
|
|
|
Total gross profit |
$ 32,943 |
$ 33,294 |
|
|
|
|
|
|
|
|
|
Gross profit margin by geographic
segment |
|
|
|
|
|
U.S. |
70.8% |
71.9% |
|
|
|
International |
62.5% |
59.8% |
|
|
|
Total gross profit margin |
67.7% |
67.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes: |
|
|
|
|
|
1) The impact from foreign
currency represents the percentage change in 2015 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, 2015 |
|
|
Non-GAAP |
|
|
|
GAAP |
Adjustments |
|
Non-GAAP |
|
|
|
|
|
Revenues |
$ 48,647 |
$ -- |
|
$ 48,647 |
Cost of revenues |
15,335 |
-- |
|
15,335 |
Amortization of acquired intangible
assets |
369 |
-- |
|
369 |
Total cost of revenues |
15,704 |
-- |
|
15,704 |
Gross profit |
32,943 |
-- |
|
32,943 |
|
67.7% |
|
|
67.7% |
Operating expenses: |
|
|
|
|
Research and development |
3,851 |
-- |
|
3,851 |
Sales and marketing |
18,195 |
-- |
|
18,195 |
General and administrative |
9,138 |
-- |
|
9,138 |
Amortization of acquired intangible
assets |
677 |
-- |
|
677 |
Restructuring expenses |
(60) |
60 |
(b) |
-- |
Total operating expenses |
31,801 |
60 |
|
31,861 |
Operating (loss) income |
1,142 |
(60) |
|
1,082 |
Interest and other income (expense),
net |
(4,801) |
115 |
(a) |
(4,686) |
Loss from continuing operations before
taxes |
(3,659) |
55 |
|
(3,604) |
Income tax provision |
902 |
-- |
|
902 |
Net loss |
$ (4,561) |
$ 55 |
|
$ (4,506) |
|
|
|
|
|
|
|
|
|
|
Notes: |
|
|
|
|
(a) Consists of warrant fair
value adjustment. |
(b) Employee severance and
facility closing costs accrued for the restructuring of the
Company's French operations. |
|
|
|
|
|
|
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) |
(c) |
9,443 |
Amortization of acquired intangible
assets |
758 |
-- |
|
758 |
Transaction related costs |
-- |
|
|
-- |
Litigation settlement |
-- |
-- |
|
-- |
Restructuring expenses |
776 |
(776) |
(d) |
-- |
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: |
|
|
|
|
(c) Amount consists of Orthotec
litigation trial related costs of $4.8 million. |
(d) 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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