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
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.
About Alphatec Holdings, Inc.
Alphatec Holdings, Inc. (ATEC), through its wholly-owned subsidiaries, Alphatec Spine, Inc. and SafeOp Surgical, Inc., is a medical device company dedicated to revolutionizing the approach to spine surgery through clinical distinction. ATEC architects and commercializes approach-based technology that integrates seamlessly with the SafeOp Neural InformatiX System to provide real-time, objective nerve information that can enhance the safety and reproducibility of spine surgery. Additional information can be found 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 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 the Company’s 2020 revenue and growth outlook, planned commercial launches and product introductions, the Company’s strategy in significantly repositioning the ATEC brand, turning the Company into a growth organization and creating future market disruption, its ability to finance future operations, statements about the timing of the anticipated EOS acquisition, when and whether the anticipated EOS acquisition ultimately will close, the potential benefits and synergies of the anticipated acquisition (including the expected impact on future financial and operating results). 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: uncertainty of success in developing new products or products currently in the pipeline; uncertainties in the Company’s ability to execute upon its strategic operating plan; uncertainties regarding the ability to successfully license or acquire new products, and the commercial success of such products; failure to achieve acceptance of products by the surgeon community; failure to obtain FDA or other regulatory clearance or approval for new products, or unexpected or prolonged delays in the process; continuation of favorable third party reimbursement for procedures performed; 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 products or emerging new technologies; product liability exposure; an unsuccessful outcome in any litigation in which the Company is a defendant; patent infringement claims; the Company’s ability to meet its financial obligations under its credit agreements and the OrthoTec LLC settlement agreement; uncertainties as to the timing and the closing of the EOS acquisition; uncertainties as to the percentage of EOS’s securityholders tendering their shares; the ability to retain and hire key EOS personnel, maintain relationships with their customers and suppliers, and maintain their operating results and business generally; the risk that the businesses will not be integrated successfully. The words “believe,” “will,” “should,” “expect,” “intend,” “estimate,” “look forward” 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. 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.