Alphatec Holdings, Inc. (“ATEC” or the “Company”) (Nasdaq: ATEC), a
medical device company dedicated to revolutionizing the approach to
spine surgery, announced today preliminary revenue results for the
first quarter ended March 31, 2020, and provided a business update
on its response to the COVID-19 pandemic.
Preliminary, Unaudited First Quarter
2020 Revenue
Preliminary, unaudited first quarter 2020
results reflect U.S. revenue growth of 25% to 26%. The growth was
largely driven by the continuing rapid adoption of recently
released ATEC technologies (launched since 2018), with new product
sales growing to over 55% of U.S. revenue.
|
Quarter EndedMarch 31, 2020 (unaudited) |
Total Revenue |
$29.6 million to $30.0 million |
U.S. Revenue |
$28.7 million to $29.0 million |
“I am inspired by the commitment and resolve
demonstrated by the ATEC Family and our customers in delivering
strong results despite facing obvious challenges in the final month
of the quarter,” said Pat Miles, Chairman and Chief Executive
Officer. “The unprecedented pandemic presents near-term
uncertainties, but we have built this company to overcome adversity
through extreme focus. We will remain fixated on stewarding
better spine surgery through innovation. We know that spine
procedures deemed elective in the context of this pandemic will
return; there are still patients suffering whose needs can only be
adequately addressed with surgical intervention. We will be ready.
I am confident that once this global crisis is behind us, ATEC will
continue to march forward as spine’s most innovative company.”
The preliminary results announced today are
unaudited and therefore subject to change. The Company expects to
announce first quarter financial and operating results on May 7,
2020, after market close.
Business Update
The novel coronavirus has forced ATEC employees
to change the way they do business. The California-based Company
has been operating under strict social distancing and stay-at-home
requirements since March 15, 2020, operating with minimal employee
presence in the workplace. Despite this, the Company
continues to work closely with its surgeon customers, sales channel
agents and supply chain partners to navigate the operational
challenges, support necessary procedures, preserve upcoming product
releases and build inventory to capably support the increased
number of cases expected once restrictions have been lifted
following the pandemic.
ATEC intends to prioritize and advance its
product development programs to ensure that its pipeline of core
new technology continues to move forward largely unabated by the
economic disruptions; however, the full duration and impact of
current environmental factors cannot yet be accurately determined.
In the meantime, ATEC employees are facing the uncertainty by
embracing the Company’s familial culture and supporting each other,
personally and professionally. This includes participation in a
voluntary salary-to-equity conversion program, through which ATEC
leadership preserved over $750,000 in cash compensation in the
second quarter to support payroll protection for hourly and
underemployed salaried colleagues. It also engendered a sick
time “donation” program, whereby ATEC employees forfeited 40 weeks
of accrued sick time to be pooled and used by fellow employees
deemed unable to work.
“I am exceptionally proud of the entire ATEC
extended family,” added Miles. “A crisis tests organizational
character, demonstrating whether a company’s culture is congruent
with its actions, or merely a collection of consultant buzzwords. I
know our teams are ‘all in’, not because of the words they use, but
because of their actions. We are rising to the challenge and
remain completely focused on our strategic priorities. The profound
confidence demonstrated by ATEC leadership in voluntarily
sacrificing a significant percentage of their cash compensation in
the second quarter is both humbling and inspiring, as is the
donation of hundreds of hours of paid time by ATEC team members for
use by fellow employees in need. The ATEC family is fully committed
to support our customers over the long term through the
perseverance of our mission to revolutionize the approach to spine
surgery with the Organic Innovation Machine we have created.”
As a result of hospitals globally postponing
elective procedures to preserve capacity for COVID-19 patients,
ATEC is suspending its previously announced 2020 revenue guidance.
Following a strong start to the year, revenue will be materially
impacted by the pandemic in the near term. While spine surgeries
will not be postponed indefinitely, the Company cannot yet
determine the extent or duration of those deferrals, nor the
requirements or the timing of the recovery once operating room and
other pandemic-related constraints have been lifted.
ATEC expects to provide an updated outlook
as more information becomes available.
Balance Sheet Update
To extend its cash runway, the Company completed
a draw of $20.0 million under its credit facility with Squadron
Medical Finance Solutions LLC (“Squadron” or “Squadron Capital”) on
April 2, 2020. Including the draw, the Company’s preliminary
pro forma cash balance at March 31, 2020, was approximately $47.5
million.
“We appreciate the continued support from
Squadron,” said Jeff Black, Chief Financial Officer. “As we remain
intensely focused on managing cash burn, particularly during this
global pandemic, this injection of capital reinforces our balance
sheet.”
"We believe that ATEC is the best-led and most
highly focused pure-play spine company in the industry,” said David
Pelizzon, President of Squadron Capital. “Our long-term support
remains steadfast.”
To supplement its cash balance, the Company is
in the process of submitting an application under the recently
enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES
Act” or the “Act”) administered by the U.S. Small Business
Administration. Section 1106 of the Act provides for forgiveness of
up to the full principal amount of qualifying loans guaranteed
under the Paycheck Protection Program. The Paycheck Protection
Program and loan forgiveness are intended to provide economic
relief to small businesses such as ATEC, that are adversely
impacted under the Coronavirus Disease 2019 (COVID-19) Emergency
Declaration (COVID-19 Emergency Declaration) issued by President
Trump on March 13, 2020.
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.
About Squadron Medical Finance Solutions, LLC, a
division of Squadron Capital
Squadron Capital seeks to acquire and invest in
operating companies located both in the US and
abroad. Squadron’s mission is long-term investment
(multi-generational) and assistance to the portfolio companies’
leadership teams in the execution of their business plans. Squadron
Medical Finance Solutions assists orthopedic OEMs in achieving
their business objectives by offering financing of surgical
instruments and implant sets, or by providing debt financing to
support the broader capital requirements of growing companies.
Squadron is a strategic investor in a broad range of companies in
the orthopedic space, both public and private.
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 references to the
impact of the COVID-19 pandemic on the Company's business and
financial results, the Company’s ability to maintain operations to
support its customers and patients in the near-term and to
capitalize on future growth opportunities, and the Company’s
expectations to delay, prioritize and/or reduce spending associated
with planned product development and launch initiatives and future
revenue and growth. 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: changes to our financial results for the
quarter ended March 31, 2020 due to the completion of financial
closing procedures; the extent of the impact of COVID-19 pandemic
on the Company's business and the economy, including the duration
of elective surgery deferrals and the desire of patients and
surgeons to perform elective surgeries once the pandemic has
subsided and/or governmental orders no longer prohibit or recommend
against performing elective surgeries; the uncertainty of success
in developing new products or products currently in the Company’s
pipeline; failure to achieve acceptance of the Company’s 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 using the Company’s
products; the Company’s ability to compete with other products and
with emerging new technologies; product liability exposure; patent
infringement claims; and claims related to the Company’s
intellectual property. 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.
Investor/Media Contact:
Josh BergInvestor Relations (760)
494-6790ir@atecspine.com
Company Contact:
Jeff BlackChief Financial OfficerAlphatec
Holdings, Inc. ir@atecspine.com
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