ATEC Alphatec Holdings Inc

• Full year 2023 total revenue grew 37% to $482 million
• Full year 2023 adjusted EBITDA margin improved ~890 basis points
• Full year 2024 total revenue expected to approximate $595 million, enabling adjusted EBITDA margin expansion of approximately 560 basis points

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 and full year ended December 31, 2023, and business highlights.

Fourth Quarter and Full Year 2023 Financial Results

Quarter EndedDecember 31, 2023 Year EndedDecember 31, 2023 Total revenues

$

138

 

$

482

 

GAAP gross margin

 

69.0

%

 

64.3

%

Non-GAAP gross margin (prior definition)*

 

72.9

%

 

72.6

%

Non-GAAP gross margin (updated definition)*

 

69.7

%

 

69.8

%

Operating expenses

$

140

 

$

484

 

Non-GAAP operating expenses

$

106

 

$

387

 

GAAP net loss

$

(49

)

$

(187

)

Non-Gaap adjusted EBITDA (prior definition)*

$

6

 

$

4

 

Non-Gaap adjusted EBITDA (updated definition)*

$

2

 

$

(9

)

Ending cash balance

$

221

 

 

*Refer to discussion of updated non-GAAP financial definition. Numbers and percentages may not foot due to rounding.

Business Highlights

• Portfolio-wide strength drove fourth quarter 2023 surgical revenue growth of 34% with an acceleration in volume growth to 29% compared to 24% in the prior quarter;
• Expanded lateral platform with full launch of Lateral TransPsoas (LTP™) + Midline ALIF approaches and Calibrate LTX™, a lateral expandable implant;
• Elevated the procedural sophistication of comprehensive portfolio with launch of 15 new products and line extensions in 2023;
• Trained over 500 surgeons in 2023, contributing to a 27% increase in surgeon users compared to 2022.

Pat Miles, Chairman and Chief Executive Officer, said, "The success we’ve achieved to date is testament: ATEC lateral sophistication, alone, is capable of building a good, profitable company. But we aspire for much more. We are building a spine monster, and the informatics and procedural innovation that our 100% spine-focused knowhow will unleash in the years ahead will further our mission to truly revolutionize spine care. We are all systems go in the pursuit of ATEC’s best, which is yet to come."

Non-GAAP Financial Definition Update

The Company is updating its non-GAAP financial measures to include the non-cash impact of the provision for excess and obsolete inventory (“E&O”) in the calculation of Cost of Goods Sold. With the majority of ATEC’s strategic portfolio transformation complete, the Company has determined that E&O charges are a normal and recurring aspect of operating the business and should be included in the assessment of operating performance. For detail on the impact of this reporting change on previously reported periods and 2024 guidance, a reconciliation of non-GAAP financial measures under both the updated and prior definitions has been included in this release and on the Investor Relations Section of ATEC’s Corporate Website.

Financial Outlook for the Full Year 2024

The Company continues to expect total revenue for the fiscal year ended December 31, 2024, to approximate $595 million, reflecting growth of approximately 23% compared to 2023. This includes surgical revenue of $530 million and approximately $65 million of EOS revenue. The Company expects full year 2024 non-GAAP adjusted EBITDA to approximate $22 million, which implies 560 basis points of improvement in adjusted EBITDA margin compared to full year 2023. Under the prior non-GAAP financial definition, adjusted EBITDA guidance would have approximated $40 million.

Financial Results Webcast

The Company will host a live webcast today at 1:30 p.m. PT / 4:30 p.m. ET. To access the live webcast, please visit 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 be available beginning approximately two hours after the webcast’s completion through March 5, 2024. Access the replay by dialing (800) 770-2030 and referencing conference ID number 97241.

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 and a discussion of the Company’s non-GAAP definitions. We have not reconciled our adjusted operating expenses and adjusted EBITDA estimates for full year 2024 because certain items that impact these figures are uncertain or out of our control and cannot be reasonably predicted. Accordingly, a reconciliation of 2024 adjusted operating expenses and adjusted EBITDA estimates is not available without unreasonable effort.

Inducement Awards Granted

As an inducement material to accepting employment with the Company, and in accordance with Nasdaq Listing Rule 5635(c)(4), ATEC today announced that the independent Compensation Committee of the Board of Directors has approved aggregate grants to 22 new employees (who are not executive officers) of, collectively, 31,780 restricted stock units (“RSUs”) under the Company’s 2016 Employment Inducement Award Plan. The RSUs will vest in equal annual installments on each of the first four anniversaries of the grant date, provided that the recipient remains continuously employed by ATEC as of such vesting date. In addition, the RSUs will vest fully upon a change of control of ATEC.

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 Machine™ 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 become 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; planned product launches, introductions, regulatory submissions or clearances; efforts to transform sales and distribution channels; the Company’s ability to compel surgeon adoption; and the Company’s future ability to finance its operations and sufficiency of its cash runway. 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; the Company’s ability to compete with other products or with emerging technologies; 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.

Alphatec Holdings, Inc.

Consolidated Statements of Operations

(in thousands, except per share amounts)

 

Three Months Ended Year Ended December 31, December 31,

2023

2022

2023

2022

(unaudited) Revenue: Revenue from products and services

$

137,970

 

$

105,944

 

$

482,262

 

$

350,852

 

Revenue from international supply agreement

 

—

 

 

—

 

 

—

 

 

15

 

Total revenue

 

137,970

 

 

105,944

 

 

482,262

 

 

350,867

 

Cost of sales

 

42,780

 

 

37,093

 

 

172,059

 

 

117,808

 

Gross profit

 

95,190

 

 

68,851

 

 

310,203

 

 

233,059

 

Operating expenses: Research and development

 

22,284

 

 

11,604

 

 

70,115

 

 

44,033

 

Sales, general and administrative

 

104,120

 

 

81,920

 

 

374,080

 

 

300,013

 

Litigation-related expenses

 

9,472

 

 

7,314

 

 

22,287

 

 

23,943

 

Amortization of acquired intangible assets

 

3,823

 

 

2,934

 

 

14,284

 

 

10,115

 

Transaction-related expenses

 

(65

)

 

—

 

 

2,113

 

 

120

 

Restructuring expenses

 

386

 

 

106

 

 

719

 

 

1,810

 

Total operating expenses

 

140,020

 

 

103,878

 

 

483,598

 

 

380,034

 

Operating loss

 

(44,830

)

 

(35,027

)

 

(173,395

)

 

(146,975

)

Interest expense, net: Interest expense, net

 

(4,416

)

 

(1,329

)

 

(16,641

)

 

(5,505

)

Other income, net

 

44

 

 

1,049

 

 

3,121

 

 

471

 

Total interest expense, net

 

(4,372

)

 

(280

)

 

(13,520

)

 

(5,034

)

Net loss before taxes

 

(49,202

)

 

(35,307

)

 

(186,915

)

 

(152,009

)

Income tax benefit

 

(124

)

 

(524

)

 

(277

)

 

(716

)

Net loss

$

(49,078

)

$

(34,783

)

$

(186,638

)

$

(151,293

)

Net loss per share, basic and diluted

$

(0.37

)

$

(0.33

)

$

(1.54

)

$

(1.46

)

Weighted average shares outstanding, basic and diluted

 

133,750

 

 

105,858

 

 

121,242

 

 

103,373

 

Stock-based compensation included in: Cost of sales

$

481

 

$

1,157

 

$

25,082

 

$

2,597

 

Research and development

 

9,154

 

 

1,029

 

 

18,741

 

 

5,016

 

Sales, general and administrative

 

10,880

 

 

7,906

 

 

37,421

 

 

32,943

 

$

20,515

 

$

10,092

 

$

81,244

 

$

40,556

 

Alphatec Holdings, Inc.

Consolidated Balance Sheets

(in thousands)

 

December 31,2023 December 31,2022   ASSETS Current assets: Cash and cash equivalents

$

220,970

$

84,696

Accounts receivable, net

 

72,613

 

60,060

 

Inventories

 

136,842

 

101,521

 

Prepaid expenses and other current assets

 

20,666

 

9,357

 

Total current assets

 

451,091

 

255,634

 

Property and equipment, net

 

149,835

 

101,952

 

Right-of-use assets

 

26,410

 

28,360

 

Goodwill

 

73,003

 

47,367

 

Intangible assets, net

 

102,451

 

82,781

Other assets

 

2,418

 

4,874

Total assets

$

805,208

$

520,968

 

  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable

$

48,985

$

34,742

 

Accrued expenses and other current liabilities

 

87,712

 

72,382

 

Contract liabilities

 

13,910

 

11,956

 

Short-term debt

 

1,808

 

14,948

 

Current portion of operating lease liabilities

 

5,159

 

4,842

 

Total current liabilities

 

157,574

 

138,870

 

Total long-term liabilities

 

545,915

 

393,162

 

Redeemable preferred stock

 

23,603

 

23,603

 

Stockholders' equity (deficit)

 

78,116

 

(34,667

)

Total liabilities and stockholders' equity (deficit)

$

805,208

$

520,968

 

Alphatec Holdings, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands)

 

Three Months Ended   Year Ended December 31,   December 31,

2023

 

2022

 

2023

 

2022

(unaudited)   Gross profit, GAAP

$

95,190

 

 

$

68,851

 

 

$

310,203

 

 

$

233,059

 

Add: amortization of intangible assets

 

278

 

 

 

27

 

 

 

939

 

 

 

64

 

Add: stock-based compensation

 

481

 

 

 

1,157

 

 

 

25,082

 

 

 

2,597

 

Add: purchase accounting adjustments on acquisitions

 

198

 

 

 

565

 

 

 

393

 

 

 

1,349

 

Non-GAAP gross profit

$

96,147

 

 

$

70,600

 

 

$

336,617

 

 

$

237,069

 

Add: excess and obsolete write-down

 

4,420

 

 

 

2,769

 

 

 

13,608

 

 

 

9,792

 

Prior definition non-GAAP gross profit

$

100,567

 

 

$

73,369

 

 

$

350,225

 

 

$

246,861

 

Gross margin, GAAP

 

69.0

%

 

 

65.0

%

 

 

64.3

%

 

 

66.4

%

Add: amortization of intangible assets

 

0.2

%

 

 

0.0

%

 

 

0.2

%

 

 

0.0

%

Add: stock-based compensation

 

0.3

%

 

 

1.1

%

 

 

5.2

%

 

 

0.7

%

Add: purchase accounting adjustments on acquisitions

 

0.1

%

 

 

0.5

%

 

 

0.1

%

 

 

0.4

%

Non-GAAP gross margin

 

69.7

%

 

 

66.6

%

 

 

69.8

%

 

 

67.6

%

Add: excess and obsolete write-down

 

3.2

%

 

 

2.6

%

 

 

2.8

%

 

 

2.8

%

Prior definition non-GAAP gross margin

 

72.9

%

 

 

69.3

%

 

 

72.6

%

 

 

70.4

%

        Three Months Ended   Year Ended December 31,   December 31,

2023

 

2022

 

2023

 

2022

(unaudited)   Operating expenses, GAAP

$

140,020

 

 

$

103,878

 

 

$

483,598

 

 

$

380,034

 

Adjustments:       Stock-based compensation

 

(20,034

)

 

 

(8,935

)

 

 

(56,162

)

 

 

(37,959

)

Litigation-related expenses

 

(9,472

)

 

 

(7,314

)

 

 

(22,287

)

 

 

(23,943

)

Amortization of intangible assets

 

(3,823

)

 

 

(2,934

)

 

 

(14,284

)

 

 

(10,115

)

Transaction-related expenses

 

65

 

 

 

—

 

 

 

(2,113

)

 

 

(120

)

Restructuring expenses

 

(386

)

 

 

(106

)

 

 

(719

)

 

 

(1,810

)

Other non-recurring expenses1

 

—

 

 

 

—

 

 

 

(1,349

)

 

 

—

 

Non-GAAP operating expenses

$

106,370

 

 

$

84,589

 

 

$

386,684

 

 

$

306,087

 

        Three Months Ended   Year Ended December 31,   December 31,

2023

 

2022

 

2023

 

2022

(unaudited)   Net loss, GAAP

$

(49,078

)

 

$

(34,783

)

 

$

(186,638

)

 

$

(151,293

)

Interest expense, net

4,372

280

13,520

5,034

  Income tax benefit

(124

)

(524

)

(277

)

(716

) Depreciation

 

11,918

 

 

 

8,388

 

 

 

40,916

 

 

 

30,989

 

Amortization of intangible assets

 

4,101

 

 

 

2,961

 

 

 

15,223

 

 

 

10,179

 

EBITDA

 

(28,811

)

 

 

(23,678

)

 

 

(117,256

)

 

 

(105,807

)

Add back significant items:       Stock-based compensation

 

20,515

 

 

 

10,092

 

 

 

81,244

 

 

 

40,556

 

Purchase accounting adjustments on acquisitions

 

198

 

 

 

565

 

 

 

393

 

 

 

1,349

 

Litigation-related expenses

 

9,472

 

 

 

7,314

 

 

 

22,287

 

 

 

23,943

 

Transaction-related expenses

 

(65

)

 

 

—

 

 

 

2,113

 

 

 

120

 

Restructuring expenses

 

386

 

 

 

106

 

 

 

719

 

 

 

1,810

 

Other non-recurring expenses1

 

—

 

 

 

—

 

 

 

1,349

 

 

 

—

 

Adjusted EBITDA

$

1,695

 

 

$

(5,601

)

 

$

(9,151

)

 

$

(38,029

)

Excess & obsolete write-down

 

4,420

 

 

 

2,769

 

 

 

13,608

 

 

 

9,792

 

Prior definition adjusted EBITDA

$

6,115

 

 

$

(2,832

)

 

$

4,457

 

 

$

(28,237

)

       

1 Non-recurring consulting fees associated with the implementation of our state tax-planning strategy

Non-GAAP Definitions

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

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240227112817/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