Alphatec Holdings, Inc. Reports Third Quarter 2024 Financial Results And Raises Full-Year Guidance

CARLSBAD, Calif.--(BUSINESS WIRE)--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 ended September 30, 2024, and recent corporate highlights.

Third Quarter 2024 Financial Results

	Quarter Ended September 30, 2024
Total revenue	$151 million
GAAP gross margin	68%
Non-GAAP gross margin	69%
GAAP operating expenses	$136 million
Non-GAAP operating expenses	$114 million
GAAP net loss	($40) million
Adjusted EBITDA	$7.4 million
Adjusted EBITDA margin	5%
Ending cash balance	$81 million

Recent Highlights

• Drove 20% procedural volume growth on continued momentum of PTP^TM and LTP^TM;
• Achieved 19% growth in new surgeon adoption, a key leading indicator of future growth;
• Continued to expand U.S. footprint, which fueled over 200 surgeon training engagements;
• Reduced free cash use to $21 million as accelerated investment phase nears completion.

"At ATEC, our commitment continues to be to enhance spine care through innovation," said Pat Miles, Chairman and Chief Executive Officer. "That commitment has fueled growth at multiples of our industry for over five years. We recognize the importance of converting growth to expand profitability so we can support our long-term vision, and we are actively executing internal initiatives to impact cash flow. Our view of the opportunity ahead is unchanged: we are building a special company that is uniquely positioned to revolutionize spine care."

Increased Existing Term Debt Facility

The Company reached an agreement with Braidwell LP, and Pharmakon Advisors, LP, to expand the Company's existing term loan by $50 million, availing total capacity of up to $200 million. With the close of the transaction, the Company has pro-forma cash of approximately $128 million.

Pedro Gonzalez de Cosio, Co-Founder, Principal and CEO of Pharmakon Advisors, said, "ATEC's mission to improve spine care is fueling exceptional growth. We are excited to partner with the team in support of that important mission as the company continues to expand profitability and inflects to positive cash flow."

Additional details regarding the financing will be included in a Current Report on Form 8-K, which ATEC will file with the Securities and Exchange Commission today.

Financial Outlook for the Full-Year 2024

For the fiscal year ended December 31, 2024, the Company now expects total revenue to grow 25% to $605 million compared to the previous expectation of $602 million. This includes surgical revenue of $540 million and EOS revenue of $65 million. The Company now expects non-GAAP adjusted EBITDA of approximately $27 million compared to the previous expectation of $25.5 million.

Financial Results Webcast

ATEC will present these results via a live webcast today at 1:30 p.m. PT / 4:30 p.m. ET. The live webcast can be accessed by visiting 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 remain available through the Investor Relations Section of ATEC's Corporate Website for twelve months.

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.

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^TM 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 be 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 and commitments; and the Company's ability to compel surgeon adoption, drive procedural growth and transform the sales channel. 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 and the form of such funding; 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.

Non-GAAP Definitions

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

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.

Alphatec Holdings, Inc. Condensed Consolidated Statements of Operations (in thousands, except per share amounts)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
			2024				2023				2024				2023
		(unaudited)								(unaudited)
Revenue from products and services		$	150,719			$	118,262			$	434,769			$	344,292
Cost of sales			47,990				38,215				132,095				129,279
Gross profit			102,729				80,047				302,674				215,013
Operating expenses:
Research and development			20,357				20,000				57,474				47,831
Sales, general and administrative			109,200				91,411				335,658				269,960
Litigation-related expenses			2,093				2,715				8,611				12,815
Amortization of acquired intangible assets			3,848				3,873				11,538				10,461
Transaction-related expenses			-				278				(117	)			2,178
Restructuring expenses			934				129				1,861				333
Total operating expenses			136,432				118,406				415,025				343,578
Operating loss			(33,703	)			(38,359	)			(112,351	)			(128,565	)
Other expense, net:
Interest expense, net			(6,572	)			(4,459	)			(17,728	)			(12,225	)
Other income, net			623				47				897				3,077
Total other expense, net			(5,949	)			(4,412	)			(16,831	)			(9,148	)
Net loss before taxes			(39,652	)			(42,771	)			(129,182	)			(137,713	)
Income tax benefit			(36	)			(117	)			(391	)			(153	)
Net loss		$	(39,616	)		$	(42,654	)		$	(128,791	)		$	(137,560	)
Net loss per share, basic and diluted		$	(0.28	)		$	(0.35	)		$	(0.90	)		$	(1.18	)
Weighted average shares outstanding, basic and diluted			143,492				122,468				142,400				117,026
Stock-based compensation included in:
Cost of sales		$	1,439			$	2,369			$	2,476			$	24,601
Research and development			7,207				6,790				17,137				9,587
Sales, general and administrative			8,816				10,914				32,131				26,541
		$	17,462			$	20,073			$	51,744			$	60,729

Alphatec Holdings, Inc. Condensed Consolidated Balance Sheets (in thousands)
		September 30, 2024				December 31, 2023
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	80,976			$	220,970
Accounts receivable, net			78,452				72,613
Inventories			183,111				136,842
Prepaid expenses and other current assets			19,886				20,666
Total current assets			362,425				451,091
Property and equipment, net			171,430				149,835
Right-of-use assets			37,015				26,410
Goodwill			73,397				73,003
Intangible assets, net			98,785				102,451
Other assets			2,843				2,418
Total assets		$	745,895			$	805,208
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	59,578			$	48,985
Accrued expenses and other current liabilities			76,262				87,712
Contract liabilities			11,602				13,910
Short-term debt			1,790				1,808
Current portion of operating lease liabilities			6,989				5,159
Total current liabilities			156,221				157,574
Total long-term liabilities			567,433				545,915
Redeemable preferred stock			23,603				23,603
Stockholders' equity			(1,362	)			78,116
Total liabilities and stockholders' equity		$	745,895			$	805,208

Alphatec Holdings, Inc. Reconciliation of Non-GAAP Financial Measures (in thousands)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
			2024				2023				2024				2023
(unaudited)
Gross profit, GAAP		$	102,729			$	80,047			$	302,674			$	215,013
Add: amortization of intangible assets			308				221				922				661
Add: stock-based compensation			1,439				2,369				2,476				24,601
Add: purchase accounting adjustments on acquisitions			-				-				197				195
Non-GAAP gross profit		$	104,476			$	82,637			$	306,269			$	240,470
Gross margin, GAAP			68.2	%			67.7	%			69.6	%			62.5	%
Add: amortization of intangible assets			0.2	%			0.2	%			0.2	%			0.2	%
Add: stock-based compensation			1.0	%			2.0	%			0.6	%			7.1	%
Add: purchase accounting adjustments on acquisitions			0.0	%			0.0	%			0.0	%			0.1	%
Non-GAAP gross margin			69.3	%			69.9	%			70.4	%			69.8	%
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
			2024				2023				2024				2023
(unaudited)
Operating expenses, GAAP		$	136,432			$	118,406			$	415,025			$	343,578
Adjustments:
Stock-based compensation			(16,023	)			(17,704	)			(49,268	)			(36,128	)
Litigation-related expenses			(2,093	)			(2,715	)			(8,611	)			(12,815	)
Amortization of intangible assets			(3,848	)			(3,873	)			(11,538	)			(10,461	)
Transaction-related expenses			-				(278	)			117				(2,178	)
Restructuring expenses			(934	)			(129	)			(1,861	)			(333	)
Other non-recurring expenses1, 2			-				-				(1,608	)			(1,349	)
Non-GAAP operating expenses		$	113,534			$	93,707			$	342,256			$	280,314
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
			2024				2023				2024				2023
(unaudited)
Net loss, GAAP		$	(39,616	)		$	(42,654	)		$	(128,791	)		$	(137,560	)
Other expense, net			5,949				4,412				16,831				9,148
Income tax benefit			(36	)			(117	)			(391	)			(153	)
Depreciation			16,491				10,651				45,950				28,998
Amortization of intangible assets			4,156				4,094				12,460				11,122
EBITDA			(13,056	)			(23,614	)			(53,941	)			(88,445	)
Add back significant items:
Stock-based compensation			17,462				20,073				51,744				60,729
Purchase accounting adjustments on acquisitions			-				-				197				195
Litigation-related expenses			2,093				2,715				8,611				12,815
Transaction-related expenses			-				278				(117	)			2,178
Restructuring expenses			934				129				1,861				333
Other non-recurring expenses1, 2			-				-				1,608				1,349
Adjusted EBITDA		$	7,433			$	(419	)		$	9,963			$	(10,846	)
Adjusted EBITDA margin			4.9	%			(0.4	%)			2.3	%			(3.2	%)
Adjusted EBITDA margin expansion		530 bps
1. Non-recurring net charges on assets and liabilities associated with customer plan of reorganization
2. Non-recurring consulting fees associated with the implementation of our state tax-planning strategy

Contacts

Investor/Media Contact:
Tina Jacobsen, CFA
Investor Relations
[phone]
[e-mail]

Company Contact:
J. Todd Koning
Chief Financial Officer
[e-mail]