EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

For more information:

Michael O’Neill

Chief Financial Officer

Alphatec Spine, Inc.

(760) 494-6746

investorrelations@alphatecspine.com

Westwicke Partners

Lynn C. Pieper

(415) 202-5678

lynn.pieper@westwicke.com

ALPHATEC SPINE ANNOUNCES SECOND QUARTER 2011

REVENUE AND FINANCIAL RESULTS

 

  •  

Revenue of $50.9 million – 12.0% growth over Q2 2010; 7.6% growth on a constant currency basis

 

  •  

US revenue of $34.5 million; 17.8% growth over Q2 2010

CARLSBAD, Calif., August 4, 2011 – Alphatec Holdings, Inc. (Nasdaq: ATEC), the parent company of Alphatec Spine, Inc., a medical device company that designs, develops, manufactures and markets products for the surgical treatment of spine disorders, with a focus on treating conditions related to the aging spine, announced today financial results for the fiscal quarter ended June 30, 2011.

Second Quarter 2011 Performance Highlights

 

•  

Achieved revenue of $50.9 million in the second quarter 2011, which represented growth of 12.0% versus the second quarter 2010, and 2.2% sequential revenue growth over the first quarter 2011.

 

  •  

US revenue of $34.5 million reported for the second quarter 2011 represented 17.8% growth over second quarter 2010, driven by strength of our core products and increase in purchase orders from hospitals for Alphatec Spine products.

 

  •  

International revenue of $16.3 million reported in the second quarter 2011 up 1.3% versus the $16.1 million reported for the second quarter 2010.

 

•  

Cash flow was break-even in the second quarter 2011, reflecting strong revenue growth, working capital management and operating expense control.

 

•  

Received PMDA regulatory approval of Illico® in Japan, a market that has strong demand for minimally invasive surgical approaches.

 

  •  

We believe Alphatec Spine now holds the fourth largest market share position in Japan.

 

•  

Continued Aging Spine market penetration of OsseoFix® and OsseoScrew® in Europe.

 

  •  

OsseoFix revenue growth was 32% in the second quarter, with over 2,600 cases having been completed since product launch.

 

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  •  

OsseoScrew continues to gain momentum and is driving pull-through of other key Alphatec Spine products.

 

            •  

Resubmitted the 510k application for OsseoScrew to the FDA in the second quarter, as planned.

 

•  

Continued uptake and demand for PureGenTM, the Company’s Osteoprogenitor Cell Allograft, with over 500 cases completed since product launch, with no reported adverse events, complications or complaints.

 

•  

Implemented a 10% US workforce reduction in order to align US staffing levels with margin and profit goals.

“We are pleased with our 12% global revenue growth, which was driven in large part by our nearly 18% US revenue growth in the second quarter. Each of those growth rates significantly outpaces our competitors, globally and in the US, respectively. The strength of our broad product portfolio continues to convert business, most notably in the US hospital market. Internationally, OsseoFix and OsseoScrew continue to see strong market adoption and product pull-through, and we are particularly pleased with the strength of our results in Japan” stated Dirk Kuyper, Alphatec Spine’s President and Chief Executive Officer.

Mr. Kuyper continued, “While we are pleased to have reported record revenue results and break-even cash flow in the quarter, we have turned our focus to our US gross margin, which we expect to meaningfully improve throughout the remainder of 2011 and 2012. We have initiatives underway that aim to reduce costs, better utilize our in-house manufacturing capacity and improve manufacturing efficiencies. We continue to be laser-focused on driving our differentiated technologies in Aging Spine, MIS and Biologics to gain market share globally.”

Second Quarter 2011 Financial Results

Consolidated revenues for the second quarter 2011 were $50.9 million, an increase of 12.0% from the $45.4 million reported for the second quarter 2010. US revenues for the second quarter 2011 were $34.5 million, an increase of 17.8% from the $29.3 million reported for the second quarter 2010. International revenues were $16.3 million for the second quarter 2011, up 1.3% versus the $16.1 million reported in the second quarter 2010.

Gross profit for the second quarter 2011 was $29.9 million, an increase of $1.1 million over the second quarter 2010 gross profit of $28.8 million. Second quarter 2011 gross margin of 58.7% was below the second quarter 2010 gross margin of 63.5%. Second quarter 2011 cost of goods sold includes $2.7 million in inventory write-downs. Excluding these write-downs, gross profit was $32.6 million and gross margin was 64.0% for the second quarter 2011. International gross margin increased modestly to 50.1% versus the 49.0% international gross margin reported in second quarter 2010. Total operating expenses for the second quarter 2011 were $33.2 million, an increase of $1.3 million compared to the second quarter 2010 total operating expenses of $31.9 million.

Adjusted EBITDA was $2.7 million in the second quarter 2011, a decrease of $1.1 million compared to the $3.8 million reported for the second quarter 2010. The decline in Adjusted EBITDA is primarily attributable to the negative gross margin contribution from the $2.7 million in inventory write-downs taken in the quarter. Excluding these write-downs, Adjusted EBITDA was $5.4 million in second quarter 2011.

 

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Net loss for the second quarter 2011 was $3.0 million, or ($0.03) per share (basic and diluted), compared with a net loss of $3.0 million, or ($0.04) per share (basic and diluted) for the second quarter 2010.

Non-GAAP EPS for the second quarter 2011 was ($0.02) per share (basic and diluted), compared to $0.00 per share (basic and diluted) reported for the second quarter 2010. Non-GAAP net earnings or (loss) excludes in-process research and development expenses, acquisition-related inventory step-up, amortization of intangible assets and transaction and restructuring expenses.

Cash and cash equivalents were $21.8 million at June 30, 2011 which is an increase of $0.3 million as compared to the $21.5 million cash position as of March 31, 2011.

2011 Financial Guidance

The Company is updating its full year 2011 financial guidance with revenues of $195.0 million to $205.0 million, and $22.0 million to $25.0 million in annual Adjusted EBITDA; approximately 11% to 12% of revenue.

Conference Call

Alphatec Spine will host a conference call today at 2:00 p.m. PT / 5:00 p.m. ET to discuss the results. To participate in the conference call, please visit the investor relations section of the Alphatec Spine website at www.alphatecspine.com. The dial-in numbers are (877) 556-5251 for domestic callers and (720) 545-0036 for international. A live webcast of the conference call will be available online from the investor relations section of the Alphatec Spine website at www.alphatecspine.com. The webcast will be recorded and will remain available on the investor relations section of Alphatec Spine’s website for at least 30 days.

About Alphatec Spine

Alphatec Spine, Inc. is a wholly owned subsidiary of Alphatec Holdings, Inc. (Nasdaq:ATEC). Alphatec Spine is a medical device company that designs, develops, manufactures and markets products for the surgical treatment of spine disorders, primarily focused on the aging spine. The Company’s mission is to combine world-class customer service with innovative, surgeon-driven design that will help improve the aging patient’s quality of life. The Company is poised to achieve its goal through new solutions for patients with osteoporosis, stenosis and other aging spine deformities, improved minimally invasive products and techniques and integrated biologics solutions. In addition to its US operations, the Company also markets its products in over 50 international markets through its subsidiary, Scient’x S.A.S., via a direct sales force in France, Italy and the United Kingdom and via independent distributors in the rest of Europe, the Middle East and Africa, South America and Latin America. In Asia, the Company markets its products through its subsidiary, Alphatec Pacific, Inc. and through distributors in the rest of the Asia Pacific region.

Non-GAAP Information

Non-GAAP earnings included in this press release is a non-GAAP (generally accepted accounting principles) financial measure that represents net income (loss) excluding the effects of in-process research and development expenses, transaction-related expenses and litigation settlement expenses. Management does not consider these expenses when it makes certain evaluations of the operations of the Company. Non-GAAP earnings, as defined above, may not be similar to non-GAAP earnings measures used by other companies and is not a measurement under GAAP.

 

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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, and other non-recurring income or expense items, such as in-process research and development expense and transaction-related expenses. Adjusted EBITDA, as defined above, may not be similar to adjusted EBITDA measures used by other companies and is not a measurement under GAAP.

Though management finds non-GAAP-based earnings or loss and EBITDA useful for evaluating aspects of the Company’s business, its reliance on these measures is limited because excluded items often have a material effect on the Company’s earnings and earnings per common share calculated in accordance with GAAP. Therefore, management uses non-GAAP adjusted EBITDA in conjunction with GAAP earnings and earnings per common share measures. 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. While the GAAP results are more complete, the Company prefers to allow investors to have supplemental metrics since, with reconciliation to GAAP, they may provide greater insight into the Company’s financial results.

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, including, but not limited to, the following: Alphatec Spine’s ability to meet its 2011 revenue, adjusted EBITDA, free cash flow and earnings projections, the growth rate of the spine market related to aging and elderly patients, uncertainty of success in developing new products or products currently in Alphatec Spine’s pipeline, the successful global launch of the Company’s new products and the products in its development pipeline including OsseoFix, OsseoScrew, Illico, and PureGen, failure to achieve acceptance of Alphatec Spine’s products by the surgeon community, failure to obtain FDA clearance or approval for new products, or unexpected or prolonged delays in the process, Alphatec Spine’s ability to develop and expand its US and/or global revenues, continuation of favorable third party payor reimbursement for procedures performed using Alphatec Spine’s products, unanticipated expenses or liabilities or other adverse events affecting cash flow or Alphatec Spine’s ability to successfully control its costs or achieve profitability, uncertainty of additional funding, Alphatec Spine’s ability to compete with other competing products and with emerging new technologies, product liability exposure, patent infringement claims and claims related to Alphatec Spine’s intellectual property. Please refer to the risks detailed from time to time in Alphatec Spine’s SEC reports, including quarterly reports on Form 10-Q, reports on Form 8-K and annual reports on Form 10-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.

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ALPHATEC HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands - unaudited)

 

     June 30,      December 31,  
     2011      2010  
ASSETS      

Current assets:

      

Cash and cash equivalents

    $ 21,761       $ 23,168   

Accounts receivable, net

      41,711         39,777   

Inventories, net

      47,974         51,635   

Prepaid expenses and other current assets

      8,831         6,652   

Deferred income tax assets

      1,588         1,592   
  

 

 

     

 

 

  

Total current assets

      121,865         122,824   

Property and equipment, net

      34,691         38,440   

Goodwill

      178,905         170,194   

Intangibles, net

      44,821         43,148   

Other assets

      4,164         2,410   
  

 

 

     

 

 

  

Total assets

    $ 384,446       $ 377,016   
  

 

 

     

 

 

  
LIABILITIES AND STOCKHOLDERS’ EQUITY      

Current liabilities:

      

Accounts payable

    $ 14,919       $ 15,957   

Accrued expenses

      23,356         22,530   

Deferred revenue

      3,291         3,396   

Current portion of long-term debt

      963         1,708   
  

 

 

     

 

 

  

Total current liabilities

      42,529         43,591   

Total long term liabilities

      42,990         43,388   

Redeemable preferred stock

      23,603         23,603   

Stockholders’ equity

      275,324         266,434   
  

 

 

     

 

 

  

Total liabilities and stockholders’ equity

    $ 384,446       $ 377,016   
  

 

 

     

 

 

  

 

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ALPHATEC HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts - unaudited)

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2011     2010     2011     2010  

Revenues

    $ 50,862      $ 45,424      $ 100,582      $ 80,746   

Cost of revenues

      20,585        16,222        37,958        27,970   

Amortization of acquired intangible assets

      416        369        812        369   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total cost of revenues

      21,001        16,591        38,770        28,339   
  

 

 

    

 

 

    

 

 

    

 

 

  

Gross profit

      29,861        28,833        61,812        52,407   

Operating expenses:

         

Research and development

      4,382        4,909        9,795        8,596   

In-process research and development

      —          92        —          542   

Sales and marketing

      19,291        17,115        37,920        30,519   

General and administrative

      8,938        8,007        18,080        13,567   

Amortization of acquired intangible assets

      554        469        1,084        469   

Transaction related expenses

      —          493        —          3,645   

Restructuring expenses

      —          805        599        1,687   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total operating expenses

      33,165        31,890        67,478        59,025   
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating loss

      (3,304 )      (3,057 )      (5,666 )      (6,618 ) 

Interest and other income (expense), net

      (502 )      (309 )      (756 )      (1,278 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Loss from continuing operations before taxes

      (3,806 )      (3,366 )      (6,422 )      (7,896 ) 

Income tax benefit

      (762 )      (265 )      (1,511 )      (129 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Loss from continuing operations

      (3,044 )      (3,101 )      (4,911 )      (7,767 ) 

Loss from discontinued operations, net of tax

      —          122        —          78   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net loss

    $ (3,044 )    $ (2,979 )    $ (4,911 )    $ (7,689 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net loss per common share:

         

Basic and diluted net loss from continuing operations

    $ (0.03 )    $ (0.04 )    $ (0.06 )    $ (0.11 ) 

Basic and diluted net income from discontinued operations

      —          0.00        —          0.00   
  

 

 

    

 

 

    

 

 

    

 

 

  

Basic and diluted net loss per share

    $ (0.03 )    $ (0.04 )    $ (0.06 )    $ (0.11 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Weighted-average shares - basic and diluted

      88,740        84,675        88,720        69,500   

 

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ALPHATEC HOLDINGS, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(in thousands, except per share amounts - unaudited)

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2011     2010     2011     2010  

Operating loss, as reported

    $ (3,304 )    $ (3,057 )    $ (5,666 )    $ (6,618 ) 

Add back:

         

Depreciation

      3,662        3,234        7,434        5,876   

Amortization of intangible assets

      347        203        652        1,123   

Amortization of acquired intangible assets

      970        838        1,896        838   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total EBITDA

      1,675        1,218        4,316        1,219   

Add back significant items:

         

Stock-based compensation

      734        772        1,448        1,753   

In-process research and development

      —          92        —          542   

Acquisition-related inventory step-up

      321        413        751        413   

Transaction related expenses

      —          493        —          3,645   

Restructuring expenses

      —          805        599        1,687   
  

 

 

    

 

 

    

 

 

    

 

 

  

EBITDA, as adjusted for significant items

    $ 2,730      $ 3,793      $ 7,114      $ 9,259   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net loss, as reported

    $ (3,044 )    $ (2,979 )    $ (4,911 )    $ (7,689 ) 

Add back:

         

In-process research and development

      —          92        —          542   

Acquisition-related inventory step-up

      321        413        751        413   

Amortization of acquired intangible assets

      970        838        1,896        838   

Transaction related expenses

      —          493        —          3,645   

Restructuring expenses

      —          805        599        1,687   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net loss, as adjusted for significant items

    $ (1,753 )    $ (338 )    $ (1,665 )    $ (564 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net loss per common share - basic and diluted

    $ (0.03 )    $ (0.04 )    $ (0.06 )    $ (0.11 ) 

Add back:

         

In-process research and development

      —          0.00        —          0.01   

Acquisition-related inventory step-up

      0.00        0.01        0.01        0.01   

Amortization of acquired intangible assets

      0.01        0.01        0.02        0.01   

Transaction related expenses

      —          0.01        —          0.05   

Restructuring expenses

      —          0.01        0.01        0.02   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net loss per common share - basic and diluted, as adjusted for significant items

    $ (0.02 )    $ 0.00      $ (0.02 )    $ (0.01 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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ALPHATEC HOLDINGS, INC.

RECONCILIATION OF GEOGRAPHIC SEGMENT REVENUES AND GROSS PROFIT

(in thousands, except percentages - unaudited)

 

     Three Months Ended           Impact from  
     June 30,           Foreign  
     2011     2010     % Change     Currency  

Revenues by geographic segment

         

U.S.

    $ 34,539      $ 29,317        17.8 %      0.0 % 

International

      16,323        16,107        1.3 %      13.7 % 
  

 

 

    

 

 

      

Total revenues

    $ 50,862      $ 45,424        12.0 %      4.0 % 
  

 

 

    

 

 

      

Gross profit by geographic segment

         

U.S.

    $ 21,688      $ 20,933       

International

      8,173        7,900       
  

 

 

    

 

 

      

Total gross profit

    $ 29,861      $ 28,833       
  

 

 

    

 

 

      

Gross profit margin by geographic segment

         

U.S.

      62.8 %      71.4 %     

International

      50.1 %      49.0 %     
  

 

 

    

 

 

      

Total gross profit margin

      58.7 %      63.5 %     
  

 

 

    

 

 

      
     Six Months Ended           Impact from  
     June 30,           Foreign  
     2011     2010     % Change     Currency  

Revenues by geographic segment

         

U.S.

    $ 68,399      $ 57,753        18.4 %      0.0 % 

International

      32,183        22,993        40.0 %      10.9 % 
  

 

 

    

 

 

      

Total revenues

    $ 100,582      $ 80,746        24.6 %      3.2 % 
  

 

 

    

 

 

      

Gross profit by geographic segment

         

U.S.

    $ 46,109      $ 40,799       

International

      15,703        11,608       
  

 

 

    

 

 

      

Total gross profit

    $ 61,812      $ 52,407       
  

 

 

    

 

 

      

Gross profit margin by geographic segment

         

U.S.

      67.4 %      70.6 %     

International

      48.8 %      50.5 %     
  

 

 

    

 

 

      

Total gross profit margin

      61.5 %      64.9 %     
  

 

 

    

 

 

      

Footnotes:

1) The impact from foreign currency represents the percentage change in 2011 revenues due to the change in foreign exchange rates for the periods presented.

 

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ALPHATEC HOLDINGS, INC.

PRO FORMA REVENUES BY GEOGRAPHIC SEGMENT

(in thousands, except percentages - unaudited)

 

     Three Months Ended            Impact from  
     June 30,            Foreign  
     2011      2010      % Change     Currency  

Pro Forma Revenues by geographic segment

           

U.S.

    $ 34,539       $ 29,317         17.8 %      0.0 % 

International

      16,323         16,107         1.3 %      13.7 % 
  

 

 

     

 

 

       

Total revenues

    $ 50,862       $ 45,424         12.0 %      4.0 % 
  

 

 

     

 

 

       
     Six Months Ended            Impact from  
     June 30,            Foreign  
     2011      2010      % Change     Currency  

Pro Forma Revenues by geographic segment

           

U.S.

    $ 68,399       $ 60,728         12.6 %      0.0 % 

International

      32,183         31,353         2.6 %      9.2 % 
  

 

 

     

 

 

       

Total revenues

    $ 100,582       $ 92,081         9.2 %      2.8 % 
  

 

 

     

 

 

       

Footnotes:

1) Pro Forma revenues for the periods presented include the results of Scient’x as if the Scient’x acquisition had occurred on January 1, 2010.
2) The impact from foreign currency represents the percentage change in 2011 revenues due to the change in foreign exchange rates for the periods presented.

 

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