CARLSBAD, Calif., Aug. 04, 2015 (GLOBE NEWSWIRE) — Alphatec Holdings, Inc. (Nasdaq:ATEC), the parent company of Alphatec Spine, Inc., a global provider of spinal fusion technologies, announced today financial results for the second quarter ended June 30, 2015.
- Second quarter consolidated net revenues of $46.6 million.
- Second quarter adjusted EBITDA of $3.8 million, 8% of revenue.
- Operational transformation initiative underway with a goal to significantly improve underlying cost structure over next 2-3 years.
Highlights of the Second Quarter 2015 and Recent Activities
Positive Progress Made Towards Alphatec’s Corporate Strategic Objectives
Financial
- Consolidated revenues of $46.6 million as reported, or $50.2 million in constant currency.
- Consolidated revenues were impacted by $3.6 million of foreign currency headwinds.
- International revenues grew 23% in constant currency over the second quarter of 2014 and represent 42% of global revenues as reported.
Strategic Pillar #1: “Go-to-Market” Product Portfolio and R&D Pipeline
- Established global, exclusive development and distribution agreement with Haider Biologics for Alphatec Neocore™ Osteoconductive Matrix, a synthetic scaffold used in bone regeneration, as well as future products. This contract provides unique opportunity for Alphatec to expand the Company’s biologics portfolio globally, which will help support our second strategic pillar of commercial expansion.
- Arsenal™ Degen and Arsenal CBX™ launches well underway in the U.S. and we continue to see positive adoption among new and existing surgeon customers.
Strategic Pillar #2: Expand Global Commercial Participation
- U.S. sales force expansion into 38 of the 40 unrepresented metropolitan markets complete as of August 3, 2015. Expansion provides a new commercial presence in large geographic markets for Alphatec and we believe this should accelerate topline expansion in the future.
- Initial European Union sales distribution expansion 100% complete. Work is now underway to broaden global expansion into other international markets, providing additional opportunities for future topline improvement.
Strategic Pillar #3: Transform Manufacturing and Distribution Operations
- Operational transformation underway to significantly improve our underlying cost structure and balance sheet by strategically outsourcing manufacturing and distribution – estimating completion by end of 2015.
“Partnering with outsourced manufacturing and distribution suppliers will allow us to repurpose cash into higher value activities such as integrated design, faster product delivery cycle-times, and efficient distribution of our products and instruments,” said Mike O’Neill, Chief Financial Officer of Alphatec Spine. “We are confident in this approach as we’ve been successfully using these partners to manufacture both our implants and instruments for several years, including Arsenal Degen and Arsenal CBX. Expanding our relationship through this outsourcing initiative will allow us to reach our operational transformation goals quickly and efficiently.”
“During the last twelve months, Alphatec has embarked on an overall company transformation to accelerate global growth and increase profitability,” said Jim Corbett, President and Chief Executive Officer of Alphatec Spine. “While our Q2 performance reflects the significant work we still have ahead of us, we have established a solid foundation for our strategic plans. I, together with the senior leadership team, am confident that we now have both the strategy and the structure to compete more effectively and broadly in the spinal fusion market.”
Quarter Ended June 30, 2015
Consolidated net revenues for the second quarter of 2015 were $46.6 million as reported, down 12.3% compared to $53.2 million reported for the second quarter of 2014, or down 5.6% on a constant currency basis. Consolidated revenues were impacted by $3.6 million in the second quarter due to declines in the valuation of the Japanese Yen and Euro against the U.S. Dollar.
U.S. net revenues for the second quarter of 2015 were $27.2 million, down 21.1%, compared to $34.5 million reported for the second quarter of 2014.
International net revenues for the second quarter of 2015 were $19.4 million, up 4.0% compared to $18.6 million for the second quarter of 2014, or up 23.0% on a constant currency basis.
Consolidated gross profit and gross margin for the second quarter of 2015 were $27.5 million and 59.0%, respectively, compared to $36.1 million and 67.9%, respectively, for the second quarter of 2014.
Gross profit declined 23.8% from the second quarter of 2015 primarily as a result of lower U.S. sales volume, foreign currency translation effects and global geographic mix.
Gross margin declined 8.9 percentage points compared to prior year as a result of unfavorable variation in regional and product mix, where international margins are typically lower, as well as write offs related to manufacturing and product lifecycle management.
Total operating expenses for the second quarter of 2015 were $30.4 million, reflecting a decrease of approximately $3.9 million compared to the second quarter of 2014, and down 4.5% sequentially. This decrease is primarily attributable to lower commission expenses as a result of lower U.S. sales volume, as well as savings in marketing, R&D and G&A functions.
GAAP net loss for the second quarter of 2015 was $3.9 million or ($0.04) per share (basic and diluted), compared to a net loss of $2.9 million, or ($0.03) per share (basic and diluted) for the second quarter of 2014.
Adjusted EBITDA in the second quarter of 2015 was $3.8 million, or 8.0% of revenues, compared to $7.7 million, or 14.4% of revenues reported in the second quarter of 2014. Second quarter 2015 adjusted EBITDA represents net income excluding effects of interest, taxes, depreciation, amortization and stock-based compensation.
Cash and cash equivalents were $8.9 million at June 30, 2015, compared to $11.4 million reported at March 31, 2015. Additionally, the Company has reported $4.6 million of restricted cash, which must be used for future payment obligations associated with the Orthotec settlement.
2015 Financial Guidance
“The first half of this year we have been making significant changes to our business and investing in transforming our commercial model, which we believe will position us for a stronger second half of 2015 and 2016,” said Mike O’Neill, Chief Financial Officer. “Based on our first half results, as well as our expectations for full ramp up of our commercial expansion, we are revising our full year guidance for both revenue and adjusted EBITDA. While our corporate transformation is taking us longer than we anticipated, we remain confident in our plans and the entire Alphatec team continues to execute against each of our strategic pillars.”
The Company is adjusting full year 2015 constant currency revenue guidance to -2.5% to 1.3% versus 2014, which represents a range of revenue in constant currency of $202 million to $210 million. Additionally, the Company is revising guidance expectations for annual adjusted EBITDA to $22 millionto $26 million in 2015.
Conference Call
Alphatec Spine will webcast its Quarterly Update Call today at 5:00 p.m. EDT / 2:00 p.m. PDT. Jim Corbett, President and CEO of Alphatec Spine, will lead the call. During the call the Company plans to provide further details underlying its second quarter 2015 financial results.
To access the webcast, please log on to www.alphatecspine.com approximately fifteen minutes prior to the call to register, download and install any necessary audio software. For those without access to the internet, the live call may be accessed by phone by calling toll-free (877) 556-5251 (U.S. / Canada) or (720) 545-0036 (international), participant passcode number 89016351. A replay of the call will also be available on the investor relations section of Alphatec Spine’s website for at least 30 days.
Non-GAAP Information
Alphatec Spine reports certain non-GAAP financial measures such as non-GAAP earnings and earnings per share, adjusted for effects of amortization and other non-recurring or expense items, such as loss on extinguishment of debt, and restructuring expenses. 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, in process research and development (IPR&D) expenses and other non-recurring income or expense items, such as severance expenses, litigation expenses, damages associated with ongoing litigation and transaction-related expenses. 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. For completeness, management uses non-GAAP adjusted EBITDA in conjunction with GAAP earnings and earnings per common share measures. These non-GAAP financial measures 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 measure.
About Alphatec Spine
Alphatec Spine, Inc., a wholly owned subsidiary of Alphatec Holdings, Inc., is a global medical device company that designs, develops, manufactures and markets spinal fusion technology products and solutions for the treatment of spinal disorders associated with disease and degeneration, congenital deformities and trauma. The Company’s mission is to improve lives by delivering advancements in spinal fusion technologies. The Company and its affiliates market products in the U.S. and internationally via a direct sales force and independent distributors.
Additional information can be found at www.alphatecspine.com.
