ATEC Reports First Quarter 2023 Financial Results

About this update from Alphatec Holdings, Inc.

Total revenue grew 54% to $109 million , including surgical revenue growth of 55% EOS revenue grew to $15 million Adjusted EBITDA margin improved 1,080 basis points year-over-year 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 March 31, 2023 , and recent corporate highlights. First-Quarter 2023 Financial Results Quarter Ended March 31, 2023 Total revenue $109 million GAAP gross margin 65% Non-GAAP gross margin 72% GAAP operating expenses $111 million Non-GAAP operating expenses $93 million GAAP operating loss ($40) million Adjusted EBITDA ($5) million Ending cash balance $117 million Recent Highlights Extended momentum of PTPTM (Prone TransPsoas) procedure, the strongest contributor to Q1 revenue growth; Advanced lateral sophistication with full commercial release of LTPTM (Lateral TransPsoas) procedure; Introduced ATEC AIS (Adolescent Idiopathic Scoliosis) Approach, with adaptable InVictusTM instrumentation designed to streamline and optimize de-rotation; Drove 40% increase in surgical volume and 11% increase in average revenue per procedure; Acquired navigation-enabled robotics platform to enhance precision of ATEC’s procedural strategy. “We continue to execute against our mission to revolutionize the approach to spine surgery,” said Pat Miles , Chairman and Chief Executive Officer. “As many in our industry capitulate, or seek to drive growth through acquired revenues, ATEC is content to be the outlier: methodically applying our 100% spine focus and unmatched know-how to integrate and evolve technologies that improve the predictability and reproducibility of spine care. ATEC's innovation is not only driving rapid adoption today, it will also set new clinical standards for years to come.” Financial Outlook for the Full-Year 2023 The Company continues to expect total revenue to grow 28% to $450 million for the fiscal year ended December 31, 2023 , in line with expectations shared in conjunction with the release of preliminary first-quarter financial results. This includes surgical revenue growth of approximately 30% and $57 million of EOS revenue. The Company continues to expect to achieve non-GAAP adjusted EBITDA break-even for the full-year 2023. 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 in to the webcast, please register via this link . A replay of the webcast will remain available through the Investor Relations Section of ATEC’s Corporate Website for twelve months. In addition, a dial-in replay will be available beginning about two hours after the webcast’s completion through May 11, 2022 . 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. About Alphatec Holdings, Inc. ATEC, through its wholly owned subsidiaries, Alphatec Spine, Inc. , EOS imaging S.A. and SafeOp Surgical, Inc. , is a medical device company dedicated to revolutionizing the approach to spine surgery through clinical distinction. ATEC’s Organic Innovation MachineTM 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; planned product launches and introductions; and the Company’s ability to compel surgeon adoption. 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 first-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; 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. Condensed Consolidated Statements of Operations (in thousands, except per share amounts) Three Months Ended March 31 , 2023 2022 (unaudited) Revenue: Revenue from products and services $ 109,110 $ 70,918 Revenue from international supply agreement — 15 Total revenue 109,110 70,933 Cost of sales 38,685 21,717 Gross profit 70,425 49,216 Operating expenses: Research and development 13,260 9,722 Sales, general and administrative 91,262 69,471 Litigation-related expenses 3,192 7,532 Amortization of acquired intangible assets 2,883 2,230 Transaction-related expenses — 120 Restructuring expenses 175 1,370 Total operating expenses 110,772 90,445 Operating loss (40,347 ) (41,229 ) Interest and other expense, net: Interest expense, net (3,874 ) (1,456 ) Other (expense) income, net 706 (30 ) Total interest and other expense, net (3,168 ) (1,486 ) Net loss before taxes (43,515 ) (42,715 ) Income tax (benefit) provision 14 (99 ) Net loss $ (43,529 ) $ (42,616 ) Net loss per share, basic and diluted $ (0.40 ) $ (0.43 ) Weighted average shares outstanding, basic and diluted 109,751 99,978 Stock-based compensation included in: Cost of sales $ 6,006 $ 256 Research and development 1,317 972 Sales, general and administrative 9,139 8,956 $ 16,462 $ 10,184 ALPHATEC HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) March 31 ,2023 December 31 ,2022 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 116,698 $ 84,696 Accounts receivable, net 62,415 60,060 Inventories 108,242 101,521 Prepaid expenses and other current assets 11,798 9,357 Total current assets 299,153 255,634 Property and equipment, net 109,750 101,952 Right-of-use assets 28,063 28,360 Goodwill 47,924 47,367 Intangible assets, net 81,079 82,781 Other assets 3,724 4,874 Total assets $ 569,693 $ 520,968 LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY Current liabilities: Accounts payable $ 39,070 $ 34,742 Accrued expenses and other current liabilities 69,032 72,382 Contract liabilities 13,938 11,956 Short-term debt 16,068 14,948 Current portion of operating lease liabilities 4,796 4,842 Total current liabilities 142,904 138,870 Total long-term liabilities 461,548 393,162 Redeemable preferred stock 23,603 23,603 Stockholders' (deficit) equity (58,362 ) (34,667 ) Total liabilities and stockholders' (deficit) equity $ 569,693 $ 520,968 Alphatec Holdings, Inc. Reconciliation of Non-GAAP Financial Measures (in thousands) Three Months Ended March 31 , 2023 2022 (unaudited) Gross profit, GAAP $ 70,425 $ 49,216 Add: amortization of intangible assets 220 - Add: stock-based compensation 6,006 256 Add: purchase accounting adjustments on acquisitions 195 - Add: excess and obsolete write-down 2,098 1,706 Non-GAAP gross profit $ 78,944 $ 51,178 Gross margin, GAAP 64.5 % 69.4 % Add: amortization of intangible assets 0.2 % 0.0 % Add: stock-based compensation 5.5 % 0.4 % Add: purchase accounting adjustments on acquisitions 0.2 % 0.0 % Add: excess and obsolete write-down 1.9 % 2.4 % Non-GAAP gross margin 72.3 % 72.1 % Three Months Ended March 31 , 2023 2022 (unaudited) Operating expenses, GAAP $ 110,772 $ 90,445 Adjustments: Stock-based compensation (10,456 ) (9,928 ) Litigation-related expenses (3,192 ) (7,532 ) Amortization of intangible assets (2,883 ) (2,230 ) Transaction-related expenses - (120 ) Restructuring expenses (175 ) (1,370 ) Other non-recurring expenses1 (1,349 ) - Non-GAAP operating expenses $ 92,717 $ 69,265 Three Months Ended March 31 , 2023 2022 (unaudited) Operating loss, GAAP $ (40,347 ) $ (41,229 ) Depreciation 8,589 7,085 Amortization of intangible assets 3,103 2,230 EBITDA (28,655 ) (31,914 ) Add back significant items: Stock-based compensation 16,462 10,184 Purchase accounting adjustments on acquisitions 195 - Excess & obsolete write-down 2,098 1,706 Litigation-related expenses 3,192 7,532 Transaction-related expenses - 120 Restructuring expenses 175 1,370 Other non-recurring expenses1 1,349 - Adjusted EBITDA $ (5,184 ) $ (11,002 ) 1 Non-recurring consulting fees associated with the implementation of our state tax-planning strategy View source version on businesswire.com : https://www.businesswire.com/news/home/20230504005511/en/ Investor/Media Contact: Tina Jacobsen , CFA Investor Relations (760) 494-6790 [email protected] Company Contact: J. Todd Koning Chief Financial Officer [email protected] Source: Alphatec Holdings, Inc.

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