ATEC Reports Fourth Quarter and Full Year 2019 Financial Results
And 35% Year-Over-Year in the Fourth Quarter
Fourth Quarter and Full Year 2019 Financial Highlights
Quarter Ended December 31, 2019 |
Year Ended |
||
Total revenues | |||
71.1% | 71.4% | ||
Operating expenses | |||
Non-GAAP operating expenses | |||
Operating loss | |||
Non-GAAP Adjusted EBITDA | |||
2019 and Recent Commercial and Product Highlights
- Increased the percent of revenue driven by new products to 48% in the fourth quarter of 2019 and 37% for the full year 2019
- Advanced clinical distinction with 12 new product launches
- Grew revenue per case by over 20% year-over-year in the fourth quarter 2019 and by 17% year-over-year in the full year 2019
- Continued to make significant progress transforming the sales network, generating revenue growth from strategic distribution partners of over 40% compared to fourth quarter 2018
- Launched the SafeOp Neural Monitoring System, the first reflection of the AlphaInformatiX platform
- Received FDA 510(k) clearance for 6 products
- Announced an agreement to acquire
EOS Imaging, S.A. (“EOS”), adding unprecedented spine imaging and anatomical modeling proficiencies to the AlphaInformatiX platform - Secured a new capital commitment of up to
$160 million to refinance existing debt and fund the proposed acquisition of EOS
“2019 was a strong year of execution,” said
“We are building on that momentum in 2020,” Miles added. “With our recently announced agreement to acquire EOS imaging, we are significantly enhancing our ability to inform spine surgery, improve clinical decisions and drive better patient-specific outcomes. The future is exceptionally bright for spine’s Organic Innovation Machine!”
Comparison of 2019 Financial Results to 2018
Total operating expenses for the fourth quarter 2019 were
On a non-GAAP basis, excluding restructuring charges, stock-based compensation, transaction-related expenses, litigation-related expenses, fair value adjustments, and a 2018 gain on settlement, total operating expenses in the fourth quarter 2019 increased to
GAAP Operating loss for the fourth quarter 2019 was
Non-GAAP Adjusted EBITDA, which excludes stock-based compensation, fair value adjustments, litigation-related expenses, restructuring, transaction-related expenses, non-cash excess and obsolescence charges and a 2018 gain on settlement, was a loss of
For more detailed information on non-GAAP operating expenses, non-GAAP adjusted operating loss and non-GAAP adjusted EBITDA, please refer to the table, “Alphatec Holdings, Inc. Reconciliation of Non-GAAP Financial Measures,” that follows.
Current and long-term debt includes
Cash and cash equivalents were
2020 Financial Outlook
ATEC expects total 2020 revenue between
Investor Conference Call
Non-GAAP Financial Information
To supplement the Company’s financial statements presented in accordance with
About
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 or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors. Forward-looking statements include the references to the Company’s 2020 revenue and growth outlook, planned commercial launches and product introductions, the Company’s strategy in significantly repositioning the ATEC brand, turning the Company into a growth organization and creating future market disruption, its ability to finance future operations, statements about the timing of the anticipated EOS acquisition, when and whether the anticipated EOS acquisition ultimately will close, the potential benefits and synergies of the anticipated acquisition (including the expected impact on future financial and operating results). The 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: uncertainty of success in developing new products or products currently in the pipeline; uncertainties in the Company’s ability to execute upon its strategic operating plan; uncertainties regarding the ability to successfully license or acquire new products, and the commercial success of such products; failure to achieve acceptance of products by the surgeon community; failure to obtain FDA or other regulatory clearance or approval for new products, or unexpected or prolonged delays in the process; continuation of favorable third party reimbursement for procedures performed; unanticipated expenses or liabilities or other adverse events affecting cash flow or the Company’s ability to successfully control its costs or achieve profitability; uncertainty of additional funding; the Company’s ability to compete with other products or emerging new technologies; product liability exposure; an unsuccessful outcome in any litigation in which the Company is a defendant; patent infringement claims; the Company’s ability to meet its financial obligations under its credit agreements and the OrthoTec LLC settlement agreement; uncertainties as to the timing and the closing of the EOS acquisition; uncertainties as to the percentage of EOS’s securityholders tendering their shares; the ability to retain and hire key EOS personnel, maintain relationships with their customers and suppliers, and maintain their operating results and business generally; the risk that the businesses will not be integrated successfully. The words “believe,” “will,” “should,” “expect,” “intend,” “estimate,” “look forward” and “anticipate,” variations of such words and similar expressions identify forward-looking statements, but their absence does not mean that a statement is not a forward-looking statement. 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.
Investor/Media Contact:
Investor Relations
(760) 494-6790
ir@atecspine.com
Company Contact:
Chief Financial Officer
ir@atecspine.com
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(unaudited) | (unaudited) | ||||||||||||||
Revenues: | |||||||||||||||
Revenue from |
$ | 31,143 | $ | 23,050 | $ | 108,242 | $ | 83,656 | |||||||
Revenue from international supply agreement | 1,209 | 2,293 | 5,185 | 8,038 | |||||||||||
Total revenues | 32,352 | 25,343 | 113,427 | 91,694 | |||||||||||
Cost of revenues | 10,145 | 8,771 | 35,833 | 28,457 | |||||||||||
Gross profit | 22,207 | 16,572 | 77,594 | 63,237 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 3,436 | 2,964 | 13,849 | 9,853 | |||||||||||
Sales, general and administrative | 28,976 | 18,949 | 101,714 | 72,640 | |||||||||||
Litigation-related expenses | 4,122 | 1,540 | 8,549 | 5,683 | |||||||||||
Amortization of intangible assets | 172 | 187 | 698 | 738 | |||||||||||
Transaction-related expenses | — | 4 | — | 1,550 | |||||||||||
Gain on settlement | — | — | — | (6,168 | ) | ||||||||||
Restructuring expenses | — | 623 | 60 | 1,381 | |||||||||||
Total operating expenses | 36,706 | 24,267 | 124,870 | 85,677 | |||||||||||
Operating loss | (14,499 | ) | (7,695 | ) | (47,276 | ) | (22,440 | ) | |||||||
Total other expenses, net | (2,899 | ) | (2,546 | ) | (9,865 | ) | (7,729 | ) | |||||||
Loss from continuing operations before taxes | (17,398 | ) | (10,241 | ) | (57,141 | ) | (30,169 | ) | |||||||
Income tax (benefit) provision | (361 | ) | 336 | (239 | ) | (1,361 | ) | ||||||||
Loss from continuing operations | (17,037 | ) | (10,577 | ) | (56,902 | ) | (28,808 | ) | |||||||
Loss from discontinued operations | 6 | (51 | ) | (100 | ) | (167 | ) | ||||||||
Net loss | $ | (17,031 | ) | $ | (10,628 | ) | $ | (57,002 | ) | $ | (28,975 | ) | |||
Recognition of beneficial conversion feature - Series B Preferred Stock | - | - | - | (13,488 | ) | ||||||||||
Net loss attributable to common shareholders | $ | (17,031 | ) | $ | (10,628 | ) | $ | (57,002 | ) | $ | (42,463 | ) | |||
Net loss per share, basic and diluted: | |||||||||||||||
Continuing operations | $ | (0.28 | ) | $ | (0.24 | ) | $ | (1.09 | ) | $ | (0.82 | ) | |||
Discontinued operations | — | — | — | — | |||||||||||
Net loss per share, basic and diluted | $ | (0.28 | ) | $ | (0.25 | ) | $ | (1.09 | ) | $ | (1.20 | ) | |||
Shares used in calculating basic and diluted net loss per share | 61,139 | 43,201 | 52,234 | 35,315 | |||||||||||
Stock-based compensation included in: | |||||||||||||||
Cost of revenue | $ | 33 | $ | 22 | $ | 146 | $ | 73 | |||||||
Research and development | 209 | 222 | 752 | 351 | |||||||||||
Sales, general and administrative | 3,148 | 1,618 | 10,058 | 4,880 | |||||||||||
$ | 3,390 | $ | 1,862 | $ | 10,956 | $ | 5,304 | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(in thousands) | |||||||
2019 |
2018 |
||||||
(unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash | $ | 47,113 | $ | 29,054 | |||
Accounts receivable, net | 16,150 | 15,095 | |||||
Inventories, net | 34,854 | 28,765 | |||||
Prepaid expenses and other current assets | 9,880 | 2,380 | |||||
Current assets of discontinued operations | 321 | 242 | |||||
Total current assets | 108,318 | 75,536 | |||||
Property and equipment, net | 19,722 | 13,235 | |||||
Right-of-use asset | 1,860 | - | |||||
13,897 | 13,897 | ||||||
Intangibles, net | 25,605 | 26,408 | |||||
Other assets | 493 | 347 | |||||
Noncurrent assets of discontinued operations | 53 | 54 | |||||
Total assets | $ | 169,948 | $ | 129,477 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 7,772 | $ | 4,399 | |||
Accrued expenses | 26,416 | 22,316 | |||||
Current portion of long-term debt | 489 | 3,276 | |||||
Current portion of lease liability | 1,314 | - | |||||
Current liabilities of discontinued operations | 399 | 621 | |||||
Total current liabilities | 36,390 | 30,612 | |||||
Total long term liabilities | 66,324 | 57,688 | |||||
Redeemable preferred stock | 23,603 | 23,603 | |||||
Stockholders' equity | 43,631 | 17,574 | |||||
Total liabilities and stockholders' equity | $ | 169,948 | $ | 129,477 | |||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | |||||||||||||||
(in thousands) | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(unaudited) | (unaudited) | ||||||||||||||
Operating expenses | 36,706 | 24,267 | 124,870 | 85,677 | |||||||||||
Adjustments: | |||||||||||||||
Stock-based compensation | (3,357 | ) | (1,840 | ) | (10,810 | ) | (5,231 | ) | |||||||
Contingent consideration fair value adjustment | - | (200 | ) | (289 | ) | (846 | ) | ||||||||
Litigation-related expenses | (4,122 | ) | (1,540 | ) | (8,549 | ) | (5,683 | ) | |||||||
Restructuring | - | (623 | ) | (60 | ) | (1,381 | ) | ||||||||
Transaction-related expenses | - | (4 | ) | - | (1,550 | ) | |||||||||
Gain on settlement | - | - | - | 6,168 | |||||||||||
Non-GAAP operating expenses | $ | 29,227 | $ | 20,060 | $ | 105,162 | $ | 77,154 | |||||||
Three Months Ended | Year Ended | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(unaudited) | (unaudited) | ||||||||||||||
Operating loss, as reported | $ | (14,499 | ) | $ | (7,695 | ) | $ | (47,276 | ) | $ | (22,440 | ) | |||
Add back significant items: | |||||||||||||||
Stock-based compensation | 3,390 | 1,862 | 10,956 | 5,304 | |||||||||||
Contingent consideration fair value adjustment | - | 200 | 289 | 846 | |||||||||||
Litigation-related expenses | 4,122 | 1,540 | 8,549 | 5,683 | |||||||||||
Restructuring | - | 623 | 60 | 1,381 | |||||||||||
Transaction-related expenses | - | 4 | - | 1,550 | |||||||||||
Excess & obsolete charges | 2,173 | 1,717 | 8,624 | 3,733 | |||||||||||
Gain on settlement | - | - | - | (6,168 | ) | ||||||||||
Adjusted operating loss | (4,814 | ) | (1,749 | ) | (18,798 | ) | (10,111 | ) | |||||||
Operating loss, as reported | $ | (14,499 | ) | $ | (7,695 | ) | $ | (47,276 | ) | $ | (22,440 | ) | |||
Depreciation | 1,947 | 1,597 | 6,775 | 6,051 | |||||||||||
Amortization of intangible assets | 277 | 187 | 803 | 738 | |||||||||||
EBITDA | (12,275 | ) | (5,911 | ) | (39,698 | ) | (15,651 | ) | |||||||
Add back significant items: | |||||||||||||||
Stock-based compensation | 3,390 | 1,862 | 10,956 | 5,304 | |||||||||||
Contingent consideration fair value adjustment | - | 200 | 289 | 846 | |||||||||||
Litigation-related expenses | 4,122 | 1,540 | 8,549 | 5,683 | |||||||||||
Restructuring | - | 623 | 60 | 1,381 | |||||||||||
Transaction-related expenses | - | 4 | - | 1,550 | |||||||||||
Excess & obsolete charges | 2,173 | 1,717 | 8,624 | 3,733 | |||||||||||
Gain on settlement | - | - | - | (6,168 | ) | ||||||||||
Adjusted EBITDA | $ | (2,590 | ) | $ | 35 | $ | (11,220 | ) | $ | (3,322 | ) | ||||
RECONCILIATION OF GEOGRAPHIC SEGMENT REVENUES AND GROSS PROFIT |
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(in thousands, except percentages) |
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Three Months Ended | Year Ended | |||||||||||||||||
% Change | ||||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||
Revenues by source | (unaudited) | |||||||||||||||||
Revenue from |
$ | 31,143 | $ | 23,050 | $ | 108,242 | $ | 83,656 | 29.4 | % | ||||||||
Revenue from international supply agreement | 1,209 | 2,293 | 5,185 | 8,038 | (35.5 | %) | ||||||||||||
Total revenues | $ | 32,352 | $ | 25,343 | $ | 113,427 | $ | 91,694 | 23.7 | % | ||||||||
Gross profit by source | ||||||||||||||||||
Revenue from |
$ | 22,148 | $ | 16,510 | $ | 77,235 | $ | 62,740 | ||||||||||
Revenue from international supply agreement | 59 | 62 | 359 | 497 | ||||||||||||||
Total gross profit | $ | 22,207 | $ | 16,572 | $ | 77,594 | $ | 63,237 | ||||||||||
Gross profit margin by source | ||||||||||||||||||
Revenue from |
71.1 | % | 71.6 | % | 71.4 | % | 75.0 | % | ||||||||||
Revenue from international supply agreement | 4.9 | % | 2.7 | % | 6.9 | % | 6.2 | % | ||||||||||
Total gross profit margin | 68.6 | % | 65.4 | % | 68.4 | % | 69.0 | % | ||||||||||
RECONCILIATION OF GAAP TO NON-GAAP GROSS PROFIT AND GROSS MARGIN FROM |
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(in thousands, except percentages) |
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Three Months Ended | Year Ended | |||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||
GAAP-based gross profit from |
$ | 22,148 | $ | 16,510 | $ | 77,235 | $ | 62,740 | ||||||||||
Add: non-cash excess and obsolete charges | 2,173 | 1,717 | 8,624 | 3,733 | ||||||||||||||
Non-GAAP gross profit from |
$ | 24,321 | $ | 18,227 | $ | 85,859 | $ | 66,473 | ||||||||||
GAAP-based gross margin from |
71.1 | % | 71.6 | % | 71.4 | % | 75.0 | % | ||||||||||
Add: non-cash excess and obsolete charges | 7.0 | % | 7.4 | % | 8.0 | % | 4.5 | % | ||||||||||
Non-GAAP gross margin from |
78.1 | % | 79.1 | % | 79.3 | % | 79.5 | % | ||||||||||
Source: Alphatec Holdings, Inc.