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Alphatec Spine Announces First Quarter 2013 Revenue and Financial Results

Alphatec Spine Announces First Quarter 2013 Revenue and Financial Results

CARLSBAD, Calif., April 30, 2013 (GLOBE NEWSWIRE) -- Alphatec Holdings, Inc.
(Nasdaq:ATEC), the parent company of Alphatec Spine, Inc., announced today
financial results for the first quarter of fiscal year 2013, ended March 31,
2013.

"I am pleased to report strong results for Alphatec Spine's first quarter
2013. We are off to a great start to the new year," said Les Cross, Chairman
and CEO of Alphatec Spine. "It is clear that the investments we made into
Alphatec's leadership, innovation, operations and business development
activities in 2012 are paying dividends.

"Revenue growth of more than 4% over the first quarter of last year, or more
than 6% on a constant currency basis, was above market, and we achieved this
excellent result in spite of ongoing spine market challenges.

"Our U.S. business grew almost 2% over the first quarter of 2012, driven by
the Company's acquisition of Phygen.

"Our international business grew 9% over the first quarter of 2012, or
approximately 16% on a constant currency basis. Our subsidiary in Japan
continues to perform very well, but in the first quarter, its growth was
significantly impacted by the weakness of the Japanese Yen versus the U.S.
Dollar.

"We remain excited about our new product pipeline this year. Our Pegasus™
anchored, anterior cervical interbody device, which offers single-step
deployment of the anchor without the need for impaction, has been received
well by surgeons and the cases that have been performed thus far have gone
well.

"Likewise, the initial cases for our recently approved Alphatec Solus®
anterior lumbar interbody fusion device, which provides four points of
fixation from a single deployment step, have gone very well and interest in
the marketplace for this product is growing.

"We are also excited about our newest minimally invasive surgery systems
(MIS), including our ILLICO® Multi-Level System, which expands a surgeon's
opportunity to address longer constructs by leveraging the strength of
Alphatec's ILLICO MIS system.

"On the operations side of our business, we continue to progress with our
lean-practice implementation to streamline processes that should drive further
cost reductions in our manufacturing, supply chain and inventory systems,
strengthening margins and reducing working capital.

"Finally, I would like to thank all Alphatec Spine employees who working hard
to make Alphatec Spine a world class company."

First Quarter 2013 Financial Results

Consolidated net revenues for the first quarter of 2013 were $50.4 million,
representing growth of approximately 4.1 percent compared to $48.5 million
reported for the first quarter of 2012. Excluding the effect of foreign
currency conversion, net revenues increased 6.4 percent during the quarter.

U.S. net revenues for the first quarter of 2013 were $33.1 million,
representing growth of 1.5 percent, compared to $32.6 million reported for
U.S. net revenues in the first quarter of 2012. U.S. net revenues were driven
by the Company's acquisition of Phygen, which contributed $2.0 million in
revenue.

International net revenues for the first quarter of 2013 were $17.4 million,
representing growth of 9.3 percent compared to $15.9 million reported for the
first quarter of 2012. Excluding the effect of foreign currency conversion,
net revenues increased 16.4 percent.

Gross profit and gross margin for the first quarter of 2013 were $32.7 million
and 64.9 percent, respectively, compared to $31.8 million and 65.7 percent,
respectively, for the first quarter of 2012. Gross margin in the first quarter
of 2013 was negatively impacted by increased pricing pressures in the U.S.
spine market and product mix from lower-margin international revenues.
Additionally, gross margin in the first quarter of 2013 was impacted by the
Cross Medical settlement, which continues to reduce quarterly gross profit by
approximately $1.0 million per quarter for the amortization of a licensed
intangible asset. This represents approximately 200 basis points of margin in
the first quarter of 2013.

Total operating expenses for the first quarter of 2013 were $34.1 million, or
67.6 percent of revenues, reflecting an increase of approximately $2.2
million, compared to the first quarter of 2012. Operating expenses for the
first quarter of 2013 included higher legal expenses associated with current
litigation matters of $1.3 million, Phygen-related expenses of $1.2 million,
which were not in the prior year period and approximately $0.6 million
attributable to the new medical device excise tax.

GAAP Net loss for the first quarter of 2013 was $2.6 million or ($0.03) per
share (basic and diluted), compared to a net loss of $1.3 million, or ($0.01)
per share (basic and diluted) for the first quarter of 2012.

Adjusted EBITDA in the first quarter of 2013 was $6.1 million, or 12.1 percent
of revenues, compared to $6.2 million, or 12.8 percent of revenues reported
for the first quarter of 2012. Adjusted EBITDA was reduced by $0.6 million
related to the new medical device excise tax. Adjusted EBITDA represents net
income or loss excluding the effects of interest, taxes, depreciation,
amortization, stock-based compensation, and other non-recurring items, such as
restructuring expenses, IPR&D and transaction-related expenses.

Cash and cash equivalents were $19.3 million at March 31, 2013, compared to
$22.2 million reported at December 31, 2012.

2013 Financial Guidance

The Company expects revenue for 2013 to be in a range between $204 million and
$210 million on a constant currency basis, or approximately 4% to 7% growth
over 2012. The significant devaluation of the Japanese Yen impacted Alphatec
Spine's first quarter revenue by over $1 million, and with the expectation
that the Japanese Yen's exchange rate will not substantially improve in 2013,
the aggregate revenue impact to the remainder of 2013 could potentially be as
high as $4 million. The Company expects Adjusted EBITDA for 2013 to be in a
range of $24 million to $27 million, or approximately 21% to 36% growth over
2012, representing approximately 12% and 13% of expected revenue. As
previously stated, this guidance assumes only modest contributions for
PureGen, all of which were realized in the first quarter of 2013.

Conference Call Information

Alphatec Spine has scheduled a conference call for today, April 30, 2013, at
2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to discuss its first quarter
2013 financial results. The conference call ID is 35408826 and the dial-in
number is (877) 556-5251. 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., a wholly owned subsidiary of Alphatec Holdings, Inc., is
a medical device company that designs, develops, manufactures and markets
physician-inspired products and solutions for the treatment of spinal
disorders associated with trauma, congenital deformities, disease and
degeneration. The Company's mission is to combine innovative surgical
solutions with world-class customer service to improve outcomes and patient
quality of life. The Company and its affiliates market products in the U.S.
and in over 50 countries internationally via a direct sales force and
independent distributors. Additional information can be found at
www.alphatecspine.com.

Non-GAAP Information

Non-GAAP earnings and earnings per share included in this press release are
non-GAAP (generally accepted accounting principles) financial measures that
represents net income (loss) excluding the effects of amortization and other
non-recurring or expense items, such as loss on extinguishment of debt,
restructuring expenses and transaction-related expenses. Management does not
consider these expenses when it makes certain evaluations of the operations of
the Company. Non-GAAP earnings and earnings per share, as defined above, may
not be similar to non-GAAP earnings measures used by other companies and is
not a measurement under GAAP. 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 severance 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. Forward looking statements include references to Alphatec
Spine's 2013 revenue, adjusted EBITDA, and free cash flow projections; the
success of the Company's initiatives from 2012 and 2013 to drive global sales
growth, increase margins and increase operating efficiencies, the ability to
achieve surgeon conversions in connection with the Phygen acquisition and
reductions in the Company's manufacturing costs and operating expenses. The
words "believe," "will," "should," "expect," "intend," "estimate" 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. 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;
the success of the integration and revenue increases due to the Phygen
acquisition and realize the benefits of such transaction; the uncertainty of
success in developing new products or products currently in Alphatec Spine's
pipeline; the uncertainties regarding the ability to successfully license or
acquire new products, and the commercial success of such products;
uncertainties regarding the regulatory status of the Company's PureGen
product, and the ability to keep such product on the market; failure to
achieve acceptance of Alphatec Spine's products by the surgeon community,
including the products discussed in this press release; failure to
successfully implement streamlining activities to create anticipated savings;
failure to successfully begin in-house manufacturing of certain products;
failure to obtain FDA clearance or approval for new products, including the
products discussed in this press release, or unexpected or prolonged delays in
the process; Alphatec Spine's ability to develop and expand its U.S. 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; failure to meet all financial obligations in the Cross Medical
settlement or its credit agreement; 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 its
Annual Report Form 10-K for the year ended December 31, 2012, filed on March
5, 2013 with the Securities and Exchange Commission, as well as other filings
on Form 10-Q and periodic filings on Form 8-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.

ALPHATEC HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands - unaudited)
                                                    
                                                    
                                          March 31,  December 31,
                                          2013       2012
ASSETS                                               
Current assets:                                      
Cash and cash equivalents                 $19,293  $22,241
Accounts receivable, net                  40,711     41,012
Inventories, net                          50,457     49,855
Prepaid expenses and other current assets 5,753      5,953
Deferred income tax assets                2,964     2,991
Total current assets                       119,178    122,052
                                                    
Property and equipment, net                31,310     30,403
Goodwill                                   175,669    180,838
Intangibles, net                           46,227     46,856
Other assets                               1,815      1,978
Total assets                               $374,199 $382,127
                                                    
LIABILITIES AND STOCKHOLDERS' EQUITY                 
Current liabilities:                                 
Accounts payable                          $18,516  $15,237
Accrued expenses                          34,397     38,490
Deferred revenue                          1,313      1,361
Current portion of long-term debt         1,277      1,700
Total current liabilities                  55,503     56,788
                                                    
Total long term liabilities               55,230    55,920
Redeemable preferred stock                23,603    23,603
Stockholders' equity                      239,863   245,816
Total liabilities and stockholders' equity $374,199 $382,127
                                                    

ALPHATEC HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts - unaudited)
                                                      
                                                      
                                            Three Months Ended
                                            March 31,
                                            2013       2012
                                                      
Revenues                                     $50,443  $48,461
Cost of revenues                             17,270    16,263
Amortization of acquired intangible assets   431       379
Total cost of revenues                       17,701     16,642
Gross profit                                 32,742     31,819
                                                      
Operating expenses:                                    
Research and development                     3,682     4,010
Sales and marketing                          18,495    18,536
General and administrative                   11,130     8,825
Amortization of acquired intangible assets   793        574
Total operating expenses                     34,100     31,945
Operating loss                               (1,358)    (126)
Interest and other expense, net              (1,343)    (928)
Loss from continuing operations before taxes (2,701)    (1,054)
Income tax (benefit) provision               (52)      207
Net loss                                     $(2,649) $(1,261)
                                                      
Net loss per common share:                             
Basic and diluted net loss per share         $(0.03)  $(0.01)
                                                      
Weighted-average shares - basic and diluted  95,826     88,938


ALPHATEC HOLDINGS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands, except per share amounts - unaudited)
                                                                  
                                                                  
                                                        Three Months Ended
                                                        March 31,
                                                        2013       2012
                                                                  
Operating loss, as reported                              $(1,358) $(126)
Add back:                                                          
Depreciation                                             3,521     3,456
Amortization of intangible assets                        1,514     1,394
Amortization of acquired intangible assets               1,224     953
Total EBITDA                                             4,901      5,677
                                                                  
Add back significant items:                                        
Stock-based compensation                                 1,184     547
                                                                  
EBITDA, as adjusted for significant items                $6,085   $6,224
                                                                  
                                                                  
Net loss, as reported                                    $(2,649) $(1,261)
Add back:                                                          
Amortization of acquired intangible assets               1,224     953
Amortization of intangible assets                        1,514     1,394
                                                                  
Net loss, as adjusted for significant items              $89      $1,086
                                                                  
                                                                  
Net loss per common share - basic and diluted            $(0.03)  $(0.01)
Add back:                                                          
Amortization of acquired intangible assets               0.01      0.01
Amortization of intangible assets                        0.02      0.02
                                                                  
Net loss per common share - basic and diluted, as        $0.00    $0.01
adjusted for significant items
                                                                  
                                                                  
                                                                  
Weighted-average shares - basic and diluted              95,826     88,938


ALPHATEC HOLDINGS, INC.
RECONCILIATION OF GEOGRAPHIC SEGMENT REVENUES AND GROSS PROFIT
(in thousands, except percentages - unaudited)
                                                              
                                                              
                   Three Months Ended                           % Change
                   March 31,               % Change  % Change    Foreign
                   2013        2012        As         Operations  Currency^1
                                            Reported
                                                              
Revenues by                                                    
geographic segment
U.S.                $33,062   $32,561   1.5%       1.5%        0.0%
International       17,381      15,900      9.3%       16.4%       -7.1%
Total revenues      $50,443   $48,461   4.1%       6.4%        -2.3%
                                                              
Gross profit by                                                
geographic segment
U.S.                $23,051   $22,847                        
International       9,691       8,972                            
Total gross profit  $32,742   $31,819                        
                                                              
Gross profit margin
by geographic                                                  
segment
U.S.                69.7%       70.2%                            
International       55.8%       56.4%                            
Total gross profit  64.9%       65.7%                            
margin
                                                              
                                                              
Footnotes:
1)The impact from foreign currency represents the percentage change in 2013
revenues due to the change in foreign exchange rates for the periods
presented.

CONTACT: Investor/Media Contact:
        
         Mark Francois
         Senior Director, Investor Relations
         Alphatec Spine, Inc.
         (760) 494-6610
         mfrancois@AlphatecSpine.com

Alphatec Spine