Alphatec Spine Announces Second Quarter 2013 Revenue and Financial Results

Alphatec Spine Announces Second Quarter 2013 Revenue and Financial Results

CARLSBAD, Calif., Aug. 6, 2013 (GLOBE NEWSWIRE) -- Alphatec Holdings, Inc.
(Nasdaq:ATEC), the parent company of Alphatec Spine, Inc., announced today
financial results for the second quarter of fiscal year 2013, ended June 30,
2013.

Second Quarter 2013 Highlights

  *Total revenue of $51.0 million; up 5.8% as reported from Q212, or 8.8% on
    a constant currency basis
    
  *International revenue of $18.5 million; up 20.7% as reported from Q212, or
    30.2% on a constant currency basis
    
  *U.S. revenue of $32.5 million; down 1.2% from Q212 due to the loss of
    PureGen® and ongoing price declines
    
  *Implant unit sales to U.S. hospitals up 10.2% from Q212 due to growing
    physician adoption
    
  *Full launch of Alphatec Solus® and Pegasus™ expected to strengthen U.S.
    revenue in H2 2013

"Our second quarter 2013 results reflect another strong revenue quarter for
Alphatec Spine. With the first six months of 2013 completed and revenue of
approximately $101.5 million, we are on track to achieve our 2013 revenue
guidance," said Les Cross, Chairman and CEO of Alphatec Spine.

"Our international business was particularly strong with solid growth in each
of Europe, Asia/Pacific, Latin America, the Middle East/Africa and Japan,
despite significant currency headwinds from the Japanese Yen. Excluding the
impact of foreign currency conversion, international revenue was a new record
for the Company. We look forward to receiving key product registration
approvals for Alphatec-branded products in Brazil, China and certain Asia
Pacific geographies in the second half of this year. Our international
business represented over 36% of total revenues in the second quarter.

"Essentially flat year-over-year growth in our U.S. business reflects the
full-quarter loss of our biologic product, PureGen, ongoing pricing pressures,
which remain a mid-single digit headwind in the U.S., and a planned reduction
in business with certain physician-owned stocking distributors. Combined,
these three impacts offset strong implant unit sales growth in our core U.S.
hospital channel for Alphatec products. As we look to the second half of 2013,
we anticipate full-market launches of two new interbody devices, Alphatec
Solus, which is used in anterior lumbar fusion procedures, and Pegasus, which
is used in anterior cervical fusion procedures. We are also pleased with the
performance of our minimally invasive surgery products, including our ILLICO
Multi-Level System, which is designed to be used in longer lumbar constructs.

"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.

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

Second Quarter 2013 Financial Results

Consolidated net revenues for the second quarter of 2013 were $51.0 million,
representing growth of approximately 5.8 percent compared to $48.2 million
reported for the second quarter of 2012. Excluding the effect of foreign
currency conversion, net revenues increased 8.8 percent during the quarter.

U.S. net revenues for the second quarter of 2013 were $32.5 million, a
reduction of 1.2 percent, compared to $32.9 million reported for U.S. net
revenues in the second quarter of 2012.

International net revenues for the second quarter of 2013 were $18.5 million,
representing growth of 20.7 percent compared to $15.3 million reported for the
second quarter of 2012. Excluding the effect of foreign currency conversion,
international net revenues increased 30.2 percent.

Gross profit and gross margin for the second quarter of 2013 were $32.1
million and 62.9 percent, respectively, compared to $30.2 million and 62.6
percent, respectively, for the second quarter of 2012. Gross margin in the
second quarter of 2013 was negatively impacted by regional revenue mix of a
larger percentage of sales from lower-margin international revenues and from
ongoing pricing pressures in the U.S. spine market. Additionally, gross margin
in the second 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 each of the first and
second quarters of 2013.

Total operating expenses for the second quarter of 2013 were $35.0 million, or
68.6 percent of revenues, reflecting an increase of approximately $1.0
million, compared to the second quarter of 2012. Operating expenses for the
second quarter of 2013 included higher R&D expenses, legal expenses associated
with current litigation matters, and higher amortization and non-recurring
expenses related to the Phygen acquisition.

GAAP Net loss for the second quarter of 2013 was $4.7 million or ($0.05) per
share (basic and diluted), compared to a net loss of $6.4 million, or ($0.07)
per share (basic and diluted) for the second quarter of 2012.

Adjusted EBITDA in the second quarter of 2013 was $4.9 million, or 9.6 percent
of revenues, compared to $2.7 million, or 5.7 percent of revenues reported for
the second quarter of 2012. 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 $12.9 million at June 30, 2013, compared to
$22.2 million reported at December 31, 2012 and has been driven by cash
payments for the Phygen acquisition and ongoing quarterly payments to Cross
Medical.

2013 Financial Guidance

The Company continues to expect 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 second quarter revenue by over $1.6 million, and with the
expectation that the Japanese Yen's exchange rate will not substantially
improve in 2013, the aggregate revenue impact to the second half of 2013 could
potentially be as high as $3 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, August 6, 2013, at
2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to discuss its second quarter
2013 financial results. The conference call ID is 20625218 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 expensesand 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 projections; the success of the
Company's initiative to drive global sales growth, increase margins and
increase operating efficiencies, the ability to achieve benefits 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 Alphatec Solus, Pegasus and Illico Multi-Level systems 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 or international regulatory approvals 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
4, 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)
                                                    
                                          June 30,   December 31,
                                          2013       2012
ASSETS                                               
Current assets:                                      
Cash and cash equivalents                 $12,948  $22,241
Accounts receivable, net                  41,031     41,012
Inventories, net                          50,614     49,855
Prepaid expenses and other current assets 5,619      5,953
Deferred income tax assets                2,835     2,991
Total current assets                       113,047    122,052
                                                    
Property and equipment, net                30,471     30,403
Goodwill                                   177,832    180,838
Intangibles, net                           43,611     46,856
Other assets                               1,710      1,978
Total assets                               $366,671 $382,127
                                                    
LIABILITIES AND STOCKHOLDERS' EQUITY                 
Current liabilities:                                 
Accounts payable                          $18,329  $15,237
Accrued expenses                          29,597     38,490
Deferred revenue                          1,176      1,361
Current portion of long-term debt         709        1,700
Total current liabilities                  49,811     56,788
                                                    
Total long term liabilities               55,375    55,920
Redeemable preferred stock                23,603    23,603
Stockholders' equity                      237,882   245,816
Total liabilities and stockholders' equity $366,671 $382,127

                                                                
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,
                                  2013       2012       2013       2012
                                                                
Revenues                           $51,020  $48,235  $101,463 $96,696
Cost of revenues                   18,501    17,666    35,771    33,929
Amortization of acquired           426       373       857       752
intangible assets
Total cost of revenues            18,927     18,039     36,628     34,681
Gross profit                       32,093     30,196     64,835     62,015
                                                                
Operating expenses:                                              
Research and development          3,666     3,777     7,348     7,787
Sales and marketing               19,160    19,529    37,655    38,065
General and administrative        11,445     10,132     22,575    18,957
Amortization of acquired          721        509        1,514     1,083
intangible assets
Total operating expenses          34,992     33,947     69,092     65,892
Operating loss                     (2,899)    (3,751)    (4,257)    (3,877)
Interest and other income         (1,327)    (3,551)    (2,670)    (4,479)
(expense), net
Loss from continuing operations    (4,226)    (7,302)    (6,927)    (8,356)
before taxes
Income tax provision (benefit)    435       (928)     383       (721)
Net loss                           $(4,661) $(6,374) $(7,310) $(7,635)
                                                                
                                                                
Net loss per common share:                                       
Basic and diluted net loss per    $(0.05)  $(0.07)  $(0.08)  $(0.09)
share
                                                                
Weighted-average shares - basic    95,926     89,218     95,876     89,078
and diluted

                                                                
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,
                                  2013       2012       2013       2012
                                                                
Operating loss, as reported        $(2,899) $(3,751) $(4,257) $(3,877)
Add back:                                                        
Depreciation                       3,654     3,539     7,175     6,995
Amortization of intangible assets  1,529     1,399     3,043     2,793
Amortization of acquired           1,147     882       2,371     1,835
intangible assets
Total EBITDA                       3,431      2,069      8,332      7,746
                                                                
Add back significant items:                                      
Stock-based compensation           795       663       1,979     1,210
Restructuring and other charges    655       --        655       --
                                                                
EBITDA, as adjusted for            $4,881   $2,732   $10,966  $8,956
significant items
                                                                
                                                                
Net loss, as reported              $(4,661) $(6,374) $(7,310) $(7,635)
Add back:                                                        
Amortization of acquired           1,147     882       2,371     1,835
intangible assets
Amortization of intangible assets  1,529     1,399     3,043     2,793
Loss on extinguishment of debt     --       2,911     --       2,911
Restructuring and other charges    655       --       655       --
                                                                
Net loss, as adjusted for          $(1,330) $(1,182) $(1,241) $(96)
significant items
                                                                
                                                                
Net loss per common share - basic  $(0.05)  $(0.07)  $(0.08)  $(0.09)
and diluted
Add back:                                                        
Amortization of acquired           0.01      0.01      0.02      0.02
intangible assets
Amortization of intangible assets  0.02      0.02      0.03      0.03
Loss on extinguishment of debt     --       0.03      --       0.04
Transaction related expense        0.01      --       0.01      --
                                                                
Net loss per common share - basic
and diluted, as adjusted for       $(0.01)  $(0.01)  $(0.01)  $(0.00)
significant items

                                                                
ALPHATEC HOLDINGS, INC.
RECONCILIATION OF GEOGRAPHIC SEGMENT REVENUES AND GROSS PROFIT
(in thousands, except percentages - unaudited)
                                                                
                   Three Months Ended                             % Change
                   June 30,                 % Change   % Change     Foreign
                   2013         2012        As         Operations   Currency
                                             Reported
                                                                
Revenues by                                                      
geographic segment
U.S.                $32,491    $32,888   -1.2%      -1.2%        0.0%
International       18,529       15,347      20.7%      30.2%        -9.5%
Total revenues      $51,020    $48,235   5.8%       8.8%         -3.0%
                                                                
Gross profit by                                                  
geographic segment
U.S.                $21,973    $22,577                         
International       10,120       7,619                             
Total gross profit  $32,093    $30,196                         
                                                                
Gross profit margin
by geographic                                                    
segment
U.S.                67.6%        68.6%                             
International       54.6%        49.6%                             
Total gross profit  62.9%        62.6%                             
margin
                                                                
                                                                
                                                                
                   Six Months Ended                               % Change
                   June 30,                % Change   % Change     Foreign
                   2013         2012        As         Operations   Currency
                                             Reported
                                                                
Revenues by                                                      
geographic segment
U.S.                $65,553    $65,449   0.2%       0.2%         0.0%
International       35,910       31,247      14.9%      23.8%        -8.8%
Total revenues      $101,463   $96,696   4.9%       7.8%         -2.9%
                                                                
Gross profit by                                                  
geographic segment
U.S.                $45,024    $45,424                         
International       19,811       16,591                            
Total gross profit  $64,835    $62,015                         
                                                                
Gross profit margin
by geographic                                                    
segment
U.S.                68.7%        69.4%                             
International       55.2%        53.1%                             
Total gross profit  63.9%        64.1%                             
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
 
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