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Alphatec Holdings Announces Third Quarter 2015 Revenue And Financial Results

The following excerpt is from the company's SEC filing.

CARLSBAD, CA, November 3, 2015 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 third quarter ended September 30, 2015.

Third quarter consolidated net revenues of $43 million.

Third quarter adjusted EBITDA of $5.3 million, 12.2% of revenue.

Stabilized U.S. business - revenue of $27.4 million, up sequentially from the second quarter of 2015.

Highlights of the Third quarter 2015 and Recent Activities

Positive Progress Made Towards Alphatecs Corporate Strategic Objectives

Financial

Consolidated revenues of $43.0 million as reported, or $45.7 million in constant currency.

Consolidated revenues were impacted by $2.7 million of foreign currency headwinds.

International revenues grew 13.2% in constant currency over the third quarter of 2014 and represent 36% of global revenues as reported.

Strategic Pillar #1: Go-to-Market Product Portfolio and R&D Pipeline

Arsenal CBX successfully used in over 50 patients during limited market release and on track to enter full commercial launch by year-end.

Battalion titanium-coated PEEK interbody fusion system introduced in the U.S. and first surgical cases have been successfully completed.

Alphatec Neocore Osteoconductive Matrix, a synthetic scaffold for the regeneration of bone, was successfully launched and first surgical case completed.

Arsenal Deformity and lateral development programs remain on track for Q1 2016 introduction.

Strategic Pillar #2: Transform Manufacturing and Distribution Operations

Outsourcing of manufacturing to drive reductions in instrument costs, implant unit costs and capital expense on track - estimating completion by January 2016.

Partnered with UPS for outsourcing physical distribution of implant and instrument sets to enhance customer service and drive set utilization improvements - staged rollout underway.

Strategic Pillar #3: Expand Global Commercial Participation

Significant commercial expansion in large metropolitan markets continues through direct selling reps, distributor relationships, new surgeon customers and new geographies.

Anticipate at least $3.0 million of revenue from these new markets in the U.S. in Q4 2015.

Q3 marks a turning point for Alphatec where we are beginning to see early results from our overall company transformation, said Jim Corbett, President and Chief Executive Officer of Alphatec Spine. First of all, our competitive product portfolio and pipeline is stronger than it has ever been. Second, we remain on schedule with improving our underlying cost structure by outsourcing both manufacturing and distribution. And, now, our commercial transformation is well-underway and gaining momentum both in the U.S. and internationally and we expect that to continue into Q4 and 2016. Through the execution of each of our strategic pillars, we are building a stronger, more competitive company one that we believe is poised to gain share and generate profitable growth in the future.

-more-

Quarter Ended September 30, 2015

Consolidated net revenues

for the third quarter of 2015 were $43.0 million as reported, down 15.7% compared to $51.0 million reported for the third quarter of 2014, or down 10.4% on a constant currency basis. Consolidated revenues were impacted by $2.7 million in the third quarter due to declines in the valuation of the Japanese Yen and Euro against the U.S. Dollar.

U.S. net revenues

for the third quarter of 2015 were $27.4 million, down 21.3%, compared to $34.8 million reported for the third quarter of 2014.

International net revenues

for the third quarter of 2015 were $15.6 million, down 3.7% compared to $16.2 million for the third quarter of 2014, or up 13.2% on a constant currency basis.

Consolidated gross profit and gross margin

for the third quarter of 2015 were $28.5 million and 66.2%, respectively, compared to $36.3 million and 71.2%, respectively, for the third quarter of 2014.

Gross profit declined 21.6% from the third quarter of 2014 primarily as a result of lower U.S. sales volume, foreign currency translation effects and global geographic mix.

Gross margin declined 5.0 percentage points compared to a strong quarter for gross margin in third quarter 2014. The decline over prior year is primarily attributable to unfavorable variation in global regional and product mix, as well as currency effects, and lower milestones and royalties in the third quarter 2014.

Total operating expenses

for the third quarter of 2015 were $193.4 million, reflecting an increase of $158.9 million compared to the third quarter of 2014. This variance is driven primarily by non-cash, goodwill and intangible asset impairment charges totaling $165.2 million and restructuring expenses totaling $335 thousand, offset by savings in R&D and G&A functions, as well as lower commission expenses as a result of lower U.S. sales volume. The Company is required to test for goodwill impairment according to specific accounting standards annually, or on an interim basis in the case of specific circumstances. Due to the decline of the Companys market capitalization during the third quarter, the Company was required to perform a valuation of its goodwill and intangible assets, which resulted in a $165.2 million non-cash impairment charge. As this is a non-cash charge, this does not affect the ongoing operations of the Company.

When adjusted for non-recurring impairment, restructuring and IPR&D expenses, total operating expenses for the third quarter of 2015 would be $27.6 million, reflecting an improvement of 18.7%, or approximately $6.4 million, compared to the third quarter of 2014, and an improvement of 9.2% sequentially.

GAAP...


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