Alphatec Holdings, Inc. (Nasdaq:ATEC), the parent company of Alphatec Spine, Inc., a medical device company that designs, develops, manufactures and markets products for the surgical treatment of spine disorders, with a focus on treating conditions related to the aging spine, announced today financial results for the first quarter March 31, 2010.
First Quarter 2010 Financial Highlights
- Record consolidated revenue of $38.4 million reported in the first quarter 2010 represents 25.6% growth over the first quarter 2009 and 5.0% sequential revenue growth over fourth quarter 2009.
- U.S. revenue of $28.4 million reported for the first quarter 2010 represented growth of 19.4% over first quarter 2009, double the growth of the U.S. spine market.
- European revenue of $3.9 million reported in the first quarter 2010 grew by 303% over the $1 million reported for first quarter 2009.
- Adjusted EBITDA of $5.4 million reported in the first quarter 2010 compared to $1.4 million reported for the first quarter 2009, representing strong operating leverage with continued investment in product development.
- Non-GAAP net loss was $0.2 million for the first quarter 2010, excluding Scient'x acquisition-related transaction and restructuring costs of $4.0 million and in-process research and development expenses of $0.5 million. Non-GAAP EPS was $0.00 per share for first quarter 2010 compared to non-GAAP EPS of ($0.06) per share reported in first quarter 2009.
First Quarter 2010 Performance Highlights
- Closed the acquisition of Scient'x SA in late March 2010.
- Acquisition creates global scale and offers revenue and cost synergies; complements core product portfolio and enhances Aging Spine focus - combined entity is the third-largest independent spinal implant company, with a global span of product distribution in over 50 countries.
- Completed follow-on equity offering in mid-April 2010 resulting in $42.5 million of net proceeds to the Company.
- Provides significant capital to fund general corporate purposes and working capital, including integration of Scient'x.
- Reached significant milestones in the development and launch of products within the Company's Aging Spine portfolio.
- As of March 31, 2010, over 900 patients have been treated in the EU with the Company's OsseoFix Spinal Fracture Reduction System, a minimally invasive device that stabilizes the vertebral body following a vertebral compression fracture.
- OsseoScrew, the Company's proprietary expandable pedicle screw system, designed for use in patients that require additional fixation, was approved and launched in the EU in the first quarter 2010.
"Today we are pleased to announce our eleventh consecutive quarter of record revenues and continued strong year-over-year growth. With the closing of the Scient'x acquisition and the completion of the equity follow-on offering, Alphatec Spine has become a leading pure-play spine company that is truly global, with scale to address the spine market in the U.S., Asia, Europe and Latin America," stated Dirk Kuyper, Alphatec Spine's President and Chief Executive Officer. Mr. Kuyper continued, "We are particularly pleased with our ability to demonstrate operating leverage, as evidenced by adjusted EBITDA of more than $5.0 million reported in the first quarter of 2010. We look forward to leveraging our broad-based international distribution network to drive long-term growth and profitability."
Mr. Kuyper continued, "Lastly, I am pleased with the progress we have made with the U.S. integration of Scient'x into Alphatec Spine. As of April 30th, Scient'x's U.S. operations have been consolidated into Alphatec Spine, and we remain on track to realize at least $5 million of savings by eliminating redundancies in Scient'x's operating expenses."
First Quarter 2010 Financial Results
The effective date of the Scient'x acquisition for accounting purposes is March 31, 2010. The Company's reported consolidated balance sheet includes the fair value of Scient'x's acquired assets and assumed liabilities, in accordance with the acquisition method of accounting. The first quarter 2010 reported consolidated statement of operations and consolidated statement of cash flows does not include the operating performance of Scient'x.
Consolidated revenues for the first quarter 2010 were $38.4 million, an increase of 25.6% from the $30.6 million reported for the first quarter 2009. U.S. revenues for the first quarter 2010 were $28.4 million, an increase of 19.4% from the $23.8 million reported for the first quarter 2009. Asian revenues for the first quarter 2010 were $6.1 million, an increase of 4.6% from the $5.8 million reported for the first quarter 2009. European revenues for the first quarter 2010 were $3.9 million, a significant increase over the $1.0 million reported for the first quarter 2009.
Gross profit for the first quarter 2010 was $24.0 million, an increase of $4.2 million over first quarter 2009 of $19.8 million. First quarter 2010 gross margin of 62.4% was below first quarter 2009 gross margin of 64.6%. The decrease in gross margin of 220 basis points is primarily due to geographic sales mix, increased surgical instrument depreciation and modest U.S. hospital price erosion, partially offset by improving manufacturing efficiencies and reduced royalty burden.
Total operating expenses for the first quarter 2010 were $27.6 million, an increase of $4.7 million compared to first quarter 2009 of $22.9 million. The first quarter 2010 includes $4.0 million in acquisition-related restructuring and transaction expenses. Excluding the acquisition-related expenses, total operating expense increased $0.7 million compared to first quarter 2009, primarily related to an increase in research and development and sales and marketing expenses.
Research and development expenses for the first quarter 2010 were $3.7 million, an increase of $0.8 million compared to the first quarter 2009 of $2.9 million.
In-process research and development expenses for the first quarter 2010 were $0.5 million, a decrease of $0.8 million compared to the first quarter 2009 of $1.3 million.
Sales and marketing expenses for the first quarter 2010 were $13.8 million, an increase of $1.0 million compared to the first quarter 2009 of $12.8 million.
General and administrative expenses for the first quarter 2010 were $5.6 million, a decrease of $0.4 million, compared to the first quarter 2009 of $6.0 million.
Adjusted EBITDA was $5.4 million in the first quarter 2010, an increase of $4.0 million compared to the $1.4 million reported for the first quarter 2009. Adjusted EBITDA growth represents increased operating leverage while driving year-over-year revenue growth of $7.8 million in the first quarter 2010.
Net loss for the first quarter 2010 was $4.7 million, or ($0.09) per share (basic and diluted), compared with a net loss of $4.4 million, or ($0.09) per share (basic and diluted) for the first quarter 2009.
Non-GAAP EPS for first quarter 2010 was $0.00 per share compared to ($0.06) per share reported first quarter 2009. Non-GAAP net earnings or (loss) excludes in-process research and development expenses and Scient'x acquisition-related transaction and restructuring expenses.
2010 Financial Guidance
Reaffirming full year 2010 financial guidance, the Company anticipates pro forma combined revenues of $220 million to $225 million, $32 million to $35 million in pro forma combined adjusted EBITDA and positive non-GAAP EPS for the full year 2010, excluding amortization of acquired intangible assets, acquisition-related transaction and restructuring expenses. The Company reiterates this guidance to reflect the 2010 pro forma combined affect on a 12-month basis, as if the acquisition closed January 1, 2010.
On a financial reporting basis, the Company expects full year 2010 consolidated revenues in the range of $208 million to $213 million, adjusted EBITDA to be in the range of $32 million to $35 million, and positive non-GAAP EPS, excluding amortization of acquired intangible assets, and acquisition-related transaction and restructuring expenses. The financial reporting basis guidance reflects the actual closing of the Scient'x acquisition at the end of March 2010 and the inclusion of Scient'x's actual operating results, effective April 1, 2010, into the Company's consolidated statement of operations and consolidated statement of cash flows.
As previously announced, the Scient'x transaction closed on March 26, 2010. The Company has absorbed acquisition-related expenses that had a negative impact to GAAP EPS in the first quarter of 2010 and expects to absorb additional acquisition-related expenses in second quarter 2010.
Study highlights disparities in stroke burden across regions