ATEC Reports Second Quarter 2022 Financial Results and Increases Full-Year Revenue Guidance

• Total revenue grows 35% to $84 million, including organic revenue growth of 30%
• EOS imaging generates revenue of $12 million
• Company increases full-year revenue guidance to $325 million, reflecting 34% growth

CARLSBAD, Calif.--(BUSINESS WIRE)-- Alphatec Holdings, Inc. (Nasdaq: ATEC), a provider of innovative solutions dedicated to revolutionizing the approach to spine surgery, today announced financial results for the quarter ended June 30, 2022, and recent corporate highlights.

Second-Quarter and Full-Year 2022 Financial Results

	Quarter Ended June 30, 2022
Total revenue	$84 million
GAAP gross margin	66%
Non-GAAP gross margin	70%
Operating expenses	$91 million
Non-GAAP operating expenses	$75 million
GAAP operating loss	($36) million
Non-GAAP adjusted EBITDA	($8) million
Ending cash balance	$107 million

Recent Highlights

• Hosted over 150 surgeons at training events, contributing to a 23% increase in surgeon users compared to prior year;
• Strong surgeon adoption fueled average revenue per surgery growth of 10%;
• Generated $12 million in EOS-related revenue, reflecting 49% growth on a pro-forma basis;
• Drove operating cost leverage, with a $3 million sequential improvement in adjusted EBITDA;
• Signed term sheet for a $50 million revolver with $25 million accordion feature.

“By focusing on the entire surgical procedure and investing to obviate clinical variability, we are bringing increased predictability and reproducibility to spine surgery and fueling sector-leading growth,” said Pat Miles, Chairman and Chief Executive Officer. “That growth has enabled us to begin to lever sales channel investments while expanding our geographic footprint. At our Investor Day in May, we shared a long-term financial outlook that included a 23% revenue CAGR toward $555 million in 2025 and positive adjusted EBITDA in 2023. We are executing against those commitments and I am confident that years of sustainable growth and scale lie ahead.”

Financial Outlook for the Full-Year 2022

The Company now expects total revenue of $325 million for the fiscal year ended December 31, 2022, reflecting growth of approximately 34% compared to the full year 2021. This includes organic revenue growth of approximately 31% and $48 million of revenue related to EOS imaging.

Financial Results Webcast

ATEC will present these results via a live webcast today at 1:30 p.m. PT / 4:30 p.m. ET. The live webcast can be accessed by visiting the Investor Relations Section of ATEC’s Corporate Website.

To dial in to the webcast, please register via this link.

A replay of the webcast will remain available through the Investor Relations Section of ATEC’s Corporate Website for twelve months. In addition, a dial-in replay will be available beginning two hours after the webcast’s completion through August 11, 2022. Access the replay by dialing (800) 770-2030 and referencing conference ID number 97241.

Non-GAAP Financial Information

To supplement the Company’s financial statements presented in accordance with generally accepted accounting principles in the United States of America (GAAP), the Company reports certain non-GAAP financial measures, including non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating loss, and non-GAAP adjusted EBITDA. The Company believes that these non-GAAP financial measures provide 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 baseline for assessing the future earnings potential of the Company. The Company’s non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in the Company’s industry, as other companies in the industry may calculate non-GAAP financial results differently, particularly related to non-recurring, unusual items. Non-GAAP financial results should be considered in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Included below are reconciliations of the non-GAAP financial measures to the comparable GAAP financial measures.

About Alphatec Holdings, Inc.

ATEC, through its wholly owned subsidiaries, Alphatec Spine, Inc., EOS imaging S.A. and SafeOp Surgical, Inc., is a medical device company dedicated to revolutionizing the approach to spine surgery through clinical distinction. ATEC’s Organic Innovation Machine^TM is focused on developing new approaches that integrate seamlessly with the Company’s expanding AlphaInformatiX Platform to better inform surgery and more safely and reproducibly achieve the goals of spine surgery. ATEC’s vision is to become the Standard Bearer in Spine. For more information, visit us at www.atecspine.com.

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 will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors. Forward-looking statements include, but are not limited to: references to the Company’s revenue and growth outlook; planned product launches, introductions, regulatory submissions or clearances; efforts to transform sales and distribution channels; the Company’s ability to compel surgeon adoption; and the Company’s future ability to finance its operations and sufficiency of its cash runway. 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 uncertainty of success in developing new products or products currently in the pipeline; the uncertainties in the Company’s ability to execute upon its strategic operating plan; the uncertainties regarding the ability to successfully license or acquire new products, and the commercial success of such products; failure to achieve acceptance of the Company’s products by the surgeon community; failure to obtain FDA or other regulatory clearance or approval or unexpected or prolonged delays in the process; continuation of favorable third-party reimbursement; unanticipated expenses or liabilities or other adverse events affecting cash flow or the Company’s ability to achieve profitability; uncertainty of additional funding; the Company’s ability to compete with other products or with emerging technologies; product liability exposure; an unsuccessful outcome in any litigation; patent infringement claims; claims related to the Company’s intellectual property; and the Company’s ability to meet its financial obligations. 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.

ALPHATEC HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2022				2021				2022				2021
(unaudited)
Revenue:
Revenue from products and services		$	84,151			$	61,885			$	155,069			$	105,601
Revenue from international supply agreement			-				364				15				769
Total revenue			84,151				62,249				155,084				106,370
Cost of sales			28,675				21,184				50,392				33,447
Gross profit			55,476				41,065				104,692				72,923
Operating expenses:
Research and development			10,596				7,839				20,318				13,640
Sales, general and administrative			72,668				60,659				142,139				101,085
Litigation-related expenses			5,495				1,167				13,027				4,502
Amortization of acquired intangible assets			2,177				1,208				4,407				1,380
Transaction-related expenses			-				4,771				120				5,783
Restructuring expenses			289				1,173				1,659				1,331
Total operating expenses			91,225				76,817				181,670				127,721
Operating loss			(35,749	)			(35,752	)			(76,978	)			(54,798	)
Interest and other expense, net:
Interest expense, net			(1,435	)			(2,394	)			(2,891	)			(4,332	)
Other expenses, net			67				(16	)			37				(1,905	)
Total interest and other expenses, net			(1,368	)			(2,410	)			(2,854	)			(6,237	)
Net loss before taxes			(37,117	)			(38,162	)			(79,832	)			(61,035	)
Income tax provision			203				43				332				73
Net loss		$	(37,320	)		$	(38,205	)		$	(80,164	)		$	(61,108	)
Net loss per share, basic and diluted		$	(0.36	)		$	(0.39	)		$	(0.79	)		$	(0.66	)
Weighted average shares outstanding, basic and diluted			102,849				98,541				101,422				92,912
Stock-based compensation included in:
Cost of revenue		$	449			$	235			$	705			$	330
Research and development			1,362				664				2,334				1,162
Sales, general and administrative			7,392				10,597				16,348				14,478
		$	9,203			$	11,496			$	19,387			$	15,970

ALPHATEC HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
		June 30, 2022			December 31, 2021
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	107,470		$	187,248
Accounts receivable, net			43,928			41,893
Inventories			102,796			91,703
Prepaid expenses and other current assets			11,045			10,313
Total current assets			265,239			331,157
Property and equipment, net			99,183			87,401
Right-of-use asset			28,116			25,283
Goodwill			39,170			39,689
Intangible assets, net			78,611			85,274
Other assets			1,616			3,249
Total assets		$	511,935		$	572,053
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	33,157		$	25,737
Accrued expenses and other current liabilities			55,874			55,549
Contract liabilities			13,850			15,255
Short-term debt			14,266			342
Current portion of operating lease liabilities			4,164			4,212
Total current liabilities			121,311			101,095
Total long-term liabilities			356,482			367,933
Redeemable preferred stock			23,603			23,603
Stockholders' equity			10,539			79,422
Total liabilities and stockholders' equity		$	511,935		$	572,053

ALPHATEC HOLDINGS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2022				2021				2022				2021
(unaudited)
Gross profit, GAAP		$	55,476			$	41,065			$	104,692			$	72,923
Add: amortization of intangible assets			9				268				9				536
Add: stock-based compensation			449				235				705				330
Add: purchase accounting adjustments on acquisitions			437				1,763				437				1,763
Add: excess and obsolete write-down			2,394				2,221				4,100				4,317
Non-GAAP gross profit		$	58,765			$	45,552			$	109,943			$	79,869
Gross margin, GAAP			65.9	%			66.0	%			67.5	%			68.6	%
Add: amortization of intangible assets			0.0	%			0.4	%			0.0	%			0.5	%
Add: stock-based compensation			0.5	%			0.4	%			0.5	%			0.3	%
Add: purchase accounting adjustments on acquisitions			0.5	%			2.8	%			0.3	%			1.7	%
Add: excess and obsolete write-down			2.8	%			3.6	%			2.6	%			4.1	%
Non-GAAP gross margin			69.7	%			73.2	%			70.9	%			75.2	%
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2022				2021				2022				2021
(unaudited)
Operating expenses, GAAP		$	91,225			$	76,817			$	181,670			$	127,721
Adjustments:
Stock-based compensation			(8,754	)			(11,261	)			(18,682	)			(15,640	)
Litigation-related expenses			(5,495	)			(1,167	)			(13,027	)			(4,502	)
Amortization of intangible assets			(2,177	)			(1,208	)			(4,407	)			(1,380	)
Transaction-related expenses			-				(4,771	)			(120	)			(5,783	)
Restructuring expenses			(289	)			(1,173	)			(1,659	)			(1,331	)
Non-GAAP operating expenses		$	74,510			$	57,237			$	143,775			$	99,085
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2022				2021				2022				2021
(unaudited)
Operating loss, GAAP		$	(35,749	)		$	(35,752	)		$	(76,978	)		$	(54,798	)
Depreciation			7,506				5,068				14,591				8,477
Amortization of intangible assets			2,186				1,476				4,416				1,917
EBITDA			(26,057	)			(29,208	)			(57,971	)			(44,404	)
Add back significant items:
Stock-based compensation			9,203				11,496				19,387				15,970
Purchase accounting adjustments on acquisitions			437				1,763				437				1,763
Excess & obsolete write-down			2,394				2,221				4,100				4,317
Litigation-related expenses			5,495				1,167				13,027				4,502
Transaction-related expenses			-				4,771				120				5,783
Restructuring expenses			289				1,173				1,659				1,331
Adjusted EBITDA		$	(8,239	)		$	(6,617	)		$	(19,241	)		$	(10,738	)

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