Revenue Performance - Revenue from U.S. products for the three months ended June 30, 2019, was $26.1 million, a 28% increase from $20.4 million in the same period of 2018[146] - Total revenues for the six months ended June 30, 2019, reached $51.9 million, up 19.7% from $43.3 million for the same period in 2018[146] - Total revenues increased to $27.3 million for the three months ended June 30, 2019, up 24.1% from $22.0 million in the same period of 2018[148] - Revenue from U.S. products was $26.1 million for the three months ended June 30, 2019, representing a 27.9% increase from $20.4 million in the same period of 2018[149] Gross Profit and Margin - Gross profit for the three months ended June 30, 2019, was $18.9 million, representing a gross margin of approximately 69.2%, compared to $15.6 million and a margin of 70.7% in the prior year[146] - Gross profit for the three months ended June 30, 2019, was $18.9 million, a 21.2% increase from $15.6 million in the same period of 2018[154] - Gross profit margin from U.S. product revenue decreased to 72.2% for the three months ended June 30, 2019, down from 75.8% in the same period of 2018[156] Expenses - Research and development expenses increased to $3.4 million for the three months ended June 30, 2019, compared to $2.0 million in the same period of 2018, reflecting a 67% increase[146] - Sales, general and administrative expenses rose to $24.6 million for the three months ended June 30, 2019, a 40% increase from $17.5 million in the same period of 2018[146] - Research and development expenses rose by $1.4 million, or 70.0%, during the three months ended June 30, 2019, compared to the same period in 2018[158] - Sales, general and administrative expenses increased by $7.1 million, or 40.6%, during the three months ended June 30, 2019, compared to the same period in 2018[159] Operating and Net Loss - The operating loss for the three months ended June 30, 2019, was $10.4 million, compared to a loss of $6.5 million in the same period of 2018[146] - The net loss for the six months ended June 30, 2019, was $25.4 million, compared to a net loss of $9.0 million for the same period in 2018[146] Strategic Distribution and Market Presence - The percentage of sales contributed by the strategic distribution channel increased to 88% for the three months ended June 30, 2019, up from 80% in the same period of 2018[129] - The company aims to expand its market presence by adding new high-quality dedicated distributors to reach untapped markets across the U.S.[128] - The company completed the sale of its international distribution operations on September 1, 2016, and now operates solely in the U.S. market[130] Cash and Liquidity - As of June 30, 2019, the company had cash of $18.6 million and accounts receivable of $13.6 million, indicating sufficient liquidity for planned expenditures for at least 12 months[168] - The company anticipates continued operating losses and negative cash flows for at least the next year as it incurs costs related to its operating plan and new product introductions[169] - The company closed on an expanded credit facility with Squadron for up to $30 million in additional secured financing, with a draw of $10 million taken in June 2019[170] - As of June 30, 2019, the company had $10.7 million outstanding under the Amended Credit Facility with MidCap, which provides for a revolving credit commitment of up to $22.5 million[174] Debt and Obligations - The total debt outstanding with Squadron has a five-year maturity and bears interest at LIBOR plus 8%, with a minimum interest rate of 10% and a maximum of 13% per year[177] - The company is required to maintain a minimum liquidity covenant of $5 million through March 2020 and a minimum fixed charge coverage ratio beginning in April 2020[171] - Total contractual obligations and commercial commitments as of June 30, 2019, amounted to $114.1 million, including various debt agreements and settlement obligations[185] Cash Flow and Investments - The company used net cash of $14.6 million from operating activities for the six months ended June 30, 2019, primarily due to net loss adjustments and working capital[181] - Cash used in investing activities for the six months ended June 30, 2019, was $3.7 million, mainly for the purchase of surgical instruments to support new product launches[182] - Financing activities provided cash of $7.8 million for the six months ended June 30, 2019, primarily from a $10 million draw from the Squadron expanded credit facility[183] Settlement Payments - As of June 30, 2019, the company had made $38.4 million in Orthotec settlement payments, with an aggregate of $19.4 million remaining to be paid[180] Lease and Indebtedness - The company entered into a lease agreement for office and R&D space in Carlsbad, California, with a monthly rent of approximately $105,000, increasing by $3,000 each year[186] - As of June 30, 2019, the company's outstanding floating rate indebtedness totaled $57.6 million, primarily linked to the LIBOR rate[195] - A 100 basis point increase in interest rates would decrease pre-tax income and cash flow by approximately $0.6 million, assuming the floating rate indebtedness remains constant[195] Commodity Price Exposure - The company purchases raw materials processed from commodities like titanium and stainless steel, exposing it to fluctuations in commodity prices[196] - A 10% change in commodity prices would not have had a material impact on the company's results of operations for the six months ended June 30, 2019[196]

Alphatec Holdings, Inc. (NASDAQ:ATEC) Q2 2019 Earnings Conference Call July 24, 2019 4:30 PM ET Company Participants Patrick Miles - Executive Chairman, President and Chief Executive Officer Jeffrey Black - Executive Vice President and Chief Financial Officer Conference Call Participants Brooks O'Neil - Lake Street Capital Markets, LLC Swayampakula Ramakanth - H.C. Wainwright Operator Good afternoon, everyone and welcome to Alphatec's Second Quarter 2019 Conference Call. We would like to remind everyone tha ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 000-52024 ALPHATEC HOLDINGS, INC. (Exact name of registrant as specified in its charter) Delaware 20-2463898 (State or other jurisd ...

Revenue Performance - Total revenues for the year ended December 31, 2018 were $91.7 million, a decrease of $10.0 million, or 9.8%, compared to $101.7 million for the year ended December 31, 2017[243] - Revenue from U.S. products was $83.7 million for the year ended December 31, 2018, down $3.2 million, or 3.7%, from $86.9 million in 2017, primarily due to exiting the stocking distributor model[244] - Revenue from the strategic distribution channel increased to $67.1 million, representing 80% of U.S. revenues, up from 59% in 2017, while legacy and terminated distribution revenue decreased by 53%[245] - Revenue from the international supply agreement was $8.0 million for 2018, a decrease of $6.8 million from $14.8 million in 2017, with expectations of continued decline[244] Cost and Profitability - Total cost of revenues decreased to $28.5 million for the year ended December 31, 2018, down $5.0 million, or 14.9%, from $33.5 million in 2017[246] - Gross profit for the year ended December 31, 2018 was $63.2 million, a decrease of $5.0 million, or 7.3%, compared to $68.2 million in 2017[250] - Gross profit margin from U.S. product revenue was 75.0% for 2018, down from 76.6% in 2017, attributed to increased excess and obsolescence expenses[250] Expenses - Research and development expenses increased to $10.0 million for the year ended December 31, 2018, compared to $4.9 million in 2017, reflecting increased investment in product development[240] - Research and development expenses increased by $5.1 million, or 104.1%, for the year ended December 31, 2018, primarily due to the integration of SafeOp technology and product development costs for Kodiak and IdentiTi systems[252] - Sales, general and administrative expenses rose by $2.5 million, or 3.6%, for the year ended December 31, 2018, mainly due to costs associated with the SafeOp acquisition and marketing efforts for new products[253] - Litigation-related expenses amounted to $5.7 million for the year ended December 31, 2018, significantly higher than $0.3 million in 2017, with expectations for a decrease in future periods[254] Financial Losses - Operating loss for the year ended December 31, 2018 was $(22.4) million, compared to $(9.0) million in 2017, indicating a significant increase in operational challenges[240] - Net loss attributable to common shareholders was $(42.5) million for the year ended December 31, 2018, compared to $(2.3) million in 2017, highlighting a substantial decline in financial performance[240] Cash Flow and Liquidity - Operating activities used net cash of $25.6 million for the year ended December 31, 2018, with significant adjustments for non-cash items and working capital[280] - Cash used in investing activities totaled $21.7 million for the year ended December 31, 2018, primarily for the acquisition of SafeOp and purchases of surgical instruments and equipment[282] - As of December 31, 2018, the company had cash of $29.1 million and accounts receivable of $15.1 million, indicating a solid liquidity position[265] - Financing activities generated net cash of $53.9 million for the year ended December 31, 2018, primarily from a private placement and warrant exercises totaling $51.9 million[283] Debt and Obligations - The company closed a $35.0 million Term Loan with Squadron on November 6, 2018, with net proceeds used to retire existing debt and for general corporate purposes[268] - Total contractual obligations and commercial commitments amounted to $107.8 million as of December 31, 2018, with significant obligations including $35 million for the Squadron Term Loan and $23.5 million in interest expenses[284] - The company has incurred $36.2 million in Orthotec settlement payments, with an outstanding balance of $21.6 million remaining[279] Internal Controls and Reporting - A material weakness in internal control over financial reporting was identified as of December 31, 2018, which was remediated in the first quarter of 2019[310] - The company’s management is responsible for establishing adequate internal control over financial reporting to ensure reliability in financial statements[311] - Management assessed the effectiveness of internal control over financial reporting as of December 31, 2018, identifying deficiencies related to significant non-routine transactions[313] - An error was identified in previously issued financial statements for the quarters ended June 30, 2018, and September 30, 2018, related to the accounting for a beneficial conversion feature of Series B Convertible Preferred Stock[314] - A material weakness was concluded due to a lack of sufficient oversight and review for the application of U.S. GAAP in complex equity transactions[314] - Remediation actions included hiring additional personnel for increased oversight and redesigning internal controls for timely quarterly reviews[315] - There have been no changes to internal control over financial reporting during the most recent fiscal quarter that materially affected its effectiveness[316] Accounting Policies - The company recognized revenue in accordance with ASC Topic 606, which did not materially impact its consolidated financial statements[290] - The company assesses impairment of intangible assets annually, with significant management judgment required in estimating fair value[291] - Stock-based compensation is recognized based on fair value and is affected by estimates of future volatility and expected term of stock options[295] - The company’s outstanding floating rate indebtedness totaled $46 million, with a potential pre-tax income decrease of approximately $0.5 million for a 100 basis point increase in interest rates[305]