Alphatec (US:ATEC)2019-07-26 18:51Revenue 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]