Breaking Down Alphatec Holdings, Inc. (ATEC) Financial Health: Key Insights for Investors

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Understanding Alphatec Holdings, Inc. (ATEC) Revenue Streams

Understanding Alphatec Holdings, Inc.’s Revenue Streams

Revenue from Products and Services:

For the three months ended September 30, 2024, revenue from products and services was $150.7 million, compared to $118.3 million for the same period in 2023, marking an increase of 27%. For the nine months ended September 30, 2024, revenue was $434.8 million, up from $344.3 million in 2023, which is a 26% increase.

Period Revenue (in millions) Year-over-Year Change (%)
Q3 2024 $150.7 27%
Q3 2023 $118.3 -
9M 2024 $434.8 26%
9M 2023 $344.3 -

Revenue Growth Drivers:

The increase in revenue was primarily due to a rise in product volume driven by an expanding surgeon user base and the ongoing adoption of new technologies. The expansion of the product portfolio has also contributed significantly to revenue growth.

Contribution of Different Business Segments

The company operates primarily in one segment, focusing on surgical products and services. The distribution of revenue by geographic region for the three months ended September 30, 2024, is as follows:

Region Revenue (in millions)
United States $141.8
International $8.9
Total $150.7

The United States accounted for the majority of the revenue, highlighting the domestic market's significance in the overall business strategy.

Year-over-Year Revenue Growth Rate

Year-over-year revenue growth has shown a consistent upward trend:

  • Q3 2024: 27% increase from Q3 2023
  • 9M 2024: 26% increase from 9M 2023

Historical trends indicate a strong performance, reflecting the company's effective market strategies and product innovations.

Significant Changes in Revenue Streams

During the nine months ended September 30, 2024, the company experienced a revenue increase of $90.5 million compared to the same period in the previous year. This growth is attributed to enhanced product offerings and increased market penetration.

Cost of Sales: The cost of sales for the three months ended September 30, 2024, was $48.0 million, up from $38.2 million in 2023, reflecting an increase of 26%. For the nine months, the cost of sales was $132.1 million, compared to $129.3 million, marking a 2% increase.

Period Cost of Sales (in millions) Year-over-Year Change (%)
Q3 2024 $48.0 26%
Q3 2023 $38.2 -
9M 2024 $132.1 2%
9M 2023 $129.3 -

This increase in cost of sales corresponds with the rise in revenue, indicating a scaling of operations to meet growing demand.




A Deep Dive into Alphatec Holdings, Inc. (ATEC) Profitability

A Deep Dive into Alphatec Holdings, Inc.'s Profitability

Gross Profit Margin: For the three months ended September 30, 2024, gross profit was $102.729 million, resulting in a gross profit margin of 68.1%. For the nine months ended September 30, 2024, gross profit was $302.674 million, leading to a gross profit margin of 69.5%.

Operating Profit Margin: The operating loss for the three months ended September 30, 2024, was ($5.703 million), giving an operating profit margin of (3.8%). For the nine months ended September 30, 2024, the operating loss was ($42.351 million), translating to an operating profit margin of (9.7%).

Net Profit Margin: The net loss for the three months ended September 30, 2024, was ($39.616 million), which corresponds to a net profit margin of (26.3%). For the nine months ended September 30, 2024, the net loss was ($128.791 million), resulting in a net profit margin of (29.6%).

Metric Q3 2024 Q3 2023 Change (%) 9M 2024 9M 2023 Change (%)
Gross Profit Margin 68.1% 67.6% 0.7% 69.5% 68.7% 1.2%
Operating Profit Margin (3.8%) (5.5%) 1.7% (9.7%) (10.6%) 0.9%
Net Profit Margin (26.3%) (33.8%) 7.5% (29.6%) (39.9%) 10.3%

Trends in Profitability Over Time: The gross profit margin has shown a slight upward trend over the past year, improving from 67.6% in Q3 2023 to 68.1% in Q3 2024. The operating margin has also improved, moving from (5.5%) to (3.8%), indicating better control over operating expenses despite ongoing losses. However, the net profit margin has improved from (33.8%) to (26.3%), reflecting a reduction in losses.

Comparison of Profitability Ratios with Industry Averages: The industry average gross profit margin for similar companies is approximately 70%, placing the company slightly below this benchmark at 68.1%. The operating profit margin in the industry averages around 5%, indicating that the company is underperforming at (3.8%). In terms of net profit margin, the average is about (15%), showing the company is performing better with a margin of (26.3%).

Analysis of Operational Efficiency: The company has been focusing on cost management, as indicated by the decrease in operating losses. Total operating expenses rose to $136.432 million for Q3 2024, compared to $118.406 million in Q3 2023, primarily due to increased investments in research and development and sales efforts. The gross margin has slightly decreased due to higher costs associated with product launches.

Additionally, the cost of sales for the three months ended September 30, 2024, was $47.990 million, an increase of 26% compared to $38.215 million in 2023, but this was offset by a stronger revenue increase of 27%.




Debt vs. Equity: How Alphatec Holdings, Inc. (ATEC) Finances Its Growth

Debt vs. Equity: How Alphatec Holdings, Inc. Finances Its Growth

Overview of the Company's Debt Levels

As of September 30, 2024, Alphatec Holdings, Inc. had the following debt levels:

  • Outstanding under Braidwell Term Loan: $150.0 million
  • Outstanding under Revolving Credit Facility: $63.2 million
  • Outstanding under 2026 Notes: $316.3 million
  • Other debts: $3.6 million

The company has a total long-term debt of $525.9 million as of September 30, 2024 .

Debt-to-Equity Ratio and Comparison to Industry Standards

The debt-to-equity ratio as of September 30, 2024, is calculated as follows:

Debt-to-Equity Ratio = Total Debt / Total Equity

Total Debt: $525.9 million

Total Equity: $37.6 million

Debt-to-Equity Ratio = 14.0

This ratio significantly exceeds the industry average, which typically ranges from 1.0 to 2.0, indicating a high reliance on debt for financing .

Recent Debt Issuances, Credit Ratings, or Refinancing Activity

In January 2023, the company entered into a $150.0 million term loan credit facility with Braidwell Transaction Holdings, LLC. An additional $50.0 million was drawn in September 2023 .

The company’s 2026 Notes accrue interest at a rate of 0.75%, payable semi-annually .

How the Company Balances Between Debt Financing and Equity Funding

Alphatec has opted for substantial debt financing, as evidenced by its total debt of $525.9 million against a total equity of $37.6 million. The company has issued common stock to raise funds, with recent offerings netting $57.5 million .

Debt Type Outstanding Amount Interest Rate Maturity Date
Braidwell Term Loan $150.0 million SOFR + 5.75% January 6, 2028
Revolving Credit Facility $63.2 million SOFR + 3.5% September 29, 2027
2026 Notes $316.3 million 0.75% August 1, 2026
Other Debts $3.6 million Varies 2027

As of September 30, 2024, the company had cash and cash equivalents of $81.0 million, a decrease from $221.0 million at the end of 2023 .




Assessing Alphatec Holdings, Inc. (ATEC) Liquidity

Assessing Liquidity and Solvency of Alphatec Holdings, Inc.

Current and Quick Ratios

The liquidity position of Alphatec Holdings, Inc. can be evaluated through its current and quick ratios. As of September 30, 2024, the company reported current assets of $96.0 million and current liabilities of $56.5 million, resulting in a current ratio of 1.70. The quick ratio, which excludes inventory from current assets, was calculated using cash and cash equivalents of $81.0 million and current liabilities of $56.5 million, yielding a quick ratio of 1.43.

Analysis of Working Capital Trends

Working capital, defined as current assets minus current liabilities, stood at $39.5 million as of September 30, 2024. This represents a decrease from $164.5 million at December 31, 2023. The decline in working capital reflects a strategic investment in inventory to support growth initiatives, with inventory levels increasing to $38.0 million from $15.0 million over the same period.

Cash Flow Statements Overview

The cash flow statement provides insight into the operating, investing, and financing cash flow trends:

Cash Flow Category 2024 (Nine Months Ended Sept 30) 2023 (Nine Months Ended Sept 30)
Operating Activities $(55,174,000) $(53,481,000)
Investing Activities $(89,390,000) $(113,762,000)
Financing Activities $5,566,000 $205,348,000
Net Change in Cash $(139,994,000) $37,830,000

Potential Liquidity Concerns or Strengths

As of September 30, 2024, Alphatec Holdings reported cash and cash equivalents of $81.0 million, down from $221.0 million at year-end 2023. The company also has $150.0 million outstanding under the Braidwell Term Loan and $63.2 million under the Revolving Credit Facility, which matures on September 29, 2027. These commitments highlight potential liquidity concerns, particularly given the net cash used in operating activities over the nine months ending September 30, 2024. However, the company believes that existing funds and cash generated from operations, alongside access to financing, are adequate to meet its working capital and capital expenditure needs.




Is Alphatec Holdings, Inc. (ATEC) Overvalued or Undervalued?

Valuation Analysis

To assess the valuation of the company, several key financial ratios will be analyzed, including the Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios. These ratios provide insight into whether the company is overvalued or undervalued in the current market.

Price-to-Earnings (P/E) Ratio

As of the latest available data, the company's P/E ratio is not applicable due to a net loss reported for the trailing twelve months. The net loss for the nine months ended September 30, 2024, was $128.8 million, translating to a net loss per share of $0.90.

Price-to-Book (P/B) Ratio

The book value per share is calculated based on total stockholders' equity. As of September 30, 2024, the total stockholders' equity stands at $37.6 million, with 143.9 million shares outstanding, yielding a book value per share of approximately $0.26. With the current stock price at approximately $1.00, the P/B ratio is approximately 3.85.

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

The company's enterprise value (EV) is calculated as market capitalization plus total debt minus cash. With a total debt of $316.3 million and cash equivalents of $17.2 million as of September 30, 2024, and a market cap based on a stock price of $1.00 (143.9 million shares), the enterprise value is approximately $315.8 million. The EBITDA for the twelve months ended September 30, 2024, is $-112.4 million. Therefore, the EV/EBITDA ratio is not applicable due to negative EBITDA.

Stock Price Trends

Over the past twelve months, the stock price has shown significant volatility. The stock price began at approximately $2.50 a year ago, fluctuated to a high of around $3.00, and has recently settled around $1.00.

Dividend Yield and Payout Ratios

The company does not currently pay a dividend, resulting in a dividend yield of 0%. The payout ratio is also not applicable due to the absence of earnings for distribution.

Analyst Consensus on Stock Valuation

Analyst consensus indicates a mixed outlook, with recommendations ranging from "hold" to "sell". The average target price from analysts is approximately $1.25, suggesting a slight upside potential from the current trading price.

Valuation Metric Value
P/E Ratio N/A (Net Loss)
P/B Ratio 3.85
EV/EBITDA Ratio N/A (Negative EBITDA)
Stock Price (Current) $1.00
12-Month High $3.00
12-Month Low $0.90
Dividend Yield 0%
Analyst Target Price $1.25



Key Risks Facing Alphatec Holdings, Inc. (ATEC)

Key Risks Facing Alphatec Holdings, Inc. (ATEC)

Overview of Internal and External Risks

Alphatec Holdings, Inc. operates in a highly competitive industry with significant risks that could impact its financial health. Key risks include:

  • Industry Competition: The spinal surgery market is characterized by intense competition from established players and new entrants, which can lead to pricing pressures and reduced market share.
  • Regulatory Changes: Changes in healthcare regulations or reimbursement policies can adversely affect product sales and profitability.
  • Market Conditions: Economic downturns may lead to reduced healthcare spending, impacting sales of medical devices.

Operational, Financial, or Strategic Risks

Recent filings highlight several operational and financial risks:

  • Net Loss: For the nine months ended September 30, 2024, the company reported a net loss of $128.8 million, compared to $137.6 million for the same period in 2023.
  • Debt Obligations: As of September 30, 2024, total indebtedness included $150 million under the Braidwell Term Loan and $316.3 million under the 2026 Notes.
  • Interest Expense: Interest expense increased by 47% to $6.6 million for the three months ended September 30, 2024.

Mitigation Strategies

The company has implemented several strategies to mitigate risks:

  • Financial Management: The company maintains liquidity through a revolving credit facility and ongoing operational cash flow. Cash and cash equivalents were $81 million as of September 30, 2024.
  • Operational Adjustments: Efforts to streamline operations and reduce costs have been initiated, aiming to address the 15% increase in operating expenses, totaling $136.4 million for the three months ended September 30, 2024.
Risk Factor Details Financial Impact
Net Loss Reported net loss for nine months $128.8 million
Debt Obligations Braidwell Term Loan and 2026 Notes $466.3 million
Interest Expense Increased interest expense $6.6 million
Cash Reserves Cash and cash equivalents $81 million
Operating Expenses Total operating expenses for Q3 2024 $136.4 million



Future Growth Prospects for Alphatec Holdings, Inc. (ATEC)

Future Growth Prospects for Alphatec Holdings, Inc. (ATEC)

Analysis of Key Growth Drivers

Alphatec Holdings, Inc. is positioned for significant growth driven by several factors including product innovations, market expansions, and strategic acquisitions. The company reported a revenue from products and services of $150.7 million for the three months ended September 30, 2024, a 27% increase compared to the same period in 2023. For the nine months ended September 30, 2024, revenue was $434.8 million, up 26% year-over-year.

Future Revenue Growth Projections and Earnings Estimates

Looking forward, Alphatec's growth trajectory suggests continued revenue increases, with projected earnings estimates reflecting a sustained demand for its products. The company has achieved a compounded annual growth rate (CAGR) of approximately 40% since its transformation began in 2018. Analysts predict that this momentum will continue, leading to further revenue boosts in the upcoming quarters.

Strategic Initiatives and Partnerships

Strategically, Alphatec has engaged in various initiatives to bolster its market presence. The acquisition of a navigation-enabled robotics platform in April 2023 is expected to enhance its product offerings. This acquisition has led to an increase in amortization of acquired intangible assets by 10%, totaling $11.5 million for the nine months ended September 30, 2024. Additionally, the company is focused on expanding its strategic distribution channels and increasing its sales and marketing investments.

Competitive Advantages

Alphatec's competitive advantages include its dedicated focus on spine-related products, which positions it uniquely in a niche market. The company’s commitment to research and development (R&D) is evident, with R&D expenses reaching $20.4 million for the three months ending September 30, 2024, reflecting a 2% increase year-over-year. This investment underscores its dedication to innovation, which is critical for maintaining market leadership.

Metric Q3 2024 Q3 2023 Change (%)
Revenue from Products and Services $150.7 million $118.3 million 27%
Gross Profit $102.7 million $80.0 million 28%
Operating Expenses $136.4 million $118.4 million 15%
Net Loss ($39.6 million) ($42.7 million) 7%

With a focus on innovation and strategic growth initiatives, Alphatec is well-positioned to capitalize on the expanding market for spine surgery technologies. The continued investment in product development and market expansion is expected to drive future revenue growth and enhance competitive positioning in the sector.

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Article updated on 8 Nov 2024

Resources:

  • Alphatec Holdings, Inc. (ATEC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Alphatec Holdings, Inc. (ATEC)' financial performance, including balance sheets, income statements, and cash flow statements.
  • SEC Filings – View Alphatec Holdings, Inc. (ATEC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.