Surgalign on track to achieve target cash savings of $30M-$35M in 2023

Surgalign Holdings provided updates on its previously announced restructuring plan. On November 8, 2022, Surgalign’s Board of Directors approved a restructuring plan intended to help the Company drive growth in the most valuable and profitable parts of its business. The approved plan included product portfolio rationalization in the domestic markets, and a scale down of its international business which will continue throughout 2023. Additionally, as part of the restructuring plan, the Company reduced its workforce in December of 2022, cut non-essential spending, and realigned resources to support growth of its Digital Health and core hardware assets. The primary focus of the planned restructuring has centered on product line rationalization. Surgalign targeted products with declining revenue and more limited growth prospects based on investments, as well as low and negative ROI profiles. The Company estimates that approximately 70% of total 2022 revenue was generated from roughly 30% of its product brands and believes that operating costs to support its other approximately 70% of its brands was too costly. Therefore, in January 2023, the Company began the process of removing those products from its portfolio. In anticipation of its product rationalization and the resulting downsizing of its offering, Surgalign announced in November 2022, plans to reduce its workforce. Notifications were provided and the Company executed on its plan, resulting in a reduction in force of approximately 20%. The combination of these efforts should enable the Company to significantly reduce its cash burn on a go-forward basis. Additionally, as part of its rationalization initiatives, the Company expects to incur an inventory write-down of approximately $12.5 – $15.5 million in the fourth quarter of 2022. By simplifying its offering, the Company anticipates it will be in a stronger position to service its customers, invest in its offering and execute its Digital Health strategy in the coming year. Furthermore, in an effort to extend its cash runway, Surgalign previously announced that it would explore all strategic avenues, including the potential divestiture of its assets, should opportunities arise. As announced on March 1, 2023, the Company closed on the sale of its Coflex and CoFix brands to Xtant Medical Holdings, Inc. for a total purchase price of $17.0 million. There has and continues to be interest in many of its other brands and the Company intends to continue to explore all strategic paths to unlock and enhance shareholder value.