Surgalign Plans Corporate Restructuring Program

Surgalign’s Board of Directors approved a corporate restructuring plan that is intended to help drive growth in the most valuable and profitable parts of the company’s business.

Surgalign intends to continue its brand and product rationalization programs, which are expected to result in a greater focus on new products brought to market over the past year and core hardware products that hold the greatest growth prospects. Throughout 4Q22 and into early 2023, the company intends to discontinue some of its lower-performing SKUs, which will enable the redeployment of resources across research and development and support the commercialization of products that align with its go-forward business strategy.

Additionally, as part of its focus to improve operational efficiencies, Surgalign intends to continue ongoing efforts, as well as initiate several new programs designed to streamline and optimize resources and lower future working capital requirements. This will include product rationalization, process improvements and organizational redesign programs, which the company expects will result in lower non-essential spending, particularly in general and administrative expenses and select capital expenditures.

As a result of the restructuring programs and initiatives planned, the company expects an estimated cash savings of approximately $30.0 million to $35.0 million compared to 2022. Further restructuring initiatives may include the potential paring down, selling or exiting certain aspects of its business, both domestically and abroad.

To achieve these savings, the Company expects to incur approximately $3.0 million to $3.5 million in employee-related severance costs and $2.5 million to $3.5 million in other exit and disposal costs in 4Q22 and 1Q23 for a total estimated restructuring cost of approximately $5.5 million to $7.0 million. Estimated cash savings are expected to be realized throughout 2023 and programs are anticipated to begin late in 4Q22 and be substantially complete in the first half of 2023. The company continues to evaluate and identify other areas of its business to enhance efficiencies and improve processes, with a goal to further lower its operating expenses and capital needs.

Terry Rich, President and Chief Executive Officer of Surgalign, said, “We intend to take aggressive steps to realign our business and improve our market position and value creation opportunities. Our focus is on innovation and better serving our customers with the products and support they need to improve patient outcomes. We believe these programs will enable us to generate growth in areas we are focused on, enhance gross margins and lower expenses, and over time, improve our financial position by freeing up resources to invest in areas we believe hold the greatest promise. Implementation of these programs will be dependent on the outcome of financing initiatives currently underway.”

Source: Surgalign Holdings, Inc.