Surgalign announced that its board of directors has approved a corporate restructuring plan intended to help drive growth in the most valuable and profitable parts of the company’s business.
As part of the plan approved on November 8, 2022, 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 the fourth quarter of 2022 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 the go-forward business strategy.
Additionally, as part of its focus to improve operational efficiencies, the company 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 to $35 million compared to 2022. The company also disclosed that its board of directors has approved the exploration of further restructuring initiatives, which include but are not limited to, the potential paring down, selling or exiting certain aspects of its business, both domestically and abroad.
, stated, “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," said Terry Rich, President and Chief Executive Officer of Surgalign.
To achieve these savings, the company expects to incur approximately $3 million to $3.5 million in employee-related severance costs and $2.5 - $3.5 million in other exit and disposal costs in the fourth quarter of 2022 and first quarter of 2023 for a total estimated restructuring cost of approximately $5.5 - $7.0 million. Estimated cash savings are expected to be realized throughout 2023 and programs are anticipated to begin late in the fourth quarter of 2022 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.