Alphatec Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 4, 2023

There are 8 speakers on the call.

Operator

Good afternoon, everyone, and welcome to the webcast of ATAX First Quarter Financial Results. We would like to remind everyone that participants on the call will make forward looking statements. These statements are based on current expectations and are subject to uncertainties that could cause actual results to differ materially. These uncertainties are detailed in documents filed regularly with the SEC. During this call, you may hear the company refer to non GAAP pro form a or adjusted measures.

Operator

Reconciliations of non GAAP measures to U. S. GAAP can be found in the supplemental financial tables included in today's press release, which identify and quantify all excluded items and provide management's view of why this information is useful to investors. Leading today's call will be ATEX Chairman and CEO, Pat Miles and CFO, Todd Koning. Now, I will turn the call over to Pat Miles.

Speaker 1

Thanks very much, Audra, and welcome everybody to Q1 2023 financial results for ATEC. I am going to be providing some forward looking statements, so please read at your leisure. The momentum for the company is exceedingly strong and very pleased to report q1 2023 revenue at $109,000,000 which is 54% growth, 40% surgical volume growth And adjusted EBITDA margin improvement, 10.80 bps. And so Some recent highlights, extended momentum of PTP was the strongest contributor to Q1 growth, Fully launched LTP and we'll go more into that, which is very exciting. Introduce Invictus Direct vertebral rotation, AIS system, which is I'll go into that a little bit more as well, drove $15,000,000 in EOS revenue, and We acquired the navigation enabled robotics platform to enhance precision of our procedural strategy.

Speaker 1

And so, a lot of good things going on And a lot of momentum. And I think if you look back at the momentum, you could look back to really kind of our established commitments all the way back to 2018. And that is to create clinical distinction. If we're not doing something better, we're not going to be able to compel surgeon adoption. If we are not compelling adoption, Then it'd be very difficult to garner the type of distribution that we're looking for.

Speaker 1

And so, when we talk about clinical distinction, I think that the momentum would suggest that we're compelling adoption. And when you start to build procedures from the ground up And you're furthering procedural momentum. You could really look at PTP and LTP and look at things like the patient positioners and the retractors and information. And now that so excited to add the navigation enabled robotics piece. And so, this whole view of Distinction being different and how we're creating it, I think, is starting to be reflected at least procedurally.

Speaker 1

We got a ways to go in terms of reflecting the EO's piece, but can't be more excited about the influence it's having both on idiopathic and adult deformity. And Again, I'll speak a little bit more on that as we roll forward. And so an area of profancimliarity to the company is lateral. And when you start to think about sophistication being demonstrated through multiple distinctions of Same subject. I would say that lateral is a profound competency.

Speaker 1

And so when we talk about designing procedures from the ground up, we can't be more excited about what we're doing with regard to the lateral LTP transpolis approach. And so what you've seen in the marketplace is a big Swing back to ALIF. And so what surgeons want to do is they want to do a conventional midline ALIF. And the beauty of this procedure is that it provides the ability to do A list at 5.1 in a position of great familiarity. And so, the most common treated levels are L3 to S1.

Speaker 1

We want to be able Have a solution for lateral approach surgery. LTP is a reflection of all of our know how internally and can't be more excited about it. It really does enhance economics when you don't have to turn the room over, you don't forego all the expense associated with all of the disposables in a surgery As well as just the you start to think about a patient under anesthesia. So the beauty of the economics, the ergonomics and the optionality provided by this is exceedingly valuable. And then what we get to do is we get to integrate some of the experiences that we had on the patient position as well as what we've done exceedingly well on the SafeOp front.

Speaker 1

So just super excited about the momentum and all that's going on in that arena. Our momentum clearly on the procedural front is fantastic. Our run with EOS is yet ahead. And just because we're it has been very focused and candidly successful on the momentum creation portion With proceduralization in the lateral space, it doesn't mean that we can't commit the same type of prowess procedurally for things like AIS. And I thought it would be valuable to just provide a little bit of a vision on how we're leveraging EOS to increase our influence in deformity And really beginning to extend procedural strategy really beyond lateral and advanced care in something like AIS, which is adolescent idiopathic scoliosis.

Speaker 1

And so I mentioned that we launched the Invictus DVR Direct vertebral rotation instrumentation. And so the great part is, as we've launched that instrumentation, But now when you start to think, gosh, how are we going to have influence across something that's been somewhat of a mature market? And when you think about What we're calling our Alpha Informatics platform, you think about EOS, you think about how we're automating measures. And so if a patient goes in and gets automated measures and they get A preoperative plan. And you realize through the automated measures that there is a rotational deformity.

Speaker 1

When a patient gets de rotated or a surgeon de rotates a spine via a system like DVR, what they're going to use ultimately Is there going to use SafeOp in a way that all three provides motor evoked potentials such that when they de rotate the spine, it will provide them A confidence that everything is okay neurologically. And so you start to see, gosh, how does SafeOp start to Provide influence in that surgery and it becomes relatively apparent. And then just the ability to say how do we integrate the information that we got from the EOS And that will be with an interoperative assessment that will be availed in 2024. And then the ability to ultimately take that Information from EOS and applied bending coordinates preoperatively such that we can understand exactly what's going to go on with the surgery is again another opportunity to influence What's going on in AIS surgery? And then lastly, a position that ultimately effectuates Yes, there's a more precisely and more amenably place implants based upon the patient's position.

Speaker 1

And so We feel like there's a ton of opportunities to proceduralize outside of lateral and really create momentum for the company outside of what's previously gone on. This is a, I think, really kind of a key slide and a kind of a thesis that Really hits home with us is we think it's entertaining that some think the spine is commoditized and I think that they look at the inflation of spine surgeries as implants or screws. And when you start to look at outcomes, you start to see how are spine outcomes versus orthopedics and they're less predictable versus orthopedics. And so If you start to look at the graph and you say, gosh, what's the revision rate of a total knee surgery in 5 years and it's 3%. And you say, Yes.

Speaker 1

What's in a total hip replacement revision in 10 years? And it's around 5%. But then you start to look Spine surgery, you look at degenerative surgery and it's 10% to 15% in 1 to 3 years and adult deformity, it could be up to 25% to 30% in 2 to 5 years. So it's fascinating to us that people think, gosh, this is a commoditized environment when we realize there's still a ton to do to make this stuff better. And our view is that really it's about how do you start to mitigate variables.

Speaker 1

And if your commitment is to mitigate variables, That doesn't mean more screws. What it means is more information, and that's how we ultimately expand the influence of EOS. And so developing and integrating Spine's most powerful information based variable mitigation system has really been a commitment that we've made with regard to yields. And so just to be able to understand the preoperative phase and what you're going to start to see through the EOS system is automation. And so The days of surgeons measuring all of the different parameters that they're trying to achieve through the intervention It's going to be gone because ultimately we're going to do that in an automated way, which will ultimately help automate surgical planning and it will help with the diagnostic process.

Speaker 2

The other thing that could

Speaker 1

be fun is to bring this stuff into the operating room and really understand what the type of changes that we are able to garner with regard to some of the Patient specific type of RAS, understanding a patient's bone quality, utilizing reconciliation interoperatively to make sure that you're getting what you are Trying to achieve based upon what your original surgical plan was, and then assessment and follow-up. And then again, if you keep doing that a bunch of There's a predictive analytic reflection that ultimately creates just much greater predictability. But Our variable mitigation doesn't stop at EOS. It's like such a Exciting part of the platform becomes is how do we continue to even interoperatively become more sophisticated? How do we become more precise?

Speaker 1

And that's what's so exciting about the investment that we just made in the Fusion Robotics platform. And so our intention is to improve procedural predictability and efficiency while reducing radiation exposure.

Speaker 2

And so, whatever we think of these

Speaker 1

things, we think of them as How we would integrate them procedurally. And if you look at the picture on the far left, you get, really the option to intervene and place robotically navigated EMG verified pedicle screws, that means combining 2 technologies, both navigation and robotics, plus EMG, so that you're affirmed in terms of this group placement, but it doesn't stop there. And this is where we think that our opportunity is to integrate these things procedurally. And then what we'll be able to do is we'll be able to navigate the lateral incision, plan bony anatomy trajectory, facilitate precise dilator and retractor placement With integrated automated neural navigation that provides real time information on location and health of nerves interoperatively. So just be able to assemble these technologies to create one more precision to make it a much safer surgery.

Speaker 1

So we believe that that's going to again mitigate variables as it relates to the intervention. And then navigation Enable Robotics platform enhances predictability, monitoring retractor migration throughout the surgery while doing disc prep and interbody placement, Again, as an element of precision. And so, again, I think that all of these things ultimately drive a variable mitigation And effort that again makes for a greater level of predictability. So just can't be more excited about the distinction that that continues to provide, which ultimately compels adoption, And so, as discussed on the most recent call, We cannot be more enthusiastic about the team that's around the Fusion Robotics platform. And we love to say, Gosh, those guys aren't guessing with regard to what the requirements are to make this stuff seamlessly integrated into what we do with regard to procedures.

Speaker 1

And so The founders who we've talked a little bit about, Brad Clayton and Kevin Foley, have been around this since the mid-90s, And they know this field exceedingly well. And we just believe that our capacity to integrate this technology into the procedures, as I just described, It's the opportunity. And so we get to do so with a foundationally versatile platform that ultimately has a very small footprint, We think it's also a great advantage. And so we believe ourselves to be really uniquely well positioned for the informatics arms race that's going to ensue. And so I think with regard to the preoperative Capabilities and all that I described earlier, all of the interoperative elements that drive a procedural sophistication, And then an understanding of what happens postoperatively and us feeding that thing that back in such that surgeons will have an understanding of the type of experience that the patient has, we feel like is a recipe for forward success.

Speaker 1

And so I think that statistically as we are to date, the whole compelling surgeon adoption is being reflected As we continue to increase the blended products per category, the other, I think, element of a reflection is The continued interest in our surgeon education, which was 100 this quarter and the demand continues to be Profoundly robust. I expect we'll do 400 to 500 again this year. And so very excited about continuing to host surgeons here at our facility in Carlsbad. Lastly, I think that the distribution team is getting better and better. We're still a small company.

Speaker 1

We're less than 5% market share. And so our focus really is how do we strategically fill in large geographic gaps? I would continue to compel new surgeon adopters. And so that really remains our focus. The one thing that's got to make you exceedingly bullish Is that those people who have been around a long time are growing at 48%.

Speaker 1

And there's nothing that I think makes us more confident in the trajectory of what's going on is that the What's going on is that the people who have been around this a long time understand that they have a clinical aptitude are growing in a great way. And so What we're trying to do is continue to advance that clinical aptitude, earn increased share by share of existing surgeon users And further penetrate adjacent geographies within existing areas. And so That's the color commentary on the business, and I'll turn it over to Todd to talk about financials.

Speaker 3

Thanks, Pat, and good afternoon, everyone. We appreciate you joining the call today. I'll begin with revenue. 1st quarter total revenue was $109,000,000 reflecting 54% growth over the prior year and a 3% increase compared to the previous quarter. The $109,000,000 in revenue is comprised of $94,000,000 in surgical revenue and $15,000,000 1st quarter surgical revenue of $94,000,000 increased 55% compared to the prior year period.

Speaker 3

Procedural volume grew 40% in the Q1 with average revenue per case expanding 11% year over year as revenue mix continues to shift towards procedures with more products per case and greater complexity. And while laterally related revenue contribute the most to growth, Revenue related to our recently launched posterior expandable cage and biologics also grew solidly in the quarter. EOS revenue in the Q1 was $15,000,000 up 46% compared to last year with solid execution on deliveries and installations in addition to an order that was delivered in a nonstrategic international geography. We're going to do the remainder of the P and L. 1st quarter non GAAP gross margin was 72.4%, up 20 basis points compared to the prior year.

Speaker 3

1st quarter non GAAP R and D was $12,000,000 and Approximately 11% of sales compared to $9,000,000 and 12% of sales in the prior year. The increase on an absolute dollar basis was driven by Continued investment to organically expand our product portfolio and advance the Alpha Informatics platform. Non GAAP G and A was $81,000,000 and approximately 74 percent of sales in the Q1 compared to $61,000,000 and 85 percent of sales in the prior year period. We delivered over 1100 basis points of improvement. Consistent with our long range plan, approximately 40% of the leverage came from variable selling rate improvement, while the balance was driven by leveraging the infrastructure investments we've made.

Speaker 3

Total non GAAP operating expense amounted to $93,000,000 and approximately 85% of sales in the Q1 compared to $69,000,000 98% of sales in the prior year period, demonstrating 12.70 basis points of operating leverage year over year. Adjusted EBITDA was a loss of $5,200,000 and approximately 5% of sales in the Q1 compared to an $11,000,000 adjusted EBITDA loss And 16% of sales in the prior year. The 10.80 basis point improvement as a percent of sales was driven primarily by SG and A leverage. These results continue to demonstrate the leverage we can deliver as our business grows. We ended the Q1 with $117,000,000 in cash That includes $95,000,000 in net proceeds from the BraveWell term loan offset by $28,000,000 pay down of a revolving credit facility.

Speaker 3

Operating cash used totaled $35,000,000 which was predominantly related to investments in inventory and instruments to support sales growth and new product launches. Q1 of each year is also seasonally burdened with some compensation related payments. We continue to expect Full year 2023 cash used to meaningfully improve relative to 2022 as adjusted EBITDA improves consistent with our long term plan. That and the carrying value was $449,000,000 We continue to have undrawn and available borrowings under both the MidCap revolving credit facility and the Braid Well term loan. Now turning our look to the full year 2023, in line with the pre release of Q1 financial results a few weeks ago, We continue to expect full year 2023 total revenue to grow 28% to approximate $450,000,000 That includes 2023 Surgical revenue growth of approximately 30% to $393,000,000 and EOS revenue of approximately 57,000,000 As sales growth drives leverage across our business, we continue to expect to achieve adjusted EBITDA breakeven for the full year 2023.

Speaker 3

The strength of our revenue results in 2023 enables us to absorb about $4,000,000 of investment in the robotic navigation technology we acquired, while continuing to deliver on our commitment to achieve the 100 basis points of adjusted EBITDA margin expansion. Clearly, the momentum of the business is strong, which positions us well to achieve the profitability and free cash flow goals in our long range plan. The next few slides provide additional context for our 2023 guidance. And I'll start by sharing how our expectations for procedural volume growth and the expansion of average revenue for surgery shape surgical revenue guidance. We will continue to train surgeons at a robust rate, which drives both surgeon adoption and utilization.

Speaker 3

Training surgeons builds loyalty and enable surgeons to work up the procedural complexity curve, both of which increase utilization. The middle chart is a testament to the consistent ramp in utilization that our surgeon cohorts have demonstrated each year. We now expect these dynamics to fuel high teens percent procedure volume growth for the full year 2023 compared to the mid teens volume growth we expected previously. Average revenue per surgery growth is our mix shift towards procedures that require more products per surgery like PTP and LTP and towards surgeries with greater complexity, all of which feature higher revenue per procedure than our overall average. The gradual addition of expandable implants to our portfolio and increasing biologics attach rate are also enabling us to capture more of each procedural revenue opportunity.

Speaker 3

We expect these dynamics to drive growth in average revenue per surgery at a high single digit percent rate for the full year of 2023.

Speaker 1

Now with respect to the rest of the

Speaker 3

P and L, we have begun to demonstrate how this business scales as we grow and we expect that dynamic to continue through 2023. Guidance for breakeven adjusted EBITDA this year implies 800 basis points of improvement relative to full year 2022. And our confidence in delivering that level of operating leverage The full year 'twenty three is shaped by the 800 basis points of margin expansion we drove in the second half of twenty twenty two and by the strong 10.80 basis points we drove in the Q1 of 2023. Additionally, the components driving this leverage as we grow are consistent with what we described in our long range plan last May. So we are pleased to be able to continue investing in the priorities that support business growth while achieving our financial commitments.

Speaker 3

So in closing, 2023 has started out strong and we continue to see great momentum in the business. Surgeon interest is strong as demonstrated by the training metrics Pat shared earlier. This is a leading indicator of adoption, which ultimately drives the magnitude of procedure growth we are achieving. It is clear to us, when you enable surgeons to do better surgery, you earn their trust and a greater share of their overall procedural volume. You can see our commitment to invest in innovation through our prioritization of research and development.

Speaker 3

Our organic innovation machine It's completely focused on revolutionizing the approach to spine surgery. Through the recent acquisition of the Fusion Robotics assets, We added a tremendously knowledgeable team of people that will lead the integration of navigation enabled robotics into our procedural offering. We are laser focused on executing our strategy, and I can't think of a place I'd rather be than in the middle of what we're doing here at ATEC. And as you might expect, we have an active IR calendar over the next few months, and I hope to connect with many of you in person. With that, I'll turn the call back over to Pat.

Speaker 1

Thank you very much, Todd. Greatly appreciate it. So our view is that Spine's future will be defined by information. Our foundation of the SafeOp platform, the EOS asset as well as the Fusion Robotics asset that we've most recently added We'll be foundational to our success. And so only ATEC has the know how and technological foundation to set Spine's informational standard, And that's where we're heading.

Speaker 1

So with that, we will take questions.

Operator

Thank you. We will now open the floor up for questions. We'll go first to Matt Blackman at Stifel.

Speaker 4

Good afternoon, everybody. Thank you for taking my questions. I've got 2. And maybe to start a question for Todd, and I'm sure you're going to love this one. But we're almost a year into the 3 year LRP you laid out.

Speaker 4

And as we run our numbers and even bake in some deceleration, it seems like you're tracking Well, I had a plan, particularly on the top line. And I appreciate this may not be the forum for you to update the LRP, but it does feel like you could do your 2025 revenue goalpost as early as 2024. So the question is, am I missing something? Is there a reason beyond comps or a law of larger numbers, why you might see A deceleration to sub-twenty percent growth over the next 12 months that makes that sort of earlier than expected arrival on the 5 $55,000,000 revenue goalpost more challenging than we're appreciating? And I've got one follow-up.

Speaker 3

Thanks, Matt. Good to talk to you too. That's a good question and happy to answer it and give some context. I think our view is the business continues to be And we've been, I think, abundantly clear about our commitment to creating clinical distinction to drive surgeon adoption and the level of adoption that we As seen, which is driving the procedural volume has been strong. The leading indicators of And surgeon training, I think, are all trending north of our long range plan kind of milestones, if you will.

Speaker 3

And so I certainly like where we are relative to the revenue, Strong growth this year guidance around 30% year over year growth. Our long range plan assumptions, as you remember, were just kind of Low 20s percentage growth. So I think we entered the last 2 years of our LRP with really ahead of the game and with some tail to our So windy our tails, if you will, and so feel good about where we're going. Probably kind of short of answering specifically what 2025 revenue is going to be, but that should And then relative to the adjusted EBITDA component of that, much of our walk, As you know, it's time phased. And so I think on an absolute dollar basis, we would view $80,000,000 of adjusted EBITDA as being The floor and I think we've often talked about incremental revenue over our guide dropping through at kind of $0.10 on the dollar.

Speaker 3

And So I think more or less, I think you can kind of begin to think about how adjusted EBITDA might be different from the $80,000,000 on a higher revenue number I'm doing some of that math.

Speaker 4

Great. I really appreciate that. And I think there's a lot of stuff to pick from here. But one of the things I haven't heard you talk about Recently, and I suspect progress is being made. Just on international, just remind us where you are on the international rollout, Australia, Japan, what's left to do?

Speaker 4

And I guess really what's a reasonable way to think about when we start seeing visible revenue contribution? Could it be in 2024? I mean, I think we've got it baked in 2025, I'm just wondering if it's evolving a little bit faster.

Speaker 1

Yes. Matt, I appreciate the question. I was over at Spine Week Earlier this week in Australia, and so much of, I think, as these things become are the right people around it. And so the foundation that we're building with the Australian team is outstanding. And we're starting to do business literally.

Speaker 1

I think March Was the kind of the initiation of that business. And the great thing is, I think that there's a shared surgical kind of thesis One, they've adopted lateral surgery very quickly and favorably, and they still Utilize lateral surgery, so I think from a competitive perspective and from an opportunity standpoint, it's readily apparent. And I think that we have a team there to ultimately do very well. And so I would say we're just literally getting out of the gate on the Australian front. We probably have another year on the at least on the Japan business front.

Speaker 1

Again, I think that if I were to just speak subjectively about the right people around things, there is a lot of enthusiasm to for us to get into Japan. So I guess, again, very vague, but I would say, New Zealand, Australia, a great team getting off in a robust manner. Hopefully, we'll see a contribution just it will be a small one toward the end of the year, but the whole Japanese market will be probably 1 year, 1.5 years, 2025 This is what we're thinking, so, but love the foundation we're building.

Speaker 4

Great. Thank you so much.

Speaker 3

Appreciate it.

Speaker 1

Yes. Thanks, Matt. Thanks, Matt.

Operator

We'll move next to Brooks O'Neil at Lake Street Capital Markets.

Speaker 5

Good afternoon, guys. So I'm just curious if you'd comment how significant and ongoing industry consolidation Impacts your ability to grow and hit those long term growth targets.

Speaker 1

Yes. Brooks, I would say so much of it becomes us just And I'm working the business as we know it. And I'm not trying to be coy at all. And I think I read somewhere recently, somebody just talked about Not a lot happens until the integration takes place. And so candidly, it's been somewhat quiet out there.

Speaker 1

We love what we're doing. I got to tell you, I love the addition of the navigation robotics piece. And I think there's a lot of people this is a small town in terms of spine. And I think a lot of people understand the prolific nature of how we integrate technology to create better procedures. And so I think that's been demonstrated through our run to our guidance at from $83,000,000 in whatever it was 2018 To 450 in terms of our guidance this year.

Speaker 1

And so, I don't think that you can fake that. And I think people understand that. And I think that as you look at SafeOp as being a proxy for how we integrate navigation, I like our chances. And with the navigation team that's over in Colorado, the level of know how was kind of outlandish. And so, again, I guess, I pay less attention to the dynamics of all the frenetics in this space and just continue to say how do we create the distinction, how do we compel adoption and how do we get the right people in each of the different territories?

Speaker 1

And I think our excitement is how do we incent And compel and inspire great sales guys to come over and join the sale. A lot of great stuff is going on here. We have a heck of a long run, and And we want them on our team.

Speaker 5

Great. Let me just ask one more. So, obviously, you had PTP before you had REMI. Can you just talk a little bit about whether you see Remy enhancing the PTP procedure? Or are you thinking about it Or with LTP and deformity and some of this other stuff that's coming down the line?

Speaker 1

Yes. It's a great question, Brooks, the dynamics are that PTP adoption is profoundly robust. And then you ask, why do you need more technology? And one of the requirements associated with PTP is really it's like how do I get that first dilator orthogonal to the spine. And the challenge is, is it takes some radiation that is generated by the fluoroscope or the x-ray machine.

Speaker 1

And so our desire is to continue to protect not only the surgeons, but increase the precision by limiting the volume of radiation, Having people be able to place something more precise and then also give them a heads up, like one of the things I love about our SSCP As it tells the surgeon, hey, maybe there's something wrong, there's a degradation in the SSEP signal. We'd love to integrate the same type of dynamic here where what you can know as a surgeon is, Hey, maybe the retractor slightly moved and you would love some type of an alert. And so when you start to think about all the opportunities to mitigate variables in Surgery, our view was this was a great investment because ultimately what we could do is integrate these technologies in a way that continues to limit The technological kind of surging gestalt and can we provide technology to augment their efforts. And so we feel like PTP and LTP are great opportunities to do that. And then we just think that integrating these with the whole ecosystem of EOS and SafeOp and the others, This again provides great value and mitigates variables in surgery.

Speaker 5

Fantastic. Thanks a lot and keep up all the great work.

Speaker 1

Thanks, Brooke. Appreciate it.

Operator

We'll go next to Josh Jennings at TD Cowen.

Speaker 6

Hi, this is Eric on for Josh. Thanks for taking the question. Wanted to talk about REMI for a second. I was just curious to hear Feedback from surgeons that you're hearing on that acquisition, what are their thoughts on the combination of REMI with the ATEC portfolio?

Speaker 1

Yes. It's not unexpected. And it's been very, very favorable. I was over at as I said earlier, I was over at Spine Week in Australia, and there were several U. S.

Speaker 1

Surgeons and several Australian surgeons who approached me and were exceedingly pleased And candidly, they readily see the opportunity to integrate these technologies. And we've always talked about having 2 independent Like a neurophysiology and a navigation system that tells you in 2 different ways that, hey, you're safe. And I mean that through petroscrew placement as well as things like Transoas approach. And so These guys readily understand what our kind of thinking is around this acquisition, and I can't I've yet to hear of anybody who hasn't been supportive. I'm sure somebody will approach me.

Speaker 1

But in our view is We'll demonstrate like we're in this for the long haul. We'll demonstrate over the long term the value that we envisioned with regard to the integration of this technology to our portfolio.

Speaker 3

And Eric, I think the opportunity is to really integrate it into the full procedural approach. I mean, to date, robotics and navigation have Largely been all about pedicle replacement, which certainly has some value, but we think the real value is being able to integrate it into a procedural approach to mitigate variables of surgery.

Speaker 6

Understood. That makes a lot of sense. And I can totally appreciate that it Take some time to integrate that sort of technology into the portfolio, but when would it be appropriate for us to start seeing contributions from that REMI acquisition in revenue?

Speaker 1

Yes. I think the short term in terms of the 6 to 12 months efforts is going to be how do we get all of our implants Through the regulatory clearance and make sure that all of it is they're used together in a relatively conventional manner. I would tell you that Probably 25 ish is when you'll start to see the integration and procedurally of how these things all fit together. And we have great confidence in the elegance of this integration.

Speaker 6

Understood. Thanks for the questions.

Speaker 3

Thanks, Aaron.

Operator

And we'll take our next question from Sean Lee at H. C. Wainwright.

Speaker 7

Good afternoon, guys, and thanks for taking my question. I just have one, probably a little higher level one on the robotic surgery front. In terms of the lateral surgeries with AlphaTek is focusing on, What portion of surgeries currently are using robotic assistance? And with the right devices and technologies, Where do you think that number can get to over the next, say, about 4 to 5 years?

Speaker 1

Yes. I think it's a great question, Sean. I would tell you, if I were to be a betting man, I guess I am, I would say 3% or less today, 1% or less, really people are not utilizing it for the anterior column. As much as it's being promoted as Dutch? I think that it has been sketchy at best, robotics in the lateral Transolis, approach.

Speaker 1

Guys have talked a lot about it. They've been inspired about it, but little to none is done. I think that there's a great capability and I guess I'm more inspired by the navigation Maybe once we navigate something, we'll hold it with an arm. And if that's robotics, then I'm inspired about that too. But it's I think that there's a real opportunity.

Speaker 1

Like, When you start to think about predictability, orthogonality is a big driver of that. And so for us to create an orthogonal exposure in the spine and hold it in a place And tell somebody if it moves, I think that's very valuable. And so my hope is what we would do is, again, demonstrate another Requirement for lateral surgery through these means. Like I can't imagine a stronger position that we have in lateral surgery with automated SSCPs. Like how somebody doesn't utilize automated SSCPs and appreciate the discerning element of a degradation Of a signal as a precursor to a potential motor deficit, like why would you not use that?

Speaker 1

And so I think that as we continue to apply these technologies to a procedure, Again, I think that as Todd commented in terms of variable mitigation, that's the thesis of what we're trying to accomplish. And so more probably long winded than you'd hoped, but it's I think it's less than 1% today. I think it has a propensity to be very, very valuable, and I think that we're going to be The standard bearer as it relates to making the rules of a procedure that we know best.

Speaker 7

Great. That's very helpful.

Operator

That does conclude our question and answer session. At this time, I would like to turn the call back to Pat Miles for closing remarks.

Speaker 1

Thanks very much, Audra. Appreciate everybody's interest and excitement about ATEC. We are literally just getting started. We have a heck of a long run and excited about the potential. So anyway, thanks very much.

Operator

And that does conclude today's conference. Again, thank you for your participation. You may now disconnect.

Powered by Quartr
Earnings Conference Call
Alphatec Q1 2023
00:00 / 00:00