NASDAQ:ATEC Alphatec Q2 2023 Earnings Report $11.51 +0.11 (+0.96%) Closing price 04/25/2025 04:00 PM EasternExtended Trading$11.52 +0.01 (+0.04%) As of 04/25/2025 06:30 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Alphatec EPS ResultsActual EPS-$0.43Consensus EPS -$0.30Beat/MissMissed by -$0.13One Year Ago EPSN/AAlphatec Revenue ResultsActual Revenue$116.92 millionExpected Revenue$110.18 millionBeat/MissBeat by +$6.74 millionYoY Revenue GrowthN/AAlphatec Announcement DetailsQuarterQ2 2023Date8/3/2023TimeN/AConference Call DateThursday, August 3, 2023Conference Call Time4:00PM ETUpcoming EarningsAlphatec's Q1 2025 earnings is scheduled for Thursday, May 1, 2025, with a conference call scheduled at 4:30 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Alphatec Q2 2023 Earnings Call TranscriptProvided by QuartrAugust 3, 2023 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00Good afternoon, everyone, and welcome to the webcast of ATEC's Second 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. Operator00:00:33Reconciliations 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 the ATEX Chairman and CEO, Pat Miles and CFO, Todd Koning. All lines have been placed on mute to prevent any background noise. Operator00:01:01After the speakers' remarks, there will be a question and answer Thank you. Now I will turn the call over to Pat Miles. Speaker 100:01:20Thanks so much, Danica, And welcome everybody to the Q2 2023 financial results call. I would ask you to review the forward looking statements At your leisure. I got to tell you, this has been a very good quarter. So our growth has been fueled by our Spine focus. So if you look, we had $117,000,000 in Q2 'twenty three revenue, which is a 39% growth, 41% surgical revenue growth that would exclude EOS and a positive $1,500,000 adjusted EBITDA. Speaker 100:02:01The highlights are that we extended the lateral momentum, really the strongest contributor to our Q2 growth, Launched ALIF access to proceduralize LTP and midline ALIF approach for L3 to S1. We acquired navigation enabled robotics platform, which we'll talk a little bit about. We drove $15,000,000 in EOS revenue, which was a 24% growth. We achieved 32% volume growth and 7% growth in revenue per procedure and expanded adjusted EBITDA margin by 1100 basis points. Our commitments really since ATEC recreation have not changed, But kind of under the auspices of Spine Focus, we've been able to continue to create authentic clinical distinction. Speaker 100:02:51And so the commitment of clinical distinction continues. There's nothing better than being aligned with your customer. And spine surgeons commit their career, their vocation to spine surgery. So being aligned with them in terms of being spine focused is big, and so we continue to compel surgeon adoption. And I would say Same with regard to being elevated by the whole spine focused thing. Speaker 100:03:21It's just Being aligned with the sales force and being sophisticated with regard to the subject matter in spine becomes very, very important. So one of the great misnomers in spine is that it's commoditized. Spine is not commoditized. If something is commoditized, oftentimes there's great predictability associated with it. When you see a 10% to 15% revision rate in 1 to 3 years in degenerative surgery, I would say that that's not a predictable environment, at least it's not a durable environment. Speaker 100:03:55And when it's 25% to 30% in 2 to 5 years, I would say the same. And so as we look at the opportunity in front of us, we think we could Drive predictability, reproducibility and durability by mitigating variables. And so when you start to think about how do you mitigate variables How do you elevate procedural sophistication? And spine is a very challenging environment in doing so. And so our view is what you do is you take an informatics view and you create an ecosystem and you control variables from end to end and you start off preoperatively and you start to look at the measures of a patient. Speaker 100:04:34You start to plan against a patient early on, so diagnostically and preoperatively. And then what you do is you do everything you can interoperatively To mitigate variables. And I think we continue to demonstrate the things necessary. I think the acquisition of the navigation enabled robotic platform would suggest, gosh, we continue to make progress on that front. With the continued evolution of our SafeOp platform, the neural navigation and nerve health tool. Speaker 100:05:02We continue to get better on that front as well. So not only pre op and interop, But also we're trying to inform future surgery with regard to the post op experience. And so I think that There's a great opportunity to create greater predictability in a field that generally currently lacks it. I think what is important is to talk about why is ATEC continue to grow significantly outpacing the marketplace. And I would tell you the driver is lateral. Speaker 100:05:34And if you look at all of the clinical data out there. It's tough not to think that in certain indications for surgery that lateral is just not better. And so as it relates to blood loss, less blood loss, as it relates to hospital stay, a less hospital stay and days back to normal activity in terms of just ambulating. It's been demonstrated to be better and that's in 500 peer reviewed publications. So I would say make no mistake, the lateral market is the most coveted market. Speaker 100:06:06It is the growth market. And the great part is, as other companies are out celebrating anniversaries and it's often the wrong date, What ATEC is doing is setting a new standard in lateral. And that's it's the thing that we do best because we have great experience in the space. We're the very people who created the 1st generation led by Doctor. Luis Pimenta, who was the original lateral pioneer and is our CMO. Speaker 100:06:33And so there's nothing better than having the most versed, most sophisticated in it. So we're applying decades of lateral experience to address Really what we did in the 1st generation. So what we're doing is we're saying, what are the goals of surgery? And the goals of surgery are decompression, stabilization and alignment. So how does PTP in essence continue to evolve what we did initially? Speaker 100:06:57Well, the great part is, is with the SafeOp platform, we're addressing the neuroretraction complications. The patient that we're doing the PTP is a much more familiar position to surgeons and it mitigates inefficiencies. If a surgeon does a decompression, which is again part of the goals of surgery, they're in a prone position, so it's a better position. Your ability to stabilize, meaning put posterior fixation or pedicle screws in, is in the prone position is the most favorable place to place pedicle screws. Our ability to use patient positioners to control the patient position, again, is something that we've learned and applied to PTP. Speaker 100:07:37You don't have to turn the room over And clearly the sagittal alignment is better. Our view and really it's not even our view, it's an undeniable truth, If you're not serious about market participation in lateral surgery unless you have automated neuromonitoring, it's a foundational requirement. It's not a nice to have. So ours is designed to directly address the most common documented risk, which is femoral nerve complications in lateral surgery. And so, it is one of the things that we really celebrate, which is having unmatched organizational neuromonitoring expertise. Speaker 100:08:13We have the best of the best. We have great experience in this space and we just continue to get better. And so when we see people knocking off meaning copying our attractor or copying our patient positions. We know they can't copy the neuro monitoring. Taking Capturing a small signal in a very noisy environment and then interpreting that and providing actionable feedback Is the magic and without doing that, you're not ever going to be a serious participant in lateral surgery. Speaker 100:08:46So we covet the SafeOp platform and what's going on. And also think about it as what we're doing is we're taking an informatic and driving greater predictability with this tool. And I think there's going to be a consistency with regard to how people look at ATEC in terms of what the competencies are. But I think part of being the most committed to an environment, meaning lateral, you have to do research and you have to do education. And so I would say that we're the most committed to both the research and education within the field, and I think it's being demonstrated. Speaker 100:09:20Some of the most recent publications are PTP for adjacent level disease, PTP versus TLIF, PTP versus the standard first generation lateral that we did. And so there's 27 peer reviewed publications currently. We've trained over 500 surgeons in 2022 and we continue to host really important events. We have a PTP Council that continues to provide feedback and we apply the learnings as expediently as we possibly can, As well as had a Duke Emory Conference as well, which again, I think just illustrates or demonstrates a commitment to lateral surgery. And so, I would tell you that we are quickly becoming the lateral standard bearer. Speaker 100:10:09And I think the bottom line is PTP is really more aligned with the goals of surgery and really enables us to expand the marketplace in a very meaningful way. And so really from just participating in the $1,000,000,000 segment to making it a $3,000,000,000 segment based upon the addition Addressing pathology that would historically been addressed by PLIF and TLIF where you would need to do some type of a posterior decompression. So I would say that only ATEX committed to the at the outset to improve lateral, challenging its pioneers to better meet surgical requirements and address hurdles. We Have a solution designed to avoid the complications, which is the SafeOp part, which I talked about a minute ago. I think the whole applying our learnings I would tell you a cultural reflection of who we are here. Speaker 100:11:04And the other thing is, is obsoleting our last best effort. So when someone copies this, they're going to copy our last best effort because we're going to play our learnings forward. Not only transforming and expanding the market to surgeons who are accustomed to more conventional techniques. So, really our interest is to continue to advance the most coveted market, which is lateral surgery. I think the other way that we've been rewarded as I think when you create lateral confidence, it earns a surgeon's trust. Speaker 100:11:33And we deem that to be really a halo effect. And when we say halo effect, what that means is it expands ATEC product utilization In more conventional procedures. And so that becomes very, very valuable in terms of reflecting the momentum. And so I previously talked about informatics mitigating variables and the experience in translating say SafeOp in terms of the information and how it drives safety or looking at how we're going to integrate the navigation enabled robotics into lateral surgery. But EOS is really kind of staring at us as such a great opportunity to expand its influence in the reasonably near term. Speaker 100:12:22And the first thing that you're going to see mid-twenty 4 is you're going to start to see automated alignment reports, automated 3 d models, automated surgical planning and the option if you want to is applying the surgical planning elements to a patient specific rod. And so when we say automated alignment, what we mean is, as you as the As a biplanar view is taking on the image, our ability to immediately add public parameters and the measurements to assure alignment are immediate. And so this opportunity to continue to add informatics to The planning element becomes very, very apparent. The other thing in 2024 is going to be the assessment and follow-up. And so That will be a big part of what you're going to see in 2024. Speaker 100:13:16So we expect a lot of influence by EOs next year. And then subsequent to that is going to be things like bone quality. If you're going to stabilize the spine, which we said the goals are decompression, stabilization and alignment. You're going to want to know what the underlying material is. And so we feel like having a bone quality measure is very valuable. Speaker 100:13:35We'll also integrate an interoperative rod bending element to continue to make refinements in the alignment effort. We believe that there's a configuration opportunity to less than the number of assets required in the room. And then, the great future is really a predictive analytics a foundation that enables us to provide the surgeon data on like patients that have had a technique that have like pathology and give them a foundational view with regard to a rich data set. We're building the foundation for that rich data set. We recently got attestation for a SOC 2, which is a IT requirement that ultimately housed data. Speaker 100:14:14We're on our way to high trust. We have numerous accounts currently adding patients today that have EOS Edge to our data set. So we will have the most rich data set in spine. And I think having been at this for a very long time, All of the data collection forever has been manual. And so when I make a big deal out of the automated element, what we're telling you is that we're collecting objective data in an automated way that's going to make for a more assured data collection source. Speaker 100:14:49And so we talked a little bit about the navigation enabled robotics. The integration of it is right on track. Our learnings continue to affirm the investment thesis. We're thrilled about the team. They have deep expertise, And our ability to advance the integration and development is very, very apparent to us. Speaker 100:15:13We expect the initial experience in late this year, filing regulatory clearance for Invictus screw placement. We will continue to expect freehand navigation clearance in mid to late 2024 and then full integration into lateral procedural workflow in 2025. And so we remain totally bullish and profoundly enthusiastic about what's going on, on that front. So I think from a creating clinical distinction, a ton of momentum and a ton of excitement. In terms of compelling surgeon adoption, we went from about 1.8 products per procedure to now it's at 2.4. Speaker 100:15:54So I think the a convoyed element of the way that we view surgery is coming to fruition. Also, if ever you're wondering about the demand, The demand for educational experiences is still exceedingly high. And so we had 150 surgeons in Q2 and there remains a tremendous amount of interest in what we're doing. As it relates to elevating distribution, I can't be more excited on this front. I think that when you talk about spine focus When you talk about opportunities to grow, we're a less than 5% shareholder at this point. Speaker 100:16:34And We're so well positioned from a spine focused perspective. We celebrate the uncertainties in a marketplace. We think that they improve the quality and quantity of the funnel of sales people interested in working with ATEC. We'll continue to strategically fill in large geographic gaps And we'll continue to compel Surgeon adoption. And again, I think that this speaks to the spine focus, Which candidly others don't have. Speaker 100:17:04Another very, very affirming view is, if you're going to come join us, the likelihood of you growing at 38% is very high. That's a percentage growth rate of our same store sales. Statements and comments. Pat? Speaker 200:17:52Well, thank you, Pat, and good afternoon, everyone. We appreciate you joining us on the call today. So I'll begin with revenue. The 2nd quarter total revenue was $117,000,000 growing 39% over the prior year an increasing 7% compared to the previous quarter. The $117,000,000 in revenue is comprised of $102,000,000 in surgical revenue and $15,000,000 of EOS revenue. Speaker 200:18:172nd quarter surgical revenue of $102,000,000 increased 41% compared to the prior year period. Procedural volume grew 32% in the 2nd quarter, reflecting strong surgeon adoption with growth in the number of surgeons utilizing our procedural solutions up over 25%. Average revenue per case expanded 7% year over year due to continued mix benefit from the momentum of our lateral franchise, a continued increase of our biologics attach rate and an increase in case complexity. Strong performance in lateral drove increases in both procedural volume and revenue per case. The number of surgeons using PTP is growing and utilization of PTP among those surgeons is expanding as the procedures apply to a broadening set of pathologies. Speaker 200:19:02A robust perception to our posterior expandable cages also contributed to growth overall. Importantly, the areas where we have invested to create clinical distinction are the areas achieving the strongest growth. EOS revenue in the second quarter was $15,000,000 up 24% compared to last year with solid execution on deliveries and installations. Looking through the remainder of the P and L, 2nd quarter non GAAP gross margin Was 73%, up 3.40 basis points compared to the prior year. The year over year increase was primarily driven by royalty rate improvements and mix. Speaker 200:19:37The mix benefit came from both an increased contribution of surgical revenue and an improved EOS gross margin. EOS gross margin improvement is due to the success we've had in addressing the backlog of ServiceMeade over the last 12 months, as well as pricing initiatives we've implemented. 2nd quarter non GAAP R and D was $13,000,000 and approximately 11% of sales compared to $9,000,000 and 11% of sales in the prior year. The increase on an absolute dollar basis was driven by continued investment in our organic innovation machine to advance procedural and information based solutions, including approximately $1,000,000 of investment associated with the robotic navigation platform we acquired in April. Non GAAP SG and A was $81,000,000 approximately 69% of sales in the 2nd quarter, compared to $65,000,000 78% of sales in the prior year period. Speaker 200:20:27We delivered 8.50 basis points of improvement year over year. Approximately half of that was driven by improved variable selling expense and the other half by infrastructure leverage, including about 80 basis points of investment related to creating an international presence. As we grow the business, contributions to the leverage that we are delivering continues to be in line with our expectations. Total non GAAP operating expenses amounted to $94,000,000 an approximately 80% of sales in the 2nd quarter, compared to $75,000,000 89% of sales in the prior year period, demonstrating over 800 basis points of operating leverage year over year. Adjusted EBITDA was $1,500,000 and approximately 1% of sales in the Q2 compared to an $8,000,000 loss and negative 10% sales in the prior year period. Speaker 200:21:16This represents another quarter of over 1,000 basis points of margin expansion and we are pleased to have achieved positive adjusted EBITDA this quarter, slightly ahead of plan. Continued top line growth and disciplined execution is delivering results And this quarter's performance reinforces our confidence in achieving the long term profitability goals we've committed to. Turning to the balance sheet, we ended the 2nd quarter with $101,000,000 in cash. Operating cash use totaled $37,000,000 of which approximately 90% was related to investments in the sales generating assets, inventory and instruments that fuel our growing distribution footprint and new product launches. Given the strength of sales momentum in the first half, We pulled forward the required satin inventory investments. Speaker 200:22:05Offsetting that, adjusted EBITDA improvements in the first half benefited operating cash And we expect that to continue into the second half of this year. Debt at carrying value was $470,000,000 We continue to have undrawn and available borrowings under both MidCap revolving credit facility and the Braidwill term loan. Turning to our outlook for the full year 2023, we now expect full year 2023 total revenue to grow 32% to approximately $462,000,000 That includes surgical revenue growth of approximately 33% to $404,000,000 and EOS revenue growth of approximately 21% to $58,000,000 As sales growth drives leverage across our business, we expect to continue to achieve significant adjusted EBITDA progress this year. In conjunction With the increased top line guidance, we are raising full year adjusted EBITDA guidance to $2,000,000 representing 840 basis points of margin expansion. The increased guide is in line with the framework we've shared, specifically that we anticipate about 10% of revenue upside to flow through to adjusted EBITDA, I'll start by sharing how our expectations in procedural volume and average revenue per surgery growth shape surgical revenue guidance. Speaker 200:23:27We continue to train surgeons at a robust rate, which drives both surgeon adoption and utilization. Training surgeons built loyalty and enabled 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. Due to improvements in these dynamics, we now expect low 20s percent procedure volume growth for the full year 2023 compared to high teens volume growth 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. Speaker 200:24:09The gradual addition of expandable implants progress to our portfolio and increasing biologic attach rates are also enabling us to capture more of each procedural revenue opportunity. We continue to expect these dynamics to drive growth in average revenue per surgery at a high single digit rate percent rate for the full year. In sum, increased surgical revenue guidance is related to increased procedural volume expectations. That volume growth is being powered by adoption, both the quantity of surgeon customers and per surgeon utilization. These dynamics validate our thesis that when you create clinical distinction, you do compel surgeon adoption. Speaker 200:24:46With respect to the rest of the P and L, we have begun to demonstrate the operating leverage that sales growth enables, And we expect that dynamic to continue. Guidance for the adjusted EBITDA of $2,000,000 for this full year implies 840 basis points of improvement relative to last year. The components that are delivering leverage have been consistent with what we described in our long range plan last May. At that time, we committed to 2,500 basis points of operating leverage over the 2021 to 202025 time horizon. That entailed about 300 basis points of contribution from R and D, about 1,000 basis points related to variable selling rate and about 1200 basis point contribution from SG and A infrastructure leverage. Speaker 200:25:26The improving variable selling rate and the infrastructure leverage that sales growth has enabled over the last several quarters gives us great confidence to continue investing in growth while achieving our financial commitments. Now in closing, results this quarter are a continued a testament to our belief that good surgery is good business. Our investments to advance spine surgery and become the standard bearer have and will continue to deliver sector leading growth. Financial results this quarter are also mark a significant milestone for ATEC, a revenue growth driven inflection to positive adjusted EBITDA. We have great momentum and great opportunity ahead. Speaker 200:26:05We have an active IR calendar over the next few months, including our Innovation Day, which Pat mentioned in conjunction with NASS in October, and I hope to connect with many of you in person. With that, I'll turn the call back over to Pat. Speaker 100:26:16Thanks much, Todd. I think oftentimes we say things like our best is yet to come. But I would say that we've built a foundation really assembled for a long term a growth trajectory. And if you look at what we've done from 2018 to 2022 and really have grown at a 40% revenue CAGR, I think it was clearly a big influence on from Lateral. I think our best days are yet ahead. Speaker 100:26:45And if you think about us continuing to drive growth through distinguishing ourselves within the lateral franchise. We've yet to reflect the value of EOS from an informatics I think it provides us great opportunity to have an expanded presence in deformity. I think the navigation enabled robotics piece is apparent in terms of what the opportunity is there. We love the uncertainty of the marketplace. I think the spine focus will be rewarded. Speaker 100:27:15And so totally enthusiastic about responding to those opportunities. We continue to see expanded hospital access in places that we've had zero business. We now have access and we have the opportunity to build sales forces in states where we've had 0 sales. From an international perspective, we're in the very, very early phases and We're going to continue to be narrow and deep, but we're seeing success out of the places that we're participating. And then lastly, just the continued momentum in terms of lateral is quite clear. Speaker 100:27:51It's like expandables will be launched at NASH both from a lateral perspective and from a posterior. We're working on corfectomy. We have 3 d printed implants. There's a lot going on within the cervical realm, And we continue to professionalize our sales force of interest and really a shout out to our regulatory team. We have 9 regulatory submissions this quarter. Speaker 100:28:17That's surpassed entire previous years. And so, If you're wondering if there's a commitment to continuing to obsolete ourselves, there absolutely is. And so I would tell you that I believe that our 100% spine focus is powering our ability to be the standard bearer in the space. And when we say our best is yet to come, I think it's an objective truth. Anyway, with that, I'll turn it back over to the operator. Operator00:28:42Great. Thank you. We will now open the floor for questions. The first question comes from Matt Blackman with Stifel. Please go ahead. Speaker 300:29:09Thank you for taking my questions And good afternoon, everybody. Maybe just to start, Pat, you mentioned and I was hoping you could repeat it because it went by too fast, The 2Q surgeon metric number you provided. And if possible, can you just break that out even in the roughest terms between what's called lateral naive versus competitive surgeons. And I'm curious if that mix has changed at all over the last 6 months, over the last 12 months. And then if I could add on top of that, just curious what sort of surgeon reception you're getting for LTP and who will be coming in to be trained on that? Speaker 300:29:46And then I've got one follow-up. Speaker 100:29:49All right. I'll let Todd answer the surgeon metric stuff just because If it has a numeric value, I'm going to screw it up. As it relates to the reception on the LTP front, it's been very, very good. The reality is we haven't had the volume sets out there to garner the level of a response to the level of demand this apparent. And so, I, on a daily basis, get text and pictures of a 501A lift with a 4 or 5 lateral with the patient positioner and it's a thing of beauty And it's better than the work that we've done before. Speaker 100:30:34And so the surgery is good. And when the surgery is good, the volume follows. And so I remain exceedingly bullish and I would say that we're in a very early phase of that. Speaker 200:30:46And Matt, relative to the 2Q metric, we did about 150 this quarter. If you look over the past 4 quarters, I think it's 515 is the total. So we continue at a strong clip and feel good about the level of surgeon training. And as you know, surgeon training is a great Leading indicator for surgeon adoption. And so as we look at the demographics of people coming through, I'd say it's probably 25% are really Lateral naive, I think, in your words and kind of new to the technique With the balance being people who are familiar with the technique and are looking to adopt PTP or LTP. Speaker 300:31:34Okay. And then just one quick follow-up. I'm curious if you could just take a step back, talk quite a bit about the lateral market in general, but how fast do you think that market is growing today, Particularly when we think about sort of the underlying spine market being a maybe a low single digit grower. Can you just maybe give us some context You're obviously highly levered to the lateral opportunity more so than maybe that sort of traditional low single digits by market. But just curious what you think the Underlying market is growing today in the U. Speaker 300:32:02S. Speaker 100:32:03Yes, Matt. It's a tough one to put a number on. But one of the things that was the nemesis of the previous experience was that There were certain indications for surgery that you couldn't address with the technique. And so the great part is, I don't know if the market is expanding as fast as we hope, hope it is, but I will tell you the applicability of lateral into a much larger space is very apparent to us. And so that's why like I don't know if it resonates, but it's like the whole direct decompression in a prone position, the ability to stabilize in a prone position. Speaker 100:32:41Historically, those would have all been placentesis type patients. And so for us to start to evolve the technique into a much broader market space Suggest opportunity. And that's where it's like I have a tough time discerning, is it market is it very fast market growth Or is it just one of the things where we're applying the technique into a much broader space from a pathologic perspective. And so Either way, we're enjoying the trek. We're still such a small market shareholder. Speaker 100:33:12There's A plethora of opportunity out there. But there's not like outside of expandables in the last 10 years, there's really hasn't been very much from a a CLIF perspective in terms of evolution. So when you say what's the most coveted market, clearly the advantages of the latter been demonstrated and that's why we're so excited about what's going on from a SafeOp perspective because it is very hard. And so anyway, longer answer than you wanted, but it's just kind of a little bit of a context in how we think about it. Speaker 200:33:42And Matt, I think the implication there is To the extent that the lateral market is growing faster, which we do believe it is than the overall market, that incremental growth due to tapping the existing kind of PLIF and TLIF market really accrues to PTP. So for us, it's actually growing quite quickly Because one, we're taking share in existing kind of pathological applications, but also because we're able to expand the amount of a utility to a broader set of pathologies that growth accrues only to us. Speaker 300:34:17Understood. Thank you. I'll get back in the queue. Operator00:34:23Great. Thank you. Our next question comes from Joshua Jennings with TD Cowen. Please go ahead. Speaker 400:34:31Hi, good afternoon. Congrats on another strong quarter. I was hoping to just Learn a little bit more about the early trends with the LTP launch. And I guess the follow-up on that Just with this ALIF access system that you're now launching as well. I mean, as we think about LPP gaining more and more traction in that revenue per case metric. Speaker 400:35:00Is the LTP associated with more levels per case and therefore increase revenue per case and should that drive that kind of lateral revenue per case metric even higher? Speaker 100:35:12Yes. Josh, like I would say, the shortest construct that's going to be most common would be L4-five and L5S-one. So it's going to be at least two levels. And so what we're seeing It is really a very favorable acceptance from lateral or excuse me, from approach surgeons. And as you know, the nemesis of lateral has been you can't address L5S1 from a lateral position. Speaker 100:35:46And so to get the type of reception that we're receiving from access surgeons is super important. And so what we're seeing in terms of the early experience is multilevel surgery, L5S1 done by an approach surgeon with our access system, with the patient position required to tilt the patient and then bringing the patient back to an orthogonal position from 4, 5 and above. And so, again, I think It's better the work is better than what we've done before. And so the ability to apply that learning and make sure that we're including 51 is hugely important. And As I look at the pictures, all of the orthogonality associated with what drives predictability is right there. Speaker 100:36:34And so again, all indications are that this will be a good one. Speaker 200:36:39And Josh, to your point, more levels means more complexity, Which ultimately does translate into higher revenue per case. Speaker 400:36:48Great. Thanks for that. And then just wanted to You guys are growing so strongly off of a sizable base. And one of the elements we're trying to think through is just on the cross selling opportunity with EOS accounts that you inherited with that acquisition and that didn't have haven't adopted ATAX implant portfolio. But Where are we in that process? Speaker 400:37:11Our assumption is it's still very early and there's still a lot of opportunity runway ahead, but just wanted to get an update there. Thanks for taking the questions. Speaker 100:37:19Yes. Josh, I think when I outlined what I believe to be the growth drivers of significant manner, The EOS influence in any hugely meaningful way has not transpired as of yet in terms of the reflection from the Data that you get out of the EOS unit to move people for better surgery into the operative experience. And that's where it's like All of the automation is going to inspire significant interest. And just the ability to have an automated alignment measure as you take a full body standing biplanar low dose image. So your ability to get the alignment measures to ultimately apply into your surgical plan and have an automated surgical plan. Speaker 100:38:09All those things being automated will elevate the likelihood of their utility. And so as you utilize those and you said, say, gosh, in this patient, I would like a patient specific rod, your ability to select patient specific rod and have that delivered into the experience, and then have an interoperative reconciliation, say I got what I achieved based upon what the plan was And then to follow-up on that postoperatively with the exact same film, I think is ultimately what's going to compel The kind of the deformity audience into the experience. And so I think we're very early on since we haven't launched this stuff. I don't think that you've seen the type of the traction that we expect to have over the years. We realized that this was going to be a long run. Speaker 100:38:54I would tell you one of the things I'm most proud of about the company is whenever we acquire a technology, what we do is we improve it and we integrate it into our thesis. And so I would say that the last little while has been committed to evolving EOS into the way that we think about the interoperative experience and those things are forthcoming clearly in mid-twenty 24. And so our excitement is that we have a lot of momentum on the lateral front and on the surgical front, But our best days are yet ahead based upon the translation of our ability to once again take information and drive more predictability. Operator00:39:36Our next question comes from Matthew O'Brien with Piper Sandler. Please go ahead. Hi. This is Samantha on for Matt. Congrats on a great quarter and thank you for taking our question. Operator00:39:49To start, I guess, a little bit on the adjusted EBITDA. You've already achieved adjusted EBITDA positive versus the breakeven expectation at the beginning of the year. Can you talk to us a little bit more about what allowed you to see that so early and maybe what we can expect for Cadence moving forward? Speaker 200:40:07Thanks, Samantha. I think ultimately, when you look at our adjusted EBITDA going into the year, More or less, we kind of messaged 800 basis points of operating margin expansion or just EBITDA margin expansion on the full year With a little bit of that heavier in the first half and a little bit later in the second half. And I think that would have kind of led you to something like a minus 5, 0 and a plus 5 is kind of how I think the math would have shook out after you looked at that from that standpoint. And so then kind of coming into this quarter, Knowing that 0 was kind of the expectation, clearly the revenue outperformance benefits there And we definitely benefited from some incremental improvement in our variable selling expense. And so I think this quarter about half of it, half of our operating expense leverage was due to variable selling expenses. Speaker 200:41:05So we saw that come through a little bit stronger in the quarter. And that's really just a little bit of, I think timing of our investments on that front. And so Ultimately ended up a little bit better than probably would have expected given the revenue outperformance. But I just keep in mind that we're talking about 100 of 1,000 of dollars here as we kind of flip from negative to 0. And I think we spent just shy of $90,000,000 in total. Speaker 200:41:33So Being as close as where I think was a pretty good result and we're very pleased with I think the broader comment, which is As we've kind of built the company and as we've architected the walk to profitability, the profitability is coming in the areas That we expected. And so that to me is what is really the takeaway here. In terms of cadence, I think our total top line a raise is another $12,000,000 so beat by 7 in the Q2 and raised by 5 in the back half. And if you apply Really the 10% drop through on that, think about another $500,000 of drop through in the second half, which probably puts you a couple of $100,000 positive in the Q3 and the balance there in Q4. So that's kind Operator00:42:28And then just one more from us. I know we've talked a little bit about the market growth, buy. Also, could you touch on whether you're seeing any share taking as well? Thank you. Speaker 200:42:39Yes. I think clearly when you just do the numbers, if the market is growing, call it low to mid single digits and I think our surgical revenue grew 41%. We're clearly taking a lot of share. And I think that's been the story. Clearly, lateral in our clinical distinction And all of the innovation we've created and brought to the market is driving a ton of attention. Speaker 200:43:05And I think, again, Greatest indicator is the amount of training we're doing and the interest that we're getting from surgeons and from our ability to elevate the distribution footprint. Operator00:43:26Inley. Please go ahead. Speaker 500:43:29Hi, thanks for taking the questions. Maybe for Pat to start, but In your prepared remarks, you talked about just the uncertainty in the marketplace and your opportunity to fill in still large geographic gaps Amongst your sales organization. Pat, can you go into a little bit more detail there? And just given some of the market disruptions, are you Even pulling forward some investment in the sales organization and maybe just help us think of anything that's kind of baked into the stated guide for building out some of the geographic gaps. Speaker 100:44:04Yes, I'll go ahead and take the, I guess the qualitative, I'll get time to the harder one. I think We're being as opportunistic as we can possibly be. And the dynamic is that I think that The sales people who have been in spine and have found success in spine want a partner that's aligned with them. And so when we talk about being spine focused, much of it is really an outreach to the people who are committed to this thing over the next 10 to 15 years. If you want to move the field of spine surgery, you will work with us. Speaker 100:44:44And that's where it's like our enthusiasm to continue to outreach to, Candidly, companies that have not been very focused in this fine field and think that it's commoditized is an opportunity for us. And so where we see some uncertainty in the marketplace. We're a very certain place and it's kind of a strange thing to say. 5 years ago when we took over ATEC, I wouldn't call it hugely certain, but I will tell you today as it relates to having the foundational technology in the asset base Of the type of engineering know how that we have from a mechanical perspective, the prowess on the neurophysiologic perspective, the understanding of imaging, the understanding of navigation robotics. I will tell you that it just provides us an opportunity to go solicit and to retain top talent. Speaker 100:45:36Top talent in the room makes a difference. We rely upon the sales guys in the room to make a difference. And so We're aggressively seeking those guys who can make a difference in the operating room to partner with us. And so, I think with the Globus NUBA thing and with the big companies being somewhat lethargic, we're being opportunistic. Speaker 200:46:00And Drew, in terms of our opportunity that Pat talked about and our willingness to invest, clearly, we're willing to invest. I think we've demonstrated that. If you think about the growth that we're seeing in our investment, we're leaning into that growth To fuel it, as you think about the investment in our sales organization, that There is certainly a level of investment that's baked into the underlying guide and we feel very good about where that's at. Kind of order of magnitude. It's very similar to what we've seen in previous years. Speaker 200:46:35And so, while from quarter to quarter that might change, We feel good about where we are relative to our ability to invest to drive the growth. Speaker 500:46:46Got it. Thank you. And maybe just one on robotics. But the initial experience is expected later this year, freehand in late 2024, full integration in 2025, if I I heard that correctly earlier in the call. But as you are thinking about commercializing the robotics platform, I know we're still a bit of ways, but are you how are you thinking about placement trajectory or utilization trends. Speaker 500:47:12Is there anything that makes you feel better or worse when you kind of benchmark that to what some of the other couple of competitors have been able to do in the robotics space? Thanks for taking the questions. Speaker 100:47:23Yes. Thanks, Drew. I think it's a great question. And the dynamic becomes is, What we love is small footprints. And so when you have a small footprint, oftentimes there's a direct relation to the COGS. Speaker 100:47:38And when you have a limit when you have low COGS, high technology, it provides you flexibility. And so as I look to the future and I look at what capability of what the guys in Boulder are doing with regard to that robot and that navigation piece, it's going to provide us great the ability to integrate it into the procedural workflow in a very elegant way, but that also means we get flexibility with regard to if you have to acquire it, can you lease it, Can we integrate it with regard to some type of a volume utility in implant? So I think it gives us like ultra flexibility where we don't have to back a bus up the robot in. And so our enthusiasm is very high with regard to just kind of the foundational cost structure of the system. Speaker 200:48:20I think the only thing I'd add to that Pat is just given the fact that the cost and hence our price point being about $500,000 relative to the total price our price point be about $500,000 which is significantly lower than other market prices of other robots. Our ability to do earn outs and those types of things and not needing 5 surgeons to sign up to the deal Is totally imminent. And so that really opens up so many more opportunities for us to essentially commercialize this thing in the long run, in a way that works for everybody. Operator00:49:01Our next question comes from David Saxon with Needham and Co. Please go ahead. Speaker 300:49:07Yes. Hey, guys. Thanks for taking my questions. I've been hopping between So I apologize if any of my questions have been answered. But maybe first on the portfolio, wanted to see how you're thinking about the breadth of it. Speaker 300:49:20I think you've talked about in the past about wanting to add some sort of motion preservation product. Is that So a focus, and then are there any other gaps in the portfolio that might be priorities to address? Speaker 100:49:36Yes. You know the great part is, I think the navigation robotic thing filled a big gap. And so, we're totally enthusiastic with regard to where we sit from a portfolio breadth perspective today. If you look at the in the high 90s kind of prevalence of pathology and can we address it? The answer is yes. Speaker 100:50:02I would say, a hole clearly is cervical motion. We'll fill that hole In the years to come, who knows when or what presents itself. But I don't see that as much of a detriment. We're in the process. We'll output some, corpectomy things next year. Speaker 100:50:22I would say, as we sit today, it's an irritants to me, but it's one of those things where it's, I guess, forthcoming and we have a clear view. We have designs. We have we're in the very early Experience, so we're good there. But other than that, I love where we are. I think what you're going See, as you're going to see continued expansion within kind of the idiopathic deformity space for us not to translate a rotational understanding in EOS to a system that ultimately addresses some of those things to not utilize some of our learnings from patient positioning, to that utilize our motor vocodentials within our neph physiology realm. Speaker 100:51:01And so I think that we have a lot of opportunities to continue to expand our really kind of competencies across different pathologies and different patient types. But I feel great about where we are. Speaker 200:51:13Yes. I mean, I love it because ultimately, it's really such a reflection of the organic innovation machine we've built here That can ultimately address so much of the gaps that we have in front of us. And that's ultimately why you see our commitment to invest the kind of R and D spend that we do. Speaker 300:51:33Great. Thanks for that. And if I could just have a or ask a follow-up for Todd. Just on EBITDA, I guess just the path to $80,000,000 in $25,000,000 I think at the Analyst Day, you kind of thought it would be more of a ramp. But I think you're kind of outperforming EBITDA. Speaker 300:51:56So could it look more linear With 24 being closer to 40, any thoughts there would be helpful. Thanks. Speaker 200:52:05Yes. Thanks, David, for the question. I guess what I'd tell you is, I feel very good about how the leverage is manifesting itself. And I think One of the great comforts I have sitting in my seat is the fact that Pat and I were totally aligned on where the company is going. And the way our leadership team has built the company reflects the leverage that we've communicated. Speaker 200:52:33And so the investments reflect the priorities of the business. And as we grow, ultimately, we see that leverage. And so, what I'd tell you We feel good about the quarter. Happy that we can raise full year guidance, be a little bit ahead of the game there and our ability to continue to march toward our long term goals and objectives totally intact and we feel great about it. And so I'm probably going to be short of giving you a hard number or a hard answer there, but I like our chances. Operator00:53:14All right. Our next question comes from Aaron Wukmir from Lake Street Capital Markets. Please go ahead. Speaker 200:53:22Hey, good afternoon, everyone. Speaker 600:53:23This is Aaron on the line for Brooks. Congrats on the strong quarter. You guys are doing a lot of good things and we're really excited about the growth going forward. So how sustainable do you believe that these elevated procedure volumes can continue? You mentioned this a little bit in the prepared remarks, but Are you seeing other companies respond to the innovation with any moves of their own? Speaker 600:53:45How are they responding to innovations in lateral and with SafeOp and EOS? Speaker 100:53:52Yes. Erin, thanks so much for the question and our best to Brooks. But The interesting thing is that these things are very tough to pivot, meaning if there's a competitive dynamic that is very well protected. It's not the IP that protects it. It becomes the know how that does. Speaker 100:54:13And that's kind of why I gush about the neurophysiology piece. I think I've been at this in terms of just within lateral north of 20 years, 22 years. And so the reality is, the one thing I know is that neurophysiology, automated neurophysiology is an absolute unequivocal requirement. And so when people show different things in lateral, but they don't show an automated neurophysiology system that ultimately includes SSCPs to understand retraction injury, then they're not serious about participating. So when I look at a procedure and I see people copy our patient position or copy our attractor, What they can't copy is the know how that we have here with regard to neurophysiology. Speaker 100:54:56And so that's going to be a very difficult thing to do. And so that's going to take years to do and years of a competency to create. And so that's why I love our momentum and I love the type of progress we're making from a surgeon user perspective because these are unadulterated truths and that's where it's like I feel like we're very well protected in the very area where we have a committed expertise because there's a very long level of experience And know how. And so my general view is, we will continue to grow procedurally And we will continue to really relish in the high ASP of the convoy sales and that's why we ultimately say, gosh, for creating distinction. That distinction is driving adoption. Speaker 100:55:42The adoption is reflective of the convoy sales. Speaker 600:55:46Great. Awesome. Yes, very helpful. And then just a quick follow-up. I think you might have this as well in the remarks, but can you describe just a little bit what you're seeing now in the international markets and what your plans are sort of there? Speaker 600:55:58Would you consider that a meaningful priority for you guys. And then also on the flip side, are you seeing any disruption in the domestic markets at all? Speaker 100:56:10Let me answer the international thing first. I would tell you that one of the things that we Want to do is we want to be very deliberate. And so when we go into a marketplace, we want to be all And so our early experience in Australia has been awesome. So New Zealand and Australia are very are not huge markets. I got to tell you, we're doing great surgery in those markets with people who know how to deliver great surgery. Speaker 100:56:38And that's where it's like we realize that the precursor to a great business Is doing great work. And so our enthusiasm as it relates to the contribution in the years to come from Australia and New Zealand is very, very high. We started to lay the foundation for Japan. We will do the same thing in Japan. Japan is a great market and it's a big market. Speaker 100:56:58I think from a surgical They view surgery in a very similar vein as we do. And so as we think of the international contribution, we don't feel like we have to be worldwide. What we want to do As we always talk about being narrow and deep. And so the interest there becomes just that. How do we continue to follow the very directive that we committed to in the early phase of the recreation of this company. Speaker 100:57:23As it relates To the domestic market, I think that there's a lot of disruption. I think that we're irritating people, which is the intent. And I think that the Globus NuVasive news creates uncertainty. And so And I think that there's also a lethargy in the companies that aren't spine focused. And so to me, I think, we're sitting in a very opportune space of great opportunity in the international market, some uncertainty for us to exploit in the domestic market. Speaker 100:58:02And so I think we find ourselves in a very good place. Operator00:58:15All right. Our final question is from Sean Lee with H. C. Wainwright. Please go ahead. Speaker 200:58:23Good afternoon, guys. Congrats on a great quarter and thanks for taking my questions. Moving back a bit To the prepared remarks where you mentioned the increasing surgeon training. So I was wondering what's the Sales cycle, I guess, like for the PTP, where how long does it take for a surgeon to come to training to start using the PTP in their practice and then move on to become a repeat customer. And what's the rate of these surgeon conversions? Speaker 100:58:55Don, if you could tell us that, we would be forever indebted. No, it's like Each of the individual surgeons have different needs and they come to us with different sets of experiences. And so One of the challenges is what are the list of requirements to ultimately prepare somebody them to feel comfortable in applying the procedure into surgery. And believe you me, it's within our interest to make sure that they are profoundly confident and comfortable. And so One surgeon may need a single cadaveric experience and they come to a course and they start doing cases. Speaker 100:59:31Other surgeons may need a course, they may need to go watch a surgery, they may need to go, they may need a proctor surgeon into their surgery and they may be very, very slow to uptake. And so, it's profoundly different for each individual surgeon. And the one thing I know, and this should provide you great comfort, is The surgeons don't want to make any mistakes, and I think that they're profoundly careful. And so they're going to take their time. And sometimes they need to be competed into it. Speaker 101:00:00It depends upon the marketplace, but I got to tell you, there's numerous geographies out there where PTP is on such an upswing that the surgeons feel forced to do it because they're losing patients for not doing it. And so, we are profoundly confident. I think the publications all suggest that this is an absolutely predictable reproducible experience, but we have to respond to the individual needs of the respective surgeon to make sure that it's predictable. So I know that's a long winded answer and I didn't give any specific numbers. Candidly, I can't and won't. Speaker 201:00:35I understand, but it's very helpful for help understanding this market. Next my next question is on the You mentioned during the prepared remarks that you've seen geographic expansion and moving to adjacent markets especially. How much is that contributing to your overall growth and where do you see that trend going over the next 6 to 12 months? Speaker 101:01:03Yes. I think that's a great question and I would say limited. And it's So often what will happen is we may have a, a, generally a stronghold in a Pacific City, but then the adjacent cities that have big spine spends, we do nothing in. And The great part about, I think, our the makeup of our business is you're seeing 38% growth in those territories that have been established. And so, if we're seeing that type of growth in same store sales, that in my mind means, gosh, I'd accepted that As a tool that will our business that will expand. Speaker 101:01:47And so the great thing is, we have like if you're going to 38% in those areas and your overall growth This 41% surgically, I would say it's not like we're adding a bunch of people that ultimately gets to a place and that's where it's like Our enthusiasm is to add those adjacencies, so what we could enjoy not only the adjacencies, but the same store sales growth that we would enjoy in that geography. And so Thanks, Sean. Operator01:02:24Great. Thank you. I will now turn the call back over to Pat Miles for closing remarks. Speaker 101:02:30Yes. Thanks very much for your interest in ATEC. And as we say, our best is yet to come. So excited about what's going on and We love Spine, and we are thrilled to be serving it. Thanks. Operator01:02:43Thank you. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may nowRead morePowered by Conference Call Audio Live Call not available Earnings Conference CallAlphatec Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Alphatec Earnings HeadlinesWhen Can We Expect A Profit From Alphatec Holdings, Inc. (NASDAQ:ATEC)?April 23 at 1:24 PM | finance.yahoo.comATEC Launches PTP™ Corpectomy, The Next Evolution of Lateral Approach SurgeryApril 23 at 8:23 AM | finance.yahoo.comTrump purposefully forcing markets to crash…Whether you agree with the plan or not doesn’t matter. It’s happening. The only question is – are you ready for it?April 26, 2025 | Porter & Company (Ad)Barclays names most and least affected healthcare companies from tariffsApril 16, 2025 | msn.comAlphatec Sees Unusually High Options Volume (NASDAQ:ATEC)April 16, 2025 | americanbankingnews.comExamination Of Alphatec Holdings: Prognosis--Chronic Cash BurnApril 15, 2025 | seekingalpha.comSee More Alphatec Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Alphatec? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Alphatec and other key companies, straight to your email. Email Address About AlphatecAlphatec (NASDAQ:ATEC), a medical technology company, designs, develops, and advances technologies for the surgical treatment of spinal disorders in the United States and internationally. It manufactures and sells implants and instruments through third-party suppliers. The company offers Alpha InformatiX product platform, including EOS imaging system that provides full-body imaging; VEA alignment mobile application, which leverages EOS technology to more quickly quantify alignment parameters on a mobile device; SafeOp Neural InformatiX System that automates electromyographic and somatosensory evoked potential monitoring; and Valence, an intra-operative system that integrates navigation and robotics into spine procedures, as well as Sigma Prone TransPsoas (PTP) Access and PTP Patient Positioning Systems. It also provides split-blade retractors; Sigma-ALIF Access System, a procedure-specific access system; spinal implants and fixation systems comprising NanoTec surface modifications, Calibrate PSX, and Invictus, as well as various standalone implants for height restoration and stabilization. In addition, the company provides biologics comprising 3D ProFuse Osteoconductive Bioscaffold for ease of handling and better endplate-to-endplate contact; AlphaGRAFT Demineralized Bone Matrix (DBM) comprising demineralized human tissues; AlphaGRAFT DBM Fibers comprising demineralized fibers; AlphaGRAFT Cellular Bone Matrix (CBM), a growth factor-enriched cellular bone matrix; AlphaGRAFT CBM that is delivered in granular, fiber, or structural form; BioCORE Moldable Bioactive Graft, a synthetic mineral-collagen composite matrix that can be molded to fit the bone defect; and Amnioshield Amniotic Tissue Barrier, an allograft for spinal surgical barrier applications. The company sells its products through a network of independent sales agents and direct sales representatives. Alphatec Holdings, Inc. was founded in 1990 and is headquartered in Carlsbad, California.View Alphatec ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step In Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Starbucks (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 7 speakers on the call. Operator00:00:00Good afternoon, everyone, and welcome to the webcast of ATEC's Second 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. Operator00:00:33Reconciliations 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 the ATEX Chairman and CEO, Pat Miles and CFO, Todd Koning. All lines have been placed on mute to prevent any background noise. Operator00:01:01After the speakers' remarks, there will be a question and answer Thank you. Now I will turn the call over to Pat Miles. Speaker 100:01:20Thanks so much, Danica, And welcome everybody to the Q2 2023 financial results call. I would ask you to review the forward looking statements At your leisure. I got to tell you, this has been a very good quarter. So our growth has been fueled by our Spine focus. So if you look, we had $117,000,000 in Q2 'twenty three revenue, which is a 39% growth, 41% surgical revenue growth that would exclude EOS and a positive $1,500,000 adjusted EBITDA. Speaker 100:02:01The highlights are that we extended the lateral momentum, really the strongest contributor to our Q2 growth, Launched ALIF access to proceduralize LTP and midline ALIF approach for L3 to S1. We acquired navigation enabled robotics platform, which we'll talk a little bit about. We drove $15,000,000 in EOS revenue, which was a 24% growth. We achieved 32% volume growth and 7% growth in revenue per procedure and expanded adjusted EBITDA margin by 1100 basis points. Our commitments really since ATEC recreation have not changed, But kind of under the auspices of Spine Focus, we've been able to continue to create authentic clinical distinction. Speaker 100:02:51And so the commitment of clinical distinction continues. There's nothing better than being aligned with your customer. And spine surgeons commit their career, their vocation to spine surgery. So being aligned with them in terms of being spine focused is big, and so we continue to compel surgeon adoption. And I would say Same with regard to being elevated by the whole spine focused thing. Speaker 100:03:21It's just Being aligned with the sales force and being sophisticated with regard to the subject matter in spine becomes very, very important. So one of the great misnomers in spine is that it's commoditized. Spine is not commoditized. If something is commoditized, oftentimes there's great predictability associated with it. When you see a 10% to 15% revision rate in 1 to 3 years in degenerative surgery, I would say that that's not a predictable environment, at least it's not a durable environment. Speaker 100:03:55And when it's 25% to 30% in 2 to 5 years, I would say the same. And so as we look at the opportunity in front of us, we think we could Drive predictability, reproducibility and durability by mitigating variables. And so when you start to think about how do you mitigate variables How do you elevate procedural sophistication? And spine is a very challenging environment in doing so. And so our view is what you do is you take an informatics view and you create an ecosystem and you control variables from end to end and you start off preoperatively and you start to look at the measures of a patient. Speaker 100:04:34You start to plan against a patient early on, so diagnostically and preoperatively. And then what you do is you do everything you can interoperatively To mitigate variables. And I think we continue to demonstrate the things necessary. I think the acquisition of the navigation enabled robotic platform would suggest, gosh, we continue to make progress on that front. With the continued evolution of our SafeOp platform, the neural navigation and nerve health tool. Speaker 100:05:02We continue to get better on that front as well. So not only pre op and interop, But also we're trying to inform future surgery with regard to the post op experience. And so I think that There's a great opportunity to create greater predictability in a field that generally currently lacks it. I think what is important is to talk about why is ATEC continue to grow significantly outpacing the marketplace. And I would tell you the driver is lateral. Speaker 100:05:34And if you look at all of the clinical data out there. It's tough not to think that in certain indications for surgery that lateral is just not better. And so as it relates to blood loss, less blood loss, as it relates to hospital stay, a less hospital stay and days back to normal activity in terms of just ambulating. It's been demonstrated to be better and that's in 500 peer reviewed publications. So I would say make no mistake, the lateral market is the most coveted market. Speaker 100:06:06It is the growth market. And the great part is, as other companies are out celebrating anniversaries and it's often the wrong date, What ATEC is doing is setting a new standard in lateral. And that's it's the thing that we do best because we have great experience in the space. We're the very people who created the 1st generation led by Doctor. Luis Pimenta, who was the original lateral pioneer and is our CMO. Speaker 100:06:33And so there's nothing better than having the most versed, most sophisticated in it. So we're applying decades of lateral experience to address Really what we did in the 1st generation. So what we're doing is we're saying, what are the goals of surgery? And the goals of surgery are decompression, stabilization and alignment. So how does PTP in essence continue to evolve what we did initially? Speaker 100:06:57Well, the great part is, is with the SafeOp platform, we're addressing the neuroretraction complications. The patient that we're doing the PTP is a much more familiar position to surgeons and it mitigates inefficiencies. If a surgeon does a decompression, which is again part of the goals of surgery, they're in a prone position, so it's a better position. Your ability to stabilize, meaning put posterior fixation or pedicle screws in, is in the prone position is the most favorable place to place pedicle screws. Our ability to use patient positioners to control the patient position, again, is something that we've learned and applied to PTP. Speaker 100:07:37You don't have to turn the room over And clearly the sagittal alignment is better. Our view and really it's not even our view, it's an undeniable truth, If you're not serious about market participation in lateral surgery unless you have automated neuromonitoring, it's a foundational requirement. It's not a nice to have. So ours is designed to directly address the most common documented risk, which is femoral nerve complications in lateral surgery. And so, it is one of the things that we really celebrate, which is having unmatched organizational neuromonitoring expertise. Speaker 100:08:13We have the best of the best. We have great experience in this space and we just continue to get better. And so when we see people knocking off meaning copying our attractor or copying our patient positions. We know they can't copy the neuro monitoring. Taking Capturing a small signal in a very noisy environment and then interpreting that and providing actionable feedback Is the magic and without doing that, you're not ever going to be a serious participant in lateral surgery. Speaker 100:08:46So we covet the SafeOp platform and what's going on. And also think about it as what we're doing is we're taking an informatic and driving greater predictability with this tool. And I think there's going to be a consistency with regard to how people look at ATEC in terms of what the competencies are. But I think part of being the most committed to an environment, meaning lateral, you have to do research and you have to do education. And so I would say that we're the most committed to both the research and education within the field, and I think it's being demonstrated. Speaker 100:09:20Some of the most recent publications are PTP for adjacent level disease, PTP versus TLIF, PTP versus the standard first generation lateral that we did. And so there's 27 peer reviewed publications currently. We've trained over 500 surgeons in 2022 and we continue to host really important events. We have a PTP Council that continues to provide feedback and we apply the learnings as expediently as we possibly can, As well as had a Duke Emory Conference as well, which again, I think just illustrates or demonstrates a commitment to lateral surgery. And so, I would tell you that we are quickly becoming the lateral standard bearer. Speaker 100:10:09And I think the bottom line is PTP is really more aligned with the goals of surgery and really enables us to expand the marketplace in a very meaningful way. And so really from just participating in the $1,000,000,000 segment to making it a $3,000,000,000 segment based upon the addition Addressing pathology that would historically been addressed by PLIF and TLIF where you would need to do some type of a posterior decompression. So I would say that only ATEX committed to the at the outset to improve lateral, challenging its pioneers to better meet surgical requirements and address hurdles. We Have a solution designed to avoid the complications, which is the SafeOp part, which I talked about a minute ago. I think the whole applying our learnings I would tell you a cultural reflection of who we are here. Speaker 100:11:04And the other thing is, is obsoleting our last best effort. So when someone copies this, they're going to copy our last best effort because we're going to play our learnings forward. Not only transforming and expanding the market to surgeons who are accustomed to more conventional techniques. So, really our interest is to continue to advance the most coveted market, which is lateral surgery. I think the other way that we've been rewarded as I think when you create lateral confidence, it earns a surgeon's trust. Speaker 100:11:33And we deem that to be really a halo effect. And when we say halo effect, what that means is it expands ATEC product utilization In more conventional procedures. And so that becomes very, very valuable in terms of reflecting the momentum. And so I previously talked about informatics mitigating variables and the experience in translating say SafeOp in terms of the information and how it drives safety or looking at how we're going to integrate the navigation enabled robotics into lateral surgery. But EOS is really kind of staring at us as such a great opportunity to expand its influence in the reasonably near term. Speaker 100:12:22And the first thing that you're going to see mid-twenty 4 is you're going to start to see automated alignment reports, automated 3 d models, automated surgical planning and the option if you want to is applying the surgical planning elements to a patient specific rod. And so when we say automated alignment, what we mean is, as you as the As a biplanar view is taking on the image, our ability to immediately add public parameters and the measurements to assure alignment are immediate. And so this opportunity to continue to add informatics to The planning element becomes very, very apparent. The other thing in 2024 is going to be the assessment and follow-up. And so That will be a big part of what you're going to see in 2024. Speaker 100:13:16So we expect a lot of influence by EOs next year. And then subsequent to that is going to be things like bone quality. If you're going to stabilize the spine, which we said the goals are decompression, stabilization and alignment. You're going to want to know what the underlying material is. And so we feel like having a bone quality measure is very valuable. Speaker 100:13:35We'll also integrate an interoperative rod bending element to continue to make refinements in the alignment effort. We believe that there's a configuration opportunity to less than the number of assets required in the room. And then, the great future is really a predictive analytics a foundation that enables us to provide the surgeon data on like patients that have had a technique that have like pathology and give them a foundational view with regard to a rich data set. We're building the foundation for that rich data set. We recently got attestation for a SOC 2, which is a IT requirement that ultimately housed data. Speaker 100:14:14We're on our way to high trust. We have numerous accounts currently adding patients today that have EOS Edge to our data set. So we will have the most rich data set in spine. And I think having been at this for a very long time, All of the data collection forever has been manual. And so when I make a big deal out of the automated element, what we're telling you is that we're collecting objective data in an automated way that's going to make for a more assured data collection source. Speaker 100:14:49And so we talked a little bit about the navigation enabled robotics. The integration of it is right on track. Our learnings continue to affirm the investment thesis. We're thrilled about the team. They have deep expertise, And our ability to advance the integration and development is very, very apparent to us. Speaker 100:15:13We expect the initial experience in late this year, filing regulatory clearance for Invictus screw placement. We will continue to expect freehand navigation clearance in mid to late 2024 and then full integration into lateral procedural workflow in 2025. And so we remain totally bullish and profoundly enthusiastic about what's going on, on that front. So I think from a creating clinical distinction, a ton of momentum and a ton of excitement. In terms of compelling surgeon adoption, we went from about 1.8 products per procedure to now it's at 2.4. Speaker 100:15:54So I think the a convoyed element of the way that we view surgery is coming to fruition. Also, if ever you're wondering about the demand, The demand for educational experiences is still exceedingly high. And so we had 150 surgeons in Q2 and there remains a tremendous amount of interest in what we're doing. As it relates to elevating distribution, I can't be more excited on this front. I think that when you talk about spine focus When you talk about opportunities to grow, we're a less than 5% shareholder at this point. Speaker 100:16:34And We're so well positioned from a spine focused perspective. We celebrate the uncertainties in a marketplace. We think that they improve the quality and quantity of the funnel of sales people interested in working with ATEC. We'll continue to strategically fill in large geographic gaps And we'll continue to compel Surgeon adoption. And again, I think that this speaks to the spine focus, Which candidly others don't have. Speaker 100:17:04Another very, very affirming view is, if you're going to come join us, the likelihood of you growing at 38% is very high. That's a percentage growth rate of our same store sales. Statements and comments. Pat? Speaker 200:17:52Well, thank you, Pat, and good afternoon, everyone. We appreciate you joining us on the call today. So I'll begin with revenue. The 2nd quarter total revenue was $117,000,000 growing 39% over the prior year an increasing 7% compared to the previous quarter. The $117,000,000 in revenue is comprised of $102,000,000 in surgical revenue and $15,000,000 of EOS revenue. Speaker 200:18:172nd quarter surgical revenue of $102,000,000 increased 41% compared to the prior year period. Procedural volume grew 32% in the 2nd quarter, reflecting strong surgeon adoption with growth in the number of surgeons utilizing our procedural solutions up over 25%. Average revenue per case expanded 7% year over year due to continued mix benefit from the momentum of our lateral franchise, a continued increase of our biologics attach rate and an increase in case complexity. Strong performance in lateral drove increases in both procedural volume and revenue per case. The number of surgeons using PTP is growing and utilization of PTP among those surgeons is expanding as the procedures apply to a broadening set of pathologies. Speaker 200:19:02A robust perception to our posterior expandable cages also contributed to growth overall. Importantly, the areas where we have invested to create clinical distinction are the areas achieving the strongest growth. EOS revenue in the second quarter was $15,000,000 up 24% compared to last year with solid execution on deliveries and installations. Looking through the remainder of the P and L, 2nd quarter non GAAP gross margin Was 73%, up 3.40 basis points compared to the prior year. The year over year increase was primarily driven by royalty rate improvements and mix. Speaker 200:19:37The mix benefit came from both an increased contribution of surgical revenue and an improved EOS gross margin. EOS gross margin improvement is due to the success we've had in addressing the backlog of ServiceMeade over the last 12 months, as well as pricing initiatives we've implemented. 2nd quarter non GAAP R and D was $13,000,000 and approximately 11% of sales compared to $9,000,000 and 11% of sales in the prior year. The increase on an absolute dollar basis was driven by continued investment in our organic innovation machine to advance procedural and information based solutions, including approximately $1,000,000 of investment associated with the robotic navigation platform we acquired in April. Non GAAP SG and A was $81,000,000 approximately 69% of sales in the 2nd quarter, compared to $65,000,000 78% of sales in the prior year period. Speaker 200:20:27We delivered 8.50 basis points of improvement year over year. Approximately half of that was driven by improved variable selling expense and the other half by infrastructure leverage, including about 80 basis points of investment related to creating an international presence. As we grow the business, contributions to the leverage that we are delivering continues to be in line with our expectations. Total non GAAP operating expenses amounted to $94,000,000 an approximately 80% of sales in the 2nd quarter, compared to $75,000,000 89% of sales in the prior year period, demonstrating over 800 basis points of operating leverage year over year. Adjusted EBITDA was $1,500,000 and approximately 1% of sales in the Q2 compared to an $8,000,000 loss and negative 10% sales in the prior year period. Speaker 200:21:16This represents another quarter of over 1,000 basis points of margin expansion and we are pleased to have achieved positive adjusted EBITDA this quarter, slightly ahead of plan. Continued top line growth and disciplined execution is delivering results And this quarter's performance reinforces our confidence in achieving the long term profitability goals we've committed to. Turning to the balance sheet, we ended the 2nd quarter with $101,000,000 in cash. Operating cash use totaled $37,000,000 of which approximately 90% was related to investments in the sales generating assets, inventory and instruments that fuel our growing distribution footprint and new product launches. Given the strength of sales momentum in the first half, We pulled forward the required satin inventory investments. Speaker 200:22:05Offsetting that, adjusted EBITDA improvements in the first half benefited operating cash And we expect that to continue into the second half of this year. Debt at carrying value was $470,000,000 We continue to have undrawn and available borrowings under both MidCap revolving credit facility and the Braidwill term loan. Turning to our outlook for the full year 2023, we now expect full year 2023 total revenue to grow 32% to approximately $462,000,000 That includes surgical revenue growth of approximately 33% to $404,000,000 and EOS revenue growth of approximately 21% to $58,000,000 As sales growth drives leverage across our business, we expect to continue to achieve significant adjusted EBITDA progress this year. In conjunction With the increased top line guidance, we are raising full year adjusted EBITDA guidance to $2,000,000 representing 840 basis points of margin expansion. The increased guide is in line with the framework we've shared, specifically that we anticipate about 10% of revenue upside to flow through to adjusted EBITDA, I'll start by sharing how our expectations in procedural volume and average revenue per surgery growth shape surgical revenue guidance. Speaker 200:23:27We continue to train surgeons at a robust rate, which drives both surgeon adoption and utilization. Training surgeons built loyalty and enabled 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. Due to improvements in these dynamics, we now expect low 20s percent procedure volume growth for the full year 2023 compared to high teens volume growth 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. Speaker 200:24:09The gradual addition of expandable implants progress to our portfolio and increasing biologic attach rates are also enabling us to capture more of each procedural revenue opportunity. We continue to expect these dynamics to drive growth in average revenue per surgery at a high single digit rate percent rate for the full year. In sum, increased surgical revenue guidance is related to increased procedural volume expectations. That volume growth is being powered by adoption, both the quantity of surgeon customers and per surgeon utilization. These dynamics validate our thesis that when you create clinical distinction, you do compel surgeon adoption. Speaker 200:24:46With respect to the rest of the P and L, we have begun to demonstrate the operating leverage that sales growth enables, And we expect that dynamic to continue. Guidance for the adjusted EBITDA of $2,000,000 for this full year implies 840 basis points of improvement relative to last year. The components that are delivering leverage have been consistent with what we described in our long range plan last May. At that time, we committed to 2,500 basis points of operating leverage over the 2021 to 202025 time horizon. That entailed about 300 basis points of contribution from R and D, about 1,000 basis points related to variable selling rate and about 1200 basis point contribution from SG and A infrastructure leverage. Speaker 200:25:26The improving variable selling rate and the infrastructure leverage that sales growth has enabled over the last several quarters gives us great confidence to continue investing in growth while achieving our financial commitments. Now in closing, results this quarter are a continued a testament to our belief that good surgery is good business. Our investments to advance spine surgery and become the standard bearer have and will continue to deliver sector leading growth. Financial results this quarter are also mark a significant milestone for ATEC, a revenue growth driven inflection to positive adjusted EBITDA. We have great momentum and great opportunity ahead. Speaker 200:26:05We have an active IR calendar over the next few months, including our Innovation Day, which Pat mentioned in conjunction with NASS in October, and I hope to connect with many of you in person. With that, I'll turn the call back over to Pat. Speaker 100:26:16Thanks much, Todd. I think oftentimes we say things like our best is yet to come. But I would say that we've built a foundation really assembled for a long term a growth trajectory. And if you look at what we've done from 2018 to 2022 and really have grown at a 40% revenue CAGR, I think it was clearly a big influence on from Lateral. I think our best days are yet ahead. Speaker 100:26:45And if you think about us continuing to drive growth through distinguishing ourselves within the lateral franchise. We've yet to reflect the value of EOS from an informatics I think it provides us great opportunity to have an expanded presence in deformity. I think the navigation enabled robotics piece is apparent in terms of what the opportunity is there. We love the uncertainty of the marketplace. I think the spine focus will be rewarded. Speaker 100:27:15And so totally enthusiastic about responding to those opportunities. We continue to see expanded hospital access in places that we've had zero business. We now have access and we have the opportunity to build sales forces in states where we've had 0 sales. From an international perspective, we're in the very, very early phases and We're going to continue to be narrow and deep, but we're seeing success out of the places that we're participating. And then lastly, just the continued momentum in terms of lateral is quite clear. Speaker 100:27:51It's like expandables will be launched at NASH both from a lateral perspective and from a posterior. We're working on corfectomy. We have 3 d printed implants. There's a lot going on within the cervical realm, And we continue to professionalize our sales force of interest and really a shout out to our regulatory team. We have 9 regulatory submissions this quarter. Speaker 100:28:17That's surpassed entire previous years. And so, If you're wondering if there's a commitment to continuing to obsolete ourselves, there absolutely is. And so I would tell you that I believe that our 100% spine focus is powering our ability to be the standard bearer in the space. And when we say our best is yet to come, I think it's an objective truth. Anyway, with that, I'll turn it back over to the operator. Operator00:28:42Great. Thank you. We will now open the floor for questions. The first question comes from Matt Blackman with Stifel. Please go ahead. Speaker 300:29:09Thank you for taking my questions And good afternoon, everybody. Maybe just to start, Pat, you mentioned and I was hoping you could repeat it because it went by too fast, The 2Q surgeon metric number you provided. And if possible, can you just break that out even in the roughest terms between what's called lateral naive versus competitive surgeons. And I'm curious if that mix has changed at all over the last 6 months, over the last 12 months. And then if I could add on top of that, just curious what sort of surgeon reception you're getting for LTP and who will be coming in to be trained on that? Speaker 300:29:46And then I've got one follow-up. Speaker 100:29:49All right. I'll let Todd answer the surgeon metric stuff just because If it has a numeric value, I'm going to screw it up. As it relates to the reception on the LTP front, it's been very, very good. The reality is we haven't had the volume sets out there to garner the level of a response to the level of demand this apparent. And so, I, on a daily basis, get text and pictures of a 501A lift with a 4 or 5 lateral with the patient positioner and it's a thing of beauty And it's better than the work that we've done before. Speaker 100:30:34And so the surgery is good. And when the surgery is good, the volume follows. And so I remain exceedingly bullish and I would say that we're in a very early phase of that. Speaker 200:30:46And Matt, relative to the 2Q metric, we did about 150 this quarter. If you look over the past 4 quarters, I think it's 515 is the total. So we continue at a strong clip and feel good about the level of surgeon training. And as you know, surgeon training is a great Leading indicator for surgeon adoption. And so as we look at the demographics of people coming through, I'd say it's probably 25% are really Lateral naive, I think, in your words and kind of new to the technique With the balance being people who are familiar with the technique and are looking to adopt PTP or LTP. Speaker 300:31:34Okay. And then just one quick follow-up. I'm curious if you could just take a step back, talk quite a bit about the lateral market in general, but how fast do you think that market is growing today, Particularly when we think about sort of the underlying spine market being a maybe a low single digit grower. Can you just maybe give us some context You're obviously highly levered to the lateral opportunity more so than maybe that sort of traditional low single digits by market. But just curious what you think the Underlying market is growing today in the U. Speaker 300:32:02S. Speaker 100:32:03Yes, Matt. It's a tough one to put a number on. But one of the things that was the nemesis of the previous experience was that There were certain indications for surgery that you couldn't address with the technique. And so the great part is, I don't know if the market is expanding as fast as we hope, hope it is, but I will tell you the applicability of lateral into a much larger space is very apparent to us. And so that's why like I don't know if it resonates, but it's like the whole direct decompression in a prone position, the ability to stabilize in a prone position. Speaker 100:32:41Historically, those would have all been placentesis type patients. And so for us to start to evolve the technique into a much broader market space Suggest opportunity. And that's where it's like I have a tough time discerning, is it market is it very fast market growth Or is it just one of the things where we're applying the technique into a much broader space from a pathologic perspective. And so Either way, we're enjoying the trek. We're still such a small market shareholder. Speaker 100:33:12There's A plethora of opportunity out there. But there's not like outside of expandables in the last 10 years, there's really hasn't been very much from a a CLIF perspective in terms of evolution. So when you say what's the most coveted market, clearly the advantages of the latter been demonstrated and that's why we're so excited about what's going on from a SafeOp perspective because it is very hard. And so anyway, longer answer than you wanted, but it's just kind of a little bit of a context in how we think about it. Speaker 200:33:42And Matt, I think the implication there is To the extent that the lateral market is growing faster, which we do believe it is than the overall market, that incremental growth due to tapping the existing kind of PLIF and TLIF market really accrues to PTP. So for us, it's actually growing quite quickly Because one, we're taking share in existing kind of pathological applications, but also because we're able to expand the amount of a utility to a broader set of pathologies that growth accrues only to us. Speaker 300:34:17Understood. Thank you. I'll get back in the queue. Operator00:34:23Great. Thank you. Our next question comes from Joshua Jennings with TD Cowen. Please go ahead. Speaker 400:34:31Hi, good afternoon. Congrats on another strong quarter. I was hoping to just Learn a little bit more about the early trends with the LTP launch. And I guess the follow-up on that Just with this ALIF access system that you're now launching as well. I mean, as we think about LPP gaining more and more traction in that revenue per case metric. Speaker 400:35:00Is the LTP associated with more levels per case and therefore increase revenue per case and should that drive that kind of lateral revenue per case metric even higher? Speaker 100:35:12Yes. Josh, like I would say, the shortest construct that's going to be most common would be L4-five and L5S-one. So it's going to be at least two levels. And so what we're seeing It is really a very favorable acceptance from lateral or excuse me, from approach surgeons. And as you know, the nemesis of lateral has been you can't address L5S1 from a lateral position. Speaker 100:35:46And so to get the type of reception that we're receiving from access surgeons is super important. And so what we're seeing in terms of the early experience is multilevel surgery, L5S1 done by an approach surgeon with our access system, with the patient position required to tilt the patient and then bringing the patient back to an orthogonal position from 4, 5 and above. And so, again, I think It's better the work is better than what we've done before. And so the ability to apply that learning and make sure that we're including 51 is hugely important. And As I look at the pictures, all of the orthogonality associated with what drives predictability is right there. Speaker 100:36:34And so again, all indications are that this will be a good one. Speaker 200:36:39And Josh, to your point, more levels means more complexity, Which ultimately does translate into higher revenue per case. Speaker 400:36:48Great. Thanks for that. And then just wanted to You guys are growing so strongly off of a sizable base. And one of the elements we're trying to think through is just on the cross selling opportunity with EOS accounts that you inherited with that acquisition and that didn't have haven't adopted ATAX implant portfolio. But Where are we in that process? Speaker 400:37:11Our assumption is it's still very early and there's still a lot of opportunity runway ahead, but just wanted to get an update there. Thanks for taking the questions. Speaker 100:37:19Yes. Josh, I think when I outlined what I believe to be the growth drivers of significant manner, The EOS influence in any hugely meaningful way has not transpired as of yet in terms of the reflection from the Data that you get out of the EOS unit to move people for better surgery into the operative experience. And that's where it's like All of the automation is going to inspire significant interest. And just the ability to have an automated alignment measure as you take a full body standing biplanar low dose image. So your ability to get the alignment measures to ultimately apply into your surgical plan and have an automated surgical plan. Speaker 100:38:09All those things being automated will elevate the likelihood of their utility. And so as you utilize those and you said, say, gosh, in this patient, I would like a patient specific rod, your ability to select patient specific rod and have that delivered into the experience, and then have an interoperative reconciliation, say I got what I achieved based upon what the plan was And then to follow-up on that postoperatively with the exact same film, I think is ultimately what's going to compel The kind of the deformity audience into the experience. And so I think we're very early on since we haven't launched this stuff. I don't think that you've seen the type of the traction that we expect to have over the years. We realized that this was going to be a long run. Speaker 100:38:54I would tell you one of the things I'm most proud of about the company is whenever we acquire a technology, what we do is we improve it and we integrate it into our thesis. And so I would say that the last little while has been committed to evolving EOS into the way that we think about the interoperative experience and those things are forthcoming clearly in mid-twenty 24. And so our excitement is that we have a lot of momentum on the lateral front and on the surgical front, But our best days are yet ahead based upon the translation of our ability to once again take information and drive more predictability. Operator00:39:36Our next question comes from Matthew O'Brien with Piper Sandler. Please go ahead. Hi. This is Samantha on for Matt. Congrats on a great quarter and thank you for taking our question. Operator00:39:49To start, I guess, a little bit on the adjusted EBITDA. You've already achieved adjusted EBITDA positive versus the breakeven expectation at the beginning of the year. Can you talk to us a little bit more about what allowed you to see that so early and maybe what we can expect for Cadence moving forward? Speaker 200:40:07Thanks, Samantha. I think ultimately, when you look at our adjusted EBITDA going into the year, More or less, we kind of messaged 800 basis points of operating margin expansion or just EBITDA margin expansion on the full year With a little bit of that heavier in the first half and a little bit later in the second half. And I think that would have kind of led you to something like a minus 5, 0 and a plus 5 is kind of how I think the math would have shook out after you looked at that from that standpoint. And so then kind of coming into this quarter, Knowing that 0 was kind of the expectation, clearly the revenue outperformance benefits there And we definitely benefited from some incremental improvement in our variable selling expense. And so I think this quarter about half of it, half of our operating expense leverage was due to variable selling expenses. Speaker 200:41:05So we saw that come through a little bit stronger in the quarter. And that's really just a little bit of, I think timing of our investments on that front. And so Ultimately ended up a little bit better than probably would have expected given the revenue outperformance. But I just keep in mind that we're talking about 100 of 1,000 of dollars here as we kind of flip from negative to 0. And I think we spent just shy of $90,000,000 in total. Speaker 200:41:33So Being as close as where I think was a pretty good result and we're very pleased with I think the broader comment, which is As we've kind of built the company and as we've architected the walk to profitability, the profitability is coming in the areas That we expected. And so that to me is what is really the takeaway here. In terms of cadence, I think our total top line a raise is another $12,000,000 so beat by 7 in the Q2 and raised by 5 in the back half. And if you apply Really the 10% drop through on that, think about another $500,000 of drop through in the second half, which probably puts you a couple of $100,000 positive in the Q3 and the balance there in Q4. So that's kind Operator00:42:28And then just one more from us. I know we've talked a little bit about the market growth, buy. Also, could you touch on whether you're seeing any share taking as well? Thank you. Speaker 200:42:39Yes. I think clearly when you just do the numbers, if the market is growing, call it low to mid single digits and I think our surgical revenue grew 41%. We're clearly taking a lot of share. And I think that's been the story. Clearly, lateral in our clinical distinction And all of the innovation we've created and brought to the market is driving a ton of attention. Speaker 200:43:05And I think, again, Greatest indicator is the amount of training we're doing and the interest that we're getting from surgeons and from our ability to elevate the distribution footprint. Operator00:43:26Inley. Please go ahead. Speaker 500:43:29Hi, thanks for taking the questions. Maybe for Pat to start, but In your prepared remarks, you talked about just the uncertainty in the marketplace and your opportunity to fill in still large geographic gaps Amongst your sales organization. Pat, can you go into a little bit more detail there? And just given some of the market disruptions, are you Even pulling forward some investment in the sales organization and maybe just help us think of anything that's kind of baked into the stated guide for building out some of the geographic gaps. Speaker 100:44:04Yes, I'll go ahead and take the, I guess the qualitative, I'll get time to the harder one. I think We're being as opportunistic as we can possibly be. And the dynamic is that I think that The sales people who have been in spine and have found success in spine want a partner that's aligned with them. And so when we talk about being spine focused, much of it is really an outreach to the people who are committed to this thing over the next 10 to 15 years. If you want to move the field of spine surgery, you will work with us. Speaker 100:44:44And that's where it's like our enthusiasm to continue to outreach to, Candidly, companies that have not been very focused in this fine field and think that it's commoditized is an opportunity for us. And so where we see some uncertainty in the marketplace. We're a very certain place and it's kind of a strange thing to say. 5 years ago when we took over ATEC, I wouldn't call it hugely certain, but I will tell you today as it relates to having the foundational technology in the asset base Of the type of engineering know how that we have from a mechanical perspective, the prowess on the neurophysiologic perspective, the understanding of imaging, the understanding of navigation robotics. I will tell you that it just provides us an opportunity to go solicit and to retain top talent. Speaker 100:45:36Top talent in the room makes a difference. We rely upon the sales guys in the room to make a difference. And so We're aggressively seeking those guys who can make a difference in the operating room to partner with us. And so, I think with the Globus NUBA thing and with the big companies being somewhat lethargic, we're being opportunistic. Speaker 200:46:00And Drew, in terms of our opportunity that Pat talked about and our willingness to invest, clearly, we're willing to invest. I think we've demonstrated that. If you think about the growth that we're seeing in our investment, we're leaning into that growth To fuel it, as you think about the investment in our sales organization, that There is certainly a level of investment that's baked into the underlying guide and we feel very good about where that's at. Kind of order of magnitude. It's very similar to what we've seen in previous years. Speaker 200:46:35And so, while from quarter to quarter that might change, We feel good about where we are relative to our ability to invest to drive the growth. Speaker 500:46:46Got it. Thank you. And maybe just one on robotics. But the initial experience is expected later this year, freehand in late 2024, full integration in 2025, if I I heard that correctly earlier in the call. But as you are thinking about commercializing the robotics platform, I know we're still a bit of ways, but are you how are you thinking about placement trajectory or utilization trends. Speaker 500:47:12Is there anything that makes you feel better or worse when you kind of benchmark that to what some of the other couple of competitors have been able to do in the robotics space? Thanks for taking the questions. Speaker 100:47:23Yes. Thanks, Drew. I think it's a great question. And the dynamic becomes is, What we love is small footprints. And so when you have a small footprint, oftentimes there's a direct relation to the COGS. Speaker 100:47:38And when you have a limit when you have low COGS, high technology, it provides you flexibility. And so as I look to the future and I look at what capability of what the guys in Boulder are doing with regard to that robot and that navigation piece, it's going to provide us great the ability to integrate it into the procedural workflow in a very elegant way, but that also means we get flexibility with regard to if you have to acquire it, can you lease it, Can we integrate it with regard to some type of a volume utility in implant? So I think it gives us like ultra flexibility where we don't have to back a bus up the robot in. And so our enthusiasm is very high with regard to just kind of the foundational cost structure of the system. Speaker 200:48:20I think the only thing I'd add to that Pat is just given the fact that the cost and hence our price point being about $500,000 relative to the total price our price point be about $500,000 which is significantly lower than other market prices of other robots. Our ability to do earn outs and those types of things and not needing 5 surgeons to sign up to the deal Is totally imminent. And so that really opens up so many more opportunities for us to essentially commercialize this thing in the long run, in a way that works for everybody. Operator00:49:01Our next question comes from David Saxon with Needham and Co. Please go ahead. Speaker 300:49:07Yes. Hey, guys. Thanks for taking my questions. I've been hopping between So I apologize if any of my questions have been answered. But maybe first on the portfolio, wanted to see how you're thinking about the breadth of it. Speaker 300:49:20I think you've talked about in the past about wanting to add some sort of motion preservation product. Is that So a focus, and then are there any other gaps in the portfolio that might be priorities to address? Speaker 100:49:36Yes. You know the great part is, I think the navigation robotic thing filled a big gap. And so, we're totally enthusiastic with regard to where we sit from a portfolio breadth perspective today. If you look at the in the high 90s kind of prevalence of pathology and can we address it? The answer is yes. Speaker 100:50:02I would say, a hole clearly is cervical motion. We'll fill that hole In the years to come, who knows when or what presents itself. But I don't see that as much of a detriment. We're in the process. We'll output some, corpectomy things next year. Speaker 100:50:22I would say, as we sit today, it's an irritants to me, but it's one of those things where it's, I guess, forthcoming and we have a clear view. We have designs. We have we're in the very early Experience, so we're good there. But other than that, I love where we are. I think what you're going See, as you're going to see continued expansion within kind of the idiopathic deformity space for us not to translate a rotational understanding in EOS to a system that ultimately addresses some of those things to not utilize some of our learnings from patient positioning, to that utilize our motor vocodentials within our neph physiology realm. Speaker 100:51:01And so I think that we have a lot of opportunities to continue to expand our really kind of competencies across different pathologies and different patient types. But I feel great about where we are. Speaker 200:51:13Yes. I mean, I love it because ultimately, it's really such a reflection of the organic innovation machine we've built here That can ultimately address so much of the gaps that we have in front of us. And that's ultimately why you see our commitment to invest the kind of R and D spend that we do. Speaker 300:51:33Great. Thanks for that. And if I could just have a or ask a follow-up for Todd. Just on EBITDA, I guess just the path to $80,000,000 in $25,000,000 I think at the Analyst Day, you kind of thought it would be more of a ramp. But I think you're kind of outperforming EBITDA. Speaker 300:51:56So could it look more linear With 24 being closer to 40, any thoughts there would be helpful. Thanks. Speaker 200:52:05Yes. Thanks, David, for the question. I guess what I'd tell you is, I feel very good about how the leverage is manifesting itself. And I think One of the great comforts I have sitting in my seat is the fact that Pat and I were totally aligned on where the company is going. And the way our leadership team has built the company reflects the leverage that we've communicated. Speaker 200:52:33And so the investments reflect the priorities of the business. And as we grow, ultimately, we see that leverage. And so, what I'd tell you We feel good about the quarter. Happy that we can raise full year guidance, be a little bit ahead of the game there and our ability to continue to march toward our long term goals and objectives totally intact and we feel great about it. And so I'm probably going to be short of giving you a hard number or a hard answer there, but I like our chances. Operator00:53:14All right. Our next question comes from Aaron Wukmir from Lake Street Capital Markets. Please go ahead. Speaker 200:53:22Hey, good afternoon, everyone. Speaker 600:53:23This is Aaron on the line for Brooks. Congrats on the strong quarter. You guys are doing a lot of good things and we're really excited about the growth going forward. So how sustainable do you believe that these elevated procedure volumes can continue? You mentioned this a little bit in the prepared remarks, but Are you seeing other companies respond to the innovation with any moves of their own? Speaker 600:53:45How are they responding to innovations in lateral and with SafeOp and EOS? Speaker 100:53:52Yes. Erin, thanks so much for the question and our best to Brooks. But The interesting thing is that these things are very tough to pivot, meaning if there's a competitive dynamic that is very well protected. It's not the IP that protects it. It becomes the know how that does. Speaker 100:54:13And that's kind of why I gush about the neurophysiology piece. I think I've been at this in terms of just within lateral north of 20 years, 22 years. And so the reality is, the one thing I know is that neurophysiology, automated neurophysiology is an absolute unequivocal requirement. And so when people show different things in lateral, but they don't show an automated neurophysiology system that ultimately includes SSCPs to understand retraction injury, then they're not serious about participating. So when I look at a procedure and I see people copy our patient position or copy our attractor, What they can't copy is the know how that we have here with regard to neurophysiology. Speaker 100:54:56And so that's going to be a very difficult thing to do. And so that's going to take years to do and years of a competency to create. And so that's why I love our momentum and I love the type of progress we're making from a surgeon user perspective because these are unadulterated truths and that's where it's like I feel like we're very well protected in the very area where we have a committed expertise because there's a very long level of experience And know how. And so my general view is, we will continue to grow procedurally And we will continue to really relish in the high ASP of the convoy sales and that's why we ultimately say, gosh, for creating distinction. That distinction is driving adoption. Speaker 100:55:42The adoption is reflective of the convoy sales. Speaker 600:55:46Great. Awesome. Yes, very helpful. And then just a quick follow-up. I think you might have this as well in the remarks, but can you describe just a little bit what you're seeing now in the international markets and what your plans are sort of there? Speaker 600:55:58Would you consider that a meaningful priority for you guys. And then also on the flip side, are you seeing any disruption in the domestic markets at all? Speaker 100:56:10Let me answer the international thing first. I would tell you that one of the things that we Want to do is we want to be very deliberate. And so when we go into a marketplace, we want to be all And so our early experience in Australia has been awesome. So New Zealand and Australia are very are not huge markets. I got to tell you, we're doing great surgery in those markets with people who know how to deliver great surgery. Speaker 100:56:38And that's where it's like we realize that the precursor to a great business Is doing great work. And so our enthusiasm as it relates to the contribution in the years to come from Australia and New Zealand is very, very high. We started to lay the foundation for Japan. We will do the same thing in Japan. Japan is a great market and it's a big market. Speaker 100:56:58I think from a surgical They view surgery in a very similar vein as we do. And so as we think of the international contribution, we don't feel like we have to be worldwide. What we want to do As we always talk about being narrow and deep. And so the interest there becomes just that. How do we continue to follow the very directive that we committed to in the early phase of the recreation of this company. Speaker 100:57:23As it relates To the domestic market, I think that there's a lot of disruption. I think that we're irritating people, which is the intent. And I think that the Globus NuVasive news creates uncertainty. And so And I think that there's also a lethargy in the companies that aren't spine focused. And so to me, I think, we're sitting in a very opportune space of great opportunity in the international market, some uncertainty for us to exploit in the domestic market. Speaker 100:58:02And so I think we find ourselves in a very good place. Operator00:58:15All right. Our final question is from Sean Lee with H. C. Wainwright. Please go ahead. Speaker 200:58:23Good afternoon, guys. Congrats on a great quarter and thanks for taking my questions. Moving back a bit To the prepared remarks where you mentioned the increasing surgeon training. So I was wondering what's the Sales cycle, I guess, like for the PTP, where how long does it take for a surgeon to come to training to start using the PTP in their practice and then move on to become a repeat customer. And what's the rate of these surgeon conversions? Speaker 100:58:55Don, if you could tell us that, we would be forever indebted. No, it's like Each of the individual surgeons have different needs and they come to us with different sets of experiences. And so One of the challenges is what are the list of requirements to ultimately prepare somebody them to feel comfortable in applying the procedure into surgery. And believe you me, it's within our interest to make sure that they are profoundly confident and comfortable. And so One surgeon may need a single cadaveric experience and they come to a course and they start doing cases. Speaker 100:59:31Other surgeons may need a course, they may need to go watch a surgery, they may need to go, they may need a proctor surgeon into their surgery and they may be very, very slow to uptake. And so, it's profoundly different for each individual surgeon. And the one thing I know, and this should provide you great comfort, is The surgeons don't want to make any mistakes, and I think that they're profoundly careful. And so they're going to take their time. And sometimes they need to be competed into it. Speaker 101:00:00It depends upon the marketplace, but I got to tell you, there's numerous geographies out there where PTP is on such an upswing that the surgeons feel forced to do it because they're losing patients for not doing it. And so, we are profoundly confident. I think the publications all suggest that this is an absolutely predictable reproducible experience, but we have to respond to the individual needs of the respective surgeon to make sure that it's predictable. So I know that's a long winded answer and I didn't give any specific numbers. Candidly, I can't and won't. Speaker 201:00:35I understand, but it's very helpful for help understanding this market. Next my next question is on the You mentioned during the prepared remarks that you've seen geographic expansion and moving to adjacent markets especially. How much is that contributing to your overall growth and where do you see that trend going over the next 6 to 12 months? Speaker 101:01:03Yes. I think that's a great question and I would say limited. And it's So often what will happen is we may have a, a, generally a stronghold in a Pacific City, but then the adjacent cities that have big spine spends, we do nothing in. And The great part about, I think, our the makeup of our business is you're seeing 38% growth in those territories that have been established. And so, if we're seeing that type of growth in same store sales, that in my mind means, gosh, I'd accepted that As a tool that will our business that will expand. Speaker 101:01:47And so the great thing is, we have like if you're going to 38% in those areas and your overall growth This 41% surgically, I would say it's not like we're adding a bunch of people that ultimately gets to a place and that's where it's like Our enthusiasm is to add those adjacencies, so what we could enjoy not only the adjacencies, but the same store sales growth that we would enjoy in that geography. And so Thanks, Sean. Operator01:02:24Great. Thank you. I will now turn the call back over to Pat Miles for closing remarks. Speaker 101:02:30Yes. Thanks very much for your interest in ATEC. And as we say, our best is yet to come. So excited about what's going on and We love Spine, and we are thrilled to be serving it. Thanks. Operator01:02:43Thank you. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may nowRead morePowered by