Alphatec (NasdaqGS:ATEC) Q4 2025 Earnings call February 24, 2026 04:30 PM ET Speaker2Good afternoon, everyone, and welcome to the webcast of ATEC's fourth quarter and full year 2025 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 S ...

Financial Data and Key Metrics Changes - Total revenue for the third quarter was $197 million, representing a 30% increase year-over-year and a sequential increase of $11 million from the previous quarter [5][14] - Adjusted EBITDA reached $26 million, or 13% of revenue, marking an improvement of 840 basis points compared to the prior year [4][11] - Free cash flow was reported at $5 million, with total cash and available cash amounting to $260 million [12][14] Business Line Data and Key Metrics Changes - Surgical revenue was $177 million, up 31% year-over-year and 5% sequentially, driven by a procedural volume growth of 28% [5][8] - EOS revenue increased to $20 million, a 29% rise compared to the prior year, with strong demand in the U.S. market [8][9] - Same-store sales in the U.S. grew 30% year-over-year, indicating strong performance in established territories [8][9] Market Data and Key Metrics Changes - The company reported a 30% growth in same-store sales, reflecting strong demand in existing markets [8] - The increase in new surgeon users by 26% in the third quarter indicates a growing adoption of the company's products [5][6] Company Strategy and Development Direction - The company remains 100% spine-focused, emphasizing proceduralization and expanding its product offerings in lateral, cervical, and deformity markets [3][19] - The strategic focus includes leveraging technology integration to enhance surgical outcomes and democratize surgical techniques [20][25] - The company is positioned to meet its long-range plan commitments, aiming for $1 billion in revenue by 2027 [17][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver durable revenue growth and strong profitability improvements [11][17] - The company anticipates raising its full-year revenue guidance by $18 million to $760 million, driven by overperformance in case volume [14][15] - Management highlighted the importance of surgeon adoption and the long-term potential of the spine market, indicating a positive outlook for future growth [18][67] Other Important Information - The company has seen a significant improvement in its operating margin, with a 1,100 basis points expansion year-over-year [10][11] - The trailing 12-month adjusted EBITDA now stands at $81 million, reflecting the company's ability to generate cash flow [11][12] Q&A Session Summary Question: Cash flow expectations for next year - Management expects free cash flow for next year to be around $20 million, aligning with revenue growth and EBITDA drop-through [32][33] Question: Update on long-range plan - An update to the long-range plan is anticipated towards the end of next year as the company progresses through 2026 [34] Question: Competitive landscape and consolidation - The company welcomes market disruption and believes it can capitalize on the current dynamics in the spine market [37][39] Question: Role of Valence in lateral space - Valence is expected to enhance efficiency and democratize surgical techniques, benefiting both experienced and new users [40][44] Question: Health of the spine market and competitive dynamics - The spine market remains healthy, with the company taking share from multiple competitors, reflecting decisions made 18 to 24 months ago [48][50] Question: Balancing growth and profitability - The company aims to balance growth and profitability by investing in innovation while leveraging existing infrastructure [52][54] Question: Timing for deformity portfolio contributions - The company is in the early stages of influencing the deformity market, with several products in the design phase and a focus on expanding EOS availability [73][75]

Financial Data and Key Metrics Changes - Global sales for Q2 were $936 million, a decrease of 5% as reported or a negative 7% on a constant currency basis, with adjusted EBITDA margin at 21%, increasing 360 basis points year-over-year [13][20][21] - Adjusted earnings per share were $0.52, growing 7% compared to the prior year, driven primarily by active cost reduction programs [14][21] - Cash flow from operations was $48 million for the quarter, with a net debt to EBITDA ratio of 3.1 times [22][21] Business Line Data and Key Metrics Changes - EDS (Endo, Resto, and preventative products) saw a constant currency sales increase of 1.1%, while OIS (Orthodontic and Implant Solutions) sales declined 19.4% due to lower lab volumes globally [23][24] - CTS (Connected Technology Solutions) sales fell 5.9% in constant currency, with double-digit growth in imaging in Europe offset by declines in CADCAM and imaging in the U.S. [24] - Wellspect Healthcare sales declined 2.5%, impacted by prior year dealer stocking orders [25] Market Data and Key Metrics Changes - U.S. sales in Q2 were $293 million, down 18% in total or 11% excluding the BiTE impact, primarily due to softness in connected technology solutions and orthodontic and implant solutions [15] - European sales were approximately flat year-over-year, with Germany showing growth driven by CTS and SureSmile, which was up over 27% [16] - Rest of world sales were $239 million, up slightly year-over-year, with growth in essential dental solutions and SureSmile [16] Company Strategy and Development Direction - The company aims to enhance customer experience and support through simplified interactions and increased strategic investments [11][12] - Focus on innovation and speed to market is emphasized, with the DS Core platform gaining traction among users [11][12] - The company plans to streamline operations to unlock value and reduce costs, redirecting funds into sustained profitable growth [12][27] Management's Comments on Operating Environment and Future Outlook - Management noted that global patient volumes and procedures remained largely unchanged, with a focus on long-term strategies rather than short-term fluctuations [31][32] - The company maintains its full-year 2025 outlook for sales, adjusted EBITDA margin, and adjusted EPS despite current challenges [25][27] - Management is cautious about the impact of tariffs, with an updated annualized impact now estimated at $80 million [48][49] Other Important Information - A non-cash after-tax charge of approximately $214 million was recorded related to the impairment of goodwill and other intangible assets [21] - The company completed a $550 million hybrid bond offering in Q2, enhancing financial flexibility [22] Q&A Session Summary Question: Overview of the broader dental market - Management indicated that patient volumes remain stable, but procedural utilization in elective areas like implants and ortho continues to be soft, with a focus on long-term strategies [30][31] Question: Distributor stock dynamics - Management noted no significant revenue impact from distributor stock changes, with healthy positions in imaging and CADCAM [34][35] Question: Motivation for joining Dentsply - The new CEO expressed a desire to apply operational experience and execution strategies learned from previous roles to enhance Dentsply's performance [38][39] Question: Performance of implants - Management highlighted a decline in premium implants due to shifts from legacy brands, with expectations for growth driven by sales force changes and new consumer experiences [41][44] Question: Tariff assumptions - The annualized impact of tariffs has increased to about $80 million, with ongoing efforts to mitigate costs through supply chain efficiencies [47][48] Question: Adjustments on BiTE - A $4 million adjustment was noted for BiTE in Q2, with no further changes anticipated for the second half of the year [51] Question: Portfolio assessment and growth strategy - Management believes there are no major gaps in the portfolio, focusing on organic growth while remaining open to opportunistic acquisitions [56][58] Question: Confidence in value implants - Management acknowledged challenges in the value implant segment due to Middle East volatility but expects performance to improve in the second half of the year [88][89]