Summary of Conference Call Company and Industry - **Company**: Alphatec - **Industry**: Medical Technology, specifically Spine Surgery Key Points and Arguments Lateral Performance and Market Opportunity - Alphatec's lateral performance in Q3 is described as outstanding, indicating strong execution in this segment of the spine market [3][4] - The company believes it is in the early stages of lateral market penetration, with significant opportunities for improvement and clinical experience enhancement [3][5] - The lateral market is estimated to be around $1 billion, with an additional $2 billion potential from traditional posterior approach surgeries that could adopt lateral techniques [6] Technological Integration and Innovation - The integration of navigation robotics and 3D-printed implants is expected to enhance procedural precision and reduce radiation exposure, which is a concern for surgeons [4][5][29] - Alphatec is focusing on improving the clinical experience through better technology integration, which is seen as a catalyst for growth [4][11] Growth Metrics and Projections - The company has been growing at a rate of 8-9 times the market growth, with a projected growth of approximately $130 million in 2023 and nearly $150 million in 2024 [13][16] - A net growth rate of 20% in new surgeons has been reported, indicating strong adoption of Alphatec's procedures [14][15] Market Dynamics and Competitive Landscape - The company is benefiting from disruptions in the market, particularly from competitors like GMED, NuVasive, and Stryker, which may be losing focus [18][22] - Alphatec's sales force is currently one of the smaller ones in the industry, indicating room for growth and expansion [24][26] Future Growth Strategies - The company plans to expand its sales force and enhance its product offerings, particularly in deformity surgery and cervical procedures [24][39] - The integration of informatics tools is expected to provide surgeons with better decision-making capabilities, which is seen as a significant opportunity for growth [40][41] Financial Management and Investment - Alphatec is focused on self-funding its growth through profitability, with a long-term plan that includes a ratio of $0.75 investment in sets and inventory for every dollar of revenue growth [37][38] - The company is confident in its capital allocation strategy, which aims to balance investment in growth with maintaining healthy margins [36] Challenges and Considerations - There is a recognition that the market may eventually slow down, and the company is preparing for this by ensuring it has a robust operational strategy [10][16] - The need for continuous innovation and adaptation to market demands is emphasized, particularly in the context of evolving surgical techniques and technologies [40][42] Other Important Content - The discussion highlights the importance of alignment and bone mineral density in spine surgery, with Alphatec's recent clearance for BMD assessment by level being a unique offering [41][42] - The company is in the early stages of expanding its presence in key geographic markets, with a focus on long-term commitments to growth [21][22]

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 Performance & Growth - ATEC experienced a sector-leading revenue Compound Annual Growth Rate (CAGR) of approximately 40% over 5 years, driven by market share expansion[4] - Total revenue for 2023 reached $482 million, representing a 37% year-over-year increase[7] - Surgical revenue in 2023 was $423 million, a 39% increase year-over-year[7] - EOS revenue for 2023 amounted to $59 million, reflecting a 24% year-over-year growth[7] - The company projects 2024 revenue to be $595 million, indicating a 24% growth[8] Market Position & Strategy - ATEC is focused on an $8 billion spine market[4] - The company's strategy involves meeting unmet needs in spine surgery through clinical distinction[19] - ATEC is a 100% spine-focused company, differentiating it from larger, less focused competitors[17, 20] - ATEC aims to achieve cash flow break-even in 2025, supporting self-funded future growth[4] Innovation & Technology - ATEC is integrating unprecedented information into spine care with enabling technology[19] - The company is advancing deformity treatment with procedural sophistication[19] - ATEC is developing the EOS Catalyst, expected in mid-2024, to automate alignment reports and surgical planning[72, 73]

Financial Performance & Guidance - Preliminary Q3 2023 surgical revenue is expected to be between $103.3 million and $103.9 million, representing a year-over-year (YoY) increase of 31% to 32%[4] - Preliminary Q3 2023 EOS revenue is expected to be between $14.3 million and $14.5 million, a YoY increase of 27% to 29%[4] - Total revenue for Q3 2023 is projected to be between $117.7 million and $118.5 million, reflecting a YoY growth of 31% to 32%[4] - Full-year 2023 surgical revenue guidance has been updated to $414 million, a 33% YoY increase[5] - Full-year 2023 EOS revenue guidance remains at $58 million, a 21% YoY increase[5] - Total revenue guidance for FY2023 has been increased by $10 million to $472 million, representing a 32% YoY increase[5] Strategic Focus & Innovation - ATEC is uniquely 100% spine focused, driving innovation from the operating room, not the board room[7, 9, 10] - ATEC aims to improve precision, predictability, and durability in spine surgery, addressing the 25-30% of surgeries that require revision[11, 12] - ATEC's innovation addresses the goals of spine surgery: decompression, stabilization, and alignment, strongly correlated to successful clinical outcomes[19, 25] - ATEC is positioning to capitalize on industry disruptions, adding 30 sales professionals from disrupted companies[32] Technology & Solutions - EOS imaging objectively answers essential clinical questions, providing full-body, standing, functional global alignment assessment with less radiation[52, 65] - The Catalyst system, expected to launch in 2024, will provide automated alignment reports, surgical planning, and patient-specific rods[68] - ATEC's lateral approach, including PTP (Prone Transpsoas) and LTP (Lateral Transpsoas), aims to address the hurdles of first-generation lateral surgery, with LTP designed for single-position surgery for L3 to S1[98, 122] - Valence, ATEC's navigation and robotics platform, is designed to be practical, economical, and ASC (Ambulatory Surgery Center) suitable[151]

Financial Data and Key Metrics Changes - The company reported a revenue of $169 million for Q1 2025, representing a 22% increase compared to the prior year [8][12] - Adjusted EBITDA for the quarter was $11 million, equating to a 6% margin, which is an improvement of over 800 basis points year over year [12][20] - Non-GAAP gross margin was 70%, down 50 basis points year over year but up 70 basis points sequentially [10][11] - Free cash use was $15 million, reflecting a $55 million improvement compared to Q1 2024 [14][15] Business Line Data and Key Metrics Changes - Surgical revenue was $152 million, growing 24% year over year, while EOS revenue was $17 million, up 8% [8][10] - Procedural volume growth was 17%, driven by an 18% increase in the number of surgeons utilizing ATEC procedures [9][10] - Average revenue per procedure grew by 6%, indicating effective capture of procedural revenue opportunities [9] Market Data and Key Metrics Changes - Same store sales grew 23% year over year, demonstrating significant growth in established markets [10][11] - The company experienced record order growth for EOS, with a 28% year over year increase in the order book [10] Company Strategy and Development Direction - The company is focused on creating clinical distinction through innovative procedural solutions that improve patient outcomes [22][24] - ATEC aims to minimize surgical variables through technology, expanding its sales force and enhancing field operations [24][26] - The strategy includes a strong commitment to informatics and automated alignment planning to improve surgical predictability [26][36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving cash flow positivity for the full year 2025, with expectations of continued strong revenue growth [15][18] - The company anticipates revenue growth of 20% for the full year 2025, with surgical revenue growth of 21% [18][20] - Management noted that the current economic environment has not negatively impacted demand, with a robust backlog of procedures [100][101] Other Important Information - The company successfully refinanced its 2026 convertible note, extending maturity and maintaining a low coupon rate [15] - The company is committed to maintaining disciplined cost management while investing in growth drivers [11][12] Q&A Session Summary Question: Market size and competitive dynamics for the new Corpectomy system - Management indicated that they are the only company offering this procedure in the prone position, which provides unique advantages [39][40] Question: Tariff exposure in 2025 - The company expects low single-digit million impacts on cost of goods sold due to tariffs, primarily affecting EOS equipment [50][51] Question: Update on robot launch plan - The robot is in the alpha phase, with plans for an end-of-year launch, and integration with navigation systems is ongoing [55][92] Question: Trends in cash outlay and cash use - The company achieved cash use at the low end of the expected range and anticipates positive cash flow in the latter half of 2025 [61][63] Question: Competitive dynamics in the spine market - Management noted that the company is positioned as the largest pure play spine company, with a strong focus on improving the ecosystem for spine surgery [66][69] Question: Salesforce productivity and performance - The company reported a 23% growth in same store sales, indicating effective performance from newly recruited sales representatives [78][79] Question: EOS placements and portfolio pull-through - Most EOS placements are in new accounts, with significant growth expected in complex procedures [84][86] Question: Overall market volumes and ASC growth - The market is healthy, with good volume trends, and the company sees potential for growth in Ambulatory Surgery Centers (ASCs) over time [88][90] Question: International market expansion - The company remains bullish on international markets like Australia and Japan, focusing on profitable growth without a large infrastructure [105][107]

Financial Data and Key Metrics Changes - Total revenue for Q4 2024 was $177 million, representing a 28% increase year-over-year and a 17% sequential increase [13] - Full year 2024 total revenue reached $612 million, up 27% compared to the prior year [24] - Adjusted EBITDA for Q4 was $21 million, equating to a 12% margin, with over 1,000 basis points of improvement year-over-year [20] - Non-GAAP gross margin was 70%, flat compared to the previous year [16] - Free cash flow generated in Q4 was $9 million, marking the first cash flow since the transformation [23] Business Line Data and Key Metrics Changes - Surgical revenue for Q4 was $157 million, up 28% year-over-year, with procedural volume growth of 19% and average revenue per procedure growth of 7% [13][14] - EOS revenue for Q4 was $20 million, up 32% year-over-year, driven by robust demand and record order volume [15] - Surgical revenue for the full year was $545 million, a 29% increase compared to 2023 [24] Market Data and Key Metrics Changes - The company holds an 8% market share in the spine market, indicating significant growth potential [6] - Surgeon adoption grew by 19% on a five-year CAGR, with procedural volume growth at 25% [7] Company Strategy and Development Direction - The company aims to revolutionize spine surgery by improving procedural durability and predictability through informatics [40][41] - The focus is on leveraging unique technologies and clinical distinctions to capture market share in a disrupted environment [56][58] - Plans for 2025 include a revenue growth target of approximately $732 million, with surgical revenue growth of 21% [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver on financial commitments and translate revenue growth into profit and cash flow [21][34] - The company is optimistic about the growth potential in Japan, having conducted its first surgeries there [11][125] - Management highlighted the importance of operational discipline and efficiency improvements in driving profitability [19][78] Other Important Information - The company is positioned as the largest pure-play spine company, focusing exclusively on spine-related products and technologies [45] - The introduction of EOS Insight software is expected to enhance growth and adoption rates [102][106] Q&A Session Summary Question: Assurance on spending in 2025 amidst industry disruption - Management indicated that previous investments have been made and there are no plans for outsized expenses that could undermine financial goals [50] Question: Potential benefits from a competitor's sale of its spinal implants business - Management sees disruption as an opportunity and believes their informatics platform positions them favorably to attract talent from competitors [56][58] Question: International plans for 2025, particularly in Japan - Management emphasized a disciplined approach to entering the Japanese market, focusing on long-term growth rather than immediate gains [62] Question: Growth potential of PTP and LTP offerings - Management believes they are in the early stages of growth for PTP and LTP, with significant market opportunities ahead [70][72] Question: Efficiencies targeted in SG&A - Management discussed deliberate organizational reductions and improved operational efficiency, which are expected to continue benefiting the bottom line in 2025 [76][78] Question: Strategy for share capture and regional field team upgrades - Management noted ongoing improvements in sales force effectiveness and the need for further expansion in underrepresented geographies [83][86] Question: Competitive positioning with upcoming robotic technology - Management views robotics as part of a broader solution to surgical challenges, emphasizing the importance of systemic variables in surgical outcomes [91][92] Question: Opportunities in pediatric surgery - Management acknowledged being underpenetrated in pediatric surgery but sees potential for growth leveraging existing EOS technology [100][118] Question: Growth expectations for EOS - Management anticipates continued growth for EOS, with expectations for increased adoption and monetization through implant pull-through [102][106]