Alphatec (US:ATEC)2020-05-12 02:28Financial Data and Key Metrics Changes - The company reported a 27% year-over-year revenue growth in Q1 2020, with 56% of that growth attributed to new products, compared to 22% in Q1 2019 and less than 10% in fiscal year 2018 [8][9] - Average revenue per case grew by 15% year-over-year, reflecting increased confidence in new devices, up from 30% growth in Q1 2018 [9] - The company ended Q1 with $27.5 million in cash, and after a draw on its credit facility, it had a pro forma cash balance of $47.5 million [15][16] Business Line Data and Key Metrics Changes - Strategic distribution channels saw a 34% year-over-year revenue growth, driven by increased surgical volume and case complexity [17] - The company experienced a consistent gross margin, although there was a drag from excess and obsolescence on legacy products, which is expected to normalize in 2021 [17][18] Market Data and Key Metrics Changes - The company noted signs of recovery in surgical volumes, particularly in spine surgeries, although it is still early to predict full recovery [14] - There is a growing pent-up demand for postponed surgeries, with hospitals increasing operating room hours to accommodate this demand [22] Company Strategy and Development Direction - The company remains committed to innovation in the spine market, with plans for 8 to 10 new product releases in 2020 [10] - The focus is on creating clinical distinction, compelling surgeon adoption, and revitalizing the sales force, with a strong emphasis on training during the slowdown [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of surgical volumes and the company's ability to emerge stronger from the current crisis [6][14] - The leadership highlighted the importance of maintaining employee engagement and preserving cash flow during the pandemic [5][7] Other Important Information - The company secured a $35 million commitment from Squadron Capital, extending its financial runway and removing financial covenants from its credit facility [8][16] - Regulatory submissions for new products have continued without significant delays due to COVID-19 [57] Q&A Session Summary Question: Is there pent-up demand for spine surgeries? - Management confirmed that postponed surgeries are expected to be rescheduled as hospitals increase operating hours to accommodate demand [22] Question: How has COVID-19 affected the launch of Alpha Informatix or SafeOp? - Management noted that product development has continued, and they are confident in the integration of the system into surgical procedures [24][25] Question: What is the current state of collaboration with EOS? - Management expressed disappointment but remains optimistic about future collaboration opportunities, emphasizing the need for a different approach [28][29] Question: What are the terms of the new financing with Squadron? - The financing terms include LIBOR plus 8%, with a 10% floor and 13% ceiling, providing the necessary runway for growth [31] Question: What drove the revenue growth in Q1? - The growth was attributed to increased confidence in new devices, attracting more surgeons, and higher case complexity [34][35] Question: What was the impact of COVID-19 on procedural volumes in March and April? - There was a significant slowdown in March, but early signs of recovery were noted in April, with volumes exceeding expectations [44] Question: What types of cases are being performed during the recovery? - The focus has been on single and two-level cervical cases and minimally invasive procedures that do not require extensive ICU resources [46] Question: What is the medium-term margin outlook? - Management expects to maintain gross margins in the mid-70% range, despite potential near-term headwinds [48] Question: How far along is the adoption of SafeOp among the distribution channel? - Management indicated that they are in the early stages of adoption, with about 25% penetration into their group [51]