Alphatec Holdings, Inc. (ATEC) on Q1 2021 Results - Earnings Call Transcript
Operator: Good afternoon, everyone, and welcome to the webcast of ATEC's First Quarter 2021 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 the call, you may hear the company refer to reported amounts which in accordance with U.S. GAAP as well as non-GAAP or pro forma measures. Reconciliations of non-GAAP measures to U.S. GAAP can be found in the supplemental financial tables included in the press release, which identify and quantify all excluded items and provide management's view of why this information is useful to investors. Pat Miles: Thanks very much, and welcome to the Q1 2021 ATEC conference call. We will clearly be making some forward-looking statements. So if you review the forward-looking statement at your leisure. Let me start by saying I'm super proud of the ATEC family. And one of the things we talk about around here is we always say that revenue chases value creation. And so over the last eight quarters, we grew at an average of 33%. And so I would say that we're well positioned for continued industry-leading growth. And we'll talk more about these, but really revolutionizing spine surgery through the launch of PTP, a lot of excitement there. Increasing clinical prowess and progressing toward sales exclusivity, we'll talk more about that. Elevating surgeon and sales education through our new state-of-the-art facility. We have a beautiful facility and are hosting a lot of people, and the traction is palpable. And then really, how do we improve information from diagnosis through follow-up with really a set standard, which is what EOS is going to provide. And so historically, we provided a bit of a scorecard of leading indicators, and we'll continue to do the same, but expect some evolution in how we view the demographics of our business. So for Q1, strong momentum, 50% year-over-year growth, 10th consecutive quarter of double-digit year-over-year growth, 77% new product revenue contribution, which is clearly up over the previous couple of years, 17% year-over-year growth in revenue per surgeon, 13% year-over-year growth in average revenue per case. And we're seeing a tick-up in the average products sold per category. And so the one thing you're going to find is that our commitments will remain unchanged, and we will accelerate growth by prioritizing these key initiatives. And we will continue to create clinical distinction, that's really build an organic product development machine and advance our information-based core competence. Through clinical distinction, we'll compel surgeon adoption, and we measure that objectively through the increased revenue and products sold per surgery. And then also perpetually revitalize the sales force, making sure that we have the congruence between the inside and the outside of the company and that things are going well. So we'll jump into the scorecard really under each of the commitments. And so I would say that the organic innovation machine will continue to create clinical distinction really through a sophisticated understanding of what approach-based technology compel surgeon adoption. Todd Koning: Thank you, Pat, and good afternoon, everybody. Before I go through the first quarter financial results, I want to express just how delighted I am to be here at ATEC. Having previously worked closely with many on this team, I'm well acquainted with the profound caliber of committed spine expertise that has been assembled here. I've watched from the periphery as ATEC posted quarter-after-quarter phenomenal growth. And in fact, ATEC grew 30% last year, a year in which there was little to no growth from anyone other than ATEC. Needless to say, I wholeheartedly recognize the opportunity for significant value creation that lies ahead, and I'm eager to contribute to that success. As ATEC grows into a much larger spine company, I intend to expand on the strong foundation that has been established to build a world-class finance organization, one capable of scaling the company through rapid domestic growth and eventually expansion outside of the U.S. This inaugural earnings release certainly marks a solid start to an exciting year for ATEC, and I am honored that now I get to be an instrumental part of it. I'll begin with revenue. We had a great start to the year with the first quarter U.S. revenue of $43.7 million, reflecting growth of 50% compared to the prior year period. Total revenue, which includes the contribution of our international supply agreement, was $44.1 million in the quarter, up 47% compared to the same quarter last year. Increased search and adoption of new products and procedures and the continued revitalization of APAC's strategic distribution channel offset the pressure we saw on surgical volumes early in the quarter. It is evident that our ability to deliver clinically distinctive procedural solutions is compelling surgeon adoption. Continuing through the remainder of the P&L, non-GAAP U.S. gross margin was 77.9% in the first quarter, roughly in line with the prior year quarter. Excluded from the non-GAAP gross margin number, our E&O charges related to legacy products, which were down almost 100 basis points compared to last year as a percent of sales. E&O charges are beginning to normalize and will continue to do so following years of transitioning to new products. Operating expenses continue to reflect consistent, thoughtful investments to support rapid long-term growth. Non-GAAP R&D was $5.3 million and approximately 12% of sales in the first quarter, compared to $3.8 million and approximately 13% of sales in the prior year quarter. The increase on an absolute dollar basis was driven by continued investment to support organic portfolio expansion. Pat Miles: Todd thanks much. As I look to -- look at Q1 and the number of catalysts for growth forward, I really can't be more excited. I think we will continue a sustainable approach to long-term execution through the things that we've already committed to, which is perpetuating clinical distinction. I love where we are from a PTP and a lateral momentum perspective. I think bringing the sophistication of the EOS transaction on is fantastic. We've yet to make our statement in cervical and biologics, and we have products in that -- those areas forthcoming in large ways. And we will continue to be aggressive as we design and develop solutions. Our sales force, I think, is being revitalized as we continue to grow; we continue to compel people forward as well as clearly the surgeon adoption is going quite well. And so we've, I think, eradicated many of the headwinds that we had previously faced. And we just love the business that we're in, and we intend to continue to advance spine surgery faster and really make a difference where it counts, which is in the operating room, which is where our expertise lies. So with that, we will turn it over and take questions. Operator: . Your first question comes from the line of Brooks O'Neil from Lake Street Capital. Brooks O'Neil: Good afternoon guys. I'm excited as you are for the future of ATEC. And I could see all the progress you've been making over the last couple of years, so congratulations on that. I guess we should open it up by starting to just talk a little bit about what you're seeing in the marketplace now, Pat and Todd, in terms of reopening the activity. And I'm curious if you think there's any sort of latent backlog or procedures that you have an opportunity to capture over the next few months. Pat Miles: Yes. Brooks, hey, thanks very much for the comments. And the -- probably like everybody else has already talked about it, there was softness in January and February. And then March was more of a breakout month. And I think everybody's kind of commented on that. And my expectation is that there's likely some backlog, and it's -- as we've always talked about it, it's 500 counties and 3,000 hospitals. So it's always tough to appreciate the demographics, and we're such a small player. It's one of the things where it's tough for us to make big market assessments as it relates to just a reflection of our performance. But it feels a little bit like things are starting to normalize. And I think that's all that we want is the greater the normalization, the greater the opportunity for us. Brooks O'Neil: Great. And then my second question. You talked about your excitement about PTP. And I recall there was a lot of wonder in my mind about meeting Luis Pimentel at the Spine Society meeting last year. Maybe it was the year before. I can't even remember. But is it your assessment that there's anything left in Luis' bag of trick? Or do you think forward proceduralization efforts are going to come from other places than Luis? Pat Miles: Yes. I got to tell you; like something that makes me very proud is Luis has been a pioneer for years. Luis pioneered the lateral space all the way back in 2003. And we created a monster company through some of his thinking. And so when I see him engage in the development of an idea that he's very, very bullish on, candidly, the guy has been right a lot. And I think PTP is just another example of him being right. And so clearly, what we do is respond to the requirements associated with each individual technique. I would tell you, Luis' forte is the lateral surgery. I should -- I got to say lateral and interior column surgery. And so when we look at lateral and ALIF, I think that we have light years of a runway because there's an expertise that exists nowhere else. And so I think key is the driver of that expertise. And I think that the people around him like a Bill Taylor and Devon and other surgeons all contribute in their respective ways to the sophistication of that portfolio piece. And so anyway, I think it's an exciting time. And I think the guy is such a meaningful contributor to who we are as a company. So hopefully, that answered your question. I start gushing when I talk about Luis. Operator: Your next question comes from the line of Joshua Jennings from Cowen. Your line is open. Joshua Jennings: Hi, thanks for taking the question. little bit -- on PTP. I just on my question to that topic. Pat, if you could just share where you think you are in the launch? We believe it's still early days to final launches, more multiyear or even longer. But just if you could update us on just -- you feel like your team is going to launch a PTP in converting, mostly minimum basic surgeries? Or are you also converting noninvasive surgeries already? And maybe -- the halo effect come from this PTP adoption from the lower -- also in that have been attractive -- and to take questions and investments to start for the year. Pat Miles: Thanks, Josh. And to me, we're in such the early phase. Usually like -- this business runs like an 18-month arrears. We're enjoying the work that we've done 18 months ago today. And then 18-months from now is when you're going to really start to see the kind of the real traction of much of the work that's been launched recently. And so I think it's kind of a fascinating dynamic. So I would tell you that we're in the super early phase of this. The comforting stuff is the three things I try to hit on, which becomes when someone applies it to a very straightforward type of an indication for surgery, like spine -- grade one spondylolisthesis and they have success in there, what happens is they go much more complex. And so we're seeing that very thing with the people who are adopting it is they're starting very simple and they're marching to a more complex utility. And we're seeing the reflection of that in an increased ASP per surgery. And so first of all, I'd say that we're in the very, very early phases. The interesting part is I -- if I look at the demographics of the surgeons who have come through here, we've had a fair number of guys who have been more kind of traditionally posterior approach guys more than I would have expected. I would have expected everybody have lateral experience then they're going to try this new lateral. And there's a lot of that. But I will tell you, there's also a fair number of surgeons who never adopted lateral, who just prefer the position of prone more and who are interested in adopting this for all the benefits associated with lateral surgery. The one thing that I think is clear is that the lateral guys will likely be a little bit quicker in terms of just they're not learning a heck of a lot new other than this whole position and all of the utility of the specifically designed goods to make it successful. The other guys who have not done lateral are learning a lot more with regard to the retroperitoneal access and some of the other things. And so we're seeing a little bit of a slower adoption on that front, so we're going forward together. Operator: Your next question comes from the line of Matthew O'Brien from Piper Sandler. Your line is open. Matthew O'Brien: Good afternoon. Thanks for taking the question. For starters, Pat, can you talk a little bit more about the distribution channel and exclusivity and $4 million per distributor. I mean that's a boat load, some better, some below that. But where does that trend over time? How many more distributors do you need to cover the U.S.? And is there an opportunity in certain direct markets even in the U.S. to certain markets in the U.S. to go direct? Pat Miles: Yes. As you appreciate, Matt, these are the hardest things to do is to make sure that there's just real congruence in terms of kind of the clinical acumen and the long-term commitment within the field. So you spend all this money to creating solutions and you got to make sure that the guys who are carrying kind of -- carrying the mail are the demographics that are going to make that -- make a long run with it. And clearly, we've cleared out the vast majority of the historical Alphatec Spine headwinds. And so the challenge is -- like there's huge markets where we have like very, very little. And I won't go individually into the specific markets. But if you name the top metro areas in the country, you'd hit some of them. And the challenge is there's zero -- like St. Louis, Missouri, we have nobody. There's a big swath of land that we don't have anybody. And so it's found money when we add a distributor. But we're doing our best to really kind of carry the standard of making sure the type of people that come in here are the type of people who want to build a monster. We're going to be in this for a long time, and we are totally committed to really grow an unbelievably strong company. And so we just want to make sure the demographics of the people are reflective of the commitment that we require. And so I know that's a bit vague, but my point is there's a lot of geography that yet need to be covered. Matthew O'Brien: Got it. That's helpful. And as a follow-up -- and sorry, I'm going to kind of throw two together here. Can you talk about -- I know you don't own the asset yet, but the EOS funnel an opportunity, there's some noise in the market about like a limited opportunity for EOS in terms of new system placements. And I'd love to just hear a little bit more about that. And then I think it's kind of important to talk about InVictus OCT. I know it's not the most -- maybe the sexiest product in the world. But as I understand that there's a lot of pull-through sales that you get in having that one just generally speaking on the cervical side of things. So can you just talk about what that can do for you in that part of the business. Thank you. Pat Miles: Yes. I was going to be facetious and say the reason we acquired EOS is because of the limited opportunity. The -- I got to tell you, it's what I love about the assembly of a bunch of students of the business of spine. And the ability to have the standard at the origin of a patient experience to understand from an AP and a standing full-body lateral and understand all the compensatory mechanisms. When you start to think about what drives a great spine outcome, it's things like alignment, understanding kind of bone quality, things that a lot of surgeons are guessing at today. For us to create objective measure around those dynamics is such an opportunity. And everybody always talks about predictive analytics. And you talk about machine learning and AI. The reality is, how do you do machine learning and AI if you don't have the original standard input? And so what we believe the value of EOS is our ability to start to understand the economics and the clinical elements and combine those of spine such that what we can start to do is understand what's the likelihood for success within specific pathologic states with regard to specific approaches and what's the financial profile associated with it. And I think when you're committed to those types of things, what happens is that you see great value in something like EOS. And when you're into this thing just for the chargeable in the operating room, you're going to miss it. And so the great opportunity is, as we're committed to the team for the long haul, we think there's great value to be created. I got to tell you, I think there's 380 systems already placed. When I look at all the different capital equipment type technology, there's not a lot of people that have 380 systems. For us to make hay with the current systems placed, especially in the United States where it's a who's who of institutions, I like our chances with regard to reflecting value from this asset. And so to me, it's funny when somebody says a limited opportunity. I welcome that thinking. Because over time, what we'll do is just continue to demonstrate the value of the very thinking that has contributed to our acquisition of EOS. And so the second point, I think, was a great one, which is the whole OCT thing. So InVictus OCT, we were at a previous place that did a thoracolumbar system and still haven't launched the posterior cervical system. I got to tell you, in the three years that we've been here; we've gone from head to ilium. And what happens is If you could say, gosh, does it -- what's the meaning of that? The meaning of that is our ability to understand the clinical requirements of an environment and do things expediently and clinically meaningful. And so the -- to go from head to ilium, I think, again, for those of you who are sophisticated students of this industry, there's very few systems that are continuously built from head to ilium and, candidly, as coveted as the type of sophistication that InVictus brings. So anyway, I think it's a great point, but it's a reflection of if you're a student of this to realize that sophistication. Operator: Your next question comes from the line of Kyle Rose from Canaccord. Your line is open. Kyle Rose: Thank you for taking the questions. Jeff, I just wanted to circle back on PTP and talk a little bit more just about the components of growth. So when we think about how much of the growth is coming from the lateral side of the business with PTP, maybe help us understand what that mix looks like with the new products from PTP and lateral relative to some of the traditional fixation business? And then the real heart of that question, it's just around now that you've got the opportunity with more reopening and surgeon training activities, you've got the education that are coming on board. I'm really just trying to understand how much have we seen already? And how much is really yet to come when we think about going deeper with PTP and lateral? Pat Miles: Yes. To me, that's -- I think it's If you're in our boat, meaning -- so we turn Alphatec around. And you better compel someone when you do that. And I think PTP is like the perfect thing that can tell people because what it does is enable surgeons to do things with great optionality. And there are so many variables in surgery. Surgery -- spine surgery is very complex. And so the opportunity to address the volume of variables that you do with PTP is fantastic. And so what happens is it gets reflected, really, I would say, in the anterior column. The great part is all of these things have been designed to work together. And so when you create a procedure like PTP, to some degree, you've made the rules. And when you make the rules of the procedure, surgeons want to follow those rules because, especially in the early phase, they want this thing to be predictable. And so what happened is the sales get reflected in the whole neurophysiology front to get reflected in the interbody elements to get reflected in the posterior fixation elements. So it gets reflected across the board. And then in addition to that, when a surgeon -- when we steward a surgeon to success in a specific new procedure that ultimately is something that they didn't have before, there's a halo reflection. And so we'll start to see cervical pull-through. Because what's happening is, if they trust us with something as intricate as a PTP, they'll surely trust us with an ACDF. And so it just becomes the whole high you create confidence through the process. And I think that what we're seeing is a reflection across the board in terms of the sales. But within the context of PTP, it's just such an early phase that I think the surgery is going as we expect it would. Clearly, it took us a couple of years to create this thing. It's not like we arrive by luck. It's a matter of having gone through the efforts. So hopefully, that answers your question. Kyle Rose: No, it's helpful. And then just -- you've spent a lot of time, particularly on this call and on the prior EOS calls. You're talking about like the long-term vision proceduralizing spine. Obviously, you've got a lot of brain power from an R&D perspective. But when do we think we see some of that translate with EOS at the table? Is it -- do you need 12 months, 24 months to drive new procedural innovations that maybe fully integrate the opportunity from EOS? And then I'll just ask my last question just upfront as well. Just any other major product gaps you see? There's a lot of focus on cervical discs now. So just any commentary around product gaps moving forward would be helpful as well. Pat Miles: Yes. Kind of the way that I look at EOS is the long-term vision is the whole machine learning and AI and how do we do predictive analytics, both economically and financially. It's a walk. And so the initial walk is going to make sure that cash -- the sales forces together, we get now 300 people talking about EOS every day. And then we also have the EOS capital force going in and talking to administration. So our ability to expedite kind of the placements of this -- and I hate the term ecosystem -- an ecosystem out there of EOS units for us to ultimately derive value from. And so I would say it's going to be in the 12-month time frame with regard to informing the preoperative planning elements on ATEC product, and that will really be kind of the early phase of our proceduralization. The great part is, is that will extend into kind of the continuation of everything from building fixation elements that are demand-matched to the type of bone quality as well as the type of alignment tools that we will be able to ultimately effort. So that will be kind of the second thing that comes out. But that's what you get when you assemble kind of the beauty of a spine company in this -- controlling the imaging element is you get to, again, make the rules for these things. And so we'll be sprinting at the different procedures based upon how people interpret the algorithm for individual pathology out of EOS, but that will be kind of a little bit of the crawl walk in terms of informing through the preoperative planning elements and then some of the surgical tools. And then the longer term, it will be the AI stuff. From a product gap perspective, I love cervical motion. I think -- clearly, it's a place where I think it's good surgery. And so I think it's a gap for us. We also have a few other gaps that we're designing and developing through. I would say we got to hurry up and fulfill the corpectomy requirements. It's a place where we have a lot of interest in terms of PTP applied in corpectomy. And so I think that those are great opportunities. I would tell you we have a sound bag now. And the great part is our sound bag has been created in the last three years by people who know what they're doing. And so there's much to be excited about with regard to ATEC. And I don't feel like the headwind of a cervical disc or the lack of corpectomy devices are impediment. Operator: Your next question comes from the line of Mathew Blackman from Stifel. Your line is open. Mathew Blackman: All right. Good afternoon everybody. Thanks for taking my questions. Maybe to start for Todd, welcome aboard. Todd Koning: Thanks. Mathew Blackman: Just curious, what are your marching orders? And maybe give us a flavor of your skill set, experience that you can bring to bear. I think particularly as we look ahead to some of the longer-term growth factors like international expansion, et cetera, that would be helpful. And then I've got a couple of follow-ups. Todd Koning: Yes, Matt. Thank very much. So I think when I look at the growth vectors here and the opportunity for us to create value at ATEC. And as Pat said, there's a long runway, and I'm all in to build this monster over the long run. So just to get that out there. But the opportunity to see revenue grow in our existing customers, Pat talked about it, when they trust us with something that is difficult and complex, an we've proven our work in providing the solution, that helps them to provide a better surgical outcome. Then it's a lot easier to kind of walk up to the more simpler procedures and cases. And so I think there's a tremendous opportunity for us to grow with our existing customer base. Pat talked about our ability to and need to expand coverage throughout the U.S. And as we think about partnering with -- truly partnering with distribution channels and people really organizations, that's an opportunity that I also think I can add value in, in terms of how we partner, how we structure that partnership over the long run. And as we think about the international expansion and the opportunity we have to commercialize outside the U.S., as you know, I think I've spent about eight years in roles outside the U.S. And so I'm pretty familiar with that environment believe that I can add some value there. And I had spent a number of years in my career growing companies kind of in the sweet spot. So I think Pat and Jeff and the team have done a great job of getting us to this spot capitalizing the business, the organic innovation machine is just turning on. And so as you think about what to take to scale a business, it takes a disciplined approach, it takes the prioritization of capital, whether that be our cash or whether that be our intellectual capital and where we spend our time day-to-day. And I think that can help add value to that and really the prioritization of that. So it matches really the opportunity to increase shareholder value over the long run. Pat Miles: If I could -- I just can say, Matt, if you don't mind, the other thing to add to that is I think Todd's coming in at the perfect time in terms of I think also kind of an understanding of capital and how to ultimately sprinkle the entire civilized world with units and making sure that what we're doing is doing it in a thoughtful way and an expedient way. As we look at kind of the creation of an ecosystem out there of placed units and our opportunity to derive revenue from those placed units, I think that there's going to be a significant role that Todd is going to play in terms of creating an experience and a confidence to that effort. So -- Mathew Blackman: I appreciate it, guys. Really, really helpful. Just a couple of follow-ups. You had -- you were mentioning sort of same surgeon sales growth. I think you grew that 17% this quarter, but you grew the U.S. business 50%, 5-0. So I assume that implies you're also opening a bunch of new accounts. Am I thinking about that correctly, that math? Is there any way to sort of quantify or gives you context to sort of the new account onboarding that you've had, certainly in this quarter, but over recent quarters? And then I'll throw the other one out there, just to get out of the way, on gross margin. Obviously, excess and obsolete headwinds are fading, as you said, in 2021. Should we expect in 2022 those charges are diminished? And as you sort of re-approach that 77, high 70s, would it be -- to call it gross margin? Or is it going to be more measured than that? Thanks. Todd Koning: So I guess what I'd say on the growth, Matt, you look at that 50% growth and just over two-thirds of that was really kind of driven by volume, and then you can kind of see case ASP and kind of the mix toward higher-ASP procedures kind of playing into that. I don't know that we've been terribly public about our quantifying our expansion into new customer base. So I don't think we're planning on being public about that at the moment. But what I can tell you is that we have got a ton of both surgeons and the best spine sales force out there coming through our facility using our state-of-the-art training facility. We've got eight suites where we train our surgeons and our sales organization. And that things check for the people. And so I think that's a great indicator of our ability to expand into other new accounts on that front. So I guess, as it relates to gross margin, we've said that I think we've quantified the E&O impact at maybe 400 to 500 basis points over the last number of quarters. And I think the company has been public with saying that's probably in the 300 basis point on a run rate basis that kind of gets us into an overall U.S. business of mid-70s gross margin. I'd tell you, Matt; I haven't learned anything in the last three weeks that would tell me to come off that number. So I'm going to elect to hold on that commentary. So I hope that helps. Operator: . Your next question comes from the line of John -- Jason Wittes from Northland. Your line is open. Jason Wittes: Hi thanks for taking the question. First on EOS. I understand that the potential is pretty significant, especially as you kind of work in some of the data analytics available to surgeons. But there is a value purchase proposition now for surgeons. I mean, how do you see the current value proposition for one of your surgeons? And I mean, can you -- is it -- can you sell it on its current indications? Or do you -- or more selling on the promise of what's to come in the future? Pat Miles: Jason, the -- it's the right way to be thinking about EOS. Like I have to say there's an immediate -- there's a medium- and a long-term value opportunity. And if you look across the type of institutions that have already acquired EOS, they're significant and they're of their creme de la creme institutions. Much of the utility of EOS in the early phase was based upon an earlier product called EOS 3.5. And it mostly did adolescents. And so there is such great value in terms of the type of imaging that it provided an adolescents. They tried it in adults. The image quality of the 3.5 was not as good in the adults. Our opportunity with the new EOSedge that has unbelievable image quality in both pediatrics all the way through adult is phenomenal. And so to your point, in terms of the immediate opportunity, it's significant. And so I would tell you there's probably a kind of a historical bias that used to think about this thing purely in kind of a pediatric adolescent utility based upon kind of the low radiation and everything else. The image quality is so good with the new one and the type of information you could garner from it, I bet that there's unbelievable value immediately with regard to the type of imaging one gets from the EOSedge. And so I think that as we start to put the companies together, the ability to start to monetize these things in a much more expedient way than just selling capital, which was the situation that EOS was sourced in previously, but utilize our implant as a currency tool like everybody else is doing within the capital business, is just an opportunity to get EOSedge out there in a way that provides the type of information where there's better decisions made for surgery. And so I would tell you that your point is exactly the right one, which is that the EOSedge is a tool that ultimately will expand the application and utility. And I think that our ability to utilize our currency to get it out there is just an opportunity for us to start to, again, the ecosystem. I'll think of a better term next time. Just to start with those systems placed. So anyway, I appreciate the question. I think it's the right one. Jason Wittes: I appreciate the color on that. Secondly, just sort of a clarification. I'm looking at your slide when you talk about expanding exclusivity, and it looks as if you're kind of around 75 distributors, but it sounds like you want to get down to 50. I assume that means there's some more -- to be done, but also obviously, I do 50 times 4; I only get $200 million. I assume there's multiple salespeople under those distributors as well. So just maybe a clarification in kind of what the game plan might be in terms of, I guess, further horse trading or consolidation? Pat Miles: Yes. I've committed to Todd that -- you could do all the math ones, but since you get the whole -- the 50 times 4, I can keep up with that. Jason Wittes: Okay. That's about my level. So thanks Pat Miles: The -- again, I think these are such fluid dynamics. I think that their target, honestly, what we want to do is we want to create sales organizations that have the type of -- they have reasonably big businesses. And so the intention was, as we walked -- I don't cause you a number back. I think in 2018, we said, gosh, in 2022, will be a $200 million company. The -- that was kind of the 50 guide at $4 million a piece. And so -- but the intention of that slide is really to say, Gosh, how do we make for more significant but fewer kind of sales leaders, but more feet on the street that ultimately are filling in. And so we have guides that are well above the $4 million mark. And then guys that are well below the $4 million mark just based upon kind of where they are, when they started and what the run looks like. And so I would tell you that's somewhat fluid. But I would love to stay between $50 million -- 50 and 75 in a manageable number. But again, I want to make these guys have significant business or they make big -- and just the ability to create stability is the intention. Jason Wittes: Okay. And just one maybe a quick follow-up, another math question, I apologize. In terms of EBITDA and cash burn, how should we be thinking about this year? I mean you've got quite a bit going on pedal to metal in a lot of respects. So what -- in terms of the outlook for that piece, especially with all the CapEx, which I assume is coming, how should we be thinking about those parameters? Todd Koning: Yes, Jason, we used about $34 million worth of cash here in the quarter. I think if you looked at our last four quarters, I think we averaged somewhere around 17%. So if you assume that the next three quarters would be like that average, you'd probably get to an $85 million number on the full year. And then you kind of ask, well, why is Q1 so different, so heavy relative to the rest of the year. And I think I'd tell you two things. One, we've definitely invested in the sets and the inventory to support the kind of growth that you're seeing here in the first quarter and that our guidance implies. So I think that's a forward-looking investment. Obviously, we'll continue to invest, but I wouldn't expect it to be at the same rate that you saw here in the first quarter for the balance of the year. And then the second point is, we do have some onetime compensation-related items that tend to hit -- that do hit the first quarter that don't have other -- so that also kind of hits on the cash flow timing. So I think looking at it from that perspective, I think you're going to get pretty comfortable. We ended at $190 million cash, about $100 million of that is earmarked for EOS more or less, plus another $40 million on Squadron and that gives us roughly $130 million of cash in dry powder. So I think we got plenty of runway. Operator: This concludes our Q&A session. I will turn the call over back to our presenters for the closing remarks. Pat Miles: Just thanks very much for your interest in ATEC. We are in the very early phase of building what we intend to be one of the great companies. Thanks very much. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.ATEC Ratings Summary
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Alphatec Shares Down 5% Despite Strong Preliminary Q4 Results Announcement
Alphatec Holdings, Inc. (NASDAQ:ATEC) announced preliminary financial results for Q4 and provided guidance for fiscal 2023 revenue and adjusted EBITDA. While numbers came in better than expected, shares fell more than 5% today.
For Q4, the company expects revenue to be in the range of $105.2-106.2 million (up 42-44% year-over-year), well above the Street estimate of $95.3 million. This includes Surgical revenue of $90.7-91.5 million (up 48-50% year-over-year), compared to the Street estimate of $83.5 million and EOS revenue of $14.5-14.7 million (up 13-15% year-over-year), compared to the Street estimate of $13.0 million.
For 2023, the company expects revenue to be $438 million (up 25% year-over-year), above the Street estimate of $412 million. Further, management reiterated expectations for reaching adjusted EBITDA breakeven in 2023.
Alphatec Shares Down 5% Despite Strong Preliminary Q4 Results Announcement
Alphatec Holdings, Inc. (NASDAQ:ATEC) announced preliminary financial results for Q4 and provided guidance for fiscal 2023 revenue and adjusted EBITDA. While numbers came in better than expected, shares fell more than 5% today.
For Q4, the company expects revenue to be in the range of $105.2-106.2 million (up 42-44% year-over-year), well above the Street estimate of $95.3 million. This includes Surgical revenue of $90.7-91.5 million (up 48-50% year-over-year), compared to the Street estimate of $83.5 million and EOS revenue of $14.5-14.7 million (up 13-15% year-over-year), compared to the Street estimate of $13.0 million.
For 2023, the company expects revenue to be $438 million (up 25% year-over-year), above the Street estimate of $412 million. Further, management reiterated expectations for reaching adjusted EBITDA breakeven in 2023.
