Alphatec Holdings (NASDAQ:ATEC) reported first-quarter financial results on Tuesday. The transcript from the company’s first-quarter earnings call has been provided below.
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Access the full call at https://events.q4inc.com/attendee/786682215
Summary
Alphatec Holdings reported a 14% overall revenue growth and 17% surgical revenue growth, with improvements in profitability and balance sheet enhancements.
The company adjusted its guidance to reflect current expectations, expecting at least $20 million in free cash flow for the year, despite a near-zero expectation for Q2.
The strategic focus remains on clinical distinction, surgeon adoption, and sales force scaling, with emphasis on procedural approaches that improve surgery outcomes.
EOS installations faced timing challenges, but the company is confident in its long-term strategic value, enabling access to key institutions and driving a 30% revenue lift per surgeon after Insight adoption.
The company is optimistic about its future outlook, maintaining its full-year growth guidance backed by strong surgeon adoption and international business contributions, despite short-term execution issues with EOS.
Full Transcript
Todd
Approximately 35% drop through on the incremental revenue dollar year-over-year for free cash flow,. We continue to expect at least 20 million in free cash flow for the full year. With the second quarter expectations for free cash flow, to approximate zero. We recognize that adjusting our guidance is a significant decision and we believe that the updated guidance appropriately reflects our current outlook as we remain laser-focused on delivering the profitable sales growth implied in our 2026 guidelines. To put our first quarter financial performance in perspective, we drove 14% overall revenue growth, and 17% surgical revenue growth at an annualized scale of approximately $800 million with strong operating leverage, translating into significant profitability expansion while making material improvements to our balance sheet. While the quarter didn’t live up to our growth expectations, we are confident in our ability to continue to grow at multiples in the market, translating that into profitability and cash flow. With that, I’ll turn the call back to Pat.
Pat
Thanks Todd. Our strategy hasn’t changed because we know it works. We start with clinical distinction. If it doesn’t matter in the OR, it doesn’t matter. But if it makes surgery better in the OR, it matters to us greatly. This is how we have built the best procedural approaches in our industry. Second is surgeon adoption,. We don’t sell products. We develop approaches that improve surgery, elevate workflows, and build trust. We know this philosophy is effective because our surgeon demand remains very high. Third is a sales engine. We’re continually assembling and improving upon a sales force that is disciplined, aligned and energized and built to scale. Put that together and it’s very straightforward. Do something clinically meaningful. Surgeons adopt and we scale it. We’re not focused on widgets, or, as we like to say, the currency of our business.. We assemble procedures from the ground up. Everything you see here is designed to work together. That’s what has driven and will continue to drive our model. We don’t sell one thing, be it a screw, a plate, an implant or a rod. We offer procedural approaches that make surgery better, and better procedures over time lead to expanded indications, greater complexity and increased revenue. While we call that a convoyed sales effect, it’s really just a result of designing procedures the right way, leading to better patient outcomes. We start in lateral for a reason, because it is where we have the greatest collection of know how and how we most distinguish. The surgery works. It’s reproducible, efficient, and surgeons feel comfortable with it very quickly. I was in a case Last Friday, an L4,5 spondy, 15 minutes in disc height was restored in under an hour. The case was done with minimal blood loss and morbidity. That same case used to take four hours. And it was a very different experience. Far less reproducible for the surgeon, far less predictable for the patient. PTP has profoundly improved surgery for both surgeon and patient. That’s what creates confidence. And once surgeons experience reproducible success in lateral, they don’t stay with just that procedure. They expand their utility into cervical T lift, posterior fixation, all things across the board. Our growth isn’t dependent on just adding incremental surgeons. It’s expanding indications for procedures they adopt and moving them to other approaches, which is what happens after they trust you. That’s what the model is really about and that’s how it compounds. EOS continues to be a big deal for us.. And while installation timing was a challenge in the quarter, the EOS experience is playing out exactly as we expected. First, EOS edge gets us in the door with leading institutions that were hard to impossible for us to access previously. Places like Duke, nyu, hss, Northwestern, University of Virginia, University of Maryland, just to name a few. Then EOS becomes part of the workflow. Pre surgical planning, interoperative reconciliation and follow up. Then it starts driving the case volume, insight, patient specific rods alignment. And over time it builds something more valuable than any one product. It’s data generation that’s the moat.. We’re already seeing EOs impact about 30% revenue lift per surgeon after Insight adoption. So EOS isn’t just additive, it’s multiplicative. What’s happening with Insight right now is important. We’re moving from imaging to intelligence, 3D alignment,, patient specific planning, starting to predict outcomes, not just react to them. And every case makes the system better. That’s how this compounds. We are creating a true structured data advantage. At the core of this is our ability to take EOS imaging and convert it into quantitative, actionable intelligence,. It’s becoming smarter, more predictive and more embedded into clinical decision making. That’s how you build clinical distinction. This is where owning the image and translating into data matters. Valence is early,, but it’s doing exactly what we needed to do. It fits seamlessly into the surgical workflow. It doesn’t get in the way. The footprint is very small. It actually makes the case cleaner. And that’s everything. If it disrupts the surgeon’s workflow, it doesn’t get used. We’re seeing strong utility, positive surgeon feedback and real usage and the same pattern we’ve seen before. It works. Surgeons trust it, it grows. That’s how this is playing out. Japan looks very familiar in a good way. We’re leading with lateral, building early confidence and seeing surgeons engage. I have seen it firsthand. I was in the OR a couple of weeks ago and the surgery was methodical, predictable and reproducible. This is the same pattern they adopt. They do more, they expand. It’s early, but it’s exactly what we wanted to see. In closing, when I think about a tech, it’s pretty straightforward,. We’re focused 100% in spine. We built real leadership in lateral. We’re doing the same thing in deformity with eos. And we put the infrastructure in place to scale. Most importantly, we’re growing and becoming more profitable at the same time. We’ve established a system and ecosystem that builds upon itself. Last point. Why people are coming here, surgeons and reps, because we care about what they care about. We don’t push widgets. We give them procedures and increasingly information that improves predictability and patient outcomes, that drives surgeon interest and adoption, leading to more cases that in turn attracts sales agents and builds careers. And that’s why ATEC, is the preferred destination in spine. With that, we will take questions.
Operator
As a reminder, sell side analysts planning to ask a question must be registered through the dedicated analyst link included in today’s materials. If you have not yet registered, please do so now to be included in the Q and A queue. If you would like to ask a question, please press star, 1 to raise your hand. To withdraw your question, press star, 1 again. We will now open the floor up for questions in consideration of others, please limit yourself to one question. Our first question comes from the line of Matthew Blackman with TD Cowan. Your line is open. Please go ahead.
Matthew Blackman (Equity Analyst)
Good afternoon, everybody. Can you hear me okay, We can hear you. Yep.
Operator
You guys hear me okay? Yep. Go ahead, Matthew.
Matthew Blackman (Equity Analyst)
Thank you. Thank you. So I guess this is not really a fair question, but I do need to ask it in the context of the LRP guidance. 2027 feel confident, comfortable today reaffirming that billion dollar revenue number. Obviously all the other pieces feel like they’re in a good place, but the billion dollar top line, particularly in the context of, you know, I think consensus is at about 4 or 5% higher than that. Just any thoughts on that 2027 LRP number where consensus is relative to how things shook out here in the first quarter and relative to the new guide, just the big step up that’s implied to get to that 2027 number, particularly that consensus number. I’ll leave it at that. That’s my one question. Thank you.
Operator
A reminder to unmute yourself locally. Matt, can you hear us? Matt, can you hear us?
Matthew Blackman (Equity Analyst)
I can hear you now.
Operator
Could you repeat your question for us please?
Matthew Blackman (Equity Analyst)
Sure. My one question was actually in regards to the 2027 LRP, aside from all the margins sort of metrics which are all tracking above plan, you know the revenue target, a billion dollars, you know, more, so just looking at in the context of where consensus is, which is about 4 to 5% higher than that with the new guidance here for 2027, it’s a pretty big incremental revenue step up to get to that number. Just your level of comfort here sitting today with that LRP revenue number for 2027. And Chief sent you willing to comment on where consensus is sitting for 2027. Just given some of these puts and takes that you’re absorbing here early here in 2027. Thank you so much. Can you guys hear me? Anyone?
Todd
Matt. All right, let me give a shot here answering your question. So Hank, your question ultimately is, given the fact that we’ve adjusted our guidance to reflect our current expectations around our EOS number, I would tell you that the guide in terms of where we are on EOS and the adjustment that we’ve made is really to reflect some very near term execution issues that we believe that we’ve addressed through adding incremental sales talent and downstream marketing resources to the organization. And so we fundamentally believe that that’s going to just address the issues that we have. And I think the guidance would suggest that as ultimately we believe that we’ve addressed the foundational issues that are execution related. So as we would expect to exit this year more in line with what our original guide would have assumed and therefore believe that we are on track to accomplish the goals that we laid out in the context of our long range plan.
Matthew Blackman (Equity Analyst)
Okay, I’ll leave it at that. I’ll get back in queue.
Operator
Our next question comes from the line of Alan Gong with JP Morgan. Your line is open. Please go ahead.
Alan Gong (Equity Analyst)
Thanks for the question. Mine is kind of on the forward trajectory and specifically the pricing per case headwind, that you saw this quarter. It was good to see volume stick back up to 20% plus. But it sounds like that price per case headwind, could be sticking around especially as cervical and some of your faster growing businesses sound like they’re going to continue to put pressure onto that. Is that the right way to think about it going forward? That maybe for this year we should be forecasting continued revenue per case headwinds offset by volume growth?
Todd
Yeah, Alan, I think that our guidance implies kind of, high teens volume growth with kind of, flattish revenue per procedure growth or essentially no growth on the revenue per procedure. And your commentary and your understanding, I think is correct in the sense that as I called out in my prepared comments, our revenue per procedure growth or the score of the decline this quarter was really a function of mix attributed to both strong cervical procedures because cervical procedures have a lower revenue per procedure contribution as well as a strong performance in our international business, which does currently have a lower revenue per procedure profile as well. And then the third piece is a little bit more execution related associated with our biologics attachment rate. And so again there we believe that we’ve got some upcoming product launches and improvements in …
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