Alphatec Holdings Inc (ATEC) Q1 2024 Earnings Call Transcript Highlights: Robust Growth and ...
Total Revenue: $138 million, 27% growth year-over-year.
Surgical Revenue: $123 million, 30% growth year-over-year.
EOS Revenue: $16 million, 5% growth year-over-year.
Adjusted EBITDA: Loss of $3 million, 450 basis points improvement.
Net Income: Not explicitly mentioned, focus on adjusted EBITDA provided.
Gross Margin: Non-GAAP gross margin 71%, up 50 basis points year-over-year.
Surgical Volume Growth: 23% increase.
Average Surgical Revenue per Case: 6% growth.
Same-Store Sales: 28% growth in established territories.
Market Capitalization: Not discussed in the call.
Free Cash Flow: Cash flow break-even expected in 2025.
2024 Revenue Outlook: Expected total revenue growth of 25% to approximately $601 million.
2024 Adjusted EBITDA Outlook: Expected to be approximately $23 million.
Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Reported a significant revenue growth of 27% year-over-year, reaching $138 million in total revenue for the first quarter.
Achieved a 30% growth in surgical revenue and a 23% increase in surgical volume, indicating strong market demand and adoption.
Expanded the sales team and invested $60 million in revenue-generating assets to support increased surgical volumes and market demand.
Introduced 150 new surgeons to their systems in the quarter, leading to a 21% increase in surgeon adoption.
Continued innovation and development in neuromonitoring and lateral surgery techniques, maintaining a leadership position in these areas.
Negative Points
Despite revenue growth, the company reported an adjusted EBITDA loss of $3 million, although this is an improvement from the previous year.
The company is still in the early stages of market penetration in several international markets, including Japan, which may delay significant revenue contributions from these regions.
Faces challenges in the capital equipment market, particularly with the new EOS Insight launch, as it requires significant effort to educate and sell to new customers.
The company's profitability is still under pressure, with significant investments planned for the year that could affect short-term financial stability.
Relies heavily on the continued adoption and integration of new surgical techniques and technologies, which may face resistance or slower acceptance in conservative markets.
Q & A Highlights
Q: Congratulations on a strong start to 2024. Pat, I was hoping to ask about the opportunity in deformity. I know you guys have talked about this multiple times over the last 6 to 12 months, but one, maybe just help us think about Atec's share in deformity may be hard to parse out. And then on top of that, I was hoping to just ask about the evolution of SafeOp and integrating motor evoked potentials into the monitoring platform and how important that it is to deformity procedure. So, one, deformity procedures and Atec's future share taking, and then I have one follow-up on EOS. A: Yeah. Josh, I think the opportunity to influence deformity is very apparent and opportune. I think the most coveted tool in evaluating deformity is an EOS image, and I think bringing about predictive analytics to a field that completely lacks it is an opportunity to distinguish. And so, it's been so exciting to see the automated measures, the planning, understanding reciprocal change in the levels, bringing that into an operative experience and understanding that you can refine a patient-specific implant, and then you can refine it in the operating room based upon the information you delivered. And then just the ability to take that information and have the exact same image postoperatively is almost predictive analytics by description. And so, you think about the type of revision rates that you see in deformity, and you think about what are the variables that you're trying to control, and we think the great tool to control variables is the EOS image and ultimately how we utilize that in the surgery. And so, we're a bit player in the grand scheme of things in deformity, and we feel like this tool really brings us to the forefront of both adult and idiopathic. We have a long way to go from a design development perspective in terms of some of the implant systems in that realm. We're doing a good job, but we have opportunity abound. And so, I would tell you from a EOS perspective, the most coveted tool in the business, from an implant perspective, I would say good to very good. We will be great. We have the mechanical aptitude to be great. I think the big sleeper is SafeOp, and I think that when you start to especially think about idiopathic deformity and you start to think about how disruptive MEPs are today and the ability to do things like facilitation in a way that you don't need the voltage to ultimately test the motor elements of the cord, and to be able to assess that by not disrupting surgery, we feel like is another significant benefit. And so, we feel like in both the adult and in the idiopathic realm, there are significant opportunities technologically to distinguish ourselves, which ultimately, this is a group that's steeped in research and a group that doesn't make decisions to change easily, but our technology portfolio, I believe, will provide that impetus.
Q: Great. And just one follow-up, another technology question. Just on the interop alignment and automated reconciliation tool, can you just help us understand where you are in that development process? It looks like on one of the slides that there's at least a prototype, or maybe that's already in play and I'm just behind, but how important is that technology? Where are you guys in development there? It looks like it may be the only non-FDA cleared, I guess, piece of the EOS Insight platform, and that may just be an overread by me on the slide. Thanks for helping us out. A: No, I think it's the right catch. The interoperative reconciliation is not something that has historically been done. And so we're, in essence, making a market there, and we're early on in the experience with that. We expect FDA clearance by the end of Q2, but I will tell you, this will be a long effort in terms of creating utility and simplicity and a seamlessness in the operating room. So it's our most immature element of the Insight portfolio of goods, but one that we believe to be very, very valuable over time. So I'll look forward to more updates, but your catch is exactly the right one.
Q: I'd love to talk about the competitive hiring you've seen over the last few quarters, but specifically around what you're seeing in terms of leakage in territories that are covered by those competitive reps, how effective has cross-covering been in regions that are covered by, I guess, non-competes. And then anything to update to the hiring from, I think, it was 50 last year disclosed in mid-March. And then just quickly for Todd, any selling day impact in the quarter? Thanks so much for taking my question. A: I'll start off and then I'll let Todd, I hate to say clean up, but he'll provide decisions. It's the way we work together. Anyway, the hiring is going very, very well. It's entertaining. I get the opportunity to sit with our sales training class, and I sat in there yesterday with 30 people, men and women, and there is not a company that's not represented in the people who are coming forth to ATAC. And so one of the things that we committed to, and it's almost like the international focus of, hey, we're going to go narrow and deep. We're going to grow our sales force in a very deliberate way. Our sales leader is a very disciplined guy, Dave Sponsel. And I think that he's done a superb job in terms of being methodical with regard to the geographies that we grow into and how many people within those geographies, can we support them from a implant and instrument and a procedural perspective. And so there's a lot of things to bring to bear. And so trying to be deliberate and precise in these efforts is hugely important, but we continue to grow the sales force. There continues to be a lag in terms of their influence, but I would tell you great progress is being made. The difference between, I think, the perspective from a banker investor standpoint is, I think there's an expectation that it happens overnight. And I think I tried to utilize the proxy of the K2 striker as one that would suggest these things take time. And as we look back on them, they're going to feel quick. When you do the work through them, they're not so quick. And so anyway, we remain bullish. It's a long tail and we are super excited about our prospects.
Q: So I apologize if we've already been asked. But can you maybe just talk about what you saw, what trends you saw during the quarter with respect to patient volumes? And then add a follow up, please. A: Yeah, I guess at least this is Pat. I think what we saw is a pretty consistent flow really all the way through the quarter. I think there's some vacations in the back end of March. But again, nothing that would create any discerned interest. So it
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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