Q2 2020 Alphatec Holdings Inc Earnings Call
[music].
Good afternoon, everyone welcome to Alphatec second third or 2020 financial results in recent corporate highlights announcement.
He would like to remind everyone that participants on the call will make forward looking statements. These statements are based on current current expectations and are subject to uncertainties that could cause actual results to differ materially.
These uncertainties are detailed in documents filed regular me would be estimation.
During this call give me here the company refer to <unk> reported amounts which are in accordance with yes, Yep I smell is non gap for pro forma measures.
The conciliation self non-GAAP measures the U.S. gap can be found in the supplemental financial tables included a press release.
Which identify and point if like all excluded items and provide management's view of why this information it's useful to investors.
Joining us on the call today will be Eightx, chairman and CEO, Pat miles and see if Oh, Jeff but.
Now I will turn to go over to pass mouse, chairman and CEO of Alphatec spine.
Good afternoon, everybody a welcome to the second quarter, It's a conference call.
I'm coming up on my three year anniversary in October and really wanted to share with every one some of our learnings around the transformation of Atech.
When I arrived I was told it is all we needed to do is transformed the sales force and all would be well. The reality is that it's never that simple.
In our second Investor call, we outlined three commitments that we made to transform atech.
The first one was.
Great and put it how we create clinical distinction the second one what's how do we can tell surgeon adoption and the third one was how do we revitalized the sales channel and so when we start to think about creating clinical distinction what we meant that what that meant to US is is really creating more sophisticated surgical solutions, meaning to KRW.
Great the internal know how to be able to serve the interest of spine surgery.
It is about serving the clinical requirements really better than anyone.
With that we'd be able to then compel surgeon adoption, which means how do we create confidence in predictability, how we make surgeons buy into where have confidence in the distinction we're generating the distinction didnt have could be really from an individual product, but rather and how we were addressing a our procedures.
Of specific type pathologies. The question was are we created that type of confidence that we can be reflected in surgeons engagement.
I was with more complex surgery or more products per procedure.
And then the whole revitalizing the chip sales shale this but how do we attract the best salespeople.
It doesn't matter, how well, we do things internally if it is not reflected in the field, where revitalizing our sales force with an interesting clinical attitude.
Our people have to be clinically focused west. These these people are fashion. They know what companies are creating products and procedures that determine a prosperous future we want them to be clinically adapt and totally focused on a tech, which hopefully it becomes the exclusivity approach, which oh, we will earn overtime.
I'd like to delve into each of of our commitments and demonstrate how things have changed what is important is that we create a methodical approach, which means that our commitments or claims are reflected in metrics.
But the first thing it better to his creek and organic innovation machine.
That is a team of experienced passionate people curious as to how to improve.
Fine care.
We built the fundamentals of that team are the foundation of that team over the past few years have launched 17 products, which makes up 61% of ourselves I think were other she spine.
Surgery as being Commoditized, we see nothing but opportunity spine surgery still leads improving and we intend to work with surgeons to do just that.
When we talk about compelling surgeon surgeons most of it gets reflected in earning procedures, where there are multiple products use or increasing surgeon confidence, where there's an increasing complexity of surgery and speaking with spine procedural development, we developed products based upon their requirements around the specific approach you will feel.
Lot of companies apply legacy technologies to new approaches and claim we've got one of those but surgeons are compelled by companies willing to designed and developed specifically for the approaching pathology also creating a shared interests with surgeons is about designing products beyond only those that are our billable.
About fulfilling the requirements of spine surgery.
As a reflection of our progress things like the number of products use per case up 27% since Q2 of 17.
Cases with more than one product sold up 46%.
We look at things like average revenue per case up 47%. That's one of that really speaks to confidence the surgeons have more confidence in the products that we're creating and then revenue up from top 20 surgeons up 51%.
Number three is about revitalizing the sales channel I love. This one there becomes a cynicism around sales guys running toward whoever has the highest commission rate. The reality is that they run for the company with the most promising future.
They want to be a sexual to the surgeons the color I believe that they love being part of something special and the great ones of course are a significant resource to their surgeon success. They create certainty in an uncertain environment. The number one question is shelf person gets is what's new well they tech there's a lot knew what we have seen thus far in our.
She held transformation.
He is is 77% increase in the revenue per distributor with less distributors can the percentage of sales of our strategic channel at 91%.
So things are getting better so when we start to think about.
Creating clinical distinction I look back over the last few years and as we created the organic innovation machine. What we created is really unbelievable no.
There is there is great know how at Atech, it's easy to get consumed with only financial reflection and lose sight of serving the interest of a marketplace. Our job is to serve the interest of spine surgery, we're doing that by serving a process of how we do things in back in 2018, we acquired foundational technology has enabled us to provide unique information that surgeons.
We realized that when we when we acquired it that we were immediately one of two companies that could create distinction in lateral surgery with automated nor physiology. The beauty of safe up was that we knew the value of what we were providing didn't stop at identifying a nerve with automated the EMS you in lateral there are multiple applications beyond lateral.
However, the value that we could provide in lateral was unique it would be both nerve identification as well as discerning nerve health. It is a very big deal that means that we immediately can do something that no one else come to the competition will immediately say, we got one of those are we can do that but the surgeons and field people know, it's just not true.
So moving in a 19, we launched 12 plus products, including an integrated safe up system with peripheral that integrated with our instruments in implants.
This was the start of our effort to procedural eyes or build individual approaches.
The new products were foundational and it enabled us to begin building a pro a portfolio of products to compel surgeons and attract significant sales talent. The great part was that our team designed in feature sets with our foundational products that are unique and clinically valuable clearly products like single step that integrate with safe up is one of them.
We move on the 2020.
So we hit 2020 and with all of our momentum we run smack Dab into a global pandemic.
However, what we what we don't do is panic, what we do as Contra trade on what we know which is serving the interest the spine surgery and control what we can as we store that company as everyone would expect so what we do is focused on three things, we designed and developed new products that we deemed to be weaknesses in our surgical portfolio both in both.
The insignia cervical plate and Invictus post your surgical system will alpha launch in Q3 2020, it seamlessly extends invictus up to the poster cervical spine from the lumbar and thoracic region.
We also added modularity, two invictus and integrated with our T. live for tractor Sigma, which will launch in Q4.
These are things, we do very well so we we have great expectation around these products.
Lastly, we developed a new lateral single position procedure main PTP, which will launch in Q4. This is a lateral prone transource surgery, whereby once again, everyone will say, we got one of those in a typical fashion they don't where the team that launch lateral surgery back in 2003 the level the level.
Of lateral know how at eight tech is unrivaled, having previously built the lateral market. It is a space for which we are profoundly familiar.
The Guy pictured in the loops is luis come into for those of you who may not realize it he pioneered lateral surgery, he's our chief medical officer in them and among he and other spine surgeons with whom we interact our people never satisfied with where spine surgery is today.
T P will be a very significant addition to not just eightx armamentarium, but the armamentarium of spine surgery, where several hundred surgeries into our experience. So we are not guessing.
More on this as we launch in the fourth quarter.
So when we look at the investments that create value over the years, we go back and look at the importance of the people in the portfolio investments in recreating eightyk. It is very clear that we're making progress as you can see we have invested where we have invested we prospered where we haven't we struggled the prior to our investment was to create clear.
Nickel distinction.
With information and lateral in our first phase.
Since Q2 2017, we've grown 60, we've grown 61% in that kick in the categories of information lateral and posterior fixation.
In phase two we began to invest in a lift cliff and Telus. It is up 34% and we're just getting started you will see continued upcoming launches in 20 and 21 in these categories Lastly, our redesign.
Slash investment in offing surgical and biologics is at a very early stage you will see the fruits of them in 20 and will fully launched in 2021. The point is that we have been very deliberate with our investment thesis, we know the market well and our ability to continue to invest in preclinical distinction is significant.
Now onto the scorecard for Q2 2020, the momentum we built is strong and candidly somewhat undeniable.
We are up 11% year over year, 15% within strategic distribution.
We are growing at 25% amongst our top 20 surgeons, 61% of our revenue is new products versus 32 in Q2 of 19 in less than 10% in 2018.
The confidence reflected in a 14% year over year growth in average revenue per case.
A significant it's our seventh.
Consecutive double digit year over year growth quarter, and one that I really like is that we're selling.
1.8.
Average product category sold for surgery that means we're starting that combine in procedure lines the portfolio in a way that's creating clinical distinction.
So.
As as we look forward, you're going to see profound change, which means we're going to do three things were going to create clinical distinction, we're going to compel surgeon adoption and we're going to revitalize a sales channel that means that what we're going to do is continue to develop product.
We're going to increasingly do things that are more complex when it continue to attract.
Surgeon interest, we're going to continue to advance toward exclusivity with regard to our sales channel and we're going to continue to expand in underpenetrated geographies. So.
Clearly a lot of good things going on and can't be more excited about where we are as a company and with that I'll turn it over to Jeff.
Great. Thank you Pat and good afternoon, everybody just a few quick minutes on the financial results.
As with revenue.
Again as Pat mentioned, we are expanding our revenue per case, you sell very strong momentum, particularly going into the last month of the quarter.
June was the second highest month.
Volume in the company's history.
Again as expected we continue to see the international headwind under our supply agreement, that's winding down as anticipated.
At mentioned as you start to really dig into the growth metrics here.
11% growth in us revenue still reflect headwinds from or legacy distribution and that was down 23% through strategic grew 15%.
When you look at our performance and our year over year growth of 11%.
Even in a down market. We grew over there is strong second quarter 2019 comp, where we saw 28% year over year growth a year ago. So that speaks to continued momentum in the sales channel.
When you look at gross margin again with the story is the same although we are beginning to get a lot more clarity on the path toward toward our margins at scale as expected. We saw you know drag from legacy products. So that continues a last year in 2019, it had about an 800 basis.
Point impact on margin for the first half of 2020, it's it's more along 600 basis points.
Historically, we've seen it more in the three to 400 basis points. So this speaks to future margin improvement opportunities as we scale, our GAAP margins in the mid to high seventys or well in sight.
We took a look at high level at the CNL.
Again, we're making continued investments expanding the portfolio investing in the sales channel.
In late Q1 will depend Imec first hit we took immediate actions to shore up spend and we did that with an eye toward not compromising key product development initiatives, we're well on track still to release at eight to 10 new products in 2020.
But at the same time, we're able to avoid workforce reductions and keep the atech team intact. In fact, we continue to make a number of key hires well deferring spend where it made sense.
While Q2 is probably not representative of near term expense profile. So it's definitely indication of our ability to pull the appropriate cash levers wouldn't be required required to do so.
Again, a segue into the balance sheet. When you take was that our balance sheet. We ended Q2 with more than $55 million in cash and available draws on our squadron line that provides us runway through mid 2021, our term debt with squadron does not begin to amortize and took.
For 2022, we also just entered into a one year repayment holiday on our 1.1 million quarterly obligations Orthotec. So when you look took a look at our cash burn profile more than 6% of our operating cash over the last four quarters was related to the to support Capex for new product launches in Q2.
It was nearly 60% so as we start to think about financing needs, it's really about making the capital investments required to drive continued growth.
The shelf filing of the ATM, we put in place today is intended to give us ultimate flexibility to access access capital markets. When it makes sense for us to do so.
Before I wrap it up answered vector to Pat just a little bit of commentary and a look at our historical personnel.
Again, when you look at our revenue our annualized us revenue.
Run rate from strategic distribution in the first half of 2020.
Actually doubled since.
2017.
We've made investments we committed to making product portfolio in sales channel, which has driven the revenue performance. We also committed to.
We've also hold relied on June today, so what you're seeing in the SGN a line is truly an investment in the sales channel.
Operating leverage will come over time for now our focus is making the right strategic investments to build predictable and sustainable topline growth.
With that old already but our turn it over the past or to wrap up.
Thanks, Jeff are at our vision for the new Atech has that has begun to materialize, but.
We have.
Enjoyed our seventh quarter of double digit year over year sales growth and and as we talked about.
A few years back.
Really what creates double digit growth is really is his focus.
Execution.
And building organic innovation and there's a group here that knows how to do that and so when you. When you look at our our efforts it's all about.
Executing.
And in a culture committed to serving the interest of spine surgery and I would tell you that we are just getting going and so we're very excited and with that will.
Turnover take questions.
As a reminder, you asked a question you will need to press star one on your telephone and to draw. Your question to me press the pound Keith.
And first question is from Lake Street capital Boot O'neil.
Sure line is now open.
Thank you very much good afternoon, guys. It sounds like you a spine geyser isn't some striped out there.
Or try and Brooks.
Where to go.
So first question I guess.
I think Jeff mentioned that June was and second highest month in.
In the company's history can you give us a little feel for what you're seeing in July and maybe early August obviously, some spikes occurring but where we hear is lot of procedures are getting done. So what do you guys see.
Yes Brooks. The this is Jeff thanks for the question.
Momentum is continues to be encouraging and strong we're obviously cautiously optimistic and.
Given the current environment, but we're seeing strong demand right and I think what what we're finding is that.
The question is is spine surgery truly elective when you've got patients in chronic pain that needs surgical intervention.
So we're encouraged by what we're seeing early in the third quarter.
Great and.
Pat talked about.
Efforts to proceed julys various aspects the spine surgery, obviously your.
Our deep history unilateral would luis and.
You know all of them.
Great whether some of the areas you think you give procedure wise going forward.
Maybe talk just a little bit about those efforts.
Yes books.
Yes, hi proceeded speak one hour.
[laughter], it's one of those things where.
I got to tell yet I think surgeons are looking for partners that will invest in things that ultimately make spine surgery better and so often it's been only the billable.
He is investing in like the having shared interest with a surgeon means that youd care enough about what he's doing to invest in that these unique and it may be not a great business.
As it relates to the individual component, but assembled it becomes an ugly business until I think note all the way from anterior cervical disc equity infusion all the way down to tee lift to lateral all of them require adjunctive technology that at this point, they all kind of part.
Together and it's a bit of an underwhelming experience and so for us to build into choreograph architect. These things is just such a great opportunity and and really create greater predictability. So a patient going with a specific pathology. The likelihood of then knowing exactly how things are going gogos very high until that so it's we.
Really.
Virtually every procedure.
Every procedure, great and then maybe my last one I just love the here, how things are going with safe Bob what the responses out there in the field and maybe if you have three if you could share any thoughts about what.
The next 12 months might bring to the C. Bob platform.
That would be really interesting.
Yes.
Well I love.
Love Safe option and I am thrilled with how it's doing and when we created that we said we want to a conduit to deliver information into the operating room in the first bit of information was going to be more physiology, what we're dealing is providing better no physiology than anybody else.
As I hope, while it's clear, which which means both whereas the nerve and then what's the health of the nerve, which nobody is doing today and so you know, there's one or two companies doing that and I'm going to tell you. We have a better solution. So that parts of very fun, but how the thing evolved in is what's the information based upon the procedure that you're doing and so there.
It's all kinds of different not only murphy's geologic additions, we can make to the.
Health Informatics platform within safe up but also we're still profoundly interested in things like alignment and so what will start to see it seems like alignment elements added to the platform whereby you'll have just additional information and so.
There is that there's a there's a fair amount of things that we believe will create predictability in surgery and we believe can be delivered through that platform.
That's great I told you that was my last question, but I actually have one more and I ask you quite off what about this but you know lot of bugs in the spine marketplace about robots and we've talked about the fact that you believe in power into the surgeons more than putting a robot to work, but tell me what you.
See out there in the marketplace today with regard to robots in your interest in pursuing some track along those lines.
Yes.
It's.
[laughter] to build a loaded question clearly.
The.
Well the way I would answer it is is we look at a specific procedure applied to a specific pathology. If your to do the math on that and you look at the applicability of robots. It's relatively narrow it is ubiquitous as everybody wants to think that they are they're just not and so the reality is is there still.
The interesting pieces of equipment that are not getting utilized.
Very significantly and I appreciate all of the exuberant.
Having been around for the exuberance of the lumbar total this replacement when it came through.
Well you do he'll watch the seem to me say gosh, what is the specific pathlogic application minute solving or what's the problem that at solving well robots. At this point is only sobbing, placing pedicle screws, which have been done for years and so it's one of those things where I just have a tough time, suggesting is ubiquitous value associated with robotics when I see so much concern.
Being done as well as I look at it as a tool for very complex surgery litters.
As you know goofy anatomy, no big time, looking you know rotational issues were serving really struggles.
And.
Yes, again, a very narrow part of the market and so again I'm enthusiastic about technology and as anyone as it relates to its applicability today I think it's limited.
Okay. That's great. Thank you very much and congratulations on all your accomplishing.
Thanks.
Next question from Piper Sandlers, Matthew O'brien, Messier lines knows and.
Good afternoon, guys. This is Patrick on for Matt Congrats on the quarter, especially on the lens of Cobot 19, I wanted to start on kind of the competitive environment, you're seeing right now.
You're in a really great position from a capital capitalization perspective, but there are smaller players who are less capitalize that are struggling during this time. So if you could trying to parse out where some of your competitive wins are coming from during this timeframe that'd be helpful are they coming more downstream are you getting broad based wins, both up and downstream I think that'd be helpful.
For us to understand thank you.
Yeah.
I'll do my best in terms of.
Trying to.
Create some clarity.
I would tell you that.
We're getting geographic wins based up on no, earning people interest and enthusiasm on what we're doing surgically.
I think in pockets we have.
Some very strong sales clinically that salespeople.
And I think when we have that people that can appreciate that feature sets that have been designed in to the technology. We prosper and those are those are areas that that we're finding success, where we are finding success is is when we have.
More legacy type people, who don't engage in the clinical.
Sophistication of what we're doing and when they're not bringing the surgeons anything new is is kind of where we have not seen much prospered in so.
I'm not trying to be cryptic, it's just yet and I'm just telling the way we see it and the way it is.
Now that's helpful. I appreciate it it's more of a convoluted question and I don't mean to ask you know difficult questions, but I'm just curious when when we think about the back half of this year can you just talked about some of the dynamics going on between the backlog and de Novo patience as we kind of think about your growth rate as you move.
Bond or are you still seeing surgeon working through their backlogs is a lot of that work done just how should we think about that for the for the remainder of this year and then I have one more follow thank you.
Okay, Here's here's my view Patrick is.
The pandemic thing has been a tale of 50 states.
And so what happens is there's somebody puts and takes per practice, but it's very difficult to discern.
What's pent up demand and whats normalized demand I think we saw a lot of the.
Hi, I'm kind of pent up elements from April show up in May and probably parts of June.
My expectation is that there's so many puts and takes of why people get surgery and why they don't get again, it just becomes difficult to discern what's pent up demand and kind of what's normal kind of a run rate type of things I think surgeons are still seeing less patients in their clinics and hence less surgical planning.
And so.
It's it's a situation where it's like.
It's really tough to discern.
Thanks, That's that's really helpful color on my last question briefly.
On the slides when you're talking about.
Protects vision moving forward a component of that is expanding into Underpenetrated geography can you just help investors they understand like where those underpenetrated geographies, you're specifically focused on it as you look to move into those you know what's the what's the demand like food distributors to to get on board Alphatec I would think you're generating a.
A lot of momentum right now for for distributors to get onboard. So I would think it'd be a natural process for you to expand but I'm. Just curious if you could provide more more color there for folks. Thanks again for taking the questions. Yes. Thanks Patrick.
It's a great. It's a great question and I think that what what you're getting it is there's a unique level of sophistication with regard to the design development prowess that exist today tech and so when a when a new distributor comes over I think there blown away with regard to the technology that exists here and so and.
You know a lot of times, you'll get a little company and they'll try to compel a distributor what we see as distributors come over and realize that the technology here is better than where they come from and so it's an issue as well as they see what's clear is coming forward and I think that theres a lot of enthusiasm so from that standpoint the the.
Volume of distributors coming our way that are interested in innovation is very very high and so that parts great.
The challenges are.
Our but there's still geographies, where where we have some legacy people or this or that we're just not been able to to penetrated as expediently as we'd like to us and so the great part is there's a hell of lot of opportunity out. There you know the tough part is we still have some some disparity with regard.
To the prowess in the field and so it's a that that's that's about as much resolutions that the.
Enthusiastic to good but et cetera, I got to tell you from a technology perspective, the people who come to us door blown with what we're doing.
Got it guys. Thanks, again and congrats on the quarter. Thanks Patrick.
Next question from Northland Capital, Jason When do you see your line is no.
Question.
Impressive growth, especially relative to your peers, you're asking you guys actually grew this quarter, which again is quite impressive so what a follow up to a question. You had earlier you mentioned I think June was your was your strongest quarter. After a month ever could you kind of see give us some color in terms of how July.
When relative to June and sort of how the the quarter one month to month, it's been a a metric a lot of you ever companies have been providing.
Yes, Jason this is Jeff and I guess similar to.
The Brooks' question, where we're seeing continued strong interest in momentum.
Typically July is typically slower than June but.
Certainly seeing strong momentum and we still have every indication that.
You know come to my earlier in my earlier response was that it starts to to put two question, whether certain surgeries are elective or not so what I would tell you is momentum has continued and we're we're cautiously optimistic about the third quarter.
Okay, and I guess, you're not if it's given covert though I you sound like you're still by the position to provide any sort of guidance at this point, but it sounds like things are generally optimistic.
Correct, yes.
Okay.
You know and the I noticed you mentioned the cervical launch are you guys. If I think about your current basket, which I know is rapidly changing.
Is there are you guys doing much cervical business or this is a potentially a big anchor all game with these launches I think you're planning at the end of the year.
Yes, Jason Yes, the one of the best surgeries that a surgeon can do is an anterior cervical disc equity infusion, meaning the patients do most well they'll go in animals predictable things. They do it is that surgery.
I would tell you that net that based on the historical challenges at Alphatec had if they didn't invest in continuing to evolve the technology and so we're dealing with a very aged.
Cervical portfolio and if you look at the demographics of that one of my Slide show, where we made investments I would say that it's reflective of the type of prowess, we had in the different areas and so the frustrating part it is.
It's a.
It's a hard place to create significant distinction I think we've done a very very good job with regard to the Invictus part you think about plus all being here for about two and a half years and we're going to have a stem to stern solution with regard to invictus with with modularity out all the other elements of all of a push your fixation.
System. It takes most companies five plus years to do.
I can name will come to determine the I'm kidding the.
But the reality of it is is that.
Got it exceedingly strong push if it's a clarification offerings as well is a continuing.
Proven on that anterior side as well so a long answer to yes, we're doing what would be much more sophisticated we're starting to evaluate those things in Q3 of this year and we'll launch early and 21.
Okay, and then you don't others.
One question you know safe up at least from one my view is kind of linchpin technology for you guys. If I think about your customer base.
Can you give any kind of statistics are measurements in terms of who's actually using it at this point and what the outlook for safe off is in terms of adoption.
Yes.
First of all realize those of US who built a previous company did so with interior technology to say fab in another place.
This technology is really.
Yes. This this technology performing better and and so you know the things that were really tracking is linkage to specific procedures and so how often as it used with our screws, how often as it used in lateral and in our these percentage is indicative of what we believe traction to look.
Like and so we're finding great success in the integration of those tools together and so that's what it provides a such enthusiasm. The other thing is there such scalability, where where we were previously working with a a to any idea and 26 computer we're working with a Bluetooth tab.
Yeah, that's awesome and so just when you start to think about footprint in the operating room, but the type of intelligence that we're bringing in its highly valuable and so from our enthusiasm is great.
And that the tie that we're seeing the different spine procedures is very high and so I would you say that it's doing what we expected it to do.
I mean are most of your surgeons using safe up in one form or another at this point or.
There are still adoption curve going on.
But I think in adoption curve until the cast come home.
It's one of shopped with us if they're doing lateral with us the reason they're using safe.
Okay. That's my answer my question that's helpful.
Maybe a question for Jeff Real quick I mean, the nonstrategic business.
Is there any sort of projection in terms of where that goes in the future I mean, it's it's been on a decline obviously.
It seems like there's some residuals stick around how should we be thinking about that business, especially on a going forward basis.
Yes, Jason I think we've got so much more visibility into into that network than we did a couple of years ago and I think the expectation was that we would continue to see that cut in half every every year and and potentially not deal will control that transition. We're now at a point, where you et cetera. It's.
Stood at about a 10 million to our run rate, but it's in some very specific key geographies and those are geographies, where that distributor will ultimately either decide to join us on a more exclusive basis or we now have the ability to move in a new distributor who will take over that territory.
And and walk to exclusivity with us. So yes. The answer is we don't think that the drag ultimately will will create a long term kind of a a net.
Absence of revenue, if you will which was a real risk two or three years ago, but it's about a 10 million to our run rate and we now have the ability to to two more so than we did to manage that transition.
Okay and involved one last question on P.G.P.I. I think Nasa's the unveiling I guess, that's going to be.
Online and unfortunately, given do cobot.
Once that happens when does that really sort of get launched into is that is that the unveiling and then it gets launch of the field and does that make this you know a 2020 2021 event is that the right way to think about the launch PTP.
Hi.
Its a.
I think so I guess, it's funny things with it so frustrating.
The suggestion of a virtual mass and yes.
It's a par or at.
The great part of it is the timing hasn't changed and we're not going to change it we're going to launch it when we committed to launching it and and we're going to see the momentum pick up if you.
He'll start to see the reflection of it really I think in in 2021 and in like like years ago. When we launched a lateral I think the uptake is going to be faster with this is based upon the acceptance and lateral not having some people on lateral but it's going to be one of those things where I.
Let me give your construction a reflection of it in our company enroll in 2021 2022.
That's a great opting to people in our company. So that we can train them on the new approach and and.
Inspire them with regard to our technology and so we will see it into some adapting.
Great. Thank you. Thank you very much.
Thanks linkages.
Next question from Canaccord.
Algorithms Collier Nines Nelson.
Great. Thanks for thanks for squeezing me in government.
So a lot's been asked but Jeff you gave it a lot of commentary in the prepared remarks, but I just.
Want to go back to just the overall Q2 as it stands because.
The growth you've delivered considering the economic backdrop of what we've seen the peer group do is.
Exceptional.
So I'm wondering if you can help maybe walk us through the Q2 from on a month over month perspective, what was the low point some of the productivity improvements you saw because many of you put up 15% in the strategic group.
Overall than I mean that implies your exit velocity in June was materially higher than that so trying to understand what went right.
And then what kind of digging from there.
Yeah, let me provide a color Kyle.
Is it.
April April was was exceedingly tough.
You know, we there's still places that were doing surgery.
I think some of that virtue that we I guess appreciate it was the fact that in the pockets of areas where people are doing surgery.
They continue to do surgery and so.
That was of a you know.
I guess a opportunity for us, but I think it's not going to be profoundly different with regard to.
Nick the case volume one thing that we did see is when we see that continued long with the completion of the number of products per surgery use.
And then less.
Less of the decrease in the volume of surgery, what we see as an expansion in our revenue number and so much like we talked about strategically from the beginning is is our expectation is is if we do a great job assembled procedure he's more products per procedure compile more people when we're going to see a big expansion.
We saw a rescission in the in the volume of cases, but still saw more products per case yours as well as more complex surgery being done so I'll, let Jeff incident that numeric one.
Yes, let me just to give a little more color on that adds to that point, obviously April.
April we saw.
Significant impact for the quarter as we disclosed we saw about a 4% year over year decrease in surgical volumes right in and obviously more than made out made up for that in the increase in the expanding revenue per case, but.
To your point.
Most if not all of that 4% happened in the middle of the pandemic grades. So all the way throughout April and and early made a little bit, but we started to see very strong robust recovery and in June again second highest.
Month in company history, and we hit an average daily sales level that exceeded the peak in Q4 19.
Okay, Great that's very helpful.
So then maybe help me understand the I entered I get the there's lot of uncertainties in that there's a little bit caution around me pretty you guys goalpost back a year, but help me understand I guess, how you think about some of those uncertainties and what will need to go wrong too.
I guess materially changed some momentum because.
When I look at what happened in April I mean, it's one of the biggest.
Deferrals of procedures, we we've ever seen in the space, but you guys still delivered the type of growth you have so I guess I'm just trying to understand even in that backdrop. You grew I guess what are you contemplating for the second half from.
Headwinds tailwinds perspective that might not give you confidence to put in a floor.
Per for growth and we think about.
Some sort of a goal posts.
Yeah, Kyle I think if the obvious bones and I'm trying to think of anything that would be you know that inform node informed but it's it's just the uncertainty around you know what's going on from a from a flare up on the pandemic fraud.
Yes, there's there's.
To me like there's nothing that that's obvious around around you know what could the rail.
Momentum other than than again, this significant pandemic that becomes uncertain forced off and so.
I wish I had a great answer, but that's all that.
That.
Yeah.
I think giving it is.
That's a whole comment about it to tailor 50 state. It's like you know the it becomes puts and takes within each of the different states and so it's just difficult to discern what's going on.
You know over a long period of time.
Okay.
And then just last last one for me is we've heard a lot of commentary about hospitals restrict the commercial patterns.
As a rep access to let me with physicians and get into cases, and then also.
No just challenges meeting with value analysis committees and getting on contracts.
So maybe kind of help us understand obviously, you're growing obviously your green on better talent, you're launching new products, how have your conversations and your ability to convert physicians and new accounts. During during this backdrop how have how has that played out and then maybe different or better than what you were expecting over the course last couple more.
Thank you for taking the questions Yeah, I got to take how I think thats the question.
The reality of it is as we went into the pandemic and we said we can sit here and get it take what's going on or we could be aggressive and I'll tell you know.
We.
I think we were very aggressive from a from a sales education perspective from a surgeon recruitment perspective from a sales recruitment perspective, what are the things that I think that this pandemic has given us is pause and pause to determine who I want to partner with over the next 10 years and who is a scalable company.
And what's transpired is is that I.
I would tell you that that we've grown out of this thing based upon the enthusiasm to partner with us and.
Not not to be coy again, they are trying to be.
Funny, but it's really been an opportunity for people to reevaluate, where they are and where they want to go and so you know that's that's kind of what we've seen as it relates to the ability to get into accounts in the ability to pair.
You know kind of pair.
You know that visit like we've had some challenges with regard to salespeople coming out here, especially for the northeast and then going back into their accounts. So what we've had to do a lot is Canada.
Telephonic and like everybody else to Lebac stuff, but I think that the most foundational learning from this experience is that.
So we're we're a small aggressive company and that Didnt change over the pandemic and so our opportunity to go can tell people is very high and we took advantage of that.
Great. Thank you very much and congrats again on an exceptional quarter. Thank you. Thank you go.
Since last question from H.C. Wainwright Chung Li Chenier lines Nelson.
Oh, good afternoon pad and Jeff and thanks for taking my question.
Most of the stuff I want us have already been answered, but if you could just to provide a little bit more color on how the quarter went in terms of geographics and different types of surgery like where are you seeing surgery slow down a lot more in certain geographies and others, where there are faster rebalancing. So.
In areas, where there are some procedures are affected more than others. This provides us some thoughts on that.
Yeah. It's on the answer is yes.
I think your your your question is is really an answer which becomes there were there are deferring volumes in different geographies and then they were different types of Kate is and I think it's it's probably reflective of everybody else's experience, which is.
Where that pandemic was it was most high what you would get as you get a fair amount of surgical cases that were emergent, which where my let Patrick patient shake it potentially had the exposure as something.
Bad going on over the long term. So they were cases have gotten done.
Or trauma type of cases, where there was a car accident or some other issue what areas and immediate operative requirement.
What what got pushed out or are more off some of the degenerative type of things that were more long term in nature and so I would tell you that that happened differently in different geography, and so that kind of back to that puts and takes that we talked about earlier is depending upon how much.
Of a pandemic within their respective geography would kinda dictate the types of surgeries that would go on but oftentimes shut off of the most simple things you know that were most emergent and then of all of into the more complex type of surgeries.
Well I see that's helpful or not you know like because.
Since you guys mentioned, what kind of went into.
Hi cost shutdown cash for the regime preservation mode because of the uncertainties associated with the pandemic I was wondering whether you've turned to foster back on completing now is it or is it back to business as usual and whether we are we going to see any impact from the spending slowdown in the second half was a year.
Thanks.
Yeah, I'll, let Jeff answer the question most directly but I will tell you there that you know.
We're buying implanted instruments to keep up with demand I would say that that's the most.
When we started get back to normal operating activity I would say that's the most aggressive thing that we're doing as it relates to operating expenses I think we're still trying to be exceedingly thoughtful stores with regard to how we March forward.
Yes, I think Thats right is it just just to give color commentary. We we certainly have took a critical looking continue to take a critical look at that hiring and able to phase hiring for sure. We've we've not slowed down on the product development front, but our priority now is insured.
Thing that we're making the right investments in supply chain to meet up with demand for product right and so.
When you to look at opportunities to defer or pull levers as as we can you know we did the pandemic in of itself is a cost savings tool and that Theres just not as much traveling happening there. There's a lot a lot a lot of virtual training going on the so some some of the spend slows down because we just aren't able to do.
[music] it and in other cases were typically agree to curb critical look as you know is it isn't necessary for today to to drive current momentum and it's not we revisited and figure out if it's if it spend we can differ.
Hi, senior that's very helpful. Thanks for the so called on the follow up.
Great well.
Thanks, Thanks for the questions and I.
I guess will end with it.
Companies are about people and we've assembled a great bunch of people and ER I am joined a a the start of some momentum and so excited about what's going on today Tech and appreciate everybodys interest. Thanks, so much quicker.
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Thanks, so much or presenter sensing everyone for dissipated.
Today's conference call you may now disconnect have a great.
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