Q4 2020 Alphatec Holdings Inc Earnings Call
Okay.
Good afternoon, everyone and welcome to you of the webcast of <unk> fourth quarter and full year 2020 of financial results.
And we'd like to remind everyone that participants on the call we'll make forward looking statements.
Fitments are based on current expectations and are subject to uncertainties that could cause actual results to differ materially. These on.
Guarantees are detailed in the documents filed regularly with the S E C.
During this call. He made sure of the company refer to reported amounts which are in accordance with U S. GAAP as well as non-GAAP or pro forma measures reconciliation of non-GAAP measures to the 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 it is superb.
Is it useful to investors, leading today's call will be <unk>, chairman and CEO, Pat miles and CFO, Jeff Black now I will turn the call over to Pat miles.
Welcome everybody and good afternoon to the Q4, 2020 a tech conference call.
And clearly today, we will be making some forward statements of you familiarize yourself with that I will stay with you from having the listen to me and read it.
Things are going well.
And really no complaints of I think you know when when we say well, we all oftentimes liked the quantify what that means and so average revenue growth over the past the eight quarters has been a 30% and so I think that that's a good start to the hour.
Turning around the company and and and the momentum that it has created I guess more importantly, and and what I guess provides me. The the most optimism is is really what we're doing is we're fulfilling the mission of revolutionizing the approach to spine surgery, and I think the launch of our pro and train so if P. T P.
Is is really a reflection of that and and I'll give you a little bit more on that to come and where else.
And so increasing the clinical prowess really the know how of our sales force and the and expanding and exclusivity, which is exceedingly important elevating surgeon and sales training through the state of the board of Education facility. We just opened up about a month ago, we have of seven station category.
Lab, we have the expanded them by mechanical lab, we have and expanded what we call the technology Advancement group of machine shop, and so the facility really of starting to fit in with a very strategic priorities that we are.
Advanced and the other thing is really kind of the greenfield opportunity, we have with further and clinical sophistication and through improved information with with E. On so that's.
Very exciting to us.
So if you were to kind of look back and just the Q4 seems a long way away, but and it was a good quarter and year over year of U S revenue growth at 38% year over year growth and revenue per surgeon at 15% clearly there's adoption on the new product side 75 per cent of our revenue is coming from new products.
Year over year, and average revenue per case at 13% ninth consecutive double digit year over year growth.
And and we'll get it more into this but the average product categories sold per case is is.
Increasing until.
One thing that you'll find about as it is is the you're going to hear the same thing over and over as it relates to really the the strategic imperatives and and our view is if youre going to make for meaning in this business you better do something different and you better do something better and that's what the whole create clinical distinction is all about and and we feel like we're making progress and we'll delve each day.
And the each of these priorities priorities and give you a little bit of color also compelling surgeon adoption comes from being better and creating clinical distinction and we feel like we're doing that and that really helps us revitalize the sales channel the ultimate trends.
Translate to what we're doing with regard to the procedures and so just the jump right in the credit creating clinical distinction and you start to think about what the March has been over the past few years and and what we've really kind of had as it is a and he got a reasonably good approach in terms of making sure that we're making the investments at the proper time in terms of <unk>.
<unk> thing, so 2020 was reflective of the 11 product launches and and more importantly, we start to think about what the effects on the procedures and so when you start to think about what the investment thesis is.
You have to say gosh, you know the the returns have been pretty good and and where we've invested we've made significant progress and and.
Probably the places that you know I'm, most proud of and it's not just because it's it's the biggest area of growth and you start to look at what we call Alpha informatics and that's the ex parte and it includes a safe up and you look at say FOP and lateral and it's it's places of significant experience and the company I would tell you the way.
Of the industry's best and in the not for a moment, while I ever back off saying that the the debt.
The the new home of lateral of sits up here at a tech and also from a post of your fixation perspective Theres theirs.
And suggesting a significant and product development attitude would be an understatement and then we're also making and <unk>.
Progress on the other procedures and the Cliff and T liffe, and and and this year should be a significant contribution on the cervical and biologic side, saying is is the or and operating some of the legacy products that were here when when the when we arrived and so when you start to look at how we think about making the investments and <unk>.
We make the investments we think of the world and procedural means and I and this is.
Really intended to provide you a little bit of a of a view and when we think about making things better what we do as we think about what the procedure needs and what we should do and what priority with regard to the the specific product development and some of the elements that I think need to be called out as when you start to look at and sophistication and said gosh, you know say five P. M D C.
S. A C P maybe not unto themselves the greatest revenue drivers, but they mean so much as it relates to alter the dominating things like lateral surgery and then you go over to the right and you start to see cash we break out lateral and the lateral trans Solus L. P. P and prone trend show us, which is P. T P and start to think of the things like positions as being very meaningful as it relates to the.
The dynamics of being procedurally focused and so.
Loved loved the love the slide in the really I think if there's a different approaches in terms of the way that people think about the business and our pursuit is really and the perfect procedure, how do we ultimately fulfill the requirements of the perfect procedure and then what we do is as we build solutions from the ground up to and to address really the.
Unmet specific procedural requirements versus just reactively trying to jam technology, and its something that candidly may not fit and and and so and it's it's it's a pursuit that we have that I think is the value creation engine of of what we're doing and ultimately what it does is it compel surgeon adoption and surgeons and get it.
And and and Surgeons I think very much appreciate the Tac because it feels like we're aligned with them and their pursuit to make sure that they're serving the interest of patients and so if you look at kind of the the numeric reflection of success, we keep walking up the product categories per case to one nine and aggregate the year over year growth and average rep.
On a per case of 13%. This just means we're doing more and more sophisticated and things.
And then revenue per surgeon. So we're we're compelling them better I guess and and then we just keep C and the growth, but the the reason for that really is what the investment thesis is and the investment thesis and the things that ultimately make a difference I remember you know talking to at a a surge and friends and not long ago and and we.
We're just prioritizing those things and ultimately make a difference and the success of his treating patients and oftentimes the implants, maybe fourth or fifth in terms of the importance and I think so often companies think that spine surgery is implants and it's just not the case, what we are of stewards to the effort and I Love. The fact of what we're doing.
And is engaging technology and a way to integrate so that people can make and objective actionable decisions during the surgery the better fulfill the requirements of the care.
You also said the thing about our adoption and you start to think gosh, you know how much of the surgery are we getting and and and what is the opportunity one of the quotes around here that I. So appreciate the sophistication of indirect relation of the number of distinctions you draw the subject when you start to look at what we're doing with regard to lateral clearly.
We of L. P P and P. T. P. And then you start to look at the number of products per surgery that we can ultimately fulfill to create the pursuit of the perfect procedure and you realize that we're literally just the you know it's it's the tip of the iceberg so to speak with regard to the different ways and we could open the influence of care for the better and so we believe that that creates value.
And so when you start to think about how we're translating that to the field and revitalizing our sales channel. It's it it's going very well at and and our hats off to that group I will tell you I think that from a sales and management perspective, it's as good as it gets and and we are of great team and I'm exceedingly proud of them and so the the percentage of <unk>.
Sales driven by our strategic channel is 95% and the the revenue growth from the strategic distribution group is is the is it is 47 per cent. The great. Part is is that we're growing them the growth and U S revenue per distributor is significant and and it has been and that's.
It's been a big part of the turnaround and we still have a ton of open the geographies and and we keep the walk of of trying to maximize the number of people on the street, and and and and minimize the that the the volume of agents and making sure. The the that those agents continue to grow in size, but debt.
With that I will I'll turn it over the life to Jetblue.
You bet and and thank you all for joining us today and I'll just spend a few quick minutes on some color commentary on the results that we announced today.
The first with revenue you're following the initial COVID-19 impact that the industry saw we all saw in Q1 and Q2, we did see a robust recovery acceleration and our U S product revenue really on the strength of of new and expanding product portfolio that the patch just walked you through we actually finished the year ahead of our.
2020, 2020 guidance, even though we did see some pressure on volumes and in late Q4 from the uptick and Covid cases.
On the Oh U S International front of our international supply agreement for our legacy products is winding down as expected and that agreement expires in mid 2021.
On gross margins when you look at on a gross margins were running and the high 70 per cent range on a non-GAAP basis and that excludes noncash charges for excess and obsolescence and on a GAAP basis were running and in the low 70 per cent.
So the reason we're stripping out the you know for now is it over the past two years, we've been picking really outsized reserves on our legacy of product inventory, representing about 800 basis points in 2019, but 500 basis points in 2020. So we'll continue to see some of this you know drag and 2020 one.
But by the end of the year that should be primarily behind us on the on a normalized basis. We continue to expect you know to be somewhere between 304 hundred basis points, and and our GAAP margins and in the mid 70 per cent range.
Yeah.
A couple of comments comments on the P&L you are consistent with prior quarters, we focused investments and product development and sales channel.
For this view a week, we steward, we strip out the stock based compensation and litigation restructuring transaction related costs really to provide a sense of our true core investments and when you look at R&D as a percentage of revenue and continues to track above peers as we continue to fill the product pipeline you can.
And expect a similar profile into 2020 one.
SG&A it it's a similar story and the growth and our SG&A.
It really represents an increase in variable costs associated with the ramp in revenue as well as key investments, we're making in our strategic sales channel going broader into new geographies and and also deeper into existing geographies.
And as the business continues to scale, we'll need to make investments and G&A related infrastructure, but to date, we've really held the line on G&A and we're already beginning to see cost leverage on the G&A line.
Balance sheet in the fourth quarter, we shored up the balance sheet pretty significantly we reduced debt, we secured capital required to fund continued investment from the business as well as the purchase of our pending acquisition with us. So we secured $250 million of new capital.
During the fourth quarter through public and private placement of common stock.
And we're better positioned than ever from a balance sheet perspective to execute the business and.
And as a in terms of cash burn profile continues to reflect investment and supporting our revenue ramp in Q4.
You take operating cash burn and 70% of it wasn't capex. The the large majority was for instrument kits and implant inventory to support our growing new product revenue base, which which now accounts for about 75 per cent of our U S revenue and the quarter. When you look at the balance of yet on the on a pro forma cash and available cash basis.
Inc.
And including the pipe that we secured and in December and closed just this past Monday, we have pro forma cash and available cash through our credit facility with squadron of about $208 million.
On the revenue guidance of where we are reaffirming guidance that we provided.
And in the fourth quarter of $176 million and U S revenue that represents 25 per cent revenue growth.
And that'll continue to be driven by strong surgeon adoption and expanding strategic distribution and and we will continue to see of ramp up of new products.
Our international supply and supply agreement as I mentioned will terminate and August of 2020, one and so we're seeing that ramp down as expected.
And again as as you all know the iOS transaction, which we expect to close in the second quarter non.
Not included in this guidance and will update guidance when that transaction closes.
And finally, just to wrap up with an update on <unk> and as you likely saw we expect to file the tender offer tomorrow.
To execute the transaction, we still expect that we're on track that but it'll close in the second quarter.
When when you look at their 2020 results. They reported on a month or two ago up just under 20% year over year and revenue recurring revenue was strong and they're seeing a strong book of business, even though the did get impacted by the pandemic related elements on the capital business. They are seeing nice robust uptake and.
And and demand and their new products. So we're excited about the bringing them on board very.
Very significant opportunities for us to take advantage of cross selling opportunities very minimal overlap and the customer bases and a real ability to access their installed base with our implant business and vice versa. So.
We're excited about that transaction and and more on that at that as that evolves.
And with that I'll turn it back over the past.
Thanks, Jeff So I.
And I got to tell you you know, where we can't be more excited and we feel like we have of multi.
Fast and the gross strategy and and in the meantime, we're perpetuate and clinical distinction by revolutionizing surgery, we're advancing and sophistication both on the on the sales force front and on that and he is going to provide us more opportunity to do so cervical and biologics and isn't going to mean.
And you start to contribute a eight to 10 products of year, we'll we'll keep going and the sales channel.
The and we will start to run towards the 4 million per distributor, which is which is a bit of long term goal.
And so what we believe will continue to compel surgeon adoption and the the headwinds a reputation of lean from a sales force of at.
And for the most part of dissipated and we're looking forward to the the other headwind of the international supply agreement to expire so and can't be more excited it's a it was very fun. This past weekend at the Seattle Science Foundation, Dr. Pimenta, who is the pioneer of lateral undisputed and really.
The presentation of P. T P and it was one of those gratifying experiences to watch a pro talk about what's next and lateral surgery and so if opportunity presents I believe it will be a link to our the industrial part of our web site, if there's interest and understanding more about P. T P, but with that.
We will take questions.
Yeah.
And in order to ask a question and you won't need to press star one on your telephone to withdraw your question press the pound the hash key we will now open the floor for questions. Your first question comes from Brooks O'neil from Lake Street capital.
Hey, guys, great person and take some great quarter, great everything so.
What I wanted to start off with the kind of a big picture question you spine guys.
Took over a couple of years ago, and you've done a great job with the company and the stock has begun to respond.
How would you assess where you are and your overall journey number one number two can you point to a couple of the big things you hope to accomplish in 2020, one as milestones and then.
And do you think about next couple of years, what are the kind of two or three big things you.
I feel you need to kind of cross over to get to the other side of the.
You know Big Boy, a little boy picture and the spine in the streets.
Well, we've always felt like we're big boys. So so we're going on we're gonna and the.
And at that and.
Just kidding of Brooks.
Okay.
Hey.
Yeah.
And we're still Super early and this thing you know one of the fun things was debt when we acquired them safe up it was such an important part could be of conduit into surgery that we can deliver information and I got to tell you. The those those guys that are only delivering mechanical devices without information and are going to suffer.
And so much of the opportunity and it makes something better is through the informatics as of <unk>.
Surgery, and so we're thrilled about that acquisition, but more importantly, we've created the a conduit where surgeons can rely up on meaningful actual information that we are delivering to them and so I think that that was such a great kind of start and and it's really the start of our opportunity to make sure that we identify the requirements of each procedure and deliver.
The informatic element, that's most important to make for predictability and so that's that's super exciting I think that will continue through <unk> through 'twenty, one and and you see a bit of taking all of the iOS element and start to be able to take that information and of preoperative plan through that kind of do it to make sure that the surgeons are getting what they are.
Need is the is profoundly valuable and so you start to think about closing is that's a big thing this year and you start to look at you know we've been developing from surgical products. This year. So of cervical will start to make it a nice contribution will continue to expand the sophistication from and indications perspective as it relates to things like the P. T P.
And L. T P and so I think that there's a maturing process that's going on in 2020, one that's very very valuable and so but I think I think you know.
Long term you know.
I got to tell you that there's a there's such a great opportunity. There is theres a lot of people running our way with regard to hey, listen what's the next 10 years look like and and who's going to be the companies and ultimately giant kills based upon their understanding of the requirements of the environment that we're working and debt and I feel like that's us and so I'm Super excited about the long.
Term prospects of this company.
Great that's really fantastic and then just the last thing.
I think you were just talking about it but clearly your efforts are all about empowering.
And surgeons with informatics with great tools et cetera.
Obviously, there are people and the industry, who think the right approach is to just offer up of robot and get it into the O R.
And you sort of distinguish your thrust from the robot. It's Russ you see from some of the other guys out there.
Completely and and and.
And I genuinely have nothing against individual types of technology, but I think when you start to prioritize what the you know what's going to have the greatest impact on a specific procedure and for instance, you know.
And we developed the whole P. T P thing and and you say cash is a robot or ease of patient position and gonna have a larger effect on the predictability associated with and outcome of our of say prone and transfer of surgery I got to tell you. It's not even close it if the patient positioning and then you start to say gosh is neurophysiology, meaning being able.
And the identified where neural elements are or you know understanding the health of that and what's more important matter of robot and and and by far and so again I think that the theres nothing wrong with the robots I hope, we get I'll get to you know some some robotic view, but there's things that are priorities to that when you start to look at what the requirements are of a specific procedure and so you know I don't.
And the big argument with anybody over over the value, we'll see at the end when the when the market reflects the demand on what we're doing but I got to tell you.
And I'm very bullish on our understanding what the requirements are of of what the priority should be from of product development per se.
Absolutely makes sense and they keep it up thanks a lot.
Thanks, so much Brooks.
Your next question comes from Joshua Jennings from Cowen.
Hi, Thanks, Pat and Jeff Congrats on the.
The strong end of the year.
And all the progress I wanted to follow up on the Brooks's question and the thinking about the Alpha informatics safe I've spent a huge enabler.
For some of the procedure and the surgery.
Techniques and approaches you guys are introducing and.
Imagine you guys aren't standing still on the neuro monitoring and anything you can share interest in terms of of how you see CFR part form of about evolving.
Yeah, I think it's of great. It's a great question and it's like.
A lot of the core technology around safe up it was really kind of the inspiring part. It's like you know the ability to automate SSE piece has been it's been really revolutionary and the speed by which we can deliver that information is significant but kind of the foundational element of the of the the technology.
And where we can pick up Super small signals has been the reason why we get to do it over and over and over where most people know people can't capture the signaled consistently and so from a from a somatosensory of of potential standpoint, but the the the beauty of the that is what are the other applications, where we can apply the.
These technologies in a way that the signals are very small, but but very meaningful and and so we're decipher. He knows the we believe theres. Some D C P or hopefully some more individuals neural kind of information that we can provide but you know is important as we look at say T lift or is it important as we look at some of the surgical applications.
And then addition to that and he's starting to look at gosh can we start to say hey, there's a canary in the coal mine and saying that there may be a a retraction of injury and then verify that with other technology. So I think that there's so many opportunities to continue to utilize this technology in ways that are very valuable to the surgical experience and so.
It feels like we're just getting going on that front.
Excellent.
I noticed in the and the kind of product portfolio of Buildout section of the mouth and informatics you guys listed track and so I was hoping you guys could just help us kind of think about that the kind of intraoperative imaging and and how that's evolving and how you're integrating it into your alpha.
Alex platform.
Yeah, thanks, much like the.
The yeah, it's funny, it's like.
People will talk about robotics, and think that gosh, we don't like imaging technology, but we're gonna buy yes.
And we love of imaging technology, and and one of the great elements of creating a surgical predictability and is making sure. The the entire bell curve can do this thing reproducible.
And what happens is is one of the best ways to do that is two of device procedures that are orthogonal and so if you go directly to the front of the cervical spine and do an ACD and that's very predictable because it's the it's a very straightforward movement. If you go to the front of the spine and the lumbar spine and it's a very predictable if you could absolutely directly to the side of it.
Predictable and so what happens is if you continue in that way and it becomes a very safe corridor and the be able to utilize track X, which in essence is radiation list by cleaner floral and be able to say, hey, and my staying and my lane from a informatic perspective, we believe that that creates safety and so.
You know it's much like your car when you start to get out of your Lane and says Hey, you know you're getting out of your lane and so you know we teaser on here stay in your lane and broke.
So we feel like the whole track X element becomes a very valuable part of alerting surgeons to making sure that they're staying with Argos.
So I just have one more sorry, and just to sneak it in and I think it's clear and we have understanding of just the kind of Halo effect. When you watch the surgical technique like P. T P and you get some pull through and some of the other procedure categories, but I was just wondering specifically for the cervical portfolio of launch and it does appear.
T P customer.
Can you experienced the halo effect, even and cervical and maybe just more directly and what percentage of your of.
And you're kind of of minimally invasive lumbar surgeons are also performing surgical proof of cervical procedures excuse me I'm just wanted to think about as you introduced surgical products you know the launch and and anything that can help on the trajectory. Thanks, and thanks for taking on the questions.
Yeah. Thanks, Josh.
I got to tell you. The this is this is an interesting and businesses and I loved the kind of the nomenclature of Halo effect, because what happens is when you compel someone or create confidence with them the likelihood for them to throw you. The things that are less complicated is important and so you know.
The the opportunity for us to create a best in class surgical portfolio is often the earned by the confidence created through things like PPP and so you know it's funny to us when we see.
People touting the things that the candidly are very conventional and haven't evolved much surgically and a way that ultimately our view is that what we'll do is we'll do the hard things very well and I bet, we get allocated the thing comes in.
The relatively straightforward and and so.
But it is great and because they're all the reflection and the confidence of the surgeon has and what you do and so it's important that the stuff is the best in class. So we're excited about the contribution of the share of will go in and one of the other thing we're going on we're going to launch and in the time that I've been here, we're going to launch a what's called the Invictus OTT and and that extra little of cervical thoracic.
System, and and that it's going to come here in the and the very near term and so we will have gone from heads at the state from the period of time that we've been here, where the most others have not even come close to touching that expedient and I think it just speaks to the level of prowess of our.
Kind of development group.
Oh, great. Thanks, again for all of the details.
Our next question comes from Kyle Rose from Canaccord.
Great. Thank you very much for taking the questions.
And I just wanted to take you know.
A little bit of a step back I mean, you guys grew 30% this year and that's clearly multiples above the broader market but.
But when you talk about some of the key products here and when I think about the stay FOP a.
P P P.
And those are products that you know I think on the last call you talked about 550 cases and P. T. P. I mean, those are proud of our techniques that take.
A lot more surgeon training and so I guess help us understand you know.
And when you think about the growth and 2020, how you were able to put up like this type of growth and and and this market.
Despite some of the heavy lifting and.
Required for the new product launches and I'm, just trying to understand how that really sets up and informs the grow.
In in 2020, one when you know the the burden of education, you hopefully you'll get the easier you can get more in front of people and I'm, just really trying to understand and know how much of the the underlying groundwork was really late and in 'twenty two to continue to see more upside in 2020 one.
Yeah, I'll speak to the color and then I'll I'll, let Jeff probably and add some some intelligence to it the but.
But you know the the.
And I think that the debt what we what we saw in 2020 was really kind of just the initial entre and one of the things that we do a lot of is is alpha evaluation and and I think the day the alpha evaluation for something like P. T. P was very robust and the great. Part is is if you look at the impact and it has on our price per <unk>.
Surgery and significant based upon the number of categories of products used and so when you start to think about safe up and and and and and post your fixation and and candidly you know the interim.
Body stuff and like there's a lot of categories and things like P. T piece of the magnification of the reflected revenue when you start to pile on the volume of the cases that ultimately are earned through.
That's true and it's delivering what we believed it would and so I would tell you the that those of the types of things that has developed and delivered the the majority of the of the growth. The other thing is it's candidly there there's a sales groups coming our way that have significant books of business and and inspired.
And surgeons and and and I think that they start to get a feel for the type of technology. The this new company has and and they're not underwhelmed and so I think that the fun part is is the debt yeah. There's few things worse and then not fulfilling the very expectation that you created with regard to bringing these people over and there.
The ability to be successful with our technology has been very high.
And even get yeah, and I think just two of them expand.
Expanding on out of bed I think COVID-19. There there are a number of growth drivers and I think that's why maybe you know it's hard for you and get your head around and kind of where it's all coming from but I think it's it's certainly the expansion of the PTP, but it's from a surgeon base that already exists that are already using our existing products. So from that perspective, it's incremental to what they're already doing.
And then to Pat's point, we're going not just expanding geographies, we're going deeper into existing geographies. So there are a number of sort of growth level of leverage if you will that we could pull that debt that gets you to that growth rate.
And that's very helpful. I'm, just trying to to understand the type of growth. We saw on the second half in relation to guidance for the full year and in 'twenty one.
And maybe let's touch on that a little bit you know obviously you closed out the year very strong.
I think when you listen to your peers, although clearly not apples to apples given your growth when you listen to your peers.
And they saw a slowdown and cases in and the latter part of the Q4 that seems to have continued.
For the first two months into the end of the Q1, just so when we think about the 25% growth year over year, obviously, you've got the big comps from the second half, but and just how should we understand and think about the progression of revenues through the year of giving you. We still will have some COVID-19 headwinds in the near term.
Yeah.
Yeah kind of I.
I would say my view is and you know.
And we felt some of the Lumpiness at the end of the year and and then some of the Lumpiness at the beginning of the year and I think that debt and the great part of it is I think to everybody's commentary the the uncertainty is dissipating and so we're seeing it.
You know upticks in terms of just the confidence in the.
The ability to deliver the surgery and so.
But I would say it wasn't the different in terms of the dynamics of what they saw and what we saw.
Great. Thank you for taking the questions and congrats on a on a great end of the year.
I appreciate that thanks, Kevin.
Your next question comes from Matthew O'brien from Piper Sandler.
Good afternoon, and thanks for taking the questions I guess, just the final follow up a little bit on Kyle's question on the guide for the year I mean, 25% growth is phenomenal, it's well well above the market growth rate, obviously, a little bit of a <unk>, Pat which you've been talking about over the last eight quarters and as far as 30% growth and then.
Moving into cervical and you're moving into biologics of little bit more of so I'm just trying to make sure I understand that you're trying to be more conservative still plenty of opportunity on the lumbar side of things versus you know things are just our penetration opportunities may be slowing down a little bit on the Barcelona shifting and the sort of a cooler.
And along those lines the that you're trying to call out here again are you just trying to be conservative with the outlook for the year.
Any color there would be helpful. Thank you.
Yeah, Yeah yeah.
And.
And that's the rack of lumbar and slowing down and it's one of those things where it's like.
Yeah, there's lumpiness out there and and and you start to look at you know us having just come out of the pandemic in it and it it would be irresponsible to get too too ahead of ourselves and so we're enthusiastic about like a growing this thing out and and what we do as we chart the different categories in terms of our.
The drill influence.
The very carefully and and so what we're just trying to do as the architect forward, but it's not a matter of of our concern over the demand for what we're doing being affected.
The effect that it's more a matter of just saying gosh, how do we think about all the debt the lumpiness of the environment and and the different things that we have to do and so.
The debt, we're trying to be thoughtful and I don't know about conservative I think that you know and.
Nobody else is talking with 25% gross so it's one of the teams and we're just trying to be.
The proper stewards of the of the process.
Okay. It makes total sense and then thinking about the the space just generally speaking you've got a bigger player and not you know not not one of the biggest three or four players, but a bigger player of that spinning off there.
And the spinal dental businesses and you don't have a desk and you can't go after that piece of their business, but they are of sizeable player do you have a big domestic presence is there a way to make a bigger push for thrust into some of those accounts here because I know they are already thinking about the.
Some guys are already pretty nervous is the bigger is there a way to really get more of kind of a disproportionate amount of that share.
And to the end of the Alphatec.
Organization over the next maybe.
The year or two and then I'm also curious about national accounts, you Havent talked the talk about that and I'm just wondering what you're doing from the national account perspective. Thanks.
Yeah.
When and if there's one thing that we love, its disruption and and and and and so it's and it's one of those things where it's like and.
And I think the debt.
And and I think that there there is there's the leaders of companies that don't like spine, because they don't know it and I think there's so much opportunity to make spine surgery better.
And that I think people have fatigue on her.
How to do that and and I think one of the the virtues of the company is the fact that we're a great students of the requirements of the environment and when I say that what I mean is if we can't be more opt more optimistic about making things better and when there's disruption, especially with companies that haven't been super excited about the space cash we love it because theres a ton of disruption and we feel.
And our sales opportunity.
The significant opportunity and so yeah.
And we.
And we love the continued disruption in the.
The rest of them on the spinner spine divisions out of it would be thrilled about that day.
And so.
The the as it relates to national accounts.
And that could just did you know I'm I'm bullish on what we're doing I think were earning a lot of respect based upon the types of things that we're doing and one of the ways and becomes do you have something that's unique and so we've got into a number of I D and based upon the fact that the.
And nobody else has a fully baked.
The prone trends so its portfolio of a lot of people say, hey, I can apply our stuff to this and then they have a terrible experience and they say, it's a bad surgery. The reality of it is they havent designed and developed for the specific utility and.
And our opportunity is with these I D and us to insert ourselves with regard to having unique technology, and then being able to expand our footprint. The best we can with them and so that's been very successful and and we've got and access to a lot of places based upon having something unique.
So anyway, it and it's part of the fun.
Got it thank you.
Thanks, Matt.
Your next question comes from Matthew Blackman from Stifel.
Good afternoon, Pat and Jeff appreciate the questions Congrats on a great on to the ear.
To start can you just give us perhaps a little bit more color on the P. T P rollout or any metrics to share on surgeon adoption to date and whether it's skewed to the eight type customers or if there's more of a balance of of new customers adopting and then a follow up to that is have you been able to go full bore with the rollout given the the four acute COVID-19 resurgence I assume there is.
And you come up of training required and that's what we've been able to adjust to or has that been the headwinds and I've got a couple of follow ups.
Okay, great Yeah.
And it's it's it's been interesting at the the.
And the rollout has been.
The interesting in that.
As I said this this group has as much lateral experience and really when I say that I'm trying to be nice and.
This place it has more of a letter of experience on anybody and so what happens is you go out there and you solicit surgeons, who have had a large experienced with lateral surgery and to ultimately compel them to come and get trained and and to adopt it into their practice is candidly not been been overly challenging.
And so we've got and a very good reception and the reason one of the core reasons. We've done P. T. P is really not to just stay with a bunch of them.
And the people who've already of that adopted what we deem to be great surgery and specific types of indications, but also to attract surgeons, who have historically been surgeons who've approached the spine from of prone.
Post of your perspective, and so they have a position prone and have them approach. It from that the patient positioning is much more familiar to them and so we feel like the the initial guys when they see and Luis Pimenta and Bill Taylor and people like that they said gosh I know these guys. These guys are luminaries in the field of lateral spine gosh. This is.
Something I should listen to and then ultimately our expectation is we're going to continue to expand it based upon those people who are the most comfortable operating in our current position and so.
Hopefully that is that the that answers your question.
I appreciate it makes sense and then.
And just two more and as.
And we think about the the key growth drivers and in 2021, they're all basically the same drivers we saw on 2020 with with the Eos layered on top of that because we think about each of those the revenue per procedure and our channel productivity channel upgrades and U S. Geographic expansion of the rank order of importance of those changed at all versus 2020.
And and specifically if you think about and you've mentioned it a couple of times and expanding the U S footprint does that become a bigger contributor in 2021, and directionally versus 2020.
Yeah, I kind of think of them as all being so important and it's one of those things where it's like it's you know it's tough to say gosh. The ones. One is gonna be a larger contributor and it I think that we would start with saying can we can we drive clinical distinction, which will ultimately compel surgeons, which will ultimately drive you know kind of the sales footprint and then making sure the.
And it gets reflected in a way that the the search and find success and and then success breeds success and and and that's kind of the the order of of always how we think about things and and so.
You know unless.
Unless geoff as any other commentary, it's a I don't think about it any differently than what I just described.
Yeah, and I would say it as Pat had had run through on the on the presentation.
The average product categories per case still and you know what the stage is still a ton of room to expand and so I would think about growth drivers being very similar.
And as they were in 2020, because we're just getting started and there's still so much opportunity to expand both product per case as well as revenue per case, and then expand geographies and and go deeper into existing geographies. So I think the growth levers are very similar to what they were in 2020 one.
And then last last question and sort of.
Following up on on Kyle's question earlier and for a number of reasons I know this is not a fair question, but with all of the success from 2020 clearly momentum in 'twenty, one and now you've got iOS on top of that is there any change and how you think about or how we should think about the sustainable growth rate for alphatec and in like 22 and be on it I guess from what I'm asking can you sustain.
20% plus gross over the next several years or are the things that we should be sensitive to and law of large numbers or anything like that it sounds like youre still on the very early innings here.
Yeah Yeah.
It feels like we're in the early innings, you know, we're a smaller company and and and then just from a pure and numeric perspective.
I think that debt, we're playing big and and and so I think the there's a significant runway for the company ahead of us and so it's tough to say hey, listen we're just going to handle this on a year by year basis, and and and do what we know how to do it as well as we can and and not get ahead of ourselves and it's like.
Yeah of Panther.
<unk> last year was was it the great.
The reflection on and.
Not getting ahead of yourself and and so I would tell you that we're just going to stay the course and and focus on what we are pretty good at and what we love to do and and we feel like that will reflect gross.
Alright, I appreciate and congrats again guys. Thanks. Thank you very much thanks, Matt.
Your next question comes from Jason Wittes from Northland.
Alright, Thanks, just a few questions here. So first off it sounds like you did have maybe some COVID-19 hit but it was somewhat indiscernible is that the right of way to think about it and you know going into this you know I guess one.
We're into 2020 one at this point.
Again is that also the case that the other maybe some but it's not necessarily a discernible and to.
And to the mix of search of your business given the girlfriend and you guys have.
Yeah.
Yeah, I would describe it and it is like as you know kind of the end of the year was lumpy and in the beginning of the year of it.
And it's lumpy and and you know.
As you know we've talked about it it's like it's the tale of 500 counties I used to say at the tail of 50 States and now it's a tale of 500 accounts, because everybody's kind of making their own decisions as to when the they start back and and and so and they're there then you layer that in with regard of the types of the reasons why people operate and the.
Type of demographics of the practice and it just creates a control and two of the.
Just to be able to prognosticate and it's very hard and so for us, we've just seen lumpiness and debt.
And the closures of hospitals and whatnot, but we feel like a lot of it is dissipating and we're well on the back end.
Okay, that's fair.
And I think it was mentioned earlier on track X.
The slick technology, and and I mean, basically if you could talk about.
Narrowing the bell curve. So that every source of can do something and also reducing radiation and it seems to do all of that that relationship is that exclusive to you guys and is that is that something you'd consider central to your navigation and strategy as well.
Yeah and.
So so the the.
One of the things that were huge fans of is is is workflow and so the ability to ultimately.
Uh huh integrate within someone's workflow becomes very very important and track X.
And as such a great tool and part of it becomes is is how do you acquire the image and to be able to upgrade the image of our update the image based up on a single flow shot and continue on with biplane. Apart is so valuable because what happens is it it doesn't require a brand new spin or you know and there's a lot of the technology requires and so.
We love the fact that what you can do is update it on the fly and and really kind of the key.
The workflow of the experience and at a very rapid pace as it relates to the relationship. It is and we are exclusive as it relates to all things PTP. They started the company before.
And we're on the same time, we didn't and so.
And it's not exclusive from the post to hear your perspective, but from a PTP perspective, so all of the anterior column and stuff that we're doing together is something that is exclusive to us.
That helps and then on iOS.
And I think when you.
We announced the deal.
I think you throw on an estimate of something and the range of 40 and $50 million on a full year basis for this for 2020 one.
And that's not that's full year and not something that's not inclusive of when you close the deal but is that still a reasonable expectation.
You know what of full year, EPS might look like and 2021.
Yeah.
Let me jump on it and and Jeff will provide the specifics.
And I'm not sure of the that was thrown out but yeah. Okay. So I apologize I might have might have been my assumption, but I.
Go ahead, sorry about that.
I guess the way.
The that we think about is is there's very little overlap and the two businesses and and as we channel check the interest of our customers and it is exceedingly high and as we start.
Start to think how we can play a role in some of the academic institutions that have already acquired the technology. We also see that as being very high and so the.
And the opportunity is significant and.
But you know as it relates to quantifying it and.
That's where every lap of my pounds, yes, yes.
Yes.
Well I think what you're referring to as and when we announced the deal we had shown a pro forma illustrative revenue profile of that combine the two.
And census numbers I think that's what the offering to yes.
And that that is the the I think that's exactly right and that number and so I guess, what we'll say is that look we're still we're still modeling the business will.
We'll be much better prepared to provide guidance once the once it closes.
Okay, That's fair and let me just ask you from just a.
Sort of of integration.
The integration standpoint and.
What is it just looked like on day, one I mean, I would assume there's a lot of work to be done to the in it to fully integrate it within.
On the whole informatics platform within the Alphatec itself, what does it look like on day, one and what it looks like on day 365, and you know what does it look like five years from now and if that's a fair question to ask.
It's.
And I'm not sure if it's fair enough.
Okay.
No. The the you know one of the things that the the that we authentically want to do is kind of run at the integration of this thing, but we want to be Super responsible with how we go about doing that and so we will have somebody from this off of sitting in Paris as part of that team and just to start the <unk>.
And you know kind of the cadence of how we do things together will be very very important and so you know I think the the first thing that will be done. It is how do we also we help each other with regard to the sales.
Sales synergies and and when.
And you have you guys sell and capital and it's all they're doing is knocking on the door of the hospital administrator, and then telling surgeon and say this is a very important piece of equipment and they see them once a quarter. It becomes very hard to create the impetus for for excitement and and and for movement and so when we have the number of guidance that we have in the field.
With the Surgeons every day and then hitting on the surgeons from them.
You know kind of the a M and implant sales force perspective, and then having the capital guys hitting on administration and it really creates a much more.
And much faster route to the I think of buying position because the relevance and the technology is so high it and you know our view is is we're gonna start informing them of surgical planning and things of that nature.
Very very quickly and that's going to be so the first things that we do and and and then you know we think that there's so much opportunity to deliver information through the alpha informatics platform and a way to ultimately make surgery better until we feel like we have on years of opportunity to take the type of information to make things better and so.
And I don't know what the what the timeline of each of those projects are as of yet, but I know exactly what it looks like and that's what makes us so excited.
Okay that was a very fair answer two of them, maybe not a fair question, but I appreciate it.
Okay.
I'll jump back in queue. Thanks, alright, thanks, so much.
Your next question comes from Sean Lee from H C Wainwright.
Good afternoon, guys and thanks for taking my question.
Most of my question sort of answered it but I just have a higher level went on and how you view of the product portfolio and the.
The prepared remarks, you mentioned the increased number of.
Products per procedure as well as the switching distributors and two exclusive.
The main driver for the coming year. So I was wondering which part of the product portfolio you feel could do with most number of new products, where do you see.
Wow.
Where do you see the new products and help the most and driving these two goals.
Yeah, I think it and I think it's of Great question I think the.
It's like and we make you know nobody be exclusive and and we.
Earn exclusivity and and and.
And I don't mean to be trite with regard to saying that but it's one of the things where it's like.
If you have the type of technology, where these guys Kid can really create a big business and have great confidence and the business forward our opportunity to earn their confidence is is is the is very high and and so when I start thinking about things like and.
Clearly the least objected human with regard to P. T P, but and you start to look at lateral surgery and you start to see cash right now just the way that we see lateral surgery, you know there could be nine different product categories associated with <unk>.
<unk> surgery and.
And you start to say gosh, you know this.
This is the type of of the resolution that we see these procedures.
I start to think gosh, we could really really distinguish ourselves and lateral surgery and then that I thought the the comment with regard to the Halo effect on say cervical and maybe very high and and so it's that type of thing that becomes compelling and and so I get excited about the compelling exclusivity with things like P. T P.
And then ultimately the the Halo effect of of some of the different things that are maybe more conventional and nature.
And Bill it's helpful. Thanks.
Thanks very much.
Yeah.
And that was on our last question, ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
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