Q3 2022 Alphatec Holdings Inc Earnings Call
<unk> the easiest ways to kind of start to think through P. T. P and L. T. P is I would think of it as as that which is driven by the pathology and so the more complex pathology, where there requires a direct fee compression and stabilization I would think PTP more of a degenerative population, which is short segment, but.
They include 514 surgeon, who wants to do it through an Alice I would think L. P. P. But the beauty becomes is back to the sophistication thing our ability to provide both platforms the that accommodates the surgeons.
Interest is a is really what we're after so we've taken all the learnings from PTP and developed a patient positioner that facilitates lateral surgery.
In a more midline ayliffe axis to all five S. One.
It's amazing.
We're in this day and age and people are talking about the commoditization of spine surgery, but we're still keeping patients to beds and so we believe that the addition of the patient positioner, a specifically designed retractor system the integration of safe up.
And just a an entire procedure built from the ground up is going to be a welcome evolution in the field of lateral trends. So a surgery. So cannot be more excited about that either so speaking of applied learnings. We have also launched our first of many expandable interbody devices. This is opposed to your approach expandable first in <unk>.
Foremost of assure data correction is accomplished from a back in the prone position. It anchors P. T P by providing a medium sized post to your approach at L. Five S. One.
Inexpensive <unk> fashion. The media lives post procedure includes specific invictus cortical screw design, coupled with an elegant retractor system, an expandable interbody device and so now we have solutions both at from an LTP via a live in a P. T P. A.
Via via the media lives post your approach.
For both the lateral techniques so.
Transferring now to really the the informatic element and just a little bit about about via <unk> or our interest is in integrating our multiple informatic elements. We've we've recently, we've recently released an app called via what it does is it quantifies the alignment parameters and it will enable abroad.
<unk> Eos image access for integration into our intra operative solutions and so its another tool where whereby we can.
<unk> iOS related information more to come but wanted to provide some a little bit of a view and the many ways, we'll deliver information that will improve our decision making.
So wanted to talk a little bit about E. O S yields continues to go quite well, we believe that the.
The value of iOS is unmatched, we believe that our standing weight bearing by planner non magnified image and we have the makings of a spine alignment standard alignment remains the greatest correlate it to a successful durable long term outcome and it doesn't matter.
In short segment or long segment surgery. It is profoundly valuable in terms of the ability to understand how our spine need be aligned.
There's an old quip in spine surgery that are 100% of spy.
Spine surgeons are deformity surgeons, they either create them or they fix them.
Many of trees are clearly set ingest, but the revision risks for Mallow line patients is tenants that have a properly.
<unk> patients the Srs, who is really the authority when it comes to spinal alignment.
Is is.
Is are big fans of of iOS. During a recent meeting in Sweden, Larry Lenke previous Srs, President famed deformity surgeon pull the audience and 70% of of the surgeons in the audience at Srs owned an Eos machine another 30% raise their hands if they had more than one so.
We see this as as the society.
That influences these types of surgeons and to me is as as the Srs goes oftentimes the rest of the spine community goes and so the question really becomes is all right. What do you do from here and and really our work has really been been defined and described in its ongoing.
And what it's about is integrating.
And designing feature sets that can integrate into a tech procedures and so providing automated alignment reports that enable expedient surgical planning generating data to drive preop and Interop Rod bending.
Understanding bone density measure to provide surgeons and understanding of underlying bone quality I'm not to mention all the back office work that's going on.
Assembling a predictive analytics platform and a platform that ultimately will enable us to gain some operational efficiencies as well so.
How's that.
It occurred to us as we were thinking about the quarter and so often we utilize things like Hayward, where we're just getting going and I think a lot of people utilize that nomenclature to fill space, but.
To us it's very apparent as we demonstrate that the foundational elements of our platforms are very relevant well beyond lateral surgery.
And so just wanted to provide an example of a of a field that were working are working on so.
I imagine in idiopathic scoliosis patient with a rotational deformity, that's that's kind of right in the middle of what you know companies like us focus on it.
It would be profoundly advantageous to understand the apex of this deformity via iOS. So you start to think about what the value of our foundational technology is you think gosh yields will provide great value and in that patient type and then you start to ask yourself, what's the reciprocal alignment what reciprocal alignment would be gained through direct at the Chiba rotation.
Via the Invictus DVR system directly.
People rotation system, and then you say gosh positioning her or the patient in a patient position to assist a surgeon maximizing the correction that would be quite valuable and then assuring the neurologic safety of the correction with facility Mep's as or D. Rotating the spine. So I think so often people look at these foundational.
Elements as unique or independent when the reality is the application for these elements will be reflected in future types of applications. So when we say, we're just getting started.
We we genuinely meaning we're literally just getting started.
That's just a little bit about the whole clinical distinction and would love to give you a couple of.
Objective measures with regard to compelling surgeon adoption and so we have more surgeon users 22% growth in surgery.
User base year over year.
As we talked a little bit.
The aggregate products per procedure is growing.
It was at two three in Q3 of 'twenty two.
The volume of surgeons coming through our surgeon education.
Group and coming through a tech has been significant and that was right around 150, and so not much to add to this slide other than the fact that what we're seeing is just continued growth in our thesis and we look at this as a proxy for our people buying into the very clinical thesis that we're putting forward.
And when they use more of the proposed products than the likelihood for them buying into this thesis is is much better.
Love, what's going on in the in the in the sales channel Love, what's going on Dave Sponsel lead with regard to the field force in the in the continued evolution.
<unk>.
And those areas that we have established sales agencies, we enjoy a 46% year over year revenue growth and for US. That's that's a proxy of same store sales and that and the stickiness of of what's going on there.
The market share is always a.
Bit of a challenge, but we believe ourselves to be a 3% holder and I always think that means we have 97% to go.
And and that we're a 5% holder in those markets that we participate in we still have uncovered geographies. So in the aggregate probably a 3% in those geographies that we participate in more like a 5% and as I think everybody appreciates. The salesforce is very is very much shaping up however.
It is the perpetual build in the perpetual place of improvement and so.
Anyway, just wanted to give you a few.
Kind of background.
The dynamics of what's going on with the company and probably best I turn it over to Todd at this point.
Alright.
I appreciate it and.
And good afternoon, everybody. We appreciate you joining us on the call today. So I'll begin with revenue third quarter total revenue was $90 million, reflecting 43% growth over the prior year and a 7% increase compared to the second quarter.
$90 million in revenue was comprised of $79 million in surgical revenue and $11 million of iOS revenue.
Now that we're fully anniversaried the close of the Eos transaction, what we used to refer to as organic revenue will now be referred to as surgical revenue.
Third quarter surgical revenue of $79 million increased 53% compared to the prior year period procedural volume grew 32% year over year, a surgeon adoption continued to expand the number of surgeon users increased 22% compared to last year, reflecting the strong level of training activity, we've consistently seen over the last year.
Additionally, much of our growth is coming from established sales agencies with at least one year of tenure in that cohort achieved 46% growth in the quarter demonstrating durable sales growth from our most tenured agents.
Average revenue per case expanded 15% year over year as revenue mix continues to shift towards procedures with more products per case and procedures with greater complexity.
As a reminder, the average revenue per lateral procedure is about two times, our overall average and lateral related revenue continues to grow meaningfully faster than surgical revenue overall.
While lateral related revenue again contributed the most to our growth revenue related to biologics Cliff and a lift also grew significantly in the quarter.
<unk> revenue in the third quarter was $11 million flat compared to Q3 of 2021 on a reported basis and up 7% in constant currency results reflect the timing of capital deliveries and installations in the period.
Experience is increasingly helping us to better manage the complexity of deliveries and installations and also continued to make nice progress with the integration.
We have achieved 45% growth in the opportunity pipeline year over year and are on track with platform innovation initiatives.
Continuing through the remainder of the P&L third quarter non-GAAP gross margin was 71% down 130 basis points compared to the prior year increased service costs as we address the backlog of service calls created during the COVID-19 pandemic contributed 90 basis points of pressure year over year. Another 60 basis points of gross margin pressure was related to <unk>.
Increase in our biologics attach rate, which comes at a meaningfully lower gross margin profile and overall business. Our expectation is that the margin headwinds outlined above will persist throughout the year.
Operating expense in the third quarter demonstrated leverage while thoughtful investments in the long term sector leading growth continued.
With third quarter, non-GAAP , R&D was $10 million and approximately 12% of sales a 100 basis points lower than the prior year. The increase on an absolute dollar basis was driven by continued investment to support organic portfolio expansion and the advancement of the Eos platform non-GAAP SG&A was $67 million and approximately 75% of.
Sales in the third quarter compared to $52 million and approximately 84% of sales in the prior year period.
We delivered 860 basis points of improvement, while continuing to invest in the expansion and training of the ACI sales network surgeon education and support for the increasing size and sophistication of the company.
Total non-GAAP operating expenses amounted to $78 million and approximately 87% of sales in the third quarter compared to $60 million and 96% of sales in the prior year period.
Delivering a total of 960 basis points of operating leverage year over year.
I'd also like to highlight that we achieved 200 basis points of operating leverage sequentially that is an early testament to the leverage we are expecting to deliver as our business scales adjusted.
Adjusted EBITDA was a loss of $6 million and approximately 7% of sales in the third quarter compared to a $10 million loss in 16% of sales in the prior year.
<unk> of 870 basis points as a percent of sales was driven by 960 basis points of operating expense leverage which was partially offset by gross margin sequentially. Adjusted EBITDA improved $2 million on a revenue step up of $6 million and resulting in 290 basis points of improvement.
Yes.
Our sales growth leverage across our business.
An adjusted EBITDA loss for the full year 2022 of approximately $28 million or about 8% of sales relative to approximately 12% of sales in 2021.
This will position us well to deliver the breakeven adjusted EBITDA that we are committed to for the full year 2023.
Turning to the balance sheet, we ended the third quarter with $106 million in cash operating cash use improved relative to last quarter and totaled $24 million.
Roughly half of that sequential improvement was driven by lower instruments inventory in PP&E spend.
Approximately $2 million improvement was related to reduced litigation spend and the balance by improved EBITDA and working capital.
We continue to expect full year 2022 cash use to meaningfully improve relative to last year consistent with our long term plan.
Net carrying value of $370 million, which includes $360 million of our convertible debt and the drawdown of $35 million from the $50 million.
Dollar revolving credit facility that we closed in the third quarter.
Now turning to our outlook for the full year 2022.
In line with 40% full year growth rate that we've previewed in conjunction with the pre release of the third quarter financial results. We now expect full year 2022, total revenue to approximate $340 million, which as a reminder compares to guidance of $325 million previously updated guidance includes the following we now expect full year 2000.
22, surgical revenue to approximate $294 million compared.
Compared to $277 million previously.
Dated expectations reflect growth of 39% compared to 2021, which contemplates strong performance in the third quarter and continued momentum into the fourth quarter.
We now expect <unk> revenue of approximately $46 million for the full year 2022, compared to 48 million previously updated guidance for iOS flex the timing and complexity of installations in deliveries from our order book as the iOS business becomes more U S markets concentrated.
I want to share how are expectations for procedure volume growth and the expansion of average revenue per surgery support updated <unk> surgical surgical revenue guidance.
With surgeon adoption, expanding and surgeon utilization, increasing we have achieved strong procedure volume growth throughout the year, including 32% in the third quarter. As a result, we now expect procedure volumes to grow at low <unk> rate for the full year compared to the high teens percent rate. We anticipated previously average revenue per surgery growth is a procedural.
Mix shifts towards procedures that require more products per surgery, like PTP, and LTP and towards surgeries with greater complexity, all of which feature higher revenue per procedure than our overall average the strength of the growth in revenue per surgery year to date, including a 15% growth rate in the third quarter drive our new expectations for a low double digit rate.
Of expansion for the full year compared to the high single digit percent rate that we expected previously.
Most of you know our guidance philosophy is to be thoughtful and prudent about how we set expectations by putting numbers out there that we believe we can achieve and have a reasonable opportunity to exceed.
In closing the third quarter marked the introduction of significant innovation, we showcased LTP at NASS launched our first expandable Interbody cage and introduced our mutualized posterior approach our sector, leading growth continues to validate our procedural thesis and reinforces that clinical distinction because what ultimately compel surgeon adoption.
We also demonstrated how our revenue growth will enable us to scale the business and begin to deliver operating leverage in short third quarter performance was another step towards the achievement of our long term objectives.
As you May expect we have another active IR calendar over the next few months and I hope to connect with many of you in person with that I'll turn it over the past.
So much Todd.
That said, we are we've gone deep in this before but literally our focus is is how do we continue to earn market share through lateral sophistication.
How do we garner more by earning the.
Respect and confidence of the surgeons to garner more of their practice and that's the Halo effect and nice to have new products launched within that category will continue to focus on the sales channel and continue to improve from now until the as far as the eye can see.
We're in the process of getting international off the ground in.
In a small way.
And I would tell you that we haven't even begun to see the influence of iOS in the meaningful way that we expected in the years to come and so we love the love the acquisition and loved the long view associated with our opportunity in that space.
So as.
As we as we talked about at our Investor day.
Our focus is $555 million.
In 2025, which would be an adjusted EBITDA of $80 million and really focused on just the the disciplined investment.
On the walk in and so.
Our opportunity to address the need for predictability and reproducibility is massive the spine market is massive and it's and it's ours for the taking so we believe that the.
The spine needs.
And with that we will turn it back to the operator.
Yeah.
Michelle are you there.
Yes, Okay. We will now open the floor up for questions and the interest of time and consideration of others with questions. Please limit yourself to one question. The first question comes from Matthew O'brien with Piper Sandler.
Hi, This is Phil on for Matt. Thank you for taking my questions Pat Congrats on five years.
Another impressive quarter in terms of procedural volumes.
Despite no longer vacation cycle. Some of your competition pointed out I was wondering if you could provide color as to why you were a bit more insulated from that dynamic compared to your peers.
Yes.
The real question in getting that here could you have grown quicker in a more normalized environment. Thank you.
Yeah.
The.
At one appreciate the whole five year congrats it's a.
We love what we're building here and.
Hopefully it will do another investor day at some point and get people here I think the enthusiasm for the spine space is palpable.
And we love what we're doing I don't think that we're insulated from the dynamics of what is going on we're also still what I would consider a smaller player in this space and so some of the macro demographics.
We're earning share and so we're earning share at a great rate and what's earning share is doing and making investments in some of the foundational technology that I was talking about earlier like patient positioning and Retractors and things that are super meaningful to surgeons and so.
I think the adoption is still very early and I think that we have great momentum and I see great.
Mentum moving forward and so I know that doesn't give you any hard data but.
I guess, that's the way I see it.
Great. Thanks.
The next question comes from young Li with Jefferies.
Alright, great. Thanks, guys for taking the question.
Also want to extend my congrats to Patria five years here.
Youre going to phone right.
So I guess.
Good to see the <unk>.
Continued momentum in the business.
You have a nice cadence of new product launches this year and more to come next year.
You're on track for.
Record surgeon training this year with a pretty strong track record of contribution from the previously trained cohorts.
It seems like this momentum should carryover.
In the forward periods, maybe there's some tough comps but.
Any early comments you can make on the sustainability of <unk> growth momentum.
On the period.
Yes. Thank you. Thank you Lee this is Todd.
Yes.
We appreciate the question.
And I guess as I can.
Think about the the metrics you shared I think one of the things that we talked about on our Investor day was how.
Surgeon training is a great leading indicator for surgeon adoption.
And the level of interest that we're seeing coming through the facility is incredibly strong as as you mentioned and just approximately 150 150 surgeons came through again in the quarter.
And I think what we also know that as surgeons adopt our technology and we see it in particular and PTP.
They not only begin to use the approach and more complex surgeries, but ultimately as we earn their trust and confidence we gain a greater share of their overall business and so that continues and I think that's ultimately why youll see.
Volume up north of 30% in and surgeon users upgraded over 20% and so youll also see implied there.
A meaningful growth in kind of procedures per surgeon and so thats whats implied there and so I think all of that actually reflects what we know to be true, which is when you do something clinically. The strength you you ultimately compel surgeons to adopt it and Thats what were seeing.
So our belief is that we'll continue to see that into the future because we're we're continuing to deliver clinically distinct solutions.
LTV is a great example of that that we showcased in the quarter.
Alright, great I appreciate it looking forward to seeing you guys in London.
Yes, Thanks John .
Already our next question comes from Brooks O'neil with Lake Street capital markets.
Hey, guys nice to see your NAV and then I'm just curious if you could.
Talk just a little bit about the response you got from surgeons through the stuff.
Presenting and talking about that.
Yes.
Yes Brooks thanks.
It's good to hear you.
The.
I think it's one of those things, where I think people have great expectation with regard to our continued track.
Transformation of the lateral space I think when when your CMO is luis commence and the and the other surgeons who are around this that have that level of technical aptitude in the lateral space I think that theres, a big expectation and a lot of enthusiasm about what we're doing laterally and I think that that was very very well received.
I think the other thing that was.
<unk> was exciting and.
It was just the volume of surgeons, who see the vision on the yield front.
And just when you start to think through all of the opportunities that present themselves with regard to the information that comes out of that machine. It is significant the other huge validation becomes when the Srs.
The Scoliosis Research Society has such a predominance of users. It again is a forward view of what's to come from a from a mainstream spine practice dynamic and so I would say.
The kind of the things that really jumped out at me is is.
Is just the momentum of the company is tolerable and I believe we're making investments in the right places.
Great. Thanks, a lot.
Okay.
Your next question comes from drew Ranieri with Morgan Stanley .
Hi, Thanks for taking my question and.
Congratulations on five years.
More to come.
My question I'm going to pick on Todd.
Have a follow up for you perhaps.
Todd just on.
I think I heard you with leverage comments, but.
You improved leverage about 200 basis points, but I was hoping you might be able to drill in a bit more on really what the cash burn was your operating cash burn was in the quarter.
I might have missed it but.
It would be great. If you can make any any topic without that.
Really kind of remind us about your confidence for improving leverage into next year, and becoming EBITDA profitable or breakeven for 'twenty three.
Thanks drew.
To that end.
Appreciate the opportunity.
Our operating cash burn our free cash burn was $24 million in the quarter. So if you kind of remember what our commitment has been is to do tens of millions of dollars better than we did last year, we did $142 million of cash burn last year.
Free cash burn and.
Really the commentary implies about $122 million of free cash burn.
That's kind of a ceiling for us and so the $24 million free cash burn here in the quarter I think is very much in line with with being able to deliver on that commitment.
And so I think we feel good about where that landed I think certainly within our expectations.
And sets us up for.
Have a good Q4 on the free cash burn.
Standpoint, there I think sequentially Q2, our free cash burn was $40 million really half the improvement was.
Reduction in sets and inventory in PP&E.
A reduction in litigation spend sequentially and then the balance is really an improvement in adjusted EBITDA and net working capital. So I think on the free cash burn perspective, we're right, where we expect it to be and set us up nice for a good finish.
On the adjusted EBITDA line.
We had a negative $6 million of adjusted EBITDA in the period.
And it ultimately feel feel good about that.
I think ultimately the the commitment again is to deliver flat adjusted EBITDA from 2021, so that implies a $28 million number here in the full year.
And so ultimately.
As you kind of look at what we delivered in Q1.
Which was $10 million in Q2, eight and now six here in Q3.
I think what's notable there is that really implies a $3 million improvement in Q4 3 million adjusted EBITDA loss in Q4, and again I think that kind of trajectory sets us up very nicely.
Into next year, and achieving our commitment of being adjusted EBITDA breakeven into next year and I guess finally, I just kind of say, we we saw $6 million step up Q3 to Q3 Q2 to Q3 in revenue.
And drop through about $2 million of that in adjusted EBITDA improvement in and again I think that feels.
Feels good then it makes sense so.
At the end of the day at the end of the day year over year adjusted EBITDA of negative $6 million is about 7% of sales and improved a 170 basis points over the prior year Q3, and an early this is a good quarter from a comparison standpoint year over year, because it's really the first quarter, we have a fully.
Comped out the <unk>.
Acquisitions, so that gives you a good sense for where we're at and where we're headed.
Alright. Thanks, I appreciate the detail Todd just actually on this is probably a question.
For you and for Pat.
With the guidance is coming in a little bit because of installations could you just talk about.
What you can do to improve that.
I know that we're still kind of a choppy capital environment, but would love to hear how youre, maybe even thinking about <unk> for 2023, I think consensus is about $60 million.
Really when Youre looking at the pipeline for taking.
Taking a look at kind of your quarterly slides here.
How should we think about your ability to monetize some of those applications and features that are coming down the road. Thank you for taking the questions.
Yeah I'll go ahead and start out and then I'll, let I'll, let Todd cleanup, where ice grew up.
<unk>.
As it relates to the instant installations, our view as well.
We're taking a long view on this and we'll sell one to a.
Two a somebody who doesn't have the infrastructure yet in the installation will be less predictable due to all the goings on with regard to.
Building out the space, which.
This is kennedy the unpredictable time in that realm.
With regard to what's going on in the economy and so we're a little bit beholden to that our view is is that.
Our enthusiasm for the integration of these technologies is massive and we haven't really begun to see them. We've done a couple of <unk> whereby you guys are in essence.
Rising a rebate to.
By the system.
But once you start to see the integration of the tools I think youre going to start to see massive momentum with regard to both businesses.
Complementing each other.
Candidly a unique proxy is how do we use information with regard to safe up and how did we translated I think it is going to be not dissimilar here with regard to taking things like automated measurement being able to plan surgery being able to plan surgery with APAC goods being able to do all the preoperative rod.
Bending elements integrating the information that we're generating from the imaging into the operating room understanding what happened Postop aggregating the data like there's so many opportunities for us to reflect the value of that data.
Also didn't even mention the bone quality element.
Parts of this thing where not only does it give us an opportunity to rethink the way, we do stabilization our fixation in spine, but it also provides the user another tool to understand the underlying.
Bone quality that patient with whom they are going to intervene and theyre doing it on a on a much more sophisticated level, which is which is by individual spine level not just a general.
The value that indexes scan would provide you so.
My enthusiasm for us to integrate these technologies is exceedingly high and if youre going to see this over the coming really the coming years bits at a time.
But our view is one of our long walk.
And I think I'd kind of add to that.
If you think about next year I think the street's around $400 million in total representing about a 23% growth over our previous guidance and then presumably they will get updated here.
Post the call.
But if you look at where <unk> is at today and the $46 million on a constant currency basis is growing north of 20% on a full year pro forma basis.
I think it gives us great confidence in our ability to continue to grow that business and to do it in line with what we've talked about in the past and so I think.
We're managing through some of the near term.
Really installation complexities, but that doesn't really reflect the level of interest.
And the pipeline in and truly the value that.
<unk> is bringing to us so I.
I think to Pat's point, we remain steadfastly confident.
And frankly every year since we bought it has told us anything.
We're more confident there was the right move them than ever.
Thanks for taking the questions.
Your next question comes from the line of Josh Jennings with Cowen.
Hi, This is Eric on for Josh Thanks for taking the questions.
Just thinking about LTP.
With the launch kind of just around the corner could you talk about the learnings that youll be able to take from your experience launching and finding commercial success with PTP.
You will be applying to the launch of LTV. Thank you.
Yes, Thanks, Eric for the question, it's I guess I'd say get comfortable because it's a subject that I.
Absolutely adore.
That is the whole lateral surgery, one and.
I would tell you that the probably the first kind of undeniable truths that.
We have learned is you see a bit of manage that patient within a patient positioning and it put the surgeon in a in a position to two ultimately effectuate surgery surgery in a much more elegant and efficient manner and so you think about youre trying to do or Fob dental surgery.
The ability to utilize a patient position or to make sure that you are truly in a in a orthogonal position.
The patients an orthogonal position compared to taking into the bed.
I would tell you that as a diametrically different and I think that we have been rewarded by our investment with PTP into a patient position because now what we can do is apply that learning to LTP.
The other element is.
Designing for their respective procedure and so from a from a retractor perspective.
And then the integration of neurophysiology.
There is there is a.
Really kind of a significant experience.
With.
With safe up that the sales forces enjoyed that will absolutely integrate directly into what we're doing with LTP and so I think that the sales force is used to what we're doing with regard to patient position errors and in Canada. The integrated components and so I think where we will have a tailwind is within the sales.
<unk> that has already been successful with people in terms of transforming them from from our into PTP users and then.
Picking up surgeons, who want to continue to evolve into.
More predictability around what we're doing from an LTV perspective, the other place is no.
No.
<unk> five S. One.
A lot of most surgeons still require an access surgeon and so one way that will evolve is is we'll do general or vascular surgeon access courses at the company and so again a benefit of the patient position is that it puts you in a position to get more of a midline type of an analyst at five one and so just see.
<unk> to launch our whole AOS retractor system with our LTP patient positioner available is really.
The opportunity to train both the vascular general surgeon with the spine surgeons such that if you want to stay in the lateral position and L. Three to S. One your ability to do that through lateral approach at four 5% and three four and then do a <unk> with a general surgeon do the exposure.
It would be something that we would expect to be a common.
Application of <unk>.
This position and procedure, so probably more than you care to hear that.
That's helpful color.
That makes a lot of sense. Thanks for the question.
Your next question comes from Caitlin Kannan with.
Canaccord Genuity.
Hi, This is Cameron on for Calgary was just a couple quick ones from me on iOS can you provide the U S O U S split.
And also just on <unk> when do you expect to launch.
Yeah. Thanks.
On the iOS component, we haven't been explicit about the revenue split I mean, what we have Caitlin said is as as we continue to grow the iOS business, it's going to become more U S centric.
We are walking away from.
And our non strategic.
Countries outside the U S and really kind of focusing our efforts so.
Youll see more of a U S footprint as we grow this business over the coming years.
Yes, yes no.
I was just going to.
Draft off of that comment.
It will also further the predictability associated with our performance I think year over year.
There's a lot of economies around the world that Yosef previously sell into that candidly didn't facilitate our collective interest in so again I think we're a different company now, meaning <unk> and our ability to be more focal as Todd said into the into the states as well as into the strategic countries that are interested is going to be reflective of where the density of the <unk>.
<unk>.
As it relates to via <unk>.
It is rolling out now and it's rolling out and being used.
Again to quantify.
Parameters.
Parameters in deformity and so.
But the great thing.
It's the beginning of another conduit into the operating room that we will utilize for for a multiple or a multitude of different reasons be it.
Be it tracking inventory be it tracking.
No.
During charge sheets.
From an operational perspective, all the way through.
Pulling down <unk> images, and preoperative planning elements and some of the rod bending parameters that ultimately will integrate into the experience. So our thrill for these tools is significant.
Great. Thanks.
You know theres, a number of companies that aren't as a dogmatic with regard to the March toward exclusivity, where we are the only oh.
Player in the bag so to speak.
But there's always good people in these things and good people that are looking for opportunities and we will be opportunistic in and perpetually hunt.
Great. Thank you.
Your next question comes from Jason <unk> with loop capital.
Hi, Thanks for taking the question.
I appreciate the detail you gave in especially on the underlying drivers of guidance and.
And if I look at kind of what you've introduced most recently quite a bit again, but it seems like the expandable cage in biologics should be an easy lay up in terms of just improving our case revenue revenue per case is that the right way of thinking, whereas LTP it sounds like.
I don't know what type of trajectory, we should be anticipating for that but I would love to get a little more understanding if you could.
Yes, Jason I'll start and then I'll, let Todd.
It takes time mistakes.
The.
There is no such thing as a lay up in this business.
And that index.
Giving you with you relatively speaking, but yes.
I hear you know.
The fact of the matter is is your points are really good one in that what we found is guys would use our T lift retractor and our screw system and then because.
Because we didn't have expandable technology, they would they would use somebody else's expandable device and so that those types of things get rectified immediately and those are the things that we're super excited about.
And.
As I noted in my commentary its really the first of many expandable devices and so.
We will have other expandable devices. This year that we're enthusiastic about walking through what we call the alpha or the verification cycle. The performance of the devices, but youll see youll see many more and one of the great.
<unk> of an expandable device is really the control.
Alignment or lordosis and so.
Again things that you don't care about but are hugely meaningful is when you put something in a device and you want to control. The spine you have to release the spine and one of the great things about PTP as you release the back of the spine in the front of the spine and it provides you the ability to really.
Be very.
Sophisticated with regard to how you drive.
Alignment and.
And so we think the relevance of the.
Expandable devices going to be significant based upon not only the fact that cash we have an expandable device, but we have techniques at ultimate accommodate maximizing their their meaning and so those are some of the things I think that we're most excited about.
And Jason I think youre spot on in terms of how that how about that.
That plays out in our financials.
The expandable interbody and biologics and being a tailwind to revenue per procedure because in the biologics case, especially as we're getting a lot of growth and in particular from our synthetic biologics that we recently launched.
We're getting more attach rate and ultimately those that are biologics attach rate is happening and procedures that we have had in the past and so we're seeing.
Another product category being added to an existing procedure run rate the same on an expandable and that may come through and the fact that is expandable has a higher ASP.
And so maybe it's replacing aesthetic cage that we get today or or in the case that Pat mentioned, maybe we're getting the expandable today, where we weren't in the past.
And so both of those are certainly revenue tailwind to the to the revenue per procedure.
And <unk>.
Additions to products per case.
And just really quick on LTP.
Can we assume first.
Obviously, it's too early to see how big this is going to be but in terms of adoption.
Even types of surgeons does it look like BGP or does it look different or how are you thinking about it.
Got it.
That's a good question.
It's one of those things, where it's like we've been so focused on.
It kind of verification that everything is functioning like it's supposed to.
We look at it at lateral as such.
Our growth center of our business.
We see this as really kind of a long walk.
What we're gonna do as is.
Yeah. It's interesting we have a lot of the degenerative elements built.
And ready to plug in and so my expectation is this is going to be a bit of a walk with regard to where they do degenerative cases as I said I think it's most applicable in L. Three to S. One.
Where somebody who wants to do a lift at five one.
And so that's why I think about such a degenerative tool, but theres also going to be as we continue.
Next year, we'll come out with a <unk> device and so youll start to see again expanding dollars and expanding.
Our complexity in our LTP portfolio, but I see it a bit like you said I think in terms of just the <unk>.
We'll work on the LTE front out of the gate and we're going to have some training courses with some luminaries in the field of of lateral surgery, and so that will I think create some.
Some momentum, but it's like it's like all of these things.
Take time to get the people around them and get the people trained and comfortable to to make for momentum, but you love doing it while you have momentum.
Very helpful and also congratulations on five years look forward to congratulate you on a $1 billion revenue, which I think comes before churn. So anyway. Thank you very much.
That will be the real celebration I didn't intend to speak about me as more excited just about the fact that yes.
Five years ago, we were at $83 million run rate of <unk> 84 for the year and now we're doing it quarterly and you're just loved the continued momentum.
Okay.
Well, thanks very much for us for your interest in APAC and very much appreciate the questions and look forward to talking to everybody next quarter. Thanks much.
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