Q4 2023 Alphatec Holdings Inc Earnings Call

Operator: Good afternoon, everyone, and welcome to the webcast of ATEC's fourth-quarter financial results. We would like to remind everyone that participants on the call will make forward-looking statements. These statements are based on current expectations and are subject to uncertainty that could cause actual results to differ materially. These uncertainties are detailed in documents filed regularly with the SBA.

Good afternoon, everyone and welcome to the webcast of apex fourth quarter financial results. He would like to remind everyone that participants on the call. We will make forward looking statements.

Statements are based on current expectations and are subject to uncertainties that could cause actual results to differ materially.

These uncertainties are detailed in documents filed regularly with the S E T.

Operator: During this call, you may hear the company refer to non-GAAP or adjusted. Reconciliations of these measures to U.S. GAAP can be found in the Supplemental Financial Tables included in today's press release, which identify and quantify all excluded items and provide management's view of why this information is useful to investors. Leading today's call will be Apex Chairman and CEO, Pat Miles, and CFO, Todd Colvin. Now, I will turn the call over to Patrick.

During this call you may hear the company refer to non-GAAP or adjusted measures.

Reconciliations of these measures to U S. GAAP can be found in the supplemental financial tables included in today's press release, which identify and quantify all excluded items and provide management's view of why this information is useful to investors.

Leading today's call will be apex, chairman and CEO, Pat miles and CFO Todd.

Now I will turn the call over to Pat miles. Please go ahead.

Patrick S. Miles: Thanks very much, Jesse. Welcome to the Q4 2023 financial results call. Clearly, there will be some forward-looking statements, but I would characterize 2023 as a very good year.

Thanks, very much desert race.

Welcome to the Q4 2023.

Actual results call.

Clearly there'll be some forward looking statements.

But I would characterize 2023 is a very good year.

Patrick S. Miles: A few of the highlights, much of which has been communicated. But revenue of $482 million, which was a 37% total revenue growth. 890 basis points of adjusted EBITDA expansion. 40% surgical revenue growth was a broad contribution, 31% surgical volume growth, verses 25% in 2022, which suggests acceleration, greater than 500 surgeons trained, and a lot of work really in three key areas, which is beginning with lateral. We launched LTP with the ALIF midline element.

A few of the highlights.

Much of which has been communicated.

But revenue of $482 million, which was a 37% total revenue growth.

890 basis points of adjusted EBITDA expansion.

40% surgical revenue growth.

It was a broad contribution 31% surgical volume growth versus 25 in 2022, which.

Suggest acceleration grid.

Greater than 500 surgeons trained and a lot of work really in three key areas, which is which is beginning with lateral.

We launched LTE with the <unk> midline element, we launched expandable in lateral from an informatic perspective, Eos has really expanded from a developmental perspective and look forward to talking a little bit about that.

Patrick S. Miles: We launched expandables in lateral. From an informatics perspective, EOS has really expanded from a developmental perspective, and I look forward to talking a little bit about that. We also acquired and navigated and enabled a robotic system from an informatics perspective, and for a capital raise, we raised $150 million. So I would say a very productive year.

We also.

Acquired a navigation enabled robotic system from an informatic perspective, and from a capital raise a raised $150 million. So I would say a very productive year.

Patrick S. Miles: To put it in context, we've gone from about 1% market share to probably a little north of 5, depending upon how you calculate it. Again, I think that the interesting elements are the growth rate of 40% over that period, from an annual growth rate perspective, a compound annual growth rate perspective, 17% new surge in CAGR, 24% procedural volume, people are doing work, and then revenue per cage cage or 12.

To put it in context, we've gone from.

About 1% market share to probably a little north of five depending upon how you calculate it again I think the interesting elements or the growth rate.

40% over that period from a from a.

The annual growth rate perspective, a compound annual growth rate perspective, 17% new surgeon CAGR.

24% procedural volume CAGR. So people are doing work with US and then our revenue per case CAGR of 12%.

Patrick S. Miles: I'll get into that as well because I think it's such a buy-in to our surgical thesis. Our priorities have not changed, and really, what we're committed to is earning share through clinical distinction. And it's interesting, we've been talking about this since 2018, but surgeons adopt technology when there's a reason to and when there's clinical distinction. We attract salespeople when there's clinical distinction, and so our enthusiasm for that continues. Our opportunity to really kind of initiate the company's resurrection, if you will, was around how do you create clinical distinction? And there's such expertise within lateral here. That's what we did.

Getting to that as well because I think it's such a buy in Q1, our surgical thesis.

Our priorities have not changed.

Really what we're committed to is earning share a few clinical distinction.

And it's it's it's.

It's interesting we've been talking about this in 2018, but.

Surgeons adopt technology, where there is a reason to clinical distinction we attract salespeople the nearest clinical distinction and so our enthusiasm for that continues.

Our opportunity to really kind of initiate the company's resurrection. If you will was around how do you create clinical distinction and theres such an expertise within lateral here. That's what we did and so we've gone from about 1% to about 12% share in lateral.

Patrick S. Miles: And so we've gone from about 1% to about 12% share in lateral. And the ability for us to continue to improve the utility and expand its application is very apparent. And so, we're doing that through really fulfilling the surgical requirements and addressing hurdles within the procedure itself. We're integrating SAFOP to avoid the complication that's most associated with lateral surgery, which really speaks to the whole automated SSEP element, which you don't even determine where the nerve is, but also its health. And then one of the other elements was when we created PTP; really, what we were able to do was obviate the need to approach from posteriorly with PLIF and TLIF.

And the ability for us to continue to improve the utility and expand its applications is very apparent.

We're doing that through really fulfilling the surgical requirements and addressing hurdles within the procedure itself, we're integrating save up to avoid the complication is most associated with lateral surgery, which really speaks to the whole.

<unk> automated the SSC Pete element, which you don't even you don't only determined where the nerve is good also withheld.

One of the other element was when we created the PTP really what we're able to do with Abbvie.

The need to.

To approach from posteriorly with Cliff appeal, it and so what the essence of that because it is a lateral franchise that addresses really a $3 billion market opportunity versus what was previously a $1 billion market opportunity.

Patrick S. Miles: And so what the essence of that becomes is a lateral franchise that addresses really a $3 billion market opportunity versus what was previously a $1 billion market opportunity. So we love that because one of the things that it does is it furthers confidence. So if we do lateral surgery extremely well, what we find is that we have access to a greater part of a surgeon's practice. We call that the halo effect.

We love that because one of the things that it does is it further confidence so we do lateral surgery extremely well what we find is that we have access to a greater part of the surgeon's practice, we called out the Halo effect and so if one of our salespeople to execute with a surgeon.

Patrick S. Miles: And so if one of our salespeople executes with a surgeon a lateral approach in either the prone or the lateral position, what happens is we often earn trust. And that trust ultimately expands the footprint of what type of surgery we do with that respective surgeon. We've continued to commit to approximately 8 to 10 products per year. This was a big year for us at 15.

Literally approach in either the prone or the lateral position. What happens is we often earn trust net trust ultimately expands the footprint of what type of surgery, we deal with that respective surging.

We've continued to commit to approximately 8% to 10 products per year. This was a big year for us at 15, and we always look for product launches to ultimately expand the influence of our procedures and if you look kind of across each of the areas from a lateral standpoint.

Patrick S. Miles: And, you know, we always look for product launches to ultimately expand the influence of our procedure. And if you look kind of across each of the areas, from a lateral standpoint, the expandables were a big one. The other thing that I love that we do is really establish a foundation for what's next. We launched some products in the lateral for thoracic. We will prepare for thoracic propectomy, as well as we launched an LTP positioner. We applied our learnings from what we knew in PTP and applied it to LTP, which is a lateral transplant. From an anterior perspective, access is hugely important to surgeons.

Expandable was a big one.

The other thing that I loved that we do is really we established a foundation for what's next we launched some products in lateral for thoracic we will.

Prepare for thoracic lobectomy as well as we launched an LTP position, we applied our learnings from what we knew in Ptv.

And Ah quieted to OTT, which is lateral transformers.

And answer your perspective access is hugely important to surgeons, we developed an access system for AOS and ultimately that's going to integrate with regard to the procedural vision of elsewhere to S. One with regard to <unk>.

Patrick S. Miles: We developed an access system for ALIF, and ultimately, that's going to integrate with regard to the procedural vision of L4 to S1 with regard to LTP. So, I'm super excited about that. From a posterior perspective, expandables were a big part of our launch profile this year, as well as some tools for stabilization in osteoporotic bones. That's important as it starts to lay the foundation for where we're going on the EOS front with regard to bone quality measures. From a cervical standpoint, there's been significant demand for our cervical portfolio. I would say that's reflective of the halo dynamic that we speak of, as well as SAFOP2 in our biologics portfolio. It's fun to see not only continue to launch a demineralized bone fiber product but also start to see the integration of our biologics within the context of our expandables. And so when you have an expandable device and you expand it, what you want to do is backfill it with a biologic. And to integrate these steps into a workflow that's elegant is part of our proceduralization view.

LTP, so super chat about that from a post your perspective expandable was a big part of our launch profile this year as well.

Well there is some some tools for.

Bert.

Stabilization in osteoporotic bone that's important as it starts to lay the foundation for where we're going on the iOS front with regard to bone quality measure from a surgical standpoint, there's been significant demand of our cervical portfolio I would say that's reflective of the halo dynamic that we speak of as well as save up to an hour.

<unk> portfolio, it's fun to see.

Not only.

Turning to launch a <unk> a day.

Mineralized bone fiber product, but also start to see the integration of our <unk>.

<unk> within the context of our expandable and so when you have an expandable device and you expand it what you want to do is backfill it with biologic and integrate these steps into a workflow. This elegant is part of our proceed utilization view.

And so when you start to think about how we.

Patrick S. Miles: And so when you start to think about how we, more surgeons. The surgeon adoption effort is really multi-faceted, and so we compel more surgeons because of the clinical distinction, and then we earn more of their cases based upon the confidence it creates with their experience.

Gardner.

More surgeons the surgeon adoption effort is really multi faceted and so we can tell more surgeons because of the clinical distinction.

And then we earn more of their cases based upon the confidence are created with their with their experience and then the more products category sold in each case is really in my mind that buy into the procedural architecture or the thesis that we put forth and so certain procedures. We're gonna have less products per procedure. Other surgeries are going to have more.

Patrick S. Miles: And then the more product categories sold in each case is really, in my mind, a buy-in to the procedural architecture or the thesis that we put forth. And so certain procedures are going to have fewer products per procedure; other surgeries are going to have more products per procedure. But we think it's a good proxy for what we're doing with regard to the whole proceduralization effort. Distinction doesn't only compel adoption by the surgeon, but it also attracts salespeople. And so we think that it's continually important to further our distinction. And so improving our distribution network is going to be a constant priority. You will continue to see us do that.

Price per procedure, but we think it's a good proxy for what we're doing with regard to the whole procedure utilization effort.

So distinction doesn't only compel adoption by the shortage, but it also attract salespeople and so we think that it's continually continually important new to.

Further our distinction.

And so elevating our distribution network is going to be a constant priority will continue to see us.

Do that as we said earlier, we've gone to an approximate 5% market share.

Patrick S. Miles: As we said earlier, we earned an approximate 5% market share. The inspiring thing for us is that in places where we've had distribution in a place that has a number of people within their distributor network, there are places that we have 25% market share. And that just speaks to the application of our portfolio to an expanded utility, as well as the competence of the people in that respective area. We've really never been more enthusiastic with regard to the status of the marketplace in general. We internally characterize it as 35% disrupted and 60% apathetic.

The inspiring thing for US is that in places, where we've had distribution in a place that has a.

A number of people within their distributor network Theres places that we are 25% market share and that just speaks to the application of our portfolio into an expanded utility as well as the competence of the people in that respect the area.

We really never been more enthusiastic with regard to the status of the marketplace in general.

We internally characterize it as 35% disrupted and 60% episodic.

Patrick S. Miles: And I don't know if there's a better place to be when you are sprinting to move the field than a market that's disrupted and apathetic. And so one thing that would suggest that there are good things happening would be that we have a 36% same-store sales dynamic. And that means that there is a growth rate that clearly far exceeds anybody else from a same-store perspective. And so when people come here, their ability to build a big business is significant. And so the beauty is that we are attracting people who want to play along, those committed to moving the field. Surely not that anyone's interested in a single-year experience or a single-year guarantee.

I don't know if there's a better place to be when you are sprinting at moving a field than a market this disruptive and episodic and so.

I Wonder would suggest that there is good things happen what would be the 30, we have a 36% same store sales dynamic and that means that there's a growth rate.

Clearly far exceeds anybody else from a same store perspective, and so when people come here their ability to build a big business is significant so the beauty is we're attracting people who want to play along.

Those committed to moving the feel surely not the ones you're interested in a single year experience or a single year guarantee we're in this for the long haul and I think can't be more excited about what we're building.

Patrick S. Miles: We're in this for the long haul, and I can't be more excited about what we're building. When you start to think about our place in the market and our portfolio as we speak, if we wanted to build a good company, we would have stopped right here, and we would have built a lateral franchise and, candidly, could have been done. It's really what we did at the last... Our aspirations are much greater, and we genuinely want to revolutionize the approach to spine surgery, which we've committed to. So, you know, much like we built the first part of the company around the informatic element of SAFOP and performed better lateral surgery, we're doing the same here with regard to deformity. And so, started off building it with the people, clearly it's always about the people, acquired SAFOP, built a lateral franchise, and I think you're seeing the same thing happen again with regard to EOS. And so you couldn't be more excited about that.

When you start to think about our our place in the market and our portfolio as we speak if we wanted to build a good company, we would've stopped right here and we have built a lateral franchising and candidly could've been done it's really what we did at the last company. Our aspirations are much greater and we genuinely want to revolutionize the approach.

Spine surgery, which we've which we've committed to.

Much like we built the first part of the company around the informatic element of safe up and performing better well lateral surgery. We're doing the same here with regard to deformity. So started out building it with the people clearly it's always about the people acquired say Bob build a lateral franchise and I think.

We're seeing the same thing happened again with regard to iOS. So it can't be more excited about that so the value of our informatics studies.

Patrick S. Miles: And so the value of our information set is that it creates an ecosystem. What we've seen is that we have seen silos of information, and I think they're less valuable than when you have the opportunity to combine elements, and it is proceduralization not only mechanically but electronically, it's really proceduralization on steroids, the ability to assemble these goods to ultimately improve not only the interoperative element but the predictive nature of what we're trying to do from an improvement in spine care perspective. Several years ago, I said that the spine business needs A-TECH, and I have never believed it more. And I think that you could look here, and if you think the science is settled when you have a 10 to 15 percent revision rate within one to three years in short-segment surgery and 25 to 30 in two to five years in deformity surgery, I think you're kidding yourself. And so, I love being in an area where clearly spine science isn't settled.

Is that it creates an ecosystem.

What we've seen is we've seen silos of information of information I think there are less valuable than when you have the opportunity to combine elements and it is the procedure elevation.

Not only mechanically but informatics.

It's really.

Procedure realization on steroids, the ability to assemble these goods to hopefully improve not only the inner operative element, but the predictive nature of what we're trying to do from a.

Improvement of spine care perspective.

Several years ago, I said that the spine business needs <unk> and I have never believed it more I think that you could look here.

Do you think the science is settled when you have a 10% to 15% revision rate within one to three years in short segment surgery and 25 to 30 in two to five years in in deformity surgery, I think you're kidding yourself and so.

Well being is an area, where we're clearly the spine science isn't settled.

Patrick S. Miles: And I think there's a very clear requirement for spine to have an objective informatic ecosystem. And I think an interesting place to look, really, is at what we're doing here with regard to EOS. And if you look at the box in the lower left-hand corner, that's what most surgeons see. They see a very focal view.

I think there's a very clear requirements.

Responding to have an objective informatics ecosystem.

And I think it is an interesting place to look really is is that what we're doing here with regard to <unk> and.

And if you look at the box in the lower left hand corner, that's what most surgeons see they see a very focal view and I think when you. When you pull out you start to see a more global view you can see how a limited view really starts to mislead surging and so.

Patrick S. Miles: And I think when you pull out, you start to see a more global view. You can see how a limited view really starts to mislead the surgeon. And so one of the beauties of the EOS Insight is that it's going to provide you with automation, where at this point, alignment is measured by hand calculation, which is hugely time-consuming, and it requires software that's, candidly, not very friendly from a workflow

One of the beauties of the of the.

Insight is that it is.

Provide you automd.

Automation, where at this point, it's alignment measured by by hand calculation, which is hugely time time consuming and it.

Requires software it is candidly not very friendly from a workflow perspective, and so when you start to think about spine surgery is being decompression stabilization and alignment.

Patrick S. Miles: And so when you start to think about spine surgery as being decompression, stabilization, and alignment, and alignment is the greatest correlate to a long-term, successful, durable outcome, and you look back at what the revision rates are with regard to spine surgery, you start to say, gosh, there's a heck of an opportunity to bring objective information into the environment. And so, if science needs to become more settled, then it needs to become more settled with data. And there's not a better source of data than the tool that informs pre-, intra-, and post-op care that's completely aligned with surgical goals. Back to the surgical goals of decompression and stabilization alignment, you'll love that you have a tool that ultimately informs through automated alignment reports, automated surgical planning, pre-bent rods, interoperative alignment reconciliation, and assessment and follow-up. So, it is the data that will provide a pre-, intra-, and post-informatics that will ultimately just provide a richer ecosystem of information. It is...

<unk> is the greatest correlate it to a long term successful durable outcome and you look back at what the revision rates are with regard to <unk> you start to say gosh, there's a heck of an opportunity to bring objective information into an environment and so if it is a science needs to become more settled than it needs to become more.

Settled with data and there's not a better source of data then the tool that informs pre and post up.

This is completely aligned with surgical goals back to the surgical Kohl's a decompression stabilization alignment you'll love that you have a tool that ultimately informs to automate alignment reports automated surgical planning pre.

<unk> rubbed interoperable alignment reconciliation and assessment and follow up so it is that the data that will provide a pre and post informatics hopefully.

Just provide a richer ecosystem.

Of information it is.

Patrick S. Miles: It is very, very straightforward, I think, to be inspired by how it's going to influence deformity, and data and informatics will inform better surgery. Clearly, our opportunity in deformity is apparent. And so in this image, representative of an idiopathic deformity, you can see the value that understanding the rotational deformity has with the assembly of the procedure, with the assembly of a neurological understanding of what's going on, where it's the assembly of the parts that ultimately plays a role.

It is very very straightforward I think to be in.

Inspired by how it is going to influence deformity.

<unk>.

Data and informatics informs better surgery, clearly our opportunity in deformity is apparent and so in the in the image.

Irrespective of.

Okay.

Idiopathic deformity, you could see the value that understanding the rotational deformity has with the assembly of the procedure with the assembly of a understanding of neurological whats going on where it gets the assembly of the parts that ultimately plays a role and so the opportunity within deformity is very clear and I think it reflects.

Patrick S. Miles: And so the opportunity within deformity is very clear, and I think it's reflective of the type of demand that ultimately was demonstrated here a few weeks ago at our first annual deformity summit. We had 30 plus deformity thought leaders across the field join us in Carlsbad for the first one, and could not be more excited about the understanding and appreciation of the tools that ultimately will reflect the sophistication within the field. And so when you start to think about really a unique dynamic that sits in a 5% market shareholder's bag, there's an ecosystem that informs not only the preoperative element in terms of who to operate on and why, but also the intraoperative element, which enables a procedural understanding of not only informatic needs, but also the mechanical needs in a workflow that ultimately begets predictability, and then inform that again with regard to the post Clearly, there's momentum, but the beauty is what's in front of us. So we will continue to expand our lateral sophistication with regard to new products and a broader and deeper sales footprint. We're literally just starting off in international markets, had a decent year in Australia and New Zealand, and are about to get into Japan.

<unk> of the type of demand that ultimately was demonstrated here a few weeks ago at our first annual deformity summit, we had 30 plus.

Before we thought leaders across the field join us in Carlsbad for the first one.

Could not be more excited about the understanding and appreciation of the tools that ultimately will reflect the sophistication in the field and so when you start to think about.

Really a unique dynamic that sits in a in a 5% market share holders bag is an ecosystem that informs not only the preoperative element in terms of who the operate on an and wide, but also the intra operative element, which in which enables a procedural understanding of not only inform.

That it needs, but also the mechanical leads.

Workflow that ultimately to get predictability and then informed that again with regard to the Costar information that.

That's.

Comes from the exact same image that was taken for the pre op and the plan. So.

Great year.

In 2023, clearly there is momentum.

But the beauty is is what's in front of us and so we will continue to expand our lateral sophistication with regard to new products and broader and deeper sales footprint. We're literally just I think.

Starting off in international had a decent year.

In Australia, and New Zealand and about to get into Japan.

Patrick S. Miles: More hospitals are providing us access based upon our clinical distinction. We love, love, love the market dynamics of disruption and apathy. The integration of a more sophisticated, integrated navigation robotic element into what we're doing laterally, the whole navigation robotics plus neurophysiology in real time providing information, informational feedback. We love that.

More hospitals are providing us access based upon our clinical distinction, we love Love Love the market dynamics of disruption and apathy.

The integration of our more sophisticated integrated it.

Navigation robotic element into what we're doing laterally the whole navigation robotics, plus neurophysiology in real time, providing information informational feedback we love that.

Todd Colvin: And we're just getting going on the EOS front with regard to the EOS Insight, so I would tell you that there is a lot of momentum, and there is more to come. And so with that, I'll turn it over to Tom.

And we're just getting going on the yield front with regard to the.

<unk> insight so I would tell you that there was a there's a lot of momentum and there's more to come and so with that I'll turn it over to Tom well. Thank you Pat and good afternoon, everyone. We appreciate you joining us on the call today I'll.

Todd Colvin: We appreciate you joining us on the call today. I'll begin with revenue. Fourth quarter total revenue was $138 million, reflecting 30% growth compared to the prior year and 17% increase compared to the prior quarter.

I'll begin with revenue fourth quarter total revenue was $138 million.

<unk>, 30% growth compared to the prior year, a 17% increase compared to the prior quarter and $138 million in revenue is comprised of $123 million and surgical revenue and $115 million.

Todd Colvin: The $138 million in revenue is comprised of $123 million in surgical revenue and $15 million of EOS revenue. For the quarter, surgical revenue of $123 million increased 34% against a tough 49% previous year comparison, with strong contribution from our entire portfolio. Underlying that surgical revenue growth was robust procedural volume, which grew 29% this quarter. That is an acceleration compared to the third quarter procedural volume growth of 24%. Growth reflects both a solid increase in the number of surgeons adopting APEC procedures and an increase in surgeon utilization. Average revenue per case grew 4% year-over-year, driven by an increased mix of lateral surgeries, an expanding biologics attach rate, and greater case complexity. Increasing the mix of cervical surgeries is offsetting those tail limbs to some degree.

<unk> revenue.

Surgical revenue of $123 million increased 34% against a tough 9% previous year comparison with strong contribution from our entire portfolio.

Your line that surgical revenue growth was robust procedure volumes, which grew 29%. This quarter that is an acceleration compared to the third quarter procedural volume growth of 44%.

Growth reflects both a solid increase in the number of surgeons adopting defect procedures and an increase in surgeon utilization average revenue per case grew 4% year over year, driven by increased mix of lateral surgeries and expanding biologics attach rates and greater case complexity, increasing mix of cervical surgeries is offset.

Those tailwind to some degree.

Todd Colvin: And EOS revenue in the fourth quarter was $15 million, up 5% compared to last year. Turning to results for the full year 2023, total revenue was $482 million, reflecting 37% growth compared to 2022. That was comprised of $423 million in surgical revenue and $59 million in EOS revenue. For the full year, surgical revenue grew 40% compared to the prior year, with absolute dollar growth of $120 million. Procedural volume grew 31% year-over-year, which is higher compared to the 25% volume growth in 2022.

And you have less revenue in the fourth quarter was $15 million up 5% compared to last year.

Turning to results for the full year 2023, total revenue was $482 million, reflecting 37% growth compared to 2022 that was comprised of $423 million in surgical revenue and $59 million of iOS revenue full year surgical revenue grew 40%.

Compared to the prior year absolute dollar growth of $120 million.

Procedural volume grew 31% year over year, which accelerated compared to the 25% volume growth in 2022.

Todd Colvin: Volume growth in 2023 was underpinned by a 27% increase in surge in users. Average revenue per case grew 7% driven by an increased mix of lateral surgeries and an expanding biologics attach rate and greater case complexity. The increasing mix of cervical surgeries is offsetting those tailwinds to some degree. EOS revenue of $59 million grew 24% over full year 2022 on continued strong interest in the technology. A geographical makeshift towards the US is also benefiting EOS ASPs.

Volume growth in 2023 was underpinned by a 27% increase in surgeon users average revenue per case grew 7% driven by increased mix of lateral surgery, and expanding biologics attach rate and greater case complexity.

The increasing mix of cervical surgeries is offsetting those tailwind to some degree.

$59 million grew 24% over full year 2022, and continued strong interest in the technology, a geographical mix shift towards the U S is also benefiting Ddos asps.

Todd Colvin: Now, before I work through the remainder of the P&L, I'll spend a moment on the updated definition of non-GAAP that we have adopted. For those of you that have followed the A-TECH transformation since its inception, you know that the creation of Clinical Distinction was our number one commitment, a priority that catalyzed the complete overhaul of the product portfolio. That overhaul generated material but non-cash excess and obsolete inventory charges, or E&O, as the legacy product portfolio was obviated and discontinued.

Now before I work through the remainder of the P&L I'll spend a moment on the updated definition of non-GAAP that we have adopted for.

For those of you that have followed the E Tech transformation.

Since its inception, you know that the creation of clinical distinction was our number one commitment a priority of that catalyzed a complete overhaul of the product portfolio that overhaul generated material, but noncash excess and obsolete inventory charges or as legacy product portfolio.

<unk> and discontinued.

Todd Colvin: To help investors assess the core performance of our business throughout that process, we determined it was appropriate to exclude E&O charges from our calculation of non-GAAP cost of goods sold. Thankfully, that transition is largely behind us. Now the E&O charges we are taking are a recurring aspect of our current business operation. As a result, the non-GAAP financial results and guidance for 2024 that we shared today include the non-cash charge as part of the calculation for cost of goods sold and adjusted EBITDA. You can see from this reconciliation that the inclusion of E&O and cost of goods sold impacts reported gross profit, and thus adjusted EBITDA, by about $4 million in the fourth quarter of 2023. Fourth quarter adjusted EBITDA under the previous non-GAAP definition would have been $6 million, a drop through on incremental revenue dollars of 28%, and strong performance compared to the $5 million expectation implied by previous guidance. With respect to the full year, the inclusion of E&O and cost of goods sold impacts gross profit and adjusted EBITDA by about $14 million.

Help investors assess the core performance of our business throughout that process. We determined it was appropriate to exclude charges from our calculation of non-GAAP cost of goods sold.

That transition is largely behind US now the charges, we are taking a recurring aspect of our current business operations. As a result, the non-GAAP financial results and guidance for 2024 that we share today include a noncash charge as part of the calculation for cost of goods sold and adjusted.

EBITDA.

You can see from this reconciliation that the inclusion of <unk> and cost of goods sold impacts reported gross profit and thus adjusted EBITDA by about $4 million in the fourth quarter 2023.

Fourth quarter adjusted EBITDA under the previous non-GAAP definition would have been $6 million drop through on incremental revenue dollars or 48% and strong performance compared to the $5 million expectations implied by previous guidance with respect to the full year, the inclusion of <unk> and cost of goods sold.

<unk> gross profit and adjusted EBITDA by about $14 million.

Todd Colvin: Full year 2023 adjusted EBITDA under the previous non-GAAP definition would have been $4 million, reflecting a drop through of 25% on incremental revenue dollars and ahead of the $3 million that we guided to last quarter. I'd like to first emphasize that, first and foremost, this updated definition of non-GAAP does not have a material impact on either the degree of margin expansion reported in 2023 or on the degree of expansion that we expect going forward. Under both the prior definition and the updated definition, 2023 Adjusted DBDA expanded 890 basis points year over year. Second, E&O inventory expense is a non-cash item and has zero impact on our commitment to achieve cash flow breakeven in 2025. We've shared a reconciliation of the updated definition with previously reported periods in the appendix of this deck and in a supplementary financial file. Both documents are accessible from our IR website.

Full year 2023, adjusted EBITDA under the previous non-GAAP definition would have been $4 million.

Reflecting drop through of 25% on incremental revenue dollars and ahead of the $3 million that we guided to last quarter.

I'd like to first emphasize that one this updated definition of non-GAAP does not have a material impact on either the degree of margin expansion reported in 2023 or on the degree of expansion that we expect going forward under both the prior definition and the updated definition only 23 adjusted EBITDA expanded.

890 basis points year over year second inventory.

Expense is a noncash item and has zero impact on our commitment to achieve cash flow breakeven in 2025.

We've shared a reconciliation of the updated definition on previously reported periods in the appendix of the stack and our supplementary financial file both documents are accessible from our IR website.

Todd Colvin: Now, I'll turn to the results for the remainder of the P&L, which incorporates the updated non-GAAP definition I just shared. For the fourth quarter, non-GAAP gross margin was 70%, up 310 basis points compared to the prior year. The year-over-year increase was primarily driven by improved EOS gross margin, which is benefiting from execution as we improve service operations and for pricing initiatives. Additionally, surgical revenue mix and operations efficiencies drove margin improvement in the quarter. Fourth quarter non-GAAP R&D was $13 million and approximately 10% of sales, compared to $11 million and 10% of sales in the prior year. The increase on an absolute dollar basis was driven by continued investment in organic innovation and investment-related devalence, the robotic navigation platform that we acquired in 2023. Non-GAAP SG&A was $93 million and approximately 68% of sales in the fourth quarter, compared to $74 million and 70% of sales in the prior year period.

Now I'll turn to the results for the remainder of the P&L, which incorporate the updated non-GAAP definition I just shared fourth quarter non-GAAP gross margin was 70% up 310 basis points compared to the prior year. The year over year increase was primarily driven by improved gross margin, which is benefiting from the execution.

As we improve service operations and from pricing initiatives. Additionally, surgical revenue mix and operational efficiencies drove margin improvement in the quarter.

Fourth quarter, non-GAAP, R&D was $13 million and approximately 10% of sales compared to $11 million or 10% of sales in the prior year. The increase on an absolute dollar basis was driven by continued investment in organic innovation and investments related to valence and robotics navigation platform that we acquired in 2023.

non-GAAP SG&A was $93 million of approximately 68% of sales in the fourth quarter compared to $74 million and 70% of sales in the prior year period, we delivered 230 basis points of net improvement even after investing in both the U S and the international sales channels in line with the last several quarters left.

Todd Colvin: We delivered 230 basis points of net improvement, even after investing in both the US and international sales channels. In line with the last several quarters, leverage is being driven by the expected contributors, infrastructure leverage, and variable rate improvement. Total non-GAAP operating expenses amounted to $107 million and approximately 77% of revenue for a quarter compared to $85 million and 80% of sales in the prior year period, demonstrating 270 basis points of operating leverage year over year.

<unk> is being driven by the expected contributors infrastructure leverage and variable rate improvements.

Total non-GAAP operating expenses amounted to $107 million and approximately 77% fourth quarter compared to $85 million at 80% of sales in the prior year period, demonstrating 270 basis points of operating leverage year over year.

Todd Colvin: Just Addibita was $2 million and approximately 1% of sales in the fourth quarter compared to a $6 million loss that represented 5% of sales in the prior year, a 650 basis point improvement as a percent of sales. The consistent Adjust Addibita margin expansion that we are driving underscores our confidence in achieving the long-term profitability goals we've committed to. Turning to full year 2023 results, non-GAAP gross margin was 70%, up 220 basis points compared to the prior year. Non-GAAP R&D for the full year was $51 million and approximately 11% of sales, compared to $39 million and an improvement of 40 basis points compared to the prior year. 2023 non-GAAP SG&A was $335 million and approximately 70%- compared to $267 million and an improvement of 660 basis points compared to the prior year. Total non-GAAP operating expenses for the full year amounted to $387 million and approximately 80% of sales compared to $306 million and an improvement of 700 basis points compared to the prior year period.

Adjusted EBITDA was $2 million and approximately 1% of sales in the fourth quarter compared to a $6 million loss that represented 5% of sales in the <unk>.

Ah.

650 basis point improvement as a percent of sales a consistent adjusted EBITDA margin expansion that we're driving underscores our confidence in achieving the long term profitability goals, we've committed to.

Turning to full year 2023 results non-GAAP gross margin was 70% up 220 basis points compared to the prior year non-GAAP R&D for the full year was $51 million and approximately 11% of sales compared to $39 million.

And an improvement of 40 basis points compared to the prior year.

23, non-GAAP SG&A was $335 million and approximately 70% of sales compared to $267 million, an improvement of 660 basis points compared to the prior years.

Total non-GAAP operating expenses for the full year amounted to $387 million and approximately 80% of sales compared to $306 million, an improvement of 700 basis points compared to the prior year period.

Todd Colvin: 2023 adjusted EBITDA was a loss of $9 million and approximately 2% of sales, an improvement of $29 million and 890 basis points compared to full year 2022. The magnitude of drop through, or the contribution of incremental revenue dollars to adjusted EBITDA, was 22% for the full year and 26% in the second half of 2020. We demonstrated an ability to grow the top line and significantly expand profitability margins while also investing in the future growth of the business. For example, investments in Valence and International combined comprise almost 110 basis points of Adjusted Depot for the full year 2023. These investments will drive growth and profitability in the business beyond 2024. Turning to the balance sheet, we ended the fourth quarter with $221 million in cash, and year-end debt at carrying value was $527 million.

2023, adjusted EBITDA was a loss of $9 million and approximately 2% of sales an improvement of $29 million and 890 basis points compared to full year 2020 to the magnitude of drop through or the contribution of incremental revenue dollars to adjusted EBITDA was 22% for the full year and 26% in the second half.

2023.

We've demonstrated an ability to grow the topline and significantly expand profitability margins. While also investing in the future growth of the business for example investments in <unk> and international combined comprised almost 110 basis points of adjusted EBITDA for the full year 2023, These investments will drive growth and profitability in the business.

Beyond 2024.

Turning to the balance sheet. We ended the fourth quarter was $221 million in cash and yearend debt carrying value was $527 million.

Todd Colvin: Pre-cash use totaled $51 million, with $35 million of that invested in the inventory and instruments that support our growing distribution footprint and new product launches. As you can see on the chart at the bottom of this slide, adjusted EBITDA improvements are benefiting operating cash... Cash use for revenue-generating assets stepped up in the fourth quarter as we invested in instruments and inventory to enable recent sales recruitment wins to serve surgery. As we communicated previously, our recent raise will fund the revenue-generating assets required for the teams we have already onboarded and those that we will onboard in the future. And that investment has an attractive ROI of about three times over the course of five years. In 2024, we will continue to put that capital to work. We're expecting to use approximately $100 million of cash for the full year.

Free cash use totaled $51 million for $35 million of that invested in the inventory and instruments that support our growing distribution footprint and new product launches as you can see on the chart at the bottom of the slide adjusted EBITDA improvements are benefiting operating cash use cash.

Cash used for revenue generating assets stepped up in the fourth quarter as we invested in instruments and inventory to enable recent sales recruitment wins to serve surgeries as we communicated previously our recent raise will fund the revenue generating assets required for the teams we have already on boarded and those that we will onboard in the future.

That investment has an attractive ROI of about three times over the course of five years.

In 2024, we will continue to put that capital to work expecting to use approximately $100 million of cash for the full year.

Todd Colvin: We anticipate cash use to be front-end loaded, with the magnitude of investment in Q1 stepping up relative to Q4 2023, in Q2, stepping down relative to Q1, and the second half of the year progressing toward breakeven. Turning to our outlook for the full year 2024, consistent with our January pre-release, we expect continued portfolio-wide momentum to drive full year 2024 total revenue growth of 23% to approximate $595 million. That includes 2023 surgical revenue growth and 2024 Surgical Revenue Growth of approximately $25 per, $530 million, and EOS revenue of approximately $65 million. Note that EOS revenue in 2023 benefited from purchases related to our decision to exit non-strategic geographies, creating a tougher growth comparison to 2024. However, as sales growth powers leverage across our business, we expect to achieve continued solid profitability progress. We expect full year 2024 adjusted EBITDA of approximately $22 million, inclusive of a $18 million E&O inventory. Using the prior definition of non-GAAP, 2024 adjusted EBITDA guidance would have approximated $40 million.

We anticipate cash used to be front end loaded with the magnitude of investment in Q1 stepping up relative to the Q4 2023.

In Q2 stepping down relative to Q1 in the second half of the year progressing towards breakeven.

Turning to our outlook for the full year 2024, consistent with our January pre release, we expect continued portfolio wide momentum to drive full year 2020 for total revenue growth of 23% to approximate $595 million that includes 2023 surgical revenue growth.

Excuse me 2024 surgical revenue growth of approximately 25%.

$530 million and Ddos revenue of approximately $65 million note that revenue in 2023 benefited from purchases related to our decision to exit nonstrategic geographies, creating a tougher growth comparison to 2024.

As sales growth powers leverage across our business, we expect to achieve continued solid profitability progress. We expect full year 2024, adjusted EBITDA of approximately $22 million includes.

Inclusive of $18 million inventory efficient using the prior definitions definition of non-GAAP 2024, adjusted EBITDA guidance would have approximated $40 million we.

We expect to deliver 560 basis points of adjusted EBITDA margin expansion progress on top of the 890 basis points of progress delivered in 2023 that positions us well to achieve our long term profitability and free cash flow commitments.

The next few slides provide additional context for 2024 guidance I'll start with how our expectations for procedural volume and average revenue per surgery growth shape surgical revenue guidance the.

Todd Colvin: We expect to deliver 560 basis points of adjusted EBITDA margin expansion progress on top of the 890 basis points of progress delivered in 2023. That positions us well to achieve our long-term profitability and free cash flow commitment. The next few slides provide additional context for 2024 guidance. I'll start with how our expectations for procedural volume and average revenue per surgery growth shape surgical revenue guidance. The clinical distinction we have created has driven a robust rate of surge in adoption and utilization. User growth has consistently been strong, growing 27% in 2023.

The clinical distinction we have created has driven a robust rate of surgeon adoption and utilization surgeon user growth has consistently been strong growing 27% in 2023.

Another possibly less depreciated, yet consistent and sustainable aspect of volume growth to surgeon utilization.

Top Middle chart is a testament to the consistent ramp in utilization that our surgeon cohorts demonstrate each year, our procedures build surgeon confidence, which inspires loyalty and empower surgeons to work up the procedural complexity curve, both of which increased utilization.

Each new surgeon relationship that we established typically unlocks a multi year utilization growth opportunity. We expect these dynamics to few of about 20% procedure volume growth for the full year 2024.

Todd Colvin: Another possibly less appreciated yet consistent and sustainable aspect of volume growth is surgeon utilization. The top middle chart is a testament to the consistent ramp in utilization that our surgeon cohorts demonstrate each year. Our procedures build surgeon confidence, which inspires loyalty and empowers surgeons to work up the procedural complexity curve, both of which increase utilization. Each new physician relationship that we establish typically unlocks a multi-year utilization growth opportunity. We expect these dynamics to fuel about 20% procedure volume growth for the full year 2024. Average revenue per surgery grows as we makeshift towards procedures that require more products for surgery, like ETP and LTP, and towards surgeries with greater complexity, all of which feature higher revenue per procedure than our overall average. The increase in procedural complexity and increasing biological test rate are also listed.

Average revenue per surgery grows as our mix shift towards procedures that require more products per surgery, DTP and LTV and toward surgeries with greater complexity, all of which feature higher revenue per procedure and our overall average the increase in procedural complexity and increasing biologics Patriot are also tailwind.

Revenue growth at recent cervical innovation is delivering as a slight headwind to average revenue per case at cervical cases feature a lower than average ASP.

We expect these dynamics to drive mid single digit percent growth and average revenue per case for the full year 2024, now turning to our expectations for the adjusted EBITDA guidance for adjusted EBITDA of $22 million for the full year 2024 implies 560 basis points of improvement and approximately 28% drop through on.

The year over year growth in revenue compared to 26% drop through in the second half of 2003 with <unk>.

Three a progress that we have delivered and the drivers of expected leverage contributing as plan give us great confidence in continued operating profitability improvement, we expect to components delivering leverage to continue to be consistent with what we described in our long range plan that we gave in may of 2022.

Todd Colvin: The revenue growth that recent cervical innovation is delivering is a slight headwind to average revenue per case, as cervical cases feature a lower than average ASP. We expect these dynamics to drive mid-single-digit percent growth in average revenue per case for the full year 2024. Now, turning to our expectations for the adjusted EBITDA guidance. Adjusted EBITDA of $22 million for the full year 2024 implies 560 basis points of improvement and approximately 28% drop-through on the year-over-year growth in revenue dollars compared to 26% drop-through in the second half of 2023.

2023 was a remarkable year, our financial reflection of execution.

In March our inflection to profitability that presented us with an unprecedented competitive opportunity one that we seized equipping our balance sheet with cash to invest in the high return revenue generating assets that will fuel growth in the years to come the profitability progress, we have and will continue to mix along with a well funded balance sheet.

<unk> us to progress towards cash flow breakeven in 2025 and self funded growth thereafter.

The sector, leading growth that we're driving as dovetailing with the delivery of significant operating leverage there is no accident, we committed to a financial plan and we are executing to that plan and in doing so we have set the stage for continued value creation.

Todd Colvin: The degree of progress that we have delivered and the drivers of expected leverage contributing as planned gives us great confidence in continued operating profitability improvement. We expect the components delivering leverage to continue to be consistent with what we described in a long-range plan that we gave in May of 2022. 2023 was a remarkable year, a financial reflection of, It marked our inflection to profitability. It presented us with an unprecedented competitive opportunity, one that we seized, equipping our balance sheet with cash to invest in the high-return, revenue-generating assets that will fuel growth in the years to come.

This one scrappy, David and glass style spying story continues to shift into a very different kind of story one of profitable sustainable long term growth our best is truly at the covenant.

And Thats, a great segue to remind you of our long range plan to update on March 19th in New York City.

Available feature additional detail about our plans for profitable growth, adding two years to the long range plan that exists today.

If you plan to join US in person. Please RSVP through our IR website and for those that can't physically attend the event will also be webcast. We hope to see you there with that I will turn the call back to Pat.

Thanks, so much Chad.

I will tell you that what brings this year is our spine focused momentum I can't be more deliberate with regard to the value of being focused and aligned with a customer base on a jewelry.

Todd Colvin: The profitability progress we have and will continue to make, along with a well-funded balance sheet, positions us to progress toward cash flow breakeven in 2025 and self-funded growth thereafter. That the sector-leading growth that we are driving is dovetailing with the delivery of significant operating leverage is no accident. We committed to a financial plan, and we are executing on that plan.

The shipping segment.

What's the PD market and so that brings about 40% revenue growth it brings about.

That's a huge opportunity, Florida was a disrupted market.

It brings about growth that is profitable from a sales perspective.

Todd Colvin: And in doing so, we have set the stage for continued value creation. This once crappy, David and Glias-style spine story continues to shift into a very different kind of story, one of profitable, sustainable, long-term growth. Our best is truly yet.

And a lot of momentum driven by.

The things that I spoke to previously so anyway Super excited about 2023 celebrated the big year with our National sales meeting as of late and I think we go into the.

2024 with significant momentum.

With that we will take questions.

We will now open the floor up for questions.

Todd Colvin: And that's a great segue to remind you of our long-range plan update on March 19th in New York City. The event will feature additional detail about our plans for profitable growth, adding two years onto the long-range plan that exists today. If you plan to join us in person, please RSVP through our IR website, and for those that can't physically attend, the event will also be webcast.

Accommodate everyone on the call today, please limit yourselves to one question.

The first question comes from the line of Matthew O'brien with Piper Sandler Your line is open.

Hi, This is Phil on for Matt Thanks for taking our questions and congrats on the excellent quarter. I was just curious if you could provide an update on the rep hiring cadence you've seen.

Patrick S. Miles: We hope to see you there. With that, I will turn the call back to Pat. Thanks much, Todd.

I'll stop there I guess Q3, how much disruption is still out there and you've talked about being under <unk>.

Patrick S. Miles: I will tell you that what brought us here is our spine-focused momentum. I couldn't be more deliberate with regard to the value of being focused on and aligned with a customer base in a very specific segment of the orthopedic market. And so that brings about 40% revenue growth. It brings about a huge opportunity forward with a disrupted market. It brings about growth that is profitable from a sales perspective and a lot of momentum driven by the things that I spoke about previously. Anyway, I'm super excited about that.

Index in certain U S geographies in the past any update on that front.

From from these ads.

I would say 94% of the market is still disrupted.

Just kidding, we're almost 6%.

Yes.

These things take a long time to play out and.

And I would say that the approach that we're taking is one of methodical nature and so we have areas of great need we have areas of adjacent need and and so what we're trying to do is identify where we're going to get the most expedient influence.

Patrick S. Miles: 2023 celebrated a big year with our national sales meeting as of late, and I think we go into 2024 with significant momentum. With that, we will take questions. To accommodate everyone on the call today, please limit yourself to one question. The first question comes from the line of Matthew O'Brien with Piper Sandler. Hey, this is Phil for Matt.

That we can with the best people that we can.

This is going to play itself out over a three to five year period I love those.

It's a 12 month phenomenon, it's not it will be rewarded by those who play long and so the great part is it is.

There is plenty to do our portfolio becomes richer and richer with regard to its distinction.

And I just can't be more enthusiastic with regard to improving portfolio with a probably a best in class Commission rates.

Patrick S. Miles: Thanks for taking our questions and congrats on the excellent quarter. I was just curious if you could provide an update on the rep hiring cadence you've seen since your last update, I guess Q3. How much disruption is still out there? And you've talked about being, you know, under-indexed in certain U.S. geographies in the past. Any update on that front? I would say 94% of the market is still disrupted. I'm just kidding; we're almost 6%.

Yes.

Yes.

Better reflects reflects all of that stuff thats going on phosphates.

That's helpful and I guess just.

On that same storyline with with respect to guidance is there any guardrails around cadence through the year as these were up higher than the recent rep hires ramp.

Youre going to continue to hire this quarter as well do you expect it to ramp fairly uniformly through the year or is there going to be a bigger jump in the back half.

Patrick S. Miles: These things take a long time to play out, and I would say that the approach that we're taking is one of methodical nature. And so we have areas of great need; we have areas of adjacent need. And so what we're trying to do is identify where we're going to get the most expedient influence that we can with the best people that we can. This is going to play itself out over a three- to five-year period. I love those who think it's a 12-month phenomenon. It's not.

I'll, let Todd speak to the speak of the numeric reflection if there is one.

I think so often happens is revenue is a lagging indicator and it's a lag indicator for bringing people over getting access to the hospitals getting the surgeons familiar with the goods.

There's a lot that goes into it and so the immediacy of the influence is somewhat muted.

Patrick S. Miles: It will be rewarded by those who play long. And so the great part is there's plenty to do. Our portfolio is becoming richer and richer with regard to its distinction, and I just can't be more enthusiastic with regard to an improving portfolio with probably a best-in-class commission. And, you know, I think Alphatec Holdings reflects all that stuff that's going on. That's helpful.

And so my concern always is kind of the over.

<unk> asset.

Are you someone who just comes over if we're playing long our view is that these guys got to help us in the years to come we would prefer them to do so with an unbelievable portfolio with unbelievable training.

So I would tell you the way we constructed the guidance really was.

<unk> the organization that we have here kind of coming out of.

Patrick S. Miles: And I guess just, you know, on that same storyline with respect to guidance, are there any guardrails around cadence through the year as these rep hires and recent rep hires ramp up? And, you know, you're going to continue to hire this quarter as well. Do you expect it to ramp fairly uniformly through the year? Or is there going to be a bigger jump? Yeah, I'll let Todd speak to the numeric reflection if there is one. Like, what I think so often happens is revenue is a lag indicator. And it's a lag indicator for bringing people over, getting access to hospitals, getting surgeons familiar with the goods. Like, there's a lot that goes into it, and so the immediacy of the influence is somewhat muted.

The fourth quarter.

And really allowing new rep adds to be upside to that and execution of the underlying business really driving the strength of the guide and so.

I think we've set up the year well in that regard.

As a reminder, our our guidance philosophy is to put numbers out there that we believe we can achieve to achieve a reasonable opportunity to exceed I think as it relates to.

<unk> I think as you as you see normal seasonality cadence you typically have a step down from Q4 to Q1 step up Q2 kind of Q2 to Q3 is flattish.

Up in Q4, and so I think that overall shape of the curve will will remain and I think fundamentally where we land overall will really be a reflection of the underlying strength of the business as we go throughout the year.

Todd Colvin: And so my concern always is kind of the over-enthusiastic view of someone who just comes over. If we're playing long, our view is that these guys are going to help us in the years to come. We want to prepare them to do so with an unbelievable portfolio and unbelievable training. And Phil, I'd tell you, the way we constructed the guidance really was reflecting the organization that we have here kind of coming out of the fourth quarter and really allowing new rep ads to be upside to that, and execution of the underlying business really driving the strength of the guide. And so I think we've set up the year well in that regard. And, you know, as a reminder, our guidance philosophy is to put numbers out there that we believe we can achieve and have a reasonable opportunity to exceed. I think, as it relates to cadence, I think, you know, as you see normal seasonality cadence, you typically have a step down from Q4 to Q1, step up to Q2, kind of Q2 to Q3 is sladdish, and then a step up in Q4.

Makes sense. Thanks, so much for taking our questions.

Our next question comes from the line of Matt Blackman with Stifel. Your line is open.

Hi, This is Emily on for Matt.

Just wondering if you can provide some color on the training that you have had thus far this year and expect to have in terms of what youre seeing for demand versus prior years or anything on the mix of new versus existing <unk> users or lateral versus non lateral anything there you can help us with.

Oh, yes.

I hope I can help you I'm not sure I will.

But then you havent becomes.

I think people come here to learn lateral from Louise Pimenta Bill Taylor Devry.

These guys are unbelievable lateral surgeons and then there's a whole slew of them.

And so the dynamic is as I think surgeons come here to learn lateral and then I think that there.

Todd Colvin: And so I think that the overall shape of the curve will remain, and I think fundamentally where we land overall will really be a reflection of the underlying strength of the business as we go throughout the year.

Inspired by the other things and so.

The continuation of the expanded indications of that portfolio would indicate that we're going to get some people who are returning because what they're doing is they're expanding their application of St. PTP.

Patrick S. Miles: Thanks so much for taking our questions. Our next question comes from the line of Matt Blackman with Stifle. Hi, this is Emily on behalf of Matt.

Starting to see the early experience with regard to core <unk>, which is really fun just from the standpoint of if youre laying on your stomach you get to control the back of the spine in the front of the spine and the same in the same city and Theres, just some real advantages from a from a.

Patrick S. Miles: Just wondering if you can provide some color on the trainings that you've had thus far this year and expect to have. In terms of what you're seeing for demand versus prior years or anything like that, on the mix of new versus existing A-TECH users or lateral versus non-lateral. Anything there you can help with?

It kind of a big surgery perspective until that part of it is.

Is great. So we're seeing some return, but we're also seeing a ton of new interest and I think you saw that through the numbers on the.

Patrick S. Miles: Yeah, you know. I hope I can help you. I'm not sure if I will. The dynamic becomes... I think people come here to learn lateral thinking from Luis Pimenta, Bill Taylor, and Virat Devran. These guys are unbelievable lateral surgeons, and there's a whole slew of them. And so the dynamic is I think surgeons come here to learn lateral things, and then I think that they're inspired by other things. And so the continuation of the expanded indications of the portfolio would indicate that we're going to get some people who are returning because what they're doing is they're expanding their application of, say, a PTP. We're starting to see early experience with regard to corpectomy, which is really fun just from the standpoint of if you're laying on your stomach, you get to control the back of the spine and the front of the spine in the same sitting, and there are just some real advantages from a kind of big surgery perspective, and so that part of it is great.

Uh huh.

Yes, new surgeon contract.

It's.

There is a lot of interest and Theres a lot of geography that we havent touched yet so we feel like it's the right combination of people who have already adopted who are expanding.

New people.

Coming in and so that kind of demographic.

Okay, Great and just maybe to expand on that one piece in terms of the expanded indications for lateral so we've had the 1 billion bucket and the 2 billion bucket of dealer pillar for a while is there any kind of traction we begin to that bigger bucket and what may be an influx of experienced lateral surgeons that may be new to <unk> accelerate that trend.

Yes, it's a great question and the answer is yes.

So I think when you start to see like.

More of our new footprint of surgeons, who come over I think just a familiarity and a comfort and navigating the retro peritoneal space, which is core to the lateral approach and so no matter what the position. These guys are very comfortable in terms of doing that and so the opportunity to expand indications is going to be faster and so.

Patrick S. Miles: And so we're seeing some return, but we're also seeing a ton of new interest, and I think you saw that through the numbers on the new surgeon contribution. There's a lot of interest, and there's a lot of geography that we haven't touched yet, and so we feel like it's the right combination of people who have already adopted who are expanding, and new people coming in, and so that's kind of in Great. And just maybe to expand on that one piece, in terms of the expanded indications for lateral, so we've had the 1 billion bucket and the 2 billion bucket of P-LIFT for quite some time. Is there any kind of traction moving into that bigger bucket?

If you think about kind of the cadence of our products too.

Engage that space, we wanted to make sure that we built a great procedure.

As a patient positioner with a retractor and instruments and all of the necessary element within was super sophisticated on the safe upfront and then we thought that would inform us to be able to walk up the indications for surgery and so you saw a regular static implant than an expandable implant now youre seeing to course, correct me and so youre seeing the kind of walk up of sophisticated.

Patrick S. Miles: And would maybe an influx of experienced lateral surgeons that may be new to the field accelerate that? Yeah, it's a great question. And the answer is yes. And so, I think when you start to see, like, more of a NUVA footprint of surgeons who come over, I think just the familiarity and the comfort in navigating the retroperitoneal space, which is core to the lateral approach. And so, no matter what the position, these guys are very comfortable in terms of doing that.

Applications of.

Surgery, and so it's the more informed the more sophisticated the lateral user of the faster they will uptake in the more indications for surgery that they will utilize and so previously if there was.

Like compressive material in the post to your part of the spine. It would indicate cash I should do a T lift because I cant do a decompression in the <unk> patient in the lateral position the advent of PGP of LTE opportunity to do all of what you would normally do with the patient in a composition and approach from the back and do it in directly compression but possible.

Patrick S. Miles: And so, you know, if you think about kind of the cadence of our products, too, to engage that space, we wanted to make sure that we built a great procedure with a patient positioner, with a retractor and instruments and all the necessary elements, but then it was super sophisticated on the safe out front. And then we thought that would inform us to be able to discuss the indications for surgery. And so you saw a regular static implant, then an expandable implant, and now you're seeing a cortectomy.

And all the benefits of lateral in that position and so that's our enthusiasm with PGP and that's how we're seeing kind of the utilization, but if youre a lateral.

What we're seeing is a faster uptick.

Emily.

It really makes a lot of sense. When you look at that and you understand that that kind of translates into more procedures or more products through the procedure. So products per case goes up revenue procedure kind of get some tailwind to that plus as Pat said when they apply it to more complex pathologies oftentimes that means.

Either more procedures within their practice get to use TTP or there are more levels in that procedure.

Patrick S. Miles: And so you're seeing the kind of rise of sophisticated applications of surgery. And so it's, you know, the more informed, the more sophisticated the lateral user, the faster they will uptake and the more indications for surgery that they will utilize. And so previously, if there was, like, compressive material in the posterior part of the spine, it would indicate, gosh, I should do a T-lift because I can't do a decompression with a patient in a lateral position. The advent of PTP offers the opportunity to do all of what you would normally do with a patient in a prone position and approach from the back and do a direct decompression, but also get all the benefits of lateral in that position.

Of which and all of which really contribute to this great same store sales growth that you see because ultimately the utilization of procedure just continues to expand and broaden.

The more that we offer and the more they get comfortable with it.

At a higher price because it was discussed.

Okay.

Great. Thanks, so much.

Next question comes from the line of Nick Coppola with Wells Fargo. Your line is open.

Hey, good afternoon, and thanks for taking the question.

Two for me. So you talked about 15, new product launches and line extensions in 2023 can we expect a similar cadence in 2004, and maybe just talk about some of the key product launches, we should be able to about four and then I had a follow up please.

Yeah.

Thanks Jay.

One of the things that I love about this company is that.

Patrick S. Miles: And so that's our enthusiasm for PTP, and that's how we're seeing utilization. But if you're a lateral surgeon, what we're seeing is faster. And Emily, it really makes a lot of sense when you look at that and you understand that that kind of translates into more procedures or more products through the procedure. So products per case goes up, and revenue procedures kind of get some tailwind from that. Plus, as Pat said, when they apply it to more complex pathologies, oftentimes that means either more procedures within their practice get to use PTP, or there are more levels in that procedure.

And there is a organic innovation machine.

There's an authenticity around wanting to move the field and so we have kind of continues as a cadence of always doing between eight and 10 and some of these things will be.

We'll be line additions and others will be big new product launches, but I think the things that we will start to move the needle is in 2024, you'll start to see.

Kind of continuation of of this expansion of the cervical portfolio, which we think is.

As opportunity because as more people utilize lateral get confident with this what they do is expanding utility within the <unk> realm, we want to make sure that we get all of that and so we continue to extend kind of the sophistication within the.

Todd Colvin: Both of which and all of which really contribute to this great same-store sales growth that you see because, ultimately, the utilization of the procedure just continues to expand and broaden the more that we offer it and the more they get comfortable with it, at a higher price because, Thank you. OK, and, Great, thanks so much. The next question comes from the line of Vic Kopra with Wells Fargo. Hey, good afternoon, and thanks for taking the question. Just two for me.

Within that realm also.

There are so many opportunities for us to continue to build the next foundation.

What are the next foundations for US is how do we think through things like bone quality as it relates to yields and can we translate that bone quality into an implant and so us becoming sophisticated with three D. Printing is very important so youll start to see <unk> printed implants.

Patrick S. Miles: So, you know, you talked about 15 new product launches and line extensions in 2023. Can we expect a similar pace in 2024 and maybe just talk about some of the key product launches we should be on the lookout for? And then I had a follow-up.

From us.

We love the opportunity for the assembly of goods I would say another one.

It's forthcoming.

We'll get a lot of experience this year, but next year will be a big one will be the integration of the navigated robotic element into into PTP and so just when you start to think about.

Patrick S. Miles: Yeah, thanks Jake. One of the things that I love about this company is that there is an organic innovation machine. There's an authenticity around wanting to move the field. And so we have kind of committed to a cadence of always doing between 8 and 10.

The opportunity for innovation, it's not in a single silo.

The assembly of goods and so for us to understand Neurologically, where we are with regard to save up assembled to have navigated robotic element with regard to our valence platform those together become the innovation not one or the other and I think so often people think gosh, you're going to commit to a single technology.

Patrick S. Miles: And some of these things will be line additions, and others will be big new product launches. But I think the things that will start to move the needle are in 2024; you'll start to see kind of a continuation of this expansion of the cervical portfolio, which we think is opportune because as more people utilize lateral, get confident with this, what they do is they expand the utility within the cervical realm. We want to make sure that we get all of that, and so we continue to expand the kind of sophistication within that realm. Also, there are so many opportunities for us to continue to build the next foundation, and one of the next foundations for us is that how do we think through things like bone quality as it relates to EOS, and can we translate that bone quality into an implant? And so us becoming sophisticated with 3D printing is very important, so you'll start to see 3D printed implants from us.

And this is going to change everything spine.

Spine is a field of great variables, so sorry for the diatribe, but if things of that nature that I think youre going to see a lot of we also have a key expandable <unk> implant that is going to be excellent.

So I think theres going to be just a myriad of new products that youre going to see either deliberate through a procedure that already exist or elevating the sophistication of a procedure through the utility of assembled goods and to prevent rod from from insight is a huge add yes.

Yes after this year.

<unk> insight.

In fact portfolio.

We are Super channel the Crazy part, though is if you've been in this business chablis as long as what you'd see is that these things take a little while to.

Yes.

To reflect the value for money.

Patrick S. Miles: And so we love the opportunity for the assembly of goods. I would say another one that's forthcoming, and we'll get a lot of experience this year, but next year will be a big one, will be the integration of the navigated robotic element into PTP. And so just when you start to think about the opportunity for innovation, it's not in a single silo.

Revenue perspective.

You'll launch these products Youll train the field on these products youll get to hospitals to accept the pricing on these products.

And then you'll see the net you'll see the revenue reflection and so we that's why we're going to see revenue as a lagging indicator to the work we've done 18 to 24 months ago.

And so anyway, sorry for the guidelines.

No not at all of that was that was great. Thank you and just my follow up question you have your upcoming Investor meeting in March.

Patrick S. Miles: It's in the assembly of goods. And so for us to understand neurologically where we are with regard to SAPOP, assembled to a navigated robotic element with regard to our valence platform, those are together an innovation, not one or the other. And I think that so often people think, gosh, I'm going to commit to a single technology, and this is going to change everything. Spine is a field of great variables, and so sorry for the diatribe.

And against that you kind of what we can expect at that upcoming analyst day. Thank you.

Yes Vik.

And I won't steal the thunder of the meeting but.

Fundamentally we're going to have another two years of financial projections very consistent with how we laid out story in May of 2022, obviously, we'll we'll have some additional kind of qualitative components to that but fundamentally it will be an extension of our financial commitments through the year 2027.

Patrick S. Miles: But it's things of that nature that I think you're going to see a lot of. We also have an expandable T-lift implant that's going to be excellent. And so I think there's going to be just a myriad of new products that you're going to see either delivered through a procedure that already exists or elevating the sophistication of a procedure through the utility of assembled goods. And the Prevent Rod from Insight is a huge add-on to the- Yeah, yeah, that's this year.

Our next question comes from the line of Josh Jennings with TD co.

Your line is open.

Hi, This is Eric on for Josh Thanks for taking the question.

I wanted to focus on your opportunity internationally I understand you guys are just getting going in some markets like Australia and New Zealand.

Patrick S. Miles: So the whole Insight portfolio, we are super excited about it. The crazy part, though, is if you've been in this business, sadly, for as long as I have. What you see is that these things take a little while to, in essence, reflect value from a revenue perspective. And so you'll launch these products, you'll train the field on these products, you'll get hospitals to accept the pricing on these products, and then you'll see revenue reflection. And so that's why we always say revenue is a lag indicator for the work that we do 18 to 24 months before. And so, anyway, sorry for the guy. No, not at all.

Specific to 2024, what level of international contribution have you guys factored into guidance here.

So we haven't broken that out specifically, Eric I think you will see us give more granularity on that type of.

I guess insight in our long range plan updates so maybe stay tuned there.

But I would tell you that it's starting to contribute and.

We're getting good growth in the Australian New Zealand markets. Those are really starting to work for us and as Pat said, we will begin very very early stages to see a little bit of revenue reflection coming out of Japan later this year.

Todd Colvin: That was great. Thank you. And just my follow-up question, you know, you have your upcoming investor meeting in March. Any hints as to kind of what we can expect at that upcoming Analyst Day? Thank you. Yes, Vic.

Not material at all but it will be good to start seeing that we've really built a great team in both Japan, and Australia and New Zealand.

Really really start to come on so I think we're very excited about the opportunity.

And our.

Todd Colvin: And I won't steal the thunder of the meeting, but fundamentally, we're going to give another two years of financial projections, very consistent with how we laid out the story in May of 2022. Obviously, we'll have some additional qualitative components to that, but fundamentally, it'll be an extension of our financial commitments through the year 2027. Our next question comes from the line of Josh Jennings with TD Cohen.

Our experienced thus far in those markets has reinforced our strategy of going narrow and deep in.

A very specific geographic footprint that we've laid out so.

Maybe I'll leave it there.

The organization has done a ton of work to lay the foundation for future success of international net.

Most proud of because of just the predictable cadence of what's transpiring.

Each of the different teams.

And then just to touch point, we have the right team on the ground and so the translation of that business to be what we intended to be exact.

Todd Colvin: Hi, this is Eric on behalf of Josh. Thanks for taking the question. I wanted to focus on your opportunity internationally. I understand you guys are just getting going in some markets like Australia and New Zealand, specific to 2020, of what level of international contribution. So, we haven't broken that out specifically, Eric.

That's great and then maybe thinking about you guys have talked about the <unk> platform being slated for rollout in the not too distant future here.

Was just curious to hear your expectation for that launch and maybe how many systems do you think you could have on the market exiting 2024, just any sort of launch metrics that we could be expecting that'd be great. Thank you.

Todd Colvin: I think you'll see us give more granularity on that type of, I guess, insight in our long-range plan updates. So, maybe stay tuned there. But, you know, I tell you that it's starting to contribute, and we're getting good growth in the Australian and New Zealand markets. Those are really starting to work for us.

Yeah.

I won't give you any launch metrics.

I will tell you that.

Everything is on track.

I probably blue.

In the presentation I didn't.

Todd Colvin: And, as Pat said, we'll begin, in very, very early stages, to see a little bit of revenue reflection coming out of Japan later this year. Not material at all, but it'll be good to start seeing that. We've really built a great team in both Japan and Australia New Zealand, really, really starting to come on.

Talk about the regulatory clearances and so.

The impediment, we found them and it's us and so we should be on time. It is my point and I was just getting about an impediment.

The dynamic is.

One where.

I think that theres going be great demand the challenge of capital equipment is that you've got to get the dollars allocated. These then you have to get the room ready and then you have to get get the line in terms of getting it placed and so again I think that.

Patrick S. Miles: So, I think we're very excited about the opportunity, and I think our experience thus far in those markets has reinforced the strategy of going narrow and deep in a very specific geographic footprint that we've laid out.

Our enthusiasm for the technology is over the Moon I just wanted to make sure that that is tempered, but with the practical dynamics associated with getting the systems in place and so.

Patrick S. Miles: Your organization has done a ton of work to lay the foundation for the future success of International. And that's what you're most proud of because of the predictable cadence of what's changing on each of the different teams. And then, to Kyle's point, we have the right team on the ground, and so the translation of that business could be what we intended it to be. That's great.

The technology is everything that we had hoped for and that we had intended the automation its ultimately being integrated into the workflow of how we're doing things.

Exactly what we expected.

Patrick S. Miles: And then maybe thinking about EOS, you guys have talked about the updated platform being slated for a rollout in the not too distant future here; I was just curious to hear your expectations for that launch, maybe how many systems you think you could have on the market by exiting 2024. Any sort of launch we could be expecting would be great. I won't give you any launch metrics, but I will tell you that everything is on track. I probably blew it in the presentation; I didn't talk about their regulatory clearance for them. So the impediment, we found them, and it's us, and so we should be on time is my point. I was just kidding about an impediment.

Again, I think it is creating just a more sophisticated field and so.

Alright.

All of that is coming Q2 24 as committed.

But.

The dynamics.

The influence on the volume of units in the field will be felt in the years to come.

Okay.

Thank you for taking the questions.

Yes.

Yes.

Next question comes from the line of Brooks O'neil with Lake Street Capital markets. Your line is open.

Thank you good afternoon.

I am kind of intrigued by this notion that you have 25% market share.

Some markets, but 5%.

Overall.

In the U S spine market.

Patrick S. Miles: The dynamic is one where I think that there's going to be great demand. The challenge with capital equipment is that you have to get the dollars allocated, then you have to get the room ready, and then you have to get the line in terms of getting it placed. And so again, I think that our enthusiasm for the technology is over the moon. I just want to make sure that it's tempered with the practical dynamics associated with getting these systems in place. And so the technology is everything that we had hoped for and that we had intended.

And I'm, just hoping you could talk a little bit about some of the keys to getting to that 25%.

In the markets, where you have that.

Two.

Whether youre confident that you can get to 25% in the markets, where you don't.

And are there any structural obstacles to achieving the big share in some key markets around the country now.

Thank you.

That was a tough one brooks.

The.

I would say.

Patrick S. Miles: The automation that's ultimately being integrated into the workflow of how we're doing things is exactly what we expected. It's, again, I think it's creating just a more sophisticated field. And so... you know... And so... you know... And so... All of that is coming Q224 as committed, but the dynamics of the influence on the volume of units in the field will be felt in the years to come.

The features or tender is a reflection of those people who are at 25% market share.

Oftentimes.

They have a kind of a key center that they have.

They have gotten into.

And they've gotten into it with lateral surgery and then the lateral surgery has proliferated amongst our partners until theres been a competitive dynamic for people to adopt what we're doing.

Todd Colvin: Thank you for taking the question. The next question comes from the line of Brooks O'Neill with Lake Street Capital Markets. Your line is open. Thank you. Good afternoon.

And so I would say that.

There are some great statistics around if you have a.

Significant lateral business as a distributor of ours and the likelihood of you growing at north of 40% is high and then that ultimately reflects in the 25% market share in their respective geography, and so I would say that that is really getting the foundation and it's all a lot of the guys, whom candidly have been some.

Patrick S. Miles: I just am kind of intrigued by this notion that you have 25% market share in some markets, but 5% overall, in the U.S. fine market. And I'm just hoping you could talk a little bit about some of the keys to getting to that 25% in the markets where you have it, and whether you're confident that you can get to 25% in the markets where you don't. And are there any structural obstacles to achieving a big share in some key markets around the country? That was a tough one, Brooks.

So near to us from a previous companies that came over early and had been <unk> been able to establish the business until and then what they've done.

Reap the reward of the Halo effect.

Candidly one of the one of the great things with regard to people, who have just come over as a way in areas, where there is an iOS.

<unk>.

Kind of a hey.

Focal iOS.

Field reflection.

Those guys will ultimately likely not only build off the lateral space, but also build off the.

Patrick S. Miles: I would say, the features or the reflection of those people who are at 25% market share oftentimes may have a key center that they have gotten into, and they've gotten into it with lateral surgery, and then lateral surgery has proliferated amongst the partners, and so there's been a competitive dynamic for people to adopt what we're doing. And so I would say that there are some great statistics around if you have a significant lateral business as a distributor of ours, then the likelihood of you growing at north of 40% is high, and then that ultimately reflects in the 25% market share in their respective geography. And so I would say that that is really kind of the foundation, and it's a lot of the guys who, candidly, have been somewhat familiar to us from a previous company that And then what they've done is they've reaped the reward of the halo effect.

<unk> installed base and so when you when you asked kind of.

Is there an impediment to long term growth.

Yes.

Really isn't this is a this is an interesting business, though just based upon the demographics of each of the individual geographies guys are very slow to change.

What we tried to do is provide in every every reason in the world to change our view is the more we can reflect in the.

In a in a wide geography of iOS informatics, so volume of information that we'll provide to create greater predictability will drive people to us and so that's why I think that the strategy of lateral one eight.

<unk> procedural reflection.

Second a procedural reflection I hope that 10 years from now Nobody's talking about individual products is all we're talking about is what theyre doing procedurally and we feel like that that procedural.

Opportunity informed by something like heels.

Patrick S. Miles: Candidly, one of the great things with regard to people who have just come over as a weight in areas where there is an EOS, kind of a focal EOS field reflection, those guys will ultimately likely not only build off the lateral space but also build off the ES install base. And so, when you ask kind of, you know, is there an impediment to long-term growth? There really isn't.

A kind of growing sophistication with the information that's driven at the surgeon will make for better outcomes better outcomes will drive a better day.

How we're thinking about it and that's how we're seeing it reflected hopefully that's.

Kind of precise enough to to answer your questions.

No that was great pad I really appreciate that.

Check on one tiny little bit more is that to be greedy, but.

Patrick S. Miles: This is an interesting business, so just based upon the demographics of each of the individual geographies, those are very slow to change. And what we try to do is provide them with every reason in the world to change. Our view is the more we can reflect in the, in a wide geography of EOS informatics, the volume of information that will provide to create greater predictability will drive people to us. And so that's why I think that the strategy of lateral first, a procedural reflection, EOS second, a procedural reflection. I hope that 10 years from now, nobody's talking about individual products as all they're talking about is what they're doing procedurally. And we feel that procedural opportunity informed by something like EOS and a kind of growing sophistication with the information that's driven at the surgeon will make for better outcomes.

Deformity gives you an opportunity to grow your share in some markets even beyond that.

25%.

Yes.

I think it's truly the great question Brooks.

Why why do you see this being somewhat of a stodgy environment as you see so many places that has committed to a a provider for long periods of time.

Unseat those providers of long period of time, you have to do something thats unique.

And so the deformity market is a big market.

The reason why the numbers kind of get a little wonky as because it's not as though theres a lateral market and then theres a deformity market.

There's times that lateral is used in deformity.

Did you say it is a very large market.

And the ability to ultimately participate in that market is a sign of sophistication and so oftentimes if you do the complex things well you could do more.

Patrick S. Miles: And better outcomes will drive a better day. And so that's how we're thinking about it, and that's how we're seeing it reflected. Hopefully, that's kind of precise enough to answer your question. That was great, Pat. I really appreciate that. I'll just tack on one tiny little bit more. Deformity gives you an opportunity to grow your share in some markets even beyond the current 25%? Yeah, I can

Four things well and what's happened is there's been companies that have long been in this business and have established themselves as deformity providers. We believe the deformity is best.

Approached from an assembly of goods much like we have with regard to lateral it's a different assembly of goods, but the opportunity for us to do a patient positioner in idiopathic scoliosis, where there is a curve. That's more flexible we think is opportunity we think neurophysiology in terms of automating it with regard to facilitate it.

Patrick S. Miles: I think it's truly a great question, Brooks. Why you see this being somewhat of a stodgy environment is that you see so many places that have committed to a provider for long periods of time, and so to unseat those providers over a long period of time, you have to do something that's unique. And so the deformity market is a big market, and the reason why the numbers kind of get a little wonky is because it's not as though there's You know, often there are times that lateral is used in deformity, but let's just say it's a very large market, and the ability to ultimately participate in that market is a sign of sophistication, and so oftentimes if you do the complex things well, you can do the more straightforward things well, and what's happened is that there are companies that have long been in this business that have established themselves as deformity providers.

And even using pardon me of SSE is valuable in those cases, and then understanding rotational deformity with regard to iOS. When you start to assemble all of those things that suggest to us a procedural requirement and Thats, where I think people have historically used the stock I am still experience in this field that I could do it our view is how do we provide.

Objective information that hopefully drives behavior, and that's where we think that once that starts to become more commonplace our ability to reflect an influence in that market is high.

Makes total sense to me I'm looking for 2 billion Bucks, let's go.

Sure.

Okay.

Yes.

Next question comes from the line of David Saxon with Needham <unk> Company. Your line is open.

Hi, Pat Hi, Todd Congrats on the quarter and thanks for taking my questions I wanted to start on lateral.

Patrick S. Miles: We believe that deformity is best approached from an assembly of goods, much like we have with regard to lateral. It's a different assembly of goods, but the opportunity for us to do a patient positioner in idiopathic scoliosis where there's a curve that's more flexible is, we think, appropriate. We think neurophysiology in terms of automating it with regard to facilitated MEPs and even using automated SSEPs is valuable in those cases, and then understanding rotational deformity with regard to EOs. When you start to assemble all of those things, that suggests to us a procedural requirement, and that's where I think people have historically used gestalt.

Specifically for LTP, so for for a Doctor who is doing all right.

Our U X with.

Is LTP the path of least resistance from a tech product perspective.

And if so how is that.

Launch resume kind of knew the doctors.

Is that where you're seeing the most traction in that cohort.

Yes completely.

Patrick S. Miles: I'm so experienced in this field that I could do it. Our view is how we provide objective information that ultimately drives behavior, and that's where we think that once that starts to become more commonplace, our ability to reflect an influence in that market is high. That makes total sense to me. I'm looking for two billion bucks.

It's.

So.

As the poor soul, who was in Sao Paulo, taking people to beds in the early days of excellence creation.

To understand the requirements and having a product development group and marketing group to understand them. This shortly is so valuable and so what youre seeing is even.

Patrick S. Miles: Let's go. Thank you. Thank you. The next question comes from the line David Saxon with Needham, your lightning. Hi, Pat.

We clearly communicate the PTP and next generation two two lateral or excellent youre still many applications, where LTE piece.

Patrick S. Miles: Hi, Todd. Congratulations on the quarter, and thanks for taking my questions. I wanted to start on lateral, specifically for LTP. So, for a doctor who's doing X-LIF, is LTP the path of least resistance from an A-Tech product perspective? And if so, how did that launch resonate with kind of new doctors? Is that where you're seeing the most traction in that cohort? you know, completely.

Super valuable and so what we've done is we've taken all the learnings that we've had from X lift from that.

In previous years as well as from PTP and we've combined those and that gets reflected in terms of patient positioner imagine wearing 2024 are still taking people to beds and suggesting that there is nothing left to do in spine surgery sticker.

Patrick S. Miles: So as the poor soul who was in Sao Paulo, taping people to beds in the early days of XLIF creation, to understand the requirements of having a product development group and a marketing group that understand them viscerally is so valuable. And so what you're seeing is even though we clearly communicate that PTP is the next generation to Ladder or XLIF, there are still many applications where LTP is super valuable.

And then the opportunity to say, Hey, I'm, a monitoring company, but it's all I'm doing is telling you where the nerve isn't in the monitoring is not valuable after that.

But people still have slight pain because of plexopathy because what they are doing is retracting the plexus tool and so there's many opportunities to continue to make these things to improve these procedures and I think that we're doing those with regard to the assembly of the technology that we are to lateral until when a surgeon comes and tries it that way.

Patrick S. Miles: And so what we've done is we've taken all the learnings that we've had from XLIF from the previous years, as well as from PTP, and we've combined those. And that gets reflected in terms of a patient positioner. Imagine we're in 2024, and people are still taping people to beds and suggesting that there's nothing left to do in spine surgery. That is despicable.

What they see as the next generation.

Okay, Great Super helpful. And then I just wanted to clarify.

Clarify something Todd I think you said.

In the script.

For the Opex cadence did you say it was supposed to be kind of front end loaded.

Patrick S. Miles: And then the opportunity to say, hey, I'm a monitoring company, but all I'm doing is telling you where the nerve is, and then the monitoring is not valuable. But people still have thigh pain because of plexopathy because what they're doing is retracting the plexus to them. And so there are many opportunities to continue to make these things, to improve these procedures, and I think that we're doing those with regard to the assembly of the technology that we are to lateral. And so when a surgeon comes and tries ATEC lateral, what they see is the next generation. Okay, great. Super helpful. And then I just wanted to clarify something, Todd. I think you said in the script, for the OPEX cadence. Did you say it was supposed to be kind of front-end loaded, higher in the first and second quarter? I just want to make sure I know where I heard that. Thanks so much.

Higher than the first and second quarter I, just want to make sure I.

I heard that correctly or not thanks, so much.

Thank you David My commentary was specific to the cash flow cadence throughout the year. So we've communicated we're going to spend about $100 million of cash this year.

As part of the investment and the sets and inventory the revenue generating assets that will ultimately fulfill the needs of the sales folks who've come in who will come and so that's what we're spending it on we spent some they're clearly in the in the fourth quarter you can see that.

And then ultimately cash burn in the first quarter, we will step up from Q4, it will step down in Q2, and then the second half.

Patrick S. Miles: Thank you, David. My commentary was specific to the cash flow cadence throughout the year. So we've communicated we're going to spend about $100 million in cash this year as part of the investment in the sets and inventory, the revenue-generating assets that will ultimately fulfill the needs of the sales folks who come and who will come. And so that's what we're spending it on. We spent some time there. Clearly, in the fourth quarter, you can see that.

The approaching cash flow breakeven and so I think ultimately that will be the cadence there.

We're expecting throughout the year with respect to cash burn.

Okay, great. Thank you.

Our next question comes from the line of drew Ranieri with Morgan Stanley. Your line is open.

Hi, Pat and Todd Thanks for taking the questions and apologies. If this has been covered already but on balance could you give us an update on how you're thinking about development for the product and.

Todd Colvin: And then, ultimately, cash burn in the first quarter will step up from Q4. It will step down in Q2. And then in the second half, it will be approaching cash flow break-even. And so I think, ultimately, that'll be the cadence that we're expecting throughout the year with respect to cash. Great, thank you. Our next question comes from the line of Drew Ranieri with Morgan Stanley. Your line is open. Apologies, product, for how you're.

With more competition coming potentially in 2025, just remind us how youre thinking about differentiation of your system, especially as.

Maybe more spine procedures are starting to move towards the ASC. Thanks for taking the question.

Thanks, so much true.

<unk>.

First of all I guess.

Patrick S. Miles: Thanks much, Drew. First of all, I guess, you know, I can't be more excited about what's going on with regard to surveillance. We're getting experience, so it's being utilized, which we suggested as much. That utilization is going to get expanded. 2024 is going to be more of an evaluation and verification type of year. It's going to be used like all the other robots, in a relatively conventional way, in terms of just placing screws.

I can't be more excited about what's going on with regard to.

<unk>.

Yes.

We're getting experience so it's being utilized which we saw.

Suggested as much.

That utilization is going to get expanded its going to be 2024th anymore.

Okay.

Valuation verification type of a year with regard to it can be used like all the other robots in a relatively conventional way in terms of just placing screws.

Patrick S. Miles: The launch in 2025 will ultimately be a verified tool that integrates or assembles with a workflow of first and foremost what we're doing in PTP. And so just the ability to combine neurophysiology with navigation integrated into that effort will be phenomenal. And so making sure that you know where the bones are, you know where the nerves are, and you understand what the health of the nerves is, all of those things are great. One of the virtues of PTP is that you have control of both the front of the spine and the back of the spine.

The launch in 2025 will ultimately be a verified tool that ultimately integrates were assembled with a workflow first and foremost what we're doing in TTP and so just the ability to assemble neurophysiology with navigation.

Integrated into that effort will be phenomenal and so.

Making sure that you know where the bones are you know where the nerves are you understand what the health of nervous all of those things are great. One of the virtues of PTP is you have control of both the front of the spine in the back of the spine and so your ability to literally manipulate both of those at the same time and know navigated way is fantastic and so.

Patrick S. Miles: And so your ability to literally manipulate both those at the same time in a guided way is fantastic. And so you will start to see that in 25 and that's a unique opportunity for us. And so you know, we have the ability to navigate two things at once here in the coming years. When you start to think about ASCs, one of the dynamics is that oftentimes they're surgeon-owned. And I've not met a ton of surgeons who love to buy expensive capital.

You will start to see that in 'twenty, five and that's a unique opportunity for us and so we have the ability to navigate two things at once.

Here in the coming becoming.

Coming years.

When you start to think about.

At AFC.

One of the dynamics is that oftentimes they are surging.

I've not met a ton of surgeons, who love to buy expensive capital.

Patrick S. Miles: And so what we have done is ultimately created a footprint that accommodates the utility of navigation robotics in a way that's procedural. And so if we have to bring everything in, the site of service is really just not that big a deal because our thinking is only around the success of the procedure and the required elements that make for predictability. And so our enthusiasm with regard to the ASC is very high because the footprint of our goods is very limited, and our ability to ultimately execute a predictable surgery within a small space where there's not a high enthusiasm for capital is good. So that's the thinking and that's where we are from a strategic perspective, and maybe just one more, I don't think this was discussed, guidance, maybe just talk to us about how, about, and what Andrew, this is Todd.

And so what we have done is ultimately clearing the footprint to accommodate the utility of navigation robotics in a way that is procedural and so if we have to bring everything in the site of service. It's really just not that big a deal because our thinking is only around the success of the procedure and the required elements that make for predictability and.

R&D is yes with regard to the ASC is very high because the footprint of our goods is very limited in our ability to ultimately execute critical surgery within a small space, where there's not a high enthusiasm for.

Capital is.

So that's the thinking and that's where we are from a strategic perspective.

Thanks, Pat and maybe just one more.

Hi.

I think this was discussed but just.

In your 2024 guidance, maybe just talk to us about how you're thinking about competitive rep hiring.

Todd Colvin: As we kind of laid out our guidance for 2024, we ultimately said, what organization do we have exiting the year? What's our run rate? And so that really is how we built our 2020 guide. Excuse me, what was our exit rate in 23? That's really how we thought about and built our 2024 guide. So it's really a reflection of the fundamental, I think, underlying fundamentals of the business and the organization that we have in place.

What factor that might have to play in there.

With any additional hires that you did.

We will do beyond 2023.

And lastly, just.

Can you just remind us where you are in terms of sales force head count for the year and thanks for taking the questions again.

Yes.

As we kind of laid out our guidance for 2024, we ultimately say what what organizations, we have exiting the year whats our run rate and so that really is how we built our 2020 excuse me.

What was our exit rate in 'twenty three that's really how we've thought about and built our 2024 guide. So it's really a reflection of the fundamental I think.

Todd Colvin: I think, as you know, oftentimes what we do today really reflects revenue in 12 to 18 months from now. So our view is, as we get more competitive reps on board and as the business may do better than what we've assumed, that ultimately would be kind of what would drive an upside case to our guidance. But fundamentally, we're trying to put guidance out there that we believe we can achieve and have reasonable opportunities to exceed. I think that opportunity to exceed would really probably be on the volumetric side and kind of the core business, or the amount of reps that kind of come, relative to the total sales force, you know, kind of the low 300s, mid 300s, so that's more or less where we're at.

Underlying fundamentals of the business reorganization that we have in place I think as you know oftentimes what we do today really reflects revenue in 12 months to 18 months from now so our view is.

As as as we get more competitive reps onboard and as the business may do better than what we have assumed that Mike that ultimately would be kind of what would drive an upside case to our guidance.

Fundamentally we're trying to put guidance out there that we believe we can achieve and have reasonable opportunities to exceed that.

Turning to exceed would really probably be on the volumetric side and kind of the core business and or upsides. The line reps that kind of come.

Throughout the year.

Relative to total sales force kind of.

Low three hundreds mid three hundreds so.

That's more or less where we're at.

Operator: There are no further questions at this time. Mr. Miles, I turn the call back. Thanks very much, Desiree. And really, just thanks, everybody, for your interest in ATEC. We are in this for the long haul, clearly, and can't be more excited about the momentum that was created by a great year in 2023. Thank you very much. This concludes today's conference call; you may now disconnect.

Okay.

There are no further questions at this time, Mr. Myles I'll turn the call back over to you.

Thanks, very much Ted right and really just thanks, everybody for your interest in <unk>. We are in this for the long haul clearly and can't be more excited about the momentum that was created in a great year in 2023. Thank you very much.

This concludes today's conference call you may now disconnect.

Please wait the conference will begin shortly.

Yes.

Yes.