Q1 2025 Alphatec Holdings Inc Earnings Call

Unknown Executive: Please wait, the conference will begin shortly.

Please wait the conference will begin shortly.

[music].

Unknown Executive: Good afternoon, everyone, and welcome to the webcast of ATEC's first quarter financial We would like to remind everyone that participants on the call will make forward looking These 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 SEC. During this call, you may hear the company refer to non-GAAP or adjusted measures. Reconciliations of these measures to U.S.

Speaker Change: Good afternoon, everyone and welcome to the webcast of <unk> first quarter financial results, we would like to remind everyone that participants on the call. We'll make forward looking statements. These 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.

The regularly with the SEC.

Speaker Change: 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.

Unknown Executive: 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.

Greg: Leading today's call will be ATEX Chairman and CEO, Pat Miles, and CFO, Todd Conant. Now I will turn the call over to Pat Miles.

Pat Miles: Leading today's call will be <unk>, chairman and CEO, Pat miles and CFO Todd Koning.

Pat Miles: Now I will turn the call over to Pat miles.

Pat Miles: Thanks much, Greg, and welcome everybody to the Q1 2025 financial results, ATEC earning call. There will be a few forward looking statements, which I would ask for you to review at your leisure. So, really a great start to 2025. Enjoyed revenue growth at 22%, with surgical growth at 24%. That's about four times the market, if you're keeping track.

Pat Miles: Thanks, So much Greg and welcome everybody to the Q1 2025 financial results.

Pat Miles: Earning call.

Pat Miles: There will be a few forward looking statements, which I would ask for you to review at your leisure.

Pat Miles: So a really great start to 2025 enjoyed revenue growth of 22%.

With surgical growth at 24%.

Pat Miles: That's about four times the market, if you're keeping track.

Pat Miles: This is really a phenomenal result for the largest pure play spine company in A-Tech.

Pat Miles: This is really a really a phenomenal result for the largest pure play spine company in APAC. So.

Pat Miles: So, Q1 is always a little challenging seasonally when it comes to profitability and cashflow. As cashflow, or case volume slows compared to Q4, taxes reset, and we see a disproportionate share of meetings and events. But in spite of all of that, we delivered $11 million of adjusted EBITDA, which is our second best quarter ever, and above expectations. And from a cashflow perspective, our cash burn in Q1 was at the low end of the range at $15 million. So, profitability and cashflow performance in Q1 has really put us in a great position to meet or exceed our 2025 goals.

Pat Miles: Q1 is always a little chat.

Pat Miles: Challenging seasonally.

When it comes to profitability and cash flow as cash flow.

Pat Miles: This volume slows compared to Q4 taxes reset and we see a disproportionate share of meetings and events, but in spite of all of that we delivered $11 million of adjusted EBITDA, which is our second best quarter ever and above expectations and from a cash flow perspective, our cash burn in Q1 was at the low end of the range at $15 million.

Pat Miles: So profitability and cash flow performance in Q1 is really put us in a great position to meet or exceed our 2025 goals.

Pat Miles: And I think if we hearken back, the changes we made last year resulted in a much more cash efficient organization. And so we are 100% committed to continuing to operate the company in a deliberate manner and deliver growth, profitability and cash flow commitments, as stated. So the revenue came in at $169 million. Really, the key thing I'd like to highlight is the strength of the surgical growth, where we saw 24% year-over-year growth. Underpinning this growth was an 18% increase in the number of surgeons utilizing A-TEC procedures. The fact that revenue grew 23% in established territories demonstrates how we continue to gain surgeon and territory penetration where we have established representation.

Pat Miles: And I think if we hearken back to changes we made last year have resulted in a much more cash efficient organization. So we are 100% committed to continuing to operate the company in a deliberate manner and deliver growth profitability and cash flow commitments as stated.

Pat Miles: So.

Pat Miles: Hum.

Pat Miles: Revenue came in at $169 million.

Pat Miles: Really the key thing I'd like to highlight the strength of the surgical growth, where we saw a 24% year over year growth underpinning. This growth was an 18% increase the number of surgeons utilizing <unk>.

Pat Miles: They ticked up procedures.

Pat Miles: The fact that revenue grew 23% in established territories demonstrates how we continue to gain surgeon and territory penetration, where we have established representation and so what I would tell you is.

Pat Miles: And so what I would tell you is our thesis is working. And where we have representation that's been established, we continue to compel adoption. And so the durable revenue growth drives profitability and cash flow clearly.

Pat Miles: Our thesis is working and where we have a representation. That's been established we continue to compel adoption and so the durable revenue growth drive profitability and cash flow clearly.

Pat Miles: EOS order growth was also a record for which we're very, very encouraged. It's a foundation of our strategy. And finally, as the largest peer play, we continue to be the preferred destination spine.

Pat Miles: Order growth was also a record for which we're very very encouraged it's a foundation of our strategy.

Pat Miles: And finally as the largest pure play we continue to be the preferred destination spine the environment for recruiting sales talent couldn't be better and and really we're off to a great start with great confidence in terms of moving into the year, So anyway with that I'll turn it over to Todd well. Thank you Pat and good afternoon, everybody I'll begin today with a first.

Pat Miles: The environment for recruiting sales talent couldn't be better. And really, we're off to a great start with great confidence in terms of moving into the year.

Todd Conant: So anyway, with that, I'll turn it over to Todd. Well, thank you, Pat.

Todd Conant: And good afternoon, everybody. I'll begin today with the first quarter 2025 P&L highlights. Total revenue was $169 million, up 22% compared to the prior year. The $169 million in revenue was comprised of $152 million in surgical revenue and $17 million of EOS. First quarter surgical revenue of $152 million grew 24% compared to the prior year period. That represents nearly 30 million in year-over-year growth. When normalizing for selling days, we grew 32 million year-over-year, or 26%. Procedural volume growth was 17% driven by strong surge in adoption of 18%. This level of adoption clearly reflects the compelling nature of our portfolio, and is supported by the ongoing investments in the sales.

Pat Miles: Quarter 2025 P&L highlights.

Todd: Revenue was $169 million up 22% compared to the prior year to $169 million in revenue was comprised of $152 million in surgical revenue and $17 million of <unk> revenue.

First quarter surgical revenue of $152 million grew 24% compared to the prior year period that represents nearly $30 million in year over year growth.

Todd: When normalizing for selling days, we grew $32 million year over year or 26%.

Todd: Procedure volume growth was 17% driven by strong surgeon adoption of 18%. This level of adoption clearly reflects the compelling nature of our portfolio and is supported by the ongoing investments in the sales force.

Todd Conant: Average revenue per procedure growth was a strong 6% as we continue to capture more of the procedural revenue opportunity. Same store sales or sales that come from sales agents that have been in territory for a year or more grew 23% year over year, which demonstrates that we continue to grow significantly in the markets where we are already established through growing both our share of wallet with existing surgeons and new surgeon adoption. EOS revenue increased $17 million in the first quarter, up 8% compared to last year. Record order volume has fueled a 28% year-over-year increase in the order book, evidence of the demand for our unique end-to-end informatics solution.

Todd: Average revenue per procedure growth was a strong 6% as we continue to capture more of the procedure revenue opportunity same.

Todd: Same store sales or sales that come from sales agents that have been in territory for a year or more grew 23% year over year, which demonstrates that we continue to grow significantly in the markets, where we're already established through growing both our share of wallet with existing surgeons and new surgeon adoption.

Todd: IOS revenue increased $17 million in the first quarter up 8% compared to last year record order volume has fueled a 28% year over year increase in the order book evidence of the demand for our unique end to end informatics solution and positions us for strong system installations, and the accompanied implant pull through in the coming years.

Todd Conant: AMP positions us for strong system installations and the accompanied implant pull-through in the coming years. Turning to the remainder of the P&L, first quarter non-GAAP gross margin was 70%, down 50 basis points compared to the previous year and up 70 basis points sequentially, primarily driven by product mix. Non-GAAP R&D was $13 million and approximately 8% of sales. Top-line growth drove 230 basis points of leverage, while absolute spend has remained roughly flat. Nongap SG&A was $111 million and approximately 66% of sales. Approximately 400 basis points of year-over-year improvement came from variable expense rate improvement, while the balance came from infrastructure leverage.

Todd: Turning to the remainder of the P&L first quarter non-GAAP gross margin was 70% down 50 basis points compared to the previous year and up 70 basis points sequentially, primarily driven by product mix.

Todd: non-GAAP R&D was $13 million and approximately 8% of sales top line growth drove 230 basis points of leverage while absolute spend has remained roughly flat.

Todd: non-GAAP SG&A was $111 million and approximately 66% of sales.

Todd: Approximately 400 basis points of year over year improvement came from variable expense rate improvement.

Todd: The balance came from infrastructure leverage.

Todd Conant: We reported total non-GAAP operating expense of $124 million, which was approximately 74% of sales. By maintaining disciplined cost management, we delivered a modest 8% increase in operating expenses while continuing to invest in the growth drivers of the business. Those efforts, along with our durable top line growth, drove a 900 basis point expansion in our operating margin year over year.

Todd: We reported total non-GAAP operating expense of $124 million, which was approximately.

Todd: 74% of sales by maintaining.

Todd: Disciplined cost management, we delivered a modest 8% increase in operating expenses, while continuing to invest in the growth drivers of the business.

Todd: Those efforts along with our durable top line growth drove a 900 basis point expansion in our operating margin year over year.

Todd Conant: I'll turn next to Adjusted EBITDA, which was positive for the fourth consecutive quarter. Our first quarter adjusted EBITDA was $11 million, equating to a 6% margin and over 800 basis points of improvement compared to the prior year period. We are very pleased with this performance. It is the second best performance we've had since the start of ATEx transformation. This quarter also marks our second consecutive period with an over 40% drop through on a year over year revenue growth to adjusted EBITDA. reflecting both infrastructure scalability and an improving variable selling expense profile. You can see in the chart in the slide that the profit margin expansion that we are executing has been significant and consistent.

Todd: I'll turn next to adjusted EBITDA, which was positive for the fourth consecutive quarter.

Todd: Our first quarter adjusted EBITDA was $11 million equating to a 6% margin and over 800 basis points of improvement compared to the prior year period.

Todd: We are very pleased with this performance. It is the second best performance <unk> had since the start of a tech transformation.

Todd: This quarter also marks our second consecutive period with an over 40% drop through on a year over year revenue growth to adjusted EBITDA.

Todd: Reflecting both infrastructure scalability, and an improving variable selling expense profile.

Todd: You can see in the chart on this slide that the profit margin expansion that we are executing has been significant and consistent.

Todd Conant: This quarter marks 12 consecutive quarters of adjusted EBITDA margin expansion. We entered 2025 a stronger company, and that is clearly reflected in our first quarter results. This progress stems from the changes we implemented last year to improve in two key areas. Firstly, the management and prioritization of our human resources, and secondly, strengthened focus and operational improvements in managing inventory and instrumentation. We are driving meaningful margin expansion that aligns with the priorities outlined in our long-range plan and as a result of disciplined execution. These deliberate results give us great confidence in our ability to continue delivering on our financial commitments and translate revenue growth into profit and cash.

Todd: This quarter marks 12 consecutive quarters of adjusted EBITDA margin expansion, we entered 2025, a stronger company and that is clearly reflected in our first quarter results. This progress stems from the changes we implemented last year to improve in two key areas. Firstly, the management and prioritization of our human resources, and secondly, strengthened focus and <unk>.

Todd: Operational improvements and managing inventory and instrumentation sets.

Todd: We are driving meaningful margin expansion that aligns with the priorities outlined in our long range plan and as a result of disciplined execution.

Todd: These deliberate results give us great confidence in our ability to continue delivering on our financial commitments and translate revenue growth into profit and cash flow.

Todd Conant: Turning now to the balance sheet. We ended the first quarter with $153 million in cash on hand. Additionally, we had access to $60 million of available borrowing on our revolving credit line, which was undrawn at quarter end, making our total cash and available cash $213 million.

Todd: Turning now to the balance sheet.

Todd: We ended the first quarter with $153 million in cash on hand. Additionally, we had access to $60 million of available borrowing on our revolving credit line.

Todd: Which was undrawn at quarter end, making our total cash and available cash $213 million.

Todd Conant: Our free cash use of $15 million in the first quarter represents a $55 million improvement in cash use over the first quarter 2024. We managed our free cash use performance to the favorable end of the $15 to $20 million range that we previously communicated, and would have beat if not for working capital headwinds. And these headwinds were modest and transient, and we believe the metrics will improve over the course of 2025. Our first quarter cash management execution and the underlying dynamics of the business reinforces our confidence that we will be cash flow positive for the full year.

Todd: Our free cash use of $15 million in the first quarter represents a $55 million improvement in cash use over the first quarter 2024, we managed our free cash use performance to the favorable end of the $15 million to $20 million range that we previously communicated and would've beat if not for working capital headwinds and these headwinds were modest.

Todd: And transient and we believe the metrics will improve over the course of 2025.

Todd: Our first quarter cash management execution in the underlying dynamics of the business reinforces our confidence that we will be cash flow positive for the full year.

Todd Conant: In March, we successfully refinanced our 2026 convertible note. Refinancing effectively pushed out the maturity. to 2030, provide a dilution protection up to $23.46, and maintain the same low coupon rate of 75 basis. We used the $405 million of proceeds to pay for the fees and the cap call and bought back 80% of the existing convert, the maximum allowed under creeping tender rules. The net proceeds of $82 million gives us flexibility to address the remaining $63 million of the 26 notes when the time is right.

Todd: In March we successfully refinanced our 2026 convertible note.

Todd: Refinancing effectively pushed out the maturity.

Todd: To 2030 provided dilution protection up to $23 46.

Todd: And maintain the same low coupon rate of 75 basis points.

Todd: We used the $405 million of proceeds to pay for the fees and the cap call and bought back 80% of the existing convert the maximum allowed under creeping tender rules.

Todd: Net proceeds of $82 million gives us flexibility to address the remaining $63 million of the 'twenty six notes when the time is right.

Todd Conant: Our financial outlook for the year expects continued strong revenue growth to drive incremental profit margin As we exited the first quarter of the year and contemplated our full year outlook, we felt it prudent to simply flow through the beat on the top and bottom line. This approach is consistent with our philosophy of guiding the numbers we believe we can achieve and have a reasonable opportunity to As it relates to cash flow, our first quarter performance further reinforces that we will be cash flow positive for the full year 2025. With respect to the cadence of our cash flows for the remainder of 2025, we expect the second quarter to range from zero to $5 million, with the third and the fourth quarters generating positive cash flow, resulting in us being cash flow positive for the full year 2025.

Todd: Our financial outlook for the year expects continued strong revenue growth to drive incremental profit margin expansion.

As we exited the first quarter of the year and contemplated our full year outlook, we felt it prudent to simply flow through the beat on the top and bottom line. This approach is consistent with our philosophy of guiding the numbers. We believe we can achieve and have a reasonable opportunity to exceed.

Todd: As it relates to cash flow, our first quarter performance further reinforces that we will be cash flow positive for the full year 2025 with respect to the cadence of our cash flows for the remainder of 'twenty five we expect the second quarter to range from zero to $5 million with a third and the fourth quarters generating positive cash flow, resulting in us being cash flow.

Todd: Positive for the full year 2025.

Todd Conant: Our Revenue Outlook for the full year 2025 expects adoption of our unique procedural approach to drive revenue growth of 20% to approximately $734 million compared to our previous guidance of $732 million. That includes surgical revenue growth of 21% to approximately $658 million, which will be fueled by mid-teen surgical volume growth and mid-single-digit revenue per surgery growth. We expect EOS revenue approximately $76 million. Turning to the outlook for the full year 2025 Adjusted EBITDA, we expect sales growth to continue to leverage the infrastructure we have built, contributing to an Adjusted EBITDA of $78 million versus our prior guidance of $75 million.

Todd: Our revenue outlook for the full year 2025 expected adoption of our unique procedural approach to drive revenue growth of 20% to approximately $734 million compared to our previous guidance of $732 million.

Todd: That includes surgical revenue growth of 21% to approximately $658 million, which.

Todd: Which will be fueled by mid teen surgical volume growth and mid single digit revenue per surgery growth, we expect iOS revenue approximately $76 million.

Todd: Turning to the outlook for the full year 2025, adjusted EBITDA, we expect sales growth to continue to leverage the infrastructure. We have built contributing to an adjusted EBITDA of $78 million versus our prior guidance of $75 million. This includes us absorbing the impact of expected tariffs in the second half of the year.

Todd Conant: This includes us absorbing the impact of expected tariffs in the second half of the year. Our direct exposure to tariffs is limited to the EOS units we import from France to support the U.S. installations and the associated repair parts. We estimate the impact of tariffs on our cost of goods sold to be in the low single-digit millions of dollars.

Our direct exposure to tariffs is limited to the iOS units, we import from France to support the U S installations and the associated repair parts.

Todd: We estimate the impact of tariffs on our cost of goods sold to be in the low single digit millions of dollars.

Todd Conant: The chart on the slide depicts the consistency of the profitability progress we are making. Our Adjusted EBITDA guidance of $78 million will generate an Adjusted EBITDA margin of 11%. That implies a 39% drop-through of the incremental growth in revenue dollars to Adjusted EBITDA. This trajectory positions us well to achieve our 2027 Adjusted EBITDA margin goal of 18% at $1 billion in revenue.

Todd: The chart on the slide depicts the consistency of the profitability progress we are making our adjusted EBITDA guidance of $78 million will generate an adjusted EBITDA margin of 11% that implies a 39% drop through of the incremental growth in revenue dollars to adjusted EBITDA. This trajectory positions us well to achieve our 2027 adjusted EBITDA margin.

Todd: Goal of 18% at $1 billion in revenue.

Todd Conant: So in conclusion, through our investments in the team and infrastructure, we have built a fast growing 100% spine focused company. We are delivering on a return on those investments through durable revenue growth leadership and consistent operating leverage improvement, which is beginning to inflect a cash flow generation.

Pat Miles: So in conclusion through our investments in the team and infrastructure, we have built a fast growing 100% spine focused company. We are delivering on our return on those investments through durable revenue growth leadership and consistent operating leverage improvement, which is beginning to inflect the cash flow generation with that ill turn the call back over to Pat.

Todd Conant: With that, I'll turn the call back over to Thank you much, Todd.

Pat Miles: Thank you much Todd I want to spend a few slides just kind of walk through a couple of strategic imperatives.

Pat Miles: I want to spend a few slides just kind of walking through a couple of strategic imperatives, as, as I would say, our strategy has been steadfast and our execution relentless. And so we have been consistent, not only in who we intend to be, but the execution of it all. So we are creating clinical distinction. It's undeniable. We have and will continue to architect unparalleled procedural solutions that improve patient outcomes. I think PTP and LTP are clearly, we're heading into deformity in a similar way. The revenue growth and surge in user growth affirms we are compelling adoption.

Speaker Change: As I would say.

Speaker Change: Our strategy has been steadfast in our execution relentless and so.

Speaker Change: We have been consistent not only in who we intend to be but the execution of it. All so we are creating clinical distinction <unk>, we have and will continue to architect unparalleled procedural solutions that improve patient outcomes, I think PTP and LTP.

Speaker Change: Clearly, we're heading into two deformity in a similar way.

Speaker Change: The revenue growth and surgeon user growth affirms we are compelling adoption. So we are doing this by furthering clinical value, we talk a lot about furthering value by minimizing surgical variables with technology and this is happening.

Pat Miles: So we are doing this by furthering clinical value. We talk a lot about furthering value by minimizing surgical variables with technology and this is happening. Additionally, we're expanding our sales force and getting better in the field. So I would say that we are scaling and we are winning. Something that's near and dear, I think, is really the growing validation of our EOS and informatics thesis. We've talked a lot about the unusually high revision rates in spine surgery versus hip and knee, which just speaks to the opportunity. The volume of variables in spine surgery far outnumbers that in single joint surgery.

Speaker Change: We're expanding our sales force and getting better in the field. So I would say that we are scaling and we are winning.

Speaker Change: Something that's near and Dear I think is really the growing validation of our Eos and informatics thesis.

Speaker Change: We've talked a lot about the unusually high revision rates in spine surgery versus hip and knee, which just speaks to the opportunity the volume of variables in spine surgery far out numbers that in single joint surgery. Our view is that many of the issues driving revision surgery spine surgery can be effectuate it by controlling variables through improved informatics, hence the five.

Pat Miles: Our view is that many of the issues driving spine surgery can be effectuated by controlling variables through improved informatics, hence the foundational commitment. So I think that there's a misplaced notion that revision is most often caused by interoperative surgeon error due to a lack of precision. The reality is that most revision surgery is not due to error in implant or pedicle screw placement, but rather error prior to the surgery due to a lack of surgical planning. It is for this reason we strongly believe that the spine field needs more automated informatics. And so we view our pre, intra, and post-op informatics will drive much more predictable surgery than the incremental precision associated with pedicle screw placement.

Speaker Change: <unk> commitment. So I think that there is a misplaced notion that revision is most often caused by inter operative surgery due to a lack of precision.

Speaker Change: The reality is that most revision surgery is not due to air in implant, our pedicle screw placement, but rather are prior to the surgery due to a lack of surgical planning.

Speaker Change: For this reason we are strong we strongly believe that the spine field needs more automated informatics and so we view, our pre and post op informatics drive much more.

Speaker Change: We will drive much more predictable surgery.

Speaker Change: Incremental precision associated with.

Speaker Change: Pedicle screw placement, so hence our thesis too.

Pat Miles: So hence our thesis committed to EOS and informatics.

Speaker Change: This is committed to Es and informatics.

Pat Miles: Much like we said in the early days of ATEC, the ATEC turnaround, spine needs ATEC. I would tell you that spine surgery needs automated alignment planning and predictive analytics. And we're bringing that to you with EOS. And so super enthusiastic with regard to that. There's nothing better than having a thesis and then have it reflect in the specific patient outcomes. And that's what we're doing. And so I would tell you that our history is one of technological furtherance. And much like when we acquired SAFE-OP and integrated different modalities, the auto EMG, auto SSEPs, and facilitated MEPs, we furthered the technology to a point of great clinical influence on lateral surgery.

Speaker Change: Much like we said in the early days of <unk> turnaround spine needs Atek I would tell you that spine surgery needs automated alignment planning and predictive analytics and we're bringing that to you with with Eos and so super enthusiastic with regard to to that there is nothing better than having a thesis and then habit, reflecting the specific page.

Speaker Change: Outcomes and that's that's what we're doing and so I would tell you that our history is one of technological further ensign and much like when we acquired <unk> and integrated different modalities to auto EMG auto SSE and fulfill the Philippines Meps, we further the technology to a point of great clinical influence on lateral.

Pat Miles: And so if you wanna look at a proxy, SAFE-OP is a proxy for what we're doing for EOS. So the same effect is happening with EOS. So below and pictorially what you see is you see a patient where the pre-op scan gave not only spine alignment parameters in an automated way, but also where the spine should be normatively. And so not just a numeric reflection, so bringing objective measure, but really where the spine should be. A surgical plan was assembled and executed with a post-op scan at six and 12 weeks. So you'll see that the pre-op picture reflects not only automated measures, but where the normative position.

Surgery, and so if you want to look at our proxy shape up as a proxy for what we're doing for <unk>. So the.

Speaker Change: The same effect is happening with es. So.

Speaker Change: <unk> what you see is you see a patient with a <unk> scan gave not only spinal alignment parameters in an automated way, but also where the spine should be normally Italy, and so not just <unk>.

Speaker Change: Numeric reflections of bringing objective measure, but really whereas spine should be surgical plan was assembled and executed with a post op scan at six and 12 weeks. So youll see that the pre op picture reflects not only automated measures, but where the normal positioning.

Pat Miles: where the spine should be based upon age and demographic. The plan provides a simulation of values required to achieve the surgical goals. And then the six and 12 week provides assessment for surgical plans. You could tell exactly how you did. This is a much more comprehensive clinical approach to what is commonly done today. If alignment is a key quota to a successful long-term outcome, meaning it impacts or lessens the revision rate, it is this type of information that brings about objective measure and makes for a meaningful difference.

Speaker Change: We are in the spine should be based upon age and demographic. The plan provides a simulation of values required to achieve the surgical goals and then the six and 12 week provides assessment for surgical plants, you could tell us exactly how you did this is a much more comprehensive clinical approach to what is commonly done today, if alignment is a key quarter to a successful.

Speaker Change: Long term outcome, meaning it impacts or lessens. The revision rate is this type of information that brings about objective measure and meaning and makes for a meaningful difference. So we cannot be more excited about where we are with es strategy clearly theres a lot of <unk>.

Pat Miles: So we cannot be more excited about where we are with the EO strategy. Clearly there's a lot of enthusiasm with regard to the acquisition of the units. And we are headed to a future of predictive analytics. And that we find to be extraordinarily exciting. If you think about what's fueled the company today, it's really kind of the architecting of procedures for, really architecting procedures. And what we see is we see an expanding complexity. So our procedural strategy continues to expand application and grow in volume. For us, it is quite clear that if your objective is to lessen variables that undermine clinical predictability, then assembling all the elements of a procedure will create demand and compel adoption.

Speaker Change: <unk>.

Speaker Change: With regard to the acquisition of the units and we are headed to a future of.

Speaker Change: Predictive analytics and that we find to be extraordinarily exciting.

Speaker Change: If you think about what has fueled our company today, it's really kind of the architects of procedures for us.

Speaker Change: Really architected procedures and what we see is we see an expanding complexity. So.

Speaker Change: Our procedures that strategy continues to expand application and growing volume.

Speaker Change: For us it is quite clear that if your objective is to lessen variables that undermine clinical predictability than assembling all of the elements of a procedure will create demand and compel adoption.

Pat Miles: We have seen our lateral franchise grow in both total procedures and addressable pathologies. Like most new techniques, surgeons start their adoption in short segment, simple type of applications. And as they see success, they continue to expand the utility to more levels and greater complexity. That has clearly been the case with what we've done from a lateral perspective. We have, and then we have recently launched our fully integrated corpectomy system that includes not only implants, but a specifically designed retractor for the unique requirements of this surgery. Because many times vertebral fracture is in the thoracic spine, it is vitally important to monitor the spinal cord.

Speaker Change: We have seen our lateral franchise growing both total procedures and addressable pathologies like most new technique certain start their adoption and short segment simple type of apps.

Speaker Change: Applications.

Speaker Change: As they see success they continue to expand the utility.

Speaker Change: Two more levels and greater complexity.

Speaker Change: That has clearly been the case with what we've done from a lateral perspective, we have and then we have recently launched our fully integrated <unk> system that includes not only implants, but are specifically designed retractor for unique.

Speaker Change: For the unique requirements of this surgery.

Speaker Change: Many times of our T. Before actually is in the thoracic spine is vitally important to monitor the spinal cord enter <unk> III and MEP modality.

Pat Miles: Enter SAFE-OP3 and the MEP modality. Monitoring motor function throughout these complex surgeries is a requirement. A big reason we are growing at the rate that we are is that these spine procedures are fully thought out. They include patient positioners, specific monitoring, customized surgical exposure with indication-specific retractors, implants, and soon to come, integrated navigation to reduce radiation and increase precision. It is no wonder that we will continue to expand our footprint in lateral surgery and beyond. A nemesis in spine has been the requirement for surgeons to make do without fully contemplated spine procedures. That is no longer the case as we continue to expand our significant impact.

Speaker Change: Monitoring motor function throughout these complex surgeries is a requirement a big reason we are growing at the rates. We are is that these spine procedures are fully thought out. They include patient positioning specific monitoring customized surgical exposure with indication specific retractors implants, and sutent and soon to come integrated navigation.

Speaker Change: <unk> to date to reduce radiation and increased precision. It is no wonder that we will continue to expand our footprint in lateral surgery and beyond a nemesis in spine has been the requirement for surgeons to make do without fully contemplated spine procedures that is no longer the case as we continue to expand our significant influence.

Pat Miles: In speaking about compelling adoption and winning access, as I previously described, our lateral business is the perfect proxy for our procedural strategy. We are taking the learnings from that experience and applying it across other techniques. Our growth rate is reflective of compelling adoption. Surgeons are growing utility through increased volume and expanded application. What is also true is that with EOS, we are gaining access to more surgeons, academic institutions, and hospital systems. The very thesis that we contemplated is coming to fruition in front of our eyes. The clinical credibility of our foundational informatics technology enables us to win access.

Speaker Change: And speaking about compelling adoption winning access as I previously described our lateral business is a perfect proxy for our procedural strategy. We are taking the learnings from that experience and applying it across other techniques. Our growth rate is reflective of compelling adoption surgeons are growing.

Speaker Change: Surgeons are growing.

Speaker Change: Growing utility to increased volume and extended application. What is also true is that.

Speaker Change: Is that with <unk>, we are gaining access to more surgeons academic institutions and hospital system. The very thesis that we contemplated is coming to fruition in front of our eyes. The clinical credibility of our foundational informatics technology enables us to win access our integrated ecosystem has the most comprehensive.

Pat Miles: Our informatic ecosystem is the most comprehensive and scalable in the business. The recently launched EOS Insight software enables us to scan a patient, automate alignment measures for assessment, simulate the surgical effect through our planning software, integrate the surgical plan into the OR so as to reflect the plan and confirm interoperatively. However, the most exciting piece really is the correlation, not only immediately after surgery to understand the veracity of the surgical plan execution, but also to understand how things evolve over time through longitudinal correlation. So correlation is the foundation of AI. We have the makings of an informatic system that will be predictive as we move forward and gain a deeper understanding for improved decision.

Speaker Change: And scalable in the business. The recently launched <unk> software enables us to scan patients Odyssey automate alignment measures for assessment stimulate the surgical effect to our planning software integrate the surgical plan into the or so as to reflect the plan and confirm interoperability. However, the most exciting piece really the.

<unk> not only immediately after surgery to understand the veracity of the surgical plan execution, but also to understand how things evolve over time to longitudinal correlation. So correlation is the foundation of AI, we have the makings of an informatic system that will be predictive.

Speaker Change: Move forward and gain a deeper understanding for improved decision making.

Pat Miles: So I would tell you that if spine is your vocation, I don't know of a better place than A-TECH. That is why we know it to be the preferred destination.

Speaker Change: So.

Speaker Change: I would tell you that if spine as your vocation I don't know of a better place in APAC that is why we know it to be the preferred destination. So I'm excited to continue to grow the APEC faithful and and with that we will take questions.

Pat Miles: So I'm excited to continue to grow the A-TECH faithful, and with that, we'll take questions. All right. Thank you.

Speaker Change: Alright, Thank you and we will now open up the floor for questions I would like to remind everyone that in order to ask a question. It is pressing star one on your telephone keypad and.

Unknown Executive: And we will now open up the floor for questions. I would like to remind everyone that in order to ask a question, it is pressing star one on your telephone keypad. In consideration of others, please limit yourself to one question. Thank you very much. And we will pause just a moment to compile the Q&A route.

Speaker Change: In consideration of others. Please limit yourself to one question. Thank you very much and we will pause just a moment to compile the Q&A roster.

Brooks O'Neill: All right, looks like our first question today comes from the line of Brooks O'Neill with Lake Street Capital Markets. Brooks, please go ahead. Thank you. Good afternoon, guys. Congratulations on the good start to the year. Pat, you're just talking a lot about the new Corpectomy system.

Speaker Change: Alright, it looks like our first question today comes from the line of Brooks O'neil with Lake Street Capital markets. Please go ahead.

Brooks O'neil: Thank you good afternoon, guys. Congratulations on the good start to the year pad, you're just talking a lot about the new <unk> system and I'm, hoping you could give us a little bit of a feel for how big you think that market segment might be and maybe what the competitive dynamics are as it relates to other.

Pat Miles: And I'm hoping you could give us a little bit of a feel for how big you think that market segment might be, and maybe what the competitive dynamics are as it relates to other players that already have products or systems to address the need. Yeah, thanks, Brooks. Appreciate the question.

Brooks O'neil: Players that already have.

Brooks O'neil: Products or systems to address the need.

Brooks O'neil: Yes, Thanks Brooks.

Pat Miles: In terms of valuing the market, it's, it's, it's, it's, that's a bit of a tough one. You know, the, what you see is, is from a marketplace perspective, I would tell you that we're the only ones doing this in the prone position. And when you have instability based upon fracture, which is oftentimes, so mostly tumor and trauma are the, are the, the utility for a chlorpectomy. And so when you have instability, what you want is access to the front and the back of the spine. And the beauty of PTP is that you have access to the front and the back of the spine in the same setting.

Speaker Change: I appreciate the question.

Speaker Change: In terms of valuing the markets yet.

Speaker Change: That's a bit of a tough one.

Speaker Change: The.

Speaker Change: What you see is is from a marketplace perspective, I would tell you that we're the only ones doing this and the prone position.

Speaker Change: When you have instability based up on fracture.

Speaker Change: Which is oftentimes so mostly tumor in trauma or the or the utility for our core <unk> and so when you have instability. What you want is access to the front and the back of the spine and the beauty of PTP is that you have access to the front and the back of the spine in the same setting and so this is really a unique.

Pat Miles: And so this is really a, a, a unique approach for us. Others have tried to do it in the lateral position and have done it in the lateral position to do it in a, in a prone position is highly advantageous. And so super excited about it. It's completely reflective of what we intended in terms of the whole, you start simple and you continue to walk. And what you see is you see not only expansion in the volume of procedures applied, but also the number of applications and reasons why someone should learn the technique and apply to their practice.

Hi.

Speaker Change: Approach for us.

Speaker Change: Others have tried to do it in a lateral position and have done it in the lateral position to do it in a prone position is highly advantageous and so <unk>.

Speaker Change: Super excited about it it completely reflective of what we intended in terms of the hole you start simple and you continue to work and what you see as you see not only expansion in the volume of procedures applied but also the number of applications and reasons why someone should learn the technique and apply to their practice and so we're seeing it in spades.

Pat Miles: And so we're seeing it in spades and the reason I brought up the, the EOS and academic access is a lot of these get shipped over to academic institutions just because of the complexity. And because these are oftentimes seriously ill patients, and so the whole EOS play, and the whole dynamic of continue to march up the complexity curve, I think, play together.

Speaker Change: Sure.

Speaker Change: The reason I brought up the Pos and academic access is a lot of these get shipped over to academic institutions, just because of the complexity and because these are oftentimes seriously ill patients and so the whole <unk> play in the whole dynamic of continue to March up the complexity curve I think play together and so maybe.

Pat Miles: And so maybe more color than you wanted. But just a little bit about this, this, the system itself from an engineering perspective, it's outstanding. The, the, the retractor and just the, the versatility of an exposure system specific for corpecting me. And then the implant itself is outstanding, the type of mechanical prowess we have around here is unbelievable. And then it ties in well with the other things we're doing, as I said, with from a safe perspective.

Speaker Change: More color than you wanted.

Speaker Change: Just a little bit about the system itself from an engineering perspective, it's outstanding.

Speaker Change: The retractor and just the the versatility of an exposure system specific for <unk> and then the implant itself is outstanding.

Speaker Change: The type of mechanical prowess, we have around here is unbelievable and then it ties in well with the other things we're doing as I said with Nep's from a safety perspective and otherwise.

Pat Miles: All right, Pat, that was awesome. Do you mind if I just ask, do you think you will ultimately incorporate any functionality from EOS in that particular procedure or no? You know, the beauty of what we're doing with EOS is that our ability to measure the alignment parameters with a patient like that, you know, that's rarely done. So to be able to get an EOS scan, and then integrate that element into the operative experience, and make sure that the patient walks away not only fixed from a stability perspective, but fixed in alignment. And whenever we talk about the goals of surgery being decompression, stabilization, and alignment, we will have fulfilled them based upon the sophistication of not only the procedure, but also the type of informatics that drives a behavior.

Speaker Change: Alright that was awesome do you mind, if I could just ask.

Speaker Change: Do you think you will ultimately incorporate any functionality from <unk> in that particular procedure or no.

Speaker Change: The beauty of what we're doing with iOS is that.

Speaker Change: Is that our ability to measure the alignment.

Speaker Change: Parameters with a patient like that.

Speaker Change: That's rarely done so to be able to get an <unk> scan and then integrate that element into the operative experience and make sure that the patient walks away not only fixed from a stability perspective, but fixed in alignment and whenever we talked about the goal of the surgery being decompression stabilization and alignment we will have fulfill them based upon the sophistication of not only the procedure.

Speaker Change: But also the type of informatic that drives behavior and so anyway.

Pat Miles: And so, anyway, it's exciting to know that, because oftentimes this may be a young person, if they have a traumatic accident, and the last thing you want to do is have them have an adjacent level disease because you fixed them in the wrong place. And so, anyway, the alignment piece is a big part of it, and you can utilize EOS as a proxy for alignment that we integrate into the operative experience.

Speaker Change: It's exciting to know that because oftentimes this maybe a young person if they have a traumatic accident in last thing you want to do is have them have an adjacent level disease, because you're fixing the wrong place and so anyway, the alignment pieces, a big part of it and you can utilize <unk> as a proxy for alignment that we integrate into the operating experience.

Brooks O'Neill: Great, thank you very much. Yep, thank you. Thanks, Brooks.

Speaker Change: Great. Thank you very much.

Speaker Change: Thank you.

Speaker Change: Thanks Brooks.

Vik Chopra: And our next question comes from the line of Vik Chopra with Wells Fargo. Vik, please go ahead. Hey, good afternoon. And thanks so much for taking the question or two for me. I'm just wondering if you could just talk about the tariff exposure in 2025. You know, when you expect that to hit the P&L? And maybe what, what percent of your products are sourced from or manufactured in Mexico, China, and the EU?

Speaker Change: And our next question comes from the line of <unk> Chopra with Wells Fargo. Please go ahead.

Chopra: Hey, good afternoon, and thanks, so much for taking the question two for me.

Chopra: Just wondering if you could just talk about the tariff exposure in 2025.

Chopra: When do you expect that to hit the P&L and what what percentage of your box are sourced from or manufactured in Mexico, China and the EU and this had a quick follow up please.

Todd Conant: And then just had a quick follow up. Yeah, Vic.

Chopra: Yes.

Todd Conant: Good afternoon. Thanks for the call. Or the question rather. The the tariff exposure, as I laid out in my prepared remarks, we size that to be approximately low single digit millions hitting our cost of goods sold line, largely in the second half of this year. And our exposure is really limited to our EOS equipment and any related replacement parts associated with EOS, largely because we manufacture our EOS machines in France, and we import the US volume into America for the installed base. And so that's that's the exposure, we really don't have direct tariff exposure in our import.

Chopra: Good afternoon, and thanks for the call.

Chopra: And there was a question rather.

Chopra: Tariff exposure as I laid out in my prepared remarks, we size that to be approximately low single digit millions hitting our cost of goods sold line largely in the second half of this year.

Chopra: And.

Chopra: Our exposure is really limited to our iOS equipment and any related replacement parts associated with us largely because we manufacture our eos machines in France, and we import the U S volume into America for the installed base and so.

Chopra: That's the exposure, we really don't have a direct tariff exposure in our implant business.

Todd Conant: Okay, that's super helpful. Thanks for clarifying that Todd.

Speaker Change: Okay. That's super helpful I'll take the clarifying that Todd.

Vik Chopra: And my follow up question is any update on your robot launch plans and maybe just talk about how Valens will fit into the company's overall strategy. Thank you. Yeah, thanks, Vic. The everything is going as planned. We are doing cases. As a matter of fact, I was in a case recently. And, and everything is going as planned. And so The whole verification process in my mind becomes the most important, you know, such a, such a big part of our thesis is, is procedures. And I was in a place recently, we did, we, as if I did it, there are seven PTPs done before 1pm, and it just speaks to the efficiency of the workflow.

Speaker Change: My question is any update on your robot launch plans and maybe you could talk about how the landscape. It is the company's overall strategy. Thank you.

Speaker Change: Yes, thanks, Nick.

Speaker Change: Everything is going as planned.

Speaker Change: Our.

Speaker Change: Doing cases is a matter of fact I was in a case recently.

Speaker Change: And.

Speaker Change: And everything is going as planned and so.

Speaker Change: The whole verification process in my mind becomes the most important.

Speaker Change: Such a such a big part of our thesis is procedures and I was in a place recently we did.

Speaker Change: As if I did it.

Speaker Change: There are seven Ptp's done before one PM and it just speaks to the efficiency of the workflow and the last thing we want to do is slow the workflow because theres some goofy interaction with regard to our robotic piece of our navigation piece and so.

Pat Miles: And the last thing we want to do is slow the workflow, because there's some goofy interaction with regard to our robotic piece or our navigation piece. And so we're in the, we're in the alpha phase, everything is going as planned, looking forward to integrating the navigation piece to that. And, and this should be an end of the year launch. And so, really, I'm trying to think of any other color that would be of interest, but, you know, I think that I'm as excited about the navigation piece in the integrated workflow as I am the robotic piece.

Speaker Change: We're in the we're in the Alpha phase everything is going as planned and looking forward to integrating the navigation piece to that and that there should be in end of the year.

Speaker Change: Launch and so.

Speaker Change: Really I'm trying to think of any other color that would be of interest but.

Speaker Change: No.

Speaker Change: I think that.

Speaker Change: Excited about the navigation piece and the integrated workflow as I am the robotically.

Speaker Change: Yeah.

Vik Chopra: All right. Thank you, Vic.

Vic: Alright, Thank you Vic.

Matt Miksic: And our next question comes from the line of Matt Miksic with Barclays. Matt, please go ahead. Hey, thanks so much for taking the question. So wanted to ask, if you could maybe, Todd, dive into a little bit more color on on the cash outlay. I know that was a big subject last year, you exceeded or, you know, beat our number this this first quarter, as hoped, maybe just talk about where, you know, how the cash use is changing, maybe what the trends for the rest of the year should look like. And then I have one quick follow up.

Speaker Change: And our next question comes from the line of Matt <unk> with Barclays. Please go ahead.

Speaker Change: Alright, thanks, so much for taking the question.

Speaker Change: So wanted to ask if you could maybe dive into a little bit more color on the cash outlay I know there was a big subject last year.

Speaker Change: <unk> exceeded.

Speaker Change: So it beat our number this first quarter as hoped.

Speaker Change: Maybe just talk about where.

Speaker Change: Other cash uses changing maybe what the trends for the rest of the year should look like and then I have one quick follow up.

Pat Miles: Hey, Matt, because I don't do numeric things very well, I'm going to tell you just a little, little color. You know, what, what, what thrills me is when you start to think about cash utility, I immediately think of sets and, and, and, and the like. And, and, you know, the one place that I didn't mention in my prepared remarks, but but we're getting just light years better is in terms of asset utility, and asset place. And so it's a situation to where, as we continue to mature, and I think about it clinically, we continue to get better in such profound ways.

Speaker Change: Hey, Matt because I don't do numeric things very well I'm going to tell you just a little little color.

Speaker Change: You know what.

Thrills me is when you start to think about cash utility I immediately think of sets in and the like.

Speaker Change: The one place that I didn't mention in my prepared remarks, but we're getting just light years better is in terms of asset utility.

Speaker Change: And asset place and so it's a situation to where as we continue to mature and I think about it clinically.

Speaker Change: We continue to get better in such profound ways. We're also getting profoundly better with regard to our operational prowess and so.

Todd Conant: We're also getting profoundly better with regard to our operational prowess. And so I would tell you that that's a big part of cash utility. And before Todd gets into the specific numbers, I just want to mention, you know, the investment in our Memphis facility several years ago, the type of sophistication that's going on there, the, the, the just continued evolution and maturity internally here, our field forces is getting better, and the people are managing in the field is getting better.

Speaker Change: I would tell you that thats, a big part of cash utility and before targets into the specific numbers I just wanted to mentioned the investment in our Memphis facility several years ago. The type of sophistication that's going on there.

Speaker Change:

Speaker Change: Just continued evolution and maturity internally here, our field force is getting better and the people are managing in the field is getting better so anyway I just want to make mention that because it's so important.

Pat Miles: So anyway, I just want to make mention that because I think it's Agreed, Pat.

Speaker Change: Agreed patent so Matt maybe I'll step back and hit a couple of things one I think the timing question is real and so last quarter. We said Q1 would be a cash use between 15% and 20 and and we clearly hit the low end of that range and feel really good about that execution.

Todd Conant: And so, Matt, maybe I'll step back and hit a couple things. One, I think the timing question is real. And so, last quarter, we said Q1 would be a cash use between 15 and 20, and we clearly hit the low end of that range and feel really good about that execution. On my prepared remarks, I said Q2, you should expect a zero to plus five, and then positive in Q3 and positive in Q4 to get you something north of zero on the full year. And so that's the cadence that we expect. You know, I think your question really was of, like, why do we do better?

Speaker Change: On my prepared remarks, I said Q2, we should expect a zero to plus five.

Speaker Change: And then positive in Q3 and positive in Q4 to get you something north of zero on the full year and so that's the cadence that we expect I think your question really was like.

Speaker Change: Why do we do better how do we think about the balance of the year, what gives us confidence and so I think.

Todd Conant: How do we think about the balance of the year? What gives us confidence? And so I think, first off, you know, why do we do better? And I did make mention of the fact that we saw some modest yet transient working capital headwinds. Our kind of assumption coming into the year was. Accounts receivable, DSO, would be around 45 days. We were at the high 40s here in the month, and some of that just kind of comes down to timing and whatnot. But for us to be able to achieve a $15 million cash use and still withstand a little bit of that headwind on the working capital front, I feel very good.

Speaker Change: First off why do we do better.

Speaker Change: I did make mention of the fact that we saw some modest yet transient working capital headwinds are kind of assumption coming into the year was.

Speaker Change: Accounts receivable DSO would be around 45 days, we were at the high forties here in the month and some of that just kind of comes down to timing and whatnot, but for us to be able to achieve.

Speaker Change: $15 million cash use and still withstand a little bit of that headwind on the working capital front I feel very good. So that tells me that I feel good about where I'm, Eric because I think that working capital metrics will we will essentially go back to where we expect them to for the balance of the year, which gives me some level of confidence.

Todd Conant: So that tells me that I feel good about where I'm at, because I think that working capital metrics will essentially go back to where we expect them to for the balance of the year, which gives me a level of confidence that we can continue to make progress on cash flow, just from that standpoint. You think about the fact that our adjusted EBITDA was significantly better, about $3 million better than we anticipated here in the first quarter, and so some of that falls through to your cash flow. And I think the ongoing profitability profile that we have seen and are expecting to see give us confidence in our ability to hit our cash flow goals.

Speaker Change: We can continue to make progress on cash flow just from that standpoint, you think about the fact that our adjusted EBITDA was significantly better about $3 million better than we anticipated here in the first quarter and so some of that falls through to your cash flow.

Speaker Change: And I think the ongoing.

Speaker Change: Profitability profile that we have seen and are expecting to see give us confidence in our ability to hit our cash flow goals.

Todd Conant: And then I think this year and going into next year and beyond is really what Pat, I think, is also talking to, which is the asset utilization is getting better. And we've got a long ways to go, of course, but it's getting better. And when you see the dynamics of top-line growth, expanding profitability, certainly in this quarter, ahead of what we expected, and an improving asset utilization environment, you feel really good about your ability to be cash efficient.

Speaker Change: And then I think.

Speaker Change: This year and going into next year and beyond is really what pad I think is also talking to which is the.

Speaker Change: The asset utilization is getting better.

Speaker Change: We've got a long ways to go of course, but it's getting better and when you see the dynamics of topline growth expanding profitability certainly in this quarter ahead of what we expected.

Speaker Change: And in improving asset utilization environment, you feel really good about your ability to be cash efficient.

Matt Miksic: This may be one question, if I could, on the competitive dynamic. by right now. You may have commented on it, I'm juggling a few calls right now, but any color you have on the quality of reps, the type of reps, the number of inbounds.

Speaker Change: That's super helpful.

Speaker Change: Just maybe one more question if I could on <unk>.

Speaker Change: Some of the competitive dynamics in spine right now.

Speaker Change: You may have commented on it I'm juggling a few calls right now but.

Speaker Change: Color you have on the quality of reps that type of reps the number of inbound.

Pat Miles: like the posture of the company right now in terms of adding reps. you know, important part of growing the way you're growing, any color. Yeah, we were trying to be subtle with regard to the preferred destination. You know, it's one of those things where it's like, you know, in all sincerity, though, if you think about if your vocation is spine surgery, you want to be aligned with a company that is, existence is dependent upon being great in spine surgery. And candidly, that's us and we're the pure play. And so we're unapologetically evangelical about this space.

Speaker Change: Like the posture of the company right now in terms of adding reps.

Speaker Change: Part of growing the way youre growing any color would be appreciated. Thanks.

Speaker Change: Yes, we were trying to be subtle with regard to the preferred destination piece.

Speaker Change: It's one of those things where it's.

Speaker Change: In all sincerity, though if you think about if your vocation as spine surgery.

Speaker Change: Don't be aligned with a company that is existing to it depending upon being great in spine surgery, and candidly, that's us and where the peer play and that and so.

Speaker Change: Unapologetically.

Speaker Change: Evangelical about this space, we know that we're able to make it better youll look outside and you see how.

Pat Miles: We know that we're able to make it better. You look outside and you see how, you know, things have spun to private equity in a couple of instances. We've already made a big investment that we're scaling off of over the next years ahead. And so we feel like our ecosystem just avails continued improvement, continued evolution, continued capacity to make things better. I would say that the guys who have spun out have a big investment ahead of them. And this is a this is a expensive place. And so we're seeing a lot of people realizing that.

Speaker Change: Things as fund to private equity and a couple of <unk>.

Speaker Change: Instances, we've already made a big investment that we're scaling off of over the next years ahead, and so we feel like our ecosystem Avails continued improvement continued evolution continued capacity to make things better.

Speaker Change: I would tell you the guys who have spun out have a big investment ahead of them and this is this is a expensive place and so.

Speaker Change: We're seeing a lot of people realizing that I think when you start to see the volume of new surgeons that are coming over.

Pat Miles: I think when you start to see the volume of new surgeons that are coming over, then you start to wonder, will their rep come with them? And the answer is clearly a straight commission guys. Yes. And so we're seeing, you know, X-Striker, we're seeing Medtronic, we're seeing Globus, we're seeing. And so as we talked about, geez, a year ago, these things play out over long periods of time because everybody has their own individual dynamics that drive their change.

Speaker Change: When you start to wonder.

Speaker Change: Their rep come with them and the answer is clearly a straight commission guys, yes, and so we.

Speaker Change: We're seeing.

Speaker Change: Ex Stryker, we're seeing.

Speaker Change: Medtronic, we're seeing Globus, we're seeing and so as we talked about cheese a year ago. These things play out over long periods of time, because everybody has their own individual dynamics that drive their change, but I would tell you. If you had told me seven years ago. When we started this turnaround that we'd be sitting here as the largest pure play spine company with the opportunity to run the <unk>.

Pat Miles: But I would tell you, if you'd have told me seven years ago when we started this turnaround that we'd be sitting here as the largest pure play spine company with the opportunity to run the table, I would say I'd be surprised. But that's where we sit today. And we can't be more excited about the.

Speaker Change: <unk> I would say.

Speaker Change: I'd be surprised but that's where we sit today and we can't be more excited about the opportunity.

Matt Miksic: Thanks for taking the questions.

Speaker Change: Well congrats on all the progress thanks for taking the questions.

Speaker Change: Thanks, Matt.

Speaker Change: Thank you Matt.

Matthew Blackman: And our next question comes from the line of Matthew Blackman with. Matthew, please go ahead. All right, good afternoon, everybody.

Speaker Change: And our next question comes from the line of Mathew Blackman with Stifel. Mathew. Please go ahead.

Mathew Blackman: Alright, good afternoon, everybody and just upfront I have every intention to respect your one question request, but no one else has I guess I won't either so apologies in advance.

Matthew Blackman: And just up front, I had every intention to respect your one question request, but no one else has. So I guess I won't either. So apologies in advance.

Matthew Blackman: But if I could start and, and Pat, you sort of alluded to it, Todd, maybe to the extent you can maybe layer in some some numbers Applicable, but I was hoping to sort of get a state of the union on the sales force today, where they are in terms of your productivity relative to expectations, particularly the reps that you've recruited and onboarded over the last couple of years. They have all the sets and implants they need. Are you finding more opportunities than you expected these with these new reps? Just again, we're, you know, a year plus out, I think everybody's got what they need, just how the rep footprint is performing and how that performs. Yeah, Matt, it's really like, you know, this is no kiss up.

Speaker Change:

Speaker Change: But if I could start and Pat you sort of alluded to it Todd maybe to the extent you can maybe layer in some some numbers if applicable, but I was hoping to sort of get to a state of the union on the Salesforce today, where they are in terms of productivity relative to expectations, particularly the reps that you've recruited non boarded over the last couple of years.

Speaker Change: They have all the sets and implants. They need are you finding more opportunities than you expected. These with these new reps just again.

A year plus out I think everybody's got what they need just to how the rep.

Speaker Change: <unk> footprint is performing and how that performed in the first quarter.

Matt: Yeah, Matt.

Speaker Change: It's really like.

Speaker Change: And this is no case, if such the.

Pat Miles: It's such the good question, because it's like, what happens oftentimes is demographically, you know, the rep that comes over reflects the configuration of what he'd previously sold. And then what we see is over time, they evolve into this whole, you know, kind of more lateral type of business. And so, as you, as we said, it takes 12 to 18 months to ultimately reflect in a, in a momentum of any of any kind. And so, you know, what we're seeing is geographically different footprints of the types of sales that they're doing. And then what they're doing is evolving.

Speaker Change: Good question, because it's like what happens oftentimes is demographically.

Speaker Change: The rep it comes over.

Speaker Change: Flex the configuration of what he'd previously sold.

Speaker Change: And then what we see is over time, they evolve into this whole kind of more lateral type of business and so as you as we have said it takes 12 to 18 months to ultimately reflect in a.

Speaker Change: In a momentum of any of any kind and so.

Speaker Change: What we're seeing is geographically different footprints of the types of.

Speaker Change: Sales that Theyre doing and then what they're doing is evolving and so.

Pat Miles: And so that probably the one that comes to mind is up in the Initially, we were being very conventional with regard to the reflected product utility, we're evolving now more into a more proprietary type of sales reflection. And so it's fun to see that start to start to come forth. And so we have the sets, as I said, we're being more efficient with the sets, which more opportunity to place them in different locations. The thing that is super attractive is, is we're in a bunch of academic institutions, which we weren't before, I think just the, the reputational dynamic of, of not only having a unique tool with PTP, but then also coming forth with EOS and translating that into the operative experience, avails access.

Speaker Change: The one that comes to mind is up in the northeast initially we were being very conventional with regard to the reflected.

Speaker Change: Product utility, we're evolving now more into a more proprietary type of sales reflection and so.

Speaker Change: Got it.

Speaker Change: It's fun to see that start to start to come forth and so we have the SaaS as I said, we're being more efficient with the sets, which avail has more opportunity to place them in different locations.

Speaker Change: The thing that is super attractive as is.

Speaker Change: In a bunch of academic institutions, which we werent before I think just the the reputation dynamic of not only having a unique tool with TTP, but then also coming forth with iOS and translating that into the operative experience avails access and so those are the things that we contemplated in the.

Todd Conant: And so those are the things that we contemplated in the acquisition of the technology and how we would ultimately evolve it.

Speaker Change: Acquisition of the technology, and how we would ultimately evolve it but.

Todd Conant: But But, you know, just some color in terms of just the generalities of what we're seeing. We have a long way to go with regard to the build out of the sales force in any meaningful density. We're still, I would tell you, young enough. Agreed.

Speaker Change: But.

Speaker Change: Just some color in terms of just the generalities.

Speaker Change: What we're seeing where we have a long way to go with regard to the build out of the sales force in any meaningful density we're still I would tell you young in the process.

Speaker Change: Yes.

Todd Conant: And Matt, I think maybe I'd just give you two data points here. One, we talk about same-store sales, so growth in sales agent territories that have been with us for a year or more, growing at 23%, and that's relative to a 24% growth in our overall surgical revenue in the first quarter. So that tells you that people show up, and year after year after year after year, they grow on the territory that they have. And so I think that tells you both that, one, you get more of a share of your existing surgeons' business, plus you're able to expand kind of across the territory and attract more surgeons into that territory.

Matt: And Matt I.

Matt: I think maybe I'll just give you two data points here one.

Matt: We talk about same store sales so growth in sales agent territories that have been with us for a year or more are growing at 23% and thats relative to a 24% growth in our overall.

Matt: Surgical surgical revenue in the first quarter so that.

Matt: That tells you that people show up and year after year after year after year they grow on the territory that they have and so I think that tells you. Both that one you get more of a a share of your existing surgeons business plus.

Matt: You are able to expand kind of across the territory and attract more surgeons into that territory and I think that's demonstrated by the fact, if you look at the absolute dollar growth and again, if you normalize.

Todd Conant: And I think that's demonstrated by the fact, if you look at the absolute dollar growth, and again, if you normalize this quarter for 64 days versus 63 days, over the last two years, we've added more than $60 million. And so that's about a $30 million a year clip. And that really kind of accelerated here in 2025 over 2024. So I would tell you that, yeah, the investments we're making are certainly paying off, and that's a reflection of, I think, the demand profile that's there, which is a function of the clinical distinction and our procedural approach.

Matt: This quarter for 64 days versus 63 days over the last two years, we've added more than $60 million.

Matt: That's about a $30 million a year clip.

Matt: And that really kind of accelerated here in 2025 over 2024, So I would tell you that yes. The investments we're making are are certainly paying off and thats a reflection of the the.

Matt: I think the demand profile, that's there which is a function of the clinical distinction there procedural approach.

Matthew Blackman: I appreciate that. And then my follow up, it's actually Good Segway.

I appreciate that.

Matt: Then my follow up it's actually.

Matt: I think a good segue.

Matthew Blackman: on Pat's commentary on EOS. I'm just, I'm curious, can you give us, just even in the roughest sense, how EOS placements today are splitting out between new accounts to ATAC, under-indexed accounts, and core ATAC users, just from a, you know, who's using the portfolio and not today. And then on top of that, you know, you mentioned it, we've done a lot of work, we've obviously seen it, this playbook at other companies with enabling technology, but is there a number you can point to in terms of, you know, you put an EOS system in, you get this type of magnitude of portfolio pull through, and I guess specifically, you know, maybe the Holy Grail for EOS is getting you into these complex procedures where you're definitely under-indexed for peers.

Matt: On Pats commentary on Es I'm, just I'm curious can you give us just even in the rough sense, how U S. Placements today are splitting out between new accounts to APAC under indexed accounts and core a tech users just from a who is using the portfolio and not today and and then on top of that you have.

Matt: Mentioned it we've done a lot of work, we've obviously seen it this playbook at other.

Matt: Companies with enabling technology, but is there a number you can point to in terms of you put an ecosystem and you get this type of magnitude of portfolio pull through and I guess, specifically, maybe the Holy Grail for US is getting you into these complex procedures, where you are definitely under indexed or peers is that happening is that a tipping point.

Matthew Blackman: Is that happening? Is that a tipping point ahead for that happening?

Matt: <unk> ahead for that happening just any color on iOS would be helpful. I appreciate it. Thank you.

Pat Miles: Just any color on EOS would be helpful. Appreciate it, thank you. Yeah, thanks, Matt. And clearly, that's the long play, right? It's, I think that we've been, we've been pretty deliberate with regard to, you know, the, you know, turning this company around and doing something unique was, was, you know, reflective of our, our, our expertise in lateral, and that's clearly playing out exactly as planned. I think that the EOS element, I wanted to show you an example, I can show you a bunch of examples of, of watching the EOSync play out in real time. You know, when you start talking about, you know, gosh, you know, are we gaining access?

Speaker Change: Yeah, Thanks, Matt and.

Speaker Change: And clearly that's the long play right. It's I think that we've been we've been pretty deliberate with regard to the.

Speaker Change: Turning this company around and doing something unique was was.

Speaker Change: Reflective of our our expertise in lateral and that's clearly playing out exactly as planned I think the iOS.

Speaker Change: Element I wanted to show yet.

Speaker Change: An example, I can tell you a bunch of examples of of watching the EEOC play out in real time.

Speaker Change: When you start talking about gosh are we gaining access and how is it different.

Pat Miles: And how's it different? It's like, I recall when we had zero access. And, and, and so, you know, when you see places like, you know, Hospital for Special Surgery having, you know, I think nine of them or something to that effect. And you have all of these very highly sought after institutions having a bunch of them, you know, clearly, it is a valuable tool. When you look at the demographics of who's getting them, I would tell you that most of the people buying ESs were not customers of ours before, they are customers of ours now.

I recall, when we had zero access and <unk> and so.

Speaker Change: When you see places like.

Speaker Change: Hospital for special surgery haven't.

Speaker Change: I think nine of them or something to that effect and you have all of these very highly sought after institutions, having a bunch of them.

Speaker Change: Clearly.

Speaker Change: It is it is a valuable tool when you look at the demographics of who's getting them I would tell you that.

Speaker Change: Most of the people buying yes as were not customers of ours before they are customers of ours now.

Pat Miles: Historically, it's been more of a pediatric type of a tool. We've been very under indexed in pediatric surgery, but we're heading in that direction. And so the great thing is, is what we contemplated when we initially bought the asset was, how do we be relevant in adult deformity first? And because the pediatric utility was robust, it wasn't a place that we felt like we could make immediate type of influence. As we've continued to get more adoption in the adult deformity realm, you'll see the adolescent and pedesting follow suit. And so we think that our best is yet to come.

Speaker Change: Historically, it's been more of a pediatric type of a tool we've been very under indexed in pediatric surgery, but we're heading in that direction and so the great thing is is what we contemplated when we initially bought the asset was how do we be relevant in adult deformity first.

Speaker Change: Because the pediatric utility was robust and it wasn't a place that we felt like we could make.

Speaker Change: Immediate type of influence as we've continued to get.

Speaker Change: More adoption in the.

Speaker Change: In the adult deformity realm.

Speaker Change: Youll see the adolescent and pizza to follow suit and so.

Speaker Change: We think that our best is yet to come and we say things like that really numerically minded because we haven't touched parts of this thing that ultimately are highly valuable from a clinical perspective.

Pat Miles: And we say things like that, really numerically minded, because we haven't touched parts of this thing that ultimately are highly valuable from a clinical perspective.

Matthew Blackman: I appreciate it, guys. And I promise we'll all try harder next quarter to limit ourselves to one question. Thanks. Thanks, Matt.

Speaker Change: Alright, I appreciate it guys and I promise, we're all try harder next quarter to limit ourselves to one question. Thanks.

Speaker Change: Thanks.

Matt: Thanks, Matt.

Matthew O'brien: And next question comes from the line of Matthew O'Brien with Piper Sandler. Matthew, please go ahead.

Speaker Change: And next question comes from the line of Matthew O'brien with Piper Sandler Matthew. Please go ahead.

Samantha: This is Samantha on for Matt. Thank you for taking our question. I guess we just wanted to touch on just overall volumes, how those are trending, and then also any feedback on growth in the ASCs as well. Yeah, I would say, you know, our view is the market is healthy, and volumes are good. And, you know, I don't think he grew up 24% surgically, if it's not the case.

Speaker Change: Let me just anantha on for Matt. Thank you for taking our question.

Speaker Change: I guess, if we just wanted to touch on just overall volumes how those are trending and then also.

Speaker Change: Any feedback on growth in the ASC is as well.

Speaker Change: Yeah, I would say our view is is the market is healthy and volumes are good and.

Speaker Change: I think it grew 24% surgically if it is not the case and so.

Pat Miles: And so, and so just kind of a 60,000 foot view, I'll let Todd Pipe in, if you'd like to add any specifics. The ASC is a long play. And, and, you know, what happens is, is the most simple type of pathology gets done in a place where there's greatest, you know, where the surgeon has the greatest comfort and the greatest predictability. And so I think over time, you're going to see that change. I think there's guys today doing PTP and not patient setting, they're doing very simple single level type of things. But what happens is, is your ability to control pain for a patient, and your ability to limit the potential for complication is really kind of the driving forces of the ASC.

Todd: And so just kind of a 60000 foot view I'll, let Todd <unk>.

If you'd like to add any specifics.

Speaker Change: Yes, he is a long play.

Speaker Change: And what happens is the most simple type of pathology gets done in a place where there is greatest where they are.

Speaker Change: Surgeon has the greatest comfort and the greatest predictability and so I think over time, you're going to see that change.

Speaker Change: Theres guys today doing PTP in that patient setting theyre doing very simple single level type of things, but what happens is your ability to control pain for a patient and your ability.

Speaker Change: Limit the potential for complication is really kind of the driving forces of the ASC and so a lot of work like decompression and single level and maybe two level cervical and those are the major things going on there today, but I think you are seeing an evolution thats going to just take time.

Pat Miles: And so a lot of work, like decompression, and single level, and maybe two level cervical, and those are the major things going on there today.

Samantha: But I think you're seeing an evolution that's going to just take Awesome. Thank you. That's great.

Speaker Change: Okay. Thank you that's great and then I know you previously touched on the robot.

Pat Miles: And then I know we previously touched on the robot that's coming out, like you said, at the end of this year, and I just wanted to touch on that again and kind of any feedback on kind of what's left to get it launched and any feedback you've had from physicians. Thank you. Yeah, thanks. The feedback's been great. It places screws accurately, which is what robots in the spine space do. And so the software is very intuitive. The utility has been expedient. You know, my greatest concerns are always workflow. Are we increasing anesthetic time because we're trying to place a screw slightly more precisely?

Speaker Change: Coming out after you said at the end of this year.

Speaker Change: Wanted to touch on that again, and then kind of any feedback on kind of what what's left to get it launched and any feedback you've had from physicians. Thank you.

Speaker Change: Yes. Thanks.

Speaker Change: The feedback has been great.

Speaker Change: It places screws accurately.

Speaker Change: Which is what the robots in the spine space too and so the software is very intuitive.

Speaker Change: The utility has been expedient.

Speaker Change: My my greatest.

Speaker Change: Concerns are always workflow are we are we taking.

Speaker Change: Are we increasing anesthetic time, because we're trying to placements grew slightly more.

Pat Miles: It ultimately doesn't effectuate the clinical dynamic. I think that's, you know, I don't want that. And so we want to make sure that the workflow is very seamless. And so really what we're waiting on is our navigation piece and such that what we're doing is we're navigating an entire procedure. So meaning we're navigating the lateral space, we're integrating the robot in the posterior space. And so, you know, the beauty of PTP and to be able to watch a surgery whereby a surgeon has access to the anterior column, navigates that access, the PA closes while the surgeon operates on the back, like that level of expedience and that level of elegance from a workflow perspective is nonexistent today.

Speaker Change: Precisely that ultimately didn't effectuate the clinical dynamic I think thats.

Speaker Change: Yes, I don't want that and so we want to make sure that the workflow is very seamless and so really what were waiting on as is.

Speaker Change: Our our navigation piece and such that what we're doing is we're navigating an entire procedure. So meaning we're navigating the lateral space, we're integrating the robot in the post aerospace.

Speaker Change: The beauty of PTP and to be able to watch a surgery, whereby a surgeon has access to the anterior column navigate that access.

Speaker Change: P. A close is while the while the surgeon.

Speaker Change: It's on the back of that level of expedient net level of elegance from a workflow perspective is nonexistent today and so our opportunity to continue to be the purveyors of that is very <unk>.

Pat Miles: And so our opportunity to continue to be the purveyors of that is very apparent. And so anyway, so we're seeing the very thing that it's supposed to do with regard to the robotic piece. And as all a robot is, is part of a stabilization workflow. That's it.

Speaker Change: And so.

Speaker Change: So we're.

Speaker Change: We're seeing the very thing that it's supposed to do with regard to the robotic piece.

Speaker Change: And as all of the robot is part of our as part of our stabilization workflow. That's it and I think theres been some romanticizing of it today is Mr. <unk>.

Samantha: And I think there's been some romanticizing of it that is misdirected. Thank you. Thanks, Samantha.

Speaker Change: Thank you.

Speaker Change: Thanks, Amit.

Xuyang Li: And our next question comes from the line of Xuyang Li with Jefferies Young, please go ahead. All right. Good afternoon, and thanks for taking the question. I'll just keep it to one.

Speaker Change: And our next question comes from the line of young Lee with Jefferies. Young. Please go ahead.

Young Lee: Alright. Good afternoon. Thanks for taking my questions I'll, just keep it to one.

Pat Miles: On the spine market, I guess I'm kind of curious about the deferability and the resiliency of the market due to an economic downturn. Maybe try to jog your memory a little bit on, you know, if you remember sort of what happened to the spine market during the financial crisis as kind of like a worst-case scenario for any potential upcoming macro headwind. Yeah, I guess, and Todd could pipe in, you know, but, you know, I guess I shudder to say, you know, I was around in 2008. And not that my recollection is going to be very precise as it relates to the different years, but, you know, spine is not elective.

Speaker Change: <unk>.

Speaker Change: By end market.

Speaker Change: I guess im kind of curious about.

Speaker Change: The.

Speaker Change: Deferred ability.

Speaker Change: Resiliency of the market during an economic downturn.

Speaker Change: Maybe kind of jogged my memory, a little bit.

Speaker Change:

Speaker Change: If you remember sort of what happens to the spot market during the financial crisis.

Speaker Change: That's kind of like a worst case scenario for any potential macro headwinds.

Speaker Change: Yes, I guess in Antarctic pipe in.

Speaker Change: I guess I shudder to say I was around in 2008.

Speaker Change: Not that my recollection is can be very precise as it relates to the different years, but.

Speaker Change: Spine is not elective and I think that there becomes a dynamic to where it's like hey can they put it off and if you have neuro pain youre not going to put it off and so I would tell you that it's a highly resilient in the volatility of the.

Todd Conant: And I think that there becomes this dynamic to where it's like, hey, you know, can they put it off? And if you have neural pain, you're not going to put it off. And and so I would tell you that it's highly resilient in the volatility of the, you know, I'll speak to the current economic uncertainty. It's like, we're not seeing changes in volumes. You know, we're seeing a lot of demand for what we're doing. And so I would tell you, nothing has changed other than there's high demand for what we're doing. There's a robust backlog of things to do.

Speaker Change: I'll speak to the current <unk>.

Speaker Change: Economic uncertainty, it's like we're not seeing changes in volumes we're seeing.

Speaker Change: Lot of demand for what we're doing and so I would tell you nothing has changed other than.

Speaker Change: There is high demand for what we're doing there is a robust back.

Todd Conant: And and we're leaning in as aggressively as we can to this market. We love this market. We think it's it's it's helping people. We know it's helping people. And so that will continue.

Speaker Change: Backlog of things to do.

Speaker Change: And we're leaning in as aggressively as we can to this market. We love this market and we think it's.

Speaker Change: It's helping people we know what is helping people and so that will continue in yogurt I think to put a finer point on history, a little bit I think to Pat's point you go back to the financial crisis I think the.

Todd Conant: And, Xuyang, I think to put a finer point on history a little bit, I think to Pat's point, you go back to the financial crisis. I think the the analysis we've done would suggest that our market was reasonably robust during that point in time. And I think the other point is, as you looked at volumes that went through COVID, while there was certainly some staffing influence to to the volume, moving around, but the fundamental demand did not go away. And so we agree. Exactly. And so I, I, I feel like we're we're in a pretty good spot.

Speaker Change: The analysis, we've done would suggest that our market was reasonably robust during that point in time.

Speaker Change: And I think the other point is as you looked at volumes that went through Covid.

Speaker Change: While there were certainly some staffing influenced to the volume.

Speaker Change: Moving around but the fundamental demand did not go away and so we recognize exactly and so.

Speaker Change: Hi.

Speaker Change: I feel like we're in a pretty good spot.

Xuyang Li: All right. Great. Appreciate it.

Speaker Change: Alright, great I appreciate it.

Eric Anderson: All right, thanks, Xuyang. And our next question comes from the line of Josh Jennings with TD Cowen. Josh, please go ahead.

John: Alright, thank John.

Speaker Change: And our next question comes from the line of Josh Jennings with Didi Cowen Josh. Please go ahead.

Pat Miles: Hi, this is Eric on for Josh. Thank you guys for taking the question. I wanted to ask your latest thoughts around expansion into international markets. I know Australia and New Zealand have been a focus You had your first surgeries in Japan not too long ago. Specifically, I was just curious if your thinking internationally changes at all given the current macro landscape, or maybe not at all, but how should we be... Yeah, I think that we've been so affirmed by our approach. And and the way we built the structure of the company is we haven't built a huge international infrastructure to serve a place that's not profitable.

John: Hi, This is Eric on for Josh. Thank you guys for taking the question.

John: I wanted to ask your latest thoughts around expansion into international markets, I know, Australia, and New Zealand had been a focus.

Speaker Change: You had your first surgeries in Japan, not too long ago.

Speaker Change: Specifically I was just curious if youre thinking internationally changes at all given the current macro landscape or maybe not at all but how should we be.

Speaker Change: Thinking about that.

Speaker Change: Yeah, I think that we've been so affirmative buyer approach and the way we built the structure of the company is we haven't built a huge international infrastructure to serve a place that's not profitable and so we've been.

Pat Miles: And, and so we've been totally bullish on, on Australia, New Zealand, you know, I just because it's a top of mind, got a note today in terms of people reaching well north of 100 in their PTP experience down in Australia. So like, the thing is going as we intended. And so we don't have a big infrastructure, but we have a very narrow business that shares the same type of a surgical perspective as we do. And so love that we are in such the early phase of the second largest market in the world of Japan. And we have, you know, we have a light years to go in that market.

Speaker Change: Totally bullish on.

Speaker Change: Australia New Zealand.

Speaker Change: Just because its a top of mind.

Speaker Change: <unk> got a note today in terms of people, reaching well north of 100, and the PTP experience down in Australia. So the thing is going as we intended and so we don't have a big infrastructure, but we have a very narrow business that shares the same type of a surgical perspective, as we do and so love that we're in such the early phase of the second largest market in the world.

Speaker Change: Japan, and we are we have a light years to go in that market. So I love kind of our thesis as it relates to let's say focal let's take completely committed to our marketplace. Japan also is a great deformity market. They love <unk>, our opportunity to ultimately lay the foundation with lateral and evolve.

Pat Miles: So I love kind of our thesis as it relates to let's stay focal, let's stay completely committed to a marketplace. Japan also is a great deformity market. They love EOS, our opportunity to ultimately lay the foundation with lateral and evolve into the EOS translation is so apparent. And so anyway, I think that we're well positioned. There's really not a lot of interest to go outside that dynamic. I think our internal build thesis has reflected as much. Eric, narrow and deep. That's what we've always said. And I think that's what we're seeing. And to Pat's point, I think the strategy is paying off and we got a huge run in front of us in there.

Speaker Change: Into the iOS translation is so apparent and so anyway, I think we're well positioned theres really not a lot of interest to go outside that.

Speaker Change: Dynamic I think our internal build.

Speaker Change: This is reflected as much.

Speaker Change: Eric narrow and deep that's what we've always said and I think that's what we're seeing and to Pat's point I think the strategy is paying off and we've got a huge run in front of us and internationally and.

Eric Anderson: in the markets that we've chosen. Understood. Yeah, that makes sense.

Speaker Change: In the markets that we've chosen.

Todd Conant: And if I could ask one quick follow up, just on pricing, generally, if I think about commentary from some med device management teams lately, in ortho specifically, it seems like in the last year or so, we've sort of entered a new era for price. Certainly for companies that are introducing innovation to their respective markets. And when I think about Spine, ATEC definitely fits the bill there. So I was just curious how your team is thinking about. One quick point, and Todd will put the specific on it, is you know we still believe in this whole convoyed sales thing in terms of the procedural price and what we're seeing is more products increment per procedure and and so as it relates to historical pricing degradation we're not seeing it because ultimately what we're seeing is the reflection of the convoyed sales, the the accumulation of the procedural elements.

Speaker Change: Understood that makes sense and if I could ask one quick follow up just on pricing generally if I think about commentary from some of the device management teams lately.

Speaker Change: Ortho specifically it seems like in the last year or so we sort of entered a new era for pricing.

Speaker Change: Certainly for companies that are introducing innovation to their respective markets and when I think about spine <unk> definitely fits the bill there. So I was just curious how your team is thinking about pricing.

Speaker Change: One quick point and kind of put the specific on it is we still believe in this whole convoy sales thing in terms of the procedural pricing and what we're seeing is more products per procedure and so as it relates to historical pricing degradation, we're not seeing it because ultimately what we're seeing is a reflection of the convoy sales.

Speaker Change: The accumulation of the procedural elements.

Eric Anderson: Yeah, you know we often talk about kind of same product, same store, year over year, being a very low single-digit decline there. Our innovation engine, the ability for us to launch new product and really mix our way out of some of those headwinds has been our history, will continue to be our history, and to Pat's point we're just getting more of the procedural revenue opportunity as we continue to grow. That makes sense. Thank you for the questions. Thanks, Eric.

Speaker Change: We often talk about kind of the same product same store year over year being very low single digit decline there our innovation engine.

Pat Miles: The ability for us to launch new product and really mix our way out of some of those headwinds has been our history. We will continue to be our history and to Pat's point, we are just getting <unk>.

Speaker Change: More of the procedural revenue opportunity as we continue to grow.

Pat Miles: That makes sense. Thank you for the questions.

Speaker Change: Thanks, Eric.

David Saxon: And our next question comes from the line of David Saxon with Needham.

Speaker Change: And our next question comes from the line of David Saxon with Needham David. Please go ahead.

Todd Conant: David, please go ahead. Oh, great. Good afternoon. Thanks for taking my question. And congrats on the quarter.

David Saxon: Oh, great. Good afternoon. Thanks for taking my question and congrats on the quarter.

Todd Conant: I think this is probably more for Todd. But Todd, you've talked historically, maybe two, two years ago, or over the course of a couple years ago, about letting 10% of the top line outperformance drop through to the bottom line. I mean, as the numbers get bigger, you know, maybe the upside gets a little smaller. But is that still a good way to think about it? Or has the size of the business or kind of how you think about the near term opportunities? Opportunity change that framework at all. Thanks so much.

David Saxon: I think this is probably more for Todd, but Todd you've talked historically, maybe two two years ago or over the course of a couple of years ago about wedding, 10% of the topline outperformance dropped through to the bottom line.

David Saxon: As the numbers get bigger maybe to the upside gets a little smaller but is that still a good way to think about it or has the size of the business or kind of how you're thinking about the near term opportunity changed that framework. It all thanks so much.

Todd Conant: Yeah, thanks, David. You know, I think you look at our, our drop through in absolute terms, in Q4 of last year was 49%. We delivered 44% of the incremental revenue year over year to drop through to adjusted EBITDA. And, you know, I think even on the beat, we dropped through a significant amount of that to the bottom line as well. And I think you're, you're just seeing a level of focus and effort on driving profitability and cash utility. You know, I think You'll continue to see that through the balance of the year. Great, thank you.

Speaker Change: Yes, Thanks, David I think you look at our our drop through in absolute terms.

Speaker Change: In Q4 of last year was 49%, we delivered 44% of the incremental revenue year over year to drop through to adjusted EBITDA.

Speaker Change: And I think even on the beat we dropped through a significant amount of that to the bottom line as well and I think youre, just seeing a level of focus and effort on driving profitability and cash utility.

Speaker Change: I think.

Speaker Change: You'll continue to see that through the balance of the year.

Speaker Change: Yes.

Speaker Change: Great. Thank you.

David Saxon: All right. Thanks, David.

Speaker Change: Alright, Thanks, David.

Mikayla: And our next question comes from the line of Caitlin Cronin with Canaccord.

Speaker Change: And our next question comes from the line of Caitlin Conan with Canaccord Caitlin. Please go ahead.

Mikayla: Caitlin, please go ahead. Hey, guys, it's Mikayla filling in for Caitlin. Thanks for taking the question. We've seen a focus with some recent M&A on the interventionalist call point, so I was just wondering if there were any plans to leverage the interventionalist call point or how you're thinking about that. No, I'm just being snarky. You know, our business is the spine surgeon and the alignment with what the spine surgeon does. And we feel very strongly that that we have a customer with whom we have aligned interest, we have a sales force with whom we have aligned interest.

Speaker Change: Hey, guys. This is <unk> filling in for Caitlin and thanks for taking the question.

Speaker Change: We've seen a focus with some recent M&A on the interventional, let's call point. So I was just wondering if there are any plans to leverage then differentially powerpoint or how youre thinking about that.

Speaker Change: No.

Speaker Change: I'm just being snarky.

Speaker Change: Our business is the spine surgeon and the alignment with what the spine surgeon does and.

Speaker Change: We feel very strongly that.

Speaker Change: We have a customer with whom we have aligned interest we have a sales force with whom we have aligned interest.

Pat Miles: And, you know, we think that defocusing our organization into a interventionist or pain environment would be a huge mistake. And so that's just our candid view. Got it. Thanks so much.

Speaker Change: And.

Speaker Change: We think that day.

Speaker Change: Focusing our organization into a interventional pain environment would be a huge mistake and so that's just our kinder view.

Speaker Change: Got it thanks, so much.

Speaker Change: Yes.

Pat Miles: Thank you, Michaela.

Speaker Change: Thank you Michaella.

Sean Lee: And our next question comes from the line of Sean Lee with H.C.

Speaker Change: And our next question comes from the line of Sean Lee with HC Wainwright John Please go ahead.

Pat Miles: Wainwright. Sean, please go ahead. Hey, good afternoon, guys, congrats on a good quarter, and thanks for taking my question. For the last couple of years, you guys have been making a big push on the EOS and informatics, and let's say the whole pre-op planning, the interop monitoring, and the post-op analysis. So I was wondering if you can provide some color on which parts of this system are seeing the most use right now, and where do you think the biggest growth is going to come from in the future? Yeah, it's a great question, Sean. The, I think, you know, the dynamic is one of maturity.

Sean Lee: Hey, good afternoon, guys. Congrats on a good quarter and thanks for taking my question.

Sean Lee: For the last couple of years, you guys have been making a big push you on the yields and informatics and let's say filed flip the whole pre op planning Dean trough monitoring the post op analysis. So I was wondering.

Sean Lee: If you can provide some color on which parts of the system seem the most used right now and where do you think the.

Sean Lee: Its growth is going to come from in the future. Thanks.

Sean Lee: Yes.

Sean Lee: Great question Sean.

Sean Lee: I think the dynamic is one of maturity and.

Pat Miles: And, and, you know, when you when you say, gosh, how have you built the business from, you know, gosh, back in 2000 2018, it was like 89 million headed south to what's our guidance is 734 734 head north. And, and I would tell you that what's what's created the uniqueness in our lateral effort, core part of it is telling a surgeon, hey, there's a nerve right there. And this is the health of the nerve. And then now we've added, you can understand the motor pathway of the nerve, like these things, if you look at your skin to spine from a lateral perspective in the flank, the most concerning anatomy is neural.

Sean Lee: When you say gosh, how have you built the business from <unk>.

Sean Lee: Cash back in to 2018, it was like 89 million head itself.

Sean Lee: To which our guidance is 7734 734 heading north.

Sean Lee: And I would tell you.

Sean Lee: What's created the uniqueness in our lateral effort a core part of it is telling a surgeon hey, there's a nerve right. There and this is the health of the nerve and then now we've added.

Sean Lee: You can understand the motor pathway at the nerve like these things if you look at your skin to spine from a lateral perspective in the flank the most concerning.

Sean Lee: Anatomy is neuro and so but to be able to provide that level of neuro.

Pat Miles: And so to be able to provide that level of neural precision and sophistication is, is not done anywhere. And this is why, you know, it's not a coincidence that we're growing at the rate that we are, we are the lateral maven. And, and so then you say, gosh, when did we buy? And when do we start the integration process with EOS? And I would say it really 21. And, and really, in earnest, you know, you get together as a company, you fund the things that can only weren't being funded, you start to get on the road of automating things.

Sean Lee: <unk> and sophistication is is not done anywhere and this is why.

Speaker Change: Not a coincidence that we're growing at the rate that we are we are the lateral maven and so then you say gosh when did we buy and when do we start the integration process with <unk> I would say it really 'twenty, one and really in earnest.

Speaker Change: Together as a company to fund the things that you can't really weren't being funded and you'll start to get on the road of automating things. So we spent 22 in <unk> and 'twenty.

Pat Miles: So we spent, you know, 22 and, and, and, you know, 23, shoring up the unit and designing some of the software elements. And gosh, we, we recently, last year launched the insight software such that that's the translational tool. And so I would say we're in like the, the first inning from a EOS perspective, and we're in the third inning from a safe out perspective. And, and so there's such a runway on both those things. I think surgeons are yearning for it. You know, the challenge with this environment's been people have been consumed with the currency, which everybody wants to sell pedicle screws, but you sell pedicle screws and implants based upon your shared interest with the surgeon who's trying to care for a patient and understanding what the procedural requirements are to execute.

Speaker Change: 'twenty three.

Speaker Change: Shoring up the unit in designing some of the software elements in cash we recently last year launched.

Speaker Change: The insight software such that that's the translational tool and so I would tell you. We're in like the first inning from a <unk> perspective and were in the third inning from a safety perspective, and so theres such a runway on both of those things I think surgeons are yearning for it.

Speaker Change: Challenge with this environment has been people have been consumed with the currency, which everybody wants to sell pedicle screws, but yourself pedicle screws in implants based upon your shared interest with the surgeon who is trying to care for our patients and understanding what the procedural requirements are to execute.

Speaker Change: Yes.

Pat Miles: Thanks a lot. That's very helpful.

Speaker Change: Thanks for that that's very helpful.

Sean Lee: All right, thank you, Sean.

Speaker Change: Alright, Thank you Sean.

Pat Miles: And that is all the questions we have today, so I will now turn the call back over to Pat Miles for closing comments. Pat. Thanks, Greg. Just want to thank everybody for their interest in A-TECH. I want to remind you that we are the Preferred Destination and excited about the business that we serve. And so, thanks for your time.

Speaker Change: And that is all the questions. We have today. So I will now turn the call back over to Pat miles for closing comments.

Speaker Change: Thanks, Greg just want to thank everybody for their interest in <unk> I want to remind you that we are the preferred destination and excited about the business that we serve and so thanks for your time.

Greg: Thanks, Pat.

Unknown Executive: And ladies and gentlemen, that concludes today's call. Again, thanks for joining. And you may now disconnect. Have a great day, everyone. Thank you.

Speaker Change: Thanks, Pat and ladies and gentlemen that concludes today's call again, thanks for joining and you may now disconnect and have a great day everyone.

Speaker Change: Thank you.

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