ATEC - Earnings call transcript Q2 2018

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Operator

Good afternoon, everyone, and welcome to Alphatec Second Quarter 2018 Conference Call. We would like to remind everyone that participants on the call will make forward-looking statements. These statements are based on current expectations and are subject to uncertainties that 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 reported amounts, which are in accordance with the U.S. non-GAAP forma as well as or measures. pro GAAP U.S. of non-GAAP to measures Reconciliations excluded management's in GAAP is which press all the can useful identify and the quantify financial be found to supplemental investors. tables this of views why included in and items information provides release,

Joining the Black. Jeff will call be CEO, Chairman and CFO, us Miles; Rich; President and on Pat and today ATEC's COO, Terry

to like Terry call Rich. to I'd Now over turn the

Terry Rich

Thank you, everyone. and Valerie, welcome,

strategic the million, ATEC's progress of U.S. being that Second priorities. quarter our second $XX.X Total generated U.S. revenue with was marks results XXXX. up the in by demonstrate since sequential growth rate commercial made sequentially, business the quarter highest X%

to by We be teams the encouraged are our day. continue victories experiencing every

we the increasingly vision are core The progresses, our demonstrating of most shape. taking our improvement. are new is we long-term that for believe metrics are business significant the predictive confident As our of ATEC health transformation

in our outpacing our a For growth visiting want example, we about by overall. of to relationships programs Conversions these more is learn driven experience doubled the surgeons than new the ATEC surgeons Revenue strong. for who of more surgeons hosted substantially educational number record ATEC. events, new new the sequentially, second quarter, through revenue

at new are new indicators and considering sophistication are in into initiatives field. commercial was we Growth the dedicated legacy During transformation XX% dedicated these XXXX. the a up level enhancing June, the the sales ATEC making This business U.S. interest to simultaneously new second of the we distribution encouraging, sales products. generate especially we The the our ATEC from and reengaging revenue, the progress average their transitioning family. shipping of integrating ATEC attributable highest reached key impact year. volumes percentage lead driven In of the network, the of partners, force surgeons in XX%, the is daily the substantial that by while quarter, so end far strength expanded continues of growth without to to distribution quarter to driving, surgeons this by

volume, sophisticated to in would ATEC Emery Channel and These President our members and our to we are to regard spine exceptionally vision. who are Dave ATEC. coming of relationships not influence Controller. team call to board, As Finance the experience in leaders success I'm I the With that serve field. simultaneously Region South Rooney, the exceptional to spine also and distribution more ATEC to I pleased Development. partners long-term our know to do Jud, over Sales new bring X Vice President new distribution nondedicated talent, the With decades with to Central we higher leadership. like Sponsel, terminate proven vision. welcome to Area Vice had appointed of welcome ATEC track Robert our achieve with people continuing family turn newly working President them for to forward the industry I'll on that, Pat. Vice sales look records of

Patrick Miles

to in biomechanical cultural throughout field. Thanks have we and informed representatives the transformation Jerry, deep in clinical so our point development, exciting network ATEC. into driven of everybody. and an afternoon, know-how continuing engineering most organization. our talent, attract the and much, every good spines of to product at marketing, From department We're By teams, organizational the

being made the half to will and impact revenue are phase ATEC second of clinical of scenes. ahead. XX% skilled beginning of the spine begin advance next machine, of radically to creating over building come portfolio infrastructure place capable key our efforts outcomes. but Today, improves distinction In an patient is innovation the those results The transformation We taking XXXX. launched lies metrics, reflect our fruition. business The are to generated investments or don't fruits to a our the by innovative developed in powers the products of this that in before of year, behind

increasing XX surgical lunches, Alpha our new contribution product, broad range address uniquely a to revenue procedures. expect We from of that

the that because mission creating. and wholeheartedly to us they We most their energy the our talent lunches XX into a time monster. that some Jeff time, powers cannot trust harnessing recognize sophistication that, The years. surgeons know innovation call is ATEC. needs to largely a build and to with are deliver. market distributors exceptional investing of portfolio to we turn however, and build industry's the the like wait know the change was takes for We undifferentiated team's the to Alpha prolific I'd Transformation for results. new and reflect It in XX-plus are a and on the into new that I've seen the have with innovation anything spine They financial coming the brought we believe speaks new we machine and with volumes over organic our in and is to ability year ATEC. people that in are par in And

Jeffrey Black

and everybody. Pat, good you, Thank afternoon,

of quarter revenue same U.S. dedicated saw time channel, commercial and from million, growth we XX% U.S. our $XX.X commercial the revenue second distribution was of more our at Our sequentially, revenue. up grewed which than X% XX%

to we're was revenue expanded beginning distributor strong, in surge efficiency. New drive and

the in first XX% in XX.X% the second was margin gross compared to U.S. Our quarter. quarter

throughout U.S. to expect as half of gross stabilized our at level we this and XXXX. remain work to optimize supply chain, the margin is second roughly we Our

the sales $XX.X transaction-related expenses, expenses, compared attributable first support litigation increase non-GAAP gain expense, to primarily million in the in compensation, which a development. is in million product second investment to and on a and restructuring operating The Our quarter sequential quarter. quarter. the contract settlement million stock-based $X.X $XX.X in exclude expenses first We're

and our aggressive launches. across marketing. sales and development, those into You'll will Alpha recall business, of We operating the particularly course in over investment continued anticipate implemented efforts This business support growth-related do that an we in functions XXXX continue all rationalization XXXX, the product today. expense investment XX

cash, XXXX, in operating expense to exercises. the $X.X ended million which with included dollars from relative result both warrant of proceeds as We As and in nearly absolute increased million in have percentage quarter a revenue. $XX second a

debt and costs, continued the into transaction-related usage cash even reflecting careful increased was in the Excluding management business. cash service investment operating million, $X with our quarter

approximately expect continue $XX for full the revenue total to XXXX. We of million year of

will now the As the respected intently in We and long-term to call we comments. the continue evolve to execute the we decisions the this strongly inspired Pat being fastest are over we focused the growing process. on that turn U.S. company. I'll closing ATEC transformation, are that made vision for spine driving most ultimately initiatives feel

Patrick Miles

their I'd closing to everybody for support. Thanks, thank like In Jeff.

becoming has been machine Our innovation organic stronger. about optimism an never

Second quarter confidence. our validate results

We market innovations for outcomes spine the I it. long-term to in that confident introduce will have ATEC programs transformation. entered collective direction now turn decisions on our I value. investment questions. convinced over wait improving made Spine's a I and that any am absolutely call new create to underway. already can't fully greatest the surgical the the is a I'm roof. now to of being meaningful the will expertise resides the significant phase right this of the under relentless operator, in for focus Valerie,

Operator

[Operator Instructions].

Street Capital. question first of O'Neil Brooks Our comes Lake from

Brooks O'Neil

half, I focus the product like innovation, specifically, pipeline, feel, more product ask a of can questions. help give Just around XX areas might to some Jeff, you've couple more that a any Alpha excited you you mentioned mentioned, think the the of us product of lunches about us Guys, be for second for outlook? innovation

Patrick Miles

think systems And of we in Brooks, I at year. been implant different plenty instrument undifferentiated sure. of see Literally is procedures number Pat, have Yes. see half of the that evaluations this for start you for across that implant you'll opportunity. back a the to years, look number a if of in the

across see also the implant clearance mostly that be of to evaluated XXX(k) and to start be verified -- the going we've for to made, desire You is procedures multiple it's our will SafeOp through this that year. end investment but system will get

Brooks O'Neil

what's Okay. those through fall, part see or timing, allow this the of will And year? the back the will of sort we Pat, later

Patrick Miles

Yes.

So question, appreciate Brooks. the

titanium case evaluation approach a of quarter. of ran our an porous end we literally, a the at the So posterior getting Alpha from or at

And year. end now through start so these is until to flush our the the will -- things desire of out from

Brooks O'Neil

in Great. item? than of, And question, expense the that modeling. maybe expense and I organization was sort understand was higher line you have couple But might to the what just like for I of G&A a expect Look completely. little about, that of Jeff. particular one sort could then quarters Obviously, talk build over I next you're continuing just you

Jeffrey Black

Yes, absolutely, Brooks.

with litigation favorable in our so then it's the And So release are first that that the a continue, something and couple there will costs. press very did in we're up of tick primary driver existing talked is costs. drivers core they there, litigation, we associated had the of compensation believe costs litigation-related stock-based are for outcomes level, at about We costs, uptick said, but continuing like G&A support expenses, so managing. well litigation was terms G&A, to stock-based operate right but our we're expect I as see continue we we an an the that to there in don't in uptick core we'll G&A manage to costs, as compensation the

Operator

of comes question H.C. Swayampakula next Ramakanth Wainwright. from Our

Swayampakula Ramakanth

portion that conservative To there you year talked that of X for the understand start momentum and number? we off think especially Do in increased guidance well your really the in is you going percentage the June. with distributors don't is that about of something the or

Terry Rich

I but some to pointed direction. will $XX but that be year. feel out, million channel, think, various the we we again, as confident, good this And distribution we came times, transition well, about you earlier the with remain the at out lumpiness there continues

Swayampakula Ramakanth

Okay. these talked products, final or think will time end normally And should initiating year of all becoming and Alpha next the become of meaningful. the a contributor, product about, can between which these Alpha launches a XX the that launches early become Alpha launch also, we XX Alpha And launches, you that then, by say, revenue what's year? lag regarding the

Patrick Miles

Pat. this is RK,

launch the to relates full of an timing, what's it a in a between timing terms great and launch. alpha As it's the question

beginning being has of predictability. much from our EFOs about the this So business of in been

with want And is our absolute so have predictability products. to performance regards to sure the make of that what we clinical we

On find make so the time what you and oftentimes to is launch potential really quicker. been that things see. less do of you you can much time its unexpected the fully appreciate is a what And have through evaluation a any of systems, you sure things you're some that able want of way to technology simple more if a other in get implant taken paces to that has the

to super that a time And was a on What answer. the I go you tell few to that going there you system, not and usually the going every element timeframe. a sure to which a usually implant you're of is make I'll then build, make clear XX-day that to be freeze wish changes there's any you evaluation, so a such is design and months

we hopefully, and so bit that color to how enough the gives understand And a a to little you think experience garnering about performance of freeze and a then going purchase. a around

Swayampakula Ramakanth

gross Thank X on Pat, about we last about question you much, we margin. The over margins for how say, is and What to for should trend think should very it's gross X going years? me that. or the, forward next think

Jeffrey Black

Yes, Raj, is Jeff. this

drive us. giving think now you beyond we're be fixed raw remain is, leverage be about to But We'll Because relationships a think is is cost renewed starting the of I There for going tailwind, takes. new it. reductions down. expectation the to while to right probably is kind to on levels. relationships should fair way as extremely the scalable low-XX% and chain, right? And margin XXXX think So in are of to supply guidance will, got if great you and see amount well continue materials. cost gross frankly, there'll is We've around volume XX% expect our not that I to costs relationship puts components -- we're as some range these

Operator

Scott Gambill question Our Financial. Gardner next of comes from

Scott Gambill

involved I It's three my Alphatec. I first time got questions. live have since call on with I've a actually been

this amortizing remember at about first the begins end think million of have one that? quarter. if about the Am you $XX I correct I I correctly, that

Jeffrey Black

That's talking we our -- September. That's our of were about $XX amortize correct. correct. the million will million begin Yes, $XX term term to loan. at end

Scott Gambill

be so going if to to -- or I'm refine the curious are that what? to going plan or just off far managing as what how Yes, it's you as paid is

Jeffrey Black

number a actively Yes, it about addressing. of maturities. it's say suffices to the that extend that debt at to but question. something actively we're refinance this at great Nothing a Scott, is prepared It and looking we're to we're talk point, opportunities

Scott Gambill

-- there the meat though? I saw this you you as do wrap far Ideally, dealing quarter on that? you as could? if lucid with mean are Okay. up Or timing

Jeffrey Black

to but the better about sooner think Yes, We're for the timing, sure. sooner specific the talk better. and not I prepared absolutely

Scott Gambill

was X for My question, I'm the that that not looking anywhere. seen happened All not Okay. expected XX I correct but has if would I'm some next that right. yet scenario, just I call that mid-quarter, it assume SafeOp on certification. so last sure have because I'm not do a about again, the that

Patrick Miles

And and overly some behind tell would other concerned this requirements testing of a submission it -- exactly everything will in moving just relates is are Pat. not we in you what business being company nominal, I fine. about so What the go correct, it this get the and not quarter -- You along happens companies, that we'll... or largest is to as placed is this -- it's been

Scott Gambill

I not that can do I'm you somewhere. for elbow you still pin a to year-end just ready it that about was but get Okay, give to guys market or little too now? trying you either, believe want it more room Do bit by that worried

Patrick Miles

Yes.

was in of the intention it launch Our 'XX. to beginning

we're for but track earlier that, And on would than you wanted tell I later. so I that clearly

Scott Gambill

the little I is guys board, Okay, and and question last might you I'm you that's September after it NASS had NASS. so when saving assume great. And year. talk coming a last for the happened, on now, if because see October, this right, last to some effort out that's right continuation -- jumped -- of NASS explain. of more coming back going for I is then My dialogue require recall occur right was it now to is going some about that, out at all I various metrics Pat, bit conversation, end you of the these of guys you NASS? of that success to

feel all new And let's put of NASS? be products you this that for coming some wondering of of may what goals we XXXX, part be portfolio about this just of how presumably two. when guys I'm So round together, will And your of approaching out say?

Patrick Miles

Thanks we demarcation need and the been unto Yes. as as I long-term a at you, build will the a we value. of we're are relates itself huge making a things a year is people not of these one deal. hell having It's of NASS, is NASS a ultimately type question. tell here for where, getting progress of it lot to that to

them innovative together. to high think quarter-to-quarter nimble so demand. are I is out and together, And and that that such would small got it created you, making in the where coming demographics progress this think like technology are products we I to of coming vision marketplace I the tell of clearly companies that just of are

into it assembled kind on And that DNA so as relates to the you the get NASS, people some don't but take specifics the of call. to really it that will group will time the see of we that want have soon of of enough, here the

Operator

conference closing further over Miles this like for time. remarks. Pat no at the to showing to turn I'd any back questions I'm

Patrick Miles

Just endeavor, to next talking to this to and appreciate quarter. you support Thanks of look forward much. everybody's

Operator

Ladies today's and Thank conference. Thank a for does and this you day. gentleman, your conclude have participation, wonderful you.

may all You disconnect.

Alphatec (ATEC) 5 Aug 182018 Q2 Earnings call transcript