ATEC - Earnings call transcript Q4 2019

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Operator

Good afternoon, everyone, and welcome to Alphatec's Fourth Quarter and Fiscal Year 2019 Financial Results Announcement. 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 could cause actual results to differ materially. These uncertainties are detailed in documents filed regularly with SEC.

During this call, you may hear the company refer to reported amounts, which are in accordance with 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 view why included in and items information provide release,

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

Alphatec will Pat Miles, CEO of to the Chairman over Spine. call turn Now I and

Patrick Miles

Thank year call. you, and XXXX QX to full and welcome the conference

very Medical's interest quarter. coming expanded your in OneFit appreciate ATEC, Besançon, are I -- statements are We we much to France, and We this Medical. forward-looking the home -- from you of EOS EOS'

we So at so those review your X leisure. have pages, please

on our We new XXXX. X, from an footprint we We less than Neural XX Slide OR new in commitments. established in was percentage products. to and platform revenue on SafeOp the increased of year our XXXX the XX% launch delivered of XXXX clearance for Monitoring and with great launched So really a ATEC. XX% We product

year We original full XX% sales and network. the XX% we strategic full sales the finished the year was target and growth XX%, targeted at XX% within at of growth growth. initially beginning the drove year year we growth within year network, of the The was strategic the and at revenue XX% -- between finished the

revenue expanded very surgery, year. XX%, also per a We so good

XX% look from a and you on little at back QX is X, If bit to 'XX. QX see growth of peel see QX what we Slide 'XX you XXXX

'XX. XX% average revenue growth, to 'XX quarter consecutive to daily So U.S. sales XX% year-over-year QX growth. QX a QX significant Fifth of double-digit amount sequential in from and accelerating QX

very strong a of So financial perspective. again, from really execution a year

a compel gosh, the year. started be create sales channel, distinction, we If we it'd to year to if said, can X, and the clinical very adoption initially we and surgeon and Slide say, start good you go revitalize

was progress X. in the what at look a Slide QX take let's So on

So come started talk year organic is that in QX, the products, machine, came -- think XXXX, new our less about -- new revenue we And from to we I which of had revenue of from outstanding. our we innovation speaks when products. when the than XX% XX% it

our launched year It's cornerstone of the of be also obligation SafeOp out XX Neural We going fulfilling finished operating to the the System. products. distinction really And InformatiX our additionally, commercially the room. releasing in

are, case rate "Gosh, surgeon If new you a inception go we growth a XX% say, to 'XX. we XX We QX 'XX the part 'XX had highest top with a It's QX as of growth from compel X.X. QX talked per who QX adoption?" X, Slide 'XX. how we we about We And QX increase we get of the sales had 'XX you do always and versus XX% entire procedure? revenue ATEC. the the And big the do versus the revenue in surgeons being then so convoyed how since finished

I think, success So of of ratchet of surgeon really use, products metrics again, adoption. is of surgery up continue number we our per a which, one compelling see telling the the to in

network. start significant When of significant had revenue from distributors, dollar contribution we you increase. growth. the channel, increase growth revitalizing comes our revenue strategic at dollars you look amount revenue -- a look top XX% our the to per per to And start overall XX% from again, revenue, another when at XX the XX% very sales in of distributor,

a solid then So XX% speaks strategic the within revenue to foundation and growth distribution it network.

in in XXXX. year and a translated XXXX year. So XXXX a all that in great built all, was was It was

with So have. the couldn't that be excited year more we

XXXX. new forward to start ATEC really the as forward do what and in look look to to XXXX into let's is So going

terms products. what so what is new a compel amount to come that index going going is means is surgeon distinction. from in going our clinical we're what from do And vitality continue we're adoption to to of with to of And revenue

that new our from products revenue believe come of XXXX. XX% we in will So

X guidance will to new million XX From product to We We perspective, to unique previously expect sales a $XXX categories per EOS U.S. convoyed integration of we we're X about to the launch focus XXXX again reach talked another Imaging. then And million. sold of is surgery. $XXX launch products. XX% that of revenue going a going big be

And growth for so a again, continued a strong look we and great year.

improving We you started really is outcomes. in clinical are big source with making it information decision-making Imaging added go another XX, to better a as better to information, we outcomes and more driving SafeOp, based we've out physiology where and difference drive patient is recently If Slide information. of in which

is of anatomic you patient-specific opportunity. those globally. EOS full provides EOS XXX weight-bearing provides significant a They XXX to a in us with and image rapid foundation, calibrated so and The For body is of is who technical enables publications. customize than a familiar excited. academic It which modeling, They really ton not a start what it have provides with XD units exceedingly peer-reviewed are bi-planer Imaging, us have Imaging to greater installed virtue just influence you, care scan. and

for a these XX, we experience, operating created could we in acquisitions, can influence spine sequence is conduit Part the surgery. the deliver to go if Page of you that operative SafeOp information. to better room us better into really If inform of the

on there's clinical the shows great the XX the the Alignment focus is to to The a of outcome. the deliver that One objectively surgery. and the operating of of has ultimately element picture of manage is delivered alignment. key of image, is which the the that we source conduit room. effectively long-term most slide correlative the challenge on areas been And image the operating XD Slide as a by so reconstruction not room, alignment during successful to

really in-surgery, post-op preop as assessment end-to-end information expand follow-up. get as ATEC more important And well or much this space. a the all It in from through care to of from so the now planning, makes player stages we diagnosis really

how bit inform. me about give And you we little a let

going so to thing influences look and create in ultimately the diagnosis. which left-hand corner ability the And lower to you're is the an first image, do

If with see of informs and image dynamics it the the diagnosis little there's yellow into we you plan. could that reconstruction circle, surgeon, associated create that oftentimes XD compensatory then the the can a input surgical

of levels, this for understand that ability significant we number the platform. of need we need angles Our to type the that the surgery levels, with the becomes from instrumentation the

specific look The other thing what we products we the send at do start to in is that surgery. can

number inefficient in send to surgery. spine that the surgery any they with regard of very products I think everybody appreciates that for individual is

Our upon send capacity of significant products to preplan a we fulfill surgery start based have to opportunity. to to a is specific a limit the number in

data then to did out and So is how start to information, of to as information the against in implants. the the our postoperatively of plan and to access a the to opportunity ultimately ability surgical well will ability our plan. of ability specific this control into dynamics The start as close surgical assess type terms to the we create original a come plan significant OR peel cloud with drive deliver the and reconcile surgery associated individual that a patient-specific

is to correlate So images these the X ability significant.

a a images. in is ability when have to then this inform calibrated a and is time surgical about talk to planning then and and can ultimately, it have opportunity a do. about your So to correlated, that plan process do significant you again, X you we technology talk way will the nobody time And else that time and we time that start

excited or the be And acquisition bullish so we Imaging. cannot of EOS about more

And long-term that's if we're value. informs how Slide believe turn outcomes, committed improved build we what and you to, that you that's to XX, it and

sales the draft ATEC inventory that channel, placed XXX the will partner we planning believe enhances starts clinical a it to that clinical we they here elevates and our reputation. the complements draft optimizes provide it strength cost meaning great it that international positive us that we has will brand, units sales to the the to -- off and So have the significantly lessens the serve, prowess, future And access will off reenter it in areas marketplace with a both additionally, in. we

and I financials. it Jeff that, run with him through will turn the so over to And let

Jeffrey Black

the Pat, about financials look the bit press in highlight today. gross call the give But revenue, a you, talk I'll released sheet. and at thank and of on quick today encourage participating a you, take highlights, balance full everybody, release. you a for that we in set margin, Thank also would some P&L to the

year. as on more strong XX% than on in strategic and the We from Pat both fourth quarter commercial is a of mentioned, saw And distribution. traction by performance new products. 'XX, this Slide strong the very growth really heels full So

decline in greater a expected than also did and to see. we We see legacy terminated

quarter year-over-year and certainly in XX% year-over-year the pleased by year. we're just XX% fourth under for So growth the full

for about expecting In XX% XXXX, U.S. in terms we're outlook growth revenue. product of total

We from and expect and we'll see distribution decline. between XX% channel, legacy and strategic terminated our to continue XX%

Slide in and XXXX than a a quarters, we on XX, of taking new significant we ramp past and write-downs since product or XX% XXXX with very we've revenue introductions in began aggressive a products. new about XX% of little our legacy in product Very by bit communicated revenue products, saw consistent very what on margin. greater our adoption, was our driven legacy

in continue XXXX, to noncash see about then and we'll and XXX see reflect normalize start So level pressure E&O. at it our margins in in that beyond. basis 'XX to about We'll points

some Slide P&L quick highlights. XX just

we're theme channel. -- really in actually sales line again, product in portfolio, new R&D the We've here, distribution. in we're investing significant held making and G&A. of the think make to on common significant investment investment the the is investment the a in Most I continuing

In has to flat XXXX. fact, XXXX been G&A

balance couple cash. sheet. ended on a in year And of XX, million the the $XX.X comments with We

term of required last $XX secured the debt, importantly, the to be in for that might million used be to up think, potential to and fully around our requirements purchase to will that up cash of we've existing cash be the acquisition to to $XXX refinance -- the requirements complete fund million announced million fund will another new used required we capital, the week, $XXX of to EOS. I EOS then proposed up

the As expect or probably know, equity. you tender a tender will all be cash for in April which we go will offer, out

on So it cash remains -- acquisition. ultimate the is seen be cash to the requirement what

that channel of the really rate the the accelerating in that's to terms story. in investment makeup And far in -- growth. the the support finally, rates accelerated continued same investment it's P&L, It's of R&D, market growth of continuing an above then sales

of the So distribution the we was planned revenue as as of against in headwinds well international growth revenue XX% unwinding declines that in XXXX, stream. saw and our our a strategic

And with to Pat. that, I'll over turn it back

Patrick Miles

to got formidable field. new been I very a brand-new XXXX our disruptive off force national fun is tell Thanks, be came it's a for a has you, ourselves to meeting. It to just year sales the believe we in very be, the Jeff. company. We ATEC. place XXXX a And and

with so will take questions. we that, now And

Operator

[Operator Instructions].

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

Brooks O'Neil

I I'm would color how and you we EOS if the on the see close acquisition obviously, just I'm you integrating of then about little get like launch? to could move excited about provide curious a talk SafeOp initial as And bit you little the basic into past response to XXXX just the the transaction? start, and a EOS

Patrick Miles

This one Pat. take and is Thanks, I'll ahead on. Brooks. go that

I SafeOp with tell thrilled the launch. foremost, I you will and am that First Surgical

without enter if the every what is, which availing automated spine every spine across landscape the interest lateral technology all of of -- in space to has I company look company, in is surgery participating neurophysiology. really the think attempted the you

And we're in to will is set surgery we but automated a we'll we is, are the the we what add information health we apply us this that very did will a nerve unique for device nerves well able on what got And when company. said, this, a tell started we also so our I to a and as distinguishes way feature where the determine identify what do that there way is. you, we of to are,

in are. We're And lot more be, so lot we We're early can on better think of around the enthusiasm in and seeing sophisticated a it very November. the launch. the traction We launched we I clinically of this off a device.

enthusiasm based our is, think around upon of to reflects to confidence information So core surgery, the gives our is and translate utility I of great me better than was the much company. that's what was get that we to diagnostics. information it really of of surgery?" competency say, the fact to ability much reflect "Gosh, take in that And continue to able interoperative the we the the as this EOS and information EOS out -- be how it is, earlier really the earlier drive ultimately The do so better beauty experience, of

to the so sales surgical start begin that XXX room. is what the garner planning acquisition. surgical to immediate units platform, start the the next is be platform start start around if AlphaInformatiX to operating other's of momentum to with the port see this each going inform really, through to information just translation relatively the integrate then all we the greater the implants. experience going through such is we of And the I prowess, to early SafeOp access do which to even But you're significant in can of placed And planning and ATEC EOS places houses to think to see phase we

So we excited. are exceedingly

Brooks O'Neil

Great, Pat.

of to the key take between transaction get and here some to closed? some question. deal. quarter that happen things quick the to to need Second third that are going understand somewhere the I time What it's close in

Jeffrey Black

Yes, plan is through that tender July it's this are of or regulatory in Brooks, number expectation at to that take that all in point. customary that And France closing this there jumping that see mid-April, offer Euronext. close matter to a regulatory is getting just really on conditions. expect it's all through a and a process really type us The launch what would August. groups we the then will we process of is The

Brooks O'Neil

XX prepared excitement products then from give And -- continuing can us me X you to can organic just you of ATEC? the just for in last a know at Great. talk your the little But some innovation new script, the product machine. bit question mentioned Okay. introductions of sense you I trajectory is about new

Patrick Miles

of Brooks, Yes, best. really the one it's

look in I think getting XXXX think, to attribution I at our we're usually, regard you of of the look the to at stuff. of new products, growth if the that and longer. you it takes all think, great the with company a competencies lot new clearly, Candidly, traction we're I

stuff. somewhat I'm so a And lot pleased the of new the traction early about of

that you forward will lot for things about talked specific come the surgery. The requirements designing Prone a see Transpsoas is we've

find that interested longer a you're -- development. and start you're specific longer no find going are so is And what design their going goods innovation to surgery to have that to in companies requires previous to apply no that

design a unique be so that's effort you And development to around see PTP will and going to ATEC.

is as see well new to realm the going TLIF. fixation products you're what within Additionally, as several posterior

can't going so of more about And we excited be number the things on this year.

and in them the ahead XX. to them to You'll it launch see X we products We strategically. opted more sense because we go like makes just after list feel

it so year. great And should anyway, be a

Brooks O'Neil

up Great. progress, for the A good all you of guys, keep lot good work.

Patrick Miles

you Thank much. so

Jeffrey Black

Thanks Brooks.

Operator

from O'Brien comes Matt question with next Sandler. Piper Our

Andrew Stafford

guess, those over as are guess that a be with been little This that nice about dividends last the as of today, is the I of the Matt. congrats last challenging know pay Drew and a for on years. couple in I you I'm lot opened on here. new months just first quarter bit clearly these like within door products place. you're And of you've starting a over to which, really going it can currently deeper as accounts more in getting sometimes seems sure talking the said, sort

at surgeons, more your would products you front of more talk bundling, to mean some the color it could helpful. kind is on getting institutions, be pitching maybe of in So your of strategy any there? of I these advantages there top-down

Patrick Miles

really of for in is the I This question. couple at Pat. ways. it Thanks Yes. look a

surgeons we distinction of I the more that compel the business. can will currently create, we're whom think doing partners clinical we the more the

platform making as an us and informatic company that's And distinguishes that sophistication. our so we're why really elevates a bullish clinical on so

And our of the a understand you are what so surgeon's starts getting start about do out stuff is maybe hospital larger or what surgeon think patients partner the to the to is room as result. his you impact in getting using says is have how meaningful -- sooner heading such to slightly groups something and better do on think of start why better happens make he's folks I a that the you surgeons, of to

believe And of that ultimately it's that those so types things I surgeons. move

additionally, variables more same per we've products at surgery procedure entire mitigated We more through more look out into. the getting what many convoyed that's how we the we've experience. That means is of of the lens surgeon upon sales. controlled the of I and And think a surgery whole based done or of per the sell can architecture procedure. surgery, we've the

look how expanding with into really that's our at relationship accounts. then stuff so the that And utilizing go the a way surgeon more have into deeper surgeons we the we and

Andrew Stafford

of guess, per Okay. the mean to believe by are to then, marching is then just I on if same for to of that complete which a you last That's wanted gauge you at case I I very believe couple that your to as look utilization whether if any said I mean, point products here. you to continuing increased And there is helpful. of I your surgeons, looking fill? start portfolio out existing And the higher? years, the quarter. same enough revenue not, XX%, think you gaps keep need continue

Patrick Miles

really of surgery. great because will an is tell yes. we to answer you I question. yes, a the the And unequivocal And chase will Yes. I It's continue say, requirements

will is bring One of into greater things the complexion. EOS us that

and means levels shock had procedure. you more is increase and the well, with complex more gives experience And is, happens confidence per what your which he's it you and performed happens so we a more revenue he products, and then what happens of more a great once and enters surgeon, a have is gain what when into surgery, is then

see. starting And so that's you're what to

And to greater seeing goods see him you're availed to surgeon. then us to more and the starting complex surgery. from apply more confidence our You're

access understand us to perspective, with participate alignment and are to think to start collaborate start in to and to defining especially our EOS I with from to the surgery enables spinal who the surgeons a surgery. ability ability to really garner more continue start the platform, to course, those more complex

I think it be And will go up to those over as evolve see continue chasing the you we portfolio, that So time. indications. will

Operator

question Kyle Canaccord. Rose Our with comes next from

Kyle Rose

And congrats on strong XXXX. in a QX

go-forward sales I you on to help So of the I last played the little Obviously, several the team. commercial think cadence about and that more on investments the should team years maybe But wanted over we just just how a put in place and the maybe state the out. the guess, talk us of the And focus should productivity has us that improvements? XXXX, pace are understand As have the bit more in Just the now the become do XXXX. some help end into of basis? underlying hires of XXXX off understand natural then are productive? on move that how to just from to you going a hiring how productivity we big think about non-compete roll we

Patrick Miles

Thanks, Kyle. Yes.

that, of I'm the super kind has. And that. I sales a experience we're of a off all friends of discipline sales is timely had past leadership talked came that our just national and And cadence the entity. closest the meeting reflection question, creating XXX pleased I assembled. in with that think lot -- kind our really our historical we and that things about a I've of sales think lot this that's and our of a weekend of And the it's the one

we to clinical think require we're that clinical doing I a solutions tell you, is that we I don't are got what attitude yet. have creating that

in we pockets. think I so it have And

And have of of I I we is geographies? is people in starting And think I get we right are the very lot to think the people a right our contributors. non-compete. so answer are yes. off They strong coming the think challenge

to not regard I got need to you, we're where to the proficiency the tell clinical we across be sales with force. entire

from years years But forward of looking year where where -- as at ago. the are we light started are XXXX a we we year. in continue to we from were to so in And from will light I'm the building end that we And be where we evolve.

the we still a of level to to where is level get needs confidence of so And my increased dramatically. enthusiasm The need work. clinical proficiency from

always And so early I always because the we always phase like better. feel I that would get we're tell in you can

Sorry for the diatribe.

Kyle Rose

I about think the appreciate no, that was about then helpful. it. No, appreciate no, -- you moving earlier And commentary when SafeOp. very from I

we help pull-through? and of that in see to driver when should a integration selling we directly of do months year? that first us other understand SafeOp and really expect implant accounts would on the from you new InformatiX of through planning revenues, board the be as via and happen? come Or just to indirectly before should all EOS can meaningful whether in expect and need or up Or tools Just the that opening then the see software some this of accounts X

Patrick Miles

new SafeOp think expect should upon I you see we as know it accounts come on to board based today.

of And directly so you dollar from be. will passive as it be the always system contributor. neurophysiology going the revenue volume significant, The will a generated is see but to influence not

already so see could for system, always to from significant traction And we've but a it information. the be we've thought conduit started

that deliver there to front informing providing And the on so timely information. always yearn very, think much the things there in them that's we've they to we're information do what start surgeons for that said can we Surgeons, actionable doing is information. of relevant. with out terms is very of through when so And pulling cloud, by you about objective, information

that what regard the I'm we're be see we're immediate call is that to of about SSEP I early. But That's platform. with and architecture the used we're excited. entire say, traction doing -- that automated per at X we're walk-up." a well we create think out surgery. the seeing our new doing start to can't relevance And products on least forward based talking about the because EMG And the capacity And what X I per X to front. over we're And significant I very the products is front procedure. more SafeOp to the upon InformatiX I'm we'll really when surgery or look on of very the excited so really day that getting platform. "Gosh,

And an it's architecture. time so of phase early of with to the regard kind exciting our

Kyle Rose

And Jeff attention sure make question, to. last gets I then want some to

how CapEx Just we overall and as sets that this through investments think thoughts should Just move the we on year about in inventory? and year?

Jeffrey Black

good, $XX we that a given new can Kyle, but Yes, XXXX. I saw think for million haven't guidance, roughly you a expect new level think investment instrument I on We kits introductions. any similar of spent you specific in implant sets and product

can at level you think the think similar XXXX. about of investment I for

Operator

[Operator Instructions].

from comes question with next Kang Wainwright. Our H.C. Sean

Sean Kang

Sean for is Wainwright. Kang This H.C. RK at

announcement So the it my by synergy, can of longer the I longer first EOS. question how is the Based $XXX guidance even the positively you guidance? impact provided on of million XXXX term before expectations acquisition remember term of or

Jeffrey Black

that what be. this the that -- rate revenue Sean, transaction Thanks Jeff. the incremental a and last did and -- about Yes, not will EOS to We is think specific guidance on $XX business. question. We week for given it's run again, we've any million indicate

we I the answer question that absolutely accelerates believe to our $XXX that this to think So that is short million. path

Sean Kang

helpful. I see. That's

Another products they there Alphatec pull-through easy is how it like effects to obligation is, from question an related to do institution regarding academic from from? if -- products, transition institution the is non-Alphatec disengage any another for Is the EOS, so? chose so to question it -- to contractual

Patrick Miles

thing can is on is one The that Pat. is count this easy. you Sean, Yes, nothing

that will information a is will there the is process. you I interbody realize devices. than there tell individual and there be more we distinction and the EOS in And plates screws so that in

will it implant the systems. more And so the believe depending we upon type that than of value to at for so times attributed for the information the indication be will surgery,

And to so reflect good feel fast, with in how into It's be of like but systems. that and our drive regard information to the not to going going will integration it we that implant it's ultimately change. we do will universal be not

Operator

to back any turn Ladies this further to the you would not for remarks. over at this I now call. I'm time. call today's like for Pat concludes showing Miles any and questions conference further participating. gentlemen, Thank

now may You disconnect.

Alphatec (ATEC) 5 Mar 202019 Q4 Earnings call transcript