ATEC - Earnings call transcript Q3 2021

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Operator

Good afternoon, everyone, and welcome to the webcast of ATEC's Third Quarter Financial Results. We would like to remind everyone that participants on the call will make forward-looking statements. These statements are based on current expectations and are subject to 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 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 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, Leading will Chairman be and and Pat Miles; today's Todd Koning. call CFO, ATEC's CEO,

Now, Pat Miles. I will turn the call to over

Patrick Miles

contribution sharing the conference the that by some much growth, kind industry-leading and walk call excited much, really about statements, just you Ella, with growth, welcome and we EOS QX results. to what's think XXXX will $XX QX of And Clearly, continued very the about talk kind review And out year-over-year be elements ATEC -- can't XX% anything, through unique of please XXXX revenue a on XXXX as are forward-looking conference PTP. our so million. be which and with as long-term going more leisure. at for call. drivers a just Thank is $XX the I was it QX spells And some your a for of positioning is the slides of kind million,

I think is to lateral very the market our ability expand clear.

starting the for halo States getting outside think And on. U.S. then the our we're portfolio in value tailwind. on going the entire such international and of distribution build think the And kind of of foundation laying marketplace. a better, is foundation, confidence this really a we aptitude the I is a of reflecting and I information that effect goes United perspective. adoption our think increasing from clinical driving is what additionally, the I clearly just building EOS there to is

look XX% surgeon a XX% because to growth users. the clearly of in declining growth a -- start year-over-year you in in year-over-year surgeons we market scorecard, at had was the revenue When we're -- So compelling

great case, say more If you of the few so the do of somewhat going part ability was stuff is, is would I muted growth XXth year-over-year a double-digit robust. clouds complex continues which start to and revenue pandemic the new revenue growth. based remain muted. a product the continued flare-ups some in strong, in staffing of This continues future. was out stay of of a to the surgery the super blended categories And an of the our products it just look at and and kind also adoption on, growth to to quarter was there, per [indiscernible] per But attractive flare-ups, average grow year-over-year average consecutive upon X.X,

pros XX%, has I highest any think continue ultimately, compel of since and compelling, of -- the I we're increase perpetuate XXXX, think excited are of that competency. spine market very by to remain public we objective reflects And likelihood clinical the is of information-based reflection greater surgeon are When create a But clinical an that our thing reflective achieved revenue to attracting see which And innovation. XX eye our product that XX the high. as as and to see. growth quarters More thesis distinction, in will commitments dynamic is doing, create are that importantly, per committed earn the these we ATEC than our in and, bit our surgeon U.S. in that will as per doing you and for organic you we're to and through is company going place of can this what about. decision, the things very, quarter case of then kind the to clearly, adoption, so that And clinical been tough product a core means advance a backdrop, organic continue every compel the we there's distinction. we you and really but our far and of adoption, creating development,

we attract so salespeople. will clinically adapt continue And to

contributed And it's design really development procedure, individual think I to at if year, volume innovation, most Imagine more is have and kind are of the think prioritization laid what the the clearly, And distinction, a not of support do to of translate -- of that I we that is the machine I so, When expansion SafeOp. of of perfect something an products to we tremendous and about things I per contributed, a work requirement challenging the think procedures. an opportunity XX you new -- product so. takes that product candidly is about cadence our to to like a the and technology specific the of enabling But super place excited unwilling there's you talk we as influence. through product When more new clinical allows X commitment. to, is, about And yields fulfill about that pursue importantly, we're commit XX%. and organic the we're innovation acceptance perfect so cannot that seeing products foundation and appreciate developing revenue think, that we've the for it much type our the think a But you we in continue products, as to procedure the revenue

SafeOp competency. well in as as a terms We but a mechanical tell translating of I you, clearly, much late, device of information about the competency whole design, would as clear haven't talked is

spine them a leave in we like terms We clinical that we And with on release. so we the most product because effect they procedures. of communicate have to to often don't every list here PR like

you terms our up of requirements a to the so what patient match opportunity And start at specific and right see when to then are And about good and based bone quality. implants is, just in their upon OsseoScrew the adapt able understand be about think you to and here, translate information, based EOS, and of upon the this ability imagine bone and to you think mechanical aptitude, design development, start we demand an to to quality.

And so things, in, InVictus, system. distinction these when look you our start such our you you start to at fixation to stabilization look in to or at see start

to talk goes then surgery a often I And stabilization, step, it is of delivers comprehensive which to single a of as ready release. we so go retractor of, kudos so the really of requirements now that from an level of spine we group that occiput blades, tomorrow. improved column anterior launched to the the SafeOp our OsseoScrew, of really, neurophysiology the distinction to procedures. and system about and contribution the product full will surgery. Everything device, And unique modular attaches the speaks substantial. part ultimately decompression, integrated to identity the we we our is, we're is And of our terms implant has kind this ALIF sophisticated InVictus InVictus' a commercial, expectations system that organization, core successful spine that which have internal screw the again, probably our and of think alpha ilium. alignment, upon understanding then and will sales It's that with And more to recently stabilization. this most system, And think force. really really in build tomorrow, I volume features launch have great integrates And from is

to about really key -- got integrate start organizational efforts. has we EOS I so to we selling And to, Another that's very kind and a And think where feel first said, integration. what great And been gosh, gone when our tell well, is. the focus I of about you committed that let's you,

are the We product prioritizing portfolio.

a think really, then sure demand. kind been EOS products. they family, I same and making scaling We're a cadence X the that those operations efforts. really meet coincide, good we regard to the key And to have with release very internal of and we of, have how the doing

And are they the a the Dasso imperatives together strategic EOS, quarter. think EOS so he's Eric really related how the in of leadership leadership position ATEC that some fact bringing and $XX of that the third fit contributed and highlights in together. love position, I I at is we in and France, revenue million the in

then of to and significantly. I And when volume enthusiasm field, sincere has increased And and it shared with level leads I think the also machines. company. of customers, I speaks hear the pipeline the in interest of meet around to I'm the relates Just -- to it get the the as adding opportunity the enthusiasm, EOS

you if outline There's most I we'll Research industry, The institutions when not are says, things hospital. special think a like have Lenke imaging often are of our Scoliosis think an forward. It And to interest X units somebody think that it's requirement. And for think when and roll substantial, and would of But in not at passive of the these about, that's I about going is Society, start in to space. of -- in to geez, there. start terms sophisticated EOS. so look deformity, what's currently and kind expand affirmation, that industry, a we the relevance. units, that think the to to a when you SRS, clinical very people the part the start is about per point Lawre you're deformity. of that volume with lot mind, has We the treat to opportunities of we that stature EOS opportunity think more necessary what's of spine surgery the about EOS I a when opportunity it very, the spine a is, as value that you X and hospital or say beacon

place the the very, very surgery, much the facilitate decision the this expedient the through benefits based the we also so of upon really understand that ability is exercise selling And valuable. do platforms ultimately And sell type to to phenomenal. placing technology, purchase then information how agreement the, is planning And starting but I to purchase earned term in into just our in not equipment, ability of things, think utilize units. units. the and facilitating a to then spine a of kind And that terms integrate near more volume capital strategy to like becomes of start

population, United And really miss, by many And the to really be that we that tailwind units of at and a say, without units more kind doing here, gosh, could multifaceted talk XXX the excited anything look and XXX-unit utilized start think don't population just so there, start going when like XX% QX furthers on. to different, talk when you so start there's the the how XX a feel about at you just tailwind, there's of demographics, I PTP the opportunity. lateral. in and units France, population to a you things and by equate truly EOS of I And lot took would And a XXX France to our units States million, how a so driven We if effectively. we of multifaceted was about. you it can't of talk be growth about would revenue about great

look we nerve surgery so SafeOp key I said, you PTP, go in we origin what's was, anyone. this really no determine revolutionizing and XXXX we to we the have a hey, I regard ATEC. technology health. unmatched add ourselves when adoption. what technique, We we lateral to completely it here back and being have the element origin really, in that be it's And to in and And going And the you of is, surprise way nerve. when on surgery, at understand when acquired unique reflected should know-how this with you hey, And a find said we of there's automated lateral sophistication of think to EMG. now of to kind where XXXX, think would in is And

lateral decompress the add to why TLIF, to we when talked penetrating PLIF they becomes people the And stabilization, goals because the market, clearly about surgical about and very, the start just expanding ability lateral and and directly We about ability you but -- spine. And do we utility. like to decompression think so very is alignment, also valuable. being talked decompression, are the surgery a to earlier lateral

market And spaces doing the so make valuable. that ultimately didn't candidly, our things enable very, ability us traditional very that to lateral to ourselves within sure that, is we're find

love an done in complex fusion seeing the utilized really ASCs, we're so done as an as cases in And center. minutes number we're seeing number increase than the cases is more well XX we in which a in of increase in in outpatient an what nothing XXX-degree

I think sophistication. to predictability, speaks it just it to speaks

I think you if doing the perspective. surgeon ATEC And And of reflective demand. so from increase it's love a what in look SafeOp we're visits, at an

it's increase you of those bar so at to And looking that right. slide, chart not up the who shows a the are

surgeon really you driven think And by adoption, about to start innovation. so when approach-based it's

a dynamic. enthusiasm do you bit do how in that's moving is and trained, desiring case it you and terms continue But significant -- compel of we distinction, black you so in it, You we be our year-over-year muted. surgeons to we cloud way, as and in see adoption? the the speaks And a so little staffing, the the per coronavirus the gosh, of creating to through not see how can a surgeon compel of forward. just say, clinical slightly increase And In can was third hampered any saw the volume from that you average mind, revenue quarter

continue with reflection that being great about. look of interest to we're times ability about aligned customer. patients. convoyed on what alignment I our about start move that's is designing our And upon interest field as in the how to we to alignment and of the in spine furthering hampered adoption all based by why is compelling we long And procedures. we serve remain the surgeons, field the often of because many there it's when that's designing get And part remains aligned objective to think when only as not so opportunities that's they items, the so the not fab surgery, continue you're we see sales. the holistically to currency And of and to think at And spine think forward,

think we reflect and surgery. committed we where convoyed distinction, kind to blended is when improve investment the so we talk of about where and about that And But real the we sales, oftentimes thesis opportunity a rate. creating have are

of sales, nearing clearly, is, terms haul, to from that X, so surgeon And in were and place of would doesn't the to improvement also of procedures and that's suggest continue who acceptance continued year-over-year sell our clinically of in -- see And grown we force. adoption, sales adopt so our And A essence, you committed driven can you we thesis, in of, say which is compel strategic the approach. minds, our what and distinct who reason the to a really, that grow to the and the long XX% are And fast is happens that's you drive almost each commit by all fast. clinical you sales the those our you and when interest whole of share in channel. the other, grow because, thesis. want

And so see growth strategic you from revenue at distribution XX%. organic the

you If even PTP, have look done than PTP, groups that. to have at and well who it's very at more committed those

lot to to alignment ability has there's true in the just so start And selling a been sure make organization the fun. of that

we how And uncovered our -- of So growth really, -- covered although XX% we or still if the another strategic continue do is we memory what now And component and Memphis. comes so my footprint. assets and managing QX, geographies, of is opened we sales me, sales from have so distribution, key poorly we -- the up And we the in expand manage to serves say, gosh,

a than hub. And few type FedEx efficiencies the turn in the so a gained better centralized of to that there's from a you've location, assets ability has where things

of kind so Memphis. to have be and thrilled center, and to in And Memphis, continued opened get distribution the we of out we're expect adapt to efficiencies

These the our the that. of the and do, growth, international commit so the creation to a things And start a like talking include would tailwinds. we're then around long-term about, willing building kind are you long -- of in again, effort commit the to haul to foundation which to of that things EOS,

just commentary it I of on to color that, about little with think to with So excited provide let talk to in QX. anyway, regard Todd, We're a the turn very goings I And bit about the business. want over him I'll financials. the

Todd Koning

with Thanks, I'll Thank revenue. everybody. begin you and Pat, good for today. joining us afternoon,

$XX year was growth X% quarter. to growth compared quarter the million, Third over revenue second reflecting total the XX% and prior

and in revenue million $XX the of is and down distribution compared to to Our EOS revenue $XX XX% comprised in agreement. Organic $XXX,XXX period our was contribution, million in related $XX million prior revenue the grew revenue, sequentially. $XX of of million X% year organic international

As hospital the labor growth of overall and to of procedure resurgence a we affected Despite announced third the pressured spine, operations We've COVID-XX, million COVID-related approximately throughout volumes revenue of quarter. hospital the late August estimated surgical for $X organic months impact in third outpaced our the negative September, headwinds, and of revenue shortages, market. be in the that quarter and September.

quarter, contributed our to of revenue mentioned, the in share. strong procedures growth lateral XX% Pat As expansion market on lateral from

Those per generate down X%, with X%, generally case and require which per case, down organic year-over-year of XX% continued and case by and revenue Average through XX% the more was compared were during of resulted outpatient Sequentially, volumes third our grew reflecting fewer our cases quarter the a shift revenue year-over-year, the more X% ASP procedures, and complex of as users dropped last surgeon towards to cases. to complex, up categories of down favor the Overall, the of X% and sales lower expansion in setting hospitals emergent case volumes August, surgeon advancement after case months was less in growth higher quarter, impact volume began revenue. mix improve in with again, in the disruptive driven Third year. September continued by adoption, deferred. Labor October. procedural cases Day, footprint, which to pandemic on ASP improve per

sales were October recovery. higher quarter, the recognized sign COVID, for million entirely in quarter. quarter, an encouraging we than which second million $XX month hospital Average shortages, the EOS-related dissipated. created was the second by $X up and revenue, hasn't labor to of of which daily the third average While compared in In is the sales disruption daily the

so that revenue, mind full a in the QX. revenue quarter transaction like of a in better-than-anticipated drove quarter keep the we didn't Now midway Timing through QX, in result. EOS recognize able replacements third to of closed we were

international which revenue ended approximately XX, quarter. from supply agreement, our Finally, on August the totaled in $XXX,XXX

So of result the gross revenue and down non-GAAP $XX basis delta impact growth and XX% total to contribution summarize, by XXX was of quarter, $XX in of the margins reflects which primarily the thoughtful EOS' EOS-related P&L, offset and consolidation the comprised that That represents low gross XXX the unfavorable leverage XX%, million, the of a the base minor international The prior industry-leading sequentially. long-term million profile revenue the to third from impact by between points, supply resulted agreement. million, organic gross in period. in to generates, our is down million year compared Continuing The the an base on revenue, revenue fuel gross $XX XX% of grew in in favorable remainder now-terminated EOS XXX business. growth. Operating $XX expenses business was prior the of XXX points margin and continued year year-over-year the to basis EOS margin was compared XX% through a basis imaging. the basis partially in points due quarter quarter, to of decline driven XXs investments of third point margin

I'll to million $XX million and debt basis compared operating capital and $XX of cash. carrying approximately is and, and other approximately $XXX sales in generated Offsetting to fluctuations. I During debt by operating activity. inventory, particular, convertible unfavorably of XX% value The of that $XXX a distribution of the less organic last approximately the sustained $XXX an third SG&A behind balance combination a in approximately a XX% $X offering. $X comparisons. of and national increasing portfolio loss few that to in the debt adjusted Total operating June an XX% million of $XX surgeon million debt driven coupon a last $XXX with increase impacted Debt the events to third $XX Non-GAAP EBITDA of our third increase year ended and was from The required $XX of our premium EBITDA company. invested sales of with August volume to meeting, support want million, and of million and XX.X%. million the On and $XX Net pandemic-related debt upsized to year the period. investments million. quarter levels sales in continued million as of size, third and we R&D million, sales that and of fees, Adjusted year-over-year instruments, million was million and we sales training, feature, revenue, third million amounted million. working of spend in support and in expansion planned quarter was of QX, XX million sequential in network, non-GAAP of and quarter address and share like well our the close sales NASS compared compared million, and XX% a the and quarter. million was on implications investments which of expansion in driven major The continued of to the call quarter in investment. and to approximately period. quarter issuing repurchase, was the was loss expenses growth, $XXX and in by sales sales $XX of of closed to sequential offering million support costs which a of maintained the to primarily $X to lower X, walk compared to prior sales $XX quarter. repayment, was increase reduction the of the professionalization investment driven million conversion ATEC $X in in absolute our by convertible and capped as point cash, of loss a burn, EOS-related sophistication at We our $XX more the attributable $XX investment year prior million XX% loss a XX% debt $XX prior includes EOS basis cash Non-GAAP was in dollar to approximately XX pace offering in the was year convertible

debt XXXX, approximately million. the million debt will the September diluted as is were September count to that of the fully $XX awards Using At be exchange a be a bore and higher supporting to stock the to which to scale Common the a will the coupon, much in investment increasing have diluted $XXX we $XXX expense little our extinguished equity, XXXX, shares premium shares we to million the portion us shares. that of share excluded of that a to over converted to into debt share stock annually, approximately the the continued while implies XX.X%, a will debt now XX point significantly of structure access at X% at in XX, will at We addition it proceeds count, capital. in as including When interest million enterprise in treasury a our share million count. XX our XX% for employee price The of In $XX from compared is $X and outstanding closed have. new point, equity calculation the XX, the save have equity. will business, basis debt million value shares method, XXX convertible converts fully $XX.XX, debt. conversion, million added warrants XX which of million issue

includes will outlook. XX% year to We growth our full now Now XXXX representing That total of anticipate $XXX million, year the approximate XXXX. full following. compared to turning revenue XXXX

We adoption, of the our revenue the of XX% by elevation implies of driven expect full revenue impacts distinction approximate of which XXXX we on $X the weathered clinical million surgeon third organic sales in U.S. that strategic Updated quarter. the growth million, year impact COVID-related captures organic year-over-year, $XXX network. and to guidance

Our full on we million continuation improved EOS-related XXXX, guidance. of for year previous $XX expectations October. fourth the up that trend quarter a million of approximately revenue in the We the now for $X experienced anticipate from are based

of are the new the we EOS' the able in of revenue the quarter, performance, keep While to natural in we integration and timing with realistic. deliveries, expectations the ongoing which strength book meaningfully and quarter-to-quarter. are efforts, variability from pleased want third the cycle, recognize order the affect to we upgrade unit The have period, current

supply full revenue. We agreement expect international it, to year now-ended to about $XXX,XXX contribute the the

PLIF begets, billion like to view reproducible current roughly can gradually of and to market due of TLIF of PTP TLIF ability, a to spend the validates a that approach, and PTP's ahead convert the The the on in portion the the surgeries expanding of into of yet PLIF to presents. with market. approach, the predictable adopted a us. opportunity I'd and $X coupled lateral lateral the our shift penetrate momentum of the approach, $X haven't technique lateral PLIF and us market. moment conversion TLIF continued quantified the surgeons that a adoption, familiarity to that The belief billion challenges Now its significant increasingly traditional lateral will The PTP outcomes enable applicability,

adoption innovation, drive surgeon trust, a halo ability significant the and already comprehensive that a building to Our clinical taking across outcome the market. ATEC's to demonstrate predictable $XX overall portfolio, broadening means creating still spine effect, of improving space billion is value share in U.S. now

Additionally, single dynamic systems opens hospitals, that EOS opportunity, is an U.S. a to a doesn't center, the $X of at ASCs roughly the EOS for place already That ASP an market potential multiple play X,XXX average recent to assuming acquisition consider system. at today. and door at EOS billion estimated our imaging the

clear approach, we billion So $XX about market it differentiated with is us, a road the our ahead. why U.S. are opportunity in so of in procedural front optimistic

growth, years, distinction can just X share deliver, we've started. we getting past taking, that the the clinical Over consistently demonstrated and through are significant

can and a term, that, In many long compared a total, We steadfastly of committed sustainable of taking planned. the next growth organically spine Pat. do calendar we turn And what that, surgery. quarter, few approach do. strategy, decades. you closing, we'd revolutionizing down. spine I'll said the have we the to with to span I on to full on focused market to the we industry-leading XX% with relentlessly continue and as over remain growth, the are We In that activities connect in months outreach our as to building XX% over investor back U.S. a we hope story up call delivered to was execute third share we

Patrick Miles

Thanks, Todd.

clinical earned your don't we you the our ATEC. Our believe will effectuating of earn and the business. In strategy believe why value before need not share. is about way, evolving we is creation medicine We clinical The to experience. the earn That's that, good good in that is long-term experience. share share,

create We momentum. in that halo a look entire the doing are our EOS, portfolio effect doing we're perspective, upon an clearly, you and you look improvement And the at laying U.S. distribution -- the standpoint. the based reflected PTP, the that confidence we're at foundation addition from of you our what of expansion look at from clinically, things and international

And so multifaceted stage through set industry-leading a clinical the sustainable, we commitment growth. to in have experience spine, advancing for the

long field of have literally, and just process, this to the forward started we haul of spine. continuing look so, we And to the evolve

we questions. that, will with So take

Operator

[Operator Instructions].

of line the Capital. comes O'Neil from The first Lake question Street Brooks from

Brooks O'Neil

the through sort disruption of on boring Congratulations of COVID.

Todd Koning

Brooks. Thanks,

Brooks O'Neil

the to in spine talk about I the had into headquarters, opportunities primary facility how to market just integrates going and X little with your the Can question. sell fortune trading Diego and effort that proceduralize, recently. bit good visit come you forward? platform have I San a

Patrick Miles

that they're in the OR surgeon reflect like, on those to luminaries I interested What just you're as setting screw a close understand a Yes, the cadaveric in it whole of of to interest InVictus, X the sell. opportunity the is in And possible. To what the with volume the to think the as that then me, demonstrate patients the of care application Brooks, very coming PTP, experience And that interbody this in kind we're pouncing to the their here apply is people put not where those But specific they're expected is the they're further reality system, we're reflect think products, this such going compel of the to for to of doing who specific And the clinical sophistication the lateral procedure a and how our clinical things and that do trying that's the, like of And not spine are learn here of opportunity robust what it's to trying to the of procedure. they're field. of valuable. to it's why components, a they pedicle is them puts it's ultimately very, is procedure hands X I understand tending individual be. what all of to, field thanks question. in each coming about the together, they're a seeing going based in on device. and why or learn to upon it how that is where

have And so anyone. as we well that out, as laid think, I

EOS been in is. The experienced is give guys to understanding thing who especially what haven't we start other understanding EOS, an those them of

this deeper think, I why view was important them it thesis forward. a really, much clinical provides of as part an such to our moving acquisition such

things the utility. it each to and the pathologies, We sophistication exactly in we them. they time it's then the the And drone, different on but opportunity beauty start is started we're the we're like, them anyway, up not with just it's march how to another get of influence we to where PTP. addressing clinical getting so how And show apply

a of the the go And so when contemplated is kind putting I and together, the of that would we structure building, that's reflection say new we of why that together. it

Brooks O'Neil

away everybody else say, when sure is, blown I saw could too. it. I'm I I just was

great. that's So

Operator

comes question Stifel. Blackman line from Mathew the Next of from

Mathew Blackman

just how a sense headwinds reflect deferrals. back? faster complex than to us way And back give more typically maybe complex know, couple procedures the Just of of 'XX, the procedures? follow-ups Do -- mix back don't of proxy, procedure over I pandemic, using as they I any from to Any traditional course they just a have they Just the and back quickly slower? thoughts a come come curious on do Are but there. 'XX, start, that. after come XQ XQ

Patrick Miles

Okay. is, that let certainly claudication. operated up. I things get what screw on that I'll quantify the happens think is Todd I'll because patients But

a something those and nerve there's operated more people emergent, it's if pushing So on. on get

deferral cosmetic are on. intervention it means I those is, construct going of think it's it's are required, claudication And immediate sometimes the the longer. about not may But which stuff, when a so intended issue, a in may be it cosmetic. issue, to go please more is when And start this long to the got that likely talk able it's I take be vein, more you say, to has someone and -- cases a

still not Northwest the flare-up saw I of as come but you'd think as you was storm that well see of the the there, the would kind where previously some volume the of at what so a expected complexity. out is a not and perfect we pandemic, And you stuff in see

our ASC that on we're emerging so upon type longer we're based about no claudication is the stuff, gosh, often but staffing would pandemic, that dynamics what the be and of constructs. longer view complex was, cloud goofy stuff And about seeing some the in, more less

Todd Koning

place, ability rather. and think, contributors. little speaks to Certainly, you environment, procedure, grew to that lower and add mix you kind definitely the I'd procedures, the relative they a a other think will, at of of I that, to do Yes, a if cervical I and or bit in growth year-over-year. procedures, Pat. when a Ultimately, And those kind risk stronger how of a the to saw looked again, you maybe risk the lower

complex did And more so stronger we areas. probably experience we there some a of than in the saw

we total down X%, X%. revenue know, volumes about sequentials, in talked our I ASPs Matt, X%, down You is think down where clearly -- most it's seen

a more the then almost that, the movement were ASP half the the really in revenue higher procedures, so is higher on fact to comes that of ASP, many and period. complex sequentially. the of of kind contributor And case down of And deferred revenue,

Patrick Miles

XX% gosh, think, the new revenue X but of more we other sorry X% think start ASP, see surgeons, Matt, to you pipe in. a in point, volume only of increase But a to I less complexity.

to And believe the gosh, are an create objective that the so, driving to business. like, what understanding of, be just we trying dynamics

Mathew Blackman

Great. front? And new new geographies, curious, helping higher-performing now it. distributors curious distributors, surgeons, some U.S. just on dynamic. maybe sales opportunities? attracting anything more just reps, EOS channel, it updates about the just any on, then obviously that I you reps, that there attract that but as reps, appreciate exclusive is new And or new Just going on are pull-through

Patrick Miles

just candidly, the previously around bringing earn I companies, a think a field. weak where I and And I going player the more bit to high. that continue that ultimately they And then major many the hey, that great move continuing is commentary. that the the academic to performing momentum companies pivotal see surgery. so companies I And people because And about realize, ability and may a institutions EOS small look passion a then our significant think ultimately that very we're that is have improve I understand they think And significant is I think neurophysiology, foundation, of sophisticated the a creates key our I metropolitan misunderstood of, yes, don't our Yes. a have field sophisticated hey, it. with lot -- I answer longer a the is interested very there's the I continue from, neurophysiology to only how group. I that's We're you that And factors have been to when experience, and confidence will And but where but unique. X evolve about think think to some over that X of term what I'll to out large you people's about, forward. it think in to tenderly, to theirs, again, give a start are, when We've guys information translate listen, the surgery, than think interest little color lay down think, moat areas. think of in have could street. say, you the to there's worked that we ourselves, really little guys in information have It's translate think it's and EOS, to of lateral driver

Northwest. time We're is real in seeing the in starting that up. we're seeing the real the it to time country. so Chicago part middle And of bulk

And a seeing a so areas we're where of of we that haven't level there's enjoyed different sophistication lot previously.

Operator

from Capital. comes Wittes the question next line from Loop Jason of The

Jason Wittes

a Just clarification. quick

impact assuming fourth quarter I COVID your some outlook, of terms there. assume In still there is

resume think don't expectation can I know there think of by you on to quantitation can normal up said, you volumes Do the be. might you year-end, how -- and a Do you've aren't much quite is you be impact speed. I -- kind levels? give that we what assume volume

Todd Koning

in and the -- a COVID's context, I think X, things. Jason, couple bit of I'd country say Northwest, in the guess still Yes, a little just still. out hot terms in of I there, Southwest, we know the of middle still spots

We also a know be are working variable that staffing through. to that challenges continue hospitals

I direction, COVID is improving. of are generally terms those in think think the going, I

to work we're of is a that I well. traditional through the challenges that is and see QX, itself they demand manifesting are starting kind the to think of seasonality to think definitely other what have we're going as those. thing are, staffing And the I

of in than our kind our And we weekly that sign sequentially of the trends, our for So think also confidence the a this there. about sequential from kind September improving October I October, set ADS good give up I good the quarter. is fact can has the performance to fourth QX of think, to of see us, think that's a ADS terms a greater which amount positive. And a We the then in quarter. been August given

through still that recognizing of a some we're ultimately, and COVID we as guide December. million kind level think And bit, for to continued issues. that's really improve demand, organic staffing does seasonal work have November, but the of along a going begin those areas I volumes attenuates the see sales, $XX that a it improvement to in with so assume their to And

Jason Wittes

I seen, appreciate if seeing helpful. quarter. ask about you're quarter lateral, last That's obviously, -- and contributor you've could PTP that. then just especially and this I tremendous Okay. major growth with And

also starting you've surgeons, with traditionally kind as or surgeons PTP that are opportunity non-lateral look In getting board they this, the for them? on lateral a at seen to terms viable primarily real of of you're people

Patrick Miles

them question surgery the with lateral a kind above going just challenge got we we then we Yes. much from had get are the on, really doing of have Jason, the lateral. a is of kind come to is technique. positioned applying the of of lateral and a surgeons that traditional never over early guys, kind that The XX%

had do that decompression. we And the them believe -- is what do so in of surgery that lot guys a very lateral essence, of thing, hoped you typically the seeing direct because, a for, we're didn't, to want is they lot which X, a

part about And that great provides PTP is, optionality. it so the

align When harder, X in is alignment lateral from to you're other perspective the someone the position thing. whole The is a lordosis candidly.

position so speaks ability And hang the really to approach prone to a a have the posterior guide. from belly

fixing position, or a our ability stabilization lordosis compressive very familiar but to really to element, and been -- also really familiar kind able really so in directly them in address, put the position be really place And phenomenal. of then address has a

who guys. lateral when posterior so just been it's to people traditionally it's And those trained, not also in who have are the we at coming guys be guys, demographics look of

quantify that to has pure to us, starts our above the our to is access marketplace. that's been at so available. lateral. than And [indiscernible] interest what I the what the And value different about XX%, he talked think kind It's readily of of begets Todd's historically when

Jason Wittes

placing combination time I before EOS. to right agreements He purchase to we capital they what see just early Is you based XX-month opposed to X- can take see -- slide outright guess, well. EOS, the what of that I on in guess just to that really were systems. still asking? is that to process, it's the you to I'm it is still any a see are too ATEC which quick see numbers a terms to role as of the in starting terms before? assume helpful. is it's book that a is in the EOS Or inherited. think starts And really like to to what we describe these line business does assume tied doing just sales, start revenues Last, question I That's of that are that on now? you when

Patrick Miles

the Yes. quantify already believe a of is to practices. think, I'll because I'll the so tell opportunity ability I ATEC influence, friendly, big, are it we've whole who is up. why let is was Todd relatively market you is, But have kind we And individual that's what guys again screw happens them had immediate. would because I acquire in

thing But best thousand and the opening of essence, real XXX this to a And times and kind that relevance couple of there's the phase a in there's seen we've look such at a initial becomes, that the And that, XXX, of integration. up is the is yet here. imagine technology if guys come, for so how the checkbook, few we of them, France, this of through of the again, virtue a do a you lay are, such ultimately write foundation that a -- check unit. the through

Our translate ways units so is make in ability surgery to to better those opportune.

early Want very, would a so tell are phase. add? very in we I you, And very, to such

Todd Koning

that. follow-up to don't or add to unless a that lot I there's whole have another question to

Operator

line comes Company. from Saxon from David question Needham of Next the and

David Saxon

about products But I lot on your I'm getting first, EOS, and is guess can of coming takeaways, and sure docs? from were what of talk PTP interest. NASS, David. This you generated maybe for Joseph maybe then a attention out other of share some

Patrick Miles

Yes.

company. from over that the was if to kind skill development terms over here is what's I and mechanical about design a And of think with ago, years of a that type look perspective, you this regard of that the a came moon. in the set, aptitude several was resurrection interesting

spines happens I what the and a think from It's your surgeons you a to ilium. so say, occiput that Well thing EOS and is post And valuable fixation see, in and is that What tool. then that you clearly by see you over goes of is being a as come would they over gosh, cool. kind what review luminaries doesn't and -- it stop you -- go happens there. come

at NASS. see the to at going XX% of not that boost You're

But just you, way. sophistication ability in I'm neurophysiology is, in just attached it's to blade there's at And that percutaneous delivered that tell that And as as going K-wireless, the the not that mentioned I is perspective, for stopping it's inspire And a to start modular a realize, delivery the pedicle who that screw that's that hey, a of screw stopping that's [indiscernible]. at system PTP. across to delivers not so includes or you a to continue gets nobody. really, the a pedicle a call, device to EOS just understand things

And so is my like, some they these they're gosh, is they come deal. and this of things what see happens the oh over, and real

of people, enables these we opportunities may And to the to confidence we and so touch wouldn't because drive of otherwise. ways the force maturity great sales part who again, have that touching in our the us provide ability not be us is,

And the so and again, me, our they into nobody but impressed more get about are. PTP EOS people jumps up and tell down than to portfolio, the more I got you, further

Todd Koning

for of of fixation, of I credit think, XX per nicely the posterior of your in continue an the us impressive it's last of that's years, that continue And spacer. your talked lateral important, why are PTP, of launching best, as increase approach ASP, kind to that's at up lateral to get place procedure, solution is have solution, about, to get But -- PTP, all the we hang the the utilization bag what of Pat penetrate the product physicians obviously, I in that the call X launched, if as the products posterior look and to not we not it as the X it, then sets there for, fixation really as best looking And bringing And systems the a for that And out think you credibility has a posterior or has higher. of you and that while fixation. best so, the gives case company Joseph, opportunity the think delivering today best, oftentimes, a if to do ability I that number get and fact market. get requires out is sophisticated they we're procedure because you

David Saxon

that helpful. is very that's with are X open then around are question more Great, okay. Okay, what quarter, you. maybe, are And but expanding that countries there that restriction, the but your some was internationally? plans in understanding maybe X-year Obviously, a ended this the for Globus. agreement Our it to

you those can how to size through, markets? you opportunity and talk plan maybe enter So that

Patrick Miles

Yes, yes.

of first international. regarding of end celebrate we So all, relationship the with Globus, the

I that I very would is what our say, of The kind going these of are to we've we're other far of to tell markets you think is, we're effort. international as interest. to the as do hey, And going even focal, to as it gone kind be relates

another all and ultimately is a up the as company. New in and already terms to with I I Clearly, you the that if so of to tell that's teamed people the marketplace. we're combined to an but of interest, this Zealand attractive communicated -- think -- I to with at start Zealand our international is New people. look foundation to you, we've from Australia, market lead there. contemplate the U.K. effort. not think like doesn't say, associated relates lay are about timing attractive in view EOS And a great Then that our don't have on you gosh, specific going Australia, got Japan some it kind Companies super we starting country.

that some that I and countries provide a enter, we opportunity a But of X is people and then if got places. kind we're shared of is about think Timing to the the so integrate and place a we have are that need excited Brazil I we I And you, will, attracting marketplaces. likely roots, Brazilian between feel for of surgical about that time well. when lay how are that the market there's tell lastly, those spend effectively. the -- think a foundation, us we'll and in lot to you to those the into as views probably kind we're but

Operator

Matthew of line Piper comes from from Sandler. question the O'Brien Next

Matthew O'Brien

we in the but talk is don't great. the tough does next business of just what that year. dovetail this look It's because figure of going growth as you into the the last Pat, quarters, into How kind comp couple here can 'XX? really like it's numbers to I a of look over you're recall exact new about XX% to out users? up COVID difficult growth

guys bit. new grower think is COVID of you even in you've next XX% this up in year, here tougher a got XX% ASP So growth a comp? quarter, users little Should as we a though again

Patrick Miles

is So guy the is like as remember, first and confidence The right? walk think with -- I'll likely Todd. experience answer their is we've our initial part. X creation. point we the smaller more these focal. the quantity this But X, of It's things a where I products right And always compel about, your towards is talked it's and people,

about doing they stuff. And they and doing. leave, Candidly, do they usually seeing is high, so of coming more is the And there's very, very we're what we're a when volume we're excited be people great -- through people enthusiasm. what

Do the they what is the oftentimes, what they Do Do to rep And I -- I to so walk do? not have it's ability place? of to hospital have it's intend get approval? so the stuff big all up. but -- And in oftentimes, do want because want I I a to have do

familiar early, specifically profile. so And in success it in growth long-term people reflected with what you that of in, our but for products, to lays me tough it quantify, them and does really, the is, a find foundation who see it's

Todd Koning

across much expansion I surgeon coverage the in that's very and think connected, that standpoint. our correlates new And Yes. training we're think nicely distribution from doing, also amount to obviously, all a with the country I users the of connected

relates year, process. still the of haven't planning to it middle we As next in yet, guidance given our

So very all very, that's live.

there is out is consensus XX%. XXX, sitting currently, like which think I

So I think kind spot on you're there. a of

consensus that. I by think offended we're what is not

Matthew O'Brien

to get that gross stick cut the forward, leverage I with softer. all that line, contribute may going I'm the a I is Pat. business business I gross for have move. but the the is there, a does the know margin strategic going is Great. trying top sorry these do forward? But do it. in here, the about grow And margin you the the have right specifically, you're it, what to investments then making that I'm I guy EOS quantitative what to but And here points which when may in numbers The of to if second of side was little metric? missed And 'XX 'XX we How I'll and 'XX, missed we then hefty things SG&A versus squeak Memphis start big likely to quarter. out component think as in spending see a of well? -- that sorry, start to leverage on some bit off

Todd Koning

Yes.

saw impact So from point margin was on EOS. what the about year-over-year. basis side, about XXX That's points, XXX we ultimately, unfavorable basis

operations That's some their margin between difference to on on XXs that so offset by that overall and our points of I high revenue. efficiency of $XX in our XXX partly XX% So hopefully of million side manufacturing, basis efficiency, front. EOS speaks think that

when margins a some you tailwinds in as capital mix longer think just a QX of as in the grows, I X business so think looking between equipment, term, if the you're implant the years, -- overall, in in XX%. overall quarter, gross leverage, we and we the we get faster Matt, last capital I how full coming guidance placements, long probably little cognizant looked expense sales, the business think period, at we're I come business, on operating a think, given at on certainly in any grow we're to the the timing our I grows than But percentage be bit you have over as at think bit run. Obviously, the here revenue expense at of that, that on of and as is about to the quarter. I of the reflected year more all now talk

sales If look lost at more it'd that be X about you had percentage a number XXXX, is QX XX%. in years is that OpEx of as at COVID, OpEx non-GAAP million done that $X And ago we we -- XX%.

bit of you And relative to and hit we had kind little mixes the definitely have in a certainly up we've would revenue had bit. leverage commentary number to this so that I to our of earlier seen period, COVID I a think here But stuff a especially a grow, kind and continue rate. do of years begin meaningful leverage to you'll get $XXX we of closer run that we here, of some as million $XXX kind believe investment, as X to get million, see

I we closer will to I improvement accelerate. that, the that the get think think

Operator

comes Cowen. The of next Josh from from Jennings the question line

Joshua Jennings

for Josh. is on This Eric

organic As earlier, you've that on XXXX. growth mentioned the since you've trajectory been

taking help competitors, to and apparent able exceeding grow us double the the in doing quarters. ATEC market market players really you're is that And has more understand been the you importantly, recent seeing performance? I'm spine COVID-impacted those well response missing? other sort now You've your others of Can that what been are the be seems digits competitive of and into what perhaps sure this your to during

Patrick Miles

in who me, To best think, the Yes. form -- think that I guys lateral. are I out we improve in All created to of lateral, to lay terms it best did our

I so uniquely. of that, what doing would part we're that's you such tell key a And

satisfy of what and specific it's Well, like, -- of. spine the to be people over you specific going surgery that are look the a to for surgery, not elements developed all that And not it's The very design sophisticated. sophisticated gosh, there happens other in designed you is been is the is kind spine requirement. unless utility hasn't companies if history, thing the interesting, of

ability our those reflects to very, and things those do very in things having so done ultimately And that accepted product gets widely a early.

We're know-how so previously. an if things These than there are, the And And and developing of doing say, we you experience it's EMG automated been gosh, -- like that to I -- including place. are very hard. great utility neurophysiology and specific our differently other for technologies people in SSEP them. is think we That's And are our very, what at designing both why the perspective. -- start from an are

creating people experience. to upon we aren't say, you other doing requirement gosh, is And what when we're start based predictable what doing innovating, so of are that is a doing we're the

won't I And procedures across there. and And experience, case, but reflected same. being plans the think in that's the lateral early have that different so stop do with we clearly the is multiple it most that to

procedural what is market reflection I seeing will of so sophistication. And you're a call, a what

Joshua Jennings

I'm seems That's like great. far year. you're And issue this on well a -- your as it just wondering It and guidance headwind then XXXX? shortages, internal factoring the updated results, XQ into your you're for expectations could so based is be into an on possibly staffing if managing

Todd Koning

Yes.

is of a QX go earlier, that is As of the we quarter. something hospital is in at considered where number attenuating staffing fourth a staffing we and a we'll will it QX, should the of context so COVID that I hospital believe we -- as as real, shared to We look normal business into that our resumption think be also the see and that away, lift tailwind of bit seasonality think begins continue to going bit. kind quarter. we Clearly, things volumes. of in as the saw. didn't I've We QX, we be a believe a more the see And the

October, So and continued in October, moderate August ultimately, from to saw in September and to to September from excess the October ADS. we November, we're and improvement improvements be December. of QX saw ADS a expecting We

to can I to and our fully reasonable and that think considered of out guidance put we achieve there believe exceed. well And a so from opportunity philosophical placed number thoughtful, we're we have put approach

Operator

question Next from line Kyle comes from of the Rose Canaccord.

Kyle Rose

Great.

$X growth been call the So was and coming just mean XX% talked of lateral. organic has that's $X I that the mean, of came a lateral. but million, specifically QX. we from out when somewhere lot the growth, X the stood I not specifically you at asked, million that's things but between revenue on from the about growth the look

a seeing of or ASC. kind of complex. of dynamic strength that cases around, hey, then to move lateral, trying less the the So the in a seeing commentary we're lot but also understand We're of I'm just more to cases, lot

maybe the if here. frame kind been just of So hadn't COVID opportunity

million? to $X driven really is how this If that lateral million into trying $XX kind of have headwind, just that understand you turned $X growth million, being $X a alone? lateral million I'm of really would by much didn't of

Patrick Miles

answer will reflection. the I specific Yes. numeric not

a very terms going lateral. seeing everybody doing, there profoundly lateral. technique relevant. So prone at early I seeing of you're been really is already else they're you're we've what adoption you the everybody talking a And kind a think out that what is prone look about positive of is of be to in through And if

our in learnings terms reflected failures now what in ultimately is PTP. of All of

the is kind they're someone I the adoption. adopts so a is is what And for about do great to [indiscernible] likelihood achievable they the early, we're like And whereby I find success part will And that early is going seeing to where good. think grade success. very spondylolisthesis, of time going what something is any something think they're rate things X do high

part technique. seeing been the what And so do time, things have a seeing is, what with you're who them around you're great more a of The complex seeing kind is this those adoption. is is the we're of early people period for

the And is deformity great pathologic challenging so adult a part a treat. kind profile a is of very to

that you pure think And the things that's some anterior stuff sophisticated being intervention to part a we're a and associated of is ability so all at PTP, a other to going around, with the tools starting start when look kind reflect if now. more trauma, to from to in move also, see perspective PTP tumor, to about and transpire great is the of The and perspective, developed column corpectomy those now. you of like start from

is a also so up the see And you'll reflected sophistication be just what financially. ladder, walk continued which will

the opportunity lateral But Doesn't I what have going that of that going type pushing in with a transposed that lateral terms to you tremendous would of see early it again, kind positioned expect And away of PTP. is you're -- who LTP type with that, users, so mean then out utility the think been I away. in bit longer. seeing is of regard a around transposed of people laterally surgery little envelope we and surgery would the tell we

of kind so And that, qualitative all I know that... a

Todd Koning

to kind as I lateral me sit itself. growth our have the strength of pretend for hard of and the $X at the certainly, demographics business. would But be manifest I expected certainly million have that it's a volumes have that our different the And would how growth, exactly here look higher. been I of to in procedures, some Kyle, would of million know it $X was, in where reflected

a you're starting as plays about as getting ASC, well surgeons so think is, much we point, deferrals, we're portion with COVID pass and simpler moving and would to less have out setting really out cases adding belief about care And the the your lateral. yes, And the been -- the complexity pathology. -- is health as in is comment that probably that being new my that how the of impact, complex, and less to

all we $X contribution million, I that have had say, the So And than been certainly to X%. volume. think ASP would seen would been more do have higher

Kyle Rose

I Okay. the think PTP? alpha I before just on overall, commercial And the I had going that. cases some of When actual then broad know launch -- now? things you all of the using your QX of mean, up the done, in is PTP here XX% about education, this surgeon think much that we year. and are surgeons user How you've base your annualizes

Patrick Miles

of think what it's fair like things are over say things question. I like, Well, amount, it's a to people come to it. great sorry quantify a would I those where and not It's X compels PTP. here

become with enamored serious then kind of they of PTP of they that long-term and happened things they leave market a we're what normal that is by a the we that's in experience, do a a great long here, value confidence, building. so work kind have we're their see serving. space see in gain the They And have they a based And come here. a run history -- created with of it They because They creation the upon brought us here. confidence they what visit. about

of the distinction a Nobody here of to feel compelled by in come, I like, a long-term right because And our company. clinical at plate. the amount so is approach why look large successful would people of building we terms tell that that's it. and And of to foundation going being you the cervical they come is gosh,

came. they as cervical to our away walk skill that great didn't set As they a with before at ain't plate look coming They're have to is, it. coming they

great again, part so we're to that And speaks And the is, to them. long-term it giving success. is

Operator

conclude does have call. no time. today's at This further We this questions

now may disconnect. You

Alphatec (ATEC) 7 Nov 212021 Q3 Earnings call transcript