Alphatec Holdings, Inc. · NASDAQ:ATEC
Alphatec — Q1 2024 Earnings Presentation
36 slides from Alphatec's earnings presentation, May 7, 2024
Slide 1: Q1 2024 Financial Results
Q1 2024 FINANCIAL RESULTS PAT MILES, CHAIRMAN & CEO | TODD KONING, EVP & CFO MAY 7, 2024
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainty. Such statements are based on management's current expectations and are subject to a number of risks and un
Slide 3: Q1 2024 Highlights
Q1 2024 $138M Total revenue 27% Total revenue growth ~450 bps adjusted EBITDA HIGHLIGHTS margin expansion ESTABLISHED FOUNDATION 30% 23% 6% Surgical revenue growth Surgical volume Growth in average TO DELIVER PROFITABLE with broad contribution growth surgical revenue / case LONG-TERM GROWTH REVENUE-
Slide 4: ATEC Is Different
ATEC IS DIFFERENT 100% KNOWHOW CLINICAL DISTINCTION Spine focus Unmatched mechanical, imaging, Compelling surgeons & talent with innovation navigation & neuromonitoring expertise that advances spine surgery PROCEDURALIZATION INFORMATION Assembling technologies from the ground up to Integrating unpre
Slide 5: Growth Drivers
GROWTH U.S. SALES FORCE Cherry-picking aligned and disrupted talent DRIVERS INTERNATIONAL Narrow & deep strategy beginning to contribute VALENCE Workflow-integrated robotic navigation on track for 2025 EOS INFORMATICS Influence launch soon + expanding deformity presence LATERAL DOMINANCE LATERAL INF
Slide 6: Why Is Lateral Leadership Important?
WHY IS LATERAL LEADERSHIP IMPORTANT? Advancing spine surgery by applying UNRIVALED KNOWHOW to approaches with significant, clinically validated advantages BLOOD LOSS* HOSPITAL STAY* DAYS UNTIL cc/ level days WALKING* 800 12 3 TLIF PLIF 700 10 PLIF 600 8 2 500 >500 400 6 TLIF 300 4 1 ALIF 200 ALIF PE
Slide 7: Lateral Requires Neuromonitoring, ATEC's Competitive Edge
LATERAL REQUIRES NEUROMONITORING, ATEC’S COMPETITIVE EDGE EMG & SSEP MONITORING IS WITHOUT SSEP MONITORING, FEMORAL PIVOTAL TO LATERAL OUTCOMES NERVE COMPLICATIONS ARE A RISK Highly enervated psoas muscle must be navigated to safely approach the spine laterally 16% to 36% Thigh paresthesia/ –20-minu
Slide 8: The Next Generation of Neuromonitoring
THE NEXT GENERATION OF NEUROMONITORING The value of intra-operative objective measures OTHERS U.S. lateral market share* ~12% ~50% >30% Neuromonitoring integrated Surgeon-directed EMG (nerve location) SSEP (nerve health) Small footprint 8 | * Management estimate
Slide 9: Our Competitive Moat Is a Highly Protected Trade Secret
OUR COMPETIVE MOAT IS A HIGHLY PROTECTED TRADE SECRET PROPRIETARY ALGORITHM SSEPs’ extremely small signal Automated SSEP provides real-time nerve challenging to find & interpret health assessment vs. delayed information amid electrical O.R. noise and compromised surgical response >60 11 Neuromonitor
Slide 10: ~230 Product Development Engineers Committed to Continued Innovation
~230 PRODUCT DEVELOPMENT ENGINEERS COMMITTED TO CONTINUED INNOVATION Innovating beyond our last best effort in lateral ENABLING TECHNOLOGY DEVELOPMENT INCREASING PROCEDURAL VALUE Corpectomy Multi-level Deformity AIS Lateral workflow- MEP integration will NEXT-GEN SOPHISTICATION integrated extend Saf
Slide 11: Lateral Market Penetration & Expansion: Long-Tailed Growth Driver
LATERAL MARKET PENETRATION & EXPANSION: WILL BE A LONG-TAILED GROWTH DRIVER Unrivaled investment in the most coveted spine market ONLY ATEC: $2B U.S. TLIF & PLIF* (conventional techniques that can be treated with PTP) • Committed to improve lateral by better meeting surgical requirements & addressin
Slide 12: Lateral Confidence Creation Earns Surgeon Trust
HALO EFFECT FROM LATERAL DISTINCTION LATERAL CONFIDENCE LATERAL CREATION EARNS SURGEON TRUST… …and expands utilization of our more conventional approaches ANTERIOR POSTERIOR CERVICAL APPROACHES APPROACHES APPROACHES 12
Slide 13: EOS Insight Ready for Launch, Data Collection Underway
EOS INSIGHT READY FOR LAUNCH, AS COMMITTED – DATA COLLECTION UNDERWAY Completely unique and completely protected technology DATA 2022 2024 C L E A R E D Collection of data & standardized images to inform future care already underway ✓SOC 2 ✓HITRUST C L E A R E D C L E A R E D C L E A R E D 13
Slide 14: Replicating a Proven Informatics Playbook
REPLICATING A PROVEN INFORMATICS PLAYBOOK Automated neuromonitoring is to lateral what EOS will be to alignment SAFEOP’S LATERAL INFLUENCE Procedurally integrated objective information drives surgeon decision making– lateral EOS WILL INFLUENCE DEFORMITY Procedurally integrated objective information
Slide 15: Paradigm-Shifting Technology (Pre-operative)
PARADIGM-SHIFTING TECHNOLOGY Controlling variables with objective, efficient pre-operative standard CURRENT STANDARD: THE EOS STANDARD ALIGNMENT & PLANNING BY GESTAULT Automatically calculated Time-consuming hand-calculations RARELY USED, alignment & understanding even though alignment is most corre
Slide 16: Paradigm-Shifting Technology (Intra- and Post-operative)
PARADIGM-SHIFTING TECHNOLOGY Controlling variables with objective, efficient intra- and post-operative standard CURRENT THE EOS PRE-OP POST-OP STANDARD: STANDARD NO INTRA-OP / POST- Import surgical plan into O.R. OP RECONCILIATION Measure alignment TO PLAN parameters and refine as Surgeon unsure of
Slide 17: Valence Development Is on Track
VALENCE DEVELOPMENT IS ON TRACK OUR COMMITMENTS Onboard team with deep expertise to spearhead technological integration and development Secure clearance for InVictus screw placement Obtain free-hand navigation clearance 2024 Integrate into lateral workflow for improved 2025 predictability and effici
Slide 18: International Is Progressing
INTERNATIONAL IS PROGRESSING Applying learnings to ensure integrity of ATEC proceduralization AUSTRALIA/ JAPAN NEW ZEALAND Market Size* $250M $450M ANZ: PTP fully cleared - 40+ surgeons attended inaugural ATEC 2023 Revenue $5M $0 anterior lateral meeting in Sydney - 20 surgeons trained Regulatory Cl
Slide 19: Disruption: A 2-3 Year Tailwind
DISRUPTION: A 2-3 YEAR TAILWIND Capitalizing on opportunity to accelerate & improve caliber of our U.S expansion >5% • Quality & quantity of funnel consistently strong ~35% of U.S. market • Strategically filling in major markets and adjacent recently disrupted geographies, some talent upgrades • Pat
Slide 20: Influence in Major Markets Expanding
INFLUENCE IN MAJOR MARKETS EXPANDING TOP 10 U.S. SPINE GEOGRAPHIES >5% Share of U.S. market overall* 1 New York, NY 2021 share* -- 2023 share* 4% 2 Los Angeles, CA 1% 3% 3 Dallas, TX 2% 6% 6% Share of top 10 U.S. markets* 4 5 6 Houston, TX Phoenix, AZ Chicago, IL 3% 3% 5% 8% 12% 14% 7 Washington, DC
Slide 21: Well-Positioned to Create Value Next Several Years
WELL-POSITIONED TO CREATE VALUE NEXT SEVERAL YEARS (AND BEYOND) 2023 2027 Revenue $482M $1B 20% REVENUE CAGR Adjusted EBITDA* ($9M) $180M 2,000 18% BPS MARGIN EXPANSION Adjusted EBITDA Margin* (2%) CASH FLOW Free Cash Flow ($159M) $65M BREAK-EVEN 2025 21 | * See Adjusted EBITDA reconciliation in app
Slide 22: Financials
odec INFORMED BY E()N FINANCIALS
Slide 23: Q1'24 Revenue
Q1’24 REVENUE Portfolio-wide momentum with greatest contribution to growth from lateral Q1 2024 YOY QOQ Surgical Revenue $123M 30% 0% 23% YoY surgical 6% YoY growth in EOS Revenue $16M 5% 3% volume growth avg revenue/ case TOTAL REVENUE $138M 27% 0% 23
Slide 24: Non-GAAP P&L Highlights
NON-GAAP P&L HIGHLIGHTS * Revenue growth fueling significant operating leverage • Gross margin % increased with EOS margin Q1 2024 YOY improvement and volume-driven leverage of Total Revenue $ $138M +27% Memphis distribution center • R&D levering while furthering innovation & Gross margin % 71% +50
Slide 25: Balance Sheet
BALANCE SHEET Cash and liquidity to support path to cash flow break-even • Free cash use $70M CASH & DEBT Q1 2024 • Deploying capital as planned to invest in Cash $144M revenue-generating assets Debt (at face value) 1 $527M • Continue to expect FY 2024 cash use of ~$100M to be front-end loaded CASH
Slide 26: Equipping Expanding Sales Team
EQUIPPING EXPANDING SALES TEAM Surgery –serving asset investments generate 3X ROI INVESTMENT VS REVENUE GROWTH & AEBITDA* • Investment in sets & inventory to support future growth generally at $400 rate of 75% of sales growth • 2025 to 2027 AEBITDA will exceed $300 investment requirements $200 75% $
Slide 27: Updated 2024 Guidance
UPDATED 2024 GUIDANCE Continued market share expansion driving sector-leading growth & operating leverage FY 2024 FY 2024 LOW YOY PREVIOUS UPDATED 20’s% MSD% Surgical Revenue $530M $536M 27% Surgical volume Rev / surgery growth growth EOS Revenue $65M $65M 9% TOTAL REVENUE $595M $601M 25% Growth mom
Slide 28: Operating Leverage Fuels Our Inflection to Cash Generation
OPERATING LEVERAGE FUELS OUR INFLECTION TO CASH GENERATION Well-defined path to self-funded growth ahead DRIVERS OF OPERATING LEVERAGE ADJUSTED EBITDA, FREE CASH FROM 2023 TO 2027 FLOW & CASH BALANCE ($M) $300 Variable Selling $200 ~1,000bps SG&A Infrastructure 2,000 $100 $0 ~700bps bps of 2023 2024
Slide 29: Spine-Focused Momentum
~40% REVENUE CAGR Sector-leading, 5-year revenue CAGR fueled by clinical distinction-driven market share expansion $8B MARKET * Vast need for effective care & predictable outcomes not being met by unfocused conglomerateurs SPINE-FOCUSED PROFITABLE SALES GROWTH MOMENTUM Clear line of sight to cash fl
Slide 30: The Opportunity to Improve Spine Surgery Is Significant
THE OPPORTUNITY TO IMPROVE SPINE SURGERY IS SIGNIFICANT % OF SURGERIES THAT REQUIRE REVISION* 25-30% ADULT SPINE DEFORMITY 10-15% DEGENERATIVE UNIQUELY POSITIONED SPINE 3% >5% KNEES HIPS TO LEAD 5 years 10 years 1 to 3 years 2 to 5 years 30 | * Sources in appendix
Slide 31: Appendix
INFORMED BY E()N APPENDIX
Slide 32: Supplemental Financial Information
SUPPLEMENTAL FINANCIAL INFORMATION Access this file at https://investors.alphatecspine.com/quarterly-results/default.aspx
Slide 33: Supplemental Financial Information
SUPPLEMENTAL FINANCIAL INFORMATION Access this file at https://investors.alphatecspine.com/quarterly- results/default.aspx
Slide 34: Supplemental Financial Information
SUPPLEMENTAL FINANCIAL INFORMATION Access this file at https://investors.alphatecspine.com/quarterly- results/default.aspx
Slide 35: Sources & References
SOURCES & REFERENCES SLIDE 9 – SAFE OP CLINICAL EVIDENCE SLIDE 31 – DURABILITY OF ORTHOPEDIC SURGERY 1. Barkay G, Oshtori R, Reto J, et al. Sequential Depth Stimulation Within the Psoas Offers No Benefit for Localization 1. Bhandari M, et al. Clinical and economic burden of revision knee of the Lumb
Slide 36: Does Data Support the "20-Minute Rule" in Lateral Surgery?
DOES DATA SUPPORT THE “20-MINUTE RULE” IN LATERAL SURGERY? SafeOp obviates the 20-minute rule with objective SSEP information “Retractor time is not the primary driver of injuries and limiting retractor time is a poor predictor of post-operative quadriceps motor injury.”