Alphatec Holdings, Inc. · NASDAQ:ATEC
Alphatec — Q4 2023 Earnings Presentation
34 slides from Alphatec's earnings presentation, Feb 27, 2024
Slide 1: Q4 2023 Financial Results
Q4 2023 FINANCIAL RESULTS PAT MILES, CHAIRMAN & CEO | TODD KONING, EVP & CFO FEBRUARY 27, 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: Highlights
2023 $482M Total revenue 37% Total revenue growth ~890 bps adjusted EBITDA HIGHLIGHTS margin expansion 40% 31% >500 HARNESSING MOMENTUM Surgical revenue growth Surgical volume growth Surgeons trained with broad contribution vs 25% in 2022 TO FOSTER CONTINUED ROBUST GROWTH LATERAL INFORMATICS CAPITAL
Slide 4: The Long View: Spine-Focused Momentum
THE LONG VIEW: SPINE-FOCUSED MOMENTUM 6% SECTOR-LEADING GROWTH U.S. FUELED BY MARKET SHARE EXPANSION MARKET SHARE* 5% 4% 3% ~40% TOTAL REVENUE 17% NEW SURGEON 24% PROCEDURAL 12% REVENUE / CASE CAGR ADOPTION CAGR^ VOLUME CAGR^ CAGR^ 2% 1% 0% 2018 2019 2020 2021 2022 2023 4 *Source: Management estimat
Slide 5: Our Commitments: Clinical Distinction, Surgeon Adoption, Distribution
EARNING SHARE SINCE 2018 BY COMPELLING WITH CLINICAL DISTINCTION 2 SURGEON ADOPTION More surgeon users + consistently expanding utilization of ATEC solutions Our Commitments 1 CLINICAL DISTINCTION Spine focused, industry-leading expertise applied to advance 3 ELEVATE DISTRIBUTION procedures and inte
Slide 6: ATEC Distinction Starts with Lateral Market Penetration & Expansion
ATEC DISTINCTION STARTS WITH LATERAL MARKET PENETRATION & EXPANSION ONLY ATEC: • Committed to improve lateral by better meeting surgical requirements & addressing hurdles $2B * U.S. TLIF & PLIF (conventional techniques that can be treated with PTP) • Integrated SafeOp to avoid the complication $1B m
Slide 7: 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 7
Slide 8: Innovation Is Advancing Sophistication Portfolio-Wide
INNOVATION IS ADVANCING SOPHISTICATION PORTFOLIO-WIDE 15 NEW PRODUCTS & LATERAL ANTERIOR ALIF PLIF POSTERIOR FIXATION TLIF CERVICAL PCF ACDF LINE EXTENSIONS IN 2023 - Expandable & nanotech - Access system - Deformity & AIS solutions - Access systems implants seamlessly - Osteoporotic solutions - Pla
Slide 9: Distinction Compels Multifaceted Surgeon Adoption
DISTINCTION COMPELS MULTIFACETED SURGEON ADOPTION MORE SURGEON MORE OF EACH MORE PRODUCT CATEGORIES CUSTOMERS SURGEON’S CASES SOLD INTO EACH CASE Avg. product categories / case (Opportunity: 5 to 9) + + + + + + 2.4 2018 2019 2020 2021 2022 2023 9
Slide 10: Distinction Elevates Distribution
DISTINCTION ELEVATES DISTRIBUTION Leveraging surgeon demand & industry disruptions to enhance the ATEC footprint 5% US MARKET SHARE1 EXPAND FOOTPRINT & INCREASE CONTRIBUTION OF EXISTING TEAM ~25% 36% • Capitalize on market • Further penetrate adjacent uncertainties to improve markets within existing
Slide 11: ATEC Lateral Sophistication Would Build a Good Company
ATEC LATERAL SOPHISTICATION, ALONE, WOULD BUILD A GOOD COMPANY… 2021-2023 LTP & HALO EFFECT WHERE WE’VE BEEN WHERE WE’RE GOING – 2020 PTP INFORMATICS & DEFORMITY 2018 SAFEOP 2018 ORGANIC …BUT WE SEEK TO INNOVATION MACHINE REVOLUTIONIZE SPINE ATEC IS BUILDING A MONSTER! 11
Slide 12: The ATEC Informatic Ecosystem
THE ATEC INFORMATIC ECOSYSTEM On track to broaden our competitive moat with workflow-integrated enabling technology that better achieves the goals of surgery PROPRIETARY PRECISION & PREDICTABILITY FROM PRE-OP TO POST-OP Real-time monitor of location Navigation-enabled robotic and health of nerves du
Slide 13: What Are We Solving For?
WHAT ARE WE SOLVING FOR? SPINE SCIENCE ISN’T SETTLED = significant opportunity to improve surgery 25-30% % OF SURGERIES THAT REQUIRE REVISION 10-15% 1 .Bhandari M, et al. Clinical and economic burden of revision knee arthroplasty. Clin Med Insights Arthritis Musculoskelet >5% Disord. 2012;5:89-94 2.
Slide 14: Surgery Without EOS = Decision Making by Gestalt
SURGERY WITHOUT EOS = DECISION MAKING BY GESTALT Radiographic image: EOS full body images: limited view = limited insight VS if you can see & measure it, you can fix it SPINE’S CHALLENGES SURGERY RELIES ON UNINFORMED NO INTRA-OP SEGMENTAL IMAGING PRE-OP PLAN RECONCILIATION • Limited view of the • Al
Slide 15: Data to Further the Science
DATA TO FURTHER THE SCIENCE EOS InsightTM launches soon DATA PRE-OP INTRA-OP POST-OP Automated Intra-op surgical alignment/ planning reconciliation Automated Pre-bent Assessment alignment rods & follow-up reports 15
Slide 16: Informatics Establishing Our Influence in Deformity
INFORMATICS ESTABLISHING OUR INFLUENCE IN DEFORMITY Replicating procedural view to advance care ALPHA INFORMATIX PROCEDURE-SPECIFIC POSITIONER • EOS Insight will automate measures & • Pre-incision correction capabilities quantify pre-op planning, enable intra-op • Alpha evaluation underway assessmen
Slide 17: Surgeon Attendees: Who's Who of Deformity & Research
>30 Surgeon attendees - THE WHO’S WHO of deformity & research programs globally INSTITUTE OF SPINE PATHOLOGY SAO PAULO 17
Slide 18: Spine's Most Distinct, Informed Ecosystem
SPINE’S MOST DISTINCT, INFORMED ECOSYSTEM WILL IMPROVE SPINE CARE Workflow-integrated informatics = better outcomes = increased adoption & utilization PRE-OP INTRA-OP POST-OP Automated alignment Sophisticated, Follow Up Surgical planning proceduralized interventions Machine Learning Customized rod-b
Slide 19: All Systems Go!
ALL SYSTEMS GO! EOS INFORMATICS Influence launch - 2024 + Expanding deformity presence VALENCE OUR BEST IS YET TO COME WITH NUMEROUS Workflow-integrated robotic navigation - 2025 INCREMENTAL GROWTH CATALYSTS AHEAD MARKET DYNAMICS Compelling disrupted talent – 2024 & 2025 HOSPITAL ACCESS Increasing I
Slide 20: Financials
ondec INFORMED BY E()N FINANCIALS
Slide 21: Revenue
REVENUE Growth driven by portfolio-wide momentum Q4 2023 YOY FY 2023 YOY • Strong surgical revenue growth against tough ~50% comp in Surgical Revenue $123M 34% $423M 40% Q4’22 • Surgeon adoption increased 27% EOS Revenue $15M 5% $59M 24% in 2023 • Volume growth accelerated both TOTAL REVENUE $138M 3
Slide 22: Non-GAAP Definition Update
NON-GAAP DEFINITION UPDATE Non-cash excess & obsolete inventory charges will be included in non-GAAP COGS calculation Q4 2023 YOY FY 2023 YOY • With portfolio overhaul complete, non-cash E&O charges are normal Adjusted EBITDA $ $6M + $9M $4M + $33M and recurring DEFINITION PRIOR • Immaterial impact
Slide 23: Non-GAAP P&L Highlights
NON-GAAP P&L HIGHLIGHTS * Revenue growth fueling significant operating leverage Q4 2023 YOY FY 2023 YOY • GM% increase YoY due primarily Total Revenue $ $138M + 30% $482M + 38% to EOS GM improvement • R&D reflects continued Gross margin % 70% + 310 bps 70% + 220 bps investment + Valence R&D % 10% (5
Slide 24: Balance Sheet
BALANCE SHEET Cash and liquidity to support path to cash flow break-even CASH & DEBT Q4 2023 • Free cash use of $51M Cash $221M • Improving adjusted EBITDA benefits free cash flow 1 Debt (at face value) $527M • Investing in revenue-generating assets (instruments & inventory) to fuel strong CASH USE
Slide 25: 2024 Guidance
2024 GUIDANCE Continued market share expansion will drive growth and operating leverage FY 2023 YOY Surgical Revenue $530M 25% Portfolio-wide volume momentum drives confidence in continued EOS Revenue $65M 9% sector-leading revenue growth TOTAL REVENUE $595M 23% ADJUSTED EBITDA (Updated definition)
Slide 26: Surgical Revenue Drivers
SURGICAL REVENUE DRIVERS VOLUME GROWTH SURGEON ADOPTION SURGEON UTILIZATION VOLUME SURGEON USERS AVG CASES/ SURGEON 42,300 +27% 32,400 + 25,800 ~20% 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023 2021 2022 2023 2024E AVG REVENUE / SURGERY GROWTH MIX SHIFT PRODUCT REVENUE / SURGERY • Lateral cases
Slide 27: Continuing to Deliver on Profitability Commitments
CONTINUING TO DELIVER ON PROFITABILTY COMMITMENTS Increasingly well-defined path to cash flow break-even in 2025 OPERATING LEVERAGE DRIVERS OF LRP OPERATING IN 2024 LEVERAGE FROM 2021 TO 2025 SG&A Infrastructure $22M adjusted EBITDA = ~1,200bps 560 bps of improvement Variable Selling ~1,000bps 2,500
Slide 28: Profitable Growth Ahead
PROFITABLE GROWTH AHEAD INFLECTED TO WELL-CAPITALIZED SELF-FUNDED PROFITABILITY + BALANCE SHEET = GROWTH AHEAD On track with intended margin Well-positioned to Cash flow break-even in expansion from infrastructure capitalize on recent market 2025 will fund future leverage and variable selling disrup
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 is not being met by unfocused conglomerateurs SPINE FOCUSED PROFITABLE SALES GROWTH Fueling path to cash flow break-even
Slide 30: Appendix
INFORMED BY E()N APPENDIX
Slide 31: Access this file at https://investors.alphatecspine.com/quarterly-results/default.aspx
Access this file at https://investors.alphatecspine.com/quarterly-results/default.aspx
Slide 32: Access this file at https://investors.alphatecspine.com/ quarterly-results/default.aspx
Access this file at https://investors.alphatecspine.com/ quarterly-results/default.aspx
Slide 33: Access this file at https://investors.alphatecspine.com/ quarterly-results/default.aspx
Access this file at https://investors.alphatecspine.com/ quarterly-results/default.aspx
Slide 34: Access this file at https://investors.alphatecspine.com/quarterly-results/default.aspx
Access this file at https://investors.alphatecspine.com/quarterly-results/default.aspx