Day three of the Jefferies London Healthcare Conference. We're saving the best for last here. Pleased to be joined by management from Alphatec. We've got Todd Koning, EVP and CFO, and Robert Judd, VP Finance. My name is Young Li, one of the US MedTech analysts, and this will be a moderated Q&A session. Gentlemen, welcome, and thanks for coming to our conference. Thanks for having us. Thanks for having us. All right. I guess to start, I mean, you know, it's a little bit more of an international audience. Maybe just to start a little bit high level. So Alphatec has been the fastest organic grower in spine in recent years. Maybe if you can talk a little bit about the differentiation, your secret sauce or special sauce, you know, what enables you to grow at the fastest rate in spine organically, and how sustainable are those growth drivers going forward? Yeah, thanks, Young. I think, you know, clearly, if you kinda look back at the remake of the company, Pat Miles, our CEO, and really started to remake and rebuild the company back in 2018, and, ultimately, we really kind of focused on, rebuilding and launching new products and refreshing the posterior fixation, the interbodies, kind of the screws and the cages, and really the hardware of the company. Along the way, we purchased some foundational technology, kind of enabling technology to support the strategy. So in 2018, we acquired SafeOp, which was a neuromonitoring platform, which is critical to and required for, lateral surgery, and we'll talk more about that in a minute. 2021, we acquired EOS, which is just a fantastic imaging platform that really allows you to understand global alignment in a differentiated way and really helps us bring forward understanding how to measure your patient, how to create a plan automatically or in an automated fashion, and being able to bring patient-specific implants to bear. And ultimately, that gives you a great data set that you can understand kind of preoperatively what the pathology is, what your plan was, how you achieved your plan postoperatively, and then follow that patient over time. And because it's standardized imaging, you can ultimately measure pre, post, and over time changes in the spinal anatomy. That's gonna give us a great data set to really ultimately leverage our business on and better understand how to connect a diagnosis and a pathology with a treatment and what happens over time. Then, more recently, we acquired a navigation and robotic platform. We did that in April of this year. We've rebranded that Valence. And so when you look at the company today, it really has all of the kind of the hardware necessary and the enabling technology. Probably is the leading enabling technology portfolio in spine today. It allows us to make a huge run going forward. And so you had asked, Young Li, what kinda what's driven the growth and, you know, early 2021, late 2020, we launched PTP Prone Transpsoas. Really a very distinct lateral solution combined with our SafeOp platform that allows you to avoid the most common complication of spine surgery by monitoring the health of the nerve intraoperatively. It also has a patient positioner, which allows you to really dial in the patient anatomy and position the patient in a way that gives you a level of precision and confidence. And so you can do your lateral procedure and your posterior fixation approach all in a single position, which gives great efficiency and for the surgeon. And so much of our growth in the company has been driven by our lateral portfolio. When we, when we set out to remake the company, the first goal was to create clinical distinction, in other words, to help surgeons do better surgery. The second one was to compel surgeon adoption based on clinical distinction, and it's at that point, then you can really attract the sales force. Often, I think in spine, people get confused and think, "Hey, all I gotta do is I gotta just find a really big spine rep, and then all the surgeon will follow him or her, and that's how you grow a business." Ultimately, that's a very transactional and relationship. What you wanna do is ultimately create clinical distinction in such a way that it compels a surgeon to adopt your technology. When you do that, then you can get the sales reps to support the sales. And so we've really been focused on doing that, mostly in a lateral offering, both PTP and more recently, we've launched LTP as two platforms for lateral surgery. And you've seen our growth. We've grown, you know, over 40% a year. We laid out a long-range plan in 2020. Well, I guess about a year and a half ago, that said we'd grow 20% a year from 2021 to 2025. That actually said or implied that our 2025 revenue would be $555 million. And in that, we said we would be Adjusted EBITDA break even in 2023, and that we'd be cash flow break even in 2025. When you look at that long-range planning, the street estimates put us north of $555 million today for 2024. So really achieving that plan a year early.... Our guidance today from an Adjusted EBITDA standpoint is $3 million, but that's net of absorbing $4 million of OpEx associated with the Valens, the navigation platform that we purchased. So really kind of a +7 on this year. So in many ways, really overachieving the long range plan, both on a top-line growth as well as a profitability expansion. And so, you know, I'd tell you, Young, the growth has really been a function of our clinical distinction, and it has come through both in kind of the volume in terms of procedural growth, as well as the revenue per procedure growth that really reflects the clinical value that we're bringing to spine. All right, great. That's an excellent overview. I guess, just staying high level for one more question before we dive in. Just, you know, addressing the, you know, important topic of potential GLP impact on Alphatec's business and your core markets. You know, are there any near-term impacts on numbers or long-term impacts to the TAM? Can you maybe talk about obesity and high BMIs impacts on spine surgery, as well as some of the other important clinical drivers of degenerative spine pain other than obesity? Yeah. So I think, you know, when you look at spinal interventions, the important thing to note is there's typically a BMI cutoff, 35-40, kind of depends on the surgeon. And so our view has really been that GLPs in certainly in kind of the near to medium term, offer a patient population tailwind, just by virtue of making people eligible for spine surgery in a way they wouldn't have before. I think it's well documented that people who've got a BMI greater than 40 have a 7 times more likelihood of having an infection post-surgery. And so, you know, I think this ultimately provides an opportunity for some growth in the spine, really, procedures, that wouldn't have been there without it. You know, when you look at the reasons for spine interventions, the predominant volume is associated with degenerative discs and degenerative diseases. And so that is so much an age-related and probably a DNA-related phenomenon. Not that weight doesn't have a factor, but I think it ultimately really kind of becomes one of time and. And so, you know, from our perspective, really, the near to medium term is quite robust, relative to GLP impact, meaning more population potential. And I think the long term is really kind of time will tell, and so. All right, great. Yeah. We would agree with that, as well. But yeah, it will take time to prove out. I guess moving on to the topic of, just industry consolidation and disruption, you know, potentially a third or half of the market is going through some sort of integration or restructuring. You know, at the, Spine Conference last month, you announced the addition of a, ex-Spine CEO to your board, along with the hiring of another ex-Spine CEO as, special advisor to your board. You also hired 30+ competitive reps from those companies that's, you know, digesting and integrating their mergers, and we expect more to come. Can you maybe talk about the cadence of competitive hirings from those disrupted companies? And, you know, how many reps can you absorb, on the high end? You want to speak to the disruption? Yeah. I mean, I think you look at the landscape, but you set it up, Young, but you know, you have Globus and NuVasive merging. The deal just closed a little over a month ago. SeaSpine and Orthofix are still in the midst of an integration, and then there was some leadership change there. You have J&J alluding to maybe some restructuring of their spine and orthopedics. So to your point, there's a lot of disruption, probably historically, you know, over the last few decades, and I think certainly looking forward, this is a once in a lifetime type of dynamic. That's at least how we view it. And I think you look at where's the destination? So if all these people are disrupted or dislocated or disenfranchised in some form or fashion, what's the destination? And I think it's increasingly becoming clear that we are the destination. I mean, there's just not a lot of destinations left, frankly. And then you look at a company like Alphatec that is setting the standard in how do you care for patients? How do you develop a procedural approach in lateral surgery? You have next generation lateral with PTP and with the LTP procedures that we've launched, the things we're doing with EOS and now with Valens, as Todd talked about, and it's a destination. And so we shared the 30 reps that we hired as really just a litmus test to describe, "Hey, we have people. This is real." Like, the events have occurred as far as the deal closing and the leadership change that occurred, and these folks have come, and that really is the thesis for us, you know, getting the instruments and inventory that we need to fund the growth. And so you asked kind of what the cadence is, and I think the nice thing about the setup for us is there's people knocking on our door as far as the interest. And what that allows us to do is to prioritize and hire the opportunities. We talk about a third of the country in the U.S. being uncovered or undercovered from a sales perspective. And so the opportunity is ours to look at these potential hires, to prioritize them, and that there's no shortage of people in the funnel. So it's up to us to make sure we hire the people that we have that we think have the highest likelihood of success, the highest impact. And the reason we like the setup is you think about the folks that are coming, in particular from NuVasive, the management team at Alphatec was probably involved in their hiring. The surgeons that are doing lateral surgery, Dr. Pimenta, who pioneered lateral surgery, was likely involved in training those surgeons. And so the opportunity to be confident in the conversion of those people and frankly, their desire to come to a company that's really become the thought leader in lateral, being ATEC, is a nice setup. And so I think you're gonna continue to see us add, you know, strategically and again, in a well-thought-out and a prioritized manner, the right people at the right time and the right places. I think that that's something that's gonna happen over the next, you know, 6-12 months and beyond. Okay, excellent. And, I guess somewhat related to that, you know, you did do a secondary three weeks ago, raised $150 million in cash. That's a sizable amount. I guess, what are the key priorities for the use of cash? You know, how much can be used for competitive rep hirings, especially in filling out some of the white spaces in the U.S. that you don't have a presence in? And, you know, what does it mean for product development, acquisitions, and getting to cash flow break even? Young, the raise was really all about getting capital so that we could build out the sets and the inventory, kind of the revenue-generating assets that sales reps ultimately require to support the revenue that they service. And so, you know, I'd just tell you, you know, our focus here is ultimately to continue to grow on the top line faster, much faster than the market has, to continue to expand operating margins like we have been, and getting to cash flow break-even in 2025. That's the play, and the raise allows us to invest in the sets and the inventory so that we can move the competitive hires. And the competitive hires, historically, we have really kind of done a one by one by one approach. And you can be more asset efficient in that and be a bit little more linear in how you bring assets into the company to support that growth. But like we've said more recently, where we hired 30 reps over the course of a two months or so, 15 of those guys were in the New York, New Jersey. It was a single team. Those guys support maybe $30 million-$40 million worth of revenue. For them to have the confidence to sign on with us, they had to come and actually see the inventory. They had to have a level of confidence that when they're on day one as an ATEC sales agency, that they can support their surgeon customers, and to do that, they need to have the assets to do that. Ultimately, you've got to have a set of inventory and assets that you can deliver and bring in one fell swoop to support the amount of volume that when you convert an entire territory, if you will. That's different than adding kind of a one by one by one over time. This capital raise was really allows us to forward buy the assets and the inventory required to support a number of significant territory movements, and that's really what the raise was all about and why we did the raise. That's the focus there. You know, our commitment to profitability is totally intact, and I think the question we'll often get is: How much of the raise will you use to, you know, essentially have to pay for the new sales reps? And what I would tell you is that our ability to drive profit expansion, profit margin expansion, if you look at our long-range plan, we said from 2021 to 2025, 2,500 basis points of leverage coming over that period of time. We're about halfway through, and we've delivered about half of the leverage. Of that 2,500 basis points, 300 of it coming from R&D, 2,200 of it coming from SG&A. Of that 2,200, 1,200 of it comes from leveraging the infrastructure that we've built in the company, and 1,000 comes from variable selling expense improvements. As you look at the profit margin expansion that we've delivered, if you look at the last half of that last year, second half of last year, over 800 basis points of Adjusted EBITDA profit margin expansion. First half of this year, over 1,000 basis points. The full year implies 860 basis points on a full year basis this year, Adjusted EBITDA margin expansion. And so we're totally delivering on the, the profit margin expansion. We're about halfway to where we need to be. We're ahead of the game in absolute dollars relative to our long-range plan commitment as well on that basis. And so, you know, what, what you need to understand about the variable selling expense is that if, if we, over that time horizon, have committed to 1,000 basis points, that's on a net basis. Our ability to drive more than 1,000 basis points over that time is what you have to do on a gross basis to have investment room for new sales reps. We knew that we would always be adding new sales reps, so we knew we were gonna essentially have more leverage than 1,000 basis points associated with our variable selling expenses. We've only committed to 1,000 because we wanna have space to continue to reinvest, to fill in the gaps. And so I think that's point one. Point two is our history has been that year one of a competitive rep hire is always at a higher variable cost than your average and kind of the target. And that's typically because you've got, you know, you don't typically get as much of this revenue as you think you'll get, and there's usually some amount of guarantee that's in there. And so that's been our experience, and that's how we plan. What is totally unique about this disruption is what Robert was talking about, and the fact that much of the NuVasive experience is with sales reps we know, trained, and probably hired down the road, and with surgeons we know, and the surgeons are also lateral surgeons. So they know what they want. Our ability or our confidence in understanding when we say, "You're gonna get $X million associated with this transition in year one," our confidence is much higher that that number is gonna be real, and in fact, true because of those dynamics, versus our average experience of history, where you kinda get a highly variable experience. So when you combine all those factors, our confidence in the ability to continue to drive the margin expansion while taking advantage of the top line of the disruption is quite high. I think the only other thing I'd point there on the leverage is that, you know, the leverage we've seen thus far has been exactly the way we designed the company and kinda communicated where it would come from. Clearly sitting in my shoes, hitting the number is one thing, but it's really important to hit the number in the way you designed it, so that you have confidence in your ability to continue to execute. All right. Excellent. I guess maybe just turning to your PTP procedure, you know, it's the biggest driver for growth, opens doors to new accounts, takes share, drives higher utilization per case. You know, it's been very successful. I'm kinda curious about the competitive response to it. You know, Globus has their prone lateral procedure. They have a patient positioner as well. It's integrated into their robot. You know, how do you think their products stack up against PTP? Are you aware of other companies working on similar types of products and procedures? Maybe you can talk a little bit about, you know, how long it took you to develop it, train surgeons, and scale it, and how big the mode is. Yeah, yeah. I mean, I think the most important thing when you think about the competitive landscape and lateral, and you gotta go back to understand the history of how lateral was built, which NuVasive built lateral on the back of having an automated neurophysiology monitoring platform, and so that which eventually became NVM5. Now, that's what allowed them to build the lateral market, 'cause you have to go through the nerves in the psoas muscle laterally to access the spine. And so you sit here 15 years later, there hasn't been a lot of innovation from NuVasive on that product, yet they've still, they still, over time, maintain quite a bit of the market share there in lateral. Well, as we think about the competitive advantage that we have, when we introduced SafeOp, well, one, we created automated neurophysiology, surgeon-directed neurophysiology monitoring, that was allowed you to navigate to the spine, which is essentially what NuVasive solution had done. But more importantly, and incremental to that, we created the opportunity to monitor the nerves intraoperatively. So you could tell were you causing stress or pressure or starving the nerve of oxygen during the procedure? And that's the number one complication of lateral spine surgery, is damaging the nerves in the psoas because, you know, you're putting the retractor in there, and you're retracting the space and putting pressure on it. That can manifest itself in thigh pain, leg drop, and that may resolve or may not resolve post-surgery. So when you think about the barriers to lateral adoption, that was the number one complication. You're talking about a 10% complication rate with that particular complication, and so that's the number one complication of lateral surgery. It's been a hurdle to adoption. And so with our solution, you can now monitor the health of the nerve real time in the OR. If you need to, you can take your retractor out or shrink it, let the nerve recover, and then continue your surgery. And so as we think about the competitive response, Are there elements of the things we've introduced that people will attempt to copy or knock off? Like, for sure. But when you think about neurophysiology and the SafeOp solution, that is unique to us. It's a trade secret element. I mean, the people that created automated neurophysiology and monitoring at NuVasive are now doing that here for us. I think we own 90% of the know-how there. And so I don't think anyone can be a serious player in the lateral space without having a solution there, and I think our solution is unique and second to none in that regard. Even with the elements like the positioner, which clearly we brought it to the market, we were the thought leaders there. We're on our third now, coming up on our fourth iteration of that. And so knowing how we do that and differentiating it, we're ahead of the curve there, and we'll continue to be as we innovate the procedure. All right. Excellent. Maybe just one last question. You know, your business is mostly focused on the U.S. and will remain so in the near future. You know, you have some interest in expanding OUS to a few large and good economic markets. Maybe just talk a little bit about why the focus in the U.S., why not expand more internationally? Are there key profitability differences between the U.S. and typical OUS markets? Young, you know, our focus has been on spine only. Our focus has been on the US 'cause it's the largest market, and our view on international has been to go to places that have good economics, where the surgeon can still have a good influence on who's used, where you can sell a procedure, and ultimately, markets that have accepted lateral surgery and kind of very consistently appreciate and essentially are kinda committed to an anterior column approach to spine surgery. And so that really led us to New Zealand, Australia, and Japan initially, and that's really where our focus has been. I think part of our discipline in the international markets early on is to ensure that we don't dilute the overall profitability profile of our international presence. Part of our collective experience has been one of international markets, if not done carefully, can maybe lead to top-line growth early, but ultimately lead to profitability headwinds kind of in the early to mid-term, and you need to have a lot of scale if you're gonna be in a lot of different countries, especially with a direct infrastructure. And so our view was go to those places where you have confidence that you can commercialize, and you can penetrate deeply and get to a profitability profile that ultimately supports your goals and objectives, and then you can kind of incrementally scale thereafter. And I think our view has been, let's grow this business in a profitable manner, which is kind of U.S. Spine hardware, narrow internationally, and obviously continue to leverage the installed base of EOS where it's at and continue to grow that because that, in the long run, will give us a huge competitive advantage in terms of accessing data and being able to, you know, really build an informatic platform that will be hugely advantageous and predominantly, well, be exclusive to ATEC. All right. Great. Thanks so much for the Q&A, and thank you for attending our conference. Thanks, Young. Thank you.