Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Alphatec Holdings Inc (ATEC, Financial) reported a 25% year-over-year revenue growth, reaching $145.6 million in Q2 2024.
- Surgical revenue grew by 27%, driven by strong performance in lateral and expandable implants.
- The company achieved profitability with an adjusted EBITDA of $5.6 million.
- There was a 20% growth in new surgeon users and a record-breaking 244 surgeon training engagements.
- The successful on-time launch of EOS Insight, an advanced imaging and informatics tool, is expected to drive future growth and improve spine surgery predictability.
Negative Points
- Cash burn for 2024 is expected to be higher than initially forecasted, ranging between $125 million and $135 million.
- There were supply constraints in one of the biologics offerings and expandable implants, impacting revenue growth.
- The company experienced inefficiencies in inventory management, leading to higher working capital needs.
- Days sales outstanding (DSO) increased, affecting cash flow and necessitating more conservative working capital assumptions.
- The transition to upgraded sales territories caused some dislocation, impacting procedural volume growth.
Q & A Highlights
Q&A Highlights from Alphatec Holdings Inc (ATEC) Q2 2024 Earnings Call
Q: Just on the cash burn, obviously higher than we were expecting. So just wanted to confirm, you're now expecting $125 million to $135 million cash burn for 2024. Is that right?
A: That's correct. (J. Todd Koning, CFO)
Q: Will we need to raise cash against the portfolio in cash flow breakeven in 2025?
A: If you look at the growth next year, with about $123 million of year-over-year revenue growth, and about $45 million of growth in adjusted EBITDA year-over-year, we feel very good about achieving our cash flow breakeven with our existing liquidity where we're at today. (J. Todd Koning, CFO)
Q: Can you talk about some of the expected hiring trends for 2024? And any color on the cadence of competitive rep recruitment?
A: It's robust and geographic dependent. We could take on as many people as we want, but it depends on what makes most sense in what geographies at what time. (Patrick Miles, CEO)
Q: Just starting with the territory upgrades, where are you in implementing these, and how many territories have you upgraded or expect to upgrade?
A: We have opportunities for the next eight years. We're prioritizing those territories most opportune for significant expedient profitable growth. (Patrick Miles, CEO)
Q: Can you just talk about the supply constraints you mentioned and how much that might have cost you in revenue upside for the quarter?
A: We outgrew our supply of one of our biologics offerings and one of our expandable implants. We have addressed both constraints and expect sequential revenue growth from $130 million to $132 million in Q3. (J. Todd Koning, CFO)
Q: What are your thoughts on the overall utilization environment specifically for orthopedic and spine names?
A: It's been pretty typical. We are a 6% market share holder, so we don't have as wide of a visibility on the market per se, but utilization has been relatively typical. (Patrick Miles, CEO)
Q: Can you give us an update on Japan and maybe how you're thinking about that market timing-wise?
A: Super excited about Japan. Regulatory stuff is coming through, and we hope to do a surgery in Japan in the fourth quarter. (Patrick Miles, CEO)
Q: What specifically is causing the DSOs to go up? How confident are you that the DSOs and inventory dynamics won't get worse?
A: DSOs have not improved to the extent expected. We saw a step up Q4 to Q1, stepped down Q1 to Q2, but not as much as expected. On inventory, we are assuming no further improvements. (J. Todd Koning, CFO)
Q: What milestones should we be looking for to see how you're progressing with deformity?
A: The growth of the company is modeled to reflect the technological advancement of the field. We have a long-term commitment to this field, and EOS is a proxy for that commitment. (Patrick Miles, CEO)
Q: Are you getting inroads with existing deformity surgeons or more converting the surgeons who don't do deformity yet?
A: We're focusing on young surgeons coming out of deformity programs and historically famous deformity surgeons who have been supportive of us acquiring EOS. (Patrick Miles, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
