Alphatec Holdings, Inc.

Thank you, everyone, and welcome to the webcast of A-TECH's first 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 non-GAP or adjusted measures. Reconciliations of these measures to U.S. GAP can be found in the supplemental financial tables included in today's press release, which identify and quantify all excluded items and provide management's view of why this information is useful to investors. Leading today's call will be A-TECH's Chairman and CEO, Pat Miles, and CFO, Todd Koenig. Now I will turn the call over to Pat Miles.

Thanks much, Greg, and welcome, everybody, to the Q1 2025 financial results A-TECH Earning Call. There will be a few forward-looking statements, which I would ask for you to review at your leisure. So, really a great start to 2025. Enjoyed revenue growth at 22 percent with surgical growth at 24 percent. That's about four times the market, if you're keeping track. This is really a phenomenal result for the largest pure-play spine company in A-TECH. So, Q1 is always a little challenging seasonally when it comes to profitability and cash flow. As cash flow or case volume slows compared to Q4, tax is reset, and we see a disproportionate share of meetings and events. But in spite of all of that, we delivered $11 million with -At-Evita, which is our second-best quarter ever and above expectations. From a cash flow perspective, our cash burn in Q1 was at the low end of the range at $15 million. So, profitability and cash flow performance in Q1 has really put us in a great position to meet or exceed our 2025 goals. I think if we harken back, the changes we made last year resulted in a much more cash-efficient organization. And so, we are 100 percent committed to continuing to operate the company in a deliberate manner and deliver growth, profitability, and cash flow commitments as stated. So, the revenue came in at $169 million. Really, the key thing I'd like to highlight is the strength of the surgical growth, where we saw 24 percent -over-year growth. Underprinting this growth was an 18 percent increase in the number of surgeons utilizing ATEC procedures. The fact that revenue grew 23 percent in established territories demonstrates how we continue to gain surgeons and territory penetration where we have established representation. And so, what I would tell you is our thesis is working, and where we have representation that's been established, we continue to compel adoption. And so, the durable revenue growth drives profitability and cash flow, clearly. EO's order growth was also a record for which we're very, very encouraged. It's a foundation of our strategy. And finally, as the largest peer play, we continue to be the preferred destination spine. The environment for recruiting sales talent couldn't be better, and really, we're off to a great start with great confidence in terms of moving into the year. So, anyway, with that, I'll turn it over to Todd.

Well, thank you, Pat, and good afternoon, everybody. I'll begin today with the first quarter 2025 P&L highlights. Total revenue was 169 million, up 22 percent compared to the prior year. The 169 million in revenue was comprised of 152 million in surgical revenue, and 17 million of EO's revenue. First quarter surgical revenue of 152 million dollars grew 24 percent compared to the prior year period. That represents nearly 30 million in -over-year growth. When normalizing for selling days, we grew 32 million -over-year, or 26 percent. Procedural volume growth was 17 percent, driven by strong surge in adoption of 18 percent. This level of adoption clearly reflects the compelling nature of our portfolio, and is supported by the ongoing investments in the sales force. Average revenue per procedure growth was a strong 6 percent as we continue to capture more of the procedural revenue opportunity. Same store sales, or sales that come from sales agents that have been in territory for a year or more, grew 23 percent -over-year, which demonstrates that we continue to grow significantly in the markets where we are already established through growing both our share of wallet with existing surgeons and new surgeon adoption. EO's revenue increased 17 million in the first quarter, up 8 percent compared to last year. Record order volume has fueled a 28 percent -over-year increase in the order book. Evidence of the demand for our unique -to-end informatics solution, and positions us for strong system installations and the accompanied implant pull-through in the coming years. Turning to the remainder of the P&L, first quarter non-GAAP gross margin was 70 percent, down 50 basis points compared to the previous year, and up 70 basis points sequentially, primarily driven by product mix. Non-GAAP R&D was 13 million dollars, and approximately 8 percent of sales. Top line growth drove 230 basis points of leverage, while absolute spend has remained roughly flat. Non-GAAP SG&A was 111 million dollars, and approximately 66 percent of sales. Approximately 400 basis points of -over-year improvement came from variable expense rate improvement, while the balance came from infrastructure leverage. We reported total non-GAAP operating expense of 124 million dollars, which was approximately 74 percent of sales. By maintaining disciplined cost management, we delivered a modest 8 percent increase in operating expenses, while continuing to invest in the growth drivers of the business. Those efforts, along with our durable top line growth, drove a 900 basis point expansion in our operating margin -over-year. I'll turn next to adjusted EBITDA, which was positive for the fourth consecutive quarter. Our first quarter adjusted EBITDA was 11 million dollars, equating to a 6 percent margin, and over 800 basis points of improvement compared to the prior year period. We are very pleased with this performance, and it is the second best performance we've had since the start of A-TECH's transformation. This quarter also marks our second consecutive period with an over 40 percent drop through on a -over-year revenue growth to adjusted EBITDA, reflecting both infrastructure scalability and an improving variable selling expense profile. You can see in the chart in the slide that the profit margin expansion that we are executing has been significant and consistent. This quarter marks 12 consecutive quarters of adjusted EBITDA margin expansion. We entered 2025 a stronger company, and that is clearly reflected in our first quarter results. This progress stems from the changes we implemented last year to improve in two key areas. Firstly, the management and prioritization of our human resources, and secondly, strengthened focus and operational improvements in managing inventory and instrumentation sets. We are driving meaningful margin expansion that aligns with the priorities outlined in our long-range plan and is a result of disciplined execution. These deliberate results give us great confidence in our ability to continue delivering on our financial commitments and translate revenue growth into profit and cash flow. Turning now to the balance sheet. We ended the first quarter with $153 million in cash on hand. Additionally, we had access to $60 million of available borrowing on our revolving credit line, which was undrawn at quarter end, making our total cash and available cash $213 million. Our free cash use of $15 million in the first quarter represents a $55 million improvement in use over the first quarter 2024. We managed our free cash use performance to the favorable end of the $15 to $20 million range that we previously communicated and would have beat if not for working capital headwinds. And these headwinds were modest and transient, and we believe the metrics will improve over the course of 2025. Our first quarter cash management execution and the underlying dynamics of the business reinforces our confidence that we will be cash flow positive for the full year. In March, we successfully refinanced our 2026 convertible note. Refinancing effectively pushed out the maturity to 2030, provided dilution protection up to $23.46, and maintained the same low coupon rate of 75 basis points. We used the $405 million of proceeds to pay for the fees and the cap call and bought back 80% of the existing convert, the maximum allowed under tender rules. The net proceeds of $82 million gives us flexibility to address the remaining $63 million of the 26 notes when the time is right. Our financial outlook for the year expects continued strong revenue growth to drive incremental profit margin expansion. As we exited the first quarter of the year and contemplated our full year outlook, we felt it prudent to simply flow through the beat on the top and bottom line. This approach is consistent with our philosophy guiding the numbers we believe we can achieve and have a reasonable opportunity to exceed. As it relates to cash flow, our first quarter performance further reinforces that we will be cash flow positive for the full year 2025. With respect to the cadence of our cash flows for the remainder of 2025, we expect the second quarter to range from zero to $5 million, with the third and the fourth quarters generating positive cash flow, resulting in us being cash flow positive for the year 2025. Our revenue outlook for the full year 2025 expects adoption of our unique procedural approach to drive revenue growth of 20% to approximately $734 million compared to our previous guidance of $732 million. That includes surgical revenue growth of 21% to approximately $658 million, which will be fueled by mid-teen surgical volume growth and -single-digit per-surgery growth. We expect EOS revenue of approximately $76 million. Turning to the outlook for the full year 2025 adjusted EBITDA, we expect sales growth to continue to leverage the infrastructure we have built, contributing to an adjusted EBITDA of $78 million versus our prior guidance of $75 million. This includes us absorbing the impact of expected tariffs in the second half of the year. Our direct exposure to tariffs is limited to the EOS units we import from France to support the installations and the associated repair parts. We estimate the impact of tariffs on our cost of goods sold to be in the low single-digit millions of dollars. The chart on the slide depicts the consistency of the profitability progress we are making. Our adjusted EBITDA guidance of $78 million will generate an adjusted EBITDA margin of 11%. That implies a 39% drop through of the incremental growth in revenue dollars to adjusted EBITDA. This trajectory positions us well to achieve our 2027 adjusted EBITDA margin goal of 18% at $1 billion in revenue. So in conclusion, through our investments in the team and infrastructure, we have built a fast-grilling 100% spine-focused company. We are delivering on a return on those investments through durable revenue growth leadership and consistent operating leverage improvement, which is beginning to inflect the cashflow generation. With that, I'll turn the call back over to Pat.

Thank you much, Todd. I want to spend a few slides just kind of walking through a couple of strategic comparatives, as I would say. Our strategy has been steadfast and our execution relentless. And so we have been consistent not only in who we intend to be, but the execution of it all. So we are creating clinical distinction. It's undeniable. We have and will continue to architect unparalleled procedural solutions that improve patient outcomes. I think PTP and LTP are clearly, we're heading into deformity in a similar way. The revenue growth and surgeon user growth affirms we are compelling adoption. So we are doing this by furthering clinical value. We talk a lot about furthering value by minimizing surgical variables with technology, and this is happening. Additionally, we're expanding our sales force and getting better in the field. So I would say that we are scaling and we are winning. Something that's near and dear, I think, is really the growing validation of our and informatics thesis. We've talked a lot about the unusually high revision rates in spine surgery versus hip and knee, which just speaks to the opportunity. The volume of variables in spine surgery far outnumbers that in single joint surgery. Our view is that many of the issues driving spine surgery can be effectuated by controlling variables through improved informatics, hence the foundational commitment. So I think that there's a misplaced notion that revision is most often caused by interoperative surgeon error due to a lack of precision. The reality is that most revision surgery is not due to error in implant or pedicle screw placement, but rather error prior to the surgery due to a lack of surgical planning. It is for this reason, we strongly believe that the spine field needs more automated informatics. And so we view our pre, intra, and post-op informatics will drive much more predictable surgery than the incremental precision associated with pedicle screw placement. So hence our thesis committed to EOS and informatics. Much like we said in the early days of the ATEC turnaround, spine needs ATEC. I would tell you that spine surgery needs automated alignment planning and predictive analytics. And we're bringing that to you with EOS. And so super enthusiastic with regard to that. There's nothing better than having a thesis and then have it reflect in the specific patient outcomes. And that's what we're doing. And so I would tell you that our history is one of technological furtherance. And much like when we acquired safe op and integrated different modalities, the auto EMG, auto SSCPs, and facilitative MEPs, we furthered the technology to a point of great clinical influence on lateral surgery. And so if you want to look at a proxy, safe op is a proxy for what we're doing for EOS. So the same effect is happening with EOS. So below and pick fourly, what you see is you see a patient with a pre-op scan gave not only spine alignment parameters in an automated way, but also where the spine should be normatively. And so not just numeric reflection, so bringing objective measure, but really where the spine should be. A surgical plan was assembled and executed with a post-op scan at six and 12 weeks. So you'll see that the pre-op picture reflects not only automated measures, but where the normative position is, where the spine should be based upon age and demographic. The plan provides a simulation of values required to achieve the surgical goals. And then the six and 12 week provides assessment for surgical plans. You could tell exactly how you did. This is a much more comprehensive clinical approach to what is commonly done today. If alignment is a key quality to a successful long-term outcome, meaning it impacts or lessens the revision rate, it is this type of information that brings about objective measure and makes for a meaningful difference. So we cannot be more excited about where we are with the EOS strategy. Clearly, there's a lot of enthusiasm with regard to the acquisition of the units. And we are headed to a future of predictive analytics. And that we find to be extraordinarily exciting. If you think about what's fueled the company today, it's really kind of the architecting of procedures for, really architecting procedures. And what we see is we see an expanding complexity. So our procedural strategy continues to expand application and grow in volume. For us, it is quite clear that if your objective is to lessen variables that undermine clinical predictability, then assembling all the elements of a procedure will create demand and compel adoption. We have seen our lateral franchise grow in both total procedures and addressable pathologies. Like most new techniques, surgeons start their adoption in short segment, simple type of applications. And then as they see success, they continue to expand utility to more levels and greater complexity. That has clearly been the case with what we've done from a lateral perspective. And then we have recently launched our fully integrated clopectomy system that includes not only implants, but a specifically designed retractor for unique requirements of this surgery. Because many times vertebra fracti is in the thoracic spine, it is vitally important to monitor the spinal cord. Enter CFOT3 and the MEP modality. Monitoring motor function throughout these complex surgeries is a requirement. A big reason we are growing at the rate that we are is that these spine procedures are fully thought out. They include patient positioners, specific monitoring, customized surgical exposure with indication specific retractors, implants, and soon to come, integrated navigation to reduce radiation and increase precision. It is no wonder that we will continue to expand our footprint in lateral surgery and beyond. A nemesis in spine has been the requirement for surgeons to make do without fully contemplated spine procedures. That is no longer the case as we continue to expand our significant influence. In speaking about compelling adoption, winning access, as I previously described, our lateral business is a perfect proxy for our procedural strategy. We are taking the learnings from that experience and applying it across other techniques. Our growth rate is reflective of compelling adoption. Surgeons are growing, surgeons are growing, growing utility to increase volume and expand the application. What is also true is that with EoT, we are gaining access to more surgeons, academic institutions, and hospital systems. The very thesis that we contemplate is coming to fruition in front of our eyes. The clinical credibility of our foundational informatics technology enables us to win access. Our informatics ecosystem is the most comprehensive and scalable in the business. The recently launched EoT Insight software enables us to scan a patient, automate alignment measures for assessment, simulate the surgical effect through our planning software, integrate the surgical plan into the OR so as to reflect the plan and confirm interoperably. However, the most exciting piece really is the correlation, not only immediately after surgery to understand the veracity of the surgical plan execution, but also to understand how things evolve over time through longitudinal correlation. So correlation is the foundation of AI. We have the makings of an informatics system will be predictive as we move forward and gain a deeper understanding for improved decision making. So I would tell you that if spine is your vocation, I don't know of a better place than ATEC. That is why we know it to be the preferred destination. So I'm excited to continue to grow the ATEC faithful and with that, we'll take questions.

All right, thank you. And we will now open up the floor for questions. I would like to remind everyone that in order to ask a question, it is pressing star one on your telephone keypad. In consideration of others, please limit yourself to one question. Thank you very much. And we will pause just a moment to compile the Q&A roster. All right, looks like our first question today comes from the line of Brooks O'Neill with Lake Street Capital Market.

Brooks,

please go ahead.

Thank you. Good afternoon, guys. Congratulations on the good start to the year. Pat, you're just talking a lot about the new Corpectome system, and I'm hoping you could give us a little bit of a feel for how big you think that market segment might be and maybe what the competitive dynamics are as it relates to other players that already have products or systems to address the need.

Yeah, thanks, Brooks. Appreciate the question. In terms of valuing the market, it's a bit of a tough one. What you see is, from a marketplace perspective, I would tell you that we're the only ones doing this in the prone position. And when you have instability based upon fracture, which is oftentimes so mostly tumor and trauma are the utility for a Corpectome. And so when you have instability, what you want is access to the front back of the spine. And the beauty of PTP is that you have access to the front and the back of the spine in the same setting. And so this is really a unique approach for us. Others have tried to do it in a lateral position and have done it in a lateral position. To do it in a prone position is highly advantageous. And so super excited about it. It's completely reflective of what we intended in terms of the whole, you start simple and you continue to walk. And what you see is you see not only expansion in the volume of procedures applied, but also the number of applications and reasons why someone should learn the technique and apply it to their practice. And so we're seeing it in spades. And the reason I brought up the EOS and academic access is, a lot of these get shipped over to academic institutions just because of the complexity and because these are oftentimes seriously ill patients. And so the whole EOS play and the whole dynamic of continuing to march up the complexity curve, I think play together. And so maybe more color than you wanted, but just a little bit about the system itself. From an engineering perspective, it's outstanding. The retractor and just the versatility of an exposure system specific for corpectomy. And then the implant itself is outstanding. The type of mechanical prowess we have around here is unbelievable. And then it ties in well with the other things we're doing, as I said, with MEPs from a safe out perspective and otherwise.

Dr. Robert P. Dixon All right, Pat, that was awesome. Do you mind if I just ask, do you think you will ultimately incorporate any functionality from EOS in that particular procedure or no?

Dr. Pat Smith The beauty of what we're doing with EOS is that our ability to measure the alignment parameters with a patient like that, that's rarely done. So to be able to get an EOS scan and then integrate that element into the operative experience and make sure that the patient walks away not only fixed from a stability perspective, but fixed in alignment. And whenever we talk about the goals of surgery being decompression, stabilization, alignment, we will have fulfilled them based upon the sophistication of not only the procedure, but also the type of informatics that drives a behavior. And so anyway, it's exciting to know that because oftentimes this may be a young person, if they have a traumatic accident, and the last thing you want to do is have them have an adjacent level disease because you fix them in the wrong place. And so anyway, the alignment piece is a big part of it. And you can utilize EOS as a proxy for alignment that we

have. Dr. Pat Smith Thank you very much.

Dr. Nancy Lee Yep, thank you.

Dr. Robert R. Reilly Thanks, Brooks. And our next question comes from the line of Vic Ciapra with Wells Fargo. Vic, please go ahead.

Vic Ciapra Hey, good afternoon, and thanks so much for taking the question. Two for me. I was just wondering if you could just talk about the tariff exposure in 2025, when you expect that to hit the P&L, and maybe what percent of your products are sourced from or manufactured in Mexico, China, and the EU, and then technically, Palo Alto, please.

Dr. Robert R. Reilly Yeah, Vic,

good

afternoon. Thanks for the call, or the question rather. The tariff exposure, as I laid out in my prepared remarks, we size that to be approximately low single-digit millions, hitting our cost of goods sold line, largely in second half of this year. And our exposure is really limited to our EOS equipment and any related replacement parts associated with EOS, largely because we manufacture our EOS machines in France, and we import the US volume into America for the install base. And so, that's the exposure. We really don't have direct tariff exposure in our implant business.

Vic Ciapra Okay, that's super helpful. Thanks for clarifying that, Todd. And my follow-up question is, any update on your robot launch plans, and maybe just talk about how the lens will fit into the company's overall strategy. Thank you.

Dr. Robert R. Reilly Yeah, thanks, Vic. Everything is going as planned. We are doing cases. As a matter of fact, I was in a case recently, and everything is going as planned. And so, the whole verification process in my mind becomes the most important. Such a big part of our thesis is procedures. And I was in a place recently, as if I did it, there are seven PTPs done before 1 p.m. And it just speaks to the efficiency of workflow. And the last thing we want to do is slow the workflow because there's some goofy interaction with regard to our robotic piece or our navigation piece. And so, we're in the alpha phase. Everything is going as planned. Looking forward to integrating the navigation piece to that. And this should be an end of the year launch. And so, really, I'm trying to think any other color that would be of interest. But I think that I'm as excited about the navigation piece and the integrated workflow as I am the robotic piece.

All right. Thank you, Vic. And our next question comes from the line of Matt McSick with Barclays. Matt, please go ahead.

Matt Thanks so much for taking the question. So, I wanted to ask if you could maybe dive into a little bit more color on the cash outlay. I know that was a big subject last year. You exceeded or beat our number this first quarter as hoped. Maybe just talk about how the cash use is changing. Maybe what the trends for the rest of the year should look like. And then I have one quick follow up.

Hey, Matt, because I don't do numeric things very well, I'm going to tell you just a little color. You know what thrills me is when you start to think about cash utility, I immediately think of sets and the like. And the one place that I didn't mention in my prepared remarks, but we're getting just light years better is in terms of asset utility and asset place. And so, it's a situation where as we continue to mature, and I think about it clinically, we continue to get better in such profound ways. We're also getting profoundly better with regard to our operational prowess. And so, I would say that that's a big part of cash utility. And before Todd gets into the specific numbers, I just want to mention the investment in our Memphis facility several years ago, the type of sophistication that's going on there, the just continued evolution and maturity internally here. Our field force is getting better and the people who are managing in the field is getting better. So anyway, I just want to make mention that because I think it's so important.

Agreed, Pat. And so, Matt, maybe I'll step back and hit a couple things. One, I think the timing question is real. And so, last quarter, we said Q1 would be a cash use between 15 and 20. And we clearly hit the low end of that range and feel really good about that execution. On my prepared remarks, I said Q2, you should expect a zero to plus five, and then positive in Q3 and positive in Q4 to get you something north of zero on the full year. And so, that's the cadence that we expect. I think your question really was of like, why did we do better? How do we think about the balance of the year? What gives us confidence? And so, I think first off, why did we do better? And I did make mention of the fact that we saw some modest yet transient working capital headwinds. Our kind of assumption coming into the year was accounts receivable DSO would be around 45 days. We were at the high 40s here in the month, and some of that just kind of comes down to timing and whatnot. But for us to be able to achieve a $15 million cash use and still withstand a little bit of that headwind on the working capital front, I feel very good. So, that tells me that I feel good about where I'm at, because I think that working capital metrics will essentially go back to where we expect them to for the balance of the year, which gives me a level of confidence that we can continue to make progress on cash flow, just from that standpoint. You think about the fact that our adjusted EBITDA was significantly about $3 million better than we anticipated here in the first quarter. And so, some of that falls through to your cash flow. And I think the ongoing profitability profile that we have seen and are expecting to see give us confidence in our ability to hit our cash flow goals. And then I think this year and going into next year and beyond is really what Pat, I think, is also talking to, which is the asset utilization is getting better. And we've got a long ways to go, of course, but it's getting better. And when you see the dynamics of top line growth, expanding profitability, certainly in this quarter ahead of what we expected, and improving asset utilization environment, you feel really good about your ability to be cash efficient.

That's super helpful. And this may be one question, if I could, on some of the competitive dynamics in spine right now. You may have commented on it. I'm struggling with a few calls right now. But any color you have on the quality of reps, the type of reps, the number of inbound, the posture of the company right now in terms of adding reps, and an important part of the way you're growing, any color would be appreciated. Thanks.

Yeah, we were trying to be subtle with regard to the preferred destination piece. It's one of those things where it's like, in all sincerity, though, if you think about, if your vocation is spine surgery, you want to be aligned with a company that is existing to depend upon being great in spine surgery. And candidly, that's us, and we're the apologetically evangelical about this space. We know that we're able to make it better. You look outside and you see how things have spun to private equity in a couple of instances. We've already made a big investment that we're scaling off of over the next years ahead. And so we feel like our ecosystem just avails continued improvement, continued evolution, continued capacity to make things better. I would say that the guys who have spun out have a big investment ahead of them. And this is an expensive place. And so we're seeing a lot of people realizing that. I think when you start to see the volume of new surgeons that are coming over, then you start to wonder, will their rep come with them? And the answer is clearly a straight commission, guys, yes. And so we're seeing XStriker, we're seeing Medtronic, we're seeing Globus. And so as we talked about, geez, a year ago, these things play out over long periods of time because everybody has their own individual dynamics that drive their change. But I would tell you, if you'd have told me seven years ago when we started this turnaround that we'd be sitting here as the largest pure place spine company with the opportunity to run the table, I would say I'd be surprised. But that's where we sit today and we can't be more excited about the opportunity.

Well, congrats on all the progress. Thanks for taking the questions.

Thanks, Matt. Thank you, Matt. And our next question comes from the line of Matthew Blackman with Steeple. Matthew, please go ahead.

All right. Good afternoon, everybody. And just up front, I had every intention to respect your one question request, but no one else has. So I

have

a question. But if I could start and Pat, you sort of alluded to it, Todd, maybe to the extent you can maybe layer in some numbers that's applicable. But I was hoping to sort of get a state of the union on the Salesforce today where they are in terms of the productivity relative to expectations, particularly the reps that you've recruited and onboarded over the last couple of years. Do they have all the sets and implants they need? Are you finding more opportunities than you expected with these new reps? Again, we're a year plus out. I think everybody's got what they need just to how the rep footprint is performing and how that performed in the first quarter.

Yeah, Matt, it's really like, you know, this is no kiss up. It's such a good question because it's like what happens oftentimes is demographically, you know, the rep that comes over reflects the configuration of what he'd previously sold. And then what we see is over time, they evolve into this whole, you know, kind of more lateral type of business. And so as you, as we said, it takes 12 to 18 months to ultimately reflect in a momentum of any kind. And so, what we're seeing is geographically different footprint of the types of sales that they're doing. And then what they're doing is evolving. And so, probably the one that comes to mind is up in the Northeast. Initially, we were being very conventional with regard to the reflected product utility. We're evolving now more into a more proprietary type of sales reflection. And so, it's fun to see that start to come forth. And so, we have the sets. As I said, being more efficient with the sets, which avails more opportunity to place them in different locations. The thing that is super attractive is we're in a bunch of academic institutions, which we weren't before. I think just the reputational dynamic of not only having a unique tool with PTP, but then also coming forth with EOS and translating that into the operative experience, avails access. And so, those are the things that we contemplated in the acquisition of the technology and how we would ultimately evolve it. But just some color in terms of just the generalities of what we're seeing. We have a long way to go with regard to the build out of the sales force in any meaningful density. We're still, I would tell you, young in the process.

Yeah. Agreed. And Matt, I think maybe I'd just give you two data points here. One, we talk about same store sales. So, growth in sales agent territories that have been with us for a year or more. Growing at 23%. And that's relative to a 24% growth in our overall surgical revenue in the first quarter. So, that tells you that people show up and year after year after year, they grow on the territory that they have. And so, I think that tells you both that, one, you get more of a share of your existing surgeon's business, plus you're able to expand kind of across the territory and attract more surgeons into that territory. And I think that's demonstrated by the fact, if you look at the absolute dollar growth, and again, if you normalize this quarter for 64 days versus 63 days, over the last two years, we've added more than $60 million. And so, that's about a $30 million a year clip. And that really kind of accelerated here in 2025 over 2024. So, I would tell you that, yeah, the investments we're making are certainly paying off. And that's a reflection of the, I think, the demand profile that's there, which is a function of the clinical distinction or procedural approach.

I appreciate that. And then my follow-up, that's actually, I think, a good segue on Pat's commentary on EOS. I'm just curious, can you give us, just even in the roughest sense, how EOS placements today are splitting out between new accounts to A-Tech, under-indexed accounts, and core A-Tech users, just from who's using the portfolio and not today? And then on top of that, you mentioned it, we've done a lot of work, we've obviously seen it, this playbook at other companies with enabling technology, but is there a number you can point to in terms of, you put an EOS system in, you get this type of magnitude of portfolio pull-through? And I guess specifically, maybe the holy grail for EOS is getting you into these complex procedures where you're definitely under-indexed for peers. Is that happening? Is that a tipping point ahead for that happening? Just any color on EOS would be helpful. I appreciate it. Thank you.

Yeah. Thanks, Matt. And clearly, that's the long play, right? I think that we've been pretty deliberate with regard to turning this company around and doing something unique was reflective of our expertise in lateral, and that's clearly playing out exactly as planned. I think the EOS element, I wanted to show you an example, I could show you a bunch of examples of watching the EOSing play out in real time. When you start talking about, gosh, are we gaining access and how is it different? It's like, I recall when we had zero access. And so, when you see places like you know, Hospital for Special Surgery having, you know, I think nine of them or something to that effect, and you have all of these very highly sought after institutions having a bunch of them, you know, clearly it is a valuable tool. When you look at the demographics of who's getting them, I would tell you that most of the people buying EOSes were not customers of ours before. They are customers of ours now. Historically, it's been more of a pediatric type of a tool. We've been very under indexed in pediatric surgery, but we're heading in that direction. And so, the great thing is what we contemplated when we initially bought the asset was how do we be relevant in adults deformity first? And because the pediatric utility was robust, it wasn't a place that we felt like we could make immediate type of influence. As we continue to get more adoption in the adult deformity realm, you'll see the adolescent and peds thing follow suit. And so, we think that our best is yet to come. And we say things like that really numerically minded because we haven't touched parts of this thing that ultimately are highly valuable from a clinical perspective.

All right. I appreciate it, guys. And I promise we'll all try harder next quarter to limit ourselves to one question. Thanks.

Thanks.

Thanks, Matt. And next question comes from the line of Matthew O'Brien with Piper Sandler. Matthew, please go ahead.

This is Samantha on from that. Thank you for taking our question. I guess we just wanted to touch on just overall volumes, how those are trending, and then also any feedback on growth in the ASCs as well.

Yeah, I would say, you know, our view is the market is healthy and volumes are good. And, you know, I don't think it grew 24% surgically if it's not the case. And so, just kind of a 60,000 foot view all at Todd Pipe Band if he likes it, got any specifics. The ASC is a long play. And, you know, what happens is the most simple type of pathology gets done in a place where there's greatest, you know, where the surgeon has the greatest comfort and the greatest predictability. And so, I think over time you're going to see that change. I think there's guys today doing PTP in that patient setting. They're doing very simple single level type of things. But what happens is your ability to control pain for a patient and your ability to limit the potential for complication is really kind of the driving forces of the ASC. And so, a lot of work like decompression and single level and maybe two level cervical, and those are the major things going on there today. But I think you're seeing an evolution that's going to just take time.

Awesome. Thank you. That's great. And then I know we previously touched on the robot coming out of, you said at the end of this year. I just wanted to touch on that again and kind of any feedback on kind of what's left to get it launched and any feedback you've had from physicians. Thank you.

Yeah, thanks. The feedback's been great. It places screws accurately, which is what robots in the spine space do. And so, the software is very intuitive. The utility has been expedient. My greatest concerns are always workflow. Are we increasing anesthetic time because we're trying to place a screw slightly more precisely that ultimately doesn't effectuate the clinical dynamic? I think that's, you know, I don't want that. And so, we want to make sure that the workflow is very seamless. And so, really what we're waiting on is our navigation piece and such that what we're doing is we're navigating an entire procedure. So, meaning we're navigating the lateral space, we're integrating the robot in the posterior space. You know, the beauty of PTP and to be able to watch a surgery whereby a surgeon has access to the anterior column navigates that access, the PA closes while the surgeon operates on the back. That level of expedience and that level of elegance from a workflow perspective is nonexistent today. And so, our opportunity to continue to be the purveyors of that is very apparent. And so, anyway, so we're seeing the very thing that it's supposed to do with regard to the robotic piece. And as all a robot is, is part of a stabilization workflow. That's it. And I think there's been some romanticizing of it that is misdirected.

Thank you.

Thanks, Samantha. And our next question comes from the line of Young Lee with Jefferies. Young, please go ahead.

All right. Good afternoon. And thanks for taking the question. I'll just keep it one. On the spine market, I guess I'm kind of curious about the deferability and the resiliency of the market due to an economic downturn. Maybe try to jog your memory a little bit on, you know, if you remember sort of

what

happened to the spine market during the financial crisis. That's kind of like a worst case scenario for any potential upcoming macro headwinds.

Yeah, I guess, and Todd could pipe in, you know, but, you know, I guess I shudder to say, you know, I was around in 2008 and not that my recollection is going to be very precise as it relates to the different years, but, you know, spine is not elective. And I think that there becomes this dynamic to where it's like, hey, you know, can they put it off? And if you have neural pain, you're not going to put it off. And so I would tell you that it's highly resilient in the volatility of the, you know, I'll speak to the current economic uncertainty. It's like we're not seeing changes in volumes. You know, we're seeing, you know, a lot of demand for what we're doing. And so I would tell you, nothing has changed other than there's high demand for what we're doing. There's a robust backlog of things to do. And we're leaning in as aggressively as we can to this market. We love this market. We think it's helping people. We know it's helping people. And so that will continue.

And Young, I think to put a finer point on history a little bit, I think to Pat's point, you go back to the financial crisis. I think the analysis we've done would suggest that our market was reasonably robust during that point in time. And I think the other point is, as you looked at volumes that went through COVID, while there was certainly some staffing influence to the volume moving around, but the fundamental demand did not go away. And so we agree with that. Exactly. And so I feel like we're in a pretty good spot. Great.

Appreciate it.

All right. Thanks, Young. And our next question comes from the line of Josh Jennings with TD Cowan. Josh, please

go ahead. Hi, this is Eric Alper Josh. Thank you guys for taking the question. I wanted to ask your latest thoughts around expansion into international markets. I know Australia and New Zealand have been a focus. You had your first surgeries in Japan not too long ago. Specifically, I was just curious if you're thinking internationally, changes at all given the current macro landscape or maybe not at all, but how should we be thinking about that?

Yeah, I think that we've been so affirmed by our approach. And the way we built the structure of the company is we haven't built a huge international infrastructure to serve a place that's not profitable. And so we've been totally bullish on Australia and New Zealand. Just because it's the top of mind, got a note today in terms of people reaching well north of 100 in their PTP experience down in Australia. So like the thing is going as we intended. And so we don't have a big infrastructure, but we have a very narrow business that shares the same type of a surgical perspective as we do. And so love that we are in such the early phase of the second largest market in the world of Japan. And we have a years to go in that market. And so I love kind of our thesis as it relates to let's say focal, let's say completely committed to a marketplace. Japan also is a great deformity market. They love EOS. Our opportunity to ultimately lay the foundation with lateral and evolve into the EOS translation is so apparent. And so anyway, I think that we're well positioned. There's really not a lot of interest to go outside that dynamic. I think our internal build thesis has reflected as much.

Eric, narrow and deep. That's what we've always said. And I think that's what we're seeing. And to Pat's point, I think the strategy is paying off and we got a huge run in front of us in the international, in the market set with Jillson.

Great. Understood. Yeah, that makes sense. And if I could ask one quick follow up just on pricing generally, if I think about the commentary from some device management teams lately in ortho specifically, it seems like in the last year or so we sort of entered a new era for pricing, certainly for companies that are introducing innovation to their respective markets. And when I think about spine, A-Tech definitely fits the bill there. So I was just curious how your team is thinking about pricing.

One quick point and Pat will put the specific on it is, you know, we still believe in this whole convoy sales thing in terms of the procedural price. And what we're seeing is more products increment per procedure. And so as it relates to historical pricing degradation, we're not seeing it because ultimately what we're seeing is the reflection of the convoy sales, the accumulation of the procedural elements.

Yeah. We often talk about kind of same product, same store year over year being a very low single digit decline there. Our innovation engine, the ability for us to launch new product and really mix our way out of some of those headwinds has been our history. It will continue to be our history. And to Pat's point, we're just getting more of the procedural revenue opportunity as we continue to grow.

That makes sense. Thank you for the questions.

Thanks, Eric. And our next question comes from the line of David Saxon with Needham. David, please go ahead.

Oh, great. Good afternoon. Thanks for taking my question and congrats on the quarter. I think this is probably more for Todd, but Todd, you've talked historically maybe two years ago or over the course of a couple of years ago about letting 10% of the top line app performance drop through to the bottom line. I mean, as the numbers get bigger, maybe the upside gets a little smaller, but is that still a good way to think about it or has the size of the business or kind of how you think about the near term opportunity changed that framework at all? Thanks so much.

Yeah, thanks, David. I think you look at our drop through in absolute terms. In Q4 of last year was 49%. We delivered 44% of the incremental revenue year over year to drop through to adjust the debit. And I think even on the beat, we dropped through a significant amount of that to the bottom line as well. And I think you're just seeing a level of focus and effort on driving profitability and cash utility. I think you'll continue to see that through the balance of the year.

Great. Thank you.

All right. Thanks, David. And our next question comes from the line of Caitlin Cronin with Canaccord. Caitlin, please go ahead.

Hey, guys. It's Michaela filling in for Caitlin. Thanks for taking the question. We've seen a focus with some recent M&A on the interventionalist call point. So I was just wondering if there are any plans to leverage the interventionalist call point or how you're thinking about that?

No. I'm just being snarky. You know, our business is the spine surgeon and the alignment with what the spine surgeon does. And we feel very strongly that we have a customer with whom we have aligned interest. We have a sales force with whom we have aligned interest. And, you know, we think that defocusing our organization into an interventionalist or paying environment would be a huge mistake. And so that's just our candid view.

Got it. Thanks so much.

Thank you, Michaela. And our next question comes from the line of Sean Lee with HC Wainwright. Sean, please go ahead.

Hey, good afternoon, guys. Congrats on a good quarter. And thanks for taking my question. For the last couple of years, you guys have been making a big push on the EOs and informatics and the safe output, the whole pre-op planning, the interrupt monitoring, the post-op analysis. So I was wondering if you can provide some color on which parts of the system is seeing the most use right now and where do you think the biggest growth is going to come from in the future? Thanks.

Yeah, it's a great question, Sean. I think, you know, the dynamic is one of maturity. And, you know, when you say, gosh, how have you built the business from, you know, gosh, back in 2018, it was like 89 million headed south to, what's our guidance is 734 heading north. And I would tell you what's created the uniqueness in our lateral effort, a core part of it is telling the surgeon, hey, there's a nerve right there, and this is the health of the nerve. And then now we've added, you could understand the motor pathway of the nerve. Like these things, if you look at your skin to spine from a lateral perspective in the flank, the most concerning anatomy is neural. And so to be able to provide that level of neural precision and sophistication is not done anywhere. And this is why, you know, it's not a coincidence that we're growing at the rate that we are. We are the lateral maven. And so then you say, gosh, when did we buy and when do we start the integration process with EOS? And I would say really 21. And really in earnest, you know, you get together as a company, you fund the things that can only weren't being funded, you start to get on the road of automating things. So we spent, you know, 22 and 23 shoring up the unit and designing some of the software elements. And gosh, we recently last year launched the insight software such that that's the translational tool. And so I would say we're in like the first inning from an EOS perspective and we're in the third inning from a safe out perspective. And so there's such a runway on both those things. I think surgeons are yearning for it. You know, the challenge with this environment has been people have been consumed with the currency, which everybody wants to sell, pedicle screws, but you sell pedicle screws and implants based upon your shared interests with the surgeon who's trying to care for a patient and understanding what the procedural requirements are to execute.

Thanks a lot. That's very helpful.

All right. Thank you, Sean. And that is all the questions we have today. So I will now turn the call back over to Pat Miles for closing comments. Pat.

Thanks, Greg. Just want to thank everybody for their interest in A-Tech. I want to remind you that we are the preferred destination and excited about the business that we serve. And so thanks for your time.

Thanks, Pat. And ladies and gentlemen, that concludes today's call. Again, thanks for joining and you may now disconnect. Have a great day, everyone.