Alphatec Holdings, Inc.

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-GAAP or adjusted measures. Reconciliations of these measures to U.S. GAAP 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 ATEC's Chairman and CEO, Pat Miles, and CFO, Todd Koning. Now, I will turn the call over to Pat Miles.

Thanks very much, Lacey. Appreciate it. Welcome to the Q3 ATEC Financial Results Conference Call. As usual, there will be some forward-looking statements, so please read that at your leisure. I want to take a moment and put in the context what we are building here at A-TECH. I will tell you, it's a very small number of public med tech companies, I believe less than 10, that are over $500 million in revenue, meaningfully profitable, and growing over 10%. Our results and guidance suggests that we're not only in that club, we're leading that club with top line growth of 30% while approaching a run rate of $800 million in revenue. My point is, is that we're becoming the company that we intended. And what I want to do is make sure that these things don't happen by happenstance and they happen by a a bunch of committed people. And so I wanted to thank those who supported and have been part of the mission and also remind everybody that we're just getting going. And so there is much to do. And so now I want to speak to why we are so uniquely positioned for a very long run. And I think the key is, is we're 100% spine focused. And we make decisions every day purely on spines. We are leading through proceduralization, which means that we're advancing lateral, which is reflected in convoyed sales, and we're applying that thesis across the board. From a deformity perspective, we're in the very infancy of our role or influence on that market space, really driven by EOS and EOS Insight. We had previously built a infrastructure that's going to last us a very long run. I look forward to describing more about that. And from this point forward, what you'll see is durable, profitable sales growth. And so just to share a couple of statistics from Q3, we grew at 30%. We had an adjusted EBITDA of $26 million, which is 13% of revenue. We improved by 840 basis points and turned in a free cash flow of $5 million. And so from a total perspective, That means that the total revenue was $197 million. The surgical revenue growth was 31%. Something that I'm totally excited about is the same store sales, so revenue growth in established territories was 30%. It just tells you that there's demand in what we're doing. New surgeon users was 26%. Cash flow. We have plenty of access to cash and cash at $216 million. Our trailing 12-month adjusted EBITDA is $81 million, and we are flowing cash on a trailing 12-month basis, which feels great. So what I'll do is I'll turn the detail over to Todd and be back with you after his comments.

Well, thank you, Pat, and good afternoon, everyone. I'll begin today with the third quarter 2025 P&L highlights. Total revenue was $197 million, up $46 million and 30% compared to the prior year period and up $11 million sequentially from the second quarter of this year. The $197 million in revenue was comprised of $177 million in surgical revenue and $20 million of EOS revenue. Third quarter surgical revenue of $177 million grew 31% compared to the prior year period and was up sequentially by 5%. That represents $41 million in year-over-year growth. Procedural volume growth of 28% was driven by strong surgeon adoption, where we increased our net new surgeon users in the third quarter by 26%. Procedural volume growth reflects both an increased number of surgeons as well as earning a greater share of an existing surgeon's business. We see this happening as our procedures are used across a broader set of pathologies and as surgeons adopt more of our portfolio offerings like cervical or compactomy. Since we first began reporting on new surgeon users in 2022, we have consistently added at least 19% net new surgeon users each quarter over the past three years. This surge in adoption reflects both the attractiveness of our portfolio and the coordinated investments we're making in sales talent to meet that demand. Average revenue per procedure grew 2%, which was consistent with our expectations. Procedurally, we saw strong revenue contributions from our lateral and cervical solutions, and we are beginning to see measurable influence from our deformity offering. Same store sales in the US or sales that come from sales agents that have been in territory for a year or more grew 30% year over year, which demonstrates that we continue to grow significantly in the markets where we are already established. Our strong surge in adoption, increased utilization, and same store sales growth results are testament to the durability and consistency of our revenue growth algorithm. EOS revenue increased to $20 million in the third quarter, up 29% compared to the prior year period. Demand in the US market, where we have a strong presence with our implant sales force, continues to be strong and the biggest driver of growth in both deliveries and new orders. This, in conjunction with a growing number of surgeons using EOS Insight, positions us to see the benefit of the accompanying implant pull-through in the coming years. Turning to the remainder of the P&L, third quarter non-GAAP gross margin was 70%, flat sequentially and up 80 basis points compared to the previous year, primarily driven by product mix and volume leverage. Non-GAAP R&D was $15 million in the third quarter. R&D investment was up year over year by more than $2 million and was up sequentially by $1 million. Non-GAAP R&D expense was approximately 8% of sales in the quarter, with top line growth driving 90 basis points of leverage year over year. R&D is an area where we continue to see opportunities to invest in innovation that will drive future growth. Given the scale of our business, we can make these increased investments and generate EBITDA leverage without sacrificing the growth opportunities. Non-GAAP SG&A of $112 million was approximately 57% of sales in the third quarter compared to 67% of sales in the prior year period. SG&A grew by 11% year-over-year compared to our 30% increase in revenue which drove 980 basis points of improvement. We continue to leverage the company's foundational infrastructure investments, improve our variable selling expenses, and be very deliberate in new headcount additions. The combination of these factors accounts for about two thirds of the improvement. We reported total non-GAAP operating expense of $127 million, which was approximately 65% of sales. Our operating expense investment reflect continued prioritization of strategic growth initiatives supporting sales expansion and new product development. While our foundational infrastructure is in place, we continue to expand the sales force, build out procedural solutions, and integrate technology, data, and information into the operating room experience. We continue to improve as an organization, and the disciplined prioritization of these investments, along with our durable top line growth, drove over 1,100 basis points of expansion in our operating margin year over year. I'll turn next to adjusted EBITDA, which was a record quarter for us at $26 million or 13% of sales in the third quarter, delivering 840 basis points of improvement compared to the prior year period. This quarter also marks our fourth consecutive period with over 40% drop through on a year over year revenue growth to adjusted EBITDA. The discipline and how we look at headcount additions, the other types of investments we make has served us well and will continue to be foundational in how we drive profitable sales growth. You can see from the chart on this slide that the profit margin expansion that we are executing has been both significant and consistent. Our trailing 12 months of adjusted EBITDA now sits at $81 million and 11% of revenue. We are driving meaningful margin expansion that aligns with the priorities outlined in our long-range plan and as a result of disciplined execution. These deliberate results give us confidence in our ability to continue to deliver on our financial commitments and translate revenue growth into profit and cash flow. We are committed to driving profitable sales growth. Now turning to the balance sheet, we ended the third quarter with $156 million in cash on hand. Additionally, we had access to $60 million of available borrowing on a revolving credit line, which was undrawn at the quarter end, making our total cash and available cash $260 million. Our positive free cash flow of $5 million was again at the favorable end of the $1 to $5 million range that we previously communicated. We generated $14 million in cash from operating activities while we continued to invest in surgical instruments. Going into 2025, we had forward invested in instruments and inventory, the revenue generating assets of the company. This year, you've seen how our revenue has grown and how we've become more asset efficient. We are growing more in absolute dollars than we ever have in our history, and we are doing it more efficiently. This efficiency is the result of the relentless execution of the plans we put in place by multiple teams across our company. The evidence of the company's inflection to cash flow generation is undeniable with our trailing 12 months of free cash flow turning positive for the first time in company history. The third quarter also marks our second consecutive quarter with positive free cash flow. Looking back at the past four quarters, We've now delivered positive free cash flow in three of the four. With our consistent profitable growth and cash generation and a strong balance sheet, our financial position has never been better, and we foresee opportunities to begin to de-levering our balance sheet in 2026. Given the momentum in the US surgical business in the third quarter and healthy underlying spine market, we are raising our full year revenue guidance by $18 million to $760 million. Our revenue outlook for the full year 2025 expects adoption of our unique procedural approach to drive surgical revenue of approximately $684 million, and we expect EOS revenue of approximately $76 million. Our surgical revenue guidance raise is a result of overperformance in case volume, which we now expect to grow in the low 20% range year over year. We continue to expect case ASP to grow in the low single digits year over year. As it relates to free cash flow, our third quarter and trailing 12 month performance further reinforces our confidence in delivering positive free cash flow for the full year 2025. We expect fourth quarter free cash flow to range from positive $6 million to positive $8 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 $91 million. An $8 million increase versus our prior guidance of $83 million. Notably, our trailing 12 months of adjusted EBITDA of $81 million as of the third quarter speaks to our ability to deliver on our full year commitment of $91 million. As a reminder, our adjusted EBITDA guidance includes us absorbing the impact of expected tariffs in the second half of the year, and we continue to estimate the impact of tariffs on our cost of goods sold to be in the low single-digit millions of dollars for the full year. The chart on the slide depicts the consistency of the profitability progress we are making and the tremendous power of our business model to drive future profitability. Our adjusted EBITDA guidance of $91 million will generate an adjusted EBITDA margin of 12% for the full year. Notably, our current guide implies a 200 basis point improvement compared to the 10% adjusted EBITDA margin we guided to at the beginning of this year. Given the profitable revenue growth we've generated this year, we can now self-fund the investment in instruments and inventory to support our future revenue growth. We are well positioned to meet or exceed our 2027 financial commitments of $1 billion in revenue, 18% adjusted EBITDA, and $65 million of free cash flow. The third quarter financial results are another step towards delivering on our commitments. We are delivering durable revenue growth, strong profitability improvement, and seeing all of that translate into free cash flow. This team has made meaningful improvements in how we operate the business. You can see that clearly from the financial results. Most importantly, we are helping surgeons perform better surgery, and that is where we will remain laser-focused because it is the foundation for creating lasting value. With that, I'll turn the call back over to Pat.