Alphatec Holdings, Inc. Q2 FY2025 earnings call

• Profitable revenue growth leadership continued with total revenue at $186 million, up 27% year-over-year. Surgical revenue growth at 29% (6x market growth). • Adjusted EBITDA of $23 million is a record, 13% of revenue, and marks the fifth consecutive quarter of positive adjusted EBITDA, 4x improvement over prior year same quarter. • Achieved $5 million in free cash flow. • Surgeon user growth of 21%, same-store sales in established territories 29%. • Continued investment in R&D with non-GAAP R&D at $14 million, 8% of sales. • SG&A at $108 million, 58% of sales, with improvements in variable expense rate and infrastructure leverage. • Trailing 12 months adjusted EBITDA at $62 million.

Total revenue for Q2 2025 was $186 million. Surgical revenue was $168 million, representing 90.3% of total revenue, and grew 29% year-over-year. EOS revenue was $17 million, accounting for 9.1% of total revenue, with a 11% year-over-year increase. Adjusted EBITDA was $23 million, which is 13% of revenue, a record and the fifth consecutive quarter of positive adjusted EBITDA. Surgeon user growth was 21%, and same-store sales in established territories grew 29%.

• Increased full-year revenue guidance by $8 million to $742 million due to strong Q2 surgical performance. • Expect third quarter free cash flow to range from positive $1 million to $5 million, with fourth quarter also positive, resulting in full-year free cash flow positive. • Adjusted EBITDA guidance raised to $83 million, up from prior $78 million, with adjusted EBITDA margin of 11%, expecting 40% drop-through of incremental revenue to adjusted EBITDA. • Anticipate tariffs to impact cost of goods sold in low single-digit millions for the full year.

Q: Matt Miksic asks about what makes the robot different when launched and investments in integrating a turnkey front-to-back solution.

A: Pat Miles responds that what makes them different is the procedural architecture of very specific application, integrating elements into the spine procedure workflow, and the navigation robotics will be integrated into the workflow to provide increased precision without radiation. J. Todd Koning adds that the people brought on board and operational sophistication have contributed to growth.

Q: Young Li asks about drivers of same-store growth and contribution from reps added.

A: Patrick S. Miles defers to Todd Koning, who states that people brought on board over 12-24 months are contributors, and surgeon adoption and utilization are key. Todd also mentions operational sophistication and monitoring of asset utilization.

Q: Vik Chopra asks about organic growth guidance for the rest of the year and robot launch plans.

A: J. Todd Koning says they raised full-year revenue guidance to $742 million, expecting sequential step down Q2 to Q3. Patrick S. Miles states the robot launch is on track for early 2026 and will be shown at NASS, with the robotic piece in alpha and navigation piece to be added, and it's a small footprint tool with clinical influence.

Q: Anna Sophia Runci asks about drivers of surgical volume growth and trends in ASC vs hospital.

A: J. Todd Koning says ASC mix is sub-10%, and Patrick S. Miles adds it's about patient selection and controlling pain. Todd mentions volume growth was driven by utilization and surgeon adoption, with more utilization contribution in the quarter.

Q: Joshua Thomas Jennings asks about drivers of surgeon user growth acceleration and halo effect.

A: Patrick S. Miles and J. Todd Koning state that broader interest, academic institution interest, and EOS influence are driving surgeon user growth, with the halo effect reflecting expanded confidence in the ecosystem. Patrick mentions more interest from academic institutions and fellows.

Q: Benjamin Charles Haynor asks about geographic penetration and adoption acceleration.

A: Patrick S. Miles states that EOS image is coveted, academic institutions are enthusiastic about the translational tool, and EOS provides a foundational standard for predictive environment, leading to geographic adoption acceleration.

Q: Michelle asks about second half revenue expectations and free cash flow timing.

A: J. Todd Koning says they expect sequential step down Q2 to Q3, with third quarter free cash flow range $1-5 million and fourth quarter positive, resulting in full-year free cash flow positive, and guidance is set to achieve commitments.

Q: David Saxon asks about motion preservation and its impact on growth outlook.

A: Patrick S. Miles states they will focus on exploiting their best-in-class asset base for now, as there's much opportunity with their current ecosystem, and motion preservation can be addressed later.

Q: Jason Wittes asks about CapEx modeling and EOS revenue structure.

A: J. Todd Koning says bulk of CapEx is in instrumentation to support surgical growth, with $0.75 investment in inventory and instrumentation per dollar of year-over-year surgical growth. EOS revenue has a recurring stream of ~$5 million per quarter in maintenance and warranty, with primarily system sales.