Alphatec Holdings, Inc. (ATEC) Earnings Call Transcript & Summary

Welcome, everybody. My name is Pat Miles. It's great to have you guys in Sunny Southern Cal, and thanks for being here. Those of you who are virtual, welcome to ATEC. Thanks for the warm welcome. Tina suggested that this is what I should expect, and this is what I'm getting. So it's perfect. Now, really thrilled you guys are here. Our interest is to share as much about the company as we can. I got to tell you, we're an open book. And hopefully, as you came in, you appreciate the fact that this campus is such a reflection of who we are. So we're thrilled that you're here. We're thrilled you're experiencing -- whatever you do, make yourself at home. Clearly, there's going to be some forward-looking statements and just want to be transparent with regard to what those are. I'll save you the reading of it. And we have a great day. You're going to hear from the vast majority of our senior management team for the first part of the morning. We're going to do -- take a break and do a little rotation so that, literally, you guys see, when we talk about PTP, we want you guys to see exactly what we're talking about because the more you know, the more you'll appreciate what we're doing here. And you're going to be stuck with a little bit of a tour. Culture is such a big part of who we are. We want to make sure that we share the campus with you, and I think that you appreciate just based upon walking up. And then we're going to have a panel of surgeons. It's going to be led by Kelli Howell and these are luminaries in the field and we're thrilled that they're here and can't be more appreciative of them being here. And so each of them onto themselves is really a luminary. And so as I said, my name is Pat Miles. I've been at this a heck of a long time, and long enough to remember when Smith & Nephew had a spine line. And so I was a mentee in for a little while and then went over to a company called [ Soft Mordanic ] which was acquired by Medtronic. I feel like the resident historian, because I often tell about kind of the early days of [ Soft Mordanic ] and kind of the exciting part of being there. After Medtronic acquired, [ Soft Mordanic ] went over to NuVasive at $0. There's about 25 of us at the time, and it was a lonely place. So the big company that it is today, it wasn't that when we got there. And so I had really a great run there from $0 to close to $1 billion in revenue. And that was a great run. And so thrilled to be about 10 minutes north up here, we're building a special company, and I'll let you guys be the judge, but it thrills me to be able to share it with you. And so what's interesting is we fancy ourselves Spine's most experienced students. And if we represent anything today, I want you guys to know that we're a curious bunch. And so -- and we're curious and we're also a very deliberate bunch. And you're not deliberate if you finished 2017 -- so I joined in October of '17, and we finished at a 19% decrease year-over-year in sales. And if you want to be at a lonely place, that was a lonely time. And so we thought what would be great is what we'll do is we'll suggest that we're going to do $200 million in 2022. And the way that we're going to do it is we're going to -- the product development group here is -- you'll hear me brag about them time and time again. And this is an environment that we thought, "Gosh, if we get the right team together, what we could do is reflect 80% of our revenue in new products. And so that will, in essence, revitalize the company." We'll do 8 to 10 product launches a year, we'll professionalize the sales group. The sales group was out of control. There is several hundred distributors. And so we had to ultimately call that to 50 at $4 million a piece. And so there was a ton of heavy lifting to do and we knew that what we could do is create procedures and magnify the value of the procedures based upon the number of products used. And so that was our thesis, and we thought, we have great confidence in our ability to get to $200 million by 2022. And the beautiful part is we got there sooner. So in 2021, we met the objective that we committed to, and people said, "You guys are crazy for putting that moniker out there." And our belief was we know exactly how to reflect value in this business, and let's go ahead and commit to something so that we're nice and clear. And so clearly did $212 million or [ $213 million ] last year. This year, we're committed to $316 million. And I've got to tell you, it's much of the same story. It's the whole how do you do stuff better. And what we love to say is we're not guessing. This is something that we know viscerally. We've been -- we've been at this a long time. And from a surgeon perspective, the type of insights that we're getting from the surgeons to be able to create distinction in the field is very, very apparent. So our enthusiasm to put the right people around this thing, get the right surgeon ideas reflected, is really the -- who we are. And one of the things that I think that gets lost often times in at the last place that I was, Alice, Louisiana, was just this culture of Maven, and he was -- he would call on everybody in the audience to answer questions. And I've got to tell you, hopefully, one of the values of you being here is your feeling. And the greatest compliment that we get is people will say, "There's an energy here that's authentic. And the authentic interest in the curiosity of how to make something better." Our values are just that. It's like -- I think there's a lot of people who don't like the work that they do. We love it, it's part of our core values. We love Spine, and I hope you get that reflection as you're here, because we love what we do, and we're totally unapologetic for it. And candidly, our vision is to be the standard bearer in the space. So we'll create the rules in the space. It's the beauty of what we're doing with regard to PTP. Now everybody has to follow our rules. We love that. And then from a mission perspective, it's like how do we revolutionize the approach to spine surgery. And that means not just the literal approach in terms of how you get there, but also how we do things. And so we feel like that's a heck of opportunity. And so when you go about restarting a company, there's a heck of a lot of work. And our view is unless you're willing to create clinical distinction and why are you even showing up as a company. And so -- but the first thing you got to do is get the people together, then you got to make sure that there's a technology foundation and then you got to make sure that you start to design and develop so that what you could do is our belief is in procedures. You can do approach-based things, then you put the procedures together and then you start to scale. And again, this building we moved into a little over a year ago, and it's reflective of the level of confidence that we want to create. And the confidence we create it with the surgeons. The surgeons are who we're serving. And so what's interesting is those guys came in and say, "Who's this Alphatec bunch? Who are these guys? This was a broken company before." Then they come in, there's a level of confidence created that's profoundly valuable. And so, so much of people engaging and serving their patients is really a creation of confidence. And so when you start to look through, gosh, over the years, how things go, and so you're going to hear from everybody up here, so I'm not going to introduce everybody. But there's a couple of people you're not going to hear from that are profoundly important to this effort. Craig Hunsaker runs what we call People and Culture. He is the cultural maven, he's the head cheerleader. He's all about it. And so we are not passive about a culture that gets created, but it's a performance culture. It's not one of those where everybody jumps around in parties, although this is a great place to hang out. It's -- but it's all about how do we create a performance culture. He's also our General Counsel. And so he's, I think, a protector of us in just a nice and aggressive way would be the understatement. Eric Dasso is somebody whom I've worked with for a year. He's not here today. He's in Paris. He moved his family to France. And again, what was important about that is when we trade a cadence much like here with regard to the whole product output that's reflective of our deals. And when we talk about integrating companies, it's not a passive effort. And so he moved his whole family out there. He's out there, one of the show, a phenomenal guy with great experience. Another guy you won't hear from today, who is likely a bit of a shy guy, the guy who's the best in the business and his name Scott Lish and he runs our product development group. If all those things were it's -- when you want confidence and you have such competent people in the field of the very place you're engaging with regard to product development, you want somebody who can lead it in the way that's unique and the guys need unique leader. And so when you start to think of the old Alphatec, I got to tell you, this place is turned over. We turned over 100% of the executive team. Over 90% of the entire group and over 90% of the Board as well. And so it's a new company. And so that's why we call it ATEC. And what we want to do is distance ourselves from -- kind of a little bit of a solid path -- sorry, pass rather. But what's so important is when you start this thing out is you say, "Gosh, how do we start to build a process leading company? How do I create predictability in the entire process? If we're going to do product development, we've got to be the best at and how do we create a process that we ultimately serve." And you also need technology. And when you start to think about technology, the whole safe thing was so foundational to us because what we want to do is say, "How do you create a conduit into the operating room with a small footprint?" I got to tell you, I don't love all of these cards going into a small geography. And so what we said we have to have super credible information, which is going to be the neurophysiologic piece that we're profoundly familiar with. And then what we do is we say, "Gosh, now we have a conduit. We can deliver all kinds of stuff in there that ultimately serve the interest of surgery." And so these things are profoundly delivered. And I want to make sure that you guys appreciate the fact that these things don't come by happenstance and like, "Oh, SafeOp is available. Let's go get that." It's a plan to make sure that what we're doing is serving the interest of how we view the world of surgery. We love it too, because it's literally you can carry it then, it's a little tablet. And so the footprint in the operating room is small, but the influence is huge. And so then you start to design stuff that integrates into the process of the workflow of surgery. And we find that to be profoundly important to make sure that what you're doing is you're not wasting steps. And you don't do that if you don't love it. And when you love something, you're willing to commit to the level of distinction that ultimately makes it unique. And that's the whole clinical distinction from a product perspective. Nothing like a pandemic year and you start doing -- you start launching procedures. Everybody else is at home. I got to tell you, we were here. The garage doors were open, we had arrows on the floor, so we were following all the rules. But I got to tell you, everybody was in the house creating procedure that ultimately create a level of distinction in the environment such that we're a unique player. And so I think so off and people think, "Oh my gosh, these guys are growing at 50%. What is surprise." Well, it shouldn't be. Because ultimately, the volume of work being done and the uniqueness of the work was hugely important, and it really separated us. And then we start to say, "Gosh, we have this great procedure." Again, to work ahead. It's not what the building just shows up. So we plan -- like this was a warehouse. So we plan this warehouse and we say, "How do we make sure that people want to come and work here?" So we built a campus. And I think the -- when I give you a tour you'll appreciate the elements of the campus that ultimately becomes so valuable to keeping the know-how here. We call it know-how, and so we want to keep them here. And then we also built a distribution facility. You don't have to be -- understand geography very well to realign. It's not great to distribute out of Southern California if you're going to serve the entire country. And so we put a distribution facility in Memphis. There's a great competency of distribution in Memphis. So our ability to build that was valuable. We took on some money. How do we continue to fund this thing and make sure that we have fuel to continue to do the work that we're intending to do? And then we acquired EOS. We think EOS is a foundation for what's next. The ability to take that information and deliver it into the operating room and beyond is so opportune. Joe Walland is going to share that with you here in a bit, but I think you'll be inspired by it. I think that what happens is, again, this goes back to the students. We are a student of the environment that we serve. And so our view is that as we look at the near term, we said, "Gosh, our ability to run to north of $500 million is very apparent to us. Our ability to have an adjusted EBITDA of $80 million is apparent to us. And what it's based upon is our understanding of the long-term walk." And so candidly, I was more nervous about the $218 million about the -- north of $500 million in 2025. And so adjusted EBITDA breakeven in 2023. Clearly, a disciplined investment will deliver cash flow breakeven without additional dilutive capital. And I appreciate that, that's a concern. I'm telling you, we have the ability to ultimately pull the levers to make for the necessary decisions to do the things that we have to do. And so we're thrilled about that, and we can't be more excited about what's going on internally. And I want to just take a couple of minutes to talk about the industry in general. And I think that the group of companies in this space think gets commoditized. And I got to tell you, we think it's not that good in the hands of the masses. And so that's to guess, gosh, is there a predictability issues, there's reproducibility issue. And that begets a market opportunity. And so our view is what a massive market opportunity. There's the [ henious ] in the space that aren't fulfilling the requirements, the very environment that they serve. And we think, gosh, that's a heck of an opportunity. So when we think about predictability, we think about confidence, the whole creation of confidence, and we say, "Gosh, the chosen intervention best suits the patient and meet or exceeds expectations." The fact that that's not going on everywhere, all of us know someone who's had a challenging spine surgery. And there's so many variables that undermine a spine surgery. And we think, gosh, there's an unbelievable opportunity to ultimately create predictability clinically, operationally and economically. And to me, that's a wonderful opportunity. And so where so many companies just see the world of spine surgery as pedicle screws, we see it as opportunities to effectuate variables. And so we think it's a tremendous opportunity. And if you're not doing in the hands of mass, there's a bell curve in this business. And the reality becomes if you're not able to make sure that the masses can do something, then it's not a business. And so we're mavens as it relates to how we do this. And so one of the ways we do this and one of the ways we create reproducibility, and I want you guys to see it in the lab, is the proceduralization thing. If you're not willing to design and develop for the specific requirements of a procedure, then you're not in the game to win it. And that's where it's like -- I got to tell you, it's not like we want to be the patient positioner company. But if that's a requirement to openly create reproducibility, then you do it. And I love these big companies who were like, we'll do the pedicle screw or we'll do the interbody, but we won't do the necessary things to ultimately align with the surgeons to ultimately create predictability and reproducibility. And to me, that's not serving the interest of a specific space. And that's why we chuckle about like this slide, and I think it's interesting in terms of the currency. Everybody wants to involve themselves in the currency, but nobody wants to do the work. And we're loving the opportunity to do the work because what we'll do is be the curious students -- design and develop and invest in the things that are necessary to create predictability. We love this slide. This is who we are. We're going to create clinical distinction. We're going to compel surgeon adoption, and we're going to continue to reflect that in the field. And you're going to hear from Sponsel and Brian Snider, and they're going to talk a little bit about how we're doing this as well. And clearly, it's a place that I absolutely love. We think the whole proceduralization starts in [indiscernible]. We think the ability to understand the patient and the entirety of the patient, it's the only way that I get it. Joe will talk a little bit about this. But there's nothing better than saying, "Gosh, this is how I'm going to -- or this is why I need to intervene, and then this is how I'm going to intervene. And this is the assembly of goods I'm going to use to intervene." It creates the level of predictability that didn't exist today. And what's going to happen is, ultimately, hospitals are going to start saying, "I have to pay for a procedure." And then you say, "Okay, who's procedure are you going to use?" And you better be prepared to ultimately of all the elements of the procedure to ultimately serve the requirements of that environment. And so in our minds, this is a very -- if you want a create total joint like predictability, this is what you ultimately have to do. And it's not as though we're new at this. So we've done this before, and we've done it, I think, reasonably well. It's funny when you start to think about the people in this thing, and it's fun for me to see so many of the surgeons and the influencers around this thing. So you're going to hear from Luiz Pimenta in the Cadaveric Lab. Imagine that. He's on here as a guy who, in essence, pioneered lateral surgery. He's here with us as our Chief Medical Officer. And then Bill Taylor, for those of you who are virtual, will hear from Bill Taylor. I got to tell you, these guys aren't guessing. And so when we say, "Hey, we're not guessing." We're not guessing. And so it's a great group around it and just love it. And we always talk about your sophistication is in relation to the number of distinctions you draw those subjects. And for us to start -- to create distinction within the context of lateral surgery is something that we believe to be important. And the beauty is it's not as though lateral surgery wasn't well received. It was -- it is and was great surgery. We talked about at the other places, the blood loss, the lessened hospitals stay, the patient up and going. There's over 500 peer reviewed publications by -- really stewarded by Kelli Howell, who's here as well. And so the great part is we've got the band back together, we got the surgeons here, and we did something great before. But the problem is it wasn't accepted by the hands of the masses. And so when we look at lateral surgery, only 30% of the surgeons did it. And there were very clear reasons why they didn't do it. And so it was one of the seems where it's -- there's positioning issues. What happens is when you go to get spine surgery, oftentimes it's 3 things: decompression, stabilization and alignment. And you couldn't directly decompress with it as long as since we're in that position, you got to rely upon the height restoration to indirectly decompress the neural elements. And it was a bad position to get sagittal alignment or lordosis and there's some neural challenges. And it ultimately was limited to a very short contract, so it impeded you. And so the history and sadly, again, I feel like Dr. Pimenta always say, when they start asking you to give the history lesson, you know that you're almost done. And so the minimally invasive surgery has been challenging in spine. And they usually say, minimally invasive, minimally effective, and there's always a compromise and the reason a lot of people didn't adopt it is because there's compromises. In the first-generation lateral, there are compromises. You couldn't do a direct decompression, the placing pedicle screws in a lateral position was very difficult. And alignment is the greatest -- is the correlative to a successful long-term outcome. And so you couldn't align someone very predictably. And so the challenge was, it did -- it got you partially all the way there. And that's the beauty of the whole PTP thing is we never stopped asking the questions as how do you further the requirements associated with this technique. And that was the whole PTP thing where there's no compromises. And so when you think about spine as decompression and stabilization, the patients in the position to where what you're doing is you're doing a direct decompression, you're stabilizing in a space. And so when you start to think about, gosh, how do you get this in the hands of the many. This is a very familiar position that surgeons are operating in. And then from an alignment perspective, the belly hangs in your ability to create alignment. And you could see it here, this was a study done just -- a position study. And you can tell by the way that somebody lays down in the prone position that you get more lordosis. And so just your ability to effectually base it upon the position becomes very, very important. And so we love the fact that you got that. And this is just another example from a patient positioner perspective that gives you an understanding. And so sagittal alignment is the greatest predictor of a successful long-term outcome. You may want to think about effectuating sagittal alignment. And so we think it's profoundly important. The other thing it gives you is, the #1 reason why people get surgery is what's called spondylolisthesis and it's a slip and you can see it. You can see it here, if I can get the -- you can see it here. And literally, you get a slip. And based upon the positioning, you get a resolution of a slip. And this is only in a subset of patients, but the beauty is a surgeon would much rather operate on some of these, they don't have to pull back the spine and have it sit there and fix them in space and restore the alignment than they would to have to do that. And so there's great value in terms of the position. Here are the elements. This is the -- this is the rules. So we talked about setting the rules to procedures. As it relates to PTP, if you're unwilling to do neurophysiology in a huge way, if you're unwilling to do a patient positioner and if you're unwilling to specifically design a retractor for the experience, it's not going to be good. And the reason we know that is because we did it. And so it's not like we're guessing. And so the great part is, as we think about the business and you start to think about, gosh, what's safe [indiscernible]. And it's -- I think, so often, because people don't understand if they kind of blow it off a little bit as not being very meaningful. I'm telling you, it's the key to the kingdom. And so the beauty is EMGs, through the psoas says, "Hey, where's the nerve?" That's all it does. It tells you a nerve location. And the problem is, once you retract the nerves, you have the propensity to potentially hurt them. And that's been one of the kind of underpinnings of why people didn't do the procedure. And that's why we added automated SSEPs to SafeOp is to make sure that what we could tell is the nerve health over time. So you have an objective measure of nerve health. We talked about that when we acquired it. We're doing it today. And so EMG is critical, but alone, it's insufficient. And so if you're going to do these cases, if I'm a patient, I surely want a monitoring for the entirety of the case. And what you want is you want actionable information. And so that's what we love, is we don't need a big footprint. What we need is actual information that tells a surgeon something is exceedingly meaningful to them. And so the beauty of the automated SSEP is it's real time and they can make decisions based upon the dynamics associated with the information that they're getting. And it's like why doesn't everybody do it? Because it's profoundly hard. These are unbelievably small signals. And so the amplification of the signal, the ability to get the signal, the process to signal and ultimately to communicate the signal, these are very, very hard things. We have the best team in the business. I brag about them all the time, and it's a virtue to brag about them because these guys are really good and it's unique. And so it's not like somebody just shows up and says, "Hey, I'm going to do one of these." It's a long walk. And so we love that in terms of the moat associated with the business because it is a long walk if you're going to do this. And then we started to think the best way to design an develop specifically for predictability. You'll see the orthogonality in the lab, and you'll see the specifics of all the things we designed. I've got to tell you, surgeons love exposure. If you're unwilling to create the necessary elements to create the most elegant exposure, then you're unwilling to participate, I think, sincerely in the evolution of the business. This is craziness. When I was with Dr. Pimenta down in 2000 doing the procedure, we were taking the patient to the bed. It's 2022, and we're still taking patients to a bed. Now what we do is we have a positioner. We think it's so profound. If you're going to do orthogonal surgery and you're going to put a crooked patient on a crooked bed and you're going to take them down, that's not the level of sophistication we're looking for in terms of making spine surgery reproducible. It's a little underwhelming, honestly. And so our ability to create positioners to ultimately facilitate that is huge. The value creation is very apparent to the hospital, and you'll hear that through the discussion today, especially with the surgeons. You have to hear from me, but they're certainly clearly clinically efficiency and cost effectiveness. And so our view is PTP was designed by the people who understand this like nobody's business and really to address the challenges associated with why the adoption was only 30%. And so we're totally bullish on it. And what it does ultimately reflects the decompressive, the stabilization and the sagittal corrections that ultimately are important. I think you guys will really get that in the lab and you're going to get it in the video that Dr. Taylor communicate. And so our unwittingly unshy view is spine surgery needs ATEC. And it's one of the things where the level of sophistication going on in this environment is underwhelming. And having been at this for 30 years, we love it, and we love the opportunity to do it better than anybody else. And that's the one we call clinical distinction, and that's what we're committed to. And I think you'll find that based upon being here and what we're trying to accomplish. And so who I want to invite up next, and he's got a unique background. He's been in the medical device business for years. I think what makes him an interesting guide to really be a beacon as it relates to our imaging solutions is the fact that he's done the Medicrea thing at a very, very high level. He understands predictive analytics. He understands what we're translating with regard to the imaging element. And so I can't be more thrilled to have Joe Walland to provide you a little perspective on EOS.

Good morning. I can't be more excited to be up here talking to you all this morning and online. And as Pat mentioned, several years in the med device space from an experience standpoint, but more significantly is I've had 20-plus years in this space, but it's all been in spine. So you have seen a lot of transitions through the years and when EOS comes up in the discussion, I couldn't -- this is probably the most exciting thing that I've seen in my 20-plus years of experience and excited to be talking to you all this morning about kind of where we stand today, but also where we're going into the future. And so Pat talked a little bit about creating clinical distinction and where are opportunities with EOS in terms of creating clinical distinction. And we have a massive opportunity to advance our information-based competitive advantage. And one thing that we all know is surgeons yearn for information and more so, information at their fingertips is how do we get information to them quickly and effectively. And as Pat mentioned earlier, SafeOp has been our conduit to bringing information intraoperatively. But then how do we leverage that with information and informatics from EOS? And not just bringing information intraoperatively, but also looking at the preoperative aspect as well as the post-op analytics. And that's a huge opportunity where, in our opinion, no one has done it well. As I look at this space, and for some of you that may not be familiar with EOS, it's consistent unstitched full-body image. But for some of you that don't know kind of the space itself, prior to EOS, there has been 0 innovation in this space for roughly 50 years. And so as we look at the competitive landscape in this area, there's no competitor that has the ability that we have when it comes to EOS. And I put up on the screen here, just a side-by-side comparison of EOS to traditional X-ray, because that's the only thing that's out there. And as you can see, there's really no comparison. If you look at the dose requirement, EOS provides up to 80% reduction in radiation versus a traditional X-ray. Huge, huge, huge number there. 3D imaging. So having the capability of looking at imaging, not just in 2D but in 3D, because we're simultaneously taken an APN lateral image with EOS, we're able to reconstruct the spine in the 3D manner. And that is something that traditional X-ray just can't do today. Looking at the full body assessment, Pat talked about the importance of the global alignment and balance of a patient. You have limited views with traditional X-ray. But looking at the full body, seeing if the patient is compensating for the ailments that they're experiencing. And you can't do that with anything else other than EOS. Obviously, weight-bearing, patients standing getting a full body image and seeing them in their natural state and assessing that patient in a natural state. And then I'll talk a little bit more about this later, but from an image sticking requirement. So with traditional X-ray, when you're doing longer length films, there are stitching that's required, which there's numerous errors that are involved in that. And with EOS, you're getting a full comprehensive, complete, fully calibrated image that is -- that doesn't require stitching. So having accurate information, again, giving that information to surgeons at their fingertips. And then lastly, no magnification errors. And being -- having a fully calibrated image, and this is absolutely critical for understanding preoperative planning. If you have the magnification error when you're planning out a case, you will be off with your measurements. And so surgeons, they need EOS when it comes to preop surgical planning. Pat mentioned about the 3 main goals of surgery being decompression, stabilization and alignment. But you all focus on the stabilization alignment piece with EOS. And what EOS brings is that preoperative understanding of bone quality and informed for more -- for better implant selection. And so we'll talk more about that in terms of the capabilities of looking at the bone quality of each per people segment with EOS, which is a massive opportunity, especially in the adult community. And then from an alignment perspective, EOS is going to be Spine's first objective approach to the restoration of not just alignment, but the global alignment. And I think we got to be clear in what we're talking about there. And we feel EOS set new standards in spine. And what I'll focus on today is these 3 main pillars that Pat mentioned in his presentation as well as how are we doing it clinically, how are we doing operationally and then also economically. And first, I'll start with kind of the hospital access piece. One of the things when we acquired EOS, EOS had a very strong footprint across the U.S. and some of the top institutions around the country. So doors immediately opened up for us to be able to bring ATEC and EOS together as one company and really go share the message. The opportunity for ATEC was there was only 5% overlap of where we are doing business on the implant side to where the installed base was on the EOS side. So a huge opportunity for growth there. And as you can see, we're 90% of the top orthopedic hospitals in the country, 80% of the top 25 according to U.S. News & World Report. And we're just getting started. Recently, we just added Texas Back Institute to the list down in Dallas, Texas. Many of you are probably familiar with Texas Back, a very prestigious institution. And we're excited to partner with them moving forward as we continue our path to [indiscernible] with EOS machines. But our opportunity still remains massive. If you look at our market share or the percentage of hospitals that we are currently in or have an installed base, it's only 6% and the number of total hospitals is greater than 3,000. And we're not even including the opportunities where institutions can put several leases into 1 facility. Couple of examples is NYU already has 3 EOS machines. HSS has 5 with the march to get to 10 over time. And so our opportunities are massive when it comes to flooding the earth with EOS. And then bringing to the 2 companies together has been -- we've seen some of the fruit of doing so. EOS as a stand-alone company have basically 3 sales reps selling to the entire U.S. You combine that with the ATEC sales force and then some new additions that we've brought on board since the June close, we now have over 300 sales professionals focused on selling the message behind EOS and expanding our opportunity pipeline. And since June, we've been able to grow our opportunity pipeline by over 40%, which is extremely massive and we're just getting started there. And then increasing our ability to access the end users, i.e., the surgeon customers, and you'll hear from some of them later today. But EOS never had that opportunity to build that relationship as a stand-alone company. they relied on word of mouth as well as trade shows. But with our implant team and our combined efforts, we're able to go after the end user right away. And then -- and that's what's led to that kind of that opportunity funnel growth over time. And then multiple acquisition strategies, and this is important because historically, EOS would just focus on the outright capital purchase and follow the capital schedule and that could take several years. And so we've been creative in terms of orchestrating different deals as a combined entity. And we're super excited that we've seen out of the gates over the first 9 months, the sales cycle reduced dramatically as well as the ability to close a lot of these deals in a timely fashion, not just from our side but also from our surgeon customer side that need the EOS information for their patients. And then lastly, and this one is there is a strong established reimbursement associated with EOS. So the return on investment is massive. And also, this turns into a great profit center for any institution that is utilizing EOS. And then focusing on the operative influence. And I wanted to at least demonstrate what imaging looks like or traditional imaging looks like with audio. And on the far right, I talked earlier a little bit about image stitching. And you can see there's different images that are stitched together. And you really can't tell and surgeons can't give a proper diagnosis for the patient. The angles from an alignment perspective are going to be off. There's a possibility of misdiagnosing a patient because they can't truly see what's going on. And then also here on the left is you have very localized views as well. So you don't really understand the relationship of the spine to the pelvis to even looking at compensation in the lower limbs. And then on the far left here, looking at varying contrast in the image, whether they use too much dosage or too little dosage which skews the view of the patient. And that's just not there with EOS. When you look at the EOS side of things, and I'll show you right here in terms of looking at the compensation. You can't achieve this with traditional X-ray. Having a full body image and looking at the standing functional alignment, looking -- there's obviously no stitching areas. You don't see any stitching here. It's a congruent image. Zero magnification, as we talked about. This is a key contributor to accurate surgical planning. Less radiation, as we talked about, up to 80% reduction in radiation. Reduced exam time and exam time for EOS takes 20 to 25 seconds. The maximum throughput for a clinic on a daily basis is greater than 150 patients. Talk about the workflow opportunities that, that presents, not just to institutions, but even in a private practice setting, which is another huge growth opportunity for EOS. And then obviously, looking at the 3D anatomical reconstructions, being the only company to be able to do that and provide that information and planning in a 3D aspect. It's massive. And then talking about influencing the clinical experience, and I'll talk about more of these in great detail as the slides go on here, but having automated 2D alignment reports, level-specific bone quality information, which doesn't exist today, automated 3D reconstructions, 3D planning. That includes the ATEC implants and pulling through the implants into the planning aspect of what we're doing, having patient-specific configurations that help us out operationally, but not just us on the industry side but also on the hospital side. And then as Pat mentioned about having that intraoperative reconciliation in terms of confirming that you've achieved your plan in surgery before you leave and not relying on just your outcome image and really guessing if you've achieved your plan. And so looking at the global limelight picture, we want to look at the relationship between the pelvis and the spine and using data to get better and better over time. Looking at the full body image and seeing how the patient compensates, how do you quantify that. And as Pat mentioned earlier, EOS is spine's first objective approach to the restoration of global alignment and that's strongly correlated to the successful clinical outcomes. There's a study out there that says that 62% of patients are malaligned post operatively. Huge issue. That leads to higher revision rates, numerous surgeries. EOS is needed in the market to prevent a statistic like that. I'm going to go through real quick in terms of showing you how EOS is performed in some of the information. So bear with me here and pay attention to the screen. But as patient comes in, the beams come down and take a stout image of the patient, measure the body mass. And then as the beams come up, they take a simultaneous AP and lateral image using flex doses, which reduces the radiation. As you can see, clear concise imaging, fully calibrated, you can zoom in, zoom out and get a look at the spine. And then also having this level-specific bone quality to really understand what you're dealing with from an implant perspective. Being able to automate the 2D measurements as well as the 3D surgical planning. Over here on the right are the spinal pelvic parameters and where the normative ranges fall for global balance. And then as you can see, as you do your surgical gesture, how that moves and how you know that, that patient is going to be aligned from the literature from a spinal pelvic parameter standpoint. All this information is shared in the cloud. And then looking at the intraoperative execution piece, the red line is where the patient is at currently. The green line is the surgical plan. And then as you continue to put your interbody devices in and then you replace in your pedicle screws, you're going to see this red line shift slowly and slowly up in terms of how do we get through the green line, which is the surgical plan, which is that intraoperative confirmation. And then patient -- placing your patient specific rod, tightening it down, knowing that you've achieved your alignment goals from a parameter standpoint but also on the general image over here to the right. And then looking at the case analytics, taking the preoperative plan, the intraoperative confirmation as well as the post-op assessment, whether it's 6 months, 1 year, 2 year. Using all that information in that database, truly using artificial intelligence and machine learning, I think it's overused in today's market. And then as we continue to plan out each and every case, we get better and better over time. And this is going to be the holy grail behind what we're doing behind EOS. Going a little bit more specifically into the bone density aspect. I want you to have a good understanding of what we're talking about here in terms of where we see our opportunity with demand matched implants. Having level-specific bone quality information, when you're planning out these surgical cases is imperative to the successful outcome of the patient. What surgeons currently have to do is send patients out to get a DEXA scan. And they get a relative T-score average, and they really don't get that level specific information that they need for planning out these cases, and that's what they're going to get with EOS. So we're going to be able to plan out specifically what's the appropriate implant selection for those particular levels that may be compromised from a bone quality perspective. Massive opportunity here. And then the intraoperative reconciliation piece. We're going to be able to maximize our in-house rod-bending expertise, have a rod band EOS particularly made according to the surgical plan. Then correlating that plan to the intraoperative experience. And then really truly understanding how alignment changes when that patient lays down in surgery, whether prone or supine. And then truly lay the groundwork in terms of predictive analytics. And a lot of companies say they do it. This is the true platform to do it from a standardization perspective. And then lastly, from a predictive analytics standpoint. And one of the things I want to make clear to you all is when we do an EOS deal, we have contractual language in there that we are requesting access to this data. And so we're collecting this data every time we have a unit that's placed in the market. And the way that we look at this is in the 3 different buckets, from a preoperative standpoint, intraoperative and post-op. From the preop, collecting the patient reported data, the preoperative diagnosis and surgical planning. And then intraoperatively, documenting the customized configurations and how do we use that data to get better operationally with customized rod implant utilization, bone density information, et cetera. And then postoperatively, looking at the assessment and follow-up and the patient recorded outcome scores, the clinical measurements that we're looking at. And then truly building predictive analytics getting better and better over time with each and every patient we put into our database. And we'll set new standards operationally as well. And this picture here says it all. The industry, as it stands today in spine, has some inefficiencies. Spending out totes after totes after totes for surgeries, the amount of money spent on CapEx, inventory, freight, time, order entry. And then the intangible costs, like the burden on the sales team, that's taken away from a selling environment because they have to process trades like this. And then from the hospital perspective, receiving 30, 40 trays per procedure and sterilizing them all, the labor costs associated with it. There's huge opportunities to get better from an operational efficiency perspective. This is how we look at EOS informed surgical planning. And how do we get from the picture on the left to the picture on the right, and it's through planning with EOS. And then looking at the new -- setting new standards from an economical standpoint. We truly -- we feel we have a pathway towards predictive surgical planning or procedural pricing planning. And just to describe to you how hospital negotiations work today, it's basically a line item by line item perspective or a widget-by-widget and that's how you negotiate price with an institution. But with predictive analytics and what we're talking about here today is looking at hospital negotiations objectively, but informed by a surgical plan and analytics and really sharing with them the procedural spend data as well. And then how do we increase the predictability of the cost of care, not just on our side but for the hospital side as well. So we feel data and surgical planning can and will change the currency in spine. We're seeing this already on the total joint side at institutions like HSS, and we have a huge opportunity to do that as well here in Spine. And last slide for me today, before I turn it over to Brian, but we have unprecedented capabilities today with EOS. But there is a huge opportunity for us to set new standards in the future. This is what the next 3-plus years look like from a roadmap perspective for us. Super excited about what we're doing. When we made this acquisition with EOS, it's like, "Oh, this is an imaging modality system." It's like, "No, you're mistaken. This is an informatics and analytics platform." And that's how we see it. And hopefully, you see that with the roadmap here from informed surgical planning, automated 2D measurements from a spinal pelvic parameter standpoint, preoperative rod bending to match a surgical plan, bone density information that is suitable or the correct choice for the bone quality of that particular segment. Intraoperative reconciliation, how do you know you achieve your plan intraoperatively. The rod bending intraoperatively, having that capability as well. Customized configurations, how do we get better operationally, and that's the way to do so. And then last, but certainly not least, is building spine's first true predictive analytics platform, and it's going to be massive. Yes, thank you very much for your time this morning. And we're super excited about not only what EOS is today, but what it's going to bring to the future. We truly feel it's going to be a standard of care in spine. Like I said, I don't see any competition out there that's going to get in our way, and we have a long runway ahead of us. So with that said, I'm going to introduce Brian Snider, our Executive Vice President of Marketing.

Good morning. Brian Snider, I've been with ATEC for about 5 years. Prior to Alphatec, I was with NuVasive for a little under a decade under Pat Miles' leadership. I was responsible for Anterior Column and also XLIF. I love this quote. So right when you walk in our building, you see our business is in the operating room. We're here to create clinical distinction, and ultimately make spine surgery better. So what I'm going to first talk about is creating clinical distinction. Our inspiration for how we create clinical distinction, it comes from the operating room. It's not the boardroom. We work with spine surgeons to define clinical challenges and ultimately work towards procedural solutions. And if you look past the last 4 years, now 82% of our revenue is coming from new products. So when you launch products, the market ultimately accepts them. Pat walked through a lot of this, but you look in 2018, the acquisition of SafeOp, talk about foundational for the company. With SafeOp technology, we can do what other companies cannot. And that's truly monitor the health of the nerve and provide surgeons with actionable information. It's been paramount especially with our growth in terms of lateral. But then in 2019, we launched 18 products in 2019, one of which was InVictus, our poster fixation system, which has become the truly best-in-class. In 2020, as Pat mentioned, while other companies were sleeping, we were assembling technologies to ultimately drive procedural solutions. We launched Sigma TLIF and then also PTP. And then last year, ton of growth in ALIF, and I'm going to talk more about the opportunity with ALIF in terms of a procedural solution, but we also finalized our posterior fixation system. It now goes from occiput to ilium. It communicates as one. We did it much faster than any other company based on know-how and commitment. This will take other companies over a decade to do. And then obviously, we acquired EOS last year. So we launched [ 40 ] products in 4 years. We're wondering how do we do that at ATEC, and it's about the culture that ultimately we create. We have a process. So first, start up with product managers, working with spine surgeons to understand the clinical challenges. And from that, we decide, these are the product requirements and this is the standard. The product managers then translate that standard to the engineers, and the engineers designing gets the standard. And it's important, and Pat's going to give a tour of a building, marketing and product development. They sit side by side. And it's important that there's healthy tension amongst both groups because they're both pushing ultimately for the best output for the surgeon and ultimately the patient. So we design against the standard. We make everything first here in our technology advancement group. . So an example of that. We made 65 different iterations of the screw shrink, our posterior fixation system. So some people say, "Gosh, posterior fixation, a pedicle screw. It's a commodity." It comes down to the nuances in our building. So 65 iterations, the same engineers that design it working with Dr. Turner and the testing team to develop test strategies to ultimately bring to failure. So we break it and we go back, we redesign, we remake and test again. It's an iterative cycle. We then bring surgeons in to evaluate in our cadaveric lab, which you'll see later today. Then we go on to a 510(k), and then ultimately, what we call an alpha evaluation. And that's 6 months. It's a controlled subset. We get a lot of feedback, then we make changes and then ultimately drive towards a full commercial launch. To Pat's point, everything is designed here for a specific approach. The other thing is we don't care what the competition is doing. We have our blinders on, and we're sprinting towards the clinical requirements. We don't care what the competition has done or what they're doing. A great example of that, and ultimately, the culture we're creating, it allows us to create things like PTP. And I love this photo of Dr. Pimenta when he shocked the world in 2019 at NASS, and it says, "The future of PTP". I think this quote is very appropriate. Good idea is always crazy ultimately until they're not. We make mistakes along the way, but we apply the learnings. We're building that culture. And this is a great example. So the patient positioners that starts off as a crude prototype in our lab, there's learnings, ultimately, off-the-shelf bolsters and a lot of tape against the pass point tape, not very elegant. Now to a carbon fiber patient positioner that puts the patient in an ideal position ultimately to drive predictability and reproducibility in the OR. So what are we doing from a procedural standpoint? Let me start with lateral. We are going to absolutely dominate lateral surgery. There's more lateral know-how at ATEC than any other place in the world. And Pat talked about segmenting lateral even further. Very excited about PTP when the patient is prone, and you're accessing the lateral ports in the spine. We're also very excited about what we call LTP, lateral [Transcos]. So a big opportunity to eliminate tape if there's a better way to position for reproducibility. So we'll see patient positioners new access systems, expandables, nanotechnology. And then with all this we're moving towards solutions, solutions for thoracic, revision surgery and ultimately alignment. And then from ALIF, we had a ton of growth last year, ALIF, due to ultimately an implant. There's such an opportunity to create predictability around the procedure. We feel that there is an ideal position that we can place a patient for, again, a reproducible ALIF approach, especially at [ F5.1 ]. We talked about that more in the months to come. but we'll be creating a patient positioner, access systems, new standalones, again, integrating nanotechnology and expandable. And then posterior approaches, this is the vast majority of spine right here. Again, we're taking our learnings. You're going to see patient positions again for adolescent idiopathic scoliosis and also adult conditions, more access systems for minimally invasive approaches. And then to Joe's point about being able to monitor or be able to measure bone density with each vertebral body, we'll have osteoporotic solutions, again, to give surgeons the ability to correct the spine even when the bone density is incredibly low. And then cervical. I love the fact to see we're starting to see cervical growth. We'll be launching our cervical plate later this year. But then again, opportunity to create an entire procedure. No one's done anterocervical well from an access standpoint. We're going to develop and we are developing an incredible access system. And again, integrating the nanotechnology and also patient positioners, especially for posterior several, there's an unmet clinical need. You start to overlay what we're doing from a biologic standpoint, all the pull-through opportunity because it is the entire procedure. This week, we're doing our first case with our new bioactive synthetic graft. We'll be working on next-gen demineralized bone fibers. But then you think about how you're going to deliver biologics, especially with all the expandables I talked about, so deliver graft -- ultimately a better way to deliver graph. And then last, a minimally invasive way to deliver bone graft, again stuff that other companies are not contemplating. Pat mentioned just the foundational element of SafeOp. And I'd tell you, we're doubling down on SafeOp, coming out with SafeOp 2.0 because that's going to ultimately enable us to come out with more modalities going forward. Other modalities include MEP and also GSCP. So we think about those, think about opportunity in thoracic in deformity, in cervical, having a full platform of monitoring but then doing stuff that no other company has contemplated before. I mentioned we're going to dominate lateral surgery. There's an opportunity to take lateral monitoring to the next level where we're mapping out the nerves for a surgeon when they know exactly where the nerves are, again, to drive reproducibility with lateral. And we're also trying to tackle a very complex clinical challenge around C5 palsy. So a lot of investment, again, around neuromonitoring. And then to overlay all the exciting stuff that Joe talked about. So you're talking about surgical planning and the automated 2D, the pre-op rods that will be available. Again, EOS bone density, aligning that with implant solutions, interoperative reconciliation and then also interoperative rod all through EOS. I love the Joe's slide about operational inefficiencies. To put it bluntly, I don't think any company in orthopedics has done operations well, just. And what an opportunity with the data coming in from EOS to truly drive efficiencies in terms of providing surgeons what they truly need to provide the best outcome for the patient. And then last, with EOS, because the data is so standardized we have such an amazing opportunity to drive towards predictive analytics. So in terms of compelling surgeon adoption, it's really multifaceted. First, we're going to gain more customers, and I'll talk about how. We're going to gain more of each surgeon's cases. And then last about proceduralization is gaining more products sold per case. But first, in terms of gaining more surgeons. One thing that we're completely aligned with, surgeons care about their patients. They want a better outcome. That's near and dear to our hearts. I encourage all of you to go to our website. We have some patient testimonials. So motivating for the ATEC family to hear how products and also the -- what the surgeons are doing to improve these patients' lives. We're developing world-class training, and we couldn't do it without esteemed faculty, and you'll hear from a number of them today. So Dr. Davin from UCSF, Gene Massey from Ortho South Carolina, Alpesh Patel from Northwestern, Tyler Smith from the Sierra Spine Institute and, obviously, Luis Pimenta, our Chief Medical Officer. And you look at some of the other influences, ISSG and WashU influences. Tony Tohmeh, you look back at like some of the first publications on XLIF and the importance of neuromonitoring comes from Dr. Tohmeh's work. And then Bill Taylor. Pat talked about Dr. Taylor before. So he did the first XLIF in the United States. He also did the first PTP. So we have just an incredible group of surgeons who is driving ultimately the training. The training is around procedural advancements really with a focus on PTP. We're integrating EOS into everything from the planning to ultimately the post-op reconciliation, and we think there's a huge opportunity really to train residents and also fellows. And to Pat's point about 2021, we were here, we were working. Over 400 surgeons came in for training, again, while other companies have their doors closed. The other thing is the PTP Summit. So in about a month, we'll be hosting the third annual PTP Summit actually in this room and outside, and it's an early user group meeting. It's where surgeons that have adopted PTP can come and share and study the procedure. A lot of publications and also ultimately training comes from these type of user group meetings. So the same people who put together SOLAS and that was the Society of Lateral Access Surgery, they're all here. Kelly was one of the leads when it comes to SOLAS. But the reason I bring up SOLAS is, you think about lateral surgery, it was originally for single-level distie restoration. Societies like SOLAS, really drove it towards all the advanced applications and then over 500 peer-reviewed clinical articles. The other thing is we recently hosted the anterior in the lateral spine conference and this was comprised of alumni from Duke and also Emory, sharing best practices and learnings in terms of anterior column surgery. So in terms of gaining more of each surgeon cases, I love to look at the data, and I think the data speaks for itself. So surgeons that we introduced to ATEC in 2018, you can see the average number of cases on the right, goes up every year. again, as they gain confidence in our procedural solutions, if you look at '19, the same trend, and 2020. And then the halo effect. So what is the halo effect? I'd tell you, in this business, there's nothing more powerful than when you introduce a surgeon to a new procedure and they look at you and they say, "This procedure changed the way I treat my patients, and my patients are doing better." I have a recent example. I was in a case in Texas with a surgeon who was trained on PTP about 9 months ago. He was an open TLIF surgeon without much lateral experience at all. He comes up to me and goes, "You don't understand. PTP changed my practice. It's my go-to procedure for lumbar now." Pat talks about some of the barriers previously to lateral versus PTP now. I'd tell you, you drive that level of confidence with the surgeon, the pull-through opportunity is tremendous from cervical to biologics to the -- ultimately, the posterior approaches. And last, capturing more of each case, this is proceduralization. So where we're doing it very well as a company, you can see, lateral. Over 4 products per case with still a tremendous opportunity to go, but then to take those learnings and to drive them across all the procedures. Our blended average now is 2.1%. So tremendous opportunity to capture more of each of the cases. And last, this is what we're in pursuit of. We're in pursuit of the perfect procedure. And now we're in pursuit of perfect procedures. And I tell you, we'll never be there. We'll constantly obsolete ourselves and we'll be running ultimately for the clinical requirements. So up next, I would like to introduce David Sponsel, our Executive Vice President of Sales.

I'm excited to be here. I've been excited to be at ATEC since day 1. And my background, I spent the majority of my career at Stryker. And when Pat was talking about some of the commoditized products in our business, I lived it for a long time, and we always talked about the product launches and what was going to compel a sales channel to ultimately join the mission. And so I really -- at the end of my tenure with Stryker, I was really left uninspired with spine. And ultimately, when I found ATEC, it was an opportunity, even though we didn't have anything yet, but the talent in the room and what we were going to do to change spine surgery was incredibly inspiring. So I'm super excited to be here. But I will tell you, as we wanted to elevate the distribution, it was not a pretty road at the beginning. And so we always joke about the 2 surgeons and a dog. And what it really was, was distribution channel that really with the concierge service and less actually of a distribution channel, more of just individual sales reps out in the country selling to 1 or 2 customers working with different 10 customer -- working with 1 of our 2 different customers and ultimately carry in 10 different lines that they would leverage companies against for commission rates because there was nothing compelling about the technology. It was all a transactional business. And so part of the evolution of the sales channel has really been walking away from that transactional business. It's really hard to scale a business when you deal with these transactional folks out there because the only way you can grow your business is just continue to add, add and add. And so ultimately, what we were able to do is as the portfolio became more distinctive, we were able to compel kind of sales folks to come onboard because they're going to be able to create value with our surgeon customers and really be part of the team. And so ultimately, from these individual reps that were just in surgeon-specific kind of accounts, we built out the geography-based network. And ultimately, each distributor leads multiple reps. And so those high commission points that you were paying towards this concierge service now is being funded to build out big teams for a long-term sustainable growth model business. And so as we continue to elevate and the evolution of the sales team, we put a lot of emphasis on training. As we'll come out with compelling technologies that are just better clinically, we had to put a lot of effort in training. And then in addition to, obviously, when you're backing out a lot of these businesses, there's a lot of geography left to fill in the U.S. And we got a heck of a lot that we'll get into then we still have left to go. And ultimately, building kind of that leverage towards exclusivity, and we're getting there, and you'll see it as we as we look at the numbers, really from a strategic distribution standpoint and ultimately opening up to give us scale from a distribution -- operational distribution standpoint with Memphis and then ultimately build the foundation for our international presence. But what's exciting to me and where I see the big opportunity, not just in opening new markets, but it's like -- when you look at the markets that we're in, we've got a 3% overall share in the United States. But the markets that we're in is 5% plus in different markets. And so just with the opportunities that we're going to be able to open, it's super exciting. And so as we look at kind of where we've been and what's a numerical reflection of how we've gotten to the results, it's like you walk away from a bunch of distributors and you go from 156, [ 100 plus 56]. Out of [ 56 ] that we have today, only 8 of the original distributors that we had in 2017 are still here. If you look at the revenue per distributor, as I was talking about really that concierge-style business, so it's more of a kind of a sales rep versus a business, and so our distributors as they hire these sales reps are starting to really scale their businesses at an industry-leading pace. We talked about the sales trading. You're coming out with things like SafeOp and PTP, the EOS. And as that integrates, you're going to have to have a massive training program. And so that's something we didn't even have in 2017. So the reps are really elevating from a clinical perspective. And we talked about the strategic distribution. 97% of all of our sales are who we view as long-term sustainable partners moving forward. And really with that distinctive technology and the ability to kind of compel the surgeon adoption, you start to earn more complexity in the case load that you're getting. And so it's not just the 1- and 2-level cases, you start to really earn more of the complex cases that's really reflected in the products per case and then also just in the overall ASP. And so what you ultimately get at the end of the day, from 2017 to 2021 is, 2017, transactional business, sales channel that has leverage over the organization, nothing compelling about the portfolio; to 2021, you've got a compelling technology, you've got a dedicated sales channel, of which we're all in it together. There's no leverage either which way because it truly is a team and then you build walls around your business. You go from a 19% business -- or a 19% decrease in overall business to one that's growing at 50%. And so honestly, the results speak for themselves. And then when you think about how that's translated relative to our peers, you guys all know these numbers. But at the end of the day, we're taking market share. And so when you think about kind of, okay, you rebuilt the foundation of the organization. What's the path forward? And so really the scale, and we're going to continue to pour gas on the training efforts that we're doing, not only just from a sales rep perspective, but also from a surgeon perspective. We've got a lot of space left to build in the U.S. And ultimately, we've got to leverage cost within our sales channels, we'll show you how we're going to do that. and then ultimately going into the international space. So we use a lot of analytics and data to kind of drive all these decisions. And so one thing I love about with our team and really with our distribution team, all the way down to the sales reps is we use a lot of the information that we've acquired to drive our decision-making. And so everything starts to become a very predictable kind of outcome as we enter into new markets., And so we know where the business is, we know who the surgeons are, and then ultimately, we know what the walk is or what needs to happen. And we have confidence in this because of the distinctive technology that we're doing. We're just doing it better. And so ultimately, that clinical distinction is key to every relationship. Again, I talked about the transactional nature previously. But really, what I love is, is that we, our partners, with the surgeons, our reps actually feel like they are a part of the team and driving real value. And one of the reasons we do that is I talked about we didn't really have a training program early on. Coming from a previous life at Stryker, when I was doing my sales training, I sat in a conference room. I had 2 weeks than I would either read, either take the test but there was never any hands on. What I love about what we do with Kelly and team is when our sales reps come into train, there is real hands-on experience to where they're actually doing the procedure in a cadaver setting. That's very impactful in terms of not only their credibility, but just elevating their know-how. And so we'll continue to really enhance these efforts. And then talking about that, creating confidence, predictability, and Brian was talking about the halo effect. As we continue to grow in the existing markets that we're in one, of the exciting things for me over the last few years has really been -- and just one example where we've done this is Northern California. We've seen exponential growth over the last really 2 to 3 years. And a big part of that is because of PTP. PTP compel surgeon adoption, and then there's a halo effect on the rest of the portfolio. And so -- in fact, when you look at PTP and our top 20 distributors that are selling PTP, their growth rate in 2021 was 77%. So our overall growth rate was 50%. These guys are growing about 50% more than everybody else. So it really will continue to compel surgeon adoption. And the great part is, is we've done this a bunch of times now. So now it all becomes an exercise and execution. And with that execution, we've got a lot of space left to fill. And I know we always talk about all the geographies, but we're going to continue to open up the new markets and sponsor where we don't have any distribution today. And we're going to continue to build in our existing distribution as we add those sales reps using those analytics. And again, an example of that is when you look at just the top 10 markets in the United States. The top 10 markets, we've got a 2% market share relative to everybody else. In the U.S. to the markets that we're in, 5%, and then really the 3% overall. But you think about things in these cities, that the nice thing is, is we've already started making investments in all of these markets except for one. And so now it all becomes, as I said earlier, about execution. And part of that execution comes from really the way that we're structured. We talk about alignment a lot. And one of the things coming in here that we wanted to align on that was really misaligned back in 2017 is really from a performance management standpoint, from a business planning standpoint, even from a compensation standpoint, everybody is rowing in the same direction and hyper-focused on building out these specific markets. So that alignment has absolutely been key to our success. And then acquiring EOS, one of the things that was important to us, as Joe mentioned earlier, we had 3 sales reps. And so we ended up hiring 4 additional sales reps on EOS in terms of having to correlate with our sales directors in each of these specific markets to drive focus with our implant teams. And then the commission leverage. As you guys maybe know or don't know, entering into these markets, when you go from 100-plus distributors, you're trying to maintain a certain amount of revenue, and you're backing out all of those and adding 48 new distributors, it's relatively expensive. And so the walk on these is very expensive in the first few years. A lot of these folks that we bring in, they have noncompetes. And if they're new in the industry, it takes a little bit of time to train and ramp up. So we've got a couple of big investment years over the last few years. And so the nice thing is, though, about our distribution channel, the way that we've constructed our contracts, is really there's a walk down in rates. In fact, 85% of our business over the next few years, they start to walk down in their overall commission rates. And a big part of that is because, again, when I talked about that alignment, we're aligned not only with the sales directors and the distributors and the sales reps, everybody stays the same way, base commission, growth commission. And so as they scale, cost comes down. And part of funding the growth is really in the operational kind of predictability. These reps are out on an island. And when we're able to create confidence and predictability, we're going to compel from a clinical standpoint to have people join. But we're also going to compel because they're going to have confidence and predictability that they're going to have what they need in order to cover their business. And so moving the operational piece to Memphis has been a huge win for our sales channel and just in terms of the elevated service hours and, ultimately, the know-how of that team in Memphis. The other exciting piece is, as you look out towards the international entry, we're going to stay narrow and deep on that and really focused on kind of the sizable markets where we've got strong surgeon influence. But the exciting thing for me when I think about international, a company like our size and where we're at today, you're normally going into the international space completely cold. With the EOS acquisition, we have a presence already in all these international markets that we're going to be entering. And so it's very exciting to you go in where people know who you are, and you can get going a lot faster. And so finally, and I know we talked about the $555 million earlier. We're going to continue to stay in the sales channel. We're going to continue to open up new markets. Through those things, we will continue to compel more surgeon adoption within existing markets and the new markets, earn more of each customer's cases. And what I mean is there are certain segments of practices that we don't get right now based on a particular procedure that we're going to continue to earn. And then as Brian spoke about, earning more product categories per case based on the complexity and the proceduralization of the portfolio. And I had in the past comments, and I was thinking about it coming into this is 2018, when we throw up the $200 million, it was kind of like, "I think we can do it." This is crystal clear to me on the $555 million, and I couldn't be more bullish. And so I appreciate you taking time to go through that. And I will introduce Mr. Todd Koning, our CFO.

Good morning, everybody. My name is Todd Koning. I'm the Chief Financial Officer here at ATEC. Pat likes to say, spine experience counts. And so when I was getting my spine experience, I met the leadership team here and a couple of years past and Pat called me, and over a year ago, I joined the team here, and I joined it because of the leadership and because of the opportunity. And I'd say not a day goes by, but that decision doesn't get reinforced more and more. And so we've got quite an opportunity here and to talk about that $555 million in 2025. Operating margins at 5%, expanding 2,500 basis points over that time, delivering $80 million in adjusted EBITDA and $10 million of free cash flow in 2025. And so we've got conviction in that and have confidence in our ability to execute to this. And so I'll spend the next few minutes helping you understand why we have a level of confidence we do. So Pat talked about $200 million by 2022. Ultimately, we delivered $212 million in 2021, a year earlier. Off of that base, we continue to grow. And so $269 million of our organic revenue here in 2022 as our guide and then growing at about 20% from there on out, get us a 22% CAGR over the planning horizon from '21, to '25. And then as you know, last year, we closed the EOS acquisition, added another $30 million of revenue last year and $47 million to tie to our $316 million guide this year and growing that as well to get to $555 million by 2025. So what really drives the confidence in our ability to achieve a 20% growth rate over the life of our planning horizon in our organic sales? Let me get the overall results with the clicker here. Wrong way. All right. Back to the slide. So really 3 points here. One is really the momentum we have in the business in both volume and procedure ASP. Two is our ability to continue to grow in what we believe is a billion dollar market in the lateral market. And that market is growing, probably the fastest segment of market growth in spine and us being the fastest-growing company in that segment. And finally, our distribution footprint that Dave talked about in terms of building on where we've made investments and making new investments to increase coverage. So no surprise. You guys have seen this slide before, A $10 billion U.S. market. Really, a focus of ours is a billion dollar lateral market and really the opportunity through the optionality that PTP brings and its familiar position, really, our belief is that as that becomes more and more widely adopted, those pathologies that have traditionally been treated through a TLIF or a PLIF approach will be utilized -- will utilize a PTP approach and ultimately continuing to drive a growing lateral market that we can ultimately own. In addition to that, we've got $2 billion of EOS market opportunity. And really, our ability to continue to penetrate that as EOS becomes the standard of imaging in spine is tremendous, as Joe talked about. From a revenue standpoint, it's really 2 variable equation. You've got volume and you've got procedure ASP. And so historically, our volume has grown 21%. We've got a 15% assumption in our model from a procedure ASP standpoint, 13% has been the experience, and we're modeling 6% going forward. On the procedure volume side, you've got 2 components to that. You can add more surgeons and you can see the surgeon utilization go up in your existing surgeons. So think kind of new stores and same-store sales growth. And so let's talk about new surgeon additions. Fundamentally, hopefully, what's been clear through this is clinical distinction drive surgeon adoption. So it all starts with what we're doing to help the surgeon further their practice. And so historically, we've seen a 12% growth in surgeons. And if you look on the bottom right-hand side here, you can see that we've graphed essentially kind of surgeons by year from '18 to '21. The great component of that graph is the 2017 surgeons. And so you can see those '17 surgeons get smaller over time. And that really reflects the transition in the distribution channel that Dave described to you. And so what that really means is new surgeon additions '18 and onwards has really grown faster than the underlying growth rate of the top line growth rate of 12% over that time. We also know surgeon education reflects the interest and the clinical distinction that we're bringing. And so surgeon education is ultimately a great proxy for our ability to continue to drive surgeon adoption. You can also see increased utilization in surgeons. So our surgeon utilization historically has been about 7% growth. Our model suggests 5% increase in surgeon utilization over the time period. and Brian showed this. And the data that we have suggest that as people come on and adopt our technologies and our procedural approaches, surgeon utilization goes up year after year after year. And so that gives us the confidence. And where does that come from? Well, it comes from the halo effect that Brian talked about. We'll ultimately get more of a surgeon's practice when you earn their trust and confidence due to the clinical distinction you've brought to their practice. Utilization, the more complex pathologies of the PTP approach. What we see is that surgeons get more comfortable using PTP, they use that in more complex pathologies and a greater utilization of PTP. And ultimately, EOS and the existing footprint, the installed base that EOS brought to us gives us access to some of the leading institutions where we historically didn't have access. From a procedural ASP standpoint, we're growing -- or we grew from 5,700 to 8,200, and we're modeling going from 8,200 to 10,400. And so what are some of the drivers of that growth? Historically, what we've seen is the growth of lateral in our business has driven a mix benefit. So as I've talked about before, lateral has a procedural ASP that is 2x the average of the company. And so as lateral drove and led the growth of the business, you see a mix benefit pickup in procedure ASP. You also see that as PTP is used in more complex pathologies, those pathologies tend to treat more levels, more levels are longer constructs that ultimately have a higher ASP. And then the green bar there, you see the increasing product cases -- product categories per case metric that we've seen. Last year was at 2.1%, and that's grown significantly over the past. So those 3 things will continue to be a tailwind into the future. x's But to that, we also add a launch of our expandable solutions. And where today, we may do posterior approaches where we get posterior fixation and provide the access, but we're not giving the interbody because the surgeon wanted to use an expandable, we'll have that as we launch that. And then ultimately, EOS installed base provides us access to the deformity market in many ways. And so those are longer constructs and have a higher ASP as well. Dave talked about our distribution growth and shared this data with you. And we've kind of highlighted here on the left, the areas where we have a meaningful presence. And so ultimately, our growth there is to help those distributors grow laterally and grow on the investment that's already been made. And then we still have areas where we need to make investments and create coverage. And that will be more of an investment feel versus kind of expanding on the investments we've made. So from a summary, our outlook is strong in terms of how we drive 20% top line growth in organic sales. And that's really through procedural volume growing at 15%, tailwinds being more surgeon adoption through clinical distinction and supported by surgeon training, greater utilization of our procedures in a surgeon's practice, really driven by the trust and confidence that we've engendered and ultimately expanding the footprint of our sales organization. Procedural ASP growth of 6%, really driven by the leadership and lateral markets that we have, That gives you a number of ways to drive procedural ASP tailwind, the expanding product cases per procedure. EOS access and continuing to launch new products that command a price premium. From [ Anil's ] perspective, we're delivering $85 million in our model in 2025, and you can see the growing installed base of deals. And that comes -- along with that comes a nice recurring revenue stream as well. And on the right-hand side of this graph, you can see that the U.S. presence of our EOS installed base is going to grow, and that's going to reflect the investments that we've talked about in our U.S. distribution, specifically to EOS and where our focus is. So let's talk about our path to profitability and delivering leverage in the business. So $555 million of revenue in 2025. That's delivering 5% operating margin, expanding those operating margins by 2,500 basis points over the planning horizon. Gross margin, assumed at 71%, basically flat. And the assumption there is we'll see some industry standard, low single-digit price pressure in our kind of same product same-store sales being offset by innovation and new product launches. R&D delivers about 300 basis points of operating leverage and landing at 8% at $555 million revenue. And that really reflects our confidence that we've got so much more innovation to deliver and spine continues to need it and that we will be able to grow at above market rates post the planning period as a consequence. And then 58% SG&A, really, the balance of that growth comes from 2 areas: one is SG&A infrastructure leverage and variable selling expense profile. So let's talk a little bit about the infrastructure leverage. Really 3 things there. One, we've made investments over the course of '21 and '22 to grow our business and to build the infrastructure necessary to support a growing business. And so that comes in the form of like our leadership teams in place, We've got new facilities and those types of investments that we can scale off of. From a sales and marketing standpoint, you know that we've got our sales management team in place, and we've got the marketing organization built out and we've built the clinical infrastructure to support sales training and surge in education. And then finally, EOS, we acquired that company about a year ago. We've integrated it into our business, it's now operating as one. And as we grow revenue, we'll get scale off of that revenue. From a variable selling cost profile improvement, Dave talked about the fact in year 1, when you bring on a new distributor, you've got a fixed cost base as they leave a business. They got to come here. And so you have a fixed cost base in year 1. In year 2, they move to a variable cost contract, variable costs tied to their sales. And so ultimately, we'll pay a growth rate for that. And then in year 3, the revenue that they generated the previous year is paid at market competitive rates, the base rate, and then we'll pay additional points for growth on top of that. And so that levers. And so the gray box here really reflects the fact that, as Dave talked about, 85% of our revenue today is in contractual step downs over time. And so we get leverage off of those contractual step-downs. The green bar is really getting leverage on those fixed investments, going from 100 down to, but really only 8 of the 56 existed. So we had to add about 48. And so that's really getting leverage on those investments we made. And then going forward, we've now got Memphis as a centralized distribution facility. And so it being centralized, you just get a cost benefit from having to ship a product, rather all the way across the country, kind of halfway across in both ways. And so there's just some cost levers that comes with that. All of that creates some space for us to continue to invest in the open territories that we have. That variable selling expense leverage and the SG&A leverage in particular, drives improved adjusted EBITDA. And so we get EBITDA -- adjusted EBITDA breakeven in 2023. We deliver $80 million of adjusted EBITDA in 2025. You can see the cash usage assumption over time. That's really improved by the -- it's really improved as adjusted EBITDA gets improved as well as the second component of our of our cash use is investing in inventory. And so we typically invest about 75% of our absolute sales growth into inventory to support that growth in that new base of business. Our assumption is we'll get to -- we'll keep about $50 million of cash on the balance sheet, and as we mature our capital structure, we'll take down a revolver on the order of $50 million to $75 million to really support the working capital needs of the business. All of that enables us to do everything that we need to do without raising additional dilutive capital. And so finally, our key takeaways. Point one, $555 million growing at 23%, delivering 2,500 basis points of operating margin leverage, getting to 5% of non-GAAP operating margin, $80 million of adjusted EBITDA driving $10 million of free cash flow. Second point is our revenue profile. I think as Dave said, has a number of tailwinds for us to continue to outperform the expectation. That's either in the form of faster surgeon adoption, greater utilization, procedural ASP. Clearly, our ability to continue to drive distinction and growth in the lateral market is a tailwind of that EOS momentum and a faster international expansion. Fourth point -- third point rather is adjusted EBITDA breakeven in 2023. And finally, as we run a disciplined process and a disciplined company, we can get to cash flow breakeven without raising additional dilutive capital. And so I couldn't be more excited about what we have in front of us. We've got a huge opportunity, high conviction plan. And with that, I invite Pat to come back up here to give us some closing comments and then do some management Q&A.

So we're running a bit behind, so I'm going to hustle through this, but if we can go ahead and get the chairs up and get everybody head in this direction, that would be great. I think everybody appreciates really what the drivers of the business are and what we're trying to accomplish here. I think as you take the tour around the building, you'll really get it, and that's what we're so excited about. And we're not kidding when we say spine surgery needs ATEC, and so I think you'll see that as we roll forward and as you do the tour. But now let's go ahead and get into the Q&A.

Josh Jennings from Cowen. Really appreciate your team share with all us out here and sharing your internal road map and still trying to catch my breath from all the pipeline action that you guys have on the table today. Pat, you've been talking -- I think since you took the seat at Alphatec and even in your NuVasive days by creating clinical distinction, creating surgical approaches that provide reproducibility and predictability and now you're moving all the way, I guess, maybe to one of the holy grail in spine surgery with this predictive analytics. And Joe gave us a great download on just how you guys are going to get there. But I guess my question -- follow-up question really is do you need any hardware to get to that predictive analytic period where you're able to create this everything from preoperative all the way or pre-op or this predictive analytic algorithm where you're having inputs with ATEC implants, but also being able to reduce the inventory burden and the trade burden for each procedure. What else do you need to get to every size what's already in place? It's just software evolution and just acquiring all this data from your EOS installed base? That's my first question. I just have one follow-up.

Sure, I'll start off, and I'll let Joe kind of clean up my miss, which is -- if he'll agree. I think what was so compelling about the acquisition to us was, I think, to Joe's point earlier, it was an informatic source. If you think of the correlative to successful long-term outcomes is alignment, and you're getting somebody in a standing active position. And then like one of the things that Scott Lish's team does extraordinarily well is integrate technology in a way that ultimately reflects the informatic victim. And so the ability to start to do like the rod bending stuff is very, very apparent to us. We have a talent here who's done that before. And so the ability to start to translate those elements are very clear to us. The great part is we always think about people kind of, from a Chicago East, popping off about predictive analytics when the reality is there's no standard image. And so our view is just you do to have a standard image in an active position, plan against that image, understand where you got to in the operating room and then the postoperative image and have that go to a cloud where it's not required for there to be an active effort to do that, we think, is profoundly valuable. Because garnering data previously was a disaster, and it required a lot of people around it to do it. And so right now, really, the infrastructure is being built from a cloud perspective to ultimately accommodate those elements. And there's so much, be it Microsoft and other companies, that are thrilled to work with us in those endeavors.

I wouldn't say much to add to that. The key there is just the standardization of the images and then having a foundational element within the planning software built with our ATEC specific implants, and that's where you're going to continue to build and evolve the platform over time.

One point that Joe made that's great, imagine going in and say, "Hey, what's the bone quality?" And then like if you have to realign a spine and you don't have proper bone quality, it creates variables that ultimately aren't controlled and understanding what type of fixation element to ultimately grab this fine and manipulate it is hugely important. And I think that people don't understand that this is a tool that's going to drive interoperative decision-making, and we think that's hugely valued.

Yes.

Yes. Great. Just one follow-up on -- I think it's clear, you guys have the team. You've been there and done that, have some -- all the pioneering team from the lateral approach. And I think the road map there is also very clear. Thinking about all the other categories within the spine industry, ALIF, even posterior probably, post your approaches, what happens? Can you just show us your confidence that you can walk the walk that you talked about in lateral in these other procedure categories and how your team is there? And then also, how does SafeOp give you an advantage in categories outside of lateral?

Yes. It's a great question. And so -- but here are the -- when you start to think about lead indicators, for me, I start to think to myself, it's like has the guys put together from a product development perspective, a poster fixation system. And how sophisticated is it, right? We're a little small company, and who are we? Well, we have the guys who've done 7 of them. And so this is the next generation of what we did down the street. And so the beauty is the level of confidence is -- Brian was talking about going from the head to the OEM, nobody else has done that especially in a period of time that we have. The guys down the street are doing it alpha. We've had the whole thing done for a year now. And so the ability to ultimately expedite these elements based upon -- we don't want to be cocky about our know-how, but I've got to tell you, there's a ton of experience. And that's why I gush on Scott Lish. I got to tell you, his team understands how to put these things together. We do it internally, which I'll show you on the tour. Alex Turner back there understands biomechanics as well as anybody. He understands all the fixturing and how to ultimately make sure that the mechanisms that we created our full proof. And then we evaluate in the lab, and so the very thing that Brian described as a process is in our DNA, and we've done it to get it for years. Again, what I think a lot of people don't appreciate is that all of this stuff is designed together. And SafeOp, like little things that integrate these elements together, it's like if you use InVictus, There's parts of InVictus that ultimately attach -- that SafeOp attaches to. So for things like screw testing. And so if somebody places a pedicle screw and they put in a screw with InVictus, it's attached to SafeOp. And so the ability to ultimately integrate these things from a workflow perspective is very seamless. And so the great part is it's not only in NASTA, but Brian was talking about C5 policy. And when you could start to take very small signals and eradicate the noise and start to understand the waveform stuff at a level of sophistication that we are -- you can start to do things that are more predictive in nature in terms of mitigating potential problems with cervical. Nobody is doing that. People making a cervical place, that's great. But the question is, can you make it better? And cervical surgery is reasonably good surgery. But the beauty becomes is with that conduit in the operating room and with the sophistication we have in neurophysiology, our ability to ultimately evolve it is exceedingly high.

Matt Blackman with Stifel. Thank you for putting this together. It's been great. A couple of two-part questions, apologies upfront. Maybe Joe, just on that EOS innovation road map, where is the heavy lifting in terms of sort of getting some of that stuff done? And is there a tipping point in terms of adding enhancements that makes the system so robust that it's something that can't be ignored. And maybe, Todd, sort of a follow-on to that is, should we think about the EOS ramp that you've got baked in ratable through 2025? Or again, is there some sort of tipping point that we should be thinking about in terms of the enhancements that will be rolled out? And then again, a follow-up.

Yes. To answer your first question about kind of the heavy lifting. The way we look at the road map perspective is starting with automating as much information as we can. And when I made that comment during my presentation about giving surgeons information at their fingertips. So the time of scan, they're getting all this information from that particular patient. And so to answer about the heavy lifting, I would say it's about the heavy lifting, but that's kind of step 1 in the process as we kind of build out the platform. And then in parallel path to that is we're working behind the scenes on the bone density information and giving that and bringing that to market. And there's a lot of work to be done in terms of the research. And when we go on the tour today, we'll show you what we're doing and what we're planning with the EOS system here that's going to be fully functional unit. But as I look at from where we're at today in terms of what our capabilities are, automation is key. And then bone density and then from there, everything else, we'll be able to deliver pretty seamlessly.

And Matt, your question is how do you get from the $47 million to the $85 and I think it's just a consistent growth rate around 20%.

Okay. And then, Todd, just a follow-up for you on lateral. Just any updated metrics on the physicians train sort of lateral naive versus experience? And then as we think about what you've baked in, obviously, you you're showing a ramping in share in lateral. What are you thinking about just market penetration and market and overall growth sort of in that backdrop and how you're thinking about your lateral business? .

Yes. So I think on the overall lateral market size and growth, our assumption is kind of underlying growth kind of mid-single digits. And then as we can continue to compel people to adopt lateral, and it's used by more and more people in pathologies that would typically have been done by a TLIF and GLIF approach, I think that can grow probably high single digits over time. And your other question was number of training?

Yes. The mix of sort of the [indiscernible] training that are naive.

Do you want to talk about kind of like [indiscernible] first. And then...

Yes, as [ 75, 25 ]. Whatever the [ 75 ] lateral enthusiasts, [ 25 ] TLIF and GLIF. I think whenever you launch something, the kind of the same characters that adopted lateral are the first guys to evolve and say, "Gosh, this is interesting." But the great part is we're seeing the TLIF and GLIF as I think in Brian's example. I know exactly what you're talking about in terms of down in Texas, where a surgeon was so used to the slog of some of the post care approaches and was able to apply it at 4, 5 and above, and now is a core part of this practice.

6 Kyle Rose from Canaccord. Yes, thanks for the weather and the greater event today. Todd, I just wanted to kind of talk a little bit about guidance. I guess, what does guidance contemplate with respect to the contribution from the OUS market entrants as well as you gave that $85 million number from EOS. Obviously, there's a recurring revenue business there. We've seen a shift towards earn-out models, contractual utilization models, things of that sort. So do we see the that $85 million, does that flow through on a true capital side of the business? Or do we see that in the implant side of the business?

So the 85% is really the EOS specific component of that. So that will be a combination of recurring revenue stream on maintenance and the capital sale, Kyle. And then your other question was?

OUS country.

OUS. So really, OUS is pretty immaterial in terms of the total. Obviously, we're growing, but it's a 0 number going to a number that overall is probably 1% to 2% of the total.

And then on the P&L, obviously, a lot of the leverage is driven by the top line growth and the execution there. But we're in a bit of an unknown inflationary environment, both for your customers as well as you're running the business here. I guess maybe just your confidence in the 5% when we think about the $555 million of revenue and the control over the levers you have to get there.

Yes, Kyle. I think the answer to that is we've built out our model with what we think are the kind of the appropriate assumptions that give us some space to ensure that we deliver on the commitments we've made much like we have historically. So we've got high conviction in being able to achieve what we laid out.

Jason Wittes from Loop Capital. Maybe just a follow-up on the guidance, specifically the cash position. If I look through it, and I appreciate the level of detail you gave, which is pretty significant, especially for longer-term guidance or outlook at least. I think you're assuming you end up with about $50 million cash. Does that assume that the revolver -- then does that assume the revolver -- do I assume you draw from that revolver, which I think is 50% to 75%. And also you have a fair amount of warrants still, I think, last I checked, does that assume any dilution or cash in on those warrants, adding to the whole cash position of the company?

Yes. So we do assume we draw down on the revolver. From a warrant perspective, we see a mix of cash exercise and cashless. So we've made some conservative assumptions on the cash.

But not significant, it sounds like. Okay. Fair enough. Very helpful. And then a follow-up. Pat, I appreciate kind of the significant amount of effort you put into PTP and obviously, the success. You've taken a very holistic view, but you did also mention that SafeOp is kind of one of the major linchpins. And when I think about the spine industry and how it works, whereas everybody likes to copy each other, and at various levels of success. I look at SafeOp as being something that's going to be very hard for our competitors to replicate. I wonder if that's how you see it. And I wonder if you could maybe be a little more specific on kind of Safehouse SafeOp improves that procedure versus your just traditional nerve monitoring system out there that just looks at nerve location?

Yes. Again, I think that that's why we say we're not guessing. We've been around this stuff a long time. And we kind of did the first generation of the neuromonitoring in terms of, hey, where is the nerve. But over time, when you learn some of the other challenges associated with the different procedures, especially lateral procedures. If you're going to split the source, you're going to retract the plexus. You better understand how am I hurting it. And so one of the quote on quote complications or side effects were nerve-related complications. And so as we came here and we said, gosh, if we're going to be -- create clinical distinction, we got to do something better and different. And so an unbelievable competency of the team was all about neuromonitoring. And so one of the things we did is first acquired the SafeOp neuromonitoring and they had SSEP experience with regard to some of the cardiac type of retraction injury. And so we thought, gosh, can we apply that to the plexus in the -- so as we retrack the plexus and clearly, we can. And you're starting to see the publications come out, whereby there's very actionable information. The other part of it is it's real time. And so part of the problems with SSEP and general SSEP is buy a monitor, is the fact that it takes 15 minutes to ultimately get a signal and then they have to get another thing and then compare the signal. This continues over time based upon the computing and some come off, the new ones come on. And so the ability to do something and make decisions real time becomes profound. And so the type of surgeons that is around this demands, that of us. And that's why we went to the map on something like this that's so important. And to your point, everybody kind of copies each other. But part of the problem is, I'm not sure the other companies understand the requirements of the environment that they're serving. And so what happens is there's a lag in terms of we'll wait and see what Alphatec does with this whole PTP. That's a hell to-head start. And what we'll do is be able to apply our learnings associated with all the other elements to ultimately get a head start. And so the one thing that we're actually committed to is obsoleting ourselves. And one of the things that's always served us well is just the ability to do that. And so we're going to take our learnings continue to apply them. We're going to have a tough time catching up.

David Saxon from Needham. Thanks so much for everything today. Maybe a 2-parter for Dave and Todd for -- I guess, starting with Dave, just kind of the cadence of getting into the 1/3 of the U.S. that you're not already in today. And then the part for Todd, just given the mechanics of the commissions, if hiring is more front-end loaded? Should the OpEx leverage be kind of more back-end loaded?

Yes. So one of the things that we know based on the data that we've acquired, we've assembled. It's kind of like we know where the markets are, where we do business, where we don't do business, obviously. But what we also want to know to create that confidence and predictability that once we enter a market, there's going to be a quick turnaround, we want to know that we have a hospital contract access. Do we know somebody there? Do we have a surgeon that somebody knows from another place? Because it is walk once you go into a new market. And so some of those analytics are what we're doing in terms of what's the best spot for us to go into for the highest chance of probable success. And so after doing it multiple times, we kind of have that algorithm figured out. And in addition to that, there's also opportunities when we talk about compelling search and adoption. Once the surgeons are compelled, there's a lot of competitive folks chasing this thing. We showed the number on kind of the surgeon business last year. But from a competitive rep standpoint, I won't share the number, but there's a tremendous amount of competitive reps that are drawn to this place. And so we're going to go organically and look at the markets that we're going to enter based on the facts that we know. And then in addition, when that pitch comes down the middle, we're going to execute on somebody that's compelled to join the organization.

And David, on the improvement in variable selling expense that we talked about on the walk, I think the first bar was grain, and that really represented the 85% of revenue where we have contractual lockdowns. I think you can think about that is reasonably linear. And I think the green bar was really representing the investments we've made. And so I think that leverage actually gets a little bit bigger over time. So just by the nature of the fact you had a fixed that investment and as you grow the revenue growth, you benefit off that. So.

Brooks O'Neil from Lake Street. Obviously, our world on the investment side has changed pretty dramatically in the last, call it, year. Has it caused you guys to think differently about how you're running the company? How you think about the company? And where you're going with the company? Or are you pretty much doing what you said you'd do?

Well, I think we're a deliberate group. And we're not naive to the dynamics of the environment that we're operating under. And so Todd uses the word conviction. I use the term very deliberate. And we're guys who make a commitment in 2018, and we show up early. And our commitments are not passive. And so we understand the very environment that we're operating in. We'll pull the requisite levers to make sure that we're fulfilling the very commitments that we're making. But yes, I would say I think there's so many opportunities to make spine surgery better. I understand the nervousness in terms of the economy that we're operating under. It just requires us to continue to be more deliberate and have conditions as it relates to the very place that we're placing our bets. And so that's how I would answer. All right. I think now what we're going to do is we're going to transition. So those who are virtual are going to get a couple of videos, so stay tuned. And I think the rest of us are going to split up. We're going to go part of us in the lab and part of this in an unbelievable tour.

So I think those of you who [indiscernible] You're going to follow Tina to the tour. For those of you who have a gray button on your badge, you will follow K and you'll be going to the lab first. And I think for those online, meet us here in about an hour. [Break] [Presentation]

All right. Well, welcome back. How was the lab? Good? Good tour. Hope you guys enjoyed it. So my name is Kelli Howell. If I didn't reach you in the lab. I'll introduce myself here. I'm Executive Vice President of Clinical and Scientific Affairs here at ATEC. I've been here for a little over 4 years. And before that, spent a little over 18% down the road, another company from $0 to $1 billion as well. So like many of my colleagues on the senior executive team have a lot of experience in this space, my responsibilities have largely always been in research and education. And so through those functions, I've had just an immense opportunity to partner with these gentlemen and their colleagues on those types of activities. And so I get the distinct pleasure of being here to kind of moderate this panel discussion with them to give some insight on what they think about ATEC where we're going, answer some of your questions as well. So to kick things off, I guess, I wanted to ask each of you individually kind of the simple question of what attracted you to ATEC. Maybe start here with Mr. Deviren.

I think my question that comes to my mind is that the previous relationship with the management team. So when I first started working with the ATEC, they didn't have much actually, it was in 2017. And then -- but I was really excited to work with Pat, you, Scott, Brian. And I was looking forward to like design, innovate and create better surgeries for the patients. So that was the main attraction to me. So I love engaging that developing, designing and creating a better procedure for our patients. That is one of my passions. So I was looking forward to like start their game, which I did that with them with the previous company for a while. I know Kelli for, what, 13 years from me. And that's actually the main thing that attracted to me. And over time, actually I got even more excited. Whenever I come here, the excitement, the energy, the enthusiasm in this facility is like so much fun and so much in joyful. So I love coming here and working with the engineers management team to create a better solution for our patients.

Okay. And I apologize, I'm going to back up just a little bit because I forgot to give introductions. I think you all who spent time in the lab or on the tour, met each of our faculty today. But for the benefit of those online, I want to give a bit of an introduction. So Dr. Vedat Deviren is an orthopedic spine surgeon and a professor of Orthopedic Surgery at the University of California at San Francisco. Dr. Gene Masser is also an orthopedic spine surgeon operating at Ortho South Carolina in Myrtle Beach, South Carolina. [ Dr. Pimenta ] is a neurosurgeon who has been operating in the last 50 years out of Sao Paulo, Brazil, but really internationally recognized the a pioneer and an innovator in the space is really credited with a lot of innovation in spine, including as you know the lateral approach. [ Dr. Altek Patel ] is an orthopedic spine surgeon and professor of orthopedic and neurological surgery at Northwestern. And Dr. Tyler Smith is an orthopedic spine surgeon operating out of Ser Spine Institute in Roseville, California. So with that, thank you, Dr. Deviren for your first interaction.

Before I pass the microphone, I just want to say one more thing. So in my practice, I do a lot of people with surgeries and the construct of surgeries. By doing those surgeries, I do help a lot of my colleagues in my institutions to help their surgeries like younger, older or neurosurgeons. And my colleagues use like different products from different companies. And one thing that I experienced with those products, I really truly believe that the ATEC currently has the best product in the market. So that is the one of the other reasons that I've really been using all the ATEC products in my practice. I've seen all the products across the board every week, every month. So I really believe that they have the best product right now.

Yes, well said. So I did not have necessarily the benefit of previous relationships with administration here as much as I did in leadership here as much as I did local relationships with the local distributor in North Georgia and South Carolina. So when Alphatec recruited the distributor, who I would consider the best distributor in the area, that relationship is what kind of what led me to at least look into Alphatec and their products. And so I came over and started using PTP products very early on in the 2018 -- 2019 range as the innovation was happening. And that was kind of an exciting time for me to come over and see that change. And that's what salespeople, I think, the people in the field love to come to a surgeon with is something different and something new. And I think it's very frustrating for people in the field to go to the same surgeons over and over again with the same bag of products. And so I could see in them as they came to me with some innovation that they believed in what Alphatec was doing. And it kind of reminded me of this quote that said that, " When someone shows you who they are, believe them the first time". And so I kind of -- I knew what my reps, my distributor was telling me about ATEC, but it took me to come here to come to the headquarters to see that the first thing you see when you walk in the door is the cadaver lab where innovation happens. They showed me what Alphatec was all about as far as innovation is concerned. And so I came over to work with PTP. But then over time, as I -- as what was shown what Alphatec was all about in the other products that they offer, they're innovation in other areas, whether it's cervical or posterior lumbar, et cetera. They've shown me that their product is worthwhile of our trust and our patients' trust. And so that's grown the amount of business and the amount of products that I use with Alphatec.

Great. Maybe we'll come back to you. We'll save the best for last, right?

We'll save the best for last, right? And our one neurosurgery colleague here right? So my answer to that question in terms of why I have worked with and continue to work with Alphatec is a bit of a combination of what you've heard so far. So I had no really strong relationship with the management in their prior roles. I had awareness of Alphatec, the old Alphatec, which was not a positive experience, right, for many people. And I had an opportunity to sit with Pat Miles and with a number of leadership and over time, got to trust each other, got to know each other and got to see what their interests are and their interests are really founded in this concept of curiosity. I know Pat talked about it. And it's a learning-based organization ,cares about production. But if you ask them to prioritize it, I think it's a learning-based organization. And for a company that wants to be the innovator and has shown itself to be the primary innovator in the spine world in the last few years, that culture of curiosity is really important. And so that was probably the one thing that attracted me. And then we, over time, have continued to work together, developed products together. We went through a cycle of getting into our hospital and getting into agreements, which took some time. But despite that fact of not having that direct sales channel, we still have a really good relationship, really good communication and really good product development that now that we have a sales channel,it's just, I think, flourishing.

' Okay.

So I've been involved in design and development for most of my career. And some of the projects that I was working on previously really lost momentum. And there was lack of funding, there was lack of initiative. There was lack of any real progress. So I started calling around and talking to some other folks in the industry to say, okay, let's acknowledge that the spine surgery is not where it needs to be. And where can I manifest some of these ideas, where can I get a meaningful audience to have this collaboration because I certainly can't do it alone. Knowing that industry needs input from people in the field like the surgeons here. There were a lot of blank stares, and it was not really an enthusiasm for a root cause analysis of -- it was more about widgets or strategic planning or how many cases I do. And from a revenue perspective, what kind of target am I type of conversation until I started talking to some folks that I've known for a long time with a renewed opportunity here. And already admissioned that this is not about just changing the thread pitch. This is about an environment and creating an ecosystem to make spine surgery better. And I think that the commonality of those of us that are involved in this for several years now is that we bring a lot of humility to where we are now, and that's matched with the curiosity, enthusiasm we all suffer from what I call the better, better, better disease. And that matches with the iterative cycle here and the resources and willingness to not just talk about implants on their own, but take that step back that attracts me so much and create a procedural solution that really addresses why the problem is a problem in the first place. And those are kind of arcane ways of looking at this, but that's really why this company is so magnetic to like-minded innovative people that are willing to acknowledge that we're not even close to where we need to be, but we believe we can get there. We can further demission. We're not just rolling over. So this has become kind of a beacon for a lot of folks in my position. Thankfully, I've been around long enough to enjoy the additional collaboration and honestly, brilliance that comes in with these other inputs.

Great. Great. Well, and the reason I left such [ measures ] for last is I think goes without saying that he has really invested in innovation and innovation in lateral in particular. So really tied tightly to our prior exercise in that endeavor as well. But what makes you change that history, I guess, and commitment, and being willing to commit your historical reputation and forward interest in a company that when you came over as our Chief Medical Officer, really making that big of a leap and commitment to an organization like this at a time when we had nothing.

Well, I don't have anything to add to all this. But 1 thing that I learned in my life that innovation comes after failures. If we fail, we learn what we did, and we change what we did. And 1 thing in spine that is true is that there is no perfect procedure, which means that innovation never ends, so far at least. So although we think that we have really a brand-new thing, we are evolving. We need to change it. We need to make it better. Making better is only possible if you really pay attention to your failures. So this has been my life. So I -- you may have seen in one of the walls that I say that we learned with the failures. I recently gave a talk in CSG. And they asked -- the [indiscernible] asked me to talk, and I will talk about lateral again. I will talk about my failures in my life. So I gave a full talk. I could talk hours on how many failures I made. So -- and failures are important part of life, right? The key that in the way to learn to walk. The kid has to fall, right? And this is a big part of learning to walk. And here, we are learning to walk.

Well, I mean, I'd like to dig into that a little bit and the idea that lateral approach surgery, I would not necessarily classify as a failure. I think it's a very good surgery. I think we -- you all have done a lot of lateral surgery, and we're really proud of that history, too. But Dr. Pimenta, maybe start with you, too, why make it different then? What made you think of it as something that needed to continue to evolve? What were the challenges?

Yes. The biggest challenge is when we came here trying to make lateral better. We're looking to the demographic of surgeons that do later. And we -- at that time, we consider 20% of surgeons only in the market do lateral. And why 80%, 70% don't do lateral? And then we start looking into those, right? So I think what we have now, we are targeting actually the 70% of those surgeons because we made lateral to be part of a big procedure, which is fine, in general. It doesn't matter if it's 1 level or 200 levels, like my friend here does all the time. So -- but still, lateral is part of the procedure. It's not only the procedure. So it's not "oh, its lateral surgery". No, lateral surgery is only part of surgeries, spine surgery.

Well, one of the things -- and we talked about in the lab for those who were in there was the one of those challenges was the efficiency, certainly the positioning and then the need to reposition a patient for poster fixation because the vast majority of the surgery is done from the back, you -- even with a lateral oriented surgery, you're often supplementing that with poster fixation. And so 1 way that's come -- solutions trying to overcome that is to place those screws with the patient still in a lateral position. And I know Dr. Smith, you did that for a long time. And -- just kind of curious on your thoughts of that as a solution versus having the patient prone.

So I was working in an institution where what we call the flip is when the patient is positioned on their side and the lateral decubitus position, I'm a [indiscernible] wall lateral surgeons. So that's my default way of looking at thoracolumbar surgeries. But once you finish that, you have to close. You have to reposition the patient on a separate table. You have to reprep, regrate, you got to move a bunch of equipment around. It's disruptive even when you're really dialed in and choreographed about it, can take maybe 30 minutes minimum as up to 90 minutes in some kind of less organized operating rooms. So that as a production-based mind, I didn't want to take all the time. So we started thinking about ways to avoid the flip. We were doing the flip so that we could put the rods and screws in and sometimes do decompressions as it have been referenced to multiple times. So I thought, well, why don't I just do the screws while the patients up on their side. And over several years of tenacity and many, many failures, we kind of figured it out, and I became quite comfortable. I'll stop short of saying mastery, but I was able to do most of what I wanted to do, and enthusiastically sharing that message in forms like this and doing some publications. And the adoption rate was pretty close to 0. I think that conceptually, it made sense, but it didn't really solve the real problem. So when the idea of going prone and doing the lateral parts in the familiar position was orbiting around, that's when I had my just kind of epiphany moment thinking, well, that sounds a lot easier. And why don't we focus on that. And now, of course, you're seeing adoption rates skyrocket the way I would hope they had in my kind of misguided efforts previously. And now I think about the 3 overlapping rings. We talked about -- on the wall over here, you see the values, the mission, the vision, I think about spine surgery in similar circumstances. There's the pain points and ease of the procedure in the operating room, how efficient it is, how quickly we can throughput what the pain points are for the surgeon and the team, overlapped by what I consider the recovery. A lot of surgeons will brag about how their patients get out of the hospital in a day or 2 or 3 or whatever it is. But I think most importantly, is the long-term outcome for patients that surgeons tend to not talk about as much. It's harder to study. And typically, there is a compromise in one of those things. I was willing to work harder in the operating room to get the good recovery and good long-term outcomes. And with PTP, with integrated environment and a procedural solution, now I don't have to compromise on any one of those things, and it's very, very satisfying to talk to patients and their families about how -- yes, you're going home early. Yes, surgery took less time than we anticipated, and they're going to do great for -- into the foreseeable future. So for those of us that take those things seriously, that's just remarkably satisfying now.

Yes. Obviously, that's what we're doing at [indiscernible] is for the patient and the outcome. But that efficiency piece, I think, is usually important and translates to a clinical benefit as well. Dr. Patel, you're relatively new to PTP but I think I heard you commenting on the efficiency in your OR and your SaaS reaction to PTP. I thought maybe you could share that with this group.

Yes. Absolutely. I am still relatively novel or novice, I should say, at the PTP technique, but have done laterals for a number of years. But I probably at least was in that 80% -- 70%, 80% that wasn't a full adopter of lateral, right? My default was posterior. It's 1 position. It's the same position for every case. There was a reproducibility of it, that when I shifted into lateral got disrupted. And that disruption was felt by me in terms of positioning. But to [ Kelly's ] point, my staff. And at least, at our institution, we have a fair amount of turnover in our nursing staff, and in our sort of surgical assistance staff. And so having to constantly train again and again and again, and get a lateral based procedure to be reproducible to be consistent was a big challenge. And that was probably a big friction for me, personally, and I think for a lot of the surgeons at my institution. And since we brought prone in, I mean it's what we do every day. It's not a new concept or a new technique, and it's remarkably easy and it is really, really -- the friction points have really dissolved away. Our staff is happier, which always then makes me happier. And I will -- the one quote I'll share is that. Every time we now do a prone case, PTP case, whereas previously, we were doing a lateral once we're finished positioning the general feel in the room between the anesthesiologist, the nursing staff and myself as well as our trainees is like, oh, that's it. It feels like there's more we should be doing for positioning. Like that was too fast, it wasn't complicated enough. We must be forgetting something, right? Now we'll eventually get past that, I think, once we've forgotten our old pure lateral pain points. But yes, very positive response so far, but very early for me still.

Great.

I just want to chime in. That's a great point. The efficiency in the OR has a lot of those same sentiments. And it makes me wonder why have we spent 20 years doing surgery in a lateral position. And I think truly, the honest answer is that was just what was figured out first. And I would -- wager, I wasn't there, but I would wager -- if 20 years ago, if you developed PTP first, would we be sitting in here talking about how we have this new procedure, where we take them up laterally, and do lateral decubitus. I don't think lateral decubitus surgery would have ever been developed if PTP was developed first. And I think that tells you why we're all willing to go through the learning curve, maybe not failures, but learning curve, learning this new procedure and bringing it to the masses through [indiscernible].

This is how you fail [indiscernible]

Yes. Give the mic to Dr. Massey if you would, just because one of the other hurdles to adoption, like I said, the struggle through it or the lack of adoption may have also been associated with a fear of the lumbar plexus. And one that's true for both lateral decubitus and prone positioning, if you're approaching the spine laterally, you're dealing with the nerve of lumbar plexus. And so maybe talk to us a little bit about how you feel about that, and what we're doing differently here at ATEC?

That's a great point, my apologies to the folks that were at my table because I gave it a bit of this feel there, too. But...

Might be a reason why I'm asking you to answer this question.

But to me, the neuromonitoring really has in this day and age 2 parts. It has the triggered EMG, which is the sonar, if you will, to identify where the nerve is. And then once you place the retractor, you never get any more information from a triggered EMG. And so every neuromonitoring system out there, third-party integrated, what have you, is relying on mainly a neuromonitoring system that stops giving you information as soon as the retractor is down, and you don't hit the stimulation button again. And so if that brings in part 2, which is the safeness nerve, SSCPs. And so that gives you in 3-second intervals, real-time monitoring of the thermal nerve. And so for me, that's when the information is important in that 5, 10, 15, 20 minutes while I'm doing the discectomy. And I would say if there are people out there who tell you that they can do safeness nerve, SSEPs, they've never used SafeOps, number one. And I don't think they understand the full benefit of having rapid, actionable information in the middle of the procedure. They've never closed down a retractor because the safeness nerve signal started decreasing 17 minutes into the case because for 7 years of my life, I never had that information. And so then I start thinking, well, now that I've had exposure to SafeOp, would I ever do a procedure without it? And for me, the answer is no. And then I asked myself 1 step further, which was if I was ever a patient or even more importantly, if my wife ever had to have a lateral surgery, I wouldn't never let her have a surgery without SafeOp if that was available.

That's quite a testimony and appreciate that. And then lastly, just to touch on this PTP topic is this idea of poor adoption, partly due to what we would say, moderate sagittal correction, right? And Dr. Deviren, you are both in MIS and a deformity surgeon. So the rare MIS deformity surgeon. But as all of us are learning more about the importance of sagittal alignment, and recognizing that a large number of -- that 80% or 70% of surgeons who don't adopt, they fall into this category of wanting to do bigger posterior procedures because they're correcting a more complex pathology. And so I want to get your thoughts on what PTP does differently in that space here?

Well, the -- I think the -- I would just want to say in general like it's so critical to understand the concept of procedural solution in medicine. So a lot of times in medical errors that happens that you don't have a procedural solution. You don't have a standard procedure. So a lot of the other companies trying to mimic the similar prone transfer surgeries. And they are not achieving the same success because they are not approaching to the problem as a procedural solution. I think what I've seen with the Pat and his team's concept of procedural solution like the aviation, like when you are performing some critical tasks, you have to have this smooth workflow, and follow that workflow and execute safely, same thing with the PTP like they created such a platform with all these pieces together so we can execute that safely. That's number 1 thing that I think it's really critical for our practice to make sure that we have all the pieces together that executed procedures safely and smoothly with very seamless workflow that everybody understands in the OR. Then the other benefit comes from the PTP compared to well, like I did so many lateral surgeries in the past, even before the lateral interbody fusions. We are doing a huge [indiscernible] approach for deformity surgeries. And I think that's why we kind of first started with the decubitus position not to prone because I don't think that anybody had any experience approaching to the bully in prone position. But what happens actually when you do a lateral position and you lose the site alignment on the patients. You have no control over when they are on a lateral decubitus position. And then you're assuming by doing your discectomy, you seeing starting to trials the approach or reach that goal, and you're not really knowing exactly if you reach or not. But with the prone position, it's just the nature of the gravity pull down to the belly and belly content. And then you naturally achieve the social alignment on the PTP procedure in prone position. So that's what I see when I start doing PTP. Oh, I don't need to do a lot of work. It's just nature. I just need to clean up the disc and put my implant. It's already there versus when you are doing the lateral, you do a lot of work to make sure that you achieve that level in that position in the [ search for ] alignment. So that is very critical for the deformity surgeries that achieving the lumbar lordosis to reach the deformity alignment cause.

Agreed. And you can't fix it if you don't measure it. So the other thing that we talked a lot about today already is at EOS. And so I wanted to get a thought from everyone on the panel about what you think EOS brings to ATEC as a solution?

Well, the when the first -- actually, the acquisition attempt failed, I was extremely disappointed because I was so excited to have the EOS because I really believed in that technology that what can they bring to the spine surgery. I think one of the things that I already mentioned that I think standard care is not fully there yet. I think with that ecosystem that the imaging, the planning platform, the predictive modeling, I think we are going to execute much more successful spine surgeries. I don't want to keep going, but if there's any more questions later, I can answer, I'm really excited to....

And you have an EOS, you know that...

Yes. We have an EOS unit, and every patient that is EOS imaging in my clinic, whenever they come for follow-up or the new patients, significantly to less radiation...

Such as your deformity patients?

Everybody. Everybody gets EOS images. And I personally don't believe that we can separate patients as deformity patients versus degenerative patients. I think when your disc actually degenerate, this is if you look at it, the interior height is higher than the posterior height. When the disc collapse, you lose it's interior height. Fundamentally, all the spine patients they generate for scoliosis, they are all deformity patients, and we need to make those measurements on every patients.

Ok. Massey?

Yes. So I'll just weigh in. I mean, I look at this -- from a private practice standpoint, I'm in private practice with 25 other surgeons, we run a successful business, and we also do our procedures in an HCA facility, which is very careful when it comes to counting the beans, counting the costs and the benefits. And so I live in a very critical world when it comes to capital outlay, and new technology. And what I can say from my standpoint is I want an EOS system for my private practice for 2 reasons. Number one, knowledge is power when it comes to spine, planning is power and you don't know what you don't know. And so number one, that information will only help me be a better surgeon to take care of our patients. Number two, efficiency, right? So at a hospital or in a private practice, you have to have efficiency. And so to be able to get a scan in 30 to 60 seconds as opposed to 5 minutes plus stitching is a major deal in the private practice world. There's 5,800 private practice orthopedic groups out there. And I can tell you 1 thing they are all looking at is profitability of ancillary services. So it's very helpful to have an MRI machine, for example, in our office because number one, it's great service for our patients. But it's also an ancillary revenue stream. And we're in the process of doing the analysis on how much ancillary revenue EOS will bring to our group while helping our patients. And I can tell you that our leadership is very excited about that as another ancillary revenue from a private practice standpoint. So I think that's a very small but critical piece to EOS is, number one, the clinical piece. But number two, the financial piece to private practice groups like myself that felt maybe a little different than an academic setting where the hospital or the university is laying out in the capital for it. So it has to make sense on both fronts. And I think it definitely does on both fronts from us standpoint.

Anyone else?

Yes. I'll add that my private practice is already engaged in the acquisition pathway for an EOS. And I'll echo the idea that there is no spine surgery that's not deformity. I do a lot of degenerative spine, which is what I consider short segment deformities. So we also do a lot of revisions. So a lot of these surgeries that were previously applied where they didn't pay careful attention to the spinal pelvic parameters and the lordotic alignment. Well, we get another crack at them down the road, and we'd like to stop that where it stops in the folks that we can. So EOS gives us actionable data on that, that you can change your assumptions while you're in the operation. I think that's analogous to SafeOp in the automated SSEPs. Because you're not just between the rails, it's not bowling with bumpers. You need to be able to understand that you need to make a change and adjust to the reality of that particular patient, and EOS really informs that not just on a planning perspective, but intraoperative and then post-op validate it and then you could feed back on that learning like we discussed in the presentation. So I think our long-term success as spine surgeons, especially in cost-constrained modeling. You have CMS reviewing all of these things all the time, where we're really putting out our spend on our nation's elderly population. And right now, I'm not sure it's all that accurate. We're trying to bring a lot more fidelity to that transaction.

I'll try to add a few unique thoughts to what's already been described. So 1 unique concept around EOS for our institution. We've had the EOS since 2014, and we've had the new EOSedge since 2021. And it's part of our routine clinical practice, and we're a busy clinical practice of 9 spine surgeons between orthopedics and neurosurgery, and it's absolutely vital to our workflow, right? One is that it informs us better than plane radiograph. So getting even in a "degen" patient with a, let's say, a Grade I L4/5 spondylolisthesis, identifying their global alignment is extraordinarily helpful. It helps you craft your solution with a little more patient-specific accuracy. Second, from an operational standpoint, it's really challenging to get consistent imaging with standard x-ray techniques and standard x-ray imaging. It's very operator dependent. So there's a substantial amount of time and training that goes into getting our radiographers to be at that level of reproducibility and reliability that we want. And that's a real challenge, especially in the last year, 1.5 years with workflow challenges, workforce challenges that we're having. So this sort of automates that, right? And it gets some of that noise and that variability out of the equation in terms of the capture of data. The third thing I'll add on this maybe starts with my research with a lot of the research we're doing like [indiscernible] on machine vision and on machine learning. But the ability to have consistently acquired structured labeled data, which is also a way that I look at the EOS machine as a way to capture that structured label data consistently. That's an unbelievable advantage. And as I look at a lot of companies that are looking at the analytics space or looking at the AI space, the rate-limiting step for them to be successful more often than not is the access to structured label data. And so that's where the value of this, to me, really shines in terms of future state.

Agreed. I can attest the data collection is hard, and which is why I partner with kind of select surgeons who really undertake that because you really believe in and have the infrastructure to do it. I think what EOS does is provide a tool through which we can offer that kind of structured data collection for all of those who use it, and not just research sites in particular. So I could pick these guys brains for hours and hours, but I do want to make sure we leave enough question -- enough time for questions from the audience.

Yes. So I'm just curious when I set here all morning, I listened, and it sounds to me like there's 3 sort of game-changing innovations associated with ATEC. One is SafeOp, 1 is PTP, 1 is EOS. To me, I mean, all the benefits sound like no-brainers for adoption. So what are the limiters for adoption in the industry? And how can we get doctors to buy this and use this faster?

I have a microphone. I guess I gotta go first. Let me rather than answering all 3 technologies at once, right? I'll take maybe the one I'm most familiar with, which is EOS. And then let others talk about SafeOp and about PTP. I would say the biggest constraint or the limited factor on EOS is probably still a level of awareness within the general population of spine surgeons, right? It's a technology that once people become aware of, they want rather -- they want it. And the business models work favorably for it. So it really is, in my opinion, at least, about awareness. And again, moving the concept of EOS being just for deformity surgeons and really identifying the value add it brings to all the spine patients that we treat, right, both in terms of patient safety, resolution, reliability of image acquisition, and then the future-state analytics. I think all of that will tell that story, but it still starts with surgeon-level awareness. What I've seen in the last year since there's been this change in the management of the sales force between EOS and ATEC is we're seeing more surgeons, at least in the midwest, asking for the ability to capture EOS imaging, asking for the EOS machines from their hospitals or organizations.

Yes. I would echo that. I think that's -- you made a great point about the sales force. So to go from 3 people selling North America, EOS, to 300 people trying to educate and explain the surgeons why EOS imaging will lead to better surgery, I think, is a big deal. And I also spoke earlier about the relationship. So the difference is those 300 people who are in the field have a very close relationship with their surgeon customers. And so when they come to me, and I've trusted them with my cervical cases, I've trusted them to support my lumbar cases. And they tell me that EOS could be a benefit to my patients. I listened to that differently than I do a cold call, which we all get from a company we may or may not have any connection with, telling us about a new technology. Those are received in a very different way. And then from a PTP standpoint, you mentioned -- and SafeOp. The no-brainer kind of feel as to the people who come and hear about the benefits. I think one of the ways you lead adoption is you bring 400 people into headquarters and you let them see what we all saw when we came and saw it for the first time, and what you all are getting to experience today is to come in and drink the [indiscernible]. And that's to me, that's planting seeds. And I think that's how surgeons change the way they act and the way that they care for patients. I mean we all care deeply about how well our patients do. So we're very careful about what we will "try" out, if you will. And I think you plant feeds over time with good relationships, you support that and then sometimes it takes time for those to grow. And I think that's where the longer run from this thing comes in. It's not a -- I don't think this is a 1-year deal, where you're going to see those 400 visits result in -- the results in 1 year. I think you're going to see the growth of that for many, many years to come.

Yes. I agree with that. I think amplifying the message is really important. And Dr. Pimenta mentioned in one of the lab sessions this morning that in training lateral for many, many years, 1 to 2 visiting surgeons out of a group of 10 may go back into their practices and adopt a lateral decubitus procedure. Now we're seeing closer to 7 or 8 out of 10 that come through for training, which is astounding if your expectations have been in 10%, 20% previously. So that speaks to the intuitiveness of adopting a procedure like this. The audience will evolve over time. But I think from the SafeOp perspective, it's become indispensable in my surgeries. I've got over 1,000 cases with it, and I use it for everything from microdiscectomies, to laminectomies to cervical to laterals to TLIF to ALIF. So I found that it has extraordinary stickiness. And that's not just in SafeOp, in particular. I think what we haven't spent much time talking about today is how robust the implant portfolio is. It's almost kind of been assumed. I think Pat mentioned it's best-in-class. I will swear by that. There's not an instrument that hits my hand that I don't feel really good about. So the per case utilization numbers keep going up because there's a lot of little sticky things in there when somebody says, well, I've never used single step before. I really like that on a cadaver model in my office. I can't wait to use this. They use it. It works. It's simple. It's fast. It's efficient. And then they say, well, what else you got going on over here. And there's -- it's a multifaceted approach that at this point, even relatively early on, there's enough on the table in multiple different directions to keep growing that. I will also acknowledge that the portfolio was not yet fully complete. So there are -- with new surgeon adopters, we'll say, I wanted that 1 extra particular thing and the development pipeline is still in play. So the -- it's only going to grow from there. But it's a pleasure to not have to apologize for any part of the offering when we're teaching surgeons how to do this, and helping them with adoption.

I will add a couple of things. In terms of adaptations like spine companies have 2 customers. One is the surgeons, one is the patients. For the surgeons, you need to add a value to their practice. If you're not adding value, you're not going to adapt it, like the technology. Number two, the clinical benefits. If there is no clinical benefit to the product or the procedure, the adaptation is you may -- they may try for a short period of time, but it is going to fail. I've seen so many times in my career, like 20 years that a lot of companies come up with the product for this problem doesn't exist. Like we don't have any problem for the screw placement. And now all these hospitals are acquiring robots, it sits on the corner, not being utilized because the screw placement is not a problem. So if you don't have any clinical benefit or you're not adding the value, that adaptation is not going to be there, eventually, it's going to fail, which has failed with the total disc replacement. So that's really critical for the companies to understand that you need to add a value. You need to have a clinical benefit to the patient's outcome.

David Saxon from Needham & Company. Thanks for the panel, this has been super interesting. Just wondering, once you all adopted PTP, what portion of your lateral procedures did you eventually convert over to PTP? And are there any cases or anatomies that aren't appropriate for PTP, and you do traditional lateral?

I have a quick answer. My for lumber spine 100%. And the thoracic spine, I used to do laterals because some tumors and the calcified thoracic disc herniation. I need to be compressed to cord. It's just easier to be compressed in our position. But for the lumber spine 100% PTP now.

Yes. I would echo that as well. I remember very early on when I was investigating the procedure I was able to have dinner with Dr. Pimenta. And I talked to him about case selection, trying to determine which procedures that I previously did in lateral decubitus would then benefit from the PTP position. And I asked him which ones that I should do. And he said, oh! That's all he said to me, oh! And what I've found over time is that, that is true, which is any procedure that was a lateral decubitus candidate in my hands, is now a PTP candidate in my hands with all of the clinical benefits that we just went over in the lab, which is improved L4-5 access, safer access, better position of the nerve, et cetera.

So I'd like to just add on to that for a moment because for me, it's over 100% because there are cases that have transitional anatomy, L4-5 may kind of mimic an L5-S1 where you think, I may not be able to get this from lateral, but now I have permission to try. And I've met with more success on cases that I would have not indicated properly for a lateral approach because if I can't get there, I just saw it up and do a TLIF or whatever other procedure my bail out would have been. So I would say it's actually a little bit more than 100%.

I'll add in there that for me, lateral to prone is almost -- again, it's 100%. The more interesting part about it for me is that there were cases that I used to traditionally are standard to an MIS, TLIF for. That was my go-to for a lot of pathology. And given the ease and the utility of PTP, I'm pivoting away from those TLIF cages and TLIF cases to PTP. So it's not just taking my lateral business and converting it. It's probably also converting some part of my TLIF business.

Yes. The only thing I want to add here because I had this question 200 times per day. So -- and my question would be the same thing you heard here. But there is 1 simple exception that we are right now considering as we evolve with the PTP and the knowledge on the positioner, the value of the positioner. If we bring this value to lateral procedure -- in the lateral position without using [ tapes ], et cetera, we may and looks like there are cases that we are able to do let's say the patient has a pathology that has to be addressed for 5 and 51 that we position the patient in lateral, and we are able to do both levels. The ALIF and lateral. And the lateral 4-5. So that is the new exception, I would say. It's coming. So it's still evolving as we evolve in this company every day.

Josh Jennings from Cowen. Thanks for sharing all your these insights with us. Wanted to just ask about EOS and this is a very straightforward question. Do you believe that your outcomes have improved since EOS adoption not everyone has adopted on this stage, but for those adopters and then your experience, have your outcomes improved? And then just a follow-up would be, I think I want to doctor -- I'm sorry, Dr. Massey, you said that you would not want to use -- go into surgery without having SafeOp access. Is that -- any thoughts, similar thoughts on EOS? I mean would -- now that you have experience with the EOS, can you go back if you change practices. It didn't have EOS system at the new hospital. Would you be able to practice as effectively as with the EOS imaging system?

I think the outcome data is not there yet. So in terms of -- I can say that the patient outcome is improved by utilizing the EOS. But the information, getting the information on time and making a better decision with that information has significantly improved. I think over time, when we collect enough data, we will see that the impact on the outcome. So the -- I'm not sure that the EOS will change the outcome of the patients, but I think it will change how we make decisions about the surgeries. So hopefully, we will be making better decisions, and that will impact the outcome. So I think we are in a process of putting all these pieces together, and eventually, we are going to collect enough data to answer that question.

I think your question is fantastic, which is, is there a difference in outcomes like objective, measurable outcome difference. And to Vedat's point, there's not yet as far as patient reported outcomes go in a standard fashion. Satisfaction with the imaging system and the imaging experience amongst patients is very, very high, right? So if you want to measure that as one of our potential goals, which is to keep patients happy and satisfied the low-dose radiation exposure and the EOS imaging acquisition is really favorable for patients, right? And to your second question, which is I actually have part of my practice in a suburban area and a community location around Chicago. And I don't have the EOS on site there. And it's a noticeable difference in terms of the image quality I get. It's a noticeable difference in the level of frustration I have in terms of -- working with the images in a standard stitched-image fashion versus an EOS image fashion. And to the point now where part of our workflow is oftentimes asking patients to come into our EOS location, our primary practice to get a an EOS film. So it's actually changing the ask we have from patients. So yes, I see the difference. I can appreciate the difference. And it may be one of those things where you don't realize how good it is until it's taken away. And for me, that's every other week, it gets taken away. So we're looking for improvements.

Also, I just want to add one more thing. I can imagine that how that's going to impact the outcome. So our patient population is changing. So because of the aging populations, we are treating more and more fragile patients and the osteoporosis like almost a osteopenia is like epidemic level. And the treatments for that actually pathology is not really that great. They can only maintain the bone quality not really improve. So our patients like -- a significant number of our patients are osteopenic or osteoporotic. And when we go to the surgery, we don't actually have the data or information how to handle it -- or the quality of the bone and how to deal with it. But hopefully, with the EOS, we will get that information and you can come up with patient-specific implants. Like one of the product that ATEC has to nobody else has, that they has expandable screws, which is for those osteoporotic bone that you can have a better purchase, better anchor for the surgery. So I think that will add significant values when you get there with more information and then we can select better implants for those patients, I can say that, that will be a significant impact for better outcome.

I would also remind the audience that you're listening to some very rigorously scientific professional opinions, and I'm going to break with the format and ask a follow-up question. So anecdotally, do you feel like your patients are doing better? Or how would you contrast that to the robot collecting dust in the corner that had its initial novelty and then limited utilities. So I don't hear that you're moving away from it with your current experience.

So I'll answer that first, which is I mentioned earlier that I have a practice where I don't have the EOS, and I can -- it's a noticeable difference in my practice and noticeable difference in my decision-making. We have recently had a number of conversations about removing one, if not both of the robots at our hospital because of low use. And the -- there were no tears that were shed. There was no consternation. There was no worry, how am I going to take care of my patients. It was more a discussion of, great, what can we do with that space instead, right? So that's an anecdotal response to say, 1 technology is not missed when it's gone. The other technology is missed when it's not there.

So I haven't used the robot, so I can't speak to like to people had that experience. But what I've seen is that the hospital acquires the technology then it is not utilized, just occupy the space, which is very, very valuable for the hospital. So -- and I think it's more marketing tool than the technology that helps the patients care. But I'm not against the technology. I think eventually, we will need -- we will use robots in medicine, which [indiscernible] been very successful, but I don't think that we are there yet for the spine. I don't need a drill guard, we need a robot that we're actually doing the procedure. We talked about it last night. So I think it's really critical that we need to keep pushing the technologies available to perform the procedure. But at this point, the robots are like is a really attractive name to market the hospitals and the surgeons. But at this point, it's just a drill guard in our hands. And actually, at significant time to the surgeries and then accurately, especially if you are getting -- using the preoperative CT scan because it is on a supine position, and patient is prone. So accuracy of this screw placement not as great as like you think it would be.

I think we have time for one more question...

My name is [ Gordon Ben ]. I'm from Salesforce, representing our M&A. So I appreciate all the insights. As we heard today, ATEC has pretty ambitious goals of growing about 20% year-over-year. And I think all of us from an investor perspective, want to continue. We see it. We see the benefits of it, and we hear it from you guys. So if you were to be responsive for ATEC EOS' growth, what would you be telling? Like the marketing and sales teams and management team to be like focusing on to get there, yes, from like a surgeon adoption point, too.

I think Joe had a slide showing that the road map. So I think soon, the first thing is going to be available is the planning platform. So -- and then integrating the image recognition technologies and the planning and the alignment measurements are going to be automated, and that information is going to be provided to the patient -- provide to the surgeons. But like I said, this is not something that a -- long time ago, getting us called uses X-ray was a huge challenge like you can come across to a lot of surgeons. You don't need full spine X-rays. So like the water finds an easier way to flow, it's going to be a standard. You cannot avoid when there is a better technology available for surgeon's practice to adding value to make a better decision. The adaptation is going to get there. You cannot avoid -- like the iPhones, like nobody believed in a touchscreen phones in the time, right? They kind of ignored it. And I really believe that the with planning platform, imaging technologies, you're just collecting more information for better patient care. It's not necessarily, you really aggressively need to sell it. But it's just going to sell itself because it adds the value.

I'm involved in the supply chain process and vendor consolidation initiatives at a regional hospital chain where I take a lot of my cases now. And the conversation around capital expenditure for, say, a robot or some intraoperative imaging device, a 3D C-arm or an O-arm or something like that is very different than the conversation around EOS, where it's a potential revenue stream for whoever acquires it. And I think that's a big differentiator. When you come to these conversations and say, well, from a marketing perspective and a sales force perspective, now there's these more collaborative opportunities to say we're going to talk to you about implant pricing, and dovetail that into CapEx for an imaging acquisition opportunity. And there's no stakeholder that loses in that proposition because they had established ways to make that a profit center for whoever ends up acquiring the machine, be it a private practice or an institution stand-alone outpatient imaging centers, whatever the conversation is. It's a much different dialogue now when you have surgeons calling for it, and there's no real downside other than the expense to acquire.

So I would answer your question in terms of what advice would I give, which it would probably focus on -- continue to focus on solving problems with technology, not creating technology that looks for problems. I think Vedat has mentioned that earlier, right? We see that a lot. And so -- and they've demonstrated that, right? And the idea would be to continue to do that, keep looking at bigger problems that we can solve that either create value for surgeons because we still are the primary decision makers. Create value for patients because they also are what we care about the most. But increasingly, think about how you do value creation for the hospitals, the health systems, the ASCs as well. I also sit on that same kind of concept with the value analysis committee for our institution. And we're constantly asking where is the value add in this technology, and it is competitively differentiated. And I think that bar for adoption from surgeons and from hospitals and ASCs is going to continue to go up, right? So solving problems with unique technology gets you those 3 audiences, surgeons, patients and hospitals or ASCs.

Okay. Well, with that, I'd ask you to give a round applause for our faculty team. Thank you for your time, and invite Pat Miles to come up the stage and say a few last word.

So as much as anything, I think the way that, that ended in terms of -- we do have a very inspired group to solve spine's problems. And I think hearing from them, it's not perfect, yet. So we have so much opportunity. And clearly, we're very bullish. We're a very deliberate bunch. We don't put plans out there by guessing. And I think that that's as much as anything that I wanted to make sure I communicated in closing. And so thrilled that you came. Appreciate everybody virtually and appreciate your interest in the company. So thanks very much.