ATEC Q1 2025: Same-Store Sales +23%, 44% Revenue Converted to EBITDA
- Surgeon adoption and sales force strength: Q&A responses highlighted 23% year-over-year growth in same‐store sales, underscoring robust penetration in established territories and increasing surgeon adoption, a strong indicator of sustained demand for ATEC’s procedural portfolio.
- Innovative product differentiation: Management emphasized the unique advantages of products such as the prone-position corpectomy system and the rapidly expanding EOS platform, which are attracting new accounts and driving the company’s market edge.
- Improved operational execution and cash management: The team noted improved cash use—hitting the low end of their guidance—and enhanced asset utilization, reinforcing confidence in the company’s ability to translate top‐line growth into profitability and positive cash flow.
- Working Capital Headwinds: There were indications of higher DSO and transient working capital issues in Q1, which could continue to pressure cash flow if not resolved.
- Risks with New Product Integration: The company is in the early stages of launching critical new products such as its robotic system and integrated navigation piece. Any delays or workflow inefficiencies in these technological rollouts could adversely impact revenue growth.
- Tariff and International Exposure: While current tariff impact is described as low single-digit millions, exposure from importing key equipment (e.g., EOS machines from France) and reliance on international markets such as Japan could pose risks if trade or geopolitical conditions change.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Total Revenue | FY 2025 | 20% growth to $732M | 20% growth to $734M | raised |
Surgical Revenue | FY 2025 | 21% growth to $657M | 21% growth to $658M | raised |
EOS Revenue | FY 2025 | $75M | $76M | raised |
Adjusted EBITDA | FY 2025 | $75M | $78M | raised |
EBITDA Drop-through | FY 2025 | 37% drop-through | 39% drop-through | raised |
Cash Flow | FY 2025 | Positive free cash flow | Cash flow positive for the full year | no change |
Tariff Impact | FY 2025 | no prior guidance | Impact on COGS by low single-digit millions | no prior guidance |
2027 Adjusted EBITDA Margin | FY 2025 | 18% on $1B | 18% on $1B | no change |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Surgeon Adoption | Q2–Q4 2024 calls emphasized steady growth with 20% YOY surgeon adoption, robust training engagements and 19% adoption rates ( , , ) | Q1 2025 reported 17% procedural volume growth with 18% surgeon adoption and 23% same‐store sales growth, reinforcing strong training conversion ( ) | Consistent strong adoption with continued high training conversion and incremental growth |
Operational Efficiency | Q2 2024 highlighted DSOs and inventory inefficiencies affecting cash use ( ); Q3 2024 noted flat operating expenses and a streamlined structure ( ); Q4 2024 featured improved operational discipline and free cash flow generation ( ) | Q1 2025 showed better asset utilization, margin expansion, and low-end cash burn with transient working capital headwinds ( ) | Continued focus on efficiency with gradual improvements in asset use and cash flow management |
Innovative Product Differentiation | Q2–Q4 2024 discussed robust EOS Insight integration, predictive analytics and early adoption of prone-position systems with record orders for EOS Insight ( , , ) | Q1 2025 emphasized a comprehensive EOS Insight launch along with integration of the prone-position system to improve surgical planning and precision ( ) | Sustained momentum in product innovation with deeper integration and broader application of advanced technology |
International Expansion and Tariff/Geopolitical Exposure | Q2 and Q4 2024 emphasized progress in Japan and confirmed existing penetration in Australia/New Zealand ( ); no tariff issues were raised in Q4 2024 | Q1 2025 reiterated a focused expansion in Australia, New Zealand, and early Japan entries while noting limited tariff exposure on EOS equipment ( ) | Consistent strategic expansion into key markets with controlled tariff exposure |
Sales Force Effectiveness and Territory Transitions | Q2 2024 outlined upgrades in sales agencies and territory transitions ( ); Q3 and Q4 2024 detailed ramp-ups, evolving sales teams, and territory reassignments to drive revenue ( ) | Q1 2025 highlighted 23% same-store sales growth, effective transitions from conventional to innovative product selling, and ongoing investment in the sales force ( ) | Continuous strengthening of sales force capability with strategic territory upgrades driving consistent growth |
Lateral and PTP Procedure Market Opportunities | Q2 2024 positioned the lateral portfolio as a key growth driver with premium ASPs ( ); Q3 and Q4 2024 emphasized a $1B market share opportunity and early-stage PTP adoption with robust surgeon training ( ) | Q1 2025 spotlighted expansion into broader lateral applications and the unique advantages of the PTP approach, with increased procedural complexity and efficiency ( ) | Robust and expanding market opportunities with increasing procedural sophistication and market penetration |
New Product Integration Risks | Q3 2024 discussed the robotic system’s integration as part of a broader tool ecosystem in “friends and family” testing ( ); Q4 2024 noted evaluation measures with a planned launch in the back half of 2025 ( ) | Q1 2025 described the robotic system and integrated navigation as in an alpha phase with strong emphasis on seamless workflow integration and physician feedback ( ) | A cautious, iterative approach remains in place with incremental refinements ahead of a broader launch |
Capital Investment and Inventory Management | Q2 2024 detailed heavy capital investment into inventory and instruments leading to higher-than-expected working capital needs ( ); Q3 and Q4 2024 noted significant investments with a transition toward improved asset efficiency ( ) | Q1 2025 highlighted ongoing improvements in asset utilization, underscored by Memphis facility investments and gradual resolution of working capital headwinds ( ) | Transitioning from heavy outlays to more efficient asset management with progressive improvements in working capital dynamics |
Margin Pressure and Product Mix Issues | Q3 2024 reported a 69% non‐GAAP gross margin down 60 basis points due to lower EOS margins and a higher share of lower-margin biologics ( ); Q2 2024 did not explicitly address these issues | Q1 2025 disclosed a 70% non‐GAAP gross margin with a 50 basis point YOY decline, primarily attributed to product mix and anticipated low single-digit tariff costs ( ) | Recurring margin pressure from product mix persists, with moderate declines partially mitigated by innovations |
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Margin Expansion
Q: Does revenue drop-through to EBITDA remain strong?
A: Management highlighted that they delivered a 44% drop‐through of incremental revenue to adjusted EBITDA, demonstrating disciplined cost control and consistent margin expansion. -
Cash Flow
Q: How is cash usage trending this quarter?
A: They reported Q1 cash use at the low end around $15 million and expect near break-even cash flow over the year, supported by improved working capital and higher-than-anticipated adjusted EBITDA. -
Sales Productivity
Q: How is the sales force performing overall?
A: Executives noted that same-store sales grew by 23%, with new reps evolving into more value-based, proprietary sales approaches, reflecting strong productivity gains. -
Pricing Strategy
Q: What guidance is given on pricing and product mix?
A: Management maintained that pricing remains robust, with minimal degradation year-over-year due to a focus on convoyed procedural sales, supporting an improved product mix. -
Tariff Exposure
Q: What’s the impact of tariffs in 2025?
A: Tariff exposure is confined mainly to EOS equipment imports, causing a low single-digit million impact on cost of goods sold, primarily in the second half of the year. -
Corpectomy Market
Q: How large is the corpectomy market opportunity?
A: The team believes that the unique approach of performing corpectomies in the prone position creates a significant, underserved market opportunity with strong competitive advantages. -
EOS Integration
Q: Will EOS functionality be used in corpectomy procedures?
A: They plan to integrate EOS scans to objectively measure alignment, which will enhance surgical planning and outcomes in corpectomy cases. -
Robot Launch
Q: When will the new robot be launched?
A: The robotic system is currently in its alpha phase with navigation integration, and management is targeting an end-of-year launch to ensure seamless workflow and precision. -
International Expansion
Q: What progress is being made in international markets?
A: The company is bullish on international growth, achieving early success in Australia, New Zealand, and Japan with a focused, narrow strategy that leverages its clinical expertise. -
Market Resilience
Q: How resilient is the spine market in downturns?
A: Management stated that spine surgery is largely non-elective, ensuring robust volumes even during economic downturns, as patients pursue timely care for neural pain. -
Volumes & ASC Growth
Q: How are surgical volumes and ASC growth tracking?
A: Surgical volumes grew by 24%, underlining strong demand, while ASC growth remains a longer-term play as procedures become more refined for the outpatient setting. -
Interventionalist Value
Q: Will interventionalist strategies be leveraged?
A: Management made it clear that a shift toward interventionalist or pain management strategies would distract from their core spine focus, which remains central to their value proposition. -
Informatics Usage
Q: Which parts of the EOS system are most used?
A: Surgeons are increasingly adopting EOS alongside the Insight software, especially in lateral procedures and SafeOp applications, with expectations for significant growth in predictive surgical planning.
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