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Alphatec Holdings, Inc. (ATEC)·Q3 2024 Earnings Summary

Executive Summary

  • ATEC delivered another high-growth quarter: total revenue $150.7M (+27% y/y; +4% q/q), surgical revenue $135M (+30% y/y), EOS revenue $15M (+7% y/y), and adjusted EBITDA $7.4M (5% margin), the second consecutive positive quarter .
  • Management raised FY24 guidance: total revenue to ~$605M (from $602M), surgical to ~$540M, EOS ~$65M, and adjusted EBITDA to ~$27M (from ~$25.5M); Q4 implied adjusted EBITDA ~$17M (10% margin) as profitability accelerates; gross margin targeted ~70% exiting the year .
  • Cash trajectory inflecting: Q3 free cash use cut >50% sequentially to ~$21M; ending cash $81M and term loan upsized by $50M (SOFR + 5.75%) to bolster liquidity; pro forma cash ~$128M at close; year-end liquidity expected ~$145M; 2025 free cash flow breakeven reiterated .
  • Key execution drivers: 20% procedural volume growth, +9% revenue per procedure, +19% new surgeon users, >200 training engagements; EOS Insight momentum (record orders YTD) and continued lateral leadership support sustained share gains .

What Went Well and What Went Wrong

  • What Went Well

    • Strong top-line and EBITDA: Revenue $150.7M (+27% y/y) and adjusted EBITDA $7.4M (5% margin), with sequential EBITDA improvement (Q2: $5.6M) as operating expenses remained flat for the third straight quarter .
    • Commercial execution: Procedural volume +20% y/y, revenue per procedure +9%, new surgeon users +19%, and >200 trainings underscore durable demand; sales coverage expansion contributed $5M sequential growth .
    • Liquidity enhancement and cash burn improvement: Free cash use reduced >50% q/q to ~$21M; term loan expanded by $50M (to $200M capacity) at SOFR + 5.75%, lifting pro forma cash to ~$128M at close and supporting 2025 cash breakeven plan .

  • What Went Wrong

    • Gross margin softness: Non-GAAP gross margin 69% (down ~60 bps y/y) due to product/geographic mix (lower-margin EOS international and stronger biologics); Q4 gross margin guided ~69.5% with year-end ~70% .
    • Ongoing working capital intensity: Despite sequential improvement, inventory/set efficiency and DSOs remain focal; full-year cash use guidance held at $125–$135M given assumptions for working capital and restructuring cash costs in Q4 .
    • GAAP losses persist: GAAP net loss $(39.6)M and GAAP EPS $(0.28), reflecting heavy investment and interest expense; sequential EPS improvement from $(0.29) but indicates continued reliance on non-GAAP operating leverage and mix to drive profitability .

Financial Results

Note: Periods presented oldest → newest.

  • Headline P&L and Margins
MetricQ3 2023Q2 2024Q3 2024
Total Revenue ($M)$118.3 $145.6 $150.7
GAAP Diluted EPS ($)$(0.35) $(0.29) $(0.28)
Adjusted EBITDA ($M)$(0.4) $5.6 $7.4
Adjusted EBITDA Margin (%)(0.4%) 3.8% 4.9%
Non-GAAP Gross Margin (%)69.9% 71.2% 69.3%
Non-GAAP Operating Expenses ($M)$93.7 $113.8 $113.5
Ending Cash ($M)—$99.8 $81.0
  • Growth Context
Growth vs.Revenue GrowthAdj. EBITDA $ Change
YoY (Q3 2024 vs Q3 2023)+27% ($150.7M vs $118.3M) +$7.8M ($7.4M vs $(0.4)M)
Seq (Q3 2024 vs Q2 2024)+3.5% ($150.7M vs $145.6M) +$1.8M ($7.4M vs $5.6M)
  • Segment/Category
MetricQ2 2024Q3 2024
Surgical Revenue ($M)$130.0 $135.0
EOS Revenue ($M)$15.5 $15.0
  • Operating KPIs
KPIQ1 2024Q2 2024Q3 2024
Procedural Volume Growth (y/y)+23% +15% (≈+18% adjusted for coverage timing) +20%
Revenue per Procedure (y/y)+6% +10% +9%
New Surgeon Users (y/y)+21% +20% +19%
Surgeon Training Engagements150 244 (record) >200
  • Balance Sheet/Liquidity
MetricQ2 2024Q3 2024
Ending Cash ($M)$99.8 $81.0
Term Loan Capacity—Increased by $50M to $200M total; SOFR + 5.75%
Pro Forma Cash at Close ($M)—~$128
Expected YE Liquidity ($M)—~$145
Q3 Free Cash Use ($M)—~$21 (reduced >50% sequentially)
  • Estimate comparison: S&P Global consensus data was unavailable due to retrieval limits; estimate variance analysis is therefore not shown.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenueFY2024~$602M ~$605M Raised
Surgical RevenueFY2024~$537M ~$540M Raised
EOS RevenueFY2024~$65M ~$65M Maintained
Adjusted EBITDAFY2024~$25.5M ~$27.0M Raised
Adjusted EBITDA (Implied)Q4 2024—~$17M (~10% margin) New detail
Non-GAAP Gross MarginQ4 2024 / Exit—~69.5% in Q4; ~70% exit run-rate New detail
Free Cash UseFY2024$125–$135M $125–$135M Maintained
Liquidity (YE)FY2024—~$145M access expected New detail

Non‑GAAP adjustments include stock-based compensation, amortization of acquired intangibles, litigation-related and other non-recurring items, transaction and restructuring costs as defined by the company .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2, Q1)Current Period (Q3)Trend
AI/informatics (EOS Insight)Q2 launch; automation of alignment, 3D planning, intra-op reconciliation; strong surgeon enthusiasm Record EOS orders YTD; EOS laying foundation for implant growth; Q4 EOS revenue implied ~$18M Strengthening
Supply chain/mixQ2 supply constraints resolved; mix favored lateral/biologics; non-GAAP GM 71.2% Non-GAAP GM 69% on product/geographic mix (EOS international, biologics) Slightly softer GM on mix
Salesforce/territory upgradesCoverage upgrades created near-term volume variance; underpins ASP and growth Continued expansion; $5M sequential revenue benefit; >200 trainings Improving coverage
Cash flow/liquidityFY24 cash use reset to $125–$135M; Q4 cash generation targeted; YE cash ~$100M (pre-term loan) Q3 cash use cut >50% seq; term loan +$50M; pro forma cash ~$128M; YE liquidity ~$145M; FCF breakeven 2025 reiterated De-risked
Robotics/ValenceEarly cases; integration to lateral workflow; broader impact 2025+ “Friends & family” refinement; consider broader launch mid-2025 On track
InternationalJapan initial entry late 2024; broader lateral ramp later; ANZ traction First Japan cases targeted; continued progress flagged Building

Management Commentary

  • “Our focus is on perpetuating profitable growth… $151 million in total revenue (+27%), 30% surgical revenue growth… $7.4 million adjusted EBITDA… on track to generate cash in Q4 ‘24.” – Pat Miles, CEO .
  • “Guidance implies Q4 adjusted EBITDA of $17 million (10% of sales)… we expect total revenue ~$605M, surgical ~$540M, EOS ~$65M, and FY adjusted EBITDA ~$27M.” – J. Todd Koning, CFO .
  • “We expanded our term loan by $50 million… interest rate of SOFR + 5.75%… pro-forma cash at close is $128 million… access to cash and liquidity of $145 million exiting the year.” – CFO .
  • “Nothing has changed with our 2027 long-range plan: $1B revenue, $180M adjusted EBITDA (18% margin), and $65M free cash flow.” – CEO .
  • “Non-GAAP gross margin in Q4 ~69.5%; expect to end the year about 70% gross margin.” – CFO .

Q&A Highlights

  • Cash discipline and breakeven: Management addressed investor concern about overspending, pointing to flat operating expenses across three quarters, EBITDA upside, narrowed org structure, asset efficiency, and plan to reach cash breakeven in 2025 supported by ~$75M adjusted EBITDA and ~$50M set/inventory spend next year .
  • Limited macro disruption: Minimal hurricane or IV fluid shortage impact; Q4 guidance assumes catch-up where applicable .
  • Gross margin drivers: EOS margin headwinds from international distributor mix and stronger biologics (lower margin) weighed on Q3; Q4 non-GAAP GM ~69.5% expected .
  • EOS momentum: Record order book; Q4 EOS revenue implied at ~$18M, up from ~$15M run-rate .
  • Valence timing: Continued refinement through mid-2025 before assessing broader launch; emphasizes small footprint and integration into workflow .

Estimates Context

  • Attempts to retrieve S&P Global consensus for Q3 2024 EPS/revenue/EBITDA failed due to data retrieval limits; as a result, estimate comparisons are not shown. Where estimate comparisons are required, please note that S&P Global consensus data was unavailable at the time of analysis.

Key Takeaways for Investors

  • Positive inflection in profitability and cash: Second straight positive adjusted EBITDA quarter and >50% sequential reduction in cash burn, with Q4 cash generation targeted and enhanced liquidity via $50M term loan expansion (SOFR + 5.75%) .
  • Durable growth engines: 20% volume growth, +9% revenue/procedure, +19% new surgeon users, >200 trainings, and sales coverage expansion support sustained share gains into 2025 .
  • Guidance raised again: FY revenue to ~$605M and adjusted EBITDA to ~$27M, with Q4 implied 10% margin—setting a base for 2025 cash breakeven and long-range 2027 targets .
  • Mix watch: Non-GAAP GM compression this quarter driven by EOS international and biologics; management expects ~69.5% in Q4 and ~70% by year-end, mitigating margin risk near term .
  • Execution focus: Inventory/set utilization and DSOs remain focal into Q4; management actions and improved EBITDA should enable the cash breakeven path in 2025 .
  • Strategic moat building: EOS Insight (AI/automation) and lateral leadership continue to differentiate; Valence robotics integration expected to broaden the procedural ecosystem starting mid-2025 .

Appendix: Source Documents

  • Q3 2024 press release: headline metrics, guidance, and reconciliations .
  • Q3 2024 earnings call transcript: revenue mix, KPIs, profitability drivers, liquidity actions, forward outlook .
  • 8-K (Item 2.02 / 1.01): reference to press release and $50M term loan amendment (SOFR + 5.75%) .
  • Q2 2024 press release and transcript: prior-quarter actuals and guidance baseline .
  • Q1 2024 transcript: early-year KPIs and strategic context .

Estimate comparisons: S&P Global consensus data was unavailable at the time of analysis.