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Alphatec Holdings, Inc. (ATEC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 total revenue rose 28% year over year to $177 million, driven by 19% surgical volume growth and a 7% increase in average revenue per procedure; adjusted EBITDA reached $21 million (12% margin) and the company generated $9 million of free cash flow .
  • Management reiterated FY 2025 guidance of approximately $732 million revenue (surgical ~$657 million; EOS ~$75 million) and ~ $75 million adjusted EBITDA, now explicitly guiding to positive full-year free cash flow (a change from prior breakeven framing) .
  • Operating leverage accelerated: SG&A improved ~850 bps year over year and R&D ~200 bps in Q4, marking the first non-GAAP operating profit since the organizational remake; ending cash was $139 million .
  • Strategic catalysts: record EOS orders and EOS Insight adoption, Japan market entry with first surgeries, and continued lateral franchise momentum (PTP/LTP), alongside disciplined OpEx reductions and improved asset utilization .

What Went Well and What Went Wrong

What Went Well

  • Profitability inflection with operating leverage: “Q4 marking our first non-GAAP operating profit since the remake… adjusted EBITDA was $21 million, equating to a 12% margin and over 1,000 basis points of improvement” .
  • Durable growth and positive cash generation: “We generated free cash flow of $9 million… Top line momentum, coupled with operational discipline… positions us well to deliver on 2025 expectations” .
  • Strategic execution: “We are expanding our influence in deformity through EOS-integrated, procedure-specific technologies… performed our first surgeries in Japan” .

What Went Wrong

  • GAAP losses and capital structure: GAAP net loss was $(33) million in Q4; stockholders’ equity was $(14.2) million and debt at face value $590 million with $316 million converts due August 2026 under evaluation for alternatives .
  • Margin mix headwinds earlier in 2024: Q3 non-GAAP gross margin was pressured by lower-margin EOS international mix and biologics performance despite lateral share gains .
  • Working capital and inventory inefficiencies in 1H 2024 required higher cash use and raised full-year cash burn expectations before improving in Q4 with asset utilization discipline .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Total Revenue ($USD Millions)$146 $151 $177
GAAP Gross Margin (%)70.5% 68.2% 68.8%
Non-GAAP Gross Margin (%)71.2% 69.3% 69.7%
GAAP Net Loss ($USD Millions)$(41) $(40) $(33)
Net Loss per Share ($USD)$(0.29) $(0.28) $(0.23)
Adjusted EBITDA ($USD Millions)$5.6 $7.4 $21.0
Adjusted EBITDA Margin (%)3.8% 4.9% 11.7%
Ending Cash ($USD Millions)$100 $81 $139
Segment RevenueQ2 2024Q3 2024Q4 2024
Surgical Revenue ($USD Millions)$130 $135 $157
EOS Revenue ($USD Millions)$15.5 $15 $20
KPIsQ2 2024Q3 2024Q4 2024
Surgical Volume Growth (%)15% (adjusted would have been ~18%) 20% 19%
Avg Revenue per Procedure Growth (%)10% 9% 7%
New Surgeon Users Growth (%)20% 19% 20%
Non-GAAP R&D (% of Sales)~9% ~9% ~8%
Non-GAAP SG&A (% of Sales)~68.9% ~67% ~60%
Free Cash Flow ($USD Millions)N/AN/A$9

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($USD Millions)FY 2024$602 $605 Raised
Adjusted EBITDA ($USD Millions)FY 2024$23.0 $25.5 Raised
Total Revenue ($USD Millions)FY 2025~$732 ~$732 Maintained
Surgical Revenue ($USD Millions)FY 2025~$657 ~$657 Maintained
EOS Revenue ($USD Millions)FY 2025~$75 ~$75 Maintained
Adjusted EBITDA ($USD Millions)FY 2025~$75 ~$75 Maintained
Free Cash FlowFY 2025Breakeven (prior framing) Positive FCF Raised
Cash Use ($USD Millions)Q1 2025N/A$15–$20 New detail

Earnings Call Themes & Trends

TopicQ2 2024 (Prior-2)Q3 2024 (Prior-1)Q4 2024 (Current)Trend
AI/Technology initiatives (EOS Insight)Launched EOS Insight; end-to-end planning and automated alignment; intra-op reconciliation vision Record EOS orders; early site enthusiasm; workflow automation benefits Continued robust demand; EOS Insight adoption; guidance implies $75M EOS in 2025 Strengthening adoption
Supply chain/working capitalInventory inefficiencies and DSOs raised cash-use guidance; plan to inflect to cash in Q4 Free cash use reduced; term loan expanded; cash generation expected in Q4 $9M FCF generated; improved asset utilization; disciplined OpEx Improving
Industry disruption/competitiveRecruiting experienced reps; multi-year tailwind Continued upgrades; strong sequential surgical growth; loan support Opportunity from Stryker’s spine exit; informatics-led differentiation to attract talent Opportunity increasing
Product performance (Lateral, PTP/LTP)Lateral/expandables lead growth; ASP tailwinds Lateral franchise primary growth driver PTP/LTP in early innings; lateral market $1B with ATEC ~15% share; $2B of posterior approaches addressable via lateral Expanding
Regional trendsTargeting first Japan surgery by Q4 N/AFirst surgeries in Japan; international surgical revenue ~1–2% of total Growing footprint
Regulatory/legalLitigation-related expenses ongoing, excluded from non-GAAP Continued non-GAAP treatment Litigation-related expenses down vs prior year; reconciled in non-GAAP Stabilizing

Management Commentary

  • “Q4 marking our first non-GAAP operating profit since the remake of the organization began” and “adjusted EBITDA was $21 million, equating to a 12% margin… over 1,000 basis points of improvement” .
  • “We generated free cash flow of $9 million… The primary contributors were strong adjusted EBITDA and our transition beyond the period of heavy investment in instruments and inventory” .
  • “We are expanding our influence in deformity through EOS-integrated, procedure-specific technologies… performed our first surgeries in Japan” .
  • “We expect EOS revenue of approximately $75 million [FY 2025]… and adjusted EBITDA of approximately $75 million… positive free cash flow for the full year 2025” .
  • “Our lateral franchise continues to be the primary driver of this growth… procedural volume growth of 19% and average revenue per procedure growth of 7%” .

Q&A Highlights

  • Industry disruption and share capture: Management sees opportunity from competitors exiting spine (e.g., Stryker), positioning ATEC’s informatics platform as a magnet for talent and surgeon demand .
  • International strategy: Japan plans are long-term, disciplined, with lateral beachhead; international surgical revenue contribution currently between 1% and 2% of total .
  • PTP/LTP penetration: “Super early innings”; lateral market ~$1B with ~15% ATEC share; up to $2B of posterior approaches could shift to lateral over time .
  • Operating efficiency: SG&A savings and organizational realignment should continue into 2025; improving asset utilization of instruments and inventory is a focus .
  • Estimates cadence: Management is “reasonably comfortable” with Street Q1 2025 revenue around $168 million and notes normal seasonality from Q4 to Q1 .

Estimates Context

  • S&P Global consensus (revenue and EPS) for Q4 2024 was unavailable at time of drafting due to data access limits. Management did not cite Q4 consensus on the call, but indicated comfort with Q1 2025 Street revenue around $168 million, consistent with typical Q1 seasonality .
  • Given Q4’s strong adjusted EBITDA margin expansion and explicit FY 2025 positive FCF framing, profitability estimates may require upward revision even if top-line estimates remain unchanged, anchored by FY 2025 adjusted EBITDA guidance of ~$75 million .

Key Takeaways for Investors

  • Revenue quality improving: sequential revenue acceleration (+17% vs Q3) with disciplined OpEx delivered first non-GAAP operating profit and 12% adjusted EBITDA margin, signaling sustainable operating leverage .
  • Cash inflection: $9M free cash flow in Q4 and positive FCF guided for FY 2025, supported by improved asset utilization and reduced instrument/inventory spend versus 2024 .
  • Strategic moats in informatics: EOS Insight and intraoperative alignment capabilities create a differentiated, end-to-end spine ecosystem likely to drive implant pull-through and deformity relevance .
  • Lateral leadership runway: PTP/LTP adoption still early with large TAM expansion potential from posterior approaches, underpinning multi-year growth visibility .
  • International optionality: Early Japan entry provides a credible second-engine for growth with disciplined, lateral-led penetration strategy .
  • Balance sheet watch: Debt at face value $590M and 2026 converts ($316M) remain a key focus; management continues to evaluate alternatives amid improving EBITDA trajectory .
  • Near-term trading setup: Q1 seasonality and management comfort with Street ~$168M revenue should temper expectations; catalysts include additional EOS placements, robotics/navigation (Valence) updates, and continued SG&A leverage .

Appendix: Q4 2024 Earnings Press Release Summary (for reference)

  • “Total revenue $177 million; Non-GAAP gross margin 70%; Non-GAAP adjusted EBITDA $21 million (12% margin); ending cash $139 million” .
  • FY 2025 outlook: “Total revenue ~$732 million; surgical ~$657 million; EOS ~$75 million; adjusted EBITDA ~$75 million; positive free cash flow” .