ATEC

Good afternoon, everyone, and welcome to the webcast of ATEC's first quarter financial results. We would like to remind everyone that participants on the call will make forward-looking statements. These statements are based on current expectations and are subject to uncertainties that could cause actual results to differ materially. These uncertainties are detailed in documents filed regularly with the SEC. During this call, you may hear the company refer to non-GAAP or adjusted measures. Reconciliation of these measures to U.S. GAAP can be found in the supplemental financial tables included in today's press release, which identify and quantify all excluded items and provide management's view of why this information is useful to investors. Sell-side analysts planning to ask a question must be registered through the dedicated analyst link included in today's materials. If you have not yet registered, please do so now to be included in the Q&A queue.

Leading today's call will be the ATEC Chairman and CEO, Pat Miles, and CFO, Todd Koning. Now, I will turn the call over to Pat Miles.

Thanks, Paige. Appreciate it. Welcome to the Q1 2026 financial results call from ATEC. There will be some forward-looking statements. Please review at your leisure. With that, let me start simple. The business is working, and it's scaling. We did $192 million in Q1. This was short of our internal expectation, primarily due to a shortfall in EOS sales performance. Surgical revenue was up 17%, mostly in line with consensus. What matters most is what is fueling that growth. Cases up 21%, surgeons up 23%. That's not only a utilization story. It's an adoption story. We are adding surgeons, and they're doing more with us. We have created a durable growth model. EOS revenue was $14 million for the quarter.

As stated, this was short of our quarterly goal, and we have taken steps to bolster the team in sales, downstream marketing, and EOS support. However, the important thing we are seeing is EOS Insight is evolving into more than a product, but a platform. Growth and adoption of our EOS Insight platform is creating significant momentum. EOS has enabled us to gain access to prestigious institutions and a hunting license within those institutions, which is increasingly paying off for us. We generated $21 million of EBITDA, and yes, we used $11 million of cash, but that was a function of timing and intent. We are leaning into and investing in what's working. When you step back, ATEC has become a compounding engine. More surgeons, more cases, and more platform pull-through, and we're still just at the beginning of what we know we can do.

With that, I will turn it over to Todd.

Well, thank you, Pat, and good afternoon, everyone. I'll start with the first quarter 2026 revenue. Total revenue was $192 million, up 14% year-over-year, with surgical revenue of $178 million growing 17%. Sequentially, surgical revenue declined 6%, which was more pronounced than we have historically seen, primarily due to lower revenue per procedure contribution. Our strong year-over-year growth continues to be driven by the core elements of our model, which are 21% procedural volume growth, driven by 23% growth in new surgeon users and continued revenue per procedure expansion within our individual procedures. The consistent trends in net new surgeon additions and strong case volume, both above 20% again this quarter, speak to the ongoing momentum and durability in our surgical business.

Revenue per case declined approximately 3% year-over-year, driven primarily by mix impacts. In the U.S., we saw a higher mix of cervical procedures, which have a lower average revenue per case. In addition, our strong OUS performance reduced reported revenue per case by approximately 130 basis points. Finally, our overall biologics attachment rate was lower than expected. Importantly, and consistent with the prior periods, we are seeing strength in core individual procedural ASPs for lateral, ALIF, and cervical, which were up 2%, 4%, and 8% respectively year-over-year. Turning to EOS, revenue was $14 million, down $3 million year-over-year, as the number of system deliveries were lower than the prior year period, resulting in lower revenue recognition for the quarter.

These results were below our expectations for the quarter, and we have taken steps to address this by strengthening our sales team and downstream marketing function. The installed base of global EOS units increased by 7% year-over-year. In the U.S., the EOSedge installed base, which is a prerequisite for EOS Insight, grew by 39% year-over-year, and the amount of EOS Insight accounts more than doubled. We continue to see strong utilization trends in these EOSedge accounts and increasing evidence of implant pull-through following EOS Insight adoption. Implant volumes at EOS Insight accounts are increasing meaningfully post-go-live, reinforcing the long-term strategic and financial value of the platform. Turning to the P&L, gross margin for the quarter was 71.6%, representing over 120 basis points of improvement year-over-year.

This expansion was driven by continued asset efficiency improvements, temporary mix benefit from lower than expected EOS and biologics sales, and ongoing cost improvements in operational discipline. Non-GAAP operating expenses grew approximately 6% year-over-year, well below the revenue growth, reflecting continued operating leverage in the business and disciplined management of expenses. First quarter non-GAAP R&D was $14 million, or 7% of revenue, up slightly year-over-year as we continue to invest in innovation and launch new procedural solutions.

Non-GAAP SG&A was $118 million, which grew 6% and was 62% of revenue, improving by 420 basis points year-over-year, which is primarily driven by improvements in our variable selling costs and slower depreciation growth. As a result of the continued top-line revenue growth and disciplined management of expenses, we continued to see margin expansion and profitability improvements. Adjusted EBITDA was $21 million in the first quarter, representing 11% of revenue and growing 97% year-over-year. Importantly, we delivered 45% drop through on incremental revenue, demonstrating the scalability of the business model. Overall, we continued to see meaningful operating leverage, consistent margin expansion, and improving profitability aligned with our long-term plan. Turning now to the balance sheet. We ended the quarter with approximately $140 million in cash.

Free cash used for the quarter was approximately $11 million at the favorable end of our expected range. Our cash flow profile continues to reflect positive operating cash flow, with operating cash flow generating cash for the fourth consecutive quarter while continuing to invest in instruments and inventory to support growth. Notably, we invested approximately $33 million in inventory and instruments this past quarter to support the demand we are seeing from our 20%+ growth in surgeon adoption and the corresponding growth in our sales team. Our consistent profitable growth, strong cash generation, and increasingly attractive EBITDA profile, now exceeding $100 million on a trailing twelve-month basis, have positioned us to mature our capital structure.

As a result of our strong operating performance and continued progression to a more scaled and profitable financial profile, we were able to announce today that we recently entered into a new term loan A and revolving credit facility led by J.P. Morgan and TD Cowen. This new bank facility, which replaces our previous term loan and asset-backed revolver, simplifies our capital structure. It extends maturities to 2031 and reduces interest expense by more than $6 million annually. We estimate this new facility will save the company as much as $35 million in interest over the life of the facility. At close, the new loan has a rate of SOFR plus 275 basis points. The new facility matures in May 2031. We are very pleased with the bank syndicate we partnered with in this new facility.

This transaction reflects the continued maturation of the business and the continued improvement of our capital structure and credit profile. Turning to the revenue outlook. We now expect total revenue for full year 2026 of approximately $882 million, representing 15% growth year-over-year. This includes surgical revenue of approximately $805 million, unchanged from our prior guidance, representing 17% growth or a $118 million increase year-over-year. We expect surgical case volume growth in the high teens and average revenue per case to be flat for the full year. We now expect EOS revenue of approximately $77 million, reflecting updated expectations for our EOS business. We take guidance very seriously, and this update reflects our current outlook and a clear, realistic view of near-term performance while reinforcing our confidence in the long-term opportunity.

Importantly, we are maintaining our surgical revenue guidance, reflecting continued confidence in the underlying demand and growth drivers of the business. To recap our financial outlook, we expect revenue to grow 15% to $882 million for the full year. We continue to expect adjusted EBITDA of approximately $134 million, even with the reduced revenue expectations, which reflect the confidence we have in our profitability progression. This is a 15% margin, representing approximately 35% drop through on the incremental revenue dollar year-over-year. For free cash flow, we continue to expect at least $20 million in free cash flow for the full year, with the second quarter expectations for free cash flow to approximate 0.

We recognize that adjusting our guidance is a significant decision, and we believe that the updated guidance appropriately reflects our current outlook as we remain laser-focused on delivering the profitable sales growth implied in our 2026 guide. To put our first quarter financial performance in perspective, we drove 14% overall revenue growth and 17% surgical revenue growth at an annualized scale of approximately $800 million, with strong operating leverage translating into significant profitability expansion while making material improvements to our balance sheet. While the quarter didn't live up to our growth expectations, we are confident in our ability to continue to grow at multiples of the market, translating that into profitability and cash flow. With that, I'll turn the call back to Pat.

Thanks, Todd. Our strategy hasn't changed because we know it works. We start with clinical distinction. If it doesn't matter in the OR, it doesn't matter. If it makes surgery better in the OR, it matters to us greatly. This is how we have built the best procedural approaches in our industry. Second is surgeon adoption. We don't sell products. We develop approaches that improve surgery, elevate workflows, and build trust. We know this philosophy is effective because our surgeon demand remains very high. Third is the sales engine. We are continually assembling and improving upon a sales force that is disciplined, aligned, and energized, and built to scale. Put that together, it's very straightforward. Do something clinically meaningful, surgeons adopt, we scale it. We're not focused on widgets, as we like to say, the currency of our business. We assemble procedures from the ground up.

Everything you see here is designed to work together. That's what has driven and will continue to drive our model. We don't sell 1 thing, be it a screw, a plate, an implant, or a rod. We offer procedural approaches that make surgery better. Better procedures over time lead to expanded indications, greater complexity, and increased revenue. While we call that a convoyed sales effect, it's really just a result of designing procedures the right way, leading to better patient outcomes. We start in lateral for a reason, because it is where we have the greatest collection of know-how and how we most distinguish. The surgery works. It's reproducible, efficient, and surgeons feel comfortable with it very quickly. I was in a case last Friday, an L4-5 spondy. 15 minutes in, disc height was restored.

In under an hour, the case was done with minimal blood loss and morbidity. That same case used to take four hours and was a very different experience. Far less reproducible for the surgeon, far less predictable for the patient. PTP has profoundly improved surgery for both surgeon and patient. That's what creates confidence. Once surgeons experience reproducible success in lateral, they don't stay with just that procedure. They expand their utility into cervical, TLIF, posterior fixation, all things across the board. Our growth isn't dependent on just adding incremental surgeons, it's expanding indications for procedures they adopt and moving them to other approaches, which is what happens after they trust you. That's what the model is really about, and that's how it compounds. EOS continues to be a big deal for us.

While installation timing was a challenge in the quarter, the EOS experience is playing out exactly as we expected. First, EOSedge gets us in the door with leading institutions that were hard to impossible for us to access previously. Places like Duke, NYU, HSS, Northwestern, University of Virginia, University of Maryland, just to name a few. EOS becomes part of the workflow, pre-surgical planning, intraoperative reconciliation, and follow-up. It starts driving the case volume, Insight, patient-specific rods, alignment, and over time, it builds something more valuable than any 1 product. It's data generation. That's the moat. We're already seeing EOS impact. About 30% revenue lift per surgeon after Insight adoption. EOS isn't just additive, it's multiplicative. What's happening with Insight right now is important. We're moving from imaging to intelligence, 3D alignment, patient-specific planning, starting to predict outcomes, not just react to them.

Every case makes the system better. That's how this compounds. We are creating a true structured data advantage. At the core of this is our ability to take EOS imaging and convert it into quantitative, actionable intelligence. It's becoming smarter, more predictive, and more embedded into clinical decision-making. That's how you build clinical distinction. This is where owning the image and translating into data matters. Valence is early, but it's doing exactly what we need it to do. It fits seamlessly into the surgical workflow. It doesn't get in the way. The footprint is very small. It actually makes the case cleaner, and that's everything. If it disrupts the surgeon's workflow, it doesn't get used. We're seeing strong utility, positive surgeon feedback, and real usage, and the same pattern we've seen before. It works, surgeons trust it grows. That's how this is playing out.

Japan looks very familiar in a good way. We're leading with lateral, building early confidence, and seeing surgeons engage. I have seen it firsthand. I was in the OR two weeks ago, and the surgery was methodical, predictable, and reproducible. This is the same pattern. They adopt, they do more, they expand. It's early, but it's exactly what we wanted to see. In closing, when I think about ATEC, it's pretty straightforward. We're focused 100% in spine. We built real leadership in lateral. We're doing the same thing in deformity with EOS, and we've put the infrastructure in place to scale. Most importantly, we're growing and becoming more profitable at the same time. We've established a system and ecosystem that builds upon itself. Last point, why people are coming here, surgeons and reps, because we care about what they care about. We don't push widgets.

We give them procedures and increasingly information. That improves predictability and patient outcomes. That drives surgeon interest and adoption, leading more cases. That in turn attracts sales agents and builds careers. That's why ATEC is the preferred destination in spine. With that, we will take questions.

As a reminder, sell-side analysts planning to ask a question must be registered through the dedicated analyst link included in today's materials. If you have not yet registered, please do so now to be included in the Q&A queue. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We will now open the floor up for questions. In consideration of others, please limit yourself to one question. Our first question comes from the line of Matthew Blackman with TD Cowen. Your line is open. Please go ahead.

Good afternoon, everybody. Can you hear me okay? Hello?

We can hear you, yes.

You guys hear me? Okay.

Yep. Go ahead, Matthew. Thank you.

Thank you. I guess this is not really a fair question, I do need to ask it. In the context of the LRP guide 2027, do you feel confident, comfortable today reaffirming that billion-dollar revenue number? Obviously, all the other pieces feel like they're in a good place. The billion-dollar top line, particularly in the context of, you know, I think consensus is at about 4% or 5% higher than that. Just any thoughts on that 2027 LRP number where consensus is relative to how things shook out here in the first quarter and relative to the new guide? Just the big step up that's implied to get to that 2027 number, particularly that consensus number. I'll leave it at that. That's my one question. Thank you. Hello?

A reminder to unmute yourself locally.

Matt, can you hear us?

I can hear you. Now I can hear you. Matt. I can hear you now.

Could you repeat your question for us, please?

Sure. My 1 question was actually in regards to the 2027 LRP. Aside from all the margins sort of metrics, which are all tracking above plan, you know, the revenue target $1 billion. You know, more so just looking at in the context of where consensus is, which is about 4%-5% higher than that. With the new guidance here for 2026, it's a pretty big incremental revenue step up to get to that number. Just your level of comfort here sitting today with that LRP revenue number for 2027. Steve, if you're willing to comment on where consensus is sitting for 2027, just given some of these puts and takes that you're absorbing here early here in 2026. Thank you so much. Can you guys hear me? Anyone?

Hi, Matthew. I can hear you. I think we might be having some technical difficulties with the main speaker line room. Please just hold momentarily.

Okay.

They can hear you.

Okay.

Can you guys back?

Matt?

Yeah.

I'm gonna give a shot here, answering your question. I think your question ultimately is, given the fact that we've adjusted our guidance to reflect our current expectations around our EOS number. I would tell you that the guide in terms of where we are on EOS and the adjustment that we've made is really to reflect some very near-term execution issues that we believe that we've addressed through adding incremental sales talent and downstream marketing resources to the organization. We fundamentally believe that that's gonna address the issues that we have. I think the guidance would suggest that as ultimately we believe that we've addressed the foundational issues that are execution related.

As we would expect to exit this year more in line with what our original guide would have assumed, and therefore believe that we are on track to accomplish the goals that we laid out in the context of our long-range plan.

Okay. I'll leave it at that. I'll get back in queue. Appreciate it.

Our next question comes from the line of Allen Gong with J.P. Morgan. Your line is open. Please go ahead.

Thanks for the question. Mine is kind of on the forward trajectory and specifically, you know, the price-pricing per case headwind that you saw this quarter. You know, it was good to see volume tick back up to 20% plus, but it sounds like that price per case headwind could be, you know, sticking around, especially as cervical and, you know, some of your faster growing businesses sound like they're going to continue to put pressure onto that. Is that the right way to think about it going forward? That, you know, maybe for this year we should be forecasting continued, you know, revenue per case headwinds offset by volume growth?

Yeah, Allen, I think that our guidance implies kind of high teens volume growth with kind of flattish revenue per procedure growth or essentially no growth on the revenue per procedure. Your commentary and your understanding, I think, is correct in the sense that, as I called out in my prepared comments, our revenue per procedure growth or the score of the decline this quarter was really a function of mix attributed to both strong cervical procedures, because cervical procedures have a lower revenue per procedure contribution, as well as a strong performance in our international business, which does currently have a lower revenue per procedure profile as well. Then the third piece is a little bit more execution related associated with our biologics attachment rate.

Again, there, we believe that we've got some upcoming product launches and improvements in our execution associated with that part of the business as well. As we think about how to model our revenue per procedure for the balance of the year, we're thinking about that to be flat on a year-over-year basis.

I would just add, you know, if you look at the places where we make investments, we get a response. You know, if you look across lateral, it grew, ASP grew. It was reflective of exactly what we intended from the build perspective. To me, it's like, you know, frustrating to see the, you know, the mix impact the overall. You know, where we're investing and where we're distinguishing ourselves, I think we're prospering.

Yeah, I think that's a good point, Pat. In the context of the prepared remarks, we said, lateral grew 2% revenue per procedure, ALIF grew, I think 4% and ultimately cervical grew 8%. We've made significant investments in those areas.

Right.

Got it. I guess a question on, you know, your ability to like reiterate adjusted EBITDA. It's definitely good to see you able to, you know, kind of keep costs under control. Seems as though, you know, there are some root areas where you potentially may need to increase investment, you know, such as what you had talked about for EOS Insight. How should we think about, you know, balancing potential need for increased investment and, you know, driving revenue growth? How do you kind of balance those two things? Where are your priorities? Thank you.

Yeah. You know, I think it's a, it's a, it's an interesting question and, you know, one of the things that I feel great about is the infrastructure's in place. You know, what's, what's interesting is when you grow 39% year-over-year in EOSedge base, just the opportunity for you to exploit that base is, is very, very evident. What, what's maddening about this business is the installation elements. What happens is there's always a build-out with regard to installation, so it makes some of the installation choppy, which the revenue rec reflects the installation. I don't see it as a, as an investment requirement for us to grow. You know, we're growing 30% by surgeon in accounts that have EOS.

The thesis is totally intact, that's. Like, to me, I'm thrilled about the reflection of the demand profile around those places where we have systems installed, and we have the EOS Insight software installed. To me, this is just, you know, the quarter-by-quarter dynamics of a long-term execution. I'm totally thrilled about the EOS business in general, irritated by the lumpiness, but don't see some new investment profile required at all.

Okay. Our next question comes from the line of Matt Miksic with Barclays. Your line is open. Please go ahead.

Hey, can you hear me okay?

Yeah, we can hear you.

All right. Excellent. Thank you. I know this call seems to be moving a little bit slow here with the audio, I'll try to keep this tight and to one. Maybe just obviously the numbers in surgical, putting EOS aside for a sec, came in a little bit lighter than expected. You know, we didn't hear or see anything in the quarter that would suggest there was kind of anything, quote, like, wrong with ATEC or anything tripping up companies in ATEC. You know, can you maybe talk a little bit about if there was some phasing in Q1, if there was some, I don't know, any territories catching up, difficult comps like regional? I don't know if there was storms.

Not many companies would say much about storms, but was there anything that you'd say, "You know what? This would've been a better quarter if, you know, this." Any kind of color and maybe confidence of sequential, you know, performance, either, you know, sequentially, acceleration sequentially, you know, anything you can help us understand about the sequence from here to get to your new full year number. Thanks so much.

Yeah. Matt, I'll start with just a little bit of color and then let Todd jump in. I, you know, I would say, you know, the most comforting part is that the momentum reflected in the business where we most distinguish continues to be profoundly robust. That's the part that I think we find most comforting. You know, clearly the surgeon additions up over 20%, it speaks to a business in demand. It was kind of a goofy quarter.

I'll let Todd provide his view, but it's like, you know, we're seeing strength, you know, right out of the gate in Q2. It's to me it's this is quarter-by-quarter lumpiness.

Matt, maybe just to put a little bit more finer point on that or add to that, you know, I think your question about, like, the Q1 in total, I mean, clearly there was some weather in kinda late January. You know, I think FedEx was restrained for almost an entire week. I think the Northeast had 2 storms. Now there's weather every year, so how much of that is discrete impact here? Probably some amount, given the fact I think there was more weather this year than historically, is normal. I think there's that consideration.

You know, I think the question of really just, you know, at the end of the day, where we exited March was probably a bit softer than we had expected it to end. You know, I think we attribute that to just some of the growth that we didn't see in our traditional posterior kinda open procedures and some bio attachment along with that. I think to Pat's point though, the good news is, you know, you started to see definitely a sequential improvement in April, which ultimately gives us confidence as we grow into the second quarter and the seasonality we see from Q1 to Q2. I think it's important to kinda keep in context that historically the seasonality between kinda April and March and all of that's a little bit hard to predict.

Fundamentally, I think we believe that we're in a good spot relative to our guidance, and our guidance philosophy hasn't changed. You know, I think the other thing just more structurally going from Q1 to Q2, you obviously have the deformity season that comes up, starts in kinda late May and into June. That will ultimately, drive some improvement there. When you think about our overall demand profile and the investment we've made in sets and inventory to support that increased demand, that's there. You know, again, I think we take a step back and we look at the overall volume growth and the surgeon adoption.

That is really what gives us a level of confidence that, you know, we're in the same spot relative to where we expected to be coming into the year on a full year growth basis expectation. I think we ultimately hang our hat on the strong surgeon adoption and the volumetric components of the business.

To history utilization. Yeah.

If I could take, maybe just 1, I don't know if you can still hear me, but just, you know, I noticed that surgeon adoption was up year-over-year. I mean, it was obviously up 22%, but, you know, it's faster than a year ago, surgeon adoption growth. Anything just on the same thematic question of like acceleration of trends or momentum, and is that, you know, how much of a leading indicator is that, the fact that it's growing faster now? You know, what would we attribute that to? Does that, you know, tell us anything about what to expect in the coming quarters as well? The fact that that's, I guess, accelerating instead of slowing. Thanks again for taking the question.

Yeah. I, you know, Again, my general sense is the volume of people adopting our lateral portfolio is growing and is growing at an expedient rate. You know, the frustrating part is, I think to Todd's point is it's like, you know, you see the growth profile, you see the price per surgery with regard to the lateral contribution. The stuff where I think is more conventional, I would say short segment surgery that's open that is like everybody else's just seem flat. The biologic impact I think was bad. You know, Thera-adaptive can't come fast enough.

It's one of those things where it's like, you know, again, I think the procedural strategy's been well adopted. I think the EOS stuff is working as planned, the clearly distinguishing and lateral. You know, when we're not profoundly different than somebody else, we don't do profoundly better than everybody else.

I think the only thing I'd add there, Matt, would just be the continuing growing contribution from our international business. I think that both is a surgeon adoption story as well as a revenue contributor and a growing revenue contributor as we grow through the rest of the year.

Yeah. The beauty of that thing is it's completely reflective of the lateral thesis that the company's been built on, and we're seeing the same type of adoption dynamics happen internationally. To me, that's a great reflection.

Our next question comes from the line of Matthew O'Brien with Piper Sandler. Your line is open. Please go ahead.

Good afternoon. This is Anna Anfranat. Thanks for taking our question. I wanted to ask on sort of the cadence for the rest of the year. You know, it sounds like the majority of work has been done here in terms of realigning the sales team for EOS, you know, new reps coming on board, some investment and additional marketing resources. I presume it'll take some time for these new reps to ramp, though. Just as we look at the cadence for the rest of the year, you know, when would you anticipate things in the EOS franchise getting back on track for foreseeable future? Thanks.

This is Todd. I think our expectation is that begins to contribute in a more full way in the second half. That's really how we're thinking about it. We think the overall growth in the second quarter should be similar to our first quarter results at about 14%. I think our guide implies essentially 17% overall revenue growth in the second half as EOS contributes more meaningfully.

Yeah. You know, just to make sure that I appreciate the question, too. It's like, you know, the cadence of adding surgical sales rep has been totally consistent, and they're coming from all players. You know, what you're getting is just the consistency of the reflection of attracting more salespeople. That's going on as it has in the same cadence and has not slowed at all. You know, that part I think is just continuing. If anything, really the focal part of the frustration is around EOS placements. The dynamic is we gotta continue to improve as a capital equipment provider. You know, when you miss by 3 units or whatever, what are 5 units?

It like, in the grand scheme of thing, what it doesn't do is impede the belief in being, or what's going on in the field. What's going on in the field is absolute expansion of the utility of the device once we get them placed.

Our next question comes from the line of David Saxon with Needham. Your line is open.

Hey.

Please go ahead.

Yeah, great. Good afternoon. Thanks for taking my questions. Maybe to start, I just wanna clarify, Todd, the comment you just made about second quarter. You said something about 14. Can you clarify, is that $14 million for EOS for the second quarter or 14% overall growth for the second quarter?

My commentary, David, was that we would expect the overall growth to mirror first quarter's overall growth at 14%.

Okay, great. My one question is just on a follow-up on the revenue per case assumption in the guidance. Specifically what's embedded in that in terms of how U.S. case mix trends over the balance of the year and biologics attachment rate. Really just trying to understand if cervical mix continues to be strong and you know, no change to the biologics attachment rate. Kind of what's the risk to the flat revenue per revenue per case assumption? Thanks so much.

Yeah, David, I think the idea here is that we would continue to see a relative contribution of cervical to the overall business, as we've seen the strength of its growth over the last really number of quarters that business continues to grow and we continue to drive adoption through that procedural mix. You know, we saw about 38% biologics attachment rate. We would expect that to go up a couple points. You know, I think things that would make sense there are why we believe that is one, just a greater sales force execution and focus on that front. As well as the fact that you enter deformity season, and those deformity season cases tend to be longer constructs.

1, you get just more revenue per case on average from that. Plus they tend to have a higher utilization of biologics as well. That's more or less. Or excuse me, that is how I constructed the revenue per procedure math for the balance of the year.

Great. Thank you.

Our next question comes from the line of Caitlin Cronin with Canaccord Genuity. Your line is open. Please go ahead.

Hi. Thanks for taking the question. Maybe just to turn back to EOS, I think you noted the weakness was, you know, execution related, if you could provide any more color on that specifically. If any of the weakness was related to, you know, more the capital environment or appetite by facilities. Just following on from that, do any of those hurdles translate into, you know, the other capital parts of your business with Valence and navigation?

Yeah. Thanks for the question. I would say that the EOS thing bleeding into the Valence thing is really a non-starter. You know, one of the challenges associated with EOS has always been the structural build-out. It's like literally you're doing construction on a room just based upon the size of the unit. What happens is if you have more EOS unit that requires more build-out, the predictability associated with the delivery becomes or the installation becomes less.

It's one of those things where it's like when we said, "Hey, we're gonna get better with regard to the sales piece, we're gonna get better with regard to the downstream marketing piece, and we're gonna get better with regard to the support piece." The support piece really is making sure that we're aligned with regard to the timing associated with the installation. Those things are somewhat challenging. They have nothing to do with Valence. You know, I always hate, you know, to suggest that we're a proxy for anything. You know, with regard to understanding the capital equipment environment, it's just tough to tell. We're irritated over the lack of execution. We committed to a number of units, we didn't fulfill the number of units.

I gotta tell you, the demand profile is phenomenal and the thesis of it is great. The construction and installation is less good. That's kind of the way I think about the business, but I don't see it bleeding into anything else. I just see it as an execution flaw.

Thank you.

Our next question comes from the line of Thomas Stephan with Stifel. Your line is open. Please go ahead.

Great. Hey, guys. Thanks for taking the questions. I wanted to ask about the 2026 surgical outlook. Hopefully, I have some of these numbers correct. I think surgical up 17% in the quarter, full year guidance also 17%. Comps get much more difficult. You talked about March below expectations, but April came back. Business seemingly has become a little unpredictable, I feel like in the last couple quarters. Todd or Pat, you know, what gives you the confidence in maintaining the outlook for surgical when you deseled again in 1Q, and with guidance implying the stacks re-accelerate? Is it April? Are there incremental drivers, you know, that can continue to support growth? Thanks.

Yeah, this is Pat. I, you know, it's like, I'll, I'll always provide the color and I'll let Todd, you know, make me right or not based upon the numbers. The thing that gives us confidence is just the demand profile around the procedures that most distinguish us and the volume of surgeons that continue to flock toward us. Like to see a historical growth rate in the volume of surgeons and then to see historically what they've done from a utilization perspectives, gives us a lot of confidence. If you Like looking at kind of the demographics of the types of surgery and seeing, you know, that, you know, what we were losing more is some conventional stuff.

Q2 and Q3 are conventional fests, if you will. It's a lot of long reconstruction stuff. The way that EOS is impacting our business, I would say that gives us a lot of confidence. As I look at just the demographics of how the revenue was reflected, I remain totally bullish. Clearly the comps get harder, but it's 1 of those things where it's like when the business is coming in as you expected it from a procedural type standpoint and you see the surgeons joining, for me it just gives me, it feels like a tailwind.

Tom, I think your question's totally a fair one in terms of, you know, the deceleration that we've seen and how do we think about Q2 onwards in light of our Q1 performance. I would point to a couple things. One, you know, I made the comment about March was not as good as we had expected, although April has rebounded and feel like that gives us a good platform into Q2. I think fundamentally, a lot of this is where do you start? I think the April start is a confidence builder there. Second point I'd make is just the structural increase from Q1 to Q2 in terms of the deformity season.

We've invested in incremental assets, whether that be small stature sets or, and/or rather, patient positioners. Like, we know that demand is there, so we have invested to fulfill the expectation of that demand to come. That happens both in Q2 and in Q3. I think we talked about our ability to drive increased biologics attachment rate through focused sales execution efforts. The international contribution continues to get better as we walk through the year, and I think that has been demonstrated as we've gone, and so our confidence there is high as well. I think for all those reasons, we believe that the path from, you know, Q1 to Q2 and onwards, is very much intact.

I think just if you look at the total surgeon adoption, again, I think it's just a great leading indicator. It historically has been, and I think, you know, to have sales, you gotta have customers, and the customers are growing at 20% plus.

Got it. Thanks, guys.

Our next question comes from the line of Ross Osborne with Wells Fargo. Your line is open. Please go ahead.

Hi. Thanks for taking our questions. Maybe moving on to Valence, would you discuss placements to date and what early pull-through numbers look like?

Yeah. Not, not gonna speak to the specific numbers, you know. You know, I think what we or at least how we characterized this year was one of, let's get as much experience as we can. Let's make sure the product is absolutely perfect. It is doing everything that we've expected. I would tell you that, you know, these are things that you won't appreciate is my presumption. Clearly not trying to be insulting, there's an infield camera that is hugely elegant, and just the ability to have the surgeon control the elements in the room, is exactly what you want. You also don't want a huge piece of capital. It's not a huge piece of capital. It's doing everything that we've expected.

It's been utilized in PTP mostly. You know, it's trending toward more than the numbers that we provided for the year as a target. We're totally bullish on it. Super excited about just the type of clinical impact it can have and the workflow that's been initiated with its design. Again, hugely confident, hugely bullish. The ability to integrate the best neurophysiology in class with the most elegant, seamlessly effective workflow will increase the volume of PTP users. There's no question in my mind. It's going as planned.

Thank you.

Our next question comes from the line of Keith Hinton with Freedom Capital Markets. Your line is open. Please go ahead.

Hey, guys. Good afternoon. This is Nakul on for Keith. First of all, thank you for taking our questions. We have two questions. The first one being the revenue per procedure appearing to be down approximately 4% year-over-year. We think that's the first case of down year-over-year since at least 2021 or maybe earlier. What are the drivers there, and how are you thinking about revenue per procedures for the rest of 2026 and in the out years?

As I shared my prepared remarks, you've got about, you know, clearly a mix impact from a stronger growth in our cervical procedures. Cervical procedures carry a lower revenue per procedure profile than our overall average.

Since that led the growth, that pulled the overall average revenue per procedure down. The second is our strong performance outside the U.S. They also have a lower revenue per procedure profile than our overall average. Really, the two primary drivers there are mix related. Then the final driver is just lower biologics attachment rate, so that had an impact. I would just tell you though is when you look at our anterior column, so think about lateral and ALIF. Lateral's revenue per procedure grew 2%. ALIF's revenue per procedure grew 4%. Cervical's revenue per procedure grew 8%. I think the revenue per procedure growth or our ability to capture the revenue opportunity in a procedure continues to expand.

That's the important piece to this, and I think that is also a fulfillment of the investment thesis that we've laid forth.

Great. Just the last one. In 2025, growth in surgeon users was in line with procedure growth, which seems to imply procedures for surgeon was around flat year-over-year. Where are you today in terms of penetration rate with active U.S. spine surgeons?

Going forward, how should we think about the balance between increasing breadth and depth in terms of driving volume growth? Also, once again, thanks for taking the questions.

Yeah. I mean, we obviously saw a strong, another strong quarter of surgeon adoption. I think your question on utilization rates, I think if you go back to 2022, we saw utilization rates, or we've seen utilization rates grow on average about 3% a year in the U.S. Clearly, on average, we're seeing greater utilization. That utilization number is obviously pulled down by the strong adoption numbers that we see, we averaged out at about 3%. You know, we continue to feel good about that.

I think going back to some of the themes of this call in terms of why we have confidence in our full year guide on the surgical revenue piece is fundamentally related to the fact that we see strong demand from new surgeons to come here and have always seen that demand translate into procedural adoption. You know, we expect to continue to see that throughout the balance of this year, which gives us guide, you know, confidence in our overall guide.

Okay. Got it. Thanks.

Our next question comes from the line of Sean Lee with H.C. Wainwright. Your line is open. Please go ahead.

Hey, good afternoon, guys, thanks for taking our questions. I just have a bit of a higher level one. With the EOS revenue and the guidance staying at a low growth this year, I was wondering, does the strategic case of where EOS sits inside the procedure ecosystem where, you know, as the platform as a door knocker of a sort, as well as for a driver for surgeon pull-through, does that case still hold? Do you think it maybe makes sense to rethink some of the hardware monetization model as well?

Sean, it doesn't make me think. It makes me so enthusiastic about what we're doing. You know, imagine from where we've come. You know, it's Alphatec Spine getting access to the institutions like HSS, NYU, Duke, Northwestern, University of Virginia, University of Maryland. Like, it is unbelievable the type of access that EOS has given us. You know, probably the thing that I am most kind of disappointed in myself in is enabling you guys to understand the uniqueness of this informatic tool. There is nobody in the business that has a tool that ultimately provides for a preoperative image, a plan integrated into the intraoperative experience and then evaluated postoperatively. It's all the same image. That provides you what's called a structured data set.

Your ability to translate a structured data set is unlike anything anybody else has, and it's all automated. The nemesis of spine surgery historically has been a lack of data. For us to have the structured data set that automatically fuels information into a depot that we could translate to mitigate variables. We've talked in previous calls about the revision rate in spine and how, you know, mitigating variables is the route to greater predictability. You know, the fact that we've missed on a few installations and then to suggest that we're gonna rethink the thesis is not even a consideration. I would tell you that I just got back from the American Association of Neurological Surgeons. You know who the big players are? It's Medtronic, Globus Medical, and ourselves. You know who the most promising player is? Atec Spine.

It's one of these things for us to translate this tool. In five years, it's going to be the father-son game. It's any inference that there is any blinking with regard to the thesis is misdirected. Sorry for the diatribe, but I gotta tell you, it's like, this has the room the size of Texas. You have a team that's committed to the size of Texas and, you know, you miss on a construction on a few placements of EOS and people questioning it is a word I would choose not to use. Anyway, appreciate the question.

Yeah, thanks for that. Thanks again for taking our question.

We have reached the end of the question and answer session. I will now hand the call back to Pat Miles for closing remarks.

Just a quick comment. I just wanna thank everybody for dialing in. I've never been more bullish and more enthusiastic with regard to the build of Alphatec Spine. I'm thrilled about the volume of people coming over here from competitive companies that are supporting the effort. It's like our best days are out in front of us. The strategic thesis is such the right one. We're gonna be the data source in this business. Just wanna share my enthusiasm for where we are and look forward to discussions as the year progresses, because we will continue to prosper as we have for the last 8 years. Anyway, thanks very much for your interest and look forward to more.

This concludes today's call. Thank you for attending. You may now disconnect.