Good afternoon, everyone. And welcome to the webcast of ATEC's Fourth 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 pro forma measures. Reconciliations of non-GAAP measures to US GAAP can be found in the supplemental financial tables included in the press release, which identify and quantify all excluded items and provide management's view of why this information is useful to investors. Leading today's call will be ATEC's Chairman and CEO, Pat Miles; and CFO, Todd Koning. Now, I will turn the call over to Pat Miles.

Thank you, Angela. And welcome everybody to the Q4 2022 ATEC conference call. We will be providing some forward-looking statements, so please review that at your leisure. So our momentum by revolutionizing the approach to spine surgery continues. Our finish for 2022 was $351 million. We grew 44%. Over four years, we've grown at least 25% each year and had a 40% four year CAGR. And that comes via a year where we launched 10 new products, including our first expandable implant. We expanded lateral procedural sophistication with PTP and LTP, which includes a Midline ALIF. We drove $40 million in EOS revenue, trained greater than 500 surgeons, achieved greater than 20% growth in surgeon users and increased our access to cash and liquidity to approximately $275 million. I believe much of our value creation is unlocked by our culture. So it is worthwhile describing who we are and who we're not. And I will say who we are is a winning culture focused solely on spine surgery, committed to moving the field of spine forward through informatic and procedural innovation. So who are we not? I would say we're not a division of a division. We are not a conglomerate tour, acquiring growth and disinterested in furthering technology or an implant only transaction uncommitted to the full clinical experience. Our commitments haven't changed. We focus exclusively on spine, fulfilling unmet clinical needs through integrating technology to create predictability, that we call creating clinical distinction. And so when we create clinical distinction, we believe that we compel surgeon adoption. When we compel surgeon adoption, we believe we have access to a more effective sales force and an expanding sales force. So our clinical distinction view is different. Our 100% spine focus allows us to invest in procedural technology that furthers…

Thanks Pat, and good afternoon, everybody. We appreciate you joining us on the call today. I'll begin with revenue. Fourth quarter total revenue was $106 million, reflecting 43% growth over the prior year and an 18% increase compared to the third quarter. $106 million in revenue is comprised of $91 million in surgical revenue and $15 million of EOS revenue, which grew 14% over prior year. Fourth quarter surgical revenue of $91 million increased 49% compared to the prior year. Procedural volume grew 26% in the fourth quarter with an average revenue per case expanding 18% year-over-year as revenue mix continues to shift towards procedures with more products per case and greater complexity. The average revenue per lateral procedure is about 2 times our overall average and lateral related revenue continues to grow meaningfully faster than surgical revenue overall. And while lateral related revenue contributed the most to growth, revenue related to ALIF and biologics also continued to grow solidly in the quarter. Turning to the full year 2022. Total revenue was $351 million, reflecting 44% growth compared to 2021. That is comprised of $303 million in surgical revenue and $48 million of EOS revenue. Full year surgical revenue grew 43% compared to the prior year, driven by volume growth of 25% and average revenue per case growth of 14%. Hosting over 500 surgeon training events in 2022 field surgeon adoption and drove a 22% year-over-year increase in the number of surgeon users. As newly trained surgeons become increasingly familiar with ATEC clinical distinction and partner with us both for more cases and for more complex cases, utilization is also growing. Walking through the remainder of the P&L. Fourth quarter non GAAP gross margin was 69%, down 120 basis points compared to the prior year. The pressure was attributable to…

Thanks much, Todd. I think what you will find is our share earnings strategy will not change. We will continue to garner value out of the investments that we made in procedures like PTP and LTP. What you will see is an expanding complexity of the type of pathologies that we will address through these different procedures. The investments have been made and now the opportunity to exploit those investments is before us. That effort will allow us the confidence that we have created in a way that will enable a halo effect that will increase other product adoption, so an expanding portfolio adoption. That confidence and that expansion will ultimately compel sales people to come our way. Those sales people telling our way will avail more opportunity. We are continuing our early experience in the international marketplace. As we stated, we will be direct and narrow in those spaces. As it relates to EOS, we have only just begun. So we're literally laying the foundation for an opportunity that will avail itself in '24, '25, '26. We believe that the translation of an EOS information is before us and that will be the real value creation, where we love to sell iOS units, it is an investment that will pay off in the future that will ultimately avail the translation of the very information that comes from those systems. So our enthusiasm is exceedingly high. Our opportunity to apply our nimble focus to improve spine care is massive. Our best days are yet ahead. With that, we will take questions.

[Operator Instructions] The first question comes from Matthew O'Brien with Piper Sandler.

This is Phil on Matt. Just a multi-parter here on guidance more. So what are your puts and take with the industry as we move into 2023, what really gets you to the top end of the range and likewise the bottom? And what are you seeing from the LTP standpoint there? I mean, we're really excited by it, but what do you see in there?

So as always, I will let Todd quantifying and I’ll qualify. And it's just best. I guess the second one first. We're hugely bullish on LTP. And do not go overly deep into each of the different reasons why, just because I think I may lose the interest of the audience. The ability to ultimately change the position to get access to 51 is game changing. And so in inflations that we have historically been, they've tried to tape a patient to a bed and do a lateral ALIF at 51, and it becomes very hard. And I think that surgeons agree that the best position to do an ALIF is supine. And so if you can get media wise access between the bifurcation at 51, it's a game changer. And so to be able to go four to one from an LTP perspective and have the patient controlled orthogonally with a patient positioner and protecting the neural elements with things like safe ups, it is a very valuable tool. And so when we start to think through the elements that ultimately avail the top end of our guidance, what we do is we say, what are we confident in. And as the guys who pioneered lateral from the inception, our confidence is in our ability to compel the interest. And I think you see signs of that through all of the surgeons who have come through the building. And so I would say that our confidence is in the volume of people we’re compelling to come through the building, and then the clinical aspects of the lateral technique that ultimately will expand the halo effect across the portfolio. And so PTP is still in its early infancy of a big run. We'd love to get LTP out there in a much more wide way. You start to see the expandables come in and it speaks to a company that's just enjoying the early part of this momentum.

And so I think as you kind of think about the $438 million guide, growing 25%. You think about the surgical revenue component of that, and I laid that out in terms of procedural volume and procedural ASP. And our procedural ASP assumption being in the high single digits, and that's actually higher than what our long range plan assumption was. And then if you look at our volume component, really being in the mid teens growth over 2022 and that's really very much in line with our long range planning. And I think you see our guidance philosophy coming through here being putting out numbers that we believe that we can achieve and have a reasonable opportunity to exceed. And so I think so much of your question I think was really about industry factors. And I have to tell you when we're guiding to 25%, I think our upside is really more about our ability to continue to compel surgeon adoption through I think all the things that Pat just laid out. And I think that will ultimately come through stronger volume relative to our guidance. So that's kind of how I think about the range and where things can defer. It's probably mostly on the volume component. It's really dependent on our ability to continue to compel surgeon adoption through clinical distinction.

The next question comes from the line of Josh Jennings with Cowen.

It’s Eric on for Josh. Just starting on PTP, it seems like adoption and utilization of the procedure has been really solid in recent months. How penetrated do you think PTP is right now, and is it still early innings for PTP adoption do you think?

It's fascinating, right? It's like, if you --- what's been interesting for us is to really look at the established businesses that we have out there from a distribution perspective or a sales force perspective. Those people who are selling PTP are growing at a rate that is far surpasses those people who are -- who've had less success with it. And that's what provides us such enthusiasm with regard to when you start to see like the established distributors reflected growth of 46%. I will tell you, it's in its absolute infancy. The beauty of the technique is the applicability to multiple different pathologic states. And so the opportunity to utilize it in things like deformity, our enthusiasm to utilize it in things like corpectomy. And so it is such the early phases of PTP. And so the applicability is very, very wide. The thing that thrills me is we've made the foundational investments to ultimately exploit the opportunity. And so when someone learns how to apply that technique, their ability to apply to more unique pathologies expands what that avails us as an opportunity to design into those expanded applications. And so I would say that PTP is in its absolute infancy and can't be more bullish with regard to where the things going.

And I think Eric, the only thing I'd add to that would be, when you look at PTP, it’s applicability from a relatively straightforward single level degenerative case to the complex procedures as Pat described, it gives us such an opportunity, kind of beyond the existing as we've talked about the billion dollar lateral market as it is today. And I think that is one of the true, I think, opportunities that PTP has availed us which is to really expand that market well beyond the billion dollars as we've defined it. And frankly, well beyond just dealing with singular or two level degenerative cases, but into complex cases as well. And so as you kind of think about our penetration in surgeon use, obviously, more surgeons is good. But I think the more complexity you can apply with the procedure or you can address through the procedure, you get more utilization out of the existing surgeon base.

It's a great point. But the reality is what we have seen in whenever a new technique is created and there becomes an adoption curve, there is people who run forward with more complexity and when people who demonstrate more complexity, you will get more people get on the bandwagon of an early adoption type of pathology.

The next question comes from the line of Drew Ranieri with Morgan Stanley.

Maybe just to start, and I apologize, this is a multi-part kind of question. But in kind of thinking about your revenue guidance and what you were able to do last year. Just maybe how should we think about any upside potential dropping through to the bottom line, just in the context of your commitment to EBITDA breakeven. Are you more willing to let that fall or are you still really kind of in investment mode to drive volume and surgeon adoption? Just love your thoughts on kind of that dynamic. And I have a follow-up.

And I think the first thing I'd say is, our guide implies about 30% drop through on the year-over-year. And so that's a pretty big drop through and so that's really kind of where we are starting. I think for you to think about how to the extent that we overachieve our guidance, how that might drop to the top line. Really the way we've kind of thought about it is, after you go for the gross margin and the variable costs associated with the incremental revenue, what's left probably two thirds of that gets invested back in the business and R&D to drive growth and one third of it kind of drops to the bottom line. And I think that's kind of how we are thinking about it. And ultimately, we believe that there is such an opportunity to continue to innovate, make spine surgery better and grow this business. We want to make sure that we are fueling the machine.

And then still on the profitability context. But Pat, I mean, it sounded like you were calling out compelling and attracting sales force or sales reps. Just given the environment that we're in and industry, I mean, are you seeing any more evidence of an acceleration and maybe sales force additions? And as you are thinking about that potentially, would you step back from the committed breakeven and EBITDA to greatly expand the sales force this year to drive a longer term opportunity?

I guess, at least the way I'm thinking about is any way to make the team better since the inception of the company, we've committed to. And I always love the view that companies are people, and assemblies of people that are committed to making something better. And as those opportunities present themselves, we will make decisions that are in the best interest of our efforts. I don't see us coming off of our commitments. But I got to tell you, we will be opportunistic with regard to people who are aligned with our thinking. I got to tell you, being a spine only force and committing our vocation to spine, there is a lot of people out there that I think feel the same way we do. And so our enthusiasm is to expand the team with people with great experience and have the same joy for spine that we do.

And Drew, I think as you can appreciate, our plan, our guide, assumes that we will be investing in the sales force. And so I think that's an important component to understand about our guidance. We are going into the year knowing we’ll be adding.

And just with your comments, maybe specifically on the cadence of the year on the first quarter. Should we think about that as really like a mid single digit step down sequentially, or is there any reason why it could be better given some of the growth drivers, tail ends at your back heading into '23?

So I think in terms of the -- was the question adjusted EBITDA or revenue related?

We can hit both.

I think on the top-line, I guess typical seasonality from a revenue, surgical revenue perspective, would probably lead you to -- we did 91, probably a couple million dollars step down sequentially, would be the typical seasonality you'd see. I think, if you looked at the EOS seasonality from last year, it was another probably $2 million going from Q4 to Q1. So if we were at $106 million in the fourth quarter, you could probably think about 102-ish, somewhere around those, that area in the first quarter. We do know that -- one of our biggest investments in the organization is the people, Pat talked about that. And some of the taxes and those types of things, step up sequentially, from Q4 to Q1. We also always have a national sales meeting that isn't investment in the organization in Q1. And so from an expense profile standpoint, there's a bit of a sequential step up for those reasons. If you kind of think then about how that flows through adjusted EBITDA, if you just take your 800 basis points margin expansion on the full year and if you appreciate that that's probably 900-ish basis point improvement in the first half and a 700 basis point improvement in the second half. I think you kind of get to a mid single digit negative adjusted EBITDA absolute number in the first quarter. And so I think that obviously improves in the second quarter. And as I shared earlier, we view -- seen a positive number in the third quarter.

The next question comes from the line of Mathew Blackman with Stifel.

This is Emily on Matt. I just wanted to touch on EOS and the next kind of wave of product features versus if there's anything in 2023 of note that we should be looking out for. And then further out 2024, '25, I wonder if you could give us an example of how surgeon might be using EOS today compared to how they might be using it then with all these new features in terms of procedures, product opportunity? And then what needs to be done on the product side to keep pace and optimize that product pull through for EOS?

Emily, that’s a question that warms my heart. And I absolutely adore just the opportunity that EOS provides. And when you think what the output is today, the output today is a standing rate bearing image in a biplanar view, so both the front and the side. And then what you could do is you can reconstruct the entire skeletol system in a single image. And so what the near term will provide, and I'll give you some time frames, like this year, we'll go through the verification process of each of the different feature sets, such that we know that they're perfectly operating and perfectly accurate. And so the effort this year will be really a verification of the elements. And so what we're doing right now is our IT team and the software team is building the cloud infrastructure with things like high trust and other elements that are required to ultimately house images in a HIPAA friendly way. And so those things are going on in the background. And so I would say the things that are going on right now is the automated measurements, the preoperative planning elements, the ability to do patient specific rods, and some of the interpretive reconciliation. So those will be the first things that you see on the marketplace in, let's call it, mid to late '24. We'll go through the verification process much sooner than that. And so it will be in the marketplace is late this year. And so our excitement associated with a surgeon having the ability to pull down an image from the portal, understand exactly what the imaging is, exactly what the plan is, what the interoperative experience was and then reconcile it back to the plan, that's the foundation of a predictive environment. And so…

The next question comes from Brooks O’Neil with Lake Street Capital Markets. Brooks O’Neil: I'm just hoping we kind of beat around the bush a little bit, but maybe you guys can talk about the impact of ongoing consolidation in the spine space and whether you see that as a positive or negative for ATEC?

So it's a question that clearly has come our way a fair amount. And my genuine view is what we need to do is create clinical distinction, compel surgeon adoption and expand the sales force. And I would tell you, there's a lot of people out there that are aligned with our thinking. And so what I would say is we're going to be opportunistic as we can be. The one thing that we love is chaos. If there's chaos out there, we're going to be opportunistic with regard to that chaos. And our interest is long beyond any consolidation. We're laughing today that we still have 95% of the market to address. 4% to 5% market share holder, we got a long runway. And our enthusiasm as we've spoken from the beginning is to be the standard bearer, we want to be the guys that make the rules in this business because we understand the requirements better than anybody. And so that's how we think about it. Candidly, you know, we're indifferent to anybody else. Our focus is on what we're doing.

Your next question comes from the line of Kyle Rose with Canaccord.

So I just wanted to -- I understand the leverage commentary when we think about this year, about 30% drop through on incremental revenues. Maybe just help us zoom out from a big picture perspective, and how we should think about that on a longer term basis. Obviously, as you scale the sales force and make additional investments, whether it's this year or you get productivity from previous cohorts. How should we think about that drop through on a ratable basis beyond 2023?

Well, Kyle, I think when we laid out our long range plan and we kind of said, going from 2021 to 2025 and then in 2025 be in a $555 million in revenue and $80 million of adjusted EBITDA, and I think that's about 12%, 13%, 14% adjusted EBITDA margin in 2025. And so as we did that walk, we said, call it, two thirds of that's going to come from our leveraging of the infrastructure and the investments that we have made and the balance will come from improvement in our variable selling expenses. And ultimately, I think that's really where we are headed. And so I think on the margin you can kind of do the math year-over-year on that. But ultimately, that's the direction we are headed and the plan we’ve laid out relative to profitability profile.

And then I'll just -- I'll be greedy and take a follow-up here as well. You talked about the utilization increasing on a products per case basis as well as the productivity of surgeon -- new surgeon users. Just wanted to see -- we saw the chart there, but if you could maybe just take it one level deeper. As you go to the wider group of physicians, how have you seen the procedural complexity curve elongate or be pulled forward? I'm just trying to understand how the utilization rates are changing in the last several cohorts, as the market has normalized coming out of the pandemic?

I guess if I understand your question and tell me, if I got it wrong is, what we have seen is people are compelled to come out here and what they'll do is, they'll come out here for PTP. And so they will learn PTP, they will have had a successful experience of PTP and they will expand the utility into things like cervical and more of a commoditized degenerative utility of different products. And so we will see the halo effect. The more experienced they get with PTP, the more complex they'll start to apply to the different procedures. And I think that all gets reflected is the dollars per procedure starts to incrementally lift. And so we will start to see greater dollars in the PTP realm and that will ultimately skew the math as it relates to the entirety of all the procedures and the contribution by PTP. I don't know if that answers your question.

The next question comes from the line of David Saxon with Needham & Company.

I wanted to ask on LTP. I know it's early. But any overlap with docs doing PTP and those doing LTP? And if not, how we should think about the LTP opportunity and what it could mean for ATEC's market share over the next call it 12 to 24 months? And then kind of looking at the chart showing the surgeon utilization ramp. Is there any reason why you wouldn't be able to see that with a cohort of docs adopting LTP?

It's a great question, and I think we have a bunch of surgeons who do both PTP and LTP. And the dynamic is oftentimes it's dependent upon pathology. So like if you have pathology that's in this posterior and you want to do a decompression. If I want to do a single position surgery, I don't want to do a decompression in the lateral position. So I will do it in a prone position. And so the way we're seeing this start to unfold is you're starting to see individual pathologies or individual types of surgeries being applied to individual patient physician. And so to us, what we don't want to do is we want the surgeons to drive the reflected utility of the different procedures. But what we're seeing is clearly a lot of excitement. And I think one of the things that has yet to be reflected and I think time will tell is the impact of LTP, as you say, What's at least our view is that the pendulum swinging back into your column at 51 is very, very big. So when you hear people say, hey, there's a lot of ALIF contribution to the number, realize what that means is surgeons are doing more ALIFs, surgeons want to do ALIFs in as, close to a supine position as you possibly can, meaning laying on your back. There's a bifurcation at 51 that you operate through. And the more we can get that from a physician perspective, the better we are. And so why we designed LTP is based upon our 20 plus years of experience in lateral, which means our understanding as to what the best patient position is for the respective requirements. And so we are totally bullish that we have a great solution from a PTP perspective, a great solution from an LTP perspective. And we think the momentum is really -- it's a pregame reflection, because we have a lot to build on both fronts. And clearly, I think the dynamics and the marketplace is going to avail people the opportunity to give us an evaluation where maybe in past times they may not have.

The next question comes from the line of Sean Lee with H.C. Wainwright.

So over the last couple of quarters, you have mentioned the potential to expand internationally as well the avenues you're looking to grow. So I was wondering whether we would be seeing more of that this year? And if so, would you still be leading with EOS or would you be going for lateral as the main focus there in that arena as well?

The one thing that we're excited about is our international team. And there's a guy internally here, Chris Lyons, who started to assemble what is an outstanding team in Australia and New Zealand, and we're in the process of figuring out what to do in Japan. And so the Australia team will lead with our lateral kind of sophistication, they're steeped in a lateral experience. And so I like our chances in terms of building the foundation of a business. And I think as we start to translate, there's like 30 EOS is in Australia, so it has a nice foundation from which to build. And so I think just the ability to translate that down there is also an exciting place for us. And then clearly, Japan is a place that we are hugely enthusiastic about. And so we will continue to be very narrow and deep in these markets. But I think so much of the future is about what the team looks like and we're very bullish in terms of the team that we've assembled in our international business.

And Sean, when we kind of talked about narrow and deep, I think it does reflect our commitment to bringing the lateral sophistication to the international markets. And so that is definitely how we plan to ultimately serve our patients and customers that.

There are no further questions at this time. I will now turn the call back over to Pat Miles for closing remarks.

Thanks very much, Angela. And thanks, everybody for your interest in ATEC. We are just beginning and so clearly a lot of growth this year but our best days are yet ahead. And we appreciate everyone's interest in ATEC. Thanks much.

This concludes today's call. You may now disconnect.