Alphatec Holdings, Inc. (NASDAQ:ATEC) Q4 2022 Earnings Call Transcript

Todd Koning: 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.

Drew Ranieri: 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?

Pat Miles: 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.

Todd Koning: 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.

Drew Ranieri: 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?

Todd Koning: So I think in terms of the — was the question adjusted EBITDA or revenue related?

Drew Ranieri: We can hit both.

Todd Koning: 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.