Pat Miles: Yes. I think it’s truly a great question, Brooks. Why do you see this being somewhat of a stodgy environment, as you see so many places that have committed to a provider for long periods of time? And so to un-seek those providers in a long period of time, you have to do something that’s unique. And so the deformity market is a big market. And the reason why the numbers kind of get a little wonky is because it’s not as though there’s a lateral market and then there’s a deformity market. There’s tens of collateral is used in deformity. But let’s just say, it’s a very large market. and the ability to ultimately participate in that market is a sign of sophistication. And so oftentimes, if you do the complex things well, you can do the more things well.
And what’s happened is, there’s been companies that have long been in this business that have established themselves as deformity providers. We believe that deformity is best approach from an assembly of goods, much like we have with regard to lateral. It’s a different assembly of goods. But the opportunity for us to do a patient positioner in idiopathic scoliosis, where there’s a curve that’s more flexible, we think is opportune. We think neurophysiology in terms of automating it with regard to facilitated MEPs and even using automated SSEP is valuable in those cases. And then understanding rotational deformity with regard to EOS. When you start to assemble all of those things that suggest to us a procedural requirement. And that’s where I think people have historically used gestalt.
I’m so experienced in this field that I can do it. Our view is how do we provide objective information that ultimately drives behavior. And that’s where we think that once that starts to become more commonplace, our ability to reflect an influence in that market is high.
Brooks O’Neil: Make total sense to me. I’m looking for $2 billion. Let’s go to
Pat Miles: We too.
Operator: Next question comes from the line of David Jackson with Needham & Company. Your line is open.
David Jackson: Hi. Pat. Hi, Todd. Congrats on the quarter. Thanks for taking my question. I wanted to start on lateral specifically for LTP. So for a doctor who’s doing ALIP or sorry, XLIP is LTP the path of least resistance from an ATEC product perspective? And if so, how has that launch resonated with kind of doctors? Is that where you’re seeing the most traction in that cohort?
Pat Miles: Yes, completely. It’s — so as the parcel who is in Sao Paulo taking people to beds in the early days of XLIF creation to understand the requirements of having a product development group and marketing group that understand them viscerally is so valuable. And so what you’re seeing is even we clearly communicate that PTPs the next generation to do lateral or expo, there’s still many applications where LTP is super valuable. And so what we’ve done is we’ve taken all the learnings that we’ve had from XLIF, from previous years as well as from PTP and we’ve combined those and that gets reflected in terms of a patient position. Imagine when 2024, people are still taking people to beds and suggesting that there’s nothing left to do in spine surgery that is pickable.
And then the opportunity to say, “Hey, I’m a monitoring company, but is all I’m going to tell you where the nerve is and then the monitoring is not valuable after that. But people still have side pain because of plexopathy because what they’re doing is retracting the Plexus to them. And so there’s many opportunities to continue to make these things — to improve these procedures. And I think that we’re doing those with regard to the assembly of the technology that we are to lateral. And so when a surgeon comes and tries it the collateral, what they see as the next generation of goods.
David Jackson: Okay. Great. Super helpful. And then I just wanted to clarify something, Todd, I think you said in the script, for the OpEx cadence, did you say it was supposed to be kind of front-end loaded higher in the first and second quarter? I just want to make sure whether I heard that correctly or not. Thank so much.
Todd Koning: David. My commentary was specific to the cash flow cadence throughout the year. So we’ve communicated we’re going to spend about $100 million of cash this year as part of the investment in the sets in inventory, the revenue-generating assets that will ultimately fulfill the needs of the sales folks who come and who will come. And so that’s what we’re spending it on. We spent some there. Clearly, in the fourth quarter, you can see that — and then ultimately, cash burn in the first quarter will step up from Q4. It will step down in Q2. And in the second half, it will be approaching cash flow breakeven. And so I think ultimately, that will be the cadence that we’re expecting throughout the year with respect to cash burn.
David Jackson: Okay. Great. Thank you.
Operator: Our next question comes from the line of Drew Ranieri with Morgan Stanley. Your line is open.
Drew Ranieri: Hi, Pat and Todd. Thanks for taking the question. And apologies if this has been covered already. But on balance, could you give us an update on how you’re thinking about development for the product? And with more competition coming potentially in 2025, just remind us how you’re thinking about differentiation of your system, especially as maybe more spine procedures are starting to move towards the ASC? Thanks for taking the question.
Pat Miles: Thanks much, Drew. Thanks much, Drew. First of all, I guess I can’t be more excited about what’s going on with regard to Valence. We’re getting experience. So it’s being utilized, which we suggested as much. That utilization is going to get expanded. It’s going to be — 2024 is going to be more of an evaluation, verification type of a year with regard to — it’s going to be used, like all the other robots, in a relatively conventional way in terms of just placing screws. The launch in 2025 will ultimately be a verified tool that ultimately integrates or assembles with the workflow of, first and foremost, what we’re doing in PTP. And so just the ability to assemble neurophysiology with navigation integrated into that effort will be phenomenal.
And so making sure that you know where the bones are, you know where the nerves are, and you understand what the health of the nerve is, all of those things are great. One of the virtues of PTP is you have control of both the front of the spine and the back of the spine. And so your ability to literally manipulate both those at the same time in a navigated way is fantastic. And so you will start to see that in ’25, and that’s a unique opportunity for us. And so we have the ability to navigate 2 things at once here in in the coming years. When you start to think about ASCs, one of the dynamics is that oftentimes they’re surgeon-owned. And I’ve not met a ton of surgeons who love to buy expensive capital. And so what we have done is ultimately create a footprint that accommodates the utility of navigation robotics in a way that’s procedural.
And so if we have to bring everything in the site of service, it’s really just not that big a deal because our thinking is only around the success of the procedure and the required elements that make for predictability. And so our enthusiasm with regard to the ASC is very high because the footprint of our goods is very limited and our ability to ultimately execute critical surgery within a small space where there’s not a high enthusiasm for capital is good. So that’s the thinking, and that’s where we are from a strategic perspective.
Drew Ranieri: Got it. And maybe just one more. I don’t think this was discussed, but just how — in your 2024 guidance, maybe just talk to us about how you’re thinking about competitive rep hiring and what factor that might have to play in there with any additional hires that you did or will do beyond 2023? And lastly, just can you just remind us where you are in terms of sales force headcount for year-end?
Todd Koning: Drew, this is Todd. As we kind of laid out our guidance for 2024, we ultimately said, what organization do we have exiting the year? What’s our run rate? And so that really is how we built our — what was our exit rate in ’23? That’s really how we thought about and built our 2024 guide. So it’s really a reflection of the fundamental, I think, underlying fundamentals of the business and the organization that we have in place. I think as you know, oftentimes what we do today really reflects revenue in 12 to 18 months from now. So our view is as we get more competitive reps on board and as the business may do better than what we have assumed, that might — that ultimately would be kind of what would drive an upside case to our guidance.
But fundamentally, we’re trying to put guidance out there that we believe we can achieve and have reasonable opportunities to exceed. I think that opportunity to exceed would really probably be on the volumetric side and kind of the core business and/or upside down on the reps that kind of come throughout the year. Relative to total sales force, kind of the low-300s, mid-300s. So that’s more or less where we’re at.
Operator: There are no further questions at this time. Mr. Miles, I’ll turn the call back over to you.
Pat Miles: Thanks very much, Debra. And really just thanks, everybody, for your interest in ATEC. We are in this for the long haul, clearly, and we can’t be more excited about the momentum that was created in a great year in 2023. Thank you very much.
