Thank you, guys. Good afternoon, and last session of the day, Wednesday. So I'm Teavon, associate in the healthcare group. Please introduce here Pat Miles, who's the CEO of Alphatec, or ATEC for short. He's going to go through a presentation of the company and maybe a brief Q&A afterwards, but Pat, leave it to you.
Thank you.
That was exceedingly warm, thank you. It's a pleasure to be here, and I feel like we're the anchor to the day, and so it's great. My name is Pat Miles. I am the Chairman and CEO of Alphatec Spine. I am a 30-year veteran of the field, and it's candidly a field I'm significantly passionate about. About seven years ago, we turned around a struggling company, and I'm proud to kind of share with you what's transpired to date, but I would tell you, there is a lot of opportunity to revolutionize spine surgery, and we are in the process of doing it, and so you will hear some forward-looking statements, and so review that at your leisure. A little update in terms of where we are, and I would tell you that to summarize from where we've come, we have developed a very sustainable revenue growth profile.
I'll explain how we've done that, and it's really kind of through a procedural strategy, and it really has a long runway. I'm excited to share a little bit about that. The spine market is very large, and I think the demographics of it are fantastic. It is unsettled. When you have an unsettled large market, it provides nothing but opportunity for a disruptor. I would tell you, we are disrupting a large unsettled market, and we like to say that the spine market needs ATEC. There is a historical significant lateral experience, and so there's a procedure within spine that is an approach from the side or lateral. We had previously developed it with a previous company, and so we are the originators of that technique, and who better than the originators to further it? We're furthering the technique.
One thing that you'll find is spine surgery has historically been a lot of widgets, and what's been missing is information. And so what we've really built over the last several years is an informatic moat, and so we're integrating outcome-improving data to help drive better decisions in spine care. And so share a little bit about that. And really some very, very good news is we're increasingly profitable. And so we're a profitable company as of 2024, and we'll start flowing cash in 2025, which has been kind of a shift for us. And so our mission really is to revolutionize spine surgery, and you do that by doing something better. And doing something better means you create clinical distinction. And so, as I said, we're distinguishing ourselves through procedures and informatics. And when you do something better in spine surgery, you compel adoption.
And so it sounds kind of silly for me to be saying this, but it's like do something better, the surgeons come over and start to use more of your stuff, and then what you do is you attract a sales force. And so really that's been the strategic imperatives of our mission. And so the surgeon adoption has been very, very strong, and we have fueled market-leading growth for several years. We've grown at a 40% CAGR through 2023, and really that's continued in 2024. And so we grew 27% in the full year of 2024, which has gone from a 3% market share to an 8% market share position. And so, as I stated before, the growth is very durable. We expect it to continue in 2025, and it's really just a big part of our thesis is distinguishing ourselves and continue to outgrow everybody.
I think, again, the great story here is if you know spine surgery, it is kind of the land of the behemoths. It's the Johnson & Johnson, it's Medtronic, it's Globus, it's very large companies. When we started the turnaround, we knew that we had to be relevant in a hurry, and so we've been very, very aggressive in terms of the early build of infrastructure. And so now what we're seeing is kind of the scaling off of that infrastructure and demonstrating profitability. And so we had about 2,800 basis points of margin expansion in 2024, and we're really demonstrating ourselves to be profitable. If you know anything about really the orthopedic space, the money that's required to support these companies is really people and assets, and a big part of the asset build is in the instrument kits.
And if you're looking at the slide, the instrument kits are to your right, and they are of significant expense. And so for every $1 in new growth requires a $0.75 investment. And so the one core thing when you're generating operating leverage is you want to be efficient utilizers of your assets. And I would tell you another place of leverage is that we continue to get more sophisticated with regard to our asset utility, and that comes through sales force maturity. It comes from a density in terms of where we're seeing our sales. We're doing a better job with surgical set efficiency, meaning we're turning them more frequently. The data is better. The internal infrastructure of systems that provide us information is better. We're utilizing the infrastructure properly, and as I said, the data insights are very good.
And so as we roll forward, really the expectation for more profit improvement is apparent. And so in 2025, our expectation is about $75 million of Adjusted EBITDA. And as you look forward, it's really continued clinical distinction driving more significant growth and reflecting it profitably. And so we'll do $732 million as our guide in 2025, which is $75 million, as I said, in Adjusted EBITDA, and we'll be flowing cash. And so we want to be a self-sustaining entity, and we have built a significant infrastructure, so we can't be more excited to continue to be self-funders, if you will. And so the part that really inspires me is really what's ahead. And the spine market, as I said, is an unsettled place, and so what we want to do is continue self-funded market share expansion. And there are a lot of challenges in spine surgery.
I think if I polled this group, you'd realize that every one of us have had a friend or a cohort that has had a challenging spine surgery. And so it just reeks of a space that requires innovation. And so I think a place or a statistical group that is reflective of that is if you look at total knee surgery, the revision rate in total knee surgery in three or in five years is 3%. In total hip surgery, it's 5% in a 10-year period. And then you go to spine and you say, "Gosh, in short-segment degenerative surgery, it could be in the upwards of 10%-15% in one to three years." That's not a durable experience, and it just, again, screams of opportunity for advancement. And then you talk about long construct adult deformity in two to five years of 30%.
If I told a patient, if I was a surgeon, that they're going to have a 30% chance of a revision in one to three years, we're not going to get a lot of takers. And so you ask yourself, how do you make for improvement? And I'll go into that, but it really just screams of opportunity. And so we feel like we'll go from an 8% player to a double-digit player based upon the clinical distinction that I was describing. And so I think when you participate in the land of the behemoths, you ask yourself, "What's different about ATEC?" And one huge difference is our existence is purely dependent upon how well we do in spine. We are 100% spine-focused, so we live and die by how good we are at this. And so I would tell you, we're down in Carlsbad, California.
We have an unbelievable assembly of people. People are what makes companies, and I would tell you we have unmatched know-how from a clinical expertise perspective, and that's what really gives me such the bullishness is we've demonstrated the capacity to do stuff better, which has been reflected in the run rate. One way to do that is if you think of historically what's gone on in spine surgery, it's been an implant, an implant, an implant, and our thesis has always been, "Hey, what procedure, what assembly of goods ultimately reflects and improves spine care?", and so we believe in what we call proceduralization. I'm not sure it's a word, but it's what we believe in. The way that you make things better is ultimately providing information that drives better decision-making, and that's the kind of informatic piece that we're talking about.
And so we want to integrate data to improve clinical decision-making. And when you participate in this market, you got to have a full bag, and you got to be able to address all kinds of different pathologies and whatnot. And so it's always interesting to me because it's like, "Why does spine focus matter?" And it's because it creates a clinical understanding that ultimately enables us to continue to evolve. And I think that we're such believers that innovation comes from the operating room, being students of what the requirements of surgery are. And so often, I think board decisions impede innovation. And so we love to say that innovation comes from the operating room and not the boardroom.
So much of the proceduralization effort is about variable mitigation, and I think it's a way of saying, "How do we make for a more predictable environment based upon the assembly of goods in a workflow?" And so when you start to think about what are the goals of spine surgery, and we'll refer back to these, but if you go into a spine surgery, often, really almost all the time, is a surgeon wants to do a decompression, meaning take pressure off a nerve most often. They want to fix the spine because sometimes it's the instability that causes the pain. And then they want to align. You want to be properly aligned in a normative state such that you don't require a bunch of musculature to hold yourself up.
And so when you start to think about what the requirements of the environment are and you architect the procedure to ultimately reflect the requirements of a pathology, then the opportunity to make it better is relatively evident to us. And so we are just evangelicals about clinical distinction really kind of driving the surgeon adoption. And so I think we leverage a great history of experience to be able to do that, and I think it's playing out. And we really kind of live by the moniker that good surgery is good business, and it's playing out like that. And I think that historically we were a big part of creating great surgery with a lateral approach. And as I stated when I started, it's like if you create something, the opportunity to understand how to better it is very evident.
And so when you start to think about a successful procedure historically in spine, the lateral approach has really been one. And so it's reflected in limited blood loss, lessened hospital stay, and faster return to normal activity. And it's been buoyed by a lot of peer-reviewed publications that in essence support it. And so it's a long time seeing minimally invasive reconstructive spine surgery come to fruition and ultimately see it verified in the peer-reviewed literature. But when you start to think what opportunities we have to make it better, it's evident that there's ways to improve it. And kind of the first generation of what we did previously didn't fully address all of the goals of spine surgery. And so when you think about what's really driven the ATEC momentum, it's really kind of been we've revised and really improved the lateral approach.
And you'll hear it called PTP, which is prone transpsoas surgery. And so the beauty of it is where the first generation required to rely on an indirect decompression, we have the ability to do a direct decompression. There's different positions that surgeons like to place stabilization tools or pedicle screws. And in a lateral position, it was very difficult. In a prone position, it's very simple. In alignment, when your belly hangs and creates curvature in the spine, there's a much more predictable way to ultimately create lordosis or alignment. And so we've really kind of improved upon what we'd previously built. And when you look at the growth rate, it's reflective of just a clinical distinction driven a lot by the lateral portfolio. And so when you see things like retractors and screws and interbody devices, it's not as though those aren't easy to replicate.
But what is extraordinarily hard to replicate is the informatic that drives better decisions. And this is where SafeOp comes in. And really, it's a competitive moat around the procedure. If you think about the anatomy from the side of your body to your spine, so skin to spine, really the most important anatomy there is what's called the lumbar plexus. It's a neural assembly or a neural bundle. And so when you approach the side of the spine and create an operative corridor or an exposure, what you care about is, "Am I going to hit the nerves? Am I going to hit the nerves?
And am I going to hurt the nerves?" And so one of the things that we've done with SafeOp is we've been able to say, "Hey, we know exactly where the nerve is and describe that to you." And then we've also been able to say, "Hey, here's the health of the nerve." And so when you create an exposure, the one thing you want to do is make sure that you mitigate the potential complication of a neural issue. And so it's been highly predictive, and there's nothing better than to be able to tell a surgeon, "Hey, listen, the nerve is starting to lose part of its signal.
You need to respond or you need to do something different." And again, when you start to think of value creation in a space, what you want to do is make sure that the surgeon understands where they are from a neurologic perspective. And so these things are tremendously difficult to do. And so when people start to say, "Gosh, we can do that," they really can't. And so that's been such a key driver of our success is just having the capability to effectively describe where we are from a neurologic health perspective. And so when you think about single-position surgery or you think about what we call PTP, really it achieves all the goals: the decompression, stabilization, alignment, and it creates a very predictable and reproducible experience. And what surgeons want to do is they want to see the patient in the office.
They want to understand what the requirements of the surgery is, and they want to be able to describe to the patient exactly what's going to happen, and then they want that to happen. And with all of the variables in spine surgery, it's much different than a single joint type of surgery. That's very, very hard. And when you provide that to them, it creates a lot of confidence. And again, I think the demand side of our business would be reflective of, "Hey, there's a lot of momentum in that, and there's a lot of people who have had a very positive experience," as this is really the area of sophistication that's led to the multiples of growth compared to anybody else. We also have a lateral transpsoas approach where the patient's in the lateral position. That has also done very well.
It also utilizes the SafeOp tool that ultimately, again, distinguishes the neurologic location and health, and that's been, again, another key driver. I would tell you we've maybe got a little ahead of myself, but we've been very fast, and we are best in class in lateral surgery, but we also know that we should not and will not stop, and so we believe there's opportunities to continue to improvement, and we believe that our ability to ultimately continue to integrate informatics into the technique in a way that just continues to distinguish us and make it easier. The other thing is to democratize it. One of the challenges with the old lateral was that it was less applicable to certain types of pathology, so there's only about 30% of the population that would do it.
Again, with the utility of integrating informatics, the opportunity to bring more surgeons into the fold that ultimately can apply this to their patients is greater, and so we feel like that's a very significant deal. The other thing is, again, having been at this a long time, you start to see the demographics of utility and where we are in the phase of maturity of this technique is we're seeing people use this in reasonably simple type of applications surgically, and so often what happens is surgeons get experience in a simple type of application, then what they do is expand to more complex indications of surgery.
And so what you're seeing here is where they may have done something short and degenerative in the past, we're starting to see people do increasing complexity of things like tumor surgery and trauma surgery where they take out the entire vertebral body, which is called a corpectomy. And so the increasing complexity is clearly coming forward. And so what you're seeing is oftentimes it gets reflected in more expensive implants. And so as you continue to see the ASP being reflected, you'll see a growth profile in the ASP. And so we're excited about that. As I said, having been at this since the beginning of the turnaround, it was a bit lonely in the early days telling people that we're going to do lateral surgery from a prone position. And there were many dinners with myself, our CMO, who's Dr.
Luis Pimenta, who's really the pioneer of the lateral approach. He, myself, and two others at dinner, and garnering a following was somewhat of a challenge. I think that when you start to look at the type of interest that people are having in what we're doing today, this is just an example. We were at the North American Spine Society meeting and had the surgical stadium, and it was standing room only, so if you want to appreciate kind of a significant evolution in the enthusiasm around a technique, Luiz Pimenta draws a crowd, and I think that the unbelievable experience with regard to the application of PTP is being reflected in the enthusiasm by the attendees, so the lateral market historically has been about $1 billion, and that would be just reflective of those surgeries that are applicable to somebody to approach a spine lateral.
And we've gone from, I think, 12% last year to 16% this year, so we continue to make our way and continue to distinguish ourselves. The beauty is, as I said earlier, a lot of surgeons, what they do is they apply the procedure that's reflective of the requirements of the pathology. And when you appreciate why people have historically gone directly from the back, the beauty of doing lateral surgery on your stomach enables you to ultimately expand the market tam to really a $3 billion market tam because the applicability of the procedure is much more widely expanded based upon the ability to address posterior pathology. And so I said earlier that when you do something very, very well and you create a level of confidence with a surgeon, oftentimes that confidence gets reflected in more of their business.
And so what we're seeing is more of their business in what really is what we call the halo effect in other less distinguished or less differentiated procedures that they do. And so our share of their practice grows when we bring something new to them and we improve their capacity to care for their patients. And so we're seeing that in real time. Several years ago, we acquired a company called EOS Imaging. And I think that some people were like, "Why would you buy an imaging company?" And I think so often people look at themselves as one thing, but we realize that the value is in something else. And so it's an imaging company that we deem to be an informatic play.
Much like we talked about SafeOp providing information to drive better decision-making, we felt like the most coveted image in spine would be valuable as it relates to addressing another challenge in the field. EOS is a full body. When you stand in the system, it's a full body standing functional global alignment assessment tool. There's no stitching errors, no magnification. The radiation is 5x less than an X-ray. It's reduced exam time. As you can see, you get a full body view of a patient. It is the most coveted image in all of orthopedics. When you think about, "Gosh, can I translate the most coveted image where you know that there's a problem in the field into a piece of information that ultimately will improve care?" That's what we really set out to do.
And I was at what's called the ISDS, which is the International Spinal Deformity Symposium, recently. And I just thought it was a phenomenal presentation by Bassel Diebo, who's a surgeon at Brown. And when you start to think about improving something, what you think about is objective measure. And so much of spine surgery today is gestalt or it's art. And you're like, "How do you make something better if everybody's an artist?" And I thought it was very, very fascinating that what we want to do is create a level of precision by creating objectivity and create a level of predictability.
And so when you see that 50% of spine surgeries are revisions, which is horrific, and 90% of them are due to malalignment, and then you say, "We own an image that ultimately enables you to understand alignment," we feel that is substantial value that we can translate. And then when you start to say a fraction of the 5,000 spine surgeons do the majority of the reconstructive work in the United States, a fraction of those plan their surgery. And again, I think that those people who may not be as familiar with the field should be spooked by that. You would hope that every surgery would be planned and less than 10% of spine surgeons use any type of surgical planning software. And so when we start to think about opportunities to move the field forward, our view is that this is a heck of an opportunity, right?
It's like if I could start to automate these elements and drive a level of predictability associated with alignment, that should be nothing but a significant opportunity. But it's a big investment. But if your interest is in moving a field forward, these are the type of investments that you want to make. And so our influence in terms of improving durability, as I said earlier, spine is done at such a significant revision rate. And as Dr. Diebo talked about, most of them are through malalignment. So our thesis was if we can go ahead and automate alignment reports from the image. So you stand in the image, you get the image in clinic, we provide the patient or the surgeon an automated report that says, "Hey, this is what the alignment is of the patient." And then what we do is we automate surgical planning.
The surgical planning is informed with our implants, and so we, in essence, say, "Hey, here's what you need to do. Here's what we expect that you will get." We can facilitate patient-specific or customized implants to ultimately reflect the requirements of that surgery, which again is an adjunct and an opportunity to monetize this service, and then in the operating, we can provide you, "Hey, did I get everything I want based upon what my plan was?" and so we call that intraoperative alignment reconciliation, and so what we want to do is make this less art and more of an objective measure that reflects the requirements of this need, and then from a post-op perspective, did I get everything that I intended to? And then throughout that entire process, how do we collect the data to ultimately inform what's forward?
That's where I think that if we can drive more data-driven decisions over a period of time based upon demographics of patient populations, we feel like the opportunity for us to own a dataset that's profoundly valuable in the field is great. So right now, we have 100 EOS Edge units. We have about 225 EOS units across the United States. About 125 of them or 130 of them are previous generation. We have 100 of the EOS Edges that we can apply this software tool to. So we are sprinting at the long haul of building a population of EOS units out there such that we can make this such a relevant tool. We're monetizing it through the implant pull-through. The workflow and clinical benefit is in really kind of all surgery. The most immediate relevant understanding is going to be in long constructs.
But we think the automation thing becomes just so important. Data collection in spine, over my 30-year experience, has been horrific. You'd be underwhelmed by the data collection. It requires an automation. If it takes extra work for a surgeon to do, these guys are working their tails off. You have to be able to automate these things to ultimately provide them the type of data and information to improve what they're doing. And so what you're seeing on the far right is really kind of the AI-driven automated alignment. It literally just takes a couple of minutes. This is what so many residents and fellows are doing by hand. And when you say that this is a driver, so the most correlative element to a durable long-term outcome is alignment.
And when people are measuring these by protractors and the like, when we have the type of technology to automate these things, we just think is absolutely crazy. And so this tool is something that is highly valuable. On the right side, you see the surgical plan. And what happens is the opportunity for us to inform the surgical plan and talk to the surgeon about a normative position of the spine based upon their intervention is such a valuable tool. So you start to think about minimizing revision surgery and impacting and improve care. Our capability of designing these constructs and understanding the constructs within individual demographics is very, very valuable. And so that tool becomes of significant importance. But if you have a great plan and you don't have a way to reconcile it intraoperatively, it minimizes the potential for the success of the plan.
And so we also have an intraoperative reconciliation tool that says, "Hey, here's the plan that you intended. Here are the measurements that we have identified. Here is the opportunity to reconcile your plan into what we're doing." And so you don't leave the operating room with a person that's malaligned based upon your inability to reconcile it intraoperatively. And so the other great part is these plans enable us to continue to refine the implant that's reflective of the specific requirements. And so when you start to think of ATEC as a company, we very much distinguish ourselves from a procedural perspective in that we've grown the company in a very fast way by distinguishing ourselves procedurally. We feel like this is the route to a more predictable future. And this is the longer play. And so we are really spine's only end-to-end standardized imaging solution.
Really, the ability to capture exponential data points that will inform trends and practice analytics and clinical research and data-driven improvements and should this patient have surgery or not, understand how they walk. Not to mention, we talked a lot about kind of the leverage of the company and the importance of continuing to drive efficiency through the instrument trays. It's such a big investment. For us to customize configurations and make sure that what we're doing is just shipping what's required versus general configuration is an opportunity to continue to leverage the spend of the company. We like to say that there's a proven playbook to inform surgery of ways to make better decisions. We've done that. We've demonstrated with regard to SafeOp in lateral, and we feel like it's a proxy for what we're doing on the EOS front.
The opportunity to inform and make better decisions based upon an informatic tool is something that is near and dear to us and something that there's great competency internally in. I showed a little picture of our navigation robotic tool. One of the other things that we're doing is I would tell you we're the procedure guys. We understand spine, and you could probably hear in my voice there's a great passion for the field. The opportunity to continue to expand precision, increase efficiency with things like navigation and things like robotic is apparent to us. We feel like integrating them into the workflow of a procedure is the magic. It's like, "I don't want to be known as the robot guys.
What I want to be known as the guys who have procedures that only fulfill the requirements of what the pathology needs are." And so we're running at the verification of this device. We expect it to be out mid-year. I think the big impact will be out in 2024 just as we start to set more systems across our user base. The workflow is very simple. And again, it's probably a mid-year type of reflection. And so we're big believers in informatics. We've made investments in informatics, and we believe that clearly the SafeOp one drove the expansive growth to date. And we feel like we have others forthcoming. That's a big deal. Again, having a little bit of experience in this, we have in companies past built huge infrastructures for international and not been served by them. We've been very focal with regard to our international footprint.
We've committed to Australia and New Zealand as well as Japan, and we see them as both extraordinarily formidable markets. They're reflective of the type of surgery that we profess. The regulatory clearances are done and straightforward. The surgeon training is underway. We have a great sales presence in both areas, and we have direct teams in both, and so we've been selling in Australia and New Zealand for a couple of years now. We just started in Japan in December, and so we haven't built a huge internal infrastructure to support it because we don't need to, and we'll stay very focal with regard to what our international footprint is. We're a domestic and narrowly focused international. By 2027, we expect the contribution to be in the $30 million range when we reach $1 billion as a company, and so we remain focused.
We said that the long-term financial commitment is. We said in 2023 that we'd be $1 billion in 2027, which is a 20% CAGR. We said the adjusted EBITDA would be $180 million. We're on track for that, which is a 2,000 basis point margin expansion. We said an adjusted EBITDA of 18% and flow $65 million of cash. We are in a great time in the company's history. We're growing like a weed, and we're translating that leverage to a profitable company. We're excited to self-fund and continue to drive free cash flow. In summary, I would tell you, if you walk away with anything, you got my diatribe about spine surgery, is we are going to sustain a growth leadership position based upon the investments that we made to date. We're going to continue to increase profitability through growth.
And we've already built the infrastructure, and we're going to continue to drive leverage off of that. We're going to continue to flow cash through the discipline commitments, 25 inflection, which is an exciting time. Felt like we had to invest early. And we're going to continue to self-fund ahead. And we have ample liquidity to execute the plan and continue to create shareholder value, which we're super excited about. So that is our story. And so we're proud of it. And so anyway, thanks very much. Happy to take a question or two if that's of interest. If not, appreciate your attention.
Perfect. Thank you so much. Any questions?
That was a smattering.
Any questions in the audience? Okay. I have, oh, please, yes, go ahead.
Two years ago, we acquired the navigation system, which was already 510(k) registered. What kind of modification or changes did you apply to this navigation system to make it part of your proceduralization? Thanks.
Yeah, it's a great question. The 510(k) was for a different pedicle screw system that wasn't ours. And so you end up having to redo all of the efforts there. And so we redid all of those efforts. We also felt like there was opportunity to improve the interface that the surgeon engages. The other thing we wanted to do is add a navigation piece. And so we think freehand navigation with robotics that is procedurally designed is more important than just a robotic that places screws. As you looked at all the demographics and said, "Gosh, why are people getting revisions?" It's not because of mal screw placement. It's because of malalignment.
And so the opportunity for us to say, "Hey, we love the value that a freehand navigation can have mostly, I think, in the front of the spine where you navigate a dilator for, say, PTP, and then add that to the simplicity and the small footprint of what we acquired to deliver screws," we think is a great opportunity. And so it's just taken some time to redesign that in the way that we intend to integrate it into the operative experience. Thanks. Yeah.
Perfect. Perfect. Pat, thank you so much for your time. Thank you for the presentation.
Thank you.
Everyone, thank you for coming out.