Good afternoon, everyone, and welcome to the webcast of ATEC's Second Quarter Financial Results. We would like to remind everyone that participants on the call will make forward-looking statements. These statements are based on the 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. Reconciliations 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 views 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. Please go ahead, sir.

Thanks, Mark. I really appreciate it and welcome to the Q2 2025 financial results call from ATEC. There will be some forward-looking statements, so read that at your leisure. I would consider this a good to great quarter. Q2 2025 financial results show surgical revenue growth of 29%, which is about 6x the market, so I believe that is growth leadership. We achieved $23 million of adjusted EBITDA, which is a record for us and 13% of revenue, improving 880 basis points year-over-year. This has inflected us into producing $5 million in free cash flow. The profitable revenue growth leadership has continued, culminating in $186 million in total revenue with a total revenue growth of 27%. As stated, the surgical revenue growth stands at 29%. In terms of same-store sales, revenue growth in established territories reached 29%. This indicates that demand in established distributor areas continues to grow; it’s not just about adding personnel. The surgeon user growth of 21% is notable and suggests compelling adoption. The $23 million of adjusted EBITDA marks the fifth consecutive quarter of positive adjusted EBITDA, reflecting a 4x improvement over last year's same quarter. We are clearly well past the inflection point on profitability. We are not only leveraging infrastructure investments but are also witnessing the benefits of the changes implemented last year regarding expense control. Our infrastructure is poised to support over $1 billion in revenue, and enhanced EBITDA performance combined with focused asset management has generated $5 million in free cash flow. I’m proud of the team and their achievements, with $217 million in cash and access to cash. We are profitable from a non-GAAP net income perspective and our rapid growth has positioned us as the third largest in market share in the U.S. Overall, I consider this a good quarter. I will now turn it over to Todd for further details.

All right. Thank you, Pat, and good afternoon, everyone. I'll begin today with the second quarter 2025 P&L highlights. Total revenue was $186 million, up $40 million year-over-year, reflecting a 27% growth compared to the prior year. This revenue is composed of $168 million in surgical revenue and $17 million of EOS revenue, with the first quarter surgical revenue of $168 million showcasing a 29% growth over the previous year. That represents $38 million in year-over-year growth. There was no selling day difference year-over-year as we include Good Friday in our selling day calculations, given its similarity in surgical volume to other Fridays. Procedural volume growth was 28%, propelled by a strong surgeon adoption rate of 21% and increased utilization of 6%. Such strong surgeon adoption reflects our portfolio's appeal and the targeted investments we are making in sales talent to meet this demand. Average revenue per procedure increased by 1%, indicative of a strong comparison from the prior year's average revenue per case. Our same-store sales in the U.S., from agents who have been in territory for more than a year, also grew 29% year-over-year, demonstrating significant growth in our established markets. Our strong surgeon adoption, increased utilization, and same-store sales growth is a testament to our efforts in increasing share of wallet with existing surgeons and attracting new surgeons. We know that clinical distinction drives surgeon adoption. In the first half of the year, we enhanced our clinical distinction by expanding our procedural offerings, which now include a new cervical retractor system, a segmental cervical plating system, corpectomy solutions, and new applications for SafeOp in MEPs. Our investment in organic innovation creates a foundation for future growth. EOS revenue increased to $17 million in the first quarter, marking an 11% rise compared to last year. Demand in the U.S. market, where we have a strong implant sales force presence, continues to be the primary growth driver in terms of both deliveries and new orders, positioning us for substantial system installations and the associated implant pull-through in the upcoming years. Looking at the rest of the P&L, first-quarter non-GAAP gross margin stood at 70%, consistent sequentially but down 130 basis points year-over-year, primarily due to increased biologics attachment rates and product mix associated with our cervical business strength. Non-GAAP R&D was $14 million in the second quarter, reflecting an increase both sequentially and year-over-year, as we continue investing in long-term growth. Non-GAAP R&D expense constituted approximately 8% of sales in the quarter, with top-line growth yielding 170 basis points of leverage. Non-GAAP SG&A of $108 million accounted for approximately 58% of sales in the second quarter, which was down $4 million sequentially. Year-over-year absolute increases in SG&A were driven by variable costs associated with the 29% increase in surgical revenue, while non-variable SG&A expenses decreased in absolute terms year-over-year. These reductions highlight operational changes made to increase emphasis on profitability and cash flow. SG&A improved by nearly 1,100 basis points year-over-year, with 800 basis points attributed to variable expense rate improvements and infrastructure leverage. An additional 300 basis points of improvement came from utilizing depreciation related to prior year instrument investments. Total reported non-GAAP operating expense was $122 million, roughly 66% of sales. By maintaining discipline while supporting strategic growth initiatives, we delivered a modest 7% increase in operating expenses while investing in key growth areas. These actions, coupled with strong top-line growth, drove over 1,100 basis points expansion in our operating margin year-over-year. Regarding adjusted EBITDA, it reached $23 million, or 13% of sales in the second quarter, compared to $6 million and 4% of sales in the same quarter last year, marking an $18 million increase. This is our best performance since ATEC's transformation began. The quarter also reflects our third consecutive period exhibiting over 40% drop-through on year-over-year revenue growth to adjusted EBITDA, demonstrating both infrastructure scalability and an improving variable selling expense profile. Our trailing 12 months of adjusted EBITDA stands at $62 million. We are achieving meaningful margin expansion aligned with the priorities outlined in our long-range plan, thanks to disciplined execution. These promising results instill confidence in our ability to meet our financial commitments and convert revenue growth into profit and cash flow. On the balance sheet front, we ended the first quarter with $157 million in cash and had an additional $60 million available on our revolving line of credit, which remained undrawn at quarter-end, bringing total cash and available cash to $217 million. Our positive free cash flow of $5 million was at the favorable end of the previously communicated range of $0 to $5 million. A record $16 million in cash generated from operating activities allowed us to continue investing in surgical instruments while still delivering positive free cash flow, increasing our overall cash balance sequentially by $4 million. The company's progress towards cash flow generation is becoming evident, with our trailing 12 months of cash use improving to $22 million this quarter. This year, we are benefiting from the operational enhancements we are implementing, including better planning of inventory purchases, hiring strategies, and operational standards for field assets. I am proud of the teamwork and results we've achieved across our company in this domain. Meeting these goals contributed to our positive free cash flow in the second quarter, reinforcing our confidence in becoming cash flow positive for the full year. Given the growing trend of EBITDA we are generating, our focused asset management, and our strong cash position, it is clear that we do not require additional financing. We expect sustained strong revenue growth to drive incremental profit margin expansion for this year. We are raising our full-year revenue guidance by $8 million to $742 million due to the robust Q2 performance in our surgical business. Our revenue outlook for the full year '25 anticipates our unique procedural approach will drive surgical revenue to around $666 million, with EOS revenue expected to reach approximately $76 million. Regarding free cash flow, our performance in the second quarter strengthens our confidence in delivering positive free cash flow for the entirety of 2025. Concerning cash flow timing for the remainder of '25, we project third-quarter free cash flow will range from a positive $1 million to $5 million, with the fourth quarter yielding additional positive cash flow, resulting in positive cash flow for the full year 2025. For adjusted EBITDA, we anticipate that sales growth will continue to leverage the infrastructure we’ve built, contributing to an adjusted EBITDA of $83 million, an increase of $5 million from our previous guidance of $78 million. Notably, the trailing 12 months of adjusted EBITDA at $62 million as of the second quarter underscores our capability to fulfill our full-year commitment of $83 million. Please remember that our adjusted EBITDA guidance accounts for the impact of expected tariffs in the latter half of the year, which we estimate will be in the low single-digit millions for the full year. We are off to a great start at the halfway mark and are confident in our ability to deliver on our commitments for the second half of the year. The chart depicted emphasizes the considerable profitability progress we are achieving and the powerful potential of our business model to enhance future profitability. Our adjusted EBITDA guidance of $83 million translates to an adjusted EBITDA margin of 11%, representing a 40% conversion of incremental revenue growth to adjusted EBITDA. This trajectory positions us well to attain our 2027 adjusted EBITDA margin goal of 18% at $1 billion in revenue. Reflecting on our financial results at the year's midpoint, I would highlight a few key points: First, we continue to grow at 5 to 6 times the overall market. Second, we've generated $62 million of adjusted EBITDA over the last 12 months and reached 13% of sales in the second quarter. Third, we recorded our first quarter of non-GAAP net income of $3 million. Lastly, we achieved positive free cash flow of $5 million this quarter. I believe it is safe to state we have surpassed the profitability inflection point. It's thrilling to observe the team’s hard work manifesting results, establishing us as a profitable growth company. I will now turn the call back to Pat.

Thanks, Todd. I greatly appreciate it. I want to provide some meaningful insight into the sources of our growth and the reasons for this growth. I would describe our strategy as steadfast, and our execution as relentless. We are fulfilling our commitments. The pillars of our business prompt us to ask: Are we doing something better clinically? Are we creating clinical distinction? Clinical distinction indeed compels surgeons, which is reflected in the 21% new surgeon growth. We will continue expanding and enhancing our sales force. Under these three pillars, significant positive developments are occurring. It’s noteworthy to highlight our previous statements about how the spine market needs ATEC; this is not a boastful remark but rather a statement that reflects the unsettled nature of the spine market. If you ask ten spine surgeons how to approach the same patient, you will receive ten different answers. This inconsistency arises due to the complex nature of spine surgery, which is accompanied by numerous variables that diminish durability. For instance, the revision rate in spine surgery significantly outstrips that of total joints, evidenced by total hip surgery having a revision rate of around 5% over ten years and total knee surgery at 3% over five years, compared to spine surgery revision rates anywhere between 15% to 30%. This variance necessitates greater control. Historically, the industry's response has been to add more tools for precision in implant placement. However, I assert that this approach is insufficient. Our view is that the challenges are much more intricate, demanding more sophisticated solutions. This understanding has driven the design and development of our ecosystem, which addresses intraoperative challenges and enhances care through data-driven decision-making. What we have constructed is a scalable ecosystem for long-term operations, supported by previous investments in technology that facilitate durable growth and profitability. These investments empower us to amplify the value of each technology and integrate them into a cohesive, comprehensive system. Our end-to-end ecosystem influences not only intraoperative phases but also guides preoperative decisions and postoperative analytics. This data-driven insight resides in our insight portal, employing AI and machine learning models to refine decision-making processes. We believe these elements are pivotal in cultivating a long-term growth structure amid the numerous challenges in spine surgery. Our foundational investments in informatics including SafeOp, Valence, and EOS allow our ecosystem to materialize. We're currently architecting a seamless process for spine procedures, something previously unseen in the industry. The goals of spine surgery include decompression, stabilization, and alignment; providing critical information about the nerves through SafeOp—such as the nerve's location, health status, and overall condition—is fundamental to a successful intraoperative experience. Our capability to assure precision in implant placement or stabilization via navigation and robotics through Valence represents a vital piece of this puzzle. We are on the verge of launching Valence, and I want to elaborate on our market approach. Primarily, ATEC is a procedure company. Valence will be intricately woven into the step-by-step workflow of our proprietary spine procedures, like PTP. Navigating the anterior column combined with neurophysiology will enhance the elegance of the process. The robotic assistance in screw placement at the rear will establish the first fully integrated system. This achievement democratizes surgical techniques for broader audiences of surgeons who may have hesitated due to unfamiliarity with lateral surgery. We see this as another catalyst for growth. The system features a compact footprint, designed to occupy minimal operational space while allowing aggressive placements. Our pursuit is to create the best- integrated system possible. Our initiative is to leverage objective measures that mitigate variability in procedures. While other companies focus on merely expanding their product offerings, we aim to reduce variability through measurable objective metrics. We are objectifying the spine experience by introducing scientific tools to surgeons rather than relying solely on surgical experience. History has shown that manual processes often fail; thus, automation is key to streamlining data collection and analysis for improvements in surgery. We have just begun to utilize data mined from our ecosystem to enhance our procedures—there is still a journey ahead. It is important to understand why we express that the spine market needs ATEC. Notably, the high revision rates in spine surgery validate how our strategy—focused on reducing variability and providing clarity—resonates with customers. Our success is mirrored in the recruitment of top-tier sales personnel, underpinning our assertion that the spine market necessitates ATEC. After more than six years of consistent growth at rates exceeding the overall market, we are now recognized as the third-largest U.S. spine player. Our unique ecosystem and procedural strategy will sustain our outsized profitable growth. As we have stated repeatedly, our focused efforts will continue to yield rewards. Our unwavering commitment to spine surgery, paired with a team that possesses unparalleled clinical expertise, positions ATEC as the preeminent choice in this sector. I would also like to remind you that our journey is just beginning; our ecosystem has much to achieve in terms of improvements, and our best contributions are yet to come. A heartfelt thank you to ATEC's team, as it is their efforts that have driven this momentum. With that said, we are now open to questions.

And the first question comes from Matt Miksic at Barclays.

I just wanted to congratulate you on a really strong quarter. The top line performance and the direction of cash flows is impressive. So, congrats. I wanted to ask a bit about, Pat, a question that I often get as well. Given how well things are going, folks start seeking something additional. As robust as the top line is, the lateral and prone lateral segments are thriving on the enabling technology and digital side. This might be two parts of one question. What differentiates your robot when it's more widely presented, and what types of investments are you planning or have you made to support the integration of that complete solution—from imaging to automation to enabling technology?

Yes, Matt. Reflecting on our previous discussions about robotics is a cathartic experience for me. Historically, I remember assembling multiple products for a procedure, and the market response was a mix of incredulity and enthusiasm—people seemed inspired yet skeptical. A significant issue in spine surgery is that it comprises a multitude of variables creating a generalized equipment environment. What sets us apart is our procedural architecture aimed at a specific application. The real potential in navigation robotics lies not only in the technology itself but in how we can integrate these aspects into the surgical workflow. Our track record with lateral surgery has helped us establish a significant run rate, bolstered by a distinct know-how regarding the assembly of components. My focus on navigation robotics resides in ensuring reproducibility in surgical procedures, enhancing precision without radiation exposure. Understanding how to integrate these tools into the workflow will elevate surgical accuracy. The interoperative camera we have designed allows for flexible positioning to obtain optimal views without obstructive operators in the room. Those in the investment community might not grasp the chaotic atmosphere that exists in an operating room. A streamlined workflow facilitates an execution-oriented environment rather than one clouded with decision-making that should occur before surgery. We strive to employ a technology-centric aesthetic to help surgeons execute their plans effectively.

Your next question comes from the line of Young Li with Jefferies.

To start, curious about your strong same-store growth. How much of that is attributed to reps added two years ago, and how much is tied to the increased availability of instrument sets from last year alongside some efficiency initiatives related to these instruments?

I'll start with the subjective view and allow Todd to tackle the objective. Often, I wonder if we effectively communicate the success of our internal teams. We have evolved substantially as an operational institution. When considering asset utility, our team has matured immensely, and I tip my hat to them for their efforts. The same-store sales dynamic reflects how compelling our offerings are. Despite possible skepticism regarding adoption, I can assure you that growth will continue due to heightened sophistication in the field, compelling more professionals to join us. I cannot quantify the effect of new personnel but I’ll leave harder analyses to Todd's expertise. We cherish our same-store sales as they indicate a demand profile reflecting our clinical distinction and compelling adoption.

There are various ways to interpret this. Clearly, the personnel we added over the last 12 to 18 months have significantly contributed to our growth. The impact of our strategies resonates over the course of 12 to 24 months. It’s the surgeon adoption and utilization that are pivotal drivers. We exhibited strong utilization and surgeon adoption during the quarter, underscoring our penetration story. This is closely tied to Pat's commentary about robust same-store sales. However, we also see enhanced utilization from our existing surgeons, who apply our procedures to more intricate challenges, leading to greater share of wallet over time as this dynamic unfolds. Our efficiency and utilization of instruments contributed similarly; our operational sophistication has afforded us greater flexibility in positioning assets strategically. We are closely monitoring the performance of these opportunities to maximize asset utilization.

Congratulations on attaining the third share in the U.S.

Your next question comes from the line of Vik Chopra with WF.

Congrats on a nice quarter. I have two questions. You’re guiding for over 20% organic growth this year. Could you share any considerations as we model for Q3 and beyond? I also have a quick follow-up.

Vik, as I review our trajectory, we initially guided for $732 million, and now we stand at $742 million, reflecting a $10 million increase since our initial guidance. While the usual seasonal dip from Q2 to Q3 is anticipated, I think that the upcoming second half will likely be higher than current expectations.

That helps, thank you. Can you provide an update on your robot launch plans? Are you still on track for early 2026? Will we see it at NASS?

Yes, and yes. Similar to my earlier comments to Matt, we are actively conducting alpha tests on the robotic component, and this continues in earnest. We anticipate showcasing the navigation component and completing cases with the combined system by the end of this year. Following that, we expect the robot's influence to be fully realized in 2026. I am extremely proud of what we see unfolding—particularly the elegant utility of PTP enhanced through the navigational and robotic experience. The compact design reassures us that we can substantially influence clinical practice without the burden of large equipment, enabling us to deliver a solution comparable to those in a suitcase. Our focus remains on impactful clinical relevance.

Your next question comes from the line of Anna Sophia Runci with Piper Sandler.

This is Anna on behalf of Matt. You saw another quarter of strong surgical volume growth at 28%. Can you provide more insights into the drivers of this growth? Additionally, could you break down trends between the ASC and hospital settings?

Starting with your second question, our ASC mix currently comprises less than 10%. While it remains a minor share, it certainly presents an opportunity for growth in the spine sector moving forward. We are well-positioned in this regard, especially given that the ASC space focuses on patient selection. EOS and EOS Insights serve as excellent tools for patient selection.

I would like to add that controlling pain is crucial to the morbidity dynamics. Thus, our minimally invasive procedures are particularly suited for this setting. Ultimately, the surgeon's judgment dictates patient selection, which aligns with the overall dynamics.

As for the drivers behind our organic sales growth this quarter, volume clearly played a notable role. We witnessed more utilization contributing to our growth than in previous quarters. The overall dynamics illustrate our continued efficacy in appealing to surgeons with appropriate support from a strong sales force. I think it's easy to misconstrue the relationship between hiring sales personnel and surgeon adoption; however, in reality, the value we provide attracts qualified individuals while simultaneously meeting existing surgical demand.

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

Congratulations on the strong results. Following up on the previous question, it appears the PTP, LTP, and lateral franchises are gaining traction in the U.S. lateral market. Could you help break down this outperformance? Has it been more influenced by lateral business activities or recent product introductions? Also, could you elaborate on the halo effect noted with non-lateral products?

It's somewhat of a mix as you've described. Interest in ATEC began with the lateral segment. There's a level of sophistication attributed to surgeons like Luiz Pimenta and Bill Taylor in pioneering the lateral franchise, which has propelled our growth. Lateral procedures serve as a catalyst, but EOS is now enriching our approach to deformity and other surgical practices. We see confidence in our integrated ecosystem manifesting as relevance expands beyond lateral endeavors. Even as we haven’t fully realized EOS’s potential, evidence suggests considerable growth opportunities, particularly those tied to upcoming product launches like Valence. The nuances between cervical products may be more intricate, but they also signify opportunities within more complex surgical distinctions. Overall, our ongoing developments are indicative of our confidence in maintaining growth.

Great, thank you. Following up on the notable surgeon user growth acceleration in 2Q versus 1Q, is this primarily the result of new lateral surgeons or more from the expanding portfolio driving the increase in interest from non-lateral procedures and products?

I believe that we are spotting a trend of broader interest. We are attracting a wider audience of surgeons who recognize the value of our products and technologies. This also ties into the previous point made about special attention on our lateral offerings.

Interestingly, our market share analysis shows that where EOS is implemented, our share is significantly higher. We have not fully leveraged the value of our ecosystem. Our market growth is driven by academic institutions following the previous six months where interest from fellows and surgeons is escalating. We’re encountering an expanded interest in our initiatives and surgical approaches, suggesting a consistent and growing flow of surgeons seeking involvement in our offerings.

Your next question comes from the line of Ben Haynor with Lake Street Capital Markets.

Regarding the penetration strategy and EOS commentary, can you provide insights into geographies where you’ve historically been under-indexed? It seems adoption accelerates after reaching a certain threshold. Is there a geographic concentration that augments adoption?

In broad terms, those familiar with the spine market know that EOS imaging is highly desired. Academic institutions leverage this technology, but they seek a solution that enhances its utility. The ability to create predictive environments addressing the myriad of variables that underline durability in spinal surgery is a prime focus area. EOS serves as a foundational standard for predictive analytics, which strengthens enthusiasm for our offerings in this area. As we successfully navigate the challenges associated with high revision rates in spine surgeries, our efforts to mitigate variability through enhanced data-driven insights translate into substantial value creation for stakeholders. As a result, we observe increasing interest from academic entities eager for advancements in that direction.

Your next question comes from the line of Caitlin Cronin with Canaccord.

Congratulations on a strong quarter. Two questions to ask, but I’ll combine them. You raised guidance a bit more than the beat; could you clarify where the increased expectations may arrive in the second half? Additionally, are there any changes to your free cash flow generation expectations or timing for this year?

Thank you for your questions. As for our guidance raise, we've adjusted our full-year expectations to $742 million, up from $732 million. The increase aligns with our performance thus far, and we expect the additional revenue to materialize most prominently in Q3. Regarding cash flows, we're still on track with expectations of third-quarter free cash flow ranging from a positive $1 million to $5 million, with additional positive cash flow anticipated in Q4, keeping us cash flow positive for the full year.

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

Congratulations on the quarter. I’m juggling a few calls, so I’ll keep it high-level. On the topic of your portfolio, motion preservation is an area you haven't developed yet. How critical is this to your growth outlook, given your focus on lateral and PTP?

Motion preservation certainly plays a role, particularly in well-selected patients, but we have a significant body of work to address within our existing ecosystem. The potential advantages of what we are executing presently are profound, so we will focus on capitalizing on our strengths and extensive expertise in surgical offerings. We’re excited about our leadership in defined areas and will continue pushing boundaries without distraction toward areas where others may seek to improve.

Your next question comes from the line of Jason Wittes with ROTH.

Congratulations on solid performance. My first question is financial; regarding CapEx for the year, can we deduce it, and how should we model this moving forward? What’s your philosophy on CapEx, especially as you’re committed to positive free cash flow?

Most of our CapEx in the near term will focus on instrumentation to support surgical growth. We previously discussed how every dollar of year-over-year surgical growth necessitates a $0.75 investment into inventory and instrumentation. This instrumentation expenditure shows up in PPE&E within our cash flow statement. In my prepared remarks, I mentioned generating $16 million of operating cash, factoring in our inventory investments while spending approximately $9 to $10 million on surgical instruments, which yielded $5 million of positive cash flow. This should give you a clear idea of our cash flow dynamics. Moving forward, you can expect this $0.75 on the dollar ratio to maintain.

That clarification is helpful. Would you provide insights on EOS revenue? I assume it's primarily from capital sales, but can you clarify how much of your business is capital sales versus any recurring revenue arrangements?

Yes, we primarily sell the systems, and about $5 million a quarter emerges from recurring revenue streams, such as maintenance and warranty, while the vast majority consists of capital sales.

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

Congratulations on a great quarter! A main pillar of your growth strategy is expanding the surgeon user base into new procedures like PTP or deformity. Could you share any anecdotal evidence of how many new surgeons are trying these new procedures during their training?

From an anecdotal viewpoint, lateral surgery historically faced challenges, particularly regarding goals like decompression, stabilization, and alignment. The prone position offers easier access to achieve these goals as it facilitates aligning the spine better. Surgeons who might have dismissed lateral surgery are now showing renewed interest through PTP since it offers numerous front-to-back options. Our integration of navigation technology is further enticing those unfamiliar with lateral surgery, effectively increasing interest in that technique. Therefore, we aim to make these surgeons more comfortable through our innovative approaches and technologies. Positively, we’re seeing these ideas translate into real-world engagement.

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

To summarize, as stated in the last slide, our best is yet to come. We have substantial growth prospects ahead. We aim to position ourselves as the preferred destination for top-tier sales personnel, helping to translate our current operational achievements. Thank you all for your support and interest in ATEC.

That concludes today's conference call. You may now disconnect.