Alphatec Holdings, Inc. (ATEC) Earnings

Management highlights

### Core Business & Strategy Update - The 8-year turnaround effort has grown quarterly revenue 10x, and the core strategy of creating clinical distinction, earning surgeon trust, and building a scalable aligned sales force continues to deliver results. The company focuses on selling integrated spine procedures (not individual products) to drive better patient and surgeon outcomes, which drives adoption and compounding growth. - Lateral procedure (the company's area of core expertise) growth is in its early innings. Comprehensive integrated offerings (including SAFOM, valence, patient positioners, retractors, and implants) have improved surgical predictability and safety, leading to growing adoption: after surgeons gain confidence performing lateral procedures, they expand utilization to more patients and more complex pathologies, then expand to other ATEC procedure offerings (cervical, T-lift, posterior fixation). ### Strategic Ecosystem Expansion - EOS is a core strategic pillar: it provides access to leading academic institutions that were previously difficult to enter, and trains the next generation of spine surgeons in alignment-based, data-driven surgery. When integrated into full clinical workflow (diagnosis, planning, intraoperative care, follow-up), EOS generates structured clinical data that creates a long-term competitive moat, and early results show 32% higher implant revenue for accounts with EOS Insight installed. - The company is building an integrated procedural ecosystem combining EOS Insight (planning/data), Valence (intraoperative navigation, recently cleared for new IOA and Contour 3D capabilities, positioned as an operating system for the OR, with adoption across academic, community and ASC settings), and SafeOp (neural monitoring) to deepen surgeon confidence and become indispensable to spine surgery. - ATEC is growing its presence in complex deformity spine procedures, building on existing trust from lateral, cervical and EOS relationships to earn partnerships with key opinion leaders. Early growth is meeting expectations. ### Operational Performance - Gross margin reached 72.5% (up 260 basis points year-over-year), driven by improved inventory efficiency, targeted cost reductions, and favorable product mix. Adjusted EBITDA was $36 million (up 53% year-over-year) with an adjusted EBITDA margin of 17% (up 420 basis points year-over-year), demonstrating strong operating leverage. Positive free cash flow of $1 million was delivered in Q2, exceeding the expectation of break-even, marking the fourth consecutive quarter of positive trailing 12-month free cash flow. - International expansion is progressing as planned, with the same clinical distinction-driven model working in key target markets (Japan, Australia, New Zealand), and will become a larger contributor to growth over time. - The company completed a refinancing that consolidated legacy credit facilities, extended maturities to 2031, and is expected to reduce annual interest expense by more than $6 million, strengthening the balance sheet and lowering the cost of capital.

Guidance

- Full-year 2026 total revenue guidance is maintained at approximately $882 million, representing 15% full-year growth. Surgical revenue guidance is unchanged at ~$805 million (17% full-year growth), and EOS revenue is expected to be ~$77 million. - Full-year average revenue per case is expected to decline in the low single digits (revised from prior guidance of flattish), with year-over-year headwinds moderating through the second half of the year. Second half surgical revenue growth is expected to accelerate to 18% from 17% in the first half, with high teens surgical case volume growth expected in the second half. - Adjusted EBITDA guidance is raised to approximately $140 million (representing a 16% margin), up from the prior guidance of $134 million, driven by better-than-expected gross margin improvement and continued operating discipline. - Full-year 2026 free cash flow guidance of at least $20 million is reaffirmed. Q3 2026 free cash flow is expected to reach $4 million to $6 million.

Segment performance

Total Q2 2026 revenue was $214 million, representing 15% year-over-year growth. 1. Surgical segment: Revenue was $196 million, growing 17% year-over-year, accounting for 91.6% of total Q2 revenue. Growth was driven by 24% net new surgeon adoption growth and 20% procedural volume growth. Overall revenue per case declined 2.7% year-over-year (driven by case mix, strong international growth, and lower biologics attachment), but improved 1.5% sequentially in Q2 after biologics attachment stabilized. Revenue per case for core procedures (lateral, ALIF, cervical) grew year-over-year. 2. EOS segment: Revenue was $17 million, flat year-over-year and up from $14 million in Q1 2026, accounting for 8.0% of total Q2 revenue. Demand for systems remained strong, and EOS Insight adoption continues to grow. Among established EOS Insight accounts, implant revenue increased approximately 32% within six months of go-live.

Risks & headwinds

- Biologics attachment rate has stabilized at levels below prior year, and remains a headwind to average revenue per case that the company is focused on improving. - EOS installations can be lumpy quarter-to-quarter, and site/installation logistics (such as available space at customer facilities) can create implementation delays. - The macro impact of recent ACA changes has been assessed as immaterial, with less than 5% of the company's volume exposed to ACA-related patients, but broader industry procedure volume slowdowns could impact future results. - New product adoption, including for Valence and EOS Insight, is still in early stages, and long-term penetration and revenue contribution are uncertain.

Analyst Q&A

• Q: With 20% surgical volume growth and 24% surgeon user growth, where are the biggest remaining opportunities for sales force productivity and SG&A leverage as the business grows past $1 billion in revenue? /

  A: ATEC is still in the early innings of growth across multiple high-potential areas: converting existing TLIF procedures to ATEC's lateral offerings, increasing biologics attachment to existing procedures, growing its footprint in deformity surgery, and scaling the impact of EOS. The operational and sales infrastructure to support $1B+ revenue is already in place, so continued growth will flow through to profitability at a consistent 40% conversion rate of revenue growth to profit.

• Q: Full-year guidance shifted average revenue per case from flattish to down low single digits — what caused this change, and is it related to slower deformity growth? /

  A: The change is almost entirely driven by the fact that biologics attachment stabilized instead of improving as previously expected. Less improvement in biologics attachment was incorporated into second half guidance, and deformity growth remains on track, with no unexpected slowdown. Roughly three quarters of the revenue per case shortfall versus prior expectations is attributable to biologics, not other product lines or demand issues.

• Q: What progress has been made on improving EOS execution after last quarter's initiatives, and what should we expect for placements for the rest of the year? /

  A: EOS is the company's biggest differentiator, and the team and processes driving sales and installation have become significantly more sophisticated after early process gaps. Demand for EOS remains very strong, with adoption across both academic centers and private community clinics. The company is confident it will hit its EOS guidance for the year, and penetration of EOS Insight across the installed base is accelerating faster than expected, currently at 15-20% with growing demand from both adult and pediatric centers.

• Q: How long does it take new surgeon users to become active repeat users, and do you prioritize breadth (more new surgeons) or depth (more procedures per surgeon)? /

  A: Surgeon adoption follows a consistent multi-year curve, with steady utilization growth over the first 3-4 years after a surgeon starts using ATEC products. The company is seeing growing adoption among younger, early-career surgeons (many entering through ATEC's cervical portfolio before expanding to lateral), who have a longer growth runway than mature surgeons converting from competitors. Both breadth and depth contribute to long-term compounding growth, consistent with the company's core model.