Alphatec Holdings Inc (ATEC) 2022 Q1 法說會逐字稿

Good afternoon, everyone, and welcome to the webcast of ATEC's First Quarter of 2022 Financial Results. We would like to remind everyone that participants on the call will make forward-looking statements. These statements are based on 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 reported amounts, which are in accordance with U.S. GAAP as well as non-GAAP or pro forma measures. Reconciliations of non-GAAP measures to U.S. GAAP can be found in the supplemental financial tables included in the press release, which identify and quantify all excluded items and provide management's view 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.

Thanks very much, Casey, and welcome to the Q1 2022 financial results for ATEC. You will hear some forward-looking statements on the call, so please review the reflective forward-looking statements.

And so I'll jump right into it. ATEC turned in another strong quarter of growth, ending with $71 million in total revenue, which was 61% year-over-year growth. I think what's most important though is really we're laying the foundation for where we're headed. And really, I think you're going to hear some -- a bit of repetition.

So PTP had over 100 surgeons trained. But I think what's important is there's a lot of traction as well as we're starting to set up SafeOp as a confidence builder and conduit to deliver information into surgery. And so what that does is it sets us up for what's next with regard to PTP.

On the EOS front, we're a long-term foundation building with regard to the clinical, operational and economic influence of informatics and data, as well as EOS is availing us new hospital access as well as we're really just starting to lay the foundation for what's going to happen in terms of the integration intraoperatively with regard to EOS.

Love that we are earning share of the U.S. market. And so a little scorecard: we grew 39% year-over-year organically from a revenue growth perspective, 18% year-over-year growth in terms of surgeon users, 11% year-over-year growth in terms of average revenue per case, 87% of our revenue is new products and 2.1 is the blended average product category sold per case.

It is our 12th consecutive quarter of greater than 20% revenue growth, and that just excludes the 11% right in the thick of the pandemic in Q2.

And so just as a quick review, we haven't and will not change our commitment. We are going to stay the course with regard to creating clinical distinction, and we know that, that compels surgeon adoption, and that brings about sales professionals that we covered.

And so to jump in really in terms of how we're creating clinical distinction. Historically, Spine has been a widget-driven market. And what -- we have been exceedingly good with regard to the product development. We've done greater than 40 products since 2018. It represents 87% of our revenue.

But I think the magic really is in spine procedures. And our hunt is after -- really our pursuit of perfect procedures. And so that lends itself really to earnings share and really the most coveted market. The market that's growing is the lateral market. Anybody that suggests that this is not the market to covet, is kidding themselves because it's the growing market.

And we're creating the most distinction within the most -- within the highest growth market. And so I think that that's why you're seeing such explosive growth. And approximately 40% of our Q1 revenue growth can be attributed to lateral or 4,000 cases into PTP, which would suggest that we're not guessing. Adoption reflects unmatched sophistication internally. It's the most versed group in lateral surgery here is, bar none. 16 peer-reviewed publications. So we're just starting that walk, expanding lateral market conversion in what was historically posterior approach guys in certain TLIF surgeries.

Increasing utilization in complex cases is always a proxy for acceptance. So that's great news as well as site of service has more to do with what kind of pathology it is and what kind of intervention it is. And so us applying this in ambulatory surgery centers is increasing. What really avails this is something that's very, very hard, and that's automated neurophysiology.

And that's when you have unique features within your automated neurophysiology set like we do with SafeOp in automated SSEPs, it really creates a sound foundation, and that's been exceedingly well reflected in the number as well as is well accepted in the surgeon community. And I think that the continued demand for surgeon training visits is reflective of the amount of enthusiasm that exists with regard to really the PTP. That's why they're coming in.

Switching gears to EOS. I think the team is in place, and we're executing against these strategic objectives. We're selling systems. Our product development work in terms of integrating the pre, intra and postoperative information is ongoing. And our opportunity to collect and utilize data is really over the moon. So in Q1, we sold north of $10 million in U.S.-related revenue. The cadence of product development is really starting to take place. We're accelerating deliveries and increasing the size of the order book, as you would expect.

Creating implant sales opportunity in new-to-ATEC accounts, places that we couldn't get in before. And one of the great parts is not only when we sell a system, are we accessing the hospital from an implant perspective, but we're also garnering data access. And the reason that data access is important is that the nemesis of spine surgery for years has been its lack of predictability in the hands of the masses.

And so just the opportunity and ability to translate data is profoundly important. And so our intention is to look at this thing in really 3 key buckets. And one of them is clinical, the other operational and the last one, economic. And when you start to think about a place that lacks predictability and your intention to mitigate variables, understanding what happens preoperatively, doing a plan against the preoperative imaging, intraoperatively integrating that plan, so you understand what the objectives are and then postoperatively assessing that plan and getting that every time really we the opportunity to mitigate some of the variables that undermine the predictability of spine surgery.

And so really, when you think about that and you think about all of the images being the same and you think about capturing all of that data, really, you're setting yourself up for Spine's first real predictive analytics that's been talked about for years, but not done.

And so there's so much opportunity to integrate these elements into the operating room and make for a change that we are running at that as best we can. Operationally, Spine has really spent a ton of money on implants and instruments sending general configurations into surgery all the time. And the opportunity to understand what's required operationally also provides a great opportunity for us to effectuate freight, labor, time, tray processing and really configuration and start to modify the configuration of the reflective requirements that we know based upon the surgical plan.

And then economic -- economically really understand how much cost we have into a specific procedure such that we can effectively compete to procedurally price as well as we could start to work with the hospitals and share some of the risk, as has been talked about for years in this business.

And so we're -- I think we really have a lot of momentum with regard to creating clinical distinction. And I think it's being reflected in terms of the surgeon adoption. And so to look at the scorecard for Q1, the growth in the average revenue per case was 11%. I said over 100 surgeons trained and the growth in surgeon user base year-over-year was 18%.

And so clearly, people are being compelled because they're heading our way, which we love. And the reason they're heading our way is because we think in terms of interventions for specific pathology by procedure. And that's why really, we have a, I think, a unique commitment and unparalleled commitment to adjunctive technology. And we're going to continue to innovate and align with the surgeons with regard to what's important.

And I think when you start to look at the adoption or the buy into our procedural clinical thesis, I think that that's reflected in the number of products per surgery and you see that continue to grow. So I would tell you that our clinical thesis is clearly being accepted. I think the proceduralization is the most and best way to protect our unique technology and really set the rules that other people need to catch up to us with.

So our ability to go ahead and design and develop these procedures and then have people, in essence, try to replicate what we're doing is a very tough task seeing as what we'll do is continue to apply our learnings. And so we're creating clinical distinction, compelling adoption, which ultimately brings people to us.

And I think that -- if you look across our landscape or at least the United States landscape, the geographies, I'd say they're still underrepresented, but where we are represented, we're growing in a big way. And so those people who are committed to us are growing faster than what we're growing organically, so 43%.

But I think the litmus test is, if you look over last year and you ask yourself, gosh, is PTP a flash in a pan or is it real? And you see that the distributors -- the top 20 distributors that are selling PTP are growing at a 77% rate. I would tell you, it's for real and the momentum is really kind of stopped within our lateral business. So anyway, with that, I will turn it over to Todd.

Thanks, Pat, and good afternoon, everybody. Thank you for joining us today on our call. I'll begin with revenue. First quarter revenue was $71 million, reflecting 61% growth over the prior year and a 4% decline compared to a seasonally strong fourth quarter.

The $71 million in the revenue is comprised of $61 million of organic revenue and $10 million of EOS contribution. Our first quarter organic revenue grew 39% compared to the prior year period and was sequentially flat compared to the fourth quarter.

Year-over-year volume growth, 25%, was driven by the advancement of our sales footprint and the continued expansion of the surgeon adoption with surgeon users of 18% compared to last year, reflecting increased surgeon in utilization.

Average revenue per case expanded 11% year-over-year as revenue mix continues to shift towards procedures that feature more products per case and procedures with greater complexity. And consistent with our increasing average revenue per case, revenue from lateral procedures contributed close to 40% of our dollar growth in the quarter on the strength of PTP, which continues to expand our lateral market share.

The ALIF stand-alone interbody system, which launched late last year, was also a notable contributor to growth. While the resurgence of COVID-19 and associated hospital labor shortages pressured surgical -- procedure volumes in Spine at the first part of the quarter, volumes gradually improved, returning to normal by the end of the quarter.

We exited first quarter with exceptional momentum. In the first quarter, we recognized $10 million in EOS-related revenue, reflecting strong deliveries in the quarter and a lower degree of seasonality than anticipated. The progress we've made on our integration objectives is reducing the time required to install new orders. The $10 million reflects pro forma growth of 50% compared to the revenue EOS recognized on a stand-alone basis in Q1 2021.

Now continuing through the remainder of the P&L, first quarter non-GAAP gross margin was 72%, down 560 basis points compared to the prior year. The year-over-year decline in gross margin was primarily due to the consolidation of EOS Imaging.

The approximate 40% delta between EOS' gross margin profile and the gross margin profile of our base business was the primary driver of the year-over-year decline. Operating expenses in the first quarter reflect continued thoughtful investments to fuel long-term industry-leading growth.

First quarter non-GAAP R&D was $9 million, approximately 12% of sales compared to $5 million and approximately 12% of sales in the prior year quarter. The increase on an absolute dollar basis was driven by continued investments to support organic portfolio expansion and the advancement of the EOS platform.

Non-GAAP SG&A was $61 million and approximately 85% of sales in the first quarter compared to $37 million and approximately 83% of sales in the prior year period. The year-over-year increase on an absolute dollar basis was driven by the inclusion of EOS and the continued expansion and training of the ATEC sales network, which this quarter included in our annual global sales meeting. The depreciation of instrument sets to support new product launches and our growing distribution channel and surgeon education and investments required to support the increasing size and sophistication of the company also contributed to the increase.

Notably, general and administrative expenses have remained relatively flat on an absolute dollar basis over the past 3 quarters. Total non-GAAP operating expenses amounted to $69 million and approximately 98% of sales in the first quarter compared to $42 million and 95% of sales in the prior year period.

Adjusted EBITDA was a loss of $11 million compared to a loss of $4 million last year. While Q1 was a significant investment quarter, we continue to expect adjusted EBITDA for the full year 2022 to improve relative to the full year 2021 as sales growth will drive leverage of our sales channel investments and across the business overall.

We ended of the first quarter with $152 million in cash, operating cash use was $38 million, which, consistent with previous quarters, was predominantly related to investments in inventory and instruments to support our expanding distribution footprint and new product launches.

Included in Q1 operating cash was approximately $10 million in annual compensation-related payments, which, if excluded, would bring Q1 cash use to approximately $28 million. We expect cash use this year to meaningfully improve relative to last year, with asset leverage and a more favorable full year adjusted EBITDA.

Debt at carrying value was $337 million, which includes $316 million of convertible debt. We continue to believe that the convertible debt offering placed last year will support our baseline growth plan toward cash flow breakeven at a revenue run rate of approximately $500 million to $600 million, growing at a rate of 20% per year.

Now turning to our outlook for full year 2022. We now expect full year 2022 total revenue will approximate $316 million, representing growth of 30% compared to 2021. That includes the following: we now expect full year 2022 organic revenue to approximate $269 million compared to $260 million previously.

Updated expectations for growth of 27% compared to 2021 contemplate the strength of Q1 performance and the momentum with which we exited the quarter. We now expect EOS-related revenue of approximately $47 million for the full year 2022 compared to $45 million previously. Updated guidance for EOS reflects the strong execution-driven Q1 results.

I shared this slide last quarter to help frame ATEC organic growth with some context about its underlying components, namely, the growth of procedure volumes and average revenue per surgery. The left side of the slide depicts procedure volumes, which have increased at a significant pace since the transformation of the business began back in 2018 and the expansion of surgeon adoption and increasing geographic penetration have been essential to that growth.

The right of the slide demonstrates growth in average revenue per surgery, which also has increased at a healthy clip. Average revenue per surgery grows as our procedural mix shifts for its procedures like PTP and LTP, which have higher revenue per procedure than our overall average.

Our procedural solutions are being utilized in surgeries with greater complexity which require more products per surgery and in turn, generate higher ASPs. Finally, the level of distinction engineered into ATEC approaches and the cadence of new product launches generally enable us to command the price premium, another continuing driver of growth in average revenue per surgery.

We hope this context will help connect the multiple drivers fueling the growth of volume and average revenue per case. And when we set external revenue expectations, our expectations for procedure volume growth and the expansion of average revenue per surgery are central to that math.

The factors that I just shared give us continued confidence in our ability to grow procedure volume this year at a mid-teens percent rate. We are raising full year organic guidance due direct increased expectations for average revenue per case with the 11% growth in average revenue per case achieved in Q1, we now anticipate a high single-digit percent rate of expansion for the full year, which compares to the mid-single-digit rate expected previously.

Our guidance philosophy is to be thoughtful and prudent about how we set expectations by putting out numbers that we believe we can achieve and have a reasonable opportunity to exceed. So in closing, we continue to methodically execute the plan. We've built a business capable of delivering sector-leading growth and we most certainly aren't done.

Our relentless focus on revolutionizing spine surgery by delivering predictability and reproducibility and meeting unmet needs in a massive market is a mission that when executed well, can earn market share and create value throughout the decade to come.

I hope to see you at the ATEC Investor Day, where we intend to continue to create confidence in our ability to do just that. And with that, I'll turn the call back over to Pat.

Thanks much, Todd. So we are going to continue implementing our share earnings strategy. And we're going to be doing that by making meaning out of PTP in that opportunity. And what that ultimately does is it really provides us the opportunity to create confidence for the halo effect to the point to where our Cervical portfolio has grown over 30%.

And I would say that, that's a halo reflection of our business. We're also advancing U.S. distribution. We're expanding internationally. And the EOS opportunity in front of us is a monster and one that will enable us to change the way that surgeons and hospitals look at spine surgery. And so as Todd mentioned, you guys are all invited to the ATEC Investor Day. We will share more there, and we would ask that you please RSVP online. So with that, we will take questions.

We will now open the floor for questions (Operator Instructions) The first question comes from Brooks O'Neil from Lake Street Capital Markets.

Congratulations to the quarter. I guess I would start off with PTP, which seems to be one of the key drivers of your growth. Obviously, we expect continued growth in 2022 and pull-through related to it. Are there other areas that you see big opportunities for proceduralization in the relative next year or 2? Or do you think continuing to drive PTP is the key to the future of the company?

Yes. It's a great question, and we see tons of opportunity. I think that if you look at spine surgery, just generally, it lacks predictability in the hands of the masses. And that's almost across every type of intervention.

And so we feel like lateral surgery in the lateral position is not going away, and we feel like there's a number of different opportunities to improve lateral surgery in the lateral decubitus position. And so I think oftentimes, the great part of our portfolio is there's enough distinctions in it to where what we can do is improve in a myriad of different procedures.

We think there's opportunity to improve L5-S1 in terms of when someone intervenes with an ALIF and then they want to intervene laterally. So that's a key place. We think ALIF unto itself is an opportunity for improvement. We think that the combination of EOS and what we're doing from an Invictus perspective, what we're doing from an MEP perspective and what we're doing from a patient positioning perspective, is the way to create predictability around idiopathic scoliosis in a much more predictable way.

And so, I think, that there are so many opportunities out there, Brooks, it's just a matter of prioritizing. And the reason we love it is because we think that the others in the industry are not being sophisticated with regard to the way that they approach the requirement of this environment. And so anyway, our view is there's work to do from now until the cows come home.

And our commitment to lateral is unwavering and will continue to be a driver in our business and top line for multiple years, Brooks, certainly.

We take our next question from Mathew Blackman from Stifel. Please go ahead Mathew.

This is [Colin] on for Matt. I just had a quick question with the guidance raise. Last quarter, you talked about COVID having a similar impact in 2022 as it did in 2021, with a strong first quarter and pretty significantly raised guidance. Did that commentary kind of shift? Did it change what you see in the quarter with impact in recovery track relative to your expectations? And what kind of magnitude are you now factoring in for guidance with regard to COVID?

Yes. So I think, [Colin], thanks for the question. On the call last quarter, we kind of set up the year and said basically the COVID impact in 2022 would be similarly sized in 2021 and kind of -- for lack of precision, kind of evenly split across the quarters. And so obviously, Q1 is in the books, and so that's kind of known understood.

Q2, we're really not anticipating or factoring in any COVID impact, and there's probably some remaining COVID impact implicitly implied in the second half of the year. But more or less, I think, the point for us is as we're growing Q1, we grew 39% in our organic business. And so clearly grew through any of those kinds of challenges, and I would say to the extent there was COVID impact, it was not -- certainly didn't slow us down from growing that much.

At the end of the day, I think you can assume that there's a certain amount of COVID impact in the second half, although not certainly materially about half of what we saw last year, and we're not anticipating any here in the second quarter.

The next question comes from Matt O'Brien from Piper Sandler.

This is [Drew] on for Matt. I do want to follow up on the PTP side of things. You've had 2 pretty large step-ups in surgeon training over the last 2 quarters. I guess, first, what's really been the biggest driving factor for those big step-ups in the last 2 quarters?

And then second, are those new additions already influencing that fantastic PTP number you put up this quarter or should we expect even more good things to come?

Yes. It's fascinating in terms of the whole surgeon education and then the translation into sales and there's a lag always. And so the great part is, is I think that much of the foundation built in the second and third quarter of last year are now being reflected in the growth this year. And so what happens is a surgeon goes home and hopefully, they have a patient identified to intervene upon and oftentimes they'll do so with a relatively narrow indication set, and so something simple.

And so the intention is, how quickly can someone get up and running some of their train to ultimately do a few cases. And so I would tell you that it takes a little time to make sure that we're in the hospital and make sure all the pricing and everything else. But ultimately, I would tell you that there's probably a 2-quarter drag to somebody ultimately being trained and then starting to do cases. And so as we see the surgeon education continuing to expand, it just speaks of future quarters reflection in the top line.

And [Drew], one of the things we do is we track the cohort of surgeons who have been trained kind of quarter-by-quarter. And as we look at the utilization of our procedures with those different cohorts, you see a couple of things. And one is you see kind of lines that go up into the right and continue to do that. And so we've really been tracking that since we launched PTP back in Q4 of 2020.

And so what I would say is that, to Pat's point, early on, when they start simple and they do a couple and they get comfortable and then they probably do more of those simple procedures and then as they begin to get more and more comfortable, they can use that procedure in more complex pathologies. And so that's really a utilization increasing walk that ultimately, I think, is going to be multiyear as physicians get more and more comfortable with it.

And then as you understand, and as we talked about the halo effect as they begin to trust us and understand us more and more, we ultimately avail a bigger part of their overall business, and that also grows over time. So these aren't, "Hey, I trained 10 today, and so I get a bump for 2 quarters. The 10, I train today, will continue to grow their business and their share with ATEC for years."

Our next question comes from Jason Wittes from Loop.

First off, on EOS, something that is pretty solid quarter ahead of expectations, and you've also raised the guidance. I'm just curious if you think -- if you're -- as you look at how things are progressing, what -- are people opting more for purchases versus placements? And what is your outlook for sort of the market's appetite for placements and how do you position it within the company?

Yes. I'll let Todd pipe in after a little bit of color. But my sense is that if you look at the demographics of our company, say, we're in the 2.8% to 3% market shareholder, I look at that as 97% to go. And so the reality is, is we want to get access to institutions. And when we get access to institutions and we create a hunting license, we prosper.

And I think we've demonstrated that on several occasions. And so I think what we're seeing in the marketplace is we're seeing places like a Dayton Children's -- they're going to upgrade from a 3.5 of previous unit to garner an EOS edge.

And then you'll see someone like TBI, and what they'll do is they'll want to, in essence, earn one out more. And so it's really a combination of both. I want access everywhere. And I want access to not only the hospital to show implants and to integrate our spine procedures, but I also want the data out of there because ultimately, our capacity to translate the data will be the biggest value driver of this acquisition. And so that would be my enthusiasm.

Yes. And I think in terms of -- we're seeing purchases by and large, Jason, and getting the access that Pat's talked about. So I think we can structure these things multiple ways. The ultimate economics are by and large, the same to us. It's really more in terms of our cash flow and how the customer wants to engage on that front. So we're flexible. But, I think, to Pat's point, we're getting the economics on the machine as well as getting access to the business where we're doing -- placing EOS machines.

The next question comes from Phil Coover from Goldman Sachs.

I thought I would kind of ask how to decompose the confidence in raising guidance after 1 quarter in a few different ways, a lot of factors outside of your control in this quarter that may have been deterrent or inhibitors from you guys performing even better than you already did.

So I'm just hoping to one of the former questions, we can talk a little bit about the impact that COVID had on the quarter and maybe it's more from an absenteeism perspective than from a staffing shortage perspective? Can you shed some light on the rate at which you may have had procedures that were deferred or otherwise?

And then also talk about the supply chain and the inflationary environment and any potential headwinds that you had in terms of acquiring inventory or componentry, things that might have potentially pushed out procedures that would have made 1Q look even stronger?

Yes. I guess, I'll kick it off, this is Pat. The -- I would say, demographically, we've kind of have been challenged by the same things from a weaker start to the quarter to a stronger finish of the quarter. And so our view was pretty consistent with what I've heard across the board with regard to what the impacts were.

When you start to think about some of the supply chain elements and some of the staffing things, what comes to mind for me is freight and things of staffing at FedEx, predictability around FedEx and serving the customer-type stuff. We're not running into like chip issues. None of us have enough electronics in the operating room to be impacted by the type of computer manufacturers or -- that would suggest that we have a challenge paying up for chips and the like. And so anyway, that's kind of the way I think about it.

Yes. I think, Phil, when we looked at -- January was really tough. February is better than January and March felt like normal. And I think that's pretty consistent with what you've heard elsewhere. I think one add to that is, we definitely saw more surgeons utilize our products in Q1 than we did in Q4.

And so to me, that's encouraging because, ultimately, we increased the number of surgeons using our products in the quarter. We grew, but we still had -- you saw the volumes being challenged in January and then less so in February. And so I think as we looked at how we exited March, the improvement we saw in April.

And ultimately, I think, both on a volume perspective in terms of where we wanted it to be. And then as we continue to grow our lateral share and grow that business at rates faster than our overall growth rate, you're seeing the impact of that on our case ASP on an average basis. And so when I talked about the guidance raise, I talked about really raising that on our average revenue per case component rather than the volume component.

So I think volumes came in nicely. We're very confident in the volumes. Case ASP came in higher than anticipated. Our business in Q1 was stronger in lateral than kind of our expectation going into the quarter. And ultimately, that gives us confidence to kind of raise the overall guide on the basis of average case ASP on the full year.

We take our next question from Sean Lee from H.C. Wainwright.

Congratulations on a great quarter. Over the last several quarters, you guys have mentioned potential for international expansion as one of the major things that you just planned over the medium term. So I was wondering whether you can shed more details on what your thoughts are on that front? And how would you go about it?

Yes. I think that what we've kind of communicated is that we are going to go narrow and deep. And I think we've been very deliberate with regard to the countries that we're going to go into in the foreseeable term. That's going to be New Zealand, Australia, Japan, potentially the U.K. and potentially Brazil.

And I would announce that we have done our first PTP in New Zealand. And so now New Zealand is PTP country. And so I can't be more excited about just the proliferation outside the great United States of our signature procedure in PTP.

The next question comes from Joshua Jennings from Cowen.

Congrats to the strong 1Q. Pat and Todd or maybe this one is for you, Pat. SafeOp has been a huge enabler of your PTP procedure and also gaining lateral share. Just I haven't checked in on this for a while, but I just wanted to see -- how you see that platform evolving and how you plan on kind of keeping your lead on that important neuromonitoring element of your proprietary procedure? And then I have one follow-up.

Okay. Great. It's -- these are the things I like to talk about most just because it's truly kind of the hard things to do in this business. And when you start to think about what we're doing from an automated EMG perspective, our ability to integrate this stuff in a workflow that's very elegant in lateral surgery is unparalleled.

And so our ability to find the nerve and then determine its health based upon the canary in the coal mine of automated SSEPs. And so that is going extraordinarily well. And the team around that is phenomenal. It's the best in the business. The other thing that you'll see here in the not-too-distant future is MEPs.

And our ability to do facilitated MEPs in a way that ultimately enables us to do things where the patients have jumped off the bed, and really affirming what the canary in the coal mine tells us from an automated SSEP perspective. And so there is a long run of technological advancements that we're in the middle of that we can't be more excited about with regard to SafeOp.

And the great part is, is when we create confidence in the operating room of a tool that is so valuable, like SafeOp, what happens is it enables us to send more information in from an EOS perspective. And so what it creates is really a conduit that we can deliver information into that ultimately avails opportunity to us. And so we think that SafeOp is such a great first step in terms of doing that. So anyway, I appreciate that question.

And just a follow-up maybe for Todd just on the revenue guide increase nice to see. You talked about there is a mix shift towards higher ASP procedure and particularly kind of PTP and lateral doing better than expected out of the gain here in '22, as one of your competitors about just -- when our checks last year suggested that some of the more complex multilevel cases at risk for ICU admission maybe were being postponed at a higher clip than single-level case.

But in that bucket of increasing complexity they have laid out is a potential driver of ASP per case increased, has that started to hit? Do you think there's a backlog of cases there. Could that come on board as we move into 2Q and 3Q where some of those higher complexity cases roll through and can help you at least hit that high single-digit ASP per case increase rate or even drive it higher?

Yes. Thanks, Josh. As I was thinking about the case ASP and as we contemplated in the overall guide, I think it's really more of a mix component rather than lateral ASP actually growing throughout the year. So I really think it's more about our lateral business, which has an higher ASP than our overall average, growing at a faster rate kind of throughout the year than we had initially contemplated in the guide.

And so I think that's kind of the basis for what we did in our guidance. I think your question and comments on -- if to the extent that more complex procedures got delayed kind of in that Jan-Feb timeframe and is there a few of those that need to kind of get worked through over the next couple of months? That seems logical. I don't really have a dataset that would neither confirm nor deny, but to me, it's logical.

We have a follow-up question from Phil Coover from Goldman Sachs.

Just 1 on my kind of prior question on the EOS side. So it's basically asking if EOS in 1Q actually came in ahead of kind of expectations or if it was a strong backlog and order book that you talked about, if there was any kind of deferral that might have happened kind of asking same question I asked before from a slightly different angle on the capital side in terms of installation timeline?

And then one more, if I may. You provided that 4,000 number in the slides with regard to -- first, the question is, is that with regard to lateral procedures or to PTP? And is that a cumulative number or is that a number back in 2021 that relates to the 26,000 number?

And then the follow-up question is just kind of directionally, if that's sort of a 2021 number kind of a cumulative looking more like 12% to 15% of total cases so far, where in sort of your 2- to 3-year viewpoint as somebody asked before, does PTP ends up growing to that kind of a percentage of your total cases?

So I'm going to start because I can't keep up with all the questions, and I'm not smart enough to answer all of them. So I'm going to defer to my other partner. So here's -- I'll answer the PTP one. We hope they come once for an intervention and they don't come back.

So the PTP number is the cumulative number of PTPs done over the last, what is it, 1.5 years or whatever it's been. And so it's greater than 4,000. And it's a heck of the good start to understanding what the dynamics of the procedure is. The application of it is absolutely enormous, just from the standpoint of really anything above 5-1 and including 5-1 from a posterior approach in a TLIF, so it's not like those people are obviated from getting a PTP. But anyway, we believe this to be a resolute start to a strategy that ultimately improves the fastest-growing marketplace.

And Phil, you had kind of a question on where does PTP and in terms of kind of total contribution and in terms of our revenue? And I think maybe the way to answer that is, we expect that PTP is continuing to be -- will continue to be a driver of growth for us.

Our estimate is we're kind of in the mid- to high single digits of share in that space. We believe that what we're doing is distinct and better objectively. And as such, we would expect to be leaders in that market over time. And so I think the pace of that time will tell, but that is our expectation. And I think you had a question on EOS.

So here backlog, I think, was the question.

Backlog in EOS. So I think I've answered the question on EOS. We outperformed expectations. Largely, I think, that that reflects the operational rigor that we're applying to the business here. There's just, I think, a bit more of a cadence in terms of delivering and installing.

I think one of the things you're seeing here in the first quarter and then we'll see more of over time is that the sales will be more reflective of a U.S. marketplace presence. And so we've made sales investments in our distribution channel to drive growth in the U.S. market. And the U.S. market is one where people buy machines. We deliver them and then we install them versus multiple OUS markets have historically been a distributor-based business.

And so part of the reality, then is that we have got an installation team that then has to take those orders and install them over time. And what we want to do is create enough demand that the installation team is kind of a gating item to some degree.

And so certainly, today, what you're seeing is our rigor on planning and delivering and installing on a time line and on a calendar that's just a bit more rigorous and I think also reflects that you've got more U.S.-based volume, which requires installs. And so I think that's why you're seeing us drive of $10 million number here in the quarter.

And probably what you'll see throughout the year is a bit more linear growth rather than the history, what you've seen is historically, we saw EOS revenue be about 35% to 40% in the first half and the balance being in the second half, largely because a lot of that was influenced by distributor sales. And so again, as we become more reflective of the U.S. market presence and the investments we've made here on the sales front, I think you'll see more consistency sequentially quarter-to-quarter in terms of the sales.

And I would just add that this funnel is growing. And that's the part that I think inspires us.

This now concludes our Q&A session. So I'll hand the call back over to Pat.

Thanks much, Casey. And I just appreciate everybody's interest in ATEC. We are literally in inning #1 of a great game and love what we're doing and appreciate everybody's interest in ATEC. Thanks so much.

Thank you.

Thank you all for joining. This now concludes the call. You may now disconnect your lines.