Alphatec (ATEC) 2026年第三季度业绩电话会：因生物制剂业务走弱下调业绩指引lg...

核心要点

• 2026财年第三季度营收同比增长13%至2.21亿美元，这得益于手术业务营收增长14%以及手术硬件业务营收增长17%。
• 手术量增长约20%，新外科医生采用率增长约25%。管理层表示，Alphatec本季度新增的外科医生数量创下历史新高。
• 单次手术平均营收同比下降5%，主要是由于生物制品附着率较低。生物制品营收同比减少约100万美元。
• 调整后EBITDA增长约46%至3800万美元。调整后EBITDA利润率达到17%，同比扩大超400个基点。
• 考虑到生物制品表现疲软、手术量减少、EOS安装交付时点以及国际供应受限等因素，Alphatec将2026财年全年营收预期下调至约8.62亿美元。
• 公司第三季度产生约600万美元的自由现金流，但将全年自由现金流预期下调至1000万美元。

核心财务数据

业务与运营表现

本季度Alphatec手术业务的增长完全由手术硬件驱动。手术量增长约20%，医生采用率增长约25%，表明市场对该公司手术平台的需求依然稳健。

然而，较低的生物制品附着率导致单次手术平均营收下降5%。管理层将这一劣势部分归因于销售执行力不足以及合同获取渠道受限。此外，医院正日益将脊柱植入物与生物制品的采购流程分离开来，导致来自低价生物制品供应商的竞争更加激烈。

包括老客户在内的TLIF腰椎手术量均低于管理层预期。公司将此主要归因于大盘市场的整体疲软，而非竞争导致的份额流失。颈椎手术量的强劲增长部分弥补了这一疲软，而包括PTP在内的侧方入路手术需求继续保持稳健。

EOS产生2000万美元营收，环比增长但同比基本持平。管理层表示需求依然健康，但资本预算到账情况和安装时点导致季度营收分布不均。据公司介绍，在设有脊柱专科培训项目的学术机构中，有超过70%已安装了EOS Edge。

Alphatec正在将Valence拓展至侧方入路手术之外，最近新增了导航下TLIF。管理层表示，外科医生的早期反馈肯定了该平台的工作流整合能力，并预计Valence将在2027财年成为增长推动力。

国际业务增长遭遇了与日本无菌螺钉包装相关的临时供应问题。公司已下架受影响产品、检查库存并开始补货，但预计该中断将使2026财年国际销售额减少约300万美元。

管理层业绩指引

管理层表示，调整后的预期考虑了生物制品附着率下降、手术量放缓以及国际供应链临时受限等因素。预计全年手术单价（每例平均营收）将下降约3%，而手术硬件营收预计增长约17%，生物制品营收预计与去年同期持平。

对于第四季度，管理层假设生物制品营收环比基本持平。预计手术硬件营收将比第三季度增加约1200万美元。

公司未提供正式的2027财年指引。管理层表示，2026财年下半年的表现是展望2027财年的合理起点，并建议在纠正措施的时间和成效更加明朗之前对生物制品业务保持谨慎。管理层还指出，30%中段的调整后EBITDA转化率可能是一个有用的分析框架，同时提到第四季度指引意味着调整后EBITDA利润率为18%。

风险与关注事项

• 生物制品表现不佳可能会持续对单次手术平均营收及整体手术业务增长构成压力。
• 管理层的纠正措施取决于更严格的销售纪律、分销商问责机制以及更广泛的医院合同准入；业绩改善的时点仍存在不确定性。
• 预计TLIF腰椎手术的疲软态势将持续至第四季度，管理层正在密切观察这一状况是否会延续至2027财年。
• EOS业务营收对医院资本预算、机房准备以及安装验收时点仍保持高度敏感。
• 营收不及预期以及对工具和库存的持续投资，可能会影响自由现金流转化的时点。
• 日本包装问题预计将使全年国际销售额减少约300万美元。

分析师问答环节亮点

生物制品复苏：管理层表示，正通过财务激励、强化分销商排他性约定以及提高销售领导层问责力度来提升附着率。尽管采取了这些举措，公司仍假设第四季度生物制品无环比增长，并对2027财年保持谨慎态度。

手术市场状况：公司目前认为脊柱市场的增长率为低个位数，低于此前预期的中个位数。管理层表示，颈椎手术量超出预期，而TLIF腰椎手术量表现不佳。

EOS安装交付时点：管理层强调需求并非主要问题。主要限制因素是医院资本预算到位不均以及安装日程存在变数，大多数订单无法在收到订单的当季完成安装。

盈利能力与现金流：管理层表示，下调自由现金流预期主要反映了回款减少以及库存和工具采购的时机影响。公司认为调整后EBITDA与现金转化率之间的关系没有发生本质变化。

OsteoAdapt市场机遇：管理层预计OsteoAdapt将在BMP领域展开竞争，并表示早期IDE研究结果显示出潜在的临床优势。管理层在电话会议中未提供商业化上市预测。

业绩电话会议完整文字记录

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完整财报电话会议逐字稿

管理层陈述

Operator

Good afternoon, everyone, and welcome to the webcast of Alphatec's third quarter financial results. We would like to remind everyone that this 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 non-GAAP or adjusted measures. Reconciliation 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 actual items and provide management's view of why this information is useful to investors. Analysts planning to ask a question must be registered through the dedicated analyst link included in today's materials. If you have not yet registered, please do so now to be included in the queue. Leading today's call will be Alphatec's Chairman and CEO, Patrick Miles, and CFO, Todd Koning. Now, I'll turn the call over to Patrick Miles.

Patrick Miles

Thanks, I appreciate it. Welcome to our Q3 '26 financial results call. You will see some forward-looking statements, so please review at your leisure. In the third quarter, we delivered solid growth in profitability. Revenue reached $221 million, up 13%, with surgical revenue increasing 14% and surgical hardware increasing 17%. While revenue fell short of expectations, demand for our surgical solutions remained strong. Surgical volumes grew approximately 20%, while new surgeon growth increased approximately 25%. We attracted more new surgeons to Alphatec this past quarter than ever before. The leading indicators reinforce our confidence in the foundation we have built in the future growth of our platform. Hardware revenue grew approximately $26 million, while biologics declined year-over-year, creating an overall drag on surgical revenue growth. Biologic performance was a primary constraint on growth, and to a lesser extent, we saw slower TLIF lumbar procedure volumes that we believe reflect broader market trends. Be assured, we are not satisfied with our biologics performance and are taking action to drive greater focus and disciplined execution. EOS came in at $20 million for the quarter. EOS is emerging as an entry point with real value, allowing us to account for using EOS Insight to bring us deeper into the clinical workflow and use more of our procedures. The quarter also demonstrated the resilience and leverage of our operating model, with adjusted EBITDA of $38 million, up $12 million year-over-year, marking a 17% adjusted EBITDA margin and once again delivering positive free cash flow. Even with revenue deceleration, the scale we have built allows growth to translate into strong margins and higher earnings.

Unknown Speaker

Todd is going to take you through the numbers, and then I'll discuss the drivers of our business in greater detail. Todd, thank you. In the third quarter, we delivered solid revenue growth, expanded both our gross margin and adjusted EBITDA margin year-over-year, and generated positive free cash flow. Those results reflect how we are investing in growth, improving our productivity, and controlling the cost structure as volume scales. Our focus is what allows us to translate growth into higher margins, durable profitability, and free cash flow. Strong surgeon adoption and increased procedure volume remained the engine of our growth this quarter in our core surgical hardware business. Total revenue was $221 million, up 13% year-over-year, with surgical revenue of $202 million, growing 14%, a $25 million increase over the prior year period. Behind that growth are two elements of our model that continue to deliver: approximately 25% growth in surgeon adoption and 20% growth in procedural volume. That pace has held throughout the year, reflecting consistent, repeated surgeon choice for our procedural solutions. As Pat mentioned, we did see lower procedure volumes than expected, specifically in the TLIF lumbar category, and we believe this reflects some overall market softness, which we are following closely as we go into the fourth quarter. The strength in our cervical procedure volumes partially offset this dynamic, resulting in 20% overall procedure volume growth. Revenue per case declined 5% year-over-year, primarily due to a lower biologics attachment rate. In Q3, total biologics revenue declined about $1 million year-over-year, meaning our surgical hardware business drove all of our surgical growth for the quarter. Surgical hardware growth has been consistent for years, and we saw that again this quarter. Turning to EOS, revenue was $20 million in the quarter, up from $17 million in Q2, and essentially flat year-over-year. EOS Insight remains an important part of how EOS creates value for our surgeons and our business. We continued to see established Alphatec surgeon customers generate higher implant revenues after EOS Insight goes live. This reinforces our belief that EOS Insight is a meaningful contributor to procedural adoption and long-term growth, and we will continue to focus on bringing more accounts live. Turning to the P&L, gross margin for the quarter was 72%, up nearly 200 basis points year-over-year, as we continue to improve our inventory efficiency and reduce cost, while offsetting mix benefits from lower biologics attachment rates. Operating expenses grew approximately 8% year-over-year, while improving approximately 260 basis points as a percentage of revenue, reflecting the cost discipline in our model while we continue to fund targeted growth investments. The combination of strong gross margin expansion and disciplined execution drove adjusted EBITDA of $38 million, up approximately 46% year-over-year, and an adjusted EBITDA margin of 17%, expanding more than 400 basis points year-over-year. The pursuit of healthy margin and earnings growth has been resolute. Turning to the balance sheet, we ended the quarter with approximately $80 million in cash and $55 million of available borrowing capacity, providing roughly $135 million of total liquidity. We generated $34 million of operating cash flow during the quarter, while investing $29 million in inventory and instruments to meet the needs of our growing surgeon base as we head into the fourth quarter. As a result, we generated approximately $6 million of positive free cash flow, delivering positive trailing twelve-month free cash flow for the fifth consecutive quarter. During the quarter, we repaid the remaining balance of our 2026 convertible notes with cash on hand. This further simplified our capital structure, strengthened our balance sheet, and provided flexibility as we continue to grow and scale the business. Turning to guidance, we are lowering our full-year 2026 total company revenue expectations to approximately $862 million, representing growth of roughly 13% for the year. We now expect surgical revenue of approximately $789 million, representing growth of approximately 15%, and EOS revenue of approximately $73 million. This update reflects the lower biologics attachment rate, lower overall procedure volumes due to current market trends, and a temporary supply constraint in our international business, which we expect to impact international sales by about $3 million for the year. As a result, as we enter 2027, our outlook implies tightening surgical case volume growth and a 3% decline in revenue per case for the full-year 2026. This reflects $102 million of year-over-year surgical dollar growth, which implies 17% surgical hardware revenue growth and flat biologics revenue contribution year-over-year. Historically, biologics has contributed approximately $15 million to $25 million of annual growth, which we are not seeing this year but are working to address through improving salesforce discipline and expanded contract access. For the full-year 2026, we now expect adjusted EBITDA margins of 16%, or approximately $137 million, representing growth of approximately 47% year-over-year. We now expect free cash flow of $10 million for the full year, which implies approximately $15 million in the fourth quarter. The reduction in guidance for adjusted EBITDA and free cash flow is a direct result of the revenue declines. Even with this revised revenue outlook, we expect to deliver substantially robust growth and margin expansion, underscoring the leverage in our business. The infrastructure we have built, the gains in our gross margin, and the discipline of this team continue to drive increasing profitability and demonstrate earning power for the business. With that, I'll turn the call back.

Patrick Miles

Pat, thanks. Before I turn to our strategy, I want to be clear: our growth algorithm is built around a procedural thesis. That procedural thesis requires disciplined, convoy sales execution, bringing the full value of Alphatec to each surgeon and each account. A coordinated and deliberate selling of the entire procedure, inclusive of biologics and other technology. This quarter, our biologic performance fell well short of that standard, impacting overall performance. We're well aware of this dynamic and are actively working to increase focus and discipline here. My frustration is that we are undoubtedly earning the procedures with case volumes up 20%, but not playing through the entire procedure. Additionally, we have never attracted more new customers than we did in Q3 of this year. These are the leading indicators that reinforce our confidence in the three commitments that continue to guide the business: create clinical distinction, grow our surgeon base, and build a sales organization that scales. Our strategy begins with the procedure itself. We don't develop individual products in isolation; we build them into sophisticated, integrated procedures that make surgery better. Surgeons adopt procedures when it helps them deliver better outcomes for their patients, and that is what sits behind the pace of adoption we continue to see. Earning new surgeons is how we know the approach is working. Once an Alphatec procedure is adopted, and the surgeons trust our sales organization, it helps turn that initial adoption into broader utilization. The team supports surgeons and expands across indications and procedures, then repeats that process across accounts. In that way, clinical distinction creates demand, surgeon confidence deepens relationships, and disciplined commercial execution scales the business. What sets our growth apart is how we approach spine surgery. As I've said many times, we sell a complete procedure, not individual products. Clinical variables can undermine the success of spine surgery, and carefully designed procedures are how we mitigate these variables. We build each procedure from the ground up. As surgeons gain confidence in our procedural approach to surgery, the expanding indications they treat, they take on greater complexity within their practice. And that increase in complexity translates into increased utilization and subsequently increased revenue. Lateral continues to be a foundational entry point into Alphatec; it's where we built tremendous clinical know-how and where our distinction is most obvious. Benefits of lateral surgery for patients are well established. PTP fundamentally improved the approach to lumbar spine surgery, creating more options for the surgeon while minimizing morbidity for the patient. Our integrated approach—SafeOp, patient-specific retractors, implants, biologics, and now Valence—is designed to mitigate variability and increase simplicity and precision within PTP. Valence guides retractor placement, disc preparation, and implant placement, delivering greater precision and increasing confidence using less radiation intraoperatively. We pair that integrated experience with training on a complete approach, helping surgeons build the confidence to treat more patients and increasingly complex pathologies through lateral. This inevitably leads to them broadening the use of our other procedures. That, for us, is why new surgeon growth is such an important leading indicator. Every new relationship creates the potential for deeper procedural adoption over time. Beyond lateral, we're also seeing new surgeons begin adoption utilizing our cervical portfolio, gaining confidence in the clinical experience and looking to Alphatec for more of their practice. Additionally, we're also seeing our influence grow in complex adult and pediatric deformity. I'll share a little more on our progress in pediatric shortly, but what I want to emphasize is that we continue to see deformity as a longer-term opportunity, and realizing its full potential requires disciplined execution of the EOS capital sales model. This means placing systems in the right institutions, bringing EOS Insight into the workflow, and converting that strategic access into deeper procedure adoption. EOS remains a pivotal part of our strategy because it changes where and how we engage with surgeons. EOS Edge gives Alphatec a clinically relevant presence inside leading spine institutions, including accounts that were previously difficult or impossible for us to contractually access. Installation timing can vary by quarter, but once the system's operational, it creates a durable pathway to introduce EOS Insight. This deepens procedural engagement and builds relationships with institutions training the next generation of spine surgeons. EOS Edge is now in more than 70% of academic institutions with fellowship programs, enabling us to influence a younger cohort of surgeons who are learning alignment-based, data-driven surgery from the very start of their careers. And as these surgeons graduate from fellowships and evaluate where to build their practice, they're increasingly asking prospective institutions to acquire EOS as part of their employment. These younger surgeons typically start with less complex procedures, which creates a headwind in revenue per procedure initially, but they're a foundational element of our long-term growth profile. From this academic exposure, EOS is shaping future adoption. The strategic value of EOS grows with every patient they get scanned. EOS Insight converts imaging into alignment measurement, bone mineral density assessment, predictive surgical planning, and patient-specific graphs, and follows the entire patient journey from diagnosis to follow-up. Each patient adds structured data to a dataset that becomes more useful over time and increasingly difficult for another company to replicate. The opportunity is not simply to accumulate data, but to make it intelligent, more valuable in clinical decision-making, and available to more surgeons. We recently brought together more than 70 leading KOLs for our inaugural EOS Insight Council, and the discussion reinforced both the value EOS Insight delivers today and the opportunity ahead. We are focused on ensuring that great surgeries, performed on the right patients, for the right indications, with the right plan, culminate with a very predictable result. Creating predictability and durability by mitigating the variables in spine care is a tremendous business opportunity and has the potential to create tangible economic value for institutions for more predictable workflows and fewer unnecessary costs, to stronger evidence around patient outcomes. Continued engagement from these thought leaders gives us the ability to accelerate Insight's evolution into a continuous, ever-learning intelligence platform, proliferating both clinical and operational data. We also saw our vision reaffirmed at SRS in Sydney, where we convened leading spine surgeons for a discussion on EOS Insight's current and future capability. Published research tells us it takes an average of 17 years for scientific discovery to reach routine clinical practice. We believe the smallest and most vulnerable patients shouldn't have to wait that long. As groundbreaking pediatric deformity classifications emerged through SRS, we're working directly with thought leaders from some of the world's most prestigious spine programs, including Columbia, UCSF, and BNI, to integrate that science into EOS Insight, helping translate discovery into clinical utility today. EOS is gaining momentum for a session, and after, we've seen unprecedented outreach from high-profile surgeons interested in our ecosystem. That is why our growing priority is expanding both what EOS Insight can do and who it can reach. Today, EOS is delivering clinical data for surgeons and sites that use it, and we see our opportunity to bring that value to far more surgeons and patients. This will scale well beyond where we are today, and as we expand its reach and utility, we believe EOS Insight can and will become a standard part of how spine care is planned and delivered. Turning to surgical execution, for years, spine companies competed on implants. Our investment in EOS, SafeOp, and Valence reflects our belief that the future of spine surgery belongs to those who can improve every dimension of a procedure, whether that is how a patient's diagnosed, how surgery is planned, how it's actually performed, or how outcomes are evaluated. For Valence, early surgeon feedback is confirming that the platform fits naturally into the procedure. The workflow is intuitive, integration is seamless, and expertise continues to improve with use. The elegant and small physical footprint is an absolute thing of beauty, and the in-field camera is unlike anything else on the market. In a way, it takes up such little real estate compared to bulky, capital-intensive competitive systems. I wish everyone could experience firsthand, like PTP, utilizing Valence to truly understand the differentiation of what we have built. With a strong foundation in place, our focus is shifting from validating experience to broadening utility across more procedures. That expansion is underway. We recently added at navigating TLIF to our indications, extending Valence beyond lateral into a posterior procedure many of our surgeons are performing today. Each new indication strengthens the platform as being the operating system through which more of the procedural experience can be orchestrated. SafeOp couples its preview by adding real-time information on neural location and health. Together, these pieces create a continuous loop around the surgical intervention. EOS Insight plans, Valence and SafeOp support informed intraoperative execution, and our procedural platform fully marries surgeon intent with action. The result is a more connected experience for the surgeon, one that is actually unmatched and provides a broader role for Alphatec before, during, and after the operation. As I've said in the past, we're aiming to be indispensable. We'll continue to add capabilities and leadership to capture that opportunity. This includes a recent addition to our leadership team. I'm thrilled to announce that in September, Tommy Carls joined Alphatec as Executive Vice President, Data Intelligence and Strategy. Tommy brings more than three decades of spine and medical technology experience with a strong track record of ecosystem integration and will lead our efforts across EOS Edge, EOS Insight, data, and analytics as we continue to build out our informatics strategy. As Pat outlined, we now expect full-year revenue to approximate $862 million, including approximately $789 million in surgical revenue and $73 million in EOS revenue. We expect adjusted EBITDA of approximately $137 million, or a 16% margin, and free cash flow of about $10 million. What matters is that we're sustaining strong earnings outlook even with lower revenue expectations. That reflects the leverage in the model, continued gross margin progress, and the discipline of the organization. Our focus is steadfast: to consistently improve performance across the portfolio and convert healthy procedural demand into revenue, profitability, and cash flow. Make no mistake, we're in this for the long haul. We're growing at a rate that no other spine company has at this size. Even though revenue didn't fully meet our expectation, we expanded earnings, generated cash, and continued investing in the opportunities ahead. That resilience gives us the capacity to keep building for the long term. Here at Alphatec, we're earning share in spine, driven by clinical innovation, exceptional people, and focused execution. That combination continues to attract the best surgeons and talent and gives us great confidence in the opportunities ahead. I'm profoundly inspired by what we're building together. Thank you to everyone on the call, especially to the Alphatec faithful. Our best days are yet ahead. With that, Operator, we'll take questions.

Operator

Thank you. As a reminder, analysts planning to ask a question must be registered to the dedicated analyst link included in today's materials. If you have not yet registered, please do so now to be included in the queue. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We will now open the floor for questions. In consideration of others, please limit yourself to one question. The first question comes from Young Li with Jefferies.

Unknown Speaker

Hi. Thanks for taking my question. I want to get the background on the biologics attachment rate. I was wondering if you can go maybe a little bit more into that. Maybe we heard about the issue earlier this year. And you kind of talked about some of the plans and initiatives you are commenting on. I was wondering, does it get out across the board for your existing customers, or is it more something that impacts new or converted surgeons?

Patrick Miles

Yeah, let me, let me try to take a guess at the qualitative aspect.

Unknown Speaker

Todd, jump in. How about a more of an overview? And, and like, we're more well-versed there. I mean, that the challenge is it is when we built the procedural strategy, what's required and what drives the ACV is the inclusion of as many products for procedures we can possibly assemble. So that when you get leakage in a biologic and it starts to then yet undermine that, the entire selling of the procedure. If you look at just the elements other than BMP, which is the least distinctive element of the procedure in the biologics. And so, when you look at us, you say, "Gosh, these guys are growing procedures at 20%, and they continue to grow procedures." Yeah, I put a big target on our back for all of these companies that just sell biologics. So tell me what you're seeing. What you're seeing is a bit of a lack of discipline on our selling front. And that reflects that leakage. And candidly, yeah, damn it, it is it a little tough when you're growing again, 20% procedure volume, growing your hardware 17%, and then you see leakage in a biologic that ultimately can undermine the revenue growth rate. And so, that foundation is what you're seeing. What we're driving is a response in terms of one, far greater sales discipline with both carrot and stick, and then two, you're making sure that those early adopters of our procedures have access. And so those are kind of the two headwinds that we're addressing with regard to biologics. But suffice it to say, it's irritating, right? It's like you spend all this effort to put together a sophisticated integrated procedure, you earn the procedure, and then you get picked a bit in the biologics. So that's fundamentally the dynamic. And, Young, I'm just adding a little bit to that. I think if you look at the history, we have typically seen $15 million to $25 million of our growth year-over-year attributed to biologics. And while we saw some growth in the first half, we went backwards year-over-year by $1 million here in Q3, now flat sequentially. And to Pat's point, we have made some of the changes that Pat outlined in the course of our third quarter, and so we did see some improvement as we're exiting the quarter. But our guidance implies really flat biologics revenue from Q3 to Q4.

Unknown Speaker

Thank you.

Operator

Our next question comes from the line of Allen Gong with JP Morgan. Your line is open.

Unknown Speaker

Hi, thanks for the question. And sorry if this was already answered, jumping around a bit. You know, we've now been hearing about potential softness in the orthopedic market. We've heard some softness on the spine side. And they call it ongoing right now, is kind of maybe some challenges on the hip and knee side. You know, generally speaking, orthopedic procedures were thought of as fairly elective, but do have to be performed eventually. So I guess help us to think about that challenge. How much of that is that reflected in your updated guidance, and how confident are you in the trajectory of that market dynamic going into 2027 and beyond?

Unknown Speaker

Thanks, Allen. From the start, when we came into the year, our expectation was that market growth would be in the mid-single digits, and that's how we felt the market was performing in 2025 and earlier. And clearly, I think we have seen less volumes over the course of the year. And I think it really has demonstrated itself here in the third quarter, and it feels like it's a low single-digit growing market at this point in time. When we pull back the curtain, if you will, on our customers and we look at them, and we look at our most established customers, we definitely see a bit of a broader based softness in our TLIF lumbar volumes. And so, Pat had commented earlier that our overall procedural volume is growing 20%, and that was actually a little bit higher than what our guidance implied in the third quarter. And really what you saw was slower TLIF lumbar volumes offset by very strong cervical volumes. And of course, it's always a little bit difficult for us because we are growing in TLIF lumbar and cervical at multiples of the market, to exactly put your finger on how much market growth there is. But as we've looked at it, we definitely see a slower market contribution associated with the surgical volumes this quarter relative to how we thought about it. In the fourth quarter, we reflected that in our fourth quarter guide. I think if you look at our guide in totality, it's about $20 million year-over-year lower, about $4 million that came here in the third quarter, leaving about $16 million in the fourth quarter. Of that $16 million in the fourth quarter, we got about $12 million in total associated with surgical volume, $4 million in EOS. In the surgical volume, the majority of that is really associated with lower biologics expectation and lower procedural volumes, kind of evenly split. I'd guess about 50/50, $6 million and $6 million, yeah, more or less.

Unknown Speaker

Okay. And then I guess, like, keying on the EOS side, how should we think about the slowdown there? And give up a little bit separate from biologics and even maybe separate from procedures. Of course, the two are linked, but are we starting to see challenges on the capital side of the equation as well? We've been hearing a lot that new order books are healthy, but maybe there's like a bit of an extended period between the orders are placed and then the hospital actually accepts the installation. Help us understand the EOS slowdown.

Patrick Miles

Yeah, I would, I would say it's all of the above. You know, it's, it's, it's some, it's not a lack of demand. And you know, we try to outline a little bit in terms of what the market's telling us and what the market's showing us. In my mind, it's more about lumpy capital dollar availability and an inconsistent installation dynamic. But as it relates to a fundamental demand on the pieces of information that's driving improved data and surgery and the EOS Edge unit being that core tool that's driving that, there is a healthy demand dynamic. And so, and again, it's frustrating to not deliver continued growth on that front, but that's going to be a lumpy one. We knew that one from the beginning. And I think the other point I'd say, Allen, is clearly 2026 hasn't gone as expected, relative to our total revenue growth or relative to the expectations that we set out for performance with investors. And so we're trying to be thoughtful about how we reset our 2026 guidance going into 2027.

Unknown Speaker

Thank you.

Operator

Our next question comes from the line of Matt Blackman with TD Cowen.

Unknown Speaker

Good afternoon, everyone. Logic there. Great. And not aggregate does not have a fair question to ask today given all the moving parts here in 2026, but you have a 2027 key target of a billion dollars in revenue, $189 million in adjusted EBITDA. Just your level of comfort with that, with those key targets here again, appreciating all the moving parts here. Any commentary on that would be helpful.

Unknown Speaker

Matt, as you can imagine, we're in the middle of our planning process for next year, and we're not going to get into specific guidance for 2027. But I can share a little bit with how we think about it. First, we continue to see strong procedural growth, and I think that's encouraging. The underlying volume component of this business is strong. We're seeing strong surgeon adoption and really durable hardware growth, and so I think that that is an encouraging thing. EOS capital has had a challenging year, but what we do like are the positive signs in that business, which we're seeing, and I think that should put us in a better position next year. And we've been very pleased with the progress on Valence and EOS Insight, and see potential for continued growth in our international business as well. And now, of course, we have had challenges with our biologic performance, which we believe we have addressed, but the timing and the effectiveness of those measures is difficult to predict. And so I'd err on the side of caution until we get a little bit more clarity on that front. And consistent with last year, with, yeah, so I'd add consistent with, I think, the comment I made earlier on 2026 and our trying to be thoughtful for it. I do think the second half of 2026 is a representation of how we believe the current business is performing, and I think a pretty good jumping off point for how to think about next year.

Unknown Speaker

Okay. If I can squeeze one more in here, and again, other strong surgeon adoption quarter, and just curious, and you've sort of talked about that in the past, if you didn't add a single surgeon from here on out, if you think about 2027, does the natural progression of those surgeon cohorts growing, do you sustain that or approximate that? Can you sustain sort of late teens procedure growth on even if you didn't add another surgeon, add to the armamentarium, so to speak? Is that the right way to think about it, or not?

Unknown Speaker

I think conceptually, Matt, that's consistent with how we thought about it. I think to my earlier comment on the market dynamics, we're going to have to pay attention to those here in the fourth quarter and how we think those will shake out for next year. So I think that dynamic is a variable in your logic, but I think the logic that you laid out is consistent with how we think about it.

Unknown Speaker

Thank you so much. Thank you.

Operator

Our next question comes from the line of Vik Chopra with BMO Capital Markets.

Unknown Speaker

Thanks. Thanks for taking the questions. Pat, can you help us understand what "own it and address it" means in practice? You know, does that imply changes to the bag, pricing, team cleaning, or sales leadership? And then I have a follow-up, please.

Patrick Miles

Yeah, I think to make sure I understand exactly what you're asking, that, am I just asking about the changes that we'll make on the biologic front that'll influence what's going on, and that's, that's what you're intending? That the exacting a depressingly is that you know, what we're going on it on and addresses the the time and what that mean exactly. Yeah, I'm, "own it" means that I'm profoundly irritated by it, and it's a lack of discipline that we're going to respond to. And so, as I said, we're going to manage this with a carrot and stick across the sales force. And again, there's few things more maddening than making the investments that we've had in terms of the integrated procedural strategy. It has been so widely accepted and so enthusiastically received, and you feel like it didn't click a little bit based upon the most limited piece of the pie and the most undifferentiated piece of the pie. And so, when I said we're going to own it, we're going to respond to it in an aggressive way. You know, as you know, we're sitting at this precipice where a few years from now, or 2029, we're going to be the second company that likely will have a BMP, which is the only really distinct biologic on the market. It's unsettling when a lack of discipline in the short term, and where companies are targeting you based upon your growth in procedures, to insert themselves within what would have been a procedural case value. And so, you can imagine that we're making sure that there's discipline with regard to the exclusivity elements within our distributor agreement, and we're holding sales management completely accountable, and we're managing that financially with regard to carrot and stick. And so, I would say, we own it, we know what it is, we know exactly how you are influencing it, and we're gaining more access by the day contractually. And so, these are things that we know how to respond to.

Unknown Speaker

Okay, great, thank you. And my second question was, what gives you confidence in the updated guidance for the year? I'm just trying to understand how much of that assumes that the revenue per case continues and how much of that assumes a biologic recovery. Thank you.

Unknown Speaker

Thanks, Vik. The point on biologics is the right one. And so, what we saw in Q3 was essentially a sequentially flat biologics number. And as you can see from our reported revenue, our surgical revenue sequentially went up, and we're assuming that biologics contribution sequentially is flat from Q3 to Q4. And so we think that's the right place to put it. Overall, our surgical hardware guide assumes about $12 million of sequential growth. Last year, I think we did about $13 million or $14 million. So, just in context and just analytically, I think that gives you some comfort.

Unknown Speaker

Thank you.

Operator

Our next question comes from the line of Tom Stephan with Stifel. Your line is now open.

Unknown Speaker

Great. Hey guys, thanks for taking the questions. I wanted to go back to the TLIF lumbar. Pat, maybe for you, just be great if you can elaborate a bit more what's happening there with Alphatec and I guess it sounds like more at a market level. You know, regarding your market views, I guess is this potentially a somewhat more durable headwind? Does it feel like something that's maybe more isolated to this quarter and the fourth quarter? And then as it applies to Alphatec, are there any competitive dynamics at play here? And I have a follow-up.

Patrick Miles

Yeah, I'm not, not to be flippant, but you know, when you start to see slower volumes, these are with our gun customers with whom we've had relationships for years. And so what we're seeing is overall volume impacts to their practice. And so, as it relates to competitive dynamics, I will assure you that's not the case. The other dynamic is, I don't know if you saw it in the more prepared remarks, is there is a growing younger cohort of people who are engaging Alphatec, and oftentimes that cohort has less complex types of surgeries that they're initiating their practice in. And so, when you're growing at multiples of the market, you start to discern whether the headwind you start to look at things like, "Geez, what's our most tenured cohort doing, or is there a volume slowing in some way?" Yes. "What type of volume are we getting from the younger guys?" The younger guys are growing at a much faster rate, and you start to see that it doesn't speak to a competitive dynamic. And when you're growing procedures at 20%, you're adding surgeons at 25%, you know, again, zero hubris, but it gives you a level of confidence that the thesis is intact, and what we're seeing is just we could see, based upon the biologic thing, that really is, yeah, you see a little bit of bumpiness in terms of volumes. So...

Unknown Speaker

Yeah, but I'll just add, on your question on the durability of the market softness, our assumption is that that continues and perpetuates into the fourth quarter. And we're going to pay close attention to it. And as I had said earlier, it's too early at this point to be giving 2027 guidance. I have made some comments on how to think about that, but it is a variable we'll have to pay attention to going into next year.

Unknown Speaker

Got it. That's great, super helpful. And then just to pivot back to biologics, and Pat, maybe I'll stick with you. I guess what I'm curious on is, could this pressure be durable or even kind of structural at a market level, and that maybe extends beyond just a lapping dynamic? Can you talk about what's going on at the customer, at the hospital level? I guess I'm just curious if maybe this is more of a shift in biologics more broadly within spine that could be somewhat lasting. Thanks for taking my questions.

Patrick Miles

Yeah, it's really a good question. One of the things that we're seeing is clearly hospitals are doing their best to save money, and oftentimes will do a spine RFP and then they'll do a biologics RFP. And really, it provides a bit of a hunting license for some of the smaller companies who are willing to take a lesser price and pay higher points to distributors. And so, I would say that from a pure market dynamic perspective, that's one of the things that creates a challenge. The reality is, based upon our current access to hospitals and based upon our accessible market space, we're underperforming. And that's the piece that is frustrating, is independent of the dynamics of the marketplace, what I would call a lack of discipline is impacting that value. And so, we can't have a BMP soon enough, but in the meantime, what we have to do is get back to blocking and tackling and do the things that we know how to do to assure that our ACV is not impacted by this. Thanks.

Unknown Speaker

Our next question comes from Lawrence Siegel with Wells Fargo.

Unknown Speaker

Thanks for the question. So adjusted EBITDA only came down about $3 million. I guess the free cash flow guide was cut by $10 million after a strong Q3. The question is, what accounts for that gap? Is that time-shifted to 2027, or is there a step-down in the conversion rate which occurred for it?

Unknown Speaker

So if you look at our adjusted EBITDA of $137 million, it's 16% of revenue, which is consistent with how we came out in the previous guide. It's about $3 million lower than our previous guide. Obviously, we overperformed for EBITDA performance in the third quarter. So really, it implies about a $5 million step down year-over-year, excuse me, versus our previous guide, implied in the fourth quarter, which is about a third of the revenue change that we've guided to. So I think the EBITDA reduction in the fourth quarter is in line and consistent with the reduction that we're projecting in revenue. So I think that's in line. We end up with an 18% EBITDA ratio implied in our fourth quarter guide, which we feel is good and strong. You know, I hear your comment and your question relative to the free cash flow part of that. Part of that is clearly the lower revenue and the lower collections you get. And I would just tell you that the conversion of EBITDA to cash flow has probably has more timing dynamics than you might expect. And so what we are doing as we continue to buy and receive towards the projected level of instruments and inventory to support the increasing volume of surgeons and our expectation for revenue growth. And so I think that's really the dynamic that's impacting our cash flow on this guidance. And we don't really think that there's a fundamental change in the relationship between cash flow conversion and EBITDA. We feel good about our ability to continue to grow profitability. I think we've demonstrated that significantly over the last number of quarters and our ability to translate that into cash flow, as we've projected, has also, I think, been demonstrated. So I feel like that's working as intended.

Unknown Speaker

Okay, got it. And then maybe one on Valence. Just how is your relationship with Medtronic going in terms of kind of coexisting within the same channel? And I'd be curious to hear how many Valence cases to date have occurred and averages around what?

Patrick Miles

Yeah, I would say I have zero idea in terms of the Medtronic dynamic. What I do know is that what we're doing with Valence is unusually elegant. And someone who's been at this for 30 years, I would refrain from using that commentary unless it was an absolute. And so what we're doing with Valence is we're integrating it into the workflow of PTP. And so the utility of Valence in terms of the workflow of the front of the spine and the workflow in the back of the spine is something that Medtronic, Globus, or nobody else can do. And so I'm thrilled with regard to the early experience of it, as we, as we talked about, and it's, it's a, this is a place where we distinguish ourselves is in the clinical application of technology to ultimately create predictability in surgery. It's unmatched. And so I'm hugely bullish on our ability to translate Valence in the coming years. I love how we work in a disciplined way to ultimately make sure that it reflects the very intention of the clinical requirement. And so anyway, not going to give you numbers, I don't care about Medtronic, but I will tell you that what we're doing is highly distinguished.

Unknown Speaker

Thank you.

Operator

Our next question comes from the line of David Saxon with Needham & Company. Your line is now open.

Unknown Speaker

Great, thanks for taking my question. I'll ask a quick one there, just on the procedure mix that you're seeing in cervical and lumbar softness. Where's that showing up? Like, very curious to see how anterior lateral is holding up across PTP and ALIF or if that's kind of more in other approaches. Thanks so much.

Patrick Miles

Yeah, thanks for the question. It's fascinating. You know, it's like you look at the cohort of guys that we're attracting to as new users, and the clearest utility of our spine procedure and the clearest success isn't cervical. And so, we're going to see cervical start to run a little bit. And so, we're thrilled about that. And then, and then you start to look at, "Gosh, how is the lumbar thing doing?" And "What are we seeing from a lateral perspective?" Lateral, for us, is a proxy for success. And so, we continue to see strong demand on the lateral front. I would say that the place that's going to be the longer run is just our deformity strategy. And so, we're seeing that the volume of enthusiasm with regard to that is so abundantly clear, and it's maddening that you don't see the requisite EOS capital placement success at the time that we had hoped for it to reflect. But you know, the types of things that we're doing in deformity are just going to take time to ultimately be reflected. Great. The situation with regard to where we are with PTP, PTP continues to distinguish itself. It has been so much fun to watch and experience that technique proliferate. It'll continue to proliferate, same with regard to just lateral in general, level position, level surgery. But I would tell you that, you know, getting into the pediatric institutions, getting into some of the longer deformity cases, more adult deformity than we are current deformity. And so, I would say that's, that's the dynamic and that's the headwind.

Unknown Speaker

And David, maybe think about it this way, you know, the 20% procedural volume growth was probably a tick higher than our guidance implied in the quarter. Yet we're talking about new lower market demand. That's really a function of we completely outperformed our cervical expectations. We've underperformed on TLIF. But to Pat's point, the historical strength of the business has always been in the anterior column. And so the relative contributions, I think, remain intact, but they're overall kind of all down a bit. And we attribute that fundamentally to market demand. And so I think that's kind of how you reconcile the dynamics numerically.

Patrick Miles

Yeah, I mean, we're still multiples of the market, even in the TLIF lumbar today. So I'd say down relative to expectations, but still significant share taking in the moment.

Unknown Speaker

Yeah, okay, great. Thanks. Thank you.

Operator

Next question comes from the line of Ben On with Stephens. Your line is now open.

Unknown Speaker

This is Ben On for Mason. You had, did you sell? Look, I would you be willing to provide some color on the average time it takes for an EOS order to be delivered? I'm, and is just what share of the Q4 EOS placements you already have in hand and then converting here?

Patrick Miles

Yeah, in the summary, from a placement timing perspective, it can vary. It's all over the board based upon the build-out in the room and all the other elements that drive placement acceptance. And so, I would hate to give you a number just because the number's not going to represent anything other than a mean when, you know, some of them deliver virtually immediately if they've already had an EOS, the other ones take longer. And so, you know, I guess the key point that I think is important to appreciate is the demand for the thing has never been greater. Then at our ability to place them in order is that rarely do we place the majority in the quarter that we get them ordered. It's lumpy based upon all of the things I've defined. So, I guess, hopefully that provides a little bit of color.

Unknown Speaker

Yes, it does. Thanks. I'll just keep to one.

Operator

Our next question comes from the line of Keith Tene with Truist Securities. Your line is now open.

Unknown Speaker

Hi, good evening. So, I want to ask you, the EBITDA margin is already new. The 18% you guided for next year, can you please speak to your expectations for the margin drop-through next year? And it's even putting way and it might be, you won't be able to stay in the 40% range you have hit almost every quarter in for the past two years.

Unknown Speaker

Thanks for the question. And you know, I'm going to refrain from giving specific guidance on 2027, as I said earlier, so we're in the middle of that process. So, but here's a couple things I think you can consider. One, that we have consistently talked about a 35%, 30% drop-through year-over-year on the dollar growth to EBITDA.

Unknown Speaker

To your point, we have outperformed that over the last couple of years. You know, certainly this year we've benefited from gross margin expansion. Now, some of that gross margin expansion has been very much a reflection of the work and the discipline and the execution of the team here in terms of driving costs down and improving overall asset efficiencies. But some of that margin improvement has also been associated with the mix benefit from having more surgical hardware volume and frankly, less bio and less EOS contribution. So, you know, I wouldn't want to count on that necessarily going into the new year from a drop-through standpoint. So all that to say, I think kind of a mid-30s percent drop-through is a good way to think about it going into next year. I think the other thing I'd say is if you kind of look back at our history, you know, the EBITDA ratio where we exit in the fourth quarter is a pretty good indicator of where we land in the next year on that basis to your comment. Our guidance implies about 18% EBITDA here in the fourth quarter. And so I think that kind of helps you understand how we might be thinking about next year.

Unknown Speaker

Yes, got it. And just a small quick question. So this is a bit of a longer term one. So on OsteoAdapt, in the Q4 2025 deck, you put the TAM at around $2.5 billion, but noted that Medtronic is only doing around $600 million to $700 million in sales. So can you please speak as to why you think Medtronic's product has only around 30% of the market and whether you expect OsteoAdapt to increase that penetration rate meaningfully and if so, why?

Patrick Miles

Yes, it's a great question, and I'm going to do my best to describe the total addressable market. I think when you look at the biologics in total, it's inclusive of a lot of different synthetics, cells, all kinds of different products. And so it's a monstrously large market. Clearly, the only BMP player is Medtronic, and it's at $700 million or $800 million. I don't think they describe it exactly. But suffice it to say, when a surgeon has a patient with whom they're concerned about the prospective fusion, they use BMP. And so based upon the early understanding and the early kind of findings from the IDE and what we believe to be true, we think that there's some real clinical advantages associated with OsteoAdapt.

And so our expectation and our desire and why it's important for us to build a foundation of a biologic role within the marketplace is so we can go into this market sprinting, not jogging or walking. And so it's a large market. The biggest player, BMP by far. We think that OsteoAdapt has some features that are improvements to BMP. And so we see it as a significant opportunity. Got it. Thanks for the questions.

Operator

Thank you. Our next question comes from the line of Caitlin Roberts of Canaccord Genuity. Your line is now open.

Unknown Speaker

Hi, thanks so much for taking the questions. Just maybe a little more color on the international supply challenge you called out earlier in your prepared remarks and what you guys are doing to remedy that.

Patrick Miles

Yes, first of all, I greatly appreciate the question. You know, it's one of the things that we've done is we've spent a lot of time to, in essence, lay a foundation for future success. That means spending a lot of time, money, and effort in terms of training surgeons and preparing them. We have gotten off to a great start with regard to both Australia, New Zealand, and Japan. And as you appreciate, it's a step-by-step walk, especially in Japan. Like the Japanese Spine Society, in essence, has to say, hey, this is safe. You know, let's go ahead and do a small cohort of surgeries and make sure it's reflective of what we had communicated.

They've done that. They've broadened it. And then, you know, we finally get like the real monetization tool in the marketplace, which they value the screws most, and then there's a sterilization issue with regard to the packaging. And so we provide screws there, sterile, our implants sterile, and saw a packaging defect. If ever you want to be proud of a company, what happens is the company jumps all over it in like an obscene way. And so rarely does the CEO talk about the quality department in a company, but can I tell you, if you want to be proud of a company and say there's a culture that's robust and killing it, the quality team jumped all over it and got everything back. There was nothing in market that they didn't get. And so we, we had a whole company jump in and check every single package. The ones that we had to re-sterilize and redo, we did.

It was all hands on deck. We replenished a lot of the implants that we had to take out of market. And so it affected us, you know, in terms of slowing down the adoption. So when Todd talks about the impact of Q4, it's real. But it's always one of those things where it's like, if ever you want to feel proud of a company, those are the things that transpired. And so. Gosh, there's one more thing I was going to tell you. Anyway, that's a dynamic. You know, the irony is there's some competitors out there that had the same issue, and I would welcome a comparison to the speed by which they responded to this issue.

Unknown Speaker

Understood. Thanks so much. I'll leave it at that.

Operator

Thank you. Our next question comes from the line of Matthew O'Brien with Piper Sandler. Your line is now open.

分析师问答

Matthew O'Brien

Hi, this is Samantha on for Matt. Thanks so much for taking our question. Um, I guess just briefly touching on the hardware performance, it was really strong this quarter. Um, can you tell us what you're seeing from, um, like a pricing perspective and changes there, and how that could look as we move into 2027?

Unknown Speaker

Hi, Sam. Your question on pricing is a good one. And I would tell you that I think the pricing dynamic in the market has been relatively stable, and I don't necessarily see a change here in Q3 relative to what we saw in the first half of the year, and I'm not implying a change in the fourth quarter relative to our guidance. So I think the pricing environment is stable.

Matthew O'Brien

Okay, perfect, thank you. And then if I could just think one more on biologics, I know you said that it was, you know, flat here in Q3, same expected for Q4. I guess, how do you envision 2027 in terms of, you know, expecting sequentially flat performance in biologics and what it would take for a potential rebound?

Unknown Speaker

Yeah, I shared some comments on the call earlier about 2027 and how to think about that and how you might frame that up in totality. And I think my comment specific to the biologics is, you know, we have some challenges there. I think Pat has described those. We have addressed them very directly and believe that that will result in improvement over time. I believe the timing and the effectiveness of the measures we've taken are kind of difficult to predict. And so I would err on the side of caution until we just get a bit more clarity. So we'll be paying attention to that here in the fourth quarter.

And obviously when we do give formal guidance, we'll have some specificity around that.

Operator

Thank you. Our next question comes from the line of Ben Hainer with Lake Street Capital Markets. Your line is now open.

Benjamin Haynor

Good afternoon, gentlemen. Thanks for taking the questions. First off, I'll leave it at one and kind of step away from biologics and EOS here for a second. On Valence, just kind of curious on how you see that relationship rollout? Do you feel like you're kind of nailing the experience? And then on the angle of Valence as kind of an ASC tool, is that thesis kind of bearing out as you expect?

Patrick Miles

Hey, Ben, this is Pat. The answer is yes. You know, it's so comforting. You know, again, one of the things that I've historically described as a competency of the company is, you know, we acquired SafeOp years ago, and you look at what SafeOp is doing today in the neurophysiology device, and it's really unbelievable in terms of just the number of feature additions that we've made and the increased precision associated with delving into the evolution of it. You know, I always love the whole, you know, the investment starts after the acquisition. And I would say it's been the same with regard to Valence. It's like some of the core elements that were so key was, I don't love the duration it takes to sell capital equipment, nor do I love the real estate that it takes up in the operating room. And one of the elements of every navigation system and every robotic system is a camera that sits outside the sterile field that looks down and tries to search for the elements that enable you to navigate the tool. And so the great part about Valence is it's totally surgeon-controlled, and it's in the field.

And again, what the experience has shown us is that when you do both the front and the back of the spine, you need to move the camera. And if you're using something where the camera is outside the field, it takes a sales rep or a nurse or somebody else to move the camera to ultimately identify where the instrument is. And it's nonsense. You know, you think about the level of precision required. The long-winded answer is it's going great. It's built for utility. Like, you know, the intention was, hey, let's do this for PTP. It's hugely elegant for PTP. We've already gone on to TLIF, and it's doing exactly what we intended. And so, you know, again, I think it just speaks to the disciplined approach to clinical distinction.

And so, you know, hugely bullish on it. It'll be a tailwind for next year and just excited that we know exactly what it's going to do and what it's going to be and why it's an improvement to what's out there today.

Benjamin Haynor

Excellent. Great color on that and thanks for taking the question. Thank you.

Operator

Our last question comes from the line of Sean Lee with HC Wainwright. Your line is now open.

Xun Lee

Good afternoon, guys, and thanks for taking my question. To move into the prone procedure field, and we're wondering what do you see that as a positive in expanding the overall market or are you starting to see some pushbacks on accounts, or do you expect some pressure on pricing on that?

Patrick Miles

Yes, thanks, Sean. I think it's awesome. And the reason I think it's awesome is because it brings more attention to something that we do unbelievably well and unbelievably better. And so when you think to yourself, gosh, you know, a good proxy for me is years ago, when we launched lateral surgery at another place, the largest company in the business came up and did their best to copy it. And candidly, whenever you copy something, you oftentimes get the last best effort of the inventor. And that's ultimately what our competitors are doing is getting our last best effort. And what we will do is continue to apply our learnings into evolving the technique. And so when you have a navigation system that is designed specifically for the utility within PTP, you have a neurophysiology system that's designed specifically for the utility within PTP.

When you have a retractor system specific for the utility, I hope what it tells you is that the person who oftentimes invents it and evolves it because they're better students of the requirements of the field oftentimes prosper. And so people who copy it don't understand it deeply enough to ultimately get it right. And so we love it that they're promoting a technique that we believe deeply in because we're the ones who invented it. And so couldn't be more excited about more people communicating the virtues of prone trans-soas surgery. But what they'll ultimately do is go to PTP because it is the lead and the one that is created by the inventor. Thank you for that.

Operator

I would now like to hand the call back over to CEO Patrick Miles for closing remarks.

Patrick Miles

Yes, thanks very much. You know, it's clearly a frustrating quarter. But, you know, one of the things we say, and we're not kidding when we say that our best days are yet ahead, and we're thrilled to be long players in this business and believe deeply in what we're doing. So thanks so much.

Operator

This concludes today's conference. Thank you for your participation. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

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