Key Points
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Third-quarter revenue rose 13% to $221 million, while surgical volumes increased about 20% and new-surgeon growth reached roughly 25%. However, weaker biologics attachment rates and softer thoracolumbar volumes caused revenue to fall short of expectations.
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Profitability improved substantially: gross margin reached 72%, adjusted EBITDA rose 46% to $38 million, and free cash flow was approximately $6 million. Alphatec ended the quarter with about $135 million in liquidity after repaying its remaining 2026 Notes.
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Management lowered 2026 revenue guidance to approximately $862 million, citing biologics weakness, slower market growth and a $3 million international supply-chain impact from a sterile-implant packaging defect. The company still expects adjusted EBITDA of about $137 million and views its Valence navigation platform as a potential 2027 growth driver.
Alphatec (NASDAQ:ATEC) reported third-quarter revenue growth and expanded profitability, while lowering its full-year outlook to reflect weaker biologics performance, softer thoracolumbar procedure volumes and a temporary international supply constraint.
Revenue for the third quarter totaled $221 million, up 13% from a year earlier. Surgical revenue increased 14% to $202 million, while EOS revenue was $20 million, up from $17 million in the second quarter and essentially flat year over year.
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Chairman and Chief Executive Officer Pat Miles said demand indicators remained strong despite revenue coming in below management's expectations. Surgical volumes grew approximately 20%, and new surgeon growth rose approximately 25%, with the company attracting more new surgeons during the quarter than at any previous point, according to Miles.
"While revenue fell short of expectation, demand for our surgical solutions remained strong," Miles said. He added that surgical hardware revenue increased about $26 million, but a year-over-year decline in biologics revenue weighed on overall surgical growth.
Biologics and thoracolumbar volumes pressure outlook
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Chief Financial Officer Todd Koning said revenue per case declined 5% year over year, primarily because of lower biologics attachment rates. Total biologics revenue fell approximately $1 million from the prior-year quarter, meaning surgical hardware accounted for all of the company's surgical revenue growth in the period.
Miles described biologics as the company's primary growth constraint in the quarter and said Alphatec is increasing sales-force discipline and working to expand contractual access for surgeons and accounts. He said the company is earning procedures but is not consistently capturing the full value of integrated procedures through biologics.
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"We are undoubtedly earning the procedures, with case volumes up 20%, but not pulling through the entire procedure," Miles said.
Koning said the company historically has seen $15 million to $25 million of annual growth attributable to biologics, but does not expect that contribution in 2026. Management expects biologics revenue to remain sequentially flat from the third quarter to the fourth quarter.
The company also cited slower-than-expected thoracolumbar procedure volumes, which management believes reflect broader market softness. Koning said Alphatec had entered 2026 expecting the market to grow at a mid-single-digit rate, but now sees a low-single-digit growth environment. Strong cervical procedure volumes partly offset the thoracolumbar weakness.
Management said the revised forecast incorporates continued market softness during the fourth quarter. The company characterized the performance of its established customers' thoracolumbar volumes as softer, while maintaining that Alphatec continues to grow at multiples of the overall market.
Margins expand and free cash flow remains positive
Despite the revenue shortfall, Alphatec reported higher margins and positive free cash flow. Gross margin was 72%, an increase of nearly 200 basis points year over year, which Koning attributed to inventory efficiency, lower costs and some product-mix benefits.
Operating expenses increased approximately 8% from a year earlier but improved by about 260 basis points as a percentage of revenue. Adjusted EBITDA rose approximately 46% to $38 million, producing a 17% adjusted EBITDA margin that expanded more than 400 basis points year over year.
The company generated $34 million in operating cash flow during the quarter and invested $29 million in inventory and instrument sets to support its growing surgeon base. Free cash flow was approximately $6 million, marking the fifth consecutive quarter of positive trailing 12-month free cash flow.
Alphatec ended the quarter with approximately $80 million in cash and $55 million in available borrowing capacity, for total liquidity of roughly $135 million. During the quarter, the company repaid the remaining balance of its 2026 Notes with cash on hand.
Full-year revenue guidance reduced
Alphatec reduced its full-year 2026 revenue outlook to approximately $862 million, representing growth of roughly 13%. The revised guidance includes:
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Approximately $789 million of surgical revenue, up about 15% year over year.
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Approximately $73 million of EOS revenue.
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Approximately $137 million of adjusted EBITDA, representing a 16% margin and about 47% growth year over year.
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Approximately $10 million of free cash flow for the full year.
The revised outlook implies high-teens surgical case-volume growth and a 3% decline in revenue per case. Koning said the lower guidance reflects reduced biologics attachment rates, weaker procedure volumes and an international supply constraint expected to reduce international sales by approximately $3 million for the year.
Regarding the supply issue, Miles said the company identified a packaging defect involving sterile implants in international markets. He said Alphatec retrieved affected products, reviewed packaging and replenished much of the inventory removed from the market. Management expects the supply constraint to be resolved entering 2027.
EOS, Valence and procedural strategy remain focal points
Miles said EOS imaging remains a strategic entry point into institutions and the clinical workflow. EOSedge is now in more than 70% of academic institutions with fellowship programs, according to the company. Management said accounts using EOS Insight have generated higher implant revenue after the software goes live.
EOS capital revenue can be uneven because installation timing depends on room build-outs, customer acceptance and other factors, Miles said. He described demand for EOS systems as healthy, while acknowledging variability in capital availability and installations.
The company also highlighted the rollout of its Valence navigation platform. Alphatec recently added navigated TLIF to Valence's indications, expanding it beyond lateral procedures into a posterior application. Miles said early surgeon feedback has been positive and that the company sees Valence as a potential growth tailwind in 2027.
Alphatec also announced that Tommy Carls joined the company in September as executive vice president of Data Intelligence and Strategy. Carls will lead efforts involving EOSedge, EOS Insight, data and analytics, according to Miles.
Looking ahead, Koning declined to provide formal 2027 guidance but said the second half of 2026 provides a useful starting point for evaluating the current business. Management said it expects to monitor market conditions and the effectiveness of its biologics initiatives before offering more specific projections.
About Alphatec (NASDAQ:ATEC)
Alphatec Holdings, Inc is a medical technology company focused on the design, development and commercialization of products and procedural solutions for spine surgery. The company aims to improve the treatment of spinal disorders through technologies that support spinal fusion, deformity correction, reconstruction and minimally invasive procedures.
Its portfolio includes spinal implants, surgical instruments, navigation and imaging technologies, and intraoperative monitoring solutions.
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The article " Alphatec Q3 Earnings Call Highlights " was originally published by MarketBeat.
