Prepared remarks
Good afternoon, everyone, and welcome to the webcast of ATEC's Second Quarter Financial Results. We would like to remind everyone that participants on the call will make forward-looking statements. These statements are based on current expectations and are subject to uncertainties that could cause actual results to differ materially. These uncertainties are detailed in documents filed regularly with the SEC. During this call, you may hear the company refer to non-GAAP or adjusted measures. Reconciliations of these measures to U.S. GAAP can be found in the supplemental financial tables included in today's press release, which identify and quantify all excluded items and provide management's 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'll turn the call over to Pat Miles.
Thank you very much. I appreciate it. Welcome to our Q2 2026 financial results call. There will be some forward-looking statements, so please review them at your leisure. This quarter reflects a solid performance in both growth and profitability. We did $214 million in Q2, up 15%, with surgical up 17%, cases up about 20%, and surgeons up about 24%. Those are the leading indicators that affirm this is both a utilization story and an adoption story. We're adding surgeons, and they are doing more with us. The business is working and we are scaling. The quarter also showed strong leverage. We generated $36 million of adjusted EBITDA, up $15 million sequentially at a 17% margin, while producing positive cash flow. When you step back, this is exactly the compounding engine we've been building: more surgeons, more cases, more platform pull-through, and now it's dropping to the bottom line, creating profitable growth. EOS came in at $17 million for the quarter. Fundamentally, EOS affords us access and, as importantly, accelerated hardware usage from EOS Insight when it goes live. I'll come back to that later. Todd's going to take you through the numbers, and then I'll walk you through the catalysts that give us more enthusiasm today than ever before. We are just getting started. Over to you, Todd.
Thank you, Pat. The second quarter results reflect the continued strength and consistency of the company we are building. We delivered strong revenue growth, significant profitability expansion, and positive free cash flow, extending our track record of converting top-line performance into meaningful financial results through disciplined execution and scale. We've been very deliberate in how we allocate resources, invest in growth initiatives, improve asset efficiency, and leverage our infrastructure as the business grows. That discipline continues to translate revenue growth into expanding EBITDA margins and cash generation. Consistent with recent quarters, we continue to see robust surgeon adoption and procedural volume growth, clear indicators of long-term demand for our procedural solutions. Total revenue was $214 million, up 15% year-over-year, with surgical revenue of $196 million, growing 17%, a $28 million increase over the prior year period. That growth continues to be driven by the core elements of our model, approximately 24% growth in surgical adoption and 20% procedural volume growth. The consistency of net new surgeon adds and case volume, both at or above 20% again this quarter, speaks to the ongoing momentum and durability in our surgical business. Overall revenue per case declined approximately 2.7% year-over-year, driven by case mix and strong international growth. The remaining pressure was primarily attributable to biologics attachment, which stabilized in Q2 but remained below prior year levels. Improving biologics attachment remains an area of focused execution. Encouragingly, and consistent with prior periods, our average revenue per case across individual core procedures remains strong. Lateral, ALIF, and cervical were all up year-over-year. Also, revenue per case improved sequentially by 1.5% in the quarter, reflecting increasing stability in the underlying business. Turning to EOS. Revenue was $17 million in the quarter, up from $14 million in Q1, and essentially flat year-over-year, with demand for systems remaining strong. EOS Insight adoption continues to grow, and we are seeing increasing evidence that these accounts become meaningful adopters of our procedural solutions following implementation. Among established EOS Insight accounts, implant revenue increased approximately 32% within 6 months of go-live. These results reinforce the strategic value of EOS and EOS Insight as important drivers of surgeon engagement, procedural adoption, and long-term growth. Turning to the P&L, gross margin for the quarter was 72.5%, an increase of 260 basis points year-over-year, driven by continued improvement in inventory efficiency, cost reductions, and product mix. Operating expenses grew 11% while improving approximately 260 basis points as a percentage of revenue, signifying strong operating leverage and reflecting our approach to make disciplined, targeted reinvestments in the business. The combination of strong revenue growth, gross margin expansion, and disciplined execution drove adjusted EBITDA of $36 million, up approximately 53% year-over-year. Adjusted EBITDA margin expanded 420 basis points to 17%, further proof of the increasing scalability of our operating model and our ability to deliver expanding profitability. Turning to the balance sheet, we ended the quarter with approximately $119 million in cash and $85 million of available borrowing capacity, providing roughly $204 million of total liquidity. We generated $34 million of operating cash flow during the quarter while investing approximately $33 million in inventory and instrument sets to support continued surgeon adoption growth of more than 20% and position the business for the expected revenue ramp in the second half of 2026. As a result, we generated approximately $1 million of positive free cash flow, exceeding our expectation of roughly break-even, and delivered positive trailing 12-month free cash flow for the fourth consecutive quarter. We expect the third quarter to reach $4 million to $6 million of free cash flow. During the quarter, as we announced previously, we completed our new term loan A and revolving credit facility with JPMorgan and TD Cowen. The transaction consolidated two legacy facilities into one single capital structure, extended our maturities to 2031, and is expected to reduce annual interest expense by more than $6 million. Together, these actions further strengthen our balance sheet, lower our cost of capital, and provide additional flexibility as we continue to grow and scale the business. Turning to the revenue outlook, we are maintaining our full-year revenue guidance of approximately $882 million, representing growth of roughly 15% for the year. This includes surgical revenue of approximately $805 million, unchanged from our prior outlook, and representing growth of approximately 17%, and EOS revenue of approximately $77 million. We expect high-teens surgical case volume growth in the second half of the year. Average revenue per case is expected to decline in the low single digits for the full year, with the year-over-year impact continuing to moderate as we move through the second half and exit the year. This implies that the second-half surgical revenue growth will accelerate to 18% from 17% in the first half of the year. Given our growth outlook, sustained improvement in gross margins, and ongoing operating discipline, we are raising our adjusted EBITDA guidance to approximately $140 million, representing a 16% margin, up from our prior outlook of $134 million. We continue to expect at least $20 million of free cash flow for the full year. We are reaffirming our revenue and free cash flow guidance and raising our profitability outlook, reflecting our confidence in the continued progression of margins, profitability, and cash flow generation. With that, I'll turn the call back to Pat.
Thanks, Todd. Our strategy is unchanged because it is working. If we go back eight years since we started the ATEC turnaround, we have 10x the quarterly revenue. I don't say this because it reflects a destination, but more to reinforce that we are doing things differently. For us, it is more of a starting point. We are generating results because we remain committed to creating clinical distinction, earning surgeon adoption, and building an aligned sales machine that scales. That's been our model for years: serve spine surgery uniquely well, earn surgeon trust, and evolve the sales model. Creating clinical distinction is the root of everything we do. We don't focus on designing individual products. We integrate them into procedures that make for better surgical intervention. Adoption and growth come because the surgeons whose trust we've earned make the clinical decision to keep expanding what they do with us. We know that philosophy is working because surgeon demand remains very high. But clinical distinction only compounds if you have a sales machine to carry it into the field. Our disciplined, energized, and built-to-scale sales force is part of the procedure. It's what turns a better procedure into broad adoption. Put the three commitments together and the outcome is straightforward: do something clinically meaningful, surgeons adopt, and it scales. What creates a 20% increase in case volume and a 24% net new surgeon growth is that we focus on selling entire procedures, not just widgets. The volume of variables that undermine spine surgery success are many. The opportunity to mitigate them through carefully architected spine procedures is apparent. We assemble procedures from the ground up, and better spine procedures lead to expanded indications, expanded indications to greater complexity, and all that generates more revenue. We start in lateral for a reason. It's where we have the most know-how and the most apparent opportunity for us to create distinction. PTP has profoundly improved surgery, creating optionality for the surgeon while minimizing morbidity for the patient. I was reminded of this recently while watching a lateral case. What used to be a long surgery with a myriad of variables is now a reproducible, efficient, and confidence-building surgeon experience. The benefits of lateral surgery for patients have been apparent for decades. The challenge has been enabling more surgeons to feel confident that they can predictably perform the procedure safely and reproducibly. The advancements we've introduced to lateral surgery, including SafeOp, Valence, patient positioners, retractors, and implants, all designed to function as an entire comprehensive procedure, have produced a compounding effect on growth. We train and convert a surgeon to perform lateral surgery safely and reproducibly. Once that surgeon becomes more confident, they begin to treat more and more of their patients laterally instead of using other approaches and also to use the lateral approach to address more complex pathologies. That is why our new surgeon growth metric is such an important leading indicator of future growth and why we know that we have just scratched the surface of our long-term potential. Once surgeons trust you in lateral, they expand their utilization across other procedures, such as cervical, TLIF, and posterior fixation. That's how surgeon utilization compounds. More surgeon users applying multiple products within each procedure is how we drive convoyed sales, or products per case. It's what happens when you design procedures the right way from the ground up. EOS continues to be a pivotal part of our strategy. Installation can be bumpy quarter-to-quarter, but the post-installation EOS experience is playing out as expected. EOS Edge is a foundationally necessary clinical tool that avails us access to many of the world's most prestigious institutions. These were hard, if not impossible, institutions for us to access previously. However, with a tool as clinically relevant as EOS, we gain access, which gives us a hunting license to drive and expand adoption of our surgical procedures. What's also becoming increasingly important is that many of these institutions are training the next generation of spine surgeons. By establishing ourselves with leading academic centers and fellowship programs, we are expanding our influence with a younger cohort of surgeons who are learning alignment-based, data-driven surgery from the outset. From this access, EOS is shaping future adoption. When EOS becomes part of the clinical workflow from diagnosis, pre-surgical planning, intraoperative reconciliation, and follow-up, it starts driving case volume through Insight, alignment, bone mineral density assessment, surgical planning, and patient-specific rods. Over time, EOS builds something more valuable than one product. It generates a structured dataset. That becomes the moat. We are already realizing the benefit to the tune of about a 32% revenue lift per surgeon after EOS Insight is adopted. This is still just the beginning of the advantage we expect to see EOS and Insight provide, but early returns are very encouraging. Turning to surgical execution, historically, spine companies competed around implants. We think the future belongs to those who can meaningfully improve how surgery is diagnosed, planned, executed, and evaluated. That's exactly what we've invested in with EOS, Valence, and SafeOp. Interoperatively, let me start with Valence. Across the initial clinical experience, we're seeing what we expected: surgeons finding value in the technology, the workflow is elegant, and the procedural integration is working. The experience continues to improve with increased usage and feedback. We've been very deliberate with Valence. Our near-term focus has been getting the experience right through expanded utilization. We've always thought of Valence as a foundation to bringing more technology into the OR. Milestones like our recent FDA clearance for IOA, or intraoperative alignment, and Contour 3D, our automated rod bender, expand our capability while strengthening the technology foundation we're building. We don't view Valence as another navigation platform. We believe it will become the operating system through which more of the procedural experience is orchestrated. SafeOp plays an equally important role. It continues to evolve and expand in its utility across more procedures. It's a source of real-time, actionable intelligence around neurolocation and health, helping surgeons make better real-time decisions intraoperatively. When you combine improved surgeon decision-making through EOS Insight with intraoperative technology such as Valence and SafeOp, with the procedural innovations we've introduced over the past several years, what emerges is an integrated ecosystem that deepens surgeon confidence and makes ATEC increasingly essential to surgical execution. Our aim is to be indispensable. EOS, Valence, and SafeOp move us meaningfully closer to that objective. Another area where we are seeing growing influence is in deformity. These are some of the most demanding procedures in spine, and we're earning a seat at the table in partnering with leading KOLs. EOS imaging, alignment data, bone mineral density assessment, patient-specific planning, patient-specific rods, and a differentiated deformity portfolio all come together to help surgeons execute a myriad of complex cases with greater confidence. What's encouraging is that many of these relationships started elsewhere in the portfolio and migrated to complex deformity based upon the trust through EOS and use of our lateral, cervical, and other procedures. International growth has proved our clinical distinction model translates globally. We've been deliberate in focusing our efforts in some of the most attractive spine markets in the world: Japan, Australia, and New Zealand. And we're seeing the model play out as intended. Clinical distinction drives surgeon confidence. Surgeon confidence expands utilization. Utilization drives growth. As we enter these new markets, we're exporting and replicating a proven model. In every market where we successfully replicate, that model expands the long-term opportunity in front of us. Our international growth is a reflection of a clinical thesis that works. When you step back and look at our business today, what gives us great confidence is the ecosystem that we've built and are refining. We've talked throughout this call about the growth algorithm at ATEC. Clinical distinction compels surgeon adoption. Surgeon adoption expands utilization. Utilization compounds over time. The encouraging thing is that multiple catalysts are now reinforcing that algorithm simultaneously. We have procedural innovation driving the convoyed sales effect. Lateral continues to earn surgeon confidence and expand utilization. EOS and EOS Insight are creating access and building a differentiated informatics platform. We are growing our influence in deformity and pediatrics, commercializing Valence, integrating SafeOp more deeply into surgical execution, and successfully replicating our clinical model in attractive international markets. We continue to be a magnet for the best sales talent in spine. Each of these catalysts is an expression of the same strategy: create clinical distinction, earn surgeon trust, and expand utilization. Scale the business with the best sales force in spine. That's what we're doing. Let me leave you with this: I'm excited for the back half of the year. As we discussed, new surgeon growth in Q1 and Q2 exceeded 20%, which is a powerful leading indicator for future growth. Both EOS installations and orders rebounded nicely in Q2, reinforcing our confidence in the opportunity ahead. International is contributing as designed and will become a bigger part of our story over time. We have also continued to invest in instruments and inventory while attracting the right people to support the strong surgeon adoption we continue to see. We're in this for the long haul. We are building ATEC for decades and beyond. This quarter showed we can continue to grow at multiples of the market and turn that growth into profitability and cash. We are the preferred destination in spine: best surgeons, best talent, and best outcomes. It's a long game. We believe the long game belongs to us. Thanks to everyone on the call, and most especially the ATEC faithful. Our best days are yet ahead. With that, Operator, let's take some questions.
Questions and answers
The first question comes from Vik Chopra with BMO Capital Markets.
Congrats on a nice quarter. Pat or Todd, whoever wants to answer this one: with surgical volumes growing 20% in the quarter and surgeon users up 24%, where do you see the greatest remaining opportunities to drive sales force productivity and SG&A leverage as the business scales towards a $1 billion-plus in revenues?
Yes, Vik, thanks for the question. I'll start. I think the lateral piece is in its infancy. I would love to see more TLIF convert into lateral. As a roughly 10% market share participant, there is so much opportunity out there. From a sales force efficiency perspective, picking up more of that business is a clear opportunity. We were disappointed in some of the biologics attachments, so there's opportunity to increase biologic attachment to the volume of procedures we are doing. I'm totally bullish on the back half. We're in the infancy of deformity; we've not yet reflected the footprint we can create in deformity. I think the influence from EOS is in its infancy. So there are many places I see as opportune for us to continue to grow at an accelerated rate.
And Vik, I'd add on scaling and how that translates to the profitability of the business. You saw strong profitability drop-through of about 45% here in the second quarter. We raised guidance really on the strength of an improving gross margin profile in the second half of the year. Last year we dropped through about 40% of revenue growth to profitability; our guidance implies about the same 40%. We feel quite good about our ability to continue to grow the business and see that scale and improved profitability profile as we grow.
Just as an addition, I think the structure has been built. When you think about the ecosystem from a product perspective and foundationally the facilities, people, and infrastructure, we'll continue to grow people-wise, but we'll build off scale.
Correct.
Can I ask a quick follow-up, Pat? You mentioned the biologics attachment rate and said it stabilized during the quarter. Can you talk about what initiatives you have in place to drive improvement? When should we expect that headwind to become neutral or potentially a tailwind?
Yes. Two things in the near term: more discipline from a selling perspective, which is clearly a key one, and continuing to accelerate new product introductions. We have a number of new products forthcoming that will enable us to provide meaningful distinction. Creating product distinction in biologics is very challenging outside of BMP. That's why we did the Theradaptive deal. We expect Theradaptive to differentiate us in the biologics space. Medtronic's BMP business is large because of its uniqueness and the clinical evidence. We believe Theradaptive will help us materially in distinguishing ourselves in this important area.
Our next question comes from Mathew Blackman of TD Cowen.
Can you hear me okay?
Loud and clear.
Great. I've got 1.5 questions. First, any chance you'd be willing to break down the 20% worldwide surgical procedure growth into U.S. versus OUS? I'm curious if we could get some geographic granularity on that. And then a follow-up on revenue per procedure.
Matt, we're not breaking that out at the moment. As we get more meaningfully sized outside the U.S., we'll begin to break that out. But it is a growing contribution for sure.
Okay. On revenue per procedure: last quarter you talked about it being flattish for the full year, now you're saying down low single digits. What changed? Is it biologics attachment, outsized cervical uptake, deformity lagging? Any help on the change and the outlook for revenue per procedure?
Yes. First, it's important to note we grew volumes 20% in the first half, and our guidance implies high-teens volumes in the second half. That growth is driven by both cervical and international, which is a mix headwind and may be a bit more of a mix headwind than our guidance previously implied. Fundamentally, our biologics attach rate stabilized rather than improved. We included less improvement in the second half than previously expected from an attach rate standpoint to reflect current performance. As we go into the fourth quarter, revenue per procedure comps get easier, which helps too. That's how we think about the second half revenue per procedure.
Okay, fair enough. So it sounds like cervical mix and slower ramp on biologics, but deformity still on track. I know Q2 isn't the biggest, but Q3 could be. I want to make sure that opportunity is still front and center.
Yes, Matt. When we looked at revenue per procedure performance in the quarter, about three quarters of the miss versus where we wanted to be was really a biologics phenomenon more than anything.
Yes, I would add the deformity influence continues to grow as expected. The EOS thesis is playing out and I'm enthusiastic about how it's being reflected in the field.
And you also have more deformity sets out this quarter versus last year, which is part of the incremental CapEx spend this year, right?
Yes.
The next question comes from Allen Gong of JPM.
Hi, this is Henry on for Allen. I appreciate you taking the questions. Recently from some other ortho companies we've heard indications of procedure volume slowdowns. Can you add any color on what you're seeing from your perspective? More specifically, has there been any material impact from the recent ACA changes? And then a quick follow-up.
Yes. I'll let Todd speak to ACA changes, but our volume was robust. Our new surgeon additions were robust. Elective versus non-elective dynamics vary, but we see spine interventions as often necessary when neural pain is involved. We're seeing a consistent marketplace and robust volumes.
Yes, on ACA, we've done analysis and estimate we're probably less than 5% exposed to ACA volume, so it's really a non-factor for us. On gross margins, it was a great quarter. Three things to call out: inventory efficiency driven by good work from operations and the sales channel improving chain of custody in the field, leading to less write-off and loss; cost reductions and improved standard margins from design work, revised designs, and volume efficiencies with supply chain partners; and mix, where we had less biologics and less EOS mix in the quarter, driven by the sales dynamic. As we look to the second half, we expect more EOS mix, which is why our guidance implies something closer to 71% gross margin, about 50 basis points better than previous guidance.
The next question comes from Tom Stephan of Stifel.
First, on free cash flow: you mentioned $4 million to $6 million in Q3. That implies roughly $25 million or so in Q4 to hit the $20 million plus full-year target, which is a big step up sequentially and year-over-year. Todd, talk to the drivers of that improvement, and your confidence level in achieving the $20 million plus free cash flow for the full year. Second, surgical trends throughout Q2, exiting Q2, and into Q3 — your guide requires the second half to remain fairly consistent with Q2. Can you talk to surgical trends and your confidence in sustaining Q2 performance through the back half?
Thanks, Tom. We invested $33 million this quarter and about the same in Q1. If our full-year range is $90 million to $100 million, we've done $66 million — so we've front-loaded investment purposefully to take advantage of second-half growth opportunities. If you take a drop-through of about 36% year-over-year in the second half on revenue growth, our implied Q3-to-Q4 step up in EBITDA is about $10 million. If we deliver $5 million of free cash flow in Q3, adding the incremental EBITDA gets you to about $15 million. Additionally, you will spend less on sets and inventory in Q4 than in Q3 by probably $10 million to $15 million. That bridge of incremental EBITDA growth plus reduced inventory investment in Q4 is what gets you from $5 million to $25 million. So while it looks like a big step up optically, the components are incremental EBITDA growth and lower inventory/set investment in Q4.
Got it. Super clear, appreciate it. And on surgical trends, you maintained surgical guidance — what's driving your confidence in sustaining the Q2-type performance into the back half?
A couple of things: year-over-year dollar adds in Q2 were $28 million versus $26 million in Q1, so surgical dollar adds accelerated Q1 to Q2. Year-over-year growth at 17% stabilized from Q1. The two-year CAGRs show a bit of acceleration in Q2 over Q1, and the dollar add rate is higher in Q2 than Q1. Those trends point to a stabilizing and improving environment. We've seen north of 20% surgeon adds driving 20% surgical volume, which is above the high-teens implied in our second-half guide. Our pipeline, forward investment in sets and inventory, and sales force positioning leave us well-positioned to capitalize on the opportunity.
The next question comes from Patrick Wood of UBS.
This is Daniela on for Patrick. Appreciate you taking my question. Regarding Valence, how has the launch been going? You called out EOS placements across academic centers — have you also seen outsized demand for Valence at those facilities? Or is it more ASC settings since the smaller footprint and lower ASP versus peers seems to be a good value proposition? Any color on facility mix of placements would be helpful.
Yes, Daniela, that's a great question. The launch is going as we expected. We see academic institutions evaluating and integrating Valence, and the early utilization has been mixed across settings, both academic and community hospitals and ASCs. The real virtue is the elegant workflow: an in-field camera controllable by the surgeon, which surgeons appreciate because it allows them to control variables within the procedure. Given the cost of goods, one might assume it's an ASC tool, and it is attractive there, but we see a mix across facility types. Utilization is tracking as planned and placements are in line with expectations. Many placements are structured with earn-out dynamics given capital availability dynamics.
The next question comes from David Saxon of Needham & Company.
I wanted to follow up on the case volume growth assumption: you had 20% in the first half and guide to high teens in the second half — what's driving that slight deceleration? Also, from a case mix perspective, cervical faces tougher comps; how confident are you in sustaining lateral case volume growth so you can see better case mix?
Subjectively, we see new product acceptance on lateral with strong enthusiasm and momentum. PTP continues to show up meaningfully. New users are ramping, and our confidence is high that lateral utilization will continue to grow. Deformity volumes and thoracolumbar growth are also forthcoming. Numerically, we aim to be thoughtful and methodical in our guidance.
David, the question is why guide to high teens when volumes in H1 were 20%? We reaffirmed the full-year guide and beat the consensus a bit in Q2. Ultimately, we are focused on execution. We beat consensus in Q2, and keeping the full-year guide unchanged in the context of that beat is a disciplined approach.
The next question comes from Caitlin Roberts of Canaccord Genuity.
This is Mikaela for Caitlin. Congrats on a solid quarter. Last quarter you outlined initiatives to improve EOS execution. Can you talk about the progress you've made there? Any additional investments needed? What are you seeing so far in Q3 and how should we think about placements throughout the remainder of the year?
Great question. EOS is one of our biggest differentiators and a foundational clinical tool. The three-dimensional reconstruction and the ability to use structured alignment information are transformational. For example, with a 3D classification from Scoliosis Research Society, we can be the proxy for that classification in planning and predict patient outcomes. We see placements in both academic and community settings. Some private groups are generating revenue from an EOS unit in their clinic and using it to effectuate better surgery. EOS Insight translation shows a 32% increase in revenue at accounts using it. We've gotten more sophisticated internally in installing and commercializing EOS; the process is much improved. We don't see needing a significantly different team, but we've elevated the people leading the effort. Overall, the system is becoming more predictable and adoption is improving.
The next question comes from Lawrence Biegelsen of Wells Fargo.
Another one on EOS: you said you feel you have the right team in place. How are you feeling about their productivity levels? What's the level of risk and ramp to hitting your guide? Looking to next year, should we expect incremental rep investment?
I have great confidence in our guide. EOS is unusual: I've never met a surgeon who doesn't want an EOS. The challenges are logistics, installation and making sure the unit is placed where it will get the required volume. We will continue to get better at execution. Regarding hitting our guide and the path to $1 billion in 2027, I feel great about where we are. We cannot sell enough of these from my perspective. EOS Insight is the feature that pulls the surgical field forward via planning, alignment, and evaluation. We have the right team and will continue to improve execution.
The next question comes from Mason Carrico with Stephens.
On new surgeon users, have you seen any change in what new surgeons buy first? Historically lateral was the entry point — are recent new adds starting in cervical or other categories?
It's been interesting. We're getting into academic institutions sooner, and a younger surgeon earlier in their career may choose cervical as an entry point because ACDF is predictable and a familiar intervention. Our portfolio has distinguished itself in cervical with the same procedural thesis we applied to lateral. Many of these surgeons eventually adopt lateral as they gain confidence. When we started the turnaround, lateral was the best place to distinguish ourselves and attracted a more mature surgeon cohort. Now we're attracting younger surgeons in academic settings who often start with cervical and then adopt the broader procedural approach over time.
We've recently launched some strong cervical portfolios that are attracting people in a way they haven't in the past.
Got it. On the EOS hunting license dynamic: after an EOS installation, how many months until the first surgeon user is online? Is it usually one surgeon or multiple? Any additional detail on that ramp would be helpful.
It's subjective and varies by institution, but typical patterns emerge. After installation, we've been effective at securing image-sharing agreements foundational to EOS Insight. Usually a few surgeons drive the effort — often three or four who engage early. We send a clinical account manager to familiarize them and then hand off to the local rep. That team sits with surgeons, reviews surgeries, and the engagement ramps. Patient-specific rods have been a clear indication of utility, and we've seen strong engagement and a 32% increase in revenue at Insight accounts. It's a ramp but one we've observed consistently where early adopters expand utilization over time.
The next question comes from Keith Hinton of Freedom Capital Markets.
On EOS Insight penetration into the installed base, what's the current penetration rate and what are your goals for the next 12 to 24 months? Are new placements adopting Insight more quickly than legacy accounts?
Early, penetration is roughly 15% to 20% of the EOS fleet, and it's increasing rapidly. EOS was originally adopted widely in pediatrics for low-dose imaging; Insight's early experience has been strong in adult reconstructive deformity surgery, but we're seeing increasing interest from pediatric institutions as well, especially with the SRS 3D classification work. We're in absolute infancy in terms of Insight adoption, but data-sharing elements are progressing more expediently than expected. The value proposition resonates once institutions see the features, and adoption accelerates.
If biologics attach remained flat rather than improving in the back half, how much downside would that create on revenue per case?
Not a ton. We only assumed improvement in the fourth quarter, so the downside is limited.
The last question comes from Sean Lee of H.C. Wainwright.
Congrats on a great quarter. I noticed new surgeon growth has remained strong and ahead of revenue and case growth. How many quarters does it typically take for new surgeons to become repeat users of ATEC? From a longer-term perspective, do you value breadth — increasing more surgeons — or depth — more procedures per surgeon?
I love surgeons who adopt and then utilize. Earning trust is core. Surgeons are cautious when adopting a new company, and once they reach comfort with our products and procedures, they stick with them. It's harder to displace a surgeon who was trained on another company's system mid-career, but we're attracting a younger cohort through EOS and academic influence, which gives us a longer runway. It's tougher to quantify the exact quarters, but we're seeing strong uptake and a durable utilization curve over time. The initial impetus for many new surgeons joining us is EOS and EOS Insight and the predictive analytics route, and then they adopt our procedural portfolio across cervical and lateral.
To add, each year in our fourth-quarter call we show how different surgeon cohorts grow in utilization. There's a consistent curve over the first three to four years, and after four to five years the curve starts to bend. It's a reasonably consistent adoption experience.
I would now like to turn the conference back over to CEO, Pat Miles for closing remarks.
Yes, just a thank you to all those on the call, especially the ATEC faithful. I love what we're building, and thanks for your interest.
This concludes today's conference. Thank you for your participation. You may now disconnect.