I'm Mark Francois, Senior Director of Investor Relations for Alphatec Spine. Thank you for joining us today for Alphatec Spine's conference call to discuss our second quarter 2013 financial and operating results. Speaking today will be Les Cross, Alphatec's Chairman and Chief Executive Officer; Tom McLeer, Senior Vice President of U.S. Commercial Operations; and Mike O'Neill, Vice President and Chief Financial Officer. Also on the call today is Ebun Garner, our General Counsel. During our prepared remarks, you'll be in a listen-only mode, and after our prepared remarks have concluded, we'll open up the call for your questions. As a reminder, this conference call is being recorded today, August 6, 2013. A replay of the event will be available later today on our website and will remain there for next thirty days or so. Before I turn the call over to Les, I must remind you that today's conference call contains forward-looking statements made under the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. Such statements include statements related to the company's revenue and adjusted EBITDA expectations for 2013, the success of the company's initiative to drive global sales growth, the ability to achieve surgeon conversions in connection with the Phygen acquisition, contributions for the company's revenue and earnings in 2013 from the introduction of new products and sales and marketing strategies, the timing of U.S. FDA and other foreign and domestic governmental agency decisions that impact commercialization and distribution of our products. These forward-looking statements are based on the company's current expectations and are subject to a number of risks, uncertainties and assumptions that could cause actual results to materially differ from the forward-looking statements. The company undertakes no obligation to update any forward-looking statements whether a result of new information, future events, or otherwise. Many of these risks, uncertainties, and assumptions are discussed in our 2012 Annual Report on Form 10-K for the year ended December 31, 2012, which we filed on March 4, 2013, with the Securities and Exchange Commission as well as other filings on Form 10-Q and periodic filings on Form 8-K. Our Security documents are readily available on our website at www.alphatecspine.com. And with that, I'll turn the call over to Les.

Thank you, Mark. Good day, everyone, and welcome to Alphatec Spine's conference call to discuss our second quarter financial and operating results. We are very pleased to report another strong quarter for revenue growth for Alphatec Spine. Q2 2013 revenue totaled $51 million and represented nearly 6% growth over the second quarter of 2012 or almost 9% growth on a constant currency basis. We achieved this result in spite of the second quarter, speaking of second full quarter without the biologic product PureGen, which together with the pull-through products, the other products that were sold with it, had been generating close to $2 million per quarter of the revenue prior to our decision to voluntarily remove the product, so all-in-all pretty good growth. For the first half of 2013, revenues have totaled $101.5 million on a reported basis, trending well ahead of 2012 by about 5% or almost 8% on a constant currency basis. This puts us solidly on track to achieve our full year 2013 revenue guidance of $204 million to $210 million on a constant currency basis. While the spine market fundamentals appear to have stabilized somewhat, they still remain challenged by reduced implant pricing, diminished reimbursement for some products. However, in spite of this environment, Alphatec is succeeding and grew its business in the second quarter. The factors that have driven our success this year are as follows. Our international business continues to achieve strong revenue gains across all geographic channels. This inspired the significant currency headwinds in certain territories. We are achieving solid implant unit sales increase and share gains in our core U.S. hospital channel. We are accelerating surgeon adoption of revenue growth of our new products. The increased adoption of the innovative new minimally invasive surgery products, in our ILLICO MIS family are gaining…

Thanks, Les. Technology will continue to be a key driver in our revenue growth. This includes major upgrades to our existing product portfolio as well as new game changing options for our certain customers. This past June, we conducted a successful and well attended Technology Day in New York City that showcased the depth of our product lineup, including our newest technology and innovations. Our ILLICO MIS system was recently enhanced with the release of our ILLICO Multi-Level instrumentation for longer constructs and it continues to gain market share among the growing community of surgeons who are embracing minimally invasive surgery techniques to improve patient outcomes. ILLICO MIS products enjoy strong year-over-year increases in both units and dollars as becoming a larger component of our U.S. business. We attribute this to having developed excellent technology and products, in concert with ongoing surgeon training on MIS techniques. MIS will continue to be a core focus of our R&D efforts. Likewise, our Zodiac DVR Deformity System has enhanced our deformity offering by providing the surgeon with additional options for the correction of spinal deformities. This has allowed us to expand our customer base and become a more attractive option for longer deformity constructs. We are pleased with surgeon adoption from the beta launch of Alphatec Solus in Q2. Alphatec Solus is the unique and patented, anchored ALIF device that provides four points of fixation and is deployed using a single zero-axis step. Surgeons continue to be impress with Alphatec Solus quick-and-easy implantation, which is intend to be of benefit to patient outcomes and hospital cost. Recent biomechanical studies that will be released in the near future will show the performance of the product when used in conjunction with our ILLICO, FS and BridgePoint products. As we mentioned last quarter, our new anchored,…

Thank you, Tom. The following remarks are related to our reported operating performance for the second quarter ended June 30, 2013. Considering the ongoing challenges in the spine market revenue growth in the second quarter and the first six months of 2013 has been noteworthy among spine companies. Gross profit for Q2 2013 was $32.1 million or 62.9% of revenue compared to $30.2 million or 62.6% of revenue in Q2 2012 and was impacted by both price and regional mix. Similar to Q1 this year, Q2 '13 year-over-year declines in the U.S. hospital pricing were higher than the typically low-to-mid-single digit decline that we experienced throughout 2012, rising to mid-single digits. Sequentially, from Q1 '13, however, pricing was flat. As mentioned, gross margin was also impacted by regional sales mix in the second quarter. With robust growth in our international businesses and with international revenue typically carrying a lower gross margin, our consolidated gross margins declined accordingly. Additionally, gross profit in the second quarter and first quarters of 2013, where each reduced by about $1 million or 200 basis points for the amortization of a licensed intangible asset as part of the Cross Medical settlement, which we have described in prior results. While we now have parity year-over-year, we will still highlight the quarterly amortization charge and the impact it had on our gross margin expansion. U.S. gross margin was 67.6% in Q2 '13 compared to 68.6% in Q2 of '12, and was primarily driven by price impacts more than offsetting the favorable product mix from reduced biologics revenue. We believe that the larger part of our business that will be exposed to contract renegotiations in 2013, are now behind us. And as our new product launches, such as Alphatec Solus, Pegasus and ILLICO are now deployed into the market.…

Great. Good job, thank you, Mike. As we entered 2013, our theme was execution and we have certainly accomplished this through the first half of the year and will continue to remain focused on it for the remainder of the year. We expect the global spine markets to remain choppy, with continued price and reimbursement pressure. However, with only a modest market share, our strategy to deliver continuous flow of new products, reduce our costs in working capital, strengthen our global commercial operations. This should enable Alphatec to deliver the planned results that Mike just talked about. I would like to, again, thank all Alphatec Spine stakeholders, especially our employees who are persevering to make Alphatec Spine a stronger company that delivers greater value to all stakeholders and really delivers world-class experience to our customers. Finally, I'd like to thank Mark. Mark is leaving us today to seek new career upside. I think he is going to be a real-estate landlord down on the beach or something. Mark, thank you for all your years of help with our Investor Relations, and to everyone on the phone you have our commitment that Alphatec Spine will remain dedicated to conducting our business with a sense of urgency, accountability, and in search of excellence. Thank you, everyone. Operator, let's open up the call up for questions please.

(Operator Instructions) Our first question comes from the line of Josh Jennings from Cowen and Company.

My first question is on the U.S. business. I was wondering if you could just help delineate or define a pathway to incremental growth there. I know that the PureGen issue and the tough comp with that being excluded in the $1 million or so in the revenue in the quarter that's lost out. But can you talk about, kind of, your path to return to stronger growth trends in the U.S. with new products and any other incremental drivers there? Cowen and Company: My first question is on the U.S. business. I was wondering if you could just help delineate or define a pathway to incremental growth there. I know that the PureGen issue and the tough comp with that being excluded in the $1 million or so in the revenue in the quarter that's lost out. But can you talk about, kind of, your path to return to stronger growth trends in the U.S. with new products and any other incremental drivers there?

I think a lot of it comes down to the new products we have just launched. So when we talk about Solus and Pegasus, those were launched, and then we had a little modification of Pegasus near the very end of the quarter. So, we're going quite well here in July. We are still seeing some pricing pressures, but that along with the ILLICO MIS and deformity extensions that we have are really helping us a lot. And then as Les mentioned, Phygen is coming along very nicely.

Can you give any incremental color on Phygen in the U.S. in 2Q versus Q1, and what are your expectations here in the back half of the year for Phygen in terms of picking up? Cowen and Company: Can you give any incremental color on Phygen in the U.S. in 2Q versus Q1, and what are your expectations here in the back half of the year for Phygen in terms of picking up?

The Phygen, I think we said, we got off to a slow start. We talked about that last quarter. We've now fully integrated the business. That's totally running here out of Carlsbad. The business is accelerating at a good clip, and we expect to be in line with the guidance we originally gave when the year started of around $15 million contribution.

One of the aspects is that now that the business is completely integrated within Alphatec, we are invoicing all institutions the same. So, the complete delineation is actually a bit of a challenge, but to Leslie's point, we are back on track with surgeon adoption. We fully integrated it in the company. And certainly, we feel that we'll be able to get back to the numbers that we originally communicated as part of the transaction.

And last question, just there had been a number of product approvals in the motion preservation product lines for cervical, do you see that as a threat to your core cervical fusion business going forward and how are you approaching that threat? Cowen and Company: And last question, just there had been a number of product approvals in the motion preservation product lines for cervical, do you see that as a threat to your core cervical fusion business going forward and how are you approaching that threat?

I don't see it as a big threat. Now, I think some of it depends on the insurance reimbursement. And there is still significant interest in the motion preservation in the cervical spine. But I think, our product offering right now in the cervical area and given our market share, we have plenty of room to grow without that really impacting us.

And our next question comes from the line of Matt Miksic from Piper Jaffray.

Just one, there's been some questions throughout the quarter, other companies in spine, kind of giving their perspectives on the POD environment out there after the OIG language. I'm sorry if you made a comment on this already. But can you give us a sense as to whether, in your opinion, the sort of progress proliferation of those structures has kind of slowed or stopped or continued at a slower rate or whether it's actually reversing, and you're seeing any meaningful change in the industry yet? I’d just look love to get your perspective, and then I have a couple of quick follow-ups.

The answer to that is yes. We're seeing a lot of PODs disappearing, believe it or not, there is still some PODs appearing. But certainly from our perspective, we said in the call, we have been doing less-and-less business with PODs. It's never been a significant part of our business, no matter what anybody says. We're down now to two POD customers only. The rest have either gone away or transferred to normal distributors. So, we only have two left, both of who have a unique business model that they have actually shared in Washington. And we're also verifying that through an independent law firm. So I think the market definitely is changing. They are going away.

I think, I'd also add, this is Tom, that hospitals now in some cases are no longer having any interest in dealing with PODs. So, that by itself will eliminate a lot of PODs just because they won't have a hospital to sell to anymore, so if that continues to evolve, then you'll see this decrease occur even more rapidly.

And then just one, maybe, on what you see as the environment for sales reps, one of the challenges in this industry is finding the right people. With the momentum you're building, are you finding any change in the dynamics in your ability to attract new reps, product pipeline, maybe?

I think actually in our case having the new technology flowing through, which we talked about a little earlier has given us the opportunity to attract better distribution. As you know, we don't use direct reps unless we have a direct-to-hospital situation or something like that. But we're very flexible on our distribution model. So, with the new technology coming up, it's very competitive. We're getting access to some other better quality distributors out there, which in turn means they have a much better sales representation.

And then just finally, just a quick one on price, maybe if you could give us an update as to where sort of price and payor pressure have been in your conversations with surgeons, just sort of your view from where you stand in the market. That would be very helpful.

I don't know, as far as the surgeons. They are seeing more pressure on the reimbursement side with longer conservative care, a lot of pushback just on fusions in general, particularly for DDD. So, that's what they are concerned about is getting their patients that they feel need surgery in the queue to actually do it. So, that's the pushback they are seeing from that pricing standpoint. Mike do you --?

No. I mean, I think as I've said in some of the earlier commentary, Q1 clearly was a change for us relative to '12. Q2 was a little softer. But we've also gone through a fair number of renegotiations. And so, I think the important thing is we believe a lot of the pricing hits that we took in the first half are going to be moderated as we go into the second half. Obviously, there is no guarantee to that. But I think that the pricing for us, I think the first half of the year was where we took some pretty sizeable lumps.

And our next question comes from the line of Mark Landy from Summer Street.

Maybe it's a backhanded question, but the situation with PODs is not now an opportunity. You've brought Phygen in. You're kind of learning your way through that model. How many PODs are out there, do you think that exist, that may be, you know, similar situation with these guys just wanting to give up given what's happening, and is it feasible to go out and look for them and bring them into the fold? Summer Street: Maybe it's a backhanded question, but the situation with PODs is not now an opportunity. You've brought Phygen in. You're kind of learning your way through that model. How many PODs are out there, do you think that exist, that may be, you know, similar situation with these guys just wanting to give up given what's happening, and is it feasible to go out and look for them and bring them into the fold?

Well, that's a definite possibility. I mean, as these PODs are transitioning, which all of the professionally run PODs are looking to transition their business models, one way or another. And certainly, if there is a way for us to take advantage of that at a reasonable price, we would absolutely do so.

Les, would there be any pure geography there that would make more sense given the litigation or kind of the pressure from government or is it just generally throughout the country? Summer Street: Les, would there be any pure geography there that would make more sense given the litigation or kind of the pressure from government or is it just generally throughout the country?

I think it's throughout the country. But PODs are concentrated a lot in the west and the southwest. But no, I think that everyone across the country understands that the day of PODs is numbered in most business models. I think there might be one or two business models that might survive. But I think all professionally run PODs are seriously looking at their business models today.

And Mike, what was the med device excise tax in the quarter? Summer Street: And Mike, what was the med device excise tax in the quarter?

So most companies are operating around 2.3%, we're less than 2% at this point basis, how we look at manufacturing versus marketing. It shows up in operating expenses. It doesn't' show up in gross profit. Yes, but it's just based on the U.S. business obviously.

And then kind of, as you've seen this tremendous growth internationally, is there any opportunity to look at perhaps strategies to offset some of the pressure on gross margins? Perhaps maybe manufacturing OUS, or something along those lines, given that you have good footprints in the international markets. Unfortunately, the pricing in some of those markets is difficult. Summer Street: And then kind of, as you've seen this tremendous growth internationally, is there any opportunity to look at perhaps strategies to offset some of the pressure on gross margins? Perhaps maybe manufacturing OUS, or something along those lines, given that you have good footprints in the international markets. Unfortunately, the pricing in some of those markets is difficult.

We are committed to our manufacturing organization here. They really are turning rapidly into a true world-class operation, but some of the products that we outsource it would make sense, and by that I mean, trays, and instruments and things to really look to partner outside the country, to reduce the cost of those. So I think that's why you can see us focus more, is trying to reduce the cost. We spend about $10 million a year instrument and trays. And so the factory here is doing an excellent job. I would like to cut that by 25% or something. So that's really our focus.

And I guess just a last one. Mike, through lean and all of the manufacturing programs that you've got ongoing, do you think that you could get to a point where you can handle some of the compression on gross margin, internally caused that or is that too much of an ask? Summer Street: And I guess just a last one. Mike, through lean and all of the manufacturing programs that you've got ongoing, do you think that you could get to a point where you can handle some of the compression on gross margin, internally caused that or is that too much of an ask?

I think, obviously part of the commentary there was to highlight a lot of the activities that we see internally and to provide some color for you as you think about the opportunity for cost of goods sold. We have plenty of physical space in the facility and we have opportunities to continue to drive lean. Lean is a journey for us and we're still while we're making good progress, we're not fully deployed. So I still believe there is opportunities for us to continue to see benefit for our U.S. sourced products. But actually benefit both U.S. margins as well as international margins as well. And I think there is a fair amount of runway there for the next couple of years.

I guess if I asked you for what your yields and scrap are right now, and what they would be next year, you'd probably laugh at me? Summer Street: I guess if I asked you for what your yields and scrap are right now, and what they would be next year, you'd probably laugh at me?

Yes, I probably wouldn't want to get into that level of detail right now.

Our next question comes from the line of Bill Plovanic from Canaccord.

So couple of questions. Help me do the math on this, Mike. Your unit volume in the U.S. was up 10% and your pricing was down 5%. You've picked up the Phygen, which more than offset the biologics, but you were actually down year-over-year in the U.S. And I'm just trying to figure out, there had to be another headwind in there somewhere and what is it?

So it is very simplistic to start thinking about, taking the math and working through the units and the pricing. The 10.2% unit growth was specific to our hospital metal implant. Pricing was overall hospital pricing, but we're down, as we have planned in terms of our stocking POD business. And so you going to look at our U.S. business as a function of core hospitals, biologics and stocking, and each ones got its own dynamic. Biologics was down, because we loss PureGen and we also loss some spillover product there. Stocking was down, because we are clearly down now to just a couple of PODs. And our overall U.S. business, the volume was up principally driven on surgeon adoption, a little bit from new products, and we took a little bit on price as well. For example, we're also up 6% in unit volumes sequentially Q2 over Q1. So if you have to break it down by the components as opposed to say, volumes up 10%, prices down 5%, why aren't you up by 5%. It's not just as simple as that.

And if I remember, did you say that biologics overall was down $1 million year-over-year?

Yes, biologics is down over $1 million year-over-year, but that's because you've got PureGen and the pull-through on PureGen last year that you don't have in Q2 of this year, and assuming that our biologics business is up.

Your POD business, I think at one time, was sometimes some point between like 5% and 10% of revenues. Just to help us understand, because obviously this is a headwind, and this will dissipate and go away, and we'll get to see the organic growth of the U.S. business. Where is that POD business today as a percentage of your U.S. revenues?

It's less than 5% of the U.S., it's less than 3% of our global business. And it's down substantially year-over-year and quarter-over-quarter.

So, that is the delta I'm looking for. I'm just trying to figure out, so as we think about the business going forward, obviously that's no longer going to be in the business. And the two PODs that you have remaining, what are the odds that they remain customers?

I don't really want to handicap that, I think, as Les pointed to in our prepared remarks that both of those have agreed to a review by counsel picked by us. I can't hypothesize on what that would be.

And based on the discussions they've had in Washington that their attorneys have represented to us. If that is the case, then I would expect to continue to do business with them.

What I'm trying to get to, Les, as to you maybe have another $1 million at risk that could go away. You probably lost $1 million or $2 million with all the rest of the PODs going away. But it gives us what the base is to move off of, going forward, and with the incremental Phygen. I'm just trying to figure out where the base is?

I think that makes sense.

You're not far off.

And then my second question, just on Japan, I think that was up by 30%, including the impact of the yen. Did I catch that correctly?

No. That was the operational increase. It's up 5% as reported. I think that those numbers are right.

So I guess my question there is, I mean 30% operationally is huge. Is that sustainable, or is that stocking, or what is that, because that's a pretty big business for you?

It is a pretty big business for us. Couple of things here, is that ILLICO SE and obviously Japan is a big minimally invasive market. ILLICO SE is doing tremendously well. We have a significant amount of certain training that goes on in there, exclusively interested in minimally invasive. We also have recently received approval and have launched Novel PEEK interbodies in Japan. So we have a good cadence of product approvals in Japan and a pretty rigorous discipline about making the most of the opportunities that are there.

Yes, that's true. And then the rest of world, as we highlighted in call, if you remember back, the company acquired Scient'x. And Scient'x, being a French company had a great global footprint. And I will say that the team is really doing an excellent job of leveraging that footprint. It's a massive competitive in my experience, they have a massive global footprint of customers and they're doing very well leveraging them. But some of them in the major markets are still selling old Scient'x products, awaiting approval of our products. And we expect both China and Brazil to make significant progress on getting approvals towards the end of the year. So I think there is a lot of upside in the international business still. I know it sounds amazing with those numbers. Australia is just getting fired up. As I say, Japan will continue now with the interbody approvals. So we think the international business can continue to remain strong.

All right, with that no further questions, operator?

We have no further questions in the queue at this time.

Great. Well, operator, thank you. And thank you for everyone that participated. We look forward to getting back to you all and updating you on our next quarter's results. Thank you.