Good day, ladies and gentlemen, and welcome to the Alphatec Holdings First Quarter 2017 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will be conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions]. As a reminder, today's program is being recorded. I would now like to introduce your host for today's program. Nick Laudico with The Ruth Group. Please go ahead.

Thank you. Good afternoon, and welcome to the Alphatec Holdings first quarter 2017 conference call. Joining us on the call today will be Alphatec's CEO, Terry Rich and CFO, Jeff Black. We'd like to remind everyone that participants on the call make forward-looking statements. These statements are based on current expectations and are subject to uncertainties that could cause actual results to differ materially. These uncertainties are detailed in documents filed regularly with the SEC. During this call, you may hear the company refer to reported amounts, which are in accordance with U.S. GAAP as well as non-GAAP or pro forma measures. Reconciliations of non-GAAP measures to U.S. GAAP can be found in the supplemental financial tables included in the press release, which identify and quantify all excluded items and provide managements view of why this information is useful to investors. During the third quarter of 2016, we announced that we completed the sale of our international business to Globus Medical. Accordingly, the operating results, assets and liabilities of our international operations have been moved into discontinued operations and results presented on today's call are based on continuing operations. The company now reports revenue from its U.S. commercial operations separately from its non-U. S. revenue, which is attributed to sales to Globus under the agreement to supply its products for the international market. With that, we'll turn the call over to Terry Rich, Alphatec's CEO.

Thank you, Nick, and thanks everyone, for joining our call today. I'm pleased to be speaking to investors on behalf of our new Alphatec team. We have a comprehensive plan that we'll outline for you today which we believe will evolve Alphatec into an innovative share-taking leader in the U.S. spine market with a high performance culture, motivated employee base and highly-focused sales and marketing organizations. As Nick mentioned, joining me on the call today is Jeff Black, our CFO. I will give a summary of our financials, share my views on the Alphatec opportunity, review our sales and distribution strategy and provide some details on our recent organizational changes as well as our operating plan. I will then turn to Jeff for a detailed financial review, and will return to make closing comments before we take your questions. So here are the financial and operating highlights for our first quarter. Total revenue was $28 million, up slightly from about $27 million in the fourth quarter of last year. Our U.S. commercial business delivered $23.4 million in revenue, and our U.S. gross margin improved to 68% compared to 62% in the fourth quarter. We have received outstanding feedback regarding our recent limited user product releases, which speaks to the power of our development platform. On the cash management front, we raised nearly $19 million in gross proceeds from a private placement at the end of March, which positions us to execute on our growth strategy. Excluding restructuring charges, our operating expenses in the first quarter decreased by more than $2 million sequentially over the fourth quarter. Before I outline the strategy for the new Alphatec, let me take a moment to provide an overview of the key attributes that make Alphatec unique among U.S. spine companies of its size and…

Thank you, Terry, and good afternoon, everybody. As Terry mentioned earlier, our U.S. commercial revenue for the first quarter of 2017 was $23.4 million. This compares to $29.2 million reported for the first quarter of last year. The two biggest drivers of this 19.9% decrease in year-over-year revenue were, first, the threats that Alphatec faced in 2016, which culminated in the sale of the company's International business in order to sustain operations, and this led to a dramatic reduction in volume from several distributors and surgeons. The second driver has been the intentional decision from new leadership to exit the stock and distributor business and to terminate distributor relationships that are not representative of our long-term business and rebranding strategy. On a sequential basis, our U.S. commercial revenue was down about $1 million or 4% as compared to the fourth quarter of last year, when our U.S. commercial revenue was $24.5 million. This decrease was primarily the result of our planned exit from the stocking business and the termination of other distributor relationships. Our U.S. gross margin in the first quarter of 2017 was just above 60% compared to just under 81% for the first quarter of last year. Our margins declined due primarily to increased supply costs from reduced sourcing and manufacturing volumes as well as an increase in inventory kit write-offs due to distributor turnover. But on a sequential basis, our U.S. gross margin increased from just about 62% in the fourth quarter of last year, and this increase resulted from a reduction in charges related to obsolescence for product portfolio management that we incurred in the fourth quarter and in addition, we're starting to see the impact of cost decreases in labor and overhead as a result of consolidating our facilities in the first quarter of 2017.…

Thank you, Jeff. We are extremely excited about the opportunity we have in front of us to turn Alphatec back into a growth organization and create value for our stakeholders. We are pleased with our progress to date. Given the short time the senior leadership team has been in place, we have already made tremendous headway in positioning Alphatec for growth. While we expect the Alphatec turnaround to take time, we are confident about our direction in 2017 and expect to exit the year with significant momentum. With an experienced team now in place, a broad and strong product portfolio and a significant revenue base, we feel we are extremely well positioned to execute on our core strategy to strengthen distribution channel, drive forward on product innovation to advance superior outcomes and return to a growth organization. We look forward to providing you with updates on our progress. Stay tuned. And with that, I would like to turn the call back over to the operator, and we'll take your questions.

Thank you, operator. That'll conclude.