Q4 2021 Treace Medical Concepts Inc Earnings Call
Good day, and thank you for standing by welcome to the cheese medical concepts fourth quarter and full year 2021 earnings conference call.
As time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question you will need to press star one on your telephone. In addition, if you require any further assistance. Please press star Zero now, it's my pleasure to hand, the conference over to your host today Vivian Cervantes Smith go.
Martin Investor Relations. Thank you. Please go ahead.
Thank you Paul Good afternoon, everyone and welcome to our fourth quarter and full year 2021 earnings conference call participating from the company today will be John Tree, Chief Executive Officer, and Mark Harris, Chief Financial Officer. During the call. We will offer commentary on our commercial activity and review, our fourth quarter and full year financial.
<unk> released after the close of the market today, after which we will host a question and answer session.
The press release can be found in the Investor Relations section of our website at the investors thought trace dot com.
This call is being recorded and will be archived in the investors section of our website.
Before we begin we would like to remind you that it is our intent that all forward looking statements made during today's call will be protected under the private Securities Litigation Reform Act of 1995.
Any statements that relate to expectations or predictions of future events and market trends as.
As well as our estimated results or performance are forward looking statements. All forward looking statements are based upon our current estimates and various assumptions.
These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements.
All forward looking statements are based upon current available information and trust assumes no obligation to update these statements. Accordingly, you should not place undue reliance on these statements.
Please refer to our SEC filings, including our Form 10-K for the full year 2021 to be filed Friday March four.
With that I will now turn the call over to John .
Thank you Vivian and good afternoon, everyone. Thank you for joining us on our fourth quarter and full year 2021 earnings conference call.
We are pleased and encouraged by the strong fundamentals in our business in 2021.
Through our team's focus and steady investments in our commercial operations, we delivered above consensus revenue growth each quarter. Following our April 2021 IPO.
These results were led by expansion of our direct sales channel that is 100% focused on bringing surgery. The only such organization that we're aware of in the med Tech industry.
A disruptive technology and surgical procedure, that's backed by a growing body of clinical data.
Midstream, both rapid return to weight bearing and recurrence rates significantly below that of current standard of care.
Positive momentum from both surgeons through our active surgeon education initiatives as well as patients through our targeted DTC program and.
Steady increases in our active surgeon count and surgeon utilization rates facilitated largely by our DTC program investments and our expanding direct sales channel.
Our disrupted lap a classic solutions, specifically developed with our surgeon Advisory board to correct. The root cause of the bunyan addresses a large and underserved market.
We have identified a $5 billion plus U S market of $1 1 million annual surgical candidates.
Of which only 450000 undergo surgery each year.
Primarily due to the limitations of current standards of care.
Through 2021, we believe our market share stands at only around three 8% of the estimated 450000 annual Sonya surgical bunion procedures.
Up from two 5% in 2020, and just one 6% share of the $1 1 million annual surgical candidates.
For 2022, our business fundamentals remain firm and we see a long runway ahead of us.
We believe we mean, what we remained well positioned for steady growth and continued market share gains ahead.
With another quarter of public company complete we are pleased to note continue to continued positive market acceptance and traction with our instrumented <unk> bunion surgical correction system lateral classic.
Our team steadily build on our momentum continuing to invest in our strategic programs and executing to deliver our targeted financial and operational metrics.
Revenue in the fourth quarter was $33 4 million, representing 55% growth sequentially, 39% growth over the fourth quarter of 2020 and at the top end of our previously announced revenue range expectation of 33, 1% to $33 4 million.
For the full year 2021 revenue was $94 4 million or 65% increase over 2020 and also at the top end of our pre announced revenue expectation of $94 one to $94 4 million.
Advances made in our target growth metrics include.
<unk> and our customer base with continued strong increase in the number of active surgeon users.
Continued year over year increases in certain utilization.
Strong blended average selling prices and growth over the prior year.
Benefits from our ongoing shift to direct sales exiting the year with 58% of Q4 2021 revenue from this channel.
And heightened surgeon adoption of our new products such as the lack of plassey, many envision system, which we started rolling out in Q4, 2020, and our ductile classy system permit for correction, which we launched during the third quarter 2021.
We're excited for what lies ahead and believe we have the necessary levers to turn on or off and fluid response to any further disruption, while still investing and driving growth of our business.
Therefore, as we turn to 2022, we're providing full year revenue guidance of $125 million to $130 million, which reflects an increase of 32% to 38% from 2021 revenue level.
Now turning to our commercial and market development activities.
As a reminder, recurrence rates reported in the clinical literature with metatarsal osteotomy, which represents 70% plus of the binding surgery today are highly variable and have been shown to be as high as 78%.
To address these shortcomings we pioneered.
<unk> three D blanket correction system that is designed to address the deficiencies of these traditional approaches to Viking surgery.
We said in the past that a key differentiating driver for our business is our commitment to clinical evidence.
To date, we believe our <unk> technology is the only commercial surgical bundle solution that is supported by a strong and growing body of clinical data facilitating a steady pace of certain adoption and patient preference.
Interim datasets from our most advanced clinical program the align <unk> multicenter prospective study further demonstrates the durability of our surgical buying a correction.
Last week on February 25 in a podium presentation at the 2022 American American college of foot and ankle surgeons or AC Fas annual scientific conference, we announced the latest interim one or two year aligns <unk> analysis that demonstrated consistent positive radiographic and patient reported outcomes for patients.
Following a lateral classic procedure.
Building upon previous interim data analysis data on 160 study participants showed early return to weight bearing and walking boot at an average of just eight five days significant improvement in radio graphic measures <unk> bonding correction and significant improvement in patient reported pain reduction and quality of life measure.
At 12 months and through 24 months following the lap of biopsy procedure.
Return to work was an average of about four weeks and full on restricted activity occurred within four months post surgery.
And we had a continued low recurrence rate with only one out of 116 patients, reaching the 12 month time point and zero out of 54 patients to reach the 24 month time point, demonstrating a recurrence for an implied recurrence rate of <unk>, 9% and zero percent respectively.
<unk> is a powerful and sophisticated study and although the final report out with full two year data is not expected until 2023. It is notable that there is an interim manuscript received honorable mention for best manuscript at the recent <unk> conference.
We believe this indicates that our positive and differentiated outcomes are increasingly resonating with the surgeon community.
We also note strong interest for our products at the meeting with full capacity attendance at our large scale hands on lab, a philosophy and a Dr plastic training events.
And a similar approach to align <unk>, we are conducting a mini <unk> lap applies to the clinical study with our first patient enrolled in October 2021.
This study utilizes patient outcomes.
<unk> patient outcomes using our lap a philosophy many incision system that utilizes the small incision approach, providing both surgeons and patients with another option to surgically managed finance.
Like lateral classic the lap of flattening. Many insertion system is designed to realign the entire first metatarsal bone or a small $3 five centimeter incision as opposed to cutting and shifting the voting bump which is the case with some newer many incision osteotomy procedures.
Interest and sign up for a certain training events remains active and don't show any signs of letting up further our train surgeons, we're seeing strong patient interest from our DTC patient education initiatives.
We also offer evergreen learning for our surgeons through our regular calendar of advanced training events, both online and in person.
Our tenured surgeons can acquire advanced skills as well as more new approaches like our many incision and as Dr Classic systems.
During 2021, we accelerated investments in patient education, DTC programs expansion of our direct sales channel and R&D innovation that resulted in continued revenue expansion and momentum through Q3 and Q4.
We are more bullish than ever about the positive impact of these investments, we're making on our business, we have a well defined and proven commercial strategy is clearly working.
As such for 2022, we intend to increase the targeted improvement investments that produces momentum for us in 2021.
In effort to accelerate our penetration and share of this large market over the long term.
Specifically for 2022, we've made deliberate and strategic decisions to invest in growth initiatives that we expect will accelerate patient awareness surgeon education and demand for our novel, while our policy procedure.
Expand the footprint and coverage of our backend focused direct sales channel.
And drive more R&D innovations into the market.
And as previously discussed we will continue to support our innovative products through continued investment in building a highly differentiated body of clinical evidence.
Over the past several years, we've incrementally made important investments to our patient awareness and education efforts.
This has resulted in a comprehensive DTC program that leverages highly targeted direct to patient education to help raise awareness of our products directly with prospective patients by a social media, Google search PR and other media, including targeted television campaigns in select markets all of which are designed to encourage patients to <unk>.
More information and education on a patient website.
Locate lap of plastic surgeons and their market and ultimately schedule of surgical consultation.
This initiative has played a key role in the early growth and success of lap a philosophy and has become an integral and cost effective component of our commercial strategy contributing meaningfully not only to our unique customer experience, but also in increasing patient awareness and adoption and increasing certain utilization.
In 2022, we plan to increase our focused investments in our DTC programs to drive broader patient awareness for our innovative lateral policy procedure.
We know through both hard metrics from our lap a biopsy a patient website and direct surgeon feedback that our DTC programs, not only increased patient awareness and access to lap a plastic surgeon.
Also motivate other surgeons to become future uses Avago classic.
As mentioned <unk> is the only company that we're aware of with a direct expert sales channel focused solely on Boeing and surgery.
So as we began to invest in this channel in our early years, we carefully developed performance data and metrics over time that support ROI, particularly as our sales direct sales reps increased productivity in their territory, which typically scaled up within 24 months, helping drive market share gains.
Our channel analytics show that on average relative to our independent agencies or direct reps penetrate their markets faster generate higher surgeon utilization level and sell at a higher blended ASP.
Primarily because they are 100% focus on <unk> products and fully leverage our corporate resources and programs.
With increased confidence in this commercial strategy combined with positive surgeon and patient adoption trends, we expanded our direct sales mix from 35% of revenue in 2022, 58% of revenue in Q4 of 2021.
During 2021, we started the year with 34 quota carrying direct sales reps and more than double that group exiting 2021 was 81 direct quota carrying sales reps.
Adding an associate direct sales reps field sales managers and clinical specialists.
Two our overall quota carrying rep count we ended 2021 with a total fleet in the field of 144 W. Two sales employees and this is up from 66% and confirms our 66 employees in 2020.
In 2022 balanced against strong contribution from our high performing independent sales agencies as well as our sales organization steadily matures. We will continue the strategic investment to further expand our sales team in the field with a goal of approximately 150 quota carrying direct sales reps on board by the end of 2020.
Two.
We expect that this growing direct sales channel will continue to contribute to a higher proportion of our overall revenue in 2022 and beyond.
As such with the accelerated direct channel investments initiated in the second half of 2021 and that will continue through 2022, we now expect 70% of our revenue will come from this Boeing funded focused direct sales channel by the end of the year of 2022.
With that said, we continue to guide the business to be for the visit to be model with active surgeons in surgeon utilization, which reflect the commercial growth of our business.
Shifting now to R&D and our product development strategy.
We are committed to driving innovation with with activities that include R&D programs for both next generation bonding correction systems as well as well as the development of new technologies addressing concomitant conditions.
IP defense of our technology innovation.
Date, we have a global portfolio of over 40 granted patents, including 32 patents granted in the U S.
Our R&D programs have yielded advancements in the procedural aspects of lateral philosophy and our focus on the ammonia pathology has highlighted other meaningful volume related product opportunities along the way.
For example, our <unk> minions vision system provides both patients and physicians a minimally invasive option for our instrument and lap a policy procedure and our adductor block the Midfoot correction system addresses concomitant mid foot deformities that can occur in up to 30% of finding patients today.
To date, we are highly encouraged by the favorable response received from the surgeon community for both of these novel products.
2021, R&D investments have led to several new product innovations some of which were announced last week at the <unk> conference.
At our booth at the ACC Fas, we featured our <unk> three and one guy which is an advanced instruments, specifically designed and part of our efforts to continuously advance the speed and reproducibility of the lap of philosophy Bunnia correction procedure.
An expansion of the <unk> system, which adds several specialized instruments designed to improve the efficiency and expand the clinical application of the system.
<unk> anatomic plating system, our next generation and lap a plasma titanium plate fixation technology that provides surgeons with an additional fixation option.
And our speed release and try to home release instruments, which are a new single use specialized cutting instruments designed to provide a more reliable and complete surgical release of key soft tissue structures, commonly addressed during our lap a flat fee and they.
Dr Plassey procedures.
To clarify some of these products are under early commercial rollout today and others. We anticipate will begin rolling out in Q2 of this year.
We see continued opportunities to develop additional strategic innovation for buying into related pathologies with our unique corporate focus on the bug in pathology, we're learning more every quarter and see more meaningful product opportunities today than we did a year ago.
Our R&D teams remain closely aligned with our surgeon Advisory board and a solid clinical relationships with other key surgeons across the country, both Mds Amathi address.
Therefore, given the opportunities we've identified we intend to increase our R&D investments in 2022.
We believe our approach, particularly given our strong partnership with surgeons, who provide us timely and market leading feedback we'll continue to pay dividends over the coming years.
In closing, we're more bullish than ever before about the opportunity ahead of us and have built an organization and plan to establish <unk> as the standard of care.
As we thoughtfully invest in our proven growth initiatives, we remain focused on maximizing long term share capture and topline growth.
With that I'll now turn the call over to Mark to go over our financial performance Mark.
Thank you John Good afternoon, everyone revenue in the fourth quarter was $33 4 million, an increase of 55% over the third quarter 2021.
And our problem.
Over the third quarter of 2020 and up from $24 1 million a year ago.
Scenting and an increase of 39% over the fourth quarter of 2020.
Revenue growth was led by our expanded surgeon base and higher utilization rates, which grew the number of lap a classic procedure kits sold. In addition, we saw continued favorable average selling prices in the quarter compared to the prior year.
In the fourth quarter 2021, we sold 6235 lap a classy procedure kits, a 35% increase versus the prior year's fourth quarter blended average selling price in Q4 was $5 $363, a 3% increase over the fourth quarter in 2020, and a slight decrease.
Greece from Q3 of this year.
The number of active surgeons performing at least one case on trailing 12 months in the quarter increased 40% year over year to 1783, while utilization increased 13% year over year to an average of nine eight lap a classy procedure kits per active surgeon and the.
Trailing 12 months.
Full year 2021 revenue was $94 4 million a 65% increase over 2020 and also at the top end of our pre announced revenue expectation of $94, one to $94 4 million and our prior 2021 revenue guidance range of 90 million to 95.
$5 million.
We sold 17000.
490, <unk> procedure kits for the full year of 2021, 57% increase versus the prior year and a blended average selling price of $5398, a 5% increase over prior year.
Gross margin increased to 81, 1% in the fourth quarter of 2021 compared to 78, 9% in the fourth quarter of 2020.
The 2020 basis point gross margin expansion was due to increases in the number of lap a classic procedure kits sold increases in the blended average selling price and operational efficiencies.
For the full year 2021 gross margin was 81, 1% up from 78, 3% in the full year ago period with improvement led by increases in blended average selling price and operational efficiencies.
Total operating expenses were $32 7 million in the fourth quarter of 2021, including sales and marketing expenses of $2022 3 million.
R&D expenses of $3 4 million and G&A expenses of 7.0 million. This compares to total operating expenses of $15 4 million, including sales and marketing expenses of $11 4 million research and development expenses of $1 9 million and general and administrative expenses.
<unk> of $2 8 million in the fourth quarter of 2020.
For the full year 2021, operating expenses were $93 1 million compared with 44 million 44.0 million in the prior year period.
The increase in operating expenses reflect investments to support our growing business commercial initiatives as well as increased costs as a public company.
Fourth quarter net loss attributable to common stockholders was $6 6 million or <unk> 12 per share compared to net income of $2 4 million or <unk> <unk> per share for the same period in 2024.
Full year 2021, net loss attributable to common stockholders was $20 7 million or <unk> 43 per share compared to a net loss of $4 3 million or <unk> 12 per share in 2020.
Cash and cash equivalents were $105 million as of December 31, 2021, we continue to evaluate opportunities to further strengthen our balance sheet, including measures that improve our liquidity and reduce our cost of capital.
Before concluding let me turn to our outlook for full year 2022, as John mentioned, we are providing full year 2022 revenue guidance of $125 million to $130 million, which reflects an increase of 32% to 38% from full year 2021 revenue.
We remain encouraged by the underlying strength and momentum of our business.
Please note that for the first quarter 2022, consistent with prior years, we expect a sequential revenue decrease from the fourth quarter due to normal seasonality coming off our usual strong year end performance.
Turning to the middle of the P&L as John mentioned, we remain poised for continued investments in our business in 2022 in order to help position us for growth and market share gains in coming years.
Anticipate investments in sales and marketing as well as R&D to build upon levels seen in the fourth quarter, beginning with the first quarter 2022, and as the year progresses.
Let me now turn the call over to the operator to open the line for your questions.
Thank you Sir we will now begin the question and answer session. As a reminder to ask a question you will need to press star one on your telephone again day Star one on your telephone keypad. However, if your question has been answered and you wish to withdraw from the Keith just press the pound key please standby, while we compile the Q&A roster.
Your first question comes from Robbie Marcus with JP Morgan. Please go ahead.
Oh, great and congrats on a good quarter.
Hey, Thanks Robert.
So maybe to start you know as we think about the guide.
How do we think about.
You know volume growth versus revenue per procedure growth and then <unk>.
Second part of that question is once again this is a market that's atypical for med Tech how do we think about the phasing of it throughout the year.
Yes, Thanks Ravi.
What we just showed and what we just reported was increases in a few things one is our active surgeon base and Thats. Our primary focus for US and we also reported increases in the utilization for those surgeons and so that also remains a focus for us and we believe.
But those two metrics are really key to the forecasting revenue.
For us so we remain.
The focus on really both to adding incremental active surgeons throughout 2022 as well as all of the commercial programs that John was talking about which we believe will also have an impact on utilization. So it's going to be but we're going to add.
Surgeons active surgeons as well as continue to have higher utilization that comes as our surgeons become more tenured and utilized blepharoplasty more frequently.
Great and.
One more from me how do we think about we hear a lot of that.
Your competitors out there, saying they have the latest and greatest do we saw Johnson and Johnson and do a very small deal. What are you seeing when you go out in the field are you getting pushback from doctors.
Better trained on lateral plastein switching to other competitors and is it still very much a an open market against surgery versus other.
Procedure to innovations.
Yes, Hi, Robert John here.
Yes.
There are a couple of other competitive systems out there now.
JJ acquire crossroads or a company we have been.
Familiar with we noted them as a competitor in our S. One.
Not sure how much real traction they have out there or how much of their overall revenue is related to the bunyan products, but.
Clinical evidence it would be a question but.
We have a very large sales channel now that we've built up that 100% focuses on lap of Plasty. We've had over six years of commercial fine tuning with the procedure, a very broad patent portfolio to protect our innovations and we're the only system out there with meaningful clinical data and it was really rewarding to see.
See the fastest.
Our society.
Award that podium presentation with or without honorable mention.
With that especially at this early stage of the.
The.
Study.
So we feel really great about our ability to keep driving our growth over the long term and.
Innovating.
<unk> and <unk>.
Our channeling.
Anybody else out there that wants to try to.
Get in an invited our ankles.
For some of those folks are the more they talk us up to more of these values.
No.
We're we're feeling very very good about our prospects for long term growth, even with a couple or a handful of.
Other companies trying to get into the Fray here.
Great to hear.
A lot.
Thanks, Ravi Thanks Robyn.
Your next question comes from drew Ranieri with Morgan Stanley . Please go ahead.
Hi, Thanks for taking the questions.
I just wanted to talk about utilization for a moment I kind of remember.
During your IPO process, you had a chart talking about different levels of surgeon utilization over their tenure of using Lazar Plasty I was just kind of curious kind of what youre seeing.
Now towards the end of 2021 into 2022 kind of where are you seeing the most.
Significant increases in your search of tenures utilization rate is it coming more from the experienced stock or are you actually seeing maybe more of an acceleration and traction among the surgeon groups as we spend more data.
Bit more experience just wondering if you could help us out there. Thank you.
Hey, drew its John Thanks for the question.
As we track the utilization.
By tenure or by years that they've been performing the procedure.
It's a pretty steady decline all the way from year one to year five.
Some of those that I would say before between year four and five.
There is a pretty good job.
As they reached very high levels of certification on our patient website.
And.
They really have seen in their own practice for long term great outcomes from the procedure or so, but it's a pretty steady climb throughout the curve from year. One after year four and then you know a little bit of extra jump in year five is a smaller.
A population base of surgeons. So some really early on surgeons in that category too. Andrew. This is mark just maybe one other piece of that the benefit of doing this for now several years is we have more and more data and so we're really not being surprised or there hasn't been a.
<unk> change in.
The last year, so it's been somewhat predictive and its been very useful to us and really no surprises. There. We've had some strong just as John said, some some some strong improvements year over year as that group tenures, so nothing really new or surprising from the way that continues to progress.
Progressed nicely for us.
Got it thank you that's fair.
Just on the first quarter guidance you talked about.
Kind of the typical seasonality when I kind of go back and look at our model and we only have a few years of history, but it was down 30% in 2020 down 2020 down 22% in the first quarter of 2021 on a sequential basis.
Given kind of where we are with all of our call at the hospital staffing shortage is it some of the other challenges.
Where should we kind of figure out first quarter in that range or are you going to be towards more of the 33% decline or the 22% decline. Thank you.
Yes.
Thanks for that Ravi.
We see that there will be a decline as you mentioned, it's going to it's pretty standard fourth quarter is what we refer to as bunion season, and that's our strongest quarter of the year. So there will be a step down.
It's.
I think right now what we are guiding us for the full year and so as you look at kind of that full year and that percentage range that we've given I think that should be somewhat helpful. As we think about Q1 as well.
And.
So I don't think it will be as pronounced as a couple of years ago, but.
That step down.
Maybe we can have some more conversations about that.
Thanks for your thanks for taking my questions.
Your next question comes from Danielle <unk> with SBB Leerink. Please go ahead.
Hey, good afternoon, guys. Thanks, so much for taking the question.
One high level and one a little bit more detailed question just at a high level.
With me here.
Low single digit market share.
The potential of the intervention side, and then even lower than that.
The <unk>.
Potential total patient population here and I'm, just curious John where do you see this going over time and what are the barriers to adoption still today. It feels like you have everything in place from a sales force to the clinical data so what stopped us from becoming.
Standard of care in the next call. It five years for interventions that are surgeries that are being done and then just one follow up.
Sure.
Yes.
I think all the pieces that we're putting in place we've laid a really solid foundation in place we've been very deliberate about how we.
What about developing this business from the beginning our patent portfolio, our clinical data our.
Our sales channel and DTC patient education efforts.
And I think the foundation is getting really solidified now and what we're wanting to do is increase.
The investments in those areas to try to accelerate that.
And get to that point, where it can be the definitive standard of care.
The next several years, so I think we're heading in the right direction and we're making a lot of progress we're trying to overcome decades and decades of installed dogma and the teaching institutions and certain curriculum that metatarsal osteotomy should be used for 70% or more the majority anyway of bunions and that takes time to change and.
I think everything we're doing through our teaching programs that we're doing with the surgeons direct sales reps that can really stay close to these doctors and work them through that that transition. We're clearly seeing the impact in the utilization increases year over year as every year that doctors use lab capacity incremental year, they do more.
So it's working we're just going to try to throw some accelerators on it and see if we can push to get there quicker with these.
Investments, we began in the back half of 2021, and we're going to accelerate here in 2022.
Got it yeah. The physician inertia thing is is really get it and then just on that.
<unk> D to C initiatives and things like that.
Do you guys now.
Here the return on that or is there a way to sort of quantify how impactful that it has been.
Sure Yes.
Something we we.
Started piloting back in early 2018, so we've been very methodical about measuring the.
The impact of these investments starting from a small scale and incrementally ratcheting it up year after year after year.
We have hard metrics, we can get from our our website.
Based on.
Visits based on certain engagement that patients make there is a question are to determine if they may be a surgical candidate that they can take they can also search for a doctor in their area. So we monitor those.
Relative to our spend and we also on the other side.
We monitor our user base, our surgeon user base, and we're able to survey them progressively and measure and monitor over time, how how many of their patients or what percentage of their patients are coming in pre educated or pre impacted by our DTC efforts and we see that number.
Mining.
Tightly correlated to our spend level. So between those two we get a pretty good.
On the impact it's having in.
And then you just go to meetings like <unk>, where.
I was going to boost the whole time.
Run out of digits account, how many surgeons came up and said.
I'm ready to get trained on this I've had so many patients coming in and asking for it it's just amazing.
So I think.
Boil all that together and we feel great about the investment we're making at our DTC.
<unk> patient education.
Thank you so much.
Sure.
Once again, if you have a question you May press star one on your telephone keypad.
Again, Please press star one now.
Your last question is from Rick Wise with Stifel. Please go ahead.
Good afternoon gentlemen.
I can't believe we haven't really talked about COVID-19 on this call.
Frankly was a little anxious about the fourth quarter.
And what you might say about.
'twenty two.
Covid presents.
A headwind much of a headwind can you quantify it in the fourth quarter and.
How do we.
How do we think about.
You're starting to get to.
For the year a lot of companies have called out.
Tough januaries, and Februaries et cetera, any incremental color there.
Yes, Eric This is this is Marc and thanks for the question.
We see let's say things that other companies are seeing.
I think we've really just been trying to focus on those things that we can control some things we just can't control.
And the things that we can control we feel very good about so.
We did see what other company saw in the fourth quarter and enter into Q1.
But we're really.
We're really focus at the whole team here as we are expanding our sales force. If there are some headwinds in one region well, let's just push harder in another region to make up for it. So we're really just trying to have keep our pace of growth steady throughout the country and really be down to kind of.
Sure.
Daily business.
Each day, and we do feel that.
Brought to this is behind us and that we feel like we're largely clearing up and so.
We're anxious to move ahead.
That's great to hear and honestly I think you did a great job and that kind of context.
Yeah.
I wanted to.
Talk about.
Both the expansion of direct reps and <unk>.
Mike Inter act intersect with gross margins.
You are going to be.
If I heard you correctly 17 direct reps.
By the end of the year.
Quoting you correctly.
Please correct me if I'm not.
<unk>.
I would assume that is going to be.
Whatever it means for Opex.
Should mean.
Better gross margins correct.
You finished really strongly how should we be thinking about gross margins in 2002, and frankly beyond given this increasing mix of direct sales.
Thanks, Rick and good question.
With our growing sales force, what we see and what we've already.
In last year as really the steady increase was underway is that there are some increased costs related to these direct.
Sales channel. These W. Two employees and those costs are being reflected in the sales and marketing line as the cost of.
Selling the product.
And from a total overall cost of goods sold.
Not going to give specific guidance here on what the margin is but.
We felt comfortable with what we've been able to do there are some operating efficiencies as we get to become a larger company.
And there are benefits and efficiencies and so we've had some gross margin expansion in 2021.
But looking.
Looking at the trends in 2021, you can see that.
The Opex line items sales and marketing has been expanding and that's the line item that.
No I was referring to in part of the script, where I said, we're looking to grow from here. So both in the DTC initiatives as well as that expanding DTC or excuse me direct sales channel.
Thats, where youll see that impact the gross margin. So we feel good about our gross margins they've been healthy.
Hopefully.
The growing efficiencies and volume of sales will remain healthy.
Got you.
Maybe just last for me.
Got you I know, it's early and sort of a silly question in a way.
But it's sort of a two part question where are we.
In the rollout of mini lap.
The Doctor Plasty.
Procedure.
Yes.
How do we imagine if I would ask that question in the year, how would you hope and expect to answer it.
And.
That's part a part b in a way is.
Obviously lap of planting continues on you're adding these new incremental procedures.
Our.
Is this are you.
Is this part of going deeper in accounts is this persuading more people more physicians to get trained is it.
Opening new accounts I'm, just wondering how that all is working together.
As you as you drive for it as well the intersection of all of those things. Thank you.
Sure.
Very pleased with the uptake.
It's steady progressive uptake of the many incision system.
Into our more experienced surgeons practices.
There continues to be more interest in that system, especially as we roll out things like the three in one guide that.
Make the procedure, even faster and more straightforward.
I'd say we're in the.
Third inning on that.
For Dr. <unk>, we're still early in the first inning, our initial rollout.
Limited numbers of trays, and we're a little bit trade constrained, we're now getting into a situation, where we're going to be able to have some some good supply out in the field.
Here in the next few weeks to months.
And I think thats going to continue to grow really nicely. There is a lot of demand for our doctor velocity a lot of excitement.
Both of the.
<unk> conference and the <unk> meeting.
Prior September so we're looking forward to get hitting more availability of that system out there and driving that.
That's going to help that's going to help both of those are going to help push up our blended ASP.
Trend and our ancillary products.
As we get more direct reps I think we're going to get better penetration because we have.
More people that don't have the other.
Other company products in their bag to offer to those cases right. So they've got a focus on selling our product line and wholly.
Cross the board so.
If I fully answered your the last part of your question, but please please ask again, if I Miss something.
That's great and so it's really.
The expanded sales force expanded direct sales force with more in the bag and more tools to offer every procedure.
Sorry, this is all going to work Synergistically.
What I'm, saying it properly.
They don't have all the they don't have all the products yet, but we've got a really nice pipeline and that's where we're trying to identify additional opportunities and that's why we're upping our investment in R&D.
Got you. Thanks, so much.
But still keeping tight focus on that bunion bunion related pathologies.
At our home base.
Yep got it thank you.
Sure.
As there are no further questions at this time I would like to turn the conference back over to management for closing remarks.
Thank you Paul on behalf of truth medical we'd like to thank everyone for joining US today. This concludes our call and we look forward to our next update following the close of the first quarter 2022.
And this concludes today's conference call. Thank you for joining you may now disconnect.
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