Q2 2023 SI-BONE Inc Earnings Call

August 7, 2023

Okay.

Good afternoon, and welcome to U S bonds second quarter earnings Conference call. At this time all participants are in a listen only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes.

Ill like to turn the call over to Keith Iqbal Senior director of Investor Relations at Si bone for a few introductory comments.

Sir Please go ahead.

Thank you for participating in today's call. Joining me are Laura Francis Chief Executive Officer, and Anshul Maheshwari Chief Financial Officer.

Earlier today Si bone released financial results for the quarter ended June 32023.

A copy of the press release is available on the company's website.

Before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Any statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements.

These forward looking statements are based on the company's current expectations and inherently involve risks and uncertainties.

These risks include SL, Green's ability to introduce and commercialize new products and indications.

<unk> ability to maintain favorable reimbursement for its products and procedures.

Impact of potential economic weakness on the ability and desire of patients to undergo elective procedures.

<unk> ability to manage risks through supply chain.

The impact of future capital requirements, driven by new product introductions.

And risks to the continued renormalization of the healthcare operating environment.

Other forward looking statements include our examination of operating trends and our future financial expectations.

Such as expectations for surgeon training and adoption active surgeons, new products and clinical trial enrollment and 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.

Accordingly, you should not place undue reliance on these statements.

List and description of the risks and uncertainties associated with our business.

Please refer to the risk factors section of our most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission.

Si bone disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.

Conference call contains time sensitive information and is accurate only as of the live broadcast today August seven 2023 with that I'll turn the call over to Laura.

Thanks, Ken Good afternoon, and thank you for joining us I'm pleased with our performance in the quarter as we delivered over 30% revenue growth led by robust demand for our portfolio of solutions strong surgeon engagement and favorable reimbursement tailwind.

U S procedure growth trends over the last several quarters give me confidence that we're well positioned to deliver a strong second half of 2023.

Furthermore, our strong liquidity position bolstered by the successful capital raise in May provides us the flexibility to continue our judicious investments and portfolio expansion and commercialization initiatives.

We believe these investments combined with secular growth factors in the business.

Allow us to deliver continued revenue growth.

And accelerate our progress toward adjusted EBITDA and cash flow breakeven.

Before I discuss our results I want to thank our employees as they have continued to demonstrate unwavering dedication to serve our expanding surgeon base and ensure patients have access to our best in class solutions.

Level of consistent record performance over the last several quarters would not be possible without you.

Now moving to our second quarter performance.

The second quarter of 2023, we generated record worldwide revenue of $33 3 million, an increase of over 30% compared to the second quarter of 2022.

The quarterly result was led by record U S revenue of $31 2 million, which represents U S revenue growth of over 31% compared to the prior year period.

This fifth consecutive quarter of record worldwide revenue.

And the improving operating leverage exemplifies the consistency of our execution and strength in the business.

Now, let me provide an update on our key initiatives as we continue to look to extend our leadership position and drive strong long term growth.

Starting with sales infrastructure, our direct sales team our biggest asset as we expand our product portfolio and surgeon base.

At the end of the second quarter, our U S. Commercial organization comprised 85 quota bearing territory managers.

We complement our territory managers with clinical support specialists as well as a growing network of third party sales agents for case coverage.

We also selectively place instruments sets at high volume hospitals to meet demand.

We're confident that our hybrid strategies will allow us to further penetrate the surgeon market cost effectively accelerate topline growth and achieve higher productivity.

At the end of the second quarter, our trailing 12 month average revenue per territory in the U S was approximately $1 4 million.

Representing a 32% productivity gain over the comparable trailing 12 month period.

Our strong revenue growth and increased operating leverage over the last several quarters are the result of our investments in building a world class commercial organization.

Moving onto surgeon engagement, we exited the second quarter with approximately 935 active surgeons.

This equates to approximately 30% growth in our active surgeons over the second quarter of 2022.

This was the 10th consecutive quarter of double digit year over year growth interactive surgeons.

Based on the early third quarter trends, we surpassed the 950 active surgeons milestone we set at the end of the first quarter.

It's also encouraging to see surgeon overlap across our procedures.

We expect our complementary portfolio to drive deeper engagement and increase procedures per surgeon overtime. These.

These trends in active surgeon base reaffirmed that our portfolio expansion strategy and investment in education are resonating with our customers.

An academic training, we're pleased to see steady adoption of our procedures by surgeons first trained as residents and fellows.

They matriculate to independent practice.

For example, among the cohort of Surgeons first trained as residents and fellows procedure revenue in the second quarter of 2023, nearly doubled compared to the second quarter of 2022.

Turning to products and solutions with ICU three D ice's torque and now Ice's bedrock granted the value of our innovative versatile and complementary product portfolio has positioned us as the top choice for surgeons looking for sake or public solutions.

<unk> has become a key growth driver for us due to its expanded clearance covering si joint dysfunction trauma and adult deformity.

<unk> provides a complementary technology to IV <unk> for our existing surgeons.

It's also allowed us to engage new surgeons and successfully convert several surgeons using competitive products, one performing minimally invasive Si joint fusion procedures.

While we remained strong advocates of the lateral trans iliac trajectory as being the gold standard when performing Si joint fusion procedures.

In June we received FDA clearance for placement of Ice's torque in the posterior lateral trajectory.

This clearance provides surgeons, mostly those who are competitor conversions.

Flexibility and confidence to use their preferred approach.

The use of <unk> as a second point of fixation across the Si joint and adult deformity procedures is increasing since the product received FDA clearance for the bedrock trajectory last year.

In trauma, we remain in the early stages of market development and are encouraged by the adoption, we're seeing for ICU stork in sacral insufficiency fractures.

The trauma opportunity is of strategic importance to us as the sake or public solutions leader and is an important avenue for our growth over the long term.

Moving to ICU bed rock granted we are extremely pleased with the success of granite in its first full year on the market.

This breakthrough devices allowed us to target a 130000 annual cases across long construct adult deformity procedures and degenerative spine procedures to the sacrum expanding our total addressable market by approximately $1 billion to over $3 billion.

Given the positive surgeon reception.

<unk> actively rolling out instruments and implant sets to capitalize on the demand momentum for granted.

Furthermore, in June we expanded the granted implant family with the launch of a closed 10 granted implant.

This addition to the granite family will allow us to drive adoption with a subset of surgeons prefer implants with a close to a pad to attach the rod.

We believe granite has the potential to become the standard of care for stabilizing the base of long construct adult deformity procedures.

And this addition insurers that granite can address the preferences of surgeons performing pelvic fixation procedures.

In addition to the use of granite and long construct adult deformity procedures, we're encouraged to see that year to date nearly 40% of the procedures in which granted is used are actually shorter multilevel constructs generally a treatment for degenerative spine disorders gives.

Given the demand trends and over 100000 annual procedures involving spinal fusion to the sacrum, we're progressing toward a 2024 launch of another new product in the granite family.

We believe the new product will further accelerate adoption of granite and these short construct procedures.

Along with the growing demand for granted we're seeing a consistent trend in surgeons using some combination of our products with granite to achieve two points of fixation across the LSI joined on either side and long construct procedures.

This is driving a significant pull through opportunity for the portfolio.

And a higher per procedure average selling price.

Moving on to clinical evidence gives.

Given the growing interest in the Si joint space as a market leader with commitment to clinical evidence and patient safety, we launched the Stacy study in June .

AC is a prospective study of the use of Ip's torque inpatients with sacroiliac joint dysfunction.

Stacy is to work with a select group of physicians and gather post market information on the use of ip's toward the secretary adjunct fusion.

I'll now turn the call over to onshore to provide more detail on our financial results.

Thanks, Laura Good afternoon, everyone I will focus my comments today on second quarter revenue trends operating leverage and liquidity.

And with our updated 2023 guidance.

Starting with our second quarter revenue.

Laura noted our worldwide revenue in the second quarter was $33 3 million representing growth of over 30% compared to the prior year period.

Second quarter U S revenue was $31 $2 million, increasing over 31% compared to the prior year period.

This record U S performance was driven by growth in the procedure volumes, which rose by approximately 30% compared to the prior year period.

In addition to robust volume growth for the second consecutive quarter, our U S per procedure average selling price increased compared to the prior year period.

International revenue was $2 1 million, reflecting growth of approximately 15% compared to the prior year period across Europe , France maintained strong volume growth offset by ongoing recovery in Germany and the UK.

Moving to gross margin and operating leverage.

In the second quarter of 2023, our gross margin was 81% in line with our expectations.

As anticipated the gross margin reflects the impact of procedure and product mix due to higher total cost of ICU torque and granted.

Increase in depreciation from the deployment of instrument trays to support the growing demand for these products depth.

Depreciation associated with our second facility in Santa Clara and higher freight cost.

Operating expenses were $38 9 million in the second quarter of 2023 versus $40 million in the prior year period. The 3% decrease in operating expenses is mainly due to timing of certain commercial activities that are scheduled for the second half of 2023.

This was partially offset by an increase in stock based compensation and higher commissions associated with the revenue growth in the second quarter of 2023.

We're pleased that we have not demonstrated several consecutive quarters of improved operating leverage while investing in R&D and clinical research, which are crucial to delivering strong and sustainable revenue growth over time.

Our net loss was $11 2 million or <unk> 30 per diluted share for the second quarter of 2023 compared to a net loss of $18 5 million or <unk> 54 per diluted share in the prior year period.

Representing 46% earnings per diluted share improvement.

The earnings per diluted share for the second quarter of 2023 were also impacted by the increase in the number of shares outstanding from our follow on common stock offering in May.

Adjusted EBITDA loss in the second quarter improved 59% to $4 7 million <unk>.

<unk> 11 5 million in the prior year period.

Turning to liquidity.

We ended the quarter with a strong balance sheet, including approximately $169 million.

In cash and marketable securities.

Our cash balance includes approximately $84 million in net proceeds from the follow on offering in May.

Our first half cash used in operating activities was $14 $3 million, an improvement of nearly 50% compared to $28 4 million in the prior year period.

We are pleased with our trajectory of cash utilization in the last few quarters, while continuing our investment in long term growth initiatives.

Additionally, we are building our instrument trade inventory capacity to support the growing demand for granite as we prepare for a seasonally strong fourth quarter.

Finally, moving to our updated guidance for the year.

Based on our second quarter performance, we are increasing our full year 2023 worldwide revenue guidance and tightening the range to $132 million to $134 million.

Up from our previous guidance of $128 million to a $131 million.

This revised guidance translates to year over year growth of approximately 24% to 26% versus the previous range of 20% to 23%.

We continue to expect the 2023 annual gross margin to be approximately 80%.

Based on the updated guidance, we anticipate operating expenses will increase in the mid single digit percent for full year 2023, due to anticipated higher commission and bonus expense from higher revenue.

With that I will turn the call over to the operator for questions.

Thank you.

Yes.

To ask a question for you first of all one one on your phone and wait for your name to be announced.

Your question. Please press star one again.

Standby as we compile the Q&A roster.

One moment, please for all those questions.

Yes.

First question will come from Greg <unk> of Bank of America Securities. Your line is open.

Yes.

Good afternoon, and thanks for taking the questions and congrats on another strong quarter.

But I wanted to start I know you typically reluctant to give details on specific products.

But I'm going to try anyway.

And I wanted to see if there is any color that you can provide on the shrink in the first half and then looking at revenue guidance.

Even with the raise implies essentially flat revenue first half versus second half maybe slightly more in the second half.

So is there anything on the product level that we should be thinking about which suggests that the.

The strong first half growth that you saw wouldn't continue in the second half.

Yes.

Thanks, Craig Thanks for the question and what I'll do is I'll I'll answer your first question on the <unk>.

Syed.

And then I'll have Bob I'll turn it over to onshore to talk a little bit more about the guidance, we're really pleased with the core.

After that we just exited is 30% growth in the quarter.

<unk> continued momentum in the U S strong momentum with our active surgeon base improvements in our A&P.

60% improvement in our bottom line losses.

We're really excited about how we performed this quarter and we just see very strong momentum going into the second half of this year as well, which is why we felt confident with the.

The rate that we provided in guidance from a product perspective.

Seeing performance across the board here, so our core business.

Continues to drive our results and when I say core business I mean primary anti joint fusion and that can be with our IQ3 D products or it can be with <unk>.

We're also continuing to see momentum in our trauma business with IQ4 specifically with sacral insufficiency fractures and finally, we didn't talk quite a bit about granite, which has just been a terrific launch for us and we have a lot of excitement around granite.

You did talk a little bit about the product extension with 10 granted that was launched.

Late in the second quarter, and then that opens up some additional opportunity with certain surgeons, who prefer that particular product.

Well as you said I'm not going to break down what the growth was but we're seeing growth in all of the areas that I just mentioned.

We're really excited for the second half of the year.

And Craig Thanks for the question on guidance so when.

You talked about some of the enthusiasm in the in the business that we've seen.

Not just in the first half, but also the second half of last year.

And we've had about five quarters now record revenue in all of it.

In this first half of the year.

Is actually the strongest sequential growth and year over year growth, we've seen as a public company.

So we're feeling really good about how the business is set up some of the assumptions that we have made in our guidance and the increase in guidance. We did at the end of <unk>.

Played out better than what we anticipated both in terms of the adoption of the rollout and the ASP trends.

No.

All of that being going on also.

While being very confident of the strength of the secular trends of the business.

And also acknowledge that.

There is potential seasonal strength in the second half, we just want to be very thoughtful as we're going into the back half of the year.

That's sort of reflected in our guidance.

And some of the assumption changes that we had was.

We provided some more upside from the broader rollout in the second half.

Historically, we've talked about mid single digit ASP decline.

Even though you've had two consecutive quarters of positive ESP, we're still assuming ASP pressure in the back half of the year, albeit low single digit now. So we think it's appropriate we hedge in terms of getting into the second half of the year.

Got it. Thank you and then just a quick follow up Laura. Thank you said the new approval for torque.

Better positions you to go after some of those competitive cases that.

DSO joint fusion that may prefer the screw versus the triangular implants.

So.

Maybe if you could just expand a little bit on that and talk about how you are.

Doing picking.

Picking up those competitive cases sure sure and torque as you know was primarily launched to focus on the trauma of opportunity that we have with sacral insufficiency fractures. So that continues to be a long term opportunity for the business that we're really excited about.

Other adjacent market, our best estimate is around $350 million of potential there as well, but the more immediate offer.

Opportunity with torque certainly has been in the primary minimally invasive Si joint fusion market.

And so we've seen a very significant uptick.

Of competitive surgeons that are converting over to iqs technology using the torque implants.

Some of those surgeons have provided feedback where they're actually interested in the lateral approach, but they're also interested in the post steroid or lateral approach.

And what we want to do is we want to be the company that provides sacral pelvic solutions regardless of.

What the surgeon is interested and so while we remain strong advocates of the lateral approach is the gold standard for a lot of data out there showing the efficacy of the product using the lateral approach. We also want to give those competitive surge.

Is the solution that they're looking for and the confidence to use it so that that trajectory now on label.

Great. Thank you and congrats again on another strong one.

Thanks Glenn.

One moment please.

Question.

Scott.

Sure.

Our next question will come from the line of young Li of Jefferies. Your line is open.

Alright, great.

Thanks for taking our questions and congrats on a strong quarter here.

Was wondering if you can maybe share some more color on the intra.

Intra quarter growth.

It sounded like the momentum carried.

Through July as well.

Right.

What are some of the expectations for the summer season.

The seasonality impact.

Can you provide some color on this.

High level Q3, Q4 cadence.

Yes.

This is onshore.

Why don't I take this question, so obviously coming out of the second quarter or the first half of the year, we feel pretty good about the business and.

So that is thoughtfully reflected in our increased guidance for 2014, 26%.

When you think about quarterly trending sequentially into the third quarter.

Historically, you see as an industry a sequential dip in the third quarter from the second quarter can be somewhere around the low single digit range.

And in our guidance, that's what our assumption is.

That sequential decline for Q2 Q3.

Mainly driven by this summer.

Summer seasonality and actually having one less selling day in the quarter compared to the prior quarter, while continuing to acknowledge that.

Strong momentum with the new product rollout.

And we're going to work hard to minimize the impact of that but that's not incorporated in the guidance that we've set.

Sorry, Greg very helpful. I guess the follow.

Follow up question just in terms of getting a new surgeon.

<unk> four core Oh, sorry, two infusion procedures.

Has that timeline or process getting shorter.

Either.

Is the portfolio effect or just.

I'll jump in there too and the clinical community.

Okay.

Yeah. Thanks for the question Yeah, So and this just dovetails a little bit with your previous question on intra quarter growth in July . We did you did mention in our prepared remarks that we have actually exceeded the high watermark of 950 surgeons.

In Q1 already.

At the end of July So we did see some.

Strong new surgeon growth heading into the month of July which is very encouraging.

Given the summer months.

I do also believe that Youre right that we haven't seen a decrease in the amount of time it takes for us to bring on new surgeons and part of it is just that the procedure is more well known at this point in time and part of it is the different modalities that we can use.

In order to reach the new surgeon. So it can be a regional course, where they can narrow lab training. It can be a local training course in the or.

Or it can be with our simulators, which we still are heavily using.

And that's on the core primary outside your infusion business.

If you actually look at our granite business, it's actually quite easy to go and we do what we call an instrumentation review typically in the office of the surgeon because this is a procedure that they're used to doing already they're just going to be using the <unk> technology.

We're replacing some of the existing technologies that are out there so in terms of adding.

I do believe that we have a number of different ways.

To engage these new surgeons and that we have significantly.

<unk> significantly improved our ability to onboard.

Alright, thank you so much.

Uh huh.

Thank you.

One moment please for our next question.

And our next question will come from Kyle Rose of Canaccord. Your line is open.

Hi, great. Thanks, everyone and congrats on a strong quarter.

Wanted to just have look you've you've had the end up out in the market for it.

Over nine months now I just wanted to see have you seen any more.

Material changes in the amount of implants to be used per procedure I know theres been a lot of talk of.

Two the potential for or somewhere along that path.

And then secondly, I don't know if I missed it did you give the number of CSS reps you have in the field as well.

Sure. Thanks, Kyle for the question I will answer the question on the Encap. So just as a reminder to others that are on the call. We have an S happened twice that.

A little over $90 for Medicare cases, it's exclusive to granite and it does create a pretty strong competitive advantage for us.

And that's really combined with the efficacy of the product the goal here for surgeons is to ensure.

They don't have fixations failure in these long construct cases and at least cases on average can cost a couple of hundred thousand dollars for the initial case and can cost in the range in total of around $125000 per revision and obviously the patient.

Impact of wireless is significant so so what are what the App does is it really.

It's economically beneficial to the surgeon to the hospital and the payer and we have seen strong interest in that particular.

Yeah.

So we're pleased with that in terms of our CFS wraps.

Yeah.

Our typical pattern in prior years look actually give out both numbers if it became a little bit confusing.

Also given the push that we've had toward agency sales as well you know what.

I'll tell you this that the CFS is similar to prior years are a little less than one <unk> to two one senior quota carrying reps and then and then as I said, we're also bringing on additional agents that are helping to increase the productivity.

<unk> that we've seen.

On average our pro.

The activity increase of 32%.

Past 12 months, if you compare it to the prior year.

And it does show that we can really grow.

The territory Rep productivity in 2021, it was less than a million.

Last year was around 1.2, and now we're at $1 $4 million and those quota carrying reps are supported by the CFS is that you asked about and then also the addition of agents who have been particularly helpful with granite cases.

Okay.

Yeah.

Mr Rose.

Yeah, that's all for me thank you.

Taking the questions.

Thank you.

One moment please for our next question.

Our next question will come from the line of Sam Youll Brodowski twist.

<unk> Securities Your line is open.

Hi, Thanks for taking the questions just the first one and thanks for the color around that.

Certain dynamics to start.

Right.

With the new torque approach should we think about a steady cadence of new competitive surgeon conversion.

Through the second half and.

Or is that more of a one time thing and how should we think about what's contemplated in guidance in terms of new surgeon.

Yes.

Yes in terms of new surgeon ads.

It's not just the posterior lateral trajectory the tour, we're really focused.

We have been over the last several years through education and engagement to continue to grow that number.

And it's really critical for us as we think about the long term upwards for the business.

Based on what we've seen thus far in the quarter, we feel pretty confident that we will continue to head.

New active surgeon milestones throughout 2022 weeks at the end of each of the quarters.

Right now our expectation is to have that low to mid teens growth in the fourth quarter of 2023 compared to the fourth quarter of 2022, which as you may recall <unk> was a pretty high watermark to start with and the end of last year. So you feel very good about that.

The other piece that's also equally important for us is.

Continuing to focus on growing surgeon overlap Laura talked about the multiple modalities of treatment types that we're engaging surgeons there.

We've had a lot of success there, but we've seen.

A 30% growth in this quarter and active surgeon base, but our procedures performed for surgeons.

A flat, but you actually have surgeons moving up the volume scale as well that have been doing a procedure for a while so both of those metrics are pointing in the right direction for us.

Great that's really helpful and I appreciate the other color that you had given on the assumptions around price.

Through the second half, but just with the with the ground at lunchtime, so well does that.

You are more positive outlook on how you think about Chrysler procedure evolving through 2024 and beyond.

Yes.

Yes, Sam on the on the ESP side.

We're really encouraged by the ASP trends specifically in the first half.

We got two consecutive quarters of year over year ASP improvement.

And it's driven by two things right. The first one is the ground at volume that Laura talked about where we've seen surgeons specifically those that do adult deformity procedures using more than two points of fixation somewhat into a cycle and implants and their procedures.

And to some extent we are also seeing a bit more greater decline in the ASP within the minimally invasive Si joint fusion business, even though we've continued to see a move to ASC and.

Historically the decline has been in the mid single digit.

ASE side of service, but with the increase in the fees.

At the start of 2023, the team has actually done a great job in working where they are and in several cases being successful in maintaining that pricing.

On those contracts, but we also want to acknowledge it's been only two quarters right and while we feel good about some of the reimbursement tailwind.

The procedure product mix, we just want to be thoughtful in our not incur.

Incorporating that upside in the back half of the year or.

This one too premature to talk 2024.

Yeah.

Okay.

Thank you.

One moment. Please follow next question.

Okay.

Our next question will come from drew Ranieri of Morgan Stanley . Your line is open.

Hi, Laura on offshore thanks for taking the questions just maybe first on on Opex for for onshore.

You've done a good job year to date Leverages coming more of an important part of the story.

And in your prepared remarks, you talked about continued revenue growth and progress towards adjusted EBITDA and cash flow breakeven. So I was hoping you might be able to touch on kind of the latter two parts of these and maybe kind of what your expectations are for laying the groundwork to eventually achieving these targets.

Adjusted cash flow and <unk>.

EBITDA breakeven.

Okay.

Yes.

Thanks drew for the question in terms of the operating leverage we're really pleased with the trajectory that we've demonstrated in operating leverage it's been pretty linear to our topline growth.

And it's basically driven by the foundation that we build and making investments that we knew was required to support the level of growth acceleration, we're seeing in the business now in terms of how we see that evolve we do believe that fiscal year 2023.

We will continue to see operating leverage, albeit the year over year comps do become a bit tougher you are seeing that in last year as well, but we feel good about that and.

We're not going to be giving out guidance on when we believe we can get to breakeven from an adjusted EBITDAR a cash flow perspective, but if you look at the trajectory that we've been on.

And extrapolate where revenue has been and is potentially going to go.

When we provide 2020 for guidance and beyond.

We will be able to share more.

Okay.

Fair enough and maybe.

Maybe second on just the credit instrument trays I understand that you're continuing to roll this out in.

Part of the recent raise was to kind of build up the <unk>.

Inventory here, but for the centers that you're in today can you maybe just talk to us about what youre seeing in terms of utilization or productivity.

Hinted at some details but.

Any more clarity around what youre seeing kind of the early days of these accounts would be great. Thank you.

Thanks drew.

Granted trades the granite launch really has been a trying to supply in order to meet demand.

And I talked in my prepared remarks about the efforts of our team in order to hit the results that we've hit in this this is a particular area that I would say that the people have gone above and beyond here. So our operations team trying to supply.

The implants that are needed the trades that are needed and then the people in the field trying to utilize the trades that they have but it has not been unusual for our sales reps to have to drive hours in order to retrieve trades and actually go to another site and so what we.

Think we're doing here in the second quarter and third quarter is making sure that we have the inventory that we need.

Specially for granted as well as the trades that we really need, particularly going into the seasonally high volume fourth quarter, that's coming here and we feel very confident that we're in that position, but it really has been around 12 months of.

A lot of work in order to make sure to meet to meet the demands that our surgeons are providing.

Got it appreciate the color. Thank you.

King.

Thank you Henry.

One moment please for our next question.

Okay.

Our next question will come from the line of David Saxon of Needham and company. Your line is open.

Hello. This is Joseph on for David.

Maybe a high level question.

Looking at 2024.

Onshore I know you said it was maybe a little early to comment on it but.

Maybe some high level details you'll be facing much more difficult comps in <unk> and.

In 2024, but you're also be farther along with the granite torque rollouts.

And the assumption that the shorter concert granted launched they're going well.

Just wanted to hear how you guys are feeling about sustaining that 20 plus growth even as you start lapping those tougher comps.

Yes, Joseph status for <unk>. Thanks for the question and look.

I think our execution over the last several quarters gives us a lot of confidence in.

The underlying momentum in the business.

The foundation of which is both on our differentiated portfolio, which as you as you highlighted is that the next <unk>.

You've got a product that will launch next year, the favorable reimbursement both within the Si joint fusion side of the business as well as the <unk> grabbed it and just the improving operating leverage right. So we're set up really well.

And we do believe we are in the early innings of delivering on our long term growth strategy that we've laid out over the last couple of years.

And I have all the ingredients in place.

To deliver strong and sustainable as well as fiscally responsible growth, but that said, we don't want to get ahead of ourselves.

I want to make sure we can capitalize and deliver what we believe will be a strong second half before we talk about 2024 so.

Too early for me to give you numbers on 2024 at this point, but we're doing everything possible to deliver on a strong second half and.

And feel good about that.

Okay, Okay, great fair enough.

Maybe could we get an update on your on the marketing strategy.

You've had the DTC campaign here out for a couple of years now.

Maybe if you could talk relatively wanted to hear you guys are feeling about consumer work.

Awareness now kind of relative to when you started those activities.

Yes, I'm happy to take that question is this the digital marketing activities have been a focal point for US we are trying to generate additional knowledge with patience of Si joint dysfunction. Indeed generation, we've been quite successful in doing that whether it's bringing pay.

<unk> to the web site, completing our pain survey or using our find a doctor functionality in order to be referred to so one of our surgeons, we've been quite successful in using search as well as social media in order to drive patient.

To a better understanding of this particular condition now what we're really doing is we're starting to focus a little bit on a little lower in the funnel and so for those patients who have actually.

That had an interest in finding a doctor to help to further facilitate that process as well so our marketing strategy is evolving here as we continue to.

To develop our digital marketing strategy.

Okay. Thank you very much for taking our questions.

Thank you Keith.

Thank you.

Yeah.

Okay.

And I'm seeing no further questions in the queue.

I'd now like to turn the conference back to MS. Laura Francis.

Closing remarks.

Thanks all.

Joining the call today are year to date performance and the favorable demand trends. They bolster my conviction and a strong second half performance as well as our long term outlook for the business and I'm confident that we have all the elements in place to deliver a strong and sustainable long term growth.

And progress towards profitability. So thanks for your time today Goodbye.

This concludes today's conference call. Thank you all for participating you may now disconnect and have a pleasant day.

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Good afternoon, and welcome to <unk> second quarter earnings Conference call. At this time, all participants are in a listen only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes, and I would now like to turn the call over to <unk>.

So Keith Iqbal Senior director of Investor Relations at Si bone for a few introductory comments Sir. Please go ahead.

Thank you for participating in today's call.

Joining me are Laura Francis Chief Executive Officer, and Anshul, Maheshwari Chief Financial Officer.

Earlier today Si bone released financial results for the quarter ended June 32023.

A copy of the press release is available on the company's website.

Any statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements.

These forward looking statements are based on the company's current expectations and inherently involve risks and uncertainties.

These risks include SL, Green's ability to introduce and commercialize new products and indications.

<unk> ability to maintain favorable reimbursement for its products and procedures.

The impact of potential economic weakness on the ability and desire of patients to undergo elective procedures.

<unk> ability to manage risks through supply chain.

The impact of future capital requirements, driven by new product introductions.

And risks to the continued renormalization of the healthcare operating environment.

Other forward looking statements include our examination of operating trends and our future financial expectations.

As expectations for surgeon training and adoption active surgeons, new products and clinical trial enrollment and 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.

Accordingly, you should not place undue reliance on these statements.

For a list and description of the risks and uncertainties associated with our business. Please.

Please refer to the risk factors section of our most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission.

This conference call contains time sensitive information and is accurate only as of the live broadcast today August seven 2023 with that I'll turn the call over to Laura.

Thanks, Ken Good afternoon, and thank you for joining us I am pleased with our performance in the quarter as we delivered over 30% revenue growth led by robust demand for our portfolio of solutions strong surgeon engagement and favorable reimbursement tailwind.

U S procedure growth trends over the last several quarters give me confidence that we're well positioned to deliver a strong second half of 2023.

We believe these investments combined with secular growth factors in the business.

Allow us to deliver continued revenue growth and accelerate our progress toward adjusted EBITDA and cash flow breakeven.

This level of consistent record performance over the last several quarters would not be possible without you.

Now moving to our second quarter performance.

In the second quarter of 2023, we generated record worldwide revenue of $33 3 million, an increase of over 30% compared to the second quarter of 2022.

The quarterly result was led by record U S revenue of $31 2 million.

Which represents U S revenue growth of over 31% compared to the prior year period.

Fifth consecutive quarter of record worldwide revenue and improving operating leverage exemplifies the consistency of our execution and strength in the business.

Now, let me provide an update on our key initiatives as we continue to look to extend our leadership position and drive strong long term growth.

Starting with sales infrastructure, our direct sales team our biggest asset as we expand our product portfolio and surgeon base.

At the end of the second quarter, our U S. Commercial organization comprised 85 quota bearing territory managers.

Complement our territory managers with clinical support specialists as well as a growing network of third party sales agents for case coverage.

Also selectively place instrument sets at high volume hospitals to meet demand.

We're confident that our hybrid strategies will allow us to further penetrate the surgeon market cost effectively accelerate topline growth and achieve higher productivity.

At the end of the second quarter, our trailing 12 month average revenue per territory in the U S was approximately $1 4 million.

Representing a 32% productivity gains over the comparable trailing 12 month period.

Our strong revenue growth and increased operating leverage over the last several quarters are the result of our investments in building a world class commercial organization.

Moving onto surgeon engagement, we exited the second quarter with approximately 935 active surgeons.

This equates to approximately 30% growth in our active surgeons over the second quarter of 2022.

This was the 10th consecutive quarter of double digit year over year growth interact with surgeons.

Based on the early third quarter trends, we surpassed the 950 active surgeons milestone we set at the end of the first quarter.

It's also encouraging to see surgeon overlap across our procedures we.

We expect our complementary portfolio to drive deeper engagement and increase procedures per surgeon over time. These.

These trends in active surgeon base reaffirm that our portfolio expansion strategy and investment in education are resonating with our customers.

An academic training, we're pleased to see steady adoption of our procedures by surgeons first trained as residents and fellows.

They matriculate to independent practice.

For example, among the cohort of Surgeons first trained as residents and fellows procedure revenue in the second quarter of 2023, nearly doubled compared to the second quarter of 2022.

Turning to products and solutions with ICU three D ice's torque and now <unk> bedrock granted the value of our innovative berths at all and complementary product portfolio has positioned us as the top choice for surgeons looking for sake or public solutions.

<unk> has become a key growth driver for us due to its expanded clearance covering si joint dysfunction trauma and adult deformity.

<unk> provides a complementary technology to IV <unk> for our existing surgeons.

It's also allowed us to engage new surgeons and successfully convert several surgeons using competitive products, one performing minimally invasive Si joint fusion procedures.

While we remained strong advocates of the lateral <unk> trajectory as being the gold standard when performing Si joint fusion procedures.

In June we received FDA clearance for replacement of Ice's torque and posteriorly lateral trajectory.

This clearance provides surgeons, mostly those who are competitor conversions.

Flexibility and confidence to use their preferred approach.

The use of <unk> as a second point of fixation across the Si joint and adult deformity procedures is increasing since the product received FDA clearance for the bedrock trajectory last year.

In trauma, we remain in the early stages of market development and are encouraged by the adoption, we're seeing for IP stork in sacral insufficiency fractures.

The <unk> opportunity is of strategic importance to us as the sacred public solutions leader and this is an important avenue for our growth over the long term.

Moving to IP is bedrock granted we are extremely pleased with the success of granite in its first full year on the market.

Given the positive surgeon reception, we're actively rolling out instruments and implant sets to capitalize on the demand momentum for granted.

Furthermore, in June we expanded the granted implant family with the launch of a closed head granted implant.

This addition to the granite family will allow us to drive adoption with a subset of surgeons, who prefer implants with a close to a pad to attach the rod.

We believe granite has the potential to become the standard of care for stabilizing the base of long construct adult deformity procedures.

And this addition insurers that granite can address the preferences of surgeons performing pelvic fixation procedures.

Given the demand trends and over 100000 annual procedures involving spinal fusion to the sacrum, we're progressing toward a 2024 launch of another new product in the granite family.

We believe the new product will further accelerate adoption of granite and these short construct procedures.

This is driving a significant pull through opportunity for the portfolio.

And a higher per procedure average selling price.

Moving on to clinical evidence gives.

Given the growing interest in the Si joint space as a market leader with commitment to clinical evidence and patient safety, we launched the Stacy study in June .

<unk> is a prospective study of the use of ip's torque and patients with sacroiliac joint dysfunction.

Purpose of Stacy is to work with a select group of physicians and gather post market information and the use of ip's towards the sacroiliac joint fusion.

I'll now turn the call over to onshore to provide more detail on our financial results.

Thanks, Laura Good afternoon, everyone I will focus my comments today on second quarter revenue trends operating leverage and liquidity.

And with our updated 2023 guidance.

Starting with our second quarter revenue.

Laura noted our worldwide revenue in the second quarter was $33 3 million reps.

Representing growth of over 30% compared to the prior year period.

Second quarter U S revenue was $31 2 million.

Increasing over 31% compared to the prior year period.

This record U S performance was driven by growth in the procedure volumes, which rose by approximately 30% compared to the prior year period.

In addition to robust volume growth for the second consecutive quarter, our U S per procedure average selling price increased compared to the prior year.

Moving to gross margin and operating leverage.

In the second quarter of 2023, our gross margin was 81% in line with our expectation.

As anticipated the gross margin reflects the impact of procedure and product mix due to higher total cost of ip's torque and granted.

Increase in depreciation from the deployment of instrument trays to support the growing demand for these products.

Depreciation associated with our second facility in Santa Clara and higher freight cost.

This was partially offset by an increase in stock based compensation and higher commissions associated with the revenue growth in the second quarter of 2023.

Our net loss was $11 2 million or <unk> 30 per diluted share for the second quarter of 2023 compared to a net loss of $18 5 million or <unk> 54 per diluted share in the prior year period.

Representing 46% earnings per diluted share improvement.

The earnings per diluted share for the second quarter of 2023 were also impacted by the increase in the number of shares outstanding from our follow on common stock offering in May.

Adjusted EBITDA loss in the second quarter improved 59% to $4 7 million.

Versus 11 5 million in the prior year period.

Turning to liquidity.

We ended the quarter with a strong balance sheet, including approximately $169 million.

In cash and marketable securities.

Our cash balance includes approximately $84 million in net proceeds from the follow on offering in May.

Our first half cash used in operating activities was $14 3 million an improvement of nearly 50% compared to $28 4 million in the prior year period.

We are pleased with our trajectory of cash utilization in the last few quarters, while continuing our investment in long term growth initiatives.

Additionally, we are building our instrument tree and inventory capacity to support the growing demand for granted as we prepare for a seasonally strong fourth quarter.

Finally, moving to our updated guidance for the year.

Based on our second quarter performance, we are increasing our full year 2023 worldwide revenue guidance and tightening the range to $132 million to $134 million.

Up from our previous guidance of 128 million to $131 million.

This revised guidance translates to year over year growth of approximately 24% to 26% versus the previous range of 20% to 23%.

We continue to expect the 2023 annual gross margin to be approximately 80%.

With that I will turn the call over to the operator for questions.

Thank you.

Yes.

To ask a question. Please press star one on your phone and wait for your name to be announced to withdraw your question. Please press star one again.

Standby as we compile the Q&A roster.

One moment please for all questions.

Yes.

Our first question will come from Greg <unk> of Bank of America Securities. Your line is open.

Sure.

Good afternoon, and thanks for taking the questions and congrats on another strong quarter.

I wanted to start I know, you've typically reluctant to give details on specific products.

But I'm going to try anyway.

Wanted to see if there is any color that you can provide on the shrink in the first half and then looking at revenue guidance.

Even with the range implies essentially flat revenue first half versus second half maybe slightly more in the second half.

So is there anything on the product level that we should be thinking about.

Suggest that the.

The strong first half growth that you saw wouldn't continue in the second half.

Yes.

Thanks, Craig Thanks for the question and what I'll do is I'll I'll answer your first question on the product side.

And then I'll have Bob I'll turn it over to onshore to talk a little bit more about the guidance. We're really pleased with the quarter that we just exited 30% growth in the quarter.

Ron continued momentum in the U S strong momentum with our active surgeon base and improvements in our A&P.

60% improvement in our bottom line losses.

We're really excited about how we performed this quarter and we just see very strong momentum going into the second half of this year as well, which is why we felt confident with the.

The rate that we provided in guidance from a product perspective.

Seeing performance across the board here, so our core business.

Continued to drive our results and when I say core business I mean primary anti joint fusion and that can be with our IQ <unk> products or it can deal with IQ tour.

We're also continuing to see momentum in our trauma business with IQ4 specifically with sacral insufficiency fractures and finally, we did talk quite a bit about granite, which has just been.

A terrific launch for us and we have a lot of excitement around granite.

Talk a little bit about the product extensions with both 10 granted that was launched.

Late in the second quarter, and then that opens up some additional opportunity with certain surgeons, who prefer that particular product.

Well as you said I'm not going to breakdown, what the growth was but we're seeing growth in all of the areas that I just mentioned and are really excited for the second half of the year.

And Craig Thanks for the question on <unk>.

Got it.

Laura I believe you talked about some of the enthusiasm in the business that we've seen.

In the first half, but also the second half of last year.

<unk> had about five quarters now of record revenue.

In this first half of the year.

Is actually the strongest sequential growth and year over year growth <unk> seen a public company.

Really good about how the business is set up.

So with the assumptions that we have made in our in our guidance and the law.

<unk> is in guidance, we did at the end of <unk>.

In our fleet are better than what we anticipated both in terms of the broader adoption of the rollout and the ASP trends.

No.

While all of that being going on we also while being very confident of the strength of the secular trends of the business.

And also acknowledge that.

There is potential seasonal strength in the second half, we just want to be very thoughtful as we're going into the back half of the year.

That's sort of reflected in our guidance.

And some of the assumption changes that we had was.

We provided some more upside from the broader rollout in the second half.

Historically, we've talked about mid single digit ASP decline.

Even though we've had two consecutive quarters of positive ESP, we're still assuming ASP pressure in the back half of the year, albeit low single digit now. So we think it's appropriate we hedge in terms of getting into the second half of the year.

Got it. Thank you and then just a quick follow up Loren I think you said the new approval for torque.

Better positions you to go after some of those competitive cases that.

DSO joint fusion that may prefer the screw versus the triangular implants.

So.

Maybe if you could just expand a little bit on that and talk about how you are.

Doing picking.

Picking up those competitive cases, thanks sure sure.

<unk> as you know was primarily launched to focus on the trauma of opportunity that we have with sacral insufficiency fractures. So that continues to be a long term opportunity for the business that we're really excited about another adjacent market. Our best estimate is around $350 million.

The potential there as well, but the more immediate opportunity with torque certainly have been in the primary minimally invasive Si joint fusion market.

And so we've seen a very significant uptick.

Of competitive surgeons that are converting over to iqs technology using the torque in plants.

Some of those surgeons have provided feedback where they're actually interested in the lateral approach, but they're also interested in this posteriorly lateral approach.

And what we want to do is we want to be the company that provides sacral pelvic solutions regardless of.

Is the solution that they're looking for and the confidence to use it so that that trajectory is now on label.

Great. Thank you and congrats again on another strong one.

Thanks Glenn.

Thank you.

One moment. Please next question.

Scott.

Sure.

Our next question will come from the line of young Li of Jefferies. Your line is open.

Alright, great.

Thanks for taking my questions and congrats on a strong quarter here.

Was wondering if you can maybe share some more color on the <unk>.

Intra quarter growth.

It sounded like the momentum carried into July as well.

<unk>.

What are some of the expectations for the summer season.

The seasonality impact.

Can you provide some color on this.

High level Q3, Q4 cadence.

Yes.

This is onshore.

Why don't I take this question, so obviously coming out of the second quarter or the first half of the year, we feel pretty good about the business and.

So thoughtfully reflected in our increased guidance for 2014, 26%.

When you think about quarterly trend.

Sequentially in the third quarter.

Historically, you see as an industry a sequential dip in the third quarter from the second quarter. It can be somewhere around the low single digit range.

And in our guidance, that's what our assumption is.

That sequential decline for Q2 Q3, mainly driven by this summer.

Summer seasonality and actually having one less selling day in the quarter compared to the prior quarter, while continuing to acknowledge that.

Strong momentum with a new product rollout.

And we're going to work hard to minimize the impact of that but that's not incorporated in the guidance that we've set.

Okay, great very helpful.

I guess.

Follow up question.

In terms of getting a new surgeon.

The board is for core <unk>.

Usual procedure.

Has that timeline or process getting shorter either.

The portfolio effect or just.

With Jonathan and the Kols and clinical communities.

Okay.

Yes, thanks for the question.

And there's this dovetails a little bit with your previous question on intra quarter growth in July . We did you did mention in our prepared remarks that we have actually exceeded the high watermark of 950 surgeons in Q1.

Already.

At the end of July So we did see some.

Strong new surgeon growth heading into the month of July which is very encouraging.

Given the summer months.

I do also believe that Youre right that we have seen a decrease in the amount of time it takes for us to bring on new surgeons and part of it is just that the procedure is more well known at this point in time and part of it is the different modalities that we can use.

In order to reach the new surgeon. So it can be a regional course, where the cadaver lab training it can be a local training course in the or.

Or it can be with our simulator, which we still are heavily using.

And Thats on the core primary outside your infusion business.

If you actually look at our granite business, it's actually quite easy to go in and we do what we call an instrumentation review typically in the office of the surgeon because this is a procedure that they're used to doing already they're just going to be using the granted technology.

Replacing some of the existing technologies that are out there so in terms of adding active.

I do believe that we have a number of different ways.

To engage these new surgeons and that we have significantly.

<unk> significantly improved our ability to onboard.

Alright, thank you so much.

Alright.

Thank you.

One moment. Please next question.

And our next question will come from Kyle Rose of Canaccord. Your line is open.

Hi, great. Thanks, everyone and congrats on a strong quarter.

Wanted to just have look you've had the <unk> out in the market for it.

Over nine months now I just wanted to see have you seen any more.

Material changes in the amount of implants to be used per procedure.

There's been a lot of talk.

Two the potential for or somewhere along that path.

And then secondly, I don't know if I missed it did you give the number of CSS reps you have in the field as well.

Sure. Thanks, Kyle for the question I will answer the question on the end cap. So just as a reminder to others that are on the call we have and as happened in place.

A little over $98 for Medicare cases, it's exclusive to granite and it does create a pretty strong competitive advantage for us.

And that's really combines with the efficacy of the product the goal here for surgeons is to ensure.

They don't have fixation failure on these long construct cases and lease cases on average can cost a couple of hundred thousand dollars.

For the initial case and can cost in the range in total of around $125000 for revision and obviously the patient impact of wireless is significant so so what.

What the <unk> does is it really.

It's economically beneficial to the surgeon to the hospital and the payer and we have seen strong interest in that particular.

Yeah.

So we're pleased with that in terms of our CSS wraps.

It is our typical pattern in prior years look actually give out both numbers if it became a little bit confusing.

And also given the push that we've had toward agency sales as well.

I'll tell you is that the CFS is similar to prior year or a little less than one CSS to two one senior quota carrying reps and then and then as I said, we're also bringing on additional.

Of agents that are helping to increase the productivity that we've seen.

On average.

Our activity increase of 32%.

Past 12 months, if you compare it to the prior year.

And it does show that we can really grow.

The territory.

Productivity in 2021, it was less than $1 million.

Last year. It was around 1.2 and now we're at $1 $4 million and those quota carrying reps are supported by the CFS is that you asked about and then also the addition of agents who have been particularly helpful with brand of cases.

Yes.

Okay.

Mr Rose.

Yes, Thats all for me Thank you Brett.

Taking the questions.

Thank you.

And one moment please for our next question.

Okay.

Our next question will come from the line of Samuel for dusky boost.

Boost securities Your line is open.

Hi, Thanks for taking the questions just the first one and thanks for the color around that.

Certain dynamics to start.

Right.

With the with the new torque approach should we think about a steady cadence of new competitive surgeon conversion through the second half or is that more of a onetime thing and how should we think about what's contemplated in guidance in terms of new surgeon acquisition.

In terms of new surgeon.

It's not just the posterolateral trajectory. The tour, we're really focused as we have been over the last several years through education and engagement to continue to grow that number.

And it's really critical for us as we think about the long term outlook for the business.

Our expectation is to have that low to mid teens growth in the fourth quarter of 2023 compared to the fourth quarter of 2022, which as you may recall town has a pretty high watermark.

Start with at the end of last year. So you feel very good about that the other piece. That's also equally important for us is.

Continuing to focus on growing certain overlap Laura talked about the multiple modalities of treatment types that we're engaging surgeons bad.

We've had a lot of success there, but we've seen.

A 30% growth in this quarter and active surgeon base, but our procedures performed for surgeons sort of stayed flat. So you actually had surgeons moving up the volume scale as well that have been doing a procedure for a while so both of those metrics are pointing in the right direction for us.

Great that's really helpful and I appreciate the color you've given on the assumptions around price.

For the second half, but just with the with the granite wash going so well does that.

You are more positive outlook on how you think about price per procedure evolving through 2024 and beyond.

Yes.

Yes, Sam on the on the ESP side.

We're really encouraged by the ASP trends specifically in the first half you.

Having had two consecutive quarters of year over year ASP improvement.

And it's driven by two things right. The first one is the granite volume that Laura talked about where we've seen Serbian specifically those that do adult deformity procedures using more than two <unk>.

Points of fixation, so more than two of Si bone implants in the procedures.

And to some extent we are also seeing a bit more moderated decline in ASP within the minimally invasive Si joint fusion business, even though we've continued to see a move to ASC and.

Historically that decline has been in the mid single digit at the ASC side of service, but with the increase in the fees are in the start of 2023. The team has actually done a great job in working where they are and in several cases being successful in maintaining that pricing.

On those contracts, but we also want to acknowledge it's been only two quarters right and while we feel good about some of the reimbursement Peel away.

The procedure product mix, we just want to be thoughtful in our or not.

Incorporating that upside in the back half of the year or.

It's too premature to talk 2024.

Yeah.

Okay.

Thank you.

One moment please for our next question.

Yeah.

Okay.

Our next question will come from drew Ranieri of Morgan Stanley . Your line is open.

Hi, Laura Thanks for taking the questions just maybe first on on Opex for for onshore.

You've done a good job year to date Leverages coming more of an important part of the story.

Adjusted cash flow and EBITDA.

EBITDA breakeven.

Okay.

<unk>.

Thanks drew for the question in terms of the operating leverage we're really pleased with the trajectory that we've demonstrated in operating leverage it's been pretty linear to our top line growth.

We will continue to see operating leverage, albeit the year over year comps do become a bit tougher you are seeing that in last year as well, but we feel good about that and we're.

We're not going to be giving out guidance on when we believe we'll get to breakeven from an adjusted EBITDAR a cash flow perspective, but if you look at the trajectory that we've been on.

And extrapolate where revenue has been and is potentially going to go.

When we provide 2020 for guidance and beyond.

We'll be able to share more.

Okay.

Fair enough.

Second on just the credit instrument trays I understand that you're continuing to roll this out and part.

Part of the recent raise was to kind of build up the inventory here, but for the centers that you're in today can you maybe just talk to us about what you're seeing in terms of utilization or productivity you kind of hinted at some details, but any more clarity around what youre seeing kind of the early days of these accounts would be great. Thank you.

Thanks Jerry.

Granted trade the granite launch really has been a.

Trying to supply in order to meet demand.

And I talked in my prepared remarks about the efforts of our team in order to hit the results that we've had and this is.

A particular area that I would say that the people have gone above and beyond here. So our operations team trying to supply the implants that are needed. The trades that are needed and then the people in the field trying to utilize the trades that they have and it has not been unusual.

All for our sales reps to have to drive hours in order to retrieve trades and actually go to another site and so what we think we are doing here and there.

The second quarter and third quarter is making sure that we have the inventory that we need.

Ashley for granted as well as the trade that we really need, particularly going into the seasonally high volume fourth quarter, that's coming here and we feel very confident that we're in that position, but it really has been around 12 months of our.

A lot of work in order to to make sure to do need to meet the demands that our surgeons are providing.

Got it appreciate the color. Thank you.

Thank you.

And one moment please for our next question.

Okay.

Yes.

Next question will come from the line of David Saxon of Needham and company. Your line is open.

Hello. This is Joseph on for David.

Maybe a high level question.

At 2024.

Marshall I know you said it was maybe a little early to comment on it but maybe some high level details you'll be facing much more difficult comps.

In 2024, but you're also be farther along with the granting of torque rollouts.

And the assumption that you have the shorter concert granted launched they're going well.

Just wanted to hear how you guys are feeling about sustaining that 20 plus growth even as you start lapping those tougher comps.

Yes, Joseph Thanks for the thanks for the question and look.

I think our execution over the last several quarters gives us a lot of confidence in.

The underlying momentum in the business.

The foundation of which is both on our differentiated portfolio, which as you as you highlighted is that the next.

Family of <unk> products that will launch next year.

Favorable reimbursement both within the Si joint fusion side of the business as well as the impact on granite and just the improving operating leverage right. So we're set up really well and we do believe we are in the early innings of delivering on our long term growth strategy that we've laid out over the last couple of years.

And have all the ingredients in place.

To deliver strong and sustainable as well as fiscally responsible growth.

But that said, we don't want to get ahead of ourselves.

I want to make sure we can capitalize and deliver what we believe will be a strong second half before we talk about 2024 so.

So early for me to give you numbers on 2024 at this point, but.

We're doing everything possible to deliver on a strong second half.

And feel good about that.

Okay, Okay, great fair enough.

Maybe could we get an update on your on the marketing strategy.

You've had the DTC campaign here out for a couple of years now.

You know maybe if you could talk relatively wanted to hear you guys are feeling about consumer where awareness now kind of relative to when you started those activities.

Yeah I'm happy to take that question is is the digital marketing activities have been a focal point for US we are trying to generate.

Additional knowledge with patience F&I joint dysfunction, Indeed generation, we've been quite successful in doing that whether it's bringing patients to the web site.

Cleaning, our pain survey or using our find a doctor functionality in order to be referred to one of our surgeons, we've been quite successful in using search as well as social media in order to drive patient.

To a better understanding of this particular condition now what we're really doing is we're starting to focus a little bit on a little lower in the funnel and so for those patients who are actually had an interest in finding a doctor to help to further facilitate that process as well so our.

Marketing strategy is evolving here as we continue to.

To develop our digital marketing strategy.

Okay. Thank you very much for taking our questions.

Thank you Keith.

Thank you.

Yeah.

Yes.

Okay.

And I'm seeing no further questions in the queue.

I'd now like to turn the conference back to MS. Laura Francis.

Closing remarks.

Thanks all.

For joining the call today are year to date performance and the favorable demand trends. They bolster my conviction and a strong second half performance as well as our long term outlook for the business and I'm confident that we have all the elements in place to deliver a strong and sustainable long term growth.

And progress towards profitability. So thanks for your time today Goodbye.

This concludes today's conference call. Thank you all for participating you may now disconnect and have a pleasant day.

Q2 2023 SI-BONE Inc Earnings Call

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SI-Bone

Earnings