Q2 2023 Tenon Medical Inc Earnings Call
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Greetings and welcome to the tenant medical second quarter, 2023 financial results and corporate update conference call.
As a reminder, this call is being recorded your host today are Steve Foster Chief Executive Officer, and President and Steve <unk>, Chief Financial Officer, Mr. Foster and Mr. Van <unk> will present the results of operations for the second quarter ended June 30th two.
<unk> 23, and provide a corporate update.
A press release detailing these results was released today and it's available on the Investor Relations section of our company's website www.
W Dot tendon med dotcom.
Before we begin the formal presentation I would like to remind everyone that statements made on the call and webcast may include predictions estimates and other information that might be considered forward looking and while these forward looking statements represent our current judgment on what the future holds they are subject to risks and uncertainties that could cause.
Actual results could differ materially you are cautioned not to place undue reliance on these forward looking statements, which reflect our opinions only as of the date of this presentation.
Please keep in mind that we are not obliging ourselves to revise or publicly release the results of any revision to these forward looking statements in light of new information or future events.
Throughout today's discussion we will attempt to present some important factors relating to our business that may affect our predictions.
For more a more complete discussion of these factors and other risk you should review our prospect that's dated April 'twenty six 2022 particularly under the heading risk factors, which is on file with the Securities and Exchange Commission at Www Dot S E C.
Dot Goss.
At this time I'll turn the call over to Tenet Medical Chief Executive Officer, Steve Foster. Please go ahead Sir.
Thank you Marilyn and good afternoon, everyone.
Pleased to welcome you to today's second quarter 2023 financial results and corporate update conference call for 10 on medical.
Over the course of our record second quarter, we achieved 743000 in revenue representing a triple digit rates of 450% year over year and 72% sequentially from the first quarter.
We're fully fully commercialized catamaran system designed to deliver refined suitable option for patients with chronic sacroiliac joint pain or degenerative see colitis, but failed conservative here is rapidly gaining momentum and increasing surgical procedures.
We marked an important milestone in the second quarter with gross profit and gross margin turning positive at $194000 and 26% respectively.
Our positive second quarter reflects a focus on building, our commercial infrastructure and sales management team.
We continue to target physicians, who have been trained on Si procedures or have significant experience with our XI surgical technologies by facilitating an aggressive local workshop training program.
We are showcasing our unique solution through a wide variety of channels conferences and hands on workshops, which include a combination of our local synthetic model and kind of Eric lab workshops to train physicians on the catamaran system.
This is proven to be a timely and efficient process for our physician customers.
All of these critical activities are designed to drive acceleration in the number of procedures completed with the catamaran system.
Confirming our approach during the second quarter, our surgical procedures increased 469% compared to the year ago quarter.
To reach our sales teams, we continue to execute execute our go to market strategy during the second quarter, posting 43 positions in catamaran workshops.
These sessions are designed to highlight the effectiveness and ease of use of our product as well as how the inferior post your approach to.
To the optimized pathway and the anatomy.
This distinct implant system addresses a significant unmet market opportunity and is designed to produce broad demonstrable advantages over market competitors.
Building on the momentum of the second quarter, we expect the number of surgical procedures to continue to grow as our sales team broadens, our aggressive marketing promotion and workshops, featuring the catamaran system.
In Q3, representing our continued commitment to ongoing innovation.
We will initiate a limited release of our newly refined system to deliver catamaran starting in September 2023.
These enhanced tools promise to deliver upgraded graft handling smaller access profile and enhanced access stabilization.
The upgrades will assist our market application expansion into SRT revision surgery.
Adjunct multi level fusion and aesthetic procedures utilizing navigation software and imaging.
With that I'll turn it over to Mr. Van <unk>, our chief financial officer to discuss our financials.
Okay.
Thank you Steve.
I will give us the sink review of our financial results. Our full breakdown is available in our press release that crossed the wire this afternoon.
Our second quarter revenue was 743000, an increase of 450, 350% compared to a $135000 in the comparable year ago period.
Revenue for the first six months of this year was $1 2 million.
An increase of 471% compared to $206000.
In the same period last year.
The increase in revenue for the three and six months of this year as compared to the same periods. In 2022 was primarily due to increases of 469%.
And 476% respectively in the number of surgical procedures in which they can bring system was used.
Gross profit in the second quarter of this year was $194000 or 26% of revenue.
Compared to a gross loss of $136000 or a negative.
101% of revenue.
In the comparable year ago period.
For the first six months of this year gross profit was $147000 or 13% of revenue compared to a gross loss of $340000 or a negative 165% of revenue for the first six months of 2022.
Gross margin percent improved due to higher revenue associated with the increase in the number of surgical procedures.
Operating losses totaled $4 3 million for our second quarter compared to a loss of $5 5 million in the second quarter of 2022.
The decrease in operating expenses are a result of the arbitration settlement and other consulting expenses in Q2.
Of 2022, offset by an increase in stock based compensation increases in sales and marketing and general expenses.
For the first six months of this year operating losses totaled $9 $2 million compared to $7 $5 million in the prior year period.
The increase in operating expenses were a result of an increase in stock based compensation.
Creases in sales and marketing and general expenses as the company builds a sales function and infrastructure to support future growth.
Net loss for the net loss was four 3 million in our second quarter compared to a loss of $5 5 million in the same period of 2022.
For the first six months of this year net loss was four point.
It was $9 1 million compared to $7 8 million in the previous year period.
The company expects to incur additional losses in the future.
As of June 32023, cash and cash equivalents and short term investments totaled $6 3 million as.
As compared to $8 6 million in December 31, 2022.
I'll now turn the call back to Steve for his closing thoughts.
Thank you Steve.
The accelerating pace of catamaran procedures, we're very optimistic for continued growth and the commercialization of our proprietary FDA cleared surgical implant system.
The second quarter with strong revenue gains and a positive gross margin and believe we can continue on this growth trajectory with our expanding commercial infrastructure in season sales management team.
Looking ahead, the revenue growth combined with our recent capital raise positions us appropriately to further accelerate our momentum in the second half of the year.
We continue to reinforce our commitment to validating and differentiated patient outcomes and radiographic assessments with ongoing post market clinical studies and expect to expand the application of our distinct product offering to address that Si revision surgery adjunct multi level fusion MSI procedures utilizing.
<unk> navigation software and imaging.
We look forward to additional updates in the months to come as we continue to expand our sales infrastructure and execute on our growth objectives objectives to deliver long term value to our shareholders.
Thank you everyone for attending and I would like to hand, the call over to the operator to begin our question and answer session.
Madam.
Thank you we will now begin our question and answer session with covering analysts.
You would like to ask a question. Please press star one on your telephone keypad now you will be placed into the queue in the order received.
Be prepared to ask your question when prompted once again, if you have a question. Please press star one on your phone now.
Our first question comes from Bruce Jackson with the benchmark company.
You May now ask your question.
Hi, good afternoon, and thank you for taking my questions.
First off congrats on achieving gross profit positivity.
The number of doctors trained in the quarter of 43 up sequentially is that something that you can do you can you continue to increase the number of doctors trained next quarter.
Yes, Hi, Bruce This is Steve. Thank you for the congrats on the question.
We believe we can continue to expand that number.
As our sales team gets comfortable trained up to speed et cetera, and frankly as they broaden their activities. All of this feeds on itself and I do anticipate that number to continue to expand and grow.
Okay, and then are you still happy with the synthetic training model is that helping you at all.
Very much so look.
The physicians are extraordinarily busy.
Degree to which we can bring a workshop session to them.
Make it very convenient do it in an evening, nor or over a weekend or what have you really pays dividends.
It keeps them from having to jump on a plane and go someplace et cetera.
So we are leveraging this synthetic modeled into local programs to bring faculty and virtual lead to talk through with the physicians about their there.
Their experience with the technology and what have you and it seems to be extremely well received and quite honestly, Bruce let's us move more quickly.
Getting a trip planned for position takes time.
They're tough schedules, bringing it to them lets us move very quickly when they are ready to to be exposed to the system.
Okay, that's great.
Then in terms of the physicians that you have trained them.
We have performed the procedure.
How how well are they.
How do they repeating the procedures.
It's something where they have been trained and then they get comfortable with it and then they start.
Performing the procedures and routine fashion.
Indeed sugar.
These early stages of course, we're looking to looking to see if our technology is sticky.
That if people get trained and exposed to the technology do they did they adopt and do they stick with it and keep rolling and we're really happy with what we see on that front.
The technology is proving to be a reproducible.
Over and over again and that goes to this included post your approach that we've talked a little bit about Bruce.
Several occasions.
I want to really stress. This is a unique way of getting at this anatomy different from any other competitor that we have we believe that approach will prove to be.
A more efficient reproducible pathway that stays away from neuro and vascular structures and gives us a physician that comfort that they can get where they need to be and get the job done.
Of course, we're early we launched this technology just a couple of quarters ago. So we're early in the process, but what we're seeing is that is that is coming to fruition and it makes us really encouraged as we as we expose physicians of the technology, We watch the reaction and we watch how quickly they come back in.
<unk> and <unk>.
Reproducible use the technology to serve their patients so really encouraged with what we're seeing.
Thank you.
Then.
Last topic is the new delivery system, so Medicaid like.
Tell us a little bit about how much a difference from the current delivery system and are the the doctors for trained on the current.
System can they pick up the new system fairly easily.
Yes.
Thanks for thanks for the question, we do believe.
That well, let me back up first and foremost medical devices about constant iteration.
And improvements you hear from your physician customers, if you're smart enough to listen carefully.
You can really improve.
The way the technology tools in their hands the sequence of instrumentation things of that nature.
We're exceptionally focused on that as a small organization, we want to risk.
Respond very quickly to those types of feedback and that's what we've done here I talked about graft handling. This is just when we drilled the two holes.
Harvest that the patients own bone and pack, our implant with patent graph.
Handling that graph can be a bit TBS et cetera, we believe we've come up with some great ideas to make that process faster more efficient frankly more gratifying for the staff.
The physician alike.
The access profile. This is the access sleeve through which we put in the implant.
The shrinking pretty dramatically approximately 40%.
Of course every physician wants to do is a little soft tissue disruption as humanly possible, but yet still get the job done effectively.
So that's what that's all about.
Believe through this alpha that we call it that.
Sort of test period.
We can prove out that that we're reducing the size of that access requirements.
<unk> size pretty dramatically.
And then third you always want the entire procedure to be satisfying for the physician want things to be stable.
<unk> is easy for the nurses to support things of that nature and so we've taken a number of steps to continue that refinement process you.
Asked about access such exactly right, we've been quite aggressive.
With how we put this alpha together it will be somewhat limited in September just to make sure everything we've done is delivering on its promises.
And that our physician advisors are satisfied and none were in a position to make the technology available rather aggressively to our physician users and it just involves a small add on trade to our existing base tray.
Procedures, so it's relatively straightforward for them to have access to the technology.
Okay, great. Thanks, I have one more question.
Financial question is.
Is the income statement profile third quarter can look like.
Like the first quarter of the second quarter of this year, you had a little bit of a downtick in the.
The SG&A line, so second to come back up with the increased activity or is that like the level. This quarter is that the level that you would expect going forward.
Yes, Bruce Thanks for that I think I think you can go find it somewhere in between I think the SG&A of course is going to go up with higher revenues due to the commission structure.
But the R&D and <unk>.
General and administrative or G&A cost.
<unk> should remain relatively flat.
Q2 to Q3, except or we may see some increase.
In the stock compensation.
Yes.
Stock based compensation line.
Okay.
Great. That's that's all I've got thank you very much.
Thank you Bruce.
At this time I would just like to remind you. If you would like to ask a question. Please press star one on your keypad now.
At this time. It appears there are no further questions I would now like to turn the call back over to Mr. Foster for his closing remarks.
Thank you Madeleine so I'd like to thank each of you for joining our earnings conference call today and look forward to continuing to update you on our ongoing progress in growth.
If we were unable to answer any of your questions. Please reach out to our IR firm MZ group, who will be more than happy to assist.
With that I wish everyone a good day.
This concludes today's conference. Thank you for attending have a pleasant evening.
The host has ended this call good.