Q3 2023 AxoGen Inc Earnings Call
Speaker 1: Greetings. Welcome to AxoGen Report's third quarter 2023 Financial Results.
Greetings welcome to Axa Gen reports third quarter 2023 financial results.
Speaker 1: At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation.
At this time all participants are in listen only mode. A question and answer session will follow the formal presentation.
Speaker 1: If anyone should require operating assistance during the conference, please press star zero on your telephone keypad. Please note this activated dialogue should be recorded on the Associate Director lucky is000.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note this conference is being recorded.
Speaker 1: I will now turn the conference over to Adana Alexander, investor relations consultant. Adana, you may now begin.
I will now turn the conference over to Dana Alexander Investor Relations consultant Donna you may now begin.
Speaker 2: Thanks, Rob. Good morning, everyone. Joining me on today's call is Karen Zadaray, Accident Chairman, Chief Executive Officer and President, and Pete Mariani, Executive Vice President and Chief Financial Officer.
Robin good morning, everyone.
With me on today's call is Karen battery accidents, Chairman, Chief Executive Officer, and President and Pete Mariani, Executive Vice President and Chief Financial Officer.
Speaker 2: Karen will discuss the quarter and our outlook for the year, and Pete will provide an analysis of our financial performance and guidance, followed by a question and answer session.
Karen will discuss the quarter and our outlook for the year and Pizza will provide an analysis of our financials financial performance and guidance followed by a question and answer session.
Speaker 2: Today's call is being broadcast live via webcast, which is available on the investors section of Axigen's website.
Today's call is being broadcast live via webcast, which is available on the investors section of oxygen website.
Speaker 2: Following the end of the live call, a replay will be available in the investors section of the company's website at www.axigeninc.com.
Following the end of the live call a replay will be available in the investors section of the company's website at Www dot.
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Speaker 2: Before we get started, I'd like to remind you that during this conference call, the company will make projections and follow looking statements including.
Before we get started I'd like to remind you that during this conference call. The company will make projections and forward looking statements including.
Speaker 2: Our expectations regarding our ability to expand our footprint and expand core accounts and dissipated growth.
Our expectations regarding our ability to expand our footprint and expand courthouse anticipated growth for revenue categories penetration of core accounts marketing opportunities with nerve applications associated with immersion trauma breast.
Speaker 2: for revenue categories, penetration of core accounts, marketing opportunities with nerve applications associated with immersion, trauma, breath, OMF and surgical treatment of pain, and new products. Our expectations regarding the timing of your launch for a vibe plus.
And the surgical treatment of pain, and new products, our expectations regarding the timing of a launch for a five plus.
Speaker 2: our expectations regarding our ability to make a rolling biologics license application submission for advanced nerve grafts, and the timing of the BLA submission for approval.
Our expectations regarding our ability to make it rolling biologics license application submission for advanced nerve graft and the timing of the BLA submission for approval I believe that our balance sheet will continue to be sufficient to bridge through to cash flow breakeven and longer term profitability. Our expectation that we will continue trending to watch cash flow.
Speaker 2: our belief that our balance sheet will continue to be sufficient to bridge through to cash flow break even and longer term profitability. Our expectations that we will continue trending towards cash flow break even and our belief that trends towards operating leverage will continue will allow us to maintain a strong balance sheet position and provide ample support as we work towards profitability.
Breakeven and I believe that trends to watch the operating leverage will continue will allow us to maintain a strong balance sheet position and provides ample support as we work towards profitability.
Speaker 2: Our 2023 financial guidance, including revenue range and gross margin, optimism associated with the adoption of our new products. Key strategic pillars and our balance sheets.
Our 2023 financial guidance, including revenue range and gross margin optimism associated with the adoption of our new products key strategic pillars, and our balance sheet.
Speaker 2: Power-looking statements are based on current beliefs and assumptions and are not guarantees of future performance and are subject to risk and uncertainties. Including, not without limitation, the risk and uncertainties reflected in the company's annual and periodic reports such as hostile staffing issues, regulatory process and approval.
Forward looking statements are based on our current beliefs and assumptions and are not guarantees of future performance and are subject to risks and uncertainties, including.
Without limitation, the risks and uncertainties reflected in the company's annual and periodic reports such as hospital staffing issues regulatory process and approvals.
Speaker 2: surgeon and product adoption, and market awareness of our products. The forward-looking statements are representative only as of the date they are made and except as required by applicable law, we assume no responsibility to publicly update or revise any forward-looking statements.
On product adoption and market awareness of our products. The forward looking statements are representative only as of the day. They are made and except as required by applicable law, we assume no responsibility to publicly update or revise any forward looking statements.
In addition.
Speaker 2: For a reconciliation of non-GAAP measures, please reference today's press release and our corporate presentation on the investors section of the company's website. Now, I would like to turn the call over to Karen. Karen?
For a reconciliation of non-GAAP measures. Please reference today's press release and our corporate presentation on the investors section of the company's website now I would like to turn the call over to Karen Karen.
Speaker 3: Thank you, Donna. And thank you all for joining us today as we discussed our third quarter 2023 financial results.
Thank you Donna.
And thank you all for joining us today as we discuss our third quarter 2023 financial results.
Speaker 3: We're pleased with the quarter led by revenue of $41.3 million, representing 12% growth year over year.
We're pleased with the quarter led by revenue of $41 3 million, representing 12% growth year over year.
Speaker 3: Our performance for select improvement and emergent trauma, as well as continuous strength and schedule.
Our performance reflects improvement in emergent trauma as well as continued strength in scheduled procedures.
Speaker 3: This improvement was the result of stabilization in the hospital operating environment and improved commercial execution.
This improvement was the result of stabilization in the hospital operating environment and improved commercial execution.
Speaker 3: As you may recall, last quarter we began reporting estimated revenue and growth across two primary procedure categories, emergency trauma and partners as we
As you May recall last quarter, we began reporting estimated revenue growth across two primary procedure category emerges trauma and scheduled procedures.
Speaker 3: These estimates are based on available data received from hospitals and sales reps and assumptions regarding specific surgeon practice and account
These estimates are based on available data received from hospitals and sales right.
And assumptions regarding specific surgeon practice and account information.
Speaker 3: And as such, are subject to the limitations of the data received and are assumptionable.
And as such are subject to the limitations of the data received and our assumption.
Speaker 3: During the quarter, we estimate that emerging trauma procedures represented the price plate 50% of revenue and grew in the mid-single digit percent range versus the prior year.
During the quarter, we estimate that emergent trauma procedures represented approximately 50% of revenue and grew in the mid single digit percent range versus the prior year.
Speaker 3: As a reminder, emergent trauma generally results from injuries that initially present in an ER. These procedures are typically referred to and are completed by a specialist either immediately or within a few days following the initial injury.
As a reminder, emergent trauma generally resolved from injuries that initially presented in an E. R. These procedures are typically referred to and our completed by a specialist either immediately or within a few days following the initial injury.
Speaker 3: During the quarter, we began to see stabilization of staffing and procedure scheduling in hospital compared to the first half of 2023.
During the quarter, we began to see stabilization of staffing and procedures scheduling and hospital compared to the first half of 2023.
Speaker 3: Although we continue to see growth of certain routine procedures in lower cost settings, such as ASCs,
Although we continue to see growth of certain routine procedures and lower cost setting such as a S. C.
Speaker 3: Access to these procedures within hospitals also improved in the third quarter compared to the first half of the year.
Access to these procedures within hospitals also improved in the third quarter compared to the first half of the year.
Speaker 3: As the procedures also represent approximately half of total revenue.
Canceled procedures also represent approximately half of total revenue.
Speaker 3: During the quarter, we estimate that this category grew approximately 20% versus the prior year.
During the quarter, we estimate that this category grew approximately 20% versus the prior year.
Speaker 3: As a reminder, scheduled procedures are generally characterized as procedures where a patient is seeking relief of a nerve condition caused by a nerve defect or surgical procedure.
As a reminder, scheduled procedures are generally characterized as procedures, where patients are seeking relief of a nerve condition caused by nerve defect or surgical procedure.
Speaker 3: These include breast reconstruction following a mastectomy, nerve reconstruction following the surgical removal of a painful neuroma, and oral and maxillofacial procedures such as mandible reconstruction and nerve decompression.
These include breast reconstruction following a mastectomy.
Nerve reconstruction following the surgical removal of a painful neuroma and oral and maxillofacial procedures, such as the mandible reconstruction and nerve decompression.
Speaker 3: The growth in this category is reflective of the opportunity to provide improved quality of life outcomes for patients.
The growth in this category is reflective of the opportunity to provide improved quality of life outcomes for patients.
Speaker 3: We have built this success with compelling solutions backed by clinical data and supported by surgeon education and effective patient activation programs that educate patients and connect them with trained surgeons.
We have built the success with compelling solutions backed by clinical data and supported by surgeon education, and effective patient activation programs that educate patients and connect them with trained surgeons.
Speaker 3: Our growth strategy continues to be focused on going deeper into core accounts, where we believe there's tremendous opportunity to expand our foot.
Our growth strategy continues to be focused on going deeper into core accounts, where we believe there's tremendous opportunity to expand our footprint.
Speaker 3: Core accounts are defined as those with greater than $100,000 in revenue in the trailing 12 month.
Core accounts are defined as those with greater than $100000 in revenue in the trailing 12 months.
During the quarter core accounts totaled 372 and.
Speaker 3: During the quarter, Core Accounts totaled 372, an increase of 12% over the prior year of 331, and an increase of 7% sequentially.
An increase of 12% over the prior year of 331, and an increase of 7% sequentially.
Speaker 3: Revenues from Core Counts now represent approximately 65% of total revenues, up from 60% in prior quarters, demonstrating the strength of our commercial execution and abilities to gain deeper, certain adoption and expanded use cases of our products.
Revenues from core accounts now represent approximately 65% of total revenues up from 60% in prior quarters, demonstrating the strength of our commercial execution and ability to gain deeper surgeon adoption and expanded use cases of our products.
Speaker 3: We ended the third quarter with 116 direct sales representatives, up one from the end of the second quarter and five from a year ago.
We ended the third quarter was 116 direct sales representatives up one from the end of the second quarter and five from a year ago.
Speaker 3: We believe our revenue growth can continue to be driven primarily by increased productivity of our sales force. And we will evaluate and add additional sales reps as their territory to approach targeted reason for us,counting factor ?
We believe our revenue growth continues to be driven primarily by increased productivity of our sales force and will act and we will evaluate and add additional sales reps as their territories approach targeted levels.
Our direct sales force is supplemented by independent sales agencies that represent approximately 10% of our total revenue.
Speaker 3: Our direct sales force is supplemented by independent sales agencies that represent approximately 10% of our total revenue.
Speaker 3: Earlier in the year, we were pleased to provide an update on our key strategic pillar of product and procedure innovation.
Earlier in the year, we were pleased to provide an update on our key strategic pillar.
<unk> and procedure innovation and we expect this will continue to be a driver of long term growth.
Speaker 3: And we expect this will continue to be a driver of long term growth.
Speaker 3: As a summary, we announced three specific innovations across our offering, including an expansion of our recentization technique for women who choose an implant-based reconstruction.
Summary, we announced three specific innovations across our offering including an expansion of our recent patient technique for women, who choose an implant based reconstruction.
Speaker 3: which we believe could apply to an additional 10 to 15% of all breast reconstruction patients.
Which we believe could apply to an additional 10% to 15% of all breast reconstruction patients.
Speaker 3: We had initially set a goal of training 20 additional surgical teams by year-end.
We had initially set a goal of training 20 additional surgical teams by year end.
Speaker 3: But now expect to have more than 30 new teams trained and performing procedures. And we will continue to train additional teams in early 2024.
But now expect to have more than 30, new teams trained and performing procedures and we will continue to train additional teams in early 2024.
Speaker 3: We also announced innovation in our nerve protection portfolio.
We also announced innovation at our nerve protection portfolio.
Speaker 3: The category of nerve protection represents approximately 800 million of the overall nerve repair market and covers a wide range of injuries and defects.
The category of nerve protection represents approximately $800 million of the overall nerve repair market and covers a wide range of injuries and defect.
Speaker 3: including carpal and cubital tunnel syndromes, crush injuries, and other non-transfected traumatic nerve injuries.
Including Carpool, and Cubital tunnel syndrome crush injuries and other non transfected traumatic nerve injuries.
We believe that the diversity of these injury types in their anatomical location presents some unique challenges.
Speaker 3: We believe that the diversity of these endary types in their anatomical locations present some unique challenges.
Speaker 3: Optimizing outcomes for these patients requires a targeted portfolio solution to adequately address the specific aspects of both the injury and healing process.
Optimizing outcomes for these patients requires a targeted portfolio of solutions to adequately address the specific aspects of both the injury and healing process.
Speaker 3: Following a successful pilot release, we're happy to announce that in August we had a national launch for the first of these new products. AXIGARG, ATA Plus, NERF Protect.
Following a successful pilot release, we're happy to announce that in August we had a national launch for the first of these new products Axa Guard H E plus nerve protector.
We're very pleased with the initial surgeon engagement and feedback as they began to integrate <unk> date, Boston did their nerve protection algorithm, we're confident that Axa guard H J, plus we'll expand the adoption of nerve protection product and will help more patients with nerve injuries.
Speaker 3: We're very pleased with the initial surgeon engagement and feedback. As they began to integrate Axigard HA plus into their nerve protection algorithm, we're confident that Axigard HA plus will expand the adoption of nerve protection products and will help more patient with nerve injuries.
Additionally, we're continuing the development of a resorbable nerve protection product that functions as a barrier, providing temporary protection and tissue separation during the critical phase of healing for nerve injuries.
Speaker 3: Additionally, we're continuing the development of a resorbable nerve protection product that functions as a barrier, providing temporary protection and tissue separation during the critical phase of healing to nerve injuries.
Speaker 3: This new product will be branded a Vive Plus Soft Tissue Matrix and will be regulated as a Section 361 tissue product.
This new product will be branded Avaya, plus soft tissue matrix.
And we will be regulated as the section 361 tissue product.
Speaker 3: We expect the Vibe Plus will further strengthen our position in nerve protection, supporting emergent trauma and the surgical treatment of pain.
We expect to buy plus will further strengthen our position in nerve protection.
Porting emergent trauma and the surgeon surgical treatment of pain.
Speaker 3: We remain on track to launch this product in Q1 2024.
We remain on track to launch this product in Q1 2024.
Moving on to updates and our growing body of clinical evidence.
Speaker 3: Over the years, we've made significant investments to develop quality clinical evidence to demonstrate the safety, performance, economics, and utility of our nerve repair solutions.
Over the years, we've made significant investments to develop quality clinical evidence to demonstrate the safety performance economics and utility of our nerve repair solution.
Speaker 3: Our active clinical programs are progressing as expected.
Our active clinical programs are progressing as expected.
Speaker 3: As of the end of the quarter, we have over 200 peer-reviewed publications across trauma, breast, o-Map and pain.
As of the end of the quarter, we have over 200 peer reviewed publications across trauma breast Oh I'm up in pain.
In the quarter. The Recon study was published online in the journal of hand surgery and was recently presented in the 78th annual American Society for surgery of the hand conference.
Speaker 3: In the court of the recon study was published online in the Journal of Hand Surgery and was recently presented in the 78th Annual American Society for Surgery at the Hand Con.
Speaker 3: Both events included the author's analysis of the results, which now meant advance return to greater degree of functional recovery than conduits, and superiority was demonstrated as gaps linked in.
Both events included the authors analysis of the result, which found that advanced returned to a greater degree of functional recoveries in conduit and superiority was demonstrated as GAAP linked to increased.
Speaker 3: We're excited to see the addition of this level one evidence supporting the efficacy of advanced nerve grafts in published literature and being discussed by...
We're excited to see the addition of this level one evidence supporting the efficacy of advanced nerve graft and published literature and being discussed by surgeon.
Speaker 3: This data was supplemented by the findings in the meta-analysis and premier all payer publications.
This data was supplemented by the findings in the meta analysis and Premier all payer publications.
Speaker 3: These publications demonstrated that alligraft and autographed sensory and motor outcomes, as well as procedure costs were comparable.
Publications, demonstrating the allograft and autograph sensory and motor outcomes as well as procedure costs were comparable.
Speaker 3: Notably, the Alligrap group reduced OR times and reduced patient morbidity as compared to autographed.
Notably the Allograph group reduced Oh, our time and reduced patient morbidity as compared to autograph.
Speaker 3: We believe that these publications will continue to play an important role in surgeon clinical decision making, especially with middle adopter surgeons.
We believe that these publications will continue to play an important role in certain clinical decision, making especially with middle of Doctor Surgeons.
Turning to our new production facility and our BLA for advanced nerve graft.
Speaker 3: Turning to our new production facility and our BLA for a mass nerve graft.
Speaker 3: During the third quarter, we began processing Tishu in the new State-of-the-art APC facility, which provides for up to three times our current capacity and was designed for long-term growth and
During the third quarter, we began processing tissue in the new state of the art APC facility, which provides for up to three times. Our current capacity and was designed for long term growth and expansion.
Speaker 3: This represents a key milestone in preparation for our BLA submission.
This represents a key milestone in preparation for our BLA submission.
We continue to anticipate a pre BLA meeting with the FDA in early first quarter 2024, where we will request a utilization of a rolling submission process.
Speaker 3: We continue to anticipate a pre-BLA meeting with the FDA in early first quarter, 2024, where we will request utilization of a rolling submission process.
Speaker 3: We plan to begin filing the modules in the first quarter and complete the submission in the second quarter. We believe this process will support BLA approval in the first half of 2025.
We plan to begin filing the modules in the first quarter and complete the submission in the second quarter.
We believe this process will support BLA approval in the first half of 2025.
As a reminder, our BLA approval, we will complete the regulatory transition of advanced nerve graft from a 361 tissue based products for 351 biological products and importantly leave advance would be designated as the reference product for potential biosimilars, providing 12 years of market exclusivity.
Speaker 3: As a reminder, a BLA approval will complete the regulatory transition of advanced neurographs from a 361 tissue-based product to a 351 biological product. And importantly, we believe advanced would be designated as the reference product for potential biosimilars, providing 12 years of market exclusivity.
Speaker 3: Looking ahead, we remain focused on executing our strategic initiatives anchored in the strength of our clinical data, innovation, market development, and commercial execution to continue to drive surgeon adoption and growth. Importantly, we're also delivering operating leverage across the business and believe our balance sheet will continue to be sufficient as we bridge through to cash flow breakeven and longer-term profitability.
Looking ahead, we remain focused on executing our strategic initiatives anchored in the strength of our clinical data innovation market development and commercial execution.
To drive surgeon adoption and growth.
Importantly, we're also delivering operating leverage across the business and believe our balance sheet will continue to be sufficient as we bridge through to cash flow breakeven and longer term profitability.
Speaker 3: Now I will turn the call over to Pete to provide a review of our financial highlights and guidance.
Now I will turn the call over to Pete to provide a review of our financial highlights and guidance Pete.
Speaker 4: Thank you, Karen. Revenue for the quarter was $41.3 million, representing a 12% increase compared to the third quarter of 2022.
Thank you Karen revenue for the quarter was $41 $3 million, representing a 12% increase compared to the third quarter of 2022.
Speaker 4: Growth was primarily driven by an increase in unit volume of 8% and a 3.5% increase in
Growth was primarily driven by an increase in unit volume of 8% and a three 5% increase in price.
Speaker 4: We estimate that revenue from emergent trauma represented about half our total revenue and grew in the mid-single-digit range versus last year, while scheduled procedures also represented about half of total revenue and grew approximately 20% year-over-year.
We estimate or we estimate that revenue from emergent trauma represented about half our total revenue and grew in the mid single digit range versus last year. While scheduled procedures also represented about half of total revenue and grew approximately 20% year over year.
Speaker 4: Gross profit for the quarter was approximately 33.2 million dollars compared to gross profit of approximately 30.8 million for the third quarter of 22. Gross margin for the quarter was 80.5 percent down from 83.3 year over year reflecting the initiation of tissue processing in our new newly opened oxygen processing center in the quarter.
Gross profit for the quarter was approximately $33 $2 million compared to gross profit of approximately 38 million for the third quarter of 'twenty two.
Gross margin for the quarter was 85% down from 83.3 year over year, reflecting the initiation of tissue processing in our new newly opened oxygen processing center in the quarter.
Speaker 4: Total operating expenses for the quarter increased 5% to $37.3 million, compared to $35.6 million in Q3 of 2022.
Total operating expenses for the quarter increased 5% to $37 3 million compared to $35 6 million in Q3 of 2022.
Speaker 4: And that increase was primarily the result of increased marketing programs, compensation, and professional service.
And that increase was primarily the result of increased marketing programs compensation and professional services sale.
Speaker 4: Sales and marketing expenses in the third quarter increased 8% to 21.4 million compared to 19.8 million in the prior year. The increase was primarily due to compensation, marketing programs, and travel.
Sales and marketing expense in the third quarter increased 8% to $21 4 million compared to $19 8 million in the prior year.
The increase was primarily due to compensation marketing programs and travel.
Speaker 4: As a percentage of total revenue, sales and marketing expense decreased to 52%, compared to 54% in the third quarter of 2020.
As a percentage of total revenue sales and marketing expense decreased to 52% compared to 54% in the third quarter of 2022.
Speaker 4: Research and development expenses, the $7 million, remained flat year over year. Product development expenses represented approximately 62% of total R&D compared to 50% in the prior.
Research and development expenses were 7 million remained flat year over year.
<unk> development expenses represented approximately 62% of total R&D compared to 50% in the prior year.
Speaker 4: It included costs for a number of specific development programs along with the non-clinical spend on the BLA for advance nerve.
Included costs for a number of specific development programs.
Long with the non clinical spend on the BLA for advanced nerve graft.
Speaker 4: clinical expenses represented approximately 38% of total R&D compared to 50% in the prior year. And as a percentage of total revenues, research and development expense decreased to 17% compared to 19% in the
Clinical expenses represented approximately 38% of total R&D compared to 50% in the prior year and as a percentage of total revenues research and development expense decreased to 17% compared.
Compared to 19% in the third quarter of last year.
Speaker 4: General administrative expense was 8.8 million in the short quarter remaining flat as compared to the prior year. For net loss in the quarter was 4.1 million or 10 cents per share compared to net loss of 4.3 million or 10 cents per share in the third quarter of 2022.
General and administrative expense was $8 8 million in the third quarter remaining flat as compared to the prior year.
Net loss in the quarter was $4 1 million or 10 cents per share compared to a net loss of $4 3 million or <unk> 10 per share in the third quarter of 2022.
We recorded adjusted net income in the quarter.
Speaker 4: We recorded adjusted net income in the quarter of $700,000 or approximately one cent per share compared to an adjusted net loss of $400,000 or one cent per share last year.
$700000 or approximately one per share compared to an adjusted net loss of $400000 or one cent per share last year.
Speaker 4: We also recorded positive adjusted EBITDA in the quarter of $2.4 million compared to positive adjusted EBITDA, a $400,000 in the prior year.
We also recorded positive adjusted EBITDA in the quarter, a $2.4 million compared to positive adjusted EBITDA of $400000 in the prior year.
Speaker 4: The balance of all cash, cash equivalents and investments on September 30th with 38.6 million compared to a balance of 40.8 million at the end of the second quarter. And that change of 2.2 million includes interest in other charges capitalized into the company's new processing facility in Dayton Ohio, which was placed into service during the quarter and provides for up to three times our current capacity and is designed for long term growth and expand.
The balance of our cash cash equivalents and investments on September 30th was $38 6 million compared to a balance of $40 8 million at the end of the second quarter.
That change of $2 2 million and includes interest and other charges capitalized into the companies.
New processing facility in Dayton, Ohio, which was placed into service during the quarter and provides for up to three times. Our current capacity and is designed for long term growth and expansion.
Speaker 4: Capitalization of interest charges continued through mid-August when the facility was placed into service. Subsequently, all interest charges are recorded as interest expense and other income and loss on our PNL.
Capitalization of interest charges continued through mid August when the facility was placed into service. Subsequently all interest charges are recorded as interest expense and other income and loss on our P&L.
Speaker 4: We are pleased with the operating leverage demonstrated through 2023. And we expect to continue trending towards cash flow break even driven by leverage over our fixed cost infrastructure and our focus on thoughtful operating expense management.
We are pleased with the operating leverage is demonstrated through 2023, and we expect to continue trending towards cash flow breakeven driven by leverage over our fixed cost infrastructure.
And our focus on thoughtful operating expense management. Additionally, the license fees that we pay on advanced revenue will come to an end in the fourth quarter of this year and provide annual cash savings of approximately three and a half million dollars in 2024.
Speaker 4: Dishling, the license fees that we pay on a advanced revenue will come to an end in the fourth quarter of this year and provide annual cash savings of approximately $3.5 million in 2024.
Speaker 4: We believe our operating leverage, combined with normalized capital expenditures, will allow us to maintain our strong balance sheet position and providing ample support as we continue our path to profitability. Consume,
We believe our operating leverage combined with normalized capital expenditures will allow us to maintain our strong balance sheet position and providing ample support as we continue our path to profitability.
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Speaker 4: Now turning to guidance in today's press release, we are maintaining our full year guidance with 2023 revenue in the range of 154 to 159 million, which represents annual growth of 11 to 15%.
Now turning to guidance in today's press release, we are maintaining our full year guidance with 2023 revenue in the range of 154 to 159 million, which represents annual growth of 11% to 15%.
Speaker 4: Additionally, we anticipate the gross margins will be reduced with the continued transition to the new processing facility in the fourth quarter and continue to expect the gross margins for the full year of 2023 will be approximately 80%.
Additionally, we anticipate that gross margins will be reduced with the continued transition to the new processing facility in the fourth quarter and continue to expect gross margin for the full year 2023 will be approximately 80%.
Speaker 4: And in summary, we're pleased with our third quarter performance. We will continue to execute our strategies, invest in innovation and drive toward cash flow, break even and profitability.
And in summary, we're pleased with our third quarter performance, we will continue to execute our strategies invest in innovation and drive toward cash flow breakeven and profitability at.
Speaker 4: And at this time, we'd like to open the line for questions.
And at this time, we'd like to open the line for questions Rob.
Speaker 1: Thank you. If you'd like to ask a question at this time, please press star one from your telephone keypad, and a confirmation tone to indicate your line is in the question queue. You may press star two if you'd like to withdraw your question from the queue.
Thank you.
If you'd like to ask a question at this time. Please press star one from your telephone keypad.
<unk> told you indicate your line is in the question queue you.
You May press Star two if you like to withdraw your question from the queue.
Speaker 5: For participants who are using speaker equipment, maybe you need to pick up your handset before pressing the star keys. One moment please, we'll be pulled for questions. Thank you. Let's get that star one.
For finish line sort of using speaker equipment may be necessary to pick up your handset before pressing the star keys.
One moment. Please poll for questions. Thank you once again Thats star one.
Thank you and our first question.
Is from the line of Mike Sarcone with Jefferies. Please proceed with your questions.
Hey, good morning, Karen and Pete Thanks for taking the questions.
Good morning, good morning.
Speaker 6: Just the first one, on the guidance, if I look at what's implied for 4Q, that's kind of $38 to $43 million, which is 5% to 19% year-over-year growth at the low and high ends of the range. I was wondering if you could just talk about what are your assumptions that are baked in to both ends of the range, and just any more color there would be great to start.
So just the first one on the guidance if I look what's implied for <unk>, that's kind of $38 million to $43 million, which is 5% to 19% year over year growth at the low and high ends of the range. I was wondering if you could just talk about you know what are your assumptions that are baked in.
And to both ends of the range and.
Just any more color there would be great to start.
Speaker 4: Yeah, Mike, I think for our guidance, you know, we're trending in the middle of the range, we just didn't feel like in this current environment, trying to mess with the range and the at the end of the year would be appropriate. We're comfortable with the with the range that this is implying. And I think that this makes sense for the company.
Yeah, Mike I think for our guidance, we're trending in the middle of the range, we just didn't feel like it.
This current environment trying to mess with the range at the end of the year would be appropriate we're comfortable with the.
With the range that this was implying.
And I think that just makes sense for the company.
Speaker 6: Okay, got it. And then you think you can just give us some more color on the ASC dynamic and hospitals, you know, moving some of those simple procedures to the ASC in 2Q, you called out an economic impact. We just love to get some more granularity on how that situation is playing out.
Okay got it and then do you think you can just give us some more color on the AFC dynamic in hospitals moving some of those simple procedures to the ASC into Q U you called out an economic impact.
Would just love to get some more granularity on on how that situation is playing out.
Speaker 3: Yeah, we saw actually two things happen. We started to see a good execution in ASCs as we see some simple procedures transitioning to ASCs.
Sure Yeah, we saw.
Two things happened, we started to see good execution and Asps eased as we see some physicians some simple procedures transitioning to ASC, but we also saw stabilization in the hospital environment.
Speaker 3: But we also saw stabilization in the hospital environment where hospitals were able, in some cases, to re stabilize their staffing and allow procedures to be there. And in other cases, they've made their changes. The procedures have moved. But as I said, we're starting to be able to move into those. So, all the way around, we saw an increase.
Where hospitals were able in some cases to re stabilize their staffing and allow procedures to be there and in other cases, they've made their changes to procedures and moved to S. E. But as I said, we're starting to be able to move into those so all the way around we saw an increase in.
Speaker 3: in what we would call simple trauma. So these are lacerations that can be repaired with a connector or could be repaired with a short advance and we saw those stabilize and start to grow again.
And what we would call simple trauma. So these are lacerations that can be repaired with a connector.
Or it could be repaired with their sort of dance and we saw those stabilize and start to grow again.
Okay. Thank you.
Our next question comes from the line of Mike Kratzke with Leerink Partners. Please proceed with your questions.
Speaker 1: Our next question comes from the line of Mike Kratke with Leering Partners. Please continue with your question.
Hi, everyone. Thanks for taking my questions.
Just in the first of the upcoming DLA approval. I mean is your expectation that that is going to help drive meaningfully higher utilization from surgeons. What have you heard from your industry contacts and then just as a follow up is that pre BLA meeting being scheduled for once you already or is there any other kind of gating factor.
So how did that that you'd need to provide.
Yeah. So first on the schedule no. We don't have a date yet for the pre BLA meeting its not schedule, but we're on track to have it scheduled to be in the early part of Q1.
Speaker 3: Yes, so first on the schedule, no, we don't have a date yet for the pre-BLA meeting. It's not scheduled, but we're on track to have it scheduled to be in the early part of Q1.
Speaker 3: and in terms of gating factors, yeah,
And in terms of gating factors, yeah, there's certain.
Speaker 3: Certain documents that you provide to the FDA, they go through some logistics internally to then come up with a schedule. So those those initiatives have to happen yet. But again, we're on schedule to do what we expect to get it scheduled in the early part of of Q1.
Arguments that you provide to the FDA. They go through some logistics internally to then come up with the schedule. So those those initiatives have to happen yet, but again, we're on schedule to do what we expect to get it scheduled in the early part of that of Q1 in terms of the impact of the BLA, We think the the BLA will be.
Speaker 3: In terms of the impact of the BLA, we think the BLA will be helpful for middle adopters to be comfortable in the data that advanced nerve graft has that shows that it is certainly a superior option to conduits.
We are hopeful for middle adopters can be comfortable and the data that advance nerve graft has that shows that it is a certainly a superior option to conduits.
Speaker 3: And that, combined with the meta-analysis, is going to provide a better opportunity for their patients without the morbidity of an autograph.
And that combined with the meta analysis is going to provide a better opportunity for their patients without the morbidity of an autograft and then as I mentioned in the script. It's also faster for those hospitals that are trying to get there.
Speaker 3: And as I mentioned in the script, it's also faster for those hospitals that are trying to get their ORs turned over more quickly. And so we think that we've got a good opportunity to continue to build this business as we transition into a BLA with the stamp of being a biological product.
Oh ours turned over more quickly and so we think that we've got a good opportunity to continue to build this business as we transition into a BLA with the the stamp of being.
A biological product.
Super helpful. Thanks, very much.
Thank you. Our next question is from the line of Caitlin Cronin with Canaccord Genuity. Please proceed with your questions.
Speaker 1: Thank you. Our next question is from the line of Caitlin Cronin with Canagorgenuity. Please, as you see with your question.
Speaker 7: Hi everyone, good morning, and congrats on a great quarter. Just maybe to start touching on core accounts, it became a larger portion of your business this quarter. Historically, it's only been 60%, now 65%. Do you really expect this to keep growing? And has this really been the result of middle adopter growth or more penetration of different types of surgeons within an account?
Hi, everyone. Good morning, and congrats on a great quarter, just maybe to start touching on core accounts. It became a larger portion of their business. This quarter. Historically, it's only been 60% now 65 do you expect this to keep growing and has just really been a result of you know middle adopter gross or.
Or penetration of different types of surgeons within an account.
Speaker 3: Thank you. Yeah, thank you. Yeah, we're very excited that we're seeing faster growth in both emergent and scheduled procedures in our core accounts. And that's been our strategy is we think there's a significant opportunity to grow that business in those core accounts. That's where we've got a lot of upside potential and it is all of those. Now, the majority of our, the vast majority of our core accounts have both some business and trauma and some business and scheduled cases.
Thank you yeah. Thank you yeah, we're very excited that we're seeing faster growth in both emerging and scheduled procedures and our core accounts and that's been our strategy is we think there's a significant opportunity to grow that business. In this core accounts and that's where we've got a lot of upside potential and it is.
All of those now the majority of our the vast majority of our core accounts have both some business in trauma and some business been scheduled cases, but we see opportunity to continue to expand both of those and continue to drive that deeper adoption in that deeper adoption really by definition means we're moving in.
Speaker 3: But we see opportunity to continue to expand both of those and continue to drive that deeper adoption. And that deeper adoption really by definition means we're moving into those middle adopters and becoming the standard of care in those accounts. That's what our goal is. And then continue to grow the number of core accounts where we become the standard of care. So we think that strategy has been effective and we're happy to see that percentage increase.
To those middle adopters and becoming the standard of care in those accounts. That's what our goal is and then continue to grow the number of core accounts, where we become the standard of care. So we think that strategy has been effective and we're happy to see that percentage increase.
Awesome and then just a quick one on breast you noted a higher number of surgeons, who expect to train. This year are you starting to see revenue contribution from this new opening.
Speaker 7: Awesome. And then just a quick one on breast. You noted a higher number of surgeons expected to train this year. Are you starting to see, you know, revenue contribution from this new opening of procedures in that segment?
Opening of procedures in that segment.
Speaker 3: Yeah, it's been exciting to see the expansion and to the implant-based procedures. This is the opportunity for sensation as we're ending breast cancer awareness month has been a meaningful topic of conversation among women who have breast cancer awareness month.
Yeah, it's it's been exciting to see the expansion and into the implant based procedures and this is the opportunity for sensation as we're ending a breast cancer awareness month has been a meaningful topic of conversation among women, who have breast cancer and I think the.
Speaker 3: And I think the realization that this is an important outcome for women has continued to spur significant interest in the procedure. We've had standing room only interest in our training programs for the implant-based procedures. And we think this will continue to be an impactful part of our overall growth in the scheduled procedures.
Realization that this is an important outcome for women.
<unk> has continued to spur significant interest in the procedure we've had.
I'm standing room, only interest and our training programs for the implant based procedures. Then we think this will continue to be.
And impactful part of our overall growth in the scheduled procedures.
Thank you.
Yeah.
Speaker 1: As a reminder, to ask a question today, you may press star 1 from your telephone keypad.
As a reminder to ask a question, saying you May press star one from your telephone keypad.
Speaker 1: Our next question comes from the line of Dave Terkele with JMP Securities. Please proceed with your question.
Our next question comes from the line of Steve Turk Kelly with JMP Securities. Please proceed with your questions.
Speaker 8: Hey, good morning. Karen, maybe the, um, the Aviva Plus, the, Resorbable will, does anybody else have a resorbable product? I'm just curious and we're surging to asking for this. I'm kind of wanting to make exactly what, um, you know, where it will be used.
Hey, good morning, Ken.
Karen maybe the <unk> plus the.
Miserable does anybody else have resorbable product I'm, just curious where.
Where surgeons asking for this.
I'm kind of wondering exactly what where.
So where it will be used.
Specifically.
Speaker 3: Yeah, actually, if you remember, we had an absorbable product prior that was very well received by the market. And we voluntarily withdrew that as some FDA changes in classification of products. I just tell you that I regularly receive phone calls from surgeons who are saying that they would like a replacement back for that product that it was an important part of the overall treatment algorithm. It's not.
Yeah actually if you remember we had an observable product prior that was very well received by the market and we voluntarily withdrew that has some FTA changes and classification of products I can tell you that I regularly receive phone calls from surgeons, who are saying that they would like a replacement.
Back for that product, but it was.
An important part of the overall treatment algorithm it's not.
Speaker 3: It's not not going to be used, it's very niche products. It's not going to be used in all procedures, but in those procedures where there is a trauma that can cause damage to the surrounding tissue of a nerve as well as the nerve, it can be important to have a temporary or a resorbable soft tissue matrix that provides protection during the critical healing phase.
It's not going to be used at its very niche products that can be used in all procedures, but in those procedures, where there is a a trauma that can cause damage to the surrounding tissue of a nerve as well as the nerve.
It can be important to have a temporary or a resorbable soft.
Soft tissue matrix that provides protection during the critical healing phase.
Speaker 3: And surgeons are very interested in having this as a part of their algorithm. In addition to the offerings we have with Axisard. And so we are looking forward to getting this launched in the first quarter.
And and surgeons are very interested in having this as a part of their algorithm. In addition to the offerings that we have with Axa garden and so are we are looking forward to getting this launched in the first in the first quarter.
Great and maybe one follow up for Pete.
Speaker 4: Can you give us from a mildly standpoint sort of what you think interest expense is going to look like maybe just on a quarterly basis moving ahead, given that that capitalization is now rolling off? Yeah, I think with the structure of our debt, you'll see anywhere from a million sevens or maybe a million nine ???? pratic matin, and that would be a point.
Peter can you give us from a modeling standpoint.
What do you think interest expense is going to look like maybe just on a quarterly basis moving moving ahead given that that our capitalization is now rolling off.
Yes, I think with the structure of our debt Youll see anywhere from.
Million.
So maybe a million nine a quarter.
Speaker 4: Actually, yeah, but that's interesting expense and then we'll see interesting come as well off the cash that we have.
Actually yeah.
But that's interest expense and then we will see interest income as well off the cash that we have.
So if a few hundred thousand.
Thank you.
Thanks, Dave Thanks, Dave.
Speaker 1: Thank you. At the time, we've reached in to a question answer session and I'll turn the call over to Karen Zattery for closing remarks.
Thank you at this time, we've reached the end of our question and answer session and I'll turn the call over to Karen salary for closing remarks.
Thank you Rob.
Speaker 3: I'd like to thank the accident team who remain committed to our mission of improving nerve function and quality of life for patients with peripheral nerve.
I'd like to thank the accident team, who remain committed to our mission of improving nerve function and quality of life for patients with peripheral nerve injuries, we're happy with our current progress and we remain focused on ensuring our long term success.
Speaker 3: We're happy with our current progress, and we remain focused on ensuring our long-term success. I want to thank everyone for joining us this morning, and have a great day.
I want to thank everyone for joining us this morning and have a great day.
Speaker 1: This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.
This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.