Q4 2023 Treace Medical Concepts Inc Earnings Call

Operator: www.cdc.gov.au Good day, and thank you for standing by. Welcome to the Treace Medical Concepts fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen only mode.

Good day, and thank you for standing by welcome to the Triste medical concepts fourth quarter and full year 2023 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Julie Dewey. Please go ahead.

You will then hear an automated message advising your hand is raised.

Your question. Please press Star one again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker today Julie Dewey. Please go ahead.

Julie D. Dewey: Good afternoon, everyone, and welcome to our fourth quarter 2023 earnings conference call. We appreciate you joining us. I'm Julie Dewey, Treace's Chief Communications and IR Officer.

Good afternoon, everyone and welcome to our fourth quarter 2023 earnings Conference call. We appreciate you joining us.

Julie Dewey treats as Chief Communications, and IR Officer with me today are John <unk>, Chief Executive Officer, and Mark hair, Chief Financial Officer during.

Julie D. Dewey: With me today are John Treace, Chief Executive Officer, and Mark Hair, Chief Financial Officer. During the call, John and Mark will offer commentary on our commercial activity and review our fourth quarter and full year financial results released after the close of the market today, after which we will host a question and answer session. The press release and supplemental materials can be found in the investor relations section of our website at investors.treace.com.

During the call John and Mark will offer commentary on our commercial activity and review our fourth quarter and full year financial results released after the close of the market today after which we will host a question and answer session.

The press release and supplemental materials can be found in the Investor Relations section of our website at investors dot trees Dot com.

Julie D. Dewey: This call is being recorded and will be archived in the investor section of our website. Before we begin, we would like to remind you that it is our intent that all forward-looking statements made during today's call will be protected under the Private Securities Litigation Reform Act of 1995. Any statements that relate to expectations or predictions of future events and market trends, as well as our estimated results or performance, are forward-looking statements. All forward-looking statements are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. All forward-looking statements are based upon current available information, and Treace assumes no obligation to update these statements. Accordingly, you should not place undue reliance on these statements.

This call is being recorded and will be archived in the investors section of our website.

Before we begin we would like to remind you that it is our intent that all forward looking statements made during today's call will be protected under the private Securities Litigation Reform Act of 1995.

Any statements that relate to expectations or predictions of future events and market trends as well as our estimated results or performance are forward looking statements. All forward looking statements are based upon our current estimates and various assumptions. These statements involve material risks and uncertain.

Ts that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements.

All forward looking statements are based upon current available information and trees assumes no obligation to update. These statements. Accordingly, you should not place undue reliance on these statements. Please refer to our SEC filings, including our Form 10-K for the full year 2023 to be filed on.

Julie D. Dewey: Please refer to our SEC filings, including our Form 10-K for the full year 2023, to be filed on February 27, 2024, for a detailed presentation of risks. With that, I will now turn the call over to John. Thank you, Julie. Good afternoon, everyone.

February 27th 2024 for a detailed presentation of risks with that I will now turn the call over to John.

Thank you Julie and good afternoon, everyone and thanks for joining us I'm going to focus my comments today on our full year and fourth quarter 2023 highlights the exciting progress of our speedway implant launch and our other growth drivers. Following my comments Mark will cover the specifics of our Q4 results and our 2020 for guidance.

John Treace: And thanks for joining us. I'm going to focus my comments today on our full year and fourth quarter 2023 highlights, the exciting progress of our speed plate implant launch, and our other growth drivers. Following my comments, Mark will cover the specifics of our Q4 results and our 2024 guidance. 2023 was a busy and productive year for Treace, and we're proud of the significant progress that we have made. We successfully executed on our strategic plan, resulting in full-year U.S. revenue growth of 32 percent, surpassing the high end of our previously provided guidance range and growth that we believe is significantly above our foot and ankle peers. We also continue to scale our operations, making encouraging adjusted EBITDA progress that was ahead of the prior year and delivering gains across our key operating metrics, reaffirming our belief that we have the right strategies in place to expand the market penetration of our differentiated technology.

2023 was a busy and productive year for trees, and we're proud of the significant progress that we've made we successfully executed on our strategic plan, resulting in full year U S revenue growth of 32%, surpassing the high end of our previously provided guidance range and growth that we believe is significantly above our foot and ankle peers.

We also continue to scale, our operations, making encouraging adjusted EBITDA progress that was head of the prior year and delivering gains across our key operating metrics reaffirming our belief that we have the right strategies in place to expand the market penetration of our differentiated technologies.

John Treace: Here at Treace, we're driving a fundamental shift in the surgical treatment of bunions through our proprietary lapoplasty procedure, which is well on its way to becoming a standard of care. Lapoplasty targets a $5 billion-plus addressable market in the U.S., with continued strong adoption by the foot and ankle surgeon community. And with nearly one in four adults in the U.S. affected by bunions, we believe this represents the most compelling opportunity in the foot and ankle reconstructive market today.

<unk>, we're driving a fundamental shift in the surgical treatment of bunions through our proprietary lack of classic procedure, which is well on its way to becoming a standard of care.

<unk> targets of $5 billion, plus addressable market in the U S. With continued strong adoption by the foot and ankle surgeon community and with nearly one in four adults in the U S affected by Bunions. We believe this represents the most compelling opportunities in the foot and ankle reconstructive market today.

John Treace: As of the fourth quarter of 2023, we have penetrated approximately 6.6% of the estimated 450,000 annual bunion surgeries in the U.S., up from 5.5% in the fourth quarter of 2022 and reflecting approximately 2.7% market penetration of the estimated 1.1 million annual U.S. surgical candidates that constitute our $5 billion plus total addressable market. We've also expanded our footprint in the foot and ankle market by adding complementary procedures and technologies to treat related deformities, such as ductoplasty and hammertoe correction, both of which frequently coexist with bunions and are addressed at the same time. This has opened up new revenue opportunities and meaningfully expanded our TAM by 15% to approximately $750 million without diluting our focus on the $5 billion plus U.S. market opportunity for our core lapoplasty procedure. We initiated commercialization of several new technologies in 2023, including our speed plate fixation platform, hammer toe system, several sterile instruments, as well as a limited release of our micro lapoplasty system. We expect all of these new technologies to fuel strong growth for years to come.

After the fourth quarter of 2023, we have penetrated approximately six 6% of the estimated 450000 annual bunion surgeries in the U S up from five 5% in the fourth quarter of 2022, and reflecting approximately two 7% market penetration of the estimated $1 1 million annual U S.

Surgical candidates that constitute our $5 billion plus total addressable market.

We've also expanded our footprint in the foot and ankle market by adding complementary procedures and technologies to treat related deformities, such as a Dr Placid, and hammertoe correction, both of which frequently coexist with Bunions and are addressed at the same time.

This has opened up new revenue opportunities and meaningfully expanded our tam by 15% or approximately $750 million without diluting our focus on the $5 billion plus U S market opportunity for our core lap of biopsy procedure.

We initiated commercialization of several new technologies in 2023, including our speed fixation platform Hammertoe system, several sterile instruments as well as a limited release of our micro <unk> system. We expect all of these new technologies to fueled strong growth for years to come.

John Treace: As a uniquely focused foot and ankle company, we believe we're distinctly positioned to drive innovation-led growth and deliver long-term shareholder value. Since our founding, we've pioneered elegant breakthrough solutions, including our flagship lapoplasty and adductoplasty procedures that are designed to deliver predictable, repeatable results supported by differentiating clinical studies. Along the way, we've also taken bold steps to grow and defend the markets we've pioneered through our direct sales team, rapid product innovation, and patient awareness and education initiatives, all of which we believe have resulted in a sizable competitive advantage for Treace. With over 90,000 patients now treated with our lapoplasty procedure, we recognize that our success is not only measured in our numbers but in the transformative change that our differentiated therapies provide to Revenue in the fourth quarter was $62.2 million, up 25% over the prior year, with full-year revenue growing 32% over the prior year.

As a uniquely focused foot and ankle company. We believe we are distinctly positioned to drive innovation led growth and deliver long term shareholder value.

Since our founding we've pioneered elegant breakthrough solutions, including our flagship <unk> and Dr. Plassey procedures that are designed to deliver predictable repeatable results supported by differentiating clinical studies.

Along the way we've also taken bold steps to grow and defend the markets. We pioneered through our direct sales team rapid product innovation and our patient awareness and education initiatives all of which we believe had resulted in a sizable competitive advantage for trees.

With over 90000 patients now treated with our lack of classy procedure, we recognize that our success is not only measured on our numbers, but as a transformative change that are differentiated therapies provide to patients.

Turning now to our Q4 and full year 2023 results.

Revenue in the fourth quarter was $62 2 million up 25% over the prior year with full year revenue growing 32% over prior year.

John Treace: These results demonstrate the underlying strength and effectiveness of our strategic investments in our direct sales channel, targeted R&D initiatives, and direct-to-consumer programs. The fourth quarter was also our first quarter of positive adjusted EBITDA since going public in April of 2021. We continue to advance our key performance metrics in the fourth quarter, including substantial gains in the number of new surgeon users, ending Q4 with 2,855 active surgeons, up 164 for the quarter and up 20% year over year. A year-over-year increase in trailing 12-month surgeon utilization, with an average of 10.4 kits per active surgeon in Q4, up from 10.3 kits a year ago, despite the dilutive effect of the large number of new surgeon And a record-blended average selling price of $6,437 per lapoplasty kit sold in the quarter, up 9% over the prior year, driven by the early impact in the quarter from our new SpeedPlate and Hammer Toe systems, as well as increased adoption of our adductoplasty procedure and utilization of our new sterile instrument.

These results demonstrate the underlying strength and effectiveness of our strategic investments in our direct sales channel targeted R&D initiatives and direct to consumer programs.

Fourth quarter was also our first quarter of positive adjusted EBITDA since going public in April of 2021.

We continue to advance our key performance metrics in the fourth quarter, including substantial gains in the number of new surgeon users and in Q4 with 2855 active surgeons up 164 for the quarter and up 20% year over year.

Our year over year increase in trailing 12 months certain utilization with an average of 10 four kits per active surgeon in Q4 up from $10 three kits a year ago. Despite the dilutive effect of a large number of new surgeons added during the year.

Record blended average selling price of $6437 per lateral classic kits sold in the quarter up 9% over the prior year driven by the early impact in the quarter from our new <unk> played in hammertoe systems as well as increase the docs adoption of our Dr. Flashy procedure and utilization of our new sterile instruments.

Our strategic investments in commercial focus have continued to support the growth of our business, giving us confidence that we have a well defined proven and scalable commercial strategy.

John Treace: Our strategic investments and commercial focus have continued to support the growth of our business, giving us confidence that we have a well-defined, proven, and scalable commercial strategy. We intend to continue these targeted investments in 2024 with the goal of increasing our market penetration by expanding the footprint and coverage of our bunion-focused direct sales channel, advancing our patient education and awareness DTC initiatives, and driving more targeted R&D innovations into the market. We have a highly specialized team at Treace, including an established and growing direct sales channel, one that is 100% focused on bunion and related midfoot surgery, the only such channel in the industry. We increased the size of this team by 35% during 2023, exiting the year with 227 quota-carrying direct reps that produced roughly 82% of our revenue mix in Q4. When you include our associate sales reps, clinical specialists, and sales managers, our total employee fleet in the field totaled approximately 340 employees at the end of 2023 versus 267 at the end of the year 2022.

We intend to continue these targeted investments in 2024 with the goal of increasing our market penetration by expanding the footprint and coverage of our bundle focused direct sales channel.

Advancing our patient education and awareness DTC initiatives.

And driving more targeted R&D innovations into the market.

We have a highly specialized team of trees, including an established and growing direct sales channel. One that is 100% focused on bunion and related midfoot surgery, the only such one in the industry.

We increased the size of this team by 35% during 2023 exiting the year with 227 quota carrying direct reps that produce roughly 82% of our revenue mix in Q4.

When you include our associate sales reps clinical specialists and sales managers are total employee fleet in the field totaled approximately 340 employees at the end of 2023 versus 267 at the end of the year 2022.

We plan to appropriately grow this specialized team during 2024 to ensure strong surgeon coverage and support and continued market penetration.

As I mentioned earlier, we saw strong growth in our active surgeon base in Q4 and for the full year.

As our surgeon base continues to develop and gains tenure, we anticipate utilization gains with increased use of <unk> and Dr. <unk> as well as further adoption of our growing portfolio of complementary products all supported by our expanding direct sales channel differentiated clinical datasets and patient education and awareness DTC initiatives.

Now I'd like to turn to our product launches.

First our new <unk> fixation platform, our <unk> launch is off to a great start and we saw very strong demand in the fourth quarter. Despite its limited availability.

John Treace: We plan to appropriately grow this specialized team during 2024 to ensure a strong surge in coverage and support and continued market penetration. As I mentioned earlier, we saw strong growth in our active surgeon base in Q4 and for the full year. As our surgeon base continues to develop and gain tenure, we anticipate utilization gains with increased use of lapoplasty and adductoplasty, as well as further adoption of our growing portfolio of complementary products, all supported by our expanding direct sales channel, differentiating clinical datasets, and patient education and awareness DTC initiatives. Now, I'd like to turn to our product launches. First, our new SpeedPlate fixation platform.

In fact, <unk> represented about a quarter of our case volume in Q4 and about 20% of our active surgeons have already use be plate ware.

We are on track to have full market availability of speed played at the end of Q1, and expect broadening adoption and growth throughout 2024 and beyond.

Our speed plate fixation technology is designed to deliver the stability of a titanium locking plate with the speed of insertion and compression of the staple a very attractive combination for many surgeons.

We believe this technology is not only enhancing the experience of our existing customers, but it's also allowing us to attract and onboard a new audience of surgeons, specifically, those who prefer nighthawk staples for fixation.

While broadly applicable across <unk> and <unk>.

The plastic procedures today, we previewed new speed play implant configurations at the recent access meeting that are designed to expand the versatility of our speed play platform to address an expanded range of fusion procedures throughout the foot.

John Treace: Our SpeedPlate launch is off to a great start, and we saw very strong demand in the fourth quarter, despite its limited availability. In fact, SpeedPlate represented about a quarter of our case volume in Q4, and about 20% of our active surgeons have already used SpeedPlate. We are on track to have full market availability of SpeedPlate at the end of Q1 and expect broadening adoption and growth throughout 2024 and beyond. Our SpeedPlate fixation technology is designed to deliver the stability of a titanium locking plate with the speed of insertion and compression of the staple, a very attractive combination for many surgeons.

These news feed play configurations are expected to be available by Q3.

Next our micro lap a classic system. This is an advanced instrumentation option designed to further reduce both the incision size and related tissue dissection with the lap of classic procedure.

This exciting evolution of our instrumentation allows the patented <unk> procedure to be performed now through a two centimeter incision utilizing our new speed play fixation technology.

Our micro lap of planting system is now fully available.

While we are excited about the growth opportunity that all of these product launches represent there's even more to come from our robust product development pipeline in fact inclusive of the launches I've. Just discussed we have 10, new innovation launches slated for 2024 and more in our R&D pipeline to ensure a steady cadence of new innovations in 2025 and beyond.

John Treace: We believe this technology is not only enhancing the experience of our existing customers, but it's also allowing us to attract and onboard a new audience of surgeons, specifically those who prefer night-in-off staples for fixation. While broadly applicable across lapoplasty and adductoplasty procedures today, we previewed new speed plate implant configurations at the recent ACFAS meeting that are designed to expand the versatility of our speed plate platform to address an expanded range of fusion procedures throughout the foot. These new Speedplay configurations are expected to be available by Q3.

We were excited to highlight many of our new 2024 renovations at <unk>, including our new mini adductor plastic system, and a red point preoperative planning and patient specific instrumentation.

Many of Dr. Philosophy features advanced instrumentation designed to allow the adductor philosophy midfoot correction procedures to be performed through an approximately 50% smaller incision and Leverages <unk> technology for fixation.

The many of Dr. <unk> system is currently in limited clinical release with full commercialization plan in the second half of 2024.

We believe this new innovation can drive increase Dr plasma adoption and market penetration for years to come.

Our Red point patient specific instrumentation is our first to market technology designed to deliver preoperative planning and patient specific guidance for bunion and mid foot deformity corrections. We believe this technology can make challenging procedures more approachable to a greater number of surgeons, while reducing steps and our time.

John Treace: Next, our microlapoplasty system. This is an advanced instrumentation option designed to further reduce both the incision size and related tissue dissection during the lapoplasty procedure. This exciting evolution of our instrumentation allows the patented lapoplasty procedure to be performed now through a 2 centimeter incision. Our micro-lapoplasty system is now fully available. While we're excited about the growth opportunity that all of these product launches represent, there's even more to come from our robust product development pipeline. In fact, inclusive of the launches I've just discussed, we have 10 new innovation launches slated for 2024, and more in our R&D pipeline to ensure a steady cadence of new innovations in 2025 and beyond. We were excited to highlight many of our new 2024 innovations at ACFAS, including our new mini-adductoplasty system and our RedPoint preoperative planning and patient-specific instrumentation. Mini-adductoplasty features advanced instrumentation designed to allow the adductoplasty midfoot correction procedure to be performed through an approximately 50% smaller incision and leverages SpeedPlate technology for fixation.

<unk> is currently in limited clinical release with full commercialization plan in the second half of 2024.

As pioneers in the procedure markets that we have developed we believe <unk> is a core technology with capability to achieve broad market adoption in the years ahead further strengthening our leadership position.

Finally, we're looking forward to introducing a significant new technology platform in the back half of 2024.

We believe this platform will speed our penetration of the binding market expand our market opportunity and further reinforce our position as the leader in <unk> Bunion correction.

We will provide additional updates on our new product innovations as we continued to develop our pipeline centered around our core technologies and IP aimed at improving surgeon user experiences patient outcomes and supporting continued market penetration.

As we look specifically to 2024, our guidance provided today reflects our expanding commercial capabilities and increased contribution from the sales rep additions that we've made throughout last year continued adoption of <unk> and other complementary procedures as well as multiple new launches that we expect to drive strong growth while we also.

Advance our pipeline opportunities.

We also expect to make solid progress on our pathway to sustainable profitability as we drive towards adjusted EBITDA breakeven for full year 2024.

John Treace: The mini adductoplasty system is currently in limited clinical release with full commercialization planned in the second half of 2024. We believe this new innovation can drive increased adductoplasty adoption and market penetration for years to come. Our Redpoint patient-specific instrumentation is our first-to-market technology designed to deliver preoperative planning and patient-specific guides for bunion and midfoot deformity correction.

I am proud of another great quarter of execution of trees with solid performance from our talented team of employees.

With continued strong additions to our surgeon base, increasing productivity of our direct sales channel and a robust pipeline of new technology is fueling our commercial momentum.

I am confident that we have the right strategies in place to continue to deliver industry, leading foot and ankle growth and profitably scale, our business in 2024 and beyond.

With that I'll now turn the call over to Mark to review, our financial performance and guidance Mark.

John Treace: We believe this technology can make challenging procedures more approachable to a greater number of surgeons while reducing steps and OR time. Redpoint PSI is currently in limited clinical release, with full commercialization planned in the second half of 2024. As pioneers in the procedure markets that we have developed, we believe RedPoint PSI is a core technology with the capability to achieve broad market adoption in the years ahead, further strengthening our leadership position. Finally, we're looking forward to introducing a significant new technology platform in the back half of 2024. We believe this platform will speed our penetration of the bunion market, expand our market opportunity, and further reinforce our position as the leader in 3D bunion correction. We will provide additional updates on our new product innovations as we continue to develop our pipeline centered around our core technologies and IP aimed at improving surgeon user experiences, patient outcomes, and supporting continued market penetration.

Thank you John Good afternoon, everyone revenue for 2023 was $187 1 million representing.

Representing 32% growth over the prior year fourth quarter revenue was $62 2, million% to 25% increase compared to the prior year.

Growth in the fourth quarter was driven by increases in procedure volumes and increases in blended average selling price due to increased adoption of the company's newer technologies and expanding portfolio of complementary products. Although the fourth quarter included one less selling day than the prior year. The month of December actually had two less selling days.

On an average daily sales basis, we grew 27% in Q4.

We sold 9000 <unk>.

665 lack of class a procedure kits in the fourth quarter, a 15% increase compared to the same quarter last year.

Blended average selling price was a record $6437 in the fourth quarter up 9% over the same prior year quarter.

This higher blended average selling price was driven by lack of capacity and the additional contribution from our expanding portfolio of complementary products such as our Dr. Plassey system.

Sterile single use instruments and some early impact from speed plate and hammertoe as our direct sales channel continues to increase their procedure volumes across our surgeon customers.

John Treace: As we look specifically to 2024, our guidance provided today reflects our expanding commercial capabilities and increased contribution from the sales repetitions that we made throughout last year, continued adoption of lapoplasty, adductoplasty, and other complementary procedures, as well as multiple new launches that we expect to drive strong growth while we also advance our pipeline opportunities. We also expect to make solid progress on our pathway to sustainable profitability as we drive towards adjusted EBITDA break-even for the full year 2024. I'm proud of another great quarter of execution at Treace, with solid performance from our talented team of employees, continued strong additions to our surgeon base, increasing productivity of our direct sales channel, and a robust pipeline of new technologies fueling our commercial momentum. I'm confident that we have the right strategies in place to continue to deliver industry-leading foot and ankle growth and profitably scale our business in 2024 and beyond. With that, I'll now turn the call over to Mark to review our financial performance and guidance. Thank you, John. Good afternoon, everyone.

For the full year 2023 revenue was $187 1, million% to 32% increase over 2022 at the top end of our pre announced revenue expectations of $186 seven to $187 1 million and above the high end of our prior 2023 revenue guidance range of.

$182 million to $186 million.

We sold 29675 laptop plastic procedure kits for the full year, 2023% to 20% increase versus prior year with a blended average selling price of $6306, a 10% increase over the prior year.

Gross margin was 81, 6% in the fourth quarter of 2023 compared to 81, 9% in the fourth quarter of 2022. This 30 basis point decrease was primarily due to changes in product mix and an increase in overhead costs due to head count to support the growing business, partially offset by lower worth royalty.

And a decrease in inventory provisions for the full year 2023 gross margin was 81, 2% down from 82% in the prior year period, primarily due to changes in product mix and increase in inventory provisions and an increase in overhead costs due to head count to support the growing business.

Mark L. Hair: Revenue for 2023 was $187.1 million, representing 32% growth over the prior year. Fourth quarter revenue was $62.2 million, a 25% increase compared to the prior year. Growth in the fourth quarter was driven by increases in procedure volumes and increases in blended average selling price due to increased adoption of the company's newer technologies and an expanding portfolio of complementary products. Although the fourth quarter included one less selling day than the prior year, the month of December actually had two less selling days.

Partially offset by lower royalty rates.

Total operating expenses were $57 5 million in the fourth quarter of 2023 compared to total operating expenses of $44 2 million in the fourth quarter of 2022.

The increase in operating expenses reflects strategic investments in our expanding direct sales channel investments and product innovation increased capacity requirements as well as support for our commercial initiatives.

Mark L. Hair: On an average daily sales basis, we grew 27% in Q4. We sold 9,665 lapoplasty procedure kits in the fourth quarter, a 15% increase compared to the same quarter last year. The blended average selling price was a record $6,437 in the fourth quarter, up 9% over the same prior-year quarter.

For the full year 2023, operating expenses were $203 4 million compared to $151 2 million in the prior year period. The increase in operating expenses reflects increased investments in commercial initiatives as well as other G&A investments supporting our growing business.

Fourth quarter net loss was $6 3 million or <unk> 10 per share compared to a net loss of $4 4 million or <unk> <unk> per share for the same period of 2022, we ended the fourth quarter, our seasonally strongest with adjusted EBITDA of $2 6 million compared to an adjusted EBITDA loss of 400.

Mark L. Hair: This higher blended average selling price was driven by Lapoplasty and the additional contribution from our expanding portfolio of complementary products, such as our Ductoplasty system, sterile single-use instruments, and some early impact from SpeedPlate and Hammertoe, as our direct sales channel continues to increase procedure volumes across our surgeon-customers. For the full year 2023, revenue was $187.1 million, a 32% increase over 2022, at the top end of our preannounced revenue expectations of $186.7 to $187.1 million and above the high end of our prior 2023 revenue guidance range of $182 to $186 million. We sold 29,675 lapoplasty procedure kits for the full year 2023, a 20% increase versus the prior year, with a blended average selling price of $6,306, a 10% increase over the prior year.

67000 for the same period in 2022 as John said this is our first quarter of positive adjusted EBITDA since going public in 2021 for the full year 2023, we had a modest improvement in adjusted EBITDA compared to the prior year cash.

Cash cash equivalents marketable securities and investment receivable totaled $126 2 million as of December 31, 2023, our total available access to liquidity, including our debt facility is approximately $190 million.

We believe we have a lengthy runway in terms of our current cash level with sufficient balance sheet strength and flexibility to continue aggressively executing on our strategic investments and growth initiatives as well as a clear path to achieve positive adjusted EBITDA.

Four I discuss our 2024 guidance I wanted to mention that we will now update our key operating metrics annually at the end of the year rather than quarterly.

Mark L. Hair: Gross margin was 81.6% in the fourth quarter of 2023 compared to 81.9% in the fourth quarter of 2022. This 30 basis point decrease is primarily due to changes in product mix and an increase in overhead costs due to headcount to support the growing business, partially offset by lower royalty rates, and a decrease in inventory provisions. For the full year 2023, gross margin was 81.2%, down from 82% in the prior year period, primarily due to changes in product mix, an increase in inventory provisions, and an increase in overhead costs due to headcount to support the growing business, partially offset by lower royalty rates.

There has been and we continue to anticipate that there will be variability in these metrics from quarter to quarter due to seasonality and the timing and impact of new product launches surgeon training events and DTC investments. Therefore, our plan is to update these key metrics on an annual basis, which is much more relevant for our business at this.

Point in our growth trajectory let.

Let me now turn to our outlook for full 2024.

We are providing full year 2020 for revenue guidance of $220 million to $225 million, which reflects an increase of 18% to 20% compared to 2023.

We remain encouraged by the underlying strength and momentum in our business with our strategic investments clearly delivering on growth.

Mark L. Hair: Total operating expenses were $57.5 million in the fourth quarter of 2023 compared to total operating expenses of $44.2 million in the fourth quarter of 2022. The increase in operating expenses reflects strategic investments in our expanding direct sales channel, investments in product innovation, increased capacity requirements, as well as support for our commercial initiatives. For the full year 2023, operating expenses were $203.4 million compared to $151.2 million in the prior year. The increase in operating expenses reflects increased investments in commercial initiatives, as well as other G&A investments supporting our growing business. The fourth quarter net loss was $6.3 million, or $0.10 per share, compared to a net loss of $4.4 million, or $0.08 per share, for the same period in 2022.

Given that it's early in the year, we feel comfortable at the midpoint of this range.

We expect to make significant improvement in adjusted EBITDA for the full year 2024, and anticipate adjusted EBITDA to improve approximately 50% compared to full year 2023.

Excluding any consideration for the effect of potential future acquisitions or any other material business developments, we anticipate being close to cash flow breakeven for the full year of 2025.

Our blended ASP has historically grown mid single digits and given ongoing surgeon adoption of lack of class a complimentary products and procedures and future pipeline opportunities. We expect this trend to persist as.

As we previously stated we believe adding approximately 250 to 300 active surgeons annually is a reasonable baseline over the next few years with utilization increase is expected to drive higher procedure penetration and the tightening sales rep to surgeon ratio should support increased case coverage and adoption.

Mark L. Hair: We ended the fourth quarter, our seasonally strongest, with adjusted EBITDA of $2.6 million, compared to an adjusted EBITDA loss of $467,000 for the same period in 2022. As John said, this is our first quarter of positive adjusted EBITDA since going public in 2021. For the full year 2023, we had a modest improvement in adjusted EBITDA compared to the prior year. Cash, cash equivalents, marketable securities, and investment receivable totaled $126.2 million as of December 31, 2023. Our total available access to liquidity, including our debt facility, is approximately $190 million.

<unk>.

These new surgeon additions and training our large active surgeon base on new procedures is expected to expand utilization and drive blended ASP increases.

<unk> with previous years, we expect a sequential revenue decrease from Q4 to Q1 due to normal seasonality coming on and off our usual strong year end performance similar to last year. There has been some carryover of binding procedures into the first quarter of this year as patients entering the surgical funnel late in the fourth quarter time.

Frame are often scheduled for blending procedures into the following year given this carryover. We now expect a very slight revenue increase from Q1 to Q2 Q3 to be roughly similar to Q2, followed by a seasonally strong Q4, which is historically the largest revenue quarter of the year.

Mark L. Hair: We believe we have a lengthy runway in terms of our current cash level, with sufficient balance sheet strength and flexibility to continue aggressively executing on our strategic investments and growth initiatives, as well as a clear path to achieve positive adjusted EBITDA. Before I discuss our 2024 guidance, I wanted to mention that we will now update our key operating metrics annually at the end of the year, rather than quarterly. There has been, and we continue to anticipate that there will be, variability in these metrics from quarter to quarter due to seasonality and the timing and impact of new product launches, surgeon training events, and DTC investments.

Now before we open up the call for questions. Let me turn it back to John for some concluding comments John.

Thanks, Mark in closing we delivered another year of significant progress in 2023 and expect to remain on track to drive strong growth and profitably scale our business in the years ahead.

We're driving a market conversion and a large underserved market is the fastest growing company in foot and ankle.

We believe we're in a great position strategically with best in class Bunion, Midfoot and related complementary offerings and expanding Tam with the addition of new technologies, such as a doctor Plasty Hammertoe and speed play with more innovations to come supported by differentiating clinical studies continued strong additions to our surgeon base and a powerful and established <unk>.

Mark L. Hair: Therefore, our plan is to update these key metrics on an annual basis, which is much more relevant for our business at this point in our growth trajectory. Let me now turn to our outlook for Fall 2024. We are providing full-year 2024 revenue guidance of $220 million to $225 million, which reflects an increase of 18 to 20% compared to 2023. We remain encouraged by the underlying strength and momentum in our business, with our strategic investments clearly delivering on growth. Given that it's early in the year, we feel comfortable at the midpoint of this range.

Sales team.

We look forward to aggressively pursuing these significant opportunities to drive the performance of our business and I couldnt be more excited about the accelerating momentum we expect as we move through 2024 and beyond.

With that now let me turn the call over to the operator to open the line for your questions.

Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.

Mark L. Hair: We expect to make a significant improvement in adjusted EBITDA for the full year 2024 and anticipate adjusted EBITDA to improve by approximately 50% compared to the full year 2023, excluding any consideration for the effect of potential future acquisitions or any other material business developments. We anticipate being close to cash flow breakeven for the full year 2025. Our blended ASP has historically grown mid-single digits, and given the ongoing surge in adoption of laparoplasty, complementary products and procedures, and future pipeline opportunities, we expect this trend to persist. As we previously stated, we believe adding approximately 250 to 300 active surgeons annually is a reasonable baseline over the next few years, with utilization increases expected to drive higher procedure penetration, and the tightening sales rep to surgeon ratio should support increased case coverage and adoption.

Our first question comes from drew Ranieri with Morgan Stanley. Please go ahead.

Hi, John and Mark Thanks for taking the questions maybe first just for for both of you.

On the top line guidance for 2024, just help us parse that out a bit a bit more youre looking for incremental revenue of about $35 million to $40 million, but just.

Talk to us about how some of the new product launches might contribute to that.

And with those.

Should we be thinking more that this is going to drive utilization or more drive your blended ASP higher I know you said mid single digits, but just curious what the bigger lever for you is in 2024 with some of these new product launches. Thank you.

Yeah. Thanks, Thanks drew.

Great question good to hear from you, let me tell you a little bit about how we're thinking about the guide as well as what that revenue increases largely going to come from we continue to have our focus primarily on our flagship lateral class space. So we think a lot of that revenue growth is going to come from volume increases.

Mark L. Hair: These new surgeon additions and training our large active surgeon base on new procedures is expected to expand utilization and drive blended ASP increases. Consistent with previous years, we expect a sequential revenue decrease from Q4 to Q1 due to normal seasonality, coming off our usual strong year-end performance. Similar to last year, there has been some carryover of bunion procedures into the first quarter of this year, as patients entering the surgical funnel late in the fourth quarter timeframe are often scheduled for bunion procedures in the following year.

We will as I talked about in the prepared remarks that we're going to have some traditional seasonality we saw some of that.

More pronounced last year, and we expect to see something similar so that's why we've given some color around what we expect to see.

Standard dropdown in Q1 versus Q4, I think Q2 to be.

John Treace: Given this carryover, we now expect a very slight revenue increase from Q1 to Q2, Q3 to be roughly similar to Q2, followed by a seasonally strong Q4, which is historically the largest revenue quarter of the year. Now, before we open up the call for questions, let me turn it back to John for some concluding comments.

Right around Q Q1 level slightly ahead of that and then Q3 in line. So again, we're planning to build for the strong Q4 again this year, but most of that revenue growth is going to come from having new customer surgeons that we continue to add those that were added in 2023 and then the volume.

Operator: Thanks, Mark. In closing, we delivered another year of significant progress in 2023 and expect to remain on track to drive strong growth and profitably scale our business in the years ahead. We're driving a market conversion in a large underserved market that's the fastest growing company in foot and ankle. We believe we're in a great position strategically, with best-in-class bunion, midfoot, and related complementary offerings, an expanding TAM with the addition of new technologies such as ductoplasty, hammer toe, and speed plate, with more innovations to come, supported by differentiating clinical studies, continued strong We look forward to aggressively pursuing these significant opportunities to drive the performance of our business, and I couldn't be more excited about the accelerating momentum we expect as we move through 2024 and beyond.

That will be driven primarily through reliable plasty.

We will have some incremental and additional complementary products that will also increase our blended ASP as well so we've talked about having mid single digit growth there.

Got it and then just on the profitability side.

Encouraging to see more progress there towards breakeven.

But you are still kind of in a unique position.

So a high growth company more opportunity ahead. So maybe how are you thinking about dropping through potential top line upside down to EBITDA for this year and as they're necessarily anything that could change in terms of being a capital light business model as youre thinking about further portfolio expansion on some of these new products that have been disclosed or other.

As close thanks for taking the questions.

Okay.

Yes, so when we think about the profitability, we're really excited about what we.

Having the store for 2024.

Operator: With that, now, let me turn the call over to the operator to open the line for your questions. Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

As we mentioned in the prepared remarks, we had positive EBITDA in the fourth quarter. So we know that Kevin scale.

Higher revenue volumes that we are definitely poised to have that improvement in our bottom line and that adjusted EBITDA line. So I think a lot of it is just going to come through some leverage.

That comment is primarily through the sales and marketing line item, we've talked about this in the past as well.

Operator: Please stand by while we compile the Q&A roster. Our first question comes from Drew Ranieri with Morgan Stanley. Please go ahead.

We've hired a lot of sales reps as they continue to get more experience.

They are able to drive higher revenue volumes in their territories.

Andrew Christopher Ranieri: John and Mark, thanks for taking the questions. Maybe first, just for both of them, on the top line guys, help us parse that out a bit more, for incremental revenue of about $35,000, talk to us about how some of the new product launches might contribute to that, and with those, should we be thinking more that this is going to drive utilization or more drive your blended ASP higher? I know you said that single digit.

That actually plays very well from a leverage perspective, and so we will see that we also have some opportunities to have some increased leverage in the marketing line item or marketing.

<unk> as well, so that's where a lot of that leverages is going to come from.

And.

And then one.

One last question on the backend of that drew.

I think in the portfolio sorry, the 50 questions in one.

John Treace: Curious what the bigger lever for you is, or with some of these new products. Yeah, thanks. Thanks, Drew. Great question.

But just in terms of just the portfolio expansion is there anything that would change.

John Treace: Good to hear from you. Let me tell you a little bit about how we're thinking about the guide as well as where that revenue increase is largely going to come from. We continue to focus primarily on our flagship lapoplasty, so we think a lot of that revenue growth is going to come from volume increases. We will, as I talked about in my prior remarks, we're going to have some traditional seasonality. We saw some of that more pronounced last year, and we expect to see something similar.

You're being a capital light type of business model. Thank you.

Yes drew its John Yes, really nothing that will change there. We've got this really well established in grain philosophy to have this capital light model.

The products and technologies that we continue to put out are designed with that intent we talked about.

The margin from one lab of classy case covering for the cost of the instrumentation tray speed play we do one speed play case and the margin pace for to be played instrument trays. So it's a very capital light model that will continue to be that way.

John Treace: So that's why we've given some color around what we expect to see, the standard drop down in Q1 versus Q4, and then Q2 to be right around the Q1 level, slightly ahead of that, and then Q3 in line. So again, we're planning to build for a strong Q4 again this year, but most of the revenue growth is going to come from new customer service representatives that we continue to add, those that were added in 2023, and then volumes that will be driven primarily through Lapoplast. So we will have some incremental and additional complementary products that will also increase our blended ASP as well. So we've talked about having mid-single-digit growth. And then just on the profitability side, it's encouraging to see more progress there towards breaking even. But you're still kind of in a unique position.

Okay.

One moment for our next question.

Okay.

Our next question comes from Robbie Marcus with Jpmorgan. Please go ahead.

Okay.

Thanks, Thanks for taking the questions two from me.

Maybe first mark.

Talk about the typical drop fourth quarter to first quarter the streets hitting at about $49 million for first quarter is that where you feel comfortable in what would be deemed typical.

Yes.

Question Ravi.

That's where we do feel comfortable given the carryover that we've seen so historically, we see carryover the comment from the fourth quarter into the first quarter and given where we are in the quarter, we feel comfortable with that current current number.

Got it and then.

John Treace: You're still a high growth company, with more opportunity ahead. So maybe how are you thinking about dropping through the potential top line upside down to EBITDA for this year? And is there necessarily anything that could change?

Maybe down the P&L on adjusted EBITDA, you talk about progress towards breakeven.

Thank you.

You have a 50% improvement, which would be about a $12 million loss for 24, and you talked about <unk>.

Mark L. Hair: being a capital light business model as you're thinking about further portfolio expansion, rduct, oz. Yeah, so when we think about profitability, we're really excited about what we have in store for 2024. As I, as we mentioned in the prepared remarks, we had positive EBITDA in the fourth quarter.

<unk> and fourth quarter I believe should we think about similar cadence.

As in 2023 were first second third quarter or a negative in fourth quarter makes up the majority.

Mark L. Hair: So we know that given scale and higher revenue volumes, we were definitely poised to have that improvement in our bottom line and that adjusted EBITDA line. So I think a lot of it is just going to come through some leverage that comes primarily through the sales and marketing line item. We've talked about this in the past that as we've hired a lot of sales reps, as they continue to get more experience and they are able to drive higher revenue volumes in their territories, that actually plays very well from a leverage perspective. And so we'll see that.

With the positive.

Sets that are should we think about it improving throughout the year sequentially. Thanks, great great Great question Ravi.

Think about it largely similar to what happened in 2023.

We tend to have larger losses earlier in the year as we begin some of our marketing programs early in the year some of our medical education programs that we start early in Q1 and Q2.

And then as the revenue increase.

Mark L. Hair: We also have some opportunities to have some increased leverage in the marketing line item or marketing expenses as well. So that's where a lot of that leverage is going to come from, and And then as far as, was there one last question on the back end of that, Drew? Sorry, the 50 questions in one, but in terms of just the portfolio expansion, is there any, shop, being a capital light type of business model? Yeah, Drew. It's John.

We'll have positive EBITDA in the fourth quarter. So I would expect similar to last year losses in the first three quarters, and then theres going to be.

Some positive adjusted EBITDA in the fourth.

Great. Thanks for taking the questions.

Thank you one moment for our next question.

Okay.

Our next question comes from Rick Wise with Stifel. Please go ahead.

Good evening, John Hi, Mark.

I'm going to come back.

24 guidance, if you Wouldnt mind.

<unk>.

And I guess.

John Treace: You really have nothing that'll change there. We've got this really well-established ingrained philosophy to have this capital light model so that, you know, the products and technologies that we continue to put out are designed with that intent. You know, we talked about the margin from one lapoplasty case covering the cost of the instrumentation tray. Speed plate, you know, we do one speed plate case, and the margin pays for two speed plate instrument trays. So it's a very capital light model.

Two perspectives one.

When you when you when you're giving US This guide what was your mindset.

I could argue.

That.

Marketing strong elsewhere.

Good job Youre, clearly training that positions the portfolio is expanding.

Pete.

<unk> launched and demand seems incredibly strong.

The picture I could go on and on and on.

Operator: It'll continue to be that way. Thank you. One moment for our next question. Our next question comes from Robbie Marcus with J.P. Morgan. Please go ahead.

Help us understand why growth would be realistically.

20% relative to the 30%.

<unk> grew last year why should we expect it to be more optimistic could you just talk about your thinking there. Thank you.

Operator: Oh, great. Thanks. Thanks for taking the questions. Two for me.

Operator: Maybe first, Mark, you talk about the typical drop from fourth quarter to first quarter, the street sitting at about 49 million for the first quarter. Is that where you feel comfortable with what would be deemed typical? Yeah, you know, great question, Robbie. And that's where we do feel comfortable given the carryover that we've seen. So historically, we see carryover that comes from the fourth quarter into the first quarter. And given where we are in the quarter, we feel comfortable with that current number. I got it.

Eric This is mark Great question, I appreciate that and I like embedded in your question all of the positives that we have going from the company because thats the way we see it too we've got a great sales force. We've got some great products, we've got some products launching in the back half of the year.

But the one thing that we see right now as you talked about 32% for the full year, but the last two quarters third quarter and fourth quarter were a little bit below that and so it's really early in the year. So we just want to be very prudent.

As we're considering how we're laying out.

The way, we're thinking about 2024 and admittedly even with the seasonality. It leaves more of a back half loaded guide, but it's very early still and we don't see it representing any loss of our momentum going into 'twenty.

Mark L. Hair: And then maybe down the P&L on Adjusted Ebitda, you talk about progress towards breakeven. I think you have a 50% improvement, which would be about a $12 million loss for 2024. You talked about being profitable in the fourth quarter. Should we think about a similar cadence as in 2023, where first, second, and third quarter are negative, and the fourth quarter makes up the majority with the positive and offsets that?

2024.

So there is nothing about the market the technology training.

Thats, making you anxious which leads to my second question.

On competition clearly it seems clear to me from Acs.

From AOS.

More competition than ever more new products.

Focusing to be imitating waking up to the market and also imitating your strategy.

Mark L. Hair: Or should we think about it improving throughout the year sequentially? Thanks. Great, great, great question, Robbie.

Complement.

Yes.

To what extent is this.

Mark L. Hair: Yes, I would think of it largely similar to what happened in 2023. We tend to have larger losses earlier in the year as we begin some of our marketing programs early in the year, and some of our medical education programs that we start early in Q1 and Q2. And then, as revenue can increase, we will have positive EBITDA in the fourth quarter. So I would expect, similar to last year, losses in the first three quarters, and then there's going to be some positive adjusted EBITDA in the fourth. Great, thanks for taking the time to answer the question. Thank you.

<unk>.

More of a challenge less of a challenge.

And to what extent is that.

<unk>, maybe making you more careful thoughtful thoughtfully conservative.

As you start the year.

Hi, Rick Jon and thanks for the question and I'll take that one.

We have been seeing progressively more people enter the space over the past three years.

New competitors entering the space is kind of nothing new to us, it's a really exciting market that we have.

Sort of strategically.

Strategically redirected in terms of three binding correction. So no surprises there either companies want to enter that space the space that we pioneered and developed.

The Tam is really huge it's over $5 billion in the U S and we continue to expand it with our partner Dr. Plasty and our hammertoe entry so, but the binding space itself still very Underpenetrated. We're way out ahead, our retention rates with our surgeons are very high.

Operator: One moment for our next question. Our next question comes from Rick Wise with Steeple. Please go ahead. Good evening, John.

Operator: Hi Mark. I'm going to come back to the 2024 guide, if you wouldn't mind. And I guess from two perspectives, one, when you when you were giving us this guide, what was your mindset? I mean, I could argue that the market seems strong, and the salesforce is doing a good job. You're clearly training the positions, your portfolio is expanding, your you know, the speed paid play launched, and demand seems incredibly strong. You get the picture; I could go on and on and on.

Our IP makes it difficult for these copycats.

It tends to produce less elegant solutions that work more like the old freehand lapidus than they do lap a classy and we strongly believe that nothing works as well as the surgeon patient interface as lap of plastic doesn't and then you have to keep in mind. These these new entrants are entering the market.

Operator: Help us understand why growth would be realistically 18 to 20% relative to the 30%-ish you grew last year. Why shouldn't we expect you to be more optimistic? Could you just talk about your thinking there? Thank you. Eric, this is Mark.

Using multiline largely distracted sales forces.

They only get really a fraction of that sales force is time and attention.

Our three pronged offense of direct focused sales channel rapid product innovation, and iteration and surgeon and patient education.

Mark L. Hair: A great question. I appreciate that. And I like the positives that you have highlighted in your question about the company, because that's the way we see it, too. We've got a great sales force, we've got some great products, we've got some products launching in the back half of the year. But the one thing that we see right now is you talk about 32% for the full year, but the last two quarters, third quarter, fourth quarter, we're a little bit below that. And so it's really early in the year.

While these are great offensive tools that they positioned us with a very strong defense as well and we're just going to keep reinforcing that overtime and continuing to grow in.

<unk> established ourselves as the fastest growing company in the footnote go market, which is what we are today and where we're going to continue to be.

Thank you for that.

It'd be rude and just a quick follow up to that.

Mark L. Hair: So we just want to be very prudent as we're considering how we're laying out the way we're thinking about 2024. And admittedly, even with the seasonality, it leaves more of a back half loaded guide. But you know, it's very early still, and we don't see it representing any loss of momentum going into 2024. So there's nothing about the market, the technology, or the training that's making you anxious, which leads to my second question on competition. Clearly, it seems clear to me from ACFS and from AOS that there's more competition than ever, more new products. Folks seem to be imitating, waking up to the market, and also imitating your strategy. A nice compliment.

Early in the year presenting at JP Morgan.

You guided.

You described yourself as well positioned for 20% plus growth.

Hi.

Yes.

24.

And you're guiding to 18 to 20, why the change John Im guessing folks youre going to be curious thank you so much.

I appreciate the follow up and fair question.

Like we are positioned to move towards EBITDA breakeven, we are positioned well to grow at that 20% range, we absolutely believe that.

Our guide and as Mark said is intentionally prudent.

John Treace: To what extent is this more of a challenge, less of a challenge, and to what extent is that maybe making you more careful, thoughtful, thoughtfully conservative as you start the year? Hi Rick, John, thanks for the question. And I'll take that one.

It's early in the year.

Excited about the accelerating momentum of this business, both with the sales channel and the product launches that we have slated for the back half of the year and.

I think we're just trying to be.

John Treace: You know, we've been seeing progressively more people enter the space over the past three years, and so, you know, new competitors entering the space are kind of nothing new to us. It's a really exciting market that we've sort of strategically redirected in terms of three-plane bunion correction. So it should come as no surprise to other companies wanting to enter that space, the space that we pioneered and developed. The TAM is really huge. It's over $5 billion in the U.S., and we continue to expand it with ductoplasty and our hammertoe entries. But the bunion space itself is still very underpenetrated.

Prudent.

And make sure that.

Early here in the year, we're allowing ourselves to.

Build that confidence as we go through the year.

Makes sense. Thank you.

Thank you one moment for our next question.

Okay.

Our next question comes from Simon <unk> with UBS. Please go ahead.

Hey, Mark and John Thanks for taking the question.

Dominic about.

When thinking about the contract contribution potential from our new product launches over the next few years.

How do you think about this do you think any of these products have the ability to emulate the success of lab capacity.

Recently highlighted a significant platform launch coming this year.

John Treace: We're way out ahead. Our retention rates with our surgeons are very high. Our IP makes it difficult for these copycats, and they tend to produce less elegant solutions that work more like the old freehand Lapidus than they do Lapoplasty, and we just strongly believe that nothing works as well at the surgeon-patient interface as Lapoplasty does. And then you have to keep in mind that these new entrants are entering the market using multi-line, largely distracted sales forces. So they only get really a fraction of that sales force's time and attention.

Great Great question Simon.

I'll take that one and mark can maybe.

To it.

<unk>.

As we look at the market.

The <unk> market opportunity is the largest opportunity we have.

Clearly, but anything we can do to build upon that and accelerate that and enhance our share over time, we're going to be we're going to be working on Dr. <unk> was.

Obvious add on because 30% of our bunion patients had a mid foot deformity that nobody had a good way to correct. So we created a way to do it and we're democratizing that opportunity and that's that's a $5 billion opportunity in itself, but.

John Treace: You know, we think our three-pronged offense of the direct focus sales channel, rapid product innovation and iteration, and surgeon and patient education, while these are great offensive tools, they position us with a very strong defense as well. And we're just going to keep reinforcing that over time and continuing to grow and establish ourselves as the fastest-growing company in the foot and ankle market, which is what we are today and where we're going to continue to be. Thank you for that, and I'm just going to be rude and give just a quick half of a follow-up to that. Early in the year, when you presented at James Morgan, you guided, you talked, you described yourself as well-positioned for 20% plus growth in 24, and you're guiding to 18 to 20. Why the change, John? I'm guessing folks are going to be curious. Thank you so much.

Red point technology that can add to.

Our opportunity in Bunions and Midfoot corrections as well and then yes, we alluded to another significant platform that we are developing right now and we expect to launch in the back half of this year that will help us accelerate our penetration into the <unk> market and expand utilization so.

Hard to exactly say that any of them quote match.

<unk> the opportunity, but they all build on it and help accelerate our momentum into penetrating that opportunity.

That's really helpful.

One quick one for you guys.

How do you think about utilization increasing moving forward.

John Treace: Now, I appreciate the follow-up and fair, fair question. You know, you know, like we are positioned to move towards EBITDA, you know, break even; we are positioned well to grow at that 20% range. We absolutely believe that. Our guidance, as Mark said, is intentionally prudent. You know, it's early in the year.

Despite your surgeon base maturing when we look at our model, we're not seeing utilization increase as much as we would have.

<unk>.

That's a really good question and we've talked about this on prior calls we've had nearly 40% of our active surgeon base has come onboard in the last 24 months. So in the last two years. So we continue to make great strides in adding active surgeons year after year. So what that means we have a little.

John Treace: We're excited about the accelerating momentum of this business, both with the sales channel and the product launches that we have slated for the back half of the year. And, you know, I think we're just trying to be, trim, and make sure that early in the year, we're allowing ourselves to, you know, build that confidence as we go through the year.

Or a step function as surgeons come in initially.

Going around six cases in their first 12 months and it continues to build up to nearly 20 cases after five or six years. So it's unique.

Operator: Thank you. Thank you. One moment for our next question. Our next question comes from Simon Negan with UBS. Please go ahead. Hey, Mark and John.

They get experience with lack of clarity and then they tend to utilize <unk> more and more in their practices and so if you were to mathematically if you were to take away all these earlier.

Operator: Thanks for taking the question. How should we think about the, when thinking about the contribution potential for media product launches over the next two years, how do you think about this, and do you think any of these products have the ability to emulate the success of Lappoplasty? I know you recently highlighted a significant platform launch coming this year. Great, great question, Simon. I'll take that one.

Our more recent I should say more recent.

Surgeons that have come aboard typically do lower.

Fewer cases per year, our average utilization is much higher than what we've reported so I think thats a good problem to have meaning that we continue to add a lot of surgeons and we know that those who have been around longer just do more and so we expect utilization to continue to increase notwithstanding the fact that we will continue to add a lot more.

John Treace: And Mark can maybe add to that. You know, as we look at the market, the lapoplasty market opportunity is the largest opportunity we have, clearly. But anything we can do to build upon that and accelerate that and enhance our share over time, we're going to be working on. Ductoplasty was a very obvious add-on because 30% of our bunion patients had a midfoot deformity that nobody had a good way to correct.

Surgeons in 2024 and beyond.

That's really helpful. Thank you.

Thank you one moment for our next question.

Our next question comes from Richard <unk> with <unk> Securities. Please go ahead.

Hi, Thanks for taking the questions maybe.

Maybe just on guidance I, just want to make sure I'm understanding some of the assumptions here.

On gross margin.

John Treace: So we created a way to do it, and we're democratizing that opportunity. That's a half a billion dollar opportunity in itself, but redpoint technology can add to our opportunity in bunions and midfoot corrections as well. And then, yeah, we alluded to another significant platform that we're developing right now and expect to launch in the back half of this year that will help us accelerate our penetration into the bunion market and expand utilization. Hard to exactly say that any of them, quote, match the lapoplasty opportunity, but they all build on it and help accelerate our momentum toward penetrating that opportunity. That's really helpful. I have one quick one for you guys.

Yes, you did a little better than we were expecting in the fourth quarter.

You guided to adjusted EBITDA.

Should we think gross margin basically holding steady with 2023, and then I think you'd also referenced mid single digit.

Growth in your revenue per procedure ASD. However, you want to characterize it is that the right way to think of what's embedded in your 2004 Guide and then I have a follow up.

Yeah, Rich really good question I think youre right on all those fronts.

Given a lot of new product launches and some of the mix shift.

We are anticipating maybe the gross margin too to come down a little bit until and we've talked about this in the past so as we introduce new products. We just don't quite have the same efficiencies that gross margin initially.

John Treace: How do you think about utilization increasing moving forward? Despite your surgeon-based maturing, when we look at our model, we're not seeing the utilization increase as much as we would have expected. That's a really good question.

So.

You 2024 is having maybe some slight pressure on our gross margin, but nothing substantial so maybe a little bit less than what we saw in 2023, but all your other assumptions are right on.

Mark L. Hair: We've talked about this on prior calls. We've had nearly 40% of our active surgeon base come on board in the last 24 months, so in the last two years. So we continue to make great strides in adding active surgeons year after year. What that means is, we have a little bit of a step function as surgeons come in initially, they do around six cases in their first 12 months, and it continues to build up to nearly 20 cases after, you know, five or six years. So it's unique.

Okay, I actually have another follow up but I have a follow up to the gross margin comment first.

Gross margin in the first half a little bit below what it is going to be in the second half and on a net basis for the full year. It's down I mean, just just to get the cadence right now.

Yes.

Follow up right yes.

If you can remind us what your mic.

Our business is in the ASC setting.

It's something that we continue to hear at AOS.

Trend.

Realizing throughout orthopedics talk about your portfolio. How you are positioned there and what that will do to your pricing and margins going forward. Thank you.

Mark L. Hair: They get experience with lapoplasty, and then they tend to utilize lapoplasty more and more in their practices. And so if you were to, you know, mathematically, if you were to take away all these earlier or more recent, I should say, more recent surgeons that have come aboard who typically do lower, fewer cases per year, our average utilization is much higher than what we've reported. So I think that it's a good problem to have, meaning that we continue to add a lot of surgeons, and we know that those who have been around longer just do more. And so we expect utilization to continue to increase, notwithstanding the fact that we will continue to add a lot more surgeons in 2024 and beyond. That's really helpful.

Alright, great great questions retro is two of them I'm going to take the first one and ill give the second one to John with.

With respect to gross margin again, we're not.

<unk> substantial decreases over 2023, but I think the way you articulated is the way we're thinking about it that earlier in the year, maybe a little bit lower with some improvement in the back half of next year. So again, just a slight step down year over year, we don't view it.

You're going to be over that 80% gross margin level, which is extremely strong. So we feel really pleased I just wanted to say that it will be tempered slightly versus last year, and then John with respect to the ASC and hospital.

Mark L. Hair: Thank you. Thank you. One moment for our next question. Our next question comes from Richard Newitter with Truist Securities. Please go ahead.

Hey, rich.

So I think theres, a little bit of confusion out there on this topic, because I know theres a lot of contemporary.

Operator: Hi, thanks for taking the questions. Maybe for guidance, I just want to make sure I'm understanding some of the assumptions here. On gross margin, you did a little better than we were expecting in the fourth quarter; you guided to adjusted EBITDA. Should we think gross margin is basically holding steady in 2023? And then I think you would also reference mid single-digit growth in your revenue procedure, AST, however you want to characterize it. Is that the right way to think of what's embedded in your 24 guide? And then, as a follow up. Yeah, Rich, a really good question.

Contemporary discussion about hip and knee volumes moving to the ASC setting that outpatient setting foot and ankle has been done in those settings for 30 30 years.

Decades.

And we participate in afcs.

Private afcs and in the hospital owned Asc's, obviously, the hospital owned assets to get a little better more favorable reimbursement, but we're market competitive in the private ESC as well with different.

Different products that we have that have different price points I would say, it's the minority of our revenue that are in the private.

Mark L. Hair: I think you're right on all those fronts. Given a lot of new product launches and some of the mixed shift, we're anticipating maybe the gross margin to come down a little bit until, and we've talked about this in the past, as we introduce new products, we just don't quite have the same efficiencies and gross margin initially. And so I view 2024 as having maybe some slight pressure on the gross margin, but nothing substantial. So maybe a little bit less than what we saw in 2023. But all your other assumptions are right on.

Setting and the majority is more in the hospital outpatient and our hospital owned ASC would be that freestanding or at a hospital facility itself. So well, we're competitive there and we continue to.

To make progress there, but there's not this huge.

Serge and trend towards.

Foot and ankle procedures, there like there is in hips and knees and maybe even some spine cases that is kind of creating a lot of talk in.

On the hip and knee world.

Thank you.

Sure.

Thank you one moment for our next question.

Our next question comes from Ryan Zimmerman with BTG. Please go ahead.

Mark L. Hair: Okay, I actually have another question, but I want to respond to the gross margin comment first. Should we think of gross margin in the first half a little bit below what it's going to be in the second half, and on a net basis for the full year, it's down? I mean, just to get the cadence right.

Good afternoon, thanks for taking the question.

Alright.

Hey.

Want to start on speed play.

After a really good start we've heard very positive feedback on it.

I think John you called out that it's about 20% of cases today.

Where do you think that can go because I mean, just doing some simple math it can account for.

Mark L. Hair: No, that's my second follow-up right now, just on ASC. If you can remind us what your MIC is, the number of businesses in the ASE setting. It's something that we continue to hear at AAOS. That's the trend that's emerging throughout orthopedics. Talk about your portfolio, your position there, and what that will do to your pricing and margins going forward. Thank you. All right, great, great questions, Rich. There are two of them. I'm going to take the first one, and I'll give the second one to John.

A decent chunk of growth in 2024.

And could probably swing higher if that 20% moves higher.

Yes, great Great question, I mean, very exciting we've talked about this as being probably the most impactful technology launch for the company's central App or <unk>. These are things that our surgeon, saying not me, but it's true.

Very favorable response, we've had it in 20% of our surgeons hands.

Mark L. Hair: With respect to gross margin, again, we're not expecting substantial decreases over 2023. But I think the way you articulate it is the way we're thinking about it, that early in the year, it may be a little bit lower with some improvement in the back half of next year. So again, just a slight step down year over year, but we don't view it that way, you know; we're still going to be over that 80% gross margin level, which is extremely strong. So we feel really pleased. I just wanted to say that it will be tempered slightly versus last year. And then John, with respect to the ASCs and hospitals. Yeah, hey, Rich.

In Q4, and it made up 25% of our our procedural revenue so and we're just getting started with it and.

The other piece of the momentum is.

Right now our sales force really has three great shots on goal with lap of Plastique Slash micro lap of plassey of Dr. <unk> and the evolution of that and speed play.

Three unique technologies that can only get from our company. So one of those technologies is going to appeal to some foot and ankle surgeon sooner or later and once they get interested in one if they want to use speed play, we're going to introduce them to lap a plastic and we're going to introduce them to a doctor plastic because 30% of the cases they need to.

John Treace: So I think there's a little bit of confusion out there on this topic because I know there's a lot of contemporary discussion about hip and knee volumes moving to the ASC setting, that outpatient setting, and foot and ankle procedures have been done in those settings for, you know, 30, 30 years, decades. And we participate in ASCs, the private ASCs, and then the hospital-owned ASCs. Obviously, the hospital-owned ASCs get a little better, more favorable reimbursement. But we're market competitive in the private ASCs as well, with different, different products that we have that have different price points. I would say it's a minority of our revenue that is in the private ASC setting. And the majority are more in the hospital outpatient setting and or hospital-owned ASC, be that freestanding or at the hospital facility itself.

Correct the metric deformity.

And if they like a Dr. Plassey, we're going to show them speed play because it makes the procedure faster and more convenient. So those three technologies are really powerful.

And it's creating a very efficient model from a salesforce standpoint so.

We love speed play, we think it has a lot of opportunity not only in lap a classing of Dr. Plassey, but and a lot of other areas in the foot for foot and ankle procedures and you could see the the ratio of our cases continue to rise.

As we get more sets out there and get into full commercial.

Throughout the year.

Okay.

Fair enough and then Mark.

Talked about the cash on hand.

No our spend is going but you did and you made a comment I thought was interesting which was the access to liquidity and I'm just curious if your view on.

John Treace: So we're competitive there and we continue to make progress there, but there's not this huge surge and trend toward foot and ankle procedures there like there is in hips and knees and maybe even some spine cases that is kind of creating a lot of talk in the hip and knee world. Thank you.

How are you thinking about your cash.

<unk> has changed and are you looking at assets that are potentially out there in the field given those comments and just your broader view on kind of.

Operator: Thank you. One moment for our next question. Our next question comes from Ryan Zimmerman with BTIG. Please go ahead. Good afternoon. Thanks for taking the question. I want to start on Speed Plate.

We're not necessarily what youre going to buy but but just your appetite to kind of bring in more into the portfolio.

Yes, Great question, Ryan and the way I articulated.

Articulated just our cash and access to liquidity, which just to give the same level of information that we've given in the past just to say what we have access to we have a great relationship with our lender and until we have access to it.

Operator: It's been off to a really good start, with very positive feedback on it. I think, John, you called out that it's about 20% of cases today. Where do you think that can go? Doing some simple math.

Financing if needed.

John and I have often talked about.

If there are opportunities for us to expand the portfolio. We did last year with some great technology Red point that Si.

John Treace: A decent chunk of growth in 2024 and could probably swing higher if that 20%. Yeah, great question. I mean, very exciting. Talked about this as being probably the most impactful technology launch for the company since lapoplasty. These are things that our surgeons say, not me, but it's true. Very favorable response.

We're not saying that.

That we require any kind of acquisitions or additional products in our portfolio to have this growth that we're talking about this year, but we're we'd always be open to great complementary technologies. If it were to match what we're doing here.

So that was not in any way suggestive of what we're planning to do or any strategy changes, but just to give the full perspective as far as what our cash on hand is in full full liquidity.

John Treace: We've had it in 20% of our surgeons' hands by Q4, and it made up 25% of our procedural revenue. So, we're just getting started with it. And the other piece of the momentum is, You know, right now our sales force really has three great shots on goal with lapoplasty slash microlapoplasty, adductoplasty and the evolution of that, and SpeedPlate, three unique technologies that can only be obtained from our company. So one of those technologies is going to appeal to some foot and ankle surgeons sooner or later. And once they get interested in one, if they wanna use SpeedPlate, we're gonna introduce them to Lapoplasty.

Okay, maybe maybe I read into that a little too much but thank you for clarifying.

No problem.

Thank you one moment for our next question.

Our next question comes from George Sellers with Stephens. Please go ahead.

Hey, good afternoon, and thanks for taking the question.

On the sales force I'm, just curious what does the productivity look like for some of your top performing direct reps and then how should we think about the capacity of your direct reps in terms of maybe the number of surgeons that can support or the.

John Treace: And we're going to introduce them to Adductoplasty because, in 30% of the cases, they need to correct the med foot deformity. And if they like Adductoplasty, we're gonna show them SpeedPlate because it makes the procedure faster and more convenient. So those three technologies are really powerful. And it's creating a very efficient model from a Salesforce standpoint. We love SpeedPlate.

Level of revenue that can that can drive or how you all are thinking about it internally.

Yeah, Hey, George it's John.

Good to hear from you good question.

We have.

Broad spectrum of revenue productivity with our sales team today, you have some that have quite significant tenure several years and some of those reps can be in the several million dollars range and then we have newer reps that are still trying to climb to 300000 and beyond those newer reps right. So.

John Treace: We think it has a lot of opportunity, not only in lapoplasty and adductoplasty but in a lot of other areas in the foot for foot and ankle procedures. And you will see the ratio of our cases continue to rise as we get more sets out there and get into full commercial throughout the year. Fair enough.

What we do know is when you get to that two year time point most of our reps are operating at a level of revenue performance that we're very pleased with and we believe it's very sustainable and they're also operating at a cost of sales ratio Thats very very nice for the business and we know can create a lot of leverage going forward. So.

John Treace: And then, Mark, you know, you talked about the cash on hand, kind of knowing where spend is going, but you did, you made a comment that I thought was interesting, which was access to liquidity. And I'm just curious about your view on, you know, how are you thinking about your cash? has changed, are you looking at assets that are potentially out there in the field, given those comments? You know, your broader view on, not necessarily what you're going to buy, but the appetite to kind of bring in more. Yeah, a great question, Ryan.

We feel we feel good about the sales team we feel good about their capacity to bring these other technologies forward and part of it is because of the efficiency of this model and the way we are bringing these products out we're not asking them to run around from one part of the foot to another part of the foot and do a trauma case, and then do a hammertoe where everything builds upon.

Mark L. Hair: And the way I articulated just our cash and access to liquidity was just to give the same level of information that we've given in the past, just to say what we have access to. We have a great relationship with our lender, and so we have access to financing if needed. You know, John and I have often talked about, you know, if there are opportunities for us to expand the portfolio. We did last year with some great technology, Red Point, that's PSI.

<unk> and Dr. <unk> build on each other speed play builds on both of those and the hammertoe fits into the bundled case, our disposable instruments their problem solving for mid foot fusions that we specialize in and lap a classic cases.

So.

It's a very very efficient way to sell.

We've proven that we can establish a powerful direct channel, that's really well sustaining with room for future your nice cost leverage as well so.

Mark L. Hair: You know, we're not saying that we require any kind of acquisitions or additional products in our portfolio to have this growth that we're talking about this year, but we're, you know, we'd always be open to great complementary technologies if they were to match what we're doing here. So that was not, in any way, suggestive of what we're planning to do or any strategy changes, but just to give the full perspective as far as what our cash on hand is and full liquidity. Okay, maybe I'll read into that a little. Thank you for, no problem.

Hopefully the answer to your question, let me know if you need more information.

No that's super helpful. I appreciate that and then.

Mark maybe one for you you talked about the marketing line as being an area, where you can see leverage this year and in the future. I know you all have recently hired a new director of marketing could you just speak to some of the areas where.

Operator: Thank you. One moment for our next question. Our next question comes from George Sellers with Stevens. Please go ahead.

<unk> been able to find maybe some more efficient ways to spend that marketing line.

John Treace: Hey, good afternoon, and thanks for taking the question. On the sales force, I'm just curious, what is the productivity of some of your top performing direct reps, and then how should we think about the capacity of your direct reps in terms of maybe the number of surgeons they can support or the level of revenue they can drive, or how y'all are thinking about it internally? Yeah, hey, George, it's John.

Hello.

Driving some better returns on those investments does that that marketing line item. Thanks again for the time.

Yes, great. Great question. This is Mark let me take a first stab at that and if there's any other color John John can add to it.

Yes, we have.

Continued over the past several years, we continue to increase our spending we've tested a lot of different marketing techniques.

John Treace: Good to hear from you. A good question. You know, we have a broad spectrum of revenue productivity on our sales team today; you have some that have, you know, quite significant tenure, several years, and some of those reps can be in the several million dollar range. And then we have newer reps that are still, you know, trying to climb to 300,000 and beyond those newer reps, right? So what we do know is when you get to, at a two-year time point, most of our reps are operating at a level of revenue performance that we're very pleased with and we believe is very sustainable. And they're also operating at a cost-to-sales ratio that's very, very nice for the business and we know can create a lot of leverage going forward.

Areas, whether it be social media, whether it be television commercial spots, we've got a lot of marketing activities and campaigns. We do have a new senior vice president of marketing who has.

It's been phenomenal we're lucky to have him he's got a lot of great experience and he has already been able to really streamline a lot of our efforts to get.

Similar results were higher results with even less spend so he's he's he comes as a professional great experience. We're leaning on having so that's what we're saying we can get the same kind of results are even better results without having to continue to increase our spend levels of year. After year, So thats, where the leverage can come in because if we can hold some of that.

John Treace: So we feel good about the sales team; we feel good about their capacity to bring these other technologies forward. And part of that is because of the efficiency of this model and the way we're bringing these products out. We're not asking them to run around from one part of the foot to another part of the foot and do a trauma case and then do a hammer toe.

Spending levels consistent yet have better outcomes, that's where that leverage columns.

John anything.

I think you said it you said, it very well and comprehensively or.

Added about Nathan's.

Expertise and the impact he has been able to ask quickly on the business. He's only been here six months and.

Driven a lot of efficiencies and productivity.

John Treace: Everything builds upon, you know, lapoplasty and adductoplasty build on each other, SpeedPlate builds on both of those, and the hammer toe fits into the bunion case. Our disposable instruments, they're problem-solving for the mid-foot fusions that we specialize in and lapoplasty cases. So it's a very, very efficient way to sell, and we've proven that we can establish a powerful direct channel that's really well-sustaining with room for future-year cost leverage as well. Let me know if you need more information, know that that's super helpful. Okay, I appreciate it. And then, Mark, maybe one for you.

Sponsoring the National Pickle Ball Championships, which has high demographic overlap.

With our patient group and very impactful very cost efficient way to reach a lot of potential patients and a lot more creativity coming out of him and more to come stay tuned on some new initiatives that will be.

Launching here in the next two to three months.

Okay, great thanks for that color.

Sure.

Im showing no further questions at this time I would now like to turn it back to Julie Dewey for closing remarks.

Thanks, everybody for joining us today, we appreciate your time and interest if you have more questions. Please reach out and we'll look forward to talking to you next quarter. This concludes our call.

Mark L. Hair: You talked about the marketing line as being an area where you can see leverage this year and in the future. And I know y'all have recently hired a new director of marketing. Could you speak to some of the areas where you've been able to find maybe some more efficient ways to spend in that marketing line and how you're sort of driving some better returns on those investments through that marketing line item? Thanks again for your time.

Thank you for your participation in today's conference. This concludes the program you may now disconnect.

Okay.

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Mark L. Hair: Yeah, great, great question. This is Mark. Let me take a first stab at that. And if there's any other color, John, John could add to it.

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Mark L. Hair: Yeah, we've continued to increase our spending over the past several years. We've tested a lot of different marketing techniques, areas, whether it be social media, whether it be TV commercial spots. We've done a lot of marketing activities and campaigns. We do have a new Senior Vice President of Marketing, who's been phenomenal. We're lucky to have him.

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Mark L. Hair: He's got a lot of great experience, and he's already been able to really streamline a lot of our efforts to get similar results or higher results with even less spend. So he's, he's, he comes as a professional with great experience. We're leaning on him.

Okay.

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John Treace: So that's what we're saying we can get the same kind of results or even better results without having to continue to increase our spend levels year after year. So that's where the leverage can come in. Because if we can hold some of that spending levels constant, yet have better outcomes, that's where that leverage comes in. No, I think you said it very well and comprehensively.

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John Treace: We're excited about Nathan's expertise and the impact he's been able to have quickly on the business. He's only been here six months, but he's driven a lot of efficiencies and productivity, got us sponsoring the National Pickleball Championships, which has a high demographic overlap with our patient group, and a very impactful, very cost-efficient way to reach a lot of potential patients, and a lot more Stay tuned for some new initiatives that we'll be launching here in the next two to three months. Okay, great. Thank you all for that color, sure.

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Operator: Thank you. I'm showing no further questions at this time. I'd now like to turn it back to Julie Dewey for closing remarks. Thank you, everybody, for joining us today. We appreciate your time and interest. If you have more questions, please reach out, and we'll look forward to talking to you next quarter. This concludes our call. Thank you for your participation in today's conference. This concludes the program. You may now disconnect. Thanks for watching! Welcome to the Treace Medical Concepts fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen-only mode.

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Julie D. Dewey: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Julie Dewey. Please go ahead.

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Julie D. Dewey: Good afternoon, everyone, and welcome to our fourth quarter 2023 earnings conference call. We appreciate you joining us. I'm Julie Dewey, Treace's Chief Communications and IR Officer.

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Julie D. Dewey: With me today are John Treace, Chief Executive Officer, and Mark Hair, Chief Financial Officer. During the call, John and Mark will offer commentary on our commercial activity and review our fourth quarter and full year financial results released after the close of the market today, after which we will host a question and answer session. The press release and supplemental materials can be found in the investor relations section of our website at investors.treace.com.

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Julie D. Dewey: This call is being recorded and will be archived in the investor section of our website. Before we begin, we would like to remind you that it is our intent that all forward-looking statements made during today's call will be protected under the Private Securities Litigation Reform Act of 1995. Any statements that relate to expectations or predictions of future events and market trends, as well as our estimated results or performance, are forward-looking statements. All forward-looking statements are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. All forward-looking statements are based upon current available information, and Treace assumes no obligation to update these statements. Accordingly, you should not place undue reliance on these statements.

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Julie D. Dewey: Please refer to our SEC filings, including our Form 10-K for the full year 2023, to be filed on February 27, 2024, for a detailed presentation of risks. With that, I will now turn the call over to John. Thank you, Julie. Good afternoon, everyone.

Okay.

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Good day, and thank you for standing by welcome to the <unk> medical concepts fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

John Treace: And thanks for joining us. I'm going to focus my comments today on our full year and fourth quarter 2023 highlights, the exciting progress of our speed plate implant launch, and our other growth drivers. Following my comments, Mark will cover the specifics of our Q4 results and our 2024 guidance. 2023 was a busy and productive year for Treace, and we're proud of the significant progress that we have made. We successfully executed on our strategic plan, resulting in full-year U.S. revenue growth of 32 percent, surpassing the high end of our previously provided guidance range and growth that we believe is significantly above our foot and ankle peers. We also continue to scale our operations, making encouraging adjusted EBITDA progress that was ahead of the prior year and delivering gains across our key operating metrics, reaffirming our belief that we have the right strategies in place to expand the market penetration of our differentiated technology.

To ask a question. During this session you will need to press star one on your telephone.

Didn't hear an automated message advising your hand is raised to withdraw your question. Please press star one again.

Be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker today Julie Dewey. Please go ahead.

Good afternoon, everyone and welcome to our fourth quarter 2023 earnings Conference call. We appreciate you joining us I am Julie Dewey trees, as Chief Communications and IR Officer with me today are John <unk>, Chief Executive Officer, and Mark hair, Chief Financial Officer.

During the call John and Mark will offer commentary on our commercial activity and review our fourth quarter and full year financial results released after the close of the market today after which we will host a question and answer session.

Press release and supplemental materials can be found in the Investor Relations section of our website at investors dot trees Dot com. This call is being recorded and will be archived in the investors section of our website.

John Treace: Here at Treace, we're driving a fundamental shift in the surgical treatment of bunions through our proprietary lapoplasty procedure, which is well on its way to becoming a standard of care. Lapoplasty targets a $5 billion-plus addressable market in the U.S., with continued strong adoption by the foot and ankle surgeon community. And with nearly one in four adults in the U.S. affected by bunions, we believe this represents the most compelling opportunity in the foot and ankle reconstructive market today.

Before we begin we would like to remind you that it is our intent that all forward looking statements made during today's call will be protected under the private Securities Litigation Reform Act of 1995.

Any statements that relate to expectations or predictions of future events and market trends as well as our estimated results or performance are forward looking statements. All forward looking statements are based upon our current estimates and various assumptions.

John Treace: After the fourth quarter of 2023, we will have penetrated approximately 6.6% of the estimated 450,000 annual bunion surgeries in the US, up from 5.5% in the fourth quarter of 2022, and reflecting approximately 2.7% market penetration of the estimated 1.1 million annual US surgical candidates that constitute our $5 billion plus total addressable market. We've also expanded our footprint in the foot and ankle market by adding complementary procedures and technologies to treat related deformities, such as adductoplasty and hammertoe correction, both of which frequently coexist with bunions and are addressed at the same time. This has opened up new revenue opportunities and meaningfully expanded our TAM by 15%, or approximately $750 million, without diluting our focus on the $5 billion-plus U.S. market opportunity for our core lapoplasty procedure. We initiated commercialization of several new technologies in 2023, including our speed plate fixation platform, hammer toe system, several sterile instruments, as well as a limited release of our micro lapoplasty system. We expect all of these new technologies to fuel strong growth for years to come.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements.

All forward looking statements are based upon current available information and <unk> assumes no obligation to update. These statements. Accordingly, you should not place undue reliance on these statements. Please refer to our SEC filings, including our Form 10-K for the full year 2023 to be filed on <unk>.

February 27th 2024 for a detailed presentation of risks with that I will now turn the call over to John.

Thank you Julie good afternoon, everyone and thanks for joining us I'm going to focus my comments today on our full year and fourth quarter 2023 highlights the exciting progress of our <unk> implant launch and our other growth drivers. Following my comments Mark will cover the specifics of our Q4 results and our 2020 for guidance.

2023 was a busy and productive year for trees, and we're proud of the significant progress that we've made we successfully executed on our strategic plan, resulting in full year U S revenue growth of 32%, surpassing the high end of our previously provided guidance range and growth that we believe is significantly above our foot and ankle peers.

John Treace: As a uniquely focused foot and ankle company, we believe we're distinctly positioned to drive innovation-led growth and deliver long-term shareholder value. Since our founding, we've pioneered elegant breakthrough solutions, including our flagship lapoplasty and adductoplasty procedures that are designed to deliver predictable, repeatable results supported by differentiating clinical studies. Along the way, we've also taken bold steps to grow and defend the markets we've pioneered through our direct sales team, rapid product innovation, and patient awareness and education initiatives, all of which we believe have resulted in a sizable competitive advantage for Treace. With over 90,000 patients now treated with our lapoplasty procedure, we recognize that our success is not only measured in our numbers but in the transformative change that our differentiated therapies provide to Revenue in the fourth quarter was $62.2 million, up 25% over the prior year, with full-year revenue growing 32% over the prior year.

We also continue to scale, our operations, making encouraging adjusted EBITDA progress, though was head of the prior year and delivering gains across our key operating metrics reaffirming our belief that we have the right strategies in place to expand the market penetration of our differentiated technologies.

<unk>, we're driving a fundamental shift in the surgical treatment of bunions through our proprietary lap a flashy procedure, which is well on its way to becoming a standard of care.

<unk> targets of $5 billion, plus addressable market in the U S. With continued strong adoption by the foot and ankle surgeon community and with nearly one in four adults in the U S. Effected by Bunions. We believe this represents the most compelling opportunity in the foot and ankle reconstructive market today.

After the fourth quarter of 2023, we have penetrated approximately six 6% of the estimated 450000 annual bunion surgeries in the U S up from five 5% in the fourth quarter of 2022, and reflecting approximately two 7% market penetration of the estimated $1 1 million annual U S.

Surgical candidates that constitute our $5 billion plus total addressable market.

We've also expanded our footprint in the foot and ankle market by adding complementary procedures and technologies to treat related deformities, such as a ductile classy and hammertoe correction, both of which frequently coexist with Bunions and are addressed at the same time.

John Treace: These results demonstrate the underlying strength and effectiveness of our strategic investments in our direct sales channel, targeted R&D initiatives, and direct-to-consumer programs. The fourth quarter was also our first quarter of positive adjusted EBITDA since going public in April of 2021. We continue to advance our key performance metrics in the fourth quarter, including substantial gains in the number of new surgeon users, ending Q4 with 2,855 active surgeons, up 164 for the quarter and up 20% year over year. A year-over-year increase in trailing 12-month surgeon utilization, with an average of 10.4 kits per active surgeon in Q4, up from 10.3 kits a year ago, despite the dilutive effect of the large number of new surgeon And a record blended average selling price of $6,437 per lapoplasty kit sold in the quarter, up 9% over the prior year, driven by the early impact in the quarter from our new SpeedPlate and Hammertoe systems, as well as increased adoption of our adductoplasty procedure and utilization of our new sterile instrument.

This has opened up new revenue opportunities and meaningfully expanded our tam by 15% or approximately $750 million without diluting our focus on the $5 billion plus U S market opportunity for our core lap a flashy procedure.

We initiated commercialization of several new technologies in 2023, including our <unk> fixation platform Hammertoe system, several sterile instruments as well as a limited release of our micro <unk> system. We expect all of these new technologies to fuel strong growth for years to come.

As a uniquely focused foot and ankle company. We believe we are distinctly positioned to drive innovation led growth and deliver long term shareholder value.

Since our founding we've pioneered elegant breakthrough solutions, including our flagship lack of classy and inductive classy procedures that are designed to deliver predictable repeatable results supported by differentiating clinical studies.

Along the way we've also taken bold steps to grow and defend the markets. We pioneered through our direct sales team rapid product innovation and our patient awareness and education initiatives all of which we believe had resulted in a sizable competitive advantage for <unk>.

John Treace: Our strategic investments and commercial focus have continued to support the growth of our business, giving us confidence that we have a well-defined, proven, and scalable commercial strategy. We intend to continue these targeted investments in 2024 with the goal of increasing our market penetration by expanding the footprint and coverage of our Bunyan-focused direct sales channel, advancing our patient education and awareness DTC initiatives, and driving more targeted R&D innovations into the market. We have a highly specialized team at Treace, including an established and growing direct sales channel, one that is 100% focused on bunion and related midfoot surgery, the only such channel in the industry. We increased the size of this team by 35% during 2023, exiting the year with 227 quota-carrying direct reps that produced roughly 82% of our revenue mix in Q4. When you include our associate sales reps, clinical specialists, and sales managers, our total employee fleet in the field totaled approximately 340 employees at the end of 2023 versus 267 at the end of the year 2022.

With over 90000 patients now treated with our lack of classy procedure, we recognize that our success is not only measured in our numbers, but in a transformative change that are differentiated therapies provide to patients.

Turning now to our Q4 and full year 2023 results.

Revenue in the fourth quarter was $62 2 million up 25% over the prior year with full year revenue growing 32% over prior year.

These results demonstrate the underlying strength and effectiveness of our strategic investments in our direct sales channel targeted R&D initiatives and direct to consumer programs.

Fourth quarter was also our first quarter of positive adjusted EBITDA since going public in April of 2021.

We continued to advance our key performance metrics in the fourth quarter, including substantial gains in the number of new surgeon users and in Q4 with 2855 active surgeons up 164 for the quarter and up 20% year over year.

Our year over year increase in trailing 12 months certain utilization with an average of 10 four kits per active surgeon in Q4 up from 10, three kits a year ago. Despite the dilutive effect of the large number of new surgeons added during the year.

And record blended average selling price of $6437 per lateral classic kits sold in the quarter up 9% over the prior year driven by the early impact in the quarter from our new speed played in hammertoe systems as well as increased adoption of our Dr. Flashy procedure and utilization of our new sterile instruments.

John Treace: We plan to appropriately grow this specialized team during 2024 to ensure a strong surge in coverage and support and continued market penetration. As I mentioned earlier, we saw strong growth in our active surgeon base in Q4 and for the full year. As our surgeon base continues to develop and gain tenure, we anticipate utilization gains with increased use of lapoplasty and adductoplasty, as well as further adoption of our growing portfolio of complementary products, all supported by our expanding direct sales channel, differentiating clinical data sets, and patient education and awareness DTC initiatives. Now, I'd like to turn to our product launches. First, our new SpeedPlate fixation platform.

Our strategic investments in commercial focus have continued to support the growth of our business, giving us confidence that we have a well defined proven and scalable commercial strategy.

We intend to continue these targeted investments in 2024 with the goal of increasing our market penetration by expanding the footprint and coverage of our bundle focused direct sales channel.

<unk>, our patient education, and awareness DTC initiatives and driving more targeted R&D innovations into the market.

We have a highly specialized team of trees, including an established and growing direct sales channel. One that is 100% focused on bunion and related midfoot surgery, the only such one in the industry.

John Treace: Our SpeedPlate launch is off to a great start, and we saw very strong demand in the fourth quarter, despite its limited availability. In fact, SpeedPlate represented about a quarter of our case volume in Q4, and about 20% of our active surgeons have already used SpeedPlate. We are on track to have full market availability of SpeedPlate at the end of Q1 and expect broadening adoption and growth throughout 2024 and beyond. Our SpeedPlate fixation technology is designed to deliver the stability of a titanium locking plate with the speed of insertion and compression of a staple, a very attractive combination for many surgeons.

We increased the size of this team by 35% during 2023 exiting the year with 227 quota carrying direct reps that produce roughly 82% of our revenue mix in Q4.

When you include our associate sales reps clinical specialists and sales managers are total employee fleet in the field totaled approximately 340 employees at the end of 2023 versus 267 at the end of the year 2022.

We plan to appropriately grow this specialized team during 2024 to ensure strong surgeon coverage and support and continued market penetration.

John Treace: We believe this technology is not only enhancing the experience of our existing customers, but it's also allowing us to attract and onboard a new audience of surgeons, specifically those who prefer night in all staples for fixation. While broadly applicable across lapoplasty and adductoplasty procedures today, we previewed new speed plate implant configurations at the recent ACFAS meeting that are designed to expand the versatility of our speed plate platform to address an expanded range of fusion procedures throughout the foot. These new Speedplay configurations are expected to be available by Q3.

As I mentioned earlier, we saw strong growth in our active surgeon base in Q4 and for the full year.

That's our surgeon base continues to develop and gains tenure, we anticipate utilization gains with increased use of <unk> and Dr. <unk> as well as further adoption of our growing portfolio of complementary products all supported by our expanding direct sales channel differentiated clinical the clinical datasets and patient education and awareness DTC initiatives.

Now I'd like to turn to our product launches first our new <unk> fixation platform. Our <unk> launch is off to a great start and we saw very strong demand in the fourth quarter. Despite its limited availability.

In fact, <unk> represented about a quarter of our case volume in Q4 and about 20% of our active surgeons have already use <unk>.

John Treace: Next, our microlapoplasty system. This is an advanced instrumentation option designed to further reduce both the incision size and related tissue dissection during the lapoplasty procedure. This exciting evolution of our instrumentation allows the patented lapoplasty procedure to be performed now through a 2 centimeter incision. Our microlapoplasty system is now fully available. While we're excited about the growth opportunity that all of these product launches represent, there's even more to come from our robust product development pipeline. In fact, inclusive of the launches I've just discussed, we have 10 new innovation launches slated for 2024, and more in our R&D pipeline to ensure a steady cadence of new innovations in 2025 and beyond. We were excited to highlight many of our new 2024 innovations at ACFAS, including our new mini-adductoplasty system and our RedPoint preoperative planning and patient-specific instrumentation. Mini-adductoplasty features advanced instrumentation designed to allow the adductoplasty midfoot correction procedure to be performed through an approximately 50% smaller incision and leverages SpeedPlate technology for fixation.

We are on track to have full market availability of speed played at the end of Q1, and expect broadening adoption and growth throughout 2024 and beyond.

Our <unk> fixation technology is designed to deliver the stability of a titanium locking plate with the speed of insertion and compression of a stable a very attractive combination for many surgeons.

We believe this technology is not only enhancing the experience of our existing customers, but it's also allowing us to attract and onboard a new audience of surgeons, specifically, those who prefer nighthawk staples for fixation.

While broadly applicable across lap a classy and Dr. Flashy procedures today, we previewed new <unk> implant configurations at the recent act fast meeting that are designed to expand the versatility of our <unk> platform to address an expanded range of fusion procedures throughout the foot. These.

These new speed play configurations are expected to be available by Q3.

Next our micro lap a classic system. This is an advanced instrumentation option designed to further reduce both the incision size and related tissue dissection with the lap of biopsy procedure. This exciting.

Evolution of our instrumentation allows the patented lap a classy procedures to be performed now through a two centimeter incision utilizing our new speed play fixation technology, our micro lap of planting system is now fully available.

John Treace: The mini adductoplasty system is currently in limited clinical release with full commercialization planned in the second half of 2024. We believe this new innovation can drive increased adductoplasty adoption and market penetration for years to come. Our Redpoint patient-specific instrumentation is our first-to-market technology designed to deliver preoperative planning and patient-specific guides for bunion and midfoot deformity corrections.

While we're excited about the growth opportunity that all of these product launches represent there's even more to come from our robust product development pipeline in fact inclusive of the launches I've. Just discussed we have 10, new innovation launches slated for 2024 and more in our R&D pipeline to ensure a steady cadence of new innovations in 2025 and beyond.

Yes.

We were excited to highlight many of our new 2024 renovations at <unk>, including our new mini adductor Plassey system, and a red point preoperative planning and patient specific instrumentation.

Many of Dr. Philosophy features advanced instrumentation designed to allow the adductor philosophy midfoot correction procedures to be performed through an approximately 50% smaller incision and Leverages <unk> technology for fixation.

John Treace: We believe this technology can make challenging procedures more approachable to a greater number of surgeons while reducing steps and OR time. Redpoint PSI is currently in limited clinical release, with full commercialization planned in the second half of 2024. As pioneers in the procedure markets that we have developed, we believe RedPoint PSI is a core technology with the capability to achieve broad market adoption in the years ahead, further strengthening our leadership position. Finally, we're looking forward to introducing a significant new technology platform in the back half of 2024. We believe this platform will speed our penetration of the bunion market, expand our market opportunity, and further reinforce our position as the leader in 3D bunion correction. We will provide additional updates on our new product innovations as we continue to develop our pipeline centered around our core technologies and IP aimed at improving surgeon user experiences, patient outcomes, and supporting continued market penetration.

So many of Dr. <unk> system is currently in limited clinical release with full commercialization plan in the second half of 2024.

We believe this new innovation can drive increase it Dr plasma adoption and market penetration for years to come.

Our Red point patient specific instrumentation is our first to market technology designed to deliver preoperative planning and patient specific guidance for bunion and mid foot deformity corrections.

We believe this technology can make challenging procedures more approachable to a greater number of surgeons, while reducing steps and our time.

<unk> is currently in limited clinical release with full commercialization plan in the second half of 2024.

As pioneers in the procedure markets that we have developed we believe <unk> is a core technology with capability to achieve broad market adoption in the years ahead further strengthening our leadership position.

John Treace: As we look specifically to 2024, our guidance provided today reflects our expanding commercial capabilities and increased contribution from the sales repetitions that we made throughout last year, continued adoption of lapoplasty, adductoplasty, and other complementary procedures, as well as multiple new launches that we expect to drive strong growth while we also advance our pipeline opportunities. We also expect to make solid progress on our pathway to sustainable profitability as we drive towards a Just Adeepa DOT breakeven for the full year 2024. I'm proud of another great quarter of execution at Treace, with solid performance from our talented team of employees.

Finally, we're looking forward to introducing a significant new technology platform in the back half of 2024.

We believe this platform will speed our penetration of the bunyan market expand our market opportunity and further reinforce our position as the leader in <unk> correction.

We will provide additional updates on our new product innovations as we continue to develop our pipeline centered around our core technologies and IP aimed at improving surgeon user experiences patient outcomes and supporting continued market penetration.

As we look specifically to 2024, our guidance provided today reflects our expanding commercial capabilities and increased contribution from the sales rep additions that we made throughout last year continued adoption of <unk> and other complementary procedures as well as multiple new launches that we expect to drive strong growth while we also.

Advance our pipeline opportunities.

John Treace: With continued strong additions to our surgeon base, increasing productivity of our direct sales channel, and a robust pipeline of new technologies fueling our commercial momentum, I'm confident that we have the right strategies in place to continue to deliver industry-leading foot and ankle growth and profitably scale our business in 2024 and beyond. With that, I'll now turn the call over to Mark to review our financial performance and guidance. Thank you, John. Good afternoon, everyone.

We also expect to make solid progress on our pathway to sustainable profitability as we drive towards adjusted EBITDA breakeven for full year 2024.

I am proud of another great quarter of execution of trees with solid performance from our talented team of employees.

With continued strong additions to our surgeon base, increasing productivity of our direct sales channel and a robust pipeline of new technology is fueling our commercial momentum.

I am confident that we have the right strategies in place to continue to deliver industry, leading foot and ankle growth and profitably scale, our business in 2024 and beyond.

With that I'll now turn the call over to Mark to review, our financial performance and guidance Mark.

Mark L. Hair: Revenue for 2023 was $187.1 million, representing 32% growth over the prior year. Fourth quarter revenue was $62.2 million, a 25% increase compared to the prior year. Growth in the fourth quarter was driven by increases in procedure volumes and increases in blended average selling price due to increased adoption of the company's newer technologies and an expanding portfolio of complementary products. Although the fourth quarter included one less selling day than the prior year, the month of December actually had two less selling days.

Thank you John Good afternoon, everyone revenue for 2023 was $187 1 million.

Representing 32% growth over the prior year fourth quarter revenue was $62 2, million% to 25% increase compared to the prior year.

Growth in the fourth quarter was driven by increases in procedure volumes and increases in blended average selling price due to increased adoption of the companys newer technologies and expanding portfolio of complementary products. Although the fourth quarter included one less selling day than the prior year. The month of December actually had two less selling days.

Mark L. Hair: On an average daily sales basis, we grew 27% in Q4. We sold 9,665 lapoplasty procedure kits in the fourth quarter, a 15% increase compared to the same quarter last year. The blended average selling price was a record $6,437 in the fourth quarter, up 9% over the same prior-year quarter.

On an average daily sales basis, we grew 27% in Q4.

We sold 9000 <unk>.

665 lack of class a procedure kits in the fourth quarter, a 15% increase compared to the same quarter last year.

Blended average selling price was a record $6437 in the fourth quarter up 9% over the same prior year quarter.

Mark L. Hair: This higher blended average selling price was driven by Lapoplasty and the additional contribution from our expanding portfolio of complementary products, such as our Ductoplasty system, sterile single-use instruments, and some early impact from Speedplate and Hammertoe, as our direct sales channel continues to increase procedure volumes across our surgeon-customers. For the full year 2023, revenue was $187.1 million, a 32% increase over 2022, at the top end of our preannounced revenue expectations of $186.7 to $187.1 million and above the high end of our prior 2023 revenue guidance range of $182 to $186 million. We sold 29,675 lapoplasty procedure kits for the full year 2023, a 20% increase versus the prior year, with a blended average selling price of $6,306, a 10% increase over the prior year.

This higher blended average selling price was driven by lack of capacity and the additional contribution from our expanding portfolio of complementary products such as our Dr. Plassey system.

Sterile single use instruments and some early impact from speed plate and hammertoe as our direct sales channel continues to increase their procedure volumes across our surgeon customers.

For the full year 2023 revenue was $187 1, million% to 32% increase over 2022 at the top end of our pre announced revenue expectations of $186 seven to $187 1 million and above the high end of our prior 2023 revenue guidance range.

$182 million to $186 million.

We sold 29675 laptop lasting procedure kits for the full year, 2023% to 20% increase versus prior year with a blended average selling price of $6306, a 10% increase over the prior year.

Mark L. Hair: Gross margin was 81.6% in the fourth quarter of 2023 compared to 81.9% in the fourth quarter of 2022. This 30 basis point decrease is primarily due to changes in product mix and an increase in overhead costs due to headcount to support the growing business, partially offset by lower royalty rates, and a decrease in inventory provisions. For the full year 2023, gross margin was 81.2%, down from 82% in the prior year period, primarily due to changes in product mix, an increase in inventory provisions, and an increase in overhead costs due to headcount to support the growing business, partially offset by lower royalty rates.

Gross margin was 81, 6% in the fourth quarter of 2023 compared to 81, 9% in the fourth quarter of 2022. This 30 basis point decrease was primarily due to changes in product mix and an increase in overhead costs due to head count to support the growing business, partially offset by lower worth royalty.

And a decrease in inventory provisions for the full year 2023 gross margin was 81, 2% down from 82% in the prior year period, primarily due to changes in product mix and increase in inventory provisions and an increase in overhead costs due to head count to support the growing business.

Partially offset by lower royalty rates.

Mark L. Hair: Total operating expenses were $57.5 million in the fourth quarter of 2023 compared to total operating expenses of $44.2 million in the fourth quarter of 2022. The increase in operating expenses reflects strategic investments in our expanding direct sales channel, investments in product innovation, increased capacity requirements, as well as support for our commercial initiatives. For the full year 2023, operating expenses were $203.4 million, compared to $151.2 million in the prior year. The increase in operating expenses reflects increased investments in commercial initiatives, as well as other G&A investments supporting our growing business. The fourth quarter net loss was $6.3 million, or $0.10 per share, compared to a net loss of $4.4 million, or $0.08 per share, for the same period in 2022.

Operating expenses were $57 5 million in the fourth quarter of 2023 compared to total operating expenses of $44 2 million in the fourth quarter of 2022.

The increase in operating expenses reflect strategic investments in our expanding direct sales channel investments and product innovation increased capacity requirements as well as support for our commercial initiatives for the full year 2023 operating expenses were $203 4 million compared to $151 2 million.

In the prior year period, the increase in operating expenses reflects increased investments in commercial initiatives as well as other G&A investments supporting our growing business.

Fourth quarter net loss was $6 3 million or <unk> 10 per share compared to a net loss of $4 4 million or <unk> <unk> per share for the same period of 2022, we ended the fourth quarter, our seasonally strongest with adjusted EBITDA of $2 6 million compared to an adjusted EBITDA loss of 400.

Mark L. Hair: We ended the fourth quarter, our seasonally strongest, with adjusted EBITDA of $2.6 million, compared to an adjusted EBITDA loss of $467,000 for the same period in 2022. As John said, this is our first quarter of positive adjusted EBITDA since going public in 2021. For the full year 2023, we had a modest improvement in adjusted EBITDA compared to the prior year. Cash, cash equivalents, marketable securities, and investment receivable totaled $126.2 million as of December 31, 2023. Our total available access to liquidity, including our debt facility, is approximately $190 million.

<unk> 7000 for the same period in 2022 as John said this is our first quarter of positive adjusted EBITDA since going public in 2021 for the full year 2023, we had a modest improvement in adjusted EBITDA compared to the prior year cash.

Cash cash equivalents marketable securities and investment receivable totaled $126 2 million as of December 31, 2023, our total available access to liquidity, including our debt facility is approximately $190 million.

Mark L. Hair: We believe we have a lengthy runway in terms of our current cash level, with sufficient balance sheet strength and flexibility to continue aggressively executing on our strategic investments and growth initiatives, as well as a clear path to achieve positive adjusted EBITDA. Before I discuss our 2024 guidance, I wanted to mention that we will now update our key operating metrics annually at the end of the year rather than quarterly. There has been, and we continue to anticipate that there will be, variability in these metrics from quarter to quarter due to seasonality and the timing and impact of new product launches, surgeon training events, and DTC investments.

We believe we have a lengthy runway in terms of our current cash level with sufficient balance sheet strength and flexibility to continue aggressively executing on our strategic investments and growth initiatives as well as a clear path to achieve positive adjusted EBITDA.

Sure I discuss our 2024 guidance I wanted to mention that we will now update our key operating metrics annually at the end of the year rather than quarterly.

There has been and we continue to anticipate that there will be variability in these metrics from quarter to quarter due to seasonality and the timing and impact of new product launches surgeon training events and DTC investments. Therefore, our plan is to update these key metrics on an annual basis, which is much more relevant for our business at <unk>.

Mark L. Hair: Therefore, our plan is to update these key metrics on an annual basis, which is much more relevant for our business at this point in our growth trajectory. Let me now turn to our outlook for fall 2024. We are providing full-year 2024 revenue guidance of $220 million to $225 million, which reflects an increase of 18% to 20% compared to 2023. We remain encouraged by the underlying strength and momentum in our business, with our strategic investments clearly delivering on growth. Given that it's early in the year, we feel comfortable at the midpoint of this range.

Point in our growth trajectory let.

Let me now turn to our outlook for full 2024.

We are providing full year 2020 for revenue guidance of $220 million to $225 million, which reflects an increase of 18% to 20% compared to 2023.

We remain encouraged by the underlying strength and momentum in our business with our strategic investments clearly delivering on growth.

Given that it's early in the year, we feel comfortable at the midpoint of this range.

Mark L. Hair: We expect to make a significant improvement in adjusted EBITDA for the full year 2024 and anticipate adjusted EBITDA to improve by approximately 50% compared to the full year 2023, excluding any consideration for the effect of potential future acquisitions or any other material business developments. We anticipate being close to cash flow breakeven for the full year 2025. Our blended ASP has historically grown mid-single digits, and given the ongoing surge in adoption of laparoplasty, complementary products and procedures, and future pipeline opportunities, we expect this trend to persist. As we previously stated, we believe adding approximately 250 to 300 active surgeons annually is a reasonable baseline over the next few years, with utilization increases expected to drive higher procedure penetration, and a tightening sales rep to surgeon ratio should support increased case coverage and adoption

We expect to make significant improvement in adjusted EBITDA for the full year 2024, and anticipate adjusted EBITDA to improve approximately 50% compared to full year 2023.

Excluding any consideration for the effect of potential future acquisitions or any other material business developments, we anticipate being close to cash flow breakeven for the full year 2025.

Our blended ASP has historically grown mid single digits and given ongoing surgeon adoption of lack of class a complimentary products and procedures and future pipeline opportunities. We expect this trend to persist as.

As we previously stated we believe adding approximately 250 to 300 active surgeons annually is a reasonable baseline over the next few years with utilization of increase is expected to drive higher procedure penetration and the tightening sales rep to surgeon ratio should support increased case coverage and adoption.

Mark L. Hair: These new surgeon additions and training our large active surgeon base on new procedures is expected to expand utilization and drive blended ASP increases. Consistent with previous years, we expect a sequential revenue decrease from Q4 to Q1 due to normal seasonality, coming off our usual strong year-end performance. Similar to last year, there has been some carryover of bunion procedures into the first quarter of this year, as patients entering the surgical funnel late in the fourth quarter timeframe are often scheduled for bunion procedures in the following year.

<unk>.

These new surgeon additions and training our large active surgeon base on new procedures is expected to expand utilization and drive blended ASP increases.

Consistent with previous years, we expect a sequential revenue decrease from Q4 to Q1 due to normal seasonality coming off our usual strong year end performance similar to last year. There has been some carryover of blending procedures into the first quarter of this year as patients entering the surgical funnel late in the fourth.

<unk> timeframe are often scheduled for blending procedures into the following year. Given this carryover. We now expect a very slight revenue increase from Q1 to Q2 Q3 to be roughly similar to Q2, followed by a seasonally strong Q4, which is historically the largest revenue quarter of the year.

Mark L. Hair: Given this carryover, we now expect a very slight revenue increase from Q1 to Q2, Q3 to be roughly similar to Q2, followed by a seasonally strong Q4, which is historically the largest revenue quarter of the year. Now, before we open up the call for questions, let me turn it back to John for some concluding comments.

Now before we open up the call for questions. Let me turn it back to John for some concluding comments John.

John Treace: Thanks, Mark. In closing, we delivered another year of significant progress in 2023 and expect to remain on track to drive strong growth and profitably scale our business in the years ahead. We are driving a market conversion in a large underserved market as the fastest growing company in foot and ankle. We believe we're in a great position strategically, with best-in-class bunion, midfoot, and related complementary offerings, an expanding TAM with the addition of new technologies such as ductoplasty, hammer toe, and speed plate, with more innovations to come, supported by differentiating clinical studies, continued strong additions to We look forward to aggressively pursuing these significant opportunities to drive the performance of our business, and I couldn't be more excited about the accelerating momentum we expect as we move through 2024 and beyond. With that, now, let me turn the call over to the operator to open the line for your questions. Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

Thanks, Mark in closing we delivered another year of significant progress in 2023 and expect to remain on track to drive strong growth and profitably scale our business in the years ahead, we are driving a market conversion and a large underserved market is the fastest growing company in foot and ankle.

We believe we're in a great position strategically with best in class Bunion, Midfoot and related complementary offerings and expanding Tam with the addition of new technologies, such as the Doctor Plasty Hammertoe and speed play with more innovations to come supported by differentiating clinical studies continued strong additions to our surgeon base and a powerful and established direct.

Sales team.

We look forward to aggressively pursuing these significant opportunities to drive the performance of our business and I couldnt be more excited about the accelerating momentum we expect as we move through 2024 and beyond.

With that now let me turn the call over to the operator to open the line for your questions.

Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.

Operator: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Drew Ranieri with Morgan Stanley. Please go ahead.

Our first question comes from drew Ranieri with Morgan Stanley. Please go ahead.

Andrew Christopher Ranieri: John and Mark, thanks for taking the questions. Maybe first, just for both of them, on the top line guys, help us parse that out a bit more, for incremental revenue, about $0.35, talk to us about how some of the new product launches might contribute to that. And with those, should we be thinking more that this is going to drive utilization or more drive your blended ASP higher? I know you said that single digit. Curious what the bigger lever for you is, or with some of these new products.

Hi, John and Mark Thanks for taking the questions maybe first just for for both of you.

On the top line guidance for 2024, just help us parse that out a bit a bit more youre looking for incremental revenue of about $35 million to $40 million, but just.

Talk to us about how some of the new product launches might contribute to that and with those.

Should we be thinking more that this is going to drive utilization or more drive your blended ASP higher I know you said mid single digits, but just curious what the bigger lever for you is in 2024 with some of these new product launches. Thank you.

John Treace: Yeah, thanks. Thanks, Drew. Great question. Good to hear from you.

Yeah. Thanks, Thanks drew.

John Treace: And let me tell you a little bit about how we're thinking about the guide as well as what that revenue increase is largely going to come from. We continue to have our focus primarily on our flagship lapoplasty. So we think a lot of that revenue growth is going to come from volume increases. And we will, as I talked about in the prior remarks, we're going to have some traditional seasonality. We saw some of that, more pronounced last year, and we expect to see something similar.

Question good to hear from you Yeah, Let me tell you a little bit about how we're thinking about the guide as well as what that revenue increases largely going to come from we continue to have our focus primarily on our flagship lap last days. So we think a lot of that revenue growth is going to come from volume increases.

We will as I talked about in the prepared remarks that we're going to have some traditional seasonality we saw some of that.

More pronounced last year, and we expect to see something similar so that's why we've given some color around what we expect to see.

John Treace: So that's why we've given some color around what we expect to see, the standard drop down in Q1 versus Q4, and then Q2 to be right around the Q1 level, slightly ahead of that, and then Q3 in line. So again, we're planning to build for a strong Q4 again this year. But most of the revenue growth is going to come from new customer servants that we continue to add, those that were added in 2023, and then the volumes that will be driven primarily through Lapoplast. We will have some incremental and additional complementary products that will also increase our blended ASP as well. So we've talked about having mid-single-digit growth there. And then just on the profitability side, it's encouraging to see more progress there towards breaking even. But you're still kind of in a unique position.

Standard dropdown in Q1 versus Q4, and then Q2 to be.

Right around Q1 level slightly ahead of that and then Q3 in line. So again, we are planning to build for the strong Q4 again this year, but most of that revenue growth is going to come from having new customer surgeons that we continue to add those that were added in 2023 and then the volumes.

That will be driven primarily through lap of plasty. So we will have some incremental and additional complementary products that will also increase our blended ASP as well so we've talked about having mid single digit growth there.

Got it and then just on the profitability side, it's encouraging to see more progress there towards breakeven.

But you are still kind of in a unique position you saw high growth company more opportunity ahead. So maybe how are you thinking about dropping through potential top line upside down to EBITDA for this year and as they're necessarily anything that could change in terms of being a capital light business model as youre thinking about further portfolio.

John Treace: You're still a high growth company, with more opportunity ahead. So maybe how are you thinking about dropping through the potential top line upside down to EBIT up for this year? And is there necessarily anything that could change?

Mark L. Hair: being a capital light business model as you're thinking about further portfolio expansion and product innovation. Yeah, so when we think about profitability, we're really excited about what we have in store for 2024. As I, as we mentioned in the prepared remarks, we had positive EBITDA in the fourth quarter.

And with some of these new products that have been disclosed or undisclosed thanks for taking the questions.

Yes, so when we think about the profitability, we're really excited about what we have.

Have in store for 2024.

As we mentioned in the prepared remarks, we had positive EBITDA in the fourth quarter. So we know that Kevin scale.

Mark L. Hair: So we know that given scale and higher revenue volumes, we were definitely poised to have that improvement in our bottom line and that adjusted EBITDA line. So I think a lot of it is just going to come through some leverage that comes primarily through the sales and marketing line item. We've talked about this in the past that as we've hired a lot of sales reps, as they continue to get more experience and they are able to drive higher revenue volumes in their territories, that actually plays very well from a leverage perspective. And so we'll see that.

And higher revenue volumes that we are definitely poised to have that improvement in our bottom line and that adjusted EBITDA line. So I think a lot of it is just going to come through some some leverage.

That comment is primarily through the sales and marketing line item, we've talked about this in the past.

We've hired a lot of sales reps as they continue to get more experience.

They are able to drive higher revenue volumes in their territories.

That actually plays very well from a leverage perspective, and so we will see that we also have some opportunities to have some increased leverage in the marketing line item or marketing.

Mark L. Hair: We also have some opportunities to have some increased leverage in the marketing line item or marketing expenses as well. So that's where a lot of that leverage is going to come from, and And then as far as, was there one last question on the back end of that, Drew? I'm sorry, the 50 questions in one, but in terms of just the portfolio expansion, is there any... shop, a Capital Light type of business model? Yeah, Drew. It's John.

Expenses as well, so that's where a lot of that leverages is going to come from.

And.

And then as far as where the one last question on the backend of that drew.

And the portfolio sorry, the 50 questions in one.

But just in terms of just the portfolio expansion is there anything that would change.

You are being a capital light type of business model. Thank you.

John Treace: You really have nothing that'll change there. We've got this really well-established and grained philosophy to have this capital light model so that the products and technologies that we continue to put out are designed with that intent. We talked about the margin from one lapoplasty case covering the cost of the instrumentation tray. Speed plate, we do one speed plate case, and the margin pays for two speed plate instrument trays.

Yes drew its John Yes, really nothing that will change there. We've got this really well established in grain philosophy to have this capital light model, so that the products and.

Technologies that we continue to put out are designed with that intent we talked about the.

The margin from one lab of classy case covering for the cost of the instrumentation tray speed play we do one speed play case and the margin pace for cube speed played instrument trays. So.

Operator: So it's a very capital light model. It'll continue to be that way. Thank you. One moment for our next question. Our next question comes from Robbie Marcus with J.P. Morgan. Please go ahead.

It's a very capital light model that will continue to be that way.

Okay.

One moment for our next question.

Okay.

Our next question comes from Robbie Marcus with Jpmorgan. Please go ahead.

Robbie Marcus: Oh, great. Thanks. Thanks for taking the questions. Two for me. Maybe first, Mark, you talk about the typical drop from fourth quarter to first quarter, the street sitting at about 49 million for the first quarter. Is that where you feel comfortable, and what would be deemed typical?

Oh great.

Thanks, Thanks for taking the questions two from me.

Maybe first mark.

Talk about the typical drop fourth quarter to first quarter. The streets sitting at about $49 million for first quarter is that where you feel comfortable in what would be deemed typical.

Mark L. Hair: Yeah, you know, great question, Robbie. And that's where we do feel comfortable given the carryover that we've seen. So historically, we see carryover that comes from the fourth quarter into the first quarter. And given where we are in the quarter, we feel comfortable with that current number.

Yes.

Question Ravi.

Thats, where we do feel comfortable given the carryover that we've seen so historically, we see carryover the coming from the fourth quarter into the first quarter and given where we are in the quarter, we feel comfortable with that current current number.

Mark L. Hair: And then maybe down the P&L on Adjustee Bidai, you talk about progress towards breakeven. I think you have a 50% improvement, which would be about a $12 million loss for 2024. You talked about being profitable in the fourth quarter. Should we think about a similar cadence as in 2023, where first, second, and third quarter are negative, and the fourth quarter makes up the majority with the positive and offsets that?

Got it and then.

Maybe down the P&L on adjusted EBITDA, you talk about progress towards breakeven.

Thank you.

You have a 50% improvement which would be about a 12 million dollar loss for 24, and you talked about <unk>.

<unk> and fourth quarter I believe should we think about similar cadence.

As in 2023 were first second and third quarter are negative in fourth quarter makes up the majority.

Mark L. Hair: Or should we think about it improving throughout the year sequentially? Thanks. Great, great, great question, Robbie. Yes, I would think about it largely similar to what happened in 2023. We tend to have larger losses earlier in the year as we begin some of our marketing programs early in the year, some of our medical education programs that we start early in Q1 and Q2.

With a positive.

Sets that are should we think about it improving throughout the year sequentially. Thanks, great Great. Great question, Ravi, Yes, I would think about it largely similar to what happened in 2023.

We tend to have larger losses earlier in the year as we begin some of our marketing programs early in the year some of our medical education programs that we start early in Q1 and Q2.

Mark L. Hair: And then, as revenue can increase, we will have positive EBITDA in the fourth quarter. So I would expect, similar to last year, losses in the first three quarters, and then there's going to be some positive adjusted EBITDA in the fourth. Great, thanks for taking the question. Thank you. Our next question comes from Rick Wise with Steeple. Please go ahead. Good evening, John.

And then as the revenue increase.

We'll have positive EBITDA in the fourth quarter. So I would expect similar to last year losses in the first three quarters, and then theres going to be.

Some positive adjusted EBITDA in the fourth.

Great. Thanks for taking the questions.

Thank you one moment for our next question.

Okay.

Our next question comes from Rick Wise with Stifel. Please go ahead.

Mark L. Hair: Hi Mark. I'm going to come back to the 2024 guide, if you wouldn't mind. And I guess from two perspectives, one, when you when you were giving us this guide, what was your mindset? I mean, I could argue that the market seems strong, and Salesforce is doing a good job. You're clearly training the positions, your portfolio is expanding, your you know, the speed paid play launched, and demand seems incredibly strong. You get the picture; I could go on and on and on.

Good evening, John Hi, Mark.

I'm going to come back.

24 guidance, if you Wouldnt mind.

<unk>.

And I guess.

Two perspectives one.

When you when you when you're giving US This guide what was your mindset.

I could argue.

That.

The marketing is strong the sales force is doing a good job youre clearly training that positions the portfolio is expanding.

Pete.

<unk> launched and demand seems incredibly strong you get the picture I could go on and on and on.

Mark L. Hair: Help us understand why growth would be realistically 18 to 20% relative to the 30%-ish you grew last year. Why shouldn't we expect you to be more optimistic? Could you just talk about your thinking there? Thank you. Eric, this is Mark.

Help us understand why growth would be realistically, 18% to 20% relative to the 30%. If you grew last year.

Why.

We expect it to be more optimistic could you just.

Talk about your thinking there. Thank you.

Mark L. Hair: A great question. I appreciate that. And I like the positives that you have highlighted in your question about the company, because that's the way we see it, too. We've got a great sales force, we've got some great products, we've got some products launching in the back half of the year. But the one thing that we see right now is you talk about 32% for the full year, but the last two quarters, third quarter, fourth quarter, we're a little bit below that. And so it's really early in the year.

Eric This is mark Great question, I appreciate that and I like embedded in your question all of the positives that we have going from the company because thats the way we see it too we've got a great sales force. We've got some great products, we've got some products launching in the back half of the year.

But the one thing that we see right now as you talked about 32% for the full year, but the last two quarters third quarter fourth quarter were a little bit below that and so it's really early in the year. So we just want to be very prudent.

Mark L. Hair: So we just want to be very prudent as we're considering how we're laying out the way we're thinking about 2024. And admittedly, even with the seasonality, it leaves more of a back half loaded guide, but you know, it's very early still, and we don't see it representing any loss of momentum going into 2024. So there's nothing about the market, the technology, or the training that's making you anxious, which leads to my second question on competition. Clearly, it seems clear to me from ACFS and from AOS that there is more competition than ever, and more new products. And folks seem to be imitating you, waking up to the market and also imitating your strategy. A nice compliment.

As we're considering how we're laying out.

The way, we're thinking about 2024 and admittedly even with the seasonality. It leaves more of a back half loaded guide, but it's very early still and we don't see it representing any loss of our momentum going into <unk>.

2024.

So there is nothing about the market the technology training.

Thats, making you anxious which leads to my second question.

On competition clearly it seems clear to me from Acs and from AOS.

More competition than ever more new products.

Focusing to be imitating waking up to the market and also imitating your strategy.

Complement.

Mark L. Hair: To what extent is this more of a challenge, less of a challenge, and to what extent is that maybe making you more careful, thoughtful, thoughtfully conservative as you start the year? Hi Rick, John, thanks for the question. And I'll take that one.

To what extent is this.

More of a challenge less of a challenge.

And to what extent is.

That maybe making you more careful thoughtful thoughtfully conservative.

As you start the year.

Hi, Rick Jon and thanks for the question and I'll take that one.

John Treace: You know, we've been seeing progressively more people enter the space over the past three years, and so, you know, new competitors entering the space, kind of nothing new to us. It's a really exciting market that we've sort of, you know, strategically redirected in terms of three-plane bunion correction, so no surprises to other companies that want to enter that space, the space that we pioneered and developed. The TAM is

No.

We have been seeing progressively more people enter the space over the past three years.

New competitors entering the spaces kind of nothing new to us, it's a really exciting market.

We've.

Sort of strategically.

Strategically redirected in terms of three binding correction. So no surprises to other companies want to enter that space the space that we pioneered and developed.

John Treace: It's over $5 billion in the U.S., and we continue to expand it with ductoplasty and our hammer-toe entry, but the bunion space itself is still very underpenetrated. We're way out ahead. Our retention rates with our surgeons are very high. Our IP makes it difficult for these copycats, and they tend to produce less elegant solutions that work more like the old freehand Lapidus than they do Lapoplasty, and we just strongly believe that nothing works as well at the surgeon-patient interface as Lapoplasty does, and then you have to keep in mind these new entrants are entering the market using multi-line, largely distracted sales forces. So they only get really a fraction of that sales force's time and attention.

The Tam is really huge it's over $5 billion in the U S and we continue to expand it with our partner Dr. Plasty and our hammertoe entry so, but the binding space itself still very underpenetrated or way out ahead, our retention rates with our surgeons are very high.

Our IP makes it difficult for these copycats.

It tends to produce less elegant solutions that work more like the old freehand lapidus than they do lap a classy and we strongly believe that nothing works as well as the surgeon patient interface as lap of plastic doesn't and then you have to keep in mind. These these new entrants are entering the market.

Using multiline largely distracted sales forces so they only get really a fraction of that sales force is time and attention.

John Treace: You know, we think our three-pronged offense of the direct-focused sales channel, rapid product innovation and iteration, and surgeon and patient education, while these are great offensive tools, they position us with a very strong defense as well. And we're just going to keep reinforcing that over time and continuing to grow and establish ourselves as the fastest-growing company in the foot and ankle market, which is what we are today and where we're going to continue to be. Thank you for that, and I'm just going to be rude and give you just a quick half of a follow-up to that. Early in the year, when you presented at James Morgan, you guided, you talked, you described yourself as well positioned for 20 percent plus growth in 24, and you're guiding to 18 to 20. Why the change, John? I'm guessing folks are going to be curious. Thank you so much.

We think our three prong offense of direct focus sales channel rapid product innovation, and iteration and surgeon and patient education.

While these are great offensive tools that they positioned us with a very strong defense as well and we're just going to keep reinforcing that overtime and continuing to grow in and established ourselves as the fastest growing company in the <unk> market, which is what we are today and where we're going to continue to be.

Thank you for that.

Be rude and just a quick follow up to that early in the year presenting at JP Morgan you guided.

You talked you described yourself as well positioned for 20% plus growth.

Yes.

In 'twenty four.

And you're guiding to 18 to 21, why the change John I'm guessing folks youre going to be curious thank you so much.

John Treace: No, I appreciate the follow-up and fair question. You know, we are positioned to move towards EBITDA, you know, break even; we are positioned well to grow at that 20% range. We absolutely believe that. Our guidance, as Mark said, is intentionally prudent. You know, it's early in the year.

I appreciate the follow up and fair question.

Like we are positioned to move towards EBITDA breakeven, we are positioned well to grow at that 20% range, we absolutely believe that.

Our guide and as Mark said is intentionally prudent.

John Treace: We're excited about the accelerating momentum of this business, both with the sales channel and the product launches that we have slated for the back half of the year. And, you know, I think we're just trying to be prudent and make sure that early in the year, we're allowing ourselves to, you know, build that confidence as we go through the year.

It's early in the year.

We're excited about the accelerating momentum of this business both with the sales channel and the product launches that we have slated for the back half of the year and.

I think we're just trying to be.

Prudent.

And make sure that.

Early here in the year, we're allowing ourselves to.

Build that confidence as we go through the year.

John Treace: Thank you. Thank you. One moment for our next question. Our next question comes from Simon Negan with UBS. Please go ahead. Hey, Mark and John.

Makes sense. Thank you.

Thank you one moment for our next question.

Okay.

Our next question comes from Simon <unk> with UBS. Please go ahead.

Simon Negan: Thanks for taking the question. How should we think about the, when thinking about the contribution potential for media product launches over the next two years, how do you think about this, and do you think any of these products have the ability to emulate the success of Lappoplasty? I know you recently highlighted a significant platform launch coming this year. Great, great question, Simon. I'll take that one.

Hey, Mark and John Thanks for taking the question.

About the.

When thinking about the contract contribution potential from new product launches over the next few years.

How do you think about this and do you think any of these products have the ability to emulate the success of lab capacity I know you recently highlighted a significant platform launch coming this year.

Great Great question, Simon ill take that one and Mark can maybe.

John Treace: And Mark can maybe add to that. You know, as we look at the market, the lapoplasty market opportunity is the largest opportunity we have, clearly. But anything we can do to build upon that and accelerate that and enhance our share over time, we're going to be working on. Ductoplasty was a very obvious add-on because 30% of our bunion patients had a midfoot deformity that nobody had a good way to correct.

Add to it.

<unk>.

As we look at the market.

The <unk> market opportunity is the largest opportunity we have.

Clearly, but anything we can do to build upon that and accelerate that and enhance our share over time, we're going to be we're going to be working on Dr. <unk> was.

A very obvious add on because 30% of our bunion patients had a mid foot deformity that nobody had a good way to correct. So we we created a way to do it and we're democratizing that opportunity and Thats.

John Treace: So we created a way to do it, and we're democratizing that opportunity. That's a half a billion dollar opportunity in itself, but redpoint technology can add to our opportunity in bunions and midfoot corrections as well. And then yeah, we alluded to another significant platform that we're developing right now and we expect to launch in the back half of this year that will help us accelerate our penetration into the bunion market and expand utilization. Hard to exactly say that any of them, quote, match the lapoplasty opportunity, but they all build on it and help accelerate our momentum into penetrating that opportunity. That's really helpful. I just have one quick one for you guys.

That's a $5 billion opportunity in itself, but.

Red point technology that can add to our.

Our opportunity in Bunions and Midfoot corrections as well and then yes, we alluded to another significant platform that we are developing right now and we expect to launch in the back half of this year that will help us accelerate our penetration into the <unk> market and expand utilization so.

Hard to exactly say that any of them quote match.

<unk> the opportunity, but they all build on it and help accelerate our momentum into penetrating that opportunity.

That's really helpful.

John Treace: How do you think about utilization increasing moving forward? Despite your surgeon-based maturing, when we look at our model, we're not seeing the utilization increase as much as we would have expected. That's a really good question.

One quick one for you guys.

How do you think about utilization increasing moving forward.

Despite your surgeon base maturing when we look at our model, we're not seeing utilization increase as much as we would have.

<unk>.

That's a really good question and we've talked about this on prior calls we've had nearly 40% of our active surgeon base has come onboard in the last 24 months. So in the last two years. So we continue to make great strides in adding active surgeons year after year. So what that means we have a little.

Mark L. Hair: We've talked about this on prior calls. We've had nearly 40% of our active surgeon base come on board in the last 24 months, so in the last two years. So we continue to make great strides in adding active surgeons year after year. What that means is, we have a little bit of a step function. And surgeons come in initially, they're doing around six cases in their first 12 months, and it continues to build up to nearly 20 cases after five or six years. So it's unique. They get experience with lapoplasty, and then they tend to utilize lapoplasty more and more in their practices.

Or a step function as surgeons come in initially.

Going around six cases in their first 12 months and it continues to build up to nearly 20 cases after five or six years. So it's unique.

They get experience with lack of clarity and then they tend to utilize lack of lasting more and more in their practices and so if you were to mathematically. If you were to take away. All these earlier are more recent I should say more recent.

Mark L. Hair: And so if you were to, mathematically, if you were to take away all these earlier or more recent, I should say, more recent surgeons that have come aboard who typically do lower, fewer cases per year, our average utilization is much higher than what we've reported. So I think that it's a good problem to have, meaning that we continue to add a lot of new surgeons, and we know that those who have been around longer just do more. And so we expect utilization to continue to increase, notwithstanding the fact that we will continue to add a lot more surgeons in 2024 and beyond. That's really helpful.

Surgeons that have come aboard typically do lower.

Fewer cases per year, our average utilization is much higher than what we've reported so I think thats a good problem to have meaning that we continue to add a lot of surgeons and we know that those who have been around longer just do more and so we expect utilization to continue to increase notwithstanding the fact that we will continue to add a lot more.

Surgeons in 2024 and beyond.

Mark L. Hair: Thank you. Thank you. One moment for our next question. Our next question comes from Richard Newitter with Truist Securities. Please go ahead.

That's really helpful. Thank you.

Thank you one moment for our next question.

Our next question comes from Richard <unk> with <unk> Securities. Please go ahead.

Richard Newitter: Thanks for taking the questions. Maybe on guidance, I just want to make sure I'm understanding some of the assumptions here. On gross margin, you did a little better than we were expecting in the fourth quarter, you guided to adjusted EBITDA. Should we think gross margin is basically holding steady in 2023? And then I think you'd also referenced mid single-digit growth in your revenue procedure or AST, however you want to characterize it. Is that the right way to think of what's embedded in your 24 guide? And then, as a follow up. Yeah, Rich, a really good question.

Hi, Thanks for taking the questions maybe.

Maybe just on guidance I, just want to make sure I'm understanding some of the assumptions here.

On gross margin.

Yes, you did a little better than we were expecting in the fourth quarter.

You guided to adjusted EBITDA.

Should we think gross margin basically holding steady with 2023, and then I think you'd also referenced mid single digit.

Growth in your revenue per procedure ASC. However, you want to characterize it is that.

Right way to think of what's embedded in your 2004 guide and then I have a follow up.

Yeah, Rich really good question I think youre right on all those fronts.

Mark L. Hair: I think you're right on all those fronts. Given a lot of new product launches and some of the mixed shift, we're anticipating maybe the gross margin to come down a little bit until, and we've talked about this in the past, as we introduce new products, we just don't quite have the same efficiencies and gross margin initially. And so I view 2024 as having maybe some slight pressure on the gross margin, but nothing substantial. So maybe a little bit less than what we saw in 2023.

Given a lot of new product launches and some of the mix shift.

We are anticipating maybe that gross margin too to come down a little bit until and we've talked about this in the pathway as we introduce new products. We just don't quite have the same efficiencies that gross margin initially.

So I view, 2024th having maybe some slight pressure on our gross margin, but nothing substantial so maybe a little bit less than what we saw in 2023. So all your other assumptions are right on.

Mark L. Hair: So all your other assumptions are right on. Okay, I actually have another follow-up, but I have a follow-up to the gross margin comment first. Should we think of gross margin in the first half a little bit below what it's going to be in the second half, and on a net basis for the full year, it's down? I mean, just to get the cadence right. No, that's my second follow-up right now, just on ASC. If you can remind us what your, nd the ASC setting.

Okay, I actually have another follow up but I have a follow up to the gross margin comment first just how should we think of gross margin in the first half a little bit below what it's going to be in the second half and on a net basis for the full year. It's down I mean, just just to get the cadence right now.

My.

Follow up right yes.

You can remind us what your mic.

Business is in the ASC setting.

Mark L. Hair: It's something that we continue to hear at AAOS. That's the trend that's materializing throughout orthopedics. Talk about your portfolio, how you're positioned there, and what that will do to your pricing and margins going forward. Thank you. All right, great, great questions, Richard. There are two of them. I'm going to take the first one, and I'll give the second one to John.

It's something that we continue to hear at AOS, that's the trend that that that's materializing.

Talk about your portfolio, how your position there.

What that will do to your pricing and margins going forward. Thank you.

Alright, great great questions registered two of them I'm going to take the first one and I'll give the second one to John.

Mark L. Hair: With respect to gross margin, again, we're not expecting substantial decreases over 2023. But I think the way you articulated is the way we're thinking about it, that early in the year, it may be a little bit lower with some improvement in the back half of next year. So again, just a slight step down year over year, but we don't view it that way, you know. We're still going to be over that 80% gross margin level, which is extremely strong, so we feel really pleased. I just wanted to say that it will be tempered slightly versus last year. And then, John, with respect to the ASCs and hospitals. Yeah, hey, Rich.

With respect to gross margin again, we're not expecting substantial decreases over 2023, but I think the way you articulated is the way we're thinking about it that earlier in the year, maybe a little bit lower with some improvement in the back half of next year. So again, just a slight step down year over year, we don't view it.

Still going to be over that 80% gross margin level, which is extremely strong. So we feel really pleased I just wanted to say that it will be tempered slightly versus last year, and then John with respect to the ASC and hospital.

Mark L. Hair: So I think there's a little bit of confusion out there on this topic because I know there's a lot of contemporary discussion about hip and knee volumes moving to the ASC setting, that outpatient setting. But foot and ankle has been done in those settings for, you know, 30 years, decades. And we participate in ASCs, the private ASCs, and then the hospital-owned ASCs. Obviously, the hospital-owned ASCs get a little better, more favorable reimbursement, but we're market competitive in the private ASCs as well, with different products that we have that have different price points. I would say it's a minority of our revenue that is in the private ASC setting, and the majority is more in the hospital outpatient or hospital-owned ASC, be that freestanding or at the hospital facility itself. So we're competitive there, and we continue to make progress there. But there's not this huge surge and trend toward foot and ankle procedures there like there is in hips and knees and maybe even some spine cases that is kind of creating a lot of talk in the hip and knee world.

Hey, rich.

So I think theres, a little bit of confusion out there on this topic, because I know theres a lot of <unk>.

Contemporary discussion about hip and knee volumes moving to the ASC setting that outpatient setting foot and ankle has been done in those settings for 33 years.

Decades.

And we participate in afcs.

Private afcs and in the hospital owned Asc's, obviously, the hospital owned <unk>, a little better more favorable reimbursement, but we're market competitive in the private ESC as well with different.

Different products that we have that have different price points I would say, it's the minority of our revenue that are in the private.

Setting and the majority is more in the hospital outpatient or hospital owned <unk>.

Be that freestanding or at the hospital facility itself, so well, we're competitive there and we continue to.

To make progress there, but there's not this huge.

Serge and trend towards.

Foot and ankle procedures, there like there is in hips and knees and maybe even some spine cases that is kind of creating a lot of talk in the hip and knee world.

John Treace: Thank you. Sure. Thank you. One moment for our next question. Our next question comes from Ryan Zimmerman with BTIG. Please go ahead. Good afternoon. Thanks for taking the question. I want to start on Speed Plate.

Okay.

Thank you.

Sure.

Thank you one moment for our next question.

Our next question comes from Ryan Zimmerman with BTG. Please go ahead.

Good afternoon, thanks for taking the question.

Alright I'll start.

Hey.

I want to start on speed play.

Ryan Zimmerman: It's been off to a really good start, very positive feedback on it. I think, John, you called out that it's about 20% of cases today. Where do you think that can go? Doing some simple math, come.

Spin off to a really good start we've heard very positive feedback on it.

I think John you called out that it's about 20% of cases today, where do you think that can go because I mean, just doing some simple math it can account for.

John Treace: A decent chunk of growth in 2024 and could probably swing higher if that 20%. Yeah, great, great question. I mean, very exciting, you know, talked about this as being probably the most impactful technology launch for the company since lapoplasty. These are things that our surgeons say, not me, but it's true. A very favorable response. We've had it in 20% of our surgeons' hands by Q4, and it made up 25% of our procedural revenue. So, we're just getting started with it. And the other piece of the momentum is, you know, right now our sales force really has three great shots on goal with lapoplasty slash microlapoplasty, adductoplasty and the evolution of that, and SpeedPlate, you know, three unique technologies that you can only get from our company.

A decent chunk of growth in 2024.

Could probably swing higher if that 20% moves higher.

Yes, great Great question, I mean, very exciting we've talked about this as being probably the most impactful technology launch for the company's central App or <unk>. These are things that our surgeon, saying not me, but it's true.

Very favorable response, we've had it in 20% of our surgeons hands.

In Q4, and it made up 25% of our our procedural revenue so and we're just getting started with it and the.

The other piece of the momentum is.

Right now our sales force really has three great shots on goal.

With lap of Plassey Slash micro apoplast, adductor Plaza and the evolution of that and speed play three unique technologies that can only get from our company.

John Treace: So one of those technologies is going to appeal to some foot and ankle surgeons sooner or later. And once they get interested in one, if they wanna use SpeedPlate, we're gonna introduce them to Lapoplasty. And we're going to introduce them to a Ductoplasty because, in 30% of the cases, they need to correct the med foot deformity. And if they want a Ductoplasty, we're gonna show them SpeedPlate because it makes the procedure faster and more convenient.

So one of those technologies is going to appeal to some foot and ankle surgeon sooner or later and once they get interested in one if they want to use speed play we're going to introduce them to lap a plasty and we're going to introduce them to a doctor plastic because 30% of the cases, they need to correct the metric deformity.

And if they like adductor plassey, we're going to show them speed play because it makes the procedure faster and more convenient. So those three technologies are really powerful.

John Treace: So those three technologies are really powerful, and it's creating a very efficient model from a Salesforce standpoint. We love SpeedPlate.

And it's creating a very efficient model from a salesforce standpoint, So we love speed play we think it has a lot of opportunity not only in <unk> and Dr Plassey, but and a lot of other areas in the foot for foot and ankle procedures and you could see the the ratio of our cases continue to rise.

John Treace: We think it has a lot of opportunity, not only in lapoplasty and adductoplasty but in a lot of other areas in the foot for foot and ankle procedures. And you will see the ratio of our cases continue to rise as we get more sets out there and get into full commercial throughout the year. Fair enough. And then, Mark, you know, you talked about the cash on hand, kind of knowing where spend is going, but you did, you made a comment that I thought was interesting, which was access to liquidity. And I'm just curious if your view on, you know, how you are thinking about your cash? has changed; are you looking at assets that are potentially out there in the field, given those comments?

As we get more sets out there and get into full commercial.

Throughout the year.

Okay.

Fair enough and then Mark.

You talked about the cash on hand kind of know where spend is going but you did you made a comment I thought was interesting which was the access to liquidity and I'm. Just curious if your view on how you're thinking about your cash.

Has changed and are you looking at assets that are potentially out there in the field.

Mark L. Hair: you know, your broader view on where you are going to buy, not necessarily what you're going to buy, but the appetite to kind of bring in more. Yeah, great question, Ryan. And the way I've articulated just our cash and access to liquidity was just to give the same level of information that we've given in the past, just to say what we have access to. We have a great relationship with our lender, and so we have access to financing if needed. You know, John and I have often talked about, you know, if there are opportunities for us to expand the portfolio. We did last year with some great technology, Red Point, that's PSI.

Given those comments and just your broader view on kind of.

We're not necessarily what youre going to buy but.

Your appetite to kind of bring in more into the portfolio.

Yes, Great question, Ryan and the way I articulated.

Articulated just our cash and access to liquidity, which just to give the same level of information that we've given in the past just to say what we have access to we have a great relationship with our lender until we have access to it.

Financing if needed.

John and I have often talked about.

If there are opportunities for us to expand the portfolio. We did last year with some great technology Red point that Si.

Mark L. Hair: You know, we're not saying that we require any kind of acquisitions or additional products in our portfolio to have this growth that we're talking about this year, but we're, you know, we'd always be open to great complementary technologies if they were to match what we're doing here. So that was not, in any way, suggestive of what we're planning to do or any strategy changes, but just to give the full perspective as far as what our cash on hand is and full liquidity. Okay, maybe I'll read into that a little. Thank you for, no problem.

We're not saying that.

That we.

Acquire any kind of acquisitions or additional products in our portfolio to have this growth that we're talking about this year, but we're we'd always be open to great complementary technologies. If it were to match what we're doing here.

So that was not in any way suggestive of what we're planning to do or any strategy changes, but just to give the full perspective as far as what our cash on hand is in full full liquidity.

Okay, maybe maybe I read into that a little too much but thank you for clarifying.

George Sellers: Thank you. One moment for our next question. Our next question comes from George Sellers with Stevens. Please go ahead.

No problem.

Thank you one moment for our next question.

Our next question comes from George Sellers with Stephens. Please go ahead.

John Treace: Hey, good afternoon, and thanks for taking the question. On the sales force, I'm just curious, what is the productivity of some of your top performing direct reps, and then how should we think about the capacity of your direct reps in terms of maybe the number of surgeons they can support or the level of revenue they can drive, or how y'all are thinking about it internally? Yeah, hey, George, it's John.

Yes.

Hey, good afternoon, and thanks for taking the question.

On the sales force I'm, just curious what does the productivity look like for some of your top performing direct reps and then how should we think about the capacity of your direct reps in terms of maybe the number of surgeons that can support or the.

The level of revenue that can that can drive or how you all are thinking about it internally.

Yeah, Hey, George it's John.

John Treace: Good to hear from you. A good question. You know, we have a broad spectrum of revenue productivity with our sales team today; you have some that have, you know, quite significant tenure, several years, and some of those reps can be in the several million dollar range. And then we have newer reps that are still, you know, trying to climb to 300,000 and beyond those newer reps, right? So what we do know is when you get to your time point, most of our reps are operating at a level of revenue performance that we're very pleased with and we believe is very sustainable. And they're also operating at a cost of sales ratio that's very, very nice for the business and we know can create a lot of leverage going forward.

Good to hear from you good question.

We have.

<unk> spectrum of revenue productivity with our sales team today, you have some that up.

Quite significant tenure several years and some of those reps can be in the several million dollars range and then we have newer reps that are still trying to climb to 300000 and beyond those newer reps right. So what we do know is when you get to that two year time point most of our reps our opera.

Sitting at a level of revenue performance that we're very pleased with and we believe it's very sustainable and there are also operating at a cost of sales ratio Thats very very nice for the business and we know can create a lot of leverage going forward. So.

John Treace: So we feel good about the sales team, and we feel good about their capacity to bring these other technologies forward. And part of that is because of the efficiency of this model and the way we're bringing these products out. We're not asking them to run around from one part of the foot to another part of the foot and do a trauma case and then do a hammer toe. Everything builds upon, you know, lapoplasty and adductoplasty build upon each other, speed plate builds on both of those, and the hammer toe fits into the bunion case.

We feel we feel good about the sales team we feel good about their capacity to bring these other technologies forward and part of it is because of the efficiency of this model and the way we are bringing these products out we're not asking them to run around from one part of the foot to another part of the foot and do a trauma case, and then do a hammertoe where everything builds upon.

<unk> <unk> and Dr. <unk> build on each other speed play builds on both of those and the hammertoe fits into the bundled case, our disposable instruments their problem solving for mid foot fusions that we specialize in and lap a classic cases.

John Treace: Our disposable instruments, they're problem solving for midfoot fusions that we specialize in and lapoplasty cases. So it's a very, very efficient way to sell, and we've proven that we can establish a powerful direct channel that's really well-sustaining with room for future years of nice cost leverage as well, hopefully, to answer your question. Let me know if you need more information, know that that's super helpful. Okay, I appreciate it. And then, Mark, maybe one for you. You talked about the marketing line as being an area where you can see leverage this year and in the future. I know you've recently hired a new director of marketing. Could you speak to some of the areas where you've been able to find maybe some more efficient ways to spend in that marketing line and how you're sort of driving some better returns on those investments through that marketing line item? Thanks again for the time. Yeah, great, great question. This is Mark. Let me take a first stab at that. And if there's any other color, John could add it to it.

So, it's a very very efficient way to sell and.

We've proven that we can establish a powerful direct channel, that's really well sustaining with room for future year nice cost leverage as well so.

Hopefully that answered your question, let me know if you need more.

Our information.

No that's super helpful. I appreciate that and then.

Mark maybe one for you.

You talked about the marketing line as being an area, where you can see leverage this year and in the future.

All right.

We hired a new director of marketing could you just speak to some of the areas where.

You've been able to find maybe some more efficient ways to spend that marketing line.

How are you.

There are sort of driving some better returns on those investments does that marketing line item. Thanks again for the time.

Yes, great. Great question. This is Mark let me take a first stab at that and if there's any other color John John can add to it.

Mark L. Hair: Yeah, we've continued to increase our spending over the past several years. We've tested a lot of different marketing techniques. Areas, whether it be social media, whether it be TV commercial spots, we've done a lot of marketing activities and campaigns. We do have a new Senior Vice President of Marketing, who's been phenomenal. We're lucky to have him.

Yes.

<unk> continued over the past several years, we continue to increase our spending we've tested a lot of different marketing techniques.

Areas, whether it be social media, whether it be television commercial spots.

Got a lot of marketing activities and campaigns.

Do have a new senior vice President of marketing, who has been phenomenal. We're lucky to have him. He's got a lot of great experience and he has already been able to really streamline a lot of our efforts to get.

Mark L. Hair: He's got a lot of great experience, and he's already been able to really streamline a lot of our efforts to get similar results or higher results with even less effort. So he's, he's, he comes as a professional with great experience. We're leaning on him. So that's what we're saying. We can get the same kind of results or even better results without having to continue to increase our spend levels year after year. So that's where leverage can come in. Because if we can hold some of those spending levels consistent yet have better outcomes, that's where that leverage comes in.

Similar results were higher results with even less spend so he's he's he comes as a professional great experience. We're leaning on having so that's what we're saying we can get the same kind of results are even better results without having to continue to increase our spend levels of year. After year, So thats, where the leverage can come in because if we can hold some of that.

Spending levels consistent yet have better outcomes.

Mark L. Hair: No, I think you said it; you said it very well. And, overall, we're excited about Nathan's expertise and the impact he's been able to have quickly on the business. So he's only been here for six months, driven a lot of efficiencies and productivity, got us sponsoring the National Pickleball Championships, which has high demographic overlap with our patient group and is a very impactful, very cost-efficient way to reach a lot of potential patients, and a lot more creativity coming out of him, and more to come. Stay tuned for some new initiatives that we'll be launching here in the next two to Okay, great. Thank you all for that color, chair.

That's where that leverage columns.

John anything.

No I think you said it you said, it very well and comprehensively or excited about nathan's.

Expertise and the impact he has been able to have quickly on the business. He's only been here six months and.

Driven a lot of efficiencies and productivity.

It is sponsoring the national Pickle Ball championships, which has high demographic overlap.

With art with our patient group and very impactful very cost efficient way to reach a lot of potential patients and a lot more creativity coming out of him and more to come stay tuned on some new initiatives that will be.

Launching here in the next two to three months.

Okay, great. Thank you for that color.

Julie D. Dewey: Thank you. I'm showing no further questions at this time. I'd now like to turn it back to Julie Dewey for closing remarks. Thank you everybody for joining us today. We appreciate your time and interest. If you have more questions, please reach out, and we'll look forward to talking to you next quarter. This concludes our call. Thank you for your participation in today's conference. This concludes the program. You may now disconnect.

Sure.

I am showing no further questions at this time I would now like to turn it back to Julie Dewey for closing remarks.

Thanks, everybody for joining us today, we appreciate your time and interest if you have more questions. Please reach out and we'll look forward to talking to you next quarter. This concludes our call.

Okay.

Thank you for your participation in today's conference. This concludes the program you may now disconnect.