Q4 2023 AxoGen Inc Earnings Call

Speaker Change: [music].

Operator: Hello, and welcome to the AxoGen Inc. 2023 fourth quarter and full year financial results conference call and webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question Q at any time by pressing star 1 on your telephone.

Hello, and welcome to the actual Gen 820, 23 fourth quarter and full year financial results conference call and webcast. If anyone should require operator assistance. Please press star zero on your telephone keypad.

And answer session will follow the formal presentation.

May be placed into the question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded its now my pleasure to turn the call over to Harold Smile, Vice President Finance and Investor Relations you May now begin.

Operator: As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Harold Tmile, Vice President, Finance, and Investor Relations. Harold, you may now begin.

Harold Tmile: Thank you, Kevin, and good morning, everyone. Joining me on today's call is Karen Zaderej, AxoGen's Chairman, Chief Executive Officer, and President, and Nir Naur, Chief Financial Officer. Karen will discuss the quarter and full year 2023, and Nir will provide an analysis of our financial performance, guidance, and discuss our outlook for the year, followed by a question and answer session. Today's call is being broadcast live via webcast, which is available on the Investors section of the AxoGen website. Following the end of the live call, a replay will be available in the Investors section of the company's website at www.axogeninc.com.

Harold Smile: Thank you, Kevin and good morning, everyone.

Harold Smile: Joining me on today's call are Scott Exaggerate accidents, Chairman and Chief Executive Officer, and President and near Delaware, Chief Financial Officer, Curt will discuss the quarter and full year of 2023 and here, we provide an analysis of our financial performance guidance and discuss our outlook for the year, followed by a question and answer.

Session.

Harold Smile: Today's call is being broadcast live via webcast, which is available on the investors section of the <unk> website.

Harold Smile: Following the end of the live call a replay will be available in investors section of the company's website at Www oxygen, Inc. Dot com.

Harold Tmile: Before we get started, I'd like to remind you that during this conference call, the company will make projections and forward-looking statements, including our expectations regarding our ability to expand our footprint, expand core accounts, anticipate growth for revenue categories, penetration of core accounts, and marketing opportunities with nerve applications associated with emerging trauma, breast, OMF, and surgical treatment of pain, and knee products. Our expectations regarding the timing of a launch for AvivePlus are statements regarding the timing of the complete biologics license application submission for advanced NERF graft, as well as statements of the timing of the approval of the BLA, are citations that, assuming approval of the BLA, advanced nerve grafts will be designated as a reference product and expect a marked exclusivity of such designation.

Harold Smile: Before we get started I'd like to remind you that during this conference call. The company will make projections and forward looking statements, including our expectations regarding our ability to expand our footprint expand core accounts anticipate growth for revenue category penetration of core accounts marketing opportunities with nerf applications associated.

Harold Smile: With emerging trauma breast oma's surgical treatment of pain and new products.

Our expectations regarding the timing of a launch for five plus our statement regarding the timing of the complete biologics license application submission for advanced nerve graft as well as statements of the timing of the approved BLA.

Our expectation is that assuming a probe to bofa advanced aircrafts will be designated as the referenced product and expected market exclusively such designation.

Harold Tmile: In our belief, our balance sheet will continue to be sufficient to bridge through to cash flow breakeven and longer-term profitability. Our expectation is that we will continue trending towards cash flow breakeven, and our belief that trend-sourced operating leverage will allow us to maintain a strong balance sheet position and provide ample support as we work towards profitability. Forward-looking statements are based on current beliefs and assumptions and are not guarantees of future performance and are subject to risk and uncertainties, including, not without limitation, the risk and uncertainties reflected in the company's annual and periodic reports, such as hospital staffing issues, regulatory processes and approvals, surgeon and product adoption, and market awareness of our products. The forward-looking statements are representative only as of the date they are made, except as required by applicable law. We assume no responsibility to publicly update or revise any forward-looking statement. In addition, for reconciliation on known gap measures, please reference today's press release and our corporate presentation in the investor section of the company's website. Now, I would like to turn the call over to Karen, okay?

Harold Smile: I believe our balance sheet will continue to be sufficient to bridge through to cash flow breakeven and longer term profitability.

Dictation is that we will continue trending towards scratch flow breakeven and our belief that train stores operating leverage will allow us to maintain a strong balance sheet position and provides ample support as we work towards profitability.

Harold Smile: Forward looking statements are based on current beliefs and assumptions and are not guarantees of future performance and are subject to risks and uncertainties, including now without limitation the risks and uncertainties respect in the company's annual and periodic reports such a hospital staffing issues regulatory processes and approvals.

Harold Smile: Surgeon in product adoption and market awareness of our products.

Harold Smile: The forward looking statements are representative only as of the date they are made.

Harold Smile: As required by applicable law.

Harold Smile: We assume no responsibility to publicly update or revise any forward looking statements. In addition for a reconciliation of non-GAAP measures. Please reference today's press release and our corporate presentation on the investors section of the company's website now I would like to turn the call over to Karen King.

Karen Zaderej: Thank you, Harold. And thank you all for joining us today as we discuss our 2023 fourth quarter and full year financial results. 2023 was a solid year of key accomplishments, and we enter 2024 with a strong commercialization strategy fueled by innovation and focused execution by our sales team. Full year 2023 revenue was $159 million, a 14.7% increase compared to 2022. In the back half of 2023, we saw improved commercial execution, and during this period, we estimate that revenue from our emergent trauma procedures grew in the mid-single digits, and revenue from scheduled procedures grew above 25% as compared to the same period in 2022. As a reminder, these estimates of procedure categories are based on available data received from hospitals and sales reps and assumptions regarding specific surgeon practices and account information, and as such are subject to the limitations of the data received and our assumptions.

Karen King: Thank you Harold.

Karen King: And thank you all for joining us today as we discuss our 2023 fourth quarter and full year financial results.

Karen King: 2023 was a solid year of key accomplishments and we enter 2024 with a strong commercialization strategy fueled by innovation and focused execution by our sales team.

Karen King: Full year 2023 revenue was 159 million.

Karen King: 14, 7% increase compared to 2022.

Karen King: In the back half of 2020 three we saw improved commercial execution and during this period, we estimate that revenue from our emerging trial up procedures grew in the mid single digits and revenue from scheduled procedures grew about 25% as compared to the same period in 2022.

Karen King: As a reminder, these estimates a procedure categories are based on available data received from hospitals and sales reps and assumptions regarding specific surgeon practices and account information.

Karen King: And as such are subject to the limitations of the data received and our assumptions.

Karen King: Okay.

Karen Zaderej: We're pleased with our progress and execution as we drive long-term growth, leveraging innovation, clinical data, surgeon education, and patient activation. We're appreciative of our ongoing search engagement and feedback as they continue to integrate AxoGuard HA Plus into their nerve protection algorithm, finding differentiated applications as compared to AxoGuard Classics. We're confident that AxoGuard HA Plus will expand the adoption of nerve protection products and will help more patients with nerve injuries. Additionally, we're continuing to expand our offering for nerve protection with a 5-plus soft tissue matrix, which we anticipate will be commercially available in the second quarter of 2024. Avive Plus is a resorbable nerve protection product that functions as a barrier providing temporary protection and tissue separation during the critical phase of healing for nerve injuries.

Karen King: We're pleased with our progress and execution as we drive long term growth leveraging innovation clinical data surgeon education and patient activation.

Karen King: We're appreciative of our ongoing surgeon engagement and feedback as they continue to integrate Axa guard H H class into their nerve protection algorithm, finding differentiated applications as compared to acts of God classic.

Karen King: We're confident that actually got H M plus will expand the adoption of nerve protection products and will help more patients with nerve injuries.

Karen King: Additionally, we're continuing to expand our offering for nerf protection with a five plus soft tissue matrix, which we anticipate will be commercially available in the second quarter of 2024.

Karen King: <unk> plus is a resorbable nerve protection product that functions as a barrier, providing temporary protection and tissue separation during the critical phase of healing for nerve injuries.

Karen Zaderej: We believe Avive Plus will be regulated as a Section 361 tissue product and will further strengthen our position in nerve protection, supporting emergent trauma and the surgical treatment of pain. In 2023, we also launched our re-sensation breast neurotization technique for women who choose an implant-based reconstruction. We believe this innovative technique could apply to an additional 10 to 15% of all breast reconstruction patients. We're pleased with the surge in engagement, positive feedback from our educational programs, and the early adoption of this new technique. This approach will allow more patients to have the opportunity for sensory restoration following their mastectomy and reconstruction. In August, the RECOM study was published in the Journal of Hand Surgery. The publication includes the author's analysis of the results, which found that advance returned a greater degree of functional recovery than conduit, and superiority was demonstrated as gap length increased.

Karen King: We believe our five plus will be regulated as a section 361 tissue product and will further strengthen our position in nerve protection supporting emergent trauma and the surgical treatment of pain.

Karen King: In 2023, we also launched our recent station breast and organization technique for women, who choose an implant phase III construction.

Karen King: We believe this innovative technique could apply to an additional 10% to 15% of all breast reconstruction patients.

Karen King: We're pleased with the surgeon engagement positive feedback from our educational programs and the early adoption of this new technique.

This approach will allow more patients to have the opportunity for sensory restoration, so long in their respective me and reconstruction.

Karen King: In August the Recon study was published in the journal of hand surgery.

Karen King: The publication includes the author's analysis of the results, which found that advanced returned to a greater degree of functional recoveries in conduit and superiority was demonstrated as GAAP linked to increased.

Karen Zaderej: We believe that this edition of Level 1 Evidence, supporting the efficacy of advanced nerve grafts and published literature, continues to play an important role in surgeon clinical decision-making, especially with middle-adopter surgeons. This study adds to a strong pool of clinical evidence supporting advanced nerve grafts. In combination with the recent publications of the Meta-Analysis, the premier All-Payers Cost Comparison Study, and the U.S. Cost Effectiveness Analysis, these four studies provide a package of compelling evidence for both clinicians and payers. During the year, we completed validation and transitioned into our new processing facility near Dayton, Ohio. This facility was designed for long-term growth and expansion, providing three times our previous capacity. This new facility will also support our BLA for Advanced Neurography.

We believe that this addition of level one evidence supporting the efficacy of advanced nerve graft and published literature continues to play an important role in searching clinical decision making.

Karen King: Especially with middle adopter surgeons.

Karen King: This study adds to a strong pool of clinical evidence supporting advanced nerve graft.

Karen King: In combination with the recent publications of the meta analysis that.

Karen King: Premier All parents cost comparison study and the U S cost effectiveness analysis. These four studies provide a package of compelling evidence for both clinicians and payers.

Karen King: During the year, we completed the validation and transitioned into our new processing facility near Dayton, Ohio.

Karen King: This facility was designed for long term growth and expansion, providing three times our previous capacity.

Karen King: This new facility will also support our BLA for advancing aircrafts.

Karen Zaderej: Now turning to our fourth quarter results. We're pleased with our performance during the quarter. Revenue from the quarter increased by 18.7% to $42.9 million compared to last year. We estimate that revenue from emergent trauma represented approximately half of total revenue and grew mid-single digits compared to last year. As a reminder, emergent trauma generally results from injuries that initially present in an ER. These procedures are typically referred to and completed by a specialist either immediately or within a few days following the initial injury.

Speaker Change: Now turning to our fourth quarter results.

Speaker Change: We're pleased with our performance during the quarter Rob.

Speaker Change: Revenue from the quarter increased by 18, 7% to $42 9 million compared to last year.

Speaker Change: We estimate that revenue from the emerging trauma represented approximately half of total revenue and grew mid single digits compared to last year.

Speaker Change: As a reminder, emergent trauma generally resolved from injuries that initially present any are these.

Speaker Change: These procedures are typically referred to and completed by our specialists either immediately or within a few days following the initial injury.

Karen Zaderej: We believe scheduled procedures also represented approximately half of total revenue. During the quarter, we estimate that this category grew more than 25% versus the prior year. As a reminder, scheduled procedures are generally characterized as procedures where a patient is seeking relief of a nerve condition caused by a nerve defect or surgical procedure.

Speaker Change: We believe scheduled procedures also represented approximately half of total revenue.

During the quarter, we estimate that this category grew more than 25% versus the prior year.

Speaker Change: As a reminder of scheduled procedures are generally characterized as procedures, where a patient is seeking relief of a nerve condition caused by a nerve defects or surgical procedure.

Karen Zaderej: These include breast reconstruction following a mastectomy, nerve reconstruction following the surgical removal of a painful neuroma, nerve decompression, and oral and maxillofacial procedures such as mandible reconstruction. Strength in this category reflects the opportunity to provide improved quality of life outcomes for patients. Compelling Clinical Data, Effective Surgeon Education, and Implementation of Patient Activation Programs. As mentioned in today's press release, our growth strategy continues to be focused on going deeper into core accounts where we see significant opportunities to expand our footprint. As a reminder, core accounts are defined as those generating more than $100,000 in revenue over the trailing 12 months.

Speaker Change: These include breast reconstruction following a mastectomy nerve reconstruction following the surgical removal of a painful neuroma nerve decompression and oral and maxillofacial procedures, such as amendable reconstruction.

Speaker Change: Strength in this category reflects the opportunity to provide improved quality of life outcomes for patients compelling clinical data effective surgeon education and implementation of patient activation programs.

Speaker Change: As mentioned in today's press release, our growth strategy continues to be focused on going deeper into core accounts, where we see significant opportunity to expand our footprint.

Speaker Change: As a reminder, core accounts are defined as those generating more than $100000 in revenue over the trailing 12 months.

Karen Zaderej: Revenues from core accounts represent approximately 65% of total revenue. Growth was primarily driven by increased productivity of our direct sales force as they gained a deeper surge in adoption and expanded use cases of our products within these core accounts. We ended the fourth quarter with 116 direct sales representatives, up one from a year ago and flat sequentially. We will continue to evaluate and add sales reps as their territories approach targeted levels. Our direct sales force is supplemented by independent sales agencies that represent approximately 10% of our total revenue, and Q4 growth was broad-based across all applications and products. We were pleased by the contributions from innovations in new products and new applications. We continue to raise awareness of the need for nerve protection and saw expanded use of AxoGuard HA Plus across both emergent and scheduled procedures. We also saw a strong surgeon and patient interest in neurotization and implant-based breast reconstruction and expanded the number of surgical teams trained in this important new application.

Speaker Change: Revenues from core accounts represent approximately 65% of total revenue.

Speaker Change: Growth was primarily driven by increased productivity of our direct sales force as they gain deeper surgeon adoption and expanded use cases of our products within these core accounts.

Speaker Change: We ended the fourth quarter was 116 direct sales representatives up one from a year ago and flat sequentially.

Speaker Change: We will continue to evaluate and add sales reps and their territories approach targeted levels.

Speaker Change: Our direct sales forces supplemented by independent sales agencies that represent approximately 10% of our total revenue.

Speaker Change: Okay.

Speaker Change: In Q4 growth was broad based across all applications and products.

Speaker Change: We were pleased by the contributions from innovation and new products and new applications.

Speaker Change: We continue to raise awareness of the need for nerve protection and saw expanded use of accident or an H M plus across both emergent and scheduled procedures.

Speaker Change: We also saw strong surgeon and patient interest in notification and implant based breast reconstruction and expanded the number of surgical teams trained in this important new application.

Karen Zaderej: Moving on to updates in our growing body of clinical evidence. Over the years, we've made significant investments to develop quality clinical evidence to demonstrate the safety, performance, economics, and utility of our nerve repair solution. Our active clinical programs are progressing as expected. At the end of the quarter, we have 245 peer-reviewed publications, including Trauma, Breast, OMF, and Pain. This January, we announced positive top-line results from the RIPOSE clinical study comparing the standard-of-care neurectomy of symptomatic neuroma to neurectomy and protection of the terminated nerve end with Axegard nerve tax.

Speaker Change: Moving on to updates on our growing body of clinical evidence.

Speaker Change: Over the years, we've made significant investments to develop quality clinical evidence to demonstrate the safety performance economics and utility of our nerve repair solutions.

Speaker Change: Our active clinical programs are progressing as expected.

Speaker Change: At the end of the quarter, we have 245 peer reviewed publications, including trauma breast, Oh, MF and pain.

Speaker Change: This January we announced positive topline results from our repose clinical study comparing the standard of care neurectomy or symptomatic neuroma generic Jimmy and protection of the terminated nerve and with Axa guard nerve cap.

Karen Zaderej: This post-marketing study met its primary endpoint for reduction in pain as measured by the visual analog scale. In addition, the study investigators found that over the full 12-month course of follow-up, AxoGard NerveCap demonstrated statistical superiority for reduction in total pain reported by the subjects as compared to the Standard of Care Norectin. We believe that these findings will play an important role in surgeon clinical decision-making. Now turn to the BLA for advanced nerve grafting. We've recently completed our productive pre-BLA meeting with the FDA. We're encouraged by the positive interactions and have aligned with the FDA on a rolling submission process and the content of the modules for submission. We now anticipate the filing to be completed in Q3 of 2024 with potential approval in mid-2025. As a reminder, a BLA approval will complete the regulatory transition of the advanced nerve graft from a 361 tissue product to a 351 biological product. Importantly, we believe Avance will be designated as the reference product for potential biosimilars, providing 12 years of market exclusivity.

This post marketing study met its primary endpoint for a reduction of pain as measured by the visual analog scale.

Speaker Change: In addition, the study investigators found that over the full 12 months of course, the follow up actually got nerve cap demonstrated statistical superiority for reduction in total pain reported by the subjects as compared to the standard of care interrupt me.

Speaker Change: We believe that these findings will play an important role in surgeon clinical decision, making.

Speaker Change: Now turning to the BLA for advanced and aircraft.

Speaker Change: We've recently completed our a productive pre BLA meeting with the FDA.

Speaker Change: We're encouraged by the positive interactions and are aligned with the FDA on a rolling submission process and the content of the modules for submission.

Speaker Change: We now anticipate the filing to be completed in Q3 of 'twenty 'twenty four when potential approval in mid 2025.

Speaker Change: As a reminder, our BLA approval to complete the regulatory transition of advanced nerve graft from a 361 tissue product to a $3 51 biological product.

Speaker Change: Importantly, we believe a vast will be designated as the reference product for potential biosimilars, providing 12 years of market exclusivity.

Nir Naur: With over 100,000 advanced nerve grafts implanted since launch, we are well positioned to continue to lead and innovate in the large and developing peripheral nerve repair market. I'm proud of our team, and I look forward to continuing our mission of revolutionizing the science of nerve repair. Now, I'll turn the call over to Nir to provide a review of our financial highlights and guidance. Thank you, Karen.

Speaker Change: With over 100000 advanced nerve graft implanted since launch we are well positioned to continue to lead and innovate in the large and developing peripheral nerve repair market.

I'm proud of our team and I look forward to continuing our mission our breath of revolutionizing the science of nerve repair.

Speaker Change: Now I'll turn the call over to Nir to provide a review of our financial highlights and guidance.

Speaker Change: Sure.

Nir Naur: I'm very happy to participate in my first call. It's been a great three months ramping up and meeting people on the team. I'm very excited about the AxoGen story and the potential of the company. Now, moving to the financial results. For this quarter, our revenue reached $42.9 million, 18.7% growth from the fourth quarter of 2022. This growth is attributed to a 10.5% increase in unit volume added with a 4.9% mixed favorability and a 3.3% increase in price. We estimate that revenue from emergent trauma represented approximately half of total revenue and grew mid-single digits compared to last year. We estimate that revenue from scheduled procedures represented approximately half of October.

Nir: Thank you Karen I'm very happy to participate in my first call. It's been great three months ramping up and meeting people on the team are very excited about the origin story and the potential of a cohort.

Nir: And moving to the financial results.

Nir: For this quarter, our revenue reached $42 $9 million.

Nir: 18, 7% growth from the fourth quarter was 122.

Nir: This growth is attributed to it than that.

Nir: 5% increase in unit volume added where the 449% mix favorability and a 3.3% anchors and Brian.

Nir: We estimate that revenue from emerging from up represented approximately half of total revenue and grew mid single digits compared to last year.

Nir: We estimate that revenue from scheduled procedures represented approximately half of Dover.

Nir Naur: During the quarter, we estimate that this category grew more than 25% from first to third. Our gross profit for the quarter was $33.8 million, an increase from the $30 million recorded in the fourth quarter of 2020. This represents a gross margin of 78.7%, down from 83% in the same period last year. This change is mainly driven by the cost associated with starting tissue processing at our new facility. Our total operating expenses for the quarter increased by 3.7% to $37 million, up from $35.6 million in Q4 of 2020. Specifically, our sales and marketing expenses for the fourth quarter grew by 11.6% to $22.2 million.

Nir: During the quarter, we estimate that this category grew more than 25% versus the prior year.

Nir: Our gross profit for the quarter was $33.8 million, an increase from the $30 million recorded in the fourth quarter of 2022.

Nir: This represents a gross margin of 78, 7% down from 83% in the same period last year.

Nir: This change is mainly driven by the costs associated with starting tissue processing at our new facility.

Nir: Our total operating expenses for the quarter increased by three 7% and $37 million up from $35 $6 million in Q4.

Nir: Specifically, our sales and marketing expenses for the fourth quarter grew by 11, 6% to $22.2 million.

Nir Naur: Sales and marketing expenses as a percentage of total revenue decreased to 51.7% from 55% in the fourth quarter of 2022 as we saw improved sales force growth. Research and development expenses increased by 7.2% to $7.3 million from $6.8 million in 2022, driven by costs related to the BLA. As a percentage of total revenues, total R&D expenses decreased to 17%, down from 18.8% in the last quarter of the previous year. General and administrative expenses decreased by 16.3% to $7.5 million in Q4 of 2023 from $8.9 million in Q4 of 2022, driven mainly by Stockholm forfeitures due to the departure of executives from our system.

Nir: Sales and marketing expenses as a percentage of total revenue decreased to 51, 7% from 55% in the fourth quarter of 2022 as we saw improved sales force productivity.

Nir: Research and development expenses increased by seven 2%.

Nir: Seven $3 million from $6 $8 million in 2022, driven by cost related to the BLA.

Nir: As a percentage of total revenues total R&D expenses reduced by 17% down from 18, 8% in the last quarter over the previous year.

Nir: General and administrative expenses decreased by 16, 3% to seven and a half million dollars in Q4, 'twenty two or three from $89 million in Q4, 2022 driven mainly by Stockholm forfeitures due to the departure of executives from our company.

Nir Naur: The quarter ended with a net loss of $3.9 million, or $0.09 per share, compared to a net loss of $5.4 million, or $0.13 per share, in the fourth quarter of 2020. However, we recorded an adjusted net loss of $2.6 million for the quarter, translating to roughly $0.06 per share, a shift from an adjusted net loss of $1.1 million, or $0.03 per share, in the same period last year, driven in part by one-time severance. Adjusted fourth-quarter EBITDA was $0.6 million compared to an adjusted EBITDA loss of $0.7 million in the prior year. As of December 31st, our balance of cash-cash equivalents and investments was $37 million compared to $38.6 million at the end of the third quarter.

Nir: The quarter ended with a net loss of $349 million or <unk> <unk> per share compared to a net loss of $5 $4 million or <unk> 13 per share in the fourth quarter 2022.

Nir: Yeah.

Nir: However, we recorded an adjusted net loss of $2 $6 million for the quarter translating to roughly fix them for share shift from an adjusted net loss of $1 $1 million or three cents per share in the same period last year.

Nir: Driven in part by one time severance costs.

Nir: Adjusted fourth quarter, EBITDA was $6 million compared to an adjusted EBITDA loss of $7 million in the prior year.

Nir: As of December 31st our balance of cash cash equivalents and investments was $37 million compared with 38 $6 million at the end of the third quarter.

Nir Naur: Turning now to our guide. As outlined in today's press release, we're issuing our Fool Year guidance for 2024. We expect revenue to be in the range of $177 million to $181 million, which represents an annual growth rate of approximately 11% to 40%. Additionally, we anticipate gross margin for the full year to be in the range of 76% to 79%.

Speaker Change: Turning now to our guidance.

Speaker Change: As outlined in today's press release, we're issuing our full year guidance for 2024.

Speaker Change: We expect revenue to be in the range of $177 million and $181 million, which represents an annual growth rate of approximately 11% to four.

Speaker Change: Our neighbors.

Speaker Change: Additionally, we anticipate gross margin for the full year to be in the range of 76% to 79%.

Nir Naur: In the future, we expect our gross margin to benefit from improved capacity utilization of our new processing facility as our sales volume of events increases. And in summary, we're pleased with our fourth quarter performance. We'll continue to execute our strategies, invest in innovation, improve our productivity, and drive towards cash flow, breakeven, and profitability. And this time, we'd like to open the line for questions. Kevin.

Speaker Change: In the future, we expect our gross margin to benefit from improved capacity utilization over a new processing facility is up sales volume over that same person.

Speaker Change: In summary, we're pleased with our fourth quarter performance.

Speaker Change: We will continue to execute our strategy and invest in innovation improve our productivity and driving towards cash flow breakeven and profitability.

And this time, we'd like to open up the line for questions.

Speaker Change: Kevin.

Operator: Thank you. We're now conducting a question and answer session. If you'd like to be placed in the question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Kevin: Thank you will now be conducting a question and answer session.

Speaker Change: That can be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. Once again Thats star one to be placed into question Q1 moment. Please while we poll for questions.

Operator: Once again, that's star number one to be placed into question. One moment, please, while we poll for questions. Our first question today is... This is Chris Pasquale from Frontier Liners Online.

Speaker Change: Our first question today is coming from crisp a small from the front of your line is that life.

Speaker Change: Yeah.

Karen Zaderej: Thanks, Karen. AVIVE was annualizing at close to 8 sales before you pulled it off the market. Is there any reason to think that a buy plus won't ramp to that same level relatively quickly?

Crisp: Thanks, Karen.

Crisp: It was annualizing at close to $8 million in sales before he pulled it off the market is there any reason to think that a buyer plus won't ramp to that same level relatively quickly and how do you think about how much of that is incremental versus cannibalistic to your existing portfolio.

Karen Zaderej: And how do you think about how much of that is incremental versus cannibalistic to your existing portfolio? Yeah, I'm just to remind people of AVIVE and AVIVE+. We previously had a product that we launched called AVIVE that we withdrew because of changes in regulatory classifications from the FDA. And we've launched AVIVE again to help move back into that segment of a temporary protection barrier, which we think is an important tool for surgeons. I don't think it's going to be an immediate ramp up, so I don't want to overplay that as, you know, something that's going to completely pop up in the next few quarters. We do have some surgeons who are very anxious to get this product because they used the prior version of a Vive product as an important part of their nerve treatment algorithm. So, you know, I'd be more cautious than that and just say, I think it's going to continue to help complement the protection business that we have and allow us to continue to see growth overall and in protection, but it won't ramp immediately up to that size of revenue. There is some cannibalization.

Crisp: Yeah, and just to remind people on a five and a five plus we previously had a product that we launched that was a buys that we withdrew because of changes in regulatory classifications from the FDA and we've launched a five plus to help move back into that segment of a temporary protection barrier.

Crisp: Which we think is an important tool for surgeons.

Crisp: I don't think it's going to be an immediate ramp up so I don't want to overplay that as you know something that's gonna completely pop into this next few quarters. We do have some surgeons, who are very anxious to get this product because they used it they use the prior avaya product is an important part.

Crisp: There are other nerve treatment algorithm and so I you know I'd be more cautious on that and just say I think it's going to continue to help complement the protection business that we have and allow us to continue to see growth overall in protection, but it won't ramp are immediately up into that into that size.

Crisp: Of up revenue.

Crisp: There is some cannibalization of surgeons had to turn to another tool when they are when they no longer had of lives are on the market. So there will be some cannibalization, where the surgeons were using alternatives are of our other products to try and still provide some protection for their nerves.

Nir Naur: Surgeons had to turn to another tool when they no longer had Avive on the market. So there will be some cannibalization where the surgeons were using alternatives from our other products to try and still provide some protection for their nerves. But we do think most of the Avive business will be a new business for us. So while there will be some cannibalization, it will be predominantly new. Thanks.

Crisp: But we do think most of the <unk> business will be a new business for us so while there'll be some cannibalization will be predominantly now.

Speaker Change: Thanks, and then near just a question about the cadence of gross margin during 2020 for the.

Nir Naur: And then Nir, just a question about the cadence of gross margin during 2024. The guidance is a little bit lower than what we were thinking. I'm assuming that's related to the new facility. Can you give us some sense of what the first half looks like versus the second and, you know, whether you see a pathway back to, you know, the 82 or 83 percent margins the company enjoyed a year ago? Yeah, thank you for the question.

The guidance a little bit lower than what we were thinking I'm, assuming that's related to the new facility.

Speaker Change: Can you give us some sense of what the first half looks like versus the second and whether you see a pathway back to the 80, 283% margins for the company.

Enjoyed a year ago.

Yeah.

Speaker Change: Yes. Thank you for the question so yeah. So indeed.

Nir Naur: So yeah, so indeed, as we mentioned, we fully transitioned to the new processing facility at the end of last year. It is an important milestone for BLA. It is designed for long-term growth and basically has capacity three times our previous one, which is very good for a long-term extension and the margin. That's it.

Speaker Change: Mentioned.

Speaker Change: We are fully transitioned to the new processing facility.

Last year. It is an important milestone for BLA.

Speaker Change: Time for a long term growth and basically capacity, which is three times our previous one.

Speaker Change: Which is very good for our long term expansion in the margin. That's in the short term, it's running at a fraction of its capacity and this is a one one of the driver for the lower margin.

Nir Naur: In the short term, it's running at a fraction of its total capacity, and this is one of the drivers for the lower margin. And we're ramping it up, learning about the various benefits of capacity and other efficiencies. That said, we wanted to give guidance that we feel fully confident with. We expect the margin, probably in the latter half of the year, to be on the lower side versus the first half of the year. Nonetheless, this is our average.

Speaker Change: And we're ramping it up learning about the various benefits of our capacity and not another efficiency.

Speaker Change: That said, we wanted to give guidance that we feel fully confident with we expect a.

Speaker Change: The margin probably in the later half of the year to be on the lower side versus the first half of the year. Nonetheless. This is our average and then long term definitely we expect the margin to it.

Nir Naur: And then long-term, definitely, we expect the margin to benefit from higher sales, higher production, and higher capacity utilization. Sorry, so just to confirm, we should expect sequential decreases in gross margin through the year, not a first half dip and then a second half rebound? Right. I mean, basically, we're selling old inventory which was produced in the prior and previous facilities. So this is why the second year might be a bit lower.

Speaker Change: Benefits from higher sales and higher production higher.

Innovation.

Speaker Change: Sorry, so just to confirm we should expect sequential decreases in gross margin through the year not a not a first half dip and then a second half rebound.

Speaker Change: Right.

Speaker Change: Basically we're selling our old inventory, which was greater than the prior under the previous facility.

Speaker Change: So this is why the second year might be a bit lower but again, we're learning all of those are impacted as I said.

Karen Zaderej: But again, we're learning all of those impacts, as I said, of the new facility. And for the total year, our guidance is 76 to 79, with definitely a clear expectation of improvements in the longer term. Great, thank you. Your next question is coming from Mike Sarcone from Jeffrey's. Your line is now open.

Speaker Change: The new facility.

Speaker Change: All year our guidance is.

Speaker Change: 739, with a definitely a clear expectation from him for improvements in the longer term.

Speaker Change: Great. Thank you.

Speaker Change: Okay.

Speaker Change: Thank you next question is coming from Mike Sarcone from Jefferies. Your line is now law.

Karen Zaderej: Good morning and thanks for taking the question. I guess just to start, you know, on the guidance, the 11 to 14 percent, talk about what's baked in, you know, in terms of the scenario. Healthcare Utilization Environment at the Low and High Ends of the Range. Yeah, so we're looking at continuing to see measured growth through the year, driven predominantly by productivity improvements with our existing sales team. You know, so think of it; it's about the same number of reps, maybe up or down a few.

Michael Anthony Sarcone: Good morning, and thanks for taking the questions.

Michael Anthony Sarcone: I guess just to start you know on the guidance the 11th though it's a 14% can you just talk about what's baked in.

Michael Anthony Sarcone: [noise] of scenarios and in health care utilization environment at the low and high ends of the range.

Speaker Change: Yeah, Yeah. So we are we're looking at I'm continuing to see.

Speaker Change: Hum measured growth through the year, driven predominantly by productivity improvements with our our existing sales team and you know so think of it. It's about the same number of reps, maybe up or down a few.

Karen Zaderej: But in the same size, not a big expansion of sales teams is driven by productivity and a real focus on driving that growth in our core account. So that's our strategy, that's how we think we're continuing to build this out. And we've drawn that out and have taken what we think is a measured approach to thinking about our overall growth. Okay, and I guess, can you provide any color on how you're thinking of the growth differential in 2024 between emergent trauma and schedule? Non-trauma, can you break that out for us or help us think about that?

Speaker Change: But in the same size not a big expansion of sales teams is driven by productivity and a real focus in driving that growth in our core accounts. So that's our strategy. That's how we think we're continuing to build this out and.

Speaker Change: We've drawn that out and have taken what we think is a measured approach and thinking about our overall growth.

Speaker Change: Okay, and I guess can you provide any color on how youre thinking of the the growth differential in 2024 between emerging trauma and scheduled non trauma can you break that out for us or help us think about that.

Karen Zaderej: Well, as we've talked about before, we think the conversion process in trauma, while it's a very large market, is just hampered by the very nature of the fact that it's an unscheduled procedure, and surgeons don't take trauma calls every day in a given month. And so we think that trauma growth will continue to be paced through continued growth but having to reach those surgeons in a longer time frame with a greater number of adoption steps. In scheduled procedures, by the very nature of the fact that they're scheduled, you can plan to be with the surgeon as they adopt new technology, work with them in those cases, and help change their practice patterns over a more discreet amount of time.

Speaker Change: Well as we've talked about before we think that conversion process and trauma well, it's a very large market is.

Speaker Change: He is just hampered by the very nature of the fact that it's an unscheduled procedure.

Speaker Change: And and Surgeons don't take trauma call every day and I had given month and so we think that the trauma growth will continue to be.

Paste them through our continued growth, but having.

Speaker Change: Having to reach those surgeons and a and a longer time frame with a greater number of adoption steps and scheduled procedures by the very nature of the fact that Theyre scheduled you can plan to be with the surgeon as they adopt a new technology, our work with them in those cases and help change their practice patterns.

Speaker Change: Over a more discreet amount of time, so we think the adoption process and scheduled cases can be.

Karen Zaderej: So we think the adoption process in scheduled cases can be more rapid than what you see in trauma. So it's a blend of those two that is what made up our overall guidance. Okay, thanks, Karen. And maybe I could just squeeze one last one in.

Speaker Change: You know more rapid than what you see in trauma. So it's a blend of those two that is what made up our overall guidance.

Speaker Change: Okay. Thanks, Karen and maybe if I could just squeeze one last one and can you maybe just elaborate on how youre thinking about seasonality and in sales cadence through the year.

Karen Zaderej: Can you maybe just elaborate on how you're thinking about seasonality and sales cadence through the year? Yeah, great question. So, as we've talked about in the past, trauma has a peak during the time periods where people are more active. And so, as our business was originally trauma, you saw a cadence where first quarter to second quarter, there was a big jump up, second quarter, third quarter, there was another jump up, and then it was basically flat to down in the fourth quarter, and then sequentially, again, flat to down into the first quarter of the next year. However, scheduled cases don't follow that cadence.

Karen King: Yeah, Great question, so as we talked about on the past trauma.

Karen King: Is has it peaked during the time periods, where people are more active and so.

Karen King: As our business was originally a trauma you saw a cadence where first quarter to second quarter. There was a big jump up second quarter to third quarter ever said another jump up and then it was basically flat to down and fourth quarter, and then sequentially again flat to down into the first quarter of the next year.

Karen King: Scheduled cases don't follow that that cadence, so you're seeing some shifts in our cadence and seasonality where.

Karen Zaderej: So you're seeing some shifts in our cadence and seasonality, where scheduled cases will be driven, like most other elective scheduled procedures, they tend to be heavy towards the end of the year. There is a slight nuance difference for breast reconstruction, where many women prefer not to have their breast reconstruction during that holiday period. But in most scheduled elective procedures, you'll see a push towards the end of the year. And it will be a little bit lighter at the beginning of the year and then more of a steady slope through the rest of the year.

Karen King: We're scheduled cases will be driven like most other elective scheduled procedures.

Karen King: They tend to be heavy towards the end of the year, a little slight nuance difference for breast reconstruction, where many women prefer not to have their breast reconstruction during that holiday period, but in most scheduled electric procedures, you'll see a push towards the end of the year and it will be a little bit lighter at the beginning of the year and then more of us.

Karen King: Steady slope through the throughout the year and so again, we're going to see some shifts over time in the cadence quarter to quarter as we balance between trauma and scheduled cases.

Karen Zaderej: So again, we're going to see some shifts over time in the cadence quarter to quarter as we balance between trauma and scheduled cases. Okay, thanks, Karen. Thank you. The next question today is coming from Mike Kratky from Rearing Partners. Your line is now, Hi, everyone.

Karen King: Okay. Thanks, Karen.

Karen King: Thank you. Your next question today is coming from Mike Kratky from Leerink Partners. Your line is now live.

Michael Holden Kratky: Hi, everyone. Thanks for taking my questions.

Karen Zaderej: Thanks for taking our questions. It's great to see the agency alignment on the advanced BLA. You know, what's the latest you've been hearing from KOLs and positions on the extent to which having that ultimate BLA approval could really drive higher utilization and what are the key factors that are driving it. Well, we're really excited about continuing to move forward and getting to the final stage of our submission on the advanced BLA. It's been a long process for us, and we had a very productive meeting with the FDA that we think laid out a clear path for us as we go forward. So yeah, we are turning our sights not just to the submission but to our commercialization post-BLA. Look, from a surgeon's standpoint, surgeons really care more about the data and that recon publication than they care about the regulatory classification of a particular product.

Michael Holden Kratky: Great to see the agency alignment on the events B L. A you know what's the latest you're hearing from Kols and physicians on the extent to which having that ultimate BLA approval. It really drives high utilization and what are the key factors that are driving that.

Mike Kratky: Yeah.

Mike Kratky: But we're really excited about continuing to move forward and I'm getting to the final stage of our submission on the B L. A it's been a long process for us. So we had a very productive meeting with the FDA, but we think laid out a clear path for us as we go forward.

Mike Kratky: Yeah, we are turning our sites not just to the submission but to our commercialization post to be L. A.

Mike Kratky: Look from a surgeon standpoint, the surgeons really care more about the data and that recon publication than they care about the regulatory classification of a of a particular product, but we do think it will be helpful to continue to drive standardization, especially with middle adopters and accounts.

Karen Zaderej: But we do think it will be helpful to continue to drive standardization, especially with middle adopters and accounts as, again, becoming a premium standard product that they use in their nerve protection algorithm. We also think that having the BLA and, again, the data will be helpful as we continue to work with payers to make sure that Advair is listed as non-experimental on payers' algorithms. So we think that it will continue to be helpful as we continue to grow. But the first step was actually getting this recent publication of the recon data, which we're wanting to make sure that surgeons see so they can make an informed choice in their clinical decision-making. Yeah, that makes sense. And then maybe just one separate one.

As again, becoming a premium standard product that they use in their and their nerve protection algorithm. We also think that having the BLA and again the data will be helpful. As we continue to work with payers to make sure that advance is listed as non experimental on their AR on an.

Mike Kratky: Hum on payers algorithms.

Mike Kratky: So we think that it'll be continue to be helpful. As we continue to grow but the first step actually was actually getting this recent publication of the recon data, which we're wanting to make sure that surgeons see so they can make an informed choice in their clinical decision making.

Speaker Change: Got it yeah that makes sense and then maybe just one separate one you saw great growth in the scheduled procedures and for Q would be curious if you could provide some additional color on which procedures within that category of what's driving some of that goes and whether you've seen some of that momentum continue so far in early 2024.

Karen Zaderej: You know, you saw great growth in scheduled procedures in 4Q. We'd be curious if you could provide some additional color on which procedures within that category were driving some of that growth and whether you've seen some of that momentum continue so far in early 2020. Well, as I mentioned in the script, all of our application areas grew. So we were really pleased across all of the areas and with all of our products. So it wasn't just one hit.

Speaker Change: Well, Oh, Oh, I mentioned in the script all of our application areas grew so we were really pleased across all of the areas and with all of our products. So it wasn't one hit it's really for us to continue to develop and grow out this market and we've seen continues.

Karen Zaderej: It's really for us to continue to develop and grow this market, and we've seen continued enthusiasm for that growth and expansion as we've entered here into Q1. Thanks very much.

Speaker Change: <unk> enthusiasm for that growth and expansion and as we've entered here into Q1.

Speaker Change: Understood Thanks very much.

Karen Zaderej: Thank you. The next question is coming from Caitlin Cronin from Canada Corp Genuity. Your line is now live. Hi, thanks for taking the questions and congrats on a great quarter. Yeah, hi, everyone.

Speaker Change: Thank you. The next question is coming from Caitlin chromium from Canaccord Genuity. Your line is that a lot.

Caitlin Cronin: Hi, Thanks for taking the questions and congrats on a great quarter. Thanks.

Caitlin Cronin: Thanks, Kevin.

Caitlin Cronin: Yeah, Hello, everyone I'm just to start with 2024th guidance it seems to imply deceleration year over year at the mid point, even though it seems like scheduled procedure growth has seemed to pick up any any kind of reason for that and where do you think the mix between scheduled an emergent trauma.

Karen Zaderej: Um, just to start with 2024 guidance, it seems to imply deceleration year over year at the midpoint, even though it seems like scheduled procedure growth has seemed to kick up any kind of reason for that? And where do you think the mix between scheduled and emergent trauma could turn really? Well, again, I think we're taking a measured approach. We looked at this, not just on them, that we had great momentum coming out of the year, but really looking at the total year to take a measured approach and think about our overall, overall guidance. And so, that was the thinking behind it. Again, so far, we've been pleased with how we started the year, but we don't want to get out over our skis on this.

Caitlin Cronin: Treadmill overtime.

Caitlin Cronin: Well again I think we're taking a measured approach we looked at this and not just on them that we had great momentum coming out of the year, but really looking at the total year to take a measured approach and think about our overall, our overall guidance and so so that was.

Caitlin Cronin: The thinking behind it.

Caitlin Cronin: Again, so far we've been pleased how we saw the beginning of the year, but but we're wanting not to get out over our skis on this.

Karen Zaderej: Okay, makes sense. And where did Active Accounts end? I'm, Can somebody pull up the active account number for me?

Speaker Change: Okay makes sense and where does the active accounts.

Speaker Change: Hum cause somebody pull up the active account number for me. So we generally are focusing in it it will be in the deck that we'll get out but we're generally focusing on the core accounts, because that's where the majority of our revenue comes from is from those core accounts, but of course active accounts grow into core accounts.

Karen Zaderej: So we generally are focusing, and it will be in the deck that we'll get out, but we're generally focusing on the core accounts because that's where the majority of our revenue comes from. But, of course, active accounts grow into core accounts. So, you know, it's important to make sure that we have that feeder pool of active accounts. But our real focus is on thinking about how we can take these accounts to be $100,000 or bigger so that we can continue to go deeper and become a standard of care in those core accounts. If you remember, an active account is a pretty low threshold. It means that we have had only six orders in the past 12 months.

Is it you know it's important to make sure that we have that that feeder pool of active accounts, but our real focus is on thinking about how can we take these accounts to be $100000 or bigger.

Speaker Change: So that so that we can continue to go deeper and become a standard of care and those core accounts. If you remember an active account is a pretty low threshold. It means that we had only six orders in the past 12 months basically what it says is you're seeing the Vac Committee and you've got a surgeon who has started to use the product.

Karen Zaderej: Basically, what it says is you're through the VAC committee, and you've got a surgeon who has started to use the product in some small way, but it may not be a focus or target account for us. So we have 1,006 active accounts. So we have a very good pool to continue to build from as we drive those core accounts and build a bigger base. Okay. Thanks.

Speaker Change: In some small way, but it may not be a focus or target account for us. So we had a 1006 active accounts. So we have a very good pool to continue to build from as we drive those core accounts and build a bigger base.

Speaker Change: Understood. Thanks, so much.

Speaker Change: Yeah.

Speaker Change: Yeah.

Karen Zaderej: Thank you. The next question today is coming from Dave Turkaly from Citizens JMP. Your line is now, Hey, good morning. Good morning.

Speaker Change: Thank you. Your next question today is coming from Dave directly from citizens JMP. Your line is that right.

Hey, good morning.

Karen Zaderej: I was wondering if you might provide us a little additional detail of, when you look at the 367 core counts, like how many of them are using more than one AxoGen product or how many of them are accounts that are doing, you know, the trauma procedures as well as scheduled, and what kind of popular or how common is it?

Dave: I was wondering if you might have.

Dave: There's a little additional detail of.

Dave: When you look at the 357 core accounts.

Dave: How many of them are using more than one accident product or how many of them are are there accounts that are doing you know.

Dave: The trauma procedures as well as the.

Dave: As scheduled in and how how kind of popular how common is that.

Karen Zaderej: Yeah, um, so it's gonna be hard to answer that because it's some of all of those things. Look, most of our core accounts use more than one product. But they are most not fully penetrated, that they use all of our products in all of the applications and algorithms. So, and by that, I mean, in trauma, remember that there's a lot we call trauma one thing, but there's a lot of different types of trauma.

Speaker Change: Yeah instead.

Speaker Change: So it's very hard to answer that because it's some of all of those things, but most of our core accounts he has more than one product.

Speaker Change: That they most are not fully penetrated that they use all of our products in all of the applications and algorithm so and by that I mean in trauma remember that there's a lot we called trauma, one thing, but there's a lot of different types of trauma surgical adopt initially in sort of short digital.

Karen Zaderej: So a surgeon will initially adopt initially and sort of short digital nerve injuries and work their way up to complex mixed and motor injuries across a stair step process of adoption. And most of our accounts are at an early stage of penetration. That's why we think we want to continue to focus on that core account to become a standard of care in those core accounts. There are some core accounts that are only about trauma. There are some core accounts that are scheduled procedures only.

Speaker Change: Our of injuries and work their way up to complex mixed and motor injuries across to a stair step process of adoption and most of our accounts are our at a at an early stage of penetration. That's why we think we want to continue to focus on that core accounts have become a standard of care in those core counts.

Speaker Change: There are some core accounts that are trauma only there are some core accounts that are scheduled procedures only and so it is still a you know you get a foothold with one surgeon that's generally what it takes to become a core account is one surgeon who will then be about $100000 in Rev.

Karen Zaderej: And so it is still, you know, you get a foothold with one surgeon, that's generally what it takes to become a core account is one surgeon, who will then generate about $100,000 in revenue. And the rep's job is to continue to expand out to other surgeons across all of the applications. And so because the threshold is only $100,000, like I said, there can be a core account; there can be one surgeon who takes trauma calls, and that could be a core account. But we have a lot of opportunity to build it from there. Thank you for that. And maybe one for Nir, congrats on the progress on the bottom line. I guess as we're looking into next year, I assume probably not adjusted EBITDA positives for the full year, but maybe trending in that direction. I was wondering if you could make any comment on sort of, you know, what you think that... Even though loss might look like or, you know, maybe compared to what 23 was, directionally, you know, any, any help there would be great.

Speaker Change: Canoe and the rep's job is to continue to expand out to other surgeons do it across all of the applications and so so because the threshold. There's only 100000 like I said there can be a core account that can be one surgeon. It takes trauma call and that could be a core account, but we got a lot of opportunity to build it from there.

Speaker Change: Thank you for that and then maybe one for.

Speaker Change: There congrats on your progress on the bottom line I guess as we're looking into next year.

Speaker Change: I assume are probably not.

Speaker Change: Adjusted EBITDA positive for the full year, but maybe trending in that direction. I was wondering if you make any comment on sort of.

Speaker Change: You know what you think that.

Speaker Change: EBITDA loss might look like or you know maybe.

Speaker Change: Maybe compared to what 23 was Directionally you know Eddie any help there would be great.

Nir Naur: Yeah, I mean, we don't have specific figures, but I would say, you know, a couple of things that I would be looking at revenue growth, the benefits of operational leverage, and the economies of scale. I think this is the most important thing. In addition to that, better and continued focus on resource allocation and salesforce productivity. In addition to that, a couple of tailwinds, one of them impacting EBITDA and the other one, the cash balance, but the royalties on events that we have been paying for the past couple of years, a bit over $3 million in 2023, they rolled off at the end of 2023.

Speaker Change: Yeah, I mean, we.

Speaker Change: Uh huh.

Speaker Change: Yeah. So the specific figures, but I would say a couple of things that I would be looking at.

Speaker Change: Revenue growth and benefits of the operational leverage in the economies of scale and this is the most important thing.

Speaker Change: In addition to that.

Speaker Change: Our continued focus on resource allocation and sales force productivity inhibition through that.

Speaker Change: A couple of tailwind one of them impacting the the EBITDA and the other one the cash balance, but the royalties on events that we have been paying for the past couple of years of drawn but over a $3 million in 'twenty three freely because they rolled off at the end of 2023.

Nir Naur: So those are sort of the high-level levers that I would be looking at when you're looking at the improvement from last year to this year when it comes to the bottom line. Thank you. As a reminder, that's star number one. All questions? No?

Speaker Change: So those are sort of the higher level levers, but I wouldn't be looking at when you're looking at the improvement from last year to this year when it comes to bottom line.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Thank you as a reminder, that star one to be placed in the question queue. Our next question is coming from Ross Osborne from Cantor Fitzgerald. Your line is now live.

Operator: Okay. Our next question is coming from Ross Osborn from Cancer Fitzgerald. Your line is now live. You guys, good morning.

Ross Everett Osborn: Yes, hi, good morning, Thanks for taking the question. So in your prepared remarks, I mentioned C are actually already shape, how it's being used and new types of cases pushes classic offering could you maybe just walk us through some of those use cases.

Karen Zaderej: Thanks for taking our question. So, in your prepared remarks, you mentioned seeing XGuard H8 Plus being used in new types of cases versus the classic offering. Could you maybe just walk us through some of those use cases?

Karen Zaderej: Sure. One of the things we're really excited about AxoGuard HA Plus is that the HA layers provide a slippery gliding surface. So when you think about your extremities and where you need to bend or move, that slippery layer helps when a nerve is going around a large joint. So elbows, knees, hips, those are all areas where that gliding surface can be important to make sure that the nerve remains free from attachments and can move smoothly across and through that joint.

Ross Everett Osborn: Sure one of the things, we're really excited about axa grow to H E plus is the H a layers provide a.

Ross Everett Osborn: Slippery gliding surface. So when you think about your extremities, and where you need to bend or move that.

Ross Everett Osborn: That slippery layer helps when a nerve is going around a large joint so elbows knees hips.

Ross Everett Osborn: Those are all areas, where that gliding surface can be important to make sure that the nerve remains free from attachments and can move smoothly across and through that joint and so that that's one of the big areas that we see surgeons.

Karen Zaderej: And so that's one of the big areas that we see surgeons really seeing a great application for the AxoGuard HA Plus. So we continue to be interested in how they're using it, seeing some great applications in those areas where they want to have that gliding surface and getting some very positive feedback about the product. Okay, great.

Ross Everett Osborn: Really seeing a great application for the Axa Gert H E plus so we continue to see D are interested in how they're using it I'm seeing some great applications in those areas, where they want to have that gliding surface and getting some very positive feedback about the product.

Speaker Change: Okay, Great and then maybe lastly for US just on Opex. So it sounds like hiring maybe minimal this year in terms of sales reps.

Karen Zaderej: And then maybe lastly for us just on OPEX, since I'm probably hiring maybe minimally this year in terms of sales reps. But would you walk us through any new or expanded marketing initiatives? And also remind us to put some things on the R&D line, please. Thank you. Yeah, we are.

But would you walk us through any new or expanded marketing initiatives and also remind us God puts and takes on the R&D line. Please thank you.

Speaker Change: Yeah, we.

Karen Zaderej: Think of it as from a sales rep number that we will stay very close to that 116 number, maybe up or down a few reps from that, but it will stay very close to the 116 number. In terms of new things, again, we've already talked about the Avive Plus, which will be coming out here shortly. So we'll have a new product continuing to focus on different parts of nerve protection. We aren't looking at anything here in the short term for a big launch in a new application, but we are doing continued development work in several application areas and see that the opportunity for nerve repair is pretty expansive because nerves run all over the body and are injured in many types of procedures.

Speaker Change: Think of it as a from a sales rep number that we will stay very close to that $1 16 number may be up or down a few reps from from that but but it will stay very close to the 116 number.

In terms of a new things again, we've already talked about they advised plus which will be coming up here. Shortly so we'll have a new a new product continuing to focus and a different.

Speaker Change: Different parts of nerve protection.

Speaker Change: We aren't looking at anything here in the short term of a big launch in a new application, but we are doing a continued development work in several application areas and Ah and see that the opportunity for nerve repair is pretty expensive because nurse run.

Speaker Change: You know all over the body and and are injured in many types of procedures and so we have a a medical affairs team that really focuses on advanced techniques in nerve repair and looking at a new expansion areas and so at this point I don't have anything that I wanted to tell you is a is a confirmed.

Karen Zaderej: So we have a medical affairs team that really focuses on advanced techniques in nerve repair and looking at new expansion areas. And so, at this point, I don't have anything that I want to tell you is a confirmed expansion area, but to say that our R&D team continues to work on it and sees some promising new areas for us to look into.

Scenarios, let's just say that our R&D team continues to work on it and and sees some promising new areas for us to look into.

Karen Zaderej: Great, thank you. Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to Karen for any further questions. Well, thank you. As we conclude today's earnings call, I want to express my appreciation to our team for their exceptional efforts and to all the participants for your attention and contributions. The dedication of our staff has been pivotal in achieving the milestones we discussed today, and we look forward to sharing our continued progress with you in the future. Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation.

Speaker Change: Great. Thank you.

Speaker Change: Thank you we have reached out of our question and answer session I'd like to turn the floor back over to Kevin for any further or closing comments.

Kevin: Oh. Thank you as we conclude todays earnings call I want to express my appreciation to our team for their exceptional efforts and to all the participants for your attention and contributions.

Kevin: The dedication of our staff has been pivotal in achieving the milestones we discussed today and we look forward to sharing our continued progress with you in the future.

Speaker Change: Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.