Q1 2024 Tenon Medical Inc Earnings Call
Yeah.
Operator: Thank you for your patience. We will be beginning the conference shortly. Again, thank you for your patience.
Conference Moderator: Thank you for your patience, we will be beginning the conference. Shortly again, thank you for your patience cleans and they'll be getting shortly.
Conference Moderator: [music].
Conference Moderator: Greetings and welcome to Tennant Medical first quarter 2024 financial results and corporate update conference call.
Operator: We will be beginning shortly. Welcome to Tenon Medical's first quarter 2024 financial results and corporate update conference call. As a reminder, this call is being recorded. Your hosts for today are Steve Foster, President and Chief Executive Officer, and Steve Van Dyck, Chief Financial Officer. Mr. Foster and Mr. Van Dyck will present results of operations for the first quarter ended March 31, 2024, and provide a corporate update.
Speaker Change: As a reminder, this call is being recorded.
Speaker Change: As for today are still foster President and Chief Executive Officer, and Steve Van Dyk, Chief Financial Officer, Mr. Foster and Mr. Van deck offerings that results of operations for the first quarter ended March 31st 2024, and provide a corporate update.
Speaker Change: A press release detailing these results was released today and is available on the Investor Relations section of our company's website at Www Dot tenant met Dot com before we begin the formal presentation I would like to remind everyone that statements made on the call and webcast may include predictions estimates.
Operator: A press release detailing these results was released today and is available on the Investor Relations section of our company's website at www.tenonmed.com. Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates, and other information that may be considered forward-looking. These forward-looking statements represent our current judgment on what the future holds. They are subject to risks and uncertainties that could cause actual results to differ materially.
Speaker Change: Two minutes and other information that may be considered forward looking these forward looking statements represent our current judgment on what the future holds they are subject to risks and uncertainties that could cause actual results to differ materially.
Operator: You are requested not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our forecasts.
Speaker Change: And not to place undue reliance on these forward looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward looking statements.
Speaker Change: Of new information or future events throughout today's discussion, we will attempt to presenting some important important factors relating to our business that may affect our predictions for more complete discussion of these factors and other risks you should review our prospectus dated April.
Operator: For a more complete discussion of these factors and other risks, you should review our prospectus dated April 26, 2022, particularly under the heading Risk Factors, which is on file with the Securities and Exchange Commission at www.sec.gov. At this time, I'll turn the call over to Tenon Medical and Chief Executive Officer Steve Foster. Please go ahead, sir.
Speaker Change: 'twenty six 2022.
Speaker Change: Particularly under the heading risk factors, which on file with Securities and Exchange Commission at Www Dot S E C Dot Gov.
Speaker Change: At this time I'll turn the call over to tenants medical.
Speaker Change: Tenants Medical's, Chief Executive Officer, Steve Foster. Please go ahead Sir.
Steven M. Foster: Thank you, Sherry, and good afternoon to everyone. I'm pleased to welcome you to today's first quarter 2024 financial results and corporate update conference call for Tenon Medical. We began 2024 following a year of significant operational progress and continued focus on building market share across operations. We've made considerable commercialization and technical advances and remain on the right path as we begin our second year of commercialization. We aggressively monitor our commercial activities and have restructured our sales organization based on our 2023 learning. During Q1, we had coverage in two of five geographic regions.
Steven M. Foster: Thank you Sherry and good afternoon to everyone I am pleased to welcome you to today's first quarter 2024 financial results and corporate update conference call for 10 on medical.
Steven M. Foster: We began 2024 following a year of significant operational progress and continued focus on building market share.
Across operations, we've made considerable commercialization and technical advances and remain on the right path as we began our second year of commercialization.
We aggressively monitor our commercial activities and have restructured our sales organization based on our 2023 learnings. During Q1, we had coverage in two five geographic regions with the addition of new personnel assigned to these areas. We are now poised to move forward.
Steven M. Foster: With the addition of new personnel assigned to these areas, we are now poised to move forward. We continue to gain traction in our go-to-market approach with SI-focused physicians and network partners adopting our proprietary Catamaran system, which we believe has broadened the competitive field of surgical options available for patients with chronic sacroiliac joint pain and degenerative sacroilitis. Our first quarter of 2024 financial results reflected continued strong momentum with a 66% increase in revenue year-over-year, driven by a 42% rise in surgical procedures utilizing the CATAMARAN system.
Speaker Change: We continue to gain traction in our go to market approach with ISI focused physicians and network partners adopting our proprietary catamaran system, which we believe has broadened the competitive field of surgical options available for patients with chronic sacroiliac joint pain, and degenerative sick or license.
Speaker Change: Our first quarter of 2024 financial results reflected continued strong momentum with a 66% increase in revenue year over year, driven by a 42% rise in surgical procedures utilizing the catamaran system.
Steven M. Foster: This is our fourth consecutive quarter of positive growth, and gross profit with a steady rate of gross margin of 65% as compared to the prior quarter. As we sustain revenue growth, we believe our stable cost structure will continue to maintain gross margin performance at recent levels.
This is our fourth consecutive quarter of positive gross gross profit with a steady rate of gross margin of 65% as compared to the prior quarter.
Speaker Change: We sustained revenue growth, we believe our stable cost structure will continue to maintain gross margin performance at recent levels.
Steven M. Foster: During the quarter, we announced favorable interim results from our ongoing post-market clinical study. The first patients are now reaching their 12-month milestone, which includes a CP scan to assess bone healing. In addition to seeing marked improvements in VAS and ODI scores, we are seeing radiographic proof of bridging bone in these 12-month CT scans as assessed by an independent radiologist. This is further indication that Catamaran delivers on its clinical promises. For those new to Tenon, this prospective, multi-center, single-arm, post-market study evaluates the clinical outcomes of patients with sacroiliac joint disruptions or degenerative sacroilitis treated with the Catamaran SI Joint Fusion System. Patients will be evaluated for a period of up to 24 months, reviewing various patient-reported outcomes, radiographic assessments, and adverse events.
Speaker Change: During the quarter, we announced favorable interim results from our ongoing post market clinical study.
Speaker Change: The first patients are now reaching their 12 month milestone, which includes a C T scan to assess bone healing.
Speaker Change: In addition to see marked improvements in Vas ODI schools, we're seeing radiographic tubes for bridging boom in these 12 months she T as assessed by an independent radiologist.
catamaran: This is further indication that catamaran delivers oh, that's clinical promises.
Speaker Change: For those who need to turn on this prospective multi center single arm post market study evaluates the clinical outcomes of patients with sacroiliac joint disruption or degenerative secret lightest treated with catamaran Si joint fusion system.
Speaker Change: <unk> will be evaluated for a period of up to 24 months reviewing various patient reported outcomes radiographic assessments and adverse events as.
Steven M. Foster: As mentioned during our earnings call in March, we are approaching the end of enrollment and anticipate a detailed interim analysis in the fall of 2024. This validation further underscores our confidence that the catamaran's trans-fissing design, a less invasive inferior posterior approach, is functioning as intended to optimize patient outcomes through short-term stabilization and long-term fusion of the SI joint. Of note, the interim data from our study combined with the over 500 surgeries performed with the catamaran system today are demonstrating an exceptional safety profile, benefiting patients and their physicians alike.
Speaker Change: As mentioned during our earnings call in March we are approaching the end of enrollment and anticipate a detailed interim analysis in the fall of 2024.
Speaker Change: This validation further underscored our confidence that the catamaran transpacific design less invasive interior pushed your approach.
Speaker Change: Functioning as intended to optimize patient outcomes through short term stabilization and long term fusion of ESI Jake.
Speaker Change: Of note the interim data from our study combined with the over 500 surgeries performed with catamaran system today is demonstrating an exceptional safety profile benefiting patients and their physicians alike.
Steven M. Foster: We continued expansion of our workshop activities during the first quarter, supported by our valued physician faculty and the robust commercial infrastructure we continue to build. As a reminder, we take a precise go-to-market approach through our workshop and training programs in order to address physicians and medical professionals with extensive backgrounds and experience in SI surgical technology. We hosted 12 physicians and catamaran workshops during the first quarter of 2024.
Speaker Change: We continued expansion of our workshop activities during the first quarter supported by our valued physician faculty.
Speaker Change: Bus commercial infrastructure, we continue to build.
Speaker Change: As a reminder, we take a precise go to market approach through our workshops and training programs in order to address physicians medical professionals with extensive backgrounds and experience and Si surgical technologies, we hosted 12 physicians catamaran workshops during the first quarter of 2024.
Steven M. Foster: With validation of our system's effectiveness demonstrated in the preliminary results from our post-market study, we have reached a critical inflection point that will drive further adoption of this important technology. Tenon will be broadening our strategic marketing, promotion, and workshop efforts to get the word out that Catamaran delivers. Recently, we welcomed Christine Jakes to our board of directors.
Speaker Change: With validation of our system's effectiveness demonstrated in the preliminary results from our post market study. We have reached a critical inflection point that will drive further adoption of this important technology.
China: China, and we'll be broadening our strategic marketing promotion workshop efforts to get the word out that catamaran delivers.
Steven M. Foster: Her significant experience in the medical device field, focusing on go-to-market strategies for spine-related technological innovation, will provide valuable insight for our company. We further enhanced our growing patent portfolio for the catamaran SI joint implant system with receipt of an issuance of a notice of allowance of patent application from the U.S. Patent and Trademark Office, which further encompasses important claims for our system. Currently, we have 8 issued U.S. and international patents and 23 pending U.S. and international patent applications.
China: Recently, we welcomed Christine James to our board of directors her significant experience in the medical device field, focusing our go to market strategies of spine related technological innovation will provide valuable insights for our company.
Christine James: We further enhanced our growing patent portfolio for the catamaran, that's I joined implant system with receipt of an issuance of a notice of allowance patent application from the U S patent and trademark office, which further encompasses important claims for our system.
Christine James: Currently we have eight issued U S and international patents and 23 pending U S and international patents applications.
Steven M. Foster: Additionally, during the first quarter, we strengthened our balance sheet to support our accelerated sales and marketing initiatives. We generated proceeds of $2.6 million from our preferred stock raise during the first quarter, as we simultaneously retired $1.25 million in secured debt from the fourth quarter of 2023. With that, I'll turn it over to Mr. Van Dyck, our Chief Financial Officer, to discuss our financials. Thanks, Steve.
Speaker Change: Additionally, during the first quarter, we strengthened our balance sheet to support our accelerated sales and marketing initiatives.
Speaker Change: We generated proceeds of $2 6 million from our preferred stock raise during the first quarter as we simultaneously retired $1 million to $5 million in secured debt from the fourth quarter of 2023.
Speaker Change: With that I'll turn it over to Mr. Van Dyk, our chief financial officer to discuss our financials.
Steven M. Van Dick: I'll give us a sync review of our financial results. A full breakdown is available in our press release going over the wire this afternoon. Our revenue was $719,000 in the first quarter of 2024, an increase of 66% compared to the $433,000 in the comparable year-ago period. The increase in revenue for the first quarter as compared to the same year-ago period was primarily due to an increase of 42% in the number of catamaran surgical procedures. Gross profit in the first quarter of 2024 was $470,000, or 65% of revenue, compared to a gross loss $47,000, or a negative 11% of revenue, in the comparable year-ago quarter.
Speaker Change: Thanks, Steve I'll give a distinct review of our financial results. Our full breakdown is available in our press release across the wire. This afternoon.
Speaker Change: Our revenue was 719000 in the first quarter of 2024, an increase of 66% compared to the 433000 in the comparable year ago period.
Speaker Change: The increase in revenue for the first quarter as compared to the same year ago period was primarily due to an increase of 42% the number of catamaran and surgical procedures.
Speaker Change: Gross profit in the first quarter of 2024 was 470000 or 65% of revenues.
Speaker Change: Care to a gross loss of 470 pounds.
Speaker Change: 47000 or negative 11% of revenues.
Speaker Change: In the comparable year ago quarter.
Steven M. Van Dick: Importantly, we have seen gross margins steadily improve due to the revenue growth associated with an increase in the number of surgical procedures, which resulted in sustainable operating leverage due to the lower relative fixed costs and the absorption of more overhead into our standard cost. Operating losses totaled $3.5 million for the first quarter of 2024, compared to a loss of $4.9 million in the first quarter of 2023. Decreases in operating expenses were primarily a result of decreases in research and development expenses and third-party sales and marketing expenses due to Tenon's implementation of an internal commercial infrastructure.
Speaker Change: Importantly, we've seen gross margin steadily improve due to the revenue growth associated with the increase in the number of surgical procedures.
Speaker Change: Which resulted in sustainable operating leverage due to the lower relative fixed cost and the absorption of more overhead into our standard cost.
Speaker Change: Operating losses totaled $3 5 million for the first quarter of 2024 compared to a loss of four 9 million in the first quarter of 2023.
Speaker Change: Decreases in the operating expenses were primarily a result of decreases in research and development expenses and third party sales and marketing expenses due to tenants implementation of an internal commercial infrastructure.
Steven M. Van Dick: The net loss was $3.6 million for the first quarter of 2024, compared to a loss of $4.8 million in the same period of 2023. The company does expect to incur additional losses in the future. As of March 31st, 2024, cash and cash equivalents totaled $4.4 million, as compared to $2.4 million as of December 31st, 2023. Additionally, as of March 31st, 2024, the company has no outstanding debt. With that, I'll turn it back to Steve for closing thoughts. Thank you, Steve.
Speaker Change: Net loss was $3 $6 million in the first quarter 2024, compared to a loss of one 8 million.
Speaker Change: In the same period of 2023.
Speaker Change: The company does expect to incur additional losses in the future.
Speaker Change: As of March 31st two weeks before our cash and cash equivalents totaled four 4 million as compared to $2 4 million as of December 31, 2023.
Speaker Change: As of March 31, 2024, the company has no outstanding debt.
Steve: With that I'll turn it back to Steve for closing thoughts.
Steve: Thank you Steve.
Steven M. Foster: As we continue to drive momentum in the market, represented by year-over-year increases in our catamaran procedures, we are prioritizing the scale of our commercialization strategy for our proprietary FDA-cleared surgical implant system. We ended the first quarter with attractive year-over-year revenue growth and a fourth consecutive quarter of positive gross margins. We believe we will continue this growth trajectory supported by our expanding commercial infrastructure and seasonal sales management team. We are particularly encouraged by the interim clinical results from our post-market clinical trial, as well as the safety profile emerging from our clinical experience to date.
Steve: We continue to drive momentum in the market represented by year over year increases in our catamaran procedures. We are prioritizing the scale of our commercialization strategy of our proprietary FTE cleared surgical implant system.
Steve: We ended the first quarter with attractive year over year revenue growth and our fourth consecutive quarter of positive gross margin.
Steve: We believe we will continue this growth trajectory supported by our expanding commercial infrastructure and sheet and sales management team.
Steve: We are particularly encouraged by the interim clinical results from our post market clinical trial as well as the safety profile emerging from our clinical experience to date.
Steven M. Foster: Our organization believes deeply in the first do-no-harm component of the Hippocratic Oak and is committed to delivering technologies our physician customers can count on. Our investment in IRB-controlled post-market data gathering is further reinforcing that the catamaran system delivers on its promise. We will continue to refine and innovate to drive our growth objectives to further improve the quality of life for patients suffering from SI joint pain while pursuing long-term value for our shareholders. I thank all of you for attending, and now I'd like to hand the call over to our operator to begin the question and answer session with our covering analysts. Sherri?
Our organization: Our organization believes deeply in the first do no harm component of the hypocritical and is committed to delivering technologies, our physician customers coming up.
Steve: Our investment IRB controlled post market data gathered gathering is further reinforcing that the catamaran system delivers on its promises.
Steve: We'll continue to refine and innovate to drive our growth objectives to further improve the quality of life for patients suffering from Si joint pain, while pursuing long term value for our shareholders.
Operator: I think all of you for attending and I would like to hand, the call over to our operator to begin the question and answer session with our covering analysts sure.
Operator: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Bruce Jackson with the Benchmark Company. Please proceed.
Operator: Thank you.
Operator: I'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like train movie a question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, our first question ex crowd.
Operator: Bruce Jackson with the benchmark company. Please proceed.
Bruce David Jackson: Good afternoon. Thank you for taking my questions. First, a question about the workshops and the composition of the doctors. What's the mix between the interventional pain physicians and the spine surgeons? Thank you, Bruce.
Bruce David Jackson: Good afternoon, and thank you for taking my questions first a question about the workshops and the composition of the doctors, what's the mix between interventional pain.
Bruce David Jackson: <unk> Zimmer spine surgeons.
Steven M. Foster: I appreciate your question. Yes, we have a mix of orthopedic and neurospine surgeon and interventional and pain surgeon customers. Our mix in training is, believe it or not, right in that 50-50 range. There's a lot of debate about, you know, in this space between the specialties, etc. We are agnostic to that issue.
Operator: Thank you Bruce I. Appreciate your question, yes, we have a mix of orthopedic neuro spine surgeons and interventional pain surgeon customers.
Bruce David Jackson: Our mix in training is believe it or not right in that 50, 50 rate, which is a lot of debate about you know in this space between the specialties et cetera, we are agnostic to that issue.
unknown: We focus a great deal on making sure that the physicians, we target an invite into a workshop environment has the experience necessary.
Steven M. Foster: We focus a great deal on making sure that the physicians we target and invite into a workshop environment have the experience necessary to deal with this type of procedure, understand the SI joint, etc. But yeah, to answer your question specifically, we're right about at the 50-50 mark for interventional and pain versus spine surgery. Okay, great.
Speaker Change: To deal with this type of procedure that understand the Si joint what have you.
Speaker Change: But yes to answer your question specifically, we're right about at the 50 50, Mark interventional pain versus spine surgery.
Steven M. Foster: And then a question on the post-market study. So you released some data back in March that looked great, and I think you mentioned in the script that you're going to be releasing some more data later this year. Can you tell us how many patients were in the first group of data that was released? And then what can we look forward to with the next data release? Sure, indeed.
Speaker Change: Okay, Great and then.
Speaker Change: Question on the post market study. So you released some data back in March that look great and I think you mentioned in the script that youre going to be releasing some more data.
Speaker Change: Later this year can you.
Speaker Change: Tell us how many patients from the first group of data.
Speaker Change: That was released and then what can we look forward to with the with the next data. Please.
Speaker Change: Sure Indeed.
Steven M. Foster: Really, what you can look forward to is increasing numbers. So in the first press release, I believe you're referring to, that was about a month, a month and a half ago, we were reporting on the first few patients that had hit their 12-month milestone and gone to get that critical post-op CT. Again, we're constantly monitoring how they're responding, their satisfaction, their pain scores, things of that nature. When we get to that 12-month mark, we wanna do a radiographic assessment of the healing that's taking place around the area.
Speaker 2: What you can look forward to increasing numbers. So in the first the press release I believe you are referring to that was about a month month and a half ago. We were reporting on the first few patients citizens hit their 12 month milestone and then go on to get that critical post op C T and we're constantly monitoring.
Steven M. Foster: If the pain scores are improving and we see good radiographic proof of bridging bone fusion, we're drawing the conclusion very quickly that what we set out to do has been achieved. And so that's a critical landmark, that 12-month landmark. We had the first few patients, I believe it was six, that had hit that milestone. That's what was involved in the first press release that came out. What you'll see, Bruce, in the fall is just increasing numbers instead of six, and we'll be up to 10, 11, 12, into the teens and things of that nature.
Bruce David Jackson: And at that point, we'll be able to compile an interim analysis. It won't be a final document on the study, but it will be an analysis of our progress as we start to draw conclusions about what we're seeing in this data. Okay, great. And then last question for me: So I believe the study is going to be enrolling upwards of 50 patients eventually. Is that right?
Steven M. Foster: And then, at what point do you think physicians will look at the data and say this is going to give them the confidence to give this a try? Will the 12-month data be sufficient, or will some of them wait for the 24-month data? And that's it for me. Thank you.
Speaker 2: How they're responding to their satisfaction their pain scores things of that nature. When we get to that 12 month, Mark we wanted to do a radiographic assessment of the healing that's taking place around and if so you know what.
Speaker 2: The pain scores are improving and we see a good radiographic proof of bridging bone fusion, we're drawing the conclusion very quickly that what we set out to do has been achieved and so that's a critical landmark that 12 month landmark we had the first few patients I believe it was six that it hit that milestone that's what.
Bruce: Was involved in the first press release that came out what Youll see Bruce in the fall is just increasing numbers instead of six of them will be up to 10, 11, and 12, you know into the teens and things of that nature and at that point, we'll be able to compile an interim analysis. It won't be a final document on the study, but it will be an interim.
Speaker Change: Analysis on our progress as we start to draw conclusions about what so what we're seeing in this data.
Bruce: Okay, Great and then last question for me. So I believe that this study is going to be enrolling upwards of 50 patients eventually is that right and then.
Bruce: At what point do you think physicians will look at the data and say this this is I'm going to give them the comfort to give this a try it as well the 12 month data would be sufficient or will some of them and wait for the 24 month data and that's it for me. Thank you.
Steven M. Foster: One, the study is set for a maximum of 50 patients. So, you know, somewhere north of 40 and near 50 will shut down enrollment and go into, you know, the data gathering and assessment process. You know, where do physicians get moved to? Look, this is a wildcard question because some really want to wait for the whole study to play out and see everything together. Others will be moved, you know, at that interim analysis time window.
Speaker Change: Yeah. So thanks for that so a couple of things one the.
Speaker Change: Study is set for a maximum of 50 patients. So you know what was somewhere north of 40, a near 50 will shut down enrollment and go into our data gathering in that assessment process.
Speaker Change: Where the physicians get move look this is a wildcard question because some really want to wait for the whole study to play out and see everything together others will be moved at.
Speaker Change: At the interim analysis time window.
Steven M. Foster: You know, the bottom line is if the pain has gone away to a significant level, the patients are highly satisfied, and they see actual pictures of a bridging bone fusion of the SI joint, they start drawing conclusions. You know, something that's missing with all the different SI technologies out there is clear and definitive radiographic proof of an arthrodesis or a fusion. This is something we've been committed to delivering since day one and are very much looking forward to.
physicians: <unk> is the pain has gone away to a significant level of patients who are highly satisfied and they see actual pictures of a bridging bone fusion of the Si joint they start drawing conclusions you know something that's missing, but all the different technologies out there is clear and definitive radio.
Bruce: Proof of our short thesis or a future. This is something we've been committed to delivering since day, one and are very much looking forward to its why we are so excited and put that release out a month and half ago to see those early images of clearly he'll decile joined so I think that's what you see Bruce is just.
Steven M. Foster: It's why we were so excited and put that release out a month and a half ago to see those early images of clearly healed SI joints. So I think that's what you'll see, Bruce, is just the numbers continuing to grow as we move through the assessment of this data as the follow-up periods of the milestone.
Bruce: The numbers continuing to grow as we move through the.
physicians: The assessment of this data is a follow up periods of the milestones.
physicians: Excellent. Thank you.
physicians: Yeah.
Anthony V. Vendetti: Our next question is from Anthony Vendetti with the Maxim Group. Please proceed.
physicians: Our next question is from Anthony Vendetti with Maxim Group. Please proceed.
Anthony V. Vendetti: Thanks. Yeah, so just following up on the study, so 40 to 50 patients, 50 is the max. Where are you right now in terms of the number of patients? And then... How many sites do you anticipate when full enrollment is complete? How many sites are you looking at? Sure.
Anthony V. Vendetti: Thanks, Yeah. So.
Anthony V. Vendetti: Just following up on the on the study so 40 to 50 patients 50 is Max.
Anthony V. Vendetti: Where are you right now in terms of in terms of the number of patients and then.
Anthony V. Vendetti: How many how many sites do you anticipate.
Anthony V. Vendetti: When full enrollment.
Speaker Change: Is complete how many sites and yeah.
Steven M. Foster: We're just about done, is what I'll tell you. We're in the high 30s. You're nearing 40 and just about wrapped up with enrollment.
Steven M. Foster: Sure, Anthony. Thanks for the question.
Anthony V. Vendetti: Sure Anthony Thanks for the thanks for the question. We were just about done is what I'll tell you we're in the high Thirty's.
Anthony: Nearing 40, and just about wrapped up with enrollment I really do anticipate that'll be happening here very shortly.
Steven M. Foster: I really do anticipate that'll be happening here very shortly, and we'll go ahead and shut that down. We have eight active sites with the study right now. Don't see that expanding radically, because we're down to maybe, I don't know, eight to 10 more cases to enroll in the trial. So it'll probably be in that eight range when all is said and done.
Anthony: And we'll go ahead and shut that down we have a eight.
Anthony: Eight active sites with the study right now I don't see that expanding radically because we're down to maybe I don't know eight to 10 more cases to enroll in the trial. So it will probably be in that range when all of a setup.
Anthony V. Vendetti: Okay, um..., and then. In terms of physician training, how do you see that playing out, assuming the results come in and it's compelling? How do you anticipate that rollout?
Anthony: Okay.
Speaker Change: And then.
Speaker Change: Yeah.
unknown: In terms of physician training.
Speaker Change: How do you see that that clean now.
Speaker Change: Assuming the results come in and it's it's it's compelling.
Speaker Change: How do you anticipate that rollout.
Steven M. Foster: Well a couple of things I mentioned some of the restructuring it did our sales organization so frankly our our training number was a little lower than normal in Q1 because of that transition so I expect number one now that we're bringing people on board and what have you I expect that number to expand and grow. I think the other component to it Anthony that's really important is with clinical data like that you know that goes out and gets in front of the physicians either via you know podium presentations or posters or publications or what have you you know we anticipate more inquiries right now we're chasing trying to tell our story get people interested etc you know with data we hope that data will be compelling and it will compel physicians to inquire about hey can I check this stuff out can I get into a workshop setting etc so all arrows are pointing up on the training volume we believe we've got our synthetic model and our training program down nice and tight now etc so we're ready to go and excited about that.
Speaker Change: Well a couple of things I mentioned some of the restructuring you did our sales organization. So frankly, our our training number was a little lower than normal in Q1 because of that transition. So I expect number one now that we're bringing.
Anthony V. Vendetti: Okay, and then just in terms of the sales force as you go through this transition, what's the number that you think makes sense by the end of this year?
Anthony: People on board and what have you I expect that number to expand and grow I think the other component to it Anthony that's really important as with clinical data like that.
Speaker Change: You know that.
Anthony: Goes out and gets in front of the physicians either be a podium presentations or posters or publications or what have you. We anticipate more inquiries right now so we're chasing trying to tell our story to get people interested et cetera, you know with data, we hope that data will be compelling and it will compel <unk>.
Speaker Change: Issuance to inquire about taken I checked this stuff out and I get into a workshop sudden et cetera. So all arrows are pointing up on the training volume. We believe we've got our synthetic model in our training program down nicely type now etcetera. So we're ready to go and excited about it.
Speaker Change: Okay, and then just in terms of the sales force as you're going through this transition what what's.
Speaker Change: What's the number.
Speaker Change: You think.
Speaker Change: Makes sense.
Anthony: By the end of this year.
Anthony V. Vendetti: Uh, do you know we're in the sales organization? Yes. Yes.
Speaker Change: No more in the sales organization.
Speaker Change: Yes.
Steven M. Foster: So we set up five geographical regions around the country to put direct personnel into, you know, a combination of sales management personnel as well as clinical support personnel to help with training and first surgeries, early surgeries, in-services, things of that nature. We anticipate those five regions to be really what we build off of here in the early stages. And as our sales grow, it may make sense to go to seven, to ten, et cetera, as volumes go up, and it gets too much for these guys to handle to have a bigger geography.
unknown: Yes, so we set our five geographical regions around the country to put direct personnel went to a combination of sales and management personnel as well as clinical support personnel to help with training and FERC surgeries early surgeries in services things of that nature, we anticipate those five regions to be.
unknown: Really what we build ourselves here in the early stages and as our sales grow it may make sense to go to seven to 10 to et cetera as volumes go up and it gets too much for these guys to handle to have a bigger geography.
Steven M. Foster: And as we've talked about before, their job is to interface with independent distributors, people who are entrenched, you know, with the physicians out there, etc., to build local support, you know, case coverage, things of that nature. So that's the way our model works, and we'll be at five throughout the calendar year 2024.
Speaker Change: And as we've talked about before their jobs to interface with independent distributors.
unknown: Who are entrenched with the physicians out there et cetera.
Speaker Change: 2222 to build local support.
Speaker Change: You know case coverage things of that nature. So that's the way our model works and we'll be at fives throughout the throughout the calendar year 2024.
Anthony V. Vendetti: Okay, great. And then maybe just lastly, in terms of, and I know it's early stages, a lot of fixed costs, but, but, at, let's say, you know, normal volume, what's the margin on one of these systems approximately if you're not, you know, building them kind of at a single sort of... [inaudible]
Speaker Change: Okay, Great and then maybe just lastly in terms of and I know, it's early stages, a lot of fixed costs, but but.
Speaker Change: And let's say you know normal volume.
Speaker Change: But what's the margin on on one of these systems approximately if if you're not building them kind of.
Speaker Change: Singing single sort of.
Speaker Change: Pace, but you you know you ramped up what should be the gross margin on one of these systems.
Steven M. Foster: Yeah, it's a fair question. I'll let Steve Vendetti jump in as well, but I will say that here in the early stages, when we're not at the volume that you're talking about, at full boat volume, you know, we're pushing 65% in gross margin. We see that as a baseline. We can grow from there as volumes go up, and we can leverage. So we're encouraged. We think we can be a mid-70s margin organization going forward with our model without, you know, without putting undue stress on the organization. Steve, do you want to comment on that real quick?
Steve: But it's a fair question and I'll, let Steve jump.
Steve: Jump in as well, but I will say that here in the early stages, but we're not at the volume that you're talking about it full boat volume.
Steve: The 65% in.
Steve: In gross margin, we see that as a baseline we can grow from there as volumes go up and we can leverage.
Speaker Change: So were encouraged we think we can be a mid seventies margin.
Speaker Change: The organization going forward, whether a model without a you know without putting undue stress on the organization, Steve do you want to comment on that real quickly.
Steven M. Van Dick: Yeah, I would just add that, you know, really for us right now...
Steve: Yeah, I would just add that.
Steven M. Van Dick: You know, really, for us right now, it's not so much the material cost of the implant because that's relatively small in comparison to the total cost of goods sold, which includes the, you know, overhead component related to the, you know, our operations team located in Los Gatos. So, like Steve indicated that, you know, as volumes go up, we have a relatively high percentage of our costs that are fixed or semi-fixed.
Steve: You know really for US right now it's not so much the material cost of the implant because that's relatively small in comparison to the total cost of goods sold which includes the overhead component related to the.
Steve: Our operations team located in Los Gatos.
Steve: So like Steve you indicated that you know as volumes go up we have you know.
Speaker Change: Relatively high percentage of our costs that are fixed or semi fixed.
Steven M. Van Dick: And so, you know, we think that, you know, during the year, you know, maintaining, you know, mid-sixties kind of margins, you know, depending on the actual sales volume, you know, our mix between ASCs and hospitals, you know, our margin should begin with a six. And as revenue grows, as Steve indicated, we think that, as revenue ramps up, getting margins into the 70s is very doable. Thank you.
Speaker Change: So we think that you know during the year, maintaining mid sixteens kind of margins.
Speaker Change: No.
Speaker Change: Depending on the actual sales building and you know our mix between a season in hospitals.
Speaker Change: You know the you know our margins should begin with the six and as revenue grows as Steve indicated we think that you know.
Steve: As the revenue ramps getting margins into the seventies is very doable.
Anthony V. Vendetti: Okay, great. That's a very helpful call. I appreciate it. I'll hop back in the queue. Thank you.
Speaker Change: Okay, Great. That's very helpful color I appreciate it I'll hop back in the queue. Thank you.
Anthony: Thanks Anthony.
Steven M. Foster: Thank you. I would now like to turn the call back over to Mr. Foster for his closing remarks.
Speaker Change: Thank you I would now like to turn the call back over to Mr. Foster for closing remarks.
Steven M. Foster: Well, thank you, Sherry. I'd like to thank each of you for joining our earnings conference call today and look forward to continuing to update you on our ongoing progress and growth. If, for some reason, we were unable to answer any of your questions, please reach out to our IR firm, IMC Group, who will be more than happy to assist. And with that, I wish everyone a good day.
Steven M. Foster: Oh, Thank you Sherry I'd like to thank each of you for joining our earnings conference call today and look forward to continuing to update you on our ongoing progress in growth for.
Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
MZ group: For some reason we were unable to answer any of your questions. Please reach out to our IR firm MZ group, who will be more than happy to assist with that I wish everyone. A good day.
MZ group: Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
MZ group: Okay.
MZ group: [music].
Steven M. Foster: Uh huh.
Steven M. Foster: [music].
Steven M. Foster:
Steven M. Foster: Yes.
Steven M. Foster: Sure.
Steven M. Foster: [music].
Steven Foster: Yes.
Steven M. Foster: Okay.
Steven M. Foster: Hum.
Steven M. Foster: [music].
Operator: Yeah.
Operator: Yes.
Operator: Okay.
Operator: [music].
Operator: Yeah.
Operator: Okay.
Operator: [music].