Q2 2024 SI-BONE Inc Earnings Call

Saqib Iqbal: Good afternoon and welcome to SI-Bone's second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to hand the call over to Saqib Iqbal, Senior Director of Investor Relations at SI-Bone, for a few introductory comments.

Operator: At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would like to hand the call over to Saqib Iqbal, Senior Director of Investor Relations at SI-Bone, for a few introductory comments.

Saqib Iqbal: Thank you for participating in today's call. And joining me are Laura Francis, Chief Executive Officer, and Anshul Maheshwari, Chief Financial Officer.

Saqib Iqbal: Thank you for participating in today's call. Joining me are Laura Francis, Chief Executive Officer, and Anshul Maheshwari, Chief Financial Officer.

Speaker Change: Earlier today, SI-Bone released financial results for the quarter ended June 30, 2024. A copy of the press release is available on the company's website.

Saqib Iqbal: Earlier today, SI-Bone released financial results for the quarter ended June 30, 2024. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Therefore, any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements.

Speaker Change: Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Saqib Iqbal: These forward-looking statements are based on the company's current expectations and inherently involve risks and uncertainty. These risks include SI-Bone's ability to introduce and commercialize new products and indications. SI-Bone's ability to maintain favorable reimbursement for its products and procedures, changes in payer requirements for authorization of procedures involving SI-Bone's products, and the Impact of Potential Economic Weakness on the Ability and Desire of Patients to Undergo Elective Procedures SI-Bone's ability to manage risks to its supply chain, the impact of future capital requirements driven by new product introductions, and risks to the continued renormalization of the healthcare operating environment

Speaker Change: Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements.

Saqib Iqbal: Other forward-looking statements include our examination of operating trends and our future financial expectations, such as expectations for physician training and adoption, active physicians, new product, and clinical trial enrollment, and are based upon our current estimates and various assumptions. These statements involve material risk and uncertainty that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements.

Speaker Change: These forward-looking statements are based on the company's current expectations and inherently involve risks and uncertainties.

Speaker Change: These risks include SI-Bone's ability to introduce and commercialize new products and indications

Speaker Change: SI-Bone's ability to maintain favorable reimbursement for its products and procedures, changes in payer requirements for authorization of procedures involving SI-Bone's products,

Speaker Change: The Impact of Potential Economic Weakness on the Ability and Desire of Patients to Undergo Elective Procedures.

Speaker Change: SI-Bone's ability to manage risks to its supply chain, the impact of future capital requirements driven by new product introductions, and risks to the continued renormalization of the healthcare operating environment.

Speaker Change: Other forward-looking statements include our examination of operating trends and our future financial expectations, such as expectations for physician training and adoption, active physicians, new product, and clinical trial enrollment, and are based upon our current estimates and various assumptions.

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

Speaker Change: Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our most recent Form 10-K , filed with the Securities and Exchange Commission.

Saqib Iqbal: For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section of our most recent Form 10-K filed with the Securities and Exchange Commission. During the call, management may also discuss certain non-GAAP measures, including the company's adjusted EBITDA results. Unless otherwise noted, any reference to profitability is in terms of adjusted EBITDA. For a reconciliation of these non-GAAP measures to GAAP accounting, please see the company's full earnings release issued earlier today.

Speaker Change: During the call, management may also discuss certain non-GAAP measures, including the company's adjusted EBITDA results. Unless otherwise noted, any reference to profitability is in terms of adjusted EBITDA.

Speaker Change: For a reconciliation of these non-GAAP measures to GAAP accounting, please see the company's full earnings release issued earlier today.

Saqib Iqbal: Unless otherwise noted, all results are compared to the comparable period in the prior year. SI-Bone disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 5th, 2024. With that, I'll turn the call over to Laura.

Speaker Change: Unless otherwise noted, all results are compared to the comparable period in the prior year. SI-Bone disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise.

Speaker Change: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 5th, 2024.

Speaker Change: With that, I'll turn the call over to Laura.

Laura Francis: Thanks, Saqib. Good afternoon, and thank you for joining us. I'm pleased with our team's execution as we delivered another strong quarter and set new records across several key metrics. In the second quarter, we delivered a record $40 million in worldwide revenue, representing 20% growth. U.S. revenue was a record $37.8 million, representing 21% growth, as we benefited from strengthening demand for our growing number of solutions. We added 220 active physicians in the quarter compared to the prior year, hit another new record for active physicians, and completed a record-breaking number of new physician trainings in the quarter.

Laura Francis: Thanks, Saqib. Good afternoon, and thank you for joining us. I'm pleased with our team's execution as we delivered another strong quarter and set new records across several key metrics.

Speaker Change: In the second quarter, we delivered a record $40 million in worldwide revenue, representing 20% growth.

Speaker Change: U.S. revenue was a record $37.8 million, representing 21% growth, as we benefited from strengthening demand for our growing number of solutions.

Speaker Change: We added 220 active physicians in the quarter compared to the prior year, hit another new record for active physicians, and completed record-breaking number of new physician trainings in the quarter.

Laura Francis: Our second quarter results are indicative of the company's transformation from a single product company to a unique, high-growth medical device platform. We have a proven track record of identifying and successfully developing new markets with large unmet clinical needs across sacral pelvic conditions. Complementary markets in pelvic fixation and trauma have doubled our total target procedure volume to approximately half a million annual procedures, driven deeper physician penetration, and allowed us to deliver 20 plus percent average revenue growth over the last three years.

Speaker Change: Our second quarter results are indicative of the company's transformation from a single product company to a unique, high-growth medical device platform.

Speaker Change: We have a proven track record of identifying and successfully developing new markets with large, unmet clinical needs across sacral pelvic conditions.

Speaker Change: Complementary markets in pelvic fixation and trauma have doubled our total target procedure volume to approximately half a million annual procedures, driven deeper physician penetration, and allowed us to deliver 20-plus percent average revenue growth over the last three years.

Laura Francis: We also made dramatic progress on our profitability goals in the quarter, as we delivered a 43% improvement in our adjusted EBITDA. Over the last three years, we've achieved over 30 percentage points of improvement in our adjusted EBITDA margin.

Speaker Change: We also made dramatic progress on our profitability goals in the quarter as we delivered a 43% improvement in our adjusted EBITDA. Over the last three years, we've achieved over 30 percentage points of improvement in adjusted EBITDA margin.

Laura Francis: We continue to achieve significant operating leverage in the business, driven by our strong revenue growth, increasing use of our hybrid commercial model, and scalable corporate infrastructure. Given the durability of the tailwinds in our business, we expect revenue growth to accelerate in the second half, driven by continued market growth across all our markets, procedure volume growth across surgeons and interventional spine for SI joint dysfunction, and acceleration in demand for pelvic fixation solutions.

Speaker Change: We continue to achieve significant operating leverage in the business, driven by our strong revenue growth, increasing use of our hybrid commercial model, and scalable corporate infrastructure.

Speaker Change: Given the durability of the tailwinds in our business, we expect revenue growth to accelerate in the second half.

Speaker Change: driven by the continued physician growth across all our markets, procedure volume growth across surgeons and interventional spine for SI joint dysfunction, and acceleration in demand for pelvic fixation solutions.

Laura Francis: We expect this top-line growth to translate to positive adjusted IVF in the fourth quarter of 2024. This inflection in our adjusted EBITDA profitability, combined with our solid liquidity, as well as our capital efficient model, will give us the flexibility to self-fund our future growth.

Speaker Change: We expect this top-line growth to translate to positive adjusted ivata in the fourth quarter of 2024.

Speaker Change: This inflection in our adjusted EBITDA profitability combined with our solid liquidity as well as our capital efficient model will give us the flexibility to self-fund our future growth.

Laura Francis: We're also positioned to capture the large number of markets in the sacred pelvic space and deliver sustainable and profitable revenue growth going forward. Now, let me provide an update on our key initiatives as we look to extend our leadership, drive long-term growth, and create shareholder value. Starting with sales infrastructure, we ended the quarter with 84 territory managers supported by clinical support specialists and third-party agents for case coverage. Our hybrid commercial strategy drove a 24% increase in our trailing 12 months revenue per territory to a record $1.7 million. Our differentiated portfolio is attracting the attention of multiple large regional distributors who've expressed interest in building agency partnerships.

Speaker Change: We're also positioned to capture the large numerous markets in the sacred pelvic space and deliver sustainable and profitable revenue growth going forward.

Speaker Change: Now, let me provide an update on our key initiatives as we look to extend our leadership, drive long-term growth, and create shareholder value.

Speaker Change: Starting with sales infrastructure, we ended the quarter with 84 territory managers supported by clinical support specialists and third-party agents for case coverage.

Speaker Change: Our hybrid commercial strategy drove a 24% increase in our trailing 12 months revenue per territory to a record $1.7 million.

Speaker Change: Our differentiated portfolio is attracting the attention of multiple large regional distributors who've expressed interest in building agency partnerships.

Laura Francis: We continue to expand our agent network, primarily for pelvic fixation and trauma opportunities. The expansion of our agent network is allowing us to reach more positions and also drive incremental operating leverage in the business. Concurrently, we plan to selectively and strategically hire additional territory managers to ensure that we can expand our physician user base and density, as well as provide the highest quality of service to our growing user base.

Speaker Change: We continue to expand our agent network, primarily for pelvic fixation and trauma opportunities.

Speaker Change: The expansion of our agent network is allowing us to reach more positions and also drive incremental operating leverage in the business.

Speaker Change: Concurrently, we plan to selectively and strategically hire additional territory managers to ensure that we can expand our physician users and density, as well as provide the highest quality of service to our growing user base.

Laura Francis: Moving on to physician engagement, we exited the quarter with more than 1,150 active physicians, representing 23% growth. This is a continuation of the double-digit growth in active users we've seen in the last three years. In the second quarter, 17% of our active physicians used more than one of the procedural solutions we offer.

Speaker Change: Moving on to physician engagement, we exited the quarter with more than 1,150 active physicians, representing 23% growth. This is a continuation of the double-digit growth in active users we've seen in the last three years.

Speaker Change: In the second quarter, 17% of our active physicians used more than one of the procedural solutions we offer. The 25% increase in the number of active physicians performing more than one type of procedure highlights the synergistic nature of our portfolio.

Laura Francis: The 25% increase in the number of active physicians performing more than one type of procedure highlights the synergistic nature of our portfolio. With the launch of Granite 9-5, we're targeting both deformity and increasingly degenerative spine procedures, which account for a significant portion of the procedure volumes for our active physicians. We now have a platform to drive deeper engagement and more procedures per physician. This cross portfolio interest is a positive leading indicator of sustained demand momentum and productivity.

Speaker Change: With the launch of Granite 9-5 solution, we're targeting both deformity and increasingly degenerative spine procedures, which account for a significant portion of the procedure volumes for our active physicians.

Speaker Change: We now have a platform to drive deeper engagement and more procedures per physician. This cross-portfolio interest is a positive leading indicator of sustained demand momentum and productivity.

Laura Francis: Moving to our academic program, we trained 80 residents and fellows in the second quarter, bringing the total number of trained residents and fellows to over 1,700 since 2018. This effort translates into a growing number of physicians trained who now understand the incidence and diagnosis of sacral pelvic disorders and treatment options using our technologies. We were encouraged by the elevated interest in training and the adoption trends by previously trained residents and fellows. In the first half of 2024, sustained adoption from previously trained residents and fellows resulted in revenue attributable to this group growing 75%.

Speaker Change: Moving to our academic program, we trained 80 residents and fellows in the second quarter, bringing the total number of trained residents and fellows to over 1,700 since 2018.

Speaker Change: This effort translates into a growing number of physicians trained who now understand the incidence and diagnosis of sacral pelvic disorders and treatment options using our technologies.

Speaker Change: We're encouraged by the elevated interest in training and the adoption trends by previously trained residents and fellows.

Speaker Change: In the first half of 2024, sustained adoption from previously trained residents and fellows resulted in revenue attributable to this group growing 75 percent.

Laura Francis: Turning to products and clinical evidence, we continue to define the SI joint dysfunction, pelvic fixation, and pelvic trauma markets and reinforce our commitment to improving patient outcomes and advancing medical care by offering differentiated products backed by clinical evidence. We recently finalized five-year follow-up data for SALI, our first prospective clinical trial with iFUSE 3D. The study indicated that the clinical response to SI joint fusion using ICUs3D showed marked, immediate, and sustained improvement in all outcome measures consistent with our prior SI joint fusion studies. The patient pain score improved by 58 points, the disability scores improved by 25 points, while the percentage of people on opioids decreased from 57% at baseline to 17% at five years.

Speaker Change: Turning to products and clinical evidence, we continue to define the SI joint dysfunction, pelvic fixation, and pelvic trauma markets.

Speaker Change: and reinforce our commitment to improving patient outcomes and advancing medical care by offering differentiated products backed by clinical evidence.

Speaker Change: We recently finalized five-year follow-up data for SALI, our first prospective clinical trial with iFUSE3D.

Speaker Change: The study indicated that the clinical response to SI joint fusion using IQs3D showed marked, immediate, and sustained improvement in all outcome measures consistent with our prior SI joint fusion studies.

Speaker Change: The patient pain score improved by 58 points, the disability scores improved by 25 points, while the percentage of people on opioids decreased from 57% at baseline to 17% at 5 years.

Laura Francis: The physical function tests showed persistent improvement from baseline and the long-term radiographic analysis was positive with 100% rate of joint fusion. Our physicians have migrated from the original iFuse to iFuse 3D due to the porosity and fenestrated design, driving faster and better fixation and fusion, iFuse 3D accounts for almost the entirety of our triangular titanium implant revenue and is patented through 2035, iFuse Torque, building on the success of iFuse 3D, continues to be a key contributor to procedure volume growth and active physician engagement across both SI joint dysfunction and pelvic trauma, and has been a cornerstone of our interventional spine engagement strategy.

Speaker Change: The physical function tests showed persistent improvement from baseline and the long-term radiographic analysis was positive with 100% rate of joint fusion.

Speaker Change: Our physicians have migrated from the original I-Fuse to I-Fuse 3D due to the porosity and fenestrated design, driving faster and better fixation and fusion.

Speaker Change: iFuse 3D accounts for almost the entirety of our triangular titanium implant revenue and is patented through 2035.

Speaker Change: IFU's TORC, building on the success of IFU's 3D, continues to be a key contributor to procedure volume growth and active physician engagement across both SI joint dysfunction and pelvic trauma and has been a cornerstone of our interventional spine engagement strategy.

Laura Francis: While we provide comprehensive training on both ICUs Intra and ICUs Torque, in the second quarter, the majority of the cases performed by interventionalists utilized ICUs Torque in a lateral transfixing trajectory, which is reimbursed under CP2 code 27279.

Speaker Change: While we provide comprehensive training on both ICUs Intra and ICUs Torque, in the second quarter, the majority of the cases performed by interventionalists utilized ICUs Torque in a lateral transfixing trajectory, which is reimbursed under CP2 code 27279.

Laura Francis: The growing confidence of interventionalists in adopting IP's TORC aligns with the early outcomes we're seeing in our prospective multi-center interventionalist AC study. Interim results, which were recently presented at the American Society of Pain and Neuroscience Annual Meeting in Miami, confirm the safety and efficacy of lateral transfixing SI joint fusion when performed by interventionalists. The safety and effectiveness of the lateral procedure with I-Fuse Torque were also confirmed in a recent publication in the Journal of Pain Research by Dr. Michael Jung, a leading interventional spine physician at Wisconsin Spine and Pain.

Speaker Change: The growing confidence of interventionalists in adopting IP's TORC aligns with the early outcomes we're seeing in our prospective multi-center interventionalist AC study.

Speaker Change: Interim results, which were recently presented at the American Society of Pain and Neuroscience Annual Meeting in Miami, confirmed the safety and efficacy of lateral transfixing SI joint fusion when performed by interventionalists.

Speaker Change: The safety and effectiveness of the lateral procedure with i-Fuse Torque was also confirmed in a recent publication in the Journal of Pain Research by Dr. Michael Jung, a leading interventional spine physician at Wisconsin Spine and Pain.

Laura Francis: Dr. Jung published the results from his first 49 lateral SI joint fusion cases using iFuseTorque. The outcomes were commensurate with those observed in a large meta-analysis of studies of lateral SI joint fusion published last year. At an average of six months of follow-up, 88% of patients reported at least 50% improvement in pain. Since its launch in 2022, IQ's Bedrock Granite has been highlighted as one of the most innovative products by our customers and has seen rapid and durable adoption. Even with the rapidly increasing demand, we still have a large underpenetrated opportunity.

Speaker Change: Dr. Jung published the results from his first 49 lateral SI joint fusion cases using iFuseTorque.

Speaker Change: The outcomes were commensurate with those observed in a large meta-analysis of studies of lateral SI joint fusion published last year. At an average of 6 months of follow-up, 88% of patients reported at least 50% improvement in pain.

Speaker Change: Since its launch in 2022, IQ's Bedrock Granite has been highlighted as one of the most innovative products by our customers and has seen rapid and durable adoption.

Speaker Change: Even with the rapidly increasing demand, we still have a large underpenetrated opportunity.

Laura Francis: We believe that granite will become the standard of care for fixation and fusion of the SI joint to provide a strong foundation at the base of long construct procedures, addressing a clear unmet clinical need in spine surgery. Granite has also found significant application in shorter 2-4 level lumbar fusion procedures. In the second quarter, we launched Granite 9-5 to address the specific needs of this broader category of lumbar fusion procedures. We believe that Granite 9-5, including shorter lengths appropriate for placement in the S1 pedicle, will provide the best-in-class offering for the approximately 100,000 annual target procedures. It'll also allow us to engage deformity surgeons who have expressed an additional preference for a smaller diameter implant to better enable two points of pelvic fixation. The reception for Granite 9-5 has been spectacular.

Speaker Change: We believe that granite will become the standard of care for fixation and fusion of the SI joint to provide a strong foundation at the base of long construct procedures addressing a clear unmet clinical need in spine surgery.

Speaker Change: Granite has also found significant application in shorter two to four level lumbar fusion procedures. In the second quarter we launched Granite 9-5 to address the specific needs of this broader category of lumbar fusion procedures.

Speaker Change: We believe that Granite 9-5, including shorter lengths appropriate for placement in the F1 pedicle, will provide the best-in-class offering for the approximately 100,000 annual target procedures.

Speaker Change: It will also allow us to engage deformity surgeons who have expressed an additional preference for a smaller diameter implant to better enable two points of pelvic fixation. The reception for Granite 9-5 has been spectacular.

Laura Francis: Looking ahead, we have an active pipeline of differentiated products that will be launched in the coming months and years, beginning with the fourth quarter launch of a product specifically targeting the pelvic trauma market. Before Anshul discusses our financial performance, let me provide a quick update on the recent additions to our board of directors. On June 25th, our shareholders elected Thomas West to our board of directors at our annual stockholder meeting. Tom is the CEO of Nalu Medical, a privately held medical device company with a leading position in peripheral nerve stimulation, selling primarily to interventional pain physicians.

Speaker Change: Looking ahead, we have an active pipeline of differentiated products that will be launched in the coming months and years, beginning with the fourth quarter launch of a product specifically targeting the pelvic trauma market.

Laura Francis: Tom built his career at Johnson & Johnson and Whole Logic and was recently CEO of Intersect D&T until its acquisition by Medtronic. Today, we also announce the appointment of Dan Wolfe to our board. Dan is currently the Senior Vice President and Chief Strategy and M&A Officer at Baxter International. Previously, he held positions of increasing responsibility at Medtronic, including business development and operational leadership of Medtronic's push into personalized spine surgery with the acquisition and management of Medi-CREA.

Speaker Change: Before Anshul discusses our financial performance, let me provide a quick update on the recent additions to our Board of Directors.

Speaker Change: On June 25th, our shareholders elected Thomas West to our board of directors at our annual stockholder meeting.

Speaker Change: Tom is the CEO of Nalu Medical, a privately-held medical device company with a leading position in peripheral nerve stimulation, selling primarily to interventional pain physicians.

Speaker Change: Tom built his career at Johnson & Johnson and Whole Logic and was recently CEO of Intersect D&T up to its acquisition by Medtronic.

Speaker Change: Today we also announce the appointment of Dan Wolfe to our board. Dan is currently the Senior Vice President and Chief Strategy and M&A Officer at Baxter International.

Speaker Change: Previously, Dan held positions of increasing responsibility at Medtronic, including business development and operational leadership of Medtronic's push into personalized spine surgery with the acquisition and management of Medi-CREA.

Laura Francis: Tom and Dan bring a great mix of operational and strategic medical device experience across spine surgery and interventional pain and are tremendous additions to our board of directors. With that, I'll hand the call over to Anshul.

Speaker Change: Tom and Dan bring a great mix of operational and strategic medical device experience across spine surgery and interventional pain and are tremendous additions to our board of directors.

Anshul Maheshwari: Thanks, Laura. Good afternoon, everyone.

Speaker Change: With that, I'll hand the call over to Anshul.

Anshul Maheshwari: My comments will be focused on second quarter growth, profitability trends, and the company's starting with revenue. Our second quarter's worldwide revenue was approximately $40 million, representing growth of 20%. U.S. revenue grew 21% to $37.8 million due to strong U.S. procedure volumes and the continuation of the favorable ASP trends we have seen for the last several quarters. We have now delivered more than 20% U.S. revenue growth in nine out of the last 10 quarters. The consistency of this revenue growth is an outcome of our strategy to work with a sizable position base, create new market categories, and diversify our revenue stream. International revenue in the quarter was $2.2 million.

Speaker Change: Thanks, Laura. Good afternoon, everyone. My comments will be focused on second quarter growth, profitability trends, and liquidity.

Anshul Maheshwari: Starting with revenue growth.

Anshul Maheshwari: Our second quarter's worldwide revenue was approximately $40 million, representing growth of 20%.

Anshul Maheshwari: U.S. revenue grew 21% to $37.8 million due to strong U.S. procedure volumes and the continuation of the favorable ASP trends we have seen for the last several quarters.

Anshul Maheshwari: We have now delivered more than 20% U.S. revenue growth in nine out of the last ten quarters.

Anshul Maheshwari: The consistency of this revenue growth is an outcome of our strategy to work with a sizable position base to create new market categories and diversify our revenue streams.

Anshul Maheshwari: International revenue in the quarter was 2.2 million dollars.

Anshul Maheshwari: Moving to Gross Margin and Operating Levels. Our gross margin for the quarter was 79%. Gross margin was impacted by procedure and product, but this was partially offset by the benefit from our ongoing effort to streamline our supply chain to lower implant costs. Operating expenses were $41.7 million, representing approximately 7% growth. The increase was due to higher commissions driven by revenue growth, increasing commercial activity to support new product launches, research and development investments, and an increase in stock-based compensation.

Anshul Maheshwari: Moving to Gross Margin and Operating Leverage.

Anshul Maheshwari: A gross margin for the quarter was 79 percent.

Anshul Maheshwari: Our gross margin was impacted by procedure and product mix.

Anshul Maheshwari: These were partially offset by the benefit from our ongoing effort to streamline our supply chain to lower implant costs.

Anshul Maheshwari: Operating expenses were $41.7 million, representing approximately 7% growth.

Anshul Maheshwari: The increase was due to higher commissions, driven by revenue growth.

Anshul Maheshwari: increase in commercial activity to support new product launches, research and development investments, and increase in stock-based compensation.

Anshul Maheshwari: Looking at the first half of 2024, we are proud of the more than 2x operating leverage in the business. Our net loss improved by 20% to $8.9 million, or $0.22 per diluted share. Our adjusted EBITDA loss was the lowest since the IPO at $2.7 million, reflecting a 42% improvement. Compared to the first quarter of 2024, our adjusted EBITDA improved 33%. Turning to liquidity, we exited the quarter with a robust balance sheet, including $151 million in cash and marketable security. Our cash usage in the quarter was $6.5 million, as we invested in Granite 9-5 inventory, as well as surgical capacity to support the anticipated second half of the match.

Anshul Maheshwari: Looking at the first half of 2024, we are proud of the more than 2x operating leverage in the business.

Anshul Maheshwari: Our net loss improved by 20% to $8.9 million or $0.22 per diluted share.

Anshul Maheshwari: Our adjusted EBITDA loss was the lowest since the IPO at $2.7 billion, reflecting a 42% improvement.

Anshul Maheshwari: Compared to the first quarter of 2024, our adjusted EBITDA improved 33%.

Anshul Maheshwari: Turning to liquidity.

Speaker Change: We exited the quarter with a robust balance sheet, including $151 million in cash and marketable securities.

Speaker Change: Our cash usage in the quarter was $6.5 million as we invested in Granite 9-5 inventory, as well as surgical capacity to support the anticipated second half demand.

Anshul Maheshwari: Finally, moving to our updated outlook for 2025. Based on our second quarter results, we are increasing our 2024 Worldwide Revenue Guidance. We now expect 2024 worldwide revenue of between $165 million and $167 million, implying year-over-year growth of approximately 19 to 20 percent. Considering the 2x operating leverage for the full year 2024, we expect to achieve just a little bit of breakeven in the fourth quarter. With that, I will turn the call over to Laura.

Speaker Change: Finally, moving to our updated outlook for 2024.

Speaker Change: Based on our second quarter results, we are increasing our 2024 Worldwide Revenue Guidance.

Speaker Change: We now expect 2024 worldwide revenue of between $165 million and $167 million.

Speaker Change: implying year-over-year growth of approximately 19 to 20 percent.

Speaker Change: Considering the 2X operating leverage for the full year 2024, we expect to achieve a just-a-little-bit of break-even in the fourth quarter.

Speaker Change: With that, I will turn the call over to Laura.

Laura Francis: We're seeing robust demand for our differentiated solutions, as well as record physician engagement. That, combined with our efficient execution, will allow us to deliver industry-leading and profitable growth going forward. I'd like to thank our world-class team for their efforts to help build a sustainable, high-growth medical device platform that has helped over 100,000 patients. With that, we're happy to take your questions. Operator? Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 1.

Laura Francis: Thanks Anshul. We're seeing robust demand for our differentiated solutions as well as record physician engagement.

Laura Francis: That, combined with our efficient execution, will allow us to deliver industry-leading and profitable growth going forward.

Speaker Change: I'd like to thank our world-class team for their efforts to help build a sustainable, high-growth medical device platform that has helped over 100,000 patients.

Speaker Change: With that, we're happy to take your questions. Operator?

Operator: Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 11 on your telephone. If your question has been answered, and you wish to move yourself from the queue, please press star 11 again. We'll pause for a moment while we compile our Q&A list. Our first question comes from Matthew O'Brien with Piper Sandler. Your line is open.

Speaker Change: Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered, you wish to move yourself from the queue, please press star 1-1 again. We'll pause for a moment while we compile our Q&A roster.

Speaker Change: © The Bulletproof Executive 2013

Speaker Change: Our first question comes from Matthew O'Brien with Piper Sandler. Your line is open.

Matthew O'brien: Afternoon, thanks so much for taking the questions. Maybe for starters, Laura, just the dock utilization in the quarter, and I know that number's been rising nicely, but just on a seasonally adjusted basis, it was softer in Q2 of this year than we saw in Q2 of last year. So I'm just wondering what kind of dynamics are going on that are impacting that. I don't know if it's the shift to more interventionalists or something along those lines, but can you talk a little bit about why that's a little bit softer than we saw this time last year?

Speaker Change: Well, afternoon. Thanks so much for taking the questions. Maybe for starters, Laura, just the dock utilization in the quarter, and I know that number's been rising nicely, but just on a seasonally adjusted basis, it was softer.

Laura Francis: And then I do have a follow-up question.

Speaker Change: in Q2 of this year than we saw in Q2 of last year. So I'm just wondering what kind of dynamics are going on that are impacting that. I don't know if it's the shift, you know, to more interventionalist or something along those lines, but just can you talk a little bit about why that's a little bit softer than we saw this time last year? And then I do have a follow-up.

Laura Francis: Thanks for the question. And maybe just kind of a general summary, we really are thrilled with yet another strong quarter delivering record performance across all of our KPIs. So, 21% U.S. revenue growth, and that was led by strong demand across all of our target markets, a 25% increase in the number of physicians doing more than one procedure type, and 23% growth in our active physician base. We did talk generally about a record number of new physician trainings, given the elevated interest in a number of different parts of our portfolio.

Speaker Change: Thanks for the question and maybe just kind of a general summary. We really are thrilled with yet another strong quarter delivering record performance across all of our KPIs. So 21% U.S. revenue growth and that was led by strong demand across all of our target markets.

Speaker Change: 25% increase in the number of physicians doing more than one procedure type, 23% growth in our active physician base.

Speaker Change: We did talk generally about a record number of new physician trainings, given the elevated interest in a number of different parts of our portfolio, and then we're quite proud of the improvements in productivity as well.

Laura Francis: And then we're quite proud of the improvements in productivity as well. So, in terms of a softer number, I actually think that we're showing a very strong quarter here. So, over the last three years, we consistently have seen double-digit growth every quarter in our active physicians. We typically do look year over year, given that there can be some seasonality in these numbers, but we ended the second quarter with 1,150 active physicians. So, once again, 23% growth. And if you look year over year, it was 220 additional users. In the second half, and also to increase cases per physician.

Speaker Change: So, in terms of a softer number, I actually think that we're showing a very strong...

Speaker Change: quarter here. So over the last three years, we consistently have seen double digit growth every quarter in our active physicians. We typically do, you know, look at year over year, given that there can be some seasonality in these numbers, but we ended the second quarter with 1,150 active physicians. So once again, 23% growth.

Speaker Change: And if you look year over year, it was 220 additional users.

Speaker Change: So, it's the second consecutive quarter where we had a record number of new physicians trained, which is a good forward-looking indicator for...

Speaker Change: future active physician growth and just given the expanded portfolio as well as our world-class medical affairs team that's focused on training physicians on multiple modalities, I feel great about our ability to increase the number of active physicians in the second half and also to increase cases per physician.

Anshul Maheshwari: And then I don't know if this is a question for you or for Anshul. You know, when I look at the first half of the year, the performance is really good in the U.S., but it does, the guidance and sticking with just the raising by the amount of the bead here in Q2 does imply a pretty sharp two-year stack deceleration in the back half of the year, and that comes with 9.5, you know, addressing a lot more patients. I'm just wondering, you know, help me reconcile why we would see this deceleration in the, have been saying with all these Docs, reps, and then product. Yeah, so Matt, I can take that question.

Speaker Change: Got it. And then, I don't know if this is a question for you or for Anshul, but...

Speaker Change: You know, when I look at the first half of the year, the performance is really good in the U.S., but it does, the guidance and sticking with just the raising by the amount of the beat here in Q2,

Speaker Change: does imply a pretty sharp two-year stack deceleration in the back half of the year, and that comes with 9.5, you know, addressing a lot more patients.

Speaker Change: So I'm just wondering, you know, help me reconcile why we would see this deceleration in the U.S. versus what we've been seeing with all these new docs, reps, and then products as well.

Anshul Maheshwari: So, you know, we don't think about the business in terms of stack growth. I don't think it's the right way to think about the business that way, because there are a variety of factors that can impact the starting point. You're right, when we, as part of our guidance at 165 to 167 million, it's actually an acceleration in the second half of 2024. And that, even when you look at the third quarter, our expectations are, generally, the third quarter sees a sequential decline of 2% to 3%, and we expect to offset that. With the tailwinds, Laura talked about the rollout of Granite 9.5 as well.

Speaker Change: Matt, I can take that question. We don't think about the business in stack growth. I don't think it's the right way to think about the business that way.

Matt: because there's various number of factors that can impact the starting point. You're right, when we, as part of our guidance at $165 to $167 million, it's actually an acceleration in the second half of 2024. And that, even when you look at the third quarter, you know, our expectations is...

Speaker Change: Generally, the third quarter sees a sequential decline of 2-3%, and we expect to offset that. With the tailwind, Laura talked about the rollout of Granite 9-5 as well.

Matthew O'brien: And in general, our guidance philosophy is always being thoughtful. We've now had a consistent track record of exceeding expectations, but we just want to be thoughtful going into the second half. We've got a lot of good KPIs, including a record number of active physicians that Laura talked about, record number of trainings that she just addressed, and the growing engagement of the interventional side. So we're actually feeling quite good about the second half.

Operator: Got it. Thanks so much.

Speaker Change: And in general, our guidance philosophy is always being thoughtful. We've now had a consistent track record of

Speaker Change: exceeding expectations, but just want to be thoughtful going into the second half. We've got a lot of good KPIs, including record number of active physicians that Laura talked about, record number of trainings that she just addressed, and the growing engagement of the interventional side, so we're actually feeling quite good about the second half.

Speaker Change: Got it. Thanks so much.

Speaker Change: One moment for our next question.

Drew Ranieri: One moment for our next question. Our next question comes from Drew Ranieri with Morgan Stanley. Your line is open.

Speaker Change: Our next question comes from Drew Ranieri with Morgan Stanley , your line is open.

Drew Ranieri: Hi, everyone. Thanks for taking the questions. Maybe to start, Anshul, this one is probably for you.

Drew Ranieri: Hi everyone, thanks for taking the questions. Maybe to start, Anshul, this one is probably for you, but just on the adjusted EBITDA guide, positive for the fourth quarter, just...

Anshul Maheshwari: But just on the adjusted EBITDA guide, positive for the fourth quarter, just maybe as we think longer term for 2025, maybe how should investors maybe think about the puts and takes of breakeven next year? I mean, I think consensus is already there on an adjusted EBITDA basis, but it sounds like you have more new products coming, maybe some incremental sales reps hiring. But how should we be thinking about, or how are you thinking about balancing, maintaining kind of this 19, 20 percent growth with some of the OPEX investments that you will likely continue to have to make next year?

Speaker Change: Maybe as we think longer term

Speaker Change: for 2025. Maybe how should investors maybe think about the puts and takes of breakeven next year? I mean I think consensus is already there on an adjusted EBITDA basis.

Speaker Change: But it sounds like you have more new products coming, maybe some incremental sales reps hiring, but how should we be thinking about, or how are you thinking about balancing maintaining kind of this 19-20% growth with some of the OPEX investments that you will likely continue to have to make next year?

Anshul Maheshwari: No, I appreciate that question, Drew. So we are really proud of the operating leverage we've seen in the business, and we've incrementally converted a growing portion of our gross margin dollars to adjust to EBITDA. And the trend that we see for the backup gives us confidence in the break-even for the fourth quarter. Now, at a very high level, when you look beyond 2024, we expect annual revenue growth to continue to exceed operating expenses growth going forward.

Speaker Change: No, I appreciate that question, Drew. So we are really proud of the upwarding leverage we've seen in the business and we've incrementally converted growing portion of a gross margin dollars to adjust to the EBITDA.

Speaker Change: And the trend that we see for the backup gives us confidence in the break-even for the fourth quarter.

Speaker Change: Now, at a very high level, when you look beyond 2024, we expect annual revenue growth to continue to exceed OPEX growth going forward.

Anshul Maheshwari: So you may see some quarterly seasonality in Q1, our source, but we're feeling pretty good about that trend continuing and allowing us to report positive adjusted EBITDA annually in future years. Now, you know, you're right.

Speaker Change: So you may see some quarterly seasonality for Q1, but we're feeling pretty good about that trend continuing and allowing us to report positive adjusted EBITDA annually in the future years.

Laura Francis: We do have a huge amount of opportunity ahead of us, so we will continue to strike that right balance by making targeted investments in sales force expansion and R&D, but we expect to see significant leverage on the op-ex side from a G&A standpoint. And even on R&D, it's not going to be at the same pace as revenue growth, right? You get some scaled benefit there, too. So I think the business is set up really well going into 2025 in terms of being able to sustain adjusted EBITDA positive on an annual basis.

Speaker Change: You know, you're right, we do have a huge amount of opportunity ahead of us, so we will continue to strike that right balance.

Speaker Change: by making targeted investments in the Salesforce expansion and R&D.

Speaker Change: But we expect to see significant leverage on the OPEC side from a

Speaker Change: from a G&A standpoint. And even on R&D, it's not going to be at the same pace as revenue growth, right? You get some scaled benefit there, too. So I think the business is set up really well going into 2025 in terms of being able to sustain and just be positive on an annual basis.

Operator: I got it. It's encouraging. And maybe, Laura, for you, just, it sounds like the trauma product is still on track for the fourth quarter. I think there was like a new TORC 510K maybe about a month ago that hit FDA's website. Any more color on the product or how you're thinking about the fragility fracture market? Thanks for taking the question. Yeah, thanks Drew.

Speaker Change: I got it. It's encouraging. And maybe, Laura, for you, it sounds like the trauma product is still on track for the fourth quarter. I think there was like a new TORC 510K maybe about a month ago that hit FDA's website. Just any more color on the product or how you're thinking about the fragility fracture market? Thanks for taking the questions.

Laura Francis: Yeah, thanks, Drew. And yes, we are really excited about the new trauma product. As we've said, we're expecting a Q4 launch. And, you know, while we've seen success with TORC, the new product that we're planning to launch in the fourth quarter, it's specifically designed to fit the workflow of trauma surgeons. What's also been interesting is that we're attracting the attention of multiple regional distributors who are expressing interest in agency partnerships with those trauma surgeons to get access to our unique solutions.

Speaker Change: Yeah, thanks, Drew. And yes, we are really excited about the new trauma product. As we've said, we're expecting a Q4 launch. And, you know, while we've seen success with TORC, the new product that we're planning to launch in the fourth quarter, it's

Speaker Change: It's specifically designed to fit the workflow of trauma surgeons.

Laura Francis: So, you know, it's a planned portfolio expansion, and combining that with the use of our hybrid commercial model is going to allow us to capture this trauma opportunity as well as contribute to our long-term revenue growth.

Speaker Change: What's also been interesting is that we're attracting the attention of multiple regional distributors who are expressing interest in agency partnerships around those trauma surgeons to get access to our unique solutions.

Speaker Change: You know, it's a planned portfolio expansion and combining that with the use of our hybrid commercial model is going to allow us to capture this trauma opportunity as well as contribute to our long-term revenue growth.

Operator: One moment for our next question. Our next question comes from Richard Neuwirth with Truist Securities. Your line is open.

Speaker Change: Thanks for taking the questions.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from Richard Neuwirth with Truist Securities. Your line is open.

Richard Neuwirth: Hi, good afternoon. Thanks for taking the question. This is Ravi from Fritch.

Speaker Change: Hi, good afternoon. Thanks for taking the question. This is Ravi in Fritch. Can you hear me okay?

Operator: Can you hear me okay? Yes. Hi, thanks. So I just wanted to kind of get into the accelerating guidance commentary. Strong procedure volumes, kind of favorable trends you mentioned in the script. How do we think about that from the kind of a price volume breakdown as it comes to reconciling the growth rates with your guide? And then I have a follow-up.

Speaker Change: Yes.

Ravi: Hi, thanks. So I just wanted to kind of get into the accelerating guidance commentary.

Speaker Change: Strong procedure volumes, kind of favorable trends you mentioned in the script. How do we think about that from kind of a price volume breakdown as it comes to reconciling the growth rates with your guide? And then I have a follow-up.

Anshul Maheshwari: And I'm happy to take that. On the guide side, in the back of the error assumptions, depending on the range, right? So, on the low end of the range, our assumption is sort of a low single-digit ASP decline. Now, we've done significantly better than that over the last several quarters, when our ASP has been fairly stable. And the rest would come from volume. So, if you look at the high end of the range, it's similar ASP trends that we've seen thus far in the year, and the rest is volume. On the low end, it's 1-3% ASP pressure, and the rest is coming from volume.

Speaker Change: And I'm happy to take that. On the guide side, in the back of their assumptions, depending on the range, right? So on the low end of the range, our assumption is sort of a low single-digit ASP decline. Now, we've done significantly better than that over the last several quarters, where our ASP has been fairly stable.

Speaker Change: and the rest would come from volume. So if you look at the high end of the range, it's similar ASP trends that we've seen thus far in the year and the rest is volume. On the low end, it's one to 3% ASP pressure and the rest is coming from volume.

Laura Francis: And then maybe, just maybe, if you could help us think about, you know, you have access to a number of different physician channels at this point with the different product launches that are coming out. Help us think about kind of what you're seeing on a macro level around procedures, new product launches, maybe throughput in terms of how you're, you know, getting access to doctors in terms of the procedures you're doing, maybe on the ortho side and the interventionalist side, and then any color you could give around how you plan to address the trauma doctors as well. That would be great. Thanks. Yeah, I'm happy.

Speaker Change: Great, and then just maybe if you could help us think about, you know, you have access to a number of different physician channels at this point with the different product launches that are coming out.

Speaker Change: Help us think about kind of what you're seeing on a macro level around procedures, new product launches, maybe throughput in terms of how you're, you know, getting access to the doctors in terms of the procedures you're doing, maybe on the ortho side and the interventionalist side, and then any color you could give around how you plan to address the trauma doctors as well. That'd be great. Thanks.

Laura Francis: Yeah, I'm happy to take that question. So, you know, as we mentioned, we're continuing to see an increase in the number of physicians that we're working with. It was a record at the end of the quarter with over 1,150 active physicians, and we do have a number of different call points, but simplistically, what we are seeing is that we are targeting primary SI joint fusion with our direct sales force, with both spine surgeons as well as interventionalists, and seeing continued strong growth with spine surgeons, and then excitement to start doing our procedure with interventionalists. So, that continues to be the core that's driving the business.

Speaker Change: Yeah, I'm happy to take that question, so...

Speaker Change: As we mentioned, we're continuing to see an increase in the number of physicians that we're working with.

Speaker Change: We were at a record at the end of the quarter with over 1,150 active physicians.

Speaker Change: And we do have a number of different call points, but simplistically what we are seeing is that we are targeting primary SI joint fusion with our direct sales force.

Speaker Change: with both spine surgeons as well as interventionalists and seeing continued strong growth with spine surgeons and then excitement to start doing our procedure with interventionalists. So that continues to be the the core that's driving the business.

Operator: Pelvic fixation with our Granite 9-5 product and the recent launch of that product continues to drive our growth in pelvic fixation in a number of different ways, addressing shorter constructs and the need potentially for a smaller diameter implant or potentially using four implants in those particular cases. And what has become fairly typical there is we're using a hybrid model in those cases where you continue to have a direct salesperson from SI-Bone involved, but also third- So, that's the second procedure type, and then finally, the third one is the area of pelvic trauma, and this is still a relatively small area for the business, but it is growing very nicely.

Speaker Change: Pelvic fixation with our Granite 9-5 product and the recent launch of that product continues to drive our growth in pelvic fixation in a number of different ways, addressing shorter constructs and need potentially for a smaller diameter implant or potentially using four implants in those particular cases. And what has become fairly typical there is we're using a hybrid model in those cases where you continue to have a direct salesperson from SI-Bone involved but also third-party agents that are actually covering those particular cases and that's helping us to drive

Speaker Change: and they drive the increase in sales rep productivity that you're seeing.

Speaker Change: The second procedure type. And then finally, the third one is...

Speaker Change: The area of pelvic trauma and this is still a relatively small area for the business.

Operator: We're really excited about the launch of this new product in the fourth quarter of this year, and that's another area where we have a hybrid commercial model where we have our direct sales force working closely with third-party agents, typically those that work more with trauma surgeons, in order to drive the growth of that business. So, those are the three different areas, and those are the ways that we're approaching them from a commercialization perspective.

Speaker Change: but

Speaker Change: growing very nicely. We're really excited about the launch of this new product in the fourth quarter of this year and that's another area where we have a hybrid.

Speaker Change: commercial model where we have our direct sales force working closely with third-party agents typically those that work more with trauma surgeons in order to drive the growth of that business

Speaker Change: So, those are the three different areas and those are the ways that we're approaching them from a commercialization perspective.

Xuyang Li: Thank you. One moment for our next question. Our next question comes from Xuyang Li with Jeffries. Your line is open.

Speaker Change: Thank you. One moment for our next question.

Speaker Change: Our next question comes from Xuyang Li with Jeffries. Your line is open.

Laura Francis: Alright, great. Thanks very much for taking our questions. I guess to start, I wanted a little bit more color and details on the new product launchers this year. I mean, it sounded like Granite 9.5's recent launch has been going really, really well.

Yung Lee: Alright, great. Thanks very much for taking our questions.

Yung Lee: I guess to start, I wanted to get a little bit more color and details on the new product launchers from this year.

Anshul Maheshwari: If you can share some additional details, that would be great. Same thing for Intra; any incremental color would be helpful. And, you know, how much are those products sort of baked into the second half guidance? Thank you.

Yung Lee: And it sounded like Granite 9.5's recent launch has been going really, really well. If you can share some additional details, that'd be great. Same thing for Intra, any incremental color would be helpful. And, you know, how much are those products?

Speaker Change: sort of baked into the second half guidance. Thank you.

Laura Francis: Yeah, I'm happy to take the first part of that question. So we've launched two products thus far this year, and then, as I've mentioned a couple of times on this call, we have a third one that's going to be coming by the end of the year. So the first product that we launched was our Intra product earlier this year, and that was a dorsal allograft product targeted primarily toward interventionalists. We've seen a nice uptake on that product, but most of the sales that we have seen thus far in interventional cardiology are actually using our TORC product, our lateral transfixing product in those interventional cases, which is what we had expected.

Speaker Change: Yeah, I'm happy to take the first part of that question. So we've launched two products thus far in the year. And then, as I've mentioned a couple of times on this call, we have a third one that's going to be coming by the end of the year. So the first product that we launched was our product Intra earlier this year. And that was a

Speaker Change: A dorsal allograft product targeted primarily toward interventionalists.

Speaker Change: We've seen a nice uptake on that product, but most of the sales that we have seen thus far in Interventional are actually using our TORC product.

Speaker Change: Our lateral transfixing product in those interventional cases, which is what we had expected. We just wanted to have that additional solution for interventionalists who were interested in a bone product instead of a device.

Laura Francis: We just wanted to have that additional solution for interventionalists who were interested in a bone product instead of a device. And we are very pleased with what we're seeing with Granite 9-5 right now. So within the lumbar fusion market, we're building on the success of our original Granite product, and we're really encouraged by the surge in interest in using 9-5 in shorter constructs, which is around 100,000 annual procedures in those particular cases.

Speaker Change: And then we are very pleased with what we're seeing with Granite 9-5 right now, so within the lumbar fusion market, we're building on the success of our original Granite product, and we're really encouraged by the

Speaker Change: Surgeon interest in using 9-5 in shorter constructs, which is around 100,000 annual procedures in those particular cases.

Laura Francis: In deformity, we also see Granite 9-5 as an opportunity to engage a subset of surgeons who want a smaller diameter implant, and then in certain instances, we're seeing our existing active deformity surgeons use Granite 5 to enable two points of fixation on either side, which obviously increases our ASP. So I'm very happy with what we're seeing from an interventional perspective overall with that launch, and then also with Granite 9-5, building on the base that we had formed with our original Granite product, and also looking forward to the launch of our trauma product in the fourth quarter. I'll have Anshul speak a little bit more on the other part of the question. Yeah,

Speaker Change: Within deformity, we also see Granite 9-5 as an opportunity to engage a subset of surgeons who wanted a smaller diameter implant, and then in certain instances, we're seeing

Speaker Change: Our existing active deformity surgeons use Granite V to enable two points of fixation on either side, which obviously increases our ASP.

Speaker Change: So I'm very happy with what we're seeing from an interventional perspective overall with that launch.

Speaker Change: and then as well with Granite 9-5 building on the...

Speaker Change: the base that we had formed with our original granite product and also looking forward to the launch of our trauma product in the fourth quarter. I'll have Anshul speak a little bit more on the other part of the question. Yeah, so on the guidance side, as you know, we've been using 10-5.

Anshul Maheshwari: So on the guidance side, as you know, we've been using 10-5 in the degenerative fine space. So we have had a short construct market developed in the last couple of years with granite. 9-5 now opens up that market because we are now able to go after the S-1 opportunity, both in primary and revision cases.

Anshul Maheshwari: in the degenerative spine space. So we've had a short construct market already developed in the last couple of years with granite. 9-5 now opens up that market because we're now being able to go after the S-1 opportunity, both in primary and revision cases.

Anshul Maheshwari: So that is the upside there, and that is baked into some of our guidance. Obviously, we're being very thoughtful about how we bake that in because we're still rolling out granite in the third quarter. You know, we did a very piloted rollout in the second quarter, as you recall. So we want to be very thoughtful there. On the interventional side, obviously, TORC's doing really well there, like Laura said, you know, intra. We're seeing pockets of adoption based on reimbursement, but our assumption always was the broader option would be driven by the outcome of the dropped LCDs. So we're not incorporating much of that in our current guide at this point, which we think is the right approach.

Anshul Maheshwari: So that is upside there. That is baked into some of our guidance. Obviously, we're being very thoughtful about how we bake that in because we're still rolling out granite in the third quarter. You know, we did a very piloted rollout in the second quarter, as you recall.

Speaker Change: So, we want to be very thoughtful there. On the interventional side, obviously, TORC's doing really well there, like Laura said, you know, intra. We're seeing pockets of adoption based on reimbursement, but our assumption always was the broader adoption will be driven by

Speaker Change: The outcome of the dropped LTDs, so we're not incorporating much of that in our current guide at this point, which we think is the right approach.

Laura Francis: All right, thanks very much for that. I guess to follow up, it looks like in your presentation you updated the iFuse patent, extended it by about five months. I think most of the iFuse reps are coming from iFuse 3D, which has about 10 years left. You also have a broach instrument that has about 10 years left on it as well. I guess I'm just kind of curious, in light of the iFuse patent expiration, I wanted to get an update on the competitive dynamic currently.

Speaker Change: All right, thanks very much for that. I guess to follow up...

Speaker Change: It looks like on your presentation you updated the iFuse patent, extended it by about five months. I think most of the...

Speaker Change: I-Fuse refs are coming from I-Fuse 3D, which has about 10 years left.

Speaker Change: You also have a broach instrument that has about 10 years left on it as well. I guess I'm just kind of curious, in light of the iFuse pan expiration, wanted to get an update on the competitive dynamic currently.

Laura Francis: Yeah, I mean, we pride ourselves on being a company that identifies unmet clinical needs. And then what we do is develop innovative products, and we patent those products. And so we are constantly looking at our patent portfolio and patent protecting all of the products that we're working with. As you mentioned, with iFuse 3D, we have patents that actually run through 2035. And that is the vast majority of sales for our triangular titanium implants.

Speaker Change: Yeah, I mean, we pride ourselves on being a company that identifies unmet clinical needs. And then what we do is develop innovative products and we patent those products. And so we are constantly looking at our patent portfolio and patent protecting all of the products that we're working with.

Speaker Change: As you had mentioned, with iFuse 3D, we have patents that actually run through 2035.

Speaker Change: And that is the vast majority of sales of our triangular titanium implants. But we continue to also try to extend at least a little bit the patents on the original iFuse. But most importantly is iFuse 3D accounts for almost the entirety of our triangular titanium implant revenue, and it's patented through 2035.

Laura Francis: But we continue to try to extend at least a little bit the patents on the original iFuse. But most importantly, iFuse 3D accounts for almost the entirety of our triangular titanium implant revenue, and it's patented through 2035. We also did receive a new patent for the broach instrument recently, which extends into 2034, which also impacts our core iFuse franchise. So we've continued to build the patent portfolio with our iFuse implants, as well as Granite, which is patented through 2039, and Torque, which is patented through 2040.

Speaker Change: We also did receive a new patent for the broach instrument recently, which extends into 2034, which also impacts our core iFuse franchise.

Speaker Change: So we've continued to build the patent portfolio with our iFuse implants, as well as Granite, which is patented through 2039, and Torque, which is patented through 2040.

Operator: Thank you. One moment for our next question. Our next question comes from Caitlin Cronin with Canaccord Genuity. Your line is open.

Speaker Change: Thank you. One moment for our next question.

Speaker Change: Our next question comes from Caitlin Cronin with Canaccord Genuity. Your line is open.

Caitlin Cronin: Hi, thanks for taking the questions and congrats on a great quarter. Can you just provide a little bit more color on the updated commercial strategy that you outlined and, you know, maybe quantify any more reps that you expect to add and also any distributors you expect to onboard through the process?

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

Caitlin Cronin: Can you just provide a little bit more color on the updated commercial strategy that you outlined and, you know, maybe quantify any more reps that you expect to add and also any distributors you expect to onboard through the process?

Laura Francis: Yeah, happy to do that. So under the leadership of Tony Recupero, we've built the best direct sales force in the industry. And we continue to see strong interest from reps wanting to join our team because of the differentiation of our company compared to others, our evidence-backed and differentiated portfolio, as well as a high performance culture. So with the evolution of our portfolio, we've been leveraging this hybrid commercial model. So, in particular, engaging third-party agents, as well as adding more associate-level reps to create additional capacity for our territory managers. And they're our most valued asset.

Tony Recupero: Yeah, happy to do that. So under the leadership of Tony Recupero, we've built the best direct sales force in the industry. And we continue to see strong interest from reps wanting to join our team because of the differentiation of our company compared to others' evidence-backed and differentiated portfolio, as well as a high performance culture.

Tony Recupero: So with the evolution of our portfolio, we've been leveraging this hybrid commercial model. So, in particular, engaging third-party agents, as well as adding more associate level reps to create additional capacity for our territory managers.

Laura Francis: And what we want to do is ensure high-quality service and support for our physicians and basically just effectively capture the demand for our solutions across multiple target markets. So, if you think about it longer term, the hybrid model has allowed us to deliver average revenue growth of over 20% over the last three years and nearly double our revenue per territory to $1.7 million during that period, and it's also driven dramatic operating leverage in the business.

Tony Recupero: And they're our most valued asset. And what we want to do is ensure high quality service and support for our physicians, and basically just effectively capture the demand for our solutions across multiple target markets.

Tony Recupero: So, if you think about it longer term, the hybrid model has allowed us to deliver average revenue growth of over 20% over the last three years and nearly double our revenue per territory to $1.7 million during that period, and it's also driven dramatic operating leverage in the business.

Laura Francis: So, over the next couple of years, we're going to continue to use the hybrid model while selectively adding sales reps. So, what we anticipate is that we're going to get to 100 territories with approximately $2 million of sales rep productivity apiece, which will build a $200 million U.S. business. So, you know, you should expect to see us end 2024 with a handful of new territories.

Tony Recupero: So, over the next couple of years, we're going to continue to use the hybrid model while selectively adding sales reps. So what we envision is that we're going to get to 100 territories with approximately $2 million of sales rep productivity apiece.

Laura Francis: Got it, that's helpful. And then just a couple of questions on the interventionalist call point. How does the appointment of Thomas West really help you shape your interventionalist strategy going forward? And I also remember you mentioning recently that the target interventionalist surgeons were 1K versus the initial 45K, 4500 that you initially targeted for interventionalist surgeons. Do you see opportunities to expand to the extra 3500 that are just doing needle-based procedures over time?

Tony Recupero: which will build a $200 million U.S. business. So, you know, you should expect to see us end 2024 with a handful of new territories.

Speaker Change: Got it, that's helpful.

Speaker Change: And then just a couple of questions on the interventionalist call point. How does the appointment of Thomas West really help you shape your interventionalist strategy going forward? And I also remember you mentioning recently that the target interventionalist surgeons was 1K versus the initial 45K, 4,500 that

Speaker Change: you initially targeted of the interventional surgeons. Do you see opportunities to expand to the extra 3,500 that are just doing the needle-based procedures over time?

Laura Francis: Yeah, so asking the question about Tom and then also expansion to those 4,500 interventionalists. You know, our focus from the inception of the company has been on surgeons. It's orthopedic and neurospine surgeons in particular, and there are around, there are close to 8,000 of those that we're targeting. And, you know, if you look at the number of physicians that we've worked with, you know, we still have a long way to go with those particular surgeons.

Speaker Change: Yeah, so asking the question about Tom and then also expansion to those 4,500 interventionalists.

Speaker Change: You know, our focus...

Speaker Change: From the inception of the company has been on surgeons, it's orthopedic and neurospine surgeons.

Speaker Change: in particular, and there are around...

Speaker Change: There are close to 8,000 of those that we're targeting. And, you know, if you look at the number of physicians that we've worked with,

Speaker Change: We still have a long way to go with those particular surgeons.

Laura Francis: But we also recognize that in the interventional market, our solutions are similar, but the market is different, the call point is different. And so Tom, with his experience with NALU Medical, is a really nice addition to the board of directors to help us to think about that new call point and strategize around it. In terms of who we're targeting from an interventional perspective, the 1,000 that we're talking about are the ones that are really going to be doing the lateral torque transfixing procedure.

Speaker Change: But we also recognize that the interventional market, our solutions are similar, but the market is different, the call point is different, and so

Tom: Tom with his experience with NALU Medical is a really nice addition to the board of directors to help us to

Tom: to think about that new call point and strategize around it.

Tom: In terms of who we're targeting from an interventional perspective, the thousand that we're talking about are the ones that are really going to be doing the lateral...

Laura Francis: And so those really have been the focus for us with our initial rollout. And what we're seeing is that that coming to fruition; we are seeing more of those physicians doing those procedures, but primarily with torque. In terms of getting to the additional 3,500 in that group, we do think that there's an interesting opportunity, you know, that's here. And that with some of the additional products that we currently have, like Intra, it does give us the opportunity to penetrate that market too.

Tom: TORC transfixing procedure and so those really have been the focus for us with our initial rollout and What we're seeing is is that that come to fruition that that we are seeing more of those positions doing those procedures but primarily with TORC

Tom: In terms of getting to the additional 3,500 in that group, we do think that there's an interesting opportunity.

Tom: you know, that's here and that with some of the additional products that we currently have, like Intra, that it does give us the opportunity to also kind of trade that market too.

Operator: Great, that's super helpful. Thanks so much.

Speaker Change: Great, that's super helpful. Thanks so much.

David Turkaly: One moment for our next question. Our next question comes from David Turkaly with Citizens A&P. Your line is open. Great. Thanks, Laura, for giving your comments on Intra and Torque, and then also, you know, sort of the increase we keep seeing in active docs or physicians. I'm curious, would you call out, did you have interviews?

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from David Turkaly with Citizens A&P. Your line is open.

David Turkley: Great. Thanks, Laura, giving your comments on Intra and TORC, and then also, you know, sort of the increase we keep seeing in active docs or physicians. I'm curious, would you call out, did you have interventionalists in that 1150 today?

Laura Francis: The short answer to that is yes, Dave. So we're seeing a nice adoption by interventionalists as well as our spine surgeons that we work with on our other procedures.

Speaker Change: Short answer to that is yes, Dave. So we are seeing a nice adoption by interventionalists as well as our spine surgeons that we work with on our other procedures.

David Turkaly: Got it, and I appreciate the call you gave on 9-9-9-5. Then, uh, you know... I just wanted to clarify one thing. Is that also... The new technology add-on payment, is that relevant for that as well? It actually is, yes. So the granite family, the NTAP actually applies to the original product as well as the new granite 9-5 product. So it has that same benefit where the hospital using our granite product can receive up to around $9,800 of additional payment for pelvic fixation using granite.

Dave: Got it, and then I appreciate the call you gave on 995 and the, you know, abilities from the docs to possibly use, you know, even more than sort of two, maybe up to four implants. I just wanted to clarify one thing. Is that also,

Speaker Change: New technology add-on payment, is that relevant for that as well?

Speaker Change: It actually is, yes. So granite, the granite family, the NTAP actually applies to the original product as well as the new granite 9-5 product. So it has that same benefit.

Speaker Change: where the hospital using our Granite product can receive up to around $9,800 of additional payment for pelvic fixation using Granite.

Operator: One moment for our next question. Our next question comes from David Saxon with Needham & Company. Your line is open.

Speaker Change #100: Thank you very much. One moment for our next question.

Speaker Change #101: Our next question comes from David Saxon with Needham & Company. Your line is open.

David Saxon: Hey, everyone. This is Joseph on for David. Congratulations on the record quarter.

Speaker Change #101: Hey everyone, this is Joseph on for David. Congrats on the record quarter. Just maybe another question on intervention lists.

Laura Francis: Just maybe another question on interventionless, to try to understand the channel a little bit more. Does it have a different pattern as it relates to ramping up SI procedures once the doctor is trained? I guess, and just any differentiating factors between the interventionalists and the spine surgeons would kind of help us understand a little bit better.

Joseph: just to try to understand the channel a little bit more.

Speaker Change #103: Does it have a different pattern as it relates to, you know, ramping SI procedures once the doctor trained?

Speaker Change #103: I guess just any differentiating factors between the interventionalists and the spine surgeons would kind of help us understand a little bit better.

Laura Francis: Yeah, so we're really going after two huge markets here, right? So the SI joint fusion market is a market that's over $2 billion in total. And as I said, you have around 8,000 spine surgeons that are targets to perform SI joint fusion, and you have approximately 4,500 who are interventionalists. Also, as I said, we're really going after those first 1,000, and we're primarily leading with our TORC products, so the lateral transfixing product that is paid under $2729.

Speaker Change #105: As I said, you have around 8,000 spine surgeons that are targets to perform SI joint fusion, and you have approximately 4,500 who are interventionalists.

Speaker Change #106: Also, as I said, we're really going after around those first thousand, and we're primarily leading with our TORC products, so the lateral transfixing product.

Laura Francis: In terms of how to approach the surgeons versus the interventional spine, it's been similar in a lot of these cases just because we're looking at those who already feel very confident and comfortable with procedures. As we penetrate deeper into the interventional market into that 4,500, we definitely will think differently. It's our intra-product, for example, that may be more of interest to those particular physicians. But overall, the way that we have approached this is by approaching it with our direct sales reps, selling directly to spine surgeons as well as interventionalists, and leading with our TORC device.

Speaker Change #106: that is paid under 27279. In terms of how to approach the surgeons versus the interventional spine,

Speaker Change #106: It's been similar in a lot of these cases just because we're looking at those who already feel very confident and comfortable with procedures.

Speaker Change #106: As we penetrate deeper into the interventional market into that 4,500, we definitely will think differently. It's our intra-product, for example, that may be more of interest to those particular physicians. But overall, the way that we have approached this is we've approached it with our direct sales reps.

Speaker Change #106: selling directly to the spine surgeons as well as the interventionalists and leading with our TORC device.

Anshul Maheshwari: Okay, yeah, great, great. Thank you for all that color; it's very helpful. And then, I guess EBITDA, Adjusted EBITDA Profitability, you guys are getting there pretty soon. When you do get to EBITDA profitability, how far out should we kind of be thinking about free cash flow profitability?

Speaker Change #107: Okay, yeah, great, great, thank you for all that color. It's very helpful.

Speaker Change #108: And then, I guess EBITDA, adjusted EBITDA profitability, you know, you guys are getting there pretty soon. When you do get to EBITDA profitability, how far out should we kind of be thinking about free cash flow profitability?

Anshul Maheshwari: Yeah, so I can take that question, Joseph. So, you know, we have high gross margins driven by high ASP, and our asset base is relatively light, which is very different from what you see in traditional spine companies where you have a significant capital outlay to support growth. And as you've seen in the recent quarters, our reduction in cash usage has been somewhat in line with our adjusted EBITDA improvement, and given our expectation of adjusted EBITDA improvement on an annual basis going forward, that should continue to translate into improved cash flow trends as well.

Speaker Change #109: Yes, so I can take that question.

Joseph Silk: Joseph Silk.

Joseph Silk: You know, we have high gross margins driven by high ASP and our asset model is relatively light.

Speaker Change #111: which is very different from what you see in traditional spine companies where you have a significant capital outlay to support growth. And as you've seen in the recent quarters, our reduction in cash usage has been…

Speaker Change #111: Somewhat in line with our Adjusted Imadai Improvement.

Speaker Change #111: And given our expectation on adjusted ibada improvement on an annual basis going forward,

Speaker Change #111: That should continue to translate into improved cash flow trends as well. Now, some of that may be...

Speaker Change #111: impacted by timing of new product launches and how we're putting capacity into play, but we feel very good about that task flow trajectory once we get to that adjusted event break-even. So that's number one and then

Anshul Maheshwari: Now, some of that may be impacted by the timing of new product launches and how we're putting capacity into play, but we feel very good about that cash flow trajectory once we get to that adjusted EBITDA break-even. So that's number one. And then, you know, when we look at our overall profile, with over $150 million in cash and the ability to maintain that adjusted EBITDA improvement going forward, we feel very good about having the financial resources to be able to fund all our growth going forward.

Speaker Change #111: You know, when we look at our overall profile, with over 150 million of cash and ability to maintain that Jethre Bida'a improvement going forward, you know, we feel very good about having the financial resources to be able to fund all our growth going forward.

Operator: Okay, thanks. Yeah, congrats on the record quarter.

Speaker Change #112: Okay, thanks. Yeah, congrats on the record quarter.

Ross Osborn: One moment, one moment for our next question. Our next question comes from Ross Osborn with Cantor Fitzgerald. Your line is open. Hey guys, thanks for checking in on our questions. Congratulations on the quarter. So regarding the fourth quarter.

Speaker Change #113: One moment, one moment for our next question.

Speaker Change #114: Our next question comes from Ross Osborn with Cantor Fitzgerald. Your line is open.

Ross Osborn: Hey guys, thanks for checking in our questions. Congrats on the quarter. So regarding the fourth quarter launch for a new product and the pelvic trauma market, will this be an offering that will require real-world data, or do you expect to see a pretty quick adoption rate?

Laura Francis: Yeah, good, good, good question. And, you know, we have already been working in the trauma market since we launched TORC. So we launched TORC in, I believe it was April of 2021, and so we have been selling it to trauma surgeons. They have been using the products for sacral insufficiency fractures. And so, with that success, we do have data that we can share with these particular surgeons. So overall, coming into the second half of the year, I think we're set up really well.

Speaker Change #116: Yeah, good question. And, you know, we have already been working in the trauma market since we launched.

Speaker Change #117: So we launched TORC in, I believe it was April of 2021. And so we have been selling to trauma surgeons. They have been using the products for sacral insufficiency fractures.

Speaker Change #117: And so with that success, we do have data that we can share with these particular surgeons.

Speaker Change #117: So, you know, overall, coming into the second half of the year, I think we're set up really well.

Laura Francis: We're seeing the benefit from strong demand trends, and we're capitalizing on accelerating demand within the pelvic fixation market with the rollout of Granite 9-5. We have growing engagement within interventional spine with TORC, and we also have a new product launch targeting the trauma market in the fourth quarter. And then top-line momentum positions us to deliver adjusted EBITDA break-even in the fourth quarter, which is a major fiscal inflection for our P&L profile.

Speaker Change #117: Seeing the benefit from strong demand trends, and we're capitalizing on accelerating demand within the pelvic fixation.

Speaker Change #117: market with the rollout of Granite 9-5. We have growing engagement within Interventional Spine with TORC and we also have the new product launch targeting the trauma market in the fourth quarter.

Speaker Change #117: And then Topline Momentum positions us to deliver adjusted EBITDA break-even in the fourth quarter, which is a major fiscal inflection for our P&L profile.

Laura Francis: So, you know, our company-specific, you know, fundamental demand trends and the anticipated additions to our portfolio over the coming years, it gives me confidence that we have the platform to deliver strong and profitable revenue growth going forward, and the strong performance this quarter and the consistency of our strong results in the last several quarters across revenue growth, surge in engagement, operating leverage, it's an outcome of our focused strategy to transform the business from a single product to a multi-modality med device platform with large unmet target markets. Great.

Speaker Change #117: So, you know, our company-specific, you know, fundamental demand trends and the anticipated additions to our portfolio over the coming years, it gives me confidence that we have the platform to deliver strong and profitable revenue growth going forward, and the strong performance this quarter and the consistency of our strong results in the last several quarters across revenue growth.

Speaker Change #117: Surgeon Engagement, Operating Leverage. It's an outcome of our focus strategy to transform the business from a single product to a multi-modality med device platform with large unmet target markets.

Laura Francis: And then in terms of Stacey, it's nice to see the positive interim results comments there, but would you remind us of the rough timelines associated with it? Yeah, so with Stacy, we have already completed enrollment in that particular study. We have the first set of results, and I believe that our plan is to have a publication out by early 2025.

Speaker Change #118: Great. And then in terms of Stacey, it was nice to see the positive interim results comments there, but would you remind us of the rough timelines associated with the next milestone?

Speaker Change #119: Yeah, so with Stacey, we have already completed enrollment in that particular study. We have the first set of results, and I believe that our plan is to have a publication out by early 2025 with Stacey.

Operator: And I'm not showing any further requests at this time, and I turn the call back over to Laura for any closing remarks.

Speaker Change #120: Got it. Thanks for taking our questions.

Speaker Change #121: Thank you. And I'm not showing any further requests at this time. I'd like to turn the call back over to Laura for any closing remarks.

Laura Francis: I just want to say thank you all for your participation in our call today, and we look forward to seeing you at upcoming conferences and non-deal roadshows. Ladies and gentlemen, this concludes today's presentation. You may now disconnect. Have a wonderful day.

Laura Francis: I just want to say thank you all for your participation in our call today, and we look forward to seeing you at upcoming conferences and non-deal roadshows.

Speaker Change #122: Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day.

Speaker Change #122: and Anshul Maheshwari We are one We are one We are one We are one We are one We are one We are one

Operator: Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? [inaudible] Good afternoon, and welcome to SI-Bone's second quarter 2020 for earnings conference call. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's call. As a reminder, this call is being recorded for replay. I would like to hand the call over to Saqib Iqbal, Senior Director of Investor Relations at SI-Bone for a few introductory comments.

Speaker Change #123: Copyright © 2020 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent.

Saqib Iqbal: Thank you for participating in today's call. With me are Laura Francis, Chief Executive Officer, and Anshul Maheshwari, Chief Financial Officer.

Saqib Iqbal: Good afternoon and welcome to SI-Bone's second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to hand the call over to Saqib Iqbal, Senior Director of Investor Relations at SI-Bone, for a few introductory comments.

Speaker Change #124: Thank you for participating in today's call. Joining me are Laura Francis, Chief Executive Officer, and Anshul Maheshwari, Chief Financial Officer.

Speaker Change #124: Earlier today, SI-Bone released financial results for the quarter ended June 30, 2024. A copy of the press release is available on the company's website.

Saqib Iqbal: Earlier today, SI-Bone released financial results for the quarter ended June 30, 2024. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Therefore, any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements.

Speaker Change #125: Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Saqib Iqbal: These forward-looking statements are based on the company's current expectations and inherently involve risks and uncertainty. These risks include SI-Bone's ability to introduce and commercialize new products and indications; SI-Bone's ability to maintain favorable reimbursement for its products and procedures; changes in payer requirements for authorization of procedures involving SI-Bone products; and the impact of potential economic weakness on the ability and desire of patients to undergo elective procedures.

Speaker Change #125: Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements.

Saqib Iqbal: SI-Bone's ability to manage risks to its supply chain, the impact of future capital requirements driven by new product introductions, and risks to the continued renormalization of the healthcare operating environment. Other forward-looking statements include our examination of operating trends and our future financial expectations, such as expectations for physician training and adoption, active physicians, new products, and clinical trial enrollment, and are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements.

Saqib Iqbal: Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section of our most recent Form 10-K filed with the Securities and Exchange Commission. During the call, management may also discuss certain non-GAAP measures, including the company's adjusted EBITDA results. Unless otherwise noted, any reference to profitability is in terms of adjusted EBITDA. For a reconciliation of these non-GAAP measures to GAAP accounting, please see the company's full earnings release issued earlier today.

Speaker Change #125: These forward-looking statements are based on the company's current expectations and inherently involve risks and uncertainties.

Saqib Iqbal: Unless otherwise noted, all results are compared to the comparable period in the prior year. SI-Bone disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 5th, 2024. With that, I'll turn the call over to Laura.

Speaker Change #125: These risks include SI-Bone's ability to introduce and commercialize new products and indications

Speaker Change #126: SI-Bone's ability to maintain favorable reimbursement for its products and procedures, changes in payer requirements for authorization of procedures involving SI-Bone's products,

Speaker Change #126: The Impact of Potential Economic Weakness on the Ability and Desire of Patients to Undergo Elective Procedures.

Speaker Change #126: SI-Bone's ability to manage risks to its supply chain, the impact of future capital requirements driven by new product introductions, and risks to the continued renormalization of the healthcare operating environment.

Speaker Change #126: Other forward-looking statements include our examination of operating trends and our future financial expectations.

Speaker Change #126: such as expectations for physician training and adoption, active physicians, new product, and clinical trial enrollment, and are based upon our current estimates and various assumptions.

Speaker Change #126: These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements.

Speaker Change #126: Accordingly, you should not place undue reliance on these statements.

Speaker Change #126: For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section of our most recent Form 10-K filed with the Securities and Exchange Commission.

Speaker Change #126: During the call, management may also discuss certain non-GAAP measures, including the company's adjusted EBITDA results, unless otherwise noted, any reference to profitability is in terms of adjusted EBITDA.

Speaker Change #126: For a reconciliation of these non-GAAP measures to GAAP accounting, please see the company's full earnings release issued earlier today.

Speaker Change #126: Unless otherwise noted, all results are compared to the comparable period in the prior year.

S.I. Bond: SI-Bone disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise.

S.I. Bond: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 5th, 2024.

Laura Francis: Thanks, Saqib. Good afternoon, and thank you for joining us. I'm pleased with our team's execution as we delivered another strong quarter and set new records across several key metrics. In the second quarter, we delivered a record $40 million in worldwide revenue, representing 20% growth. U.S. revenue was a record $37.8 million, representing 21% growth, as we benefited from strengthening demand for our growing number of solutions. We added 220 active physicians in the quarter compared to the prior year, hit another new record for active physicians, and completed a record-breaking number of new physician trainings in the quarter.

S.I. Bond: With that, I'll turn the call over to Laura.

Laura Francis: Thanks, Saqib. Good afternoon and thank you for joining us. I'm pleased with our team's execution as we delivered another strong quarter and set new records across several key metrics.

Speaker Change #128: In the second quarter, we delivered a record $40 million in worldwide revenue, representing 20% growth.

Speaker Change #128: U.S. revenue was a record $37.8 million, representing 21% growth, as we benefited from strengthening demand for our growing number of solutions.

Speaker Change #128: We added 220 active physicians in the quarter compared to the prior year, hit another new record for active physicians, and completed record-breaking number of new physician trainings in the quarter.

Laura Francis: Our second quarter results are indicative of the company's transformation from a single product company to a unique, high-growth medical device platform. We have a proven track record of identifying and successfully developing new markets with large unmet clinical needs across sacral pelvic conditions. Complementary markets in pelvic fixation and trauma have doubled our total target procedure volume to approximately half a million annual procedures, driven deeper physician penetration, and allowed us to deliver 20 plus percent average revenue growth over the last three years.

Speaker Change #128: Our second quarter results are indicative of the company's transformation from a single product company to a unique, high-growth medical device platform.

Speaker Change #128: We have a proven track record of identifying and successfully developing new markets with large, unmet clinical needs across sacral pelvic conditions.

Speaker Change #128: Complementary markets in pelvic fixation and trauma have doubled our total target procedure volume to approximately half a million annual procedures.

Speaker Change #128: driven deeper physician penetration and allowed us to deliver 20 plus percent average revenue growth over the last three years.

Laura Francis: We also made dramatic progress on our profitability goals in the quarter, as we delivered a 43% improvement in our adjusted EBITDA. Over the last three years, we've achieved over 30 percentage points of improvement in our adjusted EBITDA margin.

Speaker Change #128: We also made dramatic progress on our profitability goals in the quarter as we delivered a 43% improvement in our adjusted EBITDA.

Speaker Change #128: Over the last three years, we've achieved over 30 percentage points of improvement in adjusted Ibiza margin.

Laura Francis: We continue to achieve significant operating leverage in the business, driven by our strong revenue growth, increasing use of our hybrid commercial model, and scalable corporate infrastructure. Given the durability of the tailwinds in our business, we expect revenue growth to accelerate in the second half, driven by continued market growth across all our markets, procedure volume growth across surgeons and interventional spine for SI joint dysfunction, and acceleration in demand for a pelvic fixation solution. We expect this top-line growth to translate to positive adjusted EBITDA in the fourth quarter of 2024.

Speaker Change #128: We continue to achieve significant operating leverage in the business, driven by our strong revenue growth, increasing use of our hybrid commercial model, and scalable corporate infrastructure.

Speaker Change #128: Given the durability of the tailwinds in our business, we expect revenue growth to accelerate in the second half.

Speaker Change #128: driven by the continued physician growth across all our markets, procedure volume growth across surgeons and interventional spine for SI joint dysfunction, and acceleration in demand for pelvic fixation solutions.

Speaker Change #128: We expect this top-line growth to translate to positive adjusted ivata in the fourth quarter of 2024.

Laura Francis: This inflection in our adjusted EBITDA profitability, combined with our solid liquidity, as well as our capital efficient model, will give us the flexibility to self-fund our future growth. We're also positioned to capture the large number of markets in the sacred pelvic space and deliver sustainable and profitable revenue growth going forward. Now, let me provide an update on our key initiatives as we look to extend our leadership, drive long-term growth, and create shareholder value.

Speaker Change #128: This inflection in our adjusted EBITDA profitability combined with our solid liquidity as well as our capital efficient model will give us the flexibility to self-fund our future growth.

Speaker Change #128: We're also positioned to capture the large numerous markets in the sacred pelvic space and deliver sustainable and profitable revenue growth going forward.

Speaker Change #128: Now, let me provide an update on our key initiatives as we look to extend our leadership, drive long-term growth, and create shareholder value.

Laura Francis: Starting with sales infrastructure, we ended the quarter with 84 territory managers supported by clinical support specialists and third-party agents for case coverage. Our hybrid commercial strategy drove a 24% increase in our trailing 12 months revenue per territory to a record $1.7 million. Our differentiated portfolio is attracting the attention of multiple large regional distributors who've expressed interest in building agency partnerships.

Speaker Change #128: Starting with sales infrastructure, we ended the quarter with 84 territory managers supported by clinical support specialists and third-party agents for case coverage.

Speaker Change #128: Our hybrid commercial strategy drove a 24% increase in our trailing 12 months revenue per territory to a record $1.7 million.

Speaker Change #128: Our differentiated portfolio is attracting the attention of multiple large regional distributors who've expressed interest in building agency partnerships.

Laura Francis: We continue to expand our agent network, primarily for pelvic fixation and trauma opportunities. The expansion of our agent network is allowing us to reach more positions and also drive incremental operating leverage in the business. Concurrently, we plan to selectively and strategically hire additional territory managers to ensure that we can expand our physician user base and density, as well as provide the highest quality of service to our growing user base.

Speaker Change #128: We continue to expand our agent network, primarily for pelvic fixation and trauma opportunities.

Speaker Change #128: The expansion of our agent network is allowing us to reach more positions and also drive incremental operating leverage in the business.

Speaker Change #128: Concurrently, we plan to selectively and strategically hire additional territory managers to ensure that we can expand our physician users and density, as well as provide the highest quality of service to our growing user base.

Laura Francis: Moving on to physician engagement, we exited the quarter with more than 1,150 active physicians, representing 23% growth. This is a continuation of the double-digit growth in active users we've seen in the last three years. In the second quarter, 17% of our active physicians used more than one of the procedural solutions we offer.

Speaker Change #128: Moving on to physician engagement, we exited the quarter with more than 1,150 active physicians, representing 23% growth.

Speaker Change #128: This is a continuation of the double-digit growth in active users we've seen in the last three years.

Speaker Change #128: In the second quarter, 17% of our active physicians used more than one of the procedural solutions we offer.

Laura Francis: The 25% increase in the number of active physicians performing more than one type of procedure highlights the synergistic nature of our portfolio. With the launch of Granite 9-5, we're targeting both deformity and increasingly degenerative spine procedures, which account for a significant portion of the procedure volumes for our active physicians. We now have a platform to drive deeper engagement and more procedures per physician. This cross-portfolio interest is a positive leading indicator of sustained demand momentum and productivity.

Speaker Change #128: The 25% increase in the number of active physicians performing more than one type of procedure highlights the synergistic nature of our portfolio.

Speaker Change #128: With the launch of Granite 9-5 solution, we're targeting both deformity and increasingly degenerative spine procedures, which account for a significant portion of the procedure volumes for our active physicians.

Speaker Change #128: We now have a platform to drive deeper engagement and more procedures per physician.

Speaker Change #128: This cross-portfolio interest is a positive leading indicator of sustained demand momentum and productivity.

Laura Francis: Moving to our academic program, we trained 80 residents and fellows in the second quarter, bringing the total number of trained residents and fellows to over 1,700 since 2018. This effort translates into a growing number of physicians trained who now understand the incidence and diagnosis of sacral pelvic disorders and treatment options using our technologies. We were encouraged by the elevated interest in training and the adoption trends by previously trained residents and fellows. In the first half of 2024, sustained adoption from previously trained residents and fellows resulted in revenue attributable to this group growing 75%.

Speaker Change #128: Moving to our academic program, we trained 80 residents and fellows in the second quarter, bringing the total number of trained residents and fellows to over 1,700 since 2018.

Speaker Change #128: This effort translates into a growing number of physicians trained who now understand the incidence and diagnosis of sacral pelvic disorders and treatment options using our technologies.

Speaker Change #128: We're encouraged by the elevated interest in training and the adoption trends by previously trained residents and fellows.

Speaker Change #128: In the first half of 2024, sustained adoption from previously trained residents and fellows resulted in revenue attributable to this group growing 75%.

Laura Francis: Turning to products and clinical evidence, we continue to define the SI joint dysfunction, pelvic fixation, and pelvic trauma markets and reinforce our commitment to improving patient outcomes and advancing medical care by offering differentiated products backed by clinical evidence. We recently finalized five-year follow-up data for SALI, our first prospective clinical trial with iFUSE 3D. The study indicated that the clinical response to SI joint fusion using ICUs3D showed marked, immediate, and sustained improvement in all outcome measures, consistent with our prior SI joint fusion studies. The patient pain score improved by 58 points, the disability scores improved by 25 points, while the percentage of people on opioids decreased from 57% at baseline to 17% at five years.

Speaker Change #128: Turning to products and clinical evidence, we continue to define the SI joint dysfunction, pelvic fixation, and pelvic trauma markets, and reinforce our commitment to improving patient outcomes and advancing medical care by offering differentiated products backed by clinical evidence.

Speaker Change #129: We recently finalized five-year follow-up data for SALI, our first prospective clinical trial with iFUSE 3D.

Speaker Change #129: The study indicated that the clinical response to SI joint fusion using ICUs3D showed marked, immediate, and sustained improvement in all outcome measures, consistent with our prior SI joint fusion studies.

Speaker Change #129: The patient pain score improved by 58 points, the disability scores improved by 25 points, while the percentage of people on opioids decreased from 57% at baseline to 17% at 5 years.

Laura Francis: The physical function tests showed persistent improvement from baseline and the long-term radiographic analysis was positive with 100% rate of joint fusion. Our physicians have migrated from the original iFuse to iFuse 3D due to the porosity and fenestrated design, driving faster and better fixation and fusion, iQIES 3D accounts for almost the entirety of our triangular titanium implant revenue and is patented through 2035, iFuse Torque, building on the success of iFuse 3D, continues to be a key contributor to procedure volume growth and active physician engagement across both SI joint dysfunction and pelvic trauma, and has been a cornerstone of our interventional spine engagement strategy.

Speaker Change #129: The physical function tests showed persistent improvement from baseline, and the long-term radiographic analysis was positive with 100% rate of joint fusion.

Speaker Change #130: Our physicians have migrated from the original I-Fuse to I-Fuse 3D due to the porosity and fenestrated design, driving faster and better fixation and fusion.

Speaker Change #131: iFuse 3D accounts for almost the entirety of our triangular titanium implant revenue and is patented through 2035.

Speaker Change #131: IFU's TORC, building on the success of IFU's 3D, continues to be a key contributor to procedure volume growth and active physician engagement across both SI joint dysfunction and pelvic trauma.

Speaker Change #131: and has been a cornerstone of our interventional spine engagement strategy.

Laura Francis: While we provide comprehensive training on both ICUs-intra and ICUs-torque, in the second quarter, the majority of the cases performed by interventionalists utilized ICUs-torque in a lateral transfixing trajectory, which is reimbursed under CP2 code 27279. The growing confidence of interventionalists in adopting IP's TORC aligns with the early outcomes we're seeing in our prospective multicenter interventionalist AC study.

Speaker Change #131: While we provide comprehensive training on both ICUs Intra and ICUs Torque, in the second quarter, the majority of the cases performed by interventionalists utilized ICUs Torque in a lateral transfixing trajectory, which is reimbursed under CP2 code 27279.

Speaker Change #131: The growing confidence of interventionalists in adopting IP's TORC aligns with the early outcomes we're seeing in our prospective multi-center interventionalist AC study.

Laura Francis: Interim results, which were recently presented at the American Society of Pain and Neuroscience Annual Meeting in Miami, confirm the safety and efficacy of lateral transfixing SI joint fusion, one performed by interventionalists. The safety and effectiveness of the lateral procedure with ICUs Torque were also confirmed in a recent publication in the Journal of Pain Research by Dr. Michael Jung, a leading interventional spine physician at Wisconsin Spine and Pain. Dr. Jung published the results of his first 49 lateral SI joint fusion cases using iFuse Torque.

Speaker Change #131: Interim results, which were recently presented at the American Society of Pain and Neuroscience Annual Meeting in Miami, confirmed the safety and efficacy of lateral transfixing SI joint fusion when performed by interventionalists.

Speaker Change #131: The safety and effectiveness of the lateral procedure with iFuseTorque was also confirmed in a recent publication in the Journal of Pain Research by Dr. Michael Jung, a leading interventional spine physician at Wisconsin Spine and Pain.

Speaker Change #132: Dr. Jung published the results from his first 49 lateral SI joint fusion cases using iFuseTor.

Laura Francis: The outcomes were commensurate with those observed in a large meta-analysis of studies of lateral SI joint fusion published last year, and an average of six months of follow-up, 88% of patients reported at least 50% improvement in pain. Since its launch in 2022, IQ's Bedrock Granite has been highlighted as one of the most innovative products by our customers and has seen rapid and durable adoption. Even with the rapidly increasing demand, we still have a large underpenetrated opportunity.

Speaker Change #132: The outcomes were commensurate with those observed in a large meta-analysis of studies of lateral SI joint fusion published last year.

Speaker Change #133: In an average of six months of follow-up, 88% of patients reported at least 50% improvement in pain.

Speaker Change #134: Since its launch in 2022, IQ's Bedrock Granite has been highlighted as one of the most innovative products by our customers and has seen rapid and durable adoption.

Speaker Change #134: Even with the rapidly increasing demand, we still have a large underpenetrated opportunity.

Laura Francis: We believe that granite will become the standard of care for fixation infusion of the SI joint to provide a strong foundation at the base of long construct procedures, addressing a clear unmet clinical need in spine surgery. Granite has also found significant application in shorter 2-4 level lumbar fusion procedures. In the second quarter, we launched Granite 9-5 to address the specific needs of this broader category of lumbar fusion procedures. We believe that Granite 9-5, including shorter lengths appropriate for placement in the S1 pedicle, will provide the best-in-class offering for the approximately 100,000 annual target procedures. It'll also allow us to engage deformity surgeons who have expressed an additional preference for a smaller diameter implant to better enable two points of pelvic fixation. The reception for Granite 9-5 has been spectacular.

Speaker Change #134: We believe that granite will become the standard of care for fixation infusion of the SI joint to provide a strong foundation at the base of long construct procedures addressing a clear unmet clinical need in spine surgery.

Speaker Change #134: Granite has also found significant application in shorter two to four level lumbar fusion procedures.

Speaker Change #134: In the second quarter, we launched Granite 9-5 to address the specific needs of this broader category of lumbar fusion procedures.

Speaker Change #134: We believe that Granite 9-5, including shorter lengths appropriate for placement in the F1 pedicle, will provide the best-in-class offering for the approximately 100,000 annual target procedures.

Speaker Change #134: It will also allow us to engage deformity surgeons who have expressed an additional preference for a smaller diameter implant to better enable two points of pelvic fixation.

Speaker Change #134: The reception for Granite 9-5 has been spectacular.

Laura Francis: Looking ahead, we have an active pipeline of differentiated products that will be launched in the coming months and years, beginning with the fourth quarter launch of a product specifically targeting the pelvic trauma market. Before Anshul discusses our financial performance, let me provide a quick update on the recent additions to our board of directors. On June 25th, our shareholders elected Thomas West to our board of directors at our annual stockholder meeting. Tom is the CEO of Nalu Medical, a privately held medical device company with a leading position in peripheral nerve stimulation, selling primarily to interventional pain physicians. Tom built his career at Johnson & Johnson and Whole Logic and was recently CEO of Intersect D&T until its acquisition by Medtronic. Today, we also announce the appointment of Dan Wolfe to our board.

Speaker Change #134: Looking ahead, we have an active pipeline of differentiated products that will be launched in the coming months and years, beginning with the fourth quarter launch of a product specifically targeting the pelvic trauma market.

Speaker Change #135: Before Anshul discusses our financial performance, let me provide a quick update on the recent additions to our Board of Directors.

Speaker Change #136: On June 25th, our shareholders elected Thomas West to our board of directors at our annual stockholder meeting.

Speaker Change #137: Tom is the CEO of Nalu Medical, a privately-held medical device company with a leading position in peripheral nerve stimulation, selling primarily to interventional pain physicians.

Speaker Change #137: Tom built his career at Johnson & Johnson and Hologic, and was recently CEO of Intersect D&T, up to its acquisition by Medtronic.