Q2 2024 Treace Medical Concepts Inc Earnings Call
Vivian Cervantes: John will offer commentary on our commercial activities, followed by Mark for a detailed review of our second quarter financial results released after market close today. We will host a question and answer session following our prepared remarks. Our press release can be found in the Investor Relations section of our website at investors.treace.com. This call is being recorded and will be archived in the investor section of our website.
In our commercial activity followed by Mark for a detailed review of our second quarter financial results released after market close today.
We will host a question and answer session following our prepared remarks.
Our press release can be found in the Investor Relations section of our website at investors Doc treats dotcom.
This call is being recorded and will be archived in the investors section of our website.
John Treace: Before we begin, we would like to remind you that it is our intent that all forward-looking statements made during today's call will be protected under the Private Security Litigation Reform Act of 1995, any statements that relate to expectations or predictions of future events and market trends, as well as our estimated results or performance. All forward-looking statements are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements.
Before we begin we would like to remind you that it is our intent that all forward looking statements made during today's call will be protected under the private Securities Litigation Reform Act of 1095 and he.
These statements that relate to expectations or predictions of future events and market trends as well as our estimated results or performance are forward looking statements.
All forward looking statements are based upon our current estimates and various assumptions.
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.
John Treace: All forward-looking statements are based upon current available information, and Treace Medical assumes no obligation to update these statements. Accordingly, you should not place undue reliance on these statements. Please refer to our SEC filings, including our Form 10-Q for the second quarter, filed today, and our Form 10-K for the full year 2023, filed on February 27, 2024, for a detailed presentation of. With that, I now turn the call over to John. Thank you, Vivian. Good afternoon, everyone.
Speaker Change: All forward looking statements are based upon current available information and treat medical assumes no obligation to update these statements.
Speaker Change: Accordingly, you should not place undue reliance on these statements.
Speaker Change: These reports, our SEC filings, including our Form 10-Q for the second quarter filed today and our Form 10-K for the full year 2023 filed on February 27th 2024 for a detailed presentation of risks.
Speaker Change: With that I'll now turn the call over to John.
John Treace: Thank you, Vivian. Good afternoon, everyone, and thank you for joining us on our second quarter 2024 earnings conference call. We're pleased to report that the second quarter came in as expected. During the quarter, we made significant progress toward commercializing several new products aimed at broadening our presence in the bunion market, leveraging our lapoplasty market leadership position and user base of over 3,000 surgeon customers as we prepare to enter the relatively nascent, minimally invasive osteotomy market, one which continues to grow in interest with doctors and patients alike.
John: Thank you Vivian and good afternoon, everyone and thank you for joining us on our second quarter 2024 earnings Conference call.
John: We're pleased to report that the second quarter came in as expected.
John: During the quarter, we made significant progress towards commercializing several new products aimed at broadening our presence in the bunyan market leveraging our lack of <unk> market leadership position and user base of over 3000 surgeon customers as we prepare to enter the relatively nation minimally invasive osteotomy market, one which continues to grow and interest with <unk>.
John: Doctors and patients alike.
John Treace: We have an active R&D engine focused on developing and delivering new technologies to accelerate and complement the penetration of our $5 billion plus U.S. total addressable bunion market. Inclusive of our new MIS osteotomy platforms, we have a full pipeline of more than 10 new products that we expect to commercialize, starting in the back half of 2024 and throughout 2025. Turning to the quarter, nd Quarter revenue was $44.5 million, representing 6% growth over the second quarter of 2023.
John: We have an active R&D engine focused on developing and delivering new technologies to accelerate and complement penetration of our $5 billion plus U S total addressable blended market.
John: Inclusive of our new Mis osteotomy platforms, we have a full pipeline of more than 10, new products that we expect to commercialize starting in the back half of 2024 and throughout 2025.
John: Turning to the quarter.
John: Second quarter revenue was $44 5 million, representing 6% growth over the second quarter of 2023.
John Treace: Growth resulted from continued increases in our active surgeon base, an increase in surgical cases performed, as well as a favorable product revenue mix driven by broadening adoption of our SpeedPlate, Adductiplasty, and other complementary products, which resulted in higher revenue per case. Building on these trends, we see clear opportunities to expand our share of procedure volumes from our growing surgeon customer base as we introduce new MIS osteotomy offerings, which are expected to become available in a limited fashion during the fourth quarter.
Growth resulted from continued increases in our active surgeon base, an increase in surgical cases performed as well as favorable product revenue mix driven by broadening adoption of our speed plate of Dr. <unk> and other complementary products, which resulted in higher revenue per case.
John: Building on these trends, we see clear opportunities to expand our share of procedure volumes from our growing surgeon customer base as we introduced new mis osteotomy offerings, which are expected to become available in a limited fashion during the fourth quarter.
John Treace: We believe these new products, along with our flagship Lapoplasty and Inductoplasty systems delivered by our direct bunion-focused sales force, will provide a powerful and broad suite of technologies to comprehensively address the evolving needs of bunion surgeons and patients alike. Today, we believe the overall procedure volume in the U.S. bunion market is comprised of approximately 30% lapidus fusion and 70% osteotomy, and we estimate around 10% to 15% of the osteotomies are performed using MIS techniques.
John: We believe these new products, along with our flagship lap Atlassian inductor Plassey system delivered by our direct Bunion focused sales force, who will provide a powerful and broad suite of technologies to comprehensively address the evolving needs of Bunions surgeons and patients alike.
John: Today, we believe the overall procedure volume in the U S funding market is comprised of approximately 30% lapidus fusion and 70% osteotomy.
John: And we estimate around 10% to 15% of the osteotomy as our perform using mis techniques.
John Treace: Notwithstanding the increasing interest in MIS osteotomies from surgeons and patients alike, MIS bunion surgery remains a technically challenging and predominantly freehand operation, thus limiting adoption by the broad foot and ankle surgeon community. For example, some surgeons have stated the learning curve for MIS osteotomies can be as high as 40 or more cases to achieve proficiency.
John: Notwithstanding the increasing interest in mis osteotomy from surgeons and patients alike.
John: MS Bunion surgery remains a technically challenging and predominantly freehand operation, thus limiting adoption by the broad foot and ankle surgeon community.
Speaker Change: For example, some surgeons have stated the learning curve for Mis osteotomy as can be as high as 40 or more cases to achieve proficiency.
John Treace: It's with this current market backdrop that we plan to introduce two new MIS osteotomy approaches that build upon our core capabilities for highly reproducible instrumented 3D bunion correction systems. And in doing so, we believe we can expand the minimally invasive segment of the osteotomy market by simplifying these MIS procedures and allowing surgeons to achieve reproducible 3D correction. This strategy follows the Lapoplasty playbook, where we made a challenging freehand 3D lapidus procedure reproducible and accessible to the broad foot and ankle surgeon community and, in doing so, helped expand the overall lapidus segment of the market from approximately 15% in 2015 to 30% or more today.
Speaker Change: It's with this current market backdrop that we plan to introduce two new mis osteotomy approaches that build upon our core capabilities for highly reproducible instrumented <unk> bunion correction systems.
Speaker Change: And in doing so we believe we can expand the minimally invasive segment of the osteotomy market by simplifying these mis procedures, and allowing surgeons to achieve reproducible <unk> corrections.
Speaker Change: This strategy follows the lap of plastic playbook, where we made a challenging freehand <unk> procedure reproducible and accessible to the broad foot and ankle surgeon community and in doing so help expand the overall lap of this segment of the market from approximately 15% in 2015% to 30% or more today.
John Treace: By our estimates, lapoplasty has allowed us to capture, on average, nearly 50% of our most tenured surgeon cohort's annual bunion cases, which is something we take great pride in. This said, for our total surgeon base of more than 3,000 customers, Lapoplasty is closer to 25% of their average annual bunion case mix.
Speaker Change: By our estimates lab Appalachia has allowed us to capture on average nearly 50% of our most tenured surgeon cohorts annual bundled cases, which is something we take great pride in this.
Speaker Change: <unk> said for our total surgeon base of more than 3000 customers <unk> is closer to 25% of their average annual bunion case mix.
John Treace: Given this, we believe we can accelerate our penetration into the remaining 75% of their bunion procedures with not only lapoplasty, but also with our two forthcoming MIS osteotomy solutions. We also believe we have a meaningful opportunity to attract new surgeon customers who today rely on metatarsal osteotomies for the vast majority of their bunion patients and, as such, have not yet been exposed to lapoplast. Let me share with you some additional color on our two forthcoming MIS osteotomy solutions.
Speaker Change: Given this we believe we can accelerate our penetration into the remaining 75% of their bunion procedures with not only lap a classy, but also with our two forthcoming Ms Osteotomy solutions.
Speaker Change: We also believe we have a meaningful opportunity to attract new surgeon customers, who today rely on metatarsal osteotomy for the vast majority of their bunion patients and as such have not yet been exposed to lap a plastic.
Speaker Change: Let me share with you some additional color on our two forthcoming Ms <unk> solutions.
John Treace: Our first system, known as the Nanoplasty System, was developed in conjunction with a team of highly experienced and internationally recognized MIS foot and ankle surgeons. Nanoplasty is designed to offer patients a reproducible 3D bunion correction to resolve their lifestyle-limiting bunion pain. It features highly refined instrumentation and a specialized implant delivered through a small 1.5 centimeter discrete incision on the side of the foot, making it cosmetically appealing for patients. And importantly, consistent with other minimally invasive procedures, we believe this can translate to less swelling, less pain, and allow patients the opportunity for rapid return to weight bearing in a post-op boot or surgical shoe.
Speaker Change: Our first system known as the Nana Plaza system was developed in conjunction with a team of highly experienced an internationally recognized Ms foot and ankle surgeons.
Speaker Change: <unk> is designed to offer patients with a reproducible <unk> bunion correction to resolve their lifestyle limiting bunion pain.
Speaker Change: It features a highly refined instrumentation and specialized implant delivered through a small one five centimeters discrete incision on the side of the foot, making it cosmetics appealing for patients.
Speaker Change: And importantly, consistent with other minimally invasive procedures. We believe this can translate to less swelling less pain and allow patients the opportunity for rapid returned to weight bearing and a post op boot or surgical shoe.
John Treace: We have already trained a significant cohort of surgeons on our Nanoplasty system, and based on their strong positive feedback, we believe Nanoplasty can disrupt this emerging market segment by dramatically reducing surgeon learning curves, simplifying the surgical procedure, and ultimately allowing more surgeons to bring the benefits of our MIS approach to a greater number of their bunion patients. Our second MIS osteotomy offering is geared towards the existing, more established base of MIS foot surgeons who use screws for fixation in their metatarsal osteotomies. Our approach here is to offer this existing segment of the market an instrumented and reproducible method to achieve their 3D bunion correction.
Speaker Change: We have already trained a significant cohort of surgeons on our nano plastic system and based on their strong positive feedback we believe Nana Plaza can disrupt this emerging market segment by dramatically, reducing surgeon learning curves simplifying the surgical procedure and ultimately, allowing more surgeons to bring the benefits of our mis approach to a.
Speaker Change: Greater number of their bunion patients.
Speaker Change: Our second MSR theonomy offering is geared towards existing more established base of Ms. Foote surgeons, who use screws for fixation and Theyre metatarsal osteotomy.
Speaker Change: Our approach here is to offer this existing segment of the market and instrumented and reproducible method to achieve their <unk> bunion corrections.
John Treace: We're proud of these developments and believe that these two new MIS systems, coupled with our 3D microlapoplasty system, provide a comprehensive suite of instrumented 3D MIS solutions to meet the evolving preferences of surgeons and their patients. In addition to these MIS offerings, we're also excited about other product introductions slated for the second half of 2024, which include our mini adductoplasty system. This is our next generation midfoot correction instrumentation, which reduces the adductoplasty midfoot deformity correction procedure incision size by 50 percent.
Speaker Change: We're proud of these developments and believe that these two new mis systems, coupled with our <unk> micro lap of plastic system provide a comprehensive suite of instrumented three D. Ms solutions to meet the evolving preferences of surgeons and their patients.
Speaker Change: In addition to these mis offerings. We're also excited about other product introductions slated for the second half of 2024, which include our mini adductor plastic system. This.
Speaker Change: This is our next generation Midfoot correction instrumentation, which reduces the adductor plasty midfoot deformity correction procedure incision size by 50%.
John Treace: Redpoint patient-specific instrumentation, which offers software-driven preoperative planning and patient-specific cut guides for bunion and related mid foot deformity corrections, and a new speed plate configuration designed for fusions of larger bones in the foot. We're pleased to announce that this new Speedplay configuration is now commercially available, and we're already receiving excellent feedback from surgeon users.
Speaker Change: Redpoint patient specific instrumentation, which offer software driven preoperative planning and patient specific cut guidance for bunion and related mid to a deformity corrections and a new speed play configuration designed for fusions of larger bones in the foot.
Speaker Change: We're pleased to announce that this new speed play configuration is now commercially available and we are already receiving excellent feedback from surgeon users.
John Treace: Further, inclusive of the innovations we discussed here today, we have an active R&D team with a full pipeline of new products slated for a steady cadence of more than 10 introductions expected through 2025. We're excited to bring these new innovations to our growing base of 3000 plus active surgeons through our established direct sales force, as we continue to expand our footprint in the foot and ankle market. Turning to our financial outlook, we are reaffirming our full year 2024 revenue guidance of 201 to 211 million, which reflects an increase of 7% to 13% over 2023 revenue.
Speaker Change: Further inclusive of the innovations we discussed here today, we have an active R&D team with a full pipeline of new products slated for a steady cadence of more than 10 introductions expected through 2025.
Speaker Change: We're excited to bring these new innovations to our growing base of 3000, plus active surgeons through our established direct sales force as we continue to expand our footprint in the foot and ankle market.
Speaker Change: Turning to our financial outlook, we are reaffirming our full year 2020 for revenue guidance of $201 million to $211 million, which reflects an increase of 7% to 13% over 2023 revenue.
John Treace: Before turning the call over to Mark for a review of our financial performance, let me provide an update on our clinical data and reimbursements. A key differentiating driver for our business is our commitment to clinical evidence, which we believe resonates with both surgeons and patients. From what we can see in the marketplace, we believe we continue to be the only industry participant with a growing body of clinical data. And we look forward to presenting four-year data on our flagship Align3D lapoplasty study, as well as our first interim report out of our lapoplasty mini-incision clinical study at the upcoming 2024 American Orthopedic Foot and Ankle Society meeting in September.
Speaker Change: Before turning the call over to Mark for a review of our financial performance, Let me provide an update on our clinical data and reimbursement.
Mark: The key differentiating driver for our business is our commitment to clinical evidence, which we believe resonates with both surgeons and patients.
Mark: From what we can see in the marketplace. We believe we continue to be the only industry participant with a growing body of clinical data.
Mark: And we look forward to presenting four year data on our flagship align <unk> study as well as our first interim report out of our lap of Plas a mini incision clinical study at the upcoming 2020 for American orthopedic foot and ankle Society meeting in September.
John Treace: We believe patient data coming from our differentiated and aligned 3D studies resonate with surgeons and patient communities alike, further reinforcing market adoption of the lapoplasty procedure. Finally, as many of you know, CMS recently released its proposed 2025 Medicare payment rates for hospital outpatient and ASC services to cover facility costs for surgical procedures, including supplies and implants used in the surgical case. As a reminder, our products are used in procedures covered by specific, well-established CPT codes, and we're pleased to see that CMS is proposing to reassign CPT code 28297, a primary code used for lapidus fusion, or the lapoplasty procedure, to APC 5115 with a proposed hospital outpatient rate of $12,756 for 2025.
Mark: We believe patient data coming from our differentiated align <unk> studies resonate with surgeon and patient communities alike. Further reinforcing market adoption of the lap of policy procedure.
Speaker Change: Finally, as many of you know CMS recently released its proposed 2025 Medicare payment rates for hospital outpatient and ASC services to cover facility cost for surgical procedures, including supplies in implants used in the surgical case.
Mark: As a reminder, our products are used in procedures covered by specific well established CPT codes and we're pleased to see that CMS is proposing to reassign CPT code <unk> hundred 97.
Mark: Primary code used for lapidus fusion or the lack of flagship procedure to.
Mark: To APC 515, with the proposed hospital outpatient rate of $12756 for 2025.
John Treace: This represents an increase of $5,939, or 87%, over 2024. In the ASC setting, the 2025 proposed payment is $9,719, an increase of 98% compared to $4,900 in 2024. For other bunion and related reimbursement codes relevant to Treace Medical, the proposed Medicare 2025 reimbursement rates are proposed to increase by low single digits for the hospital outpatient and ASC settings. While we estimate the majority of our patient demographic to be commercially insured, Medicare rates often have influence on commercial payers.
Mark: This represents an increase of $5939 or 87% over 2024.
Mark: In the ASC setting the 2025 proposed payment is $9719, an increase of 98% compared to $4900 in 2024.
Speaker Change: For other bunion and related reimbursement codes relevant to treat medical the proposed Medicare 2025 reimbursement rates are proposed to increase low single digits for the hospital outpatient and ASC settings.
Mark: While we estimate the majority of our patient demographic to be commercially insured Medicare rates often have influence on commercial payors.
John Treace: And while we are encouraged by this development, we remind you that these are proposed rules which are not expected to be finalized until November and therefore subject to change. Let me now turn the call over to Mark to review our financial performance. Mark
Speaker Change: And while we are encouraged by this development. We remind you that these are proposed rules, which are not expected to be finalized until November and therefore subject to change.
Speaker Change: Let me now turn the call over to Mark to review our financial performance Mark.
Mark Hair: Thank you, John. Good afternoon, everyone.
Mark: Thank you John good afternoon, everyone.
Mark Hair: Revenue in the second quarter was $44.5 million, an increase of $2.5 million and 6% over the prior year. Growth was driven by increases in case volumes, favorable product revenue mix due to expanding adoption of our SpeedPlate technology and other complementary products, as well as increases in our active surgeon base. Gross margin was 80.2% in the second quarter of 2024 compared to 81.7% in the second quarter of 2023. The decrease was primarily due to changes in product mix, increases in other costs of goods sold, partially offset by lower royalty rates.
Mark: Revenue in the second quarter was $44 5 million, an increase of $2 5 million at 6% over the prior year.
Mark: Growth was driven by increases in case volumes favorable product revenue mix due to expanding adoption of our <unk> technology and other complementary products as well as increases in our active surgeon base.
Mark: Gross margin was 82% in the second quarter of 2024 compared to 81, 7% in the second quarter of 2023 the.
Mark: The decrease was primarily due to changes in product mix increases in other cost of goods sold partially offset by lower royalty rates SEC.
Mark Hair: Second quarter 2024 gross margin of 80.2% was unchanged from the 80.2% gross margin reported in Q1. Total operating expenses were $57.1 million in the second quarter of 2024; total operating expenses were $47.3 million in the second quarter of 2023. The increase in operating expenses reflects strategic investments in our expanding direct sales channel, investments in product innovation, and support for other commercial initiatives. Second quarter net loss attributable to common stockholders was $21.3 million, or $0.34 per share, compared to a net loss of $12.4 million, or $0.20 per share, for the same period in 2023. Cash, cash equivalents, and marketable securities and investments receivable were $97 million as of June 30, 2024.
Mark: Second quarter 2024, gross margin of 82% was unchanged from the 82% gross margin reported in Q1.
Mark: Total operating expenses were $57 1 million in the second quarter of 2024.
Mark: Total operating expenses were $47 3 million in the second quarter of 2023.
Mark: The increase in operating expenses reflect strategic investments and our expanding direct sales channel investments in product innovation and support for other commercial initiatives.
Mark: Second quarter net loss attributable to common stockholders was $21 3 million or <unk> 34 per share compared to a net loss of $12 4 million or <unk> 20 per share for the same period of 2023.
Mark: Cash cash equivalents and marketable securities and investments receivables were $97 million as of June 32024.
Mark Hair: Before concluding, let me turn to our outlook for the full year 2024. As John mentioned, we are reaffirming full year 2024 revenue guidance of 201 to 211 million, which reflects an increase of 7 to 13% over 2023 revenue. For the full year 2024, we also continue to expect an adjusted EBITDA improvement of approximately 50% compared to the full year 2023. With that, I will turn the call back to John.
Mark: Before concluding let me turn to our outlook for the full year of 2024.
Mark: As John mentioned, we are reaffirming full year 2020 for revenue guidance of $201 million to $211 million, which reflects an increase of 7% to 13% over 2023 revenue for.
John: For the full year 2024, we also continue to expect adjusted EBITDA improvement of approximately 50% compared to the full year 2023.
John: With that let me turn the call back to John.
John Treace: Thanks Mark. In summary, we have a dynamic team here at Treace with a clear focus on building a comprehensive 3D bunion solutions company with a growing customer base exceeding 3,000 surgeon users and a large five billion dollar plus US total addressable market. We also have a specialized and scalable business model focused on accelerating penetration into the bunion market by leveraging our large customer base and our direct sales team with our forthcoming entry into the relatively nascent, minimally invasive osteotomy segment, one that is experiencing growing interest from surgeons and patients alike.
Speaker Change: Thanks, Mark in summary, we have a dynamic team here at <unk> with a clear focus on building a comprehensive <unk> solutions company with a growing customer base exceeding 3000 surgeon users and a large $5 billion plus U S total addressable market.
Speaker Change: We also have a specialized and scalable business model focused on accelerating penetration into the bunyan market by leveraging our large customer base and our direct focused sales team with our forthcoming entry into the relatively nascent minimally invasive osteotomy segment, one that is experiencing growing interest from surgeons and patients alike.
John Treace: For these reasons, we believe we're uniquely positioned to expand our footprint in the foot and ankle market by continuing to deliver an exciting pipeline of differentiated reproducible solutions to comprehensively address the evolving needs of bunion surgeons and patients alike. With that, I now turn the call over to the operator to open the line for your questions.
John: For these reasons, we believe we are uniquely positioned to expand our footprint in the foot and ankle market by continuing to deliver an exciting pipeline of differentiated reproducible solutions to comprehensively address the evolving needs a bunion surgeons and patients alike.
Speaker Change: With that let me now turn the call over to the operator to open the line for your questions.
Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star one one. Please stand by while we compile the Q&A roster. And our first question comes from Robbie Marcus with JP Morgan.
Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question. Please press star one again please.
Speaker Change: Please stand by while we compile the Q&A roster.
Speaker Change: And our first question comes from Robbie Marcus with JP Morgan.
Lily: Hi, this is actually Lily on behalf of Robbie. Thanks for taking the question.
John: Hi, This is actually Lili on for Robbie Thanks for taking my question.
Speaker Change: You beat consensus by about one to 2 million, but you're reiterating guidance.
Danielle Antalffy: About. And so we just didn't think that there wasn't much that had really changed since the last time that we changed our guidance, and it hasn't been that long. So we just feel really good about the guidance that we gave last time.
Speaker Change: It's been on the market and how well have you been able to drive utilization and new Doc adds in the right direction. Since you last gave us an update thanks so much.
Mark: This is mark let me, let me take a first stab at that and maybe John will have some additional color, but with respect to our surgeon count John mentioned on the prepared remarks that were over 3000.
Speaker Change: Certain customers right now so that implies about 150 or so in the first half of the year. So.
John: On one hand, we said that we'd probably expect somewhere between 250 to 300 for the full year or so about 150 already in the first half of the year, we tend to get more surgeon adds in the back half of the year. So we really feel like we're on track.
Speaker Change: We continue to see a lot of interest in our education events all over the country. We've got one coming up a national event. This weekend, we've got a packed house. There. So we continue to to attract new surgeons they come for our technology they come to our training events and they ended up using lap of classes. So.
John: We'll continue to do that and we feel like we're on course.
Speaker Change: For this year to add new surgeon users.
Speaker Change: With respect to utilization really not that much has changed since we talked last quarter.
Speaker Change: We identified.
Speaker Change: Somewhat of a change in utilization for a certain customer base.
Speaker Change: And we feel really good about what happened in Q2 that we were able to really.
Speaker Change: Forecast that right right on what we thought was going to happen and so.
Speaker Change: Q2 came in as expected in Q3 is tracking as well. So we believe that there hasnt really been an update to the trends that we identified last quarter.
Speaker Change: Just to reiterate what John said.
John: There are only going to be available and really like quantities in Q4, so not a lot of impact this year, but we definitely see it having a greater impact next year.
Speaker Change: Understood and then just a quick follow up on from a competitive perspective.
Speaker Change: To some extent the increased competitive dynamic.
Speaker Change: That you saw may have been due to trialing or docs, just trying out different devices I mean any change on the competitive front are still similar to what we saw in Q2 from the from the perspective of the pressures there. Thanks so much.
John Treace: Yeah, Danielle, it's John. Thanks for the question. You know, it's pretty consistent with our last conversation.
Speaker Change: Yes, Danielle it's John Thanks for the question.
Speaker Change: It's pretty consistent with our last call back in May it's not really one competitor, but multiple big small private public.
Speaker Change: <unk>.
Speaker Change: Knockoffs of lack of clarity.
Speaker Change: Some of them offer osteotomy products as well that we don't today.
Speaker Change: But we've got a really strong attention on this with our sales team and the sales team is armed with enhanced customer analytics.
Speaker Change: And we're highly dialed into winning a greater share of abundant cases from our surgeon customers as we progress through this year.
Speaker Change: Can fill in behind me here.
Speaker Change: Dialing back time, we identify those softening trends late in Q1, and we saw them continue through April and that resulted in our guidance change in early may we.
Speaker Change: We spoke at that time predominantly about increasing headwinds from customers Trialing. Some of these lots of plastic knock offs and some more kind of mounting interest in <unk>.
Speaker Change: I am aware of.
Speaker Change: That large player that said they saw a soft first half as well.
Speaker Change: I don't know that they identified the same causes but thats not to say that.
Speaker Change: Causes the identified arent at play as well, we just called it as clearly as we saw it to us at the time.
Speaker Change: But I'd say the.
Speaker Change: Mike Mark said Q3 is tracking as we would expect and we think we.
John Treace: We think we did a pretty good and comprehensive job of generating that new guidance, and we're continuing to operate towards that. Mark, anything you want to add to that? Yeah, I agree.
Mike Mark: We think we did a pretty good and comprehensive.
Mark: Job of generating that new guidance and we're continuing to operate towards that Mark anything you want to add to that or.
Mark: As our guidance that we talked about last quarter, we knew that there would be some toughness coming into second quarter, but that there is better comps in the back half of this year for us and so the opportunity to have increased growth rates in both Q3 and Q4, So we still stand behind those prior statements and look for.
Speaker Change: <unk> four or to Q3 and Q4.
Danielle Antalffy: Thanks, and maybe just to touch on the reaffirmed profitability guidance for the 50% improvement. Mark, can you just give a little bit more detail there in terms of what you're expecting for operating leverage for this year? And I'll ask anyway, but should we think of next year as getting closer to breakeven or breakeven? Just any more details there would be great. Thanks for taking the question.
Speaker Change: Next year.
Danielle Antalffy: Great. Thanks for taking the questions, guys.
Speaker Change: Alright, thanks for taking the questions guys.
Speaker Change: Thank you.
Speaker Change: And our next question comes from Ryan Zimmerman with <unk>.
Speaker Change: Hi, This is <unk> on for Ryan Thanks for taking the questions.
Speaker Change: So just to start out to touch on the proposed reimbursement rates for 2025, it's really great to see the lift in both the <unk> and the ASC setting.
Speaker Change: As we think about 2025.
Speaker Change: You're not going to provide guidance here, but do you think the lift in reimbursement. If the proposed rates are finalized we will help you bring in new surgeons.
Speaker Change: And drive adoption of your products.
Lee: Hi, Lee.
John: It's John.
John Treace: Yeah, you know, we're really encouraged and optimistic about these proposed changes and anticipate them being finalized in November. They go into effect on Jan 1 next year. You know, if so, the way we look at it, we see several benefits. Right now, we think that somewhere between 40% and 50% of our cases are reimbursed under APC 5115 already in the hospital outpatient setting. You know, we can't really see any downside to this, only upsides, and again, a reminder that their proposals are not yet final.
Lee: Yes, we are.
Speaker Change: We're really encouraged and optimistic about these proposed changes and anticipate them being finalized in November that go into effect Jan one of next year.
Speaker Change: So the way we look at it we see several benefits.
Speaker Change: Now, we think that somewhere between 40 and 50% of our cases are reimbursed under APC 115115 already in the hospital outpatient setting.
Lee: Due to additional certain procedures performed along with the lap of this code.
Mark Hair: Yeah, you know, that's a great question. Again, we haven't given any guidance specifically for next year, but I can tell you this: if our early training on some of our new systems is any indication, then, you know, that level of surgeon ads definitely seems reasonable next year. We've had a lot of surgeons, like John said, our training is focused on MIS procedures, including our minimally invasive micro-lapoplasty and our mini-adductoplasty, and then we're combining that with some of the MIS osteotomy solutions as well.
Mark Hair: Yeah, you know, that's a great question. Again, we
Mark Hair: And I think that theme is really resonating across a lot of surgeons. Not only are we inviting our current surgeon customers, but it's giving us a new opportunity to reach outside of our customer base and really get them excited about MIS osteotomy platforms, a space where we've never played before. And as John mentioned, some surgeons just have a bias against one type of procedure versus another, and so there are a lot of surgeons out there that have a bias against osteotomies, and so, you know, we really haven't had a lot of interaction with them, and this opens up a new door for us. And so, you know, we're not really giving a number right now, but if the early interest that we've seen is any indication, we're definitely feeling good about next year's trends as well.
Speaker Change: It's opens up new doors for us and so we're not really giving them a number right now, but if the early interest that we've seen is any indication.
Lee: Definitely feeling good about next year's trends as well.
Operator: One moment for our next question. We can't say what else. Yeah. All right.
Lee: One moment for our next question.
Lee: Okay.
Richard <unk>: And our next question comes from Richard <unk> with <unk> Securities.
Lee: Hi, This is Dan on for Rich can you hear me.
Speaker Change: We can yes.
Dan: Yes, alright, so earlier in the call you mentioned a pipeline of 10, new products to launch through 2025.
Speaker Change: I was wondering which of these do you think might be the most needle moving and anything else on these launches you'd like to share.
Speaker Change: Yes, Hi, Hi, Ben it's John.
Speaker Change: Obviously.
John: The mis osteotomy platforms are going to be I think a real real exciting.
John: New category for us to enter its going to do a lot of things we look at it as well.
Speaker Change: One plus one is three.
Mark: Having this unique opportunity to provide incremental osteotomy solutions to our 3000 plus lap a plastic surgeon base and then like Mark said also attract.
Mark: Want to make sure that it's really clear for people when we when we launched products we tend to do it in a very limited fashion. So we will put it into some surgeon hands in the fourth quarter, but we really don't see it having a material impact on the quarter at all.
Mark: Maybe these products may be available late in the quarter.
Mark: It will be nice to have them out there it would be nice to have additional trainings and surgeons have.
Mark: The first.
Mark: Bite at the Apple and have options as far as how to treat their patients will have a more full suite of options for them, but it's really not going to move the needle in Q4.
Mark: Say that it's already in.
Speaker Change: Any upside is already baked into the numbers. So I don't think there should be any increase or change to what expectations are out there for the fourth quarter.
Speaker Change: Sounds good thanks for taking the questions.
Speaker Change: Sure. Thank you.
Mark: Yeah.
Mark: And this concludes the question and answer session I would now like to turn it back to Vivian Cervantes for closing remarks.
Operator: Thank you, Operator. On behalf of Treace Medical, thank everyone for joining us today. This concludes your call. We look forward to our next update following the close of the third quarter of 2024.
Vivian Cervantes: Thank you operator on behalf of Creagh medical and thanks, everyone for joining us today.
Mark: This concludes your call and we look forward to our next update following the close of the third quarter 2024.
Speaker Change: This does conclude the program you may now disconnect.
Speaker Change: [music] okay.
Mark: Okay.
Mark: [music].
Mark: [music].
Mark: [music].