Q2 2024 Tenon Medical Inc Earnings Call

Operator: Anthony Vendetti, Bruce Jackson, Steven Foster, Tenon Medical Anthony Vendetti, Bruce Jackson, Steven Foster, Greetings, and welcome to Tenon Medical's second quarter 2024 Financial Results and Corporate Update conference call. As a reminder, this call is being recorded.

Speaker Change: Greetings and welcome to Tennant Medical's second quarter 2024 financial results and corporate update conference call.

Operator: Your hosts today are Steve Foster, President and Chief Executive Officer, and Steve Vandick, CFO Advisor. Mr. Foster and Mr. Vandick will present results of operations for the second quarter ended June 30, 2024, and provide a corporate update. A press release detailing these results was released today and is available on the Investor Relations section of our company website at www.tenonmed.com. Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates, and other information that might be considered forward-looking.

Speaker Change: As a reminder, this call is being recorded.

Speaker Change: Your hosts today are Steve Foster, President and Chief Executive Officer, and Steve Van Dyck, CFO Advisor. Mr. Foster and Mr. Van Dyck will present results of operations for the second quarter ended June 30th, 2024 and provide a corporate update.

Speaker Change: A press release detailing these results was released today and is available on the Investor Relations section of our company website at www.TenonMed.com.

Operator: While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation.

Speaker Change: Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates, and other information that might be considered forward-looking.

Speaker Change: While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that would cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation.

Operator: Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our predictions. For a more complete discussion of these factors and other risks, you should review our annual report on Form 10-K dated March 29, 2024, particularly under the heading Risk Factors, which is on file with the Securities and Exchange Commission at www.sec.gov. At this time, I'll turn the call over to Tenon's Medical Chief Executive Officer, Steve Foster. Please go ahead, sir.

Speaker Change: Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events.

Speaker Change: Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our prediction.

Speaker Change: For a more complete discussion of these factors and other risks, you should review our annual report on 10K dated March 29, 2024, particularly under the heading Risk Factors, which is on file with the Securities and Exchange Commission at www.cuc.gov.

Steve Foster: At this time, I'll turn the call over to Tennant's Medical Chief Executive Officer, Steve Foster. Please go ahead, sir.

Steve Foster: Thank you, Maria. And good afternoon to everyone. I'm pleased to welcome you to today's second quarter 2024 financial results and corporate update conference call for Tenon Medical. In the second quarter, we continued to focus on building market share for our proprietary Catamaran system, supported by our recently restructured operational sales and marketing strategy. We are pleased with the sustained revenue growth and full year milestone of generating positive gross profit as we successfully expanded all of our U.S. sales reach.

Steve Foster: Thank you, Maria, and good afternoon to everyone. I'm pleased to welcome you to today's second quarter 2024 financial results and corporate update conference call for Tenon Medical.

Steve Foster: We delivered a 21% year-over-year increase in revenue driven by a 7% rise in surgical procedures utilizing the Catamaran system. Gross profit of $470,000 expanded 142% as compared to the prior year quarter, and generated a solid gross margin of 52%. With Sustainable Revenue Group, we believe our stable cost structure will maintain a gross margin performance at recent levels and improve with increases in revenue.

Steve Foster: In the second quarter, we continue to focus on building market share for our proprietary CataBrand system, supported by our recently restructured operational sales and marketing strategy.

Steve Foster: We are pleased with the sustained revenue growth and full year milestone of generating positive gross profit as we successfully resourced all of our U.S. sales regions.

Steve Foster: We delivered a 21 percent year-over-year increase in revenue driven by a seven percent rise in surgical procedures utilizing the Catamaran system.

Speaker Change: Gross profit of $470,000 expanded 142% as compared to the prior year quarter and generated solid gross margin of 52%.

Speaker Change: With Sustainable Revenue Group, we believe our stable cost structure will maintain a gross margin performance at recent levels and improve with increases in revenue.

Steve Foster: Across operations, we've made considerable commercialization and technical advances and remain on the right path during our second year of commercialization. To provide an update on our restructured sales organization, during Q2, we have reached our 2024 full year target of sales operations in five geographic regions. With additional operational team members assigned across our now full geographic reach, we are poised for future growth. A significant component of our growth strategy is the investment in clinical research to reinforce the safety and effectiveness of the catamaran system.

Speaker Change: Across operations, we've made considerable commercialization and technical advances and remain on the right path during our second year of commercialization.

Speaker Change: To provide an update on our restructured sales organization, during Q2, we have reached our 2024 full-year target of sales operations in five geographic regions.

Speaker Change: With additional operational team members assigned across our now full geographic reach, we are poised for future growth.

Speaker Change: A significant component of our growth strategy is the investment in clinical research to reinforce the safety and effectiveness of the Catamaran system. Significant progress has been made in this area.

Steve Foster: Significant progress has been made in this area. For those new to Tenon, this prospective multicenter single-arm post-market study evaluates the clinical outcomes of patients with sacroiliac joint disruptions or degenerative sacroilitis treated with the Catamaran SI joint fusion system. Patients will be evaluated for a period of up to 24 months, reviewing various patient-reported outcomes, radiographic assessments, and adverse events. In short, this study aims to show whether the catamaran system delivers on its promises.

Steve Foster: As we near completion of enrollment in this study, we have been notified that publication of our interim analysis is now imminent. This peer-reviewed analysis reinforces that the catamaran system, utilizing a minimally invasive inferior posterior approach, is safe and effective in relieving pain and reducing disability in adult patients diagnosed with SIJ disruption or degenerative sacroilitis with failed non-surgical treatment.

Speaker Change: For those new to Tenon, this prospective multi-center, single-arm, post-market study evaluates the clinical outcomes of patients with sacroiliac joint disruptions or degenerative sacroilitis treated with the Catamaran SI joint fusion system.

Speaker Change: Patients will be evaluated for a period of up to 24 months reviewing various patient reported outcomes, radiographic assessments, and adverse events. In short, this study aims to show the catamaran system delivers on its promises.

Speaker Change: As we near completion of enrollment in this study, we have been notified that publication of our interim analysis is now imminent.

Speaker Change: This peer-reviewed analysis reinforces that the catamaran system, utilizing a minimally invasive inferior posterior approach, is safe and effective in relieving pain and reducing disability in adult patients diagnosed with SIJ disruption or degenerative sacroilitis that have failed non-surgical treatment.

Steve Foster: We look forward to sharing specific details when publication is complete in the very near future. This early validation provides conviction that the catamaran transfixing design and the less invasive inferior posterior approach are functioning as intended to optimize patient outcomes through short-term stabilization of the joint and long-term fusion. Of note, the interim data from our study, combined with the over 600 surgeries performed with the Catamaran system to date, is demonstrating an exceptional safety profile, benefiting patients and their physicians alike in delivering on its clinical promise.

Speaker Change: We look forward to sharing specific details when publication is complete in the very near future.

Speaker Change: This early validation provides conviction that the catamaran transfixing design and less invasive inferior posture approach is functioning as intended to optimize patient outcomes through short-term stabilization of the joint and long-term fusion.

Speaker Change: Of note, the interim data from our study, combined with the over 600 surgeries performed with the Catamaran system today, is demonstrating an exceptional safety profile, benefiting patients and their physicians alike in delivering on its clinical promises.

Steve Foster: Our ongoing workshop activities, led by a network of valued physician faculty, combined with the robust commercial infrastructure we've built, have us prepared for rapid expansion. Our goal is to ensure we are precise in the selection of medical professionals with experience in SI surgical technologies and to provide them with world-class workshop opportunities. Importantly, this is a prudent approach that reduces cost and provides higher return value to patients, the cohort of physicians, and Tenon's business overall.

Speaker Change: Our ongoing workshop activities, led by a network of valued physician faculty, combined with the robust commercial infrastructure we've built, have us prepared for rapid expansion.

Speaker Change: Our goal is to ensure we are precise in the selection of medical professionals with experience in S.I. surgical technologies and to provide them with world-class workshop opportunities.

Speaker Change: Importantly, this is a prudent approach that contains cost and provides higher return value to patients, the cohort of physicians, and Tenon's business overall.

Steve Van Dyck: We experienced an increase in our interactive training corresponding with our restructured marketing and sales approach and hosted 36 physicians in catamaran workshops during the second quarter of 2024. As clinical data builds from our post-market study validating the effectiveness of our SI implant and approach, our sales and marketing activities will become more robust and drive our ongoing targeted physician workshop activities. With that, I'll turn it over to Mr. Van Dyck, our CFO advisor, to discuss our financial. Thanks, Steve.

Speaker Change: We experienced an increase in our interactive training corresponding with our restructured marketing and sales approach and hosted 36 physicians in catamaran workshops during the second quarter of 2024.

Speaker Change: As clinical data builds from our post-market study, validating the effectiveness of our SI implant approach, our sales and marketing activities will become more robust and drive our ongoing targeted physician workshop activities.

Speaker Change: With that, I'll turn it over to Mr. Van Dyck, our CFO advisor, to discuss our financials.

Steve Van Dyck: I'll give a succinct review of our financial results, but a full breakdown is available in our press release that went out this afternoon. Our revenue was $901,000 in the second quarter of 2024, an increase of 21% compared to $743,000 in a comparable year-ago period.

Speaker Change: Thanks, Steve. I'll give a succinct review of our financial results. A full breakdown is available in our press release that crossed the wire this afternoon.

Speaker Change: Our revenue was $901,000 in the second quarter of 2024, an increase of 21% compared to $743,000 in a comparable year-ago period.

Steve Van Dyck: Revenue for the six months ended June 30, 2024, was $1.6 million, an increase of 38% compared to $1.2 million in the six months ended June 30, 2023. The increase in revenue for the three and six months ended June 30, 2024, as compared to the same periods in 23, was primarily due to increases of 7% and 19%, respectively, in the number of surgical procedures in which the catamaran system was used. Gross profit in the second quarter of 2024 was $470,000, or 52% of revenues, compared to $194,000, or 26% of revenues in the comparable year-ago quarter. For the six months ended June 30, gross profit was $940,000, or 58% of revenues, compared to gross profit of $147,000, or 13% of revenues for the previous year's period.

Speaker Change: Revenue for the six months ended June 30th, 2024 was $1.6 million, an increase of 38% compared to $1.2 million in the six months ended June 30th, 2023.

Speaker Change: The increase in revenue for the 3 and 6 months ended June 30, 2024 as compared to the same periods in 2023 was primarily due to increases of 7% and 19% respectively in the number of surgical procedures in which the catamaran system was used.

Speaker Change: Gross profit in the second quarter of 2024 was $470,000, or 52% of revenues, compared to $194,000, or 26% of revenues in the comparable year-ago quarter.

Speaker Change: So the six months ended June 30th, gross profit was 940,000 or 58% of revenues compared to the gross profit of 147,000 or 13% of revenue for the previous year's period.

Steve Van Dyck: Importantly, we have seen gross margins steadily improve due to revenue growth associated with an increase in the number of surgical procedures, which resulted in sustainable operating leverage due to lower relative fixed costs and the absorption of more overhead into our standard cost. Operating expenses totaled $4.3 million in the second quarter of 2024, largely in line with the expenses of $4.5 million in the second quarter of 2023. For the six months ended June 30, 24, operating expenses totaled $8.3 million compared to $9.4 million in the prior period. Decreases in operating expenses, the primary result of a decline in research and development expenses and sales and marketing expenses, offset by an increase in general administrative expenses.

Speaker Change: Importantly, we have seen gross margins steadily improve due to the revenue growth associated with an increase in the number of surgical procedures.

Speaker Change: which resulted in sustainable operating leverage due to lower relative fixed costs and the absorption of more overhead into our standard cost.

Speaker Change: Operating expenses totaled $4.3 million in the second quarter of 2024 largely in line with the expenses of $4.5 million in the second quarter of 2023.

Speaker Change: For the six months ended June 30th, 2004, operating expenses totaled $8.3 million compared to $9.4 million in the prior period.

Speaker Change: Decreases in operating expenses the primary result of a decline in research and development expenses and sales and marketing expenses offset by increase in general administrative expenses.

Steve Van Dyck: A net loss of $3.8 million for the second quarter of 2024, compared to a loss of $4.3 million in the same period in 2023. For the six months ended June 30th, 24, a net loss was 7.4 million compared to 9.1 million in the previous year.

Speaker Change: Net loss of 3.8 million to the second quarter of 24 compared to a loss of 4.3 million in the same period in 23.

Speaker Change: For the six months ended June 30th, 2024, net loss was $7.4 million compared to $9.1 million in the previous year period. The company expects to incur additional losses in the future.

Steve Van Dyck: The company expects to incur additional losses in the future. As of June 30, 2024, cash and cash equivalents totaled $2 million as compared to $2.4 million as of December 31, 2023. As of June 30, 2024, the company had no outstanding debt.

Speaker Change: As of June 30, 2024, cash and cash equivalents totaled $2 million as compared to $2.4 million as of December 31, 2023. As of June 30, 2024, the company had no outstanding debt.

Steve Van Dyck: Lastly, beginning with our third quarter in 2024 earnings call in November, Jay Hanson, our Interim Principal Accounting Officer, will join me to deliver the financial results during the earnings call. Additionally, Jay will join today for a question and answer session following Steve's closing remarks. I will now turn the call back to Steve. Thank you, Steve.

Speaker Change: Lastly, beginning with our third quarter N-2024 earnings call in November.

Speaker Change: Jay Hanson, our Interim Principal Accounting Officer, will join me to deliver the financial results during the earnings call. Additionally, Jay will join today's question and answer session following Steve's closing remarks.

Steve Foster: As we continue to drive momentum in the market, represented by year-over-year increases in our catamaran procedures, we are regionally prioritizing the scale of the commercialization strategy of our proprietary FDA-cleared surgical implant system. While the commercialization strategy was reorganized during the first half of 2024, we ended the second quarter with year-over-year revenue growth at an attractive gross margin. We believe the upcoming larger cohort of patient post-market data will be a catalyst to drive growth and adoption in the second half of 2024, supported by the expanded penetration of our commercial infrastructure and seasoned sales management.

Speaker Change: I will now turn the call back to Steve.

Jay Hanson: Thank you, Steve. As we continue to drive momentum in the market, represented by year-over-year increases in our catamaran procedures, we are regionally prioritizing the scale of the commercialization strategy of our proprietary FDA-cleared surgical implant system.

Speaker Change: While the commercialization strategy was reorganized during the first half of 2024, we ended the second quarter with year-over-year revenue growth and an attractive gross margin.

Speaker Change: We believe the upcoming larger cohort of patient post-market data will be a catalyst to drive growth and adoption in the second half of 2024, supported by the expanded penetration of our commercial infrastructure and seasoned sales management team.

Steve Foster: Lastly, on behalf of our Board of Directors and the entire Tenon Medical team, we wish Steven Dick the best in his retirement. Steve's financial expertise and leadership have set Tenon up for long-term strategic growth and expansion. Mr. Vendetti will remain with Tenon as a CFO advisor while we continue our executive search process for a permanent CFO.

Speaker Change: Lastly, on behalf of our Board of Directors and the entire Tenon Medical team, we wish Steven Dick the best in his retirement.

Speaker Change: Steve's financial expertise and leadership has set Tenon up for long-term strategic growth and expansion. Mr. VanDick will remain with Tenon as a CFO advisor while we continue our executive search process for a permanent CFO. In short, Steve will be missed.

Operator: Greetings and welcome to Tenon Medical Second Quarter, 2024 Financial Results and Corporate Update Conference Call. As a reminder, this call is being recorded.

Steve Foster: In short, Steve will be missed. I thank you all for attending, and now I'd like to hand the call back over to our operator to begin the question and answer session with our covering analysts. Maria?

Speaker Change: I thank you all for attending and now I'd like to hand the call back over to our operator to begin the question-and-answer session with our covering analysts. Maria?

Operator: Your host today are Steve Foster, President and Chief Executive Officer and Steve Vendetti, CFO Advisor. Mr. Foster and Mr. Vendetti will present results of operations through the second quarter and did June 30, 2024 and provide a corporate update. A press release detailing these results was released today and is available on the Investor Relations Section of our company website at www.tenonmed.com.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we pull for questions. Our first question comes from Bruce Jackson with The Benchmark Company. Please proceed with your question.

Speaker Change: You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates, and other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that would cause actual results to different materially. Your caution not to place undue reliance on these forward-looking statements which reflect our opinions only as of the date of this presentation.

Speaker Change: One moment, please, while we pull for questions.

Speaker Change: Our first question comes from Bruce Jackson with the Benchmark Company. Please proceed with your question.

Steve Foster: I wanted to ask about the publication of the study results. Is this going to be the same six patients that we saw the early data on previously, or will this be a slightly larger group of patients? Yeah, thanks, Bruce, and good to hear from you. There will be a larger group of patients. This is an interim analysis to the degree that we've cleared 33 enrolled patients. And, of course, those patients are all at different time points.

Bruce Jackson: Hi, good afternoon and thanks for taking my questions. I wanted to ask about the publication of the study results. Is this going to be the same six patients that we saw the early data on previously or will this be a slightly larger group of patients?

Operator: Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our prediction.

Speaker Change: Yeah, thanks Bruce and good to hear from you. So this will be a larger group of patients. This is an interim analysis to the degree that we've cleared 33 enrolled patients. And of course those patients are all at different time points. Some were very recent, some have been 12 months or more post-op.

Steve Foster: Some were very recent, some had been 12 months or more post-op. And so, what this interim analysis will do is document the progress that we've made on all the things that we're measuring, everything from adverse events to patient outcomes and feedback and things of that nature. Not to mention everything that happens in the operating room, how long the procedure took, blood loss, all the details of a study like this.

Operator: For a more complete discussion of these factors and other risks, you should review our annual report on 10K dated March 29, 2024, particularly under the heading of risk factors which is on file with the Security and Exchange Commission at www.acc.gov.

Speaker Change: And so what this interim analysis will do is document the progress that we've made on all the things that we're measuring, everything from adverse events to patient outcomes and feedback and things of that nature.

Steve Foster: At this time, I'll turn the call over to Tenon's Medical Chief Executive Officer, Steve Foster. Please go ahead, sir. Thank you, Maria, and good afternoon to everyone.

Speaker Change: Not to mention everything that happens in the operating room, you know, how long the procedure took.

Steve Foster: So this interim analysis will cover those 33 patients. And just to remind you, this is an up to 50 patient trial. So it's a significant portion of the full enrollment. Okay, and then is the study fully enrolled yet, and is this the type of study where we keep getting a larger and larger patient base, and we're going to be getting a stream of publications over the next couple of years? Yeah, that's exactly right. You know, this is the first formal publication from the study, Bruce, and it's in every way an interim analysis.

Speaker Change: blood loss, all the details of a study like this. So this interim analysis will cover those 33 patients. And just to remind, this is a up to 50 patient trial. So it's a significant portion of the full enrollment.

Steve Foster: I'm pleased welcome you to today's second quarter 2024 financial results and corporate update conference call for Tenon Medical. In the second quarter, we continue to focus on building market share for our proprietary category and system supported by our recently restructured operational sales and marketing strategy. We are pleased with the sustaining revenue growth from full-year milestone of generating positive growth profit as we successfully resourced all of our U.S, sales regions. We delivered a 21% year-over-year increase in revenue driven by a 7% rise in surgical procedures utilizing the catamaran system.

Speaker Change: Okay and then is the study fully enrolled yet and is this the type of study where we're going to keep getting a larger and larger patient base and we're going to be getting a stream of publications over the next couple of years?

Speaker Change: Yeah, that's exactly right. This is the first formal publication from the study, Bruce, and it's in every way an interim analysis.

Steve Foster: As we proceed and as we get to bigger and bigger numbers that are hitting six months, 12 months, these critical milestones, and we follow patients up to 24 months in the study and its protocol, we'll continue to provide updates and publications to support them. For obvious reasons, we're trying to drive a statistical and clear message about the capabilities of this technology. So that's what we're doing here. So the answer is yes, you'll see a cadence, if you will, of publications and updates as the data is gathered and tabulated, et cetera, as part of the study. You asked about enrollment. It's virtually finished.

Speaker Change: As we proceed and as we get to bigger and bigger numbers that are hitting six months, 12 months, these critical milestones, and we follow patience.

Steve Foster: Gross profit of 470,000 expanded 142% as compared to the prior year quarter and generated solid gross margin of 52%. With sustainable revenue growth, we believe our stable cost structure will maintain a gross margin performance at recent levels and improve with increases in revenue.

Speaker Change: up to 24 months in the study and its protocol. We'll continue to provide updates and publications to support.

Speaker Change: For obvious reasons, we're trying to drive a statistical and clear message about the capabilities of this technology. So that's what we're doing here. So the answer is yes, you'll see a cadence, if you will.

Steve Foster: Across operations, we've made considerable commercialization and technical advances and remain on the right path during our second year of commercialization. To provide an update on our restructured sales organization, during Q2, we have reached our 2024 full-year target of sales operations in five geographic regions. With additional operational team members assigned across our now full geographic reach, we are poised for future growth. A significant component of our growth strategy is the investment in clinical research to reinforce the safety and effectiveness of the catamaran system.

Speaker Change: of publications and updates from, you know, as the data is gathered and tabulated, etc., as part of the study. You asked about enrollment. Enrollment's virtually finished. We have maybe a couple, a couple, three more patients to go here and we'll be closing enrollment officially, so very close to wrapping up the front end of the enrollment.

Steve Foster: We have maybe a couple, three more patients to go here, and we'll be closing enrollment officially. So, very close to wrapping up the front end of the enrollment. Okay, great. And then just a clarification question on the definition of normalized surgical procedures. Is this like a same-store sales type of measure, or is it like a – just tell me what's – how that's defined.

Speaker Change: Okay great and then just a clarification question on the definition of normalized surgical procedures. Is this like a same-store sales type of measure or is it like a just tell me what what's how that's defined?

Steve Foster: Significant progress has been made in this area. For those new to Tenon, this prospective multi-center single-arm post-market study evaluates the clinical outcomes of patients with sacrily act joint disruptions or degenerative sacralitis treated with the catamaran SI joint fusion system. Patients will be evaluated for a period of up to 24 months, reviewing various patient-reported outcomes, radiographic assessments and adverse events. In short, this study aims to show the catamaran system delivers on its promises.

Steve Foster: Yes, that's exactly right. You know, what we're doing is assessing total surgical procedures, and, of course, everything with revenue fluctuates based on average selling price and things of that nature. So that's what we're referring to there: the number of procedures that have actually been done. Okay, great. Congratulations on all the progress. Thank you, Bruce. I appreciate it.

Speaker Change: Yes, that's exactly right. You know what we're doing is assessing total surgical procedures and of course everything with revenue fluctuates based on average selling price and things of that nature. So that's what we're referring to there is the number of procedures that have actually been done.

Speaker Change: Okay, great. Congratulations on all of the progress.

Steve Foster: As we near completion of enrollment in this study, we have been notified that publication of our infram analysis is now imminent. This peer-reviewed analysis reinforces the catamaran system utilizing a minimally invasive inferior posterior approach is safe and effective in relieving pain and reducing disability in adult patients diagnosed with SIJ disruption or degenerative sacralitis that fail non-surgical treatment.

Operator: Our next question comes from Anthony Vendetti with the Maxim Group. Please proceed with your question. Thank you. Steve, I was wondering if you could just talk about the physician workshops, how many were hosted this past quarter, and what's the expectation for the rest of this year. Just a little color on that would be great.

Speaker Change: Thank you Bruce, I appreciate it.

Speaker Change: Our next question comes from Anthony Venditti with the Maxim Group. Please proceed with your question.

Anthony Venditti: Thank you.

Anthony Venditti: Steve, I was wondering if you could just talk about the physician workshops, how many were hosted this past quarter, what's the expectation for the rest of this year, just a little color on that would be great.

Steve Foster: Thanks, Anthony. Appreciate the question. So we hosted 36 sessions in Q2, and that was a significant increase over Q1. As mentioned in the prepared statements, we did restructure our selling organization and some of the positions in our organization in Q1. And so we had a slower Q1.

Steve Foster: We look forward to sharing specific details when publication is complete in the very near future. This early validation provides conviction that the catamaran transfixing design and less invasive inferior posterior approach is functioning as intended to optimize patient outcomes through short-term stabilization of the joint and long-term fusion. Of note, the interim data from our study combined with the over 600 surgeries performed with the catamaran system to date is demonstrating an exceptional safety profile, benefiting patients and their physicians alike in delivering on its clinical promises.

Steve Foster: You bet. Thanks Anthony, appreciate the question. So we hosted 36 sessions

Speaker Change: In Q2, and that was a significant increase over Q1, as mentioned in the in the prepared statements, we did restructure

Speaker Change: are selling organizations, some of the positions in our organization in Q1. And so we had a slower Q1. We expanded that pretty dramatically in Q2, almost to an all-time high. And we expect that to continue as we onboard these professionals. They go through their training, and they're ready to go out and get after it in their assigned geography. So that'll continue to grow. And as we've talked about before, this is our mechanism.

Steve Foster: We expanded that pretty dramatically in Q2, almost to an all-time high, and we expect that to continue as we onboard these professionals. They go through their training, and they're ready to go out and get after it in their assigned geography. So that will continue to grow. And as we've talked about before, this is our mechanism to fill a proverbial funnel, if you will, with opportunities to show the technology, to train, to put them in a great workshop environment with faculty so they can get their questions answered, and get comfortable with the technology. And, of course, we hope that a large percentage of them will adopt the technology and begin using it in their clinical practice.

Steve Foster: Our ongoing workshop activities led by a network of valued physician faculty, combined with the robust commercial infrastructure we built, have us prepared for rapid expansion. Our goal is to ensure we are precise in the selection of medical professionals with experience in SI-surgical technologies and to provide them with world-class workshop opportunities. Importantly, this is a proven approach that contains cost and provides higher return value to patients, the cohort of physicians and tenants business overall.

Speaker Change: to fill a proverbial funnel, if you will, with opportunities, you know, to show the technology, to train, put the physicians in a great workshop environment with faculty so they can get their questions answered, get comfortable with the technology, and of course, we hope

Steve Foster: So critical, critical, critical for us to train effectively and to execute these workshops effectively. And we think that's not only happening, but expanding very quickly now with our new team. That's great to hear. Maybe just a little more color.

Speaker Change: that a large percentage of them will adopt the technology and begin using it in their clinical practice. So critical, critical, critical for us to train effectively and to execute these workshops effectively. We think that's not only happening, but expanding very quickly now with our new team.

Steve Foster: We experienced an increase in our interactive training corresponding with our restructured marketing and sales approach and hosted 36 physicians in catamaran workshops during the second quarter of 2024. As clinical data builds from our post-market study, validating the effectiveness of our SI implant approach, our sales and marketing activities will become more robust and drive our ongoing targeted physician workshop activities.

Steve Foster: So once they obviously complete these workshops, the hope is that they, you know, adopt the catamaran system and the technology going forward. Do most of them, or some of them, act as references for other physicians? Are they willing to act as, let's say, K. Wells, or how can you best utilize their experience once they attend the workshop? Yeah, indeed. Of course, after the workshop, there's some work to do usually with their facilities and things like that to get approvals and facilities and get things squared away so they can begin using the technology.

Speaker Change: That's great to hear. Maybe just a little more color. So once they obviously complete these workshops, the hope is that they, you know, adopt the catamaran system and the technology going forward. Do most of them or some of them act as

Speaker Change: references for other physicians? Are they willing to act as, let's say, KOLs? Or how can you best utilize their experience once they attend the workshop?

Steve Vendetti: With that, I'll turn it over to Mr. Vandick, our CFO advisor, to discuss our financials. Thanks, Dave. I'll give a succinct review of our financial results.

Steve Foster: And absolutely. Once they get experienced with Catamaran, many, not all, but many of the physicians love to teach. They love to pass the word on if they're satisfied with what they're using and how it treats their patients. And they can.

Speaker Change: Yeah, indeed. Of course, after the workshop, there's some work to do usually with their facilities and things like that to get approvals in the facilities and get things squared away so they can begin.

Steve Vendetti: Our full breakdown is available in our trust release that cost the wire this afternoon. Our revenue was $901,000 in the second quarter of 2024, an increase of 21% compared to 7,000 and 43,000 in a comparable year ago period. Revenue for the six months ended June 30, 2024 was 1.6 million and increased a 38% compared to 1.2 million in the six months ended June 30, 2023. The increase in revenue for the three and six months ended June 30, 2024 as compared to the same periods in 23 was primarily due to increases of 7% and 19% respectively in the number of surgical procedures in which the catamaran system was used.

Speaker Change: using the technology.

Speaker Change: And yes, absolutely. Once they get experienced with catamaran, many, not all, but many of the physicians love to teach. They'd love to pass the word on if they're satisfied with what they're using and how it treats their patients.

Steve Foster: They can become faculty either in live training events or virtual training events, all different kinds of pathways to get that job done. Because, quite candidly, there's nothing more powerful in our world than peer-to-peer work in education. They'll listen to us company guys for a while, but they like to hear from their colleagues. And so absolutely, Anthony, once they get comfortable with the technology, we're always in conversations about their willingness to represent, if you will, the technology in training environments and informational environments.

Speaker Change: And they can. They can become faculty either in live training events, virtual training events, all different kinds of pathways to get that job done.

Speaker Change: because, quite candidly, there's nothing more powerful in our world than peer-to-peer work in education. You know, they'll listen to us company guys for a while, but they like to hear from their colleagues. And so, absolutely, Anthony, you know, once they get comfortable with the technology, we're always in conversations about their willingness to...

Anthony Venditti: to represent, if you will, the technology in training environments and informational environments.

Steve Vendetti: Growth profit in the second quarter of 2024 was 470,000 or 52% of revenues compared to 194,000 or 26% of revenues in the comparable year go quarter. For the six months ended June 30, growth profit was 940,000 or 58% of revenues compared to the growth profit of 147,000 or 13% of revenue for the previous year's period. Importantly, we have seen growth margins steadily improved due to the revenue growth associated with an increase in the number of surgical procedures which resulted in a sustainable operating leverage due to lower relative fixed costs and the absorption of more overhead under our standard cost.

Steve Foster: Okay, and then lastly, you were talking about the sales force. Do you have a target for the end of the year in terms of the number of salespeople? Or is it, you know, you're going to be selective and grow when you get the right people in place? Well, we were very selective.

Anthony Venditti: Okay, and then lastly you were mentioning about the sales force. Do you have a target for the end of the year in terms of the number of

Steve Foster: So we have fully filled all five of our sales regions around the country; these area sales managers are assigned to building that geography through independent distribution networks, right? As things get too big for them to manage, certainly, we'll contemplate expanding to more regions and things like that, but right now, we feel like those five regions, you know, properly focused, etc., are going to be able to deliver the kind of results that we're looking for going forward.

Speaker Change: sells people or is it, you know, you're going to be selective and grow when you get the right the right people in place? Well, we were very selective. So we fully filled now all five of our sales regions around the country.

Speaker Change: These area sales managers are assigned to building that geography through independent distribution networks, right? As things get too big for them to manage, certainly.

Speaker Change: will contemplate expanding to more regions and things like that, but right now we feel like those five regions, you know, properly focused, etc., are going to be able to deliver the kind of results that we're looking for going forward. These guys are...

Steve Vendetti: Operating expenses total 4.3 million in the second quarter of 2022 are largely in line with the expenses of 4.5 million in the second quarter of 2023. For the six months ended June 30 at 24, operating expenses total 8.3 million compared to 9.4 million in the prior period. Decreases in operating expenses were primary result of a decline in research and development expenses and sales and marketing expenses offset by increase in general administrative expenses.

Steve Foster: These guys are very experienced, very professional people, and we're really encouraged by some of the new team members that we've brought on here in the last four to six months. Okay, and then lastly, and then I'll hop back in the queue on the follow-up to that, so you have the five territory slash regional managers, and you have the independent distributors. How many independent distributors are there that report? or work with your five?

Speaker Change: very experienced, very professional people, and we're really encouraged by some of the new team members that we've brought on here in the last four to six months.

Speaker Change: Okay, and then lastly, and then I'll hop back in the queue on the follow-up to that, so you have the five territory slash regional managers and you have the independent distributors. How many independent distributors are there that

Steve Vendetti: Net loss of 3.8 million to the second quarter of 2024 compared to a loss of 4.3 million in the same period in 23. For the six months ended June 30 at 24, net loss was 7.4 million compared to 9.1 million in the previous year period.

Steve Foster: Regional slash territory. Yeah, indeed. So of course, they don't report to them; they're independent by definition. But our area sales managers partner with these independent distributors, and frankly, our company across the board, internally and externally partners with these guys out in the field, who are present in the operating room, who have relationships with physicians, and what have you. We have over 90 of those contracts in place now, and that number is growing every single day.

Speaker Change: report or work with your five

Speaker Change: regional slash territory managers.

Speaker Change: Yeah, indeed. So, of course, they don't report to them. They're independent by their definition. But our area sales managers partner with these independent distributors and, frankly, our company across the board, internally and externally, partners with these guys out in the field.

Steve Vendetti: The company expects to incur additional losses in the future. As of June 30, 24 cash and cash equivalence total 2 million has compared to 2.4 million as of December 31, 2023. As of June 30, 2024, the company had no outstanding debt.

Speaker Change: who are present in the operating room who have relationships with physicians and what have you. We have over 90 of those contracts in place now and that's growing every single day. And of course when they come on board there's some work to do to train and

Steve Foster: And of course, when they come on board, there's some work to do to train and prepare them to represent the technology well and so on. So all of that work is ongoing. But it starts with these new area sales managers, their network, with independent distributors when they're within their geography, to get that number growing and building and to get that working.

Steve Vendetti: Lastly, beginning with our third quarter in 2024, earnings call in November.

Steve Vendetti: Jay Hanson, our Interim Principal Accounting Officer, will join Steve to deliver the plans results during the earnings call.

Speaker Change: and prepare them to represent the technology well and what have you. So all of that work is ongoing, but it starts with these new area sales managers, their network with independent distributors within their geography to get that number growing and building and to get that work done.

Steve Vendetti: Additionally, Jay will join today's question and answer session following Steve's closing remarks.

Steve Foster: Okay, great. Thanks so much. I appreciate the call. I'll hop back into the queue. Indeed, thank you. I would now like to turn the floor back over to Mr. Foster for his closing remarks. Thank you, Maria. So I'd like to thank everyone for joining us on our earnings conference call today and look forward to continuing to update you on our ongoing progress and growth. If we were unable to answer any of your questions, please reach out to our IR firm, VMZ Group, who would be more than happy to assist.

Steve Foster: I will now turn the call back to Steve. Thank you, Steve. As we continue to drive momentum in the market, represented by a year-over-year increases in our catamaran procedures, we are regionally prioritizing the scale of the commercialization strategy for our proprietary FDA-cleared surgical implant system. While the commercialization strategy was reorganized during the first half of 2024, we ended the second quarter with year-over-year revenue growth and extractive growth smarts. We believe the upcoming larger cohort of patient post-market data will be a catalyst to drive growth and adoption in the second half of 2024, supported by the expanded penetration of our commercial infrastructure and season sales management team.

Speaker Change: Okay, great. Thanks so much. I appreciate the call. I'll hop back to the queue.

Speaker Change: Indeed, thank you.

Speaker Change: I would now like to turn the floor back over to Mr. Foster for his closing remarks.

Steve Foster: And with that, I wish everyone a good day. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. [music]

Mr. Foster: Thank you, Maria. So I'd like to thank everyone for joining us our earnings conference call today and look forward to continuing to update you on our ongoing progress and growth.

Mr. Foster: If we were unable to answer any of your questions, please reach out to our IR firm, the MZ Group, who would be more than happy to assist. And with that, I wish everyone a good day.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: [music]

Steve Foster: Lastly, on behalf of our Board of Directors and the entire Tenon Medical team, we wish that Tenon up for long-term strategic growth and expansion. Mr. Vendetti, we'll remain with Tenon as a CFO advisor while we continue our electing search process for permanent CFO.

Steve Foster: In short, Steve will be missed.

Operator: I thank you all for attending, and I would like to hand the call back over to our operator to begin the question and answer session with our covering animals, Maria. Thank you.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question key. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your hands that before pressing the star key.

Operator: One moment, please, while we pull for question.

Bruce Jackson: Our first question comes from Pritz Jackson with the benchmark company. Please proceed with your question. Hi, good afternoon, and thanks for taking my questions. I want to ask about the publication of the study results. Is this going to be the same six patients that we saw the early data on previously or will this be a slightly larger group of patients? Yeah, thanks Bruce and good to hear from you. So this will be a large group of patients.

Bruce Jackson: This is an interim analysis to the degree that we've cleared 33 enrolled patients. Of course, those patients are all at different time points. Some were very recent. Some have been 12 months or more post-op. And so what this interim analysis will do is document the progress that we've made on all the things that we're measuring, everything from adverse events to patient outcomes and feedback and things of that nature. Not to mention everything that happens in the operating room.

Speaker Change: [music]

Bruce Jackson: How long the procedure took, blood loss, all the details of a study like this. So this interim analysis will cover those 33 patients in just a reminder. This is a up to 50 patient trial. So it's a significant portion of the full enrollment. Okay, and then it's the study full enrolled. Yeah, and is this the type of study where we're going to keep getting a larger and larger patient base. And we're going to be getting a stream of publications over the next couple of years.

Bruce Jackson: Yeah, that's exactly right. You know, this is the first formal publication from the study, Bruce. And it's in every way an interim analysis. As we proceed and as we get to bigger and bigger numbers that are hitting six months, 12 months, these critical milestones and we pile up patients up to 24 months in the study. And it's protocol will continue to provide updates and publications to support. You know, for obvious reasons, you know, we're trying to drive a statistical and clear message about the capabilities of this technology.

Bruce Jackson: So that's what we're doing here. So yet the answer is yes, you'll see a cadence if you will publications and updates from, you know, as the data is gathered and tabulated, et cetera, as part of the study. You asked about enrollment, enrollment's virtually finished. We have maybe a couple, couple of three more patients to go here and will be closing enrollment officially. So very close to wrapping up the front end. Development.

Speaker Change: Fancy a drink? No. My problem is, I can't remember his face.

Bruce Jackson: Okay, great. And then just a clarification question on the definition of normalized surgical procedures. Is this like a same-store sales type of measure or is it like a just tell me what's how that's defined? Yes, that's exactly right. You know what we're doing is assessing total surgical procedures. And of course, everything with revenue fluctuates based on average selling price and things of that nature. So that's what we're referring to there is the number of procedures that have actually been done. Okay, great. Congratulations on all the progress.

Bruce Jackson: Thank you for some appreciative.

Anthony Vendetti: Our next question comes from Anthony Vendetti with Max and Rick. Please proceed with your question. Thank you.

Steve Foster: Steve, I'm sorry if you could just talk about the physician workshops. How many were hosted this past quarter? What's the expectation for the rest of this year? Just a little color and that would be great. You bet. Thanks, Anthony. Appreciate the question. So we host the 36 sessions in Q2. And that was a significant increase over Q1. As mentioned in the prepared statements, we did restructure our selling organization. Some of the some of the positions in our organization in Q1.

Steve Foster: And so we had a slower Q1. We expanded that pretty dramatically in Q2 almost to an all time high. And we expect that to continue as we onboard these professionals. They go through their training and they're ready to go out and get after it in their assigned geography. So that'll continue to grow. And as we've talked about before, this is our mechanism to fill up a real funnel, if you will, with opportunities to show the technology to train, put the positions in a great workshop environment with faculty.

Steve Foster: So they can get their questions answered, get comfortable with the technology. And of course, we hope that a large percentage of them will adopt the technology and begin using it in their clinical practice. So critical, critical, critical for us to train effectively and to execute these workshops effectively. We think that's not only happening but expanding very quickly now with our new team. That's great to hear. It may be just a little more color.

Steve Foster: So once they obviously complete these workshops, the hope is that they adopt the catamaran system and the technology going forward. Do most of them or some of them act as references for other physicians, are they willing to act as, let's say, KOLs or how can you best utilize their experience once they attend the workshop? Yeah, indeed. Of course, after the workshop, there's some work to do usually, but their facilities and things like that to get approvals and facilities and get things squared away so they can begin using the technology.

Steve Foster: And yes, absolutely. Once they get experienced with catamaran, many, not all, but many of the physicians love to teach. They love to pass the word on if they're satisfied with what they're using and how it treats their patients. And they can, they can become faculty either in live training events, virtual training events, all different kinds of pathways to get that job done. Because quite candidly, there's nothing more powerful in our world than peer-to-peer work in education.

Steve Foster: They'll listen to us company guys for a while, but they like to hear from their colleagues. And so absolutely, Anthony, once they get comfortable with the technology, we're always in conversations about their willingness to represent, if you will, the technology and training environments and informational environments. Okay, and then lastly, you're mentioning about the Salesforce. Do you have a target for the end of the year in terms of the number of sales people, or is it, you know, you're going to be selective and grow when you get the right, the right people in place?

Steve Foster: Well, we were very selective, so we've fully filled now all five of our sales regions, sales regions around the country. These area sales managers are assigned to building that geography through independent distribution networks, right? As things get too big for them to manage certainly will contemplate expanding to more regions and things like that, but right now we feel like those five regions, you know, properly focused, et cetera, are going to be able to deliver the kind of results that we're looking forward forward. These guys are very experienced, very professional people and we're really encouraged by some of the new team members that we brought on here in the last four to six months.

Steve Foster: Okay, and then lastly, and then I'll hop back in the queue on the follow-up test. You have the five territory slash regional managers and you have the independent distributors. How many independent distributors are there that report or work with your five regional slash territory managers? Yeah, indeed, so of course they don't report to them, they're independent by their definition, but our area sales managers partner with these independent distributors and frankly are company across the board internally and externally partners with these guys out in the field who are present in the operating room who have the relationships with the physicians and what have you.

Steve Foster: We have over 90 of those contracts in place now, and that's growing every single day. And of course, when they come on board, there's some work to do to train and prepare them to represent the technology well and what have you. So all of that work is ongoing, but it starts with these new area sales managers, their network with independent distributors within their geography to get that number of growing and building and to get that work done.

Anthony Vendetti: Okay, great. Thanks so much. I appreciate the call. I'll hop back in the queue.

Anthony Vendetti: Indeed, thank you.

Steve Foster: I would now like to turn the floor back over to Mr Foster for closing our marks. Thank you, Maria. So I'd like to thank everyone for joining us, our earnings conference call today and look forward to continuing to update you on our ongoing progress and growth.

Operator: If we were unable to answer any questions, please reach out to our IR firm, the MZ Group, who would be more than happy to assist with that. I wish everyone a good day. This concludes today's teleconference. You may disconnect your lines this time. Thank you for your participation. Anthony Vendetti, Bruce Jackson, Steven Foster, Tenon Medical Anthony Vendetti, Bruce Jackson, Steven Foster, Tenon Medical