Q4 2024 SI-BONE Inc Earnings Call
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Laura: This conference call contains time sensitive information and is accurate only as of the live broadcast today February 24, 2025 with that I'll turn the call over to Laura.
Laura: Thanks, Ken Good afternoon, and thank you for joining us I'm pleased with the team's execution in the fourth quarter to deliver a record $49 million in worldwide revenue representing growth exceeding 26%.
Laura: Fourth quarter revenue in the United States increased by an impressive 28% to $46 $9 million driven by strong demand for our innovative platform from now nearly 1400 active physicians.
Laura: The outstanding performance in the quarter is an outcome of the team's focus to build the most innovative medical device platform serving orthopedic.
Laura: Surgical trauma and interventional spine physicians.
Laura: Our growth in the quarter was broad based.
Laura: The surge in demand in the Si joint fusion procedures was further strengthened by the growing interventional spine physician engagement with torque and interact.
Laura: <unk> continued to gain momentum with adoption outpacing all of our previous product launches.
Laura: <unk>, which was launched in the fourth quarter has been met with impressive adoption and has exceeded our expectations.
Laura: These early demand indicators give us confidence that each of these solutions can be major growth drivers in 2025 and beyond.
Laura: Moving down the P&L, we delivered positive adjusted EBITDA in the fourth quarter.
Laura: Given our healthy operating leverage we expect to deliver positive adjusted EBITDA for the full year 2025, and expect adjusted EBITDA margins to expand going forward.
Laura: Inflection in profitability combined with our asset light business model positions us to progress toward our next milestone of generating positive free cash flow.
Laura: Coming into 2025, we have three key growth priorities.
Laura: First implement targeted commercial initiatives to fuel adoption of the expanded portfolio and grow our physician base.
Laura: Second increased procedure density by focusing on multi modality physician engagement.
Laura: And finally lay the groundwork for the commercialization of our disruptive new products.
Laura: Now, let me provide an update on our key initiatives as we look to extend our leadership position and drive strong durable and profitable growth.
Laura: Starting with commercial infrastructure and productivity, we closed the year with 87 quota carrying U S territory managers as we promoted five territory representatives in the fourth quarter.
Laura: Our territory productivity has nearly doubled in the last three years to $1 $8 million in 2024.
Laura: In 2025, we plan to selectively expand our direct sales force to capitalize on the strong procedure demand.
Laura: As these territories mature, we anticipate surpassing $2 million per territory over time.
Laura: Our evolution from a direct sales force to a hybrid model has contributed to the territory productivity gains and market penetration.
This strategic shift allows us to scale more efficiently, while maintaining strong physician engagement.
Laura: We successfully leveraged the hybrid model for granite and as we look ahead. We are actively pursuing partnerships with trauma third party agents to facilitate broader adoption and growth for TNT.
Laura: These initiatives reflect our commitment to optimizing our sales approach and ensuring sustained and profitable market expansion.
Laura: Moving down the physician engagement the strong physician interest in the portfolio resulted in a record number of physicians trained in the year.
Laura: This translated into nearly 2000 U S physicians performing at least one procedure in 2024.
Laura: In the fourth quarter, we had nearly 1400 active physicians, representing 23% growth as we added a record 260 active positions compared to the prior year period.
Laura: In the fourth quarter, the number of physicians performing multiple procedure types grew by nearly 40%.
Laura: Looking at density trends physicians, who performed the case in the fourth quarter of 2024, and 23 averaged five procedures per physician, which is 30% higher than the overall average procedures per physician in the quarter.
Laura: Our academic programs remain a key contributor to our active position growth.
Laura: In 2020 for revenue generated from physicians, who were previously trained as residents and fellows grew by 70%.
Laura: Lighting, the outsized impact these programs on adoption and revenue growth.
Laura: The pace of our active user growth and increasing procedure density are strong leading indicators of future demand.
Laura: Turning to innovation.
Laura: Last three years, we have transformed into a high growth medical device platform that has consistently delivered in excess of 20% annual revenue growth.
Laura: We have four product families that are targeting multiple indications across Si joint dysfunction, deformity and pelvic green fractures.
Laura: Let me provide insights into the key themes across our platform.
Laura: First I'll discuss Si joint dysfunction.
Laura: Spine surgeons continue to account for the overwhelming majority of our revenue.
Laura: Building on the success of ICU three D. TORC has become an essential contributor to our surgeons Si joint dysfunction procedure volume growth.
As a reminder, ICU <unk> and torque are reimbursed under CPT $2 seven to 709, which is reimbursed by substantially all payers.
Laura: Even within interventional spine most of our trained physicians have embraced torque as a preferred solution.
Laura: In instances, where the interventional is preferring allograft solution, we're seeing success with intra which is reimbursed under CPT code 70 708.
Laura: With the increase in physician and ASC facility fees for CVT 370, <unk> effective January one 2025, we believe <unk> has potential to drive engagement in select markets, where payer reimbursement is defined.
Laura: Currently four out of seven Medicare administrative contractors are consistently covering CPT $2 7700 procedures.
Laura: Our foresight to train physicians on both torque and intra puts us in the best position to meet the needs of the interventional lists and their patients.
Laura: Similar to our surgeon customers our strategy to provide the most comprehensive set of solutions along with World Cross training and clinical support has made us the preferred partner for interventional spine physicians.
Laura: Moving to deformity and pelvic fixation.
Just on the demand in the first six months since launch granted 95 has been a resounding success UC.
Laura: Usage in adult deformity procedures has been strong traction and degenerative spine procedures is increasing and there is growing interest from pediatric deformity surgeons.
Laura: With granite 95, we have an opportunity to increase physician engagement as well as drive more procedures per user.
Laura: Granite 95 also has the potential to improve our procedure asps.
Is it smaller size provides physicians additional room to stack multiple implants for fusion using two points of fixation.
In the fourth quarter stack granite volume grew by nearly 45% compared to the prior year period.
Laura: And several of these stack cases physicians are using a combination of granite 10, five and 95 implants.
Within degenerative spine, we're in the early stages of capturing the Epsilon Epsilon AI opportunity with our existing physicians, who perform Si joint fusion procedures.
Laura: Brandon was awarded transitional pass through or TVT payment status effective January one 2025.
Laura: We believe there is potential for <unk> to play out over time as less severe cases involving shorter construct spinal fusions migrate to the hospital outpatient setting.
Laura: And finalizing the TCT award CMS determined that uniqueness of granite requires a new device code for hospitals to report its usage in a procedure.
Laura: Additionally, CMS granted zero dollar device offset which is very important.
Laura: It allows for hospitals to pass through 100% of the granite costs. They report receiving that payment. In addition to their usual facility fee.
Laura: With this award granted full cost is eligible for TPG payment enhancing grannis reimbursement profile and underscoring its unique clinical value and the fake or pelvic space.
Application of granted in pelvic fixation remains one of the most exciting areas of focus at spine Society conferences.
Laura: We recently hosted the first meeting of the spinal pelvic study group or PSG.
Laura: A consortium of deformity kols from the top academic medical centers across the United States.
Laura: This year. The members are focused on two key areas of pelvic fixation.
Laura: First is to gather data on the application of fixation at Epsilon.
Laura: The second is comparing spinal pelvic fixation using granite with conventional screws.
Laura: The group has two manuscripts currently under peer review and plan to submit additional papers this year.
Laura: A recent publication demonstrated a significantly lower incidents of screw failures with granite compared to rates reported in prior papers for traditional pelvic screws.
Laura: There were no incidents of breakage and back out for granite.
Laura: Underscoring its durable integration with bone with low rates of revisions and mechanical failures.
Laura: The paper substantiates grannis value proposition for healthcare facilities, clinicians payers and patients.
Laura: When the physician engagement and the nearly 130000 target procedures granite will be a key revenue growth driver for the next several years.
Laura: Now I'll speak about pellet green fractures.
Laura: We are thrilled with the interest from surgeons on our recently launched TNT solution designed as a unique anatomies specific technology TMT seamlessly integrates into the trauma surgeons workflow and allows us to add a new procedure with spine surgeons.
Laura: Adding to our surgical capacity in 2025 to ensure we can capture this physician demand fall.
Laura: Knowing the breakthrough device designation or bvd from the FDA. We are now pursuing a new technology add on payment or <unk> approval for TNT.
Laura: If approved the untapped will take effect in October 2025.
Laura: TNT holds the potential to become a major growth driver in the future with a tam of nearly 60000 target procedures.
Laura: Finally, I'd like to discuss our exciting product roadmap with our innovation engine running strong we have more disruptive product launches on the horizon.
Laura: Following granite in the TNT, we're excited to share that we have been awarded breakthrough device designation from the FDA for another novel implant system.
Laura: Since the beginning of the Fda's Bvd program fewer than 10 bvd products in spine have been commercialized.
Laura: This will be <unk> second product in spine and third overall, putting us in a distinguished position as the only public company in our industry to have three bvd products.
Laura: This latest bvd is for a device that has the potential to disrupt the medical device industry by providing more effective treatment for one of the most pressing needs and orthopedic and spine surgery.
Laura: This new device Leverages, our core technology and targets our existing call points.
Laura: This fits into our strategy to build a unique platform to increase procedure density by addressing unmet clinical needs.
We're in the early development phase and we will discuss applications as we get closer to launch.
Laura: Finally, 2025 will be an important year for clinical publications, we expect to publish results. This year from our Stacy study for Si joint fusion.
Speaker Change: Sylvia and Paula for pelvic fixation.
Laura: Safran for pelvic Frank fractures.
Laura: We believe clinical evidence will be an important catalysts to accelerating adoption and maintaining our differentiated reimbursement.
Laura: Now, let me comment on the ongoing Doj investigation, we have a strong compliance program in place that aligns with the Avalon that code and OID guidance.
Laura: Cooperating with the Doj in a transparent way.
Laura: We do not have any material updates at this point and do not expect to have significant updates prior to any resolution of the matter.
Laura: Before I hand, it over to onshore to discuss our financial performance I want to recognize my colleagues for an exceptional effort. In Q4. This is our busiest time of the year and we've laid the groundwork to deliver another stellar year ahead.
Anshul: With that I'll hand, the call over to Anshul.
Anshul: Thanks, Laura Good afternoon, everyone. My comments today will be focused on the fourth quarter and fiscal year revenue growth profitability and liquidity.
Anshul: Additionally, all the comparisons provided will be versus the same period in the prior year unless noted otherwise.
Anshul: Starting with revenue growth.
Anshul: Quarter worldwide revenue growth exceeded 26% to a record $49 million U.
Anshul: U S revenue was $46 9 million representing.
Anshul: Representing 28% growth.
Anshul: International revenue in the fourth quarter was $2 1 million.
Anshul: For the full year 2024, we generated worldwide revenue $167 2 million.
Anshul: Reflecting over 20% growth.
Anshul: Our U S revenue grew over 21% to $158 4 million.
Anshul: U S revenue growth was driven by a 20% increase in procedure volume growth and a modest improvement in asps due to procedure mix.
Anshul: International revenue for full year, 2024 was $8 8 million.
Anshul: Moving to profitability, our fourth quarter gross profit decreased 35% to $38 8 million.
For the full year 2024, gross profit increased 21% to $132 1 million.
Anshul: Gross margin was 79% for the quarter and the full year 2024.
Anshul: Gross margin was up 100 basis points ahead of our original fiscal year 2024 guidance due to our strong ESP as well as the benefit from our initiatives to streamline supply chain to improve lead times and lower costs.
Anshul: In the fourth quarter operating expenses grew 8% to $44 3 million.
Anshul: For the full year 2020 for operating expenses grew 7% to $167 4 million.
Anshul: Revenue related growth activities, while the key contributors to the operating expense increase including higher commissions marketing support for new products and research and development investment.
Anshul: In the fourth quarter, our net loss improved by nearly 60%.
Anshul: $4 5 million or 11 cents per diluted share.
Anshul: For the full year 2024, net loss improved by 29% to $30 9 million.
Anshul: 75 per diluted share.
Anshul: We achieved positive adjusted EBITDA of $1 9 million in.
Anshul: In the quarter compared to an adjusted EBITDA loss of $4 8 million.
Anshul: In the fourth quarter of 2023.
Anshul: This nearly $7 million improvement in adjusted EBITDA highlights the scalability of our infrastructure.
Anshul: Adjusted EBITDA loss for the full year 2024 narrowed to $5 1 million compared to $17 3 million in 2023, representing over 70% improved.
Anshul: Turning to liquidity.
Anshul: We ended 2024 with $150 million in cash and marketable securities.
Anshul: Our total cash usage in the fourth quarter with less than $800000.
Anshul: With a strong liquidity position and expanding adjusted EBITDA profitability, we are focused on making significant progress towards our goal of achieving positive free cash flow.
Anshul: Okay.
Anshul: Finally, moving to our outlook for 2025.
Anshul: We have a robust momentum entering 2025.
Anshul: When you overlay the potential impact of reimbursement tailwind like GPT for granite.
Anshul: Therefore, PMT in the second half of 2025.
Anshul: We are positioned for another strong year revenue growth and profitability.
Anshul: In 2025, we expect worldwide revenue of $193 5 million to $195 5 million.
Anshul: Implying year over year growth of approximately 16% to 17%.
Anshul: Our guidance assumes strong volume growth.
Anshul: Good evening incremental benefit from the broader commercialization of products launched in 2024.
Anshul: In part offset by low to mid single digit ASP impact from evolution of the procedure mix.
Based on the current revenue assumptions, we expect 2025 annual gross margin to be between 77% 78%.
Anshul: And annual operating expenses to grow approximately 9% at the midpoint of the revenue range.
Anshul: Accounting for business seasonality, we expect to deliver positive adjusted EBITDA in the second half of 2025 and full year 2025.
Laura: With that I will turn the call over to Laura.
Laura: Thanks onshore looking ahead, we're excited about 2025, I'm more confident than ever in our ability to deliver another standout year over the long term with robust procedure demand growing physician base and a steady cadence of unique product launches we have all the elements in place to extend our track record of delivering.
Laura: <unk> strong revenue growth and expanding profitability.
Laura: With that we're happy to take your questions operator.
Laura: Thank you ladies and gentlemen, this do you have a question or comment at this time. Please press star one on your telephone.
Laura: <unk> has been answered here, where some of yourself from the queue. Please press star one again, we will pause for a moment, while we compile the Q&A roster.
Speaker Change: Our first question comes from Craig Bijou with Bank of America. Your line is open.
Craig Bijou: Good afternoon, thanks for taking the questions and congrats on the strong finish to the year.
Craig Bijou: I wanted to start with maybe some of the growth drivers and obviously you guys are getting growth from a number of oriented and a number of different ways your legacy.
Craig Bijou: As I joined procedures then.
Craig Bijou: Granted five now TNT so.
Craig Bijou: When we think about the growth that you guys saw this year and then looking ahead to 2005 and beyond.
Speaker Change: I know you don't give specifics, but is there I guess I was hoping to hear maybe a little bit on the contribution of each of those.
Craig Bijou: And and how we should how we should think about that contribution.
Speaker Change: Thanks for the question Craig appreciate it and you're right. The fourth quarter was a great quarter for US we really hit records across all of our Kpis and in certain cases, we exceeded our own internal estimates when it came to physician demand for example from grant at 95 and also TNT.
Craig Bijou: And the record performance in the quarter and for that matter for the full year 2024. It reflects the growing momentum we have consistently seen in the business for the last several quarters. So delivering 26% worldwide revenue growth is outstanding. It was led by our U S revenue growth of 28%.
Craig Bijou: And you're asking about the different girls drivers, we really saw strong momentum across all of our procedure types and also call points as well so in our prepared remarks, I talked a fair amount about.
Craig Bijou: Our Si joint fusion business and the drivers there.
Craig Bijou: Our core business with with our surgeons with ICU three D as well as with torque, but also the interventional has provided a nice incremental growth driver there as well with adoption primarily of torque, but also with intra too.
The introduction of granite 95 was an important driver in our deformity business degenerative business overall pelvic fixation and we just continue to see a lift.
Craig Bijou: As we penetrate that very large market opportunity in the U S of around 130000 procedures and then as I said before on TNT, we actually didnt.
Craig Bijou: It didn't perform our first case until the end of September. So we were actually surprised at how rapidly we saw an uptake of TNT, especially given that we were in the beta launch phase at that point with limited inventory and limited instruments and trades out in the field.
Craig Bijou: But what we're doing right now is getting more surgical capacity in the field with all of those new products that I just mentioned so our inter product for interventional lifts are granted 95 product as well as our TMT product as well so as I said really broad based.
Craig Bijou: Performance across the portfolio and what I would say is what's exciting is that the 2024 growth drivers are likely to get stronger in 2025 because of the numerous product launches that we had in.
Craig Bijou: 2024, and it gives me the confidence that we are positioned to deliver another standout year.
Craig Bijou: And it really makes me confident that we have all the ingredients to deliver top tier med tech revenue growth for a prolonged period of time.
Craig Bijou: Got it thanks, Thanks, a lot for that.
Speaker Change: Just following up I wanted to.
Craig Bijou: I wanted to ask about guidance.
Speaker Change: In the 16% to 17% growth for 25, it's slightly lower than what you guys have guided to over the last couple of years and even when we look at your two year stack growth you guys are kind of.
Craig Bijou: Guys are in the mid Twenty's, so very strong.
Higher than that 16 to 17, so maybe just help reconcile is there anything that we're not thinking about when we think about 'twenty five or how did you approach. The your guidance this year.
Craig Bijou: Yeah, Craig good afternoon, and happy to take that call.
Craig Bijou: That question, so as Laura talked about a lot of the tailwind in the business. So we're actually feeling quite great about the business coming into 2025.
Craig Bijou: She talked about the product side momentum when you think about entering the year with a formidable trained physician base had over 4800 docs perform a procedure in the fourth quarter.
Craig Bijou: Addition of more surgical capacity on the products that we rolled out in 2024.
Craig Bijou: And then there is the additional reimbursement enhancements like TPP for granted and the potential for and tough with TNT.
Craig Bijou: There's a lot of good momentum coming into the year so feel.
Craig Bijou: I feel good about the business now that said, we don't want to get ahead of ourselves and while we are confident that we will capitalize on the demand for solutions across all our markets.
Craig Bijou: As we progress through the year, we want to grow into those opportunities as we go through the year because some of them will have an impact as we progress through the year, whether it's the reimbursement tailwind or the impact of raw surgical capacity.
Craig Bijou: So I think we took a very balanced approach to setting expectations based on the tailwind we have in the business.
Craig Bijou: We did make a couple of other assumptions in our guidance. The first one being ESP as I've said in my prepared remarks, we've assumed a low to mid single digit ASP decline just based on the evolution of the procedure mix certain processes procedures use fewer implants, and we've incorporated that but obviously, we've demonstrated that we're able to do better than <unk>.
Craig Bijou: That's who execution for the last couple of years.
Craig Bijou: So that was an assumption DSO. Other assumption is there is one less procedure day in the year and there is some FX headwinds that we've incorporated as well.
Yes.
Craig Bijou: Thanks for taking the questions.
Craig Bijou: One moment for our next question.
David: Our next question comes from David <unk> with citizens JMP. Your line is open.
David: Hey, good evening, congrats congrats on the quarter and the year.
David: Laura I just wanted to get your thoughts on sort of the.
Speaker Change: Competitive landscape, we hear a lot and it doesn't seem to be impacting you much but.
Speaker Change: Certainly there could be some disruption out there in the <unk> world. So I'd just love to hear your current thoughts on.
Speaker Change: Anything that's changing from a competitive standpoint.
Speaker Change: Thanks for the question, Dave and yes, we're thrilled with how we performed in the fourth quarter and.
Speaker Change: If you see the acceleration of the growth that we saw it hopefully we'll put people's minds at ease about the long term sustainability of the growth in our business and.
We're competing in Si joint fusion as the market leader in the space and.
Speaker Change: And that's working really well for us it's working with our historical surgeon base and it's also working very well on the interventional side too. So we really are in a in a different category of company in terms of our products. So the extensive product.
Speaker Change: The portfolio that we have at this point that meet the needs of different physicians and different.
Speaker Change: Patients as well.
Speaker Change: But in addition, it's the educational approach that we take whether I'm talking about professional education or or if I'm actually talking about our commercial sales force who is incredibly knowledgeable about the prevalence the diagnosis the anatomy as well as the treatment of these particular patients.
Speaker Change: And then finally, helping to support from a reimbursement perspective, as well and quite frankly, having most of the clinical data and the space itself. So so we're competing really well as you can see based upon the results of the numbers that we continue to generate and.
Speaker Change: As I said earlier I really think that we're just getting started with launching three different products in 2024, and starting to see the momentum really taking hold in the fourth quarter. It bodes very well for 2025.
Speaker Change: Thank you for that and I just wanted to clarify a point I think you might have said that the number of docs using multiple products grew by 40% I.
Speaker Change: I don't know if thats if that is what you said I'm just curious.
Speaker Change: What the mix is like what percentage of your active physicians are doing that now if you could share that.
Speaker Change: Dave we don't share what percent of active docs are doing that but the 40% increase in the number of docs doing multiple procedures is is a very important metric for us.
Speaker Change: Because it highlights sort of the ability to drive density.
Speaker Change: The portfolio across the call point, the other statistic that I would share is that we do share. This.
Speaker Change: Normally is the number of ads that we did in the quarter almost half of those ads, where docs that did multiple procedure types.
Speaker Change: In the quarter, so again, a really good metric for us.
Speaker Change: As Laura said in our prepared remarks, one of our priorities from a commercial growth revenue growth perspective is driving physician density and so the expanded portfolio is allowing us to do that and it's starting to reflect a little bit in our numbers. It's early days, but we're pretty pleased with that.
Speaker Change: Overall, our physician engagement and record trainings translated into 23% active physician growth. So we added a record number of active physicians ended the quarter with 1400 active physicians and actually had almost 2000 surgeons in the United States do at least one procedure.
Speaker Change: In 2024, so you can see the the base the customer base that we have built and how powerful that base actually is as the surgeons and physicians start doing multiple procedure types. So provides a huge opportunity for growth both in terms of continuing to grow the fifth.
Speaker Change: <unk> base, but also the number of procedures per physician.
Speaker Change: Got it thank you.
Speaker Change: Our next question.
Operator: Our next question comes from Matthew O'brien with Piper Sandler Your line is open.
Operator: Hey, this is Phil on for Matt. Thanks for taking our questions and I'll go everyone else's congrats on a great fourth quarter and into the year here.
Speaker Change: Two on margins for me Firstly on gross margin expected $77 five at the midpoint why might that take a step back this year compared with 2024 and then similarly back in 2021 'twenty two 'twenty two you had gross margins well into the <unk> any color on where this metric.
Operator: It could go in the long term.
Operator: And I will happy to take this question at 79% gross margins for the year, we're really proud.
Operator: We do believe these are industrial leading gross margins.
Operator: Head off where we expect it to be in 2020 for now in terms of 2025 similar to the assumptions that we have in our revenue guidance just trying to be thoughtful there where we've taken the same philosophy on our gross margins. So when you think about our gross margins and what's included in that assumption.
Operator: Is the ASP impact from the procedure product mix that we said we've assumed about low to mid single digit ESP <expletive>.
Operator: Decline just because of procedure mix, we've obviously done better than that but that's incorporated in there.
Operator: This also the onboarding of additional surgical capacities, so that leads to higher depreciation. So that's incorporated in there and then we've got some depreciation of capitalized software that we've been working on for the last couple of years to reduce administrative burden in the field.
Operator: Now in terms of what it does not include is some of the things that we've been working on very diligently to offset some of these gross margin pressures.
Some of that you saw in 2024 around streamlining of the supply chain to lower the manufacturing cost of our existing products.
Operator: We're working to continue to improve returns in the fields. So that we can get more usage out of those assets and also looking at reducing the cost of our trades and through optimization of design again from our perspective, we want it we feel very comfortable about the gross margin profile of the business and we.
Operator: We think over the medium term sort of that $6, 76% to 77% is is where we should be.
Speaker Change: That's helpful. And then one final one on Opex, just hoping to get your take on outlining 9% growth in Opex. This year compared with 7%. This past year slight DSL on the topline is that a lot. There's a lot of that baked into increased payout for reps and then.
Operator: <unk> partner again.
Operator: You were able to pass a lot of the topline upsides the bottom line in 2020 for any chance, we could see a little bit more of that in 2025.
Operator: Yes, again similar to strong topline growth industrial leading gross margins were actually quite proud of our strong operating leverage in the last few years that we've demonstrated.
Speaker Change: We are going to continue to invest in initiatives that are crucial to continue to deliver that sustainable growth Laura talked about a lot of that is in R&D, we're going to selectively expand our commercial sales force as well and investing in clinical trials as well so.
Speaker Change: Specifically in 2025, if you look at the midpoint of the guide and you look at the Opex guidance on that you've got sort of a $1 75 to one eight times leverage which is quite healthy.
Speaker Change: We are expecting to invest in R&D, it's going to be a bit more elevated as you heard on the call Laura highlighted yet another bdd device.
Speaker Change: That we are working on so we're going to continue to invest in innovation to create new market categories. We do expect sales and marketing and G&A to go up but we do expect leverage to be there.
Speaker Change: From that place as well and when you think about beyond 2025, we do expect revenue growth to continue to outpace opex growth rate now it may vary in terms of how much leverage you can get depending on the level of investment you need a new product launches.
Speaker Change: But again pretty healthy operating leverage in the business.
Absolutely and congrats again.
Speaker Change: Thank you.
Speaker Change: For our next question.
Speaker Change: Our next question comes from Caitlin Cronin with Canaccord Genuity. Your line is open.
Caitlin Cronin: Hey, guys congrats on great quarter and year I guess just to start off just thoughts one globus as intend to acquire Neville have you.
Speaker Change: Folks about never that there's competition in the interventional space from them and what do you think about the potential to also leverage this calpine.
Craig Bijou: Yeah, Caitlin thanks for the question.
Craig Bijou: So we've been competing with Globus for many years at this point and with the best commercial sales force educational and advocacy infrastructure as well as our comprehensive product portfolio, where we're clearly the market leader for a secret public solutions and thats across surgeons and interventional spine.
Craig Bijou: Physicians, so we feel really good about our position and as I said Globus already has an Si joint solution silo and if you look at the last few years with the addition of torque we not only maintained our market leadership position, but we increased our overall market share so given our successful.
<unk> for us the deal doesn't impact our strategy if anything it substantiates our strategy to expand our platform with the addition of differentiated and Anatomies specific solutions that can serve both surgeons and interventional.
Speaker Change: That's great. Thanks, and then just one more on the novel implant product any more color on the timeline of when that could come to market about one year away multiple years away.
Speaker Change: Yeah. Thanks for thanks for the question. We are really excited about this third breakthrough device designation, what we're trying to do is help our understand that we are we're a category creator at this point our customers recognize us already as a category creator, but we.
Speaker Change: It is important to share this sort of information with a with wall Street and investors as well.
Speaker Change: Given our ability to identify unmet clinical needs and innovate with breakthrough devices.
Speaker Change: <unk> with the most recent bvd, we're the only public company in the industry to have <unk> solutions and it really puts us into this distinguished position and its cementing our position as a as a category creator.
Speaker Change: Given the uniqueness of the solution and the huge market potential we are holding the details close.
Speaker Change: As I said, we're in the early development stages, we have a lot of work ahead of us to get regulatory clearances, and then get to commercialization.
Speaker Change: But we're not including anything in 2025 for this particular product, but we'll talk more as we get closer to launch.
Speaker Change: Awesome. Thanks, so much.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from David Saxon with Needham <unk> Company. Your line is open.
David Saxon: Great. Good afternoon, Lauren onshore thanks for taking my questions.
David Saxon: Congrats on the quarter, as well and especially getting to EBITDA profitability.
David Saxon: Wanted to maybe start with guidance.
David Saxon: Maybe if you could just talk about expectations for the cadence of revenue and expectations for seasonality I think in 2020 for first quarter was down kind of low single digits sequentially. So.
David Saxon: Is that a good starting point as we think about first quarter of 'twenty five or do you think it'll be any better or worse.
David Saxon: Hey, David This is <unk>. Thanks for the question.
David Saxon: As you know, we don't think about our business on a quarterly basis.
David Saxon: We think about it on a multiyear basis.
David Saxon: And focus on delivering strong long term growth and sustainable growth.
David Saxon: When you think about it from a modeling perspective, though first half historically has accounted for around I would say a 47% of our annual revenue and when you look into the sequential trends between Q4 and Q1.
David Saxon: Which is mostly normal industry seasonality.
David Saxon: You sort of see a decline of high single digits from Q4 to Q1.
David Saxon: This year. There is also one less day as we said that we incorporate in our guidance that will hit Q1, as well and that will have impact on the on the sequential decline from Q4 to Q1.
David Saxon: Yeah.
David Saxon: Okay. That's super helpful. Thanks for that and then maybe this is for Lora just on the granite intact I think that expires I believe this October at least later this year so.
David Saxon: Can you just give an update on kind of the work you've been doing to to get a new code for that for premium reimbursement.
Lora: Do you think that could be in the 2006 fee schedule or might it take longer. Thanks. So much sure happy to answer that so we've submitted our application with CMS to reassign those cases with granite to a higher paying code basically to reflect the higher cost of the case.
Lora: And we already have that data in the end tap usage and the payment date is compelling, but we'll know more in this next quarter of CMS considered our application acceptable when they released the proposed inpatient rules for next year, but we will know about that.
Speaker Change: By the middle of the year, David and it should be at the same time as.
Lora: And tap expires.
Lora: Expires that we would have a potential change in the the code.
Speaker Change: Great. Thanks, so much.
Lora: One moment for our next question.
Speaker Change: Our next question comes from Richard <unk>.
Richard <unk> with <unk> Securities. Your line is open.
Speaker Change: Hey, this is Felipe Omar on for Rich just quickly if you could walk us through the profit ramp cadence through 2025, and I think it would be helpful to get an idea. Thanks.
Speaker Change: Yeah, no happy to.
Speaker Change: Again, as I said earlier.
Speaker Change: We expect opex growth rate at the midpoint to be about 9%.
Speaker Change: Versus our revenue guide of 16% to 17% Thats, a really good operating leverage.
Speaker Change: Consistent with prior years, we do tend to see a little bit more spending in the first half of the year.
Speaker Change: Got a national sales meeting we've got additional activity in terms of physician education that goes on in the early part of the year. So we do expect to be adjusted EBITDA negative in the first half of the year, but given the momentum in the business. We do expect to be profitable on an adjusted EBITDA basis sort of in the second half of the year.
Speaker Change: More geared towards the fourth quarter, which should allow us to be adjusted EBITDA positive for the full year 2025, and then going forward in 2026 and beyond.
Speaker Change: And just given that your EBIT positive now I guess in this quarter and as Youre approaching free cash flow positive. How are you thinking about the trade off was growing horror profit acceleration versus sustaining more of a top tier revenue growth trajectory. Thanks for taking my questions.
Speaker Change: That's a great question. So if you think about our execution over the last few years, we've not treated growth for profitability.
Speaker Change: We've had north of 20% cumulative annual revenue growth rate in the U S even higher than that.
Speaker Change: Part of that is being driven by our disruptive products. The category created that category creation that we've undertaken as a company just the adoption by surgeons and that has translated into the operating leverage in our business. So I'll focus remains to continue to make investments in the business that can get to.
Speaker Change: <unk> line growth to accelerate but we feel very good that with revenue growth rate exceeding opex growth rate that you should continue to see the adjusted EBITDA expand and adjusted EBITDA margins improved with each passing year.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from Kevin Marsh with Morgan Stanley. Your line is open.
Kevin Marsh: Great. Thanks for taking the question.
Kevin Marsh: Just on reps kind of alluding to the study busy period of late and spun on paying lots of headlines typically with outcomes movement. So curious whether you feel like you could be seen as a beneficiary here.
I guess on the topic just help bridge some of those productivity targets for us between better utilization in existing accounts as customer accounts versus potentially expanding into some of those on top accounts out there today.
Kevin Marsh: Yeah happy to answer that question calendar so.
Kevin Marsh: <unk>.
We've had a.
Really strong.
Progress with our sales force over the last couple of years, we've remained relatively consistent in terms of the number of territory managers.
That had been in place as well as our more junior reps as well and a lot of the leverage has actually come from third.
Kevin Marsh: Third party <unk>.
Kevin Marsh: <unk> and those agents have been heavily involved in our granite sales and this has resulted in our our sales rep productivity moving from less than a million to around $1 8 million at the end of this last year. So.
Kevin Marsh: What do we expect going forward as we said given our growth rate, we will continue to selectively add territory managers over these next couple of years.
Kevin Marsh: We are assuming that we can actually get to rep productivity of over $2 million and Thats a combination of the territory managers work themselves with the support of the more junior reps and also with the hybrid model.
Kevin Marsh: That we're working with third.
Kevin Marsh: Third party agents on <unk>.
Kevin Marsh: In terms of disruption with the sales force other sales forces I think what you're saying is does that provide an opportunity for us to bring in top talent I would say the short answer is yes.
Kevin Marsh: As we continue to add to our sales force we are hiring some of the best people in the industry with a variety of different backgrounds. So it can be a spa.
Kevin Marsh: Spine it could be intervention all it can be trauma. Those are the sorts of people that we're hiring externally and then also given that we have a significant number of.
Kevin Marsh: Junior reps that has provided a pipeline in order to elevate them and promote them to the territory manager level, which as I had mentioned in the fourth quarter. The five additions that we had to our territory manager ranks those actually were all internal promotions.
Kevin Marsh: We have a lot of opportunity to grow the base of our representatives, but also gain leverage as well over the coming years and then <unk> on your question on density.
Kevin Marsh: Versus growth.
Kevin Marsh: Coming into 2025.
Kevin Marsh: While we expect the number of active physicians to grow at a healthy clip. We are also focused on that depot cross modality engagement with physicians.
Kevin Marsh: As I said earlier, Laura said in our prepared remarks, we are in the early stages of growing density.
Kevin Marsh: We believe that granted 95 gives us the opportunity to Reaccelerate procedure density majority of the procedure volume.
Kevin Marsh: All of our physicians performing Si joint dysfunction is degenerative spine procedures.
Kevin Marsh: With 95, we have the opportunity to work with them on degenerative spine procedures at the end of the sacrum.
And then similarly, but to a lesser extent some of our spine surgeons.
Kevin Marsh: Also see pelvic fractures and with TNT, we have the opportunity to work with them as well on fracture fixation.
So while we've seen the pockets of success already we again don't want to get ahead of ourselves on the pace of improvement in density. So when we think about our guidance for the year as well. It assumes the active position increase will remain a key growth driver in 2025 grid density being a potential nice upside to that.
Speaker Change: Great color, Thank you and I'll try for one.
Speaker Change: The C idea I appreciate you can't give much color here, but any insight you can give us on the request so far from the Doj and whether you've had to adopt any of your existing practices. In response to that just curious how collaborative that purpose has been so far thanks a lot.
Yes. Thank you so as we mentioned on the call. We don't have a material update to share we're cooperating with the Doj in a transparent way and we intend to continue to do so as we also previously shared we believe the government is most focused on or conduct of field based education events, especially those involved.
Speaker Change: Meals and physician speakers and any physician remuneration more broadly and as and when we have material updates on this we will make sure to share it with all of our investors.
Appreciate it. Thank you. Thank you.
Speaker Change: And I'm not showing any further questions at this time I'd like to turn the call back over to Laura for any closing comments wonderful. Thank you all for your participation in today's call and we look forward to seeing you at upcoming non deal Roadshows and investor conferences.
Speaker Change: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
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