Q1 2025 SI-BONE Inc Earnings Call
Iqbal Titchmarsh,
Speaker Change: Good afternoon, and welcome to Saibone's first quarter, 2025 Ernie's conference call. At this time, all participants are in a listen-only mode.
Speaker Change: We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Saqib Iqbal, Vice President, FP&A, and Investor Relations at SI-Bone for a few introductory comments.
Please go ahead
Speaker Change: Earlier today, SI-Bone released financial results for the quarter-ended March 31st, 2025
Speaker Change: A copy of the press release is available on the company's website.
Speaker Change: Before we begin, I'd like to remind you that management remarks today may include forward-looking statements within the meaning of federal security's laws which are made pursuant to the safe harbor provisions of the Private Security's Litigation Reform Act of 1995.
Speaker Change: These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings, such as our most recent form 10K, and actual results might differ materially from any forward-looking statements that we make today.
Speaker Change: Accordingly, you should not place unusual statements. These forward-looking statements speak only as of the day that they are made and we do not assume any obligation to update any forward-looking statements except as required by law.
Speaker Change: During the call, management may also discuss certain non-GAAP measures, including the company's adjusted EBITDA results. Unless otherwise noted, any reference to profitability is in terms of positive adjusted EBITDA.
Speaker Change: For a reconciliation of these non-GAAP measures to GAAP accounting, please see the company's full earnings release issued earlier today. Unless otherwise noted, all results are compared to the comparable period in prior year. With that, I'll turn the call over to Laura.
Laura: Thanks, Saqib. Good afternoon, and thank you for joining us. I am thrilled with the start to 2025, marked by another strong quarter of outstanding revenue growth, record position base, expanding growth margins, and strong operating leverage.
Laura: Our results confirm that our industry-leading, innovative platform, targeting nearly half a million annual procedures, is continuing to gain momentum.
Laura: This impressive top-line growth enabled us to deliver positive adjusted EBITDA in the quarter while continuing to make investments in R&D and commercial infrastructure.
Laura: In the U.S., our revenue was $44.8 million, reflecting approximately 27% growth and underscoring the durable tailwinds building in the business.
Laura: We're experiencing broad-based demand for our existing technologies and rapid adoption of our new solutions launched last year. With an active pipeline of novel technologies under development, we believe our procedure volume growth will be amplified as we launch these new solutions over the next 12 to 18 months.
Laura: Our innovative platform is driving deeper engagement and market penetration as we add physicians at a record pace.
Laura: Additionally, a growing number of physicians are performing multiple types of procedures, driving end-user density. These are both positive leading indicators for demand.
Laura: Our focus on differentiated solutions and clinical evidence continues to garner favorable reimbursement, including exclusive commercial reimbursement, a transitional pass-through payment, and new technology add-on payments.
Laura: The favorable reimbursement backdrop has solidified our leadership and ensured patients have access to our unique technologies.
Laura: With industry-leading growth margins, scalable commercial infrastructure, and small CapEx footprint, our business model is designed to rapidly scale profitability and generate free cash flow.
Laura: A resilient business trend support our confidence that we are positioned to consistently deliver strong results over the long term.
Laura: Now let me provide an update on our four key priorities, innovation, engagement, commercial execution, and operational excellence.
Laura: Beginning with innovation, diversifying our platform with the addition of unique yet complementary technologies has been a key tenet of our growth. This strategy has allowed us to expand our target modalities, broaden our physician footprint, and develop multiple revenue streams.
Laura: Over the last three years, we've increased our total addressable market to over $3.5 billion and delivered 25% cumulative procedure volume growth. Now, let me dive deeper into our target markets.
Laura: Starting with SI joint dysfunction, we built on the success of iFuse 3D with the introduction of iFuse Torque and recently iFuse Intra.
Laura: The comprehensive set of solutions addresses the needs of a diverse group of physicians, including orthopedic and neurospine surgeons, as well as interventional spine physicians.
Laura: While ICUs3D historically has been the gold standard, TORC has dramatically expanded the market and has become a preferred solution for newly trained surgeons as well as interventional spine physicians.
Laura: Intra, which is reimbursed under CPT 27278, is achieving adoption in markets where the interventionalists initially prefer an allograft solution and the reimbursement is clearly defined.
Laura: Our deliberate expansion with the interventionalists and decision to train them on TORC and INTRA is gaining significant traction. This specialty performed a record number of procedures with our solutions in the quarter, surpassing the previous record set in the fourth quarter of 2024.
Laura: Moving to pelvic fixation, since the launch of I-FUSE Bedrock Granite in 2022 and the subsequent addition of I-FUSE Bedrock Granite 9-5 last year, we lead the industry in providing sacral pelvic solutions.
Laura: Granite is designed to provide robust foundational support at the base of both long and short construct fusion procedures.
Laura: Since launch, Granite 9-5 has outpaced the adoption trends for Granite 10-5 WarTorque. In addition to being a key driver of position adoption, Granite 9-5 has contributed to the increase in the number of procedures utilizing four of our implants, driving higher procedure ASP.
Laura: In the first quarter, the number of four-implant granite cases grew approximately 69% compared to the prior year period.
Laura: The application of Granite 95 and higher risk short construct procedures is growing within our existing surgeon base. Notably, Granite is targeting nearly a hundred thousand degenerative procedures ending at the sacrum each year.
Laura: Starting January 1st, 2025, Granite became eligible for a Transitional Pass-Through Payment, or TPT, without any device offset costs when used in the hospital outpatient setting.
Laura: We believe there's a potential for the TPTs to play out over time, as cases involving shorter construct spinal fusions that Granite is targeting migrate to the hospital outpatient setting. Based on Medicare data, we believe that approximately 40% of these procedures could be considered for outpatient treatment.
Laura: On the reimbursement front, as part of CMS's Fiscal Year 2026 proposal for inpatient hospital rates, reimbursement for grant multilevel procedures is proposed to increase by approximately 8 percent.
Laura: In parallel, CMS has indicated the need for additional time to analyze the data with respect to our request for reassignment of granite procedures to a higher severity reimbursement category.
Laura: Moving to pelvic trauma, we entered the pelvic trauma market with the launch of TORC in 2021. In the fourth quarter of 2024, we launched our revolutionary second generation trauma solution, iFuse TORC TNT. TNT is an anatomy-specific implant designed for sacral insufficiency fractures.
Laura: Based on the Breakthrough Device Designation, CMS has proposed an NTAP for inpatient procedures of over $3,900 for TNT, effective October 1, 2025.
Laura: This represents a 20-30% reimbursement increase to the hospital for pelvic fracture fixation.
Laura: Assuming the rule is finalized as drafted, this reimbursement advantage would continue through September 2028. We believe NTAP could expand access to T&T and serve as another tailwind for a solution that is already outperforming our internal expectations.
Laura: With nearly 60,000 potential target procedures annually, representing a $300 million market opportunity, we are best positioned to capture meaningful market share over the long term.
Laura: Now to provide an update on the disruptive products we expect to launch over the next 12 to 18 months.
Laura: In the first quarter of 2026, we expect to launch a new SI joint fusion solution that builds on our knowledge of 3D-printed titanium implants and application of IPs and Trusts.
Laura: We're excited about this new solution, which we believe will simplify workflow, provide another surgical option to physicians, and allow us to reach a wider funnel of interventional physicians who've expressed interest in adopting our procedure.
Laura: We're also making significant progress with the new product under development that we mentioned last quarter, our third to win breakthrough device designation from the FDA.
Laura: This novel implant leverages our core technology, and it's targeting a more effective treatment for one of the most pressing needs in spine surgery. We expect to share more progress updates with you in the future.
Next, let's move to engagement.
Laura: In the first quarter, over 1,400 U.S. physicians performed procedures using our products, surpassing the previous record we set in the fourth quarter of 2024. This translates into a 27% increase in our physician base, as we engaged an additional 300 physicians.
Laura: Compared to the first quarter of 2022, we have more than doubled the number of U.S. physicians who perform procedures using our solutions.
Laura: Our product platform is designed to support physicians across multiple procedure types.
Laura: Once they adopt one of our solutions, we demonstrate value and expand usage into additional procedures.
Laura: This approach is contributing to strong cross-procedure adoption and deeper integration into clinical practice, as evidenced by a 43% increase in physicians performing more than one procedure type.
Laura: Looking at density trends, physicians who performed a case in both the first quarter of 2025 as well as 2024 averaged nearly five procedures per physician.
Laura: This was 30% higher than the overall average procedures per physician in the quarter. This shows an encouraging runway for procedure volume growth with the newly added physicians.
Laura: Finally, we're thrilled with the adoption trends from surgeons we trained with residents and fellows. Year-to-date, revenue attributable from previously trained residents and fellows grew by 64 percent.
Laura: We ended the quarter with 85 U.S. territories. As we've expanded our product platform, we've evolved from a direct sales force to a hybrid model, combining territory managers and clinical sports specialists with third-party agents for case support and procedure expansion.
Laura: This hybrid commercial infrastructure, which has been especially effective in pelvic fixation and growing in pelvic trauma, enabled us to increase our trailing 12-month territory productivity by nearly 25% in the first quarter to approximately $2 million.
Laura: Looking ahead, we expect gradual improvement in productivity as we grow our direct sales team and move toward our target of reaching 100 territories over the next 12 to 15 months.
Laura: Concurrently, we'll strategically leverage third-party agents to scale our commercial reach.
Speaker Change: Before I hand it over to Anshul, I would like to thank my SI bone colleagues for their relentless drive in developing and successfully commercializing unique solutions that have allowed us to partner with over 4,500 physicians worldwide and improve over 120,000 patients lives.
Speaker Change: Your focus has enabled us to deliver outsized revenue growth and puts us on a path to sustained profitability.
Thank you.
Speaker Change: With that, I'll hand the call over to Anshul to provide an update on our fourth key priority, Operational Excellence, and share our first quarter results and updated guidance in more detail.
Anshul: Thanks Laura. Good afternoon everyone. My comments today will be focused on first quarter revenue growth, profitability, and liquidity.
Anshul: All of the comparisons provided will be versus the same period in the prior year, unless otherwise noted.
Anshul: Starting with revenue growth. Our worldwide revenue was $47.3 million, representing growth of 24.9 percent.
U.S. revenue was $44.8 million, representing 26.6% growth.
International revenue in the first quarter was 2.5 million.
Anshul: Moving to profitability. Our gross profit was $37.7 million, an increase of $7.8 million, or 26.2%.
Anshul: Our gross margin rate for the quarter was 79.7%, an improvement of nearly 80 basis points.
Anshul: Consistent ASP, as well as our actions to improve manufacturing and supply chain efficiencies over the last 12 months, contributed to the gross margin expansion.
Anshul: Operating expenses were $45.2 million, representing 7.8% growth. The increase was mostly due to higher commissions related to revenue growth and research and development investment in platform expansion projects.
Anshul: Our stellar commercial execution, along with our operating discipline, allowed us to deliver revenue growth that was three times higher than our operating expense growth.
Anshul: Our net loss narrowed to $6.5 million, or $0.15 per diluted share, compared to a net loss of $10.9 million, or $0.27 per diluted share, representing continued strong year-over-year progress.
Anshul: We delivered positive adjusted EBITDA of approximately half a million compared to adjusted EBITDA loss of four million in the first quarter of 2024.
Anshul: Looking at the trail in 12 months, ending the first quarter of 2025, our revenue grew by approximately $32.6 million.
Anshul: During the same period, our adjusted EBITDA improved by approximately $16.8 million.
Anshul: Our ability to convert over 50% of the growth revenue dollars to adjusted EBITDA dollars while continuing to make investment in our priorities is illustrative of the longer-term leverage potential for our business.
Turning to Liquidity.
Anshul: We exited the quarter with $144.4 million in cash and marketable securities.
Anshul: Our total cash usage in the first quarter was $5.6 million, a 31.7% improvement over the prior year period.
Anshul: As a reminder, Q1 is seasonally a higher cash usage quarter.
Anshul: Given the strong top-line growth and operating leverage in the business, we are rapidly progressing towards a goal to achieving free cash flow in 2026.
Anshul: Before I discuss our guidance I would like to briefly address the potential impact of tariffs.
Anshul: All our implants and virtually all our instruments are manufactured domestically.
Anshul: The majority of the raw materials for our instruments is sourced from the U.S.
Anshul: And the titanium powder used in our implants is sourced from Canada under the 2020 U.S. MCA agreement with supply already secured through 2026.
Anshul: As such, we currently do not anticipate any material impact on gross margins or our supply chain from the proposed tariffs.
Anshul: As for the top line, we are currently not seeing any impact on our procedure volumes related to the macroeconomic uncertainty.
Anshul: It is important to note that given the debilitating pain and physical disability experienced by our patients, our procedures are less likely to be deferred.
Anshul: We have a track record of sustained growth, even through periods of extreme stress, as demonstrated during COVID.
Anshul: Today, we are in a much stronger position with a diversified product platform and a significantly larger physician base, which we believe provides even greater resilience.
Anshul: Now let me provide an update on our outlook for 2025.
Anshul: We are updating our full-year revenue guidance to range between $193.5 million to $197.5 million.
Anshul: The $2 million increase at the upper end of the guidance incorporates the strong first quarter results and our conviction in the demand for our solutions.
Anshul: Our decision to maintain the lower end of the guidance is not indicative of any change in demand trends coming into the second quarter.
Our internal execution remains strong.
Anshul: As we progress through the year, we will gain more clarity on the macroeconomic environment.
Anshul: Thus, we believe it is prudent to take a thoughtful approach today to protect against potential headwinds.
Anshul: Given our favorable gross margin trends, we now expect full-year gross margin to be 78% compared to the previous guidance of 77% to 78%.
Anshul: We expect fiscal year operating expenses to grow approximately 10% at midpoint of our revenue guidance.
Anshul: based on the updated revenue guidance, improved gross margins, and operating leverage. We continue to expect positive adjusted EVDA for the full year 2025.
With that, I will turn the call over to Laura.
Laura: Thanks, Anshul. I'm proud of the progress we've made and even more excited about the milestones and opportunities that lie ahead. I'm confident in our continued procedure demand and expanding physician user base and accelerating product ramp.
Laura: We're well positioned to build on our track record of consistent revenue growth, margin expansion, and profitability. The future has never been brighter for SIBONE.
Speaker Change: Certainly. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. In one moment while we compile our Q&A roster.
Thank you. Thank you. Thank you.
Speaker Change: Our first question will be coming from Craig Bejew of Bank of America. Your line is open, Craig.
Craig Bejew: Good afternoon. Thanks for taking the questions and congrats on a very strong start to the year.
Craig Bejew: I wanted to start, I don't think I've asked you guys this in a little while, but
Craig Bejew: With the new products, the new channels, how should we think about the contribution from each of those on?
Craig Bejew: on the strong growth that you're seeing. And I know you might be reluctant to give a ton of detail there, but.
Craig Bejew: maybe help us think about how, you know, that active surgeon base is growing. Is it one product that brings in a surgeon and then expands to other products? Maybe just a little help how to think about that.
Craig Bejew: Yeah, happy to answer the question, Craig. So, as you know, we don't break down revenue by product or physician or procedure type, but I certainly can say that we're experiencing broad-based growth.
Craig Bejew: And we're really excited about the impressive pace of adoption of our new products that were launched in 2024. So that includes Intra, it includes Granite 9-5 and TNT, and all of those are helping to contribute to our accelerating growth.
Craig Bejew: I will also say that we experience double digit procedure volume growth across all of our modalities, so all of the different procedure types.
Craig Bejew: that we're talking about. So once again, this is very broad-based growth that we're seeing. And we also have record engagement levels across all the different call points that we're working with, whether you're talking about orthopedic and neurospine surgeons,
general ortho trauma surgeons or interventionalists.
Speaker Change: So, you also talked a little bit about the different solutions and the opportunity to sell multiple solutions to our different call points, and that's very true. There is a complementary nature to our solutions.
Speaker Change: And we're agnostic as to which solution is driving growth. Really, our strategy is to provide a comprehensive set of solutions, and we want to be top of mind with all of our different physicians. So, as you can see, the strategy is working from the strong results that we saw for this quarter.
Speaker Change: Great. Thank you, Laura. And maybe one for Anshul. Gross margin was very strong in the quarter, obviously. So maybe first discuss kind of what drove that.
Speaker Change: Even with your raise for the full year on the gross margin side, it still looks a little bit below where Q1 gross margin was. So maybe just talk a little bit about the thought of only raising slightly and any pressures that we may see on gross margin.
Speaker Change: in general how to think about gross margin through the rest of the year.
Speaker Change: Yeah, Craig, thanks for the question. So we're really pleased with our gross margin trends, the 80 basis points improvement.
Speaker Change: was great to see. A lot of that, as we mentioned in our prepared remarks, were a combination of better.
Speaker Change: than expected ASP. Most of that is based on the procedure mix. As Laura mentioned, you know, we had a nice spike in the number of procedures that use more than four granite implants in a procedure, and that was an uplift to the ASP.
Speaker Change: So that played out well. We've also got some efficiency initiatives that we've been working on over the last 12 months.
Speaker Change: in terms of optimizing our supply chain and as you get to scale, you start seeing some of the benefits of that play out in the gross margin as well.
Speaker Change: So, feeling really good about the trajectory we've been on over the last 12 months for us to stabilize and now to start seeing it grow and get closer to that 80% again.
Now in terms of
Speaker Change: Our assumptions for the rest of the year, we've continued to stay thoughtful, so even in our revenue guide, our assumptions
Speaker Change: incorporate sort of a low single-digit ASP degradation. Part of it is just the work that we're doing on the degenerative side, on the trauma side, which tend to use fewer implants, so the ASP for procedure can be lower.
Speaker Change: So that's point number two. Point number three is we are putting out more surgical capacity as we progress through the year.
Speaker Change: And as that depreciates, that impacts gross margin and we got some software costs.
Speaker Change: that will start getting depreciated as well. Now what the gross margin guidance doesn't account for is the better ASP potential as those four implant cases continue to get more ingrained with deformity surgeons.
Speaker Change: and then also any of the improvement benefits from our gross margin initiatives that may come up in the back half of the year. So there's potential for us to do better than that, but we wanted to see some of this play out before we incorporate that in our future guidance.
Thanks for taking the questions.
Thank you.
Speaker Change: And our next question will be coming from Dave Terkeley of Citizens. Dave, your line is open.
Okay, good evening.
Speaker Change: I know it's early in the year, and Anshul, thank you for all the detail. You know, we're looking at some impressive growth over the last several quarters. You know, we kind of positioned you guys as a 15 to 20, but you've been more like 25. And I guess...
Speaker Change: I'm not saying you'd want to guide to that necessarily, but I'm wondering if you're you made the comment amplified over the next 12 to 18 months in the prepared remarks to up front. I'm just
Speaker Change: Do you think there's a time where, you know, 20% plus might be more your bogey?
Speaker Change: Maybe what I'll do is I'll start here, Dave. Thanks for the question. And I'll talk about the quarter itself, and then I'll have Anshul talk a little bit about the
the guidance. So you're right, we had
Speaker Change: You can see that we're benefiting from demand and accelerating adoption of our products.
across our different procedure types.
Speaker Change: I'm also really happy about what we're seeing on the physician front with over 1,400 physicians performing a procedure in the quarter, which is up sequentially, which is unusual for us.
Speaker Change: The physician growth was broad-based. We saw it across ortho, neuro. Great progress with trauma surgeons and with interventionalists, too.
Speaker Change: highlighting the long-term leverage potential that we have with this asset light.
Speaker Change: model, and then we're significantly reducing our cash usage, and it's setting us up to get to free cash flow.
Speaker Change: We're really confident about the growth potential of the business, not just in 2025, but even beyond that.
Speaker Change: Laura alluded to some of the tailwinds in the business already. These tailwinds are...
Speaker Change: are truly secular, they're long-term, they're very specific to SI bond, so you know if you think about what's driving this sustained strong growth over the last several quarters.
Speaker Change: So we feel good that that's very sustainable. The second thing is, we're in the early stages of capitalizing on the physician enthusiasm for our products, especially the ones that were launched in 2024.
Speaker Change: So that should continue to accelerate, especially as we put more surgical capacity out there. As Laura talked about on the prior question, the broad-based engagement and the growth across all our call points
Speaker Change: That's, again, very, very exciting. And then the last piece is the reimbursement tailwind.
Speaker Change: So when you put all of that together, we're really excited about the future and it's not just on the top line but also on the bottom line because that will allow us to expand our EBITDA margins and also make significant progress towards being a sustained free cash flow business.
Speaker Change: Thank you for that. I think the two million dollar productivity was I thought more of a maybe a slightly longer term target. I think you said you're kind of there already. I guess that's I mean that's high versus anything but
Speaker Change: Can that continue to expand, I guess, given what you're saying about implants and procedures and docs being trained?
Speaker Change: of Territory Productivity, and we did hit it in this quarter.
significant territory productivity.
Speaker Change: So, for example, a deformity procedure can take 6 to 7 hours, and being able to leverage an agent for case coverage, it creates bandwidth for our territory managers, and it's giving them the ability to focus on market development and new physician training.
Speaker Change: Driving deeper engagement with existing physicians and all of that as you know is crucial to driving strong long-term growth
Speaker Change: We're now actually working with over 200 agents, and given the growth we're seeing across all of these modalities, we expect the number of agents to continue to grow.
Speaker Change: As we also said, we expect to get to around 100 territories in the next 12 to 18 months. So it's really this hybrid model that we're working with. We do feel confident that we can go well beyond the $2 million in revenue per territory and that's going to continue to allow us to gain additional operating leverage.
Thank you.
Speaker Change: One moment for our next question, which will be coming from Matthew O'Brien of Piper Sandler. Your line is open, Matthew.
Speaker Change: Hey, this is Shilan for Matt. Thanks for taking our questions and congrats on the really great start to the year.
Speaker Change: Hoping to hear more about the expected cadence of the new guidance, understanding, you know, usually take a yearly view of these things, but
Speaker Change: As I looked at my model, it's hard to find a quarter historically where you did not grow sequentially, you know, say,
Speaker Change: for the Q4 to Q1 kind of step down. But is it fair to say the expectation is to grow sequentially every quarter this year?
Speaker Change: And I guess what I'm really trying to get at is the implied exit growth rate in Q4, given the updated guidance is really in the high single-digit, low double-digit range. So, just trying to make sure I've got a good handle on how you view the guidance update today.
Speaker Change: Yes, so a couple things, right. So we're feeling really great about the business and as you said the strong start to 2025. A lot of wind in our backs from that.
Speaker Change: You know all the all the key metrics as that you think about from a forward-looking perspective physician growth physician density New product rollout all of them give us great confidence that you know the internal execution remains strong
Speaker Change: Now, you know, we are in this weird environment from a macro standpoint and, you know, as we put our guidance out there, we wanted to be mindful of the general macroeconomic conditions. So we took a prudent approach on our outlook this early in the year.
Speaker Change: Now, on your question on seasonality, you know, we don't think about the business in quarters, so we're very well positioned in terms of the long term.
Speaker Change: But when you think about seasonality in the business, when we introduce new products, the seasonality will be impacted by the pace of that new product rollout and adoption. So, you know, if you think about it over the last few years, as we've launched new products and we've expanded our call points,
Speaker Change: The Q1 seasonality, i.e. sequential decline from Q4, has been a bit less than what you normally see.
And similarly, when you think about...
Speaker Change: And a part of that is also the newer procedures that we're targeting with deformity and trauma. They're less subject to the constraints of the out-of-pocket deductibles.
Speaker Change: Third quarter is interesting. It's got a couple factors that play out, vacation trends, industry conferences.
Speaker Change: the normal seasonality in the business. Now, you know, our focus is to work through that, but that's in our guidance. And then like you said, fourth quarter tends to be a big, big fourth quarter for us. But you know, we think being thoughtful this early in the year is the right approach.
Speaker Change: in the context of the updated revenue guidance. So anything specific to point towards
Speaker Change: that additional spend, you know, and in Q1 you only grew OPEX by about 8%, so just curious to hear what will drive kind of the step down and leverage over the next three quarters.
Speaker Change: anything in particular. Thank you. No, happy to take that, Phil. So from an OPEX perspective, we're really pleased with the operating leverage we saw, not just in this quarter, but in recent years.
Speaker Change: which is an outcome of our strong revenue growth and just the operating discipline and excellence that
The entire team is demonstrated here.
Speaker Change: To your question specifically on the rest of 2025, there are three factors that played into our...
Speaker Change: 10% OPEX growth. Number one was the R&D investments that we expect to be elevated in the next three quarters. A lot of that is just the timing of some of the spend as we make progress on the two products that Laura's talked about in our prepared remarks.
Speaker Change: And then given the trends in the first quarter on GNA, we do expect GNA to be a bit higher this year.
Speaker Change: But even with that, if you think about the leverage for the year, it's going to be 1.75.
Speaker Change: Times revenue at the midpoint and even in the back half of the year like the next three quarters It's at 1.5 times. So still pretty healthy
Thanks so much.
Speaker Change: One moment for our next question. Our next question will be coming from Young Lee of Jeffrey's. Young, your line is open.
Young Lee: You know, the thing you previously talked about, maybe there's 8,000 spine surgeons.
go after a thousand-plus introvectionalists.
Young Lee: I just wanted to get a state-of-the-state on the Surgeon TAM given your expansion and product portfolio and also are you seeing that it's you know becoming easier or faster?
Young Lee: to convert some of these physicians to bring them on board. And if you're seeing some of the, you know, prior trained surgeons that might not be, you know, high volume users coming back into the funnel as well.
Speaker Change: Yeah, those are all really good questions, Young, and we are really proud of the track record of consistently growing our physician base and the double digits that's been going on for the last
four years at this point and
Speaker Change: And then I think you asked a little bit about this too, you know, as we are adding users, we're also observing.
Speaker Change: you know, additional cross modality synergies with our platform. So more surgeons doing more procedure types with us. So I had mentioned we had a nearly 45% increase in the number of physicians performing those multiple procedure types. So.
Speaker Change: You know, we really still are starting out in all of these different categories, and in spine we still have a long way to go, and interventional, we've done a good job of being able to reach out to those interventionalists and engage them directly with our field force. And then we're getting a lot of assistance from these third-party agents.
Speaker Change: performing their procedures to continue to grow at a healthy clip.
Thank you.
Speaker Change: All right, great. Very helpful. And then, I think, in the prepared remarks, you mentioned the reassignment of granted to a higher reimbursement goal. When should we expect to hear some more updates about that?
Speaker Change: Yeah, so we initially had seen the proposal from CMS and, you know, as you know, the surgeons are primarily focused on good patient outcomes and the reason why we've seen so much growth
Speaker Change: with granite and such rapid adoption is that the underlying technology addresses this failure issue at the base of a long construct.
Speaker Change: The majority, I should also say the majority of our cases that use Granite are actually commercial payers. It's over 60% of our pelvic fixation cases that are with commercial payers.
Speaker Change: So, we expect the adoption trend is going to continue to accelerate over time.
to grow and accelerate.
Thank you very much.
One moment for our next question.
Speaker Change: And our next question will be coming from Caitlin Cronin of Canaccord Genuity. Your line is open.
Caitlin Cronin: Hi, congrats on a great quarter. I guess just to start off maybe addressing a little bit the new products that you were talking about. You know the new product that's coming in the Q1 of next year, would that fall under
Speaker Change: Yeah, thanks for the question. So, you know reimbursement is always an interesting conversation, right? It's obviously something we don't necessarily control and so instead what we've done is
Speaker Change: We are just working on multiple product solutions to meet the needs of our physicians and of their patients.
Speaker Change: newer surgeons, as well as interventionalists. And now we have our intraproduct, which is particularly appealing to our interventionalist physicians that we're working with.
Speaker Change: So this is yet another product. We don't really want to talk about whether it's in 27278 or 27279. I think what's more important for us to talk about is our ability to provide the right solution.
Speaker Change: to the right physician for their patient needs. And that regardless of where the reimbursement comes out that we have the the products to provide the solution for them.
Speaker Change: The ability that SI Bone has to identify unmet clinical needs and to develop breakthrough devices. This is our third.
Speaker Change: Breakthrough device that's been granted by the FDA. So two of them on the market currently are granite product as well as our TNT product
Speaker Change: The new device is going to leverage our core technology and it targets our existing call points.
distinguished position. It's cementing us.
Speaker Change: as a category creator, but most importantly I think what investors should take away from this is the long-term opportunity that SI Bone has in front of us, that we have a sustainable growth platform for the future.
Speaker Change: material material part of your surgeon base they are at this point and then you know how are you thinking about you know your competitive position within within that call point
Speaker Change: Yeah, thank you. So to clarify, surgeons continue to account for the overwhelming majority of our SI joint dysfunction procedures.
Speaker Change: It's additive to our surgeon-led business, so our strategy remains to get access to the patient funnel by going after that subset of interventional spine physicians who really do not refer patients to surgeons.
Speaker Change: I had mentioned in my prepared remarks, we had a record number of interventional spine physicians perform procedures, and it's giving us confidence that our targeted strategy is working.
Speaker Change: Overall, we just have the most comprehensive portfolio to support interventional spine physicians who want to perform SI joint procedures.
Speaker Change: And it's reaffirmed by that strong interest in both TORC and INTRA.
Speaker Change: So, I did also mention that we have a new product that's launching and we think that that's also going to provide an additional solution to surgeons and interventionals starting in 2026.
Great, thank you.
Speaker Change: And our next question will be coming from David Saxon of Needham and Company. David, your line is open.
David Saxon: Great. Good afternoon, Laura and Anshul. Thanks for taking my questions and congrats on the quarter. So I have two One I'll ask on T&T And then the second I'll ask on profitability for Anshul. So Laura on T&T just given that it's
David Saxon: more of a recent launch, I guess. Can you talk about the traction you're seeing there? And then as the NTAP potentially comes in in October, how are you thinking about the pace of adoption for that product and cadence of, I guess, sales contribution leading up to and then?
David Saxon: and then afterwards you know that go live date and then I guess is there an analog to Granite when that product got the end tap a couple years ago?
Yeah, good
David Saxon: solutions that are being provided in in this day and in this time. So it's just another example of our ability to develop a unique anatomy specific solution that addresses this unmet clinical need.
with sacral insufficiency fractures.
David Saxon: From an adoption perspective, we're still only in the second quarter of the launch, but the ramp has actually been ahead of our own internal plan, and we're adding surgical capacity to meet the demand. We were also very excited to see the CMS proposal for an additional $3,960 in NTAP, which would be effective October 1st, 2025.
David Saxon: in the current payment that they receive. So it should be a really nice tailwind for the business and you did a comparison to Granite and we were on the market with Granite.
David Saxon: A very short period of time, only a couple of quarters, but, you know, between the ability to reach these surgeons with a differentiated product with the appropriate health economics.
David Saxon: We think that we have a really nice opportunity to grow the business late this year and into next year.
Speaker Change: Great, that was super helpful. Thanks for that Laura. And then Anshul, just on profitability. So you got to positive EBITDA in the quarter despite seasonality. If I heard your prepared remarks correctly, it sounds like you're giving kind of soft guidance for free cash flow in 26.
Speaker Change: So, kind of a two-parter here. So, this historical trend of dropping through 50% of revenue dollar growth to EBITDA, should we kind of think of that framework continuing? And then the second part of the question on free cash flow, you talked about getting to 100 reps.
Speaker Change: over the next year or so, you're adding a couple new products as well. So as you invest in those sets for the reps and the new products, kind of how does that work into your ability to get to free cash flow next year? Thanks so much, and congrats on the quarter.
Speaker Change: And the leverage potential in the business is really high, just given the dynamics in the business, the high gross margins, the asset-light nature of the business as well.
Speaker Change: Very similar to our expectations for 2025 now it may vary it may be higher in some years and lower in others Depending on where we are in our investment cycle, but you will continue to see that operating leverage and the expansion on the margin side
Speaker Change: On your question on free cash flow and our soft indication there, again, you know, a second consecutive quarter of positive adjusted EBITDA just reflects that operational discipline and the business momentum that we have.
Speaker Change: You know, the first half of the year generally tends to see higher cash usage because of bonus payouts and Q1 and sort of inventory buildup as you plan for the back half of the year.
Speaker Change: So when I think about the asset light business model, even with the new product launches coming up, you know, our general algorithm would be to get to cash flow breakeven 12 to 15 months after you get to adjusted EBITDA breakeven.
Speaker Change: So we're not providing exact timing, but based on what we see in the business, 2026 seems like a good inflection from a free cash flow standpoint as well.
Great, thanks so much.
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Speaker Change: Thank you and I would now like to turn the call over to Laura for closing comments. Oh, we do have one last question, excuse me, from Richard Kneewitter of Truist Securities.
Robbie: Richard, your line is... Hi, this is Robbie here for Rich. Thanks for squeezing me in.
Speaker Change: A lot of things seem to be going right for the company right now and, you know, growth, heavy growth mode.
The existing sales force seems to be hitting.
Speaker Change: or split territories, or is this the growth and the guidance, can that be achieved by really just higher revenue per rep? Thank you.
Speaker Change: Robbie, thanks for that question. As Laura talked about in one of the prior comments,
Speaker Change: From a territory expansion perspective, we do plan to get to about 100 territories over the next 12 to 18 months.
Speaker Change: That's part of our growth strategy, especially as we put out new products.
Speaker Change: The intent is to make sure that the reps have the bandwidth to be able to continue to drive deeper dialogue with our existing call points, as well as additional physicians come online as they look to adopt a solution. So that's been part of our strategy to get to a hundred.
Speaker Change: Now the commercial team has done a really excellent job in getting to that two million dollars per territory.
The hybrid model has played a role in that.
Speaker Change: for sure but that's more focused on the deformity with granite and also on the potential trauma side so
Speaker Change: As you look into the future, we will continue to see productivity improve. It'll be a bit more at a gradual pace, especially as we're bringing on some of these new reps.
Speaker Change: over the next 12 to 18 months, but you won't see that go negative. You will continue to see that improve. Now, the pace will, again, vary at where the growth in the business is coming from and how quickly are we getting to those 100 territories.
Speaker Change: At this point, I wouldn't pencil in what that next target is. You know, we've been very focused on getting to that 2 million. We know we can do better than that. But it's too premature for us to say what that next milestone will be.
Speaker Change: Great, thanks. And then maybe one last one for me. Just on doctors doing more than one procedure, that's been kind of accelerating based on the kind of metrics you've been providing over the last several quarters. Is there maybe a target that you have in mind or that you're willing to disclose publicly in terms of where you think, you know, your surgeon base can...
Speaker Change: can eventually land like 80% of them or you see as kind of amenable to more than one procedure Any kind of commentary there would be great. Thank you very much
Speaker Change: Ravi, good question but again we're early in our journey of driving physician density. When you think about physician density it's coming from a few pockets. The first one is
Speaker Change: The SI joint dysfunction, for docs that are doing the SI joint dysfunction procedure, being able to work with them on the degenerative spine side with granite as they do pelvic fixation or for the procedures that end at the sacrum.
Speaker Change: We're still scratching the surface on that 9-5 was an important
launch. Thank you. Thank you.
Speaker Change: because that target, that market, so we're nine months into that launch. So a lot of runway there. When you think about sort of the surgeon base we've built.
Speaker Change: since the inception of the company, that's a big surgeon base.
Speaker Change: where the bread-and-butter procedure is the degenerative spine procedure, so a huge opportunity there.
Speaker Change: And then we're also seeing success on the trauma docs performing SI joint dysfunction. So when I think about the business long-term, we have a long runway in terms of continuing to add the number of docs, especially with the expanded call points.
Thank you.
Speaker Change: I'm showing no further questions. I'll now turn the call back to Laura for closing comments.
Laura: Yeah, I just wanted to say thanks to all of you for your participation in our call today is as I'm sure you can tell we Are energized by the opportunities before us. So thank you all for your interest in SI bone. Goodbye
Thank you.