Axonics, Inc.

Good day and thank you for standing by. Welcome to the Exonix second quarter 2023 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during a session, you will need to press star 1-1 on your telephone. You will then hear an automated message. Your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I will now hand the conference over to your speaker today. Neil Blodker, please go ahead.

Thanks, Victor. Good afternoon, and thank you for joining Exonix's second quarter 2023 results conference call. Presenting on today's call are Raymond Cohen, Chief Executive Officer, and Dan Deren, President and Chief Financial Officer. Before we begin, I would like to remind listeners that statements made on this conference call that relate to future plans, events, prospects, or performance are forward-looking statements. as defined under the Private Securities Litigation Reform Act of 1995. While these forward-looking statements are based on management's current expectations and beliefs, these statements are subject to a number of risks, uncertainties, assumptions, and other factors that could cause results to differ materially from the expectations expressed on this conference call. These risks and uncertainties are disclosed in more detail in Axonix's filings with the Securities and Exchange Commission, all of which are available online at www.sec.gov. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today's date, July 27, 2023. Except as required by law, Exonix undertakes no obligation to update or revise any forward-looking statements to reflect new information, circumstances, or unanticipated events that may arise. With that, I'd now like to turn the call over to Ray.

Thanks, Neil. I'd like to welcome everyone joining this afternoon's call. So with strong company-wide execution, Exonix generated record results in the second quarter. Revenue was $92.9 million in the second quarter, an overall increase of 35% compared to the prior year period. More specifically, Cyclone modulation revenue was $74.2 million, an increase of 33% compared to the prior year period. We are particularly proud of this level of growth considering this is the first quarter in which we anniversary last year's launch of the F-15 recharge-free system, which is currently our top-selling S&M system. Revenue growth is being driven by a combination of higher utilization and share of wallet in existing accounts, as well as the addition of competitive accounts that have converted to exonics. Internationally, our S&M revenue grew by over 50% compared to last year as a result of a measurable contribution from our recently deployed direct sales force in Australia. Bulkamed revenue was $18.7 million, an increase of 41% compared to the prior year period. Results were driven by increasing reorder rates from existing accounts the onboarding of new accounts, and the addition of new sales reps primarily focused on promoting BulkMed. Our gross margin in the quarter was 75.6%, up from 72.8% in the prior year period. The most exciting news for us is that we generated over $18 million of adjusted EBITDA in the quarter as we continue to benefit from the operating leverage inherent in our business model. Dan will discuss our margin expectations and financial performance outlook in further detail in his prepared remarks. I would now like to provide several other corporate updates. On the reimbursement front, CMS recently published proposed Medicare payment rates that will take effect in the calendar year 2024. In summary, the proposal includes S&M facility fees that would increase by 1.5% in surgery centers and be flattish in hospital outpatient departments. As for physician fees, while the conversion factor was down 3.4% across the board for all specialties, physicians performing sacral neuromodulation would actually see an increase due to the work RVUs increasing for implanting the neurostimulator. More specifically, physicians performing an external trial with a PNE in their office, followed by a full implant in a facility, would see a 50 basis point increase in reimbursement under the proposal, while physicians who perform an advanced trial in a facility followed by an implant would see a 23% increase in reimbursement. Our commercial team currently accounts for nearly 60% of Exxonix's 725-person full-time employee headcount. We have approximately 400 commercial team members in the United States, of which 185 are directly involved in selling or sales management, with the balance of the personnel being field clinical specialists, field marketing specialists, and remote therapy support specialists. Internationally, we now have approximately 25 field-based personnel, and they're located in Western Europe and Australia. We are well staffed at this time and expect only a modest increase in our commercial team headcount for the balance of 2023. Turning to the Exonix Find Real Relief direct-to-consumer advertising campaign, we continue to generate more than 10,000 qualified leads each month. A qualified lead is those individuals that complete a symptom questionnaire on our website telling us about their symptoms and providing contact information. In addition, many of our customers tell us that patients come into their practice asking about Exonix therapy after seeing our ads on television or on the Internet. The campaign continues to generate goodwill within our physician customers as they are grateful that we are helping to ensure that adults with these conditions are seen by a clinician and advancing along the care pathway. Now, we continue to note that over half of the individuals filling out these questionnaires are treatment naive, underscoring the notion that people don't know that it's not a normal part of aging to leak urine and that advanced therapies exist to treat incontinence. Our call center continues to work diligently to connect qualified leads with a physician specialist in their local community. Now, it's been about 18 months since the launch of the DTC program, and as we anticipated, it is yielding measurable FNM and bulk med revenue and an encouraging return on investment. Given the success of the DTC program, we are in the process of launching new commercials related to the conditions of stress, urinary incontinence, which is served by Bochumet, or fecal incontinence, which is part of our S&M system in the second half of this year. Now, turning to the IP lawsuit with our competitor, we will limit our comments on this topic to the following. As we have previously said and continue to maintain, we do not believe that Exonix infringes on any of our competitors' patents, And this case is simply litigation to create a financial and legal burden on exonics in an attempt to slow down our market penetration. Now, recently, the United States Court of Appeals for the Federal Circuit reversed the decision of the PTAB that the time lead patents asserted against exonics were valid, finding instead that the PTAB committed legal errors in its analysis. The Federal Circuit remanded the matter to the PTAB for another review consistent with its opinion and direction. Now, there are a few more patents under review by the Federal Circuit, and we anticipate that the appeals court decision will be forthcoming in a couple of weeks. Because of these developments, the U.S. District Court for the Central District of California issued a stay on the litigation proceedings pending the outcome of the proceedings before the PTAB. As a result, the jury trial previously scheduled for August has been postponed indefinitely. Now, turning to product development initiatives. We're making really good progress on the foramen finder lead placement technology we acquired from Radian in April, and we continue to expect it to be commercially available in mid-2024. Another project we're working on internally is a new external trial system that aims to enhance the PNE trial experience, making it more comfortable for patients and more convenient for physicians. Now, in closing, we feel like, or closing from my perspective, we feel like we're just scratching the surface of really what is possible in this under-penetrated and under-treated patient population. Now, with that said, I'm going to turn the call over to Dan, who has some prepared remarks with respect to the financial results.