SI-BONE, Inc.

Good afternoon, and welcome to SIBOOM Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's call. As a reminder, this call has been recorded for replay purposes. I would now like to turn the call over to Matt Baxo from the Gilmartin Group for a few introductory comments.

Thank you for participating in today's call. Joining me are Laura Francis, Chief Executive Officer, and Anshul Maheshwari, Chief Financial Officer. Earlier today, SI Bone released financial results for the quarter ended September 30, 2021. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. These forward-looking statements are based on the company's current expectations and inherently involve risks and uncertainties. These risks include the impact of COVID-19 pandemic will have on the ability and desire of patients and physicians to undergo procedures using the company's products, the duration of the COVID-19 pandemic, and whether the COVID-19 pandemic will reoccur in the future. Other forward-looking statements include our examination of operating trends and our future financial expectations, such as expectations for hiring, surgeon training and adoption, active surgeons, new products, clinical trial enrollment, and reimbursement decisions, and are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place under reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section of our most recent Form 10-K and Form 10-Q filed with Securities and Exchange Commission. SI Bone disclaims any intention or obligation except as required by law to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, November 8, 2021. And with that, I'll turn the call over to Laura.

Thanks, Matt. Good afternoon, and thank you for joining us. Before I cover our third quarter results, I want to share some exciting news on the reimbursement front. A few weeks ago, we announced that UnitedHealthcare, the largest commercial payer in the U.S. with over 45 million members, transition to an exclusive IFUSE-only coverage policy for minimally invasive SI joint fusion effective October 1st. With this updated policy requiring the use of IFUSE for minimally invasive SI joint fusion, UnitedHealthcare joins more than 35 other health plans, including Anthem, Humana, and many Blue Cross Blue Shield Association health plans that collectively cover approximately 160 million people. the majority of the commercially covered population. With near universal coverage for our procedure in the U.S., reimbursement provides a strong tailwind as we look to 2022 and beyond. Now onto the quarter. I'm pleased to report that SI Bone had a record revenue quarter as our employees continued to relentlessly execute through this unique operating environment. In the third quarter, we generated revenues of $22.3 million representing growth of 9% compared to the third quarter of 2022. It's important to point out that the third quarter 2021 was negatively impacted by COVID deferrals, while the third quarter of 2020 benefited from COVID rescheduling. Additionally, our sequential growth in the third quarter, while moderated by the surge in Delta variant hospitalizations, highlights the growing demand for our products and solutions. Let me discuss the impact of the Delta variant on our U.S. operations in the third quarter. We had strong operating momentum through early August when the elected procedure volumes were disrupted as hospitals prioritized resources to deal with the spike in Delta cases. The impact, which was regional, started in Texas and Florida and then extended to other regions. We believe that we were able to better manage through Delta than many of our peers based upon the demand for our products and excellent execution by our field team. We're also well-positioned because approximately 80% of our procedures are performed in an outpatient setting or at an ASC. As such, in regions impacted by the Delta surge, many of our surgeons were able to move procedures to non-impacted sites of service. According to our booking records, Delta resulted in approximately 160 U.S. cases being deferred in the third quarter, representing approximately $1.4 million in revenue. The deferrals were almost evenly split between August and September. To put the impact in context, in the fourth quarter of 2020, we estimated a $1.25 million revenue impact from deferred cases. While these are cases we know to be deferred, we believe the impact of Delta was higher when accounting for potential cases that were not scheduled. Based on our experience from prior COVID surges, as infection and hospitalization rates decline, we believe we'll recapture the previously deferred cases over the next few months. As we enter the fourth quarter, we're encouraged by the continuing decline in new infections, fewer deferrals, and growing surge in case backlog. Approximately 35 cases were deferred in October, a significant decline from what we saw in August and September, and an indication of progress toward a more normalized operating environment. The resiliency of our third quarter results reaffirms that our investments and growth initiatives over the last year are delivering and have positioned us to be a much stronger company as we emerge from the pandemic. Now, let me provide you an update on these initiatives as we look to extend our leadership position and drive durable long-term growth. Starting with sales infrastructure expansion, at the end of the quarter, our 135-person sales organization was comprised of 78 territory managers and 57 clinical support specialists. We continue to target ending the year with approximately 85 territory managers and 65 clinical support specialists. Moving on to surgeon engagement, Similar to procedure cancellation trends due to Delta, total active surgeons increased sequentially through August to an all-time high, but declined in September to approximately 630 surgeons. When segmenting our surgeon data, the sequential decline experienced in September was primarily due to deferral of inpatient procedures, including adult deformity cases. As of October, we saw recovery in active surgeons to above June levels. Our simulator technology continues to remain a cornerstone of our surgeon training program, which was highlighted once again during the recent surge in COVID cases. In addition to efficiently training surgeons, the simulators allowed us to reengage inactive surgeons and also serve as an effective sales engagement tool. Specifically, over half of the surgeons trained in the third quarter were trained using the simulator. While still early days, we're excited about the steady growth and adoption by surgeons trained on the platform. As part of our long-term strategy to grow our active surgeon base, we're investing in academic programs to educate residents and fellows on primary SI joint diagnosis and treatment. Since inception of the program, we've taught approximately 150 academic programs in the US, resulting in the training of approximately 800 surgical residents and fellows. Based on our experience, engaging fellows and residents at academic centers can accelerate the conversion to active surgeon once they begin practicing. In the third quarter, more than half of the training events were with new academic centers, demonstrating the growing interest in these programs. Finally, on our patient awareness initiative, in the third quarter, we methodically accelerated our investment in targeted digital marketing initiatives to educate and empower patients as they manage through their SI journey. We've increased our investments in search and social media, as well as added initiatives in display and native digital marketing to reach the large population of patients who are in chronic debilitating pain due to SI joint dysfunction or degeneration. We estimate that there are approximately 1.4 million of these patients in the US, many who are currently being treated with opioids and multiple steroid injections per year. Our digital initiatives will allow us to be data-driven, technology-enabled, measurable, and allow for continuously improved marketing. We expect to see the revenue impact from these programs beginning in 2022. With that, I'll now turn the call over to Anshul to provide more detail on our financial results.