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.

Thanks, Laura. Good afternoon, everyone. Our third quarter total revenue was $22.3 million, representing growth of 9% compared to the prior year period. U.S. revenue was $20.4 million increasing 8% compared to the prior year period. International revenue was $1.9 million, increasing 31% compared to the prior year period. Even with the Delta headwinds in the quarter, on a sequential basis, total revenue did grow compared to the second quarter of 2021, which we believe demonstrates the strength and durability of our business. It is important to point out that the third quarter of 2020 was a different operating environment compared to the third quarter of 2021, making for a difficult comparison. Specifically, during the third quarter of 2020, we were benefiting from rescheduled cases canceled due to COVID during the first and second quarter of 2020, whereas in the third quarter of 2021, elective procedure volumes were significantly disrupted by the spike in Delta cases. Comparing our performance to third quarter of 2019, worldwide revenue grew 38%, with the U.S. revenue increasing 37% and international revenue growing 43%. Gross margin for the third quarter of 2021 was 89% compared to 87% in the prior year period, as lower inventory write-downs more than offset higher cost of operations to support the growth of the business. Gross margin in the third quarter of 2020 was impacted by increased write-downs of iFuse-related inventory because of faster-than-anticipated adoption of iFuse 3D. Operating expenses increased 25% to $33 million in the third quarter of 2021, as compared to $26.5 million in the prior year period. The increase was driven by higher sales and marketing costs related to increased sales hiring, research and development expenses for new product, and increased stock-based compensation expense. The third quarter 2020 operating expenses were lower due to preemptive steps taken in response to COVID-19 to reduce discretionary spending. Our net loss was $15.9 million or 48 cents per diluted share for the third quarter of 2021 as compared to a net loss of $9.5 million or 33 cents per diluted share in the prior year period. Net loss included $1.8 million in debt extinguishment cost as part of our refinancing in the quarter. As of the end of the quarter, our cash and marketable securities were approximately $160 million and long-term borrowings were approximately $35 million. Given our strong operating performance and solid financial profile, in August, we refinanced our outstanding debt and replaced it with a new $35 million term loan with Silicon Valley Bank at more attractive terms. As part of the refinancing, we reduced our debt balance by $5 million. Moving to guidance. Our performance in the third quarter gives us confidence in the strong demand for our procedures. We do remain cognizant of the near-term uncertainty surrounding the severity and duration of COVID-19 and the potential implications for elective procedures and healthcare infrastructure. Based on the impact of COVID-19 on elective procedures in the third quarter and into October, we are updating the full year 2021 total revenue guidance to be approximately $89 to $90 million, representing growth of 21 to 23% compared to full year 2020. I will now turn the call over for questions. Operator?

Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by. We compile the Q&A roster. Our first question comes from Brandon Folks with Kent or Fitzgerald. You may proceed with your question.

Hi. Thanks for taking my questions, and congratulations on the quarter in a tough environment. Hi, Brandon.

Hi.

Can you just elaborate maybe a little bit on some of the pushes and pulls on that revenue guidance? Obviously, it's quite a tight range. But that said, just any color in terms of what you're seeing now in the market, you know, have you sort of assumed a status quo through the end of the year? So just any color there. And then maybe just some updates on IFU's talk, just any color on adoption there. Thank you.

Great. Thanks, Brandon. So our guidance does reflect a step up sequentially between Q3 and Q4. And as we mentioned, we did give quite a bit of detail in our prepared remarks in terms of what we saw in terms of cancellations. And as I mentioned, the operating environment in October did continue to improve, but We also recorded approximately 35 additional deferrals or around $300,000 in cases in total. The factor which is harder to quantify is the impact of unscheduled surgeries as patients or surgeons or hospitals delayed treatment due to Delta. The way that we're looking at this is that we're viewing October as a stabilizing month, and our expectation is for November and December to continue to improve. But our guidance does assume some impact of Delta through the fourth quarter, given the number of lingering macro constraints that are out there. And then we've also modeled some prolonged recapture of you know, with the third quarter deferrals and into the fourth quarter, which is historically the busiest time of the year for us. So we've incorporated all those factors into our guidance. That gets us to the $89 to $90 million for this year, growth of 21% to 23%, which is implying revenue for the quarter of of 24 to 25 million. And just to reaffirm, as we look past COVID, we really do feel that the business is set up extremely well. Even in this environment, you can see us growing between Q2 and Q3 in terms of sales, growing once again sequentially for Q4 as our expectation based upon our guidance. And we think that's coming from new products that are driving growth and adoption, our expanding surgeon base, talented and growing sales force, and fantastic reimbursement. So it really puts us into a strong position as we look at 2022 and beyond. Now, in terms of torque, while it's only been two quarters since the full launch, we're quite pleased with the strong performance of torque across trauma and competitive conversions. We see it as a great addition to our portfolio with iFuse 3D, which is the gold standard for SI joint fusion. And then we also have our iFuse bedrock technique for adult deformity. And, you know, those solutions really provide us with a leadership position in the sacral pelvic surgical solution space.

Great. Thank you very much. I appreciate all that information. It's very helpful.

Thanks, Brandon.

Thank you. Our next question comes from Drew Ranieri with Morgan Stanley. You may proceed with your question.

Hi. Thanks for taking the question. Just to look a little longer term, I mean, you're growing above 20% from your guidance for 2021, but how should investors think about 2022? You're going to be entering the year with a bigger sales force. essentially universal coverage, better reimbursement, but just any high-level thoughts about headwinds or tailwinds as we should be thinking about for 2022? And do you consider yourselves to still be a 20% plus top-line grower? Thank you.

Thanks, Drew. You know, at a macro level, we're encouraged by the improvement in the operating environment since September and We continue to see strong new case volume growth, but the cancellations in October, they just remind us that Delta is still there and makes things somewhat unpredictable in the near term. And since we're dealing with a lot of macro uncertainty, we really don't think it's prudent to make comments or provide any official 2022 guidance at this time, but But again, we feel very confident in our long-term potential. We're aggressively investing in our differentiated product development strategy, our commercial infrastructure, and we think that we can drive strong growth in the years to come. And so that's really how we're thinking about things at this point in time, and we'll obviously provide more information on our next earnings call.

Understood. And Just with some of the reimbursement and coverage changes recently with United, can you talk more about any initial feedback you're seeing from the sales force as an opportunity to reengage surgeons that have maybe been on the sidelines since there wasn't necessarily the best coverage there, and then just what other opportunities you have to get more exclusive arrangements over the next six to 12 months? Thanks for taking the questions.

Thanks, Drew. There are really two very recent changes in reimbursement that were major developments. So you mentioned specifically United Healthcare, which is the largest commercial payer in the country with over 45 million covered lives, and they're transitioning to covering SI joint fusion procedures only. when using iFuge was a huge win for us. And it just once again validates the clinical evidence that supports iFuge as the gold standard for SI joint fusion. And we also had that coming on the heels of the Anthem exclusive in July. And, you know, Anthem was not covering previously. And so we The UnitedHealthcare decision was one of going from a general policy to an exclusive policy. Anthem was non-coverage to coverage, and not just coverage but exclusive coverage. And based upon those two things alone, we now have 160 million exclusive covered lives in the United States. So how do we think about things immediately, and how do we think about things going forward? Since we received the exclusives from Anthem and United, our sales and marketing teams have been reaching out to thousands of surgeons to educate them on these changes. In the case of Anthem, we reached out to patients who were previously denied, and we've been working with them to help them get the procedure covered. And so there are a lot of marketing activities around these changes to make sure that surgeons are aware. and those that were inactive because of coverage challenges. We're focusing on those surgeons, but then also on approximately 6,000 surgeons who have yet to be trained and treat a patient. And so it does provide a tremendous tailwind to us going into 2022. It also provides a strong competitive moat as well because we do know that both of those payers are enforcing the exclusive policies.

Thank you. Our next question comes from Craig Bejulip. Thank you, America. You may proceed with your question.

Good afternoon. Thanks for taking the questions. Hi, Laura. Let me start with, and I know you talked about some of the headwinds, COVID headwinds that you could potentially see in Q4 or have thus far and still may see, but wanted to get your thoughts on what you're seeing from a hospital staffing shortage, and I I know since you're outpatient ASC-based or the majority is outpatient ASC, it seems to be less of an issue, at least listening to some of the other companies that have reported. But we just love your thoughts on what you're seeing and, you know, if you see that impacting procedure volume during the quarter.

Yeah, it's a good question. And as we mentioned, I'm really pleased with the execution of the team in the third quarter. I think that not to underestimate the amount of effort that went into continuing to grow between the second quarter and the third quarter and continuing to grow sequentially into the fourth quarter, I really do think says a lot about the execution of our field team. But I would also say that we are less impacted by some of the staffing shortage issues that are out there since around 80% of our procedures are performed in an outpatient or ASC. But as you can see from the cancellations and delays that we talked about, we're definitely not immune to those or to the impact of staffing shortages in the OR. We've heard anecdotally that we're aware that some surgeons are building backlogs. I've heard numbers from three to four months of cases due to capacity issues. And so assuming that hospitals are able to iron out those issues over the next few months, it should represent an additional opportunity for growth in 2022.

Got it. Maybe a quick follow-up on that. You guys have bounced back relatively quickly in prior COVID waves. And I guess to the extent that I know you talked a little bit about what you expect for Q4, but do you expect to see a similar bounce back as kind of what you've seen previously and I guess the second part of that, and it's related to the staffing shortages, do the staffing shortages create a bit of an issue to work through that backlog? Because that backlog seems a little bit longer than what you might have seen in previous waves.

Yeah. I mean, I would say once again that we actually feel quite good about the momentum in the business and the you know, just seeing before the deferrals in the third quarter where our bookings would have been, it gives us a lot of confidence in the business going forward. But, you know, while we continue to experience an improvement in the operating guidance environment, our guidance did assume some impact from Delta in the fourth quarter. And we even gave the numbers for October. And it does show that you have lingering macro effects and constraints that are currently out there. So we have actually modeled a longer than normal recapture curve for the third quarter deferrals, even though the fourth quarter is historically already the busiest time of the year for our surgeons. But that could also represent some upside for us if we're able to more rapidly recapture those deferred cases.

Great. That's helpful. Thanks, guys.

Thanks, Craig.

Thank you. Our next question comes from Kyle Rose with Kennecourt. You may proceed with your question. If your line is on mute, please unmute. Our next question comes from David Saxon with Needham. You may proceed with your question.

Hi. Good afternoon. Thanks so much for taking the questions. Hi, David. My first is – hi, Laura. My first is just on Torque. I mean, I think the low-hanging fruit is in that primary SI joint fusion kind of bucket. So how should we think about your progress converting those docks? Has that opportunity mostly been realized, or is there still a substantial route to run?

Yeah, it's a good question. I think our commercial team has really done an exceptional job in targeting competitive surgeons to drive the initial adoption momentum. And, you know, we obviously know which surgeons are performing SI joint fusions using competitive products because, In most cases, we train them on the procedure, given that we were the pioneer in this space. So we're really pleased in this particular area of competitive conversions for those surgeons that are using TORC for SI joint fusions. But we're also really excited about the opportunity in trauma, because TORC was primarily developed for trauma, which we're estimating is a $350 million new adjacent market for us with the ancillary opportunity actually in the competitive SI joint fusion conversion. So we're really pleased with how the product is being received at this point, especially with competitive SI joint fusions. Trauma represents a very large market opportunity for us. going forward as we're targeting those surgeons. And it's going to really help us to expand the market and extend our leadership position.

Okay, that's helpful. And then just on the Salesforce and the training simulator, have you seen any change in kind of reps as they ramp up the productivity curve? Does that training simulator help them, you know,

accelerate productivity faster or um any color there would be helpful thanks so much yeah we are actually seeing some impact from the simulator so the simulator uh can be used for training of new surgeons um that was the the primary purpose of developing the simulator technology and uh You know, it eliminated some significant bottlenecks for us, so it's been a big benefit to us from that perspective. We've also been using the simulator a lot with inactive surgeons as well because those surgeons have performed procedures and usually just need a brush-up, and the simulator has been great from that perspective. But the third area where the surgeon... the simulator is being used is it's actually become a very attractive sales and marketing tactic for our sales force. And so what we're actually seeing is that our territory managers are actually going into surgeon offices sooner than they normally may have. So typically, the salesperson is going to focus on the prevalence of SI joint dysfunction and degeneration, and they're going to focus on the diagnosis. And the simulator has provided a new sales tool for the sales force to go in and talk about the procedure itself and then focus on prevalence and diagnosis. So it actually has really helped our sales team to to engage earlier. And so, as you know, it takes six to 12 months in order to really get a surgeon up and running and going, but the simulator has gotten the clock ticking on a lot of those surgeons.

Great. Thank you.

Thank you. Our next question comes from David Rescott with Truist Securities. He may proceed with his question.

Hey, guys, thanks for taking my questions here. I appreciate, I guess, the level of transparency you gave so far just around cancellations in Q3 and into October. But at this point, I mean, you mentioned, I think, 160 in Q3, 35 in October so far. Do you get a sense, I guess, if those procedures have either been rescheduled or made up at this point? And has there been, I guess, any procedures so far that have been canceled in November? I think just getting a better sense for how these canceled procedures get rolled into the mix would help us, I think, better understand where we see the growth of the company going forward.

Yeah. You know, I don't have as much visibility into the rescheduling of cases. I have a very good understanding based upon the information in our system of what has actually been canceled. But what I can tell you is how this has played out. This is the third surge that we're dealing with at this point. And Typically, you'll have a couple months, two to three month period where there's a lot of challenges, elective procedures are being canceled, and then you'll have a stabilizing month and then you'll usually see an increase in cases because you have your new cases and then you have your rescheduled cases as well. You know, our guidance reflected this step up between Q3 and Q4, so it does take some of that into consideration. But, you know, the assumption is that it's going to take a little bit longer this time because of the lingering effects of COVID that are here and maybe some of this – you know, the issues with staffing in the hospitals. But as I said, I think that we may have an upside opportunity if we do, in fact, see these cases come back sooner.

Okay, that's helpful. I guess, you know, I know you provided some commentary so far just on 2022, and obviously don't expect you to comment on growth there. But I mean, I think in the first quarter of 2020, the business, you know, prior to the impact of COVID was was on track to deliver kind of 25% to 30% growth in that quarter. And I guess as we think about some of the guidance that you've laid out for this year and then, you know, thinking about historical growth rates in Q1 of next year, I mean, typically there's kind of this sequential step down in Q4 over Q1. And I guess just based on the momentum of the business as well as where you see some of these elective procedures or some of these canceled procedures getting rescheduled, Do you think it's fair to think about, I guess, sequential growth in Q1, or should we see some of these more historical-type sequential growth rates quarter over quarter in Q1?

We've definitely been making investments in the business to continue to drive accelerated growth. So as you had mentioned, before the pandemic, we were getting into – the range of growth in the high 20s in terms of the business. And those are the sorts of investments that we're making in the business right now. All of this is, this picture is muddled a little bit by the situation with COVID. But as a company, we've really never been in a stronger position. Over the last 18 months, we've been able to reach substantially universal payer coverage, including exclusive coverage for 160 million covered lives. We have 135 people in the sales force, and it's growing and driving a deeper dialogue with our surgeons. Our active surgeon base is expanding. You know, our product portfolio is increasing as well. And, you know, even as you look at our case volume growth in this unusual environment, it substantiates the growing underlying demand for our solutions. So we feel really good about our setup here. But, you know, these investments will take about 12 months to truly have the impact that we're looking for. And And COVID may impact timing to a certain extent, but we do remain confident that we're going to drive durable, strong growth into 2022.

Okay. Thanks for getting the questions.

Thank you.

Thank you. Our next question comes from Dave Turkley with JMP Securities. He may proceed with your question.

Thanks. Sorry, I was jumping back and forth a little bit this evening, but... I don't know.

Glad you joined us, Dave.

Yeah, well, we're always here, but it's challenging sometimes. I know it. Looking at your margins, certainly doesn't seem like there's anything going on that looks different, but love to get your thoughts sort of on labor, material, input costs, and any trends that you're seeing there change at all.

You know, we've been fortunate. We haven't been experiencing any significant supply chain issues with our implants. You know, we did talk a little bit on our last call about experiencing longer than normal delivery times with some of our instrumentation suppliers, and that's everything from issues with raw materials, labor, capacity constraints, and And while those delays have not impacted our ability to ensure our surgeons have uninterrupted access to our solutions, we are proactively working with our suppliers to plan for our demand and ensure availability of inventory to support future product launches as well as our revenue growth plans. But overall, you can see our growth margins are in a very strong position. position. They continue to hold up very nicely, and we've navigated quite well through the supply chain challenges. The only issue that we ran into was more on the new product side, but even there, I think our team has done an extraordinary job managing through things.

And then as a quick follow-up, these exclusive coverage decisions, does it help you all with recruitment, with your sales talent? Are they aware of these, and are they therefore then positioned in some of the territories where maybe these insurers are more populated?

Absolutely. This is the work of our sales team. It's really an educational sale that our sales team performs here, and they really need to understand the needs of each of the surgeons, and that includes all of these decisions on – on insurance coverage and especially the exclusive coverage decisions. So our sales team and our marketing team have been reaching out proactively to thousands of surgeons over the last few months. First of all, with the decision by Anthem in July to, first of all, cover and secondly, cover exclusively and then to receive the decision from UnitedHealthcare to switch from a general policy to an exclusive coverage policy. So you're talking about the majority of covered lives that are exclusive to IFUs. It's a real testament to the quality of the clinical data that we have out there. And yes, it does certainly help to attract top salespeople who are looking for that sort of a competitive advantage and also to be a pioneer in this particular space. Thank you.

Thank you. And as a reminder, to ask a question, you'll need to press star 1 on your telephone. Our next question comes from Kyle Rose with Canaccord. You may proceed with your questions.

Great. I'm going to try this a second time here. Hopefully you can hear me all right.

Hi, Kyle. Yes.

Hi. Good afternoon or good evening. So, yeah, look, a lot's been asked. The one thing I just wanted to ask was just some of the dynamics on the active accounts. I understand, obviously, you know, the accounts are down. You had some headwinds in the quarter just around everything Delta-related. But you also have some big tailwinds when I think about, you know, Anthem. You've got United flipping positive or United flipping exclusive. And you're talking about using the simulators to bring back some of the, I guess, dormant accounts. Maybe just help us understand what we're not seeing from the active account base and just what's really happening out there as far as when the Delta and the COVID headwinds fade away, will we see a strong bounce back in accounts? I'm just trying to understand what's really happening below the surface there with your sales team.

Yep. Yep. I think you actually kind of hit some of the high points already. So when we were looking at our active surgeon numbers in July and in August, we were hitting all-time highs on those active surgeon numbers. And then we had a drop in September, and we really dug into what was going on with our active surgeons. And what we noticed is that They were attributable to typical inpatient procedures, and they included adult deformity procedures. And when we think about the bounce back in active surgeons in October, which went back to above our levels that we were at in June, You know, there were likely a couple of factors that, you know, Delta had a transient impact on the inpatient and hospital-based surgeons, including those who are performing bedrock lung construct procedures. So if things open up, these surgeons are resuming their procedures. And then also the fourth quarter is seasonally a strong period for procedures because patients have met their deductibles and there's pent-up demand for from the patient as well as the backlog. And that's before you even think about the potential for rescheduled cases. So we certainly expect to see those numbers continue to all-time highs by the end of the year.

Okay, great. And then maybe just some of the early conversations your sales force has had with some of those dormant accounts or accounts that were Were previous customers, for whatever reason, whether it's insurance coverage or not, are no longer users? How does that re-engagement with a physician, how does that productivity curve of the physician change relative to just a de novo or a new customer?

Yeah, the inactives that move to active typically take less time because you're not necessarily convincing them of prevalence They understand the diagnosis already, and in fact, they're usually just getting a refresher on the procedure. With that said, they do have to start regularly diagnosing patients once again. And so let's say that a completely new surgeon is going to take 12 months to really get to regularly diagnosing and treating patients, an inactive to active surgeon is more in the six-month range, so it's on the lower end of that.

Okay, great. Thank you for taking the questions.

Thanks, Kyle.

Thank you, and I'm not showing any further questions at this time. I would now like to turn the call back over to Laura Francis for any further remarks.

Thanks, and thanks to all of you for joining the call today. You know, the performance in the quarter reaffirms the underlying demand for our solutions, that it's growing, and it gives me confidence in our ability to drive strong growth in 2022 and beyond. And we have a multibillion-dollar market opportunity to penetrate here in the sacred public space, and we're looking forward to the days to come. Thanks, everyone. Goodbye.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.