SI-BONE, Inc.

Good afternoon, and welcome to SI Bones' fourth 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 is being recorded for replay purposes. I would now like to turn the conference over to Saqib Iqbal, Director of Investor Relations at SI Bones, for a few introductory comments. Sir, you may begin.

Thank you for participating in today's call. Joining me are Laura Francis, Chief Executive Officer, and Anshul Maheshwari, Chief Financial Officer. Earlier today, SIBORN released financial results for the quarter ended December 31st, 2022. A copy of the press release is available on the company's website. Before we begin, I would 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 hardware 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 uncertainty. These risks include the duration of secondary impacts of the COVID-19 pandemic such as facility staffing shortages, whether the COVID-19 pandemic will recur in the future, and our ability to effectively commercialize new products going forward. 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 undue 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 the Securities and Exchange Commission. SIPhone 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, February 27, 2023. With that, I'll turn the call over to Laura.

Thanks, Saqab. Good afternoon, and thank you for joining us. For today's call, I'll provide a business update, and Anshul will provide additional detail regarding our financial results. I'm pleased with our strong finish in 2022 as we effectively navigated some macro challenges, drove steady reacceleration of the business, and delivered record performance. As you may recall, our worldwide year-over-year revenue growth in 2022 went from 10% in Q1 to 15% in Q2 to 19% in Q3, And finally, 27% in Q4. Our growth was driven by both our core SI joint fusion business, as well as new products targeted toward adult deformity and trauma applications. 2022 was a milestone year for the company as we extended our market leadership, expanded our addressable market with the launch of ICU Bedrock Granite, a breakthrough product, and received expanded FDA clearance for applications of IQ's torque and fragility fractures and spinal pelvic fixation. Our comprehensive portfolio allowed us to achieve record U.S. active surgeon growth, which we believe is crucial to deliver strong and sustainable growth in 2023 and beyond. As we progress through 2022, We delivered substantial operating leverage and significantly reduced our adjusted EBITDA loss and cash usage while investing in our long-term growth initiative. Before I discuss the details of our performance, I'd like to thank our employees for their dedication and focus to achieve these major milestones. You supported over 1,300 U.S. surgeons who performed a procedure using our solutions in 2022. Most importantly, you helped improve the quality of life for over 13,000 patients worldwide. Now moving to our performance for the fourth quarter of 2022, our worldwide revenue was $32 million, reflecting 27% growth compared to the fourth quarter of 2021 and 21% growth compared to the third quarter of 2022. Our U.S. revenue in the fourth quarter grew 28% compared to the prior year period to a record $30 million driven by 33% procedure volume growth in the quarter. For the full year 2022, we generated worldwide revenue of $106.4 million, reflecting 18% growth compared to the full year 2021. Our U.S. revenue grew over 19% compared to full year 2021 to $98.8 million. The sequential acceleration in our U.S. revenue growth in each quarter of 2022 reaffirms strong demand for our solutions in a normalizing operating environment. Now, let me provide some details on our key initiatives as we look to expand our leadership position and drive strong long-term growth, starting with sales infrastructure. Our dedicated direct sales force and agent partners are an important driver of growth as we develop our core market and grow our presence in trauma and adult deformity. We ended 2022 with 88 territory managers and 73 clinical support specialists. In 2022, the average annual revenue for territory manager increased to $1.2 million, reflecting double-digit percentage growth compared to 2021. We believe there is significant opportunity for operating leverage in 2023, given the potential for average territory productivity to be in the range of $1.5 to $2 million over time. With our expanded portfolio, we're leveraging our growing network of agents for case coverage and selectively evaluating consignment strategies at high-volume hospitals. We're confident that this hybrid approach will help the territory manager drive surge engagement ensure high-quality support for our surgeons, and deliver strong, productive, top-line growth. Moving on to surgeon engagement, surgeon adoption is one of the best-leading indicators of long-term procedure demand. We exited the fourth quarter with a record 920 active surgeons. This equates to over 33% growth in our active surgeon base over the fourth quarter of 2021, and approximately 15% sequential growth compared to the third quarter of 2022. This is the eighth consecutive quarter of double-digit year-over-year growth in our active surgeon base and the highest growth rate in active surgeon base since we've been a public company. This growth in active surgeon base is a testament to our focus on surgeon engagement, education, and outreach over the last several years. The increase in surgeons in the fourth quarter came from those who performed a minimally invasive SI joint fusion procedure, as well as adult deformity or trauma procedures. Additionally, it's exciting to see a growing surgeon overlap across our various procedures. In 2022, over half of our active surgeons who performed an adult deformity procedure also performed a minimally invasive SI joint fusion procedure using our solution. We believe our complimentary portfolio provides a significant opportunity to drive deeper engagement with our active surgeon base and increase the procedures per surgeon. With the trauma indication expansions for iFuse TORC, the launch of iFuse Bedrock Granite, and the growing interest in spinal pelvic fixation and fusion, surgeon education is crucial to drive engagement and activation. Additionally, we're experiencing great success with our academic programs that are focused on residents and fellows. Since the inception of the program, we've held training events in over 200 academic facilities in the United States and trained approximately 1,300 surgical residents and fellows. We're encouraged by the steady adoption of our procedures by these previously trained fellows and residents when they began practicing. In 2022, the number of fellows and residents who did their first case increased nearly threefold compared to 2021, while their procedure volumes increase fourfold. Turning to products and solutions, the key tenet of our strategy has been to expand our platform of sacral pelvic solutions to address outside joint pain, adult deformity, and trauma. With IP's 3D, IP's TORQ, and now IP's bedrock granite, we believe that the value of our innovative, versatile, and complementary product portfolio provides surgeons with a comprehensive set of alternatives and positions us as the top choice for surgeons for sacral pelvic solutions. iFuse TORC continues its strong growth and has become an important addition to the portfolio. TORC provides an alternative to iFuse 3D for our existing surgeons and has allowed us to convert users of competitive screw systems as well as engage new surgeons performing minimally invasive SI joint fusion. Following the FDA clearance for iFuse TORC to include fusion in conjunction with spinal pelvic fixation, we're seeing a steady uptake in the use of the product to complement ifused bedrock granite as a second point of fixation of the joint. From a biomechanical perspective, having two points of fixation is important to attain fusion. In trauma or in the early stages of market development are encouraged by the progress in the use of ifused torque for sacral insufficiency fractures. Based on our market analysis, many of our spine surgeons routinely see fragility fracture patients, providing us an opportunity to leverage existing relationships as we build this market. With approximately 120,000 of these injuries per year in the U.S., most of which are currently not treated surgically, the fragility fracture market is a recognized unmet clinical need. The trauma opportunity is of strategic importance to us as the sacral pelvic solutions leader and will be an important avenue for growth over the long term. Moving to ICU bedrock granite, The reception of iFuseBed Granite has been exceptional, driven by strong surgeon and hospital interest in adopting the product. Based on our early interest, we believe that Granite may become a standard of care for stabilizing the basal lung constructs in adult deformity procedures and in certain degenerative spinal fusion cases. As I indicated earlier, we're seeing several surgeons using some combination of our products to achieve two points of fixation across the SI joint on either side, resulting in a significant pull through opportunity for the overall portfolio and higher procedure average selling price. Since launch, nearly 2,500 hospitals across the U.S. have added iFuse bedrock granite to their approved product list. Additionally, with the recent FDA clearance to allow the use of iFuse bedrock granite with a variety of pedicle spur and rod systems, Surgeons can now have confidence using their preferred system with IQ's bedrock granite as the foundation for their construct. We believe both these milestones will be additional catalysts to drive future growth. Given the positive experience with IQ's bedrock granite, we're seeing surgeons expand the use of the product to stabilize the base of shorter multi-level constructs as part of their treatment for degenerative spinal conditions. Approximately one-third of our ICU bedrock granted cases have been in these degenerative procedures. There are over 100,000 short multi-level spinal fusion procedures per year in the U.S. While still early, the expanded use of ICU bedrock granted in these shorter multi-level spinal fusion procedures for select patients could be an exciting opportunity for us and could expand our total addressable market beyond our initially estimated $250 million. Before I hand it over to Anshul, I'd like to provide a reminder on the CMS rule for hospital outpatient and ASC payments that went effective January 1st. In 2023, Medicare facility fees and minimally invasive procedures performed using CPT code 27279 in hospital outpatient or ASC settings increased by 33% to approximately $22,000 and 26% to approximately $17,000 respectively. Today, 80% of our minimally invasive SI joint procedures are performed in an outpatient setting or at surgery centers. We expect more of our minimally invasive procedures to move to ASPs over time. While it is too early to assess the business impact of this significant increase in facility fees, we believe it could be a tailwind for demand and ASP stabilization if these sites are served. I'll now turn the call over to Anshul to provide more detail on our financial results.