SI-BONE, Inc.

Good afternoon and welcome to SI Bone's fourth quarter 2023 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 call over to Saqib Iqbal, Senior Director of Investor Relations at SI Bone, 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 December 31st, 2023. 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 SI-BONE's ability to introduce and commercialize new products and indications, SI-BONE's ability to maintain favorable reimbursement for its products and procedures, the impact of potential economic weakness on the ability and desire of patients to undergo elective procedures, SI-BONE's ability to manage risks to its supply chain, the impact of future capital requirements driven by new product introductions, and risks to the continued renormalization of the healthcare operating environment. Other forward-looking statements include our examination of operating trends and our future financial expectations, such as expectations for physician training and adoption, active physicians, new products, and clinical trial enrollment, 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. During this call, management may discuss certain non-GAAP measures, including the company's adjusted EBITDA results. For a reconciliation of these non-GAAP measures to GAAP accounting, please see the company's full earnings release issued earlier today. 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. SI-BORN 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 26, 2024. With that, I'll turn the call over to Laura.

Thanks, Saqab. Good afternoon, and thank you for joining us. 2023 was a stellar year for SI Bone, our physician customers and their patients, as we delivered record worldwide revenue and attained new heights in physician engagement. For the full year 2023, we generated worldwide revenue of $138.9 million, reflecting 31% growth compared to the full year 2022. This worldwide performance was led by robust U.S. demand, as over 1,600 U.S. physicians performed more than 15,000 procedures. We started 2023 with an initial revenue expectation of $124 to $127 million, but the strong demand for our highly differentiated solutions, growing physician engagement, and increases in our surgical capacity allowed us to significantly exceed that expectation. The momentum in the business was clearly evident at our national sales meeting in February. Our sales organization was not only enthusiastic about our performance in 2023, but was even more energized by the potential opportunity ahead of us in 2024. Having been at the company for almost nine years, I can say the mood in the company and the confidence in our future has never been stronger. Our foresight and discipline over the last few years in building scalable operating infrastructure in methodical fashion drove approximately 48% improvement in adjusted EBITDA in fiscal year 2023. We also reduced our cash usage while continuing to invest in R&D and clinical evidence to support the planned portfolio expansion in 2024. Before I provide an update on our strategic priorities, I'd like to recognize our team. Working together to deliver 25% cumulative annual U.S. procedure volume growth since 2018, our first year as a public company, is a testament to your hard work. We transformed into a multi-product company that is solving unmet clinical needs across multiple procedures. We're just getting started given the nearly half a million target sacropelvic procedures per year. Your focus on delivering for our customers is allowing us to capture this large market opportunity and deliver strong and sustainable revenue growth. Now, let me provide an update on our key initiatives as we look to extend our leadership position and drive strong long-term growth. Starting with sales infrastructure, we're extremely proud of our sales and commercial team, known for their industry-leading expertise, an extensive experience across our target markets. Their execution has allowed us to build new markets and deliver several quarters of record revenue. We ended the year with 82 quota-carrying U.S. territory managers. We complement our territory manager bandwidth with clinical support specialists, as well as a growing network of third-party sales agents for case coverage. This hybrid strategy has worked well as we continue to see growth in revenue per territory. In 2023, revenue per territory was $1.6 million, reflecting 39% growth compared to the prior year. We're confident in our ability to further increase revenue per territory and get closer to the high end of our $1.5 million to $2 million target over time. In addition to growing territory productivity, we plan to selectively add to our 82 territories over the next few years. The expanded territory footprint will enable us to maximize the potential of our growing portfolio and facilitate deeper engagement with our physicians to capture the over $3 billion total addressable market opportunity. Moving on to physician engagement, we exited the fourth quarter with nearly 1,130 active physicians, an increase of over 200 active physicians in the quarter compared to the prior year period. The 22% growth in U.S. active physicians over the fourth quarter of 2022 was the 12th consecutive quarter of double-digit year-over-year growth. This elevated level of physician interest and engagement is a great forward-looking indicator and underscores long-term growth trajectory of our business. Patients suffering from SI joint dysfunction can undergo different types of care, ranging from non-surgical pain management for short-term relief interventional procedures, which provide medium-term relief, and surgical procedures that provide long-term durable pain relief. Over the last few years, we've seen an increase in interest in SI joint stabilization procedures from interventionalists, particularly cortical bone allograft. Given that the SI joint fusion market is less than 10% penetrated today and the interventional spine physician's growing interest in the space, we've expanded our engagement with this specialty. We believe the partnership with our surgeons, as well as interventional spine physicians, which include anesthesiologists, physical medicine and rehabilitation specialists, and interventional radiologists, will accelerate our ability to capture this market opportunity. Over the last 15 months, we've been targeting a subset of the estimated 4,500 interventionalists in the U.S. who have prior experience with other minimally invasive spine procedures. We've engaged and trained highly skilled interventionalists in our lateral technique using iFuse Torque. While still early, we're encouraged by the level of interest, the caliber of interventionalists we have trained, and their pace of adoption. Clinical evidence has always been an important part of SI-Bone's commitment to its patients and physicians. In June 2023, We also initiated the STACY study, which is a prospective study on the use of IQs to work in patients with sacroiliac joint dysfunction by interventionalists. The enrollment is ongoing, and we expect to publish early results by the end of 2024. As a market leader, we believe that our broad product portfolio, training expertise, clinical evidence, and experienced sales force are clear differentiators that are leading to strong interventional engagement. Going forward, we expect active physician growth to remain strong as we engage the nearly 8,000 target surgeons and 4,500 target interventionalists. We also expect our growing product portfolio and published clinical evidence to drive deeper engagement and increase procedures per physician over time. Turning to products and solutions, we have a demonstrated track record of building innovative products and surgical techniques to address unmet clinical needs and improve patient outcomes. The robust procedure volume growth we've experienced in the U.S. substantiates the value of our innovation. In 2024, we're launching new products in each of our target markets to further extend our leadership position. Within SI joint dysfunction and degeneration, iFuse3D and iFuseTorque provide our physicians with the most comprehensive solution for minimally invasive SI joint fusion procedures reimbursed under CPT code 27279. Effective January 1, 2024, the AMA adopted a separate CPT code 27278 to describe minimally invasive sacroiliac procedures when performed using an intraarticular implant. typically a cortical bone allograft placed directly in a joint from a posterior approach. As I shared earlier, this technique is more commonly used by interventional spine physicians. With the new CPT code 27278 established for both facility and office-based procedures, and with coverage likely available from some payers, we expanded our interventionalist training to also include our new allograft product, iFuse Intra. iFuse Intra builds on iFuse Bone, which was launched in 2019 with enhanced surgical techniques that enable accurate placement of the implant into the joint using a posterior approach. We recently completed the first iFuse Intra procedure in an office-based lab setting. With iFuse Torque and iFuse Intra, we now offer interventionalists multiple products to address their treatment preferences. Moving to pelvic fixation, Based on the strong adoption demand and growing surge in interest, we believe our breakthrough device, iFuse Bedrock Granite, can become the standard of care for fixation and fusion of the SI joint, providing a strong foundation at the base of long construct adult deformity procedures. A recent publication with early CILVIA results highlighted the prevalence of SI joint pain in 16% of the patients undergoing spinal deformity surgery. further underscoring the need for inclusion of pelvic fixation infusion as part of these procedures. On the granite line extension, at the end of January, we received 510K clearance from the FDA for the 9.5 millimeter diameter implant with S1 and pediatric deformity indication. Since granite was launched in 2022, approximately 40% of our granite case volume has been in shorter two to four level constructs which are generally degenerative spine fusion procedures. Based on published data, postoperative SI joint incidence in shorter-level surgeries is estimated to be up to 20%. Additionally, some patients undergoing shorter-level lumbar fusion procedures are at a higher risk of revision due to screw loosening and other hardware failure from underlying conditions such as high pelvic incidence, osteoporotic bone, or high BMI. The current adoption of the larger diameter granite in these shorter level fusion procedures illustrates the increasing interest among the surgeon community in including pelvic fixation in high-risk patients. We believe the availability of the smaller diameter implant will provide an offering for the approximately 100,000 annual degenerative spine procedures that end at the sacrum, as well as engage deformity surgeons who have expressed a preference for a smaller diameter implant. We plan to launch the smaller diameter granite implant in the second quarter. In trauma surgery, we've made significant progress over the last 12 months to develop the market for treating sacral insufficiency fractures. We're engaged with major trauma center thought leaders are encouraged by the pace of IQ's torque adoption for treating these patients. Toward the end of 2024, we will launch another product targeting the pelvic trauma market, We believe the new product, combined with the initial results from a Saffron trial in late 2024, will be key to capturing the trauma opportunity. With over 120,000 sacral insufficiency fractures a year and one-year mortality rate of up to 25% for the patients who are treated with bed rest, the trauma market will be a crucial long-term growth driver for us. With that, I'll hand the call over to Anshul to discuss our financial performance.