This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk02: 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.
spk07: 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.
spk04: 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.
spk06: Thanks, Laura. Good afternoon, everyone. My comments today will be focused on fourth quarter and fiscal year revenue growth, gross margin, productivity, and liquidity. Additionally, all the comparisons provided will be versus the same period in the prior year unless noted otherwise. Starting with revenue growth, our fourth quarter worldwide revenue was $38.9 million, representing growth of approximately 22%. US revenue was $36.7 million, representing approximately 22% growth, predominantly from increase in procedure volume. International revenue in the fourth quarter was $2.2 million, representing approximately 12% growth. For the full year 2023, we generated worldwide revenue of $138.9 million, reflecting 31% growth, Our U.S. revenue grew approximately 32% to $130.6 million. U.S. revenue growth was driven by approximately 32% increase in procedure volume growth. International revenue for the full year 2023 was $8.3 million, representing 8% growth. Moving to gross margin and productivity. Our gross margin for the fourth quarter and the full year 2023 was approximately 74% and 79% respectively. The fourth quarter gross margin includes an approximate four percentage point impact from a $1.7 million excess inventory reserve. To provide some context, when we launched IFUS Torque in 2021, we introduced two designs, a fully threaded and a partially threaded lag implant to meet physician preference. We are seeing physicians prefer the fully-scredited IFUS Torque across all our target markets, and in fact, demand for this implant type has exceeded our expectations. Accordingly, the reserve is related to our lag implant. Operating expenses were $41.2 million in the quarter, representing approximately 8% growth. For the full year 2023, operating expenses increased approximately 4% to $156.4 million. The increase was driven by increase in compensation, higher commission related to revenue growth, and research and development investments. Our net loss was $11 million, or 27 cents per diluted share, for the fourth quarter of 2023, as compared to a net loss of $11.2 million, or 32 cents per diluted share, in the prior year period. For the full year 2023, net loss improved by approximately 29%, to $43.3 million, or $1.13 per diluted share, as compared to a net loss of $61.3 million, or $1.79 per diluted share in 2022. Net loss per diluted share for fourth quarter 2023 and full year 2023 includes the impact of increase in shares outstanding because of the follow-on stock offering in May 2023. Our adjusted EBITDA loss in the fourth quarter was $4.8 million compared to $4.2 million in the comparable period. Adjusted EBITDA loss in 2023 was $17.3 million compared to $33.2 million in 2022, reflecting approximately 48% improvement. Adjusted EBITDA for fourth quarter 2023 and full year 2023 was negatively impacted by the $1.7 million inventory reserve highlighted earlier. Turning to liquidity. We exited 2023 with a strong balance sheet, including $166 million in cash and marketable securities. Our total cash usage in the fourth quarter was less than $800,000. Our strong liquidity position, combined with our continued progress with adjusted EBITDA breakeven, provides us the flexibility to self-fund our long-term growth priorities. Finally, moving to our outlook for 2024. As Laura noted, we have several tailwinds and growth initiatives coming into 2024. We expect 2024 worldwide revenue of $162 million to $165 million, implying year-over-year growth of approximately 17% to 19%. Our guidance assumes low to mid single digit ASP deterioration driven by site of service and procedure mix, moderate impact from new product launches accounting for timing of launch and pace of adoption, and modest international revenue growth. We expect 2024 annual gross margin to be approximately 78%. Based on current revenue guidance, planned product launches as well as commercial footprint expansion We expect 2024 annual operating expenses to grow approximately 9%. Considering the anticipated operating leverage in the business, we expect significant year-over-year adjusted EBITDA improvement for full year 2024, putting us within reach of our adjusted EBITDA direct even goal. With that, I will turn the call over to Laura.
spk04: Thanks, Anshul. I hope you can feel our excitement and confidence. built on consistent innovation and execution coming into 2024. We believe the procedure demand will strengthen in 2024 as we roll out complementary products in each of our target markets. With a strong balance sheet, I believe we're uniquely positioned to deliver sustainable growth over the long term and have a clear line of sight to adjusted EBITDA breakeven. With that, we're happy to take questions. Operator?
spk02: Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. One moment for questions. Our first question comes from Craig Bijou with Bank of America. You may proceed.
spk01: Good afternoon, guys. Thanks for taking the questions and congrats on a good finish to the year. I wanted to start with kind of what you're seeing in the SI joint fusion market and with respect to the new Allograft product. So does the recent focus on Allograft by PainDocs, is that adding to SI joint fusion procedures or are they potentially taken away from the traditional implant market? And then maybe if you could just give us a little bit of more color on the strategy behind Allograft and know, what you expect contribution either on a procedure basis or from a revenue perspective.
spk04: Craig, thanks for the question. And what I first want to do is just kind of wrap up milestone year for us, hitting new highs on revenue. growing 31% worldwide, surgeon engagement growing to over 1,100 surgeons, territory productivity growing almost 40% there, and then the operating leverage, 48% improvement in our adjusted EBITDA. So what we're doing is we're coming into the bottom line, and and so what we're excited about as well is um the the opportunities that we have in 2024 so building on the momentum that we have in 2023 capitalizing on the launch of granite uh nine five in order to capture more of the opportunities with a new introduction of a product toward the end of the year that's targeting sacral insufficiency fractured. And so when I talk a little bit about the primary SI joint fusion market, we're the undisputed leader in that market space, and we were the original pioneer that's here. When you think about the patient journey and patients that are suffering from joint disease, what you're seeing is there's what I would call a continuum of care. And so they start out with medications, physical therapy, injections. But there's also this interest in what I would call the next level on that continuum of care, which are these post procedures, and those are typically performed by interventional spine specialists, and they are done with cortical bone allografts. And then you have the traditional lateral procedure that we have pioneered with our iFuse 3D product and then more recently with our TORC product. And so, as I mentioned in my presentation, we've been working with our care director for 15 months now. Our STACI study was working directly with those interventionalists. and they were actually trained on our lateral procedure with TORC, and we've seen good progress with that particular study. Now, at the beginning of the year, we actually launched a new allograft product called iFuse Intra, and we think that it actually somewhere in between where they're receiving injections and where they're potentially receiving a a lateral procedure at the end of their journey. So what we did is as the market leader we want to provide a broad product portfolio and then what we do on top of it is use our training expertise, our clinical evidence, and then our experience to lead to strong interventional engagement. We believe we've targeted, we've taken a targeted approach, and it's really allowed us to thoughtfully leverage our experienced sales force to train this specialty, and that it's an augment to our current strategy to reach more than the 280,000 target patients per year.
spk01: Great thanks thanks for that Laura and maybe for for on show you guys obviously saw tremendous operating leverage in 2023 you're forecasting more operating leverage in 24 but not to the same extent, so that may just be conservative to start the year, but. Can you just talk about the guide and how you're balancing, driving, you know, that top line growth and still working towards EBITDA breakeven? And I'm going to throw this in. Could we see EBITDA breakeven come in 2025? Correct.
spk06: Thank you for that question. And in case it's difficult to hear because of static, please let me know. So we are really proud of the operating leverage that we've demonstrated over the last couple years. As we've benefited from the investments in the scalable infrastructure we've built throughout the pandemic, when we look at 2024 and outpaces OPEX growth rate, and you can see that at the midpoint of a guidance range and the OPEX growth rate expectation of 9%, that's about 2x operating leverage. Now, You know, we do have a huge opportunity ahead of us, so we want to make sure we're making thoughtful investments to capture the growth opportunities. Laura talked about several of those coming into 2024. And we think that that investment will allow us to maintain that to accelerate our journey towards justice without breakeven. So when you think about our guide at 9%, what does that incorporate? You've got the standard merit increase that you build in. You've got the higher commissions and our strategy to add more territory, especially as we've expanded our portfolio coming into 2024. So we're going to add some more territories there. You've got some more sales and marketing spend when it comes to the new products that we're going to launch. A lot of activity there, including training with the interventional side. And then just R&D as we think about the portfolio into the future as well. But again, you know, we feel really good about being able to continue to get the leverage and stay committed to it. Now, in terms of timing, right, we're pretty confident that the operating leverage will translate into significant adjusted EBITDA improvement as we progress through the year and we handle strong fourth quarter of 24th. You know, our approach to when we get to break even is just get there versus, you know, sort of project when that timing will be. But we're really happy with the progress that we're making, and we have a clear line of sight to that milestone.
spk01: Great. Thanks for taking the questions.
spk02: Thank you. One moment for questions. Our next question comes from Drew Ranieri with Morgan Stanley. You may proceed.
spk00: Hi, Laura. Hi, Anshul. Thanks for taking the question. Maybe just to follow up on one of Craig's questions about the Allograft product that you're launching. Just to be absolutely clear, I just want to make sure that we're understanding this, that you're not seeing really a significant change in underlying market dynamics from these products taking basically the surgeries, procedures away from surgeons. Just want to get a better read on that of like kind of what you're seeing on the underlying market. And then, Anshul, you did talk about some investments you're putting behind the iFuse Intra product. So maybe just help us parse out like how much is actually going to be hitting the OpEx? How much are you spending there to really, you know, kind of start this journey with this new specialty?
spk04: I'm excited about the opportunity with Interventional. If you think about our journey, we've been in business for 15 years at this point. We pioneered minimally invasive SI joint fusion. We've really built this market. We are the market leader in the space. And yet we're less than 10% penetrated into the market right now. And so what we see is an opportunity Our primary call point has always been spine surgeons, but we do think that we can reach more of these patients by working with interventionalists as well as spine surgeons and having multiple products that will meet their specific needs. In addition, there was a new tool My prepared remarks, 27278, which is specifically for these posterior procedures, typically allograft procedures. The physician fee is around 40% less than what it is for a lateral procedure typically done with our IQ3D or TORQ products. And then these are around 20% less. But with that said, once again, what it does is it gives us the opportunity in order to reach more of these patients and further build out the market. So if you look at our performance in 2023, we had a great year. And that performance was driven by our core market in primary SI joint fusion, as well as in adjacent markets, so pelvic fixation primarily, as well as trauma, which is developing. So what we see is this opportunity to more rapidly capture this market opportunity that we've been pursuing for all of these years, and we're really excited to do it with both spine surgeons and interventionists. and it provides unique opportunities.
spk06: Andrew, to your question on the OPEX side, you know, majority of our OPEX increase is just the commissions, the pay increases that come standard, as well as some territory expansions that we had always contemplated as we think about a model where we can do $2 million per territory. You know, we've always said in the U.S., We want 800 territories to have a business that can do $200 million of revenue. We ended the year in a... ...to do that. You're going to have some more training spent as well, but that's across the board between interventional and surgeons, especially with the DGEN opportunity with the 9-5 granted as well. So I wouldn't say that, you know, there is any material shift in our OPEC strategy because of interventional, we've just got a lot of opportunities that we've always wanted to go after.
spk00: Got it. And maybe just overall on some of the newer product launches, including Intra, the small construct, and the trauma product coming, you laid out, you kind of expect another robust year of active surge in ads. Can you be a little bit more specific there? And just how are you thinking about maybe the utilization or underlying utilization of active surgeons improving with some of these newer products. Thanks for taking the question.
spk04: Thank you. So, you're going to do both growing the number of physicians that we're working with as well as increasing the number of procedures per physician as well. You know, talking about interventional, by and large, those will be new physicians that are performing the procedure. So it gives us this opportunity. And as I said, there's around 4,500 interventionalists that are targets to. In terms of increasing the number of procedures, we have always focused on increasing the number of primary SI joint fusion procedures. that our surgeons are performing. And then with the addition of TORQ and with Granit, it gave us the opportunity to further increase those numbers, either in our primary market or in our adult . What our Granit 9-5 product does is it gives us a product that's very specifically targeted toward these degenerative spine procedures. And the market opportunity there, there's around 100,000 procedures per year. There are these short construct procedures that go to the sacrum. And so that's our bread and butter surgeon that already provides the SI joint fusion. And now they have the opportunity to perform pelvic fixation with our new granite product. So a great opportunity to deepen our relationship with our surgeons and increase the number of procedures that they're performing with us quarterly, annually.
spk02: Thank you. One moment for questions. Our next question comes from David Saxon with Needham and Company. You may proceed.
spk03: Great. Good afternoon, Laura Nonchal. Thanks so much for taking my questions, and congrats to a strong end to the year. Maybe I wanted to talk about TORC to begin with. Laura, in your script, you talked a little bit about STACY, but I think another TORC study is SAFROM, and I think it's narrowing enrollment. How should we think about Saffron as it relates to the market development for TORC? Does that, can that trial catalyze TORC adoption, or will it kind of continue to be more of a gradual ramp?
spk04: Thanks for the question, David. So, on TORC, you're right, the state study was actually specifically engaging interventional spine specialists implant. And as I said, that's going well. Saffron is actually a study that is engaging surgeons performing sacral insufficiency fractures. And so this is pelvic ring fractures. It's what we call our trauma product. And I do see a pretty significant opportunity there for us. In terms of what we're expecting is to have a publication that shows the results from saffron by the end of 2024. We're encouraged by what we're seeing currently with that. And then in terms of also what we're seeing on trauma, as I said, toward the end of the year, we expect to launch another product. And so I think given that these patients that have sacral insufficiency fractures, they're around 125. patients per year in the United States. They typically are treated in rehab. They're conservative care. They're typically not treated surgically. There's a big opportunity that's here for us. We do think the clinical data is going to be really important because of the fact that surgeons typically don't treat these patients. We want to show the efficacy of, in fact, treating Safran will be important there. And then I'm not giving much information about the new product, but the new product will be another important part of targeting that particular market. So really excited about how we're going to finish 2024 in trauma and the opportunity to see that as a significant growth driver in 2025.
spk03: Great. Super helpful, Laura. Thanks for that. This one's probably for Anshul. I wanted to ask about the cadence of revenue throughout the year. Is there anything to call out in terms of seasonality? I think consensus is about 37 million for the first quarter, so down kind of mid-single digits. Sequentially, I think in 23, you were actually up in the first quarter sequentially. So, Anything to call out from a cadence perspective and any reaction to that first quarter?
spk06: Yeah, Dave, thank you for that question. So from a seasonality standpoint, for a company in our stage of growth and innovation, we believe our seasonality in 2024 is will continue to be impacted by the timing and pace of the role of the products. Not different than what we saw in 2023, that the seasonality was not comparable to what we've historically seen. From our perspective, we don't believe that the right way to look at the business, given the initiatives in 2024, but from a modeling standpoint, If you're looking at a proxy, you know, the Q1 tends to be about 67% lower than the fourth quarter. So, you know, that's a good enough proxy. And then our focus is that through execution, we can improve on that. But I would say that historical trend of 67% is a good proxy.
spk03: Great.
spk07: Super helpful. Versus Q4. Yeah.
spk03: Okay, great.
spk02: Thank you. Thank you. One moment for questions. Our next question comes from Sam Berdowski with Truist Securities. You may proceed.
spk09: Hey, thanks for taking the question. I guess just first one on the short contract launch. Can you kind of just walk us through the puts and takes on that rolling out in 2Q versus the initial longer contract launch? that we saw with Granite, and how should we be thinking about the impact of that versus the initial rollout?
spk04: Yeah, good question, Sam. So, I think that you'll see a more rapid rollout here. First of all, we were a little surprised at how quickly we received clearance. Thank you. Sorry about that. Some technical difficulties. Sam, I'm not sure what you caught on your question on short construct. Would you like me to restate that or did you capture most of it?
spk09: I think it would be great if you could just run it back for us.
spk04: Okay, great. Great. So, a short construct launch, we're actually quite excited about the opportunity that we have. with our Granite 9-5 product. The product was actually cleared earlier than we anticipated. Just a great team effort here with our product team as well as our regulatory team. And the clearance, it was a line extension for us and so we added a couple of different areas to the IFU. First of all, this S-1 trajectory, which is really targeting shorter constructs, and then also pediatric deformity as well. And to get at your question of rollout, this is a little bit different than the original granite launch, primarily because the instrument trays that are currently in the field that are meeting our demand for our current granite business, we will use those same instrument trays. So we already have the trays out in the field. Our territory managers have been speaking with our surgeons on these topics. We are in these hospitals on the approved list. And so we think that this should be a more rapid rollout. And ultimately the goal primarily is to go after these 100,000 short construct cases in the U.S.
spk09: Great. Thanks, Lauren. And I'll just ask one on intro as well. Just in terms of pricing relative to iFuse, can you level set us there and how that's factored into the pricing guide?
spk06: I'm sorry, what was the question?
spk09: Sorry, just in terms of pricing for the new Allograft, can you just level set us on where that is relative to iFuse?
spk06: Yeah, from a pricing standpoint, what I would say, Sam, is you've got to think about it as a construct pricing in terms of, you know, what a construct would be for a multi-implant primary SI joint fusion procedure. You know, our expectation is it should be pretty comparable.
spk09: Thanks for asking questions.
spk02: Thank you. One moment for questions. Our next question comes from Caitlin Cronin with Canaccord Genuity. You may proceed.
spk05: Hi, thanks for taking the questions, and congrats on a great quarter. Just touching on the new focus on interventionalists, so you're training them in lateral procedures, so you're training them in 3D and torque, and then is the new Allograft product employing a posterior approach?
spk04: Hey, Caitlin, thanks for the question. We're actually training them with our TORQ product for the lateral procedure, and then we are also training on the Allograft product, typically not the IFUSE 3D triangular-shaped implant, given the needs of interventionalists.
spk05: Got it. And then, so, you know, is the revenue per procedure, would that be, you know, less, you know, for an interventional versus, you know, say a surgeon that performed the procedure?
spk04: The pricing is similar. So with the last question that we got from Sam, that was asking about allograft pricing, but the pricing overall is very similar, whether we're selling to interventional or to spine surgeons.
spk05: Okay, got it. And then just briefly on the OUS business, what are your expectations for this year? And when do you expect clearance for torque in EMEA? Has that happened yet?
spk06: Yeah. So, you know, the OUS business, Caitlin, is about, you know, 6% of our worldwide revenue in 2023. And when we think about the guide for the year, you know, France has been performing really well for us last year and the recovery and some of the other markets like UK and Germany. They will take longer than we had previously anticipated, and what our current guidance for the year at 17 to 19 does assume is a low to mid single-digit year-over-year increase in international revenue. So, you know, U.S. revenue will be closer to 18 to 20%. Now, the international market is important for us, and the team's been doing a lot of work around training new physicians, uh modifying our go-to-market models uh which should reap benefits in 2025 and then in terms of torque we are working really hard to get torque into emea which we believe could be a growth driver for the business but likely to be in early 2025 when you start seeing any impact from that just given the regulatory process got it thank you
spk02: Thank you. And as a reminder, to ask a question, please press star 1-1 on your telephone. One moment for questions. Our next question comes from Ross Osborne with Cantor Fitzgerald. You may proceed.
spk08: Hey, guys. Congrats on the progress, and thanks for taking the questions. So maybe just one for me. Would you discuss the pediatric or formative market, just in terms of size, the current standard of care, and where you see grant applying a role?
spk04: Sure. So it's small is a short answer to you. I think the target market size is around 10,000 procedures per year, Ross. And so it's not a big area of focus for us. The opportunity in DGEN spine is 100,000. So it's 10 times that size. But we have received inquiries from pediatric deformity surgeons. who are interested in pelvic fixation, we wanted to make sure it was an option for them on label, and so the new Granite 9-5 does provide that for us.
spk02: Thank you. Now I will turn it over to Laura.
spk04: Thank you so much for your time. I really apologize for the technical issues. I hope that we've given you all of the answers that you needed. As I said earlier, we're thrilled with the year that we just came off of and really excited about 2024 with all the new opportunities in front of us and building on the momentum that we generated in 2023. So thank you again and goodbye.
spk02: Thank you for your participation. You may now disconnect.
Disclaimer