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spk06: quarter 2020 for 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 like to hand the call over to Sikib Iqbal, Senior Director of Investor Relations at SI Bone, for a few introductory comments.
spk12: Thank you for participating in today's call. Joining me are Laura Francis, Chief Executive Officer, and Anshul Maheshwari, Chief Financial Officer. Earlier today, SF1 released financial results for the quarter ended June 30th, 2024. 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 Bones' ability to introduce and commercialize new products and indications, SI Bones' ability to maintain favorable reimbursement for its products and procedures, changes in payer requirements for authorization of procedures involving SI Bones products, the impact of potential economic weakness on the ability and desire of patients to undergo elective procedures, SI Bones' 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. 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 filed with the Securities and Exchange Commission. During the call, management may also discuss certain non-GAAP measures, including the company's adjusted EBITDA results. Unless otherwise noted, any reference to profitability is in terms of adjusted EBITDA. For a reconciliation of these non-GAAP measures to GAAP accounting, please see the company's full earnings release issued earlier today. Unless otherwise noted, all results are compared to the comparable period in the prior year. SI-Borne 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, August 5th, 2024. With that, I'll turn the call over to Laura.
spk07: Thanks Aqab. Good afternoon and thank you for joining us. I'm pleased with our team's execution as we delivered another strong quarter and set new records across several key metrics. In the second quarter, We delivered a record $40 million in worldwide revenue, representing 20% growth. US revenue was a record $37.8 million, representing 21% growth, as we benefited from strengthening demand for our growing number of solutions. We added 220 active physicians in the quarter compared to the prior year, hit another new record for active physicians, and completed record-breaking number of new physician trainings in the quarter. Our second quarter results are indicative of the company's transformation from a single product company to a unique, high-growth medical device platform. We have a proven track record of identifying and successfully developing new markets with large, unmet clinical needs across sacral pelvic conditions. Complementary markets in pelvic fixation and trauma have doubled our total target procedure volume to approximately half a million annual procedures, driven deeper physician penetration, and allowed us to deliver 20-plus percent average revenue growth over the last three years. We also made dramatic progress on our profitability goals in the quarter as we delivered a 43 percent improvement in our adjusted EBITDA, Over the last three years, we've achieved over 30 percentage points of improvement in adjusted EBITDA margin. We continue to achieve significant operating leverage in the business, driven by our strong revenue growth, increasing use of our hybrid commercial model, and scalable corporate infrastructure. Given the durability of the tailwinds in our business, we expect revenue growth to accelerate in the second half. driven by the continued physician growth across all our markets, procedure volume growth across surgeons and interventional spine for SI joint dysfunction, and acceleration in demand for our pelvic fixation solutions. We expect this top line growth to translate to positive adjusted EBITDA in the fourth quarter of 2024. This inflection in our adjusted EBITDA profitability combined with our solid liquidity as well as our capital-efficient model, will give us the flexibility to self-fund our future growth. We're also positioned to capture the large, numerous markets in the sacral pelvic space and deliver sustainable and profitable revenue growth going forward. Now, let me provide an update on our key initiatives as we look to extend our leadership, drive long-term growth, and create shareholder value. Starting with sales infrastructure, We ended the quarter with 84 territory managers supported by clinical support specialists and third party agents for case coverage. Our hybrid commercial strategy drove a 24% increase in our trailing 12 months revenue per territory to a record $1.7 million. Our differentiated portfolio is attracting the attention of multiple large regional distributors who've expressed interest in building agency partnerships. We continue to expand our agent network, primarily for pelvic fixation and trauma opportunities. The expansion of our agent network is allowing us to reach more physicians and also drive incremental operating leverage in the business. Concurrently, we plan to selectively and strategically hire additional territory managers to ensure that we can expand our physician users and density, as well as provide the highest quality of service to our growing user base. Moving on to physician engagement, we exited the quarter with more than 1,150 active physicians, representing 23% growth. This is a continuation of the double-digit growth in active users we've seen in the last three years. In the second quarter, 17% of our active physicians used more than one of the procedural solutions we offer. The 25% increase in the number of active physicians performing more than one type of procedure highlights the synergistic nature of our portfolio. With the launch of Granite 9-5 solution, we're targeting both deformity and increasingly degenerative spine procedures, which account for a significant portion of the procedure volumes for active physicians. We now have a platform to drive deeper engagement and more procedures per physician. this cross-portfolio interest is a positive leading indicator of sustained demand momentum and productivity. Moving to our academic program, we trained 80 residents and fellows in the second quarter, bringing the total number of trained residents and fellows to over 1,700 since 2018. This effort translates into a growing number of physicians trained who now understand the incidence and diagnosis of sacropelvic disorders and treatment options using our technologies. We're encouraged by the elevated interest in training and the adoption trends by previously trained residents and fellows. In the first half of 2024, sustained adoption from previously trained residents and fellows resulted in revenue attributable to this group growing 75%. Turning to products and clinical evidence, We continue to define the SI joint dysfunction, pelvic fixation, and pelvic trauma markets and reinforce our commitment to improving patient outcomes and advancing medical care by offering differentiated products backed by clinical evidence. We recently finalized five-year follow-up data for SALI, our first prospective clinical trial with iFEWS3D. The study indicated that the clinical response to SI joint fusion using iFuse3D showed marked, immediate, and sustained improvement in all outcome measures, consistent with our prior SI joint fusion studies. The patient pain score improved by 58 points. The disability scores improved by 25 points, while the percentage of people on opioids decreased from 57% at baseline to 17% at five years. The physical function tests showed persistent improvement from baseline and the long-term radiographic analysis was positive with 100% rate of joint fusion. Our physicians have migrated from the original iFuse to iFuse 3D due to porosity and fenestrated design, driving faster and better fixation and fusion. iFuse 3D accounts for almost the entirety of our triangular titanium implant revenue, and is patented through 2035. iFEWS-TORC, building on the success of iFEWS-3D, continues to be a key contributor to procedure volume growth and active physician engagement across both SI joint dysfunction and pelvic trauma and has been a cornerstone of our interventional spine engagement strategy. While we provide comprehensive training on both iFEWS-INTRA and iFEWS-TORC, in the second quarter, The majority of the cases performed by interventionalists utilized iFEWS-TORC in a lateral transfixing trajectory, which is reimbursed under CP2 code 27279. The growing confidence of interventionalists in adopting iFEWS-TORC aligns with the early outcomes we're seeing in our prospective multicenter interventionalist DAISY study. Interim results, which were recently presented at the American Society of Pain and Neuroscience Annual Meeting in Miami, confirmed the safety and efficacy of lateral transfixing SI joint fusion when performed by interventionalists. The safety and effectiveness of the lateral procedure with ifuse torque was also confirmed in a recent publication in the Journal of Pain Research by Dr. Michael Jung, a leading interventional spine physician at Wisconsin Spine and Pain. Dr. Jung published the results from his first 49 lateral SI joint fusion cases using IFUSetor. The outcomes were commensurate with those observed in a large meta-analysis of studies of lateral SI joint fusion published last year. At an average of six months of follow-up, 88% of patients reported at least 50% improvement in pain. Since its launch in 2022, iFuse Bedrock Granite has been highlighted as one of the most innovative products by our customers and has seen rapid and durable adoption. Even with the rapidly increasing demand, we still have a large under-penetrated opportunity. We believe that granite will become the standard of care for fixation and fusion of the SI joints to provide a strong foundation at the base of long construct procedures, addressing a clear unmet clinical need in spine surgery. Granite has also found significant application in shorter two to four level lumbar fusion procedures. In the second quarter, we launched Granite 9-5 to address the specific needs of this broader category of lumbar fusion procedures. We believe that Granite 9-5, including shorter lengths appropriate for placement in the S1 pedicle, will provide the best in class offering for the approximately 100,000 annual target procedures. It will also allow us to engage deformity surgeons who have expressed an additional preference for a smaller diameter implant to better enable two points of pelvic fixation. The reception for Granite 9-5 has been spectacular. Looking ahead, we have an active pipeline of differentiated products that will be launched in the coming months and years, beginning with the fourth quarter launch of a product specifically targeting the pelvic trauma market. Before Anshul discusses our financial performance, let me provide a quick update on the recent additions to our board of directors. On June 25th, our shareholders elected Thomas West to our board of directors at our annual stockholder meeting. Tom is the CEO of Nalu Medical, a privately held medical device company with a leading position in peripheral nerve stimulation, selling primarily to interventional pain physicians. Tom built his career at Johnson & Johnson and Whole Logic, and was recently CEO of Intersect ENT, up to its acquisition by Medtronic. Today, we also announce the appointment of Dan Wolf to our board. Dan is currently the Senior Vice President and Chief Strategy and M&A Officer at Baxter International. Previously, Dan held positions of increasing responsibility at Medtronic, including business development, and operational leadership of Medtronic's push into personalized spine surgery with the acquisition and management of MediCrea. Tom and Dan bring a great mix of operational and strategic medical device experience across spine surgery and interventional pain and are tremendous additions to our board of directors. With that, I'll hand the call over to Anshul.
spk11: Thanks, Laura. Good afternoon, everyone. My comments will be focused on second quarter growth, profitability trends, and liquidity, starting with revenue growth. Our second quarter's worldwide revenue was approximately $40 million, representing growth of 20%. U.S. revenue grew 21% to $37.8 million due to strong U.S. procedure volumes and the continuation of the favorable ASP trends we have seen for the last several quarters. We have now delivered more than 20% U.S. revenue growth in nine out of the last 10 quarters. The consistency of this revenue growth is an outcome of our strategy to work with a sizable physician base to create new market categories and diversify our revenue streams. International revenue in the quarter was $2.2 million. Moving to gross margin and operating leverage. Our gross margin for the quarter was 79%. Our gross margin was impacted by procedure and product mix. These were partially offset by the benefit from our ongoing effort to streamline our supply chain to lower our implant cost. Operating expenses were $41.7 million, representing approximately 7% growth. The increase was due to higher commissions driven by revenue growth, increase in commercial activity to support new product launches, research and development investments, and increase in stock-based compensation. Looking at the first half of 2024, we are proud of the more than 2x operating leverage in the business. Our net loss improved by 20% to $8.9 million or 22 cents per diluted share. Our adjusted EBITDA loss was the lowest since the IPO at $2.7 million, reflecting a 43% improvement. Compared to the first quarter of 2024, Our adjusted EBITDA improved 33%. Turning to liquidity. We exited the quarter with a robust balance sheet, including $151 million in cash and marketable securities. Our cash usage in the quarter was $6.5 million as we invested in Granite 9-5 inventory, as well as surgical capacity to support the anticipated second half demand. Finally, moving to our updated outlook for 2024. Based on our second quarter results, we are increasing our 2024 worldwide revenue guidance. We now expect 2024 worldwide revenue of between $165 million and $167 million, implying year-over-year growth of approximately 19% to 20%. Considering the 2x operating leverage for the full year 2024, we expect to achieve a just a little bit of break-even in the fourth quarter. With that, I will turn the call over to Laura.
spk07: Thanks, Anshul. We're seeing robust demand for our differentiated solutions as well as record physician engagement. That, combined with our efficient execution, will allow us to deliver industry-leading and profitable growth going forward. I'd like to thank our world-class team for their efforts to help build a sustainable, high-growth medical device platform that has helped over 100,000 patients. With that, we're happy to take your questions. Operator?
spk06: Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered or you wish to move yourself from the queue, please press star 1-1 again. We'll pause for a moment while we compile our Q&A roster.
spk05: Our first question comes from Matthew O'Brien with Piper Sandler.
spk06: Your line is open.
spk02: Oh, afternoon. Thanks so much for taking the questions. Maybe for starters, Laura, just the dock utilization in the quarter, and I know that number's been rising nicely, but just on a seasonally adjusted basis, it was softer in Q2 of this year than we saw in Q2 of last year. So I'm just wondering what kind of dynamics are going on that are impacting that. I don't know if it's the to shift, you know, to more interventionalists or something along those lines. But just can you talk a little bit about why that's a little bit softer than we saw this time last year? And then I do have a follow-up.
spk07: Thanks for the question. And maybe just kind of a general summary. We really are thrilled with yet another strong quarter delivering record performance across all of our KPIs. So 21% U.S. revenue growth, and that was led by strong demand across all of our target markets. 25% increase in the number of physicians doing more than one procedure type, 23% growth in our active physician base. We did talk generally about a record number of new physician trainings, given the elevated interest in a number of different parts of our portfolio. And then we're quite proud of the improvements in productivity as well. So in terms of a softer number, I actually think that we're showing a very strong quarter here. So over the last three years, we consistently have seen double-digit growth every quarter in our active physicians. We typically do look at year-over-year, given that there can be some seasonality in these numbers, but we ended the second quarter with 1,150 active physicians, so once again, 23% growth. And if you look year-over-year, it was 220 additional users. So it's the second consecutive quarter where we had a record number of new physicians trained, which is a good forward-looking indicator for future active physician growth. And just given the expanded portfolio, as well as our world-class medical affairs team that's focused on training physicians on multiple modalities, I feel great about our ability to increase the number of active physicians in the second half and also to increase cases per physician.
spk02: Got it. And then I don't know if this is a question for you or for Anshul, but, you know, when I look at the first half of the year, the performance is really good in the U.S., but it does, the guidance and sticking with just the raising by the amount of the bead here in Q2 does imply a pretty sharp two-year stack deceleration in the back half of the year. And that comes with 9.5, you know, addressing a lot more patients. I'm just wondering, you know, Help me reconcile why we would see this deceleration in the U.S. versus what we've been seeing with all these new stocks, reps, and then products as well.
spk11: Yeah, so Matt, I can take that question. So, you know, we don't think about the business in stack growth. I don't think it's the right way to think about the business that way because there's various number of factors that can impact the starting point. You're right. When we, as part of our guidance at 165 to 167 million, it's actually an acceleration in the second half of 2024. And that, even when you look at the third quarter, you know, our expectations is, Generally, the third quarter sees a sequential decline of 2% to 3%, and we expect to offset that. With the tailwinds, Laura talked about the rollout of Granite 9-5 as well. And in general, our guidance philosophy is always being thoughtful. We've now had a consistent track record of exceeding expectations. just want to be thoughtful going into the second half. We've got a lot of good KPIs, including record number of active physicians that Maura talked about, record number of trainings that she just addressed, and the growing engagement of the interventional side. So we're actually feeling quite good about the second half.
spk06: Got it. Thanks so much. One moment for our next question. Our next question comes from Drew Ranieri with Morgan Stanley. Your line is open.
spk00: Hi, everyone. Thanks for taking the questions. Maybe to start, Anshul, this one is probably for you, but just on the adjusted EBITDA guise, positive for the fourth quarter, just maybe as we think longer term for 2025, maybe how should investors maybe think about the puts and takes of breakeven next year? I mean, I think consensus is already there on an adjusted EBITDA basis, but it sounds like you have... you have more new products coming, maybe some incremental sales reps hiring, but how should we be thinking about, or how are you thinking about balancing, maintaining kind of this 19, 20% growth with some of the OpEx investments that you will likely continue to have to make next year?
spk11: No, I appreciate that question, Drew. So we are really proud of the operating leverage we've seen in the business, and we've incrementally converted growing portion of our gross margin dollars to adjusted EBITDA, And the trend that we see for the backup gives us confidence in the break-even for the fourth quarter. Now, at a very high level, when you look beyond 2024, we expect annual revenue growth to continue to exceed OPEX growth going forward. So, you may see some quarterly seasonality for Q1 or so, but we're feeling pretty good about that trend continuing and allowing us to report positive adjusted EBITDA annually in the future years. You know, you're right. We do have a huge amount of opportunity ahead of us. So we will continue to strike that right balance by making targeted investments in the Salesforce expansion and R&D. But we expect to see significant leverage on the OPEX side from a G&A standpoint. And even on R&D, it's not going to be at the same pace as revenue growth, right? You get some scale benefit there, too. So I think the business is set up really well going into 2025 in terms of being able to sustain adjusted EBITDA positive on an annual basis.
spk00: I got it. It's encouraging. And maybe, Laura, for you, it sounds like the trauma product is still on track for the fourth quarter. I think there was like a new TORC 510K maybe about a month ago that hit FDA's website. just any more color on the product or how you're thinking about the fragility fracture market. Thanks for taking the questions.
spk07: Yeah, thanks, Drew. And yes, we are really excited about the new trauma product. As we've said, we're expecting a Q4 launch. And while we've seen success with TORQ, the new product that we're planning to launch in the fourth quarter, it's It's specifically designed to fit the workflow of trauma surgeons. What's also been interesting is that we're attracting the attention of multiple regional distributors who are expressing interest in agency partnerships around those trauma surgeons to get access to our unique solutions. You know, it's a planned portfolio expansion, and combining that with the use of our hybrid commercial model is going to allow us to capture this trauma opportunity as well as contribute to our long-term revenue growth.
spk06: Thanks for taking the questions.
spk05: One moment for our next question. Our next question comes from Richard Newer with Truist Securities.
spk06: Your line is open.
spk01: Hi, good afternoon. Thanks for taking the question. This is Ravi in Furch. Can you hear me okay?
spk07: Yes.
spk01: Hi, thanks. So I just wanted to kind of get into the accelerating guidance commentary. Strong procedure volumes, kind of favorable trends you mentioned in the script. How do we think about that from kind of a price volume breakdown as it comes to reconciling the growth rates with your guide? And then I have a follow-up.
spk11: Yeah, I'm happy to take that. On the guide side, in the back of the error assumptions, depending on the range, right, so on the low end of the range, our assumption is sort of a low single-digit ASP decline. Now, we've done significantly better than that over the last several quarters where our ASP has been fairly stable. And the rest would come from volume. If you look at the high end of the range, it's similar ASP trends that we've seen thus far in the year, and the rest is volume. On the low end, it's 1% to 3% ASP pressure, and the rest is coming from volume.
spk01: Great. And then just maybe if you could help us think about, you know, you have access to a number of different physician channels at this point with the different product launches that are coming out. Help us think about kind of what you're seeing on a macro level around procedures, new product launches, maybe throughput in terms of how you're, you know, getting access to the doctors in terms of the procedures you're doing, maybe on the ortho side and the interventional side, and then any color you could give around how you plan to address the trauma doctors as well. That would be great. Thanks.
spk07: Yeah, I'm happy to take that question. As we mentioned, we're continuing to see an increase in the number of physicians that we're working with. We were at a record at the end of the quarter with over 1,150 active physicians. And we do have a number of different call points, but simplistically what we are seeing is that we are targeting primary SI joint fusion with our direct sales force with both spine surgeons as well as interventionalists and seeing continued strong growth with spine surgeons, and then excitement to start doing our procedure with interventionalists. So that continues to be the core that's driving the business Pelvic fixation with our Granite 9-5 product and the recent launch of that product continues to drive our growth in pelvic fixation in a number of different ways, addressing shorter constructs and need potentially for a smaller diameter implant or potentially using four implants in those particular cases. And what has become fairly typical there is we're using a hybrid model in those cases where you continue to have a direct salesperson from SI Bone involved, but also third-party agents that are actually covering those particular cases. And that's helping us to drive the increase in sales rep productivity that you're seeing. So that's the second procedure type. And then finally, the third one is the area of pelvic trauma. And this is still a relatively small area for the business, but growing very nicely. We're really excited about the launch of this new product in the fourth quarter of this year. And that's another area where we have a hybrid commercial model where we have our direct sales force working closely with third-party agents typically those that work more with trauma surgeons in order to drive the growth of that business. So those are the three different areas, and those are the ways that we're approaching them from a commercialization perspective.
spk06: Thank you. One moment for our next question. Our next question comes from Young Lee with Jefferies. Your line is open.
spk03: All right, great. Thanks very much for taking our questions. I guess to start, I wanted to get a little bit more color and details on the new product launches from this year. I mean, it sounded like Granite 9.5's recent launch has been going really, really well. If you can share some additional details, that would be great. Same thing for Intra, any incremental color would be helpful. And, you know, how much are those products sort of baked into the second half guidance? Thank you.
spk07: Yeah, I'm happy to take the first part of that question. So we've launched two products thus far in the year, and then as I've mentioned a couple of times on this call, we have a third one that's going to be coming by the end of the year. So the first product that we launched was our product Intra earlier this year, and that was a dorsal allograft product targeted primarily toward interventionalists. We've seen a nice uptake on that product, but most of the sales that we have seen thus far in interventional are actually using our torque product, our lateral transfixing product in those interventional cases, which is what we had expected. We just wanted to have that additional solution for interventionalists who were interested in a bone product instead of a device. And then we are very pleased with what we're seeing with granite 9-5 right now. So within the lumbar fusion market, we're building on the success of our original granite product, and we're really encouraged by the surge in interest in using 9-5 in shorter constructs, which is around 100,000 annual procedures in those particular cases. Within deformity, we also see Granite 9-5 as an opportunity to engage a subset of surgeons who wanted a smaller diameter implant. And then in certain instances, we're seeing our existing active deformity surgeons use Granite 5 to enable two points of fixation on either side, which obviously increases our ASP. So I'm very happy with what we're seeing from an interventional perspective overall with that launch, and then as well with Granite 9-5 building on the base that we had formed with our original granite product, and also looking forward to the launch of our trauma product in the fourth quarter. I'll have Anshul speak a little bit more on the other part of the question.
spk11: Yeah. Hey, so on the guidance side, as you know, we've been using 10-5 in the degenerative spine space. So we've had a short construct market already developed in the last couple years with granite. 9-5 now opens up that market because we're now being able to go after the S-1 opportunity both in primary and revision cases. So that is upside there, that is baked into some of our guidance. Obviously, we're being very thoughtful about how we bake that in because we're still rolling out granite in the third quarter. We did a very piloted rollout in the second quarter, as you recall, So we want to be very thoughtful there. On the interventional side, obviously TORQ's doing really well there, like Laura said, you know, intra. We're seeing pockets of adoption based on reimbursement, but our assumption always was the broader option will be driven by the outcome of the draft LCD. So we're not incorporating much of that in our current guide at this point, which we think is the right approach.
spk03: All right, thanks very much for that. I guess to follow up, it looks like on your presentation, you updated the iFEWSS patent, extended it by about five months. I think most of the iFEWSS reps are coming from iFEWSS 3D, which has about 10 years left. You also have a broach instrument that has about 10 years left on it as well. I guess I'm just kind of curious, in light of the ICUs patent expiration, wanted to get an update on the competitive dynamic currently.
spk07: Yeah, I mean, we pride ourselves on being a company that identifies unmet clinical needs. And then what we do is develop innovative products and we patent those products. And so we are constantly looking at our patent portfolio and patent protecting all of the products that we're working with. As you had mentioned, with iFuse 3D, we have patents that actually run through 2035, and that is the vast majority of sales of our triangular titanium implants. But we continue to also try to extend at least a little bit the patents on the original iFuse. But most importantly is iFuse 3D accounts for almost the entirety of our triangular titanium implant revenue and it's patented through 2035. We also did receive a new patent for the broach instrument recently, which extends into 2034, which also impacts our core iFuse franchise. So we've continued to build the patent portfolio with our iFuse implants, as well as Granite, which is patented through 2039, and Torque, which is patented through 2040.
spk06: Thank you. One moment for our next question. Our next question comes from Caitlin Cronin with Canaccord Genuity. Your line is open.
spk10: Hi, thanks for taking the questions and congrats on a great quarter. Can you just provide a little bit more color on the updated commercial strategy that you outlined and, you know, maybe quantify any more reps that you expect to add and also any distributors you expect to onboard through the process?
spk07: Yeah, happy to do that. So under the leadership of Tony Recupero, we've built a best direct sales force in the industry, and we continue to see strong interest from reps wanting to join our team because of the differentiation of our company compared to others, evidence-backed and differentiated portfolio, as well as a high-performance culture. So with the evolution of our portfolio, we've been leveraging this hybrid commercial model. So in particular, engaging third party agents as well as adding more associate level reps to create additional capacity for our territory managers. And they're our most valued asset. And what we want to do is ensure high quality service and support for our physicians and basically just effectively capture the demand for our solutions across multiple target markets. So if you think about it longer term, the hybrid model has allowed us to deliver average revenue growth of over 20% over the last three years and nearly double our revenue per territory to 1.7 million during that period. And it's also driven dramatic operating leverage in the business. So over the next couple of years, we're going to continue to use the hybrid model while selectively adding sales reps. So what we envision is that we're going to get to 100 territories with approximately $2 million of sales rep productivity apiece, which will build a $200 million U.S. business. you should expect to see us end 2024 with a handful of new territories.
spk10: Got it. That's helpful. And then just a couple of questions on the intervention list call point. How does the appointment of Thomas West really help you shape your interventional strategy going forward? And I also... Remember you mentioning recently that the target interventional surgeons was 1K versus the initial 4,500 that you initially targeted of the interventional surgeons. Do you see opportunities to expand to the extra 3,500 that are just doing the needle-based procedures over time?
spk07: Yeah, so asking the question about Tom and then also expansion to those 4,500 interventionalists. You know, our focus from the inception of the company has been on surgeons. It's orthopedic and neuro-spine surgeons in particular and there are around There are close to 8,000 of those that we're targeting. And if you look at the number of physicians that we've worked with, we still have a long way to go with those particular surgeons. But we also recognize that the interventional market, our solutions are similar, but the market is different, the call point is different. Tom, with his experience with NALU Medical, is a really nice addition to the board of directors to help us to think about that new call point and strategize around it. In terms of who we're targeting from an interventional perspective, the thousand that we're talking about are the ones that are really going to be doing the lateral torque transfixing procedure. And so those really have been the focus for us with our initial rollout. And what we're seeing is that that come to fruition, that we are seeing more of those physicians doing those procedures, but primarily with torque. In terms of getting to the additional 3,500 in that group, we do think that there's an interesting opportunity you know, that's here, and that with some of the additional products that we currently have, like Intra, that it does give us the opportunity to also penetrate that market, too.
spk10: Great. That's super helpful. Thanks so much.
spk05: One moment for our next question. Our next question comes from David Turkley with Citizens A&P. Your line is open.
spk08: Great. Thanks, Laura, given your comments on the intra and torque, and then also, you know, sort of the increase we keep seeing in active docs or physicians. I'm curious, would you call out, did you have interventionalists in that 1150 today?
spk07: Short answer to that is yes, Dave. So we are seeing a nice adoption by interventionalists as well as our spine surgeons that we work with on our other procedures.
spk08: Got it, and then I appreciate the color you gave on 995 and the, you know, abilities from the docs to possibly use, you know, even more than sort of two, maybe up to four implants. I just wanted to clarify one thing. Is that also new technology add-on payment? Is that relevant for that as well?
spk07: It actually is, yes. So the Granite family, the NTAP actually applies to the original product as well as the new Granite 9-5 product. So it has that same benefit where the hospital using our Granite product can receive up to around $9,800 of additional payment for pelvic fixation using Granite.
spk06: Thank you very much. One moment for our next question. Our next question comes from David Sacklin with Neededman Company. Your line is open.
spk04: Hey, everyone. This is Joseph on for David. Congrats on the record quarter. Just maybe another question on interventionalists, just to try to understand the channel a little bit more. Does it have a different pattern as it relates to ramping SI procedures once the doctor trained? I guess just any differentiating factors between the interventionalists and the spine surgeons would kind of help us understand a little bit better.
spk07: Yeah, so we're really going after two huge markets here, right? So the SI joint fusion market is a market that's over $2 billion in total. And as I said, you have around 8,000 spine surgeons that are targets to perform SI joint fusion, and you have approximately 4,500 who are interventionalists. Also, as I said, we're really going after around those first thousand and we're primarily leading with our TORC products, so the lateral transfixing product that is paid under 27279. In terms of how to approach the surgeons versus the interventional spine, It's been similar in a lot of these cases just because we're looking at those who already feel very confident and comfortable with procedures. As we penetrate deeper into the interventional market, into that 4500, we definitely will think differently. It's our intra-product, for example, that may be more of interest to those particular physicians. But overall, the way that we have approached this is we've approached it with our direct sales reps, selling directly to the spine surgeons, as well as the interventionalists, and leading with our torque device.
spk04: Okay. Yeah, great, great. Thank you for all that color. It's very helpful. And then I guess EBITDA, adjusted EBITDA profitability, you know, you guys are getting there pretty soon. When you do get to even a profitability, how far out should we kind of be thinking about free cash flow profitability?
spk11: Yeah, so I can take that question, Joseph. So, you know, we have high gross margins driven by high ASP, and our asset model is relatively light, which is very different from what you see in traditional spine companies where you have a significant capital outlay to support growth. And as you've seen in the recent quarters, our reduction in cash usage has been somewhat in line with our adjusted EBITDA improvement. And given our expectation on adjusted EBITDA improvement on an annual basis going forward, that should continue to translate into improved cash flow trends as well. Now, some of that may be impacted by timing of new product launches and how we're putting capacity into play. But we feel very good about that cash flow trajectory once we get to that adjusted EBITDA break even. So that's number one. You know, when we look at our overall profile, with over $150 million of cash and ability to maintain that justity without improvement going forward, you know, we feel very good about having the financial resources to be able to fund all our growth going forward.
spk04: Okay, thanks. Yeah, congrats on the record quarter.
spk06: One moment for our next question. Our next question comes from Ross Osborne with Carenta Fitzgerald. Your line is open.
spk09: Hey, guys. Thanks for checking in our questions. Congrats on the quarter. So regarding the fourth quarter launch for a new product in the public trauma market, will this be an offering that will require real-world data, or do you expect to see a pretty quick adoption rate?
spk07: Yeah, good question. And, you know, we have already been working in the trauma market since we launched So we launched TORC in, I believe it was April of 2021. And so we have been selling to trauma surgeons. They have been using the product for sacral insufficiency fractures. And so with that success, we do have data that we can share with these particular surgeons. So, you know, overall, coming into the second half of the year, I think we're set up really well. We're seeing the benefit from strong demand trends, and we're capitalizing on accelerating demand within the pelvic fixation market with the rollout of Granite 9-5. We have growing engagement within interventional spine with TORC, and we also have the new product launch targeting the trauma market in the fourth quarter. And then top-line momentum positions us to deliver adjusted EBITDA break-even in the fourth quarter, which is a major fiscal inflection for our P&L profile. So our company-specific fundamental demand trends and the anticipated additions to our portfolio over the coming years, it gives me confidence that we have the platform to deliver strong and profitable revenue growth going forward and The strong performance this quarter and the consistency of our strong results in the last several quarters across revenue growth, surge in engagement, operating leverage, it's an outcome of our focus strategy to transform the business from a single product to a multi-modality med device platform with large unmet target markets.
spk09: Great. And then in terms of Stacy, it's nice to see the positive interim results comments there. But would you remind us of the rough timelines associated with the next milestone?
spk07: Yeah. So with Stacy, we have already completed enrollment in that particular study. We have the first set of results. And I believe that our plan is to have a publication out by early 2025 with Stacey.
spk06: Got it. Thanks for taking our questions.
spk07: Thank you.
spk06: And I'm not showing any further requests at this time. I'll turn the call back over to Laura for any closing remarks.
spk07: I just want to say thank you all for your participation in our call today, and we look forward to seeing you at upcoming conferences and non-deal roadshows.
spk06: Ladies and gentlemen, that concludes today's presentation. You may now disconnect and have a wonderful day.
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