Treace Medical Concepts, Inc.

Good day and thank you for standing by. Welcome to the Trees Medical Concepts 4th Quarter and Full Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question, you will need to press star 1 on your telephone. In addition, if you require any further assistance, please press star 0. Now, it is my pleasure to hand the conference over to your host today, Vivian Cervantes with Gil Martin, Investor Relations. Thank you. Please go ahead.

Thank you, Paul. Good afternoon, everyone, and welcome to our fourth quarter and full year 2021 earnings conference call. Participating from the company today will be John Treese, Chief Executive Officer, and Mark Hare, Chief Financial Officer. During the call, we will offer commentary on our commercial activity and review our fourth quarter and full year financial results released after the close of the market today, after which we will host a question and answer session. The press release can be found in the investor relations section of our website at investors.trace.com. This call is being recorded and will be archived in the investors section of our website. Before we begin, we would like to remind you that it is our intent that all forward-looking statements made during today's call will be protected under the Private Securities Litigation Reform Act of 1995. Any statements that relate to expectations or predictions of future events and market trends as well as our estimated results or performance are forward-looking statements. All forward-looking statements 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. All forward-looking statements are based upon current available information, and Teresa assumes no obligation to update these statements. Accordingly, you should not place undue reliance on these statements. Please refer to our SEC filings, including our 410 for the full year 2021 to be filed Friday, March 4th. With that, I will now turn the call over to John.

Thank you, Vivian, and good afternoon, everyone. Thank you for joining us on our fourth quarter and full year 2021 earnings conference call. We are pleased and encouraged by the strong fundamentals in our business in 2021. Through our team's focus and steady investments in our commercial operations, we delivered above consensus revenue growth each quarter following our April 2021 IPO. These results were led by expansion of our direct sales channel that is 100% focused on bunion surgery, the only such organization that we're aware of in the med tech industry. A disruptive technology and surgical procedure that's backed by a growing body of clinical data demonstrating both rapid return to weight-bearing and recurrence rates significantly below that of current standards of care. Positive momentum from both surgeons through our active surgeon education initiatives, as well as patients through our targeted DTC programs, and steady increases in our active surgeon count and surgeon utilization rates facilitated largely by our DTC program investments and our expanding direct sales channel. Our disruptive lapoplasty solution, specifically developed with our Surgeon Advisory Board to correct the root cause of the bunion, addresses a large and underserved market. We have identified a $5 billion-plus U.S. market of 1.1 million annual surgical candidates, of which only 450,000 undergo bunion surgery each year, primarily due to the limitations of current standards of care. Through 2021, we believe our market share stands at only around 3.8% of the estimated 450,000 annual surgical bunion procedures, up from 2.5% in 2020, and just 1.6% share of the 1.1 million annual surgical candidates. For 2022, our business fundamentals remain firm, and we see a long runway ahead of us. We believe we remain well positioned for steady growth and continued market share gains ahead. With another quarter as a public company complete, we are pleased to note continued positive market acceptance and traction with our instrumented 3D bunion surgical correction system, Lapoplasty. Our team steadily built on our momentum, continuing to invest in our strategic programs and executing to deliver on targeted financial and operational metrics. Revenue in the fourth quarter was 33.4 million, representing 55% growth sequentially, 39 percent growth over the fourth quarter of 2020, and at the top end of our previously announced revenue range expectation of 33.1 to 33.4 million. For the full year 2021, revenue was 94.4 million, a 65 percent increase over 2020, and also at the top end of our preannounced revenue expectation of 94.1 to 94.4 million. Advances made in our target growth metrics include Expansion in our customer base with continued strong increase in the number of active surgeon users. Continued year-over-year increases in surgeon utilization. Strong blended average selling prices and growth over the prior year. Benefits from our ongoing shift to direct sales exiting the year with 58% of Q4 2021 revenue from this channel. And heightened surgeon adoption of our new products such as the lapoplasty mini incision system. which we started rolling out in Q4 2020, and our adductiplasty system for midfoot correction, which we launched during the third quarter of 2021. We're excited for what lies ahead and believe we have the necessary levers to turn on or off in fluid response to any further disruptions while still investing in driving growth of our business. Therefore, as we turn to 2022, we are providing full-year revenue guidance of $125 to $130 million which reflects an increase of 32% to 38% from 2021 revenue levels. Now turning to our commercial and market development activities. As a reminder, recurrence rates reported in the clinical literature with metatarsal osteotomy, which represents 70% plus of the bunion surgeries today, are highly variable and have been shown to be as high as 78%. To address these shortcomings, we pioneered our proprietary Lapoplasty 3D bunion correction system that is designed to address the deficiencies of these traditional approaches to bunion surgery. We said in the past that a key differentiating driver for our business is our commitment to clinical evidence. To date, we believe our Lapoplasty technology is the only commercial surgical bunion solution that is supported by a strong and growing body of clinical data facilitating a steady pace of surgeon adoption and patient preference. Interim data sets from our most advanced clinical program, the Align3D Multi-Center Prospective Study, further demonstrates the durability of our surgical bunion correction. Last week on February 25th, in a podium presentation at the 2022 American College of Foot and Ankle Surgeons, or ACFAS, Annual Scientific Conference, we announced the latest interim one- and two-year aligned 3D analysis that demonstrated consistent, positive radiographic and patient-reported outcomes for patients following the lapoplasty procedure. Building upon previous interim data analysis, data on 160 study participants showed early return to weight-bearing in a walking boot at an average of just 8.5 days, significant improvement in radiographic measures of 3D bunion correction and significant improvement in patient-reported pain reduction and quality-of-life measurements at 12 months and through 24 months following the lapoplasty procedure. Return to work was an average of four weeks, and full unrestricted activity occurred within four months post-surgery, and we had a continued low recurrence rate, with only one out of 116 patients reaching the 12-month time point and zero out of 54 patients that reached the 24-month time point demonstrating a recurrence. for an implied recurrence rate of 0.9% and 0% respectively. Align3D is a powerful and sophisticated study, and although the final report out with full two-year data is not expected until 2023, it is notable that this interim manuscript received honorable mention for best manuscript at the recent ACFAS conference. We believe this indicates that our positive and differentiated outcomes are increasingly resonating with a certain community. We also note strong interest for our products at the meeting with full capacity attendance at our large scale hands-on lapoplasty and adductoplasty training events. In a similar approach to Align3D, we are conducting a mini 3D lapoplasty clinical study with our first patient enrolled in October 2021. This study utilizes patient outcomes, evaluates patient outcomes using our lapoplasty mini incision system that utilizes the small incision approach providing both surgeons and patients with another option to surgically manage bunions. Like lapoplasty, the lapoplasty mini-incision system is designed to realign the entire first metatarsal bone through a small 3.5-centimeter incision, as opposed to cutting and shifting the bony bump, which is the case with some newer mini-incision osteotomy procedures. Interest in sign-up for certain training events remains active and don't show any sign of letting up. Further, our trained surgeons received strong patient interest from our DTC patient education initiatives. We also offer evergreen learning for our surgeons through our regular calendar of advanced training events, both online and in person, where our tenured surgeons can acquire advanced skills as well as learn new approaches like our mini-incision and adductiplasty systems. During 2021, we accelerated investments in patient education DTC programs, expansion of our direct sales channel, and R&D innovations that resulted in continued revenue expansion and momentum through Q3 and Q4. We are more bullish than ever about the positive impact these investments are making on our business. We have a well-defined and proven commercial strategy that's clearly working. As such, for 2022, we intend to increase the targeted and proven investments that produce this momentum for us in 2021 in an effort to accelerate our penetration and share of this large market over the long term. Specifically for 2022, we've made deliberate and strategic decisions to invest in growth initiatives that we expect will accelerate patient awareness, surgeon education, and demand for our novel lapoplasty procedure, expand the footprint and coverage of our bunion-focused direct sales channel, and drive more R&D innovations into the market. And as previously discussed, we will continue to support our innovative products through continued investment in building a highly differentiated body of clinical evidence. Over the past several years, we've incrementally made important investments to our patient awareness and education efforts. This has resulted in a comprehensive DTC program that leverages highly targeted direct-to-patient education to help raise awareness of our products directly with prospective patients via social media, Google search, PR, and other media, including targeted TV campaigns in select markets, all of which are designed to encourage patients to seek more information and education on our patient website locate lapoplasty surgeons in their market, and ultimately schedule a surgical consultation. This initiative has played a key role in the early growth and success of lapoplasty, and it's become an integral and cost-effective component of our commercial strategy, contributing meaningfully not only to our unique customer experience, but also in increasing patient awareness and adoption and increasing surgeon utilizations. In 2022, we plan to increase our focused investments in our DTC programs to drive broader patient awareness for our innovative lapoplasty procedure. We know through both hard metrics from our lapoplasty patient website and direct surgeon feedback that our DTC programs not only increase patient awareness and access to lapoplasty surgeons, but they also motivate other surgeons to become future users of lapoplasty. As mentioned, Teresa is the only company that we're aware of with a direct expert sales channel focused solely on bunion surgery. So as we began to invest in this channel in our early years, we carefully developed performance data and metrics over time that support ROI, particularly as our direct sales reps increased productivity in their territories, which typically scales up within 24 months, helping drive market share gains. Our analytics show that on average, relative to our independent agencies, Our direct reps penetrate their markets faster, generate higher surgeon utilization levels, and sell at a higher blended ASP, primarily because they're 100% focused on Therese products and fully leverage our corporate resources and programs. With increased confidence in this commercial strategy, combined with positive surgeon and patient adoption trends, we expanded our direct sales mix from 35% of revenue in 2020 to 58% of revenue in Q4 of 2021. During 2021, we started the year with 34 quota-carrying direct sales reps and more than doubled that group, exiting 2021 with 81 direct quota-carrying sales reps. Adding in associate direct sales reps, field sales managers, and a clinical specialist to our overall quota-carrying rep count, we ended 2021 with a total fleet in the field of 144 W-2 sales employees And this is up from 66 employees in 2020. In 2022, balanced against strong contributions from our high-performing independent sales agencies, as well as our sales organization, Steadily Matures, we'll continue the strategic investment to further expand our sales team in the field with a goal of approximately 150 quota-carrying direct sales reps on board by the end of 2022. We expect that this growing direct sales channel will continue to contribute to a higher proportion of our overall revenue in 2022 and beyond. As such, with the accelerated direct channel investments initiated in the second half of 2021 and that will continue through 2022, we now expect 70% of our revenue will come from this Bunyan-focused direct sales channel by the end of the year 2022. With that said, we continue to guide for the business to be modeled with active surgeons and surgeon utilization, which reflect the commercial growth of our business. Shifting now to R&D and our product development strategy. We are committed to driving innovation with activities that include R&D programs for both next-generation bunion correction systems, as well as the development of new technologies addressing concomitant conditions, and IP defense of our technology innovations. To date, we have a global portfolio of over 40 granted patents, including 32 patents granted in the U.S. Our R&D programs have yielded advancements in the procedural aspects of lapoplasty, and our focus on the bunion pathology has highlighted other meaningful bunion-related product opportunities along the way. For example, our lapoplasty mini-incision system provides both patients and physicians a minimally invasive option for our instrumented lapoplasty procedures. And our adductiplasty midfoot correction system addresses concomitant midfoot deformities that can occur in up to 30% of bunion patients. To date, we are highly encouraged by the favorable response received from the surging community for both of these novel products. 2021 R&D investments have led to several new product innovations, some of which were announced last week at the ACFAS conference. At our booth at the ACFAS, we featured our Lapoplasty 3-in-1 Guide, which is an advanced instrument specifically designed in part of our efforts to continuously advance the speed and reproducibility of the lapoplasty bunion correction procedure. An expansion of the adductiplasty system, which adds several specialized instruments designed to improve the efficiency and expand the clinical application of the system. And a lapoplasty S4A anatomic plating system, our next generation in lapoplasty titanium plate fixation technology that provides surgeons with an additional fixation option and our speed release and tritone release instruments, which are new single-use specialized cutting instruments designed to provide a more reliable and complete surgical release of key soft tissue structures commonly addressed during the lapoplasty and adductoplasty procedures. To clarify, some of these products are under early commercial rollout today, and others we anticipate will begin rolling out in Q2 of this year. We see continued opportunities to develop additional strategic innovations for bunion and related pathologies. With our unique corporate focus on the bunion pathology, we're learning more every quarter and see more meaningful product opportunities today than we did a year ago. Our R&D teams remain closely aligned with our Surgeon Advisory Board and have solid clinical relationships with other key surgeons across the country, both MDs and podiatrists. Therefore, given the opportunities we've identified, we intend to increase our R&D investments in 2022. We believe our approach, particularly given our strong partnerships with surgeons who provide us timely and market-leading feedback, will continue to pay dividends over the coming years. In closing, we're more bullish than ever before about the opportunity ahead of us and have built an organization and plan to establish lapoplasty as a standard of care. As we thoughtfully invest in our proven growth initiatives, We remain focused on maximizing long-term share capture and top-line growth. With that, I'll now turn the call over to Mark to go over our financial performance. Mark.