Treace Medical Concepts, Inc.

The conference will begin shortly. To raise your hand during Q&A, you can dial star 1 1.

Good afternoon everyone and welcome to our third quarter 2022 earnings conference call. Participating from the company today will be John Tree, Chief Executive Officer, and Mark Hare, Chief Financial Officer. During the call, we will offer commentary on our commercial activity and review our third quarter financial results released after the close of 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.trees.com. This call is being recorded and will be archived in the investor 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 uncertainty 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 TREES 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 form 10Q for the third quarter and our form 10K for the full year 2021 filed on March 4, 2022 for a detailed presentation of risks. With that, I will now turn the call over to John.

Thank you, Vivian. Good afternoon, everyone, and thank you for joining us on our third quarter 2022 earnings conference call. In the third quarter, we continued to execute on our strategic plan with positive momentum carried through, resulting in sustained strong revenue growth and steady gains in our key operating metrics. Revenue in the quarter increased 53% and increased 51% in the first nine months of 2022. With our investments clearly delivering on our growth, our operations are poised to scale beginning in Q4. Before I go into details about the quarter, let's start with our market summary on where we stand today. Our disruptive lapoplasty solution was specifically developed to correct the root cause of the bunion and address a large and underserved market. We have identified an addressable $5 billion US market of 1.1 million annual surgical candidates, of which only 450,000 undergo bunion surgery each year, mainly due to limitations associated with current standards of care. In the third quarter of 2022, we penetrated approximately 5% of the estimated 450,000 annual surgical bunion procedures in the US, up from 3.5% in the third quarter of 2021, and reflecting approximately 2% market penetration of the 1.1 million annual US surgical candidates. Turning to our Q3 results, revenue in the third quarter was 33.1 million, representing 53% growth over the third quarter of 2021. During Q3, we continue to benefit from our commercial strategies and investments with improving demand trends as the quarter progressed. Therefore, we're extremely pleased not only with our top line growth, but also sustained positive trends in our key operating metrics, including our expanding direct bunion focus sales team, which accounted for 74% of our Q3 revenue mix, coming in well ahead of our 70% target for the year. Strong steady increases in the number of new surgeon users, ending Q3 with 2,218 active surgeons, up 39% year-over-year. A year-over-year increase in trailing 12-month surgeon utilization, with 10.1 kits per surgeon in Q3, up from 10.0 kits a year ago. And strong blended average selling prices of $5,794 per case representing 6% growth over the prior year due to continued adoption of our lapoplasty mini-incision system complemented by increasing utilization of our adductoplasty mid-flip correction system and from early benefit from our very recently commercialized technologies, specifically our S4A anatomic plating system and speed release and tritone tissue release instruments. Speaking to our S4A plating system for a moment, we've been very pleased with the early response we're seeing in the market. Specifically, we're seeing that surgeons are converting from our conventional plating kits to the S4A system because of its advanced anatomic fit and design advantages. As adoption trends continue, we believe this has the potential to positively contribute to our blended ASP over time as S4A carries a premium price versus our conventional plating systems. Investments in our patient awareness DTC programs, expansion of our direct bunion focus sales channel, and targeted R&D innovations have supported our revenue growth and momentum. We remain excited about the positive impact these investments are making on our business, giving us confidence that we have a well-defined, proven, and scalable commercial strategy fueling our growth. Given these positive trends, we're raising our full year 2022 revenue guidance to $135 to $138 million which reflects an increase of 43% to 46% over 2021 revenue. Shifting now to our commercial and market development activities. As previously discussed, we've been making targeted investments this year with the goal of increasing our market penetration by advancing patient awareness, surge in education, and demand for our lapoplasty and other related procedures, expanding the footprint and coverage of our bunion-focused direct sales channel, and driving more targeted R&D innovations into the marketplace. Our DTC patient awareness initiatives are a key component of our commercial strategy and are designed to educate patients on bunion deformities and our differentiated solution, encourage patients to seek more information and locate laparoplasty surgeons in their market, and ultimately to schedule a surgical consultation. We employ social media, Google search, public relations and other media including targeted TV campaigns with strong metrics and performance data that show active patient engagement, further supported by feedback from regularly conducted surgeon surveys. We believe we have a highly effective DTC strategy and more patients have been asking for lapoplasty while visiting their physicians. Our surgeon education and training programs also continue to be well received. Interest and attendance by new surgeons at our training events have been strong during 2022. Likewise, our advanced training events, both online and in-person, where our tenured surgeons can acquire advanced skills and learn new approaches, such as our mini-incision and adductoplasty procedures, continue to show strong demand. Our education programs play a key role in the effective onboarding of new surgeon users and increasing skills of existing surgeons, broadening their patient indications. Through the first nine months of 2022, We added 435 active surgeons compared to 317 surgeons in the same period last year. This represents a 37% increase. We continue to experience high turnout as evidenced by our most recent national training event in New Orleans, which was heavily oversubscribed. We're encouraged to see steady gains in our surgeon user base. As of the third quarter, our active surgeon base, which includes surgeons who performed at least one case in the trailing 12 months, has now achieved 22% penetration of the estimated 10,000 foot and ankle surgeons who perform bunion surgery in the US. As our surgeon base continues to mature, we look forward to utilization gains, not only with increased use of lapoplasty, but also our ductoplasty system, as well as further adoption of our growing portfolio of complimentary ancillary products, all supported by our expanding direct sales channel and patient education and awareness initiatives. This past weekend, we held a master's level educational event for our Centurion surgeons. The Centurion group of surgeons represents some of our most experienced lapoplasty surgeons in the country. The event was held at our new company headquarters in Ponte Vedra, where we now have expanded didactic and hands-on lab space designed for larger group training events. This first of its kind educational event focused on advanced lapoplasty and adductoplasty techniques, pre and post-op patient management, interactive reviews of challenging cases and clinical research, and also included hands-on training with some of our future technologies, including our microincision and speed plate systems. We are pleased to see the high level of interest and attendance for this meeting, as well as the enthusiasm expressed by the attendees for the unique evergreen learning programs we provide the lapoplasty surgeon community. This community is a growing network of surgeons across the country, all with a shared passion for lapoplasty and with a desire to keep advancing their knowledge and honing their surgical skills in an effort to continuously improve the care they provide to their patients. We look forward to hosting additional surgeon training events at our new state-of-the-art training facility in the future. Turning now to our direct sales channel. We have a highly specialized team at Treece, including a rapidly growing direct sales force. one that is 100% focused on bunion and related midfoot surgery and represents the only such organization we're aware of in the med tech industry. We believe this has contributed meaningfully to our revenue and market penetration. We continue to invest in our direct sales team and transition to a higher mix of direct revenue over time. In the third quarter, 74% of our revenue was generated by our direct sales force, up sequentially 68% from the second quarter, and up 53% from just a year ago. This also came in well ahead of our previously communicated 70% year-end target, and we now anticipate exiting the year approaching 80% direct revenue mix. We ended the third quarter with 143 quota-carrying direct sales reps, a 77% increase from the 81 direct reps we had at the end of 2021. On strong interest from candidates to join our employee sales team, we continue to expect to exceed our year-end goal of 150 quota-carrying sales reps. We believe these new reps are joining Treece because of our unique growth profile and our culture, driven by innovative technologies that are backed by strong clinical data sets and supported by our market-leading patient and surgeon education programs. Including associate sales reps, clinical specialists, and sales management, our employee fleet in the field increased 63% to 234 sales employees in the third quarter compared to 144 employees at the end of last year. We continue to experience the beneficial impacts from our direct sales team. Our analytics show that our direct reps on average penetrate their markets faster, generate higher surgeon utilization levels, and sell at higher blended ASPs. Our direct reps typically scale with significant revenue and cost leverage achieved within 12 to 24 months primarily because they're exclusively focused on our products and fully utilize our full suite of corporate resources and programs. Speaking now to our product development strategy, we have an R&D team committed to driving innovation to maintain our industry leadership with programs for next generation bunion correction systems, as well as the development of new ancillary products addressing other bunion related pathologies and IP defense of our technology and innovations. At the end of Q3, We had 38 granted U.S. patents and over 45 U.S. patent applications pending. We highlighted two new exciting product innovations at the American Orthopedic Foot and Ankle Society, or AOFAS, annual meeting in September, including the Lapoplasty Microincision System. This is an advanced instrumentation option designed to further reduce both the incision size and related tissue dissection with our procedure. This evolution of our instrumentation allows our patented lapoplasty procedure to be performed through two centimeter or smaller incisions. And our speed plate implant fixation platform. This is a new fixation technology platform designed for rapid insertion through small incisions, serving as both an enabling technology for the microlapoplasty procedure and with broader applicability for adductoplasty midfoot procedures as well. As a reminder, the speed plate is currently under 510K review with the FDA and is not available for sale in the U.S. We anticipate initial commercial availability of both of these technologies within the first half of 2023, pending FDA clearance. We're excited about the potential benefits this microlapoplasty speed plate combination could bring to patients. As with any procedure that involves smaller incisions and less tissue dissection, We believe this can translate to even faster recovery with less pain and less swelling. In terms of reimbursement for our products, CMS recently released its final rule for 2023 Medicare payment rates for hospital outpatient and ASC services to cover facility costs for surgical procedures, which includes implants used in the surgical case. As a reminder, our products are used in procedures covered by certain well-established DPT codes. And we are pleased to note that the 2023 reimbursement rates for these codes have been finalized with mid single digit increases effective January. This continues a multi-year trend of low to mid single digit increases in facility reimbursement rates for the codes associated with our procedures. We look forward to providing additional updates on our new product innovations as we continue to develop our pipeline centered on our core technologies and IP aimed at improving surgeon user experience patient outcomes, and supporting continued market penetration. Turning to our clinical data, a key differentiating driver for our business is our commitment to clinical evidence, which we believe resonates well with both surgeons and patients. From what we can see in the marketplace, we believe we're the only industry participant with a growing body of clinical data demonstrating rapid return to weight bearing in a walking boot with low recurrence rates at 12 and 24 months, and interim data demonstrating positive patient-reported outcome scores following our bunion correction procedure. At the 2022 Annual AOFAS Conference, we announced new interim data from the Align3D Multi-Center Prospective Clinical Study demonstrating positive radiographic and patient-reported outcomes on patients with at least 12-month follow-up following the lapoplasty procedure. Building upon previous interim data analysis, data on 159 study participants demonstrated early return to weight-bearing in a walking boot at an average of 8.3 days, a low recurrence rate defined as loss of radiographic correction with loss of correction observed in 1.4% of patients, and an 81% reduction in pain by visual analog scale, or VAS, and an 82% and 84% improvement in walking, standing, and social interaction scores, respectively, based on the Manchester Oxford Foot Questionnaire, or MOCS-FQ, reported at 24 months post-procedure. We believe we're the only company to offer this level of clinical evidence on a commercial surgical bunion product, and it's rewarding to see the meaningful impact that lapoplasty is making on patients' lives, not only physically, but socially and mentally as well, through quantifiable interim data from validated scoring systems. Again, we believe the positive interim data coming out of our differentiated Align3D study resonates strongly with surgeon and patient communities and is reinforcing further market adoption of lapoplasty. I'd now like to highlight two additional developments within the quarter. On September 20th, we held our first surgeon advisor event at the NASDAQ market site in New York. The event included presentations from five leading lapoplasty and adductoplasty surgeons highlighting the significant synergies of these two complementary surgical procedures, given that up to 30% of bunion patients present with a coexisting deformity of the midfoot, known as metatarsus adductus, and that the clinical literature demonstrates a higher rate of bunion recurrence in patients where the bunion is corrected, but this midfoot deformity is left unaddressed. I want to expand on the significance of our adductoplasty innovation. Just as a lapoplasty system transformed a challenging freehand bunion operation into an instrumented reproducible procedure, facilitating the potential for broad adoption by the foot and ankle surgeon community, we believe a ductoplasty follows the same model. We again are the first to offer an innovative instrumented system designed to deliver reproducible results for yet another technically challenging freehand operation of the midfoot that has been largely left unaddressed until now. We're excited about the long-term opportunity that adductaplasty offers to surgeons, their patients, and for our business. Early surgeon feedback has been very positive. A recent surgeon user survey indicates that on average, they anticipate using adductaplasty in up to 15% of their lapoplasty procedures. Contributing approximately $4,000 of additional revenue to lapoplasty cases Adductiplasty represents a significant incremental market opportunity that we are focused on penetrating, applying our formula of rapid design innovation, surgeon training, clinical data, and direct-to-patient awareness activities, all promoted and supported through our Bunyan-focused direct sales force and fleet of expert clinical specialist employees. Adductiplasty is driving increased interest in treat medical products in our training programs, and is also helping us gain new account approvals. And finally, I'm pleased to introduce and welcome two new board members, Lance Berry and Jane Kiernan. Lance and Jane bring decades of combined experience leading medical device companies to our board. Their perspectives will be valuable as we accelerate our strategic execution into our next phase of growth. In closing, we're executing to a plan supported by strong balance sheet that we believe is adequate to fully fund our planned commercial, market, and product development initiatives, and take us into profitability. We've developed a specialized and scalable business model centered around our disruptive first mover technologies backed by strong IP, clinical data sets, and positive reimbursement trends that are advancing the standard of care and the surgical correction of bunions and related midfoot deformities. A differentiated and proven commercial strategy driven by industry's only bunion-focused direct sales channel and DTC patient awareness and education initiatives, all supported by a talented team of over 375 Therese Medical employees, all with a shared passion for our mission to improve the surgical outcomes for Bunyan patients. With that, I'll now turn the call over to Mark to review our financial performance. Mark.

Thank you, John. Good afternoon, everyone. Revenue in the third quarter was $33.1 million, up from $21.6 million a year ago, representing an annual increase of 53%, driven by increases in procedure volumes and an increase in blood and average selling price due to adoption of our new technologies. Third quarter revenue increased 10% sequentially over Q2. In the third quarter, 2022, the number of active surgeons performing at least one case in the trailing 12 months increased 39% year over year to 2,218 surgeons, which translates to 22% penetration of the estimated 10,000 surgeons in the US who perform bunion procedures. Surgeon utilization increased to an average of 10.1 cases per year, up from an average of 10 cases a year ago. This is notable. As a reminder, we commercialized lapoplasty seven years ago, and in the past two years alone, we've added 1,085 active surgeons. nearly 50% of our total active surgeon base. We're pleased with this growing number of surgeons who, on the average, steadily increase utilization each year they use lapoplasty due to positive patient outcomes and expanding indications in their practices. We sold 5,705 lapoplasty procedure kits in the third quarter, a 44% increase versus the prior year's third quarter. Blended average selling price was $5,794. a 6% increase over the third quarter in 2021, driven by the adoption of our lapoplasty and adductoplasty systems, as well as early impact from our newest technologies, our S4A plating kit, speed release, and tritome instruments. We continue to see greater uptake of our other complementary or ancillary forefoot products as we add direct sales reps, who tend to focus more on selling these ancillary products while in lapoplasty cases. displacing other competitive binding-related forefoot products. Gross margin was 80% in the third quarter of 2022 compared to 80.4% in the third quarter of 2021. The 40 basis point decrease in gross margin was due in part to an increase in capitalized surgical instruments and related depreciation for our new products and anticipated increased demand typically seen during our seasonally strong fourth quarter. Total operating expenses were 37.7 million in the third quarter of 2022, which includes sales and marketing expenses of 25 million, research and development expenses of 3.8 million, and general and administrative expenses of 8.9 million. This compares to total operating expenses of 22.8 million in the third quarter of 2021, which included sales and marketing expenses of 16 million, research and development expenses of 2.5 million, and general and administrative expenses of $4.3 million. The increase in operating expenses reflects strategic investments in our expanding direct sales channel, investments in product innovation, increased capacity requirements, as well as support for other commercial initiatives. Third quarter net loss was $12.1 million, or $0.22 per share, compared to a net loss of $6.4 million, or $0.12 per share, for the same period 2021. Cash and cash equivalents were 88.5 million as of September 30th, 2022. Turning to our outlook for full year 2022, as John mentioned, we remain encouraged by the underlying strength and momentum in our business with our strategic investments clearly delivering on growth. Therefore, we are raising our full year 2022 revenue guidance to 135 to 138 million, an increase of 43 to 46% over 2021 revenue. This compares to our prior revenue guidance of 130 to 134 million. With productivity gains from our direct sales force, as well as increasing leverage in the middle of our P&L, we expect our operations to scale beginning in Q4. With that, let me turn the call over to the operator to open the line for your questions.

Thank you. At this time, we will conduct the question and answer session. As a reminder, To ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster.

Our first question comes from Robbie Marcus of JP Morgan.

Your line is open.

Hi, this is actually Lily on for Robbie. Thanks for taking the question and congrats on a good quarter. Maybe just to start. So you've been pretty substantially expanding your surgeon base quarter over quarter. So maybe if you could just talk about how you're balancing between driving adoption and new accounts and driving deeper penetration and existing ones, and how would you compare the level of penetration and lapoplasty share in some of those more experienced accounts versus the newer ones?

Yeah. Hi, Lily. John here. You know, I think we're focused on both fronts. We're, you know, especially with our aggressive addition of new sales reps to the team, we're building new surgeon relationships. The reps are bringing, you know, new doctors to our training events, getting them up and going on lapoplasty. And then we're also working on the other side of, you know, going deeper with our existing, you know, more tenured users as well. And those users can be brought by the reps to advanced training courses where surgeons will learn to broaden their indications over time. And they're also impacted, you know, downstream by our patient outreach initiatives. So I think we're working on both fronts, bringing on new users and, you know, focusing on increasing utilization with our existing user base as well.

Got it. That's helpful. Maybe just to follow up, we've seen you expand your portfolio pretty meaningfully over the last year or so with adductoplasty and some other new products. So, what sort of impact have you seen that had on lapoplasty adoption over the last few quarters? Have you seen that had any sort of halo effect or pull through as the portfolio has gotten bigger? Thank you.

Yeah, great, great, great question. You know, adductiplasty, for instance, is a great example of that. We're seeing a lot of new surge in interest in Therese Medical products in general, you know, by offering adductiplasty, and it just plays into this portfolio effect we're having. You know, having those two overlapping technologies in a surgical case, we're able to hit that in training. very efficiently and seeing surgeons coming on board to our training events with interest in adductoplasty and other surgeons with interest in lapoplasty, and both of them get exposed to both. And then I think our sales reps do a really nice job of rounding out the utilization to include some of our other ancillary products as they start to develop that relationship with the surgeon and the presence in the OR over time. So we're definitely having a compound effect. by having these new technologies offered.

Great. Thank you. Please stand by for the next question.

Our next question comes from Drew Rainier from Morgan Stanley.

Your line is open.

Hey John and Mark, thanks for taking the questions and congratulations on a great quarter. Maybe just to start, I know you're going to be anxious to talk about 2023, but just as you're starting to kind of think about next year, can you just help us with any puts and takes, any framework that we should be considering? I mean, you're growing tremendously this quarter. Guidance moves higher. I mean, it seems like you have nothing but tailwinds at your back. Looking at consensus, it looks like it's $170 million. kind of now implying 25% growth off your updated guidance number. But just are you comfortable there? And just maybe just talk about any moving pieces we should be considering for next year.

Hey, thanks, Drew. And great topic. Appreciate the question. Yeah, you know, the way John and I have been thinking about it is, you know, first of all, we're really pleased with the Q3 results. We put a lot of initiatives in place that are really working well, the build of the direct sales channel, some of our DTC efforts, and our new product innovation. So we're really pleased where we are, and we're really tracking to expectations here. It's a little bit early to get into next year, 2023 right now, when we're right in the middle of our biggest quarter here. But with that said, you know, we're we really feel like we're poised to scale, as we mentioned in our prepared remarks, that we've really positioned ourselves well for this large Q4 season as well as going into next year. So we'll probably provide more specifics in our Q4 earnings call next time, but we're really feeling good about where we are and all the positive metrics We talked about the number of surgeons, the utilization, the blended ASP. So we feel like we're really poised in position for good next year. But we'll get into more specifics next time.

Got it. Thank you. And maybe just on the force side, it sounded like you're going to come in a little bit above the 150 reps by year end. But just maybe help put this in context of now talking more about being a scalable business. It sounds like you're likely going to see leverage in the fourth quarter, but how should we kind of be thinking about a broader Salesforce build over the next six, 12 months even?

Yeah. Hi, Drew. Thanks. This is John. I think we're very happy with what we're seeing with these new rep additions and You know, we've been on a very aggressive build-out program this year, and we're going to continue to build that out next year. And I think what we're going to be looking for is what's that right optimum ratio of surgeons, you know, per rep. We're dialing in on that efficiency really, really well now, and we're starting to figure out, you know, where to take that. But we'll continue to invest in our direct channel into next year and obviously see some scaling. And then 24 and beyond, we'll just keep tuning it and growing it appropriately.

Got it. And last one for me is just kind of following up on, I think, Lily's question earlier. But as you're thinking about these new product launches, maybe just asking this differently, I think you're 20%, 22% penetrated in the surgeon base today. but how should we kind of think about adductiplasty and some of these newer products, maybe expanding surgeon penetration over the next 12 months or so? It sounds like it's more of a door opener for you. It might have been a barrier before by not having this product, but curious how this could really impact. And Mark, just a housekeeping question. I'm sorry I missed the procedure kits in the quarter. Thank you.

Okay, Drew, I'll grab the first side of that, and Mark can get the procedure kit number for you here. But I think we're going to continue to penetrate with adductiplasty. We're in the early innings of this ballgame with adductiplasty, but we have tremendous interest within our current existing lapoplasty surgeon user base. And then again, that combination of having both adductiplasty and lapoplasty in our portfolio is kind of supercharging more interest in coming to our trainings, and as these procedures compound in cases, you know, every adductaplasty is adding $4,000 or so on top of a lapoplasty procedure. So we really like that. We really like what we're seeing and its impact on blended ASP. I wouldn't really say it was a barrier or not having it as a hindrance. It's just a, it's another breakthrough from Therese Medical. It's the first time surgeons have had the ability to tackle a really challenging deformity of the midfoot. And so it's been just largely unaddressed. and we're giving those the enabling tools and we're coupling that with excellent advanced training so that they really feel confident doing it and then offering our clinical specialist employees that will go in on these surgeons first one two three cases and and be there and make sure they go really smooth the learning curve on a ductoplasty is is pretty quick relative frankly to lapoplasty so the doctor uptake on it can happen you know pretty pretty quick again It's never going to be the volume of lapoplasty, but we really like the add-on capability and really the clinical problem that we're solving with this.

Andrew, with respect to the procedure kits, we sold 5,705 in the quarter, so that's a 44% increase from the prior year.

Thank you.

Please stand by for the next question. Our next question comes from Ryan Zimmerman of BTIG.

Your line is open.

Hey, good afternoon. Thanks for taking the questions, and congrats as well on the great quarter. I want to ask John on the fourth quarter a little bit, sorry for the near-term question, but as we think about ASPs, and we try and spend a lot of time thinking about both ASPs and your doctor metrics, but if I recall, seasonally you see maybe a more benign bunion, if you will, maybe less variability in cases in the fourth quarter just due to patients kind of achieving their deductibles earlier in the year and getting that bunion surgery done. And so I'm just wondering if you can elaborate on kind of what your product mix or your case mix index could look like in the fourth quarter as we think about ASPs in the fourth quarter.

Yeah. Hey, Ryan. Thanks for the question. Yeah, we talked about, you know, maybe last quarter some lumpiness in our blended ASP quarter to quarter, but over time being, you know, upward and to the right. We also mentioned that, you know, traditionally in Q4, you get this high compression of patients, particularly in November and December and maybe more flow to the private ASCs where they'll make a trade-off and use a premium lapoplasty kit, but maybe not our other ancillary products. And that having maybe a little bit of a dampening effect on blended ASP. But I think from where Mark and I are seeing things right now, I think we're going to continue to see some good, strong, up and to the right momentum in our blended ASPs as we go into Q4. That would be our expectation as we sit here today.

That's very helpful, John. I appreciate the color, and I think it's good to note for investors. Maybe turn into the P&L for a little bit. Appreciate your comments, Mark and John, about being poised to scale, but if you look at the P&L this quarter, maybe where we were thinking relative to what you came in at on operating expenses, on the sales and marketing line, and so forth, just help us think through kind of you know, what poise to scale really means, particularly from a spend perspective, if you could, and just how to think about kind of some of those investments that you're making.

Yeah, thanks, Ryan. That's a good question, something that we talk about regularly here. You know, from our operating perspective, we've talked about some of the growth that we've had over the last couple of years, a lot of the investments, the growth in the sales channel. There's a lot of build there. We've also talked about you know, expansion into a needed facility where we can do more of our sales training or R&D development and those things, prototyping, warehousing, all of those infrastructure needs. And so this quarter reflects some of those investments. And we believe that from that perspective, we've kind of achieved a level that will increase, but only moderately going forward from a G&A perspective. We will continue to invest in sales and marketing, as John talked about, that we're focused on that build, and so that will continue into next year as well. But hopefully that kind of helps you think about kind of the levels where we are from a G&A perspective, and we will be, of course, building and investing more in product development, so the R&D line as well. But I think a lot of the major changes that have really taken place over the course of the last 12 to 18 months. So I think we're getting closer to that steadier state level.

Appreciate that and congrats again.

Thanks, Ryan. Thanks.

Thank you. Please stand by for the next question.

Our next question comes from Rick Wise of Stifle.

Your line is open.

Thank you very much. I am jumping between calls, so I apologize if my question has been asked. First, you obviously had a brilliant quarter. Congratulations. But I get asked frequently about the kind of pressures we're seeing and hearing from other companies. whether it's staffing shortages of one kind or another, or the consumer, and just wondering, it's sort of silly, but you don't seem to be seeing it. How immune do you think you can continue to be in this complicated time? And maybe you can just talk around that kind of a topic, if you don't mind. Thank you.

Yeah, thanks, Rick. That's a great topic. And, you know, as a company, we're not immune from some of these macro conditions that are happening out there. But, you know, as we said in prior quarters, whether the topic was related to supply chain or different COVID strands, that, you know, what we're really focused on here as a company is executing our plans, our initiatives, and our strategic playbook. And so we're going to continue to do that really keep our heads down and really focus on those items that we have control over. And so far it's been working for us. So we see the same things that other companies are seeing, but we believe as we're building a stronger sales force, as we're doing all those things that we've learned over the last few years work for us, that we'll continue to invest in those strategic areas of the company that have a return to us. So hopefully that provides a little more color as far as where our focus is.

Okay. And as you say, you've had a number of products launched this year. Adductiplasty sort of came out of left field and was an opportunity. I'd be curious to hear where you are with that penetration in your view. But I was wondering if you could talk a little more about what we could expect, what you're expecting from the pipeline a little bit. I missed again, I apologize if I missed it. Um, if, if, if you already talked about it, we can talk about it offline.

Uh, Hey Rick. Yeah, this is John. I can hit a quick, you know, a couple of quickies. I think we're in the early. Uh, the, uh, of the adductaplasty, you know, uh, conversion opportunity. First of all, uh, very early on lots of interest getting more and more cases, you know, every quarter, uh, great feedback. Our S4A plating system, just very recently released, uptake has been very rapid. It's early, but it's adding to our blended ASPs because it sells at a premium price. And then our tissue release tools, those are really nice. They're adding several hundred dollars to a good number of cases already, and we'll continue to, we think, see more upside from those as we go forward. And then as we look into 2023, we talked about earlier in the call the micro incision system, the instrumentation for doing lapoplasty through a two centimeter or smaller incision and the potential impact that could have on quicker recovery and less swelling for patients. Then the speed plate technology, which is our next generation fixation platform that, you know, it's kind of enabling technology for micro lapoplasty, but it's also a a platform that can be used in midfoot procedures with a ductoplasty as well. So beyond that, we've got a pretty robust internal development pipeline that, you know, we'll kind of have a steady rhythm of new product introductions as we go through the next, you know, 12 months, 24 months.

Gotcha. Thanks so much.

Thank you. I will now turn it back to Vivian Cervantes, Investor Relations at Gilmartin Group. Please go ahead.

Thank you, operator. On behalf of Chase Medical, thank you everyone for joining us on our third quarter earnings conference call. This concludes our call and we look forward to our next update following the close of our fourth quarter 2022. Have a good night.

Ladies and gentlemen, this concludes today's call.

You may now disconnect. The conference will begin shortly. To raise your hand during Q&A, you can dial star 1 1.