Treace Medical Concepts, Inc.

Good day and thank you for standing by. Welcome to the Treece Medical Concepts first quarter 2024 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 during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Julie Dewey. Please go ahead.

Good afternoon, everyone, and welcome to our first quarter 2024 earnings conference call. We appreciate you joining us. I'm Julie Dewey, Treece's Chief Communications and IR Officer. With me today are John Treece, Chief Executive Officer, and Mark Hare, Chief Financial Officer. During the call, John and Mark will offer commentary on our commercial activity and review our first quarter financial results released after the close of the market today, after which we will host a question and answer session. The press release and supplemental materials can be found in the investor relations section of our website at investors.treese.com. This call is being recorded and will be archived in the investor section of our website. Before we begin, we'd 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, outlook, 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 Form 10-Q for the first quarter 2024 filed today, and our Form 10-K for the full year 2023 filed on February 27, 2024, for a detailed presentation of risks. With that, I will now turn the call over to John.

Thank you, Julie. Good afternoon, everyone, and thanks for joining us. I'm going to focus my comments today on our first quarter 2024 highlights the progress of our numerous product launches, including Speedplate, our other growth drivers, and then spent some time discussing developments in the market environment, which is underpinning our decision to revise our full year guidance, as well as tell you about our exciting opportunities and strategies going forward. Following my comments, Mark will cover specifics about our Q1 results and our 2024 guidance. We grew revenue 21% in the first quarter of 2024. Revenue performance was driven by increased procedure kit volume from our expanding base of surgeons and mix driven by increased adoption of our newer technologies in our core bunion and related midfoot cases, all supported by our dedicated direct sales team. We also benefited from strong patient demand trends that extended our seasonally strong fourth quarter into the first quarter. Additionally, we made encouraging progress with respect to our adjusted EBITDA results. Our adjusted EBITDA loss improved 18% to a loss of $8.3 million in the first quarter of 2024, compared to a loss of $10 million for the same period in 2023. We've expanded our position in the foot and ankle market by adding complementary procedures and technologies to treat related deformities, namely our adductiplasty and hammertail correction systems, both of which coexist frequently with bunions and are addressed at the same time, and which together have expanded our TAM by an estimated $750 million. without diluting our focus on the $5 billion plus U.S. bunion market opportunity. Additionally, exiting Q1, we now have full market availability for a number of our newest technologies, including our speed plate fixation platform, hammer toe system, sterile instruments, and our minimally invasive micro-lapoplasty procedure. We expect all of these new technologies to contribute to our growth going forward. And we recently announced that we've now treated more than 100,000 patients with our lapoplasty procedure. recognizing that our success is not only measured by numbers, but are the transformative change that our differentiated therapies provide the patients to overcome painful, lifestyle-limiting bunion and related midfoot deformities. Further highlighting our progress in the first quarter, we delivered gains across our key operating metrics in Q1. We drove a year-over-year increase in volume of lapoplasty, adductoplasty, and complementary procedures, which were enabled by our versatile SpeedPlate platform. We also benefited from favorable mix as well, with new products like Speed Plate and our Hammer Toe systems, as well as our expanded offering of procedure-specific sterile instruments, all being utilized more frequently in our core procedures. As we previously announced, we established the first ever National Bunion Day in the United States on April 16th, and we launched our new Future You Patient Education brand awareness campaign. The response to this campaign has been very positive, driving significant increases in our website traffic and an amplified activity level on our Find a Doctor Locator. Therese was also named the first medical device partner and official foot and ankle solution partner for the Professional Pickleball Association Tour. Pickleball is the fastest growing sport in the US, and we believe we're uniquely positioned to drive greater awareness of the challenges posed by bunions and educate patients in this demographic on our pioneering lapoplasty procedure the number one most commonly used 3D bunion correction procedure by U.S. surgeons. Now I'd like to turn to our product launches. Our Speed Plate launch continues to fuel our growth, and we saw strong demand in the first quarter. In fact, Speed Plate usage nearly doubled in Q1 versus Q4 of 2023. Exiting Q1, we've achieved full commercialization of Speed Plate and expect adoption to continue steadily through the remainder of 2024. Additionally, we expect to launch a new speed plate configuration in Q3, which is designed to address some incremental larger bone fusion procedures in the foot. Next, our microlapoplasty system. This exciting evolution of our instrumentation allows the patented lapoplasty procedure to be performed now through a two centimeter incision using our new speed plate fixation technology. Our microlapoplasty system is now fully available, and throughout Q1, we witnessed a growing number of surgeons utilizing this minimally invasive lapoplasty approach. While we're excited about the growth opportunity that all these product launches represent, there's even more expected to come from our robust product development pipeline to deliver a steady cadence of new innovations in the second half of 2024, including mini-adductiplasty and our Redpoint patient-specific instrumentation. We believe both of these technologies will reinforce our market leadership position in the bunion and related midfoot correction space. We look forward to providing additional updates on these platforms, as well as other new product innovations as we progress throughout the year. Turning to our guidance, despite our strong start to the year with expected growth opportunities stemming from product launches and new innovations I just mentioned, it's become clear that the market environment and competitive landscape is quickly evolving, and we've made the decision to revise guidance for fiscal 2024. We have decided to do this now because we're seeing increased use and surge in adoption of MIS osteotomy solutions. At the same time, we're facing even more competition from knockoffs of our lapoplasty products. Both of these dynamics are creating incremental headwinds to our Lapoplasty growth. Specific to these knockoffs, we fundamentally believe that none of these systems match Lapoplasty's performance and reproducibility at the surgeon-patient interface, nor are they supported by the strong differentiating clinical data sets that Lapoplasty offers. We also believe some of these competing products are violating our IP. With this backdrop, I'd like to spend the next few minutes reviewing our strategy to expand our offerings and advance our business. While building our leading position in the Lapidus segment of the bunion market, we've simultaneously been pursuing a strategy to advance Trees from a company focused solely on Lapidus and related solutions to a comprehensive bunion solutions company. Meaning, to implement our strategy to expand our bunion solution portfolio, we plan to launch two innovative 3D MIS osteotomy systems in late 2024 into the metatarsal osteotomy segment of the market which accounts for 70% of the overall procedure volume today, and into our base of nearly 3,000 surgeon customers. Once launched, our customers who love lapoplasty but still perform, on average, over half their bunion cases using metatarsal osteotomies will then have a trace product to address all of their lapidus and osteotomy bunion cases. Additionally, we expect our MIS osteotomy solutions will afford us the opportunity to appeal to a new group of surgeons those with a strong bias for using osteotomy approaches for the majority of their bunion patients. We expect to see the positive benefit of these new MIS innovations starting in the fourth quarter of this year and ramping throughout 2025. I continue to believe we are uniquely positioned to build upon our market-leading lapoplasty position while leveraging that position to make a significant impact in the large osteotomy segment of the bunion market. First, we are confident in our track record of developing, commercializing, and rapidly innovating 3D bunion technologies that achieve broad customer acceptance due to their elegant design, reproducibility, and clinical effectiveness. We have proven this with lapoplasty, and we've applied this expertise in our instrumented approach to our 3D MIS osteotomy systems mentioned earlier. And we are confident in our ability to provide a strong educational resource for our surgeon customers as well as educate patients about our innovative therapies. Again, we have proven this with lapoplasty, and we will apply this experience with our forthcoming 3D MIS osteotomy platforms. Finally, we're confident in our bunion-focused direct sales team's ability to deliver these 3D MIS technologies to our base of nearly 3,000 lapoplasty surgeon users and continue to expand the size of our surgeon customer base over time. We recently trained an initial group of surgeons on one of our new 3D MIS osteotomy platforms in anticipation of our upcoming limited market release, and the surgeon feedback was overwhelmingly positive. I could not be more excited about the significant opportunity we expect from our new 3D MIS osteotomy platforms. At the same time, we continue to focus on expanding our product offerings and the total market we serve to become a comprehensive bunion solutions company, We are taking decisive actions to mitigate the impact of the competitive challenges as well as our revised growth rates by right-sizing our P&L and reducing costs. In addition, we intend to assert and enforce our IP rights. I am confident in our ability to capture the opportunities ahead of us, innovate for our Sturgeon customer base, and deliver value for our shareholders. I'll now turn the call over to Mark to review our first quarter financial performance and provide more details about guidance. Mark?