Treace Medical Concepts, Inc.

Good day and thank you for standing by. Welcome to the Treece Medical Concepts first quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tripp Taylor. Please go ahead.

Good morning everyone and welcome to our first quarter 2026 earnings conference call. Participating from the company today will be John Treese, Chief Executive Officer, and Mark Hare, Chief Financial Officer. John and Mark will discuss our first quarter financial results in 2026 Outlook. We will then host a question and answer session following our prepared remarks. Our press release 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 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, 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 currently available information, and Treece Medical 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 2025 Form 10-K and our Form 10-Q for the first quarter of 2026, filed before the market opens today, May 8th, which can be found in the investor relations section of our website at investors.treese.com for a detailed presentation of risks. With that, I will now turn the call over to John.

Thank you, Tripp. Good morning, everyone, and thank you for joining us on our first quarter 2026 earnings conference call. Entering 2026, Treece Medical has evolved beyond its foundation in lapoplasty into a comprehensive bunion solutions company. Building on the strategic progress made in 2025, we've expanded our portfolio with multiple new procedure innovations, which we believe position us to address a broad spectrum of surgeon and patient preferences across all Bunyan clients. This breadth of offerings will support accelerated growth in procedure volume, increased wallet share, and a meaningfully expanded serviceable market opportunity. We are encouraged by our first quarter performance, but remain focused on driving further improvement. We continue to execute on controllable levers, including continuing to strengthen our sales team, launching meaningful product innovations, and adding new accounts and surgeons. Importantly, the sustained mid-single-digit case volume momentum to start the year reinforces our confidence in our strategy to expand market penetration and improve top-line growth as we move through 2026. At the same time, we also meaningfully reduce cash burn as we progress towards cash flow breakeven. I do want to note the dynamics that impacted 2025, including macro pressures on procedure demand and portfolio mix shifts, remain present. We reported revenue declines of approximately 10% in Q1, and we believe this trend will improve over time as we annualize the launch of the new products we launched in 2025. And we believe we're well positioned to navigate these factors and drive long-term growth. As such, we're reaffirming our outlook for full year 2026 revenue, which was raised when we pre-announced our results on April 9th, to be in the range of $202 million to $212 million, representing a decline of 5% to 0% compared to full year 2025. We expect revenue declines to improve through the rest of the year, with revenue growth returning in our seasonally strongest fourth quarter. As mentioned, we expect fourth quarter revenue growth will largely be supported by case volume growth, the lapping of the ASP mix shift dynamics, as well as the contributions from our planned 2026 product launches. Now I'd like to turn to our three strategic initiatives to drive top line growth and the progress we've made on these initiatives in the first quarter of 2026. First, leveraging our large existing customer base to drive adoption of the three new bunion systems that we commercialized in 2025. Second, continuing to build upon our leadership position with Laplacide by launching new technologies that can appeal to new surging users. And third, expanding our product offerings to grow wallet share and tap into new TAM-expanding procedural adjacencies. First, let me begin with an overview on the Bunyan technologies we introduced in 2025, including their strategic relevance and early market reception. We believe these three new systems more than double our accessible market relative to lapoplasty alone, making their successful commercialization and deeper market penetration an important priority as we look to drive incremental growth. Our nanoplasty and percuplasty 3D MIS systems expand our reach into the high-volume osteotomy segment, which represents approximately 70% of the estimated 450,000 annual U.S. funding procedures. Today, we believe only around 15% of metatarsal osteotomies are effectively being performed using MIS approaches, largely due to steep learning curves, variability in outcomes, and limited correction of the third frontal plane of the deformity, which is associated with higher recurrence rates. Our two 3D minimally invasive osteotomy systems are designed to address these challenges with more reproducible, instrumented procedures that can be easier to adopt and are designed to correct all three planes of the bunion deformity. We believe this position is well to expand adoption and drive greater penetration over time across the estimated 4.4 million annual US bunion sufferers. Now speaking to our SPEED MTP great toe fusion system. SPEED MTP targets the roughly 20% of bunion patients who have developed an arthritic great toe or MTP joint. Additionally, SPEED MTP addresses a separate population of non-bunion patients who suffer from an isolated arthritic MTP joint. This is a large and strategically important market segment for trees to participate and to innovate in, given that MTP fusion is among the most common foot and ankle procedures performed. Across our growing base of over 3,300 insurgent customers, we estimate lapoplasty currently captures about 25% of their bunion-related procedure volume. These three new systems are intended to target the remaining 75%, representing a significant opportunity for continued penetration and growth. Market penetration with these three products is increasing. While just three quarters into our full launch, we continue to see a strong uptake of our new systems and a corresponding acceleration in our procedure volumes, resulting in market share gains. As of Q1, approximately 35% of our lapoplasty surgeon user base has incorporated at least one of these three new bunion systems into their practice since launch. This represents an increase over the 25% that we reported in the fourth quarter of 2025. We're also encouraged to see that approximately 30% of our new surgeons who became Treece customers by initially using one of the three new bunion systems have also used lapoplasty technology, which we believe indicates a pull through to lapoplasty technologies. Second, at the same time, we remain highly focused on advancing our leadership in lapoplasty and expanding its appeal and adoption across a broader surgeon audience. Lapidus fusion represents approximately 30% of the 450,000 annual US bunion procedures and is the largest segment where we are the recognized category leader. And we remain on track to commercialize our next generation lapoplasty platform known as Lapoplasty Lightning later this year. This system offers next generation 3D correction instrumentation and new speed TMT implants. Lightning instrumentation is designed to deliver a faster procedure by reducing procedure steps while also offering enhanced precision and enhanced control for the 3D correction. while speed TMT implants, as the name indicates, are designed to provide faster fixation application. Expanding surgeon interest and uptake of lapoplasty also includes advancing our Intelliguide PSI technology, the first patented preoperative planning and patient-specific cut guide system for bunion and MIG foot correction in the U.S., Together with Lapoplasty Lightning and Speed TMT, we believe these three core innovations position us well to extend our category leadership and drive further adoption in 2026 and beyond. Now turning to our third initiative, expanding our offerings to more broadly serve our growing customer base. In addition to our three new bunion systems, we expanded our portfolio with the addition of new speed plate implants, new sterile instruments, and we introduced our first biologics offerings. These additions are designed to enable our sales force to more comprehensively support their surgeons' needs while also increasing access to additional procedures. With this expanded portfolio, not only are we seeing growth in bunion-related adjacent procedures, but our sales team is now servicing some of their customers' incremental procedures outside of bunions as well. Building on this trend, in 2026, we are launching new technologies aimed at both increasing wallet share and expanding our access to incremental procedure volumes. Our SuperBite variable pitch compression screw system represents another differentiated technology from Treece. Compression screws are a fundamental fixation technology utilized in foot and ankle surgery. And without this high volume fixation offering in our portfolio, competitive sales reps have supplied these products where needed in Treece cases. We announced initial surgeries with our SuperBite screws in April, and we're hearing positive early responses from surgeon users and high enthusiasm from our sales reps in our early commercial experience. Not only are SuperBite screws built with advanced features based on the latest MIS customer preferences, but they're also designed to save OR time by reducing or eliminating altogether the need to pre-drill before implanting the screw due to their novel self-drilling design. The strategic addition of SuperBite to our portfolio not only reduced the need for a competitor in our cases, but importantly, they equip our sales force to gain access to a broader range of procedures ranging from the forefoot to the midfoot to the hindfoot and to the ankle. And, complementing our expanded procedure access with SuperBite, we will target improving outcomes for challenging midfoot and hindfoot fusion procedures with our forthcoming SpeedXM fusion system launch. SpeedXM leverages our novel speed plate hybrid technology, delivering the benefits of dynamic compression and locking screw stability in a specialized anatomic design to address fusions of the larger bones of the midfoot and the hindfoot. SpeedXM plates are highly complementary with SuperBite screws and our biologics as these technologies are often used in these larger bone fusion procedures. Importantly, these new products are serving procedures already performed by our existing surgeon customers in the same setting of care and often on the same day as our surgeons' bunion cases. These new offerings leverage our sales force's presence and expertise and we believe can drive greater selling efficiency and impact. We expect full commercialization of both SuperByte and SpeedXM during Q3, collectively expanding our total addressable market by approximately $300 million and providing access to attractive high ASP midfoot and hindfoot procedures where multiple trees technologies are often needed. Our strategy to build a comprehensive best-in-class bunion solutions platform is gaining traction, supported by encouraging early indicators across the business. We continue to expand our active surgeon base while increasing utilization as adoption of our broader portfolio grows, driving mid-single-digit procedure volume growth in the first quarter, which we believe supports our approach. Looking ahead, we believe we have a path to accelerating procedure growth and increasing wallet share as we drive deeper penetration with our broadened product portfolio and continue to more comprehensively service our great surgeon customers' product and procedure needs. Combined with disciplined investment, these efforts position us to deliver sustained market share gains, improve profitability, and long-term shareholder value. With that, now let me turn the call over to Mark to review our financial performance. Mark?

Thank you, John. Good morning, everyone. Revenue in the first quarter was $47.2 million, a decrease of 10% compared to the prior year. The decline was mainly driven by the shift in revenue mix towards lower priced, minimally invasive products and lower volume of bunion procedure kits sold. Gross margin was 79.3% in the first quarter of 2026, compared to 79.7% in the first quarter of 2025. Total operating expenses were $54.6 million in the first quarter of 2026, compared to total operating expenses of $57.5 million in the first quarter of 2025. First quarter net loss was $18 million or $0.28 per share compared to a net loss of $15.9 million or $0.25 per share in the first quarter of 2025. Adjusted EBITDA for the first quarter was a loss of $5.5 million compared to a loss of $3.8 million in the first quarter of 2025. Cash, cash equivalents, and market world securities totaled $51.9 million as of March 31, 2026. This represents an increase of approximately $3.5 million from the company's balance sheet of $48.4 million as of December 31, 2025, and compares to an increase of approximately $0.4 million in the first quarter of 2025. Turning to our outlook for full year 2026, we are reaffirming our full year guidance, which we raised in conjunction with the announcement of preliminary operating results on April 9th, and expect full-year 2026 revenue to be in the range of $202 million to $212 million, representing a decline of 5% to 0% compared to the full year 2025. We expect revenue declines to continue until our seasonally strongest fourth quarter. Fourth quarter revenue growth is expected to be largely supported by accelerating case volumes, the lapping of the mixed shift dynamics, as well as contributions from our planned 2026 product launches. In addition, we are reaffirming our expectation of a loss in adjusted EBITDA in the range of $4 million to $6 million for the full year 2026 as compared to a loss of $3.9 million in full year 2025. We also expect a reduction in cash usage of approximately 50% for full year 2026 as compared to full year 2025. Supported by a strong and flexible balance sheet, we believe we are well positioned to continue executing our strategic and growth initiatives for the foreseeable future. With that, I'll turn the call over to the operator to open the line for questions.

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 will pause for a moment while we compile our Q&A roster.

Our first question comes from Ryan Simmerman with BTIG.

Your line is open.

Hey, good morning. This is Izzy on for Ryan. Thank you for taking the questions. I just wanted to start on your ASP and next shift. Mark, it sounded like you are expecting the ASP headwinds to lapse around the fourth quarter, but I was hoping you could speak to that a little bit more and what we can expect moving throughout the year.

Yeah, this is Mark. Thanks for the question. As we began to talk about at the end of last year and we talked about it on our last call, we're really pleased with the launch of our new products. We know that some of these products have lower ASPs and they've been readily adopted by a large portion of our surgeon base. John talked about how around 35% of our current customer base has already adopted some of these new products at these lower ASPs. This is the dynamic that we talked about over the last couple calls. We anticipate to continue to see that until we begin to lap or to have an anniversary of when we made these new products available. It's really in the third quarter of this year. So some of these dynamics we fully anticipate to continue. This is the exact dynamics that we talked about. And so we feel like the strategy is working. We're getting these new products to our surgeons. They're utilizing them. And that's just going to have a temporary headwind in the first part of this year, but that will change in the back half of this year.

Appreciate it. Thank you. And it looks like gross margins came in a little bit higher than street expectations. So as you guys continue to launch these new products and see the benefits from the products that were launched late in 2025, how should we think about gross margins going forward? Thanks for taking the questions.

Another great question. We are very focused on gross margins here. Our new products, we really have a goal to launch new products that have consistent gross margins with what we've had historically. Some of these margins do fluctuate from quarter to quarter. We benefit in the seasonally strong fourth quarter when we have higher volumes. And there are, of course, lots of pieces and components that impact gross margins overall. But we're pleased with what we did in Q1. They came in strong, a little bit better than what we had anticipated, so we view that as very positive. So we'll continue to launch new products to keep in line with this range of high 70% gross margins, and we believe that we can continue to do that going forward.

Thank you. One moment for our next question. Our next question comes from Ben Hainor with Lake Street Capital Markets. Your line is open.

Good morning, guys. Thanks for taking the questions. You know, great to see that so many of the folks have adopted these new solutions. I guess, what are you seeing once they do? I mean, do they immediately kind of swing the pendulum to their ultimate adoption of, you know, the osteotomy solutions versus laparoplasty? Do they swing too far? Do they... work their way towards the ultimate mix, or how does that track from what you've seen thus far?

Hi, Ben. It's John. Thanks for the question. We've seen, in general, strong adoption by our customer base with these new products. Once they get trained on them, do a couple cases, they tend to be pretty sticky. And we're pleased with the way that's going there. And it's still early days. But as mentioned, we've got now 35% of our base lapoplasty customers now using one of these three new solutions in their practice. And we're working on getting more of them using two and three over time. We want them to be full portfolio surgeons as we move through time. We've also seen, and it's early, but some adoption of lapoplasty technologies with surgeons that came in initially to treat through using one of those new three products. So too early to say what the materiality of that is going to be. We'll maybe comment on that as we get more experience later through the year. But it is good to see that dynamic as well. OK.

That's helpful. Sorry.

This is Mark. I think another important point to realize is that as we've offered these new product options, we don't necessarily believe that they're replacing our lapoplasty procedures as well. We think it's going to be additive and allow them to have more options for the patient needs. So where that ultimately lands, what that mix ultimately is, you know, it's it's still to be determined, but we don't necessarily believe, I think in your question was, is it replacing lapoplasty? We think it's providing additional options for the patient needs and for those surgeons to address whatever deformity that they see.

Okay, I'm looking at it. And then, you know, as you bring out more and more solutions in the portfolio, I'd want to see folks adopt the full portfolio, of course. I mean, I guess what percentage or proportion of the foot and ankle cases that are done every year could the current and, you know, to be launched in the near future, Trees products find their way into? I mean, is it, you know, 50%, 70%, 90%? What does that look like?

Yeah, thanks, Ben. John here. It's hard to say the exact percentage, but as we launch products like Super Bite, and now we have the broad portfolio that includes MTP fusion solutions, as well as, you know, three different ways to treat a bunion, four different ways to treat a bunion, you're definitely getting into a large, being able to cover a large percentage of the surgeons, you know, workhorse foot and ankle cases, I would say. And, you know, the sales force is pretty excited about that. The addition of Super Bite For instance, in the early innings here, you know, they're displacing some competitors that used to sit in the room, you know, just to use that compression screw technology, and now they have their own. So I think it's going to be interesting to play out over time, and we do definitely appeal to a much broader base of the surgeon's overall caseload as we work through the year and get these products out.

Okay. And on the SuperBite set or kit platform, How many SKUs are in that? How does that stack up versus competitive offerings on the screw side?

Yeah, Ben, we've tried to do this in a very capital efficient and inventory efficient way. As we thought about launching a compression screw system, we didn't want to have high capital, high inventory burden. Traditionally, these systems have a lot of SKUs, hundreds and hundreds, maybe 1,000. So we've tried to design this and bring forth a system that I don't have the exact number of SKUs, but it's probably in the range of 100 or so sellable items in our system. And that makes it very lean and very efficient and something we can manage very well. And we can provide in good volumes to the field so they can really make maximum impact as we get these out.

OK, great. That's all I have. Thanks for taking the questions, gentlemen.

Thanks, Ben. Appreciate it. One moment for our next question. Our next question comes from Rick Wise with Stiefel. Your line is open.

Good morning to you both. I wanted to dig a little more into the sales cadence outlook for this year and with your patience, talk about the setup for 27. I mean, it seems like, John, the strategy clearly is visible. It seems to be working. We're in the early days of the strategy becoming increasingly visible. So sort of a two-part high-level looking at the forest kind of question. You beat the first quarter. You beat and raised. As you look at the rest of the year, how do we think about the outlook and your confidence? I know you want to stay conservative, but if you continue this first quarter pattern in the second, the third, hopefully in the fourth quarter, is it going to be you're going to do a little better potentially because of penetration? Is it going to happen on the product side? Is it something to do with your execution? Just help us understand where more of the same could happen as we go through 26. And I'll ask Mark the tough question. Mark, I know it's hard to talk about 27 in precise terms, but my numbers, my current numbers, have you growing careful, I'm being cautious, Here the consensus numbers are more like 9% or 10%. I mean, is 5% to 10% the right way to think about the potential for 27% if you execute well and all these products roll out and you see the trends we're seeing now? It sounds potentially very conservative. Help us think through all that. Sorry for the long-winded questions.

Okay. Thanks, Rick. I appreciate it. I'll take the first one, and then Mark can handle part two on future consensus. You know, the way the year lines up is, like Mark said before, you know, we've got some headwinds due to these ASP-related mix shift dynamics related to the three new bunion systems that we launched in Q3 last year. As we get to Q3, that headwind starts to abate. And additionally, in Q3 and increasingly Q4, you know, we're going to benefit from the introduction of our 2026 launches, some of which carry, you know, favorable ASPs relative to the three products we launched last year. You know, Speed TMT as well as cases that will combine are SuperBite screws, Speed XM plates, and Biologics. Those get us into some higher dollar ASP midfoot and rearfoot cases. And then, you know, we also have some new sales reps that are going to be ramping up in the back half of this year. So that's kind of the way we see the year. And we're going to keep our heads down. We're pleased with our Q1. We're not satisfied. We got a lot of work to do, but we got a lot of good things going on with this business as we build out a more robust and diversified portfolio with some new, you know, growth channels in it with these different product lines.

Hey, Rick. This is Mark. I'll just say John is right on there. We're going to look at this one quarter at a time. We're pleased with the results in Q1. They came in as expected, which is good for our progress during this year. And so I'll start there that, you know, it's one quarter at a time and we're going to focus on, you know, getting this right this year. With respect to next year, You know, we have not given any formal guidance with respect to 2027, but I can tell you that we are expecting to return to revenue growth in the fourth quarter this year. So I think it's going to be a little bit early to talk about 2027. It's going to be next year will be impacted on what is our momentum as we're exiting this year. But I think the positive story is that although we did have a decline this quarter, and we may have some revenue declines in the short term here, we believe that we'll have increased momentum with case volumes as well as the top line revenue growth as we're exiting the year. So before we give formal guidance to next year, we want to better understand that momentum, but we do believe that we're going to be set up very well for next year as we exit the as we fully anticipate or plan to exit this year with increased revenue growth.

Thank you. And just one more from me. Maybe, John, you could talk about just the general environment. We didn't hear from Stryker this quarter because of their cyber issues as clearly as we normally would. What's your sense of the market environment? Are consumers behaving as usual? Are doctors? It's just... Is the environment an OK one, or as usual, stable? What are you seeing? How are you thinking about that aspect of the rest of the year? Thank you both.

Yeah, I appreciate it, Rick. When we entered this year, we said that we expected the macro headwind type of dynamics, consumer sentiment. related impacts on elective procedures to to to continue into this year we didn't really see a reason things were going to be you know dramatically shifting um you know q1 kind of played out within our expectations really didn't see any surprises in in you know patient flow and surgeon activity beyond what we anticipated you know we don't have independent data yet to tell us what the overall market trends were for bunions or foot and ankle elective in q1 but Again, it played out as we expected pretty much. So we're going to continue to focus on our strategies, getting these new products out and in full supply, training more doctors, and getting new customers and accounts, and work our way through quarter to quarter.

Makes sense. Thank you both.

Thanks, Rick. One moment for our next question. Our next question comes from Lily with JP Morgan. Your line is open.

Hi, thanks so much for taking the question. The new MIS-ASCODME products understandably get a lot of the attention, but I'm hoping you could share some color on how lapoplasty has trended over the last few quarters. How meaningful of a contributor has the pull through from perkyplasty, nanoplasty been to reinvigorating growth in lapoplasty? And do you see lapoplasty lightening as more of an incremental update or is it something that could have a material impact on ASP and volume?

Hi, Lily. Thank you for the question. It's John. You know, as we said in our last call, there's been, you know, patient-surgeon preference changes to more MIS options and even to more MTP fusions on some bunion patients over time, MTPs where they might have some arthritis in the great toe joint. We've seen a great uptick in response to our MTP fusion offering. It's doing very well out there, and that product does carry a higher average selling price than the average price on our MIS product, so we like to see that. With respect to lapidus, there continues to be strong demand for lapoplasty, where lapoplasty is indicated in the surgeon's algorithm at this point in time, and We have seen, you know, as alluded to, what we believe to be some pull-through from surgeons that came in new to trees through one of our three new bunion products, adopting lapoplasty. Now, it's early on, and these numbers aren't large yet, but we'll be watching that through the year, and we do believe, you know, in the advancements of lightning and speed TMT, more availability of Intelliguide. These are tools that can help us appeal to more surgeons as we bring those into more force into the market late this year.

Great. And then just as a follow-up, could you talk a bit more about some of the competitive dynamics and your competitive positioning now that you're sort of going more head-to-head with the other ortho players and MIS osteotomy? So are you seeing adoption of these new products primarily from existing lapoplasty accounts? Are you seeing a good amount of competitive switches? Any color you could share on how that competitive positioning has evolved over the last few quarters would be helpful.

Thanks. Sure, Lily. I think it's been, you know, initially we probably had more uptake in our existing customer base, but as these products have gotten out in greater supply, the sales reps have become more familiar with them. We train more surgeons on them. More surgeons are using them. They're talking to their peer surgeons about these new MIS systems. Our instrumentation is fantastic. It really is. You know, it's extremely helpful in allowing these surgeons to do a more reproducible, predictable MIS osteotomy procedure. So as we've gotten more into the market over more time, we've definitely been seeing more competitive conversions and our sales team's expertise, our training, And the efficacy of these products is what's making it happen. So we're seeing a good uptake. We're seeing displacement of competitors, not only the MIS systems, but with our speed MTP, too. And that's a big, important segment of the market. So we like what we're seeing across all fronts, both how they're being implemented within our existing lapoplasty user base and the adoption we're getting from new surgeons and competitive conversions.

Great. Thanks for taking the questions.

Sure. Thank you. And I'm not showing any further questions at this time. And as such, this does conclude today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.