Tenon Medical, Inc.

Greetings and welcome to the Tennant Medical first quarter 2023 financial results. As a reminder, this call is being recorded. Your hosts today are Stephen Foster, Chief Executive Officer and President, and Stephen Van Dyck, Chief Financial Officer. Mr. Foster and Mr. Van Dyck will present results of operations for the first quarter ended March 31st, 2023, before turning the call over to questions from covering analysts. A press release detailing these results was released today and is available on the investor relations section of our company's website, www.tenantmed.com. Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates, and other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risk and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obliging ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our predictions. For a more complete discussion of these factors and other risks, you should review our prospectus dated April 26, 2022, particularly under the heading Risk Factors, which is on file with the Securities and Exchange Commission at www.sec.gov. At this time, I'll turn the conference over to Tenon Medical's Chief Executive Officer, Stephen Foster. Please go ahead, sir.

Thank you, Colin, and good afternoon to everyone. I'm pleased to welcome you to today's first quarter 2023 financial results and corporate update conference call for Tenon Medical. During the first quarter, we continued to ramp surgical procedure revenue with our fully commercialized catamaran system, designed to deliver refined surgical option for patients with chronic sacroiliac joint pain or degenerative sacroilitis that fail conservative care. 2023's primary focus is on building our commercial infrastructure and sales management team to support top-line growth in delivering on our go-to-market strategy. We are targeting physicians who have been trained on SI procedures or have significant experience with SI surgical technologies utilizing area sales managers, clinical specialists, and independent distributors in conducting an aggressive local workshop training program. We are showcasing our unique solution through a wide variety of channels, conferences, and hands-on workshops. Also, an aggressive informational marketing and promotion program that includes surgical training manual, white papers, websites, and social media is also supporting our outreach and education efforts. We continue to deploy a combination of our local synthetic model and cadaveric lab workshops to train physicians on the Catamaran system, creating a timely and efficient process for our physicians. All of these critical activities are designed to drive acceleration in the number of procedures completed with the Catamaran system. Confirming our approach, during the first quarter, our surgical procedures increased 489% compared to a year ago quarter. resulting in a 510% revenue growth year over year and a 56% growth sequentially. Turning to our clinical research timeline, during the first quarter, we continued to advance our clinical research with our two strategic post-market studies. The objective of our post-market multi-center strategic study is to report on clinical outcomes in patients with sacroiliac joint disruptions or degenerative sacroiliitis treated with the catamaran system. The study is designed to enroll up to 50 patients in up to 10 clinical sites across the country. The CT scan study will assess patient pain scores, fusion, as well as other patient reported outcomes out to 12 in 24 months. This investment allows our designated catamaran study centers to begin recruiting and enrolling patients into these respective studies and represents our continued commitment in validating and differentiating patient outcomes in radiographic assessment with the Catamaran system. We now have seven sites recruiting patients into our two strategic post-market studies, and I look forward to providing enrollment updates in the coming quarters. Looking ahead, we are well-positioned to build revenue and growth with the Catamaran system. It is now FDA-cleared, reimbursement-secured, and commercially launched. We are encouraged by our revenue ramp from the increasing number of surgical procedures utilizing the system. Early results show the system delivering on its promises and providing our physician customers with an enhanced option to treat their patients suffering from debilitating SI joint issues. We are also encouraged by the significant increase in reimbursement for the SI joint fusion procedure. CMS increased the 2023 Medicare facility fee by approximately 26% for SI joint fusion procedures performed in ASCs and 33% for these procedures done in a hospital outpatient setting. We believe the increase will drive further adoption of the Catamaran system and allow us to maintain our average selling price. With that, I'll turn it over to Mr. Van Dyck, our Chief Financial Officer, to discuss our financials.

Thank you, Steve. I'll give you a succinct review of our financial results. A full breakdown is available in our press release that crossed the wire this afternoon. Our revenue was $433,000 in the first quarter of 2023, an increase of 510% compared to the $71,000 in the comparable year-ago period. The increase in revenue in the first quarter was primarily due to an increase of 489% in the number of surgical procedures in which the catamaran system was used. Gross loss in the three months ended March 31st, 2023 was 47,000 compared to a gross loss of 204,000 in the comparable year ago quarter. Gross margin percent was a negative 11% in the first quarter of 2023 and a negative 287% in the quarter ended March 31st, 2022. Gross margin percentage increased improved due to the higher revenue associated with the increase in the number of surgical procedures. Based on our first quarter results, the company expects to produce a positive gross margin in the second quarter. Operating losses totaled $4.9 million in the first quarter of 2023 compared to a loss of $2.1 million in the first quarter of 2022. Increases in operating expenses were a result of an increase in stock-based compensation increases in sales and marketing and general expenses as the company builds its sales function and infrastructure to support future growth. Net loss was $4.8 million for the first quarter of 2023 compared to a loss of $2.4 million in the same period of 2022. The company does expect to incur additional losses in the future. As of March 31, 2023, cash and cash equivalents and short-term investments totaled $4.9 million as compared to $8.6 million in the December 31, 2022 period. I'll now turn the call back to Steve for closing thoughts. Thank you, Steve.