Tenon Medical, Inc.

Greetings and welcome to the Tenant Medical Second Quarter 2023 Financial Results and Corporate Update Conference Call. As a reminder, this call is being recorded. Your hosts today are Steve Foster, Chief Executive Officer and President, and Steve Van Dyck, Chief Financial Officer. Mr. Foster and Mr. Van Dyck will present results of operations for the second quarter ended June 30th, 2023. and provide a corporate update. A press release detailing these results was released today, and it's available on the investor relations section of our company's website, www.tenanmed.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 may be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks 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 call over to Tenon Medical Chief Executive Officer Steve Foster. Please go ahead, sir.

Thank you, Madeline, and good afternoon, everyone. I'm pleased to welcome you to today's second quarter 2023 financial results and corporate update conference call for Tenon Medical. Over the course of our record second quarter, we achieved $743,000 in revenue, representing a triple-digit growth of 450% year-over-year and 72% sequentially from the first quarter. Our fully commercialized catamaran system designed to deliver a refined surgical option for patients with chronic sacroiliac joint pain or degenerative sacralitis that fail conservative care is rapidly gaining momentum and increasing surgical procedures. We marked an important milestone in the second quarter with gross profit and gross margin turning positive at $194,000 and 26% respectively. Our positive second quarter reflects a focus on building our commercial infrastructure and sales management team. We continue to target physicians who have been trained on SI procedures or have significant experience with SI surgical technologies by facilitating an aggressive local workshop training program. We are showcasing our unique solution through a wide variety of channels, conferences, and hands-on workshops, which include a combination of our local synthetic model and cadaveric lab workshops to train physicians on the CataBrand system. This has proven to be a timely and efficient process for our physician customers. 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 second quarter, our surgical procedures increased 469% compared to the year-ago quarter. To reach our sales goals, we continue to execute our go-to-market strategy during the second quarter. hosting 43 physicians in catamaran workshops. These sessions are designed to highlight the effectiveness and ease of use of our product, as well as how the inferior posterior approach to the optimized pathway into the anatomy. This distinct implant system addresses a significant unmet market opportunity and is designed to produce broad and demonstrable advantages over market competitors. Building on the momentum of the second quarter, we expect the number of surgical procedures to continue to grow as our sales team broadens our aggressive marketing, promotion, and workshops featuring the Catamaran system. In Q3, representing our continued commitment to ongoing innovation, Tenom will initiate a limited release of our newly refined system to deliver Catamaran starting in September 2023. These enhanced tools promise to deliver upgraded graph handling, smaller access profile, and enhanced access stabilization. The upgrades will assist our market application expansion into SI revision surgery, an adjunct to multi-level fusion, and SI procedures utilizing navigation software and imaging. 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 a succinct review of our financial results. A full breakdown is available in our press release that crossed the wire this afternoon. Our second quarter revenue was $743,000, an increase of 450% compared to $135,000 in the comparable year-ago period. Revenue for the first six months of this year was $1.2 million, an increase of 471% compared to $206,000 in the same period last year. The increase in revenue for the three and six months of this year as compared to the same periods in 2022 was primarily due to increases of 469% and 476% respectively in the number of surgical procedures in which the catamaran system was used. Gross profit in the second quarter of this year was $194,000 or 26% of revenue compared to a gross loss of $136,000 or a negative 101% of revenue in the comparable year ago period. For the first six months of this year, gross profit was $147,000 or 13% of revenue compared to a gross loss of $340,000 or a negative 165% of revenue for the first six months of 2022. Gross margin percent improved due to higher revenue associated with the increase in the number of surgical procedures. Operating losses totaled 4.3 million for our second quarter, compared to a loss of 5.5 million in the second quarter of 2022. The decrease in operating expenses were a result of the arbitration settlement and other consulting expenses in Q2 of 2022 offset by an increase in stock-based compensation, increases in sales and marketing, and general expenses. For the first six months of this year, operating losses totaled $9.2 million compared to $7.5 million in the prior year period. The increase 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. The net loss was $4.3 million in our second quarter, compared to a loss of $5.5 million in the same period of 2022. For the first six months of this year, net loss was $4.3 was $9.1 million compared to $7.8 million in the previous year period. The company expects to incur additional losses in the future. As of June 30, 2023, cash and cash equivalents and short-term investments totaled $6.3 million as compared to $8.6 million in December 31, 2022. I'll now turn the call back to Steve for his closing thoughts.