Tenon Medical, Inc.

Greetings and welcome to Tenant Medical's second quarter 2024 financial results and corporate update conference call. As a reminder, this call is being recorded. Your hosts today are Steve Foster, President and Chief Executive Officer, and Steve Van Dyck, CFO Advisor. Mr. Foster and Mr. Van Dyck will present results of operations for the second quarter ended June 30th, 2024 and provide a corporate update. A press release detailing these results was released today and is available on the investor relations section of our company website at 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 risks and uncertainties that would 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 obligating 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 annual report on 10-K dated March 29, 2024, 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's Medical Chief Executive Officer, Steve Foster. Please go ahead, sir.

Thank you, Maria, and good afternoon to everyone. I'm pleased to welcome you to today's second quarter 2024 financial results and corporate update conference call for Tenon Medical. In the second quarter, we continued to focus on building market share for our proprietary catamaran system. supported by our recently restructured operational sales and marketing strategy. We are pleased with the sustained revenue growth and full-year milestone of generating positive gross profit as we successfully resourced all of our U.S. sales regions. We delivered a 21% year-over-year increase in revenue, driven by a 7% rise in surgical procedures utilizing the Catamaran system. Gross profit of $470,000 expanded 142% as compared to the prior year quarter and generated solid gross margin of 52%. With sustainable revenue growth, we believe our stable cost structure will maintain a gross margin performance at recent levels and improve with increases in revenue. Across operations, we've made considerable commercialization and technical advances and remain on the right path during our second year of commercialization. To provide an update on our restructured sales organization, during Q2, we have reached our 2024 full-year target of sales operations in five geographic regions. With additional operational team members assigned across our now full geographic reach, we are poised for future growth. A significant component of our growth strategy is the investment in clinical research to reinforce the safety and effectiveness of the catamaran system. Significant progress has been made in this area. For those new to Tenon, this prospective multicenter single-arm post-market study evaluates the clinical outcomes of patients with sacroiliac joint disruptions or degenerative sacroilitis treated with the catamaran SI joint fusion system. Patients will be evaluated for a period of up to 24 months, reviewing various patient reported outcomes, radiographic assessments, and adverse events. In short, this study aims to show the catamaran system delivers on its promises. As we near completion of enrollment in this study, we have been notified that publication of our interim analysis is now imminent. This peer-reviewed analysis reinforces that the catamaran system Utilizing a minimally invasive inferior-posterior approach is safe and effective in relieving pain and reducing disability in adult patients diagnosed with SIJ disruption or degenerative sacralitis that have failed non-surgical treatment. We look forward to sharing specific details when publication is complete in the very near future. This early validation provides conviction that the catamaran transfixing design and less invasive inferior posterior approach is functioning as intended to optimize patient outcomes through short-term stabilization of the joint and long-term fusion. Of note, the interim data from our study combined with the over 600 surgeries performed with the catamaran system today is demonstrating an exceptional safety profile. benefiting patients and their physicians alike in delivering on its clinical promises. Our ongoing workshop activities, led by a network of valued physician faculty, combined with the robust commercial infrastructure we've built, have us prepared for rapid expansion. Our goal is to ensure we are precise in the selection of medical professionals with experience in SI surgical technologies and to provide them with world-class workshop opportunities. Importantly, This is a prudent approach that contains cost and provides higher return value to patients, the cohort of physicians, and Tenon's business overall. We experienced an increase in our interactive training corresponding with our restructured marketing and sales approach and hosted 36 physicians in catamaran workshops during the second quarter of 2024. As clinical data builds from our post-market study, validating the effectiveness of our SI implant and approach, our sales and marketing activities will become more robust and drive our ongoing targeted physician workshop activities. With that, I'll turn it over to Mr. Van Dyck, our CFO Advisor, to discuss our financials.

Thanks, 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 revenue was $901,000 in the second quarter of 2024, an increase of 21% compared to $743,000 in a comparable year-ago period. Revenue for the six months ended June 30, 2024, was $1.6 million, an increase of 38% compared to $1.2 million in the six months ended June 30th. 2023. The increase in revenue for the three and six months ended June 30th, 2024 as compared to the same periods in 23 was primarily due to increases of 7% and 19% respectively in the number of surgical procedures in which the catamaran system was used. Gross profit in the second quarter of 2024 was $470,000 or 52% of revenues compared to 194,000 or 26% of revenues in the comparable year-ago quarter. For the six months ended June 30th, gross profit was 940,000 or 58% of revenues compared to the gross profit of 147,000 or 13% of revenue for the previous year's period. Importantly, we have seen gross margins steadily improve due to the revenue growth associated with an increase in the number of surgical procedures which resulted in sustainable operating leverage due to lower relative fixed costs and the absorption of more overhead into our standard cost. Operating expenses totaled $4.3 million in the second quarter of 2024, largely in line with the expenses of $4.5 million in the second quarter of 2023. For the six months ended June 30th, 2024, Operating expenses totaled $8.3 million compared to $9.4 million in the prior period. Decreases in operating expenses were primarily a result of a decline in research and development expenses and sales and marketing expenses offset by increase in general administrative expenses. Net loss of $3.8 million for the second quarter of 2024 compared to a loss of $4.3 million in the same period in 2023. For the six months into June 30th, 24, net loss was 7.4 million compared to 9.1 million in the previous year period. The company expects to incur additional losses in the future. As of June 30th, 24, cash and cash equivalents totaled 2 million as compared to 2.4 million as of December 31st, 2023. As of June 30th, 2024, the company had no outstanding debt. Lastly, beginning with our third quarter in 2024 earnings call in November, Jay Hanson, our interim principal accounting officer, will join me to deliver the financial results during the earnings call. Additionally, Jay will join today's question and answer session following Steve's closing remarks.