Treace Medical Concepts (TMCI) 8 May 222022 Q1 Earnings call transcript

Good day and thank you for standing by. Welcome to the Treace Medical Concepts’ First Quarter 2022 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Vivian Cervantes, Gilmartin Group Investor Relations. Please go ahead.

Thank you, Kim. welcome first and conference XXXX everyone call. afternoon, to quarter our earnings Good company John will Officer from today Participating the be Hair, Financial and Chief Treace, Officer. Mark Executive Chief

commercial financial be results after website we commentary will after During market of released review being release the host which section website. the quarter on we the Investor of call, will our will first our our activity the offer in recorded today, Investors can close is and question-and-answer Relations call found at in be press This of The session. investors.treace.com. the archived and section our a

upon on Before we forward-looking XXXX, these a or predictions statements. various risks. I implied these call performance events filed those Please for Accordingly, the John. of forward-looking and turn materially available full Litigation are relate Reform forward-looking remind all statements our refer based and will XX-K you results information, statements statements. over material not or from results of that XX-Q upon statements. or involve could by update filings, All for including begin, should estimated the anticipated made Any to X, undue With current later market uncertainties to obligation to the for no filed and today based forward-looking XXXX differ Act these during expectations of Private or now forward-looking to Form first it and Securities on presentation current John? XXXX. reliance will that, our risks to statements our to statements trends Treace SEC under the you that well be cause place our assumes is this All that future our statements. quarter These protected to as that detailed would year Form March we statements intent our actual estimates events call are as like be are assumptions. and

and on good for and quarter Vivian us you thank XXXX afternoon joining you, first Thank everybody earnings conference call. our

in improving in off execution commercial by in procedure solid with XXXX volumes, trends further strategies are over to XX% our in initiatives, the and We increase in aided prior resulting a on quarter a first year. revenue start strong

to our We our positive to another IPO. are of adding pleased report quarter momentum growth, since yet strong

fundamentally the that Our business by is disruptive see changing clinical surgery has which participant weightbearing technology driven From we rates. recurrence both in today. only growing surgical is industry we a body low demonstrating are and and we marketplace, our return procedure, can of what believe bunion the to rapid evidence,

demonstrating Foot In this interim peer-reviewed fact, Lapiplasty scores positive patient-reported study, Ankle we Surgery outcome Journal the our continued the ALIGNXD & from clinical procedure. a publication XX and in radiographic XX at morning, the and announced following of data on months

We DTC surgeon be through momentum sustained continue programs. enthusiasm initiatives active patients through education surgeons and as our as to pleased from the well targeted our with positive

from a our market we utilization has surgeon direct steady of aware and expansion the also their med In our XX% them revenue only surgeons our of transition note, higher focused as with up about direct Of channel well sequentially this such bunion area. active year meaningfully XX% is in up the believe our connect and quarter the procedure tech first quarter, industry learn from time. sales this patients channel mix to ago. revenue of and to fourth organization knowledgeable through growth, XX% direct in and today. We’re surgery, which channel, and increases contributed was will activities, direct of education our XXX% we’re as continue share just see help our in the and patient channel sales on over sales that a users supported and rates, to in invest revenue the sales awareness specialized encouraged to by The team we surgeon in expanding our

Our the undergo root a and candidates, underserved limitations which $X specifically correct with cause a of Lapiplasty annual due We’ve each million billion-plus market address standards developed surgery year, only was of solution to current care. to bunion U.S. X.X disruptive of identified market. and the mainly of large XXX,XXX surgical bunion

at XX%. metatarsal quarter as our in be which annual today, to the high surgeries we XX% reported in represents the of the approximately estimated XXXX, as a X.X% the highly share of been of X.X U.S., reminder, market the the As clinical surgical quarter U.S. XXXX, are first up surgical X.X% variable approximately first in from annual candidates representing the million with of bunion bunion shown XXX,XXX stands of osteotomy, recurrence In in have rates literature and and believe share procedures the X.X%

from driven share feedback surgeons, our clinical received well community, that Our our growth sustained gains. positive the continued our a and and team market by we for reinforcing we’re is conviction patients positioned

XXXX steady momentum procedures strategic traction the and strong our commercial we to revenue led benefit million, technology, metrics, of our of of from to first to over on during market the growth company-wide that first fueling by of and growth. strategic now from our strong the the operating continue discussed results, earlier QX the the half XX% QX quarter deliver in to Building I execution investments from programs in XXXX. impact representing Turning $XX QX, our realized revenue commercial back targeted quarter told, on were QX deferred acceptance All quarter. complemented was financial continued

the year-over-year; top XX% up continued for increases new only expanding trends in our our in continued team, underlying pleased mix X.X per active QX Strong up our growth an Adductoplasty metrics, representing growth are innovations which uptake including We increase. in prior growth in XX% positive with number which Mini-Incision ago, year-over-year as and our positive year over our XX.X kits by mid-foot focused correction. case, surgeon kits utilization year, $X,XXX for sales System surgeon of and line our XX% prices users with average surgeon the such but X,XXX revenue not System selling a bunion newer QX; our in represented extremely from direct strong increases blended of Lapiplasty approximate of ending the QX, used accounted of users, X% per

and and and confidence Our innovations that about growth. remain and DTC revenue direct investments continued our in the We we supported education fueling excited business on proven channel commercial positive strategy that’s a have momentum. our are impact have our have patient expansion sales investments programs, R&D expansion our of these consistently scalable making well-defined,

from we $XXX to Given revenue. up XXXX trends, $XXX raising year which increase million. XX% to prior are reflects guidance these full our from revenue full to is million positive guidance XX% $XXX of million, year to range $XXX This XXXX million of an

commercial Turning business differentiating clinical development A activities. for now key our and our is to commitment to driver market our evidence.

Surgeons As American a mentioned This Conference. morning this Foot ALIGNXD X of Scientific publication earlier, results from at February study heels interim interim XXXX to College on we Ankle presentation ALIGNXD & first in the data announced our our Ankle Surgery. pleased X-year Annual have the on podium the and of Foot comes & are the of peer-reviewed Journal of

average XX-month for from follow-up total patients, patients Data the least at maintained months of X just for X.X% on patient-reported XX XX significant patients announced, XX a interim for recurrence and days patients boot at reported early activity XXX and return improvement XXX bunion walking an demonstrated XX on Lapiplasty and following of time XX point within weight-bearing pre-surgery the with post-surgery including a consistent at rate. to reporting least data new positive work XXX a days; return and X full study publication months reporting months within to and patients As radiographic this XX-month of post-surgery, procedure. correction weeks measures outcomes recurrence with X unrestricted for at radiographic and in to patients with in and to from demonstrated X.X post-surgery months XX X-dimensional at average; the

validated or reported outcome measurement systems data the systems, scale VAS, and scores published across Foot patient interim three known MOXFQ; pain this improvement significant outcomes analog in or demonstrated information Manchester-Oxford the including PROMIS-XX. statistically as Questionnaire, patient-reported the scoring Additionally, visual

XX at XX% reporting both reduction XX pain noted per patients greater pre-surgery systems. post-surgery, than versus a example, levels scoring in months VAS For and MOXFQ

standing first Lapiplasty the offers the the approach much to a as interaction ALIGNXD, well X.X-centimeter improvement using prospective the system, as statistically root was significant Lapiplasty we incision realign and bunion. to utilizing of an metatarsal which option ongoing MiniXD Mini-Incision social system. bone multi-center our addition, a study were have and In smaller Further, address cause in reported In physical, entire in social health walking, mental, similar PROMIS-XX scoring MOXFQ. observed XX% improvement scores using clinical

the just case bump, First cutting invasive procedures. shifting bony and with minimally is newer osteotomy is the which

onboard patients the XD During the for the to outs ALIGNXD interim quarter, and report dataset this study, on new future study. forward additional and we we we as providing look done many with clinical continue to have treat sites

resonate patients. Lapiplasty from and Mini-Incision to approach continues physicians Our interest growing with both

of System price. our see selling blended to continue We average positive our a steady Mini-Incision adoption with to contributions

surgical national training remainder events strong events positive QX, with our and the expected continued strong clinical and and evidence were have level for many of strength our the the local approach, and On year. more attendance differentiated body we of surgeon at of through planned interest participation

learn offer evergreen learning for our procedures. of surgeons skills regular the Mini-Incision advanced person both where can and acquire through year, also As schedule well advanced Adductoplasty as throughout online our mentioned like we training surgeons in and before, our a events, as approaches new tenured

to into bunion-focused investments As share These the sales to and R&D for targeted this we demand patient market accelerate drive gains Lapiplasty mentioned expand direct expected drive accelerate channel growth procedure, the making and awareness, penetration investments we the more our term. our market. are long are footprint coverage in our of education innovations last quarter, and year surgeon additional and

pleased three very positive on feedback all of to report initiatives. We’re these early

Our a DTC strategy. are component patient commercial key our of initiatives awareness

years, media, on including patient which a investments to locate differentiated campaigns, seek Lapiplasty successfully of in information market are schedule on and and employed our Over solution. targeted to website, media, awareness education campaigns search, targeted encourage consultation. our TV we’ve designed all to We other more and designed the deformity their bunion Google ultimately public patients surgeons that important patients leverage made social and direct-to-patient relations the several past educate

metrics Our surveys. active from performance surgeon DT strategy works regularly data supported by further strong patient feedback show that and conducted with engagement

sales a have direct our strategy. conviction strong We in force

These XX% their our primarily Our in within quarter, because that in channel generate relative utilize on Treace fully up penetrate agencies, represented of scale and they at independent contribution direct higher our on direct strong reps leverage higher channel, typically months faster, and this ASPs. from programs. blended XX our sales markets XX% focused surgeon are by In sell first growth from utilization and with average, reps analytics of show our to was cost sales revenue, resources revenue led products XXXX. revenue of corporate the which QX XX% part XXX%

year Our this XXX sales growing reps of by goal approximately higher stands, sales overall quota-carrying contributing of XXXX with the a beyond. proportion this of and our revenue end direct channel in direct

from over expect We our year. the end come sales our bunion-focused channel that of this of XX% by revenue will

programs Turning strategy, U.S. QX, of addressing patent driving our of February. including pending. an surgeon a technologies on featured an included recent excellent booth instrument defense in of ACFAS leadership using the proficiency as Lapiplasty a in maintain granted systems XX product meaningful this IP last case to our our the we with perform several At and user end concomitant of innovation R&D minutes speed product, our of on and had procedure. and both team XX% and new new product U.S. to time as correction time next-generation for XX the This of development at innovations to applications conditions, XX this innovations. the Lapiplasty to We an complete average advance surgeon to reporting We’ve new bunion patents well technology at to our now These procedure. committed feedback depending have we very development X-in-X industry translates to reduction X-in-X catgut. saved been survey XX% Conference designed reproducibility Scientific guide, the the Lapiplasty receiving over a

designed and the expansion system. Adductoplasty the specialized improve application also featured the clinical instruments We several system, an of efficiency our of expand adding to

to our providing can before, occur mentioned a reproducible complex to next-generation system offers our anatomic XX% we serving release, system pipeline System, additional early in And as core plating Lapiplasty we’re that mid-foot plate and receiving SXA address new on on Anatomic look I uniquely technology, forward a during to in system updates design to better an system. develop TMT and joint up to clinical fixation We Lapiplasty complementary As address our patients, bunion finally, our deformities continue instrumented feedback the Adductoplasty the SXA currently excellent advanced anatomy. technologies product as variabilities our Plating early on is in focused in Lapiplasty innovations IP. surgeries. our of providing

Today, has employees, in I built Since growing, from beginnings. very in team accomplished am of highly sold procedure going are excited So of have before late from to outcomes we’re a improve here for of future in crystal so closing, this passion to many we with the patients more improve like a lives say, the and our starting the I’d deformities. on where lifestyle-limiting XX,XXX bunion in XXXX, humble over surgical Florida what from X scratch today, patients. vision so nearly market clear helped ago. we Ponte with than going bunion such talented we’ve a one Vedra, surgery first rapidly company, team despite kits great our just live about proud Lapiplasty this years of what’s suffering painful, XXX stock and ever and all shared for of mission

now With the access supported of R&D by and turn as evidence, we’re strong deliver to surgery. care call better to proven in our DTC are financial our the that, to Mark will equipped channel programs, making establishing announced goal we than review direct targeted newly With over ever I innovations, to upon standard performance. Mark? our bunion and Lapiplasty our in of capital growth clinical sales investments a

believe grew XXXX. $XX.X quarter from and million our Thank approximately you, particular up John. of over year the ago, XX% the representing which first volumes expectations, with Lapiplasty quarter, procedure as demonstrate quarter, were was the quarter benefits the increase dynamics the And. elective $XX.X These Good procedure system even procedures metrics XXXX of QX reflects afternoon, understand first number everyone. that environment saw we differentiating the base surgeons and choose rates, sold. with of from and some the as of faced procedure first the growth our scheduling correction recovering in half bunion when and well QX further into we surgeon the continue patients of rescheduled QX. in Revenue realization an in include Lapiplasty challenges. of expanded a revenue of an to million, strength kits a In a line half back higher utilization which

other number In addition, an With in point quarter quarter variance the a the selling case the expenses expense and quarter the increase margin to gross the kits, increase with products, in year-over-year first active increased was to pricing the average the first average first of compared $X,XXX, our million, utilization XXXX. X% XX% fourth operating increase were year-over-year administrative This year. well prior of million, year-over-year XX.X and least to general and and and XX% compares procedure of XXXX. In XX blended X% at surgeon of a from our margin the expenses XX.X% versus to XXXX, was trailing support. the of months. quarter in Adductoplasty million trailing in of $XX.X expenses quarter Blended Lapiplasty sold $XX.X On research in in million. as of including first quarter while increase the quarter procedure from XXXX in XX% of of Gross of modest increased we over per The a prior $XX.X first expenses basis, of X,XXX Mini-Incision XXXX. surgeons to an of $X.X approximately and reported $X.X Lapiplasty royalty XXXX, in including expenses XX.X% XXX year’s a million marketing average margin development first administrative the of gross in X,XXX, in one systems, expenses quarter. general sales was increase last kits XXXX average quarter and revenue the was continued of surgical selling million purchased active price compared development the QX XX.X% operating we in resulting and approximately of approximately our ancillary quarter providing as XX in to quarter $X.X Sequentially, months in depreciation saw performing marketing and year. increased research $X.X of expense increases QX Total million, related first in the first expenses the sales attributable incremental million total instruments. $XX.X a and to price consistent expenses and

expenses As support the previously noted, reflects commercial our investments increase growing in business to initiatives. operating and

is new the commercial, product liquidity fully flexibility us an our $XX loan, fund and revolver. new under of development Upon our loan balance advances million a were totaling we million or net for First approximately cash in the approximately loss per $X.XX share $X.XX million existing this or XXXX. agreement, sheet, week, to million, through capital, net $XXX compared initiatives. adequate enhanced our of loan last share we $X term our believe of our our of our reduced provided new market debt, million the quarter a strengthen XXXX. planned we fund favorably closing $X.X with refinancing million March under and and Earlier week’s was additional Cash of $XX equivalents bringing to financial non-dilutive loss that to as $X.X consisting announced received same period million per $XX.X company of XX, profitability cost non-dilutive arrangement and that

$XX.X our and cash of facility, previous $XX million to approximately Following to of under the and balance sheet. we credit debt million outstanding the our repayment payment related of financing added expenses fees

turn for our me let year concluding, revised XXXX. to Before full outlook

As revenue million full mentioned, to prior underlying $XXX over in $XXX an XXXX remain is $XXX momentum full business guidance to revenue. which the our million. our we an reflects our guidance and increase encouraged to XX% XX% John raising million and This to XXXX by of from of strength year increase are million, year $XXX

For quarter that, tracking of previously. our and your with I of operator With revenue XXXX, for to impact that over me catch-up the the first be flat call turn continue procedures sequentially quarter the the to expectations to open QX to business to line we see that questions. rescheduled let had the expect noted second the

from Our Robbie with JPMorgan. Instructions] [Operator first question comes of line the Marcus

is Your line now open.

it Hi. Robbie. This staffing, is some Lilly I this year. like Is terms holding are in of question. over right taking back color thinking Thanks of at rest on to for for anything normal? get the you or hoping on [ph] I capacity, is how momentum could there basically about your now was back hospital you point the that the just anything

No, pretty time to the that’s a what perspective, it’s we are do what comfortable consistent environment. are our great current able we question. is with talked with in And from last we about very

And in very We is confidence range seeing comfortable the the we provided believe we feel it’s to a we growing it’s early probably on what that May, here. that into get have with this back the we of have guidance provided the being year, year, we half lot early our supports but team to the really But and a supportable of our little only with what of sales of lot call. a rest respect are initiatives. commercial range and

is the is competitors one seeing helpful. out me-too recently know front? and I on some products acquired. of there there And there competitive are then new anything That’s was you that your Great.

have So of of these and headwinds? you what about hearing seen sort you tangible are adoption any products

these couple that System a acquired couple that been Yes, we’ve years has alongside by a Stryker the now, a John. it’s Lilly, J&J. and system competing Hi, of products for of CrossRoads was

dynamics We on haven’t seen any competitive real change the front. in that

rates getting nothing of seems We this business point. the build kind to growth offense to to way committed that and be at in our achieving really continue our of and the us were run

– great start direct of sales have So of in the system, just around the it product again, business a and lot of a And data. property with you on lot this and lot. only very focus helps refined things it market Lapiplasty, channel, huge through head a it intellectual have solely us just clinical being we a a the

Great. you. Thank

Drew Our with Ranieri next the Morgan question comes Stanley. from line of

now Your line is open.

building quarter. you ankle Hi, Mark. potentially about your thinking the question with to Congratulations just the Is curious that about into foot, piggyback going remain on move sales curious are especially on are or just to John you and but it, channel? a the how about direct just on last building competitive Maybe focus landscape, how portfolio? thinking

And like been going John. new looking like be other at problem. Drew, and did I those at with quicker, to with approaching way and to related like Hi, – And to bunion are Adductoplasty. we also continuing way be less going pathology Lapiplasty it, easier, to the invasive. it with Thanks going is coming then up question. to And Yes. we’re think do this for the that advance approach bunion that’s innovative looking the we’ve solutions I’m are opportunities we we the around

We tight R&D this X.X% and go channel bunion an this teams call penetrated, and So with procedures staying $X that for innovations we right focused our the got our design billion such market. sales have of way in on think with point to enormous runway annual just is only U.S. bunion this with the company.

moment, maybe your on it. I a that a the Thank there that the get quarter just And delayed procedures. Got in from remarks backlog catch-up for was prepared first you. from

quarter? And curious better sequential mean, Just we that in get quarter the I so being maybe first strong. with can you us so just sense the performance, can will your size what a even if of growth be maybe second normalized help

the get ability if or Lapiplasty? involved issues more maybe there in company’s to using any curious surgeons Just still were on maybe

is Mark. thanks, And Drew. This Yes.

really some really I understanding from that are both through get I encouraged that With differentiated of sure perspective, because as think we it in there is those QX, make mentioned, are that came couple from Lapiplasty. are actually a the parts both question. coming I our and to procedures of patients surgeons really shows respect to that of parts benefits

So to the in scheduling challenges were we We QX, did there the back extent of half them. in noticed feel that some procedures in QX.

thing survey with they a size had procedures and rescheduled commented it’s would with into the also are sizing, our that quarter. same came QX. that they the about definitely that surgeons We the respect on half beat of probably estimate the in to And we of

you. Thank Great.

Sure.

of Our next Antalffy the comes question from Danielle line with SVB Securities.

Your line is now open.

Hey, question good much taking quarter. afternoon, on so a guys. Thanks for the strong and congrats

Just surgeon ask stickiness could, question coming in the about what’s important the of part get procedure, versus that context journey a going of guys Once convert? a sticky John, you first-mover real with most just surgeon’s sort Lapiplasty thinking, if likely makes advantage you and here, market. that Just more surgeon stay clinical a to of new kind I data. the have of the Lapiplasty differentiated a of the to competition

any can can So context anything provide you – you there?

Danielle. Sure. a No, And are several think I there question. Hi, it’s great factors.

Our down. off whole procedure. direct that very their to is they a first commercial it’s day forwards, goes sure in, And it know the smoothly strategy technical everything steps do and the are could that we and closely, hands upside but we that the few day this is from experts specialist they this the backwards, salespeople a make product And that initially handed who that train out. go nothing, to doctors, way cases – follow provide kind very They wrapped producing hold clinical around their stickiness. into of

efficiently completely. the surgeon’s product of delivers in the is changing that really way doctors level, at hand are and have performed works bunion having these And that doctors Lapiplasty important having We expertise and expert surgery effectively alongside a patient’s that really and the that that.

about think We it very I use more X.X iteration have refinement more and aware a and live and to make easier speedy doctors provide the then its of are of to reproducible, that years effective. we solution use, them. there care. of appreciate versus had lot out for of clinical making Lapiplasty And patients ongoing differentiated education we standard a and And lot

So and doing I before provides but that appreciate evolutions just as that the for company sales to the we’re level we’re providing and them we those expertise, them our loyal, are education doctors existed the Adductoplasty. and and products the they’re are true that of see evidence and only Lapiplasty really take they support us clinical think and procedures true next everything experts ongoing developing. structure These never or to not

So it’s multifaceted, but dials the ecosystem great sticky. curve, kind – all and Lapiplasty learning into makes makes this through of that gotten they adopted very it together have once that

that’s what I Yes, at. Yes. was getting

super we we this are you should more was users publication, could on that you can how I the surgeons so board how for about publication? Lapiplasty you is accounts? Thanks Thank So or users think think so deeper that And about to to that the much. that helpful. get on that. for full that more going then congrats just mid-‘XX the reaffirming impact or something in new talk that ALIGNXD get well? impact think as going Is will cohort coming existing existing are into And

of own their to that’s use And surgeon that programs they we say when seeing that like really I’d that and not them. follow-on. patients it, they’re help and attributable to Great more talking facilities a own each our existing approved it’s in supporting effectiveness onboarding study going following product both it’s these highly committees further approval great. Lapiplasty. at they new sophisticated clinical Lapiplasty, base. data that another the this largely study, surgeons, a seeing customer clinical with yet and be year incrementally multi-center know And these say, in they’re with And reinforce reconfirms see accounts. prospective, that their take we Yes, and this are going ALIGNXD can to deserves now product locally. all the we’re The to us differentiate practice and about, the seeing sophisticated, results but is year, in like they uses sort showing only results peer-reviewed

we look and XXXX. this report forward late outs use out will of that occur can ways we in the report final in to So, more such a before lot

Thank you.

Sure.

time. am the Vivian. questions to like I Instructions] showing no [Operator turn this at now call further back I to would

thanks Thanks, of joining second look our Medical, of the behalf to good Kim. we our close forward XXXX following everybody us evening. Treace a results. quarter for update concludes our next On today. Thank you. call Have This and