Core Insights - Treace Medical Concepts, Inc. is participating in a fireside chat at the Truist Securities MedTech Conference on June 18, 2024, featuring CEO John T. Treace and CFO Mark L. Hair [1] Company Overview - Treace Medical Concepts is focused on advancing surgical treatment for bunions and related midfoot deformities, with its flagship procedures being Lapiplasty® and Adductoplasty® [4] - Approximately 67 million Americans are affected by bunions, with an estimated 1.1 million being annual surgical candidates [4] - The company has developed the Lapiplasty® 3D Bunion Correction® System, which addresses the root cause of bunions by correcting deformities in all three planes and stabilizing the affected joint [4] - Treace has also introduced the Adductoplasty® Midfoot Correction System and the Hammertoe PEEK Fixation System to address various foot deformities [4] - The company is expanding its product offerings with the SpeedPlate™ Rapid Compression Implants, which provide versatile fixation options for various surgical procedures [4]

NEW YORK, May 22, 2024 /PRNewswire/ -- Pomerantz LLP is investigating claims on behalf of investors of Treace Medical Concepts, Inc. ("Treace" or the "Company") (NASDAQ: TMCI). Such investors are advised to contact Danielle Peyton at [email protected] or 646-581-9980, ext. 7980. The investigation concerns whether Treace and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices. [Click here for information about joining the class action] On May 7, 2024 ...

Treace Medical Concepts Inc (NASDAQ:TMCI) Q1 2024 Earnings Conference Call May 7, 2024 4:30 PM ET Company Participants Julie Dewey - Chief Communications & Investor Relations Officer John Treace - Founder & CEO Mark Hair - Chief Financial Officer Conference Call Participants Richard Newitter - Truist Securities Drew Ranieri - Morgan Stanley Harrison Parsons - Stephens Simon Nigan - UBS Operator Good day, and thank you for standing by, and welcome to the Treace Medical Concepts First Quarter 2024 Earnings Co ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark one) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from___ to___ Commission file number: 001-40355 Treace Medical Concepts, Inc. (Exact name of registrant as specified in its charter) Delaware 47-1052611 (State or ...

Financial Performance - First quarter 2024 revenue was $51.1 million, a 21% increase from $42.2 million in the same period of 2023[4] - Net loss attributable to common stockholders for the first quarter 2024 was ($18.7) million, or ($0.30) per share, compared to ($13.5) million, or ($0.23) per share, for the same period in 2023[8] - Adjusted EBITDA loss improved to ($8.3) million in the first quarter 2024, compared to a loss of ($10.0) million for the same period in 2023[5] - The company expects full-year 2024 revenue to be between $201 million and $211 million, a growth of 7% to 13% compared to 2023[10] - The company aims for a significant improvement in Adjusted EBITDA for full-year 2024, anticipating approximately 50% improvement compared to 2023[10] Operating Expenses and Liabilities - Total operating expenses increased to $59.9 million in the first quarter 2024, up from $47.9 million in the first quarter 2023[7] - Total current liabilities rose from $45,033 million as of December 31, 2023, to $47,049 million as of March 31, 2024, an increase of 4.5%[25] - Accounts payable increased significantly from $11,835 million in December 2023 to $21,149 million in March 2024, reflecting a rise of 78.5%[25] - The company reported a depreciation and amortization expense of $1,909 million for Q1 2024, up from $924 million in Q1 2023, marking a 106.5% increase[27] Cash and Assets - Cash, cash equivalents, marketable securities, and investment receivable totaled $112.1 million as of March 31, 2024[9] - Cash and cash equivalents decreased from $12,982 million at the end of 2023 to $9,334 million by March 31, 2024, a reduction of 28.5%[27] - Total assets decreased from $251,907 million as of December 31, 2023, to $242,726 million as of March 31, 2024, a decline of approximately 3.5%[25] Equity and Capital - The company’s additional paid-in capital increased from $271,973 million to $279,433 million, reflecting a growth of 2.7%[25] - The total stockholders' equity decreased from $137,938 million at the end of 2023 to $126,391 million by March 31, 2024, a decline of approximately 8.4%[25] Product Development - The company plans to introduce two innovative 3D MIS Osteotomy solutions later this year to enhance its product offerings[3] - The patent portfolio expanded to 63 granted U.S. patents, with an additional 20 granted patents worldwide and 83 pending U.S. patent applications[5] Cash Flow - Cash flows used in operating activities improved to $(7,221) million in Q1 2024 from $(17,259) million in Q1 2023, a positive change of 58%[27]

Treace Medical Concepts Inc (NASDAQ:TMCI) Q4 2023 Results Conference Call February 27, 2024 4:30 PM ET Company Participants Julie Dewey - Chief Communications & Investor Relations Officer John Treace - CEO, Founder & Director Mark Hair - Chief Financial Officer Conference Call Participants Drew Ranieri - Morgan Stanley Robbie Marcus - JPMorgan Rick Wise - Stifel Simon Nigan - UBS Richard Newitter - Truist Securities Ryan Zimmerman - BTIG George Sellers - Stephens Operator Good day, and thank you for standin ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) Treace Medical specializes in bunion and midfoot deformity correction with its Lapiplasty® System, driving substantial revenue growth - The company's core focus is advancing the standard of care for bunion surgery with its patented **Lapiplasty® 3D Bunion Correction System®**, which addresses the complex 3D deformity by correcting the unstable joint at the root of the problem[18](index=18&type=chunk)[22](index=22&type=chunk) Market Opportunity for Bunion Treatment | Metric | Value | | :--- | :--- | | **Americans Affected by Bunions** | Approx. 67 million | | **Annual Surgical Candidates (U.S.)** | Approx. 1.1 million | | **Total Annual Addressable Market** | > $5 billion | | **Current Annual Bunion Surgeries** | Approx. 450,000 | Historical Revenue and Kit Sales Growth | Year | Revenue ($) | Lapiplasty® Procedure Kits Sold | | :--- | :--- | :--- | | **2020** | $57.4 million | 11,113 | | **2023** | $187.1 million | 29,675 | | **CAGR (2020-2023)** | 48.3% | 38.7% | - The company's commercial strategy relies on a direct employee sales force, supplemented by independent agencies, covering 249 territories in the U.S. In 2023, employee sales representatives generated approximately **81%** of total revenue[29](index=29&type=chunk)[66](index=66&type=chunk) [Our Solutions](index=11&type=section&id=Our%20Solutions) Treace's solutions include the Lapiplasty® System for 3D bunion correction, minimally invasive options, and patient-specific instrumentation - The **Lapiplasty® System** is a comprehensive solution combining procedural instruments (Positioner, Compressor, 3-n-1® Guide) and single-use implant kits (Biplanar Plating, SpeedPlate™ Implants) to enable a reproducible **3D bunion correction**[47](index=47&type=chunk)[49](index=49&type=chunk) - In 2023, the company launched the **SpeedPlate™ Rapid Compression Implant System**, an enabling technology for its **Micro-Lapiplasty™ minimally invasive procedure**, and the **Hammertoe PEEK Fixation System** to address common co-occurring deformities[52](index=52&type=chunk)[55](index=55&type=chunk) - The company acquired assets from **RedPoint Medical3D (RPM-3D)** in **June 2023** to develop 3D-printed, patient-specific cut guides based on CT scans, with full commercialization planned for the **second half of 2024**[56](index=56&type=chunk) [Clinical Advantages and Data](index=17&type=section&id=Clinical%20Advantages%20and%20Data) The Lapiplasty® System is supported by robust clinical evidence, including the ALIGN3D™ study, showing low recurrence and improved patient outcomes Interim ALIGN3D Clinical Study Outcomes (Mean Follow-up: 33.8 months) | Key Outcome | Result | | :--- | :--- | | **Recurrence Rate** | 0.9% | | **Time to Start Weight-Bearing** | Average of 8.4 days (in a walking boot) | | **Symptomatic Non-Union Rate** | 1.8% | | **Hardware Removal (due to pain)** | 6.9% | | **Patient-Reported Pain Improvement** | 81% | | **Patient-Reported Walking/Standing Improvement** | 86% | - The company has completed enrollment in its **ALIGN3D™ (173 patients)** and **Mini3D™ (105 patients)** prospective clinical studies and is actively enrolling for its **MTA3D™ study**, demonstrating a commitment to generating supportive clinical evidence[79](index=79&type=chunk) [Commercial Strategy](index=21&type=section&id=Commercial%20Strategy) The commercial strategy emphasizes product innovation, direct sales, surgeon training, patient education, and clinical evidence, boosting surgeon utilization - The company requires surgeons to complete a **simulated surgical training program** before performing their first Lapiplasty® Procedure, supported by **12 clinical specialists** who assist with training and live surgery support[68](index=68&type=chunk)[69](index=69&type=chunk) - Surgeon utilization of the Lapiplasty® System increases with experience. As of **year-end 2023**, surgeons who started using the system in 2018 performed an average of **17.7 procedures** in the trailing twelve months, compared to **8.0 procedures** for those who started in 2020[71](index=71&type=chunk)[74](index=74&type=chunk) - A differentiated **direct-to-patient outreach program** educates potential surgical candidates through digital and traditional marketing, directing them to an educational website and a **"Find a Doctor" tool** to locate trained local surgeons[74](index=74&type=chunk)[75](index=75&type=chunk) [Intellectual Property](index=25&type=section&id=Intellectual%20Property) Treace Medical protects its technology with a robust IP portfolio, including 52 owned U.S. patents and 141 pending applications as of December 2023 Patent Portfolio (as of Dec 31, 2023) | Patent Type | Count | | :--- | :--- | | **Owned U.S. Patents** | 52 | | **Licensed U.S. Patents** | 1 | | **Owned Foreign Patents** | 15 | | **Pending Patent Applications (Global)** | 141 | - The company owns U.S. trademark registrations for key marks including **"Lapiplasty®"**, **"Adductoplasty®"**, and **"3D Bunion Correction®"**, and has several other applications pending for newer product names like **"Micro-Lapiplasty™"** and **"SpeedPlate™"**[90](index=90&type=chunk) [Government Regulation](index=28&type=section&id=Government%20Regulation) The company's medical devices are subject to FDA Class I/II regulations, 510(k) clearance, and ongoing compliance with QSR and healthcare fraud and abuse laws - The company's currently marketed products are **Class I exempt devices** and **Class II devices**, which require **FDA 510(k) premarket notification clearance** rather than the more stringent Premarket Approval (PMA) process[108](index=108&type=chunk) - After receiving **510(k) clearance**, any significant modification to a device's safety, effectiveness, or intended use requires a **new 510(k) submission**[111](index=111&type=chunk) - The company is subject to numerous healthcare laws, including the **federal Anti-Kickback Statute**, the **False Claims Act**, and the **Physician Payments Sunshine Act**, which govern its relationships with physicians and require reporting of payments and transfers of value[127](index=127&type=chunk)[128](index=128&type=chunk)[131](index=131&type=chunk) [Human Capital](index=34&type=section&id=Human%20Capital) As of December 2023, Treace Medical had 516 employees, a 22% increase, with a focus on talent development, low turnover, and high equity participation Employee Statistics (2023) | Metric | Value | | :--- | :--- | | **Total Full-Time Employees (Year-End)** | 516 | | **Year-over-Year Employee Growth** | 22% | | **New Hires in Sales Team** | 76% | | **Undesired Turnover Rate** | < 7% | | **Employees with Equity Grants** | ~80% | - A 2022 employee engagement survey showed an **87% engagement rate**, comparing favorably to the **76%** average for benchmark medical device and biotechnology companies[138](index=138&type=chunk) [Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks including net losses, intense competition, Lapiplasty® dependence, payor reimbursement, product liability, supply chain, and healthcare regulations - The company has a history of net losses, incurring **$49.5 million in 2023** and **$42.8 million in 2022**, with an accumulated deficit of **$134.2 million** as of December 31, 2023[148](index=148&type=chunk) - Revenue is primarily generated from the **Lapiplasty® System**, making the company highly dependent on its continued market adoption by surgeons, patients, and payors[161](index=161&type=chunk) - The business is subject to intense competition from larger, more established medical device manufacturers like **Stryker**, **Johnson & Johnson (DePuy Synthes)**, and **Zimmer Biomet**, who may have greater financial resources and market presence[153](index=153&type=chunk)[154](index=154&type=chunk) - Relationships with physicians and third-party payors are subject to extensive **federal and state healthcare fraud and abuse laws (e.g., Anti-Kickback Statute)**, with potential for substantial penalties for non-compliance[219](index=219&type=chunk) [Cybersecurity](index=74&type=section&id=Item%201C.%20Cybersecurity) The company maintains a cybersecurity risk management program guided by industry standards, overseen by the CIO and Audit Committee, with no material incidents - The cybersecurity program is guided by industry frameworks including **CIS**, **NIST**, and **ISO 27000**, and is integrated into the company's overall risk management framework[297](index=297&type=chunk) - Governance is managed by the **CIO**, who reports to the **CFO** and provides regular updates to the **Audit Committee**. The Audit Committee is delegated responsibility for cybersecurity oversight by the full Board of Directors[304](index=304&type=chunk)[305](index=305&type=chunk) - The company has **not experienced any cybersecurity incidents in the past three years** that have materially affected its business, operations, or financial condition[303](index=303&type=chunk) [Properties](index=75&type=section&id=Item%202.%20Properties) As of December 2023, the company leases a 125,000 square foot corporate headquarters in Ponte Vedra, Florida, with the lease expiring in July 2032 - The company's corporate headquarters is a leased facility of approximately **125,000 square feet** in Ponte Vedra, Florida, with the lease expiring in **July 2032**[307](index=307&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=75&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ under "TMCI" since April 2021, has never paid dividends, and repurchased shares in Q4 2023 for tax obligations - The company's common stock has been trading on the NASDAQ Global Select Market under the symbol **"TMCI"** since its IPO on **April 23, 2021**[311](index=311&type=chunk) - The company has **never declared or paid cash dividends** and does not intend to in the foreseeable future, with future earnings planned for reinvestment into the business[313](index=313&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=77&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2023, revenue grew 31.9% to $187.1 million, but increased operating expenses led to a $49.5 million net loss, despite a $107.5 million stock offering - In June 2023, the company acquired assets from RPM-3D for **$20.0 million** in cash, with up to **$10.0 million** in additional milestone payments, to add patient-specific instrumentation (PSI) capabilities to its portfolio[323](index=323&type=chunk) Key Business Metrics (2023 vs. 2022) | Metric | 2023 | % Change from 2022 | | :--- | :--- | :--- | | **Lapiplasty® Kits Sold** | 29,675 | +20% | | **Blended Avg. Revenue per Kit** | $6,306 | +10% | | **Active Surgeons (Year-End)** | 2,855 | +20% | | **Avg. Kits per Active Surgeon** | 10.4 | +0.6% | - The business experiences seasonality, with the fourth quarter historically being the strongest (**30-40% of annual revenue**) due to patients meeting insurance deductibles, and the first and third quarters being comparatively weaker[333](index=333&type=chunk) [Results of Operations](index=82&type=section&id=Results%20of%20Operations) In 2023, revenue grew 31.9% to $187.1 million, but a 34.5% increase in operating expenses, particularly sales and marketing, led to a $49.5 million net loss Comparison of Operations for Years Ended December 31 ($ in thousands) | Metric | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | **Revenue** | $187,118 | $141,838 | 31.9% | | **Gross Profit** | $151,937 | $116,306 | 30.6% | | **Gross Margin** | 81.2% | 82.0% | (0.8) pts | | **Sales and Marketing** | $140,894 | $104,567 | 34.7% | | **Research and Development** | $15,440 | $13,584 | 13.7% | | **General and Administrative** | $47,031 | $32,999 | 42.5% | | **Loss from Operations** | $(51,428) | $(34,844) | 47.6% | | **Net Loss** | $(49,527) | $(42,815) | 15.7% | - The increase in G&A expenses was primarily driven by an **$8.9 million** increase in payroll-related costs and a **$4.2 million** increase in professional services, which included **$3.3 million** in accrued compensation for RPM-3D acquisition milestones[349](index=349&type=chunk) [Liquidity and Capital Resources](index=84&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 2023, the company held $123.2 million in cash and marketable securities, bolstered by a $107.5 million stock offering, with $54.0 million outstanding on its loan facility Cash Flow Summary (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | **Net cash used in operating activities** | $(34,575) | $(30,648) | | **Net cash used in investing activities** | $(81,299) | $(76,518) | | **Net cash provided by financing activities** | $109,383 | $20,806 | - Net cash from financing activities in 2023 was primarily driven by **$107.5 million** in net proceeds from a public stock offering in February[366](index=366&type=chunk) - Net cash used in investing activities in 2023 included **$20.0 million** for the RPM-3D acquisition, **$11.5 million** for property and equipment, and a net **$49.9 million** for the purchase of marketable securities[363](index=363&type=chunk) [Financial Statements and Supplementary Data](index=91&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Audited 2023 financial statements show total assets grew to $251.9 million and revenue to $187.1 million, but net loss widened to $49.5 million due to operating investments Balance Sheet Highlights (as of Dec 31, in thousands) | Account | 2023 | 2022 | | :--- | :--- | :--- | | **Cash, cash equivalents & marketable securities** | $123,198 | $81,252 | | **Total Assets** | $251,907 | $159,024 | | **Total Liabilities** | $113,969 | $98,495 | | **Total Stockholders' Equity** | $137,938 | $60,529 | Statement of Operations Highlights (Year ended Dec 31, in thousands) | Account | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | **Revenue** | $187,118 | $141,838 | $94,419 | | **Gross Profit** | $151,937 | $116,306 | $77,531 | | **Loss from Operations** | $(51,428) | $(34,844) | $(16,510) | | **Net Loss** | $(49,527) | $(42,815) | $(20,552) | - The company acquired assets from RPM-3D on June 12, 2023, for **$20.0 million** in cash and up to **$10.0 million** in contingent consideration, resulting in the recognition of **$12.8 million** in goodwill and **$9.5 million** in intangible assets[468](index=468&type=chunk)[469](index=469&type=chunk)[470](index=470&type=chunk) [Controls and Procedures](index=126&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with an unqualified auditor opinion - Management concluded that as of **December 31, 2023**, the company's disclosure controls and procedures were effective[532](index=532&type=chunk) - Based on the **COSO 2013 framework**, management concluded that the company's internal control over financial reporting was effective as of **December 31, 2023**[533](index=533&type=chunk) - The independent auditor, Grant Thornton LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting for the year ended **December 31, 2023**[538](index=538&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Executive Compensation, and Other Matters](index=129&type=section&id=Items%2010-14) Information for Items 10-14, covering directors, executive compensation, and governance, is incorporated by reference from the forthcoming 2024 Proxy Statement - Information regarding Directors, Executive Officers, Corporate Governance (Item 10), Executive Compensation (Item 11), Security Ownership (Item 12), Certain Relationships and Related Transactions (Item 13), and Principal Accountant Fees and Services (Item 14) is incorporated by reference from the forthcoming **2024 Proxy Statement**[550](index=550&type=chunk)[551](index=551&type=chunk)[552](index=552&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=130&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and exhibits, including a valuation and qualifying account roll-forward and an exhibit index Schedule II: Valuation and Qualifying Accounts (in thousands) | Account | 2021 Balance | 2022 Balance | 2023 Balance | | :--- | :--- | :--- | :--- | | **Allowance for doubtful accounts** | $414 | $735 | $980 | | **Deferred tax asset valuation allowance** | $11,941 | $22,864 | $35,211 |

Financial Data and Key Metrics Changes - Revenue for Q3 2023 was $40.8 million, representing a 23% increase year-over-year, impacted by lower-than-anticipated demand due to patient travel and vacations [10][22] - Year-to-date revenue growth was 36%, significantly above foot-and-ankle peers, with an updated full-year revenue guidance of $182 million to $186 million, reflecting a 30% increase over 2022 [7][11][24] - Gross margin decreased to 80.4% from 81.6% year-over-year, primarily due to changes in product mix and increased overhead [23] Business Line Data and Key Metrics Changes - Sold 6,459 Lapiplasty procedure kits in Q3, a 13% increase compared to the same quarter last year [22] - Record blended average selling price of $6,311 per Lapiplasty kit, up 9% year-over-year, driven by market adoption of complementary products [10][22] - Active surgeon users increased to 2,691, up 21% year-over-year, with a trailing 12-month surgeon utilization average of 10.6 kits per active surgeon [10][15] Market Data and Key Metrics Changes - Approximately 6.3% penetration of the estimated 450,000 annual surgical bunion corrections in the U.S., up from 5% in Q3 2022 [9] - The company identified a $5 billion U.S. market for bunion surgery, with only 450,000 surgeries performed annually, indicating significant growth potential [8] Company Strategy and Development Direction - The company continues to execute its strategic plan, focusing on expanding market penetration through new product launches, including SpeedPlate and Micro-Lapiplasty [7][12][20] - Investments in direct sales channels and patient awareness initiatives are expected to drive growth and improve market share [13][15] - The company aims to maintain a strong focus on bunion and related midfoot procedures while expanding its product portfolio [26][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a strong Q4 rebound, citing record surgeon additions in September and continued strength into October [36][56] - The company anticipates a positive contribution from new product launches in 2024, including SpeedPlate and Hammertoe systems, which are expected to enhance market opportunities [26][27] - Management acknowledged the impact of summer seasonality on Q3 results but remains optimistic about the fundamentals of the business [52][66] Other Important Information - The company has a robust product development pipeline with 10 new innovations slated for launch over the next 12 months [20] - Cash, cash equivalents, and marketable securities totaled $128.2 million as of September 30, 2023, providing a strong balance sheet for strategic investments [23] Q&A Session Summary Question: Impact of guidance cut by $10 million at the midpoint - Management noted that both fewer surgeons and delays in SpeedPlate contributed to the guidance cut, with unexpected summer seasonality affecting case volumes [29][30] Question: Confidence in Q4 rebound despite summer seasonality - Management highlighted strong surgeon additions in September and October, along with historical trends of Q4 being the highest revenue quarter [36][56] Question: Lower expected new surgeon additions for next year - Management explained that while the pace of new surgeon additions may slow, they expect increased utilization from the existing surgeon base and new product adoption to drive growth [39][40] Question: Decision to delay full launch of SpeedPlate - The delay was due to the opportunity to enhance the product based on early feedback, aiming for broader appeal across various surgical applications [42] Question: Gross margin performance and future expectations - Management indicated that gross margin fluctuations are common due to product mix and overhead, but they expect to maintain margins above 80% [55]

Part I: Financial Information [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed financial statements for the period ended September 30, 2023, detail the company's financial position, operational results, and cash flows [Condensed Balance Sheets](index=5&type=section&id=Condensed%20Balance%20Sheets) As of September 30, 2023, total assets increased to $240.4 million from $159.0 million at year-end 2022, driven by marketable securities and acquired intangible assets, while stockholders' equity more than doubled due to a stock offering | Balance Sheet Items (in thousands) | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $7,278 | $19,473 | | Marketable securities, short-term | $114,885 | $61,779 | | Inventories | $29,312 | $19,330 | | Goodwill & Intangible assets, net | $22,077 | $0 | | **Total Assets** | **$240,360** | **$159,024** | | **Liabilities & Equity** | | | | Total liabilities | $102,500 | $98,495 | | Total stockholders' equity | $137,860 | $60,529 | | **Total Liabilities and Stockholders' Equity** | **$240,360** | **$159,024** | - The increase in **Goodwill and Intangible assets** is a direct result of the acquisition of RPM-3D assets in June 2023[18](index=18&type=chunk)[57](index=57&type=chunk) - The significant increase in stockholders' equity was primarily driven by a follow-on public offering in February 2023, which raised net proceeds of **$107.5 million**[18](index=18&type=chunk)[30](index=30&type=chunk) [Condensed Statements of Operations and Comprehensive Loss](index=6&type=section&id=Condensed%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Revenue grew significantly year-over-year for both Q3 and the nine-month period, but increased operating expenses led to a wider net loss compared to the prior year | Metric (in thousands, except EPS) | Q3 2023 | Q3 2022 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $40,758 | $33,055 | +23.3% | | Gross Profit | $32,760 | $26,965 | +21.5% | | Loss from Operations | $(17,818) | $(11,318) | +57.4% | | Net Loss | $(17,521) | $(12,133) | +44.4% | | Net Loss Per Share | $(0.28) | $(0.22) | +27.3% | | Metric (in thousands, except EPS) | 9M 2023 | 9M 2022 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $124,906 | $92,069 | +35.7% | | Gross Profit | $101,194 | $75,558 | +33.9% | | Loss from Operations | $(44,646) | $(31,347) | +42.4% | | Net Loss | $(43,246) | $(38,403) | +12.6% | [Condensed Statements of Cash Flows](index=9&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased, while investing activities saw significant outflows for acquisitions and securities, largely offset by substantial cash inflow from financing activities, primarily a stock offering | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(35,107) | $(25,290) | | Net cash used in investing activities | $(86,306) | $(12,506) | | Net cash provided by financing activities | $109,218 | $20,509 | | **Net decrease in cash and cash equivalents** | **$(12,195)** | **$(17,287)** | - Financing activities were dominated by **$107.5 million** in net proceeds from a public stock offering[26](index=26&type=chunk) - Investing activities included **$20.0 million** for an acquisition (net of cash acquired) and a net outflow of **$57.1 million** for marketable securities transactions[26](index=26&type=chunk) [Notes to Condensed Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) The notes detail a $107.5 million public offering, the $20.0 million RPM-3D acquisition, a $150.0 million loan facility with $54.0 million drawn, and increased share-based compensation expense - On June 12, 2023, the Company acquired certain assets of RPM-3D for **$20.0 million** in cash, with up to **$10.0 million** in additional contingent payments[57](index=57&type=chunk)[58](index=58&type=chunk) - The company has a five-year, **$150.0 million** loan facility with MidCap, with **$54.0 million** drawn as of September 30, 2023[71](index=71&type=chunk)[72](index=72&type=chunk) - Share-based compensation expense for the nine months ended September 30, 2023, was **$11.5 million**, a significant increase from **$5.6 million** in the same period of 2022[84](index=84&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes revenue growth to expanded Lapiplasty® System adoption and increased surgeon utilization, while continued investments in sales, R&D, and patient outreach led to higher operating expenses and net losses, with current liquidity deemed sufficient [Overview and Key Business Metrics](index=22&type=section&id=Overview%20and%20Key%20Business%20Metrics) The company's Lapiplasty® System drives growth through an expanding direct sales force and increasing surgeon adoption, with key metrics showing positive trends in procedure kits sold and active surgeons | Key Business Metric | Q3 2023 | YoY Change | | :--- | :--- | :--- | | Lapiplasty Procedure Kits Sold | 6,454 (est.) | +13% | | Blended Avg. Revenue per Kit | $6,311 | +9% | | Active Surgeons (as of Sep 30) | 2,691 | +21.3% | | Surgeon Utilization Rate (9M 2023) | 10.6 kits/surgeon | +4.3% | - The company acquired assets from **RPM-3D** in June 2023 to add patient-specific instrumentation (PSI) technologies to its portfolio, with commercial introduction expected in the second half of 2024[90](index=90&type=chunk)[96](index=96&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Q3 2023 revenue grew 23.3% driven by increased Lapiplasty kit sales and higher average revenue per kit, but a slight gross margin decrease and significant increases in Sales & Marketing and G&A expenses led to a wider operating loss - Q3 2023 revenue growth of **23.3%** was driven by a **13%** increase in the number of Lapiplasty Procedure Kits sold and a **9%** increase in average blended revenue per kit[113](index=113&type=chunk) - Sales and Marketing expenses for Q3 2023 increased by **$8.0 million** (**31.2%**) year-over-year, primarily due to increased headcount, higher commissions, and marketing initiatives[116](index=116&type=chunk) - General and Administrative expenses for Q3 2023 increased by **$3.8 million** (**42.3%**) year-over-year, driven by higher payroll costs and **$1.5 million** in compensation expense related to the RPM-3D acquisition milestones[118](index=118&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity, comprising cash and marketable securities, was significantly bolstered by a $107.5 million public offering, and management believes these resources, along with expected revenues, are sufficient to fund operations for at least the next twelve months - Primary sources of capital have been private placements, debt financing, the IPO in April 2021 (**$107.6 million** net proceeds), and a follow-on offering in February 2023 (**$107.5 million** net proceeds)[129](index=129&type=chunk) | Liquidity Position (in millions) | As of Sep 30, 2023 | | :--- | :--- | | Cash and cash equivalents | $7.3 | | Marketable securities | $114.9 | | **Total Cash & Marketable Securities** | **$122.2** | | Outstanding Debt (Principal) | $54.0 | - Net cash used in operating activities for the first nine months of 2023 was **$35.1 million**, an increase from **$25.3 million** in the prior year period, reflecting the net loss and investment in inventory[134](index=134&type=chunk)[135](index=135&type=chunk) [Quantitative and Qualitative Disclosure About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk - As a **smaller reporting company**, Treace Medical Concepts, Inc. is not required to provide quantitative and qualitative disclosures about market risk[147](index=147&type=chunk) [Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of the end of the period covered by the report, the company's disclosure controls and procedures were **effective**[148](index=148&type=chunk) - No changes to internal control over financial reporting occurred during the quarter that materially affected or are reasonably likely to materially affect these controls[149](index=149&type=chunk) Part II: Other Information [Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company is not a party to any legal proceedings that it believes would have a material effect on its business or results of operations - The company reports **no material legal proceedings**[152](index=152&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K and the Q1 2023 Form 10-Q - **No material changes** to risk factors have been reported since the last disclosure[153](index=153&type=chunk)

Financial Performance - Revenue in the second quarter was $42 million, representing a 40% increase year-over-year, driven by higher procedure volumes and an increase in blended average selling price due to the adoption of newer technologies [1][53] - Gross margin was 81.7% in Q2 2023, down from 82.3% in Q2 2022, primarily due to changes in product mix and increased inventory provisions [4] - Net loss for the second quarter was $12.3 million, or $0.20 per share, an improvement from a net loss of $17.2 million, or $0.31 per share in the same period of 2022 [6] - Cash, cash equivalents, and marketable securities totaled $139.5 million as of June 30, 2023, reflecting a decrease of approximately $31 million during the quarter, mainly due to acquisition payments [7] Business Line Performance - The company sold 6,793 Lapiplasty procedure kits in Q2, a 30% increase compared to the same period last year [2] - The blended average selling price for Lapiplasty kits was $6,176, an 8% increase year-over-year [3][54] - Active surgeons increased to 2,581, a 26% year-over-year growth, with an average utilization of 10.7 kits per active surgeon, up from 10.1 kits a year ago [54][75] Market Data - The company has penetrated approximately 6.2% of the estimated 450,000 annual surgical bunion procedures in the U.S., up from 4.6% in Q2 2022 [52] - The total addressable market for bunion surgery in the U.S. is estimated to be over $5 billion, with 1.1 million annual surgical candidates [51] Company Strategy and Industry Competition - The company is focused on expanding its direct sales channel and increasing market penetration through strategic investments in R&D and DTC initiatives [56][59] - The acquisition of RedPoint Medical3D adds FDA-cleared patient-specific instrumentation technologies to the company's portfolio, aligning with its strategy to enhance product offerings [35] - The company anticipates continued growth in its active surgeon base and utilization of its products, supported by ongoing training and education programs [75][76] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the underlying strength and momentum of the business, raising full-year 2023 revenue guidance to $191 million to $197 million, reflecting a 35% to 39% increase over 2022 [8][55] - The company expects Q3 revenue to be similar to Q2 due to seasonality, with Q4 anticipated to be the strongest quarter driven by typical seasonal tailwinds and new product launches [9][10] Other Important Information - The company has a robust pipeline of new product launches, including the SpeedPlate implant and micro Lapiplasty instrumentation, expected to launch in Q4 2023 [81][82] - The proposed 2024 Medicare payment rates for surgical procedures are expected to see low-to-mid single-digit increases, which would benefit the company's reimbursement landscape [36][37] Q&A Session Summary Question: Guidance and cadence commentary - Management noted that the orthopedic industry typically experiences lower sales volumes in Q3 due to seasonal factors, which justifies the guidance range provided [14][15] Question: ASP trends and variability - Management acknowledged that while ASP may fluctuate quarter-to-quarter, they expect overall year-over-year increases due to new product launches and complementary products [16][17] Question: Doctor additions and education - Management reported strong interest in training programs and expressed confidence in onboarding new surgeons, with a focus on increasing utilization over time [21][22][24] Question: Product penetration rates - Management discussed the potential for increased adoption of new products like Adductoplasty and SpeedPlate, with a target of reaching 15% penetration over time [27][29] Question: Balancing DTC investments and expense leverage - Management emphasized the importance of executing commercial strategies while maintaining a focus on profitability and expense management [39][40]