SI-BONE(US:SIBN)2021-11-09 21:10PART I-FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2021, highlighting revenue growth alongside a widening net loss Condensed Consolidated Balance Sheet Data (Unaudited) | (In thousands) | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $59,863 | $53,581 | | Short-term investments | $100,988 | $142,851 | | Total current assets | $185,648 | $218,241 | | TOTAL ASSETS | $193,966 | $223,142 | | Liabilities & Equity | | | | Total current liabilities | $14,564 | $13,470 | | Long-term borrowings | $34,922 | $39,455 | | TOTAL LIABILITIES | $50,348 | $53,779 | | TOTAL STOCKHOLDERS' EQUITY | $143,618 | $169,363 | Condensed Consolidated Statements of Operations Data (Unaudited) | (In thousands, except per share data) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $22,286 | $20,373 | $64,922 | $51,243 | | Gross profit | $19,808 | $17,795 | $57,869 | $44,616 | | Loss from operations | $(13,199) | $(8,675) | $(37,739) | $(30,696) | | Net loss | $(15,872) | $(9,474) | $(42,095) | $(34,718) | | Net loss per share, basic and diluted | $(0.48) | $(0.33) | $(1.28) | $(1.23) | Condensed Consolidated Statements of Cash Flows Data (Unaudited) | (In thousands) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(26,819) | $(22,780) | | Net cash provided by investing activities | $36,202 | $4,903 | | Net cash provided by (used in) financing activities | $(2,726) | $63,363 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, noting revenue growth despite COVID-19 impacts, increased operating expenses, and a debt refinancing to improve liquidity - The resurgence of the COVID-19 pandemic driven by the Delta variant negatively impacted revenues for the three months ended September 30, 2021, with increased case cancellations recorded in August and September 202188 - The U.S. sales force expanded to 78 territory sales managers and 57 clinical support specialists as of September 30, 2021, up from 59 and 57, respectively, a year prior95 - Major payors, including Centene, Anthem, and UnitedHealthcare, established or expanded positive coverage for iFuse, with UnitedHealthcare's policy exclusively covering SI-BONE's triangular iFuse implants effective October 1, 2021102 Revenue Comparison (Q3 2021 vs Q3 2020) | (In thousands) | Q3 2021 | Q3 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $22,286 | $20,373 | $1,913 | 9% | | Gross Profit | $19,808 | $17,795 | $2,013 | 11% | Operating Expense Comparison (Q3 2021 vs Q3 2020) | (In thousands) | Q3 2021 | Q3 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Sales and marketing | $23,525 | $18,772 | $4,753 | 25% | | Research and development | $3,288 | $2,778 | $510 | 18% | | General and administrative | $6,194 | $4,920 | $1,274 | 26% | - In August 2021, the company refinanced its debt, terminating the Solar Term Loan and entering a new $35.0 million term loan with Silicon Valley Bank, resulting in a one-time loss on extinguishment of $1.8 million but providing a lower interest rate123137139 - As of September 30, 2021, the company had cash and marketable securities of $160.9 million and believes this is sufficient to fund operations and capital expenditures for at least the next 12 months134136 Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," the company is exempt from providing quantitative and qualitative disclosures about market risk - As a "smaller reporting company," SI-BONE is not required to provide the information otherwise required by this Item155 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal controls during the quarter - Based on an evaluation as of September 30, 2021, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level158 - There were no changes in internal control over financial reporting during the quarter ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting159 PART II-OTHER INFORMATION Legal Proceedings The company is involved in routine legal actions but currently believes no pending matters are material to its financial condition or operations - The company is involved in various claims, complaints, and legal actions in the normal course of business, but there are no pending matters currently believed to be material160 Risk Factors This section details significant business risks, including historical operating losses, COVID-19 impacts, reimbursement dependency, intense competition, reliance on the iFuse product, supply chain vulnerabilities, and extensive regulatory compliance - The company has a history of significant operating losses, with a net loss of $42.1 million for the nine months ended September 30, 2021, and expects to continue incurring losses165 - The COVID-19 pandemic has had, and is expected to continue to have, an adverse impact on operations, including unpredictable reductions in demand for products and delays in elective surgeries169 - The business is highly dependent on adequate coverage and reimbursement from third-party payors, and a reversal of exclusive iFuse coverage decisions could reduce market share173181 - The company faces intense competition from major medical device companies like Medtronic and Globus Medical, as well as over 20 smaller companies, leading to significant pricing pressure193194195 - Substantially all revenue comes from the iFuse product family, making the company highly dependent on the success of this single product line198 - The company relies on a limited number of third-party suppliers, some of which are single-source, for its products and components, exposing it to supply chain risks211 - The business is subject to extensive and stringent governmental regulation in the U.S. (FDA) and abroad (e.g., EU Medical Device Regulation), and non-compliance could result in significant penalties and business disruption244254 Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered equity sales in Q3 2021 and details the use of $104.1 million from its 2018 IPO for general corporate purposes - There were no sales of unregistered equity securities during the three months ended September 30, 2021337 - As of September 30, 2021, approximately $104.1 million of the net proceeds from the October 2018 IPO had been used for general corporate purposes340 Defaults Upon Senior Securities The company reports no defaults upon its senior securities - None341 Mine Safety Disclosures This item is not applicable to the company - Not Applicable342 Other Information On October 20, 2021, the company amended Executive Chairman Jeffery Dunn's employment and severance agreement, modifying change-of-control benefits and the definition of "Good Reason" - On October 20, 2021, the company entered into a Second Amendment to the Offer Letter Agreement and Severance Plan Participation Agreement with Jeffery Dunn, its Executive Chairman343 - The amendment modifies Mr. Dunn's entitlement to severance benefits upon a Change in Control and alters the definition of "Good Reason" for termination343 Exhibits This section lists exhibits filed with the Form 10-Q, including the Loan and Security Agreement, an employment agreement amendment, and required officer certifications - Lists exhibits filed with the report, including the Loan and Security Agreement with Silicon Valley Bank (Exhibit 10.1) and the Second Amendment to Jeffery Dunn's employment agreement (Exhibit 10.2)346 - Includes certifications from the CEO and CFO as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002346