Treace(US:TMCI)2023-08-12 16:42Financial 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]