Treace(US:TMCI)2023-11-11 20:42Financial 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]