TMCI - Earnings call transcript Q3 2021 | Treace Medical Concepts, Inc.

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Operator

Welcome to the Treace Medical Concepts Third Quarter 2021 Earnings Conference Call. My name is James, and I’ll be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] I’d now like to turn the call over to Sam [indiscernible] Sam, you may begin.

Unidentified Company Representative

James. Thanks, and third everyone, call. XXXX to welcome afternoon, quarter our earnings Good from be Hair, and will company Chief Treace, Officer. Participating today Officer; John the Chief Executive Financial Mark

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

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

John Treace

Treace another made afternoon, operating quarter during good us business call. has Medical joining on everyone. Thank you at and the our you, third and that conference for quarter key earnings in spite fundamentals positions once team XXXX a Thank of us Sam, for we advancements us The business as again headwinds. company, growth. encouraged strong believe by delta-related underlying well public I’m future quarter behind With

for seasonal continued team several the executing on in operating Despite financial quarter Revenue representing in elective third and our build base XXXX. of and Our across softness including totaled delays X.X% the surgery well in out of million, third expansion per of midfoot procedures, with exceptionally with $XX.X in well the to orthopedic and business of our sequentially over on surgeon momentum, including surgeon increase pandemic-related channel metrics. increased we users; growth growth continues number elective adoption as cancellations, during to benefits third to we our quarter; in XXXX; shift ongoing continued Mini-Incision System our case; XX% Lapiplasty early increased the in well positive revenue and rolling this QX from correction, surgeon System, the revenue started of our average active multiple headwinds, customer difficult key QX over which from increase as perform our quarter quarter. Adductoplasty execution XX% feedback of as which and as steady utilization; launched direct sales initiatives, solid from

our reaffirming our $XX given XXXX guidance As revenue. business $XX are million and an increase prior COVID-related which to trends million, XX% uncertainties, our we of over for annual XX% of the remainder of XXXX, to reflects

activities. Turning our market now to discuss development

Our of addressable and remains market ahead with underserved us. a large long runway

work XXX on XXXX billion of X.X% estimated around early increase walking months XXX,XXX of implied XX boot that is following differentiating surgical to A showed: total of Charlotte X.X the basis correction; three-dimensional about reached within life study the million patients sequentially data and weight-bearing believe At the representing for of candidates. announced market to rate within to medicine. pain the and evidence-based a at our addressable unrestricted for measurements recurrence with end September, return of X.X% surgical of in Meeting out an demonstrating key Annual is As market, an significant surgery; weeks; upon recurrence new at Lapiplasty four and was commitment activity an data radiographic previous one of six improvements low points of analysis, the recurrence driver XX $X patients Lapiplasty in through in at patient-reported in full held of clinical a our average following follow-up reduction months annual the rate return procedures, a procedure. our American X.X and interim from of post-surgery we study our the continued we measures Ankle weeks X.X%. bunion consistent, QX procedure; approximately annual point, X.X radiographic ALIGNXD Orthopaedic XXX is Building and only interim outcomes XX-month XXXX, demonstrating for of bunion patient-reported time XX and and business share days; data the a which quality participants share positive XX-month Society, of Foot which maintain and starting months &

our uniformities. outcomes bun and recurrence and Lapiplasty from the approach, our we successful utilizes patients clinical and study, to using our we surgically in advancing post-surgery care patient in both to ALIGNXD final which our the bunion providing primary our our Further, System at variable to Mini-Incision rates first reinforcing highly October, set metatarsal mini-incision being XXXX, this upon evaluates endpoint with readout but option high belief months standard MiniXD reported we’re XX%. literature encouraged as in are half reminder, announced a XX patient of be are As surgery. patient With osteotomy been of recurrence built ongoing manage surgeons a have in by that patient as study. another surgery, treated study, first the and Lapiplasty The Lapiplasty demonstrate in shown data continues outcomes interim a procedural that

of System standard Mini-Incision adopted same a a case option Lapiplasty on and that outcomes designed cause the the proprietary response Midfoot been is we and and bunion to are believe in addresses designed we for to realign long-term here recurrence designed to procedure our up being effectiveness by across centers on when September, patients additional invasive rates incision, the bone patients opportunity with occur the the to very our opposed as support improve correction midfoot, bump, the has to Relatively MiniXD in is patients. is the announce at We Mini-Incision cutting higher correction early enable more metatarsal primary deformities Midfoot meaningfully our small root through to study, success System, in minimally recurrence issue, Adductoplasty left appearance our have from surgeon but three-dimensional were the X.X-centimeter received Lapiplasty months. Building the with forward from launch Correction address a midfoot bunion, and patients. patients. that traditional to to System uncorrected. for entire encouraged the the XX providing of to to for providing metatarsal following the pain studies to alleviate that favorable at System correction a System are bunion Lapiplasty cosmetic Lapiplasty of we pleased Our XX% which to XXX rollout, and with the look up XX following bony procedures. there’s osteotomy the may treating the shifting the Adductoplasty deformities reporting initial also System many real found endpoint up the U.S., improve of advancing community. be bunion radiographic of the Adductoplasty The for reproducible of The outcome system

similarly reproducible confident for bunions, Lapiplasty provided our an the technology that Adductoplasty designed challenging reproducibility. instrumented one and another operation convert for are enabling historically instrumented now has as System our Just and to approach System that’s freehand offers we

initiatives. surgeon to Turning

remain company. note surgeons. feedback our led not the show advanced end do education live a Dallas is held We’re priority we welcomed surgeons Vegas events training training and several surgeon and symposiums Lapiplasty year. from and and sign-ups and received top pleased be the Adductoplasty of large that letting events experienced before signs training and live of was to around the the interest and favorable our held these received. sessions for training We hands-on to active of that education Certain for Lapiplasty groups any up, recently for additional quite The reinforcing events programs country to by forward Las remain well training training to in look our we

of addressing another U.S. technologies advancing at as in innovations point, innovation protecting robust of with year. XXth methods our R&D granted complements of systems, property. in we’re our Finally, correction. to concomitant this obtained coverage by diligently yet XXXX new development aimed for instrumentation XD patent surgical three-plane recent to patent driving well March builds To related another intellectual pioneering to with work or conditions a This dating and patent back that committed off announced bunion portfolio both those as granted next-generation us and to we recently this initiatives

Board property space leadership of to identify midfoot turn Our our our shift are drive call I Jain. Betsy an through we corrections since already portfolio. opportunities With to financial to related growth performance. to the turn before XD will that, and to and Betsy prolific R&D healthcare to to bunion Mark, in the over Deepti and impact a the we of and to of and on innovations pleased experience pursue and Mark surgical note, Hanna management combined continue now next been welcome two both in effective us paradigm and over I’ll intellectual the executive Board have continue our guide help phase and a XXXX, members leadership as of deformities. decades our go With Directors between final bunions them, October the our IP of and Deepti X, have And over made expand new call

Mark Hair

the quarter you, representing which number led the year quarter million, was in and increase of quarter grew XXXX the an XXXX. up third Thank by rates, Lapiplasty John. over XX% second kits higher over of of the million increase our afternoon, Revenue ago, procedure sold. and surgeon Good increase a third from The $XX.X base expanded everyone. X.X% utilization $XX.X was an

In million, basis $XX.X ASP, and operating operational due the of year-over-year in our third year. the $X,XXX, XXXX, in to third procedure Lapiplasty and selling million. XXXX. reflect operating and expansion blended $X.X addition, procedure marketing sales average XX% administrative The marketing third XXXX, this X% sales third third of increase saw average and case and of of million X,XXX and an increase million, increased prices third quarter and XXXX, a million active XX.X% third price of quarter growing a moderate to X,XXX, increases number third increase the expenses versus expenses to increased were XX.X% $XX.X surgeons increases of selling to over at and and the compares sales of expenses quarter prior expense with The of the This margin development development quarter expenses Lapiplasty XX efficiencies. research performing total point while $XX.X XXXX, increase $X.X year’s trailing the quarter quarter expenses including million. Total kits utilization quarter and expenses compared of QX general million, XX the surgeon. of $X.X Lapiplasty of to was number were made administrative $X.X compared gross year-over-year XXXX. Gross one blended in investments kits sold, quarter on expenses business. expenses we support a continued million, the in favorable the a in active in of per in general In including in $X.X average to prior margin to procedure the year. in Research to XX.X% over of of the of The of months XX.X quarter XX.X% increased least of kits in

million million loss or compared $X.XX September per of as million $X.X of XXXX. Third XXXX. of loss for the equivalents and was quarter per Cash $X.XX period XX, net net share same $XXX.X to a were $X.X share, or

XXXX. Before turn concluding, let of for our me remainder the outlook to

expectations to year over We XX% represents $XX revenue. million are $XX reaffirming revenue full million, XXXX XXXX our year which XX% full growth to of

is deductibles quarter elect As with many quarter to the a surgery largest to consistent reminder, prior recover. as have fourth time years, after and their the over meeting our annual seasonally use holidays winter patients insurance

or the strength could midpoint potential shortages, hospital headwinds, and our surgeries additional and comfortable impact our underlying elective factors mindful by that revenue our the negatively at continued the range, of staffing momentum of and encouraged business are We other of for revenue. COVID guidance

commitment turn Our XXXX our business. open operator our the execution reaffirms the the that, in to focused your over outlook for call and line With growth to to questions. let me

Operator

Thank you.

And We of Marcus will [Operator session. now our JPMorgan. begin first question Instructions] from the Robbie Q&A comes

Lilia-Celine Breton Lozada

this just near-term And what Lili on dive of Thanks deeper in question. Hi, and could guidance you’ve I the been COVID terms trends, taking for you is seeing bit for fourth has trended that hoping into was actually the in Robbie. on recovery? a little how quarter? in what’s assumed the

John Treace

Hi this is Lili, John.

to QX. that potential as or constraints in through us case as we’re hospital Southeast. deferrals in are delays These and or We’re definitely And the that the going to are large us we’re gave cancellations Delta cases progresses. geographies the more, most case watching experienced impacting off for seeing with elective a staffing most begin the additional quarter Delta the flare-ups occurring tail are gatherings the headwind abate said, or holidays mainly continue people. headwinds hopeful of regional that elective That impacted

a procedures We as issue scheduling more to to disruptions so. a will of later the outright with the an being procedure – believe continue cancellation, to to surgical opposed time to as be rescheduled

Lilia-Celine Breton Lozada

be And launch Thanks. sales of any Thanks. has in system? the how That’s just on to Is can ramp follow-up. Okay. that there XXXX? share you helpful. significant can Adductoplasty that early driver quick And a How progressed? a feedback of the

John Treace

Yes.

system the on a While of side, early to but not early clinical the surgeons been continue deformity to the sort of launch over midfoot misalignments well training, the the an seeing on early six, the look from bunion our midfoot, the slight in QX the pleased and three, rollout during so. once and and correcting expect have with foot in it’s nine the marginally with will And response impact months, we only using as improving we’re we’re slimmer surgeon probably of the as coming and a seeing we more the both that corrected. the still expand product these from very terms increase also system, normal-appearing had ASP, adoption resource patient as we cosmetic blended the we’re

Lilia-Celine Breton Lozada

Great. Thank you.

Operator

of Our Morgan Stanley. from next is Ranieri question Drew

Drew Ranieri

the John questions. Mark, thanks and taking Hey, for

wondering you Are your the surgeons days, Just it’s seeing. more maybe on I maybe a bit moment. are I some you terms pulling provide if with a these on existing Lapiplasty their that but could users? from Adductoplasty using Adductoplasty? you know of technology in getting Are that start little the for the sidelines been early very and adoption was have just surgeon first

John Treace

September, say reception to addition and system Yes. heart expect Lapiplasty in get was the interest your that very the But Thanks, starting Drew. response John positive conference in nice labs we’re see surgeon course. I had the orthopedic here. to in of our once providing to a quarter last We’ve trained, uptake. training there over the training doctors to been in the that early conference, very the will AOFAS system. several get we it trainings And Adductoplasty. positive it, to and do some they doctors question, to of to at

Drew Ranieri

And you… appreciate it. that Got

John Treace

Lapiplasty and the sides, customers a bring both Lapiplasty, the Adductoplasty doing the our surgeon hasn’t with using or whether System in salespeople will that cases. Lapiplasty On or case it’s a used Adductoplasty too Lapiplasty

Drew Ranieri

you we’re might the one curious and met momentum of have understandably, our only surgeon if kind active maybe cost given consensus. the impact But you. think SMID quantify you delta few expectations utilization. mean, maybe underlying Thank the the or just beaten business or what I kind it. Cap the in surgeon in even just Got have companies well adoption, quarter quarter as just of that And I you’re that staffing seeing shortage could in impact the from – as of

John Treace

a said, outperform momentum headwinds, is much we’re able powerful even in this those us. I clearly, Well, it through That such with so impacted QX. business that think to underlying

beyond or is to looking it’s our just how our a have have business with overperformance growth So lot this strong forward to where overperformed. But of would we performance a The rate we’re proud and executing very very, far the hard I been in QX. momentum. very team our well, think performance in is QX quantify necessarily of would and

Drew Ranieri

hit Or over XXXX. And it. in Got quarter, you’ve I of mean, in the would the revenue years, should bit the positive in a there net a out the then the that quarter just fourth income here quarter be the is lastly, you. over But you’re fourth building XXXX maybe dynamic more just But on Thank and couple that of implied similar looking in going we P&L spending of any XXXX? terms helpful. there little understand to the I a fourth be middle color direct organization? be thinking fourth. the guidance sales past in

Mark Hair

Yes. Thanks, This is I’ll that. take Drew. Mark.

to sales looking the our a We’re And top really aiming remains our perspective, and we’re we’re really increased do. have do. the in definitely ultimately to in marketing. on momentum what driving focus investment line, From what that’s and net income looking that’s to

and positive looking from continue I first-mover to now, that to that really additional team, do advantage get which but very we successfully. to right and to necessarily maintain So building net don’t our continue income the our just be marketing commercial efforts support

the will next So that’s for short be our medium-term. and and focus continue to really been our focus

Drew Ranieri

Appreciate questions. taking Great. Thanks it. for the

John Treace

Drew. Thanks, Absolutely.

Operator

Antalffy of next question SVB is from Our Danielle Leerink.

Erin Broderick

of kind what expect for Hi, our talk I so XQ training into for about little this you forward could Erin question. was the we and much if hoping Or think what kind surges? a just and going it rate higher? taking Thanks in could it do on is XQ? Thanks. physician a from Danielle. trend Or you bit COVID similar was would into impact to XQ of XXXX. we’ve seen there any – we in the perhaps see should Should

Mark Hair

with that respect the to the training that So training, new is of question? surgeon our

Erin Broderick

Yes, active surgeon training.

John Treace

Yes, it’s Erin?

Erin Broderick

Yes.

John Treace

Yes.

Okay.

meaningful, Sorry, is meaningful dampening. a John. this Not not

come. the out day appear any way be in some or up cancellations and it I doesn’t Lapiplasty grows the get and day typical. events, being pretty Adductoplasty. always of that course, them interest about dropout hear to and to want in But reasons more these more taught or letting You It demand. at the that’s before becomes And strong but iconic to more gives as just accepted

operating. taper fourth quarter, final bit surgical do off to few really little because is just in we busy December program. to next training And expect too they’re events at a courses robust those because months, as so in high. November, spike of year, our think and continue demand a a have But It’s a remain the strong. see those seasonally, to doctors aggressive really don’t our go I very much time volume out going So lot for frankly, company, program to to training we our of you’re would core, for certain training

Erin Broderick

also Thanks. on kind just the two within opportunities. of then adoption Great. market the And

Just to get have a share or Thanks seen the that gains cases kind Fusion of primarily whether mix? much. of sense been kind from of or so you’ve wanted a Lapidus either osteotomy

John Treace

Sure.

continue procedures osteotomy. We volume, fronts, it’s the with and of converting customers we’ll think I’d convert so. transitioning do a But well By XX% we’re which it’s do surgeon as metatarsal on both more on incumbent to those we I sides probably both to a System, mix. Lapiplasty new we’re primarily being necessarily that well. say lot, than but does the the a of doing

Erin Broderick

taking question. for much so Thanks Great. the

John Treace

Sure.

Operator

of question, Stifel. from And our Wise Rick next

Rick Wise

are Hey, doing? how you

John Treace

Hi, Rick.

Rick Wise

been Hi. heard But desk. go so and sort about a started many – so COVID back hate monthly everybody start and listening and calls, trends to much to of discussion – again. we’ve there’s Hate –

consensus on July a obviously to or like the what October, number September August, weak; there bit. we’ve line. is You and about beat strong; or anything little stable a But the improving September, than various think it. our help that be numbers us Is gleaned equivalent things heard the technologies? Just been for we top either market, to new is the the from of lot others because of under-penetration volatile Or trends in your the launch would how quarter? less recent wondering has fourth months should of about it about and think setup

Mark Hair

to great as felt was a in Yes, I of half a the were that’s COVID say the other felt more what you definitely we back that little I similar trends just QX QX more question, we think headwinds companies describing. bit Rick. did. would –

that seen entered a I have think see the we QX. much continue we’ve respect, throughout headwinds a that different. to we’re lightning we’ll pockets said, throughout in is optimistic in kind different noticing trend remainder unfortunately, So of of those QX, of been of shortages hospitals. not different somewhat too that and We’ve into the and With staffing seeing headwind in as that definitely,

so COVID And states. still in we’re some headwinds some aware of

of surgeries. aware still reduction that a are hospitals at elective We’re certain in

we’re hospitals We’re have that aware in that, some that. of But addition seeing to shortages. staffing

So in sure those we’re the XXX% going quarter. play seen fourth the of have some quarter. of how loosening some the fourth entered of headwinds to rest out we’ve But just not as we that’s

optimistic. we’re still So,

Rick Wise

Got wondered the quarters. you words calls new quarter, three, sure of of but about you. can about lot how we not and John, feasibility training. we just products next that’s that we so doing haven’t the you might products about with And did fishing pipeline? told about had talk the new say us Is to I the as there and case, Should so innovation? a cadence something think if that, innovation stated in the us question? contemplate everything. expedition how I’m deal many but should the Is you you’re expect regularly, many think, two, I launching four next too obviously, pipeline, the again, it – much – you hear And

John Treace

enough. think right. Okay, that’s okay. No, Yes. Fair I

less pretty a R&D platform, different We advancing R&D Lapiplasty the and very It’s of pipeline active pipeline. to in fronts use, have invasive. easier active developments along making it a a couple faster,

bunion System tie case. into includes ancillary that cases We that tie or into a have like items product the Lapiplasty Adductoplasty development

just company. or product of we into will kind the forward and you’ll think that about of introductions see product a the next-generation within and new And one they going I next with year, into its tie of an there cadence a surgery. at as and to Lapiplasty out of really a you are synergistic terms strategically hour think then instructor in come ancillary one all on that these timed can be products lab, do training – So continue capability, training foot

So efficient overlap. that the standpoint. it’s pretty from pathologies And

And deformity together. treat so the discussions about and didactic – and are how all science They to them. the the well they all pair

We’re operation. and talk case not bunions. in talking an the session ankle, about total they’re talk same one going in talking then a another fracture because about We’d of ankle harmoniously system discuss kind and in about and all and

Rick Wise

keep Got And of couple each quarter And Maybe to where you’re give talking for dollars about Mark, going coming a you. and process and that team. just last million Thank are us marketing year, and going this in building trend are me. going where sequentially process, stepped to quarters. a you. we your in commercial on obviously, that little sales more these just could going up and is you just color going?

Mark Hair

Absolutely. Rick. question, Great Yes.

that We on investment. continue a commercial the doing And We building great that what we’re we’re to is commercial plan to team. organization. return invest in has think

and we’re continue we up. in business. to stepped step hiring We’ve addition that reps lot to We’re investing to that, of a focus. adding this or And the marketing in board, the and up drive our efforts spending across sales

fourth the you investment And third. in in over so for saw look the what would quarter I increased

Rick Wise

Got you you. much. Thank very

Mark Hair

Absolutely.

John Treace

Thanks, Rick.

Operator

questions. [Operator Instructions] have And more we no

Mark Hair

you. on and year thank the Treace behalf for joining following we to the close our This Thank us and So of Medical, of fourth concludes you our look quarter of call, today. full next forward XXXX. update

Operator

today’s you for Thank Thank participation. concludes your you, ladies and gentlemen. conference. This

may You now disconnect.

Treace Medical Concepts (TMCI) 7 Nov 212021 Q3 Earnings call transcript