SI-BONE, Inc. (SIBN) Q3 2023 Earnings Call Transcript


Q3 2023 Earnings Conference Call

November 06, 2023, 04:30 PM ET

Company Participants

Saqib Iqbal - Senior Director of IR

Laura Francis - CEO

Anshul Maheshwari - CFO

Conference Call Participants

Young Li - Jefferies

Drew Ranieri - Morgan Stanley

Craig Bijou - Bank of America

David Saxon - Needham & Company

Dave Turkaly - JMP Securities

Caitlin Cronin - Canaccord

Samuel Brodovsky - Truist Securities



Good afternoon and welcome to SI-BONE's Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to Saqib Iqbal, Senior Director of Investor Relations at SI-BONE for a few introductory comments.

Saqib Iqbal

Thank you for participating in today's call. Joining me are Laura Francis, Chief Executive Officer; and Anshul Maheshwari, Chief Financial Officer. Earlier today, SI-BONE released financial results for the quarter ended September 30, 2023.

A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Any statements contained in this call that are related to expectations or predictions of future events, results or performance are forward-looking statements. These forward-looking statements are based on the Company's current expectations and inherently involve risks and uncertainties. These risks include SI-BONE's ability to introduce and commercialize new products and indications, SI-BONE's ability to maintain favorable reimbursement for its products and procedures, the impact of potential economic weakness on the ability and desire of patients to undergo elective procedures, SI-BONE's ability to manage risks to its supply chain, the impact of future capital requirements driven by new product introductions, and risks to the continued re-normalization of the healthcare operating environment.

Other forward-looking statements include our examination of operating trends, and our future financial expectations, such as expectations for surgeon training and adoption, active surgeons, new products, and clinical trial enrollment, and are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements.

During this call, management may discuss certain non-GAAP measures, including the Company's adjusted EBITDA results. For a reconciliation of these non-GAAP measures to GAAP accounting, please see the Company's full earnings release issued earlier today. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission.

SI-BONE disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward-looking statements whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, November 6, 2023.

With that, I'll turn the call over to Laura.

Laura Francis

Thanks, Saqib. Good afternoon and thank you for joining us.

I'm proud of our performance, as strengthening demand for our solutions allowed us to defy industry seasonality trends and deliver record worldwide revenue for the sixth consecutive quarter.

In the third quarter of 2023, we generated worldwide revenue of $34 million, an increase of 29% compared to the third quarter of 2022. The quarterly result was led by record U.S. revenue of $32.3 million which represents U.S. revenue growth of 31% compared to the prior year period. This robust revenue growth also translated into continued improvement in adjusted EBITDA loss and cash outflow and moved us closer to our profitability and cash flow breakeven goals.

We also achieved a major surgeon milestone in the third quarter with the number of active surgeons in the quarter exceeding 1,000 for the first time in the Company's history, performing nearly 3,900 procedures.

Our confidence in the business is reflected in the updated 2023 revenue growth guidance of 28% to 29%. As we look toward 2024, with a market opportunity of nearly $0.5 million annual procedures, we're in a distinguished position to capitalize on what we believe to be prolonged demand for our expanding portfolio and deliver strong and consistent revenue growth.

Before I discuss the progress across our key initiatives, I want to thank our employees for their focus and persistence to create this unique platform and for positioning us to deliver breakout growth. Your impeccable execution ensures we achieve our mission of helping thousands of patients rise up and reach for the stars.

Now, let me provide an update on our key initiatives as we look to extend our leadership position and drive strong long-term growth. Starting with sales infrastructure,. Our direct sales team is our biggest asset as we expand our product portfolio and surgeon base. Our revenue growth and operating leverage over the last several quarters are the outcome of the investments in our seasoned world-class commercial organization.

At the end of the third quarter, our U.S. commercial organization was comprised of 83 quota-bearing territory manager. We complement our territory managers with clinical support specialists as well as a growing network of third-party sales agents for case coverage. We also selectively place instrument sets at high-volume hospitals to meet demand.

This hybrid strategy allowed us to deliver nearly 30% average growth in both U.S. procedure volume, as well as U.S. active surgeon base over the last four quarters. This growth has translated into trailing 12-month average revenue per U.S. territory of over $1.5 million, representing a 38% productivity gain over the comparable trailing 12-month period.

Moving on to surgeon engagement. We exited the third quarter with over 1,040 active U.S. surgeons, representing approximately 30% growth over the third quarter of 2022. This was the 11th consecutive quarter of double-digit year-over-year growth in our U.S. active surgeons.

To put it in perspective, we had approximately a 1,000 surgeons perform a procedure in all of 2021 and now we have a larger number of surgeons perform procedures in a quarter. We're proud of this milestone, which is the outcome of years of focus on driving surgeon awareness through education, building the best clinical evidence, and expanding our portfolio of solutions to address our surgeons unmet needs.

This elevated level of surgeon interest and engagement is a great forward-looking indicator and underscores the long-term growth trajectory of our business. In the third quarter, nearly half of the active surgeons added in the quarter performed at least one minimally invasive SI joint fusion procedure and then several instances they also performed a pelvic fixation or fragility fracture procedure. We expect our complementary portfolio to drive deeper engagement and increase procedures per surgeon over time.

Turning to products and solutions, the U.S. procedure volume trends confirm that with iFuse 3D, iFuse-TORQ and now iFuse Bedrock Granite, the value of our innovative, versatile, and complementary product portfolio has positioned us as the top choice for surgeons looking for sacropelvic solutions.

IFuse-TORQ remains a key growth driver for us due to its expanded clearance covering SI joint dysfunction, trauma and adult deformity. iFuse-TORQ provides complementary technology to iFuse 3D for existing surgeons. It has also been a key driver of new surgeon engagement, as well as successful conversion of surgeons using competitive products when performing minimally invasive SI joint fusion procedures.

In trauma, we are engaged with major trauma center thought leaders and are encouraged by the adoption we're seeing for iFuse-TORQ and sacral insufficiency fractures. At a recent Orthopedic Trauma Association's event in October, there was tremendous excitement around our solution to address insufficiency fractures.

This is consistent with the increase in our trauma procedure volumes in the third quarter of 2023. Based on an annual incidence of over 120,000 insufficiency fractures in the U.S., the trauma opportunity is of strategic importance to us as the sacropelvic solutions leader and is an important avenue for growth over the long term.

What's equally exciting is the growing interest of trauma surgeons in the diagnosis and treatment of SI joint dysfunction and degeneration. In the third quarter, over one-third of the procedures performed by trauma surgeons were SI joint fusion procedures.

Moving to iFuse Bedrock Granite. We're delighted with the outstanding performance of Granite as we increase our surgical capacity in the quarter to address surgeon demand. The additional capacity positions us well for the current quarter, historically, our seasonally strongest of the year. The market reception in the pace of adoption underscores Granite's success and reaffirms our belief that it is becoming the standard of care for a long construct procedures to the pelvis.

Following the recent successful launch of our Granite-Closed Head Implant, we're also poised to introduce another Granite line extension next year. We expect the line extension to accelerate our penetration of shorter multi-level fusion procedures for the treatment of degenerative spine disorders, which already accounts for over 40% of Granite cases today. With over 130,000 annual target procedures, we believe the Granite family of implants will be a crucial growth driver for us over the next several years.

Along with the growing demand for Granite, we're also seeing a consistent trend in surgeons using some combination of our products with Granite to achieve two points of fixation across the SI joint on either side and long construct procedures. This is driving a significant pull through opportunity for the portfolio and a higher per procedure average selling price.

Before I hand the call over to Anshul, I'd like to provide some background on drivers of sacroiliac joint pain incidents in the U.S. and the question of the impact of GLP-1. The primary cause of SI joint dysfunction and degeneration is the altered function of the little ligaments and muscles supporting the SI joint. Changes in the position of the pelvis will also lead to changes in load transfer across the joints. These factors are consistent with the patient demographics in our studies, where over two-third of patients for women of which nearly 80% previously had at least one child.

Additionally, the average BMI of the over 300 patients in our INSITE and SIFI studies was between 29 and 30, which closely approximates the average BMI of adult Americans. Based on data from our clinical studies, it appears that sacroiliac joint pain is more strongly correlated with female gender and traumatic events including pregnancy rather than BMI. Within the deformity market, patients can be classified as those with adult idiopathic scoliosis or adult onset scoliosis.

Adult idiopathic scoliosis patients have had scoliosis since childhood and it mainly results from abnormal systemic skeletal growth and asynchronous spinal neuro-boney growth generally due to genetic, hereditary or biomechanical factors. Adult onset scoliosis which typically starts at the age of 50 but presents itself in an average age of 70 is driven by age related asymmetric spinal degeneration and can produce global sagittal misalignment with central and foraminal stenosis.

Based on the data in our SILVIA study, the average patient BMI was between 29 and 30. There is no clear clinical evidence around cause-effective high BMI and scoliosis, making it difficult to determine the direction of causality. This high BMI cause spinal degeneration or does the painful spinal condition tend to correlate with a sedentary lifestyle an elevated BMI?

Against this data backdrop, it is in our opinion, not likely that widespread adoption of GLP-1 therapy and a resulting decrease in average BMI in the American population would have a significant impact on the incidents of SI joint dysfunction, trauma or deformity that would meaningfully impact demand for our products in the near or immediate term.

2018 study in the Spine Journal by [indiscernible] of 244 adult spinal deformity patients indicated that BMI greater than 35 was associated with significantly worse peri-operative outcomes and higher cost compared to non-obese patients. As such, surgeons tend not to want to operate on morbidly obese patients....

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