Treace Medical Concepts, Inc. (“Treace” or the “Company”)
(NasdaqGS: TMCI), a commercial-stage orthopaedic medical device
company driving a paradigm shift in the surgical treatment of
Hallux Valgus (commonly known as bunions), today reported financial
results for the second quarter ended June 30, 2021.
Recent Highlights:
- Revenue of $20.7 million, a 167%
increase over the same period last year
- Gross margin of 80.9%, an increase
of 780 basis points from the same period last year
- Interim results from ALIGN3D™
clinical study demonstrating positive radiographic and
patient-reported outcomes starting at 6 weeks and maintained at 12
months
“We are pleased to announce continued strength
in our business, with growth in the second quarter led by
increasing surgeon utilization and steady gains in our customer
base supported by our expanding direct sales channel” said John T.
Treace, CEO, Founder and Board Member of Treace. “While the return
to pre-pandemic levels may not be linear, we continue to believe we
are well-positioned to drive continued market penetration of our
Lapiplasty® system, with comprehensive strategies and offerings
that include a body of clinical evidence demonstrating consistent,
reliable correction and low recurrence rates.”
Second Quarter 2021 Financial
ResultsRevenue for the second quarter of 2021 was $20.7
million, representing an increase of 167% compared to $7.7 million
in the second quarter of 2020. The increase was driven by an
increased number of Lapiplasty® procedure kits sold and an expanded
customer base. Revenues during the 2020 second quarter were
severely impacted by the COVID-19 pandemic, including the
government-mandated restrictions on elective procedures.
Gross profit for the second quarter of 2021 was
$16.7 million, compared to a gross profit of $5.7 million in the
second quarter of 2020. Gross margin increased to 80.9% in the
second quarter of 2021, compared to 73.1% in the second quarter of
2020. Gross margin expansion was the result of an increased number
of Lapiplasty® procedure kits sold and a higher average blended
ASP. Gross margin for the 2020 period also reflects
pandemic-related disruptions.
Total operating expenses were $20.8 million in
the second quarter of 2021, including sales and marketing (S&M)
expenses of $14.0 million, research and development (R&D)
expenses of $2.4 million, and general and administrative (G&A)
expenses of $4.3 million. This compared to total operating expenses
of $7.2 million, including S&M expenses of $4.8 million,
R&D expenses of $1.0 million, and G&A expenses of $1.4
million in the second quarter of 2020. Expenses in the second
quarter of 2020 reflect cost-reduction initiatives and the effect
of shelter-in-place orders as a result of the COVID-19
pandemic.
Second quarter net loss was ($5.1) million, or
($0.10) per share, compared to net loss of ($2.1) million, or
($0.06) per share, for the same period of 2020.
Cash and cash equivalents were $119.6 million as
of June 30, 2021. This includes cash proceeds of $107.6 million
from the Company’s initial public offering that closed in April
2021.
Financial OutlookTreace now
expects revenue for the full year 2021 to range from $90 million to
$95 million, which represents approximately 57% to 65% growth over
the Company’s fiscal year 2020 revenue. Previous revenue
expectation was $87 million to $92 million.
Webcast and Conference Call
DetailsTreace will host a conference call today, August 5,
2021, at 4:30 p.m. ET to discuss its second quarter 2021 financial
results. The dial-in numbers are (888) 708-0264 for domestic
callers or (720) 405-2122 for international callers, followed by
Conference ID: 9779815. The live webcast of the conference call
will be available on the Investor Relations section of the
Company’s website at https://investors.treace.com/. The webcast
will be archived on the website following the completion of the
call.
Use of Non-GAAP Financial
MeasuresTo supplement the financial results presented in
accordance with GAAP, this earnings release presents Adjusted
EBITDA, which the Company defines as net loss before depreciation
and amortization expense, stock-based compensation expense and
interest income/expense. Adjusted EBITDA is being presented in
addition to, and not as a substitute for, or superior to, financial
measures calculated in accordance with GAAP. Management uses
Adjusted EBITDA to evaluate the Company’s operating performance and
trends, as well as for making planning decisions. The Company
believes that Adjusted EBITDA helps to identify underlying trends
in the Company’s business that could otherwise be masked by the
effect of the expenses and other items that it excludes in Adjusted
EBITDA. Accordingly, the Company believes Adjusted EBITDA provides
useful information to investors and others in understanding and
evaluating the Company’s operating results, enhancing the overall
understanding of its past performance and future prospects, and
allowing for greater transparency with respect to the key financial
metrics used by the Company’s management in their financial and
operational decision-making. The Company also presents Adjusted
EBITDA because it believes investors, analysts and rating agencies
consider it a useful metric in measuring the Company’s performance
against other companies and its ability to meet its debt service
obligations.
There are limitations related to the use of
non-GAAP financial measures such as Adjusted EBITDA because they
are not prepared in accordance with GAAP, may exclude significant
expenses required by GAAP to be recognized in the Company’s
financial statements, and may not be comparable to non-GAAP
financial measures used by other companies. The Company encourages
investors to carefully consider its results under GAAP, as well as
its supplemental non‐GAAP information and the reconciliation
between these presentations, to more fully understand its business.
Reconciliations between GAAP and non‐GAAP results are presented
below.
Forward-Looking StatementsThis
press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
All statements other than statements of historical fact are
forward-looking statements, including, but not limited to the
Company’s expectations regarding the recovery of the market to
pre-pandemic levels; the Company’s belief that it is well
positioned to drive continued market penetration of the Lapiplasty®
system; and the Company’s expected revenue for full year 2021.
Forward-looking statements are based on management’s current
assumptions and expectations of future events and trends, which
affect or may affect the Company’s business, strategy, operations
or financial performance, and actual results and other events may
differ materially from those expressed or implied in such
statements due to numerous risks and uncertainties. Forward-looking
statements are inherently subject to risks and uncertainties, some
of which cannot be predicted or quantified. Factors that could
cause actual results or other events to differ materially from
those contemplated in this press release can be found in the Risk
Factors section of Treace’s public filings with the Securities and
Exchange Commission (SEC), including in the final prospectus filed
with the SEC on April 26, 2021 in connection with Treace’s initial
public offering. Because forward-looking statements are inherently
subject to risks and uncertainties, you should not rely on these
forward-looking statements as predictions of future events. These
forward-looking statements speak only as of their date and, except
to the extent required by law, the Company undertakes no obligation
to update these statements, whether as a result of any new
information, future developments or otherwise. The Company’s
results for the quarter ended June 30, 2021 are not necessarily
indicative of our operating results for any future periods.
About Treace Medical
ConceptsTreace Medical Concepts is a commercial-stage
orthopaedic medical device company with the goal of advancing the
standard of care for the surgical management of bunion deformities.
Bunions are complex 3-dimensional deformities that originate from
an unstable joint in the middle of the foot. Treace has pioneered
and patented the Lapiplasty® 3D Bunion Correction™ system - a
combination of instruments, implants, and surgical methods designed
to correct all 3 planes of the bunion deformity and secure the
unstable joint, addressing the root cause of the bunion and getting
patients back to their active lives quickly.
Contacts:
Treace Medical ConceptsMark L. HairChief
Financial Officermhair@treace.net(904) 373-5940
Investors:
Gilmartin GroupLynn Lewis or Vivian
CervantesIR@treace.net
Treace Medical Concepts, Inc.
Condensed Statements of Operations and Comprehensive
Loss (in thousands, except share and per share
amounts) (unaudited)
|
|
Three Months EndedJune 30, |
|
|
Six Months EndedJune 30, |
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Revenue |
$ |
20,654 |
|
|
$ |
7,739 |
|
|
$ |
39,361 |
|
|
$ |
18,995 |
|
| Cost of goods sold |
|
3,944 |
|
|
|
2,085 |
|
|
|
7,271 |
|
|
|
4,474 |
|
| Gross profit |
|
16,710 |
|
|
|
5,654 |
|
|
|
32,090 |
|
|
|
14,521 |
|
| Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
14,010 |
|
|
|
4,789 |
|
|
|
26,158 |
|
|
|
12,127 |
|
|
Research and development |
|
2,422 |
|
|
|
982 |
|
|
|
4,290 |
|
|
|
2,415 |
|
|
General and administrative |
|
4,329 |
|
|
|
1,401 |
|
|
|
7,095 |
|
|
|
2,696 |
|
| Total operating expenses |
|
20,761 |
|
|
|
7,172 |
|
|
|
37,543 |
|
|
|
17,238 |
|
| Loss from operations |
|
(4,051 |
) |
|
|
(1,518 |
) |
|
|
(5,453 |
) |
|
|
(2,717 |
) |
| Interest and other income,
net |
|
6 |
|
|
|
3 |
|
|
|
7 |
|
|
|
36 |
|
| Interest expense |
|
(1,038 |
) |
|
|
(458 |
) |
|
|
(2,069 |
) |
|
|
(899 |
) |
| Other expense, net |
|
(1,032 |
) |
|
|
(455 |
) |
|
|
(2,062 |
) |
|
|
(863 |
) |
| Net loss and comprehensive
loss |
|
(5,083 |
) |
|
|
(1,973 |
) |
|
|
(7,515 |
) |
|
|
(3,580 |
) |
| Convertible preferred stock
cumulative and undeclared dividends |
|
(39 |
) |
|
|
(159 |
) |
|
|
(196 |
) |
|
|
(318 |
) |
| Net loss attributable to common
stockholders |
$ |
(5,122 |
) |
|
$ |
(2,132 |
) |
|
$ |
(7,711 |
) |
|
$ |
(3,898 |
) |
| Net loss per share attributable
to common stockholders, basic and diluted |
$ |
(0.10 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.18 |
) |
|
$ |
(0.11 |
) |
|
Weighted-average shares used in computing net loss per share
attributable to common stockholders, basic and diluted |
|
49,187,285 |
|
|
|
37,068,288 |
|
|
|
43,556,107 |
|
|
|
37,060,491 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treace Medical Concepts, Inc.
Condensed Balance Sheets (in thousands,
except share and per share amounts)
(unaudited)
|
|
June 30, |
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
Assets |
|
|
|
|
|
|
|
| Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
119,621 |
|
|
$ |
18,079 |
|
|
Accounts receivable, net of allowance for doubtful accounts of $271
and $446 as of June 30, 2021 and December 31, 2020,
respectively |
|
10,047 |
|
|
|
14,486 |
|
|
Inventories |
|
7,643 |
|
|
|
7,820 |
|
|
Prepaid expenses and other current assets |
|
3,512 |
|
|
|
593 |
|
| Total current assets |
|
140,823 |
|
|
|
40,978 |
|
| Property and equipment, net |
|
1,475 |
|
|
|
829 |
|
| Total assets |
$ |
142,298 |
|
|
$ |
41,807 |
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
$ |
2,921 |
|
|
$ |
2,265 |
|
|
Accrued liabilities |
|
1,957 |
|
|
|
1,848 |
|
|
Accrued commissions |
|
2,553 |
|
|
|
3,513 |
|
|
Accrued compensation |
|
2,434 |
|
|
|
2,183 |
|
|
Short-term debt |
|
- |
|
|
|
1,788 |
|
| Total current liabilities |
|
9,865 |
|
|
|
11,597 |
|
| Derivative liability on term
loan |
|
245 |
|
|
|
245 |
|
| Long-term debt, net of discount
of $723 and $811 as of June 30, 2021 and December 31, 2020,
respectively |
|
29,277 |
|
|
|
29,189 |
|
| Total liabilities |
|
39,387 |
|
|
|
41,031 |
|
| Commitments and contingencies
(Note 7) |
|
|
|
|
|
|
|
| Stockholders’ equity |
|
|
|
|
|
|
|
|
Series A convertible preferred stock, $0.001 par value, 0 shares
authorized and 0 shares issued and outstanding as of June 30, 2021;
6,687,500 shares authorized and 6,687,475 shares issued and
outstanding as of December 31, 2020, respectively; liquidation
value of $0 and $8,000 as of June 30, 2021 and December 31, 2020,
respectively |
|
— |
|
|
|
7,935 |
|
|
Preferred stock, $0.001 par value, 5,000,000 shares authorized; 0
shares issued and outstanding as of June 30, 2021; 0 shares
authorized, issued and outstanding as of December 31, 2020 |
|
— |
|
|
|
— |
|
|
Common stock, $0.001 par value, 300,000,000 shares authorized;
52,755,981 issued and outstanding as of June 30, 2021; 66,875,000
shares authorized, 37,366,865 issued and outstanding as of December
31, 2020 |
45 |
|
|
28 |
|
|
Common stock Class B, $0.001 par value, 0 shares authorized, issued
and outstanding as of June 30, 2021; 1,000,000 shares authorized
and 0 shares issued and outstanding as of December 31, 2020 |
|
— |
|
|
|
— |
|
|
Additional paid-in capital |
|
131,734 |
|
|
|
14,166 |
|
|
Accumulated deficit |
|
(28,868 |
) |
|
|
(21,353 |
) |
| Total stockholders’ equity |
|
102,911 |
|
|
|
776 |
|
|
Total liabilities and stockholders’ equity |
$ |
142,298 |
|
|
$ |
41,807 |
|
|
|
|
|
|
|
|
|
|
Treace Medical Concepts, Inc.
Condensed Statements of Cash Flows (in
thousands)(unaudited)
|
|
Six Months EndedJune 30, |
|
|
Six Months EndedJune 30, |
|
|
|
2021 |
|
|
2020 |
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
| Net loss |
$ |
(7,515 |
) |
|
$ |
(3,580 |
) |
| Adjustments to reconcile net loss
to net cash used in operating activities |
|
|
|
|
|
|
|
|
Depreciation and amortization expense |
|
220 |
|
|
|
667 |
|
|
(Recovery) Provision for allowance for doubtful accounts |
|
(72 |
) |
|
|
228 |
|
|
Share-based compensation expense |
|
1,277 |
|
|
|
457 |
|
|
Amortization of debt issuance costs |
|
88 |
|
|
|
118 |
|
|
Provision for inventory obsolescence |
|
88 |
|
|
|
412 |
|
|
Net changes in operating assets and
liabilities: |
|
|
|
|
|
|
|
|
Accounts Receivable |
|
4,511 |
|
|
|
3,532 |
|
|
Inventory |
|
89 |
|
|
|
(2,590 |
) |
|
Prepaid expenses and other assets |
|
(2,919 |
) |
|
|
178 |
|
|
Accounts payable |
|
656 |
|
|
|
1,071 |
|
|
Accrued liabilities |
|
(600 |
) |
|
|
(3,233 |
) |
| Net cash used in operating
activities |
|
(4,177 |
) |
|
|
(2,740 |
) |
| Cash flows from investing
activities |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
(866 |
) |
|
|
(923 |
) |
| Net cash used in investing
activities |
|
(866 |
) |
|
|
(923 |
) |
| Cash flows from financing
activities |
|
|
|
|
|
|
|
|
Proceeds from SBA Loan |
|
— |
|
|
|
1,788 |
|
|
Repayments on SBA Loan |
|
(1,788 |
) |
|
|
— |
|
|
Proceeds from issuance of common stock upon initial public
offering, net of issuance costs and underwriting fees of $10.6
million |
|
107,610 |
|
|
|
— |
|
|
Proceeds from exercise of employee stock options |
|
763 |
|
|
|
41 |
|
| Net cash provided by financing
activities |
|
106,585 |
|
|
|
1,829 |
|
| Net increase (decrease) in cash
and cash equivalents |
|
101,542 |
|
|
|
(1,834 |
) |
| Cash and cash equivalents at
beginning of period |
|
18,079 |
|
|
|
12,139 |
|
| Cash and cash equivalents at end
of period |
$ |
119,621 |
|
|
$ |
10,305 |
|
| Supplemental disclosure
of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid for interest |
|
2,917 |
|
|
|
— |
|
| NONCASH FINANCING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Issuance of common stock upon exercise of warrants |
|
1 |
|
|
|
— |
|
|
Conversion of convertible preferred stock and accrued dividends on
convertible preferred stock into common stock |
|
7,935 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Treace Medical Concepts,
Inc.Reconciliation of GAAP Net Loss to Adjusted
EBITDA
| |
Three Months Ended June 30, |
|
Six Months EndedJune 30, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
| Net loss |
$ |
(5,083 |
) |
|
$ |
(1,973 |
) |
|
$ |
(7,515 |
) |
|
$ |
(3,580 |
) |
| Adjustments: |
|
|
|
|
|
|
|
|
Interest |
$ |
1,032 |
|
|
$ |
455 |
|
|
$ |
2,062 |
|
|
$ |
863 |
|
|
Taxes |
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
Depreciation & Amortization |
$ |
124 |
|
|
$ |
364 |
|
|
$ |
220 |
|
|
$ |
667 |
|
|
Non-cash compensation expense |
$ |
875 |
|
|
$ |
248 |
|
|
$ |
1,277 |
|
|
$ |
457 |
|
| Adjusted EBITDA |
$ |
(3,052 |
) |
|
$ |
(906 |
) |
|
$ |
(3,956 |
) |
|
$ |
(1,593 |
) |
|
|
|
|
|
|
|
|
|
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