Treace Medical Concepts, Inc. (“Treace” or the “Company”)
(NasdaqGS: TMCI), a medical technology company driving a
fundamental shift in the surgical treatment of hallux valgus
(commonly known as bunions) through its Lapiplasty® 3D Bunion
Correction™ Procedure, today reported financial results for the
second quarter ended June 30, 2023.
Recent Highlights:
- Revenue of $42.0
million in the second quarter of 2023, a 40% increase over same
period last year
- Blended average
revenue per Lapiplasty® procedure kit sold was $6,176, an 8%
increase over same period last year
- Gross margin of
81.7% in the second quarter 2023
- Second quarter
revenue contribution from direct sales channel, the industry’s only
direct bunion-focused salesforce, increased to 79% of sales
compared to 68% during the second quarter 2022
- Completed
acquisition of certain assets from RedPoint Medical3D (RPM-3D) to
enable patient specific instrumentation for bunion and related
mid-foot surgical procedures
- Granted nine
additional U.S. patents year-to-date; Patent portfolio expands to
49 granted U.S. patents and 72 pending U.S. patent
applications
- Announced
appointment of Julie Dewey as Chief Communications and Investor
Relations Officer
“Second quarter revenue grew 40% with solid
execution of our growth strategies, encouraging adjusted EBITDA
progress and continued gains across our key operating metrics,”
said John T. Treace, CEO, Founder and Board Member of Treace. “I’m
especially pleased that we reached our stated year-end target of
200 quota carrying direct sales reps by the end of the second
quarter. We expect this expansion, along with our proven commercial
programs and differentiated technologies, will drive continued
market penetration and position us well for the remainder of 2023
and beyond.”
Second Quarter 2023 Financial
ResultsRevenue for the second quarter of 2023 was $42.0
million, representing an increase of 40% compared to $30.0 million
in the second quarter of 2022. The increase was driven by an
increased number of Lapiplasty® procedure kits sold as a result of
an expanded surgeon customer base, increased utilization and
increased blended average selling prices due to increased adoption
of the Company’s newer technologies and expanding portfolio of
complementary products.
Gross profit for the second quarter of 2023 was
$34.3 million, representing an increase of 39% compared to a gross
profit of $24.7 million in the second quarter of 2022. Gross margin
totaled 81.7% in the second quarter of 2023, compared to 82.3% in
second quarter of 2022, primarily due to changes in product mix and
an increase in inventory provisions, partially offset by lower
royalty rates.
Total operating expenses were $47.3 million in
the second quarter of 2023, including sales and marketing (S&M)
expenses of $33.8 million, research and development (R&D)
expenses of $3.5 million, and general and administrative (G&A)
expenses of $10.0 million. This compared to total operating
expenses of $36.6 million, including S&M expenses of $26.6
million, R&D expenses of $3.0 million, and G&A expenses of
$7.0 million, in the second quarter of 2022. Increased operating
expenses in the second quarter of 2023 reflect strategic
investments in its expanding direct sales channel, investments in
product innovation, increased capacity requirements, as well as
support for other commercial initiatives.
Second quarter net loss attributable to common
stockholders was ($12.3) million, or ($0.20) per share, compared to
($17.2) million, or ($0.31) per share, for the same period of 2022.
Second quarter adjusted net loss was ($12.3) million, or ($0.20)
per share, compared to ($12.8) million, or ($0.23) per share for
the same period of 2022. Adjusted EBITDA was a loss of ($7.7)
million in the second quarter of 2023 compared to a loss of ($9.6)
million for the same period in 2022. See below for additional
information and a reconciliation of non-GAAP financial
information.
Financial OutlookTreace is
raising its full-year 2023 revenue guidance to $191 million to $197
million, which represents approximately 35% to 39% growth over the
Company’s 2022 revenue. This compares to the prior full-year 2023
revenue guidance of $190 million to $196 million.
Webcast and Conference Call
DetailsTreace will host a conference call today, August 8,
2023, at 4:30 p.m. ET to discuss its second quarter 2023 financial
results. Investors interested in listening to the conference call
may do so by registering. Once registered, participants will
receive dial-in numbers and a unique pin to join the call and ask
questions. 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, interest income, interest expense, taxes,
share-based compensation expense, acquisition-related costs and
debt extinguishment loss. As of March 31, 2023, in its calculation
of Adjusted EBITDA, the Company began subtracting interest income
from net loss as interest income is expected to be significant for
the full-year 2023. Prior period results for Adjusted EBITDA have
been updated to be consistent with the updated presentation as
described above. This earning release also presents net loss
attributable to common stockholders excluding the debt
extinguishment loss on an aggregate and per share basis (“Adjusted
Net Loss”). Non-GAAP financial measures such as Adjusted EBITDA and
Adjusted Net Loss are presented in addition to, and not as a
substitute for, or superior to, financial measures calculated in
accordance with GAAP. Management uses these non-GAAP financial
measures to evaluate the Company’s operating performance and
trends, as well as for making planning decisions. The Company
believes that Adjusted EBITDA and Adjusted Net Loss helps to
identify underlying trends in the Company’s business that may
otherwise be masked by the effect of the income and expenses and
other items that it excludes in its calculation of Adjusted EBITDA
and Adjusted Net Loss. Accordingly, the Company believes these
non-GAAP financial measures provide 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 key financial metrics used by the
Company’s management in their financial and operational
decision-making. The Company also presents these non-GAAP financial
measures because it believes investors, analysts and rating
agencies consider them to be a useful metrics 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 and Adjusted
Net Loss because they are not prepared in accordance with GAAP, may
exclude significant income and 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 that the expansion of the number of its
quota carrying direct sales reps, along with its commercial
programs and technologies, will drive continued market penetration
and position the Company well for the remainder of 2023 and beyond;
and the Company’s revenue guidance and revenue growth rates for
full-year 2023. 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 its Annual
Report on Form 10-K for the year ended December 31, 2022, and any
subsequent Quarterly Report on Form 10-Q or Current Report on Form
8-K. 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, 2023 are not necessarily
indicative of its operating results for any future periods.
Internet Posting of
InformationTreace routinely posts information that may be
important to investors in the “Investor Relations” section of its
website at www.treace.com. The Company encourages investors and
potential investors to consult the Treace website regularly for
important information about Treace.
About Treace Medical
ConceptsTreace Medical Concepts, Inc. is a medical
technology company with the goal of advancing the standard of care
for the surgical management of bunion and related midfoot
deformities. Bunions are complex 3-dimensional deformities that
originate from an unstable joint in the middle of the foot and
affect approximately 65 million Americans, of which Treace
estimates 1.1 million are annual surgical candidates. Treace has
pioneered and patented the Lapiplasty® 3D Bunion Correction™ System
– a combination of instruments, implants, and surgical methods
designed to surgically correct all 3 planes of the bunion deformity
and secure the unstable joint, addressing the root cause of the
bunion and helping patients get back to their active lifestyles.
Treace expanded its offering with the Adductoplasty®Midfoot
Correction System, designed for reproducible surgical correction of
the midfoot to provide further support to hallux valgus patients.
For more information, please visit www.treace.com.
To learn more about Treace, connect with us on
LinkedIn, Twitter, Facebook and Instagram.
Contacts:Treace Medical
ConceptsJulie Dewey, IRCChief Communications & IR
Officerjddewey@treace.com(209) 613-6945
|
Treace Medical Concepts, Inc. |
Statements of Operations and Comprehensive
Loss |
(in thousands, except share and per share
amounts) |
(unaudited) |
|
|
Three Months
EndedJune 30, |
|
|
Six Months
EndedJune 30, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Revenue |
$ |
41,953 |
|
|
$ |
29,967 |
|
|
$ |
84,148 |
|
|
$ |
59,014 |
|
Cost of goods sold |
|
7,675 |
|
|
|
5,291 |
|
|
|
15,714 |
|
|
|
10,421 |
|
Gross profit |
|
34,278 |
|
|
|
24,676 |
|
|
|
68,434 |
|
|
|
48,593 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
33,773 |
|
|
|
26,610 |
|
|
|
67,428 |
|
|
|
48,909 |
|
Research and development |
|
3,526 |
|
|
|
2,984 |
|
|
|
6,938 |
|
|
|
6,036 |
|
General and administrative |
|
10,031 |
|
|
|
7,015 |
|
|
|
20,896 |
|
|
|
13,677 |
|
Total operating expenses |
|
47,330 |
|
|
|
36,609 |
|
|
|
95,262 |
|
|
|
68,622 |
|
Loss from operations |
|
(13,052 |
) |
|
|
(11,933 |
) |
|
|
(26,828 |
) |
|
|
(20,029 |
) |
Interest income |
|
1,968 |
|
|
|
131 |
|
|
|
3,447 |
|
|
|
140 |
|
Interest expense |
|
(1,282 |
) |
|
|
(946 |
) |
|
|
(2,567 |
) |
|
|
(1,897 |
) |
Debt extinguishment loss |
|
— |
|
|
|
(4,483 |
) |
|
|
— |
|
|
|
(4,483 |
) |
Other income, net |
|
95 |
|
|
|
(3 |
) |
|
|
223 |
|
|
|
(1 |
) |
Other non-operating income
(expense), net |
|
781 |
|
|
|
(5,301 |
) |
|
|
1,103 |
|
|
|
(6,241 |
) |
Net loss |
$ |
(12,271 |
) |
|
$ |
(17,234 |
) |
|
$ |
(25,725 |
) |
|
$ |
(26,270 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
(loss): |
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on marketable securities |
$ |
(163 |
) |
|
$ |
— |
|
|
$ |
(192 |
) |
|
$ |
— |
|
Comprehensive loss |
$ |
(12,434 |
) |
|
$ |
(17,234 |
) |
|
$ |
(25,917 |
) |
|
$ |
(26,270 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
attributable to common stockholders, basic and diluted |
$ |
(0.20 |
) |
|
$ |
(0.31 |
) |
|
$ |
(0.43 |
) |
|
$ |
(0.48 |
) |
Weighted-average shares used in computing net loss per share
attributable to common stockholders, basic and diluted |
|
61,382,514 |
|
|
|
55,308,273 |
|
|
|
60,060,483 |
|
|
|
55,071,368 |
|
Note: A change in presentation has been made
within the Statement of Operations and Comprehensive Loss for the
three months and six months ended June 30, 2022, reclassifying $0.4
million and $0.7 million of surgical instrument expense from cost
of goods sold to sales and marketing expense to conform with the
current year’s presentation. Please refer to supplemental materials
related to quarterly 2022 results available on our investor
relations website.
Treace Medical Concepts, Inc. |
Balance Sheets |
(in thousands, except share and per share
amounts) |
(unaudited) |
|
|
June 30, |
|
|
December 31, |
|
|
2023 |
|
|
2022 |
|
Assets |
|
|
|
|
|
Current assets |
|
|
|
|
|
Cash and cash equivalents |
$ |
12,035 |
|
|
$ |
19,473 |
|
Marketable securities, short-term |
|
127,444 |
|
|
|
61,779 |
|
Accounts receivable, net of allowance for doubtful accounts of $707
and $735 as of June 30, 2023 and December 31, 2022,
respectively |
|
27,232 |
|
|
|
29,196 |
|
Inventories |
|
26,101 |
|
|
|
19,330 |
|
Prepaid expenses and other current assets |
|
5,284 |
|
|
|
3,624 |
|
Total current assets |
|
198,096 |
|
|
|
133,402 |
|
Property and equipment,
net |
|
19,435 |
|
|
|
15,338 |
|
Intangible assets, net |
|
9,500 |
|
|
|
— |
|
Goodwill |
|
12,815 |
|
|
|
— |
|
Operating lease right-of-use
assets |
|
9,651 |
|
|
|
10,138 |
|
Other non-current assets |
|
146 |
|
|
|
146 |
|
Total assets |
$ |
249,643 |
|
|
$ |
159,024 |
|
Liabilities and
Stockholders’ Equity |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Accounts payable |
$ |
8,146 |
|
|
$ |
8,668 |
|
Accrued liabilities |
|
7,072 |
|
|
|
6,216 |
|
Accrued commissions |
|
5,661 |
|
|
|
7,356 |
|
Accrued compensation |
|
5,368 |
|
|
|
7,666 |
|
Other liabilities |
|
3,775 |
|
|
|
339 |
|
Total current liabilities |
|
30,022 |
|
|
|
30,245 |
|
Long-term debt, net of
discount of $1,141 and $1,289 as of June 30, 2023 and
December 31, 2022, respectively |
|
52,859 |
|
|
|
52,711 |
|
Operating lease liabilities,
net of current portion |
|
16,766 |
|
|
|
15,539 |
|
Other long-term
liabilities |
|
37 |
|
|
|
— |
|
Total liabilities |
|
99,684 |
|
|
|
98,495 |
|
Commitments and contingencies
(Note 8) |
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
Common stock, $0.001 par value, 300,000,000 shares authorized;
61,528,409 issued and outstanding as of June 30, 2023;
300,000,000 shares authorized; 55,628,208 issued and outstanding as
of December 31, 2022 |
|
62 |
|
|
55 |
|
Additional paid-in capital |
|
260,561 |
|
|
|
145,221 |
|
Accumulated deficit |
|
(110,445 |
) |
|
|
(84,720 |
) |
Accumulated other comprehensive (loss) income |
|
(219 |
) |
|
|
(27 |
) |
Total stockholders’
equity |
|
149,959 |
|
|
|
60,529 |
|
Total liabilities and stockholders’ equity |
$ |
249,643 |
|
|
$ |
159,024 |
|
|
Treace Medical Concepts, Inc. |
Statements of Cash Flows |
(in thousands) |
(unaudited) |
|
|
Six Months Ended June 30, |
|
|
2023 |
|
|
2022 |
|
Cash flows from
operating activities |
|
|
|
|
|
Net loss |
$ |
(25,725 |
) |
|
$ |
(26,270 |
) |
Adjustments to reconcile net
loss to net cash used in operating activities |
|
|
|
|
|
Depreciation and amortization expense |
|
2,019 |
|
|
|
757 |
|
Provision (recovery) for allowance for doubtful accounts |
|
78 |
|
|
|
(45 |
) |
Share-based compensation expense |
|
6,288 |
|
|
|
3,372 |
|
Non-cash lease expense |
|
1,264 |
|
|
|
1,165 |
|
Amortization of debt issuance costs |
|
148 |
|
|
|
95 |
|
Recovery of inventory obsolescence |
|
— |
|
|
|
(197 |
) |
Gain on fair value adjustment to derivative liability |
|
— |
|
|
|
(173 |
) |
Debt extinguishment loss |
|
— |
|
|
|
4,483 |
|
Accretion (amortization) of discount (premium) on marketable
securities, net |
|
(663 |
) |
|
|
— |
|
Other, net |
|
5 |
|
|
|
— |
|
Net changes in operating
assets and liabilities, net of acquisitions: |
|
|
|
|
|
Accounts Receivable |
|
1,886 |
|
|
|
2,112 |
|
Inventory |
|
(6,704 |
) |
|
|
(2,410 |
) |
Prepaid expenses and other assets |
|
(1,641 |
) |
|
|
(1,039 |
) |
Other non-current assets |
|
— |
|
|
|
(134 |
) |
Other liabilities |
|
1,072 |
|
|
|
2,392 |
|
Accounts payable |
|
(522 |
) |
|
|
(957 |
) |
Accrued liabilities |
|
(3,137 |
) |
|
|
(958 |
) |
Other, net |
|
38 |
|
|
|
— |
|
Net cash used in operating activities |
|
(25,594 |
) |
|
|
(17,807 |
) |
|
|
|
|
|
|
Cash flows from
investing activities |
|
|
|
|
|
Purchases of available-for-sale marketable securities |
|
(120,957 |
) |
|
|
— |
|
Sales and maturities of available-for-sale marketable
securities |
|
55,763 |
|
|
|
— |
|
Purchases of property and equipment |
|
(5,709 |
) |
|
|
(6,649 |
) |
Acquisition, net of cash acquired |
|
(20,000 |
) |
|
|
— |
|
Net cash used in investing activities |
|
(90,903 |
) |
|
|
(6,649 |
) |
|
|
|
|
|
|
Cash flows from
financing activities |
|
|
|
|
|
Proceeds from interest bearing term debt |
|
— |
|
|
|
49,651 |
|
Proceeds from interest bearing revolving debt |
|
— |
|
|
|
3,850 |
|
Debt issuance costs |
|
— |
|
|
|
(989 |
) |
Repayment of term loan |
|
— |
|
|
|
(33,893 |
) |
Proceeds from issuance of common stock from public offering, net of
issuance costs and underwriting discount of $7.5 million |
|
107,527 |
|
|
|
— |
|
Proceeds from exercise of employee stock options |
|
1,532 |
|
|
|
1,537 |
|
Net cash provided by financing activities |
|
109,059 |
|
|
|
20,156 |
|
Net decrease in cash and cash equivalents |
|
(7,438 |
) |
|
|
(4,300 |
) |
Cash and cash equivalents at
beginning of period |
|
19,473 |
|
|
|
105,833 |
|
Cash and cash equivalents at
end of period |
$ |
12,035 |
|
|
$ |
101,533 |
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information: |
|
|
|
|
|
Cash paid for interest |
$ |
2,567 |
|
|
$ |
1,897 |
|
Operating lease right-of-use assets obtained in exchange for new
lease liabilities |
$ |
— |
|
|
$ |
15,300 |
|
Operating lease right-of-use asset and lease liability adjustment
due to lease incentive |
$ |
(13 |
) |
|
$ |
— |
|
Noncash investing
activities: |
|
|
|
|
|
Unrealized losses on marketable securities |
$ |
192 |
|
|
$ |
— |
|
|
Treace Medical Concepts, Inc. |
Reconciliation of GAAP Net Loss to Adjusted Net
Loss |
(in thousands, except share and per share
amounts) |
|
|
Three Months
EndedJune 30, |
|
|
Six Months
EndedJune 30, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Net loss |
$ |
(12,271 |
) |
|
$ |
(17,234 |
) |
|
$ |
(25,725 |
) |
|
$ |
(26,270 |
) |
Adjustment: |
|
|
|
|
|
|
|
|
|
|
|
Debt extinguishment loss |
|
— |
|
|
|
4,483 |
|
|
|
— |
|
|
|
4,483 |
|
Adjusted net loss |
$ |
(12,271 |
) |
|
$ |
(12,751 |
) |
|
$ |
(25,725 |
) |
|
$ |
(21,787 |
) |
Per
share |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(0.20 |
) |
|
|
(0.31 |
) |
|
|
(0.43 |
) |
|
|
(0.48 |
) |
Adjustment: |
|
|
|
|
|
|
|
|
|
|
|
Debt extinguishment loss |
|
— |
|
|
|
0.08 |
|
|
|
— |
|
|
|
0.08 |
|
Adjusted net loss |
$ |
(0.20 |
) |
|
$ |
(0.23 |
) |
|
$ |
(0.43 |
) |
|
$ |
(0.40 |
) |
Weighted average common shares outstanding per share attributable
to common stockholders, basic and diluted |
|
61,382,514 |
|
|
|
55,308,273 |
|
|
|
60,060,483 |
|
|
|
55,071,368 |
|
|
Treace Medical Concepts, Inc. |
Reconciliation of GAAP Net Loss to EBITDA & Adjusted
EBITDA |
(in thousands) |
|
|
Three Months
EndedJune 30, |
|
|
Six Months
EndedJune 30, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Net loss |
$ |
(12,271 |
) |
|
$ |
(17,234 |
) |
|
$ |
(25,725 |
) |
|
$ |
(26,270 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
(1,968 |
) |
|
|
(131 |
) |
|
|
(3,447 |
) |
|
|
(140 |
) |
Interest expense |
|
1,282 |
|
|
|
946 |
|
|
|
2,567 |
|
|
|
1,897 |
|
Taxes |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Depreciation & Amortization |
|
1,095 |
|
|
|
423 |
|
|
|
2,019 |
|
|
|
757 |
|
EBITDA |
$ |
(11,862 |
) |
|
$ |
(15,996 |
) |
|
$ |
(24,586 |
) |
|
$ |
(23,756 |
) |
Share-based compensation expense |
|
3,596 |
|
|
|
1,963 |
|
|
|
6,288 |
|
|
|
3,372 |
|
Acquisition-related costs |
|
520 |
|
|
|
— |
|
|
|
520 |
|
|
|
— |
|
Debt extinguishment loss |
|
— |
|
|
|
4,483 |
|
|
|
— |
|
|
|
4,483 |
|
Adjusted EBITDA |
$ |
(7,746 |
) |
|
$ |
(9,550 |
) |
|
$ |
(17,778 |
) |
|
$ |
(15,901 |
) |
Treace Medical Concepts (NASDAQ:TMCI)
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From Apr 2024 to May 2024
Treace Medical Concepts (NASDAQ:TMCI)
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From May 2023 to May 2024