Treace Medical Concepts, Inc. (“Treace” or the “Company”)
(NasdaqGS: TMCI), a medical technology company driving a
fundamental shift in the surgical treatment of bunions and related
midfoot deformities through its flagship Lapiplasty® and
Adductoplasty® Procedures, today reported financial results for the
first quarter ended March 31, 2024.
Recent Highlights
- Revenue of $51.1 million in first
quarter 2024 increased 21% over same period in 2023
- Gross margin of 80.2% in first
quarter 2024
- First quarter 2024 net loss
attributable to common stockholders was ($18.7) million compared to
($13.5) million for same period in 2023
- Adjusted EBITDA loss improved to
($8.3) million in first quarter 2024 compared to loss of ($10.0)
million for same period in 2023
- Achieved full commercial
availability of Micro-Lapiplasty™, SpeedPlate™ and Hammertoe
technologies in first quarter 2024
- Celebrated 100,000+ Lapiplasty® 3D
Bunion Correction® patient milestone and first-ever National Bunion
Day, launched new “Future You” patient education and awareness
campaign, and named First Medical Device Partner and Official Foot
and Ankle Solution Partner for Professional Pickleball Association
Tour
- Patent portfolio expands to 63
granted U.S. patents, with an additional 20 granted patents
worldwide and 83 pending U.S. patent applications
- Revises guidance range for
full-year 2024, expecting revenues of $201 million to $211 million
from $220 million to $225 million
John T. Treace, CEO and Founder of Treace, said,
“Our first quarter revenue growth rate of 21% represents a strong
start to 2024. Revenue performance in the quarter was driven by
increased procedure kit volume from our expanding base of surgeons
as well as increased adoption of our newer technologies, all
supported by our dedicated, direct sales team. In addition to
strong revenue growth, we made encouraging progress on Adjusted
EBITDA with the first quarter loss improving 18% over the prior
year.”
Mr. Treace continued, “Despite our strong start
to the year, we have revised our guidance for fiscal 2024 to
reflect a quickly evolving market environment with increased use of
MIS Osteotomy solutions and more competition from knockoffs of our
Lapiplasty® products. We plan to introduce two innovative 3D MIS
Osteotomy solutions later this year that we believe will establish
Treace as the leading comprehensive bunion solution provider. We
are also taking decisive action to mitigate the impact of these
competitive headwinds by rightsizing our P&L and reducing
costs. I am confident in our ability to effectively navigate this
new operating environment as we continue to work to capture the
opportunities ahead, innovate for our surgeon customer base and
deliver long-term value for our shareholders.”
First Quarter 2024 Financial
Results
Revenue for the first quarter of 2024 was $51.1
million, representing an increase of 21% compared to $42.2 million
in the first quarter of 2023. The increase was driven by higher
volume of procedure kits sold as a result of an expanded surgeon
customer base and a product mix shift that resulted from increased
adoption of newer technologies and increased sales of complementary
products used in bunion and related midfoot procedures.
Gross profit for the first quarter of 2024 was
$41.0 million, representing an increase of 20% compared to a gross
profit of $34.2 million in the first quarter of 2023. Gross margin
totaled 80.2% in the first quarter of 2024, compared to 80.9% in
the first quarter of 2023, primarily due to a shift in product mix
to newer products, partially offset by lower royalty rates.
Total operating expenses were $59.9 million in
the first quarter of 2024, compared to total operating expenses of
$47.9 million in the first quarter of 2023. Increased operating
expenses in the first quarter of 2024, including share-based
compensation expense, reflect strategic investments in the
Company’s expanding direct sales channel, investments in product
innovation, and support for other corporate initiatives.
First quarter 2024 net loss attributable to
common stockholders was ($18.7) million, or ($0.30) per share,
compared to ($13.5) million, or ($0.23) per share, for the same
period in 2023. Adjusted EBITDA loss was ($8.3) million in the
first quarter of 2024 compared to a loss of ($10.0) million for the
same period in 2023. See below for additional information and a
reconciliation of non-GAAP financial information.
Cash, cash equivalents, marketable securities
and investment receivable totaled $112.1 million as of March 31,
2024. The Company believes it has sufficient balance sheet strength
and flexibility to continue effectively executing on its strategic
investments and growth initiatives for the foreseeable future.
Financial Outlook
The Company now expects full-year 2024 revenue
of $201 million to $211 million, representing growth of 7% to 13%,
compared to full-year 2023. This compares to previous guidance of
$220 million to $225 million.
The Company continues to expect to make
significant improvement in Adjusted EBITDA for full-year 2024 and
anticipates Adjusted EBITDA to improve approximately 50% compared
to full-year 2023.*
* A reconciliation of adjusted EBITDA to GAAP
net loss on a forward-looking basis is not available without
unreasonable efforts due to the high variability, complexity and
low visibility with respect to the items excluded from this
non-GAAP measure.
An investor presentation for the Company’s first
quarter 2024 financial results is available in the "Investors"
section of Treace's website at investors.treace.com.
Webcast and Conference Call
Details
Treace will host a conference call today, May 7,
2024, at 4:30 p.m. ET to discuss its first quarter 2024 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 investors.treace.com. The webcast will be archived on
the website following the completion of the call.
Use of Non-GAAP Financial
Measures
To 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. Non-GAAP financial measures such as
Adjusted EBITDA are presented in addition to, and not as a
substitute for, or superior to, financial measures calculated in
accordance with GAAP. Management uses 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 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. Accordingly, the Company believes
this non-GAAP financial measure 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 key financial metrics used by the
Company’s management in their financial and operational
decision-making. The Company also presents this non-GAAP financial
measure because it believes investors, analysts and rating agencies
consider it to be 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
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. A reconciliation between GAAP and non-GAAP
results is presented below.
Forward-Looking Statements
This press release and statements made during
our earnings call contain 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: revised revenue guidance and estimated revenue growth
rates for full-year 2024; estimated quarterly revenue growth rates;
ability to effectively respond to and mitigate the impact of
challenges in the current market environment, including in response
to increased competition and accelerating adoption of MIS osteotomy
solutions; ability to effectively reduce costs and right size the
Company’s P&L; anticipated future product launches and the
timing of such product launches, including our planned 3D MIS
osteotomy platforms; our ability to protect and enforce our
intellectual property rights; our success in defending against
infringement of our intellectual property by third parties,
including our competitors; expected seasonality; anticipated pace
of growth in the foot and ankle market; sufficient balance sheet
strength and flexibility to continue effectively executing on its
strategic investments and growth initiatives for the foreseeable
future; and expectation of progress in Adjusted EBITDA for
full-year 2024 and expected rate of Adjusted EBITDA improvement.
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, 2023, which was filed with the SEC
on February 27, 2024, and its subsequent SEC filings. 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 March 31, 2024 are not necessarily indicative of its
operating results for any future
periods.
Internet Posting of Information
Treace 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 Concepts
Treace 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 67 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 three
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. To further support the needs of
bunion patients, Treace has introduced its
Adductoplasty® Midfoot Correction System, designed for
reproducible surgical correction of the midfoot as well as its
Hammertoe PEEK Fixation System designed to address hammertoe, claw
toe and mallet toe deformities. The Company continues to expand its
footprint in the foot and ankle market with the introduction of its
SpeedPlate™ Rapid Compression Implants, an innovative fixation
platform with broad versatility across Lapiplasty® and
Adductoplasty® procedures, as well as other common bone fusion
procedures of the foot. 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 Concepts,
Inc.Julie Dewey, IRCChief Communications & Investor
Relations 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
EndedMarch 31, |
|
|
2024 |
|
|
2023 |
|
Revenue |
$ |
51,108 |
|
|
$ |
42,195 |
|
Cost of goods sold |
|
10,127 |
|
|
|
8,039 |
|
Gross profit |
|
40,981 |
|
|
|
34,156 |
|
Operating expenses |
|
|
|
|
|
Sales and marketing |
|
40,328 |
|
|
|
33,655 |
|
Research and development |
|
5,259 |
|
|
|
3,412 |
|
General and administrative |
|
14,362 |
|
|
|
10,865 |
|
Total operating expenses |
|
59,949 |
|
|
|
47,932 |
|
Loss from operations |
|
(18,968 |
) |
|
|
(13,776 |
) |
Interest income |
|
1,535 |
|
|
|
1,479 |
|
Interest expense |
|
(1,317 |
) |
|
|
(1,285 |
) |
Other income, net |
|
74 |
|
|
|
128 |
|
Other non-operating income
(expense), net |
|
292 |
|
|
|
322 |
|
Net loss |
$ |
(18,676 |
) |
|
$ |
(13,454 |
) |
|
|
|
|
|
|
Other comprehensive income
(loss) |
|
|
|
|
|
Unrealized gain (loss) on marketable securities |
$ |
(94 |
) |
|
$ |
(29 |
) |
Comprehensive loss |
$ |
(18,770 |
) |
|
$ |
(13,483 |
) |
|
|
|
|
|
|
Net loss per share attributable
to common stockholders, basic and diluted |
$ |
(0.30 |
) |
|
$ |
(0.23 |
) |
Weighted-average shares used in computing net loss per share
attributable to common stockholders, basic and diluted |
|
61,792,788 |
|
|
|
58,723,760 |
|
|
Treace Medical Concepts, Inc.
Balance Sheets (in thousands, except share
and per share amounts)(unaudited)
|
|
March 31, |
|
|
December 31, |
|
|
|
2024 |
|
|
2023 |
|
Assets |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
9,334 |
|
|
$ |
12,982 |
|
Marketable securities, short-term |
|
|
100,672 |
|
|
|
110,216 |
|
Accounts receivable, net of allowance for doubtful accounts of
$1,076 and $980 as of March 31, 2024 and December 31,
2023, respectively |
|
|
30,083 |
|
|
|
38,063 |
|
Inventories |
|
|
35,860 |
|
|
|
29,245 |
|
Prepaid expenses and other current assets |
|
|
11,448 |
|
|
|
7,853 |
|
Total current assets |
|
|
187,397 |
|
|
|
198,359 |
|
Property and equipment, net |
|
|
24,517 |
|
|
|
22,298 |
|
Intangible assets, net of
accumulated amortization of $713 and $475 as of March 31, 2024
and December 31, 2023, respectively |
|
|
8,787 |
|
|
|
9,025 |
|
Goodwill |
|
|
12,815 |
|
|
|
12,815 |
|
Operating lease right-of-use
assets |
|
|
9,064 |
|
|
|
9,264 |
|
Other non-current assets |
|
|
146 |
|
|
|
146 |
|
Total assets |
|
$ |
242,726 |
|
|
$ |
251,907 |
|
Liabilities and
Stockholders’ Equity |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable |
|
$ |
21,149 |
|
|
$ |
11,835 |
|
Accrued liabilities |
|
|
15,155 |
|
|
|
10,458 |
|
Accrued commissions |
|
|
5,527 |
|
|
|
10,759 |
|
Accrued compensation |
|
|
4,196 |
|
|
|
7,549 |
|
Other liabilities |
|
|
1,022 |
|
|
|
4,432 |
|
Total current liabilities |
|
|
47,049 |
|
|
|
45,033 |
|
Long-term debt, net of discount
of $917 and $992 as of March 31, 2024 and December 31,
2023, respectively |
|
|
53,083 |
|
|
|
53,008 |
|
Operating lease liabilities, net
of current portion |
|
|
16,166 |
|
|
|
15,891 |
|
Other long-term liabilities |
|
|
37 |
|
|
|
37 |
|
Total liabilities |
|
|
116,335 |
|
|
|
113,969 |
|
Commitments and contingencies
(Note 7) |
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
Preferred stock, $0.001 par value, 5,000,000 shares authorized as
of March 31, 2024 and December 31, 2023; 0 shares issued
and outstanding as of March 31, 2024 and December 31,
2023 |
|
|
— |
|
|
|
— |
|
Common stock, $0.001 par value, 300,000,000 shares authorized;
61,948,776 and 61,749,654 issued, and 61,929,172 and 61,749,654
outstanding as of March 31, 2024 and December 31, 2023,
respectively |
|
|
62 |
|
|
62 |
|
Additional paid-in capital |
|
|
279,433 |
|
|
|
271,973 |
|
Accumulated deficit |
|
|
(152,923 |
) |
|
|
(134,247 |
) |
Accumulated other comprehensive (loss) income |
|
|
69 |
|
|
|
163 |
|
Treasury stock, at cost; 19,604 and 1,218 shares as of
March 31, 2024 and December 31, 2023, respectively |
|
|
(250 |
) |
|
|
(13 |
) |
Total stockholders’ equity |
|
|
126,391 |
|
|
|
137,938 |
|
Total liabilities and stockholders’ equity |
|
$ |
242,726 |
|
|
$ |
251,907 |
|
|
Treace Medical Concepts, Inc.
Statements of Cash Flows (in
thousands)(unaudited)
|
|
Three Months Ended March 31, |
|
|
|
2024 |
|
|
2023 |
|
Cash flows from operating
activities |
|
|
|
|
|
|
Net loss |
|
$ |
(18,676 |
) |
|
$ |
(13,454 |
) |
Adjustments to reconcile net loss
to net cash used in operating activities |
|
|
|
|
|
|
Depreciation and amortization expense |
|
|
1,909 |
|
|
|
924 |
|
Provision for allowance for doubtful accounts |
|
|
159 |
|
|
|
38 |
|
Share-based compensation expense |
|
|
7,408 |
|
|
|
2,692 |
|
Non-cash lease expense |
|
|
592 |
|
|
|
626 |
|
Amortization of debt issuance costs |
|
|
75 |
|
|
|
74 |
|
Recovery of loss reserve for surgical instruments |
|
|
— |
|
|
|
(23 |
) |
Accretion (amortization) of discount (premium) on marketable
securities, net |
|
|
(335 |
) |
|
|
(297 |
) |
Other, net |
|
|
90 |
|
|
|
— |
|
Net changes in operating assets
and liabilities, net of acquisitions |
|
|
|
|
|
|
Accounts receivable |
|
|
7,821 |
|
|
|
3,793 |
|
Inventory |
|
|
(6,615 |
) |
|
|
(3,189 |
) |
Prepaid expenses and other assets |
|
|
(1,495 |
) |
|
|
(963 |
) |
Other non-current assets |
|
|
— |
|
|
|
(69 |
) |
Payable to broker for unsettled marketable security purchases |
|
|
— |
|
|
|
710 |
|
Operating lease liabilities |
|
|
(657 |
) |
|
|
(478 |
) |
Accounts payable |
|
|
9,314 |
|
|
|
(3,592 |
) |
Accrued liabilities |
|
|
(6,918 |
) |
|
|
(4,076 |
) |
Other, net |
|
|
107 |
|
|
|
25 |
|
Net cash used in operating activities |
|
|
(7,221 |
) |
|
|
(17,259 |
) |
|
|
|
|
|
|
|
Cash flows from investing
activities |
|
|
|
|
|
|
Purchases of available-for-sale marketable securities |
|
|
(28,711 |
) |
|
|
(99,550 |
) |
Sales and maturities of available-for-sale marketable
securities |
|
|
36,396 |
|
|
|
20,548 |
|
Purchases of property and equipment |
|
|
(3,927 |
) |
|
|
(1,478 |
) |
Net cash provided by (used in) investing activities |
|
|
3,758 |
|
|
|
(80,480 |
) |
|
|
|
|
|
|
|
Cash flows from financing
activities |
|
|
|
|
|
|
Proceeds from issuance of common stock from public offering, net of
issuance costs and underwriting discount of $7.5 million and $10.6
million |
|
|
— |
|
|
|
107,527 |
|
Proceeds from exercise of employee stock options |
|
|
52 |
|
|
|
352 |
|
Taxes from withheld shares |
|
|
(237 |
) |
|
|
— |
|
Net cash provided by (used in) financing activities |
|
|
(185 |
) |
|
|
107,879 |
|
Net increase (decrease) in cash and cash equivalents |
|
|
(3,648 |
) |
|
|
10,140 |
|
Cash and cash equivalents at
beginning of period |
|
|
12,982 |
|
|
|
19,473 |
|
Cash and cash equivalents at end
of period |
|
$ |
9,334 |
|
|
$ |
29,613 |
|
|
|
|
|
|
|
|
Supplemental disclosure
of cash flow information |
|
|
|
|
|
|
Cash paid for interest |
|
$ |
1,317 |
|
|
$ |
1,285 |
|
Operating lease right-of-use asset and lease liability adjustment
due to lease incentive |
|
$ |
— |
|
|
$ |
(35 |
) |
Noncash investing
activities |
|
|
|
|
|
|
Unrealized (gains) losses, net on marketable securities |
|
$ |
94 |
|
|
$ |
29 |
|
Unsettled matured marketable security and receivable from
broker |
|
$ |
2,100 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
Treace Medical Concepts,
Inc.Reconciliation of GAAP Net Loss to EBITDA
& Adjusted EBITDA(in
thousands)(unaudited)
|
Three Months
EndedMarch 31, |
|
|
2024 |
|
|
2023 |
|
Net loss |
$ |
(18,676 |
) |
|
$ |
(13,454 |
) |
Adjustments: |
|
|
|
|
|
Interest income |
|
(1,535 |
) |
|
|
(1,479 |
) |
Interest expense |
|
1,317 |
|
|
|
1,285 |
|
Taxes |
|
— |
|
|
|
— |
|
Depreciation & Amortization |
|
1,909 |
|
|
|
924 |
|
EBITDA |
$ |
(16,985 |
) |
|
$ |
(12,724 |
) |
Share-based compensation expense |
|
7,408 |
|
|
|
2,692 |
|
Acquisition-related costs |
|
1,317 |
|
|
|
— |
|
Adjusted EBITDA |
$ |
(8,260 |
) |
|
$ |
(10,032 |
) |
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