From all of that. Thank you. Good afternoon—good morning, everyone. I think this is the last session that sits between people and lunch. We'll jump right in here. I'm very pleased to welcome the management team from SI-BONE, Laura Francis, Chief Executive Officer, and Anshul Maheshwari, Chief Financial Officer. Okay. Thank you. Very much appreciate your making the trip here to Miami and look forward to kinda getting into the story here. You know, I know Anshul and I had the opportunity to have a Zoom beforehand. We've not had an opportunity to meet before, but I do remember visiting SI-BONE in my prior tour of duty on the sell side. I think it was probably like 2013 or 2014 on an investor bus trip.
I've sort of got the story from Jeff very early on and seen kinda the evolution of the company. It's great to see the progress.
Yeah.
Looking forward to getting into some of those details. Maybe let's start at a higher level here. I mean, it looks like you're really at an inflection point in terms of your performance as it relates to not just revenue growth but also profitability. Maybe just talk us through the current business dynamics and what you think is really driving that upward trajectory in performance.
Yeah. Yeah. Thank you for the invite, David. Appreciate it. I joined in 2015, so I probably did not see you on that bus tour, but I've been with the company for 10 years and been the CEO for 4 years at this point. It's been an incredible experience. We really started out in SI Joint Fusion, and actually maybe even more specifically as the Triangle Company when I started. We were developing a completely new market. There was no surgical solution for the SI joint. It's the largest joint in the human body, and it was the only major joint in the human body that didn't have a solution. When I joined, there was no reimbursement whatsoever for the product. It was case-by-case reimbursement for the procedure. It's developed a very significant capability that we have.
It's identifying unmet clinical needs and developing markets. You can really see that coming to bear in the last couple of quarters. We've had a tremendous couple of quarters, Q1 growing at 25% worldwide. If you look at just the U.S. alone, growing at 27%, over 1,400 physicians that did at least one case. That was 300 added year- over- year, just in one quarter, the highest we've ever increased. Also hitting adjusted EBITDA profitability, which was the second quarter and wasn't necessarily anticipated in that first quarter because seasonally, you usually have a little bit of a dip in your sales. I'm incredibly proud of what we've accomplished. There have been investors that I've talked to previously that really were skeptical about our ability to continue to grow at this pace.
If you look over the last few years, our growth rate has been in the mid-20% range from a revenue perspective. We think that that's sustainable. I'm gonna look forward to talking a little bit more about it. There was especially skepticism about profitability because we kinda get thrown into this bucket with spine companies. Spine companies can never generate cash and profitability, especially not at the level that we're at this year. Our estimate is a little less than $200 million in sales for the year. We've done it. We're proving it. A lot of investors are looking more closely at us right now than weren't previously. They're asking the question of how we've been able to do what we're doing. I think that our message is resonating a little bit more.
We've been saying it, but we have what we call an asset light model. And what that means is, let me take an example of our pelvic fixation product, Granite. Typically, we'll be in the operating room with another company that's selling a full suite of spine products. We just sell pelvic fixation. We'll take around $9,000 out of that particular case with a tray that costs around $15,000. The other company will take around $12,000 away. They have assets in there of $150,000-$200,000. The point I'm trying to make is that we have the ability to grow at a significant clip. We're showing it. We also have a model that is going to generate profitability and cash flow.
I wanna jump into the market a little bit more because I can imagine one of the things that you hear frequently is, "It's just another spine company.
Yeah.
and, like, your logo does not help that, that either. Like, you have the vertebra in it. And it is like, "Look at this knob.
No, no. Noted.
Yeah. You see some metal. And it kinda, it looks, you know, like.
Yeah.
But, and it is a more kind of, I think, you know, defined segment than just.
Yeah.
Than what spine is. Like, how do you demystify that and help us think through, like, the market, the market you serve, size, growth, and, like, why it's not another rod, plate, screw company?
Yeah. What we do is we address unmet clinical needs. A typical spine company is going to create a full slate of products. For the most part, they're commoditized. In addition, there's gonna be a lot of enabling technologies. There might be imaging. There might be navigation. There might be robotics, right? Very high cost. As I said, a lot of cost in terms of capital as well. Instrument trays in particular to bring in. What we do is we identify separate markets that we can go after and become the market leader in those spaces. SI Joint Fusion is really the first space, as I said, that we have built. It's a very large market opportunity. Our estimate is the TAM is around 280,000 cases potential per year in that space.
It is working both with spine surgeons and interventionalists in order to fully realize that market opportunity.
Sorry, where are we on penetration there?
It's still less than 10% penetrated in that market, right? Very important for us to continue to drive forward in that marketplace and meet the physicians where they're at, meet the patients where they're at as well. Like I said, it's a combination of working with surgeons as well as interventionalists in that area. The second area is pelvic fixation. I had mentioned our product, Granite. That was our first breakthrough device from the FDA. Once again, we're developing innovative products that are being recognized as addressing unmet clinical needs. With a breakthrough device designation from the FDA, typically it makes it more straightforward to get new technology add-on payments, transitional pass-throughs depending upon whether inpatient or outpatient. We've been able to do that with our Granite product.
That market is around 130,000 procedures, and in total, multi-level constructs, both long constructs and short constructs. That is a second market. We actually just launched a third product called TNT, our second breakthrough device. That one is for pelvic ring fractures and specifically sacral insufficiency fractures. If you add it all up, we're talking about around 500,000 potential procedures per year in those three areas, representing over a $3 billion market opportunity.
And just to help us kind of square the unmet need, what are the al what how are those patients being treated otherwise right now across each of those three areas?
In the case of SI Joint Fusion, it was always conservative care. You had patients that were debilitated and that needed a surgical solution. We have become synonymous with high-quality clinical data. We have over 160,000 or 160 peer-reviewed published papers that are out there and four randomized controlled trials and multiple prospective trials. That information shows, you know, how effective our procedure actually is in that particular space.
If you kind of unpack the 25% growth that you realized in Q1, understanding it's early in the year, that's a really big number. I think your guidance reflects some moderation from what you saw in Q1. Maybe just help us think about what really came together in Q1 to achieve that level of top-line performance and then how you've kind of thought about the balance of the year.
The growth was broad-based in the first quarter. I have mentioned three different procedure types, but it is all under the umbrella of the sacral pelvic space, which is where we actually play. We sell to spine surgeons, ortho, and neurosurgeons. We also sell to interventionalists that I had mentioned. Now we are actually selling to trauma surgeons as well. That growth was broad-based in the quarter. In terms of how we are thinking about the rest of the year, we do try and be conservative with our projections, but we expect something similar. Part of the reason why you are seeing what you are is we actually put out three different products in 2024. We had a pelvic fixation product that was targeting shorter constructs. We had an allograft product that was targeting interventionalists.
I already mentioned our TNT product that is targeting pelvic ring fractures with both spine surgeons as well as general ortho trauma.
And then just on the guidance side, like Laura said, we're being very thoughtful about our guidance. Our assumptions include the legit ASB degradation, mostly because of procedure mix for the rest of the year. Although if you look at the last couple of years, our ASB has been relatively flat. I think there's some conservatism built there, especially as we go after these new opportunities. That's number one. Number two is, some of these new markets within dGen and trauma. While we're really excited to see the momentum, Granite 9.5 has actually exceeded, from an adoption standpoint, any product that we've launched in the last five years. TORQ and SI-BONE included, so very pleased there. TNT has exceeded our own internal expectations. Again, they're relatively young. We want to see how those products perform as we do a broader rollout.
We're being thoughtful about that as well for the rest of the year.
How should we think about the user ads as either as a leading indicator of future growth? I mean, adding 300, but, you know, that was 1,100 going to 1,400. That is a very big percentage.
Mm-hmm.
What were some of the feedback you got from either those surgeons who entered that? I know it's not just accounts. You know, it's users who are actively doing procedures. What were some of the facts you think that converted that many surgeons in a fairly finite period of time?
As I said, it was really across the board. It was surgeons that were interested in SI Joint Fusion and still less than 10% penetrated interventionalists. We've really only been selling to interventionalists a little over a year at this point. That was a driver. Pelvic fixation, we do believe that Granite is gonna become the standard of care, especially in deformity procedures, so adding there. And then with the TNT product, a pop, a pop there too. It was a great quarter. I think that we've had double-digit growth in our physicians for the last.
Four years.
Three to four years at this point. That is going to continue to be an area of focus. We are targeting around 12,000 physicians in total in the United States. Last year, around 2,000 did at least one procedure, 1,400 just in the first quarter. There is a lot of opportunity to grow the number of physicians that do the procedures where we play. In addition, the other area that we are focusing on is what we call surgeon density, which just means the number of procedures that surgeons are doing in any given quarter. It is going deeper with the existing procedures and also having surgeons perform multiple procedure types. Let me use an example. I mentioned our Granite 9.5 product that is targeted toward more dGen or shorter construct cases.
What we're doing is working with our SI Joint Fusion surgeons and trying to get them to perform pelvic fixation where appropriate with patients there as well. So getting them to do multiple procedure types. That's a big area of focus in addition to continuing to drive such strong growth in the number of surgeons that are doing cases.
Which of the surgeon groups has the most opportunity to expand into multiple procedure types?
The average surgeon that's doing an SI Joint Fusion every single day is doing multi-level constructs. That's low-hanging fruit for us to take those surgeons that have been doing SI Joint Fusion and have them using Granite in their degenerative spine procedures. Similarly, we actually have had such a strong response to our pelvic fixation portfolio that we're trying to get them to actually do SI Joint Fusion procedures as well. That's the lowest-hanging fruit.
Okay. And then from a product launch perspective, you talked about the product you launched in 2024 starting to have an impact now. Does that, does that mean you kind of have to be on a product launch cadence of every two years to sustain growth? Like, like, what, what is, what is sort of the product launch intensity requirements of the business?
You know, we're unique. Once again, if you talk about a spine company, they will usually talk about some sort of a cadence. We're putting out two products a year. We're putting out one per quarter. It's not really the way that we think about things. The reason is because we're not just developing a me-too product in order to put into the bag to drive revenue. What we're trying to do is identify unmet clinical needs and develop these breakthrough devices for those unmet clinical needs. It's not as simple as saying, "Hey, next quarter it's this, and the quarter after that it's this." With that said, product development has become a very important part of our growth strategy. We really do have a portfolio of products. When I first started in 2015, we were a one-product company.
In fact, before I became the CEO of the company, we were a one-product company. We have very rapidly expanded over these last four years into multiple procedure types, multiple call points, but all around the sacral pelvic space. More specifically, what we really have learned is not just do we identify the unmet clinical need. What we do is we say, "What are our core competencies that are going to allow us to deliver the best product, for those physicians and for those patients?" What we've dealt with since our inception is the sacrum has some of the poorest quality bone in the body. It lent itself to our Granite launch. It lent itself to TNT, which sacral insufficiency fractures typically are osteoporotic patients. It gives us this long-term opportunity for significant revenue growth over the long term that's sustainable.
That's really what we're driving toward.
It sounds like from the way you're laying this out and some of the things you've talked about on your calls, the strategies, there's the product launch is one piece of it, the actual product development. But then there's a pretty decent investment in market development.
Yes.
Physician education.
Yes.
You talked about going after, I don't know, so to say, younger surgeons or earlier in their career, surgeons, whatever the.
Yep.
PC term is. Maybe just sort of talk about the full kind of continuum of that product life cycle because it, it's more than just, as you said, launch a product, ship it into a warehouse.
Yeah.
Put it on the shelf.
Yep.
Play the inventory stocking, destocking game. These sound like more launch, build, iterate products.
Yes. That's true. We've talked about a couple of products that are more 2026 timeframe. As I said, we launched three products in 2024. The sales team was actually excited to really focus on driving adoption, growth, and acceleration with those three products in 2025 because some of them are easier than others to sell, right? You know, SI Joint Fusion is an area where you have to really educate the physicians that you're working with, especially the surgeons. In fact, a little less so with interventionalists because they treat these patients every single day already. It's understanding the anatomy, the prevalence, the diagnosis, the treatment, and then getting them to perform their first case to see the strong results and then to regularly diagnose and treat.
In the case of pelvic fixation, however, that was actually a much easier sell and much more rapid ramp because that issue was very well understood by surgeons already. I would say pelvic ring fractures with our TNT product, it's somewhere in the middle. The surgeons understand the issue, sacral insufficiency fractures. They understand that it's debilitating. Historically, there actually haven't been good technologies to surgically treat the patients. There is a little bit of a learning curve there too. We work in all of these areas in order to commercialize the technologies more rapidly than others.
The other thing we've done really well is in 2018, we started our academic training program. Part of that was, like Laura said, the SI Joint dysfunction was not really taught in medical school. We took on the baton of making sure that it was included in the residents and fellow training programs, and led by SI-BONE. What that allowed us to do was get in early with that next generation of doctors, or surgeons, being able to train them on the anatomy, on the diagnosis, on the treatment. That's allowed us to see a rapid adoption from docs as they graduated from the residents and fellow program.
I think we've talked about it consistently where the revenue growth, the adoption, and the consistency of adoption from that cohort of physicians who are trained as residents and fellows is far higher, almost 2x, of what we see with those that were not trained in medical school. That program's actually worked out really well for us. The other thing that we are doing is now that we've built this broad spectrum of products addressing multiple modalities, they're synergistic in nature with the call points. We're starting to train them at the same time on the multiple modalities. When you think about the new doc ads that we had in Q1, half of those new docs that came in in Q1 or docs that grew in Q1, sorry, were docs that did multiple modality procedures for us.
Again, a really good indicator that not only is our training working, but our focus on multi-modality training is also starting to bear fruit.
And how, but how much ongoing clinical support do you need then? Like, do you need reps calling on these doctors at a high degree of intensity 'cause it's like out of sight, out of mind? Like, you're sort of, it's not these procedures are not necessarily the ones that these doctors are doing every day, or you need to have reps in, yeah. How do you think about that from an account coverage perspective?
It's very interesting, right? When you think about our Salesforce model, we've actually evolved to a hybrid Salesforce model over the last three years. Our SI Joint dysfunction business is predominantly direct. It is an educational sale.
Having our reps who are best and technical experts at that anatomy and at that procedure type is important. On the deformity side, we've been leveraging more of the hybrid structure. A lot of these deformity cases are longer, six, seven-hour cases. The way it's worked out is our reps go in, train the surgeons, cover the first few cases with the intention that over time they will be covering less of those cases. They still own the relationship. They own the relationship with the agents. They own the relationship with the doc. The reason it's important is that educational approach of, you know, two points of fixation when you're doing a deformity case is very important. Just the touch points are very, very important.
On the trauma side, today we're direct, but we are looking to leverage the hybrid structure in trauma as well. It is a new call point. A lot of times you're focused on level one, level two trauma sites where you have some of these individuals who are distributors who carry a broader trauma bag are at those sites at all times. Our ability to replicate that model with that trauma site is also gonna be very valuable for us. I think you're gonna continue to see this evolve. We're also sort of testing in certain markets, predominantly trauma parking offsets, especially at high-volume trauma sites where you may not need to have a rep if the doc just wants to do the case and the rep's not available, that that doc can use the assets. Okay.
Maybe we just want to touch on briefly on, on reimbursement. You do have some devices that are breakthrough designation. How, have you been successful in getting price premiums on those, on those products? And how, how, where does reimbursement factor into that?
We have been successful there. The most recent news on those fronts are that we did receive a proposal from CMS for a new technology add-on payment for our TNT product. That would be effective on October 1st of 2025, $3,960 for that particular technology. Effective January 1st of 2025, a transitional pass-through code went into place for hospital outpatient procedures with our Granite technology. That will cover the full cost of the technology, no device offset in that particular area. We actually did just have a third product that received breakthrough device designation. That product is under development. We're giving very scant information on the product right now, but it's our third breakthrough device.
and we have found that having a breakthrough device, having a new technology add-on payment, having a transitional pass-through has been important to that initial adoption of these disruptive technologies.
Got it. I want to go over to the P&L. I know we briefly touched on the profitability that you realized in Q1, but maybe we could actually just go into a little bit more detail, down the P&L. I mean, I appreciate the gross margin dynamic. These are very big numbers for a gross margin. Any variance in price will obviously have an impact there. I think, you know, appreciate the guidance for this year. I mean, is it fair to think over a longer period of time maintaining flat gross margins would be a good outcome?
Yeah. From our perspective, one, we're really proud of the gross margins of the business. You know, a lot of that comes from the innovation that we have, which allows us to maintain the high ASB.
You know, close to 80% gross margins, for Q1, 79.7% to be accurate, which is 80 basis points above what we did in Q1 of last year. A nice real reversal of the gross margins and actually getting to higher gross margins. In terms of our guidance for the year, again, you know, we wanted to be very thoughtful with the implications for gross margins. As I said, our revenue guidance for the year assumes low single-digit ASB degradation, mostly because of procedure mix. That is going to have an impact near gross margins for sure. The second piece is when you think about some of the newer products, Granite, TNT, they are more expensive. As we target those opportunities, that is going to pressure gross margins. Still, those products can get to scale, at which point you see the cost of those products come down.
We've incorporated some of that impact as well. The third piece is just depreciation and amortization. We're gonna be putting out more trays this year, again, to support the Granite opportunity and the TNT opportunity. You start seeing that depreciation flow to the P&L before you start seeing leverage on those assets, as well. We're doing a lot of automation around reducing administrative responsibilities in the field, especially as we scale up. You'll see some of the amortization of that software flow through as well. Now, what that gross margin doesn't include is the tailwinds that we have from the better ASBs that we've seen versus in our guide. It doesn't include the potential impact of deformity cases continuing to see four implants being used versus two.
We've actually seen a really nice uptick in four implant cases since 9.5 got launched in the second half of the year. I think it's a fairly balanced view on gross margins. Again, at 78%, still industry leading.
Yeah. Yeah. As you and I know, I appreciate that you're not setting long-term targets here. Is it fair to say the gross margin, keeping it flat, as you think about all these puts and takes, that it would be a good outcome over a multi-year period?
Yeah. What we've actually talked about externally is as we look at the midterm, right, over the next few years, given the new product launches we have, we're seeing our gross margin should be in the 76%-77% range.
Part of that is some of these newer products, again, they're gonna be subscale as they start out. We're gonna have CapEx being put out for inventory assets and trays. You will have some pressure on gross margins from that. Offsetting that, though, is gonna be the scaling of the existing portfolio, the ability to get more leverage on the P&L from the trays. We have gross margin initiatives that are underway to also reduce the cost of the implants over time, not just by scaling, but also by making certain changes.
And then maybe we go into.
That's the budget.
In, into OpEx on the 10% growth in OpEx that you've targeted for this year. Maybe you can break that down a little bit between sales and marketing, G&A, and R&D.
Sure. On the OpEx side as well, I mean, our stellar top-line growth combined with the operational excellence that we have, we've seen really good leverage on the P&L over the last three years. Even in Q1, it was almost revenue growth was 3x OpEx growth. As we look to the rest of the year, we do have our R&D left given the product that we want to launch in Q1, this new breakthrough device that we're working through as well. You have R&D being a bit higher than as a percent of revenue for the rest of the year just because of timing. You will see some G&A increase as well. What we've done is we saw a Q1 increase in G&A. We've incorporated that as well.
The sales and marketing, you will continue to see that grow, but that's variable to revenue growth. Most of that's gonna be commissions.
Okay. And then you sort of wrapping this all together, talked about adjusted EBITDA and free cash flow positive for the year.
Mm-hmm.
Obviously, at a good start to Q1, along the adjusted EBITDA path. What sort of has to unfold to the balance of the year to, to that would, what would throw you off kilter here? Like, where would be the, where are the risks in the plan? And then where are the opportunities?
Yeah. Our adjusted EBITDA is an outcome. Positive adjusted EBITDA is an outcome of our revenue growth. There's been no artificial action on our part. If you think about Q1, it tends to be the softest quarter of the year for us. To be able to get adjusted EBITDA positive for our second consecutive quarter just shows the volume, the value that we can generate with that top-line growth. We feel really good about our ability to maintain that adjusted EBITDA growth profile for the rest of the year, including going forward. What we have shared externally is we expect revenue growth to outpace OpEx growth going forward consistently. It may vary from year to year depending on the volume of investment we need in the business based on the R&D and marketing requirements for new product.
If you think about it on an average, it should be about 1.5x revenue growth. It should be 1.5x OpEx growth. What that means is you should continue to see good adjusted EBITDA dollars going to the bottom line as well. On the free cash flow side as well, we've talked about being free cash flow, and I mean post-CapEx. Net free cash flow positive sometime in 2026. Part of that is our high gross margin, the operating leverage, and the asset-like business.
Okay. In a scenario where the revenue tracked ahead of what you had expected, where would you reinvest those incremental dollars? Like, if you had, you know, it doesn't sound like you're scrimping on programs, but if you did have incremental revenue and gross profit, where would you put those investment dollars? And where are the biggest opportunities to even further boost the top line?
When I think about investment, one, we have a huge opportunity ahead of us, right? You look at the products that we launched last year. We're still scratching the surface, whether it's with interventionalists, trauma, or even with Granite. What we do want to invest in is expand our sales force. We want to get to 100 territories over the next 18 months, so you're gonna see some investment there. Number two is R&D and clinical evidence remains very important for us. As we launch these new products, we want to make sure we're backing them with clinical evidence. We'll continue to make investments there. G&A, you'll most likely continue to see leverage on that front.
The other piece, as we get bigger, we're starting to think about is the investments that we want to make on being more agile in terms of getting to market sooner and other gross margin improvement initiatives around manufacturing. Those are areas that we're starting to explore as opportunities to drive more profitable growth. We have a very active pipeline ahead of us. We're not thinking beyond the organic growth that we can get because of all the things that we have in the hopper. Laura's talked about two products that we are looking to work on right now, but there is a very active pipeline that's even after those two products. We feel very well positioned.
Excellent. We have just a minute or two left here. Maybe, Laura, I'll turn it back to you to kind of wrap up with any kind of concluding remarks or takeaways for folks in the room and on the webcast.
Thank you. Thanks for, thanks for doing that. I, we're seeing very strong interest from investors in SI-BONE at this point. I think that just the growth profile that we have, over 20% consistently for the last few years, is of interest. I think that investors are better understanding the sustainability of our growth platform as well, which I think is really important. We definitely were a show me story in terms of profitability. We've shown it over two whole quarters. As Anshul said, we're gonna continue to show that, have a nice line of sight to free cash flow as well. We're a differentiated company in all of that. I'm really proud of what we've accomplished over the last 10 years.
Very proud of what we've accomplished over the last four years, especially with all of the growth from a product perspective. And, and so you're gonna see more of the same. We're excited to talk with the investors that are here as well as those that are listening, about, about SI-BONE and really helping to educate them on what we're not and what we actually are. And, and this has been a great, a great conference for us to do that. Thank you.
Excellent. We very, very much appreciate you making the trip east and look forward to continuing to follow the story.
Thanks, David.
Thanks, David.
Thank you.