Hi, good afternoon. My name is Ravi Misra. I'm on the medtech team here at Truist. Very happy to have the CFO of SI-BONE here, Anshul Maheshwari, for the next half hour. Just Q&A. If there's any questions from the audience, please feel free to chime in. I'd like to make this as interactive as possible. I mean, let's get started. I want to kind of start with the product portfolio of the company. Lots of kind of interesting strategy over the last couple of years, really securing breakthrough device-type products, favorable reimbursement. Can you maybe talk about how you've expanded beyond that SI joint into new TAMs and the applicability of some of these devices into new surgeons that you may not have been speaking to before?
Sure. Thanks for having us, Ravi, here. It's been a good conference for us. Just to talk about our portfolio, we are a very unique company. We call on ortho-neurospine trauma surgeons as well as interventional spine physicians as well. The way I would break our business down is we're a portfolio of products that's focused on three markets. Like you said, we started within the SI joint dysfunction space, where we today have three core products: the iFuse 3D triangle, the 3D printed titanium implant. You've got iFuse TORQ, which was introduced in 2021. That's been a very strong growth driver for us within the SI joint dysfunction space. Then most recently, in 2024, we did launch an allograft product that was targeted towards the interventional spine physicians along with TORQ. That market for us is about $2.5 billion TAM.
It's about our best estimate is about 300,000 annual procedures are the target across spine and interventional. We're barely 10% penetrated in that market. A huge opportunity for us to continue to penetrate that market. The expanded portfolio gives us the ability to continue to drive adoption by addressing physician preferences either on techniques or the product type that they want to use. The second market that we play in is in the pelvic fixation market. Before we launched Granite, we had what we called as a Bedrock Technique. It was effectively surgeons using our iFuse 3D technology at the base of long construct procedures to provide a strong foundation for the deformity procedures. Granite basically built on the feedback from physicians who liked the impact that a strong foundation was having on the deformity procedures.
As you know, that procedure has about a low 20% failure rate. A lot of that is because of screw loosening, rod fracturing, or even the S2AI screws breaking because of the load that it has to take from these procedures. Granite was addressing that issue. It was an unmet need with Granite, which was designated a BDD device, was subsequently given a new technology add-on payment that was applicable for three years, was for pelvic fixation. In 2024, in May, we actually launched the next generation of Granite, which is Granite 9.5, is what we call it. 9.5 stands for the diameter of the implant. And the reason that that product was really important was the feedback we got from the deformity surgeons was, "I would love an implant that's smaller."
From a real estate standpoint, we need more space, so I want to have two points of fixation. 9.5 addressed that. We also had certain docs that were doing Dgen procedures that wanted to be able to use Granite. For them and the S1 AI or the S1 trajectory, they wanted a smaller diameter implant. Granite 9.5 was targeting that as well. Between the deformity and the Dgen side, that market for us is about 130,000 procedures a year. We estimate the TAM to be about $1 billion there. Towards the fourth quarter of 2024, we actually launched a new product. It was a second breakthrough device product, iFuse TORQ TNT. That is specifically targeted towards sacral insufficiency fractures. The call point for that is trauma. Our best estimate is there's about 120,000 pelvic incidences a year, sacral pelvic fracture incidences a year.
TNT is the right product for that market. Because it was so unique, it was given Breakthrough Device Designation. CMS has a proposal out there for an NTAP for up to $3,960. Assuming that goes through, that will be a pretty meaningful step up on the facility reimbursement, between 25%-30% higher than what you would get if you were using iFuse TORQ TNT. That is sort of holistically the portfolio of the company. Over the last four years, what you have seen is this diversification has played out really well for us. When we IPO, since the IPO, our CAGR has been about 20% revenue growth. If you look at the last three years since TORQ, Granite, Granite 9.5, TNT, and INTRA have come out, that growth rate's CAGR at about 23%.
As you look at the last couple of quarters, you've seen that growth rate accelerate into the mid-20s worldwide and 27% in Q1 in the U.S.
Yeah, that was a really helpful overview. I guess number of avenues to go from there. First, just around the adopting surgeon, ortho-neuro-interventionalist trauma, can you talk a little bit, especially as maybe center us around the 1,400 docs that were using the product in the Q1 ? You talked about density. You talked about an increase year- over- year in the doctors that were using the product. Is there any area of maybe success that you're gaining in one specialty versus the other, or is it broad-based? Help us think about, is it a product-driven kind of perspective? What's kind of driving the surgeon and the doc training efforts?
Yeah, so we're really proud of the 1,400 active surgeons in the first quarter of 2025. That was a record number of active physicians in the company history. Equally, what was impressive was we added 300 docs when you look at it year- over- year, the highest number of doc adds that we've seen since our inception and definitely since being a public company. Where is that coming from? It's actually broad-based. We saw strong growth across all modalities. We saw strong record growth in interventional. We got record growth in trauma surgeons, and we got record growth in ortho-neurospine surgeons as well. It was pretty broad-based. The expanded portfolio is a big contributor to that. It's allowing us to have multiple touchpoints with each of these docs. There are a few more stats that we started to share externally, which we believe are very important.
Not only are we seeing strong engagement across all these call points to use our solutions, what we're also seeing is the number of docs that want to do multimodality procedures. Docs that are doing SI joint dysfunction, but also want to do deformity or Dgen procedures with Granite, we saw a 45% increase in the number of docs that were doing multimodality procedures. That's a really encouraging sign, especially when you look at about 1,400 docs, a majority are doing a single modality procedure. Significant opportunity to drive density there. Where is that density going to come from? A lot of that is going to come from SI joint dysfunction docs, whose majority of the business is lumbar fusion procedures, being able to target them with Granite.
Simultaneously, what we are also seeing and doing is docs that are adopting Granite, working with them to start looking at the SI joint as a pain generator and actually adopting TORQ and 3D for SI joint dysfunction procedures. That is a really exciting opportunity for us. We do believe density will continue to grow. The metric that we look at for density growing is same store sales. When you look at docs that were active in Q1 of 2025 that were also active in Q1 of 2024, they did 30% more cases on average than the overall average number of cases per doc in the quarter.
That gives us confidence that we have an opportunity to continue to not only drive the growth in number of docs, but also density per doc as we roll out more Granite, and that starts becoming a standard of care.
How should we, as we kind of plug these numbers into our model, how should we think about maybe the pace of overall utilization, right? Because that's going to be masked as you drive doc adds versus doc adds. What's driving the growth in terms of the algorithm of getting to your revenue?
Density will take some time to play out. When we set our guidance out, our expectation was that the impact of density will be pretty modest. A lot of that is just going to be continued interest that we're seeing from physicians to get engaged, trained, and start adopting a procedure. The other thing that happens is you don't see training to adoption within the same month or day. Sometimes you do in deformity, you could, but generally, training is a pre-indicator of what demand's going to look like. If you look at Q1, Q2 of last year, we had talked about record training in Q1 of 2024 and then Q2 of 2024. What you've seen is that translate into a record number of docs that did a procedure in Q1.
Now, the reason we think that in our assumptions, the growth's coming from new docs in the near term is if you look at the number of docs that did a procedure last year, there were 2,000 docs. 1,400 did a procedure in Q1. We know there's low-hanging fruit of docs that will continue to come back and do procedures on a more regular basis versus the episodic basis that we saw them do it last year. I think that's what growth's going to come from. I think over the long term, density will start playing a bigger role, especially with the expanded portfolio, driving that deeper engagement.
Okay. Maybe help think about, I think you've said in the past about 12,000 doctors as your target base. Is that inclusive of these newer specialties that you're going after, or does that expand the market going after the ortho or the neuro or the interventional?
Yeah, so majority of that market is surgeons, right? Within that market, you do have a target population of interventionalists. That's about 4,000 interventionalists and then trauma as well. Now, within the interventional space, that 4,000 is all the interventionalists that you could target. The ones that we've been targeting in the first 24 months of being out in the market with interventionalists is the subset of interventionalists that actually do surgical procedures. That's about 1,000 docs that we know that are doing surgical procedures and not really referring patients to surgeons. For us, being able to engage with them, making sure that they're trained on TORQ, on allograft, and making sure that their patients can get access to our best-in-class technology is a focus area for us. We are very thoughtful on how we approached interventionalists, and it's actually worked out well.
We always approached it as an incremental opportunity, and it's played out that way for us.
I mean, there's a lot of change going on in spine right now, right, with some of the asset sales and mergers. There seems to be a little bit more focus among some of your peers on the interventionalists, whereas as you're also focusing on. Just wondering how you're viewing that, maybe tension is not the right way to describe it, but the chance of going after the similar procedure from the interventionalist procedure or the ortho-trauma surgeon's procedure. What's your view on who's going to own that procedure in the next three, four years?
Yeah, it's very interesting, right? Ours is one of the very simpler procedures. It fits the wheelhouse of interventionalists quite well, but it's equally very attractive for surgeons too. As we look at our portfolio, we continue to be over-indexed on surgeons. That will continue to be the primary driver of growth for us. That is where most of the growth's going to come from. We do believe that there is a subset of interventionalists that will not want to do surgical procedures because either they do not have the operating privileges or they have a relationship with a surgeon where there is a good referral pattern that they have, right? They are not going to do procedures.
There's going to be that subset that we are targeting that will want to do procedures because either they have their own ASC or do not have a surgeon referral pattern or a surgeon referral model, and they want to be able to do surgical procedures. And that's those 1,000 docs that we're targeting.
Okay. Is it mostly company outreach, or they're coming to you? Because, I mean, our sense has been interventionalists have a desire to get into this world a little bit. It seems, from what we've heard, that it's been a little bit more of an exclusive club to kind of get into for SI-BONE. Maybe add a little bit of color on how aggressively you're going after that market.
Yeah, so interventionalists have always wanted to work with us. And like I said, we've worked with them since the onset of the company, but it was more about creating the referral pattern because they would do the conservative care and they'd refer the patient to the surgeon. So we've always had a relationship with interventionalists. We had the triangle product for the longest time, which was a very orthopedic product. So when we approached the interventionalist market in early 2023, our approach was to go out with TORQ. TORQ had been in the market for two years. We knew it was a proven technology. It was safe. It was replicable. So we thought that was the right product to start with the interventionalist. So there was a reason why we weren't working before because we didn't have a product like TORQ. And with TORQ, we saw success.
We actually launched a clinical study, STACI, that is interventional spine physicians using TORQ for SI joint dysfunction. We've had no serious adverse events. We're working through the clinical workflow on those to be able to share the data in the future. That worked out well for us. In 2024, like I said, we launched an allograft product because we knew there was a subset of interventionalists that will not want to do TORQ first or not want to adopt metal right away. Allograft was a good alternative for them. What we have seen is we are becoming the one-stop shop and a preferred vendor and partner for interventional spine as well. What they're looking for is a company with a comprehensive portfolio. We're one. We check that box.
Number two is nobody in the space is more experienced on SI joint dysfunction, on the diagnosis, conservative care continuum, and the treatment than SI-BONE. We have the best commercial sales force that's done over 100,000 procedures. I think that's really, really important. Number three, our focus on clinical data is also a very key differentiator for them.
Got it. You talked about the portfolio that you have. I mean, my kind of knowledge of the company is that pretty much everything has been internally developed. How should we think about further portfolio development? You've talked about a lot of new products, a stealth, I call it stealth breakthrough designated device coming out next year, next gen kind of infused. Should we think about the R&D efforts kind of internally or externally? Number one, how should we think about that balance? Number two, all in metal, or do you see kind of adjacencies to kind of go beyond the surgical arena?
Yeah, so if you look at the core tenets of the company, we're built on identifying unmet clinical needs, coming up with unique solutions, backing it up with clinical evidence, being able to get very differentiated designations in terms of breakthrough device designations and types TPTs, and then create new markets. We're not a me-too product company, right? That's what we pride ourselves on, and that's reflected in our financial profile with 80%+ gross margins, the asset-light business model that we have. It's worked out really well for us. We spend about 10%-12% of our revenue on R&D and clinical evidence. We will continue to do that. We have a very active pipeline of homegrown products underway. We've talked about a couple of them that are more near term. One is a third breakthrough device.
We believe we are the only ortho spine company that's public that has a third breakthrough device on the come. That's a huge differentiator, and we're really excited about the opportunity there. We're also going to be launching a device in Q1 that's specifically targeted towards SI joint dysfunction. That's basically building on our experiences with iFuse 3D and our experiences with INTRA and being able to provide another solution that we believe a subset of physicians would benefit from just as they look to adopt the procedure for SI joint dysfunction. You'll continue to see innovative products come out of the company. You'll continue to see us focus on breakthrough devices. That's sort of where our strengths lie.
Got it. And then just on maybe if I can push a little bit more on the next-gen products, unmet needs, kind of if you don't want to talk about the product, that's fine, but where is the unmet need that the holes can be filled?
Yeah, so the way we look at unmet needs is we look to identify within procedures, are there failure rates? Are there high revision rates? Try to look at ways to address those revision rates. If you look at Granite as an example, Granite was an outcome of failures of deformity procedures. Being able to provide a solid foundation to address that failure rate was important. That is why it was a product that resonated well with surgeons because it was addressing a known issue with these procedures. TNT, very similarly, for fracture fixation, there was no real good treatment out there. You could either get bed rest, which long-term was a death sentence, or you could go for sacroplasty, which was cement, which created other issues, or you were using traditional screws that were prone to backing out, right? For us, there was a treatment.
It was just subpar. There was no innovation in that treatment. For us to be able to come out with a better treatment that allows us to get the right good outcome for the patients and then being able to get it differentiated from a reimbursement standpoint was unique. Even as we look at the future portfolio, the opportunities are out there, right? We pride ourselves on understanding the anatomy, on understanding what causes those issues, understanding biomechanics, and then coming up with a solution.
Okay. I think I want to segue a little bit to maybe the guidance and gross margin and profit profile of the company. To us, coming out of Q1, it seemed a little bit that guidance was conservative. You raised the top end, but it was a nice beat. Talk about a little bit about the company's philosophy when it comes to setting guidance. Are you looking to beat and raise, guide and deliver? Kind of how should we think about that? Secondly, given the size of the Q1 beat and the amount of raise, historically, Q4 has been your strongest quarter. Any kind of changes to the cadence based on the strength of Q1 that we should be contemplating as we go down our path throughout the year looking at the model?
Look, we're really happy with how Q1 came out, right? When you look at the top-line growth at 25% worldwide, 27% U.S., when you look at the active physician growth, we talked about that. You look at the strong ASP, you look at gross margins, which are close to 80%, up 80 basis points year- over- year, a second quarter of adjusted EBITDA profitability. All metrics were really, really exciting for us and just show how strong demand combined with our education approach and operational excellence, what that can do to the P&L. In terms of guidance, I think we were being very thoughtful about guidance. It was only one quarter into the year. Given some of the macro uncertainty out there at that point in time, I thought it was prudent to take a conservative approach.
Be thoughtful, get another quarter or so under your belt to see how the year performs. You want to avoid the hockey stick, which tends to be a back-end hockey stick guide. I think we're being very thoughtful. We are seeing a little bit of a change in our seasonality as well. Historically, Q1, you would see a high single-digit dip from Q4. What we're seeing is a more moderated dip in Q1, sort of a 2%-3% dip because of new product launches and the timing of new capacity rollout. Q2 tends to see a more modest uptick because Q1 is also not seeing a big dip. Sequentially, Q2 is a bit more modest. Q3 can be a little bit of a wildcard sometimes because you've got industry conferences and vacation schedules.
I think sort of assuming that low single-digit decline is the right place to be. And we do expect Q4 to be a big quarter, like it always is seasonally just because people have met their deductibles.
Great. That's helpful. Then just on the gross margin outperformance in one quarter and first quarter, I think guidance is about 78% or so. There is a lot of dynamics going on here, new product adoptions coming in, pressuring that. You have mix shift. How should we think about kind of maybe the steady state of the business? Is this an 80% gross margin company, or is that just kind of a one-time thing and longer term, maybe mid-70s is the place to be?
Yeah. So again, exit the quarter at 80%. And our guidance of 78% for the year has a few assumptions built in. The first assumption is just around our procedure mix impacting ASP. So our ASP per implant is sort of being very steady. But as we go into the Dgen space and the trauma space, the number of implants used are generally two implants versus in SI joint dysfunction, you have three, and in deformity, you have anywhere between two and four. So our assumption is with the procedure mix shifting, you'll have a few basis points of impact on ASP. That is going to impact gross margins. Number two is, as we're putting out more Granite 9.5 capacity and TNT capacity, those are much more expensive implants just because they're not at scale. That is going to pressure some of your gross margins.
The third piece is we're putting out more surgical capacity, so instrument trays to support the Dgen opportunity, to support the trauma opportunity. We're still in the first year of the trauma launch, so you're going to see more capacity put out first before you can actually see the asset efficiency and the turns. You're going to start seeing some of that depreciation flow through. The last piece is we've got some software that we're implementing for automation on our workflows in the field to provide them some more flexibility. That's going to flow through the gross margin. That's sort of one side of the gross margin for the year.
What it does not include, though, is the impact of some of the gross margin initiatives that we have underway to streamline our workflows from a supply chain perspective, the potential for more foreign plant cases from deformity, because that tends to push the ASP higher. That might be a little bit of an offset. We think being thoughtful here early in the year is the right approach. Longer term, which I'd say over the next two to three years, we've indicated to investors that 76%-77% is the right bench area from a gross margin standpoint, which would still be industry leading.
Incorporated in that is the potential impact from new product launches that will happen because they'll have some of the very similar dynamics I talked about, subscale, new assets, new capital being put out there, offset by scaling of the portfolio that we launched in 2023 and 2024.
I mean, it didn't impact, or I guess you have still an outlook for EBITDA profitability and a profit ramp two straight quarters right now of positive adjusted EBITDA. You're also expanding your sales force as that's happening. Is it that the top-line expectations are going to drive the EBITDA as you layer in the sales force and R&D efforts with this kind of gross margin pressure? Help us think about what's going to accelerate your EBITDA profitability.
Yeah, our journey to profitability over the last three years has been completely linear to our top-line growth. So there's a lot of leverage that we've been able to get out of the P&L. High gross margins do help. But if you look at even Q1, our revenue growth was three times our OpEx growth. And if you look at our guidance for the year at around 10%-ish OpEx growth, that would still imply 1.7-ish times operating leverage in the P&L. That leverage is coming from everywhere. R&D continues to grow, but the dollars are smaller. So you see leverage there. G&A just being a little bit hotter in Q1, so we've incorporated that. But over the long term, you will continue to see leverage there as well.
Sales and marketing, even with adding the new territories, we want to get to 100 territories over the next 12 to 18 months. We know we'll continue to see leverage there just because of the top-line growth because we will also continue to grow the agent model, which is a lot more variable.
Just on the sales force productivity, I think you're at about $2 million, less than 100 reps. The goal was also to get to $200 million at about 100 reps, which would have been, which means you're already there on the productivity front. Help us think about why you need to accelerate so much the territory managers, given the asset light nature or the agent model. Why do you need extra reps if you're already at the productivity you want to be at for $200 million in reps?
A lot of our investment in growing our number of territories is going to be geared towards making sure we can capitalize on the opportunity ahead of us, not just with the existing portfolio, but also the other products that we want to launch in the future. We want to make sure these are large TAMs. By allowing us to have those territories, it will allow us to drive deeper penetration with our docs, especially as we focus on density with those docs because it will allow us to have that deeper dialogue on multimodality, being able to do multiple procedures with the doc and also being able to use multiple products per procedure.
If $2 million is a fully productive rep, how long kind of do you expect it to take for new hires to maybe get to that level? Is it a two-year process, a one-year process?
It generally takes about two to two and a half years for a rep to get to that number. Now, that can get accelerated depending on the kind of model they're using. In markets where they have access to agents, you could probably accelerate it faster. If you look at our commercial infrastructure, the way it's set up is our direct sales force is leading with education, is building their relationships, is helping docs get trained on the procedure as well. They're leading that effort. A lot of their focus is on the SI joint dysfunction side because that's the educational sale. On the deformity side, we're starting to leverage more agents. Even though the rep owns the relationship, he owns the training, and he is covering cases, the expectation over time is that the agent would start covering cases that frees up the rep's time.
We expect that same phenomena potentially to play out in trauma. We're actually focusing on trauma as an agent model as well because at level one, level two trauma sites, you already have people who are covering those docs. Our ability to put a unique product that has Breakthrough Device Designation and potentially NTAP in their bag could allow us to very quickly penetrate that market.
Okay, great. I think with that, the list of my questions have come to an end. Anshul, thank you. Appreciate your time.
No, thanks so much.
Have a great day, everyone.
Thank you.