Good day, thank you for standing by. Welcome to the Treace Medical Q1 2023 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a Q&A session. To ask a question during the session, you will need to press star 11 on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Vivian Cervantes, Investor Relations at Gilmartin Group. Please go ahead.
Thanks, Theresa. Good afternoon, everyone, and welcome to our Q1 2023 earnings conference call. Participating from the company today will be John Treace, Chief Executive Officer, and Mark Hair, Chief Financial Officer. During the call, we will offer commentary on our commercial activity and review our first quarter financial results released after the close of the market today, after which we will host a question and answer session. The press release and supplemental materials can be found in the Investor Relations section of our website at investors.treace.com. This call is being recorded and will be archived in the Investors section of our website. Before we begin, we would like to remind you that it is our intent that all forward-looking statements made during today's call will be protected under the Private Securities Litigation Reform Act of 1995.
Any statements that relate to expectations or predictions of future events and market trends, as well as other estimated results or performance, are forward-looking statements. All forward-looking statements are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. All forward-looking statements are based upon current available information, and Treace assumes no obligation to update these statements. You should not place undue reliance on these statements. Please refer to our SEC filings, including our Form 10-Q for the first quarter to be filed tomorrow and our Form 10-K for full year 2022 filed on March 8, 2023 for a detailed presentation of risks. With that, I now turn the call over to John.
Thank you, Vivian. Good afternoon, everyone, thanks for joining us on our Q1 2023 earnings conference call. Before we begin, I'd like to take a moment to acknowledge everyone at Treace Medical for their dedication, focused execution, and passion for our business and its mission to improve surgical outcomes for bunion patients. It's our team's collective effort, along with the support of our loyal surgeon user base and the positive impact our technologies are having on the lives of the patients they treat that has supported the success and growth for our company for nearly eight years now since our first Lapiplasty procedure was performed. In the Q1 , revenue increased 45% as compared to the same period in 2022, with steady gains across all of our key operating metrics.
It's clear to us that the strategic investments we continue to make in our business are delivering strong returns, confirming we have the right strategies in place to expand the market penetration of our differentiating technologies. Before I go into details about the quarter, let's start with our market summary on where we stand today. Our disruptive Lapiplasty solution was specifically developed to correct the root cause of the bunion and address a large and underserved market. We've identified an estimated addressable $5 billion+ U.S. market of 1.1 million annual surgical candidates, of which only 450,000 undergo bunion surgery each year, which we believe is mainly due to limitations associated with current standards of care.
As of the Q1 of 2023, we have penetrated approximately 5.8% of the estimated 450,000 annual bunion surgical procedures in the US, up from 4.3% in the first quarter of 2022, and reflecting approximately 2.4% market penetration of the 1.1 million annual US surgical candidates, which constitute our $5 billion addressable market in the US. Turning to our Q1 results. Revenue in the Q1 was $42.2 million, representing 45% growth over the first quarter of 2022. During the first quarter, we continued to benefit from our commercial strategies and investments. Growing sales force productivity coupled with strong seasonal patient demand trends that decidedly extended our seasonal strength from the Q4 into the Q1 .
Therefore, we are extremely pleased not only with our top line growth, but also the sustained positive trends in our key operating metrics, including our expanding direct bunion-focused sales team, which accounted for 79% of our Q1 revenue mix compared to 63% during the first quarter of 2022. Strong, steady increases in the number of new surgeon users ending Q1 with 2,499 active surgeons, up 31% year-over-year. A year-over-year increase in our trailing-twelve-month surgeon utilization with an average of 10.5 kits per active surgeon in Q1, up from 10.1 kits a year ago.
Strong blended average selling prices of $6,244 per Lapiplasty kit sold in the quarter, representing 13% growth over prior year as our expanding direct sales team more effectively leverages our broader portfolio of problem-solving complementary product solutions such as Adductoplasty, our FastPitch screws, and our SpeedRelease and TriTome tissue release instruments into their Lapiplasty cases. Our strategic investments and commercial focus have continued to support the growth of our business, giving us confidence that we have a well-defined, proven, and scalable commercial strategy. Given these positive trends, we're raising our full year 2023 revenue guidance to $190 million-$196 million, which reflects an increase of 34%-38% over 2022 revenue.
We remain committed to balancing aggressive execution of our targeted commercial initiatives to maximize our growth and market penetration while delivering modest improvement in our expense leverage. Shifting to our commercial and market development activities. As we previously discussed, we're continuing our targeted investments in 2023 with the goal of increasing our market penetration by expanding the footprint and coverage of our bunion focus direct sales channel, advancing our patient awareness DTC initiatives, and driving more targeted R&D innovations into the market. We have a highly specialized team at Treace, including a rapidly growing direct sales force, one that is 100% focused on bunion and related midfoot surgery, and represents the only such organization that we're aware of in the US med tech industry. We believe this has contributed meaningfully to our revenue and market penetration.
In the first quarter, 79% of our revenue was generated by our direct sales force, up sequentially from 77% in the Q4 and up from 63% in the same period last year. We continue to aggressively invest in our direct channel with a target of having over 200 quota-carrying direct sales reps by year-end, up from 168 at the end of 2022. We continue to see increasing productivity from the 87 direct reps that we hired during 2022. As a reminder, our historic data demonstrates that our direct reps typically scale with significant revenue and cost leverage achieved within 24 months, primarily because they're exclusively focused on our products and fully utilize our suite of corporate resources and programs. Our patient awareness DTC initiatives are a key component of our commercial strategy.
As you may recall, our investment in DTC is resulting in hundreds of thousands of patients visiting our website every month and tens of thousands of patients searching for Lapiplasty surgeons in their area. With one in four surgeons in the US using Lapiplasty, we now have a larger and expanding national surgeon base that can field inquiries from a higher volume of patients. On strong momentum, we stepped up our investments and initiated our DTC efforts earlier this year compared to last year to drive greater awareness amongst the target patient population.
We have a great foundation of surgeons and sales reps in place to support growing patient interest, remain focused on our patient awareness DTC initiatives that are designed to educate and steadily increase the number of potential patients visiting our website, become educated on the Lapiplasty procedure, locate experienced Lapiplasty surgeons in their area, and to ultimately schedule a consultation. Our surgeon education and training programs also continue to be well-received. Interest and attendance by new surgeons at our training events remain strong, with many of our events oversubscribed. Likewise, our advanced training events, both online and in person, where our more tenured surgeons can acquire advanced skills and learn new approaches and procedures like Adductoplasty, continue to show strong demand. Our education programs play a key role in the effective onboarding of new surgeon users and increasing the skill of our existing surgeon users, broadening their patient indications.
In the Q1 , we onboarded 112 new surgeon users who were trained in the safe and effective use of our technologies through these training programs. We're encouraged to see continuing growth in our surgeon user base. As of the first quarter, our active surgeon user base, which includes surgeons who performed at least one case in the trailing 12 months, has achieved approximately 25% penetration of the estimated 10,000 foot and ankle surgeons in the US performing bunion surgery. As our surgeon base continues to mature, we look forward to utilization gains with increased use of our Lapiplasty and Adductoplasty systems, as well as further adoption of our growing portfolio of complementary products, all supported by our expanding direct sales channel, differentiating clinical data sets, and patient awareness DTC initiatives.
Speaking now to our product development strategy, we have an R&D team that's committed to driving innovation to maintain our industry leadership with programs for both next generation bunion correction systems, as well as the development of new complementary technologies addressing other bunion-related pathologies and IP defense of our technology and innovations. As announced in April, to date, we have 47 granted US patents and 51 US patent applications pending. We highlighted two new exciting product innovations at the American College of Foot and Ankle Surgeons this past February, namely the Micro-Lapiplasty system. This is an advanced instrumentation option designed to further reduce both the incision size and related tissue dissection with the Lapiplasty procedure. This exciting evolution of our instrumentation allows the patented Lapiplasty procedure to be performed through 2- cm incisions. Our SpeedPlate implant fixation platform.
This is a new fixation technology platform designed for rapid insertion through small 2-cm incisions, serving as both an enabling technology for the Micro-Lapiplasty procedure, but also with broader applicability to both our standard and mini-incision Lapiplasty systems, as well as our Adductoplasty midfoot procedures. Feedback on SpeedPlate from surgeons who have received early clinical access during the quarter has been highly favorable, with emphasis not only on the time savings, but also the excellent stability and the dynamic compression benefits of the implant as well. We anticipate commercial launch of these technologies by year-end. We're excited about the potential benefits Micro-Lapiplasty and SpeedPlate combination can bring to patients. As with any procedure that involves smaller incisions and less tissue dissection. We believe this could translate to even faster patient recovery with less pain and swelling.
We look forward to providing additional updates on our new product innovations as we continue to develop our pipeline centered around our core technologies and IP aimed at improving surgeon user experience, patient outcomes, and supporting continued market penetration. Turning to clinical data. A key differentiating driver for our business is our commitment to clinical evidence, which we believe resonates with both surgeons and patients. From what we can see in the marketplace, we believe we're the only industry participant with a growing body of clinical data. Our interim clinical data is demonstrating rapid return to weight-bearing in a walking boot with low recurrence rates at 12 and 24 months, as well as positive patient-reported outcome scores following our bunion correction procedure.
At the 2023 American College of Foot and Ankle Surgeons Annual Scientific Conference this past February, we announced an interim analysis from our flagship ALIGN3D prospective Lapiplasty study on 128 patients with at least 24 month follow-up, which demonstrated early return to weight-bearing in a walking boot at an average of 8.1 days, a low recurrence rate of 0.9% at 24 months, 80.8% reduction in pain measured using the Visual Analog Scale, or VAS, at 24 months, 92% and 90% improvement in walking, standing, and social interaction patient-reported quality-of-life measures, respectively, using the Manchester-Oxford Foot Questionnaire through 36 months. Notably, 97.3% of patients reported they were satisfied or very satisfied with the overall results of the Lapiplasty procedure at 36 months.
The ACFAS scientific poster, which includes additional details, is available on our website. We believe we're the only company to offer this level of clinical evidence on a commercial surgical bunion product, and it's rewarding to see the meaningful impact the Lapiplasty procedure is making on patients' lives, not only physically, but socially as well, as demonstrated by the 97% patient satisfaction rating three years post Lapiplasty surgery. As a reminder, later this year, we expect to submit our primary endpoint ALIGN3D manuscript for publication in a peer-reviewed journal. This is an exciting milestone culmination of activities that began five years ago with the first patient enrolled in 2018. We believe these positive interim patient data coming from our differentiated ALIGN3D study resonates strongly with surgeons and patient communities and is reinforcing further market adoption of the Lapiplasty procedure.
I'd like to highlight one additional item that occurred right after the end of the quarter. In early April, we published our inaugural Environmental, Social, and Governance report, which outlines our focus and ongoing progress towards ESG initiatives across Treace. We will continue to integrate ESG considerations into the ways we manage our business while carrying on our mission to improve surgical outcomes for bunion patients. In closing, I'm proud of another great quarter of execution at Treace. Our solid execution, driven by our talented team of employees and proven strategic investments, supported by our strong balance sheet, continue to drive our momentum. We believe we have developed a specialized and scalable business model that's fueling our growth strategy and our mission to advance the standard of care in the surgical correction of bunion and related midfoot deformities.
With that, I'll now turn the call over to Mark to review our financial performance. Mark?
Thank you, John. Good afternoon, everyone. Revenue in the first quarter was $42.2 million, an increase of $13.1 million and 45% growth over the prior year. Growth was driven by increases in procedure volumes and an increase in blended average selling price due to adoption of our newer complementary technologies. In the first quarter of 2023, the number of active surgeons performing at least one case in the trailing 12 months increased 31% year-over-year to 2,499 surgeons, which translates to approximately 25% penetration of the estimated 10,000 surgeons in the U.S. who perform bunion procedures. Surgeon utilization increased to an average of 10.5 Lapiplasty kits purchased in the trailing 12 months, up from an average of 10.1 a year ago.
As a reminder, we commercialized the Lapiplasty procedure nearly eight years ago, and in the past two years alone, we've added 1,145 active surgeons, nearly half of our total active surgeon base. On the average, this growing number of active surgeons have steadily increased utilization each year they use Lapiplasty due to positive patient outcomes and expanding indications in their practices. We sold 6,758 Lapiplasty procedure kits in the Q1 , a 28% increase versus the prior year's Q1 . Blended average selling price in the Q1 was $6,244, a 13% increase over the first quarter in 2022, and a 6% increase from Q4 last year.
Q1 blended average selling price of $6,244 includes a contribution of approximately $4,800 from Lapiplasty and a growing contribution of approximately $1,400 from our expanding portfolio of complementary products, such as our Adductoplasty system, TriTome and SpeedRelease instruments, and FastPitch screw kits. As our expanding direct sales channel helps provide surgeons with our problem-solving technologies. Gross margin was 80.9% in the first quarter of 2023, compared to 82.3% in the first quarter of 2022.
The 140 basis point decrease was primarily due to an increase in payroll and related costs as a result of our expanding operations. Total operating expenses were $47.9 million in the Q1 of 2023, which includes sales and marketing expenses of $33.7 million, research and development expenses of $3.4 million, and general and administrative expenses of $10.9 million. This compares to total operating expenses of $32 million in the first quarter of 2022, which included sales and marketing expenses of $22.3 million, research and development expenses of $3.1 million, and general and administrative expenses of $6.7 million. The increase in operating expenses reflects strategic investments in our expanding direct sales channel, investments in product innovation, increased capacity requirements, as well as support for other commercial initiatives.
Q1 net loss attributable to common stockholders was $13.5 million, or $0.23 per share, compared to a net loss of $9 million for $0.16 per share for the same period in 2022. Cash, cash equivalents, and marketable securities were $170.7 million as of March 31, 2023. As we mentioned last quarter, we completed a follow-on offering in February, which raised net proceeds of $107.5 million. This is the first time we raised capital since our IPO. We believe this provides us with additional balance sheet strength and flexibility to continue aggressively executing on our strategic investments and growth initiatives. Before concluding, let me turn to our outlook for full year 2023.
As John mentioned, we are encouraged by the underlying strength and momentum in our business and are raising full year 2023 revenue guidance to $190 million-$196 million, which reflects an increase of 34%-38% over 2022 revenue. This is an increase from our prior full year guidance of $187 million-$193 million. For the Q2 2023, we continue to see our business tracking to expectations and expect revenue in line with elective procedure seasonality following our Q1 , which benefited from an extended seasonally strong Q4 .
Turning to the middle of the P&L, we continue to expect that our operations and expenses will continue to grow throughout 2023 as we increase our DTC investments and further expand our direct sales force while increasing leverage of our fixed costs and overhead expenses. We still expect to show modest improvements in adjusted EBITDA for the full year compared to 2022. With that, let me turn the call over to the operator to open the line for your questions.
Thank you. At this time, we will conduct the Q&A session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Robbie Marcus with JP Morgan. Your line is open.
Oh, great. Thanks for taking the questions, and congrats on another nice quarter.
Thanks, Robbie.
Thank you, Robbie.
Welcome. Maybe to start, I wanted to dive into some of the trends you saw in the first quarter. I know it's probably hard to kind of tease out each of the individual components, but what are you seeing in terms of how much is coming from better contracting, a more complete product portfolio, returns on DTC investment, increased sales force? Anything you could add to try and place where some of the growth drivers are going and what you're focused on for the rest of the year.
Yeah, Robbie, this is Mark. Great question. You know, John and I have really tried to focus on all of those items that you talked about, really with our investments on building the direct sales channel, our DTC investments that we've leaned in a little bit more this year in Q1 versus last year. Now we have an expanded portfolio of products as well. It's all these things, all the investments we really believe are helping. The other thing that we talked about in the prepared remarks was that this really strong seasonally Q4 really extended into the Q1 . Not all the procedures were achieved in the Q4 , and so we saw some of that benefit come into the Q1 as well.
I don't know that we have really quantified each one of those individually, but we feel really good about the momentum. As a reminder, the 45% growth is over a really tough comp from last year as well. We feel good about the momentum as we're coming in. We feel like all of those pieces are really playing well together to achieve that good result.
Thanks. Maybe as a follow-up here, you know, there's a lot that we're hearing in terms competitively out in the field. Another, you know, lower extremity bunion competitor was recently acquired, and the noise is growing, which is great for the field and the conversion to instrumented procedures. I'd love to hear what your reps are seeing out in the field. Do you think any of the competitors are impeding your ability to grow? If you don't win an account, what's the number one reason you're not here? Thanks a lot.
Yeah. Hi, Robbie. John here. Thanks for the question. Yeah, you know, a little bit consistent maybe with what we discussed last quarter. You know, there are other products in the marketplace
Being offered from other companies. Most of these are, you know, kind of highly diversified companies with large bags of products. We're not really seeing any incremental, I think, opposition to our momentum coming from these. In some ways, they're just further validating, what we started and what we developed long ago. You know, any of these companies' products and offerings get like a fractional portion of their sales team's, time and attention. What we found is with over, you know, nearly eight years of refinement, Lapiplasty is just so elegant and reproducible. It's frankly just unmatched in performance at the doctor-patient interface. We continue to wrap more patents around what we're doing, you know, making it a little more challenging for companies to make something that can truly replicate the elegance of Lapiplasty.
You know, on top of that, our direct sales channel, our training programs, our patient advocacy through our DTC, our real clinical outcomes data that we can back up our product with, it just further differentiates us in the market. But I can't say that there's any one of these multi-line distracted companies that's, you know, slowing our business momentum.
Great. Thanks for taking the questions.
Sure thing.
Thank you. Our next question comes from Drew Ranieri of Morgan Stanley. Your line is open.
Hi. Thanks for taking the questions. Just maybe to start on kind of the pricing trends, I appreciate you breaking out the Lapiplasty kits and the expanding portfolio. If I kind of look at the math from Q1 2022 and kind of hold that forward, I mean, you're obviously expanding your blended ASP, you're adding a direct sales force, and I think I heard you saying you're getting up to about 200 this year. Maybe just talk to us about a couple things. One, maybe the acceleration that we should kind of expect with blended ASP through 2023 and even into 2024 if you, if you wanna get that dangerous.
Second, can you just maybe highlight a bit more on the attachment rate that you're seeing for Adductoplasty in your cases, and maybe what type of surgeons are actually performing the case? Are you seeing it more in your more established, mature, tenured surgeons or even on some of the more recent adopters? Thank you.
Sure thing. Hi, Drew, it's John. Happy to answer that question. I think regarding the blended ASP, you know, as we peel back that $6,244 that we had in the first quarter, you know, roughly around, you know, $4,800 is a Lapiplasty case, and call it $1,400 and change is coming from complementary products that are used in those Lapiplasty cases. As we mentioned in the prepared remarks, we continue to see that blended ASP lifting from our new products, due to the continued adoption of Adductoplasty, which we think is still early on in the adoption curve, as well as those other recently commercialized technologies, you know, our S4a plating kits, our tissue release tools, et cetera.
I think what we're beginning to really see and appreciate is the leverage effect we're getting from this direct channel selling more of these complementary products that serve those other procedures that are performed, you know, within the Lapiplasty case. As we continue to layer on, you know, more and more new innovations as we will be later this year with SpeedPlate, for example, we definitely believe there's more room to grow our ASP over time. The Adductoplasty makeup surgeon profile, you know, interestingly, we initially brought Adductoplasty to our more tenured surgeon base and targeted them to come to trainings, and they were most excited to come. As time has gone by, we're now starting to introduce Adductoplasty in our beginners courses.
They not only get trained on Lapiplasty when they come to a training course, but they get a little bit of a training on Adductoplasty as well, so they get exposed to it then. Then we're finding, you know, more and more of those new adopters are requesting Adductoplasty for their cases earlier on. It's been a good blend of both our more tenured, advanced users and now, moving into our newer surgeon base.
Got it. Thank you. Maybe this question is more, more for Mark, as we kind of think about some of your commentary about the first quarter was tracking to expectations, but it extended seasonally strong fourth quarter into Q1 . Should we kind of interpret that as the second quarter could be flat sequentially? I would just like a little bit more understanding of maybe what you're seeing in the field given some of these strong drivers across ASP, surgeon, utilization improvements. Just maybe help us flesh that out a little bit more. Thanks for taking the questions.
Of course. Thanks, Drew. We do feel really good about what we achieved in Q1. That 45% growth over last year, you know, that was a difficult comp, and we, you know, as a result, we've raised our annual guidance range to 34%-38% growth for the full year. We do believe that the next couple quarters, our growth rates will be within that raised annual range, and we're comfortable with those midpoints, and that's, you know, based on all of these investments that we're making. We feel good about the momentum that we have going on for the rest of this year.
Thank you for your question. Our next question comes from Rick Wise of Stifel. Your line is open, Mr. Wise.
Thank you. Hi, John. Hi, Mark. Great to see another excellent quarter here. A couple things. Maybe just starting on the direct sales rep expansion, you're basically at 80%, making great strides. Just remind us your latest thinking. I mean, is the goal to have 100% direct? How quickly can you achieve it? Maybe some color around that for starters, if you would.
Sure. Hi, Rick. It's John. Thanks for the question. You know, we'll continue to progress, you know, through this year, driving, you know, more direct sales people into the field. That will, you know, likely elevate that ratio above 80% over time. That's what we would expect. You know, this said, we have some excellent, really aligned independent distributor partners who are putting up numbers that are really excellent. We'll continue to work with them along the way and continue to build out our direct channel as we move forward. I think you can continue to expect some progress in that ratio of direct as we continue to move ahead.
Right. Appreciating what you're saying about your strong, independent, distributors, John, I mean, is it a concern in terms of the pace of growth at all? Just, I'm saying this from stark ignorance, but do I worry that as you get to your max conversion levels that slows momentum or it just shifts to other factors, growth-driving factors?
I think it's probably the latter. Can you be a little more specific?
Yeah, I'm sorry if I'm not clear. I'm just thinking-
Sorry. Sorry.
The idea of going direct and having all these direct reps, just that kind of focus and intensity. Once you get to your sort of max level of conversion, does that slow your growth momentum in any way, shape, or form? In terms of-
Okay. Yeah, that's...
I'm looking ahead to 2024 and 2025. Once that process..
Right
I s finished.
Yeah. We'll continue to have, you know, high growth expectations for, you know, any of our new direct rep additions and any of our remaining independent distributors as we go forward. We don't concede on our growth expectations on either side. You know, we'll just continue to build the most effective distribution we can find in any given territory as we go forward and continue to drive high growth rates in this business. You know, run our playbook, launching new product innovations, training more surgeons, more DTC, and of course, reinforcing everything with strong clinical data sets. I think that's the way we see it, Rick.
Gotcha. On the ASPs, I was really impressed with the jump in your blended average selling price, obviously, and you've all explained it very clearly. How do we think about, you know, the sustainability of this level? Do we just assume as we see the cascade of innovative new products and the uptake of things like the Micro-Lapiplasty system, the SpeedPlate, is that blended ASP gonna move from here or move up from here? How do we think about it?
Yeah, Rick. John again. you know, one way to think about it is if you think about the mix of procedures we have, average Medicare reimbursement rates for facility materials used is ±$10,000. If we're at $6,200 today, you know, we definitely have more headroom to go in terms of addressing other procedures that coexist in a Lapiplasty case. We're gonna continue to look to innovate and provide new innovations for additional procedures so that our sales reps can stay in a Lapiplasty case, but more comprehensively solve all the interrelated problems of that bunion. you know, we do believe that there is more room to go up and to the right on the blended ASP.
It's hard to say where that ceiling is gonna max out. You know, we feel like the average reimbursement, and that's on the Medicare level, for the average case is somewhere around $10,000. The majority of our patient mix is actually commercial pay, where you have a premium to that in terms of reimbursement for implants or materials used in surgery. Yeah, I think we've got a nice runway of up, upward and to the right movement in our blended ASP over time.
Great
It could vary quarter. It could kind of wobble quarter to quarter, but over, you know, an annual term, I think you would continue to see that at a modest rate.
That's good. Thanks again.
Sure.
Our next question comes from Ryan Zimmerman of BTIG. Your line is open.
Hey, guys. Thanks for taking our questions and congrats on the nice quarter. I'll ask both my questions up front if that's okay. First, you know, as the DTC efforts grow, you know, the market's getting more competitive, you're reaching a certain level of scale. When do you think investors start to see leverage on the DTC spend in the P&L, Mark? The second question, I'll just ask this up front, is, you know, as we look at the different categories of surgeons in your customer base.
How do you think about the funnel of those surgeons progressing to more advanced options? You know, at what percentage or what time point does someone move, say, from a novice user or a general user to a center of distinction and the center of excellence, et cetera, et cetera. Thanks for taking the questions, guys.
Yeah. Thanks, Ryan. This is Mark. I think it's a great question about our DTC efforts. You know, we've really seen great activity from a DTC perspective. As we said, in previous calls, some of that investment will fluctuate quarter to quarter. Overall, we think it's a valuable way to invest and to train and to educate our patients, drive them to our website and make sure that they understand more about the Lapiplasty procedure. With regards to leverage on the P&L, you know, even this year we've talked about having increased leverage versus last year. We believe that some of that's coming this year. You know, if things go well, you know, maybe there'll be more to talk about next year.
It's a little premature for that, but, you know, we're already beginning to see some leverage and so we feel good about how that's playing out for this year, 2023. Maybe I'll have John talk about the funnel.
Sure. Sure, Ryan. Yeah, I think your question was around, you know, how surgeons are progressing through different levels.
Yeah.
I guess.
Yeah, just, you know, as you think about the broader customer base, I mean, you're at 25% of the market, you know, what percentage of those start to progress to the centers of distinction and so forth and so on, kind of up the ladder, if you will, and, you know, the pace of that shift, you know, and how that's changing maybe from what it was even just a year ago, as you introduce all these products and people, you know, become just extremely comfortable with the system? Thanks.
Ryan. You are very dialed into our centers and the surgeons on our website and then do a lot of great analysis there. You're probably a step ahead of me. I can say, you know, there's certain, you know, fixed criteria for achieving center of distinction, excellence, centurion and elite center status, you know, multiple items that play into that. They tend to evolve through those different titles over time and more experience with the product. What I can tell you is that this past year's first 12-month tenured surgeon group has adopted Lapiplasty more aggressively than any other prior first-year tenure group in the history of the business. They tend to be coming on to Lapiplasty faster and more aggressively.
We think that's, you know, largely due to the reputation that Lapiplasty has now as an established procedure, and it's getting more mainstream. They feel very comfortable embracing it a little more aggressively in their practice, versus a few years ago, where surgeons would try a couple cases, see how the patients do, wait a little bit, and then maybe come back. Respected peer effect is taking hold here. We've surveyed a lot of our new users, and they say the number one reason that they're coming to get trained on Lapiplasty now or adopting is because a respected peer of theirs is using Lapiplasty and having good results. We like what we see there. We think we're in the, you know, starting to get into the early majority part of the adoption curve.
It's exciting to see this.
Good stuff, John. Thank you. Appreciate it.
Sure, Ryan. You bet.
Thank you. Our next question comes from Richard Newitter with Truist. Your line is open.
Hi. Thanks for taking the questions. A couple from me here. maybe just first on, how you're compensating the now increasingly direct sales organization. You have more leverage, if you will, especially with this really pretty impressive, revenue per procedure, ASP increase. I guess one, what I'm trying to get at here is what's the... Where are you, focusing or emphasizing, reps to, you know, to drive growth? Is it any more or less towards higher revenue per procedure or opening new Lapiplasty customer accounts? I'm just trying to get a sense for how you balance that, especially with this new avenue of growth that's materializing.
Great, great question. Hi, Rich, it's John. You know, we keep it pretty straightforward with the sales team. They tend to be pretty much fully commissioned. They have a quota. They make a certain percentage during the quarter. If they make their quarter number, they can make a little more. You know, we kind of motivate them on that. On the other side, the management team is being compensated not only on hitting their regional numbers, but on the number of rep hires and the number of new reps that they add to the team. Then on how productive those reps get. That's kind of the way we've been doing it. They're also aligned with adding new surgeon users as well as part of their compensation plan.
They're out there working with the salespeople to identify new surgeons to bring to our training events, having a successful training event, and then getting back and making sure that that surgeon can adopt Lapiplasty in their practice efficiently. That's how we've been kind of, you know, working it. We don't have incentives to necessarily sell more products into a case or have a higher blended ASP, but it is an added benefit that we're starting to see now that we have a bigger bag, a bigger portfolio of products that can be implemented in those Lapiplasty cases. It's a great situation to be in. We find ourselves able to divide up more territories because there's more opportunity now, and that makes room for new reps who make new relationships with doctors that weren't being called on before.
Those doctors are coming to our trainings, and those new reps are now getting those doctors to convert to Lapiplasty. Hopefully, I answered your question there, but, if not, please let me know what I can do.
Got it. No, that definitely was helpful. Maybe just my follow-up on your DTC. I know you said you're putting a little more, a little sooner in 2023 relative to last year, at least. I was hoping, A, is there any quantification you can give us, you know, for how much your DTC spend is growing or what that dollar amount, you know, was last year or what you plan to do this year? You know, what was behind the decision to maybe accelerate some of that spend? How do you guys quantify the ROI, if you can? What should we be thinking about that from a leverage standpoint in the back half?
Yeah. Great, great question, Rich, and appreciate you being on the call. When we think about this year, really, we ended last year, 2022 was really our full year where we talked about it being an investment year, and we specifically called out the DTC as an investment. We did a lot of tracking with all throughout last year in all of our different channels in which we can make those investments. We felt really good about what was happening in the results of that DTC. That's why we came in this year and we really wanted to lean in. We've leaned in, you know, a good, you know, 30%-40% increase over last year. We feel like that's gonna support our growing surgeon base.
There was part of our thought process was, you know, we needed enough surgeons, Lapiplasty surgeons out there to really benefit from this DTC. There was no point in really leaning too far in without this large surgeon base. Now that we have, you know, 25% of all surgeons are using Lapiplasty, we just really felt that this was the year to lean into that. We've seen really good results last year. We've learned a lot last year. We continue to learn, we want to invest more this year because we've got this larger group of surgeons that can benefit.
Got it. Thank you for the answers, and congrats on a great quarter. Thank you.
Thanks, Rich.
Thanks, Rich.
Thank you for your question. Our next question comes from George Sellers with Stephens. Your line is open.
Hey, good afternoon. Thanks for the time, and congrats on the great quarter. Maybe, to start on the surgeon population and thinking about just the growth algorithm, how much would you attribute to surgeons who are using Lapiplasty for their Lapidus fusion procedures versus, converting surgeons to treating bunions, with Lapiplasty and doing a Lapidus fusion from a more traditional osteotomy? How much growth is associated with, driving greater penetration of surgeons who are already using Lapidus fusion procedures to treat bunions versus further penetrating that, surgeon who's still doing kind of the traditional osteotomy?
Yeah, great question. Hi, George. It's John. Well, we see two camps of surgeons, you've identified them really, really well. You have some surgeons that come out of training programs already highly, you know, Lapidus centric. You know, they believe in the principle of correcting deformity at the point of origin, that Lapidus is the correct way to do it. Those people that convert to Lapiplasty tend to embrace it, you know, very quickly, they'll use it for, you know, upwards of 70% of their cases.
The other, the other group are, and it's the majority of the surgeon population that, you know, follow the traditional algorithms that Lapidus fusion should be for the 15% or so of cases that are extreme in their deformity angles or they're hypermobile, and you really can't treat them effectively with an osteotomy. With those doctors, what we find is we expose them to Lapiplasty in our training programs. They go back and use it for their next severe case, what would be a Lapidus fusion for them that they struggled with in the past. They realize how straightforward and reproducible Lapiplasty is, so they get much more comfortable with it over time, and they begin to carve into their osteotomy base over time, starting with the severes and then going through the more moderate cases over time.
They'll progress to, you know, 40, 50%+ of their cases over time. We're having a lot of growth and success. I would say the majority of our revenue growth is coming from converting those more conservative, you know, osteotomy bias surgeons and converting their osteotomies to Lapiplasty.
Okay. That's really helpful. Then on Micro-Lapiplasty and some of the other devices that you commented on, apologies if I missed this, but could you give us an update on the full commercialization timeline for some of those additional devices?
Sure, yeah. Both Micro-Lapiplasty instrumentation, we've been doing select cases with Micro-Lapiplasty instrumentation and our prior implants, you know, already in a few centers. The SpeedPlate component is gonna come fully commercial, you know, late this year, towards the end of the year, probably more fourth quarter, and then ramp up through fourth quarter and into 2024. Those two kind of go hand in hand in a late 2023 launch.
Okay, great. Thank you so much for the time. Congrats again on the quarter.
Sure. Thanks, George. Appreciate it.
Thank you for your questions. At this time, I would like to turn it over to Vivian Cervantes for excuse me, for closing remarks.
Thank you, Theresa. Thanks everybody for joining us today. This concludes our call, and we look forward to our next update following the close of the Q2 of 2023.
Thank you for your participation, everyone. This does conclude the program. You may now disconnect.