With us, we have the CEO, John Treace, and the CFO, Mark Hair. It's a 30-minute presentation, as always. There should be a few minutes at the end for Q&A. If you do have a question, you can type it into that Q&A icon at the bottom of your screen. With that done, it's all yours, John and Mark.
Great. Thanks, Jim. It's great to be here at the Sidoti Small Cap Conference and have the opportunity to talk a bit about Treace Medical. Next slide. Our safe harbor disclosures, please refer to our SEC filings available on our website for detailed presentation of risks. Next slide. Treace Medical is a medical device company with a focused mission to improve surgical outcomes for bunion patients. Since our IPO in 2021, we continue to execute on our strategic plans, resulting in strong market share gains and encouraging adjusted EBITDA progress with continued gains across our key operating metrics, reaffirming our belief that we have the right strategies in place to expand market penetration of our differentiated technologies. We are the bunion experts, and in 2015, we pioneered and commercialized the Lapiplasty 3D Bunion Correction procedure to bring a better solution to patients and surgeons.
Our innovative bunion solutions are backed by strong IP, marketed by the industry's only bunion-focused sales team, and have established Treace Medical as the largest dollar share player in the U.S. bunion market today. Next slide. With one in four adults in the U.S. affected by bunion deformities and such large gaps in treatment success, we believe the bunion market represents one of the most under-penetrated opportunities in med tech today. Bunions are hereditary and progressive in nature, they don't go away, but tend to worsen over time. This results in nearly four and a half million Americans seeking medical attention for their painful bunions every year in the U.S. We estimate about 25% of these patients are symptomatic surgical candidates. It's this group of just over 1 million patients that represents our $5 billion U.S. TAM.
This said, less than half of these candidates are opting to have surgery today, we believe that's largely due to the recognized downsides of past surgical approaches, notably pain, lengthy recovery, and high rates of recurrence. Next slide. We believe most bunion surgeries fail before the patient even leaves the operating room. There are three planes that are involved in a bunion deformity, modern research demonstrates how important correcting this third frontal plane is on surgical outcomes, as failure to properly correct it can result in 10 to 12 times greater risk that the patient's bunion will return. It's this third frontal or rotational plane that was historically unrecognized in conventional surgical treatments until our company and surgeon advisors targeted it and developed our initial solution over 10 years ago with Lapiplasty. Next slide.
With the introduction of the Lapiplasty 3D procedure, surgeons and patients now had a new option, a comprehensive 3D fix for this 3D problem, and one that can lead to more consistent and more enduring corrections. Lapiplasty offers proprietary instrumentation and a surgical method that allows surgeons to confidently and reproducibly correct all three planes of the bunion deformity in four straightforward steps. Without the patented Lapiplasty tools and methods, this is a very challenging procedure for surgeons to perform. Lapiplasty effectively delivered surgeons a paint-by-numbers approach to three-plane bunion correction. Along with this, as well as 10 years of positive clinical outcomes and our continual commitment to making Lapiplasty faster, easier, and even more reproducible, has allowed Lapiplasty to be adopted across a broad surgeon community. Next slide.
We've strategically invested in multiple clinical data sets to track and report the results of our Lapiplasty patient outcomes. Last September, we announced peer-reviewed publication of positive four-year interim results from our ALIGN3D multi-center Lapiplasty study. Results demonstrated low recurrence rates and significant improvements in both pain and patient-reported outcome scores. The unique combination of reproducible outcomes and broad surgeon adoption, supported by this level of differentiating clinical evidence, has made Lapiplasty the gold standard for 3D Lapidus bunion correction today. Next slide. Now that we have a large bunion-focused sales team in place and a growing base of over 3,300 surgeon customers, we have evolved Treace Medical from a single technology Lapiplasty company to a comprehensive bunion solutions portfolio company.
With our broad suite of 3D bunion solutions now in hand, we're highly focused on accelerating our penetration into the bunion market and advancing our leadership position while also leveraging the foundation we've built within our customer base to introduce new products aimed at increasing our procedure volumes and expanding our wallet share over time. Next slide. Here you see the family of advanced 3D bunion correction systems our surgeons now have to target all four classes of bunions. As focused experts in this space, this is what we do best, develop highly instrumented 3D approaches that can truly democratize these challenging procedures to speed adoption across the broad surgeon community. Our new Nanoplasty and Percuplasty 3D MIS systems target the high-volume osteotomy segment of the market, a segment that we estimate represents about 70% of the 450,000 annual bunion cases in the U.S.
We have our new SpeedMTP system, which targets roughly 20% of bunion patients who also have an arthritic great toe or MTP joint. MTP fusion is one of the most common fusion procedures performed by foot and ankle surgeons, making it strategically important for Treace to serve and innovate in. Prior to launching these three new systems, we estimate we've captured about 25% on average of our 3,300 customers' total bunion-related surgical volume. In 2026, we're laser-focused on penetrating the remaining 75% of their cases by leveraging this expanded portfolio of targeted bunion solutions. We're encouraged by the early uptake that we're seeing. In just three-quarters into full availability of these systems, we're already seeing accelerated mid-single-digit bunion procedure volume growth. Next slide.
At a high level, a key component of our innovation strategy is making our 3D bunion procedures less invasive, resulting in less pain, quicker recovery, and minimizing visible scars. We believe this not only makes our procedures more attractive to patients today, but more appealing to an even larger number of the nearly four and a half million U.S. bunion sufferers in the future. Surgeon and patient interest in minimally invasive versus traditional open bunion surgery is high. From a patient's point of view, you can see how much more appealing a Treace MIS procedure would be versus a traditional open procedure.
That said, there are some real rate limiters to expanding this emerging segment of the high-volume osteotomy market, specifically steep learning curves, high variability of outcomes, and lack of attention to correcting the third frontal plane of the deformity with the current MIS approaches that exist today. As a result, we believe only about 15% of the estimated 300,000 metatarsal osteotomies are being performed with MIS approaches today. Next slide. This is changing. Treace Medical is now a driving force in this segment and pioneering the future of MIS bunion surgery with a full suite of advanced 3D technologies to meet the evolving needs and preferences of surgeons and patients.
Our Percuplasty and Nanoplasty systems are performed through poke holes or tiny incisions and provide a unique experience for the surgeon, a highly instrumented procedure that allows them to dial in all three planes of the deformity with the control and the confidence that they need. We've complemented these with our own MIS power system as well. This is a console and handpiece that powers the single-use cutting burrs used in our Percuplasty procedure, and that can also be used widely across the foot for a variety of other MIS surgical procedures. MIS is on the rise. We believe we're well-positioned to win in this space. During 2025, we had already enabled hundreds of first-time MIS surgeon users, as well as experienced MIS surgeons using competitive products to confidently introduce our advanced 3D procedures into their practice. We're just getting started. Next slide.
We estimate Lapidus fusion represents about 30% of the estimated 450,000 annual bunion procedures today in the U.S. It also represents the largest dollar segment of the bunion market. This is a market segment where we are the recognized leaders. Since 2015, we've been hyper-focused on advancing and evolving our Lapiplasty technology, making it easier, faster, and minimally invasive with our latest Micro-Lapiplasty option. In 2026, we plan to commercialize our next-generation Lapiplasty platform known as Lapiplasty Lightning. Lightning combines next-generation 3D correction instrumentation with new implants based on our novel SpeedPlate hybrid fixation technology. Lightning not only reduces steps for a faster procedure, importantly, it provides surgeons greater accuracy and greater control over their 3D correction. We performed our first live case using the Lapiplasty technology successfully early this year and look forward to commercializing it towards the end of the year.
The age of personalized surgery is here. We continue to innovate and expand surgeon access to our IntelliGuide PSI platform. This is the industry's first and only preoperative planning and patient-specific cut guide system for bunion and midfoot deformities. Not only can our IntelliGuide technology offer a personalized treatment for the patient, but it streamlines procedures and gives surgeons greater confidence and control, particularly when they're addressing more challenging deformities and revisional surgeries. Next slide. While focused on deeply penetrating the bunion market, we've been strategically adding more complementary technologies to allow our sales force to tap into adjacent procedures and more fully service their surgeons' needs over time. During 2025, we expanded our SpeedPlate and Sterling instrument lines with multiple launches within these categories. We also introduced the company's first biologics platform.
In 2026, we're adding new offerings to each of these categories and commercializing our SuperBite line of compression screws, arming our reps with yet another bread-and-butter fixation platform so they can more fully service their customers' needs and their cases. All these technologies, importantly, are designed to feed into our core bunion-related procedures while also tapping into new procedures beyond bunions throughout the foot and ankle. Importantly, these new procedures are performed by our same customers and in the same setting of care. This allows our reps to bring greater value to their customers while also creating greater selling efficiency and scalability. Next slide. Speaking now to our go-to-market strategy. First, we're focused on addressing foot and ankle surgeons' most frequently performed surgeries with a comprehensive suite of best-in-class procedural solutions.
We provide surgeons excellent medical education and hands-on training with these technologies in our Bunion Masters training programs. This enables our new surgeons to be well-equipped to confidently incorporate our procedures into their practices. Our surgeons are supported by the expertise of our fleet of clinical specialist employees and our bunion-focused direct sales team, a team that we will continue to expand in 2026 with the addition of additional experienced foot and ankle sales reps. We believe our focused approach and our passion and commitment to helping our surgeons achieve better and better outcomes for their bunion patients is a key differentiator for our company, and a reason why so many surgeons embrace Treace products. Next slide.
Our goal is to increase our rate of penetration into the $5 billion+ U.S bunion market by leveraging our comprehensive bunion portfolio and our focused sales team, while adding complementary technologies to increase customer wallet share over time. We made significant progress towards this goal by increasing our surgeon customer base from 1,275 active surgeons in 2020 to over 3,300 active surgeons in 2025, a 21% CAGR in surgeon user growth over the past five years. Our surgeon base, on average, uses more of our products each year as they choose to treat more of their patients with our growing portfolio of best-in-class procedures and technologies. We believe the strategy's working. As of Q1, approximately 35% of our Lapiplasty surgeon user base had incorporated at least one of our three new bunion systems that we launched in 2025 into their practice.
This represents an increase over the 25% we reported within the fourth quarter of 2025. We're also encouraged to see approximately 30% of our new surgeons who became Treace customers initially using one of our three new bunion technologies launched last year have also used Lapiplasty technology, which we indicate believes a pull-through to Lapiplasty. All this has driven our bunion market penetration to nearly 8% of all surgical bunion cases in the U.S. during 2025, doubling our penetration over the last four years. Next slide. While we've been building this market position, we've also made significant progress on improving our profitability and reducing our cash usage. We have a great business model, which enables us to sustain strong gross margins and scale our operating expenses. In 2024, we improved adjusted EBITDA by 55% year-over-year, putting us in a much stronger footing.
In 2025, we reduced our adjusted EBITDA loss to $3.9 million, a 64% improvement over the prior year. Along with these improvements, we also reduced cash usage by 46% in 2025 versus the prior year, and we expect a reduction in cash usage of approximately 50% for the full year 2026 as compared to 2025. We also strengthened our balance sheet by securing a new debt facility in the fourth quarter of 2025, giving us more flexibility to support and accelerate our commercial plans and extending our interest-only payments for another four years. Next slide. As a leader in the largest and most under-penetrated segment of the foot and ankle market, we have now evolved our company from a single technology player to a diversified and comprehensive bunion portfolio company.
We've seen positive customer response and uptake on our new technologies, with strengthening procedure volumes in the back half of 2025 and early 2026, a trend we expect to continue through the rest of the year as we continue to gain market share. We have a robust product pipeline coming behind this, plus additional drivers we expect to continue to fuel the growth of the company in years to come. Thank you.
Thank you, John. For investors with questions, as I said, you can type them into that Q&A tab at the bottom of your screen. I have a few of my own to start with. Can you talk about the reimbursement environment for both the Lapiplasty and the osteotomy procedures?
Sure, Jim. Good question. Lapidus fusion, the CPT codes carry a higher premium reimbursement rate for product reimbursement than osteotomies do in general. Osteotomies can be somewhere in the 50%-70% of what a Lapiplasty® or a Lapidus fusion product reimbursement amount might be.
what-
There are differences in these price points that go along with that reimbursement.
What about the physician reimbursement? How do they compare for the different types of procedures?
They're not too different. I don't think reimbursement between the two ways of doing the surgery, a Lapidus type or an osteotomy type, is really a decision driver for the surgeon. It's more what's appropriate for the patient and maybe some of those patient preferences as well.
Things like time to recover?
Yeah. There can be some less pain, maybe less swelling with some of the minimally invasive osteotomy procedures relative to a Lapiplasty. That said, in terms of time to get back to full function, they're about the same. It's typically three to four months before the bones have rejoined together and fused, and you can rely on the bone, not the hardware, to support the activity of the patient. In the near term, maybe a little less pain, a little less swelling, on the minimally invasive osteotomy side. Getting back to full activity, they're equal, more or less.
Your company made the, I guess, the long-term decision to focus on the lower price point products. What was really driving that shift?
Yeah, great. Thanks for the question. We started the company with Lapiplasty, and at the time that we introduced Lapiplasty in late 2015, Lapidus fusion as a percentage of the overall mix, we estimate it was around 15% of overall bunion cases. Over 10 years, we drove Lapiplasty into the market very effectively. We introduced a procedure that could be reproduced, taught really well, and executed reliably by surgeons. It was a very great definitive fix for not only bad bunions, severe bunions, but also moderate and a lot of mild bunions. Surgeons, we drove from 15% to 30%, maybe even higher, of the overall mix of bunion surgeries towards a Lapiplasty or a Lapidus type.
To get to the next phase of growth, we had to tap into that other 70%. That 70% of the market is the osteotomy segment that does have a lower reimbursement, there's very high volume there was an emerging trend towards wanting to do these rather than open, the way we showed on that slide, with the big incisions and big scars to poke holes and tiny incisions. A few years ago, we started to develop products to serve that segment, to transform the company into a broad provider, have a portfolio where we can go after 100% of the bunion base, not just play in that 30% that we had pushed. We have about 3,300 surgeon customers, with Lapiplasty alone, we have about 25% of their overall bunion business.
The new three products we launched last year are targeting the other 75%. That's what we're working on penetrating, that's accelerating our procedure volumes right now, even though our top-line revenue is challenged temporarily. Underneath all that, there's accelerating procedure volume. Once we work through that, we launched the products in Q3 last year, the new products that have lower price points, lower reimbursement. We annualized that in Q3 this year, that's why the guide that I believe most see us as high single digits in Q4. It's an exciting time. We needed to enter that space. We've entered with really incredibly designed products that can address what's holding back the minimally invasive trend in that big osteotomy segment, that's adaptability, competence in performing the procedure.
Our surgeons that helped us design our minimally invasive osteotomy products are world-renowned and some of the best at minimally invasive bunion surgery in the world. They will tell you that there's a 40-50 surgical case learning curve to becoming proficient doing these minimally invasive osteotomies. With our breakthrough instrumentation, we can cut that down to getting trained in a simulated surgical environment and doing two, three, four, maybe five cases. Then the surgeons, they've got it, they can adopt it into their practice. Today, there may only be about 15% of those 300,000 osteotomies being done truly minimally invasively. Now we can go expand that, like we did back in the early days with Lapidus, where it was 15%, we expanded that beyond 30%. That's where we are.
It sounds like a similar approach. You made the Lapidus procedure kind of paint by numbers, and you're trying to do the same thing with these osteotomy procedures.
Absolutely. Let them dial in that third frontal plane that's been neglected or ignored, so that not only are we delivering a minimally invasive osteotomy solution, but we believe a more enduring correction because we're fixing the third plane that's so associated. If you don't fix that third plane, recurrence rates in the literature are much higher. We have the instrumentation that allows that to be done reproducibly and confidently by the surgeon. That's a hard part of the procedure.
I looked at the guidance. It looks like you're looking for a pretty significant reduction in cash burn this year without no meaningful change in the EBITDA. How does that happen?
Maybe I'll jump in there. Jim, that's a great question. We've talked a lot about the expansion of our product portfolio, and that a lot of these new products came out last year that are shown on the screen right now. There was some additional investment that takes place. It's the capitalized surgical instrumentation that assists the surgeons in performing the procedures. Those are items that are owned by the company. They're put on our balance sheet. We had some incremental investment last year. This year, we just don't have that same level of investment. We also had more medical education and training last year on these new procedures and products that we'll be able to step back a little bit this year as well.
We've made a commitment to reduce our cash burn by 50% this year, and we believe that that's very achievable given the high gross margins and the leverage that we have in the P&L.
You mentioned the sales force, direct sales agents you have that you're expanding. Can you give us some sense on how many agents you have now and how many you expect to have by the end of the year?
I believe we were at the end of last year in the 215 range, and that's using a count of W-2s and some, FTE, 1099s. 80% of our revenue comes from our direct channel, plus or minus. That's the significant portion, contributor and driver, and they're very well-trained experts at these procedures, and that's unique in the industry. Nobody has a focused expert, direct employee bunion sales team. Our customers really value that. They're really in there partnering with the doctors, trying to make sure they get the best outcomes for every patient that's on the table with our products.
Can you give us a sense, do you try to grow at 5%, 10% this year?
We're growing opportunistically. What we've seen out in the marketplace is now that we have an expanded portfolio, a lot of competitive sales reps that carry relationships with new surgeons that we haven't done business with before, they're wanting to come to Treace. They may be with larger companies where they're getting their comp taken down, or the innovation has stalled, and it's just not as much fun anymore, and they're now turning to come to Treace Medical. We're planning, intentionally to grow the sales team, not the way we were doubling it in prior years, three years ago. Modestly grow it, but bringing in people that can actually help us grow the business more quickly and have that foot and ankle experience under them already.
It sounds like these are folks that can hit the ground running, that you're not going to have to spend six or 12 months to get them up to speed.
Many of them, yes. Some others, we have to respect their non-competes and make sure that they participate here in a way that fulfills their obligations. Some of those have a lag. We love the people that are coming, looking at Treace now. It's exciting to see people reacting to the portfolio they see. As I mentioned, every procedure we're doing, and our volume is growing much faster than our top line. Every time we get a new case with one of these new products, we're displacing some competitive product and reducing the cases that a competitive rep is getting. We're doing well there. We like what we see, and I think they see that, and they said, "Let's get on the other side of this and come to Treace.
You're guided to just above $200 million in revenue for the year. What level do you think you need to achieve in terms of revenue to get close to profitability?
Yeah. We haven't given a specific date or revenue range for that, but as John mentioned, we're fully planning to have acceleration of our top-line revenue as we come out of Q4 this year. Once we have a little bit more experience with all these new products and what our revenue growth rate is coming out of 2026, we'll be better equipped to give more insightful and thoughtful guidance next year. We have seen improvement in the leverage on the P&L and substantial reductions in the cash burn.
We believe that we're on track. We're going to get there from an adjusted EBITDA perspective soon. We're targeting some improvements, and we believe that we can get there and be independent from a cash flow perspective, and that'll be coming in the next year or two here. We're focused on growing the top line as well as being very fiscally responsible and prudent and effective, efficient in our leverage on the P&L.
I saw this morning you had a press release, another product out. Is that one of these new MIS products?
Jim, that was actually a product that fits into the category of expanding our presence throughout the foot and ankle. This was our HyperPlate XM. This is a derivation, next generation of our SpeedPlate implant fixation technology that dynamically compresses the joints together, we have locking screws built into it that add greater fixation and stability. What we're doing is taking that great technology that we've used in Lapiplasty and advancing Lapiplasty and into the SpeedMTP that you see there on the screen on the right side, that hybrid screws with plate technology, we're bringing it to the midfoot bones and the bones in the back of the foot. That's dovetailing along with our Percuplasty compression screw line. Now our salespeople are getting called into midfoot surgical cases, rearfoot surgical cases. These are brand-new procedures that we've never been in before.
Some of these have lower ASPs than maybe a Lapiplasty. Some of them can have ASPs when all the products are used that are twice a Lapiplasty. Some complex procedures where they're fusing bigger bones in the back of the foot. They're bones that are known to fuse or heal at a lower rate. Bringing advanced technology that we've used successfully to promote fusion in these other areas into those bones specifically, that's a new volume driver for us, and that's getting our sales reps called into more cases as we bring those into full commercial launch by the end of Q3. That's the third driver leg. We're expanding our foot-
The bunions.
Throughout. Not taking our eye off the bunion, these are the same procedures that our existing customer base perform. They're using this technology. They love it, now we've got something for other procedures they do, so they'll give those cases to their Treace rep. The early experience we're seeing, we really like this opportunity.
We are at time, just one last quick one, if you could. To give a quick summary of why you think this is a good time for investors to look at the stock.
I think we've got a lot of opportunity ahead of us. I believe, this is a unique moment in the time of the company where a lot of people are sitting on the sidelines, and we're a wait to show them mode. I think there's people that like me, who have bought during this period, and there are other people that probably will wait to see the top-line growth return, and I respect that as well. We've got a lot of unique attributes to this business, and we're expanding the product portfolio and working our way around the foot and getting into a whole new volume of procedures that the company's never been in before while we keep penetrating the bunion procedure market.
A lot of ways we can grow right now, and we're hitting them on all cylinders, and it's a unique opportunity where, yeah, the company's at a low valuation.
Great. It was the first time to present at one of our conferences, but very interesting story, and hopefully you'll come back again, give us an update.
Would love to do that, Jim. Thank you so much.
Thank you. Thank you, everyone, for attending.