UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
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(Commission File Number) |
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(IRS Employer Identification Number) |
(Address of principal executive offices, including Zip Code)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Item 2.02. Results of Operations and Financial Condition.
On March 3, 2022, Treace Medical Concepts, Inc. issued a press release regarding its financial results for the year ended December 31, 2021. A copy of the press release is furnished as Exhibit 99.1 to this Form 8-K.
This information is intended to be furnished under Item 2.02 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 |
Financial Statements and Exhibits.
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Exhibit No. |
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Description |
99.1 |
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Press Release of Treace Medical Concepts, Inc. issued on March 3, 2022 |
104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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TREACE MEDICAL CONCEPTS, INC. |
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Date: March 3, 2022 |
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By: |
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/s/ Mark L. Hair |
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Mark L. Hair |
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Chief Financial Officer |
Exhibit 99.1
Treace Medical Concepts Reports Fourth Quarter and Full Year 2021 Financial Results
PONTE VEDRA, Fla. – March 3, 2022—Treace Medical Concepts, Inc. (“Treace” or the “Company”) (NasdaqGS: TMCI), a medical technology company driving a paradigm shift in the surgical treatment of hallux valgus (commonly known as bunions), today reported financial results for the fourth quarter and full year ended December 31, 2021.
Recent Highlights:
“We are pleased with this strong performance driven by our bunion-focused direct sales channel, expanding direct-to-consumer programs, and focused R&D initiatives, paving the way for a 55% sequential increase in revenue during the fourth quarter,” said John T. Treace, CEO, Founder and Board Member of Treace. “With continued confidence in our commercial strategies and investments, complemented by our growing body of clinical evidence, we believe we remain well positioned for strong growth ahead.”
Fourth Quarter 2021 Financial Results
Revenue for the fourth quarter of 2021 was $33.4 million, representing an increase of 38.7% compared to $24.1 million in the fourth quarter of 2020. The increase was driven by an increased number of Lapiplasty® procedure kits sold and an expanded customer base.
Gross profit for the fourth quarter of 2021 was $27.1 million, compared to a gross profit of $19.0 million in the fourth quarter of 2020. Gross margin increased to 81.1% in the fourth quarter of 2021, compared to 78.9% in the fourth quarter of 2020. Gross margin expansion was due to volume increases without a corresponding increase in certain fixed costs as well as a higher blended average selling price.
Total operating expenses were $32.7 million in the fourth quarter of 2021, including sales and marketing (S&M) expenses of $22.3 million, research and development (R&D) expenses of $3.4 million, and general and administrative (G&A) expenses of $7.0 million. This compared to total operating expenses of $15.4 million, including S&M expenses of $11.4 million, R&D expenses of $1.9 million, and G&A expenses of $2.0 million in the fourth quarter of 2020. Expenses in the fourth quarter of 2021 reflect increased investments in sales and marketing as well as other G&A investments supporting our growing business.
Fourth quarter net loss attributable to common stockholders was ($6.6) million, or ($0.12) per share, compared to net income of $2.4 million, or $0.05 per share, for the same period of 2020.
Full Year 2021 Financial Results
Revenue for the year ended December 31, 2021 was $94.4 million, representing an increase of 64.6% compared to $57.4 million in 2020. The increase was driven by an increased number of Lapiplasty® procedure kits sold and an expanded customer base.
Gross profit for the year ended December 31, 2021 was $76.6 million, compared to a gross profit of $44.9 million in 2020. Gross margin increased to 81.1% in 2021, compared to 78.3% in 2020. Gross margin expansion was due to volume increases without a corresponding increase in certain fixed costs as well as a higher blended average selling price.
Total operating expenses for the year ended December 31, 2021 were $93.1 million, including S&M expenses of $64.5 million, R&D expenses of $10.2 million, and G&A expenses of $18.4 million. This compared to total operating expenses of $44.0 million, including S&M expenses of $31.7 million, R&D expenses of $5.8 million, and G&A expenses of $6.5 million in 2020. Expenses in 2021 reflect increased spending on targeted marketing initiatives, additions to our sales organization, higher commissions from increased sales, and increased public company related costs. During 2020, we delayed expenditures for surgeon education events, patient outreach campaigns and other planned sales and marketing expenses in connection with the pandemic.
Net loss attributable to common stockholders for the year ended December 31, 2021 was ($20.7) million, or ($0.43) per share, compared to net loss of ($4.3) million, or ($0.12) per share, in 2020.
Cash and cash equivalents were $105.8 million as of December 31, 2021.
Financial Outlook
Treace expects revenue for the full year 2022 to range from $125 million to $130 million, which represents approximately 32% to 38% growth over the Company’s 2021 revenue.
Webcast and Conference Call Details
Treace will host a conference call today, March 3, 2022, at 4:30 p.m. ET to discuss its fourth quarter and full year 2021 financial results. The dial-in numbers are (888) 708-0264 for domestic callers or (720) 405-2122 for international callers, followed by Conference ID: 6356356. The live webcast of the conference call will be available on the Investor Relations section of the Company’s website at https://investors.treace.com/. The webcast will be archived on the website following the completion of the call.
Use of Non-GAAP Financial Measures
To supplement the financial results presented in accordance with GAAP, this earnings release presents Adjusted EBITDA, which the Company defines as net loss before depreciation and amortization expense, stock-based compensation expense and interest income/expense. Adjusted EBITDA is presented in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Management uses Adjusted EBITDA to evaluate the Company’s operating performance and trends, as well as for making planning decisions. The Company believes that Adjusted EBITDA helps to identify underlying trends in the Company’s business that may otherwise be masked by the effect of the expenses and other items that it excludes in Adjusted EBITDA. Accordingly, the Company believes Adjusted EBITDA provides useful information to investors and others in understanding and evaluating the Company’s operating results, enhancing the overall understanding of its past performance and future prospects, and allowing for greater transparency with respect to a key financial metric used by the Company’s management in their financial and operational decision-making. The Company also presents Adjusted EBITDA because it believes investors, analysts and rating agencies consider it a useful metric in measuring the Company’s performance against other companies and its ability to meet its debt service obligations.
There are limitations related to the use of non-GAAP financial measures such as Adjusted EBITDA because they are not prepared in accordance with GAAP, may exclude significant expenses required by GAAP to be recognized in the Company’s financial statements, and may not be comparable to non-GAAP financial measures used by other companies. The Company encourages investors to carefully consider its results under GAAP, as well as its supplemental non‐GAAP information and the reconciliation between these presentations, to more fully understand its business. Reconciliations between GAAP and non‐GAAP results are presented below.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than
statements of historical fact are forward-looking statements, including, but not limited to the Company’s belief that it is well positioned for strong growth ahead; the Company’s expectations regarding market share gains; and the Company’s expected revenue and revenue growth rates for full year 2022. Forward-looking statements are based on management’s current assumptions and expectations of future events and trends, which affect or may affect the Company’s business, strategy, operations or financial performance, and actual results and other events may differ materially from those expressed or implied in such statements due to numerous risks and uncertainties. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Factors that could cause actual results or other events to differ materially from those contemplated in this press release can be found in the Risk Factors section of Treace’s public filings with the Securities and Exchange Commission (SEC), including in the final prospectus filed with the SEC on April 26, 2021 in connection with Treace’s initial public offering and its Annual Report on Form 10-K for the year ended December 31, 2021, which is expected to be filed with the SEC on or about March 4, 2022. Because forward-looking statements are inherently subject to risks and uncertainties, you should not rely on these forward-looking statements as predictions of future events. These forward-looking statements speak only as of their date and, except to the extent required by law, the Company undertakes no obligation to update these statements, whether as a result of any new information, future developments or otherwise. The Company’s results for the quarter and full year ended December 31, 2021 are not necessarily indicative of our operating results for any future periods.
About Treace Medical Concepts
Treace Medical Concepts, Inc. is a medical technology company with the goal of advancing the standard of care for the surgical management of bunion deformities and related midfoot correction. Bunions are complex 3-dimensional deformities that originate from an unstable joint in the middle of the foot. Treace has pioneered and patented the Lapiplasty® 3D Bunion Correction™ system – a combination of instruments, implants, and surgical methods designed to correct all 3 planes of the bunion deformity and secure the unstable joint, addressing the root cause of the bunion and helping patients get back to their active lifestyles. Treace recently expanded its offering with the Adductoplasty™ Midfoot Correction System, designed for reproducible correction of the midfoot to provide further support to hallux valgus patients. For more information, please visit www.treace.com.
Contacts:
Treace Medical Concepts
Mark L. Hair
Chief Financial Officer
mhair@treace.net
(904) 373-5940
Investors:
Gilmartin Group
Lynn Lewis or Vivian Cervantes
IR@treace.net
Treace Medical Concepts, Inc.
Statements of Operations and Comprehensive Income (Loss)
(in thousands, except share and per share amounts)
(unaudited)
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Three Months Ended |
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Twelve Months Ended |
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December 31, |
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December 31, |
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2021 |
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2020 |
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2021 |
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2020 |
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Revenue |
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$ |
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33,439 |
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$ |
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24,104 |
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$ |
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94,419 |
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$ |
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57,365 |
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Cost of goods sold |
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6,307 |
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5,085 |
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17,826 |
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12,470 |
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Gross profit |
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27,132 |
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19,019 |
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76,593 |
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44,895 |
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Operating expenses |
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Sales and marketing |
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22,325 |
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11,424 |
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64,467 |
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31,654 |
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Research and development |
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3,377 |
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1,922 |
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10,204 |
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5,847 |
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General and administrative |
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7,027 |
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2,039 |
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18,432 |
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6,539 |
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Total operating expenses |
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32,729 |
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15,385 |
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93,103 |
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44,040 |
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Income (loss) from operations |
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(5,597 |
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3,634 |
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(16,510 |
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855 |
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Interest and other income (expense), net |
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6 |
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1 |
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18 |
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(1,746 |
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Interest expense |
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(1,028 |
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(1,070 |
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(4,060 |
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(2,777 |
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Other expense, net |
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(1,022 |
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(1,069 |
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(4,042 |
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(4,523 |
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Net income (loss) and comprehensive income (loss) |
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(6,619 |
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2,565 |
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(20,552 |
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(3,668 |
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Convertible preferred stock cumulative and undeclared dividends |
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— |
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(161 |
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(196 |
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(640 |
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Net income (loss) attributable to common stockholders |
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$ |
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(6,619 |
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$ |
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2,404 |
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$ |
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(20,748 |
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$ |
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(4,308 |
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Net income (loss) per share attributable to common stockholders |
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Basic |
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$ |
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(0.12 |
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$ |
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0.06 |
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$ |
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(0.43 |
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$ |
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(0.12 |
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Diluted |
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$ |
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(0.12 |
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$ |
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0.05 |
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$ |
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(0.43 |
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$ |
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(0.12 |
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Weighted-average shares used in computing net loss per share attributable to common stockholders |
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Basic |
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53,618,371 |
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37,085,397 |
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48,415,679 |
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37,068,965 |
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Diluted |
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53,618,371 |
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49,596,028 |
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48,415,679 |
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37,068,965 |
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Treace Medical Concepts, Inc.
Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
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December 31, |
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2021 |
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2020 |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
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105,833 |
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$ |
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18,079 |
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Accounts receivable, net of allowance for doubtful accounts of $414 and $446 as of December 31, 2021 and 2020, respectively |
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18,568 |
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14,486 |
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Inventories |
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10,561 |
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7,820 |
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Prepaid expenses and other current assets |
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3,010 |
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593 |
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Total current assets |
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137,972 |
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40,978 |
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Property and equipment, net |
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2,849 |
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829 |
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Total assets |
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$ |
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140,821 |
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$ |
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41,807 |
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Liabilities and Stockholders’ Equity |
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Current liabilities |
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Accounts payable |
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$ |
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4,056 |
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$ |
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2,265 |
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Accrued liabilities |
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4,518 |
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1,848 |
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Accrued commissions |
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5,181 |
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3,513 |
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Accrued compensation |
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4,455 |
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2,183 |
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Short-term debt |
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- |
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1,788 |
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Total current liabilities |
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18,210 |
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11,597 |
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Derivative liability on term loan |
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173 |
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245 |
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Long-term debt, net of discount of $635 and $811 as of December 31, |
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29,365 |
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29,189 |
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2021 and 2020, respectively |
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Total liabilities |
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47,748 |
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41,031 |
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Commitments and contingencies (Note 7) |
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Stockholders’ equity |
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Series A convertible preferred stock, $0.001 par value, 0 shares authorized and 0 shares issued and outstanding as of December 31, 2021; 6,687,500 shares authorized and 6,687,475 shares issued and outstanding as of December 31, 2020, respectively; liquidation value of $0 and $8,000 as of December 31, 2021 and 2020, respectively |
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— |
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7,935 |
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Preferred stock, $0.001 par value, 5,000,000 shares authorized; 0 shares issued and outstanding as of December 31, 2021; 0 shares authorized, issued and outstanding as of December 31, 2020 |
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— |
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— |
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Common stock, $0.001 par value, 300,000,000 shares authorized; 54,181,082 issued and outstanding as of December 31, 2021; 66,875,000 shares authorized, 37,366,865 issued and outstanding as of December 31, 2020 |
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45 |
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28 |
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Common stock Class B, $0.001 par value, 0 shares authorized, issued and outstanding as of December 31, 2021; 1,000,000 shares authorized and 0 shares issued and outstanding as of December 31, 2020 |
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— |
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— |
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Additional paid-in capital |
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134,933 |
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14,166 |
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Accumulated deficit |
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(41,905 |
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(21,353 |
) |
Total stockholders’ equity |
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93,073 |
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|
776 |
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Total liabilities and stockholders’ equity |
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$ |
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140,821 |
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$ |
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41,807 |
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Treace Medical Concepts, Inc.
Statements of Cash Flows
(in thousands)
(unaudited)
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Year Ended December 31, |
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2021 |
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2020 |
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Cash flows from operating activities |
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Net loss |
$ |
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(20,552 |
) |
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$ |
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(3,668 |
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Adjustments to reconcile net loss to net cash used in operating activities |
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Depreciation and amortization expense |
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685 |
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1,210 |
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Provision for allowance for doubtful accounts |
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144 |
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216 |
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Share-based compensation expense |
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3,409 |
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919 |
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Amortization of debt issuance costs |
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176 |
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220 |
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Impairment of capitalized surgical instruments |
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— |
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144 |
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Gain on fair value adjustment to derivative liability |
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(72 |
) |
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— |
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Provision for inventory obsolescence |
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347 |
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1,144 |
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Loss on early settlement of debt |
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— |
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|
639 |
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Net changes in operating assets and liabilities: |
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Accounts Receivable |
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(4,226 |
) |
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(4,290 |
) |
Inventory |
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(3,088 |
) |
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(3,402 |
) |
Prepaid expenses and other assets |
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(2,417 |
) |
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(103 |
) |
Accounts payable |
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|
1,791 |
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|
|
|
1,334 |
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Accrued liabilities |
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|
6,610 |
|
|
|
|
1,143 |
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Net cash used in operating activities |
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(17,193 |
) |
|
|
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(4,494 |
) |
Cash flows from investing activities |
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Purchases of property and equipment |
|
|
(2,705 |
) |
|
|
|
(1,069 |
) |
Net cash used in investing activities |
|
|
(2,705 |
) |
|
|
|
(1,069 |
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Cash flows from financing activities |
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Proceeds from interest bearing debt |
|
— |
|
|
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29,530 |
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Payments on interest bearing debt |
|
— |
|
|
|
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(20,000 |
) |
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Proceeds from PPP Loan |
|
— |
|
|
|
|
1,788 |
|
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Repayments on PPP Loan |
|
|
(1,788 |
) |
|
|
— |
|
|
Proceeds from issuance of common stock upon initial public offering, net of issuance costs and underwriting fees of $10.6 million |
|
|
107,610 |
|
|
|
— |
|
|
Debt issuance costs |
|
— |
|
|
|
|
(179 |
) |
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Proceeds from exercise of employee stock options |
|
|
1,830 |
|
|
|
|
364 |
|
Net cash provided by financing activities |
|
|
107,652 |
|
|
|
|
11,503 |
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Net increase in cash and cash equivalents |
|
|
87,754 |
|
|
|
|
5,940 |
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Cash and cash equivalents at beginning of period |
|
|
18,079 |
|
|
|
|
12,139 |
|
Cash and cash equivalents at end of period |
$ |
|
105,833 |
|
|
$ |
|
18,079 |
|
Supplemental disclosure of cash flow information: |
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|
|
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|
||||
Cash paid for interest |
$ |
|
3,900 |
|
|
$ |
|
1,146 |
|
Noncash financing activities: |
|
|
|
|
|
||||
Issuance of common stock upon exercise of warrants |
$ |
|
1 |
|
|
$ |
— |
|
|
Conversion of convertible preferred stock and accrued dividends on convertible preferred stock into common stock |
$ |
|
7,935 |
|
|
$ |
— |
|
|
Initial fair value of derivative liability |
$ |
— |
|
|
$ |
|
245 |
|
|
Treace Medical Concepts, Inc.
Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA
|
|
Three Months Ended |
|
|
Twelve Months Ended |
|
||||||||||
|
|
December 31, |
|
|
December 30, |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
(6,619 |
) |
|
$ |
2,565 |
|
|
$ |
(20,552 |
) |
|
$ |
(3,668 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest |
|
|
1,022 |
|
|
|
1,068 |
|
|
|
4,042 |
|
|
|
4,523 |
|
Taxes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Depreciation & Amortization |
|
|
276 |
|
|
|
208 |
|
|
|
685 |
|
|
|
1,210 |
|
Non-cash compensation expense |
|
|
1,293 |
|
|
|
337 |
|
|
|
3,409 |
|
|
|
919 |
|
Adjusted EBITDA |
|
$ |
(4,028 |
) |
|
$ |
4,178 |
|
|
$ |
(12,416 |
) |
|
$ |
2,984 |
|