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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(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 November 5, 2024, Treace Medical Concepts, Inc. (the “Company”) issued a press release regarding its financial results for the quarter ended September 30, 2024. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.
This information furnished under this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, except as shall be expressly set forth by specific reference in such 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 November 5, 2024 |
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: November 5, 2024 |
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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 Third Quarter 2024 Financial Results
PONTE VEDRA, Fla. – November 5, 2024 – Treace Medical Concepts, Inc. ("Treace" or the "Company") (NasdaqGS: TMCI), a medical technology company driving a fundamental shift in the surgical treatment of bunions and related midfoot deformities through its flagship Lapiplasty® and Adductoplasty® Procedures, today reported financial results for the third quarter ended September 30, 2024.
Recent Highlights
“Our third quarter results reflect our focused execution to drive growth in the business while steadily improving our operating leverage. In addition, we are excited to announce the market release of Nanoplasty™ 3D MIS System, our first entry into the osteotomy market,” said John T. Treace, CEO and Founder of Treace. “We believe this innovative new system, combined with our market leading Lapiplasty®, Adductoplasty® and robust pipeline of future technology and procedure offerings, will further drive penetration into the overall bunion market and continue to expand our surgeon customer base through 2025 and beyond.”
Third Quarter 2024 Financial Results
Revenue for the third quarter of 2024 was $45.1 million, representing an increase of 11% compared to $40.8 million in the third quarter of 2023. The increase was driven by product mix shift that resulted from increased adoption of newer technologies and increased sales of ancillary products used in bunion cases and an increase in active surgeons.
Gross profit for the third quarter of 2024 was $36.1 million compared to a gross profit of $32.8 million in the third quarter of 2023. Gross margin totaled 80.1% in the third quarter of 2024, compared to 80.4% in the third quarter of 2023, primarily due to an increase in inventory provisions and a shift in product mix, partially offset by lower royalty rates.
Total operating expenses were $51.3 million in the third quarter of 2024, compared to total operating expenses of $50.6 million in the third quarter of 2023. Increased operating expenses in the third quarter of 2024 reflect increased share-based compensation expense, investments in product innovation, and support for other corporate initiatives.
Page | 1
Third quarter 2024 net loss was ($15.4) million, or ($0.25) per share, compared to ($17.5) million, or ($0.28) per share, for the same period in 2023. Adjusted EBITDA loss was ($5.1) million in the third quarter of 2024 compared to a loss of ($9.2) million for the same period in 2023. See below for additional information and a reconciliation of non-GAAP financial information.
Cash, cash equivalents, and marketable securities totaled $82.8 million as of September 30, 2024. The Company believes it has sufficient balance sheet strength and flexibility to continue effectively executing on its strategic investments and growth initiatives for the foreseeable future.
Financial Outlook
The Company is revising full-year 2024 revenue guidance to $204 million to $211 million, representing growth of 9% to 13%, compared to full-year 2023. This compares to previous guidance of $201 million to $211 million.
The Company continues to expect our Adjusted EBITDA loss to decrease by approximately 50% compared to full-year 2023.*
* A reconciliation of Adjusted EBITDA to GAAP net loss on a forward-looking basis is not available without unreasonable efforts due to the high variability, complexity and low visibility with respect to the items excluded from this non-GAAP measure.
Webcast and Conference Call Details
Treace will host a conference call today, November 5, 2024, at 4:30 p.m. ET to discuss its third quarter 2024 financial results. Investors interested in listening to the conference call may do so by registering. Once registered, participants will receive dial-in numbers and a unique pin to join the call and ask questions. The live webcast of the conference call will be available on the Investor Relations section of the Company’s website at 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, interest income, interest expense, taxes, share-based compensation expense, acquisition-related costs, restructuring costs, customer credit loss, and debt extinguishment loss. Non-GAAP financial measures such as Adjusted EBITDA are presented in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Management uses non-GAAP financial measures 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 income and expenses and other items that it excludes in its calculation of Adjusted EBITDA. Accordingly, the Company believes this non-GAAP financial measure 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 key financial metrics used by the Company’s management in their financial and operational decision-making. The Company also presents this non-GAAP financial measure because it believes investors, analysts and rating agencies consider it to be 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 income and 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. A reconciliation between GAAP and non-GAAP results is presented below.
Page | 2
Forward-Looking Statements
This press release and statements made during the Company’s earnings call contain 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: revenue guidance and estimated revenue growth rates for full-year 2024; estimated quarterly revenue growth rates; sufficient balance sheet strength and flexibility to continue effectively executing on its strategic investments and growth initiatives for the foreseeable future; anticipated liquidity; expected rate of Adjusted EBITDA improvement; ability to effectively respond to and mitigate the impact of challenges in the current market environment, including in response to increased competition and accelerating adoption of MIS osteotomy solutions; anticipated future product launches and the timing of such product launches, including its planned 3D MIS osteotomy platforms and the number and pace of new product innovations through 2025; ability to increase its procedure volumes, expand its surgeon customer base, provide a suite of technologies to address the evolving needs of bunion surgeons and patients, and increase penetration into the overall bunion market; strategic investments supporting its market position and long-term outlook; ability to protect and enforce its intellectual property rights, including through its recently filed patent infringement and unfair competition suit; success in defending against infringement of its intellectual property by third parties, including its competitors; expected seasonality; and anticipated pace of growth in the foot and ankle market . 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 its Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 27, 2024, and its subsequent SEC filings. 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 ended September 30, 2024 are not necessarily indicative of its operating results for any future periods.
Internet Posting of Information
Treace routinely posts information that may be important to investors in the “Investor Relations” section of its website at www.treace.com. The Company encourages investors and potential investors to consult the Treace website regularly for important information about Treace.
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 and related midfoot deformities. Bunions are complex 3-dimensional deformities that originate from an unstable joint in the middle of the foot and affect approximately 67 million Americans, of which Treace estimates 1.1 million are annual surgical candidates. Treace has pioneered and patented the Lapiplasty® 3D Bunion Correction® System – a combination of instruments, implants, and surgical methods designed to surgically correct all three 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. To further support the needs of bunion patients, Treace has introduced its Adductoplasty® Midfoot Correction System, designed for reproducible surgical correction of midfoot deformities. The Company continues to expand its footprint in the foot and ankle market with the introduction of its SpeedPlate™ Rapid Compression Implants, an innovative fixation platform with broad versatility across Lapiplasty® and Adductoplasty® procedures, as well as other common bone fusion procedures of the foot. For more information, please visit www.treace.com.
To learn more about Treace, connect with us on LinkedIn, X, Facebook and Instagram.
Page | 3
Contacts:
Treace Medical Concepts
Mark L. Hair
Chief Financial Officer
mhair@treace.net
(904) 373-5940
Investors:
Gilmartin Group
Vivian Cervantes
IR@treace.net
Page | 4
Treace Medical Concepts, Inc.
Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
(unaudited)
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Three Months Ended |
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Nine Months Ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Revenue |
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$ |
45,086 |
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$ |
40,758 |
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$ |
140,649 |
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$ |
124,906 |
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Cost of goods sold |
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8,954 |
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7,998 |
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27,862 |
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23,712 |
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Gross profit |
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36,132 |
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32,760 |
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112,787 |
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101,194 |
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Operating expenses |
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Sales and marketing |
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32,775 |
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33,542 |
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110,784 |
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100,970 |
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Research and development |
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4,963 |
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4,350 |
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15,379 |
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11,288 |
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General and administrative |
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13,528 |
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12,686 |
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42,108 |
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33,582 |
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Total operating expenses |
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51,266 |
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50,578 |
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168,271 |
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145,840 |
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Loss from operations |
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(15,134 |
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(17,818 |
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(55,484 |
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(44,646 |
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Interest income |
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1,067 |
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1,570 |
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3,978 |
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5,017 |
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Interest expense |
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(1,313 |
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(1,296 |
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(3,942 |
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(3,863 |
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Other income, net |
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20 |
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23 |
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206 |
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246 |
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Other non-operating income (expense), net |
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(226 |
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297 |
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242 |
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1,400 |
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Net loss |
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$ |
(15,360 |
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$ |
(17,521 |
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$ |
(55,242 |
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$ |
(43,246 |
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Other comprehensive income (loss) |
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Unrealized gain (loss) on marketable securities |
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$ |
217 |
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$ |
71 |
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$ |
28 |
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$ |
(121 |
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Comprehensive loss |
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$ |
(15,143 |
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$ |
(17,450 |
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$ |
(55,214 |
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$ |
(43,367 |
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Net loss per share, basic and diluted |
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$ |
(0.25 |
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$ |
(0.28 |
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$ |
(0.89 |
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$ |
(0.71 |
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Weighted-average shares used in computing net loss per share, basic and diluted |
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62,229,463 |
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61,562,494 |
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62,035,293 |
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60,566,655 |
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Page | 5
Treace Medical Concepts, Inc.
Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
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September 30, |
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December 31, |
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2024 |
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2023 |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
12,110 |
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$ |
12,982 |
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Marketable securities, short-term |
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70,689 |
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110,216 |
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Accounts receivable, net of allowance for credit losses of $743 and $980 as of September 30, 2024 and December 31, 2023, respectively |
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24,177 |
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38,063 |
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Inventories |
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43,611 |
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29,245 |
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Prepaid expenses and other current assets |
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7,015 |
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7,853 |
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Total current assets |
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157,602 |
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198,359 |
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Property and equipment, net |
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25,168 |
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22,298 |
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Intangible assets, net of accumulated amortization of $1,188 and $475 as of September 30, 2024 and December 31, 2023, respectively |
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8,312 |
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9,025 |
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Goodwill |
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12,815 |
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12,815 |
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Operating lease right-of-use assets |
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8,569 |
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9,264 |
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Other non-current assets |
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458 |
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146 |
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Total assets |
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$ |
212,924 |
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$ |
251,907 |
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Liabilities and Stockholders’ Equity |
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Current liabilities |
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Accounts payable |
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$ |
18,649 |
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$ |
11,835 |
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Accrued liabilities |
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8,098 |
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10,458 |
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Accrued commissions |
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5,347 |
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10,759 |
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Accrued compensation |
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5,598 |
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7,549 |
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Other liabilities |
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571 |
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4,432 |
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Total current liabilities |
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38,263 |
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45,033 |
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Long-term debt, net of discount of $769 and $992 as of September 30, 2024 and December 31, 2023, respectively |
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53,231 |
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53,008 |
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Operating lease liabilities, net of current portion |
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16,487 |
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15,891 |
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Other long-term liabilities |
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37 |
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37 |
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Total liabilities |
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108,018 |
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113,969 |
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Commitments and contingencies (Note 7) |
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Stockholders’ equity |
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Preferred stock, $0.001 par value, 5,000,000 shares authorized as of September 30, 2024 and December 31, 2023; 0 shares issued and outstanding as of September 30, 2024 and December 31, 2023 |
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— |
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— |
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Common stock, $0.001 par value, 300,000,000 shares authorized; 62,294,975 and 61,749,654 issued, and 62,275,371 and 61,749,654 outstanding as of September 30, 2024 and December 31, 2023, respectively |
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62 |
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62 |
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Additional paid-in capital |
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294,392 |
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271,973 |
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Accumulated deficit |
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(189,489 |
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(134,247 |
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Accumulated other comprehensive (loss) income |
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191 |
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163 |
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Treasury stock, at cost; 19,604 and 1,218 shares as of September 30, 2024 and December 31, 2023, respectively |
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(250 |
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(13 |
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Total stockholders’ equity |
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104,906 |
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137,938 |
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Total liabilities and stockholders’ equity |
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$ |
212,924 |
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$ |
251,907 |
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Page | 6
Treace Medical Concepts, Inc.
Statements of Cash Flows
(in thousands)
(unaudited)
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Nine Months Ended September 30, |
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2024 |
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2023 |
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Cash flows from operating activities |
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Net loss |
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$ |
(55,242 |
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$ |
(43,246 |
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Adjustments to reconcile net loss to net cash used in operating |
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Depreciation and amortization expense |
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6,182 |
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3,583 |
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Provision for allowance for credit losses |
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2,381 |
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79 |
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Share-based compensation expense |
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22,048 |
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11,480 |
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Non-cash lease expense |
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607 |
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1,868 |
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Amortization of debt issuance costs |
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223 |
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223 |
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Accretion (amortization) of discount (premium) on marketable securities, net |
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(918 |
) |
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(1,031 |
) |
Other, net |
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180 |
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164 |
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Net changes in operating assets and liabilities, net of acquisitions |
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Accounts receivable |
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11,505 |
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4,121 |
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Inventory |
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(14,366 |
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(9,915 |
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Prepaid expenses and other assets |
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838 |
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(1,028 |
) |
Other non-current assets |
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(312 |
) |
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— |
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Operating lease liabilities |
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(147 |
) |
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497 |
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Accounts payable |
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6,814 |
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|
12 |
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Accrued liabilities |
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(12,753 |
) |
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(1,954 |
) |
Other, net |
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— |
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40 |
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Net cash provided by (used in) operating activities |
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(32,960 |
) |
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(35,107 |
) |
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Cash flows from investing activities |
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Purchases of available-for-sale marketable securities |
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(52,890 |
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(140,075 |
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Sales and maturities of available-for-sale marketable securities |
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93,363 |
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82,979 |
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Purchases of property and equipment |
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(8,519 |
) |
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(9,210 |
) |
Acquisition, net of cash acquired |
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— |
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(20,000 |
) |
Net cash provided by (used in) investing activities |
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|
31,954 |
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|
|
(86,306 |
) |
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|
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Cash flows from financing activities |
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Proceeds from issuance of common stock from public offering, net of issuance costs and underwriting discount of $7.5 million |
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|
— |
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|
107,527 |
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Proceeds from exercise of employee stock options |
|
|
371 |
|
|
|
1,691 |
|
Taxes from withheld shares |
|
|
(237 |
) |
|
|
— |
|
Net cash provided by (used in) financing activities |
|
|
134 |
|
|
|
109,218 |
|
Net increase (decrease) in cash and cash equivalents |
|
|
(872 |
) |
|
|
(12,195 |
) |
Cash and cash equivalents at beginning of period |
|
|
12,982 |
|
|
|
19,473 |
|
Cash and cash equivalents at end of period |
|
$ |
12,110 |
|
|
$ |
7,278 |
|
|
|
|
|
|
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|
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Supplemental disclosure of cash flow information |
|
|
|
|
|
|
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Cash paid for interest |
|
$ |
3,732 |
|
|
$ |
3,863 |
|
Operating lease right-of-use asset and lease liability adjustment due to lease incentive |
|
$ |
88 |
|
|
$ |
(22 |
) |
Noncash investing activities |
|
|
|
|
|
|
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Unrealized (gains) losses, net on marketable securities |
|
$ |
(28 |
) |
|
$ |
121 |
|
Unsettled marketable security purchase and payable to broker |
|
$ |
— |
|
|
$ |
(1,100 |
) |
Unsettled matured marketable security and receivable from broker |
|
$ |
— |
|
|
$ |
6,000 |
|
Page | 7
Treace Medical Concepts, Inc.
Reconciliation of GAAP Net Loss to EBITDA & Adjusted EBITDA
(in thousands)
(unaudited)
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net loss |
$ |
(15,360 |
) |
|
$ |
(17,521 |
) |
|
$ |
(55,242 |
) |
|
$ |
(43,246 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
(1,067 |
) |
|
|
(1,570 |
) |
|
|
(3,978 |
) |
|
|
(5,017 |
) |
Interest expense |
|
1,313 |
|
|
|
1,296 |
|
|
|
3,942 |
|
|
|
3,863 |
|
Taxes |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Depreciation & Amortization |
|
2,157 |
|
|
|
1,564 |
|
|
|
6,182 |
|
|
|
3,583 |
|
EBITDA |
$ |
(12,957 |
) |
|
$ |
(16,231 |
) |
|
$ |
(49,096 |
) |
|
$ |
(40,817 |
) |
Share-based compensation expense |
|
7,900 |
|
|
|
5,192 |
|
|
|
22,048 |
|
|
|
11,480 |
|
Acquisition-related costs |
|
— |
|
|
|
1,802 |
|
|
|
1,873 |
|
|
|
2,322 |
|
Restructuring costs1 |
|
— |
|
|
|
— |
|
|
|
964 |
|
|
|
— |
|
Customer credit loss2 |
|
— |
|
|
|
— |
|
|
|
2,147 |
|
|
|
— |
|
Adjusted EBITDA |
$ |
(5,057 |
) |
|
$ |
(9,237 |
) |
|
$ |
(22,064 |
) |
|
$ |
(27,015 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
1 Restructuring charges primarily relate to severance payments and other post-employment benefits from a restructuring in June 2024.
2 Customer credit loss consists of the write-off of accounts receivable due from a customer that filed for bankruptcy during the second quarter of 2024.
Page | 8