Good day and thank you for standing by. Welcome to the Treace Medical Concepts’ First Quarter 2022 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Vivian Cervantes, Gilmartin Group Investor Relations. Please go ahead.

Thank you, Kim. Good afternoon, everyone and welcome to our first quarter 2022 earnings conference call. Participating from the company today will be John Treace, Chief Executive Officer and Mark Hair, Chief Financial Officer. During the call, we will offer commentary on our commercial activity and review our first quarter financial results released after the close of the market today, after which we will host a question-and-answer session. The press release can be found in the Investor Relations section of our website at investors.treace.com. This call is being recorded and will be archived in the Investors section of our website. Before we begin, we would like to remind you that it is our intent that all forward-looking statements made during this call will be protected under the Private Securities Litigation Reform Act of 1995. Any statements that relate to expectations or predictions of future events and market trends as well as our estimated results or performance are forward-looking statements. All forward-looking statements are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. All forward-looking statements are based upon current available information, and Treace assumes no obligation to update these statements. Accordingly, you should not place undue reliance on these statements. Please refer to our SEC filings, including our Form 10-Q for the first quarter to be filed later today and our Form 10-K for the full year 2021 filed on March 4, 2022, for a detailed presentation of risks. With that, I will now turn the call over to John. John?

Thank you, Vivian and good afternoon everybody and thank you for joining us on our first quarter 2022 earnings conference call. We are off to a solid start in 2022 with strong execution on our commercial strategies and initiatives, aided further by improving trends in procedure volumes, resulting in a 55% increase in revenue in the first quarter over prior year. We are pleased to report yet another strong quarter of growth, adding to our positive momentum since our IPO. Our business is driven by our disruptive technology and surgical procedure, which we believe is fundamentally changing bunion surgery today. From what we can see in the marketplace, we are the only industry participant that has a growing body of clinical evidence, demonstrating both rapid return to weightbearing and low recurrence rates. In fact, this morning, we announced a peer-reviewed publication in the Journal of Foot & Ankle Surgery on our interim data from the ALIGN3D clinical study, demonstrating continued positive radiographic and patient-reported outcome scores at 12 and 24 months following the Lapiplasty procedure. We continue to be pleased with the sustained enthusiasm and positive momentum from surgeons through our active surgeon education initiatives as well as patients through our targeted DTC programs. We’re also encouraged to see the steady increases in our active surgeon users and surgeon utilization rates, supported by our expanding direct sales channel as well as our patient education and awareness activities, which we believe help patients learn about our procedure and connect them with knowledgeable surgeons in their area. Of note, our direct sales channel is 100% focused on bunion surgery, the only such organization that we’re aware of in the med tech industry today. The expansion of this specialized sales team has contributed meaningfully to our revenue and market share growth, and we…

Thank you, John. Good afternoon, everyone. Revenue in the first quarter was $29.0 million, up from approximately $18.7 million a year ago, representing an increase of 55% over the first quarter of 2021. In the first half of the quarter, procedure volumes were in line with our expectations, and we saw a particular strength in the back half of the quarter, which we believe reflects a recovering elective procedure environment as well as the realization of some rescheduled procedures from Q4 2021 into Q1. And. These dynamics further demonstrate that surgeons and patients understand the differentiating benefits of Lapiplasty and continue to choose our bunion correction system even when faced with scheduling challenges. Q1 revenue growth metrics include an expanded surgeon base and higher utilization rates, which grew the number of Lapiplasty procedure kits sold. In addition, we saw an increase in our blended average selling price in the quarter compared to the prior year. With our Mini-Incision and Adductoplasty systems, as well as other ancillary products, providing continued average pricing support. In the first quarter 2022, we sold 5,278 Lapiplasty procedure kits, a 51% increase versus the prior year’s first quarter. Blended average selling price in Q1 was $5,503, a 3% increase over the first quarter of 2021 and a 2% increase from Q4 of last year. The number of active surgeons performing at least one case in the trailing 12 months in the quarter increased 40% year-over-year to 1,901, while utilization increased approximately 10% year-over-year to an average of 10.1 Lapiplasty procedure kits purchased per active surgeon in the trailing 12 months. Gross margin was 81.0% in the first quarter of 2022 compared to 82.2% in the first quarter of 2021. Sequentially, first quarter gross margin was consistent with the 81.1% reported in the fourth quarter of 2021.…

[Operator Instructions] Our first question comes from the line of Robbie Marcus with JPMorgan. Your line is now open.

Hi. This is Lilly [ph] on for Robbie. Thanks for taking the question. I was hoping I could just get some color on how you are thinking about your momentum over the rest of the year. Is there anything holding you back right now in terms of staffing, hospital capacity, anything like that at this point or is it basically back to normal?

No, that’s a great question. And from our perspective, it’s pretty consistent with what we talked about last time is we are very comfortable with what we are able to do in the current environment. We have a lot of confidence in our growing sales team and a lot of our commercial initiatives. But with respect to the rest of the year, the guidance range that we provided really supports what we are seeing and what we believe is supportable here. And it’s being only early May, it’s probably a little early to get into back half of the year, but we feel very comfortable with the range that we have provided on this call.

Great. That’s helpful. And then is there anything new that you are seeing on the competitive front? I know there is some me-too products out there and one of your competitors was recently acquired. So what are you hearing about adoption of these products and have you seen any sort of tangible headwinds?

Hi, Lilly, it’s John. Yes, that we’ve been competing alongside a couple of these products for a couple of years now, Stryker has a system and the CrossRoads System that was acquired by J&J. We haven’t seen any real change in the competitive dynamics on that front. We continue to kind of run our offense and build our business and nothing seems to be really getting in the way of us achieving the growth rates that were committed to at this point. So again, we have a very refined system, a lot of great intellectual property around it and a huge head start in the market and direct sales channel, the only product with clinical data. And you just have a lot of things through the focus of this business being solely on Lapiplasty, it just – it helps us a lot.

Great. Thank you.

Our next question comes from the line of Drew Ranieri with Morgan Stanley. Your line is now open.

Hi, John and Mark. Congratulations on the quarter. Maybe just to piggyback on that last question about the competitive landscape, but just curious how you are thinking about building your portfolio? Is the focus going to remain on foot, potentially move into ankle or just curious how you are thinking about it, especially with a building direct sales channel?

Yes. Hi, Drew, John. Thanks for the question. And I think the way we are going to approach it is I’m going like the way we’ve been approaching it, and that’s looking at this bunion problem. And continuing to advance Lapiplasty to be quicker, easier, less invasive. And then we’re also going to be looking at other opportunities that are related to the bunion pathology and coming up with new innovative solutions around those like we did with – like we do with Adductoplasty. So with only 4.3% of the annual U.S. bunion procedures penetrated, we have got such an enormous runway in this $5 billion market. We just think that staying tight and focused on this bunion call point with our sales channel with our R&D innovations and design teams is the right way to go for this company.

Got it. Thank you. And maybe just on the backlog for a moment, I get that from your prepared remarks that there was a catch-up in the first quarter from delayed procedures. Just curious if you can maybe help us size that so we can get a better sense of maybe what your normalized sequential growth will be in the second quarter? And just with the first quarter performance, I mean, even being so strong. Just curious if there were maybe still any issues or on the company’s ability to maybe get more surgeons involved in using Lapiplasty?

Yes. And thanks, Drew. This is Mark. I think there is a couple of parts to make sure I get both parts of that question. With respect to some of those procedures that came through in Q1, as I mentioned, we are actually really encouraged because from our perspective, it really shows that both surgeons and patients are really understanding the differentiated benefits that are coming from Lapiplasty. So to the extent there were some challenges in scheduling procedures in Q4, we did feel them. We noticed that in the back half of Q2. We also had a survey with our surgeons and they commented on the same thing that they are definitely rescheduled procedures that came into Q1. And with respect to sizing, we would estimate that it’s probably about half of the size of the beat in the quarter.

Great. Thank you.

Sure.

Our next question comes from the line of Danielle Antalffy with SVB Securities. Your line is now open.

Hey, good afternoon, guys. Thanks so much for taking the question and congrats on a strong quarter. Just if I could, John, ask a question about the stickiness of the Lapiplasty procedure, just in the context of new competition coming to market. Once you get a surgeon going sort of what’s the most important part of the surgeon’s journey that makes that surgeon sticky and more likely to stay with Lapiplasty versus convert? Just thinking, you guys have kind of a first-mover advantage here, a real differentiated clinical data. So anything you can – any context you can provide there?

Sure. No, it’s a great question. Hi, Danielle. And I think there are several factors. Our whole kind of commercial strategy is wrapped around producing that stickiness. And from the way that we initially train the doctors, we hold their hands very closely, provide clinical specialist experts that could go into their first few cases and make sure that everything goes smoothly and they follow the steps to the direct salespeople that they are handed off to who do nothing, but this product day in, day out. They know it backwards, forwards, upside down. And this is a very – it’s a technical procedure. We are changing the way that doctors have performed bunion surgery completely. And having that expert and that expertise alongside of these doctors is really important and having a product that really works efficiently and effectively in the surgeon’s hand at the patient’s level, Lapiplasty delivers that. We have had 6.5 years of live clinical use and very speedy refinement and iteration to make it easier to use, more reproducible, more effective. And I think the doctors appreciate that and we provide a lot of ongoing education for them. And then we are making a lot of patients aware out there about Lapiplasty and its differentiated solution versus standard of care. So I think our doctors just really see us as true experts and they’re loyal, and they appreciate not only everything we’re doing for them and the true clinical evidence we’re providing and the sales expertise, but the ongoing education and support structure that the company provides to take them to those next level evolutions of Lapiplasty or Adductoplasty. These are procedures and products that never existed before that we are developing. So it’s multifaceted, but all that kind of dials together into this great ecosystem that makes – once they have adopted Lapiplasty and gotten through the learning curve, makes it very sticky.

Yes. Yes, that’s what I was getting at. So that was super helpful. Thank you for that. And then congrats on the ALIGN3D publication, can you talk about how that could impact new users coming to Lapiplasty or is that more just reaffirming existing users are going deeper into existing accounts? Is that something that you think will get more surgeons on board or how should we think about the impact for this publication? And I think we are going to get the full cohort in mid-‘23 so that as well? Thanks so much.

Yes, great. Great follow-on. I’d say it’s going to incrementally help both in supporting onboarding new surgeons, and it’s going to further reinforce with our existing customer base. The results that they are seeing in their own clinical practice and we know that each year that a surgeon uses Lapiplasty, the following year, they use more Lapiplasty. And that’s largely attributable not only to all these programs we’re talking about, but the effectiveness that they’re seeing in their own patients locally. And when they see a sophisticated clinical study like ALIGN3D showing results like they’re seeing it, sort of reconfirms with them. And this is data that we can now take the facilities and product approval committees and really differentiate us and say, yet another peer-reviewed study, multi-center prospective, highly sophisticated, this product deserves to be approved at these accounts. So, we can use this in a lot of ways and we look forward to more such report outs that will occur before the final report out in late 2023.

Thank you.

Sure.

[Operator Instructions] I am showing no further questions at this time. I would now like to turn the call back to Vivian.

Thanks, Kim. On behalf of Treace Medical, thanks everybody for joining us today. This concludes our call and we look forward to our next update following the close of our second quarter 2022 results. Thank you. Have a good evening.