Greetings, and welcome to the Tenon Medical Third Quarter 2024 Financial Results and Corporate Update Conference Call. As a reminder, this call is being recorded. Your host today are Steven Foster, President and Chief Executive Officer; and Kevin Williamson, Chief Financial Officer. Mr. Foster and Mr. Williamson will present results of operations for the third quarter ended September 30, 2024, and provide a corporate update. A press release detailing these results was released today and is available on the Investor Relations section of our company's website, www.tenonmed.com. Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates, and other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our predictions. For a more complete discussion of these factors and other risks, you should review our Annual [sic] Report on 10-Q dated September 30, 2024, particularly under the heading "Risk Factors", while -- which is on file with the Securities and Exchange Commission at www.sec.gov. At this time, I'll turn the call over to Tenon Medical’s, Chief Executive Officer, Steven Foster. Please go ahead, sir.

Thank you, Aubrey, and good afternoon to everyone. I'm pleased to welcome you to today's third quarter 2024 financial results and corporate update conference call for Tenon Medical. In the third quarter, we continue to focus on building market share for our proprietary Catamaran System as well as securing capital to help fund our growth initiatives going forward. Since the beginning of 2024, we delivered an 18% year-over-year increase in revenue driven by a 5% rise in surgical procedures utilizing the Catamaran System. Gross margin improved 2,200 basis points to a solid 54% for the same nine months of 2024 as compared to 32% in the same year ago period. During the third quarter, revenue declined 6% over the prior year quarter and 1.6% over the second quarter of 2024. The decrease was mainly due to unexpected reimbursement per authorization headwinds that we believe to be transient in nature. We expect future coding clarity, combined with our recently published clinical data, will positively impact these issues going forward. As we move forward to sustainable revenue growth, we believe, our stable cost structure will maintain a gross margin performance at recent levels and improve with increases in revenue in the near-term due to our planned growth initiatives. Across operations, we've made considerable commercialization and technical advances including the Catamaran SE, a second generation and smaller version of our implant and access profile. As we introduce versatility and anticipate this to result in market share gains during our second year of commercialization. To maintain our momentum during the third quarter, we took the opportunity to strengthen our balance sheet to fund our growth initiatives and position the business on a sustainable growth trajectory. In September, we received an investment from a single healthcare focused institutional investor. This investment combined with additional equity…

Thank you, Steve. I'm excited to join today's earnings call and be part of the Tenon Medical journey. First and foremost, I extend my appreciation to Steve Van Dick for his previous leadership in the role and guidance during the CFO transition period. Now, I'll give a succinct review of our financial results, a full breakdown is available on our press release that crossed the wire this afternoon. Our revenue was $887,000 in the third quarter of 2024, a decrease of 6% compared to $944,000 in the third quarter of 2023. Revenue for the nine months ended September 30, 2024, was $2.5 million, an increase of 18% compared to $2.1 million in the prior year period. The fluctuations in revenue growth for the three months and nine months ended September 30, 2024, as compared to the same periods in 2023, were primarily due to a decrease of 15% and an increase of 5% respectively in the number of surgical procedures in which the Catamaran System was used. We believe the reimbursement impacts and timing of our sales force operation restructure that we experienced in Q3 will become tailwinds for us moving forward in combination with our new SE platform and clinical data initiatives. Gross profit in the third quarter of 2024 was $418,000, or 47% of revenue, compared to $535,000 or 57% of revenue in the third quarter of 2023. For the three months ended September 30, 2024, gross profit was $1.4 million, or 54% of revenue, compared to a gross profit of $682,000 or 32% of revenue in the prior year period. Gross margin percentage improved due to the absorption of more production overhead costs into our standard costs, operating leverage created due to lower fixed costs and higher revenue associated with the increase in number of surgical procedures.…

Thank you, Kevin. We are strategically advancing our commercialization strategy into our next phase of growth with steady progress and year-over-year increases in our Catamaran procedures. We ended the first nine months with year-over-year revenue growth and a notable increase in gross margin. We believe we will continue this growth trajectory supported by our capital resources, expanding commercial infrastructure, and the introduction of the new SE platform. We also believe the upcoming larger cohort of patient post-market data will be a catalyst to drive payer coverage, which will accelerate sales growth and market share gains into 2025. With our strengthened balance sheet, we have the resources to maintain our momentum and are excited to have line of sight to the next phase of growth for Tenon Medical. I thank you all for attending. Now, I would like to hand the call back over to our operator to begin our question-and-answer session with covering analysts. Operator?

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Mr. Anthony Vendetti of Maxim Group. Please go ahead, sir.

Thank you. Hey, Steve, Kevin, how are you?

Very good. Thank you, Anthony.

So you did say in your prepared remarks that in the press release you did experience unexpected reimbursement preauthorization headwinds. What specifically do you think caused that? Has that continued into the fourth quarter? Or do you believe whatever issue that occurred has been resolved? Or was it a case-by-case basis?

No. Great. I appreciate the question, Anthony. So as you know, reimbursement is very regional and so it's always hit and miss depending on where physicians are submitting preauthorization, trying to get procedures approved. What we've run into is there was a good bit of coding; I'll call it coding confusion, hey, which codes belong with which procedure. It was a big topic of conversation at recent AMA meetings and we anticipate a lot of good clarity coming down the pipe as they publish everything that they discussed and finalized from the meeting. So I think coding clarity is going to help tremendously. And then, the other part of that equation is our data, right, being able to go out and interface with payers, show them peer-reviewed data that shows this technology delivers is exceptionally important to make sure that they recognize and cover our technology. It goes without saying that there are competitors in the space that have been here a lot longer than we have. And so we've got catching up to do and work to do there, but now we have the tools to do so. So we do see it as transient, we do see it as improving. And it will continue to improve, we believe, right into 2025.

Okay. In some recently published clinical data should clarify some of the coding. And not only that, but you think will alleviate some of the preauthorization headwinds.

Yes. I don't think our data clarifies coding. I want to make sure I'm clear. What the data does is reinforce that our technology does what it says it's supposed to do in a safe and effective manner, right, without undue adverse events and things of that nature. The coding thing between AMA, CMS, et cetera, is just a different thing. There has been a lot of back and forth and frankly, controversy on the issue. We believe that's clearing pretty quickly here. And we anticipate the combination of those two things. Coding clarity in the big picture and our specific data will really help us with coverage issues going forward.

Okay. Great. And then just in terms of some of the feedback from physicians on the system, recent feedback, how would you describe that and have you made any changes to the system based on that feedback?

Yes. We absolutely have. So we mentioned in the prepared remarks the Catamaran SE, SE is really simply a smaller version of all aspects of the system, a smaller implant and therefore a smaller access portal to get down to the anatomy and do the work that needs to be done. And every physician looks at these things differently, right? As we've talked about before, Anthony, we have a combination of spine surgeons and interventional and pain physicians using these technologies. And they were all trained differently. They all look at things differently. Some bigger is better, they want more graph, more size, more robustness in the fixation, et cetera. Our initial Catamaran is going to be a better format for them. Others are more sensitive to the size of the incision; believe in the miniaturization, et cetera, that that's positive for patients. And Catamaran SE now fits that requirement and that desire for those physicians. I don't believe, frankly, that there's a big time right or wrong answer. We just simply want the physician to be comfortable with the technology, be confident with the technology. And so this is our effort to respond to their needs and desires for a system that fits their -- fits what they like.

Okay. Great. And then in terms of expanding the sales force, is that something you're looking -- you're doing currently or is that something more for 2025?

Yes. That is something we're very active in currently. That'll be happening over the coming months and quarters as we expand into areas, look at again, very geographically focused, where are the key opportunities, et cetera. Where do we need feet on the Street to really be bird-dogging targets, compelling physicians into workshop settings, so they can hear the Tenon, Catamaran story and learn about the technology, practice with the technology, et cetera? So that's really where our energy is going right now out on the Street.

Okay. Great. Thanks for all that color. I'll hop back in the queue. Appreciate it.

Thanks, Anthony.

There are no further questions at this time. I would now like to turn the call back over to Mr. Foster for his closing remarks.

Well, thank you, Aubrey. I'd like to thank each of you for joining our earnings conference call today and look forward to continuing to update you on our ongoing progress and growth. If we were unable to answer any of your questions, please reach out to our IR firm, the MZ Group. We'll be more than happy to assist. With that, I wish you good day.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.