TREACE MEDICAL CONCEPTS, INC. Q3 FY2025 earnings call

• Recognized director Richard Mott's retirement and appreciated his contributions. - The company is transforming from a single technology Lapiplasty company to a comprehensive bunion solutions company, having developed and commercialized 3 new bunion correction systems. - Appointed a Chief Commercial Officer and a new Senior Vice President of Sales, and added foot and ankle sales experts. - Third quarter revenue growth was affected by non-recurring stocking distributor sales, Lapiplasty volume pressure, and macroeconomic factors. - Focus areas include continuing to expand the product portfolio, driving surgeon and patient preference adoption, strengthening the sales team, and preparing new innovations for 2026 like the Lapiplasty Lightning platform and Percuplasty compression screw system. - Taking action to control organizational cost structure to improve profitability and reduce cash burn.

Third quarter revenues were $50.2 million, representing 11% growth over the third quarter of 2024. Adjusted EBITDA improved by 49% versus the prior year. The company has expanded its product portfolio with 3 new bunion correction systems, but experienced pressure on Lapiplasty volumes due to surgeon and patient preferences shifting towards minimally invasive osteotomies. Also, broader economic conditions and softer consumer sentiment led to more deferrals of elective bunion procedures.

• Revised full year 2025 revenue outlook to $211 million to $213 million, representing 1% to 2% growth compared to 2024. - Expect full year 2025 adjusted EBITDA loss in the range of $6.5 million to $7.5 million, a 32% to 41% improvement over the prior year. - Anticipate a reduction in cash use of 43% to 47% for the full year 2025 compared to 2024.

• Surgeon and patient preference shift towards minimally invasive osteotomies impacting Lapiplasty volumes. - Broader economic conditions and softer consumer sentiment leading to deferrals of elective bunion procedures. - Non-recurring nature of stocking distributor sales affecting future revenue. - Need to control organizational cost structure effectively to improve profitability.

Q: Can you talk a bit more about the softness in the core Lapiplasty business and how you're thinking about that trending from here? If there is a growing preference for MIS osteotomy, do you think this is something that can turn around eventually? What could get this to return to growth if doctor preferences have just been shifting elsewhere?

A: John Treace said there's a trend towards minimally invasive osteotomies, but there's a segment for Lapiplasty/Lapidus. They're capturing share in minimally invasive procedures at a lower price point, but Lapiplasty gains from new customers aren't enough to make up for overall softness from trade-off to minimally invasive osteotomies.

Q: By my math, the guide implies fourth quarter sales down 10% or so or 6% if you adjust for that pull forward that you called out. So is that how we should be thinking about at least the first few quarters of 2026?

A: Mark Hair said they're not providing 2026 guidance yet, plan to update at fourth quarter earnings call, but are optimistic with case volume increases in Q3 and Q4 and new innovation pipeline.

Q: You mentioned taking action to control what you can control. Any specifics that you can give around where you might be able to find some efficiencies on the P&L, things to kind of offset the little bit of a lower top line?

A: Mark Hair said they've taken restructuring charges and will continue to evaluate levers to control costs, with a scalable business and high margins focused on driving top line and improving profitability.

Q: How would you plan to recoup some of those deferred procedures when you're going into next year? And then the second one would be just the puts and takes to 2026 qualitatively since we appreciate you're not giving quantitative guidance?

A: John Treace said with more ways to reach patient population, improvement in consumer sentiment, and sales team engagement with new products, they're set to capture more patients back for surgery next year.