SI-BONE Inc

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q, and with the consolidated financial statements and management’s discussion and analysis of our financial condition and results of operations in our Annual Report on Form 10-K filed with the SEC on February 27, 2024. Some of the information contained in this discussion and analysis, or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many important factors, including those set forth in the“Risk Factors” section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in, or implied, by these forward-looking statements.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q, and with the consolidated financial statements and management’s discussion and analysis of our financial condition and results of operations in our Annual Report on Form 10-K filed with the SEC on February 27, 2024. Some of the information contained in this discussion and analysis, or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many important factors, including those set forth in the“Risk Factors” section of this our Annual Report on Form 10-K filed on February 27, 2024, our actual results could differ materially from the results described in, or implied, by these forward-looking statements.

Previous wording

We are a medical device company dedicated to solving musculoskeletal disorders of the sacropelvic anatomy. Leveraging our knowledge of pelvic anatomy and biomechanics, we have pioneered proprietary minimally invasive surgical implant systems to address sacroiliac joint dysfunction as well as address unmet clinical needs in pelvic fixation and management of pelvic fractures. Our products include a series of patented titanium implants and the instruments used to implant them, as well as implantable bone products. Since launching our first generation iFuse in 2009, we have launched four titanium implant product lines, including iFuse-3D in 2017, iFuse-TORQ in 2021, iFuse Bedrock Granite in 2022 and iFuse INTRA in January 2024. Within the United States, iFuse, iFuse-3D and iFuse-TORQ have clearances for applications across sacroiliac joint dysfunction and fusion, adult spinal deformity and degeneration, and pelvic trauma.

Current wording

We are a medical device company dedicated to solving musculoskeletal disorders of the sacropelvic anatomy. Leveraging our knowledge of pelvic anatomy and biomechanics, we have pioneered proprietary minimally invasive surgical implant systems to address sacroiliac joint dysfunction as well as address unmet clinical needs in pelvic fixation and management of pelvic fractures. Our products include a series of patented titanium implants and the instruments used to implant them, as well as implantable bone products. Since launching our first generation iFuse in 2009, we have launched multiple titanium implant product lines, including iFuse-3D in 2017, iFuse-TORQ in 2021, iFuse Bedrock Granite in 2022 and iFuse INTRA, an implantable bone product, in January 2024. Within the United States, iFuse, iFuse-3D and iFuse-TORQ have clearances for applications across sacroiliac joint dysfunction and fusion, adult spinal deformity and degeneration, and pelvic trauma.

Previous wording

We market our products primarily with a direct sales force as well as a number of third-party sales agents in the United States, and with a combination of a direct sales force, and sales agents and resellers in other countries. As of March 31, 2024, more than 100,000 procedures have been performed using our products by over 3,700 physicians in the United States and 38 other countries since we introduced iFuse in 2009.

Current wording

We market our products primarily with a direct sales force as well as a number of third-party sales agents in the United States, and with a combination of a direct sales force, and sales agents and resellers in other countries. As of June 30, 2024, over 100,000 procedures have been performed using our products by over 3,900 physicians in the United States and 38 other countries since we introduced iFuse in 2009.

Previous wording

As of March 31, 2024, our U.S. sales force consisted of 85 territory sales managers and 67 clinical support specialists directly employed by us and 183 third-party sales agents, compared to 87 territory sales managers and 67 clinical support specialists directly employed by us and 126 third-party sales agents as of March 31, 2023. As of March 31, 2024, our international sales force consisted of 12 sales representatives directly employed by us and a total of 28 third-party sales agents and resellers, compared to 12 sales representatives directly employed by us and a total of 31 third-party sales agents and resellers as of March 31, 2023.

Current wording

As of June 30, 2024, our U.S. sales force consisted of 84 territory sales managers and 69 clinical support specialists directly employed by us and 204 third-party sales agents, compared to 85 territory sales managers and 66 clinical support specialists directly employed by us and 141 third-party sales agents as of June 30, 2023. As of June 30, 2024, our international sales force consisted of 11 sales representatives directly employed by us and a total of 29 third-party sales agents and resellers, compared to 12 sales representatives directly employed by us and a total of 31 third-party sales agents and resellers as of June 30, 2023.

Previous wording

We are currently targeting over 12,000 U.S. physicians, including over 8,000 orthopedic and neurological surgeons and approximately 4,500 interventional spine physicians, to perform our procedures. As of March 31, 2024 and 2023, in the United States more than 2,700 and 2,300 physicians, respectively, have been trained on our products and have treated at least one patient. Outside the United States, as of March 31, 2024 and 2023, more than 1,000 and 900 physicians, respectively, have been trained on our product and have treated at least one patient. Since launching our academic training program in August 2018, we have trained approximately 1,600 surgical residents and fellows in nearly 250 academic programs in the United States.

Current wording

We are currently targeting over 12,000 U.S. physicians, including over 8,000 orthopedic and neurological surgeons and approximately 4,500 interventional spine physicians, to perform our procedures. As of June 30, 2024 and 2023, in the United States more than 2,900 and 2,400 physicians, respectively, have been trained on our products and have treated at least one patient. Outside the United States, as of June 30, 2024 and 2023, more than 1,000 and 940 physicians, respectively, have been trained on our product and have treated at least one patient. Since launching our academic training program in August 2018, we have trained approximately 1,700 surgical residents and fellows in nearly 250 academic programs in the United States.

Previous wording

In June 2022, we completed enrollment in SILVIA, a two-year prospective international multi-center randomized controlled trial of two different methods for pelvic fixation in adult patients undergoing multi-segmental, or long-construct, spinal fusion. We anticipate the results for the primary endpoint in 2025. In September 2022 we enrolled the first of the targeted 120 patients in our SAFFRON study, a prospective randomized controlled trial of surgery using our iFuse-TORQ device vs. non-surgical management in patients with debilitating sacral fragility or insufficiency fractures. We anticipate results to be available in late 2024. We are working with a select group of physicians on STACI, a prospective study on the use of iFuse-TORQ in patients with sacroiliac joint dysfunction. The purpose of STACI is to provide post-market information on the safety and effectiveness of minimally invasive sacroiliac joint fusion procedures performed with iFuse-TORQ.

Current wording

In June 2022, we completed enrollment in SILVIA, a two-year prospective international multi-center randomized controlled trial of two different methods for pelvic fixation in adult patients undergoing multi-segmental, or long-construct, spinal fusion. We anticipate the results for the primary endpoint in 2025. We are working with a select group of physicians on STACI, a prospective study on the use of iFuse-TORQ in patients with sacroiliac joint dysfunction. The purpose of STACI is to provide post-market information on the safety and effectiveness of minimally invasive sacroiliac joint fusion procedures performed with iFuse-TORQ. We are no longer actively recruiting patients in our SAFFRON study and anticipate publishing follow-up results in 2025.

Previous wording

We continue to invest in research and development initiatives to bring new and differentiated solutions to the market that deliver on our vision of improving patient quality of life through differentiated solutions to target segments with a clear unmet clinical need. Robust clinical evidence is central to drive adoption and favorable reimbursement, and we remain focused on continuing to set the industry standard in delivering evidence-based care through best-in-class clinical trials that demonstrate the efficacy, safety, and economic benefit of our solutions. During the three months ended March 31, 2024, we spent $4.3 million on R&D, equating to 11% of our revenue. During the three months ended March 31, 2023, we spent $3.3 million on R&D, equating to 10% of our revenue.

Current wording

We continue to invest in research and development initiatives to bring new and differentiated solutions to the market that deliver on our vision of improving patient quality of life through differentiated solutions to target segments with a clear unmet clinical need. Robust clinical evidence is central to drive adoption and favorable reimbursement, and we remain focused on continuing to set the industry standard in delivering evidence-based care through best-in-class clinical trials that demonstrate the efficacy, safety, and economic benefit of our solutions. During the six months ended June 30, 2024, we spent $8.7 million on research and development, equating to 11% of our revenue. During the six months ended June 30, 2023, we spent $6.9 million on research and development, equating to 11% of our revenue.

Previous wording

We are focused on increasing our territory sales managers and sales representatives capacity, efficiency and productivity. We may do this by adding more clinical support specialists and third-party sales agents as part of hybrid arrangements for case coverage, and by consigning instrument trays and implants at select sites of service. As of March 31, 2024, our average revenue per territory sales manager was approximately $1.6 million.

Current wording

We are focused on increasing our territory sales managers and sales representatives capacity, efficiency and productivity. We may do this by adding more clinical support specialists and third-party sales agents as part of hybrid arrangements for case coverage, and by consigning instrument trays and implants at select sites of service. As of June 30, 2024, our trailing twelve month average revenue per territory sales manager was approximately $1.7 million.

Previous wording

Our revenue from sales of implants fluctuate based on volume of cases (procedures performed), discounts, mix of international and U.S. sales, different implant pricing and the number of implants used for a particular patient. Similar to other orthopedic companies, our case volume can vary from quarter to quarter due to a variety of factors including reimbursement, sales force changes, physician activities, product launches, and seasonality. In addition, our revenue is impacted by changes in average selling price as we respond to the competitive landscape and price differences at different medical facilities, such as hospitals, ASCs and office-based labs or OBLs. Further, revenue results can differ based upon the mix of business between U.S. and international sales mix of our products used, and the sales channel through which each procedure is supported. Our revenue from international sales is impacted by fluctuations in foreign currency exchange rates between the U.S. dollar (our reporting currency) and the local currency.

Current wording

Our revenue from sales of implants fluctuates based on volume of cases (procedures performed), discounts, mix of international and U.S. sales, different implant pricing and the number of implants used for a particular patient. Similar to other orthopedic companies, our case volume can vary from quarter to quarter due to a variety of factors including reimbursement, sales force changes, physician activities, product launches, and seasonality. In addition, our revenue is impacted by changes in average selling price as we respond to the competitive landscape and price differences at different medical facilities, such as hospitals, ASCs and office-based labs or OBLs. Further, revenue results can differ based upon the mix of business between U.S. and international sales mix of our products used, and the sales channel through which each procedure is supported. Our revenue from international sales is impacted by fluctuations in foreign currency exchange rates between the U.S. dollar (our reporting currency) and the local currency.

Previous wording

Gross Profit and Gross Margin. Gross profit increased $3.1 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, mainly driven by higher revenue. The gross margin was 79% for the three months ended March 31, 2024 as compared to 82% for the three months ended March 31, 2023. Gross margin decreased in the first quarter 2024 due to procedure and product mix.

Current wording

Gross Profit and Gross Margin. Gross profit increased $4.6 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, mainly driven by higher revenue. The gross margin was 79% for the three months ended June 30, 2024 as compared to 81% for the three months ended June 30, 2023. Gross margin decreased in the three months ended June 30,

Previous wording

Sales and Marketing Expenses. The increase in sales and marketing expenses for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily due to a $0.8 million increase in employee related costs and stock-based compensation, a $0.7 million increase in training, travel and consulting to support the expansion of our sales and marketing activities, and a $0.6 million increase in commissions driven by higher revenues.

Current wording

Sales and Marketing Expenses. The increase in sales and marketing expenses for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 was primarily due to a $1.0 million increase in commissions driven by higher revenues and $0.5 million increase in training, travel and consulting costs to support the expansion of our sales and marketing activities.

Previous wording

Research and Development Expenses. The increase in research and development expenses for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily due to a $0.9 million increase in product development, consulting and travel costs, and a $0.2 million increase in employee related costs and stock-based compensation due to an increase in headcount within research and development.

Current wording

Research and Development Expenses. The increase in research and development expenses for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was primarily due to a $0.4 million increase in product development activities and $0.3 million increase in employee-related costs and stock-based compensation due to an increase in headcount within research and development departments.

Previous wording

General and Administrative Expenses. The increase in general and administrative expenses for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily due to a $0.7 million increase in employee related costs and stock-based compensation due to an increase in headcount within general and administrative departments.

Current wording

General and Administrative Expenses. The increase in general and administrative expenses for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was primarily due to a $0.3 million increase in employee-related costs and stock-based compensation due to an increase in headcount within general and administrative departments and a $0.2 million increase in legal, consulting and travel costs as we continue to invest in our general and administrative organizations to support our business growth.

Previous wording

Interest Income. The increase in interest income for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was mainly due to higher interest earned on our investments in marketable securities, primarily as a result of higher interest rates earned on higher cash and investment balances.

Current wording

Interest Income. The increase in interest income for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 was primarily due to higher interest earned on our investments in marketable securities, primarily as a result of higher interest rates.

Previous wording

Other Income (Expense), Net. The change in other income (expense), net for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was due to foreign currency fluctuations.

Current wording

Other Income (Expense), Net. The change in other income (expense), net for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was primarily due to foreign currency fluctuations.

Previous wording

Revenue. The increase in revenue for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily driven by $5.0 million increase in our U.S. revenue due to the increase in case volumes.

Current wording

Revenue. The increase in revenue for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 was primarily driven by a $11.6 million increase in our U.S. revenue due to the increase in case volumes.

Previous wording

As of March 31, 2024, we had cash and marketable securities of $157.8 million compared to $166.0 million as of December 31, 2023. We have financed our operations primarily through the sale of our common stock in our public offerings and debt financing arrangements. As of March 31, 2024 and December 31, 2023, we had $36.1 million in outstanding debt.

Current wording

As of June 30, 2024, we had cash and marketable securities of $151.5 million compared to $166.0 million as of December 31, 2023. We have financed our operations primarily through the sale of our common stock in our public offerings and debt financing arrangements. As of June 30, 2024 and December 31, 2023, we had $36.1 million in outstanding debt.

Previous wording

As of March 31, 2024, we had an accumulated deficit of $411.3 million, compared to $400.4 million as of December 31, 2023. During the three months ended March 31, 2024, we incurred a net loss of $10.9 million. During the years ended December 31, 2023 and 2022, we incurred a net loss of $43.3 million and $61.3 million, respectively, and expect to incur additional losses in the future. We have not achieved positive cash flow from operations to date.

Current wording

As of June 30, 2024, we had an accumulated deficit of $420.3 million, compared to $400.4 million as of December 31, 2023. During the six months ended June 30, 2024, we incurred a net loss of $19.8 million. During the years ended December 31, 2023 and 2022, we incurred a net loss of $43.3 million and $61.3 million, respectively, and expect to incur additional losses in the future. We have not achieved positive cash flow from operations to date.

Previous wording

Based upon our current operating plan, we believe that our existing cash and marketable securities will enable us to fund our operating expenses and capital expenditure requirements over the next 12 months from the filing of this Form 10-Q. However, the economic impact of a potential future disruptions in the healthcare operating environment and uncertainties affecting the economic and capital markets environment and the financial services industry pose risks and uncertainties to our future available capital resources. Further, we may face challenges and uncertainties and, as a result, may need to raise additional capital as our available capital resources may be consumed more rapidly than currently expected due to, but not limited to the following: (a) decreases in sales of our products and the uncertainty of future revenues from new products; (b) changes we may make to the business that affect ongoing operating expenses; (c) changes we may make in our business strategy; (d) regulatory and reimbursement developments affecting our existing products; (e) changes we may make in our research and development spending plans; and (f) other items affecting our forecasted level of expenditures and use of cash resources. In addition, as we seek to deploy new product offerings, the need for additional capital to fund the purchase of inventories of implants and instrument sets may become more acute and may limit the number of revenue opportunities that we pursue. Each new product family introduced typically requires the purchase of consumable implant inventory as well as investment in a fleet of instrument sets required to support procedures nationwide.

Current wording

Based upon our current operating plan, we believe that our existing cash and marketable securities will enable us to fund our operating expenses and capital expenditure requirements over the next 12 months from the filing of this Form 10-Q. However, the economic impact of a potential future disruptions in the healthcare operating environment and uncertainties affecting the economic and capital markets environment and the financial services industry pose risks and uncertainties to our future available capital resources. Further, we may face challenges and uncertainties and, as a result, may need to raise additional capital as our available capital resources may be consumed more rapidly than currently expected due to, but not limited to the following: (a) decreases in sales of our products and the uncertainty of future revenues from new products; (b) changes we may make to the business that affect ongoing operating expenses; (c) changes we may make in our business strategy; (d) regulatory and reimbursement developments affecting our existing products; (e) changes we may make in our research and development spending plans; and (f) other items affecting our forecasted level of expenditures and use of cash resources. In addition, as we seek to deploy new product offerings, the need for additional capital to fund the purchase of inventories of implants and instrument trays may become more acute and may limit the number of revenue opportunities that we pursue. Each new product line introduced typically requires the purchase of consumable implant inventory as well as investment in a fleet of instrument trays required to support procedures nationwide.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2024 of $7.6 million resulted from cash outflows due to a net loss of $10.9 million, adjusted for $7.1 million of non-cash items, and cash outflows from net changes in operating assets and liabilities of $3.7 million. Net cash used in operating activities for the three months ended March 31, 2023 of $10.8 million resulted from cash outflows due to a net loss of $11.1 million, adjusted for $7.0 million of non-cash items, and cash outflows from changes in operating assets and liabilities of $6.6 million. The decrease in net loss, net of non-cash items for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was mainly due to increased revenues. Net cash outflows from changes in operating assets and liabilities for the three months ended March 31, 2024 was primarily due to higher account payables and lower accrued liabilities attributable to the normal course timing of expenses. Net cash outflows from changes in operating assets and liabilities for the three months ended March 31, 2023 were primarily due to higher accounts receivable due to timing of collections, higher inventory due to the inventory build-up related to our implants, lower accounts payable, accrued liabilities and prepaid expenses attributable to the normal course timing of expenses.

Current wording

Net cash used in operating activities for the six months ended June 30, 2024 of $13.9 million resulted from cash outflows due to a net loss of $19.8 million, adjusted for $14.0 million of non-cash items, and cash outflows from net changes in operating assets and liabilities of $8.1 million. Net cash used in operating activities for the six months ended June 30, 2023 of $14.3 million resulted from cash outflows due to a net loss of $22.3 million, adjusted for $14.0 million of non-cash items, and cash outflows from changes in operating assets and liabilities of $6.0 million. The decrease in net loss, net of non-cash items for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was mainly due to increased revenues. Net cash outflows from changes in operating assets and liabilities for the six months ended June 30, 2024 was primarily due to higher inventory due to new product introductions, higher accounts receivable due to timing of collections, and higher accrued liabilities attributable to the normal timing of expenses. Net cash outflows from changes in operating assets and liabilities for the six months ended June 30, 2023 was primarily due to higher inventory due to the inventory build-up related to our implants, and lower accrued liabilities attributable to the normal course timing of expenses.

Previous wording

Net cash provided by investing activities in the three months ended March 31, 2024 was $6.3 million compared to cash provided by investing activities of $11.7 million in the three months ended March 31, 2023. Net cash provided by investing activities for the three months ended March 31, 2024 consisted of purchases of our marketable securities net of maturities of $8.4 million, and purchases of property and equipment of $2.1 million primarily related to individual components in instrument sets to support revenue growth. Net cash provided by investing activities for the three months ended March 31, 2023 consisted of maturities of our marketable securities net of purchases of $14.3 million, partially offset by purchases of property and equipment of $2.6 million primarily related to individual components in instrument sets to support revenue growth, as well as leasehold improvements made to the building used for research and development and warehouse space in Santa Clara.

Current wording

Net cash provided by investing activities in the six months ended June 30, 2024 was $4.5 million compared to cash provided by investing activities of $14.0 million in the six months ended June 30, 2023. Net cash provided by investing activities for the six months ended June 30, 2024 consisted of purchases of our marketable securities net of maturities of $9.7 million, and purchases of property and equipment of $5.2 million primarily related to individual components in instrument sets to support revenue growth. Net cash provided by investing activities for the six months ended June 30, 2023 consisted of maturities of our marketable securities net of purchases of $19.3 million, partially offset by purchases of property and equipment of $5.3 million primarily related to individual components in instrument sets to support revenue growth, as well as leasehold improvements made to the building used for research and development and warehouse space in Santa Clara.

Previous wording

Cash provided by financing activities in the three months ended March 31, 2024 was $0.1 million resulting from the issuance of common stock under our stock-based incentive compensation plans. This compares to $1.2 million resulting from net proceeds of $0.7 million from the refinancing of our term loan with First-Citizens and proceeds of $0.5 million from the issuance of common stock under our stock-based incentive compensation plans.

Current wording

Cash provided by financing activities in the six months ended June 30, 2024 was $1.9 million resulting from the issuance of common stock under our stock-based incentive compensation plans. This compares to $90.3 million of cash provided by financing activities in the six months ended June 30, 2023 resulting from net proceeds of $0.7 million from the refinancing of our term loan with First-Citizens, proceeds of $4.0 million from the issuance of common stock under our stock-based incentive compensation plans, and proceeds of $84.1 million, excluding the payment of $0.5 million in offering costs, from the issuance of common stock under our follow-on public offering.