Greetings, and welcome to the Tenon Medical First Quarter 2023 Financial Results. As a reminder, this call is being recorded. Your hosts today are Steven Foster, Chief Executive Officer and President; and Steven Van Dick, Chief Financial Officer. Mr. Foster and Mr.

Van Dick will present results of operations for the first quarter ended March 31, 2023, before turning the call over to questions from covering analysts. 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 obliging 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 prospectus dated April 26, 2022, particularly under the heading Risk Factors, which is on file with the Securities and Exchange Commission at www.sec.gov..

At this time, I'll turn the conference over to Tenon Medical's Chief Executive Officer, Steven Foster. Please go ahead, sir. .

Thank you, Colin, and good afternoon to everyone. I'm pleased to welcome you to today's First Quarter 2023 Financial Results and Corporate Update Conference Call for Tenon Medical..

During the first quarter, we continued to ramp surgical procedure revenue with our fully commercialized Catamaran System designed to deliver refined surgical option for patients with chronic sacroiliac joint pain or degenerative sacroiliitis that fail conservative care..

2023's primary focus is on building our commercial infrastructure and sales management team to support top line growth and delivering on our go-to-market strategy. .

We are targeting physicians who have been trained on SI procedures or have significant experience with SI surgical technologies, utilizing area sales managers, clinical specialists and independent distributors and conducting an aggressive local workshop training program.

We are showcasing our unique solution through a wide variety of channels, conferences and hands-on workshops. Also, an aggressive informational marketing and promotion program that includes surgical training manual, white papers, websites and social media is also supporting our outreach and education efforts..

We continue to deploy a combination of our local synthetic model and cadaveric lab workshops to train physicians on the Catamaran System, creating a timely and efficient process for our physicians. All of these critical activities are designed to drive acceleration in the number of procedures completed with the Catamaran System.

Confirming our approach during the first quarter, our surgical procedures increased 489% compared to a year ago quarter, resulting in a 510% revenue growth year-over-year and a 56% growth sequentially. .

Turning to our clinical research time line. During the first quarter, we continued to advance our clinical research with our 2 strategic post-market studies.

The objective of our post-market multicenter strategic study is to report on clinical outcomes in patients with sacroiliac joint disruptions or degenerative sacroiliitis treated with the Catamaran System. The study is designed to enroll up to 50 patients and up to 10 clinical sites across the country.

The CT-scan study will assess patient pain scores, fusion as well as other patient reported outcomes out to 12 and 24 months..

This investment allows our designated Catamaran study centers to begin recruiting and enrolling patients into these respective studies and represents our continued commitment in validating and differentiating patient outcomes and radiographic assessment with Catamaran System.

We now have 7 sites recruiting patients into our 2 strategic post-market studies, and I look forward to providing enrollment updates in the coming quarters..

Looking ahead, we are well positioned to build revenue and growth. The Catamaran System is now FDA-cleared, reimbursement secured and commercially launched. We are encouraged by our revenue ramp from the increasing number of surgical procedures utilizing the system.

Early results show the system delivering on its promises and providing our physician customers with an enhanced option to treat their patients suffering from debilitating SI joint issues..

We are also encouraged by the significant increase in reimbursement for the SI Joint Fusion procedure. CMS increased the 2023 Medicare facility fee by approximately 26% for SI Joint Fusion procedures performed in ASCs and 33% for these procedures done in a hospital outpatient setting.

We believe the increase will drive further adoption of the Catamaran System and allow us to maintain our average selling price..

With that, I'll turn it over to Mr. Van Dick, our Chief Financial Officer, to discuss our financials. .

Thank you, Steve. I'll give you a succinct review of our financial results. The full breakdown is available in our press release that crossed the wire this afternoon..

Our revenue was $433,000 in the first quarter of 2023, an increase of 510% compared to the $71,000 in the comparable year ago period. The increase in revenue in the first quarter was primarily due to an increase of 489% in the number of surgical procedures in which the Catamaran System was used. .

Gross loss in the 3 months ended March 31, 2023, was $47,000 compared to a gross loss of $204,000 in the comparable year ago quarter. Gross margin percent was a negative 11% in the first quarter of 2023 and a negative 287% in the quarter ended March 31, 2022.

Gross margin percentage improved due to the higher revenue associated with the increase in the number of surgical procedures. Based on our first quarter results, the company expects to produce a positive gross margin in the second quarter..

Operating losses totaled $4.9 million in the first quarter of 2023 compared to a loss of $2.1 million in the first quarter of 2022.

Increases in operating expenses were a result of an increase in stock-based compensation, increases in sales and marketing and general expenses as the company builds sales function and infrastructure to support future growth..

Net loss was $4.8 million for the first quarter of 2023 compared to a loss of $2.4 million in the same period of 2022. The company does expect to incur additional losses in the future..

As of March 31, 2023, cash and cash equivalents and short-term investments totaled $4.9 million as compared to $8.6 million in December 31, 2022, period..

I'll now turn the call back to Steve for closing thoughts. .

Thank you, Steve. With the national launch of Catamaran, increased Medicare reimbursement and accelerating surgical procedures, we are very optimistic for continued growth in the commercialization of our proprietary FDA-cleared surgical implant system.

We are driving this growth with the continued build-out of our commercial infrastructure and our sales management team in order to ramp our commercial outreach and introducing and educating physicians to our optimized surgical approach for SI Joint Fusion..

We are also focused on delivering clinical research that reinforces the promise of this distinct technology. Our post-market clinical studies represent our continued commitment to validating and differentiating patient outcomes and radiographic assessment of the Catamaran system.

We now have 7 sites recruiting patients into our 2 strategic post-market studies. I look forward to providing our shareholders with further updates in subsequent quarters as we scale commercialization and develop our clinical studies data. .

I thank all of you for attending, and now I'd like to hand the call back over to our operator to begin our question-and-answer each session with our covering analysts.

Colin?.

[Operator Instructions] And your first question comes from Bruce Jackson from the Benchmark Company. .

So a little bit of color maybe on the 34 surgeons that were treated -- I'm sorry, not treated but trained during the quarter.

Were they trained early in the quarter, later in the quarter? And how many procedures did that pull through?.

Bruce, thanks for joining us, and I appreciate your question. So a pretty even mix between the 3 months of the quarter. We had 2 big training sessions in January. So January is probably a little heavier than February. And then we had a big bolus in the end of March as well. So January, March, the heavier months.

The cycle is variable once we can compel a physician into a workshop environment, and they get exposed to the technology, should they be Interested. There is a process to go through to gain access to their facility, establish pricing, things of that nature. And that process can be very short and quick if it's in a smaller ASC environment.

It frankly can be a bit longer and laborious if it's a bigger hospital system and what have you. So lots of variability there. .

We did have 3 physicians that adopted from a training session in February -- or I'm sorry, in January that did their first surgeries in March. So we move them along as quickly and as efficiently as we can. And we love that 34 that were trained in that mix, we have great expectations for their adoption and their growth going forward. .

Okay.

And how did they respond to the synthetic training model?.

Yes, this is a great question. The big -- if there's a learning curve in this mix, it's in the imaging. They need to get comfortable using biplane or Fluoroscopy and imaging, the pelvis.

The trainer gives them a lot of great access and repetitive access to shooting the various views and getting comfortable with placing our Guidewire and getting the instrumentation where they wanted in the anatomy..

So there's been actually a very positive response to the synthetic trainer. The trainer gives us a lot of flexibility in going to local locations. Anatomic material can be hard to get. It can be very pricey, things of that nature. So the synthetic model really gives us a lot of flexibility, lets us respond very quickly to desires for training. .

Okay.

And then last question for me, are the procedures that you're doing now, are they sort of exclusively fixed on SI joint fixation? Or are they doing -- the physicians doing these procedures in conjunction with other fixation in the spine?.

Another good question. These are -- the answer is a little bit of both. Primarily, our procedures are done as a single level, if you will, as a single implant focused on a specific SI joint that has been targeted during the diagnostic process.

There have been cases done that are part of a bigger fixation and fusion procedure, which can be impactful to the SI joints with long constructs or even short constructs up and down the spine..

So there have been a few of those procedures. There's a lot of work to do on the clinical research side in this area. It's a growing area, lots of conversation about, look, when we fuse these multiple levels up and down the spine, there's a lot of load share change there can overload these SI joints, what do we do about that.

So we see that as a very dynamic discussion in the physician community right now and something that we'll be watching very carefully. .

There are no further questions at this time. I'll turn it back to Steven Foster for closing remarks. .

Thank you, Colin. I appreciate it. I'd like to thank everyone for joining our earnings conference call today and look forward to continuing to update you on our ongoing progress and growth. If we are unable to answer any of your questions, please reach out to our IR firm, MZ Group, and we'd be happy to assist in that way. .

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines..