Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Tenon Medical Inc (NASDAQ:TNON) reported an 18% year-over-year increase in revenue for the first nine months of 2024, driven by a 5% rise in surgical procedures using the catamaran system.
• Gross margin improved significantly by 2,200 basis points to 54% for the first nine months of 2024 compared to the same period last year.
• The company strengthened its balance sheet with an investment from a healthcare-focused institutional investor, resulting in net proceeds of approximately $9.6 million.
• Tenon Medical Inc (NASDAQ:TNON) has made considerable commercialization and technical advances, including the development of a second-generation, smaller version of the catamaran implant.
• The company received three new patents related to its enhanced catamaran prosthesis, strengthening its competitive position in the industry.

Negative Points

• Revenue declined by 6% in the third quarter of 2024 compared to the same quarter in 2023, primarily due to unexpected reimbursement preauthorization headwinds.
• Gross profit margin decreased to 47% in the third quarter of 2024 from 57% in the same quarter of 2023.
• Operating expenses remain high, totaling $3.6 million for the third quarter of 2024, although this is a slight decrease from the previous year.
• The company reported a net loss of $3.2 million for the third quarter of 2024, indicating ongoing financial challenges.
• Tenon Medical Inc (NASDAQ:TNON) anticipates incurring additional losses in the future as it continues to invest in growth initiatives.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Signs with TNON.

Q: What caused the unexpected reimbursement preauthorization headwinds, and have these issues been resolved? A: Steven Foster, CEO, explained that the reimbursement issues were due to regional coding confusion. They anticipate that upcoming coding clarity and their clinical data will help resolve these issues. The company views these challenges as transient and expects improvements into 2025.

Q: How does the recently published clinical data impact the reimbursement and preauthorization challenges? A: Steven Foster clarified that while the clinical data reinforces the safety and effectiveness of their technology, it does not directly resolve coding issues. However, the combination of coding clarity and their data should help with coverage issues moving forward.

Q: What feedback have you received from physicians regarding the Catamaran system, and have any changes been made based on this feedback? A: Steven Foster noted that feedback led to the development of the Catamaran SE, a smaller version of the system. This change caters to different physician preferences, allowing them to choose a system that fits their needs, whether they prefer a larger or smaller implant.

Q: Are there plans to expand the sales force, and if so, when will this occur? A: Steven Foster confirmed that they are actively expanding their sales force. This expansion is geographically focused, targeting key opportunities to engage physicians and promote the Catamaran system.

Q: How is Tenon Medical positioned financially to support its growth initiatives? A: Kevin Williamson, CFO, stated that the company has fortified its balance sheet with $9.2 million in cash and no outstanding debt as of September 30, 2024. This financial position supports their growth initiatives, including sales force expansion and the commercial launch of the Catamaran SE.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.