SI-BONE, Inc. Q1 FY2020 Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the SI-BONE First Quarter 2020 Operating Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. As a reminder, this program is being recorded. I would now like to introduce your host for today’s program, Carrie Mendivil, Investor Relations. Please go ahead.

Thank you all for participating in today’s call. Joining me today are Jeff Dunn, President and Chief Executive Officer, and Laura Francis, Chief Financial Officer and Chief Operating Officer of SI-BONE. Earlier today, SI-BONE released financial results for the quarter ended March 31, 2020. A copy of the press release is available on the Company’s website. Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of Federal Securities Laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements. All forward-looking statements including, without limitation, our examination of operating trends and our future financial expectations, which includes expectations for hiring, active surgeons, new products, reimbursement decisions and guidance for revenue are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our most recent quarterly report on Form 10-K filed with the Securities and Exchange Commission on March 11, 2020. SI-BONE disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is only accurate as of the live broadcast today, May 4, 2020. And with that, I will turn the call over to Jeff.

Thanks, Carrie. Good afternoon and thank you for joining us. I hope you and your loved ones are safe and healthy as our communities continue to be affected by the coronavirus. Before we get into the details of the quarter, I want to take a moment to thank our partners and the healthcare community, all of whom are making extraordinary efforts to care for both COVID and non-COVID patients in these difficult times. The year started off very strong and for the first two and a half months of the quarter, iFuse Procedures in the U.S. and in Europe outpaced expectations. We attribute this strong growth to the significant investments we made in 2019, including sales force expansion, surgeon training and education, and reimbursement. However, beginning in mid-March, elective procedures began to be deferred in order to preserve resources for COVID-19 patients and to protect surgical candidates from potential exposure to the coronavirus. During the last two weeks of the quarter, we saw a significant decline in the scheduling of new cases, and 300 scheduled cases were canceled worldwide. Including just the cases scheduled to the quarter end as of March 15, revenue growth for the quarter would have been 29%. Accordingly, our first quarter 2020 performance was impacted; revenue for the first quarter was $16.8 million, with $15.3 million of revenue in the United States, up 12% and 14%, respectively, compared to the first quarter of 2019. In the short term, we expect our business to continue to be impacted by the deferral of elective procedures. However, we are confident that most deferred procedures will ultimately return, and patients will eventually receive treatment. The robust procedure volumes we saw early on in the quarter confirmed the increasing acknowledgment of the SI joint as the pain generator and one that we can address. Our teams in the field have done an excellent job of staying positive, doing what they can to ensure the best possible customer service, and continuing to prioritize the safety of our patients, people, and partners. About half of the states have resumed elective procedures, and things are continuing to open daily. We are already beginning to see pockets of optimism for procedures resuming, both regionally and on a hospital-by-hospital basis. While we're unable to predict the ramp of iFuse Procedures throughout the recovery period, we are prepared for a number of different scenarios and are monitoring the situation extremely closely to ensure that we're there for support as iFuse Procedures begin to come back online. Amidst this pandemic, our priorities are in three places: first, the health and safety of our employees, customers, and patients; second, the conservation of capital to weather this challenging period; and third, sustaining investments across our organizations, so that we are well positioned to support practices now through the recovery and over the long term. As COVID-19 cases began to rise in the U.S., we took actions and implemented early measures to ensure the protection and well-being of our employees, customers, and patients. All employees in the Santa Clara office and other office locations have been required to work from home with the exception of those related to order fulfillment and select others based on local restrictions and guidance. When the pandemic took shape, we pushed inventory out into the field, so we could fulfill demand. Our critical suppliers are functioning, and we have not experienced any supplier disruptions today. We're continuing to streamline shipping, receiving, and other related processes in order to continue providing products to our customers. In doing so, we have taken essential steps to design and implement specific protocols in order to minimize contact time among employees working on site. We acted quickly to reduce spending in areas not critical to patient care to ensure our financial flexibility over the coming months. While our business will be materially impacted over the short term, we have a strong balance sheet with over $145 million in cash and marketable securities as of quarter-end. As we carefully review our expenses, we are making exceptional efforts to preserve our sales force so that we are well positioned when the moratorium on elective procedures are lifted and volumes begin returning. Over the last few years, we have built an outstanding team of top-quality representatives and dedicated rigorous training efforts to ensure their success in the field. We ended the quarter with 62 direct sales representatives and 52 clinical support specialists. We believe their strengths will be essential in the recovery that follows. Importantly, while we are navigating the challenges of the current environment, we're continuing to sustain our commercial priorities to strengthen our long-term growth opportunity. At the core of our commercial strategies is our focus on driving iFuse Procedure volumes. On our last earnings call, we outlined three ongoing initiatives we are implementing to help us grow our active surgeon base: first, to train new providers; second, to reactivate inactive surgeons; and finally, to continue to grow key opinion leader support for iFuse. To further these initiatives, our sales team is supporting healthcare providers via telephone and online technologies until conditions permit the resumption of more normalized healthcare operations. We are also ramping up our virtual education for both our SI-BONE sales force and surgeon customers to take advantage of the additional time to devote to training. Our virtual education series has been a very well-received program over the last several weeks. We've completed seven programs to date and have an additional five programs planned through the end of May. The most recent webinar on adult deformity and Bedrock was attended by over 100 surgeons and led by Dr. David Pauley of the University of Minnesota. During the quarter, we also continued to build on a significant reimbursement progress throughout 2019 and obtained a positive coverage policy by Health Alliance Plan, a commercial payor in Michigan. Additionally, we continue to make progress expanding our portfolio of comprehensive sacropelvic solutions. On the last day of the quarter, we received FDA 510-K clearance for an expanded indication for the SI-BONE iFuse implant system to support our trauma program. This new indication applies to SI joint fusion in conjunction with the treatment of acute, non-acute, and non-traumatic fractures involving the sacroiliac joint. We are launching the trauma education program in the United States in the second quarter. I personally have spoken to half a dozen surgeons about this program. Devices used in trauma have evolved little in the last 25 years, and we believe the use of our technology may well improve the outcomes for many patients that have been treated surgically and non-surgically under earlier treatment paradigms. While additional work in both the lab and the clinic will be required to evaluate the evolving treatment options for certain patient subgroups, there is considerable enthusiasm among the top leaders with whom we are working on this initiative. We remain in close contact with our customers, our community representatives, our employees, and our suppliers during this period. While the depth and duration of the current challenges are difficult to predict, I believe our mid and long-term opportunity is substantial and our business is well-positioned financially and organizationally to weather this pandemic. With that, I will now turn the call over to Laura Francis, our Chief Financial Officer and Chief Operating Officer to provide more detail on our financial results.

Thanks, Jeff. First quarter revenue increased by 12% to $16.8 million. U.S. sales provided the majority of this revenue, just over 90%, delivering a growth rate across the quarter of 14%. International revenue was relatively flat at $1.5 million compared to the corresponding prior year period. As Jeff discussed, our case volumes dropped in the second half of March, which meaningfully impacted our performance. Gross margin for the first quarter 2020 was 89% compared to 90% in the first quarter of 2019. The change in gross margin was due to higher costs of operations to support the growth of the business. We expect our gross profit and gross margin will continue to be affected by factors impacting revenue and cost of goods sold due to an expected decrease in overall demand in the second quarter of 2020 from COVID-19; we anticipate that our operations will run at less than normal capacity. Accordingly, certain labor and overhead costs will be expensed as incurred, significantly reducing our gross profit and gross margin. We cannot reliably estimate the extent to which the COVID-19 pandemic will impact our overall demand in the near-term. However, we have sufficient inventory, our supply chain dynamics are well in hand, and product flow is in good shape. Operating expenses increased 20% to $26.8 million in the first quarter of 2020 compared to $22.3 million in the first quarter of 2019. The increase in operating expenses was primarily driven by higher employee-related costs due to higher headcount, mainly from sales, hiring, surgeon training, and stock-based compensation. As Jeff noted, we've taken preemptive steps to curtail spending while there is more clarity to the extent and duration of the impact from the pandemic. We've already implemented a number of cost-saving measures, including implementing hiring restrictions, eliminating discretionary spending, reducing executive salaries, reducing capital expenditures, reducing non-essential marketing expenses, and delaying clinical research projects. We're taking an extremely thoughtful approach to spending and have also identified additional cost-saving levers that could further reduce operating expenses in this uncertain environment. Our operating loss for the first quarter of 2020 was $11.9 million compared to $8.8 million in the first quarter of 2019. Net loss was $12.8 million or $0.47 per diluted share for the first quarter of 2020, as compared to $9.3 million or $0.38 per diluted share in the first quarter 2019. Cash and marketable securities are $146.2 million at the end of the quarter. This balance reflects the $63 million in proceeds from our January follow-on offering. 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 through at least the next 12 months. We withdrew our 2020 revenue guidance on April 2 due to the evolving environment and continued uncertainties about the impact of COVID-19. We remain unable to estimate the magnitude or duration of specific impacts on our business, and for that reason, we will not provide an updated outlook until the impact of COVID-19 becomes sufficiently clear. Looking to the next several months, we expect that our business will continue to be impacted by the deferral of elective procedures. As Jeff mentioned, about half of the states in the U.S. have resumed elective procedures, or are planning for a number of different scenarios of what iFuse volume may look like over the next several quarters. That said, as a Company, we're well prepared operationally, financially, and strategically to navigate through this challenging period. I'll now turn the call back to Jeff for closing comments.

Thank you, Laura. Before closing, I want to thank our team at SI-BONE for their efforts and strength through these difficult times. I'm incredibly proud to be part of this team and believe that we will come out of this period even stronger as a company. While the immediate future is unclear, I'm confident that SI-BONE is well positioned to navigate these challenging times. The underlying fundamentals of our business remain strong. Through mid-March, we saw record procedure volumes resulting from the significant investments we made across our commercial organization to develop this market. And as Laura mentioned in the near term, we are taking a very disciplined and thoughtful approach to financial decisions and capital allocation priorities. As we continue to do our part to battle this pandemic, we remain fully committed to support patients, customers, and our communities. Stay safe and thank you for joining us. We will now open it up to questions.

Certainly. Your first question comes from the line of David Lewis from Morgan Stanley. Your question, please.

Good afternoon. Thanks for taking the questions. Jeff, a few for me this afternoon. The first just I want to kind of get into COVID in a second here. But obviously, the first two months of the quarter, by our math, you had these five to seven points and [indiscernible] acceleration. I just wonder, as you think about where the regions of the country that were strong, any sense of what the primary drivers were, how much was driven by your new commercial expansion, new payer contracts, or frankly, was it more national, which would be sort of more indicative that the benefit was tied to better physician reimbursement, just any color in the first two months of the year in terms of the inflection will be great? Then I have a couple of follow-ups.

Yes, sure, David. It really was absolutely all across the country for the first two and a half months, and that growth rate and that strength felt great. Obviously, we had a lot of cancellations in the last two weeks, and those numbers that 29% didn't even include bookings that might have come in. So there really was good strength all across the country. I think it's no different than what we saw in the previous quarter's things getting slotted in the five or so drivers in the business: more salespeople, more people trained, more surgeons trained, more reimbursement. Of course, the surgeon payment didn't hurt, and we were really firing on all cylinders. It's a little bit different as we get into COVID; we are seeing pockets, and I'm happy to answer that if that's where you want to go, where there's strength in the country that's coming back sooner than other areas.

Okay, let me just shift to cover for a second here. It kind of may be a couple of parts question here, Jeff, but people are generally doing spine procedures as being fairly deferrable than some emergent procedures. How do you think about SI-BONE, kind of relative to traditional spinal procedures and maybe some more color on sort of what are some of the characteristics of where you're seeing these pockets of strength, and they have a very significant outpatient mix. I wonder how much of that is participating? Are you seeing more procedures shift to the outpatient market? So just sort of where you are from an elective perspective relative to spine and sort of what are the characteristics of some of these places you're seeing recovery?

Well, I mean, David, first of all, if you talk to surgeons out there, I think, most — maybe a big percentage say this is something they love to do. It has tremendous success rates, and the patient satisfaction is tremendous. I think it's a very popular surgery, and it has great impact very quickly. Now with the payment, I think it's a very attractive procedure from that aspect as well. So I think we're certainly going to see more procedures that are outpatient as a percentage. Over the last number of weeks, we've seen more in Ambulatory Surgery Centers (ASCs), but I think that's more a result of slower numbers in the hospitals themselves. The percentage certainly has gone up from our -- what we talked about traditionally at 10% out in ASCs. As to what we're seeing now, the last week, we certainly are seeing procedure volumes come back with the opening of the 25 states as of today with Florida opening up and that's more than 70% of our traditional volume across the country. It’s hard for us to parse out what percentage of those cases are actually cases that were canceled in March; those hundreds of cases for their new procedures. So that's a mix. It's a little more difficult. But certainly over the last five to six days, we've seen strength coming back to the business.

Okay. And just lastly, Jeff, from me, just international, that number actually fared better than expected, and then maybe just two relative to your exposure in Germany where procedures have been a little better, but just to your thoughts you've had international and any recovery you've seen outside the U.S. Now jump back in queue. Thanks.

Sure. You’re welcome, David. So yes, we're seeing strength in Germany prior to call in March 15; we saw strength in Germany and the U.K. and in France, so some of the bigger countries. As to the COVID effect, we are seeing Germany come back. The U.K., as I'm sure you've heard from other companies, as well as France, is slower at this point, and we'll just have to see how that develops from an opening standpoint.

Thank you. Our next question comes from the line of Bob Hopkins from Bank of America. Your question, please.

All right, thank you. Good afternoon.

Hi, Bob.

Hey, Jeff, just curious; I'm happy to hear you say that last five, six days you’ve seen some improvement. I'm sorry, if I missed this, can you get through a sense, in the last week are you guys -- is it down 30% or 60%, just some sense as to what the year-over-year growth rate looks like last week or so?

Yes. The numbers going into May, year-over-year. What I'm talking about is the first day of May how bookings look like, how big the backlog was going into May, compared to a year ago was not hugely down from a year ago. So it's hard to say how much of that is, those cases that came back on from -- they were canceled again. But, April was quite honestly very, very rough -- down very significantly, but I think we're seeing a nice recovery in May.

Okay. And then one other question I wanted to ask was, obviously, for a period of time here, you've been unable to be out in the field in a regular sense. And you're not probably able to kind of be out there developing your market, which I know is a huge part of the story. How much do you think that set you back at this sort of inability to go out there and tell your story just over the last month or month and a half?

I don't think it's that much, Bob. I think the sales forces are anxious to get back to work. They are getting back to work in the middle of the country, and in places like Texas, we're seeing cases come back on very strongly. I think the surgeons that I talked to, quite a lot of them, they're very anxious to get back to work. As you might recall, we went deeper as a team into the accounts that we have and increased the number of cases per surgeon. Last quarter, I don't remember the exact number; I think it was 3.14 or 3.41 or something like that. But I honestly don't think that this month and a half of being on the sidelines had any material effect over what we think about the business longer, mid-term, and longer term. I think there's a greater realization we've seen; the store of this as a problem is there are surgeons who don't have time to learn because they're so busy in their practices, and one of the things that we have seen is the sales folks are communicating with these surgeons. The webinars that we had — as I mentioned earlier, we had over 100 surgeons in the adult deformity webinar for an hour that actually brought in some surgeons who traditionally just haven't had time to meet with our people. So the world is changing a little bit, and so there are some positive things around some of these education initiatives. I find that the surgeons are staying on the phone with me and staying on, I suspect, with the salespeople a little bit longer because they have a little more time on their hands. So ours is a story as you know, Bob, about understanding education, differential diagnosis, including the SI joints, and I think that momentum continues. I think that these webinars and the salespeople reaching out to these surgeons and sales management are continuing that momentum. Clearly, we didn't wish for this. We were, as I said, firing on all cylinders and it's been a very rough period for everyone. But, I don't see anything different about the opportunity for the business in the future.

What do you think — last quick question, what do you think better might have done in the quarter without – how was that trending?

It's getting a lot of traction, particularly from an education standpoint. I mean, I have to tell you, Bob, I was when Tony Recupero told me that they were going to be over 100 surgeons on the adult deformity webinar, that was way more than double what I thought would be on that webinar. I think we have a really good strategy in place. I think there has been, as I've said before, pretty lousy development from a technology standpoint in the SI joint before we came on the scene. I think the adult deformity results we're seeing, and I just got a report on revision rates, which we track, and they're terrific on the SI joint, and they're unbelievably good on the adult deformity cases. And then thirdly, I think that the whole trauma space, which we're just starting to enter, has had pretty sub-standard technology development, and with our technology now entering that, we've seen tremendous interest there. I think all three areas are going to contribute and be, of course, multipliers with each other for our company. I didn't quite tell you exactly how many adult deformity cases we did, but we are seeing strength in all three of those areas.

Great. Thank you very much.

You're welcome, Bob. Good to talk to you.

Thank you. Our next question comes from the line of Kyle Rose from Canaccord. Your question, please.

Great, thank you very much for taking the question. I kind of wanted to dovetail a little bit on some of the previous questions from David and Bob. Jeff, when I think about the sales trends through April. I think there's been — our surveys suggest anywhere from a 70% to 80% decline in procedure volumes for the month of April, but you had some encouraging commentary about the 50% of states opening back up in May. Those represent about 75% of your business. So maybe kind of help us frame how we should think about that month-over-month improvement. When we get into May and June, does that go from 70% to [30% to 40%] declines, just trying to understand on a relative basis how we should think about the business trending?

Jeff, maybe I can help out on this particular question because I do have some data on it. Kyle, as Jeff had said, the month of April looks like it was a trough, and what we experienced was a decline compared to our plan of over 80% in terms of case volumes in the United States. So we were off by over 80% on cases in the month of April. But when we look at May bookings, and it's just looking at May 1 and where the bookings are in the United States for the whole month of May. This is our primary leading indicator that we use to understand what the month is going to look like. A typical case will be booked two to three weeks prior to the time that it's performed. If we compare that metric to last year, we're at approximately 80% of last year's bookings on the same day as of May 1. So if you compare that to more of a plan, we would be more in 60% of plan or 40% down from where we would have anticipated. So a big jump from the 80% down in April to it looks like more like 40% down in May, at least with that one indicator.

That's very helpful. Thank you very much for the color there. You also touched a little bit on the trends in the outpatient in the ASC setting. I just want to make sure I heard you correctly. Did you say that 10% of your historical business is in the ASC, and then I just wondered if you could break out the mix with respect to outpatient versus inpatient and how that may have changed, even in the first quarter to date with better physician reimbursement?

It has traditionally been 10%, 12% in ASCs. We don't have the exact number in the hospitals i.e., both outpatient and inpatient. But certainly, we think that about 80% plus of the surgeries that are done in hospitals are actually outpatient procedures. As to the change in that, there really wasn't much change through the first two and a half months in the first quarter. And the last two quarters, there wasn't much done at all. But in April, we certainly saw the ASC numbers; even though we were working on a smaller basis, as Laura alluded to, we were down 80%. More were down in ASCs, so significantly greater percentage was done in ASCs. But I think that's really a little deceptive in the sense because the number that we're actually done in hospitals was quite small.

Okay, thank you very much for taking the questions. I'll hop back in queue.

You’re welcome.

Thank you. Our next question comes from the line of Kaila Krum from SunTrust. Your question, please.

Great. Hi, guys. Thanks for taking our questions.

Sure Kaila.

You mentioned that you're curtailing operating expenses as you navigate COVID. So, and you’ve talked about the hiring restrictions and delaying clinical projects. So can you speak, I guess, to how significantly those plans have changed and just help us understand or give us comfort that if there were any major changes and how do we think about your long-term growth from here? Is there any impact to your confidence there?

I just talking in general that Laura can add on here. Kaila, as we talked about in the past, we cut variable expenses. Some of those were cut naturally; obviously, with conventions and annual meetings and those kinds of things. I don't think that's going to change all year. I don't think those expenses are coming back, and they're not in our control. I think that expense; you have to sort of take them one at a time. The expenses related to surgeon training will go up, and we will support whatever surgeon wants to get trained and slot those back in as surgeons are allowed to be trained. Within that training area, I have alluded in the past to a new training system that we're developing, which is an advanced training system that can be used; that will be able to train surgeons on different kinds of anatomy. This is a proprietary system. This will allow us to do the surgeon trainings more locally, which means surgeons won't have to travel. We'll be rolling that out in the second half of the year. So that actually, from an expense standpoint, I'll let Laura comment on that. But there are some capital equipment expenditures in there. But there'll be travel expense changes within that whole program. As to variable expenses and marketing, we have cut back quite a bit on things like Facebook and those kinds of things. But we have been doing webinars. I think as things evolve over -- between now and the end of the year, we'll begin to ramp that up as we see fit and there will be a little more change in the percentage of money that we spend on direct-to-patient marketing versus going to the annual meetings because that number is not, as I said, going up. Laura, anything you want to add into that?

I think probably the most important thing to add, based on your question, Kaila, is we did not make any changes from a people perspective with the exception of a hiring freeze and management salary reductions. We have spent the last 18 months since we went public building a quite extraordinary group of people, both at our headquarters operation as well as in the field, and we were seeing significant acceleration of our revenues. Our goal was to keep our people intact and supported during this difficult period so that we could come out of this pretty rapidly. I just talked a little bit about what happened in April, which was a low point for us. But that May is starting to come out of this, at least based on early indicators. We have the people in place with the relationships with our surgeons in order to get those cases going again, and we have the support staff in order to drive sales. In addition, we're keeping our project prioritizations in place as well, with major projects that the company was working on, we are continuing to push forward on those. The real focus was on expenditures that would not have a significant impact long-term on the business so that as things returned, we were ready to jump on the opportunity and re-accelerate the business. From a percentage perspective when we were looking at variable expenses, we tried to cut out 10% to 15% of operating expenses with those variable costs that we took out. We went through every single expense. Jeff talked about quite a few of those already. We also looked at working capital just to make sure we were being prudent with our inventories and our payables and receivables and all of those items. Then Jeff also mentioned that we looked at capital expenditures, for example, not purchasing certain items that we had intended to or just pushing those out a little bit. We went through a full list of items and made some decisions to be prudent from a capital perspective but also to ensure that we did not impact the long-term opportunity for the business.

That makes a lot of sense. Thank you, Laura and Jeff. I guess this is a follow-up to that; you're still continuing your efforts with trauma. Can you just give us a little bit more detail on your efforts there and how you're planning to launch into that stage? Thank you.

Well, the first thing, obviously, Kaila, is we use this time with our field organization to train them up in the trauma area, so that actually was well spent time. We've implemented a whole new training system called Brainshark, which allows us to push out educational content to the field, and it's a paced learning, tracked learning. The team actually has had the opportunity to come up and understand the opportunities and get trained in the trauma space more rapidly than they might have if they were at work every day. So Tony and the team, along with his training team, are most of the way through a lot of that, and it's launching now. Certainly, we're starting to see some nice trauma cases. That worked out okay in that sense, and there are going to be some investments in the clinical area. We've seen a few surgeons step up and say we want to do our own study because we just said we're going to hold on some of this clinical investment for a few months. I think we're going to see some doctors validate some of this on their own. We're pretty excited about the trauma space and what we see going on, and more to come on that front.

Great, thank you.

You're welcome.

Thanks. So I was just wondering if you could remind us the average age of the patient treated, and then I think you talked a little bit about CMS, first private payer mix last quarter. But if I'm trying to get the age of the patients, it seems like some of the elderly may not be as willing to be in the hospital, and I know that still is kind of a majority of the procedures today. So if you could just remind us where that aid stands today and then the mix between private and CMS.

Happy to do it. We have patients that are 20 years to 80 years old. The average patient is 50 and two-thirds are female. That's the landscape. The percentage of patients in 2019 that were Medicare patients was a little shy of 50%. We certainly expect that to change. We expect over the next year or two for 80% of our patients to be non-Medicare patients. So, the commercial side will increase.

Yes, makes sense. I'm glad to hear that you're going to have those kind of numbers. I guess the other one I had quickly was in terms of the procedures, what percent would you say today that your sales force of the assistants are actually in line? I guess you mentioned some of the places bouncing back. But I know rep access has been a problem at some hospitals. So I'm imagining that some of your accounts don't need somebody there all the time. Any thoughts on that as places begin to reopen? Thank you.

Yes, you're welcome, David. Virtually all of our procedures in the past have had our reps in there. We certainly hope we can continue on that front. They add value. We are adding training capability to actually, I think, train the surgeons better so they could practice on male patients, female patients, dysmorphic patients, et cetera where we haven't had some of that capability. We'll roll that out. We view our sales forces as highly skilled and adding value. Some of these surgeons do just a few procedures in a quarter, and you might have a sales rep who's seen an order-of-magnitude larger than that, so they absolutely add value. As to actual access, I think it's too early to tell exactly how that's going to play out here. I think we certainly see reps, and I get emails from reps, so pictures of them in their car on the way to work these days, and say, I'm going to do a case, Jeff, and I've asked them to send me those pictures because I want to know that that's going on. There are certainly a few instances where we've seen reps that haven't been allowed to go in, but at least what I've heard so far — and I may want to get back to this after talking a little bit more with Tony — but I think in almost all the cases, the reps have been allowed in to the cases that we've done in the last sort of week or so.

Thank you.

You're welcome.

Thank you. Our next question comes from the line of David Saxon from Needham. Your question please.

Yes, good afternoon. I guess, just one on the recovery. What have you been hearing from doctors about their capacity as they reopen and how long it might take to work through the backlog? And then you mentioned 300 cases were pushed out. I was just wondering, what portion of those do you think will be ultimately rescheduled?

As to the surgeons' capacity, I think that they can go up 20% or so from where they would normally be. The surgeons I’ve talked to and know the sales force we’ve talked to say everyone fully expects in Q3 and particularly in Q4 — as the country hopefully fully opens up — to work Saturdays and work a lot of evenings. I think our sales force is super dedicated and not just willing to go back to work; they're excited to get back to work and get into the game and help these patients. I suspect we're going to see a bunch of Saturday soccer games missed. We'll be in the operating room pretty often. And remind me what the second portion of your question was?

And you mentioned 300 cases were pushed out, just wondering how many of those – how many of those?

Yes, sure. I suspect it's hard to say. But I wouldn't be surprised if 95% of those cases come back on the books. I don't think that a lot of people that are ready to go to the operating room in three days, just punt. I think these people are in severe pain and are convinced, and their surgeons are convinced that they can be helped in a significant way. I don’t think we're going to see a lot of loss there. I think it's more a question of when as opposed to if. I think in certain places, like the Northeast, where we're going to see — and I think all companies are going to see a lower recovery of the surgical rates; those ones are going to take longer to come back. Those places may not get back to normal until Q4, Q1. I don't know; I'm not the oracle here in that sense. I don't think anyone is in those places like South Florida and Texas and some of these other places. I think you're going to see a much faster recovery in those 300 cases or the portion they're out there in those particular geographies should come back pretty fast.

Okay. yes, that's helpful and encouraging. And then, I guess my second question is, I mean, previously, you've talked about the decorticator and the iFuse bone and that as a kind of a move to attract new surgeons. Just wanted to hear up through mid-March how those products were doing in terms of bringing in new active surgeons. Thanks very much.

You’re welcome. I think that we're very different from every other company that's competing in this space in that sense that we have a full bag. Absolutely, new surgeons are coming on. I think we've got a couple of big things in our pocket that'll come call it a year from now, in that timeframe, and we're going to add to our strength there. The strategy is to enter all those — all three of those markets with the SI joint fusion space as the foundation of the whole company, but to expand out from the trauma and adult deformity spaces to increase awareness and increase revenue and then bring these other products so that we're even more competitive in the next year.

Great. Appreciate the color.

You’re welcome.

Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Jeff Dunn, President and CEO, for any further remarks.

Sure, just a quick thank you for joining today. Obviously, these are challenging times. I honestly feel pretty good about how the team has held together. In fact, I feel great about how the team has held together and is excited to get back to work. I hope all you guys out there are safe and that your families are healthy, and I look forward to getting back to whatever the new normal is in the not too distant future. Well, thanks again for joining.

Thank you ladies and gentlemen for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.