SI-BONE, Inc. Q2 FY2021 Earnings Call

Good afternoon, and welcome to SI-BONE's Second Quarter Earnings Conference Call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Matt Bacso from the Gilmartin Group for a few introductory comments. Thank you for participating in today's call. Joining me are Laura Francis, Chief Executive Officer; and Anshul Maheshwari, Chief Financial Officer. Earlier today, SI-BONE released financial results for the quarter ended June 30, 2021. A copy of the press release is available on the company's website. Before we begin, I'd 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. These forward-looking statements are based on the company's current expectations and inherently involve risks and uncertainties. These risks include the impact of the COVID-19 pandemic on the ability and desire of patients and physicians to undergo procedures using the iFuse implant system, the duration of the COVID-19 pandemic, and whether the COVID-19 pandemic will reoccur in the future. Other forward-looking statements include our examination of operating trends and our future financial expectations, such as expectations for hiring, surgeon training and adoption, active surgeons, new products, clinical trial enrollment, and reimbursement decisions 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 of descriptions of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission. 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 accurate only as of the live broadcast today, August 2, 2021. And with that, I'll turn the call over to Laura.

Thanks, Matt. Good afternoon, and thank you for joining us. Before I cover our second quarter results, I want to share some exciting news on the reimbursement front. Based on the strength of our long-term Level 1 clinical data, Anthem has adopted coverage guidelines that are exclusive to our iFuse triangular titanium implants for minimally invasive SI joint fusion. Anthem is the second largest commercial health insurer in the United States. With over 40 million members, Anthem joins more than 35 other plans to cover iFuse exclusively in the U.S., amounting to over 120 million exclusively covered lives in total. With Anthem's exclusive coverage, we see reimbursement as a tailwind for our business. We will capitalize on the opportunity through our 2021 commercial growth plan, which includes sales infrastructure expansion, surgeon engagement, products and solutions, and patient awareness initiatives. Now on to the quarter. I'm pleased to report that SI-BONE had a record revenue quarter as our employees continue to execute relentlessly through this unique operating environment. In the second quarter, we generated revenues of $22.2 million, representing growth of 58% compared to the second quarter of 2020. As a reminder, the prior year quarter was significantly impacted by COVID. Sequentially, our second quarter revenue grew by 9% due to increased underlying demand for our products and solutions. Our strong results in the second quarter give us confidence that as the operating environment normalizes, our industry-leading diverse portfolio will accelerate our capture of the multibillion-dollar opportunity in the sacropelvic space. Now let me provide an update on our key growth initiatives as we look to extend our leadership position and drive durable long-term growth, starting with sales infrastructure expansion. At the end of the quarter, our 133 person sales organization was comprised of 74 territory managers and 59 clinical support specialists. We continue to be strategic about our mix of territory managers and clinical support specialists. Specifically, our clinical support specialists are crucial to driving revenue productivity for our territory managers while also serving as an important training ground for future territory managers. Additionally, we continue to methodically expand our sales organization to support our surgeons. As of July 1, we added 2 new regions for a total of 16 regions in the U.S. Moving on to surgeon engagement, the investment in our sales organization, our expanded product portfolio, and training infrastructure drove a significant increase in the number of active surgeons in the quarter to approximately 640, an all-time high. During the quarter, we had 24 SImulators deployed worldwide, including 21 SImulators in the U.S. SImulators, which accounted for more than half of our trainings in the quarter, not only allowed us to train new surgeons efficiently but also reengage with inactive surgeons and drive adoption. Going forward, with travel restrictions easing, we believe the combination of in-person local training and SImulator training will continue to drive surgeon engagement for new and previously inactive surgeons. As a reminder, we are targeting the approximately 7,500 spine surgeons in the U.S., of which 1,700 have been trained and have completed a procedure to date. Turning to products and solutions, starting with iFuse. We recently announced results from SALLY, our 2-year prospective multicenter trial of iFuse-3D for chronic SI joint pain. Clinical results at 24 months showed marked and sustained improvement in SI joint pain, patient function, and quality of life. The results demonstrated a significant reduction in the proportion of study subjects taking opioids for SI joint pain, from 59% at baseline to 18% at 24 months. In addition, the study included 3 objective physical function tests; active straight leg raise, 5x sit to stand, and transitional timed up and go, all of which showed statistically significant improvements from baseline. An earlier publication of 12-month results from SALLY reported radiographic analysis of CT scans showing accelerated bony bridging across the SI joint. 100% of treated SI joints showed bone integration to the iFuse implant surface on both the sacral and iliac side, and 77% of treated joints showed bony bridging across the joint. There are now 95 peer-reviewed publications demonstrating the safety, effectiveness, biomechanical or economic benefits of our iFuse technology, further substantiating iFuse as the gold standard for SI joint fusion. Moving on to iFuse-TORQ. We're pleased with the initial reception for iFuse-TORQ following its commercial launch in April. While still in the early days, we are seeing adoption in trauma as well as several competitive conversions. As a reminder, TORQ is a highly differentiated 3D print threaded implant, which was developed to solve unmet clinical needs for pelvic trauma, an attractive $350 million adjacent market. iFuse-TORQ also has applications in the primary SI joint fusion market. Last year, we estimate that our competitors generated approximately $40 million of business in primary SI joint fusion. And iFuse-TORQ allows us to offer a product that leapfrogs the competitor's screw-based implants and extends our leadership and market share. In adult deformity, Bedrock is driving revenue growth as interest in the Bedrock technique among deformity surgeons and key opinion leaders continues to increase. We currently anticipate that our second-generation adult deformity product, a first-of-its-kind design based on feedback from KOLs, will enter market preference testing in early 2022, a bit later than previously scheduled. While we're not experiencing supply chain issues with our implants, we are experiencing longer-than-normal delivery times with some of our instrumentation suppliers due to raw material, labor, and capacity challenges stemming from the impact of COVID-19. The instrumentation delays impacted our validation and verification testing, causing the delay in our second-generation adult deformity product launch. However, we are developing plans to mitigate this risk in the future. Next on to our patient awareness initiatives. We have completed our second TV marketing test program in multiple cities and compared the broadcast results to our digital marketing initiatives, including search, social media, display, and video. We're seeing a higher return on investment in the digital marketing initiatives. Based upon these results, we're focusing incremental investment toward digital marketing in the second half of 2021. These investments are expected to fuel revenue growth through patient and professional experiences, amplifying our reach to healthcare professionals and empowering patients through their SI journey. Our digital initiatives will allow us to be highly targeted, data-driven, technology-enabled, measurable, and allow for continuously improved marketing. We expect to see the revenue impact from these programs beginning in 2022. Finally, let me provide some more updates on health economics. Effective July 3, Centene Corporation established positive coverage for minimally invasive SI joint fusion. Centene is a major intermediary for both government-sponsored and privately insured healthcare programs and covers more than 25 million members. With the decisions from Anthem and Centene, substantially all of the U.S. insured population now has access to minimally invasive SI joint fusion. Internationally, in June, the French Health Ministry granted national reimbursement for iFuse-3D. This reimbursement decision by the French national healthcare system provides coverage for SI joint fusion procedures exclusively using SI-BONE's iFuse-3D implants. With that, I will now turn the call over to Anshul to provide more details on our financial results.

Thanks, Laura. Our second quarter total revenue was the highest in company history at $22.2 million, representing growth of 58% compared to the prior year period and 9% compared to the first quarter of 2021 due to the growing underlying demand for our products and solutions. U.S. revenues were $20.2 million, increasing 53% compared to the prior year period and 8% compared to the first quarter of 2021. International revenue of $2 million was a record, increasing 137% compared to the prior year period and 17% compared to the first quarter of 2021. While we had a solid quarter, the month-to-month revenue growth trend has not been linear as we continue to emerge from the pandemic. We did not see material cancellations due to COVID in the quarter, but we did experience higher-than-normal deferral of cases. We believe this is due to patients and surgeons taking advantage of the economic reopening to plan vacations earlier in the summer. Based on feedback from health care professionals, while backlog continues to grow, we believe delayed diagnosis and use of telehealth to manage patients during previous COVID surges impacted the timing and pace of backlog replenishment of patients who met the medical necessity criteria and who are ready for surgery. We think these two transient factors had an impact on patient volumes in the second quarter and could impact the third quarter. Regarding sales force hiring, we ended June with 74 direct sales reps and 59 clinical support specialists. We expect to end the year with approximately 150 full-time field sales professionals. We now anticipate ending the year with 85 direct sales reps and 65 clinical support specialists, a change from our original target of 90 and 60, respectively. Gross margin for the second quarter of 2021 was 89% compared to the prior year period of 85%, as higher costs of operations to support the growth of the business were offset by lower inventory write-downs. Our second quarter 2020 gross margins were impacted by certain period costs that were expensed as incurred due to suboptimal capacity utilization driven by lower case volume and an increase in inventory write-downs. Operating expenses increased 49% to $32.8 million in the second quarter of 2021 as compared to $22.1 million in the prior year period. The increase was driven by higher sales and marketing costs related to increased sales hiring, research and development expenses for new product development, and increased stock-based compensation expense. Our second quarter 2020 operating expenses were impacted by preemptive steps taken in response to COVID-19 to reduce discretionary spending. Our net loss was $14 million or $0.42 per diluted share for the second quarter of 2021, as compared to a net loss of $12.5 million or $0.44 per diluted share in the prior year period. As of the end of the quarter, our cash and marketable securities were approximately $176.6 million and long-term borrowings were $39.6 million. Moving to guidance, while encouraged by the strong underlying momentum in our business, we remain cautious given the uncertainty surrounding COVID-19, including potential risk of resurgence driven by new variants of the virus and uneven vaccination rates, disruption from surgeon and patient vacation schedules, pace of backlog replenishment, and the potential negative impact on hospitals and ASCs. Our guidance is highly sensitive to assumptions on a global recovery, which anticipates continued progress on vaccinations resulting in normalized case scheduling and elective procedure levels progressing throughout the year. While we had a solid first half of the year, we continue to take a measured approach given the early stage of COVID-19 recovery. Based on this, we continue to expect total revenue of $92 million to $94 million, representing a growth of 25% to 28% compared to full year 2020. Given the gross margin trends in the first and the second quarter of 2021, we are updating our gross margin guidance to between 87% to 89% for the full year 2021. I will now turn the call over for questions.

Our first question comes from Bob Hopkins with Bank of America.

Just a question on kind of what we learned on your last call versus what we're learning on this call. And big picture, it sounds like, obviously, you're making progress, but it felt like things went a little backwards relative to how you exited the first quarter throughout the rest of the second quarter. Whereas what we heard from other spine-related companies is a little bit better in Q2. So I'm just curious, do you think that your procedure is a little more elective than traditional spine? And just want to get a little more color on kind of what you saw in the quarter relative to how things exited in Q1.

Yes, Bob, thanks for the question. In terms of how we think about how things are developing, we actually feel great about the second quarter. I think the difference between us and potentially some of the other companies that you're talking to is, in my opinion, 80% of cases for iFuse are outpatient or ASC cases. As you know, we saw a pretty rapid bounce back of our business already starting in March. So I think what other companies may have seen is more of an orderly transition with both new cases plus rescheduled cases coming in more in the second quarter. So as Anshul mentioned on the call, what we saw is a little more choppiness during the quarter, but overall, I feel really good about where we ended up. We grew 58% year-over-year. Obviously, last year was impacted significantly by COVID. But we're also pleased that we grew 9% sequentially between Q1 and Q2. And so we think that bodes well for the rest of the year.

Yes, no, all fair points. So just trying to understand the difference in what we're hearing. And maybe you could talk a little bit about kind of what you're seeing currently and you mentioned a bunch of different things that could impact the near term. Are you seeing those things have an impact on your business regionally in the United States, if things turned a little bit negative from what you've been seeing recently as a result of the spread? Or are you just suggesting those are things that could have an impact in the future?

Yes. So I think it's more the situation where we really haven't seen a significant number of canceled cases similar to what we saw during the surge during the winter or at the very beginning of the pandemic. So these are more cautionary statements at this point in time. Obviously, every single day is a new day. We're seeing a lot of information just today about Florida. And so once again, these are cautionary notes. In a lot of cases, cases can't necessarily be performed inpatient if elective procedures are being stopped. They may be moved out of hospitals into ASCs. It really does feel like things are a little bit different this time; the hospital systems are more in a position to address the issues that are out there and to manage through them. But we're certainly taking all of that into consideration as we're providing information on the call and on our guidance.

Great. And then just one last really quick one. Does your guidance assume a big difference between Q3 and Q4, or is it sort of normal seasonality? Or maybe talk a little bit about the cadence.

Yes. So as I mentioned, when I think about our revenue growth for the third quarter and the fourth quarter, we delivered a solid first half this year and continue to navigate COVID-19 headwinds. It gives us confidence in the growing underlying demand to drive growth in the second half of the year and beyond as we continue to progress more toward normalization. But we are still in the early stages of recovery, and COVID-19 still exists and remains an unknown. For all those reasons, we continue to be measured given the variability in the growth rate trend that we experienced in the first half of the year. While we're not giving quarterly guidance, I will share how we're thinking about the U.S. in the second half and continued sequential growth, which, similar to our typical seasonal patterns, will be weighted toward the fourth quarter. As we're entering the third quarter, we continue to see patient and surgeon vacations, as well as backlog replenishment dynamics continuing into the quarter. When we combine that with normal Q3 seasonality in the U.S., which historically has been flat versus the second quarter, and you also have three major surgeon conferences in the third quarter, it does seem that this will likely impact cases. Overall, we think it's going to result in a modest third quarter sequential growth rate. So we anticipate that we'll continue to grow sequentially, but modestly. Also, as I said, the fourth quarter historically has been our strongest quarter. As a point of reference, going back to the fourth quarter of 2019, pre-pandemic, we had year-over-year growth of 26% and quarter-over-quarter growth of 22%. While we're still dealing with the recovery, we do expect the fourth quarter pace to assume no disruptions to the recovery trends. Just finally, with the investments we've been making across our strategic priorities and with the recent exclusive approval from Anthem, we're excited about the opportunities in the second half of the year and into 2022.

Our next question comes from Kyle Rose with Canaccord.

I just want to see if we could go back to some of the Q2 commentary. I mean, you talked about some of the transient factors as far as maybe more deferrals and then as people are taking vacations and things of that sort. And then also just a rebuilding of the funnel. Could you just maybe help us quantify the impact in Q2 and how you're thinking about that impacting Q3? It does sound like you're still pointing to growth quarter-over-quarter. But just trying to understand what that would have looked like in Q2.

Yes. If I walk through the trends for the second quarter, we ended the quarter with $22.2 million, and that was a record revenue quarter. It was 58% year-over-year growth, and 9% quarter-over-quarter growth. I'm pretty pleased with that performance and our team's execution in the first half. Let me share a little more on the dynamics we saw in the quarter, and I'll start with the U.S. We talked previously about finishing March very strong, and April was also one of our strongest months, but it was actually below March. We continue to see some nonlinear or lumpy recovery during the quarter, and we believe that was driven by a few things. We saw higher than normal deferral of cases as surgeons and patients took advantage of the economic reopening and planned vacations earlier in the summer. Based on feedback from physicians, while there's pent-up demand, the patients that delayed diagnosis and used telehealth to manage their health during previous COVID surges impacted some of the timing of the backlog replenishment for patients who meet the medical necessity criteria and are ready for surgery. We think these trends contributed to the month-to-month variability we experienced and with volumes being pressured in the early part of the quarter. But we did really see a nice trend upward toward the end of the quarter once again. So like I said, just a little bit of lumpiness in these monthly numbers for the couple of reasons that I mentioned. Outside of the U.S., we saw a very strong performance from our European operations, led by Germany and France, and we also saw early signs of recovery in the U.K., which lagged the recovery. We're pleased with how Europe is performing in the first half, and we expect the EU to continue to perform well. They have a strong leadership team in place in each of the major countries. We also have our newly announced French exclusive coverage for iFuse-3D. I hope that’s helpful, Kyle.

It is. And then just one on Anthem, and then I'll hop back in the queue. Obviously, congrats on the coverage. Great to see exclusivity. How should we think about the timeline until when that coverage could potentially impact underlying momentum? Is it 6 months? Is it a ’22 event? I'm just trying to really understand when we should see those gears moving to impact growth.

Yes. We're pretty excited about the Anthem announcement. Anthem transitioned to the AIM clinical appropriateness guidelines for SI joint fusion, which includes the requirement that iFuse triangular implants be used exclusively. With that, we have nearly universal coverage for the U.S. insured population for SI joint fusion, including coverage by over 35 health plans that are requiring the exclusive use of iFuse triangular implants for the procedure. Anthem has 40 million members across its health plans, and prior to the transition, Anthem was approving iFuse patients more on a case-by-case basis because they had a pelvic girdle trauma coverage policy only. What we saw was only around 50% of cases were actually getting approved, making it hit or miss. It was one of the toughest payers in terms of denying patients access to the procedure. Regarding the timeline you asked about, we typically estimate that it takes 6 to 12 months for this to work through the system before we see a meaningful impact on volumes. So we may have some impact in 2021; for example, some patients are currently in the pipeline for appeal. For the most part, we expect surgeons to start regularly diagnosing patients with SI joint dysfunction or degeneration that have Anthem coverage, which will be a catalyst into 2022.

Our next question comes from David Rescott with Truist Securities.

I first want to start on the number of sales reps you plan to add for the year. I know you've lowered the guidance there regarding how you're expecting to add reps. Do you see this as more of something that has run more difficulty in the hiring environment than you originally thought? Or is this more around the elective procedure or coverage? Just trying to understand what the change is here. And then I guess as a second part of that question, is this really impacting any type of sales rep productivity metrics that you've had in the past?

Yes, David, thanks for the question. This doesn't have anything to do with the hiring environment. We're still going to have the same number of FTEs when we exit 2021. We're continuing to make progress, and we're methodically expanding the sales organization. It continues to be one of our key growth initiatives. As I said, the number of people we will finish the year with will be approximately 150. What we've done is we've shifted five of those hires from territory managers to our clinical support specialists to reflect what's happening from a territory perspective and from a growth perspective. We typically add a clinical support specialist at the time when a territory is served by only one territory manager, and that territory manager begins to experience issues from a bottleneck perspective with adding new surgeons or covering cases. That's when we'll add a clinical support specialist to grow that territory from an estimated $1.5 million to more of the $2 million range. We split a territory at the point where they're typically approaching or exceeding $2 million. So this is really just a small fine-tuning of how we're handling things from a sales force perspective. We're hiring terrific people and being very thoughtful about how our territories are developing.

Okay. That makes sense. I guess, second on TORQ. I know you launched in the U.S. in April. Could you provide any color around how the early days of the launch have gone so far, at least maybe through July? I know that on the last earnings call, you had talked about how you included just a little bit of revenue contribution from TORQ in the guidance for 2021. So I guess, as far as you've gone so far, are you feeling any more or less bullish about that opportunity and so much as you'd be willing to describe how that's kind of played in your guidance so far?

Yes. I'm happy to share that. Obviously, we're only one quarter in since the full launch. We launched in April and are pleased with the initial reception for TORQ across trauma and competitive conversions. Some early surgeon feedback we're hearing is that our innovative design and differentiation have been accelerating the adoption. We're still in the early days of the products, but we like the momentum. TORQ was primarily developed for trauma, which is a $350 million new adjacent market for us, and we also have an opportunity with competitive SI joint fusion conversions. Since the trauma market is new for us, we expected targeted competitive SI joint fusion conversions to drive the initial adoption momentum. We are seeing some of that. While we've continued to execute on the competitive conversions, the adoption of TORQ for trauma has been strong as well. TORQ has been a great addition to our portfolio, and with iFuse-3D, which is the gold standard for SI joint fusion, as well as iFuse Bedrock for adult deformity, it's helped us to further extend our leadership as a sacropelvic surgical solutions company.

Your next question comes from Brandon Folkes with Cantor Fitzgerald.

Congratulations on a good quarter. I just want to drill down into the patient-related delays. Looking at it from the surgery level, completely understandable. I just wondered maybe from the diagnosis level, how should we think about that impact then? Maybe how long this patient journey in total surgery. Just trying to get a sense of whether these patients who should have been diagnosed were on vacation, does that impact maybe Q4 2022. And then secondly, it’s a tough question and granted there are so many moving pieces. But how do you view where we are now versus a normalization? And are you thinking about Q4 2021 as a normalized quarter? Or do you still expect us to have pockets of disruption?

Thank you for the questions. From a patient pipeline perspective, the medical necessity criteria is six months of conservative care. When we consider the pipeline, we focus on that six-month period. During the surge and the previous winter pandemic issues, we noted a significant use of telehealth in those areas. This diagnosis requires patient history, which can be gathered via telehealth. However, some provocative tests generally require hands-on involvement from surgeons, physician assistants, or nurse practitioners, making things a bit more complex. Additionally, a diagnostic injection is usually given, leading to a 50% to 75% reduction in pain, meaning some procedures necessitate in-person conservative care. I want to clarify our current situation. Looking at the performance in the first half of the year, I am satisfied. Based on conversations with surgeons, I believe that most impacts from the patient pipeline will likely be resolved by the third quarter. I expect the fourth quarter to be more normalized for our business. We anticipate various positive factors. Historically, the fourth quarter has been our strongest. As noted, we achieved 26% year-over-year growth in Q4 2019, with quarter-over-quarter growth at 22%. We expect similar trends to emerge, and the patient pipeline issues causing month-to-month sales variability should not affect us in the fourth quarter.

Our next question comes from Drew Ranieri with Morgan Stanley.

Just to touch on the guidance from a different angle. Just as you're looking at active surgeons for the year, I think you said 640 for the second quarter. You noted that there could be some delays in procedures from vacations. But just how are you thinking about bringing on more active surgeons in the back half of the year? Is there a target, especially as you're getting these SImulators out into the field more actively and reengaging prior surgeons?

Yes. We are actually pleased with how training is going at this point. We are approximately at our target regarding our training. While we don't provide specific numbers on training, we use the active surgeon number instead. We initially targeted a 20% growth in the number of surgeons by the end of the year compared to 2020, and we feel good about that. We like what we're seeing in terms of the increases. The SImulator has been a great tool in training surgeons in their offices or wherever they prefer to be trained. In the second quarter, we have restarted our regional and local training courses. As mentioned earlier, we expect to see a combination of regional training, local training, and SImulator training to keep us on track with those active surgeon numbers.

Got it. And just on gross margins for a second. They were clearly stronger than I think we anticipated. But can you just talk to trends in the back half of the year? You pointed to the ASC setting potentially pressuring ASPs over time. But is this kind of a better sustainable level? Just any more detail would be helpful.

Sure. We're really pleased with maintaining industry-leading gross margins in the first half. I do think that the strength of our gross margin signals the strength and differentiation of our products. We raised our guidance for our gross margin from 85% to 87%, largely driven by favorability we saw in the first half. As we think about the second half, we do think that gross margins will continue to be pressured due to the continued move to ASCs, which today accounts for close to 20% of our revenue. We generally see price deterioration year-over-year of 1% to 2%, so that will continue. Additionally, we've got some incremental ASP pressure from TORQ and Bedrock because they utilize two implants versus three. Thus, while the procedure dollar revenue tends to be lower because of the number of implants used, we will experience more depreciation going through the P&L for some of the CapEx investments we've made. Overall, all these factors will play into our gross margin guidance of 87% to 89%.

Our next question comes from David Saxon with Needham.

My first question is just on training. I think you said the split was about 50-50 between the simulator and traditional training. And I know it’s still early days on the simulator, but have you noticed any change in pattern from when you train a doctor to when you start seeing them do an iFuse procedure? Any color there would be helpful.

Sure. Surgeon training is definitely one of the critical initiatives this year, and it's important from a surgeon utilization perspective. The Simulator has been the core pillar of the strategy for this year. It's improved efficiency, and the surgeon community has reacted positively. We don't provide specific data on training but track the number of programs by type. Over half of the trainings this year have involved the Simulator, and we expect this trend to continue alongside traditional methods. Regarding adoption rates, it's too early to determine. Attendance at regional courses usually means surgeons have patients lined up. That being said, we've trained 1,700 surgeons who have treated at least one patient out of almost 6,000 surgeons who need engagement. The Simulator allows us to rapidly train many surgeons, and we're also developing various ways to engage these surgeons. Importantly, it's not just new surgeons; we're targeting inactive surgeons as well with the Simulator.

Okay. That's helpful. And then maybe just a higher-level question on TORQ. I mean, trauma is obviously the larger opportunity there, but it seems like it could be a slower ramp given that it's a different call point. So just wondering how we should think about penetration into that $350 million market segment over the next few years?

Yes, you're correct in how you're thinking about this. The low-hanging fruit is primarily the SI joint fusion conversions. We're seeing a good number of those, but we are also pleased with the traction from trauma, even if it's a new market for us and involves a different call point. In terms of penetration, it's a little early to provide specifics. However, we have a great product, and it's an unmet need in the market. We are excited about this incremental opportunity in trauma, but expect this will gain traction over a 12-month period. TORQ is already impacting our business positively.

Your next question comes from Matt Henriksson with Citi.

I'll start with the deformity market. Is there any updates regarding the SILVIA trial, especially since you made those comments about the second-generation product?

Yes. We've been working hard on SILVIA and Bedrock, which has been a valuable platform for us. It's both a revenue contributor and highly beneficial for surgeon engagement. We're excited about the potential for our next-generation adult deformity product, which is the first of its kind design based on feedback received from key opinion leaders in the space. As mentioned in our prepared remarks, we anticipate bringing the product to market in early 2022 rather than initially planned. We're not experiencing supply chain issues with our implants, but instrumentation suppliers had issues with raw materials and labor, causing delivery delays. However, we are working on internal measures to prevent future product delays. In the meantime, we have a robust business with our Bedrock product and continue to add surgeons in this area, positioning us as a sacropelvic surgical solutions company.

Great. That's helpful. And then just as a follow-up regarding the active trained physicians out there. You made the comment that some of the active physicians are newcomers, while others are those previously inactive. Can you provide more insight on that? And particularly for these inactive surgeons who are back on, how quickly do they ramp up compared to new physicians? And are they moving towards adopting the TORQ versus the traditional 3D implant?

Yes. There are various reasons why surgeons are returning to perform iFuse procedures. Reimbursement is primarily the driving factor; that could be due to covered lives or increased payment surges seen last year. With Anthem's exclusive coverage, this adds even more incentive for previously active surgeons to reengage in the procedure. It's typically easier for inactive surgeons to resume their practice compared to completely new surgeons. New surgeons need to grasp the prevalence of SI joint dysfunction and degeneration, while inactive surgeons generally require only a refresher. We utilize the Simulator to aid in training. Some surgeons prefer TORQ, providing us with another opportunity to reengage previously inactive surgeons.

I'm not showing any further questions at this time. I would now like to turn the call back over to Laura Francis for closing remarks.

Great. Thank you again for your time today, everyone. I'm really proud of our team's execution in the quarter. We were able to deliver a record quarter and make significant progress across our strategic initiatives while continuing to manage through this ongoing recovery. The performance in the quarter combined with the coverage decision from Anthem and Centene reaffirms my confidence in our ability to accelerate our capture of the multibillion-dollar market opportunity in the sacropelvic space. Anshul and I look forward to meeting with many of you in person at upcoming investor conferences and especially our surgeon panel at NASS in Boston in late September. With that, have a great evening.

This concludes today's conference call. Thank you for participating. You may now disconnect.