Earnings Call Transcript - SIBN Q1 2023

Operator, Operator

Good afternoon, and welcome to SI-BONE's First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Marissa Bych from the Gilmartin Group for few introductory comments.

Marissa Bych, Introductory Speaker

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 March 31, 2023. 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 SI-BONE's ability to introduce and commercialize new products and indications, SI-BONE's ability to maintain favorable reimbursement for its products and procedures, the impact of potential economic weakness on the ability and desire of patients to undergo elective procedures, SI-BONE's ability to manage risks to its supply chain, the impact of future capital requirements driven by new product introductions and risks to the continued renormalization of the healthcare operating environment. Other forward-looking statements include our examination of operating trends and our future financial expectations such as expectations for surgeon training and adoption, active surgeons, new products, new clinical trial enrollment and our base 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 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, May 1, 2023. And with that, I’ll turn the call over to Laura.

Laura Francis, CEO

Thanks, Marissa. Good afternoon and thank you for joining us. I am thrilled with our stellar start to 2023. The exceptional performance in the first quarter reaffirms the accelerating procedure demand over the last several quarters. Overall, year-over-year worldwide revenue growth has increased each quarter since the first quarter of 2022, rising from 10% for that period to approximately 46% in the first quarter of 2023. The record revenue and active surgeon based milestones we achieved in the first quarter reflect our consistent investments over several years to build a world-class commercial organization, introduce innovative products to create new markets, and drive surgeon and referring physician education. As I look forward, I remain highly confident that our commercial execution combined with our differentiated product pipeline will allow us to further expand our total addressable market, drive revenue growth, and improve our bottom line. Before I discuss the quarter, I want to recognize our biggest asset, our employees. Your grit and perseverance have put us in the enviable position to capitalize on the expanding demand for our differentiated solutions and to deliver strong sustainable revenue growth as well as operating leverage. Now, moving to our first quarter performance. In the first quarter of 2023, we generated worldwide revenue of $32.7 million, an increase of approximately 46% compared to the first quarter of 2022. On a sequential basis, worldwide revenue topped our fourth quarter of 2022, which you may recall was our previous best quarter. This sequential growth trend is extremely encouraging since it's the first time as a public company we've seen the first quarter performance exceed our seasonally strong fourth quarter. The strong quarterly performance was led by record US revenue of $30.5 million, which represents US revenue growth of approximately 50% compared to the prior year period. With a normalizing operating environment, robust surgeon engagement across our broaden portfolio and reimbursement tailwinds, we're excited about the potential ahead of us. Now let me provide an update on our key initiatives as we look to extend our leadership position and drive strong long-term growth. Starting with sales infrastructure. Over the last three years, we've made significant investments in expanding our direct commercial infrastructure to ensure we've built a seasoned salesforce to support growing surgeon demand. Our strong revenue growth and accelerating operating leverage over the last several quarters reaffirmed that the commercial strategy is delivering. At the end of our first quarter, our US commercial organization comprised 87 quota-bearing territory reps. We complement our direct sales team with a growing network of agents for case coverage and are selectively evaluating strategies to place instrument sets at high-volume hospitals to meet the demand. At the end of our first quarter, our trailing 12-month average revenue per territory in the US was approximately $1.3 million, representing a 28% productivity gain over the comparable trailing 12-month period ended the first quarter of 2022. We're confident that our hybrid strategy will allow our territory managers to drive surgeon engagement, deliver strong top-line growth, and achieve higher productivity. Moving on to surgeon engagement. Surgeon adoption is one of the best leading indicators of long-term procedure demand. We exited the first quarter with over 950 active surgeons, an all-time high. This equates to over 40% growth in our active surgeon base over the first quarter of 2022. This was the highest quarterly growth rate in our active surgeon base since becoming a public company in the ninth consecutive quarter of double-digit year-over-year growth in our active surgeon base. Sequentially, our active surgeon base increased as compared to the fourth quarter of 2022. It's also encouraging to see surgeon overlap across our procedures. We expect our complementary portfolio to drive deeper engagement and increase procedures per surgeon over time. These trends in active surgeon base reaffirm that our portfolio expansion strategy and investment in surgeon education are resonating with our customers. Academic programs, which we initiated in 2018, have been a strategic priority for us to engage surgeons early on in their careers. We're seeing great success in these training activities and are encouraged by the steady adoption of our procedures by these fellows and residents in the quarters and years that follow their education. In the first quarter of 2023, the procedure revenue in the cohort of surgeons who were trained as fellows and residents increased nearly threefold compared to the first quarter of 2022. Turning to products and solutions. With iFuse-3D, iFuse-TORQ, and now iFuse Bedrock Granite, the value of our innovative, versatile, and complementary product portfolio has positioned us as the top choice for surgeons looking for sacropelvic solutions. Demand for iFuse-TORQ, which recently completed its second anniversary, remains strong. It provides a complementary technology to iFuse-3D for existing surgeons and has allowed us to engage new surgeons performing minimally invasive SI joint fusion. With the expanded clearance covering SI joint dysfunction, trauma, and adult deformity, iFuse-TORQ is a key growth driver for the company. We're experiencing increased use of iFuse-TORQ as the second point of fixation for adult deformity procedures. In trauma, we remain in the early stages of market development, and we're encouraged by the steady revenue growth we're seeing in iFuse-TORQ and sacral insufficiency fractures. The trauma opportunity is of strategic importance to us as the sacropelvic solutions leader and is an important avenue for our growth over the long-term. Moving to iFuse Bedrock Granite, as we approach the first anniversary of the Granite launch, we're extremely pleased with the strong surgeon reception and increasing demand for this breakthrough product. With Granite now on the approved product list at over 2,600 hospitals, we believe this differentiated device has the potential to become the standard-of-care for stabilizing the base of long constructs and adult deformity procedures. Along with the strong demand for Granite, we're seeing a consistent trend in surgeons using some combination of our products with Granite to achieve two points of fixation across the SI joint on either side. This is driving a significant pull-through opportunity for the overall portfolio and a higher procedure average selling price. In addition to the use of Granite in long construct adult deformity procedures, we're encouraged by the steady increase in the use of the product to stabilize the base of shorter multi-level constructs and degenerative spine procedures. Nearly 40% of our Granite cases have been in these short construct procedures. There are over a hundred thousand shorter multi-level spinal fusion procedures to the sacrum per year in the United States. Given our success with Granite, we intend to introduce a new product in the Granite family in 2024, more targeted toward these shorter construct procedures. We believe the expanded portfolio will allow us to target additional degenerative procedures to sacrum potentially expanding our total addressable market for the Granite family products by nearly $700 million to nearly $1 billion. Before I pass the call onto Anshul, let me provide a quick update on our intellectual property. Last week, we were able to extend patent protection covering our first generation iFuse implant by approximately 13 months to December 2025. As a reminder, the patents covering iFuse-3D are 3D printed and fenestrated triangular titanium implant, which expire in 2035.

Anshul Maheshwari, CFO

Thanks, Laura. Good afternoon, everyone. My comments today will be focused on first quarter revenue trends, operating leverage and liquidity, and end with our updated 2023 guidance. Starting with our first quarter revenue. As Laura noted, our worldwide revenue in the first quarter was $32.7 million, representing growth of approximately 46% compared to the prior year period. We are thrilled with this growth, but do want to note as a reminder that the first quarter of 2022 was significantly impacted by COVID. First quarter US revenue was $30.5 million, increasing approximately 50% compared to the prior year period. This strong US performance was driven by growth in procedure volumes, which rose by approximately 48% compared to the prior year period. Looking sequentially, US revenue in the first quarter increased compared to the fourth quarter of 2022. This is encouraging as historically, first quarter revenue is sequentially lower than the fourth quarter. Additionally, the sequential monthly US revenue growth as we progress through the quarter reaffirmed the growing demand for our solutions. In addition to strong volume growth, our US average selling price in the first quarter of 2023 was moderately positive compared to the prior year period. International revenue was $2.3 million, reflecting growth of 9% compared to the prior year period. Across Europe, France maintained strong volume growth offset by underperformance in Germany and the UK. Moving to gross margin and operating leverage. In the first quarter of 2023, our gross margin was approximately 82%, in line with our expectation. As anticipated, the gross margin reflects the impact of procedure and product mix due to higher total cost of iFuse-TORQ and Granite, increase in depreciation from deployment of instrument trades to support the strong demand for these products, depreciation associated with our second facility in Santa Clara, and higher freight costs. Operating expenses were $38.1 million in the first quarter of 2023 versus $36.3 million in the prior year period. This 5% increase in operating expenses was mainly driven by higher commissions associated with the revenue growth. We are pleased that we have now demonstrated several consecutive quarters of operating leverage while investing in R&D in clinical research, which are crucial to expand our portfolio and create a platform to deliver strong and sustainable revenue growth over time. Our net loss was $11.1 million or $0.32 per diluted share for the first quarter of 2023 as compared to a net loss of $17.4 million or $0.52 per diluted share in the prior year period, representing a 38% improvement. Adjusted EBITDA in the first quarter improved significantly to negative $3.9 million versus an adjusted EBITDA of negative $10.7 million in the prior year period. This change translates to approximately 63% improvement in adjusted EBITDA. Adjusted EBITDA also improves sequentially compared to the fourth quarter of 2022. Turning to liquidity. We ended the quarter with $86 million in cash and marketable securities. A decrease in cash and marketable securities in the first quarter was $11.3 million and was an improvement of over 30% compared to the prior year period. As a reminder, first quarter cash outflows include the payment of prior year annual bonus. We are pleased with the trajectory of cash utilization in the last few quarters while continuing our investment in growth initiatives. Finally, moving to our updated guidance for the year. Based on the strong execution in the first quarter, robust surgeon engagement and demand for our portfolio solutions, we are increasing our 2023 worldwide revenue guidance to $128 million to $131 million, up from a previous guidance of $124 million to $127 million. This revised guidance translates to year-over-year growth of approximately 20% to 23% versus the prior range of 17% to 19%. We continue to expect 2023 annual gross margins to be approximately 80%. Based on the updated revenue guidance, we anticipate operating expenses will grow mid single-digit percent in 2023 relative to 2022, and adjusted EBITDA loss will continue to improve year-over-year in 2023. With that, I will turn the call over for questions to the operator.

Operator, Operator

Certainly. Our first question comes from Craig Bijou of Bank of America. Your line is open.

Craig Bijou, Analyst

Good afternoon, Laura and Anshul. Thank you for addressing the questions and congratulations on a strong start to the year. I wanted to ask about the procedure growth we've seen reported by several companies in Q1. Your growth was particularly impressive even considering the comparison. Could you share your insights on the procedure side? Was there pent-up demand, and are the factors that have influenced procedure growth over the past few years, such as staffing and patients' willingness to undergo procedures, easing? What is your general perspective on the procedure side?

Laura Francis, CEO

Hi, Craig. This is Laura. Thanks so much for the question and yes, we are thrilled with the record Q1 performance that we had. 46% growth is something that we're quite proud of. And even off of the comp compared to last year that was COVID impacted, it still is quite an extraordinary performance that we've seen. The momentum is coming from the core business as well as from new products as well. We've been making a lot of investments, as you know, in the business throughout the pandemic. And what we're seeing is those investments are coming to fruition for us. And so what we've really done is, with these years of investment across our product development, our clinical research, our commercial infrastructure and surgeon education, we're building an industry-leading platform here for sacropelvic solutions. So in particular though, what I would tell you is this is the first time since we've been a public company that we've seen sequential growth between the seasonally strong fourth quarter and the first quarter. So I think that really tells you the extensive acceleration that we're seeing in our business. So it certainly is macro factors. We do think that those macro factors are easing over time, but even with all of that in consideration, we're very excited about what we saw in the first quarter as well as based on the momentum exiting the first quarter, we're excited about our outlook as we continue to move further away from the pandemic.

Craig Bijou, Analyst

Got it. That's helpful. Thank you, Laura. Regarding guidance, I appreciate your comments that the first quarter comparison was easier than some of the other quarters we will see throughout the year. However, even when adjusted for comparisons, it appears slightly below the first quarter. My question is how we should consider the progression of that throughout the year. Is it just a matter of being conservative, or is there something else we should keep in mind for the remainder of the year?

Anshul Maheshwari, CFO

Hey, Craig. This is Anshul. Thanks for your question. From a guidance standpoint, Laura mentioned this earlier. We had a strong start to the year, continuing the momentum from 2022 despite some technical challenges. When we issued our initial guidance, we discussed a risk-adjusted approach, considering various positive factors such as ASP trends, the Granite rollout, Europe's stabilization, and the return of procedure volumes. We felt we were reasonably cautious with our estimates. However, our Q1 results indicate that some of these factors have exceeded our expectations. For instance, we anticipated a mid-single-digit decline in ASP but actually saw positive results, and the Granite rollout has been successful. We feel optimistic coming out of Q1, as several tailwinds are performing better than we initially predicted. We are still in the early stages of what we believe will be a prolonged recovery, so we think it’s prudent to be cautious at this point. Therefore, the increases in our guidance reflect the strong Q1 performance, and we are maintaining our risk-adjusted assumptions for the remainder of the year. While we’ve seen some positive developments, we’re incorporating a level of conservatism, which we believe is appropriate given how early it is in the year.

Craig Bijou, Analyst

Great, Thanks Anshul and I'll let others jump in, but congrats on really a great quarter.

Laura Francis, CEO

Thanks Craig.

Operator, Operator

And one moment for our next question. And our next question will come from Drew Ranieri of Morgan Stanley. Your line is open.

Drew Ranieri, Analyst

Hi, Laura. Hi, Anshul. Thanks for taking the questions. Maybe just a group mine together, but as we're kind of thinking about some of the new products and Laura, I think you said you have a new Granite product coming up in 2024, but you've made a lot of investments in your salesforce. You have multiple tailwinds at your back, but just how are you thinking about adding in new technology to not just capture additional procedure wallet share, but maybe even to further enter into adjacencies like trauma and even deformity? Just any more detail on that would be great. Thanks so much for taking the question.

Laura Francis, CEO

Thank you, Drew. Over the past few years, we have established a solid product foundation. Initially, our main offerings were iFuse and iFuse-3D, which are crucial for minimally invasive SI joint fusion. We are pleased with the positive feedback for our TORQ product in both our primary market and the trauma sector. Additionally, with last year's launch of Granite, we are encouraged by its reception, particularly in the adult deformity market, where it meets an important clinical need by addressing pelvic fixation failures in lengthy surgical constructs. Importantly, we discovered that the market for Granite is much larger than we anticipated, with about 40% of the procedures involving shorter constructs, ranging from two to four levels, as opposed to the longer constructs used for scoliosis. We are currently developing a new product tailored to these shorter constructs, recognizing the market opportunity. When we consider the potential in pelvic fixation, we estimate the total addressable market to be around $1 billion. This is a key focus for us, and we are already collaborating with orthopedic and neurosurgeons who perform spine surgeries, revealing significant opportunities for our sales team to engage with these professionals on our new products.

Drew Ranieri, Analyst

Got it. Thanks. And one last one just, as we are thinking about your updated guidance, and to piggyback off a bit of Craig's question, but can you maybe just talk about some of the utilization that you're seeing with surgeons? I mean, the 950 surgeons in the quarter is really impressive, but just maybe just talk to us about what the utilization ramp looks like now and maybe what's driving kind of that inflection point a bit more. And thanks again for taking the questions.

Laura Francis, CEO

I mentioned that we had a record 950 surgeons performing at least one procedure in the first quarter, which is over 40% growth year-over-year. This figure also marks an increase from the fourth quarter, typically our strongest quarter. We've seen nine consecutive quarters of double-digit year-over-year growth, representing the highest growth rate since becoming a public company. To address your question, we observe significant overlap as surgeons are conducting multiple procedures, including minimally invasive SI joint fusion, adult deformity, degenerative cases, and trauma cases using our products. This highlights our effective execution. We started with a focus on education and outreach regarding unmet clinical needs, and our product range is supporting that growth. Regarding the timeframe for surgeons, it varies depending on the procedure type. For our primary SI joint fusion procedure, there usually is a longer lead time because we need to identify and convince the surgeon about SI joint dysfunction's prevalence. The surgeon then has to understand how to diagnose it, identify a patient, and proceed with the procedure. Typically, this ramp-up takes around 12 months. For pelvic fixation, however, the situation is different. We're introducing a new product that not only provides pelvic fixation but also fusion for short and long construct cases, which integrates smoothly into the surgeon's workflow. This leads to a quicker adoption rate compared to our core products.

Operator, Operator

And one moment for our next question. And our next question will come from Young Li of Jefferies. Your line is open.

Young Li, Analyst

All right. Great. Thanks so much. Wanted to echo my sentiments on the great quarter as well. I guess, first question, just on the 40% growth in US active surgeons, now up to 950, was wondering, what's driving that? How much is coming from previously trained but inactive surgeons sort of coming back into the fold versus new surgeon ads? And how much of that is driven by the new products or the portfolio effect?

Laura Francis, CEO

In terms of the growth in active surgeons, we are indeed seeing reactivations, but most of the growth consists of new surgeons. Our target in the core market is around 7,500 surgeons, so there is substantial opportunity for further growth. We are welcoming many new surgeons who are performing procedures for the first time, some of whom are transitioning from competitors to our TORQ product. Regarding our product portfolio, about half of the increase in new surgeons is attributed to our core primary minimally invasive SI joint fusion procedure, while the other half comes from new procedures in pelvic fixation and trauma. Overall, the increase is noticeable across various areas.

Young Li, Analyst

Okay. That's really helpful. My follow-up question is about the good progress on narrowing the EBITDA loss. I'm wondering if you can share your latest thoughts on EBITDA breakeven or the path towards it. It seems that if you continue at this pace, you might reach it sooner than current consensus expectations.

Anshul Maheshwari, CFO

Thank you for the question. We are very pleased with our leverage performance. Our operating leverage is closely aligned with top line growth. As we saw revenue growth accelerate in 2022 and the first quarter of 2023, our leverage improved correspondingly. This progress is largely attributed to the investments we've made to support our current growth levels. While we won't be providing specific details on when we expect to reach breakeven, we are encouraged by our leverage trajectory. We have many opportunities ahead and plan to make thoughtful investments to enhance market penetration and growth. We anticipate continued improvement in operating leverage year-over-year throughout 2023, which will assist us in moving toward our adjusted EBITDA breakeven goal in the not-too-distant future.

Young Li, Analyst

All right. Great. Thank you.

Operator, Operator

And one moment for our next question. And our next question will come from Sam Brodovsky of Truist. Your line is open.

Sam Brodovsky, Analyst

Hi. Thanks for taking the questions and congratulations on the strong quarter and the start of the year. To revisit guidance, I appreciate the earlier comments on conservatism, Anshul. However, it seems to indicate a sequential decline in revenue for Q2, so it would be helpful to know what you're observing in April and your thoughts on growth in the second quarter compared to the first quarter.

Anshul Maheshwari, CFO

I'm happy to answer that, Sam, and congratulations on your new position. Looking at a sequential basis, it's quite challenging because the first half of this year, and the last three years, have been greatly affected by COVID. Even if we refer back to 2019 for sequential trends, our portfolio is now much broader. Therefore, we don't have a solid reference point for sequential trends as we enter 2023. However, we are confident in the sequential monthly trends mentioned by Laura regarding US revenue growth as we move through the first quarter, along with the record number of active surgeons we had at the end of the quarter. These are promising indicators for us, suggesting we may be entering a phase of strong demand. While we were pleased with what we observed in the first quarter and as we concluded it, I would advise against placing too much importance on quarter-to-quarter trends at this stage, particularly so early on with our expanded portfolio.

Sam Brodovsky, Analyst

Got it. That's helpful. And then one on ASP, just to make sure, it sounds like there's no change in terms of the forward guidance to the expectation for ASP to decline in the low to mid single digit. Is that right? And if you give us any color on why that would be different than what we saw in 1Q. Thank you.

Anshul Maheshwari, CFO

Yeah. Sam, no, you're accurate. Our guidance for the rest of the year does not assume any changes to our risk-adjusted metrics that we considered. So the ASP expectation in our original guidance was mid-single-digit decline. So we're not changing that. Look, we've already done better than that in the first quarter, and we feel good about it. But again, it's one quarter. We want to be able to see the trend sustain itself as we progress through the year. And that will be reflected in future revenue numbers.

Sam Brodovsky, Analyst

Great. Thanks for taking the questions.

Operator, Operator

And one moment for our next question. Our next question will come from Dave Turkaly of JMP Securities. Your line is open.

Dave Turkaly, Analyst

Thank you. Laura, I know you mentioned a second facility in Santa Clara. And I was just curious if you might make a comment on capacity and what you're doing there versus the original.

Laura Francis, CEO

Yeah. In terms of our capacity, we do actually have two facilities now in Santa Clara. There's one facility that primarily has office operations. The second facility has our warehouse and some of the assembly that we do here, specifically for instruments that also have an R&D lab that's there as well. So that building is more of an operational facility. So we do feel comfortable that we have the capacity to grow at the rate that we're growing at. We also have some great suppliers and partners, third-party manufacturers, that are able to help us to meet the demands of this sort of growth. So we're planning accordingly. And I think you may recall last year we actually hired a new Senior Vice President of Operations and IT, Jeff Bertolini. He came from NuVasive, had 10 years of experience heading up operations over there. So he's been a huge add for us because we really have moved very quickly from our initial core primary SI joint fusion business to a multi-product business. And we're not missing a beat.

Dave Turkaly, Analyst

That's great to hear. My follow-up would be on the new Granite. So I think I heard you say when you originally launched the Granite that you thought that might deformity might be a 250 million, and now you're saying with a shorter construct, maybe that goes to a billion. So there's I think 750 million incremental. Could you just walk us through the math there, like ASP or implant, and then would that construct possibly qualify for a new technology add-on payment as well?

Laura Francis, CEO

Yeah. Thanks for the questions. So you're right. Granite was originally developed for the adult deformity market. When we thought about Granite as a product, we were focused on long constructs, and we were making an assumption of a certain number of cases, around 30,000 cases with two implants. And so what we're seeing, however, even in that core market in adult deformity, is that the ASP is actually higher, the number of cases is the same, but the ASP is higher because in quite a few of those cases. In fact, the majority that are long construct cases, we're actually seeing surgeons use four implants versus two. And so that total addressable market is now closer to around $300 million. What has been really exciting for us is to actually see how many surgeons want to use this product in short construct degenerative spine cases. And as I said, it was nearly 40% of our Granite cases that were done using this product in short construct cases. So that's been a surprise as to how large that number has actually been. It's really more about patient selection in those cases, which short construct cases are appropriate for pelvic fixation, but it's a much larger market in total. So there's around a hundred thousand cases that go down to the sacrum, those two to four level cases. And so versus the 30,000, you're talking about a much larger market size that's here. In those cases, it's usually two implants instead of the four. But if you add it all together, you're getting an incremental market opportunity of $600 million to $700 million in the short construct market. And certainly, we're looking at the product itself and we're looking at the reimbursement opportunity there too as we have in all of these other cases. And so what it shows us is the big opportunity that we have in pelvic fixation infusion.

Dave Turkaly, Analyst

Thank you.

Operator, Operator

One moment for our next question. And our next question will come from Kyle Rose of Canaccord. Your line is open.

Kyle Rose, Analyst

Great. Thanks for squeezing me in here and congrats on a good quarter. So look, I just wanted to dig one layer deeper into some of the upside you’re seeing. And I guess maybe could you just help us understand how much that's coming from primary SIJ versus some of the deformity in trauma side. Obviously, you've got some big initiatives with the broader portfolio. And then I'll just ask my second question, now we've seen pretty strong growth in the number of distributors you're working with. So I just wondered, if you could help us understand how much of the performance or the growth in 2023 expectations should we think about coming from that distributor group versus the direct and the territory manager and CSS group. Thank you.

Laura Francis, CEO

Thank you, Kyle. As you know, we don’t disclose growth rates for each individual product. We currently have three main products: iFuse-3D, TORQ, and Granite, all of which are sacropelvic solutions. In Q1, we experienced significant growth from both the core market and strong demand for Granite, covering the primary SI joint fusion and pelvic fixation markets. Regarding distributors, we have significantly increased their number in the United States, primarily driven by Granite cases. These cases differ from primary SI joint fusions and have more rapid adoption since they easily integrate into the workflow without requiring extensive education. However, these cases can be longer, especially adult deformity cases. A typical primary SI joint fusion takes about 45 minutes, while adult deformity cases can last around six hours. We are leveraging our work with distributors handling these cases, which is boosting representative productivity. I've mentioned our year-over-year productivity increase of 28%, reaching approximately 1.3 million, allowing us to enhance operating leverage in the business. Our model is proving to be very effective.

Anshul Maheshwari, CFO

And Kyle, just one clarification. These are agents not what you typically think as distributors.

Kyle Rose, Analyst

Great. Thank you for taking the question.

Laura Francis, CEO

I believe he is clarifying that as a distributor, you usually sell products directly. In this situation, however, cases are being managed by an agent.

Operator, Operator

One moment for our next question. And our next question will come from Ross Osborn of Cantor Fitzgerald. Your line is open.

Ross Osborn, Analyst

Hi, everyone. Congrats on the quarter and thanks for taking our questions. So maybe just one for me on the NTAP. Did you see more cases during the quarter relative to the fourth quarter where the NTAP is being paid out?

Laura Francis, CEO

It's a good question. We believe the NTAP is very important to our Granite business. We received breakthrough device designation for the product, which helped us secure an NTAP. With our technology, hospitals can get an additional payment of up to $9,800 for an adult deformity procedure. This is significant for both the hospital and the surgeon, so we provide education on this to both parties. We're observing ongoing acceleration in this area. While there is data on the usage of the NTAP, there are considerable delays in obtaining that information. To be honest, we don’t have that data yet, which typically becomes available a few times a year. We expect to get insights late summer or early fall regarding NTAP usage. For now, we have some anecdotal information, and we understand that the economics of the procedure are crucial for surgeons and healthcare facilities.

Ross Osborn, Analyst

Got it. Thank you. Congrats again on the quarter.

Laura Francis, CEO

Thank you.

Operator, Operator

One moment for our next question. And our next question will come from David Saxon of Needham & Company. Your line is open.

David Saxon, Analyst

Hi, Laura and Anshul. Thank you for taking my questions, and congratulations on the quarter. I wanted to start by asking about TORQ in trauma. I noticed that it marks your second anniversary, so I wanted to know what stage we are at in terms of deployment and how the sales team is performing, especially since it's a different call point.

Laura Francis, CEO

Yeah. Thanks for the question, David. The opportunity in trauma is a pretty large opportunity. Our best estimate, it's around $350 million in total for pelvic ring fractures, and most of that is in sacral insufficiency fractures. Typically with patients that have osteoporotic bone. And however, you're asking the question about TORQ, and there's really two different applications of TORQ and the ones that we've seen a significant uplift in usage has been more in the primary SI joint fusion market, a lot of competitive conversions and also further expanding the core market using TORQ. The trauma opportunity we do see as a longer-term opportunity. In some cases, it's a different call point, it's a general ortho surgeon that's focused on trauma. In some cases, it's actually our typical ortho or neuro spine surgeon. And we do think that our SAFFRON study is going to be an important element to educating surgeons on the treatment of these sacral insufficiency fractures. Right now, surgeons typically don't treat these particular patients and what we'd like to show with our SAFFRON study is that treating these patients versus standard care, which is usually rehab is absolutely critical to treating the patient. So we do see this as a little longer-term opportunity, but very, very familiar to us. It feels a lot like starting out in our minimally invasive SI joint fusion market where we had to really educate on the condition and we needed to encourage surgeons to treat cases that previously they weren't treating. So it's a great long-term opportunity for us. In terms of set deployment, implants and so on, we have been doing a good job keeping up with all of that. But as I said, I would say most of the deployment has been for the core market versus trauma.

David Saxon, Analyst

Okay. Got it. That's helpful. And then maybe for my second, when the salesforce is talking to prospective doctors, are you hearing any of the same points of pushback you did kind of earlier on then in the launch? Or is the idea that the SI joint can be a source of pain? Is that becoming accepted by kind of a broader portion of the physician community?

Laura Francis, CEO

Yes, it's definitely a different conversation now. When we started the company and celebrated our 15th anniversary, very few surgeons believed that the SI joint was a source of pain. However, after significant effort and educational outreach, along with clinical data from over 80,000 cases and more than 3,000 surgeons using our products, we have seen a shift. Nowadays, most surgeons recognize the SI joint as a pain generator. Our current focus is to ensure they comprehend the product, our educational strategies, reimbursement options, health economics, and the quality of our data. We aim to encourage them to include the SI joint in their differential diagnosis of lower back pain more regularly.

David Saxon, Analyst

Got it. Great. Thank you and congrats on all the progress.

Laura Francis, CEO

Thank you.

Operator, Operator

And I'm showing no further questions. I would now like to turn the call back to Laura for closing remarks.

Laura Francis, CEO

I just want to say thank you all for joining the call today. I am really excited about the growth potential ahead of us this year and even beyond. We have all the pieces in place to deliver exceptional outcomes for our patients, support our surgeons, expand our portfolio, and create significant value for our shareholders too. So once again, thank you for your ongoing support and trust in our company. Goodbye.

Operator, Operator

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