Greetings, and welcome to the Tenon Medical Third Quarter 2023 Financial Results and Corporate Update Conference Call. As a reminder, this call is being recorded. Your hosts today are Steve Foster, Chief Executive Officer and President; and Steve Van Dick, Chief Financial Officer. Mr. Foster and Mr. Van Dick will present results of operations for the third quarter ended September 30, 2023, and provide a corporate update. A press release detailing these results was released today and is available on the Investor Relations section of the company's website, www.tenonmed.com. Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates and other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our predictions. For a more complete discussion of these factors and other risks, you should review our prospectus dated April 26, 2022, particularly under the heading Risk Factors, which is on file with the Securities and Exchange Commission at www.sec.gov.

Thank you, Devin, and good afternoon to everyone. I'm pleased to welcome you to today's third quarter 2023 financial results and corporate update conference call for Tenon Medical. During the third quarter, we expanded the adoption of our fully commercialized Catamaran System and experienced an increase in the number of surgical procedures in which the system was used, driven largely by our multifaceted marketing strategy, including ongoing educational programs, informational materials and interactive workshops. During the third quarter, procedures supported strong revenue growth with an increase of 354% year-over-year and 27% sequentially from the second quarter. In the previous quarter, we marked an important milestone with gross profit and gross profit margin turning positive. Now in the third quarter, gross profit was up 176% sequentially from the second quarter of 2023 to $535,000 and gross profit margin improved to 57% in the third quarter from 26% in the second quarter of 2023. The third quarter marked an important milestone for Tenon as we launched the surgical use of our JIB Instrument Kit for the Catamaran SI Joint Fusion System for initial patient treatment by two leading physicians in the ortho and neuro spine fields. We are encouraged by the overall positive feedback we've received from our physician customers utilizing the system as well as the encouraging early post-op results. We've developed enhanced tools with a promise to deliver upgraded graft handling, smaller access profile and enhanced access stabilization. These upgrades will assist our expansion of application into SI revision surgery, adjunct to multilevel fusion and SI procedures utilizing navigation software in imaging. Continued strong growth and increasing surgical procedures in the third quarter were fueled by our valued physician customers with support from our commercial infrastructure we built. Our mission to deliver refined surgical options for patients with chronic sacroiliac joint pain or degenerative sacroiliitis that failed conservative care is continuing to gain traction with targeted physicians. As a reminder, we leverage our relationships with national and local sales managers, clinical managers and independent distributors, and we conduct frequent local workshop training programs to reach physicians who have been trained on SI procedures or have significant experience with SI surgical technologies. We continue to focus on a combination of our local synthetic model and cadaveric lab workshops to introduce the Catamaran System, creating a timely and efficient process for our physician customers. We supplement these efforts with intensive clinical support and service. Combined, these critical advantages and activities are designed to drive acceleration in the number of procedures completed with the Catamaran System. During the third quarter, our surgical procedures increased 329% compared to the year-ago quarter, confirming a solid return on investment of our strategic approach. Our programs hosted 28 physicians in Catamaran workshops to learn more about how the implant transfixes and stabilizes the SI joint as well as why the inferior-posterior approach is the optimized approach to the anatomy. During the workshops, we highlight how this distinct implant system addresses a significant unmet market opportunity and is designed to produce broad and demonstrable advantages over market competitors. Building on the momentum of the third quarter, we expect the number of surgical procedures to continue to grow as our sales team broadens our strategic marketing, promotion and workshops featuring the Catamaran System. With that, I'll turn it over to Mr. Van Dick, our Chief Financial Officer, to discuss our financials.

Thank you, Steve. I'll give us a quick review of our financial results. A full breakdown is available in our press release that crossed the wire this afternoon. Our revenue was $944,000 in the third quarter of 2023, an increase of 354% compared to the $208,000 in the comparable year-ago period. Revenue for the nine months ended September 30, 2023, was $2.1 million, an increase of 412% compared to the $414,000 in the comparable year-ago period. The increase in revenue for the three and nine months ended September 30, 2023, as compared to the same periods in 2022, was primarily due to increases of 329% and 404%, respectively, in the number of surgical procedures in which the Catamaran System was used. Gross profit in the third quarter of 2023 was $535,000 or 57% of revenues compared to the gross loss of $94,000 or a negative 45% of revenues in the comparable year-ago quarter. For the nine months ended September 30, 2023, gross profit was $682,000 or 32% of revenues compared to a gross loss of $434,000 or a negative 105% of revenue in the comparable year-ago period. Gross margin continued to improve due to higher revenues as a result of increases in the number of surgical procedures during the quarter. Operating losses totaled $3.4 million for the third quarter of 2023 compared to a loss of $3.3 million in the third quarter of 2022. For the nine months ended September 30, 2023, operating losses totaled $12.6 million compared to a loss of $10.8 million in the comparable prior year period. The increase in operating expenses was largely due to higher sales and marketing expenses as the company further develops its sales function, increases the frequency of marketing initiatives and continues to enhance infrastructure to support future growth. Net loss was $3.3 million for the third quarter of 2023 compared to a loss of $3.2 million in the same period of 2022. For the nine months ended September 30, 2023, net loss was $12.4 million compared to a net loss of $11 million in the comparable previous year period. We continue to expect to incur additional losses in the future. As of September 30, 2023, cash and cash equivalents and short-term investments totaled $3.4 million as compared to $6.3 million as of June 30, 2023. As of September 30, 2023, the company has no outstanding debt. I will now turn the call back to Steve for his closing thoughts.

Thank you, Steve. With the accelerating pace of the Catamaran procedures and continued expansion of our sales and marketing efforts, we are very optimistic for continued growth in the commercialization of our proprietary FDA-cleared surgical implant system. We marked the third quarter with strong revenue gains and a positive growth margin and believe we can continue this growth trajectory with our expanding commercial infrastructure and seasoned sales management team. We continue to reinforce our commitment to validating and differentiating patient outcomes in radiographic assessment with ongoing post-market clinical studies and expect to expand the application of our distinct product offering to address SI revision surgery, adjunct to multilevel fusion and SI procedures utilizing navigation software in imaging. We look forward to additional updates in the months to come as we continue to expand our sales infrastructure and execute on our growth objectives to improve the quality of life of patients suffering from SI joint pain and bring long-term value to our shareholders. I thank all of you for attending. And now I'd like to hand the call over to our operator to begin our question-and-answer session with our covering analysts. Devin?

Congratulations on all of the progress. A couple of questions about the JIB Instrument Kit. Is this something that's being prototyped right now? And what are your plans in terms of getting it into full commercial availability? And are there any regulatory considerations?

Bruce, this is Steve, and thanks for your question. So our JIB kit is an enhancement of our instrumentation system. We're well past the prototype phase. We've now built these technologies and put them in the hands of select physicians to make sure that we haven't missed anything satisfactory to them and that it's delivering on its promises. The technology has been through all regulatory review and is clear to go, and we are now expanding the use of JIB into virtually all of our procedures from day to day. We spent the month of October really making sure we like what we saw. We've done over 30 procedures with the technology. We are very encouraged about the feedback and what we're seeing there. So we're off and running now with this JIB technology.

Okay. Super. And then in 2023, you had a fairly favorable reimbursement climate. Are there any changes for 2024 anticipated?

Yes, indeed. As always, a very dynamic space in the SI world. The AMA has completed their processes throughout 2023. And of course, we wait anxiously to see the final AMA CPT book. It usually comes out in the early December timeframe. What we understand from their recommendations and from prior meeting recommendations is that there will be a new Category 1 code introduced into the SI world coming in 2024. And that new Category 1 code will be focused on facilitating reimbursement and professional fees for intra-articular devices, which there are many on the market, and that will establish reimbursement leads, et cetera, in the 7.8 RVU range. That's a process they've been going through to establish the code and to establish values for that code. We anticipate very little change for Catamaran and that we will continue to have access to the use of 27279 and 27280 per the physicians' preference in the various situations that they see with patients. We draw that conclusion because 90-plus percent of our implants, once it's implanted, 90-plus percent of the implant is anchored in the ilium and then again in the sacrum. So we decidedly, by every definition, are not an intra-articular device. So that pretty much leaves 27279 and 27280 as the option. So it's a very dynamic spot. We don't know everything yet, but we think we have a pretty good view of where all this is going to shake out for the coming year.

Okay. Great. And then last question for me. You had a post-approval study underway. So I just wanted to know if there's any update on that.

Yes, it's moving along very nicely. As a matter of fact, we had two patients enrolled today at a site that we're bringing online and I'm quite excited about. I anticipate, Bruce, this post-market trial is targeted for 50 patients. It could be anywhere between 40 and 50 somewhere in that range when all is said and done. And we anticipate that enrollment for the trial will end here probably by the end of Q1, that would be my target at this point. At that point, we will be seeing some media reporting on how the patients did both pre-op in the OR and immediately post-op. And then we look forward, of course, to ongoing reports as they come in for their follow-up for pain scores and ultimately a set of scans to prove radiographically that they've appropriately healed and fused. So I am really looking forward to that data as it rolls.

Steve, yes, just to follow up on the post-market study, 40 to 50 patients and expect to conclude, you said, by the end of 1Q '24. Two signed up today, what's the total number you have signed up so far?

Yes, we're in the low 20s right now, Anthony. We're in the low 20s in enrollment. We've got several patients now that are teed up for the November and December months coming up. So we really do anticipate that we'll get into that 40 to 50 range by the end of Q1 in 2024.

Okay. Great. And how many sites is that at? Just remind me again.

We now have seven active sites around the country that are actively recruiting and enrolling patients.

Okay. And then I know you're doing physician training and obviously, you have some great numbers here in procedures, up 329% in the third quarter. Are you ramping up the physician training? How is that going? And what are you doing to get more physicians enrolled and aware of the Catamaran System?

Yes. This is a great question. So of course, we're like any other company, we're trying to fill the funnel with opportunities, right? The only way we know how to do that is to tell our story and compel and then make the ability to take a look at the technology and do a workshop with the technology as efficient and convenient, frankly, for the physicians as possible. We've got a lot of work on a synthetic model that allows us to bring the technology to them locally, so they don't have to wait and travel on a Saturday or something like that to a lab in a city where they have to fly and things of that nature. So we're accelerating by making it convenient and efficient. And of course, it's the engine that sort of fills our funnel and gets us moving towards adoption and eventual use of the technology. We're encouraged by what we see. Look, I'll stress, we target very, very carefully. And so our objective isn't to see how many people we can train. Our objective is to target really well so that when we train someone, it's worth their time and it's worth our time and investment, and that's how we choose to go about our business every day.

That's great. Just in terms of vetting them and figuring out which orthopedic surgeons you work with, maybe just a little more color on how that process goes. Is it referrals from KOLs? How do you vet the orthopedic surgeons to make sure that they're the right ones to train and work with?

Yes. Certainly, what you say, our key opinion leaders have a lot to do with sort of vetting, if you will, who we invite into training sessions. What we look at, Anthony, is the experience they have with SI technologies. The pelvis is an interesting environment to image. If the physician has experience imaging the pelvis and placing implants there, et cetera, they're way ahead of the game as it relates to being comfortable in their learning curve and what have you to adopt a technology like this. So their experience with SI technologies in the past, training sessions they've been involved in, et cetera, tells us the story about how things would go for us in a training session. And so we do, we target folks who have been down that pathway, who are comfortable with the imaging, who have these experiences in their background and frankly, have developed the referral networks and what have you to have SI as part of their practice. When we establish those things, this becomes a target that's meaningful for us and gives us synergy on that specific target.

Great. And then maybe just one financial question. So gross margin came in significantly better than I was expecting at 56.7%. Anything that you would attribute to that strong gross margin for this quarter? And is that sustainable or will it fluctuate a little bit here in the near term?

Anthony, this is Steve. Yes, I think we do believe that the gross margin is sustainable. I mean, it's tied to our growth in revenue. I think, like I mentioned earlier, or I have mentioned earlier, but what I normally refer people to is, a good portion of our cost of goods sold is either fixed or semi-fixed. So the incremental increase in revenue, and we have good leverage to increase that margin percentage as revenue grows because the amount of incremental costs associated with another extra procedure or additional procedures is right now a small piece of our cost of goods sold versus the overhead and the facility costs that we currently have. So I think we're really happy with where the margins came in, and we do expect that they will be able to continue to grow as revenue grows.

There are no further questions at this time. I'd like to turn the floor back over to Mr. Foster for closing comments.

Well, thank you, Devin. I'd like to thank each of you for joining our earnings conference call today and look forward to continuing to update you on our ongoing progress and growth. If we were unable to answer any of your questions, please reach out to our IR firm, who would be more than happy to assist. With that, I wish everybody a good evening.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.