Tenon Medical, Inc. Q2 FY2025 Earnings Call

Greetings, and welcome to the Tenon, Inc. Second Quarter 2025 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steven Foster, CEO and President. Thank you. You may begin.

Thank you, Maria, and good afternoon, everyone. I'm pleased to welcome you to today's second quarter 2025 financial results and corporate update conference call for Tenon Medical. We recently marked a pivotal step forward for Tenon Medical, highlighted by a strategic acquisition on top of a second quarter that included continued clinical validation and meaningful progress towards diversification of our product offering. Speaking to our recent announcement, a significant focus of our second quarter initiatives was a thorough due diligence and successful completion of the strategic acquisition of SiVantage, which we announced subsequent to quarter end. With integration to take place over the next 60 to 90 days, this transaction delivers active case volume, revenue-generating technologies and a robust pipeline that will continue to scale. The deal significantly enhances our commercial organization and unlocks new pathways through hospital approval processes, distribution networks and market access. Importantly, the transaction energizes our commercial infrastructure and the tools and talent to drive sustainable top-line growth. In tandem, we continue to advance the Catamaran platform with real-world adoption in complex spine procedures. Dr. Andrew Trontis completed initial Catamaran cases, demonstrating successful integration into lumbar fusion constructs. These procedures now supported by FDA clearance for use as an adjunct to thoracic lumbar fixation validate Catamaran's role in preparing and immobilizing the SI joint in preparation for fusion while reducing morbidity, blood loss and operative time. This expanded indication opens a new market opportunity and expands our footprint in the sacropelvic fixation space. The Catamaran SE, our second-generation low-profile implant, remains on track for full commercial launch in the coming weeks. The SE platform has already shown favorable feedback and alpha review. Combined with the SiVantage assets, we now offer a multiproduct dynamic approach fusion solution that differentiates Tenon in an increasingly competitive sacropelvic marketplace. In addition to the full commercial launch of the Catamaran SE platform this quarter, we are actively preparing for initial alpha surgeries using the newly developed Symmetry Plus system expected to begin in Q4 this year. Symmetry Plus represents a next-generation fusion platform designed to further enhance our SI joint portfolio with differentiated features for long-term fusion outcomes. We believe the Symmetry Plus system will complement our existing offerings and support our commitment to delivering true fusion solutions tailored to both primary and adjunctive SI joint procedures. Our clinical progress remains equally strong. We continue to collect important clinical validation through both early adopter experience and our MAINSAIL post-market study, which remains on track for the publication of the second interim analysis this quarter. As the number of enrolled patients grows, we are confident that primary endpoints of VAS and ODI scores, along with patient satisfaction will show positive trends. The secondary endpoint of fusion assessed via CT scan and confirmed by independent radiologists will reinforce that binding by AO principles of arthrodesis pays off. We are confident the inclusion of CT scan fusion data, ODI and VAS scores will provide powerful evidence supporting our Catamaran approach. The SiVantage transaction also brings with it meaningful fusion data that will support the approach and technologies currently under development as a result of this transaction. Physician education remains a top priority. In the second quarter, we hosted 16 physician workshops, engaging key opinion leaders to support our long-term adoption strategy and accelerate the learning curve for our new users. On the financial side, we reduced our operating expenses by 29% year-over-year, demonstrating tighter discipline while preserving investments in our growth strategy. We ended the quarter with $7.8 million in cash and no debt, giving us flexibility to continue executing our strategic roadmap with confidence. Looking ahead, Tenon is entering a period of sustained momentum between the SiVantage integration, Catamaran SE launch and upcoming MAINSAIL interim data publication, we're poised to execute against key milestones that will expand our addressable market, strengthen our clinical foundation and drive top-line growth. With that, I'll turn the call over to Kevin Williamson to discuss our financials.

Thank you, Steve. I will now provide a summarized review of our financial results. A full breakdown is available in our press release that crossed the wire this afternoon. Revenue for the second quarter of 2025 was $564,000 compared to $901,000 in the same period last year. Revenue for the 6 months ended June 30, 2025, was $1.3 million compared to $1.6 million in the 6 months ended June 30, 2024. The year-over-year decline was primarily due to lower procedure volumes and account mix headwinds in the second quarter of 2025, driven primarily by the strategic shift in our commercial initiatives with the impending SiVantage acquisition. With the transaction now closed, we are already seeing increased volume and interest in the Tenon story, which we expect to be meaningful moving forward. Gross profit was $245,000 or 43% of revenue in the second quarter of 2025 compared to $470,000 or 52% of revenue in the prior year quarter. For the 6 months ended June 30, 2025, gross profit was $568,000 or 44% of revenue compared to $940,000 or 58% of revenue for the previous year's period. The decline in gross margin was a result of reduced procedure volumes and lower revenue with consistent variable direct product costs and relative fixed production overhead costs year-over-year. Operating expenses totaled $3.1 million in Q2 2025, down from $4.3 million in the prior year period. For the 6 months ended June 30, 2025, operating expenses totaled $7.1 million, compared to $8.3 million in the prior year period. The 29% reduction in the quarter was driven by lower expenses across G&A, R&D and sales and marketing. The reduction in G&A and R&D was primarily driven by disciplined spending and project timing as well as a reduction in stock-based compensation, which is expected to continue. The reduction in sales and marketing expenses was driven by lower variable expense due to lower revenue as well as disciplined investment in our commercial infrastructure and sales force, reflecting our focus on the impending acquisition. Net loss for the second quarter was $2.8 million or $0.36 per share compared to a net loss of $3.8 million or $8.16 per share in the second quarter of 2024. For the 6 months ended June 30, 2025, net loss was $6.4 million compared to $7.4 million in the same year ago period. This improvement was primarily attributable to the decrease in operating expenses in the second quarter of 2025. We ended the quarter with $7.8 million in cash and cash equivalents compared to $6.5 million as of December 31, 2024. Additionally, the company continues to operate with no outstanding debt, giving us the flexibility to advance our growth strategy, including the integration of SiVantage acquisition, product development and upcoming launches of Catamaran SE and Symmetry Plus, continued focus on clinical data and market access efforts and rapid expansion of our commercial footprint. In summary, we believe the steps taken this quarter, both financially and strategically, position Tenon well to accelerate growth while maintaining a lean and focused cost structure. I'll now hand the call back to Steve for closing comments.

Thank you, Kevin. We are energized by this progress made in Q2 and the strong momentum building into the second half of 2025. From the SiVantage acquisition to the launch of Catamaran SE and ongoing clinical validation, we are executing across all pillars of our strategy. Tenon remains focused on delivering solutions that promote true biologic fusion and structural stability for patients suffering from sacropelvic disorders. We're confident in our long-term trajectory and remain committed to driving value for our patients, physicians and shareholders. I thank you all for attending. And now I'd like to hand the call over to our operator to begin our question-and-answer session with covering analysts. Maria?

Our first question comes from Scott Henry with AGP.

I'm excited for you with the SiVantage acquisition/merger, however you want to phrase it. I find that smaller companies are often in a race for scale. And do you want to achieve scale to leverage the cost in the whole business model? Is that what you're trying to get here? Do you think this could help bring you scale, make the company more viable in the big picture?

Yes, Scott, this is Steve, and thank you for the great question. You're absolutely correct. This acquisition provides us with several advantages, particularly a pathway to scaling our operations. As we move towards more intensive commercialization in the medical device sector, we focus on enhancing our access to hospital systems and contract groups. By integrating the efforts of both organizations in this area, our sales team will be better equipped to capitalize on new opportunities. Additionally, Tenon was previously a company that offered just one product, but that's no longer the case. Physicians are looking for flexibility and options when addressing issues in the sacropelvic region, and relying on a one-size-fits-all solution has become problematic. This development allows us to present various approaches and implant formats that can cater to diverse situations, be it primary, revision, or part of a larger procedure. This diversification will enhance our market access and enable us to scale more effectively. Honestly, while I'm thrilled about the products, I'm even more enthusiastic about the team. I’ve known these individuals for many years and hold them in high regard. Their expertise will significantly strengthen our capabilities, and it's hard to convey just how excited I am about this. I believe we will execute our commercial strategies at a much faster and more intense pace moving forward, and I'm genuinely excited about all these developments.

Okay. That's fantastic. And as we try to get our arms around this combined company, I don't know if you can talk to the combined revenue, the combined OpEx, gross margin picture? Or will there be filings with that? I just pulled up an 8-K pretty long. I don't see any tables in there, but they might be in there. Just trying to get an idea of how we can kind of build a picture of this combined entity.

Sure. And I'll let Kevin comment in a moment. But as part of the transaction and as part of us closing, there are some audited financials being done that need to be completed before we can share the kind of details you're looking for. So we'll need a short period of time here to wrap those things up, and then we'll be able to provide more specifics. And Kevin, if you want to comment real quickly, that might be appropriate.

Yes, happy to. So Scott, there's about a 75-day post-close period to file the audited financials for SiVantage, so we should have those filed here come mid-October based on that timeline. So I can't speak directly to the numbers, but it is an immediate revenue pickup meaningful for Tenon with the Symmetry product line that's out there. And I think, as Steve mentioned, even more specifically, we're excited for the pickup we believe is going to come from the Symmetry Plus launch that's coming up here in Q4. But immediate revenue now and more to go as Symmetry Plus gets launched in Q4.

Okay. And for clarification, is there anything that needs to be done to complete this merger? Are there any votes? Or is this final?

It's closed and approved. The only remaining item is filing the audited 2024 financials and its review period for 2025 for SiVantage. That is all in progress and has a 75-day post-close period to get those filed with the SEC.

Okay. And final question, more on the micro side. Obviously, revenues declined in the quarter, but expenses went way down, too. I don't know if you're optimizing to get ready for the planned acquisition. But how should we think about Catamaran and you also have the SE launch coming up? How should we think about the Catamaran revenues sequentially in third quarter and fourth quarter?

Yes. This is Steve. I agree. I think it's fair to say Q2, we were a bit obsessed with working through all of this and getting it done with our new SiVantage partners that was a little bit disruptive for certain. I don't anticipate that softness being ongoing. I really think we'll recover very quickly. We just felt ourselves a bit on hold with adding street personnel, sales personnel, replacing any changes, things of that nature until we got this thing closed. So that's kind of where my mind is as it relates to Catamaran.

Okay. Fair enough. Considering that we are about 1.5 months into Q3, are you expecting that a lot of the ongoing issues will still be present? Should we adjust our expectations for Q3 and anticipate a more comprehensive rollout in Q4? Would that be a reasonable perspective?

I believe it's reasonable, and Kevin, feel free to add your thoughts. In July, we were still finalizing this, which was very intensive as you can imagine. However, things have started to improve rapidly since we closed, and I am optimistic that we will recover quickly.

Yes. I would just like to add, Scott. The excitement around announcing the deal and bringing the teams together is significant. I believe you'll see Catamaran revenue return to its previous levels, plus the additional revenue from Symmetry coming in immediately. We are confident about the current status of Catamaran and its revenue. A key factor that Steve mentioned is the opportunity to leverage our hospital agreements, approvals, and distributor agreements on both sides. We are beginning to cross-sell our products and expand from there. I anticipate a solid rebound in Q3.

Our next question comes from Nicholas Sherwood with Maxim.

Kind of talking about the acquisition, what sort of is the incremental physician and hospital network that you've kind of acquired through the acquisition? And have you begun cross-selling to the sort of legacy physician partners from both Tenon and SiVantage? Or are you still waiting for everything to be integrated before you begin doing that?

Yes. Thanks for the question. A couple of things. Yes, there's going to be overlap between the two groups, if you will, at the physician level as well as at the hospital and facility level, right? Our challenge is to integrate that and leverage that as best we can, right? The reality is Tenon had some access and contracting and pricing matters done, so did SiVantage. Some of it overlaps, some of it's incremental. So it builds from day one, gives us a chance to reinforce that group and then continue to expand from there. As to the sales folks and cross-selling, that is happening immediately. We're not waiting for the audits to be done or anything like that. We've already begun the training process to get everyone prepared to sell across the portfolio, position it appropriately, support it appropriately, what have you. Our folks are very consultative out there with the physicians and their staff. And so all of that process has begun in earnest, and we'll continue to do so probably for the next 60 days or so.

Okay. Perfect. And then kind of a follow-up. What is the kind of the reimbursement landscape for the Symmetry product and the Symmetry Plus product? Is it a similar like Medicare reimbursement code as the Catamaran system? Does it have private payer coverage? Can you kind of talk about how that exists? And then any synergies there with the acquisition?

Yes, certainly. So the SI joint, there are three distinct CPT codes that cover SI procedures. The SiVantage technology is coming over, participates with those codes just like Catamaran does. So I would position that as very similar, right? Coverage goes to supporting these technologies with data. And I mentioned in the prepared comments that not only are we excited about this second interim analysis coming out from our MAINSAIL trial and reinforcing that Catamaran delivers on its promises, but the SiVantage portfolio also brings prospective data to the mix that shows that Symmetry and we believe also Symmetry Plus can deliver on very specific aspects of safety and effectiveness. So we feel like we're well positioned with data to continue the pursuit of proper coverage of these technologies. But no new incremental codes or anything like that. The SiVantage technology participates with the SI codes that are in existence.

Okay. That makes sense. And then my last question is just what kind of color can you give us on this Symmetry Plus launch? Do we have an idea of when that will be? Kind of how much of a catalyst we expect that to be for the top line? Just kind of break down what you're thinking?

We're really excited about this technology. It's a lateral approach that will be state-of-the-art and will include features we believe will be very appealing to physicians. We expect to start alpha surgeries with this technology around October. The Alpha group consists of our physician advisors and closely partnered physicians who use these technologies and provide us with detailed feedback, including what they like, what they don’t like, and what may need adjustments. The extent of these adjustments will influence the timing of a full-scale launch. Typically, this process takes about two to three months, during which we make necessary changes, build up inventory, and prepare for a full launch. So, it’s reasonable to say that we will be in the alpha phase during October, November, and December, with a full launch expected early next year.

I would now like to turn the call back over to Mr. Foster for his closing remarks.

Great. Thank you, Maria. 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, MZ Group, who would be more than happy to assist. And with that, I wish you a good day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.