Treace Medical Concepts Inc Aktie

Ladies and gentlemen, thank you for standing by. Welcome to Treace Medical Concepts' Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would like now to turn the conference over to Tripp Taylor, Investor Relations. Please go ahead.

Good morning, everyone, and welcome to our second quarter 2026 earnings conference call. Participating from the company today will be John Treace, Chief Executive Officer, and Mark Hair, Chief Financial Officer. On this call, John and Mark will discuss the second quarter financial results and 2026 outlook. We'll then host a question and answer session following the prepared remarks.

The earnings press release can be found in the Investor Relations section of our website at investors.treace.com. This call is being recorded and will be archived in the investor section of our website. Before we begin, we would like to remind you that it is our intent that all forward-looking statements made during today's call will be protected under the Private Securities Litigation Reform Act of 1995.

Any statements that relate to expectations or predictions of future events and market trends as well as future events will be protected under the Private Securities Litigation Reform Act of 1995, as well as our estimated results or performance, our forward-looking statements. All forward-looking statements are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements.

All forward-looking statements are based upon currently available information, and Treace Medical assumes no obligation to update these statements. Accordingly, you should not place undue reliance on these statements. Please refer to our SEC filings, including our 2025 Form 10-K and our Form 10-Q for the second quarter of 2026, filed before the market opens today, August 7, which can be found in the Investor Relations section on our website at investors.treace.com for a detailed presentation of risks. With that, I will now turn the call over to John.

Thank you, Tripp. Good morning, everyone, and thank you for joining us on our second quarter 2026 earnings conference call. We are pleased with our results in the second quarter, with our revenue growth rate improving sequentially and our focus on profitability generating stronger adjusted EBITDA and reduced cash usage over prior year. These results were driven by continued year-over-year case volume growth, which accelerated to high single digits in the quarter, and market share gains driven by increasing surgeon adoption of our comprehensive bunion portfolio and early impact of our expanding line of new technologies, now allowing us to tap into a broader range of procedures throughout the foot and ankle.

We continue to focus on investing in growth initiatives to leverage this growing portfolio while driving improved profitability, positioning us for stronger growth expected in the second half of the year. As a result, we are raising our full year 2026 revenue guidance to be in the range of $204 million to $212 million, representing a decline of 4% to 0% compared to full year 2025. This compares the previous revenue guidance of $202 million to $212 million. Importantly, this outlook assumes ongoing expected dynamics, including continued procedure volume increases and the lapping of the ASP mix shift dynamics related to our 2025 product launches and as we begin to benefit from our 2026 planned product launches.

More specifically, this year we expect to return to positive revenue growth in our seasonally strongest fourth quarter. Turning to our growth strategy. As we continue to prioritize penetration of the bunion market and maximize the impact of our expanded portfolio, we're focusing on 3 key initiatives. First, driving the adoption of our 3 new bunion systems launched in 2025 across our large customer base of over 3,300 existing surgeon customers. Second, to build upon our leadership position with Lapiplasty by advancing new technologies that appeal to existing and new surgeons.

And third, continue to broaden our portfolio by launching new technologies, allowing us to address adjacent procedures performed by our existing surgeon customers, enabling us to grow wallet share and expand our addressable market. And we continue to deliver these technologies through our sales channels that include our Focus Direct sales team, which accounts for approximately 80% of our revenue. Speaking now to our first initiative. Before reviewing our commercial progress, I'd like to briefly reiterate the strategic importance of the bunion technologies we introduced in 2025.

We believe these new systems meaningfully expand our addressable market beyond Lapiplasty and Adductoplasty. Nanoplasty and Percuplasty expand our reach into the high-volume osteotomy segment with differentiated 3D minimally invasive solutions designed to simplify adoption and deliver consistent three-plane correction. While our SpeedMTP system extends our portfolio into the large and attractive MTP fusion market, which overlaps with bunion pathology and is among one of the most common foot and ankle procedures performed. Across our large base of over 3,300 surgeon customers, we estimate Lapiplasty in recent years has captured around 25% of their bunion-related procedure volume on average.

Our 3 new platforms are designed to address the remaining 75% of their procedure volume, creating a significant opportunity to increase surgeon utilization and drive long-term growth across the estimated 4.4 million annual U.S. bunion sufferers. Importantly, we believe our strategy is working, and this continues to validate our confidence in the significant opportunity ahead of us. Through Q2, approximately 40% of our Lapiplasty surgeon user base has already utilized at least 1 of our 3 new bunion systems since their launch in the third quarter of 2025. This builds upon the 35% utilization rate we reported in the first quarter of 2026.

In addition, approximately 30% of the growing number of new surgeons who first became Treace customers by using 1 of our 3 new bunion systems have also used Lapiplasty technology, demonstrating a pull-through effect to Lapiplasty technologies from this new surgeon cohort. Turning to our second initiative, our core Lapiplasty franchise remains a key strategic priority. As the recognized leader in the Lapidus Fusion segment, which represents approximately 30% of the estimated 450,000 annual U.S. bunion procedures, we are continuing to invest in innovation to improve our existing users' experience, appeal to new surgeons, and extend our market leadership.

We remain on track for a limited commercial launch of our next generation Lapiplasty Lightning platform in the fourth quarter of this year. Lightning features new 3D correction instrumentation and SpeedTMT implants designed to simplify workflow, reduce procedure time, and enhance the surgeon's accuracy and their control over the 3D correction. Another key initiative for our Lapiplasty strategy is our focus on increasing surgeon adoption of our IntelliGuide technology, the industry's first patient-specific planning and cut guide system for Lapiplasty bunion and Adductoplasty midfoot corrections in the U.S.

IntelliGuide reduces steps and saves time and is particularly valuable in helping surgeons with treating complex deformities and revisional surgeries with greater confidence and control. We believe the combination of our Lapiplasty Lightning and IntelliGuide PSI platforms provide a compelling and unique value proposition and can support further surgeon adoption and reinforce our category leadership in this key market segment. Now turning to our third initiative, we continue to broaden our portfolio beyond bunions to allow our sales force to more fully service a greater share of our surgeon customers' overall foot and ankle procedures and product needs and grow our share of wallet.

During the second quarter, we took an important step towards this initiative with the limited commercial release of our new SuperBite compression screw system. As a reminder, compression screws are a fundamental bone fixation technology utilized broadly throughout the foot and ankle. We continue to receive very positive feedback and encouraging early customer uptake from our early market release of SuperBite. SuperBite features an innovative self-drilling and countersinking design that can reduce or, in many cases, eliminate the need for pre-drilling, improving OR efficiency, and simplifying the procedure.

SuperBite, which we expect to fully commercialize this quarter, enables our sales force for the first time to participate in a wide range of incremental foot and ankle surgical procedures from the forefoot to the midfoot and hindfoot, and these incremental SuperBite cases often utilize additional Treace products. Building upon our recent access into the midfoot and hindfoot fusion procedures facilitated by SuperBite, we recently completed our initial cases utilizing our HyperPlate XM dynamic compression locking implant technology. Fusions of these larger joints in the mid and hindfoot can be challenging and have associated historically with higher non-union rates.

The HyperPlate XM's implant combination of locking screws and dynamic compression provides a highly stable construct with an anatomic shape designed to promote fusion in these larger midfoot and hindfoot applications. And consistent with our focus to provide innovative sterile instrumentation to make procedures more reproducible and more efficient, we developed and recently commercialized the Great Release XM instrument. Great Release XM is specifically designed to facilitate more efficient and thorough release of the soft tissues connecting these larger joints so that the joint surfaces can be accessed to prepare for fusion.

And in the fourth quarter, we plan to further strengthen this mid and hindfoot portfolio with the introduction of our new CartiBlaster powered joint preparation rasps. These single-use sterile-packed rasps connect with the powered saw handpiece and are designed to speed up and facilitate thorough removal of the cartilage from these larger joint surfaces to effectively prepare them for use for fusion. We believe HyperPlate XM implants, Great Release XM instruments, and CartiBlaster rasps, complemented by our SuperBite compression screws, present a differentiated problem-solving portfolio to help surgeons advance their outcomes in their mid and hindfoot fusion cases.

In closing, we're pleased with the progress we made during the second quarter as we strengthened our leadership position in 3D bunion correction, advanced our portfolio, and increased our presence across the foot and ankle market. Our focus remains on unlocking the full potential of this broader portfolio while investing in our key growth initiatives. Looking ahead, our anchor position in the bunion market has presented opportunities to leverage our core capabilities into new procedural adjacencies and continue to more broadly service our surgeon customers.

We will continue to develop innovative solutions to address our customers' unmet clinical needs, support our customers' outcomes with best industry medical education, and service them with our direct focus sales team. As we execute this strategy, we believe we can drive sustainable long-term growth and create long-term value for our shareholders. With that, let me now turn the call over to Mark to review our financial performance. Mark?

Thank you, John. Good morning, everyone. Revenue in the second quarter was $45.4 million, a decrease of 4% compared to the prior year period. The decrease was driven by lower procedure kit sales to stocking distributors and a continued mix shift towards lower priced, minimally invasive products. Excluding sales to stocking distributors, we sold more procedure kits in the quarter compared to the prior year period. Gross margin was 78.5% in the second quarter of 2026 compared to 79.7% in the second quarter of 2025.

Total operating expenses decreased 8% to $50.6 million in the second quarter of 2026 compared to total operating expenses of $54.7 million in the second quarter of 2025. Second quarter net loss was $15.9 million or $0.24 per share compared to a net loss of $17.4 million or $0.28 per share in the second quarter 2025. Adjusted EBITDA for the second quarter was a loss of $3.5 million compared to a loss of $3.6 million in the second quarter of 2025, representing both improved leverage and profitability. Year-to-date, cash usage reduced by 57%, or $3.6 million, when compared to the same period in 2025.

Cash equivalents and marketable securities totaled $45.6 million as of June 30, 2026. According to our outlook for full year 2026, as John mentioned, we are raising our full year guidance and expect full year 2026 revenue to be in the range of $204 million to $212 million, representing a decline of 4% to 0% compared to the full year 2025. The previous revenue guidance of $202 million to $212 million. We expect revenue declines to continue until our seasonally strongest fourth quarter. We believe revenue in the fourth quarter will largely be supported by accelerating case volumes, the annualization of the mix shift dynamics from last year's and the company's bunion product launches, as well as contributions from our 2026 product launches.

We are updating our adjusted EBITDA guidance to be in the range of a loss of $3 million to $5 million for the full year 2026, as compared to previous guidance of a loss in the range of $4 million to $6 million, and adjusted EBITDA loss of $3.9 million for the full year 2025. In addition, we are reiterating an expected reduction in cash usage of approximately 50% for full year 2026 as compared with full year 2025. Supported by our balance sheet and available liquidity, we believe we are well positioned to continue executing our strategic and growth initiatives for the foreseeable future. With that, I'll turn the call over to the operator to open the lines for questions.

[Operator Instructions] Our first question will come from Ryan Zimmerman with U.S. Bancorp. Your line is now open.

Good morning everyone. This is Izzy on for Ryan. John, just to start off, I was curious if you could spend some time just talking about the quarter-over-quarter improvements or changes that you saw in terms of volume and pricing and whether or not either of these dynamics have improved with the new products that you've brought to market so far?

Hi, Izzy, appreciate that. Appreciate the question. Within the quarter, what we saw was greater penetration of our 3 new bunion systems that we launched in Q3 of last year. We went from 35% of our 3,300 surgeon base using those products last quarter to 40%. So that was nice to see. We also saw some contributions from our limited market release of our SuperBite screw system, and that penetrated some new procedures, so when you combine those 2 together, we accelerated our case volume growth. We talked about mid-single digits over the last couple of quarters. We were in the high single digits this quarter. So we were pleased with what we saw there. And that's pretty much what played out in the quarter that led to the result.

Appreciate that. And then, Mark, as we think about the guide for '26 and the step up, I think that's a step up for the seasonally strong fourth quarter. Could you spend a little bit of time parsing out exactly how you're thinking of the pacing in third quarter and fourth quarter?

Yes, I appreciate that. Yes, we're really excited. This is what John said, that a lot of the strategies and the commercial strategies that we've been implementing last year with our new product launches, they've been successful this year, and we really feel like the trends are working according to plan. So the way we see the second half of the year is for this continued strategies to continue to work. And so we'll see continued improvement in case volumes and more contribution from these new products in the back half of the year.

Now, fourth quarter is always our seasonally strongest quarter. We've always seen that step up, sequential step up in revenue and case volumes from Q3 to Q4, and so there's really no changes there that we're anticipating that to occur again. We've seen it time and time again that that's what happens. And so we feel like we're well positioned with the new products that we launched last year to benefit from, as well as the new products that we're launching this year to continue to drive more case volume increases. And so we're looking forward to the back half of the year.

Thank you. And the next question will come from Ben Haynor with Lake Street Capital. Your line is open.

Good morning, gentlemen. First off, for me, on the Great Release and the CartiBlaster, can you share a little bit on kind of how you see the addressable market sizes for those products?

Sure, Ben. It's John. Thanks for the question. What we've talked about is when you look at the combination of SuperBite, the HyperPlate XM, and the CartiBlaster, the Great Release XM platform, I think that expands our TAM by about $300 million on the U.S. side. That's the size of that opportunity that we're going after in this kind of midfoot and hindfoot portfolio targeting.

Perfect. That's helpful. On the Lapiplasty surgeons that are picking up your other offerings, do they tend to gravitate towards one or the other, or are there any commonalities there, and also any commonalities on who you're displacing?

Yes, you know, first at a high level, you know, we've assessed, we're getting about 20, we were, before we launched the 3 new bunion systems, we were getting around 25% on average of our surgeons' overall bunion-related volume. As these new products have been driving into that customer base, what we're finding is, you know, based on the surgeon's preference on the MIS side, they may not want to use a burr, and so they gravitate more towards Nanoplasty. That's one of our MIS systems that's an IM implant, and you don't have to learn how to use a burr.

A rotary cutting burr, there is a learning curve established with that. And you have other surgeons that prefer to go the Percuplasty route. They want to use the burr or they've been using the burr at a time, so they choose that system. As far as SpeedMTP, we're just seeing very strong adoption of that across the board, across all fronts. It's an outstanding system. Very, very low profile, great diffusion plate with excellent stability and fixation. And as the name indicates, it goes on very quickly. So, I'd say that's how the mix is playing out in our customer hands.

Got it. Thank you for the call. Congrats on the progress.

Appreciate the questions. Thanks, Ben.

Thank you. And the next question will come from Frederick Wise with Stifel. Your line is open.

Thank you. Good morning, John. Good morning, Mark. John, maybe going back to your starting comments about which I think is, you know, hats off to you and the team, but 40% of the base using at least 1 and 35% of the new docs pulling through Lapiplasty, et cetera, and obviously more products to come. But I'm curious about what kind of competitive response you're seeing, what kind of competitive response you might, we should imagine you might face? Obviously, you've got some tough competitors out there. How quickly can they, you know, you know, imitate or replicate some of the innovations I'm sure you're bringing, just how do we, you know, what are the challenges ahead from that front?

Good morning, Rick. Thanks for being here and appreciate the question. I guess at a high level, we haven't seen a notable shift on the competitive landscape since last quarter. As you know, we have numerous companies that participate in the bunion space, some very large companies and a lot of smaller players. The way we see it, we just have these very high performing products in the segments that we play in. And what differentiates us as well is we have this incredible onboarding for surgeons through our best-in-class medical education, our Bunion Masters training events. We get rave reviews. Surgeons tell us these are the best in the industry, best that they've ever attended.

And then we trained highly specialized sales team that really makes sure they can integrate and adopt these new products into their practice efficiently and effectively. And when we continue a very high pace of innovation, where we're iterating and innovating our current platforms and then launching some new platforms, we talked about several new launches that are going to affect the fourth quarter, and we have a very robust pipeline of future technologies coming beyond that that we'll be excited to talk about at a later date. So I think all those factors are helping us win in this competitive landscape, and that's the innovation formula we're going to keep driving.

Great, and Mark, to pick on you a little bit, I wanted to follow up on Izzy's excellent question. Maybe we can get a little more clarity. I heard what you said, but about fourth quarter strength on the revenue side, but are we likely to think that you can, given all the new products and the uptake, that third quarter sales can be higher. And this is sort of a three-parter of clarification. You had an adjusted EBITDA loss of $3.5 million in the quarter, obviously better or less bad, if you will, than the first quarter. Just given the trends in OPEX, is $50 million, $50 million, $51 million your new quarterly OPEX run rate? Is that the range? And therefore, the dream of getting to adjusted EBITDA close, the adjusted EBITDA break even in 2027. I mean, more credible in our mind. Thank you so much.

Yes, thanks, Rick. Let me start off, and if I miss any element of the question, just remind me what I missed here. But I think the first part of the question is our revenue, and we feel good about the way we're positioned to benefit from our new products, to have that nice step up in revenue in our seasonally strongest fourth quarter. So we plan to do, we plan for that every year. We want to ensure that our products are launched before that so our surgeons can benefit, we can benefit in that fourth quarter. And so we've done all those things this year as well. So we believe that we're going to have that step up in the fourth quarter. And I'm going to take you back a little bit.

We've been talking over the last several quarters, beginning last year, middle of last year, that we talked about we did some restructuring changes. We've created some efficiencies in the organization. The process started last year and we're annualizing and benefiting from some of those cost reductions and expense changes that we implemented last year will benefit throughout this year. We did better in adjusted EBITDA in Q2 this year versus last year on a lower revenue base. And so we believe that there is improved leverage in the system. We also had some restructuring charges that we took this quarter, meaning our work isn't done. We continue to look for efficiencies throughout the organization. We believe we can improve some of the leverage of the benefits to the bottom line.

And we want to do that in a way that's not going to hurt our investments into top line growth. Meaning we continue to invest in our great R&D program. That team is developing great products. We're continuing to invest in the commercial sales force to ensure that we've got the right top line growth commercial strategies in place, but we can also do that efficiently. We continue to look for places to do that. There are, we did better in Q2 than what was anticipated. We feel really good about that.

We're going to keep our heads down and keep doing what we've set out to do this year. And as you think about adjusted EBITDA into next year, it's a little early for me to talk about next year, but we feel very confident that we will have continued improvements. We have historically shown very strong positive adjusted EBITDA in the fourth quarter. We anticipate that we'll do that again this year and that we can be positive adjusted EBITDA next year as we think about the future, our growth trajectories and all these commercial strategies.

I hear all your points, Mark. Yes, it is, but just want to make sure I'm understanding. I hear you on the fourth quarter revenue, of course, but I want to make sure last year, third quarter sales stepped up over second. And I want to make sure that we're all on the same page and getting it right for you on the cadence. So the idea of a step up in this year's third quarter along the way to that seasonally strong fourth quarter, third quarter sales being higher than second, is a reasonable thought given everything that's happening.

It's absolutely a reasonable thought, given that the step up in our case volume increases and what we're seeing. So that's the way we've thought about the quarter. And the trajectory, the cadence throughout this year, so yes, we will have a step up in the third quarter versus Q2. That's the way we're thinking about it. That's what we believe will happen in anticipation of that stronger fourth quarter. So, yes.

Perfect. That's great color. Thanks to you both. Good to see the progress.

Thank you. And the next question will come from Richard Newitter with Truist. Your line is open.

Wanted to just ask a little bit on the environment. You know, we're pretty much through 2Q earnings here. We've seen kind of ortho players report their results, you know, there's probably been some normalization. There's been some fears of elective procedure slowdown, ACA subsidy expirations. Can you guys talk a little bit about what, obviously you made progress in the quarter, you're raising your guidance, but you guys have some pretty idiosyncratic things going on, too. I'm looking for some color on what you're seeing in the elective procedure market.

You guys have a mixed exposure, too. That would be particularly insightful to kind of get a feel for whether or not there's any kind of step function change coming. And maybe just within the context of we're in bunion season or heading into bunion season, do you get the feel that that bunion season is on track to be consistent with what normally plays out or is there hesitancy? That's question 1, and then I'll have a follow-up.

Yes, hi Rich, thanks. It's John, maybe I'll take a shot at this question and Mark can clean up on anything I missed here. But we talked about the continued year-over-year case volume growth. We talked about the acceleration we saw into high single digits in the quarter. We believe we're gaining market share, more adoption on these products. To date, I would say the underlying trends have kind of tracked with our assumptions that were built into our 2026 guidance. And then with, you know, more new products coming and impacting things in the back half of the year, like SuperBite and the new products we talked about, we can tap into incrementally more elective cases that are outside, you know, what is going on in the bunion market specifically.

With regard to some of the other commentary, ACA enrollment, et cetera, we're aware of that. And the discussion around the impact on some elective procedures. I'd say at this point we haven't seen a material impact on our elective patient demographic. We do have a pretty high percentage of our patient demographic that's commercially insured and maybe that's playing in there. So that's how I would sort of frame things right now from where we see things today.

Okay, so you're not hearing anything from your customers. There's nothing that's suggesting that there's change coming or anything overly alarming. Okay.

We have not heard anything of material impact from our customer base. You know, the summer season is typically softer for, you know, bunions in general, and that's just been our normal seasonality, or at least how it's played over the last few years for us, and nothing you know, material that we're hearing from our customers that's making this sound like a much different summer season.

Okay, that's helpful. And then just looking at the consensus for '27, I know you're obviously not going to guide to '27, but your jump off point is a nice growth trajectory for 2026, implied by the guide. Is there any reason why you wouldn't be able to sustain, you know, on a full year basis next year a high single digit growth trajectory? That's roughly where the consensus is. And I'm just wondering if you could kind of opine on that at this point, whether you're that, you know, consensus being in that arena.

Yes, Rich, this is Mark. Appreciate the question. Yes, we feel really good about the way we plan to exit this year. It should be much stronger growth rates. We're pleased. We're looking forward to that fourth quarter. A lot of the headwinds that we talked about, some of the dynamics, the mix shift, a lot of these things begin to play out. So we expect some of that benefit to come in the fourth quarter. We definitely plan to have a different trajectory as we go into 2027.

It's going to be a little bit early right now before we lock in what that range is going to be. Good as we exit this year that we'll have some wind in our sails. And there will be some, as always, there's going to be some different quarter-to-quarter challenges to overcome, but we're going to feel really good about the fourth quarter. So I think for now, we just want to keep our heads down. We want to execute on the fourth quarter, and then we'll give a little bit more color about what kind of growth rates we think we can have for next year. But we're excited about what this year will bring.

Thank you. And the next question will come from Lilia-Celine Lozada with J.P. Morgan. Your line is open.

Good morning everyone. Maybe just 1 from me. I'm hoping you could talk a bit more about price. I know some of the new MIS osteotomy products come at a lower ASP, but at the same time you've been adding a lot of new products to the bag. So what does that all mean for the average procedure price moving forward, and how far through the mix headwind from the new MIS osteotomy products are you?

Thanks, Lily. Yes, we continue to have that mix dynamic, ASP mix dynamic, and that's going to play through Q3, where we launched these products last year. So we're seeing kind of what we expect on our trends there. When we look at an average blended selling price on these products. As we launch things like SuperBite, you have 2 different places those go. Sometimes SuperBite screws go into our existing Lapiplasty, Adductoplasty procedures where they're an add-on sale and they may be a $500 or $1,000 or $1,500 addition to a case like that.

Can be used standalone, and that may be a case that varies between $500 and, you know, call it $2,000. When you get into cases more in the back of the foot, sometimes these combine multiple technologies. So you have SuperBite screws, you have our SpeedPlate or our forthcoming HyperPlate, you have some of our biologics involved, and these can be $5,000, $10,000, even $15,000 cases. So there's really a pretty big blend of the way some of these new platforms are going to roll out that are going to, I think, average out together to be pretty nice for us. And just overall strengthen our portfolio, strengthen our surgeons' relationships with their reps, get our sales reps called in to a lot more cases during the third quarter and the fourth quarter this year than they maybe were last year. So we're excited about that.

Great, thank you.

Thank you. And I am showing no further questions in the queue at this time. This will conclude today's conference call. And thank you for participating. And you may now disconnect.

Good day, and thank you for standing by. Welcome to the Treace Medical Concepts First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Trip Taylor. Please go ahead.

Good morning, everyone, and welcome to our first quarter 2026 earnings conference call. Participating from the company today will be John Treace, Chief Executive Officer; and Mark Hair, Chief Financial Officer. John and Mark will discuss our first quarter financial results and 2026 outlook. We will then host a question-and-answer session following our prepared remarks.

Our press release can be found in the Investor Relations section of our website at investors.treace.com. This call is being recorded and will be archived in the Investors section of our website.

Before we begin, we would like to remind you that it is our intent that all forward-looking statements made during today's call will be protected under the Private Securities Litigation Reform Act of 1995. Any statements that relate to expectations or predictions of future events, market trends as well as our estimated results or performance are forward-looking statements.

All forward-looking statements are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements.

All forward-looking statements are based upon currently available information and Treace Medical assumes no obligation to update these statements. Accordingly, you should not place undue reliance on these statements.

Please refer to our SEC filings, including our 2025 Form 10-K and our Form 10-Q for the first quarter of 2026 filed before the market opens today, May 8, which can be found in the Investor Relations section of our website at investors.treace.com for a detailed presentation of risks.

With that, I will now turn the call over to John.

Thank you, Trip. Good morning, everyone, and thank you for joining us on our first quarter 2026 earnings conference call. Entering 2026, Treace Medical has evolved beyond its foundation in Lapiplasty into a comprehensive bunion solutions company. Building on the strategic progress made in 2025, we've expanded our portfolio with multiple new procedure innovations, which we believe position us to address a broad spectrum of surgeon and patient preferences across all bunion classes.

We expect this breadth of offerings will support accelerated growth in procedure volume, increased wallet share and a meaningfully expanded serviceable market opportunity. We are encouraged by our first quarter performance but remain focused on driving further improvement.

We continue to execute on controllable levers, including continuing to strengthen our sales team, launching meaningful product innovations and adding new accounts and surgeons. Importantly, the sustained mid-single-digit case volume momentum to start the year reinforces our confidence in our strategy to expand market penetration and improve top line growth as we move through 2026.

At the same time, we also meaningfully reduced cash burn as we progress towards cash flow breakeven. I do want to note the dynamics that impacted 2025, including macro pressures on procedure demand and portfolio mix shifts, remain present.

We reported revenue declines of approximately 10% in Q1, and we believe this trend will improve over time as we annualize the launch of the new products we launched in 2025, and we believe we're well positioned to navigate these factors and drive long-term growth.

As such, we're reaffirming our outlook for full year 2026 revenue, which was raised when we preannounced our results on April 9 to be in the range of $202 million to $212 million, representing a decline of 5% to 0% compared to full year 2025.

We expect revenue declines to improve through the rest of the year with revenue growth returning in our seasonally strongest fourth quarter. As mentioned, we expect fourth quarter revenue growth will largely be supported by case volume growth, the lapping of the ASP mix shift dynamics as well as the contributions from our planned 2026 product launches.

Now I'd like to turn to our 3 strategic initiatives to drive top line growth and the progress we've made on these initiatives in the first quarter of 2026. First, leveraging our large existing customer base to drive adoption of the 3 new bunion systems that we commercialized in 2025; second, continuing to build upon our leadership position with Lapiplasty by launching new technologies that can appeal to new surgeon users; and third, expanding our product offerings to grow wallet share and tap into new TAM-expanding procedural adjacencies.

First, let me begin with an overview on the bunion technologies we introduced in 2025, including their strategic relevance and early market reception. We believe these 3 new systems more than double our accessible market relative to Lapiplasty alone, making their successful commercialization and deeper market penetration an important priority as we look to drive incremental growth.

Our Nanoplasty and Percuplasty 3D MIS Systems expand our reach into the high-volume osteotomy segment, which represents approximately 70% of the estimated 450,000 annual U.S. bunion procedures. Today, we believe only around 15% of metatarsal osteotomies are effectively being performed using MIS approaches, largely due to steep learning curves, variability in outcomes and limited correction of the third frontal plane of the deformity, which is associated with higher recurrence rates.

Our 2 3D minimally invasive osteotomy systems are designed to address these challenges with more reproducible, instrumented procedures that can be easier to adopt and are designed to correct all 3 planes of the bunion deformity. We believe this positions us well to expand adoption and drive greater penetration over time across the estimated 4.4 million annual U.S. bunion sufferers.

Now speaking to our SpeedMTP Great Toe Fusion System. SpeedMTP targets the roughly 20% of bunion patients who have developed an arthritic great toe or MTP joint. Additionally, SpeedMTP addresses a separate population of non-bunion patients who suffer from an isolated arthritic MTP joint.

This is a large and strategically important market segment for Treace to participate and to innovate in given that MTP fusion is among the most common foot and ankle procedures performed.

Across our growing base of over 3,300 surgeon customers, we estimate Lapiplasty currently captures about 25% of their bunion-related procedure volume. These 3 new systems are intended to target the remaining 75%, representing a significant opportunity for continued penetration and growth.

Market penetration with these 3 products is increasing. While just 3 quarters into our full launch, we continue to see a strong uptake of our new systems and a corresponding acceleration in our procedure volumes, resulting in market share gains. As of Q1, approximately 35% of our Lapiplasty surgeon user base has incorporated at least one of these 3 new bunion systems into their practice since launch. This represents an increase over the 25% that we reported in the fourth quarter of 2025.

We're also encouraged to see that approximately 30% of our new surgeons who became Treace customers by initially using one of the 3 new bunion systems have also used Lapiplasty technology, which we believe indicates a pull-through to Lapiplasty technologies.

Second, at the same time, we remain highly focused on advancing our leadership in Lapiplasty and expanding its appeal and adoption across a broader surgeon audience. Lapidus Fusion represents approximately 30% of the 450,000 annual U.S. bunion procedures and is the largest segment, where we are the recognized category leader.

And we remain on track to commercialize our next-generation Lapiplasty platform, known as Lapiplasty Lightning later this year. This system offers next-generation 3D correction instrumentation and new SpeedTMT implants.

Lightning Instrumentation is designed to deliver a faster procedure by reducing procedure steps while also offering enhanced precision and enhanced control for the 3D correction, while SpeedTMT implants, as the name indicates, are designed to provide faster fixation application.

Expanding surgeon interest and uptake of Lapiplasty also includes advancing our IntelliGuide PSI technology, the first patented preoperative planning and patient-specific cut guide system for bunion and midfoot correction in the U.S. Together with Lapiplasty Lightning and SpeedTMT, we believe these 3 core innovations position us well to extend our category leadership and drive further adoption in 2026 and beyond.

Now turning to our third initiative, expanding our offerings to more broadly serve our growing customer base. In addition to our 3 new bunion systems, we expanded our portfolio with the addition of new SpeedPlate implants, new sterile instruments and we introduced our first biologics offerings. These additions are designed to enable our sales force to more comprehensively support their surgeons' needs while also increasing access to additional procedures.

With this expanded portfolio, not only are we seeing growth in bunion-related adjacent procedures, but our sales team is now servicing some of their customers' incremental procedures outside of bunions as well. Building on this trend, in 2026, we are launching new technologies aimed at both increasing wallet share and expanding our access to incremental procedure volumes.

Our SuperBite variable pitch compression screw system represents another differentiated technology from Treace. Compression screws are a fundamental fixation technology utilized in foot and ankle surgery. And without this high-volume fixation offering in our portfolio, competitive sales reps have supplied these products where needed in Treace cases.

We announced initial surgeries with our SuperBite screws in April, and we're hearing positive early responses from surgeon users and high enthusiasm from our sales reps in our early commercial experience. Not only are SuperBite screws built with an advanced features based on the latest MIS customer preferences, but they're also designed to save OR time by reducing or eliminating altogether the need to pre-drill before implanting the screw due to their novel self-drilling design.

The strategic addition of SuperBite to our portfolio not only reduce the need for a competitor in our cases, but importantly, they equip our sales force to gain access to a broader range of procedures ranging from the forefoot to the midfoot to the hindfoot and to the ankle.

And complementing our expanded procedure access with SuperBite, we will target improving outcomes for challenging midfoot and hindfoot fusion procedures with our forthcoming SpeedXM Fusion System launch.

SpeedXM leverages our novel SpeedPlate hybrid technology, delivering the benefits of dynamic compression and locking screw stability in a specialized anatomic design to address fusions of the larger bones of the midfoot and the hindfoot. SpeedXM plates are highly complementary with SuperBite screws and/or biologics as these technologies are often used in these larger bone fusion procedures.

Importantly, these new products are serving procedures already performed by our existing surgeon customers in the same setting of care and often on the same day as our surgeons bunion cases. These new offerings leverage our sales force's presence and expertise and we believe can drive greater selling efficiency and impact.

We expect full commercialization of both SuperBite and SpeedXM during Q3, collectively expanding our total addressable market by approximately $300 million and providing access to attractive high ASP midfoot and hindfoot procedures where multiple Treace technologies are often needed.

Our strategy to build a comprehensive, best-in-class bunion solutions platform is gaining traction, supported by encouraging early indicators across the business. We continue to expand our active surgeon base while increasing utilization as adoption of our broader portfolio grows, driving mid-single-digit procedure volume growth in the first quarter, which we believe supports our approach.

Looking ahead, we believe we have a path to accelerating procedure growth and increasing wallet share as we drive deeper penetration with our broadened product portfolio and continue to more comprehensively service our great surgeon customers' product and procedure needs. Combined with disciplined investment, these efforts position us to deliver sustained market share gains, improve profitability and long-term shareholder value.

With that, now let me turn the call over to Mark to review our financial performance. Mark?

Thank you, John. Good morning, everyone. Revenue in the first quarter was $47.2 million, a decrease of 10% compared to the prior year. The decline was mainly driven by the shift in revenue mix towards lower-priced minimally invasive products and lower volume of bunion procedure kits sold.

Gross margin was 79.3% in the first quarter of 2026 compared to 79.7% in the first quarter of 2025. Total operating expenses were $54.6 million in the first quarter of 2026 compared to total operating expenses of $57.5 million in the first quarter of 2025.

First quarter net loss was $18 million or $0.28 per share compared to a net loss of $15.9 million or $0.25 per share in the first quarter of 2025. Adjusted EBITDA for the first quarter was a loss of $5.5 million compared to a loss of $3.8 million in the first quarter of 2025.

Cash, cash equivalents and marketable securities totaled $51.9 million as of March 31, 2026. This represents an increase of approximately $3.5 million from the company's balance sheet of $48.4 million as of December 31, 2025, and compares to an increase of approximately $0.4 million in the first quarter of 2025.

Turning to our outlook for full year 2026. We are reaffirming our full year guidance, which we raised in conjunction with the announcement of preliminary operating results on April 9, and expect full year 2026 revenue to be in the range of $202 million to $212 million, representing a decline of 5% to 0% compared to the full year 2025.

We expect revenue declines to continue until our seasonally strongest fourth quarter. Fourth quarter revenue growth is expected to be largely supported by accelerating case volumes, the lapping of the mix shift dynamics as well as contributions from our planned 2026 product launches.

In addition, we are reaffirming our expectation of a loss in adjusted EBITDA in the range of $4 million to $6 million for the full year 2026 as compared to a loss of $3.9 million in full year 2025. We also expect a reduction in cash usage of approximately 50% for full year 2026 as compared to full year 2025.

Supported by a strong and flexible balance sheet, we believe we are well positioned to continue executing our strategic and growth initiatives for the foreseeable future. With that, I'll turn the call over to the operator to open the line for questions.

[Operator Instructions] Our first question comes from Ryan Zimmerman with BTIG.

This is Izzy on for Ryan. So I just wanted to start on your ASP and mix shift. Mark, it sounded like you are expecting the ASP headwinds to lapse around the fourth quarter, but I was hoping you could speak to that a little bit more and what we can expect moving throughout the year?

This is Mark. Thanks for the question. As we began to talk about at the end of last year and we talked about on our last call, we're really pleased with the launch of our new products. We know that some of these products have lower ASPs and they've been readily adopted by a large portion of our surgeon base.

John talked about how around 35% of our current customer base has already adopted some of these new products at these lower ASPs. So this is the dynamic that we talked about over the last couple of calls. We anticipate to continue to see that until we begin to lap or to have an anniversary of when we made these new products available, it's really in the third quarter of this year.

So some of these dynamics, we fully anticipate to continue. This is the exact dynamics that we talked about. And so we feel like the strategy is working. We're getting these new products to our surgeons. They're utilizing them, and that's just going to have a temporary headwind in the first part of this year, but that will change in the back half of this year.

Appreciate it. And it looks like gross margins came in a little bit higher than Street expectations. So as you guys continue to launch these new products and see the benefits from the products that were launched late in 2025, how should we think about gross margins going forward?

Another great question. We are very focused on gross margins here. Our new products, we really have a goal to launch new products to have consistent gross margins with what we've had historically. Some of these margins do fluctuate from quarter-to-quarter. We benefit in the seasonally strong fourth quarter when we have higher volumes. And there are, of course, lots of pieces and components that impact gross margins overall.

But we're pleased with what we did in Q1. They came in strong, a little bit better than what we had anticipated. So we view that as very positive. So we'll continue to launch new products to keep in line with this range of high 70% gross margins, and we believe that we can continue to do that going forward.

Our next question comes from Ben Haynor with Lake Street Capital Markets.

Great to see that so many of the folks have adopted these new solutions. I guess what are you seeing once they do? I mean, do they immediately kind of swing the pendulum to their ultimate adoption of the osteotomy solutions versus Lapiplasty? Do they swing too far? Do they work their way towards the ultimate mix? Or how has that tracked from what you've seen thus far?

Ben, it's John. Thanks for the question. We've seen, in general, strong adoption by our customer base with these new products once they get trained on them, do a couple of cases, they tend to be pretty sticky. And we're pleased with the way that's going there.

And it's still early days, but as mentioned, we've got now 35% of our base Lapiplasty customers now using one of these 3 new solutions in their practice, and we're working on getting more of them using 2 and 3. Over time, we want them to be full portfolio of surgeons as we move through time.

We've also seen, and it's early, but some adoption of Lapiplasty technologies with surgeons that came in initially to Treace through using one of those new 3 products. So too early to say what the materiality of that is going to be. We'll maybe comment on that as we get more experience later through the year, but it is good to see that dynamic as well.

Sorry, this is Mark. I think another important point to realize is that as we've offered these new product options, we don't necessarily believe that they're replacing our Lapiplasty procedures as well. We think it's going to be additive and allow them to have more options for the patient needs.

So where that ultimately lands, what that mix ultimately is, it's still to be determined, but we don't necessarily believe, I think, in your question was, is it replacing Lapiplasty. We think it's providing additional options for the patient needs and for those surgeons to address whatever deformity that they see.

I was looking at it. And then as you bring out more and more solutions in the portfolio and once the folks adopt the full portfolio of course, I mean, I guess what percentage or proportion of the foot and ankle cases that are done every year could the current and to be launched in the near future Treace products find their way into? I mean, is it 50%, 70%, 90%? What does that look like?

Yes. Thanks, Ben. John here. It's hard to say the exact percentage, but as we launch products like SuperBite and now we have the broad portfolio that includes MTP Fusion solutions as well as 3 different ways to treat a bunion, 4 different ways to treat a bunion, you're definitely getting into a large -- being able to cover a large percentage of the surgeons' workhorse foot and ankle cases, I would say. And the sales force is pretty excited about that.

The addition of SuperBite, for instance, in the early innings here, they're displacing some competitors that used to sit in the room just to use that compression screw technology. And now they have their own. So I think it's going to be interesting to play out over time, and we do definitely appeal to a much broader base of the surgeons' overall caseload as we work through the year and get these products out.

Okay. And on the SuperBite, how many SKUs are in that? How does that stack up versus competitive offerings on the screw side?

Yes, Ben, we tried to do this in a very capital-efficient and inventory efficient way. As we thought about launching a compression screw system, we didn't want to have high capital, high inventory burden. Traditionally, these systems are -- have a lot of SKUs, hundreds and hundreds, maybe 1,000.

So we've been trying -- we've tried to design this and bring forth a system that, I don't have the exact number of SKUs, but it's probably in the range of 100 or so sellable items in our system, and that makes it very lean and very efficient and something we can manage very well and we can -- providing good volumes to the field so they can really make maximum impact as we get these out.

Our next question comes from Rick Wise from Stifel.

I wanted to dig a little more into the sales cadence outlook for this year, and with your patience, talk about the setup for '27. I mean, it seems like, John, the strategy clearly is visible. It seems to be working. We're in the early days of the strategy becoming increasingly visible.

So sort of a 2-part high level, looking at the farthest kind of question. You beat the first quarter, you beat and raised. As you look at the rest of the year, how do we think about the outlook and your confidence?

I know you want to stay conservative, but if you continue this first quarter pattern in the second and the third, hopefully, in the fourth quarter, is it going to be you're going to do a little better potentially because of penetration? Is it going to happen on -- is it the product side? Is it something to do with your execution? Just help us understand where more of the same could happen as we go through '26.

And I'll ask Mark the tough question. Mark, I know it's hard to talk about '27 in precise terms, but my numbers -- my current numbers have you growing, I'm being cautious 5% next year. The consensus numbers are more like 9% or 10%.

I mean, is 5% to 10% the right way to think about the potential for '27, if you execute well and all these products roll out and you see the trends we're seeing now? It sounds potentially very conservative. Help us think through all that. Sorry for the long-winded questions.

Okay. Thanks, Rick. I appreciate it. I'll take the first one, and then Mark can handle part 2 on future consensus. The way the year lines up is, like Mark said before, we've got some headwinds due to these ASP-related mix shift dynamics related to the 3 new bunion systems that we launched in Q3 last year. As we get to Q3, that headwind starts to abate.

And additionally, in Q3, and increasingly Q4, we're going to benefit from the introduction of our 2026 launches, some of which carry favorable ASPs relative to the 3 products we launched last year, SpeedTMT as well as cases that will combine our SuperBite screws, SpeedXM plates and biologics, those are -- those get us into some higher dollar ASP midfoot and rear foot cases.

And then we also have some new sales reps that are going to be ramping up in the back half of this year. So that's kind of the way we see the year and we're going to keep our heads down. We're pleased with our Q1. We're not satisfied. We got a lot of work to do, but we've got a lot of good things going on with this business as we build out a more robust and diversified portfolio with some new growth channels in it with these different product lines.

Rick, this is Mark. I'll just say John is right on there. We're going to look at this one quarter at a time. We're pleased with the results in Q1. They came in as expected, which is good for our progress during this year. And so I'll start there that it's one quarter at a time and we're going to focus on getting this right this year.

With respect to next year, we have not given any formal guidance with respect to 2027, but I can tell you that we are expecting to return to revenue growth in the fourth quarter this year. So I think it's going to be a little bit early to talk about 2027. It's going to be -- next year will be impacted on what is our momentum as we're exiting this year.

But I think the positive story is that although we did have a decline this quarter, and we may have some revenue declines in the short term here, we believe that we'll have increased momentum with case volumes as well as the top line revenue growth as we're exiting the year.

So before we give formal guidance to next year, we want to better understand that momentum, but we do believe that we're going to be set up very well for next year as we exit -- as we fully anticipate or plan to exit this year with increased revenue growth.

And just one more for me. Maybe, John, you could talk about just the general environment. We didn't hear from Stryker this quarter because of their cyber issues as clearly as we normally would. What's your sense of the market environment? Are consumers behaving as usual? Are doctors -- just is the environment an okay one or as usual or stable? How are you -- what are you seeing -- how are you thinking about that aspect for the rest of the year?

Yes, appreciate it, Rick. When we entered this year, we said that we expected the macro headwind type of dynamics, consumer sentiment related impacts on elective procedures to continue into this year. We didn't really see a reason things were going to be dramatically shifting.

Q1 kind of played out within our expectations, really didn't see any surprises in patient flow and the surgeon activity beyond what we anticipated. We don't have independent data yet to tell us what the overall market trends were for bunions or foot and ankle elective in Q1. But again, it played out as we expected pretty much.

So we're going to continue to focus on our strategies, getting these new products out in full supply, training more doctors and gaining new customers and accounts and work our way through quarter-to-quarter.

Our next question comes from Lilia Lozada with JPMorgan.

The new MIS osteotomy products understandably get a lot of the attention, but I'm hoping you could share some color on how Lapiplasty has trended over the last few quarters. How meaningful of a contributor has the pull-through from Percuplasty, Nanoplasty been to reinvigorating growth in Lapiplasty? And do you see Lapiplasty Lightning as more of an incremental update? Or is it something that could have a material impact on ASP and volumes?

Lilia, thank you for the question. It's John. As we said on our last call, there's been patient and surgeon preference changes to more MIS options and even to more MTP Fusions on some bunion patients over time, MTPs where they might have some arthritis in the great toe joint.

We've seen a great uptick in response to our MTP Fusion offering. It's doing very well out there, and that product does carry a higher average selling price than our -- the average price on our MIS products. So we like to see that.

With respect to Lapidus, there continues to be strong demand for Lapiplasty, where Lapiplasty is indicated in the surgeon's algorithm at this point in time, and we have seen, as alluded to, what we believe to be some pull-through from surgeons that came in new to Treace through one of our 3 new bunion products adopting Lapiplasty.

Now it's early on, and these numbers aren't large yet, but we'll be watching that through the year. And we do believe in the advancements of Lightning and SpeedTMT, more availability of IntelliGuide, these are tools that can help us appeal to more surgeons as we bring those into more force into the market late this year.

Great. And then just as a follow-up, could you talk a bit more about some of the competitive dynamics and your competitive positioning now that you're sort of going more head-to-head with the other ortho players in MIS osteotomy? So are you seeing adoption of these new products primarily from existing Lapiplasty accounts? Are you seeing a good amount of competitive switches? Any color you could share on how that competitive positioning has evolved over the last few quarters would be helpful.

Sure, Lilia. I think it's been -- initially, we probably had more uptake in our existing customer base. But as these products have gotten out in greater supply and the sales reps have become more familiar with them, we train more surgeons on them, more surgeons are using them, they're talking to their peer surgeons about these new MIS systems.

Our instrumentation is fantastic. It really is. It's extremely helpful in allowing these surgeons to do a more reproducible, predictable MIS osteotomy procedure. So as we've gotten more into the market, over more time, we've definitely been seeing more competitive conversions. And our sales team's expertise, our training and the efficacy of these products is what's making it happen.

So we're seeing a good uptake. We're seeing displacement of competitors, not only in the MIS systems, but with our SpeedMTP, too. And that's a big, important segment of the market. So we like what we're seeing across all fronts, both how they're being implemented within our existing Lapiplasty user base and the adoption we're getting from new surgeons and competitive conversions.

And I'm not showing any further questions at this time. And as such, this does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.

Good day, and thank you for standing by. Welcome to the Treace Medical Concepts Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Trip Taylor, Investor Relations.

Good morning, everyone, and welcome to our fourth quarter 2025 earnings conference call. Participating from the company today will be John Treace, Chief Executive Officer; and Mark Hair, Chief Financial Officer. John and Mark will discuss our fourth quarter financial results and 2026 outlook. We will then host a question-and-answer session following our prepared remarks. Our press release can be found in the Investor Relations section of our website at investors.crescom. This call is being recorded and will be archived in the Investors section of our website.

Before we begin, we would like to remind you that it is our intent that all forward-looking statements made during today's call will be protected under the Private Securities Litigation Reform Act of 1995. Any statements that relate to expectations or predictions of future events and market trends as well as our estimated results or performance are forward-looking statements. All forward-looking statements are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements.

All forward-looking statements are based upon currently available information, and Treace Medical assumes no obligation to update these statements. Accordingly, you should not place undue reliance on these statements. Please refer to our SEC filings included on our Form 10-K for 2025 filed before market opened today, February 27 and can be found in the Investor Relations section of our website at investors.treace.com for a detailed presentation of risks.

With that, I will now turn the call over to John.

Thank you, Trip. Good morning, everyone, and thank you for joining us on our fourth quarter 2025 earnings conference call. During 2025, Treace Medical entered a transformational phase, building upon our leadership is recognized bunion experts and evolving from a lapaplastyc-focused company into a comprehensive bunion solutions company. With the recent commercialization of multiple new union procedure innovations, we are now positioned to address virtually 100% of surgeons' current technique preferences for all types of bunion correction, offering 5 best-in-class instrumented systems, spanning all 4 categories of bunion deformities. We've been highly focused on accelerating our bunion procedure volume growth while also broadening our technology offerings to increase wallet share and expand our serviceable TAM.

Our elevated case volume growth in the back half of 2025 reinforces our confidence that we have the right strategies in place to continue to expand our market penetration and restore top line revenue growth later in 2026 and into the future. We also drove steady improvement in adjusted EBITDA and significantly reduced our cash burn for 2025. Before diving deeper into our expectations for 2026, I want to note that dynamics discussed on our last call that pressured 2025 including case volume growth, offset by headwinds related to broader economic conditions and softer consumer sentiment as well as a product mix shift within our expanded portfolio are still present to begin the year.

Given these market conditions, we're initiating our outlook for full year 2026 revenue to be in the range of $200 million to $212 million, representing a decline of 6% to 0% compared to full year 2025. We expect revenue declines to continue until our seasonally strongest fourth quarter. We expect fourth quarter revenue growth will largely be driven by accelerating case volumes, the lapping of the mix shift dynamics as well as a contribution from our planned 2026 product launches. We remain focused on continued improvements in profitability and reducing cash burn in 2026. As a reminder of our progress to date, in 2024, we used $50.5 million in cash and reported an $11 million loss in adjusted EBITDA.

In 2025, we used $27.3 million of cash, a 46% reduction versus 2024, and we reduced our adjusted EBITDA loss to $3.9 million in 2025, a 64% improvement over the prior year. We took several actions in 2025 to reduce our operating expenses and cash usage. Many of these changes will continue to benefit us throughout 2026. We, therefore, anticipate that we will again reduce our cash burn by approximately 50% in 2026 compared to 2025, and we're not done. We will continue to identify additional opportunities to drive our top line growth and leverage our P&L in 2026.

Now I want to focus on our strategies, the progress we made in 2025 and where we expect to deliver in 2026 To start, let me tell you about our strategies to improve our top line performance in 2026 and beyond. First, we will focus on leveraging our large existing customer base to drive adoption of our new 2025 bunion product launches. Second, we'll continue to build upon our leadership position with lapoplasty technology, adding new technologies that can attract new surgeons. And third, we will expand our product offerings to grow wallet share and tap into new TAM expanding procedural adjacencies.

To start, I want to give you an update on the new bunion technologies we launched during 2025, their strategic importance and the reception they're getting in the marketplace. We believe our 3 new bunion systems effectively doubled the accessible market that we have today with lapiplasty. So effectively driving these deep into the marketplace is a very high priority for us. First, our differentiated nanoplasty and Percuplaty/3D MIS systems expand our reach into the high-volume osteotomy segment which we estimate represents approximately 70% of the 450,000 annual bunion procedures performed in the U.S.

We estimate that only 10% to 15% of Metatarselosteotomies are being performed using MIS approaches today. and we believe this is largely due to the steep learning curve, high variability of outcomes and lack of attention to correcting the third frontal playing component of the deformity, the failure of which to do so has been associated with an increased risk of bunion recurrence. Our new 3D MIS bunion correction systems offer patients procedures that can result in less pain and fast recovery times with minimal visible scars. Importantly, these are procedures that are quick for surgeons to learn and are highly instrumented to enable a controlled correction of all 3 planes of the deformity to minimize risk of recurrence.

We believe this expands the appeal of our 3D MIS osteotomy procedures to both surgeons and patients today and could encourage a much larger portion of the 4.4 million U.S. bunion sufferers to seek surgical treatment over time.

Next, our Speed MTP system, which is designed to serve roughly 20% of bunion patients who have our the great toe or MTP joints as well as patients who suffer from isolated MTP joint arthritis. This large patient population makes MTP fusion one of the most common procedures performed by foot and ankle surgeons, making it a strategically important area for Treace to target with better solutions and continue to innovate. With our core lapiplasty system, we believe we've captured 25% on average of our 3,300 customers total bunion related procedure volume. And these 3 new systems are dialed in to target the remaining 75% and we are laser focused on penetrating that untapped opportunity.

And our strategy is working. Just over 2 quarters into the full launch of these new systems, we're encouraged by the rapid adoption and resulting acceleration we're seeing in our overall bunion related procedure volumes. As of Q4, over 25% of our surgeon base has already incorporated 1 or more of these 3 new bunion systems into their practice and our Q4 procedure volume growth increased over the mid-single-digit rates we achieved and reported on in Q3.

Next, in addition to our new products, advancing our leadership in lapiplasty technology and expanding its user base remains at the forefront of our strategy. Lapis Fusion represents approximately 30% of the estimated 450,000 U.S. annual bunion procedures and is the largest dollar segment of the market where Treace is the recognized category leader. As MIS approaches are gaining in popularity among surgeons and patients, we continue to remain focused on advancing our lapiplasty platform, making the procedure simpler, faster and minimally invasive as demonstrated by our micro lapiplasty platform, which was launched in 2024. In 2026, we plan to commercialize our next-generation lapiplasty platform known as Lapiplasty Lightning. Lightning combines next-generation 3D correction instrumentation and Speedpay TMT implants, which are built upon our proprietary speed plate hybrid fixation technology. Speed TMT is a high-performance implant designed to appeal to an incremental surgeon audience, those that prefer a single-plate fixation construct versus our traditional 2 plate or biplanar approach.

Lightning instrumentation is designed to reduce procedural steps, improve efficiency and provide surgeons with greater accuracy and control of their 3D correction. We expect full availability of our Lightning instrumentation and our speed TNT implants later in the year. Another way we're appealing to more surgeons with lapiplasty is by advancing the shift towards personalized surgery, leveraging our Intelligade PSI platform. Intelligade is industry's first and only preoperative planning and patient-specific cut guide system for correcting bunion and midfoot deformities. Intelliguide offers surgeons improved efficiency and precision and is particularly helpful in complex and revisional cases. We believe the combination of Lightning, Speed TMT and Intelliguide position us well to extend our leadership position and attract more surgeon users to our lapiplasty platform in 2026 and beyond.

Now turning to our third strategy, expanding our offerings to more broadly serve our growing customer base. In 2025, we expanded our speed plate and sterile instrument portfolios with multiple new offerings. We also entered the biologics market with our Cortifuse flowable corticofiber graft as well as our line of procedure-specific allograft wedges. These new biologic offerings allow our sales force to more comprehensively service our surgeons' needs in their cases.

In 2026, we plan to launch additional offerings to grow our customer wallet share and tap into incremental procedure adjacencies. In the back half of this year, we plan to launch 2 new important products that expand our TAM by an estimated $300 million. First, our Super bite variable pitch compression screw system. This is a very important addition to our portfolio as it equips our sales force for the first time with the most common form of fixation used in foot and ankle surgery. The Super bite system features advanced design attributes, making it ideal from both minimally invasive and conventional surgical approaches.

Next, we will make our first entry into the midfoot, hindfoot segment of the market with the launch of our new Speed XM fusion system. Speed XM leverages our speed plate fixation technology bringing the benefits of dynamic compression and enhanced stability for fusion of the larger bones of the mid and hindfoot as well as for flat foot reconstructive procedures. Speed XM is highly complementary with our Super Bite screw system as the 2 technologies are often used in concert along with biologics to stabilize and fuse these larger bones, thus giving Treace great incremental access to high ASP adjacent procedures that we do not serve today. And of course, with all our current and new product offerings, we continue to provide best-in-class education through our bunion master's hands-on training programs. These events are designed to support surgeons and confidently integrating our procedures and technologies into their practices. And following these trainings to further enable successful patient outcomes for our surgeons, we provide additional initial case support from our fleet of dedicated clinical specialists and ongoing support from our bunion focused direct sales team, a team that we plan to expand in 2026 with the addition of more experienced foot ankle sales professionals.

Our confidence in the future is grounded in the success we've achieved in the past as well as the early indications we're seeing, which reinforces our confidence that we have the right strategies in place moving forward. We've expanded our active surgeon base from nearly 1,300 users in 2020 to over 3,300 users in 2025, and these surgeons are using more of our products as they adopt our growing portfolio of best-in-class solutions. Fourth quarter procedure volume growth increased over the mid-single-digit rates achieved in Q3, reflecting the strength and effectiveness of our comprehensive bunion portfolio and strategy.

As we look ahead, we believe we're well positioned to accelerate our procedure volume growth rates while also growing our customer wallet share and expanding our TAM as we broaden our footprint in the foot and ankle market. We expect these initiatives, combined with disciplined investments, will continue to drive market share gains, improve profitability and shareholder value.

With that, let me now turn the call over to Mark to review our financial performance. Mark?

Thank you, John. Good morning, everyone. Revenue in the fourth quarter was $62.5 million, a decrease of 9% compared to the prior year period. The decline was mainly driven by the shift in revenue mix towards lower-priced products. Gross margin was 80.6% in the fourth quarter of 2025 compared to 80.7% in the fourth quarter of 2024. Total operating expenses were $56.3 million in the fourth quarter of 2025 compared to total operating expenses of $55.7 million in the fourth quarter of 2024. The increase reflects restructuring charges and increased litigation expenses in the quarter compared to prior year.

Fourth quarter net loss was $9.4 million or $0.15 per share. compared to a net loss of $0.5 million or $0.01 per share in the fourth quarter of 2024. Adjusted EBITDA for the fourth quarter was $6.2 million compared to $11.1 million in the fourth quarter of 2024. Full year 2025 adjusted EBITDA loss was $3.9 million compared to full year 2024 adjusted EBITDA loss of $11.0 million, a 64% improvement over the prior year. Cash, cash equivalents and marketable securities totaled $48.4 million as of December 31, 2025.

The company's new credit facility provides an additional $115 million of liquidity subject to certain conditions. The company used $27.3 million of cash during the full year 2025, a decrease of 46% compared to $50.5 million in 2024.

Before concluding, let me turn to our outlook for full year 2026. As John mentioned, we're initiating our full year guidance. We expect full year 2026 revenue to be in the range of $200 million to $212 million, representing a decline of 6% to 0% compared to the full year 2025. We expect revenue declines to continue until our seasonally strongest fourth quarter. Fourth quarter revenue growth will largely be driven by accelerating case volumes, the lapping of the mix shift dynamics as well as contribution from our planned 2026 product launches.

Looking closer at the first quarter, similar to prior years following our seasonally strongest quarter, we anticipate Q1 revenue will step down approximately 27% compared to Q4 2025. Then we expect year-over-year growth rates to improve each quarter thereafter. In addition, the company expects a loss in adjusted EBITDA in the range of $4 million to $6 million for the full year 2026 as compared to a loss of $3.9 million in full year 2025. We also expect a reduction in cash usage of approximately 50% for full year 2026 as compared to full year 2025. Supported by a strong and flexible balance sheet, we believe we are well positioned to continue executing our strategic and growth initiatives for the foreseeable future.

With that, I'll turn the call over to the operator to open the line for questions.

[Operator Instructions] Our first question comes from Danielle Antalffy with UBS.

We've heard from a number of players over the course of 2025 that the foot and ankle market was seemingly unusually soft. And I followed you guys for a long time. This has been a relatively high-growth market. John, I'd love to hear your thoughts on what's going on in this market. And as far as your guidance goes, the overall market itself, what's reflected from a growth perspective? Do we return back to normal, continued softness here? Anything you can say to that?

Sure. Danielle, thank you for the question. As we've indicated on past calls, during 2025, our surgeons were reporting deferrals of cases. We believe that made it a softer year and potentially a declining year in overall bunion surgical volume. As you noted, other companies have mentioned the foot and ankle market being soft, particularly in elective foot and ankle procedures in 2025 or even that may have contracted a little bit. Given we've got an increase in our Q4 case volumes versus Q3, I think it really does demonstrate that we're taking share with this new comprehensive bunion portfolio and strategy even in a softer market.

When it comes to our outlook for 2026, we're increase -- we're expecting that increase in case volume. That's going to be offset by product ASP mix-related headwinds for the first half of the year. That will begin to abate in Q3 as we start to lap the introduction of these lower ASP, higher volume driving 2025 product introductions. Additionally, in Q3, we'll increasingly, as we go into Q4 benefit from the introduction of the new 2026 product launches. These carry a little higher case ASPs, such as our lapiplasty Lightning and speed TMT and the combination effect that we get from our Speed XM, mid-foot plating and Super Bite screws. So we also have some new sales reps that are going to be ramping up in the back half of the year, and we have some easier comps there. So -- we feel good about the cadence. We feel good about the new products we're introducing and the impact they're going to have. As far as the market dynamics go, we're kind of contemplating a similar dynamic to what we experienced in 2025.

Okay. Understood. That's helpful. And I'm just curious, as far as the scaling of the biologics portfolio that you talked about, how that will impact operating margins? I know you guys are committed to EBITDA positive, but just curious about any nuances there.

Danielle, this is Mark. Thanks for the question. Yes, we're excited that we continue to expand our product offerings. And so that's just going to be another product in our bag that our sales reps can now provide to surgeons who are looking for those dose biologic solutions. And so we've got good margins on those. We don't think that it's negatively going to impact us at all, but to provide additional revenue going forward into 2026 as we have this new offering. So I don't think there's any anything negative about it at all. It's all upside for us as we have this broader portfolio.

Our next question comes from [indiscernible] LakeStreet Capital Markets.

First off for me, on the products expanding the TAM, can you maybe share a little bit more about those? How long they development in the experience of the folks that have had their hands on them yet? Any additional color there would be helpful.

Sure, Ben. Thanks for the question. Yes, the Super bite screw, which have been in development. Typically, our product development time lines are 18 months or so. We've been working with an elite team of minimally invasive surgeons on these as well as our our traditional SAB development team. We've put a lot of work into it. They're very refined. They have some really nice features that make them very high performance. the ability to put this in our sales rep's bag really adds breadth to their line, the ability to control a greater portion of the overall surgical case, and we're excited about this. It's the first time they're going to have one of the most commonly used forms of fixation in the foot and ankle. So it's going to be very synergistic with a lot of the current products they have additive to the case ASPs.

The second product we talked about was the Speed XM. That's our mid-foot plating system. Again, it's been in development for quite some time, very refined, a lot of cadaveric testing. We've had a lot of surgeons put their hands on this. and we're looking forward to rolling it out mid next year. This is perfusing larger bones that are further back in the foot like the talonavicular, the calcaneal cuboid nevicular [indiscernible] flatfoot reconstruction, triple arthrodesis. These are larger bones more on the back of the foot. These are procedure adjacencies that are often related to the union and convenient call points for our sales force. So we're excited that they'll have the ability now to tap into these new incremental high ASP procedures with these 2 complementary technologies.

And you said mid next year?

Coming mid this year.

Okay. And then secondly for me, on the quarter of your surgeons that have tried the new ceotomy solutions -- what's -- what are the ones that they pick up first? How does it kind of fit into their algorithm? Any additional color would be helpful.

Sure, sure. And there's 2 platforms there, Ben, we've got the MTP Fusion system, which is getting a lot of traction. This is the first dedicated offering that Treace Medical has offered into that large space, that large subsegment of bunion patients that the pending patient comes in, they have a painful bump, but they actually have arthritis in the big toe joints. That's roughly 20% of the patients. that surgeon to see for bunion. Then there's an entirely other class of patient that fits for that speed MTP, that MTP fusion that doesn't have a bunion but has big toe arthritis isolated. So -- it's one of the most common procedures performed by our surgeons and now we're playing in that space. The price point is at a premium to the MIS osteotomy products we offer. So we like that, and we're seeing a really good pick up there.

Regarding the MIS products, we have 2. And the way we've been hitting the marketplace and sort of segmenting the user base, if surgeons have not tried minimally invasive bunion surgery before, nanoplasty is a more welcoming and easy step for them because it does not require them to learn how to use a rotary power cutting burr, they can use their conventional saw. We have excellently designed instrumentation that allows them to control the whole procedure, correct all 3 cardinal planes in the bunion deformity and do it in a comfortable and reproducible fashion. So nanoplasty serves that customer group predominantly that hasn't engaged in minimally invasive osteotomy surgery.

The other group the surgeons that have engaged in minimally invasive osteotome surgery and they have some level of proficiency and that's our Percuplasty. So we go after them with our Percuplasty. We have superior screw designs that don't require drilling, so it makes it faster to insert. And our GIG system has just received very high claim from everybody we put it into their hands. That's allowing them to more controlled instrumented procedure, the ability to reproducibly correct all 3 planes of the bunion and do it in a fast and efficient manner.

So you add those -- these technologies to our entire portfolio. And what surgeons are seeing is a comprehensive suite of offerings that are best-in-class, whether they need to use an MTP joint doalapidus or lapiplasty or do a minimally invasive osteotomy procedure for their patients. So we're really well equipped. Salesforce is in a great position now with all these products on all these fronts, and we're driving it forward or driving our case volumes.

Our next question comes from Ryan Zimmerman with BTIG.

All right. Great. Maybe with the -- starting with the guide, both for Mark and John. When you think about what's embedded in the high end and the low end of the guide, what is the toggle? Or what are the variables that you've kind of embedded in the guidance that get you to the low end, that get you to the high end. How much of that is market dynamics versus maybe product mix shift? If you can kind of deconstruct that a little bit, I think that would be appreciated.

Ryan, this is Mark. I'll take a first shot at that. We did offer a range this year, and it partly goes to some of these dynamics that John talked about earlier that we saw exiting 2025 that there were some changes in patient dynamics and some -- what we were referring to previously, some macroeconomic headwinds. So there is some uncertainty as we come into this year, so we wanted to make sure that, that range comprehends some of that market uncertainty. So that would probably be towards the lower end of that range to the extent that there isn't some improvement or that some of these dynamics don't improve this year versus last year. So -- or they worsen.

I think on the upside is where we continue to have incremental uptake of our new products. Those that we launched last year, again, we've talked about case volume increases in both Q3 and Q4. We're anticipating case volume increases throughout 2026 as well year-over-year. So to the extent more surgeons are adopting these new cases, these new procedures, and to the extent there's greater uptake on our new product launches that are coming out. John just talked about Super Bite as well as Speed XM. So these are new product launches that are coming out this year. And to the extent there's greater uptake on those and there's opportunities to go to the high end of the range. So right now, we feel comfortable at the midpoint of the range. There are some variables in the marketplace and with our product offering. And so that's where we feel comfortable for now.

Yes. Okay. That's very helpful, Mark. And John, you've added a lot of products [indiscernible] last 18, 24 months, if you will. -- historically, the sales force was a lapiplasty focused sales force, right? And it was kind of like a tunnel vision. It was that segment of the market. How do you balance the focus of the sales force. And you're adding a lot of these products, there's pushes and pulls on pricing dynamics with those products as a result of that. I'm just curious kind of, is there a risk of dilution in terms of focus in the sales force? And just your general thoughts on kind of how you balance those dynamics with all the products you're added.

Yes. Thanks, Ryan. Really insightful question. We've done a lot of work with our sales team for the past over a year now, getting them ready for this, getting them trained. These technologies aren't technologies necessarily. They're having to push or force their products and technologies that our customer base is desiring and kind of demanding. So the way we look at it is we keep them focused on that bunion sweet spot and then as the surgeons have adjacency procedures that they want to serve with our product line, we have them to serve them. And that's why the superb screw line is so important. Speed XM is so important and the next-generation technologies we're bringing out with lapiplasty are going to be very important as well. But we find that these are the types of products that our sales force's customers are wanting from Treace Medical. SpeedXM is a perfect example. They love the Speedpay technology, and they're asking us, can you develop this for these other larger bones and I could use them with your new screws that are coming out.

So we're listening to our customers very closely, and we're trying to develop our product line in concert with kind of the path at least resistance for the sales force.

Our next question comes from Rick Wise with Stifel.

John, you highlighted, I think your words were something like you can now address 100% of the bunion opportunities or union-related opportunities with the broadened pipeline. I'm just curious how you're seeing with what you already have and what you're expecting competitively. How does this -- how does your broader product line, how does the expanding sales force, this repositioning of the company? How is it affecting competitive dynamics? And is this really going to -- I'm not asking it skeptically, I mean it's got to shake things up a little bit.

Rick, yes, great question. It's a competitive marketplace. And a lot of people are trying to play in it, a lot of large competitors, small competitors. We just returned from our largest surgeon conference of the year. The [indiscernible] conference in Las Vegas, huge attendance. Over 2,000 of our most common foot and ankle surgeons participating there. We had a great booth all these technologies were on display. We had very high traffic at our booth. I can tell you our cadaveric training labs that we held at the meeting were oversubscribed and attended beyond what we expected. So I think there's a lot of appreciation for what Treace Medical brings in terms of being bunion experts and being able to help surgeons navigate through the changing landscape of patient interest and what type of procedures they're going to want to be offering in their practice.

So knowing that Treace Medical has this full suite, 5 different categories of best-in-class solutions that can comprehensively serve those surgeons patient bunion needs across the spectrum. I think that's a very comfortable position for surgeons to be with Treace Medical. And our reps know the procedures inside and out. we hold their hands. We give the surgeons excellent training. We reinforced the uptake on the products in the OR with our expert clinical specialists to make sure those first cases go smooth, they get great patient outcomes. And then they're taken care of by very focused bunion direct sales force. So again, a lot of enthusiasm for these products, and we think it's going to continue to build.

And Mark, maybe you could expand on your cash flow outlook comments. Obviously, you've done a great job reducing your rate of cash burn, and you seem to have a lot of optimism you can make significant dent in cash burn in the year ahead. better sales will help mix, I'm guessing. But talk us through the initiatives that you're contemplating incrementally for 2026 and why we shouldn't be concerned that this is going to limit the company's ability to -- on the marketing front or sales expansion front to get the sales growth side of the job done?

Rick, we've, for the last several quarters now, talked about our laser focus on profitability improvement and cash management. And -- so we took a lot of steps last year to begin to improve our overall cost structure and our P&L. And a lot of those changes that we made last year will benefit us throughout the full year 2026. So some of those cost reductions, we reported some restructuring charges last year. So that's -- we'll be able to annualize those benefits throughout 2026. We've talked a little bit about a couple of other things that were unique to 2025. We as we've launched all of these incremental mining systems and adjacent products we really hit a high watermark with regard to our medical education, and we really invested in training all of our existing surgeons, and we reached out and did a lot of additional training to surgeons that are -- that had not been Treace customers.

So although we will very much remain focused on medical education and training surgeons, we won't have the same level in 2026 that we did in 2025. So that's going to naturally come down a little bit. We've also talked about some of the natural leverage that comes in our sales force. We've hired a lot of sales reps and as they come off some of their fixed -- they're fixed salaries, there's some natural leverage in the sales organization as well. The other thing is we've talked in the last couple of calls, we've talked a little bit about our DTC efforts and activities and investments. And we are not investing as much as we had historically. And one of the main reasons is really -- what we were doing in earlier days was building brand recognition and brand awareness for both patients and surgeons. But now we've got over -- what we estimate 1/3 of the U.S. surgeons using Treace products last year. So we've got this huge large base of surgeon customers and so we can leverage down some of that DTC investment that we don't believe will impact our top line growth.

The last thing that I'll mention with respect to cash management or cash usage is last year with the introduction of several new bunion systems, we had incremental and higher CapEx or capital expenditures for our instrumentation Treace that we own and we depreciate, but we make them available to our sales reps and to the surgeon to perform these new cases. So that was at a higher level last year. And we don't need to have the same level of capital investment in 2026. So not only is the OpEx when it comes down, you'll see some nice leverage there, but even on the CapEx as well. So the combination of all those things is what gives us confidence that we can reduce our cash burn by 50%, which is significant this year on top of the significant reductions that we just experienced last year.

Our next question comes from Richard Newitter with Truist Securities.

I have 2 questions. Maybe the first one, just a little bigger picture. -- appreciate that you see mid-single-digit case volume growth, there's a lot of cross currents with mix shift. And I doubt those are going to go away because you're going to continue to have to evolve the portfolio. and the marketplace is going to continue to be increasingly competitive. So the bigger picture question against that backdrop is, what's the end goal here? Or how do you see your kind of sustainable longer term normalized growth rate when you layer in some sense of normalcy on the bigger bag, a more productive sales force with that bigger bag, and is this a mid-single-digit grower sustainably longer term, just given where all the macro headwinds are and maybe get some share gains that offset. Is this a high single-digit sustainable grower now? Just trying to get a sense for kind of where you're headed realistically longer term? And then I have a follow-up.

Yes, Rich, this is Mark. Let me begin with that, and John may have some additional color. So we are broadening the portfolio. Some of these items that we've talked about have lower ASPs and yet some of these new products and offerings that we're providing really have strong ASPs as well. maybe a slight step down to lipaplasty, but these are strong ASPs, and we'll continue to broaden our portfolio, not only in the finance space, but the adjacencies that John talked about. So there's going to be some of that dynamic -- that overall, the ASPs or the revenue per case may come down from where we've been historically.

As we think about the foot and ankle market, some of the questions already today, and we've talked about it a little bit. We believe that there are some macro trends in 2025 that may be were different from what we've seen historically. Historically, we'd say that the foot and ankle market is somewhere in the mid-single digits and growth rate year-over-year. That's what we've seen historically. And we believe that with our focus exclusively on foot and ankle and with our primary focus on the bunion and that we can and should do at least what the market does and more. And that's because of our product profile, our direct channel sales force that can drive these products and it's our focus. So we believe that we're uniquely positioned in the marketplace to do what the market is doing broadly and then -- so that's what we would anticipate going forward.

Okay. And then I'm just curious, relative to your original expectations when you made the strategic pivot, if you will, what felt like a strategic pivot to us to the MIS osteotomy versus lapiplasty, macro development aside, how is that strategy playing out relative to kind of competitive conversions or trialing that maybe are coming back? Is everything progressing according to plan, notwithstanding some of the mix and macro kind of externalities?

Rich, John here. I would say, yes, very positive reception to these new technologies. What we're known for is developing really elegant instrumentation that takes challenging procedures and makes them very straightforward for surgeons. And these minimally invasive ways of doing the bunion, they're hard and certainly need help, and we're giving them the tools to be able to get trained and put these into their practice quickly. We already had 25% in just 2 quarters into launching these new technologies, 25% of our 3,300 customers have already used one or more of these new technologies. They have incorporated them into their practice. And we believe that's going to continue to build throughout the year larger percentage of our overall surgeon base using these new technologies and on average, those surgeons embracing more of those 3 new bunion systems as we progress throughout the year.

That's what we're laser-focused on. and we're seeing a very positive reception. I couldn't have been highlighted more than the reaction we just saw at our largest annual meeting of surgeons where we had very high turnout to get hands on with these products in the lab, learn from our top faculty how to employ them into their practice. And we're looking forward to picking up a lot of new users as they return home. So I think everything is going as planned. Our MTP Fusion product is tapping into a market we've never played in before, and we're becoming a pretty quickly here, a very large share player in that space. And I think it speaks to the power of our model and our strategy and the ability of our sales team to execute.

Our next question comes from Lilly Lozada with JPMorgan.

Great I'm hoping we can go back to some of the assumptions underpinning the guide. It sounds like you have to get past these lability and mix headwinds and have strong uptake in MIS osteotomy to get back to growth in the fourth quarter. So to what extent does a rebound in the fourth quarter and the guidance for the year, Reston meaningful share capture in MIS osteotomy. I appreciate you don't provide specific guidance by products, but any color on what the guide assumes in terms of how successful MIS osteotomy is and how lapiplasty volumes are trending relatively would be helpful.

Lilly, it's John. Thanks for the question. I'll take a shot at this, and Mark can maybe chime in as well. We have some assumptions for -- that are built into our guide, both low and high end on uptake on our MIS osteotome platform, our MTP Fusion platform, hallapoplasty and the new lapoplasty products such as speed, TMT are going to perform -- and then, of course, the new products we're bringing out, starting in the middle of the year, the Super bite screws and Speed XM. So all of those are built in. We have assumptions for them. We believe they are reasonable and achievable, and we're going to progress through the year, and we're trying to be prudent. And to the degree we can do better, we'll do better. But we're sticking to the plan for now and executing on it.

Great. And then just as a follow-up, can you talk about how the rollout of these new products affects how we should be thinking about your strategy, penetrating the market deep versus wide. It sounds like there's a cohort of docs that maybe just never gravitated towards lapiplasty and these new products give you something to offer them. So should we think about new surgeon adds trending higher than in years past? And is that more of a focus now than before?

Sure. Yes, some of them are -- some of these products are obviously built to bring on new surgeons that have not been users of lapoplasty in the past. The Lightning instrumentation is going to be new and novel and has a lot of appeal to it. We just had a training on that, an alpha kind of preview training at our [indiscernible] Conference very, very great reception from the surgeons that saw there. and the Speed TMT implant, that appeals to a very large surgeon audience that we have not appealed to before with lapiplasty because this group of surgeons like to use 1 fixation plate versus 2, which has been our traditional -- so we think we can appeal to new users there. And I'm sorry. maybe I lost the other part of your question, Lilly, if you don't mind, remind me or Mark can pick it up.

And maybe Lilly, I'll jump in a little bit. This is Mark. I think our primary strategy has been that we -- to first build a very large customer surgeon base, and we're really proud of the work that we've done that's taken a number of years, and we've really made great strides in increasing this customer's surgeon base over the last 3 or 4 years. Now that we've got this large surgeon base and what John talked about earlier, is that we've really only gotten maybe 1/4, 25% of their cases because they're doing other types of cases, we just have had an offering.

So I think the first opportunity -- strategic opportunity is to add these new products to our existing surgeon base, that's strategy and focus, number one. We know that there's many more bunion procedures that we have not been getting historically, and that's the biggest opportunity for us right now. With that said, and John is exactly right, we strongly believe that in addition to that focus on our large surgeon base, there are other surgeons that have just not really spoken to or become Treace customers and it could be because of their preferences. And in MIS is one example. We just haven't been in the MIS olceotomy space, and now we can play there. So it gives us an opportunity to provide those offerings to our large surgeon base and also reach outside of our customer base to bring incremental surgeons.

But I don't think this year that we're looking to expand in dramatic form outside of our current surgeon base. We will add new surgeons this year. We've already done so and will continue to do so. But I think the bigger opportunity right now is to drive deeper into our existing 3,300-plus customer surgeon base.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Good morning, everyone. I'm Lily Lozada. I'm on the med tech team here at JPMorgan. Very happy to have the Treace team with us here today to kick off Wednesday. John is going to do a bit of a presentation for us, and then we'll jump into some Q&A.

Thanks, Lily, and good morning, everybody. Thanks for joining us today. It's certainly great to be here at the JPMorgan Healthcare Conference and have some time to talk about Treace Medical. Safe harbor disclosures are here. Please refer to our SEC filings on our website for detailed presentations of risks.

Treace Medical is a medical device company with a focused mission to improve surgical outcomes for bunion patients. Since our IPO in 2021, we continue to execute on our strategic plans, resulting in strong market share gains and encouraging adjusted EBITDA progress. With continued gains across our key operating metrics, this reaffirms our belief that we have the right strategies in place to expand market penetration with our differentiated technologies.

We are the bunion experts. In 2015, we pioneered and commercialized the Lapiplasty 3D bunion correction procedure to bring a better solution to surgeons and deliver better outcomes for patients. Our innovative 3D bunion solutions are backed by strong IP, marketed by the industry's only bunion-focused direct sales channel and have established Treace Medical as the largest dollar share player in the U.S. bunion market today.

In Q3 of last year, we transformed our business from a Lapiplasty company to a comprehensive bunion solutions company by commercializing several new 3D bunion technologies into our base of over 3,300 surgeon customers. We're pleased with the adoption we've already seen with these new technologies as demonstrated by our accelerating procedure volume growth in the back half of 2025. With an expanded portfolio and sales force, we anticipate continued case volume growth, and we will maintain focus on operating expenses and efficient capital deployment.

With 1 in 4 adults in the U.S. affected by bunion deformities and such large gaps in treatment success, we believe the bunion market represents one of the most underpenetrated opportunities in medtech today. Bunions are hereditary in nature and progressive. They don't go away, but tend to worsen over time. And this results in roughly nearly 4.5 million Americans seeking medical attention each year for their bunion pain. And we estimate about 25% of those patients are symptomatic surgical candidates. And it's this group of just over 1 million patients that represent our $5 billion-plus U.S. TAM.

This said, less than half of these candidates are opting to have surgery, and we believe this is largely due to patient reluctance due to the downsize of past surgical approaches. Notably, pain, lengthy recoveries and high rates of recurrence.

We believe most bunion surgeries fail before the patient even leaves the operating room. There are 3 planes involved in the bunion deformity and modern research demonstrates how important correcting this third frontal plane is on surgical outcomes, as failure to properly correct it can result in 10 to 12x greater risk the bunion will return. And it's this third frontal or rotational plane that was historically unrecognized and unaddressed in conventional treatments. Until our company and our surgeon advisers targeted it and developed our initial solution over 10 years ago with Lapiplasty.

So with the introduction of the Lapiplasty 3D procedure, surgeons now had a new option, a comprehensive 3D fix for this 3D problem and one that can lead to more consistent and more enduring corrections. Lapiplasty offers proprietary instrumentation and a surgical method that allows surgeons to confidently and reproducibly correct all 3 planes of the bunion deformity in 4 straightforward steps.

Without the patented Lapiplasty tools and methods, this is a very challenging procedure for most surgeons to perform. So Lapiplasty effectively delivered surgeons a paint by numbers approach to 3-plane bunion correction. And this, along with 10 years of positive clinical results and our continued commitment to make Lapiplasty faster, easier and even more reproducible has allowed Lapiplasty to be adopted across the broad surgeon community.

And we've strategically invested in multiple clinical data sets to track and report the results of our proprietary Lapiplasty procedure on patients. Last September, we announced peer-reviewed publication of our positive 4-year interim results from our ALIGN3D multicenter prospective Lapiplasty study. Results demonstrated low recurrence rates, sustained and significant improvements in both pain and validated patient-reported outcome scores. This unique combination of reproducible outcomes and broad surgeon adoption supported by this level of differentiating clinical evidence has made Lapiplasty the gold standard in Lapidus surgery today.

And now that we have a large bunion-focused sales team in place and a growing base of over 3,300 customers, we've transformed Treace Medical from a single technology Lapiplasty company to a comprehensive bunion solutions company. With our broad suite of 3D systems now in hand, we're highly focused on accelerating our penetration into the bunion market and advancing our market leadership position, while also leveraging the foundation we've built within our customer base to introduce additional technologies that we believe can expand wallet share over time.

In 2018, our Surgeon Advisory Board published a peer-reviewed paper describing 4 classes of bunion deformities. As a business, we initially focused our early efforts on driving market share and acceptance across all these classes. That said, it's been our strategy all along to address all 4 of these classes of bunions with targeted 3D corrections, giving surgeons more options to address the evolving needs and expand the base of potential surgical candidates over time.

Here, you see the family of advanced 3D systems we now offer our surgeons to target these 4 bunion classes. As focused experts in this space, this is what we do best, developed highly-instrumented 3D approaches that can truly democratize these challenging procedures to speed adoption across the broad surgeon community.

Our new Nanoplasty and Percuplasty 3D MIS systems target the high-volume osteotomy segment of the market, a segment that we estimate represents 70% of the 450,000 annual cases in the U.S. And then we have our new SpeedMTP system, which targets roughly 20% of bunions who have arthritic great toe or MTP joints. MTP fusion is one of the most common procedures performed by foot and ankle surgeons, making it a strategically important procedure for Treace to serve and to innovate in.

Prior to launching these 3 new systems, we estimate we have captured about 25% on average of our 3,300 customers' total bunion-related volumes. In 2026, we are laser-focused on penetrating the remaining 75% of their cases by leveraging our expanded portfolio of targeted solutions. And we're encouraged by the early uptake we're seeing. Just 2 quarters into full availability of these systems, we're already seeing mid-single-digit bunion procedure volume growth.

At a high level, a key component of our innovation strategy involves making our 3D bunion procedures less invasive, resulting in less pain, quicker recoveries and minimizing visible scarring. We believe this not only makes our procedures more attractive to patients today, but more appealing to an even larger number of the nearly 4.5 million U.S. bunion sufferers in the future.

Surgeon and patient interest in MIS bunion surgery is high. And from a patient's point of view, you can see how much more appealing a Treace MIS approach would be to a traditional open osteotomy. That said, today, there are some real rate limiters to expanding this emerging segment of the high-volume osteotomy market, specifically steep learning curves, high variability of outcomes and lack of attention to correcting this third or frontal plane component of the deformity with current MIS options.

As a result, we believe that only around 10% to 15% of the estimated 300,000 metatarsal osteotomies are being performed with MIS approaches today. But this is changing. Treace Medical is now a driving force in this segment and pioneering the future of MIS bunion surgery with a full suite of advanced 3D technologies to meet the evolving needs and preferences of surgeons and patients.

Our Percuplasty and Nanoplasty systems are performed through poke holes or tiny incisions and provide a unique experience for the surgeon, a highly instrumented procedure that allows them to dial in all 3 planes of the bunion deformity with the control and the confidence that they need. And we've complemented these with our own MIS Power System. This is the console and handpiece that powers the high -- the single-use cutting burrs that are used in the Percuplasty procedure and can also be used across a wide variety of other MIS procedures throughout the foot.

MIS is on the rise, and we believe we are well positioned to win in this space. During 2025, we've already enabled hundreds of first-time MIS surgeon users as well as experienced MIS users using competitive products to confidently introduce our advanced suite of 3D procedures into their practice, and we're only getting started.

Since 2015, our company has been hyper focused on evolving our Lapiplasty technology, making it easier, faster and minimally invasive with our Micro-Lapiplasty option. We estimate Lapidus Fusion represents about 30% of the estimated 450,000 annual bunion procedures in the U.S. today and represents the largest dollar segment of the bunion market, a market where we are the recognized leaders.

And in 2026, we plan to commercialize our next-generation Lapiplasty platform known as Lapiplasty Lightning. Lightning combines next-generation 3D correction instrumentation with new implants based on our novel SpeedPlate hybrid fixation technology. Lightning not only reduces steps for a faster procedure, but importantly, it provides surgeons greater accuracy and greater control over their 3D correction. We performed our first case using Lightning technology successfully last week, and we look forward to full commercialization towards the end of 2026.

The age of personalized surgery is here, and we continue to innovate and expand surgeon access with our IntelliGuide PSI platform, industry's first and only preoperative planning and patient-specific cut guide system for bunion and midfoot corrections. Not only can our IntelliGuide technology offer a personalized treatment, it streamlines procedures and gives surgeons greater confidence and control, particularly in more challenging or revisional deformity corrections.

While focused on deeply penetrating into the bunion market, we've been strategically adding complementary technologies to allow our sales force to tap into adjacent procedures and more fully service their surgeons' needs over time. During 2025, we expanded our SpeedPlate and sterile instrument line with multiple launches in both of these categories. We also introduced the company's first biologics platform.

In 2026, we plan to add new offerings into these categories and commercialize our Percuplasty SuperBite line of compression screws, arming our sales force with another bread-and-butter fixation platform so they can more fully service their customers' needs in their cases.

All of these technologies are designed to wrap around our core bunion-related procedures. We believe this allows our sales reps to bring greater value to their customers while also creating greater selling efficiency and scalability.

Speaking now to our go-to-market strategy. First, we are focused on addressing foot and ankle surgeons most frequently performed high-volume surgeries with a comprehensive suite of best-in-class procedural solutions. And we provide surgeons with excellent education and hands-on training on these technologies through our bunion masters training events. This enables our new surgeons to be well equipped to confidently incorporate our procedures into their practices.

And then our surgeons are supported by the expertise of our clinical specialist employees and our bunion-focused direct sales team, a team that we will continue to expand in 2026 with the addition of highly-experienced foot and ankle sales reps. We believe our focused approach and our passion and commitment to helping our surgeons achieve better and better outcomes for their bunion patients is a key differentiator for our company and a reason why so many surgeons embrace Treace's products.

Our goal is to increase our rate of penetration into the $5 billion-plus U.S. bunion market by leveraging our comprehensive portfolio and our focused sales team while also adding complementary technologies to increase customer wallet share over time. We've made significant progress towards this goal by increasing our surgeon customer base from nearly 1,300 active surgeons in 2020 to over 3,300 active surgeons in 2025, a 21% CAGR in surgeon user growth over the past 5 years. And our surgeon customer base, on average, uses more of our products each year as they choose to treat more and more of their patients with our growing portfolio of best-in-class technologies.

All of this has driven our bunion market penetration to nearly 8% of all surgical bunion cases in 2025, doubling our penetration over the past 4 years. And while we're building this position in the market, we've also made significant progress on improving our profitability. We are confident that we have a great business model, which will enable us to sustain strong gross margins and scale our operating expenses.

In 2024, we improved adjusted EBITDA by 55% year-over-year, putting us in a much stronger footing, and this improvement remain a core focus in 2025, where we again do expect profitability in Q4 and strong year-over-year improvements.

In addition, for 2025, we expect to see a significant reduction in cash usage. And we also strengthened our balance sheet by securing a new debt facility in the fourth quarter of 2025, giving us more flexibility to support and accelerate our commercial plans.

As the leader in the largest and most unpenetrated segment of the foot and ankle market, we have now transformed our company from a single technology player to a diversified and comprehensive 3D bunion solutions portfolio company. We've seen positive customer response and uptake on our new technologies with strengthening procedure volumes in the back half of 2025, a trend that we expect to continue in 2026 as we continue to gain market share. We have a robust R&D pipeline behind this plus additional drivers we expect to continue to fuel the company's growth in the years to come.

Thank you very much for your time. Appreciate being here. I think we'll now take some time for Q&A.

So you preannounced fourth quarter results earlier this week, so maybe we can start there. Revenues came in at $62.1 million to $62.5 million, which is a little bit ahead of where the Street was. So any color you could share on some of the revenue drivers that drove the results in the quarter and what trends looked like exiting 2025?

Sure. Well, the drivers in Q4, we saw continued robust uptake of our new technologies. Obviously, it's a busy time of the year for bunion surgery, even if it was a little dampened compared to expectations. Our 3 new technologies continued to drive higher adoption from Q3 and into Q4. So we saw good penetration there.

In Q3, we had about 20% of our overall 3,300 surgeons that have used 1 or more of these 3 new technologies. We built upon that in Q4. So we're really pleased with what we saw there. And it was just good execution. It was right where we thought it would -- well, where we thought it would land, where we communicated, and we're pleased with it, and we'll continue to build on that for 2026.

Maybe we can talk a little bit more about underlying foot and ankle market trends. There was some softness over the course of 2025. We heard some of your peers say that they saw trends improving around the time of the third quarter earnings call. So how did that look exiting 2025? I know it's typically a seasonally stronger quarter for you, but how have demand trends looked compared to years past?

So during 2025, we saw variability in patient scheduling, a little softer patient demand here overall. And Q4 is always our largest volume quarter. So we didn't see the lift that we would expect to see going into September and October, and that kind of carried through into Q4. That said, we're pleased with seeing the procedure volumes increase we had. We had mid-single-digit procedure volume growth in Q3, and we did a little better on the procedure volume growth rate in Q4, but still in that mid-single-digit range.

But as we head into 2025, it's one of those variables that we're watching and how the patients will respond, macroeconomic environment, consumer sentiment, some of these things are playing into the mix. Yes, other companies commented on softness in either certain segments of the foot and ankle market during 2025 or the overall market. And we think there was a patient dynamic at play in terms of their decisions to ultimately undergo surgery during that year.

2026 is a big year for you as you focus or as you shift from being focused on purely Lapiplasty to adding 2 pretty meaningful new products to the portfolio. So can you share some of your early insights and learnings from the rollouts of Nanoplasty and Percuplasty? What's physician feedback been like? And how has uptake trended relative to your expectations?

Yes. The response to these 3 new technologies, we have 2 technologies targeting the largest segment of the bunion market, 70% of the bunions being. And this emerging trend of MIS, it's early on in terms of enabling surgeons to get great results. So as we expose surgeons to these new MIS technologies in our training labs, they were very excited about what our instrumented technology can do for them. They're used to really struggling with these procedures or having high variability.

They came in -- they saw in the lab a procedure that they can take and incorporate into their practice and instead of having a 40 case learning curve, have 2 or 3 cases and they really got this instrumented jig system down. That's what we're so great at. That's what we did with Lapiplasty. It was so successful is take this challenging procedure and give instrumentation that allows them to do it reproducibly over and over again. So we saw that play out.

And to the extent there were maybe some decisions along the way where a surgeon decided to treat a more moderate bunion instead of a Lapiplasty, they want to try a Nanoplasty. It was new. It was from Treace Medical. They've seen it. So we had some of that during the rollout, too. But the reaction has been great.

The SpeedMTP is another category we haven't played in, in the past. It's a high-volume procedure performed by foot and ankle surgeons, MTP fusion. Treace is now a player in that space. We've leveraged our differentiated SpeedPlate fixation technology and instrumentation to make a really, really great system, and we're converting competitors in that space today, and the sales force is having a great time with them. So those 3 technologies, we're having great results. Surgeons are responding in a very positive way, and we'll continue to drive that really hard during 2026.

So with the addition of these 2 new products, it really rounds out the portfolio and puts you on more equal footing with some of your larger peers that have had larger bags of ortho products to sell. So where have you been seeing demand coming from? Is it largely just like conversion from Lapiplasty to Nanoplasty and Percuplasty within existing accounts? Or are you seeing wins in entirely new accounts and switches from competitive products?

Yes, we're seeing both. Our 3,300 surgeon customers, on average, we have 25% of their cases with Lapiplasty. So we're going in there, and we're filling these gaps. We didn't get MTP fusions before. Now we're getting MTP fusions from our customers. We didn't get their osteotomies before. Now we're winning some of their osteotomy business with these MIS technologies.

And we're bringing in a lot of new surgeons into the funnel that want to do MIS that they're looking at the different companies and what they offer, and they're looking at what Treace offers and trying it in the lab and they're saying, that's the one I want to use. So we're kind of winning on both fronts, introducing new surgeons into Treace. And once they start using one of our MIS products, they get open to using some other products. And we've seen some of these new surgeons come in to Treace using MIS, adopting our SpeedMTP, and then using Lapiplasty for their Lapidus cases. Every surgeon needs to do Lapidus one time or another and for a certain range of their patients.

So as we bring more surgeons into the fold using this broad portfolio, it gives us an open door to address all their procedures for the first time with procedures that are all best-in-class in each of their categories.

Despite the growing preference for MIS osteotomy, Lapiplasty is still a really great product. So how do you see Nanoplasty, Percuplasty, Lapiplasty like fitting into the portfolio? Like what role does each of them fill? And how should we think about the mix of your business looking over time?

Yes. A lot of surgeons have their own algorithms and from their training programs, we have a lot of surgeons in our 3,300 customer base that just won't do an osteotomy. They'll do a Micro-Lapiplasty, they'll do something minimally invasive maybe on the Lapiplasty or Lapidus side. So some of them have an algorithm that says, most of my patients are going to be treated with a Lapidus procedure. Other surgeons, most I'd like to do with an osteotomy and avoid Lapidus where I can.

So having this bag allows us to sort of fit their own mental and training algorithms and let them choose which of our technologies they want to apply to their patients. So we think that puts us in a really strong position.

Correct me if I'm wrong, but I think the market historically has been 70% or so osteotomy and the balance Lapidus. Is there any reason that at least on a volume basis, your business won't look similar?

Today, it is -- that's a possibility down the road. We need to see how that will play out. Again, you have certain preferences within our surgeon base towards what concentration of Lapidus technology they're going to use on their patients and then you have that other end that's more osteotomy biased. So it could shift a bit over time, but we'll just have to see how that plays out.

The great news is these are good ASP products. They're winning in their spaces. They're getting great reviews from our customers. Our sales force is very excited about these technologies. We're seeing a lot of highly experienced reps from other companies now that Treace has this broad bag wanting to come join Treace. So that's a great opportunity for us to continue to build that sales team strength over time and bring in new customers.

Maybe we could dive a bit deeper into each of the key levers of the revenue model: surgeon adds, price and volume. How should we think about the implications of these new products on price? Historically, you had been seeing nice consistent increases in price year-over-year as you've added more products to the portfolio. So to what extent can additions of ancillary products offset the mix headwinds from the MIS osteotomy products? And how do we think about ASP on a blended basis?

Mark, do you want to jump in?

Yes. So there's -- as John showed in the deck, there's a lot of complementary industrial products, and we continue to release those. There are a lot that we continue to release. And these are sterile instruments that are used, single use in a Lapiplasty case or other types of procedural cases. So that's always helpful. There are items that are designed to assist the surgeon and make the technique, the surgery a little quicker. So we'll continue to do that and add.

So when we think about overall, though, we are seeing a trend that there are lower ASPs for some of these minimally invasive procedures versus the ASPs or the revenue that we're generating per case for Lapiplasty. So there is a difference. It is lower. So overall, it will probably bring down the average for the company.

But what we're seeing is, and John mentioned it, that we're seeing a nice uptick in our case volumes. So we believe that we can attract more surgeons and more of their cases. Specifically, when we think about that from a case volume perspective, we've talked over the last few years that on average, we're getting only 1 in 4 or about 25% of our surgeons' cases. Now we really have the opportunity to really push into that other 75% that we haven't really been successful in because we just didn't have those products. And so we really think that, that case volume is really going to drive and really help that overall positioning from a revenue perspective.

But as you mentioned in your question that these other products do have lower ASPs. But we're getting the cases that we didn't get in the past. So for example, the MTP cases. Those are cases where patients come in, they have some kind of bunion, but the surgeon says, hey, I can't do a Lapiplasty or a Lapidus or I really can't do an osteotomy, I need to do something else." Well, now we've got a procedure there. So that's an incremental case that we can pick up that's going to help our overall revenue.

Yes. You had a pretty meaningful bump in reimbursement last year. To what extent does that create any cushion for price? And what sort of impact did you see that have on uptake?

Yes, good question. When that happened, we were a little cautious in our commentary. I think as you will recall on that in terms of what type of tailwind that might create and that we need to watch it a little bit. A lot of our procedures in the hospital outpatient setting because other procedures are done along with the Lapiplasty we're already at that elevated level. The ASC was a big, big change kind of going up 100%.

So at the end of the day, it's a decision at the facility level, whether they're going to use a higher-end technology or not. We did -- we have heard about around the edges, some use of SpeedPlate technology maybe in ASCs a little bit more, but the material impact wasn't really there. The way we view it, though, it's the big win is for the patient because more patients now have an opportunity to get their Lapiplasty or high-end bunion procedure done in an ASC setting, which is definitely a lot more patient friendly. I think all of us would admit than maybe going to a hospital. So that's kind of the way we see it.

You talked about the big potential with these new products really being the tailwinds to volume. So maybe we could dig a little bit deeper into that. How should we be thinking about volume growth from here given you're going from targeting just 1/3 of the bunion procedure TAM to tripling that essentially. So do you think we can see an inflection in volume growth from here?

I'd say that's certainly our aspiration, our goal. We'd like to build upon that, but we also want to make sure we're measured in how that can translate in 2026. We're still dissecting data from Q4, as you can imagine. And looking at the user trends and the mix trends and what segments were driving the volume. And -- but yes, we aspire to really trying to ramp that procedure volume growth as high and as quickly as we can.

And that's absolutely what our commercial team is focused on. They've done extremely well. Think about what -- as a company, what we've been able to do primarily as a single product company and to get and to drive nearly 1/3 of all the surgeons in the U.S. using that technology. And so that's what the commercial organization is focused on is saying we can go to our surgeon customers and say, look, we have and what's shown here on the screen, we have all these solutions for you.

We can be agnostic and we can go to our surgeon customers and say, what's best for your patient. And we believe that we absolutely can pick up incremental volume as a result of that. So that's what we're focused on this year. The first place where we're going to start is looking at our large surgeon customer base and continue to expand on that volume. And then we're going to pick up additional surgeon customers as well. But that's the aspiration. That's the goal. That's the focus for this year.

Just on the topic of like surgeon adds, that's the last lever of the model. How much of a focus is expanding the surgeon base versus going deeper into existing ones? And where do you stand in penetrating the overall surgeon opportunity?

Maybe I'll start with that. So I think given the priorities, one, we're really proud that we have 1 in 3 surgeons in the U.S. that are using Lapiplasty and Treace products. So that's a great place to start. It's so much easier to work with and introduce new products to your existing customer surgeon base. And so that's going to be our primary focus.

With that said, these new procedures -- these new products allow us to approach surgeons that maybe they're more osteotomy biased. Maybe they have a bias more towards MTPs or something else that we haven't offered previously. So we're going to continue to add new surgeons, but I think the primary focus is to really offer and get more of our surgeon base using more of our broad portfolio.

There's a lot of moving pieces this year. They're moving in different directions. I know you haven't guided, not expecting you to, but how should we interpret what all of this means for growth this year?

Yes. For growth this year, we've been talking about in Q3 of last year, Q4 of last year, this mid-single-digit case volume growth. We believe that, that case volume growth will continue into 2026. And we're working through with our commercial organization and with our surgeon customers, what that mix is ultimately going to be. You mentioned that, that mix is shifting this year.

But we think overall that it's going to be additive because of our new products, so we will drive that commercial volume and success, that case volume. And so that's what's going to -- we believe will continue throughout this year. And it's going to come and we believe that it can be in all of these categories of our products. The MIS is just beginning. We believe that's going to be a strong place for us and SpeedMTP as well is going to be strong.

John, in your presentation, you talked about adding on to the sales force. On the third quarter call, you also talked about using distributors in certain markets to launch these new products. So maybe we could dig into your commercial organization a bit more. What does the direct versus distribution strategy look like from here? And any implications in terms of what that means on like price and margins going forward.

Sure. Great question. We started the company using 100% independent sales agent model, and we evolved that over time. And at the IPO, we took the opportunity to really build out the direct sales force, ramp that into the high 70s to 80% of our revenue mix, and we're around [ 70% ]. 3/4 of our revenue coming from the direct channel today. There's just certain geographies and areas and expertise within the independent sales network that makes sense. And we continue to partner with those groups, and they've proven they can drive the business, and we'll continue to have that mix and blend within our channel. But predominantly, that mid-70s type of direct sales mix is kind of the right blend for us, we believe.

And we've already targeted some additional areas and territories throughout the U.S. where we can add some of our direct sales reps in those territories. So we'll continue to add this year in targeted areas where we believe that we can gain more volume.

We've talked a lot about MIS osteotomy. Maybe we could talk about some of the other new products that you're rolling out. You talked about Lapiplasty Lightning. So maybe we can start there. Can you remind us what exactly makes Lapiplasty Lightning different? And how should we be thinking about the impact that this has on Lapiplasty? I know there's a big shift to MIS osteotomy. You had previously talked about Lapiplasty really climbing up there in terms of penetration. And so do you think that Lightning is something that could reinvigorate growth in this portion of the business?

We certainly do. We're leaders in this space. We're the lead innovators in this space, and we're committed to having the best technology. We want to be the best technologies on all fronts of ways to treat the bunion. And Lightning is pretty exciting in that it's a culmination of years of observation and learnings, and we have a design team that's really dialed into how do we make this procedure quicker, easier, give you more control over the ability to move the bone in 3 planes. And then how do you improve upon the fixation options.

So speed -- I'm sorry, Lapiplasty Lightning instrumentation, it reduces steps for a faster procedure and gives surgeons more control over how they can move the bones and then they can put on their implants faster. And we have an implant technology that's going to, we believe, appeal to a new surgeon audience as well. Some surgeons like to use a certain type of fixation construct, and we don't have that fixation construct today. So between the improvements in the instrumentation and the new implant technology, we think this can appeal to a broader surgeon audience as well.

Is it fair to assume that this comes at a premium to -- is it mini? Was that the last version of Lapiplasty?

Micro.

Micro. Okay.

Well, the implants are the sale, the item we sell. So it's going to be a similar sale. But the instrumentation, it's just going to demonstrate our commitment and give our surgeons, our current users that next generation to make them even better and better and more proficient and then appeal to a new surgeon audience as well.

Maybe we can shift gears a little bit, talk about the P&L. You were really close to adjusted EBITDA profitability, and you still aren't that far off. But how should we think about what these like strategic changes and product changes, the implications that they have in terms of profitability and like how you think about balancing, reinvigorating growth and driving profitability at this point?

Yes. So first and foremost, I think it's important to realize that all of these new products still have the great gross margins that we have and that we've historically had with Lapiplasty. So all these new products are not going to limit that profitability at that level. So that's great news. We will continue to have high 70%, close to 80% gross margins across the business, across all these product lines, which is fantastic.

As we think about profitability, we definitely made an encouraging improvement in bottom line adjusted EBITDA in 2025 versus 2024. We haven't given the final results there, but we guided back in November, and we guided to strong improvements in 2025. So we'll have more to talk about how the full year ended a little bit later.

But as we think about 2026, there's going to be some natural ways where we will have some leverage on the P&L. We're very focused on improving profitability as well as reducing our cash burn in 2026. We made strong improvements in 2025, again, from what we talked about on our last earnings call, at least 30-plus percent improvements in adjusted EBITDA and 40% to 45% improvements in reducing our cash used in 2025 versus the prior year.

So there's new opportunities that we have in 2026. Some of them we've already put in motion in 2025, and some of the changes that we made in our overall cost structure. There's some things that we did in 2025 that will -- we won't need to repeat in 2026. So it's going to be some natural leverage. And that's -- as we introduce and rolled out all these new products, we definitely needed to have the capital for all the instrumentation. So now we've got all that. So we will -- that will be an opportunity that we can -- we won't need to invest as much into our surgical instrumentation in 2026. So that's going to be beneficial in our cash usage.

And then there's some of the medical education. We leaned in really heavy in 2025 to really get the word out on all these new products that are coming. Now we are still very focused on medical education. We think that's a core value to the company and what we do for surgeons. We believe that it's incredibly useful and essential for their success. So we will continue to educate surgeons, but not at the same level. So there's going to be some natural benefits that we're going to have in 2026 versus '25.

With that, we're almost out of time. So maybe we can wrap it up there. Thank you, John and Mark, for being here, and thanks, everyone, for listening in.

Thank you.

Thank you.

Good afternoon, everyone, or I guess it's still morning a little bit, but welcome to the UBS Healthcare Conference Day 1, and happy to introduce Treace Medical. With us here today, we have John Treace, CEO; and Mark Hair, CFO. I'm Priya Sachdeva, one of the med tech analysts here at UBS, and looking forward to a great conversation with you guys.

Sounds great. Thanks, Priya. Great to be here in this beautiful location. We love your meetings. They're always in great spots.

Nice spots and not too far for you guys at least. But yes, maybe just to kick off, we can give a little bit of an overview of Treace and your guys' product offering.

Sure. Treace Medical was founded and developed the Lapiplasty Bunion Correction System. We've been advancing that technology for the past 10 years. We've achieved over $200 million in annual revenue based largely on that platform technology. And now we're in a transformative phase where we're developing new solutions for different types of abundant indications, and we can talk a little bit more about that.

Yes. Maybe a good segue from there is just talking about current portfolio and some of your new innovations and offerings, and how that's filling the gap for surgeons versus products on the market today?

Sure. And we, over the past several years, started looking at bunions and looking at sort of 4 different categories of bunions, and diving deep into those with our surgeon design team and our engineers and developing solutions that could put more focus on those 4 different areas.

If you think about Lapiplasty's position in the market, it was this broadly versatile technology that could apply to a wide range of Bunion deformities. And what we found over time was many surgeons would adopt that technology for the vast majority of their bunions. Others would adopt it for a partial or a portion of their bunions. And if you look at our 3,100 surgeon customers, the average user uses Lapiplasty on about 25% of their bunions, we estimate. So that means there's 75% of bunions we're not getting to with our current solutions. So the 4 categories of bunions that we looked at, we've got the mild to moderate bunions. We've got the moderate or more severe bunions. We have bunions that have a mid-foot deformity component to them. And then we have bunions with great toe joint arthritis.

So the goal was how do we get after faster penetration into those 4 distinct market areas. We knew Lapiplasty could serve the broad group, but most surgeons kind of decided to put Lapiplasty more towards the severe side of bunions. And so we said, let's get after the more mild to moderate bunions more aggressively. So to do that, we designed 2 minimally invasive osteotomy solutions. These are best-in-class instrumented systems that can be quickly adopted in the surgeon's practice. And it solves a big challenge with current minimally invasive osteotomy solutions. Osteotomies are 70% of the procedure market today. And so it's the largest volume segment that we're not diving deep into. So surgeons struggle with minimally invasive osteotomies today. We developed 2 great solutions for this market. Then there's the part of the market that's the big toe fusion market. The big toe Fusion market represents about 20% of overall bunions, we estimate. We've had no product solution for that category. Now we do with our SpeedMTP great toe Fusion System.

So as we take a step back, now we're well equipped to go after all 4 categories with targeted specialized solutions and dive deeper in the 75% of cases that we're not getting to today.

Yes. I want to jump in and kind of talk about how we drive that penetration higher and how these products are bringing a new offering and all the innovations. But I think before we get there, you guys did report earnings last week. Would love to just maybe level set kind of the dynamics you saw in the quarter that prompted the guidance lower and things like that. Just help us parse through all those dynamics and where are you from here?

Sure. We were a little surprised as we got into the quarter seeing continued softness in demand for Lapiplasty, and really, really the driver of that's just more interest around these minimally invasive osteotomy solutions. So as we went through the quarter, we saw that shifting. And we also had an underlying softness in the relative patient demand market. So when you cast that forward, we saw it through the summer, we saw it through September. We saw it in October. And by October, we had to decide we're just not -- we're not tracking at the same rate. So we had to make an adjustment and take down our number for Q4.

Yes. I mean I know it's hard to kind of take out that crystal ball and think about market sentiment and where to from here. But if you could maybe compare to historical periods of some type of market weakness or a change in patient appetite, what do we need to see to kind of move forward? And how are the new product offerings kind of helping us to also move forward from that?

Yes. I think we're seeing some really good underlying signs of vitality. Like in Q3, we had more mid-single-digit bunion procedure volume growth. That was great to see despite relatively flat revenue growth if you exclude that stocking distributor stocking order we had in the quarter. That was encouraging, and we continue to see that volume increasing as we go through October and into Q4.

Yes. And I know that there's a little bit of an ASP dynamic that's kind of offsetting that growth, right? So maybe just trying to understand at what point do we reach -- when do the curves cross to start moving beyond that headwind? And maybe walk us through that because mid-single-digit growth is very encouraging, but...

Yes, it is. And we're learning through Q4. We're going to need to get through this quarter and see how this mix shift occurs. The newer procedures and products are at a lower average selling price than our Lapiplasty. So that's putting that dampening on it that I mentioned that we continue to see during Q3 and into early Q4. So we're going to need to see that play out. But today, we have 20% of our current customer base that's adopted one or more of our new technologies. So we're seeing traction with our existing base of surgeons. It's just now we want to train these surgeons, get them more up to speed on our new products and get more of them using 1, 2 or 3 of our new technologies into their practice, so we can go from that 25% to 50% of their practice over time or more. That's what we're focused on doing.

Yes. Can we talk about utilization maybe between those -- maybe the newer physicians that are adopting versus existing accounts that are now getting new products? Like what are we seeing from a difference in growth within these 2 subsegments of your user base?

Well, we're seeing a couple of things. We've got the existing surgeons that are adopting new procedures, which is great to see. We're also seeing new surgeons come on board to Treace Medical because the [ beauty ] traditionally is a Lapidus fusion company, and they weren't really that much into Lapidus Fusion. Now we have these new bunion technologies that are more appealing to them. So we are bringing on some of those into the fold. They're adopting our new products, and we're finding some of them are actually adopting our legacy Lapiplasty and Adductoplasty products, too. They're just not adopting those at a rate that's fast enough to make up for the softness on the other side with Lapiplasty right now.

Got it. When you think about a high-volume account, what does that look like from a growth perspective? And maybe early feedback that you're hearing from these accounts that have high utilization?

It's still a little too early to tell. We're watching the mix shift in these procedures. And we certainly know today, we have surgeon groups that are doing more volume with us than they were before. But we need to let this play out another quarter. Q3 was our first quarter of having this full portfolio fully available. And we learned something there, and we're learning more in Q4, and we'll have better details around that as we go forward.

Got it. Maybe just at a high level, like what are surgeons saying today that they're using new products? What are we hearing from a benefit perspective? And I think another dynamic that's interesting is it seems like from our checks, like training is a little bit easier, too, with the new product offering. So if we could talk about that and what that's contributing to growth as well.

Yes. We've had very strong demand for our Bunion Masters training events. This is where the surgeons get introduced to not only our existing, but the new products as well. And the response of these products is absolutely fantastic. Surgeons are recognizing how easy they are to use relative to traditional minimally invasive osteotomy solutions. Traditional minimally invasive osteotomy solutions can take 40 to 50 cases to get up to speed with. We've got systems that they can go do in a lab and go do a couple or 3 or 4 cases and be up the learning curve and comfortable doing it in their practice. So the response we're getting from surgeons and the uptake we're getting on these new products is great. It just needs to happen faster so that we can overcome the ASP difference between a Lapiplasty case and these new products.

What drives that, the time frame? Or how do we get over the barriers that are still existing today from a market perspective and then from a Treace's perspective?

I think from a market perspective, we continue to train these surgeons and get them using these new products. We reinforce our sales team, and continue to build upon that. And then we also launch additional products that can tap other adjacencies and add procedural volume. We've got a couple of nice new products coming out next year. We've got a new compression screw system that's going to give our sales reps a more fortified portfolio around the surgeons. And then we have Lapiplasty Lightning and new forms of our SpeedPlate technology that will continue to feed and fuel that growth around that surgeon as a customer.

Got it. When you think about the competitive moat for Treace, I mean you have all these great innovations coming to market next year. How do we think about Treace versus competition today? And how is the sales force kind of utilizing that when they're on the ground?

Yes. It's -- we obviously have a pretty strong patent position, broad and deep in our Lapiplasty technology. We continue to file patents on our other technologies. We are enforcing our patents. We've been actively doing that out there. But our big advantage in our best defense is a really strong offense, and it's our rapid innovation. We don't pick a lot of products to get involved in. We pick a few, but the few we pick, we design them really, really well so that surgeons will really appreciate them. And then we spend time training them properly on them. So they feel confident with them, and we send them the clinical specialists for their first cases, and then they're handed off to a sales rep that's highly experienced in these products. So what we're known for is really caring about the surgeons experience and outcomes once they embrace our products. And I think if we continue to do that and be faster and better, that's going to play well for us long term.

Got it. Thinking about your guidance for next -- for this quarter, just thinking about as we head into 2026. I know not asking for guidance, I would love if you could give it to us today, but just the run rate in terms of a market perspective, how should we be thinking about what upside to 2026 could look like or maybe the drivers and tailwinds of potential upside to where -- the Street is in terms of numbers today?

And maybe I'll start and John can add a little bit to it. I think it's a great question, and we talked a little bit about it last week on our call that as we were watching and observing this nice uptake on our new products, we did have case volume increases, and that's what drives the underlying business. So I think that is strong, and we're very encouraged by that.

Some of that momentum that we saw in third quarter is -- it's early days in Q4, but we saw that same momentum coming into Q4 and in some respects, even increasing. So we want to feel that. We believe that our surgeons are, in fact, adopting these new products. And we're also -- just like John said, we're bringing in new surgeons that really hadn't been focused as Treace Medical as their solution to bunion products. So we're bringing in new surgeons. We're providing new products to our existing surgeon base. And so we need to get through this quarter as we learn about this mix dynamic. But at least what we view as very fundamental momentum in the overall penetration. And maybe for a short period of time, we're going to have this penetration growth rate outpace our revenue growth rate because of this mix shift, and we're selling some new products at lower prices.

So right now, we're not really talking about 2026. It's -- we've had the full complement of all of our expanded portfolio really started in July. So we're 4, 5 months into it. We're learning a lot in Q3. We're learning a lot more in Q4. This is our largest volume quarter out of every year is in Q4. So we'll be a lot more informed as we come out of the quarter. And then when we have the fourth quarter earnings call, we'll be better prepared to talk about how we see the dynamics in '26.

Understood. I want to maybe pick apart that penetration dynamic in the total addressable market. How is that shifting with -- in terms of the TAM with these new product offerings? And maybe give us a refresher on what the total addressable market is and penetration today and where it can go?

Yes. We talked about the 1.1 million symptomatic surgical candidates as the base and 450,000 procedures being performed, a $5 billion U.S. TAM, $2.3 billion on the procedures. We're going to be learning. We're not saying the TAM has shifted at this point in time. We base that off of an average $5,000 selling price at a certain point in time, and we're going to see how this mix shifts. If we need to update the TAM based on that as we go into next year, we will. But for now, we see it pretty stable.

It's a big market. These patients aren't going away. They have a chance to decide if they want to have their surgery within a given year or wait until the next year and try to delay it a little bit, and we saw some of that this year. And it was surprisingly chronic throughout the year, and it lingered into Q4 as well, and it was one of the reasons that we had to take our number down.

So the market is still there. The patient base is still there. 4.5 million Americans, we estimate still seek medical attention for their bunion pain every year. 450,000, we estimate are getting surgery. But the market is not going away. We view Lapidus as about 30% of that overall market. And our penetration in that market is pretty strong. We're probably the lead share player in the Lapidus market, a single company player. So Lapidus has strong preferences from some surgeons, and there are defined indications where every surgeon needs to continue to do a Lapidus. And that's why we're going to continue to invest with Lapiplasty Lightning and other innovations in that space. It's where we started from. We're the lead innovator there, and we're going to continue to address that market.

Yes. I mean I think it's interesting. The patients are still there, right? And so what are you seeing from like is it a delay because of financial incentives like in this era of the big beautiful bill? Are people just kind of a wait and see? Do physicians have a backlog? Trying to understand the appetite here and how that shifts.

Yes. What we saw this year was surgeons were telling us their patients are moving their scheduling. They're not wanting to have the surgery earlier in the year, and they were pushing out. Usually, that means they compress up really hard into Q4. But as we got into September, where we would normally see a lift, we didn't see the lift we're looking for. And as we had in October, we didn't see a typical lift in October. And we think that tells us that patients were continuing to defer into Q4, and that was not an expectation that we had.

We did do a large cohort survey of surgeons, and they were telling us, and this was done in October that year-to-date through October, the average of that group thought their procedure volumes were down 7%. We did a similar survey earlier in the year, and they talked about more optimism. So more optimism going forward, but more reality when they look back. So I think there's something there with consumer sentiment this year. It's been protracted. There's been a lot of anxiety on the consumer. And I think that plays into along with higher deductible insurance plans. I think that plays into how patients are deciding to have their surgery. For an elective deferrable bunion procedure, we track that patient demographic. It's a very narrow defined patient demographic. And so what other companies are seeing in foot and ankle broadly or orthopedics broadly don't necessarily apply to that demographic.

Understood. Yes. And I want to think about parsing out outside of these headwinds, some of the positive tailwinds into next year. And so I think about the new product offerings and a more comprehensive toolkit for your sales reps. Another thing that's a common trend across med tech right now is the shift to ASC. So understanding how that could potentially impact your business and what that could mean from a growth perspective. Understanding that there might be some delay from a patient sentiment perspective, but should that normalize, what does that impact look like for you guys?

Yes. We're -- bunions are elective day surgery. They're not inpatient. So we do surgeries in the hospital outpatient setting, and we do them in the ASCs. Our product configuration is actually really well designed for the ASC. We have sterile implant kits and very small low-cost instrumentation trays, and that works very, very well. We have a menu of different price point fixation kits and systems, so we can accommodate the different needs there.

And last but not least, the reimbursement in the ASC for the Lapidus Fusion code basically doubled in the ASC setting as of January 1. So we were asked, is that going to be a big tailwind for you guys? Are you going to see a big strong uptake in Lapiplasty because of that? We were reluctant to give it too much bullishness at the time. But I think the big win is for the patient because going to a hospital is a little different feel than going to some of these ASCs that feel a little bit more like a spot and warm and comfortable for the patient. So I think the big win is for the patient to be able to get a Lapiplasty procedure there and more potential to use better technology in that ASC.

Do you have a percentage of how many procedures are being done in the ASC setting today?

We haven't broken that out, but we have said the -- more than the majority is the hospital outpatient. Now there are some hospital-owned freestanding centers. Some are ASCs that are hospital majority owned. And then there's just the pure private ASCs. So...

From a sales rep perspective, is there a different approach to the ASC setting versus traditional hospital setting? Or is there anything on that side that you guys are doing to kind of drive adoption in that setting?

We're definitely -- we have strategies to continue to move the ball forward in the ASC. Definitely, I think most companies do these days. And we continue to work that. We haven't seen a difference in our sales reps per se, but our national accounts team and others that work with them, they're equipped and working on those.

And a lot of us -- the strategy with the sales rep is to be really close to these surgeons. And surgeons commonly are performing these cases at 1, 2, 3, 4 or more facilities. So to the extent they appreciate and understand all the value that our products are offering, it's kind of independent of the facility where they're doing the surgery. We believe that those relationships and our products performance will just have that surgeon bring a Treace rep kind of to wherever they happen to go. And it may be more in the ASC setting. We haven't seen a dramatic change in that. We've always had some of the ASC. We've had, like John said, more in the hospital setting, but we just want to be that one-stop shop. If it's going to be a bunion case, tell me where the procedure is going to be performed, and we'll be there ready for you.

Got it. Yes. From a sales force perspective, do you guys feel like you're at a place confident that this is a sales force that will get you to the growth that you're looking for? Is there expansion on the horizon? Just trying to think about where we are at sales rep capacity today.

Yes. We're always looking for opportunities there, Priya. And I think the thing we have noticed is since we came out with this broader platform of best-in-class bunion technologies, we've been getting a lot of inbound calls from highly experienced tenured foot and ankle sales reps from other companies across the space, and they see the opportunity here. They know Treace is known for excellence in bunion surgery, and they see the breadth opening up. It's not just one product anymore. And so we're talking to them and some we're able to bring on, some are not, and we'll keep doing so.

That sounds. I mean, should I become a foot and ankle sales rep? But that sounds great.

We can help you with that if that's your goal. We can help you.

Maybe a few for you, Mark. Just thinking about the new product offering and contribution to margin. What should we be looking for over the next years as it becomes more of a percentage of what you're selling?

Yes. I think history would show that even as we've been introducing these new products, they're really at the same gross margin level. So they're very healthy gross margins. We anticipate seeing that. We've been in the high 70% gross margins. We anticipate being there. That's our goal. That's our objective. Even with introducing these new products and often what happens is when you begin introducing them, you just don't have the economies of scale initially. So third quarter, we still have very comparable gross margins in the second quarter, and we're anticipating a slight increase in the gross margin as we come into the fourth quarter as well.

So over time, we've got some great people at the company that are looking for opportunities to decrease the costs. That's always part of our DNA is to ensure that we're getting improved costs in our products and cost reductions. And so we'll continue to look for that. And as we have more economies of scale that we'll be able to ensure that we have these strong gross margins going forward. So these new products are not a headwind to us from a gross margin perspective.

Okay. When you think about as you start to scale, what could the potential contribution look like? Or what's maybe a peak gross margin that we could look forward to?

So I think we haven't given a lot of information about that, but I -- we believe that we can and should be in the high 70% gross margin range. And these new products are in no way a headwind to that. So we continue to have very innovative products. They're complementary. We design them to have strong gross margins, and that's going to continue to be our plan and outlook going forward. And until -- if there are some changes, we don't see them yet, but that's the objective.

Got it. I think you guys mentioned on last week that the new guidance includes cash burn reduction. And can you just talk about some of those operational levers that you're pulling to kind of reduce the cost there and how to think about that going forward as well?

Yes. So I think there's a couple of things. One is we've talked about this year that we've been really focused on the strength of our balance sheet, reducing cash burn, and we've done that. So we've talked about having a reduction of about 45% or so, using 45% less cash this year versus last year. And so we've been very proud about that. We think that's the right trend and trajectory. And so throughout the company, we've continued to look, especially this year for ways to reduce costs throughout the organization. We actually reported a restructuring charge in Q3, meaning that we've taken some steps in the third quarter to ensure that our costs are better aligned. And we've taken some steps in the fourth quarter, and we'll continue to look for levers to do that.

So we're focused on driving the top line for all the ways that John has talked about here about with our new product portfolio and the sales reps, all that commercial organization. We're looking for improved profitability, and we're looking for ways to reduce that cash usage as well in 2026.

Yes. Just thinking about path to profitability, of course, it will come as we start to grow the top line. But as we parse through the remainder of the P&L, just thinking about what gets us there and what you would characterize as maybe most important to get towards profitability?

I think the first and foremost is we're looking to drive the top line. We're looking to penetrate into the market and to get stronger relationships with our surgeon customers with this broader portfolio. So I think that's our primary focus. Strengthen Lapiplasty, add these new systems. Secondly, there are ways that we can improve profitability. And so we've started to do that. I think we've made a lot of progress this year compared to last year from an EBITDA perspective, from a cash burn perspective, and there are more levers that we will take and utilize as we go into 2026. So I think that's the way we're thinking about it, drive the top line, improve that profitability throughout the middle of the P&L. And that ultimately is going to reduce the amount of cash that will be required this year or next year, 2026.

Got it. When we think about capital allocation priorities, just maybe give us a quick little refresh on debt paydown versus other opportunities and things like that.

So we've got a great relationship with a lender that we have. We entered into that debt facility back in 2022. We've got a term loan. We've got a revolver. We haven't drawn on anything since 2022. And we'll continue to think about the strength of the balance sheet as we think about that capital allocation. But we talked about last week, and we continue to say that we have strengthen the balance sheet right now to continue to drive the top line and do what we need to do as a company. So we'll continue to evaluate our opportunities along the way, but we feel good about the strength of the balance sheet right now.

And then I might pivot back for a second and think about where we are from a market penetration perspective today and thinking about clinical data that sometimes is helpful in driving broader market penetration across all of health care, right? Thoughts there, is that something that you think is priority in terms of spend going forward to just help drive awareness and adoption? Or is there other areas that you think should be a focus to help drive further penetration?

We've invested pretty heavily in our ALIGN3D study to demonstrate the effectiveness and patient outcomes with Lapiplasty. We just reported 4- and 5-year results on that study. The results speak for themselves. It's a great procedure, and it has great outcomes.

Our newer systems, it is in our DNA to provide clinical outcome support for them. We think it's the right thing to do for the patients, for the doctors and for the company to continue to invest in those. But the big spend, big investment item is kind of behind us, and these are a little more spend light that we have going forward.

One thing we've always done and we're kind of known for is direct-to-consumer advertising and making sure we get the word out to patients, make the patients aware that there are new bunion treatments and new options for them, and we'll continue to modify our approach there and do it in a more efficient and effective way going forward, but still having that as a component to maybe help with the commercial execution.

Just maybe in the last 5 minutes here, I do want to ask, when we think about where the stock is today, just maybe trying to understand maybe some of the disconnects versus share price today and what you think the fundamental growth story of Treace is just to make sure we talk about where you think we don't know where we want it to be, but just think what the biggest disconnect between the Street and investors versus your view today?

Well, it was a disappointing quarter. So I can absolutely understand why we are where we are. And we're going to do things about this. Like we said, we're going to get the ramp-up going with these new products and get the volumes going and get the top line reestablished. We're going to continue to build on our execution on our commercial channel. And then as Mark said, we're going to do the right things on the P&L to make sure we got the right profile going forward. But we'll have to let things develop over time and see where that stock price can go. It's -- we've got to go prove some things. And if we do that well, then that will move along with it.

Yes. I guess in that vein, when you think about the next 12 to 18 months, what are the most exciting opportunities? Or what you guys are most excited about for the Treace story?

I think the most exciting thing is this new portfolio we have, this broader portfolio, these products work so well, and they're getting such a positive reaction from surgeons. Our sales reps enthusiasm is way up. We're seeing the volume growth at really nice levels and continuing there. And we're just getting started with getting into our 3,100 customers and then the opportunity to bring on more new customers and have them use our legacy Lapiplasty and Adductoplasty products, too. And then continuing to launch new additional opportunities to drive more procedure volumes, more adjacent procedure growth and letting the sales force develop along with that and driving it forward. It's a really exciting time despite the numbers and the feeling on the street at the doctor level and the sales force level, commercial team level is very high right now. So I think that's what's got us most excited that we're going to see a real transformation here in Treace Medical from being a one product technology company to playing across a broader range in a very high-volume segment of the market and continuing to drive increased adoption, increased penetration and grow that share so we can become the biggest procedure share player in the bunion space.

Yes. I did just get a question from the line talking about topic du jour over the last few months has been AI and leveraging of AI in healthcare. And I don't know if you guys have any thoughts on broader market implementations of AI that could be a benefit to Treace or anything internally that you guys are working on?

Well, one thing we are doing, and we didn't talk about this technology today, but we have a technology called IntelliGuide, and this is patient-specific instrumentation. So we take a patient CT scan, run it through software manipulations, which incorporate AI, and it kicks out a basically diagnostic, a pre-op plan for that surgeon that they can see what 3-dimensional changes they're going to make in all the bones and then produce an actual cutting guide that is specific to that patient that the doctor can use in surgery and put it on, make their cuts, pull the bones together and everything is corrected the way they want to. So we're using AI there, and we have another project that's going to be an app-based X-ray tool for doctors that lets them calculate the angles and measurements that they need to make to plan their surgery, and that's another area we're using it. Mark, operationally, I think we're not a real AI-heavy company operationally, but...

For the patients and the surgeon solutions, it's really those that we can have a patient-specific diagnostic plan and Cut Guides instrumentation specifically for them developed through this software. I think that's largely where we're focused as well as providing over time, tools to surgeons that they don't -- that can support their decisions in how to treat patients. So it's really those 2 things that what we're doing for the surgeon base and for ultimately our patients so that they can have great outcomes.

That's super cool. I have 10 seconds left. But in terms of incorporation and workflow, like is this something that's easy to implement?

It is. It's easy to implement on the internal R&D side but also workflow for the surgeon. This cuts steps, this saves time. They can do complex mid-foot reconstructions that they were intimidated by. They can do complex bunion fixes and reconstructions that are intimidating saving steps, saving time and increasing the accuracy. And if you're a patient, who doesn't want something that's personalized to them. So we think there's tremendous opportunity with that technology going ahead. We're the only company at this point in time that I'm aware of that has a mid-foot correction and a bunion correction patient-specific solution. And that's pretty exciting.

That's incredible. Sounds very exciting. Well, we went a little bit over, but thank you both so much for being here and for a great conversation today.

Thanks, Priya, for having us.

Good afternoon, everyone, and welcome to our third quarter 2025 earnings conference call. Participating from the company today will be John Treace, Chief Executive Officer; and Mark Hair, Chief Financial Officer. John and Mark will discuss our third quarter financial results and updated 2025 outlook. We'll then host a question-and-answer session following our prepared remarks. Our press release can be found on the Investor Relations section of our website at investors.treace.com.

This call is being recorded and will be archived in the Investors section of our website. Before we begin, we would like to remind you that it is our intent that all forward-looking statements made during today's call will be protected under the Private Securities Litigation Reform Act of 1995. Any statements that relate to expectations or predictions of future events and market trends as well as our estimated results or performance are forward-looking statements.

All forward-looking statements are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. All forward-looking statements are based upon currently available information, and Treace Medical assumes no obligation to update these statements. Accordingly, you should not place undue reliance on these statements. Please refer to our SEC filings, including our Form 10-Q for the third quarter of 2025 filed after the market close today, November 6, and can be found in the Investor Relations section of our website at investors.treace.com for a detailed presentation of risks. With that, I will now turn the call over to John.

Thank you, Trip. Good afternoon, everyone, and thank you for joining us on our third quarter 2025 earnings conference call. In our press release issued this afternoon, we reported third quarter revenues of $50.2 million, representing 11% growth over the third quarter of 2024 and a 49% improvement in adjusted EBITDA versus the prior year.

We also provided some color on the market dynamics we have seen and are continuing to see and our revised outlook for the full year. Before I get into details on our results and outlook, market dynamics and the execution of our strategy, I wanted to take a moment to recognize one of our directors, Richard Mott, who has chosen to retire from our Board for personal reasons. Rich has made significant and valuable contributions to Treace Medical throughout his time as a director, and we appreciate the expertise, insights and guidance that he's provided to the Board and the company. We wish him all the best, and he will no doubt always be a friend here to Treace Medical.

Turning to our performance. Throughout the year, we've discussed what a transformational time this is for Treace Medical as we continue to focus our strategy to evolve our business from a single technology Lapiplasty company to a comprehensive bunion solutions company. Building upon our flagship Lapiplasty and Adductoplasty systems, we have developed and commercialized 3 new bunion correction systems this year. We believe we're now positioned to address virtually 100% of surgeon preferences for bunion correction with 5 best-in-class instrumented systems spanning all 4 classes of bunion deformities.

And these are further bolstered by expanded commercial availability of several other new technologies to broaden our footprint in the foot and ankle market. To support this expanded portfolio of products and extend our customer relationships, we brought on a Chief Commercial Officer earlier this year, and we recently appointed a new Senior Vice President of Sales and have added leading foot and ankle sales experts to our sales team.

We expected our growth to accelerate each quarter through 2025 and particularly in the second half, given our new solutions and ability to target a broader base of surgeons. Successful execution of our strategy helped drive revenue growth in the third quarter. However, we also benefited from sales to a limited number of stocking distributors that we don't expect to recur at the same levels in future quarters. At the same time, we experienced pressure on Lapiplasty volumes as surgeon and patient preferences continue to shift towards minimally invasive osteotomies.

In addition, we're seeing broader economic conditions and softer consumer sentiment leading to a greater number of deferrals of elective bunion procedures. These headwinds have continued early into the fourth quarter, which, as you know, has historically been our strongest period of the year. Given these market dynamics, we are revising our outlook for the full year. We now expect 2025 revenue to be in the range of $211 million to $213 million, representing growth of 1% to 2% compared to full year 2024. As the founder of this company and a large shareholder myself, I'm disappointed in our results and that we are not growing our top line the way we'd anticipated for the year.

I would like to provide some additional color on the drivers of our updated outlook as well as our focus areas as we move forward. First, I'd like to talk to our product portfolio and what we are seeing in surgeon and patient preferences. With our broader portfolio of products, we have now become a one-stop shop for all bunion needs with customers who use Lapiplasty technology already and have established relationships with their Treace sales reps.

Our new bunion technologies have also allowed us to attract a new audience of surgeons, those who currently prefer metatarsal osteotomy procedures for the majority of their bunion cases versus our Lapiplasty solution. With our 2 differentiated 3D MIS osteotomy solutions as well as our new SpeedMTP Great Toe Fusion system, we now have multiple opportunities to appeal to this surgeon audience. We are also seeing interest from some of these new surgeons adopting our flagship Lapiplasty and Adductoplasty solutions as well.

During the third quarter, we experienced mid-single-digit case volume growth versus the prior year. However, case volume growth was still below what we originally anticipated, and it was largely driven by our 3 new bunion systems, which have lower ASPs relative to Lapiplasty. While we believe this volume growth demonstrates that we are capturing a larger relative share of available bunion procedures, our system sales mix is shifting away from Lapiplasty which as a higher ASP system impacts our overall revenue levels.

Further, as we ramp up with our expanded portfolio of products, we are not yet seeing a level of adoption on Lapiplasty from new product surgeons that would offset other pressures on the Lapiplasty line. That said, we continue to believe we can achieve increased adoption over time. Second, we believe in addition to the change in mix, macroeconomic conditions and consumer sentiment are impacting our case volumes. In October, we conducted a survey with a cross-section of our surgeon customers and the responses to date have indicated that on average, their bunion surgical volumes year-to-date through October had decreased approximately 7% compared to the same period last year. This is consistent with what we are hearing from hospitals and surgical centers, which are reporting that outpatient elective surgeries are being deferred, particularly for commercially insured patients and the more elective the procedure, the more likely they are to be pushed out.

Third, I'll touch on the timing-related impacts of our strategy to shift our contractual arrangements with a limited number of distributors. With a new commercial leader and a new product portfolio, we have evaluated our selling strategies and saw an opportunity to enter into stocking relationships with certain key distributors, which we believe better positions us competitively in those markets.

In the third quarter, in particular, we had a greater-than-expected benefit from this change. We recorded approximately $6 million in stocking distributor sales within the quarter, with approximately half of this amount being above our plans as our distributor partners responded positively to the availability of our new products and build inventory ahead of Q4 bunion season.

While we are already seeing replenishment orders from our distributor partners, this pull forward of approximately $3 million in sales creates a headwind for us in Q4 as we do not expect this benefit to recur at the same level. Looking forward, we plan to continue to execute our strategy with a focus on driving continued market share gains, accelerating our top line growth and delivering improved profitability in 2026. To do this, we'll continue to train more of our 3,100-plus current customers on our new systems while also focusing on adding new surgeon customers. In Q3, 1 quarter into launch, over 20% of our surgeon customers have already adopted one or more of our new bunion technologies.

As a technology and innovation leader in the space, we expect we will drive increased adoption of our best-in-class portfolio, tapping into more cases and expanding our procedure volumes with our surgeons. We are already seeing encouraging traction on this front with continued enthusiasm around our new systems and high attendance at our surgeon training events.

Next, with a focus on strengthening our sales team's presence and procedural opportunities with surgeons, we plan to continue to deliver a robust pipeline of new innovations expected to impact 2026. To highlight a few, our new Lapiplasty Lightning platform. This next-generation instrumentation is designed to further increase the precision and speed of the Lapiplasty 3D correction. As a reminder, Lapidus fusion, though lower volume than osteotomy, remains the largest dollar segment in the bunion market today. We have been the pioneers and leaders in this segment, and we are committed to advancing our technology leadership and bolstering our competitive position in this market.

Next, our Percuplasty compression screw system, which incorporates the innovative design features of our MIS Percuplasty screw implants into a new line of compression screw implants. This provides our sales team a new core fixation technology, which complements our SpeedPlate platform. We believe the addition of this new system will further strengthen our sales team's ability to serve more reconstructive procedures throughout the foot and ankle.

And we'll continue to offer new procedure-specific SpeedPlate implants and problem-solving sterile instrument designs, opening up incremental procedure opportunities, serving more procedures and helping our surgeon customers achieve better results. And with new commercial and sales leadership, we plan to continue to build upon the capabilities of our already strong sales team, adding experienced foot and ankle sales professionals with deep knowledge and credibility in the market to deliver increased productivity and impact in 2026 and beyond.

Treace is known for innovation and helping surgeons deliver greater patient outcomes. As we move forward with our growing portfolio of offerings alongside of our Lapiplasty solution, we expect our sales team to be better positioned to more broadly service existing customers and onboard new surgeon customers. Finally, while we navigate this period, we are already taking action to control what we can control with respect to our organizational cost structure and plan to evaluate levers as we move forward. We have a scalable business model and are focused on improving profitability and adjusted EBITDA and reducing our cash burn in 2026. With that, let me now turn the call over to Mark to review our financial performance. Mark?

Thank you, John. Good afternoon, everyone. Revenue in the third quarter was $50.2 million, an increase of $5.1 million or 11% over the prior year period. Growth was mainly driven by an increase in bunion procedure kits sold compared to the prior year. Gross margin was 79.1% in the third quarter of 2025 compared to 80.1% in the third quarter of 2024. Total operating expenses were $55.4 million in the third quarter of 2025, an increase of 8% compared to total operating expenses of $51.3 million in the third quarter of 2024. These increases reflect increased medical education, surgeon training events on our new bunion systems, restructuring charges and increased litigation expense in the quarter compared to the prior year.

Third quarter net loss was $16.3 million or $0.26 per share, an increase in our net loss of 6% compared to a net loss of $15.4 million or $0.25 per share in the third quarter of 2024. Year-to-date, net loss was $49.6 million, a decrease of 10% compared to a net loss of $55.2 million for the same period in 2024. Adjusted EBITDA loss for the third quarter was $2.6 million compared to $5.1 million in the third quarter 2024, a reduction of 49%. This represents significant progress towards our improved profitability goals. Year-to-date, adjusted EBITDA loss was $10.1 million, a decrease of 54% compared to a loss of $22.1 million in the same period last year.

Total liquidity as of September 30, 2025, was $80.6 million, comprised of $57.4 million of cash, cash equivalents and marketable securities and $23.2 million of availability under the revolving loan facility as of September 30, 2025, compared to $90.7 million at the end of Q2. Compared to the prior year, cash usage decreased in the third quarter 2025 and year-to-date by 17% and 58%, respectively.

Before concluding, let me turn to our outlook for full year 2025. As John mentioned, we are revising our full year guidance. We now expect full year 2025 revenue to be in the range of $211 million to $213 million, representing growth of 1% to 2% compared to full year 2024. In addition, we now expect a loss in adjusted EBITDA in the range of $6.5 million to $7.5 million for the full year 2025, reflecting a 32% to 41% improvement over the prior year. We also expect a reduction in cash use of 43% to 47% for the full year 2025 as compared to the full year 2024. Supported by a strong and flexible balance sheet, we believe we are well positioned to continue executing our strategic and growth initiatives for the foreseeable future. I'll now hand it back over to John for some closing remarks.

Thanks, Mark. As we close today, I would like to reiterate that we are not satisfied with our results and that we are not delivering the growth we had initially planned for the year. However, looking ahead, we believe we are strongly positioned to drive market share gains with our new products, innovation pipeline and ability to leverage our dedicated commercial organization. We remain a recognized leader in the market, and our team is focused on increasing our top line growth, improving profitability and delivering value to shareholders. With that, let me now turn the call over to the operator to open the line for your questions.

[Operator Instructions] Our first question comes from the line of Lily Lozada with JPMorgan.

Can you talk a bit more about the softness in the core Lapiplasty business and how you're thinking about that trending from here? If there is a growing preference for MIS osteotomy, do you think this is something that can turn around eventually? What could get this to return to growth if doctor preferences have just been shifting elsewhere?

Lily, John here. Yes, it's a great question. There's definitely a trend towards popularity of minimally invasive osteotomies, yet there is a segment of the market that is the Lapiplasty or Lapidus domain where you have the more significant bunion deformities, where we started in that market and built our business around that. Now we're going to go capture share in the minimally invasive osteotomy market and the MTP fusion market. These are significant volume opportunities for us. And right now, we're getting good market share penetration. We're taking competitive share in that arena, but it's coming at a lower price point.

So the success we're having on the ground and in the surgeons' practices is not translating to the top line. That said, the reason we are doing this is we believe we can capture more customers and bring them into Treace and get them wherever they relegate the Lapiplasty procedure to for the Lapidus segment. Every surgeon has to do Lapidus at some point. There are deformities that are really severe or they're unstable and they have to use a Lapidus product there.

So it's always going to be there. We just have to get more surgeons on board, and we're doing it using our new product technology and then pulling through the Lapiplasty. But to date, the Lapiplasty gains we're getting from those new customers aren't enough to make up for the softness overall that's coming at the trade-off of minimally invasive osteotomies to Lapidus.

Got it. That's helpful. And then I know it's still early, but I'm hoping you can share some thoughts on what this all means for next year. By my math, the guide implies fourth quarter sales down 10% or so or 6% if you adjust for that pull forward that you called out. So is that how we should be thinking about at least the first few quarters of 2026?

Lily, this is Mark. I'll take that one. We're not providing guidance for 2026 at this time, and we plan to provide an update at our fourth quarter earnings call. But with that said, we're navigating a change, this transition that John talked about, and there are a lot of reasons why we are very optimistic. John talked about being the leader in the space, and we're growing case volumes. I think that's a really important point to focus on. Our case volumes increased in Q3 versus the prior year, and we fully anticipate for additional case volumes in Q4 as well.

So we've really been encouraged by the reception of these 3 new bunion systems. And we've got more innovation coming that should impact 2026 as well, of course, our strong commercial organization. So we look forward to providing an update about the progress at our Q4 earnings call.

Our next question comes from the line of Ryan Zimmerman with BTIG.

This is Marie Thibault on for Ryan this evening. I wanted to sort of follow up a little bit on the shift in preferences. I would like to understand -- I know that this has been sort of an ongoing shift, but has there been some sort of acceleration that you've seen away from Lapiplasty? A little curious why this has sort of become a bigger issue here, I guess, in the second half of this year.

And then as part of that, trying to understand sort of a good reaction to the 3 new bunion technologies, very encouraging to hear. Is that something that could be accelerated? Is that a focus for the sales team to sort of drive those products a little faster and partially offset some of the shift away from Lapiplasty?

Yes, Marie, John here. Definitely, there is a trend with the minimally invasive osteotomy and minimally invasive foot surgery. That's why we're here. And we're playing in that market with some really novel technologies, our Percuplasty System, our Nanoplasty System. And then there's another segment of the market that's the great toe fusion, and that can be about 20% of the overall 450,000 bunions. So these are -- osteotomies are 70% of the market procedure-wise, Lapidus is, call it, 30%. We're playing in all of these spaces now, and we're using the tools we have and extracting market share in our minimally invasive procedures while we work on next-generation Lapiplasty, and that will be there as a driver going forward for us as well.

And what was the second part of the question that I missed?

Is the sales force focusing on these new products?

Yes, they are. Yes. Sorry about that, Marie. They absolutely are, and they're using it to drive greater penetration, greater engagement with their surgeons. We're seeing really solid uptick with the new products. And we think that opens the door to present Lapiplasty to more surgeons and our Adductoplasty solution. So they absolutely are, and we're doing really well on that front. And that's why we were talking about the procedure volume growth mid-single digits in Q3 that we expect to continue through Q4. And if we can accelerate that, you do reach that point where the top line starts to grow again, and we'll be back on track.

Okay. Sure. That's really helpful. And then a follow-up here. You mentioned taking action to control what you can control. Any specifics that you can give around where you might be able to find some efficiencies on the P&L, things to kind of offset the little bit of a lower top line?

Yes, this is Mark. So we have been and will continue to take actions to control those things that you said, that we can control. If you look at the financials, we had reported a little somewhat of a restructuring charge already in Q3, where we've looked for opportunities to change -- make some changes in the organization and the cost structure, and we'll continue to evaluate levers as we move forward.

Fortunately, for us, we have a very scalable business. We have high margins, and we're focused on driving the top line and improving profitability. So it's definitely going to be an area of focus for us.

I'm showing no further questions at this time. This does conclude the question-and-answer session. Thank you for your participation in today's conference. This does conclude the call.

I think we've got somebody -- I think we have somebody in the queue.

We have someone now? We are sorry about that. We have Jayna Francis with UBS.

Just wondering, how would you plan to recoup some of those deferred procedures when you're going into next year? And then the second one would be just the puts and takes to 2026 qualitatively since we appreciate you're not giving quantitative guidance?

Jayna, this is John. Yes, the deferred patients into next year, our approach is now we have a lot more ways to get at the patient population and whether that's a little lighter or a little heavier. But going into next year, if we will get a little bit of improvement in consumer sentiment, we continue to get our sales team more familiar and more engaged with these new products as well as Lapiplasty. I think we set ourselves up really nicely to capture a larger share of more patients coming back into the front and having surgery.

[Operator Instructions] All right. I'm showing no further questions at this time. This does conclude the question-and-answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.