Treace Medical (TMCI) Q3 2026 Earnings Call Transcript

DATE

Fri, Nov. 6, 2026

CALL PARTICIPANTS

• Investor Relations - Trip Taylor
• Chief Executive Officer - John T. Treace
• Chief Financial Officer - Mark L. Hair

TAKEAWAYS

• Revenue -- $48.3 million, representing a 4% decrease due to a shifting revenue mix toward lower-priced products and a lower volume of bunion procedure kits sold.
• Adjusted EBITDA -- $300,000, representing a positive inflection compared to a loss of $2.6 million in the prior year period.
• Net Loss -- $12.6 million, or $0.19 per share, reflecting a 23% improvement from the $16.3 million net loss in the third quarter of 2025.
• Revenue Guidance -- $206 million to $210 million, narrowed from the previous range of $204 million to $212 million for the full year 2026.
• Adjusted EBITDA Guidance -- Loss of $1 million to $2 million, an improvement from the previously expected loss of $3 million to $5 million for the full year 2026.
• Gross Margin -- 79.5%, a 40 basis point increase from 79.1% driven by disciplined cost management.
• Total Operating Expenses -- $49.9 million, a 10% reduction resulting from targeted expense management initiatives.
• Cash Usage -- $9.7 million year-to-date, representing a 53% reduction compared to the same period in 2025.
• Cash and Marketable Securities -- $39.8 million, as of Sept. 30, 2026, supplemented by an available credit facility of $115 million.
• Surgeon Adoption Rate -- 45%, representing the portion of Lapiplasty users who have adopted at least one of three new bunion systems, up from 40% in the second quarter.
• Total Addressable Market Expansion -- $700 million, reflecting the projected impact of product introductions scheduled for 2026.
• New Product TAM Contribution -- $400 million, specifically attributed to the collective launch of the SuperBite, HyperPlate, Vitafuse, and CartiBlaster systems.
• Case Volume -- Double-digit growth, driven by market share gains and increased utilization across the comprehensive bunion portfolio.
• Bunion Kit Sales -- Mid-single digit growth when excluding sales to stocking distributors, compared to the third quarter of 2025.
• Surgeon Pull-through -- 30%, representing the portion of surgeons who initially adopted new bunion systems and later utilized Lapiplasty products.
• Procedure Volume Penetration -- 80% or more, of an average surgeon's reconstructive surgery volume can now be addressed by the expanded portfolio, compared to 30% a year ago.
• Product Pipeline -- Q1 2027 commercialization, expected for the Lapiplasty Lightning platform and the TaylorPlasty system for bunionettes.
• Active Surgeon Base -- 3,300 surgeons, representing the current customer foundation as of the end of the third quarter.
• Full-year Cash Usage Outlook -- 50% reduction, expected for the full year 2026 relative to 2025 levels.
• Clinical Evidence -- 5-year Align3D study results, demonstrating low radiographic recurrence rates and significant pain reduction following the Lapiplasty procedure.

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

• Mark L. Hair stated, "The decline was mainly driven by the shift in revenue mix towards lower priced, minimally invasive products and a lower volume of bunion procedure kits sold," regarding the year-over-year revenue contraction.

SUMMARY

Treace Medical Concepts, Inc. (NASDAQ:TMCI) reported a contraction in quarterly revenue while narrowing full-year guidance and improving bottom-line profitability metrics. Management stated that performance was impacted by transition dynamics in the product mix toward lower-priced minimally invasive systems and a reduction in orders from stocking distributors. The company indicated it is expanding its addressable market through a series of product launches targeting midfoot and hindfoot procedures to leverage its existing surgeon customer base. Management expects a return to growth in the fourth quarter, citing seasonal volume increases and the introduction of new fixation and biologic technologies.

• CEO Treace stated, "our 5 year Align3D prospective multicenter study demonstrated positive long term patient outcomes following the lapoplasty procedure including very low radiographic recurrence rates."
• Management reported that the fourth quarter of 2026 represents the first opportunity to address a broader range of elective foot and ankle procedures outside of bunions.
• The Lapiplasty Lightning platform is designed to provide surgeons with a faster procedure and higher accuracy in three-dimensional correction.
• CFO Hair noted that the revenue impact from stocking distributor orders is anticipated to decrease significantly following the third quarter.
• The TaylorPlasty system provides a minimally invasive solution for bunionettes, a deformity management stated affects approximately 5% to 10% of the U.S. adult population.
• Management indicated that many cases involving the SuperBite compression screw system create pull-through opportunities for other products in the expanded portfolio.

INDUSTRY GLOSSARY

• Lapiplasty: A system designed to correct all three dimensions of a bunion deformity while stabilizing the first TMT joint.
• Adductoplasty: A surgical system designed for the correction of metatarsus adductus deformities and osteoarthritis of the midfoot.
• Nanoplasty: A minimally invasive three-dimensional bunion correction system.
• Percuplasty: A percutaneous three-dimensional bunion correction system.
• MTP Fusion: A surgical procedure to fuse the metatarsophalangeal joint at the base of the big toe.
• Bunionette: A painful deformity of the fifth metatarsal bone on the outside of the foot.
• Osteotomy: A surgical procedure where a bone is cut to shorten, lengthen, or change its alignment.

Full Conference Call Transcript

Operator: Thank you for standing by, and welcome to Treace Medical Concepts third quarter 2026 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. You will then hear a message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. Now it is my pleasure to turn the call to Trip Taylor, with Investor Relations. Please go ahead.

Trip Taylor: Good morning, everyone, and welcome to our third quarter 2020 earnings conference call. Participating from the company today will be John T. Treace, Chief Executive Officer and Mark L. Hair, chief financial officer. John and Mark will discuss our third quarter financial results and our 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.trice.com. This call is being recorded and will be archived in the Investor Relations section of our website.

Before we begin, we would like to remind you 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 2000. 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 in 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-Ks and our Form 10 Q for the third quarter of 2026, filed before the market opens today November 6, which can be found in the Investor Relations section of our website at investors.trice.com. For a detailed presentation of risks. With that, I will now turn the call over to John. Thank you, Trip.

John T. Treace: Good morning, everyone, and thank you for joining us on our third quarter 2020 earnings conference call. We are encouraged by our third quarter performance, driven by double digit case volume growth and continued market share gains from increasing adoption of our comprehensive portfolio of best in class bunion systems and our expanding line of new technologies. During the quarter, we continued to advance our strategic priorities with investments in new products creating opportunities to build on the foundation that Lapiplasty has established, as our surgeon customers adopt more of our new products into their practice.

Now we are expanding our presence across a broader range of foot and ankle procedures, We expect the new 2026 product introductions that I will discuss this morning to expand our total addressable market by approximately $700 million This strategy has allowed us to leverage our commercial resources to pursue high impact growth opportunities while maintaining disciplined expense management. We believe this approach positions us to enhance our growth trajectory while improving operating performance over time. With that said, we are narrowing our full year 2026 revenue guidance to be in the range of $206 million to $210 million.

This compares to previous revenue guidance of $204 million to $212 million Importantly, this outlook assumes a return to growth in the fourth quarter through continued procedure volume increases and as we begin to both lap the ASP mix shift dynamics related to our 2025 product launches and benefit from our 2026 product launches. Now taking a closer look at our growth strategy and the progress we are making across our portfolio. We continue to focus on 3 key initiatives: First, leverage our large existing customer base to drive adoption of the 3 new Bunyan systems that we launched in Q3 of 2025.

Second, continue to build upon our leadership position with Lapiplasty, by launching new technologies that can make lapoplasty even more appealing and attract new surgeon users. And third, expand our product and procedure offerings to expand our TAM and grow wallet share. Now turning to our first initiative. Leveraging our existing customer base to drive adoption of our new Bunyan systems. We continue to see a substantial opportunity increase utilization of our newer bunion systems, namely Nanoplasty Percuplasty, and SpeedMTP across our existing customer base. As we have discussed, lapoplasty has established a strong position in the Lapidus fusion segment of the bunion market, but that represents only a portion of the overall bunion procedures performed by our surgeons.

Our Nanoplasty and Percuplasty systems give us differentiated 3 d minimally invasive options in the large volume osteotomy segment of the market. While our SpeedMTP system extends our reach into the attractive MTP fusion market. These technologies were developed to address different surgeon preferences and procedural approaches, allowing us to participate in a significantly larger portion of the overall bunion market than with lapoplasty alone. In fact, we estimate that the 3 new bunion systems we launched in 2025 address the remaining 75% of procedure volumes beyond lapoplasty. Across our existing customer base, we see an opportunity to increase utilization with this broader portfolio and the third quarter represented yet another validation that our strategies are working.

Through the third quarter, approximately 45% of our lapoplasty surgeons used at least 1 of these 3 new bunion systems in their practice. Up from 40% in Q2. We also continue to see approximately 30 percent of surgeons who initially became Treace customers through these new bunion systems now using lapoplasty products. Demonstrating the potential for these new systems to create synergies within our business. And pull through additional lapoplasty usage. Shifting to our second initiative, advancing our lapoplasty technology and expanding its appeal and adoption across a broader surgeon audience. Lapoplasty remains a core focal point of our strategy.

And what we believe to be the gold standard in the lapidus fusion segment of the market a segment that represents roughly 30% of the estimated U.S. Bunion procedures. As such, we intend to keep innovating training surgeons, and supporting lapoplasty, this largest dollar segment of the bunion market. We also continue to believe in the importance of supporting our technologies with clinical evidence, At the American Orthopedic Foot and Ankle Society's annual meeting in September, announced results from 3 clinical studies that further strengthen our growing body of clinical evidence across our portfolio.

Most notably, our 5 year Align3D prospective multicenter study demonstrated positive long term patient outcomes following the lapoplasty procedure including very low radiographic recurrence rates significant reduction in pain, and significant improvements in key validated patient reported outcome scores. Our 5 year Align3D data represents a first in industry for a commercial bunion system. We also shared positive results from our multicenter Adductoplasty and speed plate studies, adding to the evidence supporting our broader technology portfolio. Together, these findings continue to build our differentiated clinical providing additional proofs around the durability of our procedures, our patient outcomes, and the performance of our technologies. Turning now to our lapoplasty product strategy.

Our Lapiplasty Lightning platform is designed to allow for a faster lapoplasty procedure and to give surgeons even greater control and accuracy in dialing in their 3 d correction. We are in final preparations for the anticipated commercial launch of our Lightning system in Q1 27. We are also focused on expanding the capabilities and utilization of the IntelliGuide PSI platform, This is our patient specific planning and cut guide system for lapoplasty bunion and Adductoplasty midfoot corrections. Intelliguide brings a personalized surgery experience for patients, and is designed to provide surgeons greater confidence and control managing complex deformities revisional cases while also reducing valuable OR time.

We believe the combination of our Lapiplasty Lightning and IntelliGuide PSI platforms can continue to differentiate Treace as the trusted partner for our surgeons and extend our market leadership position in the Lapidus bunion and midfoot deformity segments of the market. And now turning to our third initiative, expanding into adjacent foot and ankle procedures. Today, we are growing wallet share and becoming a more comprehensive technology partner for our foot and ankle surgeons. If you look back a year or so ago, when we offered the Lapiplasty and Adductoplasty systems alone, we estimate these market leading solutions address around 30% of our average customers overall reconstructive foot and ankle surgery volumes.

With the expanded bunion offerings we launched in Q3 of 2025, plus the additional 2026 product launches I will discuss next, we believe we now have the opportunity to serve an estimated 80% or more of our average surgeons' reconstructive surgery volumes. Given this, this fourth quarter will be our first opportunity to tap into a broader range of elective foot and ankle procedures outside of Bunions, while also benefiting from seasonally high bunion case volumes with our expanded bunion portfolio. I would now like to elaborate on the new 2026 product introductions, which represent the $700 million TAM expansion and the value they bring to our customers. In the third quarter, we fully launched our SuperBite compression screw system.

As a reminder, compression screws are core fixation technology used throughout the foot and ankle. SuperByte was designed to make screw fixation more efficient by eliminating the step of drilling before placing the screw. A common and time consuming step performed with conventional screw systems. SuperBite quickly allowed Treace to participate in a wide range of new procedure opportunities. From incremental reconstructive surgeries in the front of the foot to the back of the foot, and to the ankle.

Early in its launch, we are pleased with the adoption we are seeing with SuperByte from our existing surgeon customer base, And in many of these SuperByte cases, the surgeon is also utilizing other Treace products creating additional pull-through opportunities for our expanded portfolio. With SuperByte screws as an entry point into the mid and hindfoot segments of the market, we have built upon this with a new fixation plate offering namely our HyperPlate XM dynamic compression locking implant. Fusions of the mid and hindfoot bones are generally known for higher nonunion rates.

We designed HyperPlate XM implants to provide a highly stable fixation construct through the use of a robust titanium compressing plate with integrated locking screws with the goal of improving outcomes for these challenging larger bone fusions. Additionally, in Q3, we introduced our Vitafuse bioactive glass graft, a synthetic bone grafting technology that complements our tissue based CortiFuse graft and our allograft wedges. These biologic offerings are highly complementary and allow Treace to more fully serve our surgeons' broader bone grafting needs throughout the foot and ankle. Adding to our differentiated suite of mid and hindfoot solutions, we also recently introduced our CartiBlaster line of power joint preparation rasps.

These are single use sterile instruments, which connect to a powered surgical saw and are designed to facilitate rapid and thorough removal of the cartilage on these larger bone surfaces to prepare them for fusion. We are seeing that CartiBlaster rasps speed up what historically has been a tedious and time consuming manual process thus improving the surgeon's overall experience and saving valuable OR time. We believe these 4 products, SuperByte, HyperPlate, Vitafuse, and CartiBlaster, the latter 2, which we expect to fully commercialize within the fourth quarter. Collectively expand our U. S. TAM by an estimated $400 million. Rounding out our 2026 portfolio expansion, earlier today, we announced successful initial cases with our new TaylorPlasty system.

TaylorPlasty is Treace's new minimally invasive instrumented solution for Taylor's bunions or bunionettes. Bunionettes are painful deformities of the fifth metatarsal bone and affect an estimated 5% to 10% of the U.S. adult population. When surgical intervention is needed, bunionette surgeries are performed either concurrent with a bunion correction or as an isolated procedure. We anticipate full commercialization of this new system within Q1 of 27. In closing, leveraging our anchor position as the market leader in bunion correction, we are actively executing our strategy to commercialize an ongoing steady cadence of new product and procedural innovations for our 2027 and beyond.

And delivering these to our growing base of surgeon customers through our direct focused sales force to expand our share and presence across the broader foot and ankle surgical market. We appreciate the dedication of our employees delivering this rapid pace of innovation along with the continued support of our surgeon customers and our shareholders. We remain focused on executing our commercial strategy, improving operating performance and building a business that can deliver sustainable growth and long term value. With that, let me now turn the call over to Mark to review our financial performance. Mark?

Mark L. Hair: Thank you, John. Good morning, everyone. Revenue in the third quarter was $48.3 million a decrease of 4% compared to the prior year period. The decline was mainly driven by the shift in revenue mix towards lower priced, minimally invasive products and a lower volume of bunion procedure kits sold. Excluding sales to stocking distributors, bunion kit sales volume, increased and revenue grew mid single digits compared to the third quarter of 2025. And we anticipate the revenue impact from stocking distributor orders will significantly decrease after the third quarter. Gross margin was 79.5% in the third quarter of 2026 compared to 79.1% in the third quarter of 2025.

Total operating expenses decreased $5.5 million or 10% to $49.9 million in the third quarter of 2026 compared to total operating expenses of $55.4 million in the third quarter of 2025. Third quarter net loss decreased by $3.7 million or 23% to $12.6 million or $0.19 per share compared to a net loss of $16.3 million or $0.26 per share in the third quarter of 2020. Adjusted EBITDA for the third quarter was a positive $300 thousand compared to a loss of $2.6 million in the third quarter of 2025. Year to date cash usage was reduced by 53% or $9.7 million when compared to the same period. In 2025.

Cash, cash equivalents, and marketable securities totaled $39.8 million as of September 30, 2026. Turning to our outlook for full year 2026. We are narrowing our full year guidance and expect full year 2026 revenue to be in the range of $206 million to $210 million representing a decline of 3% to 1% compared to full year 2025. We expect to return to revenue growth in our seasonally strongest fourth quarter. Through procedure volume increases, as we begin to lap the ASP mix shift dynamics related to our 2025 product launches, and benefit from our 2026 product launches.

In addition, we are updating our expectation of a loss in adjusted EBITDA to be in the range of $1 million to $2 million for the full year 2026 as compared to a loss of $3.9 million in full year 2025. We are reiterating our expectation of a reduction in cash usage of approximately 50% for full year 2026 as compared with 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 will turn the call over to the operator to open the line for questions.

Operator: Thank you. A question, press 11 on your telephone, and wait for your name to be announced. To remove yourself, press 11 again. Our first question comes from the line of Ryan Zimmerman with US Bancorp BTIG. Please proceed.

Ryan Zimmerman: Okay, guys, Can you hear me okay? We can. Hey, Ryan. Good morning. And thanks for taking our questions. Good to see the progress. I guess I want to start-- you know, we. We have been through this period of you know, ASP dynamics versus volume. And it is encouraging to hear about the double digit volume growth that you are seeing. I guess if you could reflect, John, on kind of how you think about that dynamic going forward, you know, particularly as it relates to ASP.

You know, as you capture more wallet share and you introduce new products, you know, help us think through maybe kind of the ASP dynamic that you think you will see as we look ahead to next year. Appreciating that, you know, you are not gonna give us specific guidance.

John T. Treace: Hi, Ryan. Good morning. Yeah. Thanks for the question. You know, we are we are seeing the gap, trend in the right direction here, this ASP mix gap. Getting closer to where both volume and. Volume growth and revenue growth as we get into this fourth quarter are seasonally strongest you know, get tighter. On top of that, you know, we are really pleased with the reception and, you know, the adoption rate of all these new products that we are beginning to bring to the market.

We think the next wave of intros is going to increase our TAM by about $700 million, and exciting for us to be in a position to bring those into our customer base on top of this great bunion portfolio. So we are going to continue to broaden the portfolio not only in bunions, other adjacencies. So there is going to be some of that dynamic where overall ASPs or revenue per case may come down a bit from where they have historically been. You know, we have talked about in the past how the newer MIS products, some of the new additional products we bring out are going to carry lower ASPs and lapoplasty.

But on the counter side of that, we. We have got a robust portfolio now of multiple technologies that are going into some high reimbursed, you know, complex cases in the midfoot and hindfoot. So we have some very high ASP cases that are getting into the mix as well that we are seeing. But we think this overall strategy, the broad portfolio, the way the ASP and volume is going to play out, is going to benefit us well for the long term. Okay. Very helpful, John. And then you know, as you think about. We are going into the busy bunion season in the fourth quarter. You have got a lot of new products to introduce.

How do you think about the phasing of those products you know, just to kind of manage through the busy season and into the next year? You know, and minimize the execution risk. You know? I think, you know, as you move into some of these other areas, you know, how do you kind of keep that focus still on, say, lapoplasty or the MIS segment of the bunion market while also pursuing, you know, foot and ankle. Yeah. I understand your question. You know, our strategy here is to build a large, diverse diversified foot and ankle business off of our anchor as the leader in the bunion space.

And that leadership position is something we are highly committed to and we are constantly working on not just the products we launched in Q3 of last year, but next generations of lapoplasty with Lightning, more IntelliGuide, which serves that, lapoplasty and Adductoplasty midfoot segment. So we are highly committed to that. The reps keep focused on that. Along with MTP Fusion. These are the highest you know, group volume procedures that surgeons do day in, day out. So we gotta be best in class in that, and we are highly committed to keeping that focus.

These new technologies and new procedures we are getting into are coming from the same customers that our reps are serving, you know, on that bunion anchor. They are happening in the same day or the same week. So it is very convenient, and it works very seamless for them to integrate these new technologies that they have in their bag into the daily surgical approach of their surgeons. So we think it is going to be pretty straightforward, but, you know, there are a lot of new technologies coming into the rep's hands. And, you know, they are having a great time. We are spending a lot of time training them.

We have hired a lot of reps that have competitive company foot and ankle experience that are now into the mix. They know how to sell the broad portfolio, so that is benefiting us as well. Got it. Thank you for taking the questions. Sure. Thanks, Ryan.

Operator: Thank you. Our next question comes from Benjamin Haynor with Lake Street Capital Markets.

Benjamin Haynor: Hey, good morning, gentlemen. Thanks for taking the questions. First off for me, just on it seems like every quarter, you are marching at about 5% more adoption of the new bunion systems by the existing laparoplasty surgeons. I guess, do you just see that tracking, at kind of 5% a quarter until we get to a 100? Does that max out at some point? How should we think about that?

John T. Treace: Hey, Benjamin. Thanks for the question. it is John. You know, we are pleased with the progress we are seeing there. You know, we are last week, we mentioned our customer base, 3.3 thousand surgeon customers. that is grown through this year, I can tell you that. And to be at a point where nearly half of that large surgeon group has used 1 or more of the 3 new bunion systems we launched in Q3 of 2025. it is. that is great progress. We are very happy with it. But not done. We have got a long way to go. We wanna drive that as deep into that procedure or the surgeon count as we can.

We would love to have 100% of these surgeons using 1 or more. But it goes beyond that. We want them using 2, 3, 4, 5, We want to create full Treace portfolio of surgeons and have our reps become a much greater resource for these surgeons that love our bunion products to serve the world that they operate in outside of bunions. Comprehensively. So that is what we are going after, and that is what we are tracking to.

Benjamin Haynor: Great. Makes sense.

John T. Treace: And then just kind of a bigger picture question. Now that you have this broad portfolio of products, at what point does it make. Start to make sense to go internationally? Yeah. International is something we understand is a real opportunity for the business. We have been working hard to get to a point where we have a broader portfolio that can engage some international markets. We go to we go to the national meetings for the, the surgeons and we see international surgeons that want these products. So we know there is a demand there. That said, it takes a while to get into a lot of these international markets. We have got the big portfolio now.

If and when we get to a point where there is something material, we will let you know. But we are we are eyeing it. We know it is an opportunity, but we will update you as things get more material there.

Benjamin Haynor: Okay. Fair enough. And then lastly for me on CartiBlaster, are there any truth to the rumors that you have secured Cardi B to endorse that product? I can either confirm nor deny what our market people may be doing to try to broadly protect, our trademarks or derivations of that might try to infringe on them. Okay. Fair enough. that is a smart maneuver there. Thanks for taking the questions, guys, and congrats on the quarter and the progress.

John T. Treace: Thanks, Benjamin.

Mark L. Hair: Thanks, Benjamin.

Operator: Thank you. Our next question comes from Rick Wise with Stifel. Please proceed.

Frederick Wise: Good morning, John. Hi, Mark. Perhaps turning back to the quarter. You posted a roughly $5 million sales beat. But kept the midpoint of the guide range. I like it, of course, when you raise low ends. You know? Help us think about why you brought the upper end down. You are a month and a half or so into the fourth quarter. Talk as well, if you would, about just what you are seeing out there just on the customer side or just given all the economic concerns how's the consumer health, if you will? And interest in getting your feet fixed as you head toward year end.

Mark L. Hair: Yeah. Good morning, Rick. This is Mark. Let me let me take a shot at your questions. there is a few questions there. So let's make sure that we unpack all those and get them all answered. Our views on Q4 are really unchanged. The magnitude of the Q3 beat, as you mentioned, is relatively modest and does not necessarily warrant a change portfolio or outlook at this stage. But, you know, that said, the double digit procedure growth is real validation that we are executing our strategies.

And just wanted to comment a little bit as a reminder in some of the prepared remarks, I mentioned, excluding stocking distributor headwinds that we had in Q3, we had significant sales in Q3 of last year for those initial stocking orders that we did not have this year. So excluding kind of that group of stocking distributor sales, revenue growth was mid single digits in Q3. And those headwinds related to stocking distributors will decrease significantly in Q4. So understanding the underlying strength of the business gives us confidence in the Q4 expected trends.

John T. Treace: We remain confident in the seasonally strong Q4 underlying opportunity of our base and our new products. John talked a lot about all these new products not only those that were launched last year, but those that have come out this year as well that will also benefit us in the fourth quarter. So we are confident that we are getting back to growth in Q4. That is a huge win. We have been talking about this for the last several quarters, so we are really pleased with what we have been able to do and think about the decline in Q3 and to jump to a very respectable growth rate in Q4. that is a meaningful change.

So we still want to ensure that our expectations are set. Very achievable, and appropriately reflect the visibility that we have today. I think there is some other questions more broadly about the overall market. Right. Yeah, that is right. We know there have been some commentaries on slowing procedure, you know, volumes from some other companies. We were in a little different situation because of the expansion of our Bunyan portfolio along with the expansion of things like getting into SuperByte, which brings us into new incremental procedures.

So Q3, we not only benefited from, you know, an early. a little bit of a startup bunion season that we typically see at the tail end of Q3, but elective foot season you know, where Superbite was bringing us into more procedures, and that definitely helped our procedure volumes. And we expect that is going to continue through Q4 here. So that is that high procedure volume growth we believe, is going to be the driver and deliver the Q4 that, that we are expecting. But we have not. We are we are in a little different situation where procedure volume growth for us has been climbing you know, as we have gone through the last 3 quarters.

And we expect it to be to climb in Q4.

Frederick Wise: Understandable given all the exciting new products John, you have several times referred to the. And it is been impressive to watch the increasing percentage of your growing physician base trying some of these new systems. Once you were at 45% this quarter, But can you give us some color on whatever metric, however you wanna frame it, but reorders after that initial trial? Or do you have a metric that says they tried it, they tried 1 of the products once, and a third of them, 10% of them, 50%, have gone on to try another 1. Just any other metrics that would help us better appreciate the sustainability of this interest or the expansion of the interest?

If you see what I am getting at? Thank you.

John T. Treace: Yeah. No. I think I know where you are going there. We. You know, the reorder rate or the repeat customer rate when they adopt 1 of these new systems is, I can tell you, pretty high. You know, we always wish for a 100% and multiple 100 percents, but we are very pleased with the, the stickiness we are seeing. We are also seeing more you know, growth in the 2-plus category and the 3-plus category. So those are you know, metrics we are watching internally and tracking and just monitoring how well we are becoming that full 1-stop shop or full service provider for our surgeon's bunion needs.

And now we are watching how are we capturing new segments like midfoot and rearfoot cases and procedure volume? So tracking and monitoring all this, and what we see is very healthy.

Frederick Wise: That sounds good. And just 1 last 1 for me, for Mark. Mark, you have alluded to and mentioned the sales performance ex the comp of the stocking distribution purchases. So if you are at a mid single digit rate now, if adoption of all these products you have launched and some that are launching, should not we be thinking about the next year potential especially against the I will call it, relatively easier comps that did not have all these exciting innovative products. Should not we imagine that next year on a preliminary basis, sales could grow in the sort of the I am just framing it just randomly, but 5%-plus, 5% to 10% kind of range.

Just for starters. I know it is not a perfect question, but, I had to ask. Thank you.

Mark L. Hair: No. Rick, I know exactly where you are going, and you know, our minds are on the same thing. The foot and ankle market has historically grown mid single digits. But more recently last year and this year, they have been lower than historical rates. Our goal is to take share and we are watching the market in these trends. But we absolutely want to return to, you know, market trends and then do better with all these additional, product lines and products that we have. So we. Before we really dive deep into 2027, and we plan to give our guidance on our Q4 call like in previous years.

But we continue to watch these new products and know that they are important to our ability to grow faster than the market. So before providing views on 2027, we really wanna better understand these case volumes in our seasonally strongest quarter. This is an important quarter for us. It always is, and it sets kind of the stage for what we believe can happen next year. So we wanna get through this fourth quarter. And then we also want a handful of months with our new products. So I know that the conversation over the last several quarters have been about the 2025 product launches. But we have got some really compelling and interesting 2026 launches.

So we really want to have a little bit more experience with those new product launches. Think they can really be a driver to case volume growth and some of them are just additive to existing cases. And we think that is important too because that means incremental revenue per case by using these sterile instruments or these other additive items that surgeons are asking for, and then we can get incremental case volume. So I know exactly where you are going for.

Rick, with the question, we are aligned and believe that, you know, the first step is to get to you know, where the market is, and then we fully plan to drive above where the market is as well. But give us a little bit more time, and we will talk about 2027. On our Q4 call.

Frederick Wise: Thanks for all the color, gentlemen.

John T. Treace: Thank you, Rick.

Mark L. Hair: Thanks, Rick.

Operator: Thank you. Our last question comes from Richard Newitter with Truist Securities.

Richard Newitter: Please proceed. Hey, guys. This is Kanal on for Richard. Nice to see the pipeline kind of growing with what is coming. I just had a question on you know, with you guys adding so much to the portfolio, I realized that some of these are, you know, sold into existing cases already. But know, to ensure continuing rep productivity are you gonna continue to add headcount? Do you need dedicated reps? And then, you know, kind of with that in mind, nice to see the EBITDA inflection this quarter.

Does that kinda play into the cost controls you guys have in place, and how are you, I appreciate maybe you cannot put a finer point on it, but if, you know, if any qualitative or directional guidance on how you are thinking about OpEx moving forward, should you need to keep adding headcount on that front?

John T. Treace: Hey, Kunal. Thanks for the question. I can maybe talk about the reps, and then Mark can talk about OpEx, if that is okay. You know, we do have the bigger bag, and there is a lot of synergy with the products that we are bringing into our established, you know, direct sales force. You know, instead of being in x number of cases, per week, they are in 1.5x cases, and this is great. This is healthy. it is easy for them to leverage, you know, throughout the day and serving more of their surgeons cases. or to hand them more technologies into their existing case that they are in today. Right?

We talked about how we have these new disposable, CartiBlasters We talked about how we have a synthetic biologics line now. These are products that are very easy in the same case for the sales rep to offer and just displace whatever other company the surgeon has been using for those technologies, SuperByte as well. So it works really efficiently. That said, we will continue to modestly build our sales channel and strengthen our sales channel over time, but we are not talking about you know, investments of big magnitude there. I would say they would be more incremental. that is our plan on the rep side.

And in terms of how it is impacting OpEx going forward, I will turn that over to Mark.

Mark L. Hair: Yeah. I will I think John hit it, right on. A lot of the sales ads, candidly, a lot of those are variable cost. that with the commission, compensation program, it is-- You know, we will align with the revenue growth, though. Those costs You know, we are we are we are not giving 2027 guidance right now, but we are not anticipating, dramatic changes to our OpEx You know, we will have some incremental increases for a variety of reasons. But, yeah, I think that the important point to take away here is we are really pleased with the leverage that we have shown this year. We have had a decline in revenue year over year.

However, at the same time, we have dramatically reduced our cash usage We are improving our bottom line adjusted EBITDA. If you look at the guidance range that we gave today, that would imply you know, perhaps a 60% plus improvement on the bottom line in adjusted EBITDA. So we think there is more improvement in leverage and profitability to come, and we are excited about getting through this really busy season for us. And giving more specifics on our Q4 call.

Richard Newitter: Awesome. Thanks, guys. I will leave it at that.

Mark L. Hair: Thank you.

Operator: Thank you. And this will conclude our Q&A session and conference for today. We want to thank everyone for participating. You may now disconnect.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.