SI-BONE, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. SI-BONE develops and sells minimally invasive implants and instruments for sacropelvic procedures, including sacroiliac joint fusion and pelvic fixation. The filing reports one operating segment; substantially all revenue is from the United States.
Financial results and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $33.3 million | $25.6 million | $66.0 million | $48.0 million |
| Gross profit / margin | $27.0 million / 81% | $22.1 million / 86% | $53.8 million / 81% | $41.6 million / 87% |
| Operating loss | $12.0 million | $17.9 million | $23.3 million | $34.7 million |
| Net loss | $11.2 million | $18.5 million | $22.3 million | $35.9 million |
| Basic and diluted loss per share | $0.30 | $0.54 | $0.61 | $1.06 |
- Q2 revenue increased 30% year over year; first-half revenue increased 37%. Management attributed growth to higher case volumes and higher domestic average selling prices.
- Gross margin declined to 81% in both periods, from 86% in Q2 and 87% in the first half of 2022. The filing cites product and procedure mix, including higher costs for iFuse-TORQ and iFuse Bedrock Granite, as well as higher depreciation; first-half results also reflected increased freight costs.
- Operating expenses were $39.0 million in Q2, down 3% year over year, and $77.0 million in the first half, up 1%. Q2 sales and marketing expense fell primarily due to timing of commercial activities.
- Cash used in operating activities was $14.3 million in the first half, versus $28.4 million a year earlier. Inventory growth and lower accrued liabilities contributed to working-capital cash outflows.
- At June 30, cash and cash equivalents were $110.8 million and short-term investments were $58.6 million, totaling $169.4 million, compared with $97.3 million at December 31, 2022. Net carrying debt was $36.0 million; no revolving-credit borrowings were outstanding. The company reported an accumulated deficit of $379.4 million.
Material changes and notable items
- In May 2023, SI-BONE raised approximately $83.7 million in net proceeds from a public offering. The company issued approximately 4.07 million shares in the offering; some additional shares were sold by a selling stockholder, for which SI-BONE received no proceeds.
- The term loan matures in December 2027 and carries a floating rate with a minimum of 6.75%; its effective interest rate was 8.9% for Q2 2023. Monthly principal amortization begins July 2025. A revolving facility of up to $15 million matures in July 2025.
- After the SVB failure, the loan was assumed by First-Citizens. The company disclosed a prior covenant violation related to moving funds and opening accounts elsewhere; enforcement was waived. SI-BONE said it was in compliance with debt covenants at June 30, but cannot access revolver advances until specified cash-management accounts and funds are transferred back to First-Citizens.
- The company reported no material pending legal proceedings and no income-tax provision for the periods presented.
Outlook, commentary, and risks
- Management expects continued operating losses and stated that, under its current operating plan, existing cash and marketable securities should fund operating expenses and capital expenditures for the next 12 months and beyond. The filing gives no numerical revenue or earnings guidance.
- Management expects continued investment in commercial capacity, product development, inventory, and instrument sets. It cited efforts to improve supplier lead times, manufacturing costs, and inventory planning.
- Key risks include sustained losses and operating cash burn; dependence on a concentrated family of products and procedures; reimbursement and pricing pressure, including a shift toward lower-priced ambulatory surgery centers; competition; and reliance on a limited number of suppliers, including single-source suppliers. Supply-chain constraints, inflation, and higher product costs may further pressure margins.
- Clinical evidence for newer products remains developing. SI-BONE anticipated primary endpoint results from its SILVIA trial in 2024 and results from the SAFFRON trial in late 2024. Adoption also depends on surgeon training, payer coverage, and reimbursement decisions.
- The company noted banking-industry and deposit-concentration risks, while reporting no losses on cash, cash equivalents, or marketable securities following SVB’s closure. It also cited possible disruption to procedures and suppliers from future COVID-19 or other public-health events.
Important facts for investors to verify
- Whether revenue growth is sustained by procedure-volume gains and pricing, and whether gross margin stabilizes or recovers.
- Whether operating cash burn and inventory investment remain consistent with management’s stated liquidity runway.
- Whether SI-BONE completes the account transfers required to access the $15 million revolver and remains compliant with loan covenants.
- Whether clinical-trial results, surgeon adoption, and payer coverage support expansion of newer products and indications.
- The effect of the public offering and equity compensation on share count; the filing reported 40,197,135 shares outstanding as of August 2, 2023.