SI-BONE, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. SI-BONE develops and sells minimally invasive implants and instruments for sacroiliac joint fusion and related procedures, primarily through its iFuse product family. The filing is unaudited; financial amounts below are in millions of dollars unless otherwise noted.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $22.4 | $20.4 | +$2.0; 10% |
| Gross profit / margin | $19.5 / 87% | $18.2 / 89% | +$1.2; margin down 2 percentage points |
| Operating expenses | $36.3 | $29.8 | +$6.5; 22% |
| Operating loss | $(16.9) | $(11.6) | Loss widened $5.3 |
| Net loss | $(17.4) | $(12.2) | Loss widened $5.2 |
| Basic and diluted loss per share | $(0.52) | $(0.37) | Worsened by $0.15 |
| Net cash used in operating activities | $(13.5) | $(9.4) | Cash use increased $4.2 |
- U.S. revenue was $20.4 million, up from $18.8 million; international revenue was $2.1 million, up from $1.7 million. International sales were 9% of revenue.
- Revenue growth reflected higher U.S. and international case volumes, more sales personnel and increased surgeon activity; lower U.S. average selling prices partly offset growth. Higher operating costs to support the business reduced gross margin.
- Sales and marketing expense rose 22% to $25.6 million, research and development rose 21% to $3.6 million, and general and administrative expense rose 20% to $7.1 million. Increased headcount, stock compensation, travel, training and marketing contributed to the increases.
Liquidity, debt and cash flows
- At March 31, 2022, cash and cash equivalents were $27.3 million and short-term investments were $103.4 million, totaling $130.7 million, compared with $147.0 million at December 31, 2021. Current assets were $161.3 million and current liabilities were $15.5 million.
- Cash and cash equivalents declined $36.1 million during the quarter. Operating activities used $13.5 million; investing activities used $22.6 million, including net purchases of marketable securities of $20.3 million and capital expenditures of $2.3 million. Financing provided $0.2 million.
- Long-term borrowings were $35.0 million, with no current portion reported. The SVB term loan carries interest at the greater of 5.75% or prime plus 2.5%; principal amortization begins September 2023. Maturity is August 2025 or August 2026 depending on a financial performance milestone. The loan is secured by substantially all company assets other than intellectual property. SI-BONE reported compliance with debt covenants.
- Management said existing cash and marketable securities were expected to fund operating expenses and capital expenditures for at least the next 12 months. The company has not generated positive operating cash flow and expects further losses.
- Inventory increased to $14.7 million from $11.5 million, partly due to inventory build-up for iFuse-TORQ. The company reported $0.6 million of supplier purchase commitments and $5.8 million of future operating lease payments.
Outlook, commentary and material risks
- No specific revenue or earnings guidance was provided. Management expects operating expenses to continue increasing to support growth and product development.
- COVID-19-related case deferrals and access limitations continued to affect demand. While no material supply disruption had occurred, suppliers faced delays, shortages and higher costs, particularly for instruments. The company was exploring alternative sourcing and inventory strategies.
- Management identified inflation and supply-chain disruption, limited or single-source suppliers, and titanium supply-chain exposure amid Russia-Ukraine-related disruption as risks to product availability, costs and margins.
- Coverage and reimbursement remain important uncertainties. SI-BONE reported that more than 300 million U.S. people had access to minimally invasive SI joint fusion, but disclosed that on April 1, 2022, AIM changed a policy influencing Anthem and others so that it would no longer be exclusive to titanium triangles, effective September 1, 2022.
- The business remains highly dependent on its iFuse product family, surgeon adoption, clinical evidence and reimbursement. The company also noted that its current U.S. patents covering the triangular iFuse design expire in November 2024.
- SI-BONE reported no material pending legal proceedings and no material off-balance-sheet arrangements. Disclosure controls were assessed as effective at the reasonable-assurance level.
Important facts for investors to verify
- Whether procedure volumes and surgeon activity can sustain revenue growth despite lower average selling prices and the margin decline.
- The effect of the AIM policy change, including its scope, implementation and impact on reimbursement and sales from September 2022.
- Whether supplier delays, inflation and instrument availability affect product supply, launches, inventory and gross margin.
- The company’s cash-burn trajectory and whether the stated liquidity runway remains adequate as operating losses and investment needs continue.
- The SVB loan’s financial performance milestone, interest-rate exposure and repayment schedule; reconcile the filing’s debt-extinguishment discussion with the reported period, as its narrative timing is not clear.