SI-BONE, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Unaudited results are compared with the corresponding 2021 periods. SI-BONE develops and sells minimally invasive implants and instruments for sacroiliac joint fusion and related pelvic and spinal procedures; most revenue is from its iFuse product family and U.S. customers.
Financial performance
| Metric | Q2 2022 | Q2 2021 | First half 2022 | First half 2021 |
|---|---|---|---|---|
| Revenue | $25.6 million | $22.2 million | $48.0 million | $42.6 million |
| Gross profit / margin | $22.1 million / 86% | $19.8 million / 89% | $41.6 million / 87% | $38.1 million / 89% |
| Operating expenses | $40.0 million | $32.8 million | $76.3 million | $62.6 million |
| Operating loss | $17.9 million | $13.0 million | $34.7 million | $24.5 million |
| Net loss | $18.5 million | $14.0 million | $35.9 million | $26.2 million |
| Net loss per share, basic and diluted | $0.54 | $0.42 | $1.06 | $0.80 |
- Q2 revenue increased 15% year over year; first-half revenue increased 13%. Growth primarily reflected higher case volumes, more sales personnel and more active surgeons. Lower average selling prices and foreign exchange effects partly offset growth.
- Gross margin declined to 86% in Q2 and 87% for the first half, from 89% in each comparable 2021 period. Management attributed the decline to higher costs of operations supporting growth.
- Operating expenses rose 22% in both Q2 and the first half. Sales and marketing was the largest increase, reflecting personnel, commissions, stock compensation, and greater travel, marketing and training activity.
- Cash used in operating activities was $28.4 million in the first half, versus $17.5 million in 2021. Inventory build-up, including for iFuse-TORQ and iFuse-Bedrock Granite, contributed to working-capital outflow. Capital expenditures were $4.3 million.
Liquidity, debt and balance sheet
- At June 30, 2022, cash and cash equivalents were $24.3 million and short-term investments were $90.1 million, totaling $114.4 million in cash and marketable securities, down from $147.0 million at December 31, 2021.
- Total assets were $166.1 million; current assets were $148.3 million and current liabilities were $16.7 million. Stockholders’ equity was $110.8 million, and accumulated deficit was $331.8 million.
- Long-term borrowings, net, were $35.1 million. The SVB term loan bears interest at the greater of 5.75% or prime plus 2.5%; monthly principal payments begin September 2023. Maturity is August 2025 or August 2026, depending on a financial milestone. The loan is secured by substantially all assets other than intellectual property. The company reported compliance with debt covenants.
- Management stated that existing cash and marketable securities were expected to fund operating expenses and capital expenditures for the next 12 months and beyond, while cautioning that future cash needs could vary and additional capital might be required. The company has not achieved positive operating cash flow and expects further losses.
Business developments, outlook and risks
- FDA clearances during 2022 expanded iFuse-TORQ use to acute, non-acute and non-traumatic fractures, including pelvic fragility and insufficiency fractures. The company also received FDA clearance for iFuse-Bedrock Granite in May 2022. CMS had proposed a New Technology Add-on Payment for procedures involving the device; the filing does not state that the proposal was finalized.
- SI-BONE reported that more than 300 million people in the U.S. had access to minimally invasive SI joint fusion, while warning that some payor coverage decisions could change. It disclosed an AIM policy, effective September 1, 2022, that would no longer limit coverage to triangular titanium implants.
- COVID-19-related case deferrals continued to affect revenue at times. Suppliers faced delays, shortages and higher costs, particularly for instruments; management said it was pursuing alternative sourcing and inventory measures. Inflation, labor constraints and broader supply-chain disruption could pressure costs, margins and product availability.
- Other key risks include dependence on a single product family, competition and pricing pressure, reimbursement uncertainty, reliance on a limited number of suppliers, clinical and regulatory uncertainty, and continued operating losses. U.S. patents covering the triangular iFuse design were expected to expire in November 2024.
- No specific revenue, earnings or margin guidance is provided in the supplied filing text. Management expects continued investment in sales, research and development and operating infrastructure. It noted historical seasonality, with lower summer sales and higher fourth-quarter sales, but said seasonality has not had a material overall impact.
- The company reported no material pending legal proceedings and no material changes in internal control over financial reporting; management concluded disclosure controls were effective at a reasonable-assurance level.
Investor verification priorities
- Track cash and investment balances, operating cash burn, inventory growth and progress toward positive cash flow against management’s stated liquidity runway.
- Verify sales growth by procedure volume, average selling price, product and geography, and whether margin pressure persists as the company expands.
- Monitor payor policy changes, including the impact of the AIM policy, and confirm the status and terms of the proposed CMS add-on payment for Bedrock Granite.
- Assess supply availability and cost trends, especially for instruments and other limited-source components, and whether new products convert inventory investment into revenue.
- Review the SVB loan’s rate exposure, financial milestone affecting maturity, covenant compliance and principal-payment schedule.
- Follow clinical evidence and adoption for Bedrock and Bedrock Granite, regulatory developments, and competitive or intellectual-property developments ahead of the November 2024 patent expirations.