SI-BONE, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are with Q1 2022 unless otherwise noted. SI-BONE is a medical-device company focused on minimally invasive sacropelvic implants, including its iFuse product family.
Financial performance
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $32.7 million | $22.4 million |
| Gross profit / margin | $26.8 million / 82% | $19.5 million / 87% |
| Operating expenses | $38.1 million | $36.3 million |
| Operating loss | $11.3 million | $16.9 million |
| Net loss | $11.1 million | $17.4 million |
| Basic and diluted loss per share | $0.32 | $0.52 |
| Cash used in operating activities | $10.8 million | $13.5 million |
Revenue grew 46%, driven mainly by higher case volumes and higher U.S. average selling prices. U.S. revenue was $30.5 million; international revenue was $2.3 million. Gross margin fell five percentage points, which management attributed to procedure and product mix, higher costs of newer implants, and increased depreciation and freight. Operating expenses rose 5%; sales and marketing increased while R&D declined with project timing.
Liquidity, debt and cash flow
At March 31, 2023, cash and cash equivalents were $23.0 million and short-term investments were $63.0 million, totaling $86.0 million, versus $97.3 million at year-end 2022. Total current assets were $128.4 million and current liabilities were $16.6 million. Net cash used in operations was $10.8 million; capital spending was $2.6 million. The company reported $35.9 million of long-term borrowings and no outstanding revolver balance.
The amended term loan matures in December 2027, carries a floating rate subject to a 6.75% floor, and begins scheduled principal amortization in July 2025. A revolving facility of up to $15 million matures in July 2025, but the company said it could not access advances until specified cash-management accounts are moved back to First-Citizens. Management stated that existing cash and investments were expected to fund operating expenses and capital needs for the next 12 months and beyond, based on its current operating plan.
Outlook, commentary and risks
- No specific revenue, earnings or margin guidance is provided. Management expects continued operating losses and anticipates future investment, including in R&D and instrument sets.
- Management cited supply-chain constraints, inflation, supplier concentration, and the need to invest in implant and instrument inventory as risks to product availability, growth and margins. COVID-19-related procedure delays and supply effects may continue.
- Coverage, reimbursement and pricing remain important uncertainties. The filing notes competition, possible shifts of procedures to ambulatory surgery centers, and potential changes in payer policies.
- The company disclosed that it breached a credit-facility term in March by opening accounts elsewhere and transferring funds from SVB. A letter agreement waived enforcement of that breach; the company reported covenant compliance at quarter-end. Access to revolver advances remained conditional on transferring certain accounts and funds back to First-Citizens.
- SVB was shut down in March and the loan was subsequently assumed by First-Citizens. SI-BONE reported no loss of deposits and continued access to its cash and investments as of the filing. It nevertheless identified banking-industry disruption and deposit concentration as risks.
- Clinical evidence and adoption for newer products remain risks. Results from the SILVIA trial are anticipated in 2024 and from the SAFFRON study in late 2024. The company also disclosed that its current U.S. patents on iFuse, including its triangular shape, expire in November 2024.
- The filing reports no material pending legal proceedings. Management concluded disclosure controls were effective at the reasonable-assurance level; no material change in internal control over financial reporting was reported for the quarter.
Important facts for investors to verify
- Whether revenue growth and procedure volumes continue, and whether gross margin recovers from Q1’s 82%.
- Cash and investment balances, operating cash burn, and the duration of the stated liquidity runway as spending and inventory needs evolve.
- Whether the company restores access to the revolver and continues complying with loan covenants and revenue requirements.
- How supplier constraints, product mix, ASC pricing pressure and reimbursement decisions affect sales and profitability.
- Progress and outcomes of SILVIA and SAFFRON, adoption of newer products, and competitive impact as iFuse patents approach expiration.