SI-BONE, Inc. — Q2 2021 Form 10-Q
Business context and period: Medical-device company focused on minimally invasive sacroiliac-joint fusion, principally selling its iFuse implant system. This unaudited report covers the three and six months ended June 30, 2021; comparisons are with the corresponding 2020 periods. SI-BONE reported one operating segment, with 91% of Q2 revenue from the U.S.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $22.2 million | $14.0 million | $42.6 million | $30.9 million |
| Gross profit / margin | $19.8 million / 89% | $11.9 million / 85% | $38.1 million / 89% | $26.8 million / 87% |
| Operating loss | $13.0 million | $10.1 million | $24.5 million | $22.0 million |
| Net loss | $14.0 million | $12.5 million | $26.2 million | $25.2 million |
| Basic and diluted loss per share | $0.42 | $0.44 | $0.80 | $0.91 |
| Operating cash used | Not stated separately | Not stated separately | $17.5 million | $17.2 million |
- Q2 revenue grew 58% year over year; six-month revenue grew 38%. Management attributed growth to recovering procedure volumes, increased active surgeons and sales-force expansion, and improved U.S. reimbursement coverage. Q2 revenue was also 9% higher than Q1 2021, according to management.
- Gross margin improved year over year, which management attributed principally to lower inventory write-downs and the absence of $0.2 million of under-capacity costs recorded in Q2 2020.
- Operating expenses rose 49% in Q2 and 28% for the first half. Sales and marketing remained the largest expense and increased with hiring, commissions, travel, training and marketing activity. Net losses widened in Q2 despite revenue growth.
- At June 30, cash and cash equivalents were $48.1 million and short-term investments were $128.5 million, totaling $176.6 million, versus $196.4 million at December 31, 2020. Current assets were $199.1 million and current liabilities $12.6 million.
- Cash used in operations was $17.5 million in the first half. Investing activities provided $9.4 million, including net maturities of marketable securities, partly offset by $4.2 million of property and equipment purchases. Financing activities provided $2.8 million, mainly employee equity-plan proceeds; the prior-year period included a $63.0 million follow-on offering.
- Debt was $39.6 million net carrying value, against $41.0 million of principal and final-fee obligations. The Solar term loan bears interest at 9.40% plus LIBOR, has an interest-only period through June 2023 and matures June 2025. It is secured by substantially all assets. The company reported covenant compliance at quarter-end.
Changes, outlook and risks
- Management said elective procedures recovered from pandemic-related deferrals, but monthly revenue remained variable. It cited COVID-19 waves, postponed procedures, changing patient and surgeon schedules, and possible supply-chain disruption as continuing uncertainties.
- Management expects operating expenses to continue increasing to support commercial growth and product development, and expects further sales-force expansion. No specific revenue, earnings or margin guidance was provided.
- Management believes existing cash and marketable securities can fund operating and capital requirements for at least the next 12 months. This assessment is subject to pandemic-related and other uncertainties; the company has not achieved positive operating cash flow and expects further losses.
- Commercial developments included FDA clearance of iFuse-TORQ in February 2021 and expanded U.S. coverage developments from Anthem and Centene. The company said more than 300 million U.S. people had access to minimally invasive SI-joint fusion; coverage terms, reimbursement and adoption remain important uncertainties.
- Key risks include dependence on the iFuse product family, competition and pricing pressure, payor coverage changes, reliance on a limited number of third-party suppliers, clinical and regulatory outcomes, and pandemic-related disruption. The company disclosed that U.S. patents covering the triangular iFuse design expire in November 2024; iFuse-3D patents expire later.
- The filing reported no currently pending legal matters believed material and no material changes in internal control over financial reporting. Q2 2020 general and administrative expense included a $0.6 million reversal of accrued litigation expense after settlement of a TCPA class action, affecting the comparison with Q2 2021.
- The company expects adoption of the new lease standard to materially affect its balance sheet, principally through recognition of operating lease assets and liabilities; it did not expect a material effect on income or cash flows.
Important facts for investors to verify
- Whether procedure volumes, sales-force productivity and reimbursement access sustain revenue growth as pandemic comparisons normalize.
- Whether rising commercial and R&D spending can translate into improved operating leverage while losses and operating cash use continue.
- Liquidity headroom under Solar’s revenue-linked minimum cash covenant, and the effect of the loan’s LIBOR-based rate and later principal repayments.
- Supplier capacity and inventory needs for new products, including iFuse-TORQ, given the disclosed supplier concentration and first-half inventory build.
- Clinical evidence, regulatory status and payor coverage for existing and new indications, including the durability of exclusive iFuse coverage policies and patent protection after 2024.