Good morning, everybody, or afternoon, depending on where you are. This is Travis Steed, Bank of America Medical Device Analyst. We're up next, we have Axonics. We've got Ray Cohen, CEO, and Dan Dearen, CFO. Thanks for joining us. Thank you. Thanks for inviting us. Ray, I don't know if you had any opening remarks, coming out of Q1 that you wanted to touch on, or you wanna jump into Q&A? Sure. We're glad, most people are starting to have made their deductibles now, things are looking more, things are looking better. All right. Good. No. you know, maybe we'll start with just, like, thinking through, like, the progression of Q1. Like, I guess, obviously, January was probably down a lot with seasonality. maybe just think through, like, how the business is shaping up over the course of Q1 into Q2, you know, momentum into April sequentially, what you're seeing on the ground. Go ahead, Dan. Yeah, I think if you, if you go back and you look at the guidance we provided, you know, quarter by quarter for 2023, it's played out exactly like we had projected. We had a nice solid Q1. We're seeing a substantial step up in Q2, and then flat for Q3, and then another big Q4. We've been in the market now since late 2019, and we have, you know, a very large field sales organization and a lot of management riding on top of them. When we, you know, build our forecast and then provide guidance, we're looking at this on, I mean, literally a granular account-by-account basis. This is not, you know, a top-down swag based on what we think the number needs to look like. It's literally, what are we seeing in each of these accounts? Mm-hmm. How is same-store sales increasing? You know, utilization, as we call it internally. You know, we've seen this consistently now since 2019. From 2020 to 2021 and into 2022, we track each of these accounts, and we look at how many procedures were they doing with us, you know, the prior quarter, the prior year. What happened? What happened? I mean, the good news for all of us in this room is what we've seen is the market has continued to expand. If you look at Definitive Healthcare data going back to 2019, this market has expanded at 14% CAGR from 2019 through 2022, and our same-store sales are increasing, you know, in line with what we have talked about and messaged and guided. I'm gonna stay away from providing specific numbers. In addition to that, we've also added and continue to add accounts every single week, month and year. The business is moving forward as we had projected, which isn't a surprise given the grossly underserved patient population that we're treating and the quality of our products and our field sales team. If I was just to add, I think that what has really been underappreciated is that when we entered the sacral neuromodulation market, it was perceived as a therapy of last resort. I mean, that was the story that we, you know, started to market into. It's taken time to, you know, get physicians to recognize that this is not, you know, your grandfather's system, right? This is a, not a four to five-year device that's not MRI compatible, that's fussy. We're talking about devices that'll last 20 years in the body. They're easy to use. Patients have great satisfaction. They're getting great efficacy. You know, it's just taken time to kind of prove that to the same physicians that were previously working with our competitor. You know, now they're talking more about it. They're more confident in the therapy. More patients are saying yes, and that's the, you know, piece of the puzzle that Dan is talking to, right? That they're doing more procedures today than they've ever done before. That gives us a lot of confidence about the future. Just looking at the street numbers, like up 27% sequentially, I think in Q2, and like the Q4 number, you know, S&M going from $55 million in Q1 to $84 million. You're seeing the business when you think about seasonality, share, kind of market acceleration, all those kind of tying in to that ramp over the course of the year. Yes. Simple as that. Yes. Maybe let's go to the market growth. I know last year, you know, the market accelerated over the course of Q4, obviously double digits. You pointed out Q1 had Omicron, there was an acceleration in the market. When you just think about the momentum, we don't really know what the market in Q1 was. When you think about that momentum over the course of the year, like, what were you seeing on the ground kind of to put some color around the numbers that we're seeing in the models? Why don't let Dan answer that? I mean- Just think about when you think about like the same-store sales accounts, like growing, you know, some of the momentum you're seeing in the market. I don't know if there's any way to think about, like, color around market growth. You know, give some extra color on why you've seen the market accelerate and continue to grow kind of double digits here. I think it's what Ray's talked about, which is if you look historically at the, call it 4,000 physicians in the United States that practice sacral neuromodulation, we'll just set Bulkamid aside for a minute. When you look at the number at the top that are really high volume, right? You have a very limited number of physicians that are doing more than 100 SNM implants per year. What does that mean? It means at the bottom of the pyramid, you've got this enormous base of physicians that are doing pretty low to mid volume. You can double or triple their implants per year without them really changing that much in their practice patterns. What we've been addressing since we launched, and even prior to launch quite honestly, is. We've delivered better products. Our IDE study for FDA approval had a 90% efficacy, which was 20+ points better than anything anyone had ever seen before. It's constant current. It's MRI compatible. We made the procedure easier to perform. We've made the ancillary components like the Clinician Programmer and Patient Remote Control easier to interface with. This is all leading to physicians having more confidence, talking to more patients, and more patients saying yes. We get asked this a lot, which is, "Okay, you had a big Q4, you've had a great ramp." Almost kind of this like, was there some anomaly that happened to cause this? The answer is no. What we're really seeing is this increase in same-store sales across all of the accounts that we're servicing, except for, you know, let's say some of the physicians that might be doing 250 per year because they're already great at talking to patients and getting them enrolled and getting them implanted. There's not much room for a physician at that level to grow. For, let's call it 98% of the market, all of these physicians could do substantially more SNM implants, and the only thing that would happen is they would have more satisfied patients with a long-term solution to their chronic condition. What are some of the things you're doing on- That's a good follow-up. Right. Thank you for that. Yeah. I think this is the piece that, you know, nobody sees, right? I mean, you would see the numbers and the top line and all the other stuff, but we're very, how should I say? We're doing a lot of things very proactively to try to help move this forward. DTC, okay, everybody gets that there's DTC. We've got 10,000-12,000 patients filling out questionnaires every single month, so that just underscores. 60% of them are treatment-naive. That really underscores the size of the market. I'll give you an example. This past weekend, we do this every month, we have one event which we call APP events. We bring in, we invite in PAs, NPs, RNs. We bring them into a session. It's a one-day session. There's other peers that are talking about the things they're doing in terms of talk tracks, how to move patients through the care pathway, et cetera. How are things working in their practice? Obviously, the people that we have come and speak to their other peers, not colleagues, but peers, are successful, right? In implementing a successful program to treat incontinence. Now, you notice I'm not saying sacral neuromodulation because these are 1/3 of the patients that we treat have stress urinary incontinence as well as urge urinary incontinence. The point is, but we're doing a lot of those kinds of things. Every month there's a program that happens around the country. There were 52 people that attended our program last weekend in Chicago. There'll be another one that will be coming up in June and on and on. We also have visits by physicians, where every month we have a group of physicians coming in, and they do an HQ visit. They see us manufacturing the product. They get a good sense about the care and quality that goes in to manufacturing the products. They get a chance to do to get their hands on products, to do a wet lab with Bulkamid, whatever it might be. They hear about the marketing programs. They get a chance to spend time with senior management. These are the kinds of things that we're doing, and it's kind of the inside baseball stuff that nobody really sees. That also helps to conspire or conspires to help us do exactly what Dan was talking about, which is seeing increases in actual utilization, if you may, which is a weird word 'cause we don't sell capital, right? Seeing more patients coming to the therapy, so. When you look at the, like, utilization, if you will, like, procedures per center per month or however you look at it, and you take that kinda lower tier or middle tier, like, is it that there's not enough patients coming in, so you need to push more through from the DTC? Is it more that you need to get these doctors to focus on your procedure versus other things? Do you need to change, like, Salesforce incentives to kinda be focused on those metrics? It's none of the above. Okay. None of those things. The fact is that in every single urology or urogynecology practice, there are hundreds, if not thousands of patients who've walked in the door, they got a drug prescription, they walked out the door, and they never came back. This is the case in every single one of these practices. What we do, as an example, is we'll get the physician to agree to do a mailing to the existing patient base. Then we see 5%-10% of those patients respond and say, "Yeah, I'm interested in a long-term solution to my chronic condition, whether I've gotten Botox before, whether I just got a drug before," whatever the case might be. That just once again, just underscores the fact that the patients are there. They've come in and out of the practice. They exist. They're in EMR systems or in paper file cabinets, all you need to do is reactivate those people and bring them back in and so forth and so on. This is the other point. Every single day in every urology practice or urogynecology practice in America, there is a waiting room filled of patients who a lot of them have incontinence. It's not like we have to go fabricate patients. They're there. You just need to talk to them. You just need to ask them the right questions. I'll give you one of the most successful things we've implemented. Imagine this, a questionnaire, a symptom survey that is handed to the patients when they check in, along with the other stack of documents, right, that everybody has to fill out that ask you a million questions that are may or may not be relevant to your condition that you're there for, right? Literally, we have pads of these things now, and they just tear them off, and they hand one to the patient. Now all of a sudden, when the doctor meets you in the exam room for that long 15-minute visit. It's like, "Oh, I see. You've got urinary urge incontinence, or you have stress incontinence, or, you know, you have some bowel issues here. Let me tell you know, the things that we have available. Oh, wait a minute. Oh, here's a video book. I'm gonna go see another patient. Why don't you take a look, Mr. Dearen, at this video book?" on and so forth. You see what I'm saying? What we're talking about, and we're trying to impress upon this point, is that this is about blocking and tackling. This is the basic stuff that we're doing, and it's paying huge dividends for us in every one of these practices. It's not like we have to go find patients or somehow, you know, we have to fabricate the interest. They're all there. It really is as simple as people just spending time and offering the alternative, you know, therapies. It sounds like more of an education, you know, I don't know if it's more patient education, physician education. Like, I don't know how you think about, like, the education process here and... Well, I mean, it starts with just letting people know who are out in the world that it's not normal to. Leaking urine, you know, God forbid, you have bowel function problems, it's not normal. This is not a normal part of aging. You know? There's a wives' tale out there that somehow this is just what happens. Oh, you have children, and then you get stress urinary incontinence. There's nothing to do about it. It's not true, you know. Excuse me. You can't get to the bathroom in time, and that's somehow normal. It's not. There, we can treat these problems. we have to, you know, we're fighting against, in a way, the commercials on television where, you know, the Depend commercials, where everybody's running around and they're running in the fields of flowers, and life is really good and, you know, we've got these great Depend now or whatever. Like, who wants to wear adult diapers? The adult diaper business is now bigger than the baby diaper business. I don't know if people know that. This is insane, right? the same thing with, you know, the, you know, the drug commercials, right? Take this drug. Oh, life's great, you know. Go run around the field, you know. That's not reality. We're working on the opposite side of that, right? Instead of normalizing the condition, we're trying to, you know, let people know, "Hey, this is not normal, and we can help solve these problems for you. On the DTC side, the 10,000 leads per month, half treatment naive, like, when you think about the funnel from initial ad to actually getting an implant, I don't know how much work you've done on in terms of the percentages of people making it through the funnel, how long it takes on average, and things you maybe could do to kind of grease that wheel? Yeah, we've looked at everything. The DTC campaign's going quite well, which is why we have said we're spending the same money in 2023 we spent in 2022. We have tracked it. The patient funnel from first contact to permanent implant can take anywhere from, let's call it 6 to probably 18 months, depending upon where you are in the curve and the physician that you see. If you're treatment naive, you're gonna be diagnosed, you're gonna undoubtedly be prescribed drugs, then you're gonna fail one drug or two, and then presumably come back and get an SNM implant. We don't disclose the exact numbers, but we know how many implants have resulted from DTC to date. We started this campaign 13 months ago. The reason that we didn't spend more money in 2023 than we did in 2022 is because we've been optimizing the back end or operationalization of the handoff from the call center to the physician practices. We know we can drive a higher return on investment by focusing on the talk track and how those patients are handed off to the practice. Specifically, we've also worked with our customers, and we've looked at those who are great at taking the handoff and getting the patient scheduled and getting them in to see a physician versus those who sit on 20 leads and forget to pick up the phone and contact them. As consumers of healthcare, I think everyone in this room knows what it can be like sometimes when you contact a new doctor. We've worked on what Ray calls a concierge service, where it's a warm handoff when possible. The call center has the patient, they call the practice, and then they literally link those two folks up in real time with the highest probability of getting that patient in to see a physician or a nurse practitioner to start them on their journey. It's gone better than the internal metrics that we had established. It's continuing to generate 10,000+ qualified leads every single month. Now we're focused on how do we improve that conversion rate on the back end and get more people into these practices so they can get diagnosed and start down a care pathway that'll solve their problems. I mean, our customers are thrilled that we're doing this, right? That, "Oh, okay, well, you're doing something that your competitor never did." We're creating awareness. They appreciate that. We get a lot of credit for that. Now we've moved from this is kind of cool, and, you know, we're on national television, and Facebook chasing people around as it does, to actually now seeing fruits of our labor. In other words, now we're starting to see that we're getting an actual measurable return on the investment of those dollars, and people are getting implants. Of course, it's across the board, right? You get, you know, you If I give Mr. Dearen, you know, 30 leads, you know, he may do six or seven implants, then I may give somebody else 30 leads, they're just fumbling around trying to make some phone calls, you know, figure out who in the office is going to make the phone calls, right? That's the work that our field team has to do to make sure that, you know, we're responsibly handling these things. That's why people have asked us, "Why don't you do more?" Well, the fact is we have so many right now, we feel responsible to try to get those patients in with physicians as opposed to just piling on more and more and more names. It's not going to move the meter. Sorry. That's helpful. Obviously, market growth matters the most, which is why we spent 15 minutes on that. When you think about where you are in the share capture, you know, how much more opportunity is there from the share side of things? you know, now that the third-party data is always retrospective, right? Now we have kind of hard data from 2021 that we can speak to. What we do know is I think you mentioned earlier, there's 4,000 accounts that are doing sacral neuromodulation. About 2,600 of them are not our customers yet. From a share capture standpoint, you know, we're pick a number, a third, 35%, whatever the number is along the way, and we've got, you know, more work to do and lots more opportunity to get these docs to come our way. Obviously, or maybe not obvious, rep relationships are, you know, important. We're competing with a company that had a monopoly for over two decades. Some of those reps have been in there a long time. They may or may not be the greatest salespeople in the world, but the point is they had no competition, so they got relationships. They're pretty good at buying dinner. Sorry, I should be a bit more respectful. You know, that's what we're, you know, kind of fighting against. Now, what's happened is Bulkamid has really helped us a lot because not only are we happy to have the revenue, it's great revenue, it's good margin, we're helping a lot more patients, but it gets us in the door of places where there might have been a really good relationship with Dr. Steed, but the fact is Mr. Dearen wants access to Bulkamid. We get in there, we get to know Mr. Dearen. He says, "Oh, wait a minute. These are not two-headed monsters like my Medtronic rep said. This is a good company with good products and good support. Hmm, maybe I should give them a shot on sacral neuromodulation." It's the kind of the tip of the spear or whatever other analogies you wanna use. It's helping us. And we believe it's gonna continue to create positive momentum for us to on the share capture side of life, right- Mm-hmm. To get more of these, you know, physicians coming our way. Did I get the numbers right? You said 2,600 accounts that are not your customers out of 4,000. Yes. There's 2,600 100% Medtronic accounts. I don't know how many of those are like onesies and twosies versus like real volume accounts. It's, you could Everybody here could pull up the numbers if you like. You just gotta pull up the code and Definitive Healthcare data shows you the distribution. It's a wide distribution. You know, you got a lot of docs who might be doing five or six, we call them dabblers. Then you've got, you know, the big spread with people at the top of the pyramid, doing a lot more. It's, it's all across the board. The thing you said on the call was chunky accounts still coming your way. Well, those are the ones we're most interested in. Mm-hmm. Yeah. It's a highly technical term. Yes. Chunky. Yeah. Right. Exactly. Right. Exactly. Yeah. It's a chunkier account. You'll probably hear that in all the fireside chats. The sal- Right. The salespeople are certainly keen on those chunkier accounts. The point is that, look, you know, you can build a territory in many different ways. You know, it's always nice to have a big cornerstone account that's doing, you know, a large volume. Again, I can also do it as a rep in a territory with 12 or 14 accounts that are doing moderate volume or low volume, and I can still get my numbers. It's a combination of all those things. I think this is a really important point, because the landscape has changed so rapidly in the last two or three years since we introduced better technology. We've seen low volume implanters and a handful of physicians that had never practiced SNM now move into the high volume category. All it takes is, you know, belief that this therapy is a better alternative than drugs or doing nothing for this enormously underserved patient population with this chronic condition which is debilitating. We expect to see that to continue. We expect to see the low volume implanters double and triple their volume and new people come in. The reality is, we don't even need to recruit new physicians to this therapy for the business to continue to grow for the foreseeable future. We haven't used the word Botox yet, but I think it's important to point out that last year, in 2022, 150,000 women got Botox injections in their bladder. That's 3x the number of SNM implants when you combine Axonics and Medtronic together. The point is, and Botox is a four- to six-month treatment. It only treats urge urinary incontinence. 20%, I'm not speaking out of school, this is clinical data, 20% UTI rate. The point is that these are patients that are just being temporized with a short-term treatment for a chronic condition, and they all eventually get tired of that. That's another major pool of patients that exist in every one of these doctor's offices that we're going after, you know, getting physicians to recognize that, yeah, it might be quick and easy, you know, and you can make a few dollars, I mean, just, you know, $100 bucks or so. You know, are you really doing the best job for those patients by exposing them to you know, Botox injections as opposed to saying, "Hey, let's take a step back. Let's think about what is a long-term solution to this problem. Are you open to that?" You know, talk about sacral neuromodulation. That's helpful. Then on the tibial side, there's one player probably getting FDA approval later this year. What do you think happens in the market as those players get FDA approval? We've looked at this market for years. When we first started the company, we were asked about the implantable tibial companies, I mean, going back to 2014, because they all predated us. I mean, we've looked at this time and again, and where we come out on this is we believe it's the wrong neural target because it's downstream. We don't believe efficacy will ever rival that of sacral neuromodulation. These companies are gonna have to raise tremendous amounts of capital to hire a field team to go out and train physicians on below the knee ankle surgery, which is not something urologists and urogynecologists do. You're talking about products that either require a patient to wear something around their leg two times a day for 30 minutes each. We think compliance adherence in the real world will not mimic that from a clinical study. We don't believe that for the implantable coin cell device, a two-year life best case on that product is gonna be attractive to patients, because if you're a 57-year-old patient, which is the average, you're gonna be signing up for a dozen plus repeat surgeries if you wanna have any kind of symptom relief. Our view on this is we understand why it's of interest to professional investors and to analysts, and we understand why certain physicians wanna be open-minded and say, "This is interesting. You know, I might give this a shot. I might try it." In the end, what we think is gonna happen is you're gonna have lower efficacy with patients having to do something and sign up potentially for multiple repeat surgeries. We just don't believe this is going to capture some large, meaningful percentage of the patient population, which is why we haven't launched our own internal implantable tibial nerve stimulation device. I'll say three things. One, market research says that patients want longevity and efficacy. Market research. Okay, that's number one. Number two, Medtronic proved that you're not gonna get a lot of patients signing up for a therapy that only lasts for a few years. They proved it over two decades. Then when we came out with a rechargeable product to start, then when we came out with the non-rechargeable or recharge-free system, we saw the shift of our business, dramatic shift. 2/3 of the business now is non-rechargeable. Why? Because patients don't want to do anything. They don't wanna keep going back and getting another procedure done, and also they don't wanna do anything. If they can get relief for their symptoms and just go about their normal life, that's what they're gonna choose. It's not that it's, you know, Dan's opinion, Ray's opinion, other, you know. This is an informed opinion based upon observation, based upon being proactive in the market, and so on and so forth. Look, we wanna sell products that people want to put in their bodies and that people wanna use and buy. That's the business we're in. We're not dogmatic about this. I think, Travis, you know, when we started this, Dan and I, we were not experts in urology or neuromodulation or any of that. We're, we're open-minded as they come. It's hard to say, you know, we like something or we think it's a good idea when the data suggests otherwise. Right. Yeah. It sounds like you probably have one that you could launch if you needed to. Like, if you are wrong and the market does take off, like, you've got some kind of backup plan. Sounds like I'm sure you could make one, right? We have the capability. Look, we have a rechargeable device that you don't have to recharge but once every six-12 months. We have a non-rechargeable device that lasts in your body for 20 years. I mean, this is not difficult to do. We're not gonna do something just because, you know, if we don't, we don't believe that's the right thing. Nor do we think it's a threat to our business. It just happens to be something that people are talking about today, but we think that this will come and go. Right. I did want to ask about the Medtronic litigation. The trial keeps getting pushed out and pushed out. I don't know, should we keep expecting that to happen, or is it actually going to happen in August this time around? Are you still sticking to the message that, you know, worst case is a check, you know, no injunction? Right. Obviously, as a publicly traded company that's been sued by a large corporation, what we can say is the trial is scheduled for mid-August. We hope it happens in August this time, and we can put it behind us. We've always maintained, going back to November of 2019 when they filed these claims against us, we don't infringe any of these claims. It's important just to highlight these claims relate to very ancillary components of the system. It's the tines or the anchors on the tined lead for fixing it in the body. Those patents that were asserted against us expired 15 months ago, I believe. Some patent claims related to transcutaneous charging. We are not infringing these claims. We believe we'll prevail in court, and that this will be behind us in August. If we were somehow found to be in violation of some of these claims, there's a whole damage calculation process that's been gone through, and we would write a check, and then the overhang would be gone, and we would move on. That's helpful. Then last question on margins, just the focus on, you know, getting more profitability. Maybe kind of walk through, kind of where you're going, you know, maybe over the course of this year, longer term, but some of the internal changes you're making to get more profitable at this point? No, it's a good question. On the gross margin, last year we were at 72.2%. We guided to a 100-125 basis point increase in 2023. In Q1, gross margin came in at 74.3%, which was ahead of the guide. We're asking everyone to just stay with 73.5% for the remainder of 2023. We've seen the increase in margin because purchase volume discounts, bringing more manufacturing process steps in-house, and a product mix shift to F15 with less rechargeable, and the F15 recharge-free product has a higher margin. Bulkamid also has a very solid margin. Over time, we projected we would be at mid-70s gross margin at scale. You know, down the line, we guided to $280 million in OpEx in 2023, which is a step up from $240 adjusted OpEx in 2022. We're talking about a 25%-27% increase in revenue in 2023 over 2022 against a mid-teens increase in OpEx. I think the message I would deliver is this: We're seeing the operating leverage in the business. We've had four quarters in a row of positive adjusted EBITDA. If you look at the sales and marketing expense line against the revenue, you'll see that it's trending in the right direction, while gross margin is also going up. We're not having to take Herculean steps or do anything out of the ordinary to try to manage our way to profitability. It's happening because the business is progressing in the way that we thought it might going back to 2018. Our goal is stay focused, execute, continue providing exceptional customer service. We didn't really talk about it, our 175 plus clinical specialists that are in the field is a distinct and differentiated competitive advantage in this market. We're just going to stay the course. We'll add incremental salespeople. We'll optimize DTC. We'll do the HQ visits. We'll do the APP events and the other half dozen marketing programs that we're running that we don't talk about. At $350 million in revenue, we expect to cross over into positive cash flow profitability and just keep driving the business forward. The leverage is there, we're seeing it. We don't see anything standing in our way from where we are to where we expect to be in the next year or so. Thank you. Thanks, Dan and Ray. We'll end there. Thanks. Appreciate it. Thank you. All right.