Afternoon, everyone. Baird 2023 Global Healthcare Conference. Excited to have the Axonics team here, player in the sacral neuromodulation space. We have Ray Cohen, CEO of the company. We have Kari Keese, CFO designate, now. I'm David Rescott, senior med tech analyst here, and we have about 30 minutes or so for Q&A. You can send in questions via email off of that little placard there, and I can pull it up on the iPad if you want, but otherwise, we'll go ahead and get started. Thank you both for being here. Thanks for the invite. So Ray, maybe to start off, 5 years public company, 4 years commercial, you got a third of a market that's nearly $1 billion in the U.S. so far. So maybe we can start off there with, at least for maybe some investors who are newer to the story, how you went from where you started to where you are now, and how do we think about the next 4-5 years for Axonics? So, explain how we went from zero revenue to annualized at $360 million in two minutes or less, right? Yes. Okay. Maybe three. So, you know, starting from the top, we made great products, okay? And our products, they last longer than our competitors, they're more efficacious than our competitors, they're easier to use than our competitor. So it started there. Second is, we went out, and we hired really excellent people. We spent time to train them up, give them tools so that they, you know, have not only products, but they've got other things they can offer to practices. We hired, you know, in effect, and I'll round, close to 200 salespeople, close to 200 clinical specialists. And, you know, we provide, you know, really excellent support and service for these customers, which is something they weren't used to. I think all of those kinds of things, in general, have accrued to the benefit of us, you know, becoming a significant player in this particular market. In the next- And then we got Bulkamid. Feel free to touch on that. I think that when we brought Bulkamid to the U.S. market, where now we have a very simple, elegant, inexpensive treatment for women with stress urinary incontinence, you know, that really helped us a lot because not only the revenue with good margins, but it, it's been a door opener for us into competitive accounts, and so we've been able to... Even if they weren't open to our message about sacral neuromodulation because they like their sales rep, and they might have been working with that rep for 10 years, the point is that Bulkamid has allowed us to get entry into those practices. Then once we're in there, you know, we have an opportunity, obviously, not only to offer Bulkamid, but to get a chance to get the sacral neuromodulation business, which is the meat and mover for the company, clearly. Okay. And maybe before we get into some of the numbers, CFO transition, Dan had been with the company since before the IPO, is retiring now. Can you just quickly touch on high-level, the turnover and, I guess not turnover, but bringing Kari on? I'm gonna let Kari speak to it. Sure. So timing, Dan will leave Axonics at the end of the month, so we're in an official transition period now. I've also been with the company since essentially the beginning, so this is not new territory for me. I've been working closely with Dan and Ray for going on 10 years at Axonics, even longer at a previous company we worked together. So, I'm very familiar with the company and the management team. I think, you know, we expect a lot of consistency here. Nothing big coming. Okay. Any plans to do anything different from a street perspective, the way in which you think about the company? No. I think, you know, what I was starting to say was, you know, I've had a hand in what we've done. I have tremendous respect for Dan and how he's led the company, so we expect continued same philosophy on guidance and approach to forecasting. Don't expect any changes. Sounds good. Okay, so, maybe we can get into some, the numbers here now. You know, Ray, we've, we've talked about, and you've talked about the company's, top-line growth and the growth in the US SNM market. If you look at the pre-COVID, post-COVID, kind of growth rate in US SNM, when Axonics entered the market, it's—I think we calculated out to be about 13%. You know, you, you've talked about, maybe getting somewhere closer to 15%, you know, maybe longer term. What do you think, I guess, I guess, around that, and what gives you the confidence that we can see re-acceleration maybe in the US SNM market toward that, toward that level? You know, look, I think it's an interesting topic when we talk about growth in the segment, when the only company that is contributing to growth in the segment is Axonics, right? So all the growth, every dollar of growth in this segment is attributable to what Axonics has done and what we've brought to the marketplace. Our competitor is not growing their business. So you know, look, we saw good growth. You quoted 13, whether it's 13, 14, whatever it might be. I mean, that occurred with the pandemic and all the other weirdness that has occurred the last few years. So why are we confident? Well, we're confident for quite a number of reasons. One, there are right now, between stress urinary incontinence and overactive bladder, which is... Let me just make a quick distinction. Overactive bladder is: I have urgency, I can't get to the bathroom in time, and I leak. Stress urinary incontinence is: I lift, I laugh, I sneeze, I exercise, and I leak. Sacral neuromodulation treats overactive bladder. Bulkamid treats stress urinary incontinence. Okay, so that's the distinctions. There are, right now, approximately 20 million women who have moderate to severe stress urinary incontinence symptoms in America, and fundamentally, an equal number of moderate to severe patients who have overactive bladder. This is an unbelievably untapped greenfield opportunity, and I believe we've just scratched the surface. So there, there's no doubt that more and more patients are coming to the therapy, that the market will continue to grow, even if we have to do it solo. And when we started to run DTC advertising eighteen months ago, and now we have 550,000 people, primarily women, who are responding to these ads every quarter. And on average, between 6% and 7% of them will fill out an online symptom questionnaire, tell us who they are, what their symptoms are, score themselves, and say that they're interested in getting an appointment with, you know, a specialist. So, I mean, these are really big numbers, and we're talking this year, we're gonna see, you know, 2.2 million people get activated based on, you know, some of our DTC efforts. So this is, this has surprised us even, right? I mean, this is amazing how many people are responding to these messages. And we're talking about a 30-second spot on national television. It's 30 seconds. We're not, we're not pitching sacral neuromodulation. We're just saying: "Look, if you have this..." It's not a patient, and these have been patients, not actors, saying: "I had this problem. I found Axonics, and now I got my life back." I mean, it's "And if you would like to have your problem resolved, then go to findrealrelief.com." So we're it's not like we're spending, you know, a bunch of time trying to, you know, quote, unquote, sell people. We're just saying: "If you've got this problem, we can help you." So it's been really interesting. So we're enthusiastic about the opportunity, and I quite frankly, I mean, it's been three and a half years, but we feel like we're just scratching the surface. You talked again, longer term, about potentially being or the goal to be the market leader in a market that is growing at, you know, at this double-digit level. When you think about where the company is today and where it could be in 4-5 years, if you're able to even think about these two things separately, would you be more disappointed if the market does not grow in the double digits or 15%, or if you're not the market leader within whatever that timeframe is? Like a double negative question, right? I would be more disappointed if we're not the market leader. Okay. Fair question. Yeah. Fair answer, I guess. Okay, so maybe just moving on to, you know, to the SNM market itself and, you know, at least relative to guidance for this year. So, you know, I think guidance, you know, for the second half of the year implies maybe 25-ish% growth or so. So a little bit of a slowdown versus the 40+% growth you had in the first half of 2023. I think Q2 of last year, you had launched the new product, so theoretically, the toughest comp may have been in Q2 of this year. So how should we think about at least some of the moving pieces around the differences between the comps in the second half of the year relative to the first half? You know, look, I think that, you know, what we've kind of guided to is to say, look, we think that the market will grow. We're gonna grow faster than the market, and we think 25% is a good number for, you know, for us to guide to. Obviously, we try to, you know, beat those numbers, of course, but we think that's a reasonable approach, and so far, so good. The 25% SNM market growth, is that- No, 25% our growth. Sorry. Yeah. 25%, right- Yeah Axonics growth. Is that how you foresee the business beyond the second half of the year? Yeah, we're not backing off that. I mean, we feel like that's a reasonable expectation for us. You know, you're an analyst. I mean, everybody makes, you know, their own calculations and comes up with what they think is appropriate. Consensus is a little bit lower than that, which is fine, and, but we're comfortable with that, and we think we should be able to do this for the foreseeable future. For 2024? And beyond. Okay. Right. Okay, great. So again, I guess on the SNM market, I think you've talked about, what is it? 1,400 or so physicians in the U.S. The potential out there is maybe around 4,000 physicians that are out there. I think, you know, in the early days of being a public company, you talked about a higher concentration of procedures being held in a smaller, relatively smaller number of these overall centers that are out there in the U.S. So when you think about where you are today in the 1,400 versus what's out there in the 4,000, how much untapped kind of market potential do you think is out there, you know, relative to where you are today? Well, the hundreds of millions of dollars that we don't have yet. I mean, that's, that's the short answer. I think, when we were doing the IPO, one of the things that we observed was that, you know, the Medtronic folks put a physician finder on their website, and they basically listed 800 customers. So what we said when we were doing the IPO, and people said: "Well, what are you gonna do?" Well, I said: "Well, first thing we're gonna do is we're gonna go after these 800 customers and convert as many of them as we can to Axonics," right? I mean, you kind of made it easy for me. You told me who your customers were, and why would they be on your website if they weren't doing a good job? So, you know, that's kinda the way we started. Now we realize that there is a much longer tail, and, you know, customers in general are... We kind of break them up into three buckets. The first bucket is dabblers. There's a lot of dabblers. They do on an average, say, 15 procedures a year. Then there's the middle group, 15-50, and then there's the larger group, 50+, and obviously, there's less of those 50+... 50+... There's a lot in the middle, and there's a long tail of these dabblers. But what we've managed to do is we've seen, even if you're a dabbler and you're doing, you know, 12 procedures a year, we can easily get you up, you know, by getting you to do another 1 or 2 per quarter. That's easy. That is not a difficult thing to do. But we also believe that every physician who's dabbling in the therapy, there's no question that they could easily do 50 a year. So that is a main focus of the company, is to provide them the tools and the support that they need to get more patients to the therapy, and that is our objective. So it's not like there's a limited pool of these candidates, right? There are so many out there. And just another interesting stat, 150,000 patients in 2022 got Botox injections, and we know that at least 60% of those patients drop out after two injections. So the point is, there's a huge pool of patients, just even the ones that got treatment, but they got Botox. So, you know, that's an area that we're working on docs to understand that, you know, you went to Botox because you didn't like the Medtronic product. You thought it was the therapy of last resort. It was not MRI compatible, it was short-lived, and it was fussy. Well, that's not what we offer. So why continue to do Botox? This is a chronic condition. Botox does not cure the condition. It temporizes you, right? For 4-6 months, and then there's mid-teens rates of urinary tract infections, which are dangerous and no fun for any woman to get that. You know, that's part of it also is we, you know, we need to get and continue to communicate that this is a chronic condition. There is no cure. Let's get people a long-term therapy, and Sacral Neuromodulation is the answer. That's the messaging that we're out there, and, you know, it's one day at a time, one doc at a time, and one patient at a time. Is there any, you know, skew, you know, more toward, you know, okay, how do we grow more the market or grow more share, either coming from the new accounts that you're not in today, driving higher utilization, higher share, more away from Botox? Is there any skew there again, as to what is the bigger growth driver going forward? No, I don't think it's one thing versus another. I think that, you know, every individual account is different, right? And you gotta understand what they're doing, why they're doing it, what their preferences are, and so on and so forth. So, for us, it's number one, increasing the uptake and the number of procedures on a per account basis. That's the number one objective of the company. Second, is to bring as many competitive accounts to Axonics as possible. And if we need to use Bulkamid in order to, you know, get the introduction into that account, penetrate with Bulkamid, and then work on getting an opportunity to sell sacral neuromodulation or get them to switch, then we're gonna do that. So we have still quite a number of customers that are splitters, you know, having converted all their business up to Axonics. We still have 2,600 physicians out there that are not working with us for sacral neuromodulation. You know, a bunch of them have got on the Bulkamid program. So you can see there's just an enormous amount of opportunity here for us to gain a higher share of wallet, more customer conversions, and increases in uptake on a per doc or per account basis, you know. So that's what we're up to. And it's not just like, okay, you know, there's something in the air. No, we are actively doing stuff, you know, to bring more patients to the therapy. The number one most effective thing, and anybody who joined us in our one-on-one earlier today has heard this, is actually just getting docs to activate the patients that they've already differentially diagnosed over the past number of years, that are sitting dead names in their file cabinets or in their EMR system. So we encourage them to say, "Look, let's pull those names out. We can work with a HIPAA-compliant third party. We got these great mailings that we can do. Let's send a letter to your existing patients and just let them know you've got new technology." Include a symptoms questionnaire in there and a self-addressed envelope, and we're getting between 5% and 20% response from existing patients who came into the practice, got a drug script probably, and never came back. This is what's been going on all these years. So when we send the mailer to people, they're like: "Oh, wow! My doc actually knows who I am, cares about me, and is now saying, 'I got new, new armamentarium to offer to you.' I'm gonna, I'm gonna go back and get-- I didn't-- my problem is not solved. I need-- I still need help." And man, that's fantastic, and that, that's the most productive thing that we do. It's the least expensive and the highest reward. Now, DTC is great, but DTC is we're taking patients out of the blue, and we find that about 60% of them have never even been to a doctor before. So they've never had drug therapy. They're naive. They have to go through the care pathway to get to our third-line therapy, and so, you know, that's taken some time. But here we are, 18 months later, and now every $1 we spend, $2 come back to the company. So we're highly, really encouraged by that, and you know, the response is quite good. So, you know what I mean? There's a lot of moving parts, and we're very active with these accounts, you know, to try to get more, let's say, mind share, right? Which is really the key. And then also help them with their talk tracks, like the words that they use. And I'm sure people in the audience, we're all consumers of healthcare, you can appreciate that. How your physician introduces you to something that could help you is really important. You know, you don't wanna scare away people. You wanna be able to, you know, share with them what you've done in the past, how well it works, and, and, you know, enroll the patient into the therapy. So... You mentioned the, you know, opportunities to open accounts with Bulkamid. Mm-hmm. Can you touch on or discuss maybe the accounts at which you have today that either were already open because of Bulkamid, or where you have that overlap, where you're selling both Bulkamid and SNM Terra? I mean, are there accounts out there that still are not using Bulkamid or still not using SNM? Excuse me. I don't know where the water went, but didn't go in the right spot. It's fair to say that half of the accounts that we have doing Bulkamid are not yet doing sacral neuromodulation with Axonics. So you can see that this is a great door opener for us, and we've opened a lot of doors with Bulkamid, and we've gotten a lot of conversions because of it. And we still have a lot of opportunity that's there, right? So you can see, you know, when you ask, "Why are you bullish?" I mean, you can see all these moving parts and all, and the opportunity that we have to, you know, generate additional revenue. When you did the acquisition, or sorry, I think you recently had a deck out that showed maybe 80% share of the sling market today, with Bulkamid, or sorry, not the sling market. 80% of the bulking agent market in the U.S., with Bulkamid. So, you've obviously gone from very small percentage to- Nothing. Zero. From 0%-80%- Yes ... in a matter of two to three years. two, two years. Maybe two years. You know, so growth so far has been driven by gaining share from bulking agents. I remember again at the time of the. I'm gonna stop you there because I disagree. We're not displacing other bulking agents. Bulking was a fourth of the amount of business that we're kinda doing. Bulking was not a big deal, weren't good products. Doctors didn't like using it. They weren't that effective. They had an inflammatory response, was the mechanism of action. So bulking was never a big deal. What we're doing now is, patients are being offered either a sling or Bulkamid, and they're choosing Bulkamid. Okay? So it's not-- we're not replacing bulking, we're replacing patients who would have just been offered a sling. Now, the reality is, just being offered a sling didn't mean they were saying yes. Most patients who have been offered a sling in the past said, "No, thank you," because it's a couple of weeks out of my life. There's recovery, there's side effects, there's all these things, and so it wasn't as attractive, and so forth. But if you get Bulkamid, you're not getting a sling. So this is the stress urinary incontinence patient now has a choice, you know, Bulkamid or a sling, and Bulkamid is a free lunch. There's no side effects, there's no adverse events, there's no downside. Just because you had Bulkamid, doesn't mean you couldn't get a sling in the future. So it's easy for them to say, "Yes," it's inexpensive, it's covered by insurance. You know, there's a lot of... And it's a, you know, 10, 15-minute kind of procedure. So, there's a lot of attractiveness associated with that, and it works immediately, and I want to double underscore that. Imagine, you've been leaking for however long, since you've had some children or whatever it is. You go in, and in a few minutes, boom, boom, boom, and now you're dry. It's like: Wow! This is amazing. I'm so glad that you suggested this to me. Right? I mean, and now what do they do? They go home, and they tell all their girlfriends about it. Because people don't talk about problems there's no solution for. But once you have a solution to a problem, and you know your other friends and family have similar issues, then you can see that it creates satisfaction from the patient, satisfaction with the doctor, and then the notion of getting referrals and so on and so forth. So it's a really powerful product from that standpoint. There's an actually interesting, like, a little bit of an emotional aspect associated with this, 'cause people are truly amazed how well it works and how quickly it works, and the fact that they are dry. You know, it's not like they're kind of dry. No, they're dry. But a caveat, as long as the doctor follows the technique and puts enough material in, they're gonna do really well. So you think that for Bulkamid today, that there is still plenty of potential to be offered as an alternative to sling procedures? This is why I wanted to interrupt you and clarify that. This is not about bulking. This is not about... There isn't-- You know what I mean? It's not like, oh, bulking was used in lieu of slings. It wasn't. Okay? So this is right now, it's either a sling or Bulkamid. Those are your choices. No one is using these other bulking agents. I mean, we're saying 80%-85% today, by the end of this year, it'll be closer to 100% because the docs are stopped using these other agents because they don't work as well, and they have an inflammatory response and all these other things. So really, we're competing to treat stress urinary incontinence patients with Bulkamid in lieu of a more invasive procedure. I mean, I think it's, it really as simple as that. Okay. Do you get a sense that because of Bulkamid sling procedures or the number of sling procedures in the U.S. have gone down because you have taken share from No, no question about it. Okay. I mean, no question about it. You know, we'll see now, at the end of 2023, when we look. You know, 'cause you only can get this data retrospectively. We'll see how what happened in the sling business. You know, it was about 120,000 procedures, you know, back when the last time we pulled up this data, and we'll see, you know, what the impact is. But, you know, we don't see slings on the decline here, not on the upswing. You know, look, back in 2015, 350,000 slings were done in America. Then the mesh controversy came in, and that declined the number, right? But 350,000 people got slings back just a few years ago. So we know that this can be hundreds of millions of dollars and hundreds of thousands of patients being treated with this really cool hydrogel. So we're really, you know, quite optimistic about what the future is there. Now, having said that, we're in this sacral neuromodulation business, okay? So this is not, you know, it's not like we're all, you know, only focused on Bulkamid. Bulkamid's a great door opener. Bulkamid provides nice margins. We're happy to have the business and all the rest, but, you know, we're really, it's really the focus, what's gonna move the meter for the company is increases in sacral neuromodulation. But I'm happy to have a $200 million-dollar business, when nobody expected that to happen. There's been a lot of questions from the buy side and sell side just around this emerging implantable tibial nerve stimulation. I know you might not be so thrilled to talk about that, but for the sake of the audience, I would love to just get your view, when you consider some of the reimbursement updates that we've had since July, you know, the efficacy, the battery life of it. So look, as you might imagine, I know quite a bit about implantable tibial nerve stimulation because we looked at it starting in 2014, and we decided as a company not to do it every single year. So what are the facts? There was one product approved, the Valencia Technologies product, which is a coin cell battery that goes in the ankle that lasts one, perhaps two years, okay? There's been virtually no uptake in that product. So if I spend one more second talking about something that has virtually no uptake, then that's, that's a waste of time. This is the wrong nodal target. It's downstream from the center that communicates with the brain. It's nothing more than something slightly different than peripheral tibial nerve stimulation, which has been around for decades, but you had to put a needle in the ankle, and you had to come to the office to get it done. So the whole concept is, "Oh, we'll, we'll put a lead, or we'll put something in the ankle. You don't have to come to the office." Okay, so that's the Valencia story, okay? BlueWind just got approval. And for the record, nobody knows what the label is from the FDA, okay? I understand there were some loose comments made in a news release, but that's not official FDA labeling, okay? That embodiment is a lead that goes into the tibial nerve, and then you have to externally power the device, and in their clinical study, that meant that two times per day for 30 minutes, I had to put a cuff around my ankle to stimulate this lead, okay? Efficacy is 65% compared to our 90%+, and once again, people are gonna have to be actively involved in that therapy. All right. So we're not too excited about that. I think it's much better than Valencia, which is somewhat close to ridiculous than anything else. I'm sorry. You asked me, I'm just gonna give you my opinion. All right. All right, now you go to reimbursement. There is no real reimbursement for ITNS. The codes will come out in January. There will be no physician fees associated with these codes, and they get Cat III codes, and anybody who knows anything about Cat III codes realizes that that means that all the private insurance companies are going to evaluate and investigate an experimental technology, and they're gonna take 3-5 years to figure out whether they want to pay for it. So this story that it gets brought up, right, it has years to go before we actually know what it's gonna be, right? What the reimbursement's gonna be, what physician payments are gonna look like, how well the products really work, whether people are adopting it or are gonna be compliant or not. So, you know, I know I'm getting questions today, but it has no impact on our business today, and we don't anticipate that it's gonna have much impact for the foreseeable future. And, you know, maybe 3-5 years from now, maybe they're able to get some patients enrolled and do some stuff and help to grow the market or whatever, so. But at the moment, it's not an area that we're excited to—why would we want to get into a business where there's lower efficacy and so on and so on? 30 seconds left. Sure. We're gonna ask about profit. You did 20% Adjusted EBITDA in the quarter. Wondering the level of stability, well, I guess, Lisa, were you starting off? But I think, at least it looks like from the street perspective, we have some moderation in the back half of the year, improving thereafter in 2024. So wondering just about your comments on what's the biggest driver, where we are today, where you see profit going longer term? Okay. Yeah, we think the Q2 result was because of natural operating leverage in the business. We weren't running the business, driving to a specific operating margin. So we do think this is sustainable, that financial profile, we saw it in Q4 as well, so we expect to see it again. There will be some modulation, you know, quarterly, as you mentioned. Q3 consensus has revenue coming down a bit, so we do expect the adjusted EBITDA percentage to come down accordingly. Long term, you know, we expect continued strong operating leverage. We expect revenue to continue to grow in excess of OpEx. So we do think, you know, without speaking specifically to 2024 guidance, we expect operating margin to be positive in 2024, and we've said that we do see a path to, you know, 20%+ operating margins in future years. All right. We're out of time. Thank you both. Thank you. Pleasure. Appreciate it.