Good afternoon, everybody. This is Travis Steed, Bank of America medical device analyst. Next up, we have Silk Road, Erica Rogers and Lucas Buchanan. Thanks for joining us. It's always our pleasure to be here, Travis. Thank you for the invite. All right, great. I know you guys just reported Q1 last night. Read the transcripts, have been pretty busy. I didn't fully understand. I feel like I'm a little confused at this point. I don't know if you can just kind of shed some light on what happened on Q1. Yeah, absolutely. First of all, I wanna start by saying we're really extremely proud of the efforts of the team. I think the thing that really reflects our success is the growth in procedures. Not only did we see quarter-over-quarter growth in procedures at 5% quarter-over-quarter growth, more importantly, we continue to see the metric of procedures per physician go up. This was our sixth straight quarter in a row of an increase in procedures per physician, which tells you that what we're doing at the commercial level is working. That commercial execution to drive physicians up the adoption curve is working. We came in essentially flat or exactly flat to Q4 on revenue. Consensus had us a tick higher than that on revenue. Some questions came in the call last night, you know, why is that so? Why were procedures outpacing growth slightly than revenue? We wanted to explain to folks kind of what happened within the quarter, some really positive dynamics. We ended 2022 with 70 territories. We started January 1st with 70 territories. We had guided last year that we would grow the field organization to between 70 and 75. We started the year with work to do on the territory expansion. Let me just step back a second, Travis, and tell you why are we doing this in the first place? Why are we growing territories? Why are we expanding territories? We've been surveying our customers to understand what are the barriers to more adoption, why isn't it going faster, and what's holding our surgeons back. The number one thing we hear consistently from customers is, "I need to gain more comfort with TCAR." One way to drive comfort with TCAR is to increase the sales rep touch points, increase that frequency of the sales professional in front of the physician. That is the strategy behind increasing the number of territories. We started out January first with an aggressive goal to get to that 75, where we left off in 2022. As we started executing that plan through the quarter, some really fantastic talent emerged. You know, let me remind you that the labor market is tight, and finding great sales talent has been challenging on and off, and some really terrific talent came our way. We pushed on the gas pedal toward the end of the quarter on expanding our territories in response to this great talent. Normal course of business, absolutely part of our plan for 2023. What it did was cause a little bit of disruption. You know, you're taking a geography, let's call it Houston, and you're dividing that up. You're moving hospitals from rep A to rep B, and in the process of doing that, there was a little bit of disconnect, temporal disconnect, on capturing reorders at the hospital level. Hospitals use inventory that they own. They use that inventory. They need to reorder that inventory. With that modest slight disruption, there was a little bit of timing disconnect. I assure you, hospitals need to put that inventory back on the shelf. You know, obviously, there's gonna be a catch-up in Q2 to sweep in that inventory that just missed the order timing in Q1. It's really as simple as that. When does the sales territory shifts impact revenue per procedure but not procedures? Right. It's a good question. You know, in part, we're really pleased to see that healthy growth in procedures, despite the fact that the quota-carrying rep is, you know, a little distracted in dividing up their territory. Remember that the clinical specialists are there to cover cases, to help work up the cases, determine the case plan. That activity was relatively more normal and less disrupted throughout the territory throughout the quarter. It's really this, what I would call very modest growing pain of a little bit of disruption at the account level for the quota-carrying person only. We've seen this phenomena- That's right. ....is this on? Yep. Yeah. We've seen this phenomena, you know, every quarter of our commercial existence. Our revenue in a period is really our units sold in a period divided by procedures in a period, which is our really our units utilized, with those are temporarily disconnected. When you divide revenue divide by procedures, we've bounced around between $6,900 and $7,400. Last year's average was $7,100. It's affected by multiple factors. What happened was this was in the normal realm of variation, and we'll be up, slightly up and slightly under for quarters to come. This was within our expectations, but unfortunately, it missed the point expectation. We made the right business decisions. Yeah ... company up well for the growth into the future. Yep. When does all this start, and is it kinda complete at this point? Yeah. I would say that, you know, our goal is to grow territories over the course of 2023. We are attempting to front-load that as much as possible. I think it's safe to say that the bulk of that is kinda behind us, but there's some modest things to do throughout the year, but I don't think that will go noticed by anyone. You know, certainly, I wanna make it clear that any of that temporal disconnect of restocking the hospital shelf is gonna be made up for, you know, in the next weeks and months. When you've done this in the past, did you see a similar impact on this, or is this kind of a one-off? It was different this time than it had been in the past when you've added salespeople. Yeah. No. We have seen this. As Lucas talked about, you know, this variation when in that quarterly math, revenue in the quarter divided by procedures in the quarter. We've seen that vary from $6,900 to $7,400, right? It's kind of normalized in around that $7,100, which is where it was last year. When we move territories around, and we move hospital accounts around, sometimes there's a little bit of disruption. You know, we had a little more than that than we anticipated. In response to, it feels like the right thing to do to open these territories and move these people now. As Lucas said, absolutely the right thing to do for the business, got it a little bit off in our modeling. In terms like you expected this when you gave the guidance for Q1, but just got the revenue procedure off a little bit. Yes, exactly. Okay. Are you seeing the catch-up happen already- Yeah. ...in terms of the Q2? Yep. Did you bake that into the guidance? Yes. Okay. Yeah. I mean, it nets into, you know, slightly more procedures, slightly lower revenue per procedure, slightly ever so lighter on first half, slightly heavier on the second half. All of that nets to roughly, you know, $180 million at the midpoint. Yep. Okay. how are you thinking about Q2, the kind of progression over the course of the year? You know, we will see quarterly growth quarter-over-quarter. We said at the Q4 earnings call that this would be a back half loaded year, as they always are in high growth medtech, right? It makes sense that Q3 and Q4 are gonna be bigger than Q1 and Q2. We're gonna see incremental growth in quarter-over-quarter and importantly, incremental growth in that procedures per physician metric. Okay. Then there was, I think in the middle of earnings call last night, a shelf that got filed, so wanna make sure to get the message on, like, plans for financing or if that was just housekeeping. The message is good corporate hygiene and housekeeping. Our prior shelf expired last Friday, so we tucked it into the queue. It was convenient. Okay. In Enflate balloon, I guess not a lot of impact in Q1 on the revenue per case. I'm just curious how you're seeing that launch and what you've included in the guidance. Absolutely. Enflate balloon is the fifth product in the portfolio for the treatment of to perform a TCAR procedure. The reason we developed that balloon was to improve the ergonomics, the ease of use, and incrementally, slightly better on the safety profile of balloons in a TCAR procedure. We started a limited market release, you know, last year, and that was going well. Just in Q2, we've entered into the full market release. Travis, we're just in that part where we're doing hospital contracting, getting the product on the shelf in the hospitals. What I can tell you is that the response from physicians is quite positive. They like it a lot. It is much more ergonomic. It is much easier to use. How should that impact the revenue per case in the model over the course of this year? I think it's like a couple $100 for the balloon. Yeah. I mean, the impact is gonna be modest 'cause it's not everywhere at once, and it's not utilized in every single case with a light switch. It'll gradually provide a tailwind- Okay ...to the to that kinda total procedure revenue opportunity. Where do you think utilization goes kind of over 2020, you know, next year? This is an interesting product 'cause the neuroprotection system, you use one in every case, right? You have to. You use a stent, sometimes in rare instances, you use two stents. With a balloon, it's dependent upon the anatomy and the lesion. Sometimes if it's really tight stenosis, they might predilate before they lay the stent down. Sometimes they may post-dilate the stent to you know, if it's calcific or something to expand it. It's more variable. We've made a bunch of assumptions, which are baked into our guidance. As we get actual experience, we'll have a tighter view on that. Obviously, we know how many balloons prior to our balloon are being used and how many procedures, that's informing our thinking. It's relatively high fidelity, and it's baked into our guidance. Other things to throw into the procedure mix to continue taking up revenue per case? Yeah. I'm glad you brought that up because our goal is to continuously improve TCAR. We're not gonna sit back on our laurels and assume that, you know, it's as good as it can ever be. You saw us, you know, develop and bring to market this balloon. What we also talked about in the quarter was 510(k) clearance for NPS Plus. That's Neuroprotection System Plus. That's our latest and greatest neuroprotection system. It has some nice new features, some ergonomic benefit for physicians. We changed the packaging, which sounds sort of incremental, but it was important to the overall ease of use in the operating room sterile environment. That's an opportunity to not only continue to delight our customers with a refreshed set of products for TCAR, but it's also an opportunity to preserve price over time. The story on NPS Plus is we'll enter into a limited market release later this year and then ultimately a full market release. That will be a gradual phase in as hospitals burn down their inventory of the current NPS system. That's another example. We are always looking across the landscape from stents to guide wires to NPS to ask ourselves the question: how can we further improve, reduce the morbidity and mortality associated with the treatment of carotid artery disease? What's the price up-lift on NPS Plus and the key differences? We have not talked about that yet. I think we're gonna get into a limited market release. We'll pressure test some of our current assumptions in that LMR, and then come back to you with a better answer. Okay. That's fair. I guess the question on the NCD, probably in July, probably the way I would phrase the question is, let's say it goes through as proposed. How do you see that impacting both the near term and kind of a longer term opportunity for you? Right. I like this question around the national coverage determination because the good news about that is CMS is taking a really deep dive into the data, and there are no more better and more recent data than on TCAR. Of all the procedures they're gonna be looking at in this review under the national coverage determination. Just to highlight that point, Travis, 11 papers published in Q1 alone in high impact factor journals, 44 papers published in 2022. The Vascular Quality Initiative, the collection of real-world evidence is really paying off. We like this idea of CMS reviewing all of those data and making a determination. They've obviously leaned in well to TCAR and done that recently, right, with the expansion into standard surgical risk. Going into this process, we're in a really great spot. As such, you know, our goal is continuously to compete against carotid endarterectomy. Make no mistake, that is still the dominant player here, which is not part of this NCD. We're competing against CEA, and we have lots of room to run in that market opportunity. As it relates to transfemoral CAS, they'll also be wondering, you know, asking themselves, "Should we broaden coverage?" This is about coverage, not payment. Let me make that very clear. They're asking themselves, "Should we broaden coverage or release some of the handcuffs and restrictions on transfemoral carotid stenting?" Which is a 30-year-old procedure, that's, you know, been around forever. You know, whether or not they say yes or no to that, we see all of that as favorable to TCAR. What about the other side of the reserve? If it goes through, do you see a situation where CAS goes up or? Yeah. I think for our customer base who are vascular surgeons, let's be clear that vascular surgeons today control and dominate the treatment of carotid artery disease. They have already voted with their feet, that's the first thing they give up is their transfemoral CAS business, and they move that immediately to TCAR. By and large, our customers don't perform transfemoral CAS anymore, for the most part. Really what you're asking is what happens to these interventional specialties who perform transfemoral CAS today, and will they be able to perform more? Maybe, interventional cardiologists might screen more of their own patients and see if there's carotid lesion there and treat those patients. If we look at where our patients come from, where do vascular surgeons get their patients? 40% of them, first of all, are symptomatic, come from neurologists who are very conservative, right? Neurologists aren't in the business of taking increased risk, stroke risk in the treatment of this symptomatic carotid lesion. That referral pattern well established 40% of the procedural volume from a neurologist with our vascular surgeons. You look at the other 60%, and you say, "Where does that come from?" Well, that comes from internal medicine specialties predominantly. Internists, neurologists, internal medicine, cardiology, all of whom are also conservative by nature. That is a well-worn referral pattern that has been in place for 70 years. We don't predict disruption in that referral pattern. Whether or not the interventional specialties among their own, you know, unique referral patterns find incremental disease could be a net positive for us in terms of expanding the treated patient population in this market. I think the part that's also interesting that people are starting to talk about more is competition's actually a good thing. That kind of turf, you know, sort of fear that might exist with a vascular surgeon incrementally pushes them more toward TCAR because the procedure that you're gonna compete with against your interventional colleague who's doing minimally invasive transfemoral CAS is your minimally invasive TCAR. For all of these reasons, no matter how this slices, we feel like it's net positive regardless of the outcome. The vascular surgeons that are doing TCAR, I mean, for the most part, they don't have interventional skills, not doing CAS? No, vascular surgeons do have CAS. They can do CAS. They absolutely have the interventional skills to do CAS, and many of our customers were doing CAS, but they quickly abandoned CAS for TCAR. Okay. Travis, keep in mind that the barrier to entry for CAS is not reimbursement- Yeah ... coverage. There are real structural issues in the market that we'd be happy to go into, but the competitive tension and the barriers to entry are net positive to TCAR, we believe. Yeah. Glad you brought that up. The barrier to entry is the clinical data on the transfemoral CAS. Okay. No, that's helpful. When you think about the chances of this NCD going through as proposed, like, how are you thinking about that? You know, if I could nail predictions on CMS, I would not be sitting here. I'd be buying and trading all the stocks out there. Right. I'd be super rich. I'm not in the business of predicting CMS. I can tell you that we have a terrific relationship with CMS that started before I came into this role 11 years ago almost, and has carried forward for the last 11- years. We have consistently asked CMS, "What is important to you?" As opposed to coming into them and saying, "Here's what's important to us, CMS, and we would like you to respond to that." We've come in the door, and we've said, "What is important in this disease state, and how can we help you, CMS, achieve that?" What they told us is, "We need a procedure that is generalizable across all physicians, all skill sets, all patients in all institutions. It cannot be a procedure that is performed by an elite group of surgeons in academic centers in high population areas. Those are not predominantly our constituents as CMS. Check, TCAR, generalizable, 2,500 surgeons trained all across the country in every type of hospital, right? How important are the public comments in their whole process? I think it's part of the process. They definitely, you know, review the public comments. They were very specific about, "In your public comment, you must cite the literature that supports your argument." About a tenth or less of the public comments did that. All the ones that didn't will be dismissed. Their real task is to partner with AHRQ, A-H-R-Q. This is their process. They'll partner with AHRQ to review the data, to read the literature. That's what they do. I'll give a more candid answer, based on some people that we know who used to work for CMS. They have to, right? Yeah. It's part of being a public government entity. They are very sophisticated in what they do. The public comment is something that they have to do. That makes sense. If I wrote. You know, if Lucas Buchanan wrote a comment, it would not be weighed the same as you know, a society or somebody else. A corporate comment. Right. Right. That's very fair. When you think about the penetration in TCAR, I guess one question I'd have is the sales reps that you're hiring now in Q1, like, do you expect to see a little bit more of a push and an inflection in some of the penetration? 'Cause in some ways it's been a little slower than I would have thought with standard risk on the market. I would have thought you could have gotten a little bit more of an uplift in the penetration with standard risk and, you know, all the things that are, you know, had tailwinds in your favor. Yeah. We're pleased with the penetration, and we're pleased with that metric of procedures per physician in the quarter-over-quarter growth in that. But to your point, in order to get to the standard of care, which is really what we're talking about, and drive that penetration from, you know, collectively 12% of the market ending 2022 to ultimately 85%-90% of the market, it takes breaking through the 70 years of inertia on carotid endarterectomy, and that's what we're doing with these sales expansion plans. I think what's safe to say is all of that is baked into our thinking around our guidance range. What about standard risk? Like, it's been out, I guess, two, three quarters now. Like, are you seeing more momentum around that? You know, is it kind of steady state? We are seeing more momentum collectively. That is true. Reminder that our customers never thought clinically the same way FDA and CMS do. They never divided their universe of patients into standard risk and high risk. We did the hard work for many years of going in and explaining to surgeons, "These are the criteria that qualify to be on label and on coverage." Surgeons don't really think that way. I just spent a bunch of time with customers out in the field and I was asking them these questions, and what they're telling me is they're more and more and more comfortable in treating that patient who's less sick and less frail. You'd think it would be the opposite. But the reason they start there is surgeons have a do no harm... All doctors have a do no harm first mentality. I'm gonna start in patients who are very sick, very frail, in whom I'm pretty certain an open surgical procedure puts them at risk of a complication. That's where I'm gonna start my TCAR journey, and I'm gonna stay in that lane until I get so comfortable with this procedure that I can open my aperture a little bit. I'm gonna stay in that lane for a while. I'm gonna open the aperture a little bit more. That's in fact what we're seeing. We don't report on standard risk versus high risk, but we are seeing this general momentum building. We said it would be incremental crescendo over time, and that is precisely what we're seeing. Okay. Anything else you need to-- You think in order to get to that 80%, you have everything you need to get there, just really just time at this point? Yeah. This is the question that we ask our customers, right? We do these surveys, and we try to understand what is it that you need in the way of clinical evidence. I think the clinical evidence is there. The ROADSTER 3 study is important. That is the first study that is a prospective, very clean, cleanly designed study in standard surgical risk patients. I think that incrementally helps on the margin as a tailwind to drive into that lower-risk patient population. The number one thing, as I said at the top of this conversation, Travis, continues to be, "I'm gaining my comfort level with the procedure." By that, they don't mean how to hook up the device and how to deploy a stent. By that, they mean their ability to predict what happens on the operating room table and what happens in the first 24- hours after the procedure. That is a well-worn path for them with carotid endarterectomy. That clinical confidence, that clinical ability to predict the outcome is what we are trying to replicate. What's the timing again on ROADSTER 3? ROADSTER 3 is very proud to say that we eclipsed the 100 patient enrolled mark in Q1. We're making great progress, in fact, slightly ahead of our own expectation on Q1, which is terrific. The target is 400 patients enrolled. I think it's safe to say we won't have a readout this year on the outcomes. If it happens, it would be later in the year. It certainly won't be in time for the Society for Vascular Surgery Vascular Annual Meeting in June. It's going well, and we're pleased so far. You also got a clearance in China, so wanted to touch on that- Yeah ...kind of what it takes to really get China off the ground. Right. We have two parallel paths going on in China. One regulatory path, the neuroprotection system, one for the stent. You're right, we got the neuroprotection system cleared in Q1. We're excited by that. Next up is the stent. That is going well. The dialogue with the agency is going well. I don't think we'll see any hiccups in that process. Now that I say that-- No, I'm kidding. I don't think we'll see any hiccups in that process. That's going well. Simultaneously with that, we are talking to potential distribution partners in China. There will also be some work to do on reimbursement in China. In Japan, both devices are already cleared. We did that last year. Excited by that. We're preparing the reimbursement submission, and once that gets closer to being submitted or is submitted, I think we have to hold off on predicting the timing. Just one quick addition. We just got the NPS Plus cleared- Okay ...in the United States. Right. It makes sense to bring that product to those markets as well. There's a layered on regulatory effort as well. Would you wait and launch wait until that gets cleared before you launch in Japan and China? Well, there's reimbursement, there's partner, there's regulatory. We're managing all of those parallel paths to get to the right outcome. I mean, our goal is the same as the U.S., is set the therapy up for success, which is really driving great outcomes and a meaningful physician training program, and take it, you know, to the market similar like we did with the U.S. I think the short answer to your question, too, Travis, is yes. Our intent is to launch NPS Plus in China and Japan, because we don't wanna have two different manufacturing lines for two different versions of NPS going at the same time. What Lucas is describing is they're probably crossing the finish line around the same time, all these, you know, parallel efforts. Okay. Then the timing on the China stent approval? Next year? First half next year? Yeah. Let me hold off in getting specific on that. You know. They've been hard to predict. Yeah. Just as the U.S. FDA has been. Yeah. Let's not try. We'll surprise you, like we did with NPS. All right. right. That works. When you think about the reimbursement, the conversation you have in international, in China and Japan, like, do you expect ASPs to hold up, you know, versus where U.S. is today? That is the goal. Okay. That's fair. Last minute here on margins, Lucas. Any update on how, one, how you think this year's margins play out? There was some movement in gross margins with the Q1 stuff, so wanna understand the moving parts there. Yeah. Also kinda longer term. Sure. Historically, margins have been kinda low to mid seventies. Last year we had a meaningful effort to invest in capacity and risk mitigation and set up a second manufacturing site, and brought it online in Minnesota. Now we have plenty of capacity, that did bring additional overhead, obviously, which hits our gross margin. In Q1, our margin actually went down to 69% from 72.6% in Q4. As the CFO and as a shareholder, I'm not happy about that. As a COO, the silver lining here is our quality system is working. Our supply chain team identified an issue with a particular component and a vendor. We fixed it in Q1 and partially into Q2. We took some period expense associated with that. For the remainder of the year, we should have some slight improvement in Q2 and then more in Q3 and Q4. For the year, that probably means low 70s%, relative to the drag from this particular issue in Q1 and partially likely in Q2. Okay. Any questions from the audience? Okay, I think that's it. We'll end there. Thank you. Thanks so much, Travis. Yeah, of course. Thank you, Travis.