Everybody, Travis Steed, the Bank of America Medical Device analyst. Next up, we have Silk Road Medical, Chas McKhann, Chief Executive Officer, and Lucas Buchanan, Chief Financial Officer. Thanks for joining us today. Thanks for having us. Great. So, Chas, I guess you're kind of six months into the role now, since joining Silk last year in November 2023. Yep. Just kind of what are some of your kind of learnings so far, as you've been in the role and how you're thinking about things strategically from here? Sure. Well, listen, thank you for having us. We appreciate it. It's been a great day. It has been six months. I joked earlier, sometimes it feels like yesterday, sometimes it feels like dog years, but that's kind of the way these jobs are. But it's going really well. You know, I was going through my interview process during a kind of tumultuous time in the markets in general, but also in the company. And there was a lot of sort of new noise going on about how the market was evolving. And yet I did my own homework, and I'm like, "We've got a really good market opportunity, a really good product, a really good team." And all of that has been validated for me in my first six months. So, you know, carotid disease is a huge issue. It's still undertreated. It's growing as you get just demographic growth. And so, you know, huge unmet need still. TCAR is a fabulous procedure. We continue to see because we have a registry we've got data. We're, well, we're about to have this summer our 100,000th patient will be treated with TCAR. And we've got data on almost all of them through the VQI registry. And so there are publications now, one that's about to come out, with 50,000 patients. We don't see that in med tech, right? You see that in pharma. And to be able to show consistency in whether it's new operators, old operators, academics, community-based, you know, you name it, we can slice it and dice it and show very consistent, predictable outcomes. And that's unusual. And so it's a great procedure. And then we've got a fabulous team, right? From inside the company, we've got, you know, people who really grew up in the carotid market, whether it was at Medtronic or at Cordis or at Boston Scientific or at Abbott, you know, people who really know this market really, really well. That's true in-house with our leadership team. It's true in our sales organization where we've hired really well. There really is no company of any real scale focused on carotid artery disease the way we are, right? You've got the big players. It's a small portion of what they do. And again, we come from a lot of those companies, but they, they invested a ton of money into it in the 2000s. It didn't really materialize. So it's now a much smaller part of their business. And then you've got a couple of smaller players who are, you know, talk about making inroads, but are, you know, literally $hundreds of millions away in investment to get to where we are today. Any surprises that kind of the first six months in the job or things you didn't predict or things you think about changing that you didn't before? Yeah. No, I think from a, again pleasantly surprised by just I knew this coming in, but just sort of seeing the culture of the team is in great shape. You always, you know, transition's gonna be tricky, but we've got just a really good spirit on things. I now appreciate better so our primary customer base is the vascular surgeon. They tend to be a relatively conservative lot. They have a good procedure with a Carotid Endarterectomy. And so that's what we are comparing to. And so the needing kind of all the tools in the market development playbook, whether it's, you know, clinical data or patient marketing or referral marketing, it's sort of all of the above to keep moving people away from a procedure that they really do like. I appreciate that much more now having spent a lot of time out in the field and talking to them. But I still like our chances 'cause we've got a really good procedure that's better for patients. And that's on us to keep changing the hearts and minds. Right. Right. Just kind of stepping back a bit, you know, just reported Q1 last week, kind of beat by $4,000,000. It was, I guess, a little earlier launch in the tapered stent, higher reorder rates. Just kind of thinking about how Q1 kind of played out kind of versus your expectations kind of a couple months ago. Sure. Yeah. No, so we had a good start to the year. I was really pleased both from an overall revenue standpoint, growing at 21%, growing our procedures by 15%. And so, you know, just a very good start to the year. We kept our guidance mostly. That there's just still a lot kind of new, right? It was my first full quarter on the job. It was, you know, the first full quarter of the new NCD environment. It was the first full quarter for a number of the reps that we added to our organization last year. We did have some new, just recent, you know, we just started our tapered stent launch in March. So just a lot of kind of new. We had just provided our annual guidance, what, a couple months before that. So we really talked a lot about it. We made a conscious decision to say, "Let's get through the first half of the year, a little bit more runway, and then provide a more fulsome update for the full year. Are those the kind of uncertainties that you have in the business that kept you from raising the full-year guidance? Like, anything that is surprising on that, or is it more just like time that you need to? No. I mean, if there was a way to not reiterate guidance, but just sort of no comment on guidance, it really was the latter. It really was just, "Let's play this out a little bit more, and then we'll provide a full update here after this coming quarter. Okay. Sounds good. And, kind of think about the higher order rates in Q1. Do you kind of see that in Q2 and kind of any way to think about the cadence of the year, first half, second half? Yeah. Again, we're not gonna get into any kind of updates for the quarter or for the year just to say, "Look, we know our most important thing that we need to keep doing is grow adoption." And so that's our laser focus is continuing to do that and showing consistent, procedural growth. And primarily with our installed base, while we're also still training some additional new physicians as well. Great. The NCD, finalized six months ago. Like, is that awareness out there in the field at a point now you have a good sense and can get comfortable with the NCD at this point? Yeah. So it, it's still early, right? This is for the new National Coverage Decision that came out in the October timeframe of last year. Things change take time to change in medicine. I think on the positive sides, we really did believe going into it that there was gonna be a, a kind of rise-a-tide element of awareness because of the NCD. And we quoted on our earnings call recently. We did an independent survey of 75 docs completely blinded of the vascular surgeons. And they have reported on average an increase in the number of referrals, which kind of validates that, that part. We also have very important positive pieces to it of some specific accounts that didn't want to be in the VQI registry that I mentioned. And we've said that there are more than 100 of those, which I think was higher than we honestly expected of, you know, whether it was because of the cost or the administrative burden or just, you know, legal paperwork just didn't do it. Now they are getting on board. So that's great. On the sort of flip side of, you know, the interventional side where there was a lot of concern last year about how that can affect things, I think the way we primarily characterize it is there is a cadre of people who've been trained in Carotid Stenting going back to 20 years ago in many cases that really fought for this. They have been the vocal advocates throughout. And they're excited about it. And so we see pockets of where there's some impact. What we're not seeing particularly is sort of a mad rush to go train a bunch of new people, either from societies or from industry. It's a long adoption curve. I'm sorry, a training curve for transfemoral stenting. It takes time. And that's been documented in many clinical trials. There's a lot of other things these companies are doing, right, in terms of other priorities. And so putting a huge push behind it doesn't mean they can't, and we're gonna keep watching it. But so far, it is much more sort of sporadic than widespread. Anything else you'd add on that? Well, I think it's an opportunity cost question too, right? Carotid disease is core to our customer base. It's not necessarily core to other interventional specialties. They've got lots going on in structural heart and peripheral and pulmonary embolism and thrombectomy. And so carotid is high-stakes work. So to enter something with a long, difficult learning curve where what could go wrong, as a complication of the procedure, stroke or death, it's not something you rush into lightly, right? So, you know, we're the majority of the market, 90%, is vascular surgeons doing CEA or TCAR, right? So what folks are talking about is the other 10% of the market where it's more widely distributed amongst other interventional specialties and companies. If you look at the subset of vascular surgeons who have the stenting skills too, kind of can do both, like, is there any change in that subgroup of patients like, "Hey, like, I've been doing TCAR, vascular surgeon, but I can also do stenting"? Are they doing a little bit more stenting on the margin? We've got some old dogs that we taught the new trick that were trained in transfemoral CAS, and then they learned TCAR. There's almost zero going back to transfemoral CAS. TCAR is easier, safer, more forgiving, more broadly applicable. So in our core customer base, again, that's receiving the majority of the referrals and doing the majority of procedures, there's very little interest in going back to something that has a known safety issue and significant learning curve. They know that 'cause they had to go through that learning curve, and bad things happened, and they got good at it. But it was, it's a high cost of doing business. What about some of the competitors that are coming into the market? I mean, one has data kind of mid, mid this year. Do you think that's a catalyst for stenting at all, or, how you kind of see that changing the stenting that we just talked about in the market? Yeah. So there are two new companies not new, actually. They've been around for a long time, pretty much as long as Silk Road have, but about to enter the US market with transfemoral stents. They have covered stent technologies, which is what they're trying to, you know, sort of claim to fame there. They've you know, when you look at their studies, if you back up and think about transfemoral stenting, we've known for years that with very good operators and very carefully selected patients, transfemoral stenting's a pretty good procedure. And that's what their studies are showing, right? They had handpicked patients in a very kind of controlled environment. As they come out, they will primarily be looking into that transfemoral marketplace that also has the Abbott, Boston Scientific, and Medtronic of the world. And, you know, we'll see as you get into more of a real-world setting how they perform. And then over time, how does that evolve? But we do see that overall, you know, all of these trends, that there will be a continued movement from surgery to more endovascular approaches. We think TCAR is well-positioned to be the leader there. And then we also think Silk Road with, again, more than 500 people in this space, more than 200 people in the field, is better positioned than anybody to continue to lead. If you think about the TCAR market, roughly 15% penetrated if you kind of do the math as it is today. Off memory, I think it's been going like 3-ish points a year in penetration. Is that kind of the right cadence? And so, like, if you think about 2-3 years out, you know, it's probably looking at 15%-20% penetrated? Or is there a way to kind of accelerate this? You know, kind of the first 15% was the hard 15, and the next 15 could be the easier 15. It's a great question and one that I think we're still personally, as I'm just getting on board, still working on and to understand that. I think it should be an area where you can start seeing some real network effects of, as I mentioned, with 100,000 patients treated, we're no longer new, right? I think that's and we're actually working on a whole marketing campaign around that. We just for the first time - and we talked about this on the earnings call - had one of a vascular surgeon in one of the major journals talk about, you know, sort of very openly and publicly that I, I view TCAR as the standard of care. It's kind of a and we just need more of that. We need more of sort of the surround sound that moves people from selectively adding, which is the more gradual, to kind of a network effect. And I think we can get there, but I don't have a timeframe for you. Right. Travis, if you look at the clinical data, which is even some of the most recent papers, this should be the standard of care. If you look at the economic benefits to the system and the hospital, this should be the standard of care. If you look at the patient benefits, it should be the standard of care. So we'd like it to go from 15%-80% at a light switch overnight. Obviously, that's not how the practice of medicine evolves. But the ingredients for success are there. And after many years of building, you know, five products through regulatory processes, building all that evidence, building a commercial team, building and expanding the FDA labeling, we're finally at a point where we can take all that we've built and spend all of the energy and hours in a day on driving the adoption curve. It's less about building, and it's more about leveraging. And so we're excited about doing everything we can to support that network effect and that tipping effect for something that, you know, should be the standard of care. And now physicians are finally saying that in a conservative group. So CEA had a 70-year run. We hope to have a 70-year run ourselves until the next thing comes along. I won't be here. If you think about the percent of your surgeons that are at standard of care today, like, what is it 10% of your surgeons at standard of care, 20%? Like, just think of the number of surgeons today that you have in your installed base that are kind of already at that kind of 80% TCAR. Yeah. It's a great question. So we think about that kind of moving people to what you just described and even a mentality of TCAR first, right? People typically start with more selectively, "Where should I do TCAR? What are your beachhead kind of" but we do have a group that really does move to, "I'm gonna do a TCAR unless I absolutely can't," right? And there's might be anatomically a few reasons or, you know, a certain issue with a lot of calcium, but and, you know, as we think about overall, our top decile are in that kind of truly TCAR-first mentality. So it's a good portion, but not nearly as much as we want. And so it's a good starting point. We just gotta keep driving. Yep. And how, look, what are you doing? I know you're going deeper into counts. That's, that's one thing you're, you're focused on. But if you kind of think about, like, just this you have a doctor here. He's doing, let's say, 30%-40% TCAR. Like, how do you take that doctor to, to 70 or 80? Like, I know your sales reps are in, in the procedures. Is it more about patient selection? Is it just getting the doctor comfortable with that patient that comes in the door that he can do TCAR on that? Yeah. It really is about sort of diagnosis by physician about what sort of their drivers are, right? And because Lucas just went through a sort of whole range of benefits and trying to figure out what matters to them. For some, it's about the clinical data and just doing more on the latest data. And we've now have three studies that show TCAR is better than CEA. And we didn't even expect that, I think. You know, Sumaira Macdonald, our Executive Medical Director, said she didn't expect to see the day for that. So some, it's clinical. For others, it might be the efficiency benefits where, you know, you can do a TCAR once you get experience in about, you know, 30 minutes less than you can a CEA. And so for either in the hospital setting - that means getting an extra case or two on the books - or for a physician who wants to do some cases, and they get to their OBL where they make the majority of their money, like, that's an efficiency benefit. And for others, it's gonna take the patients and referring physicians pushing. And so how so it's gonna be kind of individual. And we're working with our team to get much more sophisticated on our own segmentation and kind of diagnosis, and then how do we match the right tools to that doc. Is Chas changing this elsewhere something and the kind of the focus of this elsewhere something that's the kind of new that you've done and are focused on, you know, as the new CEO? Well, we've got a really good commercial team. So it's very much working with, you know, Andy Davis, our Chief Commercial Officer, and the rest of the team. But it's, it's an evolution, right? We've been doing a lot of this. So I'll give you an example of fellows. So another key element for us is that, you know, a new fellow coming out is, you know, they don't have 20 years of baggage of, "I've been doing CEA." And so they're very positively predisposed towards TCAR. We in the past have had very good training programs and, and education programs for fellows. We now are much more targeted on every step along the way of while they're there in fellowship, having them almost demand among their programs, "I need to do enough TCARs to be certified," so we get a benefit there. Then as they transition into practice, helping them move from pick your, you know, Northeast place to Missouri, in that transition, getting fully settled, they may not have full volumes yet to make but to make sure we get the lion's share, and then over time, they'll grow. And so already, we're doing it really well. We're now just getting better at it. Like, we're just adding to it, becoming more refined. And again, it's working, you know, across the team. That involves our clinical team. That involves our MedEd team. That involves our sales team, all working together. The younger surgeons coming out of fellowship have seemed a lot more receptive to TCAR on the margin. Exactly. Yeah. Exactly. So typically, you know, this is generalization. But like a lot of times in medicine, you've got the more established - I hate to say old dog, new trick - aspect to it of people who've been doing CEA for a long time. CEA is a good procedure. I said that before. And they might be more likely to say, "You know what? I'm gonna keep doing what I'm doing," versus someone who's more coming new to it with a fresh set of eyes. Yep. Great. So 2,800 doctors kind of trained at this point. Like, where does that need to go? Is it you're kind of slowing down the training process of new doctors and going deeper into counts? Or are you still kind of focused on adding doctors at this point? Yeah. But I think in a targeted way. I mean, I mentioned some of these what we call non-VQI accounts. Those are kind of very targeted opportunities. And the new fellows are probably our two biggest categories of new trainees, as well as others. I mean, I just met with someone who was just kind of a late adopter. And actually, this is a good example of where even discussion around the NCD, and this guy's like, "You know what? I now need to get on board with TCAR because I need to offer the best stent procedure." And he's adopted. He's a high-volume guy. And he's now building confidence and doing great. So there's some good catalysts there. So we will keep training doctors. But if there is a natural progression where it was primarily about training initially, and then over time, it's you continue to train, but it's much more about growing in your installed base. The disruption you saw in the sales force last year, that's kind of all done at this point? Everything's kind of in the rearview mirror? Yeah. We feel really good about our team. We hired a bunch of people last year. Now, some of the folks we hired, say, in Q3 or Q4, are still working their way up their learning curve, right? We hire well. We hire, you know, good, strong people. But then we put them through the ringer from a training standpoint because, as Lucas said, the downside here in carotid disease is stroke and death. So we want people who really are really, really good. And then as they go through their clinical training and then they become more consultative salespeople to really push TCAR adoption. And so that's gonna progress over the course of this year. Okay. But the overall sales retention, sales attitude, sales culture is excellent. Okay. Is this a business model where you hire reps, you get a rep class, you train them, and you kind of get the revenue per rep, and you see the growth coming from that? So this class of reps you added last year, you're gonna start to see the revenue coming through over the course of the next 12 months? Yeah. I mean, we're at the stage where these are, you know, largely either splitting existing territories or some replacement of territories or some other things. So it's kind of as they grow in, they will continue to gain in productivity, yes. But it's different than when you're in the very early stages where, you know, you only have 30 reps, and now you get to your 40, right? We're, you know, so we're at the stage now of really kind of getting everybody fully up to speed so we can sort of fire on all cylinders. And this is something where you have a rep in every procedure. And just trying to think about the leverage in this business model. You, you know, pretty high intensity, a lot of downside risk, as you said, to the procedure. So you want a rep there. Like, how are you thinking about scaling this business? Yeah. We are in most of the procedure. There's certainly some of our top accounts where we probably don't necessarily need to be anymore. But that's also really good selling time. And so we get a lot of benefit for it. But we are in a pretty concentrated market where we know the hospitals. We know the physicians. We've done a lot of modeling, and Lucas can speak to it, that say we're in the right range with 85 territories. Then we have almost an equal number of our therapy development specialists who are clinicals underneath that, where we really do feel that we can, you know, basically be pretty stable in our sales organization and grow procedures from there. Doesn't mean we might not do, you know, some splits, you know, some changes on the margin. But what that means is, you know, in Q1, our total and by the way, that's true pretty much across the board, where we feel like we've got good scale. And so if you look across the entire year, our actual cost base is gonna be pretty darn flat. And so anything we grow from here, we start really gaining leverage. And then I'll, you know, then to say, "So how does that then build towards profitability?" We just started reporting adjusted EBITDA in Q1. Our adjusted EBITDA loss was only $4,000,000. And so that's typically a more expensive quarter for us. So if again, we're able to progress, we're a lot closer to kind of market break-even from an adjusted EBITDA. And really, all we're adjusting for is stock comp. You take that out. We're a lot closer than I think a lot of people appreciate. You wanna add to that? Now spoken like a true CFO. Should you do you wanna talk about the modeling you did, Lucas? That he mentioned? What's that? Some of the modeling you did on the sales force that you mentioned? Well, it just gets back to we have the luxury of a very concentrated procedure volume, right? 170,000 procedures are done by a very finite group of hospitals and physicians. When we look at how many physicians and how many hospital accounts a rep can support, 85 is roughly the right number. And we've got a high ASP procedure in a concentrated market that allows us and we're only 15% penetrated nationally. So we've got the coverage model. We've got the cost base to support a much higher revenue line. We've got the manufacturing capacity to support much higher unit volume. So it is after many years of blood, sweat, and tears and building and creating this market, we are now in the position to go, you know, harvest and drive operating leverage. You talked about gross margin improvement every year. Like, what's the cadence of that? Kind of what's the total opportunity you could kind of see in the gross margin line? Right. So we in the last couple of years invested in additional manufacturing capacity. So we went from one manufacturing site to two. So that increased our overhead. But when we were at one manufacturing site, we were at 75% gross margins. And then we dipped when we got to the second manufacturing site. Now, as we increase volume, we'll have gross margin improvements ahead. We talked a little bit on the Q1 call of some positive variances in Q4 and Q1 of this year. We do expect a step down 'cause those variances will go away in Q2. And then we'll get back to more normalized, kind of very modest volume-driven gross margin gains. Longer term, like any company, we've got, you know, design for manuf design for manufacturability and other, COGS and supply chain risk reduction initiatives to see if we can climb above 75%. And we've done a great job on price all the way through, right? We've got 5 different products. We've been flat to slightly up on all of those in our commercial existence to date. Structurally, is there any reason why this couldn't be an 80% gross margin business at some point? Well, we certainly haven't pointed to that or guided to that. But I don't think it's out of the realm of possibility. Right. That's helpful. And then thinking through leverage, R&D, SG&A, and obviously, probably get a little bit more leverage on SG&A, I'd assume. How are you thinking about the kind of OpEx growth versus the revenue growth profile here? Yeah. So we were $51,000,000 in total OpEx in Q1. And we said, as Chas just mentioned, that's a pretty good guide on an absolute dollar basis for the remaining quarters of the year. So, so call it $200,000,000 and change. A little over $40,000,000 of that is the non-cash stock comp expense. So call it $160,000,000-ish kind of cash P&L expense base. And again, kind of at-scale, R&D function in terms of products and trials at scale, commercial team at scale, G&A back office, plenty of manufacturing capacity. So, you know, the you know, sometimes we get asked, "Would you would you bias towards revenue growth or bias towards profitability?" And in this type of model and where we're at, you can have your cake and eat it too, right? Revenue growth is operating leverage, is the path to profitability because we've built to scale now to support higher penetration in the future. Then thinking through other things, kind of add revenue per procedure. How sure are you thinking about the revenue per procedure line kind of moving forward and kind of the opportunity to kind of build on, on that piece of the revenue model? Yeah. So just as a quick reminder, our business model is, when we sell units to hospitals, we recognize revenue. Then physicians use those units, you know, sometimes the same day, sometimes a week later, sometimes a quarter later. And we report procedures. So there's a time difference between revenue recognition and procedure count. And that's because, unlike most MedTech companies, we don't consign. So we don't own the inventory on hospital shelves. Hospitals own their own inventory. And that's obviously a much more favorable working capital environment for us. And so, we report procedures 'cause we know our procedures. A lot of MedTech companies don't know how many procedures are going on. They just know how many units they sell. And so that gives the ability to kind of look at both metrics. It also creates a little bit of confusion. But revenue per procedure is just another way of saying, "How many units did we sell in the quarter versus how many procedures did we do in the quarter?" And so sometimes, that can be above a target because they're reordering at a higher rate because there was a lot of utilization in the prior quarter, and they're just reordering. It could be because there's a product launch, like Chas mentioned, where they're doing kind of some initial stocking before they do their first cases. And so we guide on an annual basis. But we see some quarters where revenue growth outpaces procedure growth. That was the case in Q1. And most of the quarters last year, procedure growth outpaced revenue growth. That catches up with itself, and the cycle continues. But 7,000 is kind of a good target plus or minus, with variation quarterly. If you just took each of our products at one unit each, the sum of our kind of procedure ASP would be in the high sixes. They're always ordering, you know, ahead of demand to keep par levels on the hospital shelves. Are there other things you can put in the kit, basically the product, to kind of raise that ASP over time, or? Yeah. And we have, right? We started, in the beginning of the company with just one product, the neuroprotection system. Then we added the stent. Then we added the guidewire. Then we added the micropuncture kit. And then most recently, last year, we launched a TCAR-specific balloon. So we're now up to 5 products, right? And so, and so, so it's been new product development. And also, we're on Gen 4, for example, of our neuroprotection system. And so it's not necessarily increasing revenue per procedure, but it is helping to maintain and, and in some cases, take price. Total pipeline, kind of look at everything. I think before you talked about stroke kind of being an area. And I don't know if you've kind of reprioritized the R&D pipeline since you've come into the company and kind of what you're focusing on from, you know, kind of first and kind of all the things you've been working on there. Yeah. So we, you know, are very much focused on carotid artery disease. We, like I said, we think in a way that no one else truly is. We have some interesting things we're working on in the pipeline. We have not disclosed much about them yet. My philosophy on this is not to try to sell futures too much, to really get to a point where we can answer tangible questions about what a product is, who's it targeting, what the ClinReg pathway looks like, and then start talking about it. So, you know, we are spending a substantial amount on R&D. It's for good reason, right? And so when we're ready to and can, you know, again, answer some of those key questions, we will share more. And so that'll be in the, you know, probably in the coming quarters, whether it's on an earnings call or an analyst day where we talk about our pipeline. We will we will provide more. But I just wanna wait until we've got a little bit more certainty there. So it sounds like we could hear something this calendar year on the pipeline? It could be, yeah, again, once we have something tangible to talk about, including pretty good guidance from FDA about what the pathway looks like. That's why, again, you know, I wanna make sure we know what we're up against in terms of what it's gonna look like. So that clarity would be, like, you submitting a filing to the FDA? Or is it more, like, understanding the kind of pathway? Again, once we know, once we have. These are a couple different things we're working on. And once we have the clarity of direction for it, but then we definitely will share more. Okay. There's some good stuff there. Great. If you think about how we got to where we are today with five products, one was a PMA. One was a 510(k) with clinicals. Others were 510(k) without clinicals. Some were label expansion. So there's a lot of different pathways. And so we're not just working on one, one thing. And, and so we'll, we'll shine a brighter light on it when the time is ready for different aspects of the pipeline. Great. Helpful. I think we're out of time. Thanks for joining us today. All right. Good, good discussion. Thanks, everybody. Appreciate you joining.