TREACE MEDICAL CONCEPTS THIRD QUARTER 2026 EARNINGS CONFERENCE CALL - TREACE MEDICAL CONCEPTS INC

Explicit Guidance:

• FY2026 Revenue: Narrowed guidance to a range of $206 million to $210 million, representing a 1% to 3% decline from FY2025; assumes a return to growth in Q4 driven by volume increases and ASP mix stabilization.
• FY2026 Adjusted EBITDA: Revised expectation to a loss of $1 million to $2 million, an improvement from a $3.9 million loss in FY2025.
• Cash Flow: Expecting a reduction in cash usage of approximately 50% for full-year 2026 compared to 2025.
• FY2027 Outlook: No specific quantitative guidance provided for 2027; management intends to provide updated 2027 guidance during the Q4 earnings call, pending observation of Q4 performance and several months of 2026 product adoption data.

Business-Segment Outlook:

• Bunion Portfolio: Aiming to increase utilization of new systems (Nanoplasty, Percuplasty, Speed MTP) from 45% to higher penetration among existing Laplacia surgeons; expecting continued pull-through of Laplacia products from surgeons initially acquired via new systems.
• Laplacia Core: Maintaining leadership in the Lapidus fusion segment (approx. 30% of U.S. bunion procedures) with Q1 2027 commercial launch of the Laplacia Lightning platform and ongoing expansion of the IntelliGuide PSI system for complex/revisional cases.
• Adjacent Foot & Ankle: Targeting coverage of 80% or more of an average surgeon's reconstructive volumes (up from 30% a year ago) via the 2026 expansion.
• New Product Commercialization:
  • Q4 2026: Full commercialization of VitaFuse (bioactive graft), CartoBlaster (rasps), HyperPlate XM (mid/hindfoot fixation), and SuperBite (compression screws).
  • Q1 2027: Full commercialization of the Taylor Plasty system for bunionette corrections.
• TAM Expansion: New 2026 product introductions (SuperBite, HyperPlate, VitaFuse, CartoBlaster) expected to expand U.S. TAM by $400 million; total 2026 portfolio expansion (including 2025 launches) expected to increase TAM by approximately $700 million.

Market and Competitive Outlook:

• Volume Trends: Projecting double-digit case volume growth to continue into Q4 and beyond, driven by the broader product portfolio and seasonally high bunion volumes.
• ASP Dynamics: Anticipating a gradual shift in Average Selling Price (ASP) mix; while new minimally invasive products may carry lower ASPs than Laplacia, the entry into complex midfoot/hindfoot cases introduces higher-ASP opportunities.
• Share Shifts: Goal to capture wallet share across the full surgeon profile by moving from single-product reliance to a "full service provider" model, leveraging high repeat/reorder rates for new system adoption.
• Sales Force Efficiency: Existing direct sales force expected to see 1.5x case coverage per rep as new products are bundled with existing offerings; no major headcount increases anticipated, only modest, incremental hiring.

Macro / Industry Outlook:

• Elective Procedures: Management notes potential market-wide slowing in procedure volumes but asserts a divergent positive trajectory due to their expanded portfolio and unique product mix (e.g., SuperBite driving incremental procedures).
• Stocking Distributors: Significant revenue headwinds from Q3 stocking distributor orders are expected to decrease significantly in Q4, normalizing underlying revenue performance.
• International: Acknowledged as a material opportunity with existing demand; no immediate launch timeline provided, but "eyeing" expansion once portfolio maturity and market readiness are confirmed.

Strategic Initiatives:

• Product Innovation Cadence: Executing a steady stream of new product introductions through 2027 and beyond to deepen market penetration and increase per-case revenue.
• Clinical Evidence: Leveraging 5-year Align3D study results (low recurrence, pain reduction) to reinforce Laplacia's gold-standard status and drive adoption.
• Operational Leverage: Continuing to improve operating performance and adjust cost structures to support growth; expecting further improvement in EBITDA leverage as revenue growth accelerates.

Risks and Headwinds to Outlook:

• Guidance Caveats: FY2026 outlook assumes a Q4 recovery; deviations in Q4 procedure volumes or ASP mix could impact results.
• Product Execution Risk: Management acknowledges the complexity of launching multiple new technologies (SuperBite, Taylor Plasty, etc.) simultaneously and the need to manage execution risk during the busy Q4 season.
• Market Volatility: General economic conditions and consumer health regarding elective procedures remain a variable, though the expanded portfolio is designed to mitigate volume sensitivity.
• Legal/IP: Mention of potential trademark protection activities regarding product names (e.g., "CartoBlaster" vs. "CardiBlaster") implies potential IP friction risks.

Management Tone on the Future:

• Confidence Level: High confidence in Q4 recovery and long-term growth trajectory; describing the narrowing of guidance as an "important win" and validating the "return to growth" strategy.
• Strategic Shift: Tone reflects a transition from "portfolio building" to "scaling utilization," emphasizing the integration of new products into the surgeon's daily workflow and the efficiency gains for the sales force.
• Hedges: Management explicitly deferred 2027 guidance to "get through this fourth quarter" and gather data on the new 2026 product launches, signaling a prudent, data-driven approach to future forecasting.

Miscellaneous:

• Balance Sheet: Cash equivalents and marketable securities totaled $39.8 million as of September 30, 2026, described as "strong and flexible" to support initiatives.
• Customer Base: Number of surgeon customers is growing; approximately 3,300 surgeons currently serve as the core base.
• Q&A Clarification: Management clarified that while market growth has been historically mid-single digits, they aim to outperform this rate once new product synergies fully materialize.