Q2 2023 SI-BONE Inc Earnings Call
Participants
Anshul Maheshwari; CFO; SI-BONE, Inc.
Laura A. Francis; CEO & Director; SI-BONE, Inc.
Saqib Iqbal
Andrew Christopher Ranieri; Equity Analyst; Morgan Stanley, Research Division
Craig William Bijou; Research Analyst; BofA Securities, Research Division
Joseph Scott Conway; Research Analyst; Needham & Company, LLC, Research Division
Kyle William Rose; Senior Analyst; Canaccord Genuity Corp., Research Division
Samuel E. Brodovsky; Associate; Truist Securities, Inc., Research Division
Xuyang Li; Equity Analyst; Jefferies LLC, Research Division
Presentation
Operator
Good afternoon, and welcome to SI-BONE's Second Quarter Earnings Conference Call.
(Operator Instructions) As a reminder, this call is being recorded for replay purposes.
And I would now like to turn the call over to Saqib Iqbal, Senior Director of Investor Relations at SI-BONE for a few introductory comments. Sir, please go ahead.
Saqib Iqbal
Thank you for participating in today's call. Joining me are Laura Francis, Chief Executive Officer; and Anshul Maheshwari, Chief Financial Officer.
Earlier today, SI-BONE released financial results for the quarter ended June 30, 2023. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements. These forward-looking statements are based on the company's current expectations and inherently involve risks and uncertainties.
These risks include SI-BONE's ability to introduce and commercialize new products and indications, SI-BONE's ability to maintain favorable reimbursement for its products and procedures, the impact of potential economic weakness on the ability and desire of patients to undergo elective procedures, SI-BONE's ability to manage risks to its supply chain, the impact of future capital requirements, driven by new product introductions and risk to the continued renormalization of the health care operating environment.
Other forward-looking statements include our examination of operating trends and our future financial expectations, such as expectations for surgeon training and adoption, active surgeons, new products and clinical trial enrollment and are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements.
Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission. SI-BONE disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 7, 2023.
With that, I'll turn the call over to Laura.
Laura A. Francis
Thanks, Saqib. Good afternoon, and thank you for joining us. I'm pleased with our performance in the quarter as we delivered over 30% revenue growth led by robust demand for our portfolio of solutions, strong surgeon engagement and favorable reimbursement tailwinds. The U.S. procedure growth trends over the last several quarters give me confidence that we're well positioned to deliver a strong second half of 2023.
Furthermore, our strong liquidity position, bolstered by the successful capital raised in May, provides us the flexibility to continue our judicious investments and portfolio expansion and commercialization initiatives. We believe these investments, combined with secular growth factors in the business will allow us to deliver continued revenue growth and accelerate our progress toward adjusted EBITDA and cash flow breakeven.
Before I discuss our results, I want to thank our employees as they've continued to demonstrate unwavering dedication to serve our expanding surgeon base, and ensure patients have access to our best-in-class solutions. This level of consistent record performance over the last several quarters would not be possible without you.
Now moving to our second quarter performance. In the second quarter of 2023, we generated record worldwide revenue of $33.3 million, an increase of over 30% compared to the second quarter of 2022. The quarterly result was led by record U.S. revenue of $31.2 million, which represents U.S. revenue growth of over 31% compared to the prior year period. This fifth consecutive quarter of record worldwide revenue and improving operating leverage exemplifies the consistency of our execution and strength in the business.
Now let me provide an update on our key initiatives as we continue to look to extend our leadership position and drive strong long-term growth. Starting with sales infrastructure, our direct sales team is our biggest asset as we expand our product portfolio and surgeon base. At the end of the second quarter, our U.S. commercial organization comprised 85 quota-bearing territory managers.
We complement our territory managers with clinical support specialists as well as a growing network of third-party sales agents for case coverage. We also selectively placed instrument sets and high-volume hospitals to meet demand. We're confident that our hybrid strategies will allow us to further penetrate the surgeon market cost effectively, accelerate top line growth and achieve higher productivity.
At the end of the second quarter, our trailing 12-month average revenue per territory in the U.S. was approximately $1.4 million, representing a 32% productivity gain over the comparable trailing 12-month period. Our strong revenue growth and increased operating leverage over the last several quarters are the results of our investments in building a world-class commercial organization.
Moving on to surgeon engagement. We exited the second quarter with approximately 935 active surgeons. This equates to approximately 30% growth in our active surgeons over the second quarter of 2022. This was the tenth consecutive quarter of double-digit year-over-year growth in our active surgeons. Based on the early third quarter trends, we surpassed the 950 active surgeons milestone we set at the end of the first quarter. It's also encouraging to see surgeon overlap across our procedures. We expect our complementary portfolio to drive deeper engagement and increase procedures per surgeon over time. These trends in active surgeon base reaffirm that our portfolio expansion strategy and investment in education are resonating with our customers.
On academic training, we're pleased to see steady adoption of our procedures by surgeons first trained as residents and fellows as they matriculate to independent practice. For example, among the cohort of surgeons first trained as residents and fellows, procedure revenue in the second quarter of 2023 nearly doubled compared to the second quarter of 2022.
Turning to Products & Solutions. With iFuse-3D, iFuse-TORQ and now iFuse Bedrock Granite, the value of our innovative, versatile and complementary product portfolio has positioned us as the top choice for surgeons looking for sacropelvic solutions. iFuse-TORQ become a key growth driver for us due to its expanded clearance covering SI joint dysfunction, trauma and adult deformity. IFuse-TORQ provides a complementary technology to iFuse-3D for our existing surgeons. It's also allowed us to engage new surgeons, and successfully convert several surgeons using competitor products when performing minimally invasive SI joint fusion procedures.
While we remain strong advocates of the lateral transiliac trajectory as being the gold standard when performing SI joint fusion procedures. In June, we received FDA clearance replacement of iFuse-TORQ in the posterolateral trajectory. This clearance provides surgeons mostly those who are competitor conversions, the flexibility and confidence to use their preferred approach. The use of iFuse-TORQ is a second point of fixation across the SI joint in adult deformity procedures is increasing since the product received FDA clearance for the Bedrock trajectory last year.
In trauma, we remain in the early stages of market development and are encouraged by the adoption we're seeing for iFuse-TORQ in sacral insufficiency fractures. The trauma opportunity is of strategic importance to us as the sacropelvic solutions leader and is an important avenue for our growth over the long term.
Moving to iFuse Bedrock Granite. We are extremely pleased with the success of Granite in its first full year on the market. This breakthrough device has allowed us to target 130,000 annual cases across long construct adult deformity procedures and degenerative spine procedures to the sacrum, expanding our total addressable market by approximately $1 billion to over $3 billion. Given the positive surgeon reception, we're actively rolling out instruments and implant sets to capitalize on the demand momentum for Granite.
Furthermore, in June, we expanded the Granite implant family with the launch of a closed head Granite implant. This addition to the Granite family will allow us to drive adoption with a subset of surgeons who prefer implants with a close to a head to attach the rod. We believe Granite has the potential to become the standard of care for stabilizing the base of long construct in adult deformity procedures. And this addition ensures that Granite can address the preference of the surgeons performing pelvic fixation procedures.
In addition to the use of Granite in long construct adult deformity procedures, we're encouraged to see that year-to-date, nearly 40% of the procedures in which Granite is used are actually shorter multilevel constructs, generally a treatment for degenerative spine disorders. Given the demand trends and over 100,000 annual procedures involving spinal fusion to the sacrum, we're progressing toward a 2024 launch of another new product in the Granite family. We believe the new product will further accelerate adoption of Granite in the short construct procedures.
Along with the growing demand for Granite, we're seeing a consistent trend in surgeons using some combination of our products with Granite, to achieve 2 points of fixation across the SI joint on either side in long construct procedures. This is driving a significant pull-through opportunity for the portfolio and a higher per procedure average selling price.
Moving on to clinical evidence. Given the growing interest in the SI joint space as a market leader with commitment to clinical evidence and patient safety, we launched the STACI study in June. STACI is a prospective study of the use of iFuse-TORQ in patients with sacroiliac joint dysfunction. The purpose of STACI is to work with the select group of physicians and gather post-market information on the use of iFuse-TORQ for sacroiliac joint fusion.
I'll now turn the call over to Anshul to provide more detail on our financial results.
Anshul Maheshwari
Thanks, Laura. Good afternoon, everyone. I will focus my comments today on second quarter revenue trends, operating leverage and liquidity, and end with our updated 2023 guidance.
Starting with our second quarter revenue. As Laura noted, our worldwide revenue in the second quarter was $33.3 million, representing growth of over 30% compared to the prior year period. Second quarter U.S. revenue was $31.2 million, increasing over 31% compared to the prior year period. This record U.S. performance was driven by growth in the procedure volumes, which rose by approximately 30% compared to the prior year period.
In addition to robust volume growth for the second consecutive quarter, our U.S. per procedure average selling price increased compared to the prior year period. International revenue was $2.1 million, reflecting growth of approximately 15% compared to the prior year period. Across Europe, France maintained strong volume growth, offset by ongoing recovery in Germany and the U.K.
Moving to gross margin and operating leverage. In the second quarter of 2023, our gross margin was 81%, in line with our expectations. As anticipated, the gross margin reflects the impact of procedure and product mix due to higher total cost of iFuse-TORQ and Granite, increase in depreciation from the deployment of instrument trays to support the growing demand for these products, depreciation associated with our second facility in Santa Clara and higher freight costs.
Operating expenses were $38.9 million in the second quarter of 2023 versus $40 million in the prior year period. This 3% decrease in operating expenses is mainly due to timing of certain commercial activities that are scheduled for the second half of 2023. This was partially offset by an increase in stock-based compensation and higher commission associated with the revenue growth in the second quarter of 2023. We are pleased that we have now demonstrated several consecutive quarters of improved operating leverage while investing in R&D and clinical research, which are crucial to delivering strong and sustainable revenue growth over time.
Our net loss was $11.2 million or $0.30 per diluted share for the second quarter of 2023 compared to a net loss of $18.5 million or $0.54 per diluted share in the prior year period, representing 46% earnings per diluted share improvement. The earnings per diluted share for the second quarter of 2023 were also impacted by the increase in the number of shares outstanding from our follow-on common stock offering in May. Adjusted EBITDA loss in the second quarter improved 59% to $4.7 million versus $11.5 million in the prior year period.
Turning to liquidity. We ended the quarter with a strong balance sheet, including approximately $169 million in cash and marketable securities. Our cash balance includes approximately $84 million in net proceeds from the follow-on offering in May. Our first half cash used in operating activities was $14.3 million, an improvement of nearly 50% compared to $28.4 million in the prior year period.
We are pleased with our trajectory of cash utilization in the last few quarters while continuing our investment in long-term growth initiatives. Additionally, we are building our instrument trade and inventory capacity to support the growing demand for Granite as we prepare for a seasonally strong fourth quarter.
Finally, moving to our updated guidance for the year. Based on our second quarter performance, we are increasing our full year 2023 worldwide revenue guidance and tightening the range to $132 million to $134 million, up from our previous guidance of $128 million to $131 million. This revised guidance translates to year-over-year growth of approximately 24% to 26% versus the previous range of 20% to 23%.
We continue to expect the 2023 annual gross margin to be approximately 80%. Based on the updated guidance, we anticipate operating expenses will increase in the mid-single-digit percent for full year 2023 due to anticipated higher commission and bonus expense from higher revenue.
With that, I will turn the call over to the operator for questions.
Question and Answer Session
Operator
(Operator Instructions) Our first question will come from Craig Bijou of Bank of America Securities.
Craig William Bijou
Congrats on another strong quarter. I wanted to start, I know you're typically reluctant to give details on specific products, but I'm going to try anyway. And I want to see if there's any color that you can provide on the strength in the first half. And then looking at revenue guidance even with the raise, it implies essentially flat revenue first half versus second half, maybe slightly more in the second half. So is there anything on the product level that we should be thinking about that would suggest that the strong first half growth that you saw when you continue in the second half?
Laura A. Francis
Thanks, Craig. Thanks for the question. And what I'll do is I'll answer your first question on the product side. And then I'll have -- I'll turn it over to Anshul to talk a little bit more about the guidance. We're really pleased with the quarter that we just exited 30% growth in the quarter, strong continued momentum in the U.S., strong momentum with our active surgeon base, improvement in our ASP, 60% improvement in our bottom-line losses. We're really excited about how we performed this quarter, and we just see very strong momentum going into the second half of this year as well, which is why we felt confident with the rate that we provided in guidance.
From a product perspective, we're seeing performance across the board here. So our core business continues to drive our results. And when I say core business, I mean primary SI joint fusion, and that can be with our iFuse-3D product or it can be with iFuse-TORQ. We're also continuing to see momentum in our trauma business with iFuse-TORQ specifically with sacral insufficiency fractures. And finally, we didn't talk quite a bit about Granite, which has just been a terrific launch for us, and we have a lot of excitement around Granite.
We did talk a little bit about the product extension with the closed-head Granite that was launched late in the second quarter, and then that opens up some additional opportunity with certain surgeons who prefer that particular product. I won't -- as you said, I'm not going to break down what the growth was, but we're seeing growth in all of the areas that I just mentioned and are really excited for the second of the year.
Anshul Maheshwari
And Craig, thanks for the question on guidance. So Laura already talked about some of the enthusiasm in the business that we've seen not just in the first half, but also in the second half of last year. And we've had about 5 quarters now of record revenue. And obviously, in the first half of the year, is actually the strongest sequential growth and year-over-year growth you've seen as a public company. So feeling really good about how the business is set up. Some of the assumptions that we have made in our guidance and the last increase in guidance we did at the end of the quarter have played out better than what we anticipated, both in terms of the Granite adoption, the rollout and the ASP trends.
Now all of that has been going on, we also while being very confident of the strength and the secular trend in the business. And I also want to acknowledge that there is potential seasonal strength in the second half. We just want to be very thoughtful as we're going into the back half of the year, and that's sort of reflected in our guidance and some of the assumption changes that we had was -- we provided some more upside from the Granite rollout in the second half. And historically, we've talked about mid-single-digit ASP decline. And even though we've had 2 consecutive quarters of positive ASP, we're still assuming ASP pressure in the back half of the year, albeit low single digit now. So we think it's appropriately hedged in terms of getting into the second half of the year.
Craig William Bijou
Got it. And then just a quick follow-up. Laura, I think you said the new approval for TORQ better positions you to go after some of those competitive cases that the SI joint fusion that may prefer the screw versus the triangular implant iFuse. So maybe if you could just expand a little bit on that and talk about how you are doing -- picking up those competitive cases.
Laura A. Francis
Sure, sure. And TORQ, as you know, was primarily launched to focus on the trauma opportunity that we have with sacral insufficiency fracture. So that continues to be a long-term opportunity for the business that we're really excited about another adjacent market, our best estimate is around $350 million of potential that's there as well. But the more immediate opportunity with TORQ certainly has been in the primary minimally invasive SI joint fusion market.
And so we've seen a very significant uptick of competitive surgeons that are converting over to iFuse technology using the TORQ implant. And some of those surgeons have provided feedback where they're actually interested in the lateral approach, but they're also interested in this posterolateral approach. And what we want to do is we want to be the company that provides sacropelvic solutions regardless of what the surgeon is interested in.
And so while we remain strong advocates of the lateral approach, it's the gold standard, there's a lot of data out there showing the efficacy of the product using the lateral approach, we also want to give those competitive surgeons the solution that they're looking for and the confidence to use it. So that trajectory is now on label.
Operator
Our next question will come from the line of Xuyang Li of Jefferies.
Xuyang Li
Congrats on a strong quarter here. I was wondering if you can maybe share some more color on the intra-quarter growth. It sounded like the momentum carried in July as well. But what are some of the expectations for the summer season sort of seasonality impact? And can you provide some color on the high-level Q3, Q4 cadence?
Anshul Maheshwari
Yes. Xuyang, this is Anshul. Why don't I take this question. So obviously, coming out of the second quarter or the first half of the year, we feel pretty good about the business. And some of that is thoughtfully reflected in our increased guidance of 24%, 26%. When you think about quarterly trending sequentially in the third quarter, historically, you see as an industry, a sequential dip in the third quarter from the second quarter. It can be somewhere on the low single-digit range.
And in our guidance, that's what our assumption is that sequential decline from Q2 to Q3, mainly driven by this summer seasonality and actually having one less selling day in the quarter compared to the prior quarter. While continuing to acknowledge that we've got strong momentum with the new product rollout, and we're going to work hard to minimize the impact of that, but that's not incorporated in the guidance that we've set.
Xuyang Li
All right, great. Very helpful. I guess a follow-up question, just in terms of getting a new surgeon onboarded for core SI joint fusion procedures. Is that time line or process getting shorter, either due to the portfolio effect? Or just (inaudible) in the KOL and clinical community?
Laura A. Francis
Yes. Thanks for your question, Xuyang. So -- and this dovetails a little bit with your previous question on intra-quarter growth in July. We did mention in our prepared remarks that we have actually exceeded the high watermark of 950 surgeons in Q1 already at the end of July. So we did see some strong new surgeon growth heading into the month of July, which is very encouraging, given the summer months.
I do also believe that you're right that we have seen a decrease in the amount of time it takes for us to bring on new surgeons and part of it is just that the procedure is more well-known at this point in time and part of it is the different modalities that we can use in order to reach the new surgeons. So it can be a regional course with the cadaver lab training. It can be a local training course in the OR or it can be with our simulators, which we still are heavily using And that's on the core primary SI joint fusion business.
If you actually look at our Granite business, it's actually quite easy to go in and we do what we call an instrumentation review typically in the office of the surgeon because this is a procedure that they're used to doing already. They're just going to be using the Granite technology that's replacing some of the existing technologies that are out there. So in terms of adding that [active surgeons], I do believe that we have a number of different ways to engage these new surgeons and that we have significantly improved our ability to onboard.
Operator
And our next question will come from Kyle Rose of Canaccord.
Kyle William Rose
Congrats on a strong quarter. I wanted to just ask, look, you've had the NTAP out in the market for over 9 months now. I just wanted to see if you've seen any material changes in the amount of implants being used for procedure. I know there's been a lot of talk from going to 2 to potentially 4 or somewhere along that path. And then secondly, I don't know if I missed it. Did you get the number of CSS reps you have in the field as well?
Laura A. Francis
Sure. Thanks, Kyle, for the question. I will answer the question on the NTAP. So just as a reminder to others that are on the call, we have an NTAP in place that a little over $9,800 for Medicare cases. It's exclusive to Granite, and it does create a pretty strong competitive advantage for us. And that's really combined with the efficacy of the product. The goal here for surgeons is to ensure they don't have fixation failure in these long construct cases.
And these cases on average, can cost a couple of hundred thousand dollars for the initial case and can cost in the range in total of around $125,000 for revision. And obviously, the patient impact as well is significant. So what the NTAP does is it really -- it's economically beneficial to the surgeon, to the hospital and to the payer, and we have seen strong interest in that particular NTAP. So we're pleased with that.
In terms of our CSS reps, this -- our typical pattern in the prior years will actually give out both numbers. It became a little bit confusing and also given the push that we've had towards agent sales as well. What I'll tell you is that the CSS is similar to prior years are a little less than one CSS to one senior product hearing rep and that effects that we're also bringing on additional agents that are helping to increase this productivity that we've seen. On average productivity increase of 32% this past 12 months if you compare it to the prior year, and it does show that we can really grow the territory rep productivity in 2021. It was less than $1 million. Last year, it was around $1.2 million, and now we're at $1.4 million. And those quota-carrying reps are supported by the CSS that you asked about and then also the addition of agents who have been particularly helpful with Granite cases.
Operator
Our next question will come from the line of Samuel Brodovsky of Truist Securities.
Samuel E. Brodovsky
Just the first one, and thanks for the color around the certain dynamics to start 3Q. With the new TORQ approach, should we think about a steady cadence of new competitive surgeon conversion through the second half? Or is that more of a onetime thing? And how should we think about what's contemplated in guidance in terms of new surgeon ads?
Anshul Maheshwari
Yes. In terms of new surgeon ads, it's not just the posterolateral trajectory with TORQ. We're really focused as we have been over the last several years through education and engagement to continue to grow that number. And it's really critical for us as we think about the long-term outlook for the business. And based on what we've seen thus far in the quarter, we feel pretty confident that we will continue to hit new active surgeon milestones throughout 2023 at the end of each of the quarters. And right now, our expectation is to have that low to mid-teens growth in the fourth quarter of 2023 compared to the fourth quarter of 2022, which, as you may recall, Sam, was a pretty high watermark to start within the end of last year. So we feel very good about that.
The other piece that's also equally important for us is continuing to focus on growing surgeon overlap. Laura talked about the multiple modalities and the treatment types that we're engaging surgeons with, and we've had a lot of success there, but we've seen a 30% growth in this quarter in after surgeon base, but our procedures performed for surgeons sort of stayed flat. So you actually had surgeons moving up the volume scale as well that have been doing a procedure for a while. So both those metrics pointing in the right direction for us.
Samuel E. Brodovsky
Great. That's really helpful. And I appreciate the other color you've given on assumptions around price through the second half. But just with the Granite launch going so well, does that view a more positive outlook on how you think about price per procedure evolving through 2024 and beyond?
Anshul Maheshwari
Yes. No worries, Sam. On the ASP side, look, we really encouraged by the ASP trends, specifically in the first half, having had 2 consecutive quarters of year-over-year ASP improvement, and it's driven by 2 things, right? The first one is the Granite volume that Laura has talked about, where we've seen surgeons specifically those that do adult deformity procedures using more than 2 points of fixation, so more than 2 SI joint implants in their procedures.
And to some extent, we are also seeing a bit more moderated decline in ASP within the minimally invasive SI joint fusion business even though we've continued to see a move to ASCs. And historically, that decline has been in the mid-single digit at the ASC side of service, but with the increase in the fees in the start of 2023, the team has actually done a great job and working really hard. And in several cases, being successful in maintaining that pricing on those contracts. But we also want to acknowledge it's been only 2 quarters, right? And while we feel good about some of the reimbursement tailwinds, the procedure product mix, we just want to be thoughtful in our not incorporating that upside in the back half of the year or at this point too premature to talk 2024.
Operator
Next question will come from Drew Ranieri of Morgan Stanley.
Andrew Christopher Ranieri
Just maybe first on OpEx for Anshul, but you've done a good job year-to-date. Leverage is becoming more of an important part of the story. And then your kind of prepared remarks, you talked about continued revenue growth and progress towards adjusted EBITDA and cash flow breakeven. So I was hoping you might be able to touch on kind of the latter 2 parts of these and maybe kind of what your expectations are for laying the groundwork to eventually achieving these targets of adjusted cash flow and EBITDA breakeven.
Anshul Maheshwari
Thanks, Drew, for the question. In terms of the operating leverage, we're really pleased with the trajectory that we've demonstrated in operating leverage. It's been pretty linear to our top line growth and it's basically driven by the foundation that we've built and making investments that we knew was required to support the level of growth acceleration we're seeing in the business.
Now in terms of how we see that evolve, we do believe that fiscal year 2023, we will continue to see operating leverage, albeit the year-over-year comps to become a bit tougher. You are seeing that in last year as well. But we feel good about that. And we're not going to be giving out guidance on when we believe we'll get to breakeven from an adjusted EBITDA or cash flow perspective. But if you look at the trajectory that we've been on and extrapolate where revenue has been and is potentially going to go when we provide 2024 guidance and beyond, we'll be able to share more.
Andrew Christopher Ranieri
Okay. Fair enough. And maybe second, on just the Granite instrument trays, I understand that you're continuing to roll this out. And part of the recent raise was to kind of build up the inventory here. But for the centers that you're in today, can you maybe just talk to us about what you're seeing in terms of utilization or productivity, you kind of hinted at some details, but any more clarity around what you're seeing kind of the early days of these accounts would be great.
Laura A. Francis
Thanks, Drew. On Granite trays, the Granite launch really has been trying to supply in order to meet demand. And I talked in my prepared remarks about the efforts of our team in order to hit the results that we've hit. And this is a particular area that I would say that people have gone above and beyond here. So our operations team trying to supply the implants that are needed, the trays that are needed and then the people in the field trying to utilize the trays that they have. It has not been unusual for our sales reps to have to drive hours in order to retrieve trays and actually go to another site.
And so what we think we're doing here in the second quarter and in the third quarter, is making sure that we have the inventory that we need, especially for Granite as well as the trays that we really need, particularly going into the seasonally high-volume fourth quarter that's coming here. And we feel very confident that we're in that position. But it really has been around 12 months of a lot of work in order to make sure to meet the demands that our surgeons are providing.
Operator
Our next question will come from the line of David Saxon of Needham & Company.
Joseph Scott Conway
This is Joseph on for David. Maybe a high-level question looking at 2024. Anshul, I know you said it was maybe a little early to comment on it, but maybe some high-level details, you'll be facing much more difficult comps in 2024, but you also be farther along with the Granite and TORQ rollouts and the assumption that you have the shorter construct Granite launch, they're going well. I just wanted to hear how you guys are feeling about sustaining that 20-plus growth even as you start lapping those tougher comps?
Anshul Maheshwari
Yes, Joseph, thanks for the question. And look, I think our execution over the last several quarters gives us a lot of confidence in the underlying momentum in the business, the foundation of which is built on our differentiated portfolio, which, as you highlighted, is the next family of Granite products that we'll launch next year. The favorable reimbursement, both within the SI joint fusion side of the business as well as the NTAP on Granite and just the improving operating leverage, right? So we're set really well. And we do believe we're in the early innings of delivering on our long-term growth strategy that we've laid out over the last couple of years and have all the ingredients in place to deliver strong and sustainable -- as well as fiscally responsible growth.
But that said, we don't want to get ahead of ourselves. I want to make sure we can capitalize and deliver what we believe will be a strong second half before we talk about 2024. So too early for me to give you numbers on 2024 at this point. But we're doing everything possible to deliver on a strong second half and feel good about that.
Joseph Scott Conway
Okay. Okay. Great. Fair enough. Maybe could we get an update on the marketing strategy. You've had the DTC campaign here out for a couple of years now. Maybe if you could talk relatively, I wanted to hear you guys are feeling about consumer awareness now kind of relative to when you started those activities.
Laura A. Francis
Yes, I'm happy to take that question. Is this -- the digital marketing activities have been a focal point for us. We are trying to generate additional knowledge with patients of SI joint dysfunction and degeneration. We've been quite successful in doing that, whether it's bringing patients to the website completing our pain survey or using our find a doctor functionality in order to be referred to one of our surgeons, we've been quite successful in using search as well as social media in order to drive patients to a better understanding of this particular condition.
Now what we're really doing is we're starting to focus a little bit on a little lower in the funnel. And so for those patients who have actually had an interest in finding a doctor to help to further facilitate that process as well. So our marketing strategy is evolving here as we continue to develop our digital marketing strategy.
Operator
Thank you. And I'm seeing no further questions in the queue. I would now like to turn the conference back to Ms. Laura Francis for closing remarks.
Laura A. Francis
Thanks all of you for joining the call today. The year-to-date performance and the favorable demand trends, they bolster my conviction in a strong second half performance as well as our long-term outlook for the business. And I'm confident that we have all the elements in place to deliver a strong and sustainable long-term growth and progress towards profitability. So thanks for your time today. Goodbye.
Operator
This concludes today's conference call. Thank you all for participating. You may now disconnect, and have a pleasant day.
