Executive Summary / Key Takeaways

• Treace Medical Concepts is executing a strategic transformation from a single-product Lapiplasty company to a comprehensive bunion solutions provider, aiming to address virtually 100% of surgeon and patient preferences across all four bunion classes.
• The launch and ramp-up of new systems, including Nanoplasty and Percuplasty 3D MIS osteotomy platforms and SpeedMTP, are critical to this strategy, targeting the significant portion of bunion cases not typically addressed by Lapiplasty.
• Financial performance shows continued revenue growth (Q1 2025 revenue of $52.6M, +3% YoY; FY 2024 revenue of $209.4M, +12% YoY) alongside significant progress towards profitability, with Adjusted EBITDA loss improving by 54% in Q1 2025 and 55% in FY 2024.
• Management guides for full year 2025 revenue of $224M-$230M (+7-10% growth), with growth heavily weighted to the back half as new products become fully available, and expects to reach breakeven Adjusted EBITDA for the full year.
• Key differentiators include Treace's patented 3D correction technology, a robust pipeline of innovative products, a dedicated bunion-focused direct sales force, and recent favorable CMS reimbursement changes for Lapiplasty procedures.

Setting the Scene: Pioneering 3D Bunion Correction

Treace Medical Concepts, Inc., founded in 2013, set out with a clear mission: to fundamentally advance the standard of care for the surgical management of bunion and related midfoot deformities. Recognizing that bunions are complex, three-dimensional deformities stemming from an unstable joint, the company pioneered the Lapiplasty 3D Bunion Correction System. This proprietary system, which received 510k clearance in March 2015, combines specialized instruments, implants, and surgical methods designed to correct the deformity across all three anatomic planes and stabilize the unstable joint, thereby addressing the root cause rather than merely the visible symptom.

This differentiated approach quickly established Lapiplasty as a leading technology in the Lapidus fusion segment of the bunion market, which is estimated to represent approximately 30% of the 450,000 annual bunion cases performed in the U.S. Treace has successfully built a base of over 3,100 surgeon users and treated over 130,000 patients with Lapiplasty, propelling the company to become the dollar share leader in the U.S. bunion market.

Within the broader orthopedic landscape, Treace operates as a specialized player focused intensely on the bunion and midfoot deformity market. This contrasts with larger, diversified competitors such as Stryker (SYK), Zimmer Biomet (ZBH), Johnson & Johnson (JNJ) (through DePuy Synthes), and Smith & Nephew (SNN), who offer a wide range of orthopedic products across multiple segments like trauma, joints, and extremities. While these larger players also compete in foot and ankle, their bunion offerings may not possess the same level of dedicated, procedure-specific instrumentation and 3D correction focus that defines Treace's Lapiplasty system. This specialization has been a foundational strength, allowing Treace to develop deep expertise and clinical evidence around its core procedure.

However, the competitive landscape is dynamic. In mid-2024, Treace noted increasing headwinds, including competitive offerings mimicking the Lapiplasty procedure and growing surgeon interest in minimally invasive osteotomy techniques. These dynamics underscored the need for Treace to accelerate its strategic evolution beyond its flagship product.

The Transformation Underway: From Lapiplasty to Comprehensive Bunion Solutions

Recognizing that Lapiplasty, while market-leading in its segment, on average captures only about 25% of its surgeon customers' total annual bunion cases, Treace embarked on a deliberate strategy to become a comprehensive bunion solutions company. The goal is to provide a suite of best-in-class instrumented systems that can address all four recognized classes of bunion deformities and cater to the diverse preferences of surgeons and patients, thereby targeting the remaining 75% of cases within their existing customer base and attracting new surgeons.

This strategic pivot is manifesting through a robust pipeline of new product introductions. Building on the initial expansion with the Adductoplasty System for midfoot deformities and the versatile SpeedPlate fixation platform (now used in over 50% of cases and praised for its strength, fatigue profile, low profile, and speed), Treace has significantly broadened its portfolio.

A key element of this expansion is the entry into the large metatarsal osteotomy market, estimated to represent 70% of U.S. bunion surgeries. Treace is introducing two differentiated 3D MIS (Minimally Invasive Surgery) osteotomy systems: Nanoplasty and Percuplasty. These systems are designed to bring Treace's core philosophy of instrumented, reproducible 3D correction to the MIS osteotomy space, which is currently estimated to be only 10-15% of the osteotomy market but is growing in interest. Nanoplasty utilizes a familiar powered saw and an intramedullary implant, aiming to simplify the procedure and reduce the steep learning curve often associated with traditional freehand MIS techniques using a burr. Percuplasty is geared towards existing MIS surgeons who use screws, offering instrumentation to enhance control and reproducibility in achieving 3D correction through small incisions. These systems, along with Micro-Lapiplasty (allowing the Lapiplasty procedure through a 2cm incision) and Mini-Adductoplasty (reducing incision size by 50%), provide a comprehensive suite of instrumented MIS options.

Further expanding the portfolio, the SpeedMTP system targets bunion patients with coexisting arthritic great toe joints, offering a specialized solution for MTP fusion using SpeedPlate technology. The SpeedAkin implant addresses Akin osteotomies, a complementary procedure often performed with bunion corrections. Additionally, the IntelliGuide PSI system, leveraging the acquired Red Point technology, offers patient-specific pre-operative planning and cut guides, aiming to improve accuracy and time savings.

This expanded portfolio of five core bunion systems (Lapiplasty, Adductoplasty, Nanoplasty, Percuplasty, SpeedMTP), complemented by technologies like SpeedPlate and IntelliGuide PSI, positions Treace to target virtually 100% of bunion cases. Management highlights unprecedented interest from experienced sales professionals, suggesting the expanded portfolio is also enhancing the company's ability to attract talent to its dedicated bunion-focused sales force. Looking ahead, a limited market release of the next-generation Lapiplasty Lightning system is planned for late 2025, signaling continued innovation on the flagship platform.

Performance and Path to Profitability

Treace's financial performance reflects this ongoing strategic evolution and efforts to improve operating efficiency. The company reported Q1 2025 revenue of $52.6 million, a 3% increase over Q1 2024 (4.5% adjusted for one less selling day). This followed a strong finish to 2024, with full-year revenue reaching $209.4 million, a 12% increase over 2023. Growth has been driven by increases in bunion procedure kit volumes, favorable product mix shifts towards newer technologies like SpeedPlate and Adductoplasty, and an expanding base of active surgeon users (exceeding 3,100).

While still operating at a net loss ($15.9 million in Q1 2025), Treace has demonstrated significant progress towards profitability. The company maintains a high gross margin, reporting 79.7% in Q1 2025, slightly down from 80.2% in Q1 2024 primarily due to increased inventory provisions, but consistently strong compared to larger, more diversified competitors whose gross margins typically range from 60% to 71%. This high gross margin underscores the inherent profitability potential of Treace's product sales.

Operating expenses saw a decrease in Q1 2025 ($57.5 million vs. $59.9 million in Q1 2024), reflecting the impact of expense management initiatives. Sales and marketing expenses decreased due to lower advertising spend and optimization of the sales force structure, partially offset by increased investment in surgeon training and commissions tied to higher sales. R&D expenses increased modestly as the company invests in its robust pipeline. General and administrative expenses also increased, partly due to higher payroll and stock compensation.

The focus on efficiency is clearly visible in the Adjusted EBITDA trend. The Adjusted EBITDA loss improved by 54% in Q1 2025 to $3.8 million, building on a 55% improvement in full year 2024, where the loss narrowed to $11 million. Management attributes this to operational efficiencies and leverage gained as the direct sales force matures.

Liquidity remains sound, with $70.1 million in cash, cash equivalents, and marketable securities as of March 31, 2025. Including available borrowings under its revolving credit facility, total liquidity was approximately $98.6 million.

Net cash provided by operating activities turned positive in Q1 2025 ($4.2 million), a significant improvement from using $7.2 million in the prior year period, driven by favorable changes in working capital and the reduced net loss (adjusted for non-cash items). The company believes its current liquidity is sufficient to fund operations for at least the next twelve months.

Outlook and the Path Ahead

Management is confident in the company's trajectory, reiterating full year 2025 revenue guidance of $224 million to $230 million, representing 7% to 10% growth over 2024. The cadence of this growth is expected to be heavily weighted towards the back half of the year. Q2 2025 growth is anticipated to be consistent with Q2 2024 (~6%), with sequential step-ups in growth rates expected in Q3 and Q4. This acceleration is tied directly to the increasing commercial availability and ramp-up of the new product portfolio, particularly the MIS osteotomy systems and SpeedMTP, starting in Q3 and reaching full availability in Q4. The fourth quarter is also expected to benefit from typical seasonality driven by patient deductibles.

Crucially, Treace is targeting breakeven Adjusted EBITDA for the full year 2025. This profitability goal is supported by the expectation of continued operating leverage as revenue grows and expense management initiatives yield further benefits. Management anticipates a roughly 50% decrease in cash burn for 2025 compared to 2024 and expects the company to be EBITDA positive in 2025.

Recent positive developments in CMS reimbursement for CPT code 28297 (Lapidus/Lapiplasty) are also a tailwind. Effective January 1, 2025, the payment rates increased significantly – by 89% in the hospital outpatient setting and 100% in the ASC setting. While the full impact is yet to be seen, this change could enhance patient access to Lapiplasty procedures across different sites of care and potentially facilitate the use of Treace's more premium technologies in cost-sensitive ASCs.

However, risks remain. The macro-economic environment could still impact demand for elective procedures. Competition, including Lapiplasty knockoffs and the broader adoption of MIS techniques by rivals, continues to be a factor, as evidenced by the competitive pressures noted in 2024. Treace is actively defending its intellectual property through patent infringement lawsuits against competitors like Stryker and Zimmer Biomet/Paragon 28 (P28). The company is also facing a shareholder class action lawsuit alleging misleading statements regarding competitive impact and the need for an osteotomy product, which management intends to defend vigorously. Supply chain reliance on single-source suppliers is another potential risk.

Conclusion

Treace Medical Concepts is at a pivotal juncture, transitioning from a successful single-product company to a diversified provider of comprehensive bunion solutions. By leveraging its pioneering 3D correction technology and established market leadership in the Lapidus segment, the company is strategically expanding its portfolio to address the vast majority of the bunion market opportunity, including the growing minimally invasive osteotomy segment.

The successful execution of this strategy, marked by the ramp-up and adoption of new systems like Nanoplasty, Percuplasty, and SpeedMTP, is key to achieving the guided revenue growth acceleration in the back half of 2025. Coupled with ongoing expense management and the inherent leverage in its business model, Treace is on a clear path towards profitability, targeting breakeven Adjusted EBITDA this year. While competitive pressures and macro uncertainties persist, Treace's focused innovation, dedicated sales channel, and recent favorable reimbursement changes position it to solidify its leadership in the bunion market and unlock significant future growth potential.