SI-BONE, Inc. Stock

Good afternoon, and welcome to SI-BONE's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to Saqib Iqbal, Vice President, FP&A and Investor Relations at SI-BONE, for a few introductory comments.

Earlier today, SI-BONE released financial results for the quarter ended September 30, 2026. A copy of the press release is available on the company's website.

Before we begin, I'd like to remind you that management's remarks today may 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.

These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings, such as our most recent Form 10-K and Form 10-Q, and actual results may differ materially from any forward-looking statements that we make today. Accordingly, you should not place undue reliance on these statements. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements, except as required by law.

During the call, management may also discuss certain non-GAAP measures, including adjusted EBITDA and free cash flow. Unless otherwise noted, any reference to profitability is in terms of positive adjusted EBITDA. For a reconciliation of these non-GAAP measures to GAAP accounting, please see the company's full earnings release issued earlier today. Unless otherwise noted, all results are compared to the comparable period in the prior year.

With that, I'll turn the call over to Laura.

Thanks, Saqib. Good afternoon, and thank you for joining us. We delivered a solid third quarter with accelerating procedure demand, broader physician adoption and improving financial performance. These results reflect disciplined execution of our multiyear strategy to expand our differentiated platform into new clinical applications. By focusing on anatomy-specific solutions that enable durable fixation and fusion in patients with compromised bone, we're reaching more patients and expanding our growth opportunity.

Worldwide revenue grew approximately 15% to $55.7 million. U.S. revenue increased approximately 14% to $52.8 million. U.S. procedure volume increased approximately 20%, supported by 16% growth in active physicians. The strong double-digit volume growth across all procedure types demonstrates that our targeted platform expansion and call point diversification strategies are delivering.

In addition to the strong surgeon demand in the third quarter, demand accelerated for our expanded INTRA platform from interventional spine physicians in the office space and ASC sites of care. Our decision to build differentiated solutions with applications across all sites of care has made INTRA the preferred platform for this call point.

International revenue grew 27% to $2.9 million, supported by continued adoption of technologies launched in the last 12 months. We converted the revenue growth into stronger financial performance. Adjusted EBITDA increased 32%, more than twice the pace of revenue growth, while working capital discipline contributed to stronger operating cash flow.

Innovation remains a key component of our long-term growth as we develop differentiated technologies to improve procedural outcomes for high-risk patients with compromised bone quality. We pioneered minimally invasive treatment for SI joint dysfunction and applied that experience to develop breakthrough devices targeting sacropelvic fixation and complex fusion as well as pelvic fragility fractures.

With the recent launch of iFuse Granite Onyx, we're now taking that proven expertise in developing anatomy-specific solutions beyond the pelvis. Onyx received FDA 510(k) clearance in September and is our third product to receive FDA breakthrough device designation. We believe Onyx, which is designed to address the known failure points at the upper and lower ends of the spine fusion construct, represents one of the most significant product launches in our history.

The addition of Onyx increases our estimated total addressable market to over 650,000 procedures, representing an annual total market opportunity of approximately $5 billion. Onyx is the first of several differentiated technologies that we plan to bring to market that address significant unmet clinical needs and where our expertise in compromised bone gives us a clear advantage.

We initiated the alpha launch of Onyx in October and are extremely pleased with the surgeon interest. Early demand is tracking ahead of Granite over the comparable launch period. While we expect a modest contribution in the fourth quarter, as we move to full launch, we see Onyx as a meaningful accelerant to long-term growth.

Recent reimbursement enhancements have added another long-term growth catalyst. New DRGs for multilevel spinal fusion procedures that incorporate pelvic fixation with Granite took effect October 1. Depending on patient diagnosis and severity, the increase in the average hospital payment could be up to $50,000 per qualifying procedure. We believe the reimbursement framework will enable physicians and patients to access our Granite platform, further extending our leadership in the nearly $1 billion target market and allowing us to potentially provide additional solutions such as Onyx in these same procedures.

Together, these developments mark a defining moment for SI-BONE. We're substantially expanding our addressable market. The new DRGs have created a more favorable reimbursement environment, and we have a highly engaged physician base, all of which give us confidence in delivering durable long-term growth. That confidence is also implied in our 2026 guidance, which at the midpoint would imply over 20% revenue growth in the fourth quarter.

I will now discuss our 3 key growth drivers: innovation and market development, physician engagement and commercial execution. Anshul will then cover our fourth priority: operational excellence inside of financial results and outlook.

Starting with innovation and market development. As the U.S. population ages and lives longer, osteoporosis and osteopenia are becoming more prevalent. This creates a growing need for advanced technologies that enable durable fixation and fusion in compromised bone. We believe our biomechanical expertise in developing anatomy-specific technology gives us a competitive advantage that is difficult to replicate.

Our Granite and Onyx platforms are clear examples of our disruptive innovation targeting known failures and complex fusions. Granite was our first major platform targeting failures and complex fusion, starting at the base of spinal fusion procedures. In the last 4 years, we believe Granite has become the standard of care in sacropelvic fixation.

Onyx expands our complex fusion platform by addressing screw loosening at the upper and the lower instrumented vertebra, another major challenge in spinal fusion. Published literature reports screw loosening in as many as 27% of spinal fusion constructs with higher risks in patients with osteoporosis. We've done this before. In the randomized SILVIA trial, adding fixation across the SI joint alongside S2AI screws reduced new onset SI joint pain from 8.5% to 1.1% following deformity surgery.

With Granite, the PAULA study showed a 3.3% pelvic fixation failure rate at 12 months compared to a 23.7% failure rate at 2 years reported for traditional pelvic screws in large deformity databases. With Onyx, we're bringing that same osteointegrative approach with the goal of delivering similar results.

Onyx is one of the most technologically advanced solutions we've developed. We believe the anatomy-specific thread design and implant stiffness tailored to varying vertebral bone density promotes early fixation, which is crucial to reducing implant loosening and also facilitates long-term bone integration.

We estimate the market for Onyx at approximately 200,000 annual U.S. procedures, representing a market opportunity of approximately $1.5 billion. Combined with Granite, our total market opportunity in complex fusion now stands at approximately $2.5 billion.

Onyx will also benefit from our substantial commercial footprint and large presence in complex fusion procedures. When Granite launched in 2022, we had over 700 active physicians, and we were in the early stages of building out our third-party agent network. Today, we have approximately 1,770 active physicians and over 300 agents.

In the first few weeks of the alpha launch, Onyx is already generating incremental procedures within our existing accounts, while higher implant utilization is increasing overall procedure average selling price. As more surgical capacity comes online, we're confident that this commercial reach will accelerate Onyx adoption.

From a reimbursement standpoint, depending on the number of levels fused and additional technologies being used, the new DRGs I highlighted earlier may also benefit Onyx, especially in qualifying long spinal fusion cases. Additionally, as a breakthrough designated device, Onyx is eligible for the alternative pathway for a new technology add-on payment, or NTAP. We've submitted our application to CMS and if approved, the NTAP would take effect on October 1, 2027.

In SI joint dysfunction, our largest market for minimally invasive surgical procedures, our actions to broaden our portfolio and expand physician call points to also include interventional spine physicians are delivering results. Our comprehensive portfolio serves both call points across all sites of service and extends our reach to a broader subset of patients.

In the third quarter, surgeons accounted for the vast majority of procedures, but adoption of the INTRA platform among interventional spine physicians was a significant contributor to procedure growth. We believe INTRA has established a leading position in SI joint fusion among interventional physicians, supported by our comprehensive portfolio, clinical evidence and training programs.

Proposed CMS reimbursement changes could also strengthen demand for our solutions in this market. Under the proposal, hospital outpatient and ASC payments would increase to more than $20,000 and $16,000, respectively, and in new office payments of $20,000 for CPT 27279 would be established. If finalized, these changes would take effect January 1, 2027, improve procedure economics and expand patient access. We expect CMS to issue the final ruling in the coming days.

In trauma, we continue to collaborate with Smith+Nephew on surgeon awareness and education to treat sacral insufficiency fractures using iFuse TORQ TNT. As we enter the busy season for trauma, our joint commercial actions over the last 6 months are starting to deliver as we're seeing growing adoption of our platform.

Looking ahead, we're advancing several programs targeting large established markets with significant unmet needs and high procedure failure rates. These solutions apply our compromised bone expertise to new clinical challenges and build on existing physician relationships and commercial infrastructure. By organizing our innovation around the needs of these high-risk patients, we remain committed to improving procedural outcomes.

Now turning to physician engagement. We ended the quarter with approximately 1,770 active physicians, representing 16% year-over-year growth. We're proud of our double-digit physician growth in every quarter for nearly 6 years, which we attribute to the impact of our innovation that is improving patient outcomes, the quality of our targeting activity as well as the prudent investment in physician education and high-quality clinical research.

Given our sizable installed base, we're also focused on deeper physician engagement to increase the number of cases per physician. While we continue to see steady increases in the number of physicians performing multiple procedure types, Onyx has the potential to materially accelerate this trend. Even in this limited launch period, Onyx is already driving an increase in the number of cases as well as the increase in the number of products used per case among existing Granite physicians.

Next, let's turn to commercial execution. We ended the third quarter with 93 quota-carrying territory managers. Our trailing 12-month average revenue per territory was $2.2 million, representing 7% improvement. These productivity gains reflect the operating leverage in a hybrid model strategy as our direct team focuses on physician education and relationships while third-party agents extend procedural coverage and market reach.

We're targeting to exit 2026 with nearly 100 territories. The added field capacity will allow us to capture the anticipated Onyx demand, deepen physician engagement, capitalize on the interventional momentum and prepare for future launches.

Before I hand it over to Anshul, I want to thank our colleagues for their dedication and execution. I especially want to recognize our teams involved in the development and launch of Onyx. I also want to compliment our market access team whose work helped secure the new granite DRGs. Onyx marks the beginning of our next wave of innovation, and I'm excited about what we can accomplish. We're helping physicians treat thousands of patients and improve their quality of life.

Now Anshul will discuss our financial results and outlook for the rest of the year.

Thanks, Laura. Good afternoon, everyone. Our third quarter results demonstrate our ability to drive strong procedure growth, improve profitability and generate operating cash while investing in future opportunities. Let me provide additional details on our financial performance.

Starting with revenue growth. Worldwide revenue was $55.7 million, representing 14.5% growth. U.S. revenue increased 13.9% to $52.8 million, driven by 19.5% procedure volume growth, partially offset by lower average selling price.

The robust volume in a seasonally slower quarter for the industry reflects the benefits of our strategy to build a diversified portfolio serving both surgeons and interventional pain physicians. With nearly 650,000 annual target procedures that can benefit from our highly differentiated technologies, we believe we are in the early stages of accelerating procedure volume growth.

The ASP was impacted by procedure mix, which drives the average number of implants per case as well as the site of care mix as our INTRA platform adoption increased in faster-growing ASC and in-office settings, which typically carry lower ASP. International revenue increased 27% to $2.9 million, driven by growing TORQ and TNT procedure volume.

Turning to profitability. Gross profit increased 13.7% to $44.2 million. Gross margin was 79.3%, continuing to track ahead of guidance. The minimal change in gross margin reflects the site of care and procedure mix I highlighted earlier, partially offset by the improving surgical capacity utilization and implementation of production workflow changes to reduce implant costs as well as optimize instrument costs.

Operating expenses increased 9.7%, well below revenue growth of 14.5%, demonstrating our ability to scale efficiently. Higher spending reflected sales commissions, marketing activities to support new products and continued R&D investment. Based on the trends through the first 3 quarters, we believe 2026 operating leverage will be better than our expectations at the beginning of the year.

Net loss narrowed to $3.6 million or $0.08 per diluted share compared to a net loss of $4.6 million or $0.11 per diluted share. Adjusted EBITDA increased 32.4% to $3 million, representing an adjusted EBITDA margin of 5.5%. Over the trailing 12 months, our adjusted EBITDA increased approximately 140% to nearly $13.6 million, and adjusted EBITDA margin more than doubled. Going forward, we expect strong revenue growth and continuing operating leverage to drive further margin expansion and move us towards GAAP profitability.

Turning to liquidity and cash flow. Our working capital discipline and asset-light operating model are converting improved operating performance into cash. We ended the quarter with $146.3 million in cash and equivalents, up approximately $400,000 sequentially. Year-to-date, we generated approximately $4.4 million in operating cash flow compared with $2.4 million used in the prior year period, an improvement of $6.8 million. Our robust balance sheet and progress towards consistent free cash flow generation positions us to fund our planned development programs while maintaining significant financial flexibility.

Turning to 2026 outlook. We are reaffirming our 2026 worldwide revenue of $231 million to $233 million as well as our gross margin expectations at 79%. While we are making growth-oriented investments related to Onyx launch and ongoing R&D projects, based on the year-to-date performance, we now expect our operating expenses to grow 10.5% versus our prior expectation of 12%.

The midpoint of our annual worldwide revenue guidance implies over 20% year-over-year revenue growth in the fourth quarter. As we enter our seasonally strongest quarter, our fourth quarter growth acceleration is anchored by the strengthening and broad-based procedure demand, a growing base of active physicians, an expanded commercial footprint and modest contribution from new products.

The new branded DRGs and a broader rollout of Onyx offers additional growth potential, both in terms of volume and procedure ASP upside. Early indications from these catalysts in October reinforce our confidence in a strong finish to 2026 and significant operating momentum entering 2027.

With that, I will turn the call over to Laura.

Thanks, Anshul. We're entering our next phase of growth with a differentiated portfolio, deeper physician engagement and a more favorable reimbursement environment. We've built the commercial scale to capture these opportunities, and our results demonstrate the operating leverage that growth can deliver. Looking ahead, we're very confident in our ability to accelerate growth, improve profitability and help more patients achieve better outcomes.

With that, we're happy to answer your questions. Operator?

[Operator Instructions] Our first question will be coming from the line of Patrick Wood of UBS.

Just 2 upfront. First one on Onyx. Obviously, an alpha launch at the moment, but I'd love any extra color you guys have from the clinician and surgeon feedback and if you're going to change anything as you go into full release, anything you're going to tweak. Just feedback there would be great. And then secondly, big picture, you mentioned several times, obviously, accelerating procedure growth. Q4, the implied guide is for a nice acceleration. How much is Onyx going to keep that momentum as we move through into next year even before the NTAP actually comes online?

[Audio Gap] the answer is yes to that question. So that's number one. Number two, we wanted to see if physicians that are using Onyx, are they using Onyx when they don't go to the pelvis where they typically don't use Granite, and the answer is yes to that as well. And then finally, we want to see if nonusers of Granite are wanting to use Onyx. And the answer is yes to that question, too.

So we're really excited by what we're seeing here just in the last 30 days or so. So they're early trends and all of the things that we talked about in terms of increasing procedure volumes and seeing implant utilization per case increase with Onyx is happening in the early stages. And also what gives us a lot of encouragement is Granite has been a huge success for us. And when we compare the demand for Onyx to the early demand for Granite, it's actually tracking ahead of where Granite was as well.

So maybe not that surprising because we've built such a strong number of physicians who are using our technologies, once again, as I said in the preprepared remarks, we had around 700 physicians that were active when we launched Granite, and now we're at almost 1,800, right? And also just the footprint that we have in the United States as well with the larger number of territory managers and territory reps, but also our third-party agents as well. I think all of those things are really important.

So the excitement is really evident with our commercial team. We have actually quite a bit of inbound demand already for Onyx. And so, for us, it's really deploying additional surgical capacity out there in November and December, and then we expect the full launch in January.

And then, Patrick, on the guidance side, you're correct. The midpoint of our full year guidance implies a 20% revenue growth in the fourth quarter. Now the acceleration that we expect to see in the fourth quarter is actually a buildup of all the activities we engaged in throughout the year. It started with the meaningful physician base growth that we've seen. Just comparing third quarter to third quarter, we've added nearly 250 additional physicians.

The expansion into interventional, as Laura said in her prepared remarks, is actually doing well. The INTRA platform is really accelerating adoption within the interventional space, and we saw that happen in the third quarter, which tends to be a slow quarter generally. So that bodes well for the fourth quarter.

The last piece would be on the trauma side, we've been working very closely with Smith+Nephew to sort of build the foundations entering a busy trauma quarter as well. And coming into the fourth quarter, we're seeing the benefit of that as well. And then the last piece on Onyx, what's incorporated in the guidance, when we started the year, we had said Onyx would be available at some point late in the fourth quarter. We're obviously ahead of track on that, given that Onyx was in alpha launch in October. And the color Laura provided, it's actually doing quite well for us.

So I think, net-net, we're positioned really well. Now the 2 things that could provide potentially additional upside would be the impact of new DRGs on Granite. Especially as we think about the third quarter, we had more Granite cases with 2 implants. As we continue to drive awareness in the DRGs, can we move that to 4. And then as we continue to broaden our alpha launch with more surgical sets out there for Onyx, could that be additional upside for us as well.

So I think we feel very good about the setup ending the year and then also what it sets us up as we look out the next few years from a growth perspective.

The next question will be coming from the line of Matthew O'Brien from Piper Sandler.

Maybe just to keep going on Onyx for a second here. Laura, you mentioned the 1,800 active docs roughly that you have now. How quickly can you access those clinicians? That would seem like that's the low-hanging fruit versus going after people that had not been working with you in the past. So is there any kind of metric we should think about in terms of how many you can get to by the middle of next year, by the end of next year, anything along those lines? And then just talk a little bit about training, how quickly they can get up the curve in terms of getting accustomed to Onyx and being able to incorporate it in their practice. And then I have a follow-up.

Yes. Thanks, Matt. Good questions. And in terms of Onyx, you're right. So this first quarter is really focused primarily on just the alpha launch that we're working on right now. But as we continue with every single week, we're pushing out more trades into the field as well as more inventory as well. And given just the sheer number of surgeons that are already using our Granite product, it gives us the opportunity to work with them, first of all, in these Granite cases themselves, right? So we actually have an opportunity to have a significant throughput and increase the revenue per case with adding Onyx just into existing Granite cases.

But then also, you have these 1,800 active physicians as well at the same time. And a lot of those physicians, they are doing cases that don't necessarily go to the pelvis. And so they haven't been using Granite in those cases, but they are going to be more likely to use Onyx either at the top of the construct or at the bottom of the construct. So like, for example, in cases where surgeons use both Granite and Onyx, we're seeing utilization of around 6 implants per procedure, which is going to translate to that increase in the revenue per case that I just mentioned.

But in addition to all of that, there's also the opportunity to go after new surgeons too, that had not, for one reason or another, adopted the Granite technology, and we're already starting to see cases with some of these key opinion leader surgeons in the early stages that are interested in our Onyx product. So I think your question on the commercial infrastructure being in place, and it's really just expanding the surgical capacity is what's really going to be important.

You also talked about training a little bit. And the training is very straightforward, very similar to what we did with Granite. We do a similar sort of a trade review with the surgeon before a case. They're already used to using other technologies in these cases. And so it's just a reminder of, here's our solution, here are our instruments. And so the adoption and the road to training these surgeons is a very quick one.

And the only other thing I would add, Matt, there is Onyx is a line extension. So from a VAC committee approval perspective, it's actually a very seamless process for us. It's just targeting a different disease state, like Laura said, in the UIV and LIV.

Okay. Appreciate that. And then something in the press release really got my attention. It was talking about setting you guys up for the strongest foundation for growth acceleration in the history of the company. I mean you've done 20%, 30% growth in the past. I'm not expecting the high end of that 30% number next year. But the Street settled in at about 15.5% growth for next year on the top line. That would seem to be well below what you can likely do, given all the tailwinds. Is that a fair assessment? Or is there something else that we should be contemplating?

Yes. So Matt, I can take that question. When we make that comment, and we don't make it lightly, if you look at the structural multiyear tailwinds that we have in our business, I'll just summarize the top 6 that we have. The expanded call point strategy with interventional spine is translating into faster penetration in the SI joint dysfunction market. And the proposed expanded coverage for site of care that may be announced any day at this point, assuming it's finalized, could be a further tailwind in that business for us.

The Smith+Nephew collaboration is starting to gain some momentum as well. We've talked about the new DRGs, the impact it can have on Granite adoption and more implants per case. Onyx, again, we're in alpha launch right now. We're going to put more capacity out in '27 throughout the year into 2028. And then you've got the potential benefit of NTAP at the end of 2027 as well. And then we've got other projects we're working on.

So truly a lot of tailwinds in the business. Now, as excited as we are about those tailwinds, we are still in the early stages of evaluating their impact. And we feel good about the growth prospects into 2027, but we want to get a few more months behind us from a performance standpoint before we talk about 2027.

Our focus is on closing the year strong, go through our planning process, which we are under right now and then talk about guidance and expectations in late February when we announce our fourth quarter earnings. And look, we're going to consistently be thoughtful and prudent in our approach, but we do believe that these tailwinds are not just limited to '27, but even beyond.

Our next question is coming from the line of Richard Newitter of Truist Securities.

Maybe just to follow on Matt's question just now. On the bottom line, I was just wondering if you could offer any thoughts as you potentially are about to move into one of the biggest acceleration or most confident points of -- jump-off points for acceleration going forward. And on profitability, what that could look like, it looks like you're on track to potentially exit at around 9% in 2026, adjusted EBITDA margin. That's about what you did exiting last year, 4Q '25. Just curious how we should think about the ramp, especially with what seem like pretty significant drivers, both from a margin standpoint and just sheer growth dollars? And I have a follow-up.

Yes. No, Richard, happy to take that question. Our profitability is an outcome of our strong top line growth. Let's just start with that. And obviously, with the way our spend -- [Audio Gap] as a result, we've reflected a reduction in OpEx growth for the year. Now, when we think about the coming years from a profitability standpoint, we do have a lot of growth-oriented investments that we want to be able to make in the business. We do remain committed to our operating leverage expectations. As we've always said, on the low end, it's 1.25x revenue growth to OpEx growth and could be as high as 1.75x over the long term.

Now, these investments, we think, are really important to continue to drive this sustained long-term growth that we'd like to see the business deliver. It's around investment in R&D personnel and our own machining capabilities to support the annual cadence of new product launches. We do expect to expand our sales force to capture the demand that we're seeing across all the call points. And then as we launch new products, including Onyx, we want to make sure we are investing in training and marketing activities.

So these are deliberate investments that we want to be able to make in the business to drive growth. But we do expect that the accelerating top line growth should allow us to drop a significant amount of dollars to the bottom line even at the midpoint of the leverage being around 1.4x, 1.5x.

And maybe just one follow-up. Look, congratulations. Really nice acceleration in your procedure growth this quarter. But the ASP took a little step back. I guess, maybe anything to call out there, Anshul or Laura? And kind of how should we think of that trend in 4Q, especially if you've got increased revenue procedure tailwinds?

No, that's a great question, Richard. So again, 20% procedure volume growth in the third quarter, it's actually very encouraging. We're very pleased with that, especially when you think about all the noise around slowdown in procedure volumes. And from an ASP standpoint, when we started the year, we had talked about sort of low to mid-single-digit ASP degradation from a per procedure standpoint, especially as the business mix evolves.

Now, when you think about the reach of our platform today, it now ranges from single implant procedures where INTRA is used in an ASC or an in-office setting on one end. And on the other end, you've got cases with Granite and also now Onyx, which could be 4-plus implant cases, which are performed in inpatient settings. So both of these factors can have an impact on our ASP.

And when you looked at the third quarter, what we saw was Granite continued to grow well, but we did see an increase in 2 implant Granite cases, which generally tend to be more in the degen side versus the 4 implant side. Now with the new DRG changes, we're continuing to educate people on the benefits of 2 points of fixation on either side. And then the strong demand on INTRA from interventional spine physicians in the ASC and office-based setting, which typically carries a lower ASP was expected. But what was encouraging was it's actually allowing us to penetrate the huge multibillion-dollar untapped SIJD TAM we've been targeting for so long.

So as we think about our ASP, 2 most important variables will be around where the volume growth is coming from in the site of service. Now, Laura talked a little bit about it earlier in the comments, even in the early stages of Onyx, what we are seeing is the average procedure ASP is actually moving up coming into the fourth quarter because we're starting to see some of the benefits of Onyx and also the uptake in multi-implant granite cases go higher. Now offsetting that is going to be the interventional volume, but we think net-net, you should see an improvement in ASP in the fourth quarter given the dynamics the way they're playing out.

Our question will be coming from Caitlin Roberts of Canaccord Genuity.

Maybe just jumping off of Anshul, what you mentioned about the procedure volume growth and which is strong, given the noise that you've heard from others. Maybe just a little bit more color on what you are seeing as it relates to procedure volume just across your call points.

Yes. Thanks, Caitlin, for the question. I mean if you look at the third quarter with the volume growth at 20%, we would say the short answer is no, that we're not seeing this concern that you're hearing from some other companies. Now it may be that we're just in a unique position in the industry. We're targeting unmet clinical needs and known failures in various fusion procedures, and it's clearly resonating with our customers.

I think also the fact that we're building new TAMs and now we're at a point where we're targeting over 600,000 annual procedures, we're not fighting for market share gains. We're more identifying these new opportunities, and that's contributing to the growth that we're seeing.

So I can't necessarily speculate on the macro impact and the broader industry volumes. But just given our particular situation with multiple growth drivers, we think we're really well positioned to navigate if there are headwinds or issues that are out there and to drive strong growth. And even coming into the fourth quarter, if you look at our guidance, it's saying that our best estimate is that we will exceed 20% growth. And so what we're seeing and expecting is continued strong demand across the portfolio and especially given the tailwinds with Onyx and then the new Granite DRGs and finally, the interventional ramp as well, it bodes well for us.

Great. And then just on the Smith+Nephew partnership, any KPIs in terms of surgeon or facility penetration you could share? And just thoughts on maybe partnering with them or another company for any future products that don't necessarily fit your core call points?

Yes. Thanks for asking about that. And actually, we're making nice progress with Smith+Nephew at this point. It does usually take some time in order to build that relationship and to see the results, especially in the case of SI-BONE, we're a pretty nimble company that is able to innovate and bring products to market and see the impact fairly quickly, but working with a larger company, it does tend to take a little bit more time.

But over the last several months, we've been focused on surgeon education, training and also just expanding access to TNT at these various trauma centers. And there is this normal onboarding period with physician engagement, hospital approvals and the initial procedures, but we're pleased with what we're seeing exiting Q3 and entering Q4, which is typically more of a seasonally stronger period for trauma, and we are starting to see the results of our joint commercial efforts.

Next question is coming from the line of Young Li of [ Jefferies ].

All right, great. I guess maybe back to Onyx. I wanted to hear, I guess, a little bit more on like the attachment rate for Onyx versus the classic Granite cases. I guess, what are you seeing in the alpha launch group so far? How frequently are they being used together versus not? And then where do you think that can go longer term?

Yes. I mean I talked a little bit about some of the measures that we're currently using. And as you're stating, the most obvious application is for our surgeons to use Onyx in the same cases as Granite, and we're seeing that come through. And it's low-hanging fruit, as you well, if you look at that opportunity. But what's also happening is, let's talk about the surgeons that are using Granite regularly when they go to the pelvis. What we're seeing is that those surgeons are actually using Onyx in the cases where they're not going to the pelvis.

So they may not be using Granite in those cases, but they are surgeons that have been using our products for an extended period of time and now really like what we're offering here with Onyx for their patients with compromised bone. And as I mentioned, the issue is really having issues with screw loosening in these patients that have compromised bone. And so the application is well understood, and there's an excitement with our surgeons that we're finally solving this problem overall.

So -- and then finally, we're actually seeing surgeons who have not used Granite previously, but they actually are interested in using Onyx. But as you said, I would say the primary use case is in those surgeons that we've been working with for an extended period of time, in many cases, in those procedures where they're using Granite, but we're seeing much more than that as well.

And I did talk a little bit about implant utilization as well in these cases where what we're seeing in a case where they're typically using Granite and Onyx together is they're using 6 implants in those cases. So it's a pretty exciting opportunity, and it just gives us this significant benefit in terms of increasing surgeon density that we didn't necessarily have with our portfolio previously.

And then Young, the thing I would say is if you even look at the underlying TAM, Granite's underlying TAM is about 130,000 cases, 140,000 cases, of which about 30,000 to 40,000 cases were in the deformity -- adult deformity space. And given the complexity of those adult deformity procedures, our expectation is almost all those cases where you use Granite, you might want to use Onyx at the top and the bottom of the construct. That's what's embedded in our TAM numbers. But then once you get beyond that, within the degen space, when you think about the number of fusion procedures that happen there, there's around 400,000 procedures. Our best estimate is that 100,000 of those end at the sacrum, and that's where Granite would have been used.

But UIV/LIV can extend beyond those 100,000 cases as well, especially when you think about the number of those patients that have osteoporosis, rough estimate, 1 in 3 patients. And if you look at patients who are over 50, even more patients have osteoporosis and Onyx would have application there at the UIV and LIV as well. And those end up around 150,000 cases. Now, those are bread-and-butter cases, too, for a lot of physicians that may not do Granite, because they may not be at academic centers, but do do SI joint dysfunction. And so we've got a nice overlap of physicians that can use Onyx, whether they use Granite or not.

All right. Great. That's very helpful. I guess I wanted to follow up a little bit on that concept. I guess, what are your expectations for any potential halo effect from Onyx, where you can enable some conversion or pull-through of surgeons to the other products in your portfolio?

I think there's no question that there's a halo effect. And I talked a little bit about the clinical data that we have on our Granite technology. And we recently had a surgeon that came into a Board meeting that just talked about the fact that that we have really addressed the issue at the bottom of the long construct with Granite. And now we're proving it out with our SILVIA study information and then also our PAULA study information, too.

And so it's well known that you have this issue with the upper part of the spine and the lower part of the spine. So in these particular cases with Onyx, it is another major failure point at the top and the bottom of the spine. And published literature is actually reporting screw loosening in as many as 27% of spinal fusion constructs. And so there's this understanding of what the problem actually is.

There's also an understanding that SI-BONE was able to address the issue at the bottom of the long construct and now we're moving to the next area that is a significant challenge for these particular surgeons and their patients. So I'm kind of -- I'm going to go back to what you said in terms of a halo effect. I do believe that all the work that we've done on Granite does have a halo effect and that it will have an impact on Onyx sales.

Our question is coming from the line of Gracia Mahoney of Bank of America.

The first one I wanted to ask on was just in the prepared remarks, you talked about how the new DRGs may benefit Onyx. So just wanted to clarify if they already mapped to it today. If not, what needs to happen for that to occur? And maybe just in terms of an NTAP strategy, if you do that, what sort of the application filing timeline process would be like and what you're doing to prepare hospitals for reimbursement around the product?

Yes. Good questions, Gracia. And we are excited about the new Granite DRGs. We've been working for an extended period of time with CMS on this particular topic, and we're really pleased that they created these new DRGs, recognizing the clinical complexity and the additional costs associated with treating these patients. And so from a Granite perspective, these new DRGs went into place on October 1, 2026. And so it's going to have an impact on the Granite business.

And if you think about where we were previously, the NTAP expired October 1, 2025. So for the last 12 months, there has not been a Granite NTAP in place. But now with these new DRGs and these new DRGs, if you look at the reimbursement, they pay up to an additional $50,000 more for qualifying cases. It does provide the opportunity for hospitals and surgeons to feel confident in using Granite.

And if you think about the NTAP, the NTAP is specific to Medicare cases, whereas the new DRGs are going to cover all payers, not just Medicare but also commercial payers, too. So we think that all of that is really important just for our Granite business. Now, you asked about the impact on Onyx as well. And as I said, a lot of the cases that we're seeing currently with Onyx are being done in conjunction with Granite. And so those cases are going to be accessing the new higher-paying DRGs. And so in terms of cost, the new DRGs are helping to address the higher costs associated with these technologies.

We have -- you also asked about the NTAP for Onyx. We have already applied for an NTAP with CMS. And given that this is a breakthrough device, we should be able to follow an alternative pathway with our Onyx technology, and we'll know for sure, October 1, 2027. And earlier than that, I think April already, we'll get some information on the NTAP for Onyx specifically. But we do think that there's another opportunity there for Onyx in the future with the NTAP, but also currently in conjunction with granite cases.

Okay. Super helpful. And then I guess just how to think about maybe all these product launches and any incremental impact to gross margin? I think Street is modeling gross margin down a little bit versus this year. So any sort of puts and takes to consider there as we go into 2027?

Yes, I think it's a good question. And I'll have Anshul talk a little bit about the gross margin impact. But the question about additional product launches is an important one. We really are looking at a compromised bone opportunity here. And what it's done is it's created this opportunity to significantly expand our product road map and for us to be regularly putting out products in order to meet these new opportunities and address them, very similar to what we've done already with Granite, for example, with pelvic fixation, very similar to what we've done with TNT, with pelvic trauma and now finally, with Onyx with the top and the bottom of the spine construct, we have more opportunities to further expand and regularly launch products. And I'll let Anshul talk about the gross margin impact.

Yes. So thanks for that question. We really feel great about our industry-leading gross margins. Year-to-date, we've actually tracked ahead of what we guided. And part of that is just our focus on asset utilization and implant and trade cost reduction initiatives. As our business scales with that strong top line growth, we are focused on driving more incremental revenue dollars to the bottom line and improving towards -- and progressing towards improving GAAP profit dollars now.

When you think about 2027, and I'll provide a couple of years expectations there. Going into 2027, we do anticipate some modest gross margin pressure. Most of that is from the higher noncash depreciation expenses associated with the additional Onyx surgical capacity we plan to deploy and to support the procedure demand that we expect from Onyx.

As Laura said earlier, beyond Onyx, we do expect to bring additional platforms to market in the next few years, which we know will meaningfully accelerate top line growth given how differentiated they are and they're going after known unmet needs. As we launch these technologies, we've talked about it historically that we expect gross margin to be in sort of that 78% area as you go beyond 2027. Most of that is going to be driven by the subscale nature of the new products and higher noncash costs from trade depreciation.

Now, what that does not include is our expectations to work on cost reduction initiatives with our manufacturing partners on our existing portfolio as well as our internal operational efficiency efforts, which include driving higher utilization through setting up loaner operations and things like that.

So again, very focused on gross margin profitability. We think even at that 78%, 79%, it will be industry-leading, and that should translate well into operating profit at the adjusted level and also GAAP profitability in the not-too-distant future.

Our next question is coming from the line of Matt Blackman of TD Cowen.

Can you hear me okay?

Yes.

Great. I'm just going to leave it to one. And Laura, shockingly, the question will be on Onyx. Just I'm curious, some of the early feedback we've been hearing from clinicians is focused on them wanting to see some commercial clinical and economic outcomes data before putting Onyx into their armamentarium. That doesn't strike me as an unusual request with a new product. But just curious what you're hearing from physicians, and to the extent you do need to build, we'll call it a commercial data dossier, what's the pathway to do that? How big do you think that needs to be? How long out do you think that data need to be? Just any color on that would be helpful.

Yes. As you know, we're very used to putting together high-quality clinical data. We have over almost 200 peer-reviewed published papers, including 4 randomized controlled trials and many more prospective studies as well. And so the approach that we're taking here is very similar to what we did with our Granite technology. So we have bench data and then we have all of the information on the high rate of failure at the upper and lower ends of the long spinal constructs.

And so in a lot of these cases, these surgeons actually don't have a good alternative solution. And so what we're seeing is given how well we handled the situation with Granite and addressed the issue at the bottom of the long construct, and the quality of the bench data and the product itself and the osseointegrated nature of the product, it already is lending itself to surgeons that are interested in using the product now. And so what we're doing is we're working with those particular surgeons. With that said, we're also looking at the opportunity to build that additional clinical data.

And so in terms of how we're thinking about Onyx, what we're doing is we're leveraging the benchtop in animal studies that we have currently. It's compared to conventional screws. It compares very well to those. But then we're also going to launch a prospective multicenter clinical study to evaluate Onyx safety and clinical performance as well. So very similar to what we've done in the past.

Finally, one of the other ways that surgeons do address these issues in patients is they use bone cement along with pedicle screws. But in these particular cases, cement, it can improve initial fixation, but it comes with trade-offs. So the cement can leak outside the vertebra. You can have the potential for nerve injury, pulmonary embolisms, creates a rigid interface that doesn't integrate with bone. And then it can even raise the risk of fractures at the adjacent level. So the alternatives that surgeons have right now, they are not good alternatives.

So getting back to your question, I do think that there are going to be the early adopter surgeons that understand that there are no good solutions for these patients right now. And then there are going to be others that are going to wait. In terms of the amount of time that they'll look, typically 6 to 12 months, they're going to want to see some information that shows how these particular patients did. And so -- but typically, we'll run our clinical data out at least 2 years, if not 5 years. I hope that's helpful.

Very helpful.

Our next question is coming from the line of David Saxon of Needham & Company.

I'll keep it to one as well. Just wanted to follow up on the revenue per case commentary. So I mean, it sounds like you'll start to see a benefit from Onyx here in the fourth quarter. And just given how early it is in the launch and I guess that's going to offset what you're seeing with INTRA, like, is it fair to expect some pricing tailwind or revenue per case tailwind as we go into 2027? Just any color there would be helpful.

Yes. I mean I'll talk about 2027, David, once we close out the fourth quarter on a strong note, get through our planning and come on the other side. Historically, we've always assumed coming into the new year some ASP degradation, again, because of the portfolio mix evolving. What you've got in our story right now is you've got an exciting opportunity within interventional with SI joint dysfunction, where we are becoming the market leader in that space with the most comprehensive solution set.

Reimbursement changes there could be another tailwind as assuming 27279 gets approved for office-based or in-office procedures. So you've got that on one side, which will be a big volume driver. On the flip side, you've got Granite and Onyx with the new DRGs, but also the symbiotic nature of these products being used together in the same procedure, you should get a tailwind from that.

So I think net-net, we'll talk about more on the ASP assumptions when you get into 2027. But all indications are you've got the volume benefit on both sides with Granite Onyx and Interventional, but you will have additional ASP upside from Onyx Granite.

Our next question is coming from the line of Daniel Stauder of Citizens.

I'll try to keep it to one as well. Just thinking about operating expenses, I appreciate you giving those op leverage bands as we think about 2027 and beyond. But I think you mentioned that you expect to expand the sales force as well to try to keep up with some of this demand. So first, how much of an investment could that be? Is it fair to assume that they'll be mostly focused on Onyx and Bedrock? And then how should we think about any cadence in terms of spend in '27 with the potential rep adds and any incremental spend as you get the Onyx launch going?

Yes. No, happy to take that question, Dan. So when we think about our operating leverage in the business, like I've always shared, it's driven by top line growth and our profitability performance reflects that inherent operating leverage that we've built. Now with a lot of the untapped opportunities that we see ahead of ourselves, both with the existing portfolio as well as new product launches, we do think the investments we want to make, whether it's on the R&D clinical side, like Laura talked about on the Onyx clinical side, we believe, is really important to continue to drive penetration and adoption there.

In terms of the expansion of the sales force, we're going to be very thoughtful. The reason to expand the sales force is going to be because we see specific markets where there are huge opportunities, whether it's within Interventional or whether it's with Granite Onyx to be able to drive growth there or in the SI joint fusion business as well.

So we're not going to sacrifice productivity at the sales per territory. As we expand, we're going to be very thoughtful about it. And that's what gives us confidence in the continued operating leverage in the business of on the low end, the 1.25x, on the high end, the 1.75x, which should translate into expanded profitable dollars falling to the bottom line.

Thank you. And that concludes today's Q&A session. I would like to turn the call back to Laura for closing remarks. Please go ahead.

I just want to say thank you to everyone for participating in today's call, and we also really appreciate your interest in SI-BONE. And finally, we look forward to seeing you all at upcoming conferences as well as non-deal roadshows. Thanks again. Goodbye.

This concludes today's program and thank you so much for joining. You may now disconnect.

Hello. Good morning, everyone. Thanks for joining us today. I'm Eduardo Herdan. I'm part of the Morgan Stanley team. Today, I have the pleasure of being joined by Anshul Maheshwari, COO and CFO of SI-BONE. Before we begin, just need to do a little plug for our disclaimers. Please visit morganstanley.com/researchdisclosures.

And with that, let's start with the fun part. Anshul, thank you very much for being us -- with us today. So, before we dive into performance, let's start with the big picture question. Company has evolved a lot in the last few years. Could you maybe walk us through that evolution and talk through how you see your products and end markets today?

Sure. Eduardo, thank you for having us. We appreciate being invited to Morgan Stanley. It's one of the best conferences we attend every year. In terms of how the company has evolved, you're right. If you go back to the start of the company, which goes back to 2008, 2009, we started as a single disease state company, which was addressing a known disease state with an SI joint dysfunction. We had to build the market, we had to build clinical evidence, we had to build reimbursement. And we, by far, are the leading market share owner in the SI joint dysfunction space, whether it's on the surgeon side and most recently, we've expanded on the interventional side.

In the last 6 years, what we've done is we've gone from this one disease state, one product company, to a multiproduct platform targeting the pelvic -- the pelvis. And within that, we've built out a pelvic fixation franchise, which is with Granite. That was our first breakthrough device product, driving fixation and fusion at the base of deformity and degen spine procedures. And then more recently, 2 years ago, we launched our TNT product, which was our second breakthrough device that was for pelvic fixation -- pelvic ring fractures for fragility fractures in patients, generally patients who are older with Medicare and poor bone quality. That was our second breakthrough device that we launched specifically targeting towards trauma.

Now, as we built that franchise, there were a few common themes there. One, it was understanding the biomechanics of these first products that were going into an anatomy that was facing a lot of load. #2 was your sacrum has one of the most poor quality bone, low-density bone, in the human anatomy. And so being able to drive fixation and fusion required a level of innovation that did not exist before SI-BONE came out. And #3 was because we're going after an unmet need, it was all about clinical data. And then it was about establishing reimbursement. And so we built that core skill set over the last 1.5 decades. And what you're now seeing us do is take that core skill set and say, what else can we do with it?

We are, by far, the market leader in SI joint dysfunction. We are becoming the standard of care in spinopelvic fixation. We are becoming a standard of care within fragility fractures with our TNT product. What you're now seeing is look at this as a compromised bone franchise, having had the expertise of fusing this low-quality bone in your sacrum. And we're now starting to look at opportunities for patients that have osteoporosis, osteopenia. How can we come up with solutions that help drive fixation and fusion for the patients that suffer from those disease states, still staying within spine and interventional as the core call points? And that's really important for us because we see a lot of unmet needs, areas where you have high failure rates, where we know our technology can improve patient outcomes because of a proven track record.

Our product that we've been teasing everybody about for the last 1 year is this new TAM that we're going after, which actually takes into account all these learnings I just talked about and is targeting a known failure rate in spinal fusion procedures. And we believe this technology is going to have a very significant impact on our TAM. It's going to be a whole new TAM with the same call point that today works with us on Granite. It's going to have -- because it's a third breakthrough device, it's also going to have the potential for new technology add-on payment that we plan to apply for. That, assuming if it's approved, will go effective in October of 2027. So that's our first product that's building outside of the pelvis.

What we now have also is a pretty robust pipeline of opportunities that we're going after that extend beyond this TAM. Our expectation is, on a very good cadence basis, you will see us come out with new products that are targeting high failure rates in different procedures, again, within spine and interventional at a pretty regular cadence of 1 to 2 new TAMs a year going forward.

Awesome. That's all super interesting, and I certainly will ask a few more questions about the new devices and pipeline in a bit. But maybe before we go into that, let us dive into performance a little bit. So you all have grown a pretty impressive 20% CAGR over the past 5 years, and you continue to have great updates, including this last quarter, that feel like they're going to keep pushing the company's growth. Could you maybe walk us through some of those updates and how you see them affecting the trajectory?

Sure. So we reported our second quarter earnings. And on a year-over-year basis, the worldwide growth was about 15%. Now that was versus a tough comp from last year. If you look at it on a 2-year stack, you're looking at high teens growth rate on the top line. What was equally impressive was the 19% growth rate we had in our active physician base, with close to 720 physicians performing a procedure in a quarter for us. That was a record number of physicians that did a procedure for us. So when you think about what we did, and then we had profitability increase about close to 180% improvement in adjusted EBITDA. We were free cash flow negative $300,000 operating cash flow positive as well, close to $1 million. So all the metrics pointing in the right direction.

What we're really excited about is all the other things that we did during the quarter that are going to set us up for a strong fourth quarter going into a robust multiyear innovation and growth acceleration cycle. Starting with working on the DRGs for Granite, which is our pelvic fixation product. That product had NTAP that expired in October of 2025. We've been working with CMS to get DRG reassignments for that procedure. What we did get, and it was finalized and it goes effective October 1, 2026, is 3 new DRGs, which would increase reimbursement from anywhere between $20,000 on the low end and over $50,000 on the high end for procedures where Granite is incorporated as part of the procedure. So that's going to be a really nice tailwind for the business going out.

The second thing that we were really excited about was the work that we did with the FDA on this third breakthrough device. We did file the FDA application in June, and that gives us confidence about commercializing the product in the fourth quarter and potentially as early as October, to do the alpha launch. So that should be a really nice, exciting opportunity for us. And then we continue to make progress on 2 additional devices that we expect to go into design freeze at the end of this year with the potential to commercialize them in late '27, early 2028. And so our focus has been how do we transform SI-BONE from this single product, single anatomy company into a medical device technology platform where we can now start building technology platforms that have applications around a broad set of opportunities.

Very nice. So maybe let's hone in on the install base for a second. I think you mentioned 1,700 doctors, 19% growth year-on-year. What do you think is driving the growth of your install base at that scale? And are there any specific areas of the business that are driving that growth more than others?

Yes. So we're really proud of the physician base growth that we've seen, I'd say, over the last 5 years. I mean we've -- in 2023, we had 1,700 physicians -- less than 1,700 physicians do a case in a year. And we had over 1,700 physicians do a case in a quarter. And a large part of that is an outcome of the innovation that we have done. Our innovation with Granite continues to attract more physicians into the fold for pelvic fixation. Our expansion into interventional continues to be a really good growth driver for us within SI joint dysfunction. Our launch of our TNT product a couple of years ago continues to get strong traction, especially with the partnership with Smith+Nephew on the trauma side as well.

What we did see is broad-based growth. So you saw double-digit based growth across all call points. And that is really exciting because one of the hardest things to do is to build a customer base of our scale. We've done that. And now as we put out some of these innovative products, it should allow us to now translate that into higher density, so more cases per physician, because we are going after procedures that these physicians perform today and are aware of the challenges that these procedures pose that we can solve.

So let's maybe talk a little about that a little bit more. So I think you're essentially saying that you're thinking about utilization expansion within your physician base. How should we think of that evolution over time? And how do you look at it today? Because I think today, it hasn't -- we haven't seen it, but I think you're expecting to see some inflection in the near term, correct?

Yes. So from a utilization perspective, where we see an overlap today is physicians that do SI joint dysfunction, 25% of those physicians are doing another procedure type with us. Generally, it's doing pelvic fixation with Granite. Now -- as we add more product, it will give us an opportunity to be able to do more cases with those docs. And that's what's really exciting for us. So these new products should not only drive the density, but they should also allow us to continue to increase the physician base number as well. Because if you think about the physician base, there's going to be 2 levers to the physician base.

The first one is you have some episodic physicians, those that use a product on an episodic basis, you have churn. Generally within the SI joint business, where you're not regularly diagnosing patients. With this new product launch, because we're going after a procedure type that these physicians perform all the time in the spinal fusion side, we think you will be able to see a reduction in churn. So that should allow you to drive just an increase in physician base to start with, because your denominator is not shrinking first to then grow.

And then with these new products that we're putting out there, we do expect more physicians to adopt our technology. Today, Granite, if you think about the scope of Granite, there's about 0.5 million spinal fusion procedures done in the U.S. Only 130,000 of those, let us say less than 1/3 of those, end at the sacrum or go to the pelvis. Right? So that's the subset of physicians we're working with today. With these new products we want to put out there, we can go after procedures that are not ending at the sacrum or the pelvis. So that allows us to also grow the physician base while also go deeper with the physicians who use us today.

Right. Got it. So maybe pivoting towards reimbursement. I think you mentioned it a few questions ago that you had some great news with some new DRGs recently. Maybe can you provide an update or give a little bit more color on where you landed and how we should expect it to impact the business?

Yes. So I'd say we've got multiple reimbursement tailwinds going on in the business. So let's start with the DRGs first. These DRGs will impact any procedure where Granite is used. You will be automatically be able to bill to these DRGs. Now unlike NTAP, which is only for Medicare and which is up to 3 years, these DRGs are more durable. And on a rolling basis, commercial will also adopt these DRGs from a payment standpoint. So it really expands the opportunity for Granite, both across commercial and Medicare. So that's a huge advantage.

Now when you think about how this will impact the business, it's going to impact the business in the following ways. #1 is we know biomechanically 2 points of fixation -- so using 2 Granites on either side is the best way to get fixation and fusion. So we think there should be an uptake in physicians that are doing 2 points of fixation because now economics is no longer a challenge. That's #1. #2 is you've got certain physicians and generally on the commercial side, who will be more selective in using Granite because of the reimbursement because there was no NTAP for commercial. Over time, as commercial picks up the reimbursement of these new DRGs, that friction goes away as well.

And then with some of the new sites that we're going after, you've got some pushback on the ASP, and we've been very disciplined in maintaining our ASP because we know we've been working on these DRGs. So we think those opportunities will also open up for us because physicians do want to use the product. When you couple that with the clinical data that we have with PAULA, where we've demonstrated no screw loosening, no breakage of Granite, we're really well positioned to accelerate the penetration of Granite within deformity and degen. So that's on the DRG side with Granite, which should be a huge tailwind for us starting October 1. But we think it will have a more meaningful impact as you go into 2027 as the hospital systems and the health care systems get educated and update their own internal workflows to adopt these DRGs.

The second one is this new product that we want to put out in the fourth quarter. That product is a breakthrough device. It has been grandfathered in because it's been a breakthrough device already and will be eligible for NTAP, which we plan to apply for. And assuming that's approved, that would be a new technology add-on payment that will go effective October 1, 2027. So that should be a really nice tailwind for our business there. You already have the NTAP for TNT of up to $4,000 for trauma procedures. So you've got that as a nice tailwind extending into 2027.

And then the last piece is on our SI joint dysfunction side. There is the proposal to increase the payments for ASCs and OBLs for 27278 and also for 27279 between $1,000 and $2,000, and that would be a nice tailwind for that business, assuming it's approved, effective January 1, 2027. And there is also the proposal to have 27279 be eligible for office-based lab procedures. And with the INTRA platform that we've built over the last 3 years, we're really well positioned to service the OBL market and the ASC market for pain or surgeons. And then you've got TORQ and 3D that's very well suited for the ASC and outpatient offices as well. So a lot of tailwinds. It's very unique to have a company at our scale to have that many commercial tailwinds, new product tailwinds and also reimbursement tailwinds.

Yes. So maybe let's talk about new products. You mentioned your third breakthrough device. Maybe give us a bit more detail, what is the TAM? How is it different than everything you've done so far? What impact can we expect on 2027? Anything that you can give us?

Yes, I'm not going to talk about the TAM yet. We've been deliberately quiet about the TAM opportunity or talking much about the product, mostly for competitive reasons. And we'll be able to talk about it once we get FDA clearance. Now like I said, this is our first product outside of the pelvis. It's a whole new TAM. It is by far one of the largest unmet needs and an area of failure within spine fusion. And if you think about our history, we've built our history on addressing some of the most challenging issues in any procedure, and this is no different than that. Like I said, what's exciting is it's after the same call point that today uses Granite.

So when we think about the advantages this product has vis-a-vis Granite, which has been a very successful product for us. It's been one of the fastest scaling products for us is when we launched Granite, we had to build an agent network from a case coverage standpoint. We today have 300 agents that we work with that carry Granite. So this product will have access to those agents. With Granite, we had to build our presence in academic institutions and also build our presence with physicians who are doing deformity and degen procedures. This product will benefit from that.

Because it is a known challenge within spine, we've made sure that it fits the physician workflow. There is no real training requirement for this product. It is literally a tray review, which is what Granite is today. Granite is literally a tray review where you walk in, you show a physician the tray, they understand the workflow right away and they want to use the product. So that's a really exciting opportunity for us from that perspective that you should see a much faster ramp for this product once we get through alpha and beta launch.

Great. So maybe you've spoken about the Granite launch, but maybe can we talk a little bit about the INTRA product platform and how that launch has gone and how the interventional market is going?

Yes. So we entered the interventional market about 3 years ago. And part of the reason for that was we've always worked with interventional, but more from a referral pattern perspective back to surgeons. And we do know there's a subset of patients that are with interventionalists that they want to be able to treat. And so 3 years ago, we started working with them on TORQ. It was a product that had been out since 2021, targeting towards surgeons. We started working with interventionalists on that. We actually launched our STACI study, which showcased the safety and efficacy of interventionalists using our TORQ product, and it had good -- no SAEs reported, and it was actually really good outcomes.

And since then, we've actually launched our INTRA platform specifically targeted towards interventionalists. And that platform actually has a couple of allograft solutions, our INTRA X, our INTRA V -- and most recently, we launched our INTRA Ti product that's targeting interventionalists that are in markets where reimbursement for 27278 doesn't exist or is not covered because of LCDs. And that product has done really well for us. So as a whole, the INTRA franchise is doing really well for us. interventional has been a key growth driver for us within the SI joint dysfunction space. Surgeons still account for majority of the business, but we're seeing a really good adoption from an interventional standpoint.

And we've basically used the same playbook that we did with surgeons, which is we wanted to become a one-stop shop, comprehensive solution set for surgeons. So we started with the triangle, we added TORQ. And we've done the same thing with interventionalists. We started with TORQ, then we added a couple of allograft solutions. Now we've added a metal solution. And our focus is how do you make it simple? How do you make it reproducible? And how do you make it site agnostic? And we've done that very successfully.

Very nice. And any lessons learned that can be applied elsewhere as you maybe look to launch your third breakthrough device or any other products that are maybe in the pipeline?

I think what you're going to see us do is you're going to see us launch products that actually incorporate all the lessons that we've learned. We know changing medicine is one of the most difficult things. We know people are looking for better outcomes. We know people are focused on health care economics. We know adoption accelerates when it's a simplified workflow. And so what you're seeing us focus on is we've got this significant, I'd say, a pretty substantial list of opportunities that we're going to go after where there is a known failure rate. We're going to be focused on solving them with unique solutions. We're not going to be a me-too product company. We're going to maintain our asset-light model. We're going to maintain our high ASP. We're going to focus on spine and interventional. And that platform actually has a couple of allograft solutions, our INntra-X, our IntraV -- and most recently, we launched our Intra-TI product that's targeting interventionalists that are in markets where reimbursement for 272And we're going to focus on making sure that it is within the workflow that they're used to.

Understood. And I think you teased this out at the beginning of the conversation, but how -- what should we expect in terms of pace of innovation of new product introductions?

Yes. So we earlier this year talked about this being one of the most exciting phases for SI-BONE as we transition from beyond the pelvis -- and we internally call it super cycle, and we've externally talked about it being an innovation super cycle. And what that entails is sort of looking at potentially at least, if not 1, 2 products a year at a regular basis, each of them targeting a new TAM as well, because that's really important. We will add incremental technology as we need. But what we're trying to do is build platforms that can have broader applications and that we can expand.

So for example, Granite was a platform with the 10.5 Granite, a larger diameter Granite coming out that was targeting degen -- deformity, sorry, and then the 9.5 smaller diameter targeting degen. We did the same thing with the TORQ platform, which is we launched with TORQ that was SI joint dysfunction with some application in trauma, then launched the TNT -- iFuse TNT that was targeting trauma specifically. We did the same thing with interventional with the INTRA platform. So what you're going to see us do is come out with platform technologies and then continue to build new applications and new technologies within that at a pretty regular cadence.

Got it. So maybe let's put it all together maybe in terms of we've spoken about a ton of tailwinds in the business from innovation, reimbursement. How should we think about growth going forward, given all of these tailwinds that you have?

Yes. I mean, look, our growth over the last 5 years, if you look at our CAGR, was about 20%, like you said at the start of the call. And we believe we are entering a very exciting phase of innovation where we want to be able to deliver strong, durable growth. I'm not going to provide guidance at this point. We're not going to put out a long-range plan on what that growth could be. But when you think about the durability of the tailwinds, whether it's the existing platform that will benefit from better reimbursement and continued adoption growth. When you think about the new technologies that we want to put out in the fourth quarter, when you think about the 2 additional technologies that we're starting to talk a little bit about that will commercialize in late '27, early '28.

When you think about the commercial footprint, which will organically grow as we expand our own direct footprint, but also see leverage from our agent network on the spinopelvic side, but also on the trauma side with Smith+Nephew. And then you've got the reimbursement tailwinds, these are all long-term durable tailwinds. And so we feel really good about the setup that we have to accelerate growth, but then also to make sure that it's durable -- and then how do you then take that durable growth and translate that into high gross margin dollars and expanded profitability and free cash flow.

And understanding you're not going to give guidance on this podium, but anything that you can tell us on how we should think about 2027?

I'm going to talk about 2027 when I get into 2027. Right now, focus is be heads down, deliver a Q3 that's strong and then focus on the new product launch in Q4. If you think about where consensus is, that should give you a good indication of where 2027 could land out.

Okay. Fair enough. Maybe as you think about gross margin and the gross margin trajectory, you have some new product launches. How are those going to affect your gross margins?

Yes. So let's start with the baseline. We have industry-leading gross margins at close to 79.5% -- and so we're really proud of that. That's actually come up since the last 18 months. It was sort of closer to the 78.5%, 79%. So we've done a good job in getting gross margins up. Now when we think about the next few years, what we've talked externally is gross margin sort of ranging in that 77%, 78% range. Most of the impact coming from noncash related gross margin implications, which is depreciation.

When you're putting out new products, you're going to put out surgical capacity. That surgical capacity is going to hit your depreciation before you really see a ramp from a turns and asset utilization perspective in the outer years. So you'll see some of that. But what's exciting for us is the operating leverage you can get in the middle of the P&L despite giving up some of that gross margin, is quite significant. And you should see a pretty significant drop through to the bottom line from an adjusted EBITDA standpoint, but eventually from an EBITDA standpoint and operating earnings standpoint.

Now we're equally focused on, as we scale these new products that you should have operational efficiency initiatives that will allow you to bring the cost of these products down because when you start a new product launch, your cost of the implants is much higher because it hasn't scaled. Over time, you make enhancements that get those costs down too. Now, my guidance expectations in the medium term of 77% to 78% does not account for benefits from those activities that could drive upside.

Got it. And so maybe you touched on profitability and SI-BONE is sort of in the unique position that not many med tech can say, you've had both high growth and emerging profitability at the same time. And usually, there's a trade-off there. So how have you been able to achieve both at the same time?

I think for us, it starts with innovative growth. We've grown our way to profitability. If you look at our profitability and leverage trajectory, it's been pretty linear to our top line growth. And there are certain unique themes about our business that we hold as gospel. #1 is making sure we have a differentiated platform that allows us to charge a premium ASP, that allows us to maintain our industry-leading gross margins. And because we are so differentiated, we can leverage this hybrid sales model, which allows us to get a lot of operating leverage in the middle of the P&L.

And then you tack on -- so that's what gets you to your profitability side. And then you tack on a focus on being asset-light from a business model perspective, make sure we're not heavy working capital, heavy CapEx business model, which is what traditional spine has been plagued by. You can see that translate into pretty significant improvement on a free cash flow basis as well, and we've been able to demonstrate that. So I think you'll see that continue to evolve. We've publicly talked about operating leverage being sort of in that 1.2x to 1.7x depending on where we are in the innovation cycle. But if you extrapolate that, you get a significant amount of dollars dropping to the bottom line over the medium term.

Got it. And anything that you can tell us in terms of how we could think about long-term profitability?

Like I said, from our perspective, I'm not going to give you guidance on where long-term profitability goes. But again, if you think about the operating leverage in the business, the potential for durable strong top line growth, you should be able to and sort of a sustained gross margin base. You should be able to see a pretty significant ramp in operating profitability over the medium term.

Perfect. And I think maybe just with our last minute or 2 here, what do you think is the most underappreciated part of the story that you'd want investors to take away from SI-BONE?

Yes. I'd say, actually, there's a growing appreciation as we've talked to investors throughout this year on SI-BONE not being a single disease state, single anatomy company and actually being a medical technology platform that's going after significant markets with several unmet needs. They're realizing the uniqueness of the platform, which is different from traditional spine. Like I said, it's a high ASP, high gross margin, less commoditized, high clinical evidence-backed business that's allowing us to do things that are atypical of companies in our space that is being able to inflect on profitability, continue to expand profitability, inflect on cash flow, expand cash flows, all while continuing to invest in growth. And I think that's starting to resonate a little bit more with investors, and it will continue to evolve as they see these new products being put out there.

Excellent. Well, thank you very much for taking the time, and we appreciate you being at our conference.

Of course.

Thank you. afternoon and welcome. I'd like to remind you that management's remarks today may include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions. Statements are subject to a number of risks and uncertainties, including you should not place undue on these statements. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements except as required by law. During the call, management may also discuss certain non-GAAP measures, including adjusted EBITDA and free cash flow. Unless otherwise noted, any reference to profitability is in terms of positive adjusted EBITDA For a reconciliation of these non-GAAP measures to GAAP accounting, please see the company's full earnings release issued earlier today. unless otherwise noted, all results are compared to the comparable period in the prior year. With that, I'll turn the call over to Laura.

Thanks, Akeb. Good afternoon and thank you for joining us. Our second quarter results demonstrate the strength of our core competencies and the momentum they've created in the business. We founded the company with a clear clinical objective to develop differentiated solutions that enable durable fixation and fusion in high-risk patients with compromised, often osteoporotic bone. Our target patients often live with debilitating pain and diminished quality of life. Our focus has allowed us to identify large addressable markets, establish compelling technical and clinical modes, and create a diversified business with multiple avenues for growth. During the quarter, we continued to translate that strategy into new products and markets. We extended the application of our biomechanical expertise and proprietary technology beyond the sacroiliac joint into high-value adjacencies across musculoskeletal care.

In June, we submitted the 510 application for our third technology with breakthrough device designation. This is our first platform designed for use outside the pelvis and is intended to address a recognized failure point in complex spine procedures. Subject to the 510 clearance, we remain on track to begin a phased commercial launch in the fourth quarter, perhaps as early as October. Additionally, we advanced several development programs targeting new markets we expect to enter over the next 18 months and expanded U.S. field capacity in preparation for the upcoming launches. Second quarter performance was strong across markets. Worldwide and U.S. revenues were $56 million and $53.2 million respectively, both representing approximately 15% growth. Sequentially, U.S. procedure volume increased approximately 9%, marking our strongest second quarter sequential increase in years, dispelling industry concerns regarding the payer environment.

International revenue grew approximately 26% to $2.8 million, led by continued demand for our expanded portfolio. The strong top-line growth yielded meaningful operating leverage. Revenue grew nearly twice as fast as operating expenses, contributing to a 178% improvement in adjusted EBITDA. Looking ahead, we believe the business is well positioned for continued revenue growth and further profitability improvement. Our expanding portfolio, improving reimbursement, and additional commercial capacity should deepen our relevance with physicians, reduce economic barriers, and extend our reach. Together, these factors reinforce our confidence in a strong finish to 2026. We believe the impact should be even more meaningful in 2027 as our new product moves through the adoption curve, the territories added this year become more productive, and reimbursement changes support broader utilization.

I'll now discuss our three key growth drivers, innovation and market development, position engagement, and commercial execution. OnShule will then cover our fourth priority, operational excellence, along with our financial performance and updated outlook. Starting with innovation and market development, innovation is the cornerstone of our long-term growth strategy and has helped us deliver compound annual revenue growth of more than 20% per year over the past five years. We believe we have one of the industry's broadest portfolios focused on patients with compromised bones. These high-risk patients often face difficult recoveries and division rates. By improving procedural outcomes, our technologies have the potential to enhance patient quality of life while reducing the economic burden on the healthcare system. We have a track record of developing differentiated technologies, gaining reimbursement coverage, driving physician adoption, and growing significantly faster than the underlying market.

In SI joint dysfunction, currently our largest market, the relatively low density bone of the sacrum makes durable fixation challenging. IFUS3D, TORQ, and Intra-Product Families provide a comprehensive portfolio of metal and allograft solutions for surgeons, as well as the fast-growing base of interventional spine physicians across all sites of service. In spinal pelvic fusion, our fastest scaling market, there's an increasing number of patients with bone compromising conditions. as osteoporosis and osteopenia. With Granit, we believe we have the best in class solution for pelvic fixation and spine fusion procedures. Within pelvic trauma, where the majority of our target patients are being treated for low-intensity sacral insufficiency fractures, I've been IFUSE TORQ TNT is gaining adoption among surgeons. Our next major catalyst for further accelerating growth is the launch of our first non-pelvic solution. As I highlighted earlier, we submitted the 510 application in June.

We're working with suppliers to build surgical capacity and we're on track for the phased commercial launch. Because the solution targets accounts where our team already has established relationships, we expect to leverage our existing commercial infrastructure to support an efficient launch We also have several programs at different stages of development targeting large, established markets where current treatment approaches leave meaningful room for improvement. We expect two additional solutions to progress toward design freeze later this year, with potential commercialization targeted over the next 18 months. As we look forward, our longer-term vision extends beyond titanium and allograft solutions. We pioneered 3D printed titanium implants and helped create a new product category. We're actively exploring and testing additional materials to address new disease states and developing AI-driven procedure enablement capabilities. Collectively, these initiatives are transforming SI-Bone from a leader in sacropelvic solutions into a broader spinal pelvic company focused on procedural solutions for compromised bone.

By organizing our innovation around the needs of these high-risk patients, we remain committed to improving procedural and long-term clinical outcomes. Before turning to physician engagement, I'd like to briefly update you on reimbursement. pleased by the reason they proposed an increase of approximately $1,000 to nearly $16,000. CMS has also proposed establishing OBL reimbursement of over $20,000 for CPT code 27279. If the finalized, these changes would improve the economics of treating SI joint dysfunction across all outpatient care settings, expand physician choice, and make these procedures accessible to more patients. Furthermore, the new family of DRGs for complex spinal fusion procedures, including procedures incorporating granite, is encouraging. Depending on the patient's diagnosis and severity, these new DRGs could increase the average hospital payment by up to $50,000 per procedure. We believe this framework better reflects the complexity and resource requirements of treating these high-risk patients, reduces economic objections of our hospital customers, and supports the long-term adoption of granite or with granite.

Now, let me discuss the progress on physician engagement. Physician adoption and utilization remain important leading indicators of future procedure growth. In the second quarter, 1,715 unique physicians performed at least one procedure using our technologies, an increase of approximately 19% versus the same quarter a year ago. For context, the quarterly physician count exceeded the number of unique physicians who used our technologies during full year 2023. We achieved double digit percent growth across each of our call points. Broad-based engagement reflects the clinical relevance of our solutions, as well as the effectiveness of our physician engagement and customer engagement efforts. Our concerted efforts to grow physician awareness and adoption continue to deliver.

In the quarter, the number of physicians performing more than one type of procedure increased approximately 15%. Physicians active in both the current and prior year quarters averaged approximately three times the case volume of physicians performing their first procedure with us during the quarter. In aggregate, growth in our physician base, broader use of our portfolio, and increasing utilization create a strong foundation for sustained procedure and revenue growth. As we introduce additional products that address physician-identified procedural challenges, we expect case volume per physician to become an increasingly important contributor to revenue growth and overall execution efficiency. Now let's turn to commercial execution. We ended the quarter with 93 quota-carrying territory managers who were supported by over 400 agents and junior representatives. We designed the hybrid model so that our territory managers lead clinical education and cultivate high-value physician relationships, while third-party agents and junior representatives provide procedural support and extend our reach across accounts and geographies.

Trailing 12 months revenue per territory was approximately $2.2 million, reflecting continued productivity gains and the scalability of our hybrid commercial model. We remain on track to exit 2026 with nearly 100 territories. This is a deliberate expansion ahead of multiple product launches planned for the next 18 months. Building capacity now gives our territory managers the bandwidth to strengthen physician relationships, prepare accounts for upcoming launches, and support rapid post-launch adoption. We also continue to progress in our commercial partnership with Smith and Nephew. Physician and field engagement is growing, and that's translating into steady improvement in adoption. We're coordinating joint field activity with Smith & Nephew's leadership team and expect momentum to build throughout the rest of 2026.

Before I turn the call over to Anshul, I'd like to thank my colleagues for their continued dedication and exemplary execution. With our upcoming product launch and an active pipeline and new solutions, we're adding to our track record of meaningful and differentiated innovation. Together, we're entering an important new phase of growth. This is a direct result of your work, and I'm incredibly proud of what we're building together. Onshore will now discuss our fourth priority, operational excellence, along with additional financial details and our updated outlook.

Thanks, Laura. Good afternoon, everyone. I will focus on second quarter revenue growth, profitability, liquidity, and our updated 2026 revenue guidance. unless otherwise noted, all comparisons are with the same period last year. Starting with revenue growth, worldwide revenue was 56 million, representing 15.2% growth. U.S. revenue increased 14.7% to 53.2 million. U.S. procedure volume increased nearly 15% with double-digit growth across all modalities. On a two year stack basis, procedure volume grew nearly 20% in the quarter. International revenue increased 25.9% to 2.8 million, driven by growing demand for TORC and TNT. Given this momentum, we are evaluating opportunities to introduce more of our portfolio and future products in existing international markets and to qualify and enter select new target geographies.

We believe these initiatives can make our international business an increasingly meaningful and durable contributor to worldwide growth. Turning to profitability. Gross profit increased 14.8% to 44.5 million. gross margin remained strong at 79.5%, supported by the stable average selling price, product cost optimization initiatives, and improved utilization of surgical capacity. Operating expenses increased 7.7%, a rate substantially below revenue growth. resulting in meaningful operating leverage, which was well ahead of what we had indicated at the beginning of 2026. The operating expense increase reflected ongoing investment in R&D, higher commissions associated with revenue growth, and targeted marketing investments supporting recent and upcoming product launches. Net loss narrowed to $4.1 million or $0.09 per diluted share compared to a net loss of $6.2 million or $0.14 per diluted share. Adjusted EBITDA improved 178% to 2.8 million, representing an adjusted EBITDA margin of approximately 5.1% from top-line growth and the scalability of our infrastructure. As Laura highlighted, we are developing product material and software capabilities that will broaden our product portfolio and address additional clinical needs.

Given our outperformance on profitability in the first half, we are intentionally increasing targeted research and development investment in the back half of the year advance these longer term programs. While remaining committed to our annual operating leverage and profitability expansion goals. We believe these programs can create differentiated capabilities in treating compromised bone, support faster revenue growth, and significantly increase long-term profit dollars. turning to liquidity and cash flow. We ended the quarter with 145.9 million in cash and equivalents. an increase of approximately 1.3 million sequentially. We also delivered another quarter of positive cash flow from operations reflecting continued operating rigor and disciplined working capital management. We expect to see higher than normal cash flow variability in the next two quarters, more is mostly driven by the timing of payments for build out of a new headquarters, the vast majority of which is now expected in the third quarter, and the timing of the resulting tenant improvement allowance reimbursement. We're also investing in surgical capacity to support the new product launch.

These temporary yet disciplined investments will strengthen our operating infrastructure, improve our employee experience, and position the company to scale efficiently as we enter our next phase of growth. With approximately $146 million in cash and equivalents, cash flow generation, we can fund our planned development programs while maintaining financial flexibility. Turning to guidance. Based on strong first-half performance, we are raising the low end of our 2026 worldwide revenue guidance while maintaining the high end. We now expect revenue of $231 million to $233 million, representing approximately 15 to 16% growth, Our prior guidance was 230 million to 233 million, representing approximately 14 to 16% growth. We entered the second half with strong momentum and multiple upcoming catalysts, including the anticipated 510 clearance of the new product, as well as the potential benefit of higher reimbursement from Granite in the fourth quarter. Given the timing of the 510K clearance, the phased nature of the launch, and the time required for reimbursement changes to translate into procedure growth, we're maintaining a measured approach on the impact of these catalysts. We are maintaining full-year gross margin guidance at 79%. the midpoint of our revenue range, we need to increase in the 12% area.

With that, I will turn the call over to Laura. Thanks, Anshul. Our second quarter results extend our track record of outperformance across revenue and profitability. an expanding portfolio and compromised bone, increasing commercial capacity, and improving reimbursement backdrop, and a multi-year innovation pipeline, we believe we are well-positioned for durable growth and expanding profitability in 2027 and beyond.

With that, we're happy to answer your questions. Operator? As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile our Q&A roster. Our first question will come from the line of Matthew O'Brien of Piper Sandler. Your line is open, Matthew.

Oh, thanks. Good afternoon. Thanks for taking the questions. For starters, maybe Anshul, just on the guide for the year, Good to see Q2 come in a little bit above expectations, but if you do the math on the back half, It's about a $500,000 increase to the midpoint, you know, versus the million that you just put up. It also kind of implies that the back half U.S. number decelerates a little bit versus the first half. So, you know, is there something specific? Are you having a little bit harder time getting into these – you know, these latest tranche of clinicians in terms of your full product portfolio or is it There's something else that you really want to call out as far as the guide goes for the back half. And then I do have a follow-up.

Sure, happy to take that, Matt. On the guidance side, let me just stop. Well, look, we're feeling great about the setup we have going into the back half of the year. Nineteen percent growth in active physician base. That's a very solid physician base to enter the back half of the year with. The broad-based procedural demand growth that we saw, as you saw the second quarter, sequentially growth grew nine percent on a two-year CAGR 20 percent. The sequential growth was one of the strongest that we've seen in recent in history at that 9% sequentially in the second quotations as well.

So that's on what's already in the business. Then you layer on additional catalyst around the anticipated launch of the third breakthrough device and also the impact of the new DRGs that just got finalized on Friday, those are additional tailwinds in the business as well. Now, when it comes to guidance, as I said in my prepared remarks as well, We're being consistent with our thoughtful guidance philosophy. We know third quarter seasonality can have a little bit of noise in the business. And also, we want to make sure we're growing into these catalysts that I just outlined around the third breakthrough device and the new DRG impact on the fund. fourth quarter. So we actually feel pretty good about the setup and there could be room for upside as those catalysts play out better than anticipated.

Got it. Appreciate that. And then congrats on filing for the third breakthrough device product. Would love to just hear, and I know we're not going to get much on the product itself, but just about the profitability profile of that device. Is it going to be a big drag on gross margins or operating margins for a while?.

Are there big works in capital requirements or is it similar to what taking 27? Thanks so much. Yes, Matt, that's a great question. So really excited about the third breakthrough device. that we filed a 510 in June, so it was actually ahead of schedule for us. And that sets us up really well on being able to subject to FDA clearance, commercialize this product in the fourth quarter, and as Laura said in her prepared remarks, as early as October. So feeling really good about this. Now, this device actually has some inherent advantages First, it's serving a call point where we already have established relationships. Granite, as you know, has been a great success with spine surgeons and it's going to go off to that same market from a call point perspective.

Second, this is targeting one of the largest known unmet needs. in spine fusion procedures as well. So it's a known physician challenge that we're going after. And number three, it actually fits the physician workflow, so there is no need for extensive training. What that means is once we get through the alpha launch in the fourth quarter, this product actually has potential to rapidly scale. And as you asked about the gross margin implications, we're in the process of building out the surgical capacity to be prepared for a fourth quarter launch. Our gross margin assumptions right now... are at 79% for the year. We were very deliberate in holding those gross margin numbers at 79 despite the outperformance in the first half.

That is because we are anticipating depreciation on those assets to start out earlier on and revenue to follow subsequently. Overall, it should actually be an efficient ramp for us because our reps already are in relationship with those docs. They are in a lot of the procedures with Granite already. So we're pretty excited about the commercial ramp as well.

Thanks so much. And our next question will be coming from the line of Caitlin Roberts of Canaccord Genuity. Caitlin, your line is open.

Awesome. Thanks so much for taking the questions and congrats on the quarter. I guess just maybe starting with the procedure volumes, just want to get maybe a little bit more color on what really drove the strength in the quarter and the sequential increase. Any one call point or product to call out there?.

I can talk a little bit to what we're seeing on the procedure volume side. It's broad-based, actually. So, we have three different areas of procedures that we're talking about. We have our SI joint fusion procedures, our pelvic fixation procedures, and as we said in our prepared remarks, all of those areas grew in the double-digit And then there's three different call points that we're selling to as well. Spine surgeons, interventional spine, and then trauma surgeons, which are more being approached by distribution and Smith and Nephew. But strong growth there too. So I would say that I would say that the growth that we're actually seeing, Caitlin, is broad-based in the quarter. And then we're excited about where we're headed as well with the new product that Anshul just talked about quite a bit, our... that is planned to come out in the fourth quarter that we filed with the FDA already. And then one thing that hasn't been discussed yet, we actually had a very big day on Friday and it was the confirmation of the new granite DRGs and the Those DRGs specifically reference our granite technology.

The increase is up to $50,000 for those new DRGs, so that has all been confirmed and will go into place on October 1st. And then in addition, there was also a lot of discussion in the CMS notes about breakthrough devices. There is a grandfather clause that's been put through that does recognize those breakthrough devices and the alternative pathway to receive an NTAP. So we believe we're going to fall into that category as well. So we have a lot of, catalysts that we're talking here that are going to drive these procedure volumes, whether it's reimbursement or new product, in addition to some new platform launches that are going to be coming out as well. So what we're doing is we're expanding our commercial footprint in order to support all of that.

in the coming quarters. The only thing I would say, Caitlin, is Laura mentioned the huge physician base and the double-digit growth across all call points. As we launch this third breakthrough device, that's a huge asset for us and a huge competitive advantage. not just for this product, but for future products, but specifically for this product, we do feel great about the position and the ability to really accelerate the adoption for this product even better than, you know, what we've seen with Granite, for example, which was, as we've said in our prepared remarks, one of our fastest scaling products.

Awesome. And then maybe just a question on the future products. You had two you noted potentially coming in the next 18 months. Any color on those, such as if they're beyond the sacral pelvic anatomy as well, and if they're enabling tech-related, I know you called out software, capabilities as a potential you know r d investment and um and just thoughts on m a and your interest in that or is the main focus really on the the internal investment.

Yes, good questions. And so the way that we've been expanding is thinking about compromised bone as the focus for the company. And what it's allowed us to do is we already have a very strong organic growth engine within company. Our product development capability that we have, whether it's engineering or product marketing or regulatory quality, is a very high performing organization. And then we have the support of the clinical work that we've done, very high quality clinical work. that's focused on these new devices and then the support from a reimbursement perspective. So what we're doing is we're going after those broader categories and it's basically filled our product roadmap with these new products. And so as I said, we've really developed developed this core capability that's been a focus for us. that we're working with. We expect that we'll probably work with close to 3,000 surgeons just this year alone.

And by launching additional products that can be used... those existing surgeons and oftentimes in the same cases it gives us the opportunity to significantly increase our surgeon density as well as our average selling price for those different procedures. So you should think along those lines. We are also expanding some capabilities. We talked a little bit about AI and software capabilities. We think that's a natural extension of what we've been doing with our anatomy-specific implants. Our TNT implant is an example of that. We're also working with new technologies and new materials as well, which we think are important in some of these markets for these patients with compromised bones.

So a lot of different organic activities that we're engaged in. As it relates to MNA, that's really not our focus area. Our focus area is really more around what are we going to do organically. to drive growth and accelerate growth. Great, thank you so much.

And our next question will come from the line of Young Lee of Jefferies. Your line is open, Young.

All right, great. Thanks for taking our questions. I guess to start, I'm just kind of curious, you know, as you expand and increase your profitability, Can you maybe talk a little bit about some of the internal focuses that might get more attention versus others? I'm thinking things like you talk about more R&D, so the potential to launch more products or extensions, the potential for commercial expansions. I'm thinking adding more territories as well as partnerships as well as OUS expansion. So where do those rank internally?.

I think if you listen to what I just described, what we're really doing over the last few years in product development, clinical, education, and reimbursement, and so the focus is going to continue to be on driving those core competencies and using them in order to accelerate the growth of the business and get operating leverage as well. So you should expect to continue to see us spend a significant percentage on R&D and that includes our clinical by the way. But you should also expect to see us continue to drive the Salesforce productivity upward from the 2.2 million that we talked about. And you should expect to just see us leverage a lot of those other capabilities that we've built over time. So I would say that from a profitability perspective, we're going to continue to do what we've been And that's continued to drive the growth on the top line, but drive that down to the bottom line from a profitability perspective. And then, as we said, also have a nonpartisan.

line of sight to free cash flow as well. Yes, Young, just to provide a little bit more context as well, even Even though we added more territories in the quarter, you saw productivity improve at the territory level. So as we think about a commercial expansion, that's going to be very deliberate and targeted, and you should still continue to see productivity improve. Now, you know, the initial pace of improvement may be a little bit more moderate. but the benefit of our innovation strategy is by focusing on the same call point, going after known unmet needs, the productivity ramp should be much faster once those territories have been established. So you've seen us use this playbook before, before we launched TORQ and GROW. We ran it, we did expand our sales footprint, but you saw us really quickly accelerate our productivity from what was sub a million to two plus million in a span of three years. time around with more product launches at a more regular cadence, we feel really good about the ability to continue to drive productivity over time. So that's one aspect. The other aspect, when we think about the spend on the R&D side, That spend, if you look at what we did in the current year as well, you know, we're ahead on the profitability side in the first half of the year.

We actually adjusted our OPEX guidance to actually be at 12% growth versus the 12.5% growth while still having the flexibility to invest in some of these. growth-driven initiatives, that could have a meaningful impact on the business as early as late 27 into 2028. So we're striking the right balance. Like Laura said, we expect profitability to continue to grow. Our midterm guidance has always been for this year around 1.2, 1.25 operating leverage. even at the midpoint of our revenue guide where I had revenue leverage would oscillate anywhere between 1.25 to 1.75 times, and we feel very comfortable about that.

Okay, great. That's really helpful. And then I guess just on the third breakthrough device and then, you know, you also kind of commented on other new products launching in the next several years. How should we think about these new products expanding your TAM for surgeons as well as number of procedures? Sure.

Yes, these new procedure types that we're talking about, they will actually expand RTAM. They are not sacroiliac joint procedures. They're not pelvic fixation procedures. So they are additive to the business. And as I said, this next breakthrough is going to be a new type of procedure. through device that we're talking about that's launching later this year is one that we can lean into our existing call point, our existing procedures, and our existing distribution capability as well. So that's a good example of what we're doing. what we're planning to do in our product roadmap. So it's continuing to focus on those existing call points and identify the opportunity. We really have a laser focus on increasing surgeon density.

We have such a big asset between our sales force, hybrid focus, including third-party agents, but then also just the sheer number of physicians that we're working with right now, spine surgeons and interventionalists in particular. It gives us the ability to deliver additional products. And we're not talking talking about me to products these are breakthrough devices addressing unmet clinical needs and developing new markets basically and becoming the market leader in those different spaces so we're very excited about where we're going and you know as I said everything is falling into place for us from a product perspective and a reimbursement perspective as well.

All right, thank you. And our next question will be coming from the line of David Saxon of Needham & Company. Your line is open, David.

Great. Good afternoon, Laura and Anshul. Thanks for taking my questions and congrats on the quarter. So, looks like territories ticked up and I think in the past you've talked about getting to 100 over time. So I wanted to ask about how you're approaching hiring and actually getting to 100 in the context of this upcoming product launch and kind of the broader pipeline over the next 18 months. Like, are these independent workflows or are you thinking about kind of accelerating the hiring to capitalize on what you have with this breakthrough device and then these other products you're talking about.

Yes, hiring is definitely a key focus for us right now. As you know, over the last three years, we've kept our number of territory managers relatively constant. And the reason why we did that was the operating leverage that we were able to get on, she'll mention going from a million to over 2 million in 2020 sales rep productivity over these last few years, and that really was an area of focus for us. And also just leveraging that hybrid organization that we have with our more junior territory representatives covering cases, and then our third party agents as well. But we are going into a different period in the history of the company. And the new device that we're coming out with, this third breakthrough device, has been a very important area for us to build our internal capabilities. and to hire additional quota-carrying territory managers. We're doing that in a couple of ways.

One way is to promote some of those high-quality territory representatives that have been with the company for some period of time, split the territory, and provide them with their own book of business. also hiring people from outside of the company as well. So things have changed. We ended the quarter with 93 territory managers. As we said, our plan is to grow that to close to 100 by the end of the year, and you're going to see some more hiring into 2027 too. And the goal is it usually takes around six months for territory manager in order to get productive and so are hiring in anticipation of these upcoming launches.

Okay, that's helpful. Thanks for that, Laura. And then on the Smith and Nephew partnership, I'd love to hear kind of the early feedback you're getting. And then in terms of, you know, procedure volumes, how are you seeing those ramp in the new centers they're getting you in? And then just in general, Like how long do you expect it to take to fully ramp that partnership and then, you your thoughts on how meaningful that partnership could be in terms of revenue contribution longer term, but also in 2027. Thanks so much.

Yes, I think this is a very important partnership that we've developed because what we really want to do is focus our existing territory managers on, ortho and neuro spine surgeons as well as interventional spine physicians as well. So Smith and Nephew, they really have the depth of relationship with orthopedic trauma surgeons. And it is a different call point. Our TNT product, our toy product, the ability to address sacral insufficiency fractures with those surgeons we think is absolutely critical. In terms of the relationship with Smith and Nephew, the partnership is progressing well. The cases are underway. There's a lot of physician engagement that's including both the territory manager from Smith and Nephew as well as our own territory manager and we really like the collaboration that we're seeing between our two organizations. operationally we're continuing to train their field organization and expand surgical capacity, additional trays that are given out into the field, inventory implants that are getting out into the field. But if you think about a normal onboarding cycle with new physicians, I had mentioned that it takes around six months for a territory manager to get up to speed.

We're seeing something similar to this with the Smith and Nephew relationship. So really preparing for that seasonally strong fourth quarter is...

is how we're thinking about it. Great. Thanks so much for all that.

And our next question will come from the line of Richard Newitter of Truist Securities. Your line is open Richard.

Hi, thanks for taking the questions. Maybe, Anshul, just while you have all of us here, So I guess, you know, appreciate the small bump to the midpoint of the guidance range for the year. But for third quarter, within the context of your seasonality comments, it looks like the street's modeling about 55.5 million Is that a good place to be in the right level of seasonality and all the push-pulls that we have kind of thinking quarter to quarter? and I guess I'll have to follow up after that. But anything else you'd call out from a quarterly cadence standpoint, too, down the P&L as well?.

No, Richard, so obviously, as you know, we don't guide to quarters, but historically, you've seen seasonality in the third quarter. A lot of times it's vacations. It's also conferences that may show up, although this time NASA is going on in the business is the strong physician base, the expanded sales force, the opportunity with. interventional with the intra-family of products. And like Laura said, you know, continuing to do the work we're doing with TNT. So I think our focus is how do we work through that seasonality, but right now what's embedded is that 1% to 2% sequential decline.

Okay. And then maybe just for follow-up, I guess as I look at the drivers that you have, it sounds like you're embedding some conservatism in answering Matt's question to the back half deceleration. It sounds like all SQL, you know, deceleration. If business trends hold, you should do better and you're not factoring in a ton of contribution from some meaningful tailwinds like the reimbursement and new product launch contribution. So I guess the question here is, all else equal, is there any reason why 4Q shouldn't hold if not accelerate from – or shouldn't accelerate from 2Q levels? And then also just if you can answer, do we get concern over utilization trends out there in the recent months, especially for Spine and Ortho. And if you've seen anything, your quarter-over-quarter unit growth wouldn't suggest that, but I'm just curious if you can just give us a sense of what you're hearing out there from your customers and if there's anything.

that you would flag. Thank you. Yes. Again, Richard, not getting to quarterly guidance expectation setting, but you're spot on when you think about all the things that we have going on for our business, especially as we approach that October 1. you know, there are quite a few things that could drive upside in the fourth quarter, and that gives us excitement. But some of that is, as we said, we want to moderate our own expectations. from a guidance perspective, just given the timing of when some of those come into play. So, you know, the fostered and anticipated impact of the DRGs, you know, our assumption is it takes some time for the reimbursement to flow through and get reflected in the procedure volume. But in this case, it's a new DRG. It automatically maps all grant information. procedures to the new DRG. There is no special coding requirement as such, which was the case in NTAP.

That's number one. Number two is, you know, we're prepping for bigger than an alpha launch when we go out with this new breakthrough device product, but our assumption is the fourth quarter will be an alpha launch. As you've heard from our prepared remarks, it's not going after the same call point. It's a known disease state. It's training light. So based on how we see the alpha launch expand, we could accelerate that in the fourth quarter. That could be potential upside. And then the last thing that our guidance does assume is sort of low single digit ASP degradation. Part of that is just as we think about some of the things that could ramp in interventional, which uses fewer implants, or in trauma, which uses fewer implants. That's the underlying assumption. Now, you know, this new product that we want to launch is complementary to granite.

It could be used in the same case as granite. So you could actually have...

I was curious, what has been the interventionalist feedback on NTI so far since launch? And are you seeing outsized demand in those 22 incremental states or is it more broad based? Thank you very much, I have one more. Yes, thanks for the question. We are excited about InterTI. I was actually at the Aspen meeting a couple of weeks ago and what we have now.

the broadest portfolio in SI joint fusion. We're obviously the market leader in this space. We have historically worked with spine surgeons but seeing very rapid growth in interventional and the intra-product line is driving that. And so the goal that we have is to provide a variety of solutions that meet the needs of the patients, the surgeons, the physicians, the site of service. And so, IntraTI has a unique role to play. It is a 27279 product. It is a device. It is posterior. It's single use.

So in theory it can be used at all sites of service and by surgeons or physicians alike. And so we're actually pretty excited about what we're seeing with intra-TI and the initial reception of it. We do think that some of these reimbursement tailwinds going into 2027 are going to continue to drive adoption. option of IntraTI as a solution for 27279 and it can be inpatient, outpatient, ASC, or in office as well. So all of these things bode well for our business and where we're really seeing all of this is just the rapid adoption by interventionalists of our technologies.

Thank you, Laura. And then just to expand upon the Smith and Nephew partnership, I totally appreciate that it may take up to six months to be fully up and running with the territory managers. But can you just provide some context relative to, let's say, a year ago, how many incremental level one and level two trauma centers do you now have access to where you can, you.

plug, torque, TNT, among other products. Thank you. Yes, I mean, we don't usually give that specific sort of information, but there's a couple hundred level one, level two trauma centers that we're going after, specifically working with Smith and Nephew. It is an area where our sales are small, so there's a lot of opportunity for growth in that particular space. And we do think that there's a really nice symbiotic relationship between us, Ann Smith, and Nephew, given the breakthrough device that we have addressing this unmet clinical need with sacral insufficiency fractures, but then their depth of relationship on the trauma side specifically. And ultimately, our goal is to keep our sales force focused on spine and interventional, and then leverage that capability with Smith & Nephew on the trauma side.

Thank you. Very helpful. And our next question will come from the line of Matt Blackman of TD Cohen. Your line is open, Matt.

Hi, Laura and Anshul. It's Drew on for Matt tonight. Thanks for taking the questions. Just first on utilization, Laura, you kind of touched on this through your prepared remarks and some of the answers to the questions, but one of the things you said was we expect case volumes per physician to increase. become an increasing contributor to revenue growth. And you know, just when I look over the last couple years, we've seen 20% active surge in growth, while utilization is really not much moved much. So maybe what can the business look like heading into 2027? I mean, how much of utilization can be driven from taking the economic arguments out of off the table, what's the limiting factors for utilization? Just maybe just talk a little bit more about what you're seeing and why investors should have confidence that utilization growth can really kind of finally start. Yes, I think it's a great question. And Drew, quite frankly, I think it's what I'm most excited about,.

ABOUT FOR THE BUSINESS GOING FORWARD. WE HAVE DONE AN EXTRAORDINARY of first of all building a first class sales organization. We've invested a lot in it and developing this hybrid organization where we're working with third party agents and junior reps. It's given us this bare terms of volume. And this quarter is no exception. an increase of 19% in the number of physicians that did at least one case in the second quarter. It's 1,715 cases in the second quarter. physicians that did at least one procedure with us. That number rivals most of the largest players in this market.

And so, you know, where we can really grab operating leverage is by increasing this utilization number. And I do think that the product launches that we're talking about here are particularly important. And I'm not talking about 18 months from now, I'm talking about the next product launch that we are going to as early as October start to see sales of that particular product. Those are procedures that the same surgeon base that we've been growing for all of these years. Those surgeons are very excited about using this particular product. And as I said, in some cases they're going to be using it in independent procedures. In other cases they're going to be using it with our existing granite products. as well.

So it really represents a very specific opportunity for us to truly leverage utilization and increase our surge in density.

Thanks, Sarah. And just a question to you, and I'm sure you're going to love this one. I was kind of given some of Laura's comments right there. You were just talking too about really your R&D spending. You're going to have more reps into 2027. As we do think about 2027's leverage capabilities, should we be thinking about the lower end of the range that you gave at 1.2? Or is there enough positives, tailwinds that you could actually see maybe something better than that in leverage for next year. Thanks for taking the questions.

Yes, Drew, you're right. I won't be responding to that question yet because I'm not providing guidance. But, you know, the way the business is set up, a lot of that leverage and the spend that you're seeing happen this year will be reflected in what we can see in the long-term growth rate of the business. A lot of the things that you've heard us talk about today, those are not one-time catalysts, those are multi-year catalysts, whether it's the new products like TNT and Intra-TI continuing to grain traction, whether it's a better reimbursement for granite with the new DRGs, the potential for higher SI joint reimbursements at ASCs and outpatient as well as the potential for OBL for 7-9. Then you've got the potential for NTAP that we plan to apply for for the third breakthrough device that if approved, and we have a pretty good track record of that going effective October 1, 2027. So you've actually got a lot of potential. got a lot of revenue tailwinds in the business. And that gives us confidence that the operating leverage will continue to improve in the outer years. Now, timing of whether it's 1.3 times next year or is it 1.5 times next year, will be dependent on where we are in the investment cycle for a product, but we're feeling very grow, more dollars coming to the bottom line.

And we just talked about the cash flow inflection as well, Laura did earlier in the Q&A. That's huge for us. If you look at the last four, five quarters, four of the last five quarters, we worked positive cash flow from operations. at our cash balance has actually grown year over year since Q2 of last year, and that's after making investment in the surgical capacity. So we're not just thinking about the stronger top line. We're thinking about the stronger top line, the continued operating leverage, maintaining the asset-light business so we can get more profit dollars to the bottom line, start moving from adjust the EBITDA to more GAAP profitability, but also then start inflecting on a sustained basis on free cash flow.

Okay. And I'm showing no further questions. I would now like to turn the conference back to Laura for closing remarks.

I'd just like to say thank you to everybody. I appreciate you participating in our call, as well as your interest in SI Bone. And we look forward to seeing you all at upcoming conferences and non-deal roadshows. Goodbye.

And this concludes today's conference call. Thank you for participating. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

[Audio Gap] Bank of America. Today, I'm joined by Anshul Maheshwari, as Chief Financial Officer and Chief Operating Officer for SI-BONE. Thanks for joining us, Anshul.

Yes. Thanks for having us.

So just to start out maybe more big picture on the story. You're seeing a lot of current momentum in the business, set up with a nice multiyear tailwinds in reimbursement, surgeon adoption and new products. So what excites you most about the SI-BONE story today? And what do you think maybe is most underappreciated by investors?

Yes. Thanks for the question. We actually announced our earnings last night. And if I was to break down things that we as a company are really excited about, I'd break it down into 4 buckets. The first one would be innovation. The second would be engagement. The third would be commercial expansion, the fourth would be growth and profitability. And we're firing all cylinders on all those 4 priorities.

So starting with innovation, we just launched another product in the SI joint space in Q1, INTRA Ti. That's focused on ASCs and interventional specifically. That product is tracking really well. We've got another product that we expect to commercialize in the fourth quarter. That is our third breakthrough device product. That's going after one of the largest unmet needs in spine surgery and it's going to be a massive expansion of our TAM, a huge opportunity for us going after the same [indiscernible] and actually have a lot of procedure and physician density. So really excited about the innovation side for this year.

Equally exciting is what we're doing on the R&D side and getting into what we've been talking about as an innovation super cycle, where we expect to launch products at a pretty regular cadence over the next 5 years, go after large unmet needs in the compromised bone space. These are patients that have osteoporosis, osteopenia where you have poor quality of care today or the outcomes are very poor. And we've actually got a demonstrated track record of coming out with unique technologies to service that market, and I can talk more about that. So I'd say innovation is a huge exciting opportunity for us over the next 5 years.

The second would be on the engagement side, and I break the engagement down into 2 things. One is the physician engagement. We had our 21st consecutive quarter of double-digit physician growth in a quarter, and we ended with a record over 1,650 active physicians in the quarter, which was up 17% year-over-year and which was also up sequentially from the fourth quarter, even though Q1 generally tends to see a step down. And what that tells us is that our innovative platform is resonating with our customers, and we're seeing that demand and interest at a pretty elevated level. And to us, that's a really good forward-looking indicator of where demand could go. So that's really exciting.

Equally exciting on the engagement side is reimbursement. There are 2 big reimbursement themes that I would want to talk about. The first one is, as you think about our office-based lab procedures where our allograft solution plays really well, that had a 17% increase in reimbursement starting January 1. And we've really seen a good traction on the interventional side with our overall intra portfolio, and that reimbursement provides an additional tailwind.

You've also got Granite, which has been our fastest scaling product within pelvic fixation. And CMS has proposed a new DRG family, and Granite would be pushed into that new DRG family, and that could drive a pretty significant increase in reimbursement for that solution, which we do believe should become a standard of care when you're doing pelvic fixation in deformity and B10 procedure. So I think that's a huge tailwind on the reimbursement side.

On the commercial side, you've got the excitement around the strategic partnership we have with Smith & Nephew that will allow us to really go after the trauma opportunity. It's a new call point for us with Smith & Nephew's field force. It gives us a real opportunity to capitalize on that market potential with TNT, which is also a breakthrough device with about $4,000 of new technology add-on payments with it. Then we've got our own commercial footprint expansion coming. We want to get to 100 territories. And so that should be a nice tailwind for us.

And lastly, what I'd say is when you look at all those top line drivers, what you're seeing is a really nice inflection in profitability. We have the industry-leading gross margins of close to 80% at 79.8% for the quarter, we're close to 80%. You're seeing that translate into really good operating leverage and a really good expansion of adjusted EBITDA, which was up like 400-plus percent year-over-year this quarter.

So those are all the tailwinds that excite us, right? And what's special and unique about us is these aren't tailwinds that are specific to one quarter. These are tailwinds that are multiyear tailwinds. So what I would want investors to think about SI-BONE is a growth acceleration story coming into 2026, but that growth acceleration continues into '27, '28 because as these tailwinds get mature and seasoned, we really start seeing the impact of that in the outer years.

Yes. Great. And we'll dive into each of those topics more in depth as well. But maybe just one more is, so your platform has been used in over 140,000 procedures worldwide. So what have you learned from this experience that's really shaping those next-generation products?

Yes. So for us, we've actually completed 150,000 procedures as of yesterday. So it was a huge milestone for us. And our focus has been since inception on the sacroiliac anatomy. And what most people now are aware of is your sacrum has some of the most poor quality bone. And through 150,000 procedures across 3 different disease states, we've really built a core competence of driving fixation infusion of one of the poorest bone qualities in the human anatomy. And we've had a lot of clinical data that shows the efficacy of all our solutions.

So what you're seeing us do is we're taking that to a whole new level by thinking about how do we take this skill set, this biomechanical knowledge base that we've built, this additive manufacturing knowledge base that we've built and how do we take that and build out this platform of technologies that go after this osteoporotic/osteopenia patient population. So go after clinical adjacencies, stay true to spine and interventional and go after TAMs that have either subpar technologies today or have no good treatment of care.

We've talked about the product that we're going to be launching in the fourth quarter. That's the first foray into outside the SI joint anatomy. And we've got a lot of other products in the hopper over the next 5 years that are going to allow us to significantly expand our TAM, especially as we go after these compromised bone patients.

What's also exciting is these markets are going to be faster growing because osteoporosis and osteopenia is a growing patient condition. So we know this is a fast-growing market for us. And we look at Granite, for example, when Granite was going after was going after a deformity market, but by coming out with unique technologies, we were able to grow multiple times the underlying market growth. So this is a playbook we've had for a while. We've executed it well. And so we feel really excited about the potential we can build up with it.

You reported a very good Q1 earnings, as you alluded to. Your revenues are $52.6 million, beat the Street by about $1.5 million, raised full year guide by $1 million. So why not raise by the full beat? Is this just a level of conservatism earlier in the year? Or can you talk about what you saw in Q1 also that gives you confidence in sustained momentum throughout 2026 and you can expect a similar cadence of beat and raise throughout the year?

Yes. So in terms of what we saw in Q1, that's very encouraging for us is the level of engagement that we saw across all our call points, they all grew double digit. As I said earlier, that's the best forward-looking indicator for us. When you're seeing demand go that strong, 17% growth in physician base is a really good forward-looking indicator. So that's point number one.

Point number two is, in the quarter, we saw a nice acceleration in the business. January was a little bit soft because of some weather-related issues. We did catch up on that in the quarter, but we saw a nice acceleration in Feb into March, and we saw that same trend continue into April. And that's -- we've barely launched some of the new products. INTRA Ti launched in March, our European products, TNT and TORQ in Australia launched in April. So really good tailwinds coming out of the quarter.

In terms of our guidance philosophy, we did raise the midpoint of the guide above $1 million -- around $1 million. We want to be very deliberate and thoughtful. We're still early in the year. And we have a lot of these tailwinds. So if I was to reiterate them, we're still in the early stages of seeing the impact of INTRA Ti. We're seeing really good traction with interventional across the INTRA portfolio. So we feel good about how that product will be received, especially in the ASC setting as we progress through the year. That's number one.

Number two, you've got the Smith & Nephew partnership. We signed it in March. We started engagement and training and rollout in April. That's going to continue through the second quarter. So that could be a nice tailwind for the back half of the year. And then you've got the third breakthrough device that we expect to file for FDA clearance in the third quarter and are looking to commercialize in the fourth quarter. So again, a really nice opportunity there. And then you've got the potential for an improvement in reimbursement with the new DRGs that would specifically impact Granite starting October 1, assuming they're approved.

But again, these are tailwinds that are either nascent or will materialize as we progress through the year. So our approach is let's be thoughtful, let's grow into these tailwinds and let's incorporate the upside as we see it play out in the P&L. So we think there's opportunity for upside, but it's still early in the year.

You've mentioned this earlier, but the 1,650 physicians performing your procedures in Q1, up 17% year-over-year. I believe it was your 21st consecutive quarter of double-digit growth in physician adoption. So what do you think is the key drivers of that sustained momentum? And what would potentially be the ceiling for physician penetration, if any?

What I would say the key driver of the physician engagement is innovation that is solving unmet clinical needs that are known by our physicians. Number two is backing it up with good high-quality clinical data. We are a very clinically focused company.

Three is working on health economics, making sure that as we are solving some of the biggest problems in interventional and spine that we can get appropriate level of reimbursement, and we have a really good track record with 2 NTAPs, a TPT, the potential reassignment of the DRG. And it's a commercial sales force. We have the best commercial sales force in the industry. We do a lot of education-related sales because you're changing and addressing some of the largest unmet needs. So I'd say those are the 4 things that drive the level of engagement that we see across all call points.

Now in terms of the potential, what I would say is there's about 8,000 spine surgeons that we're going after. There's about 4,000 interventionists that we're going after. And there's a few thousand trauma docs that we're going after as well. So it's a pretty huge opportunity for us to go after. And at 1,640 physicians in a quarter, we think we have a significant amount of runway there.

The second thing that we're focused on as we continue to build out the platform is while we expect the physician base to continue to grow, what we're really also targeting is how do we go deeper with that call point. It is our most underappreciated asset to have 1,640-plus docs do a procedure in a quarter. So our focus is how do we come up with innovative solutions that solve a known unmet need, that physician workflow and get more cases, so help them with multiple procedure types, but also have a synergistic portfolio where we can have more products in a case and over time, get higher ASP.

Great. Just to maybe switch over to the reimbursement. So talked about the new now including Granite, you said could be as high as $50,000 per procedure. So including this is obviously a big incremental bump in reimbursement for the product. Can you walk us through the benefit of where you're starting today, what's being reimbursed at and then its effective in October 1, how this could drive upside both in 2026 and maybe preliminary thoughts on '27 as well and a full year impact there.

Yes. So Granite is a very unique product. It's a great example of us leveraging our core competence on the biomechanical side to drive fixation infusion to come up with a solution. That was a known unmet issue. And we came up with -- and that was prone to failures before Granite came on the market. And Granite with its clinical evidence has really proven to be a superior product, and we believe it should be a standard of care.

And we recently, in March, published a study called POLA. It was a 160-patient study that demonstrated no breakage of Granite, no loosening of the implant and a significant improvement in pain scores for patients in the first 12 months. So when you think about adoption of Granite, the reason we say it's been the fastest scaling product is because it truly is a superior product. It's improving the quality of outcome for patients, and that's why it's been such a success for us.

Now with the new DRG that has been proposed, so in April, CMS proposed this new DRG family and Granite would be 1 of 2 products that would be automatically mapped to DRG. If you recall, Granite was a breakthrough device. It had a new technology add-on payment. It actually has a transitional pass-through payment as well for outpatient. The NTAP did expire a year ago, and we've been working with CMS to get Granite reassigned to a higher DRG because of the cost and complexity of procedures that Granite us.

We provided CMS with a lot of data. And what CMS concluded when they looked at the data is instead of just moving it to a higher criticality of a DRG, they believe that it was best to assign a new DRG family for Granite. So that's really exciting for a few reasons. One, I think it will ensure that patients, hospitals, physicians have uninterrupted access to Granite, assuming this DRG methodology is approved. So that's number one.

Number two is the NTAP was limited to Medicare patients only. The DRGs, generally, commercial payers will also adopt the DRG. So you now open up the opportunity with commercial payers as well and 60% of our Granite business was commercial. So I think that's a huge opportunity. And the uplift on the reimbursement could be as high as $50,000 based on the diagnosis and severity of the patients.

So I think it's going to be a nice tailwind for the business, assuming it's approved starting October 1. It will address one of the barriers that can often come up on cost of the product because of the new DRG. And we do think it should become the standard of care going forward for deformity and degen and procedures.

Maybe just because of that also, what are your latest thoughts around ASP trends, procedure mix underpinning 2026 guidance, but then also how maybe this incrementally positive benefit on reimbursement could impact pricing in the future?

Yes. So when I think about ASP, I think about ASP at the procedure level because different procedures have different number of implants that use and that varies your ASP. So on average, our ASP is around $9,000 because you've got certain products that you use 4 implants in, right? Granite could be 4 implant cases. In deformity, that's $12,000 on the flip side. You've got certain degen or trauma cases where you could use 2 implants and you've got the SI joint dysfunction where you use 3 implants.

So when we set up our guidance, we generally assume a low-to-mid-single-digit ASP degradation at the procedure mix level, and a lot of that is procedure mix. Our implant ASP has been fairly stable over the last several years. So any deviation you see in ASP is generally driven by the procedure mix. So that's our underlying assumption. We obviously have been able to do better than that over the last few years, including in Q1, you saw our ASP actually be better by 3% improvement year-over-year, again, because of procedure mix.

Now we have a huge underpenetrated opportunity ahead of us with Granite. Granite is going after 130,000 annual procedures, so about $1 billion TAM. So for us, what this new reimbursement does is it allows us to continue to penetrate that market, take pricing as a question mark for hospitals off the table, focus on clinical evidence, focus on better outcomes for patients and focus on long-term durability and pain relief for patients and continue to drive that adoption.

Great. And then you did announce the Smith & Nephew partnership entering into a strategic partnership to distribute iFuse-TORQ and iFuse-TORQ TNT in Level 1 and Level 2 trauma centers. So how is that partnership ramping? And any more color on the agreement now that it's starting to ramp throughout the year?

Yes. So trauma is a really nice opportunity for us. It's around -- our target patient population is around 60,000 patients a year. So it's around $300 million opportunity for us. It's the only product we have in trauma. TORQ's used in trauma as well, but TNT is the true beachhead that we've launched in trauma in the last couple of years -- a couple of years ago. It does have NTAP, like I said, about $4,000 plus NTAP on the procedure in Medicare cases, which is mostly what these cases are. But with one product, it's not the most efficient use of our commercial sales force, like I said, that's the biggest asset we have in our company, and we want to focus them on the largest opportunities, which is within SI joint dysfunction and pelvic fixation.

So this partnership with Smith & Nephew is a perfect situation for us to work in Level 1, Level 2 trauma centers. They have the footprint. They have the skill set at all those sites. It's very synergistic with what they bring to the table. It's a gap in their portfolio when it comes to a solution like TNT. So it fits well there. So we're very excited about the potential for this. When you add the quality of the product, solving an unmet need, great reimbursement and now the footprint that Smith & Nephew brings, it truly positions us to harness the full potential of TNT and trauma.

We're still early. Like I said, we're in the rollout phase of both training, getting the product on the approved list at several of these Level 1, Level 2 sites as well and deploying surgical capacity, which -- the first initial phase should be done in Q2, and you should start seeing the ramp in the impact in the back half of the year. Again, for us, it's not just what happens in the back half of the year, but how it positions us to actually drive the penetration of trauma in 2027 and '28 as well.

And just what percentage of your business is trauma today? And what is the growth rate of that? How to think about that?

We don't break it out at a percent level. It's a relatively young market for us. If you think about it, TNT came out a couple of years ago. So it's relatively young. This partnership with Smith & Nephew was really important for us to really accelerate the penetration of the trauma opportunity. It's done well for us. It's actually exceeded our own internal expectations even without having that dedicated trauma field force. So it's just exciting for us to see what we can do with that product now. When you have our sales force that's really good at the educational sale, partnering with the Smith & Nephew sales force to get access and be able to cover those cases.

And is there any way to quantify or maybe more color on how to think about what's currently in the guidance for 2026, maybe quantitatively as well?

Yes. So trauma was in our guidance when we provided our initial expectations at the end of February. What the Smith & Nephew opportunity does is 2 things. Our approach to trauma was always going to be the hybrid model. So leveraging our sales force for training, but then leveraging agents for case coverage and making sure they were available when these procedures get scheduled at Level 1, Level 2 trauma sites.

Now that build-out strategy will be a lot more slower. It will take a lot of time because you would have to cast the wider net. With Smith & Nephew, what you get is a really large footprint with one organization that is focused on trauma. So for us, what it does is it really accelerates our ability to penetrate this trauma opportunity as we get into 2027.

Maybe you talk a little bit about the new products that you said launching Q4, filing Q3. So any updates on the time line and what makes this go faster or slower? And what should we be looking out for next?

Yes. So really excited about this new product that we're going to put out there. What we have shared publicly is, one, we're ahead of schedule. We're in the midst and the deep depth of our testing and validation work before we go for 510(k) filing, which should be in early Q3. And assuming it goes to regulatory clearance on an accelerated time line because it is a breakthrough device product. We're hoping to be able to be commercializing this in the fourth quarter.

And what's really exciting about this product is a few things. One, we believe it's addressing one of the largest unmet needs in spine. So that's really attractive. Number two is because it's an unmet need, surgeons are already using subpar technology or similar solution to solve it. Two, it fits within the physician workflow. And those things are similar to what we have in Granite.

Granite was solving an unmet need. It fit into the physician's workflow and it had differentiated reimbursement and clinical data. So that really positions us well to be able to monetize this opportunity. So we think it's going to be a really growth driver for us, more so in '27, you might see some impact in '26, but more so in '27, '28, '29. So it's a really exciting opportunity.

The other piece that's really exciting about it is not only does it go off to the same call point, it has complementary usage with Granite. So in cases where Granite is used, we know this product is also going to have application. So it allows you to drive surgeon growth. It allows you to drive density with those physicians to get more cases per doc, but it also allows you to get more product per case, which, again, Granite has the highest ASP per procedure for us. This should allow us to even increase that over time.

And how do you think about maybe just walking us through how that expands your TAM as well?

Yes. Again, like I said, it's -- we'll share more details about the specifics of the TAM once we commercialize the product. Like I said, it's a really exciting opportunity for us. And it really builds out our focus on the pelvic fixation side. I think we did talk about it yesterday that between Granite, this new product, the DRG changes and the product portfolio that we want to bring into market over the next 5 years, the spine pelvic fixation market could be one of the biggest markets for us from a revenue perspective over time.

Makes sense. Well, excited to hear more about it. So maybe turning to margins and a little bit about profitability. You're expecting 79% full year 2026. You started out '25 guiding 77% to 78%, ended up at 79.6% for the full year. So can you just walk us through maybe what drives upside? And is this sustainable as you launch new products? And should we kind of expect a similar cadence of gross margin expansion or beats in 2026?

Yes. So again, when you think about everything we've talked about, we've talked about the top line reacceleration as we go through the year in '26 also going into 2027. So very excited about that top line. Equally exciting is the discipline we've managed to maintain on the gross margin side. We do have industry-leading gross margins at close to 80%, and we're really proud of that. And we really like the outperformance we've demonstrated on gross margins through 2025.

A lot of that was our focus on supply chain optimization, our focus on how do we get costs lower as we get scale on some of the new products that we launched over the last 3 years. And we've seen that being a sustainable advantage for us, and you saw that happen in Q1 as well. We started the year with gross margin guidance of 78%. We actually increased that by 100 basis points to 79% for the year. And so we feel very good about the trajectory of the gross margins there.

Now what -- where does gross margin go from here? We said we're going to be at 79% for the year. Part of that is us incorporating the benefits of the sustained operating activity that we have in the business, but offsetting that with some of the higher CapEx spend that we have. So most of the delta between Q1 and for the year is noncash depreciation because of surgical capacity for the Smith & Nephew partnership, the new products that we want to commercialize that we'll put out there. There is a time lag when you put capacity out and you start depreciating it before really start seeing the optimal level of utilization on those assets. So you're seeing some of that baked in.

Now what it doesn't bake in is the continued focus on operating discipline. So we're really excited about where gross margins can go in the future. But I think if you look at the next 3 years, some of that 78% gross margin would be a nice baseline.

Okay. And just quickly, maybe last minute here, but you achieved great positive free cash flow for the first time in 2025. So what operational levers drove this inflection? And how do you think about balancing continued investment in innovation with margin expansion in 2026 and beyond?

Yes. So for us, it's all about top line growth. And we know that, that top line growth through innovation and through scaling of the commercial infrastructure can drive a significant amount of operating leverage in the business. What we have planned in our guidance for this year is 12.5% increase in OpEx. That's fully loaded OpEx. That assumes the spend on marketing, commercial expansion, R&D work, but it does not incorporate some of the upside that we talked about tailwind in the business that could provide more upside in the business. So assuming that upside plays out as we progress through the year, you could see a higher operating leverage in the business.

So we feel really good about the trajectory, not just of the top line growth, but of gross margins and the continuation of the operating leverage, which for this year is 1.2x, but we think over the medium to long term, could range between 1.2 and 1.75x, which should drive a really nice margin expansion. And given our asset-light business model should translate into really nice free cash flow as we scale the business in '27 and beyond.

I think we're out of time, but thank you for joining us.

Thanks so much for having us.

Thanks.

Good afternoon, and welcome to SI-BONE's First Quarter 2026 Earnings Conference Call. [Operator Instructions]. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Saqib Iqbal, Vice President, FP&A and Investor Relations at SI-BONE for a few introductory comments.

Earlier today, SI-BONE released financial results for the quarter ended March 31, 2026. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management's remarks today may 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. These forward-looking statements are subject to a number of risks and uncertainties including those set forth in our SEC filings, such as our most recent Form 10-K, and actual results may differ materially from any forward-looking statements that we make today. Accordingly, you should not place undue reliance on these statements. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements except as required by law. During the call, management may also discuss certain non-GAAP measures, including adjusted EBITDA and free cash flow. Unless otherwise noted, any reference to profitability is in terms of positive adjusted EBITDA. For a reconciliation of these non-GAAP measures to GAAP accounting please see the company's full earnings release issued earlier today. Unless otherwise noted, all results are compared to the comparable period in the prior year. With that, I'll turn the call over to Laura. .

Thanks, Saqib. Good afternoon, and thank you for joining us. In the first quarter, we advanced our platform strategy on multiple fronts. Underpinning these strategic priorities is our clear focus on developing disruptive technologies that address unmet clinical needs for surgeons and interventionalists on treating patients with compromised one. Our technologies are differentiated and how they uniquely adhere to low-density bone to enable more durable fusion and better outcomes relative to the current standards of care. We have never been better positioned as we accelerate growth through 2026 and into 2027. Our raised full year outlook reflects that confidence. To better frame our progress in the quarter, let me connect our recent activities around product launches and commercial partnerships to our overarching strategy. We're focused on expanding into high-value clinical segments, extending our leadership position across global markets and doing so efficiently through our hybrid commercial model, including strategic collaborations Intra TI, which was launched in the quarter is not just an expansion of our SI joint portfolio. It's a deliberate focus to further build the interventional segment with a solution that aligns with the physician workflow and site of care while also providing another compelling solution for surgeons. In Europe, the introduction of TNT Torq expands our pelvic trauma portfolio and builds on the success we're seeing with Torq. In Australia, the launch of Torq extends our leadership in FI joint fusion and gives us a beachhead and public fixation. The recently announced partnership with Smith & Nephew enables us to broaden our access to trauma while keeping our direct team focused on driving depth and density in spine and interventional. .

In the quarter, our worldwide revenue was $52.6 million, representing over 11% growth. In the U.S., revenue was $49.3 million reflecting approximately 10% growth. International revenue for the quarter was $3.3 million, representing an impressive 34% growth. Our 2-year stacked worldwide and U.S. revenue growth of 18% highlights the durability of demand for our solutions. Importantly, this growth was delivered with strong operating discipline -- our operating expenses grew just over 4%, significantly below revenue growth, reflecting nearly 2.5x operating leverage. This demonstrates our ability to drive growth while progressing towards sustained profitability and cash flow generation. Before I provide an update on our strategic priorities, let me provide insight into the recently announced reimbursement proposal. This will positively impact our spinal pelvic market opportunity with Granite is finalized as proposed. As you may recall, last year, we had requested CMS to assign pelvic fixation procedures incorporating Granite to a higher severity level within existing DRGs. Based on analysis of the complexity and cost profile of these procedures, CMF has instead proposed creation new DRG families for supporting extensive or complex spinal fusion procedures, including those that incorporate Granite. We appreciate the acknowledgment by CMS of the higher procedure complexity in cases where Granite is used. Overall, we believe the proposal more appropriately aligns reimbursement with the cost of these procedures. The increase in the average hospital payment under the proposed new DRGs could be as high as $50,000 per procedure, depending upon specifics of the patient's diagnosis and severity. This reimbursement change would be effective October 1 of this calendar year. We believe this incremental reimbursement would support continued adoption of our differentiated technology and ensure patients, surgeons and hospitals maintain long-term access to Granite. It will remove cost as a potential objection and further substantiate Granite as the standard of care and spinal pelvic procedures. Taken together, we made significant progress towards building a durable growth engine with record physician engagement, a broadening procedural footprint, expanding commercial scale and favorable reimbursement backdrop. This gives us confidence that we're positioned to accelerate our revenue growth going forward.

Now I'll highlight the progress we've made on our 4 key priorities: innovation and market development, physician engagement, commercial execution and operational excellence. Starting with innovation and market development, we're a category leader in developing and commercializing differentiated procedural solutions for patients with compromised bone. To date, our focus on the factory coined across 3 distinct disease states, has resulted in nearly 150,000 procedures and has established our deep competencies around enabling fixation and fusion of low-density bone. We're now leveraging the biomechanical leadership and our proprietary technology to expand beyond the serelaxin into high-value clinical adjacencies and musculoskeletal care with a focus on patients with compromised often osteoporotic bone. With nearly 300,000 annual target procedures, fixation infusion to treat up joint dysfunction remains our largest opportunity. As we know, the state on has relatively low density bone. We are the undisputed leader with multiple RCTs that demonstrate the effectiveness of our technologies in treating this disease state. We have the most comprehensive platform that includes technologies and placement trajectories to address patient concerns and physician preferences across all types of service. The recent launch of Intra TI, our 3D titanium solution further extends our leadership by combining the clinical benefits of metal implants with the speed and simplicity of what we call our intra or post area approach-based workflow. Our intra platform is a crucial enabler of our strategy to drive strong adoption among our fast-growing base of interventionalists and accelerating our penetration in the ASC and OBL sites of care. With the ongoing migration of procedures to be setting of care, we see a significant untapped market opportunity and a long runway for sustained growth. Spinal pelvic fusion is our fastest-scaling market. As life stands increase, we expect a rise in spinal pelvic procedures for patients with bone compromising conditions like osteoporosis or osteopenia.

Building on the success of Granite, we're leveraging our expertise to develop targeted and competitively differentiated solutions that will complement Granite, address other areas of procedural failures thereby improving outcomes for this growing patient population. Since the launch of Granite, our spinal pelvic revenue growth has meaningfully outpaced the broader deformity market growth rate. supported by strong physician adoption and compelling clinical outcomes. The superiority of Granite was reaffirmed in the 160-patient PALLAS study published in March. The study demonstrated 0 granite breakage or pull out while delivering clinically meaningful improvements in both pain and disability scores at 12 months. Granite benefits from favorable reimbursement dynamics including the existing transitional pass-through with 0 device offset in the outpatient and ASC settings. The new DRGs proposed by CMS also reinforced Granite's economic attractiveness and inpatient settings by providing enduring reimbursement for our hospital customers. and providing a framework for our commercial payers to follow suit. With nearly 130,000 target procedures, intuitive surgeon workflow, superior clinical outcomes and highly supportive reimbursement -- we believe that Granite as well as our future platform technologies can potentially make the spinal telesfusion market, our largest revenue contributor in the coming years. In pelvic trauma, the majority of our approximately 60,000 target procedures are to treat low-intensity sacral insufficiency fractures. Our ICs Torq TNT system is well aligned with existing surgeon workflows, benefits from favorable reimbursement, including NTAP of over $4,000 and and is supported by our strategic partnership with Smith & Nephew. With the strong reception for TNT in Europe, we expect the pelvic trauma market to be an attractive contributor to global growth. Finally, our multiyear pipeline is also advancing ahead of plan, reinforcing our position as an innovation leader. Our third breakthrough device is advancing on schedule, verification and validation are nearing completion, and we're targeting a 510(k) submission in the early third quarter. We have clear line of sight to a commercial launch, which we expect to meaningfully expand our total addressable market deepen engagement with our spine surgeons and represent a significant new revenue driver over the next several years. This technology addresses a significant unmet need in spine surgery. -- and is designed to deepen our platform utility and for features our surgeons are already performing.

Now let's move on to physician engagement. We had over 1,650 active physicians in the quarter, representing more than 17% growth. This extends our track record of another quarter of double-digit growth across all call points. including spine, interventional and Cramer. Our expanding platform positions us to build crop procedure relationships and increase the number of procedures performed per physician. In the first quarter, physicians active in the current quarter and prior year grew faster than the overall base, reinforcing our ability to retain physician engagement while expanding their use of our platform. These physicians generate 3x the case volume of new users, reinforcing the value of long-term deep engagement. We're also seeing continued progress in cross procedure adoption. The number of physicians performing more than 1 procedure type increased 10% in the quarter compared to the prior year period. Today, only 25% of physicians performing SI joint fusion utilize our platform across additional indications, highlighting a significant opportunity to expand within our existing base with Granite and our upcoming technologies, we're well positioned to accelerate that expansion.

Now let's turn to commercial execution. We ended the quarter with 89 quota-carrying territory managers. Annual revenue per territory was $2.2 million reflecting 11% year-over-year growth. This marks the 14th consecutive quarter of double-digit territory productivity growth. Our hybrid sales model, which is comprised of the territory managers, territory representatives and over 300 third-party agents continues to be a competitive advantage. Our hybrid sales model has been particularly effective in expanding the reach of our direct sales force, especially the spinal pelvic and pelvic trauma markets. Our territory managers are considered clinical experts and thought leaders and the hybrid approach allows them to prioritize engagement activities and maximize their impact in the field. With Smith & Nephew, we completed the first phase of field rollout in April and expect training and surgical capacity rollout to be substantially complete by the end of the second quarter. We anticipate revenue contribution to begin building in the third quarter and accelerate into the fourth quarter. This is consistent with how trauma volumes seasonally concentrates in the back half of the year. While it's still early, the initial physician and field reception has been encouraging, and we'll provide more specific updates as the partnership matures.

Finally, we remain on track to expand to approximately 100 territories over the next 12 months, aligning our commercial capacity with our strategy to bring several unique platform technologies to the market in the coming years.

Before I turn the call over to Anshul, I want to thank our employees for their continued focus and execution. We've built 1 of the fastest-growing differentiated technology platforms with deep expertise in addressing the needs of patients with compromised stone. That focus continues to guide our innovation and expansion into new indications that will improve the lives of hundreds of thousands of patients over the next several years. The fundamentals of this business across physician engagement, commercial productivity and a broadening innovation pipeline give us real conviction in the trajectory ahead. Anshul will now take you through the fourth priority of operational excellence as well as provide financial details and our updated guidance, which reflects that confidence.

Thanks, Laura. Good afternoon, everyone. My comments today will focus on first quarter revenue growth, profitability and liquidity. All of the comparisons provided will be versus the same period in the prior year unless noted otherwise.

Starting with revenue growth. Our worldwide revenue was $52.6 million, representing growth of 11.2%. U.S. revenue was $49.3 million, increasing 10% on even with the stronger prior year comparison that benefited from 3 product launches. The first quarter performance was modestly impacted by the weather-related disruptions early in the quarter and our decision to deliberately pace trauma distributor onboarding, while finalizing the Smith & Nephew partnership. Revenue momentum accelerated as a quarter of progress, driven by expanding adoption of our portfolio by a record number of physicians across all sites of service. International revenue was $3.3 million increasing an impressive 33.9%, reflecting accelerating demand for i-Fuse TORQ across Europe and Australia. This trend combined with the early enthusiasm for i-Fuse TORQ TNT in Europe, reinforces our confidence in the significant long-term opportunity across our international markets.

Moving to profitability. Our gross profit was $41.9 million, an increase of $4.2 million or 11.3%. Our gross margin for the quarter was flat year-over-year at 79.8% and and remains among the best in the industry. Better-than-anticipated ASP from a favorable procedure mix alongside the sustained impact of our operational efficiency initiatives contributed to the strong gross margins in the quarter. Operating expenses were $47 million, representing 4.1% growth. The modest increase was driven by higher commissions tied to revenue growth as well as targeted investments in training, marketing investment to support intra TI launch and ongoing investment in the product pipeline. The combination of strong revenue growth and operating discipline continues to drive meaningful operating leverage in the business. Our net loss narrowed to $4.3 million or $0.10 per diluted share compared to a net loss of $6.5 million of $0.15 per diluted share, representing strong year-over-year progress. Adjusted EBITDA was $2.5 million in the quarter, representing over 440% improvement compared to $0.5 million in the first quarter of 2025. We are pleased with the expanding profitability even as we prioritize investments in innovation and commercial expansion.

Turning to liquidity. We exited the quarter with $144.7 million in cash and marketable securities providing us with significant financial flexibility. Free cash flow in the first quarter was only negative $3.4 million, representing a 50.7% improvement compared to the prior year period. As a reminder, first quarter cash usage reflects the seasonal impact of fourth quarter commission through us and annual bonus payouts. We do expect to see higher than normal cash flow variability in the second and the third quarter, driven by the timing of payments from build-out of our new headquarters, which is expected in the second quarter and the timing of tenant improvement allowance reimbursements.

Our balance sheet, combined with the progress towards free cash flow breakeven positions us well to both invest and scale profitably. We have the liquidity to accelerate R&D investments and expand the commercial infrastructure to support multiple product launches over the next 5 years.

Now turning to our updated outlook for 2026. We are increasing our full year revenue guidance to a range of $230 million to $233 million. The updated guidance implies year-over-year growth of approximately 14% to 16%. We expect quarterly year-over-year revenue growth to accelerate as we progress the year driven by the impact of the strategic innovation, commercial expansion and geographic initiatives we highlighted today. We are still in the early stages of realizing the full benefit of these efforts, which we believe could represent a meaningful source of potential outperformance in the second half of 2026 and going into 2027. As their impact increases, we will appropriately reflect the upside in our guidance. We're also raising our annual gross margin expectations to approximately 79%, up 100 basis points from our prior guidance. This reflects the favorable procedure mix and the sustained impact of our operational efficiency initiatives. Taken together, both railers reinforce our conviction that the business is performing at a high level and that our path to expanding profitability is on track. We expect full year operating expenses to grow approximately 12.5% at the midpoint of our revenue guidance. We believe this disciplined investment will further strengthen our competitive position and facilitate sustained long-term growth. With that, I will turn the call over to Laura.

Thanks, Anshul. Before we go to Q&A, let me leave you with a few proof points that define our stellar execution track record, 20 consecutive quarters of double-digit physician growth. and a record 1,650 active physicians in the first quarter, 14 consecutive quarters of double-digit territory productivity growth, improving profitability and free cash flow trajectory, guidance raised after the first quarter with revenue growth accelerating as we progress through the year and a third breakthrough device on track for launch in the fourth quarter. We've built something durable and scalable here, and we're excited about what comes next. With that, we're happy to answer your questions. Operator? .

[Operator Instructions] And our first question comes from Matthew O'Brien with Piper Sandler.

Just Anshul, can you quantify the weather impact in the quarter? And then I guess, the top end of the guide was only raised by about $500,000. The bottom end came up by $1.5 million. Why not pick it up a little bit more? Just is there anything to read into that? And then I do have a follow-up. .

Matt, yes, happy to take that question. One, we're really pleased with how the business performed in the quarter. We saw like I said in my prepared remarks, some of the acceleration in revenue as you progressed in the quarter. and that trend continued into April. So very, very encouraged there. In terms of the weather-related impact in January, I would say it's circa in the $0.5 million range, but a lot of that gets recaptured if you go back in time, even doing the pandemic or other disruptions, it generally takes days or so for those procedures to get rescheduled. So I see the impact for the quarter was pretty muted. It was just timing between month 1 and later. So that's there. In terms of our guidance, look, again, we raised the lower end of the guide by $1.5 million, the upper end by half, so the midpoint is going up about $1 million. That's pretty consistent with our disciplined approach to guidance, especially this early in the year. Laura highlighted several of the initiatives that we've been focused on in Q1, and we know that there is potential upside there, especially when you think about the potential opportunity for our intra PI product as we expand into interventional, the potential for Smith & Nephew partnership as it gets seasoned in the back half of the year. And then you've got a couple other nice tailwinds around the potential higher DRG reimbursement that could go into effect on October 1. That could be a really nice tailwind for our Granite business, which has been scaling really well. And then you've got a fourth -- third BBD product that we're going to launch out in the fourth quarter. So there's a lot of tailwinds in the business. But given that we're early in the year, a lot of these tailwinds are still preliminary, we want to grow into those and then reflect that upside in our updated guidance as we go through the year. .

Got it. Appreciate that. And then, Laura, thanks for the update on the new product that's coming out relatively soon that pre device designation. You said Q2 filing, is it too aggressive to think that we may be able to see that at NAV this year or see it launch it? Or should we really expect Marvel launch in 27 .

Yes, Matt, thanks for the question. So what we said is that we will have a Q3 filing and that we expect for the product to launch sometime in the fourth quarter based on based on that timing. So as soon as we have a product, we will be bringing that product to various conferences NAS maybe a little bit early. -- in the year for us to talk about it. But regardless, we're very excited. It is our third breakthrough device. We believe that we're addressing the largest unmet clinical need with our spine surgeons. And so we really think that we're on a good trajectory with that product. Also, we think it's going to provide a really nice opportunity for us to increase surgeon density as well. Last year, we had over 2,400 physicians who did at least 1 case with us. And so we have a very significant size customer base in order to utilize that product. And we believe that, that product may be used in the same cases as Granite as well. So -- and given the new DRG as well and that product being used in those cases, it provides this opportunity not just to open up a new TAM for us, but also to increase our surgeon density in a significant way. So -- as soon as we have a clearance you're going to know about it and you're going to see the product, but we're incredibly excited about it and what it can bring to us late this year and certainly into 2027.

Our next question comes from Young Li with Jefferies

Great. I guess just kind of curious, I mean, there's a lot of momentum in the business. There's going to be a new product auction that's going to be impacting growth next year. This reimbursement tailwinds, you're adding new territories and expanding commercial scale. I guess the question is, can '27 growth be higher than '26 growth or exit rate growth .

Young. Thanks for that question. Happy to take that. Just even thinking about how you set expectations for the rest of the year 2026. We do believe there is potential for significant upside as those tailwinds start having a more meaningful impact as we progress through the year. And that's embedded in our statement around year-over-year growth acceleration in each of the subsequent quarters. So we feel very good about that now. In terms of talking about exit growth rates, again, as revenue growth accelerates, I think that will be a nice off-run 2027 and that's just seeing the initial impact of these tailwinds. So I'm not going to provide context on where 2027 could go, but let me just provide some quantitative color that will help you understand sort of the -- the secular tailwinds in the business, which are actually long term, not specific to just. Within SI Joint Fusion, our interventional strategy is in the early innings. With the increase in reimbursement for OBL, our Intrax product is doing really well there. Intratus launched and we're seeing rapid pace of adoption across our intra-family and which should only accelerate going into 2027. On the public fixation side, Granite has scaled up really well. where the potential for the new DRGs going into effect on October 1. You obviously will have an impact in the fourth quarter, but a more pronounced impact as you go into next year. as well. And then when you layer on that new product, Laura just talked about, it also provides an opportunity for a higher procedure ASP because that new product alongside Granite can go into the same product -- and then on the pelvic trauma side, with Smith & Nephew as we go through the year and we start seeing that relationship mature. We're going to continue to put surgical capacity out there in 2027 as well given the the breadth of trauma, level 1, level 2 trauma sites we're targeting. So I think that should be a nice tailwind, too. And then there's international you've got TNT that just got commercialized in Europe. That's about, I'd say, 9 months ahead of schedule. We were hoping to commercialize it in 2027. So as that gets seasoned, that will be a nice tailwind as well. So I think there's a lot of positive long-term secular tailwinds in the business that extend beyond '26 into '27. But again, consistent with how we think about the business. we want to execute through 2026, go into those tailwinds and then be able to articulate what that exit ramp translates into 2027 growth. .

All right. That's very helpful. And then just on the revenue per rep or trailing 12 months, still seeing pretty solid double-digit growth there. Just kind of curious where do you think that can continue to grow to where does this sort of tap out at especially with the contributions from the Smith NFC relationship as well as the new territories you are adding? .

You're right. We have continued to see those productivity gains over the last 3 years. I think that we've doubled in terms of sales rep productivity. And a lot of that did come from the hybrid model that we have in place, where it's the territory managers that carry the quota, those 89 people that we ended with at the end of Q1, supported by our more junior territory reps, but then also the over 300 third-party agents that we're working with. With that said, the $2.2 million, I do not think that, that's the cap. Our largest territories are more than double that size. So we have examples where -- we have much higher productivity in the field. So those are the examples that we're using for best practices -- with that said, we do target to get to nearly 100 territories over the next 12 months. We want to capitalize on the current demand that we have and also all of the discussion that we just had around upcoming launches at the end of 2026 and then into 2027 is really important. So -- but you're also right that the growth is not solely dependent on the territory count. The expected ramp with Smith & Nephew, that partnership there is going to provide an opportunity for us, specifically in trauma while allowing our sales reps to focus on spine and interventional. So overall, I think the way that we're growing the territories, as you can see, we've gotten significant operating leverage, but our goal is to continue to drive growth and penetration with our current customers and potential new customers. .

Our next question comes from Matt Blackman with TD Cowen.

It's Drew on for Matt tonight. Laura, maybe just for you to start. I think in your prepared remarks, you said the spinal pelvic fusion market or opportunity to be your largest contributor over the next few years. maybe dive into that a little bit more. Do you need to breakthrough dosing the device the third 1 to really drive the bulk of that aspiration? Or is there more in the pipeline that's really needed for that to occur? And maybe just help us size the Granite revenue contribution today, so we might be able to better appreciate the opportunity ahead?

Yes. Drew, thanks for the question. So yes, we are pretty excited about the opportunity in spinal pelvic -- as I mentioned, we worked with over 2,400 physicians last year, most of those spine surgeons, and they're doing SI joint fusion procedures and more and more often, they're doing granite procedures. So in terms of the comment that was made that this could be our largest market, it does take into consideration the continued growth opportunity with granted, especially supported by the new DRGs effective in October of this year. We think that that's going to have a significant impact, taking cost away from the conversation that we have with hospitals and really helping to support Granite as the standard of care in spinal pelvic fixation. So that's number one. But number 2 is also that breakthrough device as well. I did mention that, that's targeted towards spine surgeons as well, it does fall into the spinal pelvic market category as well. And it is a procedure that they're doing already. It is a product that they may use in the same cases as they're using Granite. So it provides an opportunity for to engage new physicians but also to significantly increase density with our existing physicians, whether it's using that product on its own or whether it's in combination with Granite work going to increase the the ASP for that particular case. .

Yes. The other thing I would say, Drew, is we have a pretty active R&D pipeline right now. Laura has talked about it in the past. -- where we want to get into a regulated for launching products. And the strategy has been on ensuring that we're going after large unmet markets, but that are also synergistic both at a procedure level and a call point level. So that's what gives us confidence, not just these 2 products, but the other products that are in the hopper, which we're not going to talk about right now, what we will start talking about as we get closer to FDA clearance or submissions or things like that, consistent with what we've done in the past.

Got it. I definitely you don't want to give the revenue contribution for granted today. All right. Well, next question Anshul actually on to for you. Just you were talking a bit about capital spending in the second and third quarter. it looked like first quarter was kind of the lowest CapEx that you've had over the past several quarters. Just how do we kind of balance that with your commentary about putting more surgical capacity in the field for Smith & Nephew and these -- and more product launches coming throughout the year and into next year?

Yes. That's a good question. So in terms of CapEx in the business, Drew, I would think the run rate CapEx just from an instrument surgical capacity standpoint, sort of that $9 million, $10 million. We've sort of been in the $8 million to $10 million range given the year when you launch a product -- so we believe that, that's going to be the right range. There's 2 offsets to that. One is new products. Yes, we're putting up more capacity for Smith & Net, you're going to put out more surgical capacity. -- for the new product that we want to commercialize. But the offset to that also is we're making sure we're driving utilization higher of existing surgical capacity. So you're going to see leverage there. That's number one. Number 2 is now that we have a broad expertise in terms of launching multiple products, -- we're taking a lot of those learnings and making sure we drive the cost of these instrumentaris lower as we launch new products. So even though we'll put out more products, those 2 things will be allowing us to offset some of the capital footprint that we need to grow -- so that's one. Now we do have our new headquarters being built -- it's an 8-year lease, so we're in the midst of doing the construction there. So you'll have a bit of onetime spend between Q2 and Q3. But even with that, even the investment we want to make in the business, we feel very good about our target to get to free cash flow breakeven .

Our next question comes from Travis Steed with Bank of America Securities.

With maybe ask a little bit more about the Smith and EU partnership, how that's ramping and maybe any -- given a lot of qualitative color, but any way to think about the agentive contribution to growth in 2026 and assumptions in that guide raise?

Thanks for that question. We're really excited about the partnership with Smith & Nephew. So -- it covers level 1 and level 2 trauma centers and it's going to allow our trauma surgeons to gain access to our TNT product as well as tour-to-treat sacral insufficiency fractures -- we actually have the Smith & Nephew Trauma leadership team here last week in our offices. So talking about moving forward our collaboration. The excitement is clear, the commitment is clear. And that's in the field as well as with physicians as well. So we think that our TNT solution is very synergistic with their portfolio. And we're still working through rep training and the rollout should be complete by the end of the second quarter. So given a normal ramp time line, it would be a few months between training and first case, but we should start to see the revenue contribution here coming in the second half of the year. In terms of providing more information on the opportunity, if you think about the TAM, it's around 60,000 patients in total, it's around $300 million per year is the opportunity that we're targeting here. And so we'll give more information as the relationship develops and we'll bake more into our guidance as we see that momentum. .

That's helpful. And then just a quick follow-up. Maybe what you're seeing in the second quarter already in terms of procedure volumes or trends in the spine market not badly.

Yes. So we're not going to provide specific context on what we're seeing in the quarter. We did talk about in the prepared remarks around acceleration as we progressed through the first quarter, trend we saw in April. The way we are thinking about our business is not even on a quarterly basis, but on an annual multiyear basis. Because a lot of the tailwinds that we've talked about on this call are indeed secular. They're going to be over a couple -- a few years, you're going to continue to see the impact of that. And that confidence is reflected in our guidance. .

Our next question comes from Caitlin Roberts with Canaccord Genuity.

Just to start with Europe and the U.S. It seems like P&C that you noted was launched earlier than expected. -- in Europe and then along with the Australian launch of Torq, do you see these changes as changing the potential OUS growth expectations for this year?

Yes. Happy to take that, Caitlin. So on the international side, we are really pleased with how the business did, both in Q4, which was the first full quarter of torq available in Europe, but also what we're seeing in Q1 with Torq and then the early commercialization of Torq in Australia and also TNT in broader Europe. It is still 5% or 6% of our business, but it's tracking really well. And given that we're in the early stages of launch, we want to be very thoughtful about how those 2 markets scale for us before we start incorporating upside there. But we are very confident that Europe with these 2 new products continued with the strength of our as I joined business with the Triangle product, which is what they've had for the longest time, should actually be accretive to worldwide growth, which it hasn't been for the last few years. So we like the trajectory of the business, and we like what potential upside could come from it. And we are also looking at other international markets where we're seeing physician interest to be able to deploy TNT torq and potentially even Granite.

That's great. And then just on the SNN partnership, Smith & Nephew is continuing to go through its own efforts in the U.S., particularly as it works to launch its next gen me later this year. I mean, any risk for the ramp for you guys to be slower given the focus for Smith & Nephew? Or are these areas mainly separate?

For the most part, these are actually separate areas. So we're working specifically with the trauma team there at Smith & Nephew. And as I said, the products are very synergistic with 1 another. They are focusing on the pelvis later this year, and this product is supportive of that. The fact that it's a breakthrough device. The fact that it has an end cap of over $4,000, the typical ASP is significantly higher than what Smith & Nephew is used to seeing in their own portfolio. All of these things I think bode very well for the product and for the uptake with the folks at Smith & Nephew. As I said, we are working with them from a training perspective right now. We're deploying assets into the field with them. And also, it's getting some of these trauma hospitals on the approved list, too. So there's a number of things that are more administrative in nature that are going on right now. But we feel that Smith & Nephew is going to be a great partner for us, and we're seeing that commitment from them.

Our next question comes from David Saxon with Needham Company.

Congrats on the quarter. I wanted to ask on just the path to 100 territories over the next year. So just looking back, I mean that would represent set's fastest pace of hiring you've seen since I believe 2021, so I guess, like what's the confidence in getting there? And how important is it to the organization in the context of this upcoming BDD launch? .

Yes. I think actually, the last part of your question was the most important part. So since 2021, a lot of our focus in terms of expanding the sales force has been utilizing our hybrid model, and we grew from a very small number of third-party agents in 2021 and up until today, where we're over 300 at this point. So that has been a a very significant way that we've grown the business and gained significant operating leverage on the business. And Smith & Nephew relationship is another part of that particular strategy. So why do we think it's important to grow to those nearly 100 territories over the next 12 months? It does get us this next product that we're going to be launching a breakthrough device that we think that has very significant potential to gather yet more surgeons as customers beyond the record that we had this last quarter of 1,650 over 17% growth. And typically, we even see a little bit of a fallback between Q4 and Q1 in terms of the number of surgeons that are using the product, but that was not the case for us in Q1. So it is important for us to ramp to get to those 100 territories to be prepared for the launch of this next product from the perspective of adding surgeons, but also I mentioned the surgeon density that we think is incredibly important. We have a tremendous asset in our customer base. And this product will give us the ability to meet the needs of those physicians, whether it's an SI joint fusion, pelvic fixation or the new indication that we're working on with the next product. .

And then David, you want up a really good point on going back to 2021. If you look at what our strategy has been. And you look at what the performance was since 2021 once we built out the sales force -- it was very quickly followed by 4 new product launches. You launched torq, you launched Granite, you launched TNT and then you launched the intra-family -- and what you saw between 2021 and 2025, is growth really inflect in the 22% range on a cumulative -- on a CAGR basis, right? So what you're seeing is a similar playbook now except we're at a much larger scale -- we still expect to launch new products. We still expect to get a lot more operating scale on the business or operating leverage on the business. But this is in anticipation of what we know is going to be a pretty aggressive innovation cycle for us over the next 5 years. .

Okay. That was super helpful to both of you for that. Maybe for my second question, Anshul, just on gross margins. Obviously, really strong performance here in the first quarter. So like what's driving that? Is that just kind of better leverage on kind of revenue or any from an operational perspective? And then Anshul, can you just remind us what the latest assumption is in terms of pricing on guidance .

Sure. On the gross margin side, David, again, really pleased with the nearly 80% margins at 79.8%, but nearly 80% margin, which, look, we're really proud of. They are industry-leading, and they're ahead of our expectations, and that's why we reflected that in our increased guidance by increasing gross margins by 100 basis points for the year. A lot of that is driven by the better-than-expected execution, both on the procedure mix side. So the ASP came in a bit better, but also we are seeing the incremental impact of the supply chain efficiencies and cost optimization initiatives that we've put in place. So we feel really good about the trend there. Now as we launch new products, including the rollout of additional surgical capacity to support Smith & Nephew, we do expect some noncash impact, i.e., depreciation of those instrument tries in the back half of the year and that's incorporated in our updated guidance of 79% for the year. In terms of ASP, we are still maintaining a conservative position on we sort of started the year at mid-single-digit ASP decline. Now we've done better than that. Granite's been a big contributor to that because of more 4 implant cases than we had in our initial guidance, -- we're still assuming low single-digit ASP degradation. Now we think we can do better than that. But the reason for that assumption is for our interventional with the intra-family you generally have fewer implants you use. And within trauma, again, you might have anywhere between 1 and 2 implants in the procedure. So we're embedding that as potential pressure on ASP. What we're still not incorporating is the upside of granted continuing to see more foreign plant cases and the continued strength in the SI joint business where you use 3 implants. .

Our next question comes from David Turkaly with Citizens.

Just quickly on to, I know you mentioned the headquarters. Did you put a dollar amount on that? And then I just wanted to check sort of from a capital allocation standpoint, you have a lot of cash or your priorities there and as the buyback everything considered? .

Yes. So from a CapEx perspective, like I said, on this traditional surgical capacity, it's around $9 million to $10 million for the year, and then you've got another $4-plus million on CapEx for the new headquarters. Now some of that will get reimbursed. As part of the TI launch, it's just the timing of CBD based on the way the contract is structured. So that's where the CapEx sits. And then your next question was around buybacks. Look, I think when we think about capital allocation, our focus remains on making investments in R&D and new product innovation on clinical data, especially as we look at the number of products that we have in the hope that we want to commercialize. -- supporting that will be surgical capacity. And then the last piece is building the commercial infrastructure to continue to support that growth. Now we do like the way the business is positioned with the growth in gross margin dollars, the continued inflection on operating leverage, but our focus remains on growth and investing in growth accretive opportunities within the business. .

Our next question comes from Richard Newitter, the true securities line is

Maybe just on the cadence of the revenue guide. I know you said you expect acceleration moving through the year. It looks like consensus is right around 15% to 16% growth for 2Q or about $55 million. I guess that would imply maybe something like 2.5% year-over-year increase acceleration in year-over-year increases moving through the year. Is that about right? Can you comment on that cadence in the Q2 number at all? And then just on that topic as well, just you maintained your operating expense growth guidance. I guess you're coming out of the gate here almost 3x your top line growth versus your OpEx growth -- and I'm just curious to know kind of is there -- what's behind that? Where are the expenses getting pushed out if that's the case? Or is that just kind of conservatism right now? .

Yes. So happy to take both those questions, Richard, in terms of trending by quarters, as you know, we don't provide quarterly guidance and we like to manage the business on a full multiyear basis. And we do expect year-over-year growth to accelerate. Now our current assumption is the acceleration is going to be more pronounced in the second half of the year. Part of that is just timing of scaling up this new product within interventional, but also, as Laura talked about, the Smith & Nephew partnership, the expectation that you really start seeing a meaningful contribution in the third and the fourth quarter. So you might see some timing shift between Q2 and Q3, mostly because of the Smith & Nephew partnership. But for the year, we feel really good about where the growth is going and more importantly, the exit ramp from fourth quarter going into 2027. So that there -- on the spend side, you're right. We like the operating leverage we saw in the business now from an expense standpoint, when you are at our scale, timing can have a big impact. So we are in the second and third quarter, right in the midst of our VNB testing and a lot of our work on FDA regulatory submissions as well as marketing activities, both for IntraTI, which was launched, but also for this new product, we want to commercialize in the fourth quarter. So you're going to see a bulk of that spend there. We're also embedding R&D spend that is going to have an impact on products we want to launch in 2027. So you're seeing expense growth rate embedding a lot of the spend that could contribute to revenue upside as we progress through the back half of the year. So that might mean there is some upside on the operating leverage, too, but we believe it's better to be conservative, incorporate the spend and then let the growth speak for itself as you progress through the year. .

That's really helpful. And then maybe just on the DRG proposal or the upcode tailwind, it seems like a really big potential filing for you. I guess, one, -- is this something that you were expecting that you've been lobbying for or not lobbying but the kind of -- you were expecting this outcome? And then why wouldn't this be a really enormous tailwind for you next year? .

Richard, it's a great question, and we quite frankly do think this is a very significant and underappreciated tailwind. Granite, first of all, has been 1 of our fastest scaling products in the history of the company. We addressed this unmet clinical need in terms of fixation failure and multilevel constructs. We have a fair amount of clinical data that actually shows the benefit of the technology and it really should become the standard of care in 130,000 cases per year in the United States. So -- so I think number 1 is just the product itself is an incredibly important product to these patients and surgeons who are working with patients that need multilevel constructs. Now when you get into the role itself, so the inpatient rule created a new DRG group for complex and extensive spine surgeries. And under the proposal, granted is 1 of only 2 technologies for which those procedures automatically map to the new DRGs. So the proposal is actually significantly better than what we had requested from CMS. We've been in discussions with CMS for not 1 year, but 2 years. And our initial request was a reassignment of granite cases to higher severity levels within the existing DRGs. So when CMS actually looked at the data, they concluded that the reassignment actually wouldn't fully address the cost differential and so instead of moving cases around within the existing structure they created the new DRG family and the improvement in the hospital payment under the proposed new DRGs could be as high as $50,000. I mentioned that in my prepared remarks. And although it depends on the specifics of the patient diagnosis and severity. What's interesting about this too is that the new DRGs are more durable than an NTAP. They're not a temporary fix. The NTAP also was only limited to Medicare patients, and if finalized, we expect commercial payers to broadly adopt the new DRGs alongside CMS. So in summary, we do strongly believe the new DRGs are going to have a positive impact on the spinal pelvic market opportunity that we're going after with Granite, assuming that they're finalized as proposed, -- we think the incremental reimbursement is going to support the adoption of our Granite technology, and it's going to remove costs as a potential objection. Hope that helps.

I'm showing no further questions at this time. I would now like to turn it back to Laura Francis for closing remarks.

Yes. I just want to say thank you to everybody for participating in today's call. We really appreciate your interest in SI-BONE, and we look forward to seeing you all at our coming conferences as well as non-deal roadshows. Goodbye.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good afternoon, and welcome to SI-BONE's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Saqib Iqbal, Vice President, FP&A and Investor Relations at SI-BONE for a few introductory comments. Please go ahead, sir.

Earlier today, SI-BONE released financial results for the quarter ended December 31, 2025. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management's remarks today may 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. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings, such as our most recent Form 10-K, and our actual results might differ materially from any forward-looking statements that we make today. Accordingly, you should not place undue reliance on these statements. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements, except as required by law. During the call, management may also discuss certain non-GAAP measures, including the company's adjusted EBITDA results. Unless otherwise noted, any reference to profitability is in terms of positive adjusted EBITDA. For a reconciliation of these non-GAAP measures to GAAP accounting, please see the company's full earnings release issued earlier today. Unless otherwise noted, all results are compared to the comparable period in the prior year. With that, I'll turn the call over to Laura.

Thanks, Saqib. Good afternoon, and thank you for joining us. Our strong fourth quarter and full year 2025 results validate that our innovation-led growth strategy is delivering meaningful real-world impact. We've built deep technical expertise to solve complex procedural challenges that historically led to poor outcomes for patients with compromised bone. That expertise has produced a differentiated platform of solutions, including 3 products which have been granted FDA breakthrough device designation. We've consistently secured favorable reimbursement, including multiple new technology add-on payments and a transitional pass-through payment, confirming the superior outcomes, clinical value, and health economic benefits we deliver. Supported by world-class clinical evidence and an industry-leading commercial team, our proprietary technologies have been used in over 140,000 procedures worldwide.

Looking at our execution in 2025, we achieved a series of major milestones that strengthened our foundation and created powerful multiyear growth tailwinds. We generated record annual worldwide revenue of nearly $201 million, marking another year of over 20% growth. We reached new levels of customer engagement with over 2,400 U.S. physicians performing nearly 22,000 procedures in 2025. The 22% increase in U.S. physicians who used our technologies in 2025 demonstrates the growing adoption, the expanded utilization, and the strength of our commercial engine. We meaningfully strengthened our reimbursement position, securing an NTAP for iFuse-TORQ TNT and a TPT for iFuse Bedrock Granite. These are critical catalysts that enhance our access, drive adoption, and reinforce platform leadership.

At the same time, we've made substantial progress on 2 highly compelling new products. The first product, INTRA-TI, was launched last week, and we expect to commercialize our next breakthrough device in late 2026, further extending our growth runway. 2025 also marked a step change in our financial profile. We delivered our first full year of positive adjusted EBITDA and achieved a 9% adjusted EBITDA margin in the fourth quarter. We capped the year by achieving positive free cash flow in the fourth quarter. Together, these results underscore a platform that is scaling and is positioned to deliver sustained, profitable growth.

We started this company by creating the sacroiliac joint fusion market, and we remain the undisputed market leader. Over the past 5 years, we've expanded into new adjacencies in the broader sacropelvic space, applying our biomechanical expertise and proprietary technology to achieve better patient outcomes. Looking ahead, the next 5 years represent an innovation super cycle for us as we launch unique technologies targeting new clinical adjacencies. We're positioned to solve the largest unmet needs for patients with compromised bone, and we intend to lead this space for the long term. With a significant runway in our existing markets and focused innovation aimed at sizable new opportunities, we're confident in the long-term growth potential of the business.

Now I'll highlight the progress we've made on our 4 key priorities: innovation and market development, physician engagement, commercial execution, and operational excellence. Starting with innovation and market development, innovation to solve complex procedural challenges that historically led to poor outcomes for patients with compromised bone have been the primary driver of our industry-leading revenue growth of more than 20% since our IPO in 2018. We've built a reputation for developing platform technologies that become category leaders in their respective markets. We offer the most comprehensive portfolio of solutions in SI joint fusion, purposefully designed to meet diverse patient needs and physician preferences. As we continue to expand this robust offering, we're reinforcing our leadership position and deepening our commitment to innovation that addresses the needs of our orthopedic and neuro spine surgeons and a growing base of interventional spine physicians.

Earlier this month, we received FDA 510(k) clearance for INTRA-TI, the newest addition to our SI joint fusion platform. INTRA-TI builds on the interventional spine physicians' preferred posterior approach that INTRA-X uses and is backed by established nationwide reimbursement. We're confident that INTRA-TI will improve the procedural efficiency of SI joint fusion at ambulatory surgery centers. This launch further advances our strategy to be the go-to partner across call points and sites of service. We initiated our alpha launch last week and expect adoption to ramp over the course of 2026 as we scale physician education and training. INTRA-X continues to gain momentum as the preferred percutaneous allograft solution in office-based labs. Effective January 1, 2026, Medicare reimbursement for the OBL site of care increased by 17%. The new reimbursement is nearly $14,000, reinforcing the economic attractiveness of minimally invasive SI joint fusion in this site of care.

In the thoracolumbar market, iFuse Bedrock Granite has been one of our fastest-growing platforms and solidified our reputation as an innovator. Since launch, Granite has significantly outpaced the overall deformity market growth rate, driven by new surgeon adoption and expanding use cases across both deformity and degenerative spine. The success of Granite and pelvic fixation underscores our ability to introduce true platform innovation, disrupt relatively mature markets, and establish new standards of care. Granite continues to benefit from TPT payment status with a $0 device offset, resulting in 100% reimbursement of facility reported cost for Granite when used in outpatient and ASC settings. Also effective January 1, 2026, CMS approved the inclusion of the open SI joint fusion code in the TPT calculation, further expanding reimbursement pathways for these cases. We're also encouraged by broader CMS policy signals that support outpatient migration in spine. Effective January 1, 2026, CMS created a new Level 7 musculoskeletal APC, paying nearly $28,000 for certain outpatient spine procedures. While higher acuity patients will continue to be treated inpatient and clinical practice patterns will evolve over time, these changes reflect CMS' continued efforts to move procedures to lower cost settings. We believe Granite is well positioned in this environment as an adjunctive solution to spinal fusion, particularly given the availability of the TPT.

In the trauma market, iFuse-TORQ TNT continues to gain momentum as highlighted by the 50% increase in physician adoption in the fourth quarter. TNT addresses a long-standing procedural gap for sacral insufficiency fractures, where the majority of patients have low-density bone. With an intuitive workflow and up to 30% higher NTAP reimbursement in eligible cases, TNT is increasingly the preferred solution for sacral insufficiency fractures. Finally, an update on our third breakthrough device. We remain on track to file for 510(k) clearance in the third quarter. Subject to FDA review timeline, we could commercialize the unique product in late 2026. We believe this product will meaningfully expand our total addressable market and are excited about the clinical impact it can have and the growth opportunity it represents.

Now let's move on to physician engagement. In the fourth quarter, a record 1,640 physicians performed procedures using our solutions. The addition of 250 physicians in the quarter represents 18% growth compared to the prior year period. This marked our 20th consecutive quarter of double-digit growth in physician adoption. Notably, this growing physician interest spans all call points as we observed double-digit growth across each of them in the fourth quarter. The number of physicians who performed procedures in the fourth quarter of 2025 as well as the prior year outpaced overall physician base growth. This substantiates that our expanded platform strategy is driving adoption consistency. This cohort of physicians also performed more than 3x the number of cases per physician compared to physicians who performed their first case with us in the current quarter. This highlights the long-term utilization potential as physicians integrate our solutions into their practices and use our modalities with increasing intensity. Furthermore, only about 25% of physicians who performed an SI joint fusion procedure have adopted another procedure, highlighting a significant opportunity to further expand the use of our products. We also expect future products to attract new physicians while accelerating procedural density with this growing physician base.

Now let's turn to commercial execution. We ended the quarter with 89 quota-carrying territory managers. Annual revenue per territory was $2.1 million, reflecting 18% year-over-year growth. This marked the 13th consecutive quarter of double-digit territory productivity growth. Our hybrid sales model, combining a direct sales force with over 300 third-party agents has been instrumental in driving this productivity and enabling us to achieve strong operating leverage. In 2026, we plan to add 10 new territories while expanding strategic agent partnerships to ensure we can fully capture the large market opportunity. Given our success with the hybrid model, I'm excited to announce that last week, we entered into a strategic partnership with Smith+Nephew, an orthopedics industry leader to capitalize on the growing physician interest in our trauma solutions. This collaboration significantly expands our reach and accelerates our penetration into the trauma market. It will allow trauma surgeons across Level 1 and Level 2 trauma centers nationwide to gain access to TORQ and TNT in pelvic trauma.

On the leadership front, following our announcement last August, we completed a smooth commercial transition. Nicholas Kerr has assumed the role of Chief Commercial Officer, succeeding Tony Recupero, who has retired from his position as President of Commercial Operations. Tony will remain in an advisory role for the next 12 months. Nick has been the architect of our product platform expansion and his deep relationships with both the field and our customers positions our sales organization for continued success. Before I hand the call over to Anshul, I'd like to share some additional leadership updates. I'm excited to announce that Anshul has assumed the role of Chief Operating Officer, alongside his current position as Chief Financial Officer. Anshul has been leading our operations function for the past 18 months. And now in this expanded role, he'll also be responsible for the IT and program management functions. Over the past 5 years, Anshul has been instrumental in bringing operational excellence to SI-BONE, playing a pivotal role in driving strong and profitable top line growth and guiding us toward our goal of sustained free cash flow. His strategic vision, combined with his deep operational insights, uniquely position him to drive the company's next phase of growth. I'm also pleased to announce the promotion of Jeff Ziegler to Senior Vice President of Market Access and Reimbursement. Jeff has developed our reimbursement strategy, playing a crucial role in securing favorable reimbursement, including NTAP and TPT for our solutions. He'll continue to drive impactful results as we focus our reimbursement efforts on our new technologies we expect to launch. With that, I'll hand the call over to Anshul to provide an update on our fourth key priority, operational excellence, and discuss our fourth quarter results and 2026 outlook in more detail. Anshul?

Thanks, Laura. Good afternoon, everyone. My comments today will cover fourth quarter and full year revenue growth, profitability, and liquidity, and then I will walk through our full year guidance for 2026. All comparisons provided will be against the prior year period, unless noted otherwise. Starting with revenue growth. Our fourth quarter worldwide revenue grew 15% to a record $56.3 million. U.S. revenue was $53.5 million, representing 13.9% growth, which was against a tough comparable prior year quarter. On a 2-year stack basis, U.S. revenue grew 20.7%, representing a 90 basis point acceleration compared to the third quarter's 2-year stacked revenue growth. International revenue in the fourth quarter was $2.9 million, growing 38.8%. The strong international performance was driven by the stellar reception for iFuse-TORQ. We're encouraged by the traction we are seeing with TORQ and are actively working to get TNT into these markets in late 2026, well ahead of our previously planned launch in 2027.

For the full year 2025, we generated worldwide revenue of $200.9 million, reflecting 20.2% growth. Our U.S. revenue grew 20.6% to $191.1 million. U.S. revenue growth was driven by a 22% increase in procedure volume growth. International revenue for the full year 2025 was $9.8 million. Moving to profitability. Fourth quarter gross profit increased 14.8% to $44.5 million. For the full year, gross profit increased 21% to $159.9 million. Gross margin was 79% for the quarter and 79.6% for the full year. The gross margin for the full year came in approximately 200 basis points above our original 2025 guidance. This outperformance was driven by stable ASP from a favorable procedure mix and supported by the positive impact of our ongoing operational initiatives, including improved supply chain efficiency and cost optimization.

Operating expenses grew 6.2% in the fourth quarter to $47 million. For the full year 2025, operating expenses grew 8.9% to $182.2 million. The increase in operating expenses was mainly driven by revenue-generating activity, including higher sales commission and increased R&D investment aimed at expanding our product pipeline. Net loss narrowed to $1.6 million or $0.04 per diluted share compared to a net loss of $4.5 million or $0.11 per diluted share last year. For the full year 2025, net loss narrowed by 38.8% to $18.9 million or $0.44 per diluted share. We delivered positive adjusted EBITDA of $5.1 million in the quarter, a 176.2% improvement over the prior year. Our 9.1% adjusted EBITDA margin in the fourth quarter highlights the scalability of our infrastructure. Adjusted EBITDA for the full year 2025 was positive $8.9 million compared to $5.1 million of adjusted EBITDA loss in 2024, representing approximately $14 million improvement.

Turning to liquidity. We exited 2025 with $147.8 million in cash and equivalents. This was an increase of $2.1 million from the third quarter. The fourth quarter was our second consecutive quarter of positive cash flow from operating activities and the first quarter in which we generated free cash flow. We generated nearly $0.5 million in net free cash flow in the fourth quarter. This was well ahead of our previously stated goal to achieve free cash flow at some point in 2026. For the full year 2025, our cash consumption was just $2.2 million compared to $16 million in cash consumption in 2024. This significant improvement achieved while continuing to invest in surgical capacity reflects our disciplined working capital management and our highly efficient asset-light business model. Our robust liquidity position, consistent profitability, and recent cash flow inflection positions us to self-fund revenue accelerating investments in platform technologies targeting new addressable markets.

Finally, moving to our outlook for 2026. In 2026, we expect worldwide revenue of $228.5 million to $232.5 million, implying year-over-year growth of 14% to 16% driven by high teens growth in U.S. procedure volume. Our guidance also assumes revenue growth to be weighted towards the second half of the year as we expect the tailwinds that Laura highlighted to increasingly benefit the business as we progress through the year. Consistent with our guidance philosophy, we believe it's prudent to allow these tailwinds to materialize before we fully incorporate them into our expectations. Based on the revenue assumptions, we expect 2026 annual gross margin to be approximately 78%. We expect annual operating expenses to grow 12.5% at the midpoint of the revenue range, allowing us to fund key growth initiatives, including new product launch activity, planned sales force expansion, and pipeline development that we expect to commercialize in 2027 and beyond. Importantly, in 2026, based on the operating leverage inherent in our model, we will deliver increased adjusted EBITDA compared to the prior year and remain firmly on track to deliver on our free cash flow commitments. With that, I will turn the call over to Laura.

Thanks, Anshul. I want to congratulate my colleagues for record performance across revenue, physician engagement, and profitability. You are our most valuable asset. And I want to thank you for your commitment and contributions, which have helped tens of thousands of patients this year improve their lives. As we look ahead, I'm excited about the momentum we're carrying into 2026. With a strong foundation, a robust pipeline of innovative products, and expanding market opportunities, we're well positioned to deliver another impactful year. With that, we're happy to answer your questions. Operator?

[Operator Instructions] And our first question for today comes from the line of Patrick Wood from Morgan Stanley.

I'll just do two quick ones. The first one on the Smith+Nephew partnership, like how did that come about? How are you thinking about the potential contribution for that? And did we factor any of that into the guide?

Patrick, it's Laura. Thank you so much for the question. We are really excited about the partnership with Smith+Nephew. And as you know, over the last few years, we've actually successfully deployed a hybrid sales model, and it's really been a key contributor as we expanded access to our solutions. And it also translated into significant territory productivity gains as well. So what we did is building on that experience. We are announcing that partnership with Smith+Nephew. We understood that they had a very significant footprint on the trauma side, and we have particular strengths and want to focus our team on spine and on interventional. And so we had talked about this on our last couple of earnings calls that we were looking at large strategic distribution partnerships, and we're very excited that this one came to fruition. In terms of the partnership itself, it covers Level 1, Level 2 trauma centers, and it's going to allow trauma surgeons to get access to our trauma solutions and to treat these patients that have sacral insufficiency fractures. So really for both of us, it's a win-win situation, gives a large number of trauma surgeons working with Smith+Nephew access to our breakthrough technology. And we do believe that it will become a standard of care for treating pelvic fracture similar to what we did with Granite and pelvic fixation. And as I said, it also frees up our direct sales force to focus more on market development and physician engagement with spine surgeons as well as interventionalists and especially given our march toward commercializing new products this year as well.

And then, Patrick, on your question on whether -- what's included in the guide, as we shared in our prepared remarks, trauma was a nice growth driver for us last year. It's still year 1 into its launch, and we saw a 50% increase in the number of physicians actually using our solution. So really excited about what this partnership can do in terms of expanding the access of our platform to these Level 1, Level 2 trauma sites. But it's too early. We just signed the agreement. We want to see how it seasons and matures as we go through the year. And we'll be sharing more as we go through the year on the impact it's having on the business.

Super helpful. And then just as a quick follow-up. You guys now have a clear clinical data set showing that the IPM physicians are getting very similar clinical outcomes to the direct surgeons in that side. Do you think that helps sort of create more engagement on that side? Do you think the mix changes over time? Or should we see a similar mix of physicians being onboarded?

So I think what you're asking is the opportunity that we have with interventional in SI joint fusion. And as you can see with the launch of our INTRA product, it shows the dedication that we're making to the interventional physicians. Also, you mentioned clinical data, our STACI study was recently published and showed the efficacy of our TORQ product used by interventionalists and shows that they are able to perform these cases and have the same sorts of outcomes that we've seen in our other prospective studies as well as randomized controlled trials. But yes, as you can tell, we're really leaning into our work with interventionalists. We're seeing significant growth in our interventional business. And our INTRA-TI product really rounds out our SI joint fusion portfolio. It's going to allow physicians to use iFuse regardless of their preferred approach and implant type to fuse the SI joint. So in this particular case, INTRA-TI, it's a posterior metal implant with piercing features. It qualifies for CPT 27279, which is clearly covered at all sites of service. And also the posterior approach really aligns with interventional spine physicians preferred workflow. And we have a streamlined single-use instrument kit, and it's going to allow us to drive procedural efficiency, specifically in the ambulatory surgery center side of service. So we're excited about the opportunity with interventional and with our suite of products, which includes TORQ and INTRA as well as INTRA-TI.

And our next question comes from the line of Matthew Blackman from TD Cowen.

Can you hear me okay?

Yes.

Great. I've got two. Maybe, Anshul, starting with you. If I'm backing into your adjusted EBITDA from some of the commentary, some assumptions on stock-based comp and maybe a little bit of math, it seems like you're guiding to somewhere north of $20 million for EBITDA, adjusted EBITDA in 2026. So the first question is, is that right? Am I doing that math right? Any help there would be appreciated. And then I've got one follow-up.

Yes. Thanks for that question. So the way we've talked about it externally is if you look at our growth rate for the year from a guidance perspective, it's around between 14% and 16%, gross margins of 78% and OpEx growth of 12.5%. So rough math, that would imply operating leverage for 2026 being at 1.2x. And there are 3 reasons for the operating leverage to be at 1.2x this year is we've got 2 new products that we want to look to commercialize this year. We're making investments in potentially putting out TNT in Europe as well in 2026. So you've got a lot of training and commercial activity that goes on to drive the adoption of the technologies, that's number one. Number two is we are investing in expanding our commercial infrastructure. So as we've shared in our prepared remarks, we want to add 10 more territories. Part of that is in anticipation of these new product launches and making sure we can maximize the opportunity ahead of us. And then indexing on R&D, again, growth remains a key priority for us. Laura talked about a regular cadence of product launches that will happen between now and 2030. So we're really indexing heavily on the R&D side as well. And on the adjusted EBITDA side, what we've said is we expect it to be an increase from prior year. We're not being very specific. But if you did the math, it would come not at $20 million, but a bit lighter than that.

Okay. I appreciate that. And then my follow-up is on INTRA-TI. And just thinking about its ASC-centric nature, how should we think about or should we think about a possible halo effect from INTRA-TI that perhaps pulls through more of the portfolio in that setting as the product ramps over the next couple of years?

Yes. I think it's a good question that you're asking because it really is targeted toward the ambulatory surgery center. I did talk about how it really fits well with the interventional spine physician preferred workflow. And typically, those cases are done at the ambulatory surgery center. But it is also true that many of our spine surgeons also are working at ASCs too. And so we do think it's important in terms of continuing to see the growth that we would expect in our SI joint fusion part of the business. So just a little more information on it is a 3D printed titanium solution. It has a similar workflow to our allograft solution. And as I said previously, it is reimbursed under CPT 27279, which has nationwide coverage. So in terms of revenue impact, I'd say that it expands the market in a couple of ways. It provides interventional spine physicians with products similar to our INTRA-X workflow. But there are 22 states where allograft solutions are not reimbursed. And so we think that it's going to be an important solution for the physicians that are there. And then there's also a subset of interventionalists who prefer a non-allograft solution that's delivered in a posterior approach. So INTRA-TI is allowing us to serve those particular physicians. But I think what's most important is that we have a full suite of products for SI joint fusion. So with TORQ, INTRA-X, iFuse-3D and now INTRA-TI, we have a setup to continue to lead the market, both with spine surgeons as well as interventional physicians as well. And maybe the final thing I would say is that we still are in alpha launch right now. So we expect an adoption ramp, and we expect to see progress through the year and into the back half of 2026 for that particular product.

And our next question comes from the line of Travis Steed from BofA Securities.

I wanted to ask more on the cadence on revenue. You mentioned second half a little bit more weighted. Any color on kind of how you would titrate Q1? And if you'd kind of quantify some of the tailwinds and benefiting the second half?

Yes, Travis, happy to take the question. So look, coming into 2026, I think we have more tailwinds in the business than we've ever had before. If you look at the physician base that we entered the year with, we exited 2025 with over 1,640 active physicians. So that's a pretty formidable physician base. You've got the improved reimbursement backdrop that Laura talked about, whether it's the NTAP for TNT, the TPT for Granite, the increase in OBL fees for SI joint dysfunction. You've got the INTRA-TI product that we just launched. You've got the second BDD product that we're looking to commercialize potentially in late 2026. And then you've got the commercial expansion, both direct as well as the strategic partnerships. So a lot of tailwinds coming into the business. Now we do think about our business on an annual basis and increasingly on a multiyear cycle basis. So we don't really provide quarterly guidance. And as you know, at our scale, the cadence of the business can vary based on the timing and scale of new product launches and how they get commercialized, especially through this new commercial model, the hybrid commercial model. So for modeling purposes, we're expecting the revenue growth to be back half weighted, so we can see all of these tailwinds starting to materialize and incorporate them in our guidance.

Okay. Helpful. And I think earlier in the prepared remarks, you mentioned an innovation super cycle over the next 5 years. And like should we think about that as kind of sustaining the long-term growth rate? Or is there a potential that this company is actually growing faster over the next 5 years than it has been over the last 5 years?

Yes. Thanks for that question, Travis. And if you think about since our IPO, we've been delivering average revenue growth of around 20%. And we've been doing that through developing these innovative solutions and addressing failures of incumbent standard of care. So as we look at applications in compromised bone, we're looking at markets that have these higher weighted average market growth rates because of these unmet clinical needs in the space. And our technologies have gone on to become category leaders. So we're in -- whether it's SI joint fusion or whether it's pelvic fixation, or now in pelvic trauma, it's allowing us to grow multiple times at the broader market growth rates in Spine and Interventional. So as we think about developing these various platform technologies, they are meaningful at expanding the total addressable market across various new disease states, but very specifically targeted towards spine and interventional, which is really important to us in terms of focus. But looking ahead, over the next 5 years, we had used that term innovation super cycle, and we think that's the right way to think about it. We're going to be regularly launching a cadence of products, but they're going to be these unique technologies, and they're going to be targeting these new clinical adjacencies that focus on Spine and Interventional. And it really, first of all, takes these core competencies that we've developed in the business to address issues with compromised bone, but then also to lead the space for the long term.

And our next question comes from the line of Matthew O'Brien from Piper Sandler.

This is Anna on for Matt. I want to start with one on the guide. I mean, it seems like you guys have a ton of tailwinds throughout the year, but you're baking in sort of a 500 basis point sequential slowdown versus last year. So just wondering if there's anything specific to call out on areas for upside. It seems like there's a lot of areas for things to move higher. So yes.

Yes. So happy to take that, Anna. In terms of potential areas for upside, you're right, we've got a lot of tailwinds in the business. And the way I would categorize it is, if you look at our base guidance, it assumes high teens growth in procedure volume and sort of a degradation in ASP, mostly driven by the mix in procedures. Some of the deformity and trauma procedures use fewer implants, so the ASP tends to be lower. And what we've been able to do in the last few years is actually offset that ASP pressure with continued growth on the deformity side and the SI joint dysfunction side as well. So just simplistically maintaining that discipline and execution focus should provide some upside on the ASP. That's number one. And then you get into the potential ramp expectations of INTRA-TI, the continued acceleration of INTRA-X and also this partnership with Smith+Nephew, which will continue to evolve as we progress through the first half of the year. So that also gives us a lot of confidence in the continued ramp in the business as we progress through the year. And more importantly, that ramp continuing into 2027, especially when you incorporate the rollout of TNT in Europe at some point in 2026, the potential impact of our ability to commercialize the third breakthrough device at the end of 2026, which would be a material impact in '27.

Super helpful. And then I guess, just again on the new INTRA-TI product for the ASC. I was wondering if you could give a bit more color on what your presence in the ASC is today, what you size that opportunity as and how long it will take to really penetrate that market?

Yes, I can help out on that. So I've been the CEO for 5 years of the company. 5 years ago, virtually none of our sales were in the ASC. And today, around 35% of our SI joint fusion sales are in the ASC. So we do have a significant footprint there already. But I think the point you're trying to make is that with this new product INTRA-TI that it's going to provide another opportunity for us to grow the business overall and that a significant amount of that growth should be seen in the ASC. And just given the nature of the product, the single-use system that we have, the simplicity of it, it's really set up perfectly in order to grow overall in the SI joint fusion market and to drive additional sales to the ASC.

And our next question comes from the line of Caitlin Roberts from Canaccord...

On the quarter. Just to talk about the commercial expansion, the direct commercial expansion. As you think about adding these new territories and the focus on growing the outpatient business, we're just touching on the ASC, how are you thinking about strategically adding these territories?

Yes. I mean what we do, obviously, we have quite a bit of information already on the opportunities that we have there. And so you identify where your targets actually are and where we're penetrated and where we're less penetrated. So what we're doing is we're looking across the United States and addressing those areas where we have a significant opportunity, and it could be on the spine side or it could be on the interventional side and then you add accordingly in terms of territory managers in those particular locations. In addition, in around half of our cases, we actually will split a territory where the more junior territory rep is promoted to a territory manager. So on around 50% of the cases, we're typically promoting somebody into that level and another 50%, we're actually hiring from the outside. But we do have very significant opportunities across the portfolio to continue to grow and expand. We've gotten very significant leverage through our hybrid sales model with the addition of third-party agents. We have over 300 of them just in the U.S. alone. But there is a balance between growing your direct sales force and then supplementing it with hybrid, and we think that we're striking the right balance by adding 10 more territories in 2026 to capture the opportunity.

That's great. And then just a quick one on the patent extension. It seems like it applies to your original triangular iFuse implant. How much of your business would you say is that legacy segment?

Caitlin, happy to take that. The legacy Classic is barely any part of our business. I'd say it's less than 0.1% at this point. Majority of our SI joint business comes from TORQ 3D and now with the going into interventional allograft and now we expect INTRA-TI to be a bigger contributor to the business as a portfolio.

And our next question comes from the line of David Saxon from Needham & Company.

I wanted to follow up on the Smith+Nephew partnership. Maybe you can talk about the cadence of how that partnership ramps up in 2026. When do Smith+Nephew reps actually start carrying TORQ and TNT or those sets place? And then is that like a second quarter dynamic? Or can that start as early as March?

Yes, I can at least start to answer that question. I mean we just signed the agreement last week, but we are already in discussions to train and place implants as well as instrument trays into the field as well. So we're -- we're forming a joint steering committee between the 2 different companies. They're going to meet on a weekly basis and really get into a lot of the details of the relationship. But we do expect to start seeing some activity already in the month of March and then ramping up over the rest of the year.

Yes. And what I would say there, David, is just like when we put out a new product, we want to make sure we have the surgical capacity available to be able to support it. And the expectation is you should see the capacity ramp in Q2 and Q3 in preparation for Q4, which tends to be the biggest quarter.

Okay. That's helpful. And then, Anshul, maybe sticking with you. So gross margin guidance, 78%. Looking back, you've seen expansion to varying degrees over the last couple of years. I understand there's this product mix dynamic that you might be considering, but would love to just understand kind of the drivers of the 160 basis points of compression, mix, pricing, ramping product launches, et cetera.

Yes. No, happy to take that. On the gross margin side, again, look, really proud of how we've been able to address our gross margin. Obviously, we started the year in 2025 at 77% to 78%. We did much better than that, about 200 basis points higher. And as we get bigger, as the business scales, we're actually more focused on top line acceleration and operating profit dollars growth. So for 2026, as we look at our guidance of 78% gross margin, we exited the year at about 79%. So it's 100 basis points of gross margin impact. I'd put most of that is noncash impact from depreciation. A lot of that's associated with the increase in surgical capacity. So for example, as we're building out this Smith+Nephew distributorship, we're going to be putting out TNT trays that support the volume of demand we see there. Granite continues to perform really well. We're going to be putting capacity out there for that. Potentially the new product that we want to commercialize towards the tail end of 2026, there's going to be surgical capacity for that as well. ASP does have some pressure on gross margins, but we're offsetting them by some of the operational initiatives that we've been working on over the last 12 to 18 months to bring our own cost down. So I'd say, by and large, a lot of the impact is noncash. And look, like we've seen over the last couple of years, the investment in surgical capacity and the new products, that does drive meaningful acceleration in our revenue growth. And while it is driving some de minimis pressure on the gross margin side, it's allowed us to get significant leverage and profitable dollar expansion over the subsequent period. And so we feel really good about the setup and the balance we're striking.

And our next question comes from the line of Richard Newitter from Truist Securities.

This is Ravi here for Rich. Congratulations on the promotions, everybody. I guess 2 on our end. First, on guidance. You're talking about kind of high teens U.S. volume growth procedure weighted. And that would represent a little bit of a step down versus what you did in 2025. And I'd like to just kind of understand the rationale behind that outlook given that you have a little bit more of a focused sales force coming in that's growing. You have this partnership with Smith+Nephew that should help kind of lever each product set in the respective areas of the hospital. And you have a number of new product launches. So just why was kind of high teens the right point that -- and then I have a follow-up.

Yes. So Ravi, happy to take that. The first part of why it's high teens, it's -- you have to think about it from a comp perspective. Some of the impact from new products is going to happen as we progress through the year. So if you look at 2025, Q1, Q2 continued to benefit from new product launches that had happened in late 2024. If you look at it on a stack basis, actually, you do see a much higher increase in procedure volume growth versus 2024. So I'd say part of that is just the comps being the way they are. That's number one. Number two is, look, whenever you're putting out new products or expanding the impact of reimbursement coverage or commercial footprint expansion, we want to see how those play out before we start incorporating them in our guidance. So as you look at the rest of the year, you will see that impact happen more pronounced, but we think it's prudent early in the year to be thoughtful.

Great. And then I guess on the -- another question on the Smith+Nephew partnership. Can you help us understand what the incremental or the kind of marginal profit looks like for each dollar of sale transferred over to Smith+Nephew?

Yes. We're not going to break down what the relationship details are from that perspective. For us, what's important with the Smith+Nephew relationship is, number one, getting our product in Level 1, Level 2 trauma sites at a national level. Number two, being able to satisfy the demand that we're seeing from the trauma physicians. Number three, which is a natural offset of building this distribution partnership is allowing our reps to be freed up to continue to go, build relationships, engage surgeons and interventionalists to drive that side of the business growth. So it's a multifaceted impact versus just one-off with what the impact Smith+Nephew will have on the P&L.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Laura for any further remarks.

I just want to say thanks to everybody for participating in our call and appreciate your interest in SI-BONE. And we look forward to seeing all of you at upcoming conferences. Thanks again. Goodbye.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Good afternoon, and welcome to SI-BONE's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded for replay purposes.

I'll now turn the call over to Saqib Iqbal, Vice President, FP&A, Investor Relations at SI-BONE for a few introductory comments. Please go ahead.

Earlier today, SI-BONE released financial results for the quarter ended September 30, 2025. A copy of the press release is available on the company's website.

Before we begin, I'd like to remind you that, management's remarks today may 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.

These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings, such as our most recent Form 10-K, and actual results may differ materially from any forward-looking statements that we make today. Accordingly, you should not place undue reliance on these statements. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements, except as required by law.

During the call, management may also discuss certain non-GAAP measures, including the company's adjusted EBITDA results. Unless otherwise noted, any reference to profitability is in terms of positive adjusted EBITDA. For a reconciliation of these non-GAAP measures to GAAP accounting, please see the company's full earnings release issued earlier today. Unless otherwise noted, all results are compared to the comparable period in the prior year.

With that, I'll turn the call over to Laura.

Thanks, Saqib. Good afternoon, and thank you for joining us. In the third quarter, we continued to advance our vision to provide better outcomes for patients with compromised bone. Our strong performance in the quarter reflects the continuation of healthy demand trends and our disciplined execution over the last several quarters.

We delivered another quarter of robust revenue growth, achieved sustained adjusted EBITDA profitability and reached a major milestone in delivering positive operating cash flow. Additionally, we successfully commercialized iFuse-TORQ in Europe and made significant progress on the 2 new products expected to launch in 2026.

Our worldwide revenue reached $48.7 million in the third quarter, representing approximately 21% growth. In the U.S., our revenue grew over 21% to $46.4 million, driven by growing adoption of our solutions. We also experienced a notable increase in international revenue growth in the back half of the quarter, fueled by the launch of iFuse-TORQ. This consistency of more than 20% annual top line growth speaks to the strength and balance across our portfolio.

Our flagship solutions continue to perform well in a large under penetrated market, while our newer products are gaining meaningful traction and accelerating our overall growth trajectory. This is evident in the double-digit volume growth across all modalities and the record number of physicians we added in the quarter.

The progress we made on profitability and cash flow is equally exciting. We delivered positive adjusted EBITDA of $2.3 million for the quarter, which translated to an adjusted EBITDA margin of approximately 5%. We also achieved our second consecutive quarter of net cash flow breakeven and importantly, our first quarter of meaningful positive cash flow from operating activities.

Achieving these milestones at a stage in our growth when many companies are still consuming cash to reach scale underscores the real strength of our differentiated platform, hybrid commercial model and operating discipline.

Now, I'd like to highlight the progress we made on our 4 key priorities: innovation, physician engagement, commercial execution and operational excellence. I'll begin with innovation. Our platform was built to address complex challenges in sacropelvic anatomy, an area where bone density is often poor and mechanical stability is critical. We're focused on improving surgical outcomes for patients with compromised bone across multiple modalities.

Over the last 4 years, we've harnessed our biomechanical and clinical expertise to create an industry-leading platform. We pioneered the sacroiliac joint fusion category and continue to extend our leadership position with both surgeons and interventional spine physicians. Led by iFuse-TORQ, our growing surgeon procedure volume represents the majority of our SI joint dysfunction business. In parallel, adoption with the interventional call point continues to grow.

In the third quarter, our interventional case volume doubled compared to Q3 2024 as physicians recognize the value of our clinically validated solutions and comprehensive commercial expertise. TORQ and INTRA have positioned SI-BONE as the preferred partner for interventional spine physicians.

Over the last year, we believe INTRA has become recognized as the leading percutaneous implant system for SI joint procedures when performed in office-based labs.

For 2026, CMS has finalized a 17% increase in reimbursement for office-based SI joint procedures. The growing physician interest and the improved reimbursement environment are strong tailwinds for our interventional business.

Building on the learnings from TORQ and INTRA, we recently filed the 510(k) application for our next-generation technology. This solution optimizes the physician workflow across all sites of service, but with a focus on ambulatory surgery centers. Assuming normalized FDA operations, we anticipate launching this product in the first quarter of 2026.

We believe this technology will drive market penetration and extend our leadership within this fast-growing site of service. We leveraged our expertise in treating SI joint dysfunction to redefine the standard of care for spinal pelvic fixation with the launch of iFuse Bedrock Granite.

Granite has been highly successful in the adult deformity market and remains a key contributor to our revenue and physician growth. Additionally, the number of procedures using more than 2 Granite implants per case grew approximately 40% in the quarter, which resulted in the stronger-than-anticipated procedure average selling price.

In October, we received FDA 510(k) clearance for instruments that enhance procedural flexibility for surgeons and allow the use of Granite and TORQ within robotic workflows. Early feedback from the field has been encouraging, and we're well positioned to drive adoption and expand our foothold in this segment.

The majority of our Granite volume has come from adult deformity procedures. With the introduction of Granite 9.5, we're steadily expanding into the degenerative spine procedure market, which represents nearly 100,000 annual procedures that at the sacrum. Physician interest continues to grow, and we're investing in additional surgical capacity to meet rising demand.

Proposed reimbursement changes may further benefit Granite in 2026. Based on the CMS proposal, we expect the transitional pass-through or TPT, payment for Granite, including a $0 device offset to be extended for calendar year 2026.

The TPT enables facilities to use Granite in the outpatient setting and be reimbursed for the full cost of the implants for Medicare patients. Additionally, the proposed Level 7 APC payment of nearly $28,000 would compensate hospitals for complex multilevel spine fusion procedures performed on an outpatient basis. This change should benefit our business as less complex degenerative procedures, where Granite would be used migrate to lower-cost outpatient facilities.

In 2024, we continue to advance innovation with the development of iFuse-TORQ TNT. We believe this breakthrough technology will transform the treatment paradigm for patients with sacral insufficiency fractures, a nearly $300 million market opportunity.

Since launch, TNT has contributed to the threefold increase in the number of trauma surgeons using our solutions. Given the strong clinical reception, multiple large national distributor networks have expressed interest in partnering with us and expanding access to this technology.

On the reimbursement front, a new technology add-on payment, or NTAP, took effect on October 1. This NTAP of more than $4,100 represents up to a 30% increase in hospital reimbursement for pelvic fracture fixation in Medicare patients. The large untapped market, improved reimbursement and growing distributor network positions TNT to be a significant contributor to our growth for the next several years.

Finally, we made meaningful headway on our third breakthrough device, which incorporates much of our engineering and biomechanical learnings from our broader portfolio. We expect to finalize the design in the coming months, followed by comprehensive testing and validation in the first half of 2026.

We remain on track to submit our 510(k) application for FDA approval in the second half of 2026 with the potential to commercialize as early as the end of 2026. We believe this revolutionary solution can become a standard of care for addressing one of the most pressing needs in spine surgery.

We have an extensive pipeline of novel technologies under development, and we expect to launch several solutions over the next 5 years to address poor bone quality. We're enthusiastic about the impact of the expanding platform on the long-term growth trajectory of the company.

Next, let's move on to physician engagement. In the third quarter, approximately 1,530 physicians performed procedures using our solutions, representing a 27% year-over-year increase. This growth was driven by double-digit expansion across all call points. We added 330 physicians in the quarter, which marks the largest quarterly increase in the company's history. We expect this growth to continue based on the interest in our expanding platform across the diverse group of practicing physicians.

Additionally, our academic training program is cultivating the next generation of advocates. We also saw a 25% increase in the number of physicians performing more than one procedure type. Of the physicians who completed an SI joint fusion procedure in the quarter, only 25% of them performed at least one other procedure type. We have a huge opportunity to continue driving procedure density with our sizable SI joint fusion physician base as we expand the application of Granite and degenerative spine procedures.

Furthermore, we continue to see physicians who stay with us longer perform more procedures. Physicians who are active in both the third quarter of 2025 and the prior year performed more than twice as many cases per physician compared to those who are active only in the current quarter. These dynamics demonstrate that our expanding procedure platform is not only attracting new physicians, but also deepening engagement among our existing physicians.

Looking ahead, with the significant degenerative spine opportunity for Granite, the launch of our new SI joint dysfunction solution early next year and the anticipated introduction of our third breakthrough device in late 2026, we expect physician density to become an increasingly important growth driver.

Now, let's turn to commercial execution. Our trailing 12-month average revenue per territory was $2.1 million, up 16%. This marks our 12th consecutive quarter of double-digit growth in territory productivity. We ended the quarter with 88 quota-carrying territory managers, up from 85 in the last quarter. As we expand our platform and deepen penetration within existing accounts, we plan to increase the number of territories over the next year. The growth in the number of territories and the expansion of the hybrid network will ensure we capitalize on the sizable market opportunity ahead of us.

Before I hand it over to Anshul, I'd like to congratulate all my SI-BONE colleagues on recently completing 135,000 procedures. Thank you for your relentless pursuit of best-in-class technologies that address unmet clinical needs, which have helped improve the lives of these patients. With a vast untapped market opportunity and a pipeline of innovative solutions under development, we're going to be able to help hundreds of thousands more in the years to come.

With that, I'll let Anshul provide an update on our fourth key priority, operational excellence and share our third quarter results and updated guidance in more detail.

Thanks, Laura. Good afternoon, everyone. My comments today will highlight the impact of our continued operational excellence on third quarter revenue growth, profitability and liquidity. I will then walk through our full year guidance. All the comparisons provided will be against the prior year period, unless noted otherwise.

Starting with revenue growth. Our worldwide revenue was $48.7 million in the third quarter, representing growth of 20.6%. U.S. revenue was $46.4 million, representing 21.2% growth, driven by procedure volume growth of over 22%. We continue to benefit from broad-based demand with volume across all modalities growing at double-digit rates.

International revenue in the quarter was $2.3 million, representing 10.2% growth. Based on physician enthusiasm and adoption trends observed in the initial months, we expect talk to accelerate international growth in 2026.

We are actively pursuing regulatory clearance to commercialize additional products across several international markets, which will have a meaningful impact on international growth in 2027 and beyond.

Moving to profitability. Our gross profit was $38.8 million, an increase of $6.9 million or 21.8%. Gross margin was 79.8%, expanding by 75 basis points year-over-year. We were able to absorb the higher instrument depreciation and freight costs associated with increased revenue by maintaining our disciplined pricing strategy and ongoing supply chain optimization initiatives, resulting in overall margin expansion.

Our operating expenses were $44.2 million, an increase of $4.7 million or 11.9%. The increase reflects our growth-related investments and higher commissions from increased revenue as well as elevated G&A spending. We're pleased with the 1.7x operating leverage in the quarter, which underscores the strength, efficiency and scalability of our business model.

Our net loss narrowed to $4.6 million or $0.11 per diluted share compared to a net loss of $6.6 million or $0.16 per diluted share.

We delivered positive adjusted EBITDA of $2.3 million for the quarter, which translates to an adjusted EBITDA margin of approximately 5%. For the trailing 12 months ended September, we delivered positive adjusted EBITDA of $5.7 million, a dramatic improvement from an adjusted EBITDA loss of $11.7 million in the comparable prior year period.

Our improvement in profitability over the last 12 months validates our strategy that we can deliver industry-leading growth, invest in innovation and do so while expanding profitability. This momentum gives us confidence as we look ahead to sustaining profitable growth.

Turning to liquidity. In the third quarter, we were breakeven on a net cash flow basis and ended the quarter with $145.7 million in cash and marketable securities. This was our second consecutive quarter of net cash flow breakeven. We are proud to have achieved another major cash flow milestone in the third quarter, generating $2.3 million cash from operating activities.

The earlier-than-expected inflection in cash flow from operating activities reinforces our confidence in achieving positive free cash flow in 2026. Year-to-date, our net cash consumption was $4.3 million compared to a net cash consumption of $15.2 million for the comparable prior year period. This represents a 72% reduction in cash consumption. This substantial improvement is an outcome of our increasing scale and asset-light business model. We continue to invest in building surgical capacity, while remaining focused on working capital efficiency.

Our improving profitability, combined with the inflection on cash flow, positions us to self-fund our innovation, advance our deep pipeline of novel technologies that address additional unmet needs and consistently deliver robust growth.

Now, let me provide an update on our outlook for 2025. We're updating our full year revenue guidance to range between $198 million to $200 million. This implies year-over-year growth of approximately 18% to 20% as compared to the previous guidance of approximately 17% to 18%. Given the durability of our gross margin, we are now expecting the full year gross margin to be at 79.5%. We're maintaining our annual operating expense growth guidance at 10% at the midpoint of the revenue range.

With that, I will turn the call over to Laura.

Thanks, Anshul. We're encouraged by the momentum we see and remain focused on outperformance as we exit 2025. Going into 2026, we're confident in our ability to sustain strong top line growth, expand margins and inflect on free cash flow. This confidence is driven by the substantial adoption runway for our current portfolio, our promising pipeline of new products and continued disciplined execution.

After pioneering the SI joint space, we expanded our addressable market by adding new applications of our technology and expertise developing solutions for compromised bone. Today, we've built a durable innovation engine capable of funding and developing a broadening array of solutions that help more patients and deliver long-term value for shareholders.

With that, we're happy to answer your questions. Operator?

[Operator Instructions] And our first question comes from the line of Patrick Wood from Morgan Stanley.

I'd love to start on the physician density side of things just because you mentioned it. And I guess, there's kind of 2 components to that. I guess, one, as we go into next year and the bag gets larger, let's say, do you think there's going to be a halo effect between the different product categories and that side of things, the demand across the groups? And then two, like how should we think about operating leverage? You've always been super disciplined with the reps and expansion on that side. How do we think about leverage down the P&L and then the kind of halo effect between a broader offering for SI-BONE in totality?

Thanks, Patrick. Good question. Physician density is actually a very important focus point for us. And just given how much our platform has expanded, that's really a very large opportunity for us. So, we've obviously broadened out our platform from just SI joint fusion to pelvic fixation and now pelvic ring fractures as well.

And as we said, I think only around 25% of our SI joint surgeons are currently performing another procedure type. So, there's a lot of opportunity for us to grow just by increasing the use of our technology cross platform. In addition, we have a product road map, and we've talked about a couple of different products that we're going to launch in 2026. And one of those, in particular, will be provide another opportunity to further deepen that relationship with our surgeons.

We also talked a little bit about, if surgeons are regularly performing our procedures, for example, those surgeons that performed a procedure in this last quarter versus a year ago that they're doing around double the number of procedures. So, all of those things really do point to this opportunity to significantly increase physician density in the coming years. We're also obviously growing the number of physicians that we're working with in a significant way, 27% growth in the quarter. It was a record 330 additional physicians were added during the quarter.

So, we have around 12,000 opportunity with the number of surgeons that we can potentially target for our various procedure types. And so, we're really just a short way into this whole journey. Now the last question you asked was more on the leverage side. And certainly, by growing density, we have the opportunity for further leverage, and I'll have Anshul talk a little bit more about that.

Yes. Thanks, Laura. Patrick, nice to connect. In terms of operating leverage in our business, if you look at the midpoint of our guide for the revenue and OpEx growth for the year, you're sort of tracking to about 1.9x operating leverage at that midpoint. So really pleased with the strong operating leverage in recent years, which is an outcome of our strong revenue growth, predominantly the 20-plus percent growth that we've been able to demonstrate over the last several years and just the operational excellence and discipline that's come into the business as well.

Now, when you think about operating leverage going forward, our priority does remain to deliver that strong top line growth. at or above the levels we've delivered in the last several years. And as we've shared previously, we do anticipate operating leverage to sort of range between, let's say, 1.25x and 1.75x. So, revenue growth outpacing OpEx growth in that range. There will be some natural variations depending on the phase of investments we are in, where we are in our product launch cycle. But we feel pretty good about sort of that leverage. And even if you assume an average leverage of 1.5x, that should be able to drive pretty significant margin expansion over time.

Our next question comes from the line of Caitlin Roberts of Canaccord.

Congrats on a great quarter. I guess just to start off on guidance, you raised the midpoint of guidance a little bit more than the beat this quarter. Can you just talk through the philosophy for the update here and if there are any early signs of momentum in the Q4?

Yes. I'm happy to at least give it a start. I'll talk about the quarter, and then I'll have Anshul talk a little bit more about the guidance philosophy. We're obviously very pleased with how we performed in the quarter, 21% revenue growth overall, seeing a nice reacceleration of our international growth with the launch of TORQ as well. So, both of those things bode well.

I think just to highlight, if you think about how we've grown since our IPO in 2018, we have consistently delivered over 20% annual revenue growth. And it's really an outcome of us building this comprehensive platform, starting with the SI joint fusion market, but then just leveraging our technological expertise to expand into these high-growth adjacent markets as well.

In terms of the growth in the quarter, I did mention it was broad-based. We're seeing the top line momentum dropping to the bottom line with our adjusted EBITDA and net cash flow breakeven. And it really does highlight the differentiated high-margin asset-light business model that we have here. So, when we started to think about our guidance for the remainder of the year and then thinking about 2026, we always take a thoughtful approach, but it's based on the knowledge of the continued growth that we have consistently seen since we've been a public company. And I'll have Anshul talk a little bit more about the details of the guidance.

Yes. Thanks, Caitlin, for the question. When it comes to our guidance, let me just highlight a few key points. First, as you know, we maintain a very thoughtful approach to guidance. Just to provide some perspective, we started the year with a guidance of $193.5 million to $195.5 million, and our current updated guidance is $198 million to $200 million. So, what you've seen is continued outperformance, including the nearly or over 4 percentage point outperformance in the third quarter as well.

Second, again, aligned with our philosophy, our updated top end of the guidance incorporates only the $2 million outperformance in the third quarter, which is generally how we've done whatever we've outperformed by, we put it up in our guidance as well. So, I think being continued and thoughtful there is important for us.

Now on the question on what we're seeing coming into the fourth quarter, what I'd like to highlight is that 27% growth in active physician base, right? So that significant physician momentum coming into the third quarter is persisting. We already have October in the bag, and it was a really strong October and the momentum trends in November are also looking very strong. So, net-net, we do expect 4Q to be another strong quarter. But I just want to remind you that, it's versus a tougher comp with a very comparable portfolio. So even with that, we're feeling really great about the setup in Q4.

That's great. And maybe just another quick one. You generated cash again in Q3. Any updates to the cash burn expectations for the rest of the year? I know you talked about a little bit of a cash burn expectation for the second half last quarter, but any updates to that?

Yes. So again, Caitlin, really pleased with how the strong growth, the inflection on profitability, the discipline on working capital efficiencies translated into our second consecutive quarter of net cash flow breakeven and more importantly, our first quarter of positive cash flow from operating activities.

Now as we get into the fourth quarter, like we had said in our prior earnings call, we do expect to use a little bit of cash in the fourth quarter. A lot of that is just based on building up surgical capacity, and also building up some capacity for the new product that Laura has talked about that we expect to launch in Q1 of next year. So again, feeling good about where the business is headed from a cash flow standpoint and getting increasingly confident of being able to get to free cash flow at some point in 2026 as well and then self-fund our growth and investment in innovation going forward.

Our next question comes from the line of Matthew O'Brien of Piper Sandler.

So, Laura, you mentioned all these different areas where we're seeing a lot of momentum. I mean, the physician number in the quarter was unbelievable. The reimbursement updates, et cetera. When I look at the Street, I don't want guidance here for '26 right now, but I look at the Street, we're modeling more like mid-teens growth next year. I guess why wouldn't it be upper teens growth, if not better for next year? Is there something specifically that you would call out with all this momentum you're seeing in expanding sales force, et cetera? And then I do have a follow-up.

I think it's a really good question. We did really have a very strong quarter in a lot of different ways and some of those forward-looking metrics give us a lot of confidence on where we're headed as well in Q4 and beyond. But the way that we're thinking about things from a 2026 perspective is we feel pretty comfortable with where the current consensus is at. You talked about some of the things that are going to benefit us next year. This combination of favorable reimbursement changes in 2026, we're reaccelerating our international growth from TORQ and those are tailwinds.

Then there's also what I would say is actually incremental upside that will be based on the timing and the ramp of new products as well. So, like I said, feeling comfortable with where we're at from a current consensus perspective, believe that we have upside based upon the launch of new products as well. But as we always are being very thoughtful about how we're setting expectations.

Okay. Appreciate that. And then, Anshul, the gross margin topic came up a lot coming out of Q2. It was really strong in Q3 versus expectations. How durable are gross margins? And then I think we had expected them to be down pretty meaningfully in '26. Is that not the case anymore? Will these new products weigh on those -- on that metric? And how do we think about gross margins going forward?

Yes, Matt. So, coming into this year, our gross margin expectations were between 77% and 78% and at close to 79.5%, we've not only exceeded our gross margin guidance, but also improved our margins year-over-year from disciplined execution and benefit from several operational initiatives. So, we're starting to feel a little bit more confident about the durability of those gross margins. But look, they're going to be a little bit dynamic over the next few years just given the active pipeline of products.

So, I'd say over the medium term, we now expect gross margins to sort of stabilize around that 78%, 78.5% area, which is much better than what we had previously expected. And part of that is the durability that we're seeing in our gross margins. Most of that gross margin change in the future years will be driven by the increase in noncash items like depreciation from expansion of surgical capacity. What would offset that, though, is the potential for any future implant tray implant cost reduction initiatives, which is not incorporated in sort of that 78% expectation going forward.

And then the last thing I would leave you with is, as we scale, and expand our GAAP and non-GAAP operating profit will become more important for us. So, you'll continue to see us invest in surgical capacity and new products because we know they can meaningfully accelerate our revenue growth. And we expect any pressure on the gross margins to be offset by the significant operating leverage we see in the rest of the P&L.

Our next question comes from the line of Travis Steed of Bank of America.

This is Gracia on for Travis. Congrats on a great quarter. My first question, I just wanted to ask about, if there was any more directional color that you maybe wanted to give on increasing territories for the next year?

Yes, I'm happy to answer that question. In terms of our territory productivity, as you can see, we have been dramatically increasing territory productivity over the last 3 years. And what we've done is we've developed this hybrid model that includes our territory managers, senior quota-carrying territory managers. And then we added junior reps, our territory representatives to support those territory managers. And then in addition, we actually have added a significant number of third-party agents that carry our product, too. And so, what's happened is if you look at the territory productivity over these last few years, we've more than doubled that territory productivity and now at around $2.1 million in productivity at this point.

In terms of how we are thinking about the future, what we want to do is make sure that we are walking a line in order to continue to, first and foremost, drive continued growth and penetration into the market while also using this hybrid approach. So, we're not giving out specific numbers at this point in time, but what we are doing is being thoughtful as we add territory managers. And we always kind of thought of that the range that we're in currently being able to continue to add to that number. I think we're at 88 as of the end of the third quarter, add judiciously to those numbers in the next year in order to drive the growth of the business.

Yes. The only thing I would add there, Gracia, is what we've shared publicly is we want to get to 100 territories over the next 12 to 18 months. So that still remains a target for us. And then concurrently, we expect to grow our hybrid model as well as we add more agents to our network as well.

And a lot of the expansion of that commercial footprint is in anticipation of the demand that we're seeing for the existing platform, but also preparing for the new product launches in the next year, one of which will allow us to increase adoption within the SI joint dysfunction space. And the other one, as Laura talked about, our third breakthrough device, which is targeting a whole new TAM with the existing call points.

And then just to follow up a little bit on the last question. You obviously had a great performance and saw -- didn't see the typical seasonality that you would normally see in Q3. And I think a couple of your other people in the spine space have agreed with that. Just wanted to see if there's anything to call out in the market or if you're really sort of offsetting what you would typically see in procedures with that strength and uptake in products.

Yes. I would say, Gracia, a lot of that is specific to SI-BONE. The typical seasonality is there in the summer with patients and physicians taking vacations. But what we have been focused on is how do we execute through that. Part of that has been making sure that we're putting out surgical capacity, making sure we're engaging physicians across multiple modalities, driving sort of that adoption curve across all our call points.

And what you've seen is a combination of the continued demand in the SI joint dysfunction space, where we've seen double-digit volume growth, double-digit physician growth in the quarter. Once again, the continued benefit from Granite 9.5 that is driving adoption within Granite for both deformity and degenerative spine incrementally. And then finally, our TNT product, which drove almost a threefold increase in physicians that were doing procedures in the quarter on the trauma side. So, a lot of that is just the execution by our commercial team and just the focus on making sure we have the capacity to drive adoption.

Our next question comes from the line of Young Li of Jefferies.

So, I mean you added a lot of surgeons this quarter at 330. I think that's around 300 on a quarterly basis for the year. In the past 2 years, you were adding about maybe in the low 200s range. I wanted to hear a little bit more about what are the biggest drivers for those adds and the type of surgeons that you've been getting, whether it's private practice, academic guys or new surgeons versus people that have recently graduated from fellowships or priorly trained ones coming back.

Thanks for the question, Young. It's really all of the above. So, what we've seen is pretty broad-based growth, and that's how we're hitting the numbers that we are. So, we're now at 100 -- excuse me, 1,530 active physicians just in the quarter alone, and that was 27% growth. You're right, it was 330 surgeons that we added year-over-year, and that is the largest increase we've ever had.

I think part of it is just we have expanded the number of physicians that we are targeting currently. So, we started out with spine surgeons around 7,500 spine surgeons that we have been targeting. And there's a couple of ways that we're reaching those spine surgeons. One is with continuing to expand the number of surgeons doing SI joint fusion procedures, first of all.

And then secondly, those that are interested in doing these adjacent procedures. In most cases, they are doing pelvic fixation with our Granite product if they're using a second modality, but some are also using our solutions for pelvic ring fractures, too. So, we continue to further penetrate the surgeon base in those ways.

In addition, the expansion into interventional, we did talk a little bit about that in our prepared remarks and the number of procedures done by those interventionalists doubled year-over-year. So, it actually added to the total addressable market that we were going after. We think that there are around 4,500 interventionalists that are potential targets to perform SI joint fusion procedures. And so, if you add it all up, there's around 12,000 physicians.

And to be honest, I'm not even including the general ortho trauma surgeons that are also starting to do our TNT procedure as well. So, we have a pretty significant number of targets that are out there. We have a lot more that we can penetrate. So, it really provides this very nice upside for us. What we're trying to do at the same time, though, is to make sure that we're focusing our sales team and our direct sales force is very heavily focused on SI joint fusion, while we do get assistance from third-party agents with pelvic fixation and more and more with pelvic brain fractures, too. So, it's this balance that we're striking in order to go after a very large number of targets while also doing that in an efficient way.

All right. Great. Very helpful. I guess another question is just on your comment on the new product pipeline over the next 5 years. I was kind of curious, if you can share a little bit about how much that can expand your market TAM from the almost 0.5 million annual procedures currently?

Yes. It's a good question. And right now, what we're doing is we're talking more broadly about it. We're certainly getting into more details in terms of 2026 specifically. And the first product that we're talking about launching in Q1 is an SI joint fusion product, and it's targeted towards physicians that are performing procedures in ambulatory surgical centers.

So, it's continuing to help us to penetrate that large opportunity with SI joint fusion, which is a big part of that $0.5 million TAM that you just mentioned. The second product that we're going to launch in 2026, however, it really does have a significant impact on growing the TAM even further. And I won't get into details, but what we're really trying to do is address one of the most pressing needs in spine surgery using our core competencies from an innovation perspective to create that innovative solution to address this unmet clinical need.

So that's how we're thinking about 2026. And then as we think about the broader pipeline, it's really more around this concept that we've been talking about of compromised bone. When we started SI-BONE, we started an SI joint fusion. Why is that relevant to compromise bone? Because the bone in the sacrum is -- tends to be some of the poorest quality bone in the body. So, we've been developing solutions since the inception of the company around poor bone quality. And so, what we're going to do is continue to apply those in ways that focuses on our current call points to address this unmet clinical need. So more to come on that in 2026, but hopefully, that gives you a flavor.

Our next question comes from the line of Ross Osborn of Cantor Fitzgerald.

Congrats on the quarter. And apologies if I missed this, but how did ASP trend during the quarter?

Yes, happy to take that, Ross. On the ASP side, Ross, as you can see, our U.S. volume growth was around 22%. So -- and the revenue growth was a little north of 21%. So modest ASP impact in the quarter. Most of that was driven by procedure mix. Our overall implant ASP remains quite stable. So, as we've always said, we start the year and as we progress through the year, we make conservative assumptions on ASPs just because of how the portfolio is evolving. several of our procedures use 3 or more implants, but in trauma and in degen, you will generally use anywhere between 1 and 2 implants, so that can impact ASP.

But overall, very pleased with how the ASP is trending. We're seeing good traction in Granite, especially with multiple implant cases, so more than 2 implants per procedure, and that brings the overall ASP higher as well.

Okay. Great. And then for a second question, would you remind us the breadth of your TORQ European launch to date? And then touch on how you're thinking about next year. Is the game plan to drive deeper penetration within existing geographies or beginning adding new regions?

Yes. So TORQ has really just started in the EU. As you're probably aware, the earlier months in the quarter, July and August in Europe tend to be quieter month. And so we really just started to see the momentum in September. And so what we would expect is to see that continue to build in Q4 as well as into 2026.

International is just a small percentage of our business, but we do see it as an important market. And if you think about how we built the business there, they had only been selling iFuse-3D -- well, iFuse since the inception of the company and then iFuse-3D has been on the market for 7 years. So, it was really important for us to put TORQ out there and become a meaningful accelerator for growth.

So, we are very optimistic given the early TORQ adoption that we've seen. And as I said, it was really more in the month of September where we truly started to see the impact. and do expect for it to be a meaningful contributor in 2026. And then we're also evaluating the potential for other products across various international markets. Now that we've gone through that whole EU MDR process in particular, and it is a cumbersome process. It does give us the ability to take some of our other products internationally as well. So, we're excited to do that and see the long-term potential of our OUS business to drive growth.

Our next question comes from the line of David Saxon of Needham & Company.

Congrats on another strong quarter here. So, I wanted to ask on the TNT NTAP. So would love to hear how you guys are thinking about that as it relates to TNT adoption. And then I believe that just became effective in October. So, any trends you'd call out after that effective date that kind of give you confidence in that ramp?

Yes. Thanks for the question, David. We're pretty excited about the NTAP in particular. So, it was effective as of October 1. It's around $4,100. That translates to up to 30% improvement in reimbursement. in the hospital setting for pelvic ring fractures for Medicare patients.

So, we do think that this is an important driver. And more importantly, TNT is considered one of the most exciting innovations in trauma in recent history. There -- it's just another example of our ability to develop a unique anatomy-specific solution that addresses an unmet clinical need. And so, I think the NTAP is important in terms of making sure that the health economics are appropriate there. But in addition, from an adoption perspective, with the ramp ahead of us, what's really important is to see the expansion -- the further expansion of our commercial footprint here.

And I mentioned with an earlier question, how we're thinking about continuing to grow our business while focus our sales team. And so what we are doing is we're fielding inbound interest right now from multiple large national distributors that want to partner with us and expand access to the technology. And these are distributors that have a footprint specifically in trauma. So, it's another way for us to leverage our hybrid model in order to capture the opportunity that's here while also being efficient and continuing to gain operating leverage in our business.

Okay. Great. And then maybe, Anshul, one for you, and I'm not sure if I'm really going to get an answer here. But just on longer-term profitability, your 5% EBITDA margin now, just you guys have talked about kind of your capital-light model. As it relates to longer-term profitability, like do you think SI-BONE can be more or less profitable than kind of a traditional spine company?

Yes. So, let's just start with our business model, David. First, we look for unmet clinical needs. Second, we come up with unique solutions that can carry high ASP. Third, because we don't focus on me-too products, we can leverage some of this hybrid commercial infrastructure Laura talked about and get P&L leverage.

And then our asset-light model where because of the high ASP, low footprint of our trays and implant sets allows us to get a lot of leverage on the working capital side as well. So these are really unique to SI-BONE and sort of differentiate us from what people see in traditional spine.

So, I want to give that backdrop. And then when you think about the future, our focus remains to deliver the revenue growth at or above the levels that we've demonstrated. We've got a huge TAM that's untapped. We've got new products on the horizon that will further expand the TAM as well. So, we think that revenue growth is what's going to drive leverage.

Now on a prior question, I did talk about sort of the operating leverage in the business ranging between 1.25x to 1.75x depending on where we are in the investment cycle. But even with that kind of leverage, you see margin expansion at a pretty healthy clip in the outer years. So we're not going to put an anchor on what that EBITDA margin or adjusted EBITDA margin should be. But we know that, with the business model that we have, that top line growth can translate into pretty good expansion there.

David, I think question that you're asking to. And if you just look at what we've been able to accomplish to date in terms of being at the revenue levels that we're at, being adjusted EBITDA profitable for the last few quarters, starting to see an inflection on cash, we just look very different from a lot of the orthopedic or spine companies that are out there with our asset-light model. So, I really do think it's worth highlighting that and reinforcing how important that is. And it's not just talk. You can see it in the results that we've shown in terms of bottom line and cash flow.

Our next question comes from the line of Richard Newitter of Truist Securities.

This is Ravi here for Rich. So, I guess I want to kind of follow on to that profit question. Laura, you said, you're kind of comfortable with where the Street is for next year. So, let's just say you were able to outperform that. Should we think about kind of like the high end of that $1.75 being the case? Or kind of given the comments on being able to self-fund R&D kind of from the cash flow of operations. I guess, the thing that we're all trying to get at is how quickly can EBITDA inflect for this company given the growth seems to be sustaining at a pretty nice trajectory here? And I have a follow-up.

Yes. Ravi, thanks. I can take this question. From a leverage standpoint going into next year, like Laura said, we're comfortable sort of where consensus is on the revenue side. Now we do have 2 big launches next year, and there's a lot of R&D work going on to be able to get those products commercialized, one in the first quarter and the second one commercialized as early as potentially end of 2026.

So, what I would say is you should expect leverage to be a little bit on the lower end of that range that I mentioned in the 1.25x to 1.75x, so maybe in the 1.3x range at the consensus revenue numbers right now for '26. Now that leverage does grow pretty systemically as these new products start to contribute meaningfully to revenue in '27, '28 and '29.

And I think that's very consistent, Ravi, with our focus on growing our way to profitability, right? We have a very significant growth opportunity here with these 2 products coming out in 2026, and we want to lean into them while still being cognizant of the bottom line and cash flow.

Great. And then maybe one on the interventionalist comments. I think you mentioned 4,500 docs doing SI joint cases. This is an area, at least from our checks, we've picked up some significant interest from interventional pain docs to do these cases. Just help us understand a little bit maybe the trade-offs between that call point and the others and kind of the customers that you go against to see, who's actually going to be doing these cases. I guess, what we're trying to figure out is how market expansionary could that be? Or are you kind of just moving the case from one doctor to the other?

And then I guess, the last question would be regarding the products coming out next year, it sounds like kind of given your trajectory, is there any sort of special coding or payment or reimbursement terms that we should be looking for as these things get closer to launch?

Yes. Great. There's a lot there. But let me start on the interventional side at least. So, we're definitely pleased with the level of engagement with interventionalists. The 4,500 physician number I gave was really the entire universe of targets. And so, what we initially did was we went after around 1,000 of those physicians who were already regularly performing surgical procedures. And so, we've been really pleased. What we're seeing is that, as time goes on, we're seeing deeper and deeper penetration into that 4,500. There's a lot of interest by interventional spine physicians to perform procedures and specifically SI joint procedures and more and more of them are becoming comfortable and being trained appropriately to do them.

So, it is a very significant expansion opportunity in our SI joint fusion business. And we believe that we have the products that can appeal to different physicians. And we also -- we really have the strongest commercial infrastructure here.

The other thing you asked about is whether it's just taking business away. The interventionalists that we have been working with have been in areas where there are not physicians already performing the procedure or specifically spine surgeons performing the procedure. So, it is additive to our surgeon-led business. And as I said, comprehensive portfolio and gives us a lot of confidence that this is going to be a growth driver.

You also asked about reimbursement and CMS proposed a 17% increase in the payment for SI joint fusion procedures performed in office. And our Intra product, we believe, is the leading percutaneous SI joint fusion procedure done in office-based labs. So that reimbursement effective January 1, we believe is a nice tailwind for us.

And then more broadly, you were asking about new products and reimbursement there. If I talk about new products, the product that we're going to launch toward the end of 2026 is a breakthrough device. And so we will be seeking a new technology add-on payment for that particular technology as well. So a lot of tailwinds that we have in the business with new products, with reimbursement, with a new call point that's additive here that really bode well for the business in 2026 and beyond.

I'm showing no further questions at this time. I'll now turn it over to Laura for closing comments.

I just want to thank everybody for participating in the call today, and also really appreciate your interest in SI-BONE. We look forward to seeing you all at upcoming conferences. Thank you. Goodbye.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.