SI-BONE, Inc. (SIBN) Earnings

Management highlights

- Innovation and Market Development • Innovation is the cornerstone of long-term growth, delivering 20%+ compound annual revenue growth over the past 5 years, focused on solutions for high-risk patients with compromised/osteoporotic bone • A 510(k) application was submitted in June 2026 for the company's third breakthrough device, its first platform for use outside the pelvis, targeting a known failure point in complex spine procedures; phased commercial launch is on track for Q4 2026 (as early as October) pending clearance • Two additional new solutions are on track to reach design freeze by the end of 2026, with commercialization targeted over the next 18 months; the company is also exploring new materials and AI-driven procedure enablement capabilities to expand beyond current titanium and allograft solutions - Reimbursement Updates • CMS has proposed reimbursement increases for SI joint fusion procedures: ~$2,300 increase for hospital outpatient departments (to over $20,000), ~$1,000 increase for ASCs (to nearly $16,000), and new OBL reimbursement of over $20,000 for CPT code 27279 • New finalized DRGs for complex spinal fusion procedures (including those using Granite) can increase average hospital payments by up to $50,000 per procedure, better reflecting the complexity of treating high-risk patients and supporting Granite adoption - Physician Engagement • 1,715 unique physicians performed at least one procedure in Q2 2026, a 19% YoY increase; this quarterly count exceeds the total full-year 2023 unique physician count • The number of physicians performing more than one type of procedure increased 15% YoY; repeat physicians average 3x the case volume of first-time physicians, creating a strong foundation for sustained growth - Commercial Execution • Ended Q2 with 93 quota-carrying territory managers supported by over 400 agents and junior representatives under a hybrid commercial model; trailing 12-month revenue per territory reached ~$2.2 million, reflecting ongoing productivity gains • On track to exit 2026 with nearly 100 territories, expanded capacity to support upcoming product launches; the Smith and Nephew commercial partnership for pelvic trauma is progressing steadily, with growing physician and field engagement driving steady adoption improvement - Operational & Financial Performance • Gross profit increased 14.8% YoY to $44.5 million, with gross margin holding strong at 79.5%, supported by stable ASPs, product cost optimization, and improved surgical capacity utilization • Operating expenses grew 7.7% YoY, a slower rate than revenue growth, delivering meaningful operating leverage; adjusted EBITDA improved 178% YoY to $2.8 million (5.1% margin), with trailing 12-month adjusted EBITDA quadrupling year-over-year to $12.8 million • Ended the quarter with $145.9 million in cash and equivalents, with another quarter of positive operating cash flow; the company maintains sufficient liquidity to fund all planned growth initiatives

Guidance

- 2026 worldwide revenue guidance: Raised the low end of the range, maintaining the high end, to $231 million to $233 million, representing 15% to 16% YoY growth (prior guidance was $230 million to $233 million, 14% to 16% YoY growth) - Full-year 2026 gross margin guidance is maintained at 79%, accounting for early-stage depreciation on new surgical capacity built for the upcoming third breakthrough device launch - Due to better-than-expected profitability in the first half of 2026, the company is intentionally increasing targeted R&D investment in the back half of the year to advance longer-term development programs, while remaining committed to annual operating leverage and profitability expansion goals - Management retains a measured approach to guidance, embedding conservative assumptions (a 1-2% sequential Q3 decline from typical summer seasonality, low single-digit ASP degradation, and gradual impact from new catalysts) that leave room for upside if new product launch and reimbursement changes outperform expectations

Segment performance

SIBONE reports three core product/geographic segments with the following Q2 2026 performance: 1) U.S. Domestic: Revenue of $53.2 million, 14.7% year-over-year growth, contributing 95% of total worldwide revenue. U.S. procedure volume grew nearly 15% YoY, with 9% sequential growth quarter-over-quarter. 2) International: Revenue of $2.8 million, 25.9% YoY growth, contributing 5% of total worldwide revenue, driven by demand for iFuse TORQ and TNT products. Total worldwide segment revenue aggregated to $56 million, representing 15.2% YoY growth overall.

Risks & headwinds

- Forward-looking statements (including product launch timelines, revenue and profitability projections, and reimbursement impact) are subject to risks and uncertainties that could cause actual results to differ materially, including regulatory clearance delays for the new third breakthrough device - Third quarter typical seasonal volatility from summer vacations and scheduling shifts may create quarter-to-quarter noise in results - Near-term margin pressure is expected from depreciation on new surgical capacity built for the upcoming product launch, before revenue contribution from the new product ramps up - Adoption of new products and the Smith and Nephew partnership depends on successful onboarding and training, which may take longer than expected to deliver meaningful revenue contribution

Analyst Q&A

• Q: The guidance revision only adds $500k to the 2026 midpoint, implying back-half U.S. growth deceleration relative to the first half. Is this due to slower clinician adoption, or another factor? What is the profitability profile of the upcoming third breakthrough device? /

  A: Management says they feel strong about the back-half business setup, with 19% YoY growth in active physicians and 9% sequential Q2 procedure growth, one of the strongest sequential gains in recent years. The small guidance adjustment is consistent with their conservative guidance philosophy, accounting for typical Q3 seasonality and waiting to see how new catalysts (new product launch, DRG reimbursement changes) play out, with upside possible if catalysts outperform. The third breakthrough device targets an existing spine surgeon call point where the company already has established relationships, fits existing physician workflow with no need for extensive training, and will leverage existing commercial infrastructure for an efficient ramp. Full-year 79% gross margin guidance is maintained to account for early depreciation on new capacity before revenue ramps, which is the only expected near-term margin impact.

• Q: What drove the strong Q2 procedure volume growth, and can you share details on the two new products expected to launch in the next 18 months, and your M&A priorities? /

  A: Q2 procedure growth was broad-based, with double-digit growth across all three core segments (SI joint fusion, pelvic fixation, pelvic trauma) and all three physician call points (spine surgeons, interventional spine, trauma surgeons). The recently finalized Granite DRG reimbursement increases (up to $50k per procedure) that take effect October 1 are a major upcoming catalyst. All new pipeline products align with the company's focus on compromised bone, target existing physician call points, and address unmet clinical needs to increase surgeon density and average selling price, including expansion into AI/software and new materials. M&A is not a current focus; all growth priority is on organic product development.

• Q: How is the company approaching hiring to reach 100 territory managers ahead of upcoming launches, and how is the Smith and Nephew partnership progressing? /

  A: Hiring is a current key focus after years of stable territory counts, as the company enters a new growth phase with multiple upcoming product launches. The company plans to reach nearly 100 quota-carrying territory managers by the end of 2026 via internal promotions of existing junior reps and external hiring, with additional hiring planned for 2027, hiring 6 months in advance of launches to allow for productivity ramp-up. The Smith and Nephew partnership is progressing well, with collaborative field engagement and ongoing training and inventory deployment, targeting a couple hundred incremental level 1 and 2 trauma centers, with a 6-month onboarding ramp expected ahead of meaningful volume growth in Q4 2026.

• Q: Why should investors expect utilization per physician to finally grow after years of flat utilization alongside active physician growth? /

  A: For years, the company prioritized expanding its active physician base, growing that base to 1,715 unique physicians in Q2 2026, which rivals the size of physician bases at larger market players. The upcoming wave of new product launches, starting with the third breakthrough device launching as early as October 2026, will add new procedures for the same existing large physician base, often in combination with existing products like Granite. This will directly drive higher utilization per physician and operating leverage, which management calls the most exciting long-term growth opportunity for the business.