SI-BONE, Inc. (SIBN) Earnings

Management highlights

- Innovation & Market Development • The company is leveraging its core expertise in low-density bone fixation to expand beyond the SI joint into high-value adjacent musculoskeletal indications, focused on patients with compromised/osteoporotic bone • New Q1 2026 product launches include IntraTI (expanded SI joint portfolio for interventionalists, optimized for ASC/OBL sites of care where procedures are increasingly migrating), TNT TORQ (pelvic trauma portfolio expansion in Europe), and TORQ (SI joint fusion launch in Australia, establishing a pelvic fixation beachhead) • The recently announced strategic partnership with Smith & Nephew expands access to the pelvic trauma market while allowing SI Bone's direct sales team to maintain focus on high-growth spine and interventional segments • The third breakthrough device is on schedule: verification and validation are nearly complete, with a 510(k) submission targeted for early Q3 2026 and commercial launch planned for Q4 2026. The device addresses a large unmet need in spine surgery, will expand total addressable market, and deepen engagement with existing spine surgeon customers • A recent 160-patient study reaffirmed Granite's clinical superiority, showing zero breakage or pullout and meaningful improvements in patient pain and disability scores at 12 months - Physician Engagement • Q1 2026 had over 1,650 active physicians, 17% year-over-year growth, marking 20 consecutive quarters of double-digit active physician growth across all clinical segments • The number of physicians performing multiple procedure types increased 10% year-over-year, with significant remaining expansion opportunity: only 25% of current SI joint fusion physicians use SI Bone's platform across additional indications • Long-tenured active physicians generate three times the case volume of new users, highlighting the value of deep, sustained engagement - Commercial Execution • Ended Q1 with 89 quota-carrying territory managers, with annual revenue per territory of $2.2 million, 11% year-over-year growth, marking 14 consecutive quarters of double-digit territory productivity growth • The hybrid sales model (quota-carrying territory managers + junior territory reps + over 300 third-party agents) remains a core competitive advantage, enabling expanded reach while driving operating leverage • The first phase of the Smith & Nephew field rollout completed in April 2026; full training and surgical capacity rollout is expected to be substantially complete by the end of Q2 2026, with revenue contribution expected to start in Q3 and accelerate in Q4 2026, aligned with historical seasonal trauma volume concentration in the back half of the year • The company remains on track to expand to ~100 quota-carrying territories over the next 12 months to support upcoming product launches - Operational Excellence & Financial Performance • Operating expenses grew only 4.1% year-over-year, well below revenue growth, delivering nearly 2.5x operating leverage; net loss narrowed to $4.3 million ($0.10 per diluted share) from $6.5 million ($0.15 per diluted share) in the prior year • Adjusted EBITDA was $2.5 million, a more than 440% improvement year-over-year, while the company continues to invest in innovation and commercial expansion • Ended the quarter with $144.7 million in cash and marketable securities; Q1 2026 free cash flow was negative $3.4 million, a 50.7% improvement year-over-year, with Q1 cash usage impacted by seasonal fourth quarter commission true-ups and annual bonus payouts • CMS has proposed new DRG families for complex/extensive spinal fusion procedures that include Granite, which could increase average hospital payments by up to $50,000 per Granite procedure effective October 1, 2026, removing cost barriers to adoption and supporting long-term access

Guidance

- Full year 2026 revenue guidance is increased to a range of $230 million to $233 million, implying 14% to 16% year-over-year growth. The bottom end of guidance was raised by $1.5 million, and the top end raised by $500,000, for a midpoint increase of $1 million from prior guidance - Full year 2026 gross margin guidance is raised to approximately 79%, an increase of 100 basis points from prior guidance, driven by favorable procedure mix and sustained operational efficiency initiatives - Full year 2026 operating expenses are expected to grow approximately 12.5% at the midpoint of revenue guidance, reflecting disciplined targeted investment to strengthen competitive position and support long-term growth - Management expects year-over-year quarterly revenue growth to accelerate as 2026 progresses, with the most meaningful acceleration expected in the second half of the year, driven by the impact of new product launches, the scaling of the Smith & Nephew partnership, and potential reimbursement tailwinds from the new CMS DRGs. Management notes there is visible upside to guidance from these initiatives that will be incorporated as they mature

Segment performance

Geographic segment performance: Worldwide total revenue for Q1 2026 was $52.6 million, representing 11.2% year-over-year growth. U.S. revenue was $49.3 million, 10% year-over-year growth, accounting for 93.7% of total worldwide revenue. International revenue was $3.3 million, 33.9% year-over-year growth, accounting for 6.3% of total worldwide revenue. Clinical product segment performance: Fixation and fusion for SI joint dysfunction remains the company's largest current revenue opportunity, with approximately 300,000 annual target procedures and nearly 150,000 cumulative procedures performed to date. Spinal pelvic fusion is the fastest growing segment, with approximately 130,000 target annual procedures, and management expects it to become the company's largest revenue contributor in the coming years. Pelvic trauma has approximately 60,000 annual target procedures, primarily for sacral insufficiency fractures, and is positioned to contribute to global growth. Overall gross profit was $41.9 million, an 11.3% year-over-year increase, with gross margin holding flat at 79.8% year-over-year.

Risks & headwinds

- Forward-looking statements (including guidance, new product launch timelines, and partnership ramp expectations) are subject to risks and uncertainties that could cause actual results to differ materially, as detailed in the company's recent SEC filings - Q1 2026 revenue was modestly negatively impacted by early-quarter weather-related disruptions, though most impacted procedures were only delayed and are expected to be rescheduled - Cash flow is expected to have higher than normal variability in Q2 and Q3 2026 due to timing of construction spending for the company's new headquarters and delayed tenant improvement allowance reimbursement - ASP is expected to face low single-digit degradation pressure from product mix (fewer implants per procedure in interventional and trauma indications), even as better-than-expected ASP from Granite has outperformed this assumption in Q1 - Commercial ramp of new initiatives (including the Smith & Nephew partnership, new product launches, and international expansion) is still in early stages, and actual contribution may differ from current expectations

Analyst Q&A

• Q: What was the magnitude of Q1 weather impact, why was guidance only increased modestly given multiple upside drivers, and when will the third breakthrough device launch and be presented? /

  A: Weather-related Q1 impact was approximately $0.5 million, most of which will be recaptured via rescheduled procedures, so the net quarterly impact was muted. Management took a disciplined approach to guidance early in the year, as upside from IntraTI adoption, Smith & Nephew partnership scaling, the new CMS DRG reimbursement, and the new breakthrough device launch is still preliminary, and upside will be added to guidance as initiatives mature. The 510(k) submission is targeted for Q3 2026 with launch planned for Q4 2026, and the product will be presented publicly as soon as clearance is received.

• Q: Could 2027 growth exceed 2026 growth, and what is the upper cap for sales rep productivity? /

  A: Multiple secular tailwinds position the company for accelerating growth exiting 2026 into 2026: IntraTI is early in adoption in fast-growing interventional/ASC settings, the new CMS DRGs will have a larger impact on Granite growth in 2027, the new breakthrough device will launch and contribute next year, the Smith & Nephew trauma partnership will mature, and TNT TORQ launched in Europe nine months ahead of schedule. Current annual revenue per territory of $2.2 million is not a cap: the largest territories already exceed twice that level, and the hybrid sales model will continue to drive productivity gains, with new territory expansion focused on supporting upcoming product launches.

• Q: What drives the spinal pelvic fusion opportunity to become the largest segment, what is the role of the new breakthrough device, and how does CapEx planning balance new capacity with free cash flow breakeven targets? /

  A: The opportunity comes both from continued Granite growth supported by the new October 2026 CMS DRGs, which removes cost barriers to adoption, and from the new breakthrough device, which targets a common spine procedure in the spinal pelvic space and can be used alongside Granite to increase ASP and surgeon density, with additional pipeline products planned for the segment. Run-rate annual CapEx for surgical capacity remains in the $9 million to $10 million range; higher utilization of existing capacity and lower instrument tray design costs offset new capacity requirements for the partnership and new launches. The only one-time additional CapEx is ~$4 million for the new headquarters, partially reimbursed via tenant allowances, and the company remains on track for free cash flow breakeven.

• Q: What is the quantitative 2026 revenue contribution from the Smith & Nephew partnership in guidance, and is there risk of slower ramp due to Smith & Nephew's other launch priorities? /

  A: The full 60,000-procedure U.S. pelvic trauma TAM is a $300 million annual opportunity, rollout will finish by end of Q2, with revenue contribution starting in the second half of 2026. No meaningful distraction risk exists: SI Bone works exclusively with Smith & Nephew's trauma division, which is prioritizing pelvic portfolio expansion this year, the product is synergistic with their existing portfolio, and the team has shown clear commitment to the ramp.

• Q: Why is gross margin outperforming, and what ASP assumptions are built into guidance? /

  A: Q1 gross margin of 79.8% beat expectations due to better-than-expected ASP from favorable procedure mix and incremental gains from ongoing supply chain and cost optimization initiatives, leading to the 100 basis point full-year guidance increase. Guidance still assumes low single-digit ASP degradation, driven by product mix (fewer implants per procedure in interventional and trauma), even though Granite has outperformed this assumption so far this year, and the impact of new instrument depreciation for the partnership and new product is already incorporated into the 79% full-year guidance.