Spectral AI, Inc. Q1 FY2026 earnings call

• FDA De Novo Application Progress

• The company submitted its de novo application for the DeepView system to the FDA in June 2025, has responded to all additional information requests, and maintains active dialogue with the agency. Management continues to expect an FDA response by the end of Q2 2026, with a goal of commercializing DeepView for burn indication by the end of 2026.

• Contract and Funding Milestones

• In March 2026, the company received $31.7 million in accelerated advanced funding from BARDA, which included a no-cost extension of the base contract phase and acceleration of the second phase. The funding supports additional feature development for DeepView and procurement of up to 30 devices for placement in burn centers, level 1 trauma centers, and emergency departments.
• A fully functional prototype of the handheld device, developed under a U.S. Department of Defense contract via the MTEC consortium, was delivered to EmTech one week prior to the call, meeting the prior guidance of delivery by end-Q2 2026. Management expects to be invited to bid on Phase 3 of the contract by the end of 2026, and plans to pursue 510(k) approval using the cart-based DeepView system as predicate.

• Commercial Preparation

• The company is actively preparing for commercial launch: it has added a new CFO, is nearing completion of a search for a chief commercial officer, and is working with Deloitte Consulting to finalize its commercialization strategy.
• The company is finalizing protocol for a 240-patient, 12-site outcome study designed to demonstrate DeepView's impact on surgical precision, speed of treatment decisions, and reduction in patient length of stay. The study is funded by the accelerated BARDA award.
• For international markets, the company plans to update its existing 2024 UKCA approval for burn assessment to align with the improved algorithm, hardware, and software of the FDA-submitted DeepView system. Initial international sales in the UK, Australia, or GCC countries are expected to begin in late 2026 following updated UKCA labeling.

• Stakeholder Engagement and Recognition

• The company showcased DeepView at the 2026 annual American Burn Association conference, where the device was featured in multiple presentations, and the company gained exposure to over 2,200 global burn care stakeholders. The company also received the 2026 Small Business Innovator Award at the inaugural Texas Innovation Conference.

• Leadership Update

• David McGuire joined as new CFO one week prior to the call, bringing over 20 years of accounting and finance experience to support the company's transition to commercial operations.

Spectral AI reports only one core business segment focused on the development of AI-powered medical imaging devices for burn assessment. For Q1 2026, total R&D revenue was $4.0 million, down from $6.7 million in the year-ago quarter. The year-over-year decline was expected, driven by completion of work under the base phase of the BARDA Project BioShield contract, partially offset by increased activity under other U.S. government contracts including the handheld device development program. Gross margin improved 360 basis points year-over-year to 50.8%, driven by a higher concentration of direct labor in overall revenue. General and administrative expenses decreased slightly to $4.0 million from $4.1 million in Q1 2025, reflecting ongoing cost discipline partially offset by higher public company infrastructure costs. Other expense was $1.5 million in Q1 2026, compared to other income of $3.9 million in the prior year period, driven by non-cash fair value adjustments to the company's warrant liability. Net loss for Q1 2026 was $3.4 million, or $0.11 per diluted share, compared to net income of $2.9 million, or $0.11 per diluted share, in Q1 2025. Excluding warrant fair value adjustments, underlying operating performance was in line with management expectations. As of quarter-end, the company held $11.7 million in cash, had $8.5 million in total debt, and had 31.8 million shares outstanding.

• Management reaffirms full-year 2026 revenue guidance of approximately $18.5 million, which includes the impact of the accelerated BARDA funding. The guidance does not include any material revenue contributions from commercial sales of the DeepView system.

• For the $31.7 million accelerated BARDA phase 2 funding, management expects only a small portion of revenue to be recognized in 2026, with most revenue recognized in 2027, and a small remaining portion recognized in 2028.
• If selected for Phase 3 of the handheld DoD contract, no revenue from the contract is expected in 2026, with most revenue expected in 2027 and 2028.

All forward-looking statements related to FDA approval timing, commercial launch, contract awards, and future revenue recognition are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from expectations. These risks are detailed in the company's SEC filings, and investors are cautioned not to place undue reliance on forward-looking statements. Key specific risks include the possibility of delayed FDA responses or denial of approval, which would push back commercial launch timelines, and uncertainty around selection for Phase 3 of the handheld DoD contract.

Q: What gives management confidence the FDA will respond to the de Novo application by end-Q2 2026, and what commercial preparation is underway ahead of launch?

A: The company held multiple pre-submission meetings with FDA prior to its June 2025 application, resulting in a strong submission aligned with agency expectations. The company has maintained active dialogue and completed all outstanding information requests, putting it in a strong position to meet the end-Q2 timeline. Commercial preparation includes clinician outreach at industry conferences, ongoing work to update UKCA labeling to match the FDA submission, and established clinical relationships in the UK and Australia to support early commercial placement after approval.

Q: What is the expected revenue recognition cadence for the $31.7 million accelerated BARDA funding?

A: Only a small portion of the $31.7 million in funding will be recognized as revenue in 2026, as most of the work under the accelerated phase, including the 240-patient outcome study, will carry into 2027. The bulk of revenue will be recognized in 2027, with a small remaining portion recognized in 2028.

Q: What feedback did the company receive from clinicians and stakeholders at the 2026 American Burn Association conference?

A: The conference allowed many stakeholders to interact with the DeepView device for the first time, and the company generated a waitlist of potential early adopter sites interested in installations post-launch. Clinician feedback was strongly positive, particularly on the clinical results of DeepView's burn wound severity assessment presented at the conference, which highlighted the technology's clear clinical benefit.

Q: What is the regulatory path and timeline for adding an improved total body surface area (TBSA) burn measurement module to DeepView?

A: A base TBSA measurement tool is already included in the FDA-submitted DeepView system, so it will launch with this feature if approval is granted. An improved next-generation TBSA2 software upgrade is planned for 2027. Regulatory requirements will be minimal: it will require at most a 510(k) notification, which is a straightforward process compared to a full de novo review, and may not even require a formal 510(k) submission.