SI-BONE, Inc. Q3 FY2026 earnings call

• Innovation & Product Launch: Launched ONIX in an Alpha phase in October, receiving strong early demand that tracks ahead of the initial Granite launch. ONIX targets upper and lower instrumented vertebrae screw loosening, expanding the Total Addressable Market (TAM) to over 650,000 procedures annually ($5 billion opportunity).
• Physician Engagement: Active physician count reached approximately 1,770, reflecting 16% year-over-year growth. The company is leveraging this large installed base to drive deeper engagement and increased implant utilization per case.
• Commercial Execution: Expanded commercial footprint with nearly 100 territory managers targeted by year-end. Adoption of the INTRA platform among interventional spine physicians accelerated, contributing significantly to procedure growth despite being a seasonally slow quarter.
• Reimbursement Tailwinds: New DRGs for multi-level spinal fusion incorporating pelvic fixation took effect on October 1, potentially increasing hospital payments by up to $50,000 per qualifying procedure. Proposed CMS changes could further improve economics for interventional spine procedures starting January 1, 2027.
• Strategic Partnerships: Collaboration with Smith and Nephew on surgeon education and access for TNT trauma products is gaining momentum, showing early results as the busy trauma season begins.

Total worldwide revenue was $55.7 million, representing a 14.5% year-over-year growth. The U.S. segment generated $52.8 million (94.8% of total revenue), driven by a 19.5% increase in procedure volume, partially offset by lower average selling prices (ASP) due to a mix shift toward lower-ASP office-based and ASC sites. International revenue grew 27% to $2.9 million (5.2% of total revenue), supported by increasing adoption of TORC and TNT technologies for sacral insufficiency fractures.

• Reaffirmed full-year 2026 worldwide revenue guidance of $231 million to $233 million.
• Maintained gross margin expectation at 79%.
• Revised operating expense growth expectation downward from 12% to 10.5%, citing better-than-expected operating leverage.
• The midpoint of the annual guidance implies over 20% year-over-year revenue growth in the fourth quarter, driven by accelerating procedure demand, ONIX launch contribution, and new DRG impacts.

• Average Selling Price (ASP) Degradation: ASP was impacted by a shift in procedure mix toward lower-ASP sites of care (ASCs and offices) and specific implant combinations. While expected, continued mix shifts could pressure pricing.
• Gross Margin Pressure in Future Years: Management anticipates modest gross margin pressure beyond 2027 (potentially settling in the 78-79% range) due to higher non-cash depreciation expenses associated with deploying additional surgical capacity for new products like ONIX.
• Clinical Data Requirements: Physicians may require 6-12 months of commercial, clinical, and economic outcomes data before fully adopting ONIX, which could slow initial penetration rates compared to earlier expectations.
• Reimbursement Uncertainty: While new DRGs are favorable, the approval of NTAP (New Technology Add-on Payment) for ONIX is pending until late 2027, and proposed CMS changes for interventional spine procedures remain subject to final ruling.

Q: Analyst asked for feedback on the ONIX Alpha launch and how much it will sustain momentum into next year before NTAP approval.

A: Management reported exceptional early traction, with ONIX driving incremental procedures among existing Granite users and attracting non-users. Demand is tracking ahead of Granite’s initial launch. Momentum is sustained by a larger active physician base (1,770 vs. 700 at Granite launch) and expanded commercial infrastructure, with full launch planned for January.

Q: Analyst questioned whether the street’s ~15.5% growth estimate for 2027 is too conservative given multiple tailwinds.

A: Management acknowledged significant structural tailwinds (interventional expansion, new DRGs, ONIX, NTAP potential) but declined to provide 2027 guidance prematurely. They emphasized a prudent approach, focusing on closing 2026 strongly and providing updated outlooks in February after reviewing Q4 performance.

Q: Analyst asked about ASP trends and whether they would improve in Q4 given volume growth.

A: ASP was pressured in Q3 by a mix shift to lower-ASP interventional cases and two-implant Granite configurations. However, management expects ASP to improve in Q4 due to increased uptake of multi-implant Granite cases (benefiting from new DRGs) and rising ONIX utilization, which increases implants per case.

Q: Analyst inquired about the attachment rate of ONIX with Granite cases and halo effects.

A: Management highlighted a strong halo effect, with ONIX frequently used alongside Granite in complex deformity cases, averaging six implants per procedure. Additionally, ONIX is being adopted in cases where surgeons do not use Granite, addressing screw loosening at the top/bottom of constructs, thereby expanding the addressable market beyond just pelvic fixation.

Q: Analyst asked about the timeline and pathway for obtaining NTAP for ONIX.

A: Management confirmed submission of the NTAP application under the Breakthrough Device designation alternative pathway. Approval is expected by April 2027, with the payment taking effect October 1, 2027. In the interim, ONIX benefits from higher reimbursement via new Granite-specific DRGs when used in conjunction with Granite.