Q2 2025 SI-BONE Inc Earnings Call

Reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to our Vice President of FP&A and Investor Relations at SI-BONE, for a few introductory comments. Sir, you may begin.

are here today as I born released, Financial results for the quarter ended, June 30th 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 10K.

And 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 may 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, we may 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 return the call over to Laura.

Thank you for joining us this afternoon. Since our inception, our strategy has been to build a unique platform of solutions targeting some of the most challenging procedures and patients treated by our physicians.

Our proprietary solutions improve surgical outcomes with stronger fixation and fusion and lower failure rates.

This is recognized and supported by clinical data and favorable reimbursements.

We're delivering on that strategy with another quarter of strong and profitable Revenue growth supported by the increasing adoption of our platform.

We had a record number of U.S. physicians perform our procedures this quarter, reinforcing the expanding reach and clinical acceptance of our differentiated solutions.

We added an important growth engine to our international markets with the successful launch of ICUS Torque in Europe.

Our strong Topline growth coupled with our disciplined. Operating approach enable us to deliver our third consecutive quarter of positive adjusted Ava.

Alongside maintaining consistent profitability, we reached an important cash flow milestone.

We achieved cash flow break-even in the quarter, well ahead of our original timeline. Notably, we accomplished this while continuing to invest in building surgical capacity to support demand for our existing products, as well as investing in product innovation to drive future growth.

in the second quarter, we delivered worldwide Revenue growth over approximately 22%

us Revenue which accounts for 95% of our business through approximately 23%.

Us Revenue growth was supported by a 25% increase in procedure volumes reaffirming the robust underlying demand. We continue to see across our Target markets

The volume growth was broad-based. We experienced double-digit percentage growth in volume across all the modalities we serve.

This robust, volume growth, reflects the rapid adoption of last year's new offerings and sustained momentum in our existing Solutions.

Our surgeon base expanded rapidly in the quarter as we experienced double-digit percentage growth across all our coal points.

This was also our fifth consecutive quarter of sequential growth in the position base.

Productivity reached a new high water mark under scoring the strength of our commercial execution.

The high value of our unique solutions is recognized by payers, providers, and regulators, and it's reflected in the favorable reimbursement decisions and designations for iFuse, Torque, TNT, and its Bedrock Granite.

These decisions validate our leadership, and facilitate physician and patient access to our high-quality Solutions.

With the target of over half a million annual procedures in the U.S., our current portfolio has significant growth potential.

Target new addressable markets. As we leverage our knowledge of dealing with patients with poor bone quality, we aim to deepen penetration in existing target markets by meeting the diverse needs and preferences of physicians.

Now, I'd like to highlight the progress we've made on our four key priorities: innovation, key markets, and physician engagement.

Commercial execution and operational excellence.

starting with innovation in the area of SI joint, dysfunction our commitment to offering the most comprehensive portfolio of solutions, tailored to Physicians, buried needs and preferences continues to prove effective

In the second quarter, the number of Physicians performing our SI joint dysfunction, procedure grew by double digit percentage points.

While surgeons account for the majority of our SI joint, dysfunction volume, a growing base of Interventional spine. Physicians are engaging us as they incorporate our procedures in the practice,

On the product front, IP's Torque has become the preferred solution, especially among the newly trained physicians. I use inter-adoption is growing, and markets for the interventional spine. Physicians initially prefer an in-office or LG graph solution, and the reimbursement for CPT 27278 is clearly defined.

On the clinical front. Early safety data from our Stacy study was published in pain medicine.

Stacy is the first study to evaluate lateral SI joint. Fusion using our icus torque implant when performed by Interventional spine Physicians.

The data is consistent with the published surgical literature, supporting the safety and effectiveness of lateral. SI joint Fusion as performed by this position specialty.

A manuscript detailing the 6-month primary endpoint outcomes is currently under peer review at a prominent journal.

We're excited to announce that in June. We received regulatory approval to launch icus torque in Europe.

If early reception from surgeons and interventionalists is any indication of future demands? We expect torque to accelerate adoption and growth across our International markets.

in July, we complete the cases across very European markets and in several instances even converted physicians in the past used competitive products,

Moving the pelvic fixation since the launch of the iCUS Bedrock Granite platform in 2022 and the subsequent edition of IQ's Bedrock Granite 95. Last year, we have led the industry in providing sacred public solutions for spinal deformity and degenerative conditions requiring surgical intervention.

Brandon has been a stellar success with the potential to reduce the nearly 24% failure rate of level pelvic fixation.

Granite 95 continues to have a trifecta effect on the business.

First, it was a key contributor to our physician growth.

Second, it allowed us to build a deeper relationship with our customers.

Granite was the crucial driver of the 24% growth in the number of physicians performing more than one type of procedure in the quarter.

Third. The number of granite cases, utilizing 4 implants through approximately 50% in the quarter.

This is contributed to our strong average selling price per procedure.

On the reimbursement. Front. Granite has a transitional pass through payments, including a zero dollar device offset, which CMS has proposed to continue for calendar year, 2026 procedures.

We see additional Tailwind for granted in the significant changes proposed by CMS for Hospital outpatient payments.

For higher costs, lumber or fusion procedures. The level 7 ABC payments of nearly $28,000 have been proposed to compensate hospitals for complex, multi-level spinal fusion procedures performed on an outpatient basis.

Starting a calendar year 2026.

In addition, CPT 27280, which describes open SI joint fusion, was removed from the inpatient-only list.

We believe these changes will provide a tailwind for our business, as some of these procedures migrate to the lower-cost site of service.

Granite will be an economically viable component of these procedures and can be an important part of the outpatient care for these patients,

Moving the pelvic trauma IUS Torque TNT, which was awarded a Breakthrough Device designation from the FDA, is ramping ahead of expectations, as a record number of surgeons use TNT in the second quarter.

With nearly 60,000 potential Target procedures annually, the pelvic trauma market has the potential to be a significant growth driver for the business.

We're pleased with the finalized new technology add-on payments for inpatient procedures, for TNT.

The untap will be effective starting October 1, 2025.

An add-on payment of over $4,100 translates to a 20% to 30% reimbursement increase to the hospital for pelvic fracture fixation for Medicare patients.

We Believe higher reimbursement for hospitals by the end, tap will expand access to our technology for trauma patients and provide additional momentum to TNT's already strong start.

Turning to our pipeline. Innovation remains a core tenant of our long-term growth strategy. We have a track record of applying our proprietary technology, biomechanical, expertise clinical data, and Real World experience to expand into new modalities.

Where our platform technology superior fixation infusion capabilities can improve surgical outcomes.

For the new SI joint solution. We mentioned in Prior calls. We expect to submit our 510k application to the FDA soon and remain on track for commercial launch later. In the first quarter of 2026,

The solution, leverages our 3D engineering and design expertise as well as our clinical experience with intra.

We believe the solution is optimized for the ASC environment and will allow us to reach an even broader group of Physicians and extend our leadership position at that site of service.

We're also excited about the significant progress on the technology. Milestones underpinning, our third breakthrough device,

Which we discussed on the prior earnings call.

We believe this novel solution has the potential to become the standard of care for addressing 1 of the most pressing needs in spine surgery.

Based on this encouraging progress, we anticipate filing our 510k for this groundbreaking product sometime in the second half of 2026.

Next.

Move on to physician engagement.

In the second quarter.

A record 1440. Us Physicians perform procedures using our products representing, an increase of 25% over the prior year period.

The double-digit percentage growth across all our call points highlights the broad-based demand for our differentiated solutions.

The elevated level of physician interest is an outcome of our commercial team's efforts to drive deeper engagement with existing customers and successful expansion across all our call points.

Our thoughtful platform expansion strategy clearly resonates with our customer base.

Our platform supports multiple procedure types and many Physicians who adopt 1 of our Solutions. Increase their utilization over time and are more likely to adopt additional Solutions.

Positions who performed a case in the second quarter of 2025 and 2024 averaged nearly 5 procedures per physician.

This was double compared to the number of procedures performed by our physicians who are not active on our platform a year ago.

Our academic programs remain a key contributor to our active physician and revenue growth.

In the second quarter, revenue generated from physicians who were previously trained as residents and fellows increased by 63% year-over-year, highlighting the outsized impact of these programs.

Now, let's turn to commercial execution.

Are you as commercial team delivered, another strong quarter driven by our focused. Go to market strategy and operational excellence across our 85 territories.

Our trailing 12-month Revenue per territory, increased to 2.1 million representing. 23% growth over the comparable prior year period.

How we will add new territories over the next 12 months. We believe our hybrid commercial model will allow us to drive incremental productivity improvement over time.

The hybrid model provides territory managers with the ability to maintain strong connectivity with their customers focus on Market development and expansion opportunities. While also allowing our sales agents to focus on case coverage

In 2022, when we are in the early stages of our hybrid model expansion, we did 11,500 procedures across 85 territories.

Procedures have since grown by 70% to 20,000 in the trailing 12 months. While the number of territories is unchanged at 85 demonstrating the Effectiveness and efficiency of our hybrid model.

Before I hand it over to anshu, I'd like to provide a leadership update.

Operations has announced his decision to retire.

Since joining the company in 2016, Tony has been instrumental in expanding SI bones footprint, building a high-performance sales organization and delivering sustained Revenue growth while significantly increasing the company's influence across the industry.

We're deeply grateful for his leadership vision and the lasting impact he's made on SI bones.

County's retirement will be effective February 2026, at which point he will transition to an advisory role for a 12-month period.

I want to thank Tony for his outstanding leadership, partnership and friendship over the past decade.

Nicholas Kerr will take on the role of Chief Commercial Officer effective February 2026. Nick joined us by bone in 2016 and currently serves as Senior Vice President of Product Marketing and Business Development.

Throughout his tenure, Nick has been a driving force behind the company's innovation, strategy, market expansion, and commercial evolution.

With more than 25 years of experience in the medical device industry, Nick brings a unique combination of strategic foresight customer Centric leadership and operational expertise.

I would like to congratulate Nick on the promotion.

We have a seamless transition plan in place. I'm confident that our seasoned sales team will continue to execute and deliver exceptional performance under the direction of our deeply experienced leadership team.

Results and updated guidance in more detail.

Thanks, Laura. Good afternoon, everyone. My comments today will cover second quarter revenue, growth, profitability, and liquidity.

And then I will talk to our full-year guidance.

All of the comparisons provided will be against the prior period, unless noted otherwise

Starting with Revenue growth.

Worldwide revenue was $48.6 million in the second quarter, representing growth of 21.7%.

Our strong momentum in the US continues with the revenue of 46.4 million representing 22.8% growth.

Our U.S. procedure volume was up 25%, driven by double-digit volume growth across all modalities.

International Revenue in the second quarter was 2.2 million, our Revenue growth in Europe. In the quarter was impacted by the later, than expected regulatory clearance for torque.

Based on early user feedback, the enthusiasm for torque is evident.

Moving to profitability.

Our focus on operational excellence is reflected in our industry-leading gross margins, as well as strong operating leverage.

With revenue growth nearly double the level of operating expense growth.

Our gross profit was 38.8 million, and increase of 7.2 million or 222.9%.

Gross margin was 79.8%, expanding by 80 basis points year-over-year, driven by our actions to improve manufacturing and supply chain efficiencies over the last 12 months.

Our average procedure, ASP declined slightly, but remains more stable than our assumptions going into the year.

Due to the favorable procedure mix.

Our operating expenses, were 45.8 million and increase of 4.2 million or 10%.

The increase was mostly due to growth-related investments and higher commissions, as well as elevated G&A spending in the quarter.

Our net loss narrowed to $6.2 million, or $0.14 per diluted share, compared to a net loss of $8.9 million, or $0.22 per diluted share in the prior year.

We delivered positive adjusted EBITDA of $1 million, compared to an adjusted EBITDA loss of $2.7 million in the prior year.

This is our third consecutive quarter of positive adjusted Ava.

For the trailing 12 months ended second quarter of 2025, we delivered positive adjusted, Eva of 3.1 million compared to an adjusted, ibra loss of 15.4 million in the prior year, period.

Given the momentum in the business, we remain on track to deliver positive adjusted EBITDA in fiscal year 2025 and beyond while investing across our growth priorities.

Turning to liquidity.

We exited the quarter with 145.55 million in cash and marketable securities.

The sequential increase of 1.1 million marks an important milestone, as this is the first quarter where we were cash flow break-even.

Our ability to achieve this milestone ahead of plan is an indication of the potential for the business to consistently drive positive free cash flow at scale.

Based on the planned increase, in surgical capacity, we expect to consume a modest amount of cash in the second half of 2025.

Now, let me provide an update on our outlook for 2025.

We're updating a full year, Revenue guidance to range between 195 million to 198 million.

The updated guidance implies year-over-year, growth of approximately 17% to 18% as compared to the previous guidance of approximately 16% to 18%.

The updated guidance reflects the strong first half of the year and our conviction in the growing adoption of our solutions.

Given the strength of a gross margin. We now expect the full year gross margin to be between 78.5 and 79% compared to a previous guidance of 78%.

We still expect fiscal year operating expenses to grow at least 10% at the midpoint of our revenue guidance.

And we expect positive, adjusted EBITDA for the full year of 2025.

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

Thanks anuel. I want to thank all my colleagues for their commitment and contribution for delivering industry-leading Topline growth and consistent profitability.

We're energized by the momentum. We're carrying into the second half with multiple growth drivers. We're excited about our innovation engine as we launch products that will address some of the most challenging patient needs.

In addition to delivering strong Topline growth, we're committed to Growing our profitability and making progress toward delivering consistent free. Cash flow.

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

Thank you.

Ladies and gentlemen to ask a question, please press star, 1, 1 1 on your telephone, then wait for your name to be announced to withdraw your question. Please, press star 1 1 1, again please, stand by while we compile the Q&A roster,

First question comes from the line of Craig. Would you with Bank of America? Your line is open.

Uh, good afternoon, uh, Lauren Noel, and uh, congrats on another strong revenue growth and, uh, good profitability quarter. Um,

That said, I do want to start with, with the guidance, on, on the top line. Um, and you know, you guys had 20 plus percent growth in the first half, uh, I think the guidance implies, uh, a step down from there. So maybe you guys can talk a little bit about what some of the some assumptions are underlying, um, that, you know, that growth for the second half and, and maybe even a little bit of color on Cadence between Q3 and Q4.

Thanks for the question, Craig. I'll I'll start uh and then I'll have onshore talk a little bit more about the details of the guidance. So first of all, we're really pleased with how the the quarter ended um and especially led by the US growth of 23%. And what's interesting is if you look at the kegger for the last 2 years, we actually saw growth acceleration between q1 and Q2. So it it really tells us that our strategy is is working. Um you know, in addition to to growth, what we're doing is growing our way to profitability. So Topline momentum helped us to deliver a third quarter of adjusted Eve, a DOT profitability. And we're actually really excited about achieving cash flow breaking.

Even, uh, during the period, which was quite a bit earlier than our stated goal. So we're proud of the business model. We really think we're a differentiated medical device company: a high-margin, asset-light, and growing company, a profitable company. And, uh, these new cash flow metrics are substantiating all of that.

To 2.1 million per territory. Uh, and I've already mentioned our adjusted Ava and, and our cash flow goes goals as well. So, um, all of this gives me really, uh, uh, a strong sense of confidence about the demand across the portfolio and across all of our call points for the remainder of 2025. And, uh, I also talked a little bit about how we're thinking about new product development, and continuing to broaden and deepen, our Solutions, uh, to solve these challenging unmet clinical needs

So I'll turn it over to an to talk a little bit further about the details of guidance. Yeah, thanks Laura. Uh, correct. Good to connect again. Um, as Laura highlighted, you know, we're really encouraged by the strong First Step performance and our updated guidance on revenue and gross margin sort of reflects the that strong first half. Um, you know, when we think about the business going into the second half of the year, um, we're maintaining our consistent and food and approach to guidance. We've got a lot of Tailwinds in the business going into the second half, all the surgeon momentum, Laura talked about the broad-based volume demand that we're seeing, you know, beyond that as well. You look at the Tailwind, um, that could provide potential for upside. Um, in the second half are faster than anticipated, you know, continued adoption of granite, especially within djent spine. Um, our assumptions around sort of this low single digit.

The decline in ASP was around 3% to 4%. You know, it could play out better, especially as we continue to see implant deformity cases with granite continuing to grow strong. As we saw, there was a 50% increase year-over-year in the second quarter. So you've got that playing out, and you've got the potential for...

Uh, additional TNT capacity, surgical capacity being rolled out. And the potential impact of end table that goes into October 1st, the goes effective, October 1st. Um, and then yeah, to a lesser extent, you have the upside from torque in Europe, so a lot of Tailwinds but again, we just want to be thoughtful. As we said, guidance, we want to grow into those Tailwinds.

Especially uh the ones with TNT and torque. Um, so we're feeling good about how that setup is.

Uh, your question on Cadence between Q3 and Q4. So consistent, with what we've talked about, on our prior calls our assumption. In our guidance, is a sequential decline of Circa. Let's say 4% in Q3, uh, most of that is driven by seasonality certifications and conferences. Now if you go back the last few years, we've actually done better than that. Part of that is through execution. Um, so we think there's potential to do better but that's embedded in our guidance right now is sort of a sequential decline of about 4%. And then Q4 which is traditionally our largest quarter, our expectation is uh the continued ramping Cube

Got it. Thanks, thanks. That's all very helpful. Um, maybe a similar question on the gross margin guidance and obviously it's been very strong close to 80%, uh, in the first 2 quarters. Um, you know, it implies a little bit of a step down, you know, maybe that is also conservatism, but just talked about how, you know, how we should be thinking about that. You don't seem to be getting that pricing pressure that that you called out to begin the year and then even, you know, beyond 25, just how do we think about those gross margins? Is it, is it alright to think about it, stability there, or could there be pressure in in future years?

Yes, I'm happy to take that. Correct. So again on the gross margin side, similar to revenue, we're being very thoughtful. If you recall we started the year expecting gross margins to be around 77 to 78% for the year. We've obviously outperformed that original expectation. But also grown gross margins on a year-over-year basis by 80 basis points. Um I in my prepared remark talked about some of the efforts that we've been doing on supply chain and Manufacturing, that's helped improve the gross margins. So some of that is going to be sticky. Uh, in terms of our updated guidance, which is now at 782 to 79%, um, we're embedding some of that stickiness sticky Improvement in Gross margins, uh, flowing through for the rest of the year, but we are being thoughtful.

End up coming on and some of the other distribution arrangements we're working on. So, you know, you'll see some depreciation go through that. Um, and then we just are in the final stages of implementing an automated platform through Salesforce Health Cloud, and you'll see some depreciation from that as well. Um, so I think, you know, we're fairly embedding some of those headwinds in the gross margin. Now, what we're not embedding in there is the potential for, you know, better than anticipated ASP. As you said, you know, ASP has turned out better than we expected at the start of the year, um, and also the impact of additional marginal margin improvement initiatives. So I think there's going to be a balance but intake there.

Um, in terms of Beyond 2025, what we've shared previously is, you know, we we're going to continue to look at improving our operating margin our gross margins through uh various initiatives. But we do have new product launches coming out. Uh lauras talked about the potential commercialization of the next product in q1. We're going to be filing the 510k for our third bdd device in the second half of 26.

So our expectation is over the medium-term. So I'd say over the next 2 to 3 years, gross margin sort of stabilizing in the 76 to 77% range. Now,

A lot of that is newer products. Take time to scale. So they tend to put pressure on the gross margins initially, but we've got existing products that will be getting to scale to offset that

Got it all. All very helpful. Thank you, guys.

Thank you.

Please stand by for our next question.

Our next question comes from Milan of Dave turkaly with citizens Elon is open.

Hey uh, congrats on the momentum. Um, I was wondering if you might be able to provide a little color on the uh the number of

uh, Interventional docs that are now using, uh, product and, and maybe also

Uh maybe some color around, how many of them are using more than 1? I know that you called out enter and torque in the past but I'm just trying to get a feel for how fast that base is growing.

Thanks for your question, Dave. Um, the the addition of inter Interventional docs, we added them. Um, oh, a little over a year ago at this point, we started to work with Interventional and it it has been a very strong growth driver for the business. We don't break out how many of those 1440 Physicians? Uh, are uh, interventionalists? But, you know, as I said, it's a really nice strong growth driver for us. And, uh, in terms of the, the mix of the product that they're using torque still, uh, is the um, uh, product of choice for them. But

Quite a few of these interventionalists that are in areas, where the, um, reimbursement is clearly defined really like our intra product as well. So, um, you know, just to be clear, surgeons continue to account for the overwhelming, majority of SI joint, dysfunction, procedure volume. Um, but as I said, Interventional are really nice, uh, uh, growth opportunity for us. The other thing that we're doing is that a lot of the interventionalists that were working with they're in areas where, um, the surgeons are not doing these procedures. Um, and so it it it's been a real nice balance for us there. You know, overall, what we've tried to do is just develop the most comprehensive um platform for SI joint dysfunction uh and really meet the needs of the physician and of the the patient as well. We do see some surgeons uh some interventionalists that are actually using

Both products depending upon what they think the needs are of the patient. Um, the other thing that may be a little bit interesting to comment on here, is that CMS have has actually proposed around an 18%, increase in the payment for CPT 217278 when it's performed in office. Um, and so our answer product, which is the the only, uh, truly percutaneous product on the market that is primarily where that product is used.

Used. And so once again, the reimbursement needs to be clearly defined in those particular markets, but we do think that that we have a great solution for interventionalists, that are interested in using the product um in office

Just the last thing, I would say, Dave on on, uh, Interventional is the new fee joint product, we're launching in the first quarter of 2026, that's going to provide another surgical solution, and we believe it's going to simplify workflow and allow us to further expand our engagement with interventionalists.

Great, thank you for that. Um, maybe just as a quick follow-up, give them some of the positive commentary around granite.

Um, I know you kind of highlighted maybe 40% of those procedures.

You know, with the TPT could go outpatient over time. Curious, if you still think that's the right sort of Target or or could it be higher? Thank you.

You're exactly right.

the the surgeons that we're working with are performing these procedures in patient, but there was a pretty significant um,

Shift uh and proposal to um increase uh and allow various procedures into the outpatient, setting and ASC setting as well. So 1 of the things I'd highlight is that CMS proposed a level 7 APC, which was around a 28,000 payment for certain higher cost, lumbar Fusion procedures and they're now allowed to perform those procedures in an outpatient setting. Um, also CPT 27280 which describes open SI joint Fusion was removed from the inpatient only list, so it gives more confidence in the flexibility, the code selection and the economic viability of granite. And then the last comment I would make is given that Granite has been awarded a transactional, uh, uh, transitional pass through.

Code uh effective at the beginning of this year and a zero dollar device. Offset. We do think that that may be another driver for surgeons to take some of these patients that previously had done procedures in an inpatient setting and move them to an outpatient setting and it's a big opportunity. Specifically, you know, especially short, construct degenerative spine procedures, there's around a 100,000 of those that are performed every single year. Um and those are the the particular procedures that we would expect to see more of in an outpatient setting.

Thank you. Thank you. Thank you.

Please stand by for our next question.

Our next question comes from the line of young Lee with Jeffrey. Salon is open.

All right. Great. Uh, thanks for taking our questions. Um, I guess to start kind of curious, um, you know, you've been adding more and more services on a quarterly basis. Um, is there any way you can help us understand?

Um, you know, um how quickly these endure surgeons come up to the curb versus, um, surgeons in prior cohorts, prior years, with, uh, more experience. Um, you know, is it a sort of easier to, um, uh, convert them to do more procedures? Just give them there's more broader experience, um, and literature out there.

Yeah, it's a great question and and our product platform expansion strategy, really is centered around increasing procedural density. So, you know, with the broadening of our portfolio and the ability for our surgeons to do multiple procedures, uh, it really does help to drive that procedural density. We did talk a little bit about this information in our prepared remarks, where we set. If you looked at a surgeon that had done a procedure a year ago, that that same surgeon on average was doing over 5 procedures, um, per quarter, which is almost double what the average surgeon is, is actually doing so. So it does give you an idea of how significant the the maturation of the um physician base will have on the the growth and procedural density that we should see uh over the coming quarters.

Um, so that at least gives you a little bit of a picture. I'll also just say that on average, it takes around 3 years for a physician to fully ramped up and get to the overall, uh, average. Now that is just for SI joint dysfunction, but, uh, if you include deformity, it does go a little bit faster, but at least those year-over-year numbers helpful, uh, should help, uh, answer the question that you're asking.

All right, great very helpful. Um and then I guess on the um on the commercial side. Um you know you've been keeping the territories and um agents

Um, I think you're going to be expanding to more uh, territories. Um, probably around 100. Um can you maybe add some thoughts around that timing and the pace of that, as well as um on the agent side? Um should we expect to see some sort of expansion on the agent side as well?

Yeah. Uh young. Happy to take that question. So uh, really pleased with how the commercial organizations actually ramped up the revenue per territory or the last several years. Now, um, just in this quarter you saw that uh, Revenue per territory grow, 22% about, 2.1 million. So ahead of the goal that we had set, when we had we had public at 2 million, um, we're not setting a new Target, um, at this point on how much more we can get do per territory. We know we've got examples out there, uh, where a lot of our large territories have used various permutations of the hybrid model, and do well, not to 3 million annualized Revenue. So we know we can do better. Um, but you know what? We're focused on is adding more territories over the next 12 to 18 months. You're right. We want to get to about 100 or the next, I'd say, 15 months. Uh part of that is in preparation for the new product launches that we have coming in q1 and then also, the third directory device that, you know,

Once you file the 510k, we want to start ramping up our sales force, to be able to be Set, uh, to drive the adoption there, as well.

Uh, so you will see us grow there on the, on the agent side. That model is actually worked out really well for us. So, you will continue to see the agent side expand as well. Um, it provides our territory managers with the ability to maintain the connectivity with the customers while focusing on Market development and expansion, um, and the agents and Distributors can then provide bandwidth for case coverage, right? So that model's worked out really well for us. We don't see that change. Um, and so I think that model will continue, uh, on our end we will add new territories, but we do expect the hybrid commercial model to drive incremental productivity over time.

All right. Thank you very much.

Thank you.

Please stand by for our next question.

Next question comes from the line of Matthew O'Brien with 5% Sandler. Your line is open.

Afternoon. Thanks for taking the questions. Maybe Laura, just for starters on the new product side of things, can you just talk a little bit about where you are in terms of momentum across the portfolio? Because it sounds like it's building and you've got some reimbursement, Tailwind, that could accelerate it, um, next year and then beyond. So just kind of, where are we at in terms of a bunch of these new products and and then some of these catalysts that may that may help you kind of even sustain or accelerate

The performance of the business. Um,

You know, over the next 2 or 3 years,

Yeah, great question. So what I'd say is the the

uh, growth that we're

received at this point. Matt. So we we're seeing strong demand for our existing Solutions and then rapid adoption of some of our new products. We had 3 products that actually launched in 2024. So experiencing double-digit growth in our physician base across all of our call points. We also have healthy, double digit, procedure, volume growth across, all of our modalities. And if I even dig a little bit deeper Granite, 95 is clearly becoming a preferred solution for our surgeons who are adopting pelvic fixation. And then TNT, although it's still small. As I said, in my, my prepared remarks, we saw a record number of Physicians perform procedure there and we're really excited about putting the uh, when the end tap goes into place on October 1st. And I also mentioned a little bit about putting uh uh additional third-party agents into place very similar to the strategy that we use.

Procedures. And then finally, ASP is an important aspect of this too and we're seeing um, you know, continued strength in our asps Beyond uh beyond what we had even guided to. So you know the strategy that we have in place is working. We we're seeing strong results. And, you know, we're, you know, even though we're being conservative about how we're approaching our guidance for the second half of the year. We've never been in a better position as a company and, and even talking about those new products as well. What we're trying to give you a flavor for is, you know, what's to come in 2026 and what's to come in 2027 that SI bone really provides this unique differentiated high growth platform that we're now seeing consistent profitability and we're seeing the turn toward positive cash flow.

Yeah, I appreciate that. And then.

can you just talk? Get your commentary about the ASC opportunity especially with the new product that you should get early next year is intriguing, can you talk about that opportunity to grow the business and then additional Investments that are required there that we may not be fully contemplating? Thank you.

Yeah. Actually. It's a very natural extension for us. Um currently in SI joint Fusion. Uh, I think we're going on around 35% of our business that is uh, um, those procedures are being done in the ASC. So this isn't anything that's new for us. It's been a very strong area of growth over the last few years, starting basically from zero a few years ago to to where we're at today. So in terms of the the new launch that we're talking about for SI joint dysfunction, as I said, we're we're expecting to launch it in the first quarter of next year. So we're preparing our 510k application for the FDA and expect to submit that soon. Um,

And and so that's that's going to be a nice driver here for for, uh, 2026 coming up. But and that will be a product that would be targeted toward asc's uh specifically

And, you know, from an investment standpoint, because it's with the existing call point, the existing sales force, you know, it fits naturally into the bag of our commercial sales force.

Got it. Thank you.

Thank you.

Our next question comes from the line of Caitlyn Cronin with canoy. Your line is open,

Hi, congrats on the great quarter and thanks for taking questions.

So, you know, just to start, I would have thought, historically, new surgeons would start utilizing your SI joint dysfunction products first, but as your portfolio evolved, maybe just provide some color on if naive as a bone surgeon or, you know, first engaging on other parts of your portfolio before SI joint fusion.

Yeah, we we do see, you know, SI joint, uh, Fusion has been the Cornerstone of the business and we do as, as I said, previously, we're continuing to see significant growth um, around our fee joint Fusion business and the number of Physicians that are performing those procedures. But we also have seen it coming from our Granite business as well. Um, because Granite Granite, really is. Um,

Working with different surgeons in some cases. So especially let's talk about surgeons that focus more specifically on adult deformity. Um, those typically are not surgeons that are going to do SI joint Fusion. So all of the sudden, we are actually being introduced to a new population of Surgeons that previously had not adopted.

Difference for their patience as well. So, it's a halo effect that we see with our SI joint Fusion business, but similarly, with our Granite business.

That's great. And then, you know, just a bit more color on the investments that you expect would lead to cashews in the second half. Is that the surgical capacity for TNT specifically, or just overall surgical capacity and spending?

Yeah, so on the Free Cash Flow side. Caitlyn look, we're really pleased with our third consecutive quarter of, uh, positive adjustments. But, uh, and you know, that sort of reflection of the operational excellence in the business momentum, uh, that we have now, you know, we did get to, uh, cash flow break even in Q2 and we're really proud of that Milestone. It's ahead of, uh, you know, what we had said as an external Target. Um, in terms of the second half of the Year, yes, most of the spend is going to be on surgical capacity, uh, and building the inventory, especially as we go into the fourth quarter, which tends to be our biggest quarter. But also, as we start ramping up, uh, for the launch of the product, Laura talked about, uh, within the SI joint dysfunction in the first quarter of 2026,

Makes sense. Thanks so much for taking the questions.

Thank you.

Our next question comes from the line of Ross Osborne with Canaccord Genuity.

Hey guys, this is, uh, Matthew Park on for us today. Thanks for taking the questions, I guess. Starting with the OS business and the torque roll out in Europe. I was just hoping to get some additional color on how the launch is ramping in terms of procedural, volume or position interest, and then more broadly, how are you thinking about the role of international markets and contributing to overall growth of the next few years?

Yeah, I’m happy to take that. Um, so international is a small percent of our business, but it’s a really important market for us.

You know, um just do just to keep in mind the last time we launched a new product in Europe, it was 7 years ago. All right? So we're really excited about the impact torque could have in those markets. Um, we know the impact torques had in the US on the SI joint dysfunction business. It's been a very important growth driver especially with newer docs. Um, so we were really excited about the potential for that in Europe. And then like like I said, in my prepared remarks if early indications both from surgeons and interventionalist is is

An indicator, um, of what that potential is. We're feeling pretty good about the impact torque can have on reigniting our growth in Europe. Um, now we did get there, the regulatory approval a little bit later than we expected. So the first case is what performed in the third quarter, versus our expectation, of the second quarter. Um, and as we all know third quarter in Europe can be a little bit slower. So our assumptions going in is you know most of the training will take place in the latter half of third quarter and the fourth quarter. So our current guidance assumes a very minimal impact of torque Revenue in Europe in Q4 so that could be an upside if things go better. But our expectations is uh, torque will accelerate growth for Europe in 2026.

Got it, that's helpful. And then maybe one more from me. Um, I guess given that you guys achieved cash flow break-even this quarter and maintained a strong cash position, are you thinking about prioritizing capital deployment? I guess particularly between the balance of continued investment in commercial and product initiatives versus other uses.

Yeah, no, I'm happy to take that. So, from a cash flow perspective or profitability perspective, look, you know, our expectation is that the revenue growth rate will outpace the operating expense (Opex) growth rate going forward. Now, it may vary from year to year. It could be, you know, 1.25 to 1.75 times depending on the year and the amount of investment we're making.

Um, organic growth initiatives that we have.

Got it. That's helpful. Thanks for taking the questions. Congrats on the quarter.

Thank you.

Our next question comes from Milan of

David Saxon with Needleman Company, your line is open.

Oh, great, uh, good afternoon, Lauren Anel. Thanks for taking my questions and congrats on the quarter. Um, so maybe I'll start with active surgeons, up 25% year-on-year, really strong growth there. In the Scribbler, you talked about med school training programs. So, in terms of the kind of average profile of the new doctors you're adding, are they mostly coming out of med school or are these more experienced doctors? And then, is there any difference in the utilization ramp that you see across stocks coming out of grad, uh, sorry, med school versus, you know, more experienced or more established doctors?

Yeah, those are good questions. So, um, we are really pleased with the 1440 surgeons, who did at least 1 case in the second quarter 25% growth. But as I said, previously, there's actually around 12,000 Physicians that, uh, are targets for us. Uh, and so we do have this very significant Runway to expand our active user base. Um, you talked a little bit about residents and fellows and, you know, it's really a multi-year effort to engage residents.

And fellows. We started these activities in 2019. But what's great about it is once you've provided that education to them, they think about, uh, diagnosis and treatment, uh, as soon as they start practicing, so it's very different from working with a surgeon who has been, um, uh, working with patients for many years. Um, in terms of the profile by and large, I would say that it continues to be Physicians that have been, uh, in, uh, practicing for many years. Um, just because there's only a few hundred surgeons typically coming out of a fellowship program and starting their careers in any given year. Um, so it's it's a broad-based, uh, um, activity that that we engage in, in order to to both work with existing surgeons, as well as new surgeons in terms of utilization, as I said, um, the the util,

Is probably a little bit higher with the new Physicians that we that we see coming in just because they're going to start regularly diagnosing and treating. But the reality is, it's just getting those surgeons, uh, to fully adopt, uh, our procedures number 1, and then number 2 to get them to be doing multiple procedures as well. So, um, we're we're really pleased with with what we're seeing. We, we see a very nice runway in

In front of us, in terms of continuing to bring on active physicians, and also deepening the relationship and increasing the number of procedures that active surgeons are performing.

Okay, great, thanks for that, Laura and then um in terms of granted, I think you've been working on getting a a new code for that procedure. So is the ntap extension related to that work or you know could we still see that new code? Uh, come out at some point. Thanks so much. Yeah.

So, um, in terms of, uh, what's happening on the reimbursement side. So cms's decision was to increase spinal fusion. Drgs to buy 6 to 8% for inpatient procedures. So and that, that's a result of the cost data, that's out there and it reflects the increased frequency of Lumbar Fusion procedures that incorporate pelvic fixation. So we've believed the impact of the increase, drg could be as high as around 5100 and unadjusted rates, but averaging around 3,800 in total and that's comparable to the incremental end tap reimbursement, that the hospital received just as a reminder for commercial payer cases. They never benefited from the end tap. And um, and the majority of our cases have actually been these commercial, uh, pay patients, um,

Right now. So, um, so we're excited about the proposed, uh, Edition also of the level 7 APC, Which is higher cost, lumbar Fusion procedures going into the outpatient setting and also removing 27280 from the inpatient list and TPT for granite with that TPT with the zero device offset. We think that could be a pretty significant Tailwind to our business. So, overall, a lot going on from a reimbursement perspective from a granite perspective, specifically, uh, significant increase in the the existing. Drgs continued activity from us around a drg reassignment excitement around the transitional pass through code. And finally, the addition of the level 7, APC codes, moving some of these procedures that would include Granite into the outpatient setting.

Great. Thanks so much for that.

Thank you.

Our next question comes from the line of Bridget and The Wider with Truist Security. Your line is open.

Hi. This is Felipe on for Rich. Um, just in the context of gross margin. The first half has been been pretty strong um, as we we think about 2026. Um, the street is modeling about a 100 basis points of gross margin compression. So could could you just remind us just the different pieces that are in uh impacting gross margin in 26 that

Should be thinking about. Thanks so much for taking the question.

Yeah, I'm not going to be providing specific, uh, 2026 guidance. At this point, we'll provide that when we get into 2026, um, but as I've shared, uh, in my prepared remarks in previously, you know, we expect our gross margins to be a little bit more Dynamic over the next few years, we've obviously, outperformed our original expectation, for gross margin that we set at the start of this year, uh, which was like I said, 7070 78%. We're now upping our guidance to 70 and a half to 79% so that both really well going into next year. Um, we do think over the medium term so you could think of the next 2 or 3 years gross margin sort of settling in that 76 to 777% range, part of that. As I said earlier to an earlier question. Um we do expect savings from our ongoing gross margin initiatives to play out but offsetting those are the cost of new products that we want to launch and the surgical capacity that goes with them, those will be subscale in the initial year. So the cost tends to be a bit higher.

So we think that's the appropriate thoughtful way of setting gross margin expectations over the next 2, 3 years.

Thank you.

Ladies and gentlemen, I'm showing no further questions in the queue. I will now like to turn the call back over to Laura, for closing remarks.

Thank you so much. And thanks, everyone, for participating in our call today, as well as for your interest in SI-BONE. We look forward to seeing you all at upcoming conferences.

Goodbye.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect