SI-BONE, Inc. (SIBN) Q2 2026 Earnings Report, Transcript and Summary

Good afternoon, and welcome to SI-BONE's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Saqib Iqbal, Vice President, FP&A and Investor Relations at SI-BONE. Please go ahead.

Earlier today, SI-BONE released financial results for the quarter ended June 30, 2026. 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 10-K, and actual results may 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 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 may also discuss certain non-GAAP measures, including adjusted EBITDA and free cash flow. 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 turn the call over to Laura.

Thanks, Saqib. Good afternoon and thank you for joining us. Our second quarter results demonstrate the strength of our core competencies and the momentum they've created in the business. We founded the company with a clear clinical objective to develop differentiated solutions that enable durable fixation and fusion in high-risk patients with compromised, often osteoporotic bone. Our target patients often live with debilitating pain and diminished quality of life. Our focus has allowed us to identify large addressable markets, establish compelling technical and clinical moats, and create a diversified business with multiple avenues for growth. During the quarter, we continued to translate that strategy into new products and markets. We extended the application of our biomechanical expertise and proprietary technology beyond the sacroiliac joint into high-value adjacencies across musculoskeletal care. In June, we submitted the 510(k) application for our third technology with breakthrough device designation. This is our first platform designed for use outside the pelvis and is intended to address a recognized failure point in complex spine procedures. Subject to the 510(k) clearance, we remain on track to begin a phased commercial launch in the fourth quarter, perhaps as early as October. Additionally, we advanced several development programs targeting new markets we expect to enter over the next 18 months and expanded U.S. field capacity in preparation for the upcoming launches. Second quarter performance was strong across markets. Worldwide and U.S. revenues were $56 million and $53.2 million respectively, both representing approximately 15% growth. Sequentially, U.S. procedure volume increased approximately 9%, marking our strongest second quarter sequential increase in years, dispelling industry concerns regarding the payer environment. International revenue grew approximately 26% to $2.8 million, led by continued demand for our expanded portfolio. The strong top-line growth yielded meaningful operating leverage. Revenue grew nearly twice as fast as operating expenses, contributing to a 178% improvement in adjusted EBITDA. Looking ahead, we believe the business is well positioned for continued revenue growth and further profitability improvement. Our expanding portfolio, improving reimbursement, and additional commercial capacity should deepen our relevance with physicians, reduce economic barriers, and extend our reach. Together, these factors reinforce our confidence in a strong finish to 2026. We believe the impact should be even more meaningful in 2027 as our new product moves through the adoption curve, the territories added this year become more productive, and reimbursement changes support broader utilization. I'll now discuss our three key growth drivers, innovation and market development, physician engagement, and commercial execution. Anshul will then cover our fourth priority, operational excellence, along with our financial performance and updated outlook. Starting with innovation and market development, innovation is the cornerstone of our long-term growth strategy and has helped us deliver compound annual revenue growth of more than 20% per year over the past 5 years. We believe we have one of the industry's broadest portfolios focused on patients with compromised bones. These high-risk patients often face difficult recoveries and elevated revision rates. By improving procedural outcomes, our technologies have the potential to enhance patient quality of life while reducing the economic burden on the healthcare system. We have a track record of developing differentiated technologies, gaining reimbursement coverage, driving physician adoption, and growing significantly faster than the underlying market. In SI joint dysfunction, currently our largest market, the relatively low density bone of the sacrum makes durable fixation challenging. iFuse-3D, TORQ, and INTRA product families provide a comprehensive portfolio of metal and allograft solutions for surgeons, as well as the fast-growing base of interventional spine physicians across all sites of service. In spinopelvic fusion, our fastest scaling market, there's an increasing number of patients with bone compromising conditions, such as osteoporosis and osteopenia. With Granite, we believe we have the best-in-class solution for pelvic fixation and spine fusion procedures. Within pelvic trauma, where the majority of our target patients are being treated for low-intensity sacral insufficiency fractures, iFuse TORQ TNT is gaining adoption among surgeons. Our next major catalyst for further accelerating growth is the launch of our first non-pelvic solution. As I highlighted earlier, we submitted the 510(k) application in June. We're working with suppliers to build surgical capacity and we're on track for the phased commercial launch. Because the solution targets accounts where our team already has established relationships, we expect to leverage our existing commercial infrastructure to support an efficient launch. We also have several programs at different stages of development targeting large, established markets where current treatment approaches leave meaningful room for improvement. We expect two additional solutions to progress toward design freeze later this year, with potential commercialization targeted over the next 18 months. As we look forward, our longer-term vision extends beyond titanium and allograft solutions. We pioneered 3D printed titanium implants and helped create a new product category. We're actively exploring and testing additional materials to address new disease states and developing AI-driven procedure enablement capabilities. Collectively, these initiatives are transforming SI-BONE from a leader in sacropelvic solutions into a broader spinopelvic company focused on procedural solutions for compromised bone. By organizing our innovation around the needs of these high-risk patients, we remain committed to improving procedural and long-term clinical outcomes. Before turning to physician engagement, I'd like to briefly update you on reimbursement. We're pleased by the recent proposed CMS changes affecting SI joint fusion procedures. Today, the majority of SI joint fusion procedures are performed in the hospital outpatient departments, ASCs and office-based labs or OBLs. CMS has proposed increasing hospital outpatient reimbursement by approximately $2,300 to more than $20,000. For ASCs, they proposed an increase of approximately $1,000 to nearly $16,000. CMS has also proposed establishing OBL reimbursement of over $20,000 for CPT code 27279. If finalized, these changes would improve the economics of treating SI joint dysfunction across all outpatient care settings, expand physician choice, and make these procedures accessible to more patients. Furthermore, the new family of DRGs for complex spinal fusion procedures, including procedures incorporating Granite, is encouraging. Depending on the patient's diagnosis and severity, these new DRGs could increase the average hospital payment by up to $50,000 per procedure. We believe this framework better reflects the complexity and resource requirements of treating these high-risk patients, reduces economic objections of our hospital customers, and supports the long-term adoption of Granite. The reimbursement framework is also relevant to the third breakthrough device, which is intended to address another important source of failure in complex spine procedures and may be used independently or with Granite. Now, let me discuss the progress on physician engagement. Physician adoption and utilization remain important leading indicators of future procedure growth. In the second quarter, 1,715 unique physicians performed at least one procedure using our technologies, an increase of approximately 19% versus the same quarter a year ago. For context, the quarterly physician count exceeded the number of unique physicians who used our technologies during full year 2023. We achieved double-digit percent growth across each of our call points. This broad-based engagement reflects the clinical relevance of our solutions, as well as the effectiveness of our physician engagement and customer engagement efforts. Our concerted efforts to grow physician awareness and adoption continue to deliver. In the quarter, the number of physicians performing more than one type of procedure increased approximately 15%. Physicians active in both the current and prior year quarters averaged approximately 3x the case volume of physicians performing their first procedure with us during the quarter. In aggregate, growth in our physician base, broader use of our portfolio, and increasing utilization create a strong foundation for sustained procedure and revenue growth. As we introduce additional products that address physician-identified procedural challenges, we expect case volume per physician to become an increasingly important contributor to revenue growth and overall execution efficiency. Now let's turn to commercial execution. We ended the quarter with 93 quota-carrying territory managers who were supported by over 400 agents and junior representatives. We designed the hybrid model so that our territory managers lead clinical education and cultivate high-value physician relationships, while third-party agents and junior representatives provide procedural support and extend our reach across accounts and geographies. Trailing 12 months revenue per territory was approximately $2.2 million, reflecting continued productivity gains and the scalability of our hybrid commercial model. We remain on track to exit 2026 with nearly 100 territories. This is a deliberate expansion ahead of multiple product launches planned for the next 18 months. Building capacity now gives our territory managers the bandwidth to strengthen physician relationships, prepare accounts for upcoming launches, and support rapid post-launch adoption. We also continue to progress in our commercial partnership with Smith+Nephew. Physician and field engagement is growing, and that's translating into steady improvement in adoption. We're coordinating joint field activity with Smith+Nephew's leadership team and expect momentum to build throughout the rest of 2026. Before I turn the call over to Anshul, I'd like to thank my colleagues for their continued dedication and exemplary execution. With our upcoming product launch and an active pipeline of new solutions, we're adding to our track record of meaningful and differentiated innovation. Together, we're entering an important new phase of growth. This is a direct result of your work, and I'm incredibly proud of what we're building together. Anshul will now discuss our fourth priority, operational excellence, along with additional financial details and our updated outlook.

Thanks, Laura. Good afternoon, everyone. I will focus on second quarter revenue growth, profitability, liquidity, and our updated 2026 revenue guidance. Unless otherwise noted, all comparisons are with the same period last year. Starting with revenue growth, worldwide revenue was $56 million, representing 15.2% growth. U.S. revenue increased 14.7% to $53.2 million. U.S. procedure volume increased nearly 15% with double-digit growth across all modalities. On a 2-year stack basis, procedure volume grew nearly 20% in the quarter. International revenue increased 25.9% to $2.8 million, driven by growing demand for TORQ and TNT. Given this momentum, we are evaluating opportunities to introduce more of our portfolio and future products in existing international markets and to qualify and enter select new target geographies. We believe these initiatives can make our international business an increasingly meaningful and durable contributor to worldwide growth. Turning to profitability. Gross profit increased 14.8% to $44.5 million. Gross margin remained strong at 79.5%, supported by the stable average selling price, product cost optimization initiatives, and improved utilization of surgical capacity. Operating expenses increased 7.7%, a rate substantially below revenue growth, resulting in meaningful operating leverage, which was well ahead of what we had indicated at the beginning of 2026. The operating expense increase reflected ongoing investment in R&D, higher commissions associated with revenue growth, and targeted marketing investments supporting recent and upcoming product launches. Net loss narrowed to $4.1 million or $0.09 per diluted share compared to a net loss of $6.2 million or $0.14 per diluted share. Adjusted EBITDA improved 178% to $2.8 million, representing an adjusted EBITDA margin of approximately 5.1%. For the trailing 12 months through the second quarter, adjusted EBITDA quadrupled to $12.8 million compared with the prior year period. This step-up in profitability reflects both our strong top line growth and the scalability of our infrastructure. As Laura highlighted, we are developing product material and software capabilities that will broaden our product portfolio and address additional clinical needs. Given our outperformance on profitability in the first half, we are intentionally increasing targeted research and development investment in the back half of the year to advance these longer-term programs. While remaining committed to our annual operating leverage and profitability expansion goals, we believe these programs can create differentiated capabilities in treating compromised bone, support faster revenue growth, and significantly increase long-term profit dollars. Turning to liquidity and cash flow. We ended the quarter with $145.9 million in cash and equivalents, an increase of approximately $1.3 million sequentially. We also delivered another quarter of positive cash flow from operations reflecting continued operating rigor and disciplined working capital management. We expect to see higher than normal cash flow variability in the next two quarters, mostly driven by the timing of payments for build-out of a new headquarters, the vast majority of which is now expected in the third quarter, and the timing of the resulting tenant improvement allowance reimbursement. We're also investing in surgical capacity to support the new product launch. These temporary yet disciplined investments will strengthen our operating infrastructure, improve our employee experience, and position the company to scale efficiently as we enter our next phase of growth. With approximately $146 million in cash and equivalents, and a clear line of sight to consistent free cash flow generation, we can fund our planned development programs while maintaining financial flexibility. Turning to guidance. Based on strong first-half performance, we are raising the low end of our 2026 worldwide revenue guidance while maintaining the high end. We now expect revenue of $231 million to $233 million, representing approximately 15% to 16% growth. Our prior guidance was $230 million to $233 million, representing approximately 14% to 16% growth. We entered the second half with strong momentum and multiple upcoming catalysts, including the anticipated 510(k) clearance of the new product, as well as the potential benefit of higher reimbursement from Granite in the fourth quarter. Given the timing of the 510(k) clearance, the phased nature of the launch, and the time required for reimbursement changes to translate into procedure growth, we're maintaining a measured approach on the impact of these catalysts. We are maintaining full-year gross margin guidance at 79%. At the midpoint of our revenue range, we now expect full-year operating expenses to increase in the 12% area. With that, I will turn the call over to Laura.

Thanks, Anshul. Our second quarter results extend our track record of outperformance across revenue and profitability. With an expanding portfolio in compromised bone, increasing commercial capacity, an improving reimbursement backdrop, and a multi-year innovation pipeline, we believe we are well-positioned for durable growth and expanding profitability in 2027 and beyond. With that, we're happy to answer your questions. Operator?

[Operator Instructions] Our first question will come from the line of Matthew O'Brien of Piper Sandler.

For starters, maybe Anshul, just on the guide for the year, good to see Q2 come in a little bit above expectations, but if you do the math on the back half, it's about a $500,000 increase to the midpoint, you know, versus $1 million that you just put up. It also kind of implies that the back half U.S. number decelerates a little bit versus the first half. So, you know, is there something specific? Are you having a little bit harder time getting into these -- this latest tranche of clinicians in terms of your full product portfolio or is it something else that you really want to call out as far as the guide goes for the back half. And then I do have a follow-up.

Sure, happy to take that, Matt. On the guidance side, let me just start. Well, look, we're feeling great about the setup we have going into the back half of the year. 19% growth in active physician base. That's a very solid physician base to enter the back half of the year with. The broad-based procedural demand growth that we saw -- as you saw in the second quarter, sequentially growth grew 9% on a 2-year CAGR 20%. The sequential growth was one of the strongest that we've seen in recent history at that 9% sequentially in the second quarter. And then the growing infrastructure on the commercial side positions us well. So that's on what's already in the business. Then you layer on additional catalyst around the anticipated launch of the third breakthrough device and also the impact of the new DRGs that just got finalized on Friday, those are additional tailwinds in the business as well. Now, when it comes to guidance, as I said in my prepared remarks as well, we're being consistent with our thoughtful guidance philosophy. We know third quarter seasonality can have a little bit of noise in the business. And also, we want to make sure we're growing into these catalysts that I just outlined around the third breakthrough device and the new DRG impact on the fourth quarter. So we actually feel pretty good about the setup and there could be room for upside as those catalysts play out better than anticipated.

Got it. Appreciate that. And then congrats on filing for the third breakthrough device product. Would love to just hear, and I know we're not going to get much on the product itself, but just about the profitability profile of that device. Is it going to be a big drag on gross margins or operating margins for a while? Are there big working capital requirements? Or is it similar to what you have right now in the business? And do you think there could be a halo effect from that device for the rest of the portfolio as it starts to see more uptake in '27?

Yes, Matt, that's a great question. So really excited about the third breakthrough device that we filed a 510(k) for in June, so it was actually ahead of schedule for us. And that sets us up really well on being able to subject to FDA clearance, commercialize this product in the fourth quarter, and as Laura said in her prepared remarks, as early as October. So feeling really good about this. Now, this device actually has some inherent advantages. First, it's serving a call point where we already have established relationships. Granite, as you know, has been a great success with spine surgeons and it's going to go after that same market from a call point perspective. Second, this is targeting one of the largest known unmet needs in spine fusion procedures as well. So it's a known physician challenge that we're going after. And number three, it actually fits the physician workflow, so there is no need for extensive training. What that means is once we get through the alpha launch in the fourth quarter, this product actually has potential to rapidly scale. And as you asked about the gross margin implications, we're in the process of building out the surgical capacity to be prepared for a fourth quarter launch. Our gross margin assumptions right now are at 79% for the year. We were very deliberate in holding those gross margin numbers at 79% despite the outperformance in the first half. That is because we are anticipating depreciation on those assets to start out earlier on and revenue to follow subsequently. Overall, it should actually be an efficient ramp for us because our reps already are in relationship with those docs. They are in a lot of the procedures with Granite already. So we're pretty excited about the commercial ramp as well.

Our next question will be coming from the line of Caitlin Roberts of Canaccord Genuity.

Congrats on the quarter. I guess just maybe starting with the procedure volumes, just want to get maybe a little bit more color on what really drove the strength in the quarter and the sequential increase. Any one call point or product to call out there?

I can talk a little bit to what we're seeing on the procedure volume side. It's broad-based, actually. So, we have three different areas of procedures that we're talking about. We have our SI joint fusion procedures, our pelvic fixation procedures, and our pelvic trauma procedures. And as we said in our prepared remarks, all of those areas grew in the double digits. And then there's three different call points that we're selling to as well, spine surgeons, interventional spine, and then trauma surgeons, which are more being approached by distribution and Smith+Nephew. But strong growth there too. So I would say that the growth that we're actually seeing, Caitlin, is broad-based in the quarter. And then we're excited about where we're headed as well with the new product that Anshul just talked about quite a bit, our new product that is planned to come out in the fourth quarter that we filed with the FDA already. And then one thing that hasn't been discussed yet, we actually had a very big day on Friday and it was the confirmation of the new Granite DRGs. Those DRGs specifically reference our Granite technology. The increase is up to $50,000 for those new DRGs, so that has all been confirmed and will go into place on October 1st. And then in addition, there was also a lot of discussion in the CMS notes about breakthrough devices. There is a grandfather clause that's been put through that does recognize those breakthrough devices and the alternative pathway to receive an NTAP. So we believe we're going to fall into that category as well. So we have a lot of catalysts that we're talking here that are going to drive these procedure volumes, whether it's reimbursement or new product, in addition to some new platform launches that are going to be coming out as well. So what we're doing is we're expanding our commercial footprint in order to support all of that in the coming quarters.

The only thing I would say, Caitlin, is Laura mentioned the huge physician base and the double-digit growth across all call points. As we launch this third breakthrough device, that's a huge asset for us and a huge competitive advantage. Not just for this product, but for future products, but specifically for this product, we do feel great about the position and the ability to really accelerate the adoption for this product even better than, you know, what we've seen with Granite, for example, which was, as we've said in our prepared remarks, one of our fastest scaling products.

Awesome. And then maybe just a question on the future products. You had 2, you noted potentially coming in the next 18 months. Any color on those, such as if they're beyond the sacropelvic anatomy as well, and if they're enabling tech-related, I know you called out software, capabilities as a potential, you know, R&D investment, and just thoughts on M&A, and your interest in that, or is the main focus really on the internal investment?

Yes, good questions. And so the way that we've been expanding is thinking about compromised bone as the focus for the company. And what it's allowed us to do is we already have a very strong organic growth engine within the company. Our product development capability that we have, whether it's engineering or product marketing or regulatory quality, is a very high performing organization. And then we have the support of the clinical work that we've done, very high-quality clinical work, the education that's focused on these new devices and then the support from a reimbursement perspective. So what we're doing is we're going after those broader categories and it's basically filled our product roadmap with these new products. And so as I said, we've really developed this core capability that's been a focus for us. And so what we're really going to do is just to leverage that. And we're going to continue to focus, though, on our existing call points. So we think that that's really important so that we can remain focused and really leverage just the sheer number of surgeons that we're working with. We expect that we'll probably work with close to 3,000 surgeons just this year alone. And by launching additional products that can be used with those existing surgeons and oftentimes in the same cases it gives us the opportunity to significantly increase our surgeon density as well as our average selling price for those different procedures. So you should think along those lines. We are also expanding some of our capabilities. We talked a little bit about AI and software capabilities. We think that's a natural extension of what we've been doing with our anatomy-specific implants. Our TNT implant is an example of that. We're also working with new technologies and new materials as well, which we think are important in some of these markets for these patients with compromised bones. So a lot of different organic activities that we're engaged in. As it relates to M&A, that's really not our focus area. Our focus area is really more around what are we going to do organically to drive growth and accelerate growth.

Our next question will come from the line of Xuyang Li of Jefferies.

I guess to start, I'm just kind of curious, you know, as you expand and increase your profitability, can you maybe talk a little bit about some of the internal focuses that might get more attention versus others? I'm thinking things like you talk about more R&D, so the potential to launch more products and extensions, the potential for commercial expansions. I'm thinking adding more territories as well as partnerships as well as OUS expansion. So where do those rank internally?

I think if you listen to what I just described, what we're really doing is we have developed these core competencies over the last few years in product development, clinical, education, and reimbursement, and so the focus is going to continue to be on driving those core competencies and using them in order to accelerate the growth of the business and get operating leverage as well. So you should expect to continue to see us spend a significant percentage on R&D and that includes our clinical by the way. But you should also expect to see us continue to drive the sales force productivity upward from the $2.2 million that we talked about. And you should expect to just see us leverage a lot of those other capabilities that we've built over time. So I would say that from a profitability perspective, we're going to continue to do what we've been doing. And that's continue to drive the growth on the top line, but drive that down to the bottom line from a profitability perspective. And then, as we said, also have a nice line of sight to free cash flow as well.

Yes, Xuyang, just to provide a little bit more context as well, even though we added more territories in the quarter, you saw productivity improve at the territory level. So as we think about a commercial expansion, that's going to be very deliberate and targeted, and you should still continue to see productivity improve. Now, you know, the initial pace of improvement may be a little bit more moderate, but the benefit of our innovation strategy is by focusing on the same call point, going after known unmet needs, the productivity ramp should be much faster once those territories have been established. So you've seen us use this playbook before, before we launched TORQ and Granite. We did expand our sales footprint, but you saw us really quickly accelerate our productivity from what was sub-$1 million to $2-plus million in a span of three years. This time around with more product launches at a more regular cadence, we feel really good about the ability to continue to drive productivity over time. So that's one aspect. The other aspect, when we think about the spend on the R&D side, that spend, if you look at what we did in the current year as well, you know, we're ahead on the profitability side in the first half of the year. We actually adjusted our OPEX guidance to actually be at 12% growth versus the 12.5% growth while still having the flexibility to invest in some of these growth-driven initiatives, that could have a meaningful impact on the business as early as late '27 into 2028. So we're striking the right balance. Like Laura said, we expect profitability to continue to grow. Our midterm guidance has always been for this year around 1.2, 1.25 operating leverage. Even at the midpoint of our revenue guide, we're ahead of that. And what we've said over time, that revenue leverage would oscillate anywhere between 1.25 to 1.75x, and we feel very comfortable about that.

Okay, great. That's really helpful. And then I guess just on the third breakthrough device and then, you know, you also kind of commented on other new products launching in the next several years. How should we think about these new products expanding your TAM for surgeons as well as number of procedures?

Yes, these new procedure types that we're talking about, they will actually expand our TAM. They are not sacroiliac joint procedures. They're not pelvic fixation procedures. So they are additive to the business. And as I said, this next breakthrough device that we're talking about that's launching later this year is one that we can lean into our existing call point, our existing procedures, and our existing distribution capability as well. So that's a good example of what we're planning to do in our product roadmap. So it's continuing to focus on those existing call points and identify the opportunity. We really have a laser focus on increasing surgeon density. We have such a big asset between our sales force, our hybrid focus, including third-party agents, but then also just the sheer number of physicians that we're working with right now, spine surgeons and interventionalists in particular. It gives us the ability to deliver additional products. And we're not talking about me-too products, these are breakthrough devices addressing unmet clinical needs and developing new markets basically and becoming the market leader in those different spaces. So we're very excited about where we're going and, as I said, everything is falling into place for us from a product perspective and a reimbursement perspective as well.

Our next question will be coming from the line of David Saxon of Needham & Company.

Congrats on the quarter. So, looks like territories ticked up and I think in the past you've talked about getting to 100 over time. So I wanted to ask about how you're approaching hiring and actually getting to 100 in the context of this upcoming product launch and kind of the broader pipeline over the next 18 months. Like, are these independent workflows or are you thinking about kind of accelerating the hiring to capitalize on what you have with this breakthrough device and then these other products you're talking about.

Yes, hiring is definitely a key focus for us right now. As you know, over the last three years, we've kept our number of territory managers relatively constant. And the reason why we did that was the operating leverage that we were able to get on, Anshul mentioned going from $1 million to over $2 million in sales rep productivity over these last few years, and that really was an area of focus for us. And also just leveraging that hybrid organization that we have with our more junior territory representatives covering cases, and then our third party agents as well. But we are going into a different period in the history of the company. And the new device that we're coming out with, this third breakthrough device, has been a very important area for us to build our internal capabilities and to hire additional quota-carrying territory managers. We're doing that in a couple of ways. One way is to promote some of those high-quality territory representatives that have been with the company for some period of time, split the territory, and provide them with their own book of business. And then it's also hiring people from outside of the company as well. So things have changed. We ended the quarter with 93 territory managers. As we said, our plan is to grow that to close to 100 by the end of the year, and you're going to see some more hiring into 2027 too. And the goal is it usually takes around six months for a territory manager in order to get productive and so we are hiring in anticipation of these upcoming launches.

Okay, that's helpful. Thanks for that, Laura. And then on the Smith+Nephew partnership, I'd love to hear kind of the early feedback you're getting. And then in terms of, you know, procedure volumes, how are you seeing those ramp in the new centers they're getting you in? And then just in general, like how long do you expect it to take to fully ramp that partnership and then, your thoughts on how meaningful that partnership could be in terms of revenue contribution longer term, but also in 2027.

Yes, I think this is a very important partnership that we've developed because what we really want to do is focus our existing territory managers on ortho and neuro spine surgeons as well as interventional spine physicians as well. So Smith+Nephew, they really have the depth of relationship with orthopedic trauma surgeons. And it is a different call point. Our TNT product, our TORQ product, the ability to address sacral insufficiency fractures with those surgeons we think is absolutely critical. In terms of the relationship with Smith+Nephew, the partnership is progressing well. The cases are underway. There's a lot of physician engagement that's including both the territory manager from Smith+Nephew as well as our own territory manager and we really like the collaboration that we're seeing between our two organizations. So, operationally we're continuing to train their field organization and expand surgical capacity, additional trays that are getting out into the field, inventory implants that are getting out into the field. But if you think about a normal onboarding cycle with new physicians, I had mentioned that it takes around six months for a territory manager to get up to speed. We're seeing something similar to this with the Smith+Nephew relationship. So really preparing for that seasonally strong fourth quarter is how we're thinking about it.

Our next question will come from the line of Richard Newitter of Truist Securities.

Maybe, Anshul, just while you have all of us here at once, I guess, appreciate the small bump to the midpoint of the guidance range for the year. But for third quarter, within the context of your seasonality comments, it looks like the Street is modeling about $55.5 million. Is that a good place to be in the right level of seasonality and all the push-pulls that we have kind of thinking quarter to quarter? And I guess I'll have to follow up after that. But anything else you'd call out from a quarterly cadence standpoint, too, down the P&L as well?

No, Richard, so obviously, as you know, we don't guide to quarters. But historically, you've seen seasonality in the third quarter. A lot of times it's vacations. It's also conferences that may show up, although this time NASS is in the fourth quarter, not in the third quarter, that used to be the big conference. The way we've assumed it in our guidance is sort of the between 1% and 2% sequential decline just from a seasonality standpoint. Now what we have going on in the business is the strong physician base, the expanded sales force, the opportunity with interventional with the INTRA family of products. And like Laura said, continuing to do the work we're doing with TNT. So I think our focus is how do we work through that seasonality, but right now what's embedded is that 1% to 2% sequential decline.

Okay. And then maybe just for follow-up, I guess as I look at the drivers that you have, it sounds like you're embedding some conservatism in answering Matt's question to the back half deceleration. It sounds like all else equal, If business trends hold, you should do better and you're not factoring in a ton of contribution from some meaningful tailwinds like the reimbursement and new product launch contribution. So I guess the question here is, all else equal, is there any reason why 4Q shouldn't hold if not accelerate from -- shouldn't accelerate from 2Q levels? And then also just if you can answer, do we get concern over utilization trends out there in the recent months, especially for spine and ortho. And if you've seen anything, your quarter-over-quarter unit growth wouldn't suggest that, but I'm just curious if you can just give us a sense of what you're hearing out there from your customers and if there's anything that you would flag.

Yes. No, again, Richard, not getting into quarterly guidance expectation setting, but you're spot on when you think about all the things that we have going on for our business, especially as we approach that October 1, there are quite a few things that could drive upside in the fourth quarter, and that gives us excitement. But some of that is, as we said, we want to moderate our own expectations from a guidance perspective, just given the timing of when some of those come into play. So, the faster-than-anticipated impact of the DRGs, our assumption is it takes some time for the reimbursement to flow through and get reflected in the procedure volume. But in this case, it's a new DRG. It automatically maps all Granite procedures to the new DRG. There is no special coding requirement as such, which was the case in NTAP. That's number one. Number two is, you know, we're prepping for bigger than an alpha launch when we go out with this new breakthrough device product, but our assumption is the fourth quarter will be an alpha launch. But as you've heard from our prepared remarks, it's not going after the same call point. It's a known disease state. It's training light. So based on how we see the alpha launch expand, we could accelerate that in the fourth quarter. That could be potential upside. And then the last thing that our guidance does assume is sort of low-single digit ASP degradation. Part of that is just as we think about some of the things that could ramp in interventional, which uses fewer implants, or in trauma, which uses fewer implants. That's the underlying assumption. Now, you know, this new product that we want to launch is complementary to Granite. It could be used in the same case as Granite. So you could actually have ASP upside. So there's a lot of potential for outperformance, but we want to be really measured because we want to see how some of these play out in the fourth quarter.

And our next question will be coming from the line of Patrick Wood of UBS.

This is Daniella on for Patrick. I wanted to ask you about INTRA Ti. As you touched on in the prepared remarks, one of the biggest benefits of the product is the favorable reimbursement that it has versus its predecessor and peers and that it receives nationwide CMS reimbursement and unlocks 22-some-odd states that were previously uncovered. So I was curious, what has been the interventionalist feedback on INTRA Ti so far since launch? And are you seeing outsized demand in those 22 incremental states? Or is it more broad-based? I have one more.

Yes, thanks for the question. We are excited about INTRA Ti. I was actually at the ASPN meeting a couple of weeks ago and what we have now is the broadest portfolio in SI joint fusion. We're obviously the market leader in this space. We have historically worked with spine surgeons but seeing very rapid growth in interventional and the INTRA product line is driving that. And so the goal that we have is to provide a variety of solutions that meet the needs of the patients, the surgeons, the physicians, the site of service. And so, INTRA Ti has a unique role to play. It is a 27279 product. It is a device, that is posterior. It's single use. So in theory it can be used at all sites of service and by surgeons or physicians alike. And so we're actually pretty excited about what we're seeing with INTRA Ti and the initial reception of it. We do think that some of these reimbursement tailwinds going into 2027 are going to continue to drive adoption of INTRA Ti as a solution for 27279 and it can be inpatient, outpatient, ASC, or in office as well. So all of these things bode well for our business and where we're really seeing all of this is just the rapid adoption by interventionalists of our technologies.

And then just to expand upon the Smith+Nephew partnership, I totally appreciate that it may take up to 6 months to be fully up and running with the territory managers. But can you just provide some context relative to, let's say, a year ago, how many incremental Level 1 and Level 2 trauma centers do you now have access to where you can plug TORQ and TNT, among other products.

Yes, I mean, we don't usually give that specific sort of information, but there's a couple hundred Level 1, Level 2 trauma centers that we're going after, specifically working with Smith+Nephew. It is an area where our sales are small, so there's a lot of opportunity for growth in that particular space. And we do think that there's a really nice symbiotic relationship between us and Smith+Nephew, given the breakthrough device that we have addressing this unmet clinical need with sacral insufficiency fractures, but then their depth of relationship on the trauma side specifically. And ultimately, our goal is to keep our sales force focused on spine and interventional, and then leverage that capability with Smith+Nephew on the trauma side.

Our next question will come from the line of Matt Blackman of TD Cowen.

It's Drew on for Matt tonight. Just first on utilization, Laura, you kind of touched on this through your prepared remarks and some of the answers to the questions, but one of the things you said was we expect case volumes per physician to become an increasing contributor to revenue growth. And you know, just when I look over the last couple years, we've seen 20% active surgeon growth, while utilization is really not much moved much. So maybe what can the business look like heading into 2027? I mean, how much of utilization can be driven from taking the economic arguments off the table, what's the limiting factors for utilization? Just maybe just talk a little bit more about what you're seeing and why investors should have confidence that utilization growth can really kind of finally start.

Yes, I think it's a great question. And Drew, quite frankly, I think it's what I'm most excited about for the business going forward. We have done an extraordinary job of first of all building a first-class sales organization. We've invested a lot in it and developing this hybrid organization where we're working with third party agents and junior reps. It's given us this very broad reach in the United States. And -- but what you've seen, as you said, is you've seen a lot of one-for-one in terms of growth of our surgeon numbers and growth in terms of volume. And this quarter is no exception, an increase of 19% in the number of physicians that did at least one case in the second quarter. It's 1,715 physicians that did at least one procedure with us. That number rivals most of the largest players in this market. And so, you know, where we can really grab operating leverage is by increasing this utilization number. And I do think that the product launches that we're talking about here are particularly important. And I'm not talking about 18 months from now, I'm talking about the next product launch that we are going to as early as October start to see sales of that particular product. Those are procedures that the same surgeon base that we've been growing for all of these years, those surgeons are very excited about using this particular product. And as I said, in some cases they're going to be using it in independent procedures. In other cases they're going to be using it with our existing Granite products as well. So it really represents a very specific opportunity for us to truly leverage utilization and increase our surgeon density.

And just, Anshul, a question to you, and I'm sure you're going to love this one. But just kind of given some of Laura's comments right there. You were just talking too about really your R&D spending. You're going to have more reps into 2027. As we do think about 2027's leverage capabilities, should we be thinking about the lower end of the range that you gave at 1.2? Or is there enough positives, tailwinds that you could actually see maybe something better than that in leverage for next year.

Yes, Drew, you're right. I won't be responding to that question yet because I'm not providing guidance. But, you know, the way the business is set up, a lot of that leverage and the spend that you're seeing happen this year will be reflected in what we can see in the long-term growth rate of the business. A lot of the things that you've heard us talk about today, those are not one-time catalysts, those are multi-year catalysts, whether it's the new products like TNT and INTRA Ti continuing to gain traction, whether it's a better reimbursement for Granite with the new DRGs, the potential for higher SI joint reimbursements at ASCs and outpatient as well as the potential for OBL for 27279. Then you've got the potential for NTAP that we plan to apply for the third breakthrough device that if approved, and we have a pretty good track record of that going effective October 1, 2027. So you've actually got a lot of revenue tailwinds in the business. And that gives us confidence that the operating leverage will continue to improve in the outer years. Now, timing of whether it's 1.3x next year or is it 1.5x next year, will be dependent on where we are in the investment cycle for a product, but we're feeling very good about the leverage continuing to grow, more dollars coming to the bottom line. And we just talked about the cash flow inflection as well, Laura did earlier in the Q&A. That's huge for us. If you look at the last 5 quarters, 4 of the last 5 quarters, we were positive cash flow from operations. And if you look at our cash balance has actually grown year-over-year since Q2 of last year, and that's after making investment in the surgical capacity. So we're not just thinking about the stronger top line. We're thinking about the stronger top line, the continued operating leverage, maintaining the asset-light business so we can get more profit dollars to the bottom line, start moving from adjusted EBITDA to more GAAP profitability, but also then start inflecting on a sustained basis on free cash flow.

I'm showing no further questions. I would now like to turn the conference back to Laura for closing remarks.

I'd just like to say thank you to everybody. I appreciate you participating in our call, as well as your interest in SI-BONE. And we look forward to seeing you all at upcoming conferences and non-deal roadshows. Goodbye.

This concludes today's conference. Thank you for participating. You may now disconnect.