SI Q3 2026 earnings call transcript, November 5, 2026

While during the third quarter, we expanded our N22 line and continue to advance our development programs. I'll start with these two recent product introductions and then walk through updates on our enabling technology platform, our robotics program, and the pipeline projects we outlined last year. First, in early October, surgeons completed the first cases with Inset Go, our next-generation Inset anatomic linoid, consistent with the timing we outlined on our last call. Inset Go preserved. First, the key design elements of our Inset glinoid, including our Inset Plus augmented options, while reducing the surgical steps involved. The surgeon response to Inset Go has been unanimously positive since launch. Second, we received FDA clearance for and launched our N22 humeral head, extending our N22. line for patients with metal hypersensitivity into anatomic procedures and building the uptake we've seen with the N22's glenosphere on the reverse sign. Combined with the other products we've launched over the past year, including our I135 RSX humeral stem and titanium plasma spray, or TP. SDS, reverse base plate, the share of our procedures using at least one new product continue to tick up in the quarter. These launches also continue to support our average selling price. Turning to enabling technology, during the quarter we released a new version of Provoyance, which we consider to be the main engagement center for our surgeons.

That includes new features and security upgrades. These updates also build the planning foundation for our robotic technology known as INSET NEO. We connect to keeping the workflow simple and procedure times predictable for surgeons and enabling them to deliver the most accurate and effective surgery possible. As it relates to INSET NEO, development is progressing ahead of our initial internal timelines, and we remain on track for a planned FDA submission in the first half of 2027. Surgeon feedback on the portable case-by-case model continues to be very encouraging, and we look forward to sharing more. product features, and our commercial approach as we near submission. Now for a few updates across the rest of our development pipeline. Beginning with our inset clutch guide system for anatomic and reverse glenar procedures, clutch is designed to allow surgeons to more effectively transfer and execute their preoperative plan from provoyance in to the operating room through a simple reusable solution, and we expect it to provide a modest uplift to average selling price. With a new version of our provoyance software now in place, we expect to commence a limited user release of clutch in the first quarter of 2027. Second, we commence the limited user release of our subs. Scapularis sparing technique and instrumentation during the quarter. Failure of the subscapularis tendon remains a persistent postoperative complication in anatomic shoulder arthroplasty and the low profile of our inset implant designs makes our platform particularly well suited to a technique that avoids takedown of the tendon.

We're seeing growing surgeon interest and a modestly expanded availability as a limited release continues through year end and we expect the technique to continue evolving with input from our surgeon partners over time. Third, our spectrum of solutions continues to broaden beyond standard products via inset one. patient match additively manufactured iteration of our inset reverse solution purpose built for our risk based approach to preoperative planning. We believe inset one can improve upon existing market designs for challenging and complex patient indications and over the midterm can represent a lower cost higher margin procedure. the majority of patients. Our target timing for FDA submission remains intact for 2027. Augmenting our support for complex surgery even further is our exclusive collaboration with ALM Ortho, a leader in additively manufactured devices for the treatment of severe deformity and complex revisions. This relationship allows us to offer bespoke solutions for highly complex cases where surgeons may not view our current portfolio as optimal. We've been very encouraged by the positive response from our customers since announcing this partnership in September and have previously underestimated the negative impact of not having great solutions in this particular area. The first patients were treated in the third quarter successfully through this partnership and we expect more meaningful revenue contribution beginning in 2027. Taken together, we believe that INSAT-1 and our partnership with ALM-ORSLO substantially improves our ability to drive impact.

and complex surgery. We're also making progress with the soft tissue device manufacturer we partnered with last quarter. Product is on order and we expect to perform our first surgeries with these devices around year-end. This represents an important first step in adjacent soft tissue procedures performed by the same high volume shoulder specialists. We serve today. And finally, I want to provide a brief update on the clinical evidence front. Enrollment in our clinical data registry continues to exceed our expectations, now approaching around 900 patients enrolled across anatomic and reverse configurations. As we shared last quarter, we're partnering with centers that hold law. large bodies of retrospective data to accelerate our pathway to publication. The first of these sites has now received IRB approval, which will allow us to incorporate approximately 250 retrospective patients and meaningfully expand our base of two-year data. We remain encouraged by the early signals we've seen and look forward to sharing more. To help illustrate the sort of confidence in our products we believe our registry will ultimately validate, I'd like to share recent feedback from one of our leading surgeon partners in New York on his experience with our reverse system. In his words, I did roughly 50 reverses from a single competitor and had five stress factors right before switching to SI. In two years, I've done over 250 SI reverses and I had yet to see one. While anecdotal, this reflects the type of feedback we consistently hear from surgeons and the differentiation we've designed into our reverse platform.

With that, I'll now turn the call over to Jeff to review our full third quarter results and discuss our updated full-year 2026 outlook in more detail.

Thanks, Rob, and good afternoon, everyone. As Rob mentioned, net revenue for the third quarter of 2026 was $16.2 million, a 38% increase from 11.8 million. in the prior year. Growth was driven primarily by a 34% increase in implant systems sold, aided by our powerful business development system, and reflecting new surge in additions and higher utilization among existing customers, along with a year-over-year increase in average selling price. Growth was a year-over-year increase in growth margin for the third quarter of 2026 was 78.5% compared to 76.2% in the prior year. The year-over-year increase reflects higher ASPs and the cost reduction programs now flowing through our product costs. Selling, general, and administrative expenses in the third quarter of 2026 were 78.5%. 17.1 million compared to 15.1 million in the prior year. The increase in SG&A expenses was primarily driven by increased headcount in our commercial organization and higher variable selling expenses partially offset by lower legal related expenses. As announced in early September, we entered into a settlement agreement to resolve all outstanding patent litigation. Research and development expenses in the third quarter of 2026 were 3.2 million compared to 1.5 million in the prior year. The increase was primarily driven by investment and new product development efforts, including substantial work related to the robotics platform.

Thanks, Jeff.

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Our next question is from Ryan Zimmerman with U.S. Bancorp, BITG. Please proceed with your question.

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There are no further questions at this time. I would like to turn the call back. Over to Mr. Ball for closing remarks.

Thanks, everybody. I appreciate your participation, engagement, and support. Have a great afternoon. I look forward to talking to you again in a couple months.

This concludes today's teleconference.

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