CVRx, Inc.

Greetings and welcome to the CVRx second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Mike Valli, with ICR Healthcare. Thank you. You may begin.

Good afternoon. Thank you for joining us today for CVRx's second quarter 2026 earnings conference call. Joining me on today's call are the company's President and Chief Executive Officer Kevin Hykes and Chief Financial Officer Jared Oasheim. The remarks today will contain forward-looking statements, including statements about financial guidance. These statements are based on plans and expectations as of today, which may change over time. In addition, Actual results could differ materially due to a number of risks and uncertainties, including those identified in the earnings release issued prior to this call and in the company's SEC filings. I would now like to turn the call over to CVRx's President and Chief Executive Officer, Kevin Hykes.

Thanks, Mike. Good afternoon and thank you for joining our second quarter 2026 earnings call. We delivered total revenue of $15.7 million in the second quarter, Demonstrating growth of 16% over the same quarter last year, with a gross margin of 87%. Despite the positive quarter, we are seeing signs that the back half of the year will not be as strong as the first. As a result, we've lowered our revenue guidance for the year. My remarks today will cover three things. What is driving this change in outlook, what we're doing about it, and the longer-term positive trends that we're seeing. We ended the quarter with 56 sales territories in the U.S. flat compared to the end of the first quarter. It is important to note that roughly 60% of quota-carrying territory managers have joined us in the last 18 months, as we have worked to build the right organization for this next phase of growth. This rapid pace of hiring has strained our onboarding and training processes, and the ability of our area sales directors to spend the time necessary to accelerate these new team members up the productivity curve. The scale of the turnover, the slower pace of the territory manager productivity ramp, and the concentration of these new hires in a subset of our regions are the primary factors behind today's guidance update. Importantly, these challenges are not uniform across the business. In the regions where we have limited turnover and stable, seasoned leadership executing our program development selling strategy, we're seeing strong double-digit growth, which indicates to us that when we have the right conditions in place, our strategy is indeed working. The Salesforce productivity challenges that we are facing are concentrated in specific regions that have a combination of new leadership and the highest turnover as a result of our Salesforce restructuring over the last 18 months. The combination of these two factors is distracting these regions from fully executing our market development plan, offsetting the success that we're seeing elsewhere in the country. Closing that gap is the focus of the steps that I will walk through next. First, we've continued to improve our hiring process and refine our hiring profiles to make sure that the people we bring on are the right fit from day one, limiting early turnover due to skills or expectations that are not aligned. Second, we are investing significantly in onboarding and training with new resources, roles, and materials designed to get reps productive more quickly. This includes a significant strengthening of our curriculum focused on practical account access skills as well as extending the onboarding process beyond the initial three-month didactic phase to an additional three-month hands-on field mentorship. The objective of these changes is to accelerate time to productivity and to reduce sales director distraction by improving the readiness of our territory managers as they join their teams in the field. Third, we're creating multiple new field-based roles specifically focused on freeing up time for our area sales directors to more fully engage in coaching and developing the territory managers in their regions. This includes field-based reimbursement and business management personnel, as well as two vice president level leaders to better support the area sales directors themselves. These additions are being funded through a reallocation of resources, not incremental spending. And as Jared will point out in his comments today, we are actually lowering our operating expense guidance for the year. And finally, we are redeploying senior leadership talent to roles that can have the fastest and most significant impact on our commercial execution. Our Chief Marketing Officer, Paul Verrastro, one of our most experienced and respected leaders, is moving into a new role providing direct support to our field teams to further accelerate the productivity of our new territory managers and area sales directors. Patrick Lyon, a key addition to our marketing team in Q4 of last year, is being promoted to lead our marketing organization, and we are confident in his ability to build upon Paul's outstanding contributions to date. The second factor that impacts our view on the rest of the year is reimbursement. While there are a number of positive trends, We continue to be challenged by the change in behavior from our largest Medicare Advantage payer. For many quarters, this payer approved close to 80% of our prior authorizations within 30 days of submission, many within days upon receipt. In February, this payer implemented AI-based prior authorization tools which resulted in an immediate increase in initial denials on the basis of administrative omissions. This was an attempt to comply with the shortened federal requirements for prior authorization review that went into place in January. This caused their 30-day approval rate to fall sharply in February and March to roughly 25%. Our own AI-based tools discussed on our last call helped bring that rate back up to approximately 40%, but this payer has since introduced further new tactics for denying claims, and the rate has now fallen back below 30%. As a result, providers who had grown used to approvals from that payer within a matter of days are now waiting far longer and seeing meaningfully lower initial approval rates. That shift has understandably made some physicians more hesitant to recommend barostim therapy to their patients covered by that plan. Our approach to dealing with this headwind is the same one that ultimately led Humana to issue a favorable written coverage policy earlier this year. We are committed to appealing every prior authorization denial through every stage in the process and to continue these appeals through to an administrative law review if necessary. Consistent advocacy on behalf of patients and the successful pursuit of appeals through to the final administrative law stage is what ultimately incentivizes a payer to discuss a formal coverage policy. Outside of this specific payer, the rest of our reimbursement picture is strong and getting stronger. Our overall 30-day Medicare Advantage prior authorization approval rate was 60% for the second quarter, as compared to 44% in 2025. The Humana coverage policy is helping drive this progress, with approval rates now above 90%. We now cite the Humana policy in every prior authorization that we file and appeal across every payer, and we are referencing it directly in our ongoing coverage discussions with other national and regional payers. The Category 1 code implemented in January has further stabilized our experience with traditional Medicare, with approximately 96% of submitted claims for the Barriston procedure now being paid across all seven Medicare administrative contractors. On the outpatient side, CMS's proposed rule for the 2027 outpatient prospective payment system continues to support barostems placement in new technology APC 1580 at approximately $45,000 per procedure. We were also pleased to see the final inpatient prospective payment system rule increase the inpatient payment rate for the procedure from $43,000 to $45,000 effective October 1st. The previously discussed creation of the field-based reimbursement manager roles is designed to increase our field reimbursement support and to move it closer to the point of customer contact in the field. I will now shift to the longer-term positive trends that we are seeing in the business. First, we continue to believe that our focused playbook is the right one, targeting the right centers and building sustainable programs based on a redundant network of clinical and administrative stakeholders and a defined barrow stem workflow. As I mentioned earlier, our regions with stable seasoned leadership and limited turnover are proving the impact of this approach and our strong growth in these regions is the clearest validation we have that the strategy itself is working. Our work is now focused on bringing the remaining regions up to that same standard and we believe the actions we're taking and the investments that we are making will get us there. On the clinical evidence front, I'm pleased to share that the BENEFIT-HF trial is tracking ahead of our internal expectations on both center activations and patient enrollment. We are also significantly increasing our investment in real-world evidence datasets, which we believe can further strengthen the clinical evidence base supporting barostim. We now have multiple analyses from these data underway, with the first publications expected this fall. In addition, These data could potentially support an expansion of our indication and label, leveraging the new FDA real-world evidence pathway. We believe that this could potentially be a viable regulatory pathway for CBRx and we will keep you updated on this effort as it progresses. Before turning the call over to Jared, I'd like to provide an additional update. In May of 2026, we received a civil investigative demand from the U.S. Department of Justice Thank you, Kevin.

Revenue in the U.S. was $14.8 million, an increase of $2.5 million, or 21%. Revenue units in the U.S. totaled $466 compared to $391. The increases were primarily driven by continued growth in the U.S. heart failure business as a result of the expansion into new sales territories, new accounts, and increased physician and patient awareness of barostem. We ended the quarter with a total of 258 active implanting centers as compared to 240 as of June 30, 2025. As of June 30, 2026, the number of sales territories in the U.S. is 56 as compared to 47 as of June 30, 2025. Based on the current tenure of our team and as we focus on driving productivity in our existing territories, we are not anticipating adding any more sales territories for the balance of the year. Revenue in Europe was $0.9 million, a decrease of $0.4 million, or 31%. Total revenue units in Europe decreased to 40 from 61 in the prior year period. The number of sales territories in Europe remained consistent at 5. Gross profit was $13.7 million, an increase of $2.3 million, or 20%. Gross margin increased to 87% compared to 84% a year ago. R&D expenses increased $0.7 million to $3.1 million. This change was driven mainly by an increase in headcount expenses and clinical trial expenses. SG&A expenses increased $0.3 million or 1% to $23.6 million. This change was primarily driven by an increase in non-cash stock-based compensation expenses and legal expenses. partially offset by a decrease in advertising expenses and travel expenses. Interest expense increased $0.1 million to $1.6 million. This increase was driven by interest expense on the increased borrowings under the term loan agreement with Innovata's capital partners. Other income net decreased $0.5 million to $0.6 million. This balance consisted of interest income on our interest-bearing accounts. The decrease was primarily driven by the lower cash balance. Net cash used in operating and investing activities was $8.9 million as compared to $8 million. Now turning to guidance. For the full year of 2026, we now expect total revenue between $58 and $60 million. We now expect full year gross margin between 86% and 87%. We now expect operating expenses to be between $99 and $101 million. For the third quarter of 2026, we expect to report total revenue between $13.5 million and $14.5 million. With that, I'll now turn the call back over to Kevin for closing remarks.

Before we close, I'd like to provide an update on our leadership team. We recently welcomed Matt Klein as our new Vice President of Legal at CVRx, a seasoned medical device legal executive, most recently with Silk Road Medical and Boston Scientific. We're also making progress on our search for our next Chief Financial Officer. Jared has been an important part of this company for over a decade and we're pleased with the quality of the candidates who are interested in succeeding him in this role. While we're pleased with the performance year to date, we are not satisfied with the outlook for the balance of the year and we clearly have more work to do as it relates to sales execution. We are working hard to improve the hiring and onboarding process for the sales team as well as improving sales director bandwidth and support with new field-based roles to accelerate more of our sales reps up the productivity curve. Despite these short-term sales execution challenges, we remain confident in the fundamentals of this business and the unique opportunity that we have to introduce device therapy to treat a disease that has been managed exclusively with pharmaceuticals for over 50 years. Our highly differentiated therapy is based on the same fundamental and accepted mechanism of action that underlies today's guideline-based pharmacologic therapy. We have a $10 billion market opportunity with little to no device-based competition today or on the near-term horizon. While admittedly bumpy, we are nonetheless making steady progress on patient access, the most fundamental issue facing any new therapy, with a recent Category 1 code steadily improving Medicare Advantage approval rates, consistent payment for traditional Medicare patients, and our first ever written coverage policy from the second largest Medicare Advantage payer in the United States. This coverage policy opens the next chapter in our patient access work and facilitates a very different level of conversation with other Medicare Advantage and commercial payers, paving the way towards additional coverage policies in the future. We've also meaningfully strengthened the evidence base underlying barostim therapy over the last 18 months, including significant publications on hospitalization reduction and other important clinical and physiologic endpoints. We have numerous additional publications on the horizon and are seeing enthusiasm from and positive engagement by the heart failure community on the benefit HF trial. The largest therapeutic device trial in the history of the field, which, if successful, will triple our total addressable market. Changing any disease treatment paradigm is difficult, particularly in a conservative specialty like heart failure, but we are making progress each and every day. With the right commercial structure and stronger sales execution, the momentum we are building in patient access and evidence, and a number of positive catalysts on the horizon, We are confident that we will ultimately be successful. Before we close, I'd like to thank the employees of CVRx for their persistence and commitment to supporting the more than 7,000 patients who have benefited from barostim therapy, as well as the many more whose lives can be positively impacted. We are working as one team to support our sales leaders and their field teams to address the headwinds that we've discussed on this call. The consistent and undeniable impact that our therapy has on the lives of people suffering from heart failure is what drives and inspires our team each and every day. Now, I'd like to open the line for questions. Operator?

Thank you. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Brandon Vasquez with William Blair. Please proceed with your question.

It's matched on for Brandon. Can you hear me all right?

Yes.

Thanks for taking the question. Kevin, I guess I'll just start on the commercial front. Earlier in your prepared remarks, you called out the regions with higher turnover. Is this additional turnover outside of what you guys are seeing normally? And I guess if so, how many of these reps leaving are those you guys were expecting to be fully ramped by now? I guess I'm just trying to get a feel for where we now stand in the ramp of those existing reps since the commercial realignment and the ramp of new ones going forward.

Yeah, thanks, Max. So I would say it's a combination of things. The overall scale of the turnover that we've experienced over the last 18 months as part of this transition, including continuing turnover in Q2 that is higher than we would have liked, has led to some of these challenges. And I can't characterize the percent that are more recent hires. The bulk of them are from the earlier years of the company. But this is the dynamic that's putting pressure on our onboarding and training processes and that is leading to slower productivity ramps than we had anticipated seeing from this group, both in recently activated territories that aren't ramping up as quickly as they should or historically have, as well as our ability to move some of these new hires from the bench into new active territories. So as Jared mentioned, or as we mentioned on the call, the dynamic is in fact concentrated in a handful of regions who unfortunately also have our least tenured leaders leading those regions. So it's a bit of a double whammy.

Got it. And then, Jared, maybe one for you, Kevin, maybe you as well. But just on total center ads, you know, on a net basis, you guys only added one since Q1. How should we think about this for the remainder of the year, you know, considering these Salesforce, you know, changes, and you guys are still likely closing those lower tiered accounts, you know, through the remainder of 2026? Thanks for taking the questions.

Hi, Max. Thanks for the question. Yeah, so with the one center ad, that wasn't too much of a shock to us. Again, our strategy has been focused on driving deeper adoption within the centers that are active. obviously there's been a bit of change out as we continue to add the right types of centers and sunset some of those dabblers that we've talked about in previous quarters as we look to the balance of the year a large portion of our growth in centers comes along with new territories as we've talked about in the past each territory manager is directed to activate somewhere in the range of three to five centers If we now for the balance of the year do not anticipate activating any new territories, it's unlikely we'd see net growth in that center number for the balance of the year. But that also aligns with this strategy of driving deeper adoption at each one of these centers.

Thank you.

Our next question comes from the line of Chase Knickerbocker with Craig Hallam Capital Group. Please proceed with your question.

Good afternoon. Thanks for taking the questions. Kevin, maybe it would be helpful for us if you could kind of present us with some like a cohort of sorts as far as kind of the reps where you're still seeing that, you know, kind of double digit growth that you mentioned, kind of, you know, what portion of your rep base are you still seeing that in? You know, what is the characteristics as far as kind of tenure, etc.? ? and then kind of compare that to the territories in which you're having problems as far as kind of how distinct that performance is. If you could get into a little bit more detail there, I think that would be helpful to kind of frame up the issue. Thanks.

Yeah, thanks, Chase. Yeah, so in the majority of our regions, we have relatively limited turnover over the last 18 months. In those regions, we also have our most tenured leaders. And so what we're seeing there is when they are applying our program development strategy, and they're focused on four key selling activities that we've identified as the core elements of our pipeline. They are growing in the strong double digits, consistently so. Conversely, in the regions where slightly less than half, where we have the highest rates of turnover, which are well north of 50% in some cases, and we also have our least tenured leaders, we are seeing negative implant growth rates year to date, effectively offsetting the strong growth we're seeing in the regions that are, in fact, executing our strategy. So pretty stark differences in turnover rates, in tenure, in leadership, and in the execution of the strategy itself. We track those four metrics very closely so we can tell where the strategy is, in fact, being delivered and where we're still struggling to do that. and I should have mentioned earlier, in effect, we have overwhelmed, and I take full responsibility for this, we have overwhelmed our ability to onboard this many people simultaneously or over a three or four quarter extended period. And we are not seeing the productivity ramp that we were used to seeing under more stable conditions. And that is what's driving these challenges. Unfortunately, as I said, it's heavily concentrated in a number of regions where we're also onboarding new leaders. So that's made the problem worse.

Got it. Jared, if we kind of go over to OPEX guidance, is it fair to say that the majority of the cost savings in that guidance is from the kind of removal of the expected hiring of those additional sales territories or kind of where else is that cost savings coming from? And then kind of the second piece to that is just, you know, where you kind of think there might be some additional savings to find as we think about the cost base kind of going into next year. Thanks.

Yeah, happy to take that question on APEX, Chase. Just to close out maybe a little bit on what Kevin mentioned as well is I think that's one of the key points for us is continuing to highlight that in those five regions with stable leaders and with limited turnover where we're seeing this strategy play out, we are seeing those high double-digit growth. So I think highlighting that piece of it, that it is working in the areas where we have stability, is really important. I think as we turn towards OPEX, so seeing a reduction in the top-line guidance, That is partially responsible for driving down the OpEx guide, but not wholly. We've also pulled back spending in certain other projects within marketing and development areas so that we could redeploy some additional resources, as Kevin mentioned in the prepared remarks, to sales to help these reps get up that productivity curve a little bit faster. So that's supporting them in the onboarding process and the training process. and through our sales leadership team. So there is partially or a partial connection to seeing a reduction in OpEx to bringing down the top line guide. But there's also some intentional reductions in spending that are being brought forward there. As we think about 2027, again, we're looking for leverage in this model as we continue to grow this business. I think we've seen that in the front half of this year as we've grown top line at a significantly higher rate than what we've grown OpEx year to date. That will continue to be a focus for the company as we move into 2027 and beyond.

Thank you, guys.

Thank you. Our final question comes from the line of Robbie Marcus with JP Morgan. Please proceed with your question.

Yeah, thanks a lot. With now basically three years in that $50 to $60 million revenue range and expenses, you know, plus or minus $100 million a year, you know, are you coming to a point where it's not an execution issue but more a demand issue? and maybe the follow-up to that question is, you know, given where the cash balance is and the cash flow burn where you stand today in the lower guidance, how are you thinking about cash needs moving forward? Thanks a lot.

Yeah, thanks, Robby. So it's Kevin. I'll maybe take the first part of that question. So we believe and we believe where we are applying our strategy of driving deep adoption and creating sustainable programs as we lower the three barriers to adoption for this therapy, evidence, awareness and patient access, we are in fact growing this business. We know that this therapy works. We are dramatically increasing the evidence that proves that it works. We are convincing payers, including Medicare now paying at 96%, that this works and is an important therapy for these patients. Market development is difficult in any setting. It's particularly difficult in heart failure. These are among the most conservative cardiologists or physicians, for that matter, that I've ever worked with. So it is not easy, and it's not linear, and it's tough work. But we believe we have a very important therapy that can help a significant number of patients in a disease state that's been treated with drugs for 50 years. So unfortunately, I believe our problem today is in fact execution. And the demand piece of this is getting better and better with each successive improvement in patient access and each additional publication that we produce demonstrating why it works. So I guess on some levels, the execution piece, I take responsibility for that. That is fixable and we are going to fix it. And I can't necessarily say that about evidence or patient access. So thankfully, in those tough areas, we are making progress. And what we've got here is an execution problem that we need to fix. And we are confident we have the right plans in place to do that.

And Robbie, I can cover the second part of the question related to cash. So as of today, we believe we have at least 18 months of cash left on the balance sheet and $40 million remains undrawn under our debt facility. As we've said, you know, for several quarters, maybe even more than a year at this point, we may be opportunistic to raise funds to bolster the balance sheet to continue to invest in this business. But at the same point, we're going to be very thoughtful on where we're spending our money to make sure that this cash lasts as long as possible here.

Appreciate it. Thanks a lot.

Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Hykes for any final comments.

Thank you, operator, and thanks to everyone for joining today. We appreciate your continued support and look forward to updating you on our progress next quarter.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.