Shoulder Innovations, Inc.

Please stand by. Welcome, ladies and gentlemen, to the fourth quarter and full year 2025 earnings conference call for shoulder innovations. At this time, all participants are in a listen-only mode. At the end of the company's prepared remarks, we will conduct a question and answer session. Please note that this conference is being recorded and will be available on the company's website for replay shortly. I would now like to turn the call over to Sam Betzinger, Investor Relations at Gil Martin Group for a few introductory comments. Please go ahead.

Good afternoon and thank you for participating in today's call. Joining me from Shoulder Innovations are Rob Ball, Chief Executive Officer, and Jeff Points, Chief Financial Officer. Earlier today, Shoulder Innovations issued a press release announcing financial results for the quarter and year ended December 31, 2025. A copy of the press release is available on the Investor Relations section of the company's website. Before we begin, I'd like to remind you that management will make remarks during this call that constitute forward-looking statements within the meeting of federal securities laws and that these are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section of our most recent annual report on Form 10-K and our other filings with the Securities and Exchange Commission. Additionally, during this conference call, the company will discuss certain financial measures that have not been prepared in accordance with GAAP. This non-GAAP information should not be considered in isolation or as a substitute for or superior to results prepared in accordance with GAAP. Please refer to the tables in our earnings release for reconciliation of these measures to the most directly comparable GAAP financial measure. This conference call contains time sensitive information and is accurate only as of the live broadcast today, March 10, 2026. Shoulder Innovations disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. With that, I'll now turn the call over to Rob.

Thanks, Dan. Good afternoon, everyone, and thank you for joining us today on our fourth quarter and full year 2025 earnings call. We're very excited to share the details of our exceptional fourth quarter performance and review recent progress against our key priorities, which are driving continued momentum 2025 was a transformational year for shoulder innovations, and I'm proud of our team's many accomplishments. We continued to add new surgeon customers at an accelerated pace, drove rapid commercial adoption of our advanced implant systems, and solidified our position as an innovation leader in the shoulder space, all while beginning our journey as a public company. Most importantly, we continued to positively impact thousands of patients and the shoulder specialists who care for them. Revenue for the fourth quarter of 2025 was $14.4 million, reflecting an increase of 65% year-over-year and 23% sequentially. For the full year, revenue totaled $47.3 million, reflecting an increase of 50% over 2024. We are very pleased with this performance, which was driven by continued market adoption of our implant systems across a growing base of surgeon customers. Q4 gross margin of 76.7% and full year 2025 gross margin of 76.5% were also strong and reflected our commitment to enhancing profitability. We continue to take deliberate actions to drive further improvement in gross margin and believe there is additional opportunity for expansion going forward. Our performance and accelerating business momentum exiting the fourth quarter leave us highly confident in our ability to sustain our commercial progress into 2026 and beyond. As a result, we are initiating full year 2026 revenue guidance of $62 to $65 million, representing growth of 31 to 37% year over year. Our ability to achieve this growth in 2026 is grounded in the same strategic priorities that we discussed in our last call. These priorities are designed to fuel continued above-market growth and commercial momentum, and as a reminder, include driving adoption among new surgeons, increasing penetration in our existing surgeon customer base to increase procedural volume, and adding products to our portfolio to address the remaining unmet needs of patients and surgeons. This includes both expanding indications and continued enabling technology. We made meaningful progress across each of these priorities in the fourth quarter and throughout 2025. I'll begin with our efforts to drive adoption among new surgeons. As a reminder, our commercial model combines a nationwide network of independent distributors with a dedicated W2 commercial leadership team focused on identifying and converting high volume shoulder specialists using our proprietary business intelligence platform. Of the approximately 15,000 U.S. surgeons performing shoulder arthroplasty procedures annually, roughly 1,800 are high-volume specialists who account for the majority of procedures. We segment these surgeons, these high-volume surgeons, into prospects, contender, and core, with core and contender surgeons generating approximately 95% of our revenue, supporting both visibility and durability in our growth models. We're pleased to announce that we ended 2025 with 134 core and contender surgeons representing a year-over-year increase of 61%. As a reminder, we will provide our core and contender surgeon count on an annual basis moving forward. We consistently expanded this base of core and contender surgeons each quarter through 2025 and did so at an accelerating pace driven by both enhanced awareness of the shoulder innovations brand and the focused execution of our commercial leadership team, leveraging our proprietary business intelligence platform in identifying and converting high volume shoulder specialists. Specific to our commercial leadership organization, we have more than doubled the size of this team since the beginning of 2025. To support increased scale of our business, as these leaders continue to ramp, they are becoming more productive and building deeper relationships within their territories and we expect these trends to persist through the year. Speaking of territories, in the fourth quarter, we secured quality representation and hospital approvals in several new key territories that represent largely untapped greenfield opportunities, and we expect to begin activating these markets over the course of 2026. Looking ahead, we see meaningful opportunity to further enhance the efficiency and reach of our commercial organizations. As we build upon our early market share gains, we plan to continue investing in our commercial infrastructure to support sustainable growth and driving greater predictability in our business. Leveraging our independent distributor network will continue to create a clear opportunity for operating leverage as we scale, a factor we consider critical to our long-term success. Importantly, our investment in headcount also reinforces our second strategic priority by driving higher utilization and increased procedural volumes among our existing surgeon base. In the fourth quarter, total implant volume increased 62% year-over-year to 1976 units, bringing full-year 2025 implant volume to 6,506 units, an increase of 50% over 2024. Consistent with prior quarters, this performance was driven by continued utilization gains among existing surgeons particularly those onboarded in late 2024 and early 2025, as well as newly added surgeons ramping more quickly and becoming productive sooner. To further drive procedural volume growth, we also remain focused on transitioning surgeons over time from prospect to contender to core by increasing penetration and utilization. Throughout 2025, we made meaningful progress in shortening the time surgeons spend in each of those stages, For example, from Q1 to Q3, we reduced the time to convert a new surgeon from prospect to contender by 41% and from contender to core by 43%. The cumulative effect of this is significant. New surgeons who entered the pipeline in Q3 reached core status roughly 40% faster than those who entered in Q1, a strong signal that our commercial engine is maturing and becoming more efficient with scale. A key driver of this success is our surgeon to surgeon education program facilitated by our customer experience and medical education team, an integral part of our broader commercial organization. That program continued to gain momentum in the second half of 2025 as our team conducted 48 commercial company-sponsored education events during Q3 and Q4, including cadaveric and skills labs, regional events, and our second national shoulder arthroplasty symposium of the year. Many of these events, including the cadaveric and skills labs, were mostly with surgeons who are newer to SI, and we believe that organic advocacy derived from these peer connections helps drive real work success positioning us to benefit from the natural network effects within the shoulder surgical care community. The national symposium in particular is a noteworthy success story. In November, we hosted our second national shoulder arthroplasty symposium of the year, focused on learning and education around our ecosystem. The event, which was the largest in our history, also included wet lab surgical training as well as didactic sessions, which were all designed, written, and proctored by surgeons. During our Q3 call, we highlighted this event and discussed the feedback we received from surgeons around the value SI provides in creating this community, as well as the positive impact it's having on their practices. In the months since that symposium, we are seeing more clearly how meaningful that impact has been, as the particular cohort of surgeons who attended the meeting have since increased their monthly utilization with SI products by approximately 40% over the average monthly volume measured in the 12 months prior to the event. We are thrilled with this response and believe it validates the incredible work of our CEME team in creating a true differentiator in the marketplace that's driving tangible results. We're hosting our next national symposium in May, and as of this moment, enrollment is already at capacity and by far represents record attendance over the four years we've hosted these events. We look forward to sharing new insights with you after this event and other educational meetings that our commercial team has planned for 2026. To ensure we continue to equip our growing surgeon base with a comprehensive, best-in-class suite of shoulder surgical care solutions, our third strategic priority is focused on developing and launching new technologies to address the remaining unmet needs as patients and surgeons. We made significant progress on this front in the fourth quarter and into early 2026. As part of these efforts and consistent with our broader strategy of introducing complementary enabling technologies to support the full continuum of care and shoulder surgery, in December, we announced a strategic partnership with Interventional Systems, a developer of robotic solutions for minimally invasive surgery, to introduce a shoulder-specific micro-robotic solution designed to enhance surgical precision, workflow efficiency, and enable exciting new clinical approaches. This solution is designed to integrate directly with our Provoiance platform to deliver a seamless enabling technology experience from preoperative planning through interoperative execution, allowing surgeons to plan in Provoiance and deploy that plan in the operating room as a single connected workflow. Importantly, Provoiance itself is already used in virtually all of our implant procedures, making it a routine part of surgeon workflow even before the added benefit of robotic surgery. Beyond its integration with Provoyance, there are two other key benefits of this robotic system that we believe will be meaningful differentiators in the marketplace. The first is its form factor, which drives an entirely new economic model. The robot is designed to be transported directly into the operating room as a portable unit on a case-by-case basis, enabling any OR to be immediately robotic enabled without the capital burden logistical constraints, or steep learning curve associated with traditional systems. This robotics as a service model enables maximum flexibility and fundamentally disrupts the financial relationships that have historically existed between healthcare providers and traditional surgical robotic companies. This economic model is particularly relevant as shoulder procedures continue to shift towards the ambulatory surgery centers where cost efficiency and ease of implementation are critical We believe this focused approach strengthens our position relative to larger competitors whose legacy robotic platforms were not designed for this setting. As an example, at the end of 2025, over 30% of our procedures were performed in an ambulatory surgery center setting, outpacing the broader market where we believe penetration sits in the mid to high teens. We expect this trend to be durable as surgeons continue to direct more volume to ASCs where they have greater ownership and influence. With the added benefit of micro-robotic technology specialized for shoulder arthroplasty, we believe we are best positioned to capitalize on this ASC shift. The second key benefit of this robotic solution is that it requires very minimal change to the current surgical workflow, unlike other systems which require fundamental changes in both workflow and bone preparation. A procedure planned with this robotic solution will look identical to the one planned without it, but robotic integration will ensure a faster and more accurate execution. Surgeons will cut and operate as they do today, just simply with greater confidence and accuracy. We have already completed several initial cadaveric sessions, which have validated these benefits in a clinical setting. In addition, feedback from our surgeon partners has been very strong, validating our understanding of the market landscape and confirming our approach will hit the mark. These recent actions increase our conviction around the economic and competitive opportunities associated with this technology. Beyond the near-term benefits, we are excited about the longer-term innovation cycle that robotic-enabled surgery can unlock, including new surgical approaches and implant technologies that we believe have the potential to be truly transformational for the shoulder arthroplasty market. To understand why, it's important to understand that many of today's implant systems are fundamentally designed to compensate for the inherent uncertainties of the surgical process, variability that surgeons and engineers have historically managed through hardware rather than precision. Our technology platform changes that equation. By using robotics to address these uncertainties directly, we can now think about shoulder arthroplasty in an entirely new way one where implant design is no longer constrained by the limitation of manual surgery. We've made significant progress in defining what the future looks like, and we believe the opportunity is substantial. We also remain focused on expanding our product portfolio and capabilities with the goal of providing a comprehensive suite of solutions that cover 100% of shoulder procedures performed. To that end, We recently began a limited user release of our new inset I-135 RFX humeral stem product, the third addition to our I-series humeral stem product line in as many years. The I-135 is currently indicated for primary revision in certain fracture total shoulder arthroplasty procedures, meaningfully expanding the range of cases our surgeons can treat with our ecosystem. As the product progresses through limited release, Our focus will be on ensuring reproducibility before transitioning to full launch. So far, early surgeon feedback has been very positive, and customers highlighting its ease of use, straightforward surgical technique, and seamless integration with our two-trace instrumentation system. Separately, we also commenced a limited user release on our N22 glenospheres, the first introduction in our new line of glenoid technologies designed for patients with metal hypersensitivity who may experience adversity associated with allergic reactions from metal implants. Both patient and surgeon benefits, both the I-135 and new head products are also associated with higher ASPs, making them constructive to gross margin as volumes continue to build through full commercial launch. Before turning the call over to Jeff, I want to briefly highlight an update on the clinical evidence front We recently reached enrollment of over 300 patients in our clinical data registry, which we initiated in late 2024 to evaluate short- and long-term real-world clinical and radiographic outcomes, as well as implant survival of our implant systems for both anatomic and reverse shoulder osteopathy. With a target enrollment of 2,500 patients and follow-up extending to 10 years postoperatively, We believe this registry will generate a robust body of real-world evidence that will further validate the clinical performance of our ecosystem and strengthen our position with surgeons, health systems, and payers. We will provide updates over time as prices progress through the follow-up windows and data is available to share, but we are pleased with enrollment to date is progressing in line with our expectations. With that, I'll now turn the call over to Jeff to review our fourth quarter results in more detail and discuss our outlook for 2026.