Shoulder Innovations, Inc.

Please stand by. Welcome, ladies and gentlemen, to the first quarter 2026 earnings conference call for Shoulder Innovations. At this time, all participants have been placed in a listen-only mode. At the end of the company's prepared remarks, we will conduct the 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 Bensinger, Investor Relations at Gilmartin 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 first quarter ended March 31, 2026. 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 meanings 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 full 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 in 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, May 13, 2026. Shoulder Innovations displays 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 turn the call over to Rob.

Thanks, Sam. Good afternoon, everyone, and welcome to our first quarter earnings call. I'm very pleased to report that 2026 is off to a strong start. Through the first few months of the year, we've rapidly onboarded new surgeons, deepen utilization within our existing customer base, and achieve several important product milestones. This performance reflects intensifying momentum across our entire organization, which enabled us to deliver first quarter net revenue of $16.7 million, an increase of 65% year over year, and 16% sequentially. First quarter gross margin also came in strong at 77.7%. and we see further opportunity for expansion as the organization continues to mature. Given the strength of these results, our growing scale, and the efficiency of our commercial organization more broadly, we have increased conviction in the trajectory of our business And as a result, we are raising our full year 2026 net revenue guidance today to a range of 65 to 68 million, representing growth of 37 to 44% over 2025. This compares to our prior range of 62 to 65 million, or 31 to 37% growth. Jeff will provide additional color on our outlook shortly. Our ability to deliver this growth in 2026 is grounded in the same three strategic priorities we discussed in our last two calls, which 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 enabling technologies. We've made meaningful progress on all three priorities in the first quarter, which I'll walk through now. Let me start with new surge in adoption. Our W2 commercial leadership organization remains laser-focused on the roughly 1,800 high-volume shoulder specialists in the U.S., and that targeted approach continues to translate into rapid growth in our customer base of core and contender surgeon customers. We are very pleased with the new surgeon adoption trends we're seeing through the early part of 2026, and we expect that momentum to be durable throughout the year. As a reminder, we ended 2025 with 134 core and contender surgeons, up 61% year over year, and we'll update that figure on an annual cadence. Surgeon adoption continues to be driven by focused execution from our commercial leadership team, supported by our proprietary business intelligence platform. We are increasingly seeing the brand awareness we've built in the market over the past year compound that effort. And finally, we're benefiting from the accelerating productivity gains within the W2 commercial leadership cohort hired in 2025. To capitalize on this growing momentum, we again added top talent to our commercial leadership team through Q1 to support further scaling of our business, particularly as we secure additional hospital approvals in key new territories. We are making progress with activating these markets and believe there is significant greenfield opportunity remaining across the U.S. for our team to target. We look forward to the contributions from these new commercial leaders as they ramp over the next couple of quarters. and build deeper relationships within their territories. Meanwhile, we've continued to invest in our unique high-touch surgeon-to-surgeon education programs facilitated by our customer experience and medical education team. We are seeing tangible results in terms of new surgeon adoption coming out of these sessions and increasingly view them as an integral part of our broader commercial strategy. Excluding industry meetings, our CEME team conducted 44 total SI-sponsored educational events in the first quarter. And the peer-to-peer dynamic these events create generates organic advocacy that compounds across the shoulder surgical community. Most recently in April, we hosted our first national symposium of 2026 in Napa Valley. Surgeon attendance was up over 70% versus last year's event, making it the largest symposium in SI's history since we launched the program four years ago. These symposiums combine didactic content, case-based discussion, and hands-on experience with our inset shoulder arthroplasty portfolio and Provoyant's preoperative planning platform, with curriculum designed, written, and proctored all by surgeons. The consistent positive feedback we receive from attendees at these events validates the incredible work of our CME team in creating a true differentiator in the marketplace that's generating tangible results, both in terms of generating interest among new surgeons and helping to drive our second key strategic priority of increasing utilization and procedural growth within our customer base. For example, Of the attending surgeons at our NAPA course who are not already core or contender customers, more than 70% have already either performed their first case with our system, committed to their first case, or committed to increasing volume, and that progression has occurred in just a few weeks since the meeting. When looking at the first quarter specifically, total implant volume across our core, contender, and prostate customers increased 51% year over year, to 2,184 units. As has been the case in recent quarters, this volume growth reflected a combination of several additional compelling dynamics. First, surgeons are entering our new customer funnel faster. In fact, in the first quarter, we more than doubled the number of new customers entering our funnel as compared to the first quarter of 2025. Surgeons are scaling through the funnel from prospect to contender to core at a faster pace. And third, we're seeing increased volume from existing surgeons within their current prospect, contender, and core categories. Within these dynamics, the standout signal is that our highest growth surgeon category in the first quarter was core, both year over year and sequentially, which is the strongest possible signal of where our business is heading. The one category where growth has moderated is contender, and that's by design because we are losing those contenders to core status. Importantly, even as we rapidly added core surgeons, we've continued to see increases in units per surgeon both year over year and sequentially in that category. This is particularly meaningful proof point, new entrance to the core category, typically join at the lower end of the volume range, which would normally compress the average, but our highest volume core surgeons more than offset that dynamic, demonstrating that our existing core surgeons are continuing to grow their utilization, even as the segment expands. To ensure we continually equip these surgeons in best-in-class product portfolio, we've also remained focused on our third strategic priority of developing and launching new technologies to address the remaining unmet needs of patients and surgeons both through new indications and enabling technology. We've had an active few months on this front to start the year, and I want to highlight a couple specific areas of progress. Starting with new indications, consistent with our prior communicated timing, we initiated a limited user release of our I-135 RFX products in early Q1. We recently expanded the indication to include more complex fractures. And two weeks ago, we announced the transition of our INSET 135 RFX humoral stem from limited user release to full commercial launch following receipt of that expanded clearance from FDA. With this broader label, The I-135 now addresses primary, revision, and fracture total shoulder arthroplasty cases, and equally important, its addition to our portfolio means that shoulder innovations can now nearly support the full spectrum of shoulder arthroplasty procedures our surgeon customers perform in both the operating room and ambulatory surgery settings. The I-135 joins the smaller form factor I-195 and I-70 launched in 2024 and 2025, respectively, as the third addition to the I-series humeral stem product line. Consistent with those earlier launches, the I-135 is built on our exclusive inset lateral-lateral implant philosophy, which independent, peer-reviewed research has shown reduces complications and maximizes postoperative range of motion. Today, surgeons have used the I-135 in both anatomic and reverse shoulder arthroplasty configurations, and consistent feedback has highlighted a ease of use, straightforward surgical technique, and seamless integration with our two-tray surgical instrumentation system. Underpinning the clinical confidence behind the 135 and our entire implant portfolio is the real-world evidence we're building to our clinical data registry. We've now enrolled over 500 patients across both anatomic and reverse shoulder arthroplasty configurations, and we continue to believe this registry will generate a robust body of evidence that strengthens our position with surgeons, health systems, and patients over time. Separately on the new product front, We initiated a limited user release of our N22 Glenosphere in the first quarter and have been pleased with its reception so far. As a reminder, the N22 is the first introduction in our new line of technologies designed for patients with metal hypersensitivity who may experience adversity associated with allergic reactions from metal implants. We view this as an exciting incremental addressable market and look forward to providing further updates on our full launch plans in the months ahead. Turning now to enabling technology, since announcing in December our strategic partnership with Interventional Systems to introduce a shoulder-specific micro-robotic solution for shoulder arthroplasty, we've made tangible progress with respect to product development and remain incredibly excited with the mid- and longer-term economic and competitive opportunities associated with this technology. As a reminder, the solution is designed to integrate directly with our ProVoyance platform to deliver a seamless enabling technology experience from preoperative planning through interoperative execution, allowing surgeons to plan and deploy that plan in the operating room as a single connected workflow. In March, we performed yet another cadaver lab which further reinforced our conviction that interventional systems technology is indeed the right product for this robotic application in shoulder arthroplasty. This particular cadaveric session encompass the entire procedure, beginning with a CT scan, through ProVoyance, through operating the robot, placing the device in a cadaveric specimen as intended. Product development for the robotic solution is progressively slightly ahead of schedule. We are targeting 5 cent case submission in 2027. We look forward to sharing additional updates regarding timing and product features on our future earnings call this year. As a final note and stepping back across everything we've discussed today, we are increasingly finding that focused, shoulder-specific nature of our ecosystem is attracting interest from partners who see the value in reaching this market through us, and that excitement is only growing as we scale, whether through programs like our robotic development initiative or best-in-class implant portfolio or the strong clinical outcomes surgeons are achieving with our products. As we look ahead, We are excited about a number of near-term opportunities we see to further expand the breadth of our shoulder solutions we offer surgeons and patients, both through our own innovative vision, through the relationships that market leadership attracts. We look forward to sharing more updates on these opportunities in coming quarters. With that, I'll now turn the call over to Jeff to review our first quarter results in more detail and provide an update on our outlook for 2026.