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 will be placed on 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 Bentzinger, Investor Relations at Gilmart 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 second quarter ended June 30, 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 meaning 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 descriptions 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 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, August 6, 2026. Scholar 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, Sam. Good afternoon, everyone, and welcome to our second quarter earnings call. We have several noteworthy updates today across our future results and growth strategies, particularly with respect to our innovation pipeline, so we're excited to share those with you. At a high level, I'm pleased to report that our organization continued to demonstrate remarkable strength through the second quarter. Following a very strong first quarter start to 2026, we again delivered year-over-year and sequential revenue growth in Q2 as we rapidly onboarded new surgeons, deepening utilization within our existing customer base, and made steady progress in several key product initiatives. This performance enabled us to deliver second quarter net revenue of $17.2 million, an increase of 56% year-over-year. Q2 gross margins was also strong at 78.3% both year-over-year and sequentially. These improvements reflect ongoing operational efficiency and we expect further gross margin expansions from several additional cost reduction initiatives Jeff will cover shortly. Given these results, Our growing scale and the expanding efficiency of our commercial organization, we are raising our full year 2026 net revenue guidance today to a range of 67 to 69 million, representing growth of 42 to 46% over 2025. This compares to our prior range of 65 to 68 million, or 37 to 44% growth. Our guidance reflects our continued expectation for a normal degree of orthopedic seasonality that began as expected in June and will continue into the third quarter consistent with patterns we've experienced in the past. Customer activity and our pipeline remain robust, giving us high conviction in this guidance. Our ability to deliver this growth in 2026 and beyond is grounded in the same three strategic priorities we've discussed during our last few calls, which include driving adoption among new surgeons, increasing penetration in our existing customer surgeon base to increase procedural volume, and adding products to our portfolio to address the unmet needs of patients and surgeons. Beginning with new surgeon adoptions, we maintained our high pace of new customer additions through the second quarter, following our very strong start to the year. As a reminder, in the first quarter, we grew new customer additions at more than double the pace of the prior year. And then the second quarter, we added even more new customers than we did in Q1, an acceleration on top of an already strong start. Our W2 commercial leadership organization is focused on targeting the roughly 1,800 high-volume surgeon specialists in the U.S., And that approach is translating into rapid growth in our customer base. We are encouraged by these trends and expect that momentum to be durable for the balance of the year. To further capitalize on this sustained momentum, we again accelerated commercial expansion plans and added to top talent to our commercial leadership team in Q2 following our investment in this area in Q1. Just as our first half performance has benefited from the accelerating productivity gains within the W2 commercial leadership cohort hired in 2025, we expect these newly hired team members to be a growth driver in future quarters as they ramp and build deeper relationships within their territories. As always, the focused execution from our commercial leadership team is supported by our proprietary business intelligence platform, which has proven to be a true differentiator in our ability to execute on top of strong fundamentals. We also continue to invest in our surgeon to surgeon education programs, which we view as central to our commercial strategy. Our CEME team has carried out more than 90 surgeon engagement events so far this year, touching hundreds of surgeons and the organic peer advocacy these events foster remains a key differentiator for our commercial model. In April, we hosted our National Symposium in Napa, the largest such event in SIS history by surgeon attendance. In the three months since, We've already seen a tangible increase in procedural volumes among attending surgeons as compared to before the event, further evidence of the power of our education program. Turning to our second strategic priority of increasing utilization and procedural growth within our customer base. In the second quarter, total implant volume across our core contender and prospect customers increased approximately 50% year over year to 2,238 units. This growth volume is strong on its own, but what stands out even more is the composition behind it. The vast majority of our implant volume growth this quarter was derived from our core surgeon category, with core surgeons also carrying out more procedures, meaning our growth is coming from core on both a physician and unit basis, exactly as our customer base is designed to progress. Surgeons frequently enter the funnel as prospect, move to contender, and then grow to become core. Those first two categories remain consistent across quarters while our core category only continues to grow. This trend, combined with sequential increase of new surgeon ads to the funnel this quarter, gives us a highly encouraging outlook on the current trajectory of our customer base. Importantly, We're seeing these utilization increases broadly across all our territories. In the second quarter, each of our territories grew year over year and the majority demonstrating more than 80% growth year over year. We also continue to enter new markets and deepen our presence in the current ones. For instance, we recently expanded our commercial presence within two highly prominent hospital systems and now have full access at both centers. Even as we continue to make progress activating new markets across the US, we believe there is a significant greenfield opportunity remaining for our expanded commercial leadership team to target. To ensure we continually equip surgeons with the best-in-class product portfolio, we also remain focused on our third strategic priority of developing and launching new technologies to address the unmet needs of patients and surgeons. 2026 has been an active year on this front. I want to start with three recent product introductions and then walk through updates on our enabling technology platform, our robotic program, and four additional pipeline projects. First, on recent progress, we transitioned our I-135 RFX humoral stem to full commercial launch last quarter following receipt of expanded clearance from FDA to include more complex fractures. Full launch progressed through the second quarter in line with our expectations and we're pleased with the consistent surgeon feedback across both anatomic and reverse shoulder arthroplasty configurations. Second, we recently moved our N22 Glenisphere into full launch since debuting it earlier this year. This product is the first introduction of our new line of technologies designed for patients with metal hypersensitivity and represents an incremental address of the marker for us. And third, We fully rolled out our new titanium plasma spray, or TPS, reverse base plate as a product line extension, which provides an additional option for surgeons to match implant selection to patient need. We're seeing early success across each of these products. In fact, a growing portion of our total procedures year-to-date have involved the use of one of these new products, and all three have contributed to our recent uplift in average selling prices. Beyond these recent introductions, we are also committed to further extending our technology advantage and have significantly advanced several programs across enabling technology and new product development. As I've shared on recent calls, the integration of robotic surgery into our ecosystem has unlocked a renewed innovation cycle within our technical and clinical teams, and I want to outline a few initiatives that have taken clear shape over the past several quarters and represent meaningful opportunities in the near future. At the center of this innovation cycle and overarching across each of our pipeline project is a technological revamp of our Providence Enabling Technology platform. We're building upon the platform's strong existing foundation to better align with each surgeon's unique needs while delivering a substantial step up from a software perspective in terms of available information and functionality. Based on surgeon feedback to date, we believe strongly that this platform is the main engagement center for our customers, and that when paired with the innovation programs I'll describe next, will drive an important shift in how shoulder surgery is planned and executed. We believe this advancement will further expand our competitive advantage, creating an environment where innovation for improved care happens through a software advancement, and that is a shift that will benefit all stakeholders through improved care, lower costs, and lower capital requirements. We're also developing this next-generation software platform to be fully compatible with our upcoming shoulder-specific micro-robotic solution for shoulder arthroplasty, which will enable us to offer a comprehensive, integrated enabling technology suite. The purpose of enabling technology is to support more accurate, effective surgery. However, rapid and sustainable uptake requires the simplest possible adjustment to existing surgical technique, delivering predictable, consistent procedure times in the OR, and an economic proposition that is value accretive for all clinical partners. We believe this approach will deliver better outcomes at a lower economic burden across all sites of care, particularly the ambulatory surgery center. Since announcing our strategic partnership with INS in December, we've made tangible progress each quarter with product development running almost a full year ahead of our initial internal forecast, and we remain incredibly excited with the mid- and longer-term economic and competitive opportunities associated with this technology. Officially, the robotic technology will be known as Inset Neo, and we are planning FDA submission in the first half of 2027. will provide additional details on product features and filing timelines over the coming quarters. Alongside the filing, we also anticipate kicking off a robotic training program in early Q1 of next year, which will enlist the expertise of our current surgeons. Consistent with our broader philosophy surrounding peer-to-peer medical education, we believe this train-the-trainer approach will be effective in creating a scalable way to share knowledge and drive surgeon engagement at a rapid pace. Our revamped enabling technology suite is also fundamental to several initiatives across new product development. First, we've spent the last several quarters working to improve the transferability of preoperative planning information into the operating room through a simple reusable solution. With limited available starting in Q3, our new inset clutch guide system for anatomic and reverse glennary procedures will allow surgeons to more effectively transfer and execute the intended surgical plan in the OR. We also expect this solution to provide a modest uplift to average selling price. Second, we've developed a new concept for reverse procedures branded Inset One, offering a highly unique solution purpose-built for our risk-based approach in our preoperative planning. Born out of our next generation enabling technology platform, INSET-1 will enable surgeons to formulate a patient-matched, additively manufactured iteration of our INSET reverse solution, leveraging expansive data set and highly optimized decision algorithms to treat challenging and complex patient indications, improving upon existing market designs. We also believe that over the midterm, paired with our robotic solution, INSET-1 can represent a lower cost higher margin procedure for the majority of patients, enabling even lower capital costs in our current small trade platform. We're targeting FDA submission for this product in 2027. Third, we expect to commence a limited user release in Q3 of this year for our new subscapularis sparing technique initiatives. Failure of the subscapularis tendon remains a persistent postoperative complication particularly across anatomic shoulder arthroplasty, where shoulder innovations inset platform has a marked advantage due to the structure of our unique implant designs. Together with a group of innovative surgeons, our engineering clinical teams have developed instrumentation to more effectively enable surgery where takedown of the subscap tendon can be avoided, which may materially reduce the risk of this complication. This technique can also have a significant impact on post-operative protocols, Pain and Simplicity of Patient Recovery. And last, certainly not least, we're looking forward to the first surgical cases for our next generation INSET anatomic glenoid implant in early Q4 of this year. Branded INSET GO, we expect this solution to further streamline the OR experience by further reducing the surgical steps. We expect this innovation will save up to 10 minutes per procedure. The Inset and Inset Plus glenoid implants are a foundational technology for shoulder innovations, and this next generation product builds on our heritage of published and recognized clinical success in deploying experience and know-how inaccessible to any other competitor. External to our own pipeline, we also continue to generate incremental interest from additional strategic partners who see the value in accessing the shoulder surgical care market through our platform. Our enhanced brand awareness has been a meaningful positive development for SI since our IPO last year. And to that end, we are pleased to announce a new exclusive collaboration with a leader in additive manufacturing devices for the treatment of severe deformity where no other solution currently exists and cases frequently involve challenging revisions or other complicated circumstances. We expect this partnership will enable us to offer improved bespoke solution for highly complex revision cases, bolstering our broader way of offerings to the shoulder surgical care market. To be clear, these are cases where surgeons may not perceive our current solutions to be optimal for the patient condition, and this relationship will enable further expansion into these complex cases. We've also spoken before about the broader opportunity in adjacent indications, particularly soft tissue procedures. While we're bringing the same rigor to this market as we did with arthroplasty, an opportunity has emerged for faster, more immediate impact. We're pleased to announce a new relationship with a soft tissue device manufacturer that we expect will enable us to begin commercializing several of these devices before year end. We don't expect material 2026 revenue from this partnership, but it marks an important starting point that should yield strategic advantages as our commercial organization continues to grow. Before turning the call over to Jeff, I have one final update on the clinical evidence front. As we've shared previously, we are actively building a database of real-world evidence for our clinical data registry. Clinical data collection efforts within the registry are ahead of our expectations. While still preliminary, our initial review suggests improvements in postoperative acromial fractures, reduced complications related to instability, advances in patient range of motion, and materially favored aesthetic outcomes. Furthermore, we've recently identified the opportunity to accelerate our ability to publish a more thorough report of these results through partnerships with centers that hold large bodies of retrospective data. While a modest investment will be required to enable the advancement, We're encouraged by these early signals and are confident this improved approach can accelerate our pathway to publication of these results by several quarters. I'm excited that each of these innovation and clinical opportunities remain central to our existing clinical focus within shoulder surgical care, and we expect them to accelerate the efficiency of our commercial engine as we continue to scale. We look forward to providing additional updates on each of these as we progress. With that, I'll now turn the call over to Jeff to review our full second quarter results and discuss our updated full year 2026 outlook in more detail.