Hello, and thank you so much for standing by. Ladies and gentlemen, welcome to Capsule Vision Q1 2026 earnings conference call. Please know that this call is being recorded. At this time, all participants are in listen mode only. There will be some opening remarks followed by question and answer session. If you wish to ask a question, please press star 1 on your telephone GIFED. Thank you.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us for Capsule Vision's first quarter 2026 earnings call. Joining me today are Johnny Lang, President and Chief Executive Officer, and Senior Vice President of Finance, David Garcia, as well as Doug Atkinson, Senior Vice President of Sales. Before we begin, please remember that today's remarks, including forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Form 10-Q filed by us with the SEC. These forward-looking statements speak only as of the date of this call and we expressly disdain any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions, or circumstances on which any such statement is based. Our call today will cover the following agenda. Johnny will begin with an update on Capsule Vision's business, target markets, and recent highlights from our pipeline development. Then Dave will walk through a commercial update and recent financial results. After our prepared remarks, we'll open the call for Johnny, David, and Doug to take your questions. With that, I'll turn the call over to Johnny Wine.

Thank you, Lee, and good afternoon, everyone. Capsule region remains focused on advancing earlier, more accurate, and more accessible detection of gastrointestinal disease for patients worldwide. We are working toward a unified ingestible capsule platform capable of screening for multiple cancers, including esophageal, gastric, pancreatic, liver, and colorectal, through a single noninvasive procedure enabled by advanced imaging and AI. With that as our foundation, we continued to see consistent, solid, underlying performance in the first quarter. While revenue and new account additions remained stable year over year, we saw further expansion used to detect a widening range of small bowel diseases. In the first quarter, underlying procedural volume reflecting end-user consumption continued to expand, demonstrating deeper engagement with existing accounts, and the increasing reliance on capsule chemicals in routine clinical practice. We believe these trends reinforce the strengths of our installed base and highlight the Indiana University Health, Providence Health, Central Health, which we believe reinforces the value of our platform and the strength of our long-term customer relationships to our technology platform, we are entering an important phase in our AI strategy. As you know, we previously submitted our 510k application for our AI-assisted reading capability for CapsoCam Plus. We continue to expect the clearance around the mid-year, and we are preparing for a commercial launch shortly thereafter. We have been actively demonstrating this capability, which we have branded AI highlights at the recent industry meetings, and the feedback from gastroenterologists has been very encouraging. physicians are particularly focused on the potential to streamline review time while maintaining clinical rigor, which we believe will be an important driver of adoption. AI Highlights is designed to identify frames with suspected pathology and present them within a structured review workflow, fully integrated within our cloud For the native, I believe this capability has the potential to reduce the physician rating time while enhancing workflow efficiency. It is a meaningful step forward in advancing a fully integrated AI-enabled diagnostic system. Building on that momentum, we continue to make steady progress. Double capsule can colon our development program remains on track. work, with the imaging of our second-generation capsule and its AI module expected in the third quarter of 2026. We continue to believe that our decision to prioritize Gen2 positions us to enter the market with a more competitive and clinically differentiated product. Turning to our CAPSO-10 UGI program and the pancreatic cancer initiative, we are pleased to report that enrollment began this week in our clinical study. This represents an important milestone as we work to establish diagnostic criteria and build the clinical foundation for what we believe could be a first-of-its-kind non-invasive screening approach for pancreatic disease. While this remains a longer-term opportunity, we continue to believe the potential impact in this area is given the lack of effective early detection tools today. Overall, using key pipeline programs and moving closer to what we expect that will be an important inflection point with the introduction of AI-enabled. We remain focused on redefining how gastrointestinal diseases are detected, leveraging our platform to make a diagnosis earlier, commercial and financial results.

Thank you, Johnny. Turning to our commercial performance, as of March 31, 1st, 2026, more than 167,000 patients have been imaged with CapsuCam Plus for small bowel screening across the U.S. and international markets. During the first quarter, we shipped 6,229 CapsuCam Plus capsules compared to 6,447 in the prior year period, representing a year-over-year decrease of 3%, reflecting the timing of shipments that have now been placed in the second quarter. Our technology continues to be supported by a strong intellectual property portfolio, currently with 85 issued U.S. patents, reinforcing our position in capsule endoscopy innovation. In addition, reimbursement under CPT Code 9-1110 continues to support adoption across a broad range of care settings, including both private practices and hospital systems. From a commercial strategy perspective, one of our key advantages is the ability to leverage our existing sales infrastructure as we expand into new indications. We expect that the same physician call point driving adoption of CapsuCam Plus today will serve as a natural entry point for CapsuCam colon following regulatory clearance, creating a meaningful cross-selling opportunity without requiring significant incremental headcount. We continue to see encouraging engagement across larger gastroenterology networks, including GI clinics and multi-site group practices, where we are expanding our presence within existing accounts and continuing to deepen utilization across larger networks. In addition, we are seeing ongoing traction within hospital systems and group purchasing organizations, particularly as contracts come up for renewal and providers evaluate alternative solutions. As Johnny noted, we are also pleased to secure renewals with several large GI networks during the quarter, including Indiana University Health Systems, Providence Health Systems, and Jastro Health, supporting continued engagement across our installed base. As of quarter end, our U.S. direct sales organization remained consistent at 26 representatives, supported by seven regional sales managers and trainers. Internationally, we continue to build momentum, including a dedicated team of four representatives in Germany, while expanding our global footprint through distributor partnerships and high potential markets. Turning to our financial performance. For the first quarter of 2026, total revenue was $2.8 million, consistent with prior year period. While the number of capsules sold was modestly lower year over year, this was offset by a slight increase in ASP. And, as Johnny noted earlier, we continue to see strong underlying patient volume and utilization expansion trends across our installed base. Gross profit for the quarter was $1.3 million, with a gross margin of 48%, compared to 54% in the first quarter of 2025. The change in gross margin was primarily due to tariffs impacting our cost of goods sold. Operating expenses were $8.4 million, an increase of $1.5 million compared to the prior year period. This increase was driven primarily by continued investment in our pipeline, including development work related to the next-generation imaging sensor under our agreement with Canon, as well as clinical trial activities supporting the CAPSOCAM colon Gen 2 program. We ended the quarter with $17.9 million in cash and cash equivalents. As a reminder, in March, we strengthened our balance sheet with the closing of a $14 million private placement with participation from both new and existing investors. We believe this financing reflects continued confidence in our strategy and provides additional flexibility to support our key priorities, including product innovation, clinical development, and commercial expansion. Overall, we remain focused on disciplined investment to support long-term growth. Before I turn the call back to Johnny, I'd like to provide some perspective on how we're thinking about the remainder of the year. We expect second quarter revenue to be higher than the first quarter, and we also expect revenue in the second half of the year to be higher than in the first half, as we continue to build on the momentum we're seeing in our pipeline and customer engagement, as well as the anticipated launch of the AI module for CapsuCam Plus. Now, I'd like to turn the call back to Johnny for some closing remarks.

Thanks, Dave. To close, we believe the business is progressing as expected. We are seeing continued strength in utilization across our installed base, reinforcing the growing role, CapsuleCAN Plus, is playing in routine clinical practice. At the same time, we are approaching an important inflection point with the anticipated introduction of our AI-assisted capabilities, which we believe will further enhance workflow efficiency and strengthen the value of our platform for physicians. Across the pipeline, we continue to execute with discipline, with capsule can colon on track and early progress underway in our pancreatic cancer program following the initiation of our clinical study. More broadly, we remain focused on advancing a differentiated AI-enabled platform designed to improve how gastrointestinal diseases are detected through panoramic imaging, cloud-native workflow capabilities, and AI-assisted diagnostics that make review more accessible and efficient for physicians. Our platform enables physicians to securely review cases anytime and anywhere without a need for onsite servers for a dedicated IT infrastructure. We are also creating a growing cloud-based data depository that we believe will serve as an important foundation for continued AI development and training over time. At this time, Dave, Doug, and I would be happy to take your questions. Operator, can you please open the line?

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Kyle Bowser with Titan Partners. Please go ahead.

Great. Thanks. Hi, Johnny, David, and Doug. I appreciate all of the updates and for taking my questions. Maybe I will just start out regarding the application for the AI-assisted reading feature. Johnny, I guess, any sort of remaining items that need to be addressed with the FDA or our response is in and you're now just waiting for a response? I guess any caller on the update there?

Yes, FDA and capsulogen had a few interactions during these months. And right now, we have reacted on their request during these previous interactions. And we are waiting for a meeting in the next few weeks, and that is current status. And we have no showstoppers, to my knowledge.

Great. I appreciate that. And then can you remind me, so for the pancreatic cancer clinical study, which you just started enrolling, which is great, can you remind me the size of this trial, how many patients, and kind of the expected timeline for enrollment?

For this study, we plan to enroll 120 patients with high-grade dysplasia or cancer, pancreas cancer, confirmed HGD or cancer. But to account for possible dropout, patient dropout, we plan to enroll 140 to make sure we have 120 to make statistics more powerful. And also, we will have 120 subjects as a reference, healthy patient as reference. This 120 patient image will be extracted, pulled out from our cloud storage, as we just mentioned. And we have enormous data repository in our cloud storage due to our workflow. So we can pull out these healthy reference images. So total is 240, yes. And the enrollment, we cannot speculate at this time. but I would see this as a much shorter study than colon yeah so that's what what I can say at this point that without you know saying too much is a public company thank you no yep makes sense and that's helpful appreciate all that color And then maybe lastly, David, I guess, appreciate the thoughts on the cadence of revenue on Q2 in the back half of this year.

Any sort of thoughts you can call out on OPEX, just kind of wondering how this line item should kind of trend throughout the year? Thank you.

Yeah, so thanks, Kyle. Well, I think that the next couple of quarters, you're going to see continued investment in the colon study as we continue to progress on that. That will continue through Q3, and then only until we get to Q4 will be the time when that will start to trail off a bit, as we will have completed the colon study at that point in time. But all the remaining items should be fairly stable, nominal growth to support the business.

Okay, great. Thanks so much for all the updates.

Thank you. Your next question comes from the line of Bruce Jackson of StoneX. Please go ahead.

Hi, good afternoon. I'd like to kind of take a closer look at the first quarter gravity number. you mentioned that the ASPs were higher. I was wondering if you potentially put in a price increase and if there was any forward buying behavior. You also said that some of the sales may have moved into the second quarter. I'm curious about that. And of course, you often get deductible resets and everything like that out in the market. So if you could kind of put those pieces together for us and tell us how that impacted the first quarter revenue on the guide. He's very helpful.

Sure. I'll take that one. Thank you. Yeah, so in terms of the capsule volume, it was really just the impact of timing. We saw some of the orders, some of our bigger orders actually fall into April as opposed to March. And then in terms of the ASP, there was no price increase. The only thing that happened there was we just saw a little bit of a shift in our mix to some of the higher priced regions in the world. So that's really the only thing impacting ASP there and the volume. Other than that, the underlying business remains strong and there's nothing that would have changed that.

Okay, great. And then just a quick question on the research and development spending, how do you expect that level for the full year to look in comparison to 2025?

Yeah, so it will be pretty similar to 2025. You know, we did spend quite heavily in 2025 on the colon study, and that continues through, it continued through Q1 and it will continue through Q3 as I just mentioned. So, you know, when it's all said and done, the four-year R&D spending will be pretty similar to 2025.

All right. Great. That's it for me. Thank you.

Bruce, this is Johnny. Please allow me to add during our workflow So our capsule is shipped to the downloading center to retrieve data for the cloud review by the doctor. So we can measure the end user consumption very easily. So that's the benefit, one of another benefit of cloud. We know what features cloud doctors are using. We can monitor that through cloud. And during monitoring of this end user consumption, we can tell you the end user consumption growing growth is healthy. Okay. It's growing and very healthy. Yeah. So that's my teaching.

Thank you.

Thank you. Again, if you would like to ask a question, please press star, followed by the number one on your telephone keypad. There are no further questions from the analyst. That concludes our question and answer session. And that concludes our today's call as well. Thank you all for joining. You may now disconnect.