SI-BONE, Inc. (SIBN) September 2026 Conference Transcript

on this podium, but anything that you can tell us on how we should think about 2027?

I'm going to talk about 2027. When I get into 2027, right now, focus is be heads down, deliver a Q3 that's strong, and then focus on the new product launch in Q4. If you think about where consensus is, that should give you a good indication of where 2027 could land up.

Fair enough. Maybe as you think about gross margin and the gross margin trajectory, You know, you have some new product launches. How are those going to affect your gross margins?

Yeah, so let's start with the baseline. We have adjusted leading gross margins at close to 79.5%. And so we're really proud of that. That's actually come up since the last 18 months. It was sort of closer to 78.5%, 79%. So we've done a good job in getting gross margins up now. When we think about the next few years, what we've talked externally is gross margins sort of ranging in that 77%, 78% range. most of the impact coming from non-cash-related gross margin implications, which is depreciation. When you're putting out new products, you're going to put out surgical capacity. That surgical capacity is going to hit your depreciation before you really see a ramp from a terms and asset utilization perspective in the outer years. So you'll see some of that. But what's exciting for us is the operating leverage you can get in the middle of the P&L, despite giving up some of that gross margin is quite significant. And you should see a pretty significant drop through to the bottom line from an adjusted EBITDA standpoint, but eventually from an EBITDA standpoint and operating earnings standpoint. Now, we're equally focused on, as we scale these new products, that you should have operational efficiency initiatives that will allow you to bring the cost of these products down. Because when you start a new product launch, your cost of the implants is much higher because it hasn't scaled. Over time, you make enhancements that get those costs down, too. Now, my guidance expectation of the median in terms of 77% to 78% does not account for benefits from those activities that could drive upside. Got it.

And so maybe you touched on profitability, and SI Bone is sort of in the unique position that not many in MedTech can say. You've had both high growth and emerging profitability at the same time, and usually there's a tradeoff there. So how have you been able to achieve both at the same time? I think for us, it starts with innovative growth.

We've grown our way to profitability. If you look at our profitability and leverage trajectory, it's been pretty linear to our top-line growth. And there are certain unique themes about our business that we hold as gospel. Number one is making sure we have a differentiated platform that allows us to charge a premium ASP. that allows us to maintain our industry-leading gross margins. And because we are so differentiated, we can leverage this hybrid sales model, which allows us to get a lot of operating leverage in the middle of the P&L. And then you tack on, so that's what gets you to your profitability side. And then you tack on a focus on being asset light from a business model perspective, make sure we're not heavy working capital, heavy capex business model, which is what traditional spine is being plagued by. You can see that translate into pretty significant improvement on a free cash flow basis as well, and we've been able to demonstrate that. So I think you'll see that continue to evolve. We've publicly talked about operating leverage being sort of in that 1.2 to 1.7 times, depending on where we are in the innovation cycle. But if you extrapolate that, you get a significant amount of dollars dropping to the bottom line over the medium term.

Got it. And anything that you can tell us in terms of how we could think about long-term profitability?

Like I said, from our perspective, I'm not going to give you guidance on where long-term profitability goes, but again, you think about the operating leverage in the business, the potential for durable, strong top-line growth, you should be able to, and sort of a sustained gross margin base, you should be able to see a pretty significant ramp in operating profitability over the medium term.

Perfect. And I think maybe just with our last minute or two here, what do you think is the most underappreciated part of the story that you'd want investors to take away from SI Bone?

I'd say actually there's a growing appreciation as we've talked to investors throughout this year on SI Bone not being a single disease state, single anatomy company, and actually being a medical technology platform that's going after significant markets with several unmet needs. They're realizing the uniqueness of the platform, which is different from traditional spine. Like I said, it's a high ASP, high gross margin, less commoditized, high clinical evidence-based business that's allowing us to do things that are atypical of companies in our space, that is being able to inflect on profitability, continue to expand profitability, inflect on cash flow, expand cash flows, all while continuing to invest in growth. And I think that's starting to resonate a little bit more with investors, and it will continue to evolve as they see these new products being put out there.

Excellent. Well, thank you very much for taking the time, and we appreciate you being at our conference, of course.