SI-BONE - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 delivered strong top-line and profitability progress: revenue $47.29M (+24.9% y/y), gross margin 79.7% (+80 bps y/y), and positive adjusted EBITDA $0.47M, with net loss improving to $6.54M (-40% y/y).
• Wall Street estimates were exceeded: revenue beat consensus (~$45.13M*) and EPS beat (-$0.22* vs actual -$0.15), continuing the beat from Q4 and reversing a slight revenue miss in Q3*.
• Guidance raised at the upper end: FY25 revenue to $193.5–$197.5M (prior $193.5–$195.5M), FY25 gross margin lifted to 78% (prior 77–78%), OpEx growth ~10% (prior ~9%), with positive adjusted EBITDA expected for the full year.
• Key catalysts: proposed CMS NTAP for iFuse TORQ TNT (~$3,960 add-on effective Oct 1, 2025), TPT for Granite outpatient, and CMS proposal to increase inpatient spinal fusion DRGs by ~8–9%, supporting pelvic fixation economics and adoption.

What Went Well and What Went Wrong

What Went Well

• Broad-based growth with strong U.S. execution: U.S. revenue $44.8M (+26.6% y/y), driven by robust procedure demand and new product rollouts (INTRA, Granite 9.5, TNT).
• Margin expansion and operating leverage: gross margin 79.7% (+80 bps y/y) on mix/ASP and supply chain efficiencies; revenue growth ~3x OpEx growth (7.8%) enabled positive adjusted EBITDA in a seasonally heavier cash-use quarter.
• Physician engagement inflecting: record >1,400 active U.S. physicians and +300 adds in the quarter (+27.3% y/y), with increasing cross-modality usage and territory productivity reaching ~$2M per territory; “Our momentum continues unabated…” – Laura Francis.

What Went Wrong

• International remains modest: international revenue $2.5M vs $2.4M y/y; growth outside U.S. remains small relative to the business mix.
• GAAP loss persists: net loss was $6.54M (EPS -$0.15), though improved materially from prior year; depreciation and growing surgical capacity will weigh on reported margins as the year progresses.
• Seasonality and prudent stance temper guidance cadence: management assumes a 3–5% sequential decline in Q3 on normal seasonality and is maintaining the lower end of FY revenue guidance pending macro clarity.

Transcript

Operator (participant)

Good afternoon and welcome to SI-BONE's First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Saqib Iqbal, Vice President, FP&A, and Investor Relations at SI-BONE for a few introductory comments. Please go ahead.

Saqib Iqbal (VP of FP&A and Investor Relations)

Earlier today, SI-BONE released financial results for the quarter ended March 31, 2025. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management's remarks today may include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings, such as our most recent Form 10-K, and actual results might differ materially from any forward-looking statements that we make today. Accordingly, you should not place undue reliance on these statements. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements except as required by law.

During the call, management may also discuss certain non-GAAP measures, including the company's Adjusted EBITDA results. Unless otherwise noted, any reference to profitability is in terms of positive Adjusted EBITDA. For a reconciliation of these non-GAAP measures to GAAP accounting, please see the company's full earnings release issued earlier today. Unless otherwise noted, all results are compared to the comparable period in the prior year. With that, I'll turn the call over to Laura.

Laura Francis (CEO)

Thanks, Saqib. Good afternoon, and thank you for joining us. I am thrilled with the start to 2025, marked by another strong quarter of outstanding revenue growth, record position base, expanding gross margins, and strong operating leverage. Our results confirm that our industry-leading innovative platform targeting nearly 500,000 annual procedures is continuing to gain momentum. Our worldwide revenue for the quarter reached $47.3 million, representing approximately 25% growth. This impressive top-line growth enabled us to deliver positive Adjusted EBITDA in the quarter while continuing to make investments in R&D and commercial infrastructure. In the U.S., our revenue is $44.8 million, reflecting approximately 27% growth and underscoring the durable tailwinds building in the business. We're experiencing broad-based demand for our existing technologies and rapid adoption of our new solutions launched last year.

With an active pipeline of novel technologies under development, we believe our procedure volume growth will be amplified as we launch these new solutions over the next 12 to 18 months. Our innovative platform is driving deeper engagement and market penetration as we add physicians at a record pace. Additionally, a growing number of physicians are performing multiple types of procedures, driving end-user density. These are both positive leading indicators for demand. Our focus on differentiated solutions and clinical evidence continues to garner favorable reimbursement, including exclusive commercial reimbursement, a transitional pass-through payment, and new technology add-on payments. The favorable reimbursement backdrop has solidified our leadership and ensured patients have access to our unique technologies. With industry-leading gross margins, scalable commercial infrastructure, and small CapEx footprint, our business model is designed to rapidly scale profitability and generate free cash flow.

Our resilient business trends support our confidence that we are positioned to consistently deliver strong results over the long term. Now, let me provide an update on our four key priorities: innovation, engagement, commercial execution, and operational excellence. Beginning with innovation, diversifying our platform with the addition of unique yet complementary technologies has been a key tenet of our growth. This strategy has allowed us to expand our target modalities, broaden our physician footprint, and develop multiple revenue streams. Over the last three years, we've increased our total addressable market to over $3.5 billion and delivered 25% cumulative procedure volume growth. Now, let me dive deeper into our target markets. Starting with SI joint dysfunction, we built on the success of iFuse 3D with the introduction of iFuse TORQ and more recently, iFuse INTRA.

The comprehensive set of solutions addresses the needs of a diverse group of physicians, including orthopedic and neurospine surgeons, as well as interventional spine physicians. This portfolio and call point expansion has accelerated our procedure volume growth within the greater than $2 billion target market. While iFuse 3D historically has been the gold standard, TORQ has dramatically expanded the market and has become a preferred solution for newly trained surgeons as well as interventional spine physicians. INTRA, which is reimbursed under CPT 27278, is achieving adoption in markets where the interventionalists initially prefer an allograft solution and the reimbursement is clearly defined. Our deliberate expansion with interventionalists and decision to train them on TORQ and INTRA is gaining significant traction. This specialty performed a record number of procedures with our solutions in the quarter, surpassing the previous record set in the fourth quarter of 2024.

Moving to pelvic fixation, since the launch of iFuse Bedrock Granite in 2022 and the subsequent addition of iFuse Bedrock Granite 9.5 last year, we lead the industry in providing sacropelvic solutions. Granite is designed to provide robust foundational support at the base of both long and short construct fusion procedures. The platform's ability to address a known surgeon concern in multilevel spinal fusion procedures and its seamless workflow integration have led to the very rapid adoption of Granite within the nearly $1 billion target market. Since launch, Granite 9.5 has outpaced the adoption trends for Granite 10.5 or TORQ. In addition to being a key driver of physician adoption, Granite 9.5 has contributed to the increase in the number of procedures utilizing four of our implants, driving higher procedure ASP.

In the first quarter, the number of four-implant Granite cases grew approximately 69% compared to the prior year period. The application of Granite 9.5 in higher-risk short construct procedures is growing within our existing surgeon base. Notably, Granite is targeting nearly 100,000 degenerative procedures ending at the sacrum each year. Starting January 1st, 2025, Granite became eligible for a transitional pass-through payment, or TPT, without any device offset costs when used in the hospital outpatient setting. We believe there's a potential for the TPT to play out over time as cases involving shorter construct spinal fusions that Granite is targeting migrate to the hospital outpatient setting. Based on Medicare data, we believe that approximately 40% of these procedures could be considered for outpatient treatment.

On the reimbursement front, as part of CMS's fiscal year 2026 proposal for inpatient hospital rates, reimbursement for Granite multilevel procedures is proposed to increase by approximately 8%. In parallel, CMS has indicated the need for additional time to analyze the data with respect to our request for reassignment of Granite procedures to a higher severity reimbursement category. Moving to pelvic trauma, we entered the pelvic trauma market with the launch of TORQ in 2021. In the fourth quarter of 2024, we launched our revolutionary second-generation trauma solution, iFuse TORQ TNT. TNT is an anatomy-specific implant designed for sacral insufficiency fractures. Based on the Breakthrough Device Designation, CMS has proposed an NTAP for inpatient procedures of over $3,900 for TNT, effective October 1, 2025. This represents a 20%-30% reimbursement increase to the hospital for pelvic fracture fixation.

Assuming the rule is finalized as drafted, this reimbursement advantage would continue through September 2028. We believe NTAP could expand access to TNT and serve as another tailwind for a solution that is already outperforming our internal expectations. With nearly 60,000 potential target procedures annually, representing a $300 million market opportunity, we are best positioned to capture meaningful market share over the long term. Now, to provide an update on the disruptive products we expect to launch over the next 12 to 18 months. In the first quarter of 2026, we expect to launch a new SI joint fusion solution that builds on our knowledge of 3D-printed titanium implants and application of iFuse INTRA. We're excited about this new solution, which we believe will simplify workflow, provide another surgical option to physicians, and allow us to reach a wider funnel of interventional physicians who've expressed interest in adopting our procedure.

With this upcoming launch, we will further extend our leadership with the most competitive solutions available to physicians. We're also making significant progress with the new product under development that we mentioned last quarter, our third-to win Breakthrough Device Designation from the FDA. This novel implant leverages our core technology and is targeting a more effective treatment for one of the most pressing needs in spine surgery. We expect to share more progress updates with you in the future. Next, let's move to engagement. In the first quarter, over 1,400 U.S. physicians performed procedures using our products, surpassing the previous record we set in the fourth quarter of 2024. This translates into a 27% increase in our physician base as we engaged an additional 300 physicians. Compared to the first quarter of 2022, we have more than doubled the number of U.S. physicians who performed procedures using our solutions.

This represents cumulative annual physician growth of around 27%. The enormous growth in our active physician base highlights our ability to successfully engage multiple call points with our best-in-class technologies. Our product platform is designed to support physicians across multiple procedure types. Once they adopt one of our solutions, we demonstrate value and expand usage into additional procedures. TORQ is a clear example of this progression. We built on TORQ engagement by introducing complementary products like Granite that address the physician's other procedural needs. This approach is contributing to strong cross-procedure adoption and deeper integration into clinical practice, as evidenced by a 43% increase in physicians performing more than one procedure type. Looking at density trends, physicians who performed a case in both the first quarter of 2025 as well as 2024 averaged nearly five procedures per physician.

This was 30% higher than the overall average procedures per physician in the quarter. This shows an encouraging runway for procedure volume growth with the newly added physicians. Finally, we're thrilled with the adoption trends from surgeons we trained as residents and fellows. Year-to-date, revenue attributable from previously trained residents and fellows grew by 64%. Our strategy of engaging with fellows and residents early in their career is working. Now, let me discuss our commercial execution. Our strong revenue growth reflects execution by our commercial team unmatched in the industry, bringing deep clinical expertise to every engagement. We ended the quarter with 85 U.S. territories. As we've expanded our product platform, we've evolved from a direct sales force to a hybrid model, combining territory managers and clinical support specialists with third-party agents for case support and procedure expansion.

This hybrid commercial infrastructure, which has been especially effective in pelvic fixation and growing in pelvic trauma, enabled us to increase our trailing 12-month territory productivity by nearly 25% in the first quarter to approximately $2 million. Looking ahead, we expect gradual improvement in productivity as we grow our direct sales team and move toward our target of reaching 100 territories over the next 12 to 15 months. Concurrently, we'll strategically leverage third-party agents to scale our commercial reach. Before I hand it over to Anshul, I would like to thank my SI-BONE colleagues for their relentless drive in developing and successfully commercializing unique solutions that have allowed us to partner with over 4,500 physicians worldwide and improve over 120,000 patients' lives. Your focus has enabled us to deliver outsized revenue growth and puts us on a path to sustained profitability.

With our best-in-class commercial organization, backed by our strong innovation-driven culture, we have a huge and exciting opportunity ahead of us. Thank you. With that, I'll hand the call over to Anshul to provide an update on our fourth key priority, operational excellence, and share our first quarter results and updated guidance in more detail.

Anshul Maheshwari (CFO)

Thanks, Laura. Good afternoon, everyone. My comments today will be focused on first quarter revenue growth, profitability, and liquidity. All of the comparisons provided will be versus the same period in the prior year, unless otherwise noted. Starting with revenue growth, our worldwide revenue was $47.3 million, representing growth of 24.9%. U.S. revenue was $44.8 million, representing 26.6% growth. The U.S. revenue growth was driven by a remarkable 27.3% growth in procedure volume. International revenue in the first quarter was $2.5 million.

Moving to profitability, our gross profit was $37.7 million, an increase of $7.8 million, or 26.2%. Our gross margin rate for the quarter was 79.7%, an improvement of nearly 80 basis points. Consistent ASP, as well as our actions to improve manufacturing and supply chain efficiencies over the last 12 months, contributed to the gross margin expansion. Operating expenses were $45.2 million, representing 7.8% growth. The increase was mostly due to higher commissions related to revenue growth and research and development investment in platform expansion projects. Our stellar commercial execution, along with our operating discipline, allowed us to deliver revenue growth that was three times higher than our operating expense growth. Our net loss narrowed to $6.5 million, or $0.15 per diluted share, compared to a net loss of $10.9 million, or $0.27 per diluted share, representing continued strong year-over-year progress.

We delivered positive Adjusted EBITDA of approximately $500,000 compared to Adjusted EBITDA loss of $4 million in the first quarter of 2024. Looking at the trailing 12 months ending the first quarter of 2025, our revenue grew by approximately $32.6 million. During the same period, our Adjusted EBITDA improved by approximately $16.8 million. Our ability to convert over 50% of the growth revenue dollars to Adjusted EBITDA dollars while continuing to make investment in our priorities is illustrative of the longer-term leverage potential for our business. Turning to liquidity, we exited the quarter with $144.4 million in cash and marketable securities. Our total cash usage in the first quarter was $5.6 million, a 31.7% improvement over the prior year period. As a reminder, Q1 is seasonally a higher cash usage quarter.

Given the strong top-line growth and operating leverage in the business, we are rapidly progressing towards our goal to achieving free cash flow in 2026. Before I discuss our guidance, I would like to briefly address the potential impact of tariffs. All our implants and virtually all our instruments are manufactured domestically. The majority of the raw materials for our instruments is sourced from the U.S., and the titanium powder used in our implants is sourced from Canada under the 2020 USMCA agreement, with supply already secured through 2026. As such, we currently do not anticipate any material impact on gross margins or our supply chain from the proposed tariffs. As for the top line, we are currently not seeing any impact on our procedure volumes related to the macroeconomic uncertainty.

It is important to note that given the debilitating pain and physical disability experienced by our patients, our procedures are less likely to be deferred. We have a track record of sustained growth even through periods of extreme stress, as demonstrated during COVID. Today, we are in a much stronger position with a diversified product platform and a significantly larger physician base, which we believe provides even greater resilience. Now, let me provide an update on our outlook for 2025. We are updating our full-year revenue guidance to range between $193.5 million-$197.5 million. The updated guidance implies year-over-year growth of approximately 16%-18%, as compared to the previous guidance of approximately 16%-17%. The $2 million increase at the upper end of the guidance incorporates the strong first quarter results and our conviction in the demand for our solutions.

Our decision to maintain the lower end of the guidance is not indicative of any change in demand trends coming into the second quarter. Our internal execution remains strong. As we progress through the year, we will gain more clarity on the macroeconomic environment. Thus, we believe it is prudent to take a thoughtful approach today to protect against potential headwinds. Given our favorable gross margin trends, we now expect full-year gross margin to be 78% compared to the previous guidance of 77%-78%. We expect fiscal year operating expenses to grow approximately 10% at midpoint of our revenue guidance. Based on the updated revenue guidance, improved gross margins, and operating leverage, we continue to expect positive Adjusted EBITDA for the full year 2025. With that, I will turn the call over to Laura.

Laura Francis (CEO)

Thanks, Anshul. I'm proud of the progress we've made and even more excited about the milestones and opportunities that lie ahead. I'm confident in our continued procedure demand, an expanding physician user base, and accelerating product ramp. We're well-positioned to build on our track record of consistent revenue growth, margin expansion, and profitability. The future has never been brighter for SI-BONE. With that, we're happy to answer your questions. Operator?

Operator (participant)

Certainly. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment while we compile our Q&A roster. Our first question will be coming from Craig Bijou of Bank of America. Your line is open, Craig.

Craig Bijou (Equity Research Analyst)

Good afternoon. Thanks for taking the questions and congrats on a very strong start to the year.

I wanted to start—I don't think I've asked you guys this in a little while—but with the new products, the new channels, how should we think about the contribution from each of those on the strong growth that you're seeing? I know you might be reluctant to give a ton of detail there, but maybe help us think about how that active surgeon base is growing. Is it one product that brings in a surgeon and then expands to other products? Maybe just a little help how to think about that.

Laura Francis (CEO)

Yeah, happy to answer the question, Craig. As you know, we don't break down revenue by product or physician or procedure type, but I certainly can say that we're experiencing broad-based growth.

The demand for current solutions is quite strong, and we're really excited about the impressive pace of adoption of our new products that were launched in 2024. That includes INTRA and includes Granite 9.5 and TNT, and all of those are helping to contribute to our accelerating growth. I will also say that we experience double-digit procedure volume growth across all of our modalities, so all of the different procedure types that we're talking about. Once again, this is very broad-based growth that we're seeing. We also have record engagement levels across all the different call points that we're working with, whether you're talking about orthopedic and neurospine surgeons, general ortho trauma surgeons, or interventionalists. You also talked a little bit about the different solutions and the opportunity to sell multiple solutions to our different call points, and that's very true.

There is a complementary nature to our solutions, and we're agnostic as to which solution is driving growth. Really, our strategy is to provide a comprehensive set of solutions, and we want to be top of mind with all of our different physicians. As you can see, the strategy is working from the strong results that we saw for this quarter.

Craig Bijou (Equity Research Analyst)

Great. Thank you, Laura. Maybe one for Anshul. Gross margin was very strong in the quarter, obviously. Maybe first discuss kind of what drove that. Even with your raise for the full year on the gross margin side, it still looks a little bit below where Q1 gross margin was.

Maybe just talk a little bit about the thought of only raising slightly and any pressures that we may see on gross margin or just in general how to think about gross margin through the rest of the year.

Anshul Maheshwari (CFO)

Yeah, Craig, thanks for the question. We are really pleased with our gross margin trends. The 80 basis points improvement was great to see. A lot of that, as we mentioned in our prepared remarks, was a combination of better than expected ASP. Most of that is based on the procedure mix. As Laura mentioned, we had a nice spike in the number of procedures that use more than four Granite implants in a procedure, and that was an uplift to the ASP. That played out well.

We've also got some efficiency initiatives that we've been working on over the last 12 months in terms of optimizing our supply chain. As you get to scale, you start seeing some of the benefits of that play out in the gross margin as well. Feeling really good about the trajectory we've been on over the last 12 months for us to stabilize and now to start seeing it grow and get closer to that 80% again. In terms of our assumptions for the rest of the year, we've continued to stay thoughtful. Even in our revenue guide, our assumptions incorporate sort of a low single-digit ASP degradation. Part of it is just the work that we're doing on the degenerative side, on the trauma side, which tend to use fewer implants. The ASP per procedure can be lower, and that impacts our gross margin.

That also impacts our COGS because Granite and TORQ are a bit more expensive as a product as well. That's point number two. Point number three is we are putting out more surgical capacity as we progress through the year. As that depreciates, that impacts gross margin, and we got some software costs that will start getting depreciated as well. Now, what the gross margin guidance doesn't account for is the better ASP potential as those four implant cases continue to get more ingrained with deformity surgeons and then also any of the improvement benefits from our gross margin initiatives that may come up in the back half of the year. There's potential for us to do better than that, but we want to see some of this play out before we incorporate that in our future guidance.

Craig Bijou (Equity Research Analyst)

Thanks for taking the questions. Thank you.

Operator (participant)

Our next question will be coming from Dave Turkaly of Citizens. Dave, your line is open.

Dave Turkaly (Research Analyst)

Okay. Good evening. I know it's early in the year, and Anshul, thank you for all the detail. We're looking at some impressive growth over the last several quarters. We kind of positioned you guys as a 15%-20%, but you've been more like 25%. I guess I'm not saying you're going to guide to that necessarily, but I'm wondering if you made the comment amplified over the next 12-18 months in the prepared remarks to upfront. Do you think there's a time where 20% plus might be more your bogey?

Laura Francis (CEO)

Maybe what I'll do is I'll start here, Dave. Thanks for the question. I'll talk about the quarter itself, and then I'll have Anshul talk a little bit about the guidance. You're right.

We had a very strong start to the year and showed particularly strong execution during what is typically a seasonally lighter quarter. It is really laying the foundation for the rest of the year. With revenue growth and procedure volume growing 27%, you can see that we are benefiting from demand and accelerating adoption of our products, especially those that were launched in 2024. The business is really firing on all cylinders right now. As I mentioned previously to Craig, as you look at volume trends, we had healthy double-digit procedure volume growth across our different procedure types. I am also really happy about what we are seeing on the physician front with over 1,400 physicians performing a procedure in the quarter, which is up sequentially, which is unusual for us. The physician growth was broad-based. We saw it across ortho neuro, great progress with trauma surgeons and with interventionalists too.

What I'm really excited about as well is that the revenue growth translated into another quarter of positive Adjusted EBITDA. It really is highlighting the long-term leverage potential that we have with this asset-light model. We are significantly reducing our cash usage, and it's setting us up to get to free cash flow. I'll let Anshul talk a little bit more about what that means for the future.

Anshul Maheshwari (CFO)

Yeah, David, thanks for the question. Obviously, I'm not going to be providing long-term guidance at this point, but we're really confident about the growth potential of the business, not just in 2025, but even beyond that. Laura alluded to some of the tailwinds in the business already. These tailwinds are truly secular. They're long-term. They're very specific to SI-BONE.

If you think about what's driving this sustained strong growth over the last several quarters, it starts with the technology lead that we have with our differentiated portfolio, and those technologies are targeting large untapped markets. We feel good that that's very sustainable. The second thing is we're in the early stages of capitalizing on the physician enthusiasm for our products, especially the ones that were launched in 2024. That should continue to accelerate, especially as we put more surgical capacity out there. As Laura talked about on the prior question, the broad-based engagement and the growth across all our call points, that's really exciting as well. The opportunity to work with the physicians on multiple procedure types with different implants and combination of implants, that's again very, very exciting. The last piece is the reimbursement tailwinds, right?

When you put all of that together, we're really excited about the future. It's not just on the top line, but also on the bottom line because that will allow us to expand our EBITDA margins and also make significant progress towards being a sustained free cash flow business.

Dave Turkaly (Research Analyst)

Thank you for that. I think the $2 million productivity was, I thought, more of a maybe a slightly longer-term target. I think you said you're kind of there already. I guess, I mean, that's high versus anything, but can that continue to expand, I guess, given what you're saying about implants and procedures and docs being trained?

Laura Francis (CEO)

Yeah. Our sales team has just done an absolutely tremendous job here. Extremely proud of what they've been able to accomplish on territory productivity.

As you know, it's been a long-term goal for us to hit that $2 million of territory productivity, and we did hit it in this quarter. We do feel that we have the opportunity to move beyond that $2 million and in a few different ways. Our SI joint fusion procedures are predominantly covered by our direct sales force, whereas our hybrid model is concentrated in pelvic fixation and also increasingly in trauma. The hybrid model has actually allowed us to successfully drive this rapid engagement across these different multiple call points, and it's translated into this significant territory productivity. For example, a deformity procedure can take six to seven hours, and being able to leverage an agent for case coverage creates bandwidth for our territory managers.

It is giving them the ability to focus on market development and new physician training, driving deeper engagement with existing physicians. All of that, as you know, is crucial to driving strong long-term growth. We are now actually working with over 200 agents, and given the growth we are seeing across all of these modalities, we expect the number of agents to continue to grow. As we also said, we expect to get to around 100 territories in the next 12 to 18 months. It is really this hybrid model that we are working with. We do feel confident that we can go well beyond the $2 million in revenue per territory, and that is going to continue to allow us to gain additional operating leverage.

Dave Turkaly (Research Analyst)

Thank you.

Operator (participant)

One moment for our next question, which will be coming from Matthew O'Brien of Piper Sandler. Your line is open, Matthew.

Hey, this is Phil on for Matt. Thanks for taking our questions, and congrats on the really great start to the year. Hoping to hear more about the expected cadence of the new guidance. Understanding I usually take a yearly view of these things, but as I look at my model, it's hard to find a quarter historically where you did not grow sequentially for the Q4 to Q1 kind of step down. Is it fair to say the expectation is to grow sequentially every quarter this year? I guess what I'm really trying to get at is the implied exit growth rate in Q4, given the updated guidance is really in the high single-digit, low double-digit range. Just trying to make sure I've got a good handle on how you view the guidance update today.

Anshul Maheshwari (CFO)

Yeah. A couple of things, right?

We're feeling really great about the business. As you said, the strong start to 2025, a lot of wind in our backs from that. All the key metrics that you think about from a forward-looking perspective: physician growth, physician density, new product rollout, all of them give us great confidence that the internal execution remains strong. Now, we are in this weird environment from a macro standpoint, and as we put our guidance out there, we wanted to be mindful of the general macroeconomic conditions. We took a prudent approach on our outlook this early in the year. On your question on seasonality, we do not think about the business in quarters, so we're very well positioned in terms of the long term.

When you think about seasonality in the business, when we introduce new products, the seasonality will be impacted by the pace of that new product rollout and adoption. If you think about it, over the last few years, as we've launched new products and we've expanded our call points, the Q1 seasonality, i.e., sequential decline from Q4, has been a bit less than what you normally see. Similarly, when you think about Q2, the sequential variability between Q1 and Q2 is also shrinking. A part of that is also the newer procedures that we're targeting with deformity and trauma. They're less subject to the constraints of the out-of-pocket deductibles. Third quarter is interesting. It's got a couple of factors that play out: vacation trends, industry conferences. In the past, we've sort of seen a sequential flatness between Q2 and Q3.

In our guide right now, we're sort of assuming a 3%-5% sequential revenue decline just because of the normal seasonality in the business. Now, our focus is to work through that, but that's in our guidance. Like you said, fourth quarter tends to be a big fourth quarter for us. We think being thoughtful this early in the year is the right approach.

No, that's helpful. My final one on OpEx guide. I'm not sure. I heard a ton of commentary as far as the 10% growth versus the 9% in the context of the updated revenue guidance. Anything specific to point towards that additional spend? In Q1, you only grew OpEx by about 8%. Just curious to hear what will drive kind of the step down and leverage over the next three quarters, anything in particular. Thank you.

No, happy to take that, Phil. From an OpEx perspective, we're really pleased with the operating leverage we saw, not just in this quarter, but in recent years, which is an outcome of our strong revenue growth and just the operating discipline and excellence that the entire team has demonstrated here. To your question specifically on the rest of 2025, there are three factors that played into our 10% OpEx growth. Number one was the R&D investments that we expect to be elevated in the next three quarters. A lot of that is just the timing of some of the spend as we make progress on the two products that Laura's talked about in her prepared remarks. You've got sales and marketing growth generally linked to the revenue growth because it's mostly the higher commission dollars that you will pay.

Given the trends in the first quarter on G&A, we do expect G&A to be a bit higher this year. Even with that, if you think about the leverage for the year, it's going to be 1.75 times revenue at the midpoint. Even in the back half of the year, like the next three quarters, it's at 1.5 times, so still pretty healthy.

Thanks so much.

Operator (participant)

One moment for our next question. Our next question will be coming from Young Li of Jefferies. Young, your line is open.

Young Li (SVP and Equity Research Analyst)

All right, great. Thanks for taking the questions. I guess to start, new surgeon ads, really strong year over year. I think it's basically a record at around 400. The thing you previously talked about, maybe there's 8,000 spine surgeons go after 1,000 plus interventionalists.

Just wanted to get a state of the state on the surgeon TAM, given your expansion and product portfolio. Also, are you seeing that it's becoming easier or faster to convert some of these physicians to bring them on board? If you're seeing some of the prior trained surgeons that might not be high-volume users coming back into the funnel as well?

Laura Francis (CEO)

Yeah. Those are all really good questions, Young. We are really proud of the track record of consistently growing our physician base in the double digits. It's been going on for the last four years at this point. To be precise, we added approximately 300 physicians in the quarter, and it was the largest year-over-year increase ever. It does reaffirm this elevated interest in our expanding solutions. The increase wasn't concentrated in any particular call point.

It was really broad-based, and we had a record number of users across ortho, neurospine, trauma, as well as interventional. I think you asked a little bit about this too. As we are adding users, we're also observing additional cross-modality synergies with our platform. More surgeons are doing more procedure types with us. I had mentioned we had a nearly 45% increase in the number of physicians performing those multiple procedure types. We really still are starting out in all of these different categories. In spine, we still have a long way to go. In interventional, we've done a good job of being able to reach out to those interventionalists and engage them directly with our field force.

We are getting a lot of assistance from these third-party agents, certainly with pelvic fixation, but also we are just starting our expansion into general ortho trauma with the launch of our TNT product in the fourth quarter of last year. Given the expanded portfolio, the ongoing training and engagement needs, I do expect the number of physicians performing our procedures to continue to grow at a healthy clip.

Young Li (SVP and Equity Research Analyst)

All right. Very helpful. I think in the prepared remarks, you mentioned the reassignment of Granite to a higher reimbursement code. When should we expect to hear some more updates about that?

Laura Francis (CEO)

Yeah. We initially have seen the proposal from CMS. As you know, the surgeons are primarily focused on good patient outcomes.

The reason why we've seen so much growth with Granite and such rapid adoption is that the underlying technology addresses this failure issue at the base of a long construct. I should also say the majority of our cases that use Granite are actually commercial payers. It's over 60% of our pelvic fixation cases that are with commercial payers. We expect the adoption trend is going to continue to accelerate over time. From a reimbursement perspective, we are encouraged that CMS's proposal increased spinal fusion DRGs by 8-9%. What that means is that they're incorporating pelvic fixation into those DRGs. If you do the calculation, that means that there's approximately a $4,400 increase, which would help to meaningfully pay for the technology.

As we mentioned in the prepared remarks, CMS has indicated that they have a need for additional time to analyze the data with respect to our request for reassignment. We do view this as a normal administrative process and that it's not indicative of a final decision. We'll continue to work with them. Regardless, we think that we're in a great position here for our pelvic fixation products to grow and accelerate.

Young Li (SVP and Equity Research Analyst)

Thank you very much.

Operator (participant)

One moment for our next question. Our next question will be coming from Caitlin Cronin of Canaccord Genuity. Your line is open.

Caitlin Cronin (Director of Equity Research)

Hi. Congrats on a great quarter. I guess just to start off, maybe addressing a little bit the new products that you were talking about.

The new product that's coming in the Q1 of next year, would that fall under 27278 or 27279, just given you noted a leverage to INTRA there? Any other color on the breakthrough device and what call point it would be addressing? Finally, just any concerns about the regulatory pathway for both devices, just given the administration?

Laura Francis (CEO)

Yeah. Thanks for the question. Reimbursement is always an interesting conversation, right? It's obviously something we don't necessarily control. Instead, what we've done is we are just working on multiple product solutions to meet the needs of our physicians and of their patients. We have a nice line of products. We have our iFuse 3D product that we originally came out with. That's the gold standard in the industry, the most clinical data behind that particular product.

Our TORQ product has seen very rapid adoption as well with newer surgeons as well as interventionalists. Now we have our INTRA product, which is particularly appealing to our interventionalist physicians that we're working with. This is yet another product. We don't really want to talk about whether it's in 27278 or 27279. I think what's more important for us to talk about is our ability to provide the right solution to the right physician for their patient needs, and that regardless of where the reimbursement comes out, we have the products to provide the solution for them. That's on SI joint fusion. The new breakthrough device, we're really just teasing a little bit of information on that new product. It just shows the ability that SI-BONE has to identify unmet clinical needs and to develop breakthrough devices.

This is our third Breakthrough Device Designation that's been granted by the FDA. Two of them on the market currently are our Granite product as well as our TORQ product, and then our TORQ product that is targeted toward pelvic trauma. This latest BDD is for an implant system that has the potential to disrupt the spine industry, and it's going to provide a more effective treatment for one of the most pressing needs in spine surgery. The new device is going to leverage our core technology, and it targets our existing call points. With that particular product, we're in the development stage. We have a lot of work ahead of us the next 12-18 months to get regulatory clearance and then commercialization. We're excited about the progress that we're making on the development front. Overall, what should you take away from this?

We're the only public ortho spine company in our industry to have three breakthrough device solutions. It puts us into this distinguished position. It's cementing us as a category creator. Most importantly, I think what investors should take away from this is the long-term opportunity that SI-BONE has in front of us, that we have a sustainable growth platform for the future.

Caitlin Cronin (Director of Equity Research)

That's great. Maybe just turning to interventionalists more specifically, understand you probably won't just give the surgeon count on interventionalists, but maybe just some more color on how material part of your surgeon base they are at this point. How are you thinking about your competitive position within that call point?

Laura Francis (CEO)

Yeah. Thank you. To clarify, surgeons continue to account for the overwhelming majority of our SI joint dysfunction procedures.

We are also very pleased with the level of engagement with interventionalists. It is additive to our surgeon-led business. Our strategy remains to get access to the patient funnel by going after that subset of interventional spine physicians who really do not refer patients to surgeons. I had mentioned in my prepared remarks, we had a record number of interventional spine physicians perform procedures. It is giving us confidence that our targeted strategy is working. Overall, we just have the most comprehensive portfolio to support interventional spine physicians who want to perform SI joint procedures. It is reaffirmed by that strong interest in both TORQ and INTRA. I did also mention that we have a new product that is launching, and we think that is also going to provide an additional solution to surgeons and interventionalists starting in 2026.

Caitlin Cronin (Director of Equity Research)

Great. Thank you.

Operator (participant)

Our next question will be coming from David Saxon of Needham & Company. David, your line is open.

David Saxon (Senior Analyst)

Great. Good afternoon, Laura and Anshul. Thanks for taking my questions and congrats on the quarter. I have two. One, I'll ask on TNT, and then the second, I'll ask on profitability for Anshul. Laura, on TNT, just given that it's more of a recent launch, I guess, can you talk about the traction you're seeing there? As the NTAP potentially comes in in October, how are you thinking about the pace of adoption for that product and cadence of, I guess, sales contribution leading up to and then afterwards that go-live date? I guess, is there an analog to Granite when that product got the NTAP a couple of years ago?

Laura Francis (CEO)

Yeah. Good question, David. Thanks for that.

In terms of TNT, what we're hearing from general ortho trauma surgeons is that it's one of the most exciting innovations that they've seen in quite some time. Trauma is not necessarily an area where you see these disruptive solutions that are being provided in this day and in this time. It is just another example of our ability to develop a unique anatomy-specific solution that addresses this unmet clinical need with sacral insufficiency fractures. From an adoption perspective, we're still only in the second quarter of the launch, but the ramp has actually been ahead of our own internal plan, and we're adding surgical capacity to meet the demand. We were also very excited to see the CMS proposal for an additional $3,960 in NTAP, which will be effective October 1, 2025.

As you may suspect, that will be a factor that hospitals and surgeons will consider because it's a 20-30% increase in the current payment that they receive. It should be a really nice tailwind for the business. You did a comparison to Granite, and we were on the market with Granite a very short period of time, only a couple of quarters. Between the ability to reach these surgeons with a differentiated product with the appropriate health economics, we think that we have a really nice opportunity to grow the business late this year and into next year.

David Saxon (Senior Analyst)

Great. That was super helpful. Thanks for that, Laura. Anshul, just on profitability. You got to positive EBITDA in the quarter despite seasonality.

If I heard your prepared remarks correctly, it sounds like you're giving kind of soft guidance for free cash flow in 2026. Kind of a two-parter here. This historical trend of dropping through 50% of revenue dollar growth to EBITDA, should we kind of think of that framework continuing? The second part of the question on free cash flow, you talked about getting to 100 reps over the next year or so. You're adding a couple of new products as well. As you invest in those sets for the reps and the new products, kind of how does that work into your ability to get to free cash flow next year? Thanks so much and congrats on the quarter.

Anshul Maheshwari (CFO)

Oh, thanks.

David, so in terms of your first part of the question, how should you think about the drop through from revenue growth to Adjusted EBITDA growth dollars? We do expect revenue growth rate to outpace OpEx growth rate, and that should allow us to expand our margins and actually even move towards GAAP operating income because that's the next milestone from us on a P&L perspective. The leverage potential in the business is really high, just given the dynamics in the business, the high gross margins, the asset-light nature of the business as well. Now, when you think about the next few years in terms of operating leverage, it could average between a 1.5-1.75 times, so very similar to our expectations for 2025. It may vary. It may be higher in some years and lower in others, depending on where we are in our investment cycle.

You will continue to see that operating leverage and the expansion on the margin side. On your question on free cash flow and our soft indication there, again, a second consecutive quarter of positive Adjusted EBITDA just reflects that operational discipline and the business momentum that we have. The first half of the year generally tends to see higher cash usage because of bonus payouts in Q1 and sort of inventory buildup as you plan for the back half of the year. When I think about the asset-light business model, even with the new product launches coming up, our general algorithm would be to get to cash flow break-even 12-15 months after you get to Adjusted EBITDA break-even.

We're not providing exact timing, but based on what we see in the business, 2026 seems like a good inflection from a free cash flow standpoint as well.

David Saxon (Senior Analyst)

Great. Thanks so much.

Operator (participant)

Thank you. I would now like to turn the call over to Laura for closing comments. Oh, we do have one last question, excuse me, from Richard Newitter of Truist Securities. Richard, your line is up.

Hi. This is Robbie here for Rich. Thanks for squeezing me in. Nice progress on the quarter. I just wanted to kind of maybe probe a little bit on the sales rep commentary and the productivity. A lot of things seem to be going right for the company right now and heavy growth mode.

Just help me understand, how do you kind of think about the sales force growth versus the productivity growth, given all the new products and reimbursements that you have? The existing sales force seems to be hitting new milestones in terms of productivity. Can you just help us think about where you may be targeting productivity to go to before you need to add or split territories? Or is this the growth and the guidance? Can that be achieved by really just higher revenue per rep? Thank you.

Anshul Maheshwari (CFO)

Robbie, thanks for that question. As Laura talked about in one of the prior comments, from a territory expansion perspective, we do plan to get to about 100 territories over the next 12 to 18 months. That's part of our growth strategy, especially as we put out new products.

The intent is to make sure that the reps have the bandwidth to be able to continue to drive deeper dialogue with our existing call points as well as additional physicians come online as they look to adopt our solution. That has been part of our strategy to get to 100. Now, the commercial team has done a really excellent job in getting to that $2 million per territory. The hybrid model has played a role in that, for sure. That is more focused on the deformity with Granite and also on the potential trauma side. As you look into the future, we will continue to see productivity improve. It will be a bit more at a gradual pace, especially as we are bringing on some of these new reps over the next 12 to 18 months, but you will not see that go negative. You will continue to see that improve.

Now, the pace will, again, vary at where the growth in the business is coming from and how quickly are we getting to those 100 territories. At this point, I would not pencil in what that next target is. We have been very focused on getting to that $2 million. We know we can do better than that, but it is too premature for us to say what that next milestone will be.

Great. Thanks. Maybe one last one for me. Just on doctors doing more than one procedure, that has been kind of accelerating based on the kind of metrics you have been providing over the last several quarters. Is there maybe a target that you have in mind or that you are willing to disclose publicly in terms of where you think your surgeon base can eventually land?

Like 80% of them you see as kind of amenable to more than one procedure? Any kind of commentary there would be great. Thank you very much.

Robbie, good question. Again, we're early in our journey of driving physician density. When you think about physician density, it's coming from a few pockets. The first one is the SI joint dysfunction. Docs that are doing the SI joint dysfunction procedure, being able to work with them on the degenerative spine side with Granite as they do pelvic fixation or for the procedures that end at the sacrum, we're still scratching the surface on that. 9.5 was an important launch because that targets that market. We're nine months into that launch. A lot of runway there.

When you think about sort of the surgeon base we've built since the inception of the company, that's a big surgeon base where their bread-and-butter procedure is the degenerative spine procedure. A huge opportunity there. Less so on the trauma side, but we do see some of our surgeons, our spine ortho surgeons, also seeing fractures. There's an opportunity for us to be able to work with them with TORQ TNT for fracture fixation. We're also seeing success on the trauma docs performing SI joint dysfunction. When I think about the business long term, we have a long runway in terms of continuing to add the number of docs, especially with the expanded call points. We're still in the early stages of seeing that growth in density with our portfolio.

With the new products we plan to launch over the next 12 to 18 months, it gives us an additional opportunity to drive that density.

Operator (participant)

Thank you. I'm showing no further questions. I'll now turn the call back to Laura for closing comments.

Laura Francis (CEO)

I just wanted to say thanks to all of you for your participation in our call today. As I'm sure you can tell, we are energized by the opportunities before us. Thank you all for your interest in SI-BONE. Goodbye.

Operator (participant)

This concludes today's conference call. You may now disconnect.