Prepared remarks
Good afternoon, and welcome to SI-BONE's Second Quarter 2026 Earnings Conference Call. The operator provided instructions on how to ask questions. 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. Please go ahead.
Earlier today, SI-BONE released financial results for the quarter ended June 30, 2026. 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 may 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 adjusted EBITDA and free cash flow. 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.
Thanks, Saqib. Good afternoon and thank you for joining us. Our second quarter results demonstrate the strength of our core competencies and the momentum they've created in the business. We founded the company with a clear clinical objective to develop differentiated solutions that enable durable fixation and fusion in high-risk patients with compromised, often osteoporotic bone. Our target patients often live with debilitating pain and diminished quality of life. Our focus has allowed us to identify large addressable markets, establish compelling technical and clinical moats, and create a diversified business with multiple avenues for growth. During the quarter, we continued to translate that strategy into new products and markets. We extended the application of our biomechanical expertise and proprietary technology beyond the sacroiliac joint into high-value adjacencies across musculoskeletal care. In June, we submitted the 510(k) application for our third technology with breakthrough device designation. This is our first platform designed for use outside the pelvis and is intended to address a recognized failure point in complex spine procedures. Subject to the 510(k) clearance, we remain on track to begin a phased commercial launch in the fourth quarter, perhaps as early as October. Additionally, we advanced several development programs targeting new markets we expect to enter over the next 18 months and expanded U.S. field capacity in preparation for the upcoming launches. Second quarter performance was strong across markets. Worldwide and U.S. revenues were $56 million and $53.2 million respectively, both representing approximately 15% growth. Sequentially, U.S. procedure volume increased approximately 9%, marking our strongest second quarter sequential increase in years, dispelling industry concerns regarding the payer environment. International revenue grew approximately 26% to $2.8 million, led by continued demand for our expanded portfolio. The strong top-line growth yielded meaningful operating leverage. Revenue grew nearly twice as fast as operating expenses, contributing to a 178% improvement in adjusted EBITDA. Looking ahead, we believe the business is well positioned for continued revenue growth and further profitability improvement. Our expanding portfolio, improving reimbursement, and additional commercial capacity should deepen our relevance with physicians, reduce economic barriers, and extend our reach. Together, these factors reinforce our confidence in a strong finish to 2026. We believe the impact should be even more meaningful in 2027 as our new product moves through the adoption curve, the territories added this year become more productive, and reimbursement changes support broader utilization. I'll now discuss our three key growth drivers, innovation and market development, physician engagement, and commercial execution. Anshul will then cover our fourth priority, operational excellence, along with our financial performance and updated outlook. Starting with innovation and market development, innovation is the cornerstone of our long-term growth strategy and has helped us deliver compound annual revenue growth of more than 20% per year over the past 5 years. We believe we have one of the industry's broadest portfolios focused on patients with compromised bones. These high-risk patients often face difficult recoveries and elevated revision rates. By improving procedural outcomes, our technologies have the potential to enhance patient quality of life while reducing the economic burden on the healthcare system. We have a track record of developing differentiated technologies, gaining reimbursement coverage, driving physician adoption, and growing significantly faster than the underlying market. In SI joint dysfunction, currently our largest market, the relatively low density bone of the sacrum makes durable fixation challenging. iFuse-3D, TORQ, and INTRA product families provide a comprehensive portfolio of metal and allograft solutions for surgeons, as well as the fast-growing base of interventional spine physicians across all sites of service. In spinopelvic fusion, our fastest scaling market, there's an increasing number of patients with bone compromising conditions, such as osteoporosis and osteopenia. With Granite, we believe we have the best-in-class solution for pelvic fixation and spine fusion procedures. Within pelvic trauma, where the majority of our target patients are being treated for low-intensity sacral insufficiency fractures, iFuse TORQ TNT is gaining adoption among surgeons. Our next major catalyst for further accelerating growth is the launch of our first non-pelvic solution. As I highlighted earlier, we submitted the 510(k) application in June. We're working with suppliers to build surgical capacity and we're on track for the phased commercial launch. Because the solution targets accounts where our team already has established relationships, we expect to leverage our existing commercial infrastructure to support an efficient launch. We also have several programs at different stages of development targeting large, established markets where current treatment approaches leave meaningful room for improvement. We expect two additional solutions to progress toward design freeze later this year, with potential commercialization targeted over the next 18 months. As we look forward, our longer-term vision extends beyond titanium and allograft solutions. We pioneered 3D printed titanium implants and helped create a new product category. We're actively exploring and testing additional materials to address new disease states and developing AI-driven procedure enablement capabilities. Collectively, these initiatives are transforming SI-BONE from a leader in sacropelvic solutions into a broader spinopelvic company focused on procedural solutions for compromised bone. By organizing our innovation around the needs of these high-risk patients, we remain committed to improving procedural and long-term clinical outcomes. Before turning to physician engagement, I'd like to briefly update you on reimbursement. We're pleased by the recent proposed CMS changes affecting SI joint fusion procedures. Today, the majority of SI joint fusion procedures are performed in the hospital outpatient departments, ASCs and office-based labs or OBLs. CMS has proposed increasing hospital outpatient reimbursement by approximately $2,300 to more than $20,000. For ASCs, they proposed an increase of approximately $1,000 to nearly $16,000. CMS has also proposed establishing OBL reimbursement of over $20,000 for CPT code 27279. If finalized, these changes would improve the economics of treating SI joint dysfunction across all outpatient care settings, expand physician choice, and make these procedures accessible to more patients. Furthermore, the new family of DRGs for complex spinal fusion procedures, including procedures incorporating Granite, is encouraging. Depending on the patient's diagnosis and severity, these new DRGs could increase the average hospital payment by up to $50,000 per procedure. We believe this framework better reflects the complexity and resource requirements of treating these high-risk patients, reduces economic objections of our hospital customers, and supports the long-term adoption of Granite. The reimbursement framework is also relevant to the third breakthrough device, which is intended to address another important source of failure in complex spine procedures and may be used independently or with Granite. Now, let me discuss the progress on physician engagement. Physician adoption and utilization remain important leading indicators of future procedure growth. In the second quarter, 1,715 unique physicians performed at least one procedure using our technologies, an increase of approximately 19% versus the same quarter a year ago. For context, the quarterly physician count exceeded the number of unique physicians who used our technologies during full year 2023. We achieved double-digit percent growth across each of our call points. This broad-based engagement reflects the clinical relevance of our solutions, as well as the effectiveness of our physician engagement and customer engagement efforts. Our concerted efforts to grow physician awareness and adoption continue to deliver. In the quarter, the number of physicians performing more than one type of procedure increased approximately 15%. Physicians active in both the current and prior year quarters averaged approximately 3x the case volume of physicians performing their first procedure with us during the quarter. In aggregate, growth in our physician base, broader use of our portfolio, and increasing utilization create a strong foundation for sustained procedure and revenue growth. As we introduce additional products that address physician-identified procedural challenges, we expect case volume per physician to become an increasingly important contributor to revenue growth and overall execution efficiency. Now let's turn to commercial execution. We ended the quarter with 93 quota-carrying territory managers who were supported by over 400 agents and junior representatives. We designed the hybrid model so that our territory managers lead clinical education and cultivate high-value physician relationships, while third-party agents and junior representatives provide procedural support and extend our reach across accounts and geographies. Trailing 12 months revenue per territory was approximately $2.2 million, reflecting continued productivity gains and the scalability of our hybrid commercial model. We remain on track to exit 2026 with nearly 100 territories. This is a deliberate expansion ahead of multiple product launches planned for the next 18 months. Building capacity now gives our territory managers the bandwidth to strengthen physician relationships, prepare accounts for upcoming launches, and support rapid post-launch adoption. We also continue to progress in our commercial partnership with Smith+Nephew. Physician and field engagement is growing, and that's translating into steady improvement in adoption. We're coordinating joint field activity with Smith+Nephew's leadership team and expect momentum to build throughout the rest of 2026. Before I turn the call over to Anshul, I'd like to thank my colleagues for their continued dedication and exemplary execution. With our upcoming product launch and an active pipeline of new solutions, we're adding to our track record of meaningful and differentiated innovation. Together, we're entering an important new phase of growth. This is a direct result of your work, and I'm incredibly proud of what we're building together. Anshul will now discuss our fourth priority, operational excellence, along with additional financial details and our updated outlook.
Thanks, Laura. Good afternoon, everyone. I will focus on second quarter revenue growth, profitability, liquidity, and our updated 2026 revenue guidance. Unless otherwise noted, all comparisons are with the same period last year. Starting with revenue growth, worldwide revenue was $56 million, representing 15.2% growth. U.S. revenue increased 14.7% to $53.2 million. U.S. procedure volume increased nearly 15% with double-digit growth across all modalities. On a 2-year stack basis, procedure volume grew nearly 20% in the quarter. International revenue increased 25.9% to $2.8 million, driven by growing demand for TORQ and TNT. Given this momentum, we are evaluating opportunities to introduce more of our portfolio and future products in existing international markets and to qualify and enter select new target geographies. We believe these initiatives can make our international business an increasingly meaningful and durable contributor to worldwide growth. Turning to profitability. Gross profit increased 14.8% to $44.5 million. Gross margin remained strong at 79.5%, supported by the stable average selling price, product cost optimization initiatives, and improved utilization of surgical capacity. Operating expenses increased 7.7%, a rate substantially below revenue growth, resulting in meaningful operating leverage, which was well ahead of what we had indicated at the beginning of 2026. The operating expense increase reflected ongoing investment in R&D, higher commissions associated with revenue growth, and targeted marketing investments supporting recent and upcoming product launches. Net loss narrowed to $4.1 million or $0.09 per diluted share compared to a net loss of $6.2 million or $0.14 per diluted share. Adjusted EBITDA improved 178% to $2.8 million, representing an adjusted EBITDA margin of approximately 5.1%. For the trailing 12 months through the second quarter, adjusted EBITDA quadrupled to $12.8 million compared with the prior year period. This step-up in profitability reflects both our strong top line growth and the scalability of our infrastructure. As Laura highlighted, we are developing product material and software capabilities that will broaden our product portfolio and address additional clinical needs. Given our outperformance on profitability in the first half, we are intentionally increasing targeted research and development investment in the back half of the year to advance these longer-term programs. While remaining committed to our annual operating leverage and profitability expansion goals, we believe these programs can create differentiated capabilities in treating compromised bone, support faster revenue growth, and significantly increase long-term profit dollars. Turning to liquidity and cash flow. We ended the quarter with $145.9 million in cash and equivalents, an increase of approximately $1.3 million sequentially. We also delivered another quarter of positive cash flow from operations reflecting continued operating rigor and disciplined working capital management. We expect to see higher than normal cash flow variability in the next two quarters, mostly driven by the timing of payments for build-out of a new headquarters, the vast majority of which is now expected in the third quarter, and the timing of the resulting tenant improvement allowance reimbursement. We're also investing in surgical capacity to support the new product launch. These temporary yet disciplined investments will strengthen our operating infrastructure, improve our employee experience, and position the company to scale efficiently as we enter our next phase of growth. With approximately $146 million in cash and equivalents, and a clear line of sight to consistent free cash flow generation, we can fund our planned development programs while maintaining financial flexibility. Turning to guidance. Based on strong first-half performance, we are raising the low end of our 2026 worldwide revenue guidance while maintaining the high end. We now expect revenue of $231 million to $233 million, representing approximately 15% to 16% growth. Our prior guidance was $230 million to $233 million, representing approximately 14% to 16% growth. We entered the second half with strong momentum and multiple upcoming catalysts, including the anticipated 510(k) clearance of the new product, as well as the potential benefit of higher reimbursement from Granite in the fourth quarter. Given the timing of the 510(k) clearance, the phased nature of the launch, and the time required for reimbursement changes to translate into procedure growth, we're maintaining a measured approach on the impact of these catalysts. We are maintaining full-year gross margin guidance at 79%. At the midpoint of our revenue range, we now expect full-year operating expenses to increase in the 12% area. With that, I will turn the call over to Laura.
Thanks, Anshul. Our second quarter results extend our track record of outperformance across revenue and profitability. With an expanding portfolio in compromised bone, increasing commercial capacity, an improving reimbursement backdrop, and a multi-year innovation pipeline, we believe we are well-positioned for durable growth and expanding profitability in 2027 and beyond. With that, we're happy to answer your questions. Operator?
Questions and answers
The operator provided instructions to participants. Our first question will come from the line of Matthew O'Brien of Piper Sandler.
For starters, maybe Anshul, just on the guide for the year, good to see Q2 come in a little bit above expectations, but if you do the math on the back half, it's about a $500,000 increase to the midpoint versus the $1 million that you just put up. It also kind of implies that the back half U.S. number decelerates a little bit versus the first half. So, is there something specific? Are you having a little bit harder time getting into this latest tranche of clinicians in terms of your full product portfolio or is it something else that you really want to call out as far as the guide goes for the back half? I do have a follow-up.
Sure, happy to take that, Matt. On the guidance side, let me just start. We're feeling great about the setup we have going into the back half of the year. 19% growth in active physician base. That's a very solid physician base to enter the back half of the year with. The broad-based procedural demand growth that we saw in the second quarter, sequentially growth grew 9% on a 2-year CAGR of 20%. The sequential growth was one of the strongest that we've seen in recent history at that 9% sequentially in the second quarter. And then the growing infrastructure on the commercial side positions us well. So that's on what's already in the business. Then you layer on additional catalyst around the anticipated launch of the third breakthrough device and also the impact of the new DRGs that just got finalized, those are additional tailwinds in the business as well. Now, when it comes to guidance, as I said in my prepared remarks as well, we're being consistent with our thoughtful guidance philosophy. We know third quarter seasonality can have a little bit of noise in the business. And also, we want to make sure we're growing into these catalysts that I just outlined around the third breakthrough device and the new DRG impact on the fourth quarter. So we actually feel pretty good about the setup and there could be room for upside as those catalysts play out better than anticipated.
Got it. Appreciate that. And then congrats on filing for the third breakthrough device product. I'd love to just hear, and I know we're not going to get much on the product itself, but just about the profitability profile of that device. Is it going to be a big drag on gross margins or operating margins for a while? Are there big working capital requirements? Or is it similar to what you have right now in the business? And do you think there could be a halo effect from that device for the rest of the portfolio as it starts to see more uptake in '27?
That's a great question. So really excited about the third breakthrough device that we filed a 510(k) for in June, so it was actually ahead of schedule for us. And that sets us up really well on being able to, subject to FDA clearance, commercialize this product in the fourth quarter, and as Laura said in her prepared remarks, as early as October. So feeling really good about this. Now, this device actually has some inherent advantages. First, it's serving a call point where we already have established relationships. Granite, as you know, has been a great success with spine surgeons and it's going to go after that same market from a call point perspective. Second, this is targeting one of the largest known unmet needs in spine fusion procedures as well. So it's a known physician challenge that we're going after. And number three, it actually fits the physician workflow, so there is no need for extensive training. What that means is once we get through the alpha launch in the fourth quarter, this product actually has potential to rapidly scale. And as you asked about the gross margin implications, we're in the process of building out the surgical capacity to be prepared for a fourth quarter launch. Our gross margin assumptions right now are at 79% for the year. We were very deliberate in holding those gross margin numbers at 79% despite the outperformance in the first half. That is because we are anticipating depreciation on those assets to start out earlier on and revenue to follow subsequently. Overall, it should actually be an efficient ramp for us because our reps already are in relationship with those doctors. They are in a lot of the procedures with Granite already. So we're pretty excited about the commercial ramp as well.
Our next question will be coming from the line of Caitlin Roberts of Canaccord Genuity.
Congrats on the quarter. I guess just maybe starting with the procedure volumes, I want to get a little bit more color on what really drove the strength in the quarter and the sequential increase. Any one call point or product to call out there?
I can talk a little bit to what we're seeing on the procedure volume side. It's broad-based. We have three different areas of procedures that we're talking about: SI joint fusion procedures, pelvic fixation procedures, and pelvic trauma procedures. As we said in our prepared remarks, all of those areas grew in the double digits. And then there's three different call points that we're selling to as well: spine surgeons, interventional spine, and trauma surgeons, which are being approached by distribution and Smith+Nephew. But strong growth there too. So the growth that we're seeing is broad-based in the quarter. We're excited about where we're headed as well with the new product that Anshul just talked about, our new product that is planned to come out in the fourth quarter that we filed with the FDA already. One thing that hasn't been discussed yet: we actually had a very big development on Friday with the confirmation of the new Granite DRGs. Those DRGs specifically reference our Granite technology. The increase is up to $50,000 for those new DRGs, so that has all been confirmed and will go into place on October 1st. In addition, there was a lot of discussion in the CMS notes about breakthrough devices. There is a grandfather clause that's been put through that does recognize those breakthrough devices and the alternative pathway to receive an NTAP. We believe we're going to fall into that category as well. So we have a lot of catalysts that are going to drive these procedure volumes, whether it's reimbursement or new product, in addition to some new platform launches that are going to be coming out as well. What we're doing is we're expanding our commercial footprint in order to support all of that in the coming quarters.
The only thing I would add is Laura mentioned the huge physician base and the double-digit growth across all call points. As we launch this third breakthrough device, that's a huge asset for us and a huge competitive advantage. Not just for this product, but for future products, but specifically for this product, we do feel great about the position and the ability to really accelerate the adoption for this product even better than what we've seen with Granite, for example, which was one of our fastest scaling products.
Awesome. And then maybe just a question on the future products. You noted potentially two coming in the next 18 months. Any color on those, such as if they're beyond the sacropelvic anatomy as well, and if they're enabling tech-related? I know you called out software capabilities as a potential R&D investment. Just thoughts on M&A and your interest in that, or is the main focus really on internal investment?
Good questions. The way we've been expanding is thinking about compromised bone as the focus for the company. That has allowed us to leverage our strong organic growth engine. Our product development capability, whether engineering, product marketing, or regulatory quality, is a very high-performing organization. We have high-quality clinical work and focused education, and support from a reimbursement perspective. We're going after broader categories and that's filled our product roadmap with new products. We've developed this core capability and will continue to leverage it while staying focused on our existing call points. We expect to work with close to 3,000 surgeons this year alone. By launching additional products that can be used with those existing surgeons and oftentimes in the same cases, we have the opportunity to significantly increase our surgeon density as well as our average selling price for different procedures. We're also expanding capabilities. We talked about AI and software capabilities; we think that's a natural extension of what we've been doing with our anatomy-specific implants. Our TNT implant is an example. We're also working with new technologies and new materials, which we think are important in markets for patients with compromised bone. So there are many organic activities underway. As it relates to M&A, that's not our focus area. Our focus is around what we can do organically to drive and accelerate growth.
Our next question will be coming from the line of Xuyang Li of Jefferies.
To start, as you expand and increase your profitability, can you talk a bit about which internal focuses might get more attention versus others? I'm thinking R&D to launch more products and extensions, commercial expansion including adding more territories and partnerships, as well as international expansion. Where do those rank internally?
If you listen to what I described, we've developed core competencies in product development, clinical, education, and reimbursement. The focus is to continue driving those competencies and use them to accelerate growth and improve operating leverage. Expect to continue to spend a significant percentage on R&D, which includes clinical. Also expect to continue driving sales force productivity upward from the $2.2 million we discussed. We'll leverage the capabilities we've built over time. From a profitability perspective, we'll continue growing the top line and driving that down to the bottom line, while keeping a clear line of sight to free cash flow.
Even though we added more territories in the quarter, you saw productivity improve at the territory level. As we think about commercial expansion, it will be deliberate and targeted, and you should continue to see productivity improve. The initial pace of improvement may be moderate, but the benefit of our innovation strategy is by focusing on the same call point and going after known unmet needs, the productivity ramp should be much faster once territories are established. You've seen this playbook before with TORQ and Granite; we expanded our sales footprint and quickly accelerated productivity from sub-$1 million to $2-plus million in a span of three years. This time around, with more product launches at a more regular cadence, we feel good about continuing to drive productivity over time. On R&D spend, given our outperformance on profitability in the first half, we're increasing targeted R&D investment in the back half to advance strategic programs that could impact the business in late '27 into 2028. We're striking the right balance: we expect profitability to continue to improve. Our midterm guidance has always included operating leverage, and even at the midpoint of our revenue guide, we're ahead of that. Over time, revenue leverage will oscillate, and we feel comfortable about that range.
Okay, great. That's really helpful. On the third breakthrough device and other new products, how should we think about these new products expanding your TAM for surgeons as well as number of procedures?
These new procedure types will expand our TAM. They are not sacroiliac joint procedures or pelvic fixation procedures; they are additive. The next breakthrough device we're launching later this year can lean into our existing call point, procedures, and distribution capability. We have a large asset in our sales force, hybrid model including third-party agents, and the number of physicians we work with, particularly spine surgeons and interventionalists. That gives us the ability to deliver additional, differentiated products that address unmet needs and develop new markets. We're excited about this roadmap and the reimbursement trends that support it.
Our next question will be coming from the line of David Saxon of Needham & Company.
Congrats on the quarter. It looks like territories ticked up and in the past you've talked about getting to 100 over time. How are you approaching hiring to actually get to 100 in the context of the upcoming product launch and the broader pipeline over the next 18 months? Are these independent workflows or are you accelerating hiring to capitalize on the breakthrough device and other products?
Hiring is definitely a key focus. Over the last three years, we kept our number of territory managers relatively constant to achieve operating leverage and improve rep productivity. We're entering a different period with the new device and pipeline, and we've begun hiring additional quota-carrying territory managers. We're promoting high-quality territory representatives who have been with the company, splitting territories, and providing them with their own book of business, and also hiring externally. We ended the quarter with 93 territory managers and plan to grow to close to 100 by the end of the year, with more hiring into 2027. It usually takes around six months for a territory manager to get productive, so we're hiring in anticipation of upcoming launches.
Okay, that's helpful. And then on the Smith+Nephew partnership, I'd love to hear early feedback. In terms of procedure volumes, how are those ramping in the new centers they're getting you into? How long to fully ramp that partnership and how meaningful could it be in terms of revenue contribution longer term and in 2027?
This is an important partnership. We want to keep our territory managers focused on ortho and neuro spine surgeons and interventional spine physicians, and Smith+Nephew has deep relationships with orthopedic trauma surgeons. TNT and TORQ for sacral insufficiency fractures are critical in that space. The partnership is progressing well. Cases are underway, and physician engagement includes both Smith+Nephew's territory manager and our own. We're training their field organization, expanding surgical capacity, distributing additional trays, and placing inventory in the field. The onboarding cycle appears similar to a normal physician onboarding, roughly six months, and we're preparing for a seasonally strong fourth quarter.
Our next question will be coming from the line of Richard Newitter of Truist Securities.
Appreciate the small bump to the midpoint of the guidance range for the year. For third quarter, within the context of your seasonality comments, it looks like the Street is modeling about $55.5 million. Is that a good place to be regarding seasonality and the push-pulls quarter to quarter? Anything else you'd call out from a quarterly cadence standpoint, down the P&L as well?
As you know, we don't guide to quarters. Historically, you've seen seasonality in the third quarter—vacations and conference timing can impact results. The way we've assumed it in our guidance is a 1% to 2% sequential decline from a seasonality standpoint. What we have going on in the business is a strong physician base, an expanded sales force, and opportunities in interventional with the INTRA family of products and TNT. Our focus is how we work through that seasonality. Right now what's embedded is that 1% to 2% sequential decline.
It sounds like you're embedding some conservatism. All else equal, if business trends hold, should fourth quarter not accelerate from second quarter levels? Also, do you have any concerns over utilization trends out there recently, especially for spine and ortho? Your quarter-over-quarter unit growth wouldn't suggest that, but what are you hearing from customers and is there anything you'd flag?
We're not getting into quarterly expectation setting, but you're right that there are multiple things that could drive upside in the fourth quarter, especially around October 1. We're moderating expectations in guidance given timing uncertainty. The DRGs could take time to flow through into procedure volume, but this is a new DRG that automatically maps Granite procedures to the new DRG without a special coding requirement, which helps. We're prepping for more than an alpha launch for the new breakthrough device, but our assumption is the fourth quarter will be an alpha launch. The product is complementary to Granite and could be used in the same case, which could give ASP upside. Our guidance assumes a low-single digit ASP degradation, partly because interventional and trauma procedures typically use fewer implants, but the new product could change that. There's potential for outperformance, but we're being measured to see how these catalysts play out in the fourth quarter.
Our next question will be coming from the line of Patrick Wood of UBS.
I wanted to ask about INTRA Ti. One of the biggest benefits is favorable reimbursement versus its predecessor and peers, and it receives nationwide CMS reimbursement, unlocking about 22 states that were previously uncovered. What has been interventionalist feedback on INTRA Ti so far since launch? Are you seeing outsized demand in those incremental states or is the demand more broad-based? I have one more question afterwards.
We're excited about INTRA Ti. I was at the ASPN meeting a couple of weeks ago and we now have the broadest portfolio in SI joint fusion. We're the market leader in this space. Historically we worked with spine surgeons but are seeing very rapid growth in interventional, and the INTRA product line is driving that. INTRA Ti has a unique role: it is a 27279 product, posterior, single-use, and can be used at all sites of service and by surgeons or physicians alike. We're seeing a strong initial reception for INTRA Ti. We believe reimbursement tailwinds going into 2027 will continue to drive adoption of INTRA Ti as a solution for 27279 across inpatient, outpatient, ASC, or office settings. We're seeing rapid adoption by interventionalists of our technologies.
To expand on the Smith+Nephew partnership, can you provide some context relative to a year ago: how many incremental Level 1 and Level 2 trauma centers do you now have access to where you can plug TORQ and TNT, among other products?
We don't typically disclose specific counts, but there are a couple hundred Level 1 and Level 2 trauma centers we're going after with Smith+Nephew. Sales in that area are small today, so there's a lot of opportunity for growth. We view the relationship as symbiotic: we bring the breakthrough device for sacral insufficiency fractures and they bring deep trauma relationships. Our goal is to keep our sales force focused on spine and interventional and leverage Smith+Nephew for trauma.
Our next question will be coming from the line of Matt Blackman of TD Cowen.
It's Drew on for Matt. Laura, you said you expect case volumes per physician to become an increasing contributor to revenue growth. Over the last couple years, active surgeon growth has been around 20% while utilization hasn't moved much. What can the business look like heading into 2027? How much of utilization can be driven by removing economic objections, and what are the limiting factors for utilization? Why should investors have confidence utilization growth can accelerate?
That's a great question and something I'm most excited about. We've built a first-class sales organization and invested in a hybrid model with third-party agents and junior reps, giving us broad reach. You've seen one-for-one growth in surgeon numbers and in volume; this quarter we had 19% growth in physicians doing at least one case—1,715 physicians. That number rivals many of the largest players in the market. The way we get operating leverage is by increasing utilization per physician. The upcoming product launches are particularly important. The next product launching as early as October is one that the same surgeon base will be excited to use. In some cases it will be used in independent procedures and in other cases with our existing Granite products, giving us a specific opportunity to increase utilization and surgeon density.
Anshul, given Laura's comments and your comments about R&D and hiring more reps into 2027, how should we think about 2027 leverage capabilities? Should we think about the lower end of your previously given range of 1.2x, or could there be enough tailwinds to see better leverage next year?
I'm not providing guidance for next year, but a lot of the investment you're seeing this year is intended to support the long-term growth rate of the business. Many of the initiatives we discussed are multi-year catalysts: continued traction of TNT and INTRA Ti, better reimbursement for Granite with the new DRGs, potential higher SI joint reimbursements at ASCs and outpatient, and the potential for NTAP for the third breakthrough device. These revenue tailwinds give us confidence that operating leverage will continue to improve in the outer years. Timing will determine whether it's 1.3x or 1.5x next year, but we're feeling good about continued leverage and more profit dollars to the bottom line. Regarding cash flow, four of the last five quarters were positive operating cash flow. Our cash balance has grown year-over-year since Q2 of last year even after investing in surgical capacity. We're focused on stronger top-line growth, continued operating leverage, maintaining an asset-light model to deliver profit dollars to the bottom line, moving from adjusted EBITDA to GAAP profitability, and inflecting sustained free cash flow.
I'm showing no further questions. I would now like to turn the conference back to Laura for closing remarks.
I'd just like to say thank you to everybody. I appreciate you participating in our call, as well as your interest in SI-BONE. We look forward to seeing you at upcoming conferences and non-deal roadshows. Goodbye.
This concludes today's conference. Thank you for participating. You may now disconnect.