CVRx, Inc. Common Stock 2026 Q2 Earnings Call

Good afternoon. Thank you for joining us today for CVRx's second quarter 2026 earnings conference call. Joining me on today's call are the company's President and Chief Executive Officer, Kevin Hykes, and Chief Financial Officer, Jared Oasheim. The remarks today will contain forward-looking statements, including statements about financial guidance. These statements are based on plans and expectations as of today, which may change over time. Actual results could differ materially due to a number of risks and uncertainties, including those identified in the earnings release issued prior to this call and in the company's SEC filings. I would now like to turn the call over to CVRx's President and Chief Executive Officer, Kevin Hykes.

Thanks, Mike. Good afternoon, thank you for joining our second quarter 2026 earnings call. We delivered total revenue of $15.7 million in the second quarter, demonstrating growth of 16% over the same quarter last year, with a gross margin of 87%. Despite the positive quarter, we are seeing signs that the back half of the year will not be as strong as the first. We've lowered our revenue guidance for the year. My remarks today will cover three things: what is driving this change in outlook, what we're doing about it, and the longer term positive trends that we're seeing. We ended the quarter with 56 sales territories in the U.S., flat compared to the end of the first quarter.

It is important to note that roughly 60% of quota-carrying territory managers have joined us in the last 18 months as we have worked to build the right organization for this next phase of growth. This rapid pace of hiring has strained our onboarding and training processes and the ability of our area sales directors to spend the time necessary to accelerate these new team members up the productivity curve. The scale of the turnover, the slower pace of the territory manager productivity ramp, and the concentration of these new hires in a subset of our regions are the primary factors behind today's guidance update. These challenges are not uniform across the business.

In the regions where we have limited turnover and stable seasoned leadership executing our program development selling strategy, we're seeing strong double-digit growth, which indicates to us that when we have the right conditions in place, our strategy is indeed working. The sales force productivity challenges that we are facing are concentrated in specific regions that have a combination of new leadership and the highest turnover as a result of our sales force restructuring over the last 18 months. The combination of these two factors is distracting these regions from fully executing our market development plan, offsetting the success that we're seeing elsewhere in the country. Closing that gap is the focus of the steps that I will walk through next.

First, we've continued to improve our hiring process and refine our hiring profiles to make sure that the people we bring on are the right fit from day one, limiting early turnover due to skills or expectations that are not aligned. Second, we are investing significantly in onboarding and training with new resources, roles, and materials designed to get reps productive more quickly. This includes a significant strengthening of our curriculum focused on practical account access skills, as well as extending the onboarding process beyond the initial three-month didactic phase to an additional three-month hands-on field mentorship. The objective of these changes is to accelerate time to productivity and to reduce sales director distraction by improving the readiness of our territory managers as they join their teams in the field.

Third, we're creating multiple new field-based roles specifically focused on freeing up time for our area sales directors to more fully engage in coaching and developing the territory managers in their regions. This includes field-based reimbursement and business management personnel, as well as two vice president-level leaders to better support the area sales directors themselves. These additions are being funded through a reallocation of resources, not incremental spending. As Jared will point out in his comments today, we are actually lowering our operating expense guidance for the year. Finally, we are redeploying senior leadership talent to roles that can have the fastest and most significant impact on our commercial execution.

Our Chief Marketing Officer, Paul Verrastro, one of our most experienced and respected leaders, is moving into a new role providing direct support to our field teams to further accelerate the productivity of our new territory managers and area sales directors. Patrick Lyon, a key addition to our marketing team in Q4 of last year, is being promoted to lead our marketing organization, and we are confident in his ability to build upon Paul's outstanding contributions to date. The second factor that impacts our view on the rest of the year is reimbursement. While there are a number of positive trends, we continue to be challenged by the change in behavior from our largest Medicare Advantage payer. For many quarters, this payer approved close to 80% of our prior authorizations within 30 days of submission, many within days upon receipt.

In February, this payer implemented AI-based prior authorization tools, which resulted in an immediate increase in initial denials on the basis of administrative omissions. This was an attempt to comply with the shortened federal requirements for prior authorization review that went into place in January. This caused their 30-day approval rate to fall sharply in February and March to roughly 25%. Our own AI-based tools discussed on our last call helped bring that rate back up to approximately 40%. This payer has since introduced further new tactics for denying claims, and the rate has now fallen back below 30%. As a result, providers who had grown used to approvals from that payer within a matter of days are now waiting far longer and seeing meaningfully lower initial approval rates. That shift has understandably made some physicians more hesitant to recommend Barostim therapy to their patients covered by that plan.

Our approach to dealing with this headwind is the same one that ultimately led Humana to issue a favorable written coverage policy earlier this year. We are committed to appealing every prior authorization denial through every stage in the process, and to continue these appeals through to an administrative law review if necessary. Consistent advocacy on behalf of patients and the successful pursuit of appeals through to the final administrative law stage is what ultimately incentivizes a payer to discuss a formal coverage policy. Outside of this specific payer, the rest of our reimbursement picture is strong and getting stronger. Our overall 30-day Medicare Advantage prior authorization approval rate was 60% for the second quarter, as compared to 44% in 2025. The Humana coverage policy is helping drive this progress, with approval rates now above 90%.

We now cite the Humana policy in every prior authorization that we file and appeal across every payer, and we are referencing it directly in our ongoing coverage discussions with other national and regional payers. The Category I code implemented in January has further stabilized our experience with traditional Medicare, with approximately 96% of submitted claims for the Barostim procedure now being paid across all seven Medicare administrative contractors. On the outpatient side, CMS's proposed rule for the 2027 Outpatient Prospective Payment System continues to support Barostim's placement in new technology APC 1580 at approximately $45,000 per procedure. We were also pleased to see the final Inpatient Prospective Payment System rule increase the inpatient payment rate for the procedure from $43,000 to $45,000 effective October 1st.

The previously discussed creation of the field-based reimbursement manager roles is designed to increase our field reimbursement support and to move it closer to the point of customer contact in the field. I will now shift to the longer-term positive trends that we are seeing in the business. First, we continue to believe that our focused playbook is the right one, targeting the right centers and building sustainable programs based on a redundant network of clinical and administrative stakeholders and a defined Barostim workflow. As I mentioned earlier, our regions with stable, seasoned leadership and limited turnover are proving the impact of this approach, and our strong growth in these regions is the clearest validation we have that the strategy itself is working.

Our work is now focused on bringing the remaining regions up to that same standard. We believe the actions we're taking and the investments that we are making will get us there. On the clinical evidence front, I'm pleased to share that the BENEFIT-HF trial is tracking ahead of our internal expectations on both center activations and patient enrollment. We are also significantly increasing our investment in real-world evidence data sets, which we believe can further strengthen the clinical evidence base supporting Barostim. We now have multiple analyses from these data underway, with the first publications expected this fall. In addition, these data could potentially support an expansion of our indication and label, leveraging the new FDA real-world evidence pathway. We believe that this could potentially be a viable regulatory pathway for CVRx. We will keep you updated on this effort as it progresses.

Before turning the call over to Jared, I'd like to provide an additional update. In May of 2026, we received a civil investigative demand from the U.S. Department of Justice related to certain sales and marketing practices as described in our 10-Q. We are fully cooperating with the investigation. Jared will now walk through our financial results and our updated guidance for the year.