SI-BONE, Inc. Common Stock Morgan Stanley 24th Annual Global Healthcare Conference

Hello. Good morning, everyone. Thanks for joining us today. I'm Eduardo Hirvin. I'm part of the Morgan Stanley team. Today, I have the pleasure of being joined by Anshul Maheshwari, COO and CFO of SI-BONE. Before we begin, just need to do a little plug for our disclaimers. Please visit morganstanley.com/researchdisclosures. With that, let's start with the fun part. Anshul, thank you very much for being with us today. Before we dive into performance, let's start with the big picture question. Company has evolved a lot in the last few years. Could you maybe walk us through that evolution and talk through how you see your products and end markets today?

Sure. Eduardo, thank you for having us. We appreciate being invited to Morgan Stanley. It's one of the best conferences we attend every year. In terms of how the company has evolved, you're right. If you go back to the start of the company, which goes back to 2008, 2009, we started as a single disease state company, which was addressing a known disease state with an SI joint dysfunction. We had to build the market, we had to build clinical evidence, we had to build reimbursement. We, by far, are the leading market share owner in the SI joint dysfunction space, whether it's on the surgeon side, and most recently, we've expanded on the interventional side. In the last six years, what we've done is we've gone from this one disease state, one product company, to a multi-product platform targeting the pelvis.

Within that, we've built out a pelvic fixation franchise, which is with Granite. That was our first Breakthrough Device product, driving fixation and fusion at the base of deformity and DeGen spine procedures. More recently, two years ago, we launched our TNT product, which was our second Breakthrough Device. That was for pelvic ring fractures, for fragility fractures in patients, generally patients who are older with Medicare and poor bone quality. That was our second Breakthrough Device that we launched specifically targeting towards trauma. As we built that franchise, there were a few common themes there. One, it was understanding the biomechanics of these first products that were going into an anatomy that was facing a lot of load. Number two was your sacrum has one of the most poor quality bone, low density bone, in the human anatomy.

Being able to drive fixation and fusion required a level of innovation that did not exist before SI-BONE came out. Number three was because we're going after an unmet need, it was all about clinical data. Then it was about establishing reimbursement. We built that core skill set over the last decade and a half, and what you're now seeing us do is take that core skill set and say, "What else can we do with it?" We are by far the market leader in SI joint dysfunction. We are becoming the standard of care in spinal public fixation. We are becoming a standard of care within fragility fractures with our TNT product. What you're now seeing is look at this as a compromised bone franchise, having had the expertise of fusing this low-quality bone in your sacrum.

We are now starting to look at opportunities for patients that have osteoporosis, osteopenia. How can we come up with solutions that help drive fixation and fusion for the patients that suffer from those disease states, still staying within spine and interventional as the core call points? That is really important for us because we see a lot of unmet needs, areas where you have high failure rates, where we know our technology can improve patient outcomes because of a proven track record. Our product that we have been teasing everybody about for the last one year is this new TAM that we are going after, which actually takes into account all these learnings I just talked about, and is targeting a known failure rate in spinal fusion procedures. We believe this technology is going to have a very significant impact on our TAM.

It is going to be a whole new TAM with the same call point that today works with us on Granite. Because it is a third Breakthrough Device, it is also going to have the potential for new technology add-on payment that we plan to apply for. That, assuming if it is approved, will go effective in October of 2027. That is our first product that is building outside of the pelvis. What we now have also is a pretty robust pipeline of opportunities that we are going after that extend beyond this TAM. Our expectation is, on a very good cadence basis, you will see us come out with new products that are targeting high failure rates in different procedures, again, within spine and interventional, at a pretty regular cadence of one to two new TAMs a year going forward.

Awesome. That is all super interesting, and I certainly will ask a few more questions about the new devices and pipeline in a bit. But maybe before we go into that, let us dive into performance a little bit. You all have grown a pretty impressive 20% CAGR over the past five years, and you continue to have great updates, including this last quarter, that feel like they are going to keep pushing the company's growth. Could you maybe walk us through some of those updates and how you see them affecting the trajectory?

Sure. We reported our second quarter earnings, and on a year-over-year basis, the worldwide growth was about 15%. That was versus a tough comp from last year. If you look at it on a two-year stack, you are looking at high teens growth rate on the top line. What was equally impressive was the 19% growth rate we had in our active physician base, with close to 720 physicians performing a procedure in a quarter for us. That was a record number of physicians that did a procedure for us. When you think about what we did, then we had profitability increase about close to 180% improvement in adjusted EBITDA. We were free cash flow negative $300,000 operating cash flow positive as well, close to $1 million. All the metrics pointing in the right direction.

What we are really excited about is all the other things that we did during the quarter that are going to set us up for a strong fourth quarter going into a robust multi-year innovation and growth acceleration cycle. Starting with working on the DRGs for Granite, which is our pelvic fixation product. That product had NTAP that expired in October of 2025. We had been working with CMS to get DRG reassignments for that procedure. What we did get, and it was finalized and it goes effective October 1, 2026, is three new DRGs, which would increase reimbursement from anywhere between $20,000 on the low end and over $50,000 on the high end for procedures where Granite is incorporated as part of the procedure. That is going to be a really nice tailwind for the business going out.

The second thing that we were really excited about was the work that we did with the FDA on this third Breakthrough Device. We did file the FDA application in June, and that gives us confidence about commercializing the product in the fourth quarter and potentially as early as October, do the alpha launch. That should be a really nice, exciting opportunity for us. Then we continue to make progress on two additional devices that we expect to go into design freeze at the end of this year with the potential to commercialize them in late 2027, early 2028. Our focus has been how do we transform SI-BONE from this single product, single anatomy company into a medical device technology platform where we can now start building technology platforms that have applications around a broad set of opportunities.

Very nice. Maybe let us hone in on the install base for a second. I think you mentioned 1,700 doctors, 19% growth year-on-year. What do you think is driving the growth of your install base at that scale? Are there any specific areas of the business that are driving that growth more than others?

Yeah. We are really proud of the physician base growth that we have seen, I would say, over the last five years. I mean, in 2023, we had less than 1,700 physicians do a case in a year, and we had over 1,700 physicians do a case in a quarter. A large part of that is an outcome of the innovation that we have done. Our innovation with Granite continues to attract more physicians into the fold for pelvic fixation. Our expansion into interventional continues to be a really good growth driver for us with an SI joint dysfunction. Our launch of our TNT product a couple of years ago continues to get strong traction, especially with the partnership with Smith+Nephew on the trauma side as well. What we did see is broad-based growth.

You saw double-digit based growth across all call points, and that is really exciting because one of the hardest things to do is to build a customer base of our scale. We have done that, and now as we put out some of these innovative products, it should allow us to now translate that into higher density, so more cases per physician, because we are going after procedures that these physicians perform today and are aware of the challenges that these procedures pose that we can solve.

Let us maybe talk about that a little bit more. I think you are essentially saying that you are thinking about utilization expansion within your physician base. How should we think of that evolution over time, and how do you look at it today? Because I think today we have not seen it, but I think you are expecting to see some inflection in the near term, correct?