Executive Summary / Key Takeaways

• Transformative Growth Trajectory: SI-BONE is rapidly evolving into a diversified, high-growth medical device platform, leveraging its proprietary, anatomy-specific breakthrough technologies to expand its addressable market and deepen physician engagement.
• Consistent Profitability and Cash Flow Inflection: The company achieved its third consecutive quarter of positive adjusted EBITDA in Q2 2025 and reached cash flow breakeven ahead of schedule, signaling a robust financial model poised for sustained free cash flow generation by 2026.
• Innovation as a Core Moat: SI-BONE's commitment to R&D has yielded three Breakthrough Device Designations from the FDA, with products like iFuse Bedrock Granite and iFuse TORQ TNT driving significant adoption and offering superior clinical outcomes.
• Expanding Physician Base and Procedure Density: A hybrid commercial model and a comprehensive product portfolio are fueling record physician adoption (1,440 U.S. active physicians in Q2 2025) and increasing procedure density, with physicians performing multiple procedure types growing by 24% year-over-year.
• Favorable Reimbursement Tailwinds: Strategic reimbursement wins, including Transitional Pass-Through (TPT) for Granite and New Technology Add-On Payment (NTAP) for TNT, are enhancing market access and economic viability for its innovative solutions.

The Foundation of Innovation: Redefining Sacropelvic Care

SI-BONE, Inc. (SIBN) has carved out a distinctive position in the medical device industry by pioneering minimally invasive surgical implant systems for musculoskeletal disorders of the sacropelvic anatomy. Since its inception in 2008 and the launch of its first-generation iFuse in 2009, the company's strategy has centered on building a unique platform of solutions for challenging procedures, aiming to improve surgical outcomes with stronger fixation, fusion, and lower failure rates. This foundational commitment to innovation and clinical evidence has been the bedrock of its growth.

The company's journey reflects a deliberate expansion from its core sacroiliac (SI) joint dysfunction solutions into broader sacropelvic applications, including adult spinal deformity, pelvic fixation, and pelvic trauma. This strategic diversification has expanded SI-BONE's total addressable market to over $3.5 billion in the last three years, targeting over 0.5 million annual procedures in the U.S. This expansion is not merely about new products; it is about addressing unmet clinical needs with differentiated, anatomy-specific technologies that resonate with a growing base of orthopedic, neurospine, trauma, and interventional spine physicians.

Technological Edge: The Core of SI-BONE's Moat

SI-BONE's competitive advantage is deeply rooted in its proprietary technology, particularly its titanium implant systems. These aren't just incremental improvements; they represent a fundamental rethinking of sacropelvic stabilization. The company's iFuse-3D, for instance, combines a triangular cross-section with a proprietary 3D-printed porous surface and fenestrated design. This design is engineered to enhance bone integration and provide stronger fixation, a tangible benefit validated by the SILVIA trial, which demonstrated that iFuse-3D reduced new-onset SI joint pain in pelvic fixation procedures.

The iFuse TORQ line, also featuring 3D-printed threaded implants, has become a preferred solution, especially among newly trained physicians and interventionalists. Early safety data from the STACI study, which evaluated iFuse TORQ in interventional spine physicians, showed a low adverse event rate and early improvement in pain and function. This clinical validation is crucial for driving adoption in a competitive landscape.

Further expanding its technological lead, the iFuse Bedrock Granite Implant System provides foundational support for both long and short construct spinal fusion procedures. This technology directly addresses the nearly 24% failure rate of lumbopelvic fixation, a significant concern for surgeons. Clinical publications have demonstrated a significantly lower incidence of screw failures with Granite compared to traditional pelvic screws, with no incidents of breakage or back out. This superior performance translates into reduced revisions and mechanical failures, offering substantial value to healthcare facilities, clinicians, payers, and patients. The Granite 9.5 variant has notably outpaced the adoption of its predecessors, with 4-implant Granite cases growing by 50% in Q2 2025 and 69% in Q1 2025, contributing to a strong average selling price per procedure.

The iFuse TORQ TNT, launched in Q4 2024, is another testament to SI-BONE's innovative prowess, having received Breakthrough Device Designation (BDD) from the FDA. This anatomy-specific implant for sacral insufficiency fractures is designed to seamlessly integrate into trauma surgeons' workflows and is ramping ahead of expectations. SI-BONE is the only public company in its industry to have three BDD products, underscoring its unique ability to identify and address unmet clinical needs with groundbreaking solutions. A new SI joint solution, optimized for the ASC environment, is slated for a Q1 2026 launch, with a 510(k) submission expected soon. This product aims to simplify workflow and broaden engagement with interventionalists. Furthermore, a third novel implant system, also with BDD status, is in early development, with a 510(k) filing anticipated in H2 2026, targeting a "most pressing need in spine surgery." These technological advancements are critical for SI-BONE's competitive moat, enabling higher ASPs, lower costs through reduced complications, and a stronger market position.

Competitive Dynamics: A Niche Leader's Advantage

SI-BONE operates in a medical device market dominated by large, diversified players such as Medtronic (MDT), Johnson & Johnson (JNJ) through DePuy Synthes, Stryker Corporation (SYK), and Zimmer Biomet Holdings (ZBH). While these giants possess extensive global distribution networks, vast R&D budgets, and economies of scale, SI-BONE has strategically positioned itself as the market leader for sacral-pelvic solutions through specialized expertise and a highly differentiated product portfolio.

SI-BONE's strength lies in its targeted technological superiority. Its implants offer specialized, minimally invasive solutions that provide potentially better performance in joint stabilization and bone integration compared to the broader, less specialized offerings from larger competitors. For instance, the clinical evidence supporting Granite's lower failure rates directly challenges the efficacy of traditional pelvic screws, providing a compelling argument for adoption. SIBN's nimble innovation cycle in its niche allows for faster product iterations and a more focused response to specific clinical needs, which larger, more bureaucratic organizations may struggle to match.

The company's hybrid commercial model, combining a direct sales force (85 U.S. territory managers and 75 clinical support specialists in Q2 2025) with 295 third-party sales agents, allows for efficient market penetration and deeper physician engagement. This model has proven effective, with trailing 12-month revenue per territory manager increasing to $2.1 million in Q2 2025, up 23% year-over-year. This efficiency is particularly evident in pelvic fixation and growing in pelvic trauma, where agents provide case coverage, freeing direct sales teams to focus on market development and new physician training.

The recent acquisition of Nevro (NVRO) by Globus (GMED), a competitor, does not alter SI-BONE's strategy. As management noted, Globus already has an SI joint solution (SI-LOK), and SI-BONE has historically maintained and increased its market share with TORQ, demonstrating resilience against established players. This further validates SI-BONE's strategy of expanding its platform with differentiated, anatomy-specific solutions. While SI-BONE's smaller scale can lead to higher operating costs and limited global reach compared to its larger rivals, its focused expertise and strong customer loyalty in its specialized segments allow it to compete effectively. Regulatory approvals, intellectual property protections, and high R&D costs act as significant barriers to entry, helping SI-BONE defend its market position.

Financial Momentum: From Losses to Profitability and Beyond

SI-BONE's financial performance reflects its strategic execution and the increasing adoption of its innovative platform. The company has demonstrated robust top-line growth, with worldwide revenue reaching $48.6 million in Q2 2025, representing a 21.7% year-over-year increase. U.S. revenue, which constitutes 95% of the business, grew 22.8% to $46.4 million, driven by a strong 25% increase in procedure volumes across all modalities. This consistent growth follows a strong Q1 2025, which saw 24.9% worldwide revenue growth, and a full year 2024 revenue of $167.2 million, up over 20% year-over-year.

Profitability has seen a significant inflection. Gross margin reached 79.8% in Q2 2025, an 80 basis point expansion year-over-year, attributed to improved manufacturing and supply chain efficiencies, as well as a favorable procedure mix, particularly the growth in 4-implant Granite cases. Operating expenses, while increasing by 10% in Q2 2025 due to growth investments and commissions, were outpaced by revenue growth, demonstrating strong operating leverage. This disciplined approach led to SI-BONE's third consecutive quarter of positive adjusted EBITDA, reaching $1 million in Q2 2025, a substantial improvement from a $2.7 million loss in the prior year. For the trailing 12 months ended Q1 2025, the company converted over 50% of its growth revenue dollars into adjusted EBITDA, highlighting the scalability of its infrastructure.

Liquidity is also strengthening. As of June 30, 2025, SI-BONE held $145.5 million in cash and marketable securities. Critically, the company achieved cash flow breakeven in Q2 2025, well ahead of its original timeline. This milestone underscores the potential for consistent positive free cash flow at scale. While a modest amount of cash consumption is expected in the second half of 2025 due to planned increases in surgical capacity for new product launches, the company is rapidly progressing towards achieving positive free cash flow in 2026. A November 2024 debt refinancing with SVB First Citizens Bank (FCNCA), extending maturity to 2029 and reducing borrowing costs, further bolsters its financial flexibility.

Outlook and Strategic Imperatives

SI-BONE's management projects full-year 2025 revenue between $195 million and $198 million, implying 17% to 18% year-over-year growth. This guidance reflects strong first-half performance and confidence in solution adoption, though it incorporates a prudent assumption of low to mid-single-digit ASP decline due to evolving procedure mix. Gross margin is expected to be between 78.5% and 79% for the full year, benefiting from sticky efficiency improvements, partially offset by anticipated ASP pressure and depreciation from new surgical capacity. Operating expenses are projected to grow around 10%, maintaining strong operating leverage. The company remains committed to delivering positive adjusted EBITDA for the full year 2025, with profitability expected to be weighted towards the second half, particularly Q4, following seasonally higher spending in H1.

Key strategic initiatives underpin this outlook. Physician engagement remains paramount, with a record 1,440 U.S. physicians performing procedures in Q2 2025, a 25% increase year-over-year. The company targets over 12,000 U.S. physicians, including orthopedic, neurosurgical, and interventional spine specialists. Academic training programs, which have trained approximately 2,000 residents and fellows since 2018, are proving highly effective, with revenue from these previously trained physicians growing 63% in Q2 2025. Increasing procedure density is another focus, as physicians performing multiple procedure types grew 24% in Q2 2025, and active physicians averaged nearly 5 procedures per quarter. The sales force is targeted to expand to 100 territories over the next 12-15 months, supporting new product launches and market penetration.

Reimbursement tailwinds are significant. Granite received Transitional Pass-Through (TPT) payment status effective January 1, 2025, with a $0 device offset, allowing hospitals to be reimbursed for 100% of the technology cost in outpatient settings. CMS has also proposed a Level 7 APC payment of nearly $28,000 for higher-cost lumbar fusion procedures in outpatient settings for CY 2026, and CPT 27280 (open SI joint fusion) was removed from the inpatient-only list, creating tailwinds for Granite adoption in ASCs. For TNT, a finalized New Technology Add-On Payment (NTAP) of over $4,100 will be effective October 1, 2025, providing a 20-30% reimbursement increase for hospitals and expanding access to this breakthrough technology for pelvic trauma patients.

Risks and Challenges

Despite the strong momentum, SI-BONE faces several risks. A civil investigative demand from the U.S. Department of Justice, received in October 2024, concerning the federal Anti-Kickback Statute and Civil False Claims Act, introduces uncertainty. While the company is cooperating, the duration and financial impact of this investigation remain undeterminable. Changes to CPT Code 27279, effective January 1, 2026, could potentially devalue the code if procedures with lower work effort or less favorable outcomes are reported under it, prompting payer reevaluations.

Supply chain dependencies, particularly on single or limited sources for titanium and sterilization services, pose risks, exacerbated by geopolitical events and potential tariffs. Disruptions to regulatory bodies like the FDA could also delay product approvals. Macroeconomic uncertainties, while currently not impacting procedure volumes due to the debilitating nature of patient pain, could still present headwinds. Transient issues like the IV solution supply shortage and hurricane-related disruptions in Q3 and Q4 2024 illustrate the sensitivity to external factors, with some deferred cases potentially shifting into 2025.

Conclusion

SI-BONE is executing a compelling transformation, evolving from a specialized niche player to a dynamic, diversified medical device platform. Its core investment thesis is anchored in a relentless pursuit of innovation, yielding proprietary, anatomy-specific breakthrough technologies that address significant unmet clinical needs in sacropelvic care. This technological leadership, combined with a highly effective hybrid commercial model, is driving robust physician adoption and increasing procedure density across multiple modalities, expanding its addressable market and solidifying its market leadership.

The company's financial trajectory, marked by consistent double-digit revenue growth, expanding gross margins, and a recent inflection to positive adjusted EBITDA and cash flow breakeven, underscores the inherent operating leverage of its asset-light business model. Strategic reimbursement wins for Granite and TNT further enhance the economic viability and market access for its solutions, providing significant tailwinds for sustained growth. While regulatory scrutiny and supply chain dependencies present ongoing challenges, SI-BONE's proven ability to innovate, execute, and adapt positions it for continued market share gains and a clear path to consistent free cash flow generation in 2026 and beyond, making it a compelling consideration for discerning investors.