CapsoVision (CV) Q2 2026 earnings call transcript

I will now hand the conference over to Lee Salvo, Investor Relations. Please, go ahead. Thank you, Operator. Good afternoon, everyone, and thank you for joining us for CapsoVision's second quarter 2026 earnings call. Joining me today are Johnny Wong, President and Chief Executive Officer, and Senior Vice President of Finance, David Garcia, as well as Doug Atkinson, Senior Vice President of Sales. Before we begin, please remember that today's remarks include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Form 10-Q filed by us with the SEC. These forward-looking statements speak only as is the date of this call, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions, or circumstances on which any such statement is based. Our call today will cover the following agenda.

Johnny will begin with an update on CapsoVision's business, target markets, and recent highlights from our pipeline development. Then Dave will walk through a commercial update and recent financial results. After our prepared remarks, we'll open the call for Johnny, David, and Doug to take the questions.

With that, I'd like to turn the call over to Johnny Wong, CEO. Johnny?

Thank you, Lee, and good afternoon, everyone. The second quarter represented another period of steady progress for CapsoVision. As we continue the executing our commercial strategy, while advancing several important initiatives across our product portfolio. Commercially, we delivered 10% year-over-year revenue growth, Continued expanding production across large hospital systems and gastroenterology networks, renew the key customer relationships, and added new customers who recognize the value of our panoramic capsule platform. More importantly, we continue to see encouraging underlying utilization trends across our installed base, reinforcing the growing role that CapsuleCamp Plus is playing in routine clinical practice. As of June 30, more than 176,000 patients worldwide have now been imaged using CapsuleCamp Plus, Reflecting growth of 23% a year ago and highlighting the continued adoption of our technology by physicians around the world.

Our commercial team also continues to build momentum across both existing and new customer accounts, providing us with confidence as we look forward the second half of the year. One of the most significant accomplishments during the quarter was the commercial launch of AI highlights in the European Union and the other international markets. This launch represents an important milestone in the evolution of our AI-enabled platform, And it follows the inclusion of our Capsule View software with AI analysis tools and the Capsule Cloud, within the scope of our EU Quality Management System Certificate under the European Medical Device Regulation. Both are classified as class 2A medical devices in Europe, providing the regulatory foundation for us to bring our integrated AI-enabled workflow to physicians across these markets.

AI Highlights is designed to streamline decision review by automatically identifying frames containing suspected pathology and presenting them within a structured workflow. Importantly, this capability is integrated across our broader software ecosystem, including CapsuleView and our cloud-based CapsuleCloud platform, Which enables physicians to manage the procedures and review and analyze CapsuleCamp Plus studies through a flexible cloud-based environment. We believe bringing together panoramic capsule imaging, AI-assisted analysis, and a cloud-based workflow represents an important competitive differentiator for CapsuleVision. CapsoVision. Rather than offering AI as a standalone feature, our goal is to provide physicians with an integrated platform that can make a capsule endoscopy more efficient and accessible while maintaining the clinical rigor they expect. Early customer feedback has been encouraging, and we believe the international launch provides an important opportunity to demonstrate the value of AI highlights in real-world clinical practice as we prepare for commercial introduction in the United States.

Many of our customers have also expressed a strong interest in the U launch of AI highlights and I would like to provide some additional perspective on the timing of our FDA review As many of you know, we submitted our 510k application for AI highlights in December of last year. During its review, the FDA requested additional information regarding demographic representation within the clinical dataset supporting the submission. We have been working closely with the agency to address those requests and expect to obtain FDA clearance by the end of the third quarter, with commercial launch expected shortly thereafter.

We are confident that AI Highlight will represent an important catalyst for our commercial business, and as we continue expanding adoption of the Capsule 10 Plus platform.

Turning to a broader development pipeline, we continue to make meaningful progress across multiple programs. For Capsule King, development continues to advance well, and we now expect to submit our second-generation Capsule and AI module for FDA review during the fourth quarter of this year. While the submission timing has shifted by a quarter due to the need for more positive subjects with significant polyps based on discussions with FDA, our strategy remains unchanged. We believe taking the time to deliver highly differentiated second-generation platform, incorporating our latest imaging technology and AI capabilities, positioning us for greater long-term commercial success. We also continue to make encouraging progress in our CapsuleCAN UGI clinical study, evaluating pancreatic cancer detection. Enrollment continues as planned, and we remain very encouraged by the progress of the study.

While this program is still in the early stages of clinical development, we believe it represents one of the most exciting long-term opportunities for our technology platform. Pancreatic cancer remains one of the most challenging diseases to detect early, and we believe capsule endoscopy has the potential to become a valuable non-invasive diagnostic tool in this area. More broadly, what continues to excite us is the versatility of our platform. Our strategy has always extended well beyond this mobile imaging. We are building an integrated capsule endoscopy platform capable of addressing multiple gastrointestinal diseases through advanced imaging, cloud-based workflow, and artificial intelligence. Each milestone we achieve, whether extending our commercial footprint, launching new software capabilities, or advancing pipeline programs, moves us closer to realizing that region.

Overall, we believe the business is progressing as expected. We continue to execute commercially, We will advance our innovation pipeline and strengthen the foundation for long-term growth. As we enter the second half of 2026, we remain focused on delivering additional commercial momentum while bringing new capabilities to physicians and patients around the world.

With that, I will turn the call over to Dave to provide additional detail on our commercial Thank you, Johnny. Turning to our commercial performance, we are pleased with the continued momentum in the business during the second quarter. As Johnny noted, more than 176,000 patients worldwide have now been imaged with CapsuCam Plus, compared with more than 143,000 at the end of Q2 2025. During the second quarter, we shift 8,845 CapsuCam Plus capsules compared with 7,856 in the prior year period, representing a year-over-year increase of approximately 13%. We continue to see encouraging engagement across large gastroenterology networks and hospital systems, while also adding new customers to the platform. Importantly, this growth comes from a combination of continued utilization within our existing customer base and traction with new accounts.

During the quarter, we also continued to secure important customer renewals, including University of Minnesota Medical Center, Henry Ford Medical Center, University of Colorado Medical Center, and Providence Swedish Medical Center, making CapsuCam the number one capsule used in hospitals in the state of Washington. This highlights the value of the platform and the strength of our long-term customer relationships. Moreover, we believe the international launch of AI highlights further strengthens our commercial offering. As Johnny discussed, we're also seeing meaningful interest from the US customers awaiting the availability of AI highlights, and we believe its anticipated US launch represents an important opportunity to support further adoption of Capsule Cam Plus in the US.

Our technology continues to be supported by strong intellectual property portfolio with 85 issued U. S. patents as of quarter end.

From a commercial infrastructure standpoint our U direct sales organization has remained consistent with 26 representatives supported by seven regional sales managers and trainers at quarter end Internationally we continue to expand our presence through a combination of direct sales and distributor relationships including our dedicated commercial organization in Germany As we've discussed previously, one of the advantages of our commercial model is the ability to leverage this existing infrastructure as we introduce additional products and indications over time. The gastroenterologists and health systems we serve with CapsuleCam Plus today represent the same customer base we expect to address with future products, including CapsuleCam Colon.

Turning to our financial results, second quarter revenue was $3.6 million, an increase of approximately 10% from $3.3 million in the second quarter of 2025. The increase was driven by a 13% year-over-year increase in the number of CapsuleCam Plus capsules sold, partially upset by an approximately 3% decrease in the average selling price. We were pleased to deliver this growth while continuing to expand our presence across both existing and new customer accounts. Gross profit for the quarter was $1.9 million compared with $1.8 million in the prior year period. Gross margin was 51% compared with 55% in the second quarter of 2025.

The change in gross margin primarily reflected pricing pressure in a competitive market as well as higher customs and tariff expenses resulting from changes in U. S. trade policies earlier this year. Operating expenses were $9.5 million compared with $6.5 million in the second quarter of 2025. The increase primarily reflects our continued investment in product and clinical development, including expenses associated with our colon pivotal study and other clinical trials, non-recurring engineering work related to our Canon development program, as well as the incremental costs associated with operating as a public company and stock-based compensation expense. These investments support the programs Johnny discussed earlier and reflect our continued focus on advancing the pipeline while building the commercial foundation for long-term growth.

We ended the second quarter with $9.1 million in cash and cash equivalents. As a reminder, during the first quarter, we raised $14 million in gross proceeds through a private placement with new and existing investors. More recently, we established an at-the-market equity offering program of up to $100 million with Cantor Fitzgerald, providing us with additional financial flexibility as we continue investing in our commercial organization, product development, and clinical programs. Importantly, the ATM provides us with flexibility to access additional capital opportunistically based on market conditions and the needs of the business. As we look to the remainder of 2026, we continue to be encouraged by the underlying trends in the business. We expect continued commercial momentum in the second half of the year, supported by expanded adoption of CapsuCam+, continued engagement across larger hospital NGI networks, the international availability of AI highlights, and following anticipated FDA clearance, its commercial introduction in the United States.

As such, we expect revenue in the second half of the year to be higher than in the first half. We also continue investing in the programs we believe can drive CapsuleVision's longer-term growth, including CapsuleCAM colon and our broader pipeline of capsule-based diagnostic applications.

With that, I'd like to turn the call back to Johnny for some closing remarks.

Thanks, Dave. As we look ahead, we believe CapsuleVision is entering an important period. Next slide. I'm going to take a look at the data, with growing commercial adoption, the international launch of AI highlights, the anticipated U. S. launch following FDA clearance, and the continued progress across our border pipeline. And advancing our vision of an integrated AI-enabled capsule platform, that can address a growing range of gastrointestinal diseases.

With that, Dave, Doug, and I would be happy to take your questions. Operator, please open the line.

Dave Koepp Ph Thank you Bruce This is Dave I take that So in terms of the first part of your question the competitive pressure yeah so we do have one particular competitor that we go up against and you know we just see that pressure and that impacted us a little bit in the quarter And then the second part of your question about the tariffs that inbound So we saw a little bit of that impact as well in Q2 Okay, and then for my follow up, so given those conditions and looking at the second half cadence between the third quarter and the fourth quarter, would we expect that the fourth quarter would be a little bit stronger than third quarter?

Yeah, that's correct. There is some seasonality that we see in this business, and the fourth quarter tends to be the strongest quarter. And then, so when you look at the whole year, the second half ends up being much stronger than the first half.

Yeah, so Bruce, this is Johnny. So, to complement what Dave mentioned, you know, in order to keep this price, keep the margin, I think one of the things we need to do is to increase the value of our system, right? By launching the AI in the US, this should help with the increased value of our offering.

You know, that you've been able to capture since launching to international markets and the feedback. Yeah, Kyle, that's a great question, and we're so excited at CapsoVision on the launch of AI Highlights internationally, primarily looking at the EU.

Looking at AI as a whole, you know, it's a primary and important driver of adoption of capsule endoscopy. Why? Because it's going to make the physicians more efficient with reading. They will be able to decrease the time it takes to read a capsule endoscopy study, thus being able to perform more studies. And it is something that is being asked for by our customers. How we are positioning the international launch is it is going to give us the opportunity to build real-world experience in using this exciting new platform that has been added to Capsule Cloud and Capsule View. And over time, we believe the AI can help drive that broader platform of adoption, not only with customers that we currently have, but more so opening up additional doors that the competition may be in, but they do not have the AI platform that's going to really benefit us tremendously going into Q3, Q4, and then into 2027.

But the real key is going to be, and how we're going to position the AI here in the United States come Q4, at the end of Q3, Q4, with marketing. Sure.

Yeah, this is Johnny. I will take the question on the AI FDA clearance. So the demographic analysis is something we are aware of. We feel that is the key things we need to address based on the interaction with FDA. However, I have to say no one can guarantee FDA approval or clearance. This one is beyond our control. Thank you.

Then, Kyle, also with regards to the Salesforce, so we will continue to grow our Salesforce and add additional territories where I'll be working with David on that at this time in the luxury of having capsule endoscopy and selling multiple products for colon in the colon area as well as the small bowel diagnostic space is that we have We have one sales force with one call point selling both products. So, you know, we will expand where it makes sense, and we see that our sales force growing over time, but at this time, we can utilize what we have, the feet on the street that we have in the management team in place.