CapsoVision, Inc. (CV) Earnings Call Transcript & Summary

Thank you, operator. Good afternoon, everyone, and thanks for being with us on CapsoVision's Third Quarter 2026 Earnings Call. With me today are Johnny Wang, President and Chief Executive Officer; David Garcia, our Senior Vice President of Finance; and Doug Atkinson, Senior Vice President of Sales. Before we get started, please keep in mind that remarks today contain forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual events or results may differ materially because of a range of written uncertainties, including those described in the most recent Form 10-Q we filed with the SEC. Such forward-looking statements speak only as of today's call date, and we expressly disclaim any obligation or undertaking to disseminate updates or revisions to any forward-looking statements contained herein, whether to reflect a change in our expectations regarding them or a change in events, conditions or circumstances on which any such statement is based. Today's call will follow this agenda. Johnny will start 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. Once our prepared remarks are done, we will open the call up for Johnny, David and Doug to take your questions. With that, I'd like to turn the call over to Johnny Wang, CEO. Johnny?

Thanks, Lee, and good afternoon to all of you. For CapsoVision, the third quarter stood out as a significant stretch. We hit a major regulatory milestone when the FDA cleared AI highlights for CapsoCam Plus, we finished enrolling patients in the clinical study that backs our planned CapsoCam Colon submission, and we bolstered our balance sheet through the direct offering within $18 million. Taken together, those wins put us in position to push forward on our near-term commercial priorities while we keep investing in the wider potential of our capital endoscopy plate phone. Our achievements show how capable our team is, how powerful our technology is, and how large the opportunity before us is. With AI highlights now cleared in the U.S., our second-generation colon capsule advancing toward FDA submission, and ongoing progress in our pancreatic cancer trial, we are proving what our platform can deliver for physicians and patients. That moves us closer to our long-term vision of finding diseases at their earliest, frequently pre-cancerous stages, when intervention has the greatest chance of halting cancer's development. I'll start with AI highlights, which received FDA clearance on September 25 and did not officially ship in the U.S. on November 2. This represents a significant milestone for CapsoVision vegan, and we think it substantially bolsters where we stand in mobile capsule endoscopy. Our CapsoCam Plus capsule already gives us a unique base for cameras, offering a 360-degree panoramic image of the mobile. With that view, physicians can observe regions — such as the inner curves at each turning point of the mobile — that conventional forward-facing capsule technology might overlook. We believe combining this imaging strength with our proprietary AI creates a particularly persuasive offering. AI highlights builds on that edge by assisting physicians in quickly identifying images that suggest possible abnormalities. Notably, our testing has demonstrated that review supported by AI can markedly reduce time spent and boost detection accuracy compared with manual review. So for doctors, that translates into a review that's faster and more precise, plus one more layer: a diagnostic confidence label. We're equally committed to keeping both the reading and the recording experience maximally straightforward and intuitive. In our view, this pairing is what distinguishes our platform from rival offerings. There's no other mobile capsule currently available that pairs a 4 camera, 360-degree panoramic view with FDA-cleared AI-assisted review. Beyond that, CapsoCam Plus stands alone among mobile capsules in having AI cleared for pediatric patients down to 2 years old; together these strengths provide physicians with a differentiated imaging and review platform and expense the patients who can benefit from our technology. Right now, what we're focused on is continuing to educate physicians, getting customers onboarded, and assisting practices as they assess how highlights fit into their workflow. Members of our team were also at the American College of Gastroenterology annual meeting in Nashville recently, which gave us a great chance to present AI highlights to the GI community. The feedback from physicians was very favorable — many told us they were keen to begin using the technology in their practices and stressed the value of faster, more accurate review. What our approach brings together is CapsoCam Plus panoramic imaging, AI highlights within the capsule view, and the flexibility of CapsoCloud. Combined, these technologies deliver a more complete visualization and make video review faster and more accurate, while also letting physicians review a study whenever and wherever they choose. Because the platform runs entirely in the cloud, providers have no need to install or maintain servers or IT infrastructure at their own sites. In our view, these benefits set CapsoVision apart from rival offerings and could enable broader uptake over time. Turning to CapsoCam Colon: we have completed enrollment and data collection—including physician reading of capsule videos both with and without AI assistance—for the clinical study that supports our planned FDA submission. That represents a major milestone and reflects intensive work across clinical, engineering, and regulatory areas combined. I want to pause and acknowledge the enormous dedication and effort of our team, whose commitment and perseverance have been essential in bringing us to this point. I am proud of everything we have achieved together. We're still on schedule to file before the end of 2026. The goal behind our second-generation colon platform is to deliver panoramic imaging plus AI-assisted review to a far bigger market. By our estimates, the initial yearly U.S. addressable market — covering patients at high risk for colonoscopy as well as those whose procedure was incomplete — comes to roughly $1 billion. Over the longer term, the size of the colon opportunity could reach a market we estimate at more than $10 billion, and that spending is linked to the recommendation that routine colon cancer screening begin at 45 rather than 50 years old. We're also continuing to broaden the clinical footprint of the CapsoCam UGI study for pancreatic cancer detection. We already have two community-based clinical sites up and running, and now we're starting activation at more than twelve high-volume centers that specialize in pancreatic cancer, which gives us a base to speed up enrollment in the trial. It's still an early-stage program, but we think it could be one of the biggest opportunities for our imaging platform. Also, in the middle of September we closed an $8 million registered direct offering with a number of shareholders who were already invested, and we're grateful for their ongoing backing and their commitment to what we're doing. That funding gives us extra resources for the AI rollout, the colon submission we have planned, and our continuing clinical development. Dave will go into more detail on where our cash stands in a moment. We know exactly what we need to do: get the AI launch done, turn customer interest into actual adoption, finish the colon regulatory submission, and keep moving our wider pipeline forward. With that, I'll hand things over to Dave.

Thanks, Johnny. Let me begin with how we performed commercially. During the third quarter, pricing for small bowel capsule endoscopy in the U.S. was competitive, even though we kept gaining ground in growing our customer base. In Q3 we shipped 8,464 CapsoCam Plus capsules, versus 8,336 in Q3 of 2025. As of today, 85 issued U.S. patents protect our technology, which reinforces the strong foundation we have in IP and clinical innovation. We brought on a number of new accounts, with notably encouraging activity in pediatric practices and in larger gastroenterology and hospital networks, including Carillion Health Systems, Methodist Hospital systems and additional locations within Gastro Health and Kaiser Permanente. All told, we closed 34 new accounts, made up of 9 hospital systems, 4 pediatric hospital clinics and 21 adult GI clinics; we see new account additions and physician engagement as key leading indicators, since commercial gains ultimately point to stronger revenue performance. As of September 30, 2026, more than 184,000 patients have used CapsoCam Plus for small bowel screening, compared with 151,000 a year ago, across the U.S. and internationally. AI highlights for small bowel launched officially in the U.S. on November 2, and we think it gives our sales team a powerful new way to show the clinical and workflow value of CapsoCam Plus, including reading efficiency, accuracy and added diagnostic confidence. Our focus is on educating physicians, getting customers onboarded, and giving them opportunities to compare our solution with competing alternatives. Turning now to the financial results: third-quarter revenue reached $3.6 million, versus $3.5 million in Q3 of 2025 — a 1% change — while average selling price held steady year-over-year. Gross profit was $1.8 million, down from $1.9 million in the same quarter a year ago. Gross margin stood at 49%, compared with 54% last year. Several factors weighed on this quarter's gross margin: increased material costs driven by climbing flash memory prices, a one-time inventory obsolescence charge, and greater stock-based compensation expense. Operating expenses came in at $9.1 million, versus $9.9 million during the third quarter of 2025, which shows we're still keeping a tight grip on costs even as we back our clinical and development work, the CapsoCam Colon pivotal study included. With that study now finished, our related clinical spending should come down, giving us room to cut operating expense further as we continue moving our wider product pipeline forward. We posted a net loss of $7.3 million, or $0.15 a share, against a net loss of $7.9 million, or $0.17 per share, in the same period a year earlier. As of September 30, cash and cash equivalents totaled $21.8 million. That figure includes money from a registered direct offering to existing shareholders, which wrapped up on September 18 and brought in net proceeds of roughly $17.8 million. This funding bolsters our balance sheet and lengthens the cash runway we expect to have. During Q3, we also drew on the ATM facility we set up earlier this year, selling 276,446 shares through the ATM for net proceeds of $1.7 million. The ATM provides added financing flexibility, although any use of it will depend on market conditions and the needs of the business. With the end of the year approaching, our commercial priority is supporting the November 2 U.S. The AI highlights rollout is bringing in new accounts and expanding usage among existing ones, while also deepening the customer ties we built during the year. In our view, bringing together panoramic imaging, built-in AI, and a cloud-linked workflow can reinforce how we stack up against competitors as time goes on. Alongside that, we're staying committed to deploying capital carefully to back our planned CapsoCam Colon FDA submission and to keep advancing our product pipeline. As we anticipated three months ago, our projection is that second-half 2026 revenue will exceed the first half, driven by growing uptake of CapsoCam Plus; thanks to the AI features rolled out earlier this month, we anticipate faster CapsoCam Plus sales, with the complete effect showing up in 2027. On that note, I'll hand things back to Johnny for his closing comments.

Thanks, Steve. To wrap up, I'd like to stress what these achievements mean for CapsoVision. Today we have AI highlights cleared by the FDA that complement our mobile imaging platform with 4 cameras and 360-degree views. The clinical study data collection for CapsoCam Colon is now complete, which includes physicians reading the capsule videos both with and without AI assistance, and we are getting ready to submit it to the FDA. Beyond that, we keep moving our longer-term pancreatic cancer program forward and intend to start the Supers trial during the second half of next year, an initiative built on the same core imaging and software capabilities that can be sold through the same sales infrastructure. Now that AI highlights have launched in the U.S., we think we can give physicians quicker, more accurate review plus an added layer of diagnostic confidence. Our colon program offers a chance to move into a considerably bigger market over time, and the $18 million financing along with our use of the ATM facility give us extra resources to pursue these priorities. At this point our focus is on driving adoption of AI highlights, delivering a strong colon submission, and building the foundation for durable growth. We stay committed to building an integrated AI-enabled CapsoVision platform that can help physicians address a broader range of gastrointestinal diseases through diagnostics that are more accessible and patient-friendly. With that, Dave, Doug and I would be glad to take your questions. Operator, please open the line for questions.

Congratulations on everything that's come out lately. Perhaps I'll begin with the AI highlights. Clearly, in the EU and by now the U.S. as well — I realize it's early days in the U.S. — but is there any early feedback from providers that picking up AI highlights is fairly straightforward? Any thoughts you'd care to share would be great.

Yes. Thank you, Kyle; Doug Atkinson here. Internationally, the response from our customer base has been extremely favorable so far. Together with 2 of our gastroenterologists, we're working actively to demonstrate how AI highlights affects read times, and we look at presenting that at UEG in 2027. You're correct that in the U.S. we only launched on November 2. That said, we made it available right away to every single physician, and those physicians have given us feedback on what AI highlights brings — not just in reading time but in the accuracy of AI highlights too. To give one example I heard from one of our doctors: he was notified of the AI highlights on CapsoCloud, then went in and read the video once without AI highlights and once with them. When he read the study without the AI-assisted software, he missed 2 AVMs — 2 critical areas of pathology — because he thought it was a normal study. Then, reading it with AI, it did capture 2 AVMs, which are arteriovenous malformation. So it's very positive so far. A little early to tell, but the feedback received from our customer base has been very positive.

That's a really fascinating color. Then perhaps I could shift to something like the colon application and OpEx. I suppose, could you discuss briefly what steps remain prior to submitting that application? And now that the study has wrapped up, OpEx declined nicely this quarter. How should we think about R&D specifically going forward?

Yes, colons, we've gathered all the data for the colon capsule video rating with and without AI. So the full dataset has been collected and frozen — third have frozen and the statistician has been working on that data to obtain the top line data, which is the most important primary endpoints, showcasing how good our colon capsule is. So that is a very exciting moment and then after the statistician gets all these numbers primary endpoint, secondary endpoints and exploratory endpoints; we are ready to drive the submission to submit; it's a very exciting moment.

Congratulations on everything that's been happening here. Perhaps to kick things off, well done on those bigger contract renewals involving pediatric health systems and a few of the larger hospital systems. I'm just wondering, what does your revenue mix look like at this point between those bigger hospital health systems and the traditional GI clinics? And after you land a contract, how long does full ramp typically take for a hospital health system and for the GI clinic?