CapsoVision (CV) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Nov. 12, 2026

CALL PARTICIPANTS

• Investor Relations - Leigh Salvo
• President and Chief Executive Officer - Johnny Wang
• Senior Vice President of Finance - David Garcia
• Senior Vice President of Sales - Doug Atkinson

TAKEAWAYS

• Revenue -- $3.6 million, representing 1% growth compared with $3.5 million in the third quarter of 2025.
• Gross Margin -- 49%, decreasing from 54% in the prior year period due to higher material costs for flash memory and a $250,000 one-time inventory obsolescence charge.
• Capsule Shipments -- 8,464 units, compared with 8,336 units shipped during the same period last year.
• Cumulative Patient Usage -- 184,000 patients as of Sept. 30, increasing from 151,000 patients reported in the previous year.
• New Account Additions -- 34 accounts, including nine hospital systems, four pediatric hospital clinics, and 21 adult GI clinics.
• Cash and Cash Equivalents -- $21.8 million as of Sept. 30, reflecting the impact of a recent registered direct offering.
• Operating Expenses -- $9.1 million, decreasing from $9.9 million in the third quarter of 2025 due to disciplined expense management.
• Research and Development Expenses -- $4.8 million, decreasing from $6.1 million as the clinical phase of the CapsoCam Colon study concluded.
• Selling and Marketing Expenses -- $2.1 million, compared with $1.8 million in the prior year quarter.
• Net Loss -- $7.3 million, or $0.15 per share, compared with a net loss of $7.9 million, or $0.17 per share, in the third quarter of 2025.
• Registered Direct Offering Proceeds -- $17.8 million net, generated from the sale of shares to existing stockholders in September 2026.
• ATM Program Proceeds -- $1.7 million net, resulting from the sale of 276,446 shares during the third quarter.
• Initial Colon Addressable Market -- $1 billion, targeting U.S. patients at high risk for colonoscopy or those with incomplete procedures.
• Long-Term Colon Addressable Market -- $10 billion, reflecting the potential scale of the colon cancer screening market.
• Customer Mix -- 65% GI clinics and 35% hospital systems, with the latter segment growing rapidly year over year.
• Intellectual Property -- 85 issued U.S. patents, supporting the company's clinical innovation and technological foundation.
• Average Selling Price -- Stable year over year, despite a competitive pricing environment in the U.S. small bowel market.
• Flash Memory Costs -- Increased material prices, which management identified as a primary driver of the gross margin decline.

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RISKS

• Garcia stated, "The third quarter reflected a competitive pricing environment in the U.S. for small bowel capsule endoscopy," indicating ongoing pressure on market dynamics.

SUMMARY

CapsoVision, Inc. (NASDAQ:CV) reported third quarter financial results and provided updates on the U.S. commercial launch of its AI-assisted reading tool and the progress of its colon imaging platform. Management reported the FDA clearance of AI Highlights for CapsoCam Plus on Sept. 25, followed by its commercial launch on Nov. 2. The company completed clinical enrollment for the second-generation CapsoCam Colon study and confirmed plans for an FDA submission by year-end 2026. Management indicated that the $17.8 million net proceeds from a registered direct offering strengthened the balance sheet to support the AI launch and clinical pipeline. The company also expanded its clinical footprint for pancreatic cancer detection and planned a new esophageal varices trial for the second half of 2027.

• CEO Wang stated, "AI-assisted review can significantly reduce reading time and improved detection accuracy compared with manual review."
• Management reported that CapsoCam Plus is the only small bowel capsule with AI cleared for pediatric patients as young as 2 years old.
• Garcia indicated that clinical expenses are expected to decrease following the completion of the CapsoCam Colon pivotal study.
• The company has identified over a dozen large volume centers for the pancreatic cancer trial to accelerate enrollment.
• Atkinson noted that hospital system sales are growing rapidly in 2026 compared with the prior year.
• Management stated the U.S. launch of AI Highlights on Nov. 2 was made available to every physician through the CapsoCloud platform.

INDUSTRY GLOSSARY

• AI Highlights: An FDA-cleared AI-assisted reading tool designed to identify suspected abnormalities in capsule endoscopy videos.
• CapsoCam Plus: A wire-free, panoramic capsule endoscope providing a 360-degree view of the small bowel.
• CapsoCam Colon: A second-generation capsule endoscopy platform currently in development for colon imaging and polyp detection.
• CapsoCloud: A cloud-based software-as-a-service ecosystem for accessing and downloading capsule endoscopy videos.
• GPO: Group Purchasing Organization, an entity that helps healthcare providers realize savings by aggregating purchasing volume.
• AVM: Arteriovenous malformation, a type of vascular pathology that can be detected during gastrointestinal imaging.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us, and welcome to CapsoVision Third Quarter 2026 Earnings Conference Call. [Operator Instructions]. I will now hand the conference over to Leigh Salvo, Investor Relations. Please go ahead.

Leigh Salvo: Thank you, operator. Good afternoon, everyone, and thank you for joining us for CapsoVision's Third Quarter 2026 Earnings Call. Joining me today are Johnny Wang, 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 of 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 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?

Kang Wang: Thank you, Leigh, and good afternoon, everyone. The third quarter was an important period for CapsoVision. We achieved a major regulatory milestone with FDA clearance of AI Highlights for CapsoCam Plus, completed enrollment for the clinical study supporting our planned CapsoCam Colon submission and strengthened our balance sheet with an $18 million reaches the direct offering. Together, these accomplishments position us to advance our near-term commercial priorities while continuing to invest in the broader potential for our capsule endoscopy platform. Our progress underscores the strength of our team, our technology and the opportunity ahead. With AI Highlights cleared in the U.S. our second-generation colon capsule advancing toward the FDA submission and the continued progress in our pancreatic cancer trial.

We are expanding what our platform can deliver to physicians and patients, bringing us closer to our long-term vision of identifying diseases at their earliest often pre-cancerous stages when intervention has the greatest potential to prevent the cancer from developing. Let me start with AI Highlights, which received FDA clearance on September 25 and officially launched in the U.S. on November 2. This is a major achievement for CapsoVision vegan and the ones that we believe meaningfully strengthens our position is small bowel endoscopy. Our CapsoCam Plus capsule already offers a distinctive foundation 4 cameras providing a 360-degree panoramic view of this small bowel.

This view allow physicians to see areas, including the inner curves at every turning point of the small bowel that may be missed by traditional forward-facing capsule technology. We believe combining this imaging capability with our proprietary AI creates an especially compelling solution. AI Highlights builds on that advantage by helping physicians quickly identify images with suspected abnormalities. Importantly, our testing has shown that AI-assisted review can significantly reduce reading time and improved detection accuracy compared with manual review. For physicians that means a more efficient review process more accurate review and additional level of diagnostic confidence. We are also focused on making the reading and the reporting process as simple and intuitive as possible.

We believe this combination sets our platform apart from competitive solutions. No other small bowel capsule on the market offers a comparable 4 camera, 360-degree panoramic view together with FDA-cleared AI-assisted review. CapsoCam Plus is also the only small bowel capsule with AI cleared for pediatric patients as young as 2 years old. These advantages give physicians a differentiated imaging and review platform and expand the patients who can benefit from our technology. Our priority now is ongoing physician education, customer onboarding and helping practices evaluate highlights in their workflow. Our team also recently attended the American College of Gastroenterology Annual Meeting in Nashville where we had an excellent opportunity to showcase AI Highlights to the GI community.

The response from physicians was extremely encouraging with many expressing enthusiasm about faster, more accurate review and an eagerness to begin using the technology in their practices. In short, our approach brings together the panoramic imaging of CapsoCam Plus AI Highlights within CapsoView and the flexibility of CapsoCloud. Together, these technologies provide more complete visualization of this small bowel faster and more accurate video review and the ability for physicians to review study anytime anywhere. And because our platform is fully cloud-based, there is no need for providers to install or maintain on-site servers or IT infrastructure. We believe these advantages set the CapsoVision apart from competitive solutions and can support broader adoption over time. Turning to CapsoCam Colon.

We completed enrollment and data collection including physician reading of capsule videos with and without AI assistance for the clinical study supporting our planned FDA submission. This is a significant milestone and the culmination of intensive clinical engineering and regulatory work. I want to take a moment to recognize the tremendous dedication and hard work of our team whose commitment and perseverance have been instrumental in getting us to this point. I'm proud of what we have accomplished together. We remain on track for submitting before year-end 2026, our second-generation colon platform is designed to bring the advantages of panoramic imaging and AI-assisted review to a much larger market.

Based on our estimates, the initial U.S. annual addressable market for patients at high risk for colonoscopy. All those with an incomplete procedure is approximately $1 billion. And longer term, the scale of the colon opportunity has the potential to address a market estimated to be over $10 billion which is expanding with the recommendation for routine colon cancer screening dropping from 50 to 45 years old. We continue to expand the clinical footprint of the CapsoCam UGI study for pancreatic cancer detection, building on the current 2 active community-based clinical site, site activation is advancing over dozen large volume centers with pancreatic cancer expertise, establishing a foundation to accelerate clinical enrollment.

This remains an early-stage program but we believe it illustrates the greatest of potential applications for our imaging platform. Finally, in mid-September, we completed $18 million reaches the direct offering with several existing shareholders. We appreciate their continued support and commitment to our strategy. This financing provides additional resources to support the AI rollout planned colon submission and ongoing clinical development. Dave will provide more detail on our cash position shortly. Our focus is clear, execute the AI launch, convert the customer interest into adoption completed the colon regulatory submission and continue advancing our broader pipeline. With that, I will turn the call over to Dave.

David Garcia: Thank you, Johnny. Starting with our commercial performance. The third quarter reflected a competitive pricing environment in the U.S. for small bowel capsule endoscopy even as we continue to make progress in expanding our customer base. During the third quarter, we shipped 8,464 CapsoCam Plus capsules compared to 8,336 in Q3 of 2025. Today, our technology is protected by 85 issued U.S. patents, reinforcing our strong foundation in IP and clinical innovation. We added several new accounts with particularly encouraging activity in pediatric practices and larger gastroenterology and hospital networks such as Carilion Health Systems, Methodist Hospital Systems and additional locations within Gastro Health and Kaiser Permanente.

In total, we closed 34 new accounts, including 9 hospital systems, 4 pediatric hospital clinics and 21 adult GI clinics. We view new account additions and physician engagement as being important leading indicators as commercial gains ultimately signal stronger revenue performance. As of September 30, 2026, CapsoCam Plus for small bowel screening has been used by more than 184,000 patients compared to 151,000 a year ago across the U.S. and internationally. AI Highlights for small bowel officially launched in the U.S. on November 2, we believe it gives our sales team a powerful new way to demonstrate the clinical and workflow value of CapsoCam Plus, including reading efficiency, accuracy and additional diagnostic confidence.

We are prioritizing physician education, customer onboarding and opportunities for customers to evaluate our solution against competitive alternatives. Turning to our financial results. Third quarter revenue was $3.6 million compared with $3.5 million in the third quarter of 2025, a change of 1% and average selling price was stable year-over-year. Gross profit was $1.8 million compared with $1.9 million in the prior year quarter. Gross margin was 49% compared with 54% last year. Gross margin in the quarter was impacted by higher material costs due to increasing prices of flash memory, a onetime charge for inventory obsolescence and higher stock-based compensation expense.

Operating expenses were $9.1 million compared with $9.9 million in the third quarter of 2025, reflecting continued expense management while supporting our clinical and development programs, including the CapsoCam Colon pivotal study. With the study now complete, we expect our associated clinical expenses to decrease providing an opportunity for a further operating expense decline as we continue advancing our broader product pipeline. Net loss was $7.3 million or $0.15 a share compared with a net loss of $7.9 million or $0.17 per share in the prior year period.

We ended September 30 with $21.8 million in cash and cash equivalents, which included proceeds from a registered direct offering with existing shareholders that closed on September 18 and generated net proceeds of approximately $17.8 million. This capital strengthens our balance sheet and extends our expected cash runway. We also utilized our ATM facility established earlier this year during Q3, we sold 276,446 shares under the ATM for net proceeds of $1.7 million. The ATM provides additional financing flexibility, although any use will depend on market conditions and the needs of the business.

As we approach year-end, our commercial priority centers on supporting the November 2 U.S. launch of AI Highlights, expanding adoption across new and existing accounts and building on the customer relationships established during the year. We believe our combination of panoramic imaging integrated AI and cloud connected workflow can strengthen our competitive position over time. At the same time, we remain focused on disciplined deployment of capital to support our planned CapsoCam Colon FDA submission and continued development of our product pipeline. Consistent with our expectations from last quarter, we believe revenue in the second half of 2026 will be higher than the first half as adoption of our CapsoCam Plus solution expands.

With the AI Highlights launched earlier this month, we expect sales of CapsoCam Plus to accelerate with the full impact realized in 2027. With that, I'll turn the call back to Johnny for closing remarks.

Kang Wang: Thanks, Dave. I want to close by emphasizing what these milestones mean for CapsoVision. We now have FDA cleared AI Highlights to complement our 4 camera, 360-degree small bowel imaging platform. We have completed the clinical study data collection for CapsoCam Colon including physician reading of the capsule videos, both with and without AI assistance and are preparing for its FDA submission. In addition, we continue to advance our longer-term pancreatic cancer program as well as planned to commence the esophageal varices trial in the second half of next year. Each of these initiative with be built on the same core imaging and software capabilities and that can be sold through the same sales infrastructure.

With AI Highlights now launched in the U.S., we believe we can offer physicians faster, more accurate review and additional level of diagnostic confidence. While our colon program represents an opportunity to expand into a substantially larger market over time, the $18 million financing and the use of our ATM facility also provide additional resources to pursue these priorities. Our focus now is on driving adoption of AI Highlights, delivering a strong colon submission and building the foundation for durable growth. We remain committed to building an integrated AI-enabled capsule platform that can help physicians address a broader range of gastrointestinal diseases through more accessible patient-friendly diagnostics. With that, Dave, Doug and I would be happy to take your questions.

Operator, please open the line for questions.

Operator: [Operator Instructions]. Your first question comes from Kyle Bauser with Titan Partners.

Kyle Bauser: Congrats on all the recent updates here. Maybe I'll start on the AI Highlights. Obviously, in the EU and now U.S., I know it's early in the U.S., but any early feedback from providers that is a learning curve for AI Highlights pretty straightforward. I guess just any thoughts that you're going to feel would be great.

Douglas Atkinson: Yes. Thanks, Kyle. This is Doug Atkinson. So far, internationally, we have received very positive feedback from our customer base. We are actively working on with 2 of our gastroenterologists to show the effects AI Highlights has on read times, and that is something we look at presenting at UEG in 2027. You're right, in the U.S., we just launched on November 2. But with that being said, we have -- we made it immediately available to every single physician and we have received feedback from those physicians on the benefits of AI Highlights, not only in the reading time but also the accuracy of AI Highlights.

And just to share one example I've received from one of our doctors was he read both -- he was notified of the AI Highlights on CapsoCloud. He then went into read the video, read it without AI Highlights, and that read it with AI Highlights. And when he read the study without the AI-assisted software, he didn't -- he missed 2 AVMs, 2 critical areas of pathology that he thought it was a normal study. And then when he read 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.

Kyle Bauser: Really interesting color there. And then maybe I'll switch over to kind of like the colon application and OpEx. I guess, can you talk a little bit about what the remaining steps are before you submit that application? And then now that study is completed, OpEx came down nicely in the quarter. How should we think about R&D in particular kind of moving forward?

Kang Wang: Yes, on colons, we have collected all the data for the colonoscopy and capsule-video rating with and without AI. So all the data has been collected and frozen, data have been frozen and the statistician has been working on those data to get 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 statistician get all this number primary endpoint, secondary endpoints and exploratory endpoints. We are ready to draft the submission to submit. It's a very exciting moment.

Operator: Our next question comes from Kevin Holder with ROTH Capital Partners.

Kevin Holder: Congrats on all the updates here. Maybe just to start off, congrats on some of these bigger contract renewals with pediatric health systems and some of these larger hospital systems. I'm just curious kind of what is the mix of your revenue now in terms of these larger hospital health systems kind of versus the traditional GI clinics. And once you win a contract, how long does it typically take for a hospital health system and the GI clinic fully ramped?

Douglas Atkinson: Great question, Kevin. Right now, our mix is probably around 65%, 35%, 65% being the GI clinic base, 35% being the hospital system. However, we see the hospital system continue to grow very rapidly in 2026 over prior year. With the GPO contracts in place, we have a number of contracts already that CapsoVision signed with some of the largest purchasing groups. But when a new contract is signed and we just recently signed one, the way that operates is usually, we have a date identified when we would begin selling within that institution. And then we would go in and train the customer base, they would purchase product, and we would actively then start doing procedures.

In some cases, it may be delayed where we will allow a customer to use up any competitive inventory that they may have on hand to use that up before implementing the CapsoCam Plus small bowel system in their facility. So it moves fairly quickly and then you really start realizing revenue with many of the institutions on the day that you had the contract -- when the contract goes into full effect. So yes, it's an ongoing process. And as accounts join one by one, it accumulates the overall profitability and revenue for the company.

Kevin Holder: That's very helpful, Doug. And then second one for me, maybe just kind of going back to AI Highlights. I know you said that kind of you'll really see the impacts in 2027. Maybe how should we be thinking about the cadence of CapsoCam Plus adoption throughout 2027? I know it's a little early, but any early indications you had there?

Douglas Atkinson: Yes. And as we said to our lastearnings call we have many large customers and health systems that have been waiting for AI Highlights to be approved by the FDA and available for their use rather than evaluating the CapsoCam Plus versus a competitive system. They didn't want to have to do it twice with AI Highlights now available. We are seeing that invitation or door open to go into these competitive facilities and have them utilize our system. Again, it's early to realize that. But I can say from November 2, when we did go live with the product, the feedback has been extremely positive.

And just to reiterate, the benefits of the AI Highlights are the 3 key areas are the reading time, significantly decrease compared to reading without any type of AI physician-assisted software. Then number two is it builds accuracy, diagnostic accuracy to ensure the physicians going to capture that pathology that he may have missed without the AI software. And most importantly, it's going to build that confidence, that true confidence. And that's what you want with a product. And we believe we hit all 3 key points that you need to have a successful product and a successful launch with this new software.

Operator: Your next question comes from Bruce Jackson with StoneX.

Bruce Jackson: Just wanted to ask a couple of questions about the second-gen colon cam. So you're assembling the data right now for the FDA submission, what is your thinking in terms of when that data might be available to look at publicly? And is it going to be maybe in conjunction with a medical meeting?

Kang Wang: So we are confident that data will be available next month. But whether to share it publicly, we would like to have an internal meeting with Doug and Dave as well as we also want to touch base with our legal counsel. But all I can say is an exciting moment.

Bruce Jackson: Okay. Fair enough. And then the other question about the second-gen platform, is the AI component going to have the same interface as the current AI Highlights product and is going to have like a unified user interface? So will it be easy for doctors to pick up I'm using the second-gen colon cam with the AI Highlights?

Kang Wang: That's a good question. You are right. They are based on the same platform, just transparent. And is also patent-protected as you have asked -- you asked the last time.

Bruce Jackson: Okay. Thank you. That's it for me.

Operator: [Operator Instructions]. There are no further questions at this time. And this concludes today's call. Thank you for attending. You may now disconnect.

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