CapsoVision (NASDAQ:CV) reported first-quarter financial results on Thursday. The transcript from the company's first-quarter earnings call has been provided below.

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Summary

CapsoVision reported stable year-over-year revenue of $2.8 million for Q1 2026, with a slight decrease in capsule shipments due to timing, offset by a slight increase in average selling price.

The company is advancing its AI strategy, expecting FDA clearance for its AI-assisted reading capability mid-year, and progressing well in its Capsule King Colon program with a second-generation capsule expected in Q3 2026.

CapsoVision secured key renewals with large GI networks and strengthened its balance sheet with a $14 million private placement, reflecting investor confidence and supporting product innovation and commercial expansion.

Full Transcript

OPERATOR

Hello and thank you so much for standing by. Ladies and gentlemen, welcome to CapsoVision Q1 2026 earnings conference call. Please note that this call is being recorded at this time. All participants are in listen-only mode only. There will be some opening remarks followed by question and answer session. If you wish to ask a question, please press Star one on your telephone keypad. Thank you.

Johnny Wang (President and Chief Executive Officer)

Johnny thank you Lee and good afternoon everyone. Capsule Vision remains focused on advancing earlier, more accurate and more successful detection of gastrointestinal disease for patients worldwide. We are working toward a unified ingestible capsule platform capable of screening for multiple cancers, including esophageal, gastric, pancreatic, liver and colorectal through a single non invasive procedure enabled by advanced imaging and AI. With ZAG as our foundation, we continued to see consistent solid underlying performance in the first quarter. While revenue and new account additions remained stable year over year, we saw further expansion of CapsoCam, used to detect a widening range of small bowel diseases. In the first quarter, underlying procedure volume reflecting end user consumption continued to expand, demonstrating deeper engagement with existing accounts and the increasing reliance on capstochem class in routine clinical practice. We believe these trends reinforce the strength of our installed base and highlights the growing role our platform is playing in supporting physician workflow and patient care. During the quarter we also secured key renewals for large GI networks including Indiana University Health Systems, Providence Health Systems and Gastro Health, which we believe reinforces the value of our platform and the strength of our long term customer relationships. Turning to our technology platform, we are entering an important phase in our AI strategy. As you know, we previously submitted our 510k application for our AI assisted reading capability for Capsule 10 Plus. We continue to expect clearance around mid year and we are preparing for a commercial launch shortly thereafter. We have been actively demonstrating this capability which we have branded AI HighLights at recent industry meetings and the feedback from gastroenterologists has been very encouraging. Physicians are particularly focused on the potential to streamline review time while maintaining clinical rigor which we believe will be an important driver of adoption. AI HighLights is designed to identify frames with suspected pathology and present them within a structured review workflow fully integrated within our Cloud native Capsule Cloud platform. We believe this capability has the potential to reduce the physician reading time while enhancing workflow efficiency and represents a meaningful step forward in advancing a fully integrated AI enabled diagnostic system. Building on that momentum, we continue to make steady progress across our pipeline for Capsule King Colon. Our development program remains on track with the mission of our second generation capsule and its AI module expected in the third quarter of 2026. We continue to believe that our decision to prioritize Gen2 positions us to enter the market with a more competitive and clinically differentiated product. Turning to our Capsule 10 UGI program and the Pancreatic Cancer Initiative, we are pleased to report that enrollment began this week in our clinical study. This represents an important milestone as we work to establish diagnostic criteria and build the clinical foundation for what we believe could be a first of its kind, non invasive screening approach for pancreatic disease. While this remains a longer term opportunity, we continue to believe the potential impact in this area is significant given the lack of effective early detection tools today. Overall, we believe the business is progressing as expected. We are seeing continued strength in utilization, advancing key pipeline programs and moving closer to what we expect will be an important inflection point with the introduction of AI enabled capabilities. More broadly, we remain focused on redefining how gastrointestinal diseases are detected, leveraging our platform to make diagnosis earlier, more accessible and more efficient for both patients and providers. With that, I will turn the call over to Dave to walk through our commercial and financial results.

David Garcia

Thank you Johnny. Turning to our commercial performance as of March 31, 2026, more than 167,000 patients have been imaged with Capsocam plus for small bowel screening across the US and international markets. During the first quarter we shipped 6,229 Capsocam plus capsules compared to 6,447 in the prior year period, representing a year over year decrease of 3% reflecting the timing of shipments that have now been placed in the second quarter. Our technology continues to be supported by a strong intellectual property portfolio, currently with 85 issued US patents, reinforcing our position in capsule endoscopy innovation. In addition, reimbursement under CPT code 91110 continues to support adoption across a broad range settings including both private practices and hospital systems. From a commercial strategy perspective, one of our key advantages is the ability to leverage our existing sales infrastructure. As we expand into new indications, we expect that the same physician call point driving adoption of CapsoCam plus today will serve as a natural entry point for CapsoCam following regulatory clearance, creating a meaningful cross selling opportunity without requiring significant incremental headcount. We continue to see encouraging engagement across large gastroenterology networks including GI clinics and multi site group practices, where we are expanding our presence within existing accounts and continuing to deepen utilization across larger networks. In addition, we are seeing ongoing traction within hospital systems and group purchasing organizations, particularly as contracts come up for renewal and providers evaluate alternative solutions. As Johnny noted, we are also pleased to secure renewals with several large GI networks during the quarter including Indiana University Health Systems, Providence Health Systems and Gastro Health, supporting continued engagement across our installed base. As of quarter end, our U.S. direct sales organization remained consistent at 26 representatives supported by 7 regional sales managers and trainers. Internationally, we continue to build momentum including a dedicated team of four representatives in Germany, while expanding our global footprint through distributor partnerships in high potential markets. Turning to our financial performance for the first quarter of 2026, total revenue was 2.8 million consistent with prior year period, while the number of capsules sold was modestly lower year over year. This was offset by a slight increase in ASP and as Johnny noted earlier, we continue to see strong underlying patient volume and utilization expansion trends across our installed base. Gross profit for the quarter was 1.3 million with a gross margin of 48% compared to 54% in the first quarter of 2025. The change in gross margin was primarily due to tariffs impacting our cost of goods sold. Operating expenses were 8.4 million, an increase of 1.5 million compared to the prior year period. This increase was driven primarily by continued investment in our pipeline, including development work related to the next Generation Imaging Sensor under our agreement with Canon, as well as clinical trial activities supporting the Capsocam Gen 2 program, we ended the quarter with 17.9 million in cash and cash equivalents. As a reminder, in March we strengthened our balance sheet with the closing of a $14 million private placement with participation from both new and existing investors. We believe this financing reflects continued confidence in our strategy and and provides additional flexibility to support our key priorities, including product innovation, clinical development and commercial expansion. Overall, we remain focused on disciplined investment to support long term growth. Before I turn the call back to Johnny, I'd like to provide some perspective on how we're thinking about the remainder of the year. We expect second quarter revenue to be higher than the first quarter and we also expect revenue in the second half of the year to be higher than in the first half. As we continue to build on the momentum we're seeing in our pipeline and customer engagement, as well as the anticipated launch of the AI module for CapsoCam Plus. Now I'd like to turn the call back to Johnny for some closing remarks.

Johnny Wang (President and Chief Executive Officer)

Thanks Dave. To close we believe the business is progressing as expected. We are seeing continued strength in utilization across our installed base, reinforcing the growing role CapsoCam plus is playing in routine clinical practice. At the same time, we are approaching an important inflection point with the anticipated introduction of our AI assisted capabilities which we believe will further enhance workflow efficiency and strengthen the value of our platform for physicians across the pipeline. We continue to execute with discipline with CapsoCam colon on track and early progress underway in our pancreatic cancer program following the initiation of our clinical study. More broadly, we remain focused on advancing a differentiated AI enabled platform designed to improve how gastrointestinal diseases are detected through panoramic imaging, cloud native workflow capabilities and AI assisted diagnostics that make review more accessible and efficient for physicians. Our platform enables physicians to to securely review cases anytime and anywhere without the need for on site servers or dedicated IT infrastructure, while also creating a growing cloud based data depository that we believe will serve as an important foundation for continued AI development and training over time. At this time Dave, Doug and I would be happy to take your questions. Operator, can you please open the line?

OPERATOR

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press Star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press Star one again. We will pause for just a moment to compile the Q And a roster. Your first question comes from the line of Kyle Bowser with Titan Partners. Please go ahead.

Kyle Bowser (Equity Analyst)

Great, thanks. Hi Johnny, David and Doug, appreciate all of the updates and for taking my questions. Maybe I will just start out regarding the application for the AI assisted reading feature. Johnny, I guess any sort of remaining items that need to be addressed with the FDA or are responses in and you're now just waiting for a response I guess. Any color on the update there?

Johnny Wang (President and Chief Executive Officer)

Yes. FDA and CapsoVision had a few interactions during these months and right now we have reacted on their requests during these previous interactions and we are waiting for a meeting in the next few weeks and that is current status and we have no showstoppers to my knowledge.

Kyle Bowser (Equity Analyst)

Great, Appreciate that. And then can you remind me so for the pancreatic cancer clinical study which you just started enrolling, which is great. Can you remind me that the size of this trial, how many patients and kind of the expected timeline for enrollment.

Johnny Wang (President and Chief Executive Officer)

For this study we plan to enroll 120 patients with high grade dysplasia or cancer, pancreatic cancer, confirmed high-grade dysplasia or cancer. But to account for possible dropout patient dropout we plan to enroll 140 to make sure we have 120 to make a statistical to make a statistics more powerful. And also we will have 120 subjects as a reference healthy patient reference. This 120 patient image will be extracted pull out from our cloud storage. As we just mentioned we have enormous data repository in our cloud storage due to our workflow. So we can pull out this reference healthy reference images. So total is 240. Yes. And at the moment we cannot speculate at this time but I would see this as a much shorter study than colon. Yeah. So that's what I can say at this point without you know saying too much as a public company. Thank you.

Kyle Bowser (Equity Analyst)

Yep, makes sense and that's helpful. Appreciate all that color. And then maybe lastly David, I guess appreciate the thoughts on the cadence of revenue, you know, in Q2 and the back half of this year. Any sort of thoughts you can call out on opex. Just kind of wondering how all this line item should kind of trend throughout the year. Thank you.

David Garcia

Yeah, so thanks Kyle. I think that the next couple of quarters you're going to see continued investment in the colon study as we continue to progress on that. That'll continue through Q3 and then only until we get to Q4 will be the time when that will start to trail off a bit when as we will have completed the colon study at that point in time. But all the remaining items should be fairly stable, nominal growth to support the business.

Kyle Bowser (Equity Analyst)

Okay, great. Thanks so much for all the updates.

OPERATOR

Thank you. Your next question comes from the line of Bruce Jackson of Stonex. Please go ahead.

Bruce Jackson (Equity Analyst)

Hi, good afternoon. I'd like to kind of take a closer look at the first quarter revenue number. You mentioned that the ASPs were higher. I was wondering if you potentially put in a price increase and if there was any forward buying behavior. You also said that some of the sales may have moved into the second quarter. I'm curious about that. And of course you often get deductible resets and everything like that out in the market. So if you could kind of put those pieces together for us and tell us how that impacted the first quarter revenue number, that'd be very helpful.

David Garcia

Sure, I'll take that one. Thank you. Yeah. So in terms of the capsule volume, it was really just the impact of timing. We saw some of the orders, some of our bigger orders actually fall into April as opposed to March. And then in terms of the asp, there was no price increase. The only thing that happened there was we just saw a little bit of a shift in our mix to some of the higher priced regions in the world. So that's really the only thing impacting ASP there and the volume. Other than that, the underlying business remains strong and there's nothing that would have changed that.

Bruce Jackson (Equity Analyst)

Okay, great. And then just a quick question on the research and development spending, how do you expect that level for the full year to look in comparison to 2025?

David Garcia

Yeah, so it will be pretty similar to 2025. You know, we did spend quite heavily in 2025 on the, the colon study and that continues through. It continued through Q1 and it will continue through Q3, as I just mentioned. So when it's all said and done, the full year RD spending will be pretty similar to 2025.

Bruce Jackson (Equity Analyst)

All right, great. That's it for me. Thank you.

Johnny Wang (President and Chief Executive Officer)

Bruce, this is Johnny. Please allow me to add. During our workflow, our capsule is shipped to the downloading center to retrieve data for the cloud, access cloud review by the doctor. So we can measure the end user consumption very easily. So that's the benefit, one of another benefit of cloud. We know what features cloud adapter are using. We can monitor that through cloud and during monitoring of this end user consumption, we can tell you the end user consumption. Growing growth is healthy. Okay. It's growing and very healthy. Yeah. So that's my opinion. Thank you. Thank you.

OPERATOR

Thank you again. If you would like to ask a question, please press star followed by the number one on your telephone keypad. There are no further questions from the analyst. That concludes our question and answer session. And that concludes our today's call as well. Thank you all for joining. You may now disconnect.

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