Update as a public company, Barry and Jim will spend some time this morning providing a high-level introduction of Saluda for those still newer to the story. Following this, they will walk through some of the materials released to the ASX this morning as part of their first half update. The audience will have an opportunity to submit written questions via the Q&A function at any stage throughout today's presentation at the bottom of your screen. Research analysts may also raise their hands at any stage should they wish to ask a verbal question of the management team. We'll aim to get through the majority of questions asked, in some cases, combining questions on the same or similar topic. We'll seek to have the session wrapped up in approximately 30 minutes, including Q&A. Thank you. Over to you, Barry.
Yeah. Thanks, Sam. Hi, everyone. As Sam said, I'm gonna take a few moments to remind those of you already familiar with Saluda on who we are and what we do. For those of you new to the Saluda story, this will be a brief introduction to the company for you before I hand over to Jim, and we get into the details of our first half results. Saluda is a neuromodulation company focused on spinal cord stimulation. Spinal cord stimulation is an established market. We believe it represents a substantial opportunity, which remains significantly underserved. The annual cost of chronic pain in the U.S. exceeds the cost of heart disease, cancer, and diabetes.
Almost one in four American adults suffer from some form of chronic pain. In full year 2024, approximately $2.7 billion of worldwide revenue was generated from the sale of SCS devices. It's a very well-established market, reimbursement with all the codes and coverages in place. What we believe is that there's a significant opportunity to unlock a lot more value in this market. If you think about all of the eligible patients who would be insurance coverage eligible based on their conditions, for an SCS implant, that represents a $23 billion U.S. total addressable market.
Today, only 6% of that market is penetrated, and we believe with a disruptive technology, with better patient outcomes, better clinical data, and a new standard of care, that there's an opportunity to really unlock that market penetration. Also in the more immediate term, for Saluda to take a lot of the existing market share that currently exists. Next slide. The industry that exists today is called traditional fixed-dose SCS. As I said, it's well established. It's dominated by three strategics, Abbott, Medtronic, and Boston. It's been commercialized, you know, 20-30 years ago. The theory behind the therapy was actually proven over 60 years ago.
Something called the gate theory demonstrated that if you stimulate the sensory nerves around the spinal cord, you essentially block the pain signals from the periphery of the body from being registered by the brain. Those large strategics have commercialized a system that's shown in this photograph here. It consists of an IPG, an implantable pulse generator, also known as a battery, that delivers a current to leads that are placed alongside the spinal cord. During the programming, the therapy or burden of therapy is very much on the manufacturing company. After the procedure is done and the implants are put in, then it falls on the sales rep to do the programming.
Traditionally, a sales rep will turn up the stimulation until the patient feels something called paresthesia or pins and needles. This is an indication that neural activation is taking place. The rep will then turn down the stimulation by about 25%, give the patient a remote control, and the patient goes home. The reason that they're given a remote control is that the distance between the leads and the spinal cord, it's very sensitive in terms of the difference it makes to the level of stimulation. Every time a patient moves, breathes, coughs, or changes posture, there is an adjustment that happens to the amount of stimulation the patient gets.
This leads to a huge amount of frustration, and ultimately, because a patient is constantly getting overstimulated or understimulated, and ultimately, up to 30% of all the patients, and approximately 100,000 people in the U.S. get these systems implanted every year. About 30% of them ask for the system to be explanted within two years because of the frustration with all the adjustments and over and under stimulation, as I said. We believe that there's a much better approach for patients that delivers much better outcomes. That's what if we go to the next slide, this is what we've created here in Saluda. Our technology represents three major breakthroughs. The first breakthrough is that we are the first company that can actually measure the nerve's response to stimulation.
Instead of depending on subjective verbal responses from patients, we can actually, during programming, measure the nerve's response, and we can profile that on screen. The second thing we can do is, based on analyzing thousands of patients who've used our technology, we have modeled dosing patterns for patients. For the first time, there is personalized regimens being developed, which defines the optimal level for each individual patient. We define a very narrow analgesic window down to a couple of microvolts in range for that individual patient. The third part of our technology involves monitoring the level of neural stimulation. 4 million times a day, or 250 times a minute, essentially is real time, we're monitoring the level of neural response.
Every time that the leads are moving, the body is moving, we're actually measuring, but we're also adjusting. Because we're adjusting, we're keeping each patient within their narrow analgesic window, which delivers some amazing outcomes, which I'll talk to in a moment. The last thing I would say is that this technology suite that we've developed, we've got two major barriers to entry from anyone who would like to replicate this. One is on the technology side. This took over 12 years to develop, and it's extremely sophisticated and complicated. Two, our IP portfolio. We've got over 300 patents, which is protecting all of the technology I just walked through. My next slide, and my final slide before I pass it over to Jim, is a summary of the clinical and patient outcomes.
Saluda was the first company in the world to conduct a double-blinded study over three years, the most comprehensive set of clinicals ever done in SCS. The outcomes on the right are astounding, really. 83% of patients, after three years, were still experiencing over a 50% reduction in pain. Almost 60% of patients realizing over 80% pain reduction. Probably the most important metric, in my mind, is we had zero explants due to loss of efficacy at 36 months, compared to almost 30% at 24 months with the current fixed-dose SCS. 55% of patients reduced or significantly eliminated opioids.
In terms of reprogramming visits, our patients, once the program has settled in, we tend to see them less than once per year, compared to a patient on a fixed-dose system needing to come back to their pain clinic over six times a year or every two months, which creates a huge burden of therapy for the pain rep, for the physician, and for the patient. With that overview and introduction, I'm gonna pass it over to Jim.
Thanks, Barry. I'll just cover a few highlights from our issued quarterly half-year release issued earlier today. We previously issued a quarterly release at the end of January that reported our fiscal Q2 and first half revenue performance. At that time, we also updated our revenue guidance for the full year of fiscal 2026 to $85 million, which was increased from $81.9 million included in our IPO prospectus. We are reaffirming that $85 million revenue guidance and also giving some updates on our outlook and progress on some of our other key financial metrics. The points on the screen are the same highlights outlined in our half-year release issued earlier today. All amounts are in U.S. dollars. First, I'll cover our revenue and commercial performance in the first half of FY 2026.
We covered most all of this performance in our January quarterly call. Just to repeat, for those that were not with us here in January, we saw accelerating revenue growth in our fiscal Q2 that delivered a first full first half global revenue of $39.4 million and 17% year-over-year growth, driven by an increase in active implanting physicians and an increase in our U.S. trained sales force. The Q2 acceleration in growth was driven by our U.S. business. Our guidance expects a second half global growth rate of about 24%, which will be driven again by our U.S. business as more of our U.S. sales force finishes their training and begins to drive further expansion in the U.S.
Our international revenue of $11 million in the first half represented 27% year-over-year growth, as we saw increased demand in both Europe and Australia. In Europe, we also saw nice growth across many of our geographies. We saw 17% year-over-year growth in the U.S. implanted patients in the first half, as we continue to grow the number of active implanting physicians. We are also seeing positive momentum from the focus and execution of the sales process our commercial leaders have rolled out to our existing U.S. sales teams, and are using that same sales process in the training processes of our new sales hires.
As we've said during our IPO process, we are focused on expanding our U.S. sales footprint and growing our average fully trained sales reps in the U.S. to an average of 89 during the fiscal 2026 year. Our hiring and sales training processes are continuing to improve to support our targeted sales force growth. While we have not disclosed the precise number of total reps we had at the end of December, I can say that at December 31st, we were ahead of plan to get to the total number of U.S. sales reps of 154 by the end of FY 2026.
While we are ahead on total reps, we still believe we are on track to have an average of 89 fully trained reps during FY 2026, as the increased level of total reps will likely impact the fully trained number going into FY 2027. Shifting to the other key financial metrics we highlighted in our release. Our gross margin was 49.4% for the first half, reflecting about a 220 basis point improvement over prior year. The improvement in our gross margin was driven by a reduced IPG unit cost in fiscal 2026, a positive impact from the country mix of revenue in Europe, and by a reduction in the cost of the blended mix of the miscellaneous items used in Europe as a part of the procedure.
These positive impacts on gross margin were partially offset by the planned reduced pricing in targeted accounts in the U.S. as we continue to penetrate further into the physician-owned ASC part of the market. This portion of the market represents an ongoing growth opportunity we have been recently focused on. Given the positive gross margin performance in the first half, we expect to exceed the FY 2026 full year estimate of 46% that was included in the prospectus. We do expect our second half gross margin to be a bit lower than the first half performance, but we believe we are on track to finish ahead of that 46% prospectus number for the full year.
Our adjusted EBITDA is a metric we included in our pro forma forecast in our IPO prospectus as a non-GAAP metric we believe is a valuable profitability metric reflecting the core operating performance of the business. We define adjusted EBITDA as our operating income or operating loss with stock-based compensation, depreciation and amortization, special charges, or as it's labeled in our issued financials, other operating expenses, all as reconciling add backs. Our first half adjusted EBITDA was a negative $56.9 million, compared to negative $49.1 million in the prior year. In the first half of the year, our sales and marketing expenses are growing a bit faster than our revenue as we are scaling the U.S. sales force. We also had an elevated level of G&A expense from some planned one-time consulting related spend in the first half.
However, if you exclude stock-based compensation, our R&D expense actually decreased over the prior year. I mentioned before that we are a bit ahead of plan on U.S. sales rep hiring, which may drive sales and marketing expenses slightly higher than the forecast in our prospectus, given the first half performance of the business, our targeted cost savings in other areas, and the cost reduction impact of the reduction in force we implemented at the end of the first half of the fiscal year, we do expect to improve our FY 2026 full year adjusted EBITDA results compared to the pro forma forecast in the IPO prospectus. Lastly, cash used in operations. We used about $60.3 million of cash in operations in the first half of the year.
This result is better than our plan and puts us on track to improve this cash usage for the full year fiscal 2026, compared to the full year $124 million cash usage forecast in the IPO prospectus. We've been focused on controlling and reducing our overall inventory levels as well, and have been ahead of plan in that respect. This positive momentum on inventory purchase planning and inventory levels overall, is adding to our confidence in the ability to finish FY 2026 with lower cash burn than the prospectus forecast. A few other operating updates to note. As we mentioned in our quarterly update call in January, we did receive approval in Europe and Australia for our EVA automated programming technology.
That is a technology we fully launched commercially in the U.S. in July 2025, has been having a very positive impact on our business there. We are in the limited launch phase currently in Europe and Australia, we believe EVA will have a similar positive impact in these geographies. EVA has been a great advancement in our platform, allowing more patients to get into an optimized and personalized program sooner in their therapy. EVA also has been a positive influence on the effectiveness and efficiency of our new sales rep training processes. We also mentioned in January that we attended the North American Neuromodulation Society, or the NANS Society Conference recently. This was a very positive event that allowed us to showcase our technology.
We engaged with a large number of new target customers, and we were able to further showcase the clinical data supporting our therapy with 19 clinical abstracts and five podium presentations. Overall, we're very pleased with our first half performance. We continue to be encouraged by the commercial traction we are seeing, and disclosed in January. We're also pleased to be able to share that we are ahead of plan on the other key financial metrics that are critical to our long-term path to profitability. With that, Barry, I'll turn it over back over to you for a few closing remarks before we start Q&A.
Great. Thanks, Jim. As we said in our prospectus and on our roadshow, we believe this is an execution story, as we already have the best technology, the best clinical data, and our patients are doing incredibly well on our therapy. Again, we need to scale the commercial side of our business with a highly efficient sales model, while at the same time growing into an attractive gross margin profile through product and process innovation. We've made some great progress executing on both of these strategies so far this year. The accelerating activity of our physicians in the U.S. and the growth we saw in the international business were both ahead of our initial forecasts. As a result, we're pleased to reaffirm the recent increase to our full-year revenue guidance.
We also expect to improve on our key operating financial metrics of gross margin, adjusted EBITDA, and cash use and operations. We will continue to be dedicated to capturing this unique opportunity in front of us, focused on executing against both our top and our bottom-line strategies. We look forward to bringing you updates in future earnings calls, particularly given the growing momentum that we're seeing in the business. Now we'll open it up to Q&A, and I'll hand it back to Sam.
Thanks very much, Barry, and thank you, Jim. As a reminder, the audience can ask questions via the Q&A function at the bottom of your screen. The first questions, we've got a couple coming through on sales reps. Can you give some color on U.S. rep hiring in the first half? Have you been successful in recruiting both the quantity and quality of people that you're seeking? As a follow-on to that, how has the retention of these reps been?
Yeah, thanks. That's a good question. I'll take that one, Sam. First of all, on the retention, our sales force attrition is at an all-time low. I sincerely believe our sales team now believe that they can win at Saluda. I mentioned before that we had a major reset in commercial operations. We transformed how we recruit our reps and the profiles we were looking for. We transformed our internal training processes. We codified a sales process that sets our reps up for success, and we also, you know, did a major overhaul of our compensation for our sales force. That reset's now complete. In addition to that, I believe we've got the right leadership team now in place, running, in particular, our U.S. sales force.
I think the culture that's evolving here with the leadership team that we've got is creating a winning recipe. That's why we feel so good about retention, and I think that's coming through in the numbers. Like I said, attrition rates are the lowest that they've ever been at the company. I think also we're seeing now a lot of referrals from existing sales reps who are reaching out to their previous colleagues and people that they know, and they're the biggest advocate now and advertisement for what is possible for a sales rep in Saluda in terms of building a career. You know, having a really attractive compensation package and then being part of something that is really gonna transform the industry.
Yeah, we've, we're very happy where we are with recruitment. Every position that we open, we're oversubscribed with, not just the quantity of candidates, but really high-quality candidates, and I would say much higher quality candidates than we were able to attract, 12 months or 18 months ago. The momentum in the business is really helping us with our recruitment.
Maybe just one more follow-up on sales reps. Is it this progress that you're seeing on sales reps, is that what's specifically driving your growth plans and growth assumptions around revenue ahead?
Yeah. Not really, Sam. Most of the hiring that is ahead of plan are reps that are still in training. Really, we've just seen momentum with the team we had already, from improvements to some things I mentioned. The onboarding process is more efficient, our training is more effective, and all those things have helped accelerate our reps' productivity. And then Jim mentioned the continued rollout of EVA, our automated programming solution. That's leading to much more productive programming. It was a big part of our training and the learning curve, and so that's driving a lot of efficiencies for our reps as well.
I'd say the incremental reps that we're bringing in, and yes, we're ahead of schedule, which is great, that's mostly gonna be a feeder for 2027 once they come off training.
Thank you. Next question on margins. Good to see gross margins are at 49% and ahead of your plans. What are the driving factors?
I think I caught that, Sam. I think you got cut off there at the end. The question was about gross margins and being ahead of plan. I'll take that one. I hit a couple of those in my prepared remarks, but maybe just a little bit extra color. I would say, we are pleased where they're coming in at. We did see some a benefit in our current half year from a lower cost IPG. In FY 2025, we were still phasing out our first generation IPG, which was at a higher unit cost. We're benefiting a bit from that lower IPG unit cost in the current year.
This is separate from the next phase of IPG that we've talked about as a part of our IPO and elsewhere, that is still in development, that will take that unit cost even down further. Specifically, the other items that we benefited from were also in Europe. Some favorable mixed benefit in terms of some of the geographies that have a bit higher pricing are benefiting from to the margin, as well as a lower cost usage of some of the miscellaneous products that get consumed in Europe as a part of the procedure, has helped bring down the actual cost of what's getting sold there. I did mention.
part of that improvement is being offset by a modest price year-over-year price decline in the U.S. This is something we talked about pretty regularly as there is a portion of the U.S. market, what we kinda call the physician-owned ASC part of the market, the high-volume centers that can command a bit more competitive pricing. We have been starting to attack that part of the market and have been seeing some success that's brought a little bit of our price down. That was what we expected, it is offsetting a little bit of our year-over-year gross margin improvement. The only other point I'll make is, I did mention our second half. We would expect that the second half gross margin would be slightly below the 49% performance we had in the first half.
The biggest driver for that, we are still forecasting that there would be a negative price impact in Australia in the second half. The government has been proposing a reimbursement reduction for spinal cord stimulation in Australia. Reimbursement there to date is some of the highest in the world, and the government is coming back to try to push some of that reimbursement down. We're expecting a bit of a price impact in the second half of our fiscal year. I think I covered the meat of the question there, Sam.
Yeah. Great. Thank you, Jim. Next question, just on cash burn. You've talked to some of the discipline and planned initiatives to reduce cash burn, balancing this with the need to spend in order to scale your business and commercialize successfully in the U.S. Can you just remind us whether this has been in line or better than initially anticipated?
Yeah, good question. The couple of points I'll make is right now, our first half performance is actually better than our anticipated performance when we built the forecast for the prospectus. There are a couple of balanced items. As you said, we are scaling the business, so there is still growth in our spend, most specifically in the sales and marketing line, as we're adding these salespeople that Barry just talked about two questions ago. That addition of people, as I mentioned, we are a little bit ahead of plan in terms of the number of sales reps we have, so I would expect that our sales and marketing spend in the second half may be slightly ahead of our plan, but we've done enough other cost controls.
We talked at our January quarterly about a reduction in force that we did implement. While never fun to do, we thought necessary, something that has helped reduce the run rate cost now on a go-forward basis. That was built into our plan, but we've done very well. It's having a positive impact on our expenses. Our employees, frankly, have really rallied around it. We're confident that the operating milestones that we need to hit are continuing to happen, even in the face of that. The other piece I'll call out, that I did talk about in the prepared remarks, is our controlled inventory levels.
This is something that's been another nice bright spot for us as the, as the teams have really been focused on working with our vendors in terms of purchase planning, and really managing the levels of inventory we need to support the business, to start to bring those down as we had a bit of an elevated inventory level. This is something that will help control our cash burn for the year, and why we're, why we're confident in being, actually being ahead of that plan, in the prospectus.
Okay, great. Thank you. Very clear. I think that's all the questions we have that have come through today. Maybe with that, I'll pass it back to you, Barry and Jim, if there's any closing remarks.
Yeah, I think, Barry, closed well, right before the Q&A. I think, we're really excited about the results so far, the momentum that we've got in the business, and really pleased to be able to be ahead of plan this far, in our first half year, performance, so far. Thank you, everybody, for joining, and I'm sure it'll be a busy day. Thanks for spending a little bit of time with us today.
Yeah. Thank you.
Thank you. Sorry, Barry, did you want to say anything else?
No, no, just thanks, everyone, for attending.
Yeah, thanks. That concludes today's first half Saluda results call. Enjoy the rest of your day. Thank you and goodbye.