All right. Good afternoon, everyone, and thank you for joining us at this year's Canaccord Genuity Musculoskeletal Conference. My name is Caitlin Roberts, and I'm on the Med Tech Team here at Canaccord Genuity. I'm joined today by Shoulder Innovations, a medical device company offering advanced implants, enabling technologies, and efficient instrument systems for shoulder arthroplasty. With me today is Robert Ball, CEO. Before we begin, I want to remind everyone of any relevant disclosures which can be found on our conference and our firm website. With that, I'll hand it over to Rob.
Afternoon, everybody. Thank you for joining. Great to see you all. I see a lot of familiar faces. As a public company, I get to report on third quarter results. This might be somewhat uninteresting for some of you, but a few brief updates in here. Of course, we are making forward-looking statements with respect to Reg FD. Shoulder Innovations obviously focus on the shoulder surgical care market. Our first landing zone in shoulder surgical care in the broad sense is shoulder arthroplasty or shoulder replacement. That's a kind of a sub $3 billion market growing around 10%, a very vibrant market. It is the best market in orthopedics. We take advantage of that, enjoy that very much.
As of the end of the third quarter of 2025, $42 million in trailing twelve-month revenue, which represents kind of a CAGR over the prior eight quarters, about 55% compound annual growth rate, which we've obviously enjoyed very much. A very nice gross margin, 76%, which we believe there's actually upside to that. We've kind of created this revenue stream on a very purpose-built platform of shoulder arthroplasty products. They were kinda conceived from the beginning, you know, kind of all at once, so that we could land in a few zones, which I've heard a lot about even as we kinda came through the lunchtime talks and some of the other talks today. That did start with our InSet glenoid.
The InSet glenoid is a technology proprietary to Shoulder Innovations, which is focused at solving the main problem in anatomic shoulder arthroplasty, which is the loosening of the glenoid component on the scapular side of the joint. That is supported by our AI-enabled 3D preoperative planning platform. We built that from zero lines of code and now is effectively 100% engaged by all of our surgeons. We actually plan more cases in a given month than we actually perform surgically. Of course, what we're very much known for is creating that very capital-light, low case and tray instrumentation burden in the operating room. We walk into an operating room with two trays of instrumentation as opposed to what you might usually see, which is much more in a competitive environment.
Of course, a great company is not built without a great team. Dave Blue here with me in our room, our Chief Customer Experience Officer. We have literally been in the shoulder arthroplasty space for multiple decades. We got our start at DePuy Orthopaedics, building the Global Advantage product line, actually brought the first reverse shoulder arthroplasty into United States, which obviously represents a majority of market share today in the U.S. shoulders. Worked with Tornier, helped build that product line, including the Simplicity product line. We worked on the pyrocarbon implants, you know, many of those types of products, which of course, went on to be acquired by Wright Medical and then Stryker.
In addition to that, we had the opportunity to work with a small company called Imascap, which was the first company to create a automated 3D preoperative planning solution for shoulder arthroplasty, which is now Stryker's Blueprint, which indeed transformed shoulder arthroplasty. The point being, as a team, we've been in this space for decades and have had a meaningful role in many of the innovations that have been transformational in the shoulder arthroplasty space. What's interesting about shoulder arthroplasty is about the same, or shoulder pain really, is about the same number of patients would see a physician for shoulder pain annually as you would see in the knee replacement space.
We do about 5 x as many knee replacements as we do shoulder replacements in a given year, and I'm not sure that the ratio is parity, but the point is, we do far fewer shoulder replacements than we do knee replacements. One reason may be that we don't walk on our knees, of course, but you also may explain that through the fact that we have been growing in our technology stack in the shoulder arthroplasty space over recent decades and are far beyond the kinds of outcomes. If you think about the 3D restor3D presentation earlier, talking about patient satisfaction at 10 years, or patient satisfactions following shoulder arthroplasty or knee arthroplasty, we aren't there yet. We're still talking about the occurrence of rapid postoperative complications that need to be corrected for mechanical problems with the joint.
Still a lot of problems to be solved in shoulder arthroplasty, which obviously, we're working on, very diligently. The point is, that represents opportunity to overcome that kind of poor brand that's been built in the shoulder arthroplasty space, that patients are now coming to realize is a viable and important procedure that's a potential, positive outcome for them. There are two main types of shoulder replacement devices, so the anatomic device and a reverse device. Of course, the reverse is where you, instead of the ball being placed on the humeral side of the joint, the ball is placed on the scapular side of the joint. Why you would do that is you have some sort of deficiency of the rotator cuff, and with that deficiency, that needs to be overcome with the biomechanics of the joint.
Now today, the reverse shoulder style represents 70% of the marketplace worldwide or maybe even a little bit more. A very relevant component of the market. As I mentioned, just under a $3 billion market, two-thirds of that is United States. It does grow at greater than 10%. This is the best market in orthopedics and looks very much like a very high-growth med tech marketplace. What's interesting about this space is that if we consider hip and knee as an analog, we've seen outpatient procedures very much overcome inpatient procedures as it relates to joint replacement broadly.
We've seen reimbursement in Ambulatory Surgery Centers exist for a much longer period of time in hips and knees, and what we see is that that growth that's happening in the hip and knee market, 100% happens at the outpatient setting, largely the ambulatory surgery setting. We anticipate that same dynamic to happen in the shoulder arthroplasty space, especially given that CMS rendered positive payment decision in January of 2024 for shoulder replacement. This is a very new and fresh dynamic in our space. For us, we have seen our shoulder replacement procedures happen at a 10% rate in December of 2023, just before that decision, that has migrated to now over 30% in the Ambulatory Surgery Center specifically.
We know that we are far, far ahead of the marketplace, and I'll explain somewhat later here. Current challenges in the shoulder arthroplasty marketplace, we are overcoming low rates of implant survivorship broadly, very frequent postoperative complications, imprecise implant positioning, and burdensome surgical workflow. I'll walk through each one of these in some detail. We have presented a suite of solutions to overcome all of those. We call this our ecosystem, and of course, it begins with the advanced implant solutions, which I'll show a little bit more in a moment. Of course, preoperative planning is key to how we execute what happens in the operating room.
Our ProVoyance technology, AI-ML-enabled 3D preoperative planning solution, is a very important component of the way we engage with surgeons, how they understand our products, and how they deploy our products in the operating room. We have developed a very innovative commercial model, made up of our commercial organization, plus what we characterize as our CEME team, customer experience team. Those two teams work very closely together, very non-traditional commercial model that's been very, very effective in what is a very unique surgical environment or customer environment, quite frankly. Having two trays of instrumentation versus 8-10 trays of instrumentation has been fundamental in our ability to drive growth into particularly that Ambulatory Surgery Center market.
When you look at the traditional implant designs, particularly on the glenoid side and the anatomic shoulder arthroplasty, you have an ovular glenoid. We have experienced over decades ovular implants onlay or laid on top of a machine surface in glenoid arthroplasty, create what we call the rocking horse mechanism. This, we did not discover or prove this. This is well understood and proven before we existed at a company. Effectively, you have translation of the humeral head on the glenoid surface. That translation of the humeral head leads to an imbalanced load, which leads to a lifting-off action of that glenoid implant from the glenoid bone. When that rocking horse motion happens back and forth, it leads to loosening and osteolysis of the implant relative to the scapula.
Of course, we have sought to solve that problem with converting away from an ovular implant to a circular implant. That circular implant allows us to use a circular cutting tool. That circular cutting tool can create a cylindrical geometry in a pocket, if you will, inside the glenoid bone itself, and then our implant sits down in that pocket and thus the name Inset. What that does is kind of automatically creates a buttress of hard bone around the entire periphery of the implant, really creating a buttress effect against that rocking horse motion. We have proven with that Inset, we reduce 87% of that rocking horse motion, and then we've converted that mechanical mechanism of action solution into clinical results with two-year, five-year, nine-year, 100% survivorship results with a glenoid implant.
That's quite fundamental, quite differentiated relative to the rest of the marketplace. Of course, that does convert to patient outcomes. Postoperative complications can be somewhat common. When you do a shoulder replacement, you take down what's called the subscapularis tendon. That gives you exposure to the joint. Once the procedure is completed or the joint replacement is completed, you have to repair that subscapularis tendon. Repair of that subscapularis tendon can fail 15%-25% of the time, depending on the patient status, the health of the patient, skill of the surgeon, et cetera. When you have that failure of the subscapularis tendon, effectively you have a insufficient rotator cuff. Go all the way back to the beginning w hen I have osteoarthritis and an insufficient rotator cuff, I need a reverse shoulder arthroplasty, not an anatomic shoulder arthroplasty.
That brings us into the area of the reverse shoulder arthroplasty. Effectively, we've learned a lot about reverse shoulder arthroplasty over the past 10-15 years. A number of us in the room even were at Tornier when we went public in 2011. We were about 30% of our joints were reverse at that time. Today, over 70% of those joints, since you can imagine, we've learned a lot, and migrated a lot in our understanding. We've moving away from a little bit of an oversimplification here, but moving away from what we call onlay arthroplasty to inlay shoulder arthroplasty in the reverse.
Of course, you can see our implant there in the lower right. Now, what we know today is if you're after motion postoperatively with respect to shoulder arthroplasty, a very recent paper, November of 2024, 41% of patients still experience a lag in their ability to achieve internal rotation. Of course, that's how you take care of yourself in the bathroom or may reattach an undergarment. That's a fundamental emotion that we want to be able to achieve. That's a function of the way we orient the humerus and the scapula relative to one another during the surgical procedure, and the fundamental biomechanics of the joint design is what indeed drives that relationship.
We have completely differentiated the way that orientation happens, and we cause that orientation to happen through the entirety of our product line. Third, that has to be planned appropriately. In order to predict where you're gonna land from an outcome standpoint, you have to be able to plan that before the procedure. Of course, a traditional preparation for surgical care here in shoulder arthroplasty would be an X-ray or an MRI. X-ray obviously assessing bony tissue, the MRI assessing soft tissue. We've migrated onto 3D preoperative planning. We've built our own 3D preoperative planning platform based on AI. It's called ProVoyance. To the extent that we can measure every single one of our implants the implanted uses our preoperative planning solution at this point. Very high level of engagement. What's also somewhat non-intuitive, this is a best-selling tool that we have.
This is one of the main ways that we talk to our customers about their procedure and about the way our implants work. If a picture's worth a 1,000 words, this must be worth a million or a billion or what have you. It's been a very, very powerful tool for us. Of course, as the market shifts away from inpatient or hospital outpatient procedures to Ambulatory Surgery Centers, which is indeed happening, particularly with CMS renewing a positive payment decision in 2024, we are perfectly positioned to accommodate for that. We have created a Two Tray platform system. You can see here on the left, just received this image literally two weeks ago from one of our customers.
It was a task with a text message was, "Thank you for what you guys have done with your engineers." you know, kinda this is what one procedure in our Ambulatory Surgery Center looks like with one of your competitors. This is the image on the left, obviously, with the gray totes. We walk in on the right, two trays of instrumentation, it fundamentally changes how the Ambulatory Surgery Center staff perceived how the procedure's done. One, it's obviously lower cost from a sterilization standpoint. You have to decontaminate and sterilize this in-instrumentation on both sides of the procedure. Also it presents an environment where this is a much more lower anxiety, simpler procedure to use, and it's been really just fundamental in our ability to scale our company. those products, those innovations run across the entirety of our product line.
Obviously, we have been a very innovative force in the shoulder arthroplasty space for decades and will continue to do so. We have recently introduced a couple new products into the clinic. We have been robust in our communication with the market about the introduction of our I-135 platform for some fracture indications. That is now being used in patients in Q1. We also did receive in January clearance for our, what we call our N22 Glenospheres, which are for patients with a metal hypersensitivity. Both of those products are now in, I won't say in market, but in what we call our limited user release phase as we prepare for a fuller commercial launch later this year.
Of course, in December, we did announce a partnership with Interventional Systems or INS for deployment of a robotic solution, coupled with our ProVoyance platform for specifically for shoulder arthroplasty. INS has developed a robotics platform. They have partnered with a couple other companies in the United States market, and so are in commercial phases with other partners. We partnered with Interventional Systems to deploy our ProVoyance platform in the operating room. The ProVoyance is the perfect planning solution. Our robotic solution will just be a natural extension of the ProVoyance platform into the operating room. Because of the automation enabled by the AI, we can plan at the scrub sink.
With the robotic solution, you can take that planning from the scrub sink directly into the operating room using the same driver and just execute in the operating room. What's very important to us as we identified a partner for this type of solution for a couple factors. Number one, it had to be time neutral. We had to present our solution into the operating room in a way that the workflow solution for the surgeon was unchanged. We presented technologies that increased the reliability and the accuracy, the predictability of the procedure, without adding any additional time to the procedure. We believe we will achieve that. The second, and probably more importantly, is we wanted to create a new economic model, particularly suited for the Ambulatory Surgery Center, where there wasn't a burden of a capital purchase or lease or a long-term arrangement.
We effectively are creating a robotics-as-a-service model so that every operating room is a robotics operating room. We will bring this in in a portable nature. It fits into a suitcase. We can deploy it in 10 minutes. We perform the procedure, and then we can walk away from the operating room and use that equipment in another operating room instantaneously. We believe that puts us on completely new footing as it relates to shoulder arthroplasty robotics, particularly in the Ambulatory Surgery Center. The response from our customer base has been absolutely phenomenal, and we have performed several cadaver labs now with this platform and are very, very excited about both the clinical improvements that we can make, but about the way this is fitting in with the economic and the surgical circumstances of shoulder arthroplasty.
Just a very exciting opportunity for us. As I mentioned, we do deploy our devices through our unique commercial model. We do have a 1099 indirect distribution organization made up of, on the order of 180 trained reps at this point. Every single sale goes through an independent organization. We collect our invoices through those organizations. On top of that organization, we have what we call our commercial leadership organization. They essentially have grown dramatically, but are 100% W-2 employees focused on shoulder arthroplasty exclusively, driving growth through that 1099 organization. Partnered with that commercial organization is our customer experience organization.
These two W-2 organizations are sizable in nature, represent on the order of two-thirds of our employees, but provide a very focused approach in this unique market. What's very unique about this market is there's about 15,000 surgeons that may perform at least one shoulder arthroplasty. There are 1,800 that we characterize as high volume, 35 or more annually. We are focused on those 1,800, and it's very much a man-demand commercial model. We are seeking out those 1,800 high-volume surgeons, building relationship with them to help them understand how our products and services can indeed enhance their practice. It's been a very, very powerful commercial model to date. As I mentioned, 55% compound annual growth rate over the last couple years.
$11.8 million being 58% over prior year in Q3 that represented 53.3% growth on a unit basis. We did share at that time the customers that represent what we call core and contender surgeons, customers that represent 95% of our revenue had grown over 50% over the prior year. That's our best leading indicator of future revenue growth, and so that growth has been powerful for us. As we think about drivers of growth in the near future, of course, the market is sizable but also growing at 10%. As they say, "A rising tide lifts all boats." That's been obviously very important for our growth.
Really a majority of our growth is happening through what we call that core and contender, that high volume surgeon customer growth, and so that's what's driving most of it. Of course, those numbers of 1,800 surgeons being a very high growth market, those numbers of those surgeons is growing. We also have introduced some additional new products into the market. Not only that, those new products are at higher price points than our existing product line, so we're expecting to see some at least stabilization, I'll put it that way, of pricing, which is rare in the orthopedic market. All of those are obviously very constructive for growth in the relative near term. Two other areas we expect to be drivers of growth as we move into the longer term. One, exposure to international markets.
100% of our revenue today is in the U.S., so we do expect to expand outside the borders of the United States in the coming quarters, and that can be helpful from a growth standpoint. Of course, at the very beginning, I characterized us as focused on the shoulder surgical care market. Today, we are the only publicly traded company, well-capitalized, focused 100% on that high volume shoulder specialists. Of course, when you think about a high volume shoulder arthroplasty surgeon, typically, their practice is such that arthroplasty represents a minority of the procedures they perform on a weekly basis. There are many more indications that we consider as opportunities in the future. As we move into perhaps some of those soft tissue indications, that can be interesting for us in the future.
I'm gonna skip this one, with that, I'll take any questions you may have. Go ahead, Caitlin.
In terms of the INS partnership, when do you expect that to launch? What types of, you know, what indications are you starting off with?
Yeah. I'll take the second part first. The way the model works with this robotic solution, it will allow us to launch several different indications simultaneously. There isn't really. It won't cover everything, but it will cover a number of indications simultaneously. Second, we've not been clear with the market yet about when we intend to launch the product, but we have characterized it as from a cost and from a timing standpoint, kind of a typical implant product, cycle time and cost. Gives you a sense. Any other questions? Please.
Could you speak to the impact of your micro-robotic system deployment and the impact it's had on sales?
Of course, we are not in market yet with the robotic solution, but it's a fair question 'cause what I will speak to is that there is a high degree of interest in robotics, particularly in shoulder arthroplasty. I would characterize that our announcement and the way we have dialed a solution that looks very well suited to the arthroplasty market has introduced a number of inbound phone calls. I'll put it that way. It's been very constructive for the way shoulder surgeons have perceived us in the marketplace. You know, Any other questions? Oh, come on. You got two minutes. All right. Thanks a lot.