Spectral AI Q3 2026 Earnings Call Transcript

Spectral AI (NASDAQ:MDAI) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Spectral AI is transitioning from an R&D organization to a commercial enterprise, focusing on launching its Deep View AI system for burn assessment with initial sales expected in 2026.

The company began manufacturing 30 Deep View AI systems for deployment in U.S. burn centers, supported by BARDA, and is expanding its sales efforts both domestically and internationally.

Spectral AI is conducting clinical studies in the U.S. and U.K. to expand the use of its technology and has submitted a New Technology Add-on Payment application for Medicare reimbursement, with decisions expected by August 2027.

Financially, the company reported a 24.7% decline in R&D revenue to $2.9 million for Q3 2026 due to a narrower scope of work with BARDA and a completed MTech program.

Operating expenses decreased by 4% to $4.7 million, and the company ended the quarter with $11.2 million in cash and a manageable debt profile, with an additional $90 million of non-dilutive funding from BARDA available.

Full Transcript

OPERATOR

Good afternoon and welcome to the Spectral AI third quarter 2026 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Devin Sullivan, Managing Director of The Equity Group. Please go ahead.

Devin Sullivan (Managing Director)

Thank you, Gary. Good afternoon everyone and thank you for joining us for Spectral AI’s 2026 third quarter financial results conference call. Our speakers for today will be Vincent Capone, the Company’s Chief Executive Officer, and David McGuire, Chief Financial Officer. Before we begin, I’d like to remind everyone that during this call certain statements made are forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995, including statements regarding the Company’s strategy, plans, objectives, initiatives and financial outlook.

When used in this call, the words estimates, projected, expects, anticipates, forecasts, plans, intends, believes, seeks, may, will, should, future, propose and variations of those words or similar expressions or the negative versions of such words or expressions are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the Company’s control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. As such, listeners are cautioned not to place undue reliance on any forward-looking statements.

Investors should carefully consider the foregoing factors and other risks and uncertainties described in the Risk Factors section of the Company’s filings with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. With that, I would now like to turn the call over to Vincent Capone, Spectral AI’s Chief Executive Officer. Vince, please go ahead.

Vincent Capone (Chief Executive Officer)

Thanks, Devin, and thank you all for joining us today. We issued our earnings release this afternoon, which contains additional details of our operating results, and we will be filing our 10-Q with the SEC on or before November 16th of this year. Our third quarter results reflect the continued transition of Spectral AI from a research and development organization into a commercial enterprise. Commercialization of a new medical technology requires more than regulatory authorization. It requires establishing clinical confidence, expanding our existing relationships with leading burn centers, demonstrating economic value to hospital systems and ultimately integrating this technology into the clinical workflow.

These are precisely the areas where our team is focused. We are making good progress with the initial BARDA-supported deployments of our Deep View AI system for our first commercial sales, which remain an achievable goal for 2026. To that end, during this quarter we began manufacturing the first 30 Deep View AI systems for BARDA-supported deployments at U.S. burn centers. We are encouraged by the engagement we are receiving from burn centers across the country and the progress being made toward expanding our national sales footprint.

We believe the clinical infrastructure, relationships and evidence we are building today are essential to establishing a sustainable and expanding commercial business. Our vision extends beyond simply placing devices in hospitals or burn centers for mass casualty preparedness. While preparedness remains an important component of our strategy, we believe the much greater opportunity is to make this technology available as part of the clinical protocol for everyday burn care. We want to establish a national sales footprint for our Deep View AI system that supports more consistent, objective and timely burn wound assessments with the ultimate goal of improving patient outcomes.

We believe patients should have access to the benefits of our advanced diagnostic technology regardless of where they live or which burn center they visit. We are focused on making this technology broadly accessible to patients regardless of geographic location or socioeconomic status, with a goal of helping ensure more equitable access to advanced burn wound assessment and the highest quality of care. As part of this strategy, we have started clinical studies in the United States and the United Kingdom. In the United Kingdom, we are self-funding a study to expand our label to include head, hands and feet burn areas. We have completed all site initiation visits at four burn centers in the United Kingdom and have currently enrolled 10 patients already in this label expansion study.

In the United States, to further support the economic development of our Deep View AI system, we are finalizing preparations for our triage and treatment outcome study, or as we like to call it, the TNT study, which will evaluate Deep View AI’s potential to improve surgical precision, accelerate treatment decisions, and reduce hospital length of stay. We expect to commence the TNT study at four to five burn centers in early December of this year, with plans to expand to 12 centers across the United States by the end of the first quarter of 2027.

As we work through our commercialization model, we recognize the economic value of reimbursement to both hospital systems and the physicians themselves. We have been working hard to create a heightened reimbursement coding for the use of our device in both inpatient and outpatient settings. Early in the third quarter, we submitted a New Technology Add-on Payment, or NTAP, application to the Centers for Medicare & Medicaid Services for our Deep View AI system.

If approved, this would provide hospitals with additional Medicare reimbursement for eligible use of the Deep View AI system, helping to reduce adoption barriers for both eligible health systems as well as making it easier to integrate and utilize our device in the appropriate inpatient setting. We expect a determination to be made by August of next year. On the physician side, we note that a reimbursement pathway has been advanced as of January 1, 2027, with pricing supported by local Medicare Administrative Contractor pricing.

Our CPT3 coding—we are working to move to a CPT1 coding—which will be supported by our TNT study. We are also continuing to expand the Total Body Surface Area burn calculation that uses our Deep View AI system’s imaging and AI platform to quickly and objectively quantify how much of a patient’s body is burned. The advancements we are working on will provide a standardized, data-driven input for triage, fluid resuscitation and treatment decisions, which are especially valuable in complex or mass casualty situations.

In connection with our international sales strategies, we are still progressing with updating our UKCA burn assessment approval, which we secured in 2024, to reflect the improved algorithm, hardware and software that was included in our FDA clearance just this past May. Although we had anticipated receiving clearance by year-end, we now expect this approval in early 2027, after which time we will commence initial sales and placements of the Deep View AI system in either the UK, Australia or the Gulf Cooperation Council countries.

We believe our existing relationships with leading global burn centers will also support the initial commercial launch outside of the United States. To date, we have made good progress regarding awareness. We are encouraged by our interactions at the Southern Regional Burn Conference in September, where leading burn surgeons presented new study results involving our Deep View AI system. Those presentations addressed physician accuracy in identifying non-healing burns as well as the repeatability and reproducibility of the Deep View system’s AI analysis. Furthermore, in October we showcased the Deep View AI system at the American College of Emergency Physicians Scientific Assembly in Chicago.

This provided yet another opportunity to introduce our technology and discuss its potential role in burn assessment and hear directly from emergency physicians about their clinical needs and how our device supports those requirements. While the economics of our development work are different from those associated with the commercial business we are building, we remain well capitalized to execute on our strategic commercial priorities. We ended the quarter with more than $11 million in cash, a manageable debt profile and access to an additional $90 million of non-dilutive funding from BARDA. As we make this transition from a research organization to a commercial-focused enterprise, we remain disciplined about how we will deploy capital and how we will fund our business and its growth.

Our immediate priorities are clear: complete initial manufacturing and begin the initial BARDA-supported sale deliveries of the Deep View AI system across a national footprint; further advance our commercial sales efforts both domestically and internationally, with existing relationships leading to initial sales across both the U.S. and abroad; continue to support clinicians as they evaluate and introduce Deep View AI in its clinical workflow; and continue our reimbursement and label expansion initiatives to support hospitals and physicians.

With that, I’m pleased to turn the call over to David McGuire, our Chief Financial Officer.

David McGuire (Chief Financial Officer)

Thanks, Vince. Before I walk through the numbers, some context on where we are with BARDA. BARDA has supported the development of Deep View AI with approximately $250 million of non-dilutive funding, and that work led to FDA De Novo authorization in May. In June, we completed the base phase of our current BARDA contract and moved into its follow-on development phase. In this phase, the scope narrows to specific development projects and the costs are shared. BARDA reimburses a portion of our development costs and we fund the rest. The third quarter was our first full quarter under this phase, and as we noted last quarter, we prepared for it.

Research and development revenue for Q3 2026 was $2.9 million, down 24.7% from $3.8 million in Q3 2025. BARDA revenue was $2.7 million compared to $3.4 million, reflecting this narrower scope and the cost share. Revenue from other U.S. government programs, principally the MTech Intel Device program, was $0.1 million compared to $0.4 million as work under that program was completed. Gross margin was 27.2% compared to 42.7%, reflecting our share of development costs with BARDA, which is recorded in cost of revenue.

Total operating expenses for Q3 2026 declined 4% to $4.7 million from $5.0 million in Q3 2025. While we continue to invest in our commercialization activities, we are managing costs carefully without compromising our ability to execute. Breaking opex down by category in Q3 2026 compared to Q3 2025, R&D expense increased to $2.0 million from $1.5 million, primarily from the UK label expansion study for burns of the head, hands and feet that Vince described.

General and administrative expense decreased to $2.3 million from $3.1 million, primarily reflecting lower legal fees and related professional services. Selling and marketing expense increased about $50,000 to $0.4 million, reflecting increased activities ahead of first commercial sales. Other income for Q3 2026 was $0.2 million compared to other expense of $0.2 million in Q3 2025, due primarily to a $0.8 million gain from the change in the fair value of our warrant liabilities, partially offset by $0.6 million of net interest expense, primarily on our Avenue facility. Net loss was $3.7 million, or $0.11 per basic and diluted share, compared to $3.6 million, or $0.13 per share, in Q3 2025. Adjusted EBITDA, a non-GAAP measure, was a loss of $3.7 million compared to a loss of $3.1 million, reflecting lower gross profits partly offset by those lower operating expenses.

As of September 30, 2026, cash was $11.2 million compared to $15.4 million at December 31, 2025. In the first nine months of the year, we used $10.5 million in operating activities, offset by $6.3 million from financing activities, primarily that second tranche of our Avenue facility. That facility is now fully drawn at $15 million with interest-only payments through March 2027 and maturity in March 2028. We had 32.2 million shares outstanding at quarter end.

Turning to guidance, we are updating our 2026 outlook for research and development revenue of approximately $13 million compared to our previous guidance of approximately $18.5 million. The update primarily reflects two things. First, the MTech program is complete with no additional contracting opportunities in 2026. Second, the timing of development activities reimbursed under the BARDA contract moves revenue into future periods within the existing contract term.

This guidance does not include revenue from Deep View AI device sales or any new or extended government awards. As we move towards the first placement Vince described, we are directing our share of cost-share development towards the features we expect to carry the most commercial value. Our commercial model pairs device purchases or leases with recurring software and service revenue under agreements with a minimum three-year term. We believe commercial sales can generate higher margins than our development work and that this benefit will grow as our installed base expands and recurring revenue builds.

With that, I’ll ask the operator to open the floor to questions.

OPERATOR

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question today is from John Vandermosten with Zacks. Please go ahead.

John Vandermosten (Analyst)

Great. Vince, David, good afternoon to you guys. Let me start out with a question on the New Technology Add-on Payment. I want to understand a little bit better how that works and what the incentive might be. I think you said it was applicable to hospitals. Are there any other entities that are able to access that? And does it depend on what kind of patients they have? And then also are burn centers included? And do you have any sense of the magnitude of that payment that those providers might receive?

Vincent Capone (Chief Executive Officer)

John, thanks for the question. So we were quite pleased to get our NTAP application in in October. We had actually pushed for reimbursement related to this New Technology Add-on Payment for hospital systems. It’s not for physicians primarily, it’s just for the hospital system. And we had asked for a reimbursement code to be at the $2,750 per patient. I think we feel pretty confident about where that NTAP coding is going to resolve, but we don’t have an answer yet.

It will be resolved in August of 2027 with a two- to three-year term beginning in October of 2027 for the application of that additional payment. That is in addition to any payments that the hospital system can generate with the use of the device, both inpatient and then again if they see them in the emergency department on an outpatient basis.

John Vandermosten (Analyst)

Okay. And, you know, as you commercialize and your team is getting out there, what are some of the hurdles that you’re facing in terms of getting these first deployments and getting the Deep View AI into place?

Vincent Capone (Chief Executive Officer)

So, I mean, that’s a great question here. And, you know, some of the things that we try to talk about is, you know, we’re trying to do not ordinary things here, but we’re trying to do extraordinary things. And I think this technology is extraordinary in our ability to sit there and actually diagnose burn tissue. I think for us it’s an opportunity to see how we can work through the procurement process at burn centers and hospital systems. It’s been kind of what we had anticipated to get through the procurement process.

We’re offering centers opportunities to either purchase or lease the device over a minimum three-year period, and I think we’ve seen some traction with both of those approaches. For us, it’s an opportunity to offer the best economic modeling to profitable centers and for community-focused centers. So regardless of your socioeconomic status, or regardless of where you’re located in the United States, whether it’s an urban or a rural setting, you will get the same access to outstanding, you know, groundbreaking technology across the United States. So ultimately, to answer your question, we’ve seen the procurement opportunities that present themselves for us.

It’s just a matter of us working through that at each of the burn centers and the hospital systems to get through that process. And we’ve actually made some good progress, and we continue to see opportunities available to us in 2026.

John Vandermosten (Analyst)

Okay, and you guys have attended a number of medical conferences over the last couple months. You also mentioned that on the call. What are some of the takeaways that you have from that? What are some of the interactions that you’ve had with participants there?

Vincent Capone (Chief Executive Officer)

I think the reception’s been pretty good. I mean, we’ve been able to benefit from both our burn studies, both the burn treatment study and then the burn validation study, as we now kick off our TNT—triage and treatment—study. So we have relationships with a number of different burn centers across the country. I think the relationship and the reception has been excellent for us. It’s just a matter of us now working through those centers and getting the devices deployed there so we can map out a strategic and a national footprint of sales, both to support patient outcomes and also to support mass casualty or countermeasure preparedness.

John Vandermosten (Analyst)

So do you feel like those have been good lead generators, the conferences, the three or four conferences you’ve had?

Vincent Capone (Chief Executive Officer)

Yeah, yeah. I mean, I think they have been helpful for us. You know, we have relationships across a number of different burn centers, so there are few that don’t know of us or don’t know of the technology. So in those instances they have been good opportunities for us to expand awareness. It’s also been good for us to actually roll the devices out at those conferences so they could see it firsthand.

John Vandermosten (Analyst)

Okay, great. Thank you, Vince.

OPERATOR

Appreciate the answers. The next question is from Luke Horton with Northland Securities. Please go ahead.

Luke Horton (Analyst)

Hey guys, thanks for taking the questions. Just curious on pricing and how the current pricing model—or what you’re kind of marketing the Deep View system under—like how you came to that price point given that it’s a new-to-market system or device, and is there pricing power beyond this, or any sort of add-ons that you expect to adopt further down the road?

Vincent Capone (Chief Executive Officer)

Luke, thanks for the question. So pricing for the device is actually something that we’ve focused on well in advance of us obtaining our FDA approval in late May. And we’ve engaged with leading Deloitte Consulting—frankly, a leading consulting firm—to help us with our pricing analysis. We’ve also been in discussions with a number of different burn centers to get KOL opinions on pricing models. So we feel like our pricing strategy is in line with adoption both at leading burn centers and other smaller burn centers across the country.

We think that there is a compelling economic modeling here, both with length-of-stay reductions and with the work we’ve done on the reimbursement side, both for the hospital systems and with payments to physicians. If we can migrate our CPT3 coding down to a CPT1, there’s strong economic models here for the adoption of the device, not to mention for the use of the device in some of the clinical study work.

Luke Horton (Analyst)

Got it. That’s helpful. And then just on the gross margin pulling back, I know that’s the kind of BARDA cost-share structure that’s kicking in or that kicked in this quarter. Is that just for these initial 30 devices, or I guess how would gross margins look a little further out?

David McGuire (Chief Financial Officer)

Yeah. Hi Luke, this is David. So it’s two different components. The devices would refer to our commercialization sales. The current quarter gross margin is reflective of our reimbursement—I’m sorry, reimbursement of our R&D expenses—and so that is what is under the cost share from BARDA. And so as it relates to this current follow-on phase of that BARDA contract, we will continue to have that cost share in place. And so this quarter would be indicative of our continual gross margins under that contract.

And again, any commercial sales will be additive and incremental to improve our gross margins going forward.

Luke Horton (Analyst)

Okay, got it. And then I guess who are you targeting, or I guess kind of the go-to-market sales strategy? Like, are these clinicians, doctors? Is it the—like who in the trauma centers or burn centers or emergency rooms are you having these discussions with? Or is there, like, distributor partnerships? Or I guess just what’s kind of the approach and who are you kind of having those meetings with?

Vincent Capone (Chief Executive Officer)

Yeah, Luke, I think for us—this is Vince—for us, again, I mean, we’ve been involved with a number of different burn centers and a number of their leading burn physicians who are really key opinion leaders in the industry. They’re really the ones that are championing our procurement process through many of the centers. In some centers that have no experience with the Deep View device, it’s actually been quite rewarding for us to connect with their emergency room physicians and/or their burn physicians and actually sit down and do a live demonstration in their hospital to help advance the procurement process.

So, in simplest terms, it’s a relationship, kind of KOL-driven initial approach for a number of different burn centers. And for the ones that have limited experience with us, it’s been really an opportunity for us to kind of leverage that through an on-site demonstration with many of the leaders in the burn community there and/or the trauma center to drive that for us as we work through procurement.

Luke Horton (Analyst)

Okay, got it. Well, thanks for taking the questions, guys.

OPERATOR

This concludes our question and answer session. I would now like to turn the conference back over to Vince Capone for any closing remarks.

Vincent Capone (Chief Executive Officer)

So in closing, I’d like to just note that we have actually made meaningful progress on the commercial side of migrating our business from a research shop to a commercial enterprise. But we also recognize that building a commercial enterprise requires consistent execution over time. Our focus is on developing for our initial customers, learning from each deployment, and establishing the processes that can support a broader adoption across the United States.

I’d like to thank our employees, our clinical collaborators, and our government partners for their continued work, and to our shareholders for their continued support. And as we make this transition, we are extremely excited about what lies ahead for us, and we look forward to keeping you all apprised of the progress that we make. Thank you all for your attention and interest in our company. Have a nice evening.

OPERATOR

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.