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.

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.

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 10Q 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 DeepView 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 DeepView 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 DeepView 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 the 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 DeepView 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 DeepView 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 and Medicaid Services for our deep-use system. If approved, this would provide hospitals with additional Medicare reimbursement for eligible use of the deep-use 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 1st, 2027 with pricing supported by local Medicare administrative contractor pricing. Our CPT-3 coding, we are working to move to a CPT-1 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 DeepView Systems 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 DeepU 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 DeepView AI system. Those presentations address physician accuracy in identifying non-healing burns, as well as the repeatability and reproducibility of the DeepU systems AI analysis. Furthermore, in October, we showcased the DeepU 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 DeepView 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. We wish to continue to support clinicians as they evaluate and introduce DeepView AI in its clinical workflow and to 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.

Thanks, Vince. Before I walk through the numbers, some context on where we are with BARDA. BARDA has supported the development of DeepView 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 phase 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. Barter 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 EmTech handheld 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 heads, 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 an $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 shares 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 30th, 2026, cash was $11.2 million compared to $15.4 million at December 31st, 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 a 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 MSEC 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 in recurring revenue bills. With that, I'll ask the operator to open the floor to questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 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 2. At this time, we will pause momentarily to assemble our roster. Our first question today is from John Vandermosten with Zax. Please go ahead.

Great. Vince, David, good afternoon to you guys. Let me start out with a question on the new technology and 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 our burn centers included. Do you have any sense of kind of the magnitude of that payment that those providers might receive?

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 $2,750 per patient. Thank you for joining us.

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 DPU into place?

So, I mean, that's a great question here. And some of the things that we try to talk about is 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 things. 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 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. Okay.

And you guys have attended a number of medical conferences over the last couple of 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?

I think the reception's been pretty good. I mean, we've... 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 treatment and 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 fantastic. 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.

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

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 a 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.

Okay. Great. Thank you, Vince.

Appreciate the answer.

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

Hey, guys. Thanks for taking the questions. Just curious on kind of pricing and how the current pricing model or what you're kind of marketing the DeepView system under, like how you came to that price point given that it's a 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?

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 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 relentless day 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 CPT-3 coding down to a CPT-1. 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.

Got it. That's helpful. And then just on the 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?

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 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.

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 distributed partnerships or I guess just what's kind of the approach and who are you kind of having those meetings with?

Yeah, Luke, I think for us, this is Vince, for us, again, I mean we've been involved with 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 their deep view device, it's actually been Thank you for having me. Thank you for having me. and 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.

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

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

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 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.

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