Carlsmed (NASDAQ:CARL) released first-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.

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Summary

Carlsmed reported strong revenue growth of 58% year-over-year to $16.1 million for Q1 2026, driven by the adoption of its personalized spine surgery procedures.

The company experienced a 60% increase in its surgeon user base, enhancing procedural volumes and demonstrating robust clinical outcomes.

Carlsmed raised its full-year 2026 revenue guidance to between $72 million and $77 million, representing a 48% growth over 2025.

Gross margins improved to 77.1%, attributed to production efficiencies and a stable average revenue per procedure.

Strategic initiatives included the successful launch and adoption of the Aprivo cervical fusion procedure and the development of a personalized cervical plating system.

Notable CMS proposals could provide substantial reimbursement premiums for Aprivo lumbar procedures in the future, potentially enhancing hospital access and procedural adoption.

Management expressed optimism about continued growth, driven by surgeon education, commercial execution, and ongoing product innovation.

Full Transcript

OPERATOR

Ladies and gentlemen, thank you for standing by and welcome to the Carlsmed first quarter 2026 earnings conference call. At this time, all participants are in the listening only mode. After the speaker's presentation, there will be a question and answer session. I would now like to turn the conference over to your first speaker today, Stephanie Zadkovich.

Stephanie Zadkovich (Moderator)

Thank you operator welcome to Carlsmed's first quarter 2026 earnings call. Joining me on today's call are Mike Cordonier, Chairman and Chief Executive Officer, and Leo Greenstein, Chief Financial Officer. Before we begin, I would like to caution that comments made during this call will include forward looking statements within the meaning of the Private Securities Litigation Reform act of 1995. All statements made on this call that do not relate to matters of historical fact should be considered forward looking statements, including statements regarding the market in which Carlsmed operates, trends, expectations and demand for Carlsmed's products expectations with respect to reimbursement statements about the company's clinical data, surgeon adoption and utilization and Carlsmed's expected financial performance and position in the market. Any forward looking statements made during this call, including projections for future performance, is based on management's expectations. As of today, Carlsmed undertakes no obligation to update these statements except as required by applicable law. These statements are neither promises nor guarantees and are subject to known and unknown risks and uncertainties that could cause actual results, performance or achievements to differ materially from those expressed or implied by the forward looking statement. For more detailed information, please review the cautionary notes on the earnings materials accompanying today's presentation as well as Carlsmed's filings with the SEC, particularly the risk factors described in Carlsmed's Annual Report on Form 10K for the year ended December 31, 2025. I encourage you to review all Carlsmed's filings with the SEC concerning these and other matters. Additionally, during today's call, management will discuss certain non GAAP financial measures, including adjusted EBITDA. A reconciliation of these non GAAP financial measures to the most directly comparable GAAP financial measures is included in today's earnings press release. These filings, along with Carlsmed's press release for the first quarter 2026 results are available on Carlsmed's website at www.carlsmed.com under the Investors section and include additional information about Carlsmed's financial results. A recording of today's call will also be available on Carlsmed's website by 5:00pm Pacific Time today. Now I would like to turn the call over to Mike to go over Carlsmed's business highlights.

Mike Cordonier (Chairman and Chief Executive Officer)

Thank you Stephanie and welcome to the team. I would like to welcome everyone on our call today at Carlsmed, our mission is to improve outcomes and decrease the cost of health care for spine surgery and beyond. To achieve this mission, we have pioneered patient specific digital surgery for lumbar and cervical spine fusion procedures. Our vision is to make personalized surgery at scale the standard of care for spine surgery. Our AI enabled digital surgery platform empowers surgeons to partner closely with patients to seamlessly create three dimensional surgical plans and three-dimensional printed spine fusion devices designed to achieve predictable patient outcomes while supporting the surgeon's preferred surgical approach. We then provide post operative outcome analytics to our surgeon users for each procedure through our Aprivo insights as part of the MY Aprivo ecosystem. We believe this personalized outcome driven AI enabled ecosystem approach represents the future standard in medical technology, one that is better for patients, surgeons, hospitals and payers. Importantly, our model is built to scale efficiently. By manufacturing only what is needed for each specific procedure, we avoid the traditional pre built inventory trays of implants and instruments that have long burdened the legacy spine and orthopedics businesses. Instead, we're able to provide patient specific sterile packed implants and instruments specific to each patient just in time for their surgery. This capital light, demand driven approach enables us to scale rapidly while maintaining a relentless focus on patient outcomes. With this vision as our guide, 2026 is off to a great start with solid execution across our business. In the first quarter we saw strong adoption of our lumbar and cervical personalized surgery procedures, reinforcing our view that Aprivo as a platform technology is positioned to transform spine surgery. Our clinical outcome data continues to be robust and our investments in technology continue to drive the scale and productivity needed to make personalized surgery the standard of care for spine fusion procedures. With the peer reviewed data published on reduced reoperations with the Prevost personalized surgery procedures, we continue to execute on our mission to improve outcomes and decrease the cost of healthcare for spine surgery. Turning to the first quarter, we delivered strong revenue of 16.1 million representing growth of 58% over the prior year. Our growth was driven by the continued focus on medical education and compelling clinical outcome data, driving expansion of our surgeon base and increasing procedure volumes. Operationally, we continue to leverage our investments in technology to further drive production efficiencies, reducing lead time by more than 30% to 60% 6 business days in the quarter and delivering more than 200 basis points of margin expansion year over year Our fully integrated digital production system allows us to partner with hospitals, surgeons and patients to seamlessly integrate into clinic and operating room workflows preoperatively, intraoperatively and postoperatively for nearly all indicated patients. Our commercial growth continues to be driven by a surgeon led adoption model and expanding utilization. I'm proud to report that we grew our total surgeon user base by more than 60% year over year, reflective of the rapid clinical adoption of personalized surgery procedures. We continue to drive particularly strong engagement from early career and post fellowship surgeons who are eager to adopt new technology to differentiate their practices and improve outcomes. With our rapidly growing base of surgeon users, we're still in the early innings of market penetration and have long Runway ahead of us. The Aprivo lumbar procedure represents the majority of our business today where we continue to gain traction within the estimated 445,000 lumbar spine fusion procedures performed annually in the U.S. clinical evidence generation continues to support the early adoption of Aprivo by consistently demonstrating improved outcomes for patients compared to stock implants. In January, data published in the Global Spine Journal further validated our personalized spine surgery approach, including evidence demonstrating a 74% reduction in surgery revision rate at 2 years compared to stock devices. This peer reviewed study compared 2 year revision rates among complex adult spinal deformity patients receiving Carlsmed's Aprivo personalized interbody implants with previously published revision data from a similar patient cohort receiving conventional stock implants. Patients treated with Aprivo experienced significantly fewer revisions due to mechanical complications, showing a revision rate of 4.3% in patients treated with the Prevo compared to a revision rate of 16.6% of patients who had stock devices. To put this into perspective, over the past 25 years lumbar fusion technologies have not published data to demonstrate significant reduction in reoperation rates at the standard two year benchmark. In contrast, Aprivo patient specific lumbar procedures have demonstrated clinically meaningful reduction in reoperations driven by significant decreases in key complications like rod fractures and proximal junction kyphosis. Importantly, this improvement is measured against procedures with traditional stock fusion devices used by the most experienced and skilled surgeons. As a further expansion of our prevo lumbar procedure, we announced successful completion of the first Aprivo bilateral lumbar fusion procedure in February. We are seeing great data in our limited market evaluation are on track for our full commercial launch in the fourth quarter of this year. Carlsmed's Aprivo lumbar fusion technology has strong hospital reimbursement from CMS with all aprivo lumbar fusion procedures covered by one of 11 different MS-DRG codes. The majority of apprevo lumbar procedures are reassigned to the three elevated major complication or comorbidity MS-DRG codes. This provides hospitals with superior economic and clinical value to provide access to the Aprivo procedure for patients. On April 10, CMS published the FY27 proposed rule for Inpatient Prospective Payment System. Under this proposed rule, all Aprivo lumbar spine fusion procedures would be reimbursed by one of three new MS-DRG codes 5, 2, 3, 524 or 525 at a premium to traditional spine fusion procedures. If finalized as proposed. We see this development as very positive for patients, surgeons and hospitals to establish and maintain long term access to the prevo lumbar spine fusion procedure. This published rule is preliminary. We anticipate the final rule to be published prior to becoming effective on October 1, 2026. Shifting to cervical the first quarter 2026 represented our first full quarter in market commercially with the Aprivo cervical fusion procedure, which we launched in December of 2025. With an estimated 370,000 cervical fusion procedures performed annually in the US we believe that this additional growth lever can provide additional momentum in our business. As a further extension of the Aprivo platform, cervical and lumbar spine fusion procedures are performed by spine surgery, trained neurosurgeons and orthopedic surgeons alike. Many of the spine surgeons perform both lumbar spine fusion and cervical spine fusion procedures, demonstrating a substantial procedural overlap across spine surgeons. We believe that we can leverage our team to train and onboard many of the surgeons already familiar with the lumbar Aprivo technology platform on the Aprivo cervical platform in the early days of launch. We have already trained more than 20% of our surgeon users on the cervical platform. The Aprivo cervical procedure is designed to address common causes of variable outcomes associated with anterior cervical discectomy and fusion ACDF failure, including subsidence, malalignment and reoperations. The procedure is designed to optimize bone contact surface area to improve load distribution, bone graft loading, preserve end plate strength, reduce subsidence risk and restore or maintain alignment to complement Aprivo cervical and achieve progress against some of these challenges in cervical fusions. Our newly announced CORA cervical Plating system marks the debut of Carlsmed's patient specific fixation portfolio and represents a fully personalized solution for ACDF procedures. The first procedure was performed in February 2026 at the University of California, San Francisco. We are progressing well with the limited market evaluation and are on track for the launch of QORA Cervical Personalized plating system in Q4. Much like the lumbar Aprivo procedure, the cervical Aprivo procedure has a strong inpatient reimbursement profile. In October 2025, the Aprivo Cervical procedure received a new technology add on payment up to an incremental $21,125 hospital reimbursement. This reimbursement program is for a three year period and CMS renewed the NTAP payment for FY27 as anticipated in the publication of the preliminary Looking Ahead, Our strategic focus remains consistent and positions us to continue the durable high quality growth we've demonstrated to date. Within our first area of focus, patient centric innovation, we continue to advance our proprietary personalized surgery platform including AI enabled three-dimensional surgical planning, workflow automation, patient and surgeon specific devices, and single use sterile pack surgical instruments and further procedural integration in the clinic and operating room. As discussed previously, we have demonstrated great early traction with the recent launch of Aprivo cervical and we're collecting early clinical experience with the bilateral posterior prevost procedure and personalized CORA cervical plate fixation. Our product innovation portfolio includes further advancements to drive ease of integration in the surgical workflow and further personalization of spine surgery. Our second area of strategic focus is surgeon education and includes further investments in our medical education team and programs to meet accelerating demand for Aprivo personalized surgery. We continue training new surgeons every month by leveraging success in academic centers to drive peer to peer surgeon education with the thought leaders in personalized spine surgery. We also continue to support education initiatives with upcoming resident and fellow courses in partnership with leading academic institutions. As previously mentioned, we have seen strong uptake with early and mid career surgeons that are adopting digital surgical planning into their practice in their efforts to streamline workflow and improve patient outcomes. These surgeon users will continue to shape the future of spine surgery and this is an ongoing growth driver for Carlsmed that we believe will continue to drive adoption and utilization. Our third area of strategic focus, commercial execution, continues to center on surgeon onboarding, increasing surgeon utilization and expanding access within hospital systems. As we continue to scale, we've expanded our strategic and national accounts efforts to enable local and national access across large hospital systems. Across both lumbar and cervical platforms, Hospitals are recognizing the clinical workflow benefits enabled by the Aprivo ecosystem by providing deeper integration within a surgeon's preoperative and postoperative clinical workflow. We believe that our platform solution can simplify the surgeon's pre op planning, reduce time and complexity of the spine fusion procedure in the or, and enhance surgeon's ability to provide predictable outcomes to spine fusion patients. Lastly, we will continue to generate clinical data to support medical education and market adoption of our transformative personalized surgery technology platform. We believe that personalized surgery at scale is a new standard of care for spine fusion and are committed to providing solutions to patients, surgeons and hospitals that reduce revision surgeries, improve outcomes and reduce the cost of healthcare. We're just getting started. Look forward to providing further updates on our rapid market adoption. With that, I'll turn it over to Leo who will review our financial performance.

Leo Greenstein (Chief Financial Officer)

Thank you Mike and good afternoon everyone. I'll begin today with first quarter 2026 profit and loss highlights Revenue for the first quarter of 2026 was 16.1 million compared to 10.2 million in Q1 2025, representing 58% growth year over year. This growth was driven by the continued expansion of our total surgeon user base and increased unit volume sales of Aprivo as our average revenue per procedure remained substantially consistent between periods. Gross margins were 77.1% in the first quarter of 2026 compared to 74.9% in the first quarter of 2025. This 220 basis point increase was driven by our stable average revenue per prevo procedure combined with efficiency improvements in our digital production system. With investments made over the past few quarters, this now allows us to deliver the Aprivo kit to the operating room within six business days of surgeon approval of the digital surgical plan. This lead time and the associated production capacity it enables will support our continued scale. Total operating expenses were 21.7 million in the first quarter of 2026 compared to 13.4 million in the first quarter of 2025. Of this amount, R&D expenses were 5.2 million this quarter compared with 3.2 million in Q1 2025. This increase was primarily due to higher personnel costs to advance our patient centric product development priorities and AI enabled initiatives for our digital surgical planning processes. Sales and Marketing expenses were 10.3 million this quarter compared with 6.7 million in Q1 2025. This was substantially driven by increased sales headcount to drive our commercial execution strategy and variable commissions to our sales team and independent sales agents. With our revenue growth as well as increased marketing spend, general and Administrative expenses were 6.2 million this quarter compared with 3.5 million in Q1 2025. The increase was driven by personnel additions and professional services costs and legal fees for customary corporate and intellectual property matters as well as compliance and other public company related costs. Our GAAP net loss was 8.7 million this quarter compared to net loss of 5.7 million in the first quarter of 2025. EBITDA adjusted for stock based compensation was a negative 7.5 million this quarter compared to a negative 5.5 million during the first quarter of 2025. We anticipate continued improvement in adjusted EBITDA over the coming years driven by expected revenue growth and leverage across our expense base as we scale expanding contribution margin dollars enabled by our Capital Light Digital first business model provide a clearly modeled pathway towards cash flow breakeven Moving to our balance sheet, Our cash and Investments as of March 31, 2026 totaled 97.1 million. The outstanding principal under our 50 million debt facility remains at 15.6 million. While we have no current plans to make additional draws ahead of its October 2030 maturity, this facility provides low cost non dilutive standby capital and supports general corporate flexibility. Total liabilities as of March 31, 2026 were 26.5 million, of which 15.6 million relates to this debt facility. Our cash used in operating activities was $13 million during the quarter compared to $8.2 million in the first quarter of 2025. Unlike traditional medtech businesses that require capital investments in stock, implant and instrument sets, our business scales. Without these barriers to profitability as a pure play personalized surgery company, our working capital could be more strategically deployed towards continued commercial investments to drive significant growth delivery of our operational excellence priorities in digital production and continued R and D pipeline development for our business value and growth. Turning to guidance, we are raising our full year 2026 revenue range to be between 72 million and 77 million revenue representing 48% growth at the midpoint over full year 2025. As we progress towards profitability, we continue to expect gross margins to remain in the mid to high 70s and anticipate driving operating expense leverage in the coming quarters with expected revenue ramp in aprivo, lumbar and cervical. With that, I'll turn the call over to the operator for questions.

OPERATOR

Thank you. At this time we will conduct the question and answers session. As a reminder to ask a question, you will need to press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q and A roster. Our first question comes from David Roman of Goldman Sachs. The line is now open.

Mike Cordonier (Chairman and Chief Executive Officer)

Thank you. Good afternoon everybody. I wanted just to start a little bit on what you're seeing from a surgeon utilization perspective, we did see strong surgeon at the end of 2025. Can you maybe give us some perspective on how what you're seeing year to date, qualitatively, and then how you're seeing utilization across both new and existing surgeons trend in the quarter and how you're thinking about the balance of the year? Feel really good about our surgeon enthusiasm for the Aprivo platform. And as we exited Q4 with the really strong new surgeon ads, we saw that continue to accelerate into the year. And as we discussed in the call, year over year, we've added about 60% increase to our surgeon users. With that, we continue to see ongoing increase in utilization, particularly those surgeon users that have gone through the initial trial process and continue through that adoption. So. So with that, we really feel really good about the utilization and surgeon user ads that we've had.

David Roman (Equity Analyst)

Got it. And then I think, Leo, in your prepared remarks, you mentioned that average selling prices for Aprivo were roughly flat year over year. If I remember correctly, cervical procedures do come with lower ASP than lumbar. So can you maybe corroborate that point? And then is it just that cervical isn't big enough as a percentage of total to move average ASPs? And how should we think about the weighted average selling price as cervical becomes a larger percentage of total going forward? Yeah, David, this is Leo. So you know our Q1 average revenue per procedures were consistent over the prior year quarter in Q4 as well as Q1. So as we think about the future here and the combination of cervical and lumbar, we're projecting our average revenue per procedure to be in the mid to high 20s as cervical takes a greater proportion of revenue over time and the average revenue per procedure for cervical is less than lumbar. So to answer your question directly, though, the contribution margin and the ability for us to further scale our business on a single Prevost platform that serves both the lumbar and cervical indications with largely the same paw point, provides the operating leverage in our business to continue to scale and do so efficiently. Got it. Thanks so much.

OPERATOR

Thank you. One moment for our next question. Our next question comes from Travis Steed from Bank of America. Your line is now open.

Aid none

Hi, this is Aid none for Travis. So, first quarter, first full quarter of the cervical launch. Can you talk about the puts and takes and how that's progressing? Like you said, 20% of your surgeon users are now trained on that. What are you seeing from those accounts that have been trained so far. And then are we still expecting kind of high single digit, low double digit revenue contribution from cervical for the year and have a follow up?

Mike Cordonier (Chairman and Chief Executive Officer)

Thank you. Yeah, we feel really good about the traction that Cervicals received here in the first quarter of launch. And as we as reported as you mentioned, you know, about 20% of our total lumbar users are now trained on Cervical and going through the ramp as we see this progression. You know, high single digit, low double digit percent contribution of revenue from Cervical in the total plan for the company. Looks about right. Great, thank you.

Aid none

And then in the queue I see call out of cost improvements from production fees charged by your contract manufacturer. Can you double click on that and talk about if that's a one time or that's something we can expect to continue going forward?

Leo Greenstein (Chief Financial Officer)

Yes, we've made investments in our digital production system. Holistically that's allowed us to hit that six day lead time that really provided efficiencies in our production process inclusive of those with our contract manufacturer. But the investments made in those earlier quarters going back to Q3 of 2025 now allow us to cut out costs and time importantly out of the system. So what we are currently reporting in that high 70s gross margin we see to be sustainable.

OPERATOR

Thank you. As a reminder to ask a question, you will need to press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our next question comes from Richard Neuwiter from Truist Securities. Richard, your line is now open.

Richard Neuwiter (Equity Analyst)

Hi, thank you for taking the questions. Congrats on the quarter. I wanted to just go to the CMS proposal that just came out. I think you had mentioned a premium and also broader coverage I think in the past. And those are two things that I think could be pretty significant tailwinds for you in 2027, assuming everything goes as proposed into the final rule. So I guess just what percentage would you say of your procedures currently are generally getting reimbursed and covered consistently? And kind of how much would this broaden that coverage swath, if you will. And then just on the premium, I think we did some calculations and we're estimating it could be an incremental 50,000 reimbursement for stock implants on average. Obviously there's a big range in there. I think that's somewhere around $25,000 to $30,000 on average today. Above and beyond or the premium to your traditional stock implants? Is that ballpark kind of the math that you guys have worked Out. Thanks.

Mike Cordonier (Chairman and Chief Executive Officer)

Hi, Rich. Thanks for the questions. Kind of talk about this in two parts. First, the current state of reimbursement for the aprivo lumbar platform. As reported in the script, we currently have 11 different Ms. DRGs that cover the aprivo lumbar platform, all with existing coverage and reimbursement. As noted, a portion of those elevate to a higher paying DRG today with the proposed IPPS rule. It really simplifies the coding and reimbursement that all prevail procedures would map to one of three different Ms. Drgs. And you know, based on your calculations, that seems about how it would look on a national average. And so we agree, we think this is a really great solution that CMS is proposing to give, you know, significant reimbursement to these procedures.

Richard Neuwiter (Equity Analyst)

That's great. And then just what could it do in terms of the, you know, where you're, you're potentially meeting resistance or there's just not great coverage currently. What could this do for you from that standpoint? Is it 50% currently? Is it 80%? Like, just give us a sense as to how this could broaden your coverage and access.

Mike Cordonier (Chairman and Chief Executive Officer)

Yeah, we really look at this as access versus coverage because we have full coverage today. Where we really think this will provide value to hospitals in particular is to remove the ambiguity and actually simplify coding for the aprivo procedure. And so we see this as very beneficial to the hospitals to simplify the process so that they can code procedures as they normally would and know that they'll map to the right Ms. Drg. Okay, that's really helpful.

Richard Neuwiter (Equity Analyst)

If I could squeeze one more in. Just following up to David's question earlier. As cervical increases as a percentage of the mix moving through the year, just. Leo, how should we think of the gross margin impact if revenue per procedure gets impacted the gross margin too? I would imagine so. Just if you could give us anything on the cadence as we move through 26 that you'd want to call out 2Q to 4.2.

Leo Greenstein (Chief Financial Officer)

Thanks. Yeah, so as we mentioned during our prepared remarks earlier, you know, we, we see, you know, gross margins being in the mid to high 70s over, you know, the coming quarters. That factors in, as Mike covered earlier, a high single digit, low double digit mix between lumbar and cervical. So the, you know, the headwinds with the lower gross margin profile of cervical, notwithstanding the tremendous contribution margin it provides and the leverage it provides in our business is going to be offset as we see it, with our efficiencies in digital production for lumbar

Richard Neuwiter (Equity Analyst)

Very helpful. Thank you.

OPERATOR

Thank you. Our last question comes from Ryan Zimmerman from btig. Ryan, your line is now open.

Izzy

Hi, this is Izzy on for Ryan. Thank you for taking the question. And Mike, I heard your comments in all the discussion around the IPPS proposal for 2027, but I was just curious what you have heard in terms of feedback from your hospital customers and surgeons in reaction to the proposal. I know it's going to simplify coverage, but do you expect that there could be some benefit in terms of volumes? It's proposed as written.

Mike Cordonier (Chairman and Chief Executive Officer)

Thanks for the question. You know, it's early days and it is preliminary rule and so, you know, we're really holding off on those discussions until the final rule goes into place. However, this is something that, as mentioned, you know, simplifies coding, simplifies reimbursement and makes a permanent change to the prevost procedure at a higher reimbursement level. So net net, we think this is better for all stakeholders.

Izzy

Appreciate it. Thank you. And then, Leo, I've heard your commentary on guidance, but as we considered contributions flaring in the back half of the year from those new product launches, is there anything that we need to keep in mind in terms of saging on the top line? Thanks for taking the question.

Leo Greenstein (Chief Financial Officer)

Yeah, we see over the coming quarters a prevo lumbar to carry the majority of our revenue and overall contribution. Certainly we're very pleased with the early days here of cervical and the clinical results. Our surgeons are seeing with an indication how neatly it tucks into the aprivo platform and ecosystem. We'll provide additional color as we progress into the quarter, into the subsequent quarters with how we see additional things shaping up for the company's favor to further drive revenue beyond what we previously guided.

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.