Carlsmed Q1 2026 Earnings Call - 58% Revenue Growth and CMS Reimbursement Tailwinds

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 a 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 Zhadkevich.

Stephanie Zhadkevich, Investor Relations, Carlsmed: Thank you, operator. Welcome to Carlsmed’s First Quarter 2026 earnings call. Joining me on today’s call are Mike Cordonnier, 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 10-K for the year ended December 31st, 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 5:00 P.M. Pacific time today. Now, I would like to turn the call over to Mike to go over Carlsmed’s business highlights.

Mike Cordonnier, Chairman and Chief Executive Officer, Carlsmed: 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 healthcare 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 3-dimensional surgical plans and 3-D printed spine fusion devices designed to achieve predictable patient outcomes while supporting the surgeon’s preferred surgical approach. We then provide postoperative outcome analytics to our surgeon users for each procedure through our aprevo intelligence as part of the myaprevo 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 aprevo 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 aprevo 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 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 aprevo 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 aprevo 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 rates 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 aprevo personalized interbody implants with previously published revision data from a similar patient cohort receiving conventional stock implants.

Patients treated with aprevo experienced significantly fewer revisions due to mechanical complications, showing a revision rate of 4.3% in patients treated with aprevo 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 2-year benchmark. In contrast, aprevo patient-specific lumbar procedures have demonstrated clinically meaningful reduction in reoperations, driven by significant decreases in key complications like rod fractures and proximal junctional 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 aprevo lumbar procedure, we announced successful completion of the first aprevo bilateral lumbar fusion procedure in February.

We are seeing great data in our limited market evaluation and are on track for our full commercial launch in the fourth quarter of this year. Carlsmed’s aprevo lumbar fusion technology has strong hospital reimbursement from CMS, with all aprevo lumbar fusion procedures covered by one of 11 different MS-DRG codes. The majority of aprevo lumbar procedures are reassigned to the 3 elevated major complication or comorbidity MS-DRG codes. This provides hospitals with superior economic and clinical value to provide access to the aprevo procedure for patients. On April 10th, CMS published the FY 2027 proposed rule for inpatient prospective payment system. Under this proposed rule, all aprevo lumbar spine fusion procedures would be reimbursed by one of 3 new MS-DRG codes, 523, 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 aprevo 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 aprevo cervical fusion procedure, which we launched in December of 2025. With an estimated 370,000 cervical fusion procedures performed annually in the U.S., we believe that this additional growth lever can provide additional momentum in our business as a further extension of the aprevo 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 aprevo technology platform on the aprevo cervical platform. In the early days of launch, we have already trained more than 20% of our surgeon users on the cervical platform. The aprevo 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 aprevo cervical and achieve progress against some of these challenges in cervical fusions, our newly announced corra 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 corra cervical personalized plating system in Q4. Much like the lumbar aprevo procedure, the cervical aprevo procedure has a strong inpatient reimbursement profile. In October 2025, the aprevo cervical procedure received a new technology add-on payment up to an incremental $21,125 hospital reimbursement. This reimbursement program is for a 3-year period, and CMS renewed the NTAP payment for FY 2027 as anticipated in the publication of the preliminary rule.

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 3D surgical planning, workflow automation, patient and surgeon-specific devices, and single-use sterile path 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 aprevo cervical, and we’re collecting early clinical experience with the bilateral posterior aprevo procedure and personalized corra 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 aprevo 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 aprevo 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 surgeons’ 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 and 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, Carlsmed: Thank you, Mike, and good afternoon, everyone. I’ll begin today with first quarter 2026 P&L 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 aprevo, 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 aprevo 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 aprevo 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 med tech 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&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 seventies and anticipate driving operating expense leverage in the coming quarters with expected revenue ramp in aprevo lumbar and aprevo 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 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. Our first question comes from David Roman of Goldman Sachs. The line is now open.

David Roman, Analyst, Goldman Sachs: 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 ads exiting 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?

Mike Cordonnier, Chairman and Chief Executive Officer, Carlsmed: Feel really good about our surgeon enthusiasm for the aprevo platform. As we exited Q4, with the really strong new surgeon adds, we saw that continue to accelerate into the year. As we, 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 continued through that adoption. With that, we’re really feel really good about the utilization and surgeon user adds that we’ve had.

David Roman, Analyst, Goldman Sachs: Got it. Got it. Then I think, Leo, in your prepared remark, you mentioned that average selling prices for aprevo are roughly flat year-over-year. If I remember correctly, cervical procedures do come with lower ASP than lumbar. Can you maybe corroborate that point? Then is it just that cervical isn’t big enough as a percentage of total to move average ASPs? How should we think about the weighted average selling price as cervical becomes a larger percentage of total going forward?

Leo Greenstein, Chief Financial Officer, Carlsmed: Yeah, David, this is Leo. You know, our Q1 average revenue per procedures were consistent over the prior year quarter in Q4 as well as the Q1. As we think about the future here and the combination of cervical and lumbar, we’re projecting, you know, our average revenue per procedure to be in the mid to high 20s as cervical takes a greater proportion of revenue over time. The average revenue per procedure for cervical is less than lumbar. To answer your question directly, though, the contribution margin and the ability for us to further scale our business on a single aprevo platform that serves both the lumbar and cervical indications with, you know, largely the same pull point provides, you know, the operating leverage in our business to continue to scale and do so efficiently.

David Roman, Analyst, Goldman Sachs: 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.

Aidan, Analyst (on behalf of Travis Steed), Bank of America: Hi, this is Aidan for Travis. First full quarter of the cervical launch. Can you talk about kind of the puts and takes on how that’s progressing? I think 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? Are we still expecting kind of high single digit, low double digit revenue contribution from cervical for the year? I have a follow-up. Thank you.

Mike Cordonnier, Chairman and Chief Executive Officer, Carlsmed: Yeah. We feel really good about the traction that cervicals received here in the first quarter of launch. As reported, as you mentioned, about 20% of our total lumbar users are now trained on cervical and going through the ramp. As we see, this progression, high single digit, low double digit % contribution of revenue from cervical in the total, the total plan for the company looks about right.

Aidan, Analyst (on behalf of Travis Steed), Bank of America: Great. Thank you. Then in the Q, I see a 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 is that something we can expect to continue going forward? Thank you.

Leo Greenstein, Chief Financial Officer, Carlsmed: Yes. We’ve made investments in our digital production system holistically that’s allowed us to hit that 6-day lead time. That really provided, you know, efficiencies in our production process, inclusive of those with our contract manufacturer. 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. What we are currently, you know, 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 one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our next question comes from Richard Newitter from Truist Securities. Richard, your line is now open.

Richard Newitter, Analyst, Truist Securities: Hi, thank you for taking the questions. Congrats on the quarter. I wanted to just go to the CMS proposal that just came out. You know, I think you had mentioned a premium and also broader coverage. I think in the past, and those are 2 things that I think could be pretty significant tailwinds for you in 2027, assuming everything goes as proposed into the final rule. I guess just on what percentage would you say of your procedures currently are generally getting reimbursed and covered consistently? Kinda how much would this broaden that coverage swath, if you will?

Just on the, on the premium, I think we did some calculations, and we’re estimating it could be, you know, an incremental $50,000 reimbursement for stock implants, you know, on average. Obviously, there’s a big range in there. I think that’s somewhere around $25,000-$30,000 on average today above and beyond or the premium to your traditional stock implants. Is that ballpark kinda the math that you guys have worked out? Thanks.

Mike Cordonnier, Chairman and Chief Executive Officer, Carlsmed: Hi, Rich. Thanks for the questions. kinda talk about this in 2 parts. First, the current state of reimbursement for the aprevo lumbar platform. As reported in the script, we currently have 11 different MS-DRGs that cover the aprevo 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 aprevo procedures would map to 1 of 3 different MS-DRGs. Based on your calculations, that seems about how how it would look on a national average. We agree. We think this is a really great solution that CMS is proposing to give, you know, significant reimbursement to these procedures.

Richard Newitter, Analyst, Truist Securities: That’s great. Then just what could it do in terms of the, you know, where 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 Cordonnier, Chairman and Chief Executive Officer, Carlsmed: 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 aprevo procedure. 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.

Richard Newitter, Analyst, Truist Securities: Okay, that’s really helpful. If I could squeeze one more in, just following up to David’s question earlier. As cervical increases as a percentage of the mix, you know, moving through the year, just how Leo, how should we think of the gross margin impact, if revenue per procedure gets impacted, you know, the gross margin too, I would imagine? Just, if you could give us anything on the cadence as we move through 2026 that you’d wanna call out Q2 to 4Q? Thanks.

Leo Greenstein, Chief Financial Officer, Carlsmed: As we mentioned during our prepared remarks earlier, you know, 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. The, you know, the headwinds with the lower gross margin profile of cervical, notwithstanding, you know, the tremendous contribution margin it provides and the leverage it provides in our business, is gonna be offset as we see it with, you know, our efficiencies in digital production for lumbar.

Richard Newitter, Analyst, Truist Securities: Very helpful. Thank you.

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

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

Mike Cordonnier, Chairman and Chief Executive Officer, Carlsmed: Thanks for the question. You know, it’s early days, and it is preliminary rule. 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 aprevo procedure at a higher reimbursement level. Net-net, we think this is better for all stakeholders.

Izzy, Analyst (on behalf of Ryan Zimmerman), BTIG: Appreciate it. Thank you. Leo, I’ve heard your commentary on guidance, as we consider contributions layering in 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 phasing on the top line? Thanks for taking the question.

Leo Greenstein, Chief Financial Officer, Carlsmed: We see over, you know, in the coming quarters aprevo lumbar to, you know, carry the majority of our revenue and overall contribution. Certainly, we’re very pleased with the early days here of aprevo cervical and the, you know, the clinical results our surgeons are seeing with that indication, how neatly it tucks into the aprevo platform and ecosystem. We’ll provide additional color as we progress into the quarter and, you know, subsequent quarters with how we see, you know, additional things shaping up for the company’s favor to further drive, you know, revenue beyond what, you know, we previously guided.

Operator: This concludes the question and answer session. Thank you for your participation in today’s conference. This does conclude the program, and you may now disconnect.