Carlsmed Q1 Earnings Call Highlights

Key Points

• Revenue and outlook: Q1 revenue was $16.1 million, up 58% year‑over‑year, and management raised full‑year 2026 guidance to $72–$77 million (about 48% growth at the midpoint); gross margin was ~77% while GAAP net loss widened to $8.7 million, with $97.1 million in cash and $15.6 million drawn on a $50 million facility.
• Commercial momentum and operating efficiency: Surgeon users grew >60% YoY and utilization is accelerating, while production lead time fell >30% to six business days, driving more than 200 basis points of margin expansion; aprevo cervical is in its first full commercial quarter and cervical is expected to contribute a high single‑digit to low double‑digit share of revenue in 2026.
• Clinical and reimbursement developments: Peer‑reviewed data reported a 74% reduction in two‑year revision rates for aprevo versus historical stock implants (mechanical complication revisions 4.3% vs 16.6%), and CMS proposals would map aprevo lumbar to three new MS‑DRG codes potentially at a premium while aprevo cervical retains a NTAP of up to $21,125 (renewed preliminarily for FY2027).

Carlsmed NASDAQ: CARL reported first-quarter 2026 revenue of $16.1 million, up 58% from $10.2 million in the prior-year period, as the company highlighted continued surgeon adoption of its patient-specific “aprevo” spine fusion procedures and ongoing efficiency gains in its digital production system.

Commercial momentum driven by surgeon adoption

Chairman and CEO Mike Cordonnier said the company saw “strong adoption” across its lumbar and cervical personalized surgery offerings in the quarter and believes the aprevo platform is positioned to “transform spine surgery.” Cordonnier attributed growth to medical education efforts, clinical outcomes data, and expansion in the company’s surgeon base.

Operationally, Cordonnier said Carlsmed reduced production lead time “by more than 30% to six business days” and delivered “more than 200 basis points of margin expansion year-over-year.” He also said the company’s surgeon user base grew more than 60% year-over-year, with notable engagement from early-career and post-fellowship surgeons.

In response to a question on utilization trends, Cordonnier said surgeon enthusiasm continued to “accelerate into the year” following strong new surgeon additions exiting 2025. He added that utilization has increased, particularly among surgeons who have moved beyond the initial trial phase and into broader adoption.

Clinical data updates and product pipeline

Cordonnier pointed to peer-reviewed data published in January in Global Spine Journal that he said demonstrated a 74% reduction in surgery revision rates at two years for complex adult spinal deformity patients receiving Carlsmed’s aprevo personalized interbody implants compared with previously published revision data for a similar cohort using conventional stock implants.

According to Cordonnier, the revision rate due to mechanical complications was 4.3% for aprevo-treated patients versus 16.6% for patients with stock devices. He said the reductions were driven by decreases in complications such as rod fractures and proximal junctional kyphosis.

Carlsmed also discussed pipeline progress. Cordonnier said the company completed the first aprevo bilateral lumbar fusion procedure in February and is conducting a limited market evaluation, with a full commercial launch targeted for the fourth quarter of 2026.

On the cervical side, Cordonnier said the first quarter marked Carlsmed’s first full quarter commercially in the market for aprevo cervical fusion, which launched in December 2025. He said the company has trained more than 20% of its surgeon users on the cervical platform. In Q&A, Cordonnier said the cervical business is tracking with expectations for a “high single digit, low double digit percent contribution of revenue” for the year.

The company also announced its CORRA cervical plating system, which Cordonnier described as the debut of Carlsmed’s patient-specific fixation portfolio for anterior cervical discectomy and fusion procedures. He said the first procedure using CORRA was performed in February 2026 at the University of California, San Francisco, and the company remains on track for a Q4 launch following a limited market evaluation.

Reimbursement discussion focuses on CMS proposal

Cordonnier highlighted reimbursement developments for both lumbar and cervical procedures. He said the aprevo lumbar platform is currently covered under 11 different MS-DRG codes, and “the majority” of procedures are reassigned to the three elevated major complication or comorbidity MS-DRG codes.

He also discussed the Centers for Medicare & Medicaid Services’ FY 2027 proposed inpatient prospective payment system rule published April 10. Under the proposal, Cordonnier said all aprevo lumbar spine fusion procedures would map to one of three new MS-DRG codes—523, 524, or 525—“at a premium to traditional spine fusion procedures,” if finalized as proposed. He noted the rule is preliminary and said the final rule is expected ahead of an effective date of Oct. 1, 2026.

In Q&A, Cordonnier described the benefit primarily as improved access and simplified coding rather than new coverage. “We have full coverage today,” he said, adding that the proposal could remove ambiguity for hospitals and allow them to code procedures “as they normally would” with more certainty around MS-DRG mapping.

For cervical procedures, Cordonnier said CMS granted a new technology add-on payment in October 2025 of up to $21,125 in incremental hospital reimbursement for aprevo cervical for a three-year period. He added that CMS renewed the payment for FY 2027 in the preliminary rule.

Financial results: margin expansion and higher operating expenses

Chief Financial Officer Leo Greenstein said first-quarter revenue growth was driven by expansion in surgeon users and increased unit volume, with average revenue per procedure “substantially consistent” year-over-year. Gross margin was 77.1%, up from 74.9% in Q1 2025, which Greenstein attributed to stable average revenue per procedure and efficiency improvements in the digital production system.

Operating expenses rose to $21.7 million from $13.4 million a year earlier. Greenstein broke out the increases across functions:

• R&D increased to $5.2 million from $3.2 million, primarily from higher personnel costs tied to product development priorities and AI-enabled initiatives for digital surgical planning.
• Sales and marketing increased to $10.3 million from $6.7 million, driven by increased sales headcount, higher variable commissions with revenue growth, and increased marketing spending.
• General and administrative increased to $6.2 million from $3.5 million, reflecting personnel additions and higher professional services and legal fees, including compliance and public company-related costs.

Carlsmed reported a GAAP net loss of $8.7 million, compared with a $5.7 million net loss in the prior-year quarter. Adjusted EBITDA, excluding stock-based compensation, was negative $7.5 million versus negative $5.5 million in Q1 2025. Greenstein said the company anticipates improvement in adjusted EBITDA “over the coming years” as revenue grows and operating leverage improves.

Balance sheet and updated 2026 revenue outlook

Greenstein said cash and investments totaled $97.1 million as of March 31, 2026. The company had $15.6 million outstanding under a $50 million debt facility that matures in October 2030, and Greenstein said there are “no current plans” to make additional draws, though he described the facility as low-cost, non-dilutive standby capital. Total liabilities were $26.5 million, including the debt balance.

Cash used in operating activities was $13.0 million in the quarter, compared with $8.2 million in the first quarter of 2025.

For full-year 2026, Greenstein said Carlsmed is raising its revenue guidance to $72 million to $77 million, which he said represents 48% growth at the midpoint over full-year 2025. He reiterated expectations for gross margins in the mid-to-high 70s and said the company anticipates operating expense leverage in coming quarters with an expected revenue ramp in aprevo lumbar and aprevo cervical.

On product mix and pricing, Greenstein told analysts the average revenue per procedure was consistent year-over-year, but he expects average revenue per procedure to be in the “mid to high 20s” over time as cervical becomes a larger portion of revenue, noting cervical carries lower average revenue per procedure than lumbar. He also said the company expects gross margins to remain in the mid-to-high 70s even as cervical grows to a high single-digit to low double-digit mix, with lower cervical gross margin headwinds offset by production efficiencies in lumbar.

About Carlsmed NASDAQ: CARL

We are a commercial-stage medical technology company pioneering AI-enabled personalized spine surgery solutions with a mission to improve outcomes and decrease the cost of healthcare for spine surgery and beyond. We are focused on becoming the standard of care for spine fusion surgery. The aprevo Technology Platform consists of artificial intelligence (“AI”)-enabled software solutions, and interbody implants that we custom design for each patient's unique pathology and vertebral bone topography, and single-use surgical instruments (the “aprevo Technology Platform”).

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