Carlsmed Q2 Earnings Call Highlights

Key Points

• Carlsmed’s Q2 revenue rose 57% year over year to $18.9 million, driven by higher adoption of its aprevo lumbar platform and newer cervical offering. The surgeon user base grew more than 60%.
• The company raised its 2026 revenue outlook to $74 million-$78 million, while noting that a new Medicare reimbursement structure is expected to support hospital access primarily from 2027 onward.
• Gross margin improved to 76.8%, but higher research, sales and administrative costs widened the GAAP net loss to $10.5 million. Carlsmed also expects fourth-quarter launches for its aprevo Bilateral system and Corra Cervical Plating System.

Carlsmed NASDAQ: CARL reported second-quarter 2026 revenue of $18.9 million, up 57% from $12.1 million a year earlier, as growth in its aprevo lumbar platform and contributions from its newer cervical offering lifted procedure volumes.

Chairman and Chief Executive Officer Mike Cordonnier said the company’s surgeon user base increased by more than 60% year over year. He attributed growth to new surgeon onboarding, increased utilization among existing customers and demand for aprevo in higher-acuity lumbar and cervical fusion procedures.

“We had a really great quarter and really great year with new surgeon adds,” Cordonnier said during the company’s earnings call. He added that some surgeons were adopting both lumbar and cervical offerings for the first time, contributing to an acceleration in new users.

Revenue Outlook Raised

Carlsmed raised its full-year 2026 revenue outlook to $74 million to $78 million. At the midpoint, the forecast represents growth of more than 50% over 2025, according to management.

Chief Financial Officer Leo Greenstein said the revised outlook reflects volume growth in the first half and expectations for continued growth in both aprevo lumbar and aprevo Cervical during the second half. The company said it was not incorporating incremental revenue from a recent Medicare reimbursement rule into its guidance, viewing that change primarily as a catalyst for 2027 and beyond.

Greenstein described the outlook as prudent. While first-half revenue grew 57% year over year, the midpoint of the full-year guidance implies 45% growth in the second half compared with the same period of 2025, he said.

CMS Rule Could Expand Hospital Access

Management highlighted a final rule issued by the Centers for Medicare & Medicaid Services on July 31. The FY 2027 Inpatient Prospective Payment System rule creates three new Medicare Severity Diagnosis-Related Group, or MS-DRG, codes for aprevo lumbar procedures—523, 524 and 525—replacing 11 previously applicable codes.

The reimbursement structure becomes effective Oct. 1, 2026. Cordonnier said the changes simplify coding and enhance hospital reimbursement for aprevo lumbar procedures, which the company believes could broaden hospital and patient access.

However, management said it does not expect the rule to have a material impact on second-half 2026 results. Cordonnier said the company sees the policy as beneficial for hospital partnerships and procedure access over the long term, while Greenstein said hospitals will need time to absorb the new rule and complete coverage processes.

Carlsmed expects growth from the opportunity to be driven mainly by procedure volume rather than changes in average revenue per procedure. Greenstein said lumbar average revenue per procedure was about $29,000 in the second quarter, while cervical average revenue per procedure was about $18,000, and the company expects those levels to persist in coming quarters.

Margins Improved as Expenses Rose

Second-quarter gross margin expanded 340 basis points year over year to 76.8%, from 73.4%. Greenstein said lower contract-manufacturer costs per unit and efficiency improvements in the company’s digital production system more than offset product-mix effects.

Carlsmed expects to sustain gross margins in the high 70% range during the second half. Looking further ahead, Greenstein said the company sees an opportunity to reach the higher end of the 70% range and potentially the low 80% range over the next 24 months through further production-system improvements.

Operating expenses rose to $25.6 million from $15.4 million a year earlier. Research and development spending increased to $6 million, driven primarily by personnel costs related to product-development priorities and artificial-intelligence initiatives. Sales and marketing expense rose to $11.9 million as the company added sales personnel, expanded targeted marketing and paid higher variable commissions tied to revenue growth.

General and administrative expense increased to $7.6 million from $3.3 million, reflecting personnel additions, professional services, legal fees and compliance costs.

The company reported a GAAP net loss of $10.5 million, compared with a $6.8 million loss in the prior-year quarter. Adjusted EBITDA was negative $8.6 million, compared with negative $6.2 million a year earlier.

As of June 30, Carlsmed had $89.3 million in cash and investments and total liabilities of $34 million. Its liabilities included $15.6 million of outstanding principal under a $50 million debt facility maturing in October 2030. Cash used in operating activities was $7.4 million during the quarter, compared with $8.2 million a year earlier.

Product Pipeline and Clinical Programs

Lumbar procedures accounted for about 90% of second-quarter revenue, while cervical procedures represented about 10%. Management expects cervical revenue to reach roughly 11% to 12% of revenue in the second half as adoption continues to build.

The company remains on track for a fourth-quarter commercial launch of its aprevo Bilateral system, a lumbar offering being evaluated in a limited market release. Cordonnier said early surgeon feedback has pointed to the system’s preoperative 3D planning and visualization capabilities, as well as integration with posterior bilateral surgical techniques.

Carlsmed also plans a fourth-quarter commercial launch for its Corra Cervical Plating System. The company is currently conducting a limited market evaluation and expects the full launch to coincide with a fall medical society meeting. Cordonnier said Corra could provide a modest increase in cervical average revenue per procedure.

Separately, Carlsmed received institutional review board approval for its aprevo Cervical Effectiveness, or ACE, multicenter registry. The company expects enrollment to begin in the fourth quarter, with more than a dozen sites and over 300 patients anticipated. The registry is designed to collect real-world evidence at six-month, one-year and two-year intervals.

Cordonnier also cited a retrospective cohort study published in the Global Spine Journal that found a 74% reduction in reoperations among adult spinal deformity patients treated with aprevo personalized lumbar implants.

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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