Q2 2026 Carlsmed Inc Earnings Call

August 5, 2026

Operator: Ladies and gentlemen, thank you for standing by, welcome to the Carlsmed Q2 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' 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, Investor Relations. Please go ahead, Stephanie.

Speaker #1: 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 Zakavich, Investor Relations.

Speaker #1: Please go ahead, Stephanie.

Speaker #2: Thank you, operator. Welcome to Carlsmed's second quarter 2026 earnings call. Joining me today are Mike Cordogne, Chairman and Chief Executive Officer, and Leo Greensbank, Chief Financial Officer. Please note that comments made during this call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Stephanie Zhadkevich: Thank you, operator. Welcome to Carlsmed's Q2 2026 Earnings Call. Joining me today are Mike Cordonnier, Chairman and Chief Executive Officer, 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, growth prospects, 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.

Speaker #2: All statements made on this call that do not officer. 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 Before we begin, I would like to reimbursement, statements about the company's clinical data, surgeon adoption, and utilization, and CARLSMED's expected financial performance growth prospects, and position in the market.

Speaker #2: Any forward-looking statements made during this call, including projections for future performance, are based on management's expectations as of today. CARLSMED undertakes no obligation to update these statements except as required by applicable law.

Stephanie Zhadkevich: 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 statements. 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 31 December 2025. I encourage you to review all Carlsmed's filings with the SEC concerning these and other matters. These filings, along with Carlsmed's press release for the Q2 2026 results, are available on Carlsmed's website at www.carlsmed.com under the Investors section and includes additional information about Carlsmed's financial results.

Speaker #2: 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 statements.

Speaker #2: For more detailed information, please review the cautionary notes in 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 31, 2025.

Speaker #2: I encourage you to review all CARLSMED's filings with the SEC concerning these and other matters. These filings, along with CARLSMED's press release for the second quarter 2026 results, are available on CARLSMED's website at www.carlsmed.com under the Investor section, and include additional information about CARLSMED's financial results.

Speaker #2: 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.

Stephanie Zhadkevich: 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. A recording of today's call will be available on Carlsmed's website by 5:00 PM Pacific Time today. I would like to turn the call over to Mike to go over Carlsmed's business highlights.

Speaker #2: A recording of today's call will be available on the CARLSMED 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.

Speaker #3: Thank you, Stephanie, and welcome, everyone. At CARLSMED, our mission is to improve outcomes and decrease the cost of healthcare for spine surgery and beyond.

Mike Cordonnier: Thank you, Stephanie, and welcome everyone. At Carlsmed, our mission is to improve outcomes and decrease the cost of healthcare for spine surgery and beyond. We accomplish this through our proprietary data and AI-enabled surgeon in the loop personalized surgery platform. The published clinical evidence behind aprevo, which demonstrates meaningful reductions in reoperations, continues to drive strong surgeon adoption, procedure volume, and revenue growth, while our inventory-light, digital-first model lets us scale that growth efficiently. We believe Carlsmed represents the future standard in medical technology, one that is better for patients, surgeons, hospitals, and payers. In Q2, we delivered strong revenue of USD 18.9 million, representing 57% growth over the prior year, driven by rapidly onboarding new surgeons, deepening utilization within our existing customer base, and building upon our recent launch of aprevo Cervical.

Speaker #3: We accomplish this through our proprietary data and AI-enabled surgeon-in-the-loop personalized surgery platform. The published clinical evidence behind APREVO, which demonstrates meaningful reductions in reoperations, continues to drive strong surgeon adoption procedure volume and revenue growth while our inventory-light digital-first model lets us scale that growth efficiently.

Speaker #3: We believe CARLSMED represents the future standard in medical technology—one that is better for patients, surgeons, hospitals, and payers. In the second quarter, we delivered strong revenue of $18.9 million, representing 57% growth over the prior year.

Speaker #3: Driven by rapidly onboarding new surgeons, deepening utilization within our existing customer base, and building upon our recent launch of APREVO cervical. In the second quarter, our surgeon user base grew by more than 60% year over year compared to the second quarter of 2025.

Mike Cordonnier: In Q2, our surgeon user base grew by more than 60% year over year compared to Q2 2025. We saw an increase in new surgeon users and utilization driven especially by demand for aprevo within higher acuity procedures that are predominantly inpatient procedures for lumbar fusion and cervical fusion. Reflective of this strong growth in H1 2026 and our expectations for H2 of the year, we are raising our FY 2026 revenue range to between USD 74 million and USD 78 million revenue, representing over 50% growth at the midpoint over FY 2025. In a meaningful recent development, CMS issued the FY27 Inpatient Prospective Payment System, or IPPS, final rule on 31 July 2026.

Speaker #3: We saw an increase in new surgeon users and utilization driven especially by demand for APREVO within higher acuity procedures that are predominantly inpatient procedures for lumbar fusion and cervical fusion.

Speaker #3: Reflective of this strong growth in the first half of 2026 and our expectations for the second half of the year, we are raising our full-year 2026 revenue range to between $74 million and $78 million revenue—representing over 50% growth at the midpoint over full-year 2025.

Speaker #3: In a meaningful recent development, CMS issued the FY27 inpatient prospective payment system, or IPPPS, final roll on July 31, 2026. The final roll creates three new MSDRG codes applicable to APREVO lumbar procedures, 523, 524, and 525, replacing the 11 MSDRG codes that are currently applicable to APREVO lumbar procedures.

Mike Cordonnier: The final rule creates three new MS-DRG codes applicable to aprevo lumbar procedures 523, 524, and 525, replacing the 11 MS-DRG codes that are currently applicable to aprevo lumbar procedures. This new reimbursement structure, which will go into effect on 1 October 2026, simplifies coding and enhances reimbursement for hospitals for the aprevo lumbar procedure. We appreciate CMS's continued partnership to implement this important policy, which we believe will expand hospital and patient access to the aprevo procedure. We are committed to training the next generation of surgeons through expansion of our world-class medical education program for 3D preoperative planning. Our residents and fellows program continue to expand as we partner with leading teaching institutions to provide hands-on experience with aprevo. We have seen strong traction from early and mid-career surgeons who are eager to adopt 3D planning and personalized surgery in their practice to drive predictable outcomes.

Speaker #3: This new reimbursement structure—which will go into effect on October 1, 2026—simplifies coding and enhances reimbursement for hospitals for the APREVO lumbar procedure. We appreciate CMS's continued partnership to implement this important policy, which we believe will expand hospital and patient access to the APREVO procedure.

Speaker #3: We are committed to training the next generation of surgeons through expansion of our world-class medical education program for 3D preoperative planning. Our residents and fellows program continue to expand as we partner with leading teaching institutions to provide hands-on experience with APREVO.

Speaker #3: We have seen strong traction from early- and mid-career surgeons who are eager to adopt 3D planning and personalized surgery in their practice to drive predictable outcomes.

Speaker #3: Our marquee medical education program, the APREVO Power Forum, will take place this weekend, and we anticipate more than double the surgeon attendees compared to our 2025 program.

Mike Cordonnier: Our marquee medical education program, the aprevo Power Forum, will take place this weekend, and we anticipate more than double the surgeon attendees compared to our 2025 program. Our faculty will be providing the latest data and advanced preoperative planning techniques for our aprevo Cervical and lumbar procedures optimized for minimally invasive or open surgical techniques for patients with complex deformity and degenerative disc disease conditions. Operationally, we continue to demonstrate the efficiencies of our capital-light, digital-first business model. Our proprietary digital platform enables us to provide patient-specific and surgeon-specific preoperative 3D plans, personalized implants, and single-use instruments directly to the hospital. Without the significant capital investments required by traditional medtech companies like surgical trays and stock implants, we can focus on patient-centric innovation in partnership with surgeons and hospitals, and execute on our mission to improve patient outcomes.

Speaker #3: Our faculty will be providing the latest data and advanced preoperative planning techniques for our APREVO cervical and lumbar procedures, optimized for minimally invasive or open surgical techniques, for patients with complex deformity and degenerative disc disease conditions.

Speaker #3: Operationally, we continue to demonstrate the efficiencies of our capital light digital-first business model. Our proprietary digital platform enables us to provide patient-specific and surgeon-specific preoperative 3D plans, personalized implants, and single-use instruments directly to the hospital.

Speaker #3: Without the significant capital investments required by traditional medtech companies, like surgical trays and stock implants, we can focus on patient-centric innovations and partnership with surgeons and hospitals and execute on our mission to improve patient outcomes.

Speaker #3: With our deep focus on technology and operational excellence, we can consistently deliver APREVO surgical kits to the hospital in about a week, after surgeon approval of the plan.

Mike Cordonnier: With our deep focus on technology and operational excellence, we can consistently deliver aprevo surgical kits to the hospital in about a week after surgeon approval of the plan. With our continued advancements in technology, process, and supply chain, we have achieved approximately 340 basis points of gross margin expansion year-over-year. In Q2, lumbar fusion procedures represented approximately 90% of our revenue, and cervical fusion procedures represented approximately 10%. While we continue to grow the lumbar franchise rapidly, we believe that we are still in the early innings with an estimated 445,000 lumbar fusion procedures performed every year in the US. Our growing base of surgeon users and hospital customers continue to gain experience with the aprevo platform and have responded very positively to the growing body of clinical and economic benefits, showing reduced reoperation rates when using aprevo.

Speaker #3: With our continued advancements in technology process and supply chain, we have achieved approximately $340 basis points of gross margin expansion year over year. In the second quarter, lumbar fusion procedures represented approximately 90% of our revenue and cervical fusion procedures represented approximately 10%.

Speaker #3: While we continue to grow the lumbar franchise rapidly, we believe that we are still in the early innings with an estimated $445,000 lumbar fusion procedures performed every year in the U.S.

Speaker #3: Our growing base of surgeon users and hospital customers continues to gain experience with the APREVO platform and has responded very positively to the growing body of clinical and economic benefits, showing reduced reoperation rates when using APREVO.

Speaker #3: Most recently, peer-reviewed data from a retrospective cohort study published in the Global Spine Journal showed a 74% reduction in reoperations in adult spinal deformity patients treated with APREVO personalized lumbar implants.

Mike Cordonnier: Most recently, peer-reviewed data from a retrospective cohort study published in the Global Spine Journal showed a 74% reduction in reoperations in adult spinal deformity patients treated with aprevo-personalized lumbar implants. This represents one of the most significant clinically supportive advancements in patient outcomes in lumbar fusion technology in the past 25 years. We continue to expand the lumbar franchise with the limited market evaluation of the aprevo bilateral system. Early feedback from surgeon users suggests that this procedure can achieve targeted disc and regional alignment with double the graft area contact. Adoption has been strong so far, with surgeon users highlighting the benefits of preoperative 3D digital planning and visualization and the seamless integration into their posterior bilateral intraoperative technique. This expansion of the lumbar procedure addresses an estimated 30,000 procedures in the US annually. We remain on track for a Q4 commercial launch.

Speaker #3: This represents one of the most significant clinically supportive advancements in patient outcomes in lumbar fusion technology in the past 25 years. We continue to expand the lumbar franchise with a limited market evaluation of the APREVO bilateral system.

Speaker #3: Early feedback from surgeon users suggests that this procedure can achieve targeted disc and regional alignment with double the graft area contact. Adoption has been strong so far, with surgeon users highlighting the benefits of preoperative 3D digital planning and visualization and the seamless integration into their posterior bilateral intraoperative technique.

Speaker #3: This expansion of the lumbar procedure addresses an estimated 30,000 procedures in the U.S. annually. We remain on track for a Q4 commercial launch. In our APREVO cervical business, we're excited to have completed our second full quarter of commercialization, with excellent reception in the surgeon community from existing APREVO surgeon users and those new to APREVO.

Mike Cordonnier: In our aprevo Cervical business, we're excited to have completed our Q2 of commercialization to excellent reception in the surgeon community from existing aprevo surgeon users and those new to aprevo. With an estimated 370,000 cervical fusion procedures performed annually in the US, we're already driving impressive momentum of aprevo Cervical within this market as a further extension of the aprevo platform. Early feedback from surgeons indicate that aprevo Cervical procedure provides precise implant fit with maximized endplate coverage, which we believe has the potential to benefit patients with low vertebral bone density, such as osteoporosis and osteopenia, conditions that impact nearly 80% of patients. With our commitment to ongoing clinical data collection and publications, we're pleased to announce that we have recently received IRB approval for our aprevo Cervical Effectiveness, or ACE, multi-center registry.

Speaker #3: With an estimated $370,000 cervical fusion procedures performed annually in the U.S., we're already driving impressive momentum of APREVO cervical within this market as a further extension of the APREVO platform.

Speaker #3: Early feedback from surgeons indicates that APREVO cervical procedure provides precise implant fit with maximized implant coverage, which we believe has the potential to benefit patients with low vertebral bone density, such as osteoporosis and osteopenia.

Speaker #3: Conditions that impact nearly 80% of patients. With our commitment to ongoing clinical data collection and publications, we're pleased to announce that we have recently received IRB APREVO for our APREVO cervical effectiveness, or ACE, multi-center registry.

Speaker #3: Our multi-center ACE registry will collect real-world evidence from patients treated with APREVO Cervical at 6-month, 1-year, and 2-year time points. We're on track to commence enrollment in Q4 and anticipate more than a dozen sites, with over 300 total patients enrolled.

Mike Cordonnier: Our multi-center ACE registry will collect real-world evidence from patients treated with aprevo Cervical at 6 months, 1 year, and 2-year time points. We're on track to commence enrollment in Q4 and anticipate more than a dozen sites with 300-plus total patients enrolled. To expand our cervical franchise, we're progressing on track for our corra cervical plating system commercial launch, which is expected to occur by the end of this year. This corra cervical plating platform is engineered to work seamlessly with the aprevo 3D planning and 3D interbody fusion implants to maintain a personalized, precise cervical alignment through the fusion process. With the full launch of corra personalized ACDF plates, surgeons will have the flexibility to perform a personalized cervical procedure with standalone fixation, personalized multi-level fixation, and segmental fixation.

Speaker #3: To expand our cervical franchise, we're progressing on track for our CORA cervical plating system commercial launch. Which is expected to occur by the end of this year.

Speaker #3: This CORA cervical plating platform is engineered to work seamlessly with the APREVO 3D planning and 3D interbody fusion implants to maintain a personalized precise cervical alignment through the fusion process.

Speaker #3: With the full launch of CORA personalized ACDF plates, surgeons will have the flexibility to perform a personalized cervical procedure with standalone fixation, personalized multi-level fixation, and segmental fixation.

Speaker #3: With approximately 60% of cervical ACDF procedures in the U.S. utilizing fixation plates, there's significant potential for strong adoption of the APREVO plus CORA personalized cervical procedure.

Mike Cordonnier: With approximately 60% of cervical ACDF procedures in the US utilizing fixation plates, there's a significant potential for strong adoption of the aprevo plus corra personalized cervical procedure. Early feedback from our limited market evaluation suggests that corra personalized plating system may better preserve aprevo-planned alignment than off-the-shelf stock cervical plates. We remain on track for the launch of the corra cervical personalized plating system in Q4. Carlsmed's long-term strategy remains focused on the same pillars that have driven durable, high-quality growth to date. Patient-centric innovation remains at the core of our platform. We continue to advance our proprietary personalized surgery technology through AI-enabled surgeon-in-the-loop 3D surgical planning, seamless workflow integration, and devices specifically built for each patient and surgeon. Our clinical data collection and world-class medical education continue to drive the engine behind everything we do.

Speaker #3: Early feedback from our limited market evaluation suggests that CORA personalized plating system may better preserve APREVO planned alignment than off-the-shelf stock cervical plates. We remain on track for the launch of the CORA cervical personalized plating system in Q4.

Speaker #3: CARLSMED's long-term strategy remains focused on the same pillars that have driven durable, high-quality growth to date. Patient-centric innovation remains at the core of our platform.

Speaker #3: We continue to advance our proprietary personalized surgery technology through AI-enabled surgeon-in-the-loop 3D surgical planning, seamless workflow integration, and device-specifically-built for each patient and surgeon.

Speaker #3: Our clinical data collection and world-class medical education continue to drive the engine behind everything we do. On the commercial side, we're relentlessly executing new surgeon onboarding, deepening utilization among existing surgeons, and broadening access across hospital systems.

Mike Cordonnier: On the commercial side, we're relentlessly executing new surgeon onboarding, deepening utilization among existing surgeons, and broadening access across hospital systems. Demand for aprevo personalized surgery is growing fast, so we're continuing to expand our medical education programs, including new courses for residents and fellows in leading academic institutions, as well as advanced courses for key opinion leaders. Winning over early and mid-career surgeons, the ones actively looking to modernize their practice with digital planning, remains central to our long-term growth story. We continue to educate and grow our partner network to expand access to hospitals and surgeons nationwide. Central to these activities is strong clinical evidence generation. Everything we do is grounded in data because credibility with surgeons, health systems, payers, and patients is earned with proof. We believe our AI-enabled personalized surgery platform has the potential to become the new standard of care for spine fusion and beyond.

Speaker #3: Demand for APREVO personalized surgery is growing fast, so we're continuing to expand our medical education programs including new courses for residents and fellows in leading academic institutions, as well as advanced courses for key opinion leaders.

Speaker #3: Winning over early and mid-career surgeons, the ones actively looking to modernize their practice with digital planning, remains central to our long-term growth story. We continue to educate and grow our partner network to expand access to hospitals and surgeons nationwide.

Speaker #3: Central to these activities is strong clinical evidence generation. Everything we do is grounded in data because credibility with surgeons, health systems, payers, and patients is earned with proof.

Speaker #3: We believe our AI-enabled personalized surgery platform has the potential to become the new standard of care for spine fusion and beyond. I'm enthusiastic about our progress towards making APREVO personalized surgery the new standard of care as we work tirelessly to expand access to hospitals, surgeons, and, most importantly, patients in need of this procedure at a rapid pace.

Mike Cordonnier: I'm enthusiastic about our progress towards making aprevo personalized surgery the new standard of care as we work tirelessly to expand access to hospitals, surgeons, and, most importantly, patients in need of this procedure at a rapid pace. With that, I'll turn it over to Leo, who will review our financial performance.

Speaker #3: With that, I'll turn it over to Leo, who will review our financial performance.

Speaker #2: Thank you, Mike, and good afternoon, everyone. Revenue for the second quarter of 2026 was $18.9 million, compared to $12.1 million in Q2, 2025. Representing 57% growth year over year.

Leo Greenstein: Thank you, Mike, and good afternoon, everyone. Revenue for the second quarter of 2026 was $18.9 million compared to $12.1 million in Q2 2025, representing 57% growth year over year. This growth was driven by continued market share gains of the aprevo Lumbar platform with our expanding surgeon user base as well as strong contributions from our newly launched aprevo Cervical platform. Average revenue per procedure in lumbar and cervical has remained consistent over the past few quarters. Unit volume growth continues to drive results. Gross margins were 76.8% in the second quarter of 2026 compared to 73.4% in the second quarter of 2025.

Speaker #2: This growth was driven by continued market share gains of the APREVO lumbar platform, with our expanding surgeon user base as well as strong contributions from our newly launched APREVO cervical platform.

Speaker #2: Average revenue per procedure in lumbar and cervical has remained consistent over the past few quarters, so unit volume growth continues to drive results. Gross margins were 76.8% in the second quarter of 2026, compared to 73.4% in the second quarter of 2025.

Speaker #2: Gross margin expanded 340 basis points year over year, as decreased contract manufacturer costs on a per unit basis and continued efficiency improvements in our APREVO digital production system more than offset the impact of product sales mix.

Leo Greenstein: Gross margin expanded 340 basis points year over year as decreased contract manufacturer costs on a per unit basis and continued efficiency improvements in our aprevo digital production system more than offset the impact of product sales mix. Total operating expenses were $25.6 million in the second quarter of 2026 compared to $15.4 million in the second quarter of 2025. R&D expenses were $6 million this quarter compared with $4.2 million in Q2 2025. This increase was primarily due to higher personnel costs for the advancement of our patient-centric product development priorities and AI initiatives within the aprevo platform. Sales and marketing expenses were $11.9 million this quarter compared with $7.9 million in Q2 2025.

Speaker #2: Total operating expenses were $25.6 million in the second quarter of 2026, compared to 15.4 million in the second quarter of 2025. R&D expenses were $6 million this quarter, compared with $4.2 million in Q2, 2025.

Speaker #2: This increase was primarily due to higher personnel costs for the advancement of our patient-centric product development priorities and AI initiatives within the Aprevo platform.

Speaker #2: Sales and marketing expenses were $11.9 million this quarter, compared with $7.9 million in Q2, 2025. This was driven by increased sales headcount to drive our commercial execution strategy increased targeted marketing investments for the ongoing expansion of our surgeon user base and variable commissions to our sales team and independent sales agents as part of our revenue growth.

Leo Greenstein: This was driven by increased sales headcount to drive our commercial execution strategy, increased targeted marketing investments for the ongoing expansion of our surgeon user base, and variable commissions to our sales team and independent sales agents as part of our revenue growth. General and administrative expenses were $7.6 million this quarter compared with $3.3 million in Q2 2025. The increase was primarily driven by personnel additions and professional services costs and legal fees to support corporate operations, company compliance programs, and intellectual property and other ordinary course legal matters. Our GAAP net loss was $10.5 million this quarter compared to net loss of $6.8 million in the second quarter of 2025. Adjusted EBITDA was -$8.6 million this quarter compared to -$6.2 million during the second quarter of 2025.

Speaker #2: General and administrative expenses were $7.6 million this quarter, compared with $3.3 million in Q2, 2025. The increase was primarily driven by personnel additions and professional services costs and legal fees to support corporate operations company compliance programs and intellectual property and other ordinary course legal matters.

Speaker #2: Our gap net loss was $10.5 million this quarter, compared to net loss of $6.8 million in the second quarter of 2025. Adjusted EBITDA was negative $8.6 million this quarter, compared to negative $6.2 million during the second quarter of 2025.

Speaker #2: Over the coming quarters, we anticipate that our capitalized digital-first business model will enable contribution margin dollars to grow meaningfully faster than our fixed-cost base.

Leo Greenstein: Over the coming quarters, we anticipate that our capital-light, digital-first business model will enable contribution margin dollars to grow meaningfully faster than our fixed cost base. Our modeled ramp of revenue growth, gross margins in the high 70s, and operating expense leverage underpins future improvement in adjusted EBITDA and provides a visible pathway towards cash flow breakeven with our current capital resources. Turning to our balance sheet. As of 30 June 2026, cash and investments totaled $89.3 million. Total liabilities were $34 million, with $15.6 million relating to outstanding principal under our $50 million debt facility that matures in October 2030 and provides non-dilutive standby capital to support general corporate flexibility. Our cash used in operating activities was $7.4 million during the quarter compared to $8.2 million in Q2 2025.

Speaker #2: Our modeled ramp of revenue growth, gross margins in the high 70s, and operating expense leverage underpins future improvement in adjusted EBITDA and provides a visible pathway towards cash flow break-even with our current capital resources.

Speaker #2: Turning to our balance sheet, as of June 30, 2026, cash and investments totaled $89.3 million. Total liabilities were $34 million, with $15.6 million relating to outstanding principal under our $50 million debt facility that matures in October 2030 and provides non-dilutive standby capital to support general corporate flexibility.

Speaker #2: Our cash used in operating activities was $7.4 million during the quarter, compared to $8.2 million in the second quarter of 2025. Unlike traditional medtech businesses that require heavy capital investments in stock implant and instrument sets, our business can scale efficiently and effectively without it.

Mike Cordonnier: Unlike traditional medtech businesses that require heavy capital investments in stock, implant, and instrument sets, our business can scale efficiently and effectively without it. As an AI-enabled personalized surgery company, the focus of our capital deployment is for the advancements in our aprevo platform technology and continued product innovation, revenue ramp initiatives, and digital production processes that will support highly efficient business scale. Turning to guidance, we are raising our full year 2026 revenue range to between $74 million and $78 million, representing over 50% growth at the midpoint over full year 2025. This is reflective of the strong volume growth that we've seen in H1 2026 and our expectations for H2 of the year for both aprevo lumbar and cervical.

Speaker #2: As an AI-enabled personalized surgery company, the focus of our capital deployment is for the advancements in our APREVO platform technology and continued product innovation revenue ramp initiatives and digital production processes that will support highly efficient business scale.

Speaker #2: Turning to guidance, we are raising our full year 2026 revenue range to between $74 million and $78 million revenue, representing over 50% growth at the midpoint over full year 2025.

Speaker #2: This is reflective of the strong volume growth that we've seen in the first half of 2026, and our expectations for the second half of the year for both APREVO lumbar and cervical.

Speaker #2: Our expected catalyst in the second half includes: the FY27 IPPS final roll going into effect on October 1, and anticipated uplift for our overall APREVO lumbar volumes and the planned fourth quarter commercial launches of our APREVO lumbar bilateral system and CORA cervical plating system.

Mike Cordonnier: Our expected catalysts in H2 include the FY27 IPPS final rule going into effect on 1 October, an anticipated uplift for our overall aprevo lumbar volumes, and the planned Q4 commercial launches of our aprevo lumbar bilateral system and corra cervical plating system. During H2 2026, we anticipate sustaining gross margins in the high 70s with durable efficiencies in our digital production system from earlier investments, as well as fixed cost absorption over an increasing production base with our sales growth. With that, I'll turn the call over to the operator for questions.

Speaker #2: During the second half of 2026, we anticipate sustaining gross margins in the high 70s, with durable efficiencies in our digital production system from earlier investments.

Speaker #2: As well as fixed-cost absorption over an increasing production base with our sales growth. 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 answer 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&A roster. Also, please note we're allowing 1 question and 1 follow-up. Our first question comes from Matthew O'Brien at Piper Sandler.

Speaker #1: Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press *11 on your telephone.

Speaker #1: 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&A roster.

Speaker #1: Also, please note, we're allowing one question and one follow-up. Our first question comes from Matthew O'Brien at Piper Sandler.

Matthew O'Brien: Great. Thanks for taking the questions. Maybe Leo, just talking about the guide in the back half, it's good to see you bumping it up by more than a beat here in Q2, but it does still imply a little bit of a decel H2 versus H1. I'm just wondering, is there anything that you're building in there? I don't know if just there's a little bit of concern that maybe surgical volumes could slow in the back half just with some of this ACA and Medicaid discussion, or if there's anything specific to call out there, or if you're just trying to be conservative as a newer public company. I do have a follow-up.

Speaker #3: Great. Thanks for taking the question. Maybe Leo just talking about the guide in the back half. It's good to see you bumping it up by more than a beat here in Q2, but it does still imply a little bit of a decel second half versus first half.

Speaker #3: So I'm just wondering, is there anything that you're building in there? I don't know if just there's a little bit of concern that maybe surgical volumes could slow in the back half just with some of this ACA and Medicaid discussion, or if there's anything specific to call out there, or if you're just trying to be conservative as a newer public company.

Speaker #3: And then I do have a follow-up.

Leo Greenstein: Hey, Matt. Thanks for the question. We remain highly confident in our growth, both in the near and long term. As you suggested, this does reflect our continued approach of providing prudent guidance. As Mike pointed out, we had 57% revenue growth in H1 2026 relative to H1 2025. The midpoint of our guidance implies a 45% level of growth over H2 2025. We remain increasingly bullish on the prospects of our business and the catalysts that we see year coming up in H2 2026 that will drive continued growth and adoption of the aprevo platform in 2027.

Speaker #4: Hey, Matt. Thanks for the question. Yeah, we remain highly confident in our growth, both in the near and long term. And as you suggested, this does reflect our continued approach of providing proven guidance.

Speaker #4: As Mike pointed out, we had 57% revenue growth in the first half of '26 relative to the first half of '25. And the midpoint of our guidance implies a 45% level of growth over the second half of '25.

Speaker #4: So we remain increasingly bullish on the prospects of our business and the catalyst that we see here coming up in the second half of '26 that will drive continued growth and adoption of the APREVO platform in 2027.

Speaker #3: Got it. Appreciate that. And then, Mike, I mean, I could ask a million questions reimbursement, the new products, etc., but the new surge in number, obviously, we don't get it anymore, but it looks like it's pretty close to an all-time high for CARLSMED.

Matthew O'Brien: Got it. Appreciate that. Mike, I could ask a million questions, reimbursement, the new products, et cetera, but the new surgeon number, obviously we don't get it anymore, but it looks like it's pretty close to an all-time high for Carlsmed. I'm just curious if you're seeing because of the cervical platform. What potentially could happen to that interest as you layer in these reimbursement benefits. Thank you.

Speaker #3: And I'm just curious if you're seeing. Because of the cervical platform. And then what potentially could happen to that interest as you layer in these reimbursement benefits?

Speaker #3: Thank you.

Speaker #4: Yeah. Thanks, Matt. We've seen we had a really great quarter and really great year with new surge in ads. And as mentioned, we developed a cervical platform really on the heels of strong interest from existing APREVO lumbar users.

Mike Cordonnier: Thanks, Matt. We had a really great quarter and really great year with new surgeon adds. As mentioned, we developed the cervical platform really on the heels of strong interest from existing aprevo lumbar users. What we've seen trend and year to date as well as played out in this quarter is we're getting new surgeon users that are not just adopting lumbar, but also adopting cervical for the first time. We have seen an acceleration in new surgeon users, and that gives us a lot of confidence in our ongoing growth as we grow both the lumbar franchise and the cervical franchise.

Speaker #4: And what we've seen trend and year-to-date, as well as played out in this quarter, is we're getting new surge in users that are not just adopting lumbar, but also adopting cervical for the first time.

Speaker #4: And so we have seen an acceleration and new surge in users. And that gives us a lot of confidence in our ongoing growth as we grow both the lumbar franchise and the cervical franchise.

Speaker #3: Got it. Thank you.

Matthew O'Brien: Got it. Thank you.

Speaker #4: Thanks, Matt.

Mike Cordonnier: Thanks, Matt.

Speaker #1: Our next question comes from Travis Feed at Bank of America.

Operator: Our next question comes from Travis Steed at Bank of America.

Speaker #3: Hi, this is Aiden for Travis. I know you mentioned the DRG being a catalyst in the second half, but to zoom in, how much are you baking in as a benefit?

[Analyst] (Bank of America): Hi, this is Aidan on for Travis. I know you mentioned the DRG being a catalyst in H2, I guess to zoom in, how much are you baking in as a benefit, and how should we think about the cadence in H2? Is there a potential that they push procedures into Q4, just waiting for that DRG bump? What do you think about that, what do you think you're going to see in H2?

Speaker #3: And how should we think about the cadence in the second half? Is there a potential that they push procedures in the forecue just waiting for that DRG bump?

Speaker #3: What do you think about that, and what do you think you're going to see in the second half?

Mike Cordonnier: Aidan, thanks for the question. As we think about this, we do see this new CMS ruling as materially beneficial to hospitals for the long term. As you know, Q3 tends to be a bit of variability in procedure volume. While we don't anticipate this recent ruling from Medicare to have any material impact on our strong business in H2 of the year. We see that this new ruling as well as the catalysts in the product pipeline that we have, being really beneficial in 2027 and beyond as we continue to scale our business, as we continue to increase our hospital access to this procedure.

Speaker #4: Aiden, thanks for the question. As we think about this, we do see this new CMS rolling as materially beneficial to hospitals. For the long term, as you know, Q3 tends to be a bit of variability in procedure volume.

Speaker #4: While we don't anticipate this recent ruling from Medicare to have any material impact on second half of the year, we see that this new ruling, as well as the catalyst and the product pipeline that we have, being really beneficial in 2027 and beyond as we continue to scale our business, as we continue to increase our hospital access to this procedure.

[Analyst] (Bank of America): Got it. I guess when we think about 2027 and beyond, when you approach this in terms of driving growth, is this more of a pricing opportunity, a volume opportunity, or are you going to approach both of those?

Speaker #3: Got it. And I guess, when we think about 2027 and beyond, when you approach this in terms of driving growth, is this more of a pricing opportunity?

Speaker #3: A volume opportunity? Or are you going to approach both of those?

Speaker #4: Yeah. We anticipate maintaining our average revenue per procedure largely where it’s at, and really looking at this opportunity to increase our partnerships with hospitals and accelerate access to the hospital.

Mike Cordonnier: Yeah. We anticipate maintaining our average revenue per procedure largely where it's at, and really looking at this opportunity to increase our partnerships with hospitals and accelerating access to the hospitals. Net procedure volume growth versus growth through ARP.

Speaker #4: So net-net procedure volume growth versus growth through ARP.

[Analyst] (Bank of America): Great. Thank you.

Speaker #3: Great. Thank you.

Operator: Our next question comes from Richard Newitter at Truist Securities.

Speaker #1: Our next question comes from Richard Newwitter at Truist Securities.

Richard Newitter: Hi, thanks for taking the question. Maybe just to follow up on the cadence question. I'm sorry if you may have mentioned this and I missed it. The consensus as it was standing today in Q3, heading in would imply a sequential down tick versus Q2. I guess, you didn't see that last year. In fact, it stepped up. Is that the right way to think about it? With respect to what may or may not be reflected in terms of any kind of volume pickup or any kind of tailwind later this year from the reimbursement, how should we think of the top end of the range? Does the top end of your guidance range assume anything there, or would that be in addition to that? Maybe just talk to us about what would get you to the top end of the range. Thanks.

Speaker #5: Hi. Thanks for taking the question. Just maybe just to follow up on the cadence question. I'm sorry if you may have answered this and I missed it.

Speaker #5: The consensus as it was standing today in 3Q heading in would imply a sequential downtick versus 2Q. I guess you didn't see that last year.

Speaker #5: In fact, it stepped up. Is that the right way to think about it? And then, with respect to what may or may not be reflected in terms of any kind of volume pickup or any kind of tailwind later this year from the reimbursement, how should we think of the top end of the range?

Speaker #5: Does the top end of your guidance range assume anything there, or would that be in addition to that? And then maybe just talk to us about what would get you to the top end of the range.

Speaker #5: Thanks.

Speaker #3: Hey, Rich. This is Leo. So when we think about guidance, as I covered, we want to make sure that we have the ability here to continue to achieve the parameters that we've set out.

Leo Greenstein: Hey, Rich. This is Leo. When we think about guidance, as I covered, we want to make sure that we have the ability here to continue to achieve the parameters that we've set out and certainly to overachieve in terms of hitting the higher end of that guidance. The model guidance that most recently that we've provided here is reflective of current state. We are not necessarily baking in incremental revenue from the IPPS ruling that we see largely being a tailwind into 2027 as our hospital customers absorb this latest rule. It eventually will accelerate as we see it, the VAC committee process to give us expanded coverage within new hospital systems and certainly deepened penetration within our existing surgeon base.

Speaker #3: And certainly to overachieve in terms of hitting the higher end of that guidance. The model guidance that most recently that we've provided here is reflective of current state.

Speaker #3: We are not necessarily baking in incremental revenue that we from the IPPS ruling that we see largely being a tailwind in the 2027 as our hospital customers absorb this latest rule.

Speaker #3: And eventually, we'll accelerate as we see it the VAC committee process to give us expanded coverage within new hospital systems and certainly deepened penetration within our existing surgeon-based.

Richard Newitter: That's helpful. Just on gross margin, you've been beating our gross margin assumptions pretty consistently and by a decent margin. Well, pretty much since you've been public. I guess, where could we be headed if we just think a year or two out? Is this something that could be approaching 80% as we move closer to 2028?

Speaker #5: That's helpful. And then just on gross margin, you've been beating our gross margin assumptions pretty consistently. And by a decent margin, you pretty much since you've been public.

Speaker #5: I guess where could we be headed if we just think a year or two out? Is this something that could be approaching 80% as we move closer to 2028?

Speaker #3: Yeah. If you look out maybe over the next 24 months, we do see opportunities that we can get potentially into the higher end of the 70s and even into the lower end of the 80s.

Mike Cordonnier: Yeah. As you look out, maybe over the next 24 months, we do see opportunities that we can get potentially into the higher end of the 70s and even into the lower end of the 80s. We'll certainly make ongoing priority, thoughtful investments in how we further optimize our digital production system, as we did a couple of quarters ago, that have proven out to be sustainable with regards to keeping our gross margin level, in the high 70s. Q1 of this year and Q2, both at the 77% level, even with the product mix, including cervical. We continue to build from that as we further enhance the DPS system. I think we'll have ongoing opportunities into the future to further tick up, but certainly at the high 70s.

Speaker #3: We'll certainly make ongoing priority thoughtful investments in how we further optimize our digital production system as we did a couple of quarters ago that have proven out to be sustainable with regards to keeping our gross margin level in the high 70s.

Speaker #3: So Q1 of this quarter and or of this year in Q2, both at the 77% level even with the product mix including cervical. So we can continue to build from that as we further enhance the DPS system and I think we'll have ongoing opportunities into the future to further tick up.

Speaker #3: But certainly at the high 70s, we have a very scalable model upon which to accelerate our growth and ultimately to hit that adjusted EBITDA break-even mark as we think about more importantly, the operating expenses continuing to decline as a percent of revenue.

Mike Cordonnier: We have a very scalable model upon which to accelerate our growth and ultimately to hit that adjusted EBITDA breakeven mark as we think about, more importantly, the operating expenses continuing to decline as a % of revenue.

Speaker #5: Thank you.

Richard Newitter: Thank you.

Speaker #1: Our next question comes from Ryan Zimmerman at US Bancorp.

Operator: Our next question comes from Ryan Zimmerman at U.S. Bancorp.

[Analyst] (BTIG): Hi, this is Izzy on for Ryan. Thanks for taking the question. I just wanted to start with the upcoming launch of corra, and I was curious what plans have been in place in terms of how you're planning to roll it out. Whether we should expect to see broad availability or if this will be more of a targeted initial rollout to a smaller subset of users.

[Analyst] (US Bancorp): Hi, this is Izzy on for Ryan. Thanks for taking the question. I just wanted to start with the upcoming launch of corra, and I was curious what plans have been in place in terms of how you're planning to roll it out. Whether we should expect to see broad availability or if this will be more of a targeted initial rollout to a smaller subset of users.

Speaker #6: Hi. This is Izzy on for Ryan. Thanks for taking the question. So I just wanted to start with the upcoming launch of Quora. And I was curious what plans have been in place in terms of how you're planning to roll it out, whether we should expect to see broad availability or if this will be more of a targeted initial rollout to a smaller subset of users.

Speaker #3: Yeah. Great question. We're really excited about the Quora cervical launch. As previously stated, we're in the process of a limited market evaluation. We've got great feedback.

Mike Cordonnier: Great question. We are really excited about the corra cervical launch. As previously stated, we are in the process of a limited market evaluation. We have got great feedback, and in Q4, we will be moving towards a full commercial launch in conjunction with one of the Paul Society meetings. Really looking forward to that. As we have talked about corra before, this gives us the ability to have a fully personalized ACDF that can provide enhanced clinical outcomes. It also has the benefit of giving us a slight uptick in our ARP that will be meaningfully beneficial to us on the cervical franchise.

Speaker #3: And in the fourth quarter, we'll be moving towards a full commercial launch in conjunction with one of the fall society meetings. So, really looking forward to that.

Speaker #3: And as we've talked about Quora before, this gives us the ability to have a fully personalized ACDF that can provide enhanced clinical outcomes, and it also has the benefit of giving us a slight uptick in our ARP that will be meaningfully beneficial to us on the cervical franchise.

[Analyst] (BTIG): Got it. Thank you. We have heard from some competitors about plans to introduce their own custom implants. I was curious what your outlook on the market is as we start to see more competition entering. Thanks for taking the questions.

[Analyst] (US Bancorp): Got it. Thank you. We have heard from some competitors about plans to introduce their own custom implants. I was curious what your outlook on the market is as we start to see more competition entering. Thanks for taking the questions.

Speaker #6: Got it. Thank you. And we've heard from some competitors about plans to introduce their own custom implants, so I was curious what your outlook on the market is as we start to see more competition entering.

Speaker #6: Thanks for taking the questions.

Speaker #3: Yeah. We feel really confident in our growth and our growth profile. As we continue to be the only pure play AI-enabled personalized surgery company with the very novel Aprivo procedure, we do, however, see this as really a tipping point in innovation in the industry.

Mike Cordonnier: We feel really confident in our growth and our growth profile as we continue to be the only pure play AI-enabled personalized surgery company with the very novel aprevo procedure. We do, however, see this as really a tipping point in innovation in the industry, and we are really glad to see the investment in innovation that is really going into this space, as it is really ripe for innovation.

Speaker #3: And we're really glad to see the investment in innovation that's really going in to this space as it's really ripe for innovation.

Operator: Our next question comes from David Saxon at Needham & Company.

Speaker #1: Our next question comes from David Saxon at Needham & Company.

David Saxon: Great. Good afternoon, Mike and Leo. Congrats on the quarter, and thanks for taking my questions. Maybe just on cervical, really strong here coming out at 10% of the mix. Can you give an update on how you're thinking about the full year mix? I think prior it was high singles to low double. An update there would be great. By category, how are you thinking about pricing in lumbar and cervical for the back half?

Speaker #3: Great. Good afternoon, Mike and Leo congrats on the quarter. And thanks for taking my questions. Maybe just on cervical, I mean, really strong here coming out at 10% of the mix.

Speaker #3: So can you give an update on how you're thinking about the full-year mix? I think prior, it was high singles to low doubles. So an update there would be great.

Speaker #3: And then by category, how are you thinking about pricing in lumbar and cervical for the back half?

Speaker #2: Yeah, so we're certainly pleased with...

Leo Greenstein: We're certainly pleased with the surgeon receptivity to aprevo® Cervical, given it's going to the largely same call point of surgeon. Very effective way in which we can have another indication in the bag for our longer term leverage in achieving those decreasing operating expenses as a % of revenue. With regard to our expectations for H2 for cervical versus lumbar, we definitely see an ongoing uptick in cervical volumes while we continue to grow lumbar. I'd anticipate that for H2, we're probably in the low double digits, 11, 12 percentage points or so of cervical on a revenue dollar basis as compared to lumbar. As we think about the average revenue per procedure. In Q2, our average revenue per procedure in lumbar was roughly $29,000. For cervical, it was around $18,000.

Speaker #3: The surgeon receptivity to Aprivo, cervical, given it's going to the largely same call point of surgeons, is a very effective way in which we can have another indication in the bag for our longer-term leverage and achieving those decreasing operating expenses as a percent of revenue.

Speaker #3: With regard to our expectations for the second half of the year for cervical versus lumbar. We definitely see an ongoing uptick in cervical volumes while we continue to grow lumbar.

Speaker #3: I'd anticipate that for the second half of the year, we're probably in the low double digits. So 11, 12 percentage points or so of cervical on a revenue dollar basis as compared to lumbar.

Speaker #3: As we think about the average revenue per procedure, so in Q2, our average revenue per procedure in lumbar was roughly 29,000 for cervical. It was around 18,000.

Speaker #3: We see those levels persisting over the coming quarters. We'll certainly have an ability here with the launch of Quora plating for cervical to provide an additional modest uplift in average revenue per procedure for cervical as well.

Leo Greenstein: We see those levels persisting over the coming quarters. We'll certainly have an ability here with the launch of corra™ plating for cervical to provide an additional modest uplift in average revenue per procedure for cervical as well.

Speaker #5: Okay. That was helpful. Thanks for that, Leo. And then maybe for Mike, just regarding the DRG changes, I mean, is that something you could start to see a benefit from in terms of just starting those conversations and getting access into those centers even before it goes live?

David Saxon: Okay. That was helpful. Thanks for that, Leo. Maybe for Mike, just regarding the DRG changes. Is that something you could start to see a benefit from in terms of just starting those conversations and getting access into those centers even before it goes live? Or do you think 1 October is kind of when those conversations start, and then the real benefit is more like a 2027 event? Thanks so much.

Speaker #5: Or do you think October 1 is kind of when those conversations start and then the real benefit is more like a 27 event? Thanks so much.

Speaker #3: Thanks, David. Yeah. Like I stated, we're really appreciative of the partnership with CMS and appropriately reimbursing this procedure. And certainly, our current hospital partners are very enthusiastic about this.

Mike Cordonnier: Thanks, David. Yeah, like I stated, we're really appreciative of the partnership with CMS and appropriately reimbursing this procedure. Certainly, our current hospital partners are very enthusiastic about this, and we're continuing to have those conversations with new hospitals that are looking at offering this to their surgeons and patients. While the product approval time still does take some time, we'll start to see the impact of that here in the near term and the long-term durability of our growth in 2027 and beyond.

Speaker #3: And we're continuing to have those conversations. With new hospitals, that are looking at offering this to their surgeons and patients. And so while the product approval time still does take some time, we'll start to see the impact of that here in the near term.

Speaker #3: And the long-term durability of our growth in 27 and beyond.

David Saxon: Great. Thanks so much.

Speaker #5: Great. Thanks so much.

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

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