Carlsmed Inc (CARL) 2025 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Carlsmed fourth-quarter and full year 2025 earnings conference call. (Operator Instructions)

I would now like to turn the conference over to your first today, Caroline Corner, Investor Relations. Please go ahead, Caroline.

Thank you, operator. Welcome to Carlsmed's fourth-quarter and full year 2025 earnings call. Joining me on today's call are Mike Cordonnier, Chief Executive Officer and Chairman; 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 facts should be considered forward-looking statements, including statements regarding the market in which Carlsmed operates, trends, expectations and demand for Carlsmed's products and Carlsmed's expected financial performance and position in the market.

Any forward-looking statements provided during this call, including projections of 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 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 ending December 31, 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 fourth quarter and full year 2025 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 PM Pacific Time today.

Now I'd like to turn the call over to Mike to go over the Carlsmed's 2025 business highlights.

Thank you, Caroline, and welcome, everyone. 2025 was a rapid growth year for Carlsmed, and I could not be prouder of what our team has accomplished to advance our mission of improving outcomes and decreasing the cost of healthcare for spine surgery.

In July of 2025, we successfully completed our initial public offering, raising over $100 million, and we are efficiently deploying our resources towards patient-centric innovation, surgeon education and commercial execution.

In 2025, we delivered $50.5 million in revenue and 75.3% gross margins. This represents 86% year-over-year top-line growth and 151 basis points of margin expansion. In the fourth quarter, we delivered a record $15.2 million of revenue with 61% year-over-year growth and 76.5% gross margins. With further advancements in our digital production system, we have driven increased productivity and reduced lead times for aprevo lumbar and our aprevo cervical patient-specific interbody portfolio.

With these recent advancements, we are now at a lead time of six business days. Most importantly, we continue to see evidence of favorable patient outcomes. Two-year data from a retrospective cohort study published in the Global Spine Journal showed a 74% reduction in reoperation rates among adult spinal deformity patients receiving aprevo lumbar implants as compared to a separately published patient cohort receiving conventional stock implants.

These company highlights are the result of consistent operational excellence and commercial execution driven by our AI-enabled digital planning and patient-specific devices with a laser focus on what matters most, clinical outcomes.

At Carlsmed, we aim to improve spine surgery through our preoperative, intraoperative and postoperative aprevo digital surgery platform. We create AI-driven personalized surgical plans and 3D-printed custom-made anatomically designed spine fusion systems. Unlike traditional one-size-fits-all approaches, real-world evidence suggests that our aprevo platform solution has the potential to improve outcomes and reduce the number of revision surgeries.

We are fundamentally changing how spine surgery is planned and executed and how patients are treated. Our digital surgery and preoperative planning capabilities were designed to enhance operational efficiency and deliver more predictable and effective patient outcomes. And we believe we have substantial market opportunity ahead.

In November, we launched our next-generation Myaprevo ecosystem that seamlessly integrates mobile and web-based applications, enabling deeper integration with surgeons preoperative and postoperative clinical workflow. Our compelling clinical outcome data and economic value proposition has provided us a robust reimbursement foundation in lumbar surgery, where we have three MSDRG codes that cover single-level and multilevel lumbar fusion surgeries for degenerative and deformity conditions.

In October of last year, we were granted the new technology add-on payment, or NTAP, from CMS for aprevo cervical spine fusion. This NTAP provides up to $21,125 of additional reimbursement per procedure to hospitals that utilize aprevo patient-specific devices for inpatient cervical procedures. In 2025, we successfully added 101 new surgeon users on our platform, showcasing our rapid clinical adoption and a market hungry for innovation and improving outcomes.

With aprevo lumbar adoption tracking rapidly, we launched our technology into the cervical fusion market with aprevo cervical in December at the Cervical Scoliosis Research Society meeting. Cervical spine surgeries have historically been plagued by high variability in outcomes and publications suggest these are prominent in patients with poor bone quality, long construct fusions and deformity.

About one-third of cervical spine fusion patients have osteoporosis or osteopenia or soft bone. We're deeply focused on evaluating how aprevo may benefit this patient population with osteoporosis and osteopenia where it's challenging to deliver predictable outcomes. I'm deeply encouraged by the strong market traction in the early days of this launch.

Operational excellence is the foundation of our rapidly scaling personalized surgery business. We've achieved another business milestone for our customers by reducing lead times by 25%, with production timelines now at just six business days compared with eight business days in Q4 of last year and 20 days we saw a year prior. This milestone represents the final phase of our operational excellence initiative and positions us to scale meaningfully as we drive further market penetration.

Also of note, our manufacturing is now a fully integrated process that spans both cervical and lumbar products on the same production line. The combination of positive patient outcome data, operational excellence and expanding surgeon adoption across both lumbar and cervical indications reinforce our position as a true innovation leader in spine surgery.

Now I'd like to walk you through our areas of strategic focus and some recent highlights and how our achievements position us to continue the durable, high-quality growth we've demonstrated to date.

Our first area of focus is patient-centric innovation. This month, we announced the first-in-human bilateral posterior aprevo procedure that was performed at the University of Colorado. This FDA-cleared breakthrough technology allows the surgeon to address degenerative disease conditions posteriorly with maximal bone-to-implant coverage through a minimally invasive surgical approach.

The bilateral approach benefits from the same planning as the transforaminal approach while effectively doubling the bone-to-implant contact area. We have commenced the limited market evaluation of this new procedure are on track for a launch in the second half of 2026.

This month we also announced the introduction of the corra personalized fixation portfolio, and the first-in-human personalized corra cervical plate procedure performed at UCSF. The FDA 510(k) cleared corra cervical plates are fully personalized to the patient's anatomy to provide harmonious plating fixation for the aprevo cervical interbody.

The corra cervical plates are digitally designed using our proprietary AI-enabled planning system to optimize fixation to maintain the anatomical correction provided in the aprevo planning platform. The corra plates are available in a monoblock multilevel plate configuration as well as segmental plating configurations for short and long-term construct cervical fusions. We anticipate a second half of 2026 launch for the corra cervical plating portfolio to further support the personalization of cervical spine surgery.

Our second area of strategic focus is surgeon education. We've expanded our medical education team to meet the accelerating demand for aprevo lumbar and aprevo cervical. We continue to see strong interest and adoption from early to mid-career surgeons who are seeking to implement digital surgical workflows in their practice as they seek to increase predictability and improve patient outcomes.

For example, our second annual Carlsmed Residents and Fellows Course, which will be held in Q2 at Columbia University is fully enrolled months in advance of the course. We're really excited about our funnel of training, which gives us confidence that we're onboarding the next generation of aprevo surgeon users who will support our efforts to drive adoption and increase procedure penetration.

The third area is commercial execution. In the fourth quarter, we continued with our robust cadence of surgeon additions and ended the year with 101 new fully trained surgeons, each having performed one or more aprevo procedures in 2025.

During 2025, with further investments in our commercial footprint, we doubled our sales regions in the US with our direct sales team partnering with more than 100 contracted sales agents to provide a high level of service to our customers. Looking forward to 2026, we're committed to continuing our momentum and delivering high-quality, sustainable growth for personalized spine surgery.

I'm very excited about the year ahead of us. I'd like to express my personal gratitude to our shareholders, team members and surgeon users for their unwavering support of our mission to revolutionize patient care.

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

Thank you, Mike, and good afternoon, everyone. I'll begin today with fourth quarter 2025 P&L highlights.

Revenue for the fourth quarter of 2025 was $15.2 million compared with revenue of $9.4 million in Q4 2024. Our 61% year-over-year quarterly revenue growth was driven by continued expansion of our total surgeon users and utilization rates. Our average revenue per procedure was consistent between these two periods as it was for the full year. So our revenue performance in the fourth quarter and for the full year 2025 remains driven by growth in aprevo procedure volumes.

Gross margins were 76.5% for the fourth quarter of 2025 and 74.7% in the fourth quarter of 2024. This year-over-year improvement was primarily driven by lower contract manufacturing costs and various case design internal efficiencies.

As we previously discussed, we made investments last quarter as part of our supply chain productivity initiatives. This yielded a production lead time reduction from eight business days in Q3 to our current six business days as measured from the time of the surgeon's approval of the digital surgical plan to aprevo kit delivery to the OR.

Total operating expenses were $20.9 million in the fourth quarter of 2025. This compared with $11.7 million in the fourth quarter of 2024. R&D expense was $5.3 million this quarter compared with $3 million in Q4 2024. This increase was primarily due to higher personnel costs to advance our patient-centric product development priorities and AI-enabled initiatives for our surgical planning processes.

Sales and marketing expenses were $10.8 million this quarter compared with $6.4 million in Q4 2024. This increase was substantially driven by increased sales headcount to drive our commercial execution strategy and stock-based compensation. And as part of our revenue growth, variable commissions to our sales team and independent sales agents as well as other variable costs.

General and administrative expenses was $4.9 million this quarter compared with $2.3 million in Q4 2024. The increase was driven by professional services for corporate legal, customary intellectual property matters and personnel additions as well as compliance and other costs as a publicly traded company.

Our GAAP net loss was $8.6 million this quarter and was $4.7 million net loss in Q4 2024. EBITDA adjusted for stock-based compensation was a negative $8.4 million this quarter compared to a negative $4.6 million in Q4 2024.

I'll now turn to our full year 2025 results. Revenue for 2025 was $50.5 million compared with revenue of $27.2 million in 2024, representing 86% year-over-year growth. Gross margins were 75.3% for 2025 and 73.8% in 2024.

Total operating expenses were $68.6 million for 2025 compared with $44.2 million in 2024. Our GAAP net loss was $29.6 million for 2025 and was a $24.3 million net loss in 2024. EBITDA adjusted for stock-based compensation was a negative $28.4 million for 2025 compared to a negative $23.7 million in 2024. We anticipate continued improvement in adjusted EBITDA over the coming years, driven by revenue growth and increased operating leverage across our expense base.

As we scale, expanding contribution margins enabled by our capital-light digital-first model are expected to support our path toward cash flow breakeven.

Moving to our balance sheet. Our cash and investments at December 31, 2025, totaled $109.9 million. 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 December 31, 2025, were $31.3 million, of which $15.6 million relates to this debt facility. Our cash used in operating activities was $29 million in 2025. This compares to $25.5 million of cash used in operating activities in 2024. With our highly differentiated business model as the only pure-play personalized surgery company, our balance sheet is in a solid position to drive revenue growth and expansion of our surgical planning and manufacturing capacities over the coming years.

I'd now like to turn to our guidance for 2026. Our 2026 revenue range is expected to be $70 million to $75 million, representing an annual growth of 44% at the midpoint of the range over the full year 2025.

I will now turn the call over to the operator for questions. Operator?

(Operator Instructions) David Roman, Goldman Sachs.

This is Jenny Rabinowitz on for David. I was hoping you guys could talk a little bit more about like the two new indications or platforms you announced in the quarter, the bilateral approach and corra. How are you thinking about like the part of the market that this opens up for you? Is it new procedures, new surgeons?

And how are you thinking about investment in these while you're also working on the cervical launch?

Jenny, I appreciate the question. So, I'll address both of these. We're really excited about our expansion of our personalized surgery portfolio. So first, for the bilateral aprevo lumbar, we see this as continuing to accelerate our adoption of the posterior surgery market. When we look at the totality of the lumbar fusion market, it's about 8% of the market, and this was really driven by our early surgeon adopters in the posterior surgery portion of the market.

And early indications of this procedure are very positive. So now when we think about corra, this is really our first foray outside of the disc space. And this was part of our original cervical portfolio plan where we can now add a personalization to the cervical plate, which gives further personalization of the procedure.

And so, as we think about both of these, early days, very positive in the back half of the year, we'll have the full commercial launch.

Richard Newitter, Truist Securities.

This is Felipe on for Rich. Just I guess on cervical, just could you help us understand what the contribution was in the quarter and maybe how you're thinking about the ramp in 2026?

And then I just have a follow-up.

Yes. So we're just weeks into the launch, and we've had really positive response to the cervical portfolio. As we did our clinical evaluation in the back half of last year and then commenced our full launch in December, we've seen great adoption of the procedure, both from a surgeon perspective as well as from a hospital adoption with the new technology add-on payment.

And so, we anticipate aprevo cervical to continue to ramp per our plan and particularly with the addition of the personalized corra plates, we're very optimistic about this being a significant part of our portfolio on a go-forward basis.

Are you able to give any color on your, I guess, existing lumbar users and just adoption in cervical thus far? I guess, like what is utilization looking like for cervical for those existing users?

Yes. And we've been able to train about 10% of our total users on cervical in a very short period of time. And so, this gives us a lot of confidence in our existing aprevo lumbar users continuing the adoption curve. And as we look at both the surgeon training as well as the hospital approval process, we're getting really great traction with the cervical launch.

Travis Steed, Bank of America.

Congrats on all the progress. I guess I'll ask on the '26 guidance that kind of implies about $22 million of growth. You did like $23.5 million in '25. Just want to make sure I understand kind of the building blocks in '26, what you're assuming for new surgeon adds versus kind of utilization growth? And any more detail on kind of cervical would be helpful as well.

Travis, good to hear from you. Thanks for the question. Ultimately, when we think about our guidance for this year, we want to make sure as a newly public company that we're prudent with our guidance.

And as we think about our training program as well as continued adoption on both the lumbar and cervical platform here in the early days and even -- early days this year, we're seeing good momentum and gives us a lot of confidence in the guidance that we put out.

That makes sense. And not as big of a deal, but like the lead time, like you've made a lot of progress on lead time. I think you said down six days every quarter, it gets shorter. And just like, how is that impacting the business, do you think, in terms of willingness of new surgeons to adopt and maybe even reorder just because the lead time is getting less.

Yes, it's been meaningful. And we really see six days as kind of the end all be all. And so with this just hitting now in February, it really gives -- exactly like you said, new surgeon adoption, some opportunities for acceleration there as well as ensuring that if there are emergent cases inside of a trained surgeons practice that we have the opportunity to address those.

And so that's been our magic target to get to and really proud of the team that we're able to deliver on that in February.

Ryan Zimmerman, BTIG.

Congrats on your progress, guys. Just curious, Leo on ASP as we move into '26. I imagine there's some downward pressure on cervical -- from the cervical launch on broader ASP, but maybe the contribution is smaller, so it's maybe immaterial. I'm wondering if you could give us your thoughts on that.

And then I'll just ask the second question upfront. Your G&A is running a little lower than I think I expected at this point. Does that kind of carry into 2026? And any high-level thoughts you have on operating expense growth in '26 is appreciated.

Ryan, this is Leo. So maybe in order of your questions here, with regard to ARP, we've seen fairly stable ARP in Lumbar, and we foresee that to be the trend going forward. With respect to cervical, as we've discussed in the past, different reimbursement profile. So we have our ARP and pricing adjusted accordingly.

But the mix that we see in 2026, largely driven by lumbar will ultimately result in a slightly lower ARP in 2026 relative to 2025, but we certainly see it in the mid- to high $20,000 with regard to the procedural mix between cervical and lumbar. With regard to G&A, we clearly want to maintain sufficient investment in the infrastructure to support a public company and ensure that we are providing necessary compliance and other support functions for the organization.

But clearly, our focus will be investment within R&D and certainly within sales and marketing to drive ongoing revenue growth. In 2026, as I see this shaping up, continued operating leverage from the sales and marketing line and that investment made in '25 that we will continue to invest in in 2026. Will start to yield some improving benefits from those investments as a percent of revenue and ensuring that we are getting the leverage that we have intended for sales and marketing.

And G&A will continue to decline as a percent of revenue, by virtue of most of these costs being fixed that can support a growing organization.

(Operator Instructions) Matthew O'Brien, Piper Sandler.

This is [Anna] here for Matt. I wanted to ask a follow-up to Travis' question on the turnaround time. And I'm just wondering if you could maybe elaborate a bit on how impactful that was to gross margin in the quarter and how we should think about margins in '26 based on this reduced lead time?

Yes. So the lead time reduction really is driving overall manufacturing capacity and our ability to support revenue growth as we see it over the next coming years. With regard to how that shaped up in the fourth quarter and the gross margin improvement that we've seen in the fourth quarter relative to Q3, as we talked about in the past, the investment within the DPS system, the digital production system is continuing to yield ongoing efficiencies there that both drive efficiencies within the contract manufacturing and materials costs as well as internal costs for case design.

We see gross margins between lumbar and cervical being maintained in that mid-70s range into 2026 that can certainly provide that ongoing leverage and contribution margin to ultimately, in combination with the OpEx leverage that I just mentioned, converge to a clear pathway to profitability.

Excellent. And then just great to see the momentum on the new surgeons added in the quarter. It seems to be a company record by our math in Q4. So just backing into the utilization, it seems like that might have been roughly flat sequentially. Just wondering when we should start to see a real meaningful uptick there and see deeper utilization within existing accounts?

Yes. And I think that's a great question. We're really proud of our surgeon education program that really accelerated the new surgeon users, and we continue to make strategic investments there in rolling out the programs, which with a large portion of our surgeon user base being relatively new to the platform, we'll continue to invest in training and support of those accounts to see the incremental procedure volume utilization increase over the totality of our surgeon user base.

This concludes our question-and-answer session and today's conference call. Thank you for participating, and you may now disconnect.