Carlsmed (CARL) Q2 FY26 earnings call: guidance and Q&A

Why does the H2 guidance imply a deceleration in growth despite a strong Q2, and is it due to conservatism or specific concerns like surgical volume slowdowns?

Management confirmed the guidance reflects a prudent approach, emphasizing continued high confidence in near and long-term growth. They noted Q2 FY26 revenue growth was 57% YoY, and the midpoint of H2 guidance implies 45% growth over H2 FY25, indicating continued strong performance.

“this does reflect our continued approach of providing prudent guidance 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.”

asked by Matthew O'Brien · answered by Unknown Speaker

What is driving the acceleration in new surgeon users, particularly with the cervical platform, and what is the potential impact of new reimbursement benefits on this interest?

The acceleration in new surgeon users is driven by strong interest in both lumbar and cervical platforms, with new surgeons adopting both simultaneously. The cervical platform was developed due to strong interest from existing lumbar users. The new reimbursement benefits are expected to further increase hospital access and surgeon interest.

“what we've seen trend, uh, 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. And so 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.”

asked by Matthew O'Brien · answered by Michael Cordonnier

How much benefit from the new DRG codes is baked into the H2 guidance, and is there a risk of procedures being pushed to Q4 to benefit from the DRG bump?

The new CMS ruling is seen as materially beneficial for hospitals in the long term, but the guidance does not bake in incremental revenue from it for H2 2026. Management expects the ruling to be a tailwind for 2027 and beyond, as hospitals absorb the rule and it accelerates expanded coverage and penetration.

“We are not necessarily baking in incremental revenue that we've, from the IPPS ruling that we see largely being a tailwind in the 2027 as our hospital customers absorb this latest rule and it, you know, eventually we'll accelerate, as we see it, the VAC committee process to give us expanded coverage within new hospital systems and certainly deepen penetration within our existing surgeon base.”

asked by Aidan for Travis Steed · answered by Unknown Speaker

When considering 2027 and beyond, will the company's growth strategy focus more on pricing opportunities or volume opportunities?

The company anticipates maintaining its average revenue per procedure largely where it is and will focus on increasing partnerships with hospitals and accelerating access, thus driving procedure volume growth rather than average revenue per procedure (ARP) growth.

“Yes, we see, 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. So net, net. procedure volume growth versus growth through ARP.”

asked by Aidan for Travis Steed · answered by Michael Cordonnier

Given consistent gross margin beats, where could gross margins be headed in the next year or two, potentially approaching 80% by 2028?

Management sees opportunities to reach the higher end of the 70s and even the lower end of the 80s over the next 24 months. They plan ongoing thoughtful investments to optimize their digital production system, building on sustainable efficiencies that have kept margins in the high 70s (Q1 and Q2 2026 at 77%).

“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...”

asked by Richard Newlitter · answered by Unknown Speaker

What are the plans for rolling out the CORA cervical plating system, specifically regarding broad availability versus a targeted initial launch?

The CORA cervical launch will move from a limited market evaluation to a full commercial launch in Q4, in conjunction with one of the fall society meetings. This system is expected to provide enhanced clinical outcomes and a slight uptick in average revenue per procedure for the cervical franchise.

“And in the fourth quarter, we'll be moving towards a full commercial launch in conjunction with one of the fall society meetings. And so really looking forward to that. And as we've talked about CORA 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.”

asked by Iseult McMahon · answered by Michael Cordonnier

What is the company's outlook on the market as more competitors introduce their own custom implants?

Carlsmed feels confident in its growth as the only pure-play AI-enabled personalized surgery company. They view the increased competition as a 'tipping point' for innovation in the industry, which they believe is ripe for such advancements.

“Yes, 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 pre-vote procedure. We do, however, see this as really a tipping point in the industry. innovation in the industry.”

asked by Iseult McMahon · answered by Michael Cordonnier