10-Q: Carlsmed Reports Near 100% Revenue Growth, Boosted by IPO

Carlsmed, Inc. announced significant revenue growth and a successful $93.5 million IPO, while continuing to expand its AI-enabled spine surgery platform and address increasing net losses.

Summary

• Revenue for the three months ended June 30, 2025, increased by 98.7% to $12.1 million, up from $6.1 million in the prior year period.
• For the six months ended June 30, 2025, revenue grew by 99.4% to $22.3 million, compared to $11.2 million in the same period last year.
• Gross profit for the three months ended June 30, 2025, was $8.9 million (73.4% margin), and for the six months was $16.5 million (74.1% margin).
• Net loss increased to $6.8 million for the three months ended June 30, 2025, from $6.3 million, and to $12.5 million for the six months, from $11.7 million.
• Operating expenses rose significantly, with sales and marketing up 61.5% to $7.9 million for the quarter and 72.5% to $14.6 million for the six months.
• The company completed its Initial Public Offering (IPO) on July 24, 2025, raising $93.5 million in net proceeds.
• FDA 510(k) clearance for the aprevo Technology Platform for cervical spine fusion surgery was received in November 2024, and CMS provided a New Technology Add-On Payment (NTAP) for this indication effective October 1, 2025.
• As of June 30, 2025, cash and cash equivalents were $33.5 million, and the accumulated deficit reached $83.7 million.

Sentiment

Score: 7

Explanation: The company demonstrates strong operational momentum with near 100% revenue growth and successful expansion into new indications. The recent IPO significantly bolsters its financial position, providing capital for continued innovation and commercialization. While net losses are increasing, this is typical for a high-growth medical technology company investing heavily in future opportunities. Regulatory and reimbursement tailwinds further support a positive outlook.

Positives

• Achieved substantial revenue growth of 98.7% for the quarter and 99.4% for the six months ended June 30, 2025, indicating strong market adoption of the aprevo Technology Platform.
• Gross profit increased by 94.4% for the quarter and 100.6% for the six months ended June 30, 2025.
• Successfully completed an Initial Public Offering (IPO) on July 24, 2025, raising $93.5 million in net proceeds, significantly enhancing liquidity and capital resources.
• Received FDA 510(k) clearance for the aprevo Technology Platform for cervical spine fusion surgery in November 2024.
• CMS awarded New Technology Add-On Payments (NTAP) for the aprevo cervical indication, effective October 1, 2025, providing supplemental reimbursement to hospitals.
• CMS adopted new MS-DRGs in October 2024, providing premium reimbursement rates for lumbar spine fusion procedures using custom-made anatomically designed (CMAD) interbody fusion devices like aprevo.
• The first aprevo cervical procedure was successfully completed at UC San Diego Health in July 2025.
• Increased surgeon users to 199 as of June 30, 2025, up from 116 as of June 30, 2024.
• Launched a Digital Production System (DPS) in November 2024, enabling 10-business-day delivery of aprevo interbody implants after surgical plan approval.
• Maintained compliance with all covenants under the Customers Loan Agreement as of June 30, 2025.

Negatives

• Net loss increased by 7.8% to $6.8 million for the three months and by 6.6% to $12.5 million for the six months ended June 30, 2025.
• Gross margin for the three months ended June 30, 2025, slightly decreased to 73.4% from 75.0% in the prior year, primarily due to expedite production fees from contract manufacturers.
• Accumulated deficit increased to $83.7 million as of June 30, 2025, from $71.2 million as of December 31, 2024.
• Net cash used in operating activities increased to $15.2 million for the six months ended June 30, 2025, from $13.7 million in the prior year period.
• Net cash used in investing activities significantly increased to $0.9 million for the six months ended June 30, 2025, from $0.1 million in the prior year period.
• Net cash provided by financing activities decreased substantially to $9.5 million for the six months ended June 30, 2025, from $44.6 million in the prior year period (prior to IPO proceeds).
• The company expects to continue generating operating losses for the foreseeable future as it expands commercial operations and develops its product portfolio.
• Reliance on a limited number of Contract Manufacturing Organizations (CMOs) for aprevo interbody implant production.

Risks

• Ability to advance the aprevo Technology Platform and any potential future products through applicable regulatory approval processes.
• Impact of existing regulations and regulatory developments in the United States and other jurisdictions.
• Ability to maintain or improve the third-party payor reimbursement strategy.
• Ability to attract and retain hospitals and surgeons, and expectations concerning orders for products and utilization.
• Potential market size for the aprevo Technology Platform and ability to maintain competitive technological advantages.
• Intentions to pursue adjacent and international markets and ability to continue improving products and technology.
• Commercialization and marketing capabilities and strategies, and ability to maintain or reduce manufacturing times of CMOs.
• Reliance on a limited number of CMOs and relationships with, and capabilities of, suppliers.
• Scope of protection for intellectual property rights covering products.
• Ability to effectively manage growth and increased expenses associated with being a public company.
• Estimates of expenses, future revenue, capital requirements, needs for additional financing, and ability to obtain additional capital.
• Future financial performance and other factors described in the Risk Factors section of the IPO Prospectus.
• No guarantee that the cervical software platform and personalized plating solutions will obtain FDA clearance on the expected timeline, or at all.
• Future changes in the level of reimbursement could have a significant impact on results of operations, either positively or negatively.
• Quarterly and annual financial results may fluctuate due to various factors outside of control, potentially decreasing the value of common stock.
• Capital resources could be depleted sooner than expected, and additional financing may not be obtainable on favorable terms or at all.
• Future issuances of equity or convertible debt securities could result in significant dilution for existing stockholders.
• Incurrence of indebtedness would increase fixed obligations and could include covenants or other restrictions impeding operational management.
• Deteriorating global economic conditions and disruptions in credit and financial markets may adversely impact the ability to raise additional funds.

Future Outlook

Carlsmed expects to continue generating operating losses for the foreseeable future as it expands commercial operations and develops its product portfolio. The company believes its existing cash on hand, including IPO proceeds, will be sufficient to meet anticipated capital requirements for at least the next 12 months. It plans to pursue additional FDA clearances for advancements to its cervical software platform and personalized plating solutions in 2025, with full commercialization of the aprevo Technology Platform for cervical fusion surgery anticipated in early 2026. The company also intends to grow its commercial infrastructure, expand market access initiatives, and build clinical evidence, expecting gross margins to modestly increase over the medium and long term with economies of production scale and increased AI leverage.

Management Comments

• "We are a commercial-stage medical technology company pioneering artificial intelligence (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."
• "We believe this classification [new MS-DRGs] will support our customers' continued access to our technology."
• "We believe that our aprevo Technology Platform can be utilized across various indications and disease states within the spine that are beyond those that we are currently cleared for, such as cervical corpectomy and cervical disc arthroplasty."
• "We expect our gross margin to remain relatively constant over the short term and to modestly increase over the medium and long term with economies of production scale, increased leverage of our AI technologies, and other manufacturing efficiencies."

Industry Context

Carlsmed operates in the surgical device sector, specializing in AI-enabled personalized spine surgery solutions. Its aprevo Technology Platform aims to address limitations of traditional spine fusion surgery by providing custom-designed vertebral interbody implants and surgical planning software. The company has received Breakthrough Device Designations from the FDA, indicating its technology's potential to offer more effective treatment than current standard-of-care stock implants. Favorable reimbursement changes, such as new MS-DRGs providing premium rates for CMAD devices and NTAP for cervical indications, are crucial for market adoption and position Carlsmed advantageously within the competitive spine surgery market.

Comparison to Industry Standards

• The aprevo interbody implants received a Breakthrough Device Designation from the FDA, indicating they are likely to provide a more effective treatment than the current standard of care in lumbar fusion with the use of stock implants.
• New Medicare Severity-Diagnosis Related Groups (MS-DRGs) adopted by CMS provide premium reimbursement rates for hospital customers for lumbar fusion procedures involving custom-made anatomically designed (CMAD) interbody fusion devices, relative to lumbar fusion procedures using stock implants.

Corporate Governance

Legal Proceedings

• Management believes there are no claims outstanding that would have a material adverse effect on the company's financial position, results of operations, or cash flows.

Stakeholder Impact

• **Shareholders**: Benefit from significant revenue growth and the successful IPO, which provides capital for future expansion. However, they face potential dilution from future capital raises and continued operating losses.
• **Employees**: Benefit from new equity incentive and employee stock purchase plans, and increased headcount in product development, sales, and marketing roles.
• **Customers (Hospitals & Surgeons)**: Gain access to advanced AI-enabled personalized spine surgery solutions, with favorable reimbursement rates for lumbar procedures and upcoming cervical solutions.
• **Creditors (Customers Bank)**: The company is in compliance with all loan covenants, indicating a stable relationship with its lender.
• **Suppliers/Contract Manufacturers**: Experience increased demand due to higher sales volume, but may face pressure for expedited production.

Next Steps

• Continue to expand commercial operations and develop the product portfolio.
• Pursue additional FDA clearances for advancements to the cervical software platform and personalized plating solutions in 2025.
• Fully commercialize the aprevo Technology Platform for cervical spine fusion surgeries in early 2026.
• Drive adoption of the Platform for cervical fusion surgery among the existing base of surgeons.
• Engage in market access initiatives to evaluate strategic international regions.
• Grow commercial infrastructure and expand market access initiatives, including medical education programs and surgeon training.
• Build upon the strong foundation of clinical evidence, including generating publications from the COMPASS Registry.
• Accelerate product and software innovation and develop additional clinical data.
• Expand manufacturing capabilities.
• Evaluate the impact of the One Big Beautiful Bill Act (OBBBA) tax changes, with effects expected in Q3 2025 financial statements.
• Comply with new accounting standards, including ASU 2024-03 (Expense Disaggregation Disclosures) and ASU 2023-09 (Income Taxes).

Key Dates

Recommendation

Carlsmed, Inc. demonstrates exceptional year-over-year revenue growth approaching 100%, driven by strong market adoption of its innovative AI-enabled aprevo Technology Platform. The successful Initial Public Offering, raising $93.5 million, significantly strengthens the company's balance sheet and provides ample capital for continued research, development, and commercial expansion. Key regulatory clearances for both lumbar and cervical spine indications, coupled with favorable CMS reimbursement policies (new MS-DRGs and NTAP), establish a robust foundation for sustained growth and market penetration. While the company continues to incur net losses, this is a common characteristic of high-growth medical technology firms in their investment phase. The long-term potential for expanding its product portfolio and entering international markets, combined with a validated technology and improved liquidity, makes Carlsmed a compelling 'strong buy' for investors seeking exposure to disruptive healthcare innovation.

Keywords

Carlsmed, aprevo, Spine Surgery, AI-enabled Medical Technology, Personalized Implants, Lumbar Fusion, Cervical Fusion, FDA Clearance, CMS Reimbursement, Medical Devices, Surgical Planning Software, Orthopedic Implants, Biotechnology, Healthcare Technology, IPO