Rich Newitter here from Truist Securities MedTech Analyst. Thanks for joining us and tuning in. Carlsmed is the next fireside chat. We are very fortunate to have Carlsmed's Chairman and CEO, Mike Cordonnier, and Leo Greenstein, who's the CFO and Treasurer. Welcome to both of you. We're very grateful and thankful that you were able to get out here from the West Coast. Yeah. Thank you, Rich. Thrilled to be here. Just because you guys are a little newer to the public community, following your IPO last year, Mike, why don't you start off with a two- or three-minute overview of Carlsmed, the aprevo platform, and your business model and what makes it so different. Yeah, would love to. Appreciate the opportunity. Founded Carlsmed in 2018, really as a pure-play personalized surgery company. We're deeply focused on improving outcomes, reducing the cost of healthcare for spine surgery and beyond. We've built this really different business where we can take data about a patient, data from a surgeon, use our technology to create a three-dimensional patient-specific model of the patient's pathology, the optimal 3D surgical plan, then 3D printing the devices needed for that surgery. Sterile pack, deliver straight to the operating room. Makes for a very simple procedure that's ultimately generated better outcomes for patients. Then we collect post-op data and use that to continuously train the system. It's really created this closed loop platform around the patient, around the surgeon, that we've been able to scale very rapidly. As noted, we are new to the public markets, just coming up on our one-year anniversary of the IPO, and really excited about the progress the team's made so far. That's great. We've seen orthopedic companies attempt custom implants in the past. I guess, what are you guys doing today that's allowing you to have success where maybe and I get it, we started off outside of spine. Yeah It's a different area. What's allowing you to have success today or more success than perhaps predecessors that have tried this in the past, or even others who are trying this now in other orthopedic areas? Ultimately, it comes down to one thing. We started with trying to solve a very challenging clinical problem. Other applications for the technology, for personalization, we see personalization across the board, many, many areas. Where it really scales is when you're doing right by patients and creating a very scalable system. We deeply targeted, when we started the company, the patient population with complex adult spinal deformity that really had a high complication rate. We built the technology platform very specifically for that patient population, which has proven to drive better outcomes. With that, we completely built an integrated digital production system that allows us really to operate as a software company first, that then creates the complete digital surgery in partnership with the surgeon, makes it easy for them to review and approve the surgical plan, and then 3D printing what's needed and sterile pack the instruments needed for surgery that allows us to really scale. With this, we have no inventory, and we were able to do that from the very beginning and build a system that really scales and continues to drive better outcomes. I think that's what's really differentiated because it is a closed loop system that continues to improve. As you know, we started with very specific indications for lumbar adult deformity. We added additional indications for degenerative disc disease. For lumbar, we continue to add more surgical procedures, open, MIS, manual, robotic, and most recently expanded to cervical indications. We see this as a platform that really scales. I guess, I don't know if there's a killer app or one piece, but is there something in your access to the algorithm or just the AI and the capabilities today that maybe you were able to capitalize on that didn't exist when predecessors were trying it? Am I going in the right direction, or is that not true, or? You're absolutely going in the right direction. We started at this great time where there's this intersection of a giant clinical need and these emerging technologies that allow us to build a pure-play personalized surgery company that really didn't exist decades ago when the early innovators were trying this. With this, we were able to build a digital native company where we use big data. We collect lots and lots of medical imaging that we use to create the algorithms that create the personalized surgical plans, as well as the devices to achieve very predictable algorithms. This allows us to essentially continue to collect real-world clinical data and continue to evolve. That's what really has this flywheel effect For the business, that the more procedures we do, the better the planning gets and the more indications we can continue to add. You grew your [doc] installed base quite substantially in the first quarter. I think it was up 60%, compared to this time or the one quarter of last year. By our estimation, it looks like it was your second highest [doc] training quarter, at least to- date. How sustainable is that kind of trajectory? Or is there any reason you won't be able to continue to train this or support this level of [doc] training effort going forward? Rich, we've seen incredible enthusiasm for this technology platform and this procedure, particularly in the early and mid-career surgeons. We started our launch very intentionally with teaching institutions, we've now, with five years of clinical data, have continued to see surgeons that went through residents and fellows programs where they were trained on this procedure now take it into their own private practice, or take it to a new academic institution and start training the next generation of surgeons. That's really where we see the wide adoption and the continued acceleration as we continue to partner with more and more teaching institutions to embed the aprevo procedure into their curriculum, so we can train the next generation of surgeons on digital surgery, and as they're really looking at what technologies they want to adopt in their practice for the next decade. I guess, in the proposed Inpatient Prospective rule a couple of months ago, it looks like CMS is proposing to move all aprevo lumbar cases into three new DRGs. How are you guys reading that proposal? Was that something that surprised you? I mean, it seems like this could be a pretty important and significant kind of reimbursement tailwind for you guys. Can you maybe just describe that? Is this what you were expecting? What does this potentially do for you going forward in your discussions with hospitals? We see it as net beneficial for broader access to this technology across hospital systems. We really developed this technology as breakthrough technology, as initially came out with a FDA Breakthrough Designation. We partnered very closely with Medicare to make sure that we had broad access and had a new technology add-on payment when this first came out to market. As we transitioned to sunsetting the new technology add-on payment, Medicare created 11 different MS-DRGs to cover the procedure, which is what we have today, which is very beneficial for the hospital systems for inpatient. We really applaud Medicare on condensing this to three, which really makes it much simpler for coding and reimbursement for the technology and continues to provide the value to hospitals to provide this procedure to their patient population that can really drive better outcomes and ultimately better economics for the payers, with our data that shows a reduction reoperation rate, being really meaningful savings to the healthcare system at large. Just as we think about what this potentially does for you incrementally, as we look into 2027 and beyond, it seems like this has a potential dual benefit that there could be a volume or an adoption boost, and maybe you could just flesh out if that's right and why. What about on pricing? Is that something where the hospitals will make more profit and we shouldn't think of pricing really moving around that much. How we really think about it is accelerating access, because like many new technologies, one of the big limiters is getting through the hospital approval process, getting through VAC. Really having these new reimbursement tailwinds makes it very simple for the hospitals to evaluate adopting this technology and the material benefit, not just to the patients, but to their healthcare institution on the economics of surgery. We really see this as opportunities to accelerate adoption across much more broad hospital systems and ultimately providing additional ability to increase utilization for surgeons inside of those institutions. That's really how we think about this and see this as material in 2027 and beyond. That's great. It'll be interesting to see how that unfolds. I guess we'll wait until the final rule, I guess that's in August timeframe, right? Yeah. The final rule goes into place October 1. Medicare will typically publish it 30 to 60 days before the final rule goes in place. Okay. Anything you're hearing about the comment period, or does this seem like the? Yeah. We anticipate that it'll largely go in place as written, with broad industry support and support from key organizations that want to get access to this technology. Got it. Not that you don't have plenty of runway within a still significantly under-penetrated lumbar opportunity, but you guys are also in the early innings of your cervical launch. How's that commercialization effort going relative to your expectations in the early days? Cervical's gone very well. Just by background, we started our limited clinical evaluation in Q2 of last year and got really phenomenal early clinical results, particularly targeted at patients with poor bone quality. Traditional osteoporotic, osteopenia patients for cervical have had a really high complication rate. As we look at our technology being able to provide a very wide bed for fusion for that patient population, as well as providing a very predictable alignment to the patient's spine, we've got really great reception to it with our early clinical data that we collected. We launched in December of last year, and as we reported out in the first quarter, we've already had 20% of our total surgeons trained on the cervical platform in a very short period of time. We're getting really great uptick, not just from the current install base, but also pulling new surgeons that tend to be cervical specific into the aprevo platform. At the same institution. Exactly. The lumbar doc was trained, and then his counterpart that does more cervical is also saying, oh, interesting. Yeah, that's exactly right. As we think about this broader platform and also getting hospital access for a broader platform, gives us more leverage to be able to provide more value to the hospital with more than just a single patient population. We see this as continued acceleration of growth. One of the key growth drivers that we see in the back half of the year is what we're really excited about is the corra platform. This is our first foray outside the disc space. Yep. It's really important for particular patients that have ACDF procedure where we have the aprevo three-dimensional plan, the three-dimensional interbody to achieve the plan, and now the patient-specific three-dimensional cervical plate to ensure that the alignment's held in place all the way through fusion. We've developed some really incredible technology there that allows us to mate the cervical plate to the patient's anterior anatomy in the cervical, as well as deliver the optimal screw trajectory to ensure that you're getting good bony purchase to hold the fusion in place. What we anticipate this will see is much like with our lumbar portfolio, a significant ability to treat a compromised patient population and improve outcomes across that patient population for the inpatient procedures. And so corra, you did your first procedures in February, but I think the full commercial launch is slated for December, right? That's correct, yeah. Is there anything contemplated in your revised guidance on the 1Q call for corra, or is that in any way contributing? It's baked into the current guidance, as we really think about this fully rolling out in 2027 and beyond, really having an uptick in our average revenue per procedure because now we're adding more to the procedure, adding more value, acceleration of adoption of the cervical platform in 2027 and beyond. Then you mentioned 20% of your lumbar infusion or lumbar fusion installed base is trained on cervical. I guess, where are you projecting that number to be or that percentage exiting 2026? Is there any reason why the majority of your existing install base wouldn't be trained on cervical within the next 12 months? Yeah. As we think about lumbar and cervical surgeons, generally about 80% of spine surgeons do both procedures, but they tend to focus more of their practice on one versus the other. We've made significant investments in our medical education team, continuing to develop programs to support the accelerated training education around the cervical portfolio. We do anticipate to see a meaningful uptick in pull-through from the lumbar procedures, lumbar surgeons doing lumbar procedures, also doing cervical. Got it. Could that percentage double exiting the year, or is it reasonable to think you'll have over 50% trained on cervical by mid-year next year or so? Yeah, I think part of this is also thinking about the hospital approval dynamics as well. We typically have approval for lumbar, approval for cervical separately. Okay. Continuing to work through the trial utilization for cervical for many of the accounts and getting those on contract as well. Okay. It's very clear the surgeon enthusiasm is very strong and as we look at the various cervical procedures we'll do with interfixated as well as plated, we see as much as 50% of our cervical procedures adding the corra fixation in the out years. On that, Leo, I'm going to loop you in for a minute. Just cervical has a drag, all else equal, on gross margin, and I think that's embedded in your guidance, right? Maybe just remind us of that. While you're describing that, corra is going to potentially be adding revenue per procedure. Should we think of that as a good guy? When you think about the longer-term average revenue per procedure, we ended Q1 2026 with roughly $30,000 of average revenue per procedure. When you combine cervical, we see longer term in kind of the mid- to high- 20s, call it $27,000-$28,000 per average revenue per procedure. Over time. Over time. Yeah. With respect to gross margins, we really view this digital platform that we have and the AI-enabled nature of it to provide a lot of ongoing leverage in the business and to further produce additional efficiencies in that workflow in combination with fixed cost absorption with our increasing volume. We see those two items largely offsetting the product mix headwind of the lower revenue per procedure for cervical. I think the key point is that cervical represents an important ongoing extension of the aprevo digital platform. As Mike covered, the same surgeon call point largely doing cervical, so we get inherently the sales and marketing leverage with going to that same call point that provides the long-term advantage to our business and ultimately the important incremental contribution margins from the extension with cervical. With corra, as you've noted, it represents an important additional average revenue per procedure opportunity for the business. Even more importantly, it really represents the ongoing nature of what we are doing, which is a personalized surgical solution that is highly complementary with the interbodies delivered with the cervical platform. It's really on brand for what we intend to do, which is to provide the best-in-class solution for our surgeons, and I think the cervical plating solution is a complement to inherently what we're doing with the personalized solution within the cervical interbody. You did 74% gross margin first half 2025. That bumped up to 76% in the second half of last year. You just did about 77% in 1Q 2026, that was before cervicals kicked in. You just walked us through some of those dynamics. I guess let's just say we're around the mid 70s% as cervical before you even have the scale benefits and all that. Where do we see gross margin trending longer term? As I covered here, I think with the ability to further leverage what we're currently doing today with the AI initiatives and AI case planning within the aprevo platform and the absorption of those fixed costs with our ongoing ramp overall of revenue, we see that durability in the mid- to high- 70s% persisting. As we discussed earlier, the ability to further leverage the six-day lead time for both cervical and in our base business today in lumbar is highly important for delivery to our hospital customers, our surgeon users, to ensure that they are getting the solution that neatly fits into their workflow. Maybe just while we're on the topic of financials. One of the things that's always struck us about this story, you're an orthopedic and a spine company in particular with probably one of the lowest working capital requirements I've seen in MedTech, let alone orthopedics. With the scale you see, the growth rates and the opportunity in front of you, and the growth rates you should be able to maintain, is there a cash flow break-even point? You don't have to give me the year, but feel free to. Is there a revenue threshold that you run your models on that we should just be calibrating towards that you'll be cash flow break-even? There is, I think it comes back again to the function of our ongoing revenue ramp, the efficiencies and durability that we see in production with the mid-to-high 70s gross margin, and again, the leverage within the operating expense line. As pointed out, the sales and marketing line in particular. We see ongoing decreases of overall OpEx as a percent of revenue. We see that durability within the gross margin line, as a result, when you converge those items, we see well under a $200 million annual run- rate can provide us the ability to hit the cash flow break-even mark. We started Q2 with a little over $97 million in cash. We have untapped debt availability that we have no current intention or requirement to draw upon, that capital provides us what we require with what we see over the next few quarters to hit that cash flow break-even mark. While we haven't provided the timing of that, hopefully that provides. Less than a $200 million run- rate. Correct. In between $150 million and $200 million. Look, we'll continue to make important investments along the way with continued revenue ramp, ongoing efficiencies within our operational excellence initiatives, and importantly, further building on the R&D pipeline. We have the freedom to operate in all three areas without having to cut it too close, even with the current cash on hand to continue to hit that breakeven mark. Got it. With the last few minutes here, I want to talk a little bit about the competitive landscape. Imitation maybe is the best form of flattery, but it is coming from Globus, and Globus is a powerhouse in spine. They made an announcement on their 1Q call that they intend to launch a custom implant initiative, and they plan to supposedly extend that across the breadth of their portfolio. Maybe I'd love to just hear you react to that. We don't know a ton about it, but I want to hear your reaction to it. A very large competitor coming in. How are you guys differentiated? Where are the moats? Just help us think through this new consideration. Yeah. Great question. We see this as ultimate market validation of really the work that we've done in validating personalized surgery as better for the patient, better for the payer. While again, we don't know really much about it or what the intent is, we can really talk about our platform and what's truly differentiated, not just about our platform, but our business. As I started with, we are a pure play personalized surgery business, and that gives us incredible differentiation because we can take patient data, surgeon data, create personalized devices with no working capital, no capital allocation required by the customers, by the hospitals, that ultimately provides incredible value inside of the platform. It really goes to the digital production system that we built that allows us to go from patient consult to surgery in a few days and continue to collect that data that drives improvement of the algorithms, continued scale, and ultimately operating as a software company that allows us to create plans, that create devices, that create procedures, and continue to drive outcomes. We see the move broadly across medicine to personalization. As we're looking at this for more targeted drugs, as we're looking at this for targeted cancer treatments, we see personalization as being the new way forward. For us to continue to be that pure play personalized surgery company that has the end-to-end loop around the patient, around the surgeon, with the ability to operate in a truly capital-less model. Look, there's a lot of room for you to go and get one or two points of market share, and that's a huge windfall for you, and that probably doesn't even matter to Globus, and it doesn't have to come from Globus. I would imagine this is a validation of a category that you're pioneering. When we think about longer term, what's to stop Medtronic from coming in or someone else, especially if what you said one of the gating factors to why this didn't happen historically as successfully, but now it does. It's the advancements of technology. There's going to be the ability to partner with AI companies and probably to digitize or digitalize the industry on some level. Just help us get a better understanding of what specifically is your moat. What's going to stop a company from replicating what you're doing, or it's going to require too much investment or time to get there? Maybe it's just the IP. No one can do what you're doing precisely. If it's that, tell us. Yeah. It's all of those things. We certainly have a very deep IP moat around our business. We have clinical data that's specific to our procedure, and again, our procedure is very different. It requires this continuous loop that we've been able to develop with imaging patient surgical plan, procedure, post-op outcomes. As far as scalability as a business, we build our business from the ground up to be a digital business, and we see this as a difficult transition for the large players in MedTech to go truly digital only. We see this as- Can I just- Yeah interrupt? Is that just because their entire model is built on consignment and having all these different sets and inventory out in the field, this can't happen overnight for them? Yeah. That's exactly right. Moving from a kind of a traditional orthopedic spine MedTech model where you have inventory that's created, you have it deployed at hospitals and really requiring on the infrastructure of the hospital with the enabling tech, imaging, robots, navigation to drive this very capital-intensive process through the hospitals. I really think a lot of hospital systems are going to wake up and say, there's really a better way forward. Maybe we don't need this giant capital investment, and we can go with a truly capital-less environment to deliver great patient outcomes. Great. I think we're right at the half-hour mark, Mike, Leo, thank you so much for your time. Really appreciate it. Absolutely. Thank you. Thank you, Rich. That's great.