Conference Transcript - CARL 2026-06-16

Rich Neuter, Analyst — Truist Securities

Rich Neuter here from Truist Securities, MedTech Analyst. Thanks for joining us and tuning in. Carl's Med is the next fireside chat, and we are very fortunate to have Carl's Med's chairman and CEO, Mike Cordonier, and Leo Greenstein, who's the CFO and treasurer. Welcome to both of you. And we're very grateful and thankful that you were able to get out here from the West Coast.

Michael Cordonnier, CEO

Yeah, thank you, Rich. Thrilled to be here.

Rich Neuter, Analyst — Truist Securities

So just because you guys are a little newer to the public community following your IPO last year, maybe just, Mike, why don't you start off with a two or three-minute overview of Carl's Med, the Prevo platform, and kind of your business model and what makes it so different?

Michael Cordonnier, CEO

Yeah, I would love to appreciate the opportunity. you know, founded Carls Med in 2018, really as a pure play personalized surgery company, and we're deeply focused on improving outcomes, reducing the cost of healthcare for spine surgery and beyond. And so 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, and then 3D print the devices needed for that surgery. Sterile pack delivers straight to the operating room. It makes for a very simple procedure that's ultimately generated better outcomes for patients. And then we collect post-op data and use that to continuously train the system. And so it's really created this closed-loop platform around the patient, around the surgeon, that we've been able to scale very rapidly. And 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. So we've

Rich Neuter, Analyst — Truist Securities

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 some of the past, and I get it, you know, we started off outside of spine, so it's a different area. But 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?

Michael Cordonnier, CEO

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 in many, many areas. And where it really scales is when you're doing right by patients and creating a very scalable system. And so we deeply targeted when we started the company, the patient population with adult complex adult spinal deformity that really had a really high complication rate. So we built the technology platform very specifically for that patient population, which is proven to drive better outcomes. And 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 print what's needed and sterile pack the instruments needed for surgery that allows us to really scale. So 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. And I think that's what's really differentiated because it is a closed-loop system that continues to improve. And, you know, 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. And so

Rich Neuter, Analyst — Truist Securities

we see this as a platform that really scales. And I guess, I don't know if there's like a killer app or one piece, but is there something in your access to the algorithm or just AI and the capabilities today that, you know, maybe you were able to capitalize on that didn't exist when predecessors were trying? Am I going in the right direction or is that not true? You're absolutely

Michael Cordonnier, CEO

going in the right direction. And so, you know, we started at this great time where there's this intersection of a giant clinical need in 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 and so with this you know we're 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 and this allows us to essentially continue to collect real world clinical data and continue to evolve and so that's what's really has this flywheel effect for the business that the more procedures we do you know the better the planning gets and the more indications we can

Rich Neuter, Analyst — Truist Securities

continue to add um you grew your dock install base quite substantially in the first quarter i think it was up 60 percent you know compared to this time or the one quarter of last year and um by our estimation it looks like it was your second highest dock training quarter at least to date you know how sustainable is that kind of trajectory or is there any reason you won't be able to kind of continue to train this or support this level of doc training effort going forward or

Michael Cordonnier, CEO

yeah rich you know we've seen incredible enthusiasm for this technology platform and this procedure particularly in the early and mid-career surgeons you know we started our launch very intentionally with teaching institutions and you know 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 take it to a new academic institution and start training the next generation of surgeons and so 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 apprivo 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.

Rich Neuter, Analyst — Truist Securities

And then I guess you're, you know, in the in the proposed inpatient perspective rule a couple of months ago. It looks like CMS is proposing to move all approval 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?

Michael Cordonnier, CEO

Yeah, we see it as net beneficial for broader access to this technology across hospital systems. And 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 transition to sunsetting the new technology add-on payment, Medicare created 11 different MSDRGs to cover the procedure, which is what we have today, which is very beneficial for the hospital systems for inpatient. And, you know, 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. you know, with our data that shows a reduction in re-operation rate, you know, being really meaningful savings to the healthcare system at large. And then just as we think about what this

Rich Neuter, Analyst — Truist Securities

potentially does for you incrementally as we look into 27 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. And then what about on pricing? Or is that something where you'll just, you know, the hospitals will make more profit and that's not something, you know, we shouldn't think of pricing really moving around that much. Yeah. How we really think about it is

Michael Cordonnier, CEO

accelerating access, you know, because like many new technologies, you know, one of the big limiters is getting through the hospital approval process, getting through VAC, you know, 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. And so we really see this as opportunities to accelerate adoption across much more broad hospital systems and ultimately providing additional ability to increase utilization, you know, for surgeons inside of those institutions. And so that's really how we think about this and, you know, see this as material in 27 and beyond.

Rich Neuter, Analyst — Truist Securities

That's great. Yeah, we'll be interested to see how that unfolds. I guess we'll wait until rule, I guess that's an August time frame, right?

Michael Cordonnier, CEO

Yeah, the final rule goes into place October 1, so Medicare will typically publish it 30 to 60 days before the final rule goes in place.

Rich Neuter, Analyst — Truist Securities

Okay, and anything you're hearing about the comment period, or does this seem like...

Michael Cordonnier, CEO

Yeah, we anticipate that it will 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 uh so not that you don't have plenty of

Rich Neuter, Analyst — Truist Securities

runway within a still significantly under penetrated uh lumbar opportunity but you guys are also uh in the early innings of your cervical launch um how's that how's that uh commercialization effort going relative to your expectations in the early days cervical's gone

Michael Cordonnier, CEO

very well. And so 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. So traditional osteoporotic osteopenia patients for cervical have had a really high complication rate. And so 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, you know, we've got, you know, really great reception to it with our early clinical data that we collected we launched in December of last year and as 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 and you know 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 Prevo platform. At the same institution. Exactly. So the lumbar doc was

Rich Neuter, Analyst — Truist Securities

trained and then his counterpart that does more cervical is also saying, oh, interesting.

Michael Cordonnier, CEO

Yeah, that's exactly right. And, you know, as we think about this broader platform and also getting hospital access for a broader platform, it gives us more leverage, you know, to be able to provide more value to the hospital with more than just a single patient population and so so we see this as you know continued uh acceleration of growth and 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 quora platform and so this is our first foyer outside the disc space. And, you know, it's really important for particular patients that have ACDF procedure, where we have the Aprivo three-dimensional plan, the three-dimensional inner body 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. And 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. And, you know, what we anticipate this will see is, much like with our lumbar portfolio, you know, a significant ability to treat a compromised patient population and improve outcomes across that patient population for the inpatient procedures.

Rich Neuter, Analyst — Truist Securities

And so, CORA, you did your first procedures in February, but I think the full commercial launch is slated for December, right? That's correct, yeah. And just is there anything contemplated in your revised guidance on the 1Q call for CORA, or is that in any way contributing?

Michael Cordonnier, CEO

Yeah, it's baked into the current guidance. And as we really think about this fully rolling out in 27 and beyond, you know, really having an uptick in our average revenue per procedure, because now we're adding more to the procedure, adding more value, and acceleration of adoption of the cervical platform in 27 and beyond.

Rich Neuter, Analyst — Truist Securities

And 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 26? And, you know, is there any reason why, you know, the majority of your existing installed base wouldn't be trained on cervical within the next 12 months?

Michael Cordonnier, CEO

Yeah, as we think about, you know, lumbar and cervical surgeons, you know, generally about 80% of spine surgeons do both procedures, but they tend to focus more of their practice on one versus the other. And so we've made significant investments in our medical education team, continuing to develop programs to support the accelerated training, education around the cervical portfolio. So 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. And, you know, could that percentage double exiting the year?

Rich Neuter, Analyst — Truist Securities

Or is it reasonable to think you'll have, you know, over 50% trained on cervical by mid-year next year?

Michael Cordonnier, CEO

Yeah, I think, you know, part of this is also thinking about, you know, the hospital approval dynamics as well. And so, you know, we typically, you know, have approval for lumbar, approval for cervical separately. And so continuing to work through, you know, the trial utilization for cervical for many of the accounts and getting those on contract as well. and so um but but it's very clear the surgeon enthusiasm is very strong and you know as we look at you know the various cervical procedures we'll do with uh interfixated as well as plated you know we see you know as much as 50 of you know our cervical procedures adding the core fixation

Rich Neuter, Analyst — Truist Securities

you know in the out years on that so leo i'm going to loop you in for a minute just cervical has a drag, all else equal on gross margin. I think that's embedded in your guidance, right? Maybe just remind us of that. And while you're describing that, Quora is going to potentially be adding revenue per procedure. So should we think of that as a good guy? Yeah. So when you think about the

Leonard Greenstein, CFO

longer term average revenue per procedure, we ended Q1 26 with roughly $30,000 of average revenue per procedure when you combine uh now cervical we see you know longer term and kind of the the mid the high 20s so call it 27 28 000 per revenue average revenue per procedure over time over time over time so with respect to gross margins we really view this you know 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. So we see those two items largely offsetting the product mix, you know, headwind of the lower revenue per procedure for cervical. But I think the key point is that cervical represents an important ongoing extension of the aprivo digital platform and as mike covered the same surgeon call point largely doing cervical so we get inherently the sales and marketing leverage with going to you know that 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 now with cora as you've noted it represents an important additional average revenue per procedure opportunity for the business but 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 inner bodies delivered with the cervical platform so 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 you know the cervical plating solutions is a complement to inherently what we're doing with the personalized solution

Rich Neuter, Analyst — Truist Securities

within the cervical inner body. So you did 74% gross margin, first half 25. That bumped up to 76% in the second half of last year. You just did about 77% in 1Q26, but that was before cervicals kicked in. You just walked us through some of those dynamics. So I guess let's just say we're around the mid 70s as cervical before you even have the the scale benefits and all that where do we see gross margin trending longer term so i you know as i covered here i think with the

Leonard Greenstein, CFO

ability to further leverage what we're currently doing today with the ai initiatives and ai case planning within the apprevo platform and the absorption of those fixed costs with our ongoing ramp overall of revenue we we see that durability in the mid to high 70s persisting and you know as as you know we discussed earlier the ability to further leverage the six-day lead time for both cervical and in our you know base business today in lumbar is highly important for delivery to our our hospital customers our surgeon users to ensure that they are getting the solution that neatly fits into the workflow.

Rich Neuter, Analyst — Truist Securities

And maybe just while we're on the topic of financials. So, you know, one of the things that's always struck us about this story, you're an orthopedic and a spine company in particular with, you know, probably one of the lowest working capital requirements I've seen in medtech, let alone orthopedics. You know, is there a, 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. But 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. And I think it

Leonard Greenstein, CFO

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 you know as pointed out the sales and marketing line in particular so we see ongoing decreases of overall op-ex that's a percent of revenue we see that durability within the gross margin line and as a result when you converge those items we see you know well under a 200 million annual run rate can provide us to you know the ability to hit the cash flow break-even mark we started q2 with a little over 97 million in cash we We have untapped debt availability that we have no current intention or requirement to draw upon, and that capital provides us what we require with what we see over the next few quarters to hit that cash flow break-even mark. So while we haven't provided the timing of that, hopefully that provides some-

Rich Neuter, Analyst — Truist Securities

Less than a $200 million run rate. In between $150 and $200.

Leonard Greenstein, CFO

So 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. So 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.

Rich Neuter, Analyst — Truist Securities

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. Globus is a powerhouse in Spine. So 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. Very large competitor coming in. you know, how are you guys differentiated? How can, you know, where are the moats? Just help us

Michael Cordonnier, CEO

think through this new consideration. Yeah, great question. I mean, we see this as ultimate market validation of really the work that we've done in validating personalized surgery as better for the patient you know better for the payer um and you know while again we don't know really much about it or what the intent is you know we can really talk about our platform and what's truly differentiated not just about our platform but our business you know as as i started with we are a pure play personalized surgery business and that gives us like 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. And 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 and so we see you know the mood brought the move broadly across medicine to personalization you know as we're looking at this for more targeted drugs as we're looking at this for you know targeted cancer treatments we see personalization as being the new way forward. And, you know, 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.

Rich Neuter, Analyst — Truist Securities

I guess, you know, one of the things, 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 doesn't have to come from Globus. So I would imagine, you know, this is a validation of a category that you're pioneering. But, you know, 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, you know, there's going to be the ability to partner with AI companies and probably to digitize or digitalize the industry on some level. So 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? Or maybe it's just the IP. No one can do what you're doing precisely. If it's that, tell us.

Michael Cordonnier, CEO

Yeah, you know, it's all of those things. So we certainly have a very deep IP moat around our business, you know, and, you know, we have clinical data that's specific to our procedure. And, again, our procedure is very different, and it requires this, you know, continuous loop that we've been able to develop with imaging, patient, surgical plan, procedure, post-op outcomes. and you know as far as scalability as a business we build our business from the ground up to be a digital business and we see this you know as a difficult transition for you know the large players in med tech to go truly digital only um so you know we see this as you know can i just

Rich Neuter, Analyst — Truist Securities

Is that just because their entire model is built on consignment and having all these different sets and inventory out in the field, so this can't happen overnight for them?

Michael Cordonnier, CEO

Yeah, that's exactly right. So moving from a kind of a traditional orthopedic spine med tech 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, you know, there's really a better way forward. Like maybe we don't need this giant capital investment and, you know, we can go with a truly capital less environment to deliver great patient outcomes. Great. I think we're

Rich Neuter, Analyst — Truist Securities

We're right at the half hour mark. But Mike, Leo, thank you so much for your time. Really appreciate it. Thank you, Rich. That's great.