CARLSMED, INC.

CARLSMED, INC. Annual Report - A Closer Look for Investors

Considering an investment in CARLSMED, INC.? This summary provides a clear, accessible overview of their past year. We break down their business, financial performance, strategic goals, and potential risks, helping you understand the company without needing a finance degree.

The Big Picture: What is CARLSMED, INC.?

CARLSMED, INC. (ticker: CARL), based in Carlsbad, California, is an innovative medical technology company. Their fiscal year concluded on December 31, 2025.

CARLSMED's Core Innovation: The aprevo Technology Platform

CARLSMED leads the way in personalized medicine for spinal surgery with its unique aprevo Technology Platform. This integrated platform combines:

• AI-enabled software solutions: These sophisticated tools analyze patient-specific imaging data (like CT scans). They create a precise 3D model of the patient's spine, allowing surgeons to plan complex spinal fusion procedures with unprecedented accuracy. The AI optimizes implant placement and surgical approach.
• Custom interbody implants: Using AI-driven planning, CARLSMED designs and manufactures patient-specific interbody implants. These implants are tailored to each patient's unique spinal anatomy and needs, aiming to improve fit, stability, and fusion rates, especially for complex spinal deformities.
• Single-use surgical instruments: Designed for precision and efficiency, these instruments are specific to each patient's surgical plan, ensuring optimal execution of the personalized procedure.

In essence, the aprevo platform offers a comprehensive, personalized solution for spinal fusion. It aims to enhance surgical outcomes, reduce complications, and improve patient recovery by moving beyond "one-size-fits-all" approaches.

A Landmark Year: Going Public and Financial Performance

The year 2025 proved transformative for CARLSMED, as the company successfully completed its Initial Public Offering (IPO). CARLSMED's common stock began trading on the Nasdaq Global Select Market on July 23, 2025. The IPO raised approximately $150 million in proceeds, fueling the company's growth initiatives. As of February 23, 2026, approximately 26.7 million shares of common stock were outstanding.

For the year ended December 31, 2025, CARLSMED reported total revenue of $12.5 million. This revenue primarily stemmed from the initial commercialization of its aprevo Technology Platform, reflecting a significant increase as the company scaled operations post-IPO. As is common for an emerging growth company focused on innovation and market expansion, CARLSMED reported a net loss of $45.2 million. This loss reflects substantial investments in research and development and the build-out of their commercial infrastructure.

Key expenses included research and development (R&D) costs of $28.7 million, underscoring CARLSMED's commitment to advancing its technology. Selling, general, and administrative (SG&A) expenses totaled $35.8 million, reflecting the expansion of sales and marketing teams, alongside public company operating costs.

Management Discussion and Analysis (MD&A) Highlights

The year 2025 marked a pivotal period for CARLSMED, driven by its successful IPO and the initial commercialization of the aprevo Technology Platform. The company generated $12.5 million in total revenue, indicating the early stages of market penetration and adoption for its personalized spinal solutions.

CARLSMED reported a net loss of $45.2 million. This loss resulted primarily from significant strategic investments: $28.7 million in research and development to advance the aprevo platform and expand its capabilities, and $35.8 million in selling, general, and administrative expenses. These expenses funded the expansion of its commercial infrastructure, sales force, and public company operating costs. Management views these investments as critical for achieving long-term growth and market leadership.

As an emerging growth company and a smaller reporting company, CARLSMED benefits from certain reporting flexibilities. Management has elected to utilize these flexibilities but notably chose not to use the extended transition period for new accounting standards, demonstrating a commitment to timely financial reporting.

Financial Health and Liquidity

CARLSMED concluded fiscal year 2025 with a robust cash position of $110.3 million. The $150 million in IPO proceeds significantly bolstered this cash balance. This strong liquidity provides the company with substantial resources to fund ongoing operations, strategic R&D initiatives, and commercial expansion efforts. CARLSMED's financial strategy focuses on judiciously deploying this capital to achieve its growth objectives. The company's year-end cash position indicates a strong liquidity profile.

Competitive Position

CARLSMED operates within the highly competitive spinal implant market. This market includes large, well-established companies with significant financial, marketing, and R&D resources, such as Medtronic, Johnson & Johnson (DePuy Synthes), and Stryker. Despite this intense competition, CARLSMED differentiates itself through its proprietary aprevo Technology Platform.

Its competitive advantage stems from offering a comprehensive, personalized solution for spinal fusion. This solution integrates AI-enabled software for surgical planning with patient-specific interbody implants and single-use instruments. This approach aims for improved surgical outcomes and patient recovery by moving beyond traditional "one-size-fits-all" solutions. The company's focus on innovation, intellectual property protection, and continuous enhancement of its personalized technology is crucial for maintaining and strengthening its competitive standing in this specialized segment of the medical device industry.

Strategic Outlook: What They're Working Towards

CARLSMED has a clear strategic roadmap for future growth and market leadership:

• Regulatory Expansion: The company is pursuing additional regulatory approvals for new aprevo platform features and expanding its indications for use, including potential applications in other orthopedic segments.
• Market Penetration & Adoption: CARLSMED is intensifying commercialization efforts in the U.S. by expanding its direct sales force and strengthening relationships with key surgeons and hospitals. They aim to increase the number of surgeons trained and actively using the aprevo platform.
• Reimbursement Optimization: The company actively engages with third-party payers and healthcare systems to secure favorable and consistent reimbursement for its personalized spinal solutions, which is critical for broader market access and adoption.
• Geographic & Adjacent Market Expansion: CARLSMED is exploring opportunities to expand the aprevo platform into international markets. They are also evaluating adjacent orthopedic markets where personalized solutions could offer significant clinical benefits.
• Continuous Innovation: The company invests heavily in R&D to further enhance its AI algorithms, develop new implant designs, and integrate advanced materials, ensuring it maintains a competitive edge in personalized medical technology.
• Operational Efficiency: CARLSMED is streamlining manufacturing processes and supply chain management to reduce lead times for custom implants and improve overall cost efficiency, despite reliance on a limited number of specialized third-party manufacturers.

Key Risks for Investors to Consider

Like any investment, CARLSMED faces specific risks that could impact its future performance:

• Regulatory Hurdles: The medical device industry is highly regulated. Changes in FDA requirements, delays in obtaining new product approvals, or adverse regulatory decisions could significantly impact commercialization efforts.
• Commercialization & Market Adoption: Despite promising technology, successful commercialization depends on widespread surgeon adoption, favorable clinical outcomes, and the ability to differentiate from established competitors. Market acceptance for novel, personalized solutions can be slower than anticipated.
• Reimbursement Challenges: Securing adequate and consistent reimbursement from private and government payers is crucial. Unfavorable reimbursement policies or delays in coverage decisions could limit patient access and revenue growth.
• Intense Competition: The spinal implant market is highly competitive, with established players possessing greater financial and marketing resources. CARLSMED must continuously innovate to maintain its competitive advantage.
• Manufacturing & Supply Chain Dependence: Reliance on a limited number of third-party manufacturers for critical components and custom implants exposes the company to supply chain disruptions, quality control issues, or increased costs.
• Intellectual Property Protection: Protecting its proprietary AI algorithms, software, and implant designs through patents and trade secrets is vital. Any infringement or inability to defend its intellectual property could erode its competitive position.
• Need for Additional Capital: While well-capitalized from its IPO, CARLSMED anticipates needing additional funding to support its long-term growth initiatives, including expanded R&D, market expansion, and potential acquisitions. Future capital raises could dilute existing shareholders.
• Management of Growth: As an emerging growth company, effectively managing rapid expansion in operations, personnel, and commercial activities presents significant organizational and operational challenges.