CARLSMED, INC.

Previous wording

The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our results of operations and financial condition. You should read this discussion and analysis in conjunction with our unaudited Condensed Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited Financial Statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the year ended December 31, 2025 included in our Annual Report on Form 10-K. Unless the context otherwise requires, references to “Carlsmed,” the “Company,” “we,” “us,” and “our” refer to Carlsmed, Inc., a Delaware corporation. This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations, intentions, and projections. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the “Risk Factors” section of the Annual Report on Form 10-K. See the section titled “Special Note Regarding Forward-Looking Statements.” Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Current wording

The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our results of operations and financial condition. You should read this discussion and analysis in conjunction with our unaudited Condensed Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited Financial Statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the year ended December 31, 2025 included in our Annual Report. Unless the context otherwise requires, references to “Carlsmed,” the “Company,” “we,” “us,” and “our” refer to Carlsmed, Inc., a Delaware corporation. This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations, intentions, and projections. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the “Risk Factors” section of the Annual Report. See the section titled “Special Note Regarding Forward-Looking Statements.” Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Previous wording

Our technology is powered by AI-enabled technologies and outcome-based algorithms that provide personalized surgical plans for spine fusion. The surgical kit delivered to customers includes aprevo interbody implants for a custom vertebral fit and personalized alignment to address each patient’s unique needs, and single-use surgical instruments. The aprevo Technology Platform supports surgeons in achieving proper spinal alignment as they seek to improve surgical outcomes for patients with degenerative disc disease (“DDD”), including spinal deformity conditions.

Current wording

Our technology is powered by AI-enabled software solutions and outcome-based algorithms to create personalized surgical plans for spine fusion. The surgical kit delivered to customers includes aprevo interbody implants, and as applicable, fixation implants, for a custom vertebral fit and personalized alignment to address each patient’s unique needs, and single-use surgical instruments. The Carlsmed Technology Platform supports surgeons in achieving proper spinal alignment in their efforts to improve surgical outcomes for patients with degenerative disc disease (“DDD”), including spinal deformity conditions.

Previous wording

We market the aprevo Technology Platform to surgeons, hospitals and ambulatory surgical centers in the United States through a combination of our sales team and independent sales agents. Our sales team consists of Area Vice Presidents, Sales Directors, Account Managers, and Strategic and National Account leadership, who are primarily responsible for promoting our platform to surgeons, supporting digital file exchange and other connectivity between our Company and hospitals, and working with hospitals to secure required approvals for our products. Our sales team is also responsible for recruiting independent sales agents who cover each aprevo surgery in the operating room.

Current wording

We market the Carlsmed Technology Platform in the United States through a combination of our direct sales team and independent sales agents. Our sales team consists of Area Vice Presidents, Sales Directors, Account Managers, and Strategic and National Account leadership, who are primarily responsible for promoting our platform to surgeons, hospitals and ambulatory surgical centers and working with our customers to secure required approvals for our products. Our sales team is also responsible for recruiting independent sales agents who cover each surgery in the operating room.

Previous wording

Since we began commercializing the aprevo Technology Platform in 2021, we have experienced sequential quarterly and annual revenue growth from its rapid commercial adoption. For the three months ended June 30, 2026 and 2025, we recognized revenue of $18.9 million and $12.1 million, respectively, representing period-over-period growth of 57%. For the six months ended June 30, 2026 and 2025, we recognized revenue of $35.1 million and $22.3 million, respectively, representing period-over-period growth of 57%.

Current wording

Since we began commercializing the Carlsmed Technology Platform in 2021, we have experienced sequential quarterly and annual revenue growth from its rapid commercial adoption. For the three months ended September 30, 2026 and 2025, we recognized revenue of $21.6 million and $13.1 million, respectively, representing period-over-period growth of 65%. For the nine months ended September 30, 2026 and 2025, we recognized revenue of $56.6 million and $35.3 million, respectively, representing period-over-period growth of 60%.

Previous wording

Our business model depends on our ability to timely deliver the aprevo Technology Platform to allow surgeons to maintain surgical schedules for their patients. Our digital production system (“DPS”) enables a short manufacturing lead time of six business days from surgeon approval of the digital surgical plan to aprevo kit delivery to the hospital. We believe that this lead time typically fits well within our customers’ requirements. Our medical devices are manufactured to our specifications by CMOs who meet our manufacturer qualification standards.

Current wording

Our business model depends on our ability to timely deliver the Carlsmed Technology Platform to allow surgeons to maintain surgical schedules for their patients. Our digital production system (“DPS”) enables a short manufacturing lead time from surgeon approval of the digital surgical plan to kit delivery to the hospital. We believe that this lead time typically fits well within our customers’ requirements. Our medical devices are manufactured to our specifications by CMOs who meet our manufacturer qualification standards.

Previous wording

In July 2020, the U.S. Food and Drug Administration (“FDA”) awarded us a Breakthrough Device Designation, indicating that aprevo lumbar interbody implants are likely to provide a more effective treatment than the use of stock implants. In December 2020, the FDA, through its 510(k) regulatory clearance pathway, cleared our aprevo interbody implants for lumbar fusions to correct adult spinal deformity (“ASD”). After FDA clearance, we commenced the limited clinical release of the aprevo Technology Platform, with the first U.S. aprevo patient procedure completed in February 2021. In August 2022, the FDA, through its 510(k) regulatory clearance pathway, cleared the aprevo Technology Platform for the treatment of patients with several degenerative conditions of the lumbar spine.

Current wording

In July 2020, the U.S. Food and Drug Administration (“FDA”) awarded us a Breakthrough Device Designation, indicating that aprevo lumbar interbody implants are likely to provide a more effective treatment than the use of stock implants. In December 2020, the FDA, through its 510(k) regulatory clearance pathway, cleared our aprevo interbody implants for lumbar fusions to correct adult spinal deformity (“ASD”). After FDA clearance, we commenced the limited clinical release of the Carlsmed Technology Platform, with the first U.S. aprevo patient procedure completed in February 2021. In August 2022, the FDA, through its 510(k) regulatory clearance pathway, cleared the Carlsmed Technology Platform for the treatment of patients with several degenerative conditions of the lumbar spine.

Previous wording

In September 2023, the FDA granted us a Breakthrough Device Designation for aprevo in cervical spine fusion. In November 2024, we received FDA 510(k) clearance for our aprevo Technology Platform for cervical spine fusion surgery. In July 2025, the first aprevo cervical procedure was successfully completed at UC San Diego Health and we commercially launched aprevo Cervical in December 2025.

Current wording

In September 2023, the FDA granted us a Breakthrough Device Designation for aprevo in cervical spine fusion. In November 2024, we received FDA 510(k) clearance for our Carlsmed Technology Platform for cervical spine fusion surgery. In July 2025, the first aprevo cervical procedure was successfully completed at UC San Diego Health and we commercially launched aprevo cervical in December 2025.

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In December 2025, we received FDA 510(k) clearance for our corra Cervical Plating System, the first personalized cervical plating system to receive FDA 510(k) clearance. In February 2026, the first procedure using corra was successfully completed at UC San Diego Health, and we expect to commercially launch corra in December 2026.

Current wording

In December 2025, we received FDA 510(k) clearance for our corra cervical plating system, the first personalized cervical plating system to receive FDA 510(k) clearance. In February 2026, the first procedure using corra was successfully completed at the University of California San Francisco, and we expect to commercially launch corra in December 2026.

Previous wording

Since its full commercial launch in October 2021, the aprevo Technology Platform for spine fusion surgery has been used to treat more than 4,400 patients through June 30, 2026. We estimate there are approximately 4,000 spine surgeons across the United States whose patients could benefit from using our platform. As of June 30, 2026, we had an increase of over 67% of trained surgeon users on the aprevo Technology Platform who have completed one or more aprevo procedures as compared to June 30, 2025.

Current wording

Since its full commercial launch in October 2021, the Carlsmed Technology Platform for spine surgery has been used to treat more than 5,100 patients through September 30, 2026. We estimate there are approximately 4,000 spine surgeons across the United States whose patients could benefit from using our platform. As of September 30, 2026, the number of trained surgeon users on the Carlsmed Technology Platform who have completed one or more procedures increased by 69% as compared to September 30, 2025.

Previous wording

Over time, we expect to meaningfully grow the base of surgeons using the aprevo Technology Platform and its penetration with existing surgeon users. To achieve this, we plan to grow our commercial infrastructure and expand various sales and marketing initiatives, including supporting medical education programs, surgeon fellowships, and surgeon training at top academic institutions.

Current wording

Over time, we expect to meaningfully grow both the base of surgeons using the Carlsmed Technology Platform and penetration with existing surgeon users. To achieve this, we plan to grow our commercial infrastructure and expand various sales and marketing initiatives, including supporting medical education programs, surgeon fellowships, and surgeon training at top academic institutions.

Previous wording

We are also committed to building upon our strong foundation of clinical evidence demonstrating the efficacy of our aprevo Technology Platform for DDD and ASD lumbar fusions and anterior cervical discectomy and fusion ("ACDF") cervical fusions. Clinical data publications are important tools for surgeon education and patient awareness of the potential significant benefits of our personalized solution as compared to stock implants.

Current wording

We are also committed to building on our strong foundation of clinical evidence demonstrating the efficacy of our Carlsmed Technology Platform for DDD and ASD lumbar fusions and anterior cervical discectomy and fusion ("ACDF") cervical fusions. Clinical data publications are important tools for surgeon education and patient awareness of the potential significant benefits of our personalized solution as compared to stock implants.

Previous wording

Our research and development initiatives are focused on introducing new products, enhancements and capabilities aimed at increasing the value provided by our aprevo Technology Platform to patients, surgeons, and payors. We are developing new iterations of our algorithm and software platform to drive further improvements in surgical planning and in turn help surgeons to make more informed decisions to best treat their patients.

Current wording

Our research and development initiatives are focused on introducing new products, enhancements and capabilities aimed at increasing the value provided by our Carlsmed Technology Platform to patients, surgeons, and payors. We are developing new iterations of our algorithm and software platform to drive further improvements in surgical planning and in turn help surgeons to make more informed decisions to best treat their patients.

Previous wording

In November 2024, we received FDA 510(k) clearance for our aprevo interbody implants for cervical spine fusion surgery as part of the FDA-cleared aprevo Technology Platform and commenced commercialization in December 2025. Also in December 2025, we received FDA 510(k) clearance for our accompanying personalized cervical plating solutions as part of the aprevo cervical platform. In February 2026, we completed the first personalized plating procedure using the corra Cervical Plating System at the University of California San Francisco and are planning for its full commercial launch by December 2026. We expect to drive adoption of the aprevo cervical indication with our existing base of surgeons who are actively using the aprevo Technology Platform for lumbar spine fusion surgeries.

Current wording

We commenced commercialization of our aprevo interbody implants for cervical spine fusion surgery in December 2025. Shortly thereafter, in February 2026, we completed the first personalized plating procedure using the corra cervical plating system at the University of California San Francisco. The full commercial launch of the corra cervical plating system is planned for December 2026. We expect to drive adoption of the aprevo cervical indication with our existing base of surgeons who are actively using the Carlsmed Technology Platform for lumbar spine fusion surgeries.

Previous wording

In February 2026, as part of a limited market evaluation, we announced the successful completion of the first aprevo bi-lateral posterior lumbar spine surgery procedure at the University of Colorado Hospital in Denver, Colorado. The addition of aprevo bi-lateral expands our lumbar offering across multiple spinal fusion techniques and integrates seamlessly with our broader aprevo platform technology. The full commercial launch of aprevo bi-lateral is planned for the fourth quarter of 2026.

Current wording

In February 2026, as part of a limited market evaluation, we announced the successful completion of the first aprevo bi-lateral posterior lumbar spine surgery procedure at the University of Colorado Hospital in Denver, Colorado. The addition of aprevo bi-lateral expands our lumbar offering across multiple spinal fusion techniques and integrates seamlessly with our broader platform technology. We launched aprevo bi-lateral commercially in the United States in October 2026.

Previous wording

Future changes in the level of reimbursement that hospitals and outpatient facilities receive from payors for lumbar and cervical fusion surgical procedures could have a significant impact on our results of operations. The level of payors' reimbursement for procedures using our aprevo Technology Platform depends substantially on our continued ability to generate clinical evidence, garner support from key opinion leaders, and gain advocacy for patient access to our technology with Centers for Medicare & Medicaid Services ("CMS") and commercial payors.

Current wording

Future changes in the level of reimbursement that hospitals and outpatient facilities receive from payors for lumbar and cervical fusion surgical procedures could have a significant impact on our results of operations. The level of payors' reimbursement for procedures using our Carlsmed Technology Platform depends substantially on our continued ability to generate clinical evidence, garner support from key opinion leaders, and gain advocacy for patient access to our technology with the Centers for Medicare & Medicaid Services ("CMS") and commercial payors.

Previous wording

Procedures using our aprevo Technology Platform are eligible for reimbursement by Medicare, Medicare Advantage, and commercial payors. For the three and six months ended June 30, 2026, we estimate that our hospital customers’ payor mix consisted of approximately 44% commercial insurance and 56% for both Medicare and Medicare Advantage insurance, combined. We believe the clinical benefit of aprevo, which has been shown to significantly reduce long-term reoperations due to mechanical complications, will continue to support demand for our technology in lumbar spine fusion surgeries.

Current wording

Lumbar procedures using our Carlsmed Technology Platform are eligible for reimbursement by Medicare, Medicare Advantage, and commercial payors. For the three and nine months ended September 30, 2026, we estimate that our hospital customers’ payor mix consisted of approximately 47% commercial insurance and 53% for both Medicare and Medicare Advantage insurance, combined. We believe the clinical benefit of aprevo, which has been shown to significantly reduce long-term reoperations due to mechanical complications or adjacent segment disease, will continue to support demand for our technology in lumbar spine fusion surgeries.

Previous wording

The CMS Fiscal Year 2027 Inpatient Prospective Payment System (FY27 IPPS) Final Rule was released on July 31, 2026, and will be effective October 1, 2026. This final FY27 IPPS rule will replace the current MS-DRG payment framework for inpatient lumbar spine fusions. Effective October 1, 2026, all inpatient lumbar spine fusion procedures utilizing aprevo will be assigned to one of the three new MS-DRG codes: 523, 524, or 525 (Extensive or Complex Spinal Fusion Procedures Except Cervical with MCC, with Complication or Comorbidity (CC), and without CC/MCC, respectively) and will no longer be assigned to the MS-DRG 400 series. CMS removed references to CMAD interbody fusion devices from MS-DRGs 426, 447, and 450 descriptions, clarifying that qualifying personalized lumbar fusion surgeries will only be assigned to new MS-DRGs 523, 524, and 525.

Current wording

The CMS Fiscal Year 2027 Inpatient Prospective Payment System (“FY27 IPPS”) Final Rule became effective on October 1, 2026, replacing the MS-DRG payment framework under which inpatient lumbar spine fusion procedures using aprevo had been previously assigned. As of October 1, 2026, all inpatient lumbar spine fusion procedures utilizing aprevo are assigned to one of the three new MS-DRG codes: 523, 524, or 525 (Extensive or Complex Spinal Fusion Procedures Except Cervical with MCC, with Complication or Comorbidity (CC), and without CC/MCC, respectively) instead of to the MS-DRG 400 series.

Previous wording

We believe this updated framework has the potential to support broader aprevo lumbar adoption by (i) reducing hospitals' uncertainty regarding which aprevo procedures will qualify for payment elevation, as this new MS-DRG structure comprehensively includes all aprevo lumbar procedures, and (ii) providing hospitals with more appropriate reimbursement amounts that better reflect their incremental costs to perform personalized lumbar fusion procedures compared to stock interbody device procedures.

Current wording

We believe this updated framework has the potential to support broader aprevo lumbar adoption by (i) reducing hospitals' uncertainty regarding which aprevo procedures will qualify for additional reimbursement, as this new MS-DRG structure comprehensively includes all inpatient aprevo lumbar procedures, and (ii) providing hospitals with more appropriate reimbursement amounts that better reflect their incremental costs to perform personalized lumbar fusion procedures compared to stock interbody device procedures.

Previous wording

In June 2026, the CMS ICD-10 Coordination and Maintenance Committee published 24 new permanent ICD-10-PCS procedure codes that also will become effective on October 1, 2026. These new permanent codes will replace the ICD-10-PCS "X-series" codes that temporarily described aprevo procedures associated with NTAP. These new ICD-10-PCS codes describe “Interbody Fusion Device, Custom-Made Anatomically and Virtually Designed" (CMAVD) procedures and are used to assign procedures to MS-DRG codes 523, 524, and 525 as part of the FY27 IPPS final rule.

Current wording

In June 2026, the CMS ICD-10 Coordination and Maintenance Committee published 24 new permanent ICD-10-PCS procedure codes that also became effective on October 1, 2026. These new permanent codes replace the ICD-10-PCS “X-series” codes that temporarily described aprevo procedures associated with NTAP. These new ICD-10-PCS codes describe “Interbody Fusion Device, Custom-Made Anatomically and Virtually Designed” (“CMAVD”) procedures and are used to assign procedures to MS-DRG codes 523, 524, and 525 as part of the FY27 IPPS Final Rule.

Previous wording

The addition of the word “virtually” in the ICD-10-PCS procedure codes is consistent with our aprevo Technology Platform’s ability to render an interactive 3D virtual model to realign the spinal anatomy and enhance the preoperative surgical correction planning process. We believe the creation of these permanent procedure codes represents an important milestone, formally recognizing CMAVD attributes within the standard ICD-10-PCS coding system for select procedures, such as those that utilize the aprevo Technology Platform.

Current wording

The addition of the word “virtually” in the ICD-10-PCS procedure codes is consistent with our Carlsmed Technology Platform’s ability to render an interactive 3D virtual model to realign the spinal anatomy and enhance the preoperative surgical correction planning process. We believe the creation of these permanent procedure codes represents an important milestone, formally recognizing CMAVD attributes within the standard ICD-10-PCS coding system for select procedures, such as those that utilize the Carlsmed Technology Platform.

Previous wording

We believe Medicare-aged patients receiving multi-level ACDF surgeries are uniquely addressed by aprevo cervical. Based on our internal data, a majority of these procedures are performed in an inpatient setting. Effective October 1, 2025, qualifying cervical fusion procedures utilizing aprevo personalized interbody implants for traditional Medicare beneficiaries are eligible for NTAP from CMS. The NTAP program provides additional reimbursement to hospitals that use designated new medical technologies in the first few years of market introduction. These new technologies must demonstrate significant clinical improvement in the diagnosis or treatment of Medicare beneficiaries compared to existing alternatives or be designated by the FDA as Breakthrough technology. CMS created unique ICD-10-PCS codes to identify cervical fusion procedures using “custom made anatomically designed interbody fusion devices” such as our aprevo Technology Platform. Reimbursement claims submitted with these unique ICD-10-PCS procedure codes may qualify hospitals for up to an additional $21,125 in NTAP reimbursement for eligible inpatient procedures.

Current wording

We believe Medicare-aged patients receiving multi-level ACDF surgeries are uniquely addressed by aprevo cervical. Based on our internal data, a majority of these procedures are performed in an inpatient setting. Effective October 1, 2025, qualifying cervical fusion procedures utilizing aprevo personalized interbody implants for traditional Medicare beneficiaries are eligible for NTAP from CMS. The NTAP program provides temporary additional payment for eligible technologies whose costs are not adequately represented in the existing MS-DRG structure. These new technologies must demonstrate significant clinical improvement in the diagnosis or treatment of Medicare beneficiaries compared to existing alternatives or be designated by the FDA as Breakthrough technology. CMS created unique ICD-10-PCS codes to identify cervical fusion procedures using “custom made anatomically designed interbody fusion devices” such as our Carlsmed Technology Platform. Reimbursement claims submitted with these unique ICD-10-PCS procedure codes may qualify hospitals for up to an additional $21,125 in NTAP reimbursement for eligible inpatient procedures.

Previous wording

aprevo cervical currently has the same payor reimbursement methodology as stock interbody implants for hospital outpatient departments and ambulatory surgery centers. Our requested Transitional Pass-Through (“TPT”) payment for aprevo cervical in outpatient settings was not approved by CMS in its November 2025 Outpatient Prospective Payment System (OPPS) Final Rule, despite our analysis and documentation for its qualification. We continue to explore opportunities with CMS for various pathways including TPT and New Technology Ambulatory Payment Classification (NT-APC) to appropriately reimburse our customers' costs of providing the aprevo Technology Platform in outpatient cervical fusion procedures.

Current wording

aprevo cervical currently has the same payor reimbursement methodology as stock interbody implants for hospital outpatient departments and ambulatory surgery centers. Our requested Transitional Pass-Through (“TPT”) payment for aprevo cervical in outpatient settings was not approved by CMS in its November 2025 Outpatient Prospective Payment System (OPPS) Final Rule, despite our analysis and documentation for its qualification. We continue to explore opportunities with CMS for various pathways including TPT and New Technology Ambulatory

Previous wording

We sell our aprevo interbody implants and accompanying inserter instruments to customers under standard pricing schedules. We typically recognize revenue in the period of its use within a spine fusion surgical procedure.

Current wording

We sell our aprevo interbody implants, corra cervical plating systems and accompanying inserter instruments to customers under standard pricing schedules. We typically recognize revenue in the period of its use within a spine fusion surgical procedure.

Previous wording

Cost of sales includes the costs of creating patient-specific digital surgical plans and the manufacturing costs of our aprevo interbody implants and the accompanying inserter instruments. These costs of sales include allocations for personnel, software, contract manufacturing and other third-party services, packaging, shipping, provision for excess and obsolete inventory, and overhead cost allocations. We expect that our cost of sales will continue to increase in proportion to recognized revenue.

Current wording

Cost of sales includes the costs of creating patient-specific digital surgical plans and the manufacturing costs of our aprevo interbody implants and corra cervical plating systems and the accompanying inserter instruments. These costs of sales include allocations for personnel, software, contract manufacturing and other third-party services, packaging, shipping, provision for excess and obsolete inventory, and overhead cost allocations. We expect that our cost of sales will continue to increase in proportion to recognized revenue.

Previous wording

Gross profit (i.e., revenue less cost of sales) and gross margin (i.e., gross profit as apercentage of revenue) have been, and will continue to be, affected by various factors. These include potential changes to our average revenue per procedure, sales volumes, third-party manufacturing costs, direct labor costs, software costs, and provisions for excess and obsolete inventory. 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 planned manufacturing efficiencies.

Current wording

Gross profit (i.e., revenue less cost of sales) and gross margin (i.e., gross profit as apercentage of revenue) have been, and will continue to be, affected by various factors. These include potential changes to our average revenue per procedure, sales volumes, third-party manufacturing costs, labor costs, software costs, and provisions for excess and obsolete inventory. 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 planned manufacturing efficiencies.

Previous wording

We expect our sales and marketing expenses to increase in the foreseeable future as we continue to increase the size of our sales organization and scope of our marketing efforts in the United States and into other geographies, expand the indications for our aprevo Technology Platform, and establish international sales channels. While we expect sales and marketing expenses to continue to increase in absolute value, we expect that these costs will decrease as a percentage of revenue over time.

Current wording

We expect our sales and marketing expenses to increase in the foreseeable future as we continue to increase the size of our sales organization and scope of our marketing efforts in the United States and into other geographies, expand the indications for our Carlsmed Technology Platform, and establish international sales channels. While we expect sales and marketing expenses to continue to increase in absolute value, we expect that these costs will decrease as a percentage of revenue over time.

Previous wording

We accounted for these liability-classified warrants, initially measured at fair value, in accordance with ASC Topic 480. Changes in fair value of warrant liabilities have been recognized in the Condensed Statements of Operations and Comprehensive Loss. During the six months ended June 30, 2026, Customers Bank exercised the warrants on a cashless basis, resulting in the issuance of 30,366 shares of common stock. As a result of the exercise, the warrants are no longer outstanding. See Note 2—Summary of Significant Accounting Policiesin the notes to our unaudited Condensed Financial Statements for information regarding the Series B Warrant and the Series C Warrant in connection with the Customers Loan Agreement.

Current wording

We accounted for these liability-classified warrants, initially measured at fair value, in accordance with ASC Topic 480. Changes in fair value of warrant liabilities have been recognized in the Condensed Statements of Operations and Comprehensive Loss. During the nine months ended September 30, 2026, Customers Bank exercised the warrants on a cashless basis, resulting in the issuance of 30,366 shares of common stock. As a result of the exercise, the warrants are no longer outstanding. See Note 2—Summary of Significant Accounting Policiesin the notes to our unaudited Condensed Financial Statements for information regarding the Series B Warrant and the Series C Warrant in connection with the Customers Loan Agreement.

Previous wording

Comparison of the Three and Six Months Ended June 30, 2026 and 2025

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Comparison of the Three and Nine Months Ended September 30, 2026 and 2025

Previous wording

Revenue was $18.9 million and $12.1 million for the three months ended June 30, 2026 and 2025, respectively. The increase of $6.9 million, or 56.7%, was primarily driven by increased volume of aprevo Technology Platform lumbar and cervical surgical procedures in the current quarter, with our average revenue per procedure substantially constant between these periods.

Current wording

Revenue was $21.6 million and $13.1 million for the three months ended September 30, 2026 and 2025, respectively. The increase of $8.5 million, or 64.9%, was primarily driven by increased volume of Carlsmed Technology Platform lumbar and cervical surgical procedures in the current quarter, with our average revenue per procedure substantially constant between these periods.

Previous wording

Revenue was $35.1 million and $22.3 million for the six months ended June 30, 2026 and 2025, respectively. The increase of $12.8 million, or 57.4%, was primarily driven by increased volume of aprevo Technology Platform lumbar and cervical surgical procedures in the current six-month period, with our average revenue per procedure substantially constant between these periods.

Current wording

Revenue was $56.6 million and $35.3 million for the nine months ended September 30, 2026 and 2025, respectively. The increase of $21.3 million, or 60.2%, was primarily driven by increased volume of Carlsmed Technology Platform lumbar and cervical surgical procedures in the current nine-month period, with our average revenue per procedure substantially constant between these periods.

Previous wording

Cost of sales was $4.4 million and $3.2 million for the three months ended June 30, 2026 and 2025, respectively. The increase of $1.2 million, or 36.8%, was primarily driven by increased unit sales of the aprevo Technology Platform for both lumbar and cervical procedures, for the three months ended June 30, 2026 , as compared to the three months ended June 30, 2025.

Current wording

Cost of sales was $4.9 million and $3.1 million for the three months ended September 30, 2026 and 2025, respectively. The increase of $1.7 million, or 55.4%, was primarily driven by increased unit sales of the Carlsmed Technology Platform for both lumbar and cervical procedures, for the three months ended September 30, 2026, as compared to the three months ended September 30, 2025.

Previous wording

Gross margin was 76.8% for the three months ended June 30, 2026, as compared to 73.4% for the three months ended June 30, 2025 with cost improvements primarily from lower per unit production fees charged by our contract manufacturer in the current period and other efficiencies in our digital production system.

Current wording

Gross margin was 77.3% for the three months ended September 30, 2026, as compared to 75.9% for the three months ended September 30, 2025 with cost improvements primarily from lower per unit production fees charged by our contract manufacturer in the current period and other efficiencies in our digital production system.

Previous wording

Cost of sales was $8.1 million and $5.8 million for the six months ended June 30, 2026 and 2025, respectively. The increase of $2.3 million, or 40.3%, was primarily driven by increased unit sales of the aprevo Technology Platform for both lumbar and cervical procedures, for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025.

Current wording

Cost of sales was $13.0 million and $8.9 million for the nine months ended September 30, 2026 and 2025, respectively. The increase of $4.1 million, or 45.6%, was primarily driven by increased unit sales of the Carlsmed Technology Platform for both lumbar and cervical procedures, for the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025.

Previous wording

Gross margin was 76.9% for the six months ended June 30, 2026, as compared to 74.1% for the six months ended June 30, 2025 with cost improvements primarily from lower per unit production fees charged by our contract manufacturer in the current period and other efficiencies in our digital production system.

Current wording

Gross margin was 77.1% for the nine months ended September 30, 2026, as compared to 74.8% for the nine months ended September 30, 2025 with cost improvements primarily from lower per unit production fees charged by our contract manufacturer in the current period and other efficiencies in our digital production system.

Previous wording

Research and development expenses were $6.0 million and $4.2 million for the three months ended June 30, 2026 and 2025, respectively. The increase of $1.9 million, or 45.2%, was primarily due to higher personnel costs to support product development and surgical planning AI initiatives.

Current wording

Research and development expenses were $6.4 million and $4.4 million for the three months ended September 30, 2026 and 2025, respectively. The increase of $1.9 million, or 43.5%, was primarily due to higher personnel costs to support product development and testing and surgical planning AI initiatives, as well as executive transition costs.

Previous wording

Research and development expenses were $11.2 million and $7.3 million for the six months ended June 30, 2026 and 2025, respectively. The increase of $3.9 million, or 53.5%, was primarily due to higher personnel costs to support product development and surgical planning AI initiatives.

Current wording

Research and development expenses were $17.6 million and $11.8 million for the nine months ended September 30, 2026 and 2025, respectively. The increase of $5.8 million, or 49.7%, was primarily due to higher personnel costs to support product development and testing and surgical planning AI initiatives, as well as executive transition costs.

Previous wording

Sales and marketing expenses were $22.2 million and $14.6 million for the six months ended June 30, 2026 and 2025, respectively. The increase of $7.6 million, or 52.1%, was primarily driven by a $2.9 million increase in personnel-related costs (including increased headcount, sales compensation and bonuses, and stock-based compensation), a $1.8 million increase in commissions to independent sales agents and $1.2 million increase in generic surgical instruments to support increased sales activity, and a $1.7 million increase in various marketing costs.

Current wording

Sales and marketing expenses were $13.0 million and $9.6 million for the three months ended September 30, 2026 and 2025, respectively. The increase of $3.4 million, or 35.3%, was primarily driven by a $1.4 million increase in personnel-related costs (including increased headcount, sales compensation and bonuses, and stock-based compensation), a $1.4 million increase in commissions to independent sales agents and a $0.6 million increase in generic surgical instruments and other selling and marketing-related costs to support increased sales activity.

Previous wording

Sales and marketing expenses were $11.9 million and $7.9 million for the three months ended June 30, 2026 and 2025, respectively. The increase of $4.1 million, or 51.5%, was primarily driven by a $1.5 million increase in personnel-related costs (including increased headcount, sales compensation and bonuses, and stock-based compensation), a $0.9 million increase in commissions to independent sales agents and $0.8 million increase in generic surgical instruments provided to independent sales representatives to support increased case volumes, and a $0.9 million increase in various marketing costs.

Current wording

Sales and marketing expenses were $35.2 million and $24.2 million for the nine months ended September 30, 2026 and 2025, respectively. The increase of $11.0 million, or 45.4%, was primarily driven by a $4.4 million increase in personnel-related costs (including increased headcount, sales compensation and bonuses, and stock-based compensation), a $3.2 million increase in commissions to independent sales agents and a $3.4 million increase in generic surgical instruments and other selling and marketing-related costs to support increased sales activity.

Previous wording

General and administrative expenses were $13.8 million and $6.8 million for the six months ended June 30, 2026 and 2025, respectively. The increase of $7.0 million, or 103.3%, was primarily driven by a $3.4 million increase in personnel-related costs to support business growth and compliance and operational requirements as a public company, a $1.6 million increase in professional service and legal fees to support corporate operations, compliance programs, and intellectual property and other ordinary course legal matters, and a $0.8 million increase in the provision for estimated uncollectible customer accounts.

Current wording

General and administrative expenses were $10.0 million and $4.9 million for the three months ended September 30, 2026 and 2025, respectively. The increase of $5.1 million, or 103.4%, was primarily driven by a $2.9 million increase in personnel-related costs, including $1.4 million of severance and accelerated share-based compensation related to executive separation costs, as well as costs to support business growth and compliance and operational requirements as a public company; a $0.9 million increase in professional service and legal fees, including $0.5 million of executive recruiting fees to support corporate operations, compliance programs, and intellectual property and other ordinary course legal matters; and a $1.3 million increase in other administrative costs.

Previous wording

General and administrative expenses were $7.6 million and $3.3 million for the three months ended June 30, 2026 and 2025, respectively. The increase of $4.3 million, or 127.9%, was primarily driven by a $1.8 million increase in personnel-related costs to support business growth and compliance and operational requirements as a public company, a $1.4 million increase in professional service and legal fees to support corporate operations, compliance programs, and intellectual property and other ordinary course legal matters, and a $0.5 million increase in the provision for estimated uncollectible customer accounts.

Current wording

General and administrative expenses were $23.8 million and $11.7 million for the nine months ended September 30, 2026 and 2025, respectively. The increase of $12.1 million, or 103.4%, was primarily driven by a $6.3 million increase in personnel-related costs, including $1.4 million of severance and accelerated share-based compensation related to executive separation costs, as well as costs to support business growth and compliance and operational requirements as a public company; a $2.6 million increase in professional service and legal fees, including $0.5 million of executive recruiting fees to support corporate operations, compliance programs, and intellectual property and other ordinary course legal matters; a $0.9 million increase in the provision for estimated uncollectible customer accounts; and a $2.3 million increase in other administrative costs.