Q1 2024 AVITA Medical Inc Earnings Call

Operator: Good day, and thank you for standing by, and welcome to AVITA Medical Inc.'s first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jessica Ekeberg, Director of Investor Relations. Please go ahead.

Good day, and thank you for standing by and welcome to the Vida Medical Inc. First quarter 'twenty 'twenty four earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then here in the.

Made a message advising your hand is raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Jessica Echenberg director of Investor Relations. Please go ahead.

Jessica Ekeberg: Thank you, Operator. Welcome to AVITA Medical's First Quarter 2024 Earnings Call. Joining me on today's call are Jim Corbett, Chief Executive Officer, and David OToole, Chief Financial Officer. Today's earnings release and presentation are available on our website, www.avitamedical.com, under the Investor Relations section. Before we begin, I'd like to remind you that this call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results to differ materially from any expectations expressed or implied by the forward-looking statement.

Jessica Ekeberg: Thank you operator welcome to be the medical first quarter 2024 earnings call. Joining me on today's call are Jim Corbett, Chief Executive Officer, and David O'toole, Chief Financial Officer.

Jessica Ekeberg: Today's earnings release and presentation are available on our website www dot that'd be the medical dot com under the Investor Relations section.

Speaker Change: Before we begin.

Speaker Change: I'd like to remind you that this call includes forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Speaker Change: These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results to differ materially from any expectations expressed or implied by the forward looking statements.

Jessica Ekeberg: Please review our most recent filings with the SEC for comprehensive descriptions of the risk factors. Any forward-looking statements provided during this call are based on management's expectations as of today. I will now turn the call over to Jim for his comments.

Speaker Change: Please review our most recent filings with the SEC for comprehensive descriptions of the risk factors.

Speaker Change: These forward looking statements provided during this call are based on management's expectations as of today.

Speaker Change: I will now turn the call over to Jim for his comments.

Speaker Change: Okay.

James M. Corbett: Good afternoon, and thank you for joining us today. I will begin today's call by discussing our financial and business results for the first quarter, followed by our priorities and outlook for 2024. Following this update, I will turn the call over to David, who will provide commentary on our financial performance for the quarter before opening the call to Q&A. This was a disappointing quarter for us.

James M. Corbett: Thank you Jessica.

James M. Corbett: Good afternoon, and thank you for joining us today.

James M. Corbett: I will begin today's call by discussing our financial and business results of the first quarter.

James M. Corbett: Followed by our priorities and outlook for 2024.

James M. Corbett: Following this update I will turn the call over to David who will provide commentary on our financial performance for the quarter before opening the call to Q&A.

James M. Corbett: Our first quarter commercial revenue of $11.1 million not only fell short of our expectations, but it also marked the first time since my arrival that we did not achieve sequential quarterly growth. While we are encouraged by certain aspects of our business, such as our distribution agreement, which was statical in early January, it is important to address the challenges we encountered in meeting our revenue target. Let me begin by providing more color on the Revenue Guidance Announcement made on April 10.

David OToole: This was a disappointing quarter for us our first quarter commercial revenue of $11 $1 million not only felt short of our expectations, but it also marked the first time since my arrival that we did not achieve sequential quarterly growth.

David: While we are encouraged by certain aspects of our business such as our distribution agreement with <unk> in early January it is important to address the challenges we encountered in meeting our revenue targets.

David: Let me begin by providing more color on the revenue guidance announcement made on April 10th.

James M. Corbett: At the time of this announcement, we were faced with several challenges that hindered our ability to provide comprehensive insights into our performance, and I understand the frustration this may have caused our investors. However, not to justify or minimize our performance, it is important to note that, under ASX rules, we had to promptly issue the market announcement, despite not having financial statements completed for the quarter nor having analyzed external data.

David: At the time of this announcement, we are faced with several challenges hindered our ability to provide comprehensive insights into our performance and I understand the frustration. This may have caused our investors.

David: Not to justify or minimize our performance. It is important to note that under ASX rules, we had to promptly issued a market announcement, despite not having financial statements completed for the quarter, nor having analyzed external data.

James M. Corbett: Accordingly, we believed it was prudent to release what we could and refrain from speculations and instead gather more information to provide an accurate assessment, which I will provide in this call. First, as previously announced, we experienced a slower than expected conversion rate of new accounts for our expanded level of full thickness skin defects. Since the launch of Full Fitness Skin Defects in June, 2023, through March 31, 2024, we have only added a total of 73 new accounts, of which 22 accounts were closed in the first quarter. However, we had expected an average of 15 new accounts per month for a total of 135 new accounts at the end of the first quarter.

David: Lee we believed it was prudent to release, what we could get to refrain from speculations and said gather more information to provide an accurate assessment, which I provided in this call.

David: First as previously announced we experienced a slower than expected conversion rate of new accounts for our expanded level of full thickness skin defects.

David: The launch of full thickness skin defects in June 2023.

David: Through March 31, 24, we only added a total of 73, new accounts of which 22 accounts were close in the first quarter.

David: However, we had expected an average of 15, new accounts per month for a total of 135, new accounts at the end of the first quarter.

James M. Corbett: While the broadened scope of full thickness skin defects presents the opportunity to pursue multiple indications for results, navigating the Value Analysis Committee, known as VAC, approval process across the various medical specialties, including plastics, trauma, and general surgeons, and managing multiple reimbursement scenarios within a single facility has complicated the sales process beyond our initial expectations. Despite initially underestimating these complexities, we believe we will continue to become more efficient in closing new accounts, based on our current account standing on slide three. From launch to May 10, we have had a total of 178 submissions to VAX for Full Thickness Skin Defect. Of these, we have only had eight rejections.

David: While the broadened scope of full thickness skin defects presents the opportunity to pursue multiple indications for yourself.

David: <unk> the value analysis committee known as Vac approval process across the various medical specialties, including plastics trauma and general surgeons.

And managing multiple reimbursement scenarios within a single facility.

David: Complicated the sales process beyond our initial expectations.

David: <unk> initially underestimating. These complexities, we believe we will continue to become more efficient and closing new accounts.

David: Looking at our current account standing on slide three.

David: From launch to May 10.

We have had a total of 178 submissions two vacs.

David: For full thickness skin defects.

David: Of this we have only had eight rejections.

James M. Corbett: In the second quarter, we expect 46 accounts to be approved. We look forward to updating you on our progress on our next quarterly call. In addition to our account conversion rate, our burns business was significantly below our historical expectations in the quarter. To determine whether this was due to a decline in burned wound admissions or device utilization, we rely on external claims data. However, as many of you are aware, a data breach at the largest U.S. clearinghouse for insurance billing and claims, a unit of UnitedHealth Group, disrupted the data feed to our claims data provider. Despite this disruption, which happened in February, our data provider was able to secure claims data for January. Burn admissions are typically predictable and flat.

David: In the second quarter, we expect 46 accounts to be approved.

David: We look forward to updating you on our progress on our next quarterly call.

David: Okay.

David: In addition to our account conversion rate rate our branch business was significantly below our historical expectations in the quarter.

David: Determined whether this was due to a decline in burn wound admissions or device utilization.

David: We rely on external claims data.

David: However, as many of you are aware a data breach at the largest U S clearinghouse for insurance billing and claims.

David: <unk> a unit of <unk>.

David: Health group disrupted the data feed to our claims data provider.

David: Despite this disruption which happened in February our data provider was able to secure claims data for January.

David: Brian admissions are typically predictable and flat.

James M. Corbett: However, the January data revealed a 20% lower admission rate for burn wounds compared to the three previous Januarys. Although current estimates from our data providers suggest that we will not receive February-March data until September, if admissions for these two months were flat compared to prior years, the overall admissions rate would reflect a 7% quarterly decline. While we cannot accurately pinpoint the causes of our below-expected performance for the quarter, we have initiated an enhanced coverage strategy.

David: The January data revealed a 20% lower admission rate for burn wounds compared to the three previous januaries.

Although current estimates from our data providers suggests that we will not receive February March data until September.

David: Admissions for these two months were flat compared to prior years. The overall admissions rate would reflect a 7% quarterly decline.

David: While we cannot accurately pinpoint the causes of our below expectation performance for the quarter, we have initiated an enhanced coverage strategy two.

James M. Corbett: To supplement our understanding of burn accounts, our team of 29 clinical training specialists will be physically present at our burn account sites, dedicating at least 60% of their time to burn centers. We believe that this approach will reinvigorate our burn species. Additionally, Resell Go is nearing the end of its 180-day interactive review by the FDA. The 180-day period will end on May 30, 2024.

David: To supplement our understanding of Brent accounts, our team of 29 clinical training specialists will be physically present at our burn account sites dedicating at least 60% of their time in burn centers.

David: We believe that this approach will reinvigorate our branch business.

David: Additionally, resale go is nearing the end if it's 180 day interactive review by the FDA.

David: 190 day period will end on May 32024.

James M. Corbett: Assuming approval, our top 28 burn accounts will be prioritized for conversion to ResellGo in June. We're ready to go. See slide four.

David: Assuming approver approval, our top 28 current accounts will be prioritized for conversion to resale go in June.

David: We are ready to go see slide four.

David: Okay.

James M. Corbett: Now, let's turn our attention to our growth trajectory. We remain dedicated to establishing Resell as a standard of care for the treatment of burns, now extending its application to encompass full-thickness skin defects. Furthermore, we are equally committed to transforming AVITA Medical from a single product focus of resale to a broad wound care management company. As part of this commitment, we're actively exploring wound bed preparation and dermal replacement products to identify the ideal partners and products. By expanding our portfolio to address the full spectrum of clinical needs, we believe we can improve accessibility and reach more patients. To better understand this strategic transformation, let's turn to slide five.

David: Now, let's turn our attention to our growth trajectory.

David: We remain dedicated to establishing resell a standard of care for the treatment of Burns now extending its application to encompass full thickness skin defects.

David: Furthermore.

David: We are equally committed to transforming our vida medical from a single product focus or resell to abroad wound care management company.

David: As part of this commitment.

Actively exploring wound bed preparation and durable replacement products to identify the ideal partners and products.

David: By expanding our portfolio to address the full spectrum of clinical needs. We believe we can improve accessibility and reach more patients.

David: Better understand this strategic transformation, let's turn to slide five.

James M. Corbett: Referring to the slide, there's a broad continuum of clinical needs in burn, surgical, traumatic, and chronic wound care. Today, our portfolio includes resale for epidermal replacement and our co-branded dressing, Permioderm, which we launched in the U.S. on March 23. Permaniderm and the additional products we are exploring are all compatible with ReCell and each other, and all can be used alongside the treatment in many of our burn and full thickness skin defect cases to further aid in healing.

David: Referring to the slide there's a broad continuum of clinical needs and burn surgical traumatic in chronic wound care.

David: Today, our portfolio includes resell for epidermal replacement and our co branded dressing Permian Derm, which we launched in the U S. On March 23.

David: Pardon me derm and the additional products, we are exploring our all compatible with resolve and each other and all can be used alongside the treatment of.

David: Many of our burn and full thickness skin defect cases to further aid in healing.

James M. Corbett: Collectively, these products align with our vision to build a broad-based wound care company. See slide six of our presentation, which illustrates the complementary nature of Resell and Permiderm and the other potential additions to our portfolio. Here is an example of a full thickness skin defect with concern for infection.

David: Collectively these products aligned with our vision to build a broad based wound care company.

David: See slide six of our presentation, which illustrates the complementary nature of reselling Permian <unk> and the other potential additions to our portfolio.

David: Here's an example of a full thickness skin defect with concern for infection.

James M. Corbett: In this instance, the dark blue layer represents dressings for wound bed preparation, a current focus. This product serves as a protective antimicrobial layer at the base of the wound bed to maintain an optimal healing environment. This layer can be used in every single patient. The green layer represents normal scaffolds, our other focus area. Scaffolds aim to generate vascularized tissue, further supporting definitive closure. The light blue layer represents re-cell plus a meshed split thickness skin graft. As you are aware, this procedure provides definitive closure using significantly less skin compared to traditional autograft. Lastly, is the purple layer, which is the transparent permeaderm dressing optimized for protection and moisture management.

David: In this instance, the dark blue layer represents dressings for wound bed preparation. Our current focus this product serves as a protective anti microbial layer and the base of the wound bed to maintain an optimal fueling environment.

David: The Slayer can be used in every single patient.

David: The green layer represents dermal scaffolds are other focus area scaffolds aim to generate vascularized tissue further supporting definitive closure.

David: The light blue layer represents resell plus a meshed split thickness skin graft.

David: As you are aware this procedure provides definitive closure using significantly less skin compared to traditional autograft.

David: Lastly, as the peripheral layer, which is a transparent Permian Durham dressing optimized for protection and moisture management.

James M. Corbett: By looking at the broader landscape of wound care management and focusing on the ability to provide this continuum of wound care products, we strengthen our core business while addressing the multiple needs of our customers and patients. Additionally, integrating these products into a cohesive and comprehensive portfolio allows us to leverage our large resale-oriented sales organization effectively, ensuring widespread coverage across major cases. Moving on to our international expansion strategy, we're making progress in our efforts to expand into Australia and most of the European Union through third-party distribution partnerships.

Speaker Change: By looking at the broader landscape of wound care management and focusing on the ability to provide this continuum of wound care products, we strengthened our core business, while addressing multiple needs of our customers and patients.

Speaker Change: Additionally, <unk>.

Speaker Change: Integrating these products into a cohesive and comprehensive portfolio allows us to leverage our large retail oriented sales organization effectively ensuring widespread coverage across major cases.

Speaker Change: Moving on to our international expansion strategy.

James M. Corbett: We expect to execute distributor agreements in major EU countries and Australia during the remaining part of the year. As part of our European Union efforts, we have been working with an EU notified body to obtain a CE mark for Resel Go under the new medical device regulation, also known as MDR. During the quarter, we passed two major MDR conformity assessment audits and subsequently submitted the ReSoGo technical document for review.

Speaker Change: Making progress in our efforts to expand into Australia, and most of the European Union through third party distribution partnerships, we expect to execute distributor agreements in major EU countries and Australia during.

Speaker Change: During the remaining part of the year.

Speaker Change: As part of our European Union efforts, we have been working with us and EU notified body to obtain a CE mark for resale go under the new medical device regulation.

Speaker Change: Also known as MTR.

Speaker Change: During the quarter, we passed two major MTR conformity assessment audits and subsequently submitted the resale go technical document for review.

James M. Corbett: I am pleased to report that on April 22, 2024, the notified body confirmed that the technical document completeness check identified that all required information has been provided, and they are proceeding with a dedicated review of the submission. With this timeline, we expect to receive the CT mark for resale go between September and December. Additionally, we are in the validation testing stage of ReCell Go Mini. As a reminder, ReCell Go Mini is designed to address small wounds of 480 square centimeters or less, which represents approximately 2.5% or less of the total body surface area.

Speaker Change: Pleased to report that on April 22024, the notified body confirmed the technical document completeness check check identified the all required information has been provided and they are proceeding with a dedicated review of the submission.

Speaker Change: With this timeline, we expect to receive CE Mark for resale go between September and December.

Speaker Change: Additionally, we are in the validation testing stage of resale go many as a reminder, resale go many.

Speaker Change: <unk> is designed to address small loans of 480 square centimeters or less which represents approximately two 5% or less total body surface area.

James M. Corbett: This device will have the same reusable durable as ResellGo but will have a different cartridge that accommodates smaller donor skin samples. Following the completion of validation testing, we are preparing to submit a PMA supplement for ResoGo Mini in June. This submission will receive the same breakthrough device designation that the current resale device was granted. Now, turning to the Vitiligo Initiative. Our initial six-month follow-up assessments of our patients in Tone, which is our post-market study.

Speaker Change: This device will have the same reusable durable S. Resale go, but we'll have a different cartridge that accommodates smaller donor skin samples.

Speaker Change: Following the completion of validation testing, we are preparing to submit a PMA supplement for our resale go many in June.

Speaker Change: This submission will receive the same breakthrough device designation that the current resell device was granted.

Speaker Change: Now turning to the Vitiligo initiative.

Speaker Change: Our initial six month follow up assessments of our patients in town, which is our post market study.

James M. Corbett: Evaluating repigmentation and its impact on quality of life for vitiligo patients is scheduled to begin in June and conclude by the end of July. With this timing, we expect we will be able to provide preliminary insights from the data during our second quarter earnings call in August. By this time, we will also have submitted the PMA supplement for Reselco Mini, which will be the cartridge for treatment of fideligo patients.

Speaker Change: Evaluating re pigmentation and its impact on quality.

Speaker Change: Quality of life for vitiligo patients are scheduled to begin in June and conclude by the end of July.

Speaker Change: With this timing, we expect we will be able to provide preliminary insights from the data during our second quarter earnings call in August.

Speaker Change: By this time, we will also have submitted the PMA supplement for resale go many which will be the cartridge for treatment with vitiligo patients.

James M. Corbett: As I have indicated, we plan to submit the tone study and our separate health economics study for publication by the end of 2024, positioning us to begin commercial payer coverage discussions during the second quarter of 2025. As previously discussed, we anticipate a phased rollout of commercial coverage on a regional basis, with the initial phase likely to begin in the fourth quarter of 2025. Our commitment to innovation and growth continues. We're steadfast in our efforts to expand our reach, drive increased adoption, and sustain growth within our indications, as well as to expand our portfolio, all with the goal of delivering value to our shareholders.

Speaker Change: As I have indicated we plan to submit the <unk> study and our separate health economic study for publication by the end of 2024.

Speaker Change: Positioning us to begin commercial payer coverage discussions during the second quarter of 2025.

Speaker Change: As previously discussed we anticipate a phased rollout of commercial coverage on a regional basis, but the initial phase likely to begin in the fourth quarter of 2025.

Speaker Change: Our commitment to innovation and growth continues.

Speaker Change: Steadfast in our efforts to expand our reach drive increased adoption and sustained growth within our indications as well as expanding our.

Speaker Change: Our portfolio all with the goal of delivering value to our shareholders.

James M. Corbett: Before turning the call over to David, I have an organizational update. We have retained an executive search firm to find a replacement for our senior vice president of global sales, who is no longer with the company. During this interim period, our two VPs of sales for the East and the West will report directly to me. In addition, I will be directly engaged daily with the entire commercial sales team. With that, I'd like to turn the call over to David.

Before turning the call over to David I have an organizational update.

David: We have retained an executive search firm to find a replacement for our senior Vice President of global sales is no longer with the company.

David: During this interim period or two vps of sales for the east and the West will report directly to me. In addition, I will be directly engage daily with the entire commercial sales team with that I'd like to turn the call over to David.

David OToole: For the three months ended March 31st, 2024, our commercial revenue was $11.1 million, which was approximately 5.8% more than the same period in 2020. However, as Jim has mentioned, this was significantly below our expectations and previous revenue guidance range.

David: Thank you Jim.

David: For the three months ended March 31, 2024, our commercial revenue was $11 1 million, which was approximately five 8% more than the same period in 2023.

David: However, as Jim has mentioned this was significantly below our expectations and previous revenue guidance range.

David OToole: We believe we have taken the necessary steps to improve our commercial process, including VAX emissions, and return to the significant revenue growth we have demonstrated in previous quarters. Beginning this quarter, with the expansion of our product portfolio, we are now reporting revenue in two categories: Resell, which will include all versions of Resell, and wound care products, which will be all other products such as permeate.

David: We believe we have taken the necessary steps to improve our commercial process.

David: Including Vac submissions and return to the significant revenue growth, we have demonstrated in previous quarters.

David: Beginning this quarter with the expansion of our product portfolio. We are now reporting revenue in two categories.

David: So which will include all burdens of resell and wound care products, which will be all other products such as permitted.

David OToole: Since the launch of Permiaderm in the last week of March, our wound care revenue has been less than 1%. However, we expect this value to increase as we add new products and our sales team gains experience selling the new products. Gross profit margin for the quarter was 86.4% compared to 84.2% in the same period in 2023. This increase is roughly where we expected it to be for 2024 with our resale product. Total operating expenses for the quarter were $26.8 million compared to $19.4 million in the same period in 2023.

David: Since the launch of Premier Derm, and the last week of March our wound care revenue is less than 1%.

David: However, we expect this value to increase as we add new products and our sales team gains experience selling the new products.

David: Gross profit margin for the quarter was 86, 4% compared to 84, 2% in the same period in 2023.

David: This increase is directionally, where we expected it to be for 2024 with our resale products.

David: Total operating expenses for the quarter were $26 8 million compared to $19 4 million in the same period in 2023.

David OToole: The increase in operating expense is primarily attributable to an increase of $6.1 million in sales and marketing expenses due to employee-related costs, including salaries and benefits, commissions, and travel expenses, all collectively as a result of the expansion of the Commercial Sales Organization in the second quarter of 2023 to support our growing commercial operations. GNA expenses.

David: The increase in operating expense is primarily attributable to an increase of $6 1 million in sales and marketing expenses due to employee related costs, including salaries and benefits commissions and travel expenses all collectively as a result of expansion of the commercial sales organization.

<unk> in the second quarter of 2023 to support our growing commercial operations.

David: G&A expense.

David: Expenses increased by <unk> 7 million as a result of higher salaries and benefits, partially offset by lower stock compensation.

David OToole: Additionally, we incurred an increase of $0.6 million in R&D costs, which was primarily due to employee compensation costs for the Medical Science Liaison. Other net income expense increased by $0.8 million, as we recognize $0.4 million and $0.9 million for non-CAS charges related to the change in fair value of our debt and warrant liabilities, offset by an increase of approximately $0.5 million in income related to our investment activities and other income.

David: Additionally, we incurred an increase of <unk> 6 million in R&D cost, which was primarily due to employee compensation costs of the medical science liaisons teams.

David: Other net income expense increased by <unk> 8 million of expense as we recognized <unk> 4 million and <unk> 9 million for noncash charges.

David: Weighted to the change in fair value of our debt and warrant liabilities.

David: Respectively.

David: All set by an increase of approximately <unk> 5 million and income related to our investment activities in other income.

David OToole: The net loss for the first quarter was $18.7 million, or a loss of $0.73 per share, compared to a net loss of $9.2 million, or a loss of $0.37 per share, in the same period in 2023. As of March 31st, we had cash, cash equivalents, and marketable securities of $68.1 million, compared to $89.1 million as of December 31st, 2023. We acknowledge the significant use of cash during this quarter. It's important to note that this was attributable to a number of non-recurring items, including expenses totaling approximately $4 million for inventory purchases and other costs as part of our distribution agreement with Statical.

David: Net loss for the first quarter was $18 7 million.

David: Or a loss of 73 per share compared to a net loss of $9 2 million or a loss of 37 per share in the same period in 2023.

David: As of March 31, we had cash cash equivalents and marketable securities of $68 1 million compared to $89 1 million as of December 31, 2023.

David: We acknowledged the significant use of cash during this quarter.

David: It is important to note that this was attributable to a number of nonrecurring items, including expenses totaling approximately $4 million for inventory purchases and other costs as part of our distribution agreement with vertical.

David OToole: Of this total amount, we have approximately $3.1 million in inventory that we will recover through future product sales. Recall that our distribution agreement with Statical provides for a 50% gross margin, which means that gross sales for this inventory will be in the range of $6 million with no significant additional expense. As we indicated, we used more cash than anticipated.

David: Of this total amount we have approximately $3 1 million in inventory that we will recover through future product sales.

David: Recall that our distribution agreement with <unk> provides for a 50% gross margin.

David: Which means that gross sales for this inventory will be in the range of $6 million with no significant additional expense.

David: As we indicated we use more cash than anticipated this quarter.

David OToole: However, this is not a long-term concern of ours and should not affect our ability to reach cash flow break even and gap profitability no later than the third quarter of 2025. Turning now to our 2024 revenue guidance. For the second quarter of 2024, we expect commercial revenues to be in the range of $14.3 million to $15.3 million. For the full year 2024, we continue to reaffirm the lower end of our previously provided guidance range of 78.5 to 84.5 million, reflecting growth of approximately 57% at the lower end of the range over the full year 2023. Note that our annual revenue guidance now includes revenue from permits. With that, we thank you for joining us. And now, I will turn the call back to the operator for your questions and things.

David: However, this is not a long term concern of ours and should not affect our ability to reach cash flow breakeven and GAAP profitability no later than the third quarter of 2025.

David: Turning now to our 2020 for revenue guidance.

David: For the second quarter of 2024, we expect commercial revenues to be in the range of $14 3 million to $15 3 million.

For the full year 2024, we continue to reaffirm the lower end of our previously provided guidance range of $78 five to $84 5 million reflecting.

David: <unk> growth of approximately 57% at the lower end of the range over the full year 2023.

David: Note that our annual revenue guidance now includes revenue from Permian <unk>.

Speaker Change: With that we thank you for joining us and now I will turn the call back to the operator for your questions.

Operator: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Brooks O'Neill from Lake Street Capital Markets. Your line is now open.

Speaker Change: And thank you.

As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.

Speaker Change: To withdraw your question. Please press star one again, please standby, while we compile the Q&A roster and one moment for your first question.

Speaker Change: And our first question comes from Brooks O'neil from Lake Cap Lake Street Capital markets. Your line is now open.

Unknown Attendee: Thank you, and good afternoon, everyone. I have a few questions. I'll try to limit it a little bit, but would you say, David, do you expect that $6 million of FedEca revenue to occur in the second half of 2024, or is it more likely that that would extend into 2025?

Brooks O'neil: Thank you and good afternoon, everyone.

Brooks O'neil: Few questions I'll try to keep it.

Brooks O'neil: Liberated a little bit, but would you say.

Brooks O'neil: David do you expect that $6 million.

Brooks O'neil: Datacom revenue to occur in the second half of 2024 or is it more likely that that would extend into 2025.

David OToole: So Brooks, nice to talk with you. Thank you for the question. Thanks for attending.

Brooks O'neil: So.

Speaker Change: Nice to talk with you. Thank you for the question thanks for attending.

David: We haven't given any guidance on that specifically.

David OToole: We haven't given any guidance on that specifically. We are still in the early days of selling Permioderm. I think our sales team is having some traction, but it's hard at this point in time to say how quickly that uptake is going to be. We will be able to give more guidance in August of what that permeaderm revenue will be for this year.

Speaker Change: We are still in the early days of selling Premier Derm I think our sales team is having some traction.

Speaker Change: It's hard at this point in time to say how quickly that uptake is going to be.

Speaker Change: We will be able to give more guidance in August of what that Permian Durham revenue will be for this year.

Unknown Attendee: Great. Let me ask you a second question. I'm curious. You didn't mention it specifically in the prepared remarks, but do you see any evidence that counts? Are you waiting for the approval for resale to go before ordering product? Or do you think that was not much of a factor in the results for Q1 and your early look at Q2.

Speaker Change: Great.

Speaker Change: Taking my question I'm curious.

Speaker Change: You didn't mention it specifically in the prepared remarks, but do you see any evidence that.

Speaker Change: On the call.

Speaker Change: Are waiting for the approval for resale go before ordering product or do you think that was not much of a factor in results in Q1 and your early look at Q2.

James M. Corbett: Resources, Jim, it's a good question, and I did thoroughly look at that, and I don't think so. I don't think there are accounts that are waiting for that. That said, there is strong anticipation for it in many of our larger accounts.

James M. Corbett: This is Jim.

James M. Corbett: It's a good question and.

James M. Corbett: I did thoroughly look at that and I don't think so I don't think there is accounts that are waiting for that that said there is strong anticipation for it.

James M. Corbett: In many of our larger accounts.

Unknown Attendee: Sure, that makes total sense. Okay, I'll ask the last one and then I'll turn it over to you. Obviously, you expanded the size of the sales organization in anticipation of the launch to full thickness. And I'm just curious if you would assess whether there was significant disruption among your entire sales organization related to that expansion, or do you think That wasn't much of a factor in the results?

Speaker Change: Sure that makes total sense, Okay, I will ask the last one and then I'll turn it over.

Speaker Change: Obviously you.

Speaker Change: Expanded the size of the sales organization in anticipation of.

Speaker Change: The launch for full thickness.

Speaker Change: And I'm just curious if you would.

Speaker Change: Weather.

Speaker Change: There was significant disruption among your entire sales organization related to that expansion or do you think.

Speaker Change: That wasn't much of a factor in.

Speaker Change: The results this quarter.

James M. Corbett: So answer first and then the analysis. That's a great question because I studied that. It was one of the possible things that I wanted to do.

So answer first and then the analysis that's.

Speaker Change: That's a great question because I studied that.

Speaker Change: One of my possible things that I wanted to.

James M. Corbett: Understand Better. When you look backwards, you would take the burn accounts that existed prior to June, which then some of them kept the same rep, and some of them changed reps, right? A good majority, and in the group and the group that actually went with a new rep, performed over the last nine months actually slightly better than the legacy group that had stayed with their accounts, so that didn't turn out to be a cause of our challenge.

I understand better when you look backwards you would take the burn accounts that existed prior to June.

Speaker Change: Which then some of them kept the same rep and some of them.

Speaker Change: <unk> reps right.

Speaker Change: Majority.

Speaker Change: And in the group and the group that actually went with a new rep performed over the last nine months actually slightly better than the legacy group that had stayed with their accounts so that didn't turn out to be.

Speaker Change: Our cause of our of our challenge.

Unknown Attendee: Okay, so you really say, if I'm listening, and I apologize for sneaking in one last little tidbit, you would say the issue really relates to the time it's taking to get through the VAC committee. And at this point, you're optimistic about your ability to begin to make real progress on that process as we move into the back part of

Speaker Change: Okay. So you really say.

Speaker Change: Listen and I apologize for sneaking in one last little Tidbit, you would say the issue really relates to the time, it's taking to get through the Vac Committee.

Speaker Change: And at this point Youre optimistic about your ability to begin to make real progress.

Speaker Change: That process as we move into the back part of the year.

James M. Corbett: It is simply stated, yes, we feel better about it. We've had to learn how to do something that You know, this is, of course, not a good reason. But the fact is, we had not submitted to a VAC committee in virtually the previous two years organizationally, and so when you when full thickness came, it was more complex. And we had a lot of them. And so we basically had to learn and develop new capabilities and skills. So we do feel better about that. We're expecting to have a very significant quarter in approvals here in Q2. So we shall see because we'll be disclosing that. Absolutely. Thank you.

Speaker Change: Simply stated, yes, we feel better about it we've had to learn how to do something.

Speaker Change: This of course, not a good reason, but the fact is we had not submitted to a Vac committee and the <unk>.

Speaker Change: Virtually the previous two years organizationally.

Speaker Change: So when you.

Speaker Change: Full thickness came it is more complex and we have a lot of them.

Speaker Change: So we had to basically.

Speaker Change: Learn and develop new capabilities and skills. So we do feel better about that we're expecting to have a very significant quarter and approvals here in Q2.

Speaker Change: So.

Speaker Change: We shall see because we'll be disclosing that.

Unknown Attendee: Absolutely. Thank you for taking my question.

Speaker Change: Absolutely. Thank you.

Taking my questions.

Ed: Ed Thank you.

Operator: And one moment for our next question, and our next question comes from Josh Jennings from CD Cowan. Your line is now open.

Speaker Change: And one moment our next question.

Speaker Change: And our next question comes from Josh Jennings from Cowen. Your line is now open.

Joshua Jennings: Hi, this is Eric on behalf of Josh. Thanks for taking the question. Appreciate the commentary around guidance for 2Q. With that in mind, how would you have us think about the ramp in the back half of the year to ultimately reach that four-year guidance range? What do you think the sequential steps up in 3Q and 4Q could look like?

Speaker Change: Hi, This is Eric on for Josh. Thanks for taking the question I appreciate the commentary around guidance for two Q with that in mind, how would you have us thinking about the ramp in the back half of the year to ultimately reach that full year guidance range.

What do you think the sequential steps up in <unk> and <unk> could look like.

David OToole: Well, ultimately, well, they do, they do get pretty, they do get steeper, of course, you know, we had a light first quarter, our second quarter, we're recapturing our momentum. I think when we look at Q3 and Q4, You know, we have committed to the lower end of our guidance 78.5 and, So, you're correct in identifying that, but what comes with that, of course, is we'll have WeSellGo launch, which will undoubtedly give us some additional growth energy, will also have be in full launch with The Permiaderm Wound Dressing, so we have some good additions coming aboard that will add a lot during the second half, but we haven't guided specifically to the ramp yet.

Speaker Change: Well.

Speaker Change: Ultimately.

Speaker Change: They do they do get pretty they do get steeper of course.

Speaker Change: We had a light first quarter or second quarter, we are recapturing our momentum I think when we look at Q3 and Q4.

Speaker Change: We have committed to the lower end of our guidance 78, 5%.

Speaker Change: And.

Speaker Change: So you are correct in identifying that but what comes with that of course is we will have we sell go launch which will undoubtedly give us.

Speaker Change: Some additional growth energy.

Speaker Change: We will also have being full launch with the.

Speaker Change: The Permian term wound dressing so we have some good additions coming aboard it will add a lot during the second half.

Speaker Change: But we haven't.

Speaker Change: Specifically to the ramp yes.

Joshua Jennings: On the topic of VAC approvals, just out of curiosity, once the VAC committee in your customer accounts grants approval for the expanded label, how quickly are those accounts ramping up resale utilization? Is that something that happens within a few weeks, or is that something that happens right away?

Speaker Change: Understood and then on the topic of Vac approvals.

Speaker Change: Just out of curiosity once the Vac committees in your customer accounts grants approval for the expanded label. How quickly are those accounts wrapping resale utilization is that something that happens within a few weeks or is that something that happens right away just curious.

David OToole: Well, once you get approval, then there is a process of training and uptake and selling to additional positions. So this is a new, first-in-category product, and these trauma centers are seeing it for the first time, you know, contrary to burn centers who've been using it for a few years. So there is a process where we get initial orders relatively quickly, but then, of course, the real selling starts to happen with the different specialties and helping the physicians identify the appropriate patients.

Speaker Change: Well yeah.

Speaker Change: Once you get approval then there is there is a process of training and uptake in selling to additional positions. So.

Speaker Change: <unk>.

Speaker Change: This is a new first in category product and these trauma centers are seeing it for the first time.

Speaker Change: Contrary to the Burns who have been using it for a few years. So there is a process where we get initial order relatively quickly, but then of course, the real selling starts to happen with different specialties and helping our physicians.

Speaker Change: Identify.

David OToole: And that's where our, you know, medical science liaisons actually have a big impact because their role is pure education in helping physicians think about how to treat their patients with ReSell and how they can get the results that we've seen in burns. So there is a process in terms of expanding adoption over time. Okay.

Speaker Change: The appropriate patients and that's where our.

Speaker Change: <unk>.

Speaker Change: Medical Science liaisons actually.

Speaker Change: Have a big impact because their role as pure education, and helping physicians think about how to treat their patients with resell and how they can get the results that we've seen in burns. So there is a process in terms of expanding adoption over time.

Joshua Jennings: Okay, understood. Thank you for taking the questions.

Speaker Change: Okay understood. Thank you for taking the questions.

Speaker Change: And thank you.

Operator: And one moment for our next question. And our next question comes from Ryan Zimmerman from BTIG. Your line is now open.

Speaker Change: And one moment for our next question.

Speaker Change: And our next question comes from Ryan Zimmerman from <unk>. Your line is now open.

Ryan Zimmerman: Good afternoon. Thanks for taking my question. Jim, I appreciate all the color and on the components, particularly in the back half of the year, you know, you're including permeaderm. I think, first, can you elaborate on kind of, you know, maybe, Contributions from Resell Go. What are you assuming for full thickness skin defects in the back half of the year? Are you going to pick up accounts at a faster pace in the second half of the year?

Ryan Zimmerman: Good afternoon.

Ryan Zimmerman: For taking my question.

Ryan Zimmerman: Jim I appreciate all the color.

Ryan Zimmerman: On the components, particularly in the back half of the year.

Ryan Zimmerman: Youre, including the Permian.

Speaker Change: Hi, Thanks, I'm wondering first can you just elaborate on kind of.

Speaker Change: Maybe.

Speaker Change: Contributions from resale go.

Speaker Change: What are you assuming for full thickness skin the effects in the back half of the year are you going to pick up.

Speaker Change: So at a faster pace.

Ryan Zimmerman: Just, you know, help us understand kind of your confidence in this ramp in the back half of the year. And then I think, also, if you throw in some of the international distributor agreements, that could certainly help offset some of this ramp. That's kind of the first question. And then, you know, you're talking about, you know, becoming a wound care company more, Jim. And so, you know, do you need more salespeople? Are you directing your current sales force to pursue new call points? Just help us understand what kind of your thinking about those initiatives as well.

Speaker Change: In the back half of the year, just help us understand kind of your confidence in this ramp in the back half of year and then I think also if you throw in some of the international distributor agreements that can certainly help offset some of the ramp.

Speaker Change: That's kind of the first question and then Youre talking about becoming a wound care company Moore Chairman, So do you need more salespeople.

Speaker Change: Are you directing your current sales force to pursue new call points, just help us understand kind of your thinking about those initiatives as well.

James M. Corbett: Okay, let me try and make sure I get them all. If I don't, come back at me, because it was a compound question. So, first of all, let me just kind of start at the end, our vision of being a broad wound care company. We don't anticipate needing additional salespeople. So that's the first issue.

Speaker Change: Okay.

Speaker Change: Let me try and make sure I get them all if I don't come back at me.

Speaker Change: Okay.

Speaker Change: That's a compound question so first of all.

Speaker Change: Let me kind of start at the end R.

Speaker Change: Our vision of being a broad wound care company.

Speaker Change: Hey, we don't anticipate needing additional salespeople SaaS first issue.

James M. Corbett: The second is all of the product areas, as I illustrated in that particular slide. They actually go with the treatment of these types of wounds. So while our resale salesperson is sitting there, they can get into wound preparation, they can get into scaffolding, they can get into a sophisticated dressing like Permiaderm. That's all on the same patient, same doctor at the same time, same wound. So that is pure leverage and Portfolio Expansion around our existing treatment sites and physician sites, so it's synergistic to be sure. In terms of the ramp in the back half, let me comment on a few things.

Speaker Change: Second is all of the product areas as I illustrated in that particular slide.

Speaker Change: They actually go with the treatment of these type of wounds. So while our resell sales person is sitting there they can get into wound preparation that can get into scaffolding and as you can get into.

Speaker Change: Our sophisticated dressing like Permian that's all on the same patient same doctor at the same time same wound.

Speaker Change: That is a pure.

Speaker Change: Leverage and portfolio expansion around our existing.

Speaker Change: Treatment sites and physician sites. So it's.

Speaker Change: Synergistic to be sure.

Speaker Change: In terms of the ramp in the back half, let me comment on a few things we don't broken it out in terms of how we are giving guidance yet.

James M. Corbett: We don't haven't broken it out in terms of how we're giving guidance yet, but we will, as we gain a little bit more experience, but suffice to say that you can intuit that there's going to be a meaningful contribution from Permiaderm, first of all. Second of all, Resell Go, and this is again, you know, the 180 days ends May 30th, so we're actually have built inventory and are prepared for positive news. And that has a lot of energy for the second half of the year because of two things.

Speaker Change: We will as we gain a little bit more experience, but suffice to say.

That you.

Speaker Change: You can intuit that theres going to be a meaningful contribution.

Speaker Change: From Permian first of all.

Speaker Change: Second of all resale go and this is again the 180 days ends may 30. So.

Speaker Change: We are actually.

Speaker Change: Have built inventory.

Speaker Change: And are prepared for a positive news.

Speaker Change: And that has a.

Speaker Change: A lot of energy for the second half of the year because of two things, let me differentiate them for you.

James M. Corbett: Let me differentiate them for you. In the Burns world, It is a it is often we use between it's often between one and two resale kits are used for patients. So that means somewhere, greater than 10% TBSA as much as 20. And so they often have to use them in sequence. And that is a process, right? You take a biopsy, you process it in the manual method and then. You spray it on.

Speaker Change: In the Burns World.

Speaker Change: It is a.

Speaker Change: Often we use between it's often that between one and two.

Speaker Change: Resale kits are used for patients so that means somewhere.

Speaker Change: And 10% Tvs TB assay as much as 20.

Speaker Change: And so they often have to use them in sequence.

Speaker Change: That is a process right you take a biopsy you process. It in the manual method and then.

Speaker Change: You spray it on.

James M. Corbett: And then you take another biopsy and go through the same process for the second kit. Particularly for burns surgeons, they're imagining, bringing to sale go instruments into the room and processing them simultaneously and cutting OR time by a material amount. So they're really quite motivated by the prospect of Resell Go. Secondly, what goes with that is also the same benefit for full thickness because, in Byrne's case, they will use less manpower doing it because it takes a technician to assist the position, an extra technician, or nurse to help the physician prepare the current version.

Speaker Change: And then you take another biopsy and go through the same process for the second kit.

Speaker Change: Particularly for the Burns surgeons, there are imagining bringing.

Bringing to resell go.

Speaker Change: Instruments into the room and processing.

Speaker Change: Simultaneously.

Speaker Change: And cutting or time by a material amount so they're really quite motivated by the prospect of resale go secondly, what goes with that is also same benefit for full thickness because.

Speaker Change: In Burns case.

Speaker Change: It will use less manpower doing it.

Speaker Change: Because it takes a technician to assist the physician next of technician.

Speaker Change: Our nurse to help the physician prepare them. The current version you don't need that extra person in the case of resale go. So it has a double effect and it helps in the as you can imagine the burns, making case shorter and less work for less people.

James M. Corbett: You don't need that extra person in the case of Resell Go, so it has a double effect. It helps them, as you can imagine, in burns, making the case shorter and less work for fewer people. And also, at full thickness, you don't need that extra technician, and it decreases the training requirements really significantly. So we have an expectation that we will get an upsurge of adoption as a consequence of it being simply easier to do. So that's what we're believing is going to happen. So, did I get them all right?

Speaker Change: And also in the full thickness, you don't need that extra technician decreases the training requirements really significantly. So we have an expectation that we get it.

Speaker Change: Upsurge of adoption as a consequence of it being simply easier to do so.

Speaker Change: So.

Speaker Change: That's what we're we're believing is going to happen.

Speaker Change: So.

James M. Corbett: I think so. There are a lot of questions in there, Jim.

Speaker Change: Did I get them all right.

Speaker Change: I think so.

Speaker Change: There's a lot of that a lot of questions in there Tim. Thank you for knocking them out and then just.

Ryan Zimmerman: Thank you for knocking them out. And then, just, you know, lastly for me, and I'll hop back in queue, David, with the introduction of permeaderm, what are you expecting for your gross margins? I would imagine there's a little bit of pressure on the gross margin line in the back half of the year as permeaderm ramps up. Yeah.

Speaker Change: Lastly for me and I'll hop back in queue David.

Speaker Change: With the introduction of Permian what are you expecting for your gross margins I would imagine there is a little bit of pressure.

Speaker Change: On the gross margin.

Speaker Change: Wine in the back half of the year as Permian ramps up.

David OToole: Yeah, as you know, the agreement calls for a 50% gross margin for us when we sell. So, you know, it's going to be contributing less than our core business. So, but there has to be a degradation of our gross margin over the last half of the year. And as I indicated with Brooks, we're going to be giving more guidance around what that revenue looks like from Permiaderm for the second half of the year in August on our second quarter earnings.

Speaker Change: Yeah.

Speaker Change: As you know the agreement calls where 50% gross margin for us when we sell.

Speaker Change: So.

Speaker Change: It's going to be contributing less than our core business. So, but there has to be a degradation of our gross margin over the last half of that.

Speaker Change: Year, and as I indicated with Brooks.

Speaker Change: Going to be giving more guidance around what that revenue looks like from Permian <unk> for the second half of the year in.

Speaker Change: In August on our second quarter earnings call.

Operator: And thank you. And one moment for our next question. And our next question comes from Matthew O'Brien from Piper-Sandler. Your line is now open.

Speaker Change: Thank you.

Speaker Change: And thank you.

Speaker Change: And one moment for our next question.

Speaker Change: And our next question comes from Matthew O'brien from Piper Sandler Your line is now open.

Matthew O'brien: Hey, thanks for taking the questions. I guess, you know, the guide for Q2 is predicated on you guys getting back to kind of 15 new center ads per month versus kind of seven in Q1. Are you seeing that so far in April and maybe maybe

Matthew O'brien: Hey, Thanks for taking my questions.

Matthew O'brien: I guess the.

Matthew O'brien: Guide for Q2 is predicated on you guys getting back to 10 or 15.

Matthew O'brien: Nissan or app per month versus kind of seven is what you did Q1 are you seeing that so far in April and maybe early days of May.

Matthew O'brien: Could you repeat, are you talking about the new additions of... Well, what we have is the, Without disclosing sort of the month by month, in the quarter, we have specific dates for all 46 of those expected approvals of when they meet and when we expect them to be approved. So that's a

Speaker Change: Could you repeat are you talking about the new additions of.

Speaker Change: <unk>.

Speaker Change: What we have is the.

Speaker Change: Without disclosing sort of the month by month.

In the quarter, we have specific dates for all 46 of those expected approvals.

Speaker Change: When they meet and when we expect them to be approved.

Speaker Change: So okay.

Speaker Change: I told you.

James M. Corbett: Yeah, 21 versus what you expected. Yeah, are you expecting L22, or are we expecting something else?

Speaker Change: Yes, just one way.

Speaker Change: One or two of what you expected.

Speaker Change: Yes.

Speaker Change: R 22 or are we expecting 45 and got half.

Speaker Change: Well.

Matthew O'brien: [inaudible] We wanted more than 22. 22 is what we got. But they didn't come to committee. So that was a different problem. Wasn't a turndown where we went to committee and got turned down. So we've only been turned down rarely. So these 46 we expect to happen.

Speaker Change: We wanted we wanted more than 'twenty to 'twenty two is what we got.

Speaker Change: But they didnt come to committee.

Speaker Change: So that was a different different problem wasn't a turned down where we went to committee.

Speaker Change: And got turned down so we've only been rarely turned down. So these 46, we expect to happen.

Okay, because we have.

Matthew O'brien: [inaudible] got it. And, and then you know, the back half ramp is just, it's just big. I don't know how else to say it. I mean, what is it that gives you guys confidence? I don't know if it's perma derm, maybe you get all 6 million in the back half, but it's just even to the low end of the range is a massive ramp, and there's going to be skepticism about your ability to get there. So just how can you help just calm some of those fears that you might get there? And then I do have one more quick question for David.

Speaker Change: Yes.

Speaker Change: Got it.

And then the back half ramp is just it's just big and I'd also say it I mean, what is it that gives you guys are confident that in all of its permit Darren maybe you get all $6 million in the back half of it's just even to the low end of the range is a massive ramp in theres going to be skepticism about your ability to get there. So just how can you help just calling some of those.

Darren: <unk> that you can get there and then I do have one more quick question for David.

James M. Corbett: Sure. Well, first of all, Premier Derm plays a role, but Resell Go plays a bigger role. We'll get, Resell Go is going to transform our business model very fundamentally. Resell as it sits today, you have to constantly train and always be present in almost all cases. So that hurts you in utilization and burn accounts relative to having resale goals. I mean, in it, so to speak, slows down the adoption in full thickness.

Speaker Change: Sure well first of all Premier return plays a role, but resale go plays a bigger role.

Speaker Change: We'll get resale go is going to transform our business model very fundamentally.

Speaker Change: Resell as it sits today you have to constantly train and always be present almost for most cases, so that hurts, you and utilization and burn accounts relative to having <unk> in it.

Speaker Change: So to speak slows down the adoption and full thickness both of those will get significant energy from having the work being done.

James M. Corbett: Both of those will get significant energy from having the work being done in the process of creating the retail spray on skin in a way that doesn't require a person. So that will make a big difference. The market is quite huge. So getting a product that is easier to learn, easier to use, will make a ton of difference.

Speaker Change: And in the process of creating the resell.

Speaker Change: Spray on skin.

Speaker Change: In a way that doesn't require a person.

Speaker Change: So that will make a big difference to markets quite huge so getting a product it is easier to learn easier to use.

Speaker Change: We'll make it will make a ton of difference.

Matthew O'brien: And that launches late, late Q3, is that right?

Speaker Change: Okay.

Speaker Change: That launches late late Q3 is that right.

James M. Corbett: It is We expect approval on May 30th, and we have inventory.

Speaker Change: No.

Speaker Change: It is we expect approval may 30th and.

Matthew O'brien: Okay, okay, the second benefit actually benefits right away. Okay.

Speaker Change: And we have inventory.

Speaker Change: Okay. Okay. So the second half of the benefit right away, Okay, and then David.

Matthew O'brien: And then David, the commentary on SG&A is all understandable with the sales scores. Did you add any Q2, but there was a big sequential step up from Q4 to Q1 on the sales and marketing side. What was that?

David: The commentary on SG&A is all understandable with the Salesforce.

David OToole: And then do we expect spending in this range going forward? And if that's the case, why? Why would you feel comfortable that the cash you have on hand is enough to get you through to profitability?

David: You added in Q2, but there was a big sequential step up from Q4 to Q1 on the sales and marketing side, what was that and then do we expect spending in this range going forward and if thats the case I mean why.

David: Why would.

David: Why would you feel comfortable that the cash you have on hand is enough to get you through to profitability.

David OToole: So, thanks for the question. I want to answer kind of the last one first because I think I was thinking about this also as you were asking Jim about the last half of the year. The ramp is significant for the last half of the year. When we achieve that, through the initiatives that we've talked about, we are going to start to get to a point where our cash burn is not very significant with that ramp up in revenue, and so we believe in the lower end of our guidance.

David: Yes.

So thanks.

David: Thanks.

Speaker Change: For the question.

Speaker Change: The.

Speaker Change: When I answered kind of the last one first because I was thinking about this also as you were asking Jim about the last half of the.

Speaker Change: Year.

Speaker Change: The ramp is significant for the last half of the year.

Speaker Change: When we achieve that through.

Speaker Change: Through the <unk>.

Speaker Change: Initiatives that we've talked about.

That is going to start to get to a point, where our cash burn is not very significant.

Speaker Change: With that ramp up in revenue.

Speaker Change: And so.

Speaker Change: We believe in the lower end of our guidance.

And when we achieve that we will be heading into 2025.

David OToole: And when we achieve that, we'll be heading into 2025 with a significant run rate for revenue. And so we've talked about getting to a cash flow break-even by the middle of next year, and as we enter 2025 with the revenue we believe we're going to be achieving, that cash flow break-even gap profitability can be achieved. Unknown Speaker, you asked the question about our expenses going forward, SG&A. I think we've, I think we have indicated that we increased our sales force as of the end of Q3, or Q1, I'm sorry, and so.

Speaker Change: With a significant run rate for revenue.

Speaker Change: And so we've talked about getting to cash flow breakeven by the middle of next year.

Speaker Change: And as we enter 2025 with the revenue we believe we're going to be achieving.

Speaker Change: Dot.

Speaker Change: Cash flow breakeven GAAP profitability is.

Speaker Change: It can be done.

You asked the question about our expenses going forward.

Speaker Change: SG&A.

Speaker Change: I think we've.

Speaker Change: I think we have indicated that we increased our sales force.

As of the end of Q3 or Q1 I am sorry.

David OToole: As far as sales and marketing expenses are concerned, they will step up from Q1. SGN, or the other side of it, GNA, is going to stay relatively flat, if not decrease, and R&D expenses; we don't see any major step up in that also. So I think I've covered all three of them. We do see, you know, again, sales and marketing increasing because we'll have a full quarter of the expanded sales team that we put in place in Q1.

Speaker Change: And so as.

As far as the sales and marketing expense it will step up.

Speaker Change: Q Q1.

Speaker Change: Sure.

SDN or the other side of it G&A is going to stay relatively flat if not decrease.

Speaker Change: And R&D.

Speaker Change: Expenses, we don't see any major stepped up and not also so I think I've covered all three of them we do see.

Speaker Change: Again sales and marketing increasing because we will have a full quarter of the.

Speaker Change: Expanded sales team that we underwent in Q1.

Speaker Change: Got it thank you.

Speaker Change: And thank you.

Operator: And thank you. In one moment for our next question, and our next question comes from Chris Kallos from MST Access. Your line is now open.

Speaker Change: And one moment our next question.

Speaker Change: And our next question comes from Chris <unk> from MST access your line is now open.

Chris Kallos: Thank you for taking my question. Jim, I just wanted to ask about a little more color around the international expansion, in particular the CE mark and your plans for launching the products into Europe.

Chris: Thank you for taking my question, Jim I, just wanted to ask about a little more color around the international expansion in particular, the CE Mark and Youll plans.

Chris: Launching the products into Europe.

James M. Corbett: Yes, Well, first of all, we've been evaluating our different Distributor Choices. One of the things, of course, is we've done some tests, not tests, the wrong word, we've done some cases with some distributors that we have not signed as a way for them to get familiar with, [inaudible] And of course, what's happening is we're about to head into summertime, which is not the perfect time to launch into Europe, and then it will coincide with the readiness of resale under One reason we've given a broad window is that clearly, a couple of the distributors we're talking about have identified that they'd prefer the launch with Resell Go than Switch after two or three months.

Speaker Change: Yes, well first of all the.

Speaker Change: One of the.

Speaker Change: We've been evaluating are different.

Speaker Change: Distributor choices.

Speaker Change: One of the things of course, as we've done some tests not test the wrong word.

Speaker Change: In some cases with some distributors that we have not signed as a way for them to get familiar.

Speaker Change: With.

Speaker Change: The technology.

Speaker Change: And of course, what's happening is we're about to head into summer time, which is not the perfect time to launch into Europe.

Speaker Change: And then it will coincide with the readiness of resale go forward with under the MTR sometime in September October one reason, we've given a broad window is clear.

Speaker Change: Clearly a couple of the distributors were talking about have identified that they'd prefer to launch with resale go.

Speaker Change: Then switch after two or three months. So that's one of the factors, but our goal is to get that done this year and the same is true in you May know Australia recognizes the MBR.

James M. Corbett: So that's one of the factors. But our goal is to get that done this year. And the same is true, and you may know, Australia recognizes the MDR this year. So we'll be doing the same with Australia.

Speaker Change: This year, so we'll be doing the same with <unk>.

Speaker Change: Australia.

Chris Kallos: Great. And also, I understand that the disappointing quarter was largely due to a lower burn rate in January. If I heard correctly, what was the reason for that, and has that now normalized, are you comfortable that it's going to return to historical norms going forward?

Speaker Change: Great.

Speaker Change: I understand that the disappointing quarter.

Speaker Change: Largely due to a lower burn rate in January correctly.

Speaker Change: What was the reason for that is that now normalized you're comfortable that it's going to return to historical norms going forward.

James M. Corbett: You know, Chris, it seems like that, that is. The only one we had facts on, if you recall, was January. February, March, we don't have facts on, but January by itself was down enough that you could see it right away. We're not seeing that same effect currently.

Speaker Change: It seems so.

Speaker Change: Chris It seems like that.

Speaker Change: That is.

The only one we had facts on if you recall was January February March we don't have facts on but January by itself was down enough debt.

Speaker Change: You see it right away and we're not seeing that same effect currently.

Chris Kallos: I guess I'm just echoing everything; the other questions have come around the aggressive growth rate in the back half of the year. How much of that is not going to be driven by traditional burns accounts versus the new accounts in full skin thickness defects?

Great.

Speaker Change: And I guess I'm just echoing everything.

Speaker Change: Yes.

Speaker Change: Questions that come around the aggressive growth rate in the back half of the year.

Speaker Change: How much of that.

Speaker Change: How much of that is going to be driven by.

Speaker Change: Traditional burns accounts versus new accounts improve skin.

Speaker Change: Fitness fix.

Speaker Change: Well.

James M. Corbett: Through this year, burns will remain the bigger part of our business. The faster growing part of it will be full thickness. But through this year, burns is going to grow still and still be the majority, you know, more than half our sales, even in the fourth quarter. But the fastest growing part is the biggest market, which is full thickness.

Through this year Burns will remain the bigger part of our business the faster growth part of it will be full thickness.

Speaker Change: But through this year Burns.

Speaker Change: <unk> is going to grow still and still be the majority more than half of our sales.

Speaker Change: Even in the <unk>.

Speaker Change: Fourth quarter, but the fastest growing part is the biggest market, which is full thickness.

Chris Kallos: Right, that's all I had. Thank you, Jim.

Speaker Change: Alright, Thats all I had thank you Jim.

James M. Corbett: Thank you Chris and thank you.

Operator: And one moment for our next question. And our next question comes from Madeleine Williams from Wilsons. Your line is now open.

Speaker Change: And one moment our next question.

Speaker Change: And our next question comes from Matt Williams from Wilson. Your line is now open.

Madeleine Williams: Hi Jim and David, I'm just wanting to understand in regards to, thanks for putting up a little bit more color for the VAC submissions, in regards to the rejections. I just wondered if the hospitals or trauma centers that have rejected resale have certain characteristics or you can notice a certain trend in those that do reject and whether or not you can kind of get color on the approvals going forward.

Speaker Change: Okay.

Matt Williams: Hi, Jim and David I just.

Matt Williams: Just wanted to.

Matt Williams: Understand in regards to thanks for putting up the little bit more color does that submissions.

Matt Williams: In regards to the rejections I, just wondered if the hospitals or trauma centers that have rejected.

Matt Williams: So if the headset and characteristics. So you can notice.

Matt Williams: Trend in there you said de reject.

Matt Williams: Whether or not you can kind of get color on political is coming forward.

James M. Corbett: You know, Madeleine, thanks for your question. You know, there's It's eight out of almost 178 submissions, and they didn't seem to fit any pattern, to be candid; there were reasons here and there, sometimes it was related to how they perceived their patient load, that white, that was a case, for example. Another case was whether they thought the indications that particular trauma center saw were going to be economical or not for them to use them. I mean, but they were all There was no trend or pattern, you know, because it's a very small sample to try and detect a pattern unless it was for all the same reasons, which they weren't.

Matt Williams: Madeline Thanks for the question.

Speaker Change: There is.

Madeline: It's eight out of almost 178 submissions and they didn't seem to fit any pattern to be candid.

Madeline: Sure.

Madeline: Reasons here and there sometimes it was related to how they perceive their patient load that way.

That was a case for example.

Madeline: Another case was whether they thought for the indications that particular trauma centers saw whether it was going to be economic or not for them to use it.

Madeline: But they were all there was no trend or pattern.

Madeline: <unk> is a very small sample to try and detect a pattern unless it was for all the same reason, which they werent.

Madeleine Williams: Okay, thanks. And I guess, more broadly, just thinking about, do you have in mind internally the kind of rate at which you think rejections will continue to occur, assuming that, you know, some centers will reject and whether or not that's included in how you're thinking about the forecast for the rest of the year?

Speaker Change: Okay, Thanks, and I guess more broadly just thinking about do you have in mind internally.

Speaker Change: Yes.

Speaker Change: Right, which is ink rejections will continue to occur.

Speaker Change: Anticipated project and whether or not that's included in how you're thinking about the forecast for that for the rest of the year.

James M. Corbett: Yes, we think they occur almost randomly, so they don't happen at a high rate. Thus, we don't think the amount of rejections will have a material effect on our ability to.

Yes, we think they occur almost randomly.

Speaker Change: So they don't happen at a high rate. So we don't think the amount of rejections will have a material effect on our ability to.

Speaker Change: <unk> reached our guidance.

Madeleine Williams: Okay, no worries. Thanks for that.

Speaker Change: Alright, thanks for that.

Operator: and thank you. And one moment for our next question. And our next question comes from Hannah Mitchell from Bank of America. Your line is now open.

Speaker Change: And thank you.

Speaker Change: And one moment our next question.

Speaker Change: And our next question comes from Hana Mitchell from Bank of America. Your line is now open.

Hana Mitchell: Hi, gentlemen.

Hana Mitchell: Yes.

Hana Mitchell: Hassan Thanks for taking my question just wondering if you can provide any more color on Nevada national preparedness arrangement.

Hana Mitchell: What quantities bottom might be considering and over what timeframe. Thank you.

Hannah Mitchell: Yes, so we've entered into a, or in the process, our, let me begin all over again, our fundamental barter agreements have expired. What we're entering into is a First Call on an amount of inventory that they would get on first call up to a certain maximum, which we haven't, I don't, we have made public, right? And it's 1000 units. So in the event of a national disaster, BARDA has a call to purchase 1,000 units, and as a first priority. So we're managing our own inventory; they don't own any of it. And this would only occur in the event of a national disaster where they need to call upon that inventory.

Hassan: Yes. So we've entered into a are in the process are let me begin all over our fundamental BARDA agreement silver.

Hassan: It has expired.

Hassan: What we're entering into is a.

Hassan: First call on them.

Hassan: An amount of inventory.

Hassan: That they would get on first call up to a certain maximum which we haven't.

Hassan: We have made public right and it's a 1000 units.

Hassan: And.

Hassan: So the in the event of a national disaster.

Arda has a call to purchase.

Hassan: <unk> thousand units.

And.

Hassan: As a first priority.

Hassan: So we're managing our own inventories they don't own any of it and this would only occur in the event of a national disaster.

Hassan: Were they.

Hassan: Needed to call upon that inventory.

Speaker Change: Alright, thank you.

James M. Corbett: And thank you. And I am showing no further questions. I would now like to turn the call back over to Jim Corbett for closing remarks.

Speaker Change: And thank you.

Speaker Change: And I am showing no further questions I would now like to turn the call back over to Jim Corbett for closing remarks.

James M. Corbett: I'd like to thank all of you for listening and getting the latest update from AVITA. We look forward to talking with you again next quarter, and thank you again. Bye bye.

James M. Corbett: I'd like to thank all of you for listening and Guinea.

Getting the latest update from a Vida, we look forward to talking with you again next quarter.

James M. Corbett: Thank you again bye bye.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Okay.

Speaker Change: [music].