Q1 2025 Vericel Corp Earnings Call
Thank you for sending by. My name is Rachel and I will be your conference operator today. At this time, I would like to welcome everyone to the Vericel Corporation first quarter 2025 earnings call. All lines have been placed in this to prevent any background noise.
After the speakers' remarks, there will be a question in answer session. If you would like to ask a question during this time, simply press star, follow by the number one on your telephone
If he would like to withdraw your question, press star one again. I will now turn the conference call over to Eric Burns, Vericel's vice president of the NAND Invest Relations. Please go ahead.
Thank you, operator. Good morning, everyone.
Speaker Change: Joining me on today is Collar Vericel's president and chief executive Sir Nick Colangelo.
and our chief finance officer, Joe Mara.
before he began.
Speaker Change: Let me remind you that on today's call, we will be making four-looking statements covering the private security litigation reform act of 1995.
Speaker Change: These statements may involve risks and uncertainties that could cause extra results to deferment to children's expectations and are to describe our following of bonds with the SEC.
Speaker Change: In addition, all four-looking statements represent our views only as with today and should not be relied upon as representing our views as of any subsequent date.
Speaker Change: Please note that a copy of our first quarter plans to results press release in a short presentation with television today's call are available in the Investor Relations section of our website.
I will now turn the call over to Nick.
Thank you, Eric, and good morning, everyone.
Speaker Change: The company's off to a solid start to the year with record first quarter Macy and total company revenue, as well as continued strength in the Macy growth drivers and key performance indicators for the Macy Arthro launch.
NXB Revenue also continued to progress.
Speaker Change: and although Episale Revenue in the first quarter was lower than recent trends,
Speaker Change: and there's been a significant uptake in episode performance to start the second quarter, with graphs from cases completed or scheduled to date this quarter exceeding total graph volume in the first quarter.
Speaker Change: based on the positive trends across the business to start the quarter, we expect strong second quarter performance with total company revenue growth of 22 to 25%.
Speaker Change: Given this momentum and the fact that we expect tariffs to have a negligible impact on the company's business and margins, we're also reaffirming full-year revenue guidance of 20-23% revenue growth in raising profitability guidance for the year.
Macy: Mason had a strong quarter with record first quarter revenue of more than $46 million, which was in line with our expectations and represented a similar growth rate as the first quarter of last year.
Macy: Macy's performance was driven by strong underlying fundamentals as we continue to expand the Macy's surge in customer base and drive growth and biopsies.
Macy: While the first quarter typically is the seasonally lowest quarter of the year, we had double digit biopsy surgeon growth over last year, and the second highest number of biopsies and surgeons taking biopsies in any quarter since launch.
Macy: We also had the second highest number of biopsies in any month in March, which we then surpassed in April .
Macy: based on cases completed and scheduled for this quarter, as well as the momentum in Macy Growth drivers, which we believe is a attributable in part to the recent launch of Macy Arthro. We expect a very strong second quarter for Macy with revenue growth of 22 to 24% for the quarter.
Macy: While we're still early in the Macy Arthur launch, we continue to see significant strength in several leading performance indicators.
Macy: We've trained approximately 400 Macy Arthro Surgeons through the end of April , which is ahead of the pace of surgeon training when we launched Macy in 2017.
Macy: And both the biopsy and implant growth rates for Macy Arthur trained surgeons are substantially higher than the growth rates for surgeons that have not yet been trained, with year-to-date biopsy growth over 30% for trained surgeons.
Macy: Notably, the surgeons that historically used Macy predominantly for patelli cases continue to make up a meaningful portion of the Macy Arthor trained surgeons.
Macy: This cohort of surgeons has the highest biopsy growth rate among trained surgeons so far this year.
Macy: Biopsies for patients with femoral condyle defects are driving much of the outsized biopsy growth for this Macy user cohort.
Macy: suggesting that these surgeons may be considering, Macy, for a broader patient population that encompasses the largest segment of the addressable market for approximately 20,000 patients per year.
Macy: We're also encouraged by the fact that a significant percentage of Macy Arthro cases have been for patients with smaller defects outside the femoral condyls.
Macy: which is the defect location that the Macy Arthrow instruments were designed to treat.
Macy: In particular, Macy Arthur was being used in a meaningful number of cases for patients with trocally a defects, an area of the knee behind the kneecap where Macy historically had low single digit penetration.
Macy: The trocally a defect segment of Macy's addressable market is similar in size to the Patelli segment at approximately 10,000 patients per year and has the potential to be a significant source of business and a meaningful driver of upside macy growth beyond the treatment in ephemeral condyle defects.
Macy: We expect that the positive biopsy trends that we've seen to start the year will continue over multiple quarters as we train a significant number of additional surgeons. And that Macy Arthur or trained surgeons will drive hundreds of incremental biopsies this year.
Macy: While it's still too early to see a similar inflection in implant growth, given the median time from biopsy to implant.
Macy: We expect the incremental impact of Macy Arthur on overall Macy implant volumes to accelerate as we move through the year and to provide a strong foundation for continued significant implant growth in 2026.
Macy: Similar to the dynamics we saw with the launch of Macy in 2017.
Macy: Based on the strong Macy Arthur launch indicators to date in our expectation for Macy implant volume growth this year and over the next few years, we plan to begin our Macy cells for expansion in the second half of this year.
Macy: Turning to burn care, Nexobrid first quarter revenue increased over 200% compared to last year, and over 30% sequentially compared to the prior quarter.
Macy: A key priority for next-uprid remains driving deeper penetration and more consistent use across our nearly 60 ordering centers.
Macy: To that end, we generated a higher proportion of our business from consistent ordering centers in the first quarter, and that segment also had a higher average number of units per order in the quarter.
Macy: In addition, we continue to see strong surgeon interest in Nexibrid, as was demonstrated by the high level of engagement and attendance at Nexibrid Symposia and other events at the recent American Burn Association annual meeting.
Macy: For Episel, despite having the highest number of biopsies in the first quarter since 2023, first quarter revenue was lower than anticipated, primarily due to significantly higher ratio of canceled cases to patient treatments in the quarter as a result of patient health issues.
Macy: However, we're seeing much stronger episode performance to start the second quarter, with graphs from cases completed or scheduled so far this quarter exceeding total graph volume in the first quarter.
Macy: The strong start to the second quarter is being driven by biopsies received in the first quarter, indicating that the first quarter shortfall was also due in part to timing of patient treatments.
Macy: With episode graph volume increasing each month this year, we believe that the burn care franchise is positioned for much stronger performance in the second quarter.
Macy: I'll now turn the call over to Joe to provide a more detailed review of our financial results in guidance for 2025.
Thanks, Nick, and good morning, everyone.
Macy: Moving to Q1 results, the company achieved record total net revenue for the quarter of 52.6 million with 46.3 million of macy revenue, 5 million of epistle revenue, and 1.3 million of net-subred revenue.
Macy: Macy had a strong first quarter with 15% revenue growth versus the prior year which when adjusted for one fewer selling day in the quarter compared to last year represents approximately 17% growth.
Macy: These results are in line with priorier growth and the Macy Guidance for the quarter.
Macy: Nexbert Revenue of 1.3 million represented 207% growth versus the prior year and 31% growth versus the prior quarter as the Nexbert launch continues to progress.
Macy: Episau Revenue was below our initial quarterly guidance, primarily as a result of a very high percentage of canceled orders related to patient health issues, lower grafts per patient, and the timing of surgery is moving to the second quarter.
Macy: As we have discussed previously, it remains very difficult to predict the cadence of episode quarterly revenue given the nature of the burn care market and the variability in the health of potential epistle patients.
Macy: Demonstrating once again that episode trends can vary significantly on both a monthly and quarterly basis throughout the year, which is why we focus on trends over longer periods of time.
Macy: Rose Prophet for the quarter was 36.3 million or 69% of net revenue in line with the prior year of largest 69% despite the lower-epicel revenue.
Macy: Total operating expenses for the quarter were in line with our expectations at 49.1 million compared to 40.8 million for the same period in 2024.
Macy: The increase in operating expenses was primarily due to increased headcount and related employee expenses and additional costs related to the company's new facility, including depreciation and Macy Tech transfer related activities.
Macy: Moving forward, we continue to expect relatively similar quarterly operating expenses for the balance of the year.
Macy: Net loss to the quarter was 11.2 million or 23 cents per share, and non-GAAP adjusted EBITDA for the quarter was 3.2 million or 6% of that revenue.
Macy: As we noted in our last earnings call, we expected to have the lowest margins of the year in the first quarter given that it's typically the lowest macy revenue quarter of the year and expect as usual to have our highest margins in the fourth quarter, which is by far the highest macy revenue quarter of the year.
Macy: I would also note that the company's margins in the first quarter were adversely impacted by the lower episode revenue during the quarter, and we expect margins to be significantly higher in the second quarter.
Macy: Finally, the company generated 6.6 million of operating cash flow and edited the quarter with approximately 162 million in cash, restricted cash and investments, and no debt.
Macy: With the investment for the company's new facility nearly complete this quarter, we expect cash generation to inflect moving forward further enhancing the company's strong balance sheet and financial profile.
Macy: With respect to tariffs, because the company's manufacturing facilities are based in the US with the vast majority of manufacturing cost being labor and overhead, with all revenue derived from domestic sales.
Macy: We anticipate very minimal impact on our business and operations from these terrorists or future terrorists and pharmaceuticals that may be announced.
Macy: Further, because we maintain significant safety stock of most materials, including Nexibird finished product and the Major Cell College and Membrane use to manufacture Macy.
Macy: We expect at the impact of current or future tariffs on cost of goods sold in Gross Margin in 2020.
Macy: In 2025 and 2026 will be negligible and will not impact the company's financial guidance in 2025, or a midterm profitability goals of high 70% gross margin and high 30% adjusted even to margin by 2029.
Turning to our Financial Guidance [inaudible]
Macy: For the second quarter, we are off to a strong start with both franchises and expect total revenue to grow in the 22-25% range.
Macy: with total revenue expected to be approximately 64 to 66 million in a quarter.
Macy: For Macy, we expect a strong second quarter with revenue growth of approximately 22 to 24 percent with Macy Revenue expected to be approximately 54 million in the balance of our revenue during the quarter from burn care driven by a much stronger episode revenue for the second quarter.
Macy: In terms of our second quarter profitability metrics, we expect a strong financial quarter with gross margin in the low 70% range and adjusted EBITDA margin in the 20% range.
Macy: For the full year, we are maintaining our total revenue guidance with revenue growth expected to be 20 to 23 percent growth.
Macy: and terms of profitability guidance based on our financial results and strong brand leading indicators today.
Macy: As well as the continued discipline in managing expenses, we are raising our gross margin guidance to 75% and raising our adjusted EBITDA margins guidance to 26% for the full year.
Macy: Note that this updated profitability guidance includes operating expenses in 2025 related to the acceleration of our Macy's Salesforce expansion.
I will now turn the call back over to Nick.
Nick Colangelo: Thanks, Joe. In terms of our longer-term growth initiatives, we continued to advance the Macy Ankle Development Program and remain on track to initiate the Phase III mascot clinical study in the second half of this year.
Nick Colangelo: A potential macy ankle indication represents a substantial longer term growth driver for macy with an estimated addressable market of $1 billion and would enable the company to expand into other orthopedic markets.
Nick Colangelo: We also remain on track to initiate commercial manufacturing for Mason and our new facility next year.
Nick Colangelo: In closing, we're very encouraged by the significant strength in both the underlying Macy Business Fundamentals and the early Macy Arthro leading indicators, which point to potential opportunities for incremental Macy utilization, insurgent and patient segments across the Macy addressable market.
We believe that the strong pace of Macy Arthur's surgeon training
Nick Colangelo: and the incremental biopsies those surgeons have and will generate provide a very strong foundation for macy implant growth moving forward.
Nick Colangelo: In addition, the significantly improved trends for Episels positioned the burn care franchise for much stronger performance this quarter. We believe the company's well-positioned for another strong year of revenue and profit growth in 2025 and continued strong growth in the years ahead.
will now open the call up to questions.
Nick Colangelo: At this time, I would like to remind everyone in order to ask a question, press R as at the number one in your telephone case. It will pass for just a moment to compile that to any roster.
Speaker Change: Your first question comes from the line, Ryan Zimmerman, with BCI Chief, please go ahead.
Hey, good morning. Can you hear me? Okay Yeah.
Speaker Change: Nick, you talked about a bunch of metrics, and you also talked about...
Speaker Change: The femoral condyle and the trochlear potential of Macy Arthur. I'm curious to be talked a little bit about kind of...
Speaker Change: How you see the markup between for Femre O'Condale and Troll Clear specifically is that?
Speaker Change: Is any of that additive to the current market size in that you think about for Patelah and just help us understand patient interest and willingness to get some of these other lesions treated, you know, beyond say the Patelah lesions that you already treat.
Speaker Change: Yep, thanks, Ryan. So, you know, as we've talked about in the past, the Mathy Arthro Instruments were designed to treat...
Speaker Change: 2-4 square centimeter defects on the femoral condiles, and that makes up about 20,000 of the 60,000 patient-tam on an annual basis.
Speaker Change: Provide that we're just seeing that troclya, as I mentioned, could become another area.
Speaker Change: That opens up an area where we've had, if you think about our corporate presentation, on the right hand of that slide where we segment out the patient population.
Speaker Change: There's the 20,000 patients for femoral condyle defects, and then there's a 20,000 patient segment for these other smaller defects which includes the trochlius.
Speaker Change: with the instruments, and the simplicity of the procedure that, you know, these defects are amenable to be treated with the MACR for our instruments.
Speaker Change: Yeah, that's helpful. And then here's a follow-up on Macy Arthro.
Speaker Change: You know, the comms arguably get a little harder through the year.
Speaker Change: You know, we've followed kind of a very prescriptive kind of component and pacing dynamic for Macy for many years now.
But...
Speaker Change: I'm wondering if we should be thinking about bucking that trend, if you will, because of...
Speaker Change: You know, the efforts you're making to expand Macy Arthro as a growth driver because based on your guidance it would suggest that you know there might be a more you know step up a more enhanced level step up in the second half of the year given some of these trends are starting to build. [inaudible]
Thanks for taking the questions.
Speaker Change: Yeah, so good morning, Ryan. So I'll take that one. This is Joe. So, you know, I think as you think about Macy, and I think to your point of it's generally followed a pretty prescriptive pattern.
Speaker Change: and I would say, you kind of look at the guidance, you know, generally, you know, I'd say, you kind of think about the four-year guidance, you know, I guess the first kind of piece on Mason is.
Speaker Change: You know, as Nick said, the leading indicators have been, you know, really strong, just the core leading indicators we think look at things like surgeons and biopsies and the biopsies in particular, and I would say
Speaker Change: You know, when you think about those 400 trained surgeons, I mean, that's a pretty meaningful percentage of our surgeon base that's already trained and to see that cohort driving. And I think that's what I'm going to do.
Speaker Change: for kind of strong quarters the rest of the year. You know, it's kind of, we think about what the pace of macy for the remainder of the year. You know, I would say if you kind of look at it, it still generally follows the kind of mix, you know, kind of first half and second half within the year. You know, I would say, as you think about our full year guidance
Speaker Change: within our guidance, if you will, which can always shift a little bit during the year, it's probably, you know, I think we feel like Macy will be a bit higher. So, you know, I think Macy is set up for those strong quarters for their remainder of the year.
Speaker Change: You know, and if you kind of think big picture on Macy, you know, it's your point, but if you think on a full year basis, you know, the last couple of years we've been growing at 20% both of the last two years without ours from.
Speaker Change: So I certainly think it's reasonable, you know, if we get into call at the low 240s on May C to be up a couple points that are for your basis. So, you know, you would expect pretty strong growth in the remaining quarters, just kind of given what we're seeing in those positive trends on the indicators.
Speaker Change: You know what's interesting is not just thinking about 2025 and I think Nick mentioned this in the prepared remarks.
Speaker Change: But also thinking about kind of the exit rate this year and what that could look like for Macy, you know, in 2026, you know, if all 400 of those trained surgeons to date, for example, just do one additional case and you are simply not assuming that in our guidance, but it gives you a sense.
Speaker Change: You know, that would be north of 20 million dollars and you know, double digit growth, you know, just right there. So, you know, I think it gives you a sense of the potential opportunity and, you know, I think we're excited about what we've seen, but also kind of excited as we think about beyond 2025, you know, what this may look like for Mason.
Speaker Change: Thank you, Joy. Let me just squeeze one clarification. Was there any contribution in your macy numbers in the first quarter? I'm just curious how to think about that with the 15.2% growth. Thanks for taking the question.
Youth means specific contribution from Arthro? Yeah, yeah, exactly.
Nick Colangelo: Yeah, hey, Ryan, this is Nick. So, one thing, you know, again, we...
Speaker Change: As we mentioned on the last call, it's a little hard to parse out, you know, certainly we believe there are incremental cases that have occurred. It's a little harder to parse out because as we mentioned, we kind of launched in earnest.
Speaker Change: Macy Arthro in Q1. So, you know, those biopsies typically take four to six months to convert. So, you know, no doubt there's some incremental impact, but we certainly...
Speaker Change: Expect that to inflect in the back half of the year and into 2026. And I'll just point you to the dynamics that I referenced in my prepared remarks from 2017.
You know, call it roughly 20% . .
Speaker Change: Range, and then in 2018, to Joe's point, you know, that really came through with, you know, 54% macy growth in 2018 over 2017. So, you know, we're hopeful that the cadence we're seeing here with early biopsy inflection, then translates to implant.
Speaker Change: Growth and inflection in the back half of the year and into 2026 and beyond.
Okay, thank you for taking my questions.
Thanks for having us ride.
Speaker Change: We're next question comes from the lack of Richard Newitter with the Jewish authorities. Please go ahead.
Joseph Mara, Joseph Mara,
Speaker Change: Hi, thanks for taking the questions. I guess the first thing on your comment thanks to the caller on on Macy, it's family, you know.
You're striving for two, you know, two forty plus.
Speaker Change: Do you need Macy Arthro to inflect in order to achieve that? I guess the question is, how...
You know, how...
Speaker Change: How reliant are you for an inflection to hit numbers, or is there some cushion there?
Speaker Change: and then the other has a second question up front, just on the margin, you know, it's a pretty substantial and increase in two to set up.
Speaker Change: and if you guys have a high level of disability, is that just all the epithel disability coming back? So you feel really good about that step up, and it's as simple as that, or maybe it's expense timing, just maybe any color just to get us to that 20% either by margin, thanks.
Speaker Change: Again, if you think about Macy going from you know call. It 20% to 22% you know I would say we are assuming a contribution you know clearly from from our throat to help drive that inflection on a year over year basis, but I would also say you know it's it's based on.
Speaker Change: Part of our guidance assumption, but I wouldn't say, we're looking for kind of inflection if you will in the underlying trends of of Macy's Arthro.
Speaker Change: Correct, you know the back half of the year and again into 26, that's gonna give us a nice opportunity to you know to convert these incremental biopsies. So it's essentially continuing in similar trends of what we've had that you know it's it's a couple of million hires. So it's not usually material from a change perspective.
Speaker Change: And then from a margin perspective, I would say you know in the first quarter you know when you see that lower Epis Leven kind of coupled with what is typically our our lowest macy revenue. You know we did have you know I'd say pretty solid gross margin you know still at 69.
Speaker Change: Last year, you know if for example, epsl was a bit higher in the quarter. Then certainly we could have been in that 70% range. So I think getting to the low 70 Q2 with you know with a base of revenue that we expect to be much higher in the mid sixties is certainly a reasonable expectation.
Speaker Change: And for you know for the year, we did talk about gross margin, we did increase our guidance a bit to 74% on a full year basis.
Speaker Change: And the gross margin side. So we have some visibility there as well and then from an adjusted EBITDA margin you know again, the Q1 results or certainly impacted by kind of lower revenue on both products. You know, we kind of just think about where the revenue is and what our current expense basis.
Speaker Change: Like a lower margin in the first quarter in the second quarter, you know I think to your point you know once kind of the revenue you know gets up to a much more substantial number in the mid sixties you know generally it's as I commented, we probably assume similar operating expenses you know across all four quarters and.
Speaker Change: We you know look to accelerate a bit of our Macy's sales force expansion into this year you know we've contemplated that on a full year basis as well. So it is really it really is kind of that revenue level I would say that sort of drives what you're seeing on a quarter over quarter basis, and why and where that change.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: [noise] next question comes from the line of Mike Kroskey with Lyric partners. Please go ahead.
Speaker Change: Hi, everyone. This is Sam on from Mike can you guys hear me Alright, yes, yes, good morning.
Speaker Change: Yeah. Thanks, guys. So I know, it's early days and you mentioned higher biopsy rates for Macy Arthro surgeons in the quarter, but can you kind of provide any color in terms of what you're seeing in respect of conversion rates. Thus far again I know, it's probably just a small number of procedures, but are they higher than.
Speaker Change: How could this potentially translate to growth in the back half of the year.
Nick Colangelo: Yeah. This is Nick so as I mentioned on the call. It's a little early to kind of see the same kind of inflection in implants, just because the median conversion time is call. It four to six months and you know obviously, we were referencing b.
Nick Colangelo: The date so in the first you know four months of the year. So it's a little early to be able to see kind of what you know the impact will be on conversion rates, although for the reasons. We've mentioned in the past that it's a much simpler faster lesson basic surgery, one would think.
Nick Colangelo: You know you would see a higher conversion rate for Macy arthro. So.
Nick Colangelo: Regardless of that just in terms of having you know those additional biopsies. We would expect that you would see as I mentioned earlier when you have a strong uptick in buyopsies those tend to show up as implants four to six months later or a couple quarters.
Speaker Change: Impact you know we would expect in in the second half of the year and and as Joe mentioned I think it's important to note that it doesn't really require anything more than sort of maintaining the current trends we've seen year to date to be able to deliver on on the guidance that we provided today.
Speaker Change: Got it. Thanks, that's very helpful. And then I just had one follow up so I you know with your sales force like now fully trained on both Episobrin as of last quarter can you just provide any color on any cross selling opportunities that you've seen in one Q.
Speaker Change: Any episo.
Speaker Change: Cross trained on both products and that's an important part of the longer term sort of growth opportunity for our burn care franchise I would say that you know each quarter, we do see that we're getting biopsies from dormant accounts you know last year I think.
Speaker Change: Due to the fact that you know the were several million dollars worth of Epsle revenue that was attributable to what we're at one time next ibraid only accounts and and we expect that to continue so we certainly get biopsies, whether those translate into graphs and revenue you know just depends on those.
Speaker Change: Patient health issues, and and treating the patients and so on but there's certainly you know the continued opportunity to do that and that's the goal to have every account we're in become both episode users.
Speaker Change: Got it thanks, so much.
Speaker Change: I can confirm the line of Josh Jennings with TP. Please go ahead, hi, good morning, making Joe. Thanks for taking the question I was one of the ask one on Macy Arthro and and it's it's still early in the launch but any can share.
Speaker Change: From your surgeon customers are from the field just on on the acute outcome.
Speaker Change: For VC Arthroes anything on just recovery time.
Speaker Change: And acute acute procedural success et cetera be great to hear some of those data points.
Speaker Change: Yeah, Hey, Jess Thanks for the question you know I would say from our corporate perspective as I think I've mentioned previously we currently have a macy registry that you know is enrolling patients and that is intended for macy arthro patients.
Speaker Change: Create those early post surgical recovery times in advances, it's a little early to you know have data on that hopefully you know next year or sometime we'll we'll be able to kind of have data on that but you know there's certainly a number you know you can do.
Speaker Change: Surgeons, who have used macy arthroe in the videos they post about the results, they're seeing with patients and certainly you know I think their impression is as we've expected and and they would which is when you have a lesson basic surgery you do have.
Speaker Change: A better range of motion back to full weight bearing potentially sooner. So those things that you know you would want to see and would expect to see with a lesson based of surgery I think those kinds of things from the surgeon themselves are sort of what we hear.
Speaker Change: Sort of published corporate data, yet, but we hope to have that you know not too distant future.
Speaker Change: And just a quick follow up on that one and just on the procedural success rate I mean, our understanding is that they're strong and that the learning curve is is not steep but just wanted to check that box as well and just have one follow.
Speaker Change: Yeah, well you know again, it's early for for outcomes data, but you know as we've talked about previously you know these surgeons do the vast majority of their cartilage repairs Arthroscopically. So you would expect this is kind of right in their wheelhouse.
Speaker Change: You know working with surgeons, both through the human factor study and the voice of the customer kind of training.
Speaker Change: Sessions, you know we ask about that you know is is macy Arthur how does it compare to Macy open in terms of time and complexity and essentially was that parity and then compared to other cartilage repair procedures that they do how does it compare and again.
Speaker Change: That would you know sort of support a conclusion that you know seems like you've heard that the learning curve is pretty pretty quick.
Speaker Change: Gravench and then maybe for Joe.
Speaker Change: Sorry, if I missed this but just you know the plan to expand Macy Arthur sales force the margin guidance positive revision, maybe just help us understand.
Speaker Change: High level or detail just to spend associated with the expanding a C. R through sales force and and how just to get us comfortable with the back half waiting in the margin ramp clearly we can look to prior years and see the strength in the back half in terms of expand.
Speaker Change: Question and you know obviously basic continues to grow very strongly and you know as we finish up our analysis on a sales force expansion the details around it which aren't all fully.
Speaker Change: Included yet, but you know we have pretty strong step up in the back of the year as we always do and we want to make sure that we have kind of the resources to support.
Speaker Change: That expected growth in particularly in the in the high volume territory. So you know we as we did last year, you know, we wanna be adding that support in a timely way and and really setting people up for a to hit the ground running early in 20.
Speaker Change: You know I don't expect that it will necessarily be sort of a full scale expansion from that perspective, but again really designed to make sure. We can support kind of the growth we're expecting.
Speaker Change: In part as a result of MACI Arthro, Yeah, no I think that I just to add Megan to that point, it's really and I'm just given the leading indicators we've seen on Macy Arthro you know we want to make sure. We're kind of set up for success and you know we're investing behind that so it's really just.
Speaker Change: Kind of that's what's driving the decision and I would say from kind of a P. L perspective, you know to your point you made your question of then typically because the back half of the year really the fourth quarter is such a high quarter for Macy, we do have the stronger margins in the fourth quarter.
Speaker Change: And and so that's you know that's just generally how the year plays out you know I would say from an operating expense perspective to Nick's point I mean, we're not kind of instituting the full expansion in this year, but we are focused on those likely to focus on those higher volume territories and this.
Speaker Change: Back half of the year, probably you know later in the year realistically by the time, you know, we're kind of adding to the field. So certainly as we think about our kind of investments for the year. I mean this is something that you know we want to make sure is a priority. So there's a bit of prioritization that kind of comes into that but it doesn't.
Speaker Change: You know, how we're thinking about our our spend on a full year basis.
Speaker Change: Appreciate it thank you thanks.
Speaker Change: Your next question comes from the line of Casey Cronak with kind of Ord. Please go ahead.
Speaker Change: Hi, Thanks for taking the questions just to.
Speaker Change: Provide more color on the sales force expansion that you guys were talking about you know you touched on that it wouldn't be necessarily a full expansion. This year just a little more color on you know kind of a numbers for for this year and then if you would plan to maybe make it more of.
Speaker Change: Yeah. Thanks Caitlyn.
Speaker Change: You know I guess I would just start by saying again, we haven't finalized the implementation plan, but just as we look out towards the end of this year and into 26 27 and beyond you know it's clear based on the growth that we are expecting that we need to add resources I think talked.
Speaker Change: Your question on the last earnings call to get that time, you know I mentioned that wouldn't be surprised if you know maybe we had a couple dozen territories and then the question is you know we obviously are we've done this a lot in the past couple years, but expanded.
Speaker Change: 2017 through 2020, right for four or five street years, and you know, we always grew through that and increased rep productivity on a revenue per rep basis, and so you know think our team knows how to do this well to make sure that you know there's no.
Speaker Change: Year as all of that goes into sort of thinking about if we want to add resources to make sure. We're well positioned for the end of this year, how we might do that and so it's really more of a making sure we sort of provide the support that's needed without inc.
Speaker Change: Setting ourselves up for 2026, so a little more to come on the exact numbers, but it gets in the ballpark of the range that you know we had talked about previously.
Speaker Change: That's great and then you know just on Arthrope, how many surgeons of the 400 that you've trained are you know legacy Macy's users versus kind of the new Arthro inclined users you you touched on in your broader tamp.
Speaker Change: I'd say you know the Lowhanging fruit as you would expect is that you know these current basic users get trained on the Arthro procedure and you know the vast majority come out of the buckets or this cohorts that we talked about previously which currently users you know.
Speaker Change: Surely just sort of patella only surgeons or predominantly surgeons and then you know surgeons, who did both condiles and patella cases, and so that's where most of these surgeons are coming from as you would expect you know if your sales.
Speaker Change: Back to your customers you train them on me C. Arthro and then you start moving on over time to sort of prospect new user. So it follows a playbook that I think would be expected and you know there's a lot of advantages for us in that these are.
Speaker Change: Understand the clinical utility of Macy. So they are as we alluded to or discussed on our call thinking about a broader patient population that's important as well. So there's a lot of you know growth opportunity even within Macy users.
Speaker Change: That's great and then just a quick one on Episo.
Speaker Change: We actually don't see that as a trend because it it just moves each quarter, depending on again sort of the patient population that you happen to be treating so so no. There's no real you know as we've looked at things you know obviously as you might expect a number of different ways. There's no changes.
Speaker Change: You know.
Speaker Change: Burn surface area of patients for receiving biopsies that were treating et cetera. It just happens and in some ways you should think about it as sort of a carryover from Q4. So it was probably a less productive you know.
Speaker Change: Package Q4, Unlike Q1 last year, where we had sort of a a huge number of Q4 2023 biopsies coming into Q1, just didn't add at this year and so you know took a little while to sort of I guess did.
Speaker Change: That's changed in terms of the nature of the patients, we're treating or or any of the dimensions around that.
Speaker Change: Got it thank you so much.
Speaker Change: Thank you.
Speaker Change: Again, if you would like to ask a question press thir, one and your telephone.
Nissan Kerico: Next question comes from the line of Nissan Kerico with Stephens. Please go ahead.
Nissan Kerico: Hey, guys. Thanks for the questions I was wondering how how have the recent trade warheadlines impacted your view on Macy internationally I know, it's a dynamic situation, but was curious to to hear how it's impacted your view there be.
Speaker Change: You're really your market assessment process.
Speaker Change: Yeah, well you know obviously, it's a very fluid situation based in you know we believe there's certainly potential for macy outside of the United States that is sort of the project. We're engaged in evaluating right. Now you know Macy was a very you know sort of.
Speaker Change: Important product in Europe previously and so you know there's still a lot of surgeons there who you know would certainly welcome having macy as a primary option for Cardillage repair now so we're going to continue to explore it I think you know like everything.
Speaker Change: You would take anything related to sort of you know tariffs or other sort of trade impacts into account before we made you know any sort of.
Speaker Change: Got it okay and.
Speaker Change: Somewhat touched on this in the prior question, but maybe asked another way.
Speaker Change: How are you prioritizing arthro training across surgeon groups going forward I mean, how much time is this sales force spending on driving adoption among those 2000 or so arthro focused surgeon group and how are you really prioritizing adoption.
Speaker Change: Yeah, I'd say generally as I mentioned, you know first of all a lot of these trainings occur at industry events, and so you kind of or sort of regional kinds of training sessions and things like that where as typical and.
Speaker Change: Participated these and and they can choose to do so et cetera. So you know there's a lot of from a reptime perspective, there's sort of these larger group training sessions, you know that that occur and there are also individual sessions that occur.
Speaker Change: Especially if it's a you know an individual cadaver based training, where you have to find a lab you know get the cadaver knee and coordinate all that stuff I'd say you know those are more time.
Speaker Change: Virgin preference, but there's also a lot of streamlined ways to train the surgeons as I mentioned number one they can train online if they want you know sort of lab training. They can do it in a number of ways either individually or larger regional trainings you know we also.
Speaker Change: Call. These rd synthetic models.
Speaker Change: Our reps that they can train surgeons on which also cuts down on sort of you know the time and effort that's required to train a surgeon. So it's a synthetic model where they can kind of basically practice doing arthroscopic administration of.
Speaker Change: You know could become very a very streamlined weighted trained surgeons and we know that that's how some trains surgeons who have been trained and done Macy arthro implants have trained so so I'd say finally that S.
Speaker Change: Like if you the low hanging fruit always is to go to your existing customers and train them and then move on to sort of exploring the sort of high volume Cardilage repair surgeons that you know haven't used me yet and I just think you know.
Speaker Change: Every situation you might imagine, but I would say that's probably the most likely way on an individual rep basis that that these trainings occur.
Speaker Change: Understood. Thanks again.
Mason: Okay. Thanks Mason.
Speaker Change: That ends at Uni session I will now turn the call over to need a call Angelo for close remarks. Please go ahead.
Speaker Change: Okay, well, thank you and thanks, everyone for your questions and and continued interest in Bearicello look forward to providing further updates on our progress on our next call and have a great day.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.