Q4 2025 Vericel Corp Earnings Call

February 26, 2026

Speaker #1: At this time, I'd like to turn the call over to Eric Burns, Vericel's Vice President of Finance and Investor Relations. Please go ahead, sir.

Speaker #1: Thank you, Operator. And good morning, everyone. Joining me on today's call are Vericel's President and Chief Executive Officer, Nick Colangelo, and our Chief Financial Officer, Joe Mara.

Eric Burns: Thank you, operator. Good morning, everyone. Joining me on today's call are Vericel's President and Chief Executive Officer, Nick Colangelo, and our Chief Financial Officer, Joe Mara. Before we begin, let me remind you that on today's call, we will be making forward-looking statements covered under the Private Securities Litigation Reform Act of 1995. These statements may involve risks and uncertainties that could cause actual results to differ materially from expectations and are described in full in our filings with the SEC. In addition, all forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Please note that a copy of our Q4 financial results press release and a short presentation with highlights from today's call are available in the Investor Relations section of our website.

Speaker #1: Before we begin, let me remind you that on today's call, we will be making forward-looking statements covered under the Private Security Litigation Format of 1995.

Speaker #1: These statements may involve risks and uncertainties, that could cause actual results to defer materially from expectations, and are described more fully in our filings with the SEC.

Speaker #1: In addition, all forward-looking statements represent our views only as of today, and should not be relied upon as representing our views as of any subsequent date.

Speaker #1: Please note that a copy of our fourth quarter financial results press release and a short presentation with highlights from today's call are available in the Investor Relations section of our website.

Speaker #1: I will now turn the call over to Nick.

Eric Burns: I will now turn the call over to Nick.

Speaker #2: Thank you, Eric, and good morning, everyone. As highlighted in our preliminary financial results release last month, the company had a strong close to the year and delivered outstanding financial and business results in the fourth quarter.

Dominick Colangelo: Thank you, Eric, and good morning, everyone. As highlighted in our preliminary financial results release last month, the company had a strong close to the year and delivered outstanding financial and business results in the Q4, with significant revenue and profit growth and continued progress across a number of key business initiatives. From a financial perspective, the company generated record Q4 total revenue, which increased 23% over last year and exceeded our guidance for the Q4. This strong revenue performance drove significant margin expansion and profit growth as the company delivered record net income, gross margin of nearly 80%, and adjusted EBITDA margin of 40% for the Q4. We also ended the year with approximately $200 million in cash and investments and no debt as we continue to elevate the company's top-tier financial profile....

Nick Colangelo: Thank you, Eric, and good morning, everyone. As highlighted in our preliminary financial results release last month, the company had a strong close to the year and delivered outstanding financial and business results in the Q4, with significant revenue and profit growth and continued progress across a number of key business initiatives. From a financial perspective, the company generated record Q4 total revenue, which increased 23% over last year and exceeded our guidance for the Q4. This strong revenue performance drove significant margin expansion and profit growth as the company delivered record net income, gross margin of nearly 80%, and adjusted EBITDA margin of 40% for the Q4. We also ended the year with approximately $200 million in cash and investments and no debt as we continue to elevate the company's top-tier financial profile....

Speaker #2: With significant revenue and profit growth, and continued progress across a number of key business initiatives. From a financial perspective, the company generated record fourth quarter total revenue, which increased 23% over last year and exceeded our guidance for the quarter.

Speaker #2: This strong performance revenue performance drove significant margin expansion and profit growth, as the company delivered record net income, gross margin of nearly 80%, and adjusted EBITDA margin of 40% for the quarter.

Speaker #2: We also ended the year with approximately $200 million in cash and investments and no debt, as we continue to elevate the company's top-tier financial profile.

Speaker #2: We also achieved several key business objectives in the quarter, including the successful completion of the Macy Salesforce expansion, and the initiation of the Macy Anchor Clinical Study, and made substantial progress on other long-term growth initiatives as we remain on track to begin commercial manufacturing of Macy in our new facility this year, and a potentially launch Macy outside the United States in 2027.

Dominick Colangelo: We also achieved several key business objectives in the quarter, including the successful completion of the MACI salesforce expansion and the initiation of the MACI ankle clinical study, and made substantial progress on other long-term growth initiatives as we remain on track to begin commercial manufacturing of MACI in our new facility this year, and to potentially launch MACI outside the United States in 2027. MACI's second half momentum continued in the Q4, with record revenue of more than $84 million, representing 23% growth versus the prior year. This performance was driven by strong underlying fundamentals, as we had the highest number of MACI implants, implanting surgeons taking biopsies, and biopsies in any quarter since launch.

Nick Colangelo: We also achieved several key business objectives in the quarter, including the successful completion of the MACI salesforce expansion and the initiation of the MACI ankle clinical study, and made substantial progress on other long-term growth initiatives as we remain on track to begin commercial manufacturing of MACI in our new facility this year, and to potentially launch MACI outside the United States in 2027. MACI's second half momentum continued in the Q4, with record revenue of more than $84 million, representing 23% growth versus the prior year. This performance was driven by strong underlying fundamentals, as we had the highest number of MACI implants, implanting surgeons taking biopsies, and biopsies in any quarter since launch.

Speaker #2: Macy's second-half momentum continued in the fourth quarter with record revenue of more than $84 million, representing 23% growth versus the prior year. This performance was driven by strong underlying fundamentals, as we had the highest number of Macy implants, implanting surgeons, surgeons taking biopsies, and biopsies in any quarter since launch.

Speaker #2: Macy's performance was particularly strong in December across all key performance metrics, including biopsy and implant procedures, as our commercial and operations team executed exceptionally well to close the year.

Dominick Colangelo: MACI's performance was particularly strong in December across all key performance metrics, including biopsy and implant procedures, as our commercial and operations team executed exceptionally well to close the year. MACI's leadership position in the cartilage repair market has continued to strengthen since we launched the product in the US in 2017. Over the past nine years, MACI's generated compound annual revenue growth of 24% and has delivered revenue growth of 20% or more in each of the last three years. Notably, as of the end of 2025, more than 20,000 patients have now been treated with MACI. We believe that MACI's strong clinical profile, together with the surgeon and patient benefits of a simpler, less invasive surgery, have driven MACI's strong growth and will continue to do so moving forward.

Nick Colangelo: MACI's performance was particularly strong in December across all key performance metrics, including biopsy and implant procedures, as our commercial and operations team executed exceptionally well to close the year. MACI's leadership position in the cartilage repair market has continued to strengthen since we launched the product in the US in 2017. Over the past nine years, MACI's generated compound annual revenue growth of 24% and has delivered revenue growth of 20% or more in each of the last three years. Notably, as of the end of 2025, more than 20,000 patients have now been treated with MACI. We believe that MACI's strong clinical profile, together with the surgeon and patient benefits of a simpler, less invasive surgery, have driven MACI's strong growth and will continue to do so moving forward.

Speaker #2: Macy's leadership position in the cartilage repair market has continued to strengthen since we launched the product in the US in 2017. Over the past nine years, Macy's generated compound annual revenue growth of $24%, and has delivered revenue growth of 20% or more in each of the last three years.

Speaker #2: Notably, as of the end of 2025, more than 20,000 patients have now been treated with Macy. We believe that Macy's strong clinical profile together with the surgeon and patient benefits of a simpler, less invasive surgery have driven Macy's strong growth and will continue to do so moving forward.

Speaker #2: In addition, Macy's best-in-class pricing and reimbursement profile with prior authorization approval rates remaining over 95% for commercial patients in 2025 demonstrates the significant clinical value Macy represents to payers, hospitals, surgeons, and patients.

Dominick Colangelo: In addition, MACI's best-in-class pricing and reimbursement profile, with prior authorization approval rates remaining over 95% for commercial patients in 2025, demonstrates the significant clinical value MACI represents to payers, hospitals, surgeons, and patients. With the strong MACI foundation in place as we move into the new year, we're focused on executing on three strategic imperatives that we believe will position the company for sustained strong revenue and profit growth in 2026 and the years ahead. First, we're focused on capitalizing on our larger MACI salesforce, which will meaningfully increase our reach across the entire MACI customer base. Starting the year with a significantly larger footprint provides an opportunity to not only continue to drive the expansion of new MACI surgeons, but also to drive deeper penetration and increase utilization within our current MACI surgeon base.

Nick Colangelo: In addition, MACI's best-in-class pricing and reimbursement profile, with prior authorization approval rates remaining over 95% for commercial patients in 2025, demonstrates the significant clinical value MACI represents to payers, hospitals, surgeons, and patients. With the strong MACI foundation in place as we move into the new year, we're focused on executing on three strategic imperatives that we believe will position the company for sustained strong revenue and profit growth in 2026 and the years ahead. First, we're focused on capitalizing on our larger MACI salesforce, which will meaningfully increase our reach across the entire MACI customer base. Starting the year with a significantly larger footprint provides an opportunity to not only continue to drive the expansion of new MACI surgeons, but also to drive deeper penetration and increase utilization within our current MACI surgeon base.

Speaker #2: With this strong Macy Foundation in place as we move into the new year, we're focused on executing on three strategic imperatives that we believe will position the company for sustained strong revenue and profit growth in 2026 and the years ahead.

Speaker #2: First, we're focused on capitalizing on our larger Macy Salesforce, which will meaningfully increase our reach across the entire Macy customer base. Starting the year with a significantly larger footprint provides an opportunity to not only continue to drive the expansion of new Macy surgeons, but also to drive deeper penetration and increased utilization within our current Macy surgeon base.

Speaker #2: We're also implementing a number of important commercial excellence initiatives across the organization. We've made significant investments in new tools and additional resources to enhance our commercial analytics and standardize best practices across our larger sales team, which we believe will elevate execution across our commercial organization and drive deeper penetration within our surgeon user base unlocking another key growth driver for Macy.

Dominick Colangelo: We're also implementing a number of important commercial excellence initiatives across the organization. We've made significant investments in new tools and additional resources to enhance our commercial analytics and standardize best practices across our larger sales team, which we believe will elevate execution across our commercial organization and drive deeper penetration within our surgeon user base, unlocking another key growth driver for MACI. Based on these initiatives and the quality of our entire expanded sales force, we expect that MACI sales rep productivity will return to 2025 levels as early as next year. Our second strategic priority is to leverage MACI Arthro to drive continued strong growth in smaller cartilage defects, principally on the femoral condyles, which represents the largest segment of MACI's addressable market.

Nick Colangelo: We're also implementing a number of important commercial excellence initiatives across the organization. We've made significant investments in new tools and additional resources to enhance our commercial analytics and standardize best practices across our larger sales team, which we believe will elevate execution across our commercial organization and drive deeper penetration within our surgeon user base, unlocking another key growth driver for MACI. Based on these initiatives and the quality of our entire expanded sales force, we expect that MACI sales rep productivity will return to 2025 levels as early as next year. Our second strategic priority is to leverage MACI Arthro to drive continued strong growth in smaller cartilage defects, principally on the femoral condyles, which represents the largest segment of MACI's addressable market.

Speaker #2: Based on these initiatives and the quality of our entire expanded Salesforce, we expect that Macy Sales Rep productivity will return to 2025 levels as early as next year.

Speaker #2: Our second strategic priority is to leverage Macy Arthro to drive continued strong growth in smaller cartilage defects principally on the femoral condyles, which represents we've discussed throughout 2025, we've been very successful in training physicians on the Macy Arthro technique with approximately 1,000 surgeons trained to date.

Dominick Colangelo: As we've discussed throughout 2025, we've been very successful in training physicians on the MACI Arthro technique, with approximately 1,000 surgeons trained to date. Importantly, MACI Arthro-trained surgeons have continued to demonstrate a significant increase in biopsy and implant growth following training, and for those surgeons that have completed a MACI Arthro case, even higher biopsy and implant growth and higher conversion rates. With this foundation in place, our objective is to leverage MACI Arthro to drive significant growth in the treatment of small condyle defects, which historically have represented a smaller percentage of our overall patient volume and a lower growth segment for MACI.

Nick Colangelo: As we've discussed throughout 2025, we've been very successful in training physicians on the MACI Arthro technique, with approximately 1,000 surgeons trained to date. Importantly, MACI Arthro-trained surgeons have continued to demonstrate a significant increase in biopsy and implant growth following training, and for those surgeons that have completed a MACI Arthro case, even higher biopsy and implant growth and higher conversion rates. With this foundation in place, our objective is to leverage MACI Arthro to drive significant growth in the treatment of small condyle defects, which historically have represented a smaller percentage of our overall patient volume and a lower growth segment for MACI.

Speaker #2: Importantly, Macy Arthro trained surgeons have continued to demonstrate a significant increase in biopsy and implant growth following training, and for those surgeons that have completed a Macy Arthro case, even higher biopsy and implant growth and higher conversion rates.

Speaker #2: With this foundation in place, our objective is to leverage Macy Arthro to drive significant growth in the treatment of small condyle defects, which historically have represented a smaller percentage of our overall patient volume and a lower growth segment for Macy.

Speaker #2: Notably, growth in the small condyle defect segment accelerated in Macy Arthro's first full year on the market in 2025, as this segment became one of the highest Macy implant growth segments along with the patella segment, which consistently has been our highest volume and fastest growing segment.

Dominick Colangelo: Notably, growth in the small condyle defect segment accelerated in MACI Arthro's first full year on the market in 2025, as this segment became one of the highest MACI implant growth segments, along with the patella segment, which consistently has been our highest volume and fastest-growing segment. We believe that the positive trends are driven by the fact that MACI Arthro is a less invasive procedure with the potential for improved patient outcomes. Early data from ongoing investigator case series suggest a significant reduction in post-surgical pain, improved range of motion, and a meaningful acceleration in the timeline to achieving full weight bearing following MACI Arthro treatment. These initial results suggest very positive patient outcomes that could also lead to shorter overall rehab and recovery timelines.

Nick Colangelo: Notably, growth in the small condyle defect segment accelerated in MACI Arthro's first full year on the market in 2025, as this segment became one of the highest MACI implant growth segments, along with the patella segment, which consistently has been our highest volume and fastest-growing segment. We believe that the positive trends are driven by the fact that MACI Arthro is a less invasive procedure with the potential for improved patient outcomes. Early data from ongoing investigator case series suggest a significant reduction in post-surgical pain, improved range of motion, and a meaningful acceleration in the timeline to achieving full weight bearing following MACI Arthro treatment. These initial results suggest very positive patient outcomes that could also lead to shorter overall rehab and recovery timelines.

Speaker #2: We believe that the positive trends are driven by the fact that Macy Arthro is a less invasive procedure with the potential for improved patient outcomes.

Speaker #2: Early data from ongoing investigator case series suggest a significant reduction in post-surgical pain, improved range of motion, and a meaningful acceleration in the timeline to achieving full weight bearing following Macy Arthro treatment.

Speaker #2: These initial results suggest very positive patient outcomes that could also lead to shorter overall rehab and recovery timelines. We expect these case series to be presented at upcoming industry meetings and in publications and we continue to work with additional surgeons as they complete Macy Arthro cases to collect prospective outcomes data in our Macy clinical registry.

Dominick Colangelo: We expect these case series to be presented at upcoming industry meetings and in publications, and we continue to work with additional surgeons as they complete MACI Arthro cases to collect prospective outcomes data in our MACI clinical registry. Our third strategic imperatives is to leverage our lifecycle management initiatives to position the company for sustained longer-term growth. To that end, we initiated the Phase III MACI Ankle MASCOT clinical study in Q4. A potential MACI ankle indication represents a substantial growth opportunity with an estimated addressable market of more than $1 billion. It would also enable the company to expand into other areas of the orthopedics market. We also remain on track to initiate commercial manufacturing for MACI in our new facility this year, which will allow the company to potentially commercialize MACI outside the United States.

Nick Colangelo: We expect these case series to be presented at upcoming industry meetings and in publications, and we continue to work with additional surgeons as they complete MACI Arthro cases to collect prospective outcomes data in our MACI clinical registry. Our third strategic imperatives is to leverage our lifecycle management initiatives to position the company for sustained longer-term growth. To that end, we initiated the Phase III MACI Ankle MASCOT clinical study in Q4. A potential MACI ankle indication represents a substantial growth opportunity with an estimated addressable market of more than $1 billion. It would also enable the company to expand into other areas of the orthopedics market. We also remain on track to initiate commercial manufacturing for MACI in our new facility this year, which will allow the company to potentially commercialize MACI outside the United States.

Speaker #2: Our third strategic imperative is to leverage our lifecycle management initiatives to position the company for sustained longer-term growth. To that end, we initiated the phase three Macy ankle mascot clinical study in the fourth quarter.

Speaker #2: A potential Macy ankle indication represents a substantial growth opportunity with an estimated addressable market of more than $1 billion. It would also enable the company to expand into other areas of the orthopedics market.

Speaker #2: We also remain on track to initiate commercial manufacturing for Macy in our new facility this year, which will allow the company to potentially commercialize Macy outside the United States.

Speaker #2: We're taking a staged approach to Macy OUS expansion with the first phase targeting a planned launch in the UK. The UK represents an ideal first step for Macy OUS expansion as there's clearly defined expedited approval and reimbursement pathways a high level of awareness and surgeon advocacy given that Macy was previously on the market in the UK.

Dominick Colangelo: We're taking a staged approach to MACI OUS expansion, with the first phase targeting a planned launch in the UK. The UK represents an ideal first step for MACI OUS expansion, as there's clearly defined expedited approval and reimbursement pathways, a high level of awareness and surgeon advocacy, given that MACI was previously on the market in the UK, in concentrated points of care with a dozen or so centers of excellence for the treatment of cartilage injuries. Potentially launch MACI in the UK in 2027, as we seek to expand the long-term growth and value creation opportunities for the company. We expect to submit a marketing authorisation application to the UK MHRA in the middle of this year.

Nick Colangelo: We're taking a staged approach to MACI OUS expansion, with the first phase targeting a planned launch in the UK. The UK represents an ideal first step for MACI OUS expansion, as there's clearly defined expedited approval and reimbursement pathways, a high level of awareness and surgeon advocacy, given that MACI was previously on the market in the UK, in concentrated points of care with a dozen or so centers of excellence for the treatment of cartilage injuries. Potentially launch MACI in the UK in 2027, as we seek to expand the long-term growth and value creation opportunities for the company. We expect to submit a marketing authorisation application to the UK MHRA in the middle of this year.

Speaker #2: In concentrated points of care with a dozen or so centers of excellence for the treatment of cartilage injuries. We expect to submit a marketing authorization application to the UK MHRA in the middle of this year, and potentially launch Macy in the UK in 2027 as we seek to expand the long-term growth and value creation opportunities for the company.

Speaker #2: In summary, the company executed extremely well in the fourth quarter, generated record revenue and financial results, while achieving a number of key objectives that help position the company for continued growth in now turn the call over to Joe to discuss our financial results in 2026 guidance in more detail.

Dominick Colangelo: In summary, the company executed extremely well in the Q4, generated record revenue and financial results, while achieving a number of key objectives that help position the company for continued growth in 2026 and beyond. I'll now turn the call over to Joe to discuss our financial results and 2026 guidance in more detail.

Nick Colangelo: In summary, the company executed extremely well in the Q4, generated record revenue and financial results, while achieving a number of key objectives that help position the company for continued growth in 2026 and beyond. I'll now turn the call over to Joe to discuss our financial results and 2026 guidance in more detail.

Speaker #3: Thank you, Nick, and good morning, everyone. As Nick referenced, the company had an outstanding close to the year with record fourth-quarter revenue of $92.9 million and 23% growth versus the prior year.

Joe Mara: Thank you, Nick. Good morning, everyone. As Nick referenced, the company had an outstanding close to the year, with record Q4 revenue of $92.9 million and 23% growth versus the prior year. For the full year, total revenue increased to $276.3 million, which was above the high end of our guidance range for the year. MACI also had a strong close to the year, with record Q4 revenue of $84.1 million, representing 23% growth versus the prior year and 51% sequential growth versus the Q3. For the full year, MACI revenue increased 21% to $239.5 million, and burn care Q4 revenue was $8.8 million, which was above our guidance range for the Q4.

Speaker #3: For the full year, total revenue increased $276.3 million which was above the high end of our guidance range for the year. Macy also had a strong close to the year with record fourth-quarter revenue of $84.1 million representing 23% growth versus the prior year and $51% sequential growth versus the third quarter.

Speaker #3: For the full year, Macy revenue increased $21% to $239.5 million and burn care fourth-quarter revenue was $8.8 million which was above our guidance range for the quarter.

Speaker #3: For the full year, burn care revenue was $36.8 million consisting of $32.1 million of epicell revenue and $4.7 million of Nexabrid revenue. The company's substantial growth in the fourth quarter translated into significant margin expansion with gross profit of more than $73 million in the quarter or $79% of revenue and adjusted EBITDA of more than $37 million or 40% of revenue.

Joe Mara: For the full year, burn care revenue was $36.8 million, consisting of $32.1 million of Epicel revenue and $4.7 million of NexoBrid revenue. The company's substantial growth in Q4 translated into significant margin expansion, with gross profit of more than $73 million in the quarter or 79% of revenue, and adjusted EBITDA of more than $37 million or 40% of revenue, representing the company's highest quarterly margins in any quarter to date.

Speaker #3: Representing the company's highest quarterly margins in any quarter to date. On a full-year basis, the company also delivered meaningful margin expansion with 74% gross margin and increase of nearly $200 basis points compared to their prior year, and 26% adjusted EBITDA margin and increase of over $300 basis points versus the prior year, which were both above our guidance to start the year despite the incremental investments in 2025 for our new facility and the Macy Salesforce expansion.

Joe Mara: On a full year basis, the company also delivered meaningful margin expansion, with 74% gross margin, an increase of nearly 200 basis points compared to the prior year, and 26% adjusted EBITDA margin, an increase of over 300 basis points versus the prior year, which were both above our guidance to start the year, despite the incremental investments in 2025 for our new facility and the MACI salesforce expansion. GAAP net income also grew nearly 60% to $16.5 million for the full year, as the company's profit growth continues to significantly outpace our strong revenue growth.

Speaker #3: Gap net income also grew nearly 60% to $16.5 million for the full year as the company's profit growth continues to significantly outpace our strong revenue growth.

Speaker #3: Finally, the company generated full-year operating cash flow of $52 million and ended the year with approximately $200 million in cash and investments and increase of $35 million during the second half of the year, as we expected inflection in our cash generation following the completion of our new manufacturing facility is now being realized.

Joe Mara: Finally, the company generated full-year operating cash flow of $52 million and ended the year with approximately $200 million in cash and investments, an increase of $35 million during the second half of the year, as the expected inflection in our cash generation following the completion of our new manufacturing facility is now being realized. Turning to our financial guidance, we are entering 2026 with a great deal of momentum and have gotten off to a very strong start of the year in the Q1. Consistent with our commentary on our prior earnings call regarding 2026 revenue for both franchises, we expect total company revenue this year of approximately $316 to $326 million.

Speaker #3: Turning to our financial guidance, we are entering 2026 with a great deal of momentum and have gotten off to a very strong start of the year in the first quarter.

Speaker #3: Consistent with our commentary on our prior earnings call regarding 2026 revenue for both franchises, we expect total company revenue this year of approximately $316 to $326 million.

Speaker #3: For Macy, we expect another year of strong revenue growth and as a starting point for our guidance, we expect Macy revenue of approximately $280 to $286 million for the full year.

Joe Mara: For MACI, we expect another year of strong revenue growth, and as a starting point for our guidance, we expect MACI revenue of approximately $280 to 286 million for the full year. Our initial guidance reflects a continuation of current MACI key growth driver trends, including surgeon growth, biopsies per surgeon, conversion rate, and price to start the year. Recognizing that there is an opportunity for outperformance based on the momentum in our key performance indicators, our expanded sales force, and the commercial initiatives that we have put in place. As part of our initial framework, we expect a similar quarterly mix of MACI full-year revenue as last year, and importantly, a similar growth rate for MACI each quarter this year versus the prior year.

Speaker #3: Our initial guidance reflects a continuation of current Macy key growth driver trends including surge in growth, biopsies per surgeon, conversion rate, and price to start the year.

Speaker #3: Recognizing that there is an opportunity for outperformance, based on the momentum in our key performance indicators, our expanded Salesforce, and the commercial initiatives that we have put in place.

Speaker #3: As part of our initial framework, we expect a similar quarterly mix of Macy full-year revenue as last year and importantly, a similar growth rate for Macy each quarter this year versus the prior year.

Speaker #3: For burn care, we are maintaining our run rate approach to guidance with revenue of approximately $9 to $10 million per quarter, recognizing that revenue can vary on a quarterly basis.

Joe Mara: For burn care, we are maintaining our run rate approach to guidance, with revenue of approximately $9 to 10 million per quarter, recognizing that revenue can vary on a quarterly basis. For the full year, this points to approximately $36 to 40 million of total burn care revenue. Of note, we are not assuming any additional NexoBrid revenue in our initial guidance related to a potential BARDA award, although there is a reasonable possibility for incremental NexoBrid BARDA revenue during the year. For Q1, we are on track to exceed 20% total company revenue growth as we are off to a very strong start to the year for both franchises.

Speaker #3: For the full year this points to approximately $36 to $40 million of total burn care revenue. Of note, we are not assuming any additional Nexabrid revenue in our initial guidance related to a potential BARDA award, although there is a reasonable possibility for incremental Nexabrid BARDA revenue during the year.

Speaker #3: For the first quarter, we are on track to exceed 20% total company revenue growth as we are off to a very strong start to the year for both franchises.

Speaker #3: Macy's fourth-quarter momentum has continued into this year with Macy performance trending toward higher first-quarter growth than in recent years and burn care performance trends have also been strong to start the year.

Joe Mara: MACI's Q4 momentum has continued into this year, with MACI performance trending toward higher Q1 growth than in recent years. Burn care performance trends have also been strong to start the year. As such, we expect MACI revenue of approximately $54 to $55 million, and burn care revenue of $9 to $10 million for the Q1. Moving down the P&L, for the full year, we expect gross margin of approximately 75% and adjusted EBITDA margin of approximately 27%, which accounts for additional costs related to our new Burlington manufacturing facility, the incremental investments related to our MACI salesforce expansion, and increased MACI ankle MASCOT clinical trial expense as patient enrollment begins. We expect total operating expenses to be approximately $220 million for the full year and anticipate a similar level of spend each quarter.

Speaker #3: As such, we expect Macy revenue of approximately $54 to $55 million and burn care revenue of $9 to $10 million for the first quarter.

Speaker #3: Moving down the P&L, for the full year, we expect gross margin of approximately 75% and adjusted EBITDA margin of approximately 27%, which accounts for additional costs related to our new Burlington manufacturing facility; the incremental investments related to our MACI Salesforce expansion; and increased MACI Ankle MOSAIC clinical trial expense as patient enrollment begins.

Speaker #3: We expect total operating expenses to be approximately $220 million for the full year and anticipate a similar level of spend each quarter. For the first quarter, we expect gross margin of approximately 70% and adjusted EBITDA margin of approximately 10%.

Joe Mara: For Q1, we expect gross margin of approximately 70% and adjusted EBITDA margin of approximately 10%. Overall, 2026 is set up to be another positive year for the company, with strong top-line revenue growth as well as continued margin expansion and profit growth. As we look ahead, we believe that the durable growth of our portfolio positions the company to sustain strong top-line growth in the years ahead and supports our midterm revenue and profitability targets. This concludes our prepared remarks. We will now open the call to your questions.

Speaker #3: Overall, 2026 is set up to be another positive year for the company with strong top-line revenue growth as well as continued margin expansion and profit growth.

Speaker #3: As we look ahead, we believe that the durable growth of our portfolio positions the company to sustain strong top-line growth in the years ahead and supports our mid-term revenue and profitability targets.

Speaker #3: This concludes our prepared remarks. We will now open the call to your questions.

Speaker #1: Thank you, ladies and gentlemen. If you would like to ask a question, please press star one on your telephone keypad. Using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipments.

Operator: Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, star one to ask a question. We'll move to our first question, Ryan Zimmerman with BTIG.

Speaker #1: Again, star one to ask a question. We'll move to our first question. Ryan Zimmerman with BTIG.

Ryan Zimmerman: Good morning. Can you guys hear me okay?

Speaker #4: Good morning. Can you guys hear me okay?

Ryan Zimmerman: Good morning. Can you guys hear me okay?

Speaker #5: Yeah, good morning, Ryan.

Joe Mara: Yeah. Good morning, Ryan.

Nick Colangelo: Yeah. Good morning, Ryan.

Speaker #4: Good morning. Busy morning for a lot of us. So I'll try and squeeze in both questions. But I think there was a number of price increases on Macy that were taken in 2025.

Ryan Zimmerman: Morning. Busy morning for a lot of us, so I'll try and squeeze in both questions. You know, I think there was a number of price increases on MACI that were taken in 2025. Correct me if I'm wrong on that, Joe, you know, how do you think about kind of the mix of price versus volume? You know, if you reflect back on 2025, particularly on volume, I think investors, you know, are rightly concerned that price drove some of the growth. As, you know, you look ahead to 2026, kind of, you know, how do you think about that balance as well?

Speaker #4: Correct me if I'm wrong on that, Joe. But how do you think about kind of the mix of price versus volume? If you reflect back on 2025, particularly on volume, I think investors are rightly concerned that price drove some of the growth.

Speaker #4: And then, as you look ahead to '26, kind of how do you think about that balance as well?

Speaker #5: All right. We'll start. Do you want to ask your second question or just start there?

Joe Mara: All right, we'll start. Do you want to ask your second question or just start there?

Speaker #4: Oh, sorry. Let's just start there. Sorry, Joe. Thank you. Keeping me honest.

Ryan Zimmerman: Oh, sorry. Let's just start there. Sorry, Joe. Thank you. Keeping me honest.

Speaker #5: Yeah. So yeah, so look, from a pricing perspective, obviously, that's remains a key growth driver for us. Nick talked about in his prepared remarks, our kind of access position remains very strong.

Joe Mara: Look, from a pricing perspective, you know, obviously, that's, you know, remains a key growth driver for us. Nick talked about in his prepared remarks, you know, our kind of access position remains very strong. Over 95% of our commercial cases from a prior authorization perspective are approved. You know, kind of looking back historically, and I would say looking forward, you know, certainly pricing kind of has been and will remain part of our growth algorithm. If you look at the second half of last year, I mean, obviously, there was a significant improvement in the MACI performance. I'd say that step up was, you know, volume driven, although, of course, I would say, you know, both price and volume, you know, play a part in the growth.

Speaker #5: I think over 95% of our commercial cases from a prior authorization perspective, are approved. So kind of looking back historically, and I would say looking forward, certainly pricing kind of has been and will remain part of our growth algorithm.

Speaker #5: If you look at the second half of last year, I mean, obviously, there was a significant improvement in the Macy performance. I'd say that step up was volume-driven.

Speaker #5: Although, of course, I would say both price and volume play a part in the growth.

Speaker #4: Yeah. Okay. And then the other one of the other key, I think, variables to the algorithm is new doctor growth. And so as you think about kind of who's adopting Arthro, I'm curious if you could reflect on maybe kind of existing or same-source sales dynamics relative to kind of new doctor growth.

Ryan Zimmerman: Yeah. Okay, you know, the other one of the other key, I think, variables to the algorithm is new doctor growth. You know, as you think about kind of who's adopting arthro, you know, I'm curious if you could reflect on maybe kind of existing or same store sales dynamics relative to kind of new doctor growth. Appreciate the comments you gave about those adopting arthro, you know, certainly being more robust, but is that a reflection of your existing customer base or potentially new doctor growth? Thanks. Thanks for taking the question.

Speaker #4: And appreciate the comments you gave about those adopting Arthro certainly being more robust. But is that a reflection of your existing customer base or potentially new doctor growth?

Speaker #4: Thanks. Thanks for taking the questions.

Speaker #5: Yeah. Hey, Ryan, I'll start. It's Nick. I think the sort of ratio of trained surgeons that we talked about previously is held throughout the year.

Dominick Colangelo: Yeah. Hey, Ryan, I'll start. It's Nick. You know, I think the sort of ratio of trained surgeons that we talked about previously is held throughout the year. You know, about 2/3 come from existing MACI users, split between kind of former patella users and patella and condyle users, and then about 1/3 from sort of either prior open targets who had not adopted MACI at that time, and then obviously the new, arthro-only surgeons. That's kind of remained relatively consistent. You know, I'd say the dynamics that we see once the surgeons are trained, regardless of which bucket they come out of, sort of hold true in terms of obviously increasing, if they're new, but even sort of former users, increasing both biopsy and growth rates.

Nick Colangelo: Yeah. Hey, Ryan, I'll start. It's Nick. You know, I think the sort of ratio of trained surgeons that we talked about previously is held throughout the year. You know, about 2/3 come from existing MACI users, split between kind of former patella users and patella and condyle users, and then about 1/3 from sort of either prior open targets who had not adopted MACI at that time, and then obviously the new, arthro-only surgeons. That's kind of remained relatively consistent. You know, I'd say the dynamics that we see once the surgeons are trained, regardless of which bucket they come out of, sort of hold true in terms of obviously increasing, if they're new, but even sort of former users, increasing both biopsy and growth rates.

Speaker #5: So about two-thirds come from existing Macy users, split between kind of former patella users and patella and condyle users, and then about a third from sort of either prior open targets who had not adopted Macy at that time.

Speaker #5: And then, obviously, the new Arthro-only surgeons. So that's kind of remained relatively consistent. And I'd say the dynamics that we see once the surgeons are trained, regardless of which bucket they come out of, sort of hold true in terms of, obviously, increasing if they're new.

Speaker #5: But even sort of former users, increasing both biopsy and growth rates, and then particularly when they start doing Arthro cases, their growth rates for both biopsies and implants are even higher.

Dominick Colangelo: Particularly when they start doing arthro cases, their growth rates for both biopsies and implants are even higher, and their conversion rate was higher for the year as well. All obviously very encouraging trends for us as we move forward.

Nick Colangelo: Particularly when they start doing arthro cases, their growth rates for both biopsies and implants are even higher, and their conversion rate was higher for the year as well. All obviously very encouraging trends for us as we move forward.

Speaker #5: And their conversion rate was higher for the year as well. So all, obviously, very encouraging trends for us as we move forward.

Speaker #4: Thanks,

Ryan Zimmerman: Thanks, Nick.

Speaker #1: We'll go next to Mike Cracke with Lee Rink Partners.

Operator: We'll go next to Mike Kratky with Leerink Partners.

Speaker #6: Hi, guys. This is Sam on from Mike. Can you hear me all right?

[Analyst] (Leerink Partners): Hi, guys. This is Sam on for Mike. Can you hear me all right?

Speaker #5: Yep.

Speaker #7: Yeah, good morning. How are you?

Dominick Colangelo: Yep.

Nick Colangelo: Yep.

Joe Mara: Yeah. Good morning. How are you?

Speaker #6: Yeah, doing good. Thanks, guys. So just during your 3Q25 earnings call, I think you had mentioned that 20% growth for Macy would kind of be a good starting point for fiscal 2026.

[Analyst] (Leerink Partners): Yeah, doing good. Thanks, guys. Just, you know, during your Q3 2025 earnings call, I think you had mentioned that 20% growth for MACI would kind of be a good starting point for fiscal 2026. The current guidance kind of implies growth slightly below that, at roughly 18% at the midpoint. Is this just a function of, you know, kind of Q4 being a little bit better than expected? Is there anything that materially changed from then versus now when you know, issued the new guidance here?

Speaker #6: But the current guidance kind of implies growth slightly below that at roughly 18% at the midpoint. Is this just a function of kind of 4Q being a little bit better than expected?

Speaker #6: And is there anything that materially changed from then versus now when you issued the new guidance here?

Speaker #5: Yeah. So I'll start. I mean, I'll just give a quick update on the guidance. Maybe overall, and I would say just on that last part, I mean, nothing's certainly materially changed.

Joe Mara: Yeah, I'll start. I mean, I'll just give a quick update on the guidance, you know, maybe overall. I would say just on that last part, I mean, nothing's certainly materially changed. You know, I think, you know, if anything, we're probably, you know, really end of the year, a bit stronger, you know, across the business, which was great. You know, just in terms of the guidance framework, you know, to your question, you know, I would say, you know, if you look at both franchises, you know, it's really consistent with the commentary we gave in the last call. You know, on the MACI side, you know, the guidance is kind of in that low to mid $280 million range. That's, you know, consistent, I think, you know, right on top of consensus or very close.

Speaker #5: I think if anything, we probably really ended the year a bit stronger, across the business, which was great. So just in terms of the guidance framework, to your question, I would say if you look at both franchises, it's really consistent with the commentary we gave in the last call.

Speaker #5: So on the Macy side, the guidance is kind of in that low to mid 280 million dollar range. That's consistent, I think, right on top of consensus or very close.

Speaker #5: We talked about in the last call having that similar year-over-year incremental growth, which I think is accomplished as well, kind of the midpoint of that range in the 283 or 283 is right in line with last year, which is about a 42 million dollar increase.

Joe Mara: You know, we talked about in the last call, having that similar year-over-year incremental growth, you know, which I think it accomplishes as well, kind of the midpoint of that range in the 282 or 283 is right in line with last year, which is about a $42 million increase. You know, I'd say on the specific question around the 20%, I mean, obviously, there's a range around MACI. You know, we wanna be prudent to start the year. You know, what we said in the last call, in addition to having that similar incremental growth was. You know, I think coming into the call, you know, there were analysts kind of on either side of that number.

Speaker #5: I'd say on the specific question around the 20%, I mean, obviously, there's a range around Macy. We want to be prudent to start the year.

Speaker #5: But what we said in the last call, in addition to having that similar incremental growth, was I think coming into the call, there were analysts kind of on either side of that number.

Speaker #5: And I think we were comfortable with something at that range. But I think we try to be clear that we were not going to guide above that.

Joe Mara: You know, I think we were comfortable with something at that range, but I think we tried to be clear that we were not gonna guide above that. You know, I think more than anything, it's probably just being prudent on the MACI side, but we feel really good about, you know, the start of the year on MACI and the full year. Just quickly on Burn Care, you know, I think that's important as well. You know, that one's pretty straightforward. You know, we said last quarter, we're gonna maintain this run rate framework, which I think has worked well in the last couple of quarters, in particular, you know, call it 9 to 10 million per quarter, get you $36 to 40 million or $38 million at the midpoint.

Speaker #5: So, I think more than anything, it's probably just being prudent on the MACI side. But we feel really good about the start of the year on MACI and the full year.

Speaker #5: And then just quickly on burn care, I think that's important as well. So that one's pretty straightforward. We said last quarter, we're going to worked well in the last couple of quarters in particular, call it 9 to 10 million per quarter, get your 36 to 40 or 38 million at the midpoint.

Joe Mara: You know, one thing that, you know, is probably a bit off, you know, coming into the call is, you know, we referenced the high thirties last quarter, but if you actually look at external estimates, they're kinda more into the lower forties. You know, that's obviously impacting both Burn Care and the total company, you know, external starting points. You know, I did wanna point that out. You put that together, I think we have a nice balanced guide, and, you know, something around, you know, call it, you know, mid $280 or the mid of that range, rather, and high $30s in Burn Care, you're probably around $320 or so at the midpoint, which we think is a very balanced starting point.

Speaker #5: One thing that is probably a bit off coming into the call is we referenced the high 30s last quarter. But if you actually look at external estimates, the kind of more into the lower 40s.

Speaker #5: So that's obviously impacting both burn care and the total company external starting point. So I did want to point that out. So you put that together, I think we have a nice balance guide, something around, call it, mid 280 or the mid of that range rather and high 30s in burn care, you're probably around 320 or so at the midpoint, which we think is a very balanced starting point.

Speaker #5: And then just briefly on Q1, because I think that's important as well, in the context of the guide. So just to reiterate what we said in the call, we think we're off to a great start.

Joe Mara: Just briefly on Q1, because I think that's important as well, you know, in the context of the guide. Just to reiterate what we said on the call, you know, we think we're off to a great start, you know, on track to exceed 20% as a company for the Q1. You know, the MACI metrics have been really strong, and we are guiding Q1, you know, higher than, you know, we've trended, and certainly higher than we've guided, you know, in the last couple of years. Obviously, feel good about MACI. You know, Burn Care had a strong start as well. Very much on track to that, you know, run rate for Q1. We think that sets us up well.

Speaker #5: On track to exceed 20% as a company for the quarter. The Macy metrics have been really strong. And we are guiding Q1 higher than we've trended.

Speaker #5: And certainly higher than we've guided in the last couple of years. So obviously, feel good about Macy and burn care has had a strong start as well.

Speaker #5: So very much on track to that run rate for Q1. So we think that sets us up well. And then lastly, just on the Macy question and just generally, I think as we talked about in the last call, I'd say we just want a very, I would say, prudent and disciplined start of the year in our initial guide.

Joe Mara: Lastly, just, you know, on the MACI question and just generally, you know, I think as we talked about in the last call, you know, I'd say we just want a very, I would say, prudent and disciplined start of the year in our initial guide. You know, MACI has a ton of momentum. We have a number of initiatives, including the increased sales force. You know, we did see some inflection in some of our growth drivers in the second half. You know, we're not baking any of that in. We're assuming, you know, pretty similar trends on a full year basis. I would say on the Burn Care side, you know, there's certainly an opportunity for incremental BARDA revenue. You know, I think that's a reasonable possibility. We're not baking that in.

Speaker #5: So Macy has a ton of momentum. We have a number of initiatives, including the increased sales force. We did see some inflection in some of our growth drivers in the second half.

Speaker #5: But we're not baking any of that in. We're assuming pretty similar trends on a full-year basis. And similarly, I would say on the burn care side, there's certainly an opportunity for incremental part of revenue.

Speaker #5: I think that's a reasonable possibility. But we're not baking that in. So I think it's prudent. On both franchises, and just one last point on Macy, we did make the comments if you look at the full year, growth rate at the midpoint of that range, it's actually right in line with our Q1 guide.

Joe Mara: You know, I think it's prudent on both franchises. Just one last point on MACI. You know, we did make the comments, you know, if you look at the full year growth rate at the midpoint of that range, it's actually right in line with our Q1 guide. We felt like starting the year with not only a similar mix of business, because we know our business is seasonal, but also essentially consistent growth rates, really the same growth rate across all four quarters was a good way to start the year, and I think positions us really well to potentially outperform on that if we execute well. I think it's a, you know, a prudent way to start the year again, just given the seasonality of our business.

Speaker #5: And so we felt like starting the year with not only a similar mix of business, because we know our business is seasonal, but also pretty essentially consistent growth rates, really the same growth rate across all four quarters was a good way to start the year.

Speaker #5: And I think positions us really well to potentially outperform on that if we execute well. But I think it's a prudent way to start the year.

Speaker #5: Again, just given the seasonality of our business.

Speaker #4: Understood. Thanks for the call, guys.

[Analyst] (Leerink Partners): Understood. Thanks for the color, guys.

Speaker #5: Thank you.

Joe Mara: Thank you.

Speaker #1: We'll go next to Richard Newetter with Truist Securities.

Operator: We'll go next to Richard Newitter with Truist Securities.

Philippe: Hi, this is Philippe on for Rich. Just on the Salesforce expansion, you know, you guys pretty quickly expanded your territories about 30% in the last couple of months. I'm just wondering, like, just talk me through, like, rep adds and the strategies for the year and I guess, like, how you expect those new territories to ramp. Just a second question, if you could give some guidance and expectations for free cash flow ramp for the year, that would be helpful. Thanks so much.

[Analyst] (Truist Securities): Hi, this is Philippe on for Rich. Just on the Salesforce expansion, you know, you guys pretty quickly expanded your territories about 30% in the last couple of months. I'm just wondering, like, just talk me through, like, rep adds and the strategies for the year and I guess, like, how you expect those new territories to ramp. Just a second question, if you could give some guidance and expectations for free cash flow ramp for the year, that would be helpful. Thanks so much.

Speaker #8: Hi. This is Felipe on for Rich. So just on the Salesforce expansion, you guys pretty quickly expanded or expanded your territories about 30% in the last couple of months.

Speaker #8: So I'm just wondering, just talk me through Rep Ads and the strategy for the year and I guess how those you expect those new territories to ramp.

Speaker #8: And then just the second question, if you could give some guidance and expectations for free cash flow ramp for the year, that would be helpful.

Speaker #8: Thanks so much.

Speaker #5: Yep. Hey, it's Nick. I'll start with the Salesforce expansion. Well, and obviously, we're really excited about the expansion, as you'll recall from last year.

Dominick Colangelo: Yep. Hey, it's Nick. I'll start with the Salesforce expansion. Well, you know, obviously, we're really excited about the expansion. As you will recall from last year, you know, we decided to accelerate the expansion into Q4 because we wanted to support what we knew were gonna be significantly higher volumes in Q4 and make sure that we were positioned to take advantage of this momentum in MACI for the entire year, not kinda have the Salesforce expansion in the first, you know, third of the year. Really excited about that. Obviously, the larger footprint, as I mentioned on my prepared remarks, will increase our reach across the surgeon base and really gives us an opportunity to drive expansion of surgeons and deeper penetration in our existing surgeons.

Nick Colangelo: Yep. Hey, it's Nick. I'll start with the Salesforce expansion. Well, you know, obviously, we're really excited about the expansion. As you will recall from last year, you know, we decided to accelerate the expansion into Q4 because we wanted to support what we knew were gonna be significantly higher volumes in Q4 and make sure that we were positioned to take advantage of this momentum in MACI for the entire year, not kinda have the Salesforce expansion in the first, you know, third of the year. Really excited about that. Obviously, the larger footprint, as I mentioned on my prepared remarks, will increase our reach across the surgeon base and really gives us an opportunity to drive expansion of surgeons and deeper penetration in our existing surgeons.

Speaker #5: We decided to accelerate the expansion into Q4 because we wanted to support what we knew were going to be significantly higher volumes in Q4.

Speaker #5: And make sure that we were positioned to take advantage of this momentum in Macy for the entire year, and not kind of have the Salesforce expansion in the first third of the year.

Speaker #5: So really excited about that. Obviously, the larger footprint, as I mentioned on my prepared remarks, will increase our reach across the surgeon base and really gives us an opportunity to drive expansion of surgeons and deeper penetration in our existing surgeons.

Speaker #5: And I would just say, I think the team executed flawlessly on the expansion. Obviously, people outside of the company can worry about disruption when you're expanding the Salesforce and you're largest quarter.

Dominick Colangelo: I would just say, you know, I think the team executed flawlessly on the expansion. Obviously, people outside of the company can worry about disruption when you're expanding the sales force in your largest quarters. You know, great job by our sales and commercial leadership team to execute and put a plan in place. Great job by both the new and existing reps in the Q4 to not only drive our highest quarter ever, but to position us well as we come into 2026. You know, as we mentioned earlier, these are extremely experienced and talented reps that we think together with, you know, our existing sales force, are gonna drive strong performance as we move forward through the year. You know, that's an important piece of it.

Nick Colangelo: I would just say, you know, I think the team executed flawlessly on the expansion. Obviously, people outside of the company can worry about disruption when you're expanding the sales force in your largest quarters. You know, great job by our sales and commercial leadership team to execute and put a plan in place. Great job by both the new and existing reps in the Q4 to not only drive our highest quarter ever, but to position us well as we come into 2026. You know, as we mentioned earlier, these are extremely experienced and talented reps that we think together with, you know, our existing sales force, are gonna drive strong performance as we move forward through the year. You know, that's an important piece of it.

Speaker #5: So great job by ourselves. And commercial leadership team to execute and put a plan in place great job by both the new and existing reps in the fourth quarter to not only drive our highest quarter ever, but to position us well as we come into 2026.

Speaker #5: And as we mentioned earlier, these are extremely experienced and talented reps that we think together with our existing Salesforce are going to drive strong performance as we move forward through the year.

Speaker #5: So that's an important piece of it. I mentioned on the call that we expect our rep productivity to kind of get back to last year's level as quickly as next year.

Dominick Colangelo: I mentioned on the call that, you know, we expect our rep productivity to kind of get back to last year's level as quickly as next year. Really excited about the opportunity for the sales force expansion and what it's gonna mean for our business.

Nick Colangelo: I mentioned on the call that, you know, we expect our rep productivity to kind of get back to last year's level as quickly as next year. Really excited about the opportunity for the sales force expansion and what it's gonna mean for our business.

Speaker #5: So really excited about the opportunity for the Salesforce expansion and what it's going to mean for our business.

Speaker #6: Yeah. And then in terms of kind of the sort of cash flow question, I think probably the best way to think about we're not guiding to that specifically, but obviously, we think we are in an inflecting cash flow position, which is great.

Joe Mara: Yeah, then in terms of, kind of the sort of cash flow question, I think probably the best way to think about, you know, we're not guiding to that specifically, but obviously, you know, we think we are in an inflecting, cash, you know, cash flow position, which is great. You know, I think generally, I think what we talk about is our adjusted EBITDA is a good proxy for operating cash flow. It doesn't always line up because there could be collections in, you know, at the end of the year and some timing differences, but kinda over time, that tends to be a pretty good proxy, you know, for the most part. Then, you can kinda look at our, you know, run rate on the CapEx side.

Speaker #6: I think generally, I think what we talk about is our adjusted EBITDA is a good proxy for operating cash flow. It doesn't always line up because there could be collections and at the end of the year and some timing differences.

Speaker #6: But kind of over time, that tends to be a pretty good proxy for the most part. And then you can kind of look at our run rate on the CapEx side in the last couple of quarters, it's been in the low single-digit millions.

Joe Mara: In the last couple of quarters, it's been in the low single-digit millions. Obviously, much lower as we've gotten back to more of a steady state, you know, after getting through the building project. That's probably the right way to think about it, but, you know, we don't have a specific number we've guided to there.

Speaker #6: Obviously, much lower as we've gotten back to more of a steady state after getting through the building project. So that's probably the right way to think about it.

Speaker #6: But we don't have a specific number. We've guided to there.

Speaker #1: And we'll move next to Mason Carico with Stevens.

Operator: We'll move next to Mason Carrico with Stephens.

Mason Carrico: Hey, good morning, guys. Thanks for taking the questions. In the context of your MACI outlook for this year, and recognizing your comments, Joe, that leaves some room for upside. How should we think about what's baked in terms of the larger sales force, conversion rates, maybe surgeon growth, that's in the guide today?

Speaker #7: Hey, good morning, guys. And thanks for taking the questions. In the context of your Macy outlook for this year, and recognizing your comments, Joe, that leaves some room for upside, how should we think about what's baked in in terms of the larger Salesforce conversion rates, maybe surge in growth that's in the guide today?

Speaker #5: Yeah. So good morning, Mason. So I think it's again, from a Macy perspective, I think we wanted to start the year with a very balanced view.

Joe Mara: Yeah. Good morning, Mason. You know, I think. You know, again, from a MACI perspective, I think we wanted to start the year with a very balanced view. Obviously, Q1's off to a good start. You know, I think as you think about the key growth drivers there, as I said, I would say, you know, you can think of those as, you know, similar on a full year basis, whether you're talking about, you know, kind of some of the key biopsy drivers or whatnot. You know, I wouldn't say there's anything specific or kind of baking in terms of, you know, the new sales force. I think it's probably more just overall looking at the overall trends.

Speaker #5: Obviously, Q1 is off to a good start. And so I think as you think about the key growth drivers there, as I said, I would say you can think of those as similar on a full-year basis, whether you're talking about kind of some of the key buyups drivers or whatnot.

Speaker #5: I wouldn't say there's anything specific or kind of baking in in terms of the new Salesforce. I think it's probably more just overall looking at the overall trends.

Speaker #5: And it kind of Nick's earlier point, I think we have pretty high expectations of our new ads and are excited about just the increased reach and frequency we're going to have.

Joe Mara: You know, to kind of Nick's earlier point, you know, I think we have pretty high expectations of, you know, our new ads and are excited about just the increased reach and frequency we're going to have. We do think that can be impactful over time, but, you know, we're actually not really baking anything into the guide. You know, obviously, it's a long sales cycle, so you wanna have a little bit of, you know, patience there. You know, obviously, at the same time, we expect it to kinda get back to, you know, our rep productivity rates pretty quickly. You know, I think there's certainly an opportunity if the teams can do a good job to help drive that outperformance, but nothing specifically baked in, you know, assuming kind of any sort of inflection in trends.

Speaker #5: So we do think that can be impactful over time. But we're actually not really baking anything into the guide. And obviously, it's a long sales cycle, so you want to have a little bit of patience there.

Speaker #5: But obviously, at the same time, we expect that to kind of get back to our rep productivity rates pretty quickly. So I think there's certainly an opportunity if the teams can do a good job to help drive that outperformance.

Speaker #5: But nothing specifically we've baked in assuming kind of any sort of inflection and trends.

Speaker #7: Okay. Thank you for that. Would you be able to share any thoughts or anything you can point us to on how conversion rates for Macy tracked over the course of 2025?

Mason Carrico: Okay, thank you for that. Would you be able to share any thoughts, or anything you can point us to, on how conversion rates for MACI tracked over the course of 2025? What proof are you seeing that Arthro might be able to improve the conversion rates, and really shorten that time from biopsy to implant? Thanks for taking the questions.

Speaker #7: What proof are you seeing that our throw might be able to improve the conversion rates and really shorten that time from biopsy to implant?

Speaker #7: Thanks for taking the questions.

Speaker #5: Yeah. Hey, so I think on an overall basis, as Joe mentioned, that conversion rates were relatively stable for the year. But as I mentioned, within that segment of Macy arthro-trained surgeons that actually performed a case, again, we see higher biopsy and implant growth rates than Macy arthro-trained surgeons generally, which are higher than the overall average.

Dominick Colangelo: Yeah. Hey, I think on an overall basis, you know, as Joe mentioned, that conversion rates, you know, were relatively stable for the year. As I mentioned, you know, within that segment of MACI Arthro-trained surgeons that actually performed a case, again, we see higher biopsy and implant growth rates than MACI Arthro-trained surgeons generally, which are higher than the overall average. We do see higher conversion rates for those MACI Arthro implanting surgeons as well. That's the evidence, as I mentioned on my earlier remarks.

Nick Colangelo: Yeah. Hey, I think on an overall basis, you know, as Joe mentioned, that conversion rates, you know, were relatively stable for the year. As I mentioned, you know, within that segment of MACI Arthro-trained surgeons that actually performed a case, again, we see higher biopsy and implant growth rates than MACI Arthro-trained surgeons generally, which are higher than the overall average. We do see higher conversion rates for those MACI Arthro implanting surgeons as well. That's the evidence, as I mentioned on my earlier remarks.

Speaker #5: And then we do see higher conversion rates for those Macy arthro-implanting surgeons as well. So that's the evidence, as I mentioned on my earlier remarks.

Speaker #1: And we'll move next to Jeffrey Cohen with Leidenberg Zalman.

Operator: We'll move next to Jeffrey Cohen with Ladenburg Thalmann.

Jeffrey Cohen: Hey, good morning. Thanks for taking our questions. In particular, could you unpack OpEx a little bit for your 2026 guide? I'm curious on the sales force expansion from last year, does that pull through any anticipated expansions for this year and R&D as well?

Speaker #8: Hey, good morning. Thanks for taking our questions. So don't particularly could you unpack OPEX a little bit for your 26 guide and curious on the Salesforce expansion from last year, if there's any pull-through or any anticipated expansions for this year and R&D as well?

Joe Mara: Yeah. You know, I think we gave guidance at the total company level. We said, you know, approximately $220 million on a full year basis in OpEx. Probably, the easy way to think about that is, you know, call it, you know, $55 million a quarter, pretty consistent, including the first quarter. You know, I think to your kind of question and point, I mean, one thing we've been talking about is, as we move into 2026, you know, there are some incremental costs that are gonna flow through the P&L, including on the OpEx side. To your question on the SG&A side, certainly it's the expansion of the sales force. You know, it's roughly 30 people. You know, you can think of that as, you know, probably something in the $10 million range on an annual basis.

Speaker #5: Yeah. So I think we gave guidance at the total company level. So we said approximately 220 million on a full-year basis in OPEX, probably the easy way to think about that is call it 55 million a quarter, pretty consistent, including the first quarter.

Speaker #5: I think to your kind of question and point, I mean, one thing we've been talking about is as we move into 26, there are some incremental costs that are going to flow through the P&L, including on the OPEX side.

Speaker #5: So to your question on the SG&A side, certainly, it's the expansion of the Salesforce. So it's roughly 30 people. You can think of that as probably something in the $10 million range on an annual basis.

Speaker #5: And then I'd say a pretty meaningful increase on the R&D side as well as part of that. Where you can think about, obviously, the ankle trial, which was kind of in a startup phase, is now thinking of kind of the more sites and patient enrollment and whatnot.

Joe Mara: You know, I'd say a pretty meaningful increase on the R&D side as well as part of that, where you can think about, obviously, the ankle trial, which was kind of in a startup phase, is now, you know, thinking of kind of more sites and patient enrollment and whatnot. Those are really the two key drivers from an OpEx perspective that we baked in on a full year basis.

Speaker #5: So those are really the two key drivers from an OPEX perspective. That we baked in on a full-year basis.

Speaker #8: Okay. And then as follow-up, with the arthro-surgeons out there, the anticipation for 26 is being driven by new surgeons or repeat surgeons? Are you going are there 1,000 more surgeons to reach this year?

Swayampakula Ramakanth: Okay, then as a follow-up, with the arthro surgeons out there, the anticipation for 2026 is being driven by new surgeons or repeat surgeons. Are there 1,000 more surgeons to reach this year, or are you seeing more drive from existing physicians?

Jeffrey Cohen: Okay, then as a follow-up, with the arthro surgeons out there, the anticipation for 2026 is being driven by new surgeons or repeat surgeons. Are there 1,000 more surgeons to reach this year, or are you seeing more drive from existing physicians?

Speaker #8: Or are you seeing more drive from existing positions?

Speaker #5: Hey, Jeff. It's Nick. As I mentioned in my remarks, I mean, the Salesforce and Macy arthro combined give us a greater reach on the Salesforce side.

Dominick Colangelo: Hey, Jeff, it's Nick. As I mentioned in my remarks, I mean, the sales force and MACI Arthro combined, you know, give us a greater reach on the sales force side. With MACI Arthro, you know, we expect to continue to train surgeons. You know, we're really focused, given the dynamics you see with those trained and implanting surgeons, on sort of the depth of penetration that you can achieve with those surgeons in their practice. You know, that is a meaningful piece of what we're doing. We've already trained, you know, a good portion of our, you know, existing MACI users. Again, I think we'll continue to do that, and it'll bring new surgeons into the fold with MACI Arthro.

Nick Colangelo: Hey, Jeff, it's Nick. As I mentioned in my remarks, I mean, the sales force and MACI Arthro combined, you know, give us a greater reach on the sales force side. With MACI Arthro, you know, we expect to continue to train surgeons. You know, we're really focused, given the dynamics you see with those trained and implanting surgeons, on sort of the depth of penetration that you can achieve with those surgeons in their practice. You know, that is a meaningful piece of what we're doing. We've already trained, you know, a good portion of our, you know, existing MACI users. Again, I think we'll continue to do that, and it'll bring new surgeons into the fold with MACI Arthro.

Speaker #5: And then with Macy arthro, we expect to continue to train surgeons. But we're really focused given the dynamics you see with those trained and implanting surgeons on sort of the depth of penetration that you can achieve with those surgeons in their practice.

Speaker #5: And so that is a meaningful piece of what we're doing. We've already trained a good portion of our existing Macy users. Again, I think we'll continue to do that, and it'll bring new surgeons into the fold with Macy arthro.

Speaker #5: But again, getting depth into those practices is really a key growth driver. And the subject a lot of our commercial excellence initiatives that we referenced earlier on the call.

Dominick Colangelo: Again, getting depth, into those practices is really a key growth driver and the subject a lot of our commercial excellence initiatives that we referenced earlier on the call.

Nick Colangelo: Again, getting depth, into those practices is really a key growth driver and the subject a lot of our commercial excellence initiatives that we referenced earlier on the call.

Speaker #8: Got it. Thanks for taking our questions.

Swayampakula Ramakanth: Got it. Thanks for taking our questions.

Jeffrey Cohen: Got it. Thanks for taking our questions.

Speaker #5: Thank you.

Joe Mara: Thank you.

Speaker #1: We'll move next to Caitlin Roberts with Canaccord Genuity.

Operator: We'll move next to Caitlin Roberts with Canaccord Genuity.

Speaker #9: Hey, guys. It's Michaela on for Caitlin. Thanks for taking the questions. Our first one is, are you continuing to see dormant epicell accounts reactivated given Nexabrid?

Michaela: Hey, guys. It's Michaela on for Caitlin. Thanks for taking the questions. Our first one is, are you continuing to see dormant Epicel accounts reactivated given NexoBrid, and what does the next stage of NexoBrid adoption look like? If you can give any more color there.

Michaela Smith: Hey, guys. It's Michaela on for Caitlin. Thanks for taking the questions. Our first one is, are you continuing to see dormant Epicel accounts reactivated given NexoBrid, and what does the next stage of NexoBrid adoption look like? If you can give any more color there.

Speaker #9: And what does the next stage of Nexabrid adoption look like if you can give any more color there?

Speaker #5: Yeah. So we definitely see more epicell dormant accounts. So that has continued as we've sort of, I think, just by way of reference, we now have our entire burn care team of 17 territories cross-selling both products.

Dominick Colangelo: Yeah, we definitely see, you know, more Epicel dormant accounts. That has continued as we've sort of, I think, just by way of reference, you know, we now have our entire burn care team of 17 territories cross-selling both products. You certainly see additional dormant accounts each year coming on board. Again, it's a pretty sporadic patient base, you know, you can have hospitals that may or may not see a patient in that particular year. But we definitely are bringing on additional Epicel accounts. On NexoBrid, you know, we're continuing to see, you know, obviously, changing the standard of care takes time, but we're continuing to see progress there. You know, we launched the product with about 90 target accounts.

Nick Colangelo: Yeah, we definitely see, you know, more Epicel dormant accounts. That has continued as we've sort of, I think, just by way of reference, you know, we now have our entire burn care team of 17 territories cross-selling both products. You certainly see additional dormant accounts each year coming on board. Again, it's a pretty sporadic patient base, you know, you can have hospitals that may or may not see a patient in that particular year. But we definitely are bringing on additional Epicel accounts. On NexoBrid, you know, we're continuing to see, you know, obviously, changing the standard of care takes time, but we're continuing to see progress there. You know, we launched the product with about 90 target accounts.

Speaker #5: So you certainly see additional dormant accounts each year coming on board. Again, it's a pretty sporadic patient base. And so you can have hospitals that may or may not see a patient in that particular year.

Speaker #5: But we definitely are bringing on additional epicell accounts. And then on Nexabrid, we're continuing to see obviously changing the standard of care takes time, but we're continuing to see progress there.

Speaker #5: We launched the product with about 90 target accounts. To date, over 70 accounts have actually placed orders for Nexabrid. So good penetration on the overall number of accounts.

Dominick Colangelo: To date, over 70 accounts have actually placed orders for NexoBrid, you know, good penetration on the overall number of accounts. As we've talked about on prior calls, it's really about how do you move all of the accounts up the curve to be consistent users, which, you know, is what we're in the process of doing. You know, we remain sort of optimistic on what NexoBrid can do as we move forward. As Joe mentioned, you know, while we're not baking any sort of BARDA award revenue into our guidance, you know, we think that is a strong possibility for the year. If so, that will reinforce NexoBrid as a standard of care, in addition to sort of, you know, some important financial enhancements for the company as well.

Nick Colangelo: To date, over 70 accounts have actually placed orders for NexoBrid, you know, good penetration on the overall number of accounts. As we've talked about on prior calls, it's really about how do you move all of the accounts up the curve to be consistent users, which, you know, is what we're in the process of doing. You know, we remain sort of optimistic on what NexoBrid can do as we move forward. As Joe mentioned, you know, while we're not baking any sort of BARDA award revenue into our guidance, you know, we think that is a strong possibility for the year. If so, that will reinforce NexoBrid as a standard of care, in addition to sort of, you know, some important financial enhancements for the company as well.

Speaker #5: And as we've talked about on prior calls, it's really about how do you move all of the accounts up the curve to be consistent users, which is what we're in the process of doing.

Speaker #5: So we remain sort of optimistic on what NexoBrid can do as we move forward. And as Joe mentioned, while we're not baking any sort of BARDA award revenue into our guidance, we think that is a strong possibility for the year.

Speaker #5: And if so, that will reinforce Nexabrid as a standard of care. In addition to sort of some important financial enhancements for the company as well.

Speaker #9: Great. That's helpful. Thanks. And then maybe just another quick one from us. Do you have any updates on when the Macy arthro 2.0 insurance will be launched?

Michaela: Great, that's helpful. Thanks. Maybe just another quick one from us. Do you have any updates on when the MACI Arthro 2.0 instruments will be launched, and maybe what improvements you're making?

Michaela Smith: Great, that's helpful. Thanks. Maybe just another quick one from us. Do you have any updates on when the MACI Arthro 2.0 instruments will be launched, and maybe what improvements you're making?

Speaker #9: And maybe what improvements you're making?

Speaker #5: Yeah. So that's an ongoing process. We wanted to have Macy arthro instruments on the market for a sufficient period of time. In the first year.

Dominick Colangelo: Yeah, you know, that's an ongoing process. You know, we wanted to have MACI Arthro instruments on the market for a sufficient period of time, you know, in the first year, then, you know, gather feedback on enhancements that would be most important to continue sort of a journey of making MACI Arthro a simpler, less invasive procedure. I'd say we're kind of gathering up that market input now. Depending on changes, you know, these things can be, you know, by the time you develop new instruments, go through the sort of validation process, the approval process, et cetera, you know, it's a, call it an 18-month or more process. You know, that would suggest maybe next year, probably at the earliest, that we would have additional enhancements.

Nick Colangelo: Yeah, you know, that's an ongoing process. You know, we wanted to have MACI Arthro instruments on the market for a sufficient period of time, you know, in the first year, then, you know, gather feedback on enhancements that would be most important to continue sort of a journey of making MACI Arthro a simpler, less invasive procedure. I'd say we're kind of gathering up that market input now. Depending on changes, you know, these things can be, you know, by the time you develop new instruments, go through the sort of validation process, the approval process, et cetera, you know, it's a, call it an 18-month or more process. You know, that would suggest maybe next year, probably at the earliest, that we would have additional enhancements.

Speaker #5: And then gather feedback on enhancements that would be most important to continue sort of a journey of making Macy arthro a simpler less invasive procedure.

Speaker #5: So I'd say we're kind of gathering up that market input now, depending on changes. These things can be by the time you develop new instruments, go through the sort of validation process, the approval process, etc.

Speaker #5: It's call it an 18-month or more process. So that would suggest maybe next year, probably at the earliest, that we would have additional enhancements.

Speaker #9: Great. Thank you.

Michaela: Great. Thank you.

Michaela Smith: Great. Thank you.

Speaker #1: We'll move next to RK with HC Wainwright.

Operator: We'll move next to RK with H.C. Wainwright.

Speaker #10: Good morning. I'm Nick and Joe. Just a quick question on gross margin. So you recorded 79% gross margin in the fourth quarter. But the 2026 guidance calls for a margin of 75%.

Swayampakula Ramakanth: Good morning, Nick and Joe. Just a quick question on gross margin. You recorded 79% gross margin in Q4, but the 2026 guidance calls for a margin of 75%. I'm just trying to understand the 400 basis point compression. Is that coming from trying to get the manufacturing start-up activities going, or is it some amount of depreciation baked into it? When all is said and done, and the MACI manufacturing is completely transitioned into the Burlington facility, what could be the steady-state margin profile?

Ramakanth Swayampakula: Good morning, Nick and Joe. Just a quick question on gross margin. You recorded 79% gross margin in Q4, but the 2026 guidance calls for a margin of 75%. I'm just trying to understand the 400 basis point compression. Is that coming from trying to get the manufacturing start-up activities going, or is it some amount of depreciation baked into it? When all is said and done, and the MACI manufacturing is completely transitioned into the Burlington facility, what could be the steady-state margin profile?

Speaker #10: So I'm just trying to understand trying to understand the 400 basis point compression. Is that coming from trying to get the manufacturing startup activities going?

Speaker #10: Or is it some amount of depreciation baked into it? And when all is said and done, and the Macy manufacturing is completely transitioned, into the Burlington facility, what could be the steady-state margin profile?

Speaker #5: Yeah. So good morning, RK, and thanks for the question. I would say just a reminder when we talked about the 79% margin, that's based on our Q4 performance in 2025.

Joe Mara: Yeah. Good morning, RK, and thanks for the question. You know, I would say, you know, just a reminder, you know, when we talked about the 79% margin, that's based on our Q4 performance in 2025, we do see seasonality in terms of margins, and just because our business, you know, particularly MACI, is so Q4 driven, of course, in terms of the mix of the year, we do tend to see our margins scale up in that quarter. When you look on a kind of more apples and apples, I would say full year basis, you know, last year on a full year basis, we did 74%. You know, next year or, for 2026 rather, we're guiding to 75%. Some increase on a year-over-year basis.

Speaker #5: And so we do see some seasonality in terms of margins. And just because our business, particularly Macy, is so Q4-driven, of course, in terms of the mix of the year, we do tend to see our margins scale up in that quarter.

Speaker #5: So when you look on a kind of more apples and apples, I would say full-year basis, last year on a full-year basis, we did 74%.

Speaker #5: Next year, for 2026, rather, we're guiding to 75%. So some increase on a year-over-year basis. Broadly, I would say there are kind of some additional costs that we are absorbing as we move into the new facility here in Burlington.

Joe Mara: You know, broadly, I would say there are kind of some additional costs that we are absorbing as we move into the new facility here in Burlington and now have kind of multiple facilities that we're operating. You know, still feel like that's the right guidance assumption for the year. Longer term, you know, just a reminder, we said on the gross margin side, you know, we think we can get into the high seventies, you know, by the end of the decade. You know, I would say just generally kind of already being on a full year basis, you know, in the mid-seventies and, you know, trending that way this year, to start the year, you know, I think, you know, we're pretty well positioned in terms of that kind of long-term target that's out there.

Speaker #5: And now I've kind of multiple facilities that we're operating. But I still still feel like that's the right guidance assumption for the year. And then longer term, just a reminder, we said on the gross margin side, we think we can get into the high 70s by the end of the decade.

Speaker #5: And I would say just generally kind of already being on a full-year basis, in the mid-70s and trending that way this year, to start the year, I think we're pretty well positioned in terms of that kind of long-term target that's out there.

Speaker #5: And then maybe just to bring your Q4 data point back, I think Q4 has helpful when you look at those margins because we tend to grow into similar margins over time as the company grows more in an annual basis.

Joe Mara: Maybe just to bring your Q4 data point back, you know, I think, you know, Q4 is helpful when you look at those margins, because we tend to grow into similar margins over time as the company, you know, grows, you know, more on an annual basis. It is a good marker to look at, but, you know, again, I think on a full year basis, it is an increase on the gross margin side. It's just comparing Q4 to full year.

Speaker #5: So it is a good market to look at. But again, I think on a full-year basis, it is an increase on the gross margin side.

Speaker #5: It's just comparing Q4 to the full year.

Speaker #10: Thank you. One quick question on the XUS business. So as you were stating, Nick, that you're planning to submit to the UK regulatory authorities in mid-2026 or in 2026.

Swayampakula Ramakanth: Thank you. One quick question on the ex-US business. As you were stating, Nick, that you're planning to submit to the UK regulatory authorities in mid-2026 or in 2026. How are you planning the commercial infrastructure there? Is this going to be a direct launch by you, or do you plan to enter into some sort of a partnership, you know, to initiate that business?

Ramakanth Swayampakula: Thank you. One quick question on the ex-US business. As you were stating, Nick, that you're planning to submit to the UK regulatory authorities in mid-2026 or in 2026. How are you planning the commercial infrastructure there? Is this going to be a direct launch by you, or do you plan to enter into some sort of a partnership, you know, to initiate that business?

Speaker #10: So how are you planning the commercial infrastructure there? Is this going to be a direct launch by you? Or do you plan to enter into some sort of a partnership to initiate that business?

Speaker #5: Yeah. Thanks, RK. So as I mentioned on in my prepared remarks, the UK is a very attractive first step for us for Macy OUS expansion because there is an expedited approval pathway.

Dominick Colangelo: Yeah. Thanks, RK. As I mentioned on in my prepared remarks, you know, the UK is a very attractive first step for us, you know, for MACI OUS expansion, because there is an expedited approval pathway, mutual recognition pathway. That, you know, is very attractive as well as established reimbursement pathways. I also mentioned there's a, you know, concentrated call point. There's a dozen or so centers of excellence where patients in the UK with cartilage injuries are treated, which means it doesn't require a big commercial footprint. We would absolutely plan to commercialize on our own in the UK.

Nick Colangelo: Yeah. Thanks, RK. As I mentioned on in my prepared remarks, you know, the UK is a very attractive first step for us, you know, for MACI OUS expansion, because there is an expedited approval pathway, mutual recognition pathway. That, you know, is very attractive as well as established reimbursement pathways. I also mentioned there's a, you know, concentrated call point. There's a dozen or so centers of excellence where patients in the UK with cartilage injuries are treated, which means it doesn't require a big commercial footprint. We would absolutely plan to commercialize on our own in the UK.

Speaker #5: Mutual recognition pathway. So that is very attractive as well as established reimbursement pathways. And I also mentioned there's a concentrated call point. So there's a dozen or so centers of excellence where patients in the UK with cartilage injuries are treated, which means it doesn't require a big commercial footprint.

Speaker #5: So we would absolutely plan to commercialize on our own in the UK.

Speaker #10: Thank you. Thank you both for taking my questions.

Swayampakula Ramakanth: Thank you. Thank you both for taking my questions.

Ramakanth Swayampakula: Thank you. Thank you both for taking my questions.

Speaker #5: Thanks, RK.

Joe Mara: Thanks, RK.

Speaker #1: We'll take our next question from Josh Jennings with TD Cowen.

Operator: We'll take our next question from Joshua Jennings with TD Cowen.

Joshua Jennings: Hello, can you hear me okay?

Speaker #11: Hello. Can you hear me okay?

Speaker #5: Yeah. Good morning, Josh.

Joe Mara: Yeah. Good morning, Josh.

Speaker #11: Oh, I'm sorry. I was talking to my ear. Yeah, yeah. I've got an operator in my ear. Sorry about that. I know you're not breaking out MACI or Arthro.

Joshua Jennings: Oh, I'm sorry. The.

Joe Mara: Can you hear us?

Joshua Jennings: I'm talking in my ear.

Joe Mara: Yep.

Joshua Jennings: Yeah, yeah, I've got an operator in my ear. Sorry about that. Just I know you're not breaking out MACI Arthro contributions directly, and we're thinking about the MACI franchise holistically, but I was hoping maybe qualitatively, you can just share with us just whether the MACI Arthro launch in 2025 exceeded your internal expectations or in line with your internal expectations. It seems like it's exceeded it, including what's going on in this Q1 2026, where you're combating the historical seasonal trends and you're thinking you're gonna deliver 20% growth or forecasting 20% growth of that MACI franchise here in Q1 2026.

Speaker #11: Contributions directly. And we're thinking about the Macy franchise holistically. But I was hoping maybe qualitative, you can just share with us just whether the Macy Arthro launch and in 2025 exceeded your internal expectations or in line with your internal expectations.

Speaker #11: But it seems like it's exceeded it, including what's going on in this first quarter of 2026, where you're combating historical seasonal trends and you're thinking you're going to deliver 20% growth, or forecasting 20% growth, for that MACI franchise here in Q1 '26.

Speaker #5: Yeah. Thanks, look at different dimensions of the Macy Arthro launch, I mean, surge in training, as we said, we've now trained a substantial meaningful portion of our surge in base, which is great.

Dominick Colangelo: Yeah. Thanks, Josh. Yeah, I mean, I think when you look at different dimensions of the MACI Arthro launch, I mean, surgeon training, as we said, we've now trained a substantial, you know, a meaningful portion of our surgeon base, which is great. Their behavior, as you mentioned, and I've mentioned a couple of times, you know, is exactly what you'd want to see in terms of increase in growth rates and now for MACI Arthro implanters, you know, having higher conversion rates. I'd say when you look at MACI growth overall, you know, we had a couple hundred, nearly a couple hundred basis points of growth. When you look at that in the context of the increase growth rate in our small condyle defect segment, it clearly accounted essentially for that accelerated growth for the year for MACI.

Nick Colangelo: Yeah. Thanks, Josh. Yeah, I mean, I think when you look at different dimensions of the MACI Arthro launch, I mean, surgeon training, as we said, we've now trained a substantial, you know, a meaningful portion of our surgeon base, which is great. Their behavior, as you mentioned, and I've mentioned a couple of times, you know, is exactly what you'd want to see in terms of increase in growth rates and now for MACI Arthro implanters, you know, having higher conversion rates. I'd say when you look at MACI growth overall, you know, we had a couple hundred, nearly a couple hundred basis points of growth. When you look at that in the context of the increase growth rate in our small condyle defect segment, it clearly accounted essentially for that accelerated growth for the year for MACI.

Speaker #5: They're behavior, as you mentioned, and I've mentioned a couple of times, is exactly what you'd want to see in terms of increase in growth rates and now for Macy Arthro implantors.

Speaker #5: Having higher conversion rates. I'd say when you look at Macy growth overall, we had a couple hundred, nearly a couple hundred basis points of growth.

Speaker #5: And when you look at that in the context of the increase growth rate in our small condyle defect segment, it clearly accounted essentially for that accelerated growth for the year for Macy.

Speaker #5: So yeah, from that perspective, we're very pleased. Obviously, we entered last year with 150 trained surgeons. We entered this year with kind of more like 900, as we mentioned early in the year.

Dominick Colangelo: Yeah, from that perspective, we're very pleased. Obviously, we entered last year with, you know, 150 trained surgeons. We entered this year with kind of more like 900, as we mentioned, you know, early in the year. That's now grown since that time. You know, there's an opportunity, if those trends continue, to really sort of meaningfully impact the business as we move through 2026 and beyond.

Nick Colangelo: Yeah, from that perspective, we're very pleased. Obviously, we entered last year with, you know, 150 trained surgeons. We entered this year with kind of more like 900, as we mentioned, you know, early in the year. That's now grown since that time. You know, there's an opportunity, if those trends continue, to really sort of meaningfully impact the business as we move through 2026 and beyond.

Speaker #5: That's now grown since that time. And so there's an opportunity if those trends continue to really sort of meaningfully impact the business as we move through 2026 and beyond.

Speaker #10: Thanks for that. And then I know I was just hoping to, if you could share some details on this BARDA RFP, it sounds like the team's more optimistic that will come through.

Joshua Jennings: Thanks for that. I was just hoping if you could share some details on this BARDA RFP. It sounds like the team's more optimistic that will come through, you know, what's left? Is it just administrative sign-off? I think this is in the public domain, maybe just help us if that does come through, you know, what type of revenue contributions in 2026 and beyond could this BARDA RFP deliver for Vericel? Thanks for taking the questions.

Speaker #10: But what's left? Is it just administrative sign-off? And then I think this is in the public domain, but maybe just help us think about if that does come through, what type of revenue contributions in 2026 and beyond could this BARDA RFP deliver for Vericel?

Speaker #10: Thanks for taking the questions.

Speaker #5: Yep. So as you're aware, there were kind of three components to the RFP from BARDA. One was kind of strategic stockpiling for national preparedness and procurement revenue that would result from that.

Dominick Colangelo: Yep. As you're aware, there were kind of three components to the RFP from BARDA. One was kind of strategic stockpiling for national preparedness and procurement revenue that would result from that. There was a desire to add additional indications for blast trauma, and funding for that, and then for a room temperature stable formulation as well. There were kind of three components to it that would flow through our income statement differently. You know, that obviously was impacted by the government shutdown initially. As you're well aware, you know, there were parts of funding for 2026 that were pushed out to the end of January, and that's still an ongoing issue. While HHS was funded for the year as of the close of January, that's only, you know, a few weeks ago.

Nick Colangelo: Yep. As you're aware, there were kind of three components to the RFP from BARDA. One was kind of strategic stockpiling for national preparedness and procurement revenue that would result from that. There was a desire to add additional indications for blast trauma, and funding for that, and then for a room temperature stable formulation as well. There were kind of three components to it that would flow through our income statement differently. You know, that obviously was impacted by the government shutdown initially. As you're well aware, you know, there were parts of funding for 2026 that were pushed out to the end of January, and that's still an ongoing issue. While HHS was funded for the year as of the close of January, that's only, you know, a few weeks ago.

Speaker #5: There was a desire to add additional indications for blast trauma, and funding for that, and then for a room temperature-stable formulation as well.

Speaker #5: So there were kind of three components to it that would flow through our income statement differently. That obviously was impacted by the government shutdown initially, as you're well aware.

Speaker #5: There were parts of funding for 2026 that were pushed out to the end of January. And that's still an ongoing issue. So while HHS was funded, for the year, as of the close of January, that's only a few weeks ago.

Speaker #5: And so obviously, getting the machinery up and running takes a little time, it seems. But we do think there's a pretty strong possibility that we'll be able to get that award done this year.

Dominick Colangelo: You know, obviously, getting the machinery up and running takes a little time, it seems. You know, we do think there's a pretty strong possibility that we'll be able to get that award done this year, and it would have the impacts that we mentioned. You know, the RFP obviously set forth the stockpiling numbers, starting with 2,750 units and then additional procurement down the line. You know, the exact revenue that would come out of that, you know, we're not prepared to share right now. It's obviously subject to the negotiations on pricing and so on. You know, as you know, that moves forward, we can share more about that.

Nick Colangelo: You know, obviously, getting the machinery up and running takes a little time, it seems. You know, we do think there's a pretty strong possibility that we'll be able to get that award done this year, and it would have the impacts that we mentioned. You know, the RFP obviously set forth the stockpiling numbers, starting with 2,750 units and then additional procurement down the line. You know, the exact revenue that would come out of that, you know, we're not prepared to share right now. It's obviously subject to the negotiations on pricing and so on. You know, as you know, that moves forward, we can share more about that.

Speaker #5: And it would have the impacts that we mentioned you the RFP obviously set forth the stockpiling numbers. Starting with 2,750 units, and then additional procurement down the line.

Speaker #5: The exact revenue that would come out of that, we're not prepared to share right now. It's obviously subject to the negotiations on pricing and so on.

Speaker #5: But as that moves forward, we can share more about that.

Speaker #1: And that will wrap our question and answer session. I will now turn the call back over to CEO Nick Colangelo for any additional or closing remarks.

Operator: That will wrap our question and answer session. I will now turn the call back over to CEO, Dominick Colangelo, for any additional or closing remarks.

Speaker #12: Okay. Well, thanks, everyone, for joining us this morning. As we've mentioned, the company had an outstanding fourth quarter and is very well positioned to continue to deliver on what we believe is a unique combination of sustained high revenue growth and profitability in 2026 and the years ahead.

Dominick Colangelo: Okay. Well, thanks, everyone, for joining us this morning. As we've mentioned, the company had an outstanding Q4 and is very well positioned to continue to deliver on what we believe is a unique combination of sustained high revenue growth and profitability in 2026 and the years ahead. We look forward to providing further updates on our progress on our next call. Thanks again, and have a great day.

Nick Colangelo: Okay. Well, thanks, everyone, for joining us this morning. As we've mentioned, the company had an outstanding Q4 and is very well positioned to continue to deliver on what we believe is a unique combination of sustained high revenue growth and profitability in 2026 and the years ahead. We look forward to providing further updates on our progress on our next call. Thanks again, and have a great day.

Speaker #12: We look forward to providing further updates on our progress on our next call. So thanks again, and have a great day.

Operator: Thank you. That will conclude today's conference. Ladies and gentlemen, we thank you for your participation. You may disconnect at this time.

Q4 2025 Vericel Corp Earnings Call

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