Q2 2026 Vericel Corp Earnings Call

July 30, 2026

Operator 2: Ladies and gentlemen, thank you for standing by. Welcome to Vericel's Q2 2026 conference call. At this time, all participants are in a listen-only mode. I would also like to remind you that this call is being recorded for replay. I will now turn the conference call over to Eric Burns, Vericel's Vice President of Finance, Business Intelligence, and Investor Relations.

Operator: Ladies and gentlemen, thank you for standing by. Welcome to Vericel's Q2 2026 Conference Call. At this time, all participants are in a listen-only mode. I would also like to remind you that this call is being recorded for replay. I will now turn the conference call over to Eric Burns, Vericel's Vice President of Finance, Business Intelligence, and Investor Relations.

Speaker #1: I would also like to remind you that this call is being recorded for replay. I will now turn the conference call over to Eric Burns, Vericel's Vice President of Finance, Business Intelligence, and Investor Relations.

Speaker #2: 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, I would like to remind you that the discussions during this conference call will include forward-looking statements. Factors that could cause actual results to differ materially from expectations are discussed more fully in the company's most recent filings with the SEC. Also, the discussions today will include certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release as an exhibit to Vericel's current report on Form 8-K filed today with the SEC. A short presentation with highlights from today's call is also available in the investor relations section of our website. I will now turn the call over to Nick.

Speaker #2: Before we begin, I would like to remind you that the discussion is starting this conference call will include forward-looking statements. Factors that could cause actual results to defer materially from expectations are discussed more fully in the company's most recent filings with the SEC.

Speaker #2: Also, the discussions today will include certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release, which is included as an exhibit to Vericel's current report on Form 8-K filed today with the SEC.

Speaker #2: A short presentation with highlights from today's call is also available in the Investor Relations section of our website. I will now turn the call over to Nick.

Speaker #3: Thank you, Eric, and good morning, everyone. The company delivered excellent financial and commercial results across the business in the second quarter, and achieved a number of key business objectives that positioned the company to continue to generate strong revenue, profit, and cash flow growth in 2026 and beyond.

Nick Colangelo: Thank you, Eric, good morning, everyone. The company delivered excellent financial and commercial results across the business in Q2 and achieved a number of key business objectives that position the company to continue to generate strong revenue, profit, and cash flow growth in 2026 and beyond. The company generated record Q2 total revenue of more than $77 million, which increased 22% over last year and exceeded our guidance for the quarter, driven by substantial growth for both MACI and the Burn Care business. This strong revenue performance drove another quarter of significant profit and cash flow growth as the company generated GAAP net income for the quarter and over $14 million of free cash flow, ending the quarter with over $227 million in cash and investments.

Speaker #3: The company generated record second-quarter total revenue of more than $77 million, which increased 22% over last year, and exceeded our guidance for the quarter, driven by substantial growth for both Macy and the Burn Care business.

Speaker #3: This strong revenue performance drove another quarter of significant profit and cash flow growth as the company generated GAAP net income for the quarter and over $14 million of free cash flow ending the quarter with over $227 million in cash and investments.

Speaker #3: These results continued a very strong performance to date in 2026 as the company generated total revenue growth of 26%, adjusted EBITDA growth of 47%, and nearly $30 million of free cash flow in the first half of the year.

Nick Colangelo: These results continued a very strong performance to date in 2026 as the company generated total revenue growth of 26%, adjusted EBITDA growth of 47%, and nearly $30 million of free cash flow in the H1 of the year. Based on these results and the significant momentum across the business, we are raising our full year revenue guidance to $330 to $340 million, which represents total revenue growth of more than 20% at the midpoint of our guidance range. MACI had another great quarter as double-digit volume growth drove record Q2 revenue of more than $65 million, which exceeded our guidance for the quarter and represented 23% growth versus the prior year. MACI's trailing four-quarter revenue growth of 23% is significantly higher than its 19% growth in the prior four quarters as we continue to execute on our strategic initiatives to deliver sustained high revenue growth for MACI.

Speaker #3: Based on these results and the significant momentum across the business, we're raising our full-year revenue guidance to $330 to $340 million, which represents total revenue growth of more than 20% at the midpoint of our guidance range.

Speaker #3: Macy had another great quarter as double-digit volume growth drove record second-quarter revenue of more than $65 million, which exceeded our guidance for the quarter and represented 23% growth versus the prior year.

Speaker #3: Macy's trailing four-quarter revenue growth of 23% is significantly higher than its 19% growth in the prior four quarters, as we continue to execute on our strategic initiatives to deliver sustained high revenue growth for Macy.

Speaker #3: To that end, we're leveraging our larger Macy sales force to drive growth in new Macy users and deeper penetration within our current Macy surgeon practices.

Nick Colangelo: To that end, we're leveraging our larger MACI sales force to drive growth in new MACI users and deeper penetration within our current MACI surgeon practices. We continue to leverage MACI Arthro to expand overall MACI utilization, and our medical team has made significant progress in generating clinical data demonstrating the potential for improved patient outcomes with the less invasive MACI Arthro procedure. Our commercial excellence initiatives, together with strong execution from our MACI sales team, led to double-digit biopsy and implant growth, record Q2 biopsies, implants, and biopsy and implanting surgeons, as well as the second highest number of biopsies and biopsy surgeons in any quarter since launch. Burn Care Q2 revenue increased 22% to $12 million, which was above our guidance range for the quarter and represented one of the highest Burn Care revenue quarters to date.

Speaker #3: We continue to leverage Macy Arthro to expand overall Macy utilization. And our medical team has made significant progress in generating clinical data demonstrating the potential for improved patient outcomes with the less invasive Macy Arthro procedure.

Speaker #3: Our commercial excellence initiatives, together with strong execution from our Macy sales team, led to double-digit biopsy and implant growth, record second-quarter biopsies, implants, and biopsy and implanting surgeons, as well as the second highest number of biopsies and biopsy surgeons in any quarter since launch.

Speaker #3: Burn Care second-quarter revenue increased 22% to $12 million, which was above our guidance range for the quarter, and represented one of the highest Burn Care revenue quarters to date.

Speaker #3: Epicel had another strong quarter, and NexaBridge had its highest quarter of revenue ordering centers and total hospital unit sales to date, continuing the trend of strong overall Burn Care results over the past four quarters.

Nick Colangelo: Epicel had another strong quarter. NexoBrid had its highest quarter of revenue, ordering centers, and total hospital unit sales to date, continuing the trend of strong overall burn care results over the past 4 quarters. In terms of our longer-term growth initiatives, we remain on track to relaunch MACI outside the United States and submitted a MACI marketing authorisation application in the UK in Q2, which, if approved, would enable the company to potentially launch MACI in the UK in 2027. We also continue to activate sites in the MACI ankle MASCOT study and began enrolling patients in the study in Q2. Finally, as part of the company's capital allocation strategy to maximize long-term shareholder value, this morning we announced that our board of directors has authorized a $200 million share repurchase program.

Speaker #3: In terms of our longer-term growth initiatives, we remain on track to relaunch Macy outside the United States and submitted a Macy marketing authorization application in the UK in the second quarter which, if approved, would enable the company to potentially launch Macy in the UK in 2027.

Speaker #3: We also continue to activate sites in the Macy ankle mascot study and began enrolling patients in the study in the second quarter. Finally, as part of the company's capital allocation strategy to maximize long-term shareholder value, this morning we announced that our Board of Directors is authorized a $200 million share repurchase program.

Speaker #3: Our financial outperformance, robust cash generation, and strong balance sheet position the company to continue to invest in our near and long-term growth initiatives across all areas of our business and to opportunistically return capital to shareholders.

Nick Colangelo: Our financial outperformance, robust cash generation, and strong balance sheet position the company to continue to invest in our near and long-term growth initiatives across all areas of our business and to opportunistically return capital to shareholders. Our significant ongoing investments, together with the launch of the company's first share repurchase program, reflect our confidence in the sustained growth trajectory for the company in the years ahead. I'll now turn the call over to Joe to discuss our Q2 results and our updated 2026 guidance in more detail.

Speaker #3: Our significant ongoing investments together with the launch of the company's first share repurchase program reflect our confidence in the sustained growth trajectory for the company in the years ahead.

Speaker #3: I'll now turn the call over to Joe to discuss our second-quarter results and our updated 2026 guidance in more detail.

Speaker #4: Thanks, Nick, and good morning, everyone. The company had a very strong second quarter across all key financial measures, including top-line revenue, bottom-line profitability, and cash generation metrics.

Joe Mara: Thanks, Nick. Good morning, everyone. Company had a very strong Q2 across all key financial measures, including top-line revenue, bottom-line profitability, and cash generation metrics. Total revenue increased 22% to $77.5 million, which was significantly above our guidance range for the quarter, driven by strength in both commercial franchises. MACI's momentum continued with double-digit volume growth and record Q2 revenue of $65.5 million, representing 23% growth versus the prior year, and also marks the fifth consecutive quarter with MACI growth of 20% or more. Burn care revenue was approximately $12 million, with Epicel revenue of $10.4 million. Of note, Epicel revenue of more than $21 million in H1 of the year represents the second highest Epicel revenue total over a six-month period since launch.

Speaker #4: Total revenue increased 22% to $77.5 million, which was significantly above our guidance range for the quarter, driven by strength in both commercial franchises. Macy's momentum continued with double-digit volume growth and record second-quarter revenue of $65.5 million, representing 23% growth versus the prior year, and also marks the fifth consecutive quarter with Macy growth of 20% or more.

Speaker #4: Burn Care revenue was approximately $12 million, with Epicel revenue of $10.4 million, and of note, Epicel revenue of more than $21 million in the first half of the year represents the second highest Epicel revenue total over a six-month period since launch.

Speaker #4: NexaBridge revenue of more than $1.5 million was the highest quarterly revenue since launch, which increased more than 30% versus both the prior year and the prior quarter, as NexaBridge utilization continues to increase.

Joe Mara: NexoBrid revenue of more than $1.5 million was the highest quarterly revenue since launch, which increased more than 30% versus both the prior year and the prior quarter, as NexoBrid utilization continues to increase. The company also delivered strong profitability metrics for the quarter, with gross margin of 73% and adjusted EBITDA margin of 19%, both of which were above our guidance for the quarter. In addition, the company delivered GAAP net income for the first time in a Q2, with net income of $2.2 million. Finally, the company generated operating cash flow of $16.2 million and free cash flow of $14.3 million, representing the fourth consecutive quarter with free cash flow of $12 million or more.

Speaker #4: The company also delivered strong profitability metrics for the quarter, with gross margin of 73% and adjusted EBITDA margin of 19%. Both of which were above our guidance for the quarter.

Speaker #4: In addition, the company delivered GAAP net income for the first time in a second quarter, with net income of $2.2 million. Finally, the company generated operating cash flow of $16.2 million and free cash flow of $14.3 million, representing the fourth consecutive quarter with free cash flow of $12 million or more.

Speaker #4: We ended the quarter with approximately $227 million in cash and investments, an increase of over $60 million compared to the end of the second quarter last year, as the inflection in cash generation continues following the completion of our new facility.

Joe Mara: We ended the quarter with approximately $227 million in cash and investments, an increase of over $60 million compared to the end of the Q2 last year, as the inflection in cash generation continues following the completion of our new facility. With these strong Q2 results, the company has generated significant top-line, bottom-line, and cash generation growth across the business throughout the H1 of 2026. Over the last four quarters, the company has generated total revenue growth of 23%, adjusted EBITDA growth of nearly 40%, and $62 million in free cash flow as we continue to elevate the company's top-tier financial profile. Turning to our financial guidance. Based on the company's strong results across the business, we are increasing our full-year total revenue guidance range to $330 to 340 million for the year, which represents total company revenue growth of approximately 19% to 23%.

Speaker #4: With the strong second-quarter results, the company has generated significant top-line/bottom-line and cash generation growth across the business throughout the first half of 2026. And over the last four quarters, the company has generated total revenue growth of 23%, adjusted EBITDA growth of nearly 40%, and $62 million in free cash flow, as we continue to elevate the company's top-tier financial profile.

Speaker #4: Turning to our financial guidance, based on the company's strong results across the business, we are increasing our full-year total revenue guidance range to $330 million to $340 million for the year.

Speaker #4: This represents total company revenue growth of approximately 19% to 23%. After another very strong quarter for MACI, we are raising full-year MACI revenue guidance to $284 million to $290 million, compared to the prior guidance of $282 million to $288 million.

Joe Mara: After another very strong quarter for MACI, we are raising full-year MACI revenue guidance to $284 to 290 million, compared to the prior guidance of $282 to 288 million. We are also raising full-year Burn Care revenue guidance to $46 to 50 million, compared to our prior guidance of $44 to 48 million. For the Q3, we expect total revenue of approximately $76.5 to 78.5 million, with no change to our Q3 or H2 revenue guidance framework for either franchise compared to prior guidance. At the midpoint of our guidance, this implies approximately $65.5 million of MACI revenue in the Q3 with high teens growth versus the prior year. For Burn Care, the midpoint of our Q3 guidance assumes approximately $12 million of total Burn Care revenue, which maintains our core commercial Burn Care guidance framework and includes approximately $3 million of BARDA procurement revenue.

Speaker #4: We are also raising full-year Burn Care revenue guidance to $46 to $50 million, compared to our prior guidance of $44 to $48 million. For the third quarter, we expect total revenue of approximately $76.5 to $78.5 million, with no change to our third-quarter or second-half revenue guidance framework for either franchise compared to prior guidance.

Speaker #4: At the midpoint of our guidance, this implies approximately $65.5 million in Macy revenue in the third quarter, with high teens growth versus the prior year.

Speaker #4: For Burn Care, the midpoint of our third-quarter guidance assumes approximately $12 million of total Burn Care revenue, which maintains our core commercial Burn Care guidance framework and includes BARDA procurement revenue.

Speaker #4: Moving down the P&L for the full year, we continue to expect gross margin of approximately $75% and adjusted EBITDA margin of approximately $27%. For the third quarter, we expect gross margin of approximately $71 to $72% and adjusted EBITDA margin of approximately $21 to $22%.

Joe Mara: Moving down the P&L for the full year, we continue to expect gross margin of approximately 75% and adjusted EBITDA margin of approximately 27%. For the Q3, we expect gross margin of approximately 71% to 72% and adjusted EBITDA margin of approximately 21% to 22%. Finally, we are pleased to announce our $200 million share repurchase program. This program, which reflects the company's significant cash generation and overall financial strength, enables the company to continue to invest in both near-term and long-term growth initiatives and to opportunistically return capital to shareholders as part of our capital allocation strategy to maximize long-term shareholder value. Overall, 2026 is set up to be another strong year for the company. Our recent financial results continue to demonstrate the company's unique combination of sustained high revenue growth, profitability, and cash generation.

Speaker #4: Finally, we are pleased to announce our $200 million share repurchase program. This program, which reflects the company's significant cash generation and overall financial strength, enables the company to continue to invest in both near-term and long-term growth initiatives and to opportunistically return capital to shareholders as part of our capital allocation strategy to maximize long-term shareholder value.

Speaker #4: Overall, 2026 is set up to be another strong year for the company, our recent financial results continue to demonstrate the company's unique combination of sustained high revenue growth, profitability, and cash generation.

Speaker #4: As we look ahead, we believe that durable growth of our portfolio positions the company to sustain strong top-line growth and supports our mid-term revenue and profitability targets, with significant cash generation.

Joe Mara: As we look ahead, we believe that the durable growth of our portfolio positions the company to sustain strong top-line growth and supports our midterm revenue and profitability targets with significant cash generation. This concludes our prepared remarks. We will now open the call to your questions.

Speaker #4: This concludes our prepared remarks. We will now open the call to your questions.

Speaker #2: Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing star 1 on your telephone keypad.

Operator 2: Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on the phone line will indicate when your line is open. Again, press star one to ask a question. We'll take our first question from Richard Newitter of Truist Securities.

Operator: Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on the phone line will indicate when your line is open. Again, press star one to ask a question. We'll take our first question from Richard Newitter of Truist Securities.

Speaker #2: If you are using the speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on the phone line will indicate when your line is open.

Speaker #2: Again, press star 1 to ask a question. We'll take our first question from Richard Newer of Truist Securities.

Speaker #5: Hi. Thanks for taking the questions, and congrats on a great quarter here. I guess maybe just to start, the MACI acceleration, especially when you look at it on a two-year stack, I mean, it's notable.

Richard Newitter: Hi. Thanks for taking the questions, and congrats on a great quarter here. Maybe just to start, the MACI acceleration, especially when you look at it on a two-year stack, it's notable. Thank you for providing the last 12-month look-back trends, because you can see the step up there. I guess, maybe you could just go into a little bit of what's driving this step function increase. Is it MACI Arthro? Something in the underlying market? Would love to just hear how durable, and if you could also address price and volume in that. Thank you.

Speaker #5: And thank you for providing the last 12-month lookback trends because you could see the step up there. So I guess maybe you could just go into a little bit of what's driving this step function increase.

Speaker #5: Is it Macy Arthro? Something in the underlying market? We would love to just hear how durable and if you could also address price and volume in that.

Speaker #5: Thank you.

Speaker #3: Yeah. Hey, Richard. It's Nick, and I'll start. And appreciate the comments. As we've talked about over the past several quarters, I'd say about this time last year, we were talking about being very proud to be on a path to a quarter billion in revenues and similar for Macy.

Nick Colangelo: Yeah. Hey, Rich, it's Nick, and I'll start. Appreciate the comments. As we've talked about over the past several quarters, I'd say about this time last year, we were talking about being very proud to be on a path to a quarter billion in revenues and similar for MACI, and what we need to do to make sure we remain on track to reach half a billion by the end of this decade, which has really been our focus. I would say at this point, it's really a combination of the fact that we increased our MACI sales force. We obviously launched MACI Arthro, which has had an impact. We really spent a lot of time on the commercial excellence initiatives that have really elevated the execution of our MACI commercial team. We are really doing the same thing on the Burn Care side.

Speaker #3: And what we need to do to make sure we remain on track to reach half a billion by the end of this decade, which is really been our focus.

Speaker #3: And so I would say at this point, it's really a combination of the fact that we increased our Macy sales force, we obviously launched Macy Arthro, which has had an impact, really spent a lot of time on the commercial excellence initiatives that have really elevated the execution of our Macy's commercial team, and really doing the same thing on the Burn Care side.

Speaker #3: So I would say we're obviously seeing those results now. As I mentioned in my prepared remarks, our trailing 12-month growth rate is 23% versus 19% before that.

Nick Colangelo: I would say, we're obviously seeing those results now. As I mentioned in my prepared remarks, our trailing 12-month growth rate is 23% versus 19% before that. That's exactly what we had wanted and expected to see out of all the initiatives that we've talked about over the past several quarters.

Speaker #3: So that's exactly what we had wanted and expected to see out of all the initiatives that we've talked about over the past several quarters.

Speaker #4: Yeah. And just good morning, Rich. This is Joe. I mean, just to add from a kind of price volume perspective, I think it's a pretty similar kind of mix that we saw over the last few quarters.

Joe Mara: Yeah, just good morning, Rich. This is Joe. Just to add from a price-volume perspective, I think it's a pretty similar kind of mix that we saw over the last few quarters and very similar to Q1, where we saw strong biopsy growth, which of course is important. That's the key contributor to the pipeline. That translated into another quarter of strong double-digit implant growth, similar to Q1. Strong pricing as well. You net that together and another strong quarter. As Nick said, really, I think the execution from a team perspective has really elevated in both franchises, but obviously the MACI results have been strong.

Speaker #4: And very similar to Q1, where we saw strong biopsy growth, which of course is important. That's the key contributor to the pipeline. That translated into another quarter of strong double-digit implant growth, similar to Q1.

Speaker #4: And strong pricing as well. So you kind of net that together, and another strong quarter. And as Nick said, really, I think the execution from a team perspective has really elevated in both franchises. But, obviously, the MACI results have been strong.

Speaker #5: That's helpful. If I could just tag one on. On pricing durability, I mean, it's clearly part of the growth algorithm. And it looks like it's been sustainable for quite some time.

Richard Newitter: That's helpful. If I could just tag one on pricing durability. It's clearly part of the growth algorithm, and it looks like it's been sustainable for quite some time. About high single digit to low double digit is kind of what it feels like your pricing in any given year is contributing on MACI. What can you tell us as to why that's durable, or what gives you confidence in the sustainability of that going forward?

Speaker #5: About high single-digit to low double-digit is kind of what it feels like you're pricing in any given year is contributing on Macy. What can you tell us as to why that's durable, or what gives you confidence in the sustainability of that going forward?

Speaker #3: Yeah, Rich. So, we talked a lot about this on the last call—that MACI is in a pretty unique position. It's regulated as a combination device, biologic, advanced cell therapy by the FDA.

Nick Colangelo: Yeah, Rich. We talked a lot about this on the last call that MACI's in a pretty unique position. It's regulated as a combination device, biologic advanced cell therapy by the FDA. When you think about the rigorous pricing research that we regularly do and how payers and hospital administrators think about the product, we're really well-positioned. Compared to other cell and gene therapies, as we talked about, MACI's price is significantly lower than other cell therapies like CAR T therapies that can be in the half-million-dollar range or gene therapies in the million-plus range. On a unit basis, it's significantly lower than those similar technologies.

Speaker #3: And when you think about the rigorous pricing research that we regularly do and kind of how payers and hospital administrators think about the product, we're really well-positioned.

Speaker #3: So compared to other cell and gene therapies as we talked about, Macy's price is significantly lower than other cell therapies like CAR-T therapies that can be in the half-million-dollar range or gene therapies in the million-plus range.

Speaker #3: And so on a unit basis, it's significantly lower than those similar technologies. And when you look at the overall spend in any given category, whether it's those kinds of advanced cell or gene therapies, which are in the billions of dollars, or even in our space of total knee, total hip, total shoulder replacements, the overall spend to any particular payer or system is very low compared to other areas in our space.

Nick Colangelo: When you look at the overall spend in any given category, whether it's those kinds of advanced cell or gene therapies, which are in the $billions, or even in our space of total knee, total hip, total shoulder replacements, the overall spend to any particular payer or system is very low compared to other areas in our space. I think for that reason, we remain well-positioned. As we talked about in our most recent market research, it suggested that those kind of similar price increases that we have been taking really over the past decade since we launched the product, we would expect those to continue over the next several years. We've been very clear that MACI is clearly a volume and price growth story for the foreseeable future.

Speaker #3: And so I think for that reason, we remain well-positioned. And as we talked about in our most recent market research, it suggested that those kind of similar price increases that we have been taking really over the past decade since we launched the product, we would expect those to continue over the next several years.

Speaker #3: So we've been very kind of clear that Macy is clearly a volume and price growth story for the foreseeable future.

Speaker #5: Thank you. And congrats.

Richard Newitter: Thank you and congrats.

Speaker #3: Thanks, Rich.

Nick Colangelo: Thanks, Rich.

Speaker #2: Thank you. We'll take our next questions from Josh Jennings of TD Callan.

Operator 2: Thank you. We'll take our next questions from Josh Jennings of TD Cowen.

Operator: Thank you. We'll take our next questions from Josh Jennings of TD Cowen.

Speaker #6: Hi. Good morning, everyone. And thanks for taking the question. Congrats on a good quarter. Just wanted to expand on guidance quickly. Certainly, appreciate the two-year stack perspective, but just looking at this year in isolation, you had a really strong one H, but two H implies a little bit of a slowdown across the board.

[Analyst] (TD Cowen): Good morning, everyone, and thanks for taking the question. Congrats on a good quarter. Just wanted to expand on guidance quickly. Certainly appreciate the two-year stack perspective, but just looking at this year in isolation, you had a really strong H1, but H2 implies a little bit of a slowdown across the board. I want to hear your comments there and just had a quick follow-up.

Speaker #6: Wanted to hear your comments there and just had a quick follow-up.

Speaker #4: Yeah. So good morning. This is Joe. I'll take that one. So yeah, I'd say from just a quick guidance update, I think pretty straightforward, kind of similar to what we talked through last quarter.

Joe Mara: Good morning. This is Joe. I'll take that one. I'd say from just a quick guidance update, I think pretty straightforward, kind of similar to what we talked through last quarter. Obviously a strong Q2, beat by more than $2 million in each franchise. On a full year basis, essentially incorporating that beat in total and in each franchise. That's the full year update. I think to your question, I think one thing we want to maintain is, I think we've had a good guidance framework that's worked well for the company, and we want to keep that in place for the remainder of the year. I'd say we're just trying to be prudent. Our assumptions in the H2 have not changed, or our guidance commentary, rather.

Speaker #4: So, obviously a strong second quarter. We beat by more than $2 million in each franchise, and on a full-year basis, we're essentially incorporating that beat in total and in each franchise.

Speaker #4: So that's the full-year update. And I think to your question, I think one thing we want to maintain is I think we've had a good guidance framework that's worked well for the company.

Speaker #4: And we want to keep that in place for the remainder of the year. So I'd say we're just trying to be prudent. Our assumptions in the second half have not changed or our guidance commentary rather.

Speaker #4: So whether you look at Q3 or Q4 in the Macy side, you're kind of in that high teens growth rate is kind of our guidance framework assumption.

Joe Mara: Whether you look at Q3 or Q4 in the MACI side, you're kind of in that high teens growth rate is kind of our guidance framework assumption. Similar on the Burn Care side, where I think last quarter we pointed to essentially $12 million per quarter is kind of the right way to think about the H2, and that has not changed. We pointed to $12 million in the Q3, which is kind of $9 million core and $3 million BARDA. Similar assumption for the Q4. Then just back to MACI and just maybe the framework. We talked about in terms of Q3, we have a revenue range out there and obviously there's some different scenarios, but probably a good midpoint again is just to keep that high teens assumption on MACI. Call it around $65 million or so.

Speaker #4: Similar on the Burn Care side where I think last quarter we pointed to, essentially 12 million per quarter, is kind of the right way to think about the back half.

Speaker #4: And that has not changed. So we pointed to 12 million in the third quarter, which is kind of 9 million core and 3 million BARDA similar assumption for the fourth quarter.

Speaker #4: And then just back to Macy and just maybe the framework, we talked about in terms of Q3, we have a revenue range out there.

Speaker #4: And obviously, there's some different scenarios. But probably a good midpoint again is just to keep that high teens assumption on Macy, call it around 65 million or so.

Speaker #4: And then again, Burn Care at around 12 million. So I think that's consistent. And then I would say kind of to your question, obviously, over the last six months to start the year and really going back to last year, we've had a number of strong quarters.

Joe Mara: Then again, Burn Care at around $12 million. I think that's consistent. Then, I would say, to your question, obviously, over the last six months to start the year and really going back to last year, we've had a number of strong quarters. The reality is, if the team continues to execute well from a MACI perspective, we have a strong pool of biopsies, the indicators are strong. We think we should be set up very well in the H2, certainly to meet our guidance and hopefully to outperform it. That's certainly the goal. Our internal expectations remain higher. I would say somewhat similar on the Burn Care side, which is, that's obviously a more difficult market and franchise to predict.

Speaker #4: And the reality is if the team continues to execute well from a Macy perspective, we have a strong pool of biopsies. The indicators are strong.

Speaker #4: We think we should be set up very well in the second half, certainly to meet our guidance and hopefully to outperform it. So that's certainly the goal, our internal expectations remain higher.

Speaker #4: And I would say somewhat similar on the Burn Care side, which is that's obviously a more difficult market and franchise to predict. But we have seen a few quarters now of some consistent results on the Burn Care side that have been a nice improvement.

Joe Mara: We have seen a few quarters now of some consistent results on the Burn Care side that have been a nice improvement. Just generally, I would say to your question on kind of a decel in H2, that's more of a guidance framework assumption, which I think is the right place to be and to be prudent on that. Again, our internal expectations remain higher and clearly we're running at higher levels now.

Speaker #4: So just generally, I would say to your question on kind of the decel in the second half, I mean, that's more of a guidance framework assumption, which I think is the right place to be prudent on that.

Speaker #4: But again, our internal expectations remain higher and clear we're running at higher levels now.

Speaker #6: Excellent. Thank you. And just to clarify, it's John on for Josh. And then just moving to profitability, I'd adjusted EBITDA nice improvement there, strong quarter, moving also to kind of an LRP question.

[Analyst] (TD Cowen): Excellent. Thank you. Just to clarify, it's John on for Josh. Just moving to profitability on adjusted EBITDA, nice improvement there. Strong quarter. Moving also to kind of an LRP question. You are aiming for high 30s adjusted EBITDA margin by 2029. What does that ramp look like given that implies considerable expansion over the next couple of years, particularly in the framework occurring your guidance?

Speaker #6: You are aiming for high 30s adjusted EBITDA margin by 2029. What does that ramp look like given that implies considerable expansion over the next couple of years?

Speaker #6: Particularly in the framework occurring in your guidance.

Speaker #4: Yeah. So, I mean, in terms of our midterm targets generally, I feel like we're on track, whether it's revenue or the margin targets. I think what you're seeing, just as a reminder, in this calendar year is we're kind of adding a number.

Joe Mara: Yeah. In terms of our midterm targets, generally, I feel like we're on track, whether it's revenue or the margin targets. I think what you're seeing, just as a reminder in this calendar year is, we're kind of adding a number these 12 months, whether it's the salesforce expansion, the ramp-up of the ankle trial, some of our ex-US spend, et cetera. That's certainly contributing. Then, of course, on the gross margin side, which impacts EBITDA as well, kind of adding the cost for our new facility. This is a bit of a transition year on the P&L where we still expect some modest expansion and to expand a little bit in H1 from a margin perspective.

Speaker #4: These 12 months, whether it's a Salesforce expansion, kind of the ramp-up of the ANCHOR trial, some of our ex-US spend, etc., that's certainly contributing.

Speaker #4: And then, of course, on the gross margin side, which impacts EBITDA as well, kind of adding So this is a bit of a kind of transition year on the P&L where we still expect some modest expansion and to expand a little bit in H1 from a margin perspective.

Speaker #4: But I would generally say we would expect once we kind of get through '26 and into '27, we'll probably get into those more significant year-over-year increases on the adjusted EBITDA side and start to see that leverage flow through.

Joe Mara: I would generally say we would expect once we get through 2026 and into 2027, we'll probably get into those more significant year-over-year increases on the adjusted EBITDA side and start to see that leverage flow through. Again, when you get toward the end of the decade, you'll probably see things like the ankle trial will start to wind down, for example. That will help as we get there as well.

Speaker #4: And then again, when you get toward the end of the decade, you'll probably see things like the ankle trial will start to wind down, for example.

Speaker #4: So that will help as we get there as well.

Speaker #6: Excellent. Thank you very much and congrats again.

[Analyst] (TD Cowen): Excellent. Thank you very much and congrats again.

Speaker #4: Thank you.

Joe Mara: Thank you.

Speaker #2: Thank you. We'll take our next question from Ryan Zimmerman of BTIG.

Operator 2: Thank you. We'll take our next question from Ryan Zimmerman of BTIG.

Operator: Thank you. We'll take our next question from Ryan Zimmerman of BTIG.

Speaker #5: Hey, guys. Can you hear me okay? Good morning. Congrats on the quarter. This is the first share repurchase authorization in the company's history. I'm wondering Nick and Joe, how do you think about the use of that?

Ryan Zimmerman: Hey guys, can you hear me okay?

Joe Mara: Good morning, Ryan.

Nick Colangelo: Morning. Congrats on the quarter. This is the first share repurchase authorization in the company's history. I'm wondering, Nick and Joe, how you think about the use of that. Is this something that you're using to offset maybe stock-based comp? Is it to hold the share price at a certain level? Just how do you think about it in the context of your cash between that and then growth initiatives or M&A? If I think about, again, the company's history, you guys have been on the hunt for additional assets for some time, and just trying to understand what that means in that context, I guess. Hey, Ryan, it's Nick. Thanks for the question. I would just say that our capital allocation priorities remain the same. It's always about funding internal growth opportunities.

Ryan Zimmerman: Morning. Congrats on the quarter. This is the first share repurchase authorization in the company's history. I'm wondering, Nick and Joe, how you think about the use of that. Is this something that you're using to offset maybe stock-based comp? Is it to hold the share price at a certain level? Just how do you think about it in the context of your cash between that and then growth initiatives or M&A? If I think about, again, the company's history, you guys have been on the hunt for additional assets for some time, and just trying to understand what that means in that context, I guess.

Speaker #5: I mean, is this something that you're using to offset maybe stock-based comp? Is it to hold the share price at a certain level? And just how do you think about it in the context of your cash between that and then growth initiatives or M&A and kind of because if I think about kind of, again, the company's history, I mean, you guys have been on the hunt for additional assets for some time.

Speaker #5: I'm just trying to understand what that means within the purview in that context, I guess.

Speaker #3: Yeah. Hey, Ryan. It's Nick. Thanks for the question. I would just say that our capital allocation priorities remain the same. It's always about funding internal growth opportunities and as we've talked about, pretty consistently, our new facility where we made about 100 million dollar investment, and our cash still increased while we were doing that, was really the biggest capex investment we were going to need to make to achieve our growth objectives.

Nick Colangelo: Hey, Ryan, it's Nick. Thanks for the question. I would just say that our capital allocation priorities remain the same. It's always about funding internal growth opportunities.

Nick Colangelo: As we've talked about pretty consistently, our new facility, where we made about $100 million investment, and our cash still increased while we were doing that, was really the biggest CapEx investment we were going to need to make to achieve our growth objectives. With that behind us, you can see sort of the inflection in cash generation, free cash flow, et cetera, which will only ramp up as we move forward. Our internal funding of growth opportunities really falls within our operating plan. We always aggressively invest for growth, whether it's a sales force expansion, expanding outside the US, doing the MACI ankle study, commercial excellence initiatives across the board, and that's not going to change. Secondly, we obviously have nearly a quarter billion dollars in cash now, and again, that's going to continue to ramp. We continue to look for M&A opportunities, additional product opportunities.

Speaker #3: And with that behind us, you can see sort of the inflection in cash generation, free cash flow, etc., which will only ramp up as we move forward.

Speaker #3: So our internal funding of growth opportunities really falls within our operating plan. We've always aggressively invested for growth, whether it's a Salesforce expansion, expanding outside the US, doing the Macy ankle study, commercial excellence initiatives across the board.

Speaker #3: And that's not going to change. Secondly, we obviously have nearly a quarter billion dollars in cash now. And again, that's going to continue to ramp.

Speaker #3: We continue to look for M&A opportunities, additional product opportunities. We obviously built the company on business development transactions. So that's kind of in our core DNA.

Nick Colangelo: We obviously built the company on business development transactions, that's kind of in our core DNA, and that won't change either. Again, with kind of the performance of the business, our strong balance sheet, doing a share repurchase program where we can opportunistically return capital to investors, we can do both. It doesn't change our overall capital allocation strategy, and it's just a reflection of the confidence that we have in our continued long-term growth.

Speaker #3: And that won't change either. But again, with kind of the performance of the business, our strong balance sheet, doing a share repurchase program where we can opportunistically return capital to investors, we can do both.

Speaker #3: So it doesn't change our overall capital allocation strategy, and it's just a reflection of the confidence that we have in our continued long-term growth.

Speaker #5: Fair enough. And there's a couple of questions I have. I'll try and keep it to just one. But when you think about your push into Europe, I'm curious if you can talk about what you think or what reimbursement looks like?

Ryan Zimmerman: Fair enough. There's a couple questions I have. I'll try and keep it to just one, but when you think about your push into Europe, I'm curious if you can talk about what you think or what reimbursement looks like, how you think about pricing, how you think about the impact to margin as we potentially have a UK launch into 2027. Thanks.

Speaker #5: How do you think about pricing? How do you think about the impact of margins as we potentially have a UK launch into 2027? Thanks.

Speaker #3: Yeah. As we talked about on our last call, the UK opportunity is a great beachhead for us. Macy's got a lot of brand recognition, surging advocacy.

Nick Colangelo: Yeah. As we talked about on our last call, the UK opportunity is a great beachhead for us. MACI's got a lot of brand recognition, surgeon advocacy, in Europe and particularly in the UK. Those were the surgeons. MACI was developed in Europe. It was on the market in Europe. Those surgeons actually came over and trained our US surgeons when we launched the product back in 2017. Very strong advocacy, and desire to have MACI back in Europe and in the UK in particular. From a commercial execution standpoint, it's a very concentrated market there with a dozen or so centers of excellence where patients in the UK and the National Health Service will be treated for cartilage injuries. That's great.

Speaker #3: In Europe and particularly in the UK, those were the surgeons. Macy was developed in Europe. It was on the market in Europe. Those surgeons actually came over and trained our US surgeons when we launched the product back in 2017.

Speaker #3: So very strong advocacy and desire to have Macy back in Europe and the UK in particular. From a commercial execution standpoint, it's a very concentrated market there with a dozen or so centers of excellence where patients in the UK and the national health system will be treated for cartilage injuries.

Speaker #3: So that's great. And then there was the reimbursement and pricing back in the late teens, there actually was a review of ACI technologies and a positive opinion from NICE that had pricing that was certainly lower than the US, but certainly acceptable for us.

Nick Colangelo: Then there was the reimbursement and pricing, back in the late teens, there actually was a review of ACI technologies, and a positive opinion from NICE that had pricing that was certainly lower than the US, but certainly acceptable for us. We're going back, that's the next step, as we mentioned in our press release this morning. We submitted our marketing authorisation application to the UK in Q2. We remain on track for an approval, hopefully, by the end of the year and a launch into next year. Part of that whole process is a submission for a single technology appraisal by NICE. We'll go through that process again.

Speaker #3: We're going back. That's the next step as we mentioned in our press release this morning. We submitted our marketing authorization application to the UK in the second quarter.

Speaker #3: And so we remain on track for an approval, hopefully by the end of the year and a launch into next year. Part of that whole process is a submission for a single technology assessment by NICE.

Speaker #3: So we'll go through that process again. And we expect given the prior history and then the additional long-term data we have for Macy and some other changes sort of in that market that reimbursement will be at a range that will be sort of attractive to the company.

Nick Colangelo: We expect, given the prior history and then the additional long-term data we have for MACI and some other changes sort of in that market, that reimbursement will be at a range that will be sort of attractive to the company. That's important because other European countries will use that as a reference price, Canada, et cetera. Obviously, we wouldn't be doing this if we didn't think we would get pricing that would make sense for us outside the US.

Speaker #3: That's important because other European countries will use that as a reference price. Canada, etc. So obviously, we wouldn't be doing this if we didn't think we would get pricing that would make sense for us outside the US.

Speaker #4: Yeah, Ryan, just to add on your kind of P&L question, I would say generally, I mean, this is going to fit in well with our margin profile.

Joe Mara: Yeah. Ryan, just to add on your kind of P&L question, I would say generally, I mean, this is going to fit in well with our margin profile. We can use some of our capacity and at times excess capacity here in Burlington. Expect that to fit in well with our margin profile. Then, I think particularly starting in the UK, as we talked about, it's a very concentrated market, so it's not going to be a huge kind of uptake in terms of kind of FTEs or to kind of get into that market from a kind of market model perspective or go-to-market perspective, I should say. Not huge investments on the sales and marketing side. We think this will fit in well on the margin side in general for the company, and obviously, hopefully it can scale over time.

Speaker #4: We can use some of our capacity and at times excess capacity here in Burlington. So expect that to fit in well with our margin profile.

Speaker #4: And then I think particularly starting in the UK, I mean, as we talked about, it's a very concentrated market. So it's not going to be a huge kind of uptake in terms of kind of FTEs or to kind of get into that market from a kind of market model perspective or go-to-market perspective, I should say.

Speaker #4: So, not huge investments on the sales and marketing side. We think this will fit in well on the margin side, in general, for the company.

Speaker #4: And obviously, hopefully, it can scale over time.

Speaker #5: Got it. Thank you guys.

Ryan Zimmerman: Got it. Thank you, guys.

Speaker #4: Thank you.

Joe Mara: Thank you.

Nick Colangelo: Thank you.

Speaker #1: Thank you. We'll take our next question from Mike Crackey of Lyric Partners.

Operator 2: Thank you. We'll take our next question from Mike Kratky of Leerink Partners.

Operator: Thank you. We'll take our next question from Mike Kratky of Leerink Partners.

Speaker #6: Hey, how's it going, everyone? Thanks for taking our questions and congrats on the really strong quarter. Maybe just one from my side, but can you provide any additional color on to what extent you're seeing Macy are through adoption within Patella and some of the larger defects versus seemingly driving more penetration in smaller condiles and other defects?

Mike Kratky: Hey, how's it going, everyone? Thanks for taking our questions, and congrats on the really strong quarter. Maybe just one from my side, but can you provide any additional color on to what extent you're seeing MACI Arthro adoption within patella and some of the larger defects versus seemingly driving more penetration in smaller condyles and other defects? How market expanding has MACI Arthro been now that you're a little further out from launch?

Speaker #6: How market expanding has Macy Arthur been now that you're a little further out from launch?

Speaker #3: Yeah. Hey, Mike, it's Nick. So first of all, as you know, the Macy Arthur instruments are designed to treat smaller femoral condyle defects two to four square centimeter defects and that's obviously where they are being used.

Nick Colangelo: Yeah. Hey, Mike, it's Nick. First of all, as you know, the MACI Arthro instruments are designed to treat smaller femoral condyle defects, 2 to 4 square centimeter defects, and that's obviously where they are being used. As we've talked about on prior calls, we have seen use outside the femoral condyle, so in the trochlea in particular, which was a nice sort of upside, and then in even some patella cases as well. Again, they tend to be in the smaller defects. I'd say overall, we talked last call about the fact that 2025 was really a year around building the foundation of trained surgeons, which we outperformed on.

Speaker #3: As we've talked about on prior calls, we have seen use outside the femoral condyle—in the trochlea in particular, which was a nice sort of upside—and then even some patella cases as well.

Speaker #3: But again, they tend to be in the smaller defects. And so I'd say overall, we talked last call about the fact that 2025 was really a year around building the foundation of trained surgeons, which we outperformed on.

Speaker #3: We continue to train those surgeons, but we're really focused on having surgeons now move on to Macy Arthur cases because we've seen that while trained surgeons have higher activity levels than pre-arthro, those that are actually doing Macy Arthur cases actually outperform all of them, have higher conversion rates.

Nick Colangelo: We continue to train those surgeons, but we're really focused on having surgeons now move on to MACI Arthro cases because we've seen that while trained surgeons have higher activity levels than pre-arthro, those that are actually doing MACI Arthro cases actually outperform all of them, have higher conversion rates, and so on. Those trends continue as we move into 2026, and we expect that to continue. I think it's, again, intertwined with all the other commercial initiatives that we have going on that have really elevated the execution. Now we're excited to see that publications are starting to flow. Even just last week, there was a OUS long-term MACI outcomes publication for arthroscopically administered MACI, with an average kind of timeline of about 13 years, and the data there was excellent. Obviously, they weren't using the MACI Arthro instruments.

Speaker #3: And so on. So those trends continue as we move into 2026. And we expect that to continue. So I think it's, again, intertwined with all the other commercial initiatives that we have going on that have really elevated the execution.

Speaker #3: And now we're excited to see that publications are starting to flow. So even just last week, there was a OUS long-term Macy outcomes publication for arthroscopically administered Macy with an average kind of timeline of about 13 years.

Speaker #3: And the data there was excellent. Obviously, they weren't using the Macy arthro instruments. But great long-term outcomes and really sort of the highest patient satisfaction results we've seen in any of the 10-year plus data that was out there with Macy.

Nick Colangelo: Great long-term outcomes and really sort of the highest patient satisfaction results we've seen in any of the 10-year plus data that was out there with MACI, so really great outcomes there. Here in the US, as we mentioned previously, the first publication was accepted. Hasn't been published yet, but we expect that to show those shorter-term positive outcomes that we talked about previously around return to full weight bearing on a faster basis, range of motion, et cetera, less postoperative pain. We expect that that kind of clinical data will also support increased uptake with MACI Arthro as well.

Speaker #3: So really great outcomes there. And then here in the US, as we mentioned previously, the first publication was accepted hasn't been published yet, but we expect that to show those shorter-term positive outcomes that we talked about previously around return to full weight-bearing on a faster basis.

Speaker #3: Range of motion, etc. Less postoperative pain. And so we expect that that kind of clinical data will also support increased uptake with Macy arthro as well.

Speaker #6: Understood. Super helpful. And maybe just one quick follow-up, but you talked about the Salesforce expansion. To what degree are you already seeing kind of full utilization and those new reps having ramped and contributing already that you might see more upside from in the back half or 2027?

Mike Kratky: Understood. Super helpful. Maybe just one quick follow-up, you talked about the sales force expansion. To what degree are you already seeing kind of full utilization and those new reps having ramped and contributing already versus, is that still something that you might see more upside from in the back half of 2027?

Speaker #3: Yeah, that's a great question. So obviously, unlike our expansions back in sort of the late teens or 2020 where we were kind of filling in some white spaces here, there's established Macy business across the country.

Nick Colangelo: Yeah, that's a great question. Obviously, unlike our expansions back in sort of the late teens or 2020, where we were kind of filling in some white spaces, here, there's established MACI business across the country, the new reps come in and they are contributing immediately. We talked about the fact that we saw some of the highest biopsy growth rates in Q1 coming out of those new territories. They've continued to perform from that perspective in Q2 and implant growth accelerating as well. Interestingly, as we look at sort of more recent adds to our sales force over the past couple of years, you really see an inflection in the growth in years 2 and 3. That's when they really hit their stride and typically outperform sort of some of the more established territories.

Speaker #3: And so the new reps come in and they are contributing immediately and we talked about the fact that we saw some of the highest biopsy growth rates in the first quarter coming out of those new territories.

Speaker #3: And they've continued to perform from that perspective in Q2 and implant growth accelerating as well. And interestingly, as we look at sort of more recent ads to our Salesforce over the past couple of years, you really see an inflection in the growth in years two and three.

Speaker #3: That's when they really hit their stride in typically outperform sort of some of the more established territories. And so yeah, that's a great point that we're excited about that.

Nick Colangelo: Yeah, that's a great point that we're excited about that. This is not just a H1 2026 phenomenon. This is something that we should see through the remainder of 2026, into 2027, and maybe beyond as well. Yeah, we're really pleased with the execution to date, and certainly it's helping fuel the growth we've seen.

Speaker #3: This is not just a first half 2026 phenomenon. This is something that we should see through the remainder of 26 into 27 and maybe beyond as well.

Speaker #3: So yeah, we're really pleased with the execution to date and certainly it's helping fuel the growth we've seen.

Speaker #6: Awesome. Super helpful. Thanks, Nick. And congrats again.

Mike Kratky: Awesome. Super helpful. Thanks, Nick. Congrats again.

Speaker #3: Thank you.

Nick Colangelo: Thank you.

Speaker #1: Thank you. We'll take our next question from Caitlin Roberts of Canaccord Genuity.

Operator 2: Thank you. We'll take our next question from Caitlin Cronin of Canaccord Genuity.

Operator: Thank you. We'll take our next question from Caitlin Cronin of Canaccord Genuity.

Speaker #7: Hi. Congrats on a great quarter and thanks for taking the questions. Would love to touch on arthro just a little bit more. I think the last number of surgeons you mentioned that were trained on arthro was about 1,000.

Caitlin Cronin: Hi. Congrats on a great quarter, and thanks for taking the questions. Would love to touch on Arthro just a little bit more. I think the last number of surgeons you mentioned that were trained on Arthro was about 1,000. I mean, just any color, you talked about switching to the focus being on cases completed now. Any color on how many of your surgeon users have completed an Arthro case at this point, and any update on the next gen instruments and timeline for those launching?

Speaker #7: I mean, just any color you talked about switching to the focus being on cases, completed now. Any color on how many of your surgeon users have completed an arthro case at this point?

Speaker #7: And any update on the next-gen instruments and timeline for those launching?

Speaker #3: Yeah, thanks, Caitlin. Good to talk to you. I think on the Macy arthro surgeon users, we haven't really sort of kind of tracked that or publicly disclosed that.

Nick Colangelo: Yeah, thanks, Caitlin. Good to talk to you. I think on the MACI Arthro surgeon users, we haven't really sort of, kind of tracked that or publicly disclosed that. What we're really focused on is increasing those MACI Arthro cases as we talked about, for the reasons we talked about, where they have higher growth rates, conversion, et cetera. It's certainly not. If a surgeon's trained on MACI, obviously, they're very interested in using MACI Arthro. Then they have to find a patient who's got a defect that's amenable to using Arthro, and the patient then has to move forward. You know this is sort of a long sales cycle. What we do see in those trained surgeons, regardless of when they do their first case, is that they're definitely treating more smaller implants.

Speaker #3: I mean, what we're really focused on is increasing those Macy arthro cases as we talked about for the reasons we talked about where they have higher growth rates, conversion, etc.

Speaker #3: It's certainly not if a surgeon's trained on Macy, obviously, they're very interested in using Macy arthro than they have to find a patient who's got a defect that's amenable to using arthro and the patient then has to move forward.

Speaker #3: So you know this is sort of a long sales cycle, but what we do see in those trained surgeons, regardless of when they do their first case, is that they're definitely treating more smaller implants.

Speaker #3: And so that's kind of what we've been looking for to grow that share in the largest part of the market. And again, we're happy with the progress.

Nick Colangelo: That's kind of what we've been looking for to grow that share in the largest part of the market. We're happy with the progress. As you know with MACI, these things sort of play out over longer periods of time just because the sort of sales cycle is elongated for MACI. Everything remains on track that we'd want to see, and a lot of excitement remains. In terms of next generation, that's something we're continually working with surgeons on. Our goal is always to continue to reduce time for MACI Arthro cases, to simplify that. We work with a number of surgeons in labs to develop those instruments. I'd say, the first round, once we have a design freeze, which will happen here in the next couple of quarters, call it.

Speaker #3: As you know, with Macy, these things tend to play out over longer periods of time, just because the sales cycle is elongated for Macy.

Speaker #3: So everything remains on track that we'd want to see. And a lot of excitement remains. In terms of sort of next-generation, that's something we're continually working with surgeons on.

Speaker #3: Our goal is always to continue to reduce time for Macy arthro cases. To simplify that. And so we work with a number of surgeons in labs to develop those instruments.

Speaker #3: And I'd say like the first round, once we have a design freeze, which will happen here in the next couple of quarters, call it, it's usually another year or so after that to get through the whole validation and approval process.

Nick Colangelo: It's usually another year or so after that to get through the whole validation and approval process. I'd say probably, maybe 2028 would be a good time frame to think about next sets of instruments coming out.

Speaker #3: So I'd say probably maybe 2028 would be a good timeframe to think about next sets of instruments coming out.

Speaker #7: Awesome. And just turning to pricing again, we've talked a lot about the Macy pricing increases but what about Epicil and NextGrid? How much is pricing a part of the equation there?

Caitlin Cronin: Awesome. Just turning to pricing again. We've talked a lot about the MACI price increases. What about Epicel and NexoBrid? How much is pricing a part of the equation there?

Speaker #2: Yeah, I mean, so I mean, generally, I think we've talked about in the past, I mean, it's probably somewhat similar. It can vary because it can look a little bit different across different kind of parts of the channels.

Joe Mara: Yeah. Generally, I think we've talked about in the past, it's probably somewhat similar. It can vary because it can look a little bit different across different kind of parts of the channels. Generally, I would say, Epicel. We've had a strong year, very strong year from a volume perspective. That is clearly what's driving our kind of outsized results this year. We do typically take something similar on the MACI side in terms of price increases on the Epicel side. We actually haven't done a whole lot on the NexoBrid side, I think we just took a modest, I think our first price increase, around mid-year this year. It's kind of a modest piece on the NexoBrid, but pretty similar in terms of, I would say, the framework around something typically mid-single digits.

Speaker #2: But generally, I would say Epicel has had a strong year—a very strong year from a volume perspective. That is clearly what’s driving our kind of outsized results this year.

Speaker #2: But we do typically take kind of something similar in the Macy side in terms of price increases, on the Epicel side. And we actually haven't done a whole lot on the NextGrid side, but I think we just took a modest I think our first price increase around mid-year this year.

Speaker #2: So that's kind of a modest piece on the NextGrid. But pretty similar in terms of, I would say, the framework around something typically mid-single digits could be a little bit higher depending on kind of the channel.

Joe Mara: Could be a little bit higher depending on kind of the channel.

Speaker #7: Great. Thanks so much.

Caitlin Cronin: Great. Thanks so much.

Speaker #2: Thank you.

Speaker #1: Thank you. We'll take our next question from Mason Carrico. Stevenson.

Joe Mara: Thank you.

Operator 2: Thank you. We'll take our next question from Mason Carrico of Stephens.

Operator: Thank you. We'll take our next question from Mason Carrico of Stephens.

Speaker #5: Hey guys. Thanks for taking the questions here. Are you willing to share what percentage of the new to Macy surgeon cohort has completed a Macy procedure at this point?

Mason Carrico: Hey, guys. Thanks for taking the questions here. Are you willing to share what % of the new-to-MACI surgeon cohort has completed a MACI procedure at this point? I think you guys have said that that group of surgeons may be made up a third of the 1,000 trained that you highlighted earlier this year. Among those that have, are you seeing signs that they're increasing their use of MACI in their practice in general? Have they kind of been more one and done? Just any insight there.

Speaker #5: I think you guys have said that that group of surgeons may be made up a third of the 1,000 trained that you highlighted. Earlier this year.

Speaker #5: And then among those that have, are you seeing signs that they're increasing their use of Macy in their practice in general? Have they kind of been more one or done?

Speaker #5: Just any insight there?

Speaker #3: Yeah. So Mason, we really haven't gone back and continued to parse out sort of kind of how many of those trained in the different segments have actually sort of moved through the funnel to date.

Nick Colangelo: Yeah. Mason, we really haven't gone back and continued to parse out sort of how many of those trained in the different segments have actually sort of moved through the funnel to date, for the reasons that I just mentioned. I will say that, again, once we end up having those surgeons sort of trained, we do see increases in biopsies and so on. Ultimately, one would expect that those turn into implants over time. Those are kind of the early indicators that we'd look for out of all three of the segments for those, the MACI-trained surgeons. I'd say kind of equivalent behavior across the board, and we actually don't spend a lot of time at this point trying to parse out sort of differential rates out of different buckets.

Speaker #3: For the reasons that I just mentioned. But I will say that, again, once we end up having those surgeons sort of trained, we do see increases in biopsies and so on.

Speaker #3: And ultimately, one would expect that those turn into implants over time. So those are kind of the early indicators that we look for out of all three of the segments for those the Macy trained surgeons.

Speaker #3: So I'd say kind of equivalent behavior across the board, and we actually don't spend a lot of time at this point trying to parse out sort of differential rates out of different buckets.

Speaker #3: So and we did note that those trained surgeons, again, we're kind of at a critical mass, where as I mentioned on our last call, we'd expect over time that every Macy surgeon is going to be trained on Macy arthro.

Nick Colangelo: We did note that those trained surgeons, again, we're kind of at a critical mass where, as I mentioned on our last call, we'd expect over time that every MACI surgeon's going to be trained on MACI Arthro. We're just kind of seeing similar behavior across the board there.

Speaker #3: And we're just kind of seeing similar behavior across the board there.

Speaker #5: Got it. I'll just keep it to one. Thanks.

Mason Carrico: Got it. I'll just keep it to one. Thanks.

Speaker #2: Thanks, Mason.

Joe Mara: Thanks, Mason.

Speaker #1: Thank you once again. If you'd like to ask a question, please press star one on your phone. We'll take our next question from Jeffrey Cohen.

Operator 2: Once again, if you'd like to ask a question, please press star one on your phone. We'll take our next question from Jeffrey Cohen.

Operator: Once again, if you'd like to ask a question, please press star one on your phone. We'll take our next question from Jeffrey Cohen.

Speaker #6: Good morning. Thanks for taking our question. So just a couple. I did want to follow up on sales organization and back half and potential expansion.

Jeffrey Cohen: Good morning. Thanks for taking our question. Just a couple. I did want to follow up on sales organization and H2 and potential expansion. Could you talk about H2? Do you plan to add commercial folks, at least domestically, and then maybe talk about what preparations are being made in the UK from a commercial standpoint prior to launch?

Speaker #6: Could you talk about back half? Do you plan to add commercial folks at least domestically and then maybe talk about what preparations are being made in the UK from a commercial standpoint prior to launch?

Speaker #3: Yeah. Hey, Jeff. It's Nick. So I guess I'll address it for both commercial businesses on the burn care side. Over the past couple of years, we've kind of expanded pretty meaningfully to about 17 territories and burn care support specialists and at this point, we don't have any plans for sort of a wholesale revamp of that.

Nick Colangelo: Yeah. Hey, Jeff, it's Nick. I guess I'll address it for both commercial businesses. On the Burn Care side, over the past couple of years, we've kind of expanded pretty meaningfully to about 17 territories and Burn Care support specialists. At this point, we don't have any plans for sort of a wholesale revamp of that. Obviously, they're executing well and performing well. On the MACI side, obviously, we just completed early this year sort of the bigger sales force expansion. I think we're pretty good. Don't have any plans for the H2 of the year on either of those counts.

Speaker #3: Obviously, they're executing well and performing well. And so, on the MACI side, obviously, we just completed earlier this year the bigger Salesforce expansion.

Speaker #3: So I think we're pretty good. Don't have any plans for the second half of the year on either of those counts. And I would say as we go forward, it's probably going to be more about opportunistically increasing or adding reps where necessary in different parts, rather than any kind of wholesale increase again over the next, call it, year or two.

Nick Colangelo: I would say, as we go forward, it's kind of probably going to be more about opportunistically increasing or adding reps where necessary in different parts of the country, as opposed to any kind of wholesale increase again over the next, call it, year or two.

Speaker #6: Got it. That's helpful. And I was following.

Jeffrey Cohen: Got it. That's helpful. I was following up.

Speaker #3: Yeah, and then you.

Nick Colangelo: Yeah.

Jeffrey Cohen: Can you talk a little bit

Speaker #6: You talk a little bit.

Speaker #3: Oh, sorry. Just on the UK front, you mentioned that would be something hopefully we remain with the submission in. Hopefully, we get an approval by early next year.

Nick Colangelo: Oh, sorry. On the UK front, you mentioned. That would be something, hopefully we remain with the submission. Hopefully, we get an approval by early next year, can launch in 2027. As Joe mentioned, given that there's really 12 or 13 centers of excellence that perform these restorative cartilage repair procedures in the UK, we're not going to need more than really a handful of commercial folks over there at any point. That will probably happen late this year, early next year.

Speaker #3: Can launch in 2027. As Joe mentioned, given that there are really 12 or 13 centers of excellence that perform these cartilage restorative, cartilage repair procedures in the UK, we're not going to need more than really a handful of commercial folks over there at any point.

Speaker #3: So that will probably happen late this year or early next year.

Speaker #6: Got it. And then could you talk about NextGrid a little more as far as what you're seeing on utilization and sites and maybe talk about overlap or not with some of the Epicel accounts as far as existing in new customers?

Jeffrey Cohen: Got it. Could you talk about NexoBrid a little more, as far as what you're seeing on utilization and sites, and maybe talk about overlap or not with some of the Epicel accounts as far as existing and new customers?

Speaker #3: Yeah. Well, I think we're starting to feel the momentum build for NextGrid. Obviously, we said it was a record revenue ordering center hospital unit sales quarter for us.

Nick Colangelo: Yeah. I think we're starting to feel the momentum build for NexoBrid. Obviously, we said it was a record revenue ordering center, hospital unit sales quarter for us, and that we're essentially up to about 80 ordering centers cumulatively over time since launch. Feeling good about the consistency of orders coming through, and so on. Feels like that is again, building momentum, and we're excited about that, especially in combination with the BARDA award, which remains on track, as Joe mentioned. It's part of our guidance for Q3, and we're certainly well-positioned to begin that procurement process pretty early in this quarter.

Speaker #3: And that we're essentially up to about 80 ordering centers cumulatively over time since launch. So feeling good about sort of the consistency of orders coming through and so on.

Speaker #3: So it feels like that is kind of, again, building momentum, and we're excited about that, especially in combination with the BARDA award, which remains on track, as Joe mentioned.

Speaker #3: It's part of our guidance for the third quarter, and we're certainly well positioned to begin that procurement process pretty early in this quarter.

Speaker #6: Perfect. Great quarter. Thanks for taking your questions.

Jeffrey Cohen: Perfect. Great quarter. Thanks for taking our questions.

Speaker #3: Okay. Thank you.

Nick Colangelo: Okay, thank you.

Speaker #1: It appears there are no further questions at this time. I'll turn the conference back to our speakers for any additional or closing remarks.

Operator 2: It appears there are no further questions at this time. I'll turn the conference back to our speakers for any additional or closing remarks.

Operator: It appears there are no further questions at this time. I'll turn the conference back to our speakers for any additional or closing remarks.

Speaker #3: Okay, well, thank you. I just want to say thanks again for joining us this morning. The company had a great second quarter and first half of the year.

Nick Colangelo: Well, thank you. Just want to say thanks again for joining us this morning. Company had a great Q2 and H1 of the year, and we look forward to providing further updates on our performance on our next call. Thanks again, and have a great day.

Speaker #3: And we look forward to providing further updates on our performance on our next call. So thanks again and have a great day.

Operator 2: This concludes today's call. Thank you for your participation. You may now disconnect.

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

Q2 2026 Vericel Corp Earnings Call

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