Axogen, Inc.

Good morning, everyone. Joining me on today's call is Michael Dale, Axel Jens, Chief Executive Officer and Director, and Lindsay Hartley, Chief Financial Officer. Michael will discuss fourth quarter and full year 2025 financial results and corporate highlights. Lindsay will then provide details on financial performance guidance and overall outlook for the year. This will be followed by a question and answer session. Today's call and presentation is being broadcast live via webcast, which is available on the investor section of Axogen's website. Follow me into the live call. A replay will be available in the investor section of the company's website at www.axogeninc.com. Before we begin, I'd like to remind you that during this conference call, management will be making forward-looking statements, which are statements that are not historical facts and are based on current expectations and assumptions regarding future conditions, events, and results. Forward-looking statements include, among other things, statements regarding our financial guidance and outlook, clinical development activities and regulatory efforts, commercial growth initiatives, reimbursement and market access efforts, training and education initiatives, research and development activities, and our overall business strategy and operating performance. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially including without limitation the risks and uncertainties reflected in our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K, subsequent quarterly reports on Form 10-Q, and other filings we make with the Securities and Exchange Commission. Forward-looking statements speak only as of the date made, and we undertake no obligation to update any forward-looking statements except as required by law. In addition, for reconciliation of non-GAAP measures, please refer to today's press release, presentation with highlights from today's call and the corporate presentation on the investor section of the company's website. Now, I'll turn the call over to Michael. Michael, please go ahead.

Thank you, Operator, and welcome to everyone joining us this morning. Today, I'll walk through our fourth quarter and full year 2025 performance through the lens of the six priority areas of our strategic plan, highlighting how we executed against each in 2025 and and how they frame our objectives for 2026. I'll then turn the call over to Lindsay to review the financials and outlook, after which we'll open the call for questions. 2025 was a year of significant achievement for Oxygen, both financially and strategically, and one that positioned us well for durable growth in the years ahead. The first strategic plan priority I will speak about is our growth target of 15 to 20%, and the related financial operating leverage we expected for the business. We delivered strong top and bottom line performance in 2025, consistent with the upper end of the growth trajectory outlined in our strategic plan. Our Q4 revenue was $59.9 million, up 21.3% year over year, with double digit growth across all three target markets. Our full year revenue increased 20.2% to $225.2 million. Our adjusted EBITDA grew 41% to $27.9 million. And we increased our cash position by $6 million while fully funding our strategic initiatives. This performance reflects expanding adoption of Accigen's nerve repair algorithm across traumatic, iatrogenic, and chronic peripheral nerve injuries, with advanced nerve graft remaining our primary growth driver, often complemented by our broader portfolio of repair, protection, connection, and termination solutions. Importantly, we have now reached a financial inflection point, enabling greater concentration of our market development efforts while generating positive cash flow and improving profitability. Regarding capital structure and balance sheet strength, In January, we completed an upsized public offering, raising $133.3 million in net proceeds. We used $69.7 million to fully retire our term loan facility, leaving us with a clean capital structure and significantly enhanced financial flexibility. Eliminating the interest and revenue participation obligations improves our earnings quality over time, while the remaining proceeds provide capacity to fund continued execution of our strategic plan. As a result, we enter 2026 well capitalized and positioned to deliver discipline, profitable growth. The second strategic plan priority I will speak about is our market development progress for elective and plan procedures in extremities, oral, maxillofacial, and head and neck, breast, and our prostate market development plans. Across our three core markets, momentum remains strong, as represented by continued double-digit growth in each market. In extremities, which continues to be our most mature market and where we are furthest along in achieving standard of care status, supported by solid growth in both traumatic and chronic procedures. For oral, maxillofacial, and head and neck, we delivered high double-digit growth, driven by a surge in adoption of the oxygen algorithm and increasing recognition of nerve repair's impact on quality of life. Breast remains one of our fastest growing opportunities with accelerated adoption of resensation techniques and increased implant-based reconstruction volumes. In prostate, we made important foundational progress in 2025. More than 100 procedures were completed across 10 clinical sites and in collaboration with our surgeon partners, we established a standardized surgical technique. As we enter the second half of 2026, we expect to begin seeing meaningful clinical signals as nerve recovery data matures, an important step in what we believe is a highly underdeveloped and compelling market opportunity. The third strategic plan priority I will speak about is our commercial expansion progress in regards to infrastructure and Salesforce growth. In 2025, we significantly expanded our commercial organization across all markets. In Brest, we added 10 sales representatives and two regional directors, ending the year with 21 sales representatives and two regional directors. In extremities, we added 12 sales representatives in high potential geographies, ending with 117 reps and 15 regional directors. In oral, maxillofacial, and head and neck, we ended the year with three field-based market development managers. And in prostate development, we added three clinical development managers and one director. Early productivity trends are tracking well with our assumptions, Across markets, new hires typically reach independence and break even within six to nine months, after which they become accretive. In 2026, we plan to continue this expansion. We will grow the breast team to approximately 30 sales representatives. We will grow extremities to approximately 130 representatives, and we will continue to evaluate further commercial investment to support prostate market development in the second half of the year. The fourth strategic plan priority I will speak about is our commercial excellence performance specific to our high potential accounts, productivity in general, and education. Our high potential account strategy remains a cornerstone of our commercial model. In 2025, 61% of total revenue growth came from high potential accounts. Average high potential account productivity increased 21%. and active surges in high-potential accounts increased by 131. We ended the year with 679 active high-potential accounts out of an approximately 780 universe. While slightly below certain internal targets, fundamentals across both high-potential and non-high-potential accounts remained strong, with double-digit growth and improving productivity across the broader base. For 2026, our high potential objectives include 60% of revenue growth from high potential accounts and 18% productivity growth in these accounts and activation of at least 100 surgeons. Surgeon education continues to be one of Accigen's core competencies and a critical driver of algorithm adoption. In 2025, we exceeded training targets across all markets And in 2026, we plan to further expand education programs across breast extremities and oral maxillofacial head and neck. In 2025, extremities held nine professional education programs and trained 170 surgeons. In oral maxillofacial and head and neck, we held three programs and trained 59 surgeons. In breast, we held five professional education programs and trained 79 surgeon pairs. For 2026, our training objectives include holding and conducting 10 extremities professional education programs and training 200 surgeons. In oral, maxillofacial, and head and neck, we will conduct six professional education programs and train 100 surgeons. And in breast, we will conduct five professional education programs and trained 75 surgeon pairs. The fifth strategic plan priority I will speak about is progress related to our standard of care objectives as related to evidence coverage and the FDA biological license approval of Avance. In December, we achieved the most significant milestone in oxygen's history, which was the FDA approval of the biologics license application for Avance. Vance is now the first and only FDA-approved biologic therapeutic for treating peripheral nerve discontinuities with 12 years of market exclusivity. This establishes Vance as the standard of reference in nerve repair. We are acting on this milestone across four fronts. Customer engagement to reinforce confidence in Vance's safety, efficacy, and regulatory status. Payer engagement to drive near universal U.S. coverage. clinical advancement by enabling prioritized studies under an approved regulatory framework, and lastly, manufacturing investments to support scalability and margin expansion by our ability now to manage our manufacturing operations under one quality system. In 2025, we also received strong validation of events from leading medical societies, the American Association of Hand Surgery, and the American Society for Reconstructive Microsurgery issued position statements recognizing nerve allograft as a non-experimental, medically necessary standard of care for peripheral nerve defects. Building on prior guidelines from the American Association of Oral, Maxillofacial Surgeons, together, these endorsements represent an important step toward broader recognition of allograft nerve repair as a standard of care and support our efforts to expand coverage and payment in the future. On reimbursement, approximately 19.8 million additional lives gained coverage in 2025, bringing commercial coverage above 65%. With biologic license approval, we believe we are well positioned to address the remaining payer objections. Additionally, CMS implemented a new outpatient payment classification for nerve procedures in January, improving the economic profile for outpatient settings and potentially expanding site of care flexibility over time. The sixth and last strategic plan priority I will speak about is our innovation progress. Our R&D investments, which are focused on improving benefit versus risk profiles, for the treatment of nerve care are focused on three strategic priorities. Firstly, making nerve coaptation faster and easier and more consistent. Second, the advancing solutions for non-transsected and chronic nerve injuries through better protection. And thirdly, developing therapeutic reconstruction technologies to improve the fundamental ability for nerve regeneration. With the biologic license approval in place, We are moving forward also with prioritized clinical studies, including in breast, mixed, and motor nerve indications. We expect to provide more detailed updates on individual programs later this year. In each instance, these programs are progressing well, and we plan to provide more detail on each of these programs in the second half of the year. In summary, 2025 was a year of execution and validation for oxygen. We delivered strong financial results, achieved a historic regulatory milestone, and continued building momentum across our markets, all while executing against the six priorities of our strategic plan. I am proud of the Axton team and confident in our ability to deliver disciplined growth consistent with our guidance and long-term strategy. I'll now turn the call over to Lindsay to review the quarter's financials and our outlook for 2026.

Thanks, Mike. I'm pleased to report our 2025 financial results and provide 2026 guidance. We are excited about our results for the fourth quarter and the full year. Our focus on commercial execution and resource allocation have yielded top line growth and positive cash flows. For the fourth quarter, we reported strong growth with revenue of 59.9 million reflecting 21.3% growth compared to the fourth quarter of 2024. For the full year, we reported revenue of $225.2 million, reflecting growth of 20.2% compared to 2024. As mentioned during our last earnings call, we estimated that our revenue was positively impacted by the discontinuation of the case stock sales program for advance. We believe the pull forward impact on our full year results to be minimal. Revenue growth continues to be fueled by strong sales of advance and adoption of our comprehensive product algorithm across our target market. With unit volume and mix serving as the primary driver of our revenue performance in addition to price. Our gross profit for the fourth quarter came in at 44.4 million. up from 37.6 million in the fourth quarter of 2024. This represents a gross margin of 74.1%, down from 76.1% in the same period last year. Gross profit for the full year came in at 167.4 million, up from 142 million in 2024. This represents a gross margin of 74.3%, 1.5 percentage points less than 75.8% in 2024. Gross profit was negatively impacted by 1.9 million or 3.3% for the fourth quarter and 0.9% for the full year from one-time cost related to the FDA BLA approval of a van. Two-thirds of these costs, or $1.3 million, were non-cash and related to the vesting of certain stock-based compensation awards containing milestones tied to this event. Excluding these one-time costs, the year-over-year decreases of gross margin were primarily driven by approximately 2% higher product cost, offset by a reduction of inventory write-offs and reduced shipping costs on products sold. Product cost increased as a result of costs related to additional steps and tests required as we transitioned to and began processing advance as a biologic. The reduction in inventory write-offs and shipping costs resulted from the discontinuation of the case stock sales program for advance and process improvements implemented throughout the year. Operating expenses increased to $54.2 million in the fourth quarter, up from $35.6 million in the fourth quarter of 2024, and increased 18.3% as a percentage of revenue. Full-year operating expenses increased $175.2 million from $145.3 million in 2024 and increased 0.3% as a percentage of revenue. Included in operating expenses for the fourth quarter and full year was 7.2 million of non-cash one-time stock-based compensation expense related to the vesting of equity awards tied to the FDA BLA approval of advance. This expense is reflected across operating expense categories including $700,000 in sales and marketing, $4.6 million in research and development, and $1.9 million in general and administrative expenses. As a result, operating margin was negatively impacted by approximately 12.1% in the fourth quarter and 3.2% for the full year. Excluding this one-time cost, operating leverage improved by 3% as a result of top line growth and financial discipline year over year. Sales and marketing expenses as a percentage of total revenue increased nearly five percentage points to 45.4% in the fourth quarter compared to 40.6% in the fourth quarter of 2024. For the full year, sales and marketing expenses as a percentage of total revenue increased 1.5 percentage points to 43.4% from 41.9% in 2024. Research and development expenses increased 83.9% to 12.4 million in the fourth quarter, compared to 6.7 million in the fourth quarter of 2024. and as a percentage of total revenue increased by approximately seven percentage points to 20.7% from 13.6%. Full year research and development expenses increased 18.4% to 32.9 million from 27.8 million in 2024 and was flat at approximately 15% as a percentage of revenue. General and administrative expenses increased 64.6% to $14.6 million in the fourth quarter, compared to $8.9 million in the fourth quarter of 2024. And as a percentage of total revenue, increased 6.5 percentage points to 24.4% from 17.9%. Full-year general and administrative expenses increased 14.2% to $44.6 million from $39 million in 2024, and as a percentage of revenue decreased one percentage point. Net loss for the fourth quarter was $13.2 million, or $0.28 per share, compared to net income of 500,000 or one cents per share in the fourth quarter of 2024. Full year net loss was 15.7 million or 34 cents per share compared to 10 million or 23 cents per share in 2024. Adjusted net income was 3.5 million or seven cents per share for the fourth quarter of 2025 and 2024. Full year adjusted net income was $14.4 million or $0.29 per share compared to the $5.9 million or $0.13 per share in 2024. Adjusted EBITDA for the fourth quarter was $6.5 million compared to an adjusted EBITDA of $6.7 million in the same period last year. Fourth quarter adjusted EBITDA margin decreased 270 basis points to 10.9% from 13.6% in the same period last year. Full year adjusted EBITDA was $27.9 million compared to an adjusted EBITDA of $19.8 million in 2024. Full year adjusted EBITDA margin improved 180 basis points to 12.4% from 10.6% in 2024, driven by revenue growth and increased operating leverage excluding stock-based compensation expense. I am pleased to report for the full year our balance of cash, cash equivalents, restricted cash and investments increased $6 million to $45.5 million from $39.5 million as of December 31, 2024, demonstrating our ability to be cash flow positive for the year. Now turning to our full-year financial guidance for 2026. We expect full-year 2026 revenue growth to be at least 18% or total revenue of at least $265.7 million. We anticipate full-year 2026 gross margin to be in the range of 74% to 76%. This range is consistent with 2025 and considers anticipated product cost pressure as we begin selling advanced biologic product in the second quarter of 2026. In 2027, we expect to begin seeing improvement to gross margin as a result of implementing continuous improvement programs this year and increasing economies of scale. We expect to be free cash flow positive for the full year 2026. Similar to prior years, we anticipate higher cash burn in the first quarter. In summary, we are pleased with our fourth quarter and full year performance and entered 2026 with strong momentum. Looking ahead, we will continue to prioritize initiatives that strengthen our financial foundation, including targeted investments in innovation and commercial infrastructure. By maintaining a disciplined approach to expense management In leveraging economies of scale, we are confident in our ability to further enhance operating margins and deliver consistent profitability. With that, I will now open the line for questions. Operator?