Axogen, Inc.

Good morning, everyone. Joining me on today's call is Michael Dale, Axiogen's President and Chief Executive Officer, Lindsay Hartley, Chief Financial Officer. Michael will discuss first quarter 2026 financial results and corporate highlights. Lindsay will then provide details on financial performance 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. Following the end of the live call, a replay will be available on the investor section of the company's website at www.axogeninc.com. Before we begin, I would like to remind you that during this conference call, management will be making forward-looking statements. Forward-looking statements include statements regarding financial guidance and outlook, clinical development and regulatory efforts, commercial growth initiatives, reimbursement and market access efforts, training and education initiatives, research and development activities, and overall business strategy and 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 the company's filings with the Securities and Exchange Commissions. including the most recent annual report on Form 10-K, subsequent quarterly reports on Form 10-Q, and other filings made with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made, and the company undertakes no obligation to update any forward-looking statements except as required by law. In addition, for a 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 will turn the call over to Michael. Michael, please go ahead.

Thank you, operator, and welcome to everyone joining us this morning. What I would like to do today is walk through our first quarter 2026 performance through the lens of the six priority areas of our strategic plan, sharing with you how we executed against each one of those during the quarter. I will then turn the call over to Lindsay to review the financials, after which we will open the call for your questions. To begin, we are delighted with our first quarter revenue performance and the progress we're making across each of Accigen's strategic plan priorities. As noted in our earnings release, we delivered strong growth across all of our target markets, reinforcing the relevance of our market development strategies and the strength of our commercial executions. We believe we are well positioned to achieve our financial guidance and continue advancing our strategic priority objectives for 2026. Key first quarter results that underpin our confidence in the remainder of 2026 include revenue of $61.5 million, representing over 26% growth year-over-year, double-digit growth across each of our three target markets, continued progress expanding commercial insurance coverage and payment for advance, and the on-schedule expansion of our commercial organization. Combined with our well-capitalized balance sheet, these achievements reinforce our confidence in our plans to make restoration, a peripheral nerve function, and expected standard of care. So, let's review in order the progress during the quarter for each of our six strategic priorities. Starting with our first priority, revenue growth and financial operating leverage, we delivered a strong start to 2026. First quarter revenue was $61.5 million, representing 26.6% growth versus the first quarter of 2025. Growth was broad-based with all three target markets contributing to our year-over-year performance. Adjusted EBITDA was $5.7 million for the quarter, and we ended the period with $103.6 million in cash, cash equivalents, restricted cash, and investments. Performance was driven by strong demand for events and continued adoption of our broader product algorithm across all three target markets. Salesforce productivity was ahead of plan, and our active surgeon count increased meaningfully during the quarter, an indicator we monitor closely because it reflects broader adoption of nerve care within an institution. We are also beginning to see the benefit of the Salesforce additions we made in 2025, as those representatives progress through their ramp and approach full productivity within our target market development model. Overall, these results reflect execution across our full commercial system, account activation, surgeon education, rep productivity, coverage expansion, and patient awareness, and working together in alignment with our strategic plan. Moving on to our second priority, market development across extremities, oral, maxillofacial, and head, neck, and breast. Extremities delivered strong double-digit year-over-year growth in the first quarter, reflecting continued adoption of the actogen nerve repair algorithm across both traumatic and chronic peripheral nerve injury presentations. Momentum in our OMF and head and neck market continued in Q1, delivering strong double-digit year-over-year growth Increased investments in professional education and a stronger focus and presence in head and neck helped drive surgeon activation and algorithm adoption in these procedures. Breast was our fastest growing market in the first quarter, delivering strong double-digit year-over-year growth. We are seeing momentum in resensation adoption overall and implant-based reconstruction volumes specifically. We also believe we are beginning to see the productivity contribution of the sales representatives we added to the breast organization in the summer of 2025, as those reps ramp and become more productive in their accounts. Before I move on, I want to take a moment to revisit how we think about the size and nature of each of these markets, because it is directly relevant to understanding what we are doing and what we believe is possible. When we introduced our total addressable market framework, at the March 2025 Analyst Day. We were deliberate in how we estimated our market opportunities. Our TAM estimates are based on procedure volumes captured from CMS, QDMD, clinical literature, and the ASPS data. For each segment, we apply a discounting algorithm to remove procedures where an oxygen product would not realistically be indicated. We then apply expected algorithm usage based on historical utilization data and apply a procedure, ASP. The resulting TAMs, we believe, are genuinely addressable. In extremities, that is $2.9 billion including traumatic and chronic nerve injuries segmented by gap length across sensory, mixed, motor, and protection applications. In breast, the TAM is segmented by autologous and implant-based reconstruction and represents approximately one-third of the more than 150,000 reconstructive procedures performed annually in the United States. In OMF and head and neck, the TAM includes nerve reconstruction and protection across mandible reconstructions, iatrogenic injuries, neck dissections, peridectomies, and thyroidectomies. Roughly 90% of targeted OMAP head and neck procedures occur in approximately 900 accounts in the United States, most of which already overlap with our high potential account universe. And in prostate, TAM includes approximately 110,000 annual robotic-assisted radical prostatectomy cases with a well-defined, well-documented clinical problem. While we believe the patient numbers reflected in our TAM represent genuinely addressable treatment opportunities, it's important to be clear that these are markets still in development. We are building them in real time, and our strategic plan reflects the work required to establish standards of care, and in doing so, to develop these markets. As we said about a year ago, the question for action is not whether the problems are large and whether our products work. It's what business models are required to connect patients with providers. Each market has a different patient journey, variance in microsurgical knowledge and training, different referral dynamics, and a different reimbursement environment. In extremities, while we've made strong progress developing the market and advancing our standard of care objectives, we remain significantly underpenetrated relative to the size of the opportunity. There's still meaningful work to do to ensure NERF care is reflected in care guidelines across the full range of treatment presentations. In breast, most women are not aware that numbness and loss of sensation can be a consequence of a mastectomy. Even when patients understand this risk, they are often unaware our procedure is an option until after numbness has already occurred. In OMF and head and neck, we're still below 1% penetrated with an account universe that our current sales organization already covers. In prostate, we continue to refine the clinical techniques This work has been underway throughout 2025, and we believe we are making good progress. Across all of these markets, the work is about creating the conditions under which peripheral nerve repair becomes an expected standard of care. While there is still significant work ahead, this development runway is a key reason we believe Axigen has the opportunity to deliver double-digit growth for many years, as the potential to restore health and improve quality of life is enormous. With regards to our third priority, commercial expansion, we ended the first quarter with a total commercial organization of 146 sales representatives across all markets, reflecting continued disciplined expansion in line with our four-year plan. Salesforce productivity was ahead of plan in both our breast and non-breast organizations in the first quarter, which is an encouraging early data point as 2025 hires continue to ramp. Representatives hired in 2025 are progressing toward independence and break even within our six to nine month target window. And we expect them to be increasingly accretive through the remainder of the year. Now, just to give you some context for why this matters in terms of our historical trajectory, Action has not expanded its sales organization for more than three years prior to us beginning this process. So we're just now beginning to see contributions of this build. and we believe it will be a meaningful driver of our growth going forward. The fourth priority is commercial excellence, specific to our emphasis on high-potential accounts, productivity, and education. High-potential accounts continue to be a primary engine of our revenue growth, representing 60% of total revenue for the first quarter. Growth from high-potential accounts represented 48% of total revenue growth in the quarter, below our four-year target of 60%. This difference reflects strong performance in breast accounts, which are not always designated as high potential accounts. We use this as a mixed dynamic rather than a structural concern, and it simply reflects that we are seeing high growth across all accounts and market segments. Our active surgeon count in high potential accounts increased by more than 70 in the quarter, reflecting continued progress in our efforts to make nerve care awareness and skills part of more surgeons' repertoires and their practices. In the first quarter, we conducted four professional education programs, two in breast, one in extremities, and one in OMF and head and neck, consistent with our market development plans. We remain on track toward our four-year targets of 10 extremities programs training 200 surgeons, six oral maxillofacial and head and neck programs training 100 surgeons, and five breast programs training 75 surgeon pairs. As I have often mentioned, education is truly one of AXGEN's core competencies. I have been consistently impressed by what Accutane has built and the trust it has earned within the clinical community. As a reminder, we support the training of the majority of hand fellows in the United States in nerve care and are increasing our investments in fellows training in our other markets as this is key to establishing nerve care as part of their clinical practice in the future. We are regularly sought out to lead and support these educational programs. As awareness of nerve care continues to build, and with more than 70% of the clinical literature on the subject published in just the last five years, we expect demand for education and for training associated with our algorithm to continue to grow. Our fifth priority relates to our standard care objectives specific to evidence, coverage, and the FDA biologic license approval of advance. We continue to make progress expanding commercial coverage. Since receiving biologics license approval for AVANCE in December of 2025, we have been actively reengaging payers where prior objections to coverage and payments were centered on the perception that AVANCE was experimental. I'll share two recent updates. First, Cigna. In mid-April, Cigna extended explicit broad coverage to AVANCE nerve graft for peripheral nerve repair in extremities and post-mastectomy breast reconstruction for its approximately 16 million members. Cigna's breast-related coverage criteria states, quote, advanced nerve graft is considered medically necessary when used in association with mastectomy or breast reconstruction procedures when nerves cannot be preserved. We believe this medical policy update means surgeons and patients will no longer face denials for extremity, breast, and head and neck NOMAP procedures. Second, Elements, also known as Anthem. In early April, LVANCE removed ANTS from its experimental investigational list, which is an important first step. However, LVANCE also implemented utilization management criteria limiting the ANTS usage to 5 to 25 nanometer nerve gaps, consistent with what we studied in the RECON pivotal trial. It is common for medical policy teams to initially adopt the inclusion and exclusion criteria from the pivotal trial for a newly approved drug or biologic. And we believe that is what drove Elevance's decision. As we have said before, Advance is unique. While the BLA approval makes Advance still quote-unquote new to payers, the product has 17 years of clinical experience and well over 100 peer-reviewed publications. Our health, economics, and university team is currently partnered with more than 15 surgeons to educate Elevance and resolve this gap-linked criterion collaboratively. As we communicated at ERAD, advanced biologic product will begin entering commercial channels in the second quarter of 2026. From a customer and physician standpoint, this transition will be largely invisible. Surgeons order advance for its clinical profile, not its regulatory designation, and the product going into their hands performs the same function. There is no inventory obsolescence risk, and we have managed the logistics carefully to support a smooth transition. The primary effect of the biologic launch on our financials will be at the gross margin line, where we have guided to a 74% to 76% full-year range that anticipates the incremental product cost that comes with manufacturing under a biologic quality system. On the clinical study front, we have programs in active development in breast and in mixed and motor nerve educations with initiations expected this year. we will provide more detail on individual programs in the second half of the year, consistent with our prior guidance. In prostate, we remain focused on gathering clinical signals from the procedures completed at our 10 clinical sites in 2025, before making any decisions about commercial or clinical study expansion. That data is expected to mature in the second half of the year, and we will update investors accordingly when we have something meaningful to share. And finally, our sixth priority, which is about innovation, research and development, therapeutic reconstruction. As a reminder, our R&D work has three primary focus areas. First, making nerve coaptation faster, easier, and more consistent. Second, advancing solutions for non-transsected and chronic nerve injuries to better protection. And third, developing therapeutic reconstruction technologies to improve the fundamental biology of nerve regeneration. These are not abstract objectives. They are line of sight improvements to advance and to our broader algorithm that we believe will further extend our clinical and competitive position. In closing, the first quarter of 2026 was a strong start, reflecting disciplined execution of our strategic plan and total commitment to our business purpose of restoring health and improving quality of life by making restoration of peripheral nerve function an expected standard of care. Like Wadi Piper's story about the little engine that could, We think we can fulfill our mission and purpose and look forward to reporting continued progress across the priorities outlined in our strategic plan. We are raising our four-year guidance accordingly. I will now turn the call over to Lindsay to review the quarter's financials and our updated outlook for 2026. Thanks, Mike.

I am pleased to report our first quarter 2026 financial results. For the first quarter, we reported revenue of $61.5 million, reflecting growth of 26.6% compared to the first quarter of 2025. Revenue growth continues to be fueled by strong demand for advance and adoption of our product algorithm across target markets, with unit volume serving as the primary driver. Our gross profit for the quarter came in at $46.2 million, This represents a gross margin of 75.2%. Gross margin in the first quarter reflects our pre-biologic launch cost structure, as advanced biologic product has not yet entered commercial channels. Beginning in the second quarter, as biologic advance enters the channel, we expect to see incremental product cost pressure. Our full year gross margin guidance of 74% to 76% accounts for this transition, and we continue to target improvement in 2027 as we implement continuous improvement programs and benefit from increasing economies of scale. Operating expenses increased to 49 million in the quarter, up from 36.6 million in the first quarter of 2025. and increased 4.5% as a percentage of revenue. The increase as a percentage of revenue was driven primarily by an increase of compensation costs, including stock-based compensation, expense tied to certain PFUs anticipated to achieve above target on revenue growth components. Sales and marketing expenses as a percentage of total revenue increased 3.3 percentage points to 46.6% in the first quarter, compared to 43.3% in the first quarter of 2025. This increase reflects investments in our commercial strategy to support our market development initiatives and long-term growth plan. Research and development expenses increased 23.4% to 7.5 million in the first quarter. compared to 6.1 million in the first quarter of 2025. And as a percentage of total revenue decreased slightly to 12.2% from 12.5%. Our continued investment in research and development is essential to our mission of making peripheral nerve repair a standard of care through the development of clinical evidence and innovation. General and administrative expenses increased 36.1% to 12.9 million in the first quarter, compared to 9.5 million in the first quarter of 2025, and as a percentage of total revenue, increased 1.5 percentage points to 21% from 19.5%. Net loss for the first quarter was 19.6 million or $0.38 per share compared to net loss of $3.8 million, or $0.08 per share in the first quarter of 2025. Included in net income is one-time loss of $16.8 million, which was incurred upon the extinguishment of our debt facility in January. Adjusted net income was $4.1 million, or $0.07 per share for the first quarter compared to an adjusted net loss of 900,000 or two cents per share for the first quarter of 2025. Adjusted EBITDA for the first quarter was 5.7 million compared to an adjusted EBITDA of 2.9 million in the same period last year. And as a percentage of revenue increased 3.4 percentage points to 9.3% from 5.9%. demonstrating our ability to improve our financial performance. Adjusted net income and adjusted EBITDA are calculated as net income or EBITDA adjusted for stock-based compensation and the loss on the extinguishment of the debt. As of March 31, 2026, cash equivalents, restricted cash, and investments totaled $103.6 million. As expected, we experienced higher cash burn in the first quarter, consistent with prior year seasonal patterns, and we remain on track to be free cash flow positive for the full year. As a reminder, in January we completed an upsized public offering, raising $133.3 million in net proceeds, and used $69.7 million to fully retire our term loan. We continue to operate with a clean capital structure and no debt obligation. Based on our first quarter performance and visibility into the remainder of the year, we are raising our full year 2026 financial guidance. We now expect full year 2026 revenue growth of at least 20% or total revenue of at least $270 million. full-year 2026 gross margin is expected to remain in the range of 74% to 76%, and we continue to expect to be free cash flow positive for the full year 2026. This guidance reflects continued confidence in commercial execution across all three core markets and the ongoing Salesforce productivity improvements. It does not include material benefit from payer coverage decisions beyond what is already known. With that, we will now open the line for questions. Operator?