Vericel Corporation

Ladies and gentlemen, thank you for standing by. Welcome to Verasol's first quarter 2024 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, Verasol's Vice President of Finance and Investor Relations.

Thank you, Operator. And good morning, everyone. Joining me on today's call are Verasol's President and Chief Executive Officer, Nick Colangelo, and our Chief Science Officer, Joe Marra. Before we begin, let me remind you that on today's call, we will be making forward-looking statements covered under the Private Security Litigation Reform Act of 1995. These statements may involve risks and uncertainties that could cause actual results to defer materially from expectations and are described more fully in our findings with the SEC. In addition, all forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Please note that a copy of our first quarter financial results press release and a short presentation with highlights from today's call are available in the investor relations section of our website. I will now turn the call over to Nick.

Thank you, Eric, and good morning, everyone. I'll begin today's call by discussing our financial and business highlights for the first quarter, as well as our expectations for the remainder of the year. Joe will then provide a more detailed review of our first quarter financial results and guidance for 2024 before opening the call to Q&A. We entered the year with a great deal of momentum after an outstanding close in 2023, and that momentum continued through the first quarter as we delivered another quarter of top-tier revenue growth, including record first quarter total revenue and significant growth in profitability. Total revenue for the quarter increased 25% to more than $51 million, which was above the top ends of our guidance range, with record first quarter MESI revenue and more than 60% growth in burn care revenue. This strong top-line growth translated into significant margin generated record first quarter gross margin, which increased more than 400 basis points compared to last year, and adjusted EBITDA growth of more than 300% as the company's profit growth continues to outpace our high revenue growth. Based on the strong start to the year, we're increasing our full-year revenue guidance to $238 to $242 million. Macy had another excellent quarter, with revenue growing 18% to more which was above the top end of our guidance range for the quarter. Macy's first quarter performance was driven by strong underlying business fundamentals as we continue to expand the Macy Surgeon customer base and drive growth in biopsies. While the first quarter typically is the seasonally lowest quarter of the year, we had the second highest number of Macy biopsies and surgeon-taking biopsies in any quarter since launch, behind only the fourth quarter of last year. making the last two quarters the highest quarters ever on both of those metrics, as our sales and marketing teams continue to execute at a very high level in building a strong foundation for continued Macy growth. To that end, surge in interest and engagement with Macy remains high, as the number of peer-to-peer programs and training labs for Macy more than doubled, and overall program attendance more than tripled in the first quarter compared to last year. The high level of surgeon interest is driven by the strength of Macy's long-term clinical outcomes, which were highlighted in a study published in the American Journal of Sports Medicine in the first quarter. This prospective study showed excellent long-term results for Macy patients treated for both patellofemoral defects, where we currently have our highest penetration rates, as well as femoral condyle defects, which is the focus of the Macy Arthro program. Pre-launch commercial activities for Macy Arthro continue to progress in advance of our anticipated launch in the third quarter of this year. In connection with the launch, we're expanding our target surgeon base from 5,000 to 7,000 surgeons to include surgeons that perform high volumes of cartilage repair predominantly through arthroscopic procedures. Based on our experience to date, we'd expect to achieve more than 50% penetration of this larger target surgeon base over time, meaning that surgeon adoption and biopsy growth will continue to be important growth drivers for Macy in the years ahead. In addition, Macy Arthro instruments target smaller cartilage defects that comprise the largest segment of our addressable market, representing approximately 20,000 patients per year, or one third of the $3 billion addressable market for Macy. We believe that Macy Arthro will take a greater share of these procedures provide a significant upside growth opportunity for the company. We also continue to advance the Macy development program to treat cartilage defects in the ankle and remain on track to initiate the Macy ankle clinical study in 2025. Cartilage defects in the ankle represent the second largest market opportunity for Macy. We believe that a potential ankle indication with an estimated $1 billion address in the market could be another significant Turning to our burn care franchise, first quarter revenue increased more than 60% to over $11 million as we delivered another quarter of high revenue growth with total burn care revenue above the high end of our guidance range. FSL revenue grew 56% to over $10.5 million in the first quarter, representing the second highest quarterly revenue ever for FSL. Epsil continues to benefit from our expanded sales force and a higher share of voice in the bird care market, as there was a meaningful contribution to Epsil revenue in the quarter from new or dormant accounts. NexaBridge launch momentum continued during the quarter as we made significant progress with respect to bird-centered key performance indicators and growth in underlying NexaBridge demand metrics. Through the end of the first quarter, more than 60 bird centers In addition, there was a significant increase in the number of patients treated with Nexibrin in the first quarter and significant growth in the number of burn center orders and Nexibrin units ordered by hospitals versus the prior quarter. We remain very pleased with the strong surge in interest in Nexibrin as was demonstrated by the high level of attendance and engagement at Nexibrin events at the recent American Burn Association annual meeting. the progress in onboarding burn centers, the excellent clinical outcomes and positive feedback from surgeons treating patients, and the clear impact that our broader burn care portfolio and expanded sales team is having on epicellar performance. We believe that these factors will enable the company to build a strong foundation for NextAverage in 2024, and that the company is now very well positioned to deliver sustained growth to the second high-growth franchise in place. Overall, the company delivered another strong quarter, and based on the strength of our core portfolio and the expected contributions from our new product launches, we believe the company is very well positioned for continued high revenue and profit growth in 2024 and beyond.