Vericel Corporation

Good day and welcome to the VeriCell Corporation Third Quarter 2025 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Eric Burns, VeriCell's Vice President of Finance and Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Joining me on today's call are VeriCell's President and Chief Executive Officer, Dick Colangelo, and our Chief Finance 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 Securities Litigation Reform Act of 1995. These statements may involve risks and uncertainties that could cause actual results to differ materially from expectations and are described 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 third quarter financial results press release and 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. The company delivered outstanding financial and business results in the third quarter, with strong top line revenue growth and even higher profit growth, a significant inflection in operating cash flow, and continued progress across a number of key business initiatives. The company generated record third quarter total revenue, which exceeded our guidance for the quarter, record third quarter MESI revenue, which increased 25% over last year, and the highest quarterly burn care revenue of the year, as Epizel had one of its highest revenue quarters to date and Nexabert had its highest quarterly revenue since launch. The strong revenue performance translated into significant profit growth and cash generation as the company delivered gap net income of more than $5 million and adjusted EBITDA margin of 25% for the quarter, as well as record third quarter operating cash flow of more than $22 million. Macy's third quarter performance was driven by strong underlying business fundamentals as we continue to expand the Macy surgeon base and drive growth in biopsies with the launch of Macy Arthro. As anticipated, the strong Macy biopsy growth in the first half of the year, which outpaced implant growth to that point, drove an acceleration of implant and revenue growth in the third quarter. Macy also had another quarter of double-digit biopsy growth, with record third quarter highs in both Macy biopsies and the number of surgeons taking biopsies. This momentum continued into the fourth quarter as we had the highest number of Macy biopsies and surgeons taking biopsies in any month since launch in October. In addition to the strength of the core Macy fundamentals, the early launch indicators remain very strong for Macy arthro, which clearly is contributing to Macy's overall biopsy and implant growth. We now have more than 800 Macy Arthro trained surgeons through the end of October, and the biopsy and implant growth rates continue to increase substantially for trained surgeons and remain significantly higher than the growth rates for surgeons that have not yet been trained. In addition, early data indicates that the cohort of surgeons that have completed a Macy Arthro case to date have a markedly higher implant growth rate than biopsy growth rate, suggesting a higher overall conversion rate for Macy-Arthro implanting surgeons. We believe that this dynamic may be driven by the fact that Macy-Arthro is a less invasive procedure with the potential for improved patient outcomes. To that end, we remain focused on generating clinical data to demonstrate these potential patient benefits, including a shorter rehab period with Macy-Arthro administration. Early data from ongoing investigator case series suggests a significant reduction in post-surgical pain, improved range of motion, and a meaningful acceleration in the timeline to achieving full weight-bearing following Macy-Arthur treatment. These initial results suggest very positive outcomes, which could also lead to a shorter overall recovery timeline for patients. We expect to see these cases presented at industry meetings in early 2026, as well as in future publications, and we continue to work with additional surgeons as they complete Macy-Arthro cases to collect prospective outcomes data in our Macy Clinical Registry. Finally, the Macy Salesforce expansion is on track to be completed in the fourth quarter, with the new reps supporting current territories this year and moving into their new territories at the start of next year, which will support our significant fourth quarter volume growth and position Macy for a continued strong performance for the full year in 2026. In terms of our longer term Macy growth initiatives, we remain on track to initiate the phase three Macy ankle clinical study this quarter, which represents a substantial growth opportunity for Macy and would enable the company to expand into other orthopedic markets. We also remain on track to initiate commercial manufacturing for Macy in our new facility next year, which is designed to meet both US and global manufacturing requirements and will allow the company to potentially commercialize Macy outside the United States. To that end, we're initiating a stage approach to our Macy OUS expansion with the first phase targeting a planned Macy launch in the UK. This is an ideal first step for OUS expansion in that the UK has an international mutual recognition procedure that allows for accelerated approval and market access. There's a high level of awareness and surgeon advocacy for Macy given that the product was previously marketed in the UK. There's an established reimbursement pathway for this technology given a prior positive NICE opinion for Macy. And there are concentrated points of care with a dozen or so centers of excellence for the treatment of cartilage injuries in the UK. We'd expect to submit a marketing application in the middle of next year and potentially launch Macy in the UK in the first half of 2027 as we seek to expand the long-term growth and value creation opportunities for the company. In summary, Macy remains the clear market leader for knee cartilage repair with a significant competitive moat. Based on the strength of its underlying business fundamentals, we believe that Macy is very well positioned for a strong close to 2025 and continued strong growth in 2026 and beyond. The early launch indicators for Macy-Arthur remain very strong and clearly are contributing to the overall biopsy and implant growth for Macy. As we move into 2026, We expect to capitalize on having a full year to engage with the current Macy Arthro trained surgeons and to continue to meaningfully expand the number of trained surgeons next year. In addition to increasing the Macy sales force to drive further growth, we're also supporting the expanded Macy sales team with additional investments across our sales operations, marketing, and medical functions to enhance our operational excellence and commercial execution and create additional opportunities for surgeons to engage with Varicell. We believe that all of these initiatives will reinforce Macy's leadership position and drive continued strong revenue and profit growth in 2026 and the years ahead. I'll now turn the call over to Joe.