Vericel Corporation

Please stand by, we're about to begin. Good day and welcome to the VeriCell Corporation fourth quarter 2025 earnings call. Today's call is being recorded. At this time, I'd like to turn the call over to Eric Burns, VeriCell's vice president of finance and investor relations. Please go ahead, sir.

Thank you, operator, and good morning, everyone. Joining me on today's call are VeriCell's president and chief executive officer, Nick Colangelo, and our Chief Finance Officer, Joe Morrow. 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 differ materially from expectations and are described more fully in our filings of 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 fourth 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. As highlighted in our preliminary financial results release last month, The company had a strong close to the year and delivered outstanding financial and business results in the fourth quarter, with significant revenue and profit growth and continued progress across a number of key business initiatives. From a financial perspective, the company generated record fourth quarter total revenue, which increased 23% over last year and exceeded our guidance for the quarter. This strong revenue performance drove significant margin expansion and profit growth as the company delivered record net income, gross margin of nearly 80%, and adjusted EBITDA margin of 40% for the quarter. We also ended the year with approximately $200 million in cash and investments and no debt as we continue to elevate the company's top tier financial profile. We also achieved several key business objectives in the quarter, including the successful completion of the Macy Salesforce expansion, and the initiation of the Macy Ankle Clinical Study, and made substantial progress on other long-term growth initiatives as we remain on track to begin commercial manufacturing of Macy in our new facility this year, and to potentially launch Macy outside the United States in 2027. Macy's second half momentum continued in the fourth quarter with record revenue of more than $84 million, representing 23% growth versus the prior year. This performance was driven by strong underlying fundamentals as we had the highest number of Macy implants, implanting surgeons, surgeons taking biopsies and biopsies in any quarter since launch. Macy's performance was particularly strong in December across all key performance metrics, including biopsy and implant procedures, as our commercial and operations team executed exceptionally well to close the year. Macy's leadership position in the cartilage repair market has continued to strengthen since we launched the product in the U.S. in 2017. Over the past nine years, Macy's generated compound annual revenue growth of 24% and has delivered revenue growth of 20% or more in each of the last three years. Notably, as of the end of 2025, more than 20,000 patients have now been treated with Macy. We believe that Macy's strong clinical profile together with the surgeon and patient benefits of a simpler, less invasive surgery have driven Macy's strong growth and will continue to do so moving forward. In addition, Macy's best-in-class pricing and reimbursement profile with prior authorization approval rates remaining over 95% for commercial patients in 2025 demonstrates the significant clinical value Macy represents to payers, hospitals, surgeons, and patients. With the strong Macy Foundation in place as we move into the new year, we're focused on executing on three strategic imperatives that we believe will position the company for sustained strong revenue and profit growth in 2026 and the years ahead. First, we're focused on capitalizing on our larger Macy sales force, which will meaningfully increase our reach across the entire Macy customer base. Starting the year with a significantly larger footprint provides an opportunity to not only continue to drive the expansion of new Macy surgeons, but also to drive deeper penetration and increase utilization within our current Macy surgeon base. We're also implementing a number of important commercial excellence initiatives across the organization. We've made significant investments in new tools and additional resources to enhance our commercial analytics and standardized best practices across our larger sales team, which we believe will elevate execution across our commercial organization and drive deeper penetration within our surge in user base, unlocking another key growth driver for Macy. Based on these initiatives and the quality of our entire expanded sales force, We expect that Macy's sales rep productivity will return to 2025 levels as early as next year. Our second strategic priority is to leverage Macy's arthro to drive continued strong growth in smaller cartilage defects, principally on the femoral condyles, which represents the largest segment of Macy's addressable market. As we discussed throughout 2025, we've been very successful in training physicians on the Macy-Arthro technique, with approximately 1,000 surgeons trained to date. Importantly, Macy-Arthro trained surgeons have continued to demonstrate a significant increase in biopsy and implant growth following training, and for those surgeons that have completed a Macy-Arthro case, even higher biopsy and implant growth and higher conversion rates. With this foundation in place, our objective is to leverage Macy-Arthro to drive significant growth in the treatment of small condyle defects, which historically have represented a smaller percentage of our overall patient volume and a lower growth segment for Macy. Notably, growth in the small condyle defect segment accelerated in Macy-Arthro's first full year on the market in 2025, as this segment became one of the highest Macy implant growth segments along with the patella segment, which consistently has been our highest volume and fastest-growing segment. We believe that the positive trends are driven by the fact that macearthro is a less invasive procedure with the potential for improved patient outcomes. Early data from ongoing investigative case series suggest a significant reduction in post-surgical pain, improved range of motion, and a meaningful acceleration in the timeline to achieving full weight-bearing following macearthro treatment. These initial results suggest very positive patient outcomes that could also lead to shorter overall rehab and recovery timelines. We expect these case series to be presented at upcoming industry meetings and in publications, and we continue to work with additional surgeons as they complete Macy-Arthur cases to collect prospective outcomes data in our Macy clinical registry. Our third strategic imperative is to leverage our lifecycle management initiatives to position the company for sustained longer-term growth. To that end, we initiated the Phase III Macy ankle mascot clinical study in the fourth quarter. A potential Macy ankle indication represents a substantial growth opportunity with an estimated addressable market of more than $1 billion. It would also enable the company to expand into other areas of the orthopedics market. We also remain on track to initiate commercial manufacturing for Macy in our new facility this year, which will allow the company to potentially commercialize Macy outside the United States. We're taking a staged approach to Macy OUS expansion with the first phase targeting a planned launch in the UK. The UK represents an ideal first step for Macy OUS expansion as there's clearly defined expedited approval and reimbursement pathways a high level of awareness and surgeon advocacy, given that Macy was previously on the market in the UK, and concentrated points of care with a dozen or so centers of excellence for the treatment of cartilage injuries. We expect to submit a marketing authorization application to the UK MHRA in the middle of this year and potentially launch Macy in the UK in 2027 as we seek to expand the long-term growth and value creation opportunities for the company. In summary, the company executed extremely well in the fourth quarter, generating record revenue and financial results while achieving a number of key objectives that helped position the company for continued growth in 2026 and beyond. I'll now turn the call over to Joe to discuss our financial results in 2026 guidance in more detail.