Vericel Corporation

Please stand by. Good day and welcome to the Veracell Corporation first quarter 2026 earnings call. If you would like to ask a question, please press star one. Today's conference is being recorded. At this time, I would like to turn the conference over to Eric Burns, investor relations. Please go ahead.

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 Financial Officer, Joe Marra. Before we begin, I would like to remind you that the discussions during this conference call will include forward-looking statements. Factors that could cause actual results to defer materially from expectations are discussed more fully in the company's most recent filings with the SEC. The discussions today will include certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release that is an exhibit to Verasol's current report on Form 8-K filed today with the SEC. A short presentation with highlights from today's call is also 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 had a great first quarter as we delivered outstanding financial and commercial results across the business and achieved a number of key business objectives that positioned the company to continue to generate strong revenue, profit, and cash flow growth in 2026. The company generated record first quarter total revenue of more than $68 million and which increased 30% over last year and significantly exceeded our guidance for the quarter, driven by substantial growth for both Macy and the Burn Care business. This strong revenue performance drove significant margin expansion and profit growth as gross margin increased over 300 basis points, adjusted EBITDA margin increased nearly 800 basis points, and adjusted EBITDA tripled to nearly $10 million. We also generated more than $15 million of free cash flow, ending the first quarter with over $210 million in cash and investments as we continue to strengthen the company's top-tier financial profile. Based on our first quarter outperformance, the significant momentum across the business that has continued with a strong start to the second quarter, and the next barter procurement revenue expected in the second half of the year, we're raising our total revenue guidance range by $10 million for the full year. Macy had another great quarter as double-digit volume growth drove record first quarter revenue of more than $56 million, representing 22% growth versus the prior year. Notably, Macy's trailing four-quarter revenue growth rate increased to 23% compared to 19% in the prior four quarters, as we continue to execute on our strategic initiatives to deliver sustained high revenue growth for Macy. To that end, we're capitalizing on our larger Macy sales force, which meaningfully increases overall reach across our Macy target surgeons and provides an opportunity to continue to drive growth in new Macy surgeons, as well as deeper penetration within our current Macy surgeon practices. This was the first quarter with the expanded Macy Salesforce in their new territories, and they're off to a great start as we generated record first quarter biopsies, implants, and biopsy and implanting surgeons, as well as the second highest number of biopsies and biopsy surgeons in any quarter since launch. Importantly, as the quarter progressed, implant growth accelerated for both new and legacy territories, driving strong double-digit implant growth in the quarter. Growth in biopsies per surgeon also accelerated in the quarter, demonstrating deeper penetration within Macy's surgeon practices and driving another quarter of double-digit biopsy growth, which was particularly strong in our new territories. Finally, with more concentrated call points in the smaller territories, biopsy pull through to implants increased during the quarter, demonstrating the potential for the larger sales force to increase the biopsy conversion rate over time. Overall, we're very pleased with the progress to date of the expanded MESI sales force, as well as the impact of our commercial excellence initiatives, which have enhanced our commercial analytics and standardized best practices across the larger sales team. We believe that these initiatives will continue to elevate execution across the MESI commercial organization and drive deeper penetration within our surgeon user base. We're also focused on leveraging MACEI-arthro to drive continued growth in the treatment of smaller cartilage defects and to expand overall MACEI utilization. Leading indicators remained strong in the small condyle segment, with higher first quarter and trailing biopsy growth rates than the overall biopsy growth rate. and higher biopsy conversion rates to date for surgeons that have completed a mesiarthro case. We're also making significant progress in our efforts to generate new clinical data demonstrating the potential for improved patient outcomes with the less invasive mesiarthro procedure. 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-Arthro treatment. These initial data results, which were recently accepted for publication, suggest positive patient outcomes that could also lead to shorter overall rehab and recovery timelines. We're also continuing to work with additional surgeons as they complete Macy-Arthro cases to collect prospective outcomes data in our Macy Clinical Outcomes Registry. Finally, we achieved an important milestone for the company with the FDA approval for Macy commercial manufacturing at our new facility, which began in the second quarter. This important achievement not only increases our manufacturing capacity to support the long-term growth of Macy in the US, but also enables the potential commercialization of Macy outside the United States. To that end, we remain on track to submit a Macy marketing application in the UK later this year, and if approved, to potentially launch Macy in the UK in 2027, as we seek to expand the long-term growth and value creation opportunities for the company. Burn care first quarter revenue increased over 90% to $12 million, which was above our guidance range for the quarter and represented one of the highest burn care revenue quarters to date. We also announced a BARDA award valued at up to $197 million for the procurement and advanced development of Nexibrid. The base period contract of $35 million includes approximately $10 million over the next 12 months for the initial procurement of Nexibrid, funding for vendor-managed inventory-related services, and initial development activities for a potential indication for the treatment of blast trauma injuries. The contract also includes optional awards for additional procurement and advanced development of Nexabrid over the 10-year period. We're very pleased to work with BARDA to support U.S. national preparedness for potential mass casualty events and to drive further development of Nexabrid. More broadly, we believe that the BARDA award underscores the clinical importance of this innovative product and can help enhance the overall utilization of Nexabrid in the U.S. market. I'll now turn the call over to Joe to discuss our first quarter results and our 2026 guidance in more detail.

Thanks, Nick, and good morning, everyone. As Nick referenced, from a financial perspective, the company had its strongest first quarter to date across all key financial measures, including top-line revenue, bottom-line profitability, and cash generation metrics. Total revenue increased 30%, to 68.4 million, which was significantly above our guidance range for the quarter, driven by strength in both commercial franchises. Macy's momentum continued as strong double-digit volume growth drove record first quarter revenue of 56.4 million, representing 22% growth versus the prior year, which was significantly higher than recent first quarter growth rates for Macy, and marks the fourth consecutive quarter with Macy growth of 20% or more. Burn care first quarter revenue was $12 million, which was well above recent run rates and our guidance range for the quarter. EpiCell revenue of $10.9 million was particularly strong, while Nexabrid revenue of $1.1 million increased nearly 60% versus the fourth quarter. With these strong first quarter results, the company is generating significant top-line growth across the business. Macy's trailing four-quarter growth rate increased to 23%, and the trailing four-quarter growth rates for both the company and BirdCare are also above 20%. The company also delivered meaningful margin expansion in the first quarter. Gross margin increased over 300 basis points to 72%, and adjusted EBITDA margin increased nearly 800 basis points to 14%, with a just at EBITDA growing 195% versus the prior year to $9.6 million. Finally, the company generated operating cash flow of $16.4 million and free cash flow of $15.1 million, representing the third consecutive quarter with free cash flow of $12 million or more as the company's expected inflection in cash generation continues following the completion of our new manufacturing facility. We ended the quarter with approximately $211 million in cash investments, an increase of nearly $50 million compared to the end of the first quarter last year. Turning to our financial guidance, based on our very strong first quarter results across the business, as well as expected Nexabrid procurement revenue in the second half of the year under the recent BARDA award, we are increasing our full-year total revenue guidance range by $10 million. We now expect total revenue of $326 to $336 million for the year, which represents total revenue growth for the company of approximately 20% at the midpoint of our guidance range. After a very strong first quarter, we are raising full-year Macy revenue guidance to $282 to $288 million, compared to the prior guidance of $280 to $286 million. Macy's off to another strong start in the second quarter, and we expect approximately 62.5 to 63.5 million of Macy revenue for the quarter. Our guidance implies similar growth rates for remaining quarters of the year, which is consistent with our framework to start the year, recognizing that there is an opportunity for outperformance based on the momentum and our key performance indicators, our expanded sales force, and the commercial initiatives that we have put in place. We are also increasing our burn care revenue guidance based on the strong first quarter performance as well as the incremental Nexabrid barter procurement revenue expected this year. We now expect full year burn care revenue of approximately 44 to 48 million compared to our prior guidance of 36 to 40 million. And for the second quarter, we expect approximately 9 to 10 million of total burn care revenue. In terms of Nexabrid BARDA procurement revenue, at this point, we expect approximately 5 to 6 million of revenue in the second half of the year, with procurement expected to begin in the third quarter. Moving down the P&L, For the full year, we continue to expect gross margin of approximately 75% and adjusted EBITDA margin of approximately 27%, which accounts for additional costs related to our new Burlington manufacturing facility, the incremental investments related to our Macy's Salesforce expansion, increased Macy Ankle clinical trial expense, and incremental lifecycle management investments. For the second quarter, we expect gross margin of approximately 72% and adjusted EBITDA margin of approximately 18%. Overall, 2026 is set up to be another positive year for the company with strong revenue growth as well as continued margin expansion, profit growth, and cash generation. As we look ahead, we believe that the durable growth of our portfolio positions the company to sustain strong top-line growth and supports our mid-term revenue and profitability targets. This concludes our prepared remarks.

We will now open the call to your questions.

Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on the phone line will indicate when your line is open. Again, that is star 1 to ask a question. We'll pause for just a moment. We will go first to Richard Neuwetter with Truist Securities.

Hi, thanks for taking the questions. I'm juggling calls this morning, so I may have missed it, but just on the guidance outlook, can you increase, it looks like, by the 1Q outperformance? We'd just love to hear kind of what your assumption set is, especially for Macy Trends and Macy Arthro moving through the year, and most particularly in the 2Q. Thank you.

Hey, good morning, Rich. This is Joe. I'll take that question, so thanks for the question. You know, so in terms of the guidance update and the increase, I would say, you know, on a four-year basis, you're right, there's kind of two key drivers. So one, you know, the outperformance in the first quarter, you know, at a company level, whether you look at guidance or consensus, it's kind of in that $4 million to $5 million range. We've included that in our four-year guidance update, so let that flow through. And then the second piece is remainder of that of that increase is really incremental next hybrid barter revenue which we expect to begin at h2 and you know call it we said about five to six million so you know if you got to put that together just quickly on the assumptions to the second part of your question you know starting with burn care um you know obviously a very strong first quarter across the board for burn care it's actually our highest quarter since 2024 and a particularly strong epi cell quarter so i feel like we're really executing well on the burn care side so You know, to your question, you know, we've assumed, you know, call it about 2 million of outperformance from Q1 in our full year outlook on burn care. And then that remainder, call it about 6 million on the BARDA side. So, you know, up eight on a full year basis on the burn care side. So, you know, if you kind of think about the guidance going forward, obviously there's some moving pieces. But, you know, we're sticking with, you know, our framework that's worked quite well on the burn care side over the last few quarters and our run rate framework, which has been, you know, call it 9 to 10 million on a quarterly basis, and then we're adding in the second half BARDA. So to be clear on kind of just how to think about that and how to model it, it's really call it 9 million in the second quarter, then it steps up to 12 million in both Q3 and Q4 with that incremental call of 3 million of BARDA revenue flowing through. So, you know, that gets you to call it 45 million on a four-year basis on burn care. So, you know, again, we're not changing our assumptions in the back half of the year in terms of the core business we're sticking with that run rate um but obviously great performance in the first quarter and the incremental barter revenue has been included on the macy's side so you know a very strong first quarter as we talked about you know our first quarter with our expanded sales force and you know we feel like the team executed extremely well there you know a much higher q1 growth rate than we've seen in recent years and importantly you know we pointed to another quarter of both double digit biopsy and implant growth in the first quarter. You know, I'll just say we've gotten off to a strong start in Q2 and April as well. So, you know, feel very good about kind of the Macy execution, particularly with that larger sales force. So from a four-year perspective, again, call it about a $2 million beat in the first quarter in Macy. You know, we've included that on a four-year basis. You know, you kind of add that updated 285 on Macy. You know, you're right around $330 million or so at the midpoint. You know, which also is, you know, the midpoint of our guide is also 20% company growth. So, you know, that's important and good to see. You know, in terms of the Macy assumptions for the remainder of the year, you know, I think importantly, you know, we're not changing any assumptions or our approach for whether it's the second quarter or the back half of the year in Q3 and Q4. So we're keeping the same framework and approach we used in Q1. You know, I'd say we're going to remain very prudent on the guidance. We've done that on the burn care side. you know, with the run rate framework, we're going to continue to do that with Macy going forward. So, you know, the assumptions for Macy in total are essentially keeping that high teens growth for both Q2 as well as the back half. You know, and I think importantly, that also implies kind of similar year over year dollar revenue growth assumptions, which again, we feel like is a balanced starting point and consistent to how we started the year. So, You know, it implies about $63 million in the second quarter. That's about 18% growth at the midpoint of our guide. And, you know, it's pretty similar for the remaining two quarters. And so, you know, again, I would just say from a second half outlook perspective, you know, we definitely do not want to assume an acceleration in growth in the second half in Macy. So this is consistent to what we talked about last quarter. So, you know, we think this positions us really well. You know, and to that point, you know, whether it's kind of the the Salesforce contribution, you know, continuing to ramp up in our throw. You know, I would just say broadly, you know, if we maintain the recent trends we're seeing, if we continue to execute well, you know, we think this sets us up for potential outperformance both in the second quarter, but also on a four-year basis. So, you know, for Macy in particular, you know, the pieces are in place with a very strong pool of biopsies. We had a particularly strong Q4 that we think will play out, you know, during the year from a biopsy growth perspective. leading indicators remain strong. And again, we have, you know, the larger sales force, which we think can be impactful. So, you know, we're going to remain prudent on both franchises, but certainly the goal internally is to outperform that. But, you know, again, we're not going to change the approach on the guidance and, you know, we'd rather just stay prudent there.

Thanks for that. Really helpful. And then maybe just to follow up, you know, on the competitive landscape, you have a competitor that will likely be stepping into some better reimbursement situations in the first quarter of next year. Just wanted to get a feel for how you see the market kind of segmenting, how you're kind of thinking and preparing for this, what you're hearing, if anything, from your customer base on expectations for that product and how it may or may not impact you guys. Thank you.

Yeah.

Hey, Rich, this is Nick. And so I'll take that question. And obviously you're referring to Agilecy, which is a product we've talked about for years now, as we've talked about potential sort of new market entrance. And, you know, the position that we've kind of taken is one that's kind of aligned with kind of our surgeon and KOL feedback that Agilecy is really a product that's geared towards use in older patients with osteoarthritis and really as a bridge to a partial or full knee replacement where those patients have, you know, no other options. And, you know, the product's been – it was approved four years ago, so it's been around and really obviously hasn't had an impact on Macy to date, nor should it. You know, as you know, these are two different patient populations, older – osteoarthritic patients that are potentially more appropriate for agility, and then the young active patients where Macy is typically used. And, you know, there's, when you think about sort of the typical Macy patient, you know, less than if you look at publications, a very small, low single-digit percentage of Patients that are treated with Macy have any sort of bone involvement, even though it's included in the label. And there's no way if you have a clean cartilage injury, That a surgeon is going to sort of core out over a centimeter of bone to use a product like a jealousy so we actually don't think there's a lot of overlap there hasn't been to date, nor should there be for these patients. And you know, as you think about sort of the if you take a double hook on a couple dimensions number one. as you know the patella treatment uh or treatment of patella defects for macy is our largest and fastest growing part of the business historically and the jealousy is you know contraindicated for use in patella defects and so absolutely no impact on the biggest part of our business um you know it's not it indicated for our arthroscopic administration. So we actually haven't seen much, if any, impact at all from a jealousy, nor do we expect to see it. And, you know, we do pulse surveys pretty frequently. And, you know, out of the surgeons that we talk to, haven't used it and don't really plan to use it in the future.

Thank you. All right. Thanks, Rich.

We'll go next to Mike Cracke with Lee Rink Partners.

Hey, thanks, everyone.

And congrats on the very nice quarter. So you provided some encouraging commentary on accelerating implant growth. So would love to get a sense of, you know, some of the progress you're seeing specifically for Macy-Arthro. You know, where and what portion of your implants today are coming from Macy-Arthro? and able to get some traction among those new accounts that you identified that typically were Arthro only.

Hey, Mike, it's Nick.

So, yeah, so on Macy Arthro, you know, obviously we're very pleased with our progress to date. You know, as we talked about on our last call, you know, really strong foundation established in 2025 where we trained, you know, upwards of a thousand surgeons on Macy Arthro and, you know, We're kind of at critical mass where those trained surgeons are responsible for kind of over half our implants already, so really great critical mass there, great job by the team, both the medical and sales team in training surgeons. Obviously, we talked about the fact that that contributed to growth last year. And in the first year on the market, as sort of the smaller femoral condyle defects that NACR throw are intended to be used for, you know, the growth rate there was kind of at par, you know, with patella, which was great compared to lower sort of single-digit penetration and lower growth in prior years. As we said on the call, the leading indicators for Macy-Arthro remained strong. We had higher first quarter and trailing biopsy growth rates than the overall biopsy growth rate, and we continued to see that Macy-Arthro implanters, you know, had higher biopsy conversion rates. So it's clearly been one of the factors in a multifactorial sort of dynamic that has sort of, you know, elevated Macy's overall performance. So, you know, the fundamentals, as Joe mentioned, coming into this year were very strong with biopsy acceleration in the fourth quarter. You know, we have a larger sales force that's off to a great start. You know, we have Macy Arthro in there as well, which has generated a ton of interest. And then the commercial excellence initiatives, you know, are clearly taking hold as well. So, you know, we're pretty excited about, you know, the Macy Arthur start to date, and we expect it's going to continue to contribute to growth as we move forward.

Super helpful. Thanks, Nick. And maybe just one follow-up, but we'd love to hear a little bit more about the progression of the BARDA Award. You know, obviously some nice CONTRIBUTION EXPECTED ALREADY IN THE BACK HALF OF THIS YEAR, BUT HOW AND WHEN CAN WE SEE THAT REMAINING $197 MILLION START TO MATERIALIZE OVER TIME?

YEAH, YOU KNOW, WE'RE REALLY EXCITED ABOUT Working with BARDA to kind of help with US national preparedness for mass casualty burn events. We had talked about this potential award. Obviously it was delayed a little bit with the government shutdown, It's a very meaningful overall contract, as you mentioned, nearly $200 million and a $35 million initial award. And just to be clear, about two-thirds of the value of that award, whether it's this sort of the base contract or the overall, flows in one form or another to VeriCell, either through procurement and VMI service revenue, or other cost offsets for some of the other work that would go on. So the base contract is the $35 million. Obviously, that includes the initial procurement and then VMI establishment and related services. David Wiltshire- and work around a potential blast indication and those are already funded, and you know as Joe mentioned on the procurement side, you know we expect that revenue over a 12 month period to begin. David Wiltshire- In the third quarter, you know five to 6 million this year, the remainder early in 2027 on the procurement revenue so that's 10 of the first 35. The other will involve obviously doing the work around sort of the proof of concept for the Trump blast trauma indication, and that will start later this year and flow through. So we'll probably give you a little more guidance potentially on that as we go through the year in terms of the optional awards. You know there's a number of components there as well, including additional ramp up procurement, which is a pretty meaningful. Pretty meaningful. Clin or option you know that will depend if you think about when Barta had the initial stockpile, it was something like 16,500 units when they worked with Med wound on that. Our initial procurement is about call it roughly 3000 units with a ramp up of another 5000. So you know, I think Bart is pretty interested in increasing the stockpile because we run it through a BMI that will you know commercial progression and so on so that'll play out you know it's intended to start you know after the first year of procurement um and then you know obviously if the proof of concept on blast trauma uh indication works out you know that could trigger the second um and further development for that indication and then meta wounds been working on a room temperature formulation And, you know, that work will continue. And to the extent that moves forward, you know, over the course of the next year, that could trigger further work on that room temperature formulation and additional procurement of that product in, you know, starting in 2027 and beyond.

Understood. Thanks very much, Nick. Okay. Thanks, Mike.

We'll go next to Josh Jenning with TD Cowan.

Hi, good morning. Thanks, Nick and Joe, for the question.

I was hoping to just have you share your view just on the environment. You know, there have been some concerns around ortho procedures, you know, volumes just trending down, pressures from access, hurdles like the ACA subsidy expiration. You're not seeing that in Q1 of the Macy franchise. The guidance suggests that you're not expecting to see much, but have you baked in any just over high-level ortho procedure volume pressures into the guide? Seems like there is some conservatism in terms of the setup for the rest of the year in terms of how you've positioned guidance for Macy post-1Q, but we'd love to just hear what you're hearing and any more insights into your outlook.

Yeah. Hey, Josh, it's Nick. I'll start and Joe can kind of talk about our guidance perspective. You know, so, you know, we made a point on our Q4 earnings call because there was some commentary out there about, you know, slowing procedures in December and so on. And we actually had a stellar December and we didn't see any impact there. And obviously, as we talked about, you know, we had strong double digit biopsy and implant growth in the first quarter. So I would say we haven't, you know, we haven't seen anything, nor have we baked any sort of procedural slowdown into the guidance and Joe, you can cover that a little bit more as well.

Yeah, I mean, just echo what Nick said. I mean, we certainly haven't baked into any expectations, you know, on kind of the negative side there. You know, again, I'd probably go back to where Nick started, which is I think we referenced, you know, we feel like we have a great pool of biopsies. We continue to generate double-digit growth there. And, you know, just to kind of talk again about Q4, I mean, we really saw an acceleration, you know, a pretty significant acceleration in biopsy growth in the fourth quarter. and had a particularly strong December. And obviously that's our highest quarter in terms of activity. So that's really encouraging as we kind of make the turn into 2026 or having made the turn. And so, you know, what's important there, as you know, Josh, is there's a longer kind of cycle here when we think about conversion. And, you know, from a conversion perspective, I mean, those typically convert over the subsequent quarter. So, you know, some of that, you know, is probably early in Q1, but most of that is, you know, frankly, whether it's Q2 or the back half of the year. So, We feel like we're in a very good position. Of course, we're going to be mindful of the environment, but we haven't seen any signals that any of that slowdown is impacting any part of our business.

Excellent. That's great to hear. And I also wanted to just touch on the international Macy expansion opportunity. I know you guys are set up for potential launches in 2027, but can you just help us think about the buzz that's been generated by Macy? You know, is there a pent up demand in specific countries? Can we just anything again, a little temperature check question in terms of what you guys are hearing from international ortho sports medicine specialists and the anticipation for getting access to Macy, Macy Arthur for their patients. Appreciate it.

Yes. Josh, it's Nick again. Certainly the international cartilage repair sort of community is very, you know, concentrated and Macy, as you know, was on the market in Europe when we first bought this business. And so there's a significant sort of interest in having Macy come back. We talked about it, you know, with the UK being our first sort of beachhead for a lot of reasons, you know, potential expedited approval process very high surgeon awareness and advocacy over there we had a positive nice opinion for me see you know back in the late teens so really set up well and concentrated sort of cartilage repair surgical centers centers of excellence in the UK so it's a perfect sort of beachhead for us as I mentioned and yeah there's a ton of of interest and excitement about potentially having Macy back, because there's very limited options in Europe right now for sort of restorative cartilage repair procedures.

Thanks, Nick.

All right. Thanks to you.

We'll go next to Caitlin Roberts with Canaccord Genuity.

hi congrats on the great quarter and thanks for taking the questions maybe just starting with the the sales force um seems like they were beginning to really contribute this quarter um maybe just provide some some metrics around that and and the time we're seeing it take uh these reps to reach break even or close to break even yeah hey caitlyn it's nick you know obviously as we kind of referenced on our prepared

I mean, we're really sort of pleased with the initial sort of expansion and the contribution that the new territories are making to our overall business. And I would just sort of remind listeners that the fact that we expanded our sales reps in Q4, and then obviously we realigned the territories and everyone went into their new territories in Q1, you know, with absolutely zero disruption in Q4 as the new reps were working together. And then, you know, obviously a super strong performance in Q1, as Joe mentioned, you know, a higher growth rate than we've typically seen in the first quarter over the past several years. I mean, I think that says it all in terms of the kind of a flawless execution from the commercial leadership team and great execution, you know, from the reps themselves. So as we referenced on the call, you know, as the quarter progressed, you know, we saw implant growth accelerate for both new and legacy territories, which led to that strong double-digit implant growth. And that continued into April for both legacy and new territories. So off to a strong start, as Joe alluded to as well. You know, the growth in biopsies per surgeon also accelerated in the first quarter. you know, which is always our metric that we refer to for deeper penetration within Macy's surgeon practices. And that led to another quarter of double-digit biopsy growth. And that was particularly strong in the new territory. So, you know, that continued. You know, we had strong biopsy growth in the fourth quarter, accelerated again in Q1 in terms of biopsies per surgeon. So really great metrics there. And then, you know, obviously they're getting up to speed very quickly. We talked about the fact that the pull through to implants was very strong across the board. You know, there's smaller, more concentrated territories now, so you're seeing great pull through. So, you know, again, we don't look at it in terms of sort of how quickly do they get to break even. They're probably – they're certainly – a good portion of a variety beyond breakeven as they moved into these new territories. Because again, it's not like they moved into white spaces. They were existing territories, existing biopsies. They did a great job on pulling those biopsies into implants in their territories and then obviously building a pipeline for the rest of the year with their strong biopsy growth. So honestly, I don't think it could have gone any better.

That's great. And then maybe just talk through, you know, kind of the episode dynamics in the quarter and what really drove the strength.

Yeah, so, you know, obviously, as Joe mentioned, one of the highest burn care quarters we've had ever and strongest since, you know, 2024. And we talked about it last year that, you know, we kind of were taking a different approach to how we were sort of evaluating and working through each of the biopsies we receive. And I'd say probably the biggest contributor to EpiCell's performance was, you know, some growth on biopsies, which is great, but really kind of converting those biopsies into graphs. And again, that's just kind of a Salesforce execution with sort of clinical support on the patient treatment side. parameters as well so really just sort of a different level of execution not only for epiCell but across the entire commercial organization.

Great, thank you.

We'll go next to Mason Carrico with Stevens Inc.

Thanks for taking the questions here. On the potential near-term publication of data showing less post-op pain, faster range of motion, earlier weight-bearing, I guess, how material could that publication be in terms of catalyzing broader adoption or higher utilization of Macy, Arthro? Are there docs out there that, you know, are saying they'd like to see this peer-reviewed data on better patient outcomes for adopting or ramping use, just trying to get a sense of what that can mean?

Yeah. Hey, thanks Mason. It's Nick. So, you know, obviously we've been talking about the fact that because Macy-Arthur was approved through a human factors study that, you know, you didn't really have that kind of clinical data at launch, but that we were very focused on building it both through individual sort of KOLs who do a lot of Macy-Arthur cases and have these case series, which is the first set of data that demonstrates those early positive outcomes, which could lead to the longer term patient outcomes and the benefits there. you know, as well as through our Macy clinical outcomes registry where, you know, that can lead to a series of publications over time. So there's no doubt that clinical data is important. You know, I don't think we hear a lot of, we need to see those outcomes before. I think it's just intuitive to the surgeons that a less invasive surgery, you have these better early outcomes, but we definitely want to have the clinical data to support that. I would use kind of our experience with patella as an analog. You know, back in the teens, 2017, when Macy was launched, there were no patella patients in the study. you know, over time, there were publications about the effectiveness in the patella of Macy treatment that led to, you know, even broader coverage by, you know, insurance companies. We referenced back in the early 2020s, UnitedHealthcare adding patella cases to its medical policy. And, you know, so there's no doubt over time that you know, that kind of clinical data will just support continued utilization and uptake of Macy's arthro. So, yeah, we're really focused on that. We think it'll have a very positive impact.

Got it. That's helpful. And then on the dynamic of arthro-trained surgeons showing higher biopsy and implant growth than untrained surgeons, has that gap widened or narrowed or stayed the same as the trained surgeons?

base of surgeons has grown yeah i mean you know obviously i would say broadly and at a high the higher level those trends that we saw in trained surgeons remain now we're kind of getting into a point now where we have this you know relatively large critical mass of you know macy users who are now trained and you're kind of lapping the quarterly things so the gap you know is a little narrower but the trends remain the same that they definitely kind of increase their biopsy and growth rates got it thank you guys okay thanks mason we'll go next to jeffrey cowan with ladenburg tallman

Good morning. Thanks for taking the questions. Hi, Nick and Joe. Just one from our perspective, could you drill in a little bit further on the burnt franchise? I want to know a little more about EPSL, maybe per case, number of cases, and Nexabrid, and talk a little bit about the franchise as well as the commercial organization and some cross-selling and awareness on Nexabrid.

Yeah, I'll start, Jeff, and Joe can kind of jump in. You know, on epicell, it's kind of, as I mentioned, I mean, obviously it was a very, very strong quarter driven mostly by, you know, biopsy growth, but more importantly, sort of of the biopsies we received, sort of a higher treatment rate for those patients, which is great, as you know, in some cases. quarters in the past couple of years, you know, there were issues around patient health and those biopsies didn't really convert into the graphs. I think that was my point around commercial execution. I think the team, both the medical and commercial teams are doing a great job on focusing on how you take those biopsies and treat patients and realize that patient benefit of EpiCell. So That's kind of the dynamic with episode. We're encouraged. It's been, you know, a series now of good strong quarters for episode on next hybrid. You know, we're kind of. We remain in, you know, excited about the opportunity. Obviously the BARDA contract reinforces the clinical utility of the product. And, you know, as we've talked about, it takes time to change standard of care, especially when you're going from a surgical to a non-surgical approach. So this obviously kind of bolsters the revenue and utilization potentially for Nexibrid as we move forward. So, you know, we expect that over time we're going to see kind of that continued uptick in Nexabrid utilization, you know, very positive sort of kind of broadening of the number of ordering centers for Nexabrid to start the year, which, you know, again, we think will translate into higher utilization as we move through the year. And obviously, you know, we have reps now that, to your cross-selling point, promote both EpiCell and Nexibrid, and yet we've talked repeatedly about the fact that, you know, ideally we have utilization of both products in every burn center, but certainly having Nexibrid has allowed us to sort of regain traction with some of the dormant burn centers over time. So, you know, I think a good string of quarters now for burn care, and we certainly expect that to continue.

Yeah, I mean, I would say not a lot to add. This is Joe. I mean, just to echo a couple of Nick's points, I think the sort of commercial excellence initiatives we're talking about, just to be clear in those, we obviously talk about that a lot from a Macy perspective, but certainly there's a number of things we're doing on the burn care side to kind of replicate the same you know, commercial excellence, better analytics, you know, et cetera, as we think about execution. So I think certainly on the burn care side, that's important to point out. And then as Nick talked about, on the Nexabrid side, or just in burns in general, you can see, you know, quarter to quarter, there can always be changes in terms of the number of burns, and we look at that data. But we are definitely encouraged on Nexabrid. We are starting to see a broadening of centers, you know, and we've seen actually a growth in the number of orders. So You know, our strategy to sort of drive higher uptake there is, you know, how can we sort of not only get kind of our regular ordering centers continue to stay kind of high and strong, but try to move the rest of the business from, you know, starting to use Nexabrid more toward the middle and making them more regular orders. So, you know, we're actually seeing some good signals there on the Nexabrid side. So, you know, I think similar to Macy's, You know, I think on the burn care side, if you kind of take a step back, the execution has been quite strong in particular over the last few quarters, and obviously we had a great Q1.

Perfect. Thanks for taking the questions. Thanks, Jeff.

We'll go next to Ryan Zimmerman with BTIG.

Hi, Nick, Joe. This is Izzy on for Ryan. Thanks for taking the questions. Just to start, Nick, you touched on this to an earlier question, but I was hoping you could speak a little bit more about the segmentation that you're seeing in the market for cartilage lesions between Macy and other two-step procedures in terms of the lesion type, anatomical segmentation, grade levels, etc.

Yeah, I mean, I don't think anything's changed. You know, as I mentioned, we've talked about Sort of, you know, the competitive landscape, you know, for Macy for several years, it's been, you know, obviously very static, certainly over the past four years plus, and pretty much essentially since we launched the product. So, you know, Macy stands alone as the clear market leader in cartilage repair. There are no other Macy-like products. So, you know, that hasn't changed at all. We've talked about, you know, on sort of the, I mean, there's very complicated decision tree treatment algorithms that are publicly available for sort of how surgeons think about, you know, different patient types based on size, location of the defect, age, ability to do rehab, things like that. And that hasn't changed at all over the years. to any significant degree. Um, you know, we talked about there's a jealousy sort of or older osteoarthritic patients. Um, and then, you know, some other sort of more micro fracture augmentation kinds of products. And there's been a bunch of both of those kinds of things. Synthetic implants have come and gone over the years. You have a bunch of micro fracture augmentation products that are out there for smaller defects. So, You know, I'd say relatively status quo. And Macy, again, just remains the clear market leader that has expanded over time.

Appreciate that. Thank you. This is maybe a longer-term dynamic, but could we ever see a master cell line for a one-step Macy in the future? Thanks for taking the questions.

Yeah, you know, we have looked at, obviously, Macy's is an autologous cell therapy product. There have been those in years gone by that have kind of thought about allogeneic approaches. We, in fact, have developed an allogeneic cell line, you know, and so is it possible, you know, perhaps there's a lot of technical issues that would be required there and, you know, there's nothing that's To my knowledge, I think there was one potential early stage clinical study more than a decade ago that was abandoned. So there's really nobody anywhere near clinical development right now. for that. And I guess it's kind of a misnomer to a certain extent to say that a product like that would be a one step procedure. There's not a lot of one step off the shelf procedures in cartilage repair. There's often, probably most often, you know, a diagnostic arthroscopy to determine sort of the extent of a cartilage injury or as part of other, you know, arthroscopic investigational procedures, a cartilage defect is noted, and then a treatment plan is put in place. So, you know, it's, again, a bit of a misnomer to talk about one-step procedures and especially where sort of prior authorizations will be needed to or just patient sort of patients being informed and consenting to a certain treatment will be required. So anyway, hope that helps.

Our next question comes from the line of Swayama Pakula Ramakant with HC Wainwright.

Thank you. This is RK from . Good morning, Nick and Joe. Thanks for taking my questions. I have a couple of them since most of my questions have been answered. On the biopsies and implant, you know, in terms of the biopsy and implanting surgeon count, you know, is there a what what percentage of them were repeat versus first-time users um and also with the with the increased um biopsy i mean with record biopsies you know how much of that is coming from um the new salesforce uh you know what what incremental um gain did you get from uh from the new salesforce

Yeah, so good morning, RK. This is Joe, and I'll start. You know, I'd probably say, you know, we can certainly talk about the metrics, but perhaps at a slightly higher level, you know, I would say, you know, we've obviously seen very strong, you know, kind of biopsy growth, you know, over the last few quarters, really last, you know, several years since COVID, we've seen that consistent double-digit growth in biopsies, so we think that positions us well. You know, I think we're sort of highlighting the biopsies per surgeon as because we feel like that's an important metric to make sure we're kind of driving depth. And we think that those are surgeons that we think, you know, have, you know, a significant, probably a more significant opportunity when we see that metric kind of tick up, you know, to sort of pull through those biopsies into implants. So, you know, it's an important metric. You know, obviously that's coming from, you know, you're going to see a mix of existing and new surgeons, but, you know, that'll be weighted more toward existing surgeons just based on the metric. So that's important for us. You know, I will say, you know, one note on that is, you know, with a strong, you know, kind of biopsy growth, we've obviously seen, you know, similar implant growth over the last, you know, few years and a few quarters kind of tracking. They generally track together, and you would expect that with a stable conversion rate that we've talked about. You know, as Nick referenced in his prepared remarks, you know, we're seeing some good signals from an arthro, implanter perspective in terms of some of the conversion metrics there. And obviously, very early days with the new sales force, but, you know, encouraged with the kind of pull through we've seen there. So, you know, I'd say our conversion rate, you know, has kind of consistently been stable, but we are seeing some positive signs there. And so, you know, for example, if that kind of ticked up a bit, you know, that would be upside for us. We're not going to bake that into our kind of guidance or kind of long-range outlook. But, you know, that's been a metric we have been highly focused on, you know, for the last few years. And so that's something we'll continue to focus on. And then remind me of the second part of your question.

No, I was just wondering how much of the gains came from the new folks on the sales force.

Yeah, I mean, I'd probably just point to what we talked about, which is, you know, we definitely saw significant strength in the metrics, I'd say, across the board. I mean, as Nick talked about, the execution to kind of bring on our new sales force, how they, you know, sort of were integrated into Q4, which was strong, how they've performed so far in Q1. So I would say, you know, we've been pretty pleased right out of the gates. And, you know, these are very experienced, you know, reps that have kind of relationships they're bringing, you know, into the into our business. So I think it's certainly a mix, I would say, of our existing reps and our legacy reps, I should say, and our new reps. But we've been encouraged with what we've seen so far from our new sales force.

One last question, if I may. This is on the Arthro product. What do you think is the Arthro's penetration within the small condyle defect term and also What is your estimate of the addressable ARTHRO eligible patient population right now?

Yeah, so, you know, we think obviously there's been a meaningful contribution from Macy ARTHRO in that segment because that's what the instruments are designed to do. So, you know, we're very pleased there. You know, as we talked about, you know, when you kind of take it up a level, you know, these instruments the biggest part of our business is in patella it's a fast-growing part of the business the current instruments aren't really um you know it's designed for those although some surgeons are using that that is kind of a sort of life cycle iteration that we're considering doing for patella but right now you know that's kind of typically done open the larger defects are done open procedures but within you know, appropriate sort of size, two to four square centimeter defects on the femoral condyles, you know, without concomitant kinds of other procedures that need to be done, you know, we're pretty pleased with sort of the penetration we're seeing in that sort of subsegment of the smaller femoral condyle defect. So it's the biggest part of our TAM. That's why we're focused on growing it. And again, just like patella, you know, we think over years that we're going to see some pretty significant impact in that particular segment.

Thanks. Thanks for taking my questions. Thanks, RK.

This concludes today's portion of the Q&A. I would like to turn the call over to Nick Colangelo for any closing or additional remarks.

Okay, well, I'll just close by thanking everyone for joining us this morning. Obviously, the company had an outstanding first quarter, and we feel like we're really well-positioned to continue to deliver what is a very unique combination of sustained high-revenue growth, profitability, and cash generation in 2026 and the years ahead. So we look forward to providing further updates on our next call, and thanks again, and have a great day.

This concludes today's call. Thank you for your participation. You may now disconnect.