AXGN

Good morning, everyone. Joining me on today's call is Michael Dale, AxoGen President and Chief Executive Officer, Lindsey Hartley, Chief Financial Officer. Michael will discuss first quarter 2026 financial results and corporate highlights. Lindsey will 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 Investors section of AxoGen's website. Following the end of the live call, a replay will be available on the Investors 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 Commission, 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.

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 Investors section of the company's website. I will turn the call over to Michael. Michael, please go ahead.

Thank you, operator. 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 turn the call over to Lindsey 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 AxoGen'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 execution.

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 Avance, 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 of peripheral nerve function an expected standard of care. 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. We ended the period with $103.6 million in cash equivalents, restricted cash and investments. Performance was driven by strong demand for Avance and continued adoption of our broader product algorithm across all three target markets. Salesforce productivity was ahead of plan. 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. 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 AxoGen 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, QDND, clinical literature, and the ASPS data. For each segment, we apply a discounting algorithm to remove procedures where an AxoGen product would not realistically be indicated. We 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 1/3 of the more than 150,000 reconstruction 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, parotidectomies, and thyroidectomies. Roughly 90% of targeted OMF head and neck procedures occur in approximately 900 accounts in the United States, most of which already overlap with our high-potential account universe. 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 AxoGen 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 under-penetrated relative to the size of the opportunity. There is still meaningful work to do to ensure nerve 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're 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 within an account universe that our current sales organization already covers. In prostate, we continue to refine the clinical technique. 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 AxoGen 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 full-year plan. Sales force 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 breakeven 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, AxoGen has not expanded its sales organization for more than three years prior to us beginning this process.

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 full-year target of 60%. This difference reflects strong performance in breast accounts, which are not always designated as high-potential accounts. We view 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 full-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 AxoGen's core competencies. I have been consistently impressed by what AxoGen 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 Biologics License approval of Avance. We continue to make progress expanding commercial coverage.

Since receiving Biologic License approval for Avance in December of 2025, we have been actively re-engaging 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, "Avance 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 OMF procedures. Second, Elevance, also known as Anthem. In early April, Elevance removed Avance from its experimental investigational list, which is an important first step.

Elevance also implemented utilization management criteria limiting Avance usage to 5 mm-25 mm 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. We have said before, Avance is unique. While the BLA approval makes Avance feel, quote-unquote, "new to payers," the product has 17 years of clinical experience and well over 100 peer-reviewed publications. Our health economics and reimbursement team is currently partnered with more than 15 surgeons to educate Elevance and resolve this gap length criterion collaboratively. We communicated at year-end, Avance 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 Avance 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%-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 motor nerve indications, 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. We will update investors accordingly when we have something meaningful to share. 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-transected and chronic nerve injuries through better protection. 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 Avance into our broader algorithm that we believe will further extend our clinical and competitive position.

In closing, 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 Watty Piper's story about The Little Engine That Could, we think we can fulfill our mission purpose and look forward to keep reporting continued progress across the priorities outlined in our strategic plan. We are raising our full-year guidance accordingly. I will now turn the call over to Lindsey to review the quarter's financials and our updated outlook for 2026.

Thanks, Mike. I'm 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 Avance 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 Avance biologic product has not yet entered commercial channels. Beginning in the second quarter, as biologic Avance enters the channel, we expect to see incremental product cost pressure.

Our full-year gross margin guidance of 74%-76% accounts for this transition. 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. 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 PSUs 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 initiative 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 $0.02 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 obligations. 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 growth margin is expected to remain in the range of 74%-76%. 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 sales force 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?

Thank you. We will now be conducting a question-and-answer session. If you like to ask a question please press star one on your telephone keypad. The confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. We ask that analysts limit themselves to one question and a follow-up so that others have the opportunity to do so as well. One moment please while we poll for questions. Our first question comes from Michael Sarcone with Jefferies. Please proceed with your question.

Good morning. Thanks for taking the questions. Just two for me on guidance to start. You know, really nice quarter with the 27% growth, and you're expecting at least 20% for the full year, which implies a decel as we make our way through the year. Just wanted to kind of hear you elaborate on what's driving that, the moving pieces there, and how much of the guide, you know, continues to reflect prudence.

Thanks, Mike. To your question, as we look at the comparables on a going forward basis, there are sort of sequential increases that we're gonna be comparing against, and this is a commercial execution story as we've advised continuously. Our guide in part reflects that reality. Very, very confident about the future, very confident about the guidance we just raised, but mindful of the fact that each quarter is a productivity growth expectation that we need to continue to execute against.

Got it. Thanks, Mike. Just a follow-up there. You know, I believe Lindsey mentioned, you know, the guide is about continued execution here, and I think she also finished with on the reimbursement coverage side, you know, nothing beyond what we already know. I know the prior guide didn't have any, you know, of the potential coverage wins baked in. We've seen Anthem and Cigna. You know, we may see an Aetna update soon. I guess, can you talk about if there's anything in the guide related to progress there, even modestly? You know, how do you view timelines for seeing more of a contribution from some of the recent commercial coverage wins? Thank you.

Sure, Mike. We're digesting the realities of that impact in real time. As we often mention, these are not Avance when you enjoy achievement that immediately translate into activity. These need to be socialized within the relative providers across the country. They then need to negotiate their individual contracts as part of that. We know it's all going to be a net positive in a significant way, but it is not an event that happens immediately. I think really as the next quarter rolls out, we'll start to get some insights into that and speak more to it. Again, it's just not an instantaneous benefit.

Great. Thanks a lot, Mike.

Sure thing, Mike.

Our next question comes from Larry Biegelsen with Wells Fargo. Please proceed with your question.

Good morning. Thanks for taking the question, and congrats on a really nice quarter here. Mike, you know, the growth obviously accelerated here in Q1. Maybe a little bit more color on what drove the acceleration here. With the new, you know, 20%+, you know, guidance here, how are you thinking about the LRP of 15%-20%?

Sure. With regards to first quarter, really what we're seeing is cumulative effects of all the things we've been discussing now for quite some time. The ramp of the physical footprint, those individuals coming into play, the continuing benefits of the market development activities in terms of positioning, awareness. Each part of the business is getting just a little bit better each quarter. It's no one single thing, no one single part of the business. That's the most comforting thing to the team, is that we're not dependent upon any one part of the business. They're all doing well. It just reflects the fact that these are real needs from a health standpoint, grossly undertreated, and we're making a little progress each quarter towards that.

That's really what's driving the growth. There's really no magic to it. It's just, it's all of the things underlined in our strategic plan descriptions. We're benefiting from that. In terms of the LRP, we have not made any adjustments to our long-range plan. We still think that 15%-20% stands. As this year plays out and as we start to digest more about payment and coverage progress, that may change, but for now, we have not adjusted.

That's helpful. Mike, for my follow-up on prostate, you know, what are the early signals you're seeing from the 100-patient cohort ahead of the second half readout? Can you put a finer point, please, on the timing of the readout? Thank you.

In terms of the timing of the readout, in terms of substance to where we could really begin to make judgments, that's still on schedule as previously described, which is the end, really getting into third quarter. The reason why, we'll have a body of patients that we can draw conclusions from as that happens. At present, though, what we have in terms of feedback is best described as anecdotal, individual experiences, and those are all positive. I need to emphasize those are anecdotes, not data body of significance that you can truly base decisions upon.

All right. Thanks for taking the question.

Sure thing.

Our next question comes from Mike Kratky with Leerink Partners. Please proceed with your question.

Hi, everyone. Thanks for taking our questions. Congrats on the really nice quarter and recent progress. You know, maybe just to follow up on prostate quickly. In terms of the specific updates or that clinical activity signal that you're looking for, what are gonna be the specific metrics that you're focused on that will influence your commercial outlook there?

Sure. Jens, why don't you address that question?

Yeah. I mean, we're looking at, basically we're following these patients very closely, or the sites that we're working with are following patients very closely, and we're looking for clinical signs for potency and continent. The other objective with working with the clinical sites was to see how incorporating nerve grafting into robotic procedures influence the workflow. What we've seen is it's very easy for these highly trained surgeons to incorporate Avance into robotic procedures. That's another key lesson that we've gotten so far. Overall, very positive, but as Mike said, we'll report further on kind of the clinical science in the second half of the year.

Understood. Appreciate the color there. Maybe just as a follow-up, it looks like in the latest corporate deck you mentioned that 14% of commercial lives remain uncovered. You know, curious not to get ahead of any updates, but if you do see an update from Aetna, you know, how close to full coverage could that get you? How widespread is the coverage within those different plans today?

Rick, why don't you take that question?

Yeah, happy to do it. Good question. It would put us in the mid-90s if Aetna extended coverage. There are a couple regional payers out there that we certainly communicated with and in our target markets. We feel really good about that. The term we like to use instead of saying full coverage is near universal. I wake up every day feeling pretty good if we have Aetna making a coverage decision. Timing on that, because you guys are probably curious, you know, we expect something by the end of June. That's based on historical updates. Trust that I wake up every day and refresh that webpage and try to see what the news is.

Thanks very much. Appreciate the color.

Thanks, Mike.

Our next question comes from Jayson Bedford with Raymond James. Please proceed with your question.

Hi, good morning, congrats on the progress here. I guess just, are you selling BLA product today? If not, when will it be launched? Just as my follow on, I'll ask it up front. Is there a different launch strategy specifically around price, area of focus? Any detail there will be great.

We are now selling a BLA-produced product. There is no change in the pricing structure. In terms of general positioning, effectively no change beyond the presentation to customers that the product is now the first biologically approved therapeutic solution for providing physical scaffolds for treating nerve discontinuity. We remind people the criteria that was required of that process, and oftentimes thank particularly the existing customers for their support and confidence in the product over the years. But effectively, it's business as usual for the surgeon doing that kind of work.

Thank you.

Sure, Jayson.

Our next question comes from Caitlin Roberts with Canaccord Genuity. Please proceed with your question.

Hi. Thanks. Congrats on great quarter, thanks so much for taking the questions. You know, just to ask again on the biologic product transition, does that change really the method or the regulatory procedures by which a new hospital or the VAC committees within the new hospital would approve Avance, or did that really occur with the BLA approval?

There's no change whatsoever in the activities that you asked about. The transition is effectively invisible to the customer.

Got it. Understood. Just thinking about, you know, the commercial coverage currently, how many, if any of, you know, the current payers have any restrictions on the length or the type of nerve based on, you know, the RECON study or, you know, what was approved under the BLA, and then conditionally approved under the BLA?

Rick, why don't you go ahead and address Caitlin's question?

Hey, Caitlin, good question. First is good news, right? Elevance removed us from the investigational experimental list. We were surprised that they chose the RECON gap length and put that criteria on there. We've actually already engaged them and have consistent communication. We feel it's inappropriate for a few reasons. First is to pre-authorize on gap length is just surgically inappropriate because you don't know the gap length until you get into the operating room.

We educated them on that. If you go read the medical policy update, there are three key omissions. One of them is there's no mention of the BLA. The second is there's no mention of the biggest systematic review and meta-analysis on nerve repair, which shows that Avance is as effective as autograft in long gaps. The third is they don't mention either of the specialty society position statements that were issued last year. We've submitted this to them. We expect there will be an update sometime, hopefully by the end of this year or early next year, to correct this. We think it's just an honest error on their part, but they've been collaborative, and we look forward to addressing it here in the near future.

Great. Thank you so much.

Thanks, Caitlin.

Our next question comes from Anthony Petrone with Mizuho Group. Please proceed with your question.

Thanks and congrats on the quarter here. Strong execution. Maybe to go back to Resensation, Mike, you mentioned, you know, five programs. You have, you know, 75 surgeons in there, and each of these, you know, end markets, you know, are a little bit different. Maybe when you have a program that's ongoing, you're training surgeons, you know, what has been the average conversion rate to an active implanter, and how does that, you know, stack up to breast? Is it similar in extremities to breast, or is the conversion curve look a little bit different? I'll have one follow-up.

Sure. With regards to breast, and I'm generalizing here, but the historical conversion rate has been above 75%.

That's helpful. That, is that across all end markets or that's breast in specifically?

It's breast specifically.

Okay. Maybe just to recap, when we think about, you know, pushing into these new markets, breast and prostate, just a recap of, you know, the amount of graft per case. You know, what does it look like in breast and potentially prostate if we get there relative to core extremities? Thanks.

Jens, why don't you address that?

Yeah. In a breast reconstruction procedures, we typically see bilateral reconstructions, which means two grafts per procedure. In prostate, it depends whether or not it's a unilateral nerve-sparing or bilateral or a non-nerve-sparing procedure. It could be one graft if it's just one side or two grafts if it's both sides that needs the prostate that needs reconstruction. It depends on the mix.

Thank you.

Thanks, Anthony.

Our next question comes from Frank Takkinen with Lake Street Capital Markets. Please proceed with your question.

Great. Thank you for taking the questions. Congrats on the quarter. I was hoping to start on sales reps. Michael, I think I heard you call out 146 reps. Could you parse out between the different units that you have in the past between extremities and breast? As a second part to that, I think you previously guided for 130 extremities and 30 breast reps by year-end. With some of the positive developments and momentum so far in 2026, could you see yourself potentially hiring ahead of that plan?

The answer to the last question is yes, we're always looking at that. The key element is making sure we can maintain quality control logistically. Yes, constantly monitoring that. The primary expectation is we stay on schedule at a minimum. In terms of the breakouts, we have 26 breast reps now in place, and we have three regional sales directors. Then extremities, we have 120 reps in place and 15 regional sales directors. In OMF Head & Neck, we have four field-based market managers who support that effort. In prostate, we have 3 clinical development managers and one director who manages the program.

Great. That's helpful. Just as a follow-up on some of the gross margin commentary, any other details you can provide on cadencing of margins? Should we expect that Q2 impact, given it's the first quarter of BLA products to be more pronounced, or will it actually be less pronounced as it is transitioning and then through the back of the year, you could see it either go up or down? Any color on that would be helpful.

Yes. Hi, Frank Takkinen, this is Lindsey Hartley. For this quarter, Q2 that we're in right now, we expect to be at the lower end of that range, where we should see the most pressure from transitioning to the BLA. For each quarter, we should expect to be within that range and here as well.

Perfect. Thank you.

Thanks, Frank.

Our next question comes from David Turkaly with Citizens. Please proceed with your question.

Hey, good morning, guys, and congrats.

Hey, David.

I had a follow-up one for Rick. You know, looking at some of the decisions from the insurance companies and noting that, you know, they called out some of the specific indications like breast. Is that common? Do you expect that you might need to go back to some of these payers to get like a broader coverage? Or was that expected for some of these, you know, insurers to kind of call out specific target areas like that?

Thanks for the question, Dave. Our label on the BLA is quite broad, and we expect that the coverage criteria that the payers set will continue to be broad. You can see it in the growth in all of our markets.

I don't think we're gonna have to go back to the well too much. Look, we stay pretty well connected with our sales force, with surgeons out there. If we hear denials, we're pretty engaged. As you can tell, we've got pretty consistent communication with medical policy teams out there. We don't expect any big hiccups. If we run into any hurdles, we'll go and collaborate with the payers and try to knock those down in due time. Look, the product's been on the market 17 years. We got well over 100 publications, and we have society position statements and a BLA approval. We've got a pretty strong case for coverage and a really good evidence package.

Thank you for that. Maybe Mike just, you know, doesn't seem like you need to do anything but invest kinda in organically here, but $100 million on the balance sheet now. Just thoughts on the world you're operating in. Are there M&A activity or opportunities, specifically in nerve repair, that you're looking at?

Sure. With regards to the cash, as we've mentioned in the past, we have significant infrastructure development underway from a capital allocation standpoint, in terms of systems. We'll continue to deploy cash for those purposes. If we opportunistically see assets that would further burnish our business purpose, we'll absolutely pay attention to, you know, deploying cash for that purpose. There's, you know, that's kind of a day-to-day hygiene, you might say, as an expectation from our viewpoint.

Thank you.

You bet. Thanks, David.

Our next question comes from Yi Chen with H.C. Wainwright & Co. Please proceed with your question.

Hi, good morning. This is [Katherine] on for Yi. I was hoping we could get a little bit more color on maybe percentages or how the breakdown is working out in your percentages of growth, so like new surgeons versus existing account expansion. I know you said you were getting more people on board at existing facilities, but are you getting more locations, and are you seeing more new indications versus core trauma? Just trying to get a feel for if growth is becoming kind of concentrated or if it's getting more diversified as you go along.

I'll ask Jens to weigh in on this as well, but yeah, this is a general statement. The key driver in terms of overall growth is numbers of surgeons and the relative productivity of individual surgeon practitioners. Both are key elements. The third in that line would be adding the number of accounts primarily driven by oral maxillofacial and breast. The number of accounts on the extremities is also growing, but only incrementally as compared to the others. That from a source standpoint, that's the hierarchy in terms of contribution.

Yeah, I think Mike, you said it well. I think that the key takeaway is that this is broad-based growth. We're seeing surgeon activation across all of our markets and the same for new account integration. It's really broad based. We continue to have a strong focus in our high potential accounts. It's also both here as well in this quarter, but it really is broad based. We're seeing growth across all of our markets.

Great. Thank you guys so much.

Thank you.

Ladies and gentlemen, that concludes our question and answer session. I will turn the floor back over to Michael Dale for any final comments.

Thank you, operator. On behalf of the AxoGen team, I want to thank everyone for their time and interest in our work to fulfill the promise and potential for all stakeholders of our business purpose, which is to restore health and improve quality of life by making restoration of peripheral nerve function an expected standard of care. We look forward to updating you on our continued progress on our earnings call next quarter. Thank you very much.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.