VCEL

Good day. And welcome to the Vericel Corporation first quarter 2026 earnings call. If you would like to ask a question please press star one. Todays conference is being recorded. At this time I would like to turn Eric Burns, Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone. Joining me on today's call are Vericel's President and Chief Executive Officer, Nick Colangelo, and our Chief Financial Officer, Joe Mara. 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 differ 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 Vericel'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 position 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, which increased 30% over last year and significantly exceeded our guidance for the quarter, driven by substantial growth for both MACI 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 NexoBrid BARDA 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. MACI 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.

MACI'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 MACI. We're capitalizing on our larger MACI sales force, which meaningfully increases overall reach across our MACI target surgeons and provides an opportunity to continue to drive growth in new MACI surgeons, as well as deeper penetration within our current MACI surgeon practices.

This was the first quarter with the expanded MACI sales force in their new territories. 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 MACI 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 MACI 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 MACI commercial organization and drive deeper penetration within our surgeon user base. We are also focused on leveraging MACI Arthro to drive continued growth in the treatment of smaller cartilage defects and to expand overall MACI utilization. Leading indicators remained strong in the small condyle segment, with higher first quarter in trailing biopsy growth rates than the overall biopsy growth rate and higher biopsy conversion rates to date for surgeons that have completed a MACI Arthro case.

We are also making significant progress in our efforts to generate new clinical data demonstrating the potential for improved patient outcomes with the less invasive MACI Arthro 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 MACI 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 MACI Arthro cases to collect prospective outcomes data in our MACI Clinical Outcomes Registry. Finally, we achieved an important milestone for the company with the FDA approval for MACI commercial manufacturing at our new facility, which began in the 2nd quarter.

This important achievement not only increases our manufacturing capacity to support the long-term growth of MACI in the U.S., but also enables the potential commercialization of MACI outside the United States. To that end, we remain on track to submit a MACI marketing application in the U.K. later this year, and if approved, to potentially launch MACI in the U.K. 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 NexoBrid. The base period contract of $35 million includes approximately $10 million over the next 12 months for the initial procurement of NexoBrid, 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 NexoBrid 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 NexoBrid. More broadly, we believe that the BARDA award underscores the clinical importance of this innovative product and can help enhance the overall utilization of NexoBrid in the U.S. market. I'll now turn the call over to Joe to discuss our 1st 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.

MACI'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 MACI and marks the fourth consecutive quarter with MACI 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.

Epicel revenue of $10.9 million was particularly strong, while NexoBrid 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. MACI's trailing four-quarter growth rate increased to 23%, and the trailing four-quarter growth rates for both the company and Burn Care 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 adjusted 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 and 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 NexoBrid 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 million-$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 MACI revenue guidance to $282 million-$288 million compared to the prior guidance of $280 million-$286 million. MACI is off to another strong start in the second quarter, and we expect approximately $62.5 million-$63.5 million of MACI 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 in 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 NexoBrid BARDA procurement revenue expected this year.

We now expect full-year Burn Care revenue of approximately $44 million-$48 million compared to our prior guidance of $36 million-$40 million. For the second quarter, we expect approximately $9 million-$10 million of total Burn Care revenue. In terms of NexoBrid BARDA procurement revenue, at this point, we expect approximately $5 million-$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 MACI sales force expansion, increased MACI ankle clinical trial expense, and incremental life cycle 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 midterm 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 one on your telephone keypad. If you're 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 one to ask a question. We'll pause for just a moment. We will go first to Richard Newitter with Truist Securities.

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

Good morning, Rich. This is Joe. I'll take that question. Thanks for the question. You know, in terms of the guidance update and the increase, I would say, you know, on a full year basis, you're right, there's kind of 2 key drivers. 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-$5 million range. We've included that in our full year guidance update. Let that flow through. The 2nd piece is the remainder of that, of that increase is really the incremental NexoBrid BARDA revenue, which we expect to begin in H2, and, you know, call it, we said about $5 million-$6 million.

You know, if you kind of put that together just quickly on the assumptions to the second part of your question, you know, starting with Burn Care, 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 Epicel quarter. Feel like we're really executing well on the Burn Care side. 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. You know, up 8 on a full year basis on the Burn Care side.

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 million-$10 million on a quarterly basis, and then we're adding in the second half BARDA. To be clear on kind of just how to think about that and how to model 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 it $3 million of BARDA revenue flowing through. You know, that gets you to call it $45 million on a full year basis on Burn Care.

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. But obviously great performance in the first quarter and the incremental BARDA revenue has been included. On the MACI side, 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. Importantly, you know, we pointed to another quarter of both double-digit biopsy and implant growth in the first quarter. You know, I'll also say we've gotten off to a strong start in Q2 in April as well.

You know, feel very good about kind of the MACI execution, particularly with that larger sales force. From a full year perspective, again, call it about a $2 million beat in the first quarter on MACI. You know, we've included that on a full year basis. You know, you kind of add that updated $285 on MACI. 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.

You know, that's important and good to see. You know, in terms of the MACI 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. We're keeping the same framework and approach we used in Q1. You know, I'd say we're gonna remain very prudent on the guidance. We've done that on the Burn Care side. You know, with the run rate framework, we're gonna continue to do that with MACI going forward. You know, the assumptions for MACI in total, are essentially keeping that high teens growth for both Q2 as well as the back half.

You know, 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. You know, it implies about $63 million in the second quarter. That's about 18% growth at the midpoint of our guide. You know, it's pretty similar for the, for the remaining 2 quarters. 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 MACI. This is consistent to what we talked about last quarter. You know, we think this positions us really well.

You know, to that point, you know, whether it's kind of the sales force contribution, you know, continuing to ramp up in MACI Arthro, 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 full-year basis. You know, for MACI 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. Again, we have, you know, the larger sales force, which we think can be impactful. You know, we're gonna remain prudent on both franchises, but certainly the goal internally is to outperform that. You know, again, we're not gonna change the approach on the guidance and, you know, we'd rather just stay prudent there.

Thanks for that. really helpful. 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. I'll take that question. Obviously you're referring to Agility, which is a product we've talked about for years now as we've talked about potential sort of new market entrants. You know, the position that we've kind of taken is one that's kind of aligned with our surgeon and KOL feedback that Agility 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. 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 MACI to date, nor should it.

You know, as you know, these are 2 different patient populations, older osteoarthritic patients that are potentially more appropriate for Agility and then the young active patients where MACI is typically used. You know, when you think about sort of the typical MACI patient, you know, less than if you look at publications, a very small, low single-digit percentage of patients that are treated with MACI have any sort of bone involvement, even though it's included in the label. There's no way if you have a clean cartilage injury that a surgeon is going to sort of core out over 1 centimeter of bone to use a product like Agility. We actually don't think there's a lot of overlap. There hasn't been to date, nor should there be for these patients.

You know, as you think about sort of the if you take a double-click on a couple dimensions, number one, as you know, the patella treatment, or treatment of patella defects for MACI is our largest and fastest-growing part of the business historically. Agility is, you know, contraindicated for use in patella defects, absolutely no impact on the biggest part of our business. You know, it's not indicated for arthroscopic administration, we actually haven't seen much, if any impact at all, from Agility, nor do we expect to see it. 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, Richard.

We'll go next to Mike Kratky with Leerink Partners.

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

Hey, Mike, it's Nick. On MACI 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 MACI Arthro. you know, we're kind of at critical mass where those trained surgeons, you know, are responsible for kind of over half our implants already. 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 in the first year on the market as sort of the smaller femoral condyle defects that MACI Arthro 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, single-digit penetration and lower growth in prior years. As we said on the call, the leading indicators for MACI Arthro remain strong.

We had higher first quarter and trailing biopsy growth rates than the overall biopsy growth rate. We continued to see that MACI Arthro implanters, you know, had higher biopsy conversion rates. It's clearly been one of the factors in a multifactorial dynamic that has, you know, elevated MACI's overall performance.

You know, the fundamentals, as Joe mentioned, coming into this year were very, 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 MACI Arthro in there as well, which has generated a ton of interest. The commercial excellence initiatives, you know, are clearly taking hold as well. You know, we're pretty excited about, you know, the MACI Arthro start to date, and we expect it's gonna continue to contribute to growth as we move forward.

Super helpful. Thanks, Nick. Maybe just one follow-up, would 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. How and when could we see that remaining $97 million start to materialize over time?

Yeah. You know, we're really excited about working with BARDA to kind of help with U.S. 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, but it's a very meaningful overall contract. As you mentioned, nearly $200 million, and a $35 million initial award. 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 Vericel, either through procurement and VMI service revenue or other cost offsets for some of the other work that would go on. The base contract is the $35 million.

Obviously, that includes the initial procurement and then VMI establishment and related services and work around a potential blast indication. Those are already funded. You know, as Joe Mara mentioned on the procurement side, you know, we expect that revenue over a 12-month period to begin in the third quarter. You know, $5 million-$6 million this year, the remainder early in 2027 on the procurement revenue. That's $10 of the first $35. The other will involve obviously doing the work around sort of the proof of concept for the blast trauma indication, that will start later this year and flow through. 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 BARDA had the initial stockpile, it was something like 16,500 units when they worked with MediWound on that. Our initial procurement is about, call it roughly 3,000 units with a ramp-up of another 5,000. You know, I think BARDA's pretty interested in increasing the stockpile because we run it through a VMI that will require, you know, commercial progression and so on. That'll play out. You know, it's intended to start, you know, after the first year of procurement.

Then, you know, obviously, if the proof of concept on blast trauma indication works out, you know, that could trigger the second and further development for that indication. Then MediWound's been working on a room temperature formulation, and, you know, that work will continue. 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 Jennings with TD Cowen.

Hi. Good morning. Thanks, Nick and Joe for the question. 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. Clearly, you're not seeing that in Q1 with the MACI franchise.

Now, the guidance suggests that you're not expecting to see much. I mean, 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 MACI post Q1. Would love to just hear what you're hearing and any more insights into your outlook.

Yeah. Hey, Josh, it's Nick. I'll start, Joe can kinda talk about, you know, our guidance perspective. You know, we made a point on our Q4 earnings call, 'cause there was some commentary out there about, you know, slowing procedures in December and so on. We actually had a stellar December, and we didn't see any impact there. Obviously, as we talked about, you know, we had strong double-digit biopsy and implant growth in the first quarter. 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. Joe, you can cover that a little bit more as well.

Yeah, I mean, I'd 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. 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. Obviously, that's our highest quarter in terms of activity. That's really encouraging as we kind of make the turn into 2026 or having made the turn.

You know, what's important there, as you know, Josh, is there's a longer kind of cycle here when we think about conversion. You know, from a conversion perspective, I mean, those typically convert over the subsequent quarters. 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. We feel like we're in a very good position. Of course, we're gonna be mindful of the environment, but, you know, we haven't seen any signals that, you know, any of that slowdown is impacting any part of our business.

Excellent. That's great to hear. Also wanted to just touch on the international MACI expansion opportunity. I know you guys are set up for potential launches in 2027. Can you just help us think about the buzz that's been generated by MACI Arthro? You know, is there pent-up demand in specific countries? Can be 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 MACI Arthro for their patients. Appreciate it.

Yeah. Josh, it's Nick again. You know, certainly the international cartilage repair, you know, sort of community is very, you know, concentrated. MACI, as you know, was on the market in Europe when we first bought this business. There's a significant sort of interest in having MACI come back. We talked about it, you know, with the U.K. 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 MACI, you know, back in the late teens. Really set up well and concentrated sort of cartilage repair surgical centers of excellence in the U.K. It's a perfect sort of beachhead for us, as I mentioned. Yeah, there's a ton of interest and excitement about potentially having MACI back, 'cause 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 sales force, seems like they were beginning to really contribute this quarter. Maybe just provide some metrics around that and the time we're seeing it take these reps to reach breakeven or close to breakeven.

Yeah. Hey, Caitlin, it's Nick. You know, obviously, as we kind of referenced on our prepared remarks, I mean, we're really sort of pleased with the initial sort of expansion and, you know, the contribution that the new territories are making to our overall business. I would just sort of remind listeners that, you know, the fact that we expanded our, you know, sales reps in Q4, then obviously we realigned the territories and everyone went into their new territories in Q1, you know, with absolutely 0 disruption in Q4, as the new reps were working together.

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 flawless execution from the commercial leadership team and great execution, you know, from the reps themselves. 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.

That continued into April for both legacy and new territories. 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 MACI surgeon practices. That led to another quarter of double-digit biopsy growth. That was particularly strong in the new territories. 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. 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. You know, again, we don't look at it in terms of sort of how quickly do they get to break even.

There's certainly a good portion of them who are already beyond break even as they moved into these new territories. 'Cause 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, obviously building a pipeline for the rest of the year with their strong biopsy growth. Honestly, I don't think it could have gone any better.

That's great. Maybe just talk through, you know, kind of the Epicel dynamics in the quarter and what really drove the strength?

You know, obviously, as Joe Mara mentioned, 1 of the highest Burn Care quarters we've had ever, and strongest since, you know, 2024. We talked about it last year that, you know, we kinda were taking a different approach to how we were sort of evaluating and working through each of the biopsies we receive. I'd say probably the biggest contributor to Epicel's performance was, you know, some growth on biopsies, which is great, but really kinda converting those biopsies into grafts. Again, that's just kind of a sales force execution with sort of clinical support on the patient treatment parameters as well. Really just sort of a different level of execution, not only for Epicel, but across the entire commercial organization.

Great. Thank you.

We'll go next to Mason Carrico with Stephens 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 MACI Arthro? Are there docs out there that, you know, are saying they'd like to see this peer-reviewed data on better patient outcomes before adopting or ramping use? Just trying to get a sense of what that can mean.

Yeah. Hey, thanks, Mason. It's Nick. You know, obviously, we've been talking about the fact that because MACI Arthro 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 MACI Arthro 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 MACI Clinical Outcomes Registry, where, you know, that can lead to a series of publications over time. 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 or 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 MACI was launched, there were no patella patients in the study. You know, over time, there were publications about the effectiveness in the patella of MACI 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. 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 MACI Arthro. Yeah, we're really focused on that. We think it'll have a very positive impact.

Got it. That's helpful. 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 base of surgeons has grown?

Yeah, I mean, you know, obviously, I would say broadly and at a higher level, those trends that we saw in trained surgeons remain. Now, we're kinda getting into a point now where we have this, you know, relatively large critical mass of, you know, MACI users who are now trained, and you're kinda lapping the quarterly thing. The gap, you know, is a little narrower, but the trends remain the same, that they definitely kinda increase their biopsy and growth rates.

Got it. Thank you, guys.

Okay. Thanks, Mason.

We'll go next to Jeffrey S. Cohen with Ladenburg Thalmann.

Good morning. Thanks for taking the questions, Nick and Joe. Just one from our perspective. Could you drill in a little bit further on the burn franchise? Wanna know a little more about Epicel maybe per case, number of cases, and NexoBrid, and talk a little bit about the franchise as well as the commercial organization and some cross-selling and awareness on the NexoBrid.

Yeah, I'll start, Jeffrey, and Joe can kind of jump in. I'd say, you know, on Epicel, 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 the biopsies we received, sort of a higher treatment rate for those patients, which is great. As you know, in some quarters in the past couple of years, you know, there were issues around patient health, and those biopsies didn't really convert into the grafts. 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 Epicel. That's kind of the dynamic with Epicel. We're encouraged. It's been, you know, a series now of good, strong quarters for Epicel. On NexoBrid, you know, 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.

This obviously kind of bolsters the revenue and utilization potentially for NexoBrid as we move forward. You know, we expect that over time, we're gonna see kind of that continued uptick in NexoBrid utilization. You know, very positive sort of, kind of broadening of the number of ordering centers for NexoBrid to start the year, which, you know, again, we think will translate into higher utilization as we move through the year.

Obviously, you know, we have reps now that, to your cross-selling point, promote both Epicel and NexoBrid. We've talked repeatedly about the fact that, you know, ideally, we have utilization of both products in every burn center. Certainly having NexoBrid has allowed us to sort of regain traction with some of the dormant burn centers over time. I, you know, I think a good string of quarters now for Burn Care, and we, you know, certainly expect that to continue.

Yeah. I mean, I would say not a lot to add. This is Joe Mara. I mean, just to echo a couple of Nick Colangelo's points. You know, I think the sort of commercial excellence initiatives we're talking about, you know, just to be clear in those, we obviously talk about that a lot from a MACI 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. I think certainly on the Burn Care side, that's important to point out.

As Nick talked about on the NexoBrid side or just in burns in general, you can see, you know, quarter to quarter, there could always be changes in terms of the number of burns, and we look at that data. We are definitely encouraged on NexoBrid. We are starting to see a broadening of centers, you know, we've seen actually a growth in the number of orders.

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 NexoBrid more toward the middle and making them more regular orders. You know, we're actually seeing some good signals there on the NexoBrid side. You know, I think similar to MACI, 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 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 a earlier question, I was hoping you could speak a little bit more about the segmentation that you're seeing in the market for cartilage lesions between MACI and other 2-step procedures in terms of the lesion type, anatomical segmentation, grade levels, et cetera.

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 for, you know, for MACI for several years. It's been, you know, obviously very static, certainly over the past four years plus, pretty much essentially since we launched the product. You know, MACI stands alone as the clear market leader in cartilage repair. There are no other MACI-like products. You know, that hasn't changed at all.

We've talked about, you know, 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.

You know, we talked about there's Agility sort of for older osteoarthritic patients, and then, you know, some other sort of more microfracture 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 microfracture augmentation products that are out there for smaller defects. You know, I'd say relatively status quo. MACI, again, just remains the clear market leader, and that has expanded over time.

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

Yeah. You know, we have looked at. Obviously, MACI 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, 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.

I guess, you know, it's kind of a misnomer to a certain extent to say that, you know, 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. 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 patients being informed and consenting to a certain treatment will be required. Anyway, hope that helps.

Our next question comes from the line of Swayampakula Ramakanth with H.C. Wainwright.

Thank you. This is RK from H.C. Wainwright. 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, you know, the biopsy and implanting surgeon count, you know, what % of them were repeat versus first-time users? Also with the increased biopsy, I mean, with the record biopsies, you know, how much of that is coming from the new sales force? You know, what incremental gain did you get from the new sales force?

Yeah. Good morning, RK. This is Joe. 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 the last, you know, several years since COVID, we've seen that consistent double-digit growth in biopsies. We think that positions us well.

You know, I think we're sort of highlighting the biopsies per surgeon because we feel like that's an important metric to make sure we're kind of driving gaps, 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. You know, it's an important metric. You know, obviously that's coming from, you know, you're gonna see a mix of existing and new surgeons, but, you know, that'll be weighted more toward existing surgeons just based on the metrics. That's important for us.

You know, I will say, you know, one note on that is, you know, with the 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. 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. Obviously, very early days with the new sales force, but, you know, encouraged with the kind of pull-through we've seen there. You know, I'd say our conversion rate, you know, has kind of consistently been stable, but we are seeing some positive signs there.

You know, for example, if that kind of ticked up a bit, you know, that would be upside for us. We're not gonna 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. That's something we'll continue to focus on. 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?

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 performed so far in Q1.

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, into the, into our business. I think it's certainly a mix, I would say, of our existing reps and our, and our legacy reps, I should say, and our new reps. You know, we've been encouraged with what we've seen so far from our new sales force.

Okay. One last question, if I may. This is on the arthro product. You know, what do you think is the arthro's penetration within the small condyle defect, TAM? What is your estimate of the addressable arthro-eligible patient population right now?

Yeah. You know, we think obviously there's been a meaningful contribution from MACI Arthro in that segment because that's what the instruments are designed to do. 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, you know, 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.

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, 2 to 4 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 defects. It's the biggest part of our TAM. That's why we're focused on growing it. Again, just like patella, you know, we think over years that we're gonna 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, you know, 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. We look forward to providing further updates on our next call, Thanks again and have a great day.

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

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

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

Thank you, Eric, and good morning, everyone. As highlighted in our preliminary financial results release last month, the company had a strong close to the year and delivered outstanding financial and business results in the fourth quarter with significant revenue and profit growth and continued progress across a number of key business initiatives. From a financial perspective, the company generated record fourth quarter total revenue, which increased 23% over last year and exceeded our guidance for the quarter. This strong revenue performance drove significant margin expansion and profit growth as the company delivered record net income, gross margin of nearly 80% and adjusted EBITDA margin of 40% for the quarter. We also ended the year with approximately $200 million in cash and investments and no debt as we continue to elevate the company's top-tier financial profile. We also achieved several key business objectives in the quarter, including the successful completion of the MACI sales force expansion, and the initiation of the MACI Ankle clinical study and made substantial progress on other long-term growth initiatives as we remain on track to begin commercial manufacturing of MACI in our new facility this year and to potentially launch MACI outside the United States in 2027. MACI's second half momentum continued in the fourth quarter with record revenue of more than $84 million, representing 23% growth versus the prior year. This performance was driven by strong underlying fundamentals as we had the highest number of MACI implants, implanting surgeons, surgeons taking biopsies and biopsies in any quarter since launch. MACI's performance was particularly strong in December across all key performance metrics, including biopsy and implant procedures as our commercial and operations team executed exceptionally well to close the year. MACI's leadership position in the cartilage repair market has continued to strengthen since we launched the product in the U.S. in 2017. Over the past 9 years, MACI has generated compound annual revenue growth of 24% and has delivered revenue growth of 20% or more in each of the last 3 years. Notably, as of the end of 2025, more than 20,000 patients have now been treated with MACI. We believe that MACI's strong clinical profile, together with the surgeon and patient benefits of a simpler, less invasive surgery, have driven MACI's strong growth and will continue to do so moving forward. In addition, MACI's best-in-class pricing and reimbursement profile with prior authorization approval rates remaining over 95% for commercial patients in 2025, demonstrates the significant clinical value MACI represents to payors, hospitals, surgeons and patients. With this strong MACI foundation in place as we move into the new year, we're focused on executing on 3 strategic imperatives that we believe will position the company for sustained, strong revenue and profit growth in 2026 and the years ahead. First, we're focused on capitalizing on our larger MACI sales force, which will meaningfully increase our reach across the entire MACI customer base. Starting the year with a significantly larger footprint provides an opportunity to not only continue to drive the expansion of new MACI surgeons, but also to drive deeper penetration and increased utilization within our current MACI surgeon base. We're also implementing a number of important commercial excellence initiatives across the organization. We've made significant investments in new tools and additional resources to enhance our commercial analytics and standardize best practices across our larger sales team, which we believe will elevate execution across our commercial organization and drive deeper penetration within our surgeon user base, unlocking another key growth driver for MACI. Based on these initiatives and the quality of our entire expanded sales force, we expect that MACI sales rep productivity will return to 2025 levels as early as next year. Our second strategic priority is to leverage MACI Arthro to drive continued strong growth in smaller cartilage defects, principally on the femoral condyles, which represents the largest segment of MACI's addressable market. As we discussed throughout 2025, we've been very successful in training physicians on the MACI Arthro technique with approximately 1,000 surgeons trained to date. Importantly, MACI Arthro trained surgeons have continued to demonstrate a significant increase in biopsy and implant growth following training, and for those surgeons that have completed the MACI Arthro case, even higher biopsy and implant growth and higher conversion rates. With this foundation in place, our objective is to leverage MACI Arthro to drive significant growth in the treatment of small condyle defects, which historically have represented a smaller percentage of our overall patient volume and a lower growth segment for MACI. Notably, growth in the small condyle defect segment accelerated in MACI Arthro's first full year on the market in 2025 as this segment became one of the highest MACI implant growth segments along with the patella segment, which consistently has been our highest volume and fastest-growing segment. We believe that the positive trends are driven by the fact that MACI Arthro is a less invasive procedure with the potential for improved patient outcomes. Early data from ongoing investigator case series suggest a significant reduction in postsurgical pain, improved range of motion and a meaningful acceleration in the time line to achieving full weight bearing following MACI Arthro treatment. These initial results suggest very positive patient outcomes that could also lead to shorter overall rehab and recovery time lines. We expect these case series to be presented at upcoming industry meetings and in publications, and we continue to work with additional surgeons as they complete MACI Arthro cases to collect prospective outcomes data in our MACI clinical registry. Our third strategic imperative is to leverage our life cycle management initiatives to position the company for sustained longer-term growth. To that end, we initiated the Phase III MACI Ankle MASCOT clinical study in the fourth quarter. A potential MACI Ankle indication represents a substantial growth opportunity with an estimated addressable market of more than $1 billion and would also enable the company to expand into other areas of the orthopedics market. We also remain on track to initiate commercial manufacturing for MACI in our new facility this year, which will allow the company to potentially commercialize MACI outside the United States. We're taking a staged approach to MACI OUS expansion with the first phase targeting a planned launch in the U.K. The U.K. represents an ideal first step for MACI OUS expansion as there's clearly defined expedited approval and reimbursement pathways, a high level of awareness and surgeon advocacy given that MACI was previously on the market in the U.K. and concentrated points of care with a dozen or so centers of excellence for the treatment of cartilage injuries. We expect to submit a marketing authorization application to the U.K. MHRA in the middle of this year and potentially launch MACI in the U.K. in 2027 as we seek to expand the long-term growth and value creation opportunities for the company. In summary, the company executed extremely well in the fourth quarter, generated record revenue and financial results, while achieving a number of key objectives that help position the company for continued growth in 2026 and beyond. I'll now turn the call over to Joe to discuss our financial results and 2026 guidance in more detail.

Thank you, Nick, and good morning, everyone. As Nick referenced, the company had an outstanding close to the year with record fourth quarter revenue of $92.9 million and 23% growth versus the prior year. For the full year, total revenue increased to $276.3 million, which was above the high end of our guidance range for the year. MACI also had a strong close to the year with record fourth quarter revenue of $84.1 million, representing 23% growth versus the prior year and 51% sequential growth versus the third quarter. For the full year, MACI revenue increased 21% to $239.5 million, and Burn Care fourth quarter revenue was $8.8 million, which was above our guidance range for the quarter. For the full year, Burn Care revenue was $36.8 million, consisting of $32.1 million of Epicel revenue and $4.7 million of NexoBrid revenue. The company's substantial growth in the fourth quarter translated into significant margin expansion with gross profit of more than $73 million in the quarter or 79% of revenue and adjusted EBITDA of more than $37 million or 40% of revenue, representing the company's highest quarterly margins in any quarter to date. On a full year basis, the company also delivered meaningful margin expansion with 74% gross margin, an increase of nearly 200 basis points compared to the prior year and 26% adjusted EBITDA margin, an increase of over 300 basis points versus the prior year, which were both above our guidance to start the year despite the incremental investments in 2025 for our new facility and the MACI's sales force expansion. GAAP net income also grew nearly 60% to $16.5 million for the full year as the company's profit growth continues to significantly outpace our strong revenue growth. Finally, the company generated full year operating cash flow of $52 million and ended the year with approximately $200 million in cash and investments, an increase of $35 million during the second half of the year as the expected inflection in our cash generation following the completion of our new manufacturing facility is now being realized. Turning to our financial guidance. We are entering 2026 with a great deal of momentum and have gotten off to a very strong start of the year in the first quarter. Consistent with our commentary on our prior earnings call regarding 2026 revenue for both franchises, we expect total company revenue this year of approximately $316 million to $326 million. For MACI, we expect another year of strong revenue growth. And as a starting point for our guidance, we expect MACI revenue of approximately $280 million to $286 million for the full year. Our initial guidance reflects a continuation of current MACI key growth driver trends, including surgeon growth, biopsies per surgeon, conversion rate and price to start the year, recognizing that there is an opportunity for outperformance based on the momentum in our key performance indicators, our expanded sales force and the commercial initiatives that we have put in place. As part of our initial framework, we expect a similar quarterly mix of MACI full year revenue as last year and importantly, a similar growth rate for MACI each quarter this year versus the prior year. For Burn Care, we are maintaining our run rate approach to guidance with revenue of approximately $9 million to $10 million per quarter, recognizing that revenue can vary on a quarterly basis. For the full year, this points to approximately $36 million to $40 million of total Burn Care revenue. Of note, we are not assuming any additional NexoBrid revenue in our initial guidance related to a potential BARDA award, although there is a reasonable possibility for incremental NexoBrid BARDA revenue during the year. For the first quarter, we are on track to exceed 20% total company revenue growth as we are off to a very strong start to the year for both franchises. MACI's fourth quarter momentum has continued into this year with MACI performance trending toward higher first quarter growth than in recent years and Burn Care performance trends have also been strong to start the year. As such, we expect MACI revenue of approximately $54 million to $55 million and Burn Care revenue of $9 million to $10 million for the first quarter. Moving down the P&L. For the full year, we 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 MACI sales force expansion and increased MACI Ankle MASCOT clinical trial expense as patient enrollment begins. We expect total operating expenses to be approximately $220 million for the full year and anticipate a similar level of spend each quarter. For the first quarter, we expect gross margin of approximately 70% and adjusted EBITDA margin of approximately 10%. Overall, 2026 is set up to be another positive year for the company with strong top-line revenue growth as well as continued margin expansion and profit growth. As we look ahead, we believe that the durable growth of our portfolio positions the company to sustain strong top-line growth in the years ahead and supports our midterm revenue and profitability targets. This concludes our prepared remarks. We will now open the call to your questions.

[Operator Instructions] We'll move to our first question, Ryan Zimmerman with BTIG.

Busy morning for a lot of us, so I'll try and squeeze in both questions. But I think there was a number of price increases on MACI that were taken in 2025. Correct me if I'm wrong on that, Joe. But how do you think about kind of the mix of price versus volume? If you reflect back on 2025, particularly on volume, I think, investors are rightly concerned that price drove some of the growth. And then as you look ahead to '26, how do you think about that balance as well?

All right. I'll start -- do you want to ask your second question or just start there?

Sorry, let's just start there. Sorry, Joe. Keeping me honest.

Yes. So look, from a pricing perspective, obviously, that remains a key growth driver for us. Nick talked about in his prepared remarks, our kind of access position remains very strong. I think over 95% of our commercial cases from a prior authorization perspective are approved. So kind of looking back historically, and I would say looking forward, certainly, pricing kind of has been and will remain part of our growth algorithm. If you look at the second half of last year, obviously, there was a significant improvement in the MACI performance. I'd say that step-up was volume driven, although, of course, I would say both price and volume play a part in the growth.

Yes. Okay. And then one of the other key, I think, variables to the algorithm is new doctor growth. And so as you think about kind of who is adopting Arthro, I'm curious if you could reflect on maybe kind of existing or same-store sales dynamics relative to kind of new doctor growth. And appreciate the comments you gave about those adopting Arthro certainly being more robust. But is that a reflection of your existing customer base or potentially new doctor growth?

Ryan, I'll start. It's Nick. I think the sort of ratio of trained surgeons that we talked about previously has held throughout the year. So about 2/3 come from existing MACI users split between kind of former patella users and patella and condyle users and then about 1/3 from sort of either prior open targets who had not adopted MACI at that time and then obviously, the new arthro-only surgeons. So that's kind of remained relatively consistent. And I'd say the dynamics that we see once the surgeons are trained regardless of which bucket they come out of sort of hold true in terms of obviously increasing if they're new, but even sort of former users increasing both biopsy and growth rates. And then particularly when they start doing Arthro cases, their growth rates for both biopsies and implants are even higher, and their conversion rate was higher for the year as well. So all obviously very encouraging trends for us as we move forward.

We'll go next to Mike Kratky with Leerink Partners.

This is Sam on for Mike. So just during your 3Q '25 earnings call, I think, you had mentioned that 20% growth for MACI would kind of be a good starting point for fiscal 2026. But the current guidance kind of implies growth slightly below that at roughly 18% at the midpoint. Is this just a function of kind of 4Q being a little bit better than expected? And is there anything that materially changed from then versus now when you issued the new guidance here?

Yes. So I'll start. I mean I'll just give a quick update on the guidance maybe overall. And I would say just on that last part, I mean nothing certainly materially changed. I think if anything, we probably really ended the year a bit stronger across the business, which was great. So just in terms of the guidance framework, to your question, I would say, if you look at both franchises, it's really consistent with the commentary we gave in the last call. So on the MACI side, the guidance is kind of in that low to mid $280 million range. That's consistent, I think, right on top of consensus or very close. We talked about in the last call, having that similar year-over-year incremental growth, which I think accomplishes as well kind of the midpoint of that range and the $282 million or $283 million is right in line with last year, which is about a $42 million increase. I'd say on the specific question around the 20%, I mean, obviously, there's a range around MACI. We want to be prudent to start the year. But what we said in the last call, in addition to having that similar incremental growth was, I think coming into the call, there were analysts kind of on either side of that number. And I think we were comfortable with something at that range, but I think we try to be clear that we were not going to guide above that. So I think more than anything, it's probably just being prudent on the MACI side, but we feel really good about the start of the year on MACI and the full year. And then just quickly on Burn Care, I think that's important as well. So that one is pretty straightforward. We said last quarter, we're going to maintain this run rate framework, which I think has worked well in the last couple of quarters, in particular, call it, $9 million to $10 million per quarter, get to $36 million to $40 million or $38 million at the midpoint. One thing that is probably a bit off coming into the call is we referenced the high 30s last quarter, but if you actually look at external estimates, they're kind of more into the lower 40s. So that's obviously impacting both Burn Care and the total company external starting point. So I do want to point that out. So you put that together, I think we have a nice balanced guide, something around, call it, mid-280 or middle of that range rather and high 30s in Burn Care, you're probably around 320 or so at the midpoint, which we think is a very balanced starting point. And then just briefly on Q1, because I think, that's important as well in the context of the guide. So just to reiterate what we said in the call, we think we're off to a great start on track to exceed 20% as a company for the quarter. The MACI metrics have been really strong, and we are guiding Q1 higher than we've trended and certainly higher than we've guided in the last couple of years. So obviously, feel good about MACI. Burn Care has had a strong start as well. So very much on track to that run rate for Q1. So we think that sets us up well. And then lastly, just on the MACI question and just generally, I think as we talked about in the last call, I'd say we just want a very, I would say, prudent and disciplined start of the year in our initial guide. So MACI has a ton of momentum, we have a number of initiatives, including the increased sales force. We did see some inflection in some of our growth drivers in the second half, but we're not baking any of that in. We're assuming pretty similar trends on a full year basis. And similarly, I would say, on the Burn Care side, there's certainly an opportunity for incremental BARDA revenue. I think that's a reasonable possibility, but we're not baking that in. So I think it's prudent on both franchises. And just one last point on MACI. We did make the comments. If you look at the full year growth rate at the midpoint of that range, it's actually right in line with our Q1 guide. And so we felt like starting the year with not only a similar mix of business because we know our business is seasonal, but pretty -- or essentially consistent growth rates, really the same growth rate across all 4 quarters was a good way to start the year, and I think positions us really well to potentially outperform on that if we execute well. But I think it's a prudent way to start the year, again, just given the seasonality of our business.

We'll go next to Richard Newitter with Truist Securities.

This is Felipe on for Rich. So just on the sales force expansion, you guys pretty quickly expanded your territories about 30% in the last couple of months. So I'm just wondering like just talk me through like rep adds and the strategy for the year and I guess, how you expect those new territories to ramp? And then just a second question, if you could give some guidance and expectations for free cash flow ramp for the year, that would be helpful.

It's Nick. I'll start with the sales force expansion one. And obviously, we're really excited about the expansion. As you will recall from last year, we decided to accelerate the expansion into Q4 because we wanted to support what we knew were going to be significantly higher volumes in Q4 and make sure that we were positioned to take advantage of this momentum in MACI for the entire year and not kind of have the sales force expansion in the first third of the year. So really excited about that. Obviously, the larger footprint, as I mentioned on my prepared remarks, will increase our reach across the surgeon base and really gives us an opportunity to drive expansion of surgeons and deeper penetration in our existing surgeons. And I would just say, I think the team executed flawlessly on the expansion. Obviously, people outside of the company can worry about disruption when you're expanding the sales force in your largest quarter. So great job by our sales and commercial leadership team to execute and put a plan in place, great job by both the new and existing reps in the fourth quarter to not only drive our highest quarter ever, but to position us well as we come into 2026. As we mentioned earlier, these are extremely experienced and talented reps that we think, together with our existing sales force are going to drive strong performance as we move forward through the year. So that's an important piece of it. I mentioned on the call that we expect our rep productivity to kind of get back to last year's level as quickly as next year. So really excited about the opportunity for the sales force expansion and what it's going to mean for our business.

Yes. And then in terms of kind of the sort of cash flow question, I think probably the best way to think about -- we're not guiding to that specifically, but obviously, we think we are in an inflecting cash flow position, which is great. Generally, I think what we talk about is our adjusted EBITDA is a good proxy for operating cash flow. It doesn't always line up because there could be collections at the end of the year and some timing differences. But kind of over time, that tends to be a pretty good proxy for the most part. And then you kind of look at our run rate on the CapEx side in the last couple of quarters, it's been in the low single-digit millions, obviously, much lower as we've gotten back to more of a steady state after getting through the building projects. So that's probably the right way to think about it, but we don't have a specific number we've guided to there.

And we'll move next to Mason Carrico with Stephens.

In the context of your MACI outlook for this year and recognizing your comments, Joe, that leaves some room for upside, how should we think about what's baked in, in terms of the larger sales force conversion rates, maybe surgeon growth that's in the guide today?

Yes. So again, from a MACI perspective, I think we wanted to start the year with a very balanced view. Obviously, Q1 is off to a good start. And so I think as you think about the key growth drivers there, as I said, I would say you can think of those as similar on a full year basis, whether you're talking about kind of some of the key biopsy drivers or whatnot. I wouldn't say there's anything specific or kind of baking in, in terms of the new sales force. I think it's probably more just overall looking at the overall trends. To kind of Nick's earlier point, I think we have pretty high expectations of our new adds and are excited about just the increased reach and frequency we're going to have. So we do think that can be impactful over time, but we're actually not really baking anything into the guide. And obviously, it's a long sales cycle, so you want to have a little bit of patience there. But obviously, at the same time, we expect that to kind of get back to our rep productivity rates pretty quickly. So I think there's certainly an opportunity if the teams can do a good job to help drive that outperformance, but nothing specific that we've baked in, assuming kind of any sort of inflection in trends.

Okay. Would you be able to share any thoughts or anything you can point us to on how conversion rates for MACI tracked over the course of 2025? What proof are you seeing that Arthro might be able to improve the conversion rates and really shorten that time from biopsy to implant?

Yes. So I think on an overall basis, as Joe mentioned, that conversion rates were relatively stable for the year. But as I mentioned, within that segment of MACI Arthro trained surgeons that actually performed a case, again, we see higher biopsy and implant growth rates than MACI Arthro trained surgeons generally, which are higher than the overall average. And then we do see higher conversion rates for those MACI Arthro implanting surgeons as well. So that's the evidence, as I mentioned on my earlier remarks.

And we'll move next to Jeffrey Cohen with Ladenburg Thalmann.

So in particular, could you unpack OpEx a little bit for your '26 guide? And curious on the sales force expansion from last year, if there's any pull-through or any anticipated expansion for this year in R&D as well?

Yes. So I think we gave guidance at the total company level. So we said approximately $220 million on a full year basis in OpEx. Probably the easy way to think about that is, call it, $55 million a quarter, pretty consistent, including the first quarter. I think to your kind of question and point, I mean, one thing we've been talking about is as we move into '26, there are some incremental costs that are going to flow through the P&L, including on the OpEx side. So to your question on the SG&A side, certainly, it's the expansion of the sales force. So it's roughly 30 people. You can think of that as probably something in the $10 million range on an annual basis. And then I'd say a pretty meaningful increase on the R&D side as well as part of that, where you can think about, obviously, the Ankle trial, which was kind of in a start-up phase is now thinking of kind of more sites, and patient enrollment and whatnot. So those are really the 2 key drivers from an OpEx perspective that we baked in on a full year basis.

Okay. And then as a follow-up, with the Arthro surgeons out there, the anticipation for '26 is being driven by new surgeons or repeat surgeons? Are there 1,000 more surgeons to reach this year, or are you seeing more drive from existing physicians?

Jeff, it's Nick. As I mentioned in my remarks, I mean, the sales force and MACI Arthro combined, give us a greater reach on the sales force side. And then with MACI Arthro, we expect to continue to train surgeons, but we're really focused given the dynamics you see with those trained and implanting surgeons on sort of the depth of penetration that you can achieve with those surgeons in their practice. And so that is a meaningful piece of what we're doing. We've already trained a good portion of our existing MACI users. Again, I think we'll continue to do that, and it will bring new surgeons into the fold with MACI Arthro. But again, getting depth into those practices is really a key growth driver and the subject of a lot of our commercial excellence initiatives that we referenced earlier on the call.

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

It's [ Michaela ] on for Caitlin. Our first one is, are you continuing to see dormant Epicel accounts reactivated given NexoBrid? And what does the next stage of NexoBrid adoption look like, if you can give any more color there?

So we definitely see more Epicel dormant accounts. So that has continued as we've sort of, I think, just by way of reference, we now have our entire Burn Care team of 17 territories cross-selling both products. So you certainly see additional dormant accounts each year coming on board. Again, it's a pretty sporadic patient base. And so you can have hospitals that may or may not see a patient in that particular year, but we definitely are bringing on additional Epicel accounts. And then on NexoBrid, obviously, changing the standard of care takes time, but we're continuing to see progress there. We launched the product with about 90 target accounts. To date, over 70 accounts have actually placed orders for NexoBrid. So good penetration on the overall number of accounts. And as we've talked about on prior calls, it's really about how do you move all of the accounts up the curve to be consistent users, which is what we're in the process of doing. So we remain sort of optimistic on what NexoBrid can do as we move forward. And as Joe mentioned, while we're not baking any sort of BARDA award revenue into our guidance, we think that is a strong possibility for the year. And if so, that will reinforce NexoBrid as a standard of care in addition to sort of some important financial enhancements for the company as well.

And then maybe just another quick one from us. Do you have any updates on when the MACI Arthro 2.0 instruments will be launched and maybe what improvements you're making?

Yes. So that's an ongoing process. We wanted to have MACI Arthro instruments on the market for a sufficient period of time in the first year and then gather feedback on enhancements that would be most important to continue sort of a journey of making MACI Arthro a simpler, less invasive procedure. So I'd say we're kind of gathering up that market input now depending on changes, these things can be by the time you develop new instruments, go through the sort of validation process, the approval process, et cetera, it's, call it, an 18-month or more process. So that would suggest maybe next year, probably at the earliest that we would have additional enhancements.

We'll move next to RK with H.C. Wainwright.

Just a quick question on gross margin. So you recorded 79% gross margin in the fourth quarter, but the 2026 guidance calls for a margin of 75%. So I'm just trying to understand the 400 basis point compression. Is that coming from trying to get the manufacturing start-up activities going? Or is it some amount of depreciation baked into it? And when all is said and done and the MACI manufacturing is completely transitioned into the Burlington facility, what could be the steady-state margin profile?

And thanks for the question. I would say, just a reminder, when we talked about the 79% margin, that's based on our Q4 performance in 2025. And so we do see some seasonality in terms of margins and just because our business, particularly MACI is so Q4 driven, of course, in terms of the mix of the year, we do tend to see our margins scale up in that quarter. So when you look on a kind of more apples and apples, I would say, full year basis, last year, on a full year basis, we did 74% next year for 2026, rather, we're guiding to 75%. So some increase on a year-over-year basis. Broadly, I would say there are kind of some additional costs that we are absorbing as we move into the new facility here in Burlington and now have kind of multiple facilities that we're operating, but I still feel like that's the right guidance assumption for the year. And then longer-term, just a reminder, we said on the gross margin side and we think we can get into the high 70s by the end of the decade. And I would say just generally kind of already being on a full year basis in the mid-70s and trending that way this year to start the year, I think we're pretty well positioned in terms of that kind of long-term target that's out there. And then maybe just to bring your Q4 data point back, I think Q4 is helpful when you look at those margins because we tend to grow into similar margins over time as the company grows more on an annual basis. So it is a good marker to look at. But again, I think on a full year basis, it is an increase on the gross margin side. It's just comparing Q4 to full year.

One quick question on the ex-U.S. business. So as you were stating, Nick, that you're planning to submit to the U.K. regulatory authorities in mid-2026 or in 2026. So how are you planning the commercial infrastructure there? Is this going to be a direct launch by you, or do you plan to enter into some sort of a partnership to initiate that business?

Yes. Thanks RK. So as I mentioned on -- in my prepared remarks, the U.K. is a very attractive first step for us for MACI OUS expansion because I mean it is an expedited approval pathway, mutual recognition pathway. So that is very attractive as well as established reimbursement pathways. And I also mentioned there's a concentrated call point. So there's a dozen or so centers of excellence where patients in the U.K. with cartilage injuries are treated, which means it doesn't require a big commercial footprint. So we would absolutely plan to commercialize on our own in the U.K.

We'll take our next question from Josh Jennings with TD Cowen.

I know you're not breaking out MACI Arthro contributions directly and we're thinking about the MACI franchise holistically. But I was hoping maybe qualitative, you can just share with us just whether the MACI Arthro launch in 2025 exceeded your internal expectations or in line with your external expectations, but it seems like it's exceeded it and including what's going on in this first quarter of 2026, where you're combating historical, seasonal trends and you're going to -- thinking you're going to deliver 20% growth or forecasting 20% growth of that MACI franchise here in 1Q '26.

Yes, thanks Josh. So yes, I mean -- I think when you look at different dimensions of the MACI Arthro launch, I mean, surgeon training, as we said, we've now trained a meaningful portion of our surgeon base, which is great. Their behavior, as you mentioned, and I've mentioned a couple of times, is exactly what you'd want to see in terms of increasing growth rates and now for MACI Arthro implanters having higher conversion rates. I'd say when you look at MACI growth overall, we had nearly a couple of hundred basis points of growth. And when you look at that in the context of the increased growth rate in our small condyle defect segment, it clearly accounted essentially for that accelerated growth for the year for MACI. So yes, from that perspective, we're very pleased. Obviously, we entered last year with 150 trained surgeons. We enter this year with kind of more like 900, as we mentioned early in the year that's now grown since that time. And so there's an opportunity if those trends continue to really sort of meaningfully impact the business as we move through 2026 and beyond.

And then I know -- I was just hoping if you could share some details on this BARDA RFP, it sounds like the team is more optimistic that will come through. But what's left? Is it just administrative sign-off? And then I think this is in the public domain, but maybe just help us think about if that does come through, what type of revenue contributions in 2026 and beyond could this BARDA RFP deliver for Vericel?

Yes. So as you're aware, there were kind of 3 components to the RFP from BARDA. One was kind of strategic stockpiling for national preparedness and procurement revenue that would result from that. There was a desire to add additional indications for blast trauma and funding for that and then for a room temperature stable formulation as well. So there were kind of 3 components to it that would flow through our income statement differently. That obviously was impacted by the government shutdown initially. As you're well aware, there were parts of funding for 2026 that were pushed out to the end of January, and that's still an ongoing issue. So while HHS was funded for the year as of the close of January, that's only a few weeks ago and so obviously, getting the machinery up and running takes a little time, it seems. But we do think there's a pretty strong possibility that we'll be able to get that award done this year, and it would have the impacts that we mentioned. The RFP obviously set forth the stockpiling numbers, starting with 2,750 units and then additional procurement down the line. The exact revenue that would come out of that, we're not prepared to share right now. It's obviously subject to the negotiations on pricing and so on, but as that moves forward, we can share more about that.

And that will wrap our question-and-answer session. I will now turn the call back over to CEO, Nick Colangelo, for any additional or closing remarks.

Okay. Well, thanks, everyone, for joining us this morning. As we've mentioned, the company had an outstanding fourth quarter and is very well positioned to continue to deliver on what we believe is a unique combination of sustained high revenue growth and profitability in 2026 and the years ahead. We look forward to providing further updates on our progress on our next call. So thanks again, and have a great day.

Thank you. That will conclude today's conference. Ladies and gentlemen, we thank you for your participation. You may disconnect at this time.