Image source: The Motley Fool.

DATE

Thursday, Nov. 6, 2025, at 8:30 a.m. ET

CALL PARTICIPANTS

  • President and Chief Executive Officer — Dominick C. Colangelo
  • Senior Vice President and Chief Financial Officer — Joseph Anthony Mara

Need a quote from a Motley Fool analyst? Email [email protected]

TAKEAWAYS

  • Total Revenue -- $67.5 million in total revenue for Q3 2025, a record for the third quarter, with performance above company guidance.
  • MACI Revenue -- $55.7 million in MACI revenue for Q3 2025, reflecting 25% growth in MACI revenue and exceeding the high end of guidance.
  • Burn Care Revenue -- $11.8 million in burn care revenue for Q3 2025, up 21% sequentially over the second quarter, driven by Epicel's highest quarterly result of $10.4 million and NexoBrid's $1.5 million, which was its best since launch and 38% year-over-year growth.
  • Gross Profit -- Nearly $50 million in gross profit for Q3 2025, representing 73.5% of revenue and translating sales into substantial margin.
  • GAAP Net Income -- Net income was $5.1 million for Q3 2025.
  • Adjusted EBITDA -- Adjusted EBITDA increased to $17 million, up nearly 70%, with a margin of 25%
  • Operating Cash Flow -- $22.1 million in operating cash flow for Q3 2025, a record for any third quarter.
  • Free Cash Flow -- Nearly $20 million in free cash flow after $2.6 million in capital expenditures.
  • Cash and Investments -- $185 million in cash and investments at the end of the third quarter
  • MACI Biopsy Growth -- Double-digit percentage increase in MACI biopsies and record highs in both biopsies and active surgeons, with October setting new monthly records for both.
  • MACI Arthro Surgeons -- Over 800 surgeons trained through October, with substantial increases in biopsy and implant growth rates among those trained surgeons, as observed through October.
  • Clinical Outcomes -- Early investigator case series showed "a significant reduction in postsurgical pain, improved range of motion, and a meaningful acceleration in the timeline to achieving full weight-bearing" for MACI Arthro patients.
  • Salesforce Expansion -- On track for 25 new territories and three new regions, to be completed by year end, with new hires supporting volume in the fourth quarter and realignment at the start of the following year.
  • Guidance -- Full-year revenue outlook of $272 million to $276 million, with the MACI franchise expected to deliver $237.5 million to $239.5 million and fourth-quarter MACI revenue between $82 million and $84 million.
  • Margin Guidance -- Full-year gross margin guidance of 74% and adjusted EBITDA margin guidance of 26% for the full year; fourth quarter expected to reach 77% gross margin and 40% adjusted EBITDA margin for the fourth quarter with operating expenses around $50 million for the fourth quarter.
  • BURN CARE Guidance -- Full-year burn care revenue expected at $34.5 million to $36.5 million, with fourth-quarter revenue projected at $6.5 million to $8.5 million.
  • Midterm Profitability Targets -- Gross margin targeted in the high-70% range by 2029 and adjusted EBITDA margin in the high 30% range by 2029.
  • MACI Ankle Study -- Phase III clinical trial for MACI Ankle set to begin in the current quarter, aiming to expand MACI's orthopedic indications.
  • International Expansion -- Plans underway for MACI’s first out-of-U.S. launch in the UK, with a marketing application expected in mid-2026 and potential launch in 2027.
  • Commercial Manufacturing -- New MACI manufacturing facility to initiate commercial production next year, meeting U.S. and global regulatory standards.
  • Payer Access -- Company cited "mid 90% range" prior approval rates for MACI, with no significant issues from lesion size restrictions among insurance carriers.
  • Pricing Power -- "mid to high single digit" pricing increases for MACI reported as durable, supported by product positioning and consistent payer acceptance, according to Dominick C. Colangelo.

SUMMARY

Vericel Corp. (VCEL +7.88%) delivered record third-quarter revenue and cash flow, underpinned by 25% MACI sales growth and substantial sequential gains in its burn care portfolio. Margin expansion outpaced revenue growth, with adjusted EBITDA rising nearly 70% and strong profitability reflected in both absolute net income and cash generation. MACI pipeline initiatives advanced on multiple fronts, including the launch and rapid adoption of MACI Arthro, significant salesforce expansion, and the initiation of a Phase III MACI Ankle study, while groundwork was established for international commercialization in the UK. Management reaffirmed margin guidance, highlighted robust payer access and pricing resilience, and set out multi-year targets for sustained top-line and margin growth through at least 2029.

  • Management reported that surgeons completing MACI Arthro training demonstrated notably higher implant growth rates than biopsy growth, based on early data, indicating enhanced surgical conversion efficiency.
  • According to Joseph Anthony Mara, I'd say kind of the acceleration that we're seeing in Q3 in terms of the performance, I mean, that's really volume driven. As we talked about early in the year, we obviously have strong biopsy growth. The implant growth was not tracking at the same level. And so what we really saw in the third quarter, which is what we anticipated, was really the volume from an implant perspective really ticked up. Then, again, as you kinda think going forward, you know, obviously, the most important indicator as we look forward is, of course, that biopsy growth. And that's really something that is, you know, continue to be strong.
  • Initial clinical outcomes for MACI Arthro included faster postsurgical weight bearing and reduced pain, with broader clinical data to be presented in early 2026 at meetings and through future publications.
  • Burn care guidance accounted for Epicel volatility and no additional assumed NexoBrid revenue from the BARDA contract as of the third-quarter call, though management cited potential fourth-quarter upside if government processes resumed.
  • Payer dynamics were described as stable, with Dominick C. Colangelo stating, "every major medical plan has a policy, a medical policy for MACI. And our prior approval rates are, you know, up in the mid 90% range."
  • The company does not anticipate cannibalization between core MACI and MACI Arthro, with both contributing to expanding overall product utilization and market penetration.

INDUSTRY GLOSSARY

  • MACI: An autologous cellularized scaffold therapy for symptomatic, full-thickness cartilage defects of the knee.
  • MACI Arthro: The arthroscopic administration procedure for MACI, targeting smaller cartilage lesions via a less invasive technique.
  • Epicel: A permanent skin replacement device for deep-dermal or full-thickness burns, authorized under a Humanitarian Device Exemption.
  • NexoBrid: A biological orphan product for enzymatic removal of eschar in burn patients.
  • BARDA: Biomedical Advanced Research and Development Authority, a U.S. government agency funding medical countermeasures.
  • CPT Code: Current Procedural Terminology code, used for medical billing and reimbursement classification.
  • OUS: Outside the United States; refers to international business operations or markets.

Full Conference Call Transcript

Dominick C. Colangelo: Thank you, Eric, and good morning, everyone. The company delivered outstanding financial and business results in the third quarter, with strong top-line revenue growth and even higher profit growth, a significant inflection in operating cash flow, and continued progress across a number of key business initiatives. The company generated record third-quarter total revenue, which exceeded our guidance for the quarter. Record third-quarter MACI revenue increased 25% over last year, and the highest quarterly burn care revenue of the year, as Epicel had one of its highest revenue quarters to date. NexoBird had its highest quarterly revenue since launch.

This strong revenue performance translated into significant profit growth and cash generation as the company delivered GAAP net income of more than $5 million and adjusted EBITDA margin of 25% for the quarter, as well as record third-quarter operating cash flow of more than $22 million. MACI's third-quarter performance was driven by strong underlying business fundamentals as we continue to expand the MACI surgeon base and drive growth in biopsies with the launch of MACI Arthro. As anticipated, the strong MACI biopsy growth in the first half of the year, which outpaced implant growth to that point, drove an acceleration of implant and revenue growth in the third quarter.

MACI also had another quarter of double-digit biopsy growth, with record third-quarter highs in both MACI biopsies and the number of surgeons taking biopsies. This momentum continued into the fourth quarter as we had the highest number of MACI biopsies and surgeons taking biopsies in any month since launch in October. In addition to the strength of the core MACI fundamentals, the early launch indicators remain very strong for MACI Arthro, which clearly is contributing to MACI's overall biopsy and implant growth.

We now have more than 800 MACI-trained surgeons through October, and the biopsy and implant growth rates continue to increase substantially for trained surgeons and remain significantly higher than the growth rates for surgeons that have not yet been trained. In addition, early data indicates that the cohort of surgeons that have completed a MACI Arthro case to date have a markedly higher implant growth rate than biopsy growth rate, suggesting a higher overall conversion rate for MACI Arthro implanting surgeons. We believe that this dynamic may be driven by the fact MACI Arthro is a less invasive procedure with the potential for improved patient outcomes.

To that end, we remain focused on generating clinical data to demonstrate these potential patient benefits, including a shorter rehab period with MACI Arthro administration. Early data from ongoing investigator case series suggests a significant reduction in postsurgical pain, improved range of motion, and a meaningful acceleration in the timeline to achieving full weight-bearing following MACI Arthro treatment. These initial results suggest very positive outcomes, which could also lead to a shorter overall recovery timeline for patients. We expect to see these cases presented at industry meetings in early 2026, as well as in future publications, and we continue to work with additional surgeons as they complete MACI Arthro cases to collect prospective outcomes data in our MACI clinical registry.

Finally, the MACI Salesforce expansion is on track to be completed in the fourth quarter, with the new reps supporting current territories this year, moving into their new territories at the start of next year, which will support our significant fourth-quarter volume growth and position MACI for a continued strong performance for the full year in 2026.

Joseph Anthony Mara: In terms of our longer-term MACI growth initiatives, we remain on track to initiate the Phase III MACI Ankle clinical study this quarter, which represents a substantial growth opportunity for MACI and would enable the company to expand into other orthopedic markets. We also remain on track to initiate commercial manufacturing for MACI in our new facility next year, which is designed to meet both US and global manufacturing requirements and will allow the company to potentially commercialize MACI outside the United States. To that end, we're initiating a staged approach to our MACI OUS expansion, with the first phase targeting a planned MACI launch in the UK.

This is an ideal first step for OUS expansion in that the UK has an international mutual recognition procedure that allows for accelerated approval and market access. There's a high level of awareness and surgeon advocacy for MACI, given that the product was previously marketed in the UK. There's an established reimbursement pathway for this technology, given a prior positive NICE opinion from MACI. And there are concentrated points of care with a dozen or so centers of excellence for the treatment of cartilage injuries in the UK.

We'd expect to submit a marketing application in the middle of next year and potentially launch MACI in the UK in 2027 as we seek to expand the long-term growth and value creation opportunities for the company. In summary, MACI remains the clear market leader for knee cartilage repair with a significant competitive moat. Based on the strength of its underlying business fundamentals, we believe that MACI is very well positioned for a strong close to 2025 and continued strong growth in 2026 and beyond. The early launch indicators for MACI Arthro remain very strong and clearly are contributing to the overall biopsy and implant growth for MACI.

As we move into 2026, we expect to capitalize on having a full year to engage with current MACI Arthro trained surgeons and to continue to meaningfully expand the number of trained surgeons next year. In addition to increasing the MACI sales force to drive further growth, we're also supporting the expanded MACI sales team with additional investments across our sales operations, marketing, and medical functions to enhance our operational excellence in commercial execution and create additional opportunities for surgeons to engage with Vericel. We believe that all of these initiatives will reinforce our leadership position, drive continued strong revenue and profit growth in 2026 and the years ahead. I'll now turn the call over to Joe.

Joseph Anthony Mara: Thanks, Nick. And good morning, everyone. The company delivered very strong financial results in the third quarter with record total revenue of $67.5 million. MACI had a strong quarter with revenue growing 25% to $55.7 million, which was above the high end of our guidance range for the quarter. Importantly, year-to-date MACI revenue growth is over 20%, with its growth rate having increased each quarter during the year. Burn care also had a strong third quarter with revenue of $11.8 million, which increased 21% sequentially over the second quarter.

Epicel revenue of $10.4 million was the highest quarter of the year and one of its highest quarters to date, while NexoBrid revenue of $1.5 million represented its highest quarterly revenue since launch, growing 38% versus the prior year and 26% versus the prior quarter. The company's substantial revenue growth translated into significant margin with gross profit of nearly $50 million or 73.5% of revenue. The company also delivered GAAP net income of $5.1 million, and adjusted EBITDA increased nearly 70% to $17 million or 25% of revenue, an increase of nearly 800 basis points versus the prior year as the company's profit growth continues to outpace our strong revenue growth.

Finally, the company generated record third-quarter operating cash flow of $22.1 million, nearly matching the fourth quarter of last year. And with just $2.6 million of CapEx during the quarter, the company achieved record free cash flow of nearly $20 million, ending the quarter with $185 million in cash and investments, as the expected inflection of our cash generation following the completion of our new manufacturing facility is now being realized. Turning to our financial guidance, we expect full-year total revenue of approximately $272 to $276 million.

For MACI, we are maintaining our revenue guidance expectations of low 20% growth for the full year and expect full-year MACI revenue of approximately $237.5 to $239.5 million and fourth-quarter revenue of approximately $82 to $84 million. Given MACI's strong third-quarter results and expectations for its continued strong performance in Q4, MACI remains on track for a significant acceleration in revenue growth from 18% in the first half of the year to approximately 23% in the second half of the year. For burn care, we expect full-year revenue of approximately $34.5 to $36.5 million, with fourth-quarter revenue of approximately $6.5 to $8.5 million, as Epicel trends to date in the fourth quarter are similar to Q4 of last year.

I would also note that we are not assuming any additional NexoBrid revenue related to the BARDA RFP process initiated in August, although there is potential for incremental NexoBrid BARDA revenue in the fourth quarter. From a profitability perspective, we have reaffirmed our full-year profitability guidance of gross margin of 74% and adjusted EBITDA margin of 26%. For the fourth quarter, we expect a gross margin of approximately 77%, approximately $50 million of total operating expenses, which includes the investments related to our recent sales force expansion, and adjusted EBITDA margin of approximately 40%. Overall, 2025 is set up to be another positive year for the company, with strong top-line growth as well as significant margin expansion and profit growth.

As we look ahead to next year and beyond, 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 profitability targets that we announced earlier this year of gross margin in the high 70% range and adjusted EBITDA margin in the high 30% range by 2029. This now concludes our prepared remarks. We'll now open the call to your questions.

Operator: If you are dialed in via the telephone and would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure that your mute function is turned off. Allow your signal to reach our equipment. A voice prompt on the phone line will indicate when your line is open. Please state your name and company before posing your question. Again, you may press star 1 to ask a question. We'll move to our first question. Your line is now open.

Josh Jennings: Hi. Good morning. This is Josh Jennings from TD Cowen. Is that coming through okay?

Joseph Anthony Mara: Yes. Good morning, Josh. We can hear you fine.

Josh Jennings: Thank you. Maybe just I appreciate your comments. Congratulations on the strong 3Q results. Your comments just a moment ago, Joe, on 2026 continued momentum. Just sorry for the typical question, a little too early prior to 2026 guidance. So maybe just for the MACI franchise, just thinking about MACI Arthro contributions in 2026. You know, additive versus cannibalistic of standard MACI how we should be thinking about the MACI growth as we move into the coming quarters next year? I have one follow-up.

Joseph Anthony Mara: Yeah. So good morning, Josh, again, and thanks for the question. So you know, so first off, you know, just a reminder, you know, we haven't given any specific '26 commentary as of yet, but, you know, happy to give kind of our initial thoughts course, we'll kinda give more formal guidance as we move, you know, into next year. You know, I would say, you know, I'll kinda hit just briefly on both franchises. But certainly cover Macy's. So I would say across the portfolio, our expectations and year are very high. We have a number of impactful initiatives that we're very excited about. You know, across both franchises, particularly Macy. You know?

But I do think we'll be pretty prudent to start the year from a guidance perspective. So you know, maybe just briefly starting with burn care. You know, I think that one's pretty straightforward. So we talked about last quarter this kind of run rate concept, which we think is appropriate. We said we would adjust it kinda as needed, you know, on a quarterly basis. But know, if you look at our run rate, you know, over the last, you know, several quarters, we've kinda been in that nine to $10 million range on burn care.

So know, I think as a starting point for next year, kind of being in that range, you know, call it, in the high thirties on a full year basis next year is a good place to start. We do have expectations that NexoBrid will continue to increase. You know, certainly, there's there remains a possibility of some potential BARDA related revenue that could materialize. But know, just given Epicel's variability, we're just gonna be prudent on that, and I think that one's pretty straightforward.

So, you know, from a MACI perspective, you know, I would say, know, as we think about the guidance and kinda what next year looks like, if you kind of look at where analysts are, I mean, most analysts are kind of right around 20% on a full year basis plus or minus. You know, we think that's a good starting point. I think we think about twenty six. If you look at where we were on a full year basis last year, MACI was 20%. It's 20% on a year to date basis this year. So you know, we're not gonna get ahead of ourselves and plan to start the year guiding above the trends of that 20%.

So, again, that's a good place to start. You know, you can also look at kind of the incremental revenue on a year over year basis That points to something kinda similar in that $40 million plus range. Again, we don't wanna get ahead of ourselves. I guess kind of the last point I wanna make, you know, on the arthrope question, You know, I think as we think about '26 and really moving forward, know, we're not really thinking about this as kind of our throw versus non our throw. You know, we're thinking about this, you know, from a MACI total level.

But, you know, if you kinda step back and think about the progression during the year, you know, I think we're seeing exactly what we wanted to see as we kind of march through the year. So first off, great foundation in terms of engagement with surgeons. We're up to 800 trained surgeons. I think the majority of those are either new to MACI or new to smaller defects. So that's exactly what we'd wanna see. You know, the second point there that we've we've talked about for a few quarters now is know, we are seeing higher biopsy and implant growth after surgeons are trained. That's obviously exactly what we wanna see.

And we think that could be impactful over time. And then the last point, you know, early days, but know, when we look at our arthroimplanters, so the surgeons that have done ortho implants, actually seeing signals of a higher conversion rate. So I mean, if you kinda look at that collectively, that is, you know, a pretty strong data set and consistent to what we hear externally. So know, good signals on our throw for sure. But I would say, you know, certainly, we're mindful of that.

But we're just not gonna get ahead of ourselves in terms of a planning assumption or guidance next year and would rather start the year a bit more prudently which we think sets us up for success as we move throughout the year.

Josh Jennings: Appreciate that. And it's great to see the conversion rate pieces playing out from a ACR throw. We've anecdotally kinda gotten back from some surgeons that patient demand from ACR throw is increasing. More patients are seeking out orthosurgeons that perform AC arthro or coming in with requesting AC arthro. Just wondering if that if what we're picking up is a trend and whether that's helping kind of drive surgeon adoption rates, you know, surgeons hearing from patients and then they're getting more interested or are also driving volumes. Any you can share on that dynamic would be helpful.

Dominick C. Colangelo: Yeah. Hey, Josh. It's Nick. Yeah. I mean, as we've talked about repeatedly, we've you know, we've heard and seen, you know, the anecdotal feedback since the early days with MACI Arthro. You know, there's a lot of social media activity from top MACI throat implanters. You know, that certainly can be one contributive factor to sort of patients awareness of a MACI Arthro option. So that makes perfect sense to us. And, you know, as Joe mentioned, know, besides the anecdotal kind of, feedback we've been getting, which has been very positive.

You know, everything the parameters that Joe mentioned just sort of line up with everything we expected to happen, and it's the progression that we've been talking about for the entire year. So, yeah, really kinda pleased with the trends and know, I think there's makes a lot of sense that patients would be interested in a less invasive procedure that has potential benefits in terms of faster recovery and potentially overall rehab time lines. And then, of course, you know, the surgeon interest, you know, we're we're well ahead of where we expected to be on trained surgeons for the year, so that awareness and engagement has been really positive as well.

Josh Jennings: Thanks, Nick.

Operator: We'll move to our next question from Richard Newitter with Truist Securities.

Richard Newitter: Hi. Thanks for taking the questions. And congrats on the quarter. I just wanted to get a better understanding of where potentially seeing Macy Arthur actually you know, potentially getting used where the traditional MACI was not You know, just the cannibalization versus market expansion, you know, anything anecdotal that you can you can give us there. And then I have a follow-up. Thank you.

Dominick C. Colangelo: Yeah. Hey, Rich. It's Nick. So I think it's kind of continuing the trends that we've talked about on the past quarters. And, again, we don't really you know, cannibalization is not sort of how we think about this. You know? We look at increasing MACI utilization. And whether a surgeon, implants MACI through a mini arthrotomy or a small open incision or arthroscopically, you know, that all contributes to this the strong MACI growth that we are seeing.

So as we talked about before and as Joe alluded to, when you think about it from a surgeon perspective, you know, the trained surgeons and now the biopsy ing and implanting surgeons come from you know, existing MACI users, but also new users who were former open targets or the new Arthur only targets that we added. And know, the training, kinda breaks down as we talked about before, you know, roughly a third of sort of the former the MACI users who were primarily condyle, users, and then a third from those that did both condyle and femoral condyles, and then a third, you know, new users, whether they were open targets or the new targets.

So good distribution of surgeons all of whom are taking biopsies and obviously doing implants. And then from a you know, defect location or a patient perspective, you know, we've talked a lot about that, you know, we've seen use not only on the femoral condyles, but also in areas of the knee like the trochlea and tibia, even a few patella cases here and there. And you know, that, I think, will continue, especially as we think about continued innovation the MACI Arthro instruments where we will, you know, work with surgeons, design the next, you know, version two point o of MACI instruments that will allow access to different portions of the knee and so on.

So think it's pretty broad based as we've been talking about all year. And, you know, supports the growth that we've seen, you know, in this third quarter.

Richard Newitter: Okay. That's really encouraging to hear. I'm just curious, you know, just given where you are in kind of a new product launch here, as we look to next year, and, you know, understanding you might not want to provide official guidance totally understand that for '26. But anything that we should be aware of on the cadence on revenue or on the p and l? Just, you know, it's been it's been a little bit counterintuitive for the last two years, and just to preempt any you know, surprises as we all calibrate our models into next year. Thanks.

Joseph Anthony Mara: Yeah. So thanks, Rich, for the question. This is Joe. So I would say as we go into any year, I mean, I think from a MACI perspective, there's always gonna be that seasonality. I mean, it can certainly ebb and flow a bit. Know, on a quarterly basis. You know, I would say one thing, you know, as thinking about, know, we're talking about the full year. But, you know, we have tended to see in the last couple years that you know, the first quarter has tended to be at kind of a lower growth rate, you know, for whatever reason coming off Q4.

So, I mean, that course, is a dynamic we've seen that I would, you know, point out that, you know, it was present in the last couple years. So that's probably one piece. You know, in general, I would say it typically follows a pattern as we've seen in again, it can vary a bit by quarters, but, you know, halves tend to look pretty similar. So nothing I would call out, you know, obviously, the burn care side, which I don't think you're necessarily getting to. But clearly, there can be variability there.

And, again, we're gonna kinda stick with that run rate framework, and we'll adjust as needed, you know, as we've done in the fourth quarter here just based on what we're seeing because we certainly wanna make sure we're, you know, not gonna get ahead of ourselves in any quarter on burn So that's more of a framework question. I would say on the maybe just to hit the profitability for year and kind of the profitability concept. I mean, nothing know, to call out next year quarterly.

But I would say as you're thinking about the year just going forward, you know, I'd say first off, know, I think it's pretty notable if you look back at Q3 that, you know, this is if course, the fourth quarter, just based on the MACI trajectory, is always our highest revenue quarter, highest margin quarter, etcetera. But, you know, to be net income positive at a $5 million level, I think, is pretty notable in the third quarter. We achieved 25% adjusted EBITDA margin in the third quarter, which is also pretty notable.

And then, you know, just on the cash generation a moment, I mean, whether you look at free cash flow or operating cash flow, you're kind of around $20 million for the quarter. So know, we've talked, you know, a few years ago about that p and l inflection that we're starting to know, really get on, you know, the stronger side of. And I think we're just starting that kind of inflection on the cash generation piece. In terms of the fourth quarter, obviously, we'd expect a strong quarter there as well, as I talked about in the remarks.

Next year, I would say, you know, as you think about next year, you know, I think we would expect, you know, on the margin side, things to continue tick up on both the gross margin and the adjusted EBITDA side. Probably want to just be a little bit prudent there to start the year in the sense that the last two or three years have been really strong and probably a ahead of our expectations in terms of how quickly the margin has gotten up the curve. I certainly think kind of being up, call it, a point in gross margin you know, maybe a point or two on adjusted EBITDA is a reasonable starting point.

We will have to there will be investments on the sales force on a full year basis, on the ankle trial ramping up. Know, cost of goods sold will absorb some of the new buildings. So that has to be contemplated next year. You know, lastly, I would just say, you know, I think from a broader lens, if you kinda look at where the kind of financial trajectory of the company is and our P and L metrics, you know, they are really kinda starting to ramp up pretty significantly. So you know, last year, we had $50 million of adjusted EBITDA.

This year, our guidance is pointing to $70 million So we're already starting to get into that $100 million zone on adjusted EBITDA level now. And so, you know, if you assume even similar revenue growth over the next few years, and, you know, at a high 30% adjusted EBITDA, you know, I think it's certainly reasonable to be kind of getting close to that $200 million EBITDA range, you know, by 2029, call it. So you know, I think, you know, we're pretty excited about, obviously, everything that's going on the Macy side and across the business.

But, you know, we're all also very focused on that kind of financial trajectory you know, in '26, but really over the next several years, which could be pretty significant. And, again, we think it makes us pretty unique for a company of our size and scale. Thank you.

Operator: Thanks, Rich. Take our next question from Ryan Zimmerman with BTIG.

Ryan Zimmerman: Hey, guys. Can you hear me okay?

Joseph Anthony Mara: Yeah. Good morning, Ryan. Morning. Nice quarter. Thank you.

Ryan Zimmerman: Just given the biopsy trends you saw, you know, early in the year, the results this quarter, MACI the MACI guidance was tightened. And I'm wondering why fourth quarter wouldn't step up. Maybe relative to your prior guidance given what you're seeing in your commentary, you know, about biopsies in the third. And into the fourth quarter?

Joseph Anthony Mara: Yes. So thanks for the question, Ryan. So I'll take that. I mean, I think clearly, a very strong third quarter. As we referenced, the biopsies at the start of the year led to that higher implanted revenue growth, which is great to see. You know, to your point, the leading indicators have been strong. I'd say particularly the biopsies, you know, which is of course, you know, the key leading indicator for us. You know, I think, you know, in terms of the guidance, I would say, another dimension there is with that strong third quarter, it really derisks where we need to be in the fourth quarter to achieve our full year guidance.

So to your point, we're essentially maintaining the full year guide at the same level. It kinda points to about $82 million to $84 million in the fourth quarter. Which is right in line with kind of where estimates and consensus are. You know, I'd also say this kinda points to a pretty strong acceleration still from an H1 to H2 perspective, depending on where you're on the range. It's 18% to call it 22% to 23%. So pretty significant step up in the second half. Also gives us a, I'd say, a pretty achievable step up Q3 to Q4. And I'd just say broadly, you know, we just wanna be prudent here on Q4.

We recognize there certainly remains a wider range given some of the leading indicators. We've got great foundation of biopsies in place, but Q4 is our largest quarter. December is our highest month. There always could be some variability at quarter end. Particularly with the year end holidays. So, you know, we think this is appropriate. You know, it's a you know, it's an achievable step up. And I would say just we do not wanna get ahead of ourselves as we close out the year.

Ryan Zimmerman: Yeah. Okay. Fair enough. And the other question, and you kinda talked about this, Nick, which is you know, you're seeing adoption in MACIARA throw. But I guess I'm not clear. I mean, what how much Macy Arthro sales were in the third quarter? And what are you expecting relative to you know, legacy MACI, if you will, you know, as we convert and move into the both the fourth quarter, but then into 2026. I mean, if you were to kind of think about it you know, with broad strokes, I mean, does it entirely convert over this next, you know, quarter? You convert over the course of 2026?

I guess I'm just curious kinda how you think about the rise of MacArthur relative to maybe the decline of legacy Macy? Thanks.

Dominick C. Colangelo: Yeah. So we kinda don't like we said earlier, think about a decline of legacy Macy. I mean, legacy Macy was principally focused on patella defects and large you know, defects, you know, anywhere in the knee. And you know, I'd say that patella defects is one of the strongest, if not the strongest, growth drivers for CorMacy, and that remains the case. So they're not like a decline in the core MACI. And, again, you're never gonna have full sort of switchover to MACI Arthro because MACIARTHRO instruments are designed for the smaller defect, If it's above four square centimeters, you're doing an open procedure. If it's a patella case, you're typically gonna do an open procedure.

And so you know, these small defects were the smaller part know, we had lower penetration there. That's the whole thesis for launching the MACIAR throw instruments. And so as we've seen an increase in biopsies or and implants, on smaller condyle defects. You know, those are kinda MACI arthroattributable cases. So again, we don't think about it as, you know, it's gotta be blank. On the core and then blank on arthro. You can often, you know, start intending to do an arthrow case and flip to open if the defect got bigger since she did a biopsy. I mean, it's almost like a halo effect on the whole brand. And so that's how we approach it.

But no doubt, as we've talked about, that the trends for trained surgeons and how they're behaving are is exactly what you wanna see and supports the overall growth for the brand.

Ryan Zimmerman: Okay. That's very helpful. And if I could sneak one last one in. And I'll I'll hop back in queue. You know, if you go back some of the insurance carriers and their policies you know, don't restrict lesion size, Some do. Have you had to work through that, and is there you know, any impact or any gating factor there in terms of lesion size, as you launch MACIARTHRO? Thanks for taking the question.

Dominick C. Colangelo: Yep. So the answer short answer is not at all. As you mentioned, you know, there are some plans that don't have any sort of size restrictions or parameters there. There's some that require that the defect be one, one and a half, or two square centimeters or above you know, that's again exactly what the MACIARTHRO instruments are designed for. You know, they're two, three, or four square centimeter defects, so you know, really, that has not been an issue at all. And Alright. You know, as we've talked about often, every major medical plan has a policy, a medical policy for MACI. And our prior approval rates are, you know, up in the mid 90% range.

So for the appropriate patients, MACI gets approved.

Ryan Zimmerman: Alright. Appreciate it.

Operator: We'll take our next question from Caitlin Roberts with Canaccord Genuity.

Caitlin Roberts: Hi. Thanks for taking the questions. Congrats on the quarter. Just to start with burn care, can you know, just walk us through the puts and takes here? You said Epicel you expect similar Q4 dynamics this quarter as last year. And then, you know, the BARDA contract, any more color on that and why there could be some BARDA upsides? NexoBridden also has the new category three code for NexoBrid help to update there.

Dominick C. Colangelo: Yeah. Hey, Caitlin. This is Nick. So just on, you know, the Epicel trends coming into the quarter that Joe referenced, I mean, what we said was to start the quarter, and, we're still relative. We're only a third of the way through the quarter. That the trends to date, you know, which essentially is sort of the biopsies that we have coming into the quarter and, you know, in the first weeks of the quarter were more like Q4 last year. So that's what we're gonna guide to. As you know, you know, the we still have a good amount of the quarter to go.

You know, the biopsies patients we're gonna treat in December aren't even sorta in house yet, so we just don't have the visibility on that. So we as Joe mentioned, we wanna be very prudent in sort of, making sure that we don't get ahead of ourselves on Epicel guidance given its variability. On the, opportunity, you know, as you know, the RF was is public and, you know, was intended to sort of begin on October 1. Obviously, we're all aware there's a government shutdown, so things sort of came to a screeching halt.

But, you know, we are hopeful and expect that know, when the government reopens, that there's an opportunity to move forward on that RFP and the procurement, etcetera, and advanced development of NexoBrid. So more to come on that, but obviously, until that happens, we can't really kinda share much more about it. And then on the CPT code, know, I think, you know, we have, as we've talked about, had a pretty good number of P and T committee approvals for NexoBrid. Up in the 70 range, and, you know, more than 60 ordering centers. So kind of in the CPT world, I think we feel comfortable. There's pretty widespread utilization.

And you know, we would expect that, you know, next year, we'll pursue a permanent code which would then become effective in 2027. So that would be our plan right now. So more to come on that as we get into next year.

Caitlin Roberts: That's great. And then just maybe touching on the Macy's Salesforce hiring Where are you now? And you noted you're on track to be completed in the Q4. Any changes to the amount that you noted last quarter that you would hire into the year?

Dominick C. Colangelo: Yeah. No. We said we were going to be, you know, adding 25 new territories and three new regions and, you know, that is essentially virtually complete You know, onesie, twosies left to go on that. So we are extremely pleased, with the quality and caliber of the talent we've brought in. If you're in the sports medicine business, this is a great place to be with Macy. So you know, zero issues in attracting, you know, top talent and couldn't be more excited to kinda have this expanded team as we again, to support our Q4 volumes, but also as we move into next year. And so really excited about that.

And that, you know, quite frankly, is just you know, one piece, as I mentioned, of sort of the overall sort of investments and enthusiasm around Macy's So expanding the sales force, you know, we're really proud to have kind of built this franchise from a $30 million product ten years ago to close to a quarter billion now, and we're really focused on the people, the resources, the processes that we have to have in place to take it from a quarter billion to half a billion dollar product over the next several years. And that's what we're focused on. The Salesforce expansion is one piece of it.

As I alluded to in my prepared remarks, you know, we're also focused on additional marketing, sales ops, and other kinds of investments in medical affairs and engagement with our key customers to make sure that we drive, and achieve what's clearly right in front of us as we move forward over the next several years.

Caitlin Roberts: Great. Thank you so much.

Dominick C. Colangelo: K. Thank you.

Operator: We'll take our next question from Mike Kratky with Leerink Partners.

Mike Kratky: Hi, everyone. Thanks for taking my question, and congrats on a nice quarter. You've continued to show great progress on some of the leading indicators like BIOP and surgeons taking biopsies. Can you just clarify how much of your 3Q growth for MACI's being driven by implant volume versus pricing? Have you seen some of these really positive leading indicators start to materialize in your MACI volume growth? And how is that tracked relative to your expectations?

Joseph Anthony Mara: Thanks. Yes. So good morning, Mike. Thanks for the question. So yes, I mean, I'd say kind of the acceleration that we're seeing in Q3 in terms of the performance, I mean, that's really volume driven. As we talked about early in the year, we obviously have strong biopsy growth. The implant growth was not tracking at the same level. And so what we really saw in the third quarter, which is what we anticipated, was really the volume from an implant perspective really ticked up. Then, again, as you kinda think going forward, you know, obviously, the most important indicator as we look forward are one of the most important, of course, is that biopsy growth.

And that's really something that is, you know, continue to be strong. And Nick referenced October was really strong as well, you know, I think our highest month ever. So know, that's you know, it's it's really kind of been driven by that piece both in q And then, again, you think about those volumes as we start Q4, that's what's going to drive us going forward.

Mike Kratky: Understood. Thanks very much.

Joseph Anthony Mara: Thank you.

Operator: We'll take our next question from Mason Carrico with Stephens.

Ben: Hey, guys. Good morning. This is Ben on for Mason. In terms of the MACI Arthro trained surgeons, you called out that, one third split between surgeon types. Could you compare and contrast arthrobiopsy growth and maybe arthroprocedures across these? Different groups?

Dominick C. Colangelo: Yeah. So just to be clear, you know, we talked about the fact that we had former MACI users, about half of whom were condyle only, surgeons or users, and then we had, you know, the other half of those prior users that you know, did both femoral condyle and patella cases, and then we have new users. And so, you know, it kinda splits between those two, a third, a third, or three, and a third. And to be honest, you know, we've seen kind of biopsy growth across the board, and I don't think there's any sort of notable sort of you know, groups that are outperforming the others.

Obviously, if they were smaller users and they ramp up even a handful, you know, it's a high biopsy growth rate. Or if you're a new one, it's a really high biopsy growth rate. So I think the rates across those segments are relatively similar. And, you know, it's it's as Joe alluded to, know, it's pretty exciting for us to say, know, between the new users, a third of the you know, surgeons being trained, and then you know, another third coming from patella only. I mean, you know, that's two thirds of these trained surgeons who probably didn't think about using MACI. Or certainly didn't, know, in smaller condyle defects.

And so, you know, that's, again, exactly what we would have wanted to see. This early in the launch.

Ben: Great. Thanks for that. Then you've historically called out mid to high single digit pricing for MACI. Could you speak to the durability of that pricing moving forward? Or just the durability of that in light of the current reimbursement environment?

Dominick C. Colangelo: Thank you. Yeah. So, you know, again, just so everybody understands, you know, 90% up prior approval rates that we've achieved consistently for the last decade, since we launched Macy's. So some of the other things, you know, we don't have a big obviously, Medicare business at all. And so a lot of this sort of macro stuff that's circulating out there doesn't really apply to Macy.

In terms of the sort of mid to high single digit price increases that we've sort of routinely taken, I mean, we do a lot of pricing research with plans and hospital administrators and you know, again, this is viewed as a very sort of high-tech product where more like a biologic in the pharma space where mid to high single digits are pretty routine. So, you know, we're pretty comfortable in our in our pricing practices and our approach.

Ben: Great. For taking the questions.

Dominick C. Colangelo: Okay. Thank you.

Operator: We'll move to our next question from Jeffrey Cohen with Ladenburg Thalmann.

Jeffrey Cohen: Nick and Joe, thanks for taking our questions. Congrats on the quarter. Specifically. Firstly, Joe, perhaps you could talk about R and D a bit and anticipation for Q4 full year and general commentary there?

Joseph Anthony Mara: Yeah. I mean, so we haven't know, from a spend perspective, Robin, I we don't typically kinda get into the pieces, but I would say, you know, I think we called out as you're thinking about kinda Q4, we called out 50 about $50 million of total OpEx, which I think kinda gets us back to a similar point on a full year basis. That we've been talking about all year.

And, you know, I think as you think about kinda r and d going forward, it really kind of all the buckets, again, I referenced it earlier, but there's sort of two key incremental investments on the operating expense side, which are the Salesforce expansion, and Nick talked about we have some related around that, which I think will be important, and that'll be incremental next year. And then, you know, the ankle trial, you know, really next year will become, you know, much more operational where you're gonna see, you know, more sites and potentially patients kinda ramping up.

So I would expect that to increase, you know, particularly next year, but you know, we'll kinda get to, you know, where next year's spend is. You know? As we get into next year, prob probably at a somewhat similar rate in terms of growth this year, you know, perhaps a bit higher. Just with some of those investments. But, again, on Q4, we did specifically call out million dollars just to be clear of kind of what was expected there.

Jeffrey Cohen: Okay. Got it. And then secondly, I know Nick, you brought up post surgical pain. Could you talk about that a little more detail as far as anything that has been noted or you've noted as far as the medical treatment as well as the weight bearing and some of the times and some of the medications that you've that you've understood so far?

Dominick C. Colangelo: Yeah. So, you know, this started way back even in the first quarter when you know, we were talking about the fact that surgeons had do who had done, you know, the initial Macie Arthro cases were posting on social media about sort of you know, these immediate positive benefits in terms of postsurgical pain or range of motion, or sort of back to full weight bearing. Those are kind of the key early indicators. And, you know, as expected, both by us and surgeons, you know, through our market research using the product. When you have a less invasive surgery, you have less arthrofibrosis, so the knee is not swollen. You get better range of motion. Etcetera.

And so it just promotes a faster potentially faster healing process. And, you know, we've been really focused. We were fortunate to be able to get ACR throw instruments on the market quickly be through the human factor study pathway. Which didn't involve clinical a clinical study. So obviously, we didn't have the clinical data supporting a faster, post surgical recovery. But that's what we've been focused on, and I alluded to in my comments that, you know, through case series and through the MACI clinical outcomes we've been gathering that data and, you know, would expect in early twenty six that those that data will be presented, at industry conferences, ultimately, hopefully, make its way into publications.

And we think, you know, in the progression of MACI, when you go Arthro, when you go from high awareness and training, which obviously we've checked that box, to sort of surgical technique demonstrations, which you see, for instance, at International Cartilage Repair Society meeting that was recently held in Boston. Very effective presentation there. And then you move into clinical benefits for patients. That's sort of the progression you would expect see, for MACI Arthro. And so that's kinda exactly what we're seeing and sort of why we made those comments. In our prepared remarks.

Jeffrey Cohen: Perfect. Thanks for taking our questions.

Joseph Anthony Mara: Hey. Thanks, Jeff. Thanks, Jeff. Hey. Good morning.

Arthur: Nick and Joe. Can you hear me okay?

Dominick C. Colangelo: Yes. Good morning.

Arthur: Hey. This is Arthur on for RK. So I just had two quick question on the MACI side. So maybe for the MACI could you give us more color regarding the timing from the surgeon who finished the training to their taking their first biopsy, How does that compare to the initial the MACI launch? And there on the conversion wise, you may there's a high conversion rate. In term of Arthro. But how about the that every time to for the conversion? How that compare to the open surgery?

Dominick C. Colangelo: Yeah. So just starting with the training, you know, it's very much like MACI core MACI when we launched where training is never really a barrier. You know, you can train online. You can do cadaver labs. We have you know, MACI arthro synthetic knees they can practice on. And, know, obviously, in the first cases that were done, biopsies were already taken. And then they trained and did the MACI arthro procedure. So there's really no sort of gating item around training. Often, if there's a surgery that they a surgeon intends to do arthroscopically, they'll just get trained ahead of the training.

So there's really not a connection between whether you take a biopsy first you get trained first, and then take a biopsy, etcetera. So any of those scenarios, MACI arthrotraining, We make a lot of different methodologies available to surgeons, and they just kinda do what they feel most comfortable with. In terms of the conversion rate, you know, I think we mentioned on our last call that we haven't seen any sort of differences in the MAC CR throat conversion timelines. Versus regular So, you know, kinda early days on that. But, you know, kinda similar at this point.

Arthur: Oh, thanks, Nick. And the last one, could you discuss the timing and scale of the MACI ankle phase how should we think about the data rate out there? Well, just in terms of the timing, you know, we said we're set to initiate the study in the fourth quarter of this year. You know, we've kinda built line very much like the pivotal study, the summit pivotal study for the indication in the knee, which was two years to enroll. Two year follow-up, and then, you know, call it eighteen months plus on the regulatory pathway. So, you know, we've always said this is kind of a twenty thirty plus opportunity.

That's a very important part of our sort of long term strategy for MACI with you know, the core business, obviously, with a ton of momentum. ACR throw, then Macy OUS expansion opportunities, and then Macy ankle following that. Just kind of this sort of long runway of growth opportunities for Macy particularly know, with no like competition on the horizon. So thanks, Nick, and Joe for taking my question. Congrats on the quarter.

Joseph Anthony Mara: Okay. Thanks.

Dominick C. Colangelo: Okay. Well, I believe that concludes all of the questions. So I just want to thank everyone for joining us this morning. You know, obviously, we had an outstanding third quarter, and very well positioned for a strong close to the year and to continue to deliver a unique combination of sustained high revenue growth and profitability in 2026. And the years ahead. So we look forward to providing further updates on our progress on our next call. And thanks again, and have a great day.

Operator: This concludes today's call. Thank you again for your participation. You may now disconnect, and have a great day.