Vericel Corp (VCEL) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Nov. 5, 2026

CALL PARTICIPANTS

• VP of Finance and Investor Relations - Eric Burns
• President and Chief Executive Officer - Nick Colangelo
• Chief Financial Officer - Joe Mara

TAKEAWAYS

• Total Revenue -- $85.4 million, growing 26% year over year driven by top-line growth across both commercial franchises.
• MACI Revenue -- $67.4 million, a 21% increase from the prior year and representing the sixth consecutive quarter with at least 20% revenue growth.
• Burn Care Revenue -- $18.0 million, increasing 52% year over year and 52% compared to the second quarter of 2026.
• Epicel Revenue -- $12.7 million, its highest quarterly revenue since launch and up 23% versus the previous year.
• Commercial NexoBrid Revenue -- $2.3 million, growing 54% year over year and 46% sequentially as utilization continues to expand.
• BARDA Revenue -- $3.0 million, recognized for NexoBrid procurement under the existing government agreement.
• GAAP Net Income -- $14.2 million, or $0.27 per diluted share, compared to $5.1 million, or $0.10 per diluted share, in the third quarter last year.
• Non-GAAP Adjusted EBITDA -- $25.2 million, growing 48% year over year and achieving a 30% margin.
• Operating Cash Flow -- $17.7 million, contributing to a total cash and investment balance of $235.6 million at the end of the quarter.
• Free Cash Flow -- $15.7 million, with year-to-date free cash flow reaching $45.1 million.
• Share Repurchases -- $8.8 million, used to buy back 220,744 shares of common stock during the quarter.
• Total Revenue Guidance -- $344 million to $346 million for the full year, an increase from the previous range of $330 million to $340 million.
• MACI Revenue Guidance -- $290 million to $292 million for the full year, reflecting strong procedure trends and record biopsies entering the fourth quarter.
• Burn Care Revenue Guidance -- approximately $54 million for the full year, up from the previous guidance of $46 million to $50 million.
• Adjusted EBITDA Margin Guidance -- approximately 28% for the full year, an increase from the previous 27% target.
• Gross Margin Guidance -- approximately 75% for the full year, which remains unchanged from previous projections.
• MACI Arthro Adoption -- over 25% of condyle procedures under four square centimeters used the arthroscopic delivery system, a record for the product.
• MACI Ankle Addressable Market -- approximately 20,000 patients annually, representing a $1 billion market opportunity according to management estimates.
• UK MACI Addressable Market -- approximately 15,000 patients annually, representing a potential opportunity of several hundred million dollars.
• NexoBrid User Base -- more than 80 centers have placed orders for the product, with approximately 70 centers having placed repeat orders.
• Operating Expenses -- $50.4 million, an increase from $46.1 million last year due to expanded headcount and marketing programs.

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RISKS

• Colangelo noted that the company "can't control the number of catastrophic burns that occur or the number of patients that survive to be treated," which impacts the underlying demand and quarterly predictability for Epicel.

SUMMARY

Vericel Corporation (NASDAQ:VCEL) reported record performance across its product portfolio, leading to a significant increase in full-year financial guidance for revenue and margins. Management reported that the expansion of the sales force and the adoption of arthroscopic delivery systems for cartilage repair contributed to increased surgeon engagement and biopsy growth. The company indicated that its burn care business achieved record quarterly revenue through cross-selling initiatives and the expansion of the ordering center network for its newer biologic product. The company remains focused on international expansion and new indications to support long-term growth objectives.

• Colangelo noted that "the cohort of expansion territories has the highest biopsy growth rate for the first three quarters of the year," which management expects will drive implant growth through 2027.
• The company is developing next-generation instruments for MACI Arthro to further simplify surgical procedures and expand access to other areas of the knee, including the patella.
• In the United Kingdom, the National Institute for Health and Care Excellence (NICE) has accepted MACI for a single technology appraisal to establish reimbursement and pricing.
• Colangelo reported that "surgeon engagement with MACI also continues to significantly expand as the number of peer-to-peer programs and training labs through the third quarter have more than tripled compared to last year."
• The company is conducting the MASCOT study for a potential MACI ankle indication, targeting an annual addressable market of 20,000 patients.
• Mara stated that the company expects "some expansion from a bottom-line perspective next year" as it leverages top-line growth and transitions past its current investment phase.

INDUSTRY GLOSSARY

• MACI: Autologous cultured chondrocytes on a porcine collagen membrane used for the repair of knee cartilage defects.
• Epicel: A permanent skin replacement for patients with deep-dermal or full-thickness burns covering 30% or more of total body surface area.
• NexoBrid: A biologic orphan product containing proteolytic enzymes for the removal of eschar in patients with thermal burns.
• BARDA: Biomedical Advanced Research and Development Authority, a U.S. government agency that funds medical countermeasures.
• MACI Arthro: An arthroscopic delivery system designed for the surgical administration of MACI cartilage repair.
• ACI: Autologous Chondrocyte Implantation, a restorative surgical procedure to treat cartilage defects.
• NICE: National Institute for Health and Care Excellence, an agency that provides national guidance and advice to improve health and social care in the United Kingdom.
• MHRA: Medicines and Healthcare products Regulatory Agency in the United Kingdom.

Full Conference Call Transcript

Operator: Good day and welcome to the Vericel Corporation Third Quarter 2026 Earnings Call. Today's conference is being recorded. If you would like to ask a question on today's call, please press star one on your telephone keypad. Now, at this time, I would like to turn the conference over to Eric Burns, Vericel VP of Finance and Investor Relations. Please go ahead, sir.

Eric Burns: 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, 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. Also, 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, which is included as 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.

Nick Colangelo: Thank you, Eric, and good morning, everyone. The company had an outstanding third quarter, which was the strongest quarter of the year on a number of measures for the company, MACI, and our burn care business, as we generated top-tier revenue growth across the portfolio, an inflection in profitability, and significant free cash flow. We delivered record third quarter total revenue of more than $85 million, which increased 26% over last year and significantly exceeded our guidance for the quarter.

Based on our third quarter outperformance and the strong momentum that has continued into the fourth quarter, we are raising our full year total revenue guidance to $344 million-$346 million, which represents 25% revenue growth for the year at the midpoint and an increase in revenue guidance of nearly $25 million since the start of the year. We also had another excellent quarter from a profitability perspective, as net income nearly tripled, adjusted EBITDA grew nearly 50% to more than $25 million, and adjusted EBITDA margin increased to 30%, which was significantly higher than our guidance for the quarter. Based on this outperformance on profitability measures, we are also raising our adjusted EBITDA margin guidance for the year.

MACI had another great quarter with record third quarter revenue of more than $67 million, which exceeded our guidance for the quarter and increased 21% versus the prior year, marking the sixth consecutive quarter with MACI revenue growth of 20% or more, which was notable given the significant acceleration in MACI implant and revenue growth in the third quarter of last year. Beyond MACI's strong revenue performance, we continue to see significant momentum in the underlying business fundamentals that support sustained MACI growth. We achieved record third quarter MACI biopsies, implants, and biopsy and implanting surgeons.

Importantly, MACI's biopsy growth rate has increased each quarter this year, and we started the fourth quarter with the strongest biopsy month since launch in October, reflecting the strong demand that is translating into the robust implant procedure volume that supports our increased fourth quarter revenue guidance. With continued momentum across our key growth indicators and a strong start to the fourth quarter, we believe that MACI is exceptionally well-positioned to deliver a strong finish to the year and sustain its growth trajectory in 2027 and beyond.

MACI's strong performance has been driven by the consistent high level of execution of our expanded MACI sales force, as well as the impact of the MACI Arthro launch and our commercial excellence initiatives. The primary objective of our sales force expansion and commercial initiatives is to drive deeper penetration within MACI surgeon practices, and during the third quarter, we saw continued strength in biopsies per surgeon, a clear indicator that this initiative is beginning to unlock another key growth driver for MACI.

In addition, the cohort of expansion territories has the highest biopsy growth rate for the first three quarters of the year, which we expect will lead to accelerating implant growth in our new territories in the fourth quarter and into 2027. MACI Arthro adoption also continues to gain momentum. We completed a record number of MACI Arthro procedures in the third quarter, which represented the highest percentage of total MACI procedures in any quarter since launch. We also had a record high number of surgeons perform a MACI Arthro procedure in the quarter, and more than 25% of MACI procedures to treat condyle defects under four square centimeters were administered via MACI Arthro, another strong indicator of increasing adoption.

While the patella defect segment continues to be our highest volume and growth segment, we have also seen higher growth and activity in other defect locations, which we believe is a result of the focus MACI Arthro has created for these other defect segments. We expect that expanding MACI Arthro adoption and utilization will be further supported by a growing body of positive clinical evidence. Of note, a recent publication evaluating patients treated arthroscopically outside the United States reported durable clinical outcomes and a higher rate of patient satisfaction at a mean follow-up of 13.6 years, reinforcing the potential long-term clinical benefits with the arthroscopic delivery of MACI.

In addition, the first MACI Arthro publication, which was published in August, highlighted several surgical and early patient outcome advantages of the MACI Arthro procedure, including minimal surgical disruption to the joint, the ability to treat multiple cartilage defects in different compartments of the knee, a more desirable cosmetic appearance, and improved early postoperative recovery. These initial results suggest positive patient outcomes that could also lead to shorter overall rehab and recovery timelines for MACI Arthro patients. Looking ahead, we expect our MACI clinical outcomes registry to expand to even more sites in 2027, leading to additional data for future publications that can further enhance MACI's strong clinical profile.

Surgeon engagement with MACI also continues to significantly expand as the number of peer-to-peer programs and training labs through the third quarter have more than tripled compared to last year. As we move into 2027, we expect an even greater impact from the expanded MACI sales force, MACI Arthro adoption, and our commercial excellence initiatives, which together with continued overall trends towards restorative cartilage repair procedures, positions MACI for sustained strong growth in 2027 and beyond. In terms of our longer-term MACI growth drivers, we continue to activate sites and enroll patients in the MACI Ankle MASCOT study.

As a reminder, a potential MACI Ankle indication represents a substantial commercial opportunity for the company, with an estimated annual addressable market of nearly 20,000 patients, representing more than a $1 billion market opportunity. We also remain on track for the potential launch of MACI in the U.K. in the second half of 2027, which represents another meaningful market opportunity. Based on procedural data available from the U.K. National Health Service, we estimate an addressable market of approximately 15,000 patients annually, representing a potential market opportunity of several hundred million dollars. As we noted on our last call, we submitted a MACI marketing authorization application to the U.K. in the second quarter.

The MHRA completed its inspection of our new manufacturing facility in the third quarter, and earlier this month, NICE accepted MACI for a single technology appraisal, which will establish reimbursement and pricing, as well as a specific MACI funding guidance for the NHS. In parallel, we have begun initial market development work to assess additional MACI OUS expansion opportunities in Canada and Europe.

Finally, we are continuing to develop the next generation of MACI Arthro instruments, as we remain focused on continuous innovation to further simplify and reduce surgical time for the MACI Arthro procedure, and providing greater access for all areas of the knee, including for patella defects, which we expect will support sustained increases in surgeon engagement and MACI utilization. The company also delivered an exceptional quarter for the burn care business, as we built on the momentum from the first half of the year and generated the highest quarterly revenue to date for both Epicel and NexoBrid, with record quarterly burn care revenue of $18 million, representing more than 50% growth versus both the prior year and the prior quarter.

Epicel's record quarterly revenue is driven by continued strength in biopsies and new biopsying centers, as the burn care commercial team's cross-selling efforts continue to expand Epicel adoption and utilization. NexoBrid's record quarterly commercial revenue was driven by the highest number of ordering burn centers and hospital orders in any quarter to date. Notably, we have added more new NexoBrid ordering centers through the third quarter this year than during all of last year, and have continued to expand the number of consistent users, an important driver of further uptake.

To date, more than 80 centers have placed NexoBrid orders, with approximately 70 centers having placed repeat orders, as we continue to focus on driving more centers to become consistent users. Building on the success with MACI, we have also recently implemented several commercial and operational excellence initiatives across burn care that we believe are beginning to have a meaningful impact on performance. For Epicel, we began the year with a full commercial rebranding that refreshed the product's positioning around the critical importance of achieving wound closure, significantly increased our peer-to-peer activity, and sharpened our focus on supporting our surgeon customers with a multidisciplinary approach to drive the best clinical outcomes for patients.

For NexoBrid, we have implemented similar account planning as well as stakeholder mapping initiatives that are leading to broader standardization of treatment algorithms across burn centers and more consistent adoption and utilization of NexoBrid. As we move into 2027, we believe that these commercial initiatives and our enhanced execution can drive continued strong results for the burn care franchise. Overall, we are on track to deliver a strong close to the year and another great year for the company. Our recent financial results and increased guidance demonstrate the company's unique combination of sustained high revenue growth, profitability, and cash generation.

We believe that the durable growth of our portfolio positions the company to sustain strong revenue and profit growth in 2027 and the years ahead, as we remain on track to achieve our midterm revenue and profitability targets. I will now turn the call over to Joe to discuss our third quarter results and updated 2026 guidance in more detail.

Joe Mara: Thanks, Nick, and good morning, everyone. Total revenue in the third quarter increased 26% to $85.4 million, significantly above our guidance range, driven by strength across both commercial franchises. MACI revenue was $67.4 million, representing 21% growth, and burn care revenue was $18 million, representing 52% growth, with both franchises continuing to deliver top-tier revenue growth. Within burn care, Epicel revenue increased 23% to $12.7 million, its highest quarterly revenue since launch. Commercial NexoBrid revenue was $2.3 million, also a quarterly record, increasing 54% versus the prior year and 46% versus the prior quarter, as utilization continues to increase. We also recognized $3 million of NexoBrid procurement revenue under our BARDA agreement.

The company also delivered very strong profitability, with gross margin of more than 73% and adjusted EBITDA margin of 30%, both well above our guidance for the quarter. GAAP net income increased 179% to $14.2 million, or $0.27 per diluted share, and adjusted EBITDA increased 48% to $25.2 million, expanding over 400 basis points versus the prior year. The company generated approximately $18 million of operating cash flow and $16 million of free cash flow, ending the quarter with $236 million in cash and investments and no debt. We repurchased approximately 221,000 shares of common stock for $8.8 million in the third quarter, with $191 million remaining under our repurchase authorization as of the end of the quarter.

Through the first nine months of the year, the company has generated exceptional financial results, with revenue growth of 26%, adjusted EBITDA growth of nearly 50% to $50 million, and more than $45 million of free cash flow, further demonstrating our top-tier financial profile. Turning to guidance. Based on the strong results to date, the clear momentum in the business, and a strong start to the fourth quarter for both franchises, and particularly for MACI, we are increasing full-year total revenue guidance to $344 million-$346 million from $330 million-$340 million, an increase of $10 million at the midpoint of our guidance range.

This is the third consecutive quarter that we have raised revenue guidance, and our full-year guidance is now $24 million above our starting point for the year. We are increasing full-year MACI revenue guidance to $290 million-$292 million from $284 million-$290 million. Importantly, we are also raising fourth-quarter MACI guidance and now expect 21% growth, or approximately $102 million of revenue in the fourth quarter at the midpoint of our guidance. Our increased fourth-quarter MACI guidance reflects the strong MACI procedure trends to start the quarter, and if these recent trends continue into December, this would result in upside to our fourth-quarter MACI guidance.

We are also raising full-year burn care revenue guidance to approximately $54 million from $46 million-$50 million. This implies $12 million of total fourth-quarter burn care revenue, with $9 million of Epicel and commercial NexoBrid revenue and $3 million of NexoBrid BARDA procurement revenue. Moving down the P&L, we continue to expect full-year gross margin of approximately 75%, and we are increasing full-year adjusted EBITDA margin guidance to approximately 28% from 27%, reflecting this higher revenue outlook and continued expense discipline. This concludes our prepared remarks. We will now open the call to your questions.

Operator: Thank you. Ladies and gentlemen, if you 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. Again, press star one to ask a question. We will go first to Josh Jennings with TD Cowen.

Josh Jennings: Hi, good morning. Thanks, Nick and Joe. Congratulations on the strong third quarter results. Great to see the momentum continuing. Wanted to just talk about kind of the LRP targets that you have in play with the significant outperformance to date in 2026. You have to have even more confidence in the run there to achieve those and hit those marks. Maybe just talk about any thoughts on potential updates to LRP targets as we move into 2027 and get closer to the year where you set those, what seems to be not as ambitious targets after the first nine months of 2026.

Joe Mara: Yeah. Good morning, Josh, and thanks for the questions. This is Joe. I will take that one. I mean, I would say, I appreciate the question in the sense that, I would say at this point, we are probably kind of outpacing our expectations to kind of hit those targets, particularly on a top-line level, where it is kind of getting that half billion by the end of the decade. Obviously, the updated guidance for this year kind of gets us into the mid-$340s, which is a pretty substantial number for the company. So, I think we feel like we are very much on track, particularly from a top-line perspective.

I would say if you look at kind of the bottom line metrics, I think what really stands out is, number one, we are already performing well on the gross margin side. We talked about getting into the high 70s on a full-year basis. We have kind of already been in the mid-70s. Another strong quarter, while we are adding our new manufacturing facility in Q3. From a bottom line perspective, I think it is certainly noteworthy, we have seen fourth quarters with 40% plus margins, and that gives you a sense of where the company is at scale. To see a third quarter kind of reach that 30% level, I think is noteworthy.

So, we have updated our full-year guidance from an adjusted EBITDA perspective, and even with, I would say, the pretty substantive investments we are making across the business to continue to drive growth, not only in the near term, but in the mid and long term, whether that is kind of OUS, sales force expansion, et cetera. There is a ton of investment in there, and we are still on track to expand our bottom line margins pretty significantly this year, at that 28% level relative to last year. So, I think to answer your question, we are not going to update it at this point.

We will certainly be kind of prudent as we get into guidance for next year. But I would say broadly from a kind of long-term perspective, we feel like we are tracking very well to the targets we laid out from an LRP perspective.

Josh Jennings: Excellent. Thanks for that. Just maybe one follow-up. At our visit to Burlington inter-quarter, one of the, I guess, new learnings for me was just for the MACI sales force, historically, there have been meaningful productivity gains for reps as they go from their first year to second year, and even the second year to third, to the third year. But I was hoping to just circle back on that, Nick and Joe, and just get a review on those precedents and just how this sales force expansion has a long tail. Thanks.

Nick Colangelo: Yeah. Thanks, Josh. I will take that one. We talked about it a little bit on our second quarter call as well, that obviously, we have a strong track record over the years of when we expand, we have seen increases in rep productivity, and we certainly expect that to be the case again. We talked about earlier in the year, the new territories and new reps got off to a good start in the first quarter, where we saw them pulling through cases that were, or biopsies that were already existing within their territories.

They had a particularly strong biopsy growth that happened again in the second quarter, and really has continued throughout the year, where they have sort of new territories have sort of led all the cohorts in terms of biopsy growth. Obviously, that sets up those new territories for strong growth in Q4 and into 2027, given the time frames for when those biopsies convert. We also mentioned that what we have typically seen, as we look at sort of new rep adds post-COVID, is that in their second and third years, they actually sort of lead on implant growth versus new territories or even the legacy territories that tend to be the higher volume territories.

That is why we are very confident that this is not just a 2026 play, obviously, and that in 2027 and beyond, that these new reps will have an even greater impact on the overall MACI growth.

Josh Jennings: Appreciate that.

Operator: Once again, it was star one if you had a question. We will go next to Caitlin Roberts with Canaccord Genuity.

Caitlin Roberts: Hi. Great. Thanks so much for taking the questions, and congrats on a great quarter. With the strong growth in MACI, curious how much of that is being driven by new surgeon engagement. So, how far along in the surgeon penetration curve since you expanded your target surgeon base with Arthro, are you guys now?

Nick Colangelo: Yeah. Hey, Caitlin. Thanks. It's Nick. I'd say that we've talked over the years that the primary driver from a surgeon perspective up until last year was really just adding new surgeons, as MACI has become kind of standard of care over its first decade on the market. I'd say last year, we made a note that we were starting to see more biopsies per surgeon, and that was contributing to the MACI growth as well in a more balanced way.

So now, when we look at the growth in the business, whether it's biopsies, which are the leading indicator, or even implants, we see that we are continuing to add new surgeons, but we're also seeing, again, more biopsies per surgeon. So that overall biopsy growth, which leads to the implant growth, is really kind of a balanced growth between new surgeons adds and deeper penetration within their practices.

Caitlin Roberts: Great. Then, another cartilage technology has announced a recent launch in Europe, including the U.K. I mean, how are you thinking about just the competitive landscape as you enter the U.K. and then more broadly other regions OUS?

Nick Colangelo: Yeah. So, obviously, it has been a topic of conversation during the course of the year. We kind of start from, I think it has been pretty well settled as these discussions have emerged, that, first of all, MACI is the clear market leader in cartilage repair. As you look at it is obviously a very large under-penetrated market, and with a lot of growth left, especially when you look at the new, as you sort of look at the restorative therapies that are used in the market. So, MACI has got this clear positioning of young, active patients with small, moderate, and large defects, no bony involvement.

In addition to the trends of moving to restorative therapies, that is what has been fueling the growth. Based on the work we have done, we just completed our annual ATU, or awareness trial and usage market research that we do each year with 100 surgeons. Half are MACI users, half are not. Those product positionings that we have seen over the years were reinforced. I do not think anything has changed in terms of our perspective of the MACI growth opportunities and so on. There are a lot of other cartilage repair products in the market already that are marketed by several of the largest med tech companies in the U.S. and globally.

Obviously, MACI has become the market leader. That has been the case for the 10 years it has been on the market. Nothing, from our perspective, is changing in that regard. In the U.K., same sort of dynamic where I think it is pretty well understood that autologous chondrocyte implants are the gold standard for treating cartilage injuries. Other options have been around in Europe for a long time. The U.K. in particular has designated, as I have talked about before, approximately a dozen joint preservation centers to treat patients with cartilage injuries using ACI technologies. It is seen as a kind of obviously cutting edge technology in the U.K. The patient demographics are going to be the same.

The physician perspectives on appropriate patients to use MACI or any of these other products that have been around for a while are no different. As I have mentioned, MACI obviously was developed in Europe, pivotal study was conducted there. The U.K. surgeons came over and trained our U.S. surgeons when we launched the product. Really no kind of difference from our perspective in MACI's positioning as a leader in U.S. and presumably soon global cartilage repair. I guess that is our perspective as we move forward.

Caitlin Roberts: Thanks so much for the color.

Operator: We will go next to Richard Newitter with Truist Securities.

Richard Newitter: Hi. Thanks. Thanks for taking the questions. Congrats on the quarter. I just wanted to go back to 2027. Thanks for some of the early color there, and it sounds like maybe just starting on the MACI side, in the past during third quarters into the following year, you provided some just broad strokes to think about a placeholder for the year ahead. I guess on MACI, is it right to think about maybe a 20% starting point for next year, and then all those kind of incremental drivers, U.K., increasing productivity, so forth, those are things that would bring you above that?

Just trying to get a sense so that we can kind of get numbers more or less as a good starting point. Anything there? And then same question for BURN. Is it reasonable to kind of think of the algorithm where you are back to your normal kind of run rate of, call it, $10 million-$12 million per quarter? Is that a good way to think of the quarterly cadence as a placeholder to start off 2027? Thanks.

Joe Mara: Yeah. I will start on that one, Rich. Good morning, and thanks for the question. This is Joe. I would say, I guess the first thing I would kind of say is just per our prepared remarks, as Nick talked about, we are seeing a ton of momentum in the business, and on both franchises, we think there are kind of multiple growth drivers that will continue. Obviously, the sales force expansion we have talked about, MACI Arthro momentum continues, a number of commercial excellence initiatives that we think are having a meaningful impact. We certainly think that is not going to end at the end of 2026 and continue right into 2027.

I would say, we are pretty bullish on kind of what next year could look like, particularly from an internal expectation perspective. I guess from a guidance perspective, just kind of getting there, I would probably get to a couple of points. Number one, probably early in terms of kind of formal guidance, and I know that is not the question, but in terms of what that will look like, we will obviously refine that as we get into 2027. But probably a couple of helpful areas and data points to look at and think about here.

Earlier the question was asked around kind of our midterm targets, and again, we feel like we are at this point likely outpacing that a bit, which is great. But, I would say we are not going to get ahead of ourselves in terms of how we start the year from a guidance perspective. We are certainly mindful of that trajectory, but I think that helps as you think about kind of the path from 2027 and beyond.

The second thing I would just point to, which I think is really clear and helpful, is if you really look at where consensus is, that is probably a pretty good starting point, whether you look at total revenue, MACI revenue, and probably burn care to a degree as well.

If you kind of go back to where we started this year, I think we were very clear and probably a bit prudent, I would say, in our guidance philosophy on both franchises, where for MACI, for example, we said, "Look, we have internal expectations higher, but we are going to start the year probably a bit conservative and point to something with similar year-over-year dollar growth." That is how we started this year. That is actually where consensus is next year, if we kind of look at 2026 to 2027. That is probably a good starting point.

Again, we will refine that, and our internal expectations are higher, but that is kind of where the direction we went this year, and I think obviously that has worked out well, and we have beaten that from a MACI perspective. On the burn care side, you got to kind of think through the pieces there a little bit. Obviously, NexoBrid, we expect to continue to ramp. Epicel is performing much better, but I think we will certainly kind of use a similar framework or thinking about kind of where has the business been and probably start a bit prudent there as well.

I think it is just a balance where we feel like 2027 is set up for a really strong year. But I think the good news is when you look at consensus or you think about how that fits in the midterm targets, again, that is right in line with kind of how we have been guiding this year, and we think that is an appropriate starting point to start the year. Certainly, as we move through the year, our expectations could change.

Richard Newitter: Okay. So if I am hearing you right, there is probably no reason internally or just with all the momentum drivers you have out in front, that there would not be a 20%+ growth trajectory here. But you will continue the philosophy of appropriately conservative at the start of the year and then seek to outperform that and kind of think of that around a 20% kind of base. Is that right?

Joe Mara: Yeah. Again, I think you kind of hit it, which is probably from a guidance framework perspective, we will start a little bit more conservatively than that. From an internal kind of planning and progressions throughout the year, obviously, we are going to continue to strive for high growth on both franchises, I would say, including MACI. But again, we just do not want to get ahead of ourselves as we are sitting here in November for next year.

Richard Newitter: Okay. Really helpful, and congrats on the quarter, guys. Thanks.

Joe Mara: Thanks, Rich.

Operator: We will take our next question from Ryan Zimmerman with BTIG.

Ryan Zimmerman: Hey, good morning, guys. Thanks for taking our questions. Appreciate all the questions before. I guess I want to spend a moment on two things. One, on MACI, maybe Joe, you could talk about kind of the dynamics between, one, price and volume, but also conversion from biopsy to procedure. I guess I'm interested in understanding. I mean, the biopsy numbers, the KPIs you're talking about sound very good, and I'm wondering kind of how you're seeing that translate, particularly from a conversion perspective, if there's been any acceleration or step up, pull forward, and so forth with all the efforts on commercial excellence. Thank you.

Joe Mara: Yeah, and I'll start on that one. Good morning, Ryan. I'd say, as we look at the third quarter, in terms of the dynamics, I think we're very pleased with the result, another 20% plus quarter ahead of our guidance. I would add, just kind of related to your question, if you actually look at MACI on a two-year stack basis, it's actually our best quarter of the year from a revenue perspective. So, I think that sort of helps get at the strength, kind of the underlying strength that we're seeing. Maybe just to start with Q4, and I'll kind of work backwards, but I'd say Q3 was strong, kind of when we look at it from multiple dimensions.

But just to reiterate kind of the start we've gotten off to in Q4, October's behind us, November, into November now, and our procedure volume has been very strong. December, I would say, our early indicators are very strong as well. We upped the guidance in Q4, and we kind of upped our framework. Instead of pointing to kind of the high teens, we're pointing to 20% plus. I think you can imagine, we're obviously talking about strong biopsy growth accelerating each quarter, I would say. Particularly as we've gotten into Q4, we've seen that start to translate. I would say the strong biopsies that we're seeing are translating as we would anticipate, particularly in Q4 from an implant perspective.

I think conversion remains on track as we move toward year-end.

Ryan Zimmerman: Okay. Fair enough. The second question, we've had three quarters now with Epicel just really outkicking its expectations. It's so variable. I think we all know that we've lived through kind of the ups and downs with Epicel quarter to quarter. At what point do you guys say, as opposed to, let's call it a $8 million run rate per quarter, collectively it's $10 million-$12 million with NexoBrid. I mean, at what point do you start to say, "Yeah, $9 million's right or $10 million's right on Epicel?" What do you need to see to kind of get to that comfort level to kind of bump that a little higher from a quarterly run rate perspective?

Nick Colangelo: Yeah. Hey, thanks, Ryan. This is Nick. I think, as Joe mentioned earlier, just kind of whether it's on a company basis, MACI or burn care, we've kind of taken a pretty disciplined approach to how we guide. I'd say your point is absolutely accurate that Epicel now, really for a good number of quarters, five or six quarters, has performed at a much higher level. We talked a little bit about the reasons for that. Once we restructured the sales force, had all 17 territories or reps promoting both products, we've seen a lot of the benefits of having NexoBrid in the bag.

Not only is it sort of hits a different point in terms of its momentum, but also the cross-selling efforts for Epicel. Joe, I mentioned earlier kind of the rebranding for Epicel, peer-to-peer activity is up, how we approach each biopsy we get from a kind of multidisciplinary functional approach and working with surgeons on sort of the best treatment plans for outcomes for those patients. I just think all of those execution initiatives has really sort of changed the performance level for Epicel.

Now, all of that being said, we can't control the number of catastrophic burns that occur or the number of patients that survive to be treated, but we have noted that for those that do, we're performing at a much higher level. I'd say more to come on how we'll sort of guide for quarters going forward. As we get into next year, obviously, that continued performance, we would expect it doesn't end when the calendar flips on January 1st. And we said that we've gotten off again to a strong start in burn care, had the highest number of Epicel biopsies of the year in October.

So, we think we're set up for sustained higher performance and for the reasons I mentioned. But we'll get into, and Joe, you can comment if you want, sort of how we'll approach guiding the burn care as we get into 2027.

Joe Mara: Yeah, no, I mean, nothing to add. I mean, I think it's a fair question, Ryan. Again, obviously, the framework has worked quite well this year, and I think we'll kind of adjust as needed as we get into next year. But again, I think that's where we want to just separate kind of our internal expectations and some of the better execution we're seeing from the team, particularly with what we can control on burn care from our guidance framework that we just want to make sure is appropriate both kind of on a full-year basis and I would say quarter to quarter.

Ryan Zimmerman: Okay, fair enough. Thanks, guys.

Joe Mara: Thanks, Ryan.

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

Sam: Hey, everyone. This is Sam on for Mike. Margins came in really strong this quarter, and with 2026 adjusted EBITDA margin now expected to reach 28%, how should we be thinking about the next step up in margin, including contributions from manufacturing utilization, sales force leverage, and incremental spending related to the U.K. launch, and the potential trajectory moving into 2027?

Joe Mara: Yeah, good morning. Thanks for the question. This is Joe, I'll take that. Again, as we talked earlier, I think the margins in the third quarter, particularly on the adjusted EBITDA line, we were well ahead on both gross margin and adjusted EBITDA, but very strong in the third quarter to be at that 30% level. I think if you kind of think about the multi-year trajectory here, you can see with our increase to 28%, last year was in the 25%-26% adjusted EBITDA margin on a full-year basis. So, really some nice expansion this year during what was really our investment year, probably a bit ahead of where we started the year, which is great.

I think as you move through the next few years, to the question earlier, feel like we're on track certainly to kind of hit that high 30% range. It's really the leverage, really the top-line growth, and the leverage in the business. We are in an investment phase here with two facilities operating, of course, on the manufacturing side. We will have our sales force expansion in place, so that'll kind of be in the run rate, which will be helpful. There are other areas we'll probably continue to ramp up in terms of OUS and as we get closer to a potential U.K. launch and looking at other markets.

Certainly from an ex-U.S. perspective, that'll continue, and MACI Ankle will continue to ramp. So there's still spend certainly that we're going to continue to invest in. Again, having said that, I think we would still expect some expansion from a bottom-line perspective next year. Gross margin, again, we are kind of already in that mid-70% range, so that is probably kind of around where we are going to be this year and something similar next year.

I do not want to get too far ahead in terms of formal guidance, but I do think if you look at where consensus is on both gross margin and adjusted EBITDA, that is probably a good starting point to give you a sense of things are continuing to tick toward our midterm targets, pretty healthy this year and next year.

Speaker 8: Got it. Very helpful. On MACI, can you just kind of provide a little bit more color on where the strongest areas of incremental growth are coming from today? Specifically the contribution from larger versus smaller defects, the penetration across those segments, and just comment on MACI Arthro's ability to kind of continue penetrating those smaller defect segments, which historically were not a large part of the business.

Nick Colangelo: Yeah, I will start with that. As I mentioned in my prepared remarks, obviously MACI use in the patella has been our highest volume and highest growth area historically. The whole idea behind MACI Arthro is to be able to penetrate those smaller defects in the two to four square centimeter range. As we mentioned, everything with MACI kind of unfolds over quarters and years, and we are seeing some very nice momentum there where we had record number of MACI Arthro procedures, the highest percentage of total MACI procedures we have ever seen in a quarter, which is great. Highest number of surgeons, and then more than a quarter of those smaller defects being treated via MACI Arthro administration.

So, it is kind of all the things we would want to see. Obviously, we have talked about the dynamics of when surgeons become MACI Arthro implanters, and particularly when they reach a threshold, you just see the overall sort of utilization by those surgeons increase across kind of defect size and location. From that perspective, that is why we expect MACI Arthro to continue to sort of contribute to the overall utilization for MACI. So, we are pleased with where it is, and we expect, as we said, not only the sales force or commercial initiatives, but the MACI Arthro adoption to contribute to the sustainable growth rate for MACI.

Of course, having continuous innovation really helps keep surgeon engagement high, which we also noted on our call. We are working on next-generation MACI Arthro instruments that, again, will allow us to access, make it even simpler and faster with the current sort of focus, and then focus on the ability to access other parts of the knee as well, like patella, which could be another very important evolution for the brand.

Speaker 8: Thanks, guys.

Nick Colangelo: Thank you.

Operator: We will move to our next question from Mason Carrico with Stephens.

Mason Carrico: Hey, guys. Nick, maybe circling back to the prior question that you just answered. Could you just update us, I guess, on the implant mix, what it looks like today by defect type, and maybe how that compares to the mix pre-Arthro? Are you seeing similar conversion rates across defect types, or are there any differences there?

Nick Colangelo: Yeah. Hey, Mason. As I mentioned, for the patella, which is again our biggest part of the business, that is at this point, especially greater than 4 sq cm, which is a lot of the MACI patella business, that is kind of going to be an open procedure, just because of the size of the defect. Even when we develop MACI Arthro patella instruments, that will allow you to treat 2 to 4 sq cm defects using arthroscopic instrumentation. That will help in terms of kind of addressing even more patella defects, which are very, it is a very meaningful part of the market.

As we talked about, since we have introduced MACI Arthro, we have obviously grown in those smaller defects, and not just on the condyles. We have mentioned that we have seen nice growth in biopsies and implants in the trochlea and so on. It changes by quarter, just depending on patients and where their defects are that happen to be treated in that quarter. I would just say, obviously, overall growth has been strong. Patella continues to grow strongly. We are starting to see higher growth in those other smaller defects in various places in the knee.

Mason Carrico: Got it. In the past, I know you guys have talked about Arthro-trained surgeons growing biopsies and implants faster than non-trained surgeons. It seems like that is obviously still the case, given the growth metrics that you guys are calling out. Just to ask directly, does that trend continue to hold?

Nick Colangelo: Yeah. As I mentioned, we also sort of added a little bit of commentary to that by saying, just like we did when we looked at conversion rates for MACI open surgeons, once they hit sort of a critical mass of a few, three or more, a few implants per year, you see higher conversion rates for them. As I mentioned earlier, when you kind of have a MACI Arthro implanter that has hit a critical mass of MACI Arthro implants, you see not only those trends continue, but also sort of increased utilization across the board, whether it is MACI open or MACI Arthro cases, and kind of regardless of where the defect is in the knee.

Exactly the kind of things that you would want to see. Again, I believe that the continuous innovation of those instruments will continue to sort of engage surgeons and just keep the brand fresh. I think that is a very important contributor to MACI performance, not only now and in the near term, but over the longer term as we move forward.

Mason Carrico: Got it. Thank you.

Operator: We will take our next question from Jeffrey Cohen with Ladenburg Thalmann.

Jeffrey Cohen: Hi, Nick and Joe. Thanks for taking our questions. I wondered if you could talk about the burn franchise a little bit and talk about the wound market. I know that you had called out wounds. Maybe give us a sense of the commercial teams and their focus and awareness specific to wounds and what you're seeing. Thank you.

Nick Colangelo: Yeah. So just to be clear, on the burn care side, we're not really on the wound side of things. But obviously, we had the highest quarter ever for the burn care business, highest quarter ever for Epicel and NexoBrid on the commercial side as well. So, really pleased with what we're seeing there. I think, as I mentioned in my prepared remarks, a lot of it has to do with the cross-selling impacts. If you look at my commentary there, Epicel was driven by high biopsy levels and biopsying centers. NexoBrid was driven by the most orders from centers and hospital orders overall.

So, you're kind of seeing a larger footprint and the impact it has in driving both pieces of the business. As I mentioned earlier, we think we're operating at a different level for both of those products, and we think that's going to continue going forward.

Jeffrey Cohen: Got it. As follow-up, could you talk about BARDA a little bit? I know it's a bit early, but can you give us a sense of contribution going forward throughout 2027? I know you've given us a sense already of back half of 2026.

Nick Colangelo: Yeah. As we look at the two pieces, which is one, procurement revenue, that began in the third quarter, so $3 million of the NexoBrid, $5-plus million was related to the BARDA procurement. That initiated on time and is according to plan. We would expect another $3 million in the fourth quarter, and then about $4 million to start the year in the first quarter next year, with opportunities for further procurement later in the year. That is kind of the first piece of it. Secondly, we are also working on and that counts as revenue, as I mentioned, or is recognized as revenue.

The second piece of it is the development work we are doing on a blast indication and other things, and that has a cost offset or other income impact on the P&L. That began as well in the second half of the year, and that will carry through in 2027 as those activities continue to ramp up and potentially other ones on top of that. That depends on the activity level and timing and so on. We have not really commented on what that will look like in 2027, but that will be incorporated both in the revenue, in our guidance at the appropriate time, and then in our margin guidance as well.

Jeffrey Cohen: Perfect. Thanks for taking our questions.

Nick Colangelo: Okay, thank you.

Operator: We will take our final question from Charles Wallace with H.C. Wainwright.

Charles Wallace: Hi. Thanks for taking my question. This is Charles on for RK. So maybe just one more kind of on the burn care franchise and Epicel. So, obviously, it's challenging to project and lumpy by nature, but for the third quarter, could you maybe split how much of the beat was due to higher burn incidents versus the commercial initiatives? And how much of the commercial piece, the initiatives that you put in place, do you think will be repeatable in the future? Thank you.

Nick Colangelo: Yeah, I'd say in sort of the burn market data that we're able to access, it lags, so you can't really see sort of any market dynamics, but it's been pretty stable. And I'd say really the growth we've seen in Epicel relates to sort of execution, particularly through the first half of the year. The top of the funnel was relatively consistent. That improved a little bit in the third quarter, but the outperformance was definitely driven on the execution side. And again, we've had multiple quarters in a row now since we've implemented these initiatives, and actually more are sort of in the early stage.

So, to the extent we, for the things we can control, it's absolutely repeatable and obviously has taken Epicel to a different level.

Charles Wallace: Great. That's very clear. And maybe one final question, if I could sneak it in. So, with your cash flow growing, how are you balancing potential BD against share buyback, and what does the right BD asset look like? Thank you.

Nick Colangelo: Well, obviously, we're in a fortunate position to be generating, hitting that cash inflection point, and I think you can see that absolutely as we sort of finished up the CapEx involved with our new facility. We announced the authorization last quarter. We obviously started the repurchase program in the third quarter. We have nearly a quarter billion in cash, and that's growing pretty substantially. We're not really at a point where we're thinking about it's one or the other. We can do both. I think that's, we'll be opportunistic in the share repurchases, but that doesn't impact sort of our desire or ability to do any business development transactions.

Charles Wallace: Great. Thanks for taking my questions, and congrats on a great quarter.

Nick Colangelo: Thank you.

Operator: This concludes our question and answer session. I will now turn the call back over to CEO Nick Colangelo for closing remarks.

Nick Colangelo: Okay. Well, just wanted to say thanks to everyone who joined us this morning. Obviously, we are very pleased in delivering outstanding third quarter and strong year-to-date performance, and we look forward to providing updates on our next call. Thanks again, and have a great day.

Operator: Thank you. Ladies and gentlemen, that does conclude today's call. We thank you for your participation. You may disconnect at this time.

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