Good day, and thank you for standing by. Welcome to the AVIDA Medical, Inc. 2nd Quarter, 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ben Atkins, Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you, Operator. Welcome to Avita Medical's second quarter 2026 earnings call. Joining me on today's call are Carrie Vance, President and Chief Executive Officer, and David O'Toole, Chief Financial Officer. Today's earnings release and presentation are available on our website at www.abitamedical.com under the Investor Relations section. Before we begin, I would like to remind you that this call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results to differ materially from any expectations expressed or implied by the forward-looking statements. Please review our most recent filings with the SEC for comprehensive descriptions of the risk factors. Any forward-looking statements provided during this call are based on management's expectations. I'll turn the call over to Kerry.

Good afternoon in the U.S. and good morning in Australia. Thank you for joining us. As you saw in our press release today, we delivered strong revenue growth in the second quarter of $21.7 million, up 18% year-over-year and 13% sequentially. As Aveda continues to expand in the U.S. and build its presence in key international markets, our results reflect the growing utility of our acute wound care portfolio, led by ReCell and supported by Cohelix and Permioderm. In the U.S., ReCell generated $18.5 million in revenue during the second quarter, growing approximately 13% sequentially from the prior quarter. This growth reflected physician utilization following physician reimbursement stabilization together with increasing adoption of ReCell Go Mini, which continues expanding use in smaller wounds. I'll add a little more color on resale later in my remarks. Internationally, revenue from resale increased approximately 26% sequentially over the first quarter. We continue to commercialize Resale Go following regulatory authorizations in Europe, the UK, Australia, and New Zealand. As adoption builds, clinicians are also beginning to share their early clinical experience during the quarter the British Burn Association annual meeting featured the first UK clinical experience with Resell Go reporting successful treatment of 17 patients while highlighting improved operating room workflow while international revenue remains a smaller contributor today these milestones continue building the foundation for long-term growth alongside our large US opportunity Cohelix generated $1.7 million, representing approximately 16% sequential growth. We're encouraged by the steady progress we're seeing as hospitals complete their Value Analysis Committee, or VAC, reviews, and begin incorporating Cohelix into clinical practice. We continue to maintain a healthy pipeline of approximately 55 active VAC reviews, with 10 to 15 reviews typically completed each quarter, driving a steady increase in ordering accounts. The interim co-helix one clinical data presented earlier this year supports those dynamics by providing hospitals and surgeons with comparative clinical evidence. The study demonstrated substantial faster time to skin graft readiness compared with leading dermal matrices, and later this year we expect to submit the complete six-month follow-up data set for publication. providing additional evidence of long-term durability. Permeoderm generated $600,000 in revenue during the quarter. Commercial adoption remains in its early stages. We're encouraged by the initial response following our recent positioning of Permeoderm as a wound temporizer, providing clinicians with an alternative to allograft to temporarily stabilize and protect the wound before definitive closure. To further support that positioning, we expect results from our Permioderm 1 clinical study later this year. As a reminder, this post-market study evaluated Permioderm as a clinically comparable, lower-cost alternative to Allograft. Today, 25 hospitals have experience using all three Avita products. Some are already regularly incorporating the full portfolio into clinical practice, while others are still evaluating where each product best fits within their treatment pathway. That's what we'd expect at this stage of adoption of our new products, and it gives us confidence in the opportunity to grow utilization of our full portfolio within our accounts. Since becoming CEO last October, my objective has been straightforward. To build a business that consistently delivers growth, quarter over quarter, year over year, through disciplined commercial execution. Looking back over the first half of 2026, I believe we've demonstrated that objective in action. We've delivered consecutive quarters of sequential growth, broadened adoption across our portfolio, and we continue to improve the financial profile of the company. That progress gives us greater confidence in where the business is headed, and today we're updating our outlook accordingly. First, we're raising our full year 2026 revenue guidance to a range of $86 million to $89 million, representing growth of 20% to 24% over 2025. Second, we're introducing new guidance to achieve cash flow breakeven and begin generating cash during the fourth quarter of 2026. Reaching that milestone is an important step in Aviva's evolution. It reflects not only stronger revenue growth, but also the operating discipline and cash generation that David will discuss in more detail.

Thank you, Kerry. Good afternoon, and in Australia, good morning. I will use my prepared remarks to look at how our strong commercial performance is flowing through the business, particularly across operating leverage, cash generation and our path to cash flow break-even turning to the financials on slide 4 let me start with revenue as Kerry indicated revenue increased approximately 18% year-over-year and 13% sequentially from the first quarter to 21.7 million crossing over 20 million in revenue for quarter for the first time in our company history. With this sequential revenue growth for the second quarter and $41 million in revenue for the first six months of 2026, we are increasing our revenue guidance for 2026 from $80 million to $85 million to now $86 million to $89 million. This will represent growth for this year from the $71.6 million in revenue in 2025 in a range of approximately 20% to 24%. Turning to gross margin, gross margin increased to 81.9% compared to 81.2% in the prior year quarter and remained above 81% year-to-date despite continued growth in our newer products. As we've discussed previously, while changes in product mix modestly impact reported gross margin percentage, Cohelix and Permiderm contribute incremental gross profit without a proportional increase in operating expenses. Resale gross margin remains strong at approximately 86%. Resale growth provides a tailwind for reported gross margin that offsets the impact of product mix as Cohelix and Permioderm become a larger part of the business. Now looking at operating expenses. Operating expenses were $24.6 million, essentially no change to the first quarter, and approximately 6% lower than in the same period in 2025. Importantly, this demonstrates the benefit of the commercial operating structure we established during the second quarter of 2025 capable of supporting continued commercial growth without requiring a corresponding increase in operating expenses. Looking ahead for the rest of 2026, we continue to identify opportunities to further reduce operating expenses while continuing to support our commercial priorities. This quarter, operating loss and net loss improved to 6.9 million and 7.7 million respectively compared to 11.1 million and 9.9 million respectively in the same period last year. The second quarter operating and net loss showed significant improvements from the quarterly losses we have generated in the past. Turning to cash which remains one of our highest priorities as we discussed during our first quarter call we expected cash use to improve significantly during the second quarter as seasonal payments normalized collections improved and revenue continued to scale that's exactly what happened net cash use improved to approximately 3.2 million during the quarter representing a major improvement from the first quarter and from the quarterly cash burn each quarter last year. We ended the quarter with approximately $11.1 million in cash, cash equivalents, and market securities. As I look at the trajectory of our numbers indicated in the green boxes on this slide, I see a financial model performing as expected and in alignment with our growing revenue. As Carrie mentioned earlier, we are also introducing new guidance for our cash flow outlook. That confidence of reaching cash flow breakeven is supported by three financial trends that are now working together, illustrated here on slide five. First, revenue continues to scale. We've now delivered two consecutive corners of meaningful sequential growth, 9.7% and 13% respectively and we've raised our full year revenue guidance second we've maintained high gross margin above 81% while growing our portfolio over multiple quarters third we've maintained disciplined control of operating expenses and optimized our cash conversion cycle essentially we are spending less money to run the business and collecting cash faster from our operations. Taken together, those trends give us increasing confidence that Aveda is approaching an important financial inflection point. As the business continues to scale, we expect a further reduction in cash use during the third quarter before achieving cash flow breakeven and beginning to generate cash during the fourth quarter of 2026. Turning to slide six, our updated outlook reinforces our confidence that the balance sheet remains aligned with the next phase of the company's growth and funded through this transition to cash generation we continue to operate well within the requirements of our credit facility which was intentionally structured to support the business through this stage of commercial expansion as revenue continues to build the perceptive debt facility also provides access to an additional 10 million tranche once trailing 12-month revenue reaches 85 million providing additional financial flexibility as we transition towards cash generation in summary we're delivering commercial growth maintaining strong gross margin exercising control of operating expenses and significantly reducing our use of cash together those trends support our confidence in the increased revenue forecast we share today and our path towards cash generation today's results also reflect strong execution across the organization commercial operations and corporate teams have worked together exceptionally well to scale the business while maintaining financial discipline I'd like to thank everyone across the Vita for their commitment and execution during the first half of the year. With that, I'll hand the call back to Kerry.

Thanks, David. Before we open the line for questions, I'd like to spend a few minutes on resale. It's the foundation of our business, and we continue to see encouraging progress in both physician utilization and the reimbursement framework that will support future growth. Following the transition of reimbursement across all seven Medicare Administrative Contractors, or MACS, physician utilization of resale continued to strengthen during the second quarter. Total U.S. resale volume increased more than 10% sequentially this quarter to over 2,600 units. We're also seeing a growth driver emerge through Resale Go Mini. As you can see on the right-hand side of the slide, 77% of Resale Go Mini procedures year-to-date were performed in wounds of 500 square centimeters or less. That's exactly what we designed Resale Go Mini to do. to expand resale into smaller burn and trauma wounds. We also view the increased volume in the second quarter as an encouraging indicator of the underlying physician demand for resale when reimbursement is stable and predictable. To that end, we are now entering the final stages of the transition to new Category 1 CPT codes for skin cell suspension autograph, or SCSA, the procedure term for resale. As a reminder, beginning January 1st, 2027, the new Category 1 CPT code family for SCSA will replace today's multi-code structure. The current eight-code structure separates harvest, preparation, and application. This will be replaced by a simplified four-code family based on anatomic location and wound In July, within its proposed 2027 Medicare payment updates, the Centers for Medicare and Medicaid Services, or CMS, proposed nationally published Physician Relative Value Units, or RVUs, for the new SCSA codes. We expect CMS to finalize the rule later this year. If adopted as proposed, from this coming January, physician reimbursement would transition from today's regional MAC contractor price methodology to a nationally published RVU framework, improving transparency and consistency for providers. Over time, we expect this to simplify reimbursement discussions, allowing our commercial team and customers to focus less on coding complexity and more on clinical adoption and patient care. As I step back and look at the quarter, I'm incredibly encouraged by what we're seeing in our numbers. Resale utilization is growing. Cohelix and behind it, Permiderm, are gaining traction. Revenue continues to grow quarter after quarter, and we have a clear path to cash flow break even by year-end. Those aren't isolated achievements. They're evidence that the business is operating the way we intended it to. As we look to the remainder of 2026, we'll continue executing with the same discipline that has brought us to this point. Our priorities are clear. Continue expanding resale utilization, continue growing adoption of Cohelix and PermiaDerm, and continue executing with commercial and financial discipline. As we continue to do those things effectively, we believe AVIDA is well-positioned to create long-term value for shareholders while helping more patients benefit from our technologies. Thank you for joining us today and for your continued support. Operator, we're now happy to take questions.

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from Frank Takanen with Lake Street Capital Markets. Your line is open.

Great. Thank you for taking the questions and congratulations on a really solid quarter. I was hoping to ask two questions. I'll ask them both up front and then hop back in queue. To start on guidance, maybe walk through the key pieces behind the guidance increase. I heard the comments of Ariso Go, many doing well, and recovery, maybe kind of parsing out which contributed more. And then secondly, as you think about reimbursement in 2027, how much of a challenge has the previous structure been, meaning maybe what portion of cases or adoption by site has been hung up because of the previous structure, and maybe what do those new economics do to that?

Thanks, Frank. Thanks for joining today. First of all, regarding guidance, it's fairly straightforward and simple. We're on a growth trajectory, and when we said guidance at the beginning of the year, there were some things that we knew and some things that we didn't. We said some pretty responsible guidance based on the trajectory we thought we would follow, and we're on a higher trajectory. And so that's very clear to us now. I think we have eyes on the rest of the year, all of our customers. We've become very predictable in our forecasting, and so we feel it's appropriate to raise it at this time to something that we believe we'll achieve. And then second, from a reimbursement standpoint, if you just take the numbers part aside, the biggest problem last year was confusion and the amount of time that it took from our salespeople and our customers to try and get a handle on if they were going to get paid, what they were going to get paid, and when. And so we've resolved that as kind of a placeholder, because that's what it was meant to be through the max, over time, by account. And so what this will do is it will simplify the codes, but it will also make it absolute nationwide. And so, as I said in my prepared remarks, it will move us from these clarifying, more complex discussions with our customers to focus more on the clinical and economic benefits of the products, and so that will be very helpful to the efficiency and effectiveness of our sales team and I think our uptake on resale, which is still very underpenetrated in the market.

Thank you. Our next question comes from Ryan Zimmerman with U.S.

Bancorp. BTIG, your line is open.

Hi, this is Jacqueline on for Ryan. Thank you for taking the questions. I was just wondering, with the proposed 2027 PFS, is there any risk of a transitional air pocket as providers move from the eight legacy codes to the four new standardized codes? And what's the internal plan to get ahead of that educationally?

Sure. So we've already begun communication with our teams who have started to communicate with our customers. So that is already starting. Even though all of that will be finalized in late October, early November, that proposed change is likely. And because of it, we're starting to educate them already as to how this will change. And some of the associations that we're a part of are also educating their members, a lot of burn surgeons, about the change as well. And so it's kind of a full-scale effort to make sure that everybody understands it very clearly by the time it hits January 1st.

Thank you. And then with the COHELIX-1 full data set previously expected in the end of 26th and favorable interim data already reported in April showing faster time to skin grafting readiness versus the leading competitive products, can you confirm that the full data set timeline is still on track and what incremental information will it add to further support back approvals and broader adoption?

So we are still on track in terms of that timeline. The further data is just that there's follow-up data that's included as well that'll be part of that submission and publication.

Thank you. You're welcome. Thank you.

Thank you. As a reminder, to ask a question, please press star one one on your telephone. Again, that is star one one to ask a question. Our next question comes from Josh Jennings with TD Cowan. Your line is open.

Hi, good afternoon. Thanks for taking the question and congrats on a great quarter. It's John on for Josh. I just wanted to ask you quickly on adoption across all three products, specifically what you're hearing from your sales reps in the field. what feedback are they giving you at the physician level in terms of doctors using all three products, and how does this influence your pricing across your product portfolio? And this had a quick follow-up.

Well, I think the feedback from a clinical perspective is very strong. I believe that each of the products stand on their own, and the physicians have told us that in terms of their clinical effectiveness, but also the economic benefit that they see. It's still, you know, early days in them trying to figure out how two or three of Aveda's products, Permioderm, Cohelix, and Resale, how they 1 plus 1 equals 5 or 6 in terms of synergies. But we're working together with them to make sure that's maximized. But very positive. Some of our best customers are adopting all three technologies, and we expect that to continue going forward.

Okay, excellent. And then just in terms of pricing across the three individual units, certainly appreciate that resale is a creative at the gross margin line. Is there any – don't get me wrong, 85%, 86% gross margins are excellent at a product level. Is there anything you can do to keep improving that gross margin to potentially offset some of the dilution from Cohelix and Permeaderm?

Sure. So, our operational team continues to look for efficiencies on the back end of our business. So, we'll continue to look for those as well as our opportunity to maximize price in the marketplace. So, that will be something that we'll continue to hold and try to expand going forward as we should. In terms of the other products, Codelix and Permiderm, again, early days and trying to gain market penetration. We're always looking at price to make sure we're optimized there.

So we'll continue to do that.

Excellent.

Thank you, John.

Thank you. I'm showing no further questions at this time. This concludes today's conference call. Thank you for participating. You may now disconnect.