Vericel Q3 2026 Earnings Call Transcript

Vericel (NASDAQ:VCEL) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Vericel Corporation reported record third-quarter revenue of over $85 million, a 26% increase year-over-year, and significantly exceeded guidance.

Full-year revenue guidance was raised to $344-$346 million, representing 25% growth year-over-year, with adjusted EBITDA margin guidance increased to 28%.

MACI achieved record revenue of over $67 million, with notable growth in biopsies and implants, while Burn Care, including Epicel and NexoBrid, saw a combined 52% revenue increase.

The MACI Arthro launch has been a significant growth driver, with increasing adoption and positive clinical outcomes supporting sustained future growth.

Vericel is preparing for potential MACI expansion into the UK and exploring additional international opportunities in Canada and Europe, while continuing investments in sales force expansion and commercial initiatives.

Full 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 1 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 (VP of Finance and Investor Relations)

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 our 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 (President and Chief Executive Officer)

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’re raising our full year total revenue guidance to $344 to $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’re 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’s 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 condylar defects under 4 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’ve 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 post-operative 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 UK in the second half of 2027, which represents another meaningful market opportunity. Based on procedural data available from the UK 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 UK 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’ve begun initial market development work to assess additional MACI OUS expansion opportunities in Canada and Europe.

Finally, we’re 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’ve 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’ve 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’ve 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’re 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’ll now turn the call over to Joe to discuss our third quarter results and updated 2026 guidance in more detail.

Joe Mara (Chief Financial Officer)

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 barter 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 in 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 to $346 million, from $330 to $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 to $292 million from $284 to $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 to $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 barter 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 (Analyst at TD Cowen)

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 a significant outperformance to date, and 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.

It seems to be not as ambitious targets after the first nine months of ’26.

Joe Mara (Chief Financial Officer)

Yeah, good morning, Josh, and thanks for the question. So this is Joe. I’ll take that one. So, yeah, I mean, I would say I appreciate the question in the sense that I’d say at this point we’re probably kind of outpacing our expectations to kind of hit those targets, particularly on a top-line level where it’s 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’re very much on track, particularly from a top-line perspective. And then I would say if you look at kind of the bottom-line metrics, I think what really stands out is, number one, we’re already performing well on the gross margin side. We talked about getting into the high 70s on a full-year basis. We’ve kind of already been in the mid-70s; another strong quarter while we’re adding our new manufacturing facility in Q3. And then from a bottom-line perspective, I think it’s certainly noteworthy. We’ve seen fourth quarters with 40% plus margins, and that gives you a sense of where the Company is at scale.

But to see a third quarter kind of reach that 30% level I think is noteworthy. So we’ve updated our full-year guidance from an adjusted EBITDA perspective, and even with, I would say, the pretty substantive investments we’re making across the business to continue to drive growth not only in the near term, but in the mid and long term—whether that’s ex-U.S. salesforce expansion, et cetera—there’s a ton of investment in there and we’re 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’re not going to update it at this point. We’ll certainly be prudent as we get into guidance for next year. But I would say broadly from a long-term perspective, we feel like we’re tracking very well to the targets we laid out from an LRP perspective.

Josh Jennings (Analyst at TD Cowen)

Excellent, thanks for that. And then just maybe one follow-up: at our visit to Burlington intra-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 the second year and 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 salesforce expansion has a long tail.

Nick Colangelo (President and Chief Executive Officer)

Yeah, thanks, Josh. I’ll take that one. And we talked about it a little bit on our second quarter call as well that, you know, obviously we have a strong track record over the years of when we expand, we’ve seen increases in rep productivity, and we certainly expect that to be the case again. So 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 or biopsies that were already existing within their territories, and they had particularly strong biopsy growth.

That happened again in the second quarter and really has continued throughout the year, where the new territories have led all the cohorts in terms of biopsy growth. And obviously that sets up those new territories for strong growth in Q4 and into 2027, given the timeframes 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 lead on implant growth versus new territories or even the legacy territories that tend to be the higher-volume territories. So that’s why we’re very confident that this is not just a 2026 play, obviously, and that in 2027 and beyond these new reps will have an even greater impact on the overall MACI growth.

Josh Jennings (Analyst at TD Cowen)

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 (Analyst at Canaccord Genuity)

Hi, great. Thanks so much for taking the questions, and congrats on a great quarter. You know, just 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 (President and Chief Executive Officer)

Yeah. Hey, Caitlin, thanks. It’s Nick. You know, 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 you know, 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 surgeon adds and deeper penetration within their practices.

Caitlin Roberts (Analyst at Canaccord Genuity)

Great. And then, you know, another cartilage technology has announced a recent launch in Europe, including the UK. I mean, how are you thinking about just the competitive landscape as you enter the UK and then, more broadly, other regions ex-U.S.?

Nick Colangelo (President and Chief Executive Officer)

Yeah. So, you know, obviously it’s been a topic of conversation during the course of the year and, you know, we kind of start from, I think it’s been pretty well settled as these discussions have emerged that, you know, first of all, MACI is the clear market leader in cartilage repair. And, you know, as you look at it, it’s obviously a very large underpenetrated market with a lot of growth left, especially when you look at, you know, the restorative therapies that are used in the market.

So, you know, MACI’s got this clear positioning of young, active patients with, you know, small, moderate, and large defects, no bony involvement. And, you know, in addition to the trends of moving to restorative therapies, that’s what’s been fueling the growth. And so, you know, based on the work we’ve done and, you know, 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 — and those sort of product positionings that we’ve seen over the years, you know, were reinforced.

And so, you know, I don’t think anything has changed in terms of our perspective of the MACI growth opportunities and so on. You know, 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 United States and globally. And obviously MACI’s become the market leader — that’s been the case for the 10 years it’s been on the market. So nothing from our perspective is changing in that regard. In the UK, same sort of dynamic where I think it’s pretty well understood that autologous chondrocyte implants are sort of the gold standard for treating cartilage injuries.

Other options have been around in Europe for a long time. You know, the UK in particular has designated, as I’ve talked about before, approximately a dozen joint preservation centers to treat patients with cartilage injuries using ACI technologies. So it’s seen as sort of a cutting-edge technology in the UK and the patient demographics are going to be the same. Sort of 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.

And as I’ve mentioned, you know, MACI obviously was developed in Europe. The pivotal study was conducted there. The UK surgeons came over and trained our U.S. surgeons when we launched the product. So really no kind of difference from our perspective in MACI’s positioning as a leader in U.S. and presumably soon global cartilage repair. And so, you know, I guess that’s our perspective as we move forward.

OPERATOR

We will go next to Richard Newitter with Truist Securities.

Richard Newitter (Analyst at Truist Securities)

Hi, thanks. Thanks for taking the questions. Congrats on the quarter. I just want to go back to 2027 — thanks for some of the early color there. And it sounds like maybe just starting on the MACI side, you know, in the past, during third quarters into the following year, you provided some just, you know, broad strokes to think about a placeholder for, you know, 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 — UK, you know, increasing productivity, Salesforce — those are things that would bring you above that?

Just trying to get a sense so that, you know, we can kind of get numbers more or less as a good starting point, so anything there. And then same question for Burn. Is it reasonable to just kind of think of the algorithm where you’re back to your normal kind of run rate of, you know, call it $10–$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 (Chief Financial Officer)

Yeah, so I’ll start on that one, Rich. Good morning, and thanks for the question. This is Joe. So, you know, I would say, I guess the first thing I would kind of say is just, you know, per our prepared remarks, as Nick talked about, you know, we’re seeing a ton of momentum in the business and, you know, on both franchises we think there are kind of multiple growth drivers that will continue. Obviously the Salesforce expansion we’ve talked about, MACI Arthro momentum continues, you know, a number of commercial excellence initiatives that we think are having a meaningful impact.

So, you know, we certainly think that’s, you know, not going to end at the end of 2026 and continue right into 2027. So I would say, you know, we are pretty bullish on what next year could look like, particularly from an internal expectation perspective. I guess from a guidance perspective, just kind of getting there, I’d probably get to a couple of points. So, number one, probably early in terms of kind of formal guidance — and I know that’s not the question — but in terms of what that will look like, we’ll 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. So, you know, earlier the question was asked around kind of our midterm targets and, you know, again we feel like we’re at this point, you know, likely outpacing that a bit, you know, which is great.

But, you know, I would say we’re not going to get ahead of ourselves, you know, in terms of how we start the year from a guidance perspective. So we’re certainly mindful of that trajectory, but I think that helps as you think about kind of the path from 2027 and beyond. You know, 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, you know, that’s probably a pretty good starting point whether you look at total revenue, MACI revenue, and probably Burn Care, you know, to a degree as well.

And, you know, 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, you know, we have internal expectations higher, but we’re going to start the year, you know, probably a bit conservative and point to something with similar year-over-year dollar growth. And so that’s how we started this year.

You know, that’s actually where consensus is next year. If you kind of look at 2026 to 2027, that’s probably a good starting point. Again, we’ll refine that and our internal expectations are higher, but, you know, that’s kind of the direction we went this year. And I think obviously that’s worked out well and we’ve beaten that from a MACI perspective. You know, 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, you know, much better. But, you know, I think we’ll certainly kind of use a similar framework — thinking about kind of where has the business been — and probably start a bit prudent there as well. So, you know, I think it’s just a balance where we feel like 2027 is set up for a really strong year.

But, you know, I think the good news is when you look at consensus or you think about how that fits in the midterm targets, again, that’s right in line with kind of how we’ve been guiding this year, and we think that’s an appropriate starting point to start the year. You know, certainly as we move through the year, our expectations could change.

Richard Newitter (Analyst at Truist Securities)

Okay, so if I’m hearing you right, there’s probably no reason — internally or just with all the momentum drivers you have out in front — that there wouldn’t be a 20% plus growth trajectory here. But, you know, you’ll 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 (Chief Financial Officer)

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

Richard Newitter (Analyst at Truist Securities)

Okay, really helpful, and congrats on the quarter, guys. Thanks.

Joe Mara (Chief Financial Officer)

Thanks, Rich.

OPERATOR

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

Ryan Zimmerman (Analyst at BTIG)

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, you know, 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 (Chief Financial Officer)

Yeah, and I’ll start on that one. Good morning, Ryan. So, you know, I’d say, you know, 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 kind of 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, the underlying strength that we’re seeing.

And maybe just to start with Q4 — and I’ll kind of work backwards — but, you know, I’d say Q3 was strong, you know, kind of when we look at it from multiple dimensions. But, you know, just to reiterate kind of the start we’ve gotten off to in Q4: so obviously October is behind us, you know, with obviously into November now, and our procedure volume has been very strong. And, you know, December, I would say, you know, our early indicators are very strong as well.

So, you know, we upped the guidance in Q4, and we kind of upped our framework. Instead of pointing to kind of the high teens, you know, we’re pointing to 20% plus. So, you know, I think you can imagine we’re obviously talking about strong biopsy growth accelerating each quarter. I would say, you know, particularly as we’ve gotten into Q4, you know, we’ve seen that start to translate. So, you know, I would say the strong biopsies that we’re seeing are translating, you know, as we would anticipate, particularly in Q4 from an implant perspective.

So, you know, I think conversion remains on track as we move toward year-end.

Ryan Zimmerman (Analyst at BTIG)

Okay, fair enough. And then the second question: you know, we’ve had three quarters now with Epicel just really, you know, outkicking its expectations. And so, you know, it’s so variable — I think we all know that, we’ve lived through kind of the ups and downs with Epicel, you know, quarter to quarter — but at what point do you guys say, as opposed to, let’s call it an $8 million run rate per quarter, collectively it’s $10 to $12 with NexoBrid. I mean, at what point do you start to say, yeah, $9 million is right or $10 million is 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 (President and Chief Executive Officer)

Yeah. Hey, thanks, Ryan. This is Nick. You know, I think, as Joe mentioned earlier, whether it’s on a company basis, MACI or Burn Care, we’ve taken a pretty disciplined approach to how we guide. I’d say your point is absolutely accurate, that Epicel now, for a good number of quarters, five or six quarters, has performed at a much higher level. And we talked a little bit about the reasons for that. Once we restructured the sales force and 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 does it hit a different point in terms of its momentum, but also the cross-selling efforts for Epicel. You know, Joe mentioned earlier the rebranding for Epicel, peer-to-peer activity is up, how we approach each biopsy we get from a multidisciplinary, functional approach, and working with surgeons on the best treatment plans for outcomes for those patients. I just think all of those execution initiatives have really 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. So I’d say more to come on how we’ll guide for quarters going forward as we get into next year. Obviously that continued performance, we would expect, doesn’t end when the calendar flips on January 1st. And we said that we’ve gotten off to a strong start in Burn Care again, 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—how we’ll approach guiding to Burn Care as we get into 27.

Joe Mara (Chief Financial Officer)

Yeah, no, 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 adjust as needed as we get into next year. But again, I think that’s where we want to just separate 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 on a full-year basis and, I would say, quarter to quarter.

Ryan Zimmerman (Analyst at BTIG)

Okay, fair enough. Thanks, guys.

Nick Colangelo (President and Chief Executive Officer)

Thanks, Ryan.

OPERATOR

We’ll take our next question from Mike Kretke with Leerink Partners.

Sam (Analyst at Leerink Partners)

Hey everyone, this is Sam on for Mike. So margins came in really strong this quarter, and with 2026 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 UK launch, and then the potential trajectory moving into ’27?

Joe Mara (Chief Financial Officer)

Yeah, good morning, thanks for the question. This is Joe. I’ll take that. As we talked earlier, I think the margins in the third quarter, particularly on the EBITDA line—we were well ahead on both gross margin and EBITDA, but very strong in the third quarter to be at that 30% level. So I think if you think about the multiyear trajectory here, you can see with our increase to 28%. Last year was in the 25% to 26% EBITDA margin on a full-year basis, so really some nice expansion this year during what was 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, we feel like we’re on track certainly to hit that high-30% range. It’s really the leverage—the top-line growth and then 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 will be in the run rate, which will be helpful. There are other areas we’ll probably continue to ramp up in terms of ex-U.S., and as we get closer to a potential UK launch and look at other markets, certainly from an ex-U.S. perspective that’ll continue. And then MACI Ankle will continue to ramp. So there’s still spend that we’re going to continue to invest in.

Having said that, I think we would still expect some expansion from a bottom-line perspective next year. Gross margin—again, we’re already in that mid-70% range, so that’s probably around where we’re going to be this year and something similar next year. And again, I don’t 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’s probably a good starting point to give you a sense that things are continuing to tick toward our midterm targets pretty healthily this year and next year.

Sam (Analyst at Leerink Partners)

Got it. Very helpful. And then just on MACI, can you 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 comment on MACI Arthro’s ability to continue penetrating those smaller defect segments, which historically were not a large part of the business?

Nick Colangelo (President and Chief Executive Officer)

Yeah, I’ll start with that. As I mentioned in my prepared remarks, 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 2 to 4 square centimeter range. And as we mentioned, everything with MACI unfolds over quarters and years, and we were seeing some very nice momentum there where we had a record number of MACI Arthro procedures, the highest percentage of total MACI procedures we’ve 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’s all the things we would want to see.

We’ve talked about the dynamics of when surgeons become MACI Arthro implanters, and particularly when they reach a threshold, you just see the overall utilization by those surgeons increase across defect size and location. From that perspective, that’s why we expect MACI Arthro to continue to contribute to the overall utilization for MACI. We’re 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.

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

Sam (Analyst at Leerink Partners)

Thanks, guys.

OPERATOR

Thank you. We’ll move to our next question from Mason Carica with Stephens.

Mason Carica (Analyst at Stephens)

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

Nick Colangelo (President and Chief Executive Officer)

Yeah, hey, Mason. So, just as I mentioned, for the patella—which is again our biggest part of the business—that’s, at this point especially greater than 4 square centimeters, which is a lot of the MACI patella business. That’s going to be an open procedure because of the size of the defect. Even when we develop MACI Arthro patella instruments, that will allow you to treat 2 to 4 square centimeter defects using arthroscopic instrumentation, and that will help in terms of addressing even more patella defects, which are a very meaningful part of the market.

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

Mason Carica (Analyst at Stephens)

Got it. And then in the past, I know you guys have talked about Arthro-trained surgeons growing biopsies and implants faster than the non-trained surgeons. It seems like that’s still the case given the growth metrics that you’re calling out. But just to ask directly, does that trend continue to hold?

Nick Colangelo (President and Chief Executive Officer)

Yeah. And as I mentioned, we also 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 a critical mass of a few—three or more—implants per year, you see higher conversion rates for them. As I mentioned earlier, when you have a MACI Arthro implanter that’s hit a critical mass of MACI Arthro implants, you see not only those trends continue, but also increased utilization across the board, whether it’s MACI open or MACI Arthro cases and regardless of where the defect is in the knee.

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

Mason Carica (Analyst at Stephens)

Got it. Thank you.

OPERATOR

We’ll take our next question from Jeffrey Cohen with Ladenburg Thalmann.

Jeffrey Cohen (Analyst at Ladenburg Thalmann)

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 (President and Chief Executive Officer)

Yeah, so just, you know, to be clear, kind of on the burn care side, we’re not really sort of on the wound side of things, but, you know, obviously we had the highest quarter ever for the burn care business, highest quarter ever for Epicel and Nexabrid on the commercial side as well. So really pleased with what we’re seeing there. I think, you know, as I mentioned in my prepared remarks, you know, a lot of it has to do with sort of the cross-selling impacts.

If you look at, you know, kind of my commentary there, you know, Epicel was driven by, you know, high biopsy levels and biopsying centers. Nexabrid was driven by the most orders from centers and hospital orders overall. So, you know, you’re kind of seeing a larger footprint and the impact it has in sort of driving both pieces of the business. And, you know, as I mentioned earlier, we think, you know, we’re operating at a different level for both of those products and, you know, we think that’s going to continue going forward.

Joe Mara (Chief Financial Officer)

Yeah, you know, as we look at the two pieces, which is, one, procurement revenue that began in the third quarter — so 3 million of the Nexabrid 5-plus million dollars was related to the BARDA procurement. So that initiated, you know, on time and is according to plan. We’d 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.

So that’s kind of the first piece of it. Secondly, you know, we’re also working on — and that counts as revenue, as I mentioned, or is recognized as revenue. The second piece of it is sort of the development work we’re doing on a blast indication and other things. And that sort of 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.

You know, that depends on sort of the activity level and timing and so on. So we haven’t 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 sort of in our margin guidance as well. Okay, thank you.

OPERATOR

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

Charles Wallace (Analyst at H.C. Wainwright)

Hi, thanks for taking my question. This is Charles on for R.K. So maybe just one more, kind of on the Burn Care franchise and Epicel. So, you know, 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 incidence 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 (President and Chief Executive Officer)

Yeah, I’d say in sort of the burn market data that we’re able to access, you know, it lags, so you can’t really see sort of any market dynamics, but it’s been pretty stable. And, you know, I’d say really the growth we’ve seen in Epicel relates to sort of execution, particularly through the first half of the year. You know, the top of the funnel was relatively consistent. That improved a little bit in the third quarter. But, you know, 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 for the things we can control, it’s absolutely repeatable and obviously has taken Epicel to a different level.

Charles Wallace (Analyst at H.C. Wainwright)

Great, that’s very clear. And maybe one final question, if I could sneak it in. So, you know, with your cash balance growing, how are you balancing potential BD against share buyback? And what does the right BD asset look like? Thank you.

Joe Mara (Chief Financial Officer)

Yeah, well, you know, obviously we’re in a fortunate position to be generating — you know, 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. So, you know, we announced the authorization last quarter. We obviously started the repurchase program in the third quarter. You know, we have nearly a quarter of a billion in cash, and that’s growing pretty substantially.

So, you know, we’re not really at a point where we’re thinking about it as one or the other; we can do both. And so I think 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 (Analyst at H.C. Wainwright)

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

Joe Mara (Chief Financial Officer)

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 (President and Chief Executive Officer)

Okay. Well, just wanted to say thanks to everyone who joined us this morning. You know, obviously we’re very pleased in delivering outstanding third quarter and strong year-to-date performance. And we look forward to providing updates on our next call. So 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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