AVITA Therapeutics Aktie

Hello, and welcome to the 2026 Annual Meeting of Stockholders of AVITA Medical, Inc. Please note that today's meeting is being recorded. [Operator Instructions] Following the formal meeting, there will be a question-and-answer session addressing questions strictly related to today's meeting. You may submit questions at any time by clicking on the Message icon.

It is now my pleasure to hand today's meeting over to Jan Stern Reed, Chair of AVITA Medical's Board of Directors.

Thank you, Ryan. Good afternoon, and welcome to the 2026 Annual Stockholders Meeting of AVITA Medical, Inc. It is 3:00 p.m. Pacific Daylight Time on June 3, 2026 and 8 a.m. Australian Eastern Standard Time on June 4, 2026, and the meeting will now come to order. Please note that today's meeting is being held exclusively by way of live webcast with no physical meeting location.

I point you to the agenda for today's meeting in the Meeting Documents section of the virtual meeting portal. This annual meeting is being conducted in accordance with the company's bylaws and the written notice provided to all stockholders. And for a smooth and efficient meeting, we kindly ask all participants to follow along with the agenda and to abide by the guidelines provided for today's meeting.

Pursuant to our bylaws, you may submit pertinent questions at any time during today's meeting by using the field provided on the virtual meeting portal. Questions related to today's meeting content will be addressed during the Q&A session after we conclude the formal business of the meeting.

Allow me to thank you on behalf of our Board of Directors for attending today's meeting and for your continued support of the company. I am pleased to introduce our directors attending today's meeting, including myself as Chair of the Board; Cary Vance, Chief Executive Officer; Professor Suzanne Crowe, Jeremy Curnock-Cook, Robert McNamara, Dr. Michael Tarnoff and Joseph Woody. Also present are our executive officers, David O'Toole, the company's Chief Financial Officer; and Nicole Kelsey, Chief Legal and Compliance Officer and Corporate Secretary.

In accordance with our bylaws, I will preside over today's meeting and Nicole Kelsey will serve as the Secretary of this meeting.

Also in event today are representatives from Grant Thornton LLP, our independent registered public accounting firm as well as representatives from Computershare Limited, our U.S. transfer agent and Computershare Investor Services Limited, our share registry for shares held in the form of CDIs on the Australian Securities Exchange.

Before we move into the formal business of today's meeting, I'll ask Nicole to confirm that proper notice of this annual meeting has been given to all stockholders.

Thanks, Jan. The Board set April 9, 2026, is the record date for this annual meeting. I confirm that the company has received affidavits attesting to proper notice and the availability of proxy materials to all stockholders.

Additionally, an annual report on Form 10-K for the fiscal year ended December 31, 2025, including certified financial statements, has been made available to all stockholders entitled to vote at today's meeting.

Thank you, Nicole. With proper notice confirmed, I will now formally appoint the Inspector of Elections. Brian Heffernan of Computershare Limited is serving as our Independent Inspector of Elections for this meeting.

The list of holders of record of the company's common stock -- sorry about that. Bear with me. Okay. The list of the holders of -- the list of holders of record of the company's common stock as of the record date has been prepared. For the duration of today's meeting, this list of stockholders will be available for inspection by any stockholder of record upon request.

Nicole, please provide your report on the number of shares represented at the meeting, so we may formally establish quorum.

Sure thing, Jan. I hereby confirm that as of the record date, there were a total of 30,776,689 shares of common stock, which includes the underlying shares of common stock represented by CDIs listed on the Australian Stock Exchange that were outstanding and entitled to vote as of that record date. The Inspector of Elections has confirmed that proxies representing more than 50% of such shares entitled to vote at today's meeting have been received. Therefore, a quorum is present.

Great. Thank you, Nicole. With a quorum established, we can now proceed to the formal presentation and consideration of the proposals described in our proxy statement.

We have the following proposals presented for your consideration. Proposal 1, election of Directors. Proposal 2, ratification of appointment of our independent registered public accounting firm, Grant Thornton. Proposal 3, approval of an increase to the Non-Executive Director cash fee pool. Proposals 4 through 11, approval of equity awards to Non-Executive Directors pursuant to ASX Listing Rule 10.11. Proposal 12, advisory vote on executive compensation known in the U.S. as the Say-on-Pay proposal. Proposal 13, advisory vote on the frequency of Say-on-Pay proposals. Proposal 14, approval of the issuance of warrants to prospective Credit Holdings LP. Proposal 15, approval by way of special resolution of an increase to the placement capacity of the company for purposes of ASX Listing Rule 7.18.

The Board of Directors recommends a vote for all of the nominees listed in Proposal 1 and a vote for Proposals 2 through 15, except for their respective personal interests and a proposal causes them to abstain. For example, on a vote regarding their own fiscal year '26 annual equity award.

No other business has been properly presented for consideration at this meeting as required by our bylaws. The polls for voting are now open. For holders of common stock. If you have already voted by proxy, you do not need to vote again unless you wish to change your vote. However, if you have not yet submitted a proxy and wish to vote on these matters, please take a moment now to complete voting via the virtual meeting portal. CDI holders have previously submitted their voting instructions.

[Voting]

Now that everyone has had the opportunity to vote, the polls are now closed. Nicole, can you please provide the preliminary voting results at this time?

Sure thing. As Secretary, I can confirm that as of 12:00 noon Pacific Time today, all 15 proposals received the requisite for votes to pass in this year's meeting.

Great. Thank you. The Inspector of Elections will tabulate the final votes, and the final voting results will be announced through a Form 8-K filing with the U.S. Securities and Exchange Commission, immediately followed by a corresponding lodgement on the Australian Securities Exchange promptly following the close of this meeting.

Thank you for attending today's meeting. The formal portion of our Annual Stockholders' Meeting is now adjourned. We encourage all interested shareholders to review Cary Vance's recent armchair chat available in the Events and Presentations section of our Investor Relations site at ir.avitamedical.com.

We now invite your questions related strictly to matters covered in today's meeting. Please submit questions via the virtual meeting portal.

Jan, I can confirm that there have been no questions submitted through the virtual meeting portal.

Okay. This concludes AVITA Medical's 2026 Annual Stockholders Meeting. Thank you again for your participation today and for your ongoing support of AVITA Medical.

This concludes the meeting. You may now disconnect.

Good morning and thank you for joining this AVITA Medical Quarterly Australian Webinar. I'm Rudi Michelson of Monsoon Communications. AVITA CEO, Cary Vance; CFO, David O'Toole; and Ben Atkins, VP, Investor Relations and Corporate Communications, in Australia this week for Brisbane, Sydney, Melbourne roadshow. And this webinar has been arranged, so everyone has the chance to be brief, direct and ask questions on AVITA's progress.

Now let me point out, you can submit questions using the Q&A function, and we'll try and get to them after the presentation.

I'll now hand over to Cary Vance to begin the presentation.

Thank you, Rudi. It's good to be with you. I appreciate you hosting this event. Let me just start, please, with going back a couple of quarters. I think it's really important to hold the company, myself accountable for what we say each quarter. And that's a culture that's culturally how we run the company and how we expect to communicate externally as well.

In November, after being in the role for a few weeks, I came to Australia and I said, I need to get my hand -- get a handle on the business to really understand it at a deep level, where our opportunities are, where our gaps are so that we can solve those things by the end of the year and really be prepared for growth in 2026.

When I came back in February, I reported back to you that we had done those things, that I had done those things that I really felt like I understood the business, that we've changed a number of things operationally over that period of time that I had a pulse on the commercial aspect of the business, the people, how we forecast, how we expect we're going to grow going forward, the issues in front of us around reimbursement and around the speed at which we get through VAC committees, et cetera.

And so our cost, our OpEx, everything. And so I told you in February that based on what I knew, based on the guidance we had set, based on the trajectory I felt that we are on, that we were going to have a strong 2026 with sequential growth quarter after quarter. With the baseline of that $17.6 million in Q4 of 2025. Now, as I report back to you on a $19.3 million revenue Q1, I'm reporting back that, that growth has begun again. My prediction and my intent is to grow sequentially quarter-over-quarter this year so that the company regains a lot of its credibility that I think we lost last year to a good degree and also obtain and regain some of the excitement over the potential the company has to grow in all aspects of our portfolio.

What you can expect to hear from me in August is that that growth trajectory has continued and that it will continue. So I feel really good about the business. I was named permanent CEO a couple of weeks ago. Again, part of that stabilization and building back the company. I think by the end of 2026, we'll look back on '25 as having a number of external headwinds, a number of things that kind of slowed our growth trajectory and that it's kind of a one-off year in that respect and that we're back on track.

So let me just talk to you about a few of the things that have occurred over the past quarter of note. Like I said, number one, we're about revenue growth on all of our products, and we went from $17.6 million to $10.3 million (sic) [ $19.3 mllion ]. So there were a few highlights in the quarter. One was the BARDA contract. And so I want to make sure you understand what that is and what that isn't. So that $25.5 million is a big number.

Now that $25 million over 10 years is only realized if something bad happens at scale in the U.S., which, again, over 10 years could certainly occur. We obviously hope that it doesn't, but we're an acute wound care business. And so while we never want bad things to happen to individuals or to many people all at once, we are gratified to know that our products will help them in that time of need and that our business will benefit from those products being used.

So if something happens, they have kind of first right on our safety stock. It doesn't require us to do anything extra, any extra costs associated. We have a safety stock and we just rotate that, and that's what we use as being available for BARDA for that contract. What we are guaranteed is a regular administrative amount of revenue on a monthly basis, which you can generally calculate at about $100,000 a quarter for the next 10 years. And so that's what you can expect.

I think moreover, other than the dollars is that it's a great validation by the U.S. government and the burn and trauma surgeons that they coordinate with that RECELL is a crucial part of the planning for disaster relief and for treating patients should that kind of event occur. And so that's great for us from a -- just from a marketing standpoint and from a validation standpoint clinically. Our Cohealyx I interim data, again, this is a post-market study. What's great about it is that we're able to speak about it on an interim basis before we submit that data at the end of the year, and it's published early next year.

And essentially, the endpoint for that clinical study is speed to grafting. And speed and speed to healing and speed to grafting is the key going forward, not just now, but in the years to come. Hospitals and clinicians want patients to heal faster for their benefit and for the economic benefit of the hospital itself because it costs quite a bit of money to take care of them.

So if you look at the RECELL 36% sooner out of the hospital, reducing length of stay. And you add to that a Cohealyx readiness to graft, which is up to 20 days sooner, so in a week or so as opposed to 3 weeks or so, 3 or 4 weeks with some of the competition, it's a big deal for them. And it's for the patient themselves, you think about that 20-day difference between Cohealyx and some of our competitors, that's 20 days less pain, 20 days less dressing changes, 20 days less chance of infection. And so really powerful, I think, interim data that we've shared.

I would encourage any of you to go on our website and watch or listen to the webinar that we did at the American Burn Association Conference. We released some of that data. We talked about some of it with our medical affairs person, Dr. Katie Busch, but then we had 2 physicians there that talked about real world, how are they incorporating Cohealyx in their standard of care and investors and analysts were able to ask questions. And so I think it was extremely powerful to hear their perspective on it. So it's on our website. I would encourage you to listen into that again.

RECELL GO was cleared in Australia and New Zealand here close to home. We feel really good about our distributor here in Australia. Just great relationships, aggressive, smart. And now with RECELL GO approval, really have an opportunity to use that to expand the business here and grow the business. We also have a physician who moved from the U.S. who was a heavy RECELL user. She moved to the Alfred in Melbourne here. And so she's already done 3 cases here in the first month that she's been here. So I think there's a lot of momentum in Australia around RECELL and around AVITA, which is great.

And then finally, just American Burn Association in April, we had a great presence, a great buzz. We're seen as an innovator in the space. And it was great that Dr. Fiona Wood was there. She received a Lifetime Achievement Award at the American Burn Association. She was on podium. She was in the booth. She was stopped in the hallway. People wanted their picture taken with her and so on. So it was an extremely proud moment for us to have our founder there to have -- for her as well to see where this product and where this company has gone. And so just a great presence and a great impact at the American Burn Association Conference last month.

We've talked for a year about the MACs, the Medicare Administrative Contractors and how they took over the payment for physicians on RECELL and how they kind of dropped the ball and didn't publish those rates and weren't paying. That's all been resolved. All 7 MACs have published. All the rates are consistent, and they're making those payments. And they've made payments in -- going back as well that should have been made in the past.

And so that's -- our physicians are happy with that. I think for now, what we -- we're doing the usual work of going hospital by hospital, making sure that coders and physicians are aware of, a, they've been published; and b, is there a correct way of doing that? And is there anything we can do to help resolve that? Because we're kind of arm's length away from it, but we do have health care economics people in the field that now are kind of hospital by hospital, making sure we're optimizing the situation.

This is what I talked about 6 months ago. I talked about all the headwinds that the company was experiencing VAC committees and the MAC and the sales force changes in April that was a disruption. If you take all three of those things, what I said at the time was those are headwinds that are kind of keeping us from taking off, and they would turn into tailwinds. If you go back, that's the verbiage I used. That's what's happening. So right now, these payments happening with physicians, that's a great thing for us. They make more money if they use RECELL. Before they were making nothing if they use RECELL because of the problem. Now they're making more. And so again, that tailwind has turned into a -- or that headwind has turned into a tailwind.

The same thing goes with the VACs. It's kind of a slog through the VACs for Cohealyx and for PermeaDerm, but especially for Cohealyx. But once it comes out of VAC, you have that champion that put it into the VAC who's now championing commercial adoption and utilization of Cohealyx. Again, another tailwind that was a headwind.

And even the sales force optimization. So kind of changing and rejiggering the sales force, taking the opportunity to keep the best and to cut the average, let's say. And now that sales force with the great relationships and the great talent that they have fully staffed is really starting to pay dividends around growth. And again, you see that a bit in the numbers for Q1, and you'll continue to see that.

Again, this is the Cohealyx I study, some of the details around what I already talked about, on average, 33 days for our competitors, readiness to grafting versus 13 days for Cohealyx as little as 5 days. And on average, kind of that 1.5 weeks or so. You have a couple of quotes here from Dr. Bell and Dr. Castañón. Those are the 2 physicians that were on that webinar at ABA that, again, I encourage you to listen to that.

But an extremely valuable competitive dynamic there for us in a competitive space. Think about our business and our portfolio that we're used to competing with RECELL, which is basically competing against the way they've been grafting for 100 years. Don't do things the way they've been done for that long, do it with RECELL. It's economically beneficial, clinically beneficial, all of that. That's been the way we've sold in the past.

Now we're a little bit more conventional when it comes to Cohealyx and PermeaDerm, where we have competitors, worthy competitors that we have to have a value proposition that resonates. And the economic proposition here that this reduction in time represents is real as well as obviously workflow in terms of the readiness, the quality of the wound bed and the vascularization in terms of how it will accept that graft, how well the patient will heal. And again, how soon the patient can leave the hospital. And as part of that continuum, this wound bed preparation is a lot of times the thing that holds everything up. And so us being able to graft sooner is a major thing.

Let me pass it over to David to just take us through this financial side, please.

Very thanks, and good day to everyone. Nice to be back here in Melbourne again. As Cary mentioned, we had a very strong first quarter, $19.3 million. That compares to $17.6 million in the Q4, roughly a 10% increase sequentially. Even comparing that to Q1 of 2025, that was about a 4% increase.

And comparing the revenue -- the quality of the revenue this quarter versus the quality of the revenue in the first quarter of 2025, it's not necessarily comparing apples-to-apples. We had some bulk ordering that was taking place in the first half of 2025. That is not happening any longer. This is all organic growth. And it represents really, in my mind, a high watermark for revenue in the company. We did have a larger revenue at $19.4 million back in Q3 of 2024. But again, not necessarily apples-to-apples. And we see that over the next 3 quarters at $19.3 million, we're going to grow that sequentially.

Looking at gross profit margin, we're right at 82%. I expect that to stay there over time. We are at 85% gross margin for RECELL only. And then we have some degradation of the gross margin because of PermeaDerm and Cohealyx because we do the ASP sharing that we've talked about previously, a 60-40 split with PermeaDerm with our partner, Stedical and then a 50-50 split with our partner, Regenity with Cohealyx. And as those products become more impactful, the gross margin will decrease. But we don't see it going below 80% for the simple reason that we think that RECELL is going to grow even faster than the Cohealyx and PermeaDerm. And as we do that, that 85% on RECELL will offset the degradation you get from the other 2 products.

Operating expenses, still very cost disciplined. We did some restructuring, as Cary mentioned, around the sales force last year, about a year from now in 2025. And we took out about $2.5 million, not only in sales, but in some other OpEx. And you can see that, that's where we're tracking now. We're at $24.5 million in operating expenses, down significantly from Q1 of 2025 and pretty steady state to Q4 of 2025. We believe that, that OpEx will stay in that range.

Don't see that we need to add headcount. We will be opportunistic. If there is a sales force expansion some place that we need another sales rep, we will do that as long as there's a business case, we're adding another one. But we're at a good place from our OpEx, and we don't need to increase that over the next 12 to 18 months.

We did talk a little bit about cash. It's not on this slide, but I do want to mention it. We have $14.3 million of cash at the end of the quarter. We did burn more cash than we expected in the first quarter. I had mentioned in February that we expected that we were going to burn more. It was actually more than I thought it was going to be, primarily because of the fact that we had a slow January. And our cash collections are based on DSO days outstanding of 40 to 45 days. And since we don't -- we only collect, say, the first 45, 50 days of the quarter, if we don't have a strong first month, our cash collections are negatively impacted.

That is going to reverse in Q2. We are not going to have the onetime compensation costs that we had in the first quarter. And we had a very strong revenue in March -- February and March. And the demand and sales activity in April and early May have shown that, that momentum is going to continue, which will make our cash receipts for the second quarter to a point where we will burn significantly less cash than we did in the first quarter.

I do want to state that we reinforced our revenue guidance of $80 million to $85 million. That's what we had set last -- in the first part of the year, and we're -- we restated that guidance at this point.

I'll answer some of the other questions during question and answer, but I'll push it back to Cary for his closing remarks.

Thank you, David. Again, I just want to reiterate what I feel is important at the company, and that is that we have stabilized things. We understand this business. We understand our customers, how they buy, how they use the products. We have a very clear, simple, understandable strategy for growing the business. And that is that we have a very focused number of accounts, burn centers, Level 1 trauma centers. We have -- each of our reps in the U.S., for example, have just a few accounts. They're in there every day. They're in the OR. They have relationships, trusted relationships with physicians. They're selling broader and deeper. So they're getting physicians to use it on different types of cases.

We're only about 20%, 22% penetrated in RECELL, and that means smaller wounds, and we have RECELL GO mini. We have economic data that should be convincing to these physicians to use it more often. We also have physicians that don't use it. And I know and we know and we've found out exactly why each one of those doesn't use it. And that's where salesmanship starts. You go to the reasons why they are objecting to using it or using it more often and you address those. You address those through education, through peer pressure, through technology, through data. And so we're in the process of doing that.

Also, we've got pull-through on Cohealyx and PermeaDerm. So we have Cohealyx I, PermeaDerm-I that shows readiness to grafting, shows economic data that shows cost savings by using the products. And so we'll be pulling through both those products while we're expanding RECELL and we will be, like I said, growing quarter-over-quarter predictably and substantially and -- which should be, I think, comforting and exciting to investors going forward.

And so with that, let me turn it over to Ben to take questions, and we're happy to answer them.

Great. Thank you, Cary. Hope everyone can hear me all right. It's great to be here. Great to be with all of you on the line. We've had a number of questions submitted to us in advance. And I'm going to go through these questions in order, and I will read them out as they have been submitted to us.

So Cary, I'll put the first question to you. Could you help us understand who the primary customer is for the RECELL suite of products in the U.S. market and how that shapes the commercial growth opportunity?

Sure. Thanks, Ben. And I just kind of mentioned that. But first of all, I want all of you to know I've spent a lot of time in hospitals as a salesman, as a sales manager, as an executive over the years. So I understand hospitals, how they work, what pain points there are, what drives behavior, number one. Number two, I've spent a good amount of time over the last 6 months in hospitals with our reps, with our customers, understanding the workflow, understanding their transparent feedback about why they like it, what impediments there are and so on.

And so those people that we sell to are number one, I think, clinically, trauma surgeons, burn surgeons and their staff. The staff is really important from a workflow perspective and getting them on board and getting them trained and creating awareness. But there's also the department directors that, again, understand the logistics of it and the financials of it. You have buyers. You have administration.

So we talk to all of those people because they're all involved in the decision-making, the clinical decision, the economic decision of the products that they use. And so understanding who those champions are, understanding who makes the decisions in an account is extremely important. And so those are the people that we talk to every day, and those are the people we need to understand if we're really going to make a difference.

Moving to the second question, which actually is really three questions in one relating firstly to revenue by product, second to utilization, and third, related to data in relation to our pricing. But I'll start with the first part, which is on revenue by product. Would the company consider breaking out revenue by product segment, so investors can better track which products are gaining traction?

Yes. I think at some point, we will. I think, number one, the amount of revenue from that product needs to become -- needs to be a material amount to make it worth doing. I think that will come in the quarters ahead. So more to come on that. And then just quite transparently, we need to understand more about it, too. So for example, with Cohealyx, we have products that have gone through VAC. They've come out of VAC. They -- that kind of gives us the opportunity to compete. And so we have to get on contract. Once we're on contract, we have to get them to use our product more than the other products.

And so 1 quarter in, 2 quarters in, seeing that change from quarter-to-quarter. Every week, I go through the forecasting. We do account by account, by region, by territory, who's buying what, who's -- what's in the funnel around Cohealyx, what's coming out of VAC, how much are they going to buy, all of that. So we're internally in that. And so my comfort level with understanding it, frankly, if I told you I understand it perfectly, I wouldn't be credible.

We continue to understand Cohealyx, understand how they're buying it, where they're using it, where we expect them to use it. And so in subsequent quarters, when the revenue becomes more material and where we understand it so that we can consistently communicate that to you about how it's progressing, how people are using it, how we expect it to continue to climb. I mean just generally, we plan on that number going up. But the precision at which we can predict that and communicate that will be better in subsequent quarters. So that's a long way of saying not yet.

Related to that, does that plan also include disclosing procedure volume data over time?

Yes. I don't think we won't get into procedure volumes. I mean I know what they are. And one of the corporate goals that we have and one of the internal strategies and things that we talk about every week is utilization. So what happens before revenue is utilization. We want everybody to use the products and the revenue will follow. And so what we track is which physicians are using which products and for what types of procedure, what types of wounds, how many kits did they use? How much -- how large was the total body surface area burn, for example?

And so that's an internal metric that we kind of by account, by physician that we track and we push and we drive and we use modeling. We don't just use the reps and their relationships and their communication. We also use modeling tools through our sales operations team. We use -- which incorporates AI as well to understand where the business is, where they should be focused, how they should be expanding, what we're missing. So I think investors can rest assured that we are driving that type of thing internally that these are key KPIs for us. But at least in the near term, we're just -- we're not sharing procedure data externally.

The final part of the question was given that studies demonstrate meaningful cost savings and superior patient outcomes, does that give a better pricing power in negotiations with hospitals and payers?

Yes. I mean whenever you look at competing and competitive advantage or powerful data, how do you use that? You use that to get market penetration. You use that to get higher demand. And if you can get price, you get price. I mean we take price every time we can in any product line. And you balance that with the ability to penetrate from a market perspective and what the competition is and what the value prop is. So if you're more expensive, but you're more valuable, you can get away with that.

Of course, all of those dynamics and price elasticity, and we look at that every day, and we're early days here. So while we have really valuable data that we think will help us in the marketplace, we have to decide on a regular basis, especially early days, how much price we can take, how much market penetration that will give us, along with the data. We're the new guys on the block in dermal matrix, for example. We're the small guys. And so you balance all of that, the relationships we have.

We also have relationships with RECELL and we leverage that. So yes, we look at pricing. We will take pricing any and every day we can, but there are a lot of other things to balance in the competitive framework that we have on a regular basis, especially in early days. So it's a great point to bring up. There's no doubt that we want to expand our margins if we can. But we also want to expand our growth. We want to expand our market share. And so we'll balance all those things going forward.

Going into a slightly separate topic now on the MACs. Now that all 7 MACs have published payment rates, are there still any historical unpaid or disputed claims that are sitting with the hospitals? And what visibility do you have in those being cleared? What is the company doing to support hospitals through that process?

Sure. So I mean we help where we can because we have field-based health care economics market access people that communicate with hospitals directly, with the coders, with administration and with the physicians to help make sure that they're coding properly, that they get paid. And we have to be kind of arm's length, but we have to educate wherever we can.

In terms of them getting back payments and adjudicating past claims, the anecdotal data that we get is that they are being cleared up. They are getting paid, but we're not really involved in that other than, again, educating them and making sure they have the proper codes. And so we're not directly involved, but we do support them however we can. And the information we get back is that those things are being handled retroactively.

I'll ask a question initially on Cohealyx and then in a moment, we'll get to the financial position and a question for David. But before we get there, on the Cohealyx and the VAC process, of the approximately 200 target centers, how many have Cohealyx gone through the Value Analysis Committee process so far? And what proportion are currently being served? And in addition to that, how does the total addressable opportunity compare to where things stood in November of 2025 related to Cohealyx?

Yes. So first of all, the TAM or total addressable market in Cohealyx is unchanged from November. We continue to assess that as we move along. So we'll continue to assess that and update that up or down wherever. We want to make sure we're accurate. We're not just throwing numbers out there.

In terms of Cohealyx and VAC and progress, of the 200, let's say, it's -- there's about 56 in VAC right now, about 33 have come out of VAC. And so you probably have a little bit more than the 33 that even though they're in VAC, they're buying evaluation product and so on. So it's a really good flow. We have -- it's a really good pipeline. We have 56. We've had 56 pretty much for the last 9 months, but it's not the same 56. So every time 12 to 15 of them come out in the quarter, which has happened in the last couple of quarters, that's how you get to the 33. There's 15 to 30 that have backfilled those. And so if you do the math, 56 and 33, it's about half of those 200 or more are -- have either -- are either in VAC or have come out of VAC. And so that's kind of the proportion now, and we'll continue to update you on that kind of quarter-over-quarter.

David, a question for you regarding the financial position and path to breakeven. Again, two parts to this. Does the company have sufficient cash runway to reach cash flow breakeven? And before you give the answer, perhaps the second question because it's related, at what quarterly revenue level do you expect to reach operating cash flow breakeven? And based on the current trajectory and cost structure, when do you anticipate reaching that milestone?

Thanks, Ben, and thanks for reading both of those questions because I think it's -- they are related. And we've talked about this a number of times. Our cash -- our operating expenses are pretty stable. The one variable is commissions expense. And if commissions expense go up, then obviously, our revenue is going to go up also. But in general, operating expenses are going to be in that $24 million, $25 million range. Of that, $3 million is considered noncash. So we're in the $22 million range of cash out the door.

We are not giving actual guidance on when we're going to cross over. But you can see that if we grow the revenue sequentially from the $19.3 million, and you can pick a number of what you think the sequential growth would be. And if it's 5% to 10% or something like that, you can come to the calculation on when we do cross over cash flow breakeven. We're not far from it given that our cash expenses are in the range of $22 million, and we're generating $19.3 million, 85% gross margin. We just have to grow that revenue sequentially quarterly for the next few quarters, and we'll get to that point.

The first question was, do we have enough cash to get to that point of cash flow breakeven? The simple answer, in our opinion, is yes. We have $14.3 million on the balance sheet. The cash burn is going to be dramatically less this quarter. And as we grow revenue, that cash burn is going to continue to decrease over the next few quarters.

Would we like to have additional cash on the balance sheet as a small company? The answer is yes. And we're going to address that at some point this summer, if necessary. But I'm confident, Cary is confident, the Board is confident that we can run the business with the cash we have right now, and there is no concerns about having enough cash to get to cash flow breakeven.

David, while we've been presenting a few questions have come in on the Q&A. And I thought to bring you, kind of addressed this question around whether or not with future cash and the potential to raise, but I'll ask the question so that we acknowledge it. Recently, the company has registered a shelf. And the question is, can you clarify current thinking on whether additional equity capital will be required to fund operations through to cash flow breakeven?

Yes, I kind of answered that question, Ben. But I'll answer the question around the shelf registration. And the shelf registration in the United States, which is different than here in Australia, every company can put a registration shelf up. It's called an S3. It doesn't mean that we're going to raise cash. It means we have the flexibility and opportunity to take shares off that shelf any time we want, subject to ASX rules, subject to NASDAQ rules, and we could raise additional cash by using that shelf registration.

If you didn't have that shelf registration in the United States, you would have to actually file a registration statement every time you wanted to raise cash. And that is a very disruptive sort of process. And so this is a way to have flexibility in case we do need to raise additional cash. I believe at this point in time, like I said, that we have sufficient cash to get to cash flow breakeven. But it doesn't give us the cash we do have, doesn't give us the opportunistic sort of way we want to create or operate this business because there may be other businesses. There may be other products that we want to add to our portfolio. And with the skinny balance sheet we do have, that is not available to us.

So we want to grow this business organically with the products we have, but we also want to take -- be opportunistic and put other products in our product portfolio. And with the cash we have, we don't necessarily have the ability to do that.

Thanks, David. Coming back to you, there are a couple of topics which I'm going to approach in turn. The first topic we're going to talk about is international. We had a few questions there, and then the next one will be thinking about sort of future opportunities.

So on international, sort of I think two topics I'd like to hear your thoughts on. The first is specifically to RECELL, how you are prioritizing the ramping up of commercialization of RECELL outside of the U.S., particularly in light of some of the recent regulatory groundwork that we've been doing when you look at the CE mark in Europe, U.K. and you look at the recent certification here in Australia and New Zealand. So we'll do that first.

And then the second part of that question is specific to Japan. There have been some questions about the status of Japan. We've been in that market for a while now. What's your assessment of where we are today in Japan? And how do you sort of see that particular market going forward?

Thank you. So when I look at Japan, I look at Australia and New Zealand and then I look at Europe, there are kind of 3 different stories. Number one, before I get into that, we're laser-focused on where our bread is buttered, which is in the U.S., right? So we're not distracted by our international efforts. We're not spending a tremendous amount of dollars in those markets. What we've chosen to do is find really, really strong partners in distributors in those countries that we can work with, that we can work through. That's number one.

Number two, as it relates to Australia, I think we talked about it a bit. We're underperforming in Australia. RECELL GO approval will make a big difference, having the distributor that we have will make a big difference. We need to support them. We need to kind of breakthrough. There's kind of an east-west thing in Europe, where on the east side of the country in Australia, we haven't made the progress that we should. So there's just a lot of work to do there, but we're -- we've got a lot of good resources. I expect that to grow.

Europe is -- we're 6 months in or less. We're in the process of making sure we understand how the economics, how people are getting paid, the distributor in each country. A lot of times, we lump Europe like it's one thing. It's -- every country is different in terms of payment, in terms of obviously, a different distributor. We're finding out our gaps as well as opportunities. We're not in Europe just for the sake of it so that we can say we are. We're focused on being in countries where we can move the needle, where we can make substantial progress. If there are countries that just -- the climate is not hospitable economically or otherwise, we won't be there. At least we won't be there in the short term. We want to be where we can make a difference clinically, but also economically.

Japan has been around for a while. They have meaningful revenue there. But again, fresh set of eyes on the company means a fresh set of eyes in Japan and really understanding the market. The way that I've been running the company and the way that we will run the company is very data-driven. We'll do clinical studies because they'll matter, because they'll make a difference, they'll move the needle in adoption or in revenue. We'll do product development or as David said, in the future, we'll bring on another product because it makes sense in terms of our value proposition or where we're trying to go in the future.

It's not -- and I'm not saying this is the way it's been in the past, but I am saying that we won't do things for no good reason. And we're in these countries for a reason because we believe there's potential. We're putting the appropriate amount of resources and spending the appropriate amount of attention trying to make progress in these countries. And so I think investors should know what it is and what it isn't. We're still a high 90s percent business in the U.S. That's where most of the business is, but I think we can make meaningful progress in all of the geographies that we're in. Otherwise, we wouldn't be there.

So as I mentioned, we had a couple of questions about the pipeline and future opportunities. So I'll sort of ask again put them both out there and you can take them in turn. The first is, what is the outlook, if any, for cosmetic or aesthetic applications of AVITA's products? And then a question from the audience, what sort of -- what kind of level of resources are you presently dedicating to developing maybe completely new wound care products?

What was the first one, Ben?

Sorry, the first part is what is the outlook, if any, for cosmetic or aesthetic applications of the product?

Yes. So okay. Well, that's a good -- that's a good reference to what I just said, which is we're in spaces that make sense. The reason why we're not in vitiligo in the short term is because economically, from a reimbursement standpoint, we can't make it work. And unless something changes, it's hard to think that we'll be able to do it at any scale.

We are opportunistic at the company. So those are the -- there's focus and then there's being opportunistic. So for example, our whole company is focused on these 3 products on 2026 on executing perfectly. There are a group of us that are also picking our heads up from time to time and looking at 2027, '28, '29 and the types of products, the type of resources, type of strategy that we'll need. So we are focused, but we're also opportunistic. I mean we have plastic surgeons and we have even cash pay vitiligo patients and those that treat them that will want RECELL in very small amounts here or there. And so it's not like we don't oblige them or sell products to them. It's just not where our sales force is focused right now.

In terms of cosmetic applications, there's been a lot of talk about what RECELL could do or what RECELL could be. We're in conversations with people. We want to understand the science of it. We want to understand the ability to make an impact in any of those spaces. And so we will be -- we're not closed off, but we are focused on what we are going to do.

In terms of future product development, whether you look at something we developed ourselves or you look at something that we co-develop with somebody else, a partner or some other technology that we license or that we partner with, all that's on the table as we look at ways to offer more value to our customers.

We're already somewhat of a high-touch business. We're in those accounts. We're talking to those physicians. We're in the OR, those patients, when they come there to the hospital or when they're going through surgery, they get a number of different products and procedures along the way. Obviously, some of those are PermeaDerm, Cohealyx or RECELL or the like.

And so for us, we will look to develop and enhance what we already have. We will look to potentially develop other products. We do have people working on products, ways to use RECELL in different ways than it's currently being used. And so yes, we look at all of that. We're looking at any ways, short term, midterm, long term that we can enhance or add value to our position and our value proposition in the market.

And perhaps turning to a final topic, and it sort of brings us full circle back to the early conversation on the products. We've talked in the past about not just the products being used individually, but also collectively together for a continuum of a staged surgery, PermeaDerm, Cohealyx and RECELL. Can you maybe just sort of just talk about kind of where we're seeing that in the clinic, the 3 products being used on a single patient? And how that -- and characterize how that relates to the sort of the ASP as you sort of think about the 3 products being used together?

Well, each of the 3 products have to stand on their own. And so if you have any account that doesn't use RECELL, for example, PermeaDerm should be able to compete. Cohealyx should be able to compete on its own and obviously, RECELL as well.

So we probably have 20-some accounts that are using all 3 products. As Cohealyx and PermeaDerm come out of VAC, that number will go up as we use the relationships we have to pull through PermeaDerm and Cohealyx as our people are in cases where they intend to use RECELL and in the process prior to use RECELL, they're using a dermal matrix. Obviously, we're having those conversations about using Cohealyx versus maybe what they've been using in the past. That's all part of the process. We would expect there to be some synergies between the products and some of that to be understood more as it's used more, as they're used more in conjunction. So again, I think we feel really good about our customers starting to adopt the full portfolio or at least 2 out of 3 in different cases. We feel really good about that kind of value proposition.

Well, great. Thank you, Cary. I think we've gone through the questions. So I'll just hand back to you for any final thoughts.

Well, I'll just -- I'll say this. I think I understand what happened last year. I know I understand what happened last year. And I think a lot of it had to do with admittedly and maybe an overexuberant guidance and where everything had to happen in a certain time line in a certain way for that to come true. And I think what I've done, what I did in Q4 is understood what happened, understood what was happening, understood our baseline where we're at and the potential that we have. That's why we set the guidance we did.

It's not just Cary Vance saying, I'm reaffirming or we're giving guidance of $80 million to $85 million. This has been vetted through all the way down to the rep level. This is what they believe they could do, and we applied our own kind of understanding of what we thought the potential is. That's where we came up with the guidance that's where we came up with quotas that were a stretch, but that were fair for our salespeople so that they could be pushed, but they could also win and that we had a guidance that we set and that now we can reaffirm that you all can believe and you can believe that we're going to meet or beat it. And then it's just a matter of us showing you kind of quarter-by-quarter that we're getting there. And so Q1 was step one.

And my expectation is that, again, quarter-over-quarter, the credibility that we may have lost last year in some of this process that you'll start seeing that that is something that now you can start believing again. You can believe that we know our business, that we can predict our business and that we can grow our business and that we're doing it not just from a top level, but throughout the organization, throughout our product line, and it's something that you can feel not only comfortable with, but really excited about and the way that I am because I have a tremendous comfort level in our people and a tremendous amount of confidence in our people, our forecast, our future, and I'm generally and genuinely excited.

Reaffirming guidance is -- doesn't say enough about what I think is going to happen going forward. And I'm really excited about it, really excited to lead the business, lead the company and to communicate with all of you on a regular basis about what we're doing, what we've done and be held accountable for what I say is going to happen and help explain it to you because in some ways, it's a very simple business, a very simple trajectory vertically that the company is on.

So with that, I just -- I appreciate your time. I appreciate your support. I know a lot of you have been in the stock for a long time. We've tried your patience. My expectation is to make it all worthwhile someday. And again, I just appreciate your support.

Ladies and gentlemen, thank you for standing by, and welcome to AVITA Medical Inc. First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would like now to turn the conference over to Ben Atkins. Please go ahead.

Thank you, operator. Welcome to AVITA Medical's First Quarter 2026 Earnings Call. Joining me on today's call are Cary 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.avitamedical.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 as of today.

I will now turn the call over to Cary.

Good afternoon in the U.S., and good morning in Australia. Thank you for joining us. Before we turn to the quarter, I want to briefly acknowledge my appointment as President and Chief Executive Officer. Over the past 6 months, I've had the opportunity to serve in this role on an interim basis, working closely with our team, our customers and the Board. I appreciate the confidence the Board has placed in me following a thorough search process and I'm excited to lead AVITA into this next phase.

I'd also like to recognize our new Board Chair, Jan Stern Reed. Jan has been deeply engaged with the company, and I look forward to working closely with her and the Board as we continue to execute on our priorities.

Over the same period, I've spent time visiting the hospitals using our products, and speaking with surgeons. And what's clear to me is that this is not an abstract business. When you're in the operating room, you see firsthand the partnership we have with surgeons and the role our products play in helping patients recover and return to their lives. That is what drives our mission.

Turning to the first quarter. I'll start by briefly connecting the quarter to where we've been because the progression over the past couple of quarters is relevant to understanding what you're seeing in Q1. Over the past 2 quarters, we've been focused on 2 specific priorities: first, stabilizing the business. That meant working through the disruption to clinical reimbursement for RECELL, reengaging our core accounts and reestablishing a consistent procedure-based demand cadence.

Second, improving how we operate. We simplified our focus around our highest value centers. Reenergized our sales organization and put in place a new credit agreement with terms that are better aligned to the business and our expected revenue trajectory. Q1 has been the quarter where we have begun to see those changes translate into more consistent performance. Let me begin with the headline results.

As you saw in the press release, and as reflected on this slide, revenue was approximately $19.3 million, up 4% year-over-year and approximately 10% sequentially. Building on the momentum we saw exiting Q4 and representing our highest quarterly revenue over the last year. David will walk through the full financials in more detail. But importantly, operating expenses declined year-over-year, reflecting the cost-saving actions we implemented in the second quarter of 2025, and we are reaffirming full year guidance of $80 million to $85 million.

We also saw continued progress across the business and advancement across our product portfolio. I'll speak to these during my remarks.

As we think about the quarter, there are 3 points I would highlight. First, the year-over-year comparison is still influenced by prior ordering patterns. The business a year ago included more bulk purchasing behavior that we no longer see today. Second, sequential quarter-over-quarter performance is a better indicator of underlying demand. Revenue increased approximately 10% from Q4 with product demand building momentum through the quarter and continuing into April.

Third and most important is how the operating cadence is improving. We are seeing more frequent, smaller orders, better alignment between usage and purchasing and improved engagement across our core accounts. This reflects a shift away from past variability towards consistency and ultimately, predictability going forward.

Let me now go through some dynamics across our portfolio. Turning first to RECELL. At this point, all 7 Medicare Administrative Contractors have published payment rates for clinician use. What we are seeing as a result is a gradual return to utilization patterns that reflect procedural demand rather than reimbursement uncertainty. That shows up in both reengagement within the most affected burn centers and sequential quarterly improvement in ordering and case activity.

We are also beginning to see expansion in use cases, particularly with RECELL GO mini and smaller burns and trauma settings. Internationally, recent regulatory clearances in Australia and New Zealand position us to expand RECELL GO in those markets.

In addition, during the quarter, we announced a new long-term agreement with BARDA to support U.S. burn emergency preparedness. This builds on a long-standing partnership and reflects the role RECELL can play in a mass casualty response, where rapid treatment and scalability are critical.

From a business perspective, this provides a modest level of recurring readiness revenue while also reinforcing the importance of RECELL within the broader health care system. More broadly, it underscores the clinical relevance and reliability of the platform in high-acuity settings and the confidence of a key government partner in our ability to deliver at scale.

So stepping back, RECELL remains the foundation of the business and is again a driver of utilization as we build across our accounts.

Next, let me turn to Cohealyx. From a commercial standpoint, Q1 represents early stage adoption with encouraging signals. We saw, for example, an increasing number of ordering accounts as VAC approvals advance and early repeat usage by initial adopters. This is consistent with what we would expect at this stage of a product life cycle. An important development in the quarter was the interim clinical data from the Cohealyx-I study. At a high level, the data shows a significant reduction in time to graft readiness, approximately 20 days versus benchmark with consistent outcomes across patients.

We also saw a median time to grafting of approximately 11 days. Early grafting achieved in some cases within the first week and high levels of investigator satisfaction. Importantly, this data set is now supporting ongoing VAC reviews, helping to reinforce the clinical value proposition as hospitals evaluate adoption.

We also continue to hear positive feedback from clinicians already using Cohealyx, particularly around the consistency of outcomes, which is contributing to early repeat use. We expect the full data set later this year, which will be an important next step in supporting broader adoption.

And I would encourage you to listen to the key opinion leader webinar we hosted in April, available on our website. That session walks through the data in more detail. And importantly, illustrates how Cohealyx is being integrated into surgical workflows, including its use alongside RECELL in staged procedures.

Finally, touching on PermeaDerm. From a commercial standpoint, performance is still developing. This quarter, we introduced new clinical positioning relative to cadaveric allograft, focused on its role as a more affordable biosynthetic alternative in wound coverage and healing. We expect data from the PermeaDerm-I study later this year, early signals, including histology indicate comparable biological performance to cadaveric allograft.

So similar to Cohealyx, the near-term role of PermeaDerm is to build clinical confidence, clear positioning within the treatment pathway and familiarity among surgeons. We had a strong presence at the American Burn Association Annual Meeting in April, which remains the most important clinical and commercial forum for our business.

What stood out this year was the level of engagement across the portfolio. We saw broad scientific participation, meaningful clinical interaction across multiple forums and increasing discussion around how our products are used together in practice. Importantly, this was not just awareness, it was active clinical dialogue including education, case sharing and feedback from surgeons.

So the takeaway from this year's ABA Conference, we are seeing growing clinical engagement and increasing integration into clinical discussions and workflows, supported by both data and real world experience.

In summary, over the past 2 quarters, we've stabilized the business and improved how we operate. What we're now seeing is a return to more consistent utilization across our accounts with early signs of growth as that foundation takes hold. At the same time, the momentum we saw at ABA, together with the Cohealyx clinical data reinforces the clinical differentiation and value of our platform.

As we look ahead to Q2, our focus is on continued sequential growth, driven by increasing utilization across our core burn and Tier 1 trauma accounts and demonstrating our progress is repeatable.

With that, let me hand to David to review the financials in more detail.

Thank you, Cary, and good day to everyone. As Cary outlined, the first quarter reflects continued progress as we move from stabilization into a more execution-focused phase of the business. My prepared comments today will focus on how that progress is showing up in our financial results across revenue, gross margin, operating expenses and cash.

Turning first to revenue. Total revenue for the first quarter was approximately $19.3 million, representing 4% growth year-over-year and approximately 10% sequential growth from the fourth quarter of 2025. Growth in the quarter was driven by contributions from Cohealyx, RECELL GO mini and improving RECELL utilization as reimbursement dynamics continue to normalize.

Importantly, we are seeing ordering patterns increasingly aligned with underlying procedural demand. This is contributing to improved consistency in revenue with sales performance strengthening through the quarter and showing momentum as we exited March. With our Q1 results, we are reaffirming our full year 2026 net revenue guidance of $80 million to $85 million.

Turning to gross margin. Gross profit margin for the quarter was 81.7% compared to 84.7% in the prior year period. The change was primarily driven by certain required inventory reserves and product mix with Cohealyx and PermeaDerm contributing a greater proportion of revenue.

As we've discussed previously, while this shift in product mix impacts reported gross margin percentage, these products contribute incremental gross profit without a proportional increase in operating expenses.

As a result, they remain accretive to absolute gross dollars and supportive of operating leverage over time. Consistent with the framework we outlined with our broader portfolio coming out of 2025. RECELL gross margin remained strong at approximately 85% and we expect that to continue.

Turning to operating expenses. Total operating expenses were $24.5 million, down 11% year-over-year. This reflects continued execution against the cost optimization initiative, including transformation of the sales force implemented in 2025 and reinforces that we are operating with a lower and more disciplined cost base. Importantly, this structure is now stable and aligned with the current scale of the business. As revenue grows, we expect this to support improved operating leverage.

Net loss for the quarter was $10.6 million or $0.35 per basic and fully diluted share and an improvement compared to $13.9 million or $0.53 per basic and fully diluted share in the prior year period.

Now turning to cash, which we recognize as a key focus. Net cash used for the quarter was approximately $9.9 million. As expected, cash use was higher in the first quarter driven by seasonal compensation and other onetime payments and was further elevated by the timing of revenue and collections. Cash receipts obviously lagged revenue and with a greater proportion of product sales occurring later in the first quarter, our cash receipts were negatively impacted, which increased our cash use.

As we move into the second quarter, these timing dynamics have reversed. Seasonal and onetime items are completed and collections from strong late first quarter revenue and early second quarter sales activity are driving higher cash receipts, combined with ongoing cost discipline, this gives us strong confidence in a significant decrease in cash used in the second quarter. We ended the quarter with approximately $14.3 million in cash and marketable securities.

Regarding our debt facility, we remain in compliance with the trailing 12-month revenue and minimum cash covenants under our credit facility which are aligned with our current operating trajectory. Importantly, this facility put in place in January with Perceptive Advisors was structured to provide greater flexibility than our prior credit agreement, with covenant thresholds set meaningfully below our expected annual revenue levels and a reduced minimum cash requirement.

Given the level of headroom, we would not expect the revenue covenants under this agreement to be an area of focus going forward. For context, the second quarter trailing 12-month revenue covenant of $69 million implies a second quarter revenue requirement of only $15 million, which remains well below our recent quarterly revenue levels. The structure is interest-only and includes additional capacity subject to achieving a defined revenue milestone.

Taken together, these terms were designed to support execution rather than constrain it, providing improved visibility and headroom as we scale the business. As a result we believe our current capital structure is well aligned with our operating plan that supports our ability to manage the business for continued growth, improved cost efficiency and ultimately, financial sustainability.

In summary, we are seeing sequential quarterly revenue growth with an improving demand consistency, a stable and disciplined operating cost structure and clear visibility to lower cash use as we move into the second quarter. These elements reflect continued execution against the framework we established in 2025 and reinforce our focus on delivering consistent and repeatable performance through the year.

With that, I'll hand it back to Cary.

Thank you, David. So just to summarize the first quarter, we delivered a solid revenue performance in Q1, supported by improving RECELL utilization. We exited the quarter with increasingly consistent procedure-driven demand across our core accounts. We generated compelling Cohealyx clinical data reinforcing its differentiation over other dermal matrices. And we strengthened our leadership as we shift gears into this next phase of our AVITA journey.

As we look ahead to Q2, the focus is clear: build sequential growth and demonstrate recurring progress across our business.

With that, let's go to questions.

[Operator Instructions] And our first question comes from Frank Takkinen with Lake Street Capital Markets.

Congrats on a solid Q1. I was hoping to start with a question more on composition. I don't know if you'll go as far as sharing the breakdown between RECELL and Cohealyx, if you would, that would be great. If not, maybe a backup question would be just speaking to maybe which 1 was a stronger driver of growth? Was it a rebound in RECELL or kind of Cohealyx coming up the curve pretty quickly.

I mean, we're not going to break it out yet. But I mean, it was a combination of the 2, Frank. We grew in RECELL and we grew in Cohealyx. Those are the 2 main drivers.

Okay. That's helpful. In the prepared remarks, I think you made a comment of Q2 sequential growth continues to be expected. Can you maybe talk to that a little bit more? And then, obviously, the quarter was a little ahead of where Street expectations were and understand the appetite to put out expectations you can achieve. But maybe talk through how you guys thought about maybe taking the guide up a little bit, just given how well it seems the recovery is going in Q1.

Yes. I mean right now, we're sticking with the guidance. But I do think that this is a business that builds on itself. I think a lot of the work that we did even in the latter part of 2025 brought us the results in Q1. And I expect that work to continue. There was a lot of good work aside from bringing in orders and revenue. There were a lot of things built. There were hospitals that came out of VAC around Cohealyx. So there's a lot of progress behind the scenes, behind the revenue number.

And we expect to be able to retain that kind of progress that we had in Q1 into Q2 and capture 3 months of it as opposed to maybe a month or 2 of it when we got a new physician or new procedures on board in Q1. And so we expect that to build on itself kind of quarter-over-quarter. That's why we speak to it in that way. And so more to come in a few months.

And the next question will come from Ryan Zimmerman with BTIG.

Cary, David, congrats on the progress. Just to put this behind us, Cary, on the MAC dynamics. I appreciate you sharing that the 7 MACs are now publishing rates. I just want to confirm though, beyond the published rates, the seventh MAC that you were waiting on, everyone is now fully reimbursing for RECELL at this point, correct?

That's correct. Thank you, Ryan. So they've all published and there was 1 MAC that the rates were -- the rate was below the others that they've brought that rate up in line with everyone else.

Okay. That's very helpful and really good to hear. As far as -- and this is just a part of this question, and I follow up on BARDA. But just you made some comments about utilization and really smaller burns seeing some adoption. And so I'm wondering if you could elaborate on what's driving that? Are you explicitly targeting lower TBSA burns because they're more frequent? And it would suggest that doctors are becoming more comfortable certainly with the RECELL device, if that's the case. I'm wondering if you could kind of speak to that. And like I said, I just have one quick one on BARDA.

So I mean, obviously, we're pushing for them to use it on every wound and every size burn. The question is always with clinicians, is it worth it? So is it worth it economically? Is it worth it in terms of the time and the workflow. So I think it's a combination of things.

I think clinically, we're showing and convincing more that the impact on healing, on pigmentation is worth it for the patient. I think having an offering of RECELL GO mini for -- that's less expensive, that's really made for smaller wounds and then the economic impact of length of stay or the advantage to the patient and to the hospital and to really everyone involved for healing faster, I think it's just starting to resonate, and we're trying to basically cover all our bases in terms of objections or reasons why they may not use it. We're trying to address all of those through technology, through data, both economic and clinical.

Okay. Last one, maybe more for David, but the BARDA contract, I think it's up to $25.5 million in revenue -- potential revenue. I think $3.5 million, if I'm not mistaken, is guaranteed. So David, how are you thinking about that coming through when it comes through? Any guidance would certainly be helpful there? Appreciate it.

Sure, Ryan. Good to hear from you. And thanks for the question. What's guaranteed is around $3.9 million over 10 years. And that is basically amortized per month over those 10 years. So you can pretty much assume that it's going to be about $100,000 per quarter, $30,000 or so thousand per month. And it is billed on a monthly basis.

So that cash comes in during that 10-year period. The rest of it is only if there's a mass casualty. And what we're required to do is to have safety stock. We're required to have stock on hand, but it basically equates to our safety stock anyway. So it's not an increase, and I've been asked this question before, and I'll just tell you, it's not an increase in cost to have that safety stock that fulfills our requirements for BARDA.

The next question is going to come from Chris Kallos with MST Financial.

Just a quick question. Regarding the guidance, in terms of the multiple moving parts now with the product mix, what would be the drivers that you'd be looking forward to maybe for us to expect the company coming at the high end of guidance for the year. What -- in light of the Cohealyx data and the rest, what should we be aware of?

I mean I think we have -- thank you, Chris. Good to hear from you. I think we've got 1 quarter under us, right? And so I think while I and the team have a good sense of confidence, me 6 months into the role, where we stand, what we know, how, what we're doing is impacting the market and the number, it's still just a quarter. And I think for us, it's a matter of seeing the progress throughout the course of the year. That will give us a better level of kind of confidence and sight into where we would expect to finish the year. And my expectation is we're going to be as transparent as we can be about how we're progressing and what we expect and that we'll report out accordingly.

Great. And just a follow-up question regarding the smaller purchases that are coming through at the moment, can you maybe relate that to -- has that been a result of a change in strategy in the sales team and/or headcount? Maybe a comment on that.

Sure. I think we want customers to order in a way that is convenient for them in terms of how much they stock, in terms of how often they use it. We're responding to them. I think we want to make sure we're not pushing any of our own agenda about wanting any larger orders or that doesn't really help us even things out.

What I like from the AVITA side of this is it becomes very consistent and very predictable. And I think as we go through weekly regular forecasting exercises, we're becoming very good at understanding how our customers buy and predicting how they will buy in the coming weeks and months of the quarter.

And again, we would not do it that way if our customers didn't want it that way. So it's really a combination of giving them -- letting them order the way they want to order and use it and us having a mechanism and a process that helps us be very predictable.

And just 1 last question for David. David, in terms of cost-outs have we reduced the costs as much as possible. Should we sort of expect the cost line to stay stable from here on?

Yes. I think you have to look at it that we've stabilized the cost structure. And I've talked about this previously. The one variable that I hope goes up is commissions because that's the one that will drive -- will be an indicator that we're having more revenue. But from a G&A and R&D and headcount perspective, our cost structure is where we want it to be.

[Operator Instructions] The next question comes from Josh Jennings of TD Cowen.

Congratulations again, Cary, on getting the interim tag removed from your CEO title. I was hoping to just start off -- I mean, I know you had a couple of questions on MAC and you described the progress of 7 MAC publishing. Can you help us just think about this physician confidence and/or centric burn center confidence in terms of getting reimbursed for RECELL where we are there? I mean you think we're 50% to 75% VAC. I know you're banking on continued progress sequential growth over the course of this year. But maybe just help us think through where you are in that recovery on the physician and center confidence front that they'll get reimbursed.

Yes. I'd say 75% probably a good number. And as we've talked over the last 3, 5 months, I've kind of said that's the way it's going to be. There's the official MAC situation and then there's an education and communication that needs to take place to make sure that we're back to where we were over a year ago. I think that some of it is that. And then some of it is right now, we're in a kind of blocking and tackling mode health care system -- by health care system or hospital by hospital where they have their own internal communication about what's getting reimbursed and how to get reimbursed.

And so we're just trying to help with the education of all of that, something we probably would have been doing more of a year ago had this MAC issue not come up, right? So now after the fact that, that is kind of officially cleared up, now we kind of go hospital by hospital with our health care access team along with our commercial teams and make sure they understand how they get paid and how to work through the process.

And just coming out of ABA with the Cohealyx update, I was hoping -- and clearly, there's more buzz around that product. But I was hoping you could just maybe put a finer point on what you're seeing in terms of traction, still early days post ABA, but any surgeon feedback? And then also, if you could give us any just updates on the number of centers that are starting to use the entire portfolio, RECELL, Cohealyx and PermeaDerm and seeing some of the initial traction of the portfolio build-out.

Sure. I'll answer the second one first. So I think we're in the 20s in terms of centers that are using all 3 products. I think, again, if you haven't had a chance on our website, there was a great webinar we did during ABA where it was me and Katie -- Dr. Katie Bush as well as 2 of our physicians, and they spoke way better than we could about the day-to-day use, utilization and workflow of Cohealyx and PermeaDerm as well as the study and some of those results because that's -- both those things matter. Obviously, data matters, but so does the day in, day out and just the credibility that they have. And I encourage you all to go back and listen to that if you haven't already.

But I think that there's a substantial amount of buzz that comes out of ABA and the study itself and the preliminary release. I think it helps us in our VAC committees with a little bit of acceleration. That's just a gut feel that feeding them better and more information as they're in the process is going to help get it out of there sooner.

We just want to compete. I think that Cohealyx competes very well with other dermal matrices. I think we have some advantages as well. And we just want to get out there and do that. But in order to do that, we -- this data will help quite a bit as well us just practically getting out of VAC and having more people use it and give us their input and be reference sites for others to understand the advantage of using Cohealyx.

And so I think it's palpable, and it's exciting. And I'm looking forward to the months ahead as I would expect to see 12 to 15 VACs -- Cohealyx come out of 12 to 15 VACs every quarter. That's about what it was last quarter. That's another expectation, I have this quarter, and I expect that to continue. We still have about 55 to 60 of them in VAC. Every time we get some of them out, some more go back in, which is great because at some point, we're going to be covered across all the burn centers and the Level 1 trauma centers, and we're going to be cleared to compete in every one of them.

Thank you. And I'm showing no further questions in the queue at this time. I will now turn the call back over to Cary for closing remarks.

Thank you, operator, and thank you to everyone for your time and support today. We look forward to continued engagement and discussions with all of you in the coming days and weeks, and we look forward to another great quarter. Thanks, everyone.

This concludes today's conference call. Thank you for participating, and you may now disconnect.

Thank you for standing by, and welcome to the AVITA Medical Cohealyx KOL Investor Webinar. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Ben Atkins. Please go ahead, sir.

Thank you, and welcome to the AVITA Medical Cohealyx Key Opinion Leader webinar. Today, we will be reviewing an interim analysis from our Cohealyx I study, which evaluated time to autografting against a literature-derived performance benchmark.

Before we begin, I'd like to remind you that today's call will include forward-looking statements regarding AVITA's current expectations about future events. Please refer to Slide 3 for additional details. It's now my pleasure to introduce our speakers. Joining us today are Dr. Derek Bell, Professor of Plastic Surgery and Kessler Burn Center Director at the University of Rochester Medical Center; Dr. Lourdes Castañon, Clinical Associate Professor of Surgery and Director of the Burn Program at Banner University Medical Center, Tucson, affiliated with the University of Arizona College of Medicine; Cary Vance, Interim CEO of AVITA Medical; and Katie Bush, Senior Vice President of Scientific and Medical Affairs. We'll begin today's discussion with opening remarks from Cary Vance. Cary, over to you.

Thank you, Ben. Acute wound care today is complex and resource-intensive. Patients often require multiple procedures over extended periods and variability in the path to closure can drive longer hospital stays, higher complication risk and increased cost. At AVITA, we are a hospital-based acute wound care company. We are focused on a concentrated set of burn and trauma centers where we have deep relationships and a consistent clinical presence.

Growth in this business is driven less by adding new accounts and more by increasing utilization within the accounts we already serve, the same clinicians using our products across multiple patients over time. That's the foundation of our strategy.

Built on that is our portfolio of 3 complementary technologies: RECELL, our spray-on skin technology, which enables skin regeneration at the point of care; Cohealyx, a dermal matrix that prepares the wound bed and PermeaDerm, which protects and stabilizes the wound.

Individually, each of these products has clinical value. But the real strength is how they are used together on the same patient by the same clinician, optimizing the full healing pathway from wound bed preparation to dermal repair to skin coverage. And the goal is straightforward: accelerate progression to closure and healing, what we call it AVITA healing at the speed of life.

That matters clinically, but it also matters economically, improving hospital workflow, reducing length of stay and lowering cost of care. As we look at that pathway, one of the key bottlenecks remains wound bed preparation. Delays at that stage extend care and increase risk. That's where Cohealyx is designed to play a role, enabling faster, more reliable progression to grafting. Where we continue to see a bottleneck today is in preparing the wound bed for closure. Delays at that stage drive prolonged care, higher risk and increased resource utilization. That's exactly where Cohealyx is designed to play a role, enabling faster, more reliable progression to grafting.

Today, we'll share early data from our Cohealyx I multicenter study, including an interim look at time to grafting. And as we improve that step, we also expand the opportunity to utilize our broader portfolio, increasing value per patient and strengthening our leadership in acute wound care.

With that, I'll turn it over to Katie.

Thanks, Cary. Before we get into the data, I do want to take a moment to ground everyone in a key concept that underpins the Cohealyx I trial. In the treatment of deep injuries, a skin graft is used on the injury site, which originates from a donor site on the patient. This skin graft has limited vascular supply. And in order for it to successfully take, the wound bed has to be properly prepared.

It needs to be vascularized, it needs to be stable and ready to support that graft. If that doesn't happen, the graft will not take and the wound will not heal. And in practice, the preparation of the recipient site or optimization of that site is often what drives a delay in treatment. So while skin grafting is a standard and effective approach for wound healing, the rate-limiting step is getting the wound bed to a point where grafting is actually possible.

What we've seen consistently across our RECELL clinical trials, published data and real-world use is that clinicians are trying to solve the problem of wound bed optimization with dermal matrices.

In fact, more than 1/3 of patients in our RECELL trials and over 40% in published data sets receive a dermal matrix as part of their treatment. So the need is clear, but limitation of current solutions is time. In a meta-analysis review of literature, time to grafting with dermal matrices averaged approximately 33 days.

And that delay has real consequences, including increased risk of complications, longer hospital stays and overall higher cost of care. That's the problem Cohealyx was designed to address by enabling faster progression to grafting.

Our approach with Cohealyx has been to build evidence in a stepwise data-driven way. We started with preclinical work followed by clinical case series and real-world experience. And now with the Cohealyx I multicenter clinical trial, we are generating higher quality clinical evidence.

Across each of these stages, we've seen a consistent signal, a meaningful reduction in time to grafting. And in the interim analysis of Cohealyx I, we are seeing a significant decrease in time to grafting compared to the objective performance goal based on currently used dermal matrices.

At this point, I think it's most valuable to hear directly from the surgeons who are using Cohealyx in practice and who participated in the trial. Dr. Derek Bell, a Burn and Plastic in Reconstructive surgeon from the University of Rochester Medical Center in Rochester, New York; and Dr. Lourdes Castañon, a burn and trauma surgeon from the University of Arizona Department of Surgery and College of Medicine. They'll walk through their clinical study experience and how this translates at the bedside.

So with that, I'll turn it over to Dr. Bell and Dr. Castañon.

Thank you, Katie. As Katie mentioned, there is a clear need in clinical practice for better solutions to prepare the wound bed and get patients to closure more efficiently. That's what led to this multicenter study evaluating Cohealyx with full thickness wounds. I've previously worked with AVITA on prior RECELL studies, and I was particularly interested in utilizing this Cohealyx study because this is a real barrier in getting our patients to closure in a timely manner.

The goal of this study was to evaluate the ability of Cohealyx to advance wounds to the preparation and readiness stage for closure. The study enrolled patients across 20 centers, including many high-volume verified burn centers, which gives us a data set that reflects our real practices within our country.

The Cohealyx I trial evaluates Cohealyx with a standard 2-stage treatment approach consistent with how we manage many of our full thickness burns. I often utilize a 2-stage approach with my patients with a variety of different acellular dermal matrices in doing so.

In this study, the primary endpoint was the time to skin grafting, essentially how quickly can we get this patient from its initial treatment stage to the time of closure. Cohealyx is first applied to the wound bed.

And once the wound is ready, then the patients proceed to definitive closure with split thickness skin grafting often in combination with RECELL. This is a critical milestone. The faster we can get the closure, the better this is for the patient.

We evaluated this against literature reported mean of 33 days with 28 days being the lower bound of the confidence interval, representing the objective performance goals. This benchmark was established based on published data currently utilized with different dermal matrices, including but not limited to PolyNovo BTM, Integra and MatriDerm.

These are many of the products that we use in our practices. These studies were selected because they have sufficient published data to establish a reliable evidence-based benchmark, which serves as a meaningful reference point for how patients are typically managed.

This study includes a broad patient population without restrictions to patient condition or wound size, which makes the findings highly predictable to our everyday practices. In addition to time to grafting, the study also evaluated time to healing, scar outcomes and, of course, the safety profile, which is important in any studies.

So again, our target patient population was acute full-thickness wounds that required stage procedures without limitation to size with endpoints being wound healing, scar assessment and safety. This slide summarizes the primary endpoint, which is the time to skin grafting. We see from this that there's a clear reduction compared with the meta analytic control.

The mean time, decreases from 33 days with controlled matrices to 13.6 days with Cohealyx . So this difference is almost 20 days, 3 weeks essentially. This magnitude is significantly meaningful. The reduction in time by nearly 3 weeks significantly changes the course of patient care, including the risk of complications and overall utilization of our resources.

So the faster we can get our patients healed, the better it is for the patients because it mitigates risk of infection, mitigates utilization of resources within our community with prolonged wound healing, nursing, time in the hospital, et cetera.

Looking beyond the mean, the median time was 11 days, which reflects where most patients are falling. This suggests that there's an effect that's not driven by a small number of early cases, but it's pretty consistent across our cohort. The early sign of grafting that we saw was 5 days. The p-value was less than 0.001, which indicates that this is clinically significant, statistically significant data.

This is a great slide. Building on our earlier time to grafting results, it shows how this translates across our entire cohort. Most of the patients were grafted within a relatively tight window, about 72% or 3/4 were grafted within 14 days, 25% of those patients were grafted within the first week. This isn't just an average effect. It reflects how the majority of patients are progressing throughout the study.

There's a clear clustering in the 7- to 14-day range, which aligns with the median of 11 days. This consistency is important as it suggests a predictable pathway rather than just a few early responders within the study. There are some outliers, which is expected and this reflects what we see in our clinical practices.

This may be reflective of some patient-specific factors, patients that may be more sick or have more complex wounds. So this is not surprising. But overall, this reinforces that there's a consistent and accelerated time line to grafting for this subset of patients.

Beyond just the clinical outcomes, this reflects that the investigator experience is pretty good across the cohort. The satisfaction of the investigators was 90%, either being satisfied or very satisfied. None of the responders were very dissatisfied and only 10% were either dissatisfied or neutral. This suggests that the experience with the product is reproducible across the patients, and it isn't just limited to a subset.

Satisfaction is not just subjective, it reflects how the technology performs in routine practice, how this integrates with our workflow and whether this is consistent in its results. When investigators are consistently satisfied, they're more likely to continue to use this product and incorporate this into our practices. This is something you need to think about when utilization across many centers throughout this country.

This is my first patient I utilized in this trial. It's a 62-year-old gentleman who had flame burns to his trunk. The total service area was almost 500 square centimeters. He also had a history of COPD. So here is at presentation upon entrance into the operating room. He had 30 degree burns throughout the majority of this area. The area that you're looking at is his right torso with his head and shoulder being to the right and his hip being -- or his head and shoulder to the right and hip being to the left.

Here is after excision, you can see that there's a healthy appearing wound bed that's going to be accepting of the graft. There's the application of the Cohealyx. I fixed along the perimeter sparingly using skin staples and then moisten the product with saline, so it conforms to the wound bed uniformly.

You see a small red dot in the middle, it's a biopsy site for the study. Here's this patient 11 days, and he's determined to be appropriate of autologous grafting. You can see that there's nice granulation tissue throughout the majority of the wound bed. So I know that this is going to be ideal for accepting a graft.

So I put split-thickness sheet grafts on him. The reason why I roll up is because the resins tend to put the grafts upside down. These are split-thickness sheet grafts, extremely thin, 0.004 inch. There they are applied to the wound bed.

I fix them further with a wound VAC. So here's a patient 7 days postop. After the VAC takedown, you can see excellent adherence to the grafts throughout. Here is a 14 days postop and you can barely discern that this patient was even grafted.

And 8 weeks postop, you can see the majority of this is the same color and consistency as the own-burn skin. He has some areas that are a little bit hyperpigmented. However, this is smooth, soft and supple. He has a fantastic result.

So what are the key takeaways? First Cohealyx serves as a dermal matrix. We're optimizing the wound bed prior to grafting, which is translating to shorter time to definitive coverage compared to our historically published controlled acellular dermal matrices.

Secondly, our primary endpoint is designed to capture efficiency and how quickly these patients progress to closure. This is clinically meaningful. In this study, the investigators were satisfied or very satisfied with the quality of the wound and the time to grafting with the Cohealyx.

And now I'll be passing this over to my good friend and colleague, Dr. Castañon, who will discuss her experiences with Cohealyx. I thank you for this opportunity.

Thank you, Dr. Bell. At our center in Arizona, we treated 4 patients, and I will be presenting on our initial experience. This was a 55-year-old male with an upper leg wound with a necrotizing soft tissue infection or NSTI. The patient underwent surgical excision to healthy margins followed by Cohealyx placement.

It is important to note that this patient was critically ill. Their comorbidities included heart failure, cirrhosis, obesity, all which are known factors to delay wound healing. Clinical progress was monitored, and you can see the incorporation of Cohealyx 6 days following application in the leftmost image.

On postoperative day 13, the wound that appear red vascularized and suitable for skin grafting. In addition to the clinical observations, we conducted histological analysis to better understand what's happening in the wound bed prior to grafting. At day 13, a small sample was biopsied from the center of the wound bed.

What we see is the formation of dermal-like tissue layer, consistent with the proposed mechanism of action of Cohealyx supportive of effective graft preparation. Importantly, these findings align with the preclinical data, giving confidence that the product is translating as expected into the clinical setting.

Here, we can see the outcomes for this patient on the left at 12 weeks post skin grafting, having favorable skin graft take, cosmetic outcome and durability. Overall, my takeaways from my experience with Cohealyx to date include: one, it supports progression to skin grafting within clinically meaningful time frames; and two, across both the trial and my clinical practice, I am seeing consistent performance in a range of complex patients with time to grafting beginning to trend below the median observed in the study as I am getting more comfortable with what this product can do.

Thank you to Dr. Bell and Dr. Castañon for sharing both the interim data and their clinical experience with Cohealyx. This slide outlines how we're building and communicating the data set over time. We began with early readouts in 2026, sharing single center results and histology to establish initial clinical signal. With the interim analysis, we're now incorporating these data in the abstracts for upcoming conferences throughout the year.

In October of this year, the full data set will become available. And from there, we will expand to multicenter presentation at major conferences in 2027, covering safety, efficacy and broader scientific validation. In parallel, we're targeting publication providing peer-reviewed validation of the data.

Overall, this strategy allows us to communicate the data from initial readouts through full validation. With that, I'll hand it back to Cary to provide some closing remarks.

Thanks, Katie, and thank you to Dr. Bell and Dr. Castañon for your insights and for sharing your clinical experience. Let me close with a few key takeaways. First, Cohealyx is addressing a critical step in the pathway. We are redefining wound bed preparation with faster, more predictable progression to grafting.

Second, the interim data support both the clinical performance and the commercial potential of Cohealyx. This is not just about outcomes, it's about how those outcomes translate into real-world use.

Third, we're seeing strong surgeon satisfaction. And that matters because adoption in this market is driven by clinical confidence and repeat use within existing accounts. And finally, this drives greater value per patient. It reinforces our procedure-based platform with clear milestones ahead as we continue to build the data set and expand visibility.

Stepping back, what this reflects is progress. Progress in how we support clinicians, progress in how we improve patient care and progress in how we build a more valuable, more integrated acute wound care platform. With that, let's open the line for questions.

And our first question for today comes from the line of Ryan Zimmerman from BTIG.

For the physicians on the call, I appreciate you guys sharing your experience with us. Maybe the first question, I'll ask both upfront. But the first question is just why have traditional dermal matrices taken longer in your view? And what is it -- what's unique in your view about Cohealyx that enhances that time to skin graft?

And then the second question, I'll ask upfront is, historically, AVITA has been a one-product company, right, with the RECELL device, which has been very effective in burn care. Now with Cohealyx and PermeaDerm, there is more potential to use those in conjunction with the RECELL device.

But I'm just curious if you foresee using Cohealyx for all the cases where you would use the RECELL device and just how to think about the utilization of these additional products in conjunction with the RECELL device.

This is Derek Bell from Rochester. I think to answer your first question, I think that in my hands, the reason other products have taken longer to integrate is in part their composition. A lot of these products, in my hands is consistent with the 33 days. And I think that the time to vascularization just takes a long period of time.

With other products, I have tried to push the envelope and graft them sooner than 3 weeks and the grafts fail. I don't think that they incorporate imbibe and establish angiogenesis and vascular ingrowth as readily as Cohealyx does.

So I have changed my practice. I've had experience with a couple of different ones. And what has changed for me is the early incorporation onto the tissue. And I've been using it in combination with RECELL and 4:1 grafting. I will say with the combination of both products, I no longer do a 2:1, 3:1 graft.

I've been, for the most part, doing a 4:1 with RECELL on top of the product, and we've had really great results. For us, length of stay is a big issue. We are 1 of 2 centers in Arizona, and we have high volume. So for us, we want to get them out of the hospital as soon as possible. So this combination goes along with our practice, getting them out of the hospital as soon as we can.

And just a follow-up, do you anticipate for all of the burn cases you're using RECELL today? Or is there a size limit or a TBSA threshold you think about using Cohealyx and PermeaDerm or Cohealyx either one relative to maybe the size parameters you use the RECELL device for?

So I'll be honest with you, I've been experimenting since I started playing with the product, and I have pretty much applied it in different locations. We've had a couple of areas like -- so for example, traditionally, the hands of the feet tend to have like much thicker skin. And I would opt for a dermal matrix that's a little bit heavier. We have had some cases where we had an evulsion of a finger and it worked really nicely.

There are other sensitive areas such as like the dorsal of the hand or like the face. We've had a couple of face cases just recently.

And it accommodates -- like I said, I've been kind of pushing and this is only in my experience with the cases that I've been working. I've actually stacked the product and was able to gain a little bit more of a height using it.

So it's very versatile in the sense that it because it absorbs quickly, I'm able to visualize what it's going to look like, and I'm able to stack, so I'm able to better contour it to the wound.

So yes, at least in our practice, we've been using that a lot more than any of the other products since we started.

[Operator Instructions] Our next question comes from the line of Frank Takkinen from Lake Street Capital Markets.

I was hoping to start with one, maybe a little outside of the -- or I guess, related to the clinical side, but a little bit outside of it. One key barrier to adoption is consistently VAC committee approvals.

I was curious if each of you could speak about that process at your respective sites. And then at the risk of having you kind of theorize for other VACs and understanding they're all unique, do you feel the current clinical data as well as today's data is enough to start having more standard of care level VAC approvals across the greater industry?

Thanks for the question, Frank. For me, I think that we have a pretty stringent VAC committee. But I think for me, being part of the trial and be able to cooperate this data in conjunction with people at other burn centers that I know well. I know that this data is legitimate.

I think for me, that helps to get the product through the VAC committee as well. I think the price point on it is it's always a sticking point with our VAC committees. I think the price point is good and that it's far better than that of other products that are lesser quality products for the reasons I stated.

And I can add to that, that we recently had to go through the Lumière process. And for us, we are part of Banner, so we're in multiple states. So if we approve a product, it's approved on multiple hospitals within the system. It helped us that we were part of the study because we were able to review our data with the committee.

And they keep track of all this information. So they were very impressed. We had no issues attaining that. And yes, the data that's out there, the experience that we're having with it is very positive and has been very well received.

That's helpful. And then maybe just one last one. Is there a reason to still use other dermal matrices in light of today's data and then obviously, the price point, Dr. Bell that you recently referenced.

And then maybe one last one, I'll sneak in there, too. Any other data that is on your wish list for Cohealyx as you think about adoption?

I think that in using other products, I think that the needle is going to swing for me. I think that I'll probably -- those other products will probably go by the wayside. I think its utilization is multivariable, not just burn injuries, but also open wounds.

I think the product is very good because it conforms nicely as well. So in some of these wounds, it can be really challenging because of the concavities, I think that it's a benefit as well.

So I don't see limitations in its usage, and I think other products will go by the wayside.

For us, it goes along with our workflow. Like I said, we have a very large focus on length of stay and our cost center. And it works really nicely in terms of integration and early discharge. It is a product that you could actually see incorporating almost immediately. So even identifying if it's working or not, not working is very easy to identify early on by our staff, and we're training our staff to identify this.

And we have a relationship with our LTAC. So that helps with our length of stay as well. So they are aware of what the product should look like. So the fact that it incorporates quickly, you know if it's working or not.

So it strongly does help significantly as opposed to other products where you have to wait anywhere from 3 to 4 weeks before you even consider putting a skin graft on it just because it takes time for it to fully granulate and be a good wound source for a skin graft.

[Operator Instructions] And this does conclude the question-and-answer session of today's program. I'd like to hand the program back to Cary for any further remarks.

Thank you, operator. We appreciate everyone's time and attendance and engagement today. We're really excited about what we're doing at the company. We're really appreciative of Dr. Bell and Dr. Castañon ère, and we look forward to speaking to you all next month when we announce our Q1 earnings and having further discussion. So thank you. Have a good evening.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

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to understand how much they use, how much they buy, when they buy so that we can be predictable and we can impact that number and grow that number. we talked about last quarter, our shift in our sales force, reducing the spend on the sales force, reducing the size of our sales force, but then also moving them geographically as appropriate to focus on those 2 in key accounts, the 120-plus burn centers as well as the 50-60 Level 1 trauma center. So we took advantage of the opportunity to not only cut costs, but also refine our strategy, focus our call points and keep the best of the best in terms of that sales team, give them appropriate quotas, stretch quotas for them to go after 2026.

We also obviously have a 3-product platform. All 3 of those products still are fairly new. RECELL is not new, but RECELL GO is as well as Cohealyx and PermeaDerm, and that creates its own challenge in trying to get it into the accounts to sell, and we'll talk more about that. And we talked about the reimbursement challenges. The last time that we were here. We were still working through that process. We still are to some degree, but it's largely handled and I'll talk more about that.

And then, of course, we had continued to trip these covenants with OrbiMed. And we we thought it was really important to solve that issue to remove that, and we've done and as well. We grew about 11% in 2025, which isn't which isn't super impressive, but it's also not flat to negative considering all the headwinds that we had. This year, we expect to grow between 12% and 19%. We expect to get back on track to the kind of growth we've had in years past.

Specifically around reimbursement, we I think the last time we had 3 of the 7 MACs Medicare administrative contractors had been had published their rates. And now we're at 6 out of 7 in that seventh MAC, I'm highly engaged with them and the representatives that represent their constituents in the states that, that covers. And we expect them to publish as well as they've committed to do so. I'll now hand it over to David to go through some of the numbers. Go ahead, David.

Let me give you some color on our financial results for the fourth quarter and for the full year. Cary has already talked about the $71.6 million for the year, that's 11% growth. It's not where we want to be, but again, it is growth. We've talked about the $80 million to $85 million guidance already. Where I want to spend a couple of moments on is the gross profit margin. it was 82.1% for the year, 81% for the fourth quarter. That was impacted by a few things. One was we had some inventory reserves that we had to book that will not reoccur. And then also, we do have a product mix impact that will continue both Cohealyx and PermeaDerm, we have revenue sharing arrangements with our partners. Cohealyx, we have a 50-50 [indiscernible] and statical we have a 60-40 split.

And therefore, as the revenue from those products grow, there will be an impact to gross margin. However, for this year specifically, we expect resale to grow even faster than Cohealyx and PermeaDerm. So -- and our expectation for gross margin is going to be in the range of 83% to 85%. Because we're still sticking at around 86% for our resell products. The other item I wanted to point out is operating expenses.

We've been very disciplined around operating costs we took out in the second quarter of last year, about $2.5 million per quarter when we did a transformation of our sales force. We also took an opportunity to look at G&A and R&D at the same time. So there was $10 million annually that was taken out. Our run rate for the fourth quarter was $24.7 million, but that included a number of onetime cost, specifically severance costs of about $1.2 million.

So our normalized operating expense, we believe, going forward will be in the range of $23 million to $24 million. And just to point out, there are some noncash items in that number around $3 million, primarily around stock-based compensation. So historically, we have grown at a CAGR, a compound annual growth rate of 32%. We did drop off in the 2025 to 11%, but our objective for this year and years going forward is to get back on that curve, somewhere north of 20%.

Our guidance at the top end is right at 20%. And what we would what to achieve over the next couple of years is to get back to where we're growing at 20% to 30%. We've talked about the gross margins. They have historically stayed above 80. And as I indicated, we fully expect that to continue even with the product mix impact going forward. Cash use, we've been disciplined. We've reduced the amount of cash that we use every quarter for the last 3 quarters. from $10.1 million in Q1 to Q2 to $5.1 million in Q4.

And just to note that there will be -- that will uptick in this first quarter. The cash use will go up because of a reset of employee benefits, payroll taxes and bonuses that we have to pay. But once we get through this first quarter, and we start growing at the revenue rate that we think we're going to. That cash use will go down to a point where we will cross over to cash flow breakeven at some point. We aren't giving guidance at this point in time. But towards the end of the year, we will get closer and closer to that breakeven point.

And once we once we can see that, for sure, we will give everybody that guidance of when we're going to cross over. And then the last thing I want to talk about, and Terry mentioned it, we did have a credit facility with OrbiMed. We entered into that agreement in 2023. And we -- when we entered into that, we set the revenue covenants at some revenue that was unachievable going back now. So every quarter last year, we were running up against those revenue covenants and having to do an amendment or a dual waiver and it just caused a lot of distraction that we needed to solve for.

And so we went out and found another credit facility with Perceptive Advisors, a strong health care lender in the United States. We've entered into an agreement with a total agreement of $60 million. We took down $50 million at close. And the objective was to -- the main objective of doing a new credit facility was to reset the revenue covenants.

For example, the first quarter of 2026 trailing 12-month revenue covenant of $68.5 million. And if you look at the results for the 3 quarters in 2025, we would only have to achieve $15.4 million to not us that revenue covenant and all of the revenue covenants for each of the quarters going forward for the 5-year term are set with the objective of having enough headroom in those revenue covenants where we don't have to worry about it. The full year revenue covenant for 2026 is $73 million, which is significantly lower than even our lower end of our guidance of $80 million.

We also, at the time, reduce the cash requirement, the cash covenant down from $10 million to $5 million. We did add a little bit of cash to the balance sheet, around $6 million net but that was not necessarily the objective. The objective was to take away the noise that we had seen all through 2025 around the revenue covenants, which we have successfully done with this new credit facility. I'll now turn it back to Cary.

Thanks, David. Just as a reminder, I mean, this is our product portfolio. And I think what's important to understand is we are calling on these physicians every day. Our reps are in cases with them. and in a very consultative way. And so not only is there that higher touch in terms of helping them use the product, but there's an expense going on in resell, meaning physicians are using it for certain cases, certain size wounds.

Our reps are are committed to expanding that into different size, different types of wounds, expanding that usage within existing physicians. And then within existing accounts, expanding that to other physicians that don't currently use resell. So that is all ongoing. We measure internally utilization, one of our corporate goals and and something that we're pushing and measuring very intensely here in 2026 is the amount of utilization increase, the number of physicians that use it versus number of physicians that were using it what type of cases they use it for, how often they use it, all of that because those are precursors to increased revenue and penetration within existing accounts.

The great thing about the being -- having a very focused number of accounts is that we're already in 90% of those, meaning we have relationships with purchasing, with administration, with the departments and some physicians. And so you don't have to start that over again constantly. You really have to grow within the accounts that you're already in for the most part. And then, of course, we have 2 new products, Cohealyx and PermeaDerm. And so we are heavily engaged in getting adoption of those products. And most of the time that requires the products to go through a value analysis committee.

We currently have about 55 accounts that have Cohealyx in their value analysis committee. And the way this works is that we have a champion within the account that sees the value and the need for Cohealyx to be used and the advantage that it has over other dermal matrices. We provide them with as much data as we can economic benefit, clinical benefit, workflow benefit and others analysis committee and then it's evaluated over time. And then as it comes up, that same work with them to make sure that the facility knows that it's available, that it's validated and that they should start using it as extensively as possible.

Same thing goes with PermeaDerm. We have a number of them that are in value analysis committees, sometimes they aren't needed. But again, both of those will be aided as well as we go forward. Not so much that we need a lot more data for the value analysis committee, but from a quick adoption of both those technologies. The 2 studies that we have ongoing here will help us from a commercial standpoint.

Again, as a reminder, about the value of having 3 products, 3 products, the same call point, kind of the same discussion, quite often the same wound, same patient same physician. We are being consultative with the physicians. Quite often, it's not, it's science, but there's some art to it as well. And it's great when they have options in terms of working with Avida where they can use the PermeaDerm temporizing dressing to replace allograft in a more economic way and with some advantages as well. They can also on certain types of wounds use resell along with the split-thickness skin graft and then cover it with PermeaDerm.

And then ultimately, with the full-thickness wound, you'd use PermeaDerm [indiscernible] then you use Cohealyx to help vascularize the wound, they prepare the wound bed for grafting and then use resell split-thickness skin graft or not and then covered with PermeaDerm again. And you see the advantage that physicians have in utilizing those products for the patient -- for the patients healing impact, but also from a revenue standpoint, what it does for our company to have that same patient who 15 years ago would have just -- we only could have offered resell and that part of the treatment. But now from a revenue standpoint, that per patient revenue goes up substantially when we have these other products as well.

Again, 2026 is all about focus. It's about execution. If you think about all the things that happened in 2025, where we had the sales kind of reconfiguration and the focus on those 200 sites, you had a MAC issue or the MACs issue with CMS and the fact that physicians were not being paid. You had, frankly, guidance that was higher than it should have been set and things went slower than they should have done. And we had a CEO transition. We had a number of headwinds. I think some of our own doing and some from an external standpoint. But I think by the time we hit the end of 2025, some percent of that was solved, resolved and stabilized. And a company stable -- being stabilized and predictable is not all that exciting, but it is a precursor to the exciting things that are going to occur going forward. And it prepares us for growth, reduces the amount of headwinds and distraction and other things.

So our people, including our executives, can focus on growing this business, primarily in the U.S. but elsewhere as well. So we're focused on the U.S. We're focused on growing, but we also have made some inroads in other markets. do have a distributor in Japan. As you know, we have a distributor, a really good distributor in Australia. We expect RECELL GO to be approved very soon. That distributor is being trained as we speak and in parallel with that approval that's coming. We actually have a physician from the U.S. that's a heavy resale user that's moving to Melbourne. And that helps that sort of champion, that sort of influence and impact not only on the patients in Melbourne, but the physicians in Eastern, Southeastern Australia, I think, could be really impactful.

And we're in a handful of countries in Europe, and it's early days. We're less than 2 months. into that. Everyone's -- all the distributors have been trained. And while we were training those distributors, this Swiss nightclub fire occurred and we just jumped in. We sent people over there. We sent resources and product over there, and it really not only helped patients probably only a couple of dozen of them were treated with RECELL.

But also it brought attention to the fact that the day-to-day issues and wounds and burns that occur in these countries in Europe, could be better served by having resell predominantly in their country. And so again, early days there and more to come internationally. We're a data-driven company, a clinically driven company, and now to an economically driven company in terms of the types of studies that we have out there and the data that we utilize in conversations with our physicians.

If you think about how you get physicians to use not only more resell or more physicians to use resell, but then also Cohealyx and PermeaDerm's really multifaceted. You have to obviously have the clinical data. You have to have champions and examples and people on podium and abstracts written and presented on -- this patient came and presented and I did this, and it was a great outcome. And it's not just a great outcome for the patient and clinically, but it's a great outcome for the facility as well.

We talk about the physician payment being a difficult situation when we lost that clarity and we lost those payments last year. The hospital payment in utilizing resell, it's crucial that they get a set amount of payment. It doesn't matter if the patient is there for 2 weeks or 2 months. We have this moniker that says AVITA Medical healing at the speed of life. And what's so crucial about the speed at which patients heal is that everybody wins.

The patient wins, the patient has a great outcome and gets to go home the physician likes that as well, obviously, because they're caring for the patient. But the hospital gets their payment and then that bed opens up, they don't have to provide additional services. If that patient lingers [indiscernible] there longer has complications. So it's extremely beneficial. If you look at Cohealyx, for example, one of the advantages that we tout as we compete is that it's quick sooner prepares the wound bed to graft sooner than its competitors. PermeaDerm, sometimes it's just straight up.

If you look at the clinical studies. They are both 40-patient studies, Cohealyx, PermeaDerm 1. Because they're post-market studies, we can talk about them before they're published. They're going to publish towards the end of the year, but we're using them already at the [indiscernible] conference last month at the American Burn Association Conference in April. Physicians are utilizing that data in lung symposiums, on podium with abstracts, it's out there and our salespeople can use that data.

With PermeaDerm, there are a lot of reasons why they would want to use it. But sometimes straight up, it is easier to handle than an allograft, which is frozen needs to be processed in that way, but it's also less expensive. And we had a physician that said I think I can say our facility $0.5 million a year, if I just switched from allograft to PermeaDerm. And he said that in a lunch symposium with other physicians there. That's the kind of multipronged pressure that we're bringing to bear on our physicians to not only adopt utilizing resell more, for example, in the 36% length of stay reduction that has impact on strategic accounts and accounts that see the totality of the cost of care, not just as the cost of the product or even reimbursement.

But is their patients and how soon they can get them out of a facility. As an example from the [indiscernible] study, I want to show you one. So this is not an easy study or an easy case. So a lot of times, people show a nice healthy individual that was wounded and we applied a treatment and it healed really well. Well, a 91-year-old is not predisposed to healing easily or well. And so this 91-year-old female injured her leg. And it basically presented a gap between her skin and there is a separation and a void between her skin and down to the fashion. So that can't just stay because then everything starts to die.

And so you can see where the wound is, where the injury is, but then you can see the donor site. And we talk quite often about resale being this 80:1 ratio. With a very small and thin donor site. In this case, you can see that's not 80:1, but that donor side is both for resell, but it's also for a split thickness skin graft that they end up meshing to put over the injury at a 3:1 ratio, but then they spray resell over the top of it. So this is an example of a physician using all 3 of our products on a patient for a great outcome.

Next slide, warning, it's a little graphic, so I apologize. But you can see on the left, there's the wound. You can see them in the chronic skin that all needs to be cut away and down to the fashion that image on the right of that injury is that excise wound. Then in the middle there, you see Cohealyx placed down the wound. And so again, the idea of Cohealyx is to prepare a nice vascularized wound bed that's prepared for grafting. Nice living wound bed. And so that's exactly what happened. You can see how nice and red that is, how clean that is. ready for grafting, which is exactly what happened.

You can see kind of that mesh look on the screen, that's the skin graft and then they put slits in spread it across the wound at a 3:1 ratio in this case. And then we spray resell over the top, you put PermeaDerm, you can see the result on the right, which is amazing, again, for -- we all know 91-year-old that skin is very thin and it's really difficult to heal. One thing that doesn't get talked about is the the donor side itself.

The donor site itself can be quite painful. But in the case of RECELL, of course, we -- first of all, we take a thinner sample, number one. Number two, as they're spraying the wound bed, then they go back and spray the donor side as well because that needs all the help it can get, especially in the 91-year-old, so for the donor site, you can see below spray it with resell and put Permian Derm over the top. And after a few weeks, that's the result. So a really positive result for a 91-year-old an example of a physician using all 3 of our products to have that kind of result.

Again, finally, I think it's important for a company to on a quarterly basis to go back and to discuss what we said, what we said we were going to do and to do that. to then go ahead and execute according to plan, according to what we've committed to. I think you can expect that here at the company. Three months ago, I came and I talked a lot about what was going on, what I was going to do. And I'm doing a little of that today, too. talking about last year, what we've solved, what we've prepared.

And I look forward to next quarter talking a lot about the numbers and the progress and being judged by the kind of progress that we're making in the field around utilization and increased revenue in all 3 of our products. And so I look forward to doing that in a few months. And with that, I'd love to take some questions as well.

Thank you, Cary. We'll now move on to investor questions. If you have any questions, you can continue to submit them by using the Q&A function. I'll now hand over to Ben Atkins to run the Q&A.

Thanks, Rudi. Good morning, everybody. there in Australia. What I'm going to do is I'm going to start by reading out the questions that were submitted as part of the preregistration and we have about 5 or 6 there. and then I'll turn to the Q&A on the Zoom today for any questions that are being asked live.

So Cary, first question to you, and it relates to the VAC. And it's a 2-part question, both for Cohealyx and for RECELL. The question is how many VACs are evaluating Cohealyx? And the second part is, are there still hospitals among the key 200 that need to go through the VAC evaluation process before they can use RECELL. And if so, how many of those -- how many and how many of those have already begun the evaluation process?

Okay. Well, first of all, I'll take the second one first, that we're not going through the back process with resell. That's been done. We are straight up selling to physicians, and we're in expansion mode with resell. From Cohealyx standpoint, I mentioned the fact that we have about 55 of them in the back process right now. And just to understand how long that process takes. It can take anywhere from 2 to 5 months, usually, it just depends. What we try to do is everything with our power to move it along as quickly as possible. The other thing we try to do is get it into VAC as quickly as possible, but we also own that space once it comes out of that, meaning that everybody needs to know it came out. We need to prepare the physicians while it's in back, let's say, in the case of Cohealyx to be comfortable using it extensively, as extensively as possible. So the scenario you don't want is to get into VAC once it comes out of VAC for a physician to say, okay. Three weeks later, they realize that it's actually out and available for them to use or that the buyer says they can actually buy it. And then they put a kind of toe in the water and they use it on this kind of wound and then it takes another 3 months before they're just kind of full board using it. And so what we're trying to do is reduce all of that with our salespeople. And what we're generally seeing is about a dozen coming out every quarter. it varies, but that's why those 55, I think we'll see over the coming 2026, where they just work their way out every quarter, and we'll gradually have a lot smaller number that are still in VAC.

Question two, Cary, it's for you again, I think. The question relates to some changes under Medicare, perhaps more for the chronic wound side. But let me ask the question out loud Medicare established a flat standardized payment rate of approximately $127.28 per square centimeter from 2026. Has this benefited resell go adoption and usage rates thus far?

Yes. I mean, you're correct, Ben, that it's primarily for the chronic wound space, I mean, because resells reimbursed under CPT codes, and we've talked about that with the MACs. So you have the facility, DRG payment and then you have the physician payment as well that's done through the MACs. And so that's what we're getting from a reimbursement standpoint as it relates to resell.

Cary, another question for you before I have a question for David. One of our [indiscernible] which was keen to understand the key reasons for the slow momentum and meaningful progression to sales and market capture, some of which you've already, I think, reflected on in the presentation, the second part to this question is, if you could also highlight how we are progressing against incumbent alternate options and products.

Yes. So RECELL, as I've said, is -- has been around for a good while and largely in a manual way. I think that -- if I look at progress in RECELL, it's -- there are a handful of reasons why a physician might not use it or might not use it yet and some are convinced with additional data or peer pressure or whatever it might be. So we're leveraging all of those things, finding those pain points, finding ways to convince them. That's what our salespeople are doing every day, getting internal champions. -- getting people speaking at these conferences convincing people, this is the best standard of care. So that's resell. And recall is kind of a one-of-a-kind change the way you practice medicine kind of product, which is great, and we love it and our people love competing against the old ways. I think as it relates to Cohealyx and PermeaDerm, we don't shy away from the fact that there are a lot of other derma matrices, a lot of other dressings, a lot of other choices they have. It's a different type of selling. And the way you do that, number one, is you get them through VAC as quickly as you can so that you can play in the marketplace at those accounts? And then just like any other kind of selling, you try and find the distinct advantages. In the case of Cohealyx, number one is speed to graft. And speed to graph is important not only to the physician, but to the the patient. It's also important to the facility because it does play a role in that continuum of care for that wound and that patient to get them out faster, healing faster. But there's also economic benefit depending on who you're competing against. But -- and then as I said, PermeaDerm used the example of really gating against allograft and keeping it simple. In terms of money that they can save and advantages that it has. Why this low uptake? Well, again, if I mentioned to you that we have -- all of our products are new. And again, I'm not claiming that RECELL is new, but I'm saying RECELL GO is new. And even though it's automated, anytime you launch a product, there's always kind of a change and there's a necessity for real messaging and care in that process. So you have 3 new products, and it takes a bit. It takes a bit to have those conversations to get them through the VAC. And when you disrupt the sales force, I feel like we optimized it but it's still a disruption. And we need to disrupt that, it causes delay. And so for me, I'm trying to remove all the delays, all the distractions, make sure they have exactly the messaging they need, the focus they need, the quotas they need to just get up every morning and execute and be influential in their accounts.

Just as a reminder, before I ask the next question, if you do have any questions, please just add them to the Q&A, and we'll get to those shortly. David, this next one for you, and it's a 4-part question. So I hope you have a pen and paper there. A few questions. First, what is the road map to profitability? And I think second to that first part, cash flow position. Third, an update on operational cost reduction -- and fourth, any future capital funding that you think might be required to be raised within the next 18 months, if you can comment on those 4 areas, please?

Thank you, [ Ben ]. So our path to profitability is really driven by 3 things. And it's pretty simple. It's driven by revenue growth. And it's also driven by disciplined operating expenses, maintaining where we are at this point in time. and then maintain a high gross margin percentage. And we've taken care of our cost structure at this point in time. It is set. We don't see any need for additional headcount in our commercial area. We don't see an additional need for cost in G&A. R&D at this point in time is really focused on fishing our clinical studies, PermeaDerm and Cohealyx. And we can see that potentially over the next 18 months, our R&D costs may go down. So we've taken care of the cost structure to a point where -- the only thing we really need to do to get cash flow breakeven and profitability is to grow our revenue. And Cary's talked a lot about how that's going to happen. And if we're starting out with a $17.6 million revenue from Q4. Sequential growth growing to our guidance number of $80 million to $85 million. We will get to cash flow breakeven and profitability. We're not giving guidance at this point in time on when that's going to happen, but it is in the future. And our objective is to get to cash flow breakeven, get to sustainability internally from a cash perspective without raising additional equity. That's not to say that we may not at some point in the future, we may have a reason to raise additional equity. But we have enough cash on the balance sheet right now. And our objective is to grow revenue such that we can get to a point where we're not using any more cash, but we're actually generating cash on a quarterly basis. So I think I've answered those 4 parts, Ben. I'll leave it there.

I'm going to ask the last of our preregistered questions. And this one, again, is for you. and it relates to vitiligo. Vitiligo was previously highlighted as a major long-term value driver. In the recent materials, the focus has shifted almost exclusively to the staged wound pathway. Does this signal a formal deprioritization of the Vitiligo commercial effort?

Yes. So our vitiligo commercial effort is deprioritized. And I think we have a mission at this company to help patients heal to be there for our patients and our clinicians. We're patient-focused in customer-centric at this company. But I say that, but we have FDA approval for stable vitiligo. Right now, the reimbursement for that procedure is uncertain and steady too low and it's really impossible to say that we're going to have a priority of going to market for a product that's not reimbursed or that there's not sufficient payment to make it advantageous for us to do so. I think if that changes, we would love to be able to address that market. I think there's been discussion in the past about if there was cash pay. Could it be utilized? Yes, obviously, it is FDA approved. But from a focus for us, it's just not going to be a focus for us until the economics change.

Okay. I'm going to turn now to the questions and answers that have been submitted while we have been on this call. And I have a couple here. So I will start with the first that we received. This could be a question, I suppose, Cary or David, if you wish to follow up, but there have been various rumors circulating about acquisitions. What is the process for evaluating any inquiries from possible buyers and the general view of management and the Board as to entertaining an offer.

Well, the general view is that that we're running the company to grow the company and to strengthen the company and to drive value creation. And so anytime you're a company that does that, you're going to have people interested maybe in your technology or your company. First of all, we're not in a good position for that sort of a thing, number one. Number two, we're not looking forward. our board, our management, our company wants to grow and get to cash flow positive and be on a trajectory that's as an independent company. I think any kind of M&A inquiry or strategic discussion about any partnerships, anything like that. They can come in, but we're not we're not interested.

David, this next question, I think, is firmly for you and relates to the [indiscernible] covenants. The question is the rate of increase for the TTM covenants is substantial. For example, it is set at $140 million for the period ended December 31, 2030. How will you meet these requirements?

That's a great question and it's hard to answer the question. Those revenue covenants were set with the expectation that we would be getting back on a 20% revenue growth per year. And if we're on even a 20% or greater revenue growth, those revenue covenants are fully achievable in 4 years. compounded annual revenue growth rate at 20% over the next 4 years, gets us way past $140 million. So it is all about revenue growth, and it's a conservative revenue growth based on our historical CAGR and where we want to get back to and where we think we can achieve. And specifically, we have a large total addressable market in all of our products and the revenue growth, doubling our our percentage of penetration into resell only, which is about 15% would get us to $140 million very quickly. So that's how we're going to do it. And we set those revenue covenants with advisers with Perceptive Advisors to make sure that even in 2030, we aren't going to be tripping them.

Thank you. Well, that completes all of the questions that were either submitted prior to the call or during the call. So unless anyone has a question in the next few moments, I will end the Q&A there. And Cary, I'll hand back to you for any final thoughts.

Okay. Well, first of all, thank you all for your support and engagement as investors or potential investors in the company, those that follow the company, root for the company. I think as a Board member, as Chair of the Board, myself, I've always wanted the company to succeed in a very big way. And I think that last year was difficult and is difficult for the stock price, it was difficult just as a company, but I think what we'll see looking back in '25 is that we handle a lot of our business, a lot of those issues and that we weathered that storm with 11% growth and that it's a one-off of a year that I wouldn't expect to come again and that we'll get back on the trajectory that I think everybody expects from this company.

I think the company is undervalued. I think that we're very -- we have a very low level of penetration within those existing accounts and that we are laser-focused on execution this year and expect that as we revisit every quarter that we'll have some good things to talk about. So again, thank you. I look forward to talking to you some more in the months to come.

Good day, and thank you for standing by. Welcome to the AVITA Medical, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Ben Atkins. Please go ahead.

Thank you, operator. Welcome to AVITA Medical's Fourth Quarter and Full Year 2025 Earnings Call. Joining me on today's call are Cary Vance, Interim Chief Executive Officer; and David O'Toole, Chief Financial Officer.

Today's earnings release and presentation are available on our website at www.avitamedical.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 as of today.

I will now turn the call over to Cary.

Good afternoon in the U.S., and good morning in Australia. Thank you for joining us today. Before we get into the numbers, I want to start by coming back to how we closed the last call. In Q3, I ended with 3 priorities: driving disciplined execution, refining our commercial focus and positioning AVITA for growth in 2026.

The fourth quarter was about delivering on those commitments. You can see that summarized on the slide in front of you. We exited the year with a more disciplined operating model, improved visibility into cash use and a clear understanding of how our customers adopt and use our products.

We refined our commercial focus around utilization in our core burn and trauma centers. And importantly, we removed sources of friction, reimbursement uncertainty and restrictive balance sheet constraints that had weighed on execution throughout 2025. These are not headline outcomes on their own, but together, they matter. They make the business more understandable, more forecastable and more repeatable.

As we walk through the quarter today, you'll hear how those execution priorities show up in the numbers, in our operating cadence and in how we positioned heading into 2026.

Turning briefly to the results. We reported fourth quarter revenue of $17.6 million and a full year revenue of approximately $71.6 million. This represented about 11% growth over 2024 and was in line with our updated revenue guidance.

From my perspective, the fourth quarter was less about acceleration and more about control. The numbers reflect the business that is operating more predictably and with greater discipline. David will walk through the details in a moment.

A major focus throughout 2025 was resolving reimbursement uncertainty of RECELL. As of today, 6 of the 7 Medicare administrative contractors have published payment rates for RECELL procedures. This removes a key constraint that weighed on utilization throughout the year and has begun to restore confidence for clinicians.

As we said last quarter, predictable reimbursement, not only for our products, but also for the clinicians who use them is what allows our strong clinical and real-world health economic data to translate into routine standard use of RECELL.

With that clarity in place, we are now seeing early signs of utilization beginning to normalize as accounts reengage. Ultimately, growth in this business is driven less by adding new hospital accounts and more by increasing adoption, utilization and repeated use of our products, RECELL, Cohealyx and PermeaDerm by clinicians.

Roughly 90% of our revenue today comes from about 200 burn and trauma centers. We've aligned sales incentives, forecasting assumptions and field activity around earlier adoption and repeat use within these core accounts. We've also continued to shift away from bulk ordering toward more organic monthly usage patterns. Utilization matters because it creates predictability for clinicians, for hospitals and for our business.

As we look ahead, utilization will become an increasingly important way we evaluate execution internally. Today, the focus is on establishing the right operating cadence and doing the fundamentals well. So progress can cascade and compound over time. That consistency is supported by the breadth of our platform.

Our strategy is built around a single integrated platform, RECELL, Cohealyx and PermeaDerm used repeatedly by the same clinicians across multiple patient episodes. RECELL remains the foundation of our business, supported by extensive clinical evidence demonstrating faster healing, improved outcomes and shorter hospital stays.

The Cohealyx-1 post-market study is now fully enrolled and the PermeaDerm-1 study is nearing full enrollment. These studies are designed to generate practical real-world clinical and economic evidence that reflect how surgeons use these products in wound care with data expected later in 2026.

At the 2026 Boswick Burn and Wound Symposium last month, investigators presented early findings and case experiences from these studies. Also notable, 2 cases presented from the podium reported all 3 of our technologies, RECELL, Cohealyx and PermeaDerm used together on individual patients. This reinforces that our strategy to evolve from a RECELL-only story to a multiproduct acute wound care platform is translating into real-world clinical practice and higher revenue per patient opportunities.

Outside the U.S., we are taking a disciplined distributor-led approach as we build our footprint in select markets where there is clear clinical need and the right regulatory and operational foundations in place. Since receiving CE Mark approval for RECELL GO last October, we've supported initial clinical use in a small number of European markets, focused on establishing familiarity and operational readiness.

In the aftermath of the tragic nightclub fire in Crans-Montana, Switzerland, our teams and distribution partners were able to respond quickly to requests from surgeons because those foundational elements were already in place. Our role in situations like this is to remain responsive and reliable in support of patient care under extraordinarily difficult circumstances. We will continue to partner closely with the burn community to help ensure access to RECELL where and when it is needed.

As David will walk you through, our commitment to execution discipline is reflected in our financials, particularly in our cost structure, cash use and balance sheet. In January, we refinanced our debt through a new credit facility with Perceptive Advisors, LLC. This was less about adding capital and more about removing the distraction of restrictive covenants so the organization can stay focused on execution.

Turning to 2026. We expect full year revenue of $80 million to $85 million, representing growth of approximately 12% to 19% over 2025. This outlook reflects normalization of RECELL utilization, expanded portfolio use within core accounts, contributions from Cohealyx and PermeaDerm and a more predictable operating environment. This is execution-led growth driven by consistent delivery quarter-by-quarter and not onetime events or aggressive assumptions.

With that, I'll turn the call over to David to walk through the financials in more detail.

Thank you, Cary, and good afternoon, everyone. As Cary outlined, the fourth quarter marked the close of a year of stabilization for AVITA and the transition into a more execution-focused phase of the business. I'll walk through what that execution discipline looks like in the numbers, particularly across cost, cash use and our balance sheet.

Turning first to the full year view for 2025. We reported revenue of approximately $71.6 million, representing 11% growth over 2024. This marked a further consecutive year of revenue growth for the company and reflects a business that continued to grow despite the reimbursement-related headwinds.

Full year gross margin was 82.1% compared to 85.8% in 2024. This decrease reflects certain inventory reserves and impact from product mix and the increased contribution from Cohealyx and PermeaDerm. As we previously discussed, while the product mix impacts the reported margin percentage, these products contribute incremental gross profit without a commensurate increase in operating expenses, supporting operating leverage over time.

The combination of year-on-year revenue growth and gross margins above 80% provides a solid foundation for us going forward.

Turning to the fourth quarter. Total revenue was $17.6 million compared to $18.4 million in the prior year period. This was consistent with our revised revenue expectations and showed stabilization within our business. Fourth quarter gross margin was 81.2% compared to 87.6% for the same period last year, driven by inventory reserves and product mix.

Moving to operating costs. Total operating expenses in the fourth quarter were $24.7 million, down 5% year-over-year. This reduction was driven primarily by lower sales and marketing expenses, reflecting reduced headcount, compensation and commissions following the commercial transformation earlier in the year.

General and administrative expenses were essentially flat, while research and development increased modestly due to planned investment in our PermeaDerm and Cohealyx post-market studies. The fourth quarter included $1.2 million of onetime severance costs, which will not be reoccurring. Excluding these costs, fourth quarter operating expenses were down 10% year-over-year.

For the full year, even with the nonrecurring severance costs included, operating expenses declined by $10.4 million or 9%, reflecting a substantially lower operating structure going forward.

Turning to cash. The key takeaway here is improved control and visibility around cash use. The fourth quarter marked the third consecutive quarter of improvement in net cash used, declining from $10.1 million in Q2 to $6.2 million in Q3 and $5.1 million in Q4. As we look towards the first quarter in 2026, cash use will increase due to the timing of annual compensation and payroll-related items, which is expected and planned for within our operating model.

We ended the quarter with $18.2 million in cash and marketable securities. In January, we refinanced our debt through a new credit facility with Perceptive Advisors, LLC. The levels and flexibility in this facility are meaningfully better aligned with our current operating trajectory. Under the new agreement, the revenue and cash covenants provide substantially more headroom.

To put that in context, the initial trailing 12-month covenant of $68.5 million translates to only $15.4 million of revenue in Q1 to not trigger the revenue covenant. For the full year 2026, the trailing 12-month requirement of $73 million is aligned significantly below our 2026 revenue guidance.

In addition, the minimum cash covenant has been reduced from $10 million to $5 million, significantly lowering covenant risk and reinforcing that the facility was structured to support execution rather than constrain it. The facility is interest-only with no amortization and includes optional incremental capital, if needed, subject to meeting a certain revenue milestone.

Overall, this refinancing was about simplifying the balance sheet, reducing friction and removing distraction. From a financial perspective, our priorities for 2026 are straightforward: maintain disciplined control of operating costs, support revenue growth with a stable and scalable cost structure and continued cash efficiency as revenue increases.

Through that financial framework and improved capital structure and a clear line of sight into 2026 growth, we believe AVITA is better positioned to execute consistently and move towards financial sustainability.

With that, I'll turn the call back to Cary.

Thanks, David. In summary, the actions we've taken over the past several months have positioned AVITA for a stronger and more consistent 2026. We've restored reimbursement clarity, simplified our commercial focus, removed operational friction, strengthened financial discipline and advanced the clinical evidence underpinning our multiproduct platform.

Those actions set the execution milestones we'll report against throughout the year. As we move through 2026, our focus is straightforward. Do what we said we would do, report it clearly and let execution speak for itself.

With that, let's open for questions.

[Operator Instructions]. And our first question comes from the line of Ryan Zimmerman of BTIG.

On the guidance, David, with the new revenue covenants, how would you have us think about the pace of growth through the year? Is the 15.4% a good jumping off point for Q1? Or are you trying to message that that's well below kind of what you can do, and so there's no covenant risk there? I think that would be appreciated. And then I have a follow-up.

Yes. And I'm sure Cary may have a couple of things to say also. But the $15.4 million shouldn't be taken as anything around guidance at all, Brian. What we're trying to do is what you indicated is say that there's a lot of headroom for that -- for the covenant number of $15.4 million. We had $17.6 million in the fourth quarter. We wouldn't expect to go down that much in the first quarter. We've given guidance of $80 million to $85 million. And even if you annualize that just over 4 quarters, you wouldn't get to anywhere close to that $15.4 million number.

So we're not giving quarterly guidance, as you know. But that $15.4 million was just to tell everyone that this -- the new debt was structured to take covenant risk off the table, and that's what we've done.

Go ahead, Cary, sorry.

Yes, Ryan. So yes, I would just kind of pile on to that. I think that our jump-off point is Q4. I mean what we strive to do in Q4 is to kind of normalize and kind of flatten things out in terms of the ordering patterns and our ability to forecast.

And so we feel good about not only the performance of Q4, but our handle on the business to the point where we were able to, I think, understand Q1. And I think so far, we continue to understand Q1. So I think from Q4 to Q1 and from Q1 through the rest of the year, you should see progressive growth, gradual acceleration. And I think we have a good understanding of our business and more to come on that.

Appreciate that, Cary. And then we could spend a minute on the reimbursement dynamics that affected 2025. So it sounds like much of what hampered 2025 with the MACs behind you. But if you could give us a little more color into kind of the reestablishment of payment from the 6 of the 7 MACs.

Are you -- what do you have now that you kind of say with certainty? And what's holding up that seventh MAC? Is there anything we need to be concerned about? Or is it just something administratively? And maybe you could just spend a little bit more kind of talking through kind of what has transpired over the last, call it, quarter and into the first quarter?

Sure. So first of all, we're highly engaged with all 7. I think that we could put these in buckets, meaning we got commitments months ago that they would publish, then they did publish. And then once they published, it's a matter of kind of hospital by hospital, physician by physician, them becoming aware and then putting it into practice in terms of getting reimbursed and kind of returning to a clarity that will help us going forward. So that's occurred as each of the MACs kind of came on board.

In terms of that seventh one, we're highly engaged with them. That's all I can tell you is that there's no reason to be concerned, just that we're engaged with them in a process in their process, and we're hopeful and expect that they will publish as well.

Our next question comes from the line of Josh Jennings of TD Cowen.

Congratulations on all the progress on the refinancing and great to see the 60 7 MACs have established payment rates. I wanted to just ask about, first, just can you share with us just a core customer experience where Cohealyx and PermeaDerm have made it through the back process? And are you seeing signals or what signals are you seeing that giving you confidence that there ultimately can be strong Cohealyx and PermeaDerm attachment rates in RECELL cases?

Yes. I mean I think the -- thanks, Josh. I think the process is that we have a champion in some of these accounts that -- for PermeaDerm and/or Cohealyx, and we work with them from a clinical perspective, economic perspective to help them understand the value. And then it's put in the back and that champion helps move it along. And the idea is that once it comes out of the back that, that same champion then starts to push it into the department and into their practice.

And so we've seen that in a few of the MACs that have come -- or I'm sorry, a few of the MACs where those products have exited. And that's been effective in terms of us getting some uptake out of the back.

Excellent. And is there kind of an all-star account where Cohealyx and PermeaDerm have made it through that back process and you're seeing nice attachment rates on RECELL cases?

Well, no, I probably can't point to one right now. But I would say that when we were at the Boswick Burn Conference, as I said in my comments, that there were a couple of presentations on -- from physicians that used all 3 of the products, RECELL, Cohealyx and PermeaDerm. And I think that, again, is early days in terms of someone using all 3 of those, but I think we'll be able to report out more going forward as these products come out of the back and as they're starting -- as they begin to be used in conjunction with each other.

Understood. And you still have Cohealyx-1 and PermeaDerm-1 study data to help with that utilization trajectory? And just ultimately, I mean, do you see Cohealyx and PermeaDerm adoption driving increased demand for RECELL as well? Just -- I mean, I've been thinking about RECELL pulling through Cohealyx and PermeaDerm but down the line, could Cohealyx and PermeaDerm get into more accounts or just drive utilization higher in some -- in the 200 trauma/burn center base?

Yes. I mean it's a good question. I think RECELL is the established brand. It's the product that's been around the longest. But ultimately, we have relationships in these accounts. We have physicians that are using RECELL that I think, are at least drawn and open to the discussion around Cohealyx and PermeaDerm because of the relationship we have and because of their affinity for RECELL.

But you're right, I think that those physicians that may not be using RECELL or even institutions that may not use RECELL, if they're drawn to Cohealyx or we end up really making some progress there, of course, it allows you to make a connection and establish a relationship there and have the dialogue around treatment and care that could lead to a RECELL discussion as well.

Excellent. And maybe just lastly, just I think -- I mean I know the answer to this, but just want to check the box with some of the turbulence around MACs and payment rate for RECELL, just as you start to see adoption utilization of Cohealyx and PermeaDerm over the course of 2026, just review the reimbursement pathway. And then I think there's a clear pathway. There's not going to be any hurdles, but just to, again, check that box. If you could lay that out for us, that would be great.

Yes. I mean, again, I think you're correct. I mean we've had to deal with these physician payments through the MAC over the last year, but we don't expect any other disruptions to that process going forward other than continuing to work through these in the months to come.

Our next question comes from the line of Ian Arnt of Lake Street Capital Markets.

I was wondering if you guys could break down the primary drivers of growth supporting your 2026 guidance. Specifically, how much is predicted on the recovery in those RECELL lines versus contributions from Cohealyx and PermeaDerm launches?

Would you mind repeating that? It's a little bit quiet. It's hard to hear that question.

Yes. Sorry about that. I was wondering if you guys could kind of break down the primary drivers of growth supporting your 2026 guidance, specifically how much is predicated on the recovery base -- recovery in base RECELL volumes versus new contributions from Cohealyx and PermeaDerm launches?

Yes. Thank you. It will be mixed. I mean we expect that we expect growth in all 3 product lines, and we expect most of that to be driving increased utilization within existing accounts, whether that's additional physicians or additional types of procedures. So we see that trajectory in terms of utilization and have that plan in place. And so we expect all 3 product lines to grow, and we expect them to grow mostly within existing institutions where we have relationships going forward throughout the year.

Okay. That's very helpful. And I got a quick follow-up, if that's okay. In the third quarter, you guys noted that roughly 1/3 of your target accounts were in the VAC review for Cohealyx. Could you provide an update on the conversion rate of those reviews and the active ordering accounts? And are you seeing any specific bottlenecks in the process?

Any -- I'm sorry, am I seeing -- currently, we have I'm sorry, currently, we have how many in Cohealyx VAC? Is that was your question?

Yes. Just based off of the comments from the third quarter, if you could give an update on the conversion rate of those reviews that are now active ordering accounts. Are you seeing any bottlenecks in the process? Or could that delay the 2026 ramp?

Yes. So without just kind of giving a number, though, I would say that they continue to come out of VAC, Cohealyx VAC, at a kind of a steady rate, and we would expect that over the next, I would say, 6 to 9 months even. And so as they come out of the VAC, they are starting to order product. And so for us, that is going to be a continual kind of week-by-week, month-by-month, quarter-by-quarter process of anticipating and understanding that they will come out of the VAC and when they do get them to order sooner, larger, faster and to have a very positive experience with it, obviously, as well and to develop more than just that one champion in the account so that it can broaden and deepen. But we're not -- what we're not seeing in the VACs is bottlenecks other than administrative bottlenecks.

It's just they go through their process, and there is no set time. It depends on the account. And we provide them with all the information, whether it be clinical or economic to make the argument that it should successfully go through the VAC. So we haven't seen denials through the VAC really, but it is a process that takes some time, and we've seen that.

This concludes the question-and-answer session. I'll now turn it back to Cary Vance for closing remarks.

Thank you, operator. Thank you to everyone else who has joined us today as well. I look forward to updating you on the progress in the quarters to come. So thank you. Have a good rest of the day. Thanks.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good afternoon, and thank you all for joining us this week at the JPMorgan Healthcare Conference. My name is Andrew Lang and I'm an associate here on the JPMorgan Healthcare Investment Banking team. It is my pleasure to introduce AVITA Medical and its CEO, Cary Vance. We'll have a short Q&A session afterwards. But Cary, turn it over to you.

Thank you, Andrew. Good to be with you all this afternoon. I've been involved with AVITA Medical for about 3 years. I joined the Board 3 years ago and then became CEO 3 months ago. So the reason why I joined the Board, the reason why I love being a part of AVITA is the mission that AVITA has. We're all about patient care. We're a patient-centric customer-centric organization. I think you'll see some of that. I've been involved in a lot of different companies where we try to change health care and bring new standards of care to patients. In order to do that, we really need to check a few boxes. One is, obviously, clinical data, clinically driven innovation. Logistically, workflow-wise, it needs to work for our customers. And then ultimately, there needs to be an economic benefit to them as well. And so I think we tick all those boxes, you'll see that as we go through the presentation.

Our customers and our patients depend on us in their worst times. We usually care for patients on their worst days. And that's illustrated. We are just dipping our toes in the water in Europe in terms of our expansion and just started that here in Q1. And really out of the box with the Swiss nightclub fire, we found dozens and dozens of burned patients sent to different countries in Europe and we've been more than happy to respond to that and have kind of answered the call for clinicians who were trying to treat those patients. And we've done that and continue to do that this month.

Forward-looking statements. Obviously, things can change, please reference our SEC filings. We're a therapeutic acute care company. So we operate in the hospitals, and we're procedure-driven. Same patient, same hospital, same doctor with a few different products that we offer for wound closure, for surgical repair, for burns and you'll see that. We're all about bringing value -- clinical value, economic value to our patients -- to our customers and their patients. And again, I think we'll talk about that as we go. 40,000 hospitalized burned patients every year. It's a large number. And still very few of those are getting, I think, the best standard of care, which is our RECELL product line. Along with RECELL comes a number of clinical benefits, but also economic benefits and a reduction in complications. Some of those economic benefits are in the form of reimbursement and some in terms of cost savings that come from reduced length of stay and reduction in complications. This is our product line.

We have RECELL, RECELL GO, RECELL mini. RECELL mini is exactly what you would expect. It's a smaller version for smaller wounds. But RECELL GO and RECELL has been around for a good period of time, a number of years. And it basically converts a small sample of a patient's skin into a larger coverage area for spray, skin and healing. We've added Cohealyx in the last year or so, which is a dermal matrix that allows for vascularization of the wound and preparation of the wound bed. And then PermeaDerm is a transparent biosynthetic dressing for temporizing the wound and for covering the wound. It has a unique quality that is transparent, allows them to see the wound bed and how it's progressing in healing.

This is an illustration of how you can use the products by themselves or in combination. Essentially, PermeaDerm can be a temperance dressing basically to cover the wound until they figure out what they're going to do. It also is used in combination with RECELL. So after you've treated the wound with RECELL, you can put PermeaDerm over the top to aid in healing. And then, of course, with a full thickness wound, you can use all 3 products in combination to prepare the wound bed, get closure and get healing and great outcomes for the patient.

Again, PermeaDerm, we're all about speed, speed to healing. So speed to healing is good for the patient, good for the clinician, good for the hospital. So -- the sooner they can get out of there, the sooner or the better chance that they won't have complications, things like infections and so on. If -- those of you that aren't familiar with RECELL, one of the advantages is that you take a very small donor sample. So a lot of times, patients complain that the donor site is more painful and destructive sometimes even than the wound itself. And so you can take a credit card-sized sample and you could use that to spray and treat the whole -- the patient's whole back, if you wanted to, about 80:1 ratio of the sample and its application. Again, we're very data-driven, very clinical driven company, both in terms of the data we generate in clinical studies, but also how we train and prepare our clinicians and customers to treat.

Again, it's about speed. And so in the case of Cohealyx, it can be ready to graft within about a week or so as opposed to with some competitive products, it can be up to 3 weeks. And so those that want to graft quickly, Cohealyx has a great advantage in that regard. From an economic standpoint for us, as we have, again, same patient, same hospital, same physician to be used -- products can be used independently and distinctly, but also in combination, you see that, that makes a difference in terms of revenue dollars kind of per patient per wound. So if you use PermeaDerm by itself, RECELL and PermeaDerm and then all 3, you can see the economics of it per patient and revenue. And this example is 20% TBSA.

For our company, there's a large addressable market of $1.3 billion. That's really comprised of the 200 key sites, the grafters in this country, the 120, 130 burn centers, the 50-60 Level 1 trauma centers. That's where we're focused. I think it's important for our company to focus in 2026. You'll hear me say the word execution quite a bit. We've done a lot of work around reimbursement, a lot of work in the regulatory space, a lot of work in partnerships and preparing for 2026. And then we've had some headwinds that I'll talk about, but essentially, we're all about execution in 2026 and focus and our sales team is focused on those larger accounts. And while we have relationships at 90% of those accounts, we're really only penetrated at about 5% across the 3 products. Even within RECELL, it's around the 15% range. And so we have a lot of work to do in the existing accounts that we have.

So while we'll drive RECELL growth and kind of introduce and drive Cohealyx and PermeaDerm through the VAC process, it's on us too to train and to sell even coming out of the VAC process our customers on Cohealyx and PermeaDerm. What's -- what we're also doing, as I said, is we're in Australia, we're in Japan. We're in a handful of countries in Europe. And so we're just starting early days. We have approval there, and we're moving through some distribution networks in Europe to make some headway. And this unfortunate event in Switzerland has really brought notoriety to the product to some degree. And so while we help them, I think the opportunity for us to help on a more regular basis outside of that event, I think, will happen during the course of this year.

As I said, it's important for us to be a data-driven company. It's important for us to tick all those boxes to be successful in hospitals. Again, improved clinical outcomes, shorter hospital length of stay. So we're reducing time in the ICU, et cetera. Reimbursement, obviously, with every med tech company is crucial, not only the amount of reimbursement but the reliability of reimbursement, the predictable nature of them getting paid. We are -- we have category 1 code, CPT code. But the adjudication of those claims and the execution of that code has been difficult in 2025. CMS pushed that to the MAC, the Medicare administrative contractors, and then they have been somewhat slow to actually publish those rates. And so right now, as we sit here in January of 2026, 4 of the 7 have published, the other 3 are promising publication by the end of January. And so our job as a company is to educate our physicians and our customers as to how that's moving along, how they can count on those payments coming soon because it's somewhat disrupted our progress in 2025. As you might expect, when physicians all of a sudden aren't getting paid, they let us know when they change their behavior. And so we're in the process of fixing that.

We have two post-market studies in process. We have a Cohealyx-1 study, which evaluates the ability to prepare the wound bed and the readiness for closure. So that is fully enrolled. We have PermeaDerm, which looks at cost reduction as a result of using it versus allograft. That's 75% enrolled. So because they are post-market studies, I would expect that the data that's coming out of that to kind of be shared throughout the course of the year. And a lot of that will be finalized towards the end of the year. We have an opportunity at Boskirk Conference in a couple of weeks. We've got 19 abstracts there. At the American Burn Association in April, we've got 14 abstracts there. So we'll be sharing that clinical data with those in attendance.

Again, this is length of stay and it's real dollars. I think some of the data that we've shown is on average or as an example, can save them up to $42,000 at 5 fewer days in this example. So it's a 36% reduction in length of stay. Not only does it save them money when they're out sooner, but it opens up beds and that restriction that comes with it.

Behind every data point is a patient. This is an example of a patient who tried allograft and it failed. And you can see not only the effectiveness of treating that wound but the pigmentation that comes a year out, which is pretty impressive and with just treatment of RECELL alone. The company itself was on a pretty strong growth trajectory, and we ran into a handful of headwinds last year. One is this reimbursement uncertainty piece in terms of physician payments. The second is Cohealyx getting stuck in the VAC process, right? So that's all been -- we've been working through that. We also kind of restructured our sales force to focus on those 200 sites. With that comes some disruption itself. And so you see we're on a 29% CAGR over time. And so what we see in 2025 is there was growth, but it was modest growth. And what we see is we're going to return in 2026 to the kind of trajectory we were on before. And so we preannounced our guidance of $80 million to $85 million in 2026, and we expect to get back on track that way.

We also preannounced or announced yesterday morning a refinance of our debt. So we had an existing debt structure that we refinanced with Perceptive Advisors. We added some dollars to our balance sheet. But more importantly, we worked with them on, I think, more friendly terms in terms of revenue covenants and cash covenants that are more in line and gives us a buffer throughout the year. I mean I think that many of you know as a leader of a company, you're trying to remove distraction and trying to simplify so we can execute. And so this debt facility we had prior was every quarter, we were bumping up against it, and it was causing a lot of extra work and a lot of distractions. So we've solved that through this -- through our partners at Perceptive Advisors. So those are the terms of the deal. Again, those revenue covenants are well within our guidance and expectation is those won't be an issue from quarter-to-quarter. And I know that they nor I want it to be an issue. So again, it gives us some working capital as we grow our revenue as we manage our cash, it's not something that we're going to have to worry about here in 2026.

Again, in summary, I think it's important to have a great product. I think that, yes, we have a quality sales team. Yes, we have focus. We're focused on execution. We have a portfolio now of products. But I think RECELL is a flagship product like no other. I know that over the last few months, I have visited with physicians. And I've never seen a product that they love so much and a company that they're rooting for so much as RECELL and the impact that it makes on clinicians. And this is an industry in burn. That's a very close-knit, very passionate, and they care quite a bit about their patients and that whole continuum of care. And I think RECELL gives them a vehicle to really help and give them gold standard of care. Again, we have to address the financials with hospitals, ever more, it's important. And so because of that, we've got a reimbursement where we need it to be and progressively over the next quarter or two, we will see that completely come online.

I think from a length of stay and managing their own costs, we're helping them do that, both in terms of the 36% percent reduction in length of stay through RECELL, but also through the time to graft with Cohealyx. We're focused on a couple of hundred sites. And because of that, we have the very best sales force to do that, and they're very focused on the accounts that they're already in. And that's why even though it's a bit of a high touch, where they're in there, they're in there with procedures. They have the relationships while they're in there, they're selling to physicians. They're expanding broad and deep to different types of procedures, different size wounds, different physicians that haven't used it in the past. So we're selling within the relationships we already have and there's a level of trust that allows us to do that.

Again, Cohealyx and PermeaDerm, while we've launched them a year or so ago, they've been in that committee quite a bit, and we have champions that have put them there. And as they come out, those same champions they're going to make sure they're used and that we benefit from it as a company as well. And we're responsible in our cash management and our cost structure. We have reduced our costs in our spend in 2025 and we've done it in a very responsible, thoughtful way, strategic way because we realized that we also need to be positioned to grow. And so we feel really comfortable with where we're at and over the next couple of years as we grow, we don't feel like we're going to have to spend any more money to do that, and we'll be able to handle it. That's it. Thank you.

Great. Thank you, Cary. A handful of questions for you. The first, you recently preannounced financials and provided 2026 guidance, which you touched on very briefly. What underpins your confidence in from roughly $72 million in 2025 to $80 million to $85 million in 2026?

Yes. I mean I think just by way of background, I'm a commercial leader, right? So I mean I spent most of my career trying to understand and be predictable. And I think that this is a bottoms-up number. I mean I think as much as the company wants to show a certain amount of growth. This all comes from the field. It comes from each account, each territory, understanding which physicians are using it, which products they're using, how soon we think they'll adopt, what types of procedures we think they'll use it for at what cadence? When you have a renewable business, it's important to take into account when they start because if they start buying in October versus February, you're going to miss out on 6 months or so of revenue. And so I feel like it's very bottoms-up, very realistic, taking a lot of different things into account. Volume, time, how long they're in the VAC committee, how long it takes after it comes out of that committee to start using it, start buying it. I'm measuring utilization, and that will be a key factor and a precursor for revenue going forward.

So it gives me a lot of confidence having spent the last 3 months, having gone through at least partial fourth quarter, which we announced $17.6 million in revenue. I know where that $17.6 million came from. I could have told you before Thanksgiving, that's where we're ending up. And I don't think we could do that before. And I think we're getting very predictable in that way. I think that we've evened out. We understand how our customers use it, but we also understand how they buy. And the consistently -- consistency in the organic nature and the steady nature in which they buy helps us to understand our baseline predictability. And then obviously, we need to drive that number up.

Great. And I know you touched on that predictability right there at the end. Has there been anything that's changed in the business? Or what has changed in the business that gives you greater confidence in the predictability revenue today?

Yes. I mean I think getting really good at forecasting being predictable, building credibility, it's kind of people process and an overall understanding. So number one, it's the people trusting management. It's people forecasting telling you actually what they -- what's happening on the ground and then having a process. I mean we have a sales operations team that does modeling that where we're waiting certain numbers differently in month 1, month 2, month 3. And so I just think all of that is coming together, and we're becoming very predictable. I can probably tell you within a few hundred thousand what we're going to do in Q1 even, we're getting really good at it. And that's kind of step 1 because I think the company, it not only didn't perform as well as it could have in 2025, but the expectation is we're too high out of the gate. And actually, as the quarter went on or as the year went on, I think there was a feeling like we didn't know how we were going to end up or what was happening out there. And some of it was the clunkiness of the orders and the larger buys, and then some of it was just the unpredictability of reimbursement and other things. But we're going to get -- we are really good at that right now. And so now it's a matter of turning up the throttle and getting performance on track.

That's great to hear. Where are you most focused commercially in 2026 to drive that consistent execution and scale?

Yes. I mean I think focus is everything. I mean, yes, we're in these handful of countries. Yes, we're kind of pressure testing the economics, the distribution networks and so on. So yes, we're international, but we are not a company that says, don't look at our core business, look over what we're doing here or there. We are focused on the U.S. We are focused on our kind of existing 200 accounts. We're focused on our people, making sure they're properly incentivized but they have the right kind of quotas, the right comp plan, the right messaging, the right product line in their bag. And so it sounds really boring, but sometimes it is. Sometimes it's as simple as that. It's not easy, but it's simple. And that is -- we are about a focus. We are about execution about simplicity, about removing distraction and noise and letting our people sell great products to the customers they want to buy them.

Great. And switching gears a little bit. How should investors think about cash use as you move through 2026?

Yes. I mean I think we're going to be -- we're set for cash use. I mean, I think, obviously, as the revenue line grows, that helps us with cash. I think we have enough cash. We added some to the balance sheet. I think we're going to get closer and closer in the coming period of time. We're not kind of forecasting when we'll be profitable. But I think we're getting better and better at cash. We reduced cash burn last year in the latter quarters. So I think you'll continue to see us holding steady, really good cash management, really good thought around spend, around our investments. Like I said, we are positioned to grow. And so if you see our revenue line go up, you're not going to see the company having to spend millions and millions of more dollars to make that growth happen in '27 even. I think we're positioned for that, and you can see a really consistent cash management structure.

Great. Maybe just 1 more for me and then we'll open it up to the audience to see if anyone has any questions. But what are the key milestones investors should watch this year to gauge progress against your strategy?

Yes. I mean I think clinically, you're going to look at some of these clinical studies, some of the progress that we're making with key KOLs. You're going to see some of the data that comes out of it. So some of that is clinical. Some of that is the buzz that comes out in the marketplace. But ultimately, this is about revenue. But before you can get to revenue, it's about utilization. And so my KPIs will be all about utilization. Because that is a precursor to the revenue coming. So I'm tracking on a daily, weekly basis, who's using it, what new physicians have come on board for which products, what new types of procedures they're using it on kind of account by account, how we're growing within that account and within physicians and within procedures. And so it's that simple. I mean, I think there are a lot of things that have occurred in the past around -- from a regulatory reimbursement standpoint. But I think investors just need to look at revenue because I believe that -- the jury is out based on how the last year has gone as to whether or not this is flat or whether it's growing, and I think they should expect it to grow sequentially quarter-over-quarter and more than anything, that's going to be an indicator of the progress we're making.

Great. At this point, we'll open it up to the audience if there are any questions. Hearing none. Cary, thank you so much for the great presentation.

Thank you, Andrew.

And thank you all for joining us. Thanks, everyone.

Thank you.

Good morning, and thank you for joining this AVITA Medical quarterly Australian webinar. I'm Rudi Michelson of Monsoon Communications. AVITA Interim CEO, Cary Vance; and CFO, David O'Toole, are in Australia for a Melbourne, Sydney roadshow this week. And this webinar has been arranged, so everyone has the chance to be brief, direct and ask questions on AVITA's progress. Now let me point out that you can submit questions using the Q&A function, and we'll try to get to them after the presentation.

I'll now hand over to Cary Vance to begin the presentation.

Good morning, everyone. It's good to be with you and look forward to speaking with you today, and it's been a great week so far in Australia. And I'd like to reintroduce you to AVITA Medical. I've been the interim CEO for about 4 weeks. I've been on the Board of AVITA Medical for about 2.5 years. So I'm very familiar with the company, the technology, have always been excited and had a great amount of love for what the mission is of the company. And so over the past 4 weeks, I've dug in, and I'm really excited about what we're going to do going forward.

I want to remind everybody that the RECELL technology is clinically attractive to so many of our surgeons, and there are so many of them that want to implement it in their practice. And the data shows that it's extremely effective. The most recent data shows that not only is it clinically attractive for treating patients, but economically attractive for the hospital itself. Over the course of the coming months, we are focusing on the key institutions in the U.S., the high-volume institutions that can use RECELL and our other products. And with that level of focus and a renewed sense of execution and accountability in the company, I believe we can make the kind of progress that has been expected for a while.

We have two great new products in the past year that we've integrated into our portfolio. We believe that not only will those be substantial growth drivers in the quarters to come, but that they'll be synergistic in our goal to treat the patient and to provide clinicians with a full portfolio of products they can use to heal their patients. And finally, along with commercial execution, I believe that operational excellence is important, not only how we manufacture the product, but how we run the company, how we use investment and spend wisely over the course of the coming quarters so that, that investment has a return for the company and that the company grows to the level where we're able to provide a return on investment to our shareholders as well.

Just as a reminder, we are in the acute care space. And that is a space that is very unpredictable and oftentimes tragic. But what we offer at AVITA is predictability in that unpredictable world. Our technologies and their consistent ability to treat those wounds provide our clinicians and their patients with the very best source of treatment in those events. Again, as a reminder, our portfolio of products, PermeaDerm, Cohealyx and of course, RECELL, they treat across the continuum of care. They treat in a single hospital, single patient, single clinicians can use our products throughout the treatment of that wound. And in each case, we believe our products are best from a clinical perspective, but also that they speed up the time to graft, the time to heal, which is extremely important for the patient and potential complications, but also important for the hospital that is trying to -- that is striving to make economic progress themselves.

And so PermeaDerm is a biosynthetic dressing that protects the wound, that stabilizes the wound. And then depending on the wound size, and we're getting much more into trauma as well, there is a need for a scaffolding-type technology to build up the wound. And so we have this collagen-based dermal matrix that not only builds that up, but also helps in revascularizing and preparing the wound for graft.

And then, of course, our RECELL product. And the RECELL product is time tested in terms of its ability to be effective. And of course, over the last year, we've moved from a more manual process to a more automated process that helps facilitate healing and using the patient's own skin and a small part of that skin so that they don't have those harvested graft donor sites that are oftentimes painful and problematic. And then finally, again, PermeaDerm is a great source of protection and healing in that process.

What's important for this company is to get to a point of being data-driven. And so we'll do that in every aspect of the company. We already use data in effective ways as we manufacture, as we measure quality, as we forecast, and I'll talk more about that later. But it's important for us to provide physicians with the data they need to understand, but also justify utilizing our products.

And most of the data proves effectiveness, superior effectiveness of the products that we sell as well as the speed to healing. And time is of the essence for these patients. And so it's important that in the example of PermeaDerm that it promotes that wound healing quickly. And then RECELL, of course, not only does it take a much smaller amount of donor skin, but the data shows that patients can be -- can leave the hospital 36% sooner.

So for example, instead of 15.5 days, 10 days. And that amount of time not only aids the patient in terms of them wanting to get home, but in terms of the hospital and the amount of money that they spend on a patient in that bed, particularly in a critically -- critical care side of the hospital is extremely expensive. And as a result, they can save thousands of dollars -- tens of thousands of dollars on that patient if they leave earlier.

And then Cohealyx, of course, the time to graft. Other dermal matrices are oftentimes -- it takes a few weeks to be prepared for graft and ours can be ready with Cohealyx in as soon as a week. Again, this kind of shows you not only how the products are used in layering to heal the wound, but from a revenue standpoint, you can see that the additional -- these additions to our portfolio not only add clinical benefit to our clinicians, but they also add a revenue component kind of a per patient basis that utilizing 2 or 3 of the products on 1 patient can provide a significant improvement and increase in revenue per patient for AVITA.

This has been a challenging year and a challenging quarter, and we've made significant progress, just the same. I think we've had a lot of headwinds. We'll talk about those. One of those is on the reimbursement front.

The great thing about AVITA is that we got a reimbursement code. And that reimbursement code that pays institutions and physicians drives adoption. This is -- the economics of medical tech and biotech are significant and all the more going forward. And so anything that drives it forward, if it becomes unclear or diminished, it can stall things in its tracks.

And so the hope that we had at the beginning of the year that this economic component would propel our growth. And as a result, we predicted that there would be significant growth, that was stalled by the fact that the agency responsible for publishing the codes and paying the physicians failed to do so. So there's a lot of detail around this, but suffice it to say that they kicked the responsibility for that payment to 7 contractors that cover the entire U.S.

The U.S. is split up in 7 geographies. They all cover that. And then those contractors failed to do so. And once they fail to do so, the leadership of the company went to Washington, D.C., met with them, met with Congress people to admonish them that this is preventing physicians from using our technology and patients are going to suffer as a result that convinced them to move ahead and to do it, but they still took another 3 or 4 months. So just a few weeks ago, this was all kind of settled. Three of them have published, the other 4 have confirmed that they will publish most likely by the end of this month, for sure, by the end of the year. So it settled. But in essence, we've lost a year of momentum.

Now in settling it, they will go and do back payments for those physicians. So they'll be made a whole, but the company really lost that momentum with these physicians because there was a lack of clarity and really confusion about whether or not they would be paid. And so many of them shifted back to the old standard of care of grafting, even though it's a lower amount, they at least knew that they were going to get paid. And so that's the realities of the year. And one of the major headwinds that's caused us to look kind of flat in our growth, and we expect that as we've removed that barrier and that hurdle that it will actually become a propellant for us and a catalyst through 2026 and beyond.

A company like ours is all about focus. There are a lot of different things that we've had to do over the past couple of years to prepare for growth. And some of that can sometimes be a distraction. This reimbursement issue was a distraction aside from being a stalling event. We also have value analysis committees where Cohealyx, we're trying to push those through. So accounts -- hospitals have the ability to purchase the system, champions there that want to buy it need to wait until it exits the value analysis committee. We're in about 1/3 of our accounts. We expect some of those to come out in Q4, the rest in Q1 throughout Q1. And so we expect to be able to get a pretty good uptake in Cohealyx here in the next few months. But the idea is to focus on about 200 accounts, the burn centers, 120, 130 burn centers and the 50, 60 trauma center -- Level 1 trauma centers in the U.S., focus on those 3 technologies, each having its own value drivers as they work together and then focus on geographies.

Make no mistake, we are focused on the U.S. and focused on driving revenue growth in the U.S. And having spent a few days here in Australia with our distributor, I'm pretty bullish about what they're going to be able to do in the months ahead. And then we have a few other countries that we will have some progress, and we will be developing key opinion leaders and champions in those markets as well. There's a large market. I think one of the things that investors look at is what's the potential of the company, not just how well the products work, but how substantial is the market and the potential. And obviously, it's on me and on the company to realize that potential and be operationally excellent in the process. But there's a large -- there's 40,000 Americans hospitalized with burn injuries every year. And those burn injuries have a great degree of complications, potential for infection and sepsis and with a tremendous cost to the health care system. And so we address all of that. Any time that you're trying to change how they practice medicine, it's important to have a value driver in a clinical component, a workflow component and an economic component. And we tick all of those boxes for our customers. And our intention is to communicate that clearly, broadly and deeply through data and other influential means to expand adoption and utilization.

Again, this is all about focus. While the total addressable market is vast, it remains at $3.5 billion. It's important for us to focus with the resources that we have on the high-volume accounts, on those centers that do most of the work. And the great thing about it is that we are already active in those accounts. So we have a presence, we have a relationship. It's just that we need a lot of expansion.

For example, if you have 1 or 2 physicians using it, we need 10 or 12 using. If you have a physician using it on 1 or 2 procedures, we need them using it on a dozen different procedures. And so that's the goal of our commercial teams is to drive expansion and utilization within existing accounts to get further and further penetrated across our portfolio. Again, this is kind of what I talked about. We had talked about some of the opportunities we have for growth in the coming year. I think it's more than just removing the barriers that have been there, but we've restructured our sales team, which has probably caused a little disruption as well, but we've rightsized it.

So we've been able to remove representatives from more rural areas, calling on smaller accounts, and we have them located and situated throughout the country of the U.S. at the key centers. And then we also have the right kind of salespeople. I think that when customers were largely using ease of use, there was a lot of technique involved and there was a lot of need for our clinical tissue specialists to be in the cases to help them with technique to help train them to make sure they were using it properly.

Now that we have the more automated RECELL GO, we're able to have resources that both can help the clinician clinically, but also have that sales mentality and sales experience that helps drive further use and expansion in the hospital and have not only clinical discussions but workflow and financial discussions with business leaders and department directors in those hospitals. This is what I referred to in terms of the length of stay.

Again, this is not just the company promising and communicating that the RECELL technology is better for the hospital, but there's data that shows this. We already have one major institution in the U.S. that has adopted further use commitments around this data and that they want to realize this kind of savings and this kind of treatment for their patients as well.

Along the lines of data, obviously, we have the clinical data for Cohealyx and PermeaDerm needed for regulatory approval. But we've taken that next step to do post-market studies that provide our sales and marketing teams with the data they'll need to show effectiveness versus -- in the case of PermeaDerm versus cadaver skin or allograft. And in the case of Cohealyx show the data that shows the time to graft being sufficiently less than competition.

So we expect those clinical studies to be fully enrolled by the end of the year and that a lot of that data will be published throughout the year and towards the end of 2026. But because they're post-market studies, we are able to use cases and use some of that preliminary data on podium. We will be at significant burn conferences in January and in the spring, and we will have clinicians on podium talking about the initial readouts from those studies.

Again, I try to remind our teams, I try to remind myself why I joined the AVITA Board, why I'm proud and excited to be part of this organization. And aside from a lot of the business and commercial and economic commitments that I've made to make significant progress in the coming months and quarters. This is a big part of why I'm here. And this shows and demonstrates the power of the technology that we're trying to get to market. And this woman was treated conventionally, which did not work for her and then was treated with RECELL. And you can see the results after about a year, you can hardly tell that this tragic event happened to her.

And so this is part of the mission, part of why I, and I know a lot of the people that work at AVITA get up every morning because we know that every day our product is not in or fully in institution is another day that people are being -- are not able to be treated the very best way.

Moving on to financials. Just an overview, you're aware of the revenue miss in Q3. From a margin perspective, we stay strong in the 83%, 84% for RECELL. As we've discussed in the past, PermeaDerm and Cohealyx bring that margin down a bit when there's a mix. And yet those products, because of our limited amount of spend in those products, any revenue that we get drops down to the bottom line significantly and helps us with our gross profit along the way.

Operating expenses, as we've talked about, too, we've brought it down to a level that not only is sustainable, but is strategic. We cut expenses in the second quarter. As a result, our burn in the third quarter was $6 million as opposed to $10 million, and we expect to be able to continue that. And we also are positioned in terms of our people and structure to grow.

We have the fuel to grow. We also are set up to where we shouldn't have to make much change or additional spend beyond where we're at for the next at least year or 2, I think. From a cash perspective, we'll talk more about this. I'm sure there'll be Q&A about it, but we have been responsible in our cash use and our cash burn, and it's allowed us at the end of September here to have $23 million in cash.

And so we believe right now, we're well positioned for where we need to be, but we continue to address this and talk about this and to make sure that we strengthen this going forward, and that's our intention. If you look at the CAGR aside from, I think, a disappointing 2025 in terms of growth, if you look over the last handful of years, this represents during COVID, this is since FDA approval, all that has to go into going from FDA approval to launching, to scaling up, to securing reimbursement codes and having those make an impact in the market. There's been an average of about a 30% CAGR over that time. We expect that to get back on track after this year of learnings and headwinds and significant growth to follow.

Again, just in summary, I believe we're changing this health care paradigm in acute care. The way that you do that is to make sure that the hospitals have both an economic and clinical benefit aligned with using your products. We've done that. We will preach that in the coming months and quarters, but we will also use data to make sure that, that's justified. We will also use data internally to be disciplined from a financial perspective, but also be predictable to forecast accurately to set clear, transparent, relative and reasonable guidance and then achieve that guidance through day-to-day commercial execution and operational excellence, and that's our goal.

With that, I think we're handing it over for questions and Q&A.

Yes. Thank you, Cary. We'll now move on to investor questions. [Operator Instructions] I'll now hand over to Ben Atkins to run the Q&A.

Thanks, Rudy. Cary, investors are watching closely as you guide AVITA through this leadership transition. Question, as you step into this interim CEO role, what are your top 3 operational priorities over the coming months? And how should investors evaluate your progress during this transition period?

Well, as I've mentioned a few times, I mean, for me, it's about driving consistent utilization with our customers. If we drive consistent and expanded utilization with our customers, the revenue will follow. We will be able to predict it. We will be able to perform at rates that we haven't been able to in the past. So that level of commercial excellence.

Second, we need to maintain cost and operational management. There's a lot of back end to the company that supports the front end. And we need to maintain high levels of quality and high levels of strategic investment to get a return on that investment on the back end of the business. And then performance management and acceleration. We've hired a lot of people. We've changed the structure all the way up to the top and to the CEO and management -- executive management levels. I expect a high level of accountability, a high level of performance out of myself and everybody else. And there's structured ways of doing that, but there's cultural ways of doing that. My intention is to drive that to new levels in the year 2026 and beyond.

Following on from that, investors have also asked about how your -- the new leadership team plans to communicate and set expectations. To that end, what is your guidance philosophy? And how do you plan to communicate progress and expectations going forward?

Sure. So thank you. I believe in being as transparent as possible about everything that is a challenge and everything that is an opportunity and exciting to be very clear about what we're facing and what we're accomplishing. And before I can give guidance externally, I have to be honest with myself, and we have to be honest with our teams internally.

What are our issues? How can we overcome them? How can we mitigate risk? What do we expect to happen? How can we exceed what we expect to happen? So when we do that internally, it gives me the confidence to share it externally in a way that is very transparent and is very clear. And I don't think it should be a mystery what the company expects to do next year.

I don't think that if investors want to know what we're up against, what I expect that it should be pollyannish and hopeful. It should be based on information, on a customer-centric philosophy and company where the customers are telling us what they're going to do, and we're impacting that. So if they tell us what they expect to do, we should believe them.

And then we should do something to expand that and change that and share that with our investors externally. And yes, we'll do as a public company, we'll provide guidance. We'll give regular updates. But what's important for me is what we're doing internally so that when I tell you something externally, it's based in fact and in reality.

Moving to the products and particularly RECELL. Some questions are seeking clarity on how customers are engaging with RECELL GO. How would you perhaps characterize how the switch is going from the legacy RECELL to RECELL GO in those markets where it's available?

Sure. So there are some customers. These are some of our pioneering RECELL customers, which we value a great deal and appreciate. They develop techniques and capabilities using RECELL ease of use that are outstanding and amazing. And so they like how they do things. And so there's always going to be a limited number of accounts that -- and physicians that like the old manual technology because they know how to use it and they like how they use it.

And so we've looked into margins and our ability to manufacture both systems going forward, and there's no problem in doing that. And we want to be responsive to our customers, those that want to keep using the other. But the fact is everybody that's new, they're all going to use RECELL GO. They've all -- they're all looking to use RECELL GO. They're not going to dive into learning those kinds of manual techniques and taking that time.

And so everyone new is into RECELL GO and is transitioning over. I think we thought that it would be somewhat immediately -- immediate, everybody would switch over right away, but it's a transition, and we're going through that process but have had significant positive feedback from the field.

Some investors have asked also about how we are dealing -- company is dealing with reliability issues with the initial rollout of RECELL GO.

Yes. I mean, as with any technology, when you roll it out, you're going to have some opportunities for upgrades and fixes in the process. So there are a limited number of software-related error codes that were reported by some U.S. surgeons earlier in the year. There were no hardware issues, no safety issues that need to be reported or identified. So those software upgrades were rolled out last month in October at the sites.

And so in a way, it was a good opportunity for our technical people to get out into the field to do the upgrades, but also speak with customers about their experience with the product because, of course, we want to continue to have products and update them in ways that are helpful to the customer themselves. And so we're monitoring initial feedback. It's only been a couple of weeks. It's really too early to quantify how much of an impact there's been. But this is standard procedure in terms of software refinements, and we'll continue to do that.

RECELL continues to be a cornerstone of our success in burns. Investors are asking, however, to understand how growth could go beyond that core. To that end, how are we positioning RECELL for broader adoption in trauma and surgical wound settings? And when do we think that these newer indications could make a meaningful contribution to RECELL's growth?

I mean, obviously, we have history in these burn centers that goes back a long way and relationships there. And so I think when you're addressing trauma centers and new indications, it's a process. It is a process of educating the physicians about how they can use not only RECELL, but the combination of our products, Cohealyx and PermeaDerm in that process and then allowing the clinicians to give us the feedback we need but also develop their own synergies within the products, help us with champion those efforts to other physicians in the trauma space as well.

And so it's an evolution of, I think, education, but also working in conjunction with the physicians, sometimes companies at headquarters or in the R&D labs, they think this would be a good indication. This would be a good technique. And of course, we provide that for our physicians to help them. But we also listen to our advisory board, listen to those that are skilled and innovative in their space. We're not the only ones that are innovative at AVITA.

We have physicians and surgeons that are innovative. And if you give them certain tools, they will do more with it than maybe the company ever thought could be done. And so we educate them, they educate us, and I think that will help us propel our growth in the trauma space. And it will take some time over the course of 2026, I believe by the end of the year, we'll see significant uptake in trauma, and we'll learn a lot as well.

Turning to the international focus for RECELL. With CE Mark approval now secured for RECELL GO in Europe, can you walk us through the key milestones ahead for international expansion, including progress towards TGA certification here in Australia and how you see these markets contributing to the growth over the next year or 2?

Yes. I mean, on the one hand, I want to tell you how excited I am. I mean there are -- there's significant opportunity outside the U.S. I think, again, having spent some time with our distributor here in Australia and a physician as well here just yesterday, I think that there is a significant opportunity just like there is in Japan and in the U.K. and parts of the EU as well.

But I also want to make no mistake that investors and shareholders, I don't want you to think that, hey, don't pay attention to our progress or lack thereof in the past year and just pay attention to everything else we're doing in the world. The fact is we have a specific strategy and mission by country. They're all different. And ultimately, our goal is to make progress strategically and clinically and from a revenue perspective as well.

We're not expecting a lot internationally, whatever that means. I mean I just don't think people should think, well, we're going to make up for what we can't do in the U.S. by trying -- by selling a lot elsewhere. I think that anything that happens above and beyond our expectations internationally would be great.

But our goals internationally in most of these markets are introductory, building champions, understanding how good our distributors are and preparing ourselves for a more full-scale launch once we frankly get our act together in the U.S. from a revenue perspective and make the kind of progress that we expect.

Reimbursement clarity has been a key theme this year and a topic that you addressed in the slides. Building on that, with reimbursement clarity now improving, what early signs of renewed hospital engagement or physician/clinician engagement and procedural growth are we seeing in the U.S.?

Yes. That's a great question because I want to make sure that we're clear. And I think going forward, you asked about communication and transparency. I think it's really important to be clear about timing because timing -- if the timing is off, the result is the revenue is off, at least in people's minds and expectations. So when I say this has been cleared up, what has to happen and has happening and is happening is that we're communicating with those in the hospitals that are filing claims.

We're communicating with the physicians to say this has been cleared up, trying to get them to start using quicker, trying to get them to start ordering, trying to get them to file the claims so that they see that it's been paid, not that they don't believe us, we can prove it to them. But all of this is taking place, and it takes weeks, and it is taking weeks.

And so I don't expect anything substantial until it would be gradual in Q1. And what I will be looking at, and it's not just on this aspect, but in general, how do you make sure you hit your quarterly number and your yearly number as a result? You do that by looking monthly. You do that by looking daily. What are they ordering every day? What are they ordering every week, every month and who's ordering? And even before they order, who's using and how much are they using? And what are they using it for and how many physicians are using it?

I expect to get granular. I've run commercial teams. I have been a sales guy. And so I know that, that kind of granularity and information is available. It sometimes is a little bit difficult. It needs to be mined. It needs -- we need discipline around it. But when we start looking for early signs of uptick, sometimes it's as simple as if they're ordering this much pretty consistently, it goes up by 10%. It goes up by 20% on a daily basis because that's how you build a business, and that's how you build growth. It's not quarter after quarter. I mean, ultimately, it is. But that quarter is made up of months and weeks and days, and it's made up of customers and physicians and reps. And so bit by bit by bit, we're going to measure it. We're going to drive it, and it will all add up to the kind of growth that we expect.

Going a little deeper on to the reimbursement framework itself. You said that the MACs are now publishing their rates. Can you speak to the economics of these new Category 1 CPT codes for RECELL use and how that sort of links together with the broader reimbursement picture in the U.S. for RECELL?

Sure. So three of them have published. The others, like I said, intend to publish. And so in the U.S., the institution gets reimbursed, but then the physician also gets reimbursed. And the amount that the physician gets reimbursed is at a higher level than they would if they just did a split-thickness skin graft.

It's as simple as that. It's higher. So it's not an amount problem. It's in a surety that they will get paid. And so the economics are very clear, but they go both ways, obviously. So it's kind of sad that this thing that was supposed to make everything happen faster and propel this level of growth this year was the very thing that because they messed it up, physicians got confused and then they got gun-shy about using it, and they went to more sure way. And so now, I mean, you can imagine if some physicians who are fairly new, we're using -- we convinced them to use RECELL.

They started using it and then the financial piece became the way it became. So it's not just telling them, hey, you're getting paid now, go back to using it. They've been using the conventional way for now 10 months in the year. And so in some ways, it's also a reeducation around why they chose to use RECELL to begin with and having them get used to that in their standard of care.

And so in the U.S., money drives. I mean I'd like to think that -- and back when I first started in Medtech 30-some years ago, the clinician and what was best for the patient and what they wanted in terms of technology was what happened. They told the hospital to buy it and it was bought. But now it has to be justified economically even before they'll look at it clinically.

A lot of these hospitals won't let you talk to physicians until you've already run it through a pro forma for their hospital to make sure it makes economic sense for what you're charging them additionally that it can be justified from a reimbursement standpoint. So it drives the business, and it's going more and more in that direction over the coming years. So what's great about AVITA is that we have as strong or maybe even stronger of an economic story as we do a clinical story.

On that note, with the economic story, AVITA does have some of the strongest length of stay data you cited the more recent 36%. How can the company best leverage that going into the new year?

Yes. So what's important when you're dealing with a hospital is to make sure that the different parts of the hospital or a hospital system are talking to one another. So this length of stay piece and the economics associated with it, and it's not just economics, it's also optics. If you think about a CFO and a CEO of a hospital, the CEO cares about infection rates, complication rates, readmittance rates. Those things are published now. It's not just something that is bad for the patient or that the hospital encourages. In the U.S., a lot of those rates are now published. So if you're a patient or you're somebody that's public information, you can look and see in a particular city or across the country who has the highest infection rates from the hospital. So that's something that they don't want. They don't want to be on that list.

And the CEO cares about those kinds of optics. But the CFO cares about the overall cost and profitability of the institution. And so he or she is the one that can see, well, listen, we're spending a little bit more for the technology, but what's the reimbursement, but also can we save money? And how much -- how many dollars are associated with clearing out an ICU bed or a bed in the hospital. And so what's important for our sales team to be able to do is to talk to the physician to be in the cases, but then to walk down to the carpeted areas of the hospital and have these discussions with the financial people and help them understand and then help the different parts of the hospital talk to each other so that they're all on the same page. And so we share that data with them. We get them to talk to one another and be unified in what's best for the hospital, and that is utilizing our product.

A little bit deep on to the commercial execution. Some are interested in understanding how we're positioned in the U.S. market. To that end, can you characterize the sort of the size and setup of our field force, our salespeople? And under what sort of structure and process do we, AVITA sell ourselves to these 200 hospitals centers that we talk about in the TAM?

Yes. I mean we're like a lot of companies, a lot of companies I've run that have sales reps, that have sales managers, that have people that the sales managers report to and then a commercial leader and then me. And we have a very free flowing organization in terms of those levels I just described. We don't have barriers. We have a lot of engagement and involvement all the way up to the CEO role. Obviously, the reps call on the customers. They're the ones charged with driving utilization and expansion within the account.

They have those conversations that I described. Their performance is managed, their predictability and forecasting is managed by their managers. They have strategic support in those high-level conversations and understanding how to approach and do messaging. We also have a strategic account manager who will go into the high-level hospital systems and have those discussions how enterprise-wide they benefit financially and clinically from adopting our technology.

And so it's very efficient and very effective. As I described before, we have the -- to me, we have the exact right number of people. They're structured the exact right way. And I would also say that we have the highest quality sales organization we've ever had because when you trim down the sales force and you do some shifting around, you take the opportunity to keep your best and brightest, and that's what we've been able to do. And so going into 2026, I feel really confident and excited about the team that we have commercially.

Well, finally then, as we do enter this next transition phase, this next stage, what key proof points will rebuild investor confidence in your mind and define the company's next stage of value creation?

Yes. I mean when you're the CEO of the company, you're looking at dashboard literally or in your mind of these are the catalysts. These are the drivers. This is the indication that I feel like we're making an impact and like that we've turned the corner and so on. But ultimately, for shareholders, they're not going to see the daily sales. They're not going to see that kind of a micro side of things. But if I -- if you're just going to look at one thing, look at revenue, I know what's behind the revenue. Utilization is behind the revenue and a lot of other efforts and a lot of other metrics that we're going to drive.

The other thing I'll say is that in the past quarters, there's been some lumpiness and chunkiness to the orders, some larger orders coming. I think that we have learned some things about how our customers order, how we sell and present to them. I think that the -- there's a more organic -- not just this fourth quarter, but going forward, there's a more organic aspect to the orders. So I think it will be easy to see that in a given quarter, as the trajectory goes up that it's, I don't want to say, legitimate, but that it's consistent, I guess, and that you can count on that being an indication of what the next quarter should be.

And I think in the past, if we've had -- case in point, if you go back to Q3 of 2024, which was a comparator to this past Q3, which was disappointing, the Q3 of 2024 was 19, and yet there were some larger orders in there that were associated with, I think, some customers buying ease-of-use because they thought that perhaps it would be going away, as we transition to RECELL GO, things like that.

And so I think that going forward, if you're looking at revenue, let's say, of Q1, and it's at a certain level, I think you can expect that, that's the beginning of what will happen in Q2. And that's not just good for you to look at, but that's what I'll be looking at. So what I'm looking at should be the same thing you're looking at and vice versa. There shouldn't be any distance between what you're seeing and what I'm seeing, and so that's what I expect to happen in the coming quarters.

Thank you, Cary. And with that, let me hand you back to you for closing remarks.

Sure. I do see a raised hand here. So I'm not -- I want to make sure I'm addressing any other question. Am I able to see this?

Any questions just directed to the Q&A function.

Well, I don't know here, somebody's got their hand raise. I don't want to have a question left unanswered. So...

Okay. Let me -- so a question of clarification. In Slide 12, you talked about 3 boxes. Are those all active events or future goals? I believe these boxes carry out the 3 strengths that are current to our 200 focused accounts in the slide presentation.

Okay. We're doing on Slide 12. I'm not sure 3 boxes. Are these the 3 boxes? Yes, Slide 12, here we go. Yes, these are currently going on. As I indicated, we are currently active in 90% of those centers, which is great because there's a lot that is associated with just introducing yourself as a representative of the company, the company itself, the products going through validation in those hospitals, getting access to the hospitals.

We're in them. So we have the relationships. We just need to drive expansion of those relationships as the second box that we do have about 1/3 of those centers currently have Cohealyx in their value analysis committee. We expect some of those, probably somewhat of a small amount to come out here in Q4 and the rest gradually throughout Q1 and even into Q2, and it will basically give us a license to sell in those hospitals. And then yes, I mean I talked about sustained and supportive case execution, our reps in the cases, trying to drive more cases, more physicians to utilize it, yes. So...

I'm sorry, Ben, but do we want to address any of these others that are in the chat?

We are up against a time constraint. So perhaps if you want to say a few closing remarks, we'll happily take some -- a couple of these questions offline just for clarity sake.

Sure. Yes. I mean I'll just -- this one about U.S. revenue, depending on U.S. government reimbursement. We have about 70-some percent of the cases we do are under Medicare and Medicaid, and so it's about 70%. And then I think we talked about how we sell the structure and the process, how we sell in the hospitals, in the European markets, I think I talked about that.

We are early days with new distributors being set up with champions. We did a case in Germany, which is exciting. We have a physician there that's a champion. Again, it's early days. We're going to learn some things and do some things that are going to help us in forward quarters and years really. So I think that's all I see.

There was one more to that end, are there any reimbursement issues with Cohealyx and PermeaDerm? Or were those problems related only to RECELL?

No. We don't expect those. Those are currently covered, and we haven't run into any of that.

And then there was one question from David Williams. I'm not sure if maybe that David, a little bit more clarity, but are the charges in CMS outpatient rates relevant to you? And if so, are you prepared? Not sure if I know the context of that.

Can you read it one more time, please?

Are the charges in CMS outpatient rates relevant to you? And if so, are you prepared?

Okay. I'm not sure I quite understand it, though.

David, if you're listening, we will have to follow up with that question.

Let's do that.

And I think with that, we've gone through the list.

Okay. Well, perfect. So I think a bit ago, you returned it to me for summary. So I'll do that. I think at the risk of repeating myself and the reason why I think it bears repeating is because this is going to be a very focused organization. It's what I do and what I've done in the past and what I intend to do going forward.

I expect and plan and have already started to build a culture of accountability to drive consistent utilization, expanded utilization and predictable utilization in these accounts. And as it's predictable and as it's high performing, then I'm going to be able to be more predictable, I think, in my guidance and in my communication with in a very, I think, reasonable but exciting way going forward.

I expect to have with David's help, but also with the help of our teams and our company we have a culture of not only productivity, but a culture of operational excellence and a lot of pride in what we do and our mission from a clinical and patient perspective. And people are what drive the growth of every organization.

I can probably talk about it the least on these kinds of calls and any other business discussion. But the fact is every one of those employees that we have are going to be the best they can be. We're going to hire the best. We're going to expect the best from them, and they're going to do some really great work going forward and we're all going to benefit from it as well as the clinicians and the patients they serve.

So thank you all for your attention and your engagement, for your support and for your investment. Our expectation is to continue to work really hard to earn your trust and to keep your trust going forward.

Good day, and thank you for standing by. Welcome to the AVITA Medical, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Ben Atkins. Please go ahead.

Thank you, operator. Welcome to AVITA Medical's Third Quarter 2025 Earnings Call. Joining me on today's call are Cary Vance, Interim Chief Executive Officer; and David O'Toole, Chief Financial Officer. Today's earnings release and presentation are available on our website at www.avitamedical.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 as of today.

I will now turn the call over to Cary.

Good afternoon in the U.S., and good morning in Australia. It's great to be with you today. As this is my first earnings call as Interim CEO, I want to begin by saying how much I appreciate the opportunity to speak directly with our investors, employees and clinical partners who make AVITA's mission to transform acute wound care possible. I've been with AVITA as a Board member for the past 2.5 years. And now, stepping into the Interim CEO role, I see the company with new eyes, but also with deep conviction. AVITA's purpose is meaningful, its people are talented and its products are transformative. My job and our collective focus is to turn that potential into consistent performance where mission, execution and shareholder value align.

Let's be clear, this has been a challenging quarter. We reported approximately $17 million in revenue, below expectations and reflecting the ongoing impact of reimbursement disruption that began earlier in the year. We now expect full year revenue in the range of $70 million to $74 million, down from our prior guidance of $76 million to $81 million. As a reminder, in January, new Category I CPT codes for the use of RECELL took effect. Because CMS did not assign national clinical payment rates for these codes, responsibility for establishing payments fell to the regional Medicare Administrative Contractors, or MACs. The time required for each MAC to set rates and begin adjudicating claims created uncertainty, and providers awaited confirmation of reimbursement for RECELL procedures. As a result, many providers were unsure when or how claims for RECELL procedures would be paid.

The good news is that significant progress has been made. As of today, all 7 MACs have now published or confirmed acceptance of provider reimbursement rates, providing clinicians with clarity and confidence of payment when using RECELL. We're already seeing early signs of renewed demand, and we expect utilization to normalize progressively through the coming quarters. With provider reimbursement now largely resolved, RECELL's value is increasingly recognized across data, adoption, payment and policy.

At the foundation, there is powerful real-world evidence, clinical and economic data showing the ability of RECELL to optimize healing, reduce donor-site burden and shorten hospital stays. Inclusion of the CPT codes for the RECELL procedure within the CMS payment system establishes a clear pathway for clinician reimbursement. Predictable reimbursement now restores clinicians' confidence in payment. Together, these layers help fuel adoption as clinicians and hospitals integrate RECELL into routine practice.

For example, building on the strong clinical evidence, including data showing 36% reduction in hospital length of stay, one of the nation's leading burn centers has now incorporated RECELL into its treatment protocol for burns under 20% total body surface area. This is a clear example of how strong data, clinical experience and reimbursement clarity come together to make RECELL a standard point of care. I can also share that since RECELL GO received CE Mark approval in Europe in September, we saw the first patient outside of the U.S. treated with the device in Germany just last week. It's an important milestone that broadens access to our RECELL technology and underscores its global relevance.

While this quarter reflected the impact of reimbursement timing, it was also shaped by the pace of hospital Value Analysis Committee, or VAC, reviews and the evolution of our commercial organization. These factors collectively limited our near-term results and not the strength of our strategy or the quality of our products. In my first few weeks, I've spent time listening to our teams, to clinicians, our hospital partners and to shareholders. Their feedback has been candid and consistent. Our products are exceptional, but our performance hasn't always matched their potential. RECELL, Cohealyx and PermeaDerm make a real difference in acute wound care. And now, it's on us to ensure hospitals can put these products into the hands of their clinicians, and most importantly, on to their patients.

That's where my focus is, turning potential into consistent, reliable performance. Under my leadership, we've moved quickly to refine our commercial organization, aligning structure, territories and accountability around our highest value accounts. These adjustments are improving focus, visibility of customer behavior and the coordination between our sales and clinical teams. To that end, we've taken a fresh look at our market opportunity to better align our go-to-market strategy with observed customer behavior.

Historically, we've shared that across all U.S. burn and trauma hospitals, the total addressable market, or TAM, for AVITA's portfolio is about $3.5 billion, and that long-term opportunity remains unchanged. What has evolved is our understanding of where meaningful scalable use occurs. Roughly 90% of our revenue today comes from about 200 burn centers and trauma hospitals, core institutions that define acute wound care in the U.S. These represent our most immediate and scalable growth potential.

You'll see in the slide that this focus segment represents $1.3 billion in targeted opportunity within a broader $3.5 billion U.S. market. We're currently serving about 5% of that segment, giving us significant runway for penetration and growth. In other words, this focus allows us to prioritize the hospitals and surgeons where our relationships are strongest and where we know adoption, utilization and cost portfolio expansion can be scaled most effectively.

With this focus established, our execution priorities for the fourth quarter are clear. First, rebuild order momentum. With reimbursement clarity for use of RECELL returned, our commercial organization has a focused plan to reengage accounts that lowered their use of RECELL. This is back to basics execution, targeted outreach, disciplined follow-up and strong field accountability to deliver steady volume recovery.

Second, drive consistent utilization of our products. Our sales and commercial teams are working side-by-side to increase case frequency and ensure that our products, RECELL, Cohealyx and PermeaDerm, become part of a routine clinical practice. Consistency and utilization creates internal champions, champions who help expand adoption.

Third, complete the transition of our commercial organization and enhance forecast accuracy. With the commercial structure now in place, our focus is on ensuring accountability and giving our teams the tools to succeed. We're taking deliberate steps to drive more consistent and predictable revenue growth, grounded in a clear understanding of customer behavior. This includes moving towards more organic monthly purchasing patterns and refreshing our forecasting model to provide a more accurate view of future revenue. These priorities are about near-term execution, while serving the longer-term strategic vision that defines who we are and how we win. Consistent utilization is our foundation. Predictable use of our products drives predictable demand. Portfolio depth is our differentiator. RECELL, Cohealyx and PermeaDerm, used together, cover the full acute wound healing continuum.

Patient impact remains our purpose. Every decision should ultimately improve outcomes for patients, clinicians and the hospitals that care for them. We've already talked about RECELL, the anchor of our portfolio and our foundation for growth. Let me turn now to our complementary products, Cohealyx and PermeaDerm, both of which extend our reach across the acute wound healing continuum.

Cohealyx continues to emerge as a complementary growth driver. VAC submissions are underway in roughly 1/3 of our target accounts. As hospitals complete their reviews, we expect ordering to begin and build steadily over the coming quarters. Clinical feedback from our Cohealyx I study remains positive and consistent with our expectations, with surgeons noting rapid readiness for grafting. We expect full enrollment by year-end and anticipate results early next year. PermeaDerm also continues to perform well as a versatile biosynthetic dressing that complements both RECELL and Cohealyx across the wound healing continuum. We're encouraged by the early results from our PermeaDerm-I study, and we expect full data next year.

Financial discipline remains a further top priority. As David will explain in more detail, we've taken clear steps to improve the efficiency of our operations. Our operating structure is leaner, our cost base is lower, and our teams are focused on doing more with less, all while maintaining the investments that drive growth. On the balance sheet front, we secured a waiver of our Q3 revenue covenant under our OrbiMed credit agreement and have agreed to an amendment lowering the revenue covenant for Q4.

Looking ahead, we're maintaining balance sheet flexibility to ensure we have the capital resources to support our operations and growth plans. We'll provide an update on financial outlook, including 2026 revenue and guidance, in early Q1, ensuring that our guidance reflects both operational progress and our capital strategy. In the meantime, we are conserving cash and maintaining disciplined cost control, while continuing to support our operations.

While Q3 marked a transition for AVITA, it also signals the beginning of a more focused, disciplined and accountable phase for the company. The fundamentals are in place: reimbursement stability; clinical validation; and a first-rate portfolio, RECELL, Cohealyx and PermeaDerm, that allows us to serve every stage of the acute wound care continuum. We are focused on execution, delivering consistent performance, restoring confidence in fulfilling our mission to transform acute wound care for patients, providers and health systems. I look forward to continued engagement with our shareholders and to sharing measurable progress in the quarters ahead.

With that, I'll now turn the call over to David.

Thank you, Cary, and good afternoon, everyone. As Cary described, the third quarter was an inflection point for AVITA, one that reflected the challenges we faced this year, but also the actions now underway to set the stage for improvement. The results were disappointing, but maybe not surprising, given the timing of reimbursement resolution, the pace of hospital VAC reviews and the transition of our commercial organization. With those factors now stabilizing and our cost discipline firmly in place, we entered the fourth quarter better positioned to begin an upward trajectory, measured, deliberate and grounded in execution.

I'll now walk through our financial results for the third quarter ended September 30, 2025 and provide additional context around our cost structure, liquidity position and financial priorities as we look ahead to the fourth quarter and beyond.

Turning to the first slide. It shows a summary of our key financial metrics for the quarter, revenue, gross margin, operating expenses and net loss, which together reflect both the impact on revenue caused by dampened demand due to reimbursement uncertainty, but also shows the benefit of disciplined cost management, which we can control.

For the third quarter, commercial revenue was $17.1 million compared to $19.5 million in the same period last year, a 13% year-over-year decline. This performance primarily reflected the temporary reimbursement headwinds, along with other factors, including the timing of hospital VAC reviews. However, for the fourth quarter, now that all 7 regional MACs have published or confirmed provider reimbursement rates, this peels away a barrier to provider use of RECELL and support the return to growth in RECELL revenue. As a result of the third quarter revenue, we are revising our full year 2025 revenue outlook to a range of $70 million to $74 million compared with our prior guidance of $76 million to $81 million. This adjustment reflects the slower-than-anticipated timing of reimbursement normalization, as well as our measured expectations for RECELL demand returning and utilization through year-end.

Gross profit margin for the quarter was 81.3% compared to 83.7% in Q3 2024. The decline was driven by product mix, consistent with the increasing contribution of Cohealyx and PermeaDerm to overall revenue and other inventory-related adjustments. When isolating the RECELL franchise, gross margin remained strong at 83.6%, which we expect to sustain going forward. As a reminder, our average sales price share for Cohealyx and PermeaDerm is 50% and 60%, respectively. While these profit-sharing arrangements reduce overall reported gross margin as a percentage, they contribute incremental gross profit. And due to limited additional SG&A expenses associated with this revenue, operating profit is strengthened, along with operating cash flow.

Total operating expenses were $23 million, down from $30.2 million in Q3 2024, a reduction of $7.2 million or 24% year-over-year. This improvement reflects the impact of our cost reduction initiatives and the ongoing transformation of our commercial and administrative infrastructure. Breaking that down, sales and marketing expenses decreased by $3.1 million, driven by lower salaries, benefits, stock-based compensation and commissions. General and administrative expenses declined by $2.4 million, reflecting reduced headcount and compensation-related costs. Research and development expenses were down $1.7 million, primarily due to lower personnel costs and the capitalization of certain project expenses, specifically in-house developed software. As previously disclosed, following the commercial field transformation in Q2, we reduced operating expenses $2.5 million per quarter, or $10 million annually. Actual results for the third quarter show that reduction, which will continue for future quarters.

Operating loss for the quarter improved by 34% year-over-year, decreasing to $9.2 million from $13.8 million in the prior year period. Other expense net totaled $2.8 million compared to $1.1 million in Q3 2024. The increase primarily reflects a noncash charge of $2.2 million related to the issuance of 400,000 shares of common stock to OrbiMed as part of the August amendment to our loan facility and a $0.9 million change in the fair value of the debt. These items were partially offset by $0.3 million in investment income.

Net loss for the quarter was $13.2 million or $0.46 per basic and diluted shares compared to $16.2 million or $0.62 per basic and diluted share in Q3 2024, an improvement of approximately 19% year-over-year.

Turning to our cash position. The next slide shows the quarterly cash waterfall that illustrates our continued progress in managing our cash. We began the quarter with $15.7 million in cash, cash equivalents and marketable securities. In August, we strengthened our balance sheet through a $13.8 million private placement net of expenses. From there, the waterfall chart shows operating cash use totaled $6.2 million in the third quarter, a significant improvement compared with $10.1 million used in Q2, representing nearly a 40% reduction quarter-over-quarter. We ended September with $23.3 million in cash, cash equivalents and marketable securities. This trend reflects the tangible benefits of our cost actions and tighter cash management that we can control, while we return to accelerated revenue growth in future quarters. With our cost structure firmly in place, as revenue grows in 2026, we will methodically move towards cash flow breakeven.

Turning to our debt facility with OrbiMed. As of September 30, we secured a waiver for our third quarter revenue covenant under the OrbiMed facility at no cost. In November, we entered into a sixth amendment to the agreement, which lowered the fourth quarter revenue covenant to $70 million. Further amendment of the 2026 revenue covenant, if necessary, will be addressed once we have established revenue guidance for 2026. We are also evaluating capital funding options to ensure AVITA has sufficient resources to support operations through cash flow breakeven. We expect to provide an update on our capital plans together with 2026 financial guidance in early Q1 of 2026.

Looking ahead, our financial priorities are clear: first, support revenue recovery as clarity around provider reimbursement stabilizes physician use of RECELL; second, establish a more targeted approach to our large market opportunity to ensure every dollar spent advances putting products into the hands of clinicians and on to patients; third, sustain our disciplined use of cash to support the pathway towards cash flow breakeven.

Lastly, with our significantly leaner cost base and stronger visibility into utilization behavior and better forecasting, we are entering a more focused and accountable phase for the company and towards financial sustainability through execution on both growth and efficiency. We remain committed to transparency and execution as we close the year and prepare to share updated financial guidance in early Q1.

With that, I'll turn back to Cary.

Thanks, David. To close, while we adjusted our revenue forecast for 2025, the actions we're taking now are setting the stage for a stronger 2026. AVITA has always had the right clinical science, technology and products. What's changing now is how we operate. We've engaged accounts as reimbursement clarity returns, reset our commercial focus and are establishing the structure and accountability needed to deliver consistent performance. I'm proud of the team's resilience and focus and confident that we're setting the right conditions for renewed and sustainable growth.

With that, let's open the line for your questions.

[Operator Instructions] Our first question will come from Ross Osborn of Cantor Fitzgerald.

So maybe starting off, can you spend a little bit more time on the initiatives you guys are taking to better be able to forecast the business? Just curious how you're thinking about that as we're getting close to 2026.

Sure. I mean, good to hear from you, Ross. It gets all the way down to the rep level, to the customer level and understanding how our customers are utilizing the products and then, in turn, how they intend to purchase the products and what kind of cadence that is. And then, we have really good modeling in our sales support structure and really feeling like that's going to even out from month-to-month and quarter-to-quarter now that we've had a number of months under our belt with some of these newer products and newer customers. And so, between the processes and the people that are involved in it and the leadership that is now in place, I think we're going to improve quite a bit.

Okay. Great. Glad to hear it. And then, nice to see the European approval and realize you're targeting select geographies at this point. But how should we be thinking about your need to balance resources as far as launching in a new market, especially one as fragmented as Europe versus kind of getting the U.S. business back and steady?

Yes. I mean, our primary focus is the U.S. We're laser-focused on the U.S. We're going to be putting in place limited resources, selecting distributors in selected markets, as you said, really trying to understand customers in the market there and getting traction, getting acceptance and clinical champions in those markets. And so, while we're committed to them, we understand that our focus and our growth is going to come in the U.S. for a good long time. We have to get better at what we do in the U.S. I don't believe we're going to be bifurcated or distracted at all by what we're doing in other countries outside the U.S. And so, it's not a balance. It's a focus on the U.S., but with clear intention in these other countries.

And our next question will be coming from Josh Jennings of TD Cowen.

I was hoping to just -- it's still early days with the normalization of reimbursement and issuing finalized pricing under these new CPT codes. How -- there's probably a wide range of responses from accounts. But how are you guys thinking about the recovery, our accounts, with I guess written policies in place, are going to have confidence in reimbursement [ going forward ]? I'm sure some may want to try and make sure they get reimbursement. But should we be thinking that early 2026, we're going to be back to baseline in terms of having a [ resale ] customer base have confidence that reimbursement will come through?

Sure. Good to talk to you, Josh. This is about just educating them with the codes and having them start using the product and see that they have that reimbursement and showing and proving to them that it's in place. I think that we've been trying in parallel -- as we've been waiting for the MACs to approve and publish, in parallel, we've been setting up our accounts so that there's not too much time between when they publish and when they feel confident. But yet, there is going to be a bit of a lag. And so, we're in earnest trying to get them up to speed so that not only the physicians, but those that are filing the claims are aware of what they need to do and feel confident about it.

Josh, this is David. Just to add on one thing on that, and that is, as we talked about, these claims go all the way back to January. And so, these -- the MACs are going to adjudicate all of those claims going back to January that are still outstanding. And so, that will also lead to physician confidence when they realize that they're going to get paid for those claims that they've already filed going all the way back to January.

That's helpful. And just any update just on VAC approvals for Cohealyx and how they're trending? And any help just thinking about how many accounts may have the green light for Cohealyx utilization at the start of '26?

Yes. I mean, we have about 1/3 of our accounts that have -- that are in the VAC, and about 2/3 of those are scheduled to come out of the VAC in the fourth quarter, but we all know it doesn't always happen on time. So let's say, a fraction of that happens. And then, the idea is how do we truncate the number of days between when it's approved and when they order, and then when they order and when they use it and how much they use it. And so, our teams in the field are busy preparing for that VAC approval, and so that there are no gaps between that process and the ordering and utilization process.

Understood. Just one more. Just are there accounts where RECELL, Cohealyx and PermeaDerm are all available through VACs if needed? And are you seeing any signals in those accounts around the sales synergies and just the utilization of all 3 in specific cases has given you guys confidence that this portfolio can ramp once the RECELL reimbursement turbulence is now -- you guys are making your way through the eye of the storm or out of the eye of the storm and VAC approvals are coming for 2026? I'd love to just hear are there any signals from accounts where they have all 3 products in hand and are utilizing them?

Yes. Josh, thanks for the question. This is David again. So as you know, RECELL is already through VAC in the majority of the accounts that we're already serving. There are a few that we still are going through some of the trauma centers. But for the most part, RECELL is already approved. So what we're looking for is those VACs for PermeaDerm and for Cohealyx. And at this point in time, we do have accounts that are approved for all 3 of those, and they are using them on wounds. Now, it's still early days, and we will be able to provide more information on that. I think it's a good KPI at some point to share with all of our investors and our analysts. But at this point in time, it's a little too early to say what momentum we're getting from those hospitals that have all 3 approved.

Makes sense. We'll wait for some updates on the next earnings call.

[Operator Instructions] Our next question will be coming from Ryan Zimmerman of BTIG.

This is Sam on for Ryan. Maybe I can start about how you're thinking about the spending outlook, given where the balance sheet sits today and cash profile. I guess, is there more that needs to be done to right-size the organization going forward? Or are you pleased with how the teams are set up today?

Yes, we would -- thanks for the question, Sam. It's David O'Toole. So I had a few comments in my prepared remarks. And we're at a place now where we believe our G&A and our sales team is at a level where we can maintain it. We don't think there are any more additional reductions in expenses that need to happen. And we're comfortable with -- as shown, that our cash use is declining because of the restructuring that we did in the second quarter, going from $10 million use of cash down to $6 million. We want to continue that trend. But we're not going to do it. We can't cut our way through to profitability. You just can't do that. You know that. But what we are at is a place where our expense structure is very disciplined, very solid. And now, it's in a place where we can have that expense structure so that when our revenue increases, it will continue to get us on a path to profitability and cash flow breakeven.

Our next question will be coming from Chris Kallos of MST Access.

Just staying with the sales team, David or Cary, I know that was a big focus early this year in terms of reconfiguring how those -- that team is being incentivized. Are you thinking about changing the incentive structure for what you have in place or moving towards more of a portfolio sales approach rather than medical detailing?

Well, I've been in the role a few weeks. I'm going to put a lot of sales compensation plans together. I think for us, we're going to want to make sure that it's aligned with what we're trying to accomplish. I think beyond that, as we're in the process of looking at 2026 compensation plans, I do think that it will be simple and fair and directed towards growth. And that's probably all I can tell you right now, but it's definitely going to be aligned with what we're trying to accomplish in the field.

Yes. I guess that's probably unfair at this stage to ask those questions. Maybe a question for David. With the current guidance such as it is, does that factor in any catch-up from the backlog of reimbursement payments?

Chris, good to talk with you, and thanks for the questions. I really appreciate it. Look forward to seeing you down in Australia next week, as always. But from -- this is not going to be a light switch that comes on with the MACs now publishing and having the prices out there. It's going to take a little bit of time. We are out there educating our clients, our customers that it has happened and that they will get paid. But it's -- we have to rebuild the confidence of those providers to use RECELL and to know that they're going to get paid. So the guidance for the rest of this year is really a result of the lower revenue from the Q3 and really from the lower revenue from January of this year, caused by the reimbursement headwinds. As we said in our prepared remarks, we're going to give a complete update of our revenue guidance for 2026 in early 2026. And so, we'll have a -- everyone will have a better picture of what 2026 looks like at that point.

Great. And David, is it too early to talk about breakeven targets?

Yes, it is at this point. Cary has been on the job for 3 or 4 weeks now. We're all just kind of resetting. And we will be able to give more color around that and all of the revenue guidance for 2026 at the early part of the year.

And I'm showing no further questions. I would now like to turn the conference back to Cary for closing remarks.

Thank you, operator, and my thanks to all of you for your questions, your engagement and support. I think we've used the word headwinds quite a bit, both in our remarks and in some of these responses. I think what's interesting about the company is that the very same things that have been headwinds are going to be tailwinds and are going to propel us going forward. I think sometimes, the company has issues like recalls and other things that are just stopping them in their tracks. I think in this case, if you take a look at VAC committees that have held us up a bit, those same approvals are going to propel us forward. The same thing occurs with reimbursement uncertainty. When there is certainty, it will propel us forward. The same thing happens with the commercial organization. When you optimize that, that does propel you forward when you get data that tells you that you're saving money and making money by using and purchasing our products. Those types of things propel you forward financially and clinically. There's really strong evidence that AVITA and our products are going to make a growth move in 2026. And so with that, I look forward to discussing that further progress in the weeks and months ahead with all of you. Thank you.

Thank you. And this concludes today's conference. Thank you for participating. You may now disconnect.

Okay. Thank you, everybody, for joining us. This is Morgan Stanley's 23rd Global Healthcare Conference, and we're excited to bring interesting stories to you all.

Before we get started today, there's going to be an important disclosure available on our research website. So if you go to www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to a Morgan Stanley representative. And with that out of our way, I'd like to turn it over to Jim to first introduce yourself and then let's start talking about AVITA, which is a very exciting and interesting company that I've had the pleasure of getting to know over the last few years. And this conversation will help, I think, level set the story where you are today and where you guys are headed.

Perfect. My name is Jim Corbett, and I'm CEO of AVITA Medical. We have a really exciting therapeutic acute wound care portfolio, which is headlined by a technology called RECELL, which I'm sure we'll talk about here in a moment.

Awesome. So maybe just to dive in, can you tell us how -- what is the RECELL platform itself? And how does that fit into the overall mission of AVITA?

Well, RECELL is really unique. And in a way, I'm going to describe it at the end. What it produces is a spray on skin graft. And when you think about that conceptually, it's like how does that happen? Well, what we do is we take a very small autologous from the patient biopsy, and we disaggregate it in an enzyme buffering solution and then deliver it as a spray onto the wound.

Now these are for partial and full thickness wounds that often are 10, 20, 30 and more total body surface area. The benefits of the spray on skin are multiple. So first and foremost, it's a reduction in skin necessary to do the graft in the order of 97% less skin. So the biopsy you take for RECELL will expand 80:1 and to give you a dimension of it. So a 2x 2 square centimeters could cover the area of your back -- of your body. And for someone who says, how big is 10%, it's like your whole arm, right, as an example. So it's really quite extraordinary. And the second benefit is it heals very quickly because what you're doing is you're spraying the cells into the wound, they adhere to the revascularized wound and they proliferate and they proliferate faster, leave less scarring and that has a tremendous patient benefit in terms of the patient healing and getting home quicker.

Great. And for those in the room who are able to see our 36% stickers, you want to give them a little bit of background as to why we're wearing them?

Nice of you to ask. 36%. It's actually a really big thing happened last week, one of those transformational times, I think, for AVITA. Last week, at the European Burns Society meeting, a study was presented by Dr. Victoria Miles from the University Medical Center of New Orleans. And that study looked at, I think, 6,300 RECELL patients from the U.S. burn registry. It paired them in a 2:1 format with traditional full thickness skin grafts. And what it looked at was healing. And what the data showed in patients under 30% total body service area because that was the sample, and that actually represents the vast majority of full-thickness wounds in the burn world, a 36% reduction in length of stay.

Now turn that into a couple of other metrics for you. That's about a 6-day improvement in the length of hospital stay, which depending on what your cost per day is, which varies in hospital to hospital, but it's $10,000 to $12,000 a day. So you can do the math on that rather quickly. And that the patient gets home sooner, which is like the ultimate. So it saves money. They're in the hospital for a shorter time and they get their home to their family in a sooner time.

That's great.

So 36%, remember that.

Yes. It matters. And so that's RECELL, but you also have Cohealyx and PermeaDerm. So you're building out a full suite and solution of therapeutic acute wound care solutions. How do you think about capturing value across the same patient, the same wound and the same hospital pathway?

Come on, you took that right from me. That is how we see it. So our salesperson today versus our salesperson a year or 2 years ago, we used to be organized with a high percentage of our field employees were clinical specialists. Now that's a very low number and therefore very specialized use because a full thickness 10% total body surface area wound is really a 2-stage procedure. And in the first stage, you clean the wound up and you put in a dermal matrix. And in this case, that would be Cohealyx. It's made of bovine collagen, and it revascularizes the wound. And that revascularization ultimately in stage 2 is the receiver of those skin cells from the spray on skin cells of RECELL.

Now in both of those stages of procedure, the sales rep needs to be there to sell Cohealyx, then they're going to close that wound with PermeaDerm. And PermeaDerm is really unique in the sense that it's translucent, so you can see through it. That matters because when you're healing a skin graft, it's really sensitive. So instead of having to lift up the dressing to look, you can look right through it and see. At the same time, it's biosynthetic and it has a microporous, it stretches that make the pores larger, smaller. And the pores have a dual purpose. They let air in and they let exudate or the wound can express out through those same pores. n

So you have stage 1, clean the wound, with Cohealyx, cover with PermeaDerm, Stage 2, treat with RECELL, cover with PermeaDerm. And in fact, 10 days later, after care, one more Cohealyx just in case as potential. So now we have selling activity that needs to occur throughout the procedure where before we wouldn't be in the first stage at all necessarily because we had no purpose there. And in the second stage, the clinical specialists would often cover the case to support the user with training and those types of things. But now that's a selling activity included. So quite a different model.

Right. Very different. And as we then pivot towards financial profile, you guys showed a solid year-on-year growth in Q2, but unfortunately, missed expectations. Can you walk us through what happened? And what gives you confidence as we look through the back half of 2025?

Yes, that's a terrific question because I think in Q2, 2 things happened as we came to a full understanding of why both Q1 and Q2 were short of expectations, which had to do with a new CPT code that went into effect January 1. And it went into effect in a unique manner. The code was specific to RECELL. As it was developed by AMA and the CPT committee, the CMS was not pleased with the outcome. They thought it was too complex. So on the one hand, they said to AMA CPT committee in a very detailed way, here's what we want you to fix, go fix it. Well, that's about a 2-year process.

In the meantime, they said, you now have a code that you've created a specific, we want to assign that to contractor pricing. And for those of you who may or may not be familiar, the contractor pricing refers to Medicare administrative contractors, of which there are 7 that cover the United States that administer Medicare and Medicaid benefits. It's not completely uncommon for them to do contractor pricing, but it's not common either. And it takes them a while to get it organized and get harmony among them. They have an objective to handle technologies and claims and procedures commonly. And it took a few months before they got themselves organized and communicating. In the meantime, there was uncertainty around what and when the providers will be paid. That started manifesting itself right away in Q1. And that's something we wouldn't have natural visibility to. That's happening inside the billing department and claims were being delayed and in some cases, not paid correctly by the view of the provider.

And then later in May, the 7 MACs had a common meeting with the society, and they came to an understanding about how to handle this. And then they started implementing it. What we've seen here in Q3 is we see all of that coming to resolution. Now it cost us about $10 million in revenue, we estimate in diminished demand by that uncertainty in Q1 and Q2. And that's reflective in our forward guidance that we reset. So in our new guidance, year-over-year, we still are going to grow about 24%, but that is a disappointment from where we started. At the same time, what we see is profitability coming in Q2, Q3 next year, and we've guided to that, Q2 crossover, Q3 [ GAP ]. And this issue will, we think, fully resolve by the end of this quarter, and we'll see it in this quarter and more fully in Q4.

Okay. Great. And gross margins also came down a bit in Q2. And you touched a little bit on time line to profitability obviously is a flow-through. But what was driving that compression in gross margins? And how do you think about where it's trending towards?

Yes. Gross margin is really an interesting concept. So our resale gross margin runs around 87%. Our gross margin for PermeaDerm is about 60% and for Cohealyx, 50%. So as our mix grows, our percent gross margin is going to go down. But let me play out a little bit how that really works. Let's take a single patient that is 10% total body surface area. That would be a $6,500 RECELL at 85%. So give or take, $5,500 of gross profit dollars. In the case of that same 2,000 square centimeters at market price for the Cohealyx at the competitive market price, that would be $30,000.

At 50% gross profit, that would be 15,000 gross profit dollars, which would be 3x what we make for RECELL our proprietary home run product. And in the same case of PermeaDerm in which you might use -- let's imagine that you used $2,000 worth at 60%, you'd make -- you'd use it potentially as many as 2 or 3 times, you make $2,400 or $3,600 of gross profit dollars. So this all works under one other assumption, and that is that you're not increasing your SG&A, which we're not. So we don't foresee that for the next 2 years. We have -- we don't need to increase new accounts. We have -- there's about 120 burn accounts, and there's about 250 Level 1 and 2 trauma centers. So when you look at it through those eyes, our 82 headcount field team has, on average, 4 or 5 hospitals each, not too many. And they get that -- so we're a high touch still with less people than we used to have. And we have same wound, same patients, same doctor, same hospital. More dollars.

Yes. You've really sharpened up that commercial model, right? Fewer reps, higher productivity. And as you talked about with that broader portfolio, there's a lot of efficiency gains that are being generated. How do you think about this setup for the long term to fuel growth?

Well, I think for the long term, there are other adjacent same wound categories. For example, one we're working on right now is antimicrobial, where we would offer PermeaDerm and Cohealyx with and without antimicrobial agent in them as an example. Another example would be there are -- not anti-scarring, but reduced scarring technologies and treatments that we're studying and want to find a solution for that, in fact, improves the scarring outcome for these patients. So we think that we're wedded, so to speak, strategically to this adjacent market strategy for therapeutic versus chronic acute wound market and the adjacent needs for that patient and that doctor.

Yes. Great. And now with this leaner cost base and the recent raise that you all did, how do you think about cash runway and hitting breakeven by middle of '26?

Well, we feel quite good about it. Without -- I can give you one way to think about it. Our OpEx for example, per quarter is about $25 million. But of that, $2.5 million or so is noncash, $2.5 million to $3 million. So that puts to $22 million. So then you start thinking about at what revenue and what gross profit percentage. And that somewhere happens around $28 million. So with what we have in the pipeline, we see that the growth gets us there in Q2, Q3 next year. And of our current approximately $30 million in cash, we also carry that is not counting, of course, our accounts receivable and things like that. So we think we get to profitability very sufficiently with the cash we have. We think we start accumulating in the last half of next year. And we think that by the time the OrbiMed facility matures at the end of '27 that we'll be in a position to pay off that debt, which has always been the plan. We didn't want to -- we did the debt to diminish dilution, and we think we will ultimately do that.

Okay. Great. A big question within the space is always about reimbursement and adoption. So can you break down the value analysis committee process for Cohealyx? And once you're in, how quickly do accounts ramp?

So for Cohealyx, I think that's the big variable on the upside. And so value analysis committee submission is not a voluntary company choice. that is driven by physicians in the hospital who want it and a committee in the hospital accepts that submission. So that's the first hurdle that happens, right? So the next thing that happens is they have to calendar you for a meeting, the champion or champions need to show up and they have to prove it. Now we're offering a number of advantages that are unique. For example, it's a high-value inventory item. So that's a working capital issue for any hospital. And hospitals are notoriously -- they're low single-digit operating margin. So it matters.

We are in a place where we have put an RFID marker on all of our inventory. Our reps all have an RFID reader, and we put the inventory in on consignment. Now that has a number of advantages beyond the obvious. The obvious is the working capital, right? But the secondary benefit is real staff related because when they do consignment manually, what has to happen, they don't just let a sales rep walk in and start crawling around where they store product, it occupies a person or more. And when they lose it, what do they have to do? They have to find it and then that occupies a person. With RFID, all that goes away.

So the staff isn't necessarily in favor of consignment, notwithstanding it being good for the hospital. But under our model, they'll like it, right? So that's a secondary benefit. So the -- it also helps us with the value analysis committee approval because it's an advantage for them from a staff efficiency, economic efficiency. And they get a product that gets time to graft 7 to 14 days faster than anybody else's. So if you go back to my heart, 36%, if you're saving 36% of length of stay at 6 days and you get time to graft improvement of 7, that's 13, it's almost 2 weeks. Who wouldn't like that, right?

No, indeed. Sound's great. And maybe switching to reimbursement then. NTAP reimbursement for use of RECELL on non-burn trauma wounds kicks in October -- October 1. What kind of impact do you think that's going to have on the business? And how fast can hospitals move?

Well, yes, the NTAP is really targeted at nonthermal wounds and outpatient. And a lot of those patients, the hospital gets concerned about their costs and which is one reason they treat them outpatient. And this will give them an incentive to use RECELL, improve their margin and have them experience the length of stay result. It will manifest itself differently. The patients will heal faster when they get followed up. They'll have higher patient satisfaction scores. And recently, I learned that so many hospitals have a Chief Patient Experience Officer. And so this is the type of thing that would really affect that particular population.

So the reimbursement will help us motivate hospitals to adopt -- because really, if you think about it in a different way, this 36%, the NTAP are changes in protocol, okay? We had one of our biggest customers recently enter into an agreement with us that involved a commitment that we would reduce their length of stay. Otherwise, there would be some later discount. And they did that. They changed their protocol because they had a protocol not to treat patients under a certain total body surface area with RECELL because they saw RECELL as a supply cost. When you see it as a protocol change, you're selling something different. You're selling 13 days. When you're selling 13 days...

Much more impactful.

Yes.

That's great. And then just sticking on RECELL, there's multiple MACs who are now reimbursing RECELL. How is that for rebuilding physician confidence and growing use of patients?

Yes. So the MAC in essence, are resolving themselves in a positive way. Getting that communicated and verified for the physicians is a task. It's a task that the societies involved undertake themselves, and it's a task that we also help with ourselves because we'll get some proof sources, some EOBs essentially, and we'll communicate those to the physicians so that they know. And it's reassuring and it's a communication element that we have to execute well.

Okay. Great. I mean RECELL GO mini just started commercialization. Where are you starting to see the strongest traction in the early days? And what are you hearing from the field?

Yes. So RECELL GO mini has its foundation in the original trauma, which we called full-thickness skin defects, which is an acronym that FDA uses, but no one else does. It means a nonthermal trauma wound. And in that study out of nearly 60 patients, 58, I believe, but close, the average size of wound was 400 square centimeters. That is 2.5% total body surface area versus standard RECELL which is 10%. So there's a -- and the reason I make that point is there was a certain resistance kind of a cognitive distance to solve a 2.5% problem with a 10% solution, right? It seemed wasteful. And I think that's a credible thought on the part of the physician.

So we developed RECELL GO mini. It goes in the same RECELL GO device. So it doesn't require a separate processing device. It's just a different size cassette. Our response has been very positive towards those who look at it through the eyes of protocol. It's a different strategy for treating these patients in outpatient. And they have a lot of them. For example, you could have a surgical excision for a Mohs procedure. It's a perfect indication for RECELL GO mini because those are often smaller than 400 square centimeters and they need a skin graft. And so we're getting good success where protocol change is occurring. And that takes some time. But at the same time, we're able to do it.

And one of the things we find that's really fascinating is we find other wounds that don't need a skin graft, but they need a dermal matrix. So it's the same physician with his or her same wound. And so you're in there. So we had a case in was probably the first Cohealyx case. And Ohio State did the case and they did their own press release. And they had a patient who needed Cohealyx but not RECELL. And in the article, the physician was quoted as saying, "This patient left the hospital fully closed at 14 days and normally would have taken 30" which was transformative in that particular physician's way of thinking about how to treat these patients.

Yes. And you mentioned on your Q2 earnings call that you got a $300,000 order in July from a top-tier center that I think points to this commercial momentum that you're seeing in Cohealyx.

Well, for sure. Now it wasn't really one order from the one account. They ordered several times during the month, which is actually better.

Yes. Repeat customer.

Well, it shows they're utilizing the product, right? You didn't just sell a stocking order, you [ sold absolute new order ]. To give me a kind of a way to think about the potential behind Cohealyx. We have validated through claims data in the 122 or so burn centers that they use $1 billion worth of dermal matrix a year. So you can do the math on that and know that a hospital uses $8 million to $10 million worth, right? And we aren't quite at halfway. We're nearly closing in on half of the burn centers have Cohealyx already in a VAC process submitted.

Now you can do the math quickly on that. It's in the hundreds of millions of dollars of potential. Now you don't get all that at once because there's multiple physicians, there's competitors in the hospital already. But to have access to that market is really exciting, especially when you know that what you're bringing is so consistent with your fundamental theme, which is 36% length of stay, 7 days to graft, save 13 days, your patients are happier, your hospital is more profitable. You can use that bed. You know how many times more you can use the bed with the 36%? 13 more patients per year can occupy that bed.

That's a phenomenal stat. I mean you walked through a little bit of the TAM that you all have. But in reality, your TAM is $3.5 billion across trauma, surgery, outpatient. How do you think about those 3 sources of the TAM? What's scaling the fastest? Where do you see more of the longer-term opportunity?

Well, the longer-term opportunity is -- that's all the domestic potential, by the way. The way we're looking at this is through the eyes of our strength. So our strength, we're 5 years in the burn market, well established. So we are going there first. And by going there first, you build credibility, viability, revenue and margin. It's the whole stream. And you do it most efficiently. The expansion into the potential that exists in trauma and surgery will happen as an extension of that.

So if, for example, on an extreme level, we spent the next 18 months just developing our portfolio within burns, it would be a great outcome by itself. With the additional things that we can do, at the same time, you create a ramp that doesn't have a need to be steep. It can be steep as well as an individual hospital can accommodate protocol change. This is really all about protocol. It's all about how the patient gets treated. You can treat the patient, so they get out of the hospital sooner, costs less to treat and you can use the bed more or you can treat them in a way that uses the bed less, costs more to treat and they go home later.

Suboptimal. And you mentioned that, that's the $3.5 billion is that is a U.S. opportunity, right? That's right. With CE Mark expected, how important is going to Europe and abroad? And can you leverage what you've built in the U.S. outside of the U.S.?

To answer that, first, there's a bigger question is where do you go internationally? So let me step back and describe what we're thinking. So we intend to go to markets that fit 3 criteria, okay? The first criteria is they have to have a medical system that can use the technology. So that's a filter. The second is they have to have the ability to pay for it. And the third, a population to make a business. So that's actually rather restrictive because, for example, you can find places, and I don't mind saying, for example, in the Middle East, where there is some very wealthy segments of society, but in fact, very small amount that are really able to build a market around.

So the way we see that filter, it leads us to the European Union, which plus the U.K. And we think that we're starting from virtually 0. So we're going with local distribution partners because they bring us expertise in the local market on reimbursement, on physician relationships, on how business is conducted differently, say, in Germany versus Italy, right? So we're going there, but we're doing it with third-party partners for the next few years at least. And Japan, where we already have a burn approval, and we're working on a broader approval, but the and we do business there now. And Australia, and Australia is kind of a natural. It fits all 3 of those categories. It happens to also be where RECELL was invented. So there's some affinity there, which we care about.

Great. Look, we have about a minute left. What do you want folks who are in the room, folks who might be reading this transcript afterwards to take away about AVITA and where your profit is heading?

I think the best takeaway is that we did struggle with this reimbursement transition in the first half of the year and that it has passed us. The fundamentals of the business are in great shape. The products are in great shape. Quality is high. The portfolio is playing out the way we intended. And the structure of the company is at the place it needs to be for some time. So a lot of leverage ahead of us. And the reality is our future is quite bright. And I am completely motivated about it.

And 36%.

36%.

All right. Well, thank you so much for taking the time. It's always good to catch up, and congratulations on all the progress that you've made at the company.

Thank you very much.

Good morning, and thank you for joining the AVITA Medical, quarterly Australian webinar. I'm Rudi Michael SinofMonsoon Communications.

Joining us today are AVITA's CEO, Jim Corbett and CFO, David O'Toole. Jim is in Australia for a Sydney-Melbourne roadshow this week. This webinar has been arranged. So Australian investors have the chance to be brief direct and ask questions. Now let me point out that you can submit questions using the Q&A function and we'll get to them after the presentation. I'll now hand over to Jim to begin the presentation.

Thank you, Rudi. It's really great to be back in Australia again. As many of you know, after the last few years, we make a point to have this from Australia because, in fact, our Australian shareholders make up about 50% of our registry as the U.S. makes up the other half. So it's really important to us to stay in touch with you, share with you what's the latest going on are with the company. And I'm fortunate today because it's beautiful in Melbourne, a lot a little bit chilly but beautiful.

So let me begin by just emphasizing a few things. During the last couple of quarters, we've taken great care to redefine our company. and focus it on our core abilities and capabilities and our future R&D intent. Very simply said, AVITA is a leading therapeutic acute wound care company. Our mission is to transform acute wound care. Let me just take a minute to talk about that for a minute. When we say therapeutics, what we mean is that we're going to heal that wound, close that wound and send that patient home. That is the objective. That contrast with other types of wound care which are necessary, but not our mission or focus, and that is chronic wound care. For example, diabetic foot ulcers and venous leg ulcers comprise greater than 90% of chronic wound care and unfortunately, are not really intended to get treated in a way that is going to heal them permanently unless the underlying cause of the venous -- of the chronic venous insufficiency or diabetes is solved. And so those are not where we are. We're principally in the acute care setting and are treating the dose patients. So as such, when we think about what AVITA is, that defines us. And correspondingly, it means we're not a dermatology company.

Vitiligo, which we have done research on and actually received approval for, is a market that will require tremendous investment, and we think our investment dollars will be better return to shareholders and to the benefit of patients by focusing on therapeutic acute one care.

So with that, let me talk about our portfolio. What you're seeing here is the portfolio as it presents to the doctor and the patient. Let me take a moment and describe what happens within a patient with an acute wound presents. One of the things that happens immediately is the physician will need to temporize the wound. And what they're doing is they're putting a dressing around the wound to assess the strategic way they're going to treat and close that world. When they temporize they can use our new PermeaDerm biosynthetic dressing.

Now let me describe it. It's transition, so you can see through it. It's microporous so it breathes in the exadate or the wound weep can come out, and it can stay in place for a multiple number of days. So it gives the doctor and his or her team time to assess the patient. Then you move into what is typically Stage 1 of a 2-stage procedure to perform a skin graft and close the wound. In that Stage 1 treatment, the wound gets debrided. You cut away the damaged tissue. If it's a burn, it will be the tissue damage by the burn. If it is some other form of trauma, there will be dead tissue that needs to be cut away. It could be a advertising fascitis patient where you cut away the bacterial infection. In all of those cases, what needs to happen in Stage 1 is the revascularization of that wound such that it is ready to receive a skin graft.

Now when we do that, we use the dermal matrix. We have just introduced during Q2 called Cohealyx, which is a collagen structure. It has some really unique qualities, and I'll share those with you in a few slides to come. But I want you to see it in a big strategic picture of treating the patient.

About 7 days later, after applying Cohealyx, the patient is ready for skin graft. Now the patient can receive resell or resell combined with Splitskingraft, or -- and there's multiple versions of RECELL the Regal standard manual, the automated version of RECELL GO and depending on the size of the wound RECELL GO Mini, which treats a 2.5% total body surface area versus the 10% for standard resell. So that is Stage 2 and occurs again, about 7 days after the Cohealyx is applied to the room. When you complete that graft, whether it's a combo of split skin graft and RECELL or RECELL GO on its own, you need to put a dressing on, and that dressing is and can be Permian derm for all the same reasons, you can look through it without having to disturb the wound, it allows the wound to breathe and heal optimally and allows the exadate or the wound weep to exit the wound without a lot of disturbance.

Now there is 1 more stage about 10 days later when you may during after care, need to apply 1 more dressing and PermeaDerm would be very suitable for that as well. So when you think about what's going on here, I want to contrast it to our prior commercial model. What I just described requires a selling competent AVITA sales executive who is clinically trained to support every stage of that procedure. In our prior model, we would only attend as a company, the stage where RECELL was used. And we would often do that with a clinical specialist. And -- in the early days of resell, this is really the only way to go, right? You needed to have really great, so to speak, white glove care for that training that need to be used with implemented when there was new users. We now have many experienced users. And we want to sell in every phase of that multistage procedure I just described.

So we're going to talk today about the transformation of our commercial model and how basically we have a selling person present throughout the multiple procedures that involve RECELL and the products we sell that really are designed to support the needs of that same wound on that same patient by that same doctor in the same hospital. That is our vision.

This is an interesting slide. One of our really creative marketing team created this, and it really helps you see the cross-section of the wound, the derms and epidermis, and you can see that those blood vessels revascularizing. But if you just move -- the purpose of this slide left to right is to show the potential of this concept of a portfolio that's applicable to the same wound, the same patients, the same doctor and the same hospital. And you can see across the bottom, the revenue opportunity and a partial thickness wound with PermeaDerm $8,000. Deep partial thickness won with PermeaDerm, that means more than 1 resell device means more than 10% total body surface area. And then all the way to the right, where you need to put PermeaDerm into the patient's wound after it's been debreeded and it takes 7 days to get ready for skin grafting. And you get as much as almost $57,000 of revenue potential in that same wound. So our TAM, particularly in burns has tripled in the last 12 months, and it's transforming the company, both in our breadth of product opportunity, our ability to add value to the treatment of these patients who've suffered terrible injuries. And to be able to add value to the physicians workload.

To that end, the clinical trials keep on rolling at AVITA. We recently were looking at our portfolio clinical research. It's not well known, perhaps by some. We have over 250 publications, abstracts, podium presentations that have been put on at various medical conferences some of them buy AVITA executives who are well regarded in the field. Now this really defines the core and heart of how AVITA seize our role in wound care. We think that bringing forth clinical research with our products is absolutely essential to helping the physician make the right choices.

Now we've got Cohealyx-I, and we're using the Romanian because we expect more. And at the same time, this is a post-market study. Its primary endpoint is time to skin grafting. It's up to 20 centers, 40 patients. And I'm asked always right away. Wow, 40 patients, seems like just a few. Well, here's why it's 40 patients. We have used an objective performance criteria methodology in our clinical design. Objective performance criteria means we took the competitive products, we used their published clinical research and their time to graft as the foundational benchmark against Cohealyx-I. So Cohealyx-I, we don't have a need to randomize and prepare they've already done the work for their products. We're just going to do the same work for ours and compared to theirs. Well, in the case of all of our competitors, the best-in-class is 14 days time to graft and the predominant is 21 days.

So we're trying to prove an extremely powerful statistical signal that we will be 7 days or more better than everybody else. Now the benefit of that is, of course, 7 days time to graft, 7 to 14 days better than someone else, any other company, that is time off of the treatment regimen for the patient. That shortens length of stay. That is valuable. Later on, we'll talk about that, but let's just park in our mind the minimum improvement that we expect from Cohealyx-I is 7 days versus any other dermal matrix.

Now let's talk about PermeaDerm-I for a moment. PermeaDerm-I is a biosynthetic that's translucent that has adjustable microporosity, and you can leave it in place a long period of time, just like Canaviscin or Allograft. And what we're doing is we're comparing it to Allograft. Now the unfortunate and fortunate thing for us, Allograft is very much in broad use for used as a dressing on this type of wound. Let's just compare what we're going to be looking at. First of all, can you -- handling is an important part of the study. It turns out allograft has to be kept frozen, has to be thought out and you have to deal with that. So that's kind of a pragmatic logistical issue, but 1 that costs time and money and effort on part of staff. PermeaDerm does not require that.

The second is that when you apply it, you get to apply it and does allograft work? Sure, it does. Can you see through it and a firm that is working, well, no, you have to lift it up and look and when you do that, you have the risk of disturbing the wound, which we all know is not good. The third part about it is, can you adjust the microporosity so that cadaverskin breathes, well, we all know cadaver skin doesn't breathe, but PermeaDerm does. So pretty great. It's got a nice feature. And the exit date that wound weep that naturally happens as a very severe wound heels. It cannot come out through the allograft, but it can come out through the PermeaDerm.

And then finally, there's the cost factor. PermeaDerm, unfortunately, cost half as much as allograft. So when you add all these benefits and then you pay half as much for it, we think we're going to really demonstrate superiority over allograft in this study. So these are really important because all of our clinicians are treating really severely injured patients. And being able to rely on the clinical data, the products that they use to treat them is really our mission.

Now what does this do for our company economically? Well, 2.5 years ago, we were in the burn market only. And we had about a $450 million TAM. If every patient in the burn world was treated with RECELL, we could sell $0.5 billion. Now it's not been nearly that penetrated yet, but you're going to find out in a minute why it should be.

When you look here, you can see with the portfolio of our products, short and long term and built it around, and now we have trauma and surgical wounds, where we have approval for resell with resell as the castle in the moat, right? From a regulatory point of view, you can't copy it, you can't reproduce it in under 5 years. And now with the automation of RECELL GO, we have RECELL at the center of our strategy for many, many years to come in excess of a decade. So building the product portfolio, our sales rep and RECELL are centered to the case. We now have same patient, same wound, same surgeon, same hospital, a $3.5 billion TAM in the U.S. only. So really a great opportunity for this company.

Let's talk about, I think, the most consequential data of all time for RECELL. And perhaps among all the devices I've ever known, probably the most transformative data that has ever been presented. Let me set the stage. This data is mined from the U.S. burn registry and it's 6,300 patients, and it was presented at the British Burn Association Annual Meeting. And this data compared split that the skin graft to RECELL. And the results were dramatic, and over 6,300 patients over a 5-year period, with patients suffering burns covering 30% or less total body surface area. And this is the graft stage. So this is after the dermal matrix stage. The split the skin graft took 15.6 days to close, RECELL 10 5.6 days, equals, 36%.

I was sharing with the team of AVITA. Hey, the most important number in our lives has become 36. Everybody in the world should ask us, why is 36% important? Well, 36% is the amount of the length of stay a patient treated with RECELL should expect versus a split to new skin graft. So of the nearly 70% to 75% of burns that are not treated today with RECELL, I'd like to hear the argument that I want my patient to stay in the hospital longer, I want them to not go home to their family sooner, and I want to spend more money doing it. That is the comparison that has been created by this data. This is the inflection point for AVITA.

Let me share with you a very similar part of our strategy with the same conclusion. Cohealyx, when we developed Cohealyx, we did so, and we have a great capability in Boston at a university there where our Senior VP of Medical Affairs, Katie Busch is able to do the preclinical tissue research on herself. And what we are able to do there is take a pig model, which is validated for this purpose, and look and compare how a dermo matrix would perform versus 2 other competitors in this case. There was 3 other competitors. One did not perform well enough to really spend much time on.

And look at -- and if you look at this graph, it's arranged vertically. So Cohealyx going down, competitor A going down, competitor B going down. And what we're looking for is graft ready at 7 days rather not which is better relatively speaking, period because these others get graft ready sooner or later. It's just Cohealyx gets better, much faster, and in fact, that translation, it looks like 87 to 97 to 85, actually 7 days, and 7 days is a lot of days. And you add that to the 36% improvement for resell versus split thickness skin graft, and you're talking about patients treated with AVITA products getting out of the hospital as much as 13 days faster. 13 days in someone's life who's recovering from severe injury is so valuable to their life, and the doctor can treat more patients and the hospital can use that bed to treat more patients, and they make more money doing it, which sounds a little capitalistic, but it's practical.

Let's take a minute and look at a good example. This was a patient treated with Cohealyx. Now this patient did not get RECELL wasn't as big a wound. However, it was a type of wound that typically takes 30 days to recover. This patient was graft ready inside 5 days, received their graft and exited a hospital at 14. Now this was -- this particular patient was treated by OhauState University. And this was their press release. They stated this would have been a 30-day treatment and here's a patient that gets out in 14. I suppose maybe they're looking for a vacation, but they're not looking forward to be in the bed of a hospital in Ohio State, while their wound heels when they can be out live in life. So this is real-world experience with Cohealyx.

We think Cohealyx-I, the study is going to further validate this. And we have conversions already of hospitals that are using Cohealyx and finding -- this days to graft is real. It's happening, and they're so enthusiastic about it.

Let's just talk about the value of reduced length of stay. And you can look at it right here on this graph. Total estimated cost per inpatient day is $11,000. There's direct costs and related costs, but you can just see how much it is worth, and it occurred to us that we are not selling RECELL the product. We're selling to resell the protocol, the protocol to treat with autologous cell suspension, known as RECELL is going to result in faster healing, less scarring and go home soon to your family sooner. And there's nothing that really beats that combination.

Now we're going to take a minute and look what this means for the company because our future is bright, and it's important to understand some of the challenges we've recently had. This last 6 to 9 months have been a little bit challenging for the company financially. And I'd like to take a minute and describe why and why it's on its way to complete resolution. Now a new procedure like RECELL has been in place 5 years and it was time for its own independent Category I code, which went through the AMA adjudication process, and the AMA, what's called the RUC committee, which is relative unit comparison to create the points by which reimbursement is created for a new code.

When it arrives in time for release November 1, CMS looked at it and said, "Oh, my goodness, you AMA, have made this way too complicated. So we're going to propose a dual path resolution. Path A you go back and fix the code, and we gave you -- and they gave AMA a several-page guidance document that they wrote specific to the code, said, here's how you fix it. Please go fix it. And by the way, I'm happy to report that's well on its way. The societies have gotten together. They've got a submission underway, and it will all get resolved by January '27 in kind of right on schedule with the normal AMA process and twice per year meetings in the RUC process.

At the same time, we have a code, and they said, "We're going to give it to the contractor pricing. What does that mean? CMS is the central organization, and they contract with subsidiaries of commercial insurance companies to administer Medicare claims and Medicaid claims. In this case, there are 7 of those geographically in the United States, but they are not related to each other. They are all contractors with the U.S. government, and so getting them to cooperate is 7 different companies interacting. So when we spring out of the box in January, unbeknown to everybody, doctors, hospitals and ourselves, the doctors themselves got paid, but the providers -- or excuse me, the hospitals themselves get paid, the providers, the doctors, basically got all kinds of things because contractor pricing is uncommon, not as far as never happens, but it is uncommon. Medicare contractors are in experienced at it and uncoordinated. They do have a joint goal to unify and do things similarly so that Medicare policy is implemented across the U.S. in a common manner. It wasn't until the May time frame that all 7 of them met together, which they did. And during that time, they talked in the very -- with the societies and with AMA and it came to a good understanding of how to reimburse for RECELL.

What we see in June and July is the breakthrough of that solution. So what's being solved is retrospective to January 1, claims that have not been actioned upon are going to get active on, claims that were underpaid will get adjudicated and paid correctly, and all of this will come to some resolution we believe, during Q3, and we see good signs of it. So a real hiccup, it affect us very materially in the first half, and it will cause us to have a recovery in the second half. Let me describe that.

We think it affected us up to the tune of $10 million in revenue in Q1 -- first half. And in fact, when we compare our top 10 hospitals, and we look second half '24, first half '25, our top 10 hospitals not only stopped growing, they retracted $5 million. So we think this is all going to now turn around. But it caused us to say, "All right, let's ground our guidance into the reality of what we just experienced and know that during the second half, the 7 MAX have to recover, re-adjudicate a large number of claims from January, get a system in place that's reliable, well communicated to the market and take away this chaos.

So the good news is, before January 1, we had never had a claim turn down. So to run into this problem was sometimes I refer to it as concrete learning when I run into a concrete wall. That's what this felt like. So it did happen. We've worked our way through it. We've got updated guidance of $76 million to $81 million for the year, which is growth of 19% to 27%. If you hit the midpoint of that, it's about 25% growth over prior year. And if we were able to isolate the disappointment over our prior momentum, we'd have 64 going to 25% growth. We've been pretty excited. And that said, we have reset our guidance to what we believe we can readily achieve and be in a position in -- if things go a little bit better than we expect, great. We'll deal with that. But we feel very confident about this guidance, especially with the new products.

Now what did it do with cash flow breakeven and GAAP? It moved it 6 months. It didn't move it 6 years or a year, moved in 6 months. Unfortunate, but reality. And as a consequence, our crossover Q2 '26 and Q3 '26 for GAAP. So we feel great about that guidance. We have no need to grow our OpEx and in the coming year. And the sales organization redesign, I discussed earlier did some great things for us because on the 1 hand we put all selling assets in front of the customer. That's number one, really good. But when you do that and you remove the service aspect, you need less people. So we did reduce people by a material number, and we took our field organization from 180 -- 108 to 82. Our quarterly expense reductions associated with that, which is $10 million annually, which lowers our cash needed to breakeven.

So 1 of the benefits of becoming more focused is this. There's other things we did. Of course, we ceased investment in Vitiligo, which saved us marginally some capital. So what do we see right this moment as we're moving in Q3? That is very encouraging. We don't give monthly revenue, but I can give it to you qualitatively. June which is month 3 of the quarter. And remember, we're in acute wound care business. Acute wound care has to be ready for mass casualty. So there's always a minimum amount of inventory on the shelf which typically gets topped off in month 3 of a quarter. So June being 1 of a quarter, fit that definition, and it happens, June was our highest revenue month in company history. Pretty encouraging towards this recovery I've been describing.

In July, which is month 1 of the quarter, which would always be our softest month and especially following the highest ever, but in fact, July was the best month 1 we've had in a year. So it was real strong, notably including PermeaDerm and Cohealyx. So we're really feeling great about that PermeaDerm had its highest quarter of revenue to date in Q2. And Cohealyx, which was launched in April, has started to have accounts trickle out to order. Our first real conversion, they didn't place an order of $300,000 in July. They actually placed several that added up to 300,000 in July, reflecting real utilization. So it wasn't just a stocking order.

And as we move into August, they're going to do it again. So we're really bullish on the value of Cohealyx. The reimbursement issues, we think, are getting behind us. There's more work to do, but we feel confident the societies are really engaged, they're doing a terrific job. AMA is responsive to them. The MAX are being increasingly responsive to them. This resale demand is increasing, but the length of stay data is going to change the world for us. Let me take a minute. We took this data and we've gone to 2 hospitals, 1 big academic on the East Coast and 1 big IDN out west. And we went to them and both of them had a protocol don't treat under 20% TBSA. And sure enough, we as mentioned, enter into an agreement with both of them, where we share in that length of stay reduction. So -- in both cases, it's resulted in what we expect 150 additional cases every month through the remainder of the year. So just that data is going to change the whole world for us.

The operating expense reduction I mentioned earlier, we saw in Q2, you can see it on the P&L. And you've got the reason why, of course, change in how we're going to market. And many of you may know, we announced the private placement of AUD 23 million, USD 15 million investment in the company by a number of new and existing investors yesterday, so literally hot off the press. So our cash on hand is in a great place. We're closing in on nearly $30 million of cash with that investment. And we have a very strong accounts receivable, that's also coming in the order of $9 million to $10 million. So we feel we're in good shape financially. We've kind of -- there's been concern that we needed to have the right amount of cash to get profitable. That issue is solved. We're concerned about the reimbursement that issue is completely solved. We got the biggest gift on the planet by getting this length of stay data from British Burn and figuring out how to maximize that 36%, that 36% is going to change the trajectory of resales feature.

So I think with that, I want to close with the thoughts about what we're doing. With the resolution of this claims backlog, we expect to resell rebound second half. Our recovery trajectory and stronger balance sheet allows us to go after our growth, the way we're intending. And what we do is this length to stay data. I'm looking forward to reporting to you in coming quarters. The amazing impact that this makes on the care of patients, the work of the physician and the performance of AVITA.

So I close with Questions and answers, please. I hope we have the answers. I know you have the questions.

Thank you, Jim. We'll now move on to questions. If you have any questions, you can continue to submit them using the Q&A function. I'll now hand over to Ben Atkins to run the Q&A.

Thank you, Rudi. Jim, we've had a few questions come in, and I'm going to read those out either to you or to David. Jim, starting with you. How is resell performing across your target segments, burns, trauma centers and outpatient facilities? And what's your plan to reignite growth where revenues have been flat or impacted by this reimbursement headwinds?

Well, first of all, the great news is the product is performing terrifically well, whether it be -- there's those who really are accustomed to using RECELL GO, the manual device and they want to keep using it. That's great. There are those who see that RECELL GO, particularly in multi-kit procedures has some real benefits to their workflow, it doesn't change the work, but it changes the workflow and allows them to simultaneously process biopsies.

Our experience on the clinical side with PermeaDerm and Cohealyx is just overwhelmingly positive. So the big issue here is making sure this resolution of historical claims gets adjudicated and that we drive this message of the compelling reduction length of stay, the 36% reduction. This is the name of the game. It's not about the product, it's about the protocol, treat the patients with resell. It's not an expense. It is an enabler of better healing and faster time to home.

Jim, a follow-up question just on RECELL. Can you just comment on the recent -- in the earnings, the announcement about NTAP, specifically for wound care for RECELL.

Yes. That's a very good at. So we recently -- this is 1 of those things you should look at with a little bit of humor, bureaucratic camera. There's a program in Medicare called new technology add-on payment. And you can apply for it for a new technology, and we broadened our indication from burns to what essentially is trauma and surgical, which essentially is also known as nonthermal graft applications. And if they're nonthermal, you can apply the NTAP and NTAP provides an additional payment to the hospital for the use of RECELL. Now that was applied -- that was awarded in gain effect October 1, and the humerus connecting here is here you have CMS awarding us NTAP.

Previously, they had awarded us breakthrough device designation on our first PMA, 5 PMAs go. That breakthrough device designation is designed to facilitate reimbursement and regulatory approval. And so here we go through 5 PMAs. We get an NTAP and we run into this funky contractor pricing problem, which is kind of very indicative of left versus right and not really staying coordinated. But the NTAP is exciting for us. It's going to help us grow the trauma and surgical wound market. But again, it's for nonthermals in those markets.

David, we'll come to you in just a minute with the question. But Jim, just sticking with you for 1 more moment. We've had a couple of questions related to the international market. Can you perhaps just give the latest on the CE mark approval for RECELL GO? And when do we anticipate meaningful sales traction internationally, especially given some of the data that you referred to today?

Well, there's some questions behind the questions there, Ben. So let me say it this way. We are working with our notified body to get the CE mark which will cover where we intend to go internationally, which is most of Western Europe and Australia. We have approval in Japan already. Now we expected that a year ago October. And we may get it before October, we may not. The problem with the MDR is that any small company, it's -- let me step back. The MDR basically requires every product from every company to requalify. So imagine if we had to do that with the FDA, we would just destroy the FDA for 10 years. right, the work would be just amazing. And that -- but that is what the European Parliament did. So we've been implementing the MDR. We are on the third extension.

In our particular case with RECELL GO, we went with a notified body who asked that we pay a premium, they would have approval by last October. Now, we paid the premium, but we don't have approval. Now we do expect it in the near term, we're through most elements of the review, can they bureaucratically get it done before September is over or not? We don't know. -- almost assuredly we'll be launching in Q4. Now I want to temper our international view because on the 1 hand, all of -- we're starting from 0 virtually. And we're going to be giving our distributors training, and they're going to develop a market. But it is going to be a slow and steady pace, not an investment that is going to delay our profitability. So we're going to temper our investment even though we're so excited about it, but we know that we need to get profitable in the U.S. to fund our business. And we can see that in the horizon and we will be tempering our international investment as a consequence.

David, a question for you, I think. Can you walk us through your cash burn expectations for the rest of the fiscal year? And how you'll meet cash flow needs over the coming 6 to 12 months?

Ben, thanks for the question. So we don't provide guidance for cash burn or cash balances. But I do want to walk through a couple of things that get -- we'll give you some idea of how we get to cash flow breakeven. I mean, the first and most important that Jim mentioned is we raised AUD 23 million yesterday, USD 15 million. And so with the $16 million that we had on the balance sheet at 6/30, we believe that cash is sufficient to get us to start generating cash flow in the first half of 2026.

Jim mentioned that we've taken out some expenses out of our OpEx, and we think we're going to be -- we are not going to be increasing our OpEx total for at least the next year. We are right around $25 million to $26 million of operating expense per quarter. Of that, about $3.5 million to $4 million is noncash. So our cash expense with very little capital expenditures is around $21 million per quarter. We have gross margins of around 80% to 85%. And so we need to achieve somewhere in the range of USD 25 million to USD 26 million in revenue to cross over to cash flow breakeven. We had $18.5 million last quarter. Sequential growth, not very significant, will get us to that number of $25 million to $26 million. So we have sufficient cash, we have taken out expenses out of the OpEx line, and we are achieving the revenue that we believe we're going to achieve over the next 2 or 3 quarters will get us to that breakeven point.

David, another follow-up question for you, I think. But the conversation around U.S. pharma tariffs have any effect on AVITA and its sales?

No. Very little effect at all.

Jim, I'm going to bring a question back to you and this might make a good as we get towards the top of the outlook sort of end of the call question. As you look ahead to 2026 and beyond, you've spoken about a few initiatives, the NTAP in place, the macro reimbursement, new products gaining traction. What is the important milestone or catalyst in your opinion you'd want investors to watch for that you believe will define AVITA's next stage of growth?

That's a great question. There's kind of 3 big levers. #1 lever is 36%. And how that length of stay becomes well communicated in the market and redefines the protocol for treating patients with 10%, 20%, 30% TBSA wounds will absolutely redefine the company and its potential because the adoption of that protocol that was presented will make AVITA a bigger and more -- a stronger company, and that will open up all kinds of opportunities.

The second, and it's the biggest single product market we have, which is Cohealyx. And I will be measuring that principally not on an overall basis, but rather as a percentage into our power alley, which will be burdens. We can succeed with Cohealyx in burns only, notwithstanding its application throughout surgical and trauma wounds. So I think number 2 will be the maturity of the Cohealyx business, and that could happen really quickly. We figured it out the other day, if 10% of our resell patients and burns, receive Cohealyx. It would add nearly $40 million to our revenue in the first year at 10% of what we sell associated with that and certainly way more than 10% get a dermal matrix. So that's kind of a second.

The third is to take off of the trauma and surgical indications for RECELL. They're in the still early phase where we're introducing spray on skin to doctors who have never heard of it before, and helping them learn about how to integrate it into their practice and help the patients they treat. That is a -- from a patient numbers point of view, it's triple, quadruple burns in senime square treatment. So it's a huge market, but tapping into it and getting it adopted is a market development strategy where in burns, we're in market penetration. Those are 2 strategies that are a little bit difficult to execute simultaneously. And -- but we'll find a way, and we'll be sharing that with everyone along the way.

Thank you. Rudi, back to you.

That concludes the webinar, and we thank you for your participation.

Good day, and thank you for standing by. Welcome to the AVITA Medical Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's call is being recorded.

I would now like to hand it over to your first speaker today, Ben Atkins, Vice President, Investor Relations. Please go ahead.

Thank you, operator. Welcome to AVITA Medical's Second Quarter 2025 Earnings Call. Before we begin, I would like to introduce myself. My name is Ben Atkins, and I started at AVITA in July, leading Investor Relations and Corporate Communications. With many years of working in life sciences, I am thrilled to be part of AVITA and this team, and I look forward to working with our investor community.

Joining me on today's call are Jim Corbett, Chief Executive Officer; and David O'Toole, Chief Financial Officer.

Today's earnings release and presentation are available on our website at www.avitamedical.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 as of today.

I will now turn the call over to Jim for his comments.

Good afternoon to everyone joining us in the U.S., and good morning to our colleagues and investors in Australia. We have a lot to cover today. I want to begin by grounding us in what defined this quarter. starting with the 5 key developments shown on Slide 4.

First, commercial revenue for the second quarter was $18.4 million, up 21% year-over-year. However, sequential revenue was flat and impacted by a temporary headwind that has become clearer to us since March. During the quarter, we gained a deeper understanding of a meaningful delay in how the centers for Medicare and Medicaid Services and the Medicare administrative contractors implemented the conversion to the new CPT 1 codes for the use of RECELL, which went into effect in January. This delay in turn, affected provider reimbursement and ultimately, demand. To be clear, this is not a product issue, it's a claims processing issue, specifically around how the procedure that utilizes RECELL is valued and how payment is determined. I'll explain this in more detail shortly.

Third, as a result of this reimbursement disruption and its impact on revenue, we've lowered our 2025 financial forecast. That said, we remain confident in a second half rebound as resolution of these payment issues is already underway. More on that in a moment.

Fourth, we work with OrbiMed to secure a waiver for our Q2 trailing 12-month revenue covenant and to revise the covenants for the next 4 quarters, giving us flexibility as we execute against this updated growth outlook. Finally, we shared what we believe is the most consequential clinical evidence in AVITA's history. A real-world analysis of the U.S. National Burn Registry presented in June at the British Burn Association Annual Meeting, including over 6,300 patients showed that RECELL reduced length of stay by 36% for patients with deep second degree burns covering less than 30% total body surface area.

It confirms what clinicians have told us. RECELL doesn't just heal, it accelerates recovery, and in doing so reshapes the economics of care. Since the data was presented, we've already seen interest and traction.

So let's dig into the headwind I mentioned regarding claims. Turning to Slide 5. In November last year, the Centers for Medicare and Medicaid Services, or CMS, announced new Category 1 CPT codes for the use of RECELL in its rules update for 2025. Notably, CMS did not set the payment rate directly as it usually does. Instead, it assigned this task to Medicare Administrative Contractors, or MACs, through a process called contractor pricing. This happens occasionally when CMS wants to make long-term changes to a code. This work to change the code is underway and will take until January 2027. During this interim 2-year period, they can and they did, in this case, assign pricing responsibility to their contractors.

When the first claims for using RECELL were submitted under the new CPT codes, the MACs should have either adjudicated the codes and made payment or denied the claim. A denied claim or a short claim payment then leads to an appeal and a subsequent adjudication of the code's value. However, this did not happen consistently. Subsequently, there's been a lot of healthy interaction, but no conclusion on contractor pricing. The claims started piling up from January all the way through June. For clarity, we were being paid, but our providers were not.

This led to the inevitable situation where providers are uncertain about what or when they will be paid for using RECELL. So while enthusiasm to use RECELL grew along with the published clinical and economic data, this uncertainty about provider payment dampened utilization.

Picture a dimmer switch. That's what it felt like. The light didn't shut off, but it got dimmer every month as claims piled up with no clear adjudication. As an example, looking at our top 10 hospitals and their utilization of RECELL compared to the second half of 2024 to the first half of 2025, we saw a reduction of approximately $5 million in revenue in those 10 accounts alone. We have determined that in retrospect, this issue has reduced demand for RECELL overall in the first half of this year by approximately 20%. There have been multi-jurisdictional efforts by members of the American Medical Association and industry to resolve this matter. Those efforts are paying off.

In recent weeks, multiple Medicare contractors have indicated their intent to adjudicate payment. We expect all the others to follow and believe that this problem will be resolved during the third quarter. We expect demand for RECELL to pick up again during the current quarter and through the fourth quarter. As a result of this, we've adjusted our guidance to reflect the reality of the first half of the year and our expected recovery in the second half.

In turn, we've also agreed with OrbiMed to amend our credit facility. The updated terms include lower 12-month revenue covenants through the second quarter of 2026. As part of this amendment, OrbiMed's fee was paid in equity instead of cash, demonstrating their long-term commitment and confidence in our business. David will review this in the complete financial details shortly.

Clearly, we've had a very dynamic first half of the year that has disrupted our business. That said, the enthusiasm from hospital surgeons and patients for our products is stronger than ever. In May, at our acute wound care showcase, we presented our vision for therapeutic acute wound care centered around the patient with 3 complementary products and data to support them. One broad integrated portfolio targeted at the same wound, the same patient, the same doctor in the same hospital.

Turning to Slide 6. This is a milestone worth highlighting. In June, during the British Burn Association, the largest real-world analysis of RECELL to date was presented, 5 years of U.S. National Burn Registry data. The results showed a 36% reduction in hospital stay for burn patients. That's not just statistically significant, it's clinically transformative. This confirms our prior studies and what clinicians have seen time and again. RECELL helps patients get home faster.

Typically, these patients must stay in the hospital for a range of weeks. So reducing that time by over 1/3 has real impact. Why does that matter? Because every extra day in a hospital can cost more than $11,000 per patient. Multiply that by 36% fewer days and the value of earlier discharge becomes undeniable. With shorter stays, hospitals can also free up beds and treat more patients more efficiently. The impact we're highlighting is about more than just the hospital's bottom line. Getting home sooner also improves the patient's recovery and quality of life.

Let me take a moment here and share a story that's resonating far and beyond our industry. Slide 7. Abby Alexander was 18 years old when a fuel explosion in Cambodia left her with life-threatening burners over 1/3 of her body. She was flown to the U.S. where her face and arm were treated with RECELL. Today, nearly 6 years later, Abby is thriving. Her recent before and after photos have gone viral on Reddit and were featured in Newsweek and U.K. national media. The difference is striking, minimal facial scarring and a clear message from her. I wish I had RECELL everywhere. Abby's story is a powerful reminder of what's possible. This is why hospitals aren't just adopting RECELL as a product but deploying it as a protocol for enabling faster recovery and more efficient care.

Then turning to Slide 9. We have Cohealyx, our collagen-based dermal matrix. Cohealyx just made its peer-reviewed publication debut in the Journal of Surgery. The data demonstrated graft readiness in as little as 5 to 10 days. It typically takes 14 to 28 days with competitor products. This is illustrated in this case study, a 48-year-old man with multiple comorbidities presented with a full thickness wound on the right hand covering 11.25% total body surface area, a sizable open wound. 10 days post Cohealyx application, the wound was skin grafted. The majority of the wound was re epithelialized within 2 weeks post skin graft. The patient showed strong functional recovery per the clinician's assessment. This shortened days to graft is a breakthrough for complex wounds and leads also to shorter hospital stays.

Building on our preclinical and clinical research, our post-market clinical study, Cohealyx-1, will assess its performance in real-world settings. The study will look at time to graft, clinical efficacy and cost savings in the treatment of trauma wounds and burns. Study sites are enrolling, and we'll keep you updated as the data builds.

Turning to Slide 10. I want to cover some highlights within the portfolio that we believe show momentum for our vision to transform acute wound care. Since the presentation of data on RECELL at the British Burn Association in June, 2 major hospitals, an academic medical center and a regional burn center are in the process of adopting broader RECELL eligibility protocols to include all burns under 20% total body surface area. This data has resulted in transforming RECELL, the supply cost to RECELL as a protocol treatment that results in length of stay. With this approach, we have market-tested a new strategy. This strategy is an outcomes-based partnership agreement. In this agreement, the use of RECELL has a target reduction in length of stay. And if it does not achieve that result, the hospital receives a rebate.

We've reached agreement with 2 centers since June. This type of arrangement is driven by our belief in our RECELL data. It's built on a very large database of patients, so it's highly reliable. We trust it. We anticipate that these 2 centers alone will increase their RECELL units by approximately 150 additional patients each month. It is worth noting that even if we have to pay a rebate, which we believe will not be necessary, our revenue base has increased substantially with the treatment of these additional patients. We see this business model as highly adaptable across the country in other facilities.

Across the U.S., RECELL is used in nearly all burn centers. As you know, during last year, we have been expanding into Level 1 and 2 trauma centers. This week, we received approval from CMS, the U.S. agency that oversees Medicare for a special reimbursement called the NTAP, or New Technology Add-on Payment, for RECELL when used on trauma wounds and hospitalized patients. What does that mean? It means hospitals can now receive additional payment from Medicare when RECELL is used in these cases above and additive to the standard reimbursement. It's designed to accelerate access to breakthrough devices like ours by offsetting hospitals' cost of adopting the technology.

This is a strong signal from CMS. It recognizes RECELL's clinical value and helps remove a financial barrier to adoption. The policy takes effect October 1 and will be in place for 1 year. We believe this will drive increased utilization in the inpatient setting and support further expansion into trauma and surgical wounds. While the NTAP supports RECELL in the inpatient setting, we're also expanding access in the outpatient care. That's where RECELL GO mini comes in. During our pre-market approval study, we saw that the average trauma wound was about 400 square centimeters. That insight directly informed the design of RECELL GO mini, optimized for wounds 480 square centimeters or smaller compared to standard RECELL, which treats 1,920 square centimeters.

Now trauma surgeons can treat smaller wounds more efficiently in the outpatient setting with the appropriate sized spray-on application of RECELL. It's precision designed for how RECELL is actually used in trauma care and it opens the door to broader adoption outside the hospital.

A quick update on our international business. We expected CE Mark approval in Q3. But due to ongoing bureaucratic delays from our notified body, approval could move to Q4. While this has delayed our EU and Australia launch, we are prepared to go forward with an economically lean distributor-led commercial model upon approval.

Cohealyx is off to a strong start since its launch in April. As a reminder, Cohealyx is a cost-competitive, margin-accretive and has a low number of days to graft readiness. Value Analysis Committee submissions are pending in approximately 25% of the 120 to 130 U.S. burn centers nationwide. As hospitals receive VAC approval, we've seen commercial momentum grow quickly. In July, we established multiple ordering accounts. In fact, our largest account ordered nearly $300,000 of Cohealyx during the month of July alone. We are really excited about the opportunity with Cohealyx. Consider this, we sell over 1,000 RECELL kits per month. If just 10% of that 1,000, each covering on average 2,000 square centimeters, instead use our Cohealyx dermal matrix at its market price, it would generate an additional $36 million in annual revenue.

To reiterate, this presents an unmatched opportunity in our marketplace. We have RECELL that can reduce the length of stay by 36%. Additionally, Cohealyx enables faster grafting 7 to 14 days sooner than our competitors. Then as we expand from burn to include also trauma, we have PermeaDerm, our biosynthetic dressing. We in-source manufacturing of PermeaDerm to our state-of-the-art Ventura location. As a reminder, PermeaDerm acts as a temporary biosynthetic dressing to temporize wounds and manage moisture, both prior to grafting, during graft healing and during the aftercare period of graft healing. This quarter, it was featured in 10 presentations at U.S. burn conferences, demonstrating its application across a variety of wound types and stages of treatment until healing is achieved. This included a randomized trial showing single application and easier after care. Our PermeaDerm-1 study now actively enrolling is comparing the cost and clinical outcomes between PermeaDerm and allograft used in patients who need a skin graft to heal their wounds. Our excitement and the versatility of PermeaDerm, its potential to replace allograft and its integration into our portfolio is reflected in a standout quarter in sales.

As interest in our acute wound care portfolio grows, we're expanding access to our products through strategic group purchasing organization contracts, GPOs, and several integrated delivery networks, IDNs. These agreements connect us to burn centers and Level 1 and 2 trauma centers within those systems, allowing physicians in those facilities to use RECELL, Cohealyx and PermeaDerm. I'd like to provide an update on the transformation of our U.S. sales organization. To remind you, on April 1, we redesigned our commercial organization, taking into account the need for our reps to be present at both stages of the 2-stage procedure to optimize the selling of RECELL, Cohealyx and PermeaDerm, which are used in both stages. This is a significant change from our prior strategy, which relied on heavy clinical support by clinical specialists who had no selling role.

During the implementation of this, we moved from a heavy service orientation to more of a selling orientation. Consequently, we developed a more focused and efficient selling organization, taking our field headcount from 108 to 82 people. and consequently, save nearly $2.5 million per quarter. The majority of the $2.5 million came from this reorganization and results in an annual reduction in our cash needs of $10 million, which we realized effectively during Q2 period.

So turning finally to Slide 7. What does this all add up to? Innovation and integration, a comprehensive wound closure solution designed to improve patient outcomes and optimize healing quickly. RECELL, Cohealyx, PermeaDerm, working in sync like an Orchestra. Each product accelerates care. Together, they accelerate value. When you reduce hospital stays, you reduce costs. When you reduce healing time, patients go home to their families sooner. When patients go home sooner, you free up capacity. That's what AVITA's platform delivers and why this opportunity is unlike anything else in the market. We are a multiproduct platform with eyes on a $3.5 billion opportunity. Same wound, same patient, same doctor, same hospital, but now faster healing, better outcomes, lower costs. We've reset and we're ready.

At the same time, we're strengthening our leadership to reflect this next chapter. As you will have seen in yesterday's press release, I'm pleased to welcome Dr. Michael Tarnoff to our Board. Michael was the Chief Physician Executive and CEO at Tufts in Boston and held senior leadership roles at Medtronic and Covidien. His clinical expertise and leadership in surgical innovation will be instrumental as we scale.

I want to recognize Lou Panaccio, who has chaired our Board through AVITA's formative years from early commercial milestones to where we are today. Lou's steady guidance helps shape the foundation we're now building on. And I want to thank him for that effort. With that, I'm excited to welcome Cary Vance as he transitions into the Chair position. Cary's deep commercial and operating experience and passion for med tech innovation help us accelerate into our next phase of growth.

Now I'll pass it over to David to review our financials.

Thank you, Jim. For the 3 months ended June 30, 2025, our commercial revenue was $18.4 million, a 21% increase compared to the same period in 2024. This growth was mainly driven by the broadening deployment of our RECELL system, particularly RECELL GO and in spite of the headwinds during the first half of 2025 that Tim spoke about. Additional contributions came from our new products, Cohealyx and PermeaDerm as well as the expansion from burn centers to new accounts targeting trauma centers.

Gross profit margin for the second quarter was 81.2%, down from 86.1% during the same period in 2024. Note that the gross margin for RECELL products alone was 84.3% for the quarter, which we believe will remain in this range for future quarters. The decrease in the overall gross margin percentage compared to the previous year was mainly due to product mix, a higher inventory reserve and other adjustments. Regarding gross margin and gross profit, we expected our gross margin percentage to decline as revenue from PermeaDerm and Cohealyx grew. As we have previously disclosed, we share the average sales price for Cohealyx at 50% and for PermeaDerm at 60%. These distribution arrangements will contribute substantial gross profit and operating cash flow, but will impact overall gross margin.

Total operating expenses for the quarter were $26.1 million, down from $28.7 million in the same period of 2024. This decline was mainly due to a $2 million reduction in sales and marketing costs, driven by lower employee-related expenses such as salaries, benefits, commissions and stock-based compensation. G&A expenses also fell by $0.8 million, primarily because of reduced salaries, benefits, deferred compensation, professional fees and corporate costs. R&D expenses increased slightly by $0.2 million, mainly from higher salaries and benefits.

As previously disclosed, due to our recent commercial field transformation and added operational efficiencies implemented in Q2, we reduced our operating expenses by about $2.4 million this quarter. We expect to achieve the same or greater savings in each of the upcoming quarters, translating into an annual savings of $10 million. The $26.1 million in operating expenses for the second quarter include noncash expenses of approximately $2.7 million in stock-based compensation and approximately $0.8 million in depreciation and amortization. Other income expense increased by $0.9 million to $2.5 million of income for the quarter, consisting of noncash gains totaling $1.2 million related to changes in the fair value of warrants and $0.9 million related to changes in the fair value of the debt, along with $0.4 million in investment income. The second quarter's net loss was $9.9 million or $0.38 per basic and diluted share showing a 36% improvement from the net loss of $15.4 million or 60% -- $0.60 per basic and diluted share in the same period of 2024.

As of June 30, our cash and marketable securities totaled $15.7 million compared to $35.9 million at December 31, 2024. Although the accounts receivable balance of approximately $11.3 million as of June 30 will help our anticipated working capital needs in the third quarter, we still intend to raise additional capital to strengthen our balance sheet and support our working capital needs.

Turning to our OrbiMed credit agreement. At the end of June, we secured a waiver for the second quarter trailing 12-month revenue covenant, which was set at $78 million. Additionally, on August 7, we entered into an amendment to the credit agreement, adjusting the revenue covenants for the next 4 quarters to $73 million, $77 million, $90 million and $103 million, starting with the quarter ending September 30, 2025. As compensation for this amendment, we issued OrbiMed 400,000 shares of AVITA common stock. We appreciate OrbiMed's ongoing support as they accepted shares instead of cash, a cash fee, further demonstrating their confidence in our long-term strategy.

Turning to our financial outlook for the rest of the year. Due to the headwinds in the first half of the year that Jim outlined, we are revising our full year 2025 commercial revenue guidance to $76 million to $81 million from the previously estimated $100 million to $106 million. This new full year 2025 revenue guidance indicates a growth of approximately 19% to 27% compared to 2024.

Additionally, we now expect to start generating free cash flow in Q2 of 2026 and reach GAAP profitability in Q3 of 2026 compared to our earlier plan of generating free cash flow in the second half of 2025 and achieving GAAP profitability in Q4 of 2025.

Even with the many challenges we have faced in the first half of this year, I want to reiterate our optimism for the future. There is clear evidence of green shoots or signs of growth across our business. These include, we finished the second quarter with June marking one of our strongest revenue months to date as visibility to reimbursement began to emerge. Even more encouragingly, revenue in July and early part of August has signaled a strong start to the third quarter.

From a revenue standpoint, we view the size and speed of orders we received from our first Value Analysis Committee or VAC approved accounts this July as an early indicator of the potential strong demand for Cohealyx. With our proprietary position in the operating room and with burn surgeons, our ability to showcase the clinical benefits of Cohealyx is unmatched compared to our competitors. We only need to achieve back approval and convert a small percentage of procedures to see a significant impact to our revenue. The new outcome-based business model discussed earlier for certain facilities where RECELL wasn't the standard practice for burns with less than 20% total body surface area has the potential to generate significantly more revenue. The facilities where we are already implementing are just the beginning of this type of business model. In closing, we are hyper-focused on executing our operating plan for the remainder of 2025.

With that, I will turn the call back to Jim for his key takeaways for the remainder of the year before we answer your questions.

Thanks, David. Before we open the line for questions, I want to briefly bring us back to what matters most. First, with the resolution of the claims backlog now underway, we expect full demand for RECELL to return in the second half of the year. Second, our revised guidance reflects that recovery and our momentum going into 2026. Third, the amendment to our OrbiMed agreement reinforces long-term alignment around that path forward. And finally, the real-world data showing a 36% reduction in length of stay with RECELL isn't just a clinical insight, it's a value proposition that improves outcomes and strengthens hospital economics. Put simply, we're focused, executing and well positioned to accelerate.

With that, operator, let's open it up for questions.

[Operator Instructions] Our first question will come from the line of Josh Jennings from TD Cowen.

Just in terms of the resolution and the backlog of claims. It sounds like it's in progress -- in process, I should say, in July. Maybe just take us through, if you would, just a couple of different scenario analysis. I mean, how quickly can all the MACs get on board? And maybe just give us an understanding of just how many claims, what percentage of claims were being denied in the first half of the year, if there is a percentage and where that stands now in July and any improvement pace that's been documented already and how you expect that to play out over the coming months?

Well, without -- thanks, Josh. It's good to hear from you. And I'm going to answer this question carefully because there are some things underway and there's some confidential communications going on. But let me say -- let me answer your question in a few different ways. First of all, there is a multilevel approach to resolve the MACs' speed to adjudicate. So on one level, there's been communication between the MACs and central Medicare because some MACs did not have a clear understanding of their responsibility and role. So that is largely being taken care of.

Second, where you get proof about the adjudication is from the MACs themselves to physicians. So that we have seen now in multiple MACs. The third thing you can also see is that among the claims data, which we do not have full access to, there is a perfectly adjudicated case, there's a nonadjudicated case and a poorly paid adjudicated case, right? Meaning there's like 3 categories of kind of resolution underway. So where we are now, we've had a very large change in the activity related to the MAC since about June 1. And during June and July, we've seen a steady increase in their interactions, the stakeholders' interactions with the MACs, the processing of claims. So it's happening. This is a Category 1 code, not a Category 3 code. And there's -- we have never -- I don't think we could document a claim that was turned down or failed to be paid before January 1 when Medicare was reimbursing for the Medicaid and Medicare patients where RECELL was used.

So this came as a rather surprise because they rather easily could have just followed the payment practices that were in existence, although they were attached to other codes. So anyway, does that help? Am I getting to the answer for you?

Yes, that does help. And I'm just -- just with this recovery that you've described and the breakthrough in Q3 with multiple MACs adjudicating payments, and it sounds -- and you highlighted that the value that these multiple MACs are signing, the split thickness skin grafts being higher than split thickness skin grafts alone. Can you talk about the premium that's involved there and how strong of a signal that is for you that help you kind of forecast this recovery in the coming months?

Well, you see the analysis that's being used in the crosswalk, depending on the size of the wound, the RVUs basically continue to separate, if you can visualize this, left end of the graph, right end of the graph, I mean, the graph, not the graph, but the graph comparing the 2, where you have our views on the vertical axis and you have percent TBSA across the horizontal. As you go from 1,000 to 4,000 square centimeters, by -- there's a steady divergence in favor of RECELL utilization and payment versus split the skin graft only to the point where it's 40% more by the time you get to 40% -- 4,000 square centimeters. It's kind of hard to visual -- I hope I can visualize that for you. But there is a notable premium.

And then maybe just lastly, sort to tack on a list here of questions, but just noticed the update on Cohealyx and some launch metrics, particularly just the interactions with VACs, 25% of the 130 U.S. burn centers. Did you share or can you share the number of VAC approvals so far? And can we -- what percentage -- I mean, it's impossible to predict, but how would you have us think about the percentage of the 130 U.S. burn centers that have -- where you get through VAC approval and Cohealyx is, I guess, on the formulary, if you will, and you guys are rocking and rolling.

Thanks, Josh. We're going to keep the number of VAC approvals at a very high level. And one reason is our experience is, with VAC approvals of other products, is they're not all equal. And so what happens when we start disclosing them, the next logical question, are they all equal? And of course, they're not. And it really turns in a little bit of a morass. So let me answer in the following way.

First principle, we don't get to choose to submit a VAC to a VAC. It actually has to be sponsored by a physician and/or a department in the hospital. So we can propose to them our value proposition, our clinical data, our preclinical data, case studies, they choose to be interested or not. So the idea that there's more than 25% of the burn centers that have VAC approvals pending and submitted is a substantial number to happen in the first 60 days of a launch of a new product. So that's just good news like that.

The second is I can say that during April we trained and we're introducing the product. So we really started our active selling in May. Having multiple accounts that are ordering here in early July is terrifically quick by our experience and in terms of timing from -- for getting approvals. So obviously we have several approved. And the third is the, there's a little bit of time. If the doctors are experiencing 14 to 21 days ready to graft, and we're doing it in 7, it still means they don't really know how it's working for 7 days. So they find a patient, they do their first patient, and they have to wait until it's ready to graft. And then typically, they want to see that the graft takes because ready to graft is an assessment, but the graft take is actually the real deal. That's the success of the procedure where you get through closure.

So an evaluation, really, therefore, if you think about all that, even with our shortened graft time and graft take time, it's still a 3- to 4-week process. So I think the hospital that I mentioned in my comments continues to order. They may have ordered 300,000 during their first month of usage. They're on path to do that again in their second month of usage. So it is really a great market for this product because it performs better. So we do think it just fits our portfolio great, and it's going to yield great results for us.

Our next question will come from the line of Ross Osborn from Cantor Fitzgerald.

Starting off, and apologies if I missed this, but would you provide an update on how the mini rollout is going in terms of feedback, adoption and where you stand in the VAC approval process there?

Yes, I can. It's generally qualitative. The product itself is performing very well. That's A. The physicians who use it tend to be trauma or surgical physicians versus burn. So we're finding it to be a product for that Level 1 and Level 2 trauma center location. The wounds where RECELL is used in burns are actually bigger. The 2,000 square centimeters, we actually average more than 1 per case, where in the level 1 and 2 trauma, you may recall from our PMA, the average patient was 400 square centimeters, which is 2.5% TBSA. So we're getting good traction. One thing we note though is that in trauma and surgery, RECELL is really a year old, meaning a lot of physicians had never even heard of spray-on skin of RECELL, where the burn physicians have been added for a year, I mean for 5 years rather. And that's since approval. So more than that if you include the PMA time.

So I think we're getting good traction on the mini. But that said, it's a process to get adoption and change the behavior of the physician. They get good results. By the way, this burn data applies to all uses of RECELL. It just happens to be on -- if you think what a burn is, you excise a big area, it's still a wound, just like a trauma wound is a wound. So I think we'll see a lot more from mini because the dermal matrix and PermeaDerm allow us to approach the use of more patients. So I think we're looking for a strong second half from it.

Great. And then last one on Cohealyx. How should we think about the enrollment period in terms of the duration?

The enrollment of the Cohealyx-1 study, you're asking, right?

Yes.

Yes. Well, first of all, it's a 40-patient protocol, okay? And it's done using what's called OPC, objective performance criteria. So what we did is we built a protocol around the time to graft and time to -- for graft take and close as the principal outcomes. And since we're proving nearly a 50% to 100% reduction over the OPC, it takes a very small number to statistically prove when you are that much different. And so we only have to enroll 40 patients. The hard part is over, where almost all our IRBs are open to enrollment at this moment. We have a few still left to go. So I think we get enrolled by year-end. That's what we expect. That's 40 patients.

Next question come from the line of Ryan Zimmerman from BTIG.

This is actually Izzy on for Ryan. So just to start out, given your current cash balance and your burn rate, I was wondering if OrbiMed has waived any of the minimum cash balance requirement. I believe it's about $10 million. And if not, how much do you still have available today?

I'm going to have David answer that so we get the right CFO answer here.

Yes. So thanks for the question. The OrbiMed has not waived that provision in the amendment. And just to clarify, that provision of $10 million is measured at the end of a quarter, not during the quarter. We don't expect to go below $10 million at any time. And so we don't -- we didn't ask them to waive that amendment during the current process.

Understood. And with the restructuring to the sales force you guys completed or began in first quarter, I was curious what other expense levers you have contemplated that will help manage your cash burn?

So during the second quarter, as Jim mentioned, and so did I, we did a commercial transformation of our sales force, and we took a look at our entire organization, and we took out $2.5 million per quarter. And we see that continuing. So it's $10 million annually. We are going to let that play out. We don't see any other levers at this point that need to be pulled.

Okay. Helpful. And then last one for me. I was just curious if the 2023 ATM is still in place? And if so, how many shares are available in this? And if there are any restrictions on how many shares you can sell?

Yes. The ATM is still in place, and it has -- and this is public information, it has about 3.8 million worth of shares that can be sold under the ATM.

This concludes the question-and-answer session. I would now like to turn it back over to Jim, our CEO, for closing remarks.

Well, thank you very much for the questions, and thank you for the time with us today. We have a lot of exciting activities that we're doing that are going to lead to really a great second half. So we're really looking forward to that and updating you in the coming quarter on how that goes. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.