Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Avita Medical, Inc., third quarter 2026 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question at that time, you will need to press star 1-1 on your telephone keypad. As a reminder, this conference call is being recorded. At this time, I would like to turn the call over to Mr. Ben Atkins, Vice President of Investor Relations. Sir, please begin.

Thank you, operator. Welcome to Avita Medical's third 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 expectations as of today. I will now turn the call over to Cary. Good afternoon in the US and good morning in Australia. As always, we appreciate you making the time to join us on our quarterly update call. Before I discuss the quarter, I want to acknowledge the clinicians caring for patients with serious burn injuries following the devastating fire at the Wainwright Military Base in Alberta, Canada. At their request, we mobilized quickly We donated about three dozen resell units to burn centers in Calgary and Edmonton and sent a lead of staff to train and to support the clinical teams. Within days, the first patient received treatment with resell. Serious burn injuries can happen without warning. Responding takes preparation, access to treatment, and people ready to act. I want to thank our team. the clinicians and burn community in Canada, and the American Burn Association for connecting us. Resell is not commercially available in Canada, and we are grateful to Health Canada for acting quickly to facilitate access. This response brings us back to why we do this work, helping people heal from serious wounds and return to their lives. Let me turn to our third quarter performance. Revenue reached $26.1 million. up 53% year-over-year and 20% from the second quarter. Resell led that growth, supported by increasing adoption of CoHelix. We'll further discuss our product dynamics in a moment. At the same time, we reduced cash use to approximately $600,000, compared with $3.2 million in Q2. We are growing revenue. but we're also managing expenses and cash diligently. That combination continues to improve the financial position of the company. Based on our performance, we are raising full year revenue guidance for the second consecutive quarter. We now expect revenue of $92 to $94 million for the full year compared with our previous range of $86 to $89 million. We also remain on track to achieve cash flow breakeven in the fourth quarter. David will walk through the financial results and our liquidity in more detail. First, I want to put our progress in context. A year ago, our priorities were to stabilize resale utilization, rebuild engagement with our core accounts, and improve how we operate. In Q1, we began to see those actions translate into more consistent demand. In Q2, that demand supported further growth. and gave us the confidence to raise guidance and establish our cash flow break even goal. Q3 builds on that progress. We continue to grow within our accounts. Hospitals are ordering more resale. Cohelix is reaching additional customers and revenue growth is translating into lower cash use. Our commercial approach remains focused. We target high volume burn and level one trauma centers were clinicians treat burns, traumatic injuries, and complex surgical wounds. We estimate this focused US addressable market at approximately $1.3 billion annually. Our task is to grow within that market by supporting more physicians, more eligible procedures, and broader use of our portfolio within each account. Let me start with resale. US resale revenue reached $22.4 million, approximately 20% above Q2. US resale volume increased to 3,196 units, up approximately 21% sequentially. That's always an increase of more than 11% in Q2 over Q1. The growth reflects higher procedure volumes and increased ordering across our accounts. Riso Go and Riso Go Mini give clinicians options for treating different sized wounds. Mini extends the platform into smaller wounds, while Riso Go supports treatment of larger areas. That matters because the opportunity within a hospital extends across different patients, wound sizes, and surgical teams. Our commercial and clinical teams work with physicians to identify appropriate cases provide training and support consistent use. As physicians gain experience, they can assess where resale fits within their practice. The clinical evidence supporting that work also continues to grow. In October, the Journal of Plastic, Reconstructive, and Aesthetic Surgery published a systematic review that examined 99 studies across 13 countries, covering more than two decades of experience. with skin cell suspension autographing, essentially resell. All six comparative studies that assessed donor skin requirements reported reductions with our technology, while the 18 studies evaluating healing reported either favorable or comparable outcomes. The studies varied in design and quality, but together they document a broad base of clinical experience across burns and other wound types. For clinicians, reducing the amount of donor skin matters. A donor site creates another wound that then needs to heal. Reducing that burden can make a meaningful difference to a patient's recovery. Burn care established resales clinical foundation and remains an important source of growth. We also see opportunity in trauma and surgical repair where physicians face many of the same challenges in achieving wound closure and healing. As we discussed last quarter, a new Category 1 CPT code family for skin cell suspension autographing is scheduled to take effect on January 1, 2027. It will simplify the current structure from eight codes to four based on wound size and anatomic location. This week, the Centers for Medicare and Medicaid Services, or CMS, issued its final rule and established national Relative Value Units for physicians performing procedures using resale under the Medicare Physician Fee Schedule. Once effective in January, the new framework will replace today's region-by-region Medicare Administrative Contractor Pricing with nationally published RVUs. Clinicians have shared encouraging feedback about the simpler structure. Our team is ready to support hospitals with coding information and practical implementation guidance. International resale revenue was approximately $900,000, essentially flat with Q2. We continue to build experience with ResaleGo in markets where we have regulatory authorization, including the first ResaleGo cases in Australia, where resale was originally developed by Dr. Wood. While international remains a smaller contributor today, Our focus on training, clinical experience, and local relationships in key markets continues to support steadily broadening adoption over time. Let me turn to CoHelix. Revenue reached $2.1 million, up approximately 21% from Q2. We continue to add customers as hospitals complete their value analysis committee reviews and begin using CoHelix. Those reviews are an important part of adoption. Hospitalists need to assess the clinical evidence, understand the economics, and determine how a product fits into their treatment protocols. The interim COHELIX-1 results support those discussions. The study reported a median time to graft readiness of approximately 11 days, with some patients ready within the first week. We expect a complete six-month follow-up data set this month. That will add information on longer-term outcomes to the early evidence we have already shared. Our focus remains on helping hospitals complete their evaluations and supporting clinicians as they gain experience with the product. Turning to Permiderm, revenue was approximately $600,000, essentially flat with Q2. At this early stage, the timing of individual orders can affect quarterly comparisons. We are focused on building a broader base of regular use. The Permioderm-1 results we reported in August give us stronger evidence to support that work. This randomized study enrolled 40 patients across 11 U.S. burn centers. It compared Permioderm with Allograft, which is human skin transplanted from a deceased donor for temporary wound coverage before definitive split thickness skin grafting. The study met its primary endpoint. Permiaderm demonstrated a 70% economic advantage over Allograft, measured by product cost per percent total body surface area treated. It also reduced preparation time by approximately 96%, with comparable graft take and wound healing outcomes. Approximately 94% of Permioderm patients achieved at least 95% graft take one week after autographing. All patients in both groups were healed by eight weeks. These results support a clear role for Permioderm as a wound temporizer. Hospitals can store it at room temperature and use it without tissue tracking, thawing, and meshing, while maintaining comparable application time in the operating room. Its transparency allows clinicians to assess the wound without removing the covering. Those features address practical challenges in burn care, product availability, preparation time, and visibility of the wound. We have submitted the study for publication and are using the findings in clinical education and hospital evaluations. The commercial work now is to translate that evidence into adoption and repeat use. Across the portfolio, each product serves a distinct purpose. Permiderm protects and stabilizes the wound. Co-helix rebuilds the wound bed. Re-cell restores the patient's skin. That gives us several ways to meet clinical needs within the same account, based on the patient and the treatment plan. The American Burn Association's regional burn conferences provide an important forum for clinicians to share emerging evidence and practical experience. Across the four regional conferences this year, 26 presentations involve Aveda technologies. This surpasses the cumulative presence of several leading competitors. The presentations cover resale outcomes in pediatric, geriatric, and other complex burn populations. as well as applications in facial and hand reconstruction and limb salvage. Four include treatment approaches using two or more Aveda products, while others present clinical data for cohelix and permuderm. With three regional conferences now completed and one more next week, this high level of engagement highlights the growing adoption of our portfolio and further expands the evidence supporting wider clinical use. Before I hand over to David, I want to put our fourth quarter outlook in the context of the year's progress. Our full year guidance implies Q4 revenue of approximately $24.9 to $26.9 million. At the midpoint, that would deliver approximately 30% growth for the full year over 2025. Looking across the year, revenue has increased from $19.3 million in Q1 to $21.7 million in Q2, and our Q4 range reflects continued growth from that base. Q3 was particularly strong at $26.1 million and may have benefited a bit from seasonal high burn admissions during the summer. Our guidance accommodates that third quarter variability while reflecting the consistent, stronger sequential performance we have delivered through September. We remain focused on finishing the year strongly and reaching cash flow break even. Our priorities are consistent. Expand resale utilization, grow adoption of Cohelix and Permuter, and maintain commercial growth and financial discipline. With that, I'll hand it over to David.

Thank you, Cary. Good afternoon, and in Australia, good morning. Our third quarter result illustrates how sustained revenue growth is dramatically improving the financial performance of our business. We increased revenue by 20% from the second quarter, expanded gross margin to 84%, and held operating expenses flat. Together, those results decreased quarterly cash use to approximately $600,000 from $3.2 million in Q2. We also reached the revenue milestone required to draw down the remaining $10 million under our credit facility with Perceptive Advisors, LLC. We received those funds this week, strengthening our cash reserves as we approach cash flow breakeven. In my prepared remarks that follow, I will walk through the financial results for the quarter, our liquidity, and our updated outlook. Starting with revenue, third quarter revenue was $26.1 million, an increase of 53% from $17.1 million in the same period last year, and 20% from the second quarter of this year. That brings revenue for the first nine months of 2026 to approximately $67.1 million. As Cary outlined, resale led the growth. with additional contributions from Cohelix. From a financial perspective, the important point is that we are supporting the higher revenue with essentially the same operating cost base. Total operating expenses were $24.6 million flat when compared with the second quarter and up 7% compared to $23 million in the prior year period. As we expected, the majority of the increase from last year was in sales and marketing expenses. This was largely because of commissions and incentive compensation associated with stronger commercial performance. As I have discussed, sales compensation, specifically commissions, will increase as our commercial team delivers more revenue. We carefully manage the rest of the cost base so that revenue growth translates into better bottom line financial results. That is what we saw this quarter. Compared with Q2 of this year, revenue increased by approximately $4.4 million with no increase in operating expense. We continue to review spending across the business and identify opportunities to improve efficiency while supporting our commercial priorities. Turning to gross margin, gross margin increased to 84%, a 270 basis point increase compared with 81.3% in the prior year quarter and 81.9% in the second quarter. Higher resale revenue and improvements in manufacturing efficiency contributed to that increase. Resale gross margin reached 88.4% and we currently expect it to remain between 85% and 90% over the coming quarters. As I have discussed previously, CoHelix and Permiaderm carry lower gross margins than Resell. As revenue from these products increase, they ultimately will affect our overall gross margin percentage. However, we still see significant opportunity for growth in Resell revenue So the decrease in margin should not be substantial. Our other two products will contribute additional gross profit without requiring a proportional increase in operating expenses. That remains an important part of the financial value of our portfolio. For the third quarter, we generated approximately $21.9 million in gross profit. An increase of approximately $4.2 million from the second quarter of this year. Net loss improved to $6.2 million, or a loss of $0.20 per share, compared with $13.2 million, or a loss of $0.46 per share in the same period last year. The current quarter net loss included approximately $2.1 million in non-cash expense related to the revaluation of warrants. as our share price increased. That expense negatively impacted net loss and loss per share, but again, was non-cash. Now turning to cash. On our Q2 call, we said we expected a further reduction in cash use during the third quarter. We over-delivered on that metric as we approached cash generation. Net cash use declined to approximately 600,000 compared with 3.2 million in Q2 and 9.9 million in Q1. We ended September with approximately 10.5 million in cash, cash equivalents and marketable securities. The improvement reflects higher revenue, strong gross margins and continued expense and working capital management. It also demonstrates the operating leverage we have been working towards as the business grows. Turning to liquidity, The perceptive credit facility we executed in January of this year provided for a $10 million second tranche of debt if we were to achieve at least $85 million in trailing 12-month net revenue. We have satisfied that revenue milestone, and this week we received the remaining $10 million under the credit facility. The additional funds strengthen our cash reserves as we move towards cash flow breakeven and cash generation and will be reflected in our 2026 year-end balance sheet. Our improved operating performance and liquidity also supported an important change in our financial reporting. Management concluded that the substantial doubt about our ability to continue as a going concern had been alleviated. Our independent auditor concurred with that assessment. Accordingly, our third quarter Form 10-Q no longer includes that substantial doubt qualification, and the outstanding debt has now been classified as a long-term liability. The Form 10-Q does include disclosures on the plan management undertook to alleviate the going concern conclusion found in previous quarters. These developments reflect the progress we have made in improving both the operating performance and financial position of the company. Turning to our outlook, we are raising full year 2026 revenue guidance to $92 million to $94 million from our previous range of $86 million to $89 million. This is our second consecutive quarterly increase in revenue guidance. The new range represents approximately 28% to 31% growth over 2025. at the midpoint of the range would be $93 million in annual revenue. That compares with approximately $35 million in 2022 and represents a compound annual growth rate of approximately 28% over four years and returning to a more attractive growth trajectory compared to 2025. We also reaffirm our expectation of achieving cash flow breakeven in the fourth quarter. We will continue to manage spending and collections carefully as we work to deliver that fourth quarter goal. The financial trends supporting that outlook remain clear. Revenue has grown each quarter this year. Gross margin has strengthened. We have maintained control of operating expenses and cash use has declined substantially. In summary, Q3 demonstrates that higher revenue is translating into better financial performance. We substantially reduced cash use, strengthened our liquidity after quarter end, and raised our full-year revenue outlook. I want to thank our teams across Aveda for the work behind those results. With that, I'll hand the call back to Cary.

Thanks, David. Q3 demonstrates the progress we're making. Resale demand increased. Cohelix continued to grow. We added clinical evidence for Permian Derm and we brought cash use down substantially as revenue increased. We've raised our revenue outlook again and remain focused on achieving cash flow breakeven in Q4. I want to thank our employees for their work and the clinicians who trust us to support their patients. I also want to thank you for joining us and for your continued support. Operator, we're ready to take questions.

Yes, sir. Ladies and gentlemen, if you have a question or comment at this time, please press star 1-1 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press star 1-1 again. Again, if you have a question or comment, please press star 1-1 on your telephone keypad. Please stand by while we compile the Q&A roster. Our first question or comment comes from the line of Frank Takanan from Lake Street Capital Markets. Your line is open, sir.

Great. Congrats on a really impressive quarter. I was hoping to start with one on the outlook. Appreciate the comments around maybe some summer seasonality contributing in Q3. Maybe if you can quantify that approximately, just how much you think could have been kind of pulled forward into Q3, and just trying to think about The low end versus high end of Q4. You've done a really nice job marching higher quarter over quarter. And obviously the midpoint is approximately flat quarter over quarter. So just curious on maybe kind of what that amount was in that summer seasonality. And then any initial thoughts on how we should think about the quarter over quarter growth we saw this year as we head into 2027. Thanks.

Thanks, Frank. Good to talk to you. I saw quite a bit about this. We've done a little bit of analytics. If I had to ballpark it in Q3, I'd say it's about a million bucks. It was due to just higher volume and seasonality. I think we need another summer to really understand some Q3 dynamics. I think that's an approximation. If you look at doing 26.1 and we take a million away on top to 25.1 or something like that. That over Q2 and then getting us to where we're projecting to be in Q4, I think it's a pretty straight line from a trajectory standpoint and pretty strong growth line with a little extra help in Q3, like I said, maybe a million dollars

Okay, that's helpful. And then maybe I'm appreciating you're not guiding for 2027, but maybe any initial thoughts on how we should think about growth there and then maybe just talk through some of the elements that are kind of key drivers behind 2027 growth.

Yeah, I think the march continues, Frank. I mean, I think there's no secrets to it. We're going to continue to march and grow at a rate that and I think we have been growing and I think that we'll benefit from a number of things. Benefit from this reimbursement announcement that goes into effect January 1st. We'll benefit from a lot of these Cohelix VACs that have come out of VACs and that we now start really competing and winning. We'll get traction out of Permuderm. We'll get traction across the portfolio. I think it's a straight line in terms of how we grow, what the strategy is, how we execute. I don't think there's going to be any surprises except that we maintain our cost discipline, we retain some of the best commercial talent in the industry, and we execute every day and every quarter.

Okay, really helpful. And then maybe just squeeze one last one in for David. Really great job on the OPEX control. Maybe layer in kind of 2027 thoughts on operating expense and specifically any kind of seasonality we should expect in the first quarter of 2027. I know in the first quarter of 2026, we had some cash use anomalies that occurred. Any comment on 2027 would be great. Thanks.

Yeah, for 27, we don't see headcount going up significantly. And so our operating costs, we're going to try and maintain at the same level it is right now. As you indicated, first quarter, we do see benefits reset. We see incentive comp being paid. Now, a lot of those expenses, at least the incentive comp, have already been accrued in this year, right? But there is cash that will be used in the first quarter for a lot of those one-time payments. But as far as operating expenses, with the exception of commissions in our sales and marketing as our revenue goes up, they will have some variability into that. But at the same time, we will be setting quotas hopefully at a higher amount. So those commissions will somewhat stay in line. So I would just, again, reiterate, we're going to keep operating expenses flat and grow revenue so that we can generate cash next year.

Got it. Thanks again. Great quarter.

Thank you.

Thank you. Our next question or comment comes from the line of Josh Jennings from TD Cowan. Mr. Jennings, your line is now open.

Thanks. Good afternoon, and great to see the continued momentum in the business. I wanted to just touch on resale, impressive quarter, that 20% sequential growth. Let me just further unpack, Cary, if you could, the drivers of the growth between increased utilization within existing accounts, new physician adoption, and maybe even new hospital activations in the trauma channel. And then what are you seeing in the annualization metrics that gives you confidence that This momentum is sustainable in the next year.

I mean, I think we've seen consistency the last few quarters. I think it remains. I think our strategy to go broader and deeper, to add new physicians, to add new procedures within existing physicians, to go after smaller, more complex wounds with education, with an economic story and benefit, with Resale Go Mini, products that fit what they're trying to do. We expect to be on podium, continue to be on podium, not only at these regional conferences, but as we get into the early parts of next year, that will continue with a large number of podium presentations, peer pressure, education, and so that all just continues, and I really think that there's so much that's been very consistent and very gradually increasing that that one kind of anomaly, and again right now it just remains to try to be very transparent about what I know and what I don't know. I think this, I feel fairly confident that that approximate million dollars of the 26-1 is due to higher volume of patients or larger wounds in that period of time. So we're glad that we're able to help that higher volume and to generate revenue from it. But the vast majority of the growth that occurred in Q3 was according to our strategy and our execution across the board, across the portfolio. all different types of wounds, new physicians, new procedures, all of it, just as we said we would. And we expect that to continue this quarter and into next year.

Excellent. And maybe a follow-up. Just the commercial strategy is evolving nicely, positioning resale, co-helix, and permanent term as an integrated wound care portfolio. We'd love to just hear more just about the cross-selling Thank you for taking the questions.

Yeah, it's a good question. I mean, and this is how we look at it. We look at it from when the patient comes in to when the patient leaves. How can we impact that? How can we impact the timing of it, the economics of it, the clinical outcome of it? And through our training, through our products. And so right now, we have basically three product lines. And depending on the patient and the wound, we're able to have one, two, or three of those products being used. and so from a, we expect that kind of pull through. We have a tremendous amount of loyalty and trust built up through resale and they're in cases, they're in the ORs every day having discussions and in a real consultative way with physicians and clinicians. I expect that if there was ever a and another product line that would have value and need to meet certain criteria that our others do, which is basically attractive margins, an economic story, a speed to healing and acceleration where it really just fits in what we're doing, where it doesn't present a large distraction or disruption and where it's not going to take up a whole lot of our people's selling time, where it just can be tucked in fairly seamlessly. And so that's kind of what we look for. It's not something that we need right now. I think this is two very new product lines. And even with ResellGo and ResellGo Mini, even those are fairly new. but we continue to look for that because just as a company and as a commercial force, we look to add value and part of that, if part of that is another product, we're always looking for that.

Thank you.

Ladies and gentlemen, thank you. I'm showing no additional questions in the queue at this time. Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. At this time, you may disconnect. Everyone have a wonderful day. Speaker, stand by.