Vericel Corporation (VCEL) Earnings

Management highlights

- Overall Financial & Operational Performance * Delivered record Q2 2026 revenue that exceeded management guidance, driving strong profit and free cash flow growth * First half 2026 total revenue grew 26% YoY, adjusted EBITDA grew 47% YoY, and generated nearly $30 million in free cash flow * Ended Q2 with $227 million in cash and investments, an increase of over $60 million compared to Q2 2025 * Achieved GAAP net income in Q2 2026, the first second quarter GAAP profit in company history * Board of directors authorized a $200 million share repurchase program, the first in company history, to return capital to shareholders opportunistically - Macy Segment Initiatives * Expanded the Macy sales force to drive growth in new users and deeper penetration in existing surgeon practices * Macy Arthro continues to expand overall Macy utilization, with clinical data demonstrating improved patient outcomes for the less invasive procedure * Began enrolling patients in the Macy ankle study in Q2 2026, with site activation ongoing * Newly trained sales reps are already contributing to strong biopsy and implant growth, with expected additional upside in 2026 and 2027 as reps hit their stride - BurnCare Segment Initiatives * Nexabrid is seeing accelerating adoption, with its highest ever quarter for revenue, ordering centers, and total hospital unit sales, reaching ~80 cumulative ordering centers * BurnCare has delivered consistent strong results over the past four quarters, building stable momentum - International Expansion * Submitted a Macy marketing authorization application to the UK in Q2 2026, targeting potential launch in the UK in 2027 if approved

Guidance

- Management raised full year 2026 total revenue guidance to a range of $330 to $340 million, representing 19% to 23% YoY growth, up from prior guidance - Full year 2026 Macy revenue guidance was raised to $284 to $290 million, from the prior range of $282 to $288 million - Full year 2026 BurnCare revenue guidance was raised to $46 to $50 million, from the prior range of $44 to $48 million - For Q3 2026, total revenue is expected to be $76.5 to $78.5 million, with a midpoint of ~$65.5 million in Macy revenue (high teens YoY growth) and ~$12 million in BurnCare revenue (including ~$3 million in BARDA procurement revenue) - Full year 2026 gross margin is still expected to be approximately 75%, with adjusted EBITDA margin expected to be approximately 27% - Q3 2026 gross margin is expected to be 71% to 72%, and adjusted EBITDA margin is expected to be 21% to 22% - The 2029 midterm target of high 30s adjusted EBITDA margin remains on track, with more significant margin expansion expected starting in 2027 after 2026 transition investments

Segment performance

VeriCell reported total Q2 2026 revenue of $77.5 million, a 22% increase year-over-year. The Macy segment generated record revenue of $65.5 million, representing 23% YoY growth, and accounted for 84.5% of total Q2 revenue. This marked the fifth consecutive quarter of 20%+ growth for Macy, with double-digit growth in both biopsies and implants. The BurnCare segment generated total Q2 revenue of $12 million, a 22% YoY increase, and accounted for 15.5% of total Q2 revenue. Within BurnCare, EpiCell contributed $10.4 million in Q2 revenue, with $21 million in first half 2026 revenue (the second-highest six-month total since launch). Nexabrid (within BurnCare) generated $1.5 million in Q2 revenue, its highest quarterly revenue since launch, with 30% growth YoY and quarter-over-quarter. Overall, VeriCell achieved a gross margin of 73% and adjusted EBITDA margin of 19% in Q2 2026, with GAAP net income of $2.2 million, operating cash flow of $16.2 million, and free cash flow of $14.3 million.

Risks & headwinds

No explicit material risks or operational failures were discussed by management during the call.

Analyst Q&A

• Q: What is driving the recent step-up in Macy's growth, how durable is this, and what is the mix of price vs volume growth?

  A: The acceleration comes from a combination of three core initiatives: the expansion of the Macy sales force, the launch of Macy Arthro, and improved commercial excellence initiatives that lifted the sales team's execution. The current growth mix matches prior quarters, with strong double-digit volume growth (led by biopsies that drive future implant growth) paired with consistent solid pricing growth. Management expects the current growth trajectory to be sustainable, as these initiatives were designed to drive long-term sustained growth.

• Q: Why have Macy's price increases been durable, and what gives management confidence this will continue?

  A: Macy has a unique market position as an FDA-regulated combination advanced cell therapy, with a price point far lower than comparable cell and gene therapies (which can cost $500,000+ per treatment). The total per-payer spend for Macy is also very low relative to other orthopedic and advanced therapy categories. Ongoing market research confirms that the historical high single-digit to low double-digit annual price increases are well accepted by payers and providers, so management expects this trend to continue for the foreseeable future.

• Q: The guidance implies a second half 2026 growth slowdown after a strong first half — what explains this, and is it a reflection of weaker underlying momentum?

  A: The slower implied growth in guidance is just a prudent, conservative framework that management has maintained consistently; it does not reflect a change in underlying business momentum. Management incorporated the Q2 outperformance into the full year guidance and kept unchanged second half assumptions consistent with prior guidance, leaving internal expectations higher than the published midpoint. If the team continues to execute well, the company is positioned to meet or outperform the guidance range in the second half.

• Q: What is the strategy for the new $200 million share repurchase program, and how does it fit with other capital allocation priorities like M&A and internal growth?

  A: Capital allocation priorities remain unchanged: first funding organic internal growth opportunities, then pursuing opportunistic M&A (which is core to the company's growth DNA). The share repurchase is only possible because the $100 million investment in the new manufacturing facility is complete, leading to an inflection in free cash flow generation and a strong balance sheet with nearly $250 million in cash. Management can opportunistically return capital to shareholders while still funding all planned growth and pursuing M&A, reflecting confidence in the company's long-term trajectory.

• Q: What should we expect for reimbursement, pricing, and margin impact of the upcoming UK launch of Macy?

  A: The UK is a good beachhead market with strong existing surgeon advocacy (Macy was originally developed in Europe) and a concentrated market of ~12 centers of excellence, so only minimal commercial staffing will be needed. There is already a positive historical NICE recommendation for ACI technologies including Macy, with acceptable pricing, and management expects to secure attractive reimbursement during the upcoming regulatory process (other countries will use the UK price as a reference). The launch will utilize existing excess capacity at the company's US facility, so it will fit well with the company's overall margin profile with minimal incremental investment.