AVITA Medical, Inc. (RCEL) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals mixed signals. While the company shows revenue growth and improved cash usage, it has revised revenue guidance downward and faces gross margin pressure. The Q&A indicates some uncertainty in reimbursement dynamics and product adoption, but no major red flags. The strategic focus on burn centers and new product lines offers growth potential. The overall sentiment is neutral, balancing positive financial discipline against cautious guidance and market challenges.
Key Financial Performance
Fourth Quarter Revenue $17.6 million, compared to $18.4 million in the prior year period, showing stabilization within the business. This was consistent with revised revenue expectations.
Full Year Revenue Approximately $71.6 million, representing 11% growth over 2024. Growth occurred despite reimbursement-related headwinds.
Fourth Quarter Gross Margin 81.2%, compared to 87.6% in the same period last year. The decrease was driven by inventory reserves and product mix.
Full Year Gross Margin 82.1%, compared to 85.8% in 2024. The decrease reflects inventory reserves, product mix, and increased contribution from Cohealyx and PermeaDerm.
Fourth Quarter Operating Expenses $24.7 million, down 5% year-over-year. Reduction driven by lower sales and marketing expenses due to reduced headcount, compensation, and commissions.
Full Year Operating Expenses Declined by $10.4 million or 9%, even with nonrecurring severance costs included, reflecting a substantially lower operating structure.
Fourth Quarter Net Cash Used $5.1 million, marking the third consecutive quarter of improvement, down from $10.1 million in Q2 and $6.2 million in Q3.
Cash and Marketable Securities $18.2 million at the end of the quarter. Debt refinanced with a new credit facility to simplify the balance sheet and reduce covenant risk.
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Operating Highlights
RECELL, Cohealyx, and PermeaDerm: These products are being used repeatedly by clinicians across multiple patient episodes. RECELL remains the foundation of the business, supported by clinical evidence demonstrating faster healing, improved outcomes, and shorter hospital stays. Cohealyx-1 post-market study is fully enrolled, and PermeaDerm-1 study is nearing full enrollment. Early findings from these studies were presented at the 2026 Boswick Burn and Wound Symposium, showing real-world clinical practice and higher revenue per patient opportunities.
International Expansion: AVITA is taking a disciplined distributor-led approach in select markets outside the U.S. Since receiving CE Mark approval for RECELL GO in October, initial clinical use has been supported in a small number of European markets. The company responded quickly to requests from surgeons during the tragic nightclub fire in Switzerland, showcasing operational readiness.
Reimbursement Clarity: Six of the seven Medicare administrative contractors have published payment rates for RECELL procedures, removing a key constraint and restoring clinician confidence. This has led to early signs of utilization normalization.
Cost Control: Operating expenses in Q4 were down 5% year-over-year, with a 10% reduction excluding one-time severance costs. Full-year operating expenses declined by 9%, reflecting a lower operating structure.
Cash Use: Net cash used improved for three consecutive quarters, declining to $5.1 million in Q4. The company ended the quarter with $18.2 million in cash and marketable securities.
Debt Refinancing: AVITA refinanced its debt through a new credit facility with Perceptive Advisors, LLC. This reduced restrictive covenants, simplified the balance sheet, and provided more operational flexibility.
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Risk or Challenges
Reimbursement Uncertainty: Reimbursement uncertainty for RECELL procedures was a significant constraint throughout 2025, impacting clinician confidence and utilization. Although progress has been made, this remains a critical area to monitor.
Revenue Dependency: Approximately 90% of revenue is concentrated in 200 burn and trauma centers, creating a dependency on a small number of accounts and limiting diversification.
Product Mix Impact: The shift in product mix, including increased contributions from Cohealyx and PermeaDerm, has led to a decrease in gross margins, which could impact profitability.
Operating Expenses: While operating expenses have been reduced, the company incurred $1.2 million in one-time severance costs, and future cost control remains essential for financial sustainability.
Cash Use: Although cash use has improved, the company ended the quarter with $18.2 million in cash and marketable securities, which may require careful management to avoid liquidity issues.
Regulatory and Market Expansion Risks: The company is pursuing a disciplined distributor-led approach in international markets, but success depends on regulatory and operational readiness, which could pose challenges.
Debt Covenants: The company refinanced its debt to reduce restrictive covenants, but the new facility still requires meeting revenue and cash covenants, which could become a risk if growth targets are not met.
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Guidance & Outlook
Revenue Growth: The company expects full-year revenue for 2026 to be between $80 million and $85 million, representing growth of approximately 12% to 19% over 2025.
Utilization Normalization: Normalization of RECELL utilization is anticipated, along with expanded portfolio use within core accounts and contributions from Cohealyx and PermeaDerm.
Clinical Studies: Data from the Cohealyx-1 post-market study and the PermeaDerm-1 study is expected later in 2026, which will provide real-world clinical and economic evidence.
International Expansion: The company is taking a disciplined distributor-led approach in select international markets, focusing on establishing familiarity and operational readiness.
Financial Discipline: The company aims to maintain disciplined control of operating costs, support revenue growth with a stable and scalable cost structure, and continue cash efficiency as revenue increases.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:On the guidance, with the new revenue covenants, how should we think about the pace of growth through the year? Is the $15.4 million a good starting point for Q1?
A:The $15.4 million should not be taken as guidance. It was mentioned to show there is significant headroom for the covenant number. The company had $17.6 million in Q4 and does not expect to drop significantly in Q1. The guidance for the year is $80 million to $85 million, and the $15.4 million figure was structured to remove covenant risk.
Q:Can you provide more details on the reimbursement dynamics that affected 2025 and the status of the seventh MAC?
A:The company is highly engaged with all 7 MACs. Six MACs have published payment rates, and the process involves hospitals and physicians becoming aware and implementing these rates. For the seventh MAC, the company is engaged in their process and expects them to publish soon. There is no reason for concern.
Q:Can you share a core customer experience where Cohealyx and PermeaDerm have made it through the VAC process? Are there signals of strong attachment rates in RECELL cases?
A:The process involves having a champion in accounts who helps move the products through the VAC process and into practice. Some MACs have seen uptake of these products, but it is still early days. There is no specific 'all-star' account yet, but presentations at the Boswick Burn Conference showed physicians using all three products (RECELL, Cohealyx, and PermeaDerm).
Q:Do you see Cohealyx and PermeaDerm adoption driving increased demand for RECELL?
A:RECELL is the established brand, and relationships with physicians using RECELL may lead to discussions about Cohealyx and PermeaDerm. Conversely, Cohealyx and PermeaDerm adoption could open doors to new accounts and drive RECELL utilization.
Q:Can you review the reimbursement pathway for Cohealyx and PermeaDerm as adoption and utilization increase?
A:The company does not expect any disruptions to the reimbursement process for Cohealyx and PermeaDerm. They will continue working through the process in the coming months.
Q:What are the primary drivers of growth supporting the 2026 guidance? How much is based on RECELL recovery versus Cohealyx and PermeaDerm launches?
A:Growth is expected across all three product lines (RECELL, Cohealyx, and PermeaDerm), primarily through increased utilization within existing accounts. The company has a plan in place to drive growth in all three areas.
Q:Can you provide an update on the conversion rate of Cohealyx VAC reviews to active ordering accounts? Are there bottlenecks in the process?
A:Cohealyx VAC reviews are progressing at a steady rate, and accounts are starting to order products as they exit the VAC process. There are no significant bottlenecks other than administrative delays, and the company provides clinical and economic information to support the process.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the seventh MAC's timeline for publishing payment rates, citing only that they are engaged in the process. Additionally, they did not identify a specific 'all-star' account for Cohealyx and PermeaDerm adoption, instead providing general observations about early adoption trends.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Advisors LLC
Chairman Interim
Full
Independent Non
Interim CEO
Non Chairman
Perceptive Advisors
PermeaDerm clinician
PermeaDerm study
RECELL PermeaDerm
assumption
balance sheet
burn trauma
capital
cash covenant
cash use
commitment
constraint
contribution PermeaDerm
control
core account
cost structure
debt credit
discipline
distraction
facility Perceptive
financials
focus
friction
perspective
platform
priority
reimbursement uncertainty
severance
stabilization
structure cash
use balance
use core
utilization
visibility cash
RCEL Transcript
AVITA Medical, Inc. (RCEL) Q4 2025 Earnings Call Transcript
Unknown2-12
The earnings call reveals mixed signals. While the company shows revenue growth and improved cash usage, it has revised revenue guidance downward and faces gross margin pressure. The Q&A indicates some uncertainty in reimbursement dynamics and product adoption, but no major red flags. The strategic focus on burn centers and new product lines offers growth potential. The overall sentiment is neutral, balancing positive financial discipline against cautious guidance and market challenges.
AVITA Medical, Inc. (RCEL) Q3 2025 Earnings Call Transcript
Unknown11-6
The earnings call presents a mixed outlook. Financial performance showed a revenue decline and reduced margins, but cost management improved the operating loss and net loss. The Q&A reveals management's focus on U.S. growth, reimbursement normalization, and resource allocation challenges. However, lowered 2025 guidance, under-penetration, and lack of clear European strategy weigh on sentiment. Despite some positives like reduced expenses and cash position improvement, the overall sentiment remains neutral due to mixed guidance and uncertainties in execution.
AVITA Medical, Inc. (RCEL) Presents At Morgan Stanley 23rd Annual Global Healthcare Conference (Transcript)
Neutral9-8
AVITA Medical, Inc. (RCEL) Q2 2025 Earnings Call Transcript
Unknown8-8
The earnings call reveals mixed signals: strong product launches and cost savings are offset by cash decline and adoption challenges. Financial performance shows revenue growth and reduced losses, but declining gross margins and cash reserves are concerning. The Q&A section highlights adoption hurdles and cash constraints, but also potential recovery in payments. Overall, the sentiment is neutral, with no strong catalysts to suggest a significant stock price movement.
RCEL Slides
RCEL Report
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