Vericel Corp — Call Transcript 2026

Hello. Great. Welcome, everyone. Welcome back. Richard Newitter here, MedTech analyst at Truist Securities, and our next fireside chat, we have senior management from Vericel. We have Vericel's CEO and President, Nick Colangelo, and CFO, Joe Mara. Welcome. Thanks, Rich. Good to be here. Yep. Thanks for having us. Yeah. I thought maybe we would start off and get the macro question out of the way. We're trying to ask all of our companies just about underlying utilization and volumes, and you guys have a lot of things going on, new product launches. I appreciate your growth rate, and what's going on at your company might not be what's happening on the underlying utilization environment. Would love to just hear, are you seeing any notable change in trends, positive or negative, against the backdrop of some hospitals, companies that are talking about slowing utilization and things like that? What can you tell us there? Yep. I guess I'll just start by reminding our listeners that we'll be making some forward-looking statements today, so they should take a look at our documents on file with the SEC for further information. I would just say, Rich, to your point, we certainly recognize that there's a lot of macro events going on, rotations out of healthcare or MedTech specifically into tech and AI and things like that. There's a lot of sector-specific issues that people have mentioned, and this really started back at the beginning of the year at a major conference, and we were very specific in our comments that we did not, while others were mentioning sort of December slowdowns and things like that we did not see anything impacting our business, nor do we expect to. In fact, I made a point of saying that we had our largest month ever since we launched the product in December by far. We had really strong sort of underlying metrics, biopsy procedures, implant procedures, every sort of metric we always talk about, really in the second half of the year, particularly in the fourth quarter, certainly in December, and that carried over into the first quarter, where again, we had another 20%+ growth, highest first-quarter metrics ever, second-highest biopsy month ever. You have two straight quarters of the highest quarterly biopsies we've ever delivered. We've had some pretty strong growth, and we haven't seen any sort of procedural slowdown for MACI and really in our part of the market. We do track other procedures in cartilage repair, and there hasn't been any sort of noticeable decline in patient flow overall. We obviously are outgrowing the market by multiples, right? We don't rely on sort of market growth to drive our growth anyway. We certainly haven't seen that to date, and we mentioned on our last earnings call that those trends have continued to start the second quarter, which you would expect if we have two of our highest biopsy quarters ever. You're probably set up well for not only the second quarter but the rest of the year. Yeah. Maybe we can just go to the quarter and guidance and the update that was there. You had a great start to the year, especially for MACI. You said volume growth accelerated throughout the quarter as well as into April, like you said, the beginning of 2Q, and that you grew units, I believe, double digits. Right. Your guidance, though, implies more of a high teens growth rate instead of 20%+ for the remaining nine months of the year. You also had a 9.5% price increase in May. Thinking about double digits throughout 1Q, and it was accelerating and into April, just help me reconcile the step-down in the back half or the 2Q to 4Q period. Is that just conservatism or what can you reconcile for us there? I can take that one, Rich. I would say, just to build off where Nick started, I think we feel like from a commercial perspective, we just feel like the team's been operating and really executing at a very high level over the last few quarters, and I would say particularly in the back half of last year into the start of the year, as we talked about and as Nick referenced, we had a really strong first quarter, 22% revenue growth, our best first quarter in a few years. Feel really good about the start of the year. Obviously Q1 puts us in a good position as we move forward. I would say from kind of a guidance sort of framework and philosophy perspective, we were pretty pointed to start the year to try to be a bit prudent. If you kind of look back at last year, I think a good analog is kind of how we're thinking about burn care now. We've moved back to kind of a run rate concept on burn care, and I think that's worked out very well over the last few quarters. We've over-delivered there. I think on the MACI side, I would say we probably just want to be a bit prudent as we think about the guidance. To your point, whether you look at Q2 or you look at the remainder of the year, it's really high teens growth is kind of where the guide is at. I think to your question, from a pricing perspective, we did take that high single-digit price increase last month. When you kind of factor that in and kind of think about similar year-over-year pricing growth, it's not going to take much for us to kind of meet our guidance and certainly our internal expectations are higher than where our guidance is and certainly our internal goals are as well. I would say if we can continue to be around that double-digit range on biopsies and see similar pull-through on implants and our conversion rate has typically been pretty stable, I think we certainly feel like we're in a good position as we move into Q2 and beyond. Again, not only to meet the guidance, but ideally overperform there. Got it. That's really helpful color. This has come up as well, just on the pricing. You had multiple price increases last year. You have, I believe, a single price increase this year. There is some confusion out there, I think, for investors of how you guys manage your price increases. Obviously, not all of them are the same order of magnitude each time. They happen at different times. Can you tell us a little bit about how you stagger them, what the strategy is, and what your ongoing price assumption is in your growth algorithm? Yeah. I'll start, and Joe can add in color if he'd like as well. I think, first of all, you have to recognize that MACI is a kind of a unique product compared to other MedTech products, in that it's a combination device, biologic product as regulated as such by the FDA. Every major plan has a medical policy that covers MACI. It's reimbursed under a J code, like other biologic products, we set the price. We're not subject to CMS pricing or anything like that because we don't really have Medicaid and Medicare business. That's kind of the first thing. We do a lot of pricing research every year or two, and we do multi-year product or pricing analysis with payers and hospital administrators. I think it's important for investors to understand that from a payer perspective, they look at it on two dimensions. Similar technologies, this is an advanced cell therapy. If you think about other cell therapy products like CAR T therapies or other gene therapies which fall within the same class, those products are half a million dollars to multiple millions of dollars per unit. Our pricing for MACI is not even on the radar screen in terms of similar technologies. The other dimension they look at is sort of what's the overall impact to the system or their plan. Again, MACI, we're very proud of the fact that we've grown the product to about a quarter billion dollars, and we're well on our way to kind of getting to half a billion dollars over the next several years. If you look at either sort of those types of therapies I talked about, cell and gene therapies, where they're not only high price but high volume, and there's multiple billions of dollars spent on these products. Or even in our space, if you think about total knees, which call it $20 billion-ish a year, total hips, $10 billion-ish, total shoulders, $3 billion-$5 billion. Again, it's not even on the radar screen. We have this really enviable position, and again, we price sort of based on that market research, and it's really not atypical for similar kinds of products to take the price increases we take. Overall, you couple that with the kind of double-digit volume growth, we expect it to be sort of a strong pricing and volume growth story for years to come with no competition on the horizon. I don't want to put words in your mouth about a long-term MACI growth trajectory, if we just assume that your pricing can durably sustain, as you just suggested, let's just say in that high single digit, low double digit range, then giving you a 9%-11%, 8%-12%, whatever you want to say, call it 10% at the midpoint. Then units sustaining in that close to double digits, even if it's just barely 10% or 9.5%, you should be a 20+ % MACI grower for the intermediate to longer term, no? Are the components wrong? I know you won't necessarily guide there- Right Is that a reasonable way to think about what all else equal should be doable? Yeah. Obviously, we can't predict out multiple years and any other sort of macro changes in the environment. We don't expect any. I don't think directionally you're off, right? We still think we'll have strong pricing power as we move forward, the penetration rate in our TAM is still relatively low. We would expect to continue to have strong growth, again, especially as there's sort of no MACI-like competition on the horizon. Nick, if we had to hypothesize about what could potentially change that pricing conversation with commercial payers other than you're not on the radar compared to what they're paying for, what could it be? Again, we meet with payers, we've done it, just say it was every other year since we launched the product a decade ago. It's not like we're under the radar. It's just when you think about, I always use an example, like even MACI at $300 million, if you look at a UnitedHealthcare that has 15% of covered lives, what would that mean if it's a representative example, which it is? It's $45 million a year for UnitedHealthcare. Again, that's just not something that they're going to spend time actively managing. I would say it's also a function of the fact that MACI has to have a prior approval. It's a medical policy. You have to meet certain parameters to even be eligible to be treated with MACI and covered under those plans. The plans know the price, they know the outcomes data, which is great long-term outcome data, and they know that only the appropriate patients are going to be treated with MACI. It's a very transparent process. It's not like we're under the radar, but once they find out there's going to be an issue, they already know, and they know all, everything, when we do that research, and again, it's very much in line with sort of what they might expect. I think, if we got greedy, that's when you would get hurt, right? We just try to be very thoughtful about how we price going forward, and we don't really expect that to change. Nick, you also said you're basically the only player in town, right? Competition, no competition on the horizon, I think is what you said. Yep. I want to maybe just ask because this comes up a lot from investors. You have Agility, which has been on the market for some time, but they are potentially going to be stepping into a better CMS reimbursement situation starting January 1st, 2027. Smith+Nephew is a formidable company that is going to likely commercialize more aggressively and put more behind it as they step into that more favorable reimbursement situation. I guess how do you expect the competitive landscape to change at all once that happens? It sounds like not much. Why? Well, yeah, I would just step back and say for those who aren't as familiar with us, MACI is by far the market leader in cartilage repair. We've been on the market. This is our 10th year. We've had a compounded annual growth rate of 24%, 20% or more in the last three years. It is the market leader, especially obviously in our addressable market segment. I think you have to always start by saying a cartilage injury is not the same. It's a very sort of complex treatment algorithm and nuanced in that the decisions surgeons make are really based on the patient profile, so the age of the patient, their ability to do rehab with any kind of cartilage repair procedure, and the characteristics of the defect itself. The size, the location, whether there's bone involvement or not, the overall health of the knee, those are the primary decision points that lead surgeons to make a certain decision on how they want to treat. The competitive landscape has been very stable since we bought this business in 2014 and launched MACI in 2017. Potential market entrants really haven't changed, and in fact, it's moved very strongly in our favor. The way we always talk about competition is MACI-like products, and that's what I said earlier. At one point in time, there were two MACI-like products in development for the U.S. market. One didn't meet its primary endpoint and is gone. The other sort of had a European study that didn't show a difference versus microfracture. Yes, I would say that there's not going to be a MACI-like product on the market in the foreseeable future, if ever. That's number one. That's what investors should worry about. Was there going to be a product that would come to market and sort of have a direct impact on MACI? Because a new product that's kind of in that class could have taken market share, could have impacted pricing strat, whatever. That's just not going to happen. That's number one. The other thing we talked about is there's always sort of these other products that have been out there for different parts of the cartilage repair market, different segments. When you talk about procedures that are alternatives to MACI, like osteochondral allografts, OATS, which is taking a plug of a patient's own cartilage and transplanting it, microfracture with these microfracture augmentation products that are out there, and there have been other synthetic sort of products that have been on the market sort of come and gone. Those have always been out there throughout the history that we've had MACI. On Agility in particular, we've known that product for 10 years. It's been in development. It's been on the market for four years. I think if you go to the website, there are reimbursement codes if physicians want to use it now, with a permanent CPT code coming. Again, it'll depend on the reimbursement under that code based on RVUs. It'll depend on the price that's charged. Is it good economics for surgeons? We'll see, but the issue is it's not really our patient population. MACI's typical patient is a younger patient, sort of in their early 30s with a pure chondral or just a cartilage surface injury. That's what the core MACI patient is. I think if you look at our publication on the first 5,000 patients, low single-digit percentage of patients had any bone involvement. It really is sort of those surface cartilage defects. In the tenets of joint preservation is do no harm. If you have a pure cartilage injury, you're not going to drill into the bone, core out the bone to use an OCA or even an Agility. We've always said it's likely to be used in smaller defects, older patients, with osteoarthritis sort of as a bridge to a partial or full knee replacement, and that hasn't changed over the last seven years we've been talking about it. I think there was another analyst that had did a KOL call last week with a sort of early MACI adopter, high-volume surgeon, Hurricanes doc, if you're a hockey fan. His point was when he thinks about this, when you've got a defect that's 1 square centimeter or less, there's lots of different options out there that you can do, OCAs and potentially Agility, OATS, whatever. When it gets to be a centimeter and a half or larger, that's when you start skewing towards MACI. To use his words. If there's bone involvement, that's going to change the algorithm. That's where you might use an OCA or again, potentially an Agility. Really, in his words, "The share shift's going to come from OCA and OATS." Did not expect any meaningful impact on MACI business as we wouldn't. His point was, "I believe my MACI business will continue to grow in the double digits to teens in the years ahead." I don't think we could be more consistent in our perspective on this. Hopefully that answers your question. It does. I guess the question that I have as a follow-up would just be, if your competitor positions the product in a way that is more overlapping on the Venn diagram, if you will, even if it's not where it's suited, you could get some trialing or some physicians who are influenced or trying it maybe in areas they shouldn't be or pushing the envelope. I guess, will you need to contemplate that or is the market expanding at a rapid enough clip that type of impact will be negligible in your view? We don't expect any sort of impact of note. Again, companies can position products however they want. You're basically saying, you're going to override a surgeon's treatment algorithm to try a product that, again, why would you? There's a failure rate like there is with any product, right? If you core out the bone and it doesn't work, then what are you going to do in a 29-year-old patient, right? I would expect that most surgeons would not do something just regardless of how any company positions any product, if it's sort of contrary to their normal treatment algorithms. Got it. What do you think investors are most underappreciating about your competitive moat, your IP, your true protection on a true MACI-like product? Yeah. Well, like I said, MACI's regulated by the FDA as a combination device biologic product. There is no established pathway to bring those kinds of product to market, so there's no sort of biosimilar pathway for these combination products. There's no 510(k) pathway, so if anybody wants to enter the market with a MACI-like product, they have to run the clinical studies. As I mentioned earlier, it hasn't gone well for those that have tried to do it other than MACI. You can ask yourself why that is. Were they not run well? Is there something different about our approach from a manufacturing and product profile perspective? Which there's probably something to that. That's the moat. You can't just sort of enter the market under a 510(k) or a biosimilar kind of pathway. You have to run the studies. The last company in the U.S. that ran a study, whether it's a MACI-like product, it was a 10-year enrollment for 200 patients. Why would you use a trial of product when MACI's available for an appropriate patient? It gets very difficult for anybody to run these kinds of studies, it's a pretty big moat. Yep. I want to switch gears a little bit to just MACI Arthro and what this has been doing for the business, where you've been seeing use. I think you said MACI Arthro now drives over half your implants, and the trained base has reached 1,000 surgeons, right? Is that? Correct. Where are you seeing the uptake most prominently? Is this expanding the market? Yeah. Just to clarify, what we've said is that over half of MACI's overall business is coming from surgeons who are trained on MACI Arthro. It's that group of trained surgeons. Yeah, last year was MACI Arthro's first year on the market. We had said there's roughly call it 2,500-ish prior to that, surgeons that were using MACI, taking biopsies, et cetera, in any given year. Cumulatively, a little higher than that. Yeah, to have 1,000 surgeons trained in the first year on the market was pretty good, and we were pretty happy with that. At this point, we have a critical mass of trained surgeons. Over time, I would expect that any surgeon that is using MACI is going to be trained on MACI Arthro. It's not really training metrics anymore that we're concerned about. It's getting that pull-through of MACI Arthro cases from those that have been trained. That's what our commercial team is focused on this year. That's important because not only have we seen sort of what you'd want to see out of trained surgeons, where biopsy growth, implant growth increases. Total. Total. Yeah. When you sort of the surgeons that have done MACI Arthro cases, they actually have even higher biopsy growth and implant growth rates, and we've seen their conversion rates go higher. It's kind of this halo effect on the overall business. We want to make sure that continues. Obviously, we'll continue to train surgeons. The trends of how they behave tended to continue. I'd say last year, MACI actually, the growth rate increased by a couple of hundred basis points, and I'd say the increase we saw in those small femoral condyle defects that MACI Arthro is designed to treat actually became one of our faster-growing segments. Now, it's off a lower volume, so patella's always been our highest volume, sort of highest growth, or consistently is. We said the small femoral condyle defect growth actually sort of matched that or was on par with that last year. That's important, right? That was incremental to those specific physicians' overall use, right? Is it tough to break out? It's tough to break out. We just look at it in aggregate. You never know if they would've done the case anyway, even if they did it MACI Arthro and so on. I would say just there was much more use of MACI Arthro than that. I'm saying you can look at the increase in the small femoral condyle defects and that really accounted for the incremental overall growth. We're coming into the year with a lot more trained surgeons. We'll continue to train those surgeons, but we think that's a great indicator for us. Where it's being used is, these instruments were designed for two to four square centimeters, so they're matching cannulas and cutters and everything for either a two, three, or four square centimeter defect on the femoral condyle. That's where we've seen the most uptake. We've been pleasantly surprised that we're also seeing trochlea cases, so behind the kneecap, just because they can access that area easily with our Arthro procedures. Also patella usage, which is kind of interesting, right? The back of the kneecap. I think from a surgeon perspective, they'll look at it and say, "Hey, that could be a great benefit for the patient." Overall, it is with MACI Arthro generally because it's a less invasive surgery, so you'd expect sort of less postoperative pain, greater range of motion, faster back to full weight bearing, et cetera. If they can treat the defect without having to open up the knee and kind of flip the kneecap over to address a patella defect, that could have some pretty meaningful benefits for the patient as well. We're actually seeing surgeons sort of, even though that's not what the instruments were designed for, doing patella cases as well. I wanted to ask also, you got MACI Arthro still in the relatively early to mid-innings of launch, and then you also took some measures to realign your sales force entering 2026. Talk a little bit about how that's trending relative to your expectations and should we be nervous at all that there's potential. Right You're splitting territories. Is there a delayed impact coming, or what gives you confidence to say that it's not? Yeah. We decided to expand our sales force in the second half of last year. We actually moved it up a little bit because we knew we had a super high volume fourth quarter coming and in the large territories, we wanted to get people on board to be able to support those cases. Given the momentum of the business, we wanted to make sure that we had the full expanded sales force in place for all of 2026. Yeah, a lot of them came on board in the fourth quarter. Obviously, it's really interesting. I think the commercial leadership team, they executed flawlessly to bring new reps on, sort of partnering with the existing reps in those territories. There's a lot that could've gone wrong, and obviously, we sort of blew it out in Q4 and had our highest quarter ever, right? They worked really well together. They each knew what part of the territory they were going to have come the first part of the year. We get into this first quarter, and everybody's territory is realigned, and again, we said on our earnings call that it was the first quarter with the new reps and all the reps in their new territories. We had record first-quarter metrics across the board. We saw strong double-digit biopsy growth, double-digit implant growth, and particularly strong biopsy growth in the new territories. Again, I think there was flawless execution. We've done this a lot. We know how to do it well, in terms of communication, incentive comp plans, and so on, and I think the proof is in the results. At this point, with sort of potential disruption behind us, they're almost six months into the tenure here. There'll be no disruption that's delayed. Sounds like you're feeling good. Maybe to close it off here, we have two minutes left. You're sitting on a little over $200 million of cash on the balance sheet. If you continue with this type of free cash flow generation, which is accelerating, you could be approaching a half a billion dollars in a couple of years here. Yeah. Right? How should we think about what you're going to do with that cash, I'm just curious with where the stock is trading now, I would imagine you think it's undervalued. Tell me if you think different. Could there be a buyback potentially on the horizon? I'd say our capital allocation strategy has been pretty consistent. Our big capital investment was the $100 million into our new facility, which we self-funded and actually increased our cash balance while we were doing that. That was the big Cap. In order to meet our projected growth over the next five to 10 years, that was sort of the big capital investment we needed to make, that's why with that behind us, $2 million-$3 million a quarter in CapEx. We're going to have really strong free cash flow. It's down to the other two areas that we would always talk about, which is business development. We're certainly looking for other opportunities, particularly in sports medicine. At some point, if we didn't do anything else, you can do the math and say the pull-through, given our margins, both gross margin and adjusted earnings margin, is pretty strong. You'd have to think about those capital returns to shareholders, and a buyback certainly is something that we think about and we're in a position to do when we think it's right. We obviously think the stock is undervalued now. I'd just say it's an option that's on the table that we certainly talk about. Great. I think we'll close it off there. Nick, Joe, thank you so much. Great. Really appreciate it. Thanks, Rich. Appreciate it. Thanks for having us, Rich.

Speaker 3: Hello. Great. Welcome, everyone. Welcome back. Richard Newitter here, MedTech analyst at Truist Securities, and our next fireside chat, we have senior management from Vericel. We have Vericel's CEO and President, Nick Colangelo, and CFO, Joe Mara. Welcome. Hello. hello Great. great Welcome, everyone. welcome everyone Welcome back. welcome back Richard Newitter here, MedTech analyst at Truist Securities, and our next fireside chat, we have senior management from Vericel. richard newitter here medtech analyst at truist securities and our next fireside chat we have senior management from vericel We have Vericel's CEO and President, Nick Colangelo, and CFO, Joe Mara. we have vericel's ceo and president nick colangelo and cfo joe mara Welcome. welcome

Speaker 2: Thanks, Rich. Good to be here. Thanks, Rich. thanks rich Good to be here. good to be here

Speaker 1: Yep. Thanks for having us. Yep. yep Thanks for having us. thanks for having us

Speaker 3: Yeah. I thought maybe we would start off and get the macro question out of the way. We're trying to ask all of our companies just about underlying utilization and volumes, and you guys have a lot of things going on, new product launches. I appreciate your growth rate, and what's going on at your company might not be what's happening on the underlying utilization environment. Would love to just hear, are you seeing any notable change in trends, positive or negative, against the backdrop of some hospitals, companies that are talking about slowing utilization and things like that? What can you tell us there? Yeah. yeah I thought maybe we would start off and get the macro question out of the way. i thought maybe we would start off and get the macro question out of the way We're trying to ask all of our companies just about underlying utilization and volumes, and you guys have a lot of things going on, new product launches. we're trying to ask all of our companies just about underlying utilization and volumes and you guys have a lot of things going on new product launches I appreciate your growth rate, and what's going on at your company might not be what's happening on the underlying utilization environment. i appreciate your growth rate and what's going on at your company might not be what's happening on the underlying utilization environment Would love to just hear, are you seeing any notable change in trends, positive or negative, against the backdrop of some hospitals, companies that are talking about slowing utilization and things like that? would love to just hear are you seeing any notable change in trends positive or negative against the backdrop of some hospitals companies that are talking about slowing utilization and things like that What can you tell us there? what can you tell us there

Speaker 2: Yep. I guess I'll just start by reminding our listeners that we'll be making some forward-looking statements today, so they should take a look at our documents on file with the SEC for further information. I would just say, Rich, to your point, we certainly recognize that there's a lot of macro events going on, rotations out of healthcare or MedTech specifically into tech and AI and things like that. There's a lot of sector-specific issues that people have mentioned, and this really started back at the beginning of the year at a major conference, and we were very specific in our comments that we did not, while others were mentioning sort of December slowdowns and things like that we did not see anything impacting our business, nor do we expect to. Yep. yep I guess I'll just start by reminding our listeners that we'll be making some forward-looking statements today, so they should take a look at our documents on file with the SEC for further information. i guess i'll just start by reminding our listeners that we'll be making some forward-looking statements today so they should take a look at our documents on file with the sec for further information I would just say, Rich, to your point, we certainly recognize that there's a lot of macro events going on, rotations out of healthcare or MedTech specifically into tech and AI and things like that. i would just say rich to your point we certainly recognize that there's a lot of macro events going on rotations out of healthcare or medtech specifically into tech and ai and things like that There's a lot of sector-specific issues that people have mentioned, and this really started back at the beginning of the year at a major conference, and we were very specific in our comments that we did not, while others were mentioning sort of December slowdowns and things like that we did not see anything impacting our business, nor do we expect to. there's a lot of sector-specific issues that people have mentioned and this really started back at the beginning of the year at a major conference and we were very specific in our comments that we did not while others were mentioning sort of december slowdowns and things like that we did not see anything impacting our business nor do we expect to In fact, I made a point of saying that we had our largest month ever since we launched the product in December by far. We had really strong sort of underlying metrics, biopsy procedures, implant procedures, every sort of metric we always talk about, really in the second half of the year, particularly in the fourth quarter, certainly in December, and that carried over into the first quarter, where again, we had another 20%+ growth, highest first-quarter metrics ever, second-highest biopsy month ever. You have two straight quarters of the highest quarterly biopsies we've ever delivered. We've had some pretty strong growth, and we haven't seen any sort of procedural slowdown for MACI and really in our part of the market. We do track other procedures in cartilage repair, and there hasn't been any sort of noticeable decline in patient flow overall. In fact, I made a point of saying that we had our largest month ever since we launched the product in December by far. in fact i made a point of saying that we had our largest month ever since we launched the product in december by far We had really strong sort of underlying metrics, biopsy procedures, implant procedures, every sort of metric we always talk about, really in the second half of the year, particularly in the fourth quarter, certainly in December, and that carried over into the first quarter, where again, we had another 20%+ growth, highest first-quarter metrics ever, second-highest biopsy month ever. we had really strong sort of underlying metrics biopsy procedures implant procedures every sort of metric we always talk about really in the second half of the year particularly in the fourth quarter certainly in december and that carried over into the first quarter where again we had another 20%+ growth highest first-quarter metrics ever second-highest biopsy month ever You have two straight quarters of the highest quarterly biopsies we've ever delivered. you have two straight quarters of the highest quarterly biopsies we've ever delivered We've had some pretty strong growth, and we haven't seen any sort of procedural slowdown for MACI and really in our part of the market. we've had some pretty strong growth and we haven't seen any sort of procedural slowdown for maci and really in our part of the market We do track other procedures in cartilage repair, and there hasn't been any sort of noticeable decline in patient flow overall. we do track other procedures in cartilage repair and there hasn't been any sort of noticeable decline in patient flow overall We obviously are outgrowing the market by multiples, right? We don't rely on sort of market growth to drive our growth anyway. We certainly haven't seen that to date, and we mentioned on our last earnings call that those trends have continued to start the second quarter, which you would expect if we have two of our highest biopsy quarters ever. You're probably set up well for not only the second quarter but the rest of the year. We obviously are outgrowing the market by multiples, right? we obviously are outgrowing the market by multiples right We don't rely on sort of market growth to drive our growth anyway. we don't rely on sort of market growth to drive our growth anyway We certainly haven't seen that to date, and we mentioned on our last earnings call that those trends have continued to start the second quarter, which you would expect if we have two of our highest biopsy quarters ever. we certainly haven't seen that to date and we mentioned on our last earnings call that those trends have continued to start the second quarter which you would expect if we have two of our highest biopsy quarters ever You're probably set up well for not only the second quarter but the rest of the year. you're probably set up well for not only the second quarter but the rest of the year

Speaker 3: Yeah. Maybe we can just go to the quarter and guidance and the update that was there. You had a great start to the year, especially for MACI. You said volume growth accelerated throughout the quarter as well as into April, like you said, the beginning of 2Q, and that you grew units, I believe, double digits. Yeah. yeah Maybe we can just go to the quarter and guidance and the update that was there. maybe we can just go to the quarter and guidance and the update that was there You had a great start to the year, especially for MACI. you had a great start to the year especially for maci You said volume growth accelerated throughout the quarter as well as into April, like you said, the beginning of 2Q, and that you grew units, I believe, double digits. you said volume growth accelerated throughout the quarter as well as into april like you said the beginning of 2q and that you grew units i believe double digits

Speaker 2: Right. Right. right

Speaker 3: Your guidance, though, implies more of a high teens growth rate instead of 20%+ for the remaining nine months of the year. You also had a 9.5% price increase in May. Thinking about double digits throughout 1Q, and it was accelerating and into April, just help me reconcile the step-down in the back half or the 2Q to 4Q period. Is that just conservatism or what can you reconcile for us there? Your guidance, though, implies more of a high teens growth rate instead of 20%+ for the remaining nine months of the year. your guidance though implies more of a high teens growth rate instead of 20%+ for the remaining nine months of the year You also had a 9.5% price increase in May. you also had a 9.5% price increase in may Thinking about double digits throughout 1Q, and it was accelerating and into April, just help me reconcile the step-down in the back half or the 2Q to 4Q period. thinking about double digits throughout 1q and it was accelerating and into april just help me reconcile the step-down in the back half or the 2q to 4q period Is that just conservatism or what can you reconcile for us there? is that just conservatism or what can you reconcile for us there

Speaker 1: I can take that one, Rich. I would say, just to build off where Nick started, I think we feel like from a commercial perspective, we just feel like the team's been operating and really executing at a very high level over the last few quarters, and I would say particularly in the back half of last year into the start of the year, as we talked about and as Nick referenced, we had a really strong first quarter, 22% revenue growth, our best first quarter in a few years. Feel really good about the start of the year. Obviously Q1 puts us in a good position as we move forward. I would say from kind of a guidance sort of framework and philosophy perspective, we were pretty pointed to start the year to try to be a bit prudent. I can take that one, Rich. i can take that one rich I would say, just to build off where Nick started, I think we feel like from a commercial perspective, we just feel like the team's been operating and really executing at a very high level over the last few quarters, and I would say particularly in the back half of last year into the start of the year, as we talked about and as Nick referenced, we had a really strong first quarter, 22% revenue growth, our best first quarter in a few years. i would say just to build off where nick started i think we feel like from a commercial perspective we just feel like the team's been operating and really executing at a very high level over the last few quarters and i would say particularly in the back half of last year into the start of the year as we talked about and as nick referenced we had a really strong first quarter 22% revenue growth our best first quarter in a few years Feel really good about the start of the year. feel really good about the start of the year Obviously Q1 puts us in a good position as we move forward. obviously q1 puts us in a good position as we move forward I would say from kind of a guidance sort of framework and philosophy perspective, we were pretty pointed to start the year to try to be a bit prudent. i would say from kind of a guidance sort of framework and philosophy perspective we were pretty pointed to start the year to try to be a bit prudent If you kind of look back at last year, I think a good analog is kind of how we're thinking about burn care now. We've moved back to kind of a run rate concept on burn care, and I think that's worked out very well over the last few quarters. We've over-delivered there. I think on the MACI side, I would say we probably just want to be a bit prudent as we think about the guidance. To your point, whether you look at Q2 or you look at the remainder of the year, it's really high teens growth is kind of where the guide is at. I think to your question, from a pricing perspective, we did take that high single-digit price increase last month. If you kind of look back at last year, I think a good analog is kind of how we're thinking about burn care now. if you kind of look back at last year i think a good analog is kind of how we're thinking about burn care now We've moved back to kind of a run rate concept on burn care, and I think that's worked out very well over the last few quarters. we've moved back to kind of a run rate concept on burn care and i think that's worked out very well over the last few quarters We've over-delivered there. we've over-delivered there I think on the MACI side, I would say we probably just want to be a bit prudent as we think about the guidance. i think on the maci side i would say we probably just want to be a bit prudent as we think about the guidance To your point, whether you look at Q2 or you look at the remainder of the year, it's really high teens growth is kind of where the guide is at. to your point whether you look at q2 or you look at the remainder of the year it's really high teens growth is kind of where the guide is at I think to your question, from a pricing perspective, we did take that high single-digit price increase last month. i think to your question from a pricing perspective we did take that high single-digit price increase last month When you kind of factor that in and kind of think about similar year-over-year pricing growth, it's not going to take much for us to kind of meet our guidance and certainly our internal expectations are higher than where our guidance is and certainly our internal goals are as well. I would say if we can continue to be around that double-digit range on biopsies and see similar pull-through on implants and our conversion rate has typically been pretty stable, I think we certainly feel like we're in a good position as we move into Q2 and beyond. Again, not only to meet the guidance, but ideally overperform there. When you kind of factor that in and kind of think about similar year-over-year pricing growth, it's not going to take much for us to kind of meet our guidance and certainly our internal expectations are higher than where our guidance is and certainly our internal goals are as well. when you kind of factor that in and kind of think about similar year-over-year pricing growth it's not going to take much for us to kind of meet our guidance and certainly our internal expectations are higher than where our guidance is and certainly our internal goals are as well I would say if we can continue to be around that double-digit range on biopsies and see similar pull-through on implants and our conversion rate has typically been pretty stable, I think we certainly feel like we're in a good position as we move into Q2 and beyond. i would say if we can continue to be around that double-digit range on biopsies and see similar pull-through on implants and our conversion rate has typically been pretty stable i think we certainly feel like we're in a good position as we move into q2 and beyond Again, not only to meet the guidance, but ideally overperform there. again not only to meet the guidance but ideally overperform there

Speaker 3: Got it. That's really helpful color. This has come up as well, just on the pricing. You had multiple price increases last year. You have, I believe, a single price increase this year. There is some confusion out there, I think, for investors of how you guys manage your price increases. Obviously, not all of them are the same order of magnitude each time. They happen at different times. Can you tell us a little bit about how you stagger them, what the strategy is, and what your ongoing price assumption is in your growth algorithm? Got it. got it That's really helpful color. that's really helpful color This has come up as well, just on the pricing. this has come up as well just on the pricing You had multiple price increases last year. you had multiple price increases last year You have, I believe, a single price increase this year. you have i believe a single price increase this year There is some confusion out there, I think, for investors of how you guys manage your price increases. there is some confusion out there i think for investors of how you guys manage your price increases Obviously, not all of them are the same order of magnitude each time. obviously not all of them are the same order of magnitude each time They happen at different times. they happen at different times Can you tell us a little bit about how you stagger them, what the strategy is, and what your ongoing price assumption is in your growth algorithm? can you tell us a little bit about how you stagger them what the strategy is and what your ongoing price assumption is in your growth algorithm

Speaker 2: Yeah. I'll start, and Joe can add in color if he'd like as well. I think, first of all, you have to recognize that MACI is a kind of a unique product compared to other MedTech products, in that it's a combination device, biologic product as regulated as such by the FDA. Every major plan has a medical policy that covers MACI. It's reimbursed under a J code, like other biologic products, we set the price. We're not subject to CMS pricing or anything like that because we don't really have Medicaid and Medicare business. That's kind of the first thing. We do a lot of pricing research every year or two, and we do multi-year product or pricing analysis with payers and hospital administrators. Yeah. yeah I'll start, and Joe can add in color if he'd like as well. i'll start and joe can add in color if he'd like as well I think, first of all, you have to recognize that MACI is a kind of a unique product compared to other MedTech products, in that it's a combination device, biologic product as regulated as such by the FDA. i think first of all you have to recognize that maci is a kind of a unique product compared to other medtech products in that it's a combination device biologic product as regulated as such by the fda Every major plan has a medical policy that covers MACI. every major plan has a medical policy that covers maci It's reimbursed under a J code, like other biologic products, we set the price. it's reimbursed under a j code like other biologic products we set the price We're not subject to CMS pricing or anything like that because we don't really have Medicaid and Medicare business. we're not subject to cms pricing or anything like that because we don't really have medicaid and medicare business That's kind of the first thing. that's kind of the first thing We do a lot of pricing research every year or two, and we do multi-year product or pricing analysis with payers and hospital administrators. we do a lot of pricing research every year or two and we do multi-year product or pricing analysis with payers and hospital administrators I think it's important for investors to understand that from a payer perspective, they look at it on two dimensions. Similar technologies, this is an advanced cell therapy. If you think about other cell therapy products like CAR T therapies or other gene therapies which fall within the same class, those products are half a million dollars to multiple millions of dollars per unit. Our pricing for MACI is not even on the radar screen in terms of similar technologies. The other dimension they look at is sort of what's the overall impact to the system or their plan. Again, MACI, we're very proud of the fact that we've grown the product to about a quarter billion dollars, and we're well on our way to kind of getting to half a billion dollars over the next several years. I think it's important for investors to understand that from a payer perspective, they look at it on two dimensions. i think it's important for investors to understand that from a payer perspective they look at it on two dimensions Similar technologies, this is an advanced cell therapy. similar technologies this is an advanced cell therapy If you think about other cell therapy products like CAR T therapies or other gene therapies which fall within the same class, those products are half a million dollars to multiple millions of dollars per unit. if you think about other cell therapy products like car t therapies or other gene therapies which fall within the same class those products are half a million dollars to multiple millions of dollars per unit Our pricing for MACI is not even on the radar screen in terms of similar technologies. our pricing for maci is not even on the radar screen in terms of similar technologies The other dimension they look at is sort of what's the overall impact to the system or their plan. the other dimension they look at is sort of what's the overall impact to the system or their plan Again, MACI, we're very proud of the fact that we've grown the product to about a quarter billion dollars, and we're well on our way to kind of getting to half a billion dollars over the next several years. again maci we're very proud of the fact that we've grown the product to about a quarter billion dollars and we're well on our way to kind of getting to half a billion dollars over the next several years If you look at either sort of those types of therapies I talked about, cell and gene therapies, where they're not only high price but high volume, and there's multiple billions of dollars spent on these products. Or even in our space, if you think about total knees, which call it $20 billion-ish a year, total hips, $10 billion-ish, total shoulders, $3 billion-$5 billion. Again, it's not even on the radar screen. We have this really enviable position, and again, we price sort of based on that market research, and it's really not atypical for similar kinds of products to take the price increases we take. Overall, you couple that with the kind of double-digit volume growth, we expect it to be sort of a strong pricing and volume growth story for years to come with no competition on the horizon. If you look at either sort of those types of therapies I talked about, cell and gene therapies, where they're not only high price but high volume, and there's multiple billions of dollars spent on these products. if you look at either sort of those types of therapies i talked about cell and gene therapies where they're not only high price but high volume and there's multiple billions of dollars spent on these products Or even in our space, if you think about total knees, which call it $20 billion-ish a year, total hips, $10 billion-ish, total shoulders, $3 billion-$5 billion. or even in our space if you think about total knees which call it $20 billion-ish a year total hips $10 billion-ish total shoulders $3 billion-$5 billion Again, it's not even on the radar screen. again it's not even on the radar screen We have this really enviable position, and again, we price sort of based on that market research, and it's really not atypical for similar kinds of products to take the price increases we take. we have this really enviable position and again we price sort of based on that market research and it's really not atypical for similar kinds of products to take the price increases we take Overall, you couple that with the kind of double-digit volume growth, we expect it to be sort of a strong pricing and volume growth story for years to come with no competition on the horizon. overall you couple that with the kind of double-digit volume growth we expect it to be sort of a strong pricing and volume growth story for years to come with no competition on the horizon

Speaker 3: I don't want to put words in your mouth about a long-term MACI growth trajectory, if we just assume that your pricing can durably sustain, as you just suggested, let's just say in that high single digit, low double digit range, then giving you a 9%-11%, 8%-12%, whatever you want to say, call it 10% at the midpoint. Then units sustaining in that close to double digits, even if it's just barely 10% or 9.5%, you should be a 20+ % MACI grower for the intermediate to longer term, no? Are the components wrong? I know you won't necessarily guide there- I don't want to put words in your mouth about a long-term MACI growth trajectory, if we just assume that your pricing can durably sustain, as you just suggested, let's just say in that high single digit, low double digit range, then giving you a 9%-11%, 8%-12%, whatever you want to say, call it 10% at the midpoint. i don't want to put words in your mouth about a long-term maci growth trajectory if we just assume that your pricing can durably sustain as you just suggested let's just say in that high single digit low double digit range then giving you a 9%-11% 8%-12% whatever you want to say call it 10% at the midpoint Then units sustaining in that close to double digits, even if it's just barely 10% or 9.5% , you should be a 20+ % MACI grower for the intermediate to longer term, no? then units sustaining in that close to double digits even if it's just barely 10% or 9.5% you should be a 20+ % maci grower for the intermediate to longer term no Are the components wrong? are the components wrong I know you won't necessarily guide there- i know you won't necessarily guide there-

Speaker 2: Right Right right

Speaker 3: Is that a reasonable way to think about what all else equal should be doable? Is that a reasonable way to think about what all else equal should be doable? is that a reasonable way to think about what all else equal should be doable

Speaker 2: Yeah. Obviously, we can't predict out multiple years and any other sort of macro changes in the environment. We don't expect any. I don't think directionally you're off, right? We still think we'll have strong pricing power as we move forward, the penetration rate in our TAM is still relatively low. We would expect to continue to have strong growth, again, especially as there's sort of no MACI-like competition on the horizon. Yeah. yeah Obviously, we can't predict out multiple years and any other sort of macro changes in the environment. obviously we can't predict out multiple years and any other sort of macro changes in the environment We don't expect any. we don't expect any I don't think directionally you're off, right? i don't think directionally you're off right We still think we'll have strong pricing power as we move forward, the penetration rate in our TAM is still relatively low. we still think we'll have strong pricing power as we move forward the penetration rate in our tam is still relatively low We would expect to continue to have strong growth, again, especially as there's sort of no MACI-like competition on the horizon. we would expect to continue to have strong growth again especially as there's sort of no maci-like competition on the horizon

Speaker 3: Nick, if we had to hypothesize about what could potentially change that pricing conversation with commercial payers other than you're not on the radar compared to what they're paying for, what could it be? Nick, if we had to hypothesize about what could potentially change that pricing conversation with commercial payers other than you're not on the radar compared to what they're paying for, what could it be? nick if we had to hypothesize about what could potentially change that pricing conversation with commercial payers other than you're not on the radar compared to what they're paying for what could it be

Speaker 2: Again, we meet with payers, we've done it, just say it was every other year since we launched the product a decade ago. It's not like we're under the radar. It's just when you think about, I always use an example, like even MACI at $300 million, if you look at a UnitedHealthcare that has 15% of covered lives, what would that mean if it's a representative example, which it is? It's $45 million a year for UnitedHealthcare. Again, that's just not something that they're going to spend time actively managing. I would say it's also a function of the fact that MACI has to have a prior approval. It's a medical policy. You have to meet certain parameters to even be eligible to be treated with MACI and covered under those plans. Again, we meet with payers, we've done it, just say it was every other year since we launched the product a decade ago. again we meet with payers we've done it just say it was every other year since we launched the product a decade ago It's not like we're under the radar. it's not like we're under the radar It's just when you think about, I always use an example, like even MACI at $300 million, if you look at a UnitedHealthcare that has 15% of covered lives, what would that mean if it's a representative example, which it is? it's just when you think about i always use an example like even maci at $300 million if you look at a unitedhealthcare that has 15% of covered lives what would that mean if it's a representative example which it is It's $45 million a year for UnitedHealthcare. it's $45 million a year for unitedhealthcare Again, that's just not something that they're going to spend time actively managing. again that's just not something that they're going to spend time actively managing I would say it's also a function of the fact that MACI has to have a prior approval. i would say it's also a function of the fact that maci has to have a prior approval It's a medical policy. it's a medical policy You have to meet certain parameters to even be eligible to be treated with MACI and covered under those plans. you have to meet certain parameters to even be eligible to be treated with maci and covered under those plans The plans know the price, they know the outcomes data, which is great long-term outcome data, and they know that only the appropriate patients are going to be treated with MACI. It's a very transparent process. It's not like we're under the radar, but once they find out there's going to be an issue, they already know, and they know all, everything, when we do that research, and again, it's very much in line with sort of what they might expect. I think, if we got greedy, that's when you would get hurt, right? We just try to be very thoughtful about how we price going forward, and we don't really expect that to change. The plans know the price, they know the outcomes data, which is great long-term outcome data, and they know that only the appropriate patients are going to be treated with MACI. the plans know the price they know the outcomes data which is great long-term outcome data and they know that only the appropriate patients are going to be treated with maci It's a very transparent process. it's a very transparent process It's not like we're under the radar, but once they find out there's going to be an issue, they already know, and they know all, everything, when we do that research, and again, it's very much in line with sort of what they might expect. it's not like we're under the radar but once they find out there's going to be an issue they already know and they know all everything when we do that research and again it's very much in line with sort of what they might expect I think, if we got greedy, that's when you would get hurt, right? i think if we got greedy that's when you would get hurt right We just try to be very thoughtful about how we price going forward, and we don't really expect that to change. we just try to be very thoughtful about how we price going forward and we don't really expect that to change

Speaker 3: Nick, you also said you're basically the only player in town, right? Competition, no competition on the horizon, I think is what you said. Nick, you also said you're basically the only player in town, right? nick you also said you're basically the only player in town right Competition, no competition on the horizon, I think is what you said. competition no competition on the horizon i think is what you said

Speaker 2: Yep. Yep. yep

Speaker 3: I want to maybe just ask because this comes up a lot from investors. You have Agility, which has been on the market for some time, but they are potentially going to be stepping into a better CMS reimbursement situation starting January 1st, 2027. I want to maybe just ask because this comes up a lot from investors. i want to maybe just ask because this comes up a lot from investors You have Agility, which has been on the market for some time, but they are potentially going to be stepping into a better CMS reimbursement situation starting January 1st, 2027. you have agility which has been on the market for some time but they are potentially going to be stepping into a better cms reimbursement situation starting january 1st 2027 Smith+Nephew is a formidable company that is going to likely commercialize more aggressively and put more behind it as they step into that more favorable reimbursement situation. I guess how do you expect the competitive landscape to change at all once that happens? It sounds like not much. Why? Smith+Nephew is a formidable company that is going to likely commercialize more aggressively and put more behind it as they step into that more favorable reimbursement situation. smith+nephew is a formidable company that is going to likely commercialize more aggressively and put more behind it as they step into that more favorable reimbursement situation I guess how do you expect the competitive landscape to change at all once that happens? i guess how do you expect the competitive landscape to change at all once that happens It sounds like not much. it sounds like not much Why? why

Speaker 2: Well, yeah, I would just step back and say for those who aren't as familiar with us, MACI is by far the market leader in cartilage repair. We've been on the market. This is our 10th year. We've had a compounded annual growth rate of 24%, 20% or more in the last three years. It is the market leader, especially obviously in our addressable market segment. I think you have to always start by saying a cartilage injury is not the same. It's a very sort of complex treatment algorithm and nuanced in that the decisions surgeons make are really based on the patient profile, so the age of the patient, their ability to do rehab with any kind of cartilage repair procedure, and the characteristics of the defect itself. Well, yeah, I would just step back and say for those who aren't as familiar with us, MACI is by far the market leader in cartilage repair. well yeah i would just step back and say for those who aren't as familiar with us maci is by far the market leader in cartilage repair We've been on the market. we've been on the market This is our 10th year. this is our 10th year We've had a compounded annual growth rate of 24%, 20% or more in the last three years. we've had a compounded annual growth rate of 24% 20% or more in the last three years It is the market leader, especially obviously in our addressable market segment. it is the market leader especially obviously in our addressable market segment I think you have to always start by saying a cartilage injury is not the same. i think you have to always start by saying a cartilage injury is not the same It's a very sort of complex treatment algorithm and nuanced in that the decisions surgeons make are really based on the patient profile, so the age of the patient, their ability to do rehab with any kind of cartilage repair procedure, and the characteristics of the defect itself. it's a very sort of complex treatment algorithm and nuanced in that the decisions surgeons make are really based on the patient profile so the age of the patient their ability to do rehab with any kind of cartilage repair procedure and the characteristics of the defect itself The size, the location, whether there's bone involvement or not, the overall health of the knee, those are the primary decision points that lead surgeons to make a certain decision on how they want to treat. The competitive landscape has been very stable since we bought this business in 2014 and launched MACI in 2017. Potential market entrants really haven't changed, and in fact, it's moved very strongly in our favor. The way we always talk about competition is MACI-like products, and that's what I said earlier. At one point in time, there were two MACI-like products in development for the U.S. market. One didn't meet its primary endpoint and is gone. The other sort of had a European study that didn't show a difference versus microfracture. The size, the location, whether there's bone involvement or not, the overall health of the knee, those are the primary decision points that lead surgeons to make a certain decision on how they want to treat. the size the location whether there's bone involvement or not the overall health of the knee those are the primary decision points that lead surgeons to make a certain decision on how they want to treat The competitive landscape has been very stable since we bought this business in 2014 and launched MACI in 2017. the competitive landscape has been very stable since we bought this business in 2014 and launched maci in 2017 Potential market entrants really haven't changed, and in fact, it's moved very strongly in our favor. potential market entrants really haven't changed and in fact it's moved very strongly in our favor The way we always talk about competition is MACI-like products, and that's what I said earlier. the way we always talk about competition is maci-like products and that's what i said earlier At one point in time, there were two MACI-like products in development for the U.S. market. at one point in time there were two maci-like products in development for the u.s market One didn't meet its primary endpoint and is gone. one didn't meet its primary endpoint and is gone The other sort of had a European study that didn't show a difference versus microfracture. the other sort of had a european study that didn't show a difference versus microfracture Yes, I would say that there's not going to be a MACI-like product on the market in the foreseeable future, if ever. That's number one. That's what investors should worry about. Was there going to be a product that would come to market and sort of have a direct impact on MACI? Because a new product that's kind of in that class could have taken market share, could have impacted pricing strat, whatever. That's just not going to happen. Yes, I would say that there's not going to be a MACI-like product on the market in the foreseeable future, if ever. yes i would say that there's not going to be a maci-like product on the market in the foreseeable future if ever That's number one. that's number one That's what investors should worry about. that's what investors should worry about Was there going to be a product that would come to market and sort of have a direct impact on MACI? was there going to be a product that would come to market and sort of have a direct impact on maci Because a new product that's kind of in that class could have taken market share, could have impacted pricing strat, whatever. because a new product that's kind of in that class could have taken market share could have impacted pricing strat whatever That's just not going to happen. that's just not going to happen That's number one. The other thing we talked about is there's always sort of these other products that have been out there for different parts of the cartilage repair market, different segments. When you talk about procedures that are alternatives to MACI, like osteochondral allografts, OATS, which is taking a plug of a patient's own cartilage and transplanting it, microfracture with these microfracture augmentation products that are out there, and there have been other synthetic sort of products that have been on the market sort of come and gone. Those have always been out there throughout the history that we've had MACI. On Agility in particular, we've known that product for 10 years. It's been in development. It's been on the market for four years. That's number one. that's number one The other thing we talked about is there's always sort of these other products that have been out there for different parts of the cartilage repair market, different segments. the other thing we talked about is there's always sort of these other products that have been out there for different parts of the cartilage repair market different segments When you talk about procedures that are alternatives to MACI, like osteochondral allografts, OATS, which is taking a plug of a patient's own cartilage and transplanting it, microfracture with these microfracture augmentation products that are out there, and there have been other synthetic sort of products that have been on the market sort of come and gone. when you talk about procedures that are alternatives to maci like osteochondral allografts oats which is taking a plug of a patient's own cartilage and transplanting it microfracture with these microfracture augmentation products that are out there and there have been other synthetic sort of products that have been on the market sort of come and gone Those have always been out there throughout the history that we've had MACI. those have always been out there throughout the history that we've had maci On Agility in particular, we've known that product for 10 years. on agility in particular we've known that product for 10 years It's been in development. it's been in development It's been on the market for four years. it's been on the market for four years I think if you go to the website, there are reimbursement codes if physicians want to use it now, with a permanent CPT code coming. Again, it'll depend on the reimbursement under that code based on RVUs. It'll depend on the price that's charged. Is it good economics for surgeons? We'll see, but the issue is it's not really our patient population. MACI's typical patient is a younger patient, sort of in their early 30s with a pure chondral or just a cartilage surface injury. That's what the core MACI patient is. I think if you look at our publication on the first 5,000 patients, low single-digit percentage of patients had any bone involvement. It really is sort of those surface cartilage defects. In the tenets of joint preservation is do no harm. I think if you go to the website, there are reimbursement codes if physicians want to use it now, with a permanent CPT code coming. i think if you go to the website there are reimbursement codes if physicians want to use it now with a permanent cpt code coming Again, it'll depend on the reimbursement under that code based on RVUs. again it'll depend on the reimbursement under that code based on rvus It'll depend on the price that's charged. it'll depend on the price that's charged Is it good economics for surgeons? is it good economics for surgeons We'll see, but the issue is it's not really our patient population. we'll see but the issue is it's not really our patient population MACI's typical patient is a younger patient, sort of in their early 30s with a pure chondral or just a cartilage surface injury. maci's typical patient is a younger patient sort of in their early 30s with a pure chondral or just a cartilage surface injury That's what the core MACI patient is. that's what the core maci patient is I think if you look at our publication on the first 5,000 patients, low single-digit percentage of patients had any bone involvement. i think if you look at our publication on the first 5,000 patients low single-digit percentage of patients had any bone involvement It really is sort of those surface cartilage defects. it really is sort of those surface cartilage defects In the tenets of joint preservation is do no harm. in the tenets of joint preservation is do no harm If you have a pure cartilage injury, you're not going to drill into the bone, core out the bone to use an OCA or even an Agility. We've always said it's likely to be used in smaller defects, older patients, with osteoarthritis sort of as a bridge to a partial or full knee replacement, and that hasn't changed over the last seven years we've been talking about it. I think there was another analyst that had did a KOL call last week with a sort of early MACI adopter, high-volume surgeon, Hurricanes doc, if you're a hockey fan. His point was when he thinks about this, when you've got a defect that's 1 square centimeter or less, there's lots of different options out there that you can do, OCAs and potentially Agility, OATS, whatever. If you have a pure cartilage injury, you're not going to drill into the bone, core out the bone to use an OCA or even an Agility. if you have a pure cartilage injury you're not going to drill into the bone core out the bone to use an oca or even an agility We've always said it's likely to be used in smaller defects, older patients, with osteoarthritis sort of as a bridge to a partial or full knee replacement, and that hasn't changed over the last seven years we've been talking about it. we've always said it's likely to be used in smaller defects older patients with osteoarthritis sort of as a bridge to a partial or full knee replacement and that hasn't changed over the last seven years we've been talking about it I think there was another analyst that had did a KOL call last week with a sort of early MACI adopter, high-volume surgeon, Hurricanes doc, if you're a hockey fan. i think there was another analyst that had did a kol call last week with a sort of early maci adopter high-volume surgeon hurricanes doc if you're a hockey fan His point was when he thinks about this, when you've got a defect that's 1 square centimeter or less, there's lots of different options out there that you can do, OCAs and potentially Agility, OATS, whatever. his point was when he thinks about this when you've got a defect that's 1 square centimeter or less there's lots of different options out there that you can do ocas and potentially agility oats whatever When it gets to be a centimeter and a half or larger, that's when you start skewing towards MACI. To use his words. If there's bone involvement, that's going to change the algorithm. That's where you might use an OCA or again, potentially an Agility. Really, in his words, "The share shift's going to come from OCA and OATS." Did not expect any meaningful impact on MACI business as we wouldn't. His point was, "I believe my MACI business will continue to grow in the double digits to teens in the years ahead." I don't think we could be more consistent in our perspective on this. Hopefully that answers your question. When it gets to be a centimeter and a half or larger, that's when you start skewing towards MACI. when it gets to be a centimeter and a half or larger that's when you start skewing towards maci To use his words. to use his words If there's bone involvement, that's going to change the algorithm. if there's bone involvement that's going to change the algorithm That's where you might use an OCA or again, potentially an Agility. that's where you might use an oca or again potentially an agility Really, in his words, "The share shift's going to come from OCA and OATS." Did not expect any meaningful impact on MACI business as we wouldn't. really in his words "the share shift's going to come from oca and oats." did not expect any meaningful impact on maci business as we wouldn't His point was, "I believe my MACI business will continue to grow in the double digits to teens in the years ahead." I don't think we could be more consistent in our perspective on this. his point was "i believe my maci business will continue to grow in the double digits to teens in the years ahead." i don't think we could be more consistent in our perspective on this Hopefully that answers your question. hopefully that answers your question

Speaker 3: It does. I guess the question that I have as a follow-up would just be, if your competitor positions the product in a way that is more overlapping on the Venn diagram, if you will, even if it's not where it's suited, you could get some trialing or some physicians who are influenced or trying it maybe in areas they shouldn't be or pushing the envelope. I guess, will you need to contemplate that or is the market expanding at a rapid enough clip that type of impact will be negligible in your view? It does. it does I guess the question that I have as a follow-up would just be, if your competitor positions the product in a way that is more overlapping on the Venn diagram, if you will, even if it's not where it's suited, you could get some trialing or some physicians who are influenced or trying it maybe in areas they shouldn't be or pushing the envelope. i guess the question that i have as a follow-up would just be if your competitor positions the product in a way that is more overlapping on the venn diagram if you will even if it's not where it's suited you could get some trialing or some physicians who are influenced or trying it maybe in areas they shouldn't be or pushing the envelope I guess, will you need to contemplate that or is the market expanding at a rapid enough clip that type of impact will be negligible in your view? i guess will you need to contemplate that or is the market expanding at a rapid enough clip that type of impact will be negligible in your view

Speaker 2: We don't expect any sort of impact of note. Again, companies can position products however they want. You're basically saying, you're going to override a surgeon's treatment algorithm to try a product that, again, why would you? There's a failure rate like there is with any product, right? If you core out the bone and it doesn't work, then what are you going to do in a 29-year-old patient, right? I would expect that most surgeons would not do something just regardless of how any company positions any product, if it's sort of contrary to their normal treatment algorithms. We don't expect any sort of impact of note. we don't expect any sort of impact of note Again, companies can position products however they want. again companies can position products however they want You're basically saying, you're going to override a surgeon's treatment algorithm to try a product that, again, why would you? you're basically saying you're going to override a surgeon's treatment algorithm to try a product that again why would you There's a failure rate like there is with any product, right? there's a failure rate like there is with any product right If you core out the bone and it doesn't work, then what are you going to do in a 29-year-old patient, right? if you core out the bone and it doesn't work then what are you going to do in a 29-year-old patient right I would expect that most surgeons would not do something just regardless of how any company positions any product, if it's sort of contrary to their normal treatment algorithms. i would expect that most surgeons would not do something just regardless of how any company positions any product if it's sort of contrary to their normal treatment algorithms

Speaker 3: Got it. What do you think investors are most underappreciating about your competitive moat, your IP, your true protection on a true MACI-like product? Got it. got it What do you think investors are most underappreciating about your competitive moat, your IP, your true protection on a true MACI-like product? what do you think investors are most underappreciating about your competitive moat your ip your true protection on a true maci-like product

Speaker 2: Yeah. Well, like I said, MACI's regulated by the FDA as a combination device biologic product. There is no established pathway to bring those kinds of product to market, so there's no sort of biosimilar pathway for these combination products. There's no 510(k) pathway, so if anybody wants to enter the market with a MACI-like product, they have to run the clinical studies. As I mentioned earlier, it hasn't gone well for those that have tried to do it other than MACI. You can ask yourself why that is. Were they not run well? Is there something different about our approach from a manufacturing and product profile perspective? Which there's probably something to that. That's the moat. You can't just sort of enter the market under a 510(k) or a biosimilar kind of pathway. You have to run the studies. Yeah. yeah Well, like I said, MACI's regulated by the FDA as a combination device biologic product. well like i said maci's regulated by the fda as a combination device biologic product There is no established pathway to bring those kinds of product to market, so there's no sort of biosimilar pathway for these combination products. there is no established pathway to bring those kinds of product to market so there's no sort of biosimilar pathway for these combination products There's no 510(k) pathway, so if anybody wants to enter the market with a MACI-like product, they have to run the clinical studies. there's no 510(k) pathway so if anybody wants to enter the market with a maci-like product they have to run the clinical studies As I mentioned earlier, it hasn't gone well for those that have tried to do it other than MACI. as i mentioned earlier it hasn't gone well for those that have tried to do it other than maci You can ask yourself why that is. you can ask yourself why that is Were they not run well? were they not run well Is there something different about our approach from a manufacturing and product profile perspective? is there something different about our approach from a manufacturing and product profile perspective Which there's probably something to that. which there's probably something to that That's the moat. that's the moat You can't just sort of enter the market under a 510(k) or a biosimilar kind of pathway. you can't just sort of enter the market under a 510(k) or a biosimilar kind of pathway You have to run the studies. you have to run the studies The last company in the U.S. that ran a study, whether it's a MACI-like product, it was a 10-year enrollment for 200 patients. Why would you use a trial of product when MACI's available for an appropriate patient? It gets very difficult for anybody to run these kinds of studies, it's a pretty big moat. The last company in the U.S. that ran a study, whether it's a MACI-like product, it was a 10-year enrollment for 200 patients. the last company in the u.s that ran a study whether it's a maci-like product it was a 10-year enrollment for 200 patients Why would you use a trial of product when MACI's available for an appropriate patient? why would you use a trial of product when maci's available for an appropriate patient It gets very difficult for anybody to run these kinds of studies, it's a pretty big moat. it gets very difficult for anybody to run these kinds of studies it's a pretty big moat

Speaker 3: Yep. I want to switch gears a little bit to just MACI Arthro and what this has been doing for the business, where you've been seeing use. I think you said MACI Arthro now drives over half your implants, and the trained base has reached 1,000 surgeons, right? Is that? Yep. yep I want to switch gears a little bit to just MACI Arthro and what this has been doing for the business, where you've been seeing use. i want to switch gears a little bit to just maci arthro and what this has been doing for the business where you've been seeing use I think you said MACI Arthro now drives over half your implants, and the trained base has reached 1,000 surgeons, right? i think you said maci arthro now drives over half your implants and the trained base has reached 1,000 surgeons right Is that? is that

Speaker 2: Correct. Correct. correct

Speaker 3: Where are you seeing the uptake most prominently? Is this expanding the market? Where are you seeing the uptake most prominently? where are you seeing the uptake most prominently Is this expanding the market? is this expanding the market

Speaker 2: Yeah. Just to clarify, what we've said is that over half of MACI's overall business is coming from surgeons who are trained on MACI Arthro. It's that group of trained surgeons. Yeah, last year was MACI Arthro's first year on the market. We had said there's roughly call it 2,500-ish prior to that, surgeons that were using MACI, taking biopsies, et cetera, in any given year. Cumulatively, a little higher than that. Yeah, to have 1,000 surgeons trained in the first year on the market was pretty good, and we were pretty happy with that. At this point, we have a critical mass of trained surgeons. Over time, I would expect that any surgeon that is using MACI is going to be trained on MACI Arthro. It's not really training metrics anymore that we're concerned about. Yeah. yeah Just to clarify, what we've said is that over half of MACI's overall business is coming from surgeons who are trained on MACI Arthro. just to clarify what we've said is that over half of maci's overall business is coming from surgeons who are trained on maci arthro It's that group of trained surgeons. it's that group of trained surgeons Yeah, last year was MACI Arthro's first year on the market. yeah last year was maci arthro's first year on the market We had said there's roughly call it 2,500-ish prior to that, surgeons that were using MACI, taking biopsies, et cetera, in any given year. we had said there's roughly call it 2,500-ish prior to that surgeons that were using maci taking biopsies et cetera in any given year Cumulatively, a little higher than that. cumulatively a little higher than that Yeah, to have 1,000 surgeons trained in the first year on the market was pretty good, and we were pretty happy with that. yeah to have 1,000 surgeons trained in the first year on the market was pretty good and we were pretty happy with that At this point, we have a critical mass of trained surgeons. at this point we have a critical mass of trained surgeons Over time, I would expect that any surgeon that is using MACI is going to be trained on MACI Arthro. over time i would expect that any surgeon that is using maci is going to be trained on maci arthro It's not really training metrics anymore that we're concerned about. it's not really training metrics anymore that we're concerned about It's getting that pull-through of MACI Arthro cases from those that have been trained. That's what our commercial team is focused on this year. That's important because not only have we seen sort of what you'd want to see out of trained surgeons, where biopsy growth, implant growth increases. It's getting that pull-through of MACI Arthro cases from those that have been trained. it's getting that pull-through of maci arthro cases from those that have been trained That's what our commercial team is focused on this year. that's what our commercial team is focused on this year That's important because not only have we seen sort of what you'd want to see out of trained surgeons, where biopsy growth, implant growth increases. that's important because not only have we seen sort of what you'd want to see out of trained surgeons where biopsy growth implant growth increases

Speaker 3: Total. Total. total

Speaker 2: Total. Yeah. When you sort of the surgeons that have done MACI Arthro cases, they actually have even higher biopsy growth and implant growth rates, and we've seen their conversion rates go higher. It's kind of this halo effect on the overall business. We want to make sure that continues. Obviously, we'll continue to train surgeons. The trends of how they behave tended to continue. I'd say last year, MACI actually, the growth rate increased by a couple of hundred basis points, and I'd say the increase we saw in those small femoral condyle defects that MACI Arthro is designed to treat actually became one of our faster-growing segments. Now, it's off a lower volume, so patella's always been our highest volume, sort of highest growth, or consistently is. Total. total Yeah. yeah When you sort of the surgeons that have done MACI Arthro cases, they actually have even higher biopsy growth and implant growth rates, and we've seen their conversion rates go higher. when you sort of the surgeons that have done maci arthro cases they actually have even higher biopsy growth and implant growth rates and we've seen their conversion rates go higher It's kind of this halo effect on the overall business. it's kind of this halo effect on the overall business We want to make sure that continues. we want to make sure that continues Obviously, we'll continue to train surgeons. obviously we'll continue to train surgeons The trends of how they behave tended to continue. the trends of how they behave tended to continue I'd say last year, MACI actually, the growth rate increased by a couple of hundred basis points, and I'd say the increase we saw in those small femoral condyle defects that MACI Arthro is designed to treat actually became one of our faster-growing segments. i'd say last year maci actually the growth rate increased by a couple of hundred basis points and i'd say the increase we saw in those small femoral condyle defects that maci arthro is designed to treat actually became one of our faster-growing segments Now, it's off a lower volume, so patella's always been our highest volume, sort of highest growth, or consistently is. now it's off a lower volume so patella's always been our highest volume sort of highest growth or consistently is We said the small femoral condyle defect growth actually sort of matched that or was on par with that last year. That's important, right? We said the small femoral condyle defect growth actually sort of matched that or was on par with that last year. we said the small femoral condyle defect growth actually sort of matched that or was on par with that last year That's important, right? that's important right

Speaker 3: That was incremental to those specific physicians' overall use, right? Is it tough to break out? That was incremental to those specific physicians' overall use, right? that was incremental to those specific physicians' overall use right Is it tough to break out? is it tough to break out

Speaker 2: It's tough to break out. We just look at it in aggregate. You never know if they would've done the case anyway, even if they did it MACI Arthro and so on. I would say just there was much more use of MACI Arthro than that. I'm saying you can look at the increase in the small femoral condyle defects and that really accounted for the incremental overall growth. We're coming into the year with a lot more trained surgeons. We'll continue to train those surgeons, but we think that's a great indicator for us. Where it's being used is, these instruments were designed for two to four square centimeters, so they're matching cannulas and cutters and everything for either a two, three, or four square centimeter defect on the femoral condyle. That's where we've seen the most uptake. It's tough to break out. it's tough to break out We just look at it in aggregate. we just look at it in aggregate You never know if they would've done the case anyway, even if they did it MACI Arthro and so on. you never know if they would've done the case anyway even if they did it maci arthro and so on I would say just there was much more use of MACI Arthro than that. i would say just there was much more use of maci arthro than that I'm saying you can look at the increase in the small femoral condyle defects and that really accounted for the incremental overall growth. i'm saying you can look at the increase in the small femoral condyle defects and that really accounted for the incremental overall growth We're coming into the year with a lot more trained surgeons. we're coming into the year with a lot more trained surgeons We'll continue to train those surgeons, but we think that's a great indicator for us. we'll continue to train those surgeons but we think that's a great indicator for us Where it's being used is, these instruments were designed for two to four square centimeters, so they're matching cannulas and cutters and everything for either a two, three, or four square centimeter defect on the femoral condyle. where it's being used is these instruments were designed for two to four square centimeters so they're matching cannulas and cutters and everything for either a two three or four square centimeter defect on the femoral condyle That's where we've seen the most uptake. that's where we've seen the most uptake We've been pleasantly surprised that we're also seeing trochlea cases, so behind the kneecap, just because they can access that area easily with our Arthro procedures. Also patella usage, which is kind of interesting, right? The back of the kneecap. I think from a surgeon perspective, they'll look at it and say, "Hey, that could be a great benefit for the patient." Overall, it is with MACI Arthro generally because it's a less invasive surgery, so you'd expect sort of less postoperative pain, greater range of motion, faster back to full weight bearing, et cetera. If they can treat the defect without having to open up the knee and kind of flip the kneecap over to address a patella defect, that could have some pretty meaningful benefits for the patient as well. We've been pleasantly surprised that we're also seeing trochlea cases, so behind the kneecap, just because they can access that area easily with our Arthro procedures. we've been pleasantly surprised that we're also seeing trochlea cases so behind the kneecap just because they can access that area easily with our arthro procedures Also patella usage, which is kind of interesting, right? also patella usage which is kind of interesting right The back of the kneecap. the back of the kneecap I think from a surgeon perspective, they'll look at it and say, "Hey, that could be a great benefit for the patient." Overall, it is with MACI Arthro generally because it's a less invasive surgery, so you'd expect sort of less postoperative pain, greater range of motion, faster back to full weight bearing, et cetera. i think from a surgeon perspective they'll look at it and say "hey that could be a great benefit for the patient." overall it is with maci arthro generally because it's a less invasive surgery so you'd expect sort of less postoperative pain greater range of motion faster back to full weight bearing et cetera If they can treat the defect without having to open up the knee and kind of flip the kneecap over to address a patella defect, that could have some pretty meaningful benefits for the patient as well. if they can treat the defect without having to open up the knee and kind of flip the kneecap over to address a patella defect that could have some pretty meaningful benefits for the patient as well We're actually seeing surgeons sort of, even though that's not what the instruments were designed for, doing patella cases as well. We're actually seeing surgeons sort of, even though that's not what the instruments were designed for, doing patella cases as well. we're actually seeing surgeons sort of even though that's not what the instruments were designed for doing patella cases as well

Speaker 3: I wanted to ask also, you got MACI Arthro still in the relatively early to mid-innings of launch, and then you also took some measures to realign your sales force entering 2026. Talk a little bit about how that's trending relative to your expectations and should we be nervous at all that there's potential. I wanted to ask also, you got MACI Arthro still in the relatively early to mid-innings of launch, and then you also took some measures to realign your sales force entering 2026. i wanted to ask also you got maci arthro still in the relatively early to mid-innings of launch and then you also took some measures to realign your sales force entering 2026 Talk a little bit about how that's trending relative to your expectations and should we be nervous at all that there's potential. talk a little bit about how that's trending relative to your expectations and should we be nervous at all that there's potential

Speaker 2: Right Right right

Speaker 3: You're splitting territories. Is there a delayed impact coming, or what gives you confidence to say that it's not? You're splitting territories. you're splitting territories Is there a delayed impact coming, or what gives you confidence to say that it's not? is there a delayed impact coming or what gives you confidence to say that it's not

Speaker 2: Yeah. We decided to expand our sales force in the second half of last year. We actually moved it up a little bit because we knew we had a super high volume fourth quarter coming and in the large territories, we wanted to get people on board to be able to support those cases. Given the momentum of the business, we wanted to make sure that we had the full expanded sales force in place for all of 2026. Yeah, a lot of them came on board in the fourth quarter. Obviously, it's really interesting. I think the commercial leadership team, they executed flawlessly to bring new reps on, sort of partnering with the existing reps in those territories. There's a lot that could've gone wrong, and obviously, we sort of blew it out in Q4 and had our highest quarter ever, right? Yeah. yeah We decided to expand our sales force in the second half of last year. we decided to expand our sales force in the second half of last year We actually moved it up a little bit because we knew we had a super high volume fourth quarter coming and in the large territories, we wanted to get people on board to be able to support those cases. we actually moved it up a little bit because we knew we had a super high volume fourth quarter coming and in the large territories we wanted to get people on board to be able to support those cases Given the momentum of the business, we wanted to make sure that we had the full expanded sales force in place for all of 2026. given the momentum of the business we wanted to make sure that we had the full expanded sales force in place for all of 2026 Yeah, a lot of them came on board in the fourth quarter. yeah a lot of them came on board in the fourth quarter Obviously, it's really interesting. obviously it's really interesting I think the commercial leadership team, they executed flawlessly to bring new reps on, sort of partnering with the existing reps in those territories. i think the commercial leadership team they executed flawlessly to bring new reps on sort of partnering with the existing reps in those territories There's a lot that could've gone wrong, and obviously, we sort of blew it out in Q4 and had our highest quarter ever, right? there's a lot that could've gone wrong and obviously we sort of blew it out in q4 and had our highest quarter ever right They worked really well together. They each knew what part of the territory they were going to have come the first part of the year. We get into this first quarter, and everybody's territory is realigned, and again, we said on our earnings call that it was the first quarter with the new reps and all the reps in their new territories. We had record first-quarter metrics across the board. We saw strong double-digit biopsy growth, double-digit implant growth, and particularly strong biopsy growth in the new territories. Again, I think there was flawless execution. We've done this a lot. We know how to do it well, in terms of communication, incentive comp plans, and so on, and I think the proof is in the results. At this point, with sort of potential disruption behind us, they're almost six months into the tenure here. They worked really well together. they worked really well together They each knew what part of the territory they were going to have come the first part of the year. they each knew what part of the territory they were going to have come the first part of the year We get into this first quarter, and everybody's territory is realigned, and again, we said on our earnings call that it was the first quarter with the new reps and all the reps in their new territories. we get into this first quarter and everybody's territory is realigned and again we said on our earnings call that it was the first quarter with the new reps and all the reps in their new territories We had record first-quarter metrics across the board. we had record first-quarter metrics across the board We saw strong double-digit biopsy growth, double-digit implant growth, and particularly strong biopsy growth in the new territories. we saw strong double-digit biopsy growth double-digit implant growth and particularly strong biopsy growth in the new territories Again, I think there was flawless execution. again i think there was flawless execution We've done this a lot. we've done this a lot We know how to do it well, in terms of communication, incentive comp plans, and so on, and I think the proof is in the results. we know how to do it well in terms of communication incentive comp plans and so on and i think the proof is in the results At this point, with sort of potential disruption behind us, they're almost six months into the tenure here. at this point with sort of potential disruption behind us they're almost six months into the tenure here There'll be no disruption that's delayed. There'll be no disruption that's delayed. there'll be no disruption that's delayed

Speaker 3: Sounds like you're feeling good. Maybe to close it off here, we have two minutes left. You're sitting on a little over $200 million of cash on the balance sheet. If you continue with this type of free cash flow generation, which is accelerating, you could be approaching a half a billion dollars in a couple of years here. Sounds like you're feeling good. sounds like you're feeling good Maybe to close it off here, we have two minutes left. maybe to close it off here we have two minutes left You're sitting on a little over $200 million of cash on the balance sheet. you're sitting on a little over $200 million of cash on the balance sheet If you continue with this type of free cash flow generation, which is accelerating, you could be approaching a half a billion dollars in a couple of years here. if you continue with this type of free cash flow generation which is accelerating you could be approaching a half a billion dollars in a couple of years here

Speaker 2: Yeah. Yeah. yeah

Speaker 3: Right? How should we think about what you're going to do with that cash, I'm just curious with where the stock is trading now, I would imagine you think it's undervalued. Tell me if you think different. Could there be a buyback potentially on the horizon? Right? right How should we think about what you're going to do with that cash, I'm just curious with where the stock is trading now, I would imagine you think it's undervalued. how should we think about what you're going to do with that cash i'm just curious with where the stock is trading now i would imagine you think it's undervalued Tell me if you think different. tell me if you think different Could there be a buyback potentially on the horizon? could there be a buyback potentially on the horizon

Speaker 2: I'd say our capital allocation strategy has been pretty consistent. Our big capital investment was the $100 million into our new facility, which we self-funded and actually increased our cash balance while we were doing that. That was the big Cap. In order to meet our projected growth over the next five to 10 years, that was sort of the big capital investment we needed to make, that's why with that behind us, $2 million-$3 million a quarter in CapEx. We're going to have really strong free cash flow. It's down to the other two areas that we would always talk about, which is business development. We're certainly looking for other opportunities, particularly in sports medicine. I'd say our capital allocation strategy has been pretty consistent. i'd say our capital allocation strategy has been pretty consistent Our big capital investment was the $100 million into our new facility, which we self-funded and actually increased our cash balance while we were doing that. our big capital investment was the $100 million into our new facility which we self-funded and actually increased our cash balance while we were doing that That was the big Cap. that was the big cap In order to meet our projected growth over the next five to 10 years, that was sort of the big capital investment we needed to make, that's why with that behind us, $2 million-$3 million a quarter in CapEx. in order to meet our projected growth over the next five to 10 years that was sort of the big capital investment we needed to make that's why with that behind us $2 million-$3 million a quarter in capex We're going to have really strong free cash flow. we're going to have really strong free cash flow It's down to the other two areas that we would always talk about, which is business development. it's down to the other two areas that we would always talk about which is business development We're certainly looking for other opportunities, particularly in sports medicine. we're certainly looking for other opportunities particularly in sports medicine At some point, if we didn't do anything else, you can do the math and say the pull-through, given our margins, both gross margin and adjusted earnings margin, is pretty strong. You'd have to think about those capital returns to shareholders, and a buyback certainly is something that we think about and we're in a position to do when we think it's right. We obviously think the stock is undervalued now. I'd just say it's an option that's on the table that we certainly talk about. At some point, if we didn't do anything else, you can do the math and say the pull-through, given our margins, both gross margin and adjusted earnings margin, is pretty strong. at some point if we didn't do anything else you can do the math and say the pull-through given our margins both gross margin and adjusted earnings margin is pretty strong You'd have to think about those capital returns to shareholders, and a buyback certainly is something that we think about and we're in a position to do when we think it's right. you'd have to think about those capital returns to shareholders and a buyback certainly is something that we think about and we're in a position to do when we think it's right We obviously think the stock is undervalued now. we obviously think the stock is undervalued now I'd just say it's an option that's on the table that we certainly talk about. i'd just say it's an option that's on the table that we certainly talk about

Speaker 3: Great. I think we'll close it off there. Nick, Joe, thank you so much. Great. great I think we'll close it off there. i think we'll close it off there Nick, Joe, thank you so much. nick joe thank you so much

Speaker 2: Great. Really appreciate it. Great. great Really appreciate it. really appreciate it

Speaker 1: Thanks, Rich. Appreciate it. Thanks, Rich. thanks rich Appreciate it. appreciate it Thanks for having us, Rich. Thanks for having us, Rich. thanks for having us rich