AVITA Medical — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total revenue increased 53% year-over-year to $26.1 million for Q3 2026, up from $17.1 million in Q3 2025, and rose 20% sequentially from Q2 2026.
• Gross margin reached 84.0% in Q3 2026, an increase of 270 basis points compared to 81.3% in the prior-year period.
• RECELL gross margin specifically was 88.4% for the quarter, with expectations to remain between 86% and 90% in coming quarters.
• Operating expenses were $24.6 million, representing a 7% increase year-over-year ($1.6 million) but remaining flat sequentially to Q2 2026.
• Net loss improved to $6.2 million ($0.20 per share) in Q3 2026, compared to a net loss of $13.2 million ($0.46 per share) in Q3 2025.
• Net cash use improved to approximately $0.6 million in Q3 2026, down from $3.2 million in Q2 2026.
• Cash, cash equivalents, and marketable securities totaled approximately $10.5 million as of September 30, 2026.
• Trailing twelve-month revenue reached $85 million, satisfying the milestone to access the remaining $10 million under the credit facility with Perceptive Advisors LLC.
• Subsequent to quarter-end, the Company drew the $10 million tranche, bringing total borrowings under the facility to $60 million.
• The "going concern" qualification was removed from the Form 10-Q based on improved operating performance and liquidity.
• The outstanding debt under the credit facility is now classified as a long-term liability on the balance sheet.

Guidance and Future Outlook:

• Full-year 2026 revenue guidance was raised to $92 million to $94 million, up from the previous range of $86 million to $89 million.
• The updated guidance implies a 28% to 31% growth rate compared to 2025 revenue of $71.6 million.
• Implied fourth-quarter 2026 revenue guidance is $24.9 million to $26.9 million.
• The Company reaffirms its expectation of achieving cash flow breakeven in the fourth quarter of 2026.

Business Segments and Product Lines:

• RECELL drove Q3 growth with U.S. revenue of $22.4 million, reflecting approximately 20% sequential growth.
• Cohealyx generated $2.1 million in Q3 revenue, showing approximately 21% sequential growth driven by an expanding customer base and additional hospital value analysis committee approvals.
• PermeaDerm generated $0.6 million in Q3 revenue, remaining essentially flat sequentially.
• International markets generated $0.9 million in Q3 revenue, remaining essentially flat sequentially.
• PermeaDerm I met its primary endpoint, demonstrating comparable clinical outcomes to allograft while reducing product costs by 70% and preparation time by 95.7%.
• The Centers for Medicare & Medicaid Services finalized national physician payment values and simplified billing codes for RECELL procedures effective January 1, 2027.

Market and Competitive Landscape:

• RECELL is approved by the FDA for thermal burn and trauma wounds in the U.S.
• RECELL and RECELL GO are CE-marked in Europe, TGA certified in Australia, listed with Medsafe in New Zealand, and PMDA-approved in Japan.
• The Company holds exclusive rights to market Cohealyx and to manufacture, market, sell, and distribute PermeaDerm in the U.S.
• The Company receives 50% of the average sales price for Cohealyx and up to 55% for PermeaDerm.

Risks and Challenges:

• Risks include variability in volumes and hospital ordering patterns.
• Potential delays or changes in Medicare and third-party reimbursement for RECELL, including the transition to national physician payment rates.
• Risks related to collecting receivables, managing operating expenses, and working capital.
• Risks regarding compliance with covenants under the credit facility and servicing indebtedness.
• Risks associated with product mix and manufacturing costs affecting gross margin.
• Dependence on third parties for the supply of Cohealyx and PermeaDerm.
• Risks related to clinical data interpretation, FDA scope of claims, product liability, and regulatory actions.

Management Commentary and Tone:

• CEO Cary Vance stated the company delivered another strong quarter with revenue up 53% year-over-year and gross margin reaching 84%, citing disciplined expense management and commercial momentum.
• CFO David O'Toole noted that reaching the $85 million trailing twelve-month revenue milestone satisfied the condition to draw down the remaining $10 million, strengthening liquidity as the company advances toward cash flow breakeven.
• Management concluded that substantial doubt about the ability to continue as a going concern has been alleviated.

Other Key Points:

• The Company removed the "going concern" qualification from its Quarterly Report on Form 10-Q.
• Non-cash expenses related to the revaluation of warrants negatively impacted the current period net loss by $2.1 million due to the increase in AVITA Medical's share price.
• Sales and marketing expenses increased by $1.5 million year-over-year, primarily due to increased commissions and compensation.
• Research and development expenses increased by $1.0 million year-over-year, mainly from higher compensation.
• General and administrative expenses decreased by $0.9 million year-over-year.