| --- | --- | --- | |-------------------------|-------|-------| | | | | | | | | | VERICEL Q1 2024 RESULTS | | | | MAY 8, 2024 | | | Q1 2024 Financial Highlights Profitability Growth Outpacing High Revenue Growth | --- | --- | --- | |-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------- ...

Vericel Corporation (NASDAQ:VCEL) Q1 2024 Earnings Conference Call May 8, 2024 8:30 AM ET Company Participants Eric Burns - Vice President of Finance & Investor Relations Nick Colangelo - Chief Executive Officer Joe Mara - Chief Financial Officer Conference Call Participants Ryan Zimmerman - BTIG Sam Brodovsky - Truist Securities George Sellers - Stephens, Inc. Swayampakula Ramakanth - H.C. Wainwright Operator Ladies and gentlemen, thank you for standing by. Welcome to Vericel's First Quarter 2024 Conferenc ...

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents Vericel Corporation's unaudited condensed consolidated financial statements and management's discussion for the three months ended March 31, 2024 [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Vericel Corporation's unaudited condensed consolidated financial statements and related notes for the three months ended March 31, 2024 and 2023 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table provides a snapshot of Vericel's financial position, detailing assets, liabilities, and equity as of March 31, 2024, and December 31, 2023 Condensed Consolidated Balance Sheets (in millions) | Metric | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :----- | :--------------------------- | :------------------------------ | | Total Assets | $356.661 | $353.657 | | Total Liabilities | $122.765 | $127.705 | | Total Shareholders' Equity | $233.896 | $225.952 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This table details Vericel's financial performance, including revenue, expenses, and net loss for the three months ended March 31, 2024 and 2023 Condensed Consolidated Statements of Operations (in millions, except per share amounts) | Metric | Three Months Ended March 31, 2024 (in millions) | Three Months Ended March 31, 2023 (in millions) | Change ($) | Change (%) | | :----- | :---------------------------------------------- | :---------------------------------------------- | :--------- | :--------- | | Total Revenue | $51.281 | $41.017 | $10.264 | 25.0% | | Cost of Product Sales | $15.927 | $14.497 | $1.430 | 9.9% | | Gross Profit | $35.354 | $26.520 | $8.834 | 33.3% | | Research and Development | $6.418 | $5.212 | $1.206 | 23.1% | | Selling, General and Administrative | $34.400 | $29.485 | $4.915 | 16.7% | | Total Operating Expenses | $40.818 | $34.697 | $6.121 | 17.6% | | Loss from Operations | $(5.464) | $(8.177) | $2.713 | (33.2)% | | Total Other Income | $1.602 | $0.682 | $0.920 | 134.9% | | Net Loss | $(3.862) | $(7.495) | $3.633 | (48.5)% | | Basic and Diluted Net Loss Per Common Share | $(0.08) | $(0.16) | $0.08 | (50.0)% | [Condensed Consolidated Statements of Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) This table presents Vericel's net loss and other comprehensive income/loss components for the three months ended March 31, 2024 and 2023 Condensed Consolidated Statements of Comprehensive Loss (in millions) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----- | :-------------------------------- | :-------------------------------- | | Net Loss | $(3.862) | $(7.495) | | Unrealized (Loss) Gain on Investments | $(0.145) | $0.342 | | Comprehensive Loss | $(4.007) | $(7.153) | [Condensed Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) This section outlines changes in Vericel's shareholders' equity, reflecting net loss, stock-based compensation, and other equity transactions - Total shareholders' equity increased from **$225.952 million** as of December 31, 2023, to **$233.896 million** as of March 31, 2024[15](index=15&type=chunk) - Key contributors to the increase include stock-based compensation expense (**$9.834 million**) and stock option exercises (**$6.779 million**), partially offset by net loss (**$3.862 million**) and restricted stock withheld for employee tax remittance (**$4.909 million**)[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table summarizes Vericel's cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2024 and 2023 Condensed Consolidated Statements of Cash Flows (in millions) | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----------------- | :-------------------------------- | :-------------------------------- | | Net Cash Provided by Operating Activities | $7.202 | $7.860 | | Net Cash (Used in) Provided by Investing Activities | $(25.452) | $2.800 | | Net Cash Provided by Financing Activities | $2.126 | $0.107 | | Net (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash | $(16.124) | $10.767 | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $70.742 | $61.834 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Organization](index=9&type=section&id=1.%20Organization) This note describes Vericel's business, commercial products, operational segment, and ongoing monitoring of geopolitical risks - Vericel is a fully-integrated, commercial-stage biopharmaceutical company providing advanced therapies for sports medicine and severe burn care markets[22](index=22&type=chunk) - Commercial products include MACI® (autologous cultured chondrocytes on porcine collagen membrane) for knee cartilage defects, Epicel® (cultured epidermal autografts) for deep-dermal or full-thickness burns, and NexoBrid® (anacaulase-bcdb) for eschar removal in thermal burns[22](index=22&type=chunk) - NexoBrid commercial sales in the U.S. began in Q3 2023 following FDA approval on December 28, 2022[22](index=22&type=chunk) - The company operates primarily in the U.S. in one reportable segment: research, product development, manufacture, and distribution of cellular therapies and specialty biologics[22](index=22&type=chunk) - The company is monitoring the ongoing conflicts in Ukraine and Israel/Gaza, particularly the potential impact on NexoBrid supply from MediWound's facilities in Israel[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) - As of March 31, 2024, the Company had an accumulated deficit of **$407.0 million** and a net loss of **$3.9 million** during the three months ended March 31, 2024. Cash and cash equivalents were **$62.9 million** and investments were **$77.1 million**[27](index=27&type=chunk) [2. Basis of Presentation](index=10&type=section&id=2.%20Basis%20of%20Presentation) This note outlines the accounting principles, management estimates, and recent accounting standard updates applied in the financial statements - Financial statements are unaudited and prepared in accordance with U.S. GAAP and SEC rules, requiring management estimates and judgments[30](index=30&type=chunk)[31](index=31&type=chunk) - No new accounting standards were adopted during the three months ended March 31, 2024[33](index=33&type=chunk) - The company is evaluating the impact of ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Improvements to Income Tax Disclosures), effective for fiscal years beginning after December 15, 2024[33](index=33&type=chunk)[34](index=34&type=chunk) [3. Revenue](index=11&type=section&id=3.%20Revenue) This note details Vericel's revenue recognition policies and provides a breakdown of revenue by product for the reporting periods - Revenue recognition follows the five-step model in Accounting Standards Codification 606, Revenue Recognition[35](index=35&type=chunk) - MACI biopsy kit revenue is recognized upon delivery; MACI implant revenue is recognized upon delivery when the customer obtains control and the claim is billable, with estimates for contractual allowances and uncollectible consideration[36](index=36&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk) - Epicel revenue is recognized upon delivery to the hospital[42](index=42&type=chunk) - NexoBrid revenue is recognized when specialty distributors take control of the product, typically upon delivery[45](index=45&type=chunk) Revenue by Product (in millions) | Product | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------ | :-------------------------------- | :-------------------------------- | | MACI implants and kits | $40.181 | $34.190 | | Epicel | $10.664 | $6.827 | | NexoBrid | $0.436 | $0 | | **Total Revenue** | **$51.281** | **$41.017** | [4. Selected Balance Sheet Components](index=13&type=section&id=4.%20Selected%20Balance%20Sheet%20Components) This note provides detailed breakdowns of key balance sheet items, including inventory, property and equipment, intangible assets, and accrued expenses Inventory (in millions) | Component | March 31, 2024 | December 31, 2023 | | :-------- | :------------- | :---------------- | | Raw materials | $10.858 | $11.348 | | Work-in-process | $1.745 | $1.210 | | Finished goods | $0.954 | $0.529 | | **Total Inventory** | **$13.557** | **$13.087** | Property and Equipment, net (in millions) | Component | March 31, 2024 | December 31, 2023 | | :-------- | :------------- | :---------------- | | Construction in process | $47.474 | $32.531 | | **Total Property and Equipment, net** | **$56.392** | **$41.635** | - Intangible assets, net, primarily consist of the NexoBrid license, valued at **$6.719 million** as of March 31, 2024, with an estimated future amortization of **$0.469 million** for the remainder of 2024[53](index=53&type=chunk)[54](index=54&type=chunk) Accrued Expenses (in millions) | Component | March 31, 2024 | December 31, 2023 | | :-------- | :------------- | :---------------- | | Bonus-related compensation | $3.932 | $9.757 | | Employee-related accruals | $3.394 | $3.503 | | Insurance reimbursement-related liabilities | $3.385 | $3.591 | | Other accrued expenses | $0.315 | $0.364 | | **Total Accrued Expenses** | **$11.026** | **$17.215** | [5. Leases](index=15&type=section&id=5.%20Leases) This note describes Vericel's lease arrangements, particularly the Burlington Lease for its new headquarters and manufacturing facility - The Company entered into the Burlington Lease in January 2022 for approximately 126,000 square feet of manufacturing, laboratory, and office space, which will serve as its new corporate headquarters and primary manufacturing facility[56](index=56&type=chunk) - The term of the Burlington Lease began on June 1, 2023, and the Company gained control of the premises to commence tenant improvement work[58](index=58&type=chunk)[60](index=60&type=chunk) - The Company funded approximately **$28.3 million** of its required tenant improvement construction costs in April 2024[57](index=57&type=chunk)[126](index=126&type=chunk) - Operating lease expense for the three months ended March 31, 2024, was **$3.2 million**, compared to **$1.7 million** for the same period in 2023[62](index=62&type=chunk) - Operating right-of-use assets were **$73.682 million** and operating lease liabilities were **$92.153 million** as of March 31, 2024[63](index=63&type=chunk) [6. Investments](index=16&type=section&id=6.%20Investments) This note details Vericel's marketable debt securities, classified as available-for-sale, and their fair values and maturities - Marketable debt securities held by the Company are classified as available-for-sale and carried at fair value[64](index=64&type=chunk) Marketable Securities (in millions) | Type | Amortized Cost (March 31, 2024) | Estimated Fair Value (March 31, 2024) | Amortized Cost (December 31, 2023) | Estimated Fair Value (December 31, 2023) | | :--- | :------------------------------ | :------------------------------------ | :--------------------------------- | :--------------------------------------- | | Commercial paper | $7.396 | $7.383 | $3.638 | $3.639 | | Corporate notes | $56.803 | $56.604 | $47.228 | $47.159 | | U.S. government securities | $2.473 | $2.472 | $0.983 | $0.983 | | U.S. government agency bonds | $10.713 | $10.684 | $14.003 | $13.971 | | **Total** | **$77.385** | **$77.143** | **$65.852** | **$65.752** | - All marketable securities had remaining contractual maturities of three years or less as of March 31, 2024[64](index=64&type=chunk) [7. Fair Value Measurements](index=17&type=section&id=7.%20Fair%20Value%20Measurements) This note explains Vericel's fair value measurement hierarchy and provides a breakdown of financial instruments by fair value level - Fair value measurements are classified into Level 1 (quoted prices in active markets), Level 2 (observable inputs for similar instruments), and Level 3 (unobservable inputs)[65](index=65&type=chunk)[69](index=69&type=chunk) - Commercial paper, corporate notes, U.S. government securities, and U.S. government agency bonds are classified as Level 2[65](index=65&type=chunk) - Money market funds are classified as Level 1[66](index=66&type=chunk) Fair Value of Financial Instruments (in millions) | Asset Type | Total (March 31, 2024) | Level 1 (March 31, 2024) | Level 2 (March 31, 2024) | Level 3 (March 31, 2024) | Total (December 31, 2023) | Level 1 (December 31, 2023) | Level 2 (December 31, 2023) | Level 3 (December 31, 2023) | | :--------- | :--------------------- | :----------------------- | :----------------------- | :----------------------- | :------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | | Money market funds | $36.617 | $36.617 | $0 | $0 | $34.672 | $34.672 | $0 | $0 | | Commercial paper | $8.873 | $0 | $8.873 | $0 | $4.876 | $0 | $4.876 | $0 | | Corporate notes | $56.606 | $0 | $56.606 | $0 | $47.159 | $0 | $47.159 | $0 | | U.S. government agency bonds | $10.684 | $0 | $10.684 | $0 | $13.971 | $0 | $13.971 | $0 | | U.S. government securities | $23.763 | $0 | $23.763 | $0 | $24.874 | $0 | $24.874 | $0 | | **Total** | **$136.543** | **$36.617** | **$99.926** | **$0** | **$125.552** | **$34.672** | **$90.880** | **$0** | [8. Revolving Credit Agreement](index=17&type=section&id=8.%20Revolving%20Credit%20Agreement) This note outlines Vericel's $150.0 million revolving credit agreement, its utilization, and compliance with financial covenants - The Company has a **$150.0 million** five-year senior secured revolving credit agreement, with a **$15.0 million** sub-facility for letters of credit[67](index=67&type=chunk) - Approximately **$6.2 million** of the sub-facility is currently utilized for letters of credit[67](index=67&type=chunk) - As of March 31, 2024, there are no outstanding borrowings under the Revolving Credit Agreement[70](index=70&type=chunk) - The agreement includes financial covenants, such as a maximum Total Net Leverage Ratio of 3.50 to 1.00, with which the company is in compliance[71](index=71&type=chunk)[125](index=125&type=chunk) [9. Stock-Based Compensation](index=18&type=section&id=9.%20Stock-Based%20Compensation) This note details Vericel's non-cash stock-based compensation expense and the fair values of granted options and restricted stock units Total Non-Cash Stock-Based Compensation Expense (in millions) | Category | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change ($) | Change (%) | | :------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Cost of product sales | $1.241 | $0.885 | $0.356 | 40.2% | | Research and development | $1.221 | $0.977 | $0.244 | 25.0% | | Selling, general and administrative | $7.372 | $6.869 | $0.503 | 7.3% | | **Total** | **$9.834** | **$8.731** | **$1.103** | **12.6%** | - The weighted-average grant-date fair value of service-based options granted increased from **$18.00** in Q1 2023 to **$28.21** in Q1 2024[76](index=76&type=chunk) - The weighted-average grant-date fair value of restricted stock units granted increased from **$29.82** in Q1 2023 to **$48.25** in Q1 2024[77](index=77&type=chunk) [10. Net Loss Per Common Share](index=19&type=section&id=10.%20Net%20Loss%20Per%20Common%20Share) This note presents Vericel's net loss per common share calculations, including basic and diluted figures Net Loss Per Common Share (in millions, except per share amounts) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----- | :-------------------------------- | :-------------------------------- | | Net Loss | $(3.862) | $(7.495) | | Basic and Diluted Weighted-Average Common Shares Outstanding | 48,141 | 47,387 | | Basic Loss Per Common Share | $(0.08) | $(0.16) | | Diluted Loss Per Common Share | $(0.08) | $(0.16) | - Anti-dilutive shares excluded from diluted net loss per common share were **6,730** for stock options and **1,201** for restricted stock units as of March 31, 2024[78](index=78&type=chunk) [11. NexoBrid License and Supply Agreements](index=19&type=section&id=11.%20NexoBrid%20License%20and%20Supply%20Agreements) This note describes Vericel's exclusive license and supply agreements with MediWound for NexoBrid in North America - Vericel has exclusive license and supply agreements with MediWound for NexoBrid in North America[79](index=79&type=chunk) - The FDA approved NexoBrid on December 28, 2022, and the Biologics License Application (BLA) was transferred to Vericel effective February 20, 2023[79](index=79&type=chunk)[80](index=80&type=chunk) - A **$7.5 million** regulatory milestone payment was made to MediWound in February 2023, recorded as an intangible asset[81](index=81&type=chunk) - The Company is obligated to pay MediWound up to **$125.0 million** in sales milestones (first **$7.5 million** triggered at **$75.0 million** annual net sales) and tiered royalties on net sales[82](index=82&type=chunk) - MediWound manufactures and supplies NexoBrid on a unit price basis[82](index=82&type=chunk) [12. Commitments and Contingencies](index=20&type=section&id=12.%20Commitments%20and%20Contingencies) This note confirms that Vericel is not currently involved in any material litigation or regulatory proceedings - The Company is not currently a party to any material ongoing litigation, regulatory, or other proceedings[86](index=86&type=chunk) - No knowledge of any investigations by government or regulatory authorities that could have a material adverse effect on the business[86](index=86&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Vericel's financial performance, operational highlights, and liquidity for the three months ended March 31, 2024 [Overview](index=21&type=section&id=Overview) This section provides an overview of Vericel's biopharmaceutical business, product portfolio, strategic initiatives, and market opportunities - Vericel is a fully-integrated, commercial-stage biopharmaceutical company providing advanced therapies for sports medicine and severe burn care[88](index=88&type=chunk) - Products include MACI (knee cartilage repair), Epicel (permanent skin replacement for severe burns), and NexoBrid (eschar removal for thermal burns)[88](index=88&type=chunk)[93](index=93&type=chunk) - The company is developing arthroscopic delivery for MACI, with commercial launch anticipated in Q3 2024, and evaluating MACI for ankle cartilage damage, with a clinical trial expected in 2025[97](index=97&type=chunk)[98](index=98&type=chunk) - NexoBrid's FDA approval expands the burn care franchise, targeting over **30,000** hospitalized thermal burn patients annually in the U.S[102](index=102&type=chunk) - The company monitors geopolitical conflicts (Ukraine, Israel/Gaza) for potential impacts on global economy, supply chain, and NexoBrid manufacturing by MediWound in Israel[89](index=89&type=chunk)[91](index=91&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) This section analyzes Vericel's financial results, including revenue growth, changes in expenses, and net loss for the reporting period Total Revenue by Product (in millions) | Product | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change ($) | Change (%) | | :------ | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | MACI | $40.181 | $34.190 | $5.991 | 17.5% | | Epicel | $10.664 | $6.827 | $3.837 | 56.2% | | NexoBrid | $0.436 | $0 | $0.436 | N/A | | **Total Revenue** | **$51.281** | **$41.017** | **$10.264** | **25.0%** | - Gross profit increased by **33.3%** to **$35.354 million** for Q1 2024, driven by revenue growth and a fixed manufacturing cost structure[104](index=104&type=chunk)[108](index=108&type=chunk) - Research and development expenses increased by **23.1%** to **$6.418 million**, primarily due to higher headcount, employee expenses, and MACI arthroscopic development program costs[104](index=104&type=chunk)[109](index=109&type=chunk) - Selling, general and administrative expenses increased by **16.7%** to **$34.400 million**, mainly due to higher headcount, employee expenses, and lease expense associated with the Burlington Lease[104](index=104&type=chunk)[110](index=110&type=chunk) - Net loss decreased by **48.5%** to **$(3.862) million** for Q1 2024, compared to **$(7.495) million** in Q1 2023[104](index=104&type=chunk) - MACI sales historically exhibit seasonality, with Q4 typically being the strongest (average **35%** of annual volumes), while Epicel revenue has inherent variability. NexoBrid seasonality is yet to be determined[106](index=106&type=chunk)[107](index=107&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses Vericel's cash position, cash flow activities, and its ability to fund operations for the foreseeable future - Cash, cash equivalents, and restricted cash totaled **$70.7 million** as of March 31, 2024[115](index=115&type=chunk) - Net cash provided by operating activities was **$7.2 million** for Q1 2024, primarily from non-cash charges and a decrease in accounts receivable[114](index=114&type=chunk)[115](index=115&type=chunk) - Net cash used in investing activities was **$25.5 million** for Q1 2024, mainly due to **$22.6 million** in investment purchases and **$14.0 million** in property and equipment purchases (Burlington Lease construction), partially offset by **$11.1 million** from investment sales[114](index=114&type=chunk)[117](index=117&type=chunk) - Net cash provided by financing activities was **$2.1 million**, driven by stock option exercises and employee stock purchase plan proceeds, offset by tax payments for restricted stock units[114](index=114&type=chunk)[119](index=119&type=chunk) - The company believes current cash, equivalents, investments, and available borrowing capacity (including a **$150.0 million** revolving credit agreement) will be sufficient to support operations for at least 12 months[122](index=122&type=chunk)[125](index=125&type=chunk) - The company funded the remaining **$28.3 million** for the Burlington Lease construction escrow in April 2024[126](index=126&type=chunk) [Critical Accounting Policies](index=26&type=section&id=Critical%20Accounting%20Policies) This section confirms no material changes to Vericel's critical accounting policies and estimates during the reporting period - No material changes to critical accounting policies and estimates in the three months ended March 31, 2024[128](index=128&type=chunk) - Refer to the Annual Report on Form 10-K for the year ended December 31, 2023, for further information[128](index=128&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Vericel's exposures to market risk have not materially changed since December 31, 2023, with further details available in the company's Annual Report on Form 10-K - No material changes to market risk exposures since December 31, 2023[131](index=131&type=chunk) - Refer to Part II, Item 7A of the Annual Report on Form 10-K for the year ended December 31, 2023, for detailed disclosures[131](index=131&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Vericel's management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes in internal control - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2024[132](index=132&type=chunk)[133](index=133&type=chunk) - No material changes in internal control over financial reporting during the three months ended March 31, 2024[134](index=134&type=chunk) [PART II — OTHER INFORMATION](index=28&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This section covers other information including legal proceedings, risk factors, equity sales, and exhibits for the reporting period [Item 1. Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) Vericel Corporation is not currently involved in any material legal proceedings that could significantly impact its business - The Company is not a party to any material legal proceedings as of March 31, 2024[135](index=135&type=chunk) [Item 1A. Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in Vericel's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 - No material changes to risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023[136](index=136&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=28&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section is not applicable to Vericel for the reporting period, indicating no unregistered sales of equity securities or related use of proceeds - Not applicable[137](index=137&type=chunk) [Item 3. Defaults Upon Senior Securities](index=28&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section is not applicable to Vericel for the reporting period, indicating no defaults upon senior securities - Not applicable[138](index=138&type=chunk) [Item 4. Mine Safety Disclosures](index=28&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to Vericel for the reporting period, as the company does not have operations related to mine safety - Not applicable[139](index=139&type=chunk) [Item 5. Other Information](index=28&type=section&id=Item%205.%20Other%20Information) Several Section 16 officers and directors of Vericel adopted Rule 10b5-1 trading arrangements in March 2024, outlining potential future sales of common stock in accordance with company policy - In March 2024, several Section 16 officers and directors adopted Rule 10b5-1 trading arrangements for potential sales of common stock between August 2024 and August 2025[140](index=140&type=chunk)[141](index=141&type=chunk) - These plans include Kevin McLaughlin (up to **35,000** shares), Robert Zerbe (up to **17,500** shares), Sean Flynn (up to **40,075** shares), Jonathan Siegal (up to **42,577** shares), and Joseph Mara (up to **5,000** shares)[141](index=141&type=chunk) [Item 6. Exhibits](index=30&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including organizational documents, capital stock descriptions, certifications, and XBRL documents - The report includes an Exhibit Index listing various documents such as Restated Articles of Incorporation, Amended and Restated Bylaws, Description of Capital Stock, CEO/CFO certifications (Sarbanes-Oxley Act), and Inline XBRL documents[142](index=142&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk) [Signatures](index=31&type=section&id=Signatures) The Quarterly Report on Form 10-Q is officially signed by Vericel Corporation's President and Chief Executive Officer, Dominick C. Colangelo, and Chief Financial Officer, Joseph A. Mara, on May 8, 2024 - The report is signed by Dominick C. Colangelo, President and Chief Executive Officer, and Joseph A. Mara, Chief Financial Officer, on May 8, 2024[147](index=147&type=chunk)[148](index=148&type=chunk)

Exhibit 99.1 Vericel Corporation 64 Sidney Street Cambridge, MA 02139 T 617 588-5555 F 617 588-5554 www.vcel.com Vericel Reports First Quarter 2024 Financial Results and Raises Full-Year 2024 Financial Guidance Total Revenue Increased 25% to $51.3 Million Record First Quarter MACI Revenue of $40.2 Million and Burn Care Revenue Growth of 63% Adjusted EBITDA Growth of 325% Full-Year 2024 Revenue Guidance Raised to $238-$242 Million Conference Call Today at 8:30am Eastern Time CAMBRIDGE, Mass., May 8, 2024 (GL ...

Financial Data and Key Metrics Changes - Total revenue for the full year increased by 20% to over $197 million, with fourth-quarter revenue reaching $65 million, a 23% increase year-over-year [28][68] - Adjusted EBITDA for the year grew by 40% to $34 million, with a fourth-quarter adjusted EBITDA margin of 34% [9][42] - Net income for the fourth quarter more than doubled to $13 million, compared to $5.9 million in the same quarter of 2022 [23][11] Business Line Data and Key Metrics Changes - MACI revenue for the full year was $164.8 million, growing 25% year-over-year, with fourth-quarter MACI revenue of $56.7 million, a 51% increase over the third quarter [40][10] - Total burn care revenue for the full year was $32.7 million, consisting of $31.6 million from Epicel and $1.1 million from NexoBrid, with fourth-quarter burn care revenue increasing by 31% [22][68] - Epicel's growth was 22% in the fourth quarter, while NexoBrid contributed to the overall burn care revenue for the quarter [22][10] Market Data and Key Metrics Changes - The company expects continued strong revenue growth of over 20% in 2024, driven by MACI and the initial revenue contribution from NexoBrid [20][72] - The anticipated launch of MACI Arthro is expected to expand the surgeon target base from 5,000 to approximately 7,000, enhancing market penetration [15][148] Company Strategy and Development Direction - The company is focused on expanding its commercial footprint and increasing its share of voice in the burn care market, particularly with Epicel and NexoBrid [1][9] - The launch of MACI Arthro is seen as a significant growth opportunity, targeting a larger segment of the cartilage repair market [16][148] - The company aims to build a strong foundation for NexoBrid's commercial success through onboarding burn centers and supporting initial patient treatments [64][115] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to sustain high revenue growth and profitability metrics, with expectations for further margin expansion [11][20] - The management highlighted strong surgeon interest in NexoBrid and positive clinical outcomes as key indicators for future growth [65][66] - The company anticipates continued strong revenue growth in 2025, driven by a full year of MACI Arthro and increased NexoBrid usage [48][72] Other Important Information - The company ended the year with approximately $153 million in cash and investments and no debt, reflecting a strong financial position [9][43] - Operating expenses for the year increased to $142 million, primarily due to increased headcounts and related employee expenses [70] Q&A Session Summary Question: Can you discuss the seasonality and pacing for MACI this year? - Management indicated that the framework for growth remains consistent with previous years, expecting high-teens growth for MACI [50][51] Question: How quickly can traction be gained in the new target surgeon population for MACI Arthro? - Management expressed optimism about pent-up demand from surgeons and the potential for significant market penetration once arthroscopic approval is obtained [99][100] Question: What are the expectations for NexoBrid's early adoption? - Management noted strong initial interest and positive clinical feedback, indicating a gradual normalization of ordering patterns as burn centers become familiar with the product [114][116] Question: How does the company plan to manage pricing dynamics for MACI in 2024? - Management confirmed plans for annual price increases and emphasized that pricing will remain consistent regardless of the method of administration [128][104] Question: What is the outlook for Epicel's growth in 2024? - Management expects low double-digit growth for Epicel, supported by a larger share of voice and strong biopsy trends [112][134]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION for the fiscal year ended December 31, 2023 Washington, D.C. 20549 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Form 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 001-35280 VERICEL CORPORATION (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No ...

Financial Data and Key Metrics Changes - Total revenue for Q3 2023 increased 18% to approximately $45.6 million, exceeding guidance for the quarter [8][23] - Gross profit for the quarter was $30.6 million, representing a gross margin of 67%, which increased compared to both the prior quarter and the prior year [25] - The company ended Q3 with nearly $150 million in cash and investments, and no debt [8][27] Business Line Data and Key Metrics Changes - MACI revenue for Q3 reached a record $37.6 million, reflecting a 21% increase year-over-year and five consecutive quarters of over 20% growth [10][24] - Burn care revenue totaled approximately $8 million in Q3, with Epicel performing solidly and initial stocking revenue for NexoBrid contributing [18][24] Market Data and Key Metrics Changes - The anticipated launch of arthroscopic MACI is expected to significantly expand the addressable market, targeting approximately 20,000 patients annually [13][14] - NexoBrid is now commercially available in the U.S., with launch activities underway and initial patient treatments expected soon [19][21] Company Strategy and Development Direction - The company is focused on expanding its burn care franchise and anticipates NexoBrid to contribute significantly to revenue growth in 2024 [21][32] - The introduction of arthroscopic MACI is expected to drive further growth, with a commercial launch planned for the first half of 2024 [12][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving higher total revenue growth in 2024, driven by continued strength in the core MACI business and the launch of new products [9][33] - The company expects to enhance profitability metrics and gross margins in 2024, supported by sustained revenue growth [10][81] Other Important Information - The company has raised its full-year revenue guidance for 2023 to between $192.5 million and $197.5 million, marking the third increase this year [28][29] - Non-GAAP adjusted EBITDA for Q3 was $5.4 million, reflecting a 64% increase year-over-year [27] Q&A Session Summary Question: Can you elaborate on the commercialization of NexoBrid and revenue expectations for Q4? - Management indicated that they are ahead of their commercial plan for NexoBrid and expect meaningful revenue contributions in Q4, with initial stocking revenue recognized in Q3 [36][39] Question: What are the expectations for supply continuity of NexoBrid amid geopolitical concerns? - Management confirmed that manufacturing operations are ongoing and supply issues are currently under control, with deliveries received in October [54] Question: Will the arthroscopic MACI contribute to revenue growth in 2024? - Management confirmed that the launch of arthroscopic MACI is expected to contribute to revenue growth, particularly in the second half of 2024 [56][70] Question: What is the expected mix between traditional and arthroscopic MACI revenue? - Management indicated that while the exact mix is still to be determined, a significant portion of the addressable market falls into the arthroscopic category [71] Question: How will the company support the rollout of the arthroscopic delivery option? - Management plans to add a small number of support representatives to assist with the rollout, without significantly impacting the margin profile [75]

Financial Performance - Total revenue for Q3 2023 was $45.6 million, an 18% increase compared to $38.6 million in Q3 2022[3, 6] - Year-to-date total revenue increased 19% to $132.5 million[4] - Adjusted EBITDA for Q3 2023 was $5.4 million, a 64% increase compared to $3.3 million in Q3 2022[3, 6] - Net loss per share (diluted) for Q3 2023 was ($0.08) compared to ($0.14) in Q3 2022[6] - The company had approximately $149 million in cash, restricted cash, and investments as of September 30, 2023[6] Product Performance - MACI third-quarter revenue increased 21% to $37.6 million[4, 5] - NexoBrid generated $0.6 million in revenue in Q3 2023[3, 5] - Epicel generated $7.4 million in revenue in Q3 2023[3, 5] Guidance - The company increased its full-year 2023 net revenue guidance to $192.5-$197.5 million[7, 8] - MACI revenue is projected to be $160-$164 million for the full year 2023[8] - Burn Care revenue is projected to be $32.5-$33.5 million for the full year 2023[8]

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The company's financial statements show revenue growth, a narrowing net loss, and increased total assets [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets grew to $318.1 million, driven by investments in a new facility and increased lease liabilities Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total current assets** | $186,211 | $186,866 | | Property and equipment, net | $30,216 | $15,837 | | Right-of-use assets | $73,294 | $41,535 | | **Total assets** | **$318,125** | **$273,003** | | **Total current liabilities** | $35,946 | $37,463 | | Operating lease liabilities | $77,734 | $43,268 | | **Total liabilities** | **$113,745** | **$80,731** | | **Total shareholders' equity** | **$204,380** | **$192,272** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Revenue grew 18.2% in Q3 and 18.7% over nine months, leading to a significant reduction in net loss Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $45,581 | $38,551 | $132,520 | $111,671 | | Gross profit | $30,608 | $25,233 | $87,069 | $71,539 | | Loss from operations | $(5,057) | $(6,788) | $(19,195) | $(23,143) | | **Net loss** | **$(3,660)** | **$(6,577)** | **$(16,175)** | **$(22,631)** | | Net loss per share (basic & diluted) | $(0.08) | $(0.14) | $(0.34) | $(0.48) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations increased significantly to $25.2 million, contributing to a $32.5 million rise in total cash Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $25,225 | $10,712 | | Net cash provided by (used in) investing activities | $4,958 | $(14,477) | | Net cash provided by financing activities | $2,311 | $440 | | **Net increase (decrease) in cash** | **$32,494** | **$(3,325)** | | Cash, cash equivalents, and restricted cash at end of period | $83,561 | $65,216 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key notes detail the U.S. launch of NexoBrid, a new facility lease, and a milestone payment to MediWound - The company commercially launched **NexoBrid in the U.S. on September 20, 2023**, for the removal of eschar in adults with deep partial-thickness and/or full-thickness thermal burns[25](index=25&type=chunk)[46](index=46&type=chunk) Revenue by Product - Nine Months Ended Sep 30 (in thousands) | Product | 2023 | 2022 | | :--- | :--- | :--- | | MACI | $108,114 | $85,617 | | Epicel | $23,808 | $25,387 | | NexoBrid | $598 | $667 | | **Total revenue** | **$132,520** | **$111,671** | - On June 1, 2023, the company gained control of a new 126,000 sq. ft. facility in Burlington, MA, recording a **right-of-use asset and lease liability of $35.5 million**[58](index=58&type=chunk)[62](index=62&type=chunk) - In February 2023, the company paid MediWound a **$7.5 million regulatory milestone** following the FDA's BLA approval of NexoBrid, which was capitalized as an intangible asset[84](index=84&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses revenue growth driven by MACI, the strategic launch of NexoBrid, and increased operating expenses [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Revenue growth was driven by MACI, while higher SG&A and R&D costs increased operating expenses Revenue by Product - Change vs. Prior Year | Product | Q3 2023 vs Q3 2022 | 9 Months 2023 vs 9 Months 2022 | | :--- | :--- | :--- | | MACI | +21.2% | +26.3% | | Epicel | +1.1% | -6.2% | | NexoBrid | +165.8% | -10.3% | | **Total Revenue** | **+18.2%** | **+18.7%** | - The increase in SG&A expenses was primarily due to **higher headcount and employee expenses**, increased travel and in-person events, and lease expense for the new Burlington facility[115](index=115&type=chunk)[116](index=116&type=chunk) - R&D expenses increased for the nine-month period due to increased costs for the **MACI arthroscopic development program** and lower reimbursement of expenses from MediWound compared to 2022[114](index=114&type=chunk) [Product Portfolio and Pipeline](index=23&type=section&id=Product%20Portfolio%20and%20Pipeline) The company is advancing its MACI pipeline and expanding its burn care market with the launch of NexoBrid - The company anticipates the commercial launch of the **MACI arthroscopic delivery program** during the first half of 2024[101](index=101&type=chunk) - The company is actively working on a clinical development plan for using **MACI to treat cartilage injuries in the ankle**, following pre-IND interactions with the FDA[102](index=102&type=chunk) - The FDA approval of NexoBrid expands the burn care franchise's **total addressable market**, allowing treatment of a significantly larger segment of hospitalized burn patients than with Epicel alone[106](index=106&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position with sufficient cash and credit to fund operations and future commitments - The company believes its current cash, investments, and available borrowing capacity will be **sufficient to support operations for at least 12 months** from the report's issuance[128](index=128&type=chunk) - The company has a **$150 million five-year senior secured revolving credit agreement**, with no outstanding borrowings as of September 30, 2023[131](index=131&type=chunk) - Significant commitments include funding the remaining **$28.3 million for Burlington facility improvements** in early 2024 and a new supply agreement with Matricel requiring **€12.5 million in minimum purchases** over eight years[133](index=133&type=chunk)[134](index=134&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk exposures have not materially changed since the previous fiscal year-end - There have been **no material changes** to the company's market risk exposures since the end of the previous fiscal year[139](index=139&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes in internal controls - The company's Certifying Officers concluded that disclosure controls and procedures were **effective as of September 30, 2023**[140](index=140&type=chunk) - **No material changes** were made to the company's internal control over financial reporting during the third quarter of 2023[142](index=142&type=chunk) [PART II — OTHER INFORMATION](index=30&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings - As of the filing date, the company is **not involved in any material legal proceedings**[143](index=143&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) New risks related to financial industry instability and geopolitical events have been identified - A new risk factor highlights that adverse developments affecting financial institutions could **impair the company's access to cash** and impact operations and liquidity[145](index=145&type=chunk)[146](index=146&type=chunk) - A new risk factor was added concerning **economic uncertainty and market disruption** impacted by geopolitical instability, including the wars in Ukraine and between Israel and Hamas, and record inflation[147](index=147&type=chunk)[148](index=148&type=chunk) [Item 5. Other Information](index=31&type=section&id=Item%205.%20Other%20Information) Several executives and directors adopted Rule 10b5-1 trading plans during the third quarter - Key executives and directors, including CEO Dominick Colangelo, COO Michael Halpin, and Chairman Robert Zerbe, entered into **Rule 10b5-1 trading plans** during the quarter[153](index=153&type=chunk)[156](index=156&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the quarterly report, including officer certifications and incentive plans

Vericel Corporation (NASDAQ:VCEL) Q2 2023 Earnings Conference Call August 2, 2023 8:30 AM ET Company Participants Eric Burns - VP, Finance and IR Nick Colangelo - President and CEO Joe Mara - CFO Conference Call Participants Ryan Zimmerman - BTIG Sam Brodovsky - Truist Securities Jeffrey Cohen - Ladenburg Swayampakula Ramakanth - HCW George Sellers - Stephens Incorporated Operator Ladies and gentlemen, thank you for standing by, welcome to Vericel's Second Quarter 2023 Conference Call. At this time, all par ...