Avita's Q3 2025: Contradictions Emerge on Reimbursement and Revenue, Sales Incentives, and Forecasting Accuracy

Date of Call: November 12, 2025

Financials Results

• Revenue: $17.1M in Q3 2025, down 13% YOY (Q3 2024: $19.5M); full-year 2025 revenue guidance revised to $70M-$74M (prior guidance $76M-$81M)
• EPS: Net loss $13.2M, or -$0.46 per share, improved from net loss $16.2M, or -$0.62 per share in Q3 2024 (≈19% improvement YOY)
• Gross Margin: 81.3% in Q3 2025, compared to 83.7% in Q3 2024; ReCell franchise margin 83.6%
• Operating Margin: Operating loss $9.2M in Q3 2025, improved 34% YOY (operating margin percentage not specified)

Guidance:

• Full-year 2025 revenue revised to $70M–$74M (prior $76M–$81M)
• Expect utilization to normalize progressively as MAC reimbursement clarity restores clinician confidence
• 2026 revenue and detailed guidance to be provided in early Q1 2026
• Conserving cash and sustaining cost discipline while supporting operations; targeting pathway to cash-flow break-even as revenue grows
• Monitoring capital funding options and covenant discussions with Orbimed

Business Commentary:

* Revenue and Reimbursement Disruption: - AVITA Medical reported approximately $17 million in revenue for Q3 2025, below expectations, reflecting the ongoing impact of reimbursement disruption. - This was primarily due to the delayed assignment of national clinical payment rates for new Category 1 CPT codes for ReCell, which created uncertainty and temporarily slowed provider use.

* Reimbursement Clarity and Demand Recovery: - All seven Regional Medicare Administrative Contractors (MACs) have published or confirmed provider reimbursement rates for ReCell, providing clarity for clinicians. - This clarity is expected to lead to renewed demand and utilization normalization in coming quarters, as providers regain confidence in payment for ReCell procedures.* Commercial Organization Adjustments: - AVITA Medical is refining its commercial organization, aligning structure, territories, and accountability around its highest value accounts. - The adjustments are aimed at improving customer behavior visibility, sales and clinical team coordination, and ultimately enhancing product adoption in acute wound care settings.

• Focused Market Opportunity and Growth Strategy:
• The company is focusing on a segment representing $1.3 billion in targeted opportunity within the broader $3.5 billion U.S. market for acute wound care.

• The focus on core institutions, such as burn centers and trauma hospitals, allows AVITA to prioritize high-potential accounts and scalably drive adoption and utilization of its products.

• Operational Efficiency and Cash Management:

• AVITA Medical's operating expenses have been reduced by approximately $7.2 million (or 24%) year-over-year, driven by lower sales and marketing, general and administrative, and research and development expenses.
• The company has successfully managed its cash position, achieving a balance of $23.3 million by the end of Q3, with a focus on sustaining disciplined cash use to support growth.
  

  Sentiment Analysis:

  Overall Tone: Neutral

  • Management emphasized the quarter was "challenging" with revenue below expectations ($17.1M) due to reimbursement timing, while noting "all seven MACs have now published" rates and "we're already seeing early signs of renewed demand." CFO highlighted cost reductions (operating expenses down 24% YOY) and improved cash balance ($23.3M) but deferred 2026 guidance to early Q1.

Q&A:

• Question from Ross Osborne (Cantor Fitzgerald): Could you spend more time on the initiatives you’re taking to better forecast the business as we approach 2026?
  Response: Management is improving forecasting at the rep- and customer-level with new sales support models, tightened processes, and restructured leadership to smooth monthly/quarterly cadence.

• Question from Ross Osborne (Cantor Fitzgerald): How are you balancing resources between launching in Europe and getting the U.S. business back to steady?
  Response: The U.S. is the primary focus; Europe will be entered selectively via limited distributor resources while prioritizing U.S. commercialization.

• Question from Josh Jennings (TD Cowen): How should we think about the recovery timeline now that MACs issued finalized pricing — will customers be back to baseline in early 2026?
  Response: Recovery will be gradual; management expects confidence to return as MACs adjudicate claims (including retroactive claims back to January) and through active education, not an immediate 'light switch.'

• Question from Josh Jennings (TD Cowen): Any update on VAC approvals for Cohelex and how many accounts may be ready at start of 2026?
  Response: About one-third of target accounts are in VAC review and roughly two-thirds of those are scheduled to exit VAC in Q4, though timing may slip; field teams are preparing to shorten time from approval to use.

• Question from Josh Jennings (TD Cowen): Are there accounts with all three products approved and any early signals of portfolio synergies?
  Response: Some accounts are approved and using all three products, but it's early and management cannot yet quantify cross-product momentum.

• Question from Ryan Zimmerman (BTIG): How are you thinking about the spending outlook and whether additional cost reductions are needed given the balance sheet?
  Response: Management believes the company is appropriately sized after prior reductions, sees continued lower cash burn, and will not pursue further cuts but will rely on revenue recovery for profitability.

• Question from Chris Carlos (MST Access): Will you change sales incentives or move toward a portfolio sales approach versus medical detailing?
  Response: Compensation plans are being reworked for 2026 to align simply and fairly with growth objectives; details will be set as Carrie and leadership finalize plans.

• Question from Chris Carlos (MST Access): Does current guidance factor in catch-up backlog from outstanding reimbursement payments?
  Response: Guidance reflects lower YTD revenue from reimbursement headwinds; management expects retroactive adjudication of claims will support confidence but does not assume an immediate catch-up; full 2026 guidance will clarify magnitude.

Contradiction Point 1

Reimbursement Issues and Impact on Revenue

It involves differing perspectives on the impact of reimbursement issues on revenue, which could influence investor expectations and financial planning.

Is the current guidance factoring in catch-up from reimbursement payment backlogs? - Chris Carlos (MST Access)

2025Q3: The guidance doesn't assume a switch in demand yet. It's based on lower Q3 revenue and reimbursement issues since January. - David O’Toole(CFO)

What is the status of the claims backlog resolution and the timeline for MACs to onboard? What was the denial rate for claims in H1? - Joshua Thomas Jennings (TD Cowen)

2025Q2: In the event we are unable to collect from our largest accounts, this is a major risk. We're very focused on getting reimbursement resolved, and we expect to see a catch-up in volume as soon as that happens. - James M. Corbett(CEO)

Contradiction Point 2

Sales Team Incentive Structure and Strategic Focus

This contradiction highlights differing approaches to the sales team incentive structure and strategic focus, which could impact sales performance and company growth.

Will you revise the sales team's incentive structure or adopt a portfolio sales approach? - Chris Carlos (MST Access)

2025Q3: We'll align the incentive structure with our growth objectives. The plan for 2026 will be simple, fair, and focused on driving growth. - David O’Toole(CFO)

What other cost-cutting measures are being considered to reduce cash burn? - Unidentified Analyst (BTIG)

2025Q2: We are exposing them to the growing probability of our products. We are trying to de-risk our sales force a bit by sharing the risk and reward. - James M. Corbett(CEO)

Contradiction Point 3

Reimbursement and Confidence in ReCell

It involves differing perspectives on the timeline and actions taken to address reimbursement issues affecting physician confidence, which impacts the company's financial outlook.

How quickly can ReCell customers regain confidence in reimbursement as normalization progresses? - Josh Jennings (TD Cowen)

2025Q3: Carrie Vance: We are educating accounts on the new CPT codes and reimbursement availability. Claims going back to January will be processed, which will boost physician confidence. David O'Toole: MACs will adjudicate claims going back to January, enhancing physician confidence. - Carrie Vance(CEO), David O'Toole(CFO)

Can you explain reimbursement challenges and your collaboration with CMS to resolve them? - Eric (Cowen)

2025Q1: We are working very closely with the CMS to reach a resolution on this issue and have multiple lines of communication open with CMS to ensure that we are in a position to provide timely and accurate information to our customers and to ensure that we have the most up-to-date regulatory environment possible on this issue. - Jim Corbett(CEO)

Contradiction Point 4

Sales Growth and Forecasting Accuracy

It highlights differing stances on the company's ability to improve sales forecasting and achieve growth, which is crucial for investor confidence and strategic planning.

What steps is AVITA taking to improve business forecasting as we approach 2026? - Ross Osborne (Cantor Fitzgerald)

2025Q3: We're focusing on understanding customer behavior at the rep level, which will help us forecast how customers utilize and purchase our products. Our sales support structure and leadership are improving, leading to better month-to-month and quarter-to-quarter consistency. - David O’Toole(CFO)

What are the potential revenue contributions from Cohealyx and the target attachment rates for the RECELL platform? - Eric (Cowen)

2025Q1: We fully expect Cohelix to be a material contributor to our non-RECELL sales in Q3 and to almost certainly break that out by the end of the quarter. - Jim Corbett(CEO)

Contradiction Point 5

Reimbursement Normalization and Customer Confidence

It involves expectations regarding reimbursement normalization and its impact on customer confidence, which are crucial for sales and revenue projections.

As reimbursement normalization begins, how quickly can ReCell customers regain confidence in reimbursement? - Josh Jennings (TD Cowen)

2025Q3: Carrie Vance: We are educating accounts on the new CPT codes and reimbursement availability. Claims going back to January will be processed, which will boost physician confidence. David O'Toole: MACs will adjudicate claims going back to January, enhancing physician confidence. - Carrie Vance(Interim CEO), David O'Toole(CFO)

Is there a risk ReCell could become out-of-network under current reimbursement rates? Are you considering out-of-pocket payment options for ReCell? Can you quantify the number of out-of-network facilities today? - Stacy Rasgon (Bernstein Research)

2024Q4: We expect to get VAC approvals for Cohealyx and be fully approved for use across the entire trauma market in the United States by year-end. This should normalize the reimbursement environment and enable greater confidence on the part of the hospitals and healthcare systems in purchasing our products. - James Corbett(CEO)