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AVITA Medical, Inc. (RCEL)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 missed Street expectations on both revenue and EPS as Medicare Administrative Contractor (MAC) payment delays materially dampened RECELL utilization; commercial revenue was $18.4M (+21% YoY) vs ~$22.47M consensus and EPS was -$0.38 vs -$0.23 consensus, with gross margin contracting to 81.2% on mix and inventory reserve impacts . Values retrieved from S&P Global.*
  • Full‑year 2025 guidance was cut to $76–$81M (from $100–$106M) and profitability timing pushed to 2026 (cash flow breakeven Q2’26; GAAP profitability Q3’26) as management expects demand to recover once MAC adjudications progress in H2’25 .
  • Liquidity/covenant risk mitigated near term: AVITA amended its OrbiMed credit agreement—lowering TTM revenue covenants and issuing 400k shares in lieu of a cash fee—while reiterating OpEx discipline and $2.5M quarterly savings .
  • Clinical and reimbursement positives remain catalysts: CMS granted NTAP for RECELL in inpatient trauma, the first clinical publication for Cohealyx showed autograft readiness in 5–10 days, and RECELL/RECELL GO earned MedTech recognition—favorable for adoption narratives once MAC issues abate .

What Went Well and What Went Wrong

What Went Well

  • CMS support and clinical momentum: “CMS approves New Technology Add-on Payment (NTAP) for the RECELL System when performed on trauma wounds in the hospital inpatient setting,” while real‑world data showed 36% shorter hospital stays for RECELL-treated burns . CEO: “We’re accelerating time to heal, time to recover, and time to deliver value” .
  • Cost discipline and field model reset: OpEx fell to $26.1M (from $28.7M YoY), with management targeting ~$2.5M per quarter lower expenses going forward after commercial reorganization .
  • Portfolio depth and recognition: Cohealyx clinical publication showed autograft readiness in as little as 5–10 days, and RECELL/RECELL GO won “Best New Technology Solution – Surgical” at the 2025 MedTech Breakthrough Awards, supporting adoption narratives .

What Went Wrong

  • MAC reimbursement delays: Contractor pricing transition created a significant claims backlog (Jan–Jun), depressing RECELL demand; AVITA estimates ~20% demand decline and ~$10M revenue impact in H1’25, with ~$5M decline at top 10 accounts vs H2’24 .
  • Margin pressure: Gross margin fell to 81.2% (vs 86.1% YoY) on product mix (revenue share on PermeaDerm ~60% and Cohealyx ~50%), higher inventory reserve, and adjustments; RECELL-only margin remained ~84.3% .
  • Guidance reset and timeline slip: FY25 revenue cut to $76–$81M (from $100–$106M); cash flow breakeven shifted to Q2’26 (from H2’25) and GAAP profitability to Q3’26 (from Q4’25) .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$18.4 $18.5 $18.418
Gross Margin %87.6% 84.7% 81.2%
Operating Expenses ($USD Millions)$26.1 $27.5 $26.1
Net Loss ($USD Millions)$(11.6) $(13.859) $(9.920)
Diluted EPS ($)$(0.44) $(0.53) $(0.38)
Cash & Marketable Securities ($USD Millions)$35.9 $25.8 $15.7

Revenue vs. S&P Global consensus (Q2 2025)

MetricConsensusActualSurprise
Revenue ($USD Millions)$22.47*$18.42 -$4.05M (−18%); MISS
EPS ($)-$0.23*-$0.38 -$0.15; MISS

Values retrieved from S&P Global.*

Additional KPIs and mix commentary (Q2 2025)

  • RECELL-only gross margin ~84.3% (overall GM% pressured by mix and reserves) .
  • OpEx expected to run ~$2.5M lower per quarter going forward post field transformation .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025$100–$106M $76–$81M Lowered
Cash Flow BreakevenCompany-levelH2 2025 Q2 2026 Delayed
GAAP ProfitabilityCompany-levelQ4 2025 Q3 2026 Delayed
OpEx Run-RateQuarterly—Reduce ~$2.5M per quarter going forward New disclosure

Covenant thresholds (context, not guidance): TTM revenue covenant amended to $73M (Q3’25), $77M (Q4’25), $90M (Q1’26), $103M (Q2’26), then $115M thereafter; AVITA issued 400k shares to OrbiMed in lieu of cash fee .

Earnings Call Themes & Trends

TopicQ4 2024 (prior-2)Q1 2025 (prior-1)Q2 2025 (current)Trend
Reimbursement (MAC/NTAP)Preparing for trauma expansion; guidance framed without MAC headwinds CMS proposed NTAP; confident in H2 free cash flow and Q4 GAAP profitability MAC contractor pricing backlog hurt H1’25 demand; NTAP approved for inpatient trauma; resolution underway in H2’25 Deteriorated then improving as MACs adjudicate
Product portfolio (RECELL GO/mini, PermeaDerm, Cohealyx)RECELL GO conversions; Cohealyx & GO mini approvals; TAM to $3.5B Launch of GO mini (Feb) & Cohealyx (Apr); PermeaDerm manufacturing/royalty share improved Clinical validation for Cohealyx; continued emphasis on portfolio cross-sell Strengthening
Commercial model & OpExBaseline OpEx ~$26.1M; no 2025 headcount growth planned Field transformation to selling model; $2.5M/qtr OpEx reduction targeted OpEx down YoY; reiterates ~$2.5M/qtr savings Improving efficiency
Margins/mixGM 87.6% (Q4); RECELL margins resilient GM 84.7%; mix to PermeaDerm/Cohealyx to lower % but raise gross profit dollars GM 81.2% on mix, reserves; RECELL-only ~84.3% Near-term pressure
Debt/covenants4th amendment lowered early 2025 covenants Q1 covenant waiver; tariffs immaterial 5th amendment further lowers 2025–26 covenants; equity fee to OrbiMed Covenants eased
International expansionCE mark anticipated mid-2025 CE mark expectation maintained —Awaiting outcome

Management Commentary

  • CEO (Q2 PR): “Although the first half of 2025 tested our resilience and slowed our pace, a resolution is now underway and our strategic direction hasn’t changed… We’re accelerating time to heal, time to recover, and time to deliver value” .
  • CFO (Q2 PR): “Our gross margin percentage will decline, and gross profit will increase as revenue from PermeaDerm and Cohealyx grows… we now anticipate reaching cash flow break-even and GAAP profitability in 2026 as reimbursement pathways stabilize and adoption progresses” .

Q&A Highlights

Note: A Q2 2025 earnings call transcript was not available in our document set; highlights are from the most recent calls (Q1 2025, Q4 2024).

  • Cohealyx rollout and evidence: Early cases mirrored preclinical 7‑day graft readiness; post‑market study Cohealyx‑1 designed for rapid, publishable signals to speed VAC approvals .
  • RECELL GO mini adoption: Addresses smaller trauma wounds (<480 cm²); easy integration given same processing device; early demand from trauma centers .
  • Revenue cadence: Management expected sequential growth through 2025 with back‑half weighting as Cohealyx gains VAC approvals and broader adoption .
  • Margins: Overall GM% to drift lower given revenue‑share economics for PermeaDerm/Cohealyx, while RECELL-only margins remain mid‑80s; profit dollars still accretive .
  • Covenants/liquidity: Q1 covenant waiver and lower thresholds disclosed; no material tariff impact expected .

Estimates Context

  • Q2 2025 vs consensus: Revenue $18.42M vs $22.47M; EPS -$0.38 vs -$0.23—both MISS. Drivers: MAC contractor pricing delays suppressed utilization; mix and reserves pressured GM% . Values retrieved from S&P Global.*
  • Street outlook (as currently modeled):
    • Q4 2025: Revenue ~$17.36M*, EPS -$0.34*
    • Q1 2026: Revenue ~$19.41M*, EPS -$0.29*
      Management guides H2’25 recovery as MACs adjudicate backlogs, with profitability delayed to 2026 .

Key Takeaways for Investors

  • Near-term headwinds are reimbursement-driven and transitory; multiple MACs began adjudicating in July with broader resolution expected—key catalyst for H2’25 demand recovery .
  • Guidance reset de-risks 2025; amended covenants and equity fee to OrbiMed reduce default risk and preserve liquidity during reimbursement transition .
  • Portfolio breadth (RECELL GO/mini, Cohealyx, PermeaDerm) and NTAP status in trauma underpin medium‑term adoption once payment flows normalize; early Cohealyx clinical data bolsters the story .
  • Expect continued GM% pressure from mix but higher gross profit dollars as non‑RECELL products scale; OpEx reductions (~$2.5M/qtr) should support operating leverage on revenue recovery .
  • Watch list: pace of MAC adjudications, VAC decisions for Cohealyx, CE mark timing, quarterly covenant headroom, and cash trajectory as H2 unfolds .

Footnote: Values retrieved from S&P Global.*