Avita Medical, Inc. Common Stock Investor update

Thank you, Rudi. Good morning, everyone. Welcome to this second quarter briefing. It's good to be with you again. I think it's important to note that the last few quarters that I've been in Australia, we've laid out the plan for the company. We've executed to that plan, and that continues today, so I look forward to the conversation. Next slide, please. Next, please. If you look there in Q4 of 2025, I took over in mid-October. We talked about assessing the business, understanding it, stabilizing it, having an understanding of our customers, why they buy, why they might not buy, the challenges that we have, any internal lack of efficiency and effectiveness structurally, organizationally, and so on. We did a number of things in Q4 to prepare us to achieve and be successful in 2026.

As a result, Q1 had growth quarter-over-quarter at $19.3 million, and then this past quarter, second quarter, $21.7 million. We expect that to continue. We expect sequential growth quarter-over-quarter. As you can see on the right side of this slide, we're growing across product lines. We are growing both in the U.S. and internationally. A lot of good things happening that frankly, we expected to happen, and we expect to continue. As a result of not only what we've achieved in the first half of the year, but in the manner in which we achieved it, felt very comfortable raising guidance to $86 million-$89 million, and also expecting to achieve cash flow breakeven by the end of this year, and excited about that. Next slide. David. Good morning here in Australia.

I'm going to go through a couple of these slides, and then I'll give it back to Cary to talk about some other interesting things that are going on in the business. As Cary indicated, we had $21.7 million in Q2 of 2026. That is a 13% increase over Q1, and it's the second sequential growth of revenue that we've had. Q4 of last year to Q1 of this year was, as you may remember, 9.7%. We followed it up with a 13% growth rate from Q1 to Q2. Year-over-year, last quarter, we grew by 18%, the $18.4 million in Q2 of 2025, which is again, a very healthy growth from where we were just a year ago. Gross margins are staying right where we like them to be.

We'd like them to be maybe even a little bit higher, and we're doing everything we can to increase those margins, even in light of the fact that we're growing our other products, which we share ASP with. Just to remind everyone, the ASP for Cohealyx is shared 50/50 between our partners, Regenity, and then PermeaDerm, we share the ASP 60/40. So it does have an effect of decreasing our overall reported gross margin because the gross margin for RECELL is 86%. We're looking for ways to increase our margins, but we don't see it being anywhere lower than this 82%-83% gross margin rate. Very proud of the fact that we're keeping operating expenses in line. As you may remember, in Q2 of 2025, we did a restructuring of our sales team. We also took some G&A costs out.

Right now, the run rate for operating expenses is around $24.5 million. We see that continuing. Another great metric is that our overall net loss is decreasing each quarter, and significantly from 2025. We are down to a $7.7 million loss, and that's almost a $3 million increase from where it was in Q1 of 2026. Cash use, as I indicated last quarter, would go down this quarter, and that's what happened. We used about $9.9 million of cash in Q1, and we are down to $3.2 million in Q2 of 2026. That is going to continue to decrease until we cross over and start generating cash in the fourth quarter. Just real quickly, cash balance was $11.1 million at the end of Q2. Next slide. Kerry talked a little bit about the fact that we have increased our revenue guidance for the year.

We've moved it up from $80 million-$85 million. Now it's at $86 million-$89 million. We do expect to have sequential growth in the third quarter, and then again, we expect sequential growth in the fourth quarter. We have a high degree of confidence that we can get to that 86%-89% range. I've talked a little bit about all of these already, the gross margin and the operating expense. I think we'll just go to the next slide. To recap, we've increased our revenue guidance from $80 million-$85 million to $86.89 million now. We expect to get to cash flow breakeven in Q4 of this year. We have enough cash on the balance sheet to get through to that very large milestone of getting to cash flow breakeven in the Q4. We're well within the new debt covenants that we did with Perceptive Advisors.

Just as a reminder, we did the Perceptive Advisors debt agreement. It took out OrbiMed's debt facility, and the reason we did that was to reset the revenue covenants in that debt facility. As an example, the revenue covenant for this year is $73 million. You can see that we're well above that with the revenue guidance that we have at $86 million-$89 million. We do have another $10 million that we can take from the Perceptive Advisors debt facility when we reach $85 million of trailing 12-month revenue. With the new revenue guidance, you can see that that's going to happen. It doesn't mean we're going to take it, but it does give us the flexibility. If we so choose, we will reach that $85 million before that option expires in March of 2027. I'll turn it back to Cary now.

Thanks. Next slide. Before I get here, I think what David's talking about there is the kind of stability that we are looking for as leaders of the company, but that investors are looking for, too. I think permeated through all of that is a lack of distraction. If you look at taking care of our cash, keeping OPEX steady, keeping margins steady, stabilization of our people and retention, all of those things, solving the reimbursement issues from last year, I think we'll look back on 2025 as a one-off of several headwinds, as we indicated last year at the end, and also a number of ways that we stabilized the business, keep very focused, and we're all focused on growth. The only thing that's moving is the growth of our revenue and the adoption of our products.

I put this photo of this patient on here, I think to remind us all that reimbursement and all of those key drivers of our business and our guidance are patients that are benefiting from our technology, and we're extremely humble and driven by that mission. I hope that anybody that invests in this company, aside from the kind of return you would expect from us, that you feel good about contributing to this kind of good work in the world, including in Australia, which we're making some headwinds commercially there as well. From a volume perspective, I think it's important for us to note that it's not just revenue that's growing in RECELL, but volume itself, volume of kits. It's also important that as we invested in RECELL GO, that was part of the strategy to expand utilization to other types of wounds, to smaller wounds.

The way that you address expansion into those smaller wounds, number 1, is education on economics, on clinical benefit, but also providing a technology that fits better to that type of wound treatment. RECELL GO mini does that at a lower price point, smaller kits for those smaller wounds, and that's how it's being used. It's being used as we thought it would. I think it's important for us to maintain our humility and continue to look for ways to improve the business. But I also think it's gratifying to know that when you set a strategy, when you develop a product, and you set out to do something with it, that it acts the way that you thought it would because it gives you confidence that as you do things like that going forward, that you know how to do it well.

That's a good example of launching an ancillary product to our flagship in RECELL GO mini and having it perform the way you intended. Obviously, last year and even beginning of this year, we talked all about reimbursement. If I were all of you, the way I would look at it is this. 2 years ago, we got a CPT 1 code, and we thought this was going to be national across the country, and it was just going to be put in place by CMS. CMS found it too complicated and wanted us and physicians to go back and simplify things. While they were doing that, they delegated the publishing of the rates and the adjudication of claims to those Medicare administrative contractors, the 7 MACs that we've been talking about forever.

The company struggled with those MACs to try and get them to publish, which they did very slowly over the course of a year. That cost us some growth last year as a result of uncertainty in the market with physicians not feeling like they weren't sure if they were going to get paid, and if so, what they'd be paid. We finally got all of that figured out in Q1 of this year, and so we see that type of stabilization with the MACs. People are getting paid. Things are good. The even better news is that CMS just proposed, and will be finalized end of October, November, that starting January 1st, they will be handling the claims nationwide, that the set of codes are simplified. As it says here on the slide, they've bundled the steps in the process, harvesting, preparation, application into one.

Everything is very clear, transparent, predictable, because obviously money and the reimbursement drives it, but the confusion, the lack of clarity is the thing that probably disrupted it even more than the economics of it. We're really excited. The physicians were involved in that process. The American Burn Association has told physicians, they've been talking about this whole concept. Over the course of the next 4 months, we'll reiterate with those hospitals that this is going into effect January 1st. They're expecting it, they're excited about it. I think patients will benefit from it, as will AVITA in the process. Little things, though, too, I think it's pretty much the same rates, just very consistent, helps us with the outpatient market.