Avita Medical Signals Record Growth And Raised Outlook
Avita Medical Ltd ((RCEL)) has held its Q2 earnings call. Read on for the main highlights of the call.
Claim 55% Off TipRanks
- Unlock powerful investing tools with TipRanks Premium to make smarter, more confident investment decisions
- Subscribe to TipRanks Smart Investor Newsletter, and discover new investing opportunities with data-backed stock picks
Avita Medical’s latest earnings call struck an optimistic tone, with management highlighting record quarterly revenue, accelerating growth across its wound‑care portfolio, and strong gross margins. While executives acknowledged ongoing losses, limited cash, and reimbursement transition risks, they emphasized a clearer path to cash‑flow breakeven and raised guidance as signs of growing commercial momentum.
Record Quarter Underscores Accelerating Revenue Growth
Avita reported Q2 FY26 revenue of $21.7 million, up 18% year over year and 13% sequentially, marking the first time the company has crossed the $20 million quarterly threshold. First‑half FY26 revenue reached $41 million, supported by back‑to‑back sequential growth of roughly 10% and 13%, underscoring an improving demand trajectory.
Raised Full‑Year Outlook Signals Confidence in Growth
Management lifted its full‑year FY26 revenue guidance to a range of $86 million to $89 million, up from a prior $80 million to $85 million view. The new outlook implies approximately 20% to 24% growth versus FY25 revenue of $71.6 million, reflecting growing confidence in the durability of recent volume and pricing trends.
RECELL U.S. Drives Core Franchise Expansion
RECELL continued to anchor Avita’s U.S. performance, delivering $8.5 million in Q2 revenue, a 13% sequential increase. Total U.S. RECELL volume rose more than 10% sequentially to over 2,600 units, with the RECELL GO Mini gaining traction in smaller wounds, where 77% of year‑to‑date procedures involved wound areas at or below 500 cm².
International RECELL Sales Gaining Early Traction
Outside the U.S., RECELL international revenue climbed 26% sequentially as commercialization of RECELL GO advanced following regulatory clearances in Europe, the U.K., Australia, and New Zealand. Management noted that early clinical experience and physician feedback are starting to translate into broader adoption, though the overseas business remains a smaller contributor today.
Cohealyx Shows Promising Early Commercial Momentum
Cohealyx, Avita’s dermal substitute product, generated $1.7 million in Q2 revenue, growing 16% sequentially and benefiting from an expanding evaluation pipeline. The company highlighted 55 active VAC reviews, with roughly 10 to 15 typically completed each quarter, and interim Cohealyx‑I data indicating substantially faster readiness for skin grafts compared with leading dermal matrices.
Gross Margins Remain Strong Amid Portfolio Expansion
Avita maintained high profitability at the product level, reporting an 81.9% gross margin in Q2 versus 81.2% a year earlier and above 81% year‑to‑date despite adding new offerings. Management called out particularly strong gross margins around 86% for Cohealyx, underscoring the attractive economics of its newer wound‑care therapies.
Operating Discipline Begins to Deliver Leverage
Operating expenses came in at $24.6 million, essentially flat sequentially and down 6% compared with Q2 FY25, signaling early operating leverage even as Avita invests for growth. However, quarterly operating costs still exceeded revenue, showing the company is spending ahead of full profitability while attempting to control expense growth.
Losses Narrow and Cash Burn Improves
Operating loss narrowed to $6.9 million and net loss to $7.7 million, versus $11.1 million and $9.9 million, respectively, in the year‑ago quarter, reflecting both revenue growth and cost discipline. Net cash usage improved to about $3.2 million for the quarter, and Avita ended Q2 with $11.1 million in cash and marketable securities as it works toward breakeven.
Regulatory and Reimbursement Tailwinds Emerging
Management highlighted progress on reimbursement as a key strategic win, with CMS proposing nationally published physician values for a new Category I CPT code family for skin cell suspension autograft beginning in early 2027. These changes are expected to make physician reimbursement more transparent and predictable while simplifying coding, which could ultimately support broader adoption of RECELL‑based procedures.
PermeaDerm Still in Nascent Stage of Adoption
PermeaDerm contributed $600,000 in Q2 revenue, reflecting an early adoption phase and limited current commercial impact relative to Avita’s broader portfolio. Management stressed that wider uptake will depend heavily on forthcoming PermeaDerm‑I post‑market study results expected later this year, which could help strengthen clinician confidence and drive future usage.
Profitability Remains a Work in Progress
Despite visible improvement, Avita remains unprofitable, with Q2 operating and net losses underscoring the work still required to reach sustained profitability. The company’s path to breakeven hinges on continued top‑line expansion, maintaining high gross margins, and further leveraging its existing cost base over a larger revenue scale.
Liquidity Dependent on Hitting Growth Milestones
The balance sheet remains a focal point for investors, with only $11.1 million in cash and marketable securities reported at quarter end. Avita noted that an additional $10 million tranche under its debt facility will only be available once trailing 12‑month revenue reaches $85 million, tying future liquidity to execution on its growth plan.
International Business Offers Upside but Is Still Modest
While international RECELL sales are rising, management acknowledged that overseas markets are still a relatively small piece of the overall revenue mix. Longer‑term upside depends on sustained commercialization efforts, expanded clinical evidence, and deeper physician engagement in newly authorized regions.
Reimbursement Code Transition Poses Near‑Term Risk
The shift from an eight‑code structure to a streamlined four‑code SCSA CPT family in 2027 could temporarily disrupt provider workflows, creating a potential short‑term “air pocket” in procedure volumes. Final CMS rules are still pending, and management is focused on mitigation to ensure that administrative changes do not derail the broader adoption trajectory.
Guidance and Outlook Emphasize Path to Cash Generation
Management’s outlook centered on rising confidence in Avita’s growth and cash‑flow trajectory, anchored by raised FY26 revenue guidance of $86 million to $89 million, implying 20% to 24% growth over FY25. The company also for the first time outlined a target to reach cash‑flow breakeven and begin generating cash in the fourth quarter of 2026, contingent on sustained product momentum and disciplined expense management.
Avita’s earnings call painted a picture of a company moving from early‑stage commercialization to a more scaled, margin‑rich growth phase, albeit with clear execution and funding challenges still in play. For investors, the key takeaway is that rising revenue, resilient margins, and a defined breakeven target now sit against risks tied to cash levels, reimbursement transitions, and the need to prove out newer products like PermeaDerm.
