Q2 2022 Procept Biorobotics Corp Earnings Call
Good afternoon, and welcome to profit by Robotics second quarter earnings Conference call. At this time, all participants are in listen only mode.
We'll be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes.
I'd now like to turn the call over to Matt <unk> from the Gilmartin group for a few introductory comments.
Thanks, operator, good afternoon, and thank you for participating in today's call joining me from prostate by robotics. Our read is that now as CEO and Kevin waters CFO earlier today <unk> released financial results for the quarter ended June 32022.
Copy of the press release is available on the company's website before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities laws.
Made pursuant to the Safe Harbor provisions of the private Securities Litigation Reform Act of 995 any statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements. All forward looking statements, including without limitation those related to our sales and operating trends and future financial performance expense management XP.
Patients for hiring a growth market opportunity revenue guidance commercial expansion and future product development and approvals are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those implied by these forward looking statements. Accordingly, you should not place undue reliance on these statements.
For a list and description of the risks and uncertainties associated with our business. Please refer to the risk factors section of our most recent annual report on Form 10-K filed with the Securities and Exchange Commission on March 22.
2022, and available on Edgar and in our other public reports filed periodically with the SEC.
This conference call contains time sensitive information and is accurate only as of the live broadcast on August 4th 2020 to close up our robotics disclaims any intention or obligation except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise and with that I'll now turn the call over to <unk>.
Retro.
Thanks, Matt Good afternoon, and thank you for joining us for today's call I will provide opening comments and a business update followed by Kevin who will provide additional detail regarding our financial performance and updated 2022 financial guidance before opening the call to Q&A.
Starting with our quarterly revenue results.
Total revenue for the second quarter of 2022 was $16 $7 million.
Representing growth of 97% compared to the second quarter of 2021 and.
An 18% sequential growth compared to the first quarter of 2022.
U S revenue for the quarter was $14 8 million.
Presenting growth up 126% compared to the prior year period.
In the second quarter, we sold 23, <unk> robotic systems generating total U S revenue up eight 5 million.
Presenting growth up 79% compared to the second quarter of 2021.
Ah Corbijn robotics system continues to be primarily driven by sales.
High volume BPH hospitals.
Use handpiece and consumable revenue was $5 $7 million.
Representing growth of approximately 246% compared to the second quarter of 2021.
And this growth was driven by an increase in the installed base of <unk> robotic system, which has grown 56% from the second quarter of 2021.
Additionally, we have seen an increase in utilization from our installed base as measured by <unk> sold per account.
Utilization per account increased approximately 19% compared to the second quarter of 2021.
We believe the combination of releasing positive long term clinical data increased private payer coverage and outstanding real World patient outcome continues to drive surgeon interest and hospital adoption, our aqua been robotic system.
Before providing a business update let me briefly address the current macro environment, specifically supply chain and the hospital capital equipment spending.
First I want to highlight we have not experienced material product cost change in our ability to meet.
Customer demand nor has inflation.
A concerning issue to date.
While we continue to take the challenges associated with this global supply chain seriously.
Been able to navigate this disruption period, well, having successfully increased inventory levels for key components.
As we progress through the year, we are focused on ensuring we can supply our customers with what they need in a way that is high quality and timely.
As it pertains to the hospital capital spending we believe we are uniquely positioned for continued momentum around our Aqua <unk> robotic system sale in the back half of the year due to multitude of positive factors are on our technology and our early stage of market penetration.
First BPH is the number one reason meant visiting urology with many men seeking durable surgical treatment option at high volume hospitals.
Additionally, many of these men foregone treatment due to the inferior safety profile sharron.
<unk> surgical alternatives.
With a growing and increasing educate the patient population hospital systems are motivated to invest in cutting edge technologies to ensure they stay competitive and not lose patients to other area hospitals, we believe our aqua robotic system allows possibly positive operative cut.
<unk> edge technology in the BPH surgical space.
Next we exited the second quarter of 2022 with an installed base of 114 U S systems with.
With approximately 2700 total hospital performing surgeries of which 860 are high value targets. We are still very early in our adoption curve with a long runway in front of us.
It is also an important reminder, that the high volume BPH hospitals, we target are well funded with ample liquidity, which we believe mitigates some of the risks associated with an uncertain macro environment.
Additionally, since the approval of our purchase of <unk> robotic system is typically managed at the local hospital level and can routinely be authorized by the hospital's CEO and CFO is gene lines. The more complex approval process that may be required for other higher priced capital.
Equipment.
Lastly, given at Walgreens unique ability to treat all shapes and sizes Prostates hospitals are now more than ever standardizing their BPH surgical protocol.
Utilization along with our increased insurance coverage makes aqua relation logical choice.
In summary, we continue to monitor all aspects of the macro environment and its impact on our business.
We would not be increasing our revenue guidance, which Kevin will provide details on shortly if we felt pressure associated with the capital equipment environment.
Now turning to quarterly business update starting with our commercial organization.
We have successfully hired a highly efficient commercial team of experienced medical device sales professionals, we implemented an effective training and Onboarding program to put us in position to execute our 2022 commercial growth plan.
While we are approximately double our field based commercial team at the end of 2021, the number of Red has been relatively unchanged for six months.
Given the commercial momentum excellent real world clinical outcomes and increased demand our technology has been able to generate we plan to meaningfully expand our field based commercial team in the third and fourth quarter of 2020 due to further penetrate the market and expand our sales.
Residents in the U S.
This increase is captured in our updated operating expense guidance.
With a tight labor market, we continue to see strong interest from high quality candidates, which gives us additional confidence in meeting our hiring and growth objectives heading into 2023.
Next I would like to comment on utilization and procedure trends.
Which we have seen in the last 12 months.
Continue to believe the majority of our correlation procedure volumes are converted.
<unk>, which is the most commonly performed surgical procedure for BPH.
Also believe we are taking resected procedures from other modalities.
Like simple prostatectomy and laser procedures of the prostate.
On hospital utilization, we are seeing meaningful annual increases in utilization from our customers.
We believe based on our clinical data the increase in utilization is attributable to the following factors.
Given the predictability reproducibility and low learning curve associated with the <unk> robotic system, we have generally seen an increasing number of surgeons using our system each quarter at our accounts.
As a result, we believe an increasing number of accounts are beginning to standardize their respective procedure protocol in favor of actual ablation therapy.
Additionally, since our clinical data support outcomes that are independent of the prostate size and shape surgeons are using ablation therapy in a broader range of prostate sizes.
Specifically when analyzing patient data from January 2021 to June 2022, we found the most prevalent sites range treated between 60 to 80 millimeters given the size range of Prostates treated over the last 18 months, we believe surgeons are beginning to see.
Undeniably there procedures to alcohol ablation, given the limitation of surgical alternatives.
Turning to clinical updates in.
In May we announced four year water two study data at the American Urological Association Conference in New Orleans.
As a reminder, what are too was a prospective FDA study with an objective performance criteria for the <unk>.
<unk> efficacy and safety in large prostates ranging in size from 80 to 150 millimeters.
48 data were consistent with the previously reported primary endpoints.
With no change to safety results.
Vacancy results as measured by change in IP assets and <unk> also consistent at four years.
Lastly, durability remains strong with only 3% of patients requiring surgical re treatment at any time up to year four.
More recently in early July we attended the European Association of Urology Conference in Amsterdam. This.
Was the first in person European event since the pandemic and was well attended with more than 7000 registrants.
A key talking points amongst surgeons and key opinion leader was our five year water data published in February 2022.
As a reminder, our five year water data are the only prospective randomized double blind multicenter FDA pivotal study comparing the safety and efficacy of our population therapy.
This study proves accurate ablation superior safety due to low irreversible complications and superior symptom relief for cross base, ranging from 50 to 80 millimeters.
A correlation at five years exhibited durability that was two times lower risk for re treatment due to recurrent BPH symptoms when compared to term.
This is measured by patients going back to Matt or declining surgical treatment, which is represented by an approximate 1% annual growth treatment rate.
In Europe , specifically surgeons are enthusiastic about strong clinical data, which is driving them to learn more about <unk> ablation therapy.
Given this backdrop, we believe five year water and full year water two data will be a significant differentiator for our customers when choosing to replace their historical BPH surgical modalities with that population.
Lastly, touching on recent payer coverage policy updates.
In the second quarter, we received numerous insurance coverage updates, adding to the already strong list of payer for Aqua ablation therapy.
In April Aetna published updated policy, noting <unk> ablation therapy as a covered surgical alternative for BPH, providing coverage for today of roughly 21 million commercial members in the U S.
Additionally, in the second quarter numerous Bluecross Blueshield Association healthcare trends also issued positive coverage as well as medical mutual.
In aggregate these policy along with existing coverage policies provide coverage for approximately 180 million members.
As it relates to the impact of coverage on our business. There is both a long term benefit and a short term benefit the.
The obvious long term benefit is increased utilization, which will take time as we penetrate the surgical market.
The more important short term benefit is the increased value proposition of our technology and the lowering of barriers to sell capital equipment to targeted high volume BPH hospitals.
Additionally, in mid July CMS published its 2023 proposed rule for hospital outpatient prospective payment system.
The level of 6% APC code for Aqua ablation as the proposed payment that would provide the hospital approximately $8700 for each Aqua ablation procedure, which is an approximate three 5% increase over the 2022 rates and in line with our expectations.
The final rule is estimated to be published in November .
In summary, we are pleased with our performance year to date and continued to execute our strategic growth plan are penetrating high volume hospitals, increasing utilization by treating the full range of prostate sizes and shapes and expanding private payer coverage.
This positive momentum and the announcement of our long term clinical data highlighting durability, we believe aqua ablation therapy will truly revolutionize the treatment of BPH with that I will turn the call over to Kevin.
Thanks Ross.
As Roger highlighted our revenue for the second quarter of 2022 was $16 $7 million.
Representing growth of 97% compared to the second quarter of 2021 the.
The increase was primarily driven by U S revenues, including both system sales to new hospital customers and increased Handpiece revenue.
In the second quarter, we generated total U S system revenue of $8 5 million representing growth of 79% compared to the second quarter of 2021.
In the U S. We sold 23 Aqua beam robotic system with an average selling price of approximately $370000 average selling price increased approximately 6% sequentially and 10% compared to the prior year second quarter.
Our ending second quarter U S installed base was 114 Aqua beam robotic system.
Second quarter 2022 U S. Handpiece in consumable revenue was $5 $7 million.
Representing growth of approximately 246% compared to the second quarter of 2021.
And <unk> average selling prices in the quarter were approximately $3000.
We shipped approximately 1740 hand pieces in the U S. In the second quarter, representing annual unit growth of 176%.
International revenue for the second quarter was $1 9 million.
Which was roughly flat compared to the prior year period and increased 15% sequentially.
International revenues in the second quarter of 2021 benefited from a meaningful number of rescheduled procedures and the deferral of capital sales from a severely impacted first quarter of 2021 due to COVID-19 or.
Our strategy in Europe continues to be to increase brand awareness and market development activities.
On a year to date basis International revenue has increased approximately 23% from prior year and is in line with our expectations.
Gross margin for the second quarter of 2022 with approximately 51% an increase from 42% in the second quarter of 2021 the.
The increase in gross margin was driven by a variety of factors, including higher U S sales.
Increased average selling prices and higher production volume as we spread the fixed portion of manufacturing overhead costs across a larger number of units produced.
Total operating expenses in the second quarter of 2022 were $26 $4 million.
Compared to $16 8 million.
Okay.
The three four months.
For the quarter.
Okay.
Okay.
Okay.
The sales organization.
Great.
Okay.
Net loss was $19 2 million for the second quarter of 2022 compared to $14 6 million in the same period of the prior year.
Adjusted EBITDA was a loss of $14 6 million compared to a loss of $11 6 million in the second quarter of 2021.
Our cash and cash equivalents balance as of June 30 was.
$270 million, while our long term borrowings totaled $50 million, we believe our strong balance sheet will provide the liquidity and capital resources needed to support and grow our current business.
Moving to our financial guidance, given our strong start to the year and continued underlying momentum in the business. We are increasing our full year 2022 total revenue guidance to be in the range of $66 million to $68 million.
Although utilization trends in the third and fourth quarter are expected to be down relative to first half levels. Our updated revenue guidance assumes sequential growth in hand piece is sold per quarter.
As explained previously as our installed base increases throughout the year. This will provide a natural headwind to average utilization rates as new accounts are at it.
Regarding handpiece average selling prices, we expect pricing to be in the $3000 range for the remainder of 2022, which is in line with year to date actual.
Turning to Aqua beam robotic system sale, we continue to expect modest sequential increases to the number of systems sold throughout the year with average selling prices now expected to be in the range of $360000 for the second half of 2022.
Lastly on revenues, we expect 2022 international revenue growth of approximately 30% compared to 2021.
Moving down the income statement.
Now expect gross margins to be in the range of 50% to 51%, which is an increase from our previously issued range of 47% to 49%.
Turning to operating expenses, we now forecast expenses to be approximately $110 million as.
As Roger mentioned previously the majority of the incremental spend will be allocated towards expanding our commercial team and initiatives in the back half of 2022 to put us in a favorable position to execute on our long term growth plan.
Lastly, we continue to expect full year adjusted EBITDA to be in the range of negative <unk> $63 million to $60 million. Although we are trending more towards the high end of the range.
At this point I'd like to turn the call back to Roger for closing comments.
Thanks, Kevin in closing I want to thank our employees customers and shareholders for all their support to help us along our journey to becoming the standard of care for BPH, We will continue to leverage our commercial and clinical investments to execute on our long term strategy have a great day and I look forward to meeting many of you at upcoming.
Investor confidence is at this point, we will take questions operator.
As a reminder to ask a question. Please press star one.
Our first question comes from Joshua Jennings with Cowen Your line is open.
Hi, good afternoon, thanks for taking the questions and congratulations on another strong quarter I was hoping to start with just ask about the raise of the revenue guidance range suggests that sales funnel continues to fill up against a backdrop of tightening capital budgets in the U S.
Hospital budgets can you talk about the sales pipeline for <unk> and how <unk> is navigating through this soft capital spending environment.
Yeah. Thanks, Josh we feel very good about.
Updating guidance and expect unit sales to increase sequentially in Q3 and Q4, yes. There is some discussion about the macro environment, but.
We are in a unique competitive position in the sense that we are early in our adoption curve and there are a number of factors, helping with adoption and utilization and that starts with their clinical outcomes and real world.
Outcomes that physicians are seeing with our procedure.
Hospitals and surgeons are using our procedure for all prostate size changed and in fact, we are seeing in some hospitals standardization of the procedure and.
Also with its broad coverage now we have Medicare coverage many.
Commercial payers are covering.
And more importantly patients are now.
Seeking more durable safe and effective procedure. All these factors are driving for better adoption and utilization I think Kevin do you want to add anything on utilization here.
Josh just to.
To frame that.
Guidance raised rather gave a lot of background on the capital pipeline, but the high end of our guided range. It's essentially is about 3 billion raised on capital and $3 million an empty. So its both penetration and utilization that's driving the increase in the revenue range.
Thanks for that and just a follow up.
Wanted to ask about the proposed rule that you cited maintaining.
Procedures at level APC six APC code.
Three 5% tick up and reimbursement.
I think everyone because to be clear that the transitional pass through payment is going away next year, but maybe you could help us understand relative to other respective procedures.
The profitability of this proposed level.
CMS just issued and then also just touch on the reimbursement.
Premiums.
The acquisition procedures you receive them.
Private payers, thanks for taking the questions guys.
Thanks, Josh so related to APC level six this was expected and uptake.
Obtained APC level <unk>, we believe our customer we are confident there will be satisfied with.
With APC level six as far as the transitional pass through is concerned. This is not it's not a surprise and quite frankly, not the concern in defense that Transco pass through was transitional and.
If you look a year ago.
<unk>.
Compared to the coverage that we have today compared to where we are compared to last year, we have many private.
Payers covering that's on top of the Medicare and we believe that addition, based on our conversation with hospitals. These additions of these private payer.
Outweighs the transitional pass through or willing to weigh and again. This is an information that we have been cut.
Communicating with all customers and they were aware and we believe this is not a material issue.
Great. Thanks again.
Our next question comes from Craig Bijou with Bank of America. Your line is open.
Great. Thanks for thanks for taking the questions and congrats on.
Another another strong quarter.
Wanted to ask first on utilization and maybe a little bit more about what youre seeing from individual doctors.
I appreciate your comments that hospitals are you starting to see hospitals spring.
On new urologists to the system.
But maybe if you can talk a little bit about the trends.
The individual utilization trends once.
And urologists decides to adopt.
You guys have been in the market now for a number of quarters. So.
Maybe you can touch on maybe where they are early adopters where their utilization is now is it does it continue to grow within their own practice.
Yes. Thanks for this question.
Utilization increase is driven by multiple factors as I mentioned starts with clinical outcomes.
<unk>.
Physicians and hospitals.
Hospitals are using on a broad range of prostate in fact in the last 18 months. When we look at the majority of these cases are done it's on the prostate in the 60 to 80 millimeter range.
<unk>.
And they are using again, all cost base size and phosphates shapes and in fact, they are standardizing.
Effective procedure linear accounts to our in some accounts have converted all day resected procedures to draw a correlation.
And these are the driving factors for utilization and I don't know Kevin do you want to add on the most.
Definitely accounts, which have been with us for many quarters, we see sequential growth of utilization of those accounts and Kevin can yes.
The third at this point I mean, we still.
Recognize that the largest or highest utilized group are the customers that have been with us the longest.
Ed.
The utilization dynamic is still one that we're keeping a close eye on and it's important to remember that our installed base is growing significantly grew roughly 40% in the first half of the year by the time, we get to the end of the year, we're going to have an installed base.
100% over the end of 2021, so as we get additional cohort each quarter, Greg will be able to provide more specificity around utilization metrics, but for now it's fair to say that our oldest customers have our highest utilization and then on top of that we are also seeing even in those customers.
<unk> that have been with us for multiple quarters. They are still adding new physicians to those accounts today, which is helping to go with the shrink.
Got it.
That's helpful guys and on the sales reps the adds that you're expecting in the second half I'm not sure if I missed it or not but did you say, whether they're going to be capital or alkylation reps, maybe both and then maybe if you could go into a little bit of detail on.
The strategy for adding those reps you guys have obviously been doing.
Extremely well, thus far so maybe the strategy there whether they are targeting certain geographies or you just need more feet on the street.
Current geographies.
Yeah.
Yes, let me this is Kevin let me start with the strategy we've had.
Very clear on this.
We would increase the size of our sales force when we felt it would jeopardize the excellent real world commercial outcome.
Pat.
We expect and we're at that point now, where we feel comfortable with our clinical data and commercial performance that we will increase the size of the field and so that's the strategy in terms of the bifurcation, we're going to continue to add at this time.
Probably a fair equal number of both capital and Aqua ablation sales reps, we're nowhere near penetrated in every U S territory, where we need to be we have capital reps right now are fairly large territory that we wanted to take a look at it but my point being is we have a long runway in front of us in terms of.
Adding commercial head count to the business and we'll continue to do that the other point I want to make on our rough says our guidance in the back half of 2022 doesn't imply really any meaningful contribution from these new folks what we do want to do however, though is make sure they get on board and get them trained they learned the <unk>.
Protocol, such that they can be productive as we enter 2023.
But again back to the strategy. We felt now is the right time, given what we're seeing in the real world of both outcome physician and patient interest.
Great. Thanks for taking the question Kash.
Thanks, Craig.
Our next question comes from Amit <unk> with Goldman Sachs. Your line is open.
Thanks, Hey, good afternoon guys.
I wanted to maybe start with a couple of macro questions Dave.
On other earnings calls in the sector and just get your take on it.
One is just on hospital staffing shortages in and whether you all are seeing an impact from that at all and that you would call out is it making it hard to get into case observations training done installations.
Anything like that that you would call out that's impactful to you.
So thanks.
Thanks, Amit for the question so.
It has not impacted us we are hearing that but we have been able to.
Achieve our forecast so it has not been.
Material event for us.
Okay.
And I know it kind of your small and growing very fast, but do you have a sense of where we are in the BPH market overall in terms of just.
Underlying market conditions as a percent of kind of where we were in 2019, the health of the BPH bucket, if you will and how its recovering and maybe inside of that question would just love to hear you.
Any change in trend during the quarter, whether procedures that seem kind of high level I know for you they improve a lot because youre growing but overall procedures.
A sense that your customers saw improvement at.
At all during the quarter and exiting into <unk> at a high level for the BCH segment.
Yes. Good question to me. This is Kevin we definitely believe that 2019 is the last I would say macro year.
We can look at it respective surgical numbers.
Consider that a normal operating environment, we would suggest that 2020 in 2021 were impacted by Covid. Therefore, frankly, we're not paying much attention to the procedures in those years and when I think about the macro environment. We are in a bit of a unique position that as you mentioned, we're still at relatively low volumes.
Our current average utilization is around $5 five procedures per account per month, and if you look at the customers. We're targeting an average even in 2019 those customers were doing approximately 17 procedures a month. So we're still that's very focused on.
<unk> utilization with the accounts, we penetrated which shield us a bit from some of the macro factors and frankly, it's not terribly relevant to our growth in the near term if the market is growing 10% for decreasing 10%, but I would definitely agree with you that 2020 in 2021 have been on the macro level.
<unk>, but that hasnt really impacted our ability to grow.
Great and just one last quick one from me is on the system side.
Can you share how many systems that you sold where where new accounts versus E mails and.
If there were any retirements in the quarter.
Yes, or no retirements and were now through the eval and demo pool. So moving forward every every new sale.
As a greenfield sale.
And we may periodically put a rental.
With a customer but right now our model is pretty much we're going to sell.
And not offer a demo program.
Okay. Thanks very much.
Our next question comes from Matthew <unk> with Keybanc. Your line is open.
Hey, good afternoon, and thank you for taking the questions.
Just first.
It does seem like you are maintaining.
Twice.
As inflation goes, especially around the systems or why would gross margin decline in the second half versus the first half of it.
Got it.
Yes.
Yeah. Good question, our our guidance by the way welcome Matt.
Call It classic larger envelope.
So if you look at our guidance the high end of the bargain rate does imply approximately 50% gross margins in the back half of the year and Youre recognizing that we just came off a second quarter, where we recorded 51% as I pointed out a few things the first being that we are still a relatively modest revenue level.
Gross margin percentages, they're going to fluctuate and that can fluctuate fairly significantly on pretty low dollar volume is to put that in context.
$300 dollar costs equate the two percentage point on margins.
Relatively modest revenue with a high degree of fixed costs.
Tends to have gross margin metrics that that will be variable here in the near term, but trending in the right direction that would be 0.1.
0.2 is we are increasing staffing levels in our operations group in anticipation of future growth. These are in areas like supply chain and production. This does create some additional expense. However, I would point out there is nothing unusual there is nothing in frequent and our margins are implied in our second half guidance.
And with the supply chain and production. This does create some additional expense. However, I would point out there is nothing unusual there is nothing in frequent and our margins are implied in our second half guidance.
We still do believe that at scale that business.
All.
For significant margin expansion over the long term, but there is going to be some variability in the near term there is nothing.
Unusual again in the second half.
It's a multitude of factors.
Okay.
And then unusual again in the second half.
But due to factory.
Okay.
Excellent and then just.
It does seem like you're you're controlling almost the pace at which.
You are installing these systems.
The pace at which you're expanding your sales force just what makes you comfortable.
With a sales rep or a doctor.
System that you are placing there as well.
That youre going to get the outcome from that new placements.
<unk>.
Yes. So this is <unk>.
We are very disciplined targeting our accounts we are.
In the U S. Those high volume hospitals that are doing on average more than 200.
Procedures per year, we are targeting those and even before talking to the administrators in the hospital, we make sure we have a physician champion.
And because of this disciplined approach we have not seen pushback and we have had high success rate in placing us are robust and we are aware that we have that extra capital equipment. In this disciplined approach has allowed us to be successful.
And that is the reason that that you are talking.
Thank you very much.
Our next question comes from Neil Chatterji with B Riley Your line is open.
Hey, guys. Thanks for taking the questions.
Just maybe circling back on the.
<unk> commercial team adds for the second half.
Just wondering if you could just talk about kind of what you expected like maybe quarterly cadence of that if that's what you expect that to be weighted more towards third quarter fourth quarter and then if you could just maybe remind us on kind of the expected productivity ramp.
Is that before you start to see meaningful impact of that three.
Three to six months or if you could just add some color there.
Yes by the way welcome as well.
You have been covering the company now.
In terms of cadence I'll talk about our opex spend of the $110 million.
It does imply about a $60 million spend in the back half of the year and that expense cadence is.
Relevant to how we're going to build the sales team, where the fourth quarter should be larger than the third quarter and sequentially Q3 should be up about two to 3 million from Q2. So that suggests that the ads will be primarily mid to late Q3 and by the time, we have folks on board and that manifests itself in the Opex.
Expense Guy.
Guidance.
On Opex what was your second question.
I mean, I think that was pretty much.
You asked about the productivity sorry, yes exactly.
Generally yes.
It's three to six months for a rep to become fully productive.
Again that depends if youre going into new territory for some of these reps will be doing well.
We'll be looking at perhaps splitting larger territories.
We may also have to do is to continue to grow but on average it's a 36 month brand.
Got it and if I could just add.
Follow up question here.
Kind of circling back on the international front, you talked about it.
Last quarter with the Asia Pacific.
Regulatory approvals for Korea, and Japan, just kind of curious if theres any.
Any updates there in terms of adoption in Korea at kind of the reimbursement pathway in Japan, and then secondly.
If you could talk about maybe your strategy for China, and any expectations for the market there.
Yes.
In terms of our ball I'll take each of them separately in Korea as mentioned on the last call. We expected very modest contribution in 2022 really no greater than $1 billion is how I phrase that last quarter. We did sell another robot in Korea in the second quarter and the number there. So again continued penetration but relatively.
Modest revenue contributions moving forward.
Japan.
<unk> to work through the reimbursement pathway. There, we do not anticipate any Japan revenue in 2022.
Next time, we'll probably give a meaningful update on Japan would be when we introduced.
2023 guidance and then flipping to China, we have started the regulatory process there.
That could be a fairly lengthy process, but we are not expecting any meaningful contribution in China in the short term.
Great that's all correct.
There are no further questions at this time I'd like to turn the call back over to resident seeing you in the future.
Yeah. Thanks, everyone for attending our earnings call. We look forward to seeing you in the future investment meetings have a nice day.
This concludes the program and you may now disconnect Goodbye.
The conference will begin shortly to raise Johan during Q&A you can dial one one.
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Yes.
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