Q2 2023 PROCEPT BioRobotics Corporation Earnings Call
Good morning, and thank you for joining process by Robotics second quarter 2023 earnings conference call presenting on today's call are <unk>, Chief Executive Officer, and Kevin Waters, Chief Financial Officer before we begin I'd like to remind listeners that statements made on this conference call that relates to future plans events or performance are forward looking statements as defined.
Under the private Securities Litigation Reform Act of 995, while these forward looking statements are based on management's current expectations and beliefs. These statements are subject to several risks uncertainties assumptions and other factors that could cause results to differ materially from the expectations expressed on this conference call. The risks and uncertainties are disclosed in more detail in process power about expiring.
Exchange Commission all of which are available online at Www Dot SEC dot Gov listeners are cautioned not to place undue reliance on these forward looking statements, which speak only as of today's date July 27, 2023, except as required by law <unk> by robotics undertakes no obligation to update or revise.
Any forward looking statements to reflect new information circumstances or unanticipated events that may arise during the call. We will also reference certain financial measures that are not prepared in accordance with GAAP more information about how we use these non-GAAP financial measures as well as reconciliations of these measures measures to their nearest GAAP equivalent are included in our.
Our earnings release with that I'd like to turn the call over to Reza.
Good morning, 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 details regarding our financial performance and updated 2023 guidance before opening the call to Q&A.
Starting with our quarterly revenue results. We are pleased to report a record quarter with our customers and patients continue to realize the significant clinical benefits of our population therapy.
Total revenue for the second quarter of 2023 was $33 1 million.
Presenting growth of 98% compared to the second quarter of 2022.
Growth in the quarter was driven by strong U S system sales and increased utilization from our expanded installed base.
We believe the combination of positive long term clinical data.
Increased private payer coverage outstanding real world patient outcomes, and an expanded field based commercial team continued to drive surgeon interest and adoption of our robotic system.
We're also starting to generate stronger international sales momentum led by the United Kingdom. Following the publication of the nice Med Tech innovation briefing.
In the second quarter, we sold a record for the robots in the U S generating total U S system revenue of $14 8 million.
Representing growth up 74% compared to the prior year.
The sequential increase in robotic sales was driven by two key factors first is the growing and expanded capital sales pipeline.
Given the timing of how deals progress once we partner with the surgeon champion and how deals are unlikely to fall out of the sales funnel, we have good visibility into our pipeline and confidence to meet our second quarter system sales expectations.
Second as we've communicated to a handful of deals we plan to complete in Q1 ultimately closed in the second quarter. It is an important reminder, that the first quarter is typically a seasonally slow period for capital equipment, which can meaningfully impact quarter to quarter volatility.
In terms of our pipeline the number of robot placement opportunities continue to grow meaningfully which has been driven by the addition of new capital reps in Greenfield territories.
We ended the first quarter of 2023 with approximately 30 capital sales reps 10 of which were added in the late Q4 2022.
With the productivity ramp up six to nine months, we expect the capital reps added in the fourth quarter of 2022 to start contributing to the U S system sales in the back half of 2023.
Given our system sales outperformance in the first half of the year our expectations are on full year U S system sales have slightly increased however, we still expect approximately 55% of system sales to be in the second half of 2023.
Next touching on utilization and surgeon activity.
U S Handpiece and consume report revenue increased 138% compared to the second quarter of 2022.
When analyzing our accounts we are extremely pleased with overall utilization trends our U S installed base in six months has grown 40% compared to the end of 2022 and these new accounts take time to ramp to the levels of existing accounts.
We are encouraged by what we are seeing an account specific utilization and believe we now have multiple proof points, where our cooperation therapy is viewed as their respective standard of care within a given hospital.
The primary drivers of prestige growth continued to be active surgeon growth, which is a combination of new surgeons performing procedures and active surgeon retention rates of approximately 90% for the first six months of 2023.
We define active search engine engine as any surgeon, who perform a case in both the current and previous quarter as.
As a company we benefit greatly from this high level of surgeon retention as our commercial team can focus on training new surgeons.
Our revenue guidance as Kevin will go through shortly continues to be informed by what we are seeing in our pipeline opportunities progress what customers are telling us that productivity ramp of new capital reps and overall close rates.
All of these indicators continued to trend positive awareness population therapy growth, which gives us confidence in achieving our 2023 growth targets.
Next regarding our progress in the quarter with our IBM partners.
In the second quarter, we signed a national sales contract with the largest IPL in the U S that secures pricing for system placement and hand pieces sold to the nationwide.
Hospital network.
Partnering with Ibm's continues to be an important initiative as it will allow our sales team to operate in an expedited and more predictable manner as we partner with Alcoa ablation surgeon champions as at these hospitals.
Even though we sold a record number of systems in Q2. The results did not include any large multi system orders from strategic ideas.
We believe there is an opportunity in the future for multi system orders as our sales team continues to expand the pipeline.
While there are many hospital networks in the United States, we categorized strategic idms, as having greater than or equal to 20 hospitals are in network.
When analyzing the market, we estimate 17 strategic IBM account for 26% of the 860 high volume BPH hospitals, and 29% of the total 2700 BPH hospitals.
Thus the importance of these IDM relationships is meaningful to our ability to penetrate the U S market and provide increased visibility and predictability in our pipeline.
Turning to recent payer coverage updates.
In early April , we announced that United healthcare update that.
Its policy to include a correlation.
This updated policy went into effect on June one.
As the largest commercial payer in the United States with approximately $45 million covered lives United healthcare positive coverage policy will greatly improve accessibility of a correlation therapy for men suffering from BPH.
With the addition of United Healthcare, we now estimate roughly 95% of men in the U S have access to Aqua ablation therapy.
Regarding the makeup healthcare coverage, we are not anticipating any short term benefit in our Q3 utilization rates. However, we do expect to see a modest benefit of United healthcare coverage, along with normal seasonality to be a driver of expanded utilization in the <unk>.
Fourth quarter.
Additionally, in mid July CMS published its 2024 proposed rule for the hospital outpatient prospective payment system.
The level six APC code for a correlation has proposed payment that would provide the hospital $8847 four each a correlation procedure, which is a 3% increase over the 2023 dates there.
The final rule is estimated to be published in November .
With respect to international market development activities, we generated $3 2 million of international revenues in the second quarter of 2023, representing growth of 68% compared to the prior year period.
This is the second quarter in a row of outperformance by our international business.
Growth in the second quarter was driven primarily by strong sales momentum in the United Kingdom.
Since the recent positive BPH guidance update earlier this year for Aqua ablation therapy, our pipeline of large NHS hospitals has grown meaningfully.
With respect to market development activities in the U K, we are very pleased with the initial momentum we have generated.
Given the acceleration interest from UK surgeons and strong unit economics on the Handpiece system average selling prices.
We plan to make further investment over the next 12 months in the UK to accelerate growth and expand patient awareness.
Additionally, in mid July we initiated enrollment of our post market survey in Japan to treat 100 patients with Aqua ablation therapy.
While we do not expect meaningful revenue.
Contribution from Japan in 2023, the future plan is a very attractive market long term like the U S and United Kingdom, our strategy is to meet with clinical data to support a more robust and sustainable commercial launch.
In summary, I'm extremely proud of the entire process team and our collective ability to deliver a record quarter I am pleased with our year to date performance and believe that tailwind I highlighted will continue to allow us to execute our strategic growth plan of penetrating BPH hospitals and increasing.
Asian by treating their full range of our prostate sizes and shapes given this positive momentum we believe aqua ablation therapy will truly revolutionize the treatment of BPH with that I will turn the call over to Kevin.
Thanks Ross.
Revenue for the second quarter of 2023 was $33 1 million.
Representing growth of 98% compared to the second quarter of 2022.
U S revenue for the quarter $29 9 million representing.
Representing growth of 102% compared to the prior year period.
In the second quarter, we sold a record 40 robotic systems generating total U S system revenue of $14 8 million, an increase of 74% compared to the second quarter of 2022.
Our U S installed base at the end of the second quarter is now at 233 systems, which is an increase of 104% compared to the second quarter of 2022.
Second quarter system average selling prices were $370000, which was up 5% compared to the first quarter of 2023 and in line with our expectations.
While system average selling prices met our expectations and were increase from the first quarter, we still expect variability around system pricing on a quarterly basis.
U S handpiece in consumable revenue for the second quarter was $13 6 million.
Representing growth of 138% compared to the second quarter of 2022.
U S. Handpiece revenue growth was driven by an increase in the installed base of robotic system.
Monthly utilization per account increased approximately 9% compared to the second quarter of 2022.
Use handpiece revenue growth in the second quarter was a reflection of our existing accounts and surgeons, taking the next step to adopt Aqua ablation therapy as their treatment of choice for all refractive procedures.
View utilization as a true leading indicator of overall market adoption long term.
We shipped 3900 forehand pieces in the U S. In the second quarter, representing unit growth of 124% compared to the second quarter of 2022 with average selling prices of approximately $3110.
International revenue for the second quarter was $3 2 million representing growth of 68% as Robin mentioned international revenue in the quarter was driven primarily by strong performance in the United Kingdom.
Gross margin for the second quarter of 2023 with a record, 56%, which was ahead of our expectations.
Sequential gross margin expansion in the quarter was due to strong execution from our operations team and our ability to absorb overhead expenses along with revenue over achievement.
Given our favorable standard margin profile of both our robot and hand piece, we have increased confidence to further absorb overhead expenses and now expect approximately 55% gross margins for full year 2023.
Moving down the income statement total.
Total operating expenses in the second quarter of 2023, or $44 1 million compared to $26 4 million in the same period of the prior year and $49 million in the first quarter of 2023.
The increase was driven by increased sales and marketing expenses, primarily to expand the commercial organization and variable compensation expense increased research and development expenses and increased general and administrative expenses.
Total interest and other income was $340000 as quarterly interest expense from our $52 million term loan was offset by favorable interest income.
Net loss was $25 3 million for the second quarter of 2023 compared to $19 2 million in the same period of the prior year adjusted.
Adjusted EBITDA was a loss of $19 9 million compared to a loss of $14 6 million in.
In the second quarter of 2022.
Our cash and cash equivalents balance as of June 30 was approximately $150 million.
Moving to our 2023 financial outlook.
We are increasing our full year 2023, total revenue guidance to $131 million representing.
Representing growth of 75% compared to 2022.
We are increasing our revenue guidance based on the following factors starting with U S systems. We continue to expect approximately 55% of systems sales to be in the second half of 2023, which equates to 144 placements for the full year.
Given normal seasonality and timing of deals in our pipeline, we expect third quarter system sales to be down relative to the second quarter and for the fourth quarter to be our strongest of the year.
Turning to use Handpiece revenue, we continue to expect full year utilization to be approximately in the mid sector as measured by hand pieces sold per account per month.
Given normal seasonality and an expanding installed base, we expect third quarter monthly utilization to be roughly flat compared to the second quarter and for the fourth quarter to be our strongest utilization quarter of the year.
Overall utilization will be impacted by the significant additions to our installed base in the third and fourth quarters, which our guidance supplies is to grow by an additional 34% by the end of the year.
Additionally, we continue to expect Handpiece average selling price to be $3100 and our other consumables revenue to be $5 9 million.
Lastly on revenue given the strong second quarter and positive momentum, we now expect full year international revenue to be approximately $11 2 million.
Moving down the income statement, we now expect full year 2023 gross margins to be approximately 55%, which is a slight increase over our previous guidance of 54%.
Additionally, we now forecast full year 2023 operating expenses to be approximately $174 million.
Finder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again, please Sam Bible, we compile the Q&A roster.
Our first question comes from the line of Craig <unk> from Bank of America Securities.
Good morning, guys. Thanks for taking my questions and congrats on a.
Sure my quarter.
So I wanted to start by asking you a few on utilization.
You guys talked about it utilization took down sequentially, but.
<unk> growth was very strong on a tougher comp compared to Q1 and.
And you know you did highlight at the large number of system placements, probably impacted that utilization number so I.
I know you guys practice closely so can you talk about what you're seeing from cohort utilization are you seeing any leveling off of the earlier cohort and maybe.
Maybe if you can help us understand how.
Quantify or or just help us understand how we think about the dilutive effect of you know a big system placement quarter like like what you did.
Thanks, Greg So we are very happy with the queue to resolve the utilization and the positive underlying trends that we see so when we analyze every cohort definitely we see sequential growth.
The surgeon level, we see active surgeon growth, we see increased new surgeon training and more.
More importantly high so agenda attention as I mentioned in the prepared remarks all of these results in increased utilization and that is because of the real world clinical data.
Standardization of the procedure at the hospital and more importantly from the C. O M. C. A four point of view of the hospital increased efficiency because they can predict the time, so we see sequential growth.
Account that we haven't stayed with us, but as we said that he did about 21%. This was a record product placement with an increase of 21% that was the headwind, but when we analyzed cohort they are sequential increase.
Kevin you want to add something to this yeah, yeah, Craig good morning by the way.
Rather the spot on we we do continue to see the earlier cohort continue to generate.
Sequential increases in utilization and when you look at those cohort and think about how that ties into our guide for 2023, you can assume that the.
The accounts that have been with us prior to 2023 are doing well north of the six and a half per month average that our guide and five and it allows our guidance for the new accounts in 2023 to be below the average and that that's how it is shaping on you are correct and observing that having that 21% increase in our installed base is this.
Natural drag on utilization sequentially, which which we've been talking about for a few quarters, but this is really the first quarter, where we've seen that occur, but the underlying trends with our accounts hasn't changed and we have a very predictable pathway one to the counter to install the increase utilization.
Got it very very helpful.
So coming in or after Q1, there was some investor concerns I would say on the system pricing given the tip and Kevin and I. Appreciate your comments on the variability you'll have variability on pricing.
But it was good to see it back up to 370 level this quarter.
So maybe if you can expand on your confidence in you can maintain that pricing and are you seeing any pricing sensitivity, whether it's you know in certain accounts or certain regions. I mean is there anything that you would call out where there could be some <unk> some increasing price sensitivity.
Yeah.
My prepared remarks, I did talk about quarter to quarter variability around system pricing. While 370 is the average regarding so I do expect that variability quarter to quarter of an account the account and we have to talk a lot about our number one goal of the company is really to partnered with the hospital to drive procedure grow grow market share and you can't.
Do that if you don't have a system. So we do have internal limits the pricing calling for the parameters, but we're definitely willing to negotiate especially if we have a surgeon waiting in the wings to do a lot of procedure and.
Happy with Asp's rebounding, but again up until it's about quarter to quarter variability and.
Don't do that variability is any anything other than that.
Got it thanks for taking the questions guys.
Thank you Sir.
Thank you one moment for our next question.
Our next question comes from the line of Joshua Jennings from T D. Carolyn.
[noise] hi, good morning, Congrats on a strong quarter and I appreciate you taking the questions.
I was hoping to just ask about patient demand I mean, our checks with urologist, although anecdotal suggestion.
Suggests that the patient demand is escalating when.
When I used my reference basically made any patients are seeking out occupation treatment kind of being savvy and doing their own diligence.
Would love to get a.
Broader view from from your team Redfin, Kevin just about what your your field is reporting back just in terms of patient demand and how that's driving.
Can utilization.
Core base.
Yes, Thanks, Josh Yeah, definitely we do see the patient demand by day online activities.
And the full coverage or about 95 per cent patient access is also very helpful for patients not they have access.
<unk> <unk> sexual function as one of the drivers on that.
And.
The.
Predictability and.
More awareness among patients and we see this again online activity.
Just to follow up the road that other one specific to your questions regarding.
Regarding demand I think the other side of the coin I would say is urologists demand an awareness definitely increase in.
See that answer for me to whether that's linked in our Twitter with new account launching on a daily basis, we see that with our peer to peer training with has been very successful. So it both patient and surgeon awareness and demand that we definitely can't increase over the last 12 months.
Understood Thanks for that and just.
Believe you you hired a new executive to lead the marketing effort from Medtronic earlier this year.
Any plans or anything you can share and just in terms of marketing too broke neurologist and patience and how that could pick up.
23 to 2024 and then.
Just one sorry sneak one more than just on the commercial team, but I'm trying to remember system, they're prepared remarks with just.
Can you can give us an update on I guess plans for capital Rep.
Salesforce expansion <unk>.
2023, where we should think about.
That number is sitting at the at the end of this year at any color you can get one clinical special smack repletion wrap hires would be great as well thanks a lot.
Yeah, Thanks for asking and you're correct.
Have recently hired a marketing executive and our commercial theme he's responsible for both upstream and downstream and he focused on the whole gamut.
I think he's gonna that'd be very complimentary dark commercial came and we're not prepared to go into like specific initiatives, but it's definitely a bolster car came to increase awareness and look at a broader strategic items that surround the marketing and commercial things. We're happy to have him on board, but a nice addition specific a capital Rob from the capital T.
<unk>.
As I said in the prepared remarks, we did increase a capital a team from 20 to 30, just recently six months ago and historically, we have hired one or two capo rep classes per year, we do that to make sure they're properly trained and give them the proper support and regarding the remainder of this year or guidance our office does it.
Allow for us to continue to add more reps to ensure continuity and to make sure we really hit the ground running in 2024.
Understood. Thanks again.
Thanks.
[noise]. Thank you one moment for next question.
Our next question comes from the line of Matthew <unk> from Keybanc.
Hey, good morning, and thanks for taking the questions Hey, I I don't believe you actually gave a three Q placement number I think you just said you expect it to be down versus two Q and then the highest level in fork here could you help us like levels set for next quarter I kind of.
How much do you think it it it may be down.
Yeah.
We thought I'd stay down modestly.
To be fair with that we really look at our forecast is gonna first or second half as as we've been consistent but mark modest sequential decrease.
Q3 to you too.
Okay excellent and then just done on the profitability I I know, it's not really central at the at this point, but the gross margins moving higher sales numbers moving higher.
I'm just curious why the EBITDA loss was moving was moving down a little bit and not a little up.
Yeah. So we have increased our <unk> guide from 167 up to 174, given where we ended queue to which this would allow for slight sequential increases in opex in Q3, and Q4, which is the reason even with increased margin EBITDA guide went down slightly.
With that said, we do believe these opex investments, we're making in the second half primarily in R&D in sales and marketing. We view. These are high return investments that we believe will allow this business to continue to experience that.
Outside the revenue growth in 2024, as well and at the same time, even with the increase in Opex.
You pointed out the margin expansion, which we're really happy with we really weren't anticipating mid fifties until exiting 2023. So the fact that we were already there in the second quarter.
And by raising our guidance at 55% now implies that we're gonna be exiting the year closer to 57% as opposed to 55. So it really nice progress there on margins and then it's overall on Opex.
When I look at our revenue growth of 75% or revise opex guidance is now growing up 48%. So while still early in our commercial realisation of this project product excuse me.
<unk> some leverage already in the business.
Okay. Thank you very much.
Thanks My finger.
Thank you.
One moment for next question.
Our next question comes from the lineup Richard <unk> from two is securities.
Hi, Thanks for taking the quiet.
<unk>.
Couple of <unk>.
Maybe just first on.
The way you guys size up your capital funnel you provided some color on kind of <unk>.
What's what's coming into the funnel relative to <unk>.
Going out could you could you comment a little bit on on the.
Extent to which that that's expanding the lead generation.
And also within the context of a bolus of <unk> that you had at the end of last year. I know you said that you expect them to really be hitting their stride as we move into three two at <unk>. So that you could talk about whether they've started to contribute faster than expected.
First half or that's still out front and how that that that kind of.
And with the capital of subtle changes.
Okay. Thanks, Rich definitely people are very happy with the Q2 capital strong and two factors as I mentioned in the pre Petrie Mark lead to that outcome, we have great visibility on the pipeline and we.
We have seen growing sales.
Pipeline.
And then the second link the queue to what some of the.
Capital went from Q1, two two Q2, but we continue seeing that as we have met.
Mentioned previously they are different phases, one step and testing phase one that is very high leg kick without that deal to come to fruition, we see that and received that expands and Kevin you want to add.
Thanks are the focus specifically on the pipeline I mean, our pipeline when we looked at it and we gave this number.
A few quarters ago, but when we look at our pipeline, which we consider phase one which we have identified a <unk> a certain champion and has a high degree of certainty to close that pipeline as of June 30th is up about 19% from the end of Q1. So we feel good about the increasing funnel to answer that question specifically.
Around our rep productivity. If you look at our second half guide essentially assumes a very comparable level of productivity, giving 30 capo reps as we had in the back half of 2022 with 20 capo rough. So we are definitely starting to see that.
Start to produce and Q3 and Q4, but Q for for us.
Normal seasonality capital environment, it's definitely going to be our strongest quarter and I think will really be the quarter, where we have a <unk>.
<unk> point of these new rugs really producing at a meaningful level.
That's that's helpful.
Maybe just turning two.
The profitability of the Opex guidance increase.
With with gross margin, increasing even in a in a quarter, where you you have a higher.
You have a higher capital.
Overage relative to to the consumables I'm, just trying to get get a sense for.
Whether when do you think we would see the profitability start to inflict it it feels like as you did you increase these investments on the Opex side.
2024 could be a year, we really start to see consumables as a bigger mix relative to capital should we be expecting kind of you know.
Steady kind of profit.
Losses, and then all of a sudden it's going to flip hard to profitability I'm just trying to think of how we think about when you turn profitable and how fast that can happen when it does.
Yeah, I think you're thinking about it the right way and while we are definitely focused on revenue growth. We do as a management team make sure we're responsible and cognizant of where we're spending opex dollars, particularly in today's environment and we do believe when you look at our longer term model without talking about specific numbers rich that when you do too.
The profitability with this recurring revenue model with margins, we've talked about we think longer term can get the 70 per cent.
Does flip hard to use your terminology in terms of profitability and we're formulating going through 2024 objectives and plans now, but the manager of management team here is definitely focused on a pathway to profitability and making sure that we can show investors that this business can get there and I think that the nature of this business.
Is definitely attract it from a profit standpoint.
Okay. Thank you.
Thanks for us.
Thank you one moment for next question.
Our next question comes in the line of Chris Test cloud from net from research.
Thanks, and congrats on the corner guys.
So I wanted to circle back to the United coverage expansion curious why you don't expect the impact there to show up until the fourth quarter could you just remind us what was happening with those patients previously.
Was the lack of coverage there are real obstacle or are they able to get treated they just had to jump through a bunch of hoops.
Thanks, Chris so prior to United coverage, if accounts were willing to treat a patient they have to receive.
<unk> and the cases that we're doing tonight could still would pay.
Pay about.
20 per cent of those cases.
The reason and as you know this only became effective June one it takes some time for that to become fully.
Functional that's why Q3, we are not mentioning that a big impact and <unk>.
And if you look at our Guy.
One of the factors in queue for along with normal seasonality for the expansion and utilization is.
We do start to see a very modest benefit in Q4 from United but at the same time, we do have many different levers to achieve our utilization guidance and therefore I wouldn't take these comments us we're relying on a large united bumped the chief guidance, but we are expecting some benefit and that's why you see expanded utilization in the fourth quarter in particular to get to.
The full year, six and a half on utilization.
Makes sense.
And an international has been a nice surprise relative to how we were thinking about at the start of the year, you talked about Japan, not really being of 2023 story.
Which countries have driven the upsides so far this year at an outside of Japan are there any other new territory. So you guys think could be important in 2024.
Yeah. So the one of the drivers for the international was U K as we had mentioned previously with the report that came.
With nice and the <unk>.
Coverage.
Those new new K was the one of the biggest drivers the.
The reason, Japan, we don't.
Assume that contribution is because we received approval regular separate wall in Q1 of 2022.
We have to do 100 patients post market study in depth.
Enrollment started in July we are happy with that and that's why we don't anticipate near term contribution. So internationally as the had previously said we are very selective.
And we go region by region on large markets and start with market development and similar to US once we enter UK was the same we uptake reimbursement and received support from the nice.
<unk> in Japan, the same will be able to begin with clinical so we will we will go there is we will have a very targeted approach by various.
<unk> initially started with western Europe .
And then.
Japan and.
And we had the approval in South Korea.
Thank you.
Thank you one moment for next question.
Our next question comes in the line of Ryan Zimmerman from B T I G.
[noise] Hi, this is Sam on for Ryan and Thank you for taking our questions. The first one is on system placement, how many systems placed released versus sold out right in the quarter and how should we think about.
Going forward.
Yes, yes, we so we don't have.
Internal leasing program that represents a significant portion of our business all 40 system.
That we sold in the quarter were sales.
Our customers so so no leasing.
Arrangements, there I will point out though.
Second quarter, we did place a system.
We expect a recognized revenue for the fourth quarter does the system was installed the customer in the second quarter enhances doing procedures. So if you look at our installed base exiting Q3.
Excuse me accident Q1 of 192.
If you add 40 system that would suggest our installed base should be 232, but as noted in my prepared remarks, our installed base is actually a 233 and that's just due to the timing of when will recognize revenue on our system, but we don't do that.
Thank you. That's helpful. Then you indicated there 17 Idm's you are targeting what percentage of systems are placed at IGN and how should we think about that going forward for the remainder of the year. Thank you again.
Yeah. So we we haven't disclosed the exact number of idea is what we have that is today we have.
Many I suggest orders single orders from IGN, but what we don't have our these multi system orders from corporate IGN.
These purchases are really the most difficult to predict and we haven't had those the date, but we do have numerous single orders with these Ida and partners and we continued to view the.
A nice opportunity moving forward.
In 2023.
Thank you.
Thank you one moment for our next question.
Our next question comes on the line I'm, Neil challenging from be Riley.
Yeah, good morning, and thanks for taking our questions just.
Just curious on the.
Last what are you talking about the low volume centers makeup about kind of 30 per cent of the mix for the install just curious.
What you saw this quarter and the installs for low volume centers and then.
That might be impacting utilization.
Yep. Thanks, Neil so that makes it hasn't changed in the 20% to 30% as we had mentioned in the last earnings call. What we are seeing the utilization on the ramp low volume and high volume are similar again low volume as.
We have said are not small hospitals as just historically they have not been doing many BPH showed the utilization and the ramp where similar and the mix is the same at this I want I.
I want to be clear on the sequential utilization was no.
The dynamic of low volume Bird high volume hospital had no bearing on <unk>.
The 40 system that were place.
As opposed to any dynamic between low and high volume hospital.
Great Thanks for that color.
Maybe just turn it to Hudson R&D continued.
Continued to spend their so just kind of curious since you can update us there in terms of.
Efforts on the R&D pipeline.
Any any plan enhancements on Canada deliver your speed or imaging, perhaps you know I think that you could share their.
Yeah. So.
We are highly focus obviously on innovation being a robotic company and the investments in Q1 Q2, they're across the board people with product the processes.
Not talking specific about future R&D, but you can be assured we're always working to maintain our clinical advantage is kind of the bedrock of this company from a technology standpoint.
And without getting too much detail in the near term you can pick up things like making a robot robotic system similar to use this is improving workflow improving overall design and if things like that that we're talking about today, but we're definitely thinking longer term, but not gonna provide any details of this plan.
That's it for us.
Thank you one moment for next question.
Our next question comes on the line now Nathan <unk> for Wells Fargo.
Hi, Uhm, congrats on a great quarter.
Can we go back just to the capital environment. You you, obviously caught a replacement shortfall from Q1, but at that time, you mentioned <unk>, taking a cautious approach on spending how is this kind of play down in Q2, and what what are you seeing so far in Q3 in terms of the capital environment. Thanks.
Yeah. So thanks for the question that's definitely as we have mentioned in Q1 also yes hospital P piano.
P&L pressure, but we are seeing improvement in staffing and hospital definitely are privatizing spent.
<unk> innovative treatments and those treatments that allowed to treat many patients but in this case.
Their strategy.
<unk> and allowing bring more patience because BPH is number one reason patients.
Patients go see a neurologist.
And so from that point of view, we believe this fits in the in the model and.
It allows them to be more patient and also attract surgeons too in the hospital so that hasn't changed.
Okay.
And then to my second question. So at Au Wade Urology panel noted that they've seen trend of surgeons, bypassing drugs and offering golf oblation earlier.
Are you seeing significant penetration into the watchful waiters, considering that 20% to 25% percent of them are under the care of a urologist. Thanks.
So.
The data <unk> I'm, sorry that you mentioned 25 per cent of their patients are under the care of a urologist.
Yeah.
Patients are half and half roughly between the when they are under medication.
<unk> I'll just send a journalist so in longterm that may be a.
Driver, but at this point is still there is.
Large demand patients are already coming to the.
To the hospital to get treatment.
Okay.
It's difficult to tell on the numbers to be honest I mean, the reality is we're having a lot of traffic and a lot of success, but the numbers compared to the overall market are still fairly low in terms of who were penetrating we still believe the majority of our patients are converted turf and green My cases, but you can definitely talk with some of our customers who are treating patients that.
Otherwise would've foregone treatment, if awkward wasted wasn't an option. So we are seeing that but it's difficult to parse out at our volumes.
Exactly what percent of those patients are forgoing drugs or drug dropouts versus where candidates for other reflected technologies.
Okay.
Okay. Thanks.
Thank you one moment for next question.
Our next question comes from the line a brand new bass classroom William Blair.
Good morning, everyone. Thanks for taking my question first.
First I just wanted to go back to the utilization and I wanted to ask.
Kind of the same question, but slightly different.
Is there any color you can give us on how dilutive new system placement can technically be maybe what can help there is how what is a ramp typically look like in an account.
Do they like what is the procedure ramp look like so maybe we can tease out what is what.
What kind of trends, we're seeing in the quote unquote legacy installed base versus new systems.
Yeah, so again without getting into specific numbers or try and help you provide some color right and if you look at the account that had been with US pre 2023. They are north of our full year guide of six and a half and continued to trend up every quarter.
Modestly and we are seeing sequential increases in that group, but the dilutive effect of new accounts.
In any given quarter there are significant in the first quarter excuse me they are significantly less than that corporate average one of the primary reasons being just in capital equipment. It tends to be more heavily weighted towards the second and third month of any quarter and therefore, we have some account where we install a robot for example in the second quarter, but don't do any procedures.
And they don't even launched their account until the subsequent quarters that dilutive effect is fairly pronounced.
And tomorrow. It forward I would just suggest that you take an average.
Of.
Maybe half of what our normal utilization is for a new account to account for the fact that their place mid quarter.
Got it and then.
In terms of the system pipeline you guys gave some nice incremental numbers. There I think it was a 19% sequential increase in the pipeline, which is great can you remind us again, what's the typical timeframe to close on one of these I imagine that there's kind of a large window, but he's been kind of knowing that window might be helpful and they'll follow up today.
That would be how does that timeframe changed at all maybe compared to this started this year, whether it be macro or macro concerns lengthening that or just going deeper into the adoption curve. Thanks.
Yeah. That's all that's the last question for US we haven't seen any lengthening of the pipeline with any type of macro concerns.
With that said I mean, the reason why we think about the capital business first half second half of it is because timing is somewhat unpredictable with these deal but on average it can be anywhere from anywhere from three to nine months.
I think we've had an account shorter than three months, but that's definitely not the norm the Norfolk and that three to nine month range.
That gives us an opportunity to identify the surgeon champion work with administration and you know go go through all the benefits of the system and.
That's been consistent in that range, but inconsistent in terms of giving any further specificity within that range.
Thank you.
I would now like to turn the conference back over to read that God no for closing remarks.
Thank you for attempting to earnings call. We are very pleased with our results in Q2, and we hope to see many other you end up coming conferences have a nice day.
This concludes today's conference call. Thank you for participating by now disconnect.
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