Q1 2024 PROCEPT BioRobotics Corporation Earnings Call

May 1, 2024

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Operator: Good morning and welcome to Procept Biorobotics' first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. We will 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 would now like to turn the call over to Matt Bacso, Vice President, Investor Relations, for a few introductory comments.

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Good morning, and welcome to prostate by Robotics first quarter 2024 earnings conference call. At this time all participants are in a listen only mode, we'll be facilitating a question and answer session towards the end of today's call. As a reminder, this call's being recorded for replay purposes, I would now like to turn the call over to Matt.

Operator: We will 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 would now like to turn the call over to Matt Bacso, Vice President, Investor Relations, for a few introductory comments. Good morning, and thank you for joining Procept Biorobotics' first quarter 2024 earnings conference call. Presenting on today's call are Reza Zadno, Chief Executive Officer; Hisham Shiblaq, Chief Commercial Officer; and Kevin Waters, Chief Financial Officer.

Matt: President Investor Relations for a few introductory comments.

Matthew James Bacso: Good morning, and thank you for joining Procept Biorobotics' first quarter 2024 earnings conference call. Presenting on today's call are Reza Zadno, Chief Executive Officer; Sham Shiblok, Chief Commercial Officer; and Kevin Waters, Chief Financial Officer.

Matt: Good morning, and thank you for joining prostate by Robotics first quarter 2024 earnings conference call presenting on today's call are <unk>, Chief Executive Officer, Sam She block Chief Commercial officer, and Kevin Waters, Chief Financial Officer before we begin I'd like to remind listeners that statements made on this conference call that relate.

Matthew James Bacso: Before we begin, I'd like to remind listeners that statements made on this conference call that relate to future plans, events, or performance are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. 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.

Matt: To future plans events or performance are forward looking statements as defined under the private Securities Litigation Reform Act of 1995, 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.

Matt: These risks and uncertainties are disclosed in more detail and prostate firebox filings with the Securities and Exchange Commission all of which are available online at Www Dot FCC Dot Gov listeners are cautioned not to place undue reliance on these forward looking statements, which speak only as of today's date may one 2024.

Matthew James Bacso: These risks and uncertainties are disclosed in more detail in Procept Biorobotics' filings with the Securities and Exchange Commission, all of which are available online at www.sec.gov. Listeners are cautioned not to place too much reliance on these forward-looking statements, which speak only as of today's date, May 1st, 2024. Except as required by law, Procept Biorobotics undertakes no obligation to update or revise any forward-looking statements to reflect new information, circumstances, or unanticipated events that may arise.

Matt: As required by law for us that 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 measure.

Matthew James Bacso: During the call, we also referenced 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 to their nearest GAAP equivalent, is included in our earnings release. With that, I'll turn the call over to Reza.

Matt: <unk> as well as reconciliations of these measures to their nearest GAAP equivalent are included in our earnings release with that I'll turn the call over to Reza.

Reza Zadno: Good morning, and thank you for joining us. On today's call, I will provide opening comments and a general business update, followed by Sham, who will go into detail on a few key commercial initiatives. Kevin will then provide additional details regarding our financial performance and updated 2020 board guidance before opening the call to Q&A. We are pleased to report another strong quarter, with total revenue for the first quarter of 2024 of $44.5 million, representing growth of 83% compared to the first quarter of 2023.

Matthew James Bacso: These risks and uncertainties are disclosed in more detail in Procept Biorobotics' filings with the Securities and Exchange Commission, all of which are available online at www.sec.gov. Listeners are cautioned not to place too much reliance on these forward-looking statements, which speak only as of today's date, May 1, 2024. Except as required by law, Procept Biorobotics 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 also mentioned certain financial measures that are not prepared in accordance with GAAP.

Reza: Good morning, and thank you for joining us for today's call I'll provide opening comments and a general business update followed by Sham.

Reza: I'll go into detail on our future commercial initiatives.

Reza Zadno: More information about how we use these non-GAAP financial measures, as well as reconciliations of these measures to their nearest GAAP equivalent, is included in our earnings release. With that, I'll turn the call over to Reza. Good morning, and thank you for joining us. On today's call, I will provide opening comments and a general business update, followed by Hisham, who will go into detail on a few key commercial initiatives. Kevin will then provide additional details regarding our financial performance and updated 2020 board guidance before opening the call to Q&A.

Reza: Kevin will then provide additional details regarding our financial performance and updated 2020 guidance before opening the call to Q&A.

Reza Zadno: We are pleased to report another strong quarter with total revenue for the first quarter of 2024 of $44.5 million, representing growth of 83% compared to the first quarter of 2023. Growth in the quarter was driven by strong U.S. system sales, increased utilization from our expanded U.S. installed base, and record international revenues.

Reza: We are pleased to report another strong quarter with total revenue for the first quarter of 2024 up $44 $5 million representing growth up 83% compared to the first quarter of 2023.

Reza Zadno: Growth in the quarter was driven by strong U.S. system sales, increased utilization from our expanded U.S. install base, and record international revenues. U.S. monthly utilization increased approximately 7% compared to the prior year period, which is significant given an 84% increase in our install base. We exited the first quarter of 2024 with a U.S. install base of 354 systems out of a target market of 2,700 total hospitals that perform BPA surgeries. The significant increase in new accounts, in conjunction with our ability to move accounts up the utilization curve, further demonstrates not only our team's consistent commercial execution but growing customer and patient demand for accoblation therapy.

Kevin Waters: Both in the quarter was driven by strong U S system sales increased utilization from our expanded U S installed base and record international revenues.

Reza Zadno: U.S. monthly utilization increased approximately 7% compared to the prior year period, which is significant given an 84% increase in our installed base. We exited the first quarter of 2024 with a U.S. installed base of 354 systems out of a target market of 2,700 total hospitals that perform BPA surgeries. The significant increase in new accounts, in conjunction with our ability to move accounts up the utilization curve, further demonstrates not only our team's consistent commercial execution but growing customer and patient demand for acublation therapy.

Kevin Waters: Monthly utilization increased approximately 7% compared to the prior year period, which is significant given that 84% increase in our installed base.

Kevin Waters: We exited the first quarter of 'twenty 'twenty four with a U S installed base up 354 systems out of our target market of 2007 hundred total hospitals that perform BPA surgeries.

The significant increase in new accounts in conjunction with our ability to move accounts update utilization or further demonstrates not only our team's consistent commercial execution.

Kevin Waters: <unk> customer and patient demand for our correlation therapy.

Reza Zadno: As we highlighted earlier this year, there are multiple factors trending in the right direction, which will allow us to continue to execute against our long-term growth plan while being disciplined in showing a path to profitability. We believe these underlying fundamentals reflect the technology that is laying the foundation to become the BPH surgical standard of care and a business that will be a leading urology franchise globally, starting with the hospital CAPEX environment.

Kevin Waters: As we highlighted earlier this year there are multiple factors trending in the right direction, which will allow us to continue to execute against our long term growth plan, while being disciplined in showing the path to profitability.

Kevin Waters: We believe these underlying fundamentals like the technology that is laying the foundation to become the BPH surgical standard of care and the business that will be a leading urology franchise globally.

Kevin Waters: Starting with the hospital Capex environment.

Reza Zadno: We continue to believe the market is stable to improving compared to the previous 9 to 12 months. Specifically, we are having more proactive conversations with hospital CFOs and idea network partners. Compared with just a few quarters ago, we're exercising more caution in pursuing general CapEx investment given lingering macro headwinds.

Kevin Waters: Continue to believe the market is stable to improving compared to the previous nine to 12 months, specifically, we are having more proactive conversations with the hospital Cfos and IGN network partners with just a few quarters ago, we're exercising more caution in pursuing general Capex investment.

Kevin Waters: Given lingering macro headwinds.

Reza Zadno: With a growing and increasingly educated patient population, along with motivated urologists, we are seeing hospitals prioritize investment in our aqua-beam robotic system to ensure they stay competitive and not lose patients to other area hospitals. Given the disruptive nature of our technology and that patient outcomes are independent of certain skills or experience, every BPH hospital can now build a robust BPH practice with agglomeration therapy and not have to refer patients out to area specialists.

Reza Zadno: With a growing and increasingly educated patient population, along with motivated urologists, we are seeing hospitals prioritize investment in our Aquamim robotic system to ensure they stay competitive and not lose patients to other area hospitals. Given the disruptive nature of our technology and that patient outcomes are independent of certain skills or experience, every BPH hospital can now build a robust BPH practice with agglomeration therapy and not have to refer patients out to area specialists.

Kevin Waters: With a growing and increasingly educated patient population along with motivated urologists, we're seeing hospitals prioritize investment in our Aqua robotic system to ensure they stay competitive and not lose patients other area hospitals.

Kevin Waters: Given the disruptive nature of our technology and that patient outcomes are independent not surgeon's skill or experience every BPH hospitals can now build a robust BPH practice with a coalition therapy and not have to refer patients out to areas specialists.

Reza Zadno: Given these market dynamics, we are still very early in our adoption curve with a long runway in front of us selling to BPH hospitals. Additionally, in the first quarter, we launched a pilot program at our first ambulatory surgery center in the United States with one of our most experienced ag population surgeons. To be clear, we sold 38 systems in the first quarter but placed 39. The 39th is the aforementioned ASC and is included in our U.S. install base of 354.

Reza Zadno: Given these market dynamics, we are still very early in our adoption curve with a long runway in front of us selling to BPH Hospital. Additionally, in the first quarter, we launched a pilot program at our first ambulatory surgery center in the United States with one of our most experienced ag-population surgeons. To be clear, we sold 38 systems in the first quarter but placed 39. The 39th is the aforementioned ASC and is included in our U.S. installed base of 354.

Kevin Waters: Given these market dynamics, we are still very early in our adoption curve with a long runway in front of us selling to BPH hospitals.

Kevin Waters: Additionally, in the first quarter, we launched a pilot program at our first ambulatory surgery centers in the United States with one of our most experienced a population of surgeons.

To be clear, we sold 38 systems in the first quarter, but placed 39.

Kevin Waters: 39 is the aforementioned ASC and is included in our U S installed base of 350 foot. Our primary commercial strategy remains focused on penetrating BPH hospitals and partnering with the thousands of urologists, who performed receptive surgeries.

Reza Zadno: Our primary commercial strategy remains focused on penetrating BPH hospitals and partnering with the thousands of urologists who perform resective surgery. For Accoblation Therapy to be the market leader, we first need to convert the majority of DERP and laser procedures which are primarily performed in the hospital setting before making a meaningful transition to ASC. Our objective in placing systems at ASCs is to ultimately expand the surgical market long-term and increase overall surgical patient volumes that were previously either on medication or failed medication. To note, there is established Medicaid reimbursement for acquisition therapy in the ASC at approximately $6,200 per procedure.

Reza Zadno: Our primary commercial strategy remains focused on penetrating BPH hospitals and partnering with the thousands of urologists who perform resective surgeries. For Aquavolation Therapy to be the market leader, we first need to convert the majority of DERP and laser procedures which are primarily performed in the hospital setting before making a meaningful transition to ASC. Our objective in placing systems at ASCs is to ultimately expand the surgical market long-term and increase overall surgical patient volumes that were previously either on medication or failed medication. To note, there is established Medicaid reimbursement for acquisition therapy in the ASC at approximately $6,200 per procedure.

Kevin Waters: Acclamation of therapy to be the market leader, we first need to convert the majority of dirt and laser procedures, which are primarily performed in the hospital setting before making a meaningful transition to ASC.

Kevin Waters: Our objective in placing systems at ASC is to ultimately expand the surgical market long term and increase overall surgical patient volumes that were previously either a medication or failed medications to note. There is established Medicare reimbursement for acquisition therapy in the ASC at Approx.

Kevin Waters: <unk> $6200 per procedure.

Reza Zadno: We are encouraged by early utilization metrics at this center and will provide additional updates when it makes sense in the future. Turning to our commercial organization, we entered 2024 with approximately 40 capital sales reps, of which 10 were added in the third and fourth quarters of 2023. As a reminder, we believe the productivity curve for capital growth is approximately six months.

Kevin Waters: We are encouraged with early utilization metrics at this center and we'll provide additional updates when it makes sense in the future.

Reza Zadno: Over this six-month period, they are responsible for building out their respective pipelines. Thus, we do not expect the capital reps added in the fourth quarter of 2023 to start meaningfully contributing to U.S. system sales until the second half of 2024, which is factored into our 2024 guidance. Additionally, we hired a new strategic account team, which is not included in the 40 capital reps. Hisham will provide further detail on this team's early impact in the first quarter.

Kevin Waters: Turning to our commercial organization.

Kevin Waters: We entered 2024 with approximately 40 capital sales reps of which 10 were added in the third and fourth quarter of 2023.

Kevin Waters: As a reminder, we believe the productivity careful capital reps is approximately six months.

Reza Zadno: Over this six-month period, they are responsible for building out their respective pipelines. Thus, we do not expect the capital reps added in the fourth quarter of 2023 to start meaningfully contributing to U.S. system sales until the second half of 2024, which is factored into our 2024 guidance. Additionally, we hired a new strategic account team, which is not included in the 40 capital reps. Sean will provide further detail on this team's early impact in the first quarter. Next, we touch on our utilization.

Over the six months period, they are responsible for building out their respective pipelines. Thus, we do not expect the capital reps added in the fourth quarter of 2023 to start meaningfully contributing to U S system sales until the second half of 'twenty 'twenty, four which is factored into our 'twenty 'twenty four guidance.

Kevin Waters: Additionally, we hired a new strategic accounts team, which is not included in the four Decapped address Shambled provides further detail on this team's early impact in the first quarter.

Reza Zadno: Next, touching on our utilization. Given our strong commercial momentum and expanding pipeline, 2023 was an investment year to meaningfully increase headcount and add capacity to support future growth. Similar to our capital rep team, we entered 2024 with the most experienced utilization team in the company's history. While we will continue to increase headcount in 2024, it will be at a slower pace compared to 2023.

Kevin Waters: Next touching on our utilization team.

Reza Zadno: Given our strong commercial momentum and expanding pipeline, 2023 was an investment year to meaningfully increase headcount and add capacity to support future growth. Similar to our capital rep team, we entered 2024 with the most experienced utilization team in the company's history. While we will continue to increase headcount in 2024, it will be at a slower pace compared to 2023. Our goal in 2024 will be for these networks to continue to identify and train new surgeons at existing and new accounts to increase utilization with respect to international performance in the first quarter.

Given our strong commercial momentum and expanding pipeline 2023 was an investment year to meaningfully increased head count and add capacity to support future growth.

Kevin Waters: Similar to our capital regime, we entered 2024 with the most experienced utilization team in the company's history. While we will continue to increase head count in 2024, it will be at a slower pace compared to 2023.

Reza Zadno: Our goal in 2024 will be for these straps to continue to identify and train new surgeons at existing and new accounts to increase utilization. With respect to international performance in the first quarter, we generated $4.3 million of international revenue in the first quarter of 2024, representing growth of 65% compared to the prior year period. Growth in the first quarter was once again driven primarily by strong sales momentum in the United Kingdom.

Our goal in 2024 will be for these drafts to continue to identify and train new surgeons at the existing and new accounts to increase utilization.

Kevin Waters: With respect to international performance in the first quarter.

Reza Zadno: We generated $4.3 million of international revenue in the first quarter of 2024, representing growth of 65% compared to the prior year period. Growth in the first quarter was once again driven primarily by strong sales momentum in the United Kingdom.

Kevin Waters: We generated $4 $3 million of international revenue in the first quarter of 2024, representing growth of 65% compared to the prior year period.

Kevin Waters: Growth in the first quarter was once again, driven primarily by strong sales momentum in the United Kingdom.

Reza Zadno: Given the increasing interest from UK surgeons and strong unit economics on handpiece and system average selling prices, we plan to make further investments in 2024 in the UK to accelerate growth and expand patient awareness. Additionally, following our post-market survey in Japan, we have generated significant interest from Japanese surgeons. We are currently in the final stages of signing sales contracts with some of the most reputable virology practices in Japan, and we plan to launch a population therapy program later this year.

Reza Zadno: Given the increasing interest from UK surgeons and strong unit economics on hand piece and system average selling prices, we plan to make further investments in 2024 in the UK to accelerate growth and expand patient awareness. Additionally, following our post-market survey in Japan, we have generated significant interest from Japanese surgeons. We are currently in the final stages of signing sales contracts with some of the most reputable virology practices in Japan, and we plan to launch a population therapy program later this year. While we are excited about these early placements, it will take time to build our pipeline and launch accounts to start generating meaningful procedure volumes and revenue.

Given the accelerating interest from UK surgeons and strong unit economics on Handpiece system average selling prices, we plan to make further investments in 2024 in the UK to accelerate growth and expand patient awareness.

Kevin Waters: Additionally, following our post market survey in Japan, we have generated significant interest from Japanese surgeons. We are currently in the final stages of signing sales contracts with some of the most reputable urology practices in Japan, and we plan to launch ablation therapy program later this year.

Reza Zadno: While we are excited about these early placements, it will take time to build our pipeline and launch accounts to start generating meaningful procedure volumes and revenue. Like the U.S. and the United Kingdom, our strategy is to lead with clinical data and key opinion leader adoption to support a more robust and sustainable commercial model. Lastly, I want to touch on prostate cancer. A few weeks ago, we announced we would be hosting an investor event and surgeon panel at the 2024 American Neurological Association Conference in San Antonio on Friday, May 3rd at 8 a.m. Central. A webcast option will be available on our IR website for those who cannot attend in person.

Kevin Waters: While we are excited about these early placements.

Kevin Waters: It will take time to build our pipeline and launch accounts to start generating meaningful procedure volumes and revenue.

Reza Zadno: Like the U.S. and the United Kingdom, our strategy is to lead with clinical data and key opinion leader adoption to support a more robust and sustainable commercial law. Lastly, I want to touch on prostate cancer. A few weeks ago, we announced we would be hosting an investor event and surgeon panel at the 2024 American Neurological Association Conference in San Antonio on Friday, May 3rd at 8 a.m. Central. A webcast option will be available on our IR website for those who cannot attend in person.

Kevin Waters: Like the U S and the United Kingdom, our strategy is to lead with clinical data and key opinion leader adoption to support a more robust and sustainable commercial launch.

Kevin Waters: Lastly, I want to touch on prostate cancer.

Kevin Waters: A few weeks ago, we announced we will be hosting an investor event and surgeon panel at the 'twenty 'twenty Four American Neurological Association conference. It sounds journey on Friday may 3rd at eight a M central.

A webcast option will be available on our IR website for those who cannot attend in person.

Reza Zadno: The agenda for Friday's event will be to highlight six months of follow-up data of patients treated for prostate cancer with aquablation therapy. Additionally, one of our panelists will share a specific prostate cancer case and how the patient was treated. Lastly, we will conduct a fireside chat with Dr. Inderbir Gill, founding executive director of USC Urology and chairman of Urological Cancer Surgery at Keck School of Medicine at USC. The fireside chat will focus on limitations of current prostate cancer treatment options and why aquablation therapy has the potential to be a great option for patients and, ultimately, surgeons who want to recommend a treatment that is effective and reduces rates of unnecessary harm.

Kevin Waters: The agenda for Friday's events will be to highlight six months follow up data of patients treated for prostate cancer with Aqua ablation therapy. Additionally, one of our panelists will share a specific prostate cancer case and how the patient was treated lastly, we will conduct a fireside chat with Dr.

Kevin Waters: And they're big Gil founding executive director at the USC, Urology and chairman of neurological cancer surgery object school of medicine at USC.

Kevin Waters: The fireside chat will focus on limitations of current prostate cancer treatment options and why a coalition therapy has the potential to be a great option for patients and ultimately surgeons, who want you to comment that treatment that is effective and reduced sales rates are unnecessary harm.

Reza Zadno: We look forward to seeing many of you this Friday in person. To conclude my prepared remarks, every key metric we track continues to move in the right direction. To summarize, our pipeline and sales funnel continue to grow nicely in what we currently believe is a stable to improving macro environment. On average, the longer an account has been active, the more procedures they do.

Kevin Waters: We look forward to seeing many of you. This Friday in person to conclude my prepared remarks every key metrics. We track continues to move in the right direction to summarize our pipeline and sales funnel continues to grow nicely in what we believe is a stable to improving macro environment.

Reza Zadno: To conclude my prepared remarks, every key metric we track continues to move in the right direction. To summarize, our pipeline and sales funnel continue to grow nicely in what we currently believe is a stable to improving macro environment. On average, the longer an account has been active, the more procedures it does. We are launching new accounts with more surgeons while sustaining retention rates consistently above 90%. Our commercial organization is the largest and most tenured in the company's history, which we believe will lead to increased productivity.

Kevin Waters: On average the longer an account has been active in more procedures. They do we are launching new accounts with more surgeons, while sustaining retention rates consistently above 90%.

Hisham Shiblaq: We are launching new accounts with more surgeons while sustaining retention rates consistently above 90 percent. Our commercial organization is the largest and most tenured in the company's history, which we believe will lead to increased productivity. And lastly, we will continue to enroll patients in both prostate cancer studies to support population therapist clinical value in this therapeutic area to expand our footprint in the larger urology market. Given this positive momentum, we believe aqua ablation therapy is laying the foundation to become the BPH surgical standard of care, and Procept is emerging as a leading global urology company. With that, I will turn the call over to Hisham.

Kevin Waters: Our commercial organization is the largest and most tenured in the company's history, which we believe will lead to increased productivity.

Reza Zadno: And lastly, we will continue to enroll patients in both prostate cancer studies to support our population therapy's clinical value in this therapeutic area and expand our footprint in the larger urology market. Given this positive momentum, we believe aquablation therapy is laying the foundation to become the BPH surgical standard of care, and Procept is emerging as a leading global urology company.

Kevin Waters: And lastly, we will continue to enroll patients in both prostate cancer studies to support a population therapies clinical value in this therapeutic area to expand our footprint in the larger urology market.

Reza Zadno: With that, I will turn the call over to Sean.

Kevin Waters: Given this positive momentum, we believe aqua ablation therapies laying the foundation to become the BPH surgical standard of care and <unk> is emerging as a leading global urology company with that I will turn the call over to Sharon.

Sham Shiblok: Thanks Reza. I appreciate the opportunity to speak today as this is my first time participating in our quarterly earnings calls. While I've met a number of you at various investor events and bus tours, my name is Sham Shablak and I am Procept's Chief Commercial Officer and have been with the company since March 2019. Having been at Procept for over five years now, it is very fulfilling to look back at what we have collectively been able to accomplish in a relatively short period of time. While our recent history has been exciting, we believe our future will be transformational.

Hisham Shiblaq: Thanks, Reza. I appreciate the opportunity to speak today as this is my first time participating in our quarterly earnings call. While I've met a number of you at various investor events and bus tours, my name is Hisham Shiblaq, and I am Procept's Chief Commercial Officer and have been with the company since March 2019. Having been at Procept for over five years now, it is very fulfilling to look back at what we have collectively been able to accomplish in a relatively short period of time.

Sharon: Thanks, Roger I appreciate the opportunity to speak today as this is my first time participating in our quarterly earnings calls.

Sharon: I've met a number of you at various investor events and bus tours. My name is <unk> <unk>, Chief commercial officer and have been with the company since March 2019.

Sharon: That process for over five years now, it's very fulfilling to look back at what we have collectively been able to accomplish in a relatively short period of time.

Hisham Shiblaq: While our recent history has been exciting, we believe our future will be transformational. To build off Reza's section, I want to provide additional context on a few key areas, starting with an update on our strategic accounts team and relationships with IDM. As Reza mentioned, we successfully hired a strategic accounts team to join Procept with decades of experience selling capital equipment and building successful robotic programs and large IDMs. The role of this team will be to focus on partnering with strategic IDN networks across the country to improve our sales efficiencies in both the capital selling process and improve utilization at targeted IDNs.

Sharon: While our recent history has been exciting we believe our future will be transformational to <unk>.

Sharon: All about revenue section I want to provide additional context on a few key areas starting with an update on our strategic accounts team and relationships with IBM.

Sharon: As Robert mentioned, we successfully hired a strategic accounts team, who joined <unk> with decades of experience selling capital equipment and building successful robotic programs on large idms.

Sharon: This team will be to focus on partnering with strategic idea and networks across the country to improve our sales efficiencies in both the capital selling process and improve utilization at targeted IBM. As a reminder, we successfully established sales and legal contracts with the majority of large strategic idms in 2023, which allowed this new team to hit the ground running in the <unk>.

Hisham Shiblaq: As a reminder, we successfully established sales and legal contracts with the majority of large strategic IDNs in 2023, which allowed this new team to hit the ground running in the first quarter. Our IDN strategy is initially focused on the top 17 strategic IDNs that account for 29% of BPH hospitals. Regarding system sales in the first quarter, we saw several sales to these strategic IDNs. In prior quarters, hospitals in these IDNs would access regional or local funds to purchase the Aquabeam system. In the first quarter of this year, multiple strategic IDNs used corporate funds to complete Aquabeam purchases.

Sharon: First quarter.

Our IDM strategy initially focused on the top 17 strategic RDM that account for 29% of BPH hospitals regarding system sales in the first quarter. We saw several sales to these strategic idms and prior quarter as hospitals, and these ibm's, where access regional or local funds to purchase the aqua being system.

Sharon: In the first quarter of this year multiple strategic Ibms corporate bonds to complete aqua being purchases as they positive shift demonstrating the supportive operation therapy at the corporate level of strategic Ibms.

Hisham Shiblaq: This is a positive shift demonstrating the support of occupational therapy at the corporate level of strategic IDM. The systems purchased by these IDNs in the first quarter were already in our targeted sales pipeline and well-progressed in our sales process, so they did not add to our forecast incrementally. Nevertheless, the strategic account team played a crucial role in utilizing corporate funds to deploy AquaBeam systems in hospitals where we already had an existing surgeon champion.

Sharon: Systems purchased by these IBM in the first quarter, we're already at our targeted sales pipeline and well progressed in our sales process. So they did not add to our forecast incrementally. Nevertheless, the strategic account team played a crucial role in utilizing corporate funds to deploy aqua beam systems in hospitals, where we already have an existing surgeon champion given an improving hospital capex environment.

Hisham Shiblaq: Given an improving hospital capex environment and this team's early contributions in a quarter that is typically seasonally difficult, I not only have a high degree of confidence but high expectations for what they can accomplish in future quarters. Turning to Surgeon Interest and Patient Awareness As we've communicated to investors over the last few years, our primary focus is for aquablation therapy to become the standard of care for BPH surgery. To achieve this goal, we have prioritized surgeon engagement, patient outcomes, and training. Regarding surgeon engagement, in the first quarter, we held numerous peer-to-peer medical education events, which included participation from hundreds of urologists who were introduced to oculoplastic therapy for the first time.

<unk> and his team's early contributions in the quarter that is typically seasonally difficult and not only have a high degree of confidence high expectations for what they can accomplish in future quarters turning.

Sharon: Turning to certain interest in patient awareness and we have communicated to investors over the last few years. Our primary focus is for Aqua chelation therapy to become the standard of care for BPH surgery and to achieve this goal, we have prioritized surgeon engagement patient outcomes and training.

Sharon: Regarding surgeon engagement in the first quarter, we held numerous peer to peer medical medical education events, which included participation from hundreds of urologists, who introduced the operation therapy for the first time.

Hisham Shiblaq: Given the growth we have experienced over the last few years, our medical education events have been a great way to highlight our technology and for customers to share their positive experiences with aquablation with prospective physicians. This allows our participating surgeons to engage more effectively with their respective hospital CFOs to eventually acquire an AquaBeam robotic system. Regarding first quarter procedure volumes, the primary drivers of procedure volume continue to be active surgeon growth and adding new surgeons at both existing and new accounts.

Sharon: Given the growth we had experienced over the last few years, our medical education events have been a great way to highlight our technology and for customers to share their positive experience with <unk>.

Sharon: Ablation to prospective physicians. This allows our participants surgeons to engage more effectively with their respective hospital cfos to eventually acquire enough would be robotics system.

Sharon: Regarding first quarter procedure volumes. The primary drivers of that procedure volume continued to be active active surgeon growth and adding new surgeons at both existing and new accounts. Additionally, our ability to maintain certain retention rates above 90% demonstrates the clear patient and surgeon benefits of our technology, which ultimately leads to increased utilization.

Hisham Shiblaq: Additionally, our ability to maintain surgeon retention rates above 90% demonstrates the clear patient and surgeon benefits of our technology, which ultimately leads to increased utilization. As a company, we benefit greatly from this high level of surgeon retention as our commercial team can focus on adding new surgeons. And with that, I will turn the call over to Kevin. Thanks, Hisham.

Sharon: As a company we benefit greatly from this high level of surgeon, our attention and our commercial team can focus on adding new surgeons and with that I will turn the call over to Kevin.

Kevin Waters: Total revenue for the first quarter of 2024 was $44.5 million, representing growth of 83% compared to the first quarter of 2023. U.S. revenue for the quarter was $40.2 million, representing growth of 85% compared to the prior year period. In the first quarter, we sold 38 AquaBeam robotic systems with average selling prices of $373,000, generating total U.S. system revenue of $14.2 million, representing system revenue growth of 62% compared to the first quarter of 2023.

Kevin Waters: Thanks, Tim total revenue for the first quarter of 2024 was $44 5 million representing growth of 83% compared to the first quarter of 2023.

Kevin Waters: Revenue for the quarter was $40 2 million representing growth of 85% compared to the prior year period.

Kevin Waters: In the first quarter, we sold 38, Aqua beam robotic systems with average selling prices of $373000 generating total U S system revenue of $14 2 million.

Kevin Waters: Representing system revenue growth of 62% compared to the first quarter of 2020.

Kevin Waters: As Reza indicated, we sold 38 systems in the first quarter but placed an additional system at an ASC. While we may consider additional ASC placements in 2024, these placements are not factored into our system revenue guidance for 2024. U.S. handpiece and consumable revenue for the first quarter of 2024 was $23.6 million, representing growth of approximately 101% compared to the first quarter of 2023. Handpiece growth was driven by an increase in the installed base of AquaBeam Robotic Systems, which has grown 84% from the first quarter of 2023.

As Roger indicated we sold 38 systems in the first quarter, but placed an additional system at an ASC, while we may consider additional ASC placements in 2024. These placements are not factored into our system revenue guidance for 2024.

Kevin Waters: U S handpiece in consumable revenue for the first quarter of 2024 was $23 $6 million representing.

Kevin Waters: Representing growth of approximately 101% compared to the first quarter of 2023.

Kevin Waters: <unk> growth was driven by an increase in the installed base of Aqua beam robotic systems, which has grown 84% from the first quarter of 2023.

Kevin Waters: Additionally, monthly utilization of 6.8 handpieces per account increased approximately 7% compared to the first quarter of 2023. Utilization in the first quarter exceeded our initial guidance and, as expected, was down sequentially given normal elective procedure seasonality compared to the calendar fourth quarter. Overall, we continue to see increased utilization across all cohorts, which is a direct reflection of strong commercial execution, training new surgeons, and surgeons taking the next step to adopt oculation therapy as their treatment of choice for all resective procedures. We shipped 6,811 handpieces in the U.S. in the first quarter, representing unit growth of 100% compared to the first quarter of 2023. In the first quarter, hand-paced average selling prices were approximately $3,200.

Kevin Waters: Additionally, monthly utilization of $6 eight hand pieces per account increased approximately 7% compared to the first quarter of 2023.

Kevin Waters: Utilization in the first quarter exceeded our initial guidance and as expected was down sequentially given normal elective procedure seasonality compared to the calendar fourth quarter overall.

Kevin Waters: Overall, we continue to see increased utilization across all cohorts, which is a direct reflection of strong commercial execution training, new surgeons and surgeons, taking the next step adopt aqua relation therapy in their treatment of choice for all refractive procedures.

Kevin Waters: <unk> 6811 hand pieces and the U S. In the first quarter, representing unit growth of 100% compared to the first quarter of 2023.

Kevin Waters: First quarter <unk> average selling prices were approximately $3200.

Kevin Waters: We also recorded $1.8 million of other consumable revenue in the first quarter of 2024. International revenue for the first quarter of 2024 was $4.3 million, representing growth of approximately 65%. Gross margin for the first quarter of 2024 was 56.2%, representing an all-time high and 120 basis points above the high end of our first quarter guidance we provided in February. Growth margin expansion in the first quarter was due to strong execution from our operations team and our ability to absorb overhead expenses along with revenue overachievement.

Kevin Waters: We also recorded $1 8 million of other consumable revenue in the first quarter of 2024.

Kevin Waters: Our national revenue for the first quarter was $4 3 million representing growth of approximately 65%.

Kevin Waters: Gross margin for the first quarter of 2024 was 56, 2% representing an all time high and the 120 basis points above the high end of our first quarter guidance, we provided in February.

Kevin Waters: Gross margin expansion in the first quarter was due to strong execution from our operations team and our ability to absorb overhead expenses along with revenue over achievement.

Kevin Waters: Moving down the income statement, total operating expenses in the first quarter of 2024 were $52.7 million compared to $40.9 million in the same period of the prior year and $50.8 million in the fourth quarter of 2023. The increase was driven by increased sales and marketing expenses, primarily to expand the commercial organization, increased research and development expenses, and general and administrative expenses. When comparing revenue growth to operating expense growth, we see revenue was 83% in the first quarter on 29% operating expense growth, which is a favorable ratio of 2.9 times. Total interest and other income was $1.7 million. Quarterly interest expense from our $52 million term loan was offset by favorable interest income from our cash balance.

Kevin Waters: Moving down the income statement.

Kevin Waters: Total operating expenses in the first quarter of 2024 were $52 7 million.

Kevin Waters: Compared to $40 9 million in the same period of the prior year and $58 million in the fourth quarter of 2023.

Kevin Waters: The increase was driven by increased sales and marketing expenses, primarily to expand our commercial organization and increased research and development expenses and general and administrative expenses.

Kevin Waters: When comparing revenue growth to operating expense growth. We grew revenues, 83% in the first quarter on 29% operating expense growth, which is a favorable ratio of two nine times.

Total interest and other income was $1 $7 million.

Kevin Waters: Interest expense from our $52 million term loan was offset by favorable interest income from our cash balances.

Kevin Waters: The net loss was $26 million for the first quarter of 2024 compared to $28.5 million in the same period of the prior year. Suggested EBITDA was a loss of $20.4 million compared to a loss of $23.9 million in the first quarter of 2023. Our cash and cash equivalents balance as of March 31st was $229 million.

Kevin Waters: Net loss was $26 million for the first quarter of 2024, compared with $28 5 million in the same period of the prior year.

Kevin Waters: Adjusted EBITDA was a loss of $24 million.

Compared to a loss of $23 9 million in the first quarter of 2023.

Kevin Waters: Our cash and cash equivalents balance as of March 31 was $229 million we.

Kevin Waters: We believe our strong balance sheet will provide the liquidity and capital resources needed to support and grow our current business. Moving on to our 2024 financial guidance. We now expect full-year 2024 total revenue to be approximately $213.5 million, representing growth of approximately 57% compared to 2023. Starting with U.S. systems, we continue to expect approximately 45% of system sales to be in the first half of 2024, which we attribute to normal seasonality and our expanded sales force becoming more productive in the second half of 2024. This exhibits a similar cadence to what we experienced in 2023. We also anticipate system average selling prices in 2024 to be approximately $370,000. Turning to U.S. hand features.

Kevin Waters: We believe our strong balance sheet will provide the liquidity and capital resources needed to support and grow our current business.

Kevin Waters: We continue to expect to sell approximately 33,000 hand pieces for the full year at average selling prices of approximately $3,200. We also expect other consumables revenue to be approximately $9 million for the full year. Regarding quarterly cadence, we expect utilization to modestly increase sequentially throughout the year. Additionally, we expect U.S. service revenue to be approximately $12 million. Lastly, on international revenue, given another strong quarter and positive momentum in the United Kingdom, we now expect full-year international revenue to be approximately $18.5 million, representing growth of approximately 56%.

Kevin Waters: Moving to our 2024 financial guidance.

Kevin Waters: We now expect full year 2020 for total revenue to be approximately $213 5 million representing growth of approximately 57% compared to 2023.

Starting with U S systems, we continue to expect approximately 45% of systems sales to be in the first half of 2024, which we attribute to normal seasonality and our expanded sales force, becoming more productive in the second half of 2024.

Kevin Waters: This exhibit a similar cadence to what we experienced in 2023.

Kevin Waters: Also anticipate system average selling prices in 2024 to be approximately $370000.

Kevin Waters: Turning to the U S hand pieces.

Kevin Waters: We continue to expect to sell approximately 33000 hand pieces for the full year with average selling prices of approximately $3200.

Kevin Waters: We also expect other consumables revenue to be approximately $9 million for the full year.

Kevin Waters: Regarding quarterly cadence, we expect utilization to modestly increase sequentially throughout the year.

Kevin Waters: Additionally, we expect U S service revenue to be approximately $12 million.

Kevin Waters: Lastly on the international revenue given another strong quarter and positive momentum in the United Kingdom. We now expect full year international revenue to be approximately $18 5 million representing growth of approximately 56%.

Kevin Waters: Moving down the income statement, we now expect full-year 2024 gross margins to be approximately 58 to 59 percent, an increase from our previously issued guidance of 57 to 58 percent. Regarding quarterly cadence, we expect gross margins to increase sequentially throughout the year, with the second quarter being approximately 57%. Turning to operating expenses, we continue to expect full-year 2024 operating expenses to be approximately $231.5 million, representing growth of 29%. In terms of quarterly cadence, we expect the second and third quarter operating expense growth to be in the low-30 percent range compared to the prior year period.

Kevin Waters: Moving down the income statement, we now expect full year 2020 for gross margins to be approximately 58% to 59% an increase from our previously issued guidance of 57% to 58%.

Kevin Waters: Regarding quarterly cadence, we expect gross margins to increase sequentially throughout the year with the second quarter being approximately 57%.

Kevin Waters: Turning to operating expenses.

Kevin Waters: We continue to expect full year 2020 for operating expenses to be approximately $231 $5 million representing growth of 29%.

Kevin Waters: In terms of quarterly cadence, we expect the second and third quarter operating expense growth to be in the low 30 percentage range compared to the prior year period.

Kevin Waters: Given current interest rates, we expect to generate net interest income of approximately $7 million in 2024. Given the increase in revenue and growth margin, we now expect full-year 2024 adjusted EBITDA losses to be approximately $70 million, an improvement from a loss of $73 million from our previous guide. Lastly, we expect our cash burn to approximate our adjusted EBITDA and improve sequentially throughout the year. At this point, I'd like to turn the call back to Reza for closing comments.

Kevin Waters: Given current interest rates, we expect to generate net interest income of approximately $7 million in 2024.

Kevin Waters: Given the increase in revenue and gross margin. We now expect full year 2024, adjusted EBITDA loss to be approximately $70 million an improvement from a loss of $73 million from our previous guidance.

Kevin Waters: Lastly, we expect our cash burn to approximate our adjusted EBITDA improved sequentially throughout the year.

Kevin Waters: At this point I'd like to turn the call back to Roger for closing comments.

Reza Zadno: 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 investment to execute on our long-term strategy. Have a great day.

Roger: 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 seeing many of you.

Reza Zadno: And I look forward to seeing many of you at our AUA investor event on May 3 at 8am Central Time in San Antonio, Texas. At this point, we will take questions. Operator.

Speaker Change: At our <unk> Investor event on May 3rd at eight a M central time in San Antonio, Texas at this point, we will take questions operator.

Operator: Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 1 1 on your telephone. If your question has been answered and you wish to move yourself from the queue, please press star 1 1 again.

Speaker Change: Thank you ladies and gentlemen, if you have a question or a comment at this time. Please press star one on your telephone. If your question has been answered or you wish to move yourself from the queue. Please press star one again, we will pause for a moment, while we compile the Q&A roster.

Operator: We'll pause for a moment while we compile our Q&A roster. Our first question comes from Craig Bijou with B of A Securities. Your line is open.

Speaker Change: Our first question comes from Craig Bijou with Bofa Securities. Your line is open.

Craig William Bijou: Good morning, guys. Thanks for taking the question, and congratulations on a good start to the year. I want to focus on, Kevin, your comments on utilization and the sequential improvement in monthly utilization, and that's a little bit different than kind of the seasonality that you saw last year. So maybe if you could give us a little bit more color on kind of what you're seeing that gives you the confidence that you can see that utilization accelerate throughout the year. Yeah, thanks, Craig. And it was good to speak to you this morning.

Craig William Bijou: Good morning, guys. Thanks for taking my question and congrats on a good start to the year.

Craig William Bijou: I wanted to focus on Kevin your comments on utilization and the sequential improvement in the monthly utilization.

Craig William Bijou: It's a little bit different than kind of the seasonality that you saw last year. So maybe if you can give us a little bit more color on kind of what youre seeing that gives you the confidence that you.

Craig Bijou: You can see that utilization accelerate throughout the year.

Kevin Waters: So it's a fair observation; we are really pleased with the strong start to the year on monthly utilization, which is up about 7% year over year. And coming off the first quarter, you know, we just believe this provides us with multiple proof points and high confidence to continue to drive sequential utilization throughout the year. And specifically, we do look at a variety of metrics around utilization, whether that's launching new accounts now with multiple surgeons, which has increased over the prior year, which leads to sequential increases in utilization. We're also seeing older cohorts now perform more procedures than they were previously performing.

Kevin Waters: Yeah. Thanks, Craig.

This morning so.

Speaker Change: Your observation, we are really pleased with the strong start to the year.

Speaker Change: Utilization, which is up about 7% year over year and coming off the first quarter. We just believe this provided us with multiple proof points and high confidence to continue to drive the sequential utilization throughout the year and specifically we did look at a variety of metrics around utilization, whether that's launching new accounts now with.

Speaker Change: Couple surgeons, which has increased over prior year, which leads to sequential increases in utilization. We're also seeing older cohorts now perform more procedures than they were previously performing and lastly, we continue to see surge in retention rates kind of above 90%. So when we couple those factors together.

Craig William Bijou: And lastly, we continue to see surgeon retention rates kind of above 90%. So when we couple those factors together, we don't want expectations to get ahead of ourselves, but as our guidance implies, we're going to exit the year with right around 500 systems in the U.S. And given the larger install base, the new accounts are having less and less of a dilutive effect, which gives us some confidence to modestly increase utilization sequentially throughout the year. Got it, that's helpful. Thanks, Kevin.

Speaker Change: We don't want expectations to get ahead of ourselves, but as our guidance implies that we're going to exit the year with right around 500 systems in the U S.

Speaker Change: And given the larger installed base the new accounts are having less and less of a dilutive effect, which gives us some confidence to modestly increase utilization sequentially throughout the year.

Kevin Waters: And if I can ask on, obviously, you know, it was good to see some of the profitability metrics, you know, the gross margin, you raised your guidance, OPEX, you know, stayed where it was, despite raising revenue guidance. So it's good to see. And, you know, we'd love to get a little bit more color on how confident you are that you can, you know, continue to drive the leverage in the business and, potentially, any additional leverage or upside to the leverage that you're already expecting.

Speaker Change: Got it Thats helpful. Thanks, Kevin and if I can ask on obviously it was good to see some of the profitability metrics gross margin you raise your guidance.

Speaker Change: Opex stayed where it was.

Speaker Change: Despite raising revenue guidance, so it's good to see and.

Speaker Change: Love to get a little bit more color on how confident you are that you can.

Speaker Change: Continue to drive the leverage in the business.

Speaker Change: And potentially any any additional leverage or upside to deleverage that you're already expecting.

Kevin Waters: Yeah, we said this in our last call when we issued full-year operating expense guidance that we wanted 2024 to be a year where investors felt there was room to overachieve on the top line, but we would be disciplined and kind of maintain our guidance around our operating expenses. You know, that manifested itself in our first quarter results. And specifically, when I look at OPEX, what's exciting for the business is really the exit velocity that our guidance implies from a leverage standpoint.

Speaker Change: Yes.

Speaker Change: Let's say this on our last call when we issued full year operating expense guidance that we wanted 2024 to be a year, where investors felt there was room to overachieve on the top line, but we would be disciplined and kind of maintain our guidance around our operating expenses and that manifested itself in our first quarter results.

Speaker Change: And specifically when I look at Opex, what's exciting for the business is really the exit philosophy that our guidance implies from a leverage standpoint youre.

Kevin Waters: You're going to see year-over-year OPEC growth in the fourth quarter, in the low 20% range, with improving margins, which should be 60% plus equity for the year. I think this is going to demonstrate to our investors tremendous leverage as we exit the year, and we feel really good about our ability to achieve that. Great. Thanks for taking the questions, guys.

Speaker Change: Youre going to see year over year Opex growth in the fourth quarter in the low 20% range with improving margins, which should be 60% plus exiting the year I think this is going to demonstrate.

Speaker Change: Investors tremendous leverage as we exit the year and we feel really good about our ability to achieve that.

Speaker Change: Great. Thanks for taking the questions guys. Congrats again, thanks, Greg good to talk with you.

Speaker Change: Demand for our next question.

Operator: One moment for our next question. Our next question comes from Matthew O'Brien with Piper Sandler. Your line is open. Morna, thanks for taking my questions. Maybe, you know, just for starters on the ASC side, just talk about what you're going to be looking for in terms of pursuing that opportunity. You know, the investments you need to make to go down that pathway, you know, the profitability profile versus the hospital, and I guess why is now the time to start to pursue that, just given all the opportunities that you have within the hospital setting?

Speaker Change: Our next question comes from Matthew O'brien with Piper Sandler Your line is open.

Matthew Ian Mishan: Hi, good morning, Thanks for taking my questions maybe.

Matthew Ian Mishan: Just for starters on the.

Matthew Ian Mishan: The ASC side.

Matthew Ian Mishan: Just talk about what youre going to be looking for in terms of pursuing that opportunity.

Matthew Ian Mishan: The investments you need to make to go down that pathway profits.

Matthew Ian Mishan: Profitability profile versus the hospital and I guess why is now the time to.

Matthew Ian Mishan: Start to pursue that just given all the opportunity that you have within the hospital setting.

Operator: Yeah, thanks, Matt. Our primary commercial strategy remains focusing on penetrating high-volume hospitals and partnering with the thousands of urologists who are performing the respective surgeries. At the same time, we know in order to become a market leader, we have to convert the majority of terp and laser procedures first in the hospital before we... In the prepared remarks, when we talked about the particular site that... Sculpted, is one of our most tenured and experienced surgeons and, in fact, this individual actually requested to pursue... This was, quite frankly, a pull, not a push, but our objective in placing the system I don't know, Hisham. Do you want to add anything to this?

Speaker Change: Yes, Thanks, Matt.

Speaker Change: Our primary commercial strategies remains focusing on penetrating high volume hospitals, and partnering with thousands of urologists, who are performing respective surgeries.

Speaker Change: At the same time, we know in order to become market leader, we have to convert the majority of turbine laser procedure first into hospitals before.

Speaker Change: We make meaningful transition to ASC.

Speaker Change: Yes.

Speaker Change: The prepared remarks, when we talked about their particular site.

Speaker Change: Scott.

Speaker Change: Tim.

Speaker Change: Is that one of our most tenured and experienced surgeons.

Speaker Change: This individual is actually requested to pursue.

Speaker Change: <unk>.

Speaker Change: This was quite frankly, a pool not to push but Jack.

Speaker Change: Activity in placing system at ASC is to ultimately expand this market I don't know Shaun if you wanted to add anything to this.

Matthew O'brien: Yeah, thanks, Matt, for the question. The "why now" question is a good one in the sense that this is not a new interest from our surgeons. We've had a desire to go to ASC in the past; we've talked about it.

Shaun: Thanks, Thanks, Matt for the question.

Shaun: The why now question is a good one in the sense of this is not a new interest from our surgeons. We've we've received.

Desire to go to the ASC in the past we've talked about it.

Reza Zadno: As Reza mentioned, we have a lot of opportunity remaining in the hospital setting to be hyper-focused on that opportunity. With that being said, when we look at specific markets, there are some areas that have adopted the technology quite rapidly, where we have large penetration in certain geographic areas, and surgeons with a lot of aquablation experience. We have established Medicare reimbursement in the ASC. There are a lot of things that we potentially feel like we wanna validate in 2024 as far as the pilot program goes. And like Reza mentioned, we have surgeons that have a desire to do it.

Speaker Change: As Robert mentioned, we have a lot of opportunity remaining in the hospital setting we continue to be hyper focused on that opportunity.

Speaker Change: With that being said when we look at specific markets. There are some areas that have adopted the technology quite rapidly.

Speaker Change: Large penetration in certain geographic areas surgeons with a lot of operation experience, we have established Medicare reimbursement. The ASC. There are a lot of things that we've actually feel like we want to validate in 2024 as far as the pilot program goes and it really matches, we have surgeons that have a desire to do it. So we're using 2024.

Hisham Shiblaq: So we're using 2024 as a pilot year for us to kind of get this program up and going. So in the future, if we desire to expand the ASC, we have that process worked out. Regarding the leverageability of the sales force and profitability, we now have a good footprint in the US.

Speaker Change: As a pilot here for us to kind of get this program up and going so in the future. If we desire to expand ASC. We have that we have that process worked out regarding leverage leverage ability of the sales force and profitability there as we are.

Hisham Shiblaq: We have a utilization team that has worked with and experienced experienced surgeons in the hospital. So we won't need to hire additional people to go into the ASC environment. I appreciate that, Hisham.

Speaker Change: Now have a good footprint in the U S. We have a utilization team that has worked and experience with his experience in the hospital. So we wont need to hire additional people to to go onto the ASC environment. What does take what has continued to leverage our current sales force.

Matthew O'brien: And then maybe for Kevin or Matt B, just on the gross margin side, was really good in the quarter. I think Craig was talking about this to some extent as well, but just, you know, the performance was well above what we were expecting in a feeling softer quarter. Can you talk about where some of the improvement came from, sustainability, that improvement? And then, you know, I know the guide for the year went up on that metric, but is the exit velocity potentially even higher coming out of Q4 for gross margins versus what we may have been thinking a few months ago? Yeah, thanks.

Speaker Change: Got it appreciate that Sham and then maybe for Kevin or Matt just on the gross margin side was really good in the quarter I think Craig was talking about this to some extent as well, but just just the performance is well above what we were expecting and a chemo and softer quarter can you talk about where some of the some of the improvement came from their sustainability of that.

Speaker Change: <unk> and then I know the guide for the year went up on that metric as the exit velocity and potentially even higher.

Speaker Change: Coming out of Q4 for gross margins versus what we may have been thinking a few months ago. Thanks.

Kevin Waters: So I'm just going to address our Q1 performance. The majority of this upside did come from us operating more efficiently at our new facility. We had increased production, we had reduced scrap, and we had improved fixed cost absorption. Particularly compared to the fourth quarter, which we talked about on our last call, being viewed as one-time items. And I think the first quarter kind of proved that out.

Speaker Change: Yes. Thanks.

Speaker Change: First address our Q1 performance.

Speaker Change: Juruti of this upside did comp per month operating more efficiently at our new facility. We had increased production, we had reduced scrap and we had improved fixed cost absorption.

Speaker Change: Particularly compared to the fourth quarter, which we talked about on our last call being viewed as one time items and I think the first quarter kind of prove that out and we do expect this trend to continue to improve as we increase revenue you also do see some pricing favor favorability in our revised guidance. We now believe we're going to be solidly.

Kevin Waters: And we do expect this trend to continue to improve as we increase revenue. You also do see some pricing favorability in our revised guidance. We now believe we're going to be solidly in the $370 range on systems.

Speaker Change: And the 370 range on systems, you see Handpiece asps going up about $40 to 3200, and all of that is helping kind of drive.

Kevin Waters: We see hand-piece ASPs going up about $40 to $3,200, and all of that is helping kind of drive confidence and predictability in our growth margins. Regarding specificity around Q4, I mean, we didn't guide a particular number. I did say that we do expect the second quarter to be approximately 57% and improving from there, which by definition would mean that Q4 has to be 60% plus to get to that full year guide of 58 to 59%. Thank you. One moment for our next question. Our next question comes from Josh Jennings with TD Cowen. Your line is open. Hi, good morning.

Speaker Change: Confidence and predictability in our gross margins regarding specificity around Q4, I mean, we didn't guide to a particular number I did say that we do expect the second quarter to be approximately 57% and improving from there which by definition would mean that Q4 has to be 60% plus I get to that full year guide of 58 to 59.

Speaker Change: Percent.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from Josh Jennings with TD Cowen Your line is open.

Joshua Thomas Jennings: Hi, good morning, Thanks, Thanks for taking the questions.

Operator: Thanks. Thanks for taking the question, the strong start here in 2024. I wanted to follow up on just some of these profitability questions and think about the operating expense guidance for 24 and the leverage. Thank you. I guess I was called out, two times, for having growth.

Joshua Thomas Jennings: Great to see the strong start here in 2024.

Joshua Thomas Jennings: I wanted to follow up on just some of these profitability questions and thinking about the operating expense guidance for 'twenty four and the leverage alright. Thank you called out I guess two times revenue growth over <unk>.

Joshua Thomas Jennings: OPEX growth in 24 versus one and a half times in 2023. I was thinking about 2025, and I know you're not issuing guidance for the out years, but is that the right kind of pace of leverage improvement to think about as we're moving into 2025 and 2026 as we're updating our model? Yeah, we're not going to guide specifically to 25.

Joshua Thomas Jennings: Opex growth and 24 of risk is one five times in 2023.

Joshua Thomas Jennings: I'm thinking about 2025 are not issuing guidance for the out years, but but is that the right kind of pace of leverage improvement to think about it.

Joshua Thomas Jennings: Moving into 2025 and 2026 as we're updating our models.

Speaker Change: Yes, we're not giving guidance specifically the 25 to ill make a few comments.

Kevin Waters: So I'll make a few comments. I've been consistent in saying that two to one off X leverage is a good leverage that will get this business to profitability and something we're striving to achieve for the future years of the company, and we did demonstrate something better than that in the first quarter. Those are the numbers. But what I can say, just the mentality of the company, and I've now been here for kind of five plus years, and where previously revenue growth was, I don't want to say the sole focus, but it was definitely the internal focus of the management team and making sure that we could prove to the market that we have a technology that has the ability to become the standard of care. And that took a lot of investment to do.

Speaker Change: I've been consistent in saying that I do think that two to one opex leverage.

Speaker Change: Good leverage that we'll get this business to profitability and something we're striving to achieve for our.

Speaker Change: Future.

Speaker Change: Years of the company and we did demonstrate something better than that in the first quarter and those are.

Are the numbers, but what I can say just the mentality of the company and I've now been here kind of five plus years and were previously revenue growth was.

Speaker Change: Don't want to say the sole focus but it was definitely the internal focus of the management team and making sure that we could prove to the market that we have a technology that has the ability to become the standard of care and that took a lot of investment to do I now feel this.

Kevin Waters: I now feel the mentality has changed internally, where this pathway to profitability, a commitment to profitability, understanding that, you know, now with our revenue growth, we need to ultimately show profit and start shareholders, that's been embraced by the whole team at Procept, and we're just operating in, I would say, a much more disciplined fashion than we have previously. And, you know, the first quarter's... Only one quarter, but I feel good about the kind of direction the business is heading. And then maybe another follow up, a different follow up on the AFC channel. I was hoping you could share just the title.

Speaker Change: The mentality has changed internally, where this pathway to profitability a commitment to profitability understanding that now with our revenue growth we need to ultimately show a profit star shareholders. That's been embraced by the whole team across that convert is operating.

Speaker Change: I would say a much more disciplined fashion than we have previously.

Speaker Change: The first quarters.

Speaker Change: Only one quarter, but I feel good about kind of the direction of the business is heading.

Speaker Change: Understood.

Another follow up on.

Speaker Change: A different follow up on the ASC channel.

Speaker Change: Yes.

Speaker Change: I was hoping you could share just the.

Speaker Change: The pace of.

Joshua Thomas Jennings: The algorithm centers are using the discharge protocol. Are there more centers that are discharging patients through the hospital outpatient department? Schedule on the same day and just are these patients being sent home with a catheter and coming back in for a check? And just additionally, I mean, is that same-day discharge? Attractive for centers, is that algorithm going to drive increased profitability per occupation treatment, and is that something that the team can measure? Thanks, Josh.

Speaker Change: The algorithm centers are using discharge protocols are there more centers that are discharging patients through the hospital outpatient department schedule on the same day and just are these patients being sent home with a catheter or anything coming back in for chicken.

Speaker Change: And just additionally, I mean is that same day discharge attractive for centers is that algorithm kind of drive increased profitability per activation treatment and as that.

Speaker Change: The team can market to drive even stronger adoption trends. Thanks a lot.

Reza Zadno: So same day discharge, we have many accounts that in the hospital setting, COVID started implementing a protocol that allowed same day discharge. So at the ASC setting, that also happens. Hisham, do you want to add anything about that? Yeah, yeah. Hi Josh.

Speaker Change: Thanks, Josh.

Speaker Change: So same day discharge, we have many accounts that.

Speaker Change: The hospital setting started that Colby that's where.

Speaker Change: Lamenting the protocol.

Speaker Change: Same day discharge so at the ASC setting that also happens Sam do you want to add anything about this particular account yes.

Hisham Shiblaq: So the uptake of same-day surgery in a hospital setting has significantly improved over the years to a point now where we have a very large percentage of surgeons that discharge patients the same day. Obviously, in an ASC setting, you don't have a standard inpatient environment where you keep patients. So you could in many situations, but you choose most of the time to send them home the same day.

Speaker Change: Josh.

Joshua Thomas Jennings: So the uptake of same day surgery in hospital setting has significantly improved over the years.

Sam Sheblock: To a point now where we have a very large percentage of surgeons that discharge a patient at the same day.

Sam Sheblock: In an ASC setting.

Sam Sheblock: You don't have <unk>.

Sam Sheblock: Standard inpatient environment to where where you keep a patient. So if you could in many situations like choose the most of the time to send them home the same day and so when you do an alkylation unit in an ASC setting.

Hisham Shiblaq: And so when you do an oculoplasty in an ASC setting, in a physician-owned ASC setting, your intent is to have that patient go home the same day. You'll see at the AUA this year and other publications that there are multiple centers now, one outside the U.S. and one in the U.S. that are routinely doing patients in the ASC and uncomfortably sending patients home the day of the surgery, which goes back to your question as far as the discharge.

Sam Sheblock: And a <unk>.

Sam Sheblock: Physician owned ASC setting your intent is to have that patient go on the same day, you will see it the way this year and other publications that there are multiple centers now one outside the U S and one of the U S that are routinely doing patients in the AFC and comfortably setting patients home the day of surgery, which got us going back to your.

Sam Sheblock: Question as far as.

Sam Sheblock: The discharge.

Hisham Shiblaq: You wouldn't do that as a surgeon if you did not have ultimate confidence in your ability to treat the patient and send them home the same day. So you would never do a patient in an ASC without that confidence. And so that speaks to the clinical improvement that's happened over the last five years. It speaks to the confidence our surgeons have in the safety of our product. And so all of those things only happen in an ASC when you have all those boxes checked from a clinical and safety perspective.

Sam Sheblock: You wouldn't do that at a surge and if you did not have ultimate confidence in your ability to treat the patient and send them home. The same day. So you would never do a patient an ASC without that confidence and so that speaks to the clinical improvement that's happened over the last five years. It speaks to the confidence our searches have and the safety of our product and so on.

Sam Sheblock: All of those things only happened in AFC. When you have when you have all those boxes checked off on the clinical and safety perspective as far as.

Hisham Shiblaq: As far as the profitability of the procedure, the reimbursements established, we feel like this is an opportunity for surgeons to take the site of care patients desire to be in environments like the ASC. And so we think there's a large opportunity for us in the future to go into ASCs. But like I said, there's a market we're focused on the hospital. We think about when we think about the ASC for us as a market expansion opportunity in the sense that there are a lot of patients that are on the sidelines that don't desire to go to a hospital. And we think this is an opportunity for us to expand the market beyond the hospital environment. Please take a moment for our next question. Our next question comes from Richard Newitter with True Securities. Your line is open.

Sam Sheblock: The profitability of the procedure.

Sam Sheblock: Reimbursements established we feel like this is an opportunity for surgeons to take the site of care patients desire.

Sam Sheblock: To be in environments like the AFC and so we think there is a large opportunity for us.

Sam Sheblock: In the future to go into ASC, but like I said, there is a market we're focused on the hospital. When we think about when we think about the ASC for us as a market expansion opportunity.

There's a lot of patients that are on the sidelines that don't desire to go to a hospital and we think there is an opportunity for us to expand the market beyond the hospital environment.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from Richard <unk> with <unk> Securities. Your line is open.

Operator: Hi, thanks for taking the questions and congrats on a great start to the year. A few for me, maybe just starting on the IDN strategic account team. It's good to see that in place. It seems like it's coming right at a time when you have good visibility into all of the corporate C-suite level IDN contracts in place. What does this really do for you in terms of if you could talk about your visibility into the funnel conversion?

Richard: Hi, Thanks for taking the questions and congrats on a great start to the year.

Richard: Well for me, maybe just starting on the IGN strategic accounts team.

Richard: Good to see that in place seems like it's coming right at a time when you have good visibility into all of that kind of a corporate C suite level.

Richard: IGN contracts in place.

Richard: What does it really do for you in terms of if you could talk to your visibility into the funnel conversion does this does this just gives you a better line of sight to timing.

Richard: The existing funnel.

When that can translate to revenue Im also just wondering if perhaps it does something for your visibility into pricing now that you are putting a firm stake in the ground for a $370000 ASP.

Richard: Yeah.

Richard: That's tended to fluctuate and you've always said to brace for that.

Richard: Anything changed there and I have a follow up.

Operator: Does this just give you a better line of sight to the timing of the existing funnel and when that can transit to revenue? I'm also just wondering if perhaps it does something for your visibility into pricing now that you're putting a firm stake in the ground for a $370,000 ASP. That tended to fluctuate, and you've always said to brace for that. So has anything changed there that I haven't followed? Yes, I'll start. This is Kevin. Maybe I'll turn it over to Hisham.

Richard: Yes.

Richard Samuel Newitter: And, you know, Hisham did mention in his remarks that we did see in the first quarter, for the first time, multiple strategic IDNs use corporate funds. And while this is positive, these deals were already in our targeted sales pipeline, they're well-progressed in the funnel, where in prior quarters, regional or local funds were used. And it is good to see this momentum and just the dynamics of that team.

Richard: This is Kevin maybe I'll turn it over to Shannon, Yes, Tim did mention.

Kevin Waters: Remarks, we did see in the first quarter for the first time multiple strategic <unk> corporate funds to complete Aqua beam purchases in the first quarter.

Kevin Waters: While this is positive these deals were already in our targeted sales pipeline. They are well progressed in the funnel where in prior quarters regional or local funds were used and it is good to see this momentum and just the dynamics of that team I would argue that some of these deals wouldnt have gone over the finish line without the incremental.

Kevin Waters: I would argue that some of these deals wouldn't have gone over the finish line without the incremental advertising that we had in the strategic accounts team and their relationships with these administrators at IDN. So with that, maybe I'll turn it over to Hisham to talk a little bit about the team dynamics there. Sure. So I think there are a couple of things to think about when you think about IDN relationships and programmatic success. Every IDN actually has a different goal.

Kevin Waters: So we have a strategic accounts team and their relationships with these administrators that IBM, so with that maybe I'll turn it over to Sharon you talked a little bit about the team dynamics. There sure. So I think there's a couple of things to think about when you think about IBM relationships and programmatic success.

Speaker Change: Every IBM.

Hisham Shiblaq: And so it's really important that when you are starting to get to the point where we are as a company, we're not working with one or two hospitals in an IDN. We have a significant footprint now in some of these IDNs, that we understand what their goals are as a hospital network and that we're building programs to achieve those goals for each hospital. You know, in the past few years, we have been really focused on starting to build our footprint.

Sharon: Actually have a different goal and so it's really important that when you are starting to get to the point, where we are as a company. We're not we're not working with wanted to hospitals and we have significant footprint now with some of these idms that we understand what their goals are at the hospital network and that we are building programs to achieve those goals for each hospital.

Sharon: In the past few years, we are really focused on starting to build our footprint.

Hisham Shiblaq: And that is not something that companies necessarily need to necessarily focus on when you're just trying to show that you have a great program and there are clinical benefits of the procedure. So for our strategic accounts team, they have a bifurcated kind of goal. One is to obviously get new hospitals to acquire the technology. But number two is to make sure those programs are very successful.

Sharon: That is not something that companies need to necessarily focus on when Youre just trying to show that you have a great program and there is the clinical benefits of the procedure so for our for our strategic accounts team.

Sharon: <unk> kind of goal one is to obviously get new hospitals to acquire the technology, but number two is to make sure. Those programs are very successful. So the IBM wants to continue to buy more robots in the future. When we talked about in our prepared remarks was the first time, we really saw in Q1 of 'twenty four that we saw corporate ibms.

Hisham Shiblaq: So the IDN wants to continue to buy more robots in the future. What we talked about in our prepared remarks was the first time we really saw in Q1 of 24 that we saw corporate IDNs allocating funds at the corporate level to buy robots for ProPrimProCept. In the past, yes, we had contracts with the IDNs, but they would let the local funds or regional funds be used.

Sharon: Allocating funds at the corporate level to buy robots for appropriate process in the past, yes, we have.

Sharon: Contracts with with the IBM, but they would let the local funds or regional funds to be used and so this shift is obviously showing that our <unk> team is starting to make a difference and understanding the needs of the corporate IBM, then hopefully long term that will serve us well.

Hisham Shiblaq: And so this shift is obviously showing that our IDN team is starting to make a difference in understanding the needs of the corporate IDNs, and hopefully, long-term, they'll serve us well. Okay, thank you. That's helpful, caller.

Richard Samuel Newitter: And maybe just on the ASC, I guess. Physicians and checks we've done, and the physicians we've spoken to have suggested anywhere from 15 to as much as 30% of their TERP or resective volumes being performed in the ASC. Some have actually brought their ASC volumes back to the hospital patient just so they could use aquablasion. But I'm just curious, can you reconcile kind of that anecdotal feedback on the ASC kind of resective procedure opportunity and, you know, how that stacks up with what you see as the procedures being performed in the ASC? What does this open up? Yeah, thanks, Rich. This is Kevin.

Speaker Change: Okay. Thank you that's helpful color.

And maybe just on the ASC.

Speaker Change: I guess.

Speaker Change: <unk> and checks we've done and continue to be so continued I would suggest is anywhere from 15 to as much as 30% of their.

Speaker Change: Their turf our respective volumes being performed in the ASC. Some have actually brought their ASC volumes back to the hospital outpatient just so they could use aqua ablation.

Speaker Change: Just curious could you reconcile kind of that that anecdotal.

Speaker Change: Feedback on the ASC kind of resected procedure opportunity.

Speaker Change: How that stacks up with what you see as the procedures being performed in the ASC what is open up to you.

Kevin Waters: The last data we publicly shared was from 2019, which suggested that about 10% of the 300,000 resective procedures were performed in the ASC. We haven't updated that number. But just anecdotally, I think, you know, we hear the same thing that you hear that it wouldn't surprise us if that number had increased from 2019. But the last data we have is that 10% of resective procedures were in the ASC. Yeah, I would, I would say that, that there's, you know, naturally, we've all read that the hospital trend long term is, in the sense of wanting more procedures to move to an ASC setting. We're aware of that.

Speaker Change: Thanks, Chris This is Kevin the last data we publicly shared.

Kevin Waters: From 2019, which suggested that about 10%.

The $300 in our second procedures were performed in the ASC, we haven't updated that number but just anecdotally I think we hear the same thing that you hear that it wouldn't surprise me if that number has increased from 2019, but the last data we have is that 10% of respective procedures financing yes.

Kevin Waters: And we believe, like I said, long term, we have a great opportunity to serve that market as well. But the majority of our procedures continue to be in hospitals; the vast majority are in the hospital setting, the respective surgery.

Speaker Change: I would say that.

Speaker Change: At Nab.

Speaker Change: Naturally we are all red.

Speaker Change: Hospital trend long term.

Speaker Change: The sense of wanting more procedures to move to an ASC setting we're aware of that and we believe like I said long term, we have a great opportunity to serve that to serve that market as well, but the majority of our procedures continue to be in the hospitals and the vast majority are in the hospital setting their respective surgery and when we look at <unk>, we look at it as a market expansion.

Hisham Shiblaq: And when we look at ASCs, we look at them as a market expansion opportunity for us; there are millions of men that are on pharmaceuticals that fail, that choose not to go to the hospital setting. And that's, that's where we're focused on expanding the market. Thanks guys, congrats.

Speaker Change: Opportunity for US there are millions of men that are on pharmaceuticals that fail pharmaceuticals that choose not to go into the hospital setting and that's where we're focused on is expanding the market.

Operator: One moment for our next question. Our next question comes from Brandon Vazquez with William Blair. Your line is open. Everyone, thanks for taking the question. I just want to focus first on systems.

Thanks, guys congrats.

One of them before our next question.

Speaker Change: Okay.

Speaker Change: Our next question comes from Brandon Vazquez with William Blair. Your line is open.

Brandon Vazquez: You had a great quarter on the systems there. Just maybe talk a little bit about what kind of visibility and comfort you have into that ramping up through the year because system placement still needs to kind of ramp up through the year as we move forward. Yeah, thanks, good to speak with you. So our guidance is really unchanged in terms of pace, where we still expect 45% of our systems to be sold in the first half of the year, which is unchanged.

Brandon Vazquez: Hi, everyone. Thanks for taking the question I just wanted to focus first on systems, you had a great quarter on the systems. There just maybe talk a little bit about what kind of visibility and comfort you have into that ramping through the year be consistent placements still needs to kind of ramp through the year.

Brandon Vazquez: As we move forward.

Speaker Change: Yes, thanks, good to speak with you. So our guidance is really unchanged in terms of cadence, where we still do expect 45%.

Speaker Change: Our systems to be sold in the first half.

Brandon Vazquez: But I think you are alluding to the fact that that would require kind of a large number of units sold in the fourth quarter. And obviously, we have a funnel that we believe supports that. But when I look specifically at the exit of Q4, what our guidance would imply, it does suggest somewhere kind of in the 30% to 35% unit growth. Systems in Q4 of 24 over 23, which if you look at that in terms of our sales capacity, we're gonna have about 30 to 35% more fully productive sales reps as well.

Of the year, which is unchanged I think you are alluding to the fact that that would require kind of a large number of systems sold in the fourth quarter and obviously, we have funnel our funnel that we believe supports that but when I look specifically at the exit of Q4, what our guidance would reply imply.

Speaker Change: It does suggest somewhere kind of in the 30% to 35% unit growth.

In Q4 of 'twenty for over 23.

Speaker Change: If you look at that in terms of our sales capacity, we're going to have about 30% to 35% more fully productive sales reps as well so not only do we believe we have the funnel that kind of supports that robust Q4, but we also have the sales capacity and we do believe we have kind of a high degree of visibility into that so.

Kevin Waters: So not only do we believe we have the funnel that kind of supports that robust Q4, but we also have the sales capacity, and we do believe we have kind of a high degree of visibility into that. So while it may appear to be kind of a hockey stick on the surface, we think it's in line with our historical performance and in line with our productivity metrics and in line with what we think. Okay.

Speaker Change: It may appear to be kind of a hockey stick on the surface. We think it's in line with our historical performance and in line with our productivity metrics and in line with what we see in the funnel.

Brandon Vazquez: And then on the IDN side, I think you guys mentioned it was about 17 IDNs that you initially focused on with this new strategic team. Can you just talk to us a little bit about, you know, you have better data, obviously, on specific account adoption versus the whole market? Are these, you know, 17 high-volume IDNs that are maybe in the first quartile of adoption still, and your opportunity here is to make aquablation standard of care, or are these some of the accounts you've talked about in the past you've talked about some accounts that have switched already basically to 100% aquablation? Where on the adoption curve do these kinds of 17 accounts fall, just to get a sense of what the opportunity is as you focus

Speaker Change: Okay and then on.

Speaker Change: The IBM side I think you guys mentioned it was about 17 IBM Z. You're initially focus with this new strategic team can you just talk to us a little bit about you have better data obviously on specific account adoption versus the whole market or the 17 high volume items that are maybe in the first quartile of adoption still in your opportunity here.

Speaker Change: Is to make Aqua ablation standard of care or are these some of the accounts I know in the past you've talked about some accounts that have switched already basically to 100% uncle Blasian, where on the adoption curve do these kind of 17 accounts fall just to get a sense of what the opportunity is as you focus on them more.

Hisham Shiblaq: The 17 strategic IDMs that we're talking about represent roughly 30% of our BPH hospitals, from a sheer numbers perspective, about 800 hospitals. But that is not the only IDN opportunity we have. That's just our primary focus, working with the largest strategic IDNs. There are many other IDNs that we also have contracts with that are buying our systems. But just to make it clear, our strategy is just focusing on those top seven, to build momentum in the market across the country regarding the... The actual adoption is very similar to the rest of the country at this point.

Speaker Change: The 17 strategic idms that we're talking about represent roughly 30% of our BPH hospitals.

Speaker Change: Yes.

Sheer numbers perspective about 800 hospitals that is not the only IBM opportunity we have that as our primary focus is working with a largest strategic ibs. There are many other idms that that we also have contracts with that are buying our systems, but just to make it clear our strategy. We're just focusing on those top 2017.

Speaker Change: Build momentum in the market across the country.

Speaker Change: Guarding the B.

Speaker Change: The actual adoption is very similar to the rest of the country at this point, we don't see it.

Hisham Shiblaq: We don't see these large IDNs necessarily adopting at a faster rate because we have pretty good adoption across the country, like we've talked about before. We're actually seeing small and medium-sized hospitals adopting technology in addition to high-volume BPH hospitals. I do think, long-term, there is an opportunity. We already hear from some of our IDNs about the benefits of occupancy.

Speaker Change: These large IBM necessarily adopting at.

Speaker Change: At a faster rate because we have pretty good adoption across the country. What we've talked about before we're actually seeing small and medium sized hospital adopt technology addition to high volume BPH hospitals I do think long term there is an opportunity we already hear from some of our idms.

Hisham Shiblaq: There's a strategic IDN that has told us and shown us data that represents their urology business as a whole in 2023 increasing. And they have shared with us that the occupation is the primary reason why that occurred in their total urology business due to surgeons and patients shifting their practices and coming to the hospital for occupation. So a lot of excitement there on the IDN front. And just to close on that, I think it's also good to see that even with these corporate, compared to the fourth quarter of 2023. So, it's really good to see you there. Got it.

Speaker Change: Benefits of operation, there's a strategic IBM that has.

Speaker Change: As told US and showed us data that represents the urology business as a whole in 2023, increasing and they have shared with us that the operation is the primary reason why that occurred and they're totally urology business due to surgeons and patients shifting their practices and coming to the hospital for operation. So a lot of a lot of excitement there.

Brandon Vazquez: Thanks, guys. One moment for our next question. Our next question comes from Chris Pasquale with Nefron Research. Your line is open.

Speaker Change: Just to close on that I think it was also good to see that even with these corporate IDM sales in the first quarter, we did not see downward pricing pressure on systems compared to the fourth quarter of 2023. So it's a really good to see there as well.

Speaker Change: Got it thanks guys.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Our next question comes from Chris Chris Pasquale with Nephron Research Your line is open.

Operator: Thanks, a couple of follow-ups on the ASC opportunity strike me as an important milestone on a couple of fronts. For one thing, physicians don't tend to like to do procedures in that setting where there's a lot of bleeding risk. So, maybe to start, could you just talk about what it says about where aquablation stands today from a safety standpoint and resolve some of those, you know, very early issues with the procedure? Yeah, thanks.

Chris Pasquale: Thanks, a couple of follow ups on the ASC opportunity strikes me as an important milestone on a couple of fronts. One thing physicians don't tend to like to do procedures in that setting where there is a lot of bleeding risk. So maybe to start can you just talk about what it says about where aqua ablation stands today from a safety standpoint in resolving some of those.

Chris Pasquale: Very early issues with the procedure.

Chris Pasquale: As you recall, we published data on bleeding in 2020, Old Ed. Procedures Conducted. We are very happy with the outcomes, in fact, it's best in class as far as bleeding is concerned, even compared to other procedures.

Speaker Change: Yes. Thanks.

Speaker Change: As you recall, we had published data on.

Speaker Change: Bleeding.

Speaker Change: More than a year ago with the protocol that is being implemented in January of.

Speaker Change: <unk> 2020.

Speaker Change: All that.

Procedures conducted since then.

Speaker Change: We are very happy with the outcomes in fact, it's best in class in.

Speaker Change: As far as leading as cost savings compared to other procedures and.

Reza Zadno: Many accounts, as I mentioned, have already started using the protocol that was implemented in 2020. And then, Reza, can you just clarify what you think this really means for your long-term system placement opportunity? Do you see the ASC as being wholly incremental, where now, you know, when you look at a high-volume hospital, you think about not just one unit but potentially multiple units and multiple settings of care? Or could it mean, in some cases, that it's a shift in setting, and a unit is going into an ASC that might otherwise have gone into a hospital?

Speaker Change: Many accounts as I mentioned have already started.

Speaker Change: Discharging the same days, so we are seeing great progress over there.

Speaker Change: The composition doesn't come up much anymore to us.

Speaker Change: <unk> I would say.

Speaker Change: Protocol that was implemented in 2020.

Speaker Change: Thanks.

Speaker Change: And then can you just clarify what do you think this really means for your long term system placement opportunity do you see the ASC is being wholly incremental where now when you look at a high volume hospitals do you think about.

Speaker Change: Not just one unit, but potentially multiple units in multiple settings of care.

Speaker Change: Or could it mean in some of these cases that its a shift in setting in a unit is going into an ASC that might otherwise have gone into a hospital.

Reza Zadno: As we said, Hisham and I, we said this was really about market expansion. Initially, yes, we started very thoughtfully with the high-volume centers of hospitals, 860 of the 2,700. The data, as Kevin mentioned... 2019 was 300,000, more than 12 million men with BPH. Fail to Take Medicine.

Speaker Change: As we said the Sham and I said this is really about market expansion.

Speaker Change: Certainly, yes, we started very thoughtfully with their high volume centers.

Speaker Change: Hospitals 860 up to 2700.

Speaker Change: The data as Kevin mentioned in 2019 was 300000 respective procedures, but there are more than 12 million men with BPH and many failed to medication. So our ultimate goal is expanding that market starting with it.

Reza Zadno: So our ultimate goal is expanding that market, starting with the hospital. So this, we are not seeing this as either or; it is placing our system both at all these hospitals and ASPs. Yeah, I would just add to that, Chris, that we're being very deliberate in the sense that, and I mentioned this already, that we have a lot of interest in going to the ASC setting. We have not done that because we want to make sure that we do our proper job of penetrating the hospital market, and we have a lot of opportunity to continue doing that.

Speaker Change: The hospital. So we are not seeing this as either or it is placing our system. Both at all of these hospitals and ASC.

Speaker Change: Yes, I would just add to that Chris.

Speaker Change: <unk>.

Speaker Change: We're being very deliberate in the sense of an IMF.

Speaker Change: Investments already that we have a lot of interest to go to the ASC setting we have not done that because we want to make sure that we do a proper job of penetrating the hospital market and we have a lot of opportunity when you're doing that but there are certain areas, where we have a lot of experienced a high volume marketplaces surgeons that have now have their geographic area.

Reza Zadno: But there are certain areas where we have a lot of experienced, high-volume oculation surgeons that now have their geographic area that has penetrated many hospitals. MSAs or geographic areas that now have a complete footprint of occupational hospitals, that's an opportunity for us to go to the ASC and expand that market at that point. Great, thank you.

Speaker Change: That hasn't penetrated many hospitals youll hear from last Friday at our Investor Conference.

Speaker Change: There is.

Speaker Change: MSA has a geographic area, that's not a complete footprint of operation hospitals, that's an opportunity for us typically the FDA.

Speaker Change: Beyond that market at that point.

Operator: One moment for our next question. Our next question comes from Nathan Treybeck with Wells Fargo. Your line is open.

Speaker Change: Great. Thank you.

Speaker Change: Our next question.

Speaker Change: Our next question comes from Nathan <unk> with Wells Fargo. Your line is open.

Nathan Treybeck: Hi, thanks for taking the question and congrats on a strong quarter. I wanted to focus on AUA. You talked about showing six-month follow-up data from your prostate cancer trial. I guess, what are the key data points that you expect physicians will be focused on here? And, assuming the data is good, do you expect aquablation use in prostate cancer in 2024? Yeah, thanks.

Nathan: Hi, Thanks for taking the question and congrats on a strong quarter.

Nathan: I wanted to focus on <unk>.

Nathan: You talked about showing six month follow up data from your prostate cancer trial I guess what are what are the key data points that you expect physicians will be focused on here and assuming the data is good you expect aqua ablation use in prostate cancer in 2024.

Reza Zadno: Definitely, we are very excited to share more data on Friday. I hope you will be able to attend. The agenda is to highlight the six-month follow-up on those early patients. Those early patients for whom the primary focus initially was to remove the contraindications for patients who have BPH and cancer. The next step is the two IDE studies that we have started for every day. Every day, if patients have BPH and cancer, one...

Speaker Change: Yes. Thanks.

Speaker Change: Yes, definitely we are very excited to share more data on Friday, I hope you will be able to attend.

Speaker Change: There is to highlight the six months follow up on those early patients those early patients that the primary focus initially was to remove the contra indication for patients who have BPH and cancer and the FDA removed that country indication. The next step is to it.

Speaker Change: That is that we have started.

Speaker Change: Four.

Speaker Change: So today, if patients have BPH and cancer, one can treat there.

Reza Zadno: But the goal is to leverage on our previous safety profile that we have shown for BPH because it's the same organization, cancer patients, but this is too early. The goal is to present more data and start with the safety profile. I just say that we're very excited about the opportunity you'll hear Friday from a couple of surgeons and their personal experience with obesity and BPH and cancer. The labeling for us, like Reza mentioned, allows us to treat BPH patients that have prostate cancer. You'll see some of that data as well on Friday. It's a large segment of men.

Speaker Change: BPH.

Speaker Change: But their call these too.

Speaker Change: Leverage on our.

Speaker Change: <unk> safety profile that we have shown for BPH because its the same organ same procedure to treat cancer patients. But this is too early to say this is ready for commercialization for cancer.

Speaker Change: The goal is to present more data.

Speaker Change: Again, starting with the safety profile and shows efficacy there.

Speaker Change: I would just say that we're very excited about the opportunity Youll hear Friday from couple of surgeons.

Speaker Change: And their personal experience with operation in BPH and cancer the labeling for US like Roger mentioned allows us to treat BPH patients that have prostate cancer youll see some of that data as well on Friday is a large segment of men.

Hisham Shiblaq: And so we will continue to collect the data. We're talking about prostate cancer, there's no running to this, we'll be cautious, we'll collect the data, and we'll let the surgeons drive the adoption once they see the data. Okay, thanks for that.

Speaker Change: And so we will continue to collect the data and then well.

Speaker Change: Excuse me, we're talking about prostate cancer. There is no running diverse we will be cautious we'll collect the data and what the service drive.

Speaker Change: To drive the adoption once they see the data.

Nathan Treybeck: I believe I also saw that you're going to have an ASC study presented at AUA. I mean, correct me if I'm wrong, but what can we expect from this data? And like, do you expect this data to drive increased interest in moving into the ASC setting? I would say what this does for us is it validates the safety of our procedure. For many years, we've had to kind of defend the fact that our procedure is safe in the early years of commercialization, and like we've talked about multiple times on this call, surgeons would not be doing this procedure in an ASC setting if it was not a safe procedure.

Speaker Change: Okay. Thanks for that.

Speaker Change: I believe I also saw that youre going to have an ASC study presented at <unk> I mean, correct me, if I'm wrong, but what can we spectrum does data and like do you expect this data to drive increased interest to moving into the ASC setting.

Speaker Change: Yes, I would say.

Speaker Change: What this does for us as it validates the safety of our procedure for many years, we've had to kind of defend the fact that our procedure is safe in the early years of commercialization and like we've talked about multiple times on this call surgeons would not be doing this procedure in ASC setting if it was not a safe procedure to do and so youll see that the outcomes on a clinical <unk>.

Nathan Treybeck: And so you'll see that the outcomes on the clinical side basically mirror the efficacy that you get in a hospital setting. And safety is obviously paramount, and that's highlighted in this data as well. Okay, thanks.

Speaker Change: Syed.

Speaker Change: Basically mirror the efficacy.

Speaker Change: <unk> got a hospital setting and the safety is obviously paramount and Thats highlighted in this data as well.

Speaker Change: Okay. Thanks.

Hisham Shiblaq: One moment, one moment for our next question. Our next question comes from Ryan Zimmerman with BTIG. Your line is open. Hey, good morning.

Speaker Change: One of them.

Speaker Change: One of them were for next question.

Speaker Change: Yes.

Speaker Change: Our next question comes from Ryan Zimmerman with <unk>. Your line is open.

Operator: Thanks for taking the question. I hate to... Stay on the ASC topic guys, I'm sure you're sick of answering these questions. But I have to just ask, is the goal with the ASC strategy to also bring in some of the non-receptive cases that would otherwise be done alternatively to RISC-V, you know, kind of, and I don't know. If you feel like you have to, I apologize; it's not clear to me.

Ryan Zimmerman: Hey, good morning, Thanks for taking the question.

Speaker Change: I hate to stay.

Ryan Zimmerman: Stay on the ASC topic I'm sure you're sick of answering these questions.

Ryan Zimmerman: But I have to just ask.

Ryan Zimmerman: Is the goal with the ASC strategy to also bring in some of the non refractive cases that would otherwise be done.

Ryan Zimmerman: <unk> two risks active in kind of.

Speaker Change: And I don't know if if you feel like you've answered this I apologize but.

Ryan Zimmerman: You know, when you think about market expansion, are you saying just those terms that are done at an ASC, or is the broader goal? Thanks, and our goal is to treat men who have BPA. A lot of the, in fact, most of these men today are on medication, whether they go for receptive or non-receptive. So our goal is...

Speaker Change: Not clear to me.

Speaker Change: When you think about market expansive.

Speaker Change: Saying just those terms that are done in an ASC or is the broader goal too.

Speaker Change: Expand into the non respective segments.

Speaker Change: Thanks Ryan.

Ryan Zimmerman: Our goal is to treat men who have BPH.

Ryan Zimmerman: Laura.

Laura: Impact most of these men today are on medication, whether they go forward perspective, or non resected qualities to treat all men.

Reza Zadno: Yes, today, we get some of those patients who are wanting to get non-receptive in a hospital. So we are not necessarily focusing on, are these patients for non-receptive or receptive? These are patients who are looking for long-term durability and efficacy.

Ryan Zimmerman: <unk>.

Laura: Yes today, we get some of those patients who are wanted to get <unk> in the hospital setting. So we are not necessarily focusing debt.

Speaker Change: Patients with non Resectable or dissect. It. These are patients who are looking for long term durability and efficacy on that on the procedure.

Hisham Shiblaq: You know, hey, Ryan, I would say that, ultimately, we want to be where the surgeons are going to spend their time operating. And that means that the hospital and AFC are both settings that we want to be in. There's a huge opportunity currently with the over 1 million men in the U.S. that have failed pharmaceuticals and have not done anything from a surgical option beyond that. We look at that as our ultimate opportunity.

Speaker Change: Hey, Ryan I would say that ultimately we want to be where the surgeons are going to spend their time operating and that.

Speaker Change: That means that the hospital ASC are both settings that we want to be in.

Speaker Change: There is a huge opportunity currently with the over 1 million men in the U S.

Speaker Change: Pharmaceuticals that have not done anything from.

Speaker Change: From a surgical option beyond that we look at that.

Hisham Shiblaq: When we talk about market expansion, it's real. Two other questions I just want to throw in here. One, any impact that you've seen thus far on the loss of pass-through payment in the hospital setting? And then my second question, I'll squeeze in here.

Speaker Change: As our ultimate opportunity when we talk about market expansion.

Speaker Change: Real it's there in front of us and so we don't necessarily say, we're going to target.

Speaker Change: To take us from one procedure or another we're looking at BPH patients that have failed medications and taking those to the ASC is a real opportunity for us.

Speaker Change: Okay.

Speaker Change: Two other questions.

Speaker Change: Just wanted to throw in here one.

Speaker Change: Any impact that you've seen thus far on the loss of pass through payments in the hospital setting and then my second question I'll squeeze in here.

Ryan Zimmerman: I'm wondering if you could just talk about the dynamic and the discrepancy between kind of handpiece sales growth and the growth of utilization and kind of how to reconcile those two for investors that, you know, look at that and, you know, point to that. So I'll take the TPT part of it. No, the short answer is no; we are not seeing that. In fact, we started talking about the retirement of TPT more than a year ago, and hospitals are buying our system for the clinical outcome and making the practice more efficient.

Speaker Change: I'm wondering if you could just talk to the dynamic in the discrepancy between kind of hand piece sales growth and the growth of utilization and kind of how to reconcile those two for investors.

Speaker Change: Look at that in point to that as a sign that you're concerned about.

Speaker Change: So I'll take the <unk> part of it no. The short answer is no. We are not seeing that in fact, we haven't started talking about the <unk>.

Speaker Change: Retirement at TVT in more than a year ago.

Speaker Change: Hospitals are.

Speaker Change: Buying our system for the clinical outcome and making the practice more efficient in fact as you saw we had an increase.

Ryan Zimmerman: In fact, as you saw, we had an increase, a slight increase in our pricing last quarter, and we were very happy. So the short answer is no, we are not. To follow up on your second question, just to reiterate what Reza said, I think it's fantastic that we were able to raise handpiece ASPs in a quarter where the transitional pass-through did subset itself, which we believe is a proof point that it's not impactful to our business at all. In fact, we saw very little pushback from the price increase that we implemented in the first quarter.

Speaker Change: Slightly increasing our pricing last quarter, and we were very happy with utilization installed.

Speaker Change: Short answer is no we have not seen that impact.

Speaker Change: To follow up on your second question just to reiterate what Robert.

Speaker Change: <unk> said I mean, I think that's fair.

Speaker Change: Topic that we are able to raise handpiece asp's in a quarter, where the traditional pass through did subset itself, which we believe is a proof point that it's not impactful to our business at all and in fact, we saw very little pushback from the price increase.

Reza Zadno: Your second question, I think, is whether you are trying to discuss any differences between the handpiece's shift in procedures? Is that kind of the genesis of your question? Yeah, I think that's right. Yeah, so looking for us, our customers, we sell directly in the US, so we don't sell to distributors. And therefore, our customers tend to order as they need product, which is somewhere in the five to 10 range is the standard order size. We don't have large stocking orders; we don't have fulfillment houses.

Speaker Change: That we implemented in the first quarter up your second question. I think are you trying to discuss any differences between hand piece of shifting procedures does that does that kind of a general question, Mike I think Thats I think thats right Kevin.

Kevin Waters: So for us, you know, we don't see that. I'd also suggest that our visibility into procedures is very high. So we have the ability to see who's doing our cases when procedures are performed, and we have a high degree of visibility there.

Speaker Change: So looking for us our customers, we sell direct in the U S. So we don't sell to distributors and therefore, our customers tend to order as they need product, which is somewhere in the five to 10 range as the standard order size. We don't have large stocking orders, we don't have fulfillment houses so.

Speaker Change: For us.

Speaker Change: We don't see that I would also suggest that our visibility into procedures.

Speaker Change: Very high so we have the ability to see who's doing are cases when procedures are performed.

Kevin Waters: So I don't have any concern, or there haven't been any changes in trends between handpieces sold and procedures. And in fact, when we went public back in 2021, we told the investment community that if there ever was a change between those dynamics, we would be proactive, and we just haven't seen anything there at all. Thank you, Ryan.

Speaker Change: And we have a high degree of visibility there. So I don't have any concern or there hasn't been any changes in trends between hand pieces sold in procedures and in fact, when we went public back in 2021, we told the investment community. If there ever was a change kind of between those dynamics.

Speaker Change: We would be proactive and we just haven't seen anything there at all.

Speaker Change: Thank you.

Speaker Change: Thanks, Brian one moment for our next question.

Speaker Change: Okay.

Ryan Zimmerman: One moment for our next question. Our next question comes from Mike Kratky with Leering Partners. Your line is open. Hi, everyone.

Speaker Change: Our next question comes from Mike <unk> with Leerink Partners. Your line is open.

Operator: Thanks for taking our questions. Maybe a couple high-level ones from us on the Prostate Cancer Developer Program. First, how are you thinking about the size of this commercial opportunity? And to what extent can this be an expansive TAM?

Mike: Hi, everyone. Thanks for taking my question, maybe a couple of high level ones from us on the prostate cancer development program.

Mike: First how are you thinking about the size of this commercial opportunity and to what extent can this became extended.

Michael Holden Kratky: And then maybe just as a follow-up, can you provide an update on the timelines for your ongoing clinical trials and what a regulatory path forward in this indication could ultimately look like? Yeah, thanks. So, as far as the opportunity for cancer... There are millions of men in the U.S. who are on the sidelines and opting for... they are basically watchful waiters.

Mike: Then maybe just as a follow up can you provide an update on the timeline for your ongoing clinical trials and what our regulatory path forward in this indication could ultimately look like.

Speaker Change: Yes. Thanks.

Speaker Change: SaaS forest.

Speaker Change: Opportunity for cancer.

Speaker Change: This is there are millions of men in the U S who are on the sidelines and opting for they are basically watchful lasers for us.

Reza Zadno: For us, it's early to assess that market, and that's why we are starting to conduct clinical studies, and Where we see the benefit of our technology is, again, I start with the safety profile because we can replicate the same safety profile as we had in our water study. That is a great plus to what the current treatments are, discussed in more detail, hopefully you can attend. And the second part of the question... Yeah, just on the timelines for the ongoing and what we are.

Speaker Change: Early to access that market.

Speaker Change: That's why we are starting to.

Speaker Change: Conduct clinical studies and.

Speaker Change: Okay.

Speaker Change: Where we see the benefit of our technology is big and I start with the safety profile because we are.

Speaker Change: We can replicate the same safety profile as we had in our water study.

Speaker Change: That is a great pleasure to what the current treatments are on Friday. This will be discussed in more detail hopefully you can attend and see that.

Speaker Change: And the second part of the question.

Speaker Change: Could you have a critical yes.

Speaker Change: Yes.

Speaker Change: Just on the.

Speaker Change: Timelines for the ongoing.

Reza Zadno: So the second, we are conducting the PRCT001 and 002, one is 100 patients, the other one 20 patients, one with BPH and cancer, the other one doesn't, patients do not need necessarily to have BPH, so once we finish those studies, then we are going to move into another timeline, but at this point we are not talking about the nature of that study, but the whole goal, similar to BPH, generate enough data because we want, clinical data.

Speaker Change: Now we add inventory path.

Speaker Change: Yes so.

Speaker Change: Second.

Speaker Change: We are conducting the PRC casinos year 100 to one is 100 patients 20 patients one with BPH and cancer is the other one doesn't patients are not being necessarily drop BPH. So.

Speaker Change: Once we finish those studies then we're going to do another timeline at this point, we are not talking about.

Speaker Change: Nature of that study, but the whole goal similar to BPH is to generate enough data because we want to lead with clinical data when we entered this market.

Reza Zadno: Connor. Thanks very much. And I'm not showing any further questions at this time. I'd like to turn the call back over to Reza Zadno, CEO, for any closing remarks. Yeah, thanks everyone for attending this call. We look forward to seeing many of you hopefully at the AUA investor event on May 3rd. And thanks again, and see you soon. Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day. (Inaudible)

Speaker Change: Got it thanks very much.

Speaker Change: And im not showing any further questions at this time I would like to turn the call back over to Reza is Ed <unk> CEO for any closing remarks.

Reza: Yes, thanks, everyone for attending this call we look forward to seeing many of you hopefully at the Investor event on May 3rd and thanks, again and see you soon.

Speaker Change: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day for wonderful.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Good.

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