Q1 2024 Profound Medical Corp Earnings Call
Good day, and thank you for standing by.
Operator: Hey, and thank you for standing by. Welcome to the Profound Medical first quarter 2024 financial results conference call.
Operator: Welcome to the profound medical first quarter 2024 financial results Conference call.
Operator: At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. You will then hear an automated message advising that your hand has been raised. To withdraw your question, please press star 1 once again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Stephen Kilmer, Director of Investor Relations.
Operator: At this time, all participants are in listen only mode.
Stephen Kilmer: After the Speakers' presentation, there'll be a question and answer session.
Operator: You asked the question during the session you will need to press star one one on your telephone.
Stephen Kilmer: When you're an automated message advising that your hands it's been raised.
Speaker Change: Draw. Your question. Please press star one again.
Operator: Please be advised that today's conference is being recorded.
Operator: I would now like to hand, the conference over to your first Speaker, Stephen Kilmer Investor Relations.
Stephen Kilmer: Thank you. Good afternoon, everyone.
Stephen Kilmer: Thank you good afternoon, everyone.
Stephen Kilmer: By pointing out that this conference call will include forward looking statements within the meaning of applicable securities laws in the United States and Canada.
Stephen Kilmer: Let me start by pointing out that this conference call will include forward-looking statements within the meaning of applicable securities laws in the United States and Canada. All forward-looking statements are based on deep current beliefs, assumptions, and expectations and relate to, among other things, any expressed or implied statements or guidance regarding current or future financial performance and position, including the company's year 2024 financial guidance and related assumptions. The expectations regarding the efficacy of Profound's technology in the treatment of prostate cancer, PPH, uterine fibroids, palliative pain treatment, and osteoids, and osteoma, and its future revenues and financial results.
Stephen Kilmer: All forward looking statements are based on four pounds current beliefs assumptions and expectations.
Stephen Kilmer: And relate to among other things and he expressed or implied statements or guidance regarding current or future financial performance and potential.
Stephen Kilmer: The company's Euro 2024 financial guidance and related assumptions expectations regarding the efficacy of <unk> technology in the treatment of prostate cancer BPH uterine packed with uterine fibroids palliative pain treatment and austere Osteoma Atlas.
Stephen Kilmer: Such statements involve known and unknown risks and uncertainty, and other factors that may cause actual results, performance, or achievements to be materially different from those implied by such statements. Therefore, no foreign language statement can be guaranteed. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this conference call. Profound undertakes no obligation to publicly update or revise any forward-looking statement. Whether as a result of new information, future events, or otherwise, other than as required by law.
Stephen Kilmer: <unk> future revenues financial results.
Stephen Kilmer: Such statements involve known and unknown risks and uncertainties and.
Stephen Kilmer: And other factors that may cause actual results performance or achievements to be determined.
Stephen Kilmer: Different from those implied by such statements no forward looking statement can be guaranteed.
Stephen Kilmer: Listeners are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date of this conference call.
Stephen Kilmer: Without undertakes no obligation to publicly update or revise any forward looking statement.
Stephen Kilmer: Whether as a result of new information future events or otherwise other than as required by law.
Stephen Kilmer: Representing the company today are Dr. Arun Menawat, Profound's Chief Executive Officer; Rashed Dewan, the company's Chief Financial Officer; and Dr. Mathieu Burtnyk, Profound's Chief Operating Officer. With that said, I'll now turn the call over to Rashed.
Rashed Dewan: Representing the company today are Dr. Arun megawatts per pounds, Chief Executive Officer, Richard <unk>, The company's Chief Financial Officer, and Dr. Matthew Burton <unk> Chief operating officer.
Rashed: With that said I'll now turn the call over 2%.
Rashed Dewan: Good afternoon, everyone, and welcome to our first quarter 2024 conference call. On behalf of the management team and everyone at Profound, I would like to thank you for your ongoing interest in our company. For those of you who are shareholders, we appreciate your continued interest and support. I will turn the call over to Matthew in a moment to provide updates on CULSA clinical publications, Utilization Trends, and the Captain Clinical Trial.
Rashed: Good afternoon, everyone and welcome.
Matthew: Come to our first quarter 2024 conference call.
Rashed Dewan: On behalf of the management team and everyone at profound I would like to thank you for your ongoing interest in our company.
Rashed Dewan: For those of you who are shareholders.
Rashed Dewan: We appreciate your continued interest and support.
Rashed Dewan: I will turn the call over to Matthew in a moment.
Matthew: Update on Tulsa clinical publication.
Matthew: Utilization trends.
Rashed Dewan: However, before I do, I would like to provide a brief summary of our first quarter 2024 financial results and our revenue guidance for the year. All of the numbers I'll refer to have been rounded so they are approximately. For the three-month period ended March 31, 2024, the company recorded revenue of $1.91 million, with $1.48 million from recurring revenue and $428,000 from the one-time sale of capital equipment. First quarter 2024 revenues increased 3% from $1.86 million from the same period in 2020. However, actual usage during the quarter grew at double the rate, but there was a reduction in cost for consumables inventory that some installation sites.
Matthew: And the captain clinical trial.
Rashed Dewan: However, before I do.
Rashed Dewan: Like to provide a brief summary of our first quarter 2024 financial results and our revenue guidance for the year.
Rashed Dewan: To streamline things.
Rashed Dewan: All of the numbers I'll refer to have been rounded.
Rashed Dewan: But they are proximate.
Rashed Dewan: For the three months ended March 31 2024.
Rashed Dewan: <unk> recorded revenue of $1 $91 million with.
Rashed Dewan: With $1 four $8 million from recurring revenue.
Rashed Dewan: 428000 from one.
Rashed Dewan: Ill up capital equipment.
Rashed Dewan: First quarter 2020 for revenue.
Rashed Dewan: 3%.
Rashed Dewan: 186 million from the same period in 2020.
Rashed Dewan: Actual usage during the quarter.
Rashed Dewan: Double digits.
Rashed Dewan: The reduction in Tulsa pro consumables inventory some installed sites.
Rashed Dewan: While we anticipate that user inventory levels will continue to vary throughout the year, we still expect recurring revenue to grow at 60% or more. Gross margin in Q1 2024 was 66% compared to 65% in Q1 2023 and up. [inaudible] Similar to recurring revenue, we expect gross margin to vary some quarter over quarter, but just as we delivered about 60% margin in 2023, we expect to deliver that or better in 2024. Total operating expenses for the first quarter of 2024, which consists of R&D, UNM, and Selling and Distribution Expenses, were $8.8 million.
Rashed Dewan: While we anticipate that user inventory levels will continue to vary throughout the year, we still expect recurring revenue will grow at 60% or more.
Rashed Dewan: Gross margin in Q1, 2024 was 66% compared to 65% in Q1 2023 and <unk>.
Rashed Dewan: 53% sequentially from the previous fourth quarter.
Rashed Dewan: Similar to recurring revenue, we expect gross margin to vary some quarter over quarter.
Rashed Dewan: Yes.
Rashed Dewan: <unk> about 60% margin in 2023, we expect to deliver that or better in 2024.
Rashed Dewan: Total operating expenses in 2024 first quarter, which consist of.
Rashed Dewan: R&D.
Rashed Dewan: G&A.
Rashed Dewan: Selling and distribution expenses.
Rashed Dewan: An increase of 9% compared with $8.1 million in the first quarter of 2020. Breaking that down, expenditures for R&D increased 2% on a year-over-year basis to $3.9 million. GN expenses increased by 13% to $2.4 million, and Selling and Distribution Expenses increased by 15% to $2.4 million.
Rashed Dewan: Were $8 8 million.
Rashed Dewan: And increase up 9%.
Rashed Dewan: Compared with $8 1 million.
Rashed Dewan: In the first quarter of 2023.
Rashed Dewan: Breaking that down part.
Rashed Dewan: Expenditures for R&D.
Rashed Dewan: <unk>, 2% on a year over year basis to $3 9 million.
Rashed Dewan: G&A expenses increased by 13% to $2 4 million.
Rashed Dewan: Selling and distribution expenses increased by 15% to $2 4 million.
Rashed Dewan: Net Finance Income for the 2024 first quarter was $1.3 million, compared to $145,000 for the same three-month period of 2020. Overall, the company recorded a first quarter 2024 net loss of $6.2 million or $0.26 per common share, down from a net loss of $6.7 million or $0.32 per common share for the same three-month period in 2020. As of March 31, 2024, Profound had cash of $41.2 million. Finally, as you may have seen in our press release, we are providing annual revenue guidance for the first time.
Rashed Dewan: Net income for the 2020 for first quarter.
Rashed Dewan: At $1 3 million.
Rashed Dewan: Compared to 145000.
Rashed Dewan: At the same three months period of 2023.
Rashed Dewan: Overall.
Rashed Dewan: Company reported a first quarter 2024 net loss.
Rashed Dewan: $6 2 million.
Rashed Dewan: 26 <unk>.
Rashed Dewan: Our common share.
Rashed Dewan: Down from a net loss of $6 7 million.
Rashed Dewan: <unk> 32 per common share for.
Rashed Dewan: At the same three month period in 2023.
Rashed Dewan: As of March 31, 2024.
Rashed Dewan: While net cash of $41 2 million.
Rashed Dewan: Finally.
Rashed Dewan: As you may have seen in our press release.
Rashed Dewan: We are providing annual revenue guidance for the first time.
Rashed Dewan: As we believe, we now have sufficient visibility into the pace of Tulsa adoption ahead of the start of reimbursement in January, based on our business planning and budgeting activities. We currently expect total revenue for the full year 2024 to be in the range of $11 million to $12 million, which represents 53% to 67% growth compared to revenue in 2023. With that, I will now turn the call over to Matt.
Matt: We believe we now have sufficient visibility into the pace of adoption.
Matt: Head of the start of reimbursement in January.
Matt: Based on our business planning and budgeting activity.
Matt: We currently expect total revenue for the full year 2024 to be in the range of <unk>.
Matt: 11 million to $12 million, which represent 53%.
Matt: 67% growth compared to revenue in 2023.
Matt: With that I.
Rashed Dewan: I will now turn the call over to Matthew.
Mathieu Burtnyk: Thank you, Rashed, and hello everyone. Since the start of the year, there have been many conference presentations featuring TULSA that continue to demonstrate the unique pixel-by-pixel precision of the technology, the flexibility to treat a variety of patients with customized treatment plans, as well as the durability of efficacy and safety treatment outcomes. As announced earlier this week, 25 Tulsa-related scientific research presentations have been delivered at major international medical meetings so far this year, of which eight were from leading urologists at the recent American Urological Association meeting in San Antonio, Texas. I would like to take a few minutes to highlight a couple of them.
Matt: Thank you Richard and Hello, everyone.
Mathieu Burtnyk: Since the start of the year there have been many conference presentations featuring Tulsa that continue to demonstrate the unique pixel by pixel precision of the technology the flexibility to treat a variety of patients with customize treatment plans as well as the durability of efficacy and safety treatment outcomes as.
Mathieu Burtnyk: As announced earlier this week 'twenty five Tulsa related scientific research presentation has been delivered at major international medical meetings, so far in 2024.
Mathieu Burtnyk: Which ain't where from leading urologists at the recent American Urological Association meeting in San Antonio, Texas.
Mathieu Burtnyk: The first is a presentation by Dr. Ethan Wajwal from the Mayo Clinic in Florida on their initial experience with the TulsaPro in men with localized prostate cancer. They reported oncologic and safety outcomes from 60 patients, including 47% whole glands, 33% subtotal, and 21% focal ablation. With a PSA reduction of 92% to a nadir of 0.5 nanograms per milliliter and a 4% rate of clinically significant histological failure on one year follow-up biopsy, the authors conclude that their early postmarket experience treating grade group two and three prostate cancer with focal through whole gland ablation plans demonstrates comparable safety and efficacy to that reported in the TAK FDA registration study.
Mathieu Burtnyk: I'd like to take a few minutes to highlight a couple of the <unk>.
Mathieu Burtnyk: First is the presentation by Dr. Ethan Boswell from the Mayo Clinic, Florida.
Mathieu Burtnyk: Our initial experience with the Tulsa pro in men with localized prostate cancer.
Mathieu Burtnyk: Printed oncologic and CTO comes from 60 patients, including 47% whole gland, 33% up total and 21% focal ablation.
Mathieu Burtnyk: With a PSA reduction of 92% to a need your <unk> five nanograms per milliliter, and a 4% rate of clinically significant histological failure on one year follow up biopsy. The authors conclude that they're early post market experience treating great group, two and three prostate cancer with focal through whole gland ablation plans.
Mathieu Burtnyk: Demonstrates comparable efficacy to that reported in the tact FDA registration study.
Mathieu Burtnyk: The second was a presentation by Professor Peter Bostrom, Chair of the Department of Urology at Turku University Hospital in Finland, who reported the complete 12-month outcomes of the prospective single-center Phase 1-2 study of Tulsa in men with BPH. The treatment plan targeted the entire transition zone, including median lobe if present, in 30 men. The primary measure of treatment efficacy, the IPSS score, improved significantly from 16.5 to 4.
Speaker Change: The second is the presentation by professor Peter both firm.
Mathieu Burtnyk: Share of the department of Urology, a trickle University hospital in Finland, who reported the complete 12 month outcome of the prospective single Center Phase one class II study of Tulsa in men with BPH.
Mathieu Burtnyk: The treatment plan targeted to the entire transition zone, including median lobe if present in 30 men.
Mathieu Burtnyk: The prior measure of treatment efficacy the Ips that score improved significantly from $16 five to four.
Mathieu Burtnyk: Of note, the 75% reduction in IPSS is similar or better than that reported in the pivotal FDA studies of all modern minimally invasive BPH devices. Additionally, the Quality of Life Index, called EPIC, improved in both the sexual and urinary incontinence domains from 54 to 67 and from 85 to 100, respectively, possibly related to the reduced prostate volume and pressure on surrounding nerves. With the completion of this Phase 1-2 prospective clinical study, the TULSA Pro is the only incision-free device with safe and effective clinical evidence in patients with primary prostate cancer, radiorecurrent disease, and now also BPA.
Mathieu Burtnyk: Of note the 75% reduction in Etfs is similar or better than that reported in the pivotal FDA study of all modern minimally invasive BPH devices.
Mathieu Burtnyk: Additionally, the quality of life index called epic improved in both the sexual and urinary continents stemming from 54 to 67 and from 85 to 100, respectively, possibly related to the reduced prostate volume and pressure on surrounding nerves.
Mathieu Burtnyk: With the completion of the phase one class II prospective clinical study the Tulsa Pro is the only incision free device with safe and effective clinical evidence in patients with primary prostate cancer radio recurrent disease and now also BPH.
Mathieu Burtnyk: The growing body of clinical evidence demonstrating the ability of the TULSA procedure to treat patients with an unrivaled variety of prostate disease is reflected in real-world utilization trends from TULSA providers in this quarter, as highlighted in today's press release. With respect to indications, approximately 71% were treated for primary prostate cancer. 21% were hybrid patients suffering from both cancer and BPH. 6% were selfish treatments, and 2% were men with BPH only. Tulsa procedures were performed across a spectrum of treatment plans with approximately half or 53% of the whole gland, 26% subtotal but more than half the gland, 10% hemiablation, and 12% focal therapy.
Mathieu Burtnyk: The growing body of clinical evidence demonstrating the ability of the Tulsa procedure to treat patients with an unrivaled variety of prostate disease as reflected in real world utilization trends from Tulsa providers in this quarter as highlighted in today's press release.
Mathieu Burtnyk: With respect to indications approximately 71% were treated for primary prostate cancer, 21% were hybrid patients suffering from both cancer and BPH.
Mathieu Burtnyk: 6% for salvage treatments, and 2% where men with BPH only.
Mathieu Burtnyk: Tulsa procedures were performed across the spectrum of treatment plans with approximately half or 53% <unk>, 26% sub total, but more than half the gland, 10% hemi oblations and 12% focal therapy.
Mathieu Burtnyk: This continuum of treatment plans matches what we could expect from the general prevalence of prostate cancer, whether diffused or bilateral disease, multifocal cancer, and a smaller proportion of unifocal prostate tumors. Prostate cancer patients across all grades of disease were treated, primarily intermediate-risk patients, with 74% being grade group 2 and 3, 15% low-risk grade group 1, and 13% high-risk grade group 4 or 5 cancer. Similarly, patients with all prostate shapes and sizes continue to be treated with Tulsa, from less than 20 cc to over 100 cc.
Mathieu Burtnyk: This continuum of treatment plans matches, what we could expect from the general prevailing for prostate cancer, whether diffusers bilateral disease multifocal cancer, and a smaller proportion of unifocal prostate tumors.
Mathieu Burtnyk: Prostate cancer patients across all grades of disease were treated primarily intermediate risk patients with 74% being great group, two and three <unk>.
Mathieu Burtnyk: 15% low risk Great group, one and 13% high risk Great group four or five cancer.
Mathieu Burtnyk: Similarly patients with all proceeds shapes and sizes continue to be treated with Tulsa from less than 20 cc to over 100 cc.
Mathieu Burtnyk: This quarter, about one-third had prostate volumes under 40 cc, another 40% had prostate volumes between 40 and 60 cc, and the remaining 27% had larger prostates over 60 cc. We continue to see TULSA as the only treatment modality that can be used across the entire spectrum of prostate volumes and disease with clinical evidence in patients with cancer or BPH, as well as the only option for hybrid patients who have both prostate cancer and BPH. Now, I will turn the call over to Arun.
Arun: This quarter about one third had prostate volumes under 40, SEC another 40% had prostate volumes between 40, and 60 <unk> and the remaining 27% had larger prostates over 60 <unk>.
Arun: We continue to see Tulsa is the only treatment modality, which can be used across the entire spectrum of prostate volumes and disease with clinical evidence in patients with cancer or BPH as well as the only option for hybrid <unk> for both prostate cancer and BPH.
Arun: Now I will turn the call over to Ernie.
Arun Swarup Menawat: Thank you, Mathieu, and good afternoon, everyone. As you can see from what Mathieu just reviewed, our message is clear. Regardless of prostate disease state or prostate size, Telsa is being used to treat a wide variety of patients safely, effectively, and efficiently. In fact, no other modality even has the clinical publications that demonstrate applicability in such a full spectrum of patient populations, ranging from BPH to any stage of organ-confined prostate cancer to even salvage cases. In addition, TELSA is incision and radiation free. One and done. A procedure performed in a single session. No hospital stay is required.
Arun: Thank you Matthew and good.
Speaker Change: Good afternoon, everyone.
Arun Swarup Menawat: As you can see from what Matthew just reviewed our message is clear.
Arun Swarup Menawat: Regardless of prostate disease states or prostate size telcel.
Arun Swarup Menawat: <unk> is being used to treat a wide variety of patients safely.
Arun Swarup Menawat: Actively and efficiency.
Arun Swarup Menawat: In fact, no other modality, even has the clinical publications that demonstrate applicability in such a full spectrum of patient population ranging from BPH to any stage of Oregon confined prostate cancer to even.
Arun Swarup Menawat: Salvage cases.
Arun Swarup Menawat: In addition, Tulsa.
Arun Swarup Menawat: Telecom.
Arun Swarup Menawat: Incision.
Arun Swarup Menawat: Radiation free.
Arun Swarup Menawat: One of them.
Arun Swarup Menawat: Procedure.
Arun Swarup Menawat: And most Telstra patients report quick recovery to their normal routine. The Telstra procedure is done with real-time imaging in the MR board, which allows for phenomenal pixel-by-pixel accuracy and real-time temperature measurement and automated control. The use of MR is now growing in urology, as clinical evidence continues to point to the benefits of MR imaging, from early patient screening to diagnosing and treating with Telstra. We believe that MR will continue to gain acceptance in urology. Indeed, there are growing signs that MR is poised to become a mainstream imaging modality for urology. Here are just a couple of examples.
Arun Swarup Menawat: Formed in a single session.
Arun Swarup Menawat: No hospital stay is required.
Arun Swarup Menawat: And most Tulsa patients report quick recovery to their normal routine.
Arun Swarup Menawat: The Tulsa procedure is done with real time imaging in the MLR bore which allows for phenomenal pixel by pixel accuracy and real time temperature measurement and automated control.
Arun Swarup Menawat: The use of EMR is now growing and urology.
Arun Swarup Menawat: Clinical evidence continues to point to the benefits of MRI imaging from early patient screening to diagnose team.
Arun Swarup Menawat: And treating with Tulsa.
Arun Swarup Menawat: We believe that MLR will continue to gain acceptance and urology.
Arun Swarup Menawat: Indeed.
Arun Swarup Menawat: There are growing signs that Omar is poised to become a mainstream imaging modality for urology.
Arun Swarup Menawat: Here are just a couple of data points.
Arun Swarup Menawat: AUA has been holding education programs to teach reading MR images at the annual conference every year for the last four years. This year, the course was fully booked, with a waiting list. Urologists are getting the message that they need to learn to read MR imaging. And, As of this year, the AUA is requiring that all residents be educated on learning how to read biparametric MRI as part of their residency training. Tomorrow's Urologist will be comfortable with MR imaging, and Tulsa is purposefully MR-centered. It looks like the world is now moving in the direction of where we are.
Arun Swarup Menawat: AUO has been holding education programs to teach reading MRI images at the annual conference every year for the last four years.
Arun Swarup Menawat: This year the <unk>.
Arun Swarup Menawat: Course was fully booked with a waiting list.
Arun Swarup Menawat: Urologists are getting the message.
Arun Swarup Menawat: But they need to learn to read.
Arun Swarup Menawat: Imaging.
Arun Swarup Menawat: And.
Arun Swarup Menawat: As of this year.
Arun Swarup Menawat: <unk> is requiring that all residents.
Arun Swarup Menawat: Educated on learning how to read by parametric MRI.
Arun Swarup Menawat: As part of their residency training.
Arun Swarup Menawat: Tomorrow's urologists.
Arun Swarup Menawat: We will be comfortable with MRI imaging and.
Arun Swarup Menawat: And Tulsa.
Arun Swarup Menawat: Purposefully.
Arun Swarup Menawat: Our centric.
Arun Swarup Menawat: It looks like the World is now moving in the direction of where we are.
Arun Swarup Menawat: Accordingly, we have started to forge even closer relationships with the three major MR companies to go beyond the compatibility of our respective technologies and to help maximize the tremendous opportunity that we see ahead for both us and them. Manufacturers are looking to develop interventional MRs that can fulfill that growing need. A few of the leading teaching hospitals have already expressed a desire to install interventional MRs.
Arun Swarup Menawat: Accordingly.
Arun Swarup Menawat: We have started to fall.
Arun Swarup Menawat: George even closer relationships with the three major <unk> companies to.
Arun Swarup Menawat: To go beyond compatibility of our respective technologies.
Arun Swarup Menawat: And to help maximize the tremendous opportunity that we see ahead for both us and them.
Arun Swarup Menawat: Recognizing the increasing use of MLR in urology, Matt.
Arun Swarup Menawat: Manufacturers are looking to develop intervention, though mr's that can fulfill that clearly need.
Arun Swarup Menawat: A few of the leading teaching hospitals have already expressed their desire to install interventional.
Arun Swarup Menawat: In February, we announced a collaboration with Siemens Healthineers to work towards bringing a complete therapeutics solution to urology by combining our Telsa Pro system with their newly announced interventional MR solution, the Megatron, PreMAX MR scan. This arrangement is non-exclusive.
Arun Swarup Menawat: Yes.
Arun Swarup Menawat: In February <unk>.
Arun Swarup Menawat: The collaboration with Siemens health in years to work towards bringing the complete therapeutics.
Arun Swarup Menawat: Loosen to urology by combining our Tulsa pro system.
Arun Swarup Menawat: Their newly announced interventional EMR solution.
Arun Swarup Menawat: Magnetron <unk>.
Arun Swarup Menawat: Pre Max MLR scanner.
Arun Swarup Menawat: This arrangement is non exclusive.
Arun Swarup Menawat: And we will also continue to market Telsa Pro as a standalone offering, providing our customers with the flexibility to leverage the use of existing MRs or acquire an entirely new system with EMR hardware of their choice. The aim of the collaboration with Siemens Health and Human is to create and market a total solution capable of providing images from patient screening to diagnostics and then TELSA treatment with a streamlined and efficient workflow at an optimized cost of care.
Arun Swarup Menawat: And we will also continue to market <unk>.
Arun Swarup Menawat: <unk> as a standalone offering.
Arun Swarup Menawat: Abiding, our customers with the flexibility to leverage the use of existing mr's or acquire an entirely new system with EMR hardware of their choice.
Arun Swarup Menawat: The aim of the collaboration with Siemens Health emitters is to create.
Arun Swarup Menawat: And market a total solution capable of providing images from patient screening tool.
Arun Swarup Menawat: The diagnostics and then Tulsa treatment.
Arun Swarup Menawat: With a streamlined.
Arun Swarup Menawat: And efficient workflow.
Arun Swarup Menawat: An optimized cost of care.
Arun Swarup Menawat: This complete solution can also be used in additional outpatient settings such as neurology clinics, AFC, and Hospital Surgical Departments that may not have previously been suitable sites. We look to be able to announce additional collaborations in the future. Moving on to the execution of our U.S. reimbursement strategy for Tulsa, there isn't much to update you on since our last call. As you know, the American Medical Association established three CTT Category 1 codes for Tulsa in mid-2023. Since then, as part of the process,
Arun Swarup Menawat: This complete solution can also be used.
Arun Swarup Menawat: Additional outpatient settings, such as neurology clinics.
Arun Swarup Menawat: Seeds.
Arun Swarup Menawat: And hospitals physical departments that may not have previously been suitable sites.
Arun Swarup Menawat: We look to be able to announce additional collaborations in the future.
Arun Swarup Menawat: The Relative Value Unit Scale Update Committee sent questionnaires to Telsa users to determine the physician work related value unit associated with the TELSA procedure. Based on user feedback, the Center for Medicare and Medicaid Services is working with the societies that sponsored the CPT Category 1 code application to determine the Tulsa procedure payment amount that will be attached to the permanent code. The proposed recommendations are expected to be published in the Federal Register at the end of July. Finalized in November, and come into effect as of January 2024. [inaudible] I would like to reiterate.
Arun Swarup Menawat: Moving on to the execution of our U S reimbursement strategy for Tesla.
Arun Swarup Menawat: There isn't much to update you on since.
Speaker Change: Our last call.
Arun Swarup Menawat: As you know.
Arun Swarup Menawat: The American Medical Association established three Ppt category one code.
Arun Swarup Menawat: Also in mid 2023.
Arun Swarup Menawat: Since then.
Arun Swarup Menawat: Part of the process.
Arun Swarup Menawat: The relative value unit scale update committee.
Arun Swarup Menawat: Questionnaires to Tulsa users to determine the physician.
Arun Swarup Menawat: That new units.
Arun Swarup Menawat: <unk> with the Tulsa procedure.
Arun Swarup Menawat: Based on the user feedback.
Arun Swarup Menawat: Center for Medicare and Medicaid services is working with the societies.
Arun Swarup Menawat: Concert CPT category, one code application to determine the Tulsa procedure payment amount that will be attached to the permanent codes.
Arun Swarup Menawat: The proposed recommendations.
Arun Swarup Menawat: I expect it to be published in the Federal Register at the end of July.
Arun Swarup Menawat: Finalized in November.
Arun Swarup Menawat: And come into effect.
Arun Swarup Menawat: As of January 2025.
Arun Swarup Menawat: Finally.
Arun Swarup Menawat: Our continuing commitment to Innovation, with the overall goal of increasing treatment efficacy, improving workflow efficacy, and expanding Technology Access to Deliver an Even Better Tulsa Treatment Experience for Urologists and their Patients, on that front. Our submitted application for the second Telsa AI module, called Contouring Assistant, to the FDA is under review. This Tulsa AI module uses past treatment designs to recommend a design in a new procedure based upon that knowledge. We believe that the contouring assistant will not only increase neurologists' confidence in their treatment designs but will also increase their procedural efficiency.
Arun Swarup Menawat: I would like to reiterate.
Arun Swarup Menawat: Our continuing commitment.
Arun Swarup Menawat: Two innovation.
Arun Swarup Menawat: With the overall goal of <unk>.
Arun Swarup Menawat: Creasing treatment efficacy.
Arun Swarup Menawat: Improving workflow efficacy.
Arun Swarup Menawat: And expanding.
Arun Swarup Menawat: Technology access to deliver an even better Tulsa treatment experience <unk>.
Arun Swarup Menawat: Your allergies.
Arun Swarup Menawat: And their patients.
Arun Swarup Menawat: On that front.
Arun Swarup Menawat: Our submitted application.
Arun Swarup Menawat: For the second Tulsa, AI module called Contouring assistant.
Arun Swarup Menawat: Two the FDA is under review.
Arun Swarup Menawat: This Tulsa AI module.
Arun Swarup Menawat: Users passed treatment designs.
Arun Swarup Menawat: <unk> recommends a design and the new procedure based upon that knowledge.
Arun Swarup Menawat: We believe that the controlling assistant.
Arun Swarup Menawat: Not only increase urologists confidence in their treatment designs.
Arun Swarup Menawat: But will also increase their procedural efficiency.
Arun Swarup Menawat: In addition, we have begun development work on the next planned module, Tulsa BPA. More details on that will be provided later this year. There's a large and growing body of evidence, from clinical trials, as well as from commercially treated patients, that Telfa is on its way to becoming a mainstream treatment modality across the entire prostate disease spectrum. We hope to receive FDA 510K clearance for the Contouring Assistant Tulsa AI module in the coming days and weeks.
Arun Swarup Menawat: In addition, we have begun development work on the next planned module.
Arun Swarup Menawat: Tulsa BPH more details on that will be provided later this year.
Arun Swarup Menawat: To summarize.
Arun Swarup Menawat: There is a large and growing body of evidence from clinical trials.
Arun Swarup Menawat: As well as from commercially treated patients.
Arun Swarup Menawat: Tulsa is on its way to becoming a mainstream treatment modality across.
Arun Swarup Menawat: Entire prostate disease spectrum.
Arun Swarup Menawat: We hope to receive FDA five 10-K clearance.
Arun Swarup Menawat: Of the country assistant.
Arun Swarup Menawat: Hi module in the coming days and weeks.
Arun Swarup Menawat: We also eagerly await a CMS decision regarding the Tulsa proposed reimbursement rate at the end of July. We are excited by the increasing use of MR in the care continuum of prostate disease management. And we continue to work with Siemens and the other two leading MR manufacturers, Philips and GE, to further support this modern treatment process. And finally, we now have sufficient visibility into the pace of process adoption, both in terms of existing system utilization and Install-Based Growth, to initiate full year revenue guidance. That guidance is $11 to $12 billion in revenue for 2025. This ends our prepared remarks for today. With that, we're happy to take any questions you might have. Operator.
Arun Swarup Menawat: We also eagerly await CMS decision.
Arun Swarup Menawat: Regarding the Tulsa proposed reimbursement rates.
Arun Swarup Menawat: End of July.
Arun Swarup Menawat: We are excited by the increasing use of MLR in the care continuum of prostate disease management.
Arun Swarup Menawat: And we continue to work with Siemens.
Arun Swarup Menawat: And.
Arun Swarup Menawat: The other two leading MLR manufacturers Philips and GE to.
Arun Swarup Menawat: Further support this modern treatment pathway.
Arun Swarup Menawat: And finally.
Arun Swarup Menawat: We now have sufficient visibility.
Arun Swarup Menawat: Into the pace of adoption.
Arun Swarup Menawat: In terms of existing system utilization.
Arun Swarup Menawat: And installed base growth.
Arun Swarup Menawat: To initiate full year revenue guidance.
Arun Swarup Menawat: That guidance is 11% to $12 million revenue for 2024.
Arun Swarup Menawat: This ends our prepared remarks for today.
Arun Swarup Menawat: With that we're happy to take any questions you might have.
Operator: Thank you. At this time, we will conduct our question and answer session. As a reminder, to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we create our Q&A roster. Our first question will come from Rick Wise, with CFO. Go ahead, Rick.
Arun Swarup Menawat: Operator.
Speaker Change: Thank you.
Operator: This time, we will conduct our question and answer session. As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Operator: Please standby.
Operator: While we create our Q&A roster.
Operator: Okay.
Operator: Our first question will come from Rick what Rick Wise with Stifel Go ahead Rick.
John: Hi Arun, the rest of the team, this is John. I'm with Rick today. I just wanted to maybe start off on guidance and kind of how to read through performance this quarter to the rest of the year. So if I'm just sort of looking at the recurring base, it grew roughly 1% year over year. And the guidance sort of implies, and as you talked about, 60% plus recurring revenue growth implies a pretty steep ramp for the second half. So I just wish, and hope you could talk a little more about the key drivers there and your visibility to seeing that strong 2H growth.
Rick Wise: Hi, Arun the rest of the team this is John Andre Rick today.
John: I just wanted to maybe start off on guidance and kind of how to read through performance. This quarter to the rest of the year. So I'm just sort of looking at the recurring base. It grew roughly 1%.
John: Year over year, and the guidance sort of implies and as you talked about 60% plus recurring revenue growth for plaza.
John: Pretty steep ramp for the second half so I just wish I hope you could talk a little more about the key drivers there and your visibility to seeing that strong <unk> growth.
Arun Swarup Menawat: Oh, you know, it's not as steep a ramp as the numbers imply. We placed a number of new systems in Q4 last year and Q1 this year. And so those systems are, you know, we purchased the system, recurring revenue module kits in Q4, and we didn't want to put in more until they used all of these up. And so it's more about, I think, as Rashed said before, it's about leveling and making sure not to have too much inventory of customer sites.
John: Alright.
Arun Swarup Menawat: Hello.
Arun Swarup Menawat: Steeper ramp of the members and plot.
Arun Swarup Menawat: We placed a number of new systems in Q4 last year and Q1 this year and.
Arun Swarup Menawat: And so those systems are we.
Arun Swarup Menawat: Purchase.
Arun Swarup Menawat: The recurring revenue module kits in Q4, and we have been.
Arun Swarup Menawat: Put more until they use all of these up and so it's more about I think as we've said before it's about leveling and making sure there's not too much inventory at customer sites, but the number of sites has increased.
Arun Swarup Menawat: But the number of sites has increased, and these sites have come up on speed down. So I think, as we've talked about before, quarter of quarter, we still have some variability, things like that. But for the year, we are very confident in terms of increasing the utilization and, thereby, the revenue associated. So again, I would chalk this up to quarter over quarter variability, but we don't see it as a steep hill.
Arun Swarup Menawat: These types of come up on <unk>. So I think as we've talked about before quarter over quarter, we still have some variability things like that but for the year. We are very confident in terms of increasing the utilization.
Arun Swarup Menawat: And thereby the.
Arun Swarup Menawat: Okay. So again.
Arun Swarup Menawat: This up to quarter over quarter variability, but we don't see it.
Arun Swarup Menawat: Steve.
John: Thanks, that's helpful. Maybe I just have another question here. I remember on the last earnings call, you discussed potential changes to the business model, in the sense that you might actually sell the capital versus sort, using this recurring structure. Just sort of a few months later, I just wanted to get your updated thoughts. How are you thinking about the profound business model today? Have you learned anything in the past few months? Or have your recent negotiations and conversations with CMS influenced your thoughts on what the profound business model is going to be going forward?
Speaker Change: Thanks Thats helpful.
John: Maybe just another question here I remember on the last earnings call you discussed potential changes to the business model.
John: Since you might actually sell the capital versus service.
John: Using this recurring structure just sort of a few months later I just wanted to get your updated thoughts how are you thinking about the profound business model today have you learned anything in the past few months.
John: Have your recent negotiations and conversations with CMS influenced your your thoughts on what the profile business model is going to be going forward.
Arun Swarup Menawat: Yes, that's a great question also. And I think, again, part of the reason why we felt comfortable providing guidance is that I think we do have a lot more visibility at this point than we did last year. And in answer to your question, we do think that we have a fairly good idea of what the business model is going to be. I think that we will go to a bit of a hybrid model.
Arun Swarup Menawat: Yes, that's a great question also and I think again part of the reason why we felt comfortable providing guidance because I think we do have a lot more visibility at this point than we did last year and I think to your question. We do think that we have a fairly good.
Arun Swarup Menawat: Well, what the business model is going to be I think that we will go to.
Arun Swarup Menawat: That is not to say that we will not place systems only on a recurring revenue basis. But I think what you will see is that probably there will be a bit of a 70-30 mix where the recurring revenues are probably going to be in the range of about 70%, and 30% of revenues will come from the capital side of the equation. But primarily, we will remain a recurring company. So for new sites, they will have a choice; they can pay us the full amount and use it on a per use basis.
Arun Swarup Menawat: The hybrid model that is not to say that we will not place system only on recurring revenue basis.
Arun Swarup Menawat: But I think what you will see is that probably there will be a bit of a 70 30 mix.
Arun Swarup Menawat: Sure.
Arun Swarup Menawat: <unk> revenues are probably going to be in the range of about 70% and 30% and revenues will come from from.
Arun Swarup Menawat: Capital revenue capital side of the equation.
Arun Swarup Menawat: But primarily we will remain.
Arun Swarup Menawat: The new company, so for new sites.
Arun Swarup Menawat: Right.
Arun Swarup Menawat: You can pay a small amount.
Arun Swarup Menawat: And use it on a per use basis.
Arun Swarup Menawat: And then what we will also see is.
Arun Swarup Menawat: That.
Arun Swarup Menawat: <unk> two will start with recurring revenue will talk to maybe acquire based upon usage.
Arun Swarup Menawat: Okay converted into our capital and we're comfortable with that walks out.
Arun Swarup Menawat: So I think.
Arun Swarup Menawat: In overall terms.
Arun Swarup Menawat: And then what we will also see is that sites who start with recurring revenue will start to maybe acquire based upon usage and may convert it into capital, and we're comfortable with that also. And so, in overall terms, we think we will remain primarily a recurring revenue company. And we are also pretty comfortable that as the volumes increase, our gross margins will also continue to increase.
Arun Swarup Menawat: We think we will remain.
Arun Swarup Menawat: Barely a recurring revenue company.
Arun Swarup Menawat: We also are pretty comfortable that as the volumes increase.
Arun Swarup Menawat: Our gross margins will also continue to increase and we think we are track to deliver better than 70% margin over time.
Arun Swarup Menawat: And we think we are tracked to deliver better than 70% margin over time. As we go to this hybrid model, you know, we may reduce the recurring renewal participation price from, let's say around 8000 to maybe We don't expect that to go down significantly, and then capital revenues are also high-margin revenue. That's it, all of your questions in sufficient detail.
Arun Swarup Menawat: As we go through this hybrid model.
Arun Swarup Menawat: We may reduce the recurring revenue per patient price.
Arun Swarup Menawat: Let's say around 8000 to maybe.
Arun Swarup Menawat: We don't expect that to go down significantly.
Arun Swarup Menawat: And then capital revenues are also high margin revenue.
Arun Swarup Menawat: All of your question sufficient detail.
John: Yeah, thanks. That was really helpful.
Speaker Change: Yes, Thanks that was really helpful.
Operator: Thank you. One moment for our next question. Our next question is from Rahul with Raymond James. Go ahead.
John: Perfect.
Speaker Change: Thank you one moment for our next question.
Rahul: Our next question is from Raul with Raymond James Go ahead.
Rahul: Thank you, operator. Good afternoon, Arun and Rashed. Thanks so much for taking our questions. So I just wanted to follow on from John's last question around the recurring revenue versus capital in the 7030. I assume that, irrespective of whether a customer is capital equipment versus recurring revenue, you're setting pricing such that the lifetime value per user is effectively equivalent.
Speaker Change: Thank you operator.
Speaker Change: Good afternoon. Thanks, so much for taking my questions.
Rahul: Wanted to follow on from that from that from John last question around.
Rahul: The recurring revenue base capital and the 70 30, I assume that irrespective, whether our customer is.
Rahul: Capital equipment versus recurring revenue, you're setting pricing such that the lifetime value per user is effectively equivalent able to sort of comment a little bit on that.
Rahul: Are you able to sort of comment a little bit on that?
Arun Swarup Menawat: I think that that is certainly the principle that we're using. And, as you heard from Matthew's comments, also, we think Pulsa is a very efficient procedure, and that efficiency will continue to grow.
Speaker Change: Yes, I think that that is certainly in the principle that we're using.
Arun Swarup Menawat: And I think as you heard from Matthew's comments also we think that.
Arun Swarup Menawat: Tulsa.
Arun Swarup Menawat: Patient procedure and that efficiency will continue to grow.
Arun Swarup Menawat: And so we think that, on, you know, use per unit time basis, we will continue to show productivity. And that could, over time, be a reason to maintain our prices and maybe, you know, improve upon those. But you're right.
Arun Swarup Menawat: And so we think that.
Arun Swarup Menawat: On use per unit time basis, we will.
Arun Swarup Menawat: Continue to show productivity and that could over time.
Arun Swarup Menawat: And to maintain our prices and maybe.
Arun Swarup Menawat: In general, the principle really is that we will convert to a model that will be more suitable to the hospitals as reimbursement comes in. And at the same time, we want to be sure that we, you know, get the value that we provide in terms of the efficiency of our product.
Arun Swarup Menawat: Improve upon those but youre right in general the principal really is that we will convert to a model that will be more suitable to the hospitals as the reimbursement comes in.
Arun Swarup Menawat: And at the same time, we want to be sure that we.
Arun Swarup Menawat: The value that we provide in terms of the efficiency of our product.
Rahul: Thanks, Arun. That's very helpful. So, now, you've indicated that there's a lot new in the reimbursement, and so I won't push on that. However, I want to ask if you could perhaps orient us in terms of how CMS should be looking at pricing, given that surgery lands around $17,000, and your interim code is currently around $13,000. There's a significant benefit to TELSA, given the, you know, essentially long-term benefits to patients not having to go through surgery. So, again, without prognosticating on where you'll land, are you able to sort of orient us in terms of how CMS will be driving towards a pinpointed number?
Speaker Change: Thanks, that's very helpful.
Rahul: No.
Rahul: Now you had indicated that.
Rahul: New on the reimbursement and so I won't push on that however, I wanted to ask if you could perhaps orient us in terms of.
Rahul: How CMS should be looking at pricing given that.
Rahul: Surgery lands around 17000, your interim code is currently around 13000.
Rahul: There is significant benefit to Tulsa, given essentially long term to patients not having to go through surgery, So again without but not the gating on where what number you are you able to say that Orient us in terms of how CMS will be driving towards.
Arun Swarup Menawat: I'm happy to Rahul. So I think there are a number of things that are already visible, and one of them is clearly that we are a prostate cancer treatment, and I think that we would be classified into a category. Professor, Benjamin Haynor, Unknown Attendee, Rahul Sarugaser, Scott McAuley, and Dr. Sarugaser are sort of in line with that.
Rahul: Pinpointed number.
Arun: I'm happy to.
Arun Swarup Menawat: So.
Arun Swarup Menawat: I think there are a number of things that are already visible.
Arun Swarup Menawat: And one of them is.
Arun Swarup Menawat: Clearly, we are a prostate cancer treatment.
Arun Swarup Menawat: And I think that.
Arun Swarup Menawat: Matt.
Arun Swarup Menawat: We would be classified into our category.
Arun Swarup Menawat: Close.
Arun Swarup Menawat: Two were radical prostatectomy robotics.
Arun Swarup Menawat: And because the cost numbers are sort of in line with that.
Arun Swarup Menawat: Given that we have been highly disciplined about making sure that we charge the patients correctly for the same amount, and there are no hidden discounts and so on, I think CMS was quite appreciative of the fact that we ran a very clean market entry operation. Another thing that is already clear is that the work that the committees have done in the public domain, if you look into the public documents, is that our codes are zero-day global at this point. There is always a chance that CMS could change that because until they publish, there is no guarantee. But at the moment, they are slated to be the way the Rukmini system works, which was based upon European rule.
Arun Swarup Menawat: Given that we have been highly disciplined about making sure that we charge the patient correctly on the same amount and there are no discount.
Arun Swarup Menawat: Discounts and so on.
Arun Swarup Menawat: Quite appreciative of the fact that we ran is a market entry strategy.
Arun Swarup Menawat: Another thing is already clear is that the work that.
Arun Swarup Menawat: Could maybe have done in the public domain. If you look into the public documents and that we are closer to zero day global at this point.
Arun Swarup Menawat: They are.
Arun Swarup Menawat: Always a chance that CMS could change that because until they publish that have no guarantee but at the moment. They are slated to be the way the <unk> works.
Arun Swarup Menawat: And that's an important point because, in its procedure, that's a daytime procedure, so the physician gets paid only for the day of the procedure. What that means is that the pre-procedure and post-procedure visits of the patients will be paid separately. As compared to Robotic Prostectomy or other procedures within prostate cancer that are paid on a 90-day global basis, which means that for the first nine days out there, but these are the follow-ups are included. So I think, putting all things together, apples to apples, that we will have a financial model that will be quite viable for the hospital.
Rahul: That's very helpful. Thank you very much, Arun. One last quick question.
Arun Swarup Menawat: It was based upon renewal.
Speaker Change: And that's an important point because it's.
Rahul: It's procedures the daytime procedure. So the physician gets paid only for the day of the procedure.
Rahul: What that means is that they will.
Rahul: <unk>.
Rahul: Procedure.
Rahul: Post procedure visits of the patients will be paid.
Rahul: Yes.
Rahul: As compared to.
Rahul: Robotic prostatectomy or other procedures and within prostate cancer.
Rahul: That are paid on a 90 day global basis, which means that.
Speaker Change: So the question is is our focus either.
Rahul: Follow ups included so I think.
Rahul: Our expectation is putting all things.
Rahul: Things together apples apples.
Rahul: That we will have a financial model that will be quite liable for the hospital.
Mathieu Burtnyk: I know, Mathieu, you talked about the recent clinical data. You indicated in the press release that recruitment in the CAPTIN trial is on track to be completed at the end of this year. So are you still looking at interim, potential interim data at some point? When should we be, could you orient us as to when we could potentially expect some data on the CAPTIN trial? And that'll be it for me today. Thank you. Sure.
Speaker Change: Is that helpful.
Speaker Change: That's very helpful. Thank you very much Eric.
Speaker Change: One last quick question I know, Matt you talked about the recent clinical data.
Mathieu Burtnyk: You had indicated in the press release that.
Mathieu Burtnyk: Recriminate tap and trial is on track to be completed at the end of this year. So.
Speaker Change: Are you still looking at interim potential interim data at some point when should we be.
Mathieu Burtnyk: Could you oriented as to when we could potentially expect some data on the captain trial and that'll be it for me. Thank you.
Mathieu Burtnyk: Sure. Yeah, Rahul. As we've said before, we're on track to produce interim data in the first half of next year. As soon as, you know, because this is a level one randomized study, we cannot publish anything because of biases until all patients are treated, and we may have to wait 90 days for them for those early results to come in. But we do think that in the first half of next year, as we've talked about before, we will be able to produce interim results. Thanks very much.
Speaker Change: Sure Yes.
Mathieu Burtnyk: Okay.
Mathieu Burtnyk: We have said before we are on track to produce interim data in the first half of next year.
Mathieu Burtnyk: Susan.
Mathieu Burtnyk: Because this is a level one randomized study we cannot publish anything because of biases.
Mathieu Burtnyk: All patients are treated and we may have to wait 90 days.
Mathieu Burtnyk: For them from that.
Mathieu Burtnyk: Our <unk> results to come in but we do think that in the first half of next year as we've talked about before we will be able to produce interim results.
Rahul: Thanks very much. I'll get back in the queue.
Speaker Change: Thanks, very much I'll get back in the queue.
Speaker Change: Thank you.
Operator: As a reminder, to ask a question, please press star 11 on your telephone. Please stand by while we compile our Q&A roster. I am showing no further questions at this time. I would now like to turn it back to Dr. Menawat. Go ahead, Doctor.
Speaker Change: Thank you.
Rahul: As a reminder to ask a question. Please press star one one on your telephone.
Arun Swarup Menawat: Please standby, while we compile our Q&A roster.
Operator: Yes.
Arun Swarup Menawat: I am showing no further questions at this time I would now like to turn it back to Dr. Mento go ahead Dr.
Arun Swarup Menawat: Thank you so much. Look forward to updating you on the next quarter and, hopefully, with some good news. Evaluating the CMR. Human Biology. Thank you.
Arun Swarup Menawat: Thank you so much and look forward to updating you next quarter and hopefully with some good.
Arun Swarup Menawat: Regarding CMS.
Operator: Thank you, everyone, for your participation in today's conference call. This does conclude the program. You may now disconnect.
Speaker Change: Thank you.
Speaker Change: Thank you everyone for your participation in today's conference call. This does now conclude the program you may now disconnect.
Arun Swarup Menawat: Thank you.
Operator: Okay.
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Arun Swarup Menawat: Thank you.
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