Q2 2024 Profound Medical Corp Earnings Call

Operator: Good day, and thank you for standing by. Welcome to the Profound Medical second quarter 2024 financial results conference call.

Speaker Change: Good day and thank you for standing by. Welcome to the Profound Medical second 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 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Stephen Kilmer, Investor Relations.

Speaker Change: At this time, all participants are in listen-only mode.

Speaker Change: 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 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded.

Speaker Change: I would now like to hand the conference over to your first speaker today, Stephen Kilmer, Investor Relations. Please go ahead.

Stephen Kilmer: Thank you. Good afternoon, everyone.

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 four looking statements are based on Profound's 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 2024 financial outlook and related assumptions, the expectations regarding the efficacy of Profound's technology in the treatment of prostate cancer, BPH, uterine fibroids, palliative pain treatment, and osteoid osteoma, Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements to be materially different from those implied by such statements. No foreign language statement can be carried.

Stephen Kilmer: Thank you. Good afternoon, everyone. Let me start by pointing out that this conference call will include four looking statements within the meeting about applicable securities laws in the United States and Canada.

Stephen Kilmer: All four looking statements are based on Profound's 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 positions,

Stephen Kilmer: including the company's 2024 financial outlook and related assumptions, the expectations regarding the efficacy of Profound's technology in the treatment of prostate cancer, BPH, uterine fibroids, palliative pain treatment, and osteoid osteoma, and its future revenues and financial results.

Stephen Kilmer: Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements to be materially different from those implied by such statements.

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. Profound undertakes no obligation to publicly update or revise any foreign linking statement, whether as a result of new information, future events, or otherwise, other than as required by law. 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. Good afternoon, everyone.

Stephen Kilmer: No poor-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: 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 is required by law.

Speaker Change: 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.

Speaker Change: With that said, I'll now turn the call over to Rashed.

Rashed Dewan: and welcome to our second 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 Mathieu in a moment to provide updates on Tulsa clinical publication, Neutralization Trends, The Captain clinical trial, and reimbursement.

Rashed Dewan: Good afternoon, everyone, and welcome to our second 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 Mathieu in a moment to provide updates on Tulsa clinical publications.

Mathieu Burtnyk: Neutralization Trends, The Kapton Clinical Trial, and Reimbursement.

Rashed Dewan: Before I do, I would like to provide a brief summary of our second quarter 2024 financial results. To streamline, all of the numbers I will refer to have been rounded to the nearest hundred thousand for VRF Proctor for the three-month period ended June 30, 2024. The company recorded revenue of $2.23 million, with $1.46 million coming from recurring revenue and 773,000 from one-time filling up capital equipment. Second quarter, 2024 revenue increased 39% from $1.6 million from the same period in 2023.

Rashed Dewan: However,

Rashed Dewan: Before I do, I would like to provide a brief summary of our second quarter 2024 financial results.

Rashed Dewan: to streamline things.

Rashed Dewan: All of the numbers I will refer to have been rounded, but they are approximate.

Rashed Dewan: For the three-month period ended June 30, 2024, the company recorded revenue of $2.23 million.

Rashed Dewan: with $1.46 million coming from recurring revenue.

Rashed Dewan: and 773,000 from one-time fill-up capital equipment.

Rashed Dewan: Second quarter, 2024 revenue increased 39% from $1.6 million from the same period in 2023.

Rashed Dewan: Looking forward, for the full year 2024, based on the company's current business planning and budgeting activities, we continue to anticipate revenue to be in the range of 11 million to $12 million. Growth Margin in Q2 2024 was 64%, compared to 66% in Q2 2023. As we mentioned on our last call, We expect gross margin to vary some quarter over quarter, but just as we delivered about 60% margin in 2023, we continue to expect to deliver that or better in 2024.

Rashed Dewan: Looking forward.

Rashed Dewan: for the full year 2024.

Rashed Dewan: Based on the company's current business planning and budgeting activities.

Rashed Dewan: We continue to anticipate revenue to be in the range of $11 million to $12 million.

Rashed Dewan: Gross Margin in Q2 2024 was 64%.

Rashed Dewan: compared to 66% in Q2 2023.

Rashed Dewan: As we mentioned on our last call.

Rashed Dewan: We expect gross margin to vary some quarter over quarter, but just as we delivered about 60% margin in 2023,

Rashed Dewan: We continue to expect to deliver that or better in 2024.

Rashed Dewan: Total operating expenses in 2024, the second quarter, which consists of R&D, GNA, and Sales and Distribution Expenses, were $9.3 million, an increase of 24% compared to $7.5 million in the second quarter of 2023. Breaking that down further, Expenditures for R&D increased 33% on a year-over-year basis to $4.2 million. GNA expenses increased by 1% to $2.1 million, and Sales and Distribution Expenses increased by 32% to $3 million. Net finance income for the 2024 second quarter was $934,000, compared to net finance expense of $884,000 for the same three-month period in 2023.

Rashed Dewan: Total Operating Expenses in 2024, Second Quarter, which consists of R&D,

Rashed Dewan: GMA

Rashed Dewan: and Sales and Distribution Expenses were $9.3 million.

Rashed Dewan: an increase of 24%.

Rashed Dewan: compared to $7.5 million in the second quarter of 2023.

Rashed Dewan: Breaking that down further.

Rashed Dewan: Expenditures for R&D increased 33% on a year-over-year basis to $4.2 million.

Rashed Dewan: GNA expenses increased by 1% to $2.1 million.

Rashed Dewan: and Phil and the solution expensive increased by 32% to 3 million dollars.

Rashed Dewan: Net finance income for 2024 second quarter was $934,000.

Rashed Dewan: compared to net finance expense of $884,000 for the same three-month period of 2023.

Rashed Dewan: Overall, the company recorded a second quarter 2024 net loss of $6.9 million or $0.28 per common share, down from a net loss of $7.3 million or $0.35 per common share for the same three-month period in 2022. As of June 30, 2024, Profound had cash of $34.1 million. With that, I will now turn the call over to Matt.

Rashed Dewan: Overall, the company recorded a second quarter 2024 net loss of $6.9 million, or $0.28 per common share.

Rashed Dewan: down from a net loss of $7.3 million or $0.35 per common share for the same three-month period in 2023.

Rashed Dewan: As of June 30, 2024, Profound had cash of $34.1 million.

Rashed Dewan: With that, I will now turn the call over to Mathieu.

Mathieu Burtnyk: Thank you, Rashed, and hello everyone. In the second quarter, real-world utilization trends from Tulsa providers continue to demonstrate the unique and unrivaled flexibility of the technology to become a mainstream procedure in the treatment of prostate disease. Approximately three quarters, or 73%, of the procedures were for the primary treatment of prostate cancer. 15% were hybrid patients suffering from both cancer and BPH, 8% were salvage treatments, and 4% were men with B

Mathieu Burtnyk: Thank you, Rashed, and hello everyone. In the second quarter, real-world utilization trends from Tulsa providers continue to demonstrate the unique and unrivaled flexibility of the technology to become a mainstream procedure in the treatment of prostate disease.

Mathieu Burtnyk: Approximately three quarters of 73% of the procedures were for the primary treatment of prostate cancer.

Rashed Dewan: 15% were hybrid patients suffering from both cancer and BPH, 8% were salvaged treatments and 4% were men with BPH only.

Mathieu Burtnyk: Half of the procedures were prescribed whole gland treatment plans, 29% subtotal but more than half the gland, and 21% were hemiablations or focal therapy. Prostate cancer patients across all grades of disease were treated, primarily intermediate-risk patients, with 84% being grade group 2 and 3. 5% were low-risk grade group one, and 11% high-risk grade group four or 5K.

Rashed Dewan: Half of the procedures were prescribed whole gland treatment plans, 29% subtotal but more than half the gland, and 21% were hemiablations or focal therapy.

Rashed Dewan: Prostate cancer patients across all grades of disease were treated, primarily intermediate risk patients with 84% being grade group 2 and 3.

Rashed Dewan: 5% were low-risk, grade group 1, and 11% high-risk, grade group 4 or 5 cancer.

Mathieu Burtnyk: Similarly, patients with all prostate shapes and sizes were treated, from less than 20 cc to over 100 cc. In this quarter, about one-half, or 51%, had prostate volumes under 40 cc. Another 30% had a prostate volume between 40 and 60 cc, and the remaining 19% had prostates over 60 cc.

Rashed Dewan: Similarly, patients with all prostate shapes and sizes were treated, from less than 20 cc to over 100 cc.

Speaker Change: This quarter, about one-half, or 51%, had prostate volumes under 40 cc, another 30% had a prostate volume between 40 and 60 cc, and the remaining 19% had prostates over 60 cc.

Mathieu Burtnyk: We continue to see TALS as 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 patients who have both prostate cancer and BPH. The workflow step of creating the treatment plans within the spectrum of prostate diseases was recently made faster and easier with the release of Contouring Assistive, Profound's second Tulsa AI module, which received FDA 510k 510k clearance in. Since its release, early physician feedback in the form of post-treatment surveys has confirmed that prostate segmentation with the Tulsa AI module had excellent accuracy in real-world cases with decreased treatment planning time.

Rashed Dewan: We continue to see TALS as 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 patients who have both prostate cancer and BPH.

Speaker Change: The workflow step of creating the treatment plans within the spectrum of prostate diseases was recently made faster and easier with the release of Contouring Assistant, Profound's second Tulsa AI module, which received FDA 510K clearance in May.

Speaker Change: Since its release, early physician feedback in the form of post-treatment surveys has confirmed that prostate segmentation with the Tulsa AI module had excellent accuracy in real-world cases with decreased treatment planning time.

Mathieu Burtnyk: In fact, in nearly all cases, urologists reported that Conferring Assistant improved the accuracy of their treatment plan, information that we're planning to publish in conference presentations later this year. Now, I would like to now shift focus to reimbursement and highlight some of the key aspects of the new Tulsa Category 1 CPT codes included in the proposed rules issued last month by the U.S. Centers for Medicare and Medicaid Services, or CMS for short.

Speaker Change: In fact, in nearly all cases, urologists reported that Conferring Assistants improved the accuracy of their treatment plan, information that we're planning to publish in conference presentations later this year.

Speaker Change: I would like to now shift focus to reimbursement and highlight some of the key aspects of the new Tulsa Category 1 CPT codes included in the proposed rules issued last month by the U.S. Centers for Medicare and Medicaid Services, or CMS for short.

Mathieu Burtnyk: These new codes have been designed to reflect the unique aspects of the TULSA procedure with respect to location of service, number of physicians performing the procedure, and intensity of post-procedure follow-up visits. First, the Tulsa codes have been approved for use in all locations of service. That means TELSA can be performed and billed in hospitals, ambulatory surgical centers, or ASCs. And, interestingly, within the physician-owned non-facility setting, which includes an office-based lab or OBL, a physician office, a LUGPA office, or an imaging center.

Speaker Change: These new codes have been designed to reflect the unique aspects of the TULSA procedure with respect to location of service, number of physicians performing the procedure, and intensity of post-procedure follow-up visits.

Speaker Change: First, the Tulsa codes have been approved for use in all locations of service.

Speaker Change: That means TELSA can be performed and billed in hospitals, ambulatory surgical centers, or ASCs, and interestingly, within the physician-owned non-facility setting, which includes office-based lab, or OBL, a physician office, a LUGPA office, or an imaging center.

Mathieu Burtnyk: The spectrum of location of service provides not only a broad install-based opportunity but also allows for maximum patient access and physician preference. The proposed rule has established Tulsa as a level six urology APC, with the hospital national average Medicare payment just over $9,200, which is on par with all other comparative proxy cancers. However, with Tulsa's faster intra-service time, the payment rate per hour within a hospital will actually be similar, if not better, to comparable procedures.

Speaker Change: The Spectrum of Location of Service provides not only a broad and dogly felt protruding, but also allows for maximum patient access and physician preference.

Unknown Executive: Good day, and thank you for standing by.

Unknown Executive: Welcome to the Profound Medical Second Quarter 2024 Financial Results Conference call. At this time, all participants are in listen only mode.

Speaker Change: The proposed rule has established TULSA as a level 6 urology APC.

Unknown Executive: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.

Speaker Change: With the hospital National Average Medicare Payment, just over $9,200, which is on par with all other comparative prostate cancer procedures.

Speaker Change: However, with Tulsa's faster interest service time, the payment rate per hour within a hospital will actually be similar if not better to comparable procedures.

Unknown Executive: Please be advised that today's conference is being recorded.

Stephen Kilmer: I would now like to hand the conference over to your first speaker today, Stephen Kilmer, investor relations. Please go ahead. Thank you.

Mathieu Burtnyk: Additionally, within the ASC environment, the proposed national average Medicare payment for Tulsa of $7,195 has been set significantly higher than the $4,715 assigned to another longer ablative procedure. In the non-facility setting, the proposed equivalent national average Medicare payment for Tulsa is even higher at over $9,400, which creates a unique and interesting opportunity within the physician-owned office setting.

Speaker Change: Additionally, within the ASC environment, the proposed national average Medicare payment for TULSA of $7,195 has been set significantly higher than the $4,715 assigned to another longer ablative procedure.

Unknown Executive: Good afternoon, everyone.

Unknown Executive: Let me start by pointing out that this conference call will include four looking statements within the meeting about applicable securities wise in the United States and Canada. All four looking statements are based on profound current police 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 2024 financial outlook and related assumptions. The expectations regarding the efficacy of profound technology and the treatment of prostate cancer, BPH, uterine fibroids, talented pain treatment, and osteoid osteoma and its future revenue and financial results. Such statements involve known and unknown risks and certainties and other factors that may cause actual results, performance, or achievements to be materially different from those implied by such statements. No four looking statement can be guaranteed.

Speaker Change: In the non-saccelity setting, the proposed equivalent national average Medicare payment for Tulsa is even higher at over $9,400, which creates a unique and interesting opportunity within the physician-owned office setting.

Arun Menawat: Second, the Tulsa codes have been designed to optimize physician time for maximum efficiency. Unlike other comparable procedures, three TULSA codes enable the procedure to be performed entirely by one physician or two physicians working together from different or the same specialty. These physicians can share the procedure and bill for their own work performed, optimizing their RVUs per hour. The third key point is the zero day global assigned to the Tulsa procedure, which is unlike any other comparable proxy procedure that includes a 90 day global period.

Speaker Change: Second, the Tulsa codes have been designed to optimize physician time for maximum efficiency.

Speaker Change: Unlike other comparable procedures, three TULSA codes enable the procedure to be performed entirely by one physician or two physicians working together from different or the same specialty.

Speaker Change: These physicians can share the procedure and go for their own work performed, optimizing the RVUs per hour.

Unknown Executive: Listeners are cautioned not to place undue reliance on these four looking statements, which speak only as of the date of this conference call. Profound vendor takes no obligations of publicly updated or revised any four looking statements, whether or as a result of new information, future events, or otherwise, other than this required by law.

Speaker Change: The third key point is the zero-day global assigned to the Tulsa procedure, which is unlike any other comparable prostate procedure that includes a 90-day global period.

Arun Menawat: This allows flexibility for physicians to bill separately any additional services for each patient visit following the Tulsa procedure at the appropriate level based on E&M guidelines. Complex visits can be billed at a higher level, and this mitigates risks of variable or complicated patient follow-up demands that a 90-day global code creates. Following the publication of the proposed rule, CMS is accepting comments until September 9. They will then issue a final rule, likely in November this year, before the new codes and payment rates go into effect on January 1st, 2025.

Speaker Change: This allows flexibility for physicians to build separately any additional services for each patient visits, following the Tulsa procedure at the appropriate level based on ENM guidelines.

Unknown Executive: Representing the company today or Dr. Arun Benoit, profound chief executive officer, rescinds you on the company's chief financial officer and Dr. Matthew Berknek, profound chief operating officer. With that said, I'll now turn the call over to Vershade.

Speaker Change: Complex visits can be billed at a higher level, and this mitigates risks of variable or complicated patient follow-up demands that a 90-day global code creates.

Arun Menawat: Good afternoon, everyone, and welcome to our second 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.

Speaker Change: Following the publication of the proposed rule, CMS is accepting comments until September 9th.

Speaker Change: They will then issue a final rule, likely in November this year, before the new COVID-19 payment rates go into effect on January 1, 2020.

Arun Menawat: Finally, with the new CPT codes becoming effective in 2025, I wanted to provide an update on our ongoing CAPTED study, designed to support positive coverage from private payers in the US. DeKalb-Cantrell is the first and only Level 1 study comparing new technology to robotic radical prosthetics. It is powered to demonstrate non-inferior efficacy with superior quality of life outcomes such as urinary incompetence, sexual function, and penile length, among others. We continue to see strong interest in joining the study, given the high level of impact it is expected to have in urology.

Speaker Change: Finally, with the new CPT codes becoming effective in 2025, I wanted to provide an update on our ongoing CAPT&E study, designed to support positive coverage from private payers in the U.S.

Unknown Executive: I will turn the call over to Matthew in a moment to provide updates on also clinical publications, utilization trends, the captain, clinical trial, and reimbursement.

Speaker Change: The Captain Charles, the first and only level one study comparing head to head, a new technology to robotic radical prosthetic.

Speaker Change: It is powered to demonstrate non-inferior efficacy with superior quality of life outcomes such as urinary incompetence, sexual function, and penile length, among others.

Matthew Burtnyk: However, before I do, I would like to provide a brief summary of our second quarter, 2024 financial results. To streamline things, all of the numbers I will refer to have been rounded, but they are approximate. For the three month period ended June 30, 2024, the company recorded revenue of 2.23 million, with 1.46 million coming from recurring revenue, and 773,000 from one time sale of capital equipment. Second quarter, 2024 revenue increased, 39% from 1.6 million from the same period in 2020.

Speaker Change: We continue to see strong interests in joining the study, given the high level of impact it is expected to have your knowledge community.

Arun Menawat: In the last quarter, we have onboarded three additional sites, including Stanford and the Mayo Clinic, adding to the top hospitals in the world participating in CAHPS. We are pleased to reaffirm that the rate of recruitment remains well-positioned to complete enrollment in a captain study this fall. I will now turn the call over to Arun.

Speaker Change: In the last quarter, we have onboarded three additional sites, including Stanford and the Mayo Clinic, adding to the top hospitals in the world participating in CAPTIV.

Speaker Change: We are pleased to reaffirm that the rate of recruitment remains well-positioned to complete enrollment of the Kapkan study this year.

Arun Menawat: Thanks, Mathieu, and good afternoon, everyone. Our message remains clear as we approach 2025. When we start competing on a level playing field for the first time with respect to reimbursement, TELSA increasingly has the potential to become a mainstream treatment modality across the entire prostate disease spectrum, ranging from low, intermediate, or high-risk prostate cancer to hybrid patients suffering from both prostate cancer and BPH, to men with BPH only, and also to patients requiring salvage therapy for Radio Recurrent Localized Prostate Cancer. There are several reasons driving our confidence, which I would like to highlight.

Speaker Change: I will now turn the call over to Arun.

Arun Menawat: Thanks, Mathieu, and good afternoon, everyone.

Arun Menawat: Our message remains clear.

Arun Menawat: as the approach 2025.

Arun Menawat: When we will start competing on a level playing tune for the first time with respect to reimbursement.

Matthew Burtnyk: Looking forward for the full year 2024, based on the company's current business planning and budgeting activities, we continue to anticipate revenue to be in the range of $11 million to $12 million. Gross margin in Q2 2024 was 64% compared to 66% in Q2 2023. As we mentioned on our last call, we expect gross margin to vary some quarter over quarter, but just as we delivered about 60% margin in 2023, we continue to expect to deliver that or better in 2024.

Speaker Change: Telsa increasingly has the potential of becoming a mainstream treatment modality across the entire prostate disease spectrum, ranging from low, intermediate, or high-risk prostate cancer.

Speaker Change: to hybrid patients suffering from both prostate cancer and BPH.

Speaker Change: to men with BPH-only and also to patients requiring salvage therapy for radio recurrent localized prostate cancer.

Speaker Change: There are several reasons driving our confidence, which I would like to highlight.

Arun Menawat: Tulsa is an incision and radiation free One and Done procedure performed in a single session that takes a few hours. Virtually all prostate shapes and sizes can be safely, effectively, and efficiently treated with self-care. There is no bleeding associated with the procedure, no hospital stay is required, and most Telsa patients report quick recovery to their normal routine. The TILSAT procedure is done with real-time imaging on the MR board for pixel-by-pixel precision.

Speaker Change: Tulsa is an incision and radiation-free, one-and-done procedure performed in a single session that takes a few hours.

Matthew Burtnyk: Total operating expenses in 2024, second quarter, which consists of R&D, GNA and sales and distribution expenses were $9.3 million and increase of 24% compared to $7.5 million in the second quarter of 2023. Breaking that down farther, expenditures for R&D increased 33% on a year-over-year basis to $4.2 million. GNA expenses increased by 1% to $2.1 million and sales and distribution expenses increased by 32% to $3 million. Net finance income for 2024's second quarter was $934,000 compared to net finance expense of $884,000 for the same three months period of 2023.

Speaker Change: Virtually, all prostate shapes and sizes can be safely, effectively, and efficiently treated with Telsa.

Speaker Change: There is no bleeding associated with the procedure, no hospital stay is required, and most transfer patients report quick recovery to their normal routine.

Speaker Change: Also, the Tulsa procedure is done with real-time imaging in the MR board for pixel-by-pixel precision.

Arun Menawat: While some thought that might pose a unique challenge when we first introduced the technology to the market, it is now quickly evolving into one of Telstra's most distinct advantages. MR guidance allows for real-time temperature measurement and automated control to preserve prostate disease patients' urinary incontinence and sexual function while killing the targeted prostate tissue via Tulsa's precise sound absorption technology that safely and gently kills the temperature between 55 to 57 degrees. By the way, that's not just what the clinical evidence shows.

Speaker Change: While some thoughts that my post a unique challenge when we first introduced the technology to the market, it is now quickly evolving into one of the most distinct advantages.

Speaker Change: M.R. Guidance allows for real-time temperature measurement and automated control.

Speaker Change: to preserve prostate disease patients.

Speaker Change: Urinary Incontinence and Sexual Function While Killing the Targeted Prostate Tissue

Matthew Burtnyk: Overall, the company recorded its second quarter, 2024, net loss of $6.9 million are 28 cents per common share. Down from a net loss of $7.3 million are 35 cents per common share for the same three month period in 2023. As of June 30, 2024, profound had cash of $34.1 million.

Speaker Change: We have Tulsa's precise sound absorption technology that safely and gently beats it to kill temperature between 55 to 57 degrees.

Speaker Change: By the way, that's not just what the clinical evidence shows.

Arun Menawat: It's what Tulsa patients are saying. And, as we discussed in the past, Carl's use of MR is steadily growing in urology as clinical evidence continues to point to the benefits of MR imaging from early patient screening to diagnosis and treatment with pulse. Accordingly, we are now forging even closer relationships with the three major MR companies to go beyond the compatibility of our respective technologies and help maximize the tremendous opportunities that we see ahead to further support this modern treatment path.

Speaker Change: It's what Tulsa patients are saying.

Speaker Change: and

Speaker Change: As we discussed in the past, cause use of MRI is steadily growing in neurology as clinical evidence continues to point to the benefits.

Matthew Burtnyk: With that, I will now turn the call over to my people. Thank you, Rashad, and hello, everyone. In the second quarter, real-world utilization trends from Tulsa providers continue to demonstrate the unique and unrivaled flexibility of the technology to become a mainstream procedure in the treatment of prostate disease.

Speaker Change: of MR Imaging from Early Patient Screening to Diagnosis and Treating with Tulsa.

Speaker Change: Accordingly, we are now forging even closer relationships.

Matthew Burtnyk: News. Approximately three quarters are 73% of the procedures were for the primary treatment of prostate cancer, 15% were hybrid patients suffering from both cancer and BPH, 8% were salvaged treatments, and 4% were men with BPH only. Half of the procedures were prescribed whole gland treatment plans, 29% subtotal but more than half the gland, and 21% were emulations or focal therapy. Patients across all grades of disease were treated, primarily intermediate risk patients with 84% being grade group 2 and 3, 5% were low risk grade group 1, and 11% high risk grade group 4 or 5 cancer.

Speaker Change: with the three major MR companies to go beyond compatibility of our respective technologies and help maximize the tremendous opportunities that we see ahead to further support this modern treatment pathway.

Arun Menawat: We continue to innovate with two of the main goals of increasing treatment efficacy and improving workflow efficiency. On that front, we are continuing development work on the third planned TELSA AI module, TELSA BPH. More details on that will be provided later this year. Finally, as you all know, Adequate reimbursement is essential to drive forward physician adoption, and Matthew walked you through the proposed CMS use for desktop.

Speaker Change: In addition, we continue to innovate with two of the main goals of increasing treatment efficacy and improving workflow efficiency.

Speaker Change: On that front, we are continuing development work on the third planned TELSA AI module, TELSA BPH.

Matthew Burtnyk: Similarly, patients with all prostate shapes and sizes were treated from less than 20 cc to over 100 cc. This quarter of about 1.5 or 51% had prostate volumes under 40 cc, and other 30% had a prostate volume between 40 and 60 cc, and the remaining 19% had prostate over 60 cc. We continue to see also 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 patients who have both prostate cancer and BPH.

Speaker Change: More details on that will be provided later this year.

Speaker Change: Timely, as you all know, adequate reimbursement is essentially to drive forward position adoption.

Arun Menawat: So I won't repeat the information. However, I think it's fair and appropriate to highlight a couple of factors that we think should help Tulsa become a mainstream treatment once reimbursement starts next year. While TELSA and radical prostatectomy will provide similar revenues to hospitals, we believe TELSA will be more profitable for them right away. It's often said that a surgery suite, and especially a robotic surgery suite, is really the most expensive real estate in the world. It costs, on average, around $3,000 an hour for a hospital to operate a surgery suite versus around $800 an hour for an MRC.

Speaker Change: [inaudible]

Speaker Change: However, I think it's fair and appropriate to highlight a couple of factors that we think should help Tulsa become a mainstream treatment once reimbursement starts next year.

Speaker Change: Pardis.

Pardis: While TELSA and radical prostatectomy will provide similar revenues to hospitals, we believe TELSA will be more profitable.

Matthew Burtnyk: The workflow step of creating the treatment plans within the spectrum of prostate diseases was recently made faster and easier with the release of countering assistant, profound second Tulsa AI module, which received FDA 510K clearance in May. Since its release, early physician feedback in the form of post treatment surveys has confirmed that prostate segmentation with the Tulsa AI module had excellent accuracy in real world cases with decreased treatment planning time. In fact, in nearly all cases, urologists reported that countering assistant improved the accuracy of the treatment plan, information that we're playing to publish in conference presentations later this year.

Pardis: for them right away.

Speaker Change: It's often said that a socially sweet and especially a numerical you see.

Speaker Change: is really the most expensive real estate in the world.

Speaker Change: It costs, on average, around $3,000 an hour for a hospital to operate a surgery suite versus around $800 an hour for an MR suite.

Arun Menawat: Also, as I mentioned earlier, Tuftsal is a same-day procedure that doesn't require a hospital stay for recovery like RP. So CHELSOP potentially represents a lot of cost savings for a hospital on that basis alone. Unlike Tulsa, RP cannot be performed and is not reimbursed in a wide spectrum of treatment settings outside of the hospital, such as AFP, OBL, a physician's office, a LUCTA office, or an imaging center. So, while we are working with our major MR company partners to improve the treatment experience for urologists and their patients, to ensure Tulsa can be readily accessed.

Speaker Change: Also, as I mentioned earlier, TELSA is a stay-in-day procedure that doesn't require a hospital stay for recovery like RP does.

Matthew Burtnyk: I would like to now shift focus to reimbursement and highlight some of the key aspects of the new Tulsa category one CPT codes included in the proposed rules issued last month by the US Centers for Medicare and Medicaid Services or CMS for short. These new codes have been designed to reflect the unique aspects of the Tulsa procedure with respect to location of service, member physicians performing the procedure and intensity of post procedure follow up visits.

Speaker Change: So, Joseph potentially represents a lot of cost savings for a hospital on that basis unknown.

Speaker Change: Second.

Speaker Change: Unlike paper

Speaker Change: R.P.

Speaker Change: Cannot be performed.

Speaker Change: and is not reimbursed.

Speaker Change: in a wide spectrum of treatment settings outside of the hospital, such as AFC, OBL, a physician's office, a LUCTA office, or an imaging center.

Matthew Burtnyk: First, the Tulsa codes have been improved for use in all locations of service that means Tulsa can be performed and built in hospitals, ambulatory surgical centers or ASEs and interestingly within the physician owned non-facility setting, which includes office based lab or OBL, a physician office, a Lugpa office or an imaging center. The spectrum of location of service provides not only a broad installed means opportunity, but also allows for maximum patient access and physician preference.

Speaker Change: So while we are working with our major MR company partners to improve the treatment experience for yourology.

Speaker Change: and their patients.

Speaker Change: to ensuring Tulsa can be readily accessed in the most suitable setting, the same cannot be said for RP.

Arun Menawat: In the most suitable setting, the same cannot be said for RP, and, As we help drive the migration of interventional MRI from radiology to the surgical department of hospitals, we will be coming to face them while they cannot come to us, in Summer. We continue to believe. Telfer has the potential to become a mainstream treatment modality across the entire prostate disease spectrum. Patient enrollment in the Captain Post-Market Study, Comparing Telfer to RP, is progressing as planned.

Matthew Burtnyk: The proposed rule has established Tulsa as a level six urology. PC, with the hospital national average Medicare payment just over $9,200, which is on par with all other comparative proxy cancer procedures. However, with Tulsa's faster interest service time, the payment rate per hour within a hospital will actually be similar if not better to comparable procedures. Additionally, within the ASC environment, the proposed national average Medicare payment for Tulsa of $7,195 has been significantly higher than the $4,715 assigned to another longer, oblated procedure. In the non-facility setting, the proposed equivalent national average Medicare payment for Tulsa is even higher at over $9,400, which creates a unique and interesting opportunity within the physician-owned office setting.

Speaker Change: And, as we help drive the migration of interventional MRI from radiology to the surgical department of hospital, we will be coming to face them while they cannot come to us.

Samar: to Samar.

Speaker Change: We continue to believe how far as the potential to become a mainstream treatment modality across the entire philosophy of the spectrum.

Speaker Change: Patient Enrollment in the Captain Post-Market Study Comparing Calc2RP is progressing as planned.

Arun Menawat: We will provide more details on our next Tulsa AI module, Tulsa BPH, later this year. We remain on track to grow our Tulsa Fruits Strawberry program, which has 275 performers this year. We look forward to competing with other cancer disease treatment modalities on a level reimbursement playing field for the first time starting in January. With that, we are happy to take any questions you might have. Operator.

Speaker Change: We will provide more detail on our next Posa AI module, Posa BPH later this year.

Speaker Change: We remain on track to grow our self-supposed colleagues.

Matthew Burtnyk: Second, the Tulsa codes have been designed to optimize physician time for maximum efficiency. Unlike other comparable procedures, three Tulsa codes enable the procedure to be performed entirely by one physician or two physicians working together from different or the same specialty. These physicians can share the procedure and build for their own work performed, optimizing their RV use per hour. The third key point is the zero-day global assigned to the Tulsa procedure, which is unlike any other comparable proxy procedure that includes a 90-day global period.

Speaker Change: 275 systems this year.

Speaker Change: We look forward to competing with other cancer disease treatment modalities on a level reimbursement playing field for the first time starting in January .

Speaker Change: This ends our prepared remarks for today. With that, we are happy to take any questions you might have.

Operator: Thank you. At this time, we will conduct the 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 compile the Q&A list. And our first question comes from Rick Wise.

Speaker Change: Thank you. At this time, we will conduct the question and answer session. As a reminder to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To a prior question, please press star 1-1 again.

Matthew Burtnyk: This allows flexibility for physicians to build separately any additional services for each patient visit following the Tulsa procedure at the appropriate level based on M, guidelines. Complex visits can be built at a higher level, and this mitigates risks of variable or complicated patient follow-up demands that a 90-day global code creates.

Speaker Change: Please stand by while we compile the Q&A roster.

Speaker Change: And our first question comes from Rick Wise with Stephen.

Rick Wise: Good evening, Arun. Good evening, good afternoon. Good afternoon, I guess. Still, yes.

Rick Wise: Good evening Arun. Good evening. Good afternoon. Good afternoon. Good afternoon. Good afternoon, I guess. Oh still yes.

Matthew Burtnyk: Following the publication of the proposed rule, CMS is accepting comments until September 9th. They will then issue a final rule, likely in November this year, before their new codes and payment rates go into effect on January 1st, 2025.

Rick Wise: Let me start off with reimbursement. Obviously, this is a clear and clearly compelling step forward. I guess a couple of questions that maybe you'll expand on your, your, your Matthew's excellent comments and yours. Several things.

Speaker Change: Let me start off with reimbursement. Obviously, this is a clear and clearly compelling

Matthew Burtnyk: Finally, with the new CPT codes becoming effective in 2025, I wanted to provide an update on our ongoing captain study designed to support positive coverage from private payers in the U.S. The captain trials the first and only level one study comparing head-to-head a new technology to robotic, radical proxy detected. It is powered to demonstrate non-inferior efficacy with superior quality of outcomes such as year-and-year competence, sexual function, and penal link among others.

Speaker Change: Step forward.

Speaker Change: I guess a couple of questions, and maybe you'll expand on Mathieu's excellent comments and yours.

Arun Menawat: One, what kind of reaction are you getting from the physician community, from existing customers, and from potential customers? Are they maybe talking us through, or is this accelerating discussions already? Or will you have, are people saying, no, let's talk once the rule is final, just some color around there? And maybe, as well, talk about how you're getting prepared for what clearly will be a meaningfully more compelling reimbursement environment from a sales and marketing perspective.

Speaker Change: Several things. One, what kind of reaction are you getting from the physician community, from existing customers, from potential customers?

Speaker Change: Are they maybe talk us through, is this accelerating discussions already or will you have, are people saying no, let's talk once the rule is final? Just some color around there.

Matthew Burtnyk: We continue to see strong interests in joining the study, given the high level of impact it is expected to have the urologic community. In the last quarter, we have onboarded three additional sites, including Stanford and the Mayo Clinic, adding to the top hospitals in the world participating in captain. We are pleased to reaffirm that the rate of recruitment remains well-positioned to complete enrollment of the captain study this year.

Speaker Change: and maybe as well talk about how you're getting prepared for what clearly will be a meaningfully more compelling reimbursement environment from a sales and marketing environment.

Arun Menawat: Yeah, Rick, those are great questions. So, I think since the proposal came out, we have been talking with our physician community, and I can certainly speak in general terms. So the first thing that they are all very appreciative of is the flexibility that this treatment can be used, can be done in almost any setting. And so they're kind of now thinking about, OK, do I do this at an imaging center, or do I go back to my hospital and have them set this up? Or if I do it, for example, in an office setting, and have my own equipment, can I now participate both on the physician payment side as well as the technical payment side also on that?

Speaker Change: Yeah, with local earthquake questions, so I think since the proposal has come out, we have been talking with our physician committee, and I can certainly already speak in general terms.

Arun Menawat: I will now turn the call over to everyone.

Arun Menawat: Thanks, Matthew, and good afternoon, everyone. Our message remains clear. As we approach 2025, when we will start competing on a level playing field for the first time with respect to reimbursement, Tulsa increasingly has the potential of becoming a mainstream treatment modality across the entire prostate disease spectrum, ranging from low intermediate or high risk prostate cancer to hybrid patients, suffering from both prostate cancer and VPA. College to Men with BPH only, and also to patients requiring salvage therapy for radio recurrent localized prostate cancer.

Speaker Change: So the first thing that they are all very appreciative of is the flexibility that this treatment can be used, can be done in almost any setting.

Speaker Change: And so they're kind of now thinking about, okay, do I do this at an imaging center, or do I go back to my hospital and have them establish this? Or if I do it, for example, in an office setting, have my own equipment, can I now participate both on the

Mathieu Burtnyk: Physician Payment side as well as the technical payment side also on that equation. So I think that flexibility that we talked about, that Mathieu and I talked about, is actually been well received.

Arun Menawat: So I think that the flexibility that we talked about, that Mathieu and I talked about, has actually been well received. The second part of the message that I think people are starting to grasp is the fact that when we look at this from the perspective of, you know, dollars per hour, or profitability overall, I think that the numbers actually can come out a little bit better for Telstra in those situations. And so I think that a number of them are going through the numbers with us. But I think the general feedback is that there are going to be certain situations where, you know, they're going to be strong with. So I can give you a couple of really good examples.

Speaker Change: The second part of the message that I think people are starting to grasp onto is the fact that when we look at this from the perspective of

Arun Menawat: There are several reasons driving our confidence, which I would like to highlight. Tulsa is an incision and radiation-free, one-and-one procedure performed in a single session that takes a few hours. Virtually, all prostate shapes and sizes can be safely, effectively and efficiently treated with Tulsa. There is no bleeding associated with the procedure, no hospital stay is required, and most Tulsa patients report quick recovery to their normal routine. Also, the Tulsa procedure is done with real-time imaging in the MR board for pixel-by-pixel precision, while some thoughts that my pose a unique challenge when we first introduced the technology to the market, it is now quickly evolving into one of Tulsa's most distinct advantages.

Speaker Change: You know, dollars for our or profitability overall, I think that the numbers actually can come out doing this better for a tough sound.

Speaker Change: in that those situations and so I think that a number of them are going through the numbers with us but I think the general feedback is that there are going to be certain situations where you know they there's they're going to be strong wins.

Speaker Change: So I can give you a couple of actually good examples.

Rick Wise: So if we look at a private urology practice, OBL, for example, even the Medicare patient payment there will be $9,800, the national average, and if commercial payments are, you know, typically 1.5x of Medicare, you're looking at, you know, $14,700 or close to $15,000. So I think as we look at the landscape, there are going to be certain situations where there is going to be a clear win for Tulsa from an economic standpoint. So I think that, you know, we're sorting through it.

Speaker Change: So if we look at a private urology practice, OBL for example.

Speaker Change: Even the Medicare patient payment there will be $9,800, national average, and if commercial payments are typically 1.5x of Medicare, you're looking at $14,700 or close to $15,000.

Speaker Change: So I think as we look at the landscape, there are going to be certain situations where there is going to be a clear wind for itself from the economic perspective.

Arun Menawat: MR guidance allows for real-time temperature measurement and automated control to preserve prostate disease patients' urinary confidence and sexual function, while killing the targeted prostate tissue. We are Tulsa's besides sound absorption technology that safely and gently beats it to kill temperature between 55 to 57 degrees. By the way, that's not just what the clinical evidence shows, it's what Tulsa patients are saying. And as we discussed in the past, cause use of MR is steadily growing in urology as clinical evidence continues to point to the benefits of MR imaging from early patient screening to diagnosing and treating with Tulsa.

Rick Wise: It's a complex thing. We're sorting through it. Most people are prepared to talk at the proposal level and not wait for the final rule to come out, and we are, you know, our team is out in the market talking with physicians already. With respect to your second question on how we are preparing for it, I think that we are, you know, as you know, we do things quite methodically. So we are at the moment visiting with our physicians.

Mathieu Burtnyk: and Mathieu Burtnyk.

Speaker Change: So I think that, you know, we're sorting through it. It's a complex thing. We're sorting through it. Most people are prepared to talk at the proposal level and not waiting for the final rule to come out.

Mathieu Burtnyk: And we are, you know, our team is out in the market talking with the physicians already.

Mathieu Burtnyk: With respect to your second question on how are we preparing for it.

Mathieu Burtnyk: I think that.

Speaker Change: These are, you know, as you know, we do things quite methodically, so we are at the moment visiting with our physicians.

Rick Wise: We have re-engaged with the pipeline, which we feel very good about, and we can now begin to justify the adoption or acquisition of the new device based upon 2025 numbers and so on. So we are in that process at the moment. We do think that we will need to add more salespeople, so we're starting to figure out exactly how and in what locations we want to do that. So that part is a little bit in the earlier stage, but we're absolutely prepared for it.

Mathieu Burtnyk: We have reengaged with the pipeline, which we feel very good about.

Speaker Change: and that we can now begin to justify the adoption or acquisition of the new device.

Speaker Change: Lest upon 2025 numbers.

Speaker Change: and so on.

Speaker Change: So we are in that process at the moment. We do think that we will need to add more salespeople so we're starting to figure out exactly how and what locations we want to do that also.

Arun Menawat: Accordingly, we are now forging even closer relationships with the three major MR companies to go beyond compatibility of our respective technologies and help maximize the tremendous opportunities that we see ahead to further support this modern treatment pathway. In addition, we continue to innovate with two of the main goals of increasing treatment efficacy and improving workflow efficiency.

Speaker Change: So that part is loaded earlier stage, but we're absolutely prepared for it.

Arun Menawat: Gotcha. Thank you for all the detail. Another question, maybe the shorter term, you reiterated your goal of 75 systems by year-end. Maybe help us better understand your line of sight. That's a big step up from the kind of, you know, when you think of it as a third or fourth quarter run rate. It's a big step up from the kind of quarterly run rate. And again, why are you so confident?

Culture: Culture, thank you for all the detail. Analyze question, maybe just shorter term. You reiterated your goal of 70 child systems by year end.

Speaker Change: maybe help us better understand your line of sight that's a big step up from the kind of you know when you think of as a third fourth quarter run rate it's a big step up from the kind of quarterly run rate and again why are you so confident?

Arun Menawat: On that front, we are continuing development work on the third planned Tulsa AI module, Tulsa VPH, more details on that will be provided later this year. Finally, as you all know, adequate reimbursement is essential to drive forward physician adoption. Mathieu walked you through the proposed CMS rules for tough times, so I won't repeat this information. However, I think it's fair and appropriate to highlight a couple of factors that we think should help Tulsa become a mainstream treatment once reimbursement starts next year.

Rick Wise: Yeah, no, I, I, obviously, we completely get the fact that this is a big step up in the second half of this year for us. But in the second quarter, certainly, and I think, you know, in the earlier presentation this year, I sort of alluded to the fact that this is going to be a unique year for us as we transition to the reimbursement model as compared to cash pay models. I think that what we did see in the second quarter was people saying, well, you know, you're only a couple of months away from getting the proposed rule.

Speaker Change: Yeah, no, I obviously we completely get the fact that this is a big step up in the second half of this year for us.

Speaker Change: But in the second quarter, certainly, and I think, you know, in the earlier presentation this year, I sort of alluded to the fact that this is going to be a unique year for us as we transition.

Speaker Change: to the reimbursement model as compared to

Speaker Change: Catch Females.

Speaker Change: I think that what we did see in the second quarter was people were saying, well, you know, you're only a couple of months away from getting the proposal. Let me see, you know, just to be sure that we're going to be okay. So I think we did see that, but we have not only not lost the pipeline, we are actually seeing them even more engaged.

Rick Wise: Let me see, you know, just to be sure that we're going to be okay. So, I think we did see that, but we have not only not lost the pipeline, but we are actually seeing them even more engaged now that the proposed rule is in place. And so the first team is pretty confident. And that's the basis on which we felt that we should reiterate.

Arun Menawat: First, while Tulsa and radical prospectomy will provide similar revenues to hospital, we believe Tulsa will be more profitable for them right away. It's often said that a surgery suite and especially a dramatic surgery suite is really the most extensive real estate in the world. It costs on average around $3,000 an hour for a hospital to operate a surgery suite worth to around $800 an hour for an MR suite. Also, as I mentioned earlier, Tulsa is a same-day procedure that doesn't require a hospital stay for recovery like RPDOT.

Speaker Change: Now that the proposed rule is out.

Speaker Change: and so the sales team is pretty confident and that's the basis that we felt that we should reiterate the guidance.

Arun Menawat: Culture, and just allow one last one for me. You talked sort of intriguingly, I think it's the first time I'm hearing you say that you're forging closer, even closer, I think were your words, relationships with the three major MRI companies. Maybe you could just dig deeper a little bit there.

Speaker Change: Gotcha. Just one last one from me. You talked sort of intriguingly, I think it's the first time I'm hearing you say it, that you're forging closer

Speaker Change: Even closer, I think were your words, relationships with the three major MRI companies. Maybe you could just dig deeper a little bit there. What are you hoping for? What should we expect from all that?

Rick Wise: What are you hoping for? What should we expect from all that? And is that something that's going to take years, Arun, or something sooner? Just help us better understand what you're working toward. Thank you.

Speaker Change: And is that something that's going to take years, Arun, or something sooner? Just help us better understand what you're working toward. Thank you.

Arun Menawat: No, I'm happy to Rick. You know, as I said in the prepared remarks. The fact that we used an MR originally concerned me, you know, if they're going to reuse an MR or not. But I think with the clinical data and the fact that a number of physicians have not actually used the procedure, I think they actually see the value of the MR. They see the fact that this gentle heating, the heating of the tissue only to kill temperature, that continuous ability to monitor the temperature or make adjustments in the treatment plan if needed.

Arun Menawat: No, I'm happy to look, you know, as I said, in the prepared remarks.

Speaker Change: The fact that we use an MR originally was concerned, you know, are they going to reuse an MR or not.

Arun Menawat: So Tulsa potentially represents a lot of cost savings for a hospital on that basis alone. Second, unlike Tulsa, RP cannot be performed and is not reversed in a wide spectrum of treatment settings outside of the hospital, such as ASC, OBL, a physician's office, a elect office, or an imaging center. So while we are working with our major MR company partners to improve the treatment experience for urologism and their patient to ensuring Tulsa can be readily accessed in the most suitable setting, the state cannot be said for RPDOT. And as we help drive the migration of intervention MR from radiology to the surgical department of hospital, we will be coming to face them while they cannot come to us.

Speaker Change: But I think with the clinical data and the fact that number of physicians are now actually used the procedure.

Speaker Change: I think they actually see the value of DMR. They see the fact that this gentle heating

Speaker Change: So that heating tissue only to kill temperature, that continuous ability to monitor the temperature or make adjustments in the treatment plan if needed.

Arun Menawat: And then with the Tulsa AI module that was recently cleared, because we have MR, high-quality MR images, we were able to develop it. I think the first thing that has happened is people now understand it. People now think that, OK, this is not a problem.

Speaker Change: and then with the Tulsa AI module that was recently cleared because we have MR High Quality MR Images. We were able to develop it. I think the first thing that has happened is people now get people now think that okay this is not.

Arun Menawat: This is something that really adds value to treatment and patient care, and I think based on that, a number of companies are now also developing real-time in-bore biopsy procedures. So there are multiple companies that are saying, hey, we can do in-bore biopsies, and they can be done in a very timely manner, as compared to historically, where they've taken a lot longer to do so. And so this whole idea that we can, you know, use MR to screen patients, diagnose patients, maybe do an in-bore biopsy, and then treat patients is starting to really catch on.

Speaker Change: A difficulty, this is something that really adds value to treatment and patient care.

Speaker Change: I think based upon that, a number of companies are now also developing real-time in-bore biopsy procedures.

Speaker Change: So the multiple companies are saying, hey, we can do in more biopsies and they can be done in a very tiny manner as compared to historically where they've taken a lot longer to do so.

Arun Menawat: To summarize, we continue to believe Tulsa has the potential to become a mainstream treatment modality across the entire prostate disease section. Patient enrollment in the we will provide more details on our next Tulsa AI module, Tulsa BPH later this year. We remain on track to grow our Tulsa Pro-Install grade 275 systems this year. We look forward to competing with other cancer disease treatment modalities on a level reimbursement playing field for the first time starting in January.

Speaker Change: And so this whole idea that we can, you know, use MR to screen patients, diagnose patients.

Speaker Change: Maybe in more biopsy and then treat patients, it is starting to really catch up, catch on. And so the MR companies, this is very synergistic to the MR companies.

Arun Menawat: And so the MR company, this is very synergistic to the MR, and so the MR companies are working with us to really determine what is an interventional MR as compared to a diagnostic MR. And an interventional MR would be, you know, a mid-range magnet rather than a 1.5. It will be a 0.55 Tesla magnet where we can use AI technologies to provide the same high-quality images, but we can also provide practical things where a surgeon can literally walk into the MR and literally put their hand inside, and they can actually, you know, do interventions.

Speaker Change: and so the MR companies are working with us to really determine what is an interventional MR as compared to a diagnostic MR.

Speaker Change: And an interventional MR would be, you know, mid-range.

Speaker Change: Magna Drugs and the one point five, it will be a point five, five Tesla Magna.

Speaker Change: where we can use AI technologies to provide the same high-quality images

Speaker Change: but we can also.

Speaker Change: provide practical things where a surgeon can literally walk into the MR and literally put their hand inside.

Arun Menawat: And so Siemens has already announced that product. They've already publicly announced a leasing model for that product. And so I think that synergy is what I'm talking about, and I think you will hear from these companies later this year. I think we will hear about it at our SNA this year and at our own conference earlier this year that our product, the biopsies, the diagnostic images, and the treatment are all coming together, and you'll see multiple companies, you know, supporting this.

Speaker Change: and they can actually...

Speaker Change: you know, do intervention.

Speaker Change: and so Stephen has already announced that product, they are already publicly announced a leasing model for that product.

Unknown Executive: This end are prepared remarks for today with that we are happy to take any question you might have. Thank you.

Speaker Change: And so I think.

Speaker Change: Um...

Speaker Change: The synergy is what I'm talking about. And I think you will hear.

Unknown Executive: At this time we will conduct the 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 compile the Q&A roster.

Speaker Change: from these companies.

Speaker Change: Later this year, I think we will hear about it in our SNA this year and at our own conference earlier this year.

Speaker Change: There.

Speaker Change: Our product, the biopsies, the diagnostic images, and the treatment is all coming together and you'll see multiple companies, you know, supporting this effort.

Rick Wise: And our first question comes from Rick Wise with Steeple. Good evening, Arun. Good evening. Good afternoon. Good afternoon, I guess. Still, yes.

Ruan: Thank you, Ruan.

Operator: One moment for our next question, and our next question comes from Ben Haynor with Lake Street Capital Market.

Ruan: One moment for our next question.

Speaker Change: And our next question comes from Ben Haynor with Lake Street Capital Markets.

Ben Haynor: Good day, gentlemen. Thanks for taking the questions. Just maybe following up a little bit on Rick's questions there and the relationships that you have with the MRI firms out there. What has been their reaction to the proposed reimbursement? Isn't that something that kind of raises a flag for them?

Arun Menawat: Let me start off with reimbursement. Obviously this is a clear and clearly compelling step forward. I guess a couple of questions and maybe you'll expand on your your Matthew's excellent comments and yours. Several things. One, what kind of reaction are you getting from the physician community from existing customers from potential customers? Are they maybe talk us through? Is this accelerating discussions already or will you have people saying no, let's talk once the rule is final?

Ben Haynor: Good day, gentlemen. Thanks for taking the questions. Just maybe following up a little bit on Rick's questions there.

Ben Haynor: That's relationships that you're performing with the MRI firms out there. What has kind of been their reactions, the proposed reimbursement, isn't that something that kind of raises a flag for them?

Arun Menawat: Yeah, Ben, I mean, generally speaking, I think people expected that if we could level the playing field and the fact that we have a lower cost system in place, that we're going to be in a decent position. And so when these companies are looking at, you know, how do we justify an MR-centric prostate care strategy, they're looking at it, and they're saying, okay, we already have reimbursement for diagnosis, we already have Now there is a level playing field for reimbursement for the Telstra procedure.

Speaker Change: I mean, generally, I think people expected that if we could level the plane field and the fact that we have a lower cost system in place, that we're going to be in decent place.

Arun Menawat: Just some color around there and maybe as well talk about how you're getting prepared for what clearly will be a meaningfully more compelling reimbursement environment from a sales and marketing and environment. Yeah, Rick look was a great question. So I think since the proposal have come out we have been talking with our physician community and I can certainly already speak in general terms. So the first thing that they have are all very appreciative of is the flexibility that this treatment can be used can be done in almost any second.

Speaker Change: and so when these companies are looking at

Speaker Change: How do we justify an MR-centric?

Speaker Change: Profit Care Strategy

Ben Haynor: You know, they're looking at it and they're saying, okay, we already have reimbursement for diagnosis. We already have reimbursement for biopsy. Now there is a level playing field reimbursement for the Telstra procedure.

Arun Menawat: And so they're kind of now thinking about okay, do I do this at an imaging center or do I go back to my hospital and have them establishes or if I do it for example in office studying how my own equipment can I now participate both on the physician payment side as well as the technical payment side also on that equation. So I think that flexibility that we talked about that Matthew and I talked about is actually been well received.

Arun Menawat: And, And so they're basically looking at and saying this adds to their ability to justify it financially using all of this together. And then the idea is that there are a number of ASCs or OBLs or LUGPAs that have historically expressed interest in owning MRs. And so when you combine all of this together, I think we can put it across the finish line towards a financial model that can justify it.

Ben Haynor: And so they're basically looking at and saying this adds to their ability to justify the financially using all of these together. And then the idea is that there are a number of AFCs or OBLs or lookpads.

Ben Haynor: That has expressed historically, expressed interest in owning M.R.s. And so when you combine...

Ben Haynor: All of this together, I think we can put it across.

Arun Menawat: And so I think that's how these MR companies are looking at it. This is another reason to be able to justify that MR and the blood piles and so on are looking and saying, well, this is going to add to our ability to have full control of the patient from beginning to the end, which means better care of the patient.

Ben Haynor: the finish line towards a financial model that can justify it.

Ben Haynor: And so I think that's how these MR companies are looking at is that this is another reason to be able to justify.

Ben Haynor: [inaudible]

Arun Menawat: The second part of the message that I think people are starting to grasp onto is the fact that when we look at this from the perspective of you know dollars per hour or profitability overall I think that the numbers actually can come out and it's better for you. Chausau in those situations. And so I think that a number of them are going through the numbers with us, but I think the general feedback is that there are going to be certain situations where, you know, they're going to be strong wins.

Ben Haynor: Okay, that's helpful. And then on that specific issue, do they look at it and say, well, yeah, the Medicare reimbursement, you know, that looks fine to me, but I really need the commercial patients to be able to make this work? Or how do they tend to think about that to the extent that you can share?

Speaker Change: Okay, that's helpful. And then on the log post, specifically, do...

Speaker Change: Do they look at it and say, well, yeah, the Medicare reimbursement, you know, that looks fine to me, but I really need the commercial patients to be able to make this work? Or how do they tend to think about that to the extent that you can share?

Arun Menawat: Yeah, no, I mean, we've already been in an extensive dialogue. And so I think we will have to come up with an exclusive customized model for different situations. And I do think that, too, the way you're describing it is in the realm of possibilities, that they might want to pick, for example, insurance patients where the payment is pretty good. And if the AFCs or the LUDPADs are owned by physicians where they have the ability to get reimbursement from both sides of the payment equation, they are likely to take the private payers to those sites, while Medicare patients typically go to the hospital.

Speaker Change: Yeah, no, I mean, we've been already been, you know, in extensive dialogue. And so, I think...

Speaker Change: We will have to come up with an exclusive customized model for different situations.

Arun Menawat: So I can give you a couple of actually good examples. So if we look at a private urology practice, or OBL, for example, the even the Medicare patient payment there will be $9,800 national average. And if commercial payments are, you know, typically 1.5 X of Medicare, you're looking at, you know, $14,700 or close to $15,000. So I think as we look at the landscape, there are going to be certain situations where there's going to be a clear win for Sarcone from an economic perspective.

Speaker Change: and I do think that to the way you're describing it.

Speaker Change: is in the realm of possibility.

Speaker Change: is that they might want you.

Speaker Change: Pick, for example,

Speaker Change: For Insurance Patients, where the payment is pretty good, and if the air, the air, or the luckpuzz are owned by the physicians, where they have the ability to...

Speaker Change: You know, get reimbursement from both sides of the payment equation that they are likely to take the private cares, you know, to those sites and the Medicare patients typically go to the hospitals.

Arun Menawat: So I think you will see as the economic models get developed further, I think you will be able to see that, hey, there are certain types of patients that they will take to one site where it can be more profitable, and another type of patient they can take to another site where that can be profitable also. And I also think that the hospital will want to see adoption because, to a hospital, they are losing money on a Medicare patient.

Arun Menawat: So I think that, you know, we're sorting through it. It's a complex thing. We're sorting through it. Most people are prepared to talk at the proposal level and not waiting for the final rule to come out. And we are, you know, our team is out in the market talking with the physicians already. With respect to your second question on how are we preparing for it? I think that these are, you know, as you know, we do things quite metabolically.

Speaker Change: So I think you will see as the economic models, you know, get developed further, I think you will be able to see that, hey,

Speaker Change: There are certain types of patients that they will take to one site where it can be more profitable. Another type of patient they can take to another site where that can be more profitable.

Professor Burtnyk: Prophet Burtnyk, Professor Burtnyk,

Professor Burtnyk: And I also think that the hospital will want to see adoption because to a hospital, they are losing money on the Medicare patient.

Arun Menawat: So if we can show that, hey, they can actually break even or make some money on a Medicare patient, that's a win for them, in fact, also, right? And they already have, you know, robotics is well, highly utilized. So they already have enough of a patient population to use the robot. And if they make some space for it by using the MR for our procedures, they're actually making money, or at least breaking even on the TELSA procedures, and then they're making money on the other procedures that go on the robot. So I think it's not going to be a simple equation, but I think there will be plenty of different ways to be able to demonstrate economic value here. And we're quite excited.

Arun Menawat: So we are at the moment visiting with our physicians, we have re-engaged with the pipeline, which we feel very good about, and that we can now begin to justify the adoption or acquisition of the new device based upon 2025 numbers and so on. So we are in that process at the moment. We do think that we will need to add more salespeople. So we're starting to figure out exactly how and what locations that we want to do that also. So that part is a little bit earlier stage, but we're absolutely preparing for it. Gotcha. Thank you for all the detail.

Professor Burtnyk: So if we can show that, hey, they can actually break even or make some money on a pre-care patient.

Speaker Change: That's the reason I've been in fact also, right, and they already have, you know, robotics is well highly utilized. So they already have enough allocation population to use.

Professor Burtnyk: The robot, and if they make some space for that by using the MR for our procedure, they're actually making money, or if they're making even on the toast after a few years and then they're making money.

Speaker Change: on the other procedures that go on the robot. So I think it's not going to be a simple equation, but I think there's going to be plenty of different ways to be able to demonstrate economic value here. And we're quite excited about that.

Arun Menawat: Another question, maybe the shorter term, you reiterated your goal of 75 systems by year end. Maybe help us better understand your line of sight that's a big step up from the kind of, you know, when you think of it as a third fourth quarter run rate, it's a big step up from the kind of poorly run rate. And again, why are you so confident? Yeah, no, I obviously, we completely get the fact that this is a big step up in the second half of this year for us.

Ben Haynor: Okay, that makes a lot of sense. I appreciate the color there. And then, well, last one for me, just on the Tulsa AI clearances that you have now, I mean, it seems like both thermal boosts and contour assist are, you know, kind of confidence boosters for clinicians, but can you share maybe how much time you spend on Cosworth Sisters? Thank you. Thank you, I will take off of a procedure. I mean, is that 10, 20, 30 minutes? What does that look like? And then Anything more that you can share on, you know, the adoption so far of both Thermal Boost and Contour Assist amongst the folks that have it available to them?

Speaker Change: Okay, that makes a lot of sense. I appreciate you, color there. And then, well, that's for me just on the, that's what they, I, clear it as they have now. I mean, it seems like both thermal loosened and contourists are, you know, kind of confidence blisters for clinician. But can you share maybe how much?

Speaker Change: Time, the conduire sits, will take off of a procedure, I mean, at 10, 20, 30 minutes. What does that look like? And then...

Arun Menawat: But in the second quarter, and I think, you know, in the earlier presentation this year, I sort of alluded to the fact that this is going to be a unique year for us as a transition to the reimbursement model, compared to cash pay models. I think that what we did see in the second quarter was people were saying, well, you know, there were only a couple of months away from getting the proposal.

Speaker Change: Anything more that you can share on, you know, the adoption so far of a thermal boost and contoursist amongst the folks that have available to them.

Arun Menawat: Yes, absolutely. The thermal boost. You know, we explicitly talk about the wide variety of patients that are treated, and you heard that from Matthew already. The thermal boost is one of the reasons why we are seeing these later stage treatments now happening because they feel very confident that if there's a little protuberance of the cancer at the outer edge, they can blast that region. Or if they suspect that there is some involvement of the, you know, muscle, they are able to blast into that region. So I think the latest statistics, and Matthew, please feel free to chime in on this. I think it's in the order of about 50% of the patients being treated that thermal boost is being used.

Speaker Change: Yes, Ben, absolutely. The thermal boost, you know, we explicitly talk about the wide variety of patients that are treated, and you heard that from Mathieu already.

Arun Menawat: Let me see, you know, just to be sure that we're going to be okay. So I think we did see that, but we have not only not lost the pipeline. We are actually seeing them even more engaged, not that the proposal is. Out. And so the first team is pretty confident. And that's the basis that we felt that we should relate to the items. Gotcha.

Speaker Change: The thermal boost is one of the reasons why we are seeing these later stage treatments now happening with Tulsa.

Speaker Change: because they feel very confident that if there is a little protuberance of the cancer at the outer edge they can blast that region or if they suspect that there is some involvement of the you know to the muscle they are able to to blast

Arun Menawat: And just the last one last one for me, you talked sort of intriguingly. I think the first one I'm hearing you said, that you're forging closer, even even closer, I think we were your words.

Speaker Change: into that region. So, I think the latest statistics and Mathieu, please feel free to chime in on this. I think it's in the older about 50% of the patients been cleared at the time of losing being used.

Arun Menawat: Relationships of the three major MRI companies. Maybe you could just dig deeper about that. There, what are you hoping for? What should we expect from all that? And is that something that's going to take years, Arun, or something sooner? Just help us better understand what you're working towards. Thank you. Yeah. No, I'm happy to look, you know, as I said in the prepared remarks, the fact that we use an MR originally was concert, you know, is there, are they going to reuse an MR in our mod?

Mathieu Burtnyk: Yeah, that's correct. About 50% of the treatments, we see the use of thermal boost, at least for a portion of the treatment.

Mathieu Burtnyk: Yeah, that's correct, about 50% of the treatments we see the use of thermal boost, at least for a portion of the treatment plan.

Arun Menawat: and so I'm highly valued, highly valued, highly valued, and then on the AI site. The majority of our sites now already have the AI.

Speaker Change: [inaudible]

Arun Menawat: They have many, I would say about a third to maybe more than a third have already used it to treat patients. The initial feedback really is quite positive, as we anticipated. There are two things that we're hearing. One is that the treatment designs are very smooth, so they're not, they kind of like the smoothness of the way the treatment designs are proposed.

Speaker Change: And then on the.

Speaker Change: AI side, majority of our sites now already have the AI. They have many, I would say about

Arun Menawat: But I think, you know, with the clinical data and the fact that a number of physicians have not actually used the procedure, I think they actually see the value of the MR, they see the fact that this gentle heating, the heating tissue, only to kill temperature that continuous ability to monitor the temperature or make adjustments in the treatment plan, if needed. And then with the Tulsa AI module that was recently cleared.

Mathieu Burtnyk: A third to maybe more than a third have already used it to treat patients.

Arun Menawat: And the confidence that, hey, this is coming from patients who have been successfully treated in the past. And then the second thing we're hearing is that, definitely, it is saving time in all these procedures. So I think our goal is to actually present data as we get statistically significant information where we will present the data. We think the best way to put it is that, ultimately, if they're doing two cases in a day, they will be able to do three.

Mathieu Burtnyk: The initial feedback is quite positive as we anticipated. There are two things that we're hearing. One is that

Speaker Change: The treatment designs are very smooth, so they're not.

Speaker Change: They kind of like the smoothness of the way the treatment designs are proposed.

Speaker Change: and the confidence that, hey, this is coming from.

Speaker Change: patients who are successfully treated in the past. And then the second thing we're hearing is definitely it is saving time in all these procedures. So

Arun Menawat: Because we have MR high quality MR images, we were able to develop it. I think the first thing that has happened is people now get it, people now think that okay, this is not a difficulty. This is something that really add value to treatment and patient care. I think based upon that, a number of companies have are now also developing real-time in-bore biopsy procedures. So the multiple companies that are saying, hey, we can do in-bore biopsies and they can be done in a very timely manner as compared to historically where they've taken a lot longer to do so.

Speaker Change: I think our goal, we will actually present data as we get statistically significant information where we will present the data. We think the best way to put it

Speaker Change: is that ultimately...

Arun Menawat: If they're doing three in a day, they will be able to do four. If they're doing four, they'll be able to do five. And I think that, to me, is the biggest benefit of this in the sense that in about the same amount of time, they'll actually be able to do more cases, which certainly speaks to their pocketbook, but it also speaks to their whole workflow throughout their whole day. So that's what you will see. You know, I think for procedure time, it will be several minutes. But I think procedures per day you will see an increase, and that's going to be valuable.

Speaker Change: If they're doing two cases in a day, they will be able to do three.

Speaker Change: If they're doing three in a day, they'll be able to do four, if they're doing four, they'll be able to do five.

Speaker Change: and until that...

Speaker Change: To me is the biggest benefit of this in the sense that in about the same amount of time they'll actually be able to do more cases, which certainly not only speaks to the pocketbook, it also speaks to their whole workflow, their whole day.

Arun Menawat: And so this whole idea that we can, you know, use MR to screen patients, diagnosis patients maybe in more biopsy and then treat patients, it is starting to really catch up, catch on. And so the MR company, this is very synergistic to the MR company. And so the MR companies are working with us to really determine what is an intervention MR as compared to a diagnostic MR. And an intervention MR would be, you know, mid-range magnet rather than a 1.5, it will be a 0.555 Tesla magnet where we can use AI technologies to provide the same high quality images, but we can also provide practical things where a surgeon can literally walk into the MR and literally put their hand inside and they can actually, you know, do intervention.

Speaker Change: So that's what you will see, you know, I think for procedure time certainly it will be several minutes. But I think procedure is part of the day you will see increased and that's going to be valuable to them.

Ben Haynor: Okay, got it. That's all I have. Thanks for taking the questions, gentlemen.

Speaker Change: so

Speaker Change: Okay, got it

Speaker Change: That's all I have. Thanks for taking the question, gentlemen.

Operator: One moment for our next question, and our next question comes from Rahul Sarugaser with Raymond James.

Speaker Change: Thank you then.

Speaker Change: One moment for our next question.

Speaker Change: And our next question comes from Role, Sarah Gasser with Raymond James.

Rahul Sarugaser: Good afternoon, Arun, Rashed, and Mathieu. Thanks so much for taking my question. So Rick did a terrific job asking many of the clarifying questions. So maybe I'll ask something about that as you go. So Arun, you were just talking about docs going from one to two to three to four patients a day. Well, if you could give us a little more clarity in terms of how the three codes can be leveraged for docs to potentially stack procedures and essentially increase the profitability per unit time, either by using residents or just creating efficiency in the system to make it more profitable for them.

Sarah Gasser: Good afternoon, Arun, Rashed, Mathieu. Thanks so much for taking my question. So, Rick and Ben did a terrific job asking...

Sarah Gasser: Many of the clarifying questions, so maybe I'll.

Speaker Change: I'll ask something about you.

Arun Menawat: And so humans have already announced that product. They're already publicly announced a leasing model for that product. And so I think the synergy is what I'm talking about. And I think you will hear from these companies later this year. I think we will hear about RSNA this year and at our own conference earlier this year that our product, the biopsy, the diagnostic images and the treatment is all coming together and you'll see multiple companies, you know, supporting. Stafford. Thank you, Arun.

Speaker Change: As we scale, so every new just talking about the Docs going from 1 to 2 to 3 to 4.

Unknown Executive: One moment for our next question.

Patience: Patience is Day. Perhaps you could give us a little more clarity and...

Speaker Change: In terms of how the three codes can be leveraged for docs, potentially stack procedures and increase the profitability per unit time, either by...

Speaker Change: using residents or just be creating efficiency in the system to make it more profitable for them.

Arun Menawat: Yeah. Rahul, I'm happy to. As I was saying before, the flexibility and the fact that we have multiple codes allows each site to effectively determine what is the best way or the most effective and efficient way for them to treat the patient. So I'll share a couple of examples, of course.

Roll: Roll, I'm happy to. So, as I was saying before, the flexibility and the fact that we have multiple codes allows each side to effectively.

Ben Haynor: And our next question comes from Ben Haynor with Lake Street Capital Markets. Good day, gentlemen. Thanks for taking my questions. Just maybe following up a little bit on Rick's questions there in the that's relationships that you're performing with the MRI firms out there. What has kind of been their reaction to the proposal reimbursement? Isn't that something that kind of raises a flag for them? Yeah, man. I mean, generally, I think people expected that we could level the playing field and the fact that we have a lower cost system in place that we're going to be in decent play.

Speaker Change: determine what is the best way or the most effective way and efficient way for them to treat the patient. So I'll share a couple of examples.

Arun Menawat: If I'm at a teaching site, and I have a resident, I could have the resident do sort of the initial workup of the patient, which will include putting the patient on the MR table, inserting the catheters, attaching the table to the MR suite, being with the patient during the time they're being anesthetized, and that we call sort of medical device management. And a resident could easily do that. And so the primary physician could then come in really at the time when they need to start the treatment planning, which is now AI-based, but they can start to do the treatment planning.

Speaker Change: So, if I'm a teaching site and I have a resident,

Arun Menawat: Then they can stay for the treatment itself, which from beginning to end is, even based upon the CMS numbers, less than 90 minutes total time for the physician. Then they can leave, and then the resident could come back and, you know, unhook the patient's table and, you know, go with the patient to wake him up and remove the cap. So it's an efficient process that brings the primary physician only for the core part of the procedure, which would be less than 90 minutes.

Speaker Change: I could have the resident do sort of the initial workup of the patient, which will include

Arun Menawat: And if they do that, the resident could be using the medical device code, and the physician could be using the treatment part of the code. And if they do that, I think the per hour rate will be almost double, not quite double, but certainly 50 to 70% better on a per hour basis for the physician, whereas the resident will make less money, but in, you know, in comparison, will also do very well. That's just one example.

Speaker Change: putting the patient on the MR table, inserting the catheters, attaching the table to the MR suite, being with the patient during the time they're being anesthetized. And that we call sort of medical device management.

Speaker Change: And, as well as you then could easily do that.

Speaker Change: and so the primary physician could then come in really at the time when they need to start the treatment landing.

Ben Haynor: And so when these companies are looking at, you know, how do we justify an MR-centric prostate care strategy, you know, they're looking at amazing. Okay, we already have reimbursement for diagnosis. We already have reimbursement for biopsy. Now there is a level play field reimbursement for the telephoto procedure. And so they're basically looking at and saying, this adds to their ability to justify the, it's financially using all of these together. And then the idea is that there are a number of ASEs or OBLs or logpads that have expressed historically, expressed interest in owning MRs. And so when you combine all of this together, I think we can put it across the the finish line towards a financial model that can justify it.

Speaker Change: which now is AI-based.

Speaker Change: but they can start to do the treatment planning. Then they can stay for the treatment itself.

Speaker Change: which from beginning to end is even based upon the CMS numbers is less than 90 minutes total time for the physician.

Speaker Change: Then they can leave, and then the president could come back and, you know, unhook the patient's table and, you know, go with the patient to wake him up and remove the catheters.

Speaker Change: So, it's an efficient process.

Speaker Change: or bring the primary physician only for the core part of the procedure, it would be less than 90 minutes.

Speaker Change: and if they do that, the resident could be using the medical device code and the physician could be using the treatment part of the code and if they did that, I think for our basis.

Speaker Change: will be almost.

Speaker Change: I mean, not quite double, but certainly 50 to 70 percent better on a part of our basis for the position, whereas a resident will make less money, but in comparison will also do very well.

Ben Haynor: And so I think that's how these MR companies are looking at it is that this is another reason to be able to justify that MR and the logpads and so on are looking at and saying, well, this is, you know, going to add to our ability to have full control of the patient from beginning to the end, which means better care of the patient. Okay, that's a point. And then on the look, but specifically, do they look at it and say, well, yeah, the Medicare reimbursement, you know, that looks, that looks fine to me, but I really need the commercial patients to deal to make this work or how do they tend to think about that to make sense that you can share.

Arun Menawat: In another setting, you could have a urologist and a radiologist both sharing the procedure. And in that case, they can sort of do one person's treatment plan while the other person is planning the next patient. And this is also why, you know, we talk about the number of patients per day rather than the time per procedure. So I think those are a couple of examples of how they will be able to use these codes to be able to optimize the workflow that will be most efficient.

Speaker Change: That's just one example. In another setting, you could have...

Speaker Change: a urologist and a radiologist both sharing the procedure. And in that case, they can sort of one person is doing the treatment plan, the other person is planning the next patient.

Speaker Change: And this is also why, you know, we talk about, you know, number of patients per day, or then

Speaker Change: the Time for Precision. So I think those are a couple of examples of how they will be able to use these codes to be able to optimize the workflow.

Speaker Change: That will be most efficient for them.

Rahul Sarugaser: That's really, that's really helpful, Arun. Thank you so much for that.

Ben Haynor: Yeah, no, I mean, we've already been, you know, in extensive dialogue. And so I think we will have to come up with an exclusive customized model for different situations. And I do think that to the way you're describing it is in the realm of possibilities is that they might want to pick, for example, for insurance patients where the payment is pretty good. And if the AFD or the logpads are owned by the physicians where they have the ability to, you know, get reimbursement from both sides of the payment equation that they are likely to take the private care, you know, to those sides.

Speaker Change: That's really helpful, Arun. Thank you so much for that. And so, perhaps continuing on this theme and broadening into DPH.

Arun Menawat: And so perhaps continuing on this theme and broadening into BPH. So it's a two-part question. One, is there any update on, you know, profound aspirations around BPH? And very specifically, are the codes that are currently issued applicable to BPH? And how do you see the BPH strategy playing out, particularly in this, in this stacking, in this procedure stacking scenario? Sure, sure.

Speaker Change: So it's a two-part question. One, is there any update on...

Speaker Change: Aspirations around BPH, and very specifically, are the codes that are currently issued applicable in BPH, and how do you see the BPH strategy playing out, particularly, again, in the procedure stacking scenario?

Arun Menawat: Sure, yeah. So, great questions, Rahul.

Speaker Change: Sure. Sure. Yeah. So, great questions, Rahul. With respect to BPH,

Arun Menawat: With respect to BPH, we kind of see ourselves in steps. So the starting step for us is to focus on those patients where the prostates are larger than 100 cc, and they not only have BPH, but they might also have some form of early stage disease. And so that patient would particularly benefit from our therapy, that group of patients, because if they have very large prostates, we can still treat them very quickly, and we can basically ablate the transition zone, in some cases, the medium load, if it is needed.

Speaker Change: We kind of see ourselves in steps also.

Ben Haynor: And the Medicare patient typically go to the hospital. Hospital. So I think you will see as the economic models, you know, get developed further. I think you will be able to see that, hey, there are certain types of patients that they will take to one site where it can be more profitable. Another type of patient they can take to another site where that can be profitable also. And I also think that the hospital will want to see adoption because to a hospital, they are losing money on a Medicare patient.

Speaker Change: So the starting step for us is to focus on those patients where the projects are larger than 100cc.

Speaker Change: and OR, they have not only BPH, but they might also have some form of early stage disease.

Ben Haynor: So if we can show that, hey, they can actually break even or make some money on a Medicare patient, that's a rid of them. In fact, also, right. And they already have, you know, robotics is well highly utilized. So they already have enough allocation population to use the robot. And if they make some space for that by using the MR for our procedures, they're actually making money or at least breaking even on the top of procedures, and then they're making money on the other procedures that go on the robot.

Speaker Change: and so that patient would particularly benefit from our therapy, those that group of patients, because if they have large, very large prostate.

Speaker Change: We can still treat them very quickly and we can, you know, basically ablate the transition zone, in some cases the medium load, if it is needed. And still we can be a relatively fast procedure for them.

Arun Menawat: And still, we can be a relatively fast procedure for them. And because our prostates shrink, so we're shrinking a very large prostate, I think that should lead to durability over time. And in those cases where there is some form of early stage disease or even, you know, internally, we call them hotspots because in these diffusion images of the MRs, these bi-parametric images, you can actually see zones of the prostate where the cells look unusual.

Speaker Change: And because our past dates shrink, you know, we're shrinking the very large frost dates and things that should lead to durability over time.

Speaker Change: And in those cases where there is some...

Speaker Change: form of early stage disease or even, you know, internally we call them hotspot because indeed the fusion images of the

Ben Haynor: So I think there's going, it's not going to be a simple equation, but I think there's going to be plenty of different ways to be able to demonstrate economic value here. And we're quite excited about that. Okay, that makes a lot of sense. I appreciate the color there. Well, that's for me just on the, that's what they, I, clear it as they have now. I mean, it seems like both thermal boosts and contour systems are, you know, kind of confidence boosters for clinicians, but can you share maybe how much time the contour systems will take off of a procedure?

Speaker Change: of the MRS, these bi-parametric images, you can actually see zones of the prostate where the cells look unusual.

Arun Menawat: And so those patients where they see not only the PTH, the problems with the transition zone and the median lobe, but they also see those hot zones, they can actually go ahead and treat them to some extent before they develop into cancer or become bigger. So I think that subset of the market, we think, is at least about 400,000 patients. And we think that is where we want to start.

Speaker Change: and so those stations where they see not only the PPH is the problems with the transition zone in the medium-low, but they also see those hot zones, they can actually go ahead and treat them to some extent before they develop it to cancer or become bigger.

Ben Haynor: I mean, is that 10, 20, 30 minutes? What does that look like? And then anything more that you can share on, you know, the adoption so far of both thermal boosts and contour systems amongst the folks that haven't available to them. Yes, Ben, absolutely. The thermal boost, you know, we explicitly talk about the wide variety of patients that are treated, and you heard that from Matthew already. The thermal boost is one of the reasons why we are seeing these later stage treatment now happening with Tulsa because they feel very confident that if there's a little protuberance of the cancer at the outer edge, they can blast that region, or if they suspect that there is some involvement of the, you know, to the muscle, they are able to blast into that region.

Speaker Change: So I think that subset of the market, we think is at least about 400,000 patients, and we think that is where we want to start.

Arun Menawat: The procedure will automatically have the AI technology right off the gate because it is being developed off of that platform. And so we think that it will also be a lot faster than a typical cancer procedure because we're not ablating the whole prostate. We're typically doing maybe 30 percent of the prostate, which makes the treatment part also very fast. So AI-based treatment design that will be customized to each prostate and then a much smaller amount of ablation.

Speaker Change: The procedure will automatically have the AI technology right off the gate because it is being developed off of that.

Speaker Change: Platform, and so we think that it will also be a lot faster procedure than a typical cancer procedure is.

Speaker Change: Because we're not ablating the whole process, we're typically new, maybe.

Speaker Change: 30% of the prostate, which makes the treatment part also very fast. So AI-based treatment design that will be customized to each

Speaker Change: Prostate and then a much less of oblation, we think we can be fairly competitive in the market in terms of the time of the procedure.

Arun Menawat: We think we can be fairly competitive in the market in terms of the time of the procedure. And then there is your second question on reimbursement. The way our FDA clearance is, it says that the clearance is for ablation of prostate tissue, so it does not specify whether it's Good Tissue, Bad Tissue, Causing BPH, or Causing Cancer, and the reimbursement code are against this FDA clear. So, you know, we will confirm it in the end.

Speaker Change: And then to your second question on the reimbursement.

Speaker Change: The way our FDA clearance is, it says that the clearance is for ablation of prostate tissue. So, it does not specify whether it's,

Speaker Change: Good tissue that tissue causing the pH or causing can cause.

Speaker Change: and the reimbursement code are against this FDA clearance. So, you know, we will confirm it in the end, but at the moment, we think these codes should be good to go.

Ben Haynor: So I think the latest statistic and Matthew, please feel free to chime in on this. I think it's in over about 50% of the patients being treated, thermal boost is being used. Yeah, that's correct. About 50% of the treatments we see the use of thermal boosts and leads for a portion of the treatment plan. Yeah, so highly valued, highly valued. And then on the AI side, the majority of our sites now already have the AI.

Arun Menawat: But at the moment, we think these codes should be good to go. So, I think next year not only will we have this momentum towards a reimbursement-based model, but we will introduce the BPH module as well.

Speaker Change: So, I think next year, not only that we have this momentum towards reimbursement based model, but we also think that we will introduce the BPH module.

Rahul Sarugaser: That's a terrific color. Thank you so much. And I'll just put in one quick last question, and then we'll get back in the queue. Given all the tailwinds we talked about today, how is the Profound team feeling? What is the sentiment in the company?

Speaker Change: as well.

Colorado: That's terrific, Colorado. Thank you so much. And I'll just put in one quick last question, and then we'll get back in the queue. Given all the tailwinds we talked about today, how is the Profound team feeling? What is the sentiment in the company?

Ben Haynor: They have many other A third to maybe a more than a third have already used it to treat patients. The initial feedback, it is quite positive as we anticipated. There are two things that we're hearing. One is that the treatment designs are very smooth, so they're not, they kind of like the smoothness of the way the treatment designs are proposed. And the confidence that, hey, this is coming from patients who are successfully treated in the past.

Arun Menawat: I mean, you know, the profound team. I think the senior team has really done a great job. I think the goals are crystal clear for us. We know what we need to do. I think the general mood of the team at pretty much every level. Let's go get this done.

Speaker Change: I mean, you know the profound team, I think the senior team has really jumped nicely. I think the goals are crystal clear for us, you know, what we need to be.

Ben Haynor: And then the second thing we're hearing is definitely, it is saving time in all these procedures. So I think our goal, we will actually present data as we get statistically significant information where we will present the data. We think the best way to put it is that ultimately, if they're doing two cases in a day, they'll be able to do three. If they're doing three in a day, they'll be able to do four.

Speaker Change: and...

Speaker Change: I think the general mood of the team at pretty much every level, let's go get this done.

Rahul Sarugaser: Great. And I feel great about That's perfect, Arun. Wishing you the best of luck and thank you again for taking my question.

Speaker Change: Grace and I speak very good about that.

Speaker Change: Yeah.

Speaker Change: That's a terrific ring. We'll share you the best of luck and thank you again for taking my questions.

Operator: One moment for our next question, and our next question comes from Michael Sarcone with Jeffries.

Rahul: Thank you, Rahul.

Speaker Change: What moment for our next question?

Speaker Change: And our next question comes from

Michael Sarcone: Good afternoon, and thanks for taking the question.

Michael Sarcone: Good afternoon, Michael. Hi, Arun.

Speaker Change: Good afternoon and thanks for taking the question.

Michael Sarcone: Hi Arun, just to start, you know, just on the non-recurrence, I mean, the recovering non-capital revenue, it looks like that was down year over year and maybe flat versus the prior quarter. Could you maybe just talk about what you saw in the quarter there and then maybe give us some color on Tulsa utilization or procedure growth for the quarter?

Ben Haynor: As we're doing four, they'll be able to do five. And I think that to me is the biggest benefit of this, in the sense that in about the same amount of time, they'll actually be able to do more cases, which are certainly not only speaks to the pocketbook, it also speaks to their whole workflow, their whole day. So that's what you will see, you know, I think for procedure time, certainly it will be several minutes, but I think procedures per day you will see an increase, and that's going to be valuable to them. Okay, got it. That's all I have. Thanks for taking the questions, gentlemen. Thank you, Ben.

Michael: I'll be your afternoon Michael.

Speaker Change: Hi Arun, just to start, you know, just on the non-recur, I mean, to the recovering non-capital revenue. Looks like, you know, that was down over year over year and maybe flat versus the prior quarter.

Speaker Change: You may just talk about what you saw in the quarter there and then maybe give us some color on Tulsa utilization or procedure growth for the quarter.

Arun Menawat: Role in Comparing to the year over year, I think we were 39%. The number of patients that we treated in Q1 is higher than the number of patients that we treated in, sorry, in Q2 versus Q1. I think that, as I've said before, the fluctuation that you see in dollars is, you know, in thousands of dollars, and it more relates to the shift of the product to the sites as compared to the number of patients being treated.

Roland: Roland, comparing to

Roland: The, you know, year over year, I think we were 39%.

Speaker Change: The number of patients that we treated in Q1 is higher than the number of patients we treated.

Speaker Change: I think that, as I've said before, the fluctuation that you see in dollars is, you know, in thousands of dollars, and it more relates to shipment of the product.

Rose Sarah Gasser: One moment for our next question. Our next question comes from Rose, Sarah Gasser with Raymond James. Good afternoon.

Arun Menawat: And as I had sort of alluded to earlier, we do see that capital revenues are coming in this year because more and more hospitals are saying, you know, we do have funds for products like these. And now that the reimbursement picture is becoming even clearer, I think you will continue to see this mix changing. And so, I think that in some of those situations where we do sell the capital, we will reduce the dollars per case for them because today we charge everything in a bundled payment. We will start charging in an unbundled way. So, you will see these fluctuations, but I would not read anything beyond that into these detailed numbers.

Rose Sarah Gasser: I remember she had Matthew. Thanks so much for taking my question. So a recondended, terrific job asking many of the clarifying questions. So maybe I'll ask something about as you scale. So I remember you were just talking about the docs going from one to two to three to four patients a day. Perhaps you could give us a little more clarity in terms of how the two, the three codes can be leveraged for docs to potentially stack procedures and essentially increase the profitability per unit time, either by using residents or just creating efficiency in the system to make it more profitable for them.

Speaker Change: to the sites as compared to the number of patients being treated.

Speaker Change: and as I had sort of a lunatic too.

Speaker Change: Earlier, we do see that Catholic music coming in this year.

Speaker Change: Because more and more hospitals are saying, you know, we do have funds for products like these. And now that the reimbursement picture is becoming even clearer, I think you will continue to see this mix.

Speaker Change: and so I think that in some of those situations where we do sell the capital, we will reduce the dollars per case.

Speaker Change: For them, because today we charge everything in a bundled payment, we will start charging in a unbundled way, so you will see these fluctuations, but I would not read anything beyond that into these detailed numbers.

Rose Sarah Gasser: Yeah, I'm happy to. So as I was saying before, the flexibility and the fact that we have multiple codes allows each site to effectively determine what is the best way or the most effective way and efficient way for them to treat the patient. So I'll share a couple of examples. So if I'm a teaching site and I have a resident, I could have the resident do sort of the initial workup of the patient, which will include putting the patient on the MR table and selling the catheters, attaching the table to the MR suite, being with the patient, doing the time there being anesthetized.

Michael Sarcone: And then, you know, you added poor Tulsa's to the base in the quarter. Can you give us any color on how that broke out between, you know, capital sales versus just, you know, pure placements?

Understed: Understed, that's helpful. Thanks Arun Menawat. You added four pulses to the base in the quarter. Can you give us any color on how that broke out between capital sales versus just your placements?

Rose Sarah Gasser: And that we call sort of medical device management. Management. And a resident could easily do that. And so the primary physician could then come in really at the time when they need to start the treatment planning, which now is AI raised, but they can start to do the treatment planning. Then they can stay for the treatment itself, which from beginning the end is even based upon the CMS numbers is less than 90 minutes.

Arun Menawat: I think most of these are placements today. For now, I did, you know, as I was saying before, we did see that, you know, we were, I wasn't sure how this year was going to unfold to some extent because of the reimbursement news being, you know, the 800 pound gorilla. And I think in the second quarter, we did see a little bit of that sort of discussion with the hospital to say, let me just wait until I get the at least the proposed rule out before I sign on the line.

Speaker Change: I think most of these are placements today.

Speaker Change: for now.

Speaker Change: I did, you know, as I was saying before, we did see.

Speaker Change: that, you know, we were, I wasn't sure how this was going to unfold, to some extent, because of the reimbursement news being, you know, the 800 pound gorilla. And I think in the second quarter, we did see a little bit of that.

Speaker Change: sort of discussion with the hospital to say, let me this.

Speaker Change: Wait until I get burned.

Speaker Change: at least the proposed rule out before I sign on the dotted line.

Arun Menawat: But as I was saying before, I think that now everybody is back on, which is why we think we have a high bar to climb in the second half, but our team seems to be very confident about that.

Speaker Change: But as I was saying before, I think that is now everybody's back on and which is why we think we have a high bar to come in the second half but our team seems to be very confident.

Michael Sarcone: I wouldn't read it, I mean, the majority of 2024 will still be placement-based. And I think what you will see over time is that the placements will convert into capital as they start using them. And as they start to develop the economic models, I think you will start to see them convert so that they can reduce their power, case costs, and they can use other buckets for capital dollars and services.

Speaker Change: About that, but I wouldn't read, I mean majority of the 2024 will still be placement based.

Rose Sarah Gasser: That's total time for the physician. Then they can leave and then the resident could come back and, you know, unhook the patient's table and, you know, go with the patient to wake him up and remove the catheters. So it's an efficient process. It brings the primary physician only for the core part of the procedure. It would be less than 90 minutes. And if they do that, they resident could be using the medical device code and the.

Speaker Change: And I think what we will see over time is that the placements will convert into capital as they start using it and they start to develop the economic models. I think you will start to see them convert so that they can reduce their power.

Speaker Change: Case costs, and they can use other buckets for the capital dollars and service dollars.

Arun Menawat: Got it. Thank you very much, Arun.

Rose Sarah Gasser: The physician could be using the treatment part of the code. And if they did that, I think per hour basis will be almost not quite double, but certainly 50 to 70% better on a per hour basis for the physician, whereas a resident, it will make less money, but in, you know, in comparison, will also do very well.

Michael Sarcone: Thank you. Thank you, Michael, or Mohler.

Speaker Change: Got it. Thank you very much, Arun.

Operator: One moment for our next question, and our next question comes from Scott McAuley with Paradigm Capital.

Speaker Change: Thank you, thank you Michael.

Speaker Change: One moment for our next question.

Speaker Change: And our next question comes from Scott McColley with Parasite and Catmoral.

Scott McAuley: Hi everyone. Hi everybody. Most of the questions have kind of already been asked, but just following up on the last one around the capital revenue, because you did have, I think it was 700,000 plus this quarter in revenue from capital equipment. So is that sales in Europe or elsewhere versus, as you were alluding to before, US capital placement models?

Speaker Change: Good afternoon, Scott.

Scott McColley: Hey Arun, everybody. Most of the questions have kind of already been asked, but just falling up on the last one around the capital revenue, because you did have, I think it was 700,000 plus.

Arun Menawat: That's just one example. In another setting, you could have a urologist and a radiologist, both sharing the procedure. And in that case, they can sort of one person is doing the treatment plan, the other person is planning the next patient. And this is also why, you know, we talk about, you know, number of patients for data, the time for procedure. So I think those are a couple of examples of how they will be able to use these codes to be able to optimize the workflow that will be most efficient for them.

Speaker Change: this quarter in revenue from capital equipment. So is that, you know, sales in Europe or elsewhere versus, as kind of you were alluding to before, U.S. capital placement models?

Scott McAuley: This is a North American sale. So, for Europe or Asia, we would break it out, but this is a North American sale.

Speaker Change: It is the North American seal.

Speaker Change: So...

Speaker Change: For Europe or Asia, we would break it out, but this is a North American sale.

Arun Menawat: That's really, that's really helpful and thank you so much for that. And so perhaps continuing on this theme and broadening into DPH. So sort of two part question. One, is there any update on, you know, profound aspirations around DPH and very specifically, are the codes that are currently issued applicable in DPH. And then how do you see the DPH as you playing, playing out particularly again in this, in the stacking, in the procedure stacking scenario.

Rashed Dewan: Yes, Scott, this is Rashed. As is already detailed in our segment report. So if you look at our financial statement, it shows under North America.

Speaker Change: Let's go up this version so that these are already detailed in our segment report, so if you look at our financial statement, it shows under North America.

Scott McAuley: Got it. Fantastic. Yeah, other than that, everything else went out. So, thanks guys.

Speaker Change: Got it. Fantastic. Yeah, other than that, everything else has been out, so thanks guys.

Scott McAuley: Wonderful. Thank you.

Operator: One moment for our next question. Our next question comes from Brian Gagnon with Gagnon Securities.

Speaker Change: Wonderful, thank you, I did.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from Brian Gagnon with Gagnon Securities.

Brian Gagnon: Hi guys, can you hear me OK?

Brian Gagnon: Yes, Brian, good afternoon.

Brian Gagnon: Hi guys, can you hear me okay?

Brian Gagnon: Afternoon. I know it's not really fair to ask about procedures per day without real reimbursement yet, but your highest-level users, maybe your top four or five guys or gals, how many procedures are they doing per day now and where do they think those procedures per day will move to once reimbursement begins?

Arun Menawat: Sure. Yeah. So great questions. The, with respect to BPH, we kind of see ourselves in steps also. So the starting step for us is to focus on those patients where the process are larger than 100 CC and or they have not only BPH, but they might also have some form of early stage disease. And so that patient would particularly benefit from our therapy, those that group of patients, because if they have, you know, large, very large prostate, we can still treat them very quickly and we can, you know, basically have laid the transition zone in some cases, the medium road, if it is needed.

Grafionoon: Yes, I am Grafionoon.

Grafionoon: Afternoon.

Speaker Change: I know it's not really fair to ask about procedures per day with real reimbursement yet, but your highest level users, maybe your top four or five guys or gals, how many procedures are they doing per day now? And where do they think those procedures per day will move to once reimbursement begins?

Arun Menawat: Very good. Good question, Brian. We are. So we have Mathieu, 8% of the sites are doing four procedures per day already? Yeah, that's about right. Right. And I think, Matthew, how many sites, what percent are doing three procedures per day today?

Speaker Change: Very good question, Brian. We are. So we have.

Brian Gagnon: Matthew, what, 8% of the sites are doing four procedures per day already? Yeah, yep, that's about right.

Speaker Change: And I think Mathieu, how many sites, what percentage are doing 3 per day?

Mathieu Burtnyk: We're seeing about, I'd have to pull up the exact figures here, but we're seeing over 10%, maybe 20% of the sites doing three procedures per day.

Brian Gagnon: Today.

Mathieu Burtnyk: We're seeing about, I'd have to pull up the exact figures here, but we're seeing over 10% maybe 20% of the sites doing three procedures per day.

Arun Menawat: And still we can be a relatively fast procedure for them. And because our prostate strength, you know, we're shrinking the very large prostate and think that should lead to durability over time. And in those cases, where there is some form of early stage disease or even, you know, internally we caught them, called them hotspot because in these diffusion images of the of the MR. These bi-parametric images, you can actually see zones of the prostate where the cells look unusual.

Brian Gagnon: That's actually much better than I thought it would be.

Arun Menawat: Yeah, so about a quarter of the population is in the three to four. Procedures per day already. We think once this AI is fully in place, that pretty much every site, we will be able to increase one more patient, and and we're you know we're going to do our own conference shortly and we will ultimately publish the information on the number of procedures. I think in general our expectation is that we think we can provide up to a 20% advantage in terms of time. Against Radical Prosthetics.

Speaker Change: A sexually much better than we thought it would be. Yeah, so about a quarter of the population is in the three to four.

Arun Menawat: And so those patients where they see not only the PPH is the problems with the transition zone and the medium load, but they also see those hot zones, they can actually go ahead and treat them to some extent before they develop it through cancer will become bigger. So I think that subset of the market, we think is at least about 400,000 patients and we think that is where we want to start.

Speaker Change: Procedures per day already. We think once this AI is fully in place that pretty much every site we will be able to increase one more patient.

Speaker Change: We're going to do our own conference shortly and we will ultimately publish the information on the number of procedures.

Speaker Change: I think in general, our expectation is that we think we can provide up to a 20% advantage in terms of time.

Brian Gagnon: That would be great. On the MRIs and expanding relationships, are the 0.55 Tesla interventional MRIs easier to install and operate? And what does it take for a facility to install a regular MRI today versus installing one of these interventional MRIs?

Speaker Change: against radical proxy vectors.

Speaker Change: Oh, that'd be great.

Speaker Change: On the MRIs and expanding relationships are the 0.55 Kessla interventional MRIs are they easier to install and operate and what does it take for a facility to install a regular MRI today versus installing one of these interventional MRIs?

Arun Menawat: The procedure will automatically have the AI technology, the right off the gate because it is being developed off of that platform. And so we think that it will also be a lot faster. Procedure than a typical cancer procedure is because we're not ablating the whole prostate, we're typically maybe 30% of the prostate, which makes it makes the treatment part also very fast. So AI based treatment design that will be customized to each prostate and then a much less amount of of a vision, we think we can be fairly competitive in the market in terms of the time of the procedure, and then to your second question on the reimbursement, the way our FDA clearance is, it says that the clearance is for ablation of prostate tissue, so it does not specify whether it's good tissue, that tissue causing DPH or causing cancer and the reimbursement code are against the FDA clearance. So, you know, we will confirm it in the end, but at the moment, we think these codes should be good to go.

Arun Menawat: So Brian, today's MRIs typically are 1.5 to 3 teslas, and they use a lot of helium and so on. And so hospitals typically put them on their main floor or their basement floor because they weigh something in the order of 30,000 pounds. And they will require especially rebuilding the foundation of the floor. The new ones, the 0.55, have multiple advantages. Number one, they weigh about 8,000 pounds.

Speaker Change: So Brian , today's MRIs typically are 1.5 to 3 teslas.

Brian Gagnon: and they use a lot of helium and so on. And so hospitals typically put them on their main floor or their basement floor because they weigh something in the order of 30,000 pounds and they will require a

Brian Gagnon: Especially rebuilding the foundation of the floor.

Brian Gagnon: and

Speaker Change: When new ones that 255 have multiple advantages, number one, they were typically about 8,000 times.

Arun Menawat: So, you know, I kind of tell people that you can take a Ford F-250 easily. Actually, you could take a Ford F-150 and throw it from one place to the other. But the most important thing is, with that less weight, they can actually be placed in, basically, in the room of any operating room, and you can place that system in there. And the magnetism, because they are 0.55 Tesla, normally these hospitals have to provide significant shielding, which costs a million dollars or so per magnet because of these high-strength magnets versus with this, the shielding, the magnetic strength is typically about five feet from So literally almost no shielding is required, which saves a lot of money in terms of installation cost.

Speaker Change: You know, I kind of tell people that you can take a

Speaker Change: Well, um...

Speaker Change: Ford F-250 evenly actually you could take in Ford F-150 and told them from place to the other.

Speaker Change: But the most important thing is with that less weight.

Arun Menawat: So, I think next year, not only that we have this momentum towards reimbursement based model, but we also think that we will introduce the BPH module as well. That's a terrific color and thank you so much, and I'll just put in one quick last question and then go back in the queue. Given all the tailwinds you talked about today, how is the profound team feeling? What is the sentiment in the couple?

Speaker Change: They can actually be placed in a room of any operating room, and you can place that system.

Speaker Change: in there. And the magnetism, because they are 0.55 Tesla, you know, normally, these hospitals have to provide significant shielding, which costs a million dollars or so per magnet.

Speaker Change: Because of these high strength magnets, horses with this, is shielding that the magnetic strength is typically about.

Arun Menawat: I mean, you know, the profound team, I think the senior team has really jumped nicely. I think the goals are crystal clear for us, we know what we need to do. And I think the general mood of the team at pretty much every level, let's go get the done. Great, and pretty good about that. Yeah, that's a terrific room. I wish you the best of luck and thank you again for taking that question. Thank you, Emily. What moment for our next question?

Speaker Change: five feet from the edge of the of the MR itself. So literally almost no shielding required which saved a lot of money in terms of installation cost.

Brian Gagnon: And the reality is that physicians can literally stay in the MR suite doing the procedure because there's no issue related to the magnetic field. So, the number of advantages, the one that I talked about before, that physicians can literally put their hand in the door and literally see their hand, see the cancer inside the patient, and put the needles in the right places. The fact that they are smaller means they can be moved easily, and they can be put in a normal operating room-sized room.

Speaker Change: And the reality is that physicians can literally stay in the MR suite doing the procedure because there's no issue related to magnetism.

Speaker Change: So...

Speaker Change: So, number of advantages, the one that I talked about before that physicians can literally put their hand in the bore and literally see their hand, see the cancer inside the patient and put the needles in the right places.

Brian Gagnon: This is, and when you think about all this, and then you combine it with the fact that TELSA is the only procedure where it will be reimbursed in a doctor's office, you know, that starts to become a pretty compelling proposition. The caution, obviously, is entirely new, and it's going to take some time to deliver all of this, but I think this is why we are quite excited about the new MRs, that they can literally be placed, and they can be operated on.

Speaker Change: The fact that they are smaller, they can be moved easily, they can be put in a normal operating room size room. This is, and when you think about all this and then you combine with the fact that Tulsa is the only...

Unknown Executive: Our next question comes from Michael Sarkone with Jeffries. Good afternoon and thanks for taking the question. Good afternoon, Michael. Hi, Roon. Just a sword, you know, just on the non-recurring, I mean, the recovering non-capital revenue. It looks like, you know, that was down over a year over year and maybe flat versus the prior quarter. So you maybe just, you know, talk about what you saw in the quarter there and then maybe give us some color on Tulsa utilization or procedure growth for the quarter.

Speaker Change: procedure where it will be reimbursed in a doctor's office.

Speaker Change: You know, that starts to become a pretty compelling proposition.

Speaker Change: The caution obviously is entirely new and it's going to take some time to deliver all of this, but I think this is why we are quite excited about the new MRs.

Speaker Change: That they can literally be placed and they can be operated, they're much simpler to operate.

Brian Gagnon: I think they're much simpler to operate. They don't have multiple buttons because they're designed for, you know, intervention only. And then, you know, combining the economic models that we talked about before, I think that is likely to be a winning combination.

Unknown Executive: Roon, comparing to the year over year, I think we were 39%. The number of patients that we treated in Q1 is higher than the number of patients we treated in, sorry, in Q2 versus Q1. I think the, as I've said before, the fluctuation that you see in dollars is, you know, in thousands of dollars and it more relates to. Schiffment of the product to the sites as compared to the number of patients being treated.

Speaker Change: They don't have multiple buttons because they're designed for, you know, intervention only, and then, you know, combining the economic models that we talked about before, I think that is likely to be a winning combination.

Arun Menawat: Okay, so this should be a big deal for adoption of these new systems, which will, in turn, directly benefit this whole continuum of MR prostate diagnosis, treatment, and post-treatment visualization that you guys have talked about for the last year or two.

Speaker Change: Okay, so...

Speaker Change: This should be a big deal for adoption of these new systems, which in turn will directly benefit this whole continuum of MR prostate diagnosis treatment and post-treatment visualization that you guys have talked about for the last year or two.

Unknown Executive: And as I had sort of alluded to earlier, we do see that capital of music coming in this year because more and more hospitals are saying, you know, we do have funds for products like these. And now that they reimbursement images picture is becoming even clearer. I think you will continue to see this mix changing. And so I think that in some of those situations where we do tell the capital, we will reduce the dollars the purpose for them because today we charge everything in a bundle payment. We will start charging in a unbundled way so you will see the fluctuation, but I would not read anything beyond that into the details.

Brian Gagnon: That's exactly where we're going.

Arun Menawat: All right, last one for me, you talk, go ahead. Yeah, no. This is why I think our companies have invested a lot of money to commercialize this type of thing because they see that whole thing sort of converging towards an MRC. Okay, last one for me. You mentioned commercial reimbursement was higher than for CMS patients. And I guess the one thing I didn't realize, and maybe you can expand on this, is that today, radical prostatectomy, doing CMS patients is not profitable for a hospital system.

Speaker Change: That's exactly where we're going.

Speaker Change: That's exactly right.

Speaker Change: All right, last one for me. You talk, go ahead.

Speaker Change: Now, this is why I think MR companies invested a lot of money to commercialize this type of a product. Because they see that whole thing sort of converging towards an MR centric prostate care strategy.

Speaker Change: Okay, last one for me. You mentioned the commercial reimbursement.

Speaker Change: was higher than CMS patients. And I guess the one thing I didn't realize and maybe you can expand on this is that today radical prostatectomy doing CMS patients is not profitable for a hospital system.

Brian Gagnon: That's right. So, if the hospital doing the robotic prostatectomy in a typical hospital does not pay enough to cover the cost of the hospital. So they actually lose money doing it, and we think that with the way our reimbursement is working and the fact that there's less, the MR suite is far less expensive. And the fact that there's no hospital stay, we think we can show them a model that, in the worst case, will break even for even the lower cost hospitals.

Michael Sarcone: University. That's helpful. Thanks, Arun. And then, you know, you added four Tulsa to the base in the quarter. Can you give us any any color on how that broke out between, you know, capital sales versus just, you know, pure placements? I think most of these up placements today for now. I did, you know, as I was saying before, we did see that, you know, we were, I wasn't sure how this year was going to unfold to some extent because of the reimbursement news being, you know, the 800 pound gorilla.

Speaker Change: That's right. So, in the hospital, doing robotic prostatectomy,

Speaker Change: In the technical hospital, there's not paying enough to cover the cost of the hospital.

Speaker Change: So, they actually lose money doing it.

Speaker Change: and we think that with the way our reimbursement is working and the fact that there is lower.

Speaker Change: The MR suite is far less expensive. And the fact that there's no hospital stay, we think we can show them a model that in the worst case, will break even for even the lower cost hospitals.

Michael Sarcone: And I think in the second quarter, we did see a little bit of that sort of discussion with the hospital, let me just wait until I get at least a proposal out before I sign on the bottom line. But as I was saying before, I think that is now everybody's back on, which is why we think we have a high bar to come in the second half, but our team seems to be very confident about that.

Arun Menawat: So, at a minimum, you should get a lot of Medicare patients as your patients in the future, assuming they can figure out this MRI logjam.

Speaker Change: So, at a minimum you should get a lot of the medicare patients as your patients in the future, assuming they can figure out this MRI log jam.

Brian Gagnon: That's exactly right. And so we are in dialogue with them to, you know, confirm everything. We want to make sure they can use their own data to see what we are describing to them. But, I think based upon the numbers that we see, based upon the robotic prostatectomy data that is in the CMS databases, we think what we're seeing makes a lot of sense, and it will make a lot of sense for the hospital to make that transition.

Speaker Change: That's exactly right. And so we are in dialogue with them to

Speaker Change: Confirm everything, we want to make sure they can use their own data to see what we are describing to them. But I think...

Michael Sarcone: But I wouldn't read, I mean, majority of the 2024 will still be placement based. And I think what you will see over time is that the placements will convert into capital as they start using it. And they start to develop the economic model. I think you will start to see them convert so that they can reduce their per case costs, and they can use other buckets for the capital dollars and service dollars. Got it. Thank you very much room. Thank you. Thank you, Michael.

Speaker Change: Based upon the numbers that we see, based upon the robotic perspective and the data that is.

Speaker Change: in the CMS databases, we think what we are saying makes a lot of sense and it will make a lot of sense for the hospital to make that transition.

Brian Gagnon: Terrific. Thank you very much.

Speaker Change: Terrific. Thank you very much.

Operator: And that does conclude the question and answer session. I would now like to turn it back to Dr. Menawat for closing remarks.

Brad: Thank you, Brad.

Speaker Change: And this does conclude the question and answer session. I would now like to turn it back to Dr. Menawat for closing remarks.

Arun Menawat: Thank you so much. And thank you for the vibrant questions. And we're really looking forward to providing another significant update on the Q3 call. Thank you.

Dr. Menawat: Thank you so much and thank you for the vibrant questions and we're really looking forward to providing another significant update at the Q3 call. Thank you.

Scott McAuley: One moment for our next question. And our next question comes from Scott McCauley with paradigm cap roll. Good afternoon, Scott. Hi, everyone, everybody. Most of the questions have kind of already been asked, but just following up on on the last one around the capital revenue, because you did have, I think, was 700,000 plus this quarter in revenue from capital equipment. So is that you have sales in Europe or elsewhere versus is this kind of you're leading to before US capital placement models.

Operator: And thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Speaker Change: And thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Brad: Thank you.

Brad: [inaudible]

Scott McAuley: It is North American sale. So for Europe or Asia, we would break it out, but this is North American sale. Yes, God, this is so lucky. These are already telling our segment report. So if you look at our financial statements shows on the North American. God, fantastic. Other than that, everything else enough. So thanks. Wonderful. Thank you.

Brian Gagnon: One moment for our next question. Our next question comes from Brian Gagnon with Gagnon securities. Hi, guys. Can you hear me? Yes, Brian, good afternoon. Good afternoon. I know it's not really fair to ask about procedures per day without real reimbursement yet, but your highest level users, maybe your top four or five guys or gals. How many procedures are they doing per day now? And where do they think those procedures per day will move to once reimbursement begins?

Brian Gagnon: Very good, good question, Brian. We are, so we have, Matthew, 8% of the sites are doing four procedures per day already. Yep, that's all right. Right. And I think Matthew, how many sites, what percent in doing three per day today? We're seeing a boat. I'd have to pull up the exact figures here, but we're seeing over 10% of maybe 20% of the sites doing three procedures per day. That's actually much better than we thought it would be.

Brian Gagnon: Yeah, so about a quarter of the population is in the three to four procedures per day already. We think once this AI is fully in place, that pretty much every site we will be able to increase one more patient. And we're, you know, we're going to do our own conference shortly and we will ultimately publish the information on the number of procedures. I think in general, our expectation is that we think we can provide up to a 20% in terms of time.

Brian Gagnon: Again, radical growth. That'd be great. On the MRIs and expanding relationships, are the .55 Tesla interventional MRIs? Are they easier to install and operate? And what does it take for a facility to install a regular MRI today versus installing one of these interventional MRIs? So Brian, today's MRIs typically are 1.5 to 3 Tesla and they use a lot of helium and so on. And so hospitals typically put them on their main floor or their basement floor because they weigh something in the order of 30,000 pounds and they will require a specially rebuilding the foundation of the floor.

Brian Gagnon: And the new ones that .55 have multiple advantages. Number one, they weigh typically about 8,000 pounds. So, you know, I kind of tell people that you can take a 450 easily. Actually, you could take a 150 and throw them from place to the other. But the most important thing is that less weight. They can actually be placed in basically the room of any operating room and that you can place that system in there.

Brian Gagnon: And the magnetism, because they are .55 Tesla, normally these hospitals have to provide significant shielding which cost the million dollars or so per magnet because of these high strength magnets versus with this, the shielding, the magnetic strength is typically about 5 feet from the edge of the MR itself. So literally almost no shielding required would save a lot of many in terms of installation cost. And the reality is that physicians can literally stay in the MR suite during the procedure because there's no issue related to magnets.

Brian Gagnon: Management. So the number of advantages, the one that I talked about before that physicians can literally put their hand in the more and literally see their hand, see the cancer inside the patient and put the needles in the right places. The fact that they are smaller, they can be moved easily, they can be put in a normal operating room, size room. This is and when you think about all this and then you combine with the fact that Tulsa is the only procedure where it will be reimbursed in a doctor's office.

Brian Gagnon: You know, that starts to become a pretty compelling proposition. The question obviously is entirely new and and it's going to take some time to deliver all of this, but I think this is why we are quite excited about the new MRs that they can literally be placed and they can they can be awesome. They have much simpler to operate. They don't have multiple buttons because they're designed for, you know, intervention only and that and and then, you know, combining the economic models as we talked about before, I think that is likely to be a winning combination.

Brian Gagnon: Okay, so this should be a big deal for adoption of these new systems, which in turn will directly benefit this whole continuum of MR prostate diagnosis treatment and post treatment visualization that you guys have talked about for the last year or two. That's exactly where we're going. That's exactly right. All right, last one for me, you talk, go ahead. Yeah, no, this is why I think MR companies invested a lot of money to commercialize the this type of a product because they see that whole thing sort of converging towards an MR centric prostate care strategy.

Brian Gagnon: Okay, last one for me, you mentioned the commercial reimbursement was higher than CMS patients. And I guess the one thing I didn't realize and maybe you can expand on this is that today, radical prostate tech to me, doing CMS patients is not profitable for a hospital system. That's right, so if so the in the hospital doing robotic prostate tech to me in a typical hospital does not pay enough to cover the cost of the hospital.

Brian Gagnon: So it they actually lose money doing it. And we think that with the way our reimbursement is working and the fact that there's more. The MR suite is far less expensive and the fact that there's no hospital state, we think we can show them a model that in the worst case will break even for even the lower cost cost of us. So at a minimum, you should get a lot of the Medicare patients as your patients in the future, assuming they can figure out this MRI log jam.

Brian Gagnon: That's exactly right. And so we are in dialogue with them to, you know, confirm everything. We want to make sure they can use their own data to see what we are describing to them. And but I think based upon the numbers that we see based upon the robot it was protecting the data that is in the CMS database. We think what we are saying makes a lot of sense and it will make a lot of sense for the hospital. To make that transition. Terrific. Thank you very much. Thank you, Brian.

Unknown Executive: And this does conclude the question and answer session.

Arun Menawat: I would now like to turn it back to Dr. Menawat for closing remarks. Thank you so much. And thank you for the vibrant questions. And we're really looking forward to providing another significant update at the Q3 call. Thank you. And thank you for your participation in today's conference.

Unknown Executive: This does conclude the program. You may now disconnect. Thank you.