Q4 2024 Procept Biorobotics Corp Earnings Call
Good afternoon and welcome to PROCEP.
Biorobotics Fourth Quarter and Year End 2024 Earnings Conference Call.
At this time, all participants are in listen-only mode.
We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Matt Bacso, Vice President Investor Relations, for a few introductory comments.
Speaker Change: Good afternoon and thank you for joining Procept Biorobotics fourth quarter and year-end 2024 earnings conference call. Presenting on today's call are Reza Zadno, Chief Executive Officer, Kevin Waters, Chief Financial Officer, and Hisham Shiblaq, Chief Commercial Officer.
Speaker Change: Before we begin, I'd like to remind listeners that statements made on this conference call that relate to future plans, events, or performance are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995.
Speaker Change: All these forward-looking statements are based on management's current expectations and beliefs. These statements are subject to several risks, uncertainties, assumptions, and other factors.
Speaker Change: that can cause results to differ materially from the expectations expressed on this conference call. These risks and uncertainties are disclosed in more detail in PROCET-BIORBAUS filings with the Securities and Exchange Commission, all of which are available online at www.sec.gov.
Speaker Change: Listeners are cautioned not to place under-reliance on these forward-looking statements.
Speaker Change: which speak only as of today's date, February 25th, 2025. Except as required by law, ProCepR Robotics undertakes no obligation to update or revise any for-looking statements.
Speaker Change: to reflect new information, circumstances, or unanticipated events that may arise.
Speaker Change: During the call, we will also reference certain financial measures that are not prepared in accordance with GAAP. Other information about how we use these non-GAAP financial measures, as well as reconciliations of these measures to their nearest GAAP equivalent, are included in our earnings release.
With that, I will turn the call over to Reza.
Reza Zadno: Good afternoon, and thank you for joining us. For today's call, I will provide opening comments and a general business update, followed by Sham, who will provide an overview of the Hydro-Sobotic Systems commercial launch and fourth quarter procedure trends.
Speaker Change: Lastly, Kevin will provide additional details regarding our financial performance and initial 2025 financial guidance.
starting with our quarterly revenue results.
Speaker Change: Total revenue for the fourth quarter of 2024 was $68.2 million, representing growth of 57% compared to the fourth quarter of 2023.
Speaker Change: Growth in the quarter was driven by increased robot sales and increased procedures, both at higher average selling prices and record international revenues.
Speaker Change: We exited the fourth quarter of 2024 with a U.S. installed base of 505 systems, representing growth of 60% compared to the prior year period.
Speaker Change: He solved a total of 190 robotic systems in 2024. On a full-year basis, total revenue was $224.5 million, representing growth of 65%.
Speaker Change: At Procept, our focus is to first transform the global treatment of BPH and become the standard of care. While we have delivered robust growth over the last few years, we only have approximately 10% U.S. BPH resective market share.
Speaker Change: Even the size of the BPH market, we still have a long runway in front of us.
Speaker Change: In pursuit of our long-term vision, 2024 was a productive year for PROCEP in two key areas.
Speaker Change: First, in August, we received FDA 510K clearance for our next-generation hydros robotic system, a major milestone for the process.
Speaker Change: HydroSpring's significant advancement over the AquaBeam system, incorporating years of research, development, and customer feedback.
Speaker Change: Designed for mass market adoption, with advanced features to enhance surgeon accuracy and enhance the care team's usability experience, we believe Tygros will be the platform we can innovate on in the future.
Speaker Change: With the introduction of the HYDROS robotic system, we unveiled FIRST ASSIST AI.
Speaker Change: This feature combines ultrasound imaging with the advanced planning software to assist urologists in identifying key anatomical landmarks, enabling precise targeting of the resection area using the water jet.
Speaker Change: By tailoring the tissue removal plan to individual anatomy, FirstAssist AI aims to enhance procedural accuracy and outcomes.
Speaker Change: Structurally, the HYDROS robotics system fully integrates an advanced ultrasound system and a single-use digital system for providing the ability to improve visualization and streamline the operating room setup process.
Speaker Change: The HYDROS handpiece that comes pre-assembled with a single-use digital scope eliminates the need for sister scope reprocessing between procedures.
Speaker Change: These advanced features further enhance the efficiency of the procedure and are designed to deliver safe, effective, and durable results for men suffering from BPH, regardless of prostate size and shape or surgeon experience.
Speaker Change: The market receptivity of hydros has exceeded expectations, which has manifested itself into a robust capital pipeline and a higher hydro selling price.
Speaker Change: The second major milestone we achieved in 2024 was related to our cross-state cancer initiative. First, we successfully demonstrated high-population therapy does not spread cancer cells throughout the body during resection.
Speaker Change: This study published in a peer-reviewed journal, along with other supporting data.
Speaker Change: enabled us to persuade FDA to lift the contraindication for aquablation procedures.
Speaker Change: in treating BPH patients that also have an active diagnosis of prostate cancer in the United States.
Speaker Change: Second, we finished enrollment of PRCT002, an FDA-IDE feasibility study in men with grade group 1 or 2 prostate cancer. We are excited to share our cancer data at AUA in late April.
Speaker Change: Building on the PRCT-002 feasibility data, in September 2024, we received FDA ID approval to initiate a pivotal randomized clinical study for prostate cancer while also receiving breakthrough device designation.
Speaker Change: The trial known as WATER4-PCA is a global multi-center prospective randomized clinical study assessing the safety and efficacy of aquaculation therapy compared to radical prostatectomy in men with grade group one to three localized prostate cancer.
Speaker Change: The study will enroll up to 280 patients at up to 50 centers with 10-year follow-up. We strongly believe that the need to improve safety and quality of life outcomes for millions of men needing treatment for prostate cancer is an area that remains significantly underserved.
Speaker Change: We believe hyperoblation therapy could become a first-line surgical treatment for localized prostate cancer.
Speaker Change: Initiating an FDA-randomized trial against radical prostatectomy is the first big step in pursuing specific treatment of prostate cancer indication, which no other market-leading treatment has today.
Speaker Change: Given this positive momentum, we believe active ovulation therapy is laying the foundation to become the PPH surgical standard of care and PROSEP is emerging as a leading global urology company.
Speaker Change: With that, I will turn the call over to Sham to provide more detail on our hydrous launch and fourth water procedures.
Sham: Thanks, Reza. First, I want to reiterate Reza's comments on the team's exceptional performance and execution in 2024 that required an all-in attitude from every part of the organization.
Sham: Turning to the Hygros launch. In the fourth quarter, we sold 60 systems, of which 95% were comprised of Hygros for an average selling price of approximately $460,000.
Sham: After receiving FDA clearance for hydros midway through our fiscal third quarter of 2024, we transitioned into the fourth quarter with awareness and excitement around the launch spreading quickly, which certainly played into our favor as we were able to finish the year very strong.
Sham: Initial feedback from customers has been very encouraging. Aside from Hydro's fully integrated and sleek design, surgeons continue to be impressed with the new First Assist AI feature, which we believe has the potential to enable all urologists, new and experienced urologists, to improve outcomes for their patients.
Sham: Other feedback we received, particularly from hospital support staff, is how improved the surgeon and staff experience is at every stage of the oculation therapy procedure.
Sham: Specifically, with a single footprint and improved user interface, the integrated tower facilitates efficient operating room setup, procedural workflow, and operating room turnover.
Sham: Hospital CFOs are also happy to see that the new HYDROS handpiece utilizes a single-use digital scope that eliminates the need for scope reprocessing and further streamlined setup, which saves time and money.
Sham: As we enter 2025, we feel very good about the underlying trends, particularly around system average selling prices, customer demand, and high-dose user sentiment.
Sham: Next, I want to provide details on recent macro events that impacted aquablation procedures in the fourth quarter. We had tremendous momentum heading into our seasonally strongest quarter following a very strong September.
Sham: Given that DTH is an elective procedure, we typically see very strong seasonality in our fiscal fourth quarter.
Sham: This is due to typical winter elective surgery volume increases after the summer season and is bolstered by the large percentage of patients who utilize the fourth quarter to schedule procedures once they have met annual insurance deductibles.
Sham: We estimate approximately 50% of all BPH respective surgeries are Medicare, with the other half being private pay.
Sham: However, in late September, Hurricane Helene flooded Baxter's saline facility in North Carolina. Due to the severity of the storm and resulting damage, Baxter's saline production capabilities were disrupted. Why is this important? First, based on industry reports, Baxter accounts for over 50% of U.S. market share for saline production.
Sham: Second, all resected BPH procedures require the use of saline to irrigate the prostate and bladder during and post-surgery.
Sham: As it pertains to interquarter trends, we saw a more drastic and unexpected decline in the month of November.
Sham: Based on our assessment of our install base, approximately 50% of our accounts use Baxter as their primary supplier of saline. We felt these accounts either stopped performing BPH procedures or significantly reduced volumes given that BPH is an elective procedure and can be deferred in favor of more critical procedures.
Sham: From the hospital's perspective, we were informed that even if they were receiving saline orders, it was typically not at 100% of requested amounts and thus were deprioritizing elective procedures.
Sham: To help quantify the impact in the fourth quarter, since roughly 50% of our accounts were not impacted due to supplier arrangements or having adequate supply, those unaffected accounts demonstrated normal seasonal strength in the fourth quarter.
Sham: Given this acute macro challenge, we estimate a lack of sailing resulted in a delay or cancellation of between 10 to 20 percent, or up to 2,000 of our expected procedures in the fourth quarter, which ultimately impacts handpiece order patterns.
Sham: In mid-November, recognizing that accounts affected by the saline shortage would not be rescheduling procedures in December, we realigned our commercial team's efforts to proactively schedule cases for the first quarter. With an understanding of the anticipated timeline for saline shipments to hospitals, our goal was to ensure procedure volumes in the first quarter returned to meeting our expectations.
Sham: As a result of this proactive strategy, we witness a strong recovery in procedure volumes in February and feel positive about the momentum heading into March.
Sham: As it pertains to recent high-dose account launches, given the failing shortage dynamic, many of our new account launches either restricted the number of procedures they were able to perform or pushed the launch into the first quarter of 2025. In a moment, Kevin will elaborate more on what this all means for the first quarter of 2025.
Sham: Lastly, I am once again incredibly proud of the commercial team and their focus and determination to execute through these short-term challenges. I am particularly proud of their resolve in being able to pivot and ensure delayed procedures are rescheduled.
Sham: Specifically, in January and February, we have enhanced our value proposition to hospitals and that we have demonstrated how impactful it is to stack multiple aquablation procedures in a single operating room day to drive efficiency. This not only helps hospitals, but it also is a significant help to PROCEPT because it optimizes the team's resources when covering procedures.
Sham: Moving forward, we believe this will be a driver of increased procedure growth in 2025. With that, I'll turn the call over to Kevin. Thanks, Shem. Total revenue for the fourth quarter of 2024 was $68.2 million, representing growth of 57% compared to the fourth quarter of 2023.
Kevin Waters: U.S. revenue for the fourth quarter was $60.4 million, representing growth of 50% compared to the prior year period.
Kevin Waters: We generated total U.S. system revenue of $27.6 million, representing system revenue growth of 67% compared to the fourth quarter of 2023.
Kevin Waters: In the fourth quarter, we sold 60 new robotic systems at a blended average selling price of approximately $460,000. As anticipated, over 95% of our U.S. system sales were comprised of hydro systems.
Kevin Waters: Additionally, we sold three trade-in units during the quarter, generating total revenue of $245,000.
Kevin Waters: U.S. handpiece and consumable revenue for the fourth quarter of 2024 was $29.3 million, representing growth of 36% compared to the fourth quarter of 2023.
Kevin Waters: We shipped approximately 8,750 handpieces at average selling prices of approximately $3,200 in the U.S. in the fourth quarter, representing unit growth of 37% compared to the fourth quarter of 2023.
Kevin Waters: As previously mentioned by Sham, we estimate the saline supply shortage in the fourth quarter resulted in up to 2,000 procedures not being performed.
Kevin Waters: This estimate was derived from an internal quantitative analysis of account historical trends, as well as direct feedback obtained through customer interactions and surveys.
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Kevin Waters: We also recorded approximately $1.6 million of other consumable revenue in the fourth quarter of 2024.
Kevin Waters: International revenue in the fourth quarter of 2024 with $7.8 million, representing growth of 137% compared to the prior year period.
Kevin Waters: Growth in the fourth quarter was once again driven primarily by strong sales momentum in the United Kingdom.
Kevin Waters: Gross margin for the fourth quarter of 2024 was 64%, representing an all-time high. Gross margin expansion in the fourth quarter was primarily due to improved operational efficiencies and higher hydro system average selling prices.
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Moving down the income statement.
Kevin Waters: Total operating expenses for the fourth quarter of 2024 amounted to $63.4 million, compared to $50.8 million during the same period in the prior year, and $59.3 million in the third quarter of 2024.
Kevin Waters: Fourth quarter operating expenses exceeded our previously issued guidance by approximately 3.5%. This variance is primarily attributable to higher variable compensation expenses driven by high-growth system overachievement.
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A year-over-year increase.
was driven primarily by increased sales and marketing expenses.
Kevin Waters: mostly to expand the commercial organization and increase general and administrative expenses offset by lower sequential research and development expenses following the significant effort around hydrous development in the second and third quarter of 2024.
Kevin Waters: We are very pleased with the operating expense leverage we have demonstrated in 2024. When comparing revenue growth to operating expense growth, revenues increased 65% in fiscal year 24 on 30% operating expense growth.
Kevin Waters: We believe our path to profitability is becoming increasingly clear as reflected in our 2024 results.
Thank you.
Kevin Waters: This clarity is driven by our recent gross margin expansion into the mid-60% range, which is a direct result of our ability to leverage existing overhead at higher revenue levels, along with increased average selling prices across the board.
Kevin Waters: Furthermore, our consistent track record of growing revenue at a significantly faster pace than operating expenses continues to reinforce our trajectory toward profitability, which I will elaborate on further when providing our 2025 guidance.
Kevin Waters: Net loss was $18.9 million for the fourth quarter of 2024, compared to $27.5 million in the same period of the prior year. Adjusted EBITDA was a loss of $10.3 million, compared to a loss of $23.3 million in the fourth quarter of 2023.
Kevin Waters: Following our most recent capital raise in late October, our cash, cash equivalents, and restricted cash balances as of December 31st were $337 million.
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Moving to our 2025 Financial Guidance.
Kevin Waters: We expect full year 2025 total revenue to be approximately $320 million, representing growth of approximately 43% compared to 2024.
Kevin Waters: Beginning with U.S. systems, we expect to sell approximately 210 new robotic systems in 2025.
Kevin Waters: In line with previous years, our robotic sales are estimated to be distributed such that approximately 45% of the total will occur in the first half of 2025.
Kevin Waters: While pleased with the direction of new hydro system pricing, we want to stress that capital pricing can be variable quarter-to-quarter. Thus, our updated guidance assumes new system pricing to be in the range of $430,000 to $440,000.
Kevin Waters: Our primary focus in 2025 remains on the substantial opportunity to sell hydros in greenfield accounts. However, we are also seeing interest from existing customers who are looking to either replace their current AquaBeam system or acquire a second system, which would be hydros.
Kevin Waters: In response to this demand, we are incorporating approximately $3 million in system replacement revenue into our 2025 guidance, though this will predominantly be realized in the second half of the year.
Kevin Waters: We continue to believe that the replacement opportunity will serve as a significant long-term driver for the business
Kevin Waters: Although we are still in the early stages of the adoption curve, considering the 2,700 hospitals in the United States currently offering BPH-resective options to their patients.
Turning to U.S. hand pieces.
Kevin Waters: On a full-year basis, we expect to sell approximately 52,500 handpieces, representing 63% unit growth compared to 2024.
Kevin Waters: We also expect handpiece average selling prices to be approximately $3,200.
Kevin Waters: We expect other consumables revenue to be approximately $8 million for the full year.
Kevin Waters: Additionally, we expect U.S. service revenue to be approximately $15.5 million for the full year.
Kevin Waters: Lastly, on international revenue, given strong positive momentum in the United Kingdom and pending launches in Japan, we expect full-year international revenue to be approximately $32.5 million, representing annual growth of 36 percent.
Kevin Waters: Regarding gross margins, we expect full year 2025 gross margins to be approximately 64.5%, which would be an approximate 400 basis point improvement over 2024.
Kevin Waters: First quarter 2025 growth margins should be relatively consistent to the fourth quarter of 2024.
Turning to operating expenses.
Kevin Waters: We expect full year 2025 operating expenses to be approximately $300 million, representing growth of 28% over 2024. In the first quarter of 2025, our operating expense guidance assumes spend of approximately $71 million.
Kevin Waters: While we are forecasting our 2025 revenue to operating expense ratio will be down compared to 2024 levels, I want to provide additional context.
Kevin Waters: First, we believe our strong balance sheet offers us the flexibility to invest strategically in key areas to drive long-term growth.
Kevin Waters: Specifically, we are making targeted investments to accelerate enrollment in the Water 4 trial. The quicker we enroll patients, the sooner we can potentially begin generating revenue from prostate cancer treatment.
Kevin Waters: Additionally, it is important to note that clinical trial expenses are heavily front-end loaded as most expenses occur during enrollment. We expect these costs will gradually decrease over time, particularly into 2026.
Kevin Waters: Second, the total incremental operating expenses in our 2025 guidance amount to $66 million.
Kevin Waters: Of this, approximately $19.5 million is attributed to non-cash stock-based compensation, which supports our expanding workforce and reflects our commitment to rewarding employees with equity, thereby aligning their interests with those of our shareholders.
Kevin Waters: On an apples-to-apples basis, if you exclude incremental stock-based compensation, core operating expense growth would be 20% compared to 2024 levels.
Kevin Waters: Finally, consistent with our 2024 guidance philosophy, we aim to provide an initial operating expense target that is expected to remain stable throughout the year with the potential to support higher revenue levels. This approach ensures any revenue outperformance could contribute directly to the bottom line.
Thank you.
Kevin Waters: Given current interest rates, we expect to generate net interest income of $13.5 million in 2025.
Kevin Waters: When accounting for all these variables, we expect full year 2025 adjusted EBITDA loss to be approximately $35 million.
regarding first quarter revenue.
We are forecasting total first quarter revenue of $65.5 million.
Kevin Waters: U.S. system revenue is expected to be approximately $18.7 million, and we anticipate selling approximately 10,750 handpieces in the United States.
Kevin Waters: In terms of handpiece sales, we did experience some residual impacts from the sailing shortage in January.
Kevin Waters: However, February has returned to expected levels and we are optimistic about the positive trajectory we are seeing in daily procedures. Additionally, the salient shortage affected our ability to launch new accounts in both the fourth quarter and early January.
Kevin Waters: As we have communicated, we have observed that it takes new accounts approximately two to three quarters to reach a sustained and normal level of monthly procedural volume.
Reza Zadno: To summarize, the challenges experienced in the fourth quarter appear to be largely behind us and we have strong visibility in the March procedure volumes. At this point, I'd like to turn the call back to Reza for closing comments.
Reza Zadno: Thanks, Kevin. In closing, I want to provide a brief preview of AUA 2025.
Reza Zadno: AUA 2025 will be an exciting event for PROCEP as this will be the first year we present cancer results for PACT population from both of our trials, PRCT001 and PRCT002.
Reza Zadno: The data we plan to present will include procedural anatomical capabilities and safety functional outcomes with respect to incontinence and erectile function and oncologic control measured with biopsy.
Reza Zadno: Given the reproducible nature of our procedure and its safety profile seen during the treatment of BPH, we believe AUA 2025 will provide a glimpse into the future as to how early-stage prostate cancer will be treated.
Reza Zadno: Furthermore, we are the first company ever to receive IDE approval from the FDA to enroll a randomized trial against radical prostatectomy for prostate cancer.
Reza Zadno: We view this as the first big step in pursuing a specific treatment for prostate cancer indication, which no other treatment has to date. Given the amount of quality level one clinical evidence we will be gathering over the next few years, we believe we will be in an advantageous position to drive rapid change in a massively underserved market.
Reza Zadno: And finally, to conclude my prepared remarks, we are seeing multiple factors continue to trend positively, allowing us to execute our long-term strategic plan.
Reza Zadno: In summary, the U.S. HYDROS launch is off to a great start and customers are thrilled with the improved features.
Reza Zadno: Our pipeline and sales funnel continue to grow nicely at the average selling price for hydros that are trending higher than our previous aqua beam system.
Reza Zadno: Our international business continues to build momentum in the UK and Japan.
Reza Zadno: Our commercial organization is the largest and most denier in the company's history, which we believe will lead to increased productivity.
Reza Zadno: We are the first company ever to receive ID approval from the FDA to enroll a randomized trial against radical prostatectomy for prostate cancer.
Reza Zadno: We view this as the first big step in pursuing a specific treatment of prostate cancer indication.
Reza Zadno: And lastly, following an acute sailing supply disruption in the fourth quarter, we are off to a positive start in the first quarter and feel very confident in delivering another year of strong procedure growth.
Reza Zadno: We believe these underlying fundamentals reflect the technology that is laying the foundation to become the BPH surgical standard of care and a business that will be a leading global virology company. In closing, I want to thank our employees, customers, and shareholders for all their support to help us along our journey to becoming the standard of care for BPH.
Reza Zadno: We will continue to leverage our commercial and clinical investment to execute on our long-term strategy.
Reza Zadno: Have a great day, and I look forward to seeing many of you at upcoming investor conferences. At this point, we will take questions. Operator?
Speaker Change: Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. In the interest of time, we ask that you please limit yourself to one question.
Please stand by while we compile the Q&A roster.
Speaker Change: And our first question comes from Craig Bishu of Bank of America Securities. Your line is open.
Craig Bishu: Good afternoon. Thanks, guys, for taking the questions. I'll lump a couple in here, but they're around the impact from the saline shortage. So first, Kevin or Sham, I'd love to understand how...
Craig Bishu: maybe, you know, the 10 to 20% in delay or cancellation procedures and kind of reconcile that with your estimate and how you got to the estimate of the 2000 procedures. And
Craig Bishu: Beyond that, is there, I guess, thinking about either the month where you weren't impacted or the hospitals that weren't impacted, is there a way that you can kind of frame what utilization was?
Craig Bishu: in that period. And then I'll have a quick follow-up on 25 Impact.
Kevin Waters: Great. Thanks, Craig. I'll take that. This is Kevin. Before I get into your question, I just, I do want to reiterate.
Kevin Waters: From the sailing shortage and this really is multifactorial, we analyzed many different variables I'm going to go through a few of those here today. So first we did attribute and the Mt loss to procedures frankly, we just know we directly losses. They were scheduled or they were to be scheduled but were not performed that analysis was done.
Kevin Waters: Two different ways, we had direct customer inquiries in January where we went out and actually performed a customer survey to assess the impact and then also we had direct knowledge of our reps who as you know are currently in every case, we have a high degree of visibility into that factor.
Kevin Waters: I would say, it's more of a quantitative analysis internally, we understand our Q4 ordering patterns. We performed an internal analysis, there regarding normal expectations for growth, particularly coming off a very strong September and this supported the qualitative analysis, we did through surveys and rep feedback so thats factor number.
Kevin Waters: And then lastly, and this is important we did quantify loss procedures from new accounts that did not start their aqua ablation programs due to the sale and shortage.
Kevin Waters: What I mean by that is as a reminder, under normal circumstances. Once the new system is sold it typically does not perform procedures in that quarter and sold and given this dynamic we've always talked about that natural lag utilization.
Kevin Waters: Utilization however, because of sailing impact was so widespread in the fourth quarter. The reality is the majority of accounts. We sold two in the third quarter were pushed into the first quarter or they were somewhat materially limited from a procedure standpoint and this is.
Kevin Waters: Not exact which is why we provided a range, but I think we feel very good that there was an up to 2000 procedures. So that's the first part of your question. The second part of your question, we definitely saw intra quarter trends.
Kevin Waters: October was a normal October for US sure. We started to hear from accounts, we saw some impact but when we were on our Q3 call. We did not anticipate how widespread this issue was going to become and we really saw precipitous drop in November and then when you get into December you start to see some recovery in the back half.
Kevin Waters: But more importantly, what we're seeing in Q1 is a lingering impact in January.
Kevin Waters: Very strong February and a high degree of procedures coming back and accounts being launched in March so apologize for the length, there, but I hope I answered both of your questions I'll take the second part of it Craig on the hospitals that weren't impacted enough I'm glad you noticed that because we did have about 50% of our Haas.
Kevin Waters: <unk> that didn't have an impact with salient shortage in the fourth quarter and when we look at the trends of the.
Kevin Waters: Hospitals that had a normalized utilization in the fourth quarter.
Kevin Waters: Very encouraged because they performed exactly as we expected in the fourth quarter, which is seasonally a very strong quarter for all procedures, especially elective procedures. They delivered strong sequential growth in that period of time and we're in every single case, we track these metrics very closely and so we continue to be very excited and bullish about.
Kevin Waters: The trends that are going on with our procedures and if you just look at that segment of customers.
Kevin Waters: Formed out as expected.
Kevin Waters: Got it.
Speaker Change: Thanks, guys for the color if I could just squeezing a follow up just on Q1.
Speaker Change: It seems like Theres, probably some puts and takes there still some residual effect, but then you did talk about seeing.
Speaker Change: Procedures come back.
Speaker Change: Maybe they were delayed or canceled and done in Q1. So just comment on that if you wouldn't mind and maybe how we should think about utilization growth.
Speaker Change: Overall going forward.
Thanks, Craig I'll take all your questions first.
Speaker Change: Suggest our Q1 guidance doesn't fully assume that all 2000 procedures. We lost in Q4 come back I think we get the majority of those back but there is a practical reality here, where they will not all come back in the first quarter and when you look at our guide in Q1.
Speaker Change: 10750, <unk> pieces. This doesn't apply just overall utilization relatively flat to Q1 of 'twenty four but as I. Previously said, we did see lingering impacts from this into January so I would suggest on an apples to apples basis. When we're looking at February and March where the ceiling impact is behind US we are seeing.
Speaker Change: Handing utilization in those accounts and then just lastly, and this is more of a philosophical comment.
Speaker Change: Coming off a fourth quarter, which is the first quarter, where we've experienced some significant headwinds on the procedure side of the business and why we feel very good about the procedure trends, we're seeing in the first quarter.
Speaker Change: We wanted to maintain a sense of just cautious optimism here in our guidance to ensure we continue to outperform expectations that we've communicated.
Speaker Change: Thanks, guys.
Speaker Change: Thanks, Craig.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Our next question comes from Matthew O'brien of Piper Sandler Your line is open.
Speaker Change: Afternoon.
Speaker Change: Two questions as well one of them to start with is just on the ASP side in terms of what you're assuming here for <unk>.
Speaker Change: In the U S. I think Kevin it's down about six 5% year over year is what we're assuming here thats the bigger biggest drop I think we've seen from the company, what's precipitated that kind of drop in.
Speaker Change: Im happy sites.
Speaker Change: Yes, so sorry, let's just talk specifically about <unk>. So our guidance for the full year implies $3200 ASP Farhan pieces, which is actually up slightly from 2024 and relatively consistent I think what you are picking up on that in your model is other consumables.
Speaker Change: Which is another part of our business that goes into antiques revenue, but it's not directly correlated to E&ps asps.
Speaker Change: Other consumables include drapes accessories that we sell and we're guiding that number there of about $8 million and thats coming off of $7 million number in 2024, but I think thats why youre getting a lower ASP, but the fact is our hesitancy is steady at 3200.
Speaker Change: Got it.
Speaker Change: Sorry does that help.
Speaker Change: It does I keep forgetting about that but the go ahead on hydrus.
Speaker Change: Yes, let me just talk about hydro <unk>. So first off I'd always said, we've always guided relatively conservatively on price, we do expect to get a higher pan pizza Asps for hydro spin Aqua beam, but it's important to remember the majority of 25 procedures are still on the Aqua beam system Aqua means 80% of our installed base since we head into.
25%. So by analogy you should assume it's the majority of procedures, which are at the lower ASP, but year over year were relatively consistent.
Speaker Change: Got it okay I appreciate that and thanks for the clarity just on the Opex spend here for the.
Speaker Change: Our full year I mean, the total number I think is a little bit higher than what.
Speaker Change: We had been expecting and maybe some of the street and I think it makes sense with these extra investments that you're making can you just talk about the upfront loading that's being that's going on right now, especially with water for and then the extra spend there how much faster can you make that enrollment or do we have to wait for <unk> to really hear more about it.
Speaker Change: So opex in totality is up about $66 million I do appreciate that's slightly higher than expectations heading into this call with that said I did call out in my prepared remarks about $20 million of that $66 million is incremental noncash based stock compensation that as we head into year five.
Speaker Change: A public company in 2026 that year over year comparable should start to come down. So if you exclude stock based comp our opex growth is actually 20% not 28%.
Speaker Change: And so that's the year over year in terms of R&D investments, we do feel that by making targeted investments we can accelerate water for on the front end I think of that spend just to characterize it as about $10 million in 2025 in absolute dollars that is somewhat frontloaded as I call.
Speaker Change: It does mean that R&D as a total revenue will be about 25% and 25% that's an improvement from 28% and 24, but this will start to come down over time I think we've talked about this business getting to kind of a mid teens run rate on R&D as a percent of revenue in the near future here.
Speaker Change: Got it thank you.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Patrick Wood of Morgan Stanley. Your line is open.
Patrick Wood: Beautiful thank you for taking the question.
Speaker Change: I'd love to unpack, a little bit more on the hydrus feedback the kind of accounts that you're seeing.
Patrick Wood: <unk> is a high volume low volume.
Patrick Wood: Well I should say lower volume accounts. So I can just feedback from how your conversations with customers going on outside and then I have one quick follow up.
Speaker Change: Yes. Thanks.
Speaker Change: As we mentioned in our prepared remark the hydro launch.
It's our expectation customers are very excited about this feature as we have put in this.
Speaker Change: Robot that first survey, 95% of the procedures are using the AI and in fact are making little or no adjustments to what the ultrasound and the computer's offering and of course other features that help their staff to be more efficient and make the process more.
Speaker Change: Streamlines the workflow.
Speaker Change: And of course, the hospital Cfos are very excited about the fact that they don't need to re stabilize the scope I'm going to let shaft to talk about yes, yes. Thanks, Patrick This is Jim I'll take the question on the mix. So just to kind of frame up the conversation on mix of hospitals keep in mind. There is about 2700 hospitals in the U S.
Speaker Change: <unk> BPH and the early years of commercialization, we are hyper focused on the higher volume BPH hospitals, and we've talked about that number being 860 and that was the initial strategies, but what we've seen over the recent years, but the momentum is a surging demand by medium and low volume BPH hospitals keep in mind, this medium and low volume hospitals.
Speaker Change: Many of them are very large hospitals latest Dave historically have not done a lot of BPH. However, with the surge of demand like I said with operation. We're seeing many of those hospitals begin to acquire <unk> systems. So.
Speaker Change: Really and some here.
Speaker Change: The mix has been moving over the years significantly more to medium and low volume BPH hospitals or surgeons begin to do more <unk> on those centers.
Speaker Change: Super Helpful. And then maybe as a very quick follow up I don't want to get hung up on the 2000, but.
Speaker Change: Any thought on the risk that some of those patients ended up going procedures had a slightly lower saline, obviously depends on prostate size, but our lowest saline requirement, where they went for <unk>.
Speaker Change: Alex.
Speaker Change: Any sense of what the risk of that backlog being pulled away.
Speaker Change: No.
Kevin Waters: Kevin We don't feel like we lost any procedures that are resected modalities.
Kevin Waters: Reality is where we saw accounts not performing a population they werent performing any respective procedures and when you look at the sailing used for an Aqua ablation. It is less than other comparative resected technology. So no. No is the short answer we don't feel we lost any procedures to other modality.
Speaker Change: Beautiful thanks, guys.
Kevin Waters: Thank you.
Kevin Waters: Our next question comes from Brandon Vazquez of William Blair. Your line is open.
Brandon Vazquez: Hey, everyone. Thanks for taking the question I'll just ask two upfront here first on the procedure side.
Brandon Vazquez: Kind of Myopically focused on near term trends, but in.
In Q1, we're talking about utilization that's flattish year over year, but we're also seeing very excited about what we're seeing in terms of rescheduling accounts opening record new accounts I frankly would have expected that maybe to be a little bit higher so maybe talk to us a little bit about.
Brandon Vazquez: Do we see that come through a little bit later the follow through on this optimism why <unk>, we don't see that a little bit higher in Q1. The follow up question maybe for Shannon is just as you look at we don't have perfect numbers anymore. Since this mix of systems and where they are being placed is changing.
Brandon Vazquez: But regardless, you're probably looking at greater than 50% penetration into high volume accounts had been Aqua ablation system as we go through 'twenty five what does that mean for system placements as we go forward what does that mean for the durability of system placements from here. Thanks, guys.
Speaker Change: Thanks, Brian I'll take the first part of your question and our Q1 utilization is an absolute metric is heavily impacted by the lingering impacts in January.
Speaker Change: Without reading into it too much it really is flat year over year because of the impacts we're seeing in January but we're seeing tremendous momentum in both February and March and then I would just remember my comments about us coming off of Q4 and us just being somewhat cautious in our guidance just to continue to ensure we hit our expectation.
Speaker Change: <unk> that we put out there as a company.
Speaker Change: You should start to see in the second or third quarter improved year over year utilization and we're not issuing quarterly guidance at this time for <unk> and three but what I can say, what our guidance would imply is that we're going to be exiting the year Q4 with utilization growth year over year of 20% no I appreciate.
Speaker Change: That's off of comparable that's not apples to apples, but this business is hyper focused on utilization expansion not only driving utilization with new accounts, but ensuring at the accounts. We're in we're driving those current surgeons to do more procedures with that maybe I'll turn it over to Shane to talk about the second part of your question, Yes, Hey, Brian on Sham.
Speaker Change: Good.
Speaker Change: Without giving you specific numbers on the on the mix I would just tell you that our data suggests at the current run rates. We have over four years left of pipeline available for high volume BPH hospitals, let alone a significant opportunity with low and medium Boeing BPH hospitals. This doesn't account for a second system. So it doesn't occur.
Speaker Change: For potential trade opportunities doesn't account for other factors in our business in the future, which could drive sales. So this is just strictly greenfield sales.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Richard <unk> of <unk> Securities. Your line is open.
Speaker Change: Hi, Thanks for taking the questions.
Speaker Change: Just the first one I think you had mentioned.
Speaker Change: As you are launching hydro initially.
Speaker Change: Distraction.
Speaker Change: Two the kind of.
Speaker Change: Consumables are Handpiece sales force.
Speaker Change: Didn't really or maybe I missed it but I didn't hear you guys talk about that at all.
Speaker Change: Maybe that's in the rearview could you discuss what if any impact and it was there.
Speaker Change: In the fourth quarter lingering into the first quarter and can we assume thats behind us moving through <unk> and then I can follow up.
Speaker Change: Richard I'll take I'll take the first one on the Rep impact we did talk about that in Q3 and Q4 as we as we have a large field team training on hydro's.
Speaker Change: There is a silver lining in the sailing impact because we accelerated training in the fourth quarter and as we turned the year, let's turn to the new year here. We have we have that completely behind us and so in January of every rep is fully trained on the hydro system and that is no longer something we see as an impact to utilization.
Speaker Change: Okay, Great and then just on the replacement revenue I think you said that would that's $3 million anticipated for 2025.
Speaker Change: Should we be thinking that thats.
Speaker Change: Can you talk a little bit about customers that may be purchased the system within the last one to two years and then maybe some of the some of the older portions of your installed base I would imagine.
Speaker Change: There's a true up kind of asps for new more more recent purchasers than there is for those who have an older system and are upgrading you should we assume that the ASP was obviously something less than 460000, but I mean should we assume that in the 50 to 100000 range on average anyhow.
Speaker Change: There would be helpful. Thank you.
Speaker Change: Yes, let me address your comment on Asps and replacement and then ill turn it over to Sam about kind of our focus and opportunity in both Greenfield and replacement. So I would suggest that the replacements that we've talked about in 2024 are not reflective of what an ongoing replacement cycle should look like for average selling prices.
Sam: And what I mean by that is the replacement side, we executed on in Q3, and Q4 were really for our Aqua beam customers that had purchased in the previous six months and therefore, you are correct that those asps are fairly low they are in the 50 to 100 K range and those are almost more as exchanges as opposed to replacement.
Sam: Given hydro was not available when they bought Aqua beam as we move forward I think we get at a much more normal replacement opportunity, where if you have a hydro excuse me. If you have an aqua beam that you bought five years ago. The reality is youre going to buy high growth at the same asps that are greenfield would buy but if you bought off of being in the last two years.
Sam: To three years, you will get some discount but that discount is more in the 100 150 K range, not 300, which you've been seeing in the last six months. So that's on Asps and I Hope you appreciate the difference there between kind of Doug.
Sam: The replacement is in an initial launch which address near term customer concerns and then just a normal ongoing replacement cycle and ill turn over to Shannon to kind of talk about the strategy and the Y here Hey, Richard So I think it's good.
Speaker Change: Interesting dynamic that we have going on hydro's, the hydro's value is compelling for our customers. The customers are excited and we are getting inbound interest into looking at second system or trade opportunities and what we're trying to do with our sales team is ensure that we don't lose focus we faced a very disciplined on our on.
Speaker Change: Our effort to become the standard of care in BPH in order to do that we need to continue to focus on Greenfield hospitals, and then focus on opportunities, where we believe we can do trades and in an expeditious fashion, so selling a trade even though on the outside may seem like it's faster. It takes a lot of time and energy to work through a hospital purchasing process in our trade.
Speaker Change: And so that takes away from Greenfield selling time, so the focus for our capital sales team in 2025 continues to be Greenfield sales opportunities copper trades and there will be a larger sales than we've seen in 2024, we will take advantage of those as long as it makes sense and doesn't distract some greenfield sales.
Speaker Change: If I could just one follow up on that one follow up on that.
Speaker Change: Is there is there a downward pressure on the overall company ASP from that $3 million relative to the 435000 or that 435000 is separate from replacement revenue.
Speaker Change: That is separate so just to be specific here, we guided to 210 systems.
Speaker Change: ASP.
Speaker Change: A $4 30 to 400 <unk> those are completely separate than the $3 million in incremental revenue that you can ascribe that rich to about think of 10 replacement somewhere in that range in 2025 to get to that $3 million number.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Chris Pasquale of Nephron Research Your line is open.
Speaker Change: Thanks.
Speaker Change: International really seems to have inflected in the back half of 'twenty four I know it gets overshadowed by the U S business, but we saw a big step up there guidance for 25 seems to imply continued momentum and the utilization number in particular.
Speaker Change: In the fourth quarter seems to have been quite strong maybe just spend a minute on where youre seeing the strength there and what the next dominoes are for you guys in terms of O U S expansion.
Speaker Change: Yes, maybe I'll start with just providing some.
Speaker Change: Help on what was comprised of international consistent with previous quarters that the upside in the fourth quarter is primarily demand driven from the U K, both on new systems, but as you pointed out some really nice procedure growth and utilization and I think our 2025 guidance really reflects the fact that we're just.
Speaker Change: Getting started in the UK and have a lot of runway left here I'll turn it over to Sam to perhaps talk about some of the other regions that we're making some initial inroads, but at the same time, we do not have.
Sam: Significant amount of revenue and 25, I think I'll touch on the U K is a little bit more color and then talk about outside the U K. So the first thing I would say I've been spending some time over in the UK just due to the momentum that's happening in the business there.
Sam: Very very akin to our experience in the U S. We're now seeing the government hospitals adopt the technology, but also the private sector or is it sort of adopting a very nice fashion in the UK recently I was over there and met with a large lab with the executive team of the largest IGN.
Sam: Looking for a strategy to expand <unk> throughout the country. So I'm, just really really exciting opportunity there in the U K to become standard of care for BPH procedure as well outside the outside of the U K.
Sam: Our primary focus of the direct business is in Japan. We now have established reimbursement cable network is building 2025 will be a very very much a focus on expanding the installed base to a heavy focus on greenfield sales and unlike the U S. We will start to enter the U K, we will start to build the procedure business over years as you build that direct team in Japan.
Sam: And beyond those two countries, we obviously have a large.
Sam: An opportunity and we're focused on countries, where we believe we can move the market in the years to come so building going to a market development activities and building kols in those markets.
Speaker Change: Thanks, and then just one detail limit the size of the water for trial changed from what you had contemplated back in the fall I thought I heard 184 announced QAD, but maybe I misheard.
Hello.
Speaker Change: We have said waterfall with mid 280 patients randomized study in the United States.
Speaker Change: Okay. Thanks Joseph.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Nathan <unk> of Wells Fargo. Your line is open.
Speaker Change: Hi, Thanks for taking the question.
Speaker Change: Circling back to the replacement opportunity is there any way you could kind of help us understand the gross margin impact from replacement and then just generally for 2025, how should we be thinking about gross margin cadence through the year and where do you think you can exit in Q4.
Speaker Change: Yes.
Speaker Change: Richard just asked this question.
Speaker Change: The replacement opportunity is factored into our gross margin guide.
Speaker Change: We're assuming about 10 replacements at a $300000 ASP in the U S. We're assuming 210 greenfields in the U S. At 430 to 440000, so our margin expansion takes into account any dilutive impacts that we would have from.
Speaker Change: From replacement opportunities.
Speaker Change: The second part of your question on gross margins make you repeat exactly sorry, I can make sure I answer your question.
Speaker Change: Yes, basically how do you expect gross margin to trend through the year and the exit rate in Q4.
Yes, so we exited just to remind everybody. This year 2024, with Q4 margins of 64% and full year margins of 61% now that was a meaningful improvement from 52% in 2023, and then we have guided on a full year basis here to kind of mid mid 60.
Speaker Change: Four 5% that would suggest an exit velocity of somewhere in the 65% to 60, 66% range in the fourth quarter and we're pleased with that growth, but I don't want anybody to think we're disappointed given how robust 24 was the reality is 24 was always transformational for us from a gross margin.
Speaker Change: This was the year, we saw a meaningful impact of leveraging our overhead. It's the year, we moved in fully to our new facility and took advantage of that and on top of that we had a nice surprise in 'twenty four with significantly average.
Selling prices, particularly on the capital side of the business, So given where we're at today in the mid $60. We don't expect the same magnitude of move in 'twenty five, but again, we're going to be exiting the year close to 66%, which we believe importantly will be another proof point on a very clear pathway to profitability.
Speaker Change: Okay.
Speaker Change: At this point my understanding is there is a rep every procedure and I believe you talked about this in the past, but eventually you want to move beyond that where you don't need a rep at every procedure I guess.
Speaker Change: What are you thinking about timing in terms of transitioning how the procedure is done how many reps you need in the field.
Speaker Change: Thanks.
Yes sure.
Speaker Change: So I think Theres a couple of factors here that were considering before we make that decision to be something that's more widespread number one is in high volume hospitals. There are 12, BPH surgeons and so our opportunity to sell to be up to the other surgeons that arent using our technology becomes more and more challenging when we're not in the operating room.
Speaker Change: It's an unbelievable sales opportunity for our field team to be in those cases, and cross selling cross selling to those to those other.
Speaker Change: Surgeons.
Speaker Change: Other piece of this is simply the.
Speaker Change: The efficiencies of the procedure when we're in there and we're helping staff and there's a lot of different staff that covers procedures, we're able to get through a lot more cases of the day when our reps are in the room with hydro that equation could change for us. That's one of the reasons why we're excited about hydro is our ability to allow more and more different staff members to have to have a procedure can be more efficient for our surgeon. So.
Speaker Change: The short answer to your question is.
Speaker Change: We plan to pilot Somebody's hydrous accounts in 2025, and we'll see how that goes and over time, we definitely will see more and more independent surgeons, but for now we see it as an opportunity when we're in those hospitals to bring more and more series on technology.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Our next question comes from Mike Kratky of Leerink Partners. Your line is open.
Mike Kratky: Yes, hi, everyone. Thanks for taking my question.
Kevin Waters: Kevin maybe just to go back to when you talked about I think you've historically talked about 65% gross margins being in the range at which you could start to get a pretty clear path to profitability.
Speaker Change: Is it fair to think if you're exiting this year at 66, I mean not to get ahead of ourselves, but does that give you pretty good confidence that 2026, then as the year that that could happen and then I have one follow up.
Kevin Waters: Yes.
Kevin Waters: I'm going to keep my commentary focused on 25%, but I think they will help with your question anyhow and I'm going to talk about EBITDA. In particular, so we then provide quarterly EBITDA guidance and I'm going to talk about the fourth quarter. However, we do expect to see sequential improvements in EBITDA throughout the year and we do believe exiting 'twenty five we're going to.
Kevin Waters: So a very clear pathway to sustain profitability. However, we're not going to comment today on what specific quarter thats going to be or actually comment on 2026, either but to get to our implied guidance.
Kevin Waters: Get to a place exiting 'twenty five again, where it should be very clear that this is a business with significant topline growth expanding margins leveraged opex and no question about our ability to generate profits moving forward.
Speaker Change: Okay Super helpful. And then maybe just one follow up.
Earlier, you mentioned your guidance implies your hand piece ASD I think is up slightly.
Kevin Waters: But most of that is still coming from Aqua being so can you help quantify how much higher your hydro handpiece revenue is or your sorry, ASD is versus aqua beam on an apples to apples basis.
Kevin Waters: Yes, it's.
Kevin Waters: It's too early to comment on specificity. The reality is we're still working through a lot of the hydro as negotiations our installed base of hydro's is still less than 100 systems that we've sold so we feel good that we're getting increased asps, but it's probably too early to comment on what that delta looks like as we're working through multiple customer negotiations.
Is that fair.
Speaker Change: Yeah understood thanks very much.
Kevin Waters: Thank you.
Kevin Waters: Thank you.
Kevin Waters: Yeah.
Speaker Change: Our next question comes from Josh Jennings of TV Cowen Your line is open.
Speaker Change: Hi, good afternoon. Thanks, a lot for taking the question I guess, maybe a hard one to answer but I was hoping you could just share what.
Speaker Change: Competitors are doing.
Speaker Change: As <unk>.
Speaker Change: <unk> is driving the Aqua ablation treatment towards standard of care are you seeing significant counter marketing and the field is there any technology.
Speaker Change: <unk> that you guys are on your radar love to just hear how you're thinking about the competitive landscape and if it is getting tougher or if you guys are even more confident.
Speaker Change: After the past multiyear run you've been on.
Hi, Josh this is definitely on the competitive front in the last call.
Speaker Change: Five years.
Speaker Change: Technologies, we see are generally in the non receptive area under receptive, especially we do not see companies running given.
Speaker Change: As TN trial and also so this is for BPH treatment.
Speaker Change: And as far as the <unk>.
Speaker Change: Prostate cancer, yes, we see some.
Speaker Change: Technologists focal therapy, and we are still the only company and running a an FDA randomized study in the United States. So we are very confident with our technology.
Speaker Change: Sure.
Jonathan Sham: You can add more color to this yes, hi, Jonathan Sham I think.
Speaker Change: On the respective front, we've made significant progress on our journey to become a standard of care will exit 2025, roughly 20% of the respective market and when you look at the competition in the respective market. The gold standard for 100 years has been term.
Jonathan Sham: And who sells TERP.
Speaker Change: There's a lot of different product self serve so we don't really have a direct competitor when it comes to turf, which is a massive advantage for <unk> for process. The other the other company is rather touched on to not respective technologies, which tend to be office space and.
Speaker Change: And but on the hospital market, we feel like we've got an unbelievable opportunity to really continue our journey to becoming standard of care.
Speaker Change: Awesome and just.
Speaker Change: Wanted to.
Speaker Change: Check in on your system guidance and assumptions baked in and then we're going to see some early prostate cancer data at <unk> is managed thanks, sorry, I may have missed part of the prepared remarks session.
Speaker Change: Earlier, but I mean are.
Speaker Change: Are you baking in any prostate cancer indication driven system sales in 2025 system guidance.
Speaker Change: Is that not baked and thanks a lot.
No. That's our guidance does not assume any revenue or systems or procedures attributable to prostate cancer, thus far.
Speaker Change: Sure.
Speaker Change: And part of your question.
Speaker Change: Not that we are very excited he will give you an update on what if Florida drove.
Speaker Change: There will be.
Speaker Change: Data presented on <unk> and.
Speaker Change: So these are some of the information that will be presented.
Speaker Change: <unk>.
Speaker Change: Outstanding Thank you.
Thank you we have no further questions at this time I would like to turn it back to Rob <unk> CEO for closing remarks.
Speaker Change: I want to thank everyone for attending our earnings call.
Speaker Change: Hope to see you at upcoming conferences and have a nice day.
Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect.
Speaker Change: Okay.
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