Q1 2025 Procept Biorobotics Corp Earnings Call
Good morning, and welcome to Procept Bio Robotics' first quarter 2025 earnings conference call. At this time, all participants are listening only mode.
Speaker Change: We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is very recorded for replay purposes. I want to turn the call over to Matt Baxhill, Vice President Investor Relations for a few introductory comments. Thank you very much.
Matt Bacso: Good morning and thank you for joining Procept Bauer Robotics First Quarter 2025 earnings conference call. Presenting on today's call, Reza Zadno, Chief Executive Officer, Kevin Waters, Chief Financial Officer, and Sham Shiblaq, Chief Commercial Officer.
Matt Bacso: Before we begin, I'd like to remind listeners that statements made on this conference call that relate to future plans, events, or performance.
Matt Bacso: or four-looking statements as defined under the Private Securities Litigation Reform Act of 1905. While these four-looking statements are based on management's current expectations and beliefs, these statements are subject to several risks of certain use of assumptions.
Matt Bacso: Listeners are cautioned not to place under reliance on these forward-looking statements which speak only as of today's date, April 24th, 2025. Except as a car by law, press of our robotics undertakes no obligation to update or revise any forward-looking statements to reflect new information, circumstances or unanticipated events that may arise.
Matt Bacso: During the call, we will also reference certain financial measures that are not prepared in accordance with gap.
Matt Bacso: More information about how we use these non-GAAP financial measures as well as recommendations of these measures to their nearest gap equivalent are included in our earnings release. With that, I'd like to turn the call over to Reza. Thank you for your time.
Reza Zadno: Good morning 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 a commercial overview. Lastly, Kevin will provide additional details regarding our financial performance and updated the 2020-25 financial guidance.
Beginning with our quarterly revenue results.
Reza Zadno: Total revenue for the first quarter of 2025 was $69.2 million, representing growth of 55% compared to the first quarter of 2024. Growth in the quarter was driven by increased US system and hand pieces sold as well as record international revenues.
Reza Zadno: We exited the first quarter of 2025 with a US install base of 547 systems representing growth of 55% compared to the prior year period.
Reza Zadno: We sold a total of 42 robotic systems in the first quarter of 2025, turning to the global macro environment, specifically our exposure to tariffs.
Reza Zadno: As a reminder, following the establishment of full Medicare coverage in 2021, we initiated US commercial operations in earnest at the time when the pandemic had exposed significant vulnerabilities in the global supply chain.
Reza Zadno: In response, we took proactive steps to de-risk our supply chain by sourcing the majority of our strategic components in the U.S.
Reza Zadno: For components that could not be sourced within the US, we took deliberate steps to maintain significant inventory levels. This approach not only mitigated the risk of supply disruption, but also help reduce our exposure to potential tariff escalations.
Reza Zadno: For example, greater than 95% of the direct material cost of our single use handpiece is sourced in the United States.
Reza Zadno: Regarding a robotic system, our primary exposure to China lies in the ultrasound system. However, we have typically maintained a robust supply of inventory for this critical component. Kevin will provide additional detail in the guidance section.
Kevin Waters: However, given our strong, imagery position of ultrasound units and the fact that all products are assembled in California, we currently anticipate only a modest impact to 2025 gross margin.
Kevin Waters: That said, we have taken a conservative approach to our 2025 gross margin outlook and will continue to closely monitor potential headwinds that could affect fiscal 2026.
Kevin Waters: Turning to clinical updates. In March, at the 40th annual European Association of Urology Congress in Madrid, primary end point results from the water tea three randomized controlled trial were presented.
Water Three is an international perspective. [inaudible]
Kevin Waters: Multi-Central Study, Comparing Acquoblation Therapy for Laser Enucreation in Prospect sizes 80 to 180 milliliters.
Kevin Waters: The study treated 186 men and reported three months primary safety and efficacy endpoints.
Water 3, with also follow patients up to 5 years. [inaudible]
Kevin Waters: At three months, Appolation Therapy delivers similar symptoms relief to laser in the creation while demonstrating a zero-person transfusion rate and significant the lower rates of ejacurate dysfunction and incontinence.
Kevin Waters: Notably, the rate of stressing confidence was 0% among population patients.
Kevin Waters: These results had to our growing body of clinical evidence and support that Appolvation Therapy is highly reproducible in treating prostate of all sizes with a low learning curve.
Kevin Waters: Aside from the clinical outcomes, we believe the water-to-results will be instrumental in helping modify global urologic guidelines in the future for larger prospects.
Kevin Waters: Next, I want to provide a positive update regarding US Medicare coverage.
Kevin Waters: Effective April 6, 2025, First Coast and Novitas, two of the largest regional Medicare administrative contractors, positively updated two key local coverage determinations, oil CDs.
Kevin Waters: We estimate first coast and Novotos account for approximately 30% of all Medicare patients in the United States.
Kevin Waters: Regarding the LCD changes, first course and Novita's removed three key limitations, age-based restrictions for men over 80, voided volume thresholds that impact the patient in retention and the requirement to measure prostate size via transcript of ultrasound.
Kevin Waters: These changes significantly streamline the pre-procedure workup and should expand access to act population therapy for a broader patient population. With that, I will turn the call over to Shams to provide more detail on first-order commercial
Sham: Thanks, Reza. Starting with US procedures. In the first quarter, we saw 11,235 hand pieces representing your over-year unit growth of 65%.
Speaker Change: As we noted during our fourth quarter earnings call, we experienced some residual impacts from the failing shores in January . However, volumes returned to more normalised levels in February , with March demonstrating strong growth compared to the prior month. As of the end of March, we believe the failing issue is behind us.
Speaker Change: The first quarter of 2025 was an incredibly important quarter for the company to execute our plan given the macro factors from the fourth quarter. In addition to a strong handpiece quarter, we saw a greater number of accounts launched their
Speaker Change: As I look back over the last quarter, there are three key takeaways regarding the hydroist account launches.
Speaker Change: First, internally approved, we can execute supporting a large number of new accounts on accelerated timelines.
Speaker Change: Second, hospital customers are very motivated to launch and promote their hydro system. And finally, give the number of accounts that were launched in the first quarter and the daily procedure normalization post saline. We have a high degree of confidence, we will continue our procedural and system momentum as we progress through 2025.
Speaker Change: Turning to Hydros, with the launch of Hydros last year, we've seen a noticeable increase in engagement with large strategic IDNs. And based on the feedback we have received, we believe momentum is being enhanced by a few feedbackers. [inaudible]
Speaker Change: First, with the size of our install base and the growth across hospitals and procedures, many of these new hospitals now view the process as being on par with the most well-established met tech companies in the U.S.
Speaker Change: Second, they see Hydro with the potentially game-changing technology, bringing advanced capabilities to a large, established circle category that has been stagnant for years.
Speaker Change: And third, we're hearing strong desire to standardize the observations therapy across their hospital networks, driven by the consistent, reproducible outcomes, and the operational efficiency that brings. Many of these ideas have also expressed a strong interest in growing patient volumes and view hydros of an enabling technology to support that goal.
Speaker Change: of the 43 systems sold in the first quarter. Approximately 45% were associated with IDM-Balt-5 executed at the corporate level. Furthermore, approximately half of Hydro's placements went to high-volume DPH hospitals with the other half being low or medium-volume DPH hospitals.
Speaker Change: Given this dynamic, we believe Hydros is resonating with large strategic ideas and hospitals, regardless of historical VPH volume.
Speaker Change: Regarding the broader capital equipment environment, while market uncertainties present challenges, we have demonstrated a strong crack record of selling capital and incrementally higher prices driven by the underlying value of occupations therapy to the patient and hospital customers.
Speaker Change: Based on the early conversations with prospective customers on our pipeline, we do not send any material shift in overall sentiment.
Speaker Change: We believe Procept is an strong position to continue to grow the install base for the foreseeable future. Many also associate robotic surgeries and long-term strategic priority to grow revenue and market share, and thoughts are less likely to cut investment in this area, even if macro-conditions are moderately worsened.
Speaker Change: Second, we are in the early endings of a new part of launch that is being interaction. The number of low and medium volume DPH hospitals acquiring hydro systems continues to increase. It gives confidence in our ability to expand into these hospital segments and continue on our path becoming the DPH Center to Care.
Last day, I want to touch briefly on our international performance.
Speaker Change: International Revenue in the first quarter of 2025 with $8.9 million, representing growth of 104% compared to prior year period.
Speaker Change: While our international business remains primarily driven by capital sales, we are beginning to see meaningful revenue sales wins from procedural volumes, particularly in the United Kingdom, where increasing dualization is becoming a meaningful driver of the overall business.
Speaker Change: This is very encouraging as we now have many examples across the UK of launching robust and durable opposition programs in both the NHS and private sector. These real-world examples are critical of the needs needed self-developing UK.
With that, I'll turn the call over to Kevin.
Kevin Waters: Thanks, Sham. Total revenue for the first quarter of 2025 with $69.2 million for representing growth 55% compared to the first quarter of 2024.
Speaker Change: U.S. revenue for the first quarter with $60.3 million representing growth of 50% compared to the prior year period.
Speaker Change: We generated total US system revenue of $18.7 million, representing system revenue growth of 32% compared to the first quarter of 2024.
Speaker Change: In the first quarter, we sold 43 robotic systems at a blended average selling price of approximately $435,000.
Speaker Change: Looking ahead, we expect a small percentage of Hydro's placement to come from Legacy AquaBeam System Replacement. In these cases, particularly with established customers, we anticipate pricing to be largely consistent with that of a new system. [inaudible]
Speaker Change: Notably, during the quarter, one customer replaced their aqua bean for hydros. As a result, while 43 systems were sold, the U.S. install base grew by 42 units reaching a total of 547 systems. [inaudible]
Speaker Change: Disreflect, Continued Momentum, and System Adoption, and the Value Customers Place, our next generation technology.
Speaker Change: Turning to U.S. Handpiece and consumable revenue. Revenue for the first quarter of 2025 to $38 million representing growth of 61% compared to the first quarter of 2024.
Speaker Change: The 11,235 hand pieces sold in the United States were at average selling prices of approximately $3,200, representing unit growth of 65% compared to the first quarter of 2024.
Speaker Change: We also recorded approximately $2.1 million of other consumable revenue in the first quarter of 2025.
Speaker Change: International revenue in the first quarter of 2025 with $8.9 million representing growth of 104% compared to the prior year period.
Speaker Change: Growth in the first quarter was once again driven primarily by strong sales momentum in the United Kingdom.
Speaker Change: Gross Margin for the first quarter of 2025 with 63.9% consistent with the fourth quarter of 2024 and up 750 basis points year over year.
Speaker Change: The year-over-year margin expansion was driven primarily by improved operational efficiencies and higher average selling prices compared to the first quarter of 2024.
Speaker Change: Moving down the income statement, total operating expenses for the first quarter of 2025 amounted to $71.6 million compared to $52.7 million during the same period in the prior year.
Speaker Change: We believe our path to profitability is becoming increasingly clear as reflected in our recent performance.
Speaker Change: This clarity is driven by our 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 for systems and hand pieces.
Dr. Bacso, Michael Kratky,
Speaker Change: Met Loss was $24.7 million for the first quarter of 2025 compared to $26 million in the same period of the prior year.
Speaker Change: Adjusted EBITDA was a loss of $15.8 million, compared to a loss of $20.4 million in the first quarter of 2024. Our cash, cash equivalent and restricted cash balances as of March 31st were approximately $319 million.
Moving to our 2025 Financial Guidance [inaudible]
Speaker Change: We now expect full year 2025 total revenue to be approximately $323 million, representing growth of approximately 44% compared to 2024.
Speaker Change: We continue to expect to sell approximately 210 new robotic systems in the United States with pricing in the range of $430 to $440,000.
Speaker Change: Our primary focus in 2025 remains on the substantial opportunity to sell Hydros and Greenfield accounts.
Speaker Change: However, we are also seeing interest from existing customers who are looking to either replace their current aquavim system or acquire a second system which would be Hydra's.
Speaker Change: Therefore, we are guiding the total full-year US system revenue of approximately $95 million, which includes Greenfield sales and to a lesser extent replacement system.
Speaker Change: We continue to believe that the replacement opportunity will serve as a significant long-term driver for the business, although we are still in the early stages of the adoption curve.
Speaker Change: According to U.S. Handpieces, for the full year, we continue to expect sales of approximately 52,500 handpieces representing a 63% increase in unit volume compared to 2024. We remain confident in our visibility into new account launches in quarterly procedure volumes which contributed to our outperformance in the first quarter.
Speaker Change: We are maintaining handpiece average selling prices to be approximately $3,200 and are increasing other consumable revenue expectations to be approximately $9 million for the full year.
Speaker Change: Additionally, we expect U.S. service revenue to now be approximately $15 million for the full year.
Speaker Change: Lastly, on International Revenue, given strong positive momentum in the United Kingdom, we now expect full-year international revenue to be approximately $34.5 million, representing annual growth of 44%.
I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Speaker Change: Turning the gross margins, the current tariff landscape remains highly fluid. That said, we believe we are well positioned to manage both gross margins and overall profitability in this environment. [inaudible]
to clarify our exposure.
Speaker Change: tariffs primarily impact our ultrasound system and associated component source from China.
Speaker Change: Should current rates remain elevated at 145%, we estimate a potential gross margin headwind of approximately $5 million in 2025, which would equate to a 150 basis point reduction from our guidance of 64.5%.
Speaker Change: with the majority of the impact expected in the second half of the year.
Speaker Change: While we believe there's a reasonable likelihood that tariffs could moderate over time, we felt it important to outline the potential downside scenario that rates remain unchanged.
Speaker Change: Although we are not yet providing guidance for 2026, we are actively evaluating operational mitigation strategies that could reduce future exposure.
Speaker Change: Importantly, we remain confident that the current tariff environment does not compromise our path to achieving our long-term profitability objectives.
Speaker Change: We will continue to closely monitor developments and provide timely updates as needed.
Speaker Change: Turning the operating expenses. We continue to expect full year 2025 operating expenses to be approximately $300 million dollars, representing growth of 28% over 2024.
Speaker Change: In the second quarter of 2025, our operating expense guidance assumes spend of approximately $75 million dollars.
Speaker Change: Additionally, given current interest rates and cash balances, we expect full-year interest
Speaker Change: Taking all relevant factors into account, we continue to anticipate a 4-year 2025 adjusted to David L. Loth, approximately $35 million.
Speaker Change: We believe potential tariff-related headwinds can be largely mitigated through operational efficiencies identified across the organization.
Reza Zadno: 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. We are currently in Las Vegas for the 2025 AUA conference and it is also a Procept's fourth consecutive AUA Anode State.
Reza Zadno: Tomorrow we will be video webcasting the event live starting at 8 a.m. Pacific 11 a.m. Eastern. From a logistics point of view it is very important to note that the location of our event has been moved to the area hotel in conference room Joshua 9 and 10.
Reza Zadno: If you are planning to attend in person, please update your meeting location to the Arya hotel.
Dr. Bacso, Dr. Bacso, Michael Kratky,
Speaker Change: Tomorrow will be an exciting event for Procept as this will be the first year we present prostate cancer results for Appopulation from a combination of both of our Trials PRCT001 and PRCT002.
Speaker Change: The data with plan to present will include procedural and atomical capabilities and safety functional outcomes with respect to the incontinence and erectile function and oncologic control.
Speaker Change: Even the reproducible nature of our procedure and its safety profiles seen during the treatment of VPH, we believe tomorrow's analysis will provide the accolades into the future as to how low and intermediate risk prostate cancer patients could be treated.
Speaker Change: Furthermore, we are the first company ever to receive ID approval from the FDA to enroll a random much drive comparing surgical therapy against radical prostate cancer.
Speaker Change: Review this as the first crucial step in pursuing a specific prostate cancer treatment indication, which no other treatment has today.
Speaker Change: Given the amount of level one clinical evidence, we will be gathering over the next few years, along with our breakthrough device designation to fast-track approval, we believe we will be in an advantageous position to drive rapid change in a massively underserved market.
Speaker Change: To conclude my prepared remarks, we are seeing multiple factors continue to transpositively allow us to execute our long-term strategic plan.
Speaker Change: In summary, the U.S. Hydro's launch is gaining momentum with our pipeline and sales funnel going nicely.
Speaker Change: We launch significantly more greenfield accounts in the first quarter compared to any other quarter.
Speaker Change: We've exited March with very strong procedural momentum and viewed the sailing disruption to be behind us. We feel very confident in delivering another year of strong procedure growth.
Our International Business continues to build momentum in the UK.
Speaker Change: We are the first company ever to receive ID approval from the FDA to enroll a randomized trial comparing a surgical therapy against radical prostate cancer.
Speaker Change: Lastly, based on current inventory levels and limited exposure to foreign suppliers, we believe the impact of tariffs on 2025 cross margins to be very manageable, and we have reiterated our adjusted EBITDA guidance for fiscal 2025.
Speaker Change: We believe these underlying fundamentals reflect the technology that is leading the foundation to become the BP surgical standard of care and a business that will be a leading global neurology company.
Speaker Change: 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. At this point, we will take questions. Operator?
Thank you.
Speaker Change: Thank you. To have the question, you will need to press Star 101 on your telephone and wait for name to be announced. To withdraw your question, please press Star 101 again. Please stand by with the Compagate P&A roster. One moment for first question.
. . .
Dr. Bacso, Michael Kratky,
Speaker Change: Our first question will come to line with Matthew O'Brien from Piper Sandler. Your line is open.
Good, Ryan, can you guys hear me okay? Okay.
Good night.
Oh, excellent. Thanks for the questions. First starters.
Speaker Change: I just would love to hear, and I think Shibham kind of started to address it a little bit, but-
Speaker Change: Environment potentially slowing with Medicaid cuts, et cetera, but you just had your best Greenfield quarter-ever. So, maybe just talk a little bit about what you're seeing in the market in terms of buyer interest in the system and then conversion rates versus what you were kind of expecting if anybody has had slowing things down, just given the environment or even canceling, you know, converting over. Just just a bigger discussion on what you're seeing on a cat backside. So, just a little bit about what you're seeing on a cat backside. So, just a little bit about what you're seeing on a cat backside.
Speaker Change: because again I think it's getting quite a bit of attention and then I do have one follow-up.
Speaker Change: Hi Matt at Sham. Thanks for the question. So I would start by saying we haven't seen an impact when it comes to our capital interest in the hospital of just acquiring Hydros.
Speaker Change: We have the only conversations, our pipeline is at an all-time high when we look at opportunities that have now.
Speaker Change: and entered the buying process for Hydro's. And so we haven't seen any material shift in the sentiment as far as the excitement around the
Speaker Change: One thing I think we are different, I mean we're in a unique position, we're so early innings when it comes to the opportunity we have with a number of hospitals that still remain, which are less thousands of hospitals that still haven't acquired off of being our address for this point.
Speaker Change: and we're continuing to build the pipeline. The other thing is due to the disruptive nature of this technology, due to the adoption with procedures, we now have patients demanding the technology. Surgeons, hospitals don't want to lose those patients. [inaudible]
Speaker Change: and we're in a unique position right now to continue to grow that pipeline and reimbursement supports the procedure as well. There's a lot of things going in our favor even in this environment. And last thing I mentioned is the relationship with IDNs continues to strengthen. We talked about this routinely. We're at a point now where we're being invited to corporate environments where we have the key executives at large IDNs talking to us about long-term strategy, all those things plan to our favor over the course of this year in the future.
Speaker Change: I appreciate that feedback. And then the second one was really on the hand piece side that was really strong in the quarter and I know there was probably a lot of things going on.
Speaker Change: Some deferral of cases in Q4, and that's indifference to figure this out, but how many of those may have got pushed in Q4 to Q1? Or are there other dynamics underlying that are just, you know, even stronger in terms of maybe market share and certain geography and political things?
Speaker Change: Bob Bush, you know, initially anticipated again, give us a storm, the time-to-use number was
Yes, that's bad, this is Kevin, so...
Speaker Change: You're correct. We did see some impacts from deferrals in the fourth quarter, but those were largely offset by the sailing impact that still lingered into January and February . So I would characterize that dynamic as net neutral for procedures in Q1, which really means the Q1 procedures. [inaudible]
Speaker Change: or just driven by the strength of the business as opposed to backlog coming into key one which was offset by the continued weakness in the January and lingering in the February . [inaudible]
Thank you.
Thank you. One moment for our next question.
Speaker Change: Our next question will come from the line of Craig Bijou from Bank of America Securities. Your line is open.
Craig Bidrew: Good morning guys, thanks for taking the questions and congrats on the strong start to the year. We wanted to follow up on Matt's question on hand pieces and maybe ask in a slightly different way but...
Speaker Change: I know you called out barges as kind of getting back to normal and I wanted to see if maybe you could provide a little bit more color on what the procedure volume. [inaudible]
Speaker Change: Growth was in March, at least directly versus some of the other quarters and maybe how we should think about utilization in March and how that carries forward for the rest of the year.
For more information visit www.fema.gov
Speaker Change: Yeah, I'll start, maybe I'll let Shams come in, but we were really pleased with kind of returned to normalcy in March coming out of the January and February lingering impacts from saline. Moving forward, our guidance in Q2 and Q3, it assume very similar utilization rates. [inaudible]
Speaker Change: to the first quarter, and then you get into the fourth quarter and you're looking at utilization that would be up over 20%, which would imply a full year.
Speaker Change: 10% utilization growth, which we think is fairly healthy, keeping in mind how many new accounts that we're adding to the business.
Speaker Change: in 2025, which we've consistently said is that it's a natural headwind to utilization and it takes about two to three quarters, excuse me, for our accounts to get up to the corporate average but we're really pleased directionally with where utilization is trending.
Speaker Change: I would just add, Matt, sorry, Craig, it's Sham, that we continue to have great insight into daily procedures, a number of new surgeons, surgeon retention rates.
Speaker Change: and exiting March and to April , we were on track to where we want to be as far as launching new accounts and hitting the search and retention rates and adding new search ins.
Speaker Change: At the rate we need to be to hit our forecast, sailing is behind us, I think March is the first month where we felt confident that the dynamic that's now gone and we're now back in full swing as far as the early procedure rates.
Speaker Change: Great, that's helpful and I know you guys have talked a lot on this call about the
Multi-system orders for the IDNs, and you have...
Speaker Change: I've been talking about it for a number of years now and it seems like maybe there was an acceleration and you know I know you guys I heard you guys mention Hydros as one of the drivers but
Speaker Change: I mean, anything else that's changed there, it's great to see, and I'm just curious as to what those discussions look like now versus where you guys were a year ago and how should we think about that impact? Thanks.
Go in years going forward. [inaudible]
Speaker Change: Yeah, I'll just say I'm I'll start by just just really mentioning the kind of kind of [inaudible]
Edward, Edward. [inaudible]
Speaker Change: The current environment has adjusted or changed to country or question simply because hospital systems now can look back at existing programs they've had for years and versus it being kind of a vision of establishing an occupation program that can go back and look at the data and say, is this working? [inaudible]
Speaker Change: and so the fact that they can now look at their own hospitals, they can see what the reimbursement looks like. They can see how patient volumes are growing at the hospital. They can see that they're adding new surgeons because of this technology. All of those reasons are the reasons why they want to now have more strategic or corporate conversations. I will tell you that we've been having IDN purchases all along. This is now just becoming more of a partnership versus just taking one hospital at a time through the IDN. So the ability now to have those conversations will serve us. We are.
Speaker Change: That's really well over the coming years. That's the part I think we have with IDNs, you know, whether it's a bulk buy or one purchase at a time, it's more about the corporate level supporting their local hospitals and that's kind of the evolution of the conversation that's happened.
Great. Thanks, guys.
Thanks, Rick.
Thank you, one moment for an ex-question.
Speaker Change: Our next question will come from Patrick Wood from Morgan Center. The line is open.
Speaker Change: Beautiful, thanks guys. I'd love to start actually this time on OUS, obviously anytime nice supported technology, being the most stingy organization of all time, it always gets a lot of attention that way.
Speaker Change: You know, great, great result there. I'm really curious how you're thinking about...
resourcing OUS, growing there, because obviously it's a massive...
Speaker Change: Opportunity, and it's an incredibly early stage. So we're trying to work out, you know, there's a lot's going in the US as well, but how do you balance those, how should we think about the OUS ramp over the next three, five years, whatever? We're going to have fun.
Speaker Change: Patrick, thanks for the question. You know, we are very excited about the international opportunity globally.
Speaker Change: The one thing that we've spoken about in the past and all this reiterate is we want to do things the right way and when we go to a market, we want to make sure we win in a big way. And we're early as a company, we've got a lot of opportunity and we want to be very disciplined and making sure that when we go to the country that all the boxes are checked, there's a lot of boxes to be checked having winning technology in many of these markets. So we made the decision via a lot of efforts we've made on getting good reimbursement, good support from NICE, as you mentioned, to focus on the UK.
Speaker Change: Okay, as the next big market of ours, we've now continued to build the team there, and we have, we've used some great growth. We've, we also believe the formula we're using in the US can be reproducible. And so we're following a very similar structure and growth format that we had in the US. We've now taken that to the UK.
Speaker Change: The next market we'll go through is Japan and outside of those three markets we continue to do a lot of market development activities. We've got interest from well over 20 countries, significantly more than 20 countries that we decided not to go into right now because we want to support the markets we're in and win those markets, but that does serve very well for us in the years to come. [inaudible]
Speaker Change: Beautiful, and then very quickly as a follow-up, the US side of things. We're obviously moving to, you know, permanent code. We've got, you know, there were some noise in the corner around the physician fee. Any sort of updated to what's on how you're thinking about the the pro fee and then the catch change on the code side of things for this year. [inaudible]
Speaker Change: Yes, it's a rough process for the category one is complete, so the proposed ruling we expect to come up this summer.
We feel very good about...
Speaker Change: Are the physician payment because this procedure is very similar to other receptive procedures so...
Speaker Change: We anticipate this to be similar to other receptive procedures. What's important is this does not impact APC level 6, which is ultimately the ROIA to the hospital, that remains at 9200.
Love it. Thanks so much.
Thank you. One moment for next question.
Speaker Change: Next question, we'll confine Richard Newitter from Truace, your line is open.
Hi, thanks for taking me questions.
Speaker Change: I just want to talk about the concept of high volume, low volume.
or at low to mid-volume hospitals. You mentioned, I think, uh...
Speaker Change: that the proportion going into low to mid was about 50% and going into high volume was about 50%.
Can you just...
Speaker Change: Remind us what that ratio has looked like over the last one to two years so we can get a sense for whether you're at a point where maybe you're more reliant on...
Speaker Change: Medium to low volume accounts to drive higher utilization, and if that's a consideration that we should be thinking about, is it harder to get incremental utilization per account from here on or just kind of steady she goes is what you've been doing?
Speaker Change: Hey, Richard Shiblaq, I think we think very differently when you think about utilization and when you think about the size of the hospital. The one thing we've proven up to this point is if a hospital has a low or medium volume, BPH volume,
Speaker Change: When they acquire a co-oblation technology, we've seen significant increases in utilization in fact and in many cases turning them into high volume BPH hospitals.
Speaker Change: And so we're going to talk more about this tomorrow on our investor day, but this is something that actually has been very supportive for our hospitals to show they can move surgeons, they can move market share. This is what, you know, when you look back historically over the last 25 years and you see the most successful robotic surgery companies, this is what they've done.
Speaker Change: The most successful company has been able to move market share by hospitals establishing robotic programs.
Speaker Change: This has been a great success of ours and we have over 2,000 hospitals in a low and medium volume BPH hospitals that we're just getting started in.
Speaker Change: As far as your question on the shift, you used to be about 70% of our hospitals were high volume hospitals, and now we are starting to see a shift down in that because of the addition of low and medium volume hospitals. So, very exciting times for us and we continue to validate that this technology is adopted by all.
Dr. Bacso, Michael Kratky,
Speaker Change: Great, and maybe just for Kevin on the tariff, a follow up here, is the message that, you know, you could potentially see up to 150 basis point gross margin headwind. [inaudible]
Obviously, if...
Speaker Change: Everything stays the way it is right now, but you offset that in the P&L, such further down the P&L, such that.
Speaker Change: You know, the message is you absorb, or tariff headwind, should it approach 150 basis points, or there is any potential 150 basis points risk to your reiterated ebit.guide?
Speaker Change: Yeah, I'll go through that written in detail here. So the impact we discussed today, it does assume that the terrified for imports from China.
stay at the 145% level.
Speaker Change: and this expense of 5 million Mac exposure would be weighted towards the second half of the year. Obviously, it's a very dynamic situation. I mean, we heard recent commentary yesterday that would be positive around this rate. But specific to your question, the $5 million impact.
Speaker Change: would be 150 basis point reduction to our 64.5% margin guidance.
Yeah.
Nothing else changed to our moving forward.
Speaker Change: with that said, and to the second part of your question, even with this head when we are affirming our EBITDA guidance.
If margins trend...
Speaker Change: even towards the low end. The reason being is we have identified offsets.
Speaker Change: and our operating expenses to mitigate a $5 million impact. So margins would be reduced, but the overall profitability of the company.
Speaker Change: would be unchanged. At the end of the day, $5 million impact is approximately 2% of our operating expenses. And we think as a management team, we could go find that to support continued EBITDA.
Speaker Change: and then lastly, I think it's important, we don't believe the current tariff environment would material impact our pathway to profitability in the future here. We're working on a lot of things as we head into 26.
Okay, thank you.
Dr. Bacso, Dr. Bacso, Michael Kratky,
Thank you. One moment for a nice question.
The End
Speaker Change: Next question on the line of Brandon Vazquez from William Blair, your line is open.
Brandon Vasquez: Hi everyone, thanks for taking the question. I wanted to go back to the IDN's first.
Brandon Vasquez: and maybe ask a question in a slightly different way. I'm kind of curious, what does-
Brandon Vasquez: The utilization in these accounts look like it and part of asking because it sounds like this is an effort that you historically used to go in, find one KOL, put yourself in the account and expand from there, but now you're having from the top, the corporate organization push this, is there a difference in the rate of utilization, is there a difference in the peak utilization or the just rob number of procedures that are coming out of these accounts, curious on any dynamics you can talk about there. [inaudible]
Brandon Vasquez: Hey Brandon, Sham, so I think that this is something that over time we'll be able to hopefully give a lot more detail on but I'll tell you that initially it's still driven the same way and I'll tell you why we think that there could be favorability to it in the future. Right now it's driven by surgeons, surgeons drive this technology, they get excited about it and they come in from the physician office level finding patients and bringing them to the hospital.
Brandon Vasquez: and patients find those surgeons that are doing a population. However, we do have IDNs.
that have patient navigation programs. [inaudible]
Brandon Vasquez: These are employees of the hospital network that work to educate the referring physicians on new technologies the hospitals offer, and that helps to drive this funnel of patients to drive more patients for our population.
Brandon Vasquez: We have ideas currently that are very interested in and and Procept educating those nurse navigators, educating that pathway and those are opportunities that exist from the from the corporate level. I think that's an example of something I think can help utilization will.
Brandon Vasquez: There are other areas that we're talking to strategically also but at the end of the day you know these decisions are certain decisions but anything that ideas can do to educate and grave awareness is always helpful for your organization.
Speaker Change: Okay, and as maybe as a follow-up to that I'll throw two here because one's a follow-up to that question is...
Speaker Change: Basically maybe the more blunt way to ask the question I was trying to ask is [inaudible]
Speaker Change: It looks like the goal of robotics often, Sham, from your experience and intuitive, and then now what you want to do in Procept is standardize, right? You want to standardize to a certain care pathway. Do the IDN, the increasing adoption of IDNs asking more bluntly, may give you a clearer pathway to standardizing on Procept?
Speaker Change: and then separate unrelated question. Now that you guys have a second randomized control trial with Water 3, can you just spend a couple of minutes on what's the game plan here in terms of using this potentially for societies, change guidelines, and then maybe open some new international
Reza Zadno: Yeah, I'll take the Evaluation question I'll pass over to Reza I'll take the Evaluation question I'll pass over to you
Speaker Change: So, you know, I think that, you know, what we're seeing on the IDN level is absolutely, you know, an interest in doing more on the utilization front. So, you know, I, I'll tell you that, you know, tomorrow we'll talk more about it at our investor day. But these are all things that, that I believe ultimately will help, the operation become the standard of care, they do want to standardize.
Speaker Change: At the end of the day, these are certain decisions, but anything that the hospitals can do to help with training, to help with education is going to help standardize the procedure. And those are the conversations we're having right now. We're making a big investment in the strategic accounts team to be able to support the hospitals. [inaudible]
Speaker Change: and that is definitely something that's on their mind is how do they get more population procedures in our hospitals.
Speaker Change: Related to your second part of the question, Water 3 Data, where presented a few weeks ago from Madrid.
Speaker Change: as early as it is, but the initial response has been very positive. This was a randomized study against
Speaker Change: and multi-center multi-country network, shown with the 0% transfusion with...
Similar efficacy results, what better safety outcomes.
Speaker Change: So this will definitely, will be in the future, get into the international guidelines and this further strengthens our clinical benefit, the clinical benefit is our population. So definitely as you said and it will get the goal is to get into the guidelines.
And I'll be right back. I'll be right back. I'll be right back.
Thank you. One moment for next question.
Speaker Change: Our next question, conflion of Josh Jennings from TD Callin, United is Open.
Hi, good morning. Thanks for taking the questions.
Josh Jennings: I was hoping to just ask about PRCT-001-002, those results coming out. I think you'll have 12 month results on 002.
and maybe 001 as well. But...
Josh Jennings: Help us understand the plan just in terms of filing a water for is going to generate level one evidence, but in front of level one evidence will proceed move forward with filing for a general use tools claim for localized prostate cancer.
Reza Zadno: Yes, thanks, Josh. This is Reza Zad. We are very excited about the event tomorrow. I think more importantly is
Speaker Change: Hopefully tomorrow we will answer some questions about the whispered cancer. Can we treat the legion in different locations of the prostate? Can we treat in the peripheral zone or the transitional zone?
Speaker Change: and why is this randomized against Prospect? I mean, so tomorrow data, 70 patients, BRC, DZ0, 1,002, with three months and six months data on 50 patients could be presented.
Yes.
Speaker Change: We can potentially obtain a tool claim, but we know ultimately in order to our goal is to expand the market of trusted cancer.
Thank you. Bye-bye.
Thank you. One moment for next question.
Speaker Change: The next question will come from the line of Chris Pasquale from the Front Research, your line is open.
Chris Pascual: Thanks. What do you follow up on tomorrow, first and then follow up on Reimbursement? You talked to previously about some potential investment options you were evaluating.
Chris Pascual: to try and speed up the timeline for water for, not to get ahead of ourselves and what we're going to see tomorrow, but what are your latest thoughts on the enrollment timeline for that study?
Michael Kratky, Michael Kratky,
Chris Pascual: Yeah, well we can provide a lot more detail tomorrow, but we've been consistent in-
Chris Pascual: stating that, you know, kind of unencumbered, you know, this would be any approximately a 24-month enrollment. I think we think a good result is to try and, you know, shorten that by six months, and that's the additional investments we're talking about, but we're going to give an update tomorrow kind of on timeline, but you should think of this as an 18 to 24-month enrollment. [inaudible]
Speaker Change: Okay, that's helpful. And then could you just talk about the practical implications of the LCD changes? And what you think that does to your market opportunity within the geographies represented by First Coast and Novitas? Yes.
For more information visit www.fema.gov
Speaker Change: So, as I mentioned, the preferred remarks, removing some of those obstacles, definitely streamlines the patient pre-workup, the age removal, the minimum void, impacting patients with retention.
Speaker Change: and the measurement of the prostate side. These are all the obstacles that are removed and definitely the age is now removed on all max. But the other two we believe this could be a precedent for the other max to remove that the way they have to measure the prostate.
using Transrectal Autosome. All of this will facilitate that.
using the technology and patience.
Chris, I just add that I'm
Speaker Change: Not sure everybody understands that not every year all just owns the transfer of the altar stand in their office setting.
Speaker Change: and so that their ability to use trans up ultrasound is not in question but their ability to have access to it can be a challenge. So that's a big one and then rather touch on the other ones. This is the more, these are all smaller wins in a sense of like one at a time but when you add all these small wins together becomes a big win because then these...
Speaker Change: These surgeons don't think of this as a work-up nightmare, so to speak, it becomes way easier scheduled patients.
That's helpful, thanks.
Thank you. A moment for an excursion.
Speaker Change: For next question, we'll come flying to Mike Kratky from Larry Partners, United is Open.
Dr. Bacso, Michael Kratky,
Hi everyone, thanks for taking our questions.
Speaker Change: Have you seen any shift in the typical prostate size where occupation is being used as physicians get more and more familiar with the system, or as they've incorporated it into their practice broadly, whereas pedrosis started to roll out?
Speaker Change: and then maybe just a follow-up. Can you share any feedback that you hear from your customers on surgeons perceived value proposition of
Speaker Change: Yes, so the distribution curve that we have been showing in the last couple of years remains similar so it's and the majority of their prostate that are treated are below 100 milliliters, so that the distribution curve has not changed.
Shem, they want to talk about the value of privacy. The one of the, you know…
Speaker Change: Big benefits of the population is, you know, you don't always know what size of prostate is going to be when you go into surgery. I think that surgeons are consistently doing their best to gauge what they're dealing with but you get in the operating room and may times they're surprised. [inaudible]
Speaker Change: by what they're dealing with, and the Occuplation Therapy Technology allows you to treat the process of all sizes.
Speaker Change: consistently, efficiently and with consistent outcomes that we just saw, we just saw with the randomized study of Water 3. And so I think what you're going to see now is many surgeons who felt like they needed to refer out large prostate. Many surgeons who felt like they maybe needed to go get trained on a technique for large prostate surgeons that were doing prosthetectomies, et cetera. Those are patients that I believe they now have the data, they now have the support to show consistent results. And so I think we're going to see the results. So I think we're going to see the results. So I think we're going to see the results.
Speaker Change: with Occubation Therapy. We've had this data for a long time. There's over 150 peer review journals, but this Water 3 study continues to validate that the randomized data we're investing in is very consistent across the board. So I think we'll see this continue to be a big benefit for us long term.
Super helpful. Thanks very much.
Thank you. One moment for next question.
Speaker Change: The next question will come flying to Nathan Treybeck from Wells Fargo. The light is open.
Nathan Trebek: Hi, thanks for taking the question. Hey, Kevin, I just wanted to clarify something you said earlier on the ASP. I mean, I think going into the year you expected about three million from system replacements, can you just clarify like the ASP differential between replacements and Greenfield?
Nathan Trebek: Thanks. Yeah, so it's interesting dynamic and it's going to vary based on the age of the system. So for example, we did have one replacement in the first quarter but given the age of that aqua beam system, the pricing wasn't terribly different.
Nathan Trebek: then to New Greenfield account in the quarter, which is why we didn't separately call it out.
Nathan Trebek: and that dynamic, I think, is fair. If your Aqua Beam is, I'll call it 3 plus years old, and then we obviously are offering some type of trade-in discount.
Nathan Trebek: but we haven't been specific on what that is. This is going to vary from customer to customer. It's also why we incorporated a full year system revenue number into guidance to kind of help everyone back into what a replacement could look like.
Okay, that's helpful.
Speaker Change: and then on the prior just deferred procedures, you know, exiting, I think in queue for you at 2000 procedures that were deferred, you talked about some lingering impact in January and February , I guess, where does the deferral stand today? And over what time frame can you recapture these procedures? [inaudible]
Speaker Change: Yeah, it's really difficult to say with absolute certainty. It's at the end of the day the 2000 procedures that 2000 procedure maximum that we felt were deferred in the fourth quarter.
Speaker Change: They're a small part of the 52,500 procedures we're going to do here in 2025, but you know, we would expect these to kind of be coming back throughout the year. I mean BPH is an elective procedure and therefore backlog procedures are probably just likely to filter any even later throughout the year.
Thank you.
Thanks. Thank you. One moment for next question.
Speaker Change: The next question will come from Michael Sarkone from Jeffries, your line is open.
Good morning all and thanks for taking the questions.
Speaker Change: It's a follow-up on the Capitol equipment environment. Can you maybe give us an update on where you stand in terms of duration of a typical sales cycle these days? It doesn't sound like you're seeing any changes, but we love an update there and then maybe comment on what kind of visibility you have into the funnel?
and many more. Thank you.
Speaker Change: Michael Sham, do you answer your question? No changes as far as the sales cycle, six to nine months continues to be a typical sales cycle. You will see something move faster, you'll see some things go a little bit longer depending on budgetary kind of constraints, but six to nine months is a fair kind of thought as far as when you think about our pipeline and how quickly we can move through. [inaudible] I'm sorry, I'm sorry,
Speaker Change: I apologize, it was a second part of your question. I could take it just kind of visibility into the funnel and I mean specifically we haven't seen any change in conversion rates we haven't seen any change in fallout and it's been very consistent over the last 12 to 24 months.
Speaker Change: Thank you, and then just for the follow-up, maybe just give us an update on the competitive environment in BPH and what you're seeing, you know, where you're taking share, maybe any commentary on what you're, you know, the latest and greatest on the prostate, order, and realization front.
Speaker Change: Yes, so I addressed the PA first, you know, PA has been around for more than 25 years and it's going to done by radiologists. Advocacy is similar to non-resactive but the issue over their mostly undurability and the data show that...
They have about 20% treatment at...
Speaker Change: One year, so these are obvious barriers, so we don't see that as a competition. As far as where we take market share when we ask the question, you know the answer we typically get is definitely we have said in the past it is.
Terb, Greenlight, and photologic process, definitely the integration.
Speaker Change: New technologies that are coming on board what we see mostly they are various form of non-resactive procedures, so this is what we are seeing on the reassactive side we are not aware of anybody.
Speaker Change: coming up with his technology or running a clinical study on the receptive side.
For more information visit www.fema.gov
Great. Thank you.
One moment for next question.
Speaker Change: Our next question will come from the line of Ryan Zimmerman from BTIG, Uline is open.
Good morning. Thanks for taking the questions.
Speaker Change: Just a clarification on the capital sales, Kevin, I think last quarter and correct me if I'm wrong.
Speaker Change: The 210 unit guide was separate, the 95 million specifically was separate from the 3 million replacement.
Speaker Change: And is the three million now included in the 95 million? I just want to be clear because at 210, at 435 apiece, I mean you're coming in at like 91 million and change.
Speaker Change: Yeah, so it's correct, and so the 3 million would be incremental to the 210 to get you to the 95 million dollar system guide.
Speaker Change: But was that the case last quarter, Kevin, because I don't, as I interpreted it, it wasn't. I'd maybe mistaken. Yeah, sorry, same last quarter, but we did not guide a total revenue number, and we just we wanted to clarify that on this call, but nothing has changed.
in terms of our expectations. [inaudible]
Dr. Prada, Dr. Prada, Dr. Prada,
Okay.
Speaker Change: And then, just to be clear, I think this was asked, but again, I apologize, I'm just trying to get some clarification questions. The 2000 procedures that were deferred, you're not assuming or you are assuming that those were fully recouped in the first quarter.
We would suggest that any deferrals from Q4 into Q1
Speaker Change: We're largely offset by the sailing impact that we saw in January and February , so we would consider that impact negligible in the first quarter. And if they were to come back, we feel that they're going to come back throughout the year, not in anyone given quarter. [inaudible]
Okay, very clear. Thank you for the clarification.
Thanks, Ryan.
Speaker Change: Thank you. I'm not showing any further questions at this time. I want to call back over to Reza Zadno, the EO 20 Cruiser marks.
Speaker Change: Yeah, thanks for attending this meeting. Hope to see you tomorrow at our event and see you in the future conferences. Thank you very much. Have a nice day.
Speaker Change: Thank you for your participation today's conference. This does conclude the program, you may now disconnect, everyone have a great day.