Q3 2025 Procept Biorobotics Corp Earnings Call
Speaker #2: Good afternoon and welcome to PROCEPT BioRobotics Corp . Third quarter 2025 Earnings Conference Call . At this time , all participants are in listen only mode .
Speaker #2: 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 .
Speaker #2: I would now like to turn it over to Matt Basco , vice President , Investor Relations for a few introductory comments .
Speaker #3: Good afternoon , and thank you for joining PROCEPT BioRobotics Corp third quarter 2020 earnings conference call . Presenting on today's call are Larry Wood Chief Executive officer and Kevin Waters chief Financial Officer .
Speaker #3: 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 #3: While these forward looking statements are based on management's current expectations and beliefs , these statements are subject to several risks . Uncertainties , assumptions and other factors that could cause results to differ materially from the expectations expressed on this conference call .
Speaker #3: These risks and uncertainties are disclosed in more detail in PROCEPT BioRobotics Corp filings with the Securities and Exchange Commission , all of which are available online at w-w-w .
Speaker #3: Listeners are cautioned not to place undue reliance on these forward looking statements , which speak only as of today's date , November 4th , 2025 .
Speaker #3: Except as required by law , PROCEPT BioRobotics Corp undertakes no obligation to update or revise any forward looking statements to reflect new information , circumstances or unanticipated events that may arise .
Speaker #3: During the call , we'll also reference certain financial measures that are not prepared in accordance in accordance with GAAP . More information about how we use these non-GAAP non-GAAP financial measures , as well as reconciliations of these measures to their nearest GAAP equivalent , are included in our earnings release .
Speaker #3: With that , I'd like to turn the call over to Larry .
Speaker #4: Thanks , Matt . I'm excited to be on the call today to discuss our third quarter results and share some early insights from my first couple of months in the role .
Speaker #4: First , let's talk about the quarter . We demonstrated strong execution and results with total revenue for the third quarter of 2025 of $83.3 million .
Speaker #4: Strength in the quarter was driven primarily by US capital systems shift , which totaled 58 in the quarter . While we have begun to see some large hospital systems work carefully scrutinized , capital spending in light of evolving macroeconomic conditions , we delivered a strong capital quarter .
Speaker #4: Capital pricing has remained stable . And importantly , we continue to maintain solid visibility into our pipeline and remain confident in our ability to finish 2025 .
Speaker #4: On a strong note . On procedures , my handpiece sales were roughly in line with expectations . Procedure utilization is an area we are highly focused on improving , moving forward , and believe it's a key to unlocking long term value .
Speaker #4: As part of this increased focus , we're implementing several organizational changes and launching multiple initiatives aimed at improving our commercial execution . One example is increasing focus on improving our speed of new account launches , while Hydrus launches consistently deliver strong procedure adoption post launch .
Speaker #4: The timing from sale to first procedure is highly variable . The situation presents two challenges . First , it delays the realization of utilization benefits from newly installed systems , and second , hospitals are holding excess .
Speaker #4: Hydrus Handpieces that were purchased at the time of the sale . To address this , we launched an initiative with clear goals and metrics aimed at achieving procedural targets in the shortest possible time .
Speaker #4: After sale . Early results have been highly encouraging , and we plan to expand this program in the fourth quarter and fully implemented in 2026 .
Speaker #4: Reflecting on my first few months , I've had the opportunity to observe procedures and speak with a number of key opinion leaders across the field .
Speaker #4: What I've seen is only deepened my conviction in this opportunity and validated the reasons I chose to join Prosite . When I think about our long term potential , it really starts with the fundamentals .
Speaker #4: BPH is massively undertreated . Many patients fear the side effects of drugs or surgery and avoid therapy altogether . What they don't realize is delaying therapy can significantly affect their quality of life , and even lead to more serious health issues .
Speaker #4: At the same time , many patients are still unfamiliar with aquablation therapy and the life changing benefits it can offer . Our clinical value proposition is strong .
Speaker #4: The Aquablation procedure and the supporting clinical evidence are highly compelling , especially on the outcomes that matter most to patients . I think the team has done an excellent job job driving early adoption and supporting clinical users .
Speaker #4: But if we want to expand our impact , we must do more foundational work to increase therapy awareness and drive patient activation , which is something I have a lot of experience from my time at Edwards .
Speaker #4: This will in part , this will be a core part of our near and mid term commercial strategy . We are also sharpening our focus internationally .
Speaker #4: We see strong opportunities in markets that value transformational therapies and are willing to support access for patients . We will increase investment and organizational support in these regions accordingly .
Speaker #4: Additionally , to support our core initiatives , we've made a number of organizational changes . Pooja Sharma has joined us as Chief Marketing and Strategy Officer .
Speaker #4: She brings deep experience from Edwards Lifesciences , where she led marketing and strategy for the transcatheter heart valve business . Her background in driving category leadership and therapy development is exactly what we needed at this stage .
Speaker #4: Also , Stephen McGill has been promoted to Senior Vice president general manager International and will now report directly to me . Stephen has done an outstanding job leading our international business with added investment and focus .
Speaker #4: I'm excited to have him on the leadership team . This also enables our incoming commercial leader to focus exclusively on North America by organizational change and influx of new talent .
Speaker #4: Can create some short term disruption . My primary responsibility is to ensure that we have the right people and the right objectives to drive long term success .
Speaker #4: Overall , procedure volumes have been solid year to date . However , given the size of the BPH market in the United States , we are still only scratching the surface and have tremendous opportunity to further accelerate procedure growth .
Speaker #4: Looking ahead , Aquablation is a highly differentiated solution for BPH patients . While our current evidence is already strong , we will continue to invest in building a robust clinical foundation and ensuring patients are aware of aquablation therapy .
Speaker #4: We also see longer opportunities beyond BPH . Specifically , we believe Aquablation has the potential to be a compelling therapy for prostate cancer .
Speaker #4: This is an area we are actively studying in the water for clinical trial . High quality evidence generation will be foundational part of our expansion strategy in this space .
Speaker #4: In closing , I'm energized by the opportunity ahead . The leadership team has been incredibly supportive , and we are committed to advancing this therapy for the patients that need it .
Speaker #4: We will build a world class marketing organization to activate patients and accelerate utilization . We will invest meaningfully to expand market awareness . We will accelerate new account launches and drive international growth with a focused , market specific approach .
Speaker #4: With that, I'll hand it over to Kevin to walk through the financials for the quarter. Kevin.
Speaker #3: Thanks , Larry .
Speaker #5: Total revenue for the third quarter of 2025 was $83.3 million , representing growth of 43% compared to the third quarter of 2020 . For US , revenue for the third quarter was $73.9 million , representing growth of 42% compared to the prior year period .
Speaker #5: Turning to U.S. procedures, handpiece and other consumable revenue for the third quarter of 2025 was $44.4 million, representing growth of 50% compared to the third quarter of 2020.
Speaker #5: Four . We also recorded approximately $2.4 million of other consumable revenue in the third quarter of 2025 . In the third quarter , we sold approximately 13,225 Handpieces , reflecting 51% year over year unit growth .
Speaker #5: While we navigated a period of commercial leadership transition , our team continued to deliver solid performance and momentum . Turning to US robot placements .
Speaker #5: We generated total US revenue of $24.7 million , representing system revenue growth of 26% compared to the third quarter of 2020 . For the third quarter , we sold 57 new hydro systems .
Speaker #5: The pricing for our systems average selling price of approximately $435,000 . Additionally , we placed one hydro system under an operating lease model .
Speaker #5: As a result , we exited the third quarter of 2025 with the US installed base of 653 systems , representing an increase of 47% compared to the prior year period .
Speaker #5: Lastly , international revenue in the third quarter of 2025 was $9.4 million , representing growth of 53% compared to the prior year was at an period .
Speaker #5: Moving down the income statement , gross margin for the third quarter of 2025 was 64.8% , representing an increase of 160 basis points year over year .
Speaker #5: The year over year margin expansion was driven primarily by greater organizational effectiveness . Total operating expenses for the third quarter of 2025 amounted to $77.2 million , compared to $59.3 million during the same period in the prior year .
Speaker #5: Net loss was $21.4 million for the third quarter of 2025, compared to $21 million in the same period of the prior year.
Speaker #5: Adjusted EBITDA was a loss of $7.4 million , compared to a loss of $12.4 million in the third quarter of 2020 . For our cash , cash equivalents and restricted cash balances as of September 30th were approximately $297 million .
Speaker #5: Moving to our 2025 financial guidance . We continue to expect full year 2025 total revenue to be approximately $325.5 million , representing growth of approximately 45% compared to 2020 .
Speaker #5: We now expect to sell approximately 213 new robotic systems in the United States in 2025. As a result, we anticipate system sales in the fourth quarter to total approximately 65 systems.
Speaker #5: Turning to us , Handpieces . For the full year , we now expect sales of approximately 52,000 Handpieces , representing a 61% increase in unit volume compared to 2024 .
Speaker #5: The reduction in fourth quarter handpiece sales guidance reflects modest headwinds related to the optimization of field inventory resulting from the variable launch timing of recent Hydrus placements .
Speaker #5: We are maintaining handpiece average selling prices to be approximately $3,200 and other consumable revenue expectations to be approximately $9.5 million for the full year .
Speaker #5: Additionally , we expect US service and other revenue to now be approximately $17.5 million for the full year . Lastly , on international revenue , given strong positive momentum , we now expect full year international revenue to be approximately $37.5 million , representing annual growth of 56% .
Speaker #5: Turning to gross margins , we now expect full year 2025 gross margin to be in the range of 64 to 64.5% . This would imply a fourth quarter gross margin of approximately 63% , which includes approximately $2 million of tariff expense .
Speaker #5: Turning to operating expenses , we continue to expect full year 2025 operating expenses to total $302 million , representing a 29% increase compared to 2024 .
Speaker #5: After considering all relevant factors , we continue to expect a full year 2025 adjusted EBITDA loss of approximately $35 million . I would now like to pass it back to Larry for closing comments .
Speaker #4: Thanks , Kevin . Before we open the line for questions , I'd like to take a moment to . Provide perspective on fiscal 2026 .
Speaker #4: To give investors early visibility into how we are approaching the year ahead for fiscal 2026 . We are currently anticipating total revenue in the range of 410 to $430 million .
Speaker #4: The outlook reflects our current momentum in capital sales , even in an uncertain macro environment , and incorporates our expectation of modest procedural headwinds in the first half of 2026 .
Speaker #4: While we make targeted strategic investments to enhance our commercial capabilities and operational excellence , these initiatives are designed to drive sustained , long term utilization , growth and position us for durable profitability .
Speaker #4: We will continue to invest in our strategic and priorities to drive long term growth , and do not expect these investments to impede our progress toward achieving profitability .
Speaker #4: Lastly, in late February 2026, we plan to host a formal Analyst Day in New York City, where we will outline multi-year revenue guidance and provide updates on our marketing priorities and R&D initiatives.
Speaker #4: Prostate Cancer trial and profitability targets . We look forward to providing a more robust , long term view . With that , we are happy to take questions .
Speaker #4: Operator .
Speaker #2: Thank you . At this time , we will conduct the question and answer session . To ask a question , you will need to press star one one on your telephone and wait for your name to be announced .
Speaker #2: To withdraw your question , please press star one one again . Please stand by while we compile the Q&A roster . Our first question is from Matthew O'Brien from Piper Sandler .
Speaker #2: The line is open .
Speaker #6: Great . Thanks so much for taking the questions . And Larry , hope things are going well here early in your tenure as CEO .
Speaker #6: Would love if either you or Kevin would talk about the capital environment , because that number in the quarter was quite strong , clear acceleration .
Speaker #6: I know some people will worry coming out of Q2 about the capital environment . So , you know , can you just talk about the strength that you saw there , especially in an environment that you say is weakening a little bit ?
Speaker #6: Is it really , you know , hydros that's that's starting to see an inflection or , you know , maybe build some of the backlog , even further , maybe just talk a little bit more about what you're seeing there .
Speaker #6: And then I do have a follow up .
Speaker #5: Yeah . Maybe I'll start . Matt , this is Kevin . Appreciate your question . So as you observed , we're really pleased with the capital team's performance in the third quarter .
Speaker #5: I think if you recall , in the second quarter , we said that we had some variability in timing , particularly with some of our partners , and that still continues to be the case .
Speaker #5: So when , you know , we we highlight perhaps some future weakness in capital . It's really more around timing and capital allocation with our customers as opposed to any worsening of the macro environment .
Speaker #5: And the team executed very well in the third quarter . And we feel good about that momentum heading into the fourth quarter , where we're expecting somewhere in the kind of mid 60 range of systems , but feel good about the team and the capital environment and performance .
Speaker #5: .
Speaker #6: Got it . Thanks for that , Kevin . And then Larry , you know , question directly for you . You know , two months on the job now .
Speaker #6: We'd love to hear a little bit more about what you've seen in your seat . Maybe low hanging fruit , you know , some some longer term things that you can focus on and and forgive the long winded question , but you know , the near-term changes on the org side , you know , probably make people a little bit nervous , especially as you're guiding for next year .
Speaker #6: So why the confidence in even providing that 2020 ? Six revenue guidance , which basically brackets where the street's at , you know , can you just talk a little bit about your confidence there ?
Speaker #6: Thanks so much .
Speaker #4: Thanks for the question , Matthew . I will say my first eight weeks have been have been really incredible here . I thoroughly enjoyed getting involved with the management team and digging in , and I've had the chance to spend some time in the field and talk to a number of our of our colleagues .
Speaker #4: And , you know , for those of you who know me from my time at Edwards , you know , I spent 40 years at Edwards and , you know , probably thought I'd I'd never leave .
Speaker #4: And but spending the time on the board with it just felt like such a spectacular opportunity to change medicine again . And my time here , everything is really just validated .
Speaker #4: Spending time with the Kols , seeing procedures , seeing what we can deliver for patients . I think the challenges in front of us are I don't think we've necessarily told our story yet .
Speaker #4: I don't think we've told our story to clinicians , and I certainly don't think we've taken the story to patients . And , you know , I lived a lot of this journey when I was at Edwards .
Speaker #4: You know , we we had a lot of early success with transcatheter heart valves . But then we we sort of hit a little bit of a wall once we got through the early adopters , and we had to do a lot more with therapy , awareness and with patient activation and all of those things .
Speaker #4: And that was one of the big things that , you know , attracted you to come here . Because we get an opportunity to sort of transform medicine again .
Speaker #4: But when you start with the procedure that I think is so highly differentiated , not necessarily . Isn't necessarily respected as such , I think it just creates this enormous opportunity that we can change the practice of medicine .
Speaker #4: And and so I'm super energized by it . You know , we wanted to provide guidance for next year . I know being a new CEO coming in , you know , I'll just be real frank about it .
Speaker #4: There's a lot of people that just assume somebody is going to be overly conservative with the approach and and that creates uncertainty for folks .
Speaker #4: And so we just wanted to give you a range . We feel great about our future . We feel incredibly optimistic about our future .
Speaker #4: We have a lot of initiatives that we've already started , and some of the pilots that we've run , I feel very encouraged by .
Speaker #4: So I'm just really excited about the opportunity , and we look forward to sharing more with you in February . You know , I'll have more time in the role .
Speaker #4: You know , Pooja actually starts tomorrow , so you know , she'll have a little bit of time in the chair to be able to lay out some of her plans , and we're excited to share them with you and give you more long term view .
Speaker #4: In February .
Speaker #2: One moment . While we queue the next question . Our next question is from Brandon Vasquez from William Blair . Brandon , the line is open .
Speaker #7: Hey , everyone . Thanks for taking the question . First , I just wanted to focus a little bit on the quarter , specifically , and some of the updates , and then maybe a follow up on a broader question , but you talked about this dynamic in the quarter of Hydrus placements , seeing a little bit of a slower ramp .
Speaker #7: It sounds like that probably impacted utilization . I have you on my on my initial update of the model here at low single digits , increase in utilization .
Speaker #7: One , is that right ? And then two , just talk about this dynamic . Is this something specific to Hydrus . And then what kind of changes did you guys make that are already showing improvements .
Speaker #7: And how do we think about that utilization number ticking back up to the normal kind of high single low double digit range that you've historically been seeing as you tackle this dynamic ?
Speaker #5: Yeah . Thanks , Brian . Let me take the math part of that equation . And you're correct . So if you look at just pure year over year growth in utilization in the third quarter , it is in the low single digits .
Speaker #5: But frankly , kind of right around our expectations and what our guidance implied heading into the back half of the year . And then you do see utilization in the fourth quarter .
Speaker #5: Guide kind of really step back up to more in line with with where we're at with Q2 and that dynamic of Hydrus . First off , the significant number of hydro systems we've sold in the last two quarters , coupled with an elongated launch timeline has contributed to kind of that low single digit utilization .
Speaker #5: And that's really the initiatives that we're focused on as a company .
Speaker #4: Yeah , I'll just add to that . You know , we just in our natural capital cycle , a lot of our instrument placements happen late in the late in the quarter is when we close those sales .
Speaker #4: And I think that's true of most capital , you know , organizations . And what that means is we don't really get benefit from the units that we sell in that quarter , that benefit comes later .
Speaker #4: But we see a lot of variability in newly placed systems between , you know , the sale and between when they come online and when they start delivering real utilization .
Speaker #4: And that's just a huge opportunity for us to really tighten up . And that's been an area of focus for us . But , you know , I'm committed to really focusing on utilization .
Speaker #4: I mean , we have to deliver on the capital side of things for sure . But increasing utilization , I think , is our number one priority .
Speaker #4: And I think that also fuels future capital . So I see these two things as going hand in hand . And again , I think there's tremendous work that we need to do to drive utilization .
Speaker #4: And again , we have early initiatives on this that we're encouraged by . And we've made organizational changes to try to drive it , and we're going to continue to do that over the next over the next several months .
Speaker #4: But getting systems placed and getting them active and hitting our utilization targets sooner is , is going to be really important to us longer term .
Speaker #7: Okay . And maybe a higher , higher level picture as a follow up . You know , Larry , you had mentioned a little bit that your experience in building the TAVR market , I think you used the phrase if pack , sorry , patient activation and some other learnings .
Speaker #7: And you were talking about moving kind of past the early adopters into the crossing . The chasm here and going into the broad adoption .
Speaker #7: Talk a little bit about in TAVR . What did that take ? And what isn't being done here in Procept ? What do you think within the Procept story , in your experience , needs to be done ?
Speaker #7: It feels like that's kind of the next step , as you had alluded to for for Procept is you've got a great technology , great clinical backing .
Speaker #7: How do you make this a technology for the masses ?
Speaker #4: Yeah , no , it's a great question . I think one of the things that we saw in TAVR is if patients just were referred and they walk into to a surgeon's office and they had aortic stenosis , the surgeon would just recommend surgery because that's the procedure that they can do .
Speaker #4: And frankly , it's a procedure that had a great contribution margin for the hospital . And they were happy to just keep doing that .
Speaker #4: And so when a patient walks in indifferent to the procedure that they're going to get , then the doctor might do what's easiest for them or what's most profitable for them .
Speaker #4: And go down that road . I think bringing the patient's voice into that equation is really important . And I think also , you know , we generate a lot of evidence in the space to show why Carver was a good procedure for these patients .
Speaker #4: And in many cases , why it was a better procedure than surgery . And I think we need to spend more time focused on the evidence with the clinical community .
Speaker #4: So they understand these procedures aren't all created equal . And we can deliver differentiated results for patients . And at the same time , we need patients to be educated on what questions should they be asking their doctor to the degree that things like , you know , I only want to have one procedure , so I want the most complete outcome , you know , there's just a lot of things that we need to do from an educational standpoint .
Speaker #4: But I think it's a complete game changer when a patient walks in and says , you know , I want an ablation procedure , and then the doctor has to , you know , try to change them to another procedure versus a patient just coming in and saying , you know , what do you think I should have , you know , whatever you recommend is what I'll go with .
Speaker #4: And there's just a lot of work there that we have to do both with the medical community and patients. And then I think the other thing is we need to keep focusing on the evidence.
Speaker #4: We need to keep creating the evidence , and we need to keep amplifying that message . So that people feel great about the procedure they're performing .
Speaker #4: They know they can deliver these great outcomes for patients. And I think that's really what our system can do in a very differentiated way.
Speaker #4: And right now , I think the doctor's view , a lot of these procedures is being very similar in terms of outcomes . And I don't think that's representative of what the data reflects .
Speaker #4: But that's on us to tell that story .
Speaker #7: Got it. Thanks a lot, guys.
Speaker #2: Thank you. Our next question is from Richard Newitter from Truist Securities. The line is open.
Speaker #8: Hi . Thanks for taking the questions . I wanted to start off with the 26 outlook . Thank you for providing the high level revenue number .
Speaker #8: I was hoping you could provide . Maybe broad strokes on on some level on the component , there's probably a lot of ways you can get to that number .
Speaker #8: So maybe whether it's commenting relative to where you see consensus , you know , capital procedures , is there anything that needs to be kind of moved around or you kind of feel pretty good with the some of the components as they are ?
Speaker #8: And then also , if you could just talk about you mentioned the first half next year procedure , I think you had said procedures will be or utilization will be a little challenged .
Speaker #8: That why is that .
Speaker #5: Yeah . Right . So there's a lot of puts and takes to the model . So I appreciate the question . And I'll start by saying you know we plan to provide a lot of color .
Speaker #5: Obviously in February when we introduced guidance , you know , and I don't think there was anything out there we see modeling that is grossly misrepresented at this time .
Speaker #5: And our guidance essentially brackets where consensus stands today . I think the one thing I will say to maybe help frame is just with the international business , you know , you could that's somewhere in the 45 to $50 million range .
Speaker #5: Then you could kind of work , work the model backwards from there . But at this time we're not going to get into the different components .
Speaker #5: We want to finish the year . We're focused on driving procedures in the business . In the fourth quarter , and we'll provide an update in February .
Speaker #4: Yeah , okay . I'll just add as we as we you know , we mentioned that there could be some headwinds in the first half .
Speaker #4: You know, we're not, you know, we don't want to be blind to the fact that we've made a lot of organizational changes.
Speaker #4: But I'm really committed to putting the right long term organization in place that's going to drive our long term growth and our long term future .
Speaker #4: And I appreciate that . That's a transitional period . And , you know , we may see a little bit of headwind from that .
Speaker #4: But I remain super confident in the team and everything that I've seen . Everybody's on board . Everybody's committed to making these changes and driving the business , and we all think we're going in the right direction .
Speaker #4: But you know , we just want to be respectful of of that . It is a lot of change for a lot of people in a short period of time .
Speaker #4: But that's all reflected in our guidance . And we're very comfortable with the guidance that we provided . And obviously we're going to try to drive the business , you know , as hard as we can .
Speaker #8: Okay . And then maybe if I can just on profitability , look , you two quarters in a row here where you guys are coming in above us or better than , better than the street's thinking , Kevin , can you talk a little bit about where you are in the trajectory to profitability and then , you know , I guess Larry just , you know , should we expect anything in terms of reinvestment that's needed now that you've had some time to look at the business and what should we be thinking about the profit trajectory and all the comments you've provided before this leadership change ?
Speaker #8: If any ? Thanks .
Speaker #4: Yeah , maybe . Maybe I'll start with that . And then I'll let Kevin pile on if there's if I miss anything but , you know , there are going to be strategic investments that we make .
Speaker #4: But to some degree, I think it's going to be redirecting some of our spending to some of the new activities rather than just all incremental spending.
Speaker #4: But at the same time , I don't think anything is going to disrupt our path to profitability . But I will say this just so it's clear to everyone , if there's an investment that I feel we need to make that's going to drive our long term growth , and that delayed by a quarter , we would make that investment .
Speaker #4: You know , I'm really I'm building a house to live in . I'm building a house that I plan on being here for a long time .
Speaker #4: And I'm really looking at how we build this to drive , to drive long term growth and long term value . And , you know , I don't want to become so obsessed with profitability that we miss out on critical investments , even if those don't pay off for 2 or 3 quarters or for four quarters .
Speaker #4: So we're going to make those investments . But I don't think anything disrupts the path that we're on to profitability . And I think , you know , we're going to be responsible spenders of our money , but we're going to invest in the strategic priorities that are going to drive our long term value .
Speaker #8: Thank you .
Speaker #2: Our next question is from Patrick Wood of Morgan Stanley . The line is open .
Speaker #9: Amazing . Thank you so much . I'll keep it to one . But basically around the commercial activities and utilization side of things , I guess .
Speaker #9: Correct me if I'm wrong , but there's basically two componentry here . There's a as soon as the systems placed getting faster off the blocks and getting some utilization right out the gate , but presumably B it's getting eventual total utilization higher .
Speaker #9: You know , you mentioned you were putting some commercial activities in place . I just really curious when you're addressing those two factors , can you give us some some specific flesh on the bones to sort of think about the changes that are being made ?
Speaker #9: Is it is it just who's running what , or is it incentive structure ? Just any more details ? That'd be amazing . Thanks .
Speaker #4: Yeah , thanks for your question . I think , you know , there's there's a few things there . I think one , as I mentioned before , we want to see new systems .
Speaker #4: You know , the metrics that we're is , you know , really from time of sale to hitting our utilization targets . And we want to minimize the amount of out of time , which is highly variable .
Speaker #4: You know , the metrics that we're building in I would say if I'm just real frank about it , that I think sometimes the handoff between our the capital sale team and the utilization team could be enhanced .
Speaker #4: And so that's become a big area of focus . And I think that will improve our utilization out of the gate . And that's not just the time to first procedures , but the time to doing a number of procedures that we would consider to assist them to be fully launched .
Speaker #4: I think the other thing is we've looked at our organization structure to say , how do we best utilize our field resources ? And I think there's a recognition that it's more than just being in cases , you know , we have a lot of our field team that spends time in cases and they support positions , and it's an important part of what we do because we want to make sure every patient has a spectacular outcome .
Speaker #4: But there's more to the role than that . And we need to be building a market and driving the cases and spending time in the office , spending time with Referrers and doing all the other work to make sure people are up to date with the latest evidence and those sorts of things so that we're the preferred procedure for BPH .
Speaker #4: So it is asking our people to do a lot of things differently than what they've done historically . But I think that's what it's going to take .
Speaker #4: If we're going to drive and improve our utilization over time and again , it's I don't want to keep referring back to it , but this is very much the transition that we went through at Edwards in the All we did was go and support cases , and it was a if you build it , they will come .
Speaker #4: If we're going to drive and improve our utilization over time and again , it's I don't want to keep referring back to it , but this is very much the transition that we went through at Edwards in the All we did was go and support cases , and it was beginning .
Speaker #4: Then you reach an inflection point where you have to start getting to the doctors that do multiple procedures or aren't those necessarily early adopters .
Speaker #4: And eventually we're going to have to get to those entrenched positions who are very comfortable doing what they're doing , and maybe shy away from new technology .
Speaker #4: But each one of those tranches of takes a different mindset sort of and a different interaction with the customer . And I think we're just moving to the next phase of it .
Speaker #4: just entering in the next phase and and it's just going to require us to do different things than what we've done historically .
Speaker #2: next question is from Brian Zimmermann , Btig . The line is open .
Speaker #10: Good afternoon . Thanks for taking our questions . Nice to speak with everyone , Larry . The utilization talk is music to my ears .
Speaker #10: I appreciate you harping on that one . One of the questions I have , though is , you know , there are some new PFS rates that just came out and you guys got a category one code .
Speaker #10: You know , it's down in line with kind of the other procedures , about 550 , if I'm not mistaken , on on five on the code .
Speaker #10: But my question is just , you know , in light of that , how do you think that impacts utilization ? And , you know , what underpins your confidence on procedure adoption , given those dynamics , especially for 26 ?
Speaker #4: Yeah . Thanks for your question , Ryan . Honestly , I , I think the the fees came in about what we expected them to I think everything's in line .
Speaker #4: But that's really the smaller part of the economics . I mean , the procedural reimbursement is a much larger part of that . And , you know , we're still waiting to see where that falls .
Speaker #4: But we remain cautiously optimistic that that's going to land in a solid place . But I think the other thing , too , is economics are important .
Speaker #4: When you know , technology is all viewed as homogeneous . I think when technology is highly differentiated , you know , I don't know that people are going to pick better economics over a better procedure .
Speaker #4: And , you know , for those of you who you know , I know several of you followed Edwards in the early days of TAVR .
Speaker #4: I remember there was a lot of discussions with the contribution margin from open heart surgery . Is is probably more than double the contribution margin from doing a tavern .
Speaker #4: And there was a lot of people that thought that was going to be a massive headwind . And we've seen how that played out .
Speaker #4: We had a highly differentiated technology, and it became less about the contribution margin. It became more about the procedure, the efficiency of the procedure, and the outcomes that we were driving for patients.
Speaker #4: So I think we need to make sure that people understand how differentiated our procedure is . But I think the economics behind our procedure certainly support the improved utilization and increased utilization that we expect to drive .
Speaker #10: Okay , I got a lot of other questions . I'm going to just stick with one more and then I'll the follow save it for up for you guys .
Speaker #10: But you know , as you think about guidance , Larry , I mean , you know , the company has had a philosophy around guidance .
Speaker #10: I think , you know , the beats have been fairly , you know , formulaic relative to maybe expectations or , you know , kind of what the guidance has been .
Speaker #10: How do you have a different view on this in terms of how you're approaching . You know , you talked about obviously your thought process for the 26 guide , but I guess , you know , more in the context of how you think about it relative to , you know , the expectations or how you perform , or maybe what your internal guidance is , etc.
Speaker #10: . Just curious if you want to speak to that .
Speaker #4: Yeah , I don't know that I can give you a very satisfying answer . To be frank about it . It . I think , you know , my approach to guidance is we need to create a range that we're going to achieve .
Speaker #4: And I think we need to be , you know , accurate about it . And I think we need to have , you know , upside potential .
Speaker #4: But we also need to , you know , reflect realities and and not everything may go exactly like we want . But to the degree , you know , that there's expectations out there , I'm not probably a big believer in moving guidance around in relation to expectations .
Speaker #4: I'm more a believer in driving the execution of the company and putting out good guidance and achieving or exceeding our guidance through , you know , improved execution .
Speaker #4: So that's kind of where I'm going to land on things . And and we'll go . But , you know , I think it'd be unrealistic to think that I know everything about the business .
Speaker #4: You know , obviously Kevin and Matt have been here a long time , and I rely heavily on them . I'm in my eighth week and I suspect when we get to February , we could probably have a lot more fulsome discussions around guidance and how we see the long term .
Speaker #4: And maybe some of the models that we have .
Speaker #10: Understood . Thank you .
Speaker #2: Our next question is from Pasqua , Nephron Research . The line is open .
Speaker #11: Thanks , Larry . This is a market where you have a lot of patients on the sidelines deferring care . You talked need to educate those patients .
Speaker #11: You talked about the company not really having told its story yet . I put all that together and it sounds like an argument for an investment in DTC advertising , which some other companies in the sector have spent a lot of money on in recent years .
Speaker #11: Is that something that you're contemplating? And maybe talk about how you balance that drive toward profitability with some spending priorities or some areas where the company may not have been investing enough historically?
Speaker #4: Thanks , Chris . Well , I think there's a lot of there's a lot of different channels that you can use . And obviously , if we wanted to do a Super Bowl commercial that gets very expensive , but I don't think you have to do that to go deliver your
Speaker #4: to patients . I about the think , you know , there's there's social media , there's a lot of other things that we can do that are pretty cost effective ways to do things .
Speaker #4: And we did a lot of these things at Edwards . So I think these are all things that we're going to be we're going to be focused on .
Speaker #4: But we do have to take our message to the patients , and we do have to get that out there to them so that they understand .
Speaker #4: I think one of the other things , you know , and I know you followed Edwards , Chris , but there were a lot of patients that just believed that aortic stenosis was just all about symptoms , tolerance .
Speaker #4: And they there was not a an understanding of the damage that was being done while they sat in that symptomatic phase until it became intolerable .
Speaker #4: I think the same is true of BPH . I think a lot of patients are sitting on the sidelines and they're just saying , well , it's just about whether I can tolerate these symptoms or not .
Speaker #4: But there's not a good understanding of the damage that they're doing to the bladder and the long term complications that can lead to that point , to a need for earlier therapy .
Speaker #4: And so , again , I don't think any work has been done in that area to really tell that story or make that clear to patients .
Speaker #4: I think it's all just been focused purely on this procedure versus that procedure . And a lot of early data . So when I say we got to tell our story , it's not just to the patients .
Speaker #4: Some of it's to the clinicians , but there is going to be a direct to patient element of this that we will be investing in .
Speaker #4: But again , I don't think it fundamentally changes our path to profitability . I think that remains intact . And , you know , we'll just have to make responsible investments along the way .
Speaker #11: That's helpful . And I just wanted to double click on the comment about hospitals scrutinizing purchases more closely . You guys had a strong quarter for capital .
Speaker #11: Most of the other companies that get asked about this topic routinely have also said , look , things remain pretty healthy . So is there something new that you're seeing that you wanted to call out and really flag here ?
Speaker #11: Because it could impact things going forward ? Or are you just alluding to the fact that , look , it's been a tough a macro perspective in general , and you're continuing to execute despite that ?
Speaker #11: Because it could impact things going forward ? Or are you just alluding to the fact that , look , it's been a tough year from
Speaker #5: Yeah .
Speaker #4: the I And we continue to expect that to happen . It just seems like there's a few more steps being added to the process , and things have just been moving a little slower .
Speaker #4: purchasing process is taking longer . I think there were there were there were systems that we expected to close . For example , in Q2 , they just got pushed into Q3 just because it just seemed like a lot of systems have put additional steps in place , or they've expressed just some macro concerns and and it's just caused things to be delayed .
Speaker #4: I think we just wanted to be transparent about that .
Speaker #11: That's helpful . Thank you .
Speaker #2: Thank you . The next question is from Suraj Kalia from Oppenheimer and Company .
Speaker #12: Larry , congrats on your new role . It's a pleasure to be working with you again . Hopefully you can hear me . All right .
Speaker #4: I can . .
Speaker #12: Perfect . So Larry , totally get your point about TAVR . You know , the parallels there . If I could just expand on Chris's earlier question , Larry .
Speaker #12: So TAVR was a convincing solution for a high acuity condition . You know , and we saw rapid share shifts , right from Savr , specifically , as you look at BPH , do you think and as you lay out the long term plan , the focus is specifically going to be on pulling in de novo patients , whether through DTC or otherwise , or you envision this more in terms of share gains from Terp nucleation .
Speaker #12: You know , what have you .
Speaker #4: Yeah . Thanks for your question . And it's good to hear from you . It's nice to hear friendly voices . The I think the biggest opportunity we have is getting people off the sidelines .
Speaker #4: And I think even when I back in cardiac surgery , there were a lot of patients that viewed the cure as worse than the disease .
Speaker #4: And so , so people would avoid having open heart surgery , even even though they had a life threatening condition that was damaging their quality of life .
Speaker #4: And I think we see that in the BPH space as well . You have people who , you know , they're so worried about the surgery and its impact on potentially leading to incontinence or potentially leading to sexual dysfunction .
Speaker #4: So they'd rather live with their symptoms than than have them cured . And I think what we need to be able to to show people through our evidence is our incontinence rates are incredibly low , almost zero .
Speaker #4: And our sexual dysfunction rates are also incredibly low . And so you can correct your problem and actually markedly improve your quality of life .
Speaker #4: So the people suffering on the sidelines are by far and away the biggest opportunity . As we grow the market , we want to absolutely make sure we're getting our fair share .
Speaker #4: But to the degree that we can expand the market and that we can grow the market , that's more valuable to me than trying to move a SharePoint from Tierp over to over to Aquablation .
Speaker #12: Got it . And for my follow up , Larry , obviously BPH is a lot more fragmented , right ? Versus severe symptomatic as how should we think about or what is your view in terms of the price elasticity of demand , i.e. , you know , should we think about the same approach where with the sapien and Sapien three ultra , you know , you'll adopted in terms of premium pricing versus rest of the market for Aquablation also or you'll think there would be a more flexible approach given a changing price elasticity of demand and BPH and a fragmented market .
Speaker #12: Thank you for taking my questions and congrats again .
Speaker #4: Well , to the degree that you want to draw parallels with , with , you know , Sapien , I think I think I waited 15 years before I did a price increase .
Speaker #4: So I don't think price increases was a huge part of our of our development strategy . And I don't know that price increases are going to be a huge part of our strategy here , either .
Speaker #4: You know , it's funny when people say , you know , the aortic stenosis market was not very fragmented . I think that's a view today that was not a view .
Speaker #4: 15 , 18 , 20 years ago when we started working on it , I think it was highly fragmented . You looked at high risk people and intermediate risk people , low risk people .
Speaker #4: And now we talked about asymptomatic . So again , it's not a perfect analogy by any means . But I do believe that there are a lot of parallels .
Speaker #4: And I do think the journey is going to be similar . Now to your point , we're going to continue to develop our platform .
Speaker #4: We're going to continue to innovate , and we're going to continue to make sure that we have the best therapy and best technology .
Speaker #4: And it's also backed by the best evidence . And I think those are things that are that are just going to be hallmarks of what we do .
Speaker #4: But it's really going to be about getting patients off the sidelines and improving our utilization rates .
Speaker #2: One moment for the next question . Our next question is from Nathan Trebeck from Wells Fargo . The line is open .
Speaker #13: Hi . Thanks for taking the question . Kevin , I think you disclosed one system placement under an operating lease . Can you talk about why this was done ?
Speaker #13: And do you expect operating leases to become a bigger part of your system ? Placements going forward ? And then just the modeling considerations there .
Speaker #5: Yeah . This was not a indicative or a shift in our business practice , but we did feel we owed an explanation given our installed base went up by 58 .
Speaker #5: And we sold 57 . So this robot is I would characterize it more as a one off where we aren't able to recognize revenue .
Speaker #5: It's going to be paid for over time , but there is no near-term plan to have a significant shift in our business model .
Speaker #5: But as we've said in the past , the number one priority is to get robots installed and to generate procedures and to treat patients .
Speaker #5: And we'll continue to evaluate various alternatives as they make sense for the business .
Speaker #13: Okay . Thanks . And just for my follow up . So , you know , just based on my forecast , I guess over 70% of your installed base next year will be with accounts that have been doing aquablation procedures for over a year .
Speaker #13: So it seems to me that new accounts should be less of a drag on utilization growth . I guess . How does this play out for your utilization outlook next year ?
Speaker #5: Yeah , look , I think a drag is a bit harsh , but I think our focus on launching accounts in a more timely and robust manner , and the focus there should allow those new accounts to come up the curve faster and start contributing more meaningful to utilization sooner .
Speaker #5: In 2026 . So that's point one and then point two . The other area of focus is driving utilization in our existing accounts .
Speaker #5: And as you've pointed out now with the age of our installed base , that's a huge opportunity for us to drive procedure volumes and procedure revenue .
Speaker #5: It's focusing not only on new accounts , but on existing accounts , doing more procedures as well . And we also are working on numerous initiatives to help that metric as well .
Speaker #5: So it's twofold .
Speaker #2: Thank you . While we're bringing our next question to the stage , just in respect for timing , if we ask that , we can limit our Q&A to one question .
Speaker #2: Thank you . Our next question is from Mason Carrico from Stephens Inc. The line is open .
Speaker #5: Hey .
Speaker #14: Thanks for taking the questions here on the variability in timing from system sale to first surgery . Beyond that initial delay , is there any meaningful difference in utilization once fully ramped in the accounts where there was a longer delay prior to the first surgery versus accounts that made the transition quickly , and then second for the accounts that that did have a longer delay , are there any commonalities between those accounts ?
Speaker #14: Fundamentally ? I mean , does that tend to be concentrated in low volume hospitals , high volume hospitals , academic centers , community hospitals ?
Speaker #14: I guess any additional detail you can give there ?
Speaker #4: Yeah . Thanks for the question . I , I think , you know , every account is , you know , is a little bit of a snowflake .
Speaker #4: And so I don't I don't want to speak in gross generality . I will say I don't think we've had the focus organizationally and what happens the day after the system sale .
Speaker #4: And I think now what we've done in our launch pilots is we have everybody focused on what happens day one , and also , you know , a plan not just to get the first case done , but to get , you know , the first 15 cases done , to get the first 20 cases done .
Speaker #4: And really get people in a cadence of doing the cases and , and the routine of it . And so I think it's just a bunch of renewed focus on that and putting the energy behind it so that we drive that I do have a belief that if we get , you know , and this is a belief that , you know , I can't necessarily back it with data , but it's just intuitive to me that if we get a system placed and they immediately start with a high cadence of cases that we're just going to see better utilization out of that system over time than we will if we just sort of , you know , let the game come to us .
Speaker #4: So it really is just about us driving the system and driving the adoption of the procedure much more aggressively than maybe what we've done historically , where we've just kind of let the doctors , you know , use the system as they see fit rather than having a real strategic plan for how we launch each system .
Speaker #14: Got it . Thank you .
Speaker #2: Thank you . Our next question is from Joshua Jennings , TD Cohen . Your line is open .
Speaker #15: Hi . Good afternoon . Thanks for taking the questions . Nice to be on the earnings call with you again , Larry wanted to and the rest of the team wanted to just ask about the concomitant BPH and localized prostate cancer .
Speaker #15: Scenario . And I mean , it is a meaningful I think , case volume opportunity . We've had some docs over the last 12 , 18 months talk about using Aquablation for those patients .
Speaker #15: Has that started to factor into utilization levels at some of some centers or more than some centers ? And is there any opportunity to capture real world data from from those cases if they're being done at a high enough clip ?
Speaker #15: Thanks for taking the question .
Speaker #4: Yeah . Thanks , Josh . And it's good to good to hear from your voice . I , I will say that , you know , we're really focused on BPH opportunity .
Speaker #4: BPH is undertreated and , you know , I don't want to get people to distracted with cancer . Now that being said , I think cancer is just a natural adjacency for us .
Speaker #4: And , you know , I've had time with a number of our colleagues and there's a lot of excitement about how this could transform prostate cancer .
Speaker #4: But we need to complete the trial . Waterfall is running . I think we're going to provide a full update on that in February of next year at the Analyst Day , and we can provide more insights on that .
Speaker #4: And it's a natural adjacency , but I look at something , I look at something that as blocks that build on top of our BPH story , not like , you know , the whole story .
Speaker #4: And so I think everything that is in front of us right now to grow this business and drive it is going to be built around BPH, with prostate cancer being an add-on.
Speaker #15: Understood . Thank you .
Speaker #2: Thank you . Our next question is from Mike Kratky from Leerink Partners . The line is open .
Speaker #16: Hey .
Speaker #13: Guys , this .
Speaker #16: Is Brett on for Mike . Thanks for taking the question and congrats on the quarter . I just want to go back to ASP primarily on the consumable side just where you know , how should we be thinking about , you know , the mix of hydro factoring into that thousand 200 that we've been seeing the last few quarters , particularly in 26 ?
Speaker #16: Is there any point where there's an inflection where , you know , the mix actually gets to a point where you can start to see some growth ?
Speaker #16: There ?
Speaker #5: Yeah . So if you look at our installed base today and when we launched hydros , you know , essentially every system sold that's Q3 of 24 has been the hydro system .
Speaker #5: And we've said hydros does carry the consumable component higher ASP than Aqua . Think somewhere in the low single digits . And our guide in 26 perhaps for your model I'd be relatively conservative on price .
Speaker #5: We will get some upside as the mix shifts more heavily to hydros , but we're also not reliant on price increases to get to the guide that is in the model .
Speaker #5: But naturally , over time you should see low single digit price increases as the mix becomes more hydro .
Speaker #16: Got it ? That's helpful . Thanks guys .
Speaker #2: Our next question is from Michael Sarcone from Jefferies . The line is open .
Speaker #17: Good afternoon and thanks for taking the questions . Maybe one for for Kevin . You talked about for CU . Gross margin guide of around 63% .
Speaker #17: And I think you did call out 2 million from tariffs but just wanted to know if there were any other factors that you would call out in terms of what's impacting the gross margin for for CU ?
Speaker #5: No , you you said it . Our guidance incorporate about $2 million in tariff related expense . That's about 200 basis points alone for Q4 .
Speaker #5: So outside of tariffs , you'd be looking at somewhere in the mid 60s and all to say our margins at this point , you know , they'll continue to trend upwards .
Speaker #5: But at this stage of the company , even at 65% margins , this isn't a headwind or a hindrance to the company being profitable .
Speaker #5: And we feel that even even at these levels , with outsized revenue growth and manageable opex , that path to profitability still remains clear .
Speaker #5: And we're not dependent on margin expansion at this point . To get there . But we're continuing to work at it . Obviously .
Speaker #5: .
Speaker #17: Got it . Thank you .
Speaker #2: Thank you . And thank you . This will be our last question . And this question is from Travis , Steve , from B of a securities .
Speaker #2: The line is open .
Speaker #18: Hi . This is Stephanie Piazzola on for Travis . Thanks for taking the question . Just wanted to ask about the Q4 implied guidance .
Speaker #18: You beat Q3 , but maintained the full year 2025 guide . And you talked about some of the recent trends and changes , but just wanted to follow up on the Q4 guide and the key drivers of that lowered outlook in Q4 .
Speaker #18: Thank you .
Speaker #5: Yeah . So if you look at what our Q2 guide entails compared to previous guidance , we . Essentially have lowered the overall handpieces sold number by about 1000 systems .
Speaker #5: And really , we mentioned destocking . We mentioned inventory optimization and a focus on launching accounts . And it's really that dynamic flushing through via Handpieces sold in the fourth quarter .
Speaker #5: And we do look forward to giving our investors an update on the procedure side of the business . In February 26th , and we believe when you look at that metric , you'll find that there's not there's not really a slowdown in the business .
Speaker #5: But we felt we needed to call out the handpiece dynamic that both Larry and I referred to in our script .
Speaker #4: Yeah , just just to add what Kevin said , you know , and I think this is just a little bit of a , of a business maturity issue as we as we get larger as you know , we haven't really been managing customer inventory by establishing par levels for each customer .
Speaker #4: So we have some customers that are probably not carrying enough inventory. And we certainly never want a customer to not be able to do a case because they don't have adequate inventory.
Speaker #4: But at the same time , we have other customers that are probably carrying too much inventory , and , you know , our initial look at this probably says there's probably more inventory in the field than what's needed .
Speaker #4: And so as we optimize those par levels , we may see a little bit of destocking . But , you know , we're focused on procedure growth .
Speaker #4: And that's what's going to drive the long term health of the business . And you know , I'm expecting that we're going to have , you know , a good procedure quarter in in in Q4 .
Speaker #4: And that's , you know , going to be our focus going to go forward basis .
Speaker #2: Thank you . This concludes the question and answer session . Thank you for your participation in today's conference . This does conclude the program .