PROCEPT BioRobotics (NASDAQ: PRCT) reported a major income improve for the third quarter of 2024, with whole income reaching $58.4 million, marking a 66% year-over-year development. The corporate’s monetary efficiency was bolstered by sturdy demand for its robotic programs, significantly within the U.S. the place the put in base grew by 64%. The launch of the HYDROS Robotic System contributed to this success, regardless of preliminary challenges. PROCEPT additionally introduced a brand new scientific trial for Aquablation remedy and reported an enchancment in web losses, indicating strategic development and a transparent path to profitability.

Key Takeaways

• PROCEPT BioRobotics reported a 66% improve in whole income for Q3 2024, reaching $58.4 million.
• U.S. income accounted for $52.2 million, a 62% improve, with the HYDROS Robotic System contributing to 80% of latest gross sales.
• Worldwide income grew by 86%, with important gross sales within the U.Ok.
• The corporate’s gross margins reached a report excessive of 63.2%.
• Internet loss improved to $21 million from $24.6 million the earlier 12 months, with adjusted EBITDA loss additionally enhancing.
• PROCEPT expects full-year 2024 income to be between $222.5 million and $223 million, with gross margins round 61%.

Firm Outlook

• Full-year 2024 income is projected to develop by roughly 63% to 64%.
• The corporate anticipates promoting round 186 robotic programs by the top of 2024.
• Worldwide income is predicted to see an 88% improve, reaching $22.4 million.
• Working bills are projected to rise by 29%, totaling $231.5 million.
• Adjusted EBITDA loss for the total 12 months is predicted to be round $60 million.

Bearish Highlights

• Utilization per account has declined year-over-year.
• Saline shortages and hurricane disruptions have impacted process volumes, resulting in some cancellations.

Bullish Highlights

• The HYDROS system has been well-received, with most launches scheduled for late 2024.
• The corporate is optimistic about increasing therapy choices for prostate most cancers and expects to develop the ASC channel pilot program in 2025.
• Constructive reimbursement dynamics with Medicare and personal payers like Humana (NYSE:) and Cigna (NYSE:) help development.

Misses

• Gross sales representatives’ coaching for the HYDROS system will briefly impression process volumes in This fall.
• Some procedures had been sacrificed for a cautious rollout of the HYDROS platform.

Q&A Highlights

• Kevin Waters (NYSE:) mentioned the fourth-quarter ASP steerage and the price impression of the HYDROS rollout, expressing confidence in future price competitiveness and margin enhancements.
• Reza Zadno emphasised the corporate’s give attention to producing Stage 1 information to help guideline inclusion and market growth.

PROCEPT BioRobotics continues to execute its development technique efficiently, with the third quarter of 2024 exhibiting sturdy monetary efficiency and promising developments in its product choices. The corporate stays targeted on increasing its market presence within the therapy of prostate most cancers and driving in the direction of profitability within the upcoming fiscal 12 months.

InvestingPro Insights

PROCEPT BioRobotics’ spectacular Q3 2024 efficiency aligns with a number of key metrics and insights from InvestingPro. The corporate’s 66% year-over-year income development to $58.4 million is according to InvestingPro information exhibiting a sturdy income development of 73.74% over the past twelve months as of Q2 2024. This sturdy development trajectory is additional mirrored within the inventory’s efficiency, with InvestingPro reporting a exceptional 163.59% price whole return over the previous 12 months.

Regardless of the corporate’s present unprofitability, as indicated by the detrimental working earnings of $109.64 million within the final twelve months, PROCEPT’s gross revenue margin of 54.73% aligns with the reported report excessive gross margins of 63.2% in Q3. This means the corporate is successfully managing its prices whereas scaling operations.

InvestingPro Suggestions spotlight that PROCEPT operates with a average degree of debt and has liquid belongings exceeding short-term obligations. These components present monetary flexibility as the corporate continues its development section and strikes in the direction of profitability. Moreover, the tip noting that PROCEPT is buying and selling close to its 52-week excessive (96.56% of the excessive) corroborates the bullish sentiment surrounding the inventory following the sturdy quarterly outcomes.

For traders in search of a extra complete analysis, InvestingPro affords 10 extra ideas for PROCEPT BioRobotics, offering deeper insights into the corporate’s monetary well being and market place.

Full transcript – Procept Biorobotics Corp (PRCT) Q3 2024:

Operator: Good morning and welcome to PROCEPT BioRobotics Third Quarter 2024 Earnings Convention Name. Right now all individuals’ are in a listen-only mode. We shall be facilitating a question-and-answer session in the direction of the top of as we speak’s name. As a reminder, this name is being recorded for replay functions. I might now like to show the decision over to Matt Bacso, Vice President of Investor Relations, for a number of introductory feedback.

Matt Bacso: Good morning, and thanks for becoming a member of PROCEPT BioRobotics third quarter 2024 earnings convention name. Presenting on as we speak’s name are Reza Zadno, Chief Government Officer; and Kevin Waters, Chief Monetary Officer. Additionally current is Sham Shiblaq, Chief Industrial Officer, who will take part within the Q&A session. Earlier than we start, I would wish to remind listeners that statements made on this convention name that relate to future plans, occasions, or efficiency are forward-looking statements as outlined below Non-public Securities Litigation Reform Act of 1995. Whereas these forward-looking statements are primarily based on administration’s present expectations and beliefs, these statements are topic to a number of dangers and uncertainties, assumptions, and different components that would trigger outcomes to vary materially from the expectations expressed on this convention name. These dangers and uncertainties are disclosed in additional element in PROCEPT BioRobotics’ filings with the Securities and Alternate Fee, all of which can be found on-line at www.sec.gov. Listeners are cautioned to not place below reliance on these forward-looking statements, which communicate solely as of as we speak’s date, October 28, 2024. Besides as required by legislation, PROCEPT BioRobotics undertakes no obligation to replace or revise any forward-looking statements to mirror new data, circumstances or unanticipated occasions that will come up. Through the name, we may even reference sure monetary measures that aren’t ready in accordance with GAAP. Extra details about how we use these non-GAAP monetary measures, in addition to reconciliations of those measures to their nearest GAAP equal are included in our earnings launch. With that, I will flip the decision over to Reza.

Reza Zadno: Good morning and thanks for becoming a member of us. For as we speak’s name, I’ll present opening feedback and a normal enterprise replace adopted by Sham, who will present an summary of the HYDROS Robotic Programs industrial launch. Lastly, Kevin will present extra element concerning our monetary efficiency and up to date 2024 steerage. Beginning with our quarterly income outcomes. We’re happy to report one other quarter of sturdy monetary efficiency with whole income for the third quarter of 2024 of $58.4 million, representing development of 66%, in comparison with the third quarter of 2023. Progress within the quarter was pushed by sturdy demand and better common promoting costs for our robotic system, elevated utilization from our expanded U.S. put in base and report worldwide revenues. We exited the third quarter of 2024 with a U.S. put in base of 445 programs, representing development of 64%, in comparison with the prior 12 months interval. Moreover, we exceeded our utilization per account expectations for the quarter, regardless of substantial development in our U.S. put in base and the non permanent elimination of gross sales representatives from the sector as we started coaching our gross sales group on the hydro system. We knew following our HYDROS announcement that the third quarter was going to characterize distinctive challenges for our firm given we had been launching a brand new robotic system halfway by means of the quarter. However I’m extremely pleased with your entire PROCEPT group for his or her collective efforts. Through the third quarter, we efficiently transformed the capital pipeline, manufactured enough portions of economic product, reported report gross margins of 63.2%, started coaching our field-based groups, whereas mitigating draw back strain on procedures and successfully managed the market throughout this transition. In consequence, we delivered a really sturdy quarter that displays the group’s dedication and regular industrial execution. Turning to worldwide market growth actions, we generated $6.2 million of worldwide income within the third quarter of 2024, representing development of 86%, in comparison with the prior 12 months interval. Progress within the third quarter was as soon as once more pushed primarily by sturdy gross sales momentum in the UK. Our worldwide pipeline continues to extend properly, giving us additional confidence as we enter 2025. With that, I’ll flip the decision over to Sham to offer extra element on our HYDROS launch.

Sham Shiblaq: Thanks, Reza. First, I wish to reiterate Reza’s feedback on the group’s distinctive efficiency in 1 / 4 that required flawless execution and dedication from each a part of the group. Turning to the HYDROS launch itself, as soon as we obtained FDA clearance in mid-August, the capital gross sales group instantly shifted their focus to educating hospitals and surgeons on the advantages of the HYDROS system and changing the rapid AQUABEAM pipeline to HYDROS. Consciousness and pleasure across the launch unfold rapidly, which definitely performed into our favor, permitting for a reasonably clean transition and resulted in an excellent capital quarter. Preliminary suggestions from clients may be very encouraging. Other than HYDROSs totally built-in and glossy design, surgeons had been very impressed with the brand new First Help AI characteristic. As a reminder, First Help AI helps the surgeon in decoding the reside ultrasound picture for key anatomical landmarks and counsel an optimum therapy plan for every affected person. The addition of AI to our exact robotic assisted resection has the potential to allow all urologists to enhance outcomes for his or her sufferers. That is very interesting to each surgeons and directors. Different suggestions we obtained, significantly from hospital help workers, is how improved the surgeon and workers expertise is at each stage of the Aquablation Remedy process. Particularly with a single footprint and improved consumer interface, the built-in tower facilitates environment friendly working room setup, procedural workflow, and working room turnover. Moreover, hospital CFOs had been joyful to see that the brand new HYDROS handpiece makes use of a single-use digital scope that eliminates the necessity for scope reprocessing and additional streamline setup, which saves money and time. With the third quarter and the preliminary launch section behind us, we really feel superb concerning the underlying developments we’re seeing as we speak, significantly round system common promoting costs, buyer demand, and high-dose consumer sentiment. Moreover, HYDROS has definitely energized the capital gross sales group, which has translated into a sturdy pipeline the place we count on to promote a report variety of new programs within the fourth quarter of 2024. Talking briefly on utilization developments, as a reminder, we started gross sales group coaching classes on the HYDROS System in September. We plan to proceed coaching classes all through the fourth quarter, which is able to take away reps from their respective territories for a time period. Given this dynamic, this can modestly impression volumes because of the diminished case protection. As we communicated in mid-August, correctly coaching our gross sales groups is crucial to our industrial and procedural success as we transition into 2025. Whereas happy with the group’s execution within the third quarter, we notice there’s a a lot greater alternative forward for each robotic system gross sales and expanded utilization over time. As we enter the following section of our industrial development, I imagine this launch shall be a major milestone in our journey driving widespread adoption and making a profound distinction within the lives of our sufferers. With that, I’ll flip the decision again over to Reza.

Reza Zadno: Thanks, Sham. Earlier than I move it over to Kevin, I wish to talk about our latest announcement to provoke our new randomized scientific examine for prostate most cancers. On October 7, we introduced that the FDA granted breakthrough gadget designation to analyze using Aquablation remedy for prostate most cancers and permitted a pivotal investigational gadget exemption scientific trial evaluating Aquablation remedy to radical prostatectomy. Receiving breakthrough gadget designation is especially thrilling because it expedites the evaluate strategy of applied sciences that the FDA considers revolutionary and that may enhance the lives of individuals with life threatening or irreversibly debilitating ailments or circumstances. The trial we shall be enrolling generally known as the WATER IV PCa is a world multi-center potential random scientific examine assessing the protection and efficacy of Aquablation remedy in comparison with radical prostatectomy in males with grade Group 1 to three localized prostate most cancers. The examine will enroll up to 280 sufferers at up to 50 facilities, most of that are in the USA. The FDA agreed to a six-month co-primary endpoint primarily based on morbidity, particularly charges of incontinence and erectile dysfunction. Moreover, the FDA agreed to incorporate a 12-month secondary efficacy endpoint measuring the speed of nice group development. Sufferers shall be adopted up to 10-years with annual secondary endpoint analysis specializing in each the discount in therapy associated to hurt and oncological occasions. WATER-IV PCa is a singular trial design that may give attention to hurt discount when utilizing Aquablation remedy as a primary line therapy compared to radical prostatectomy. If profitable, we imagine Aquablation remedy has the potential to considerably alter the way in which urologists strategy localized prostate most cancers for thousands and thousands of males. To-date, PROCEPT is the one firm sponsored to ever obtain an ID for a randomized scientific trial evaluating a novel localized prostate most cancers therapy to a regular of care. A major alternative exists to enhance security and high quality of life outcomes for males needing therapy for prostate most cancers, and we imagine Aquablation remedy has the flexibility to develop into a first-line therapy for localized prostate most cancers. Initiating a randomized trial in opposition to radical prostatectomy is the primary massive step in pursuing a prostate cancer-specific indication, which no different therapy has as we speak. Lastly, we accomplished enrollment of PRCT002 in September and plan to share six months follow-up information in April 2025 on the American Urological Affiliation Convention in Las Vegas. Moreover, over the following 12 to 18 months, we are going to seemingly share extra particulars concerning our broader prostate most cancers industrial technique. To conclude, my ready remarks, a number of components proceed to development positively, permitting us to execute our long-term strategic plan. In abstract, the U.S. HYDROS launch is off to an awesome begin and clients are thrilled with the improved options. Our pipeline and gross sales funnel proceed to develop properly on the common promoting costs of hydro which can be trending increased than our earlier AQUABEAM system. Our worldwide enterprise continues to construct momentum within the U.Ok. and Japan. Our industrial group is the biggest and most tenured within the firm’s historical past, which we imagine will result in elevated productiveness. We’re the primary firm ever to obtain ID approval from the FDA to enroll a randomized trial in opposition to the Radical Prostatectomy for prostate most cancers. We view this as the primary massive step in pursuing a prostate most cancers particular indication, which no different therapy has as we speak. And lastly, we have now continued to exceed our steerage round profitability metrics, primarily with the growth of gross margins all through 2024. We imagine these underlying fundamentals mirror the expertise that’s laying the inspiration to develop into the BPH Surgical Heart of Care and a enterprise that shall be a number one international neurology firm. And with that, I’ll flip the decision over to Kevin.

Kevin Waters: Thanks, Reza. Complete income for the third quarter of 2024 was $58.4 million, representing development of 66%, in comparison with the third quarter of 2023. U.S. income for the quarter was $52.2 million, representing development of 62%, in comparison with the prior 12 months interval. Within the third quarter, we bought 45 robotic programs with blended common promoting costs of roughly $432,000. Of those 45 programs, roughly 80% had been HYDROS. Our HYDROS gross sales had been primarily Greenfield accounts, though we did have a number of gross sales included within the 45 programs which can be second programs at present accounts. Moreover, we recorded roughly $200,000 of incremental system income for a number of AQUABEAM system gross sales executed in earlier quarters that had been exchanged for HYDROS within the third quarter. We don’t view these as true replacements as this can be a restricted providing for purchasers who lately bought our AQUABEAM system. To be clear, these trade programs aren’t included within the reported variety of 45 programs bought and thus didn’t impression the put in base. When accounting for all of those variables, we generated whole U.S. system income of $19.6 million, representing system income development of 46%, in comparison with the third quarter of 2023. U.S. handpiece and consumable income for the third quarter of 2024 was $29.6 million, representing development of 74%, in comparison with the third quarter of 2023. Handpiece development was pushed by a rise within the put in base of robotic programs. Moreover, month-to-month utilization per account elevated roughly 7%, in comparison with the third quarter of 2023. We shipped roughly 8,740 handpieces in the united statesin the third quarter, representing unit development of 79%, in comparison with the third quarter of 2023. Third quarter common promoting costs had been roughly $3,200. We additionally recorded roughly $1.8 million of different consumable income within the third quarter of 2024. Worldwide income for the third quarter was $6.2 million, representing development of roughly 121%. Gross margin for the third quarter of 2024 was 63.2%, representing an all-time excessive. Gross margin growth within the third quarter was primarily as a result of sturdy execution from our operations group and considerably increased high-growth system common promoting costs. You will need to observe that following a full quarter of producing our new HYDROS system, it’s roughly 10% extra pricey than AQUABEAM as we speak. Over time with scale, we count on materials prices to return down. Nevertheless, this headwind is being greater than offset by elevated common promoting costs. Transferring down the earnings assertion, whole working bills within the third quarter of 2024 had been $59.3 million, in comparison with $44.5 million in the identical interval of the prior 12 months, and $58.3 million within the second quarter of 2024. The year-over-year improve was pushed primarily by elevated gross sales and advertising bills, largely to increase the industrial group and improve normal and administrative bills offset by decrease sequential research and growth bills following the numerous effort round HYDROS growth within the second quarter of 2024. We’re very happy with the working expense leverage we have now demonstrated year-to-date. When evaluating income development to working expense development, revenues elevated 69% within the first 9 months of 2024 and 32% working expense development. Internet loss was $21 million for the third quarter of 2024, in comparison with $24.6 million in the identical interval of the prior 12 months. Adjusted EBITDA was a lack of $12.4 million, in comparison with a lack of $19.4 million within the third quarter of 2023. Our money, money equivalents, and restricted money balances as of September 30 had been $200 million, and we reported a money utilization within the quarter of $17.3 million. Transferring to our 2024 monetary steerage. We now count on full-year 2024 whole income to be within the vary of $222.5 million to $223 million, representing development of roughly 63% to 64%, in comparison with 2023. Beginning with U.S. programs, we proceed to count on to promote roughly 186 robotic programs in 2024, which is roughly 56 new programs within the fourth quarter. Whereas happy with the route of latest system pricing within the third quarter, we wish to preserve pricing flexibility at this level within the HYDROS launch as we work by means of our fourth quarter pipeline. Thus, our up to date steerage assumes new system pricing within the fourth quarter to be within the vary of $420,000 to $430,000. Turning to U.S. handpieces, we count on to promote roughly 9,950 handpieces within the fourth quarter, which might equate to full-year handpieces of roughly $33,500, representing 80% unit development, in comparison with 2023. We count on fourth quarter handpiece common promoting costs corresponding to the third quarter. We additionally count on different consumables income to be roughly $7.3 million for the full-year. Moreover, we now count on U.S. service income to be roughly $11 million for the full-year. Lastly, on worldwide income, given one other sturdy quarter and optimistic momentum in the UK, we now count on full-year worldwide income to be roughly $22.4 million, representing annual development of 88%. Transferring down the earnings assertion, we now count on full-year 2024 gross margins to be roughly 61%, a rise from our beforehand issued steerage of 59%. Turning to working bills, we proceed to count on full-year 2024 working bills to be roughly $231.5 million, representing development of 29%. Given present rates of interest, we count on to generate web curiosity earnings of $5.5 million in 2024. Given the rise in income and gross margin together with our continued view on working bills, we now count on full-year 2024 adjusted EBITDA loss to be roughly $60 million, which is a rise of virtually $13 million from our preliminary steerage supplied in February. At this level, I would like to show the decision again to Reza for closing feedback.

Reza Zadno: Thanks, Kevin. In closing, I wish to thank our staff, clients, and shareholders for all their help to assist us alongside our journey to changing into the standard-of-care for BPH. We’ll proceed to leverage our industrial and scientific investments to execute on our long-term technique. Have an awesome day and I sit up for seeing a lot of you at upcoming investor conferences. At this level, we are going to take questions. Operator?

Operator: Thanks. [Operator Instructions] Now, first query coming from the lineup, Craig Bijou with Financial institution of America Securities. Your line is open.

Craig Bijou: Good morning, guys. Thanks for taking questions and congrats on one other very sturdy quarter. I wish to begin with HYDROS and so it looks as if HYDROS ASP, for those who come again within the numbers, is someplace round 450,000. And Kevin, I perceive your feedback on, you wished to be, I assume, conservative now with the ASP to start out, however how ought to we take into consideration your capability to get price there? After which perhaps for those who simply give just a little bit extra coloration on the shopper response, the HYDROS, it sounds prefer it was fairly sturdy. However extra particularly, did you see new clients both buy or type of get within the pipeline that will have been hesitant or reluctant earlier than?

Reza Zadno: Hello Craig, thanks for the query. I’ll give some normal feedback about HYDROS, the response has been extraordinarily optimistic. Surgeons are excited concerning the AI help, digital scope, the twin display screen, the workers is worked up concerning the ease of setup and quicker setup, and naturally the hospital saves time for sterilization. So general the response has been incredible. Sham, you wish to add something?

Sham Shiblaq: Sure, hello, good morning. I believe that the rapid optimistic response by our clients confirmed in our outcomes the flexibility for us to flip a pipeline in simply over a month with many processes which can be required from a hospital’s perspective to buy capital reveals the thrill of our surgeons to drive directors to make that occur. So we’re very excited by the contact on the options. When you concentrate on first help AI, that is one thing that’s not one thing that routinely will get permitted these days within the surgical atmosphere. And so we have been capable of actually, actually seize loads of pleasure. The benefit of use from the workers, the setup, the enter process, the take down, the efficiencies within the OR. We’re simply starting to launch these applications and we’re seeing rapid pleasure from our surgeons.

Reza Zadno: And should, I will simply shut the loop in your HYDROS ASP query, Craig. So we’re very happy with what we noticed within the quarter given HYDROS ASPs, in comparison with earlier AQUABEAM gross sales. At present, we’re not going to remark particularly on type of the place we are able to see this quantity going, however we positively be ok with the launch, we be ok with present ASPs. On the finish of the day we wish HYDROS in as many palms, clients’ palms as doable and we simply wish to proceed to take care of some flexibility there, which is why we supplied that vary within the fourth quarter, $420,000 to $430,000.

Craig Bijou: Obtained it, thanks guys. And I did wish to ask on utilization and I believe, and Kevin right me if I am improper, however I believe implied utilization in This fall is likely to be a step down year-over-year. I do know you had a reasonably sturdy quarter, however perhaps if, you recognize, let me know if that is right, however then if, you recognize, when you concentrate on the impression or disruption to utilization throughout Q3, I do not know for those who’d be prepared to quantify that. After which if that might be increased or decrease in This fall, simply perhaps just a little bit extra coloration on the impression that you simply’re seeing and even when that bleeds into ‘25 in any respect? Thanks.

Kevin Waters: Sure, let me begin with Q3 then I will handle This fall and I will hand it off to Sham on the finish right here to speak about a few of these dynamics. So sure, I can not particularly dollarize what that impression was within the third quarter of taking reps out of the sector. However what we are going to say is we moved all through the quarter, we positively noticed a powerful September in procedures, even with our reps popping out of the sector. So it was positively a headwind, however the process atmosphere itself in September felt actually sturdy for us. And as we head into the fourth quarter now transitioning, I will first say that we do imagine our 2024 outcomes mirror a really sturdy underlying enterprise that continues to achieve share and momentum from all different resective procedures on the market. However particularly your This fall utilization is a good one and it does counsel that year-over-year on a per account foundation utilization can be down, which by the way in which was the identical dynamic that has at all times been implied in our steerage that we have now been offering for the full-year. However particularly we do count on reps to proceed to be faraway from the sector with HYDROS for coaching within the fourth quarter. I’ll have Sham speak just a little bit about that on the finish, and that’s going to have an effect on procedures. Our steerage additionally, Craig, does permit for a few of these macro components that we’re all listening to about, significantly among the issues we noticed in October across the hurricane incident within the Southeast, we have now clearly been considerably impacted by the saline shortages, however all of these macro components are thought-about in our This fall information as nicely. And perhaps I will flip it over to Sham to shut right here.

Sham Shiblaq: The one half I assume I will simply add just a little bit on is the rep coaching, since we have talked about it prior to now. So coming off of the HYDROS approval, as a PROCEPT group, we felt ready, totally ready to assist our clients convert their purchases over to HYDROS, get them educated and able to go. So we had been already on our finish. We simply did not have visibility to how rapidly clients might full the acquisition course of after which how rapidly surgeons and workers might prepare for the coaching side of it. So although we did start our coaching course of in September with our area group. What we will see is almost all of those launches for HYDROS that had been bought in Q3 will now develop into November and December launches. So these rep trainings and the workers trainings and the surgeon trainings, you wish to time these so that they are educated earlier than the launch, not months earlier than launch. So we’ll see that start to essentially begin to choose up right here in October and November as we’re enthusiastic about these launches taking place for the opposite quarter.

Craig Bijou: Nice. Thanks, guys.

Operator: Thanks. And our subsequent query coming from the road of Brandon Vasquez with William Blair. Your line is open.

Brandon Vasquez: Good morning, everybody. Thanks for taking the query and congrats on a pleasant quarter right here. I will simply begin with perhaps holding on the practice of the final query right here. I will ask it barely totally different, are you guys capable of disclose at this level what % of your gross sales reps have been educated already, so we are able to get a greater understanding of what number of reps are left to be educated as we go into This fall after which piggybacking on that? Are you guys getting the sense that when a rep is pulled, you lose that process to a different remedy or are they ready for that rep to return again and carry out that process with Aquablation?

Sham Shiblaq: Hey, Brandon. That is Sham, I will take that query. So we’re not going to touch upon a particular share of reps, however I’ll let you know the overwhelming majority of launches will occur within the fourth quarter. Lots of them at the moment are scheduled for November and December launches. So I believe that you would be able to type of do the mathematics on the impression of the salesforce popping out of the sector. We now have a really thorough course of. We really feel superb that what we’re doing is the appropriate factor for the enterprise to make sure that we have now nice outcomes from day one with the HYDROS launch and that is going to assist us long-term, have an awesome enterprise and our sufferers shall be happier and our surgeons shall be happier as nicely. Relating to the lack of circumstances, I do not at any time imagine we’re dropping circumstances by taking us out of the sector? Are we delaying procedures? We’re by having surgeons depart their practices to go get educated by having hospitals put procedures on additional within the quarter. So we do not imagine we’re dropping circumstances. We’re simply delaying them to verify we have now a correct launch and nice outcomes.

Brandon Vasquez: Okay. And perhaps going just a little increased degree by way of you guys made feedback about putting some extra second unit programs this quarter. I do know this isn’t one thing that you simply guys had actually contemplated in your unique analysis of the market alternative or the TAM. So are you able to guys simply speak just a little bit about the place, what’s it that is type of driving these second unit programs? Any updates you may give us on the variety of accounts with second models and what which may imply for type of your long-term alternative right here? Thanks.

Sham Shiblaq: Sure, so I will take the near-term and long-term right here, Brandon. So particular to our This fall steerage and what it implies, so the 56 models that we’re guiding to within the fourth quarter, these are primarily inexperienced fields. We might have, consider lower than a handful of second programs, however we nonetheless imagine the most important driver of our enterprise as we speak is greenfield alternatives. Though we did see within the third quarter some key KOLs that purchased a second system and subsequently they’ve saved our AQUABEAM system and so they additionally purchased a HYDROS system. So that is the near-term. Once we look long run, after we consider a substitute cycle, we positively see that the demand is there. However as we communicated in mid-August, our main technique for the rest of ‘24 is to sell HYDROS systems to new accounts. It’s what we’re focused on. It’s how the sales force is compensated. And we believe we’re — nonetheless have an enormous market to penetrate on Greenfield. So only some months in, it is too early to speak actually a couple of substitute cycle, however this can most likely are available reference to our 2025 steerage on our subsequent name.

Operator: Thanks. And our Subsequent query coming from the road of Richard Newitter with Truist Securities. Your line is open.

Richard Newitter: Excuse me. Hello, thanks for taking the questions. Congrats on the quarter. Perhaps simply on the substitute and trade-in side right here, Kevin, what was the cutoff for trade-in for the third quarter, the [Indiscernible], or what number of did you say there have been that had bought lately sufficient that you simply allowed them to swap out? Was there any true up type of related to that and what is the ballpark? After which how ought to we take into consideration your technique and/or cutoff thresholds for timing of purchases like for those who made a purchase order within the final 12-months on a rolling foundation, are they eligible probably for some kind of deal, as a result of they had been latest sufficient of their final buy? In order that’s our first query and I will have a follow-up, thanks.

Reza Zadno: Sure, so and it is necessary to notice, there’s a distinction between these exchanges that I’ve introduced for as we speak and a real substitute cycle. So in reference to our launch, we at all times had been conscious of shoppers that had lately bought AQUABEAM, suppose within the final two quarters, the place maybe the system hadn’t even been put in but, the account hadn’t been launched, so subsequently we had been at all times permitting for and had a program in place to deal with these as exchanges versus or examine these to replacements. And people are the few that I discussed in my script that contributed a nominal quantity of income was a pair hundred thousand {dollars} and that, that would persist into the fourth quarter, however I would not view that as a cloth side of how we’re interested by the HYDROS launch now that we have type of gotten previous these preliminary accounts. And we then get into ‘25 Wealthy the place we do count on to provoke extra of a substitute cycle. Once more, we’re not going to offer loads of coloration round that right here as we speak, however that may have an effect on general ASPs. However with that stated, as we communicated mid-August, we have now many accounts that bought AQUABEAM three, 4, 5 years in the past that we predict are going to be proper for substitute. And albeit, the ASPs of these should not be terribly totally different than a Greenfield system.

Sham Shiblaq: Wealthy, one factor I will add to that is, we have now such a large alternative that is still with Greenfield hospitals. We’re speaking about 1,000s of hospitals that we imagine are potential alternatives to accumulate a system. The gross sales pressure has zero incentive proper now to commerce a system. They’re hyper-focused the remainder of this 12 months on including new hospitals, new accounts to make sure that we do every thing we are able to to get these up and going. So in 2025, we’ll remark extra on the commerce and replacements, however for now, we will be hyper-focused on launching new hospitals.

Richard Newitter: Okay. That is useful. Thanks. And simply — I do know you are not giving ’25 steerage as we speak, however all of us have fashions which can be going to have some flow-through penalties to the again half up to date data right here, significantly ASPs on the system facet. If we even — do not take into consideration extra income streams from replacements of which it appears like there shall be some if we simply take your fourth quarter leap off level for ASP, you get to one thing north of 10% upside to road numbers proper out of the gate. I assume assist us suppose by means of any early commentary as we modify our fashions for how to take into consideration subsequent 12 months places and the takes, do not restrict it to the income. And significantly, for those who can touch upon what ought to occur with system ASPs directionally? Thanks.

Sham Shiblaq: Sure. So that you hit the nail on the pinnacle that we’re not going to provide ’25 steerage, however I will simply reiterate our feedback that we do really feel superb concerning the HYDROS launch. We really feel superb concerning the receptivity across the ASPs that we noticed within the third quarter. However we actually, Wealthy, wish to get by means of our first full quarter of getting this product out out there earlier than we nail down a 2025 ASP. However directionally, as we have commented, we really feel nice concerning the launch and our capability to proceed to seize strong common promoting costs.

Operator: Thanks. And our subsequent query coming from the road of Josh Jennings with TD Cowen. Your line is open.

Josh Jennings: Hello, Thanks so much and congrats on one other very sturdy quarter. I wished to simply ask concerning the recombinant BPH and localized prostate most cancers alternative. I believe there have been some citations that within the U.S., there’s perhaps over 400,000 circumstances that must be intervened upon yearly. I hoped for those who guys might simply evaluate type of your outlook on the dimensions of that chance by way of the variety of procedures. After which additionally simply assist fill in — I imply, I am kind perceive that presently, I imply it is on label, clearly, and simply to examine the field, it is our understanding that each one these circumstances which can be being performed are reimbursed? After which have you ever seen any uptick in utilization over the primary 9 months of this 12 months since that prostate most cancers replace was placed on the place — prostate most cancers warning was faraway from the label?

Reza Zadno: Sure. Thanks. So sure, as we have now stated beforehand, there are about 3 million males in the USA with prostate most cancers, and there are about 300,000 new circumstances. And what we wish to accomplish with our scientific examine is actually generate a Stage 1 information, in order that we get within the tips. Our aim from the start we have now stated our aim is to increase the market as a result of out of these 3 million males, who’ve prostate most cancers, overwhelming majority of them sit on the sidelines, due to the negative effects of present remedies. With our randomized examine, our aim is to point out one, the protection of the product and efficacy after which increase the market. And as we collect extra data sooner or later, we are able to present extra coloration into the commercialization technique.

Sham Shiblaq: Hey Josh, so on the concomitant use with which means a BPH affected person that additionally has localized prostate most cancers, I believe surgeons have been utilizing BPH applied sciences, our efficient surgical procedures for a few years and really feel assured within the security of treating BPH sufferers with prostate most cancers. We do not particularly, know for years what’s been taking place with Aquablation is that of the surgeon’s determination as to how to deal with their sufferers. However I do imagine that the rationale we wished to show that the protection of it, the FDA eliminated that contraindication to additionally present that the protection was there. It is similar to different receptive procedures. So to reply your query particularly, we do not have a solution apart from we do imagine that surgeons have at all times felt secure treating most cancers sufferers which have native life most cancers faces which have BPH.

Josh Jennings: Effectively, thanks for that. Admire it. After which I simply wished to — I’ll have missed it on the decision, I hoped to listen to an replace on the ASC channel and the pilot program. And any up to date outlook on that chance as we take into consideration 2025? Thanks.

Sham Shiblaq: Sure. So I will take that one as nicely. So we proceed to have loads of success as we have begun that pilot program and get very excited concerning the alternative within the ASC setting. Proper now, there’s one middle out of Canada that is revealed, nice information, exhibiting the flexibility to get sufferers by means of an ASC setting identical day with excessive success charges. We now have the one middle within the U.S., which has been our pilot. We do count on to increase that pilot in 2025 to a restricted variety of websites, I believe a handful of web sites in 2025 and that’s very deliberate. As soon as once more, type of going again to what I stated a couple of minutes in the past. We now have 1,000s of hospitals that also want to accumulate a system for Aquablation remedy. We’ll stay hyper-focused on that. after which we count on the ASC alternative to be an accelerator for us in years to return.

Operator: Thanks. And our subsequent query coming from the road of Matthew O’Brien with Piper Sandler. Your line is open.

Unidentified Analyst: Good morning. That is Samantha on for Matt. Congrats on an awesome quarter and thanks for taking our query. I would like to start out with the aggressive dynamics in BPH. What are you seeing by way of share shift? And perhaps are you seeing this speed up from TURP and Laser in Q3??

Reza Zadno: So from a aggressive on the receptive facet, we don’t see new applied sciences coming. As we had stated beforehand, after we speak to our surgeons, overwhelming majority of the circumstances that we’re performing come from TURP and inexperienced mild. And on the identical time, anecdotally, after we are asking the query, do they see the market growth, majority of them say, sure, the variety of circumstances they’re doing is greater than what they had been doing a 12 months or two years in the past.

Unidentified Analyst: Okay. Thanks. After which I assume, second, we had been questioning for those who might present any extra coloration on profitability expectations, perhaps each within the short-term, interested by our fashions in subsequent 12 months after which additionally in the long term?

Kevin Waters: Sure, we’re — thanks for the query, that is Kevin. We’re not going to offer type of any specificity round dates, however what we might counsel is the outcomes that we have demonstrated in 2024 present that we’re an organization that has a really clear pathway to profitability. We have at all times stated with our income development, it actually comes down to our capability to regulate working bills, which I believe we have demonstrated fairly nicely this 12 months by elevating our income steerage now each quarter, whereas holding working bills flat. And on the identical time, our gross margin growth is known as a good leaping off level right here within the third quarter at a report degree over 63%. Our steerage does counsel one other sequential enchancment in 2024, ending the 12 months at 61%. I believe we’ll present that for a enterprise that has our income development, it is only a matter of time for profitability. However at this level, we nonetheless suppose it is prudent to be give attention to making investments within the enterprise to proceed to develop our high line and outsized quantities. So subsequently, we’re not going to provide any specificity round dates.

Unidentified Analyst: Okay, thanks.

Operator: Thanks. Our subsequent query coming from the road of Chris Pasquale with Nephron Analysis. Your line is open.

Chris Pasquale: Thanks. Congrats on getting the WATER IV examine permitted. Are you able to speak just a little bit concerning the thought course of and the choice to really go for particular labeling right here? I do know initially that was one thing you had been type of on the fence about how necessary you suppose that’s to broad adoption long-term. After which simply curious, is there a prespecified radiation part to the therapy routine simply to ensure that, that piece is balanced between the 2 arms?

Reza Zadno: Sure. Thanks. So the thought course of, as you talked about, was to generate Stage 1 scientific information in order that with a randomized examine, if profitable, we might get into the rules and the aim is to increase the market. Hurt discount is a vital profit that FDA sees for sufferers as a result of present remedies have excessive incidence of incontinence and erectile dysfunction. So the first endpoint, six months, as we have now talked about, is to cut back statistically important incontinence and erectile dysfunction. And naturally, the efficacy on the secondary finish level reveals the profit and that’s outlined as development to the — development of most cancers. So that’s how efficacy is outlined.

Sham Shiblaq: Chris, are you able to restate your query on radiation?

Chris Pasquale: Simply curious, are these sufferers going to be getting radiation? And is there kind of a prespecified protocol there to ensure that there’s not an imbalance between the 2 arms?

Sham Shiblaq: Sure, this can be a randomized examine that we’re taking a look at with Aquablation particular to prostatectomy in order that the radiation part, it is clearly a unique when you concentrate on shifting to definitive surgical procedure for prostate most cancers, clearly, many occasions prostatectomy and radiation different choices for sufferers. We’re taking a look at localized illness, which might both be a prostatectomy sufferers or Aquablation sufferers.

Chris Pasquale: Okay. So they are not going to be getting any radiation. After which simply wished to make clear the feedback across the saline scarcity and the impression of the hurricanes and what you guys are seeing there? Have you ever seen procedures delayed due to that? And might you simply remind us with the fluid utilization appears to be like like in a typical Aquablation process? And is the waterjet itself comprised of clinical-grade crusing?

Reza Zadno: So from a amount of saline used, in truth, the amount of saline use through the process, our process makes use of much less saline than TURP does. So broadly, it would not — it hasn’t impacted. However relying on the accounts, sure, there was some impression, however broadly no. And as I discussed on the amount of saline, it is no more than TURP. I do not know, Kevin, do you wish to add?

Kevin Waters: Sure. No. Simply concerning steerage particularly, our steerage, we did see procedures canceled in October. You possibly can suppose within the 100s, not the 1,000s, if that helps type of quantify how we’re interested by it in October. And our steerage does permit for that saline specifically, to proceed to persist considerably into November, but it surely additionally means that the present atmosphere would not worsen, proper? I believe our steerage would assume the worst is behind us, clearly, with climate and with the saline scarcity. However we, once more, really feel superb concerning the underlying trajectory of the enterprise coming off a really sturdy September from a process standpoint.

Chris Pasquale: Thanks.

Operator: Thanks. And our subsequent query coming from the road of Ryan Zimmerman with BTIG. Your line is line open.

Ryan Zimmerman: Hey guys. Good morning and congrats on the quarter. Wish to ask, we have been selecting up some feedback within the area from urologists about a variety of dynamics associated to reimbursement. I believe I’ve spoken with Barry about this beforehand, however there’s been extra chatter about issues equivalent to Medicare audits, particularly with RAC auditors and the danger of clawbacks with AQUABEAM circumstances, in addition to some pushback from Cigna and Humana on what they’re masking for AQUABEAM. And so I am simply questioning for those who can communicate to that, whether or not that is impactful, whether or not it is small. Simply perhaps put that to mattress, for those who can?

Reza Zadno: Sure, thanks, Ryan. So associated to RAC audit, as you recognize, this can be a frequent process in well being care that is performed for us. It began in about October of 2023 within the final 12-months. I am joyful to say we have now been capable of execute regardless of that audit in FDA, after we see FDA approval, there was no measurement restriction. However with a few of these, these are particular to Medicare, by the way in which. There’s a measurement restriction and we’re working with surgeons and payers to take away this restriction. For instance, we have now been in a position, in different circumstances, that there have been some age restriction with some Medicare carriers to take away that. It is only a matter of time. It’s not an impediment for our development. That is one thing that we have now to resolve. We’re working with them. So far as Cigna that you simply talked about, what Cigna talked about was they retired as of September, their coverage when a service retires a coverage, mainly, what meaning is surgeon can suggest Aquablation. In different phrases, there isn’t a restriction. So that’s definition of retirement.

Kevin Waters: I will add just a little bit on the RAC audits of Medicare, Ryan. So particularly with Aquablation, we all know that Medicare has a outsized proportion of sufferers we deal with because of the demographic of sufferers get a BPH and are getting handled. The RAC audits are particularly targeted on conventional Medicare. And so when you concentrate on 25% of the market being conventional Medicare, lower than 10% of Aquablation procedures are lower than 150 grams, which is a restriction presently with Medicare. This measurement limitation has had a minimal impression on our capability to increase and obtain our utilization targets because of the measurement vary limitation after which the standard Medicare variety of sufferers we’re treating. Additionally, you talked about Humana. Humana is the one main personal payer to have a measurement restrict restriction of 150 grams. So a really small share of our sufferers we deal with and as soon as once more, whenever you have a look at the main payers, we do not have restrictions on most of them, apart from Humana is 150-gram limitation.

Ryan Zimmerman: Okay. Very, very useful. After which simply, Kevin, by way of the steerage philosophy, I can admire there’s some macro dynamics with IV options and reps are out of the sector for coaching. However seasonally, I imply, even when that had been the case, why would not fourth quarter type of comply with an identical quarter-to-quarter step up, if you’ll, significantly for programs within the fourth quarter because it did perhaps final 12 months?

Kevin Waters: Effectively, we’re — so I will handle programs first. I imply we’re guiding to a variety of 56 programs, which is up considerably. It is up 27%, in comparison with prior 12 months, up 11 incremental models, in comparison with the third quarter and can characterize an all-time excessive for PROCEPT by a major margin. I believe our all-time excessive variety of programs in any quarter beforehand was 47%. So we really feel a ton of momentum round programs. Once we consider the utilization dynamic, I do suppose it is necessary, Sham has referenced this a number of occasions that launching a totally new platform and what that requires from a time to set up, it has elongated considerably after we set up these accounts to ensure that we do it the appropriate method. And our steerage means that we promote near 100 programs within the again half of the 12 months, which might roughly be nearly 20% of the full put in base as we exited June. So we’re simply going to be very methodical about our launch. Does that imply we sacrifice some procedures within the fourth quarter? It does completely, however we really feel it is the perfect alternative to set us up for 2025 shifting ahead to develop into the usual of care right here.

Ryan Zimmerman: Thanks.

Operator: Thanks. And our subsequent query coming from the road of Mike Kratky with Leerink Companions. Your line is open.

Brett Gasaway: Hey, good morning, guys. That is [Brett] (ph) on for Mike. Congrats on one other nice quarter and a profitable HYDROS rollout. I simply wish to return to the ASP information in 4Q. Clearly, there’s just a little little bit of flexibility there with what’s been occurring with the rollout. However how ought to we be interested by if there’s any discounting on the legacy AQUABEAM or if there’s any dynamics we ought to be interested by that is driving that, that will persist into 2025?

Kevin Waters: Sure. I do not see something uncommon right here. As we have talked about, the vast majority of our gross sales implied in our This fall information, they’re greenfield and maybe a handful of gross sales second programs to present accounts. So I believe it is higher on an ASP entrance than we expect initially. And once more, we wish to simply get by means of a full quarter of launch the place we have now HYDROS now to promote for a full quarter previous to getting too aggressive on guiding the 2025 ASPs. However there isn’t any uncommon dynamics within the fourth quarter concerning replacements, or exchanges or trade-ins. These are all primarily greenfield accounts.

Brett Gasaway: Understood. After which only a follow-up there, I assume, on the profitability facet, totally on the COGS facet. Clearly, 10% increased at this level, and that is going to scale down over time. However how ought to we be interested by simply type of the bottom degree COGS versus legacy AQUABEAM long-term? And I do know you are not commenting on cadence, however simply general, how we ought to be interested by that degree.

Kevin Waters: Sure. Perhaps I will simply discuss general gross margins basically. I did point out, and we wished to replace the funding neighborhood that HYDROS is presently costing about 10% greater than AQUABEAM. To make clear some, I might say, misinformation that was on the market in August concerning the price being the identical. With that stated, we do suppose the ASP of HYDROS goes to greater than offset type of what we’re seeing with the rise in prices. We do suppose over time, HYDROS turns into rather more corresponding to the place AQUABEAM was. And over a better time period, I might count on it to price much less in AQUABEAM long run. And we proceed to have loads of operational efficiencies in manufacturing the one largest lever in manufacturing for us to increase margins actually is producing extra product and scale. And we’re seeing that and whereas not commenting on profitability or margins, we do suppose the third quarter is a leaping off level for our enterprise now at 63%, and we should always increase from right here. And I really feel superb about our margin profile as we head into 2025. Not solely round manufacturing, however we talked within the fourth quarter final 12 months about issues like product high quality, scrap, yield, all of those metrics that we’re specializing in as a enterprise proceed to enhance and provides us a ton of conviction that this, once more, is a enterprise that has a really clear pathway to profitability.

Brett Gasaway: Is sensible. Thanks guys.

Kevin Waters: Thanks.

Operator: Thanks. I am exhibiting no additional questions within the queue presently. I’ll now flip the decision again over to Reza Zadno for ultimate feedback.

Reza Zadno: Sure, I’m going to thank everybody for becoming a member of our earnings name. I hope to see a lot of you on the upcoming conferences, and I want all of you a contented, an excellent day. Thanks.

Operator: Women and gents, that does conclude our convention for as we speak. Thanks to your participation, and chances are you’ll now disconnect.

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