EDAP TMS S.A.

Hello and welcome everyone joining today's EDAP TMS third quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question and answer session. To register to ask a question at any time, please press star one on your telephone keypad. Please note this call is being recorded and I am standing by should you need any assistance. It is now my pleasure to turn the meeting over to John Francis, With LifeSci Advisors, please go ahead.

Good morning. Thank you for joining us for the EDAP TMS third quarter 2025 financial and operating results conference call. Joining me on today's call are Ryan Rhodes, Chief Executive Officer, Ken Mobik, Chief Financial Officer, and Francois Dietsch, Chief Accounting Officer. Before we begin, I'd like to remind everyone that management's remarks today may contain forward-looking statements, which include statements regarding the company's growth and expansion plans, Such statements are based on management's current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in such forward-looking statements. Factors that may cause such a difference include, but are not limited to, those described in the company's filings with the Securities and Exchange Commission. Now I'd like to turn the call over to EDAP's Chief Executive Officer, Ryan Rhodes. Ryan?

Thank you, John, and welcome, everyone. The third quarter of 2025 marked another strong quarter for EDAP as we continue to execute on our mission to make focal one the standard of care for localized prostate cancer. With global revenues of 16.1 million US dollars, this is the second consecutive quarter with record overall quarterly revenue for the respective period. Additionally, This is also a record for HIFU revenue for a third quarter, which reflects consistent commercial execution, expanding clinical adoption, and growing recognition of the value FOCA-1 robotic HIFU brings to patients, physicians, and hospitals. During the quarter, our HIFU revenue reached $7.7 million, U.S. dollars, representing a 57% increase compared to the third quarter of last year. This is consistent with our previously announced strategy of focusing our investments in the company's core HIFU business. We recorded eight FOCA I placements, including six capital sales and two operating leases. This represents growth of 167% as compared to the same period a year ago, reflecting the growing confidence hospitals have in adopting FOCA-1 robotic HIFU as an integral cornerstone of their prostate cancer program. With new placements this quarter at the University of Virginia and the University of Michigan, Focal One has now been integrated within 21 of the 35 Society of Urologic Oncology, or SUO, approved fellowship programs, representing 60% of all such academic centers nationwide. Our growing presence across these leading urology centers is instrumental in training the next generation of urologists while accelerating clinical awareness and adoption of HIFU focal therapy as a mainstream treatment option for prostate cancer. Focal-1 procedures in the U.S. grew more than 15% year over year, making a return to double-digit growth. This acceleration reflects the growing clinical adoption of Focal-1 combined with the impact of our sustained investment in market access initiatives. We are seeing meaningful progress in reimbursement coverage with commercial payers, particularly among Medicare Advantage providers, which is driving broader patient access and stronger hospital economics. On the clinical front, an important peer-reviewed scientific study was recently published in the Journal of International Urology and Nephrology. This study concluded that HIFU delivered non-inferior 10-year oncological outcomes as compared to external beam radiation therapy in patients with stage 2 prostate cancer. Both the overall survival and cancer-specific survival rates were higher in the HIFU group with a statistically significant overall survival benefit favoring HIFU in early stage disease. This is an important addition to the growing body of evidence supporting HIFU in the treatment of prostate cancer. While both the HIFI and FARP studies are already showing strong mid-term cancer control as compared to surgery, this new publication further validates HIFU with favorable long-term follow-up data compared to radiation therapy. Together, these results continue to strengthen the clinical foundation for the FOCA-1 platform and HIFU's role in the treatment of localized prostate cancer. On the reimbursement front, the latest hospital and physician payment rules released by the Center for Medicare and Medicaid Services, or CMS, continue to reinforce the important use case of HIFU thus providing hospitals and physicians with a clear and predictable Medicare reimbursement pathway. In addition, several commercial payers, both local and national, have started to routinely approve individual claims around the country, particularly within Medicare Advantage plans, further reinforcing the positive economics driving adoption. I will now briefly touch on our development and focused areas to expand into new clinical indications. We are making meaningful progress in our benign prostatic hyperplasia or BPH clinical development program, which represents another major growth opportunity for the company. While our combined Phase I-II multicenter study is progressing to plan in Europe, We are proud to report institutional review board or IRB approval for the U.S. BPH clinical study in partnership with the Icahn School of Medicine at Mount Sinai in New York City, a prestigious academic hospital and recognized leader in urology innovation. This study will evaluate use of Focal-1 robotic HIFU for the treatment of BPH building further on our clinical experience in Europe. Our goal is to demonstrate that FOCAL-1's precision and image-guided approach can offer an effective, non-invasive, tissue-sparing alternative to conventional treatment options.

We expect the first patient to be enrolled in this study before the end of the year.

I would now like to provide a brief update on our endometriosis clinical evidence and commercialization progress. Starting first with clinical evidence, on October 20th, Professor DuVernard, the principal investigator of the Phase III randomized controlled trial, previewed the latest clinical data in the plenary session on endometriosis at the annual meeting of the European Society for Gynecological Endoscopy, or ESGE. As previously announced, the double-blind Phase III RCT compared patients treated in the HIFU group with patients assigned to a sham treatment group. Patients treated in the HIFU group reported a significant improvement across their various symptom scores at three months. Such improvements were maintained at the one-year follow-up. Over the same period, the majority of the patients in the sham group returned to baseline symptom levels similar to when they were enrolled in the beginning of the study. After unblinding, over 85% of the patients from the sham group, when given the option, elected to undergo a Focal-1 HIFU procedure to treat their condition. As noted at three and six months post-HIFU treatment, this group reported a significant improvement of their symptoms. These patients continue to be monitored as part of a long-term follow-up clinical study. On the commercial front, we are actively working with leading European centers in a limited launch phase. The goal is to establish a solid foundation to enable the expanded adoption of FOCA1-HIFU as a non-invasive treatment option for women suffering from deep infiltrating endometriosis. Finally, during the quarter, our teams maintained a strong, visible presence across multiple global scientific urology meetings. These meetings allow us to showcase our latest Focal One Eye robotic HIFU platform as a leading focal therapy technology. Urologists were able to attend numerous compelling presentations from world-renowned academic users on both the positive clinical benefits and the supporting scientific outcomes. Of particular importance was the World Congress of Endourology and Urotechnology, or WCET, meeting held in Phoenix, Arizona. This meeting featured a Focal-1 master class led by expert users as well as a semi-live Focal-1 procedure. During this event, Focal One received the 2025 Industry Award for Innovations in Endo-Urological Instrumentation. This prestigious international award given by the Endo-Urological Society acknowledges our innovation leadership in robotic HIFU technology. Focal One is the first focal therapy technology to receive this distinguished award. I will now turn the call over to Ken to review our third quarter results.

Thank you, Ryan, and good morning, everyone. For conversion purposes, our average Eurodollar exchange rate was 1.16 for the third quarter of 2025. As Ryan mentioned earlier, our record revenue for the third quarter was driven by significant strength in our core HIFU business, which grew 49% over the third quarter of 2024. Growth in our HIFU business was offset by expected continued decline in our non-core distribution and ESWL businesses, which declined by 16% in Q3 2025 versus Q3 2024. Total revenue for the third quarter of 2025 was €13.9 million, an increase of 6% as compared to total revenue of 13.1 million euros for the same period in 2024. Total HIFU revenue for the third quarter of 2025 was 6.7 million euros as compared to 4.5 million euros for the third quarter of 2024. The 49% year-over-year increase in HIFU revenue was driven by six focal one capital sales in the third quarter of 2025 versus three capital sales in the prior year period. as well as a 26% year-over-year increase in FOLCO1 treatment-driven revenue. As mentioned earlier, FOLCO1 procedures in the U.S. grew 15% year-over-year. For the nine months ending September 30, 2025, HIFU revenue was 21.3 million euros, an increase of 42% over the same period in 2024. Total revenue for the nine months ending September 30, 2025 was 43.5 million euros compared to total revenue of 43.8 million euros for the same period in 2024. Gross profit for the third quarter of 2025 was 6 million euros compared to 5.2 million euros for the same period a year ago. Gross margin was 43% in the third quarter of 2025 compared to 39.4% for the same period a year ago. The increase in gross margin year over year was primarily due to the strategic shift to our high margin HIFU business segment. Gross profit for the nine months ending September 30, 2025 was 18.5 million euros compared to 17.5 million euros for the same period in the prior year. Gross margin was 42.5% for the nine months ending September 30, 2025 versus 39.9% for the same period in the prior year. Operating expenses were 10.9 million euros for the third quarter of 2025 compared to 11 million euros for the same period in 2024. Operating expenses were 35.2 million euros for the nine months ending September 30, 2025 compared to 34.3 million euros for the same period in 2024. Operating loss for the third quarter of 2025 was 4.9 million euros, approximately 1 million euros lower as compared to the operating loss of 5.8 million euros in the third quarter of 2024. Operating loss for the nine months ending September 30, 2025 was 16.7 million euros, compared to an operating loss of 16.8 million euros for the nine months ending September 30, 2024. Excluding the impact of non-cash shared base compensation, operating loss for the third quarter would have been 4.1 million euros, compared to an operating loss of 5 million euros in Q3 2024. Net loss for the third quarter of 2025 was 5 million euros, or 0.13 euro per share, a 1.4 million euro improvement as compared to a net loss of 6.4 million euros or 0.17 euro per share in the same period a year ago. Net loss for the nine months ending September 30, 2025 was 17.7 million euros or 0.47 euro per share as compared to a net loss of 17.1 million euros or for the nine months ending September 30, 2024. Turning to the balance sheet, inventory decreased to 13.8 million euros in Q3 as compared to 15.5 million euros in the prior quarter. The sequential decrease in inventory was due to continued efforts and focus on just-in-time inventory management. Total cash and cash equivalents at the end of Q3 2025 were 10.6 million euros as compared to 16.3 million euros in the prior quarter. The sequential decrease was driven primarily by the cash used in operating activities to support strategic investments in Haifu. As announced earlier, we closed the credit facility with the European Investment Bank, which further strengthens our balance sheet. We are pleased to report that the first tranche of 11 million euros, approximately 13 million U.S. dollars, was received and will be reflected in our Q4 and full-year 2025 financial statements. I will now provide a brief update on tariffs. Based on the latest information, we are still forecasting a 15% tariff impact for all goods transferred between France and the U.S., On a year-to-date basis, the tariff impact to our business has been approximately €300,000, and we are currently estimating a full-year impact of €900,000. We continue to monitor the potential impact of U.S. tariff policies on a go-forward basis. In closing, during the quarter, we improved manufacturing efficiencies, optimized supply chain performance, and managed our operational spend. We are also making significant progress in our transition to a new supplier regarding our ultrasound imaging scanner and expect to see the cost reduction impact in the upcoming calendar year. These achievements lay the foundation for future growth. I would now like to turn the call back to Ryan for closing comments.

Thank you, Ken. With respect to guidance, we are maintaining our financial guidance for 2025. Our core HIFU business revenue is expected to grow within the range of 26% to 34% year-over-year, and our combined non-core ESWL and distribution business revenue is expected to decline within the range of 25% to 30% year-over-year. As we progress through the fourth quarter, our priorities remain clear. First, accelerate adoption and utilization across our Focal 1 install base. Second, continue expanding market access and reimbursement coverage, and third, maintained a disciplined investment approach specific to market growth opportunities. With the return to double-digit U.S. procedure growth and expanding presence at top academic centers as well as leading community hospitals, and the recent recognition of our innovative robotic Haifu technology, We drive forward in Q4 2025 with strong momentum and clear visibility for continued growth across our HIFU business. With that, I will now turn the call over to the operator for questions. Operator?

Thank you. If you'd like to ask a question, press star 1 on your keypad. To leave the queue at any time, press star 2. Once again, that is star and 1 if you would like to ask a question. I'll take our first question from Charles Wallace with HC Wainwright. Your line is now open.

Hi. Thanks for taking my question. This is Charles. I'm for RK. So I guess the first question I had was on the EIB deal, could you maybe give a little bit more color on how these proceeds are going to be used? And what was the kind of the main reason to do this? Was it just to provide more financial flexibility? And do you plan to use these funds strictly for the U.S. business or also in the international business?

Yeah, great question. With EIB, we've been open about our investment strategy, both in various areas to include product development, which is inclusive of R&D. but also in clinical development as we're working on expanding new indications. And so, really, it's more in those operating areas and some, obviously, in the commercial domain. We make appropriate investments where needed, but really it's across those three areas, product development, inclusive of R&D, clinical development, and some additional focus in commercial growth. But it is centered around our HIFU core business.

And to follow up, to answer the second part of your question, why the EIB, we did a lot of research and analysis, and given where the stock had been trading over the last 180 days, we thought this was the most attractive financing option to really allow us to further invest in Haifu, as Ryan mentioned, with no short-term dilution to the stock.

Great.

And then I guess you mentioned the double-digit increase in U.S. FOCAL 1 procedures. Can you comment on how many of these procedures were covered? And then also, as you work to expand coverage, do you expect the procedure volume to grow?

Yeah. So, again, we have a Category 1 CPT code. Some of these cases are obviously Medicare patients. Some are also noted in, as I referenced, Medicare Advantage plan patients, and some are commercial patients. So it's a little bit of a mix. I think the one area that I commented on was the fact that we saw improvement across the payers that represent Medicare Advantage plans. And that was a positive sign and a positive trend we've been on. And again, we believe looking, you know, forward, we will continue to drive momentum and activity across Medicare Advantage plans.

Great. And maybe one more question if I can squeeze in. Could you remind us, I think the third quarter is typically seasonally soft. Can you remind us what you expect in the fourth quarter?

So when we look to the fourth quarter, as Ryan mentioned, you know, we're reiterating our guidance for the year. And, you know, given what Ryan talked to you about, our guidance remains between 58 and 62 million for CY25. So our Where we don't give quarterly guidance, we feel confident that our Q4 number will be in that range to help us hit those year-end targets.

Perfect. Thank you so much for taking our questions.

Thank you. There are no further questions in the queue. I will now turn the call back over to Ryan Rhodes for any additional or closing remarks.

In closing, I want to thank everyone again for joining us on today's call, and we look forward to seeing you at the upcoming Global Investor Conferences. These include the UBS Global Healthcare Conference being held next week in West Palm Beach, Florida, the Jefferies Global Healthcare Conference in London being held the week of November 17th, and the Piper Sandler 37th Annual Healthcare Conference being held the week of December 1st in New York City.

Thank you. Thank you.

This brings us to the end of today's meeting. We appreciate your time and participation.