PROCEPT BioRobotics Corporation

We would not be increasing our revenue guidance, which Kevin will provide details on shortly, if we felt pressure associated with the capital equipment environment. Now turning to quarterly business updates, starting with our commercial organization. We have successfully hired a highly efficient commercial team of experienced medical device sales professionals. We implemented an effective training and onboarding program to put us in position to execute our 2022 commercial growth plan. While we approximately doubled our field-based commercial team at the end of 2021, the number of RET has been relatively unchanged for six months. Given the commercial momentum, excellent real-world clinical outcomes, and increased demand our technology has been able to generate, we plan to meaningfully expand our field-based commercial team in the third and fourth quarter of 2022 to further penetrate the market and expand our sales presence in the U.S. This increase is captured in our updated operating expense guidance. Even with a tight labor market, we continue to see strong interest from high-quality candidates, which gives us additional confidence in meeting our hiring and growth objectives heading into 2023. Next, I would like to comment on utilization and procedure trends, which we have seen in the last 12 months. We continue to believe the majority of aquabulation procedure volumes are converted TURP cases, which is the most commonly performed surgical procedure for BPH. We also believe we are taking resected procedures from other modalities, like simple prostatectomies and laser procedures of the prostate. On hospital utilization, we are seeing meaningful annual increases in utilization from our customers. We believe, based on our clinical data, the increase in utilization is attributable to the following factors. Given the predictability, reproducibility, and low learning curve associated with the AquaBeam robotic system, we are generally seeing an increasing number of surgeons using our system each quarter at our account. As a result, we believe an increasing number of accounts are beginning to standardize their respective procedure protocol in favor of aqua ablation therapy. Additionally, since our clinical data support outcomes that are independent of prostate size and shape, surgeons are using aqua ablation therapy in a broader range of prostate sizes. Specifically, when analyzing patient data from January 2021 to June 2022, we found the most prevalent size range treated fell between 60 to 80 milliliters. Given the size range of prostates treated over the last 18 months, we believe surgeons are beginning to standardize their procedures to aqua ablation given the limitation of surgical alternatives. Turning to clinical updates. In May, we announced four-year Water 2 study data at the American Urological Association Conference in New Orleans. As a reminder, Water 2 was a prospective FDA study with an objective performance criterion for both efficacy and safety in large prostates ranging in size from 80 to 150 milliliters. The four-year data were consistent with the previously reported primary endpoint. with no change to safety results. The efficacy result, as measured by change in IPSS and QMAX, also consistent at four years. Lastly, durability remains strong with only 3% of patients requiring surgical retreatment at any time up to year four. More recently, in early July, we attended the European Association of Urology Conference in Amsterdam. This was the first in-person European event since the pandemic and was well attended with more than 7,000 registrants. A key talking point among surgeons and key opinion leaders was our five-year water data, published in February 2022. As a reminder, our five-year water data are the only prospective randomized double-blind multicenter FDA pivotal study comparing the safety and efficacy of aquabulation therapy to TURF. The study proves aqua ablation superior safety due to low irreversible complication and superior symptom relief for prostate ranging from 50 to 80 milliliters. Aqua ablation at five years exhibited durability that was two times lower risk for retreatment due to recurrent EPA symptoms when compared to TURP. This is measured by patients going back to meds or requiring surgical retreatment which is represented by an approximate 1% annual retreatment rate. In Europe specifically, surgeons are enthusiastic about strong clinical data, which is driving them to learn more about aqua ablation therapy. Given this backdrop, we believe five-year water and four-year water tube data will be a significant differentiator for our customers when choosing to replace their historical BPH surgical modalities with aqua ablation. Lastly, touching on recent payer coverage policy updates. In the second quarter, we received numerous insurance coverage updates, adding to the already strong list of payer for aqua ablation therapy. In April, Aetna published its updated policy noting aqua ablation therapy as a covered surgical alternative for BPH, providing coverage for their roughly 21 million commercial members in the U.S. Additionally, in the second quarter, numerous Blue Cross Blue Shield Association healthcare plans also issued positive coverage as well as medical mutual. In aggregate, these policies along with existing coverage policies provide coverage for approximately 180 million members. As it relates to the impact of coverage on our business, there is both a long-term benefit and a short-term benefit. The obvious long-term benefit is increased utilization, which will take time as we penetrate the surgical market. The more important short-term benefit is the increased value proposition of our technology and the lowering of barriers to sell capital equipment to targeted high-volume BPH hospitals. Additionally, in mid-July, CMS published its 2023 proposed rule for hospital outpatient prospective payment system. The level six APC code for aqua ablation has a proposed payment that would provide the hospital approximately $8,700 for each aqua ablation procedure, which is an approximate 3.5% increase over the 2022 rates and in line with our expectations. The final rule is estimated to be published in November. In summary, we are pleased with our performance here today and continue to execute our strategic growth plan of penetrating high-value hospitals. increasing utilization by treating the full range of prostate sizes and shapes, and expanding private payer coverage. Given this positive momentum and the announcement of our long-term clinical data highlighting durability, we believe aqua ablation therapy will truly revolutionize the treatment of BPH. With that, I will turn the call over to Kevin.

Thanks, Raza. As Reza highlighted, our revenue for the second quarter of 2022 was $16.7 million, representing growth of 97% compared to the second quarter of 2021. The increase was primarily driven by U.S. revenues, including both system sales to new hospital customers and increased handpiece revenue. In the second quarter, we generated total U.S. system revenue of $8.5 million, representing growth of 79% compared to the second quarter of 2021. In the U.S., we sold 23 AquaBeam robotic systems with an average selling price of approximately $370,000. Average selling price increased approximately 6% sequentially and 10% compared to the prior year second quarter. Our ending second quarter U.S. install base was 114 AquaBeam robotic systems. Second quarter, 2022 U.S. handpiece and consumable revenue was $5.7 million representing growth of approximately 246% compared to the second quarter of 2021. Handpiece average selling prices in the quarter were approximately $3,000. We shipped approximately 1,740 handpieces in the U.S. in the second quarter, representing annual unit growth of 176%. International revenue for the second quarter was $1.9 million, which was roughly flat compared to the prior year period and increased 15% sequentially. International revenues in the second quarter of 2021 benefited from a meaningful number of rescheduled procedures and the deferral of capital sales from a severely impacted first quarter of 2021 due to COVID. Our strategy in Europe continues to be to increase brand awareness and market development activities. On a year-to-date basis, international revenue has increased approximately 23% from prior year and is in line with our expectations. Growth margin for the second quarter of 2022 was approximately 51%, an increase from 42% in the second quarter of 2021. The increase in growth margin was driven by a variety of factors, including higher U.S. sales, increased average selling prices, and higher production volume as we spread the fixed portion of manufacturing overhead costs across a larger number of units produced. Total operating expenses in the second quarter of 2022 were $26.4 million, compared to $16.8 million in the first quarter of 2022. Net loss was $19.2 million for the second quarter of 2022 compared to $14.6 million in the same period of the prior year. Adjusted EBITDA was a loss of $14.6 million compared to the loss of $11.6 million in the second quarter of 2021. Our cash and cash equivalents balance as of June 30th was $270 million, while our long-term borrowings totaled $50 million. We believe our strong balance sheet will provide the liquidity and capital resources needed to support and grow our current business. Moving to our financial guidance. Given our strong start to the year and continued underlying momentum in the business, we are increasing our full year 2022 total revenue guidance to be in the range of $66 to $68 million. Although utilization trends in the third and fourth quarter are expected to be down relative to first half levels, our updated revenue guidance assumes sequential growth in handpieces sold per quarter. As explained previously, as our install base increases throughout the year, this will provide a natural headwind to average utilization rates as new accounts are added. Regarding handpiece average selling prices, we expect pricing to be in the $3,000 range for the remainder of 2022, which is in line with year-to-date actuals. Turning to AquaBeam robotic system sales, We continue to expect modest sequential increases to the number of systems sold throughout the year with average selling prices now expected to be in the range of $360,000 for the second half of 2022. Lastly, on revenues, we expect 2022 international revenue growth of approximately 30% compared to 2021. Moving down the income statement, we now expect growth margins to be in the range of 50 to 51% which is an increase from our previously issued range of 47 to 49%. Turning to operating expenses, we now forecast expenses to be approximately $110 million. As Reza mentioned previously, the majority of the incremental spend will be allocated towards expanding our commercial team and initiatives in the back half of 2022 to put us in a favorable position to execute on our long-term growth plan. Lastly, we continue to expect Full-year adjusted EBITDA to be in the range of negative $63 to $60 million, although we are trending more towards the high end of the range. At this point, I'd like to turn the call back to Reza for closing comments.

Thanks, Kevin. In closing, I want to thank our employees, customers, and shareholders for all their support to help us along our journey to becoming the standard of care for BPH. We will continue to leverage our commercial and clinical investment to execute on our long-term strategy. Have a great day, and I look forward to meeting many of you at upcoming investor conferences. At this point, we will take questions. Operator?