PROCEPT BioRobotics Corporation

Good morning and welcome to Procept Biorobotics' first quarter 2024 earnings conference call. At this time, all participants are on a listen-only mode. 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. I would now like to turn the call over to Matt Baxo, Vice President, Investor Relations, for a few introductory comments.

Good morning and thank you for joining Procept Biorobotics' first quarter 2024 earnings conference call. Presenting on today's call are Reza Zebno, Chief Executive Officer, Sham Shablock, Chief Commercial Officer, and Kevin Waters, Chief Financial Officer. 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. 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. These risks and uncertainties are disclosed in more detail in Procept Biorobotics filings with the Securities and Exchange Commission, all of which are available online at www.sec.gov. Listeners are cautioned not to place under reliance on these forward-looking statements, which speak only as of today's date, May 1st, 2024. Except as required by law, Procept Biorobotics undertakes no obligation to update or revise any forward-looking statements to reflect new information, circumstances, or unanticipated events that may arise. During the call, we also reference certain financial measures that are not prepared in accordance with GAAP. More information about how we use these non-GAAP financial measures as well as reconciliations of these measures to their nearest GAAP equivalent are included in our earnings release. With that, I'll turn the call over to Reza.

Good morning, and thank you for joining us. For today's call, I will provide opening comments and a general business update, followed by Sham, who will go into detail on a few key commercial initiatives. Kevin will then provide additional details regarding our financial performance and updated 2024 guidance before opening the call to Q&A. We are pleased to report another strong quarter with total revenue for the first quarter of 2024 of $44.5 million, representing growth of 83% compared to the first quarter of 2023. Growth in the quarter was driven by strong U.S. system sales, increased utilization from our expanded U.S. install base, and record international revenues. U.S. monthly utilization increased approximately 7% compared to the prior year period, which is significant given an 84% increase in our install base. We exited the first quarter of 2024 with a U.S. installed base of 354 systems out of target market of 2,700 total hospitals that perform BPA surgeries. The significant increase in new accounts in conjunction with our ability to move accounts up the utilization curve further demonstrates not only our team's consistent commercial execution, but growing customer and patient demand for aquablation therapy. As we highlighted earlier this year, there are multiple factors trending in the right direction, which will allow us to continue to execute against our long-term growth plan while being disciplined in showing a path to profitability. We believe these underlying fundamentals reflect the technology that is laying the foundation to become the BPH surgical standard of care and a business that will be a leading urology franchise globally, starting with the hospital CapEx environment. We continue to believe the market is stable to improving compared to the previous 9 to 12 months. Specifically, we are having more proactive conversations with the hospital CFOs and IDN network partners who just a few quarters ago were exercising more caution in pursuing general CapEx investment given lingering macro headwinds. With a growing and increasingly educated patient population, Along with motivated urologists, we are seeing hospitals prioritize investment in our aqua beam robotic system to ensure they stay competitive and not lose patients to other area hospitals. Given the disruptive nature of our technology and that patient outcomes are independent of surgeon skill or experience, every BPH hospital can now build a robust BPH practice with aquablation therapy and not have to refer patients out to area specialists. Given this market dynamics, we are still very early in our adoption curve with a long runway in front of us selling to BPH hospitals. Additionally, in the first quarter, we launched a pilot program at our first ambulatory surgery center in the United States with one of our most experienced aqua population surgeons. To be clear, we sold 38 systems in the first quarter but placed 39. The 39th is the aforementioned ASC and is included in our U.S. installed base of 354. Our primary commercial strategy remains focused on penetrating BPH hospitals and partnering with the thousands of urologists who perform resective surgeries. For aquablation therapy to be the market leader, we first need to convert the majority of TURP and laser procedures which are primarily performed in the hospital setting before making a meaningful transition to ASC. Our objective in placing systems at ASCs is to ultimately expand the surgical market long-term and increase overall surgical patient volumes that were previously either on medication or failed medication. To note, there's established Medicare reimbursement for acquisition therapy in the ASC at approximately $6,200 per procedure. We are encouraged with early utilization metrics at this center and will provide additional updates when it makes sense in the future. Turning to our commercial organization. We entered 2024 with approximately 40 capital sales reps, of which 10 were added in the third and fourth quarter of 2023. As a reminder, we believe the productivity curve for capital reps is approximately six months. Over this six-month period, They are responsible for building out their respective pipelines. Thus, we do not expect the capital reps added in the fourth quarter of 2023 to start meaningfully contributing to U.S. system sales until the second half of 2024, which is factored into our 2024 guidance. Additionally, we hired a new strategic account team, which is not included in the 40 capital reps. Sham will provide further detail on this team's early impact in the first quarter. Next, touching on our utilization team. Given our strong commercial momentum and expanding pipeline, 2023 was an investment year to meaningfully increase headcount and add capacity to support future growth. Similar to our capital rep team, we entered 2024 with the most experienced utilization team in the company's history. While we will continue to increase headcount in 2024, it will be at a slower pace compared to 2023. Our goal in 2024 will be for these traps to continue to identify and train new surgeons at the existing and new accounts to increase utilization. With respect to international performance in the first quarter, We generated $4.3 million of international revenue in the first quarter of 2024, representing growth of 65% compared to the prior year period. Growth in the first quarter was once again driven primarily by strong sales momentum in the United Kingdom. Given the accelerating interest from UK surgeons and strong unit economics on handpiece and system average selling prices, We plan to make further investments in 2024 in the UK to accelerate growth and expand patient awareness. Additionally, following our post-market survey in Japan, we have generated significant interest from Japanese surgeons. We are currently in the final stages of signing sales contracts with some of the most reputable urology practices in Japan, and we plan to launch a population therapy program later this year. While we are excited about these early placements, it will take time to build our pipeline and launch accounts to start generating meaningful procedure volumes and revenue. Like the US and the United Kingdom, our strategy is to lead with clinical data and key opinion leader adoption to support a more robust and sustainable commercial launch. Lastly, I want to touch on prostate cancer. A few weeks ago, we announced we will be hosting an investor event and surgeon panel at the 2024 American Neurological Association Conference in San Antonio on Friday, May 3rd at 8 a.m. Central. A webcast option will be available on our IR website for those who cannot attend in person. The agenda for Friday's event will be to highlight six months follow-up data of patients treated for prostate cancer with aqua ablation therapy. Additionally, one of our panelists will share a specific prostate cancer case and how the patient was treated. Lastly, we will conduct a fireside chat with Dr. Inderbir Gil, founding executive director of USC Urology and chairman of Urological Cancer Surgery at Keck School of Medicine of USC. The fireside chat will focus on limitations of current prostate cancer treatment options and why aqua ablation therapy has the potential to be a great option for patients and ultimately surgeons who want to recommend a treatment that is effective and reduces rates of unnecessary harm. We look forward to seeing many of you this Friday in person. To conclude my prepared remarks, every key metrics we track continues to move in the right direction. our pipeline and sales funnel continue to grow nicely in what we currently believe is a stable to improving macro environment. On average, the longer an account has been active, the more procedures they do. We are launching new accounts with more surgeons while sustaining retention rates consistently above 90%. Our commercial organization is the largest and most tenured in the company's history, which we believe will lead to increased productivity. And lastly, we will continue to enroll patients in both prostate cancer studies to support aquabulation therapy's clinical value in this therapeutic area to expand our footprint in the larger urology market. Given this positive momentum, we believe aquabulation therapy is laying the foundation to become the BPH surgical standard of care, and Procept is emerging as a leading global urology company. With that, I will turn the call over to Sean.