PROCEPT BioRobotics Corporation

Good morning, and welcome to Procept Biorobotics' first quarter 2025 earnings conference call. At this time, all participants are in 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 Bauer Robotics' first quarter 2025 earnings conference call. Presenting on today's call are Reza Zadno, Chief Executive Officer, Kevin Waters, Chief Financial Officer, and Sham Shablack, Chief Commercial 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 Barobox 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, April 24, 2025. Except as required by law, Procept by Robotics 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 will 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'd like to 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 provide a commercial overview. Lastly, Kevin will provide additional details regarding our financial performance and updated 2025 financial guidance, beginning with our quarterly revenue results. Total revenue for the first quarter of 2025 was $69.2 million, representing growth of 55% compared to the first quarter of 2024. Growth in the quarter was driven by increased U.S. system and hand pieces sold as well as record international revenues. We exited the first quarter of 2025 with a U.S. install base of 547 systems, representing growth of 55% compared to the prior year period. we sold a total of 43 robotic systems in the first quarter of 2025, turning to the global macro environment, specifically our exposure to tariffs. As a reminder, following the establishment of full Medicare coverage in 2021, we initiated U.S. commercial operations in earnest at a time when the pandemic had exposed significant vulnerabilities in the global supply chain. In response, we took proactive steps to de-risk our supply chain by sourcing the majority of our strategic components in the US. For components that could not be sourced within the US, we took deliberate steps to maintain significant inventory levels. This approach not only mitigated the risk of supply disruption, but also helped reduce our exposure to potential tariff escalations. For example, Greater than 95% of the direct material cost of our single-use handpiece is sourced in the United States. Regarding our robotic system, our primary exposure to China lies in the ultrasound system. However, we have typically maintained a robust supply of inventory for this critical component. Kevin will provide additional detail in the guidance section. However, given our strong inventory position of ultrasound units, and the fact that all products are assembled in California, we currently anticipate only a modest impact to 2025 gross margin. That said, we have taken a conservative approach to our 2025 gross margin outlook and will continue to closely monitor potential headwinds that could affect fiscal 2026. Turning to clinical updates. In March, at the 40th annual European Association of Urology Congress in Madrid, primary endpoint results from the WATER-T3 randomized controlled trial were presented. WATER-3 is an international prospective multi-central study comparing aqua ablation therapy to laser enucleation in prostate sizes 80 to 180 milliliters. This study treated 186 men and reported three months primary safety and efficacy endpoints. Water 3 will also follow patients up to five years. At three months, aquabulation therapy delivers similar symptom relief to laser enucleation while demonstrating a 0% transfusion rate and significantly lower rates of ejaculatory dysfunction and incontinence. Notably, the rate of stress incontinence was 0% among aquabulation patients. These results add to our growing body of clinical evidence and support that aqua ablation therapy is highly reproducible in treating prostates of all sizes with a low learning curve. Aside from the clinical outcomes, we believe the water tree results will be instrumental in helping modify global urology guidelines in the future for larger prostates. Next, I want to provide a positive update regarding US Medicare coverage. Effective April 6, 2025, First Coast and Novitas, two of the largest regional Medicare administrative contractors, positively updated two key local coverage determinations, or LCDs. We estimate First Coast and Novitas account for approximately 30% of all Medicare patients in the United States. Regarding the LCD changes, First Coast and Novitas removed three key limitations. age-based restrictions for men over 80, voided volume thresholds that impacted patients in retention, and the requirement to measure prostate size via transrectal ultrasound. These changes significantly streamlined the pre-procedure workup and should expand access to ACK population therapy for a broader patient population. With that, I will turn the call over to Sham to provide more detail on first-quarter commercial performance.