PROCEPT BioRobotics Corp (PRCT) September 15, 2026 Conference Transcript

Okay. I think we're ready to get started. Thanks, everyone. I'm Dave Raskat, Senior MedTech Analyst here at Baird. Happy to have the ProCEP team here with us. We've got Kevin, the CFO, and Larry Wood, CEO, is, I believe, going to walk through a brief presentation. Then from there, we can hop into the Q&A. So thanks for joining us.

Oh, thanks. We're super glad to be here. So here's our safe harbor statement. I'll just say, I think as industry safe harbor statements go, I think ours is best in class. So feel free to copy it and all of our financial things. So I'll just talk a little bit about what the opportunity is around BPH. So there's about 400,000 people that get surgical therapy right now for BPH. And when you look at our penetration to that, we're, you know, a year ago, we were about 10% penetrated. We're a little better than that now, but still a huge opportunity just to penetrate into the existing market of the existing patients that are getting therapy today. But it's a significantly undertreated disease, and I think the things that happen to patients while they remain untreated are underappreciated. It can damage long-term bladder health. It can lead to retention and constance if it's not treated. I think part of the problem is the treatments that exist today are just not that attractive to many of the men with BPH. And so they tend to delay therapy for as long as they can. If you look at the funnel above the 400,000, there's about 8 million men a year who have BPH and are treated with medication. So it's a large number of people that know that they have BPH. They're unhappy with how things are going, and so they're taking medication to try to manage it. Importantly, 1.1 million men each year stop taking their medication. They either stop taking their medication because they're no longer effective, or they don't like the complications, or maybe they've read some of the latest data that's come out that suggests there's an association between the dual medication therapy and dementia. But there's a lot of reasons why people don't want to be on their medication. And so that's the next group of patients. And then if you go up front about that, there's about 40 million people who are living with BPH, and they're probably the people that are less symptomatic. But it's a progressive disease. The prostate continues to enlarge over time. So these 40 million people will continually move down and continue to fill that funnel. So we have a big near-term opportunity, which is converting existing surgery, but then there's even a larger opportunity with getting patients off the sideline. So our technology itself is unique. It represents a best-in-class therapy for this. And when I talk about best-in-class therapy, what I really mean is the things that matter most to patients. So there's about four things that when we do patient-centric research always rise to the top. The first thing is men want complete relief of their symptoms. They want maximum symptom relief. The number two thing is they want to maintain their urinary function. Number three is they want to maintain their sexual function. And number four is they do not want to have a second procedure. So when you put all those four things together, you kind of have to look at what the other therapies are that are available. There's a radical prostatectomy, which is a very successful one-and-done procedure. The problem with it is it does not preserve a sexual function. It does not preserve urinary function. If you look at incontinence rates after a radical prostatectomy, it's about 25% to 30% of men have incontinence. And if you look at the ED rates, the overwhelming majority of men have severe ED following a radical prostatectomy. So it's a one-and-done, but it doesn't take care of the rest of it. If you look at some of the other non-resective therapies, they do not provide complete relief, even though they might preserve urinary and sexual function. But they are procedures that oftentimes require retreatment within one to three years. So it's another procedure. It's another transurethral approach. And this is something that I think is really important to patients. And when we say men only want to have a one-and-done procedure, it is a large French device going through the urethra. And I think when you're talking about devices that are in that 20 to 24 French range, the number of times a man would like a 24 French device through his urethra is probably zero to one time. And this is why getting one procedure that is totally curative of your problem is so important to men. When we look at the PROSEP technology for aquablation, we have very, very low incontinence rates, about as close to zero as you can get with a medical procedure. We are able to preserve sexual function, and our durability is right in line with TURB, which is the gold standard procedure. So we can offer all of these things, and we do that by utilizing a water jet. We don't do cutting with traditional knives that create scar tissue. We don't use heat. We don't use radiation. We don't use steam. We just use water jet technology that's able to cut the tissue using the high-intensity water jet. We use AI to map the prostate so that we know exactly where the prostate is. The physician can alter the lines, alter the cutting lines where he wants the water jet to go. But once he designs the procedure or augments the procedure after our AI, it is simply a matter of standing on a foot pedal and watching the water jet do its work. They typically will do two passes with the water jet. They come in at the end with a loop and do a bladder neck cotterization just to make sure that there's no bleeding complications and the procedure's over. So it's fast, it's reliable, it's repeatable, and it delivers best-in-cast outcomes. And this is what we need to establish as the standard of care for BPH. From a business side, you know, we've seen a significant increase in our top-line growth. Revenues continue to grow over time. Our range this year is $390 million to $410 million. If you look at gross margins, we've continually seen improvement in our gross margins. uh we put a lot of effort in the past year to um uh to reducing you know discounting reducing discounts reducing anything that would adversely affect our ASP so we've seen significant growth of our average selling prices for both our system placements and our our consumables as well so that's been a big thing and then our EBITDA loss continues to fall and we expect to be EBITDA positive by the end of this year uh in Q4 so that's kind of you know what we've been focused on what we're driving and and that's kind of how we got to where we are thank you thank you for for that um i wanted to to to start maybe um you know from a high level larry you know you've been in the

the role for for about a year now um and you know the the the expectations i'll say for for growth a year ago right six months ago i think have come down um and you know you've put in some uh pieces into play to try to revert that growth and get things on a better track. So when you think about the work that's happened over the past year, the understandings that you've seen over the past year, I guess, how would you characterize where we are today relative to some of those initial comments last year and earlier this year, and the visibility you have into being able to navigate this environment going forward?

I would say nine months ago, you know, I was on a call and there were so many questions that people had about the company. There were questions about, you know, we did sort of an inventory reset. We decided there was too much inventory in the field and we had eliminated some discounting practices. And people were like very focused on that is the inventory issues behind you. You know, Q4 of last year, we were selling our system sale price was about $425,000. People were like, you know, that would seem like it was coming down. does that indicate a weakness in capital demand and you know is this just sort of a weakness in the whole company thesis you know handpiece pricing you know I think for the first three quarters of last year we were about $3,200 there were a lot of questions about about that sustainability there's certainly procedure growth there were questions about why do people not up upgrade their legacy systems you know people have their legacy aqua beam systems you know you're selling greenfield hydros but we're not seeing a lot of upgrades is that just kind of an indication that you know people buy the system and then they're not that excited about it all those things if you look at where we are today um we eliminated all those discounting practices both on the capital and on the consumable side so our pricing went from thirty two hundred dollars for hand pieces i think we've been over thirty five hundred dollars for for first half of the year which is a significant improvement in asp and it wasn't done through like a price increase we didn't jam all of our customers with a big price increase. We just eliminated end of quarter discounting and bulk purchasing and all those things. And I think there were people that worried there was, we had a reset in Q4 of last year on field inventory. But if you look at this year, we've been, you know, we expect to be at the one-to-one ratio for the full year with procedures matching handpiece sales. So I think that that's behind us. Our system pricing, you know, we've delivered on our robot placements. We've been above consensus for the first half of the year. And in Q2, our system pricing was $495,000. So a significant increase in that. We wanted to be purposeful about starting a replacement program. And we wanted to work with our customers and be good partners. So we developed a trade-in allowance where if people wanted to upgrade their system, they could trade in their legacy system and get an upgrade. And the response to that has been really positive. We thought we would do between eight to 10 of those this year. We did two in Q1, which was very fast, and we did 14 of them in Q2. And so I think that bodes well for a replacement strategy. About half of our installed base now is our legacy AquaBeam, and about half is our Hydros. So getting those legacy systems out of the field at a higher utilization level, I think, will be important. We also invested in launch teams. We now have a methodology for launching sites in a much more advanced way. When we look at the metrics from launch team activity, we see our time from PO to first cases has been reduced by about half, and we see the highest utilization of any cohort in our launch team model. So I think that bodes well for the future as well. So we're focused on that. The procedure growth still isn't what we want it to be. We have more work to do there. We've completed the reorganization of our sales force, and so we have our sales reps out of routine case coverage now, which is an important part to get them freed up to sell in the office while still covering the cases. So that's been a plus. We just started our first direct-to-patient campaigns. We're active in AT markets with television. We're active nationally with radio. We have social media campaigns. And this is the first time the company's actually done any of that new sustained marketing efforts or taking our story directly to patients.

So a lot of things to, I think, be proud of, But we still have a lot of work ahead of us, you know, at the analyst day earlier this this year, you also, you know, outlined a growth growth guidance for 2027 as well. Two part question, I guess, you know, what at the time, you know, gave you the confidence that you had the visibility into a 2027 type number, I think 25 to 30 percent was the the the ballpark growth. And as you see what has happened with the business so far this year, so far through Q3, what's implied in the back half of 2026, I guess why or why not do you still feel as though that 25 to 30 is the right way to think about growth next year?

Well, I don't think we have enough information to reset it. I think we are going to continue to grow at a differentiated number than a lot of other companies in our space. And so while we're not growing as fast as we wanted to necessarily, our growth rate is still pretty significant. And so I think we feel good about our thesis. I think all the growth in the company and all that's been built largely to date has been off just physician adoption and physicians doing the therapy. They've never really had the backing of the marketing programs and the other things. And so I think as those things take hold, that's going to help as the cohort of systems that have been done under the launch team, And as that group gets larger in size, I think that'll be a bigger contributor to our performance. And then you also have, you know, as we replace systems, it's an opportunity to relaunch those. And as that cohort gets bigger, I think that helps us as well. So when we get to the end of the year, you know, we'll figure out, you know, we'll have our formal guidance for 2027. We'll take a look at that. But, you know, I think, you know, you just look at the opportunity and the number of patients taking surgery today, the number of untreated patients. I think we have a long runway to continue to grow at a differentiated growth rate.

It's a tough question to answer, but if what you're seeing in the back half of the year not sort of underwhelms relative to what the 2026 commentary is, but gets you to a place where it feels as though 2027 expectations might be a little high, would that be coming from utilization from systems from the upgrades from you know ASPs what would be the the metrics that either get you to in that range below that range maybe even above that that range yeah I think right now if you look at where expectations are they are significantly below where our long-range plan was set

at 25 to 30 I think consensus right now is somewhere around 19 to 20 percent growth and as larry mentioned i think we still can grow at a differentiated rate to the to the overall market so look we're not focused right now on how we're going to miss 2027 what we're focused on are like what are the upside drivers and opportunities we have and i i'd frame the question more that way i think there's a lot of room with greenfield system placements to go still there is an underappreciated opportunity with the replacement cycle that are in expectations next year and I think how the setup is for next year is there's not a large increase in utilization within our existing accounts to get to consensus numbers but as Larry highlighted we'll be prepared to talk about 27 at a later date but I would also suggest that the current 2027 estimates and environment does not assume a lot of the initiatives that we're working on today really do come to fruition.

Last one on this topic. I believe last quarter you had talked about in the context of 2027 some of the levers you have around gross margins, the EBITDA guide that you put out there for 2027 as well. Do you feel as though from an operating perspective, from a gross margin perspective, that there is more cushion on that angle or on that side of the business than there is on the top line? Or if, you know, the top line is slightly less than we assume today, that, you know, you would see, you know, some more margin compression as well on that front?

Well, I think we've taken a lot of action to, I mean, if you look at, you know, procedures are off where people had modeled this. But, you know, at the same time, we gave a new guidance on procedures, we reiterated our revenue for the year at the 390 to 410. So we feel, you know, we still feel that we can achieve the revenue because of the work we've done on pricing, our replacements, and on our other strategic initiatives. So we feel good about that. I think when we think about spending, you know, we're going to prioritize top line growth. If there's an investment we make that we think can accelerate the top line, you know, we're going to make those investments. And so that's going to be our priority always. At the same time, we want to be fiscally responsible. One of the reasons we're running pilots on our direct-to-patient campaigns is we want to see the metrics out of them. We want to see what gives us the biggest bang for the buck and what gives us the most leverage out of that. So we'll continue to do that. I think the other thing is, if you look at the company spending over the last several years, there's been a lot of investment in infrastructure and just in the corporate functions to make sure that they can sustain the growth. I think we've reached critical mass there. So people get their merit increases, but I don't see us adding a lot of headcount at the corporate level. So So things like R&D, things like our G&A spending, those things, I think, are going to be largely flattish with only minimal increases. So as a percent of sales, they will come down, and we'll get leverage out of those functions. At the same time, it gives us the room to invest in things that we think drive growth. And that's pretty much the conversation Kevin and I have all the time whenever there's a request for some headcount or funding or whatever. Is this going to drive growth or not? And if it is, tell me more about it. If it's not, then it's probably not something that's going to get funded.

I'd be 26. This really was a build year for the company. We had to get through the field, Salesforce reorganization. We had to fully staff the launch team. We became fully enrolled in our Water Fork Cancer Study. And if you look at what that produced, it produced an operating expense increase of around 20% on 30% revenue growth.

And if you look historically, we've been able to manage the company where revenue growth has been about 2x opex and i would expect 27 gets more back into that operating cadence as opposed to where we're at in 26. okay um you know on the the the system placement greenfield opportunity side i think part of um you know the commentary in q2 was that more accounts wanted to upgrade to to hydros um and and you know you've got lower utilization on the aqua beam systems i think what 50 50 split in the field at this point um so uh i i believe you're also uh potentially piloting some of these upgrade programs some of the leasing operating lease um uh uh business uh i guess setups right um so um when when you think about where um you know the install base is today um the growth that you have versus the upgrade opportunity that you have Can you talk a little bit about the demand that you think that is out there that should continue to drive, in addition to system upgrades, growth in the installed base?

Well, we've been very pleased with the demand in greenfields. There's still a lot of sites, and obviously we've been able to hit our system placement numbers for the first half of the year, again, at our highest ever ASPs. We get to layer on top of that a replacement program that's going better than we would have expected at this point in time. So I think we feel good about what those opportunities are. And we have a pretty long window into our capital cycle, and we continue to remain confident about that. There are certain hospital systems that, for whatever reason, they just will not pay for capital. They just won't. And so we don't want to miss out on volume or an opportunity there. So in those cases, we can do lease structures. We can do other things. I think that's a small minority part of our things. I think we pilot those in a couple of places. But I think for the most part we've been able to you know deliver on on capital and I think you know We continue to do that. I don't know if you have anything to add Kevin.

No, I think we Feel really good that the capital pipeline continues to be strong. We have a long runway in front of us It's it's we're not hitting kind of a penetration ceiling or threshold and we are seeing now A lot more interest from large IDN and hospital networks And that coincides with the replacement cycle as well Is there a view on the company's favorability in selling a system outright versus doing some type of operating lease?

I mean, we know now that, right, intuitive, 70% of their sales are coming from some type of operating lease sale, and they've got this pretty significant recurring revenue stream of operating lease revenue. Is that a consideration at all when you think about the initial sale versus generating more recurring revenue from some of these operating lease payments? Or is the metrics a little bit different internally?

I think our biggest opportunity is to place robots and do it at a high utilization number. And I think if we can get the capital sale, I will say when a hospital makes a commitment that they're making, they spend half a million dollars on a system and we launch it properly we do those things you know it's a big investment they have real skin in the game I you know I've seen these programs before and I won't speak directly to intuitives but I've seen these programs before where if you make the bar really low to start a program then it's like well we can try it we'll see if it works we'll see if it doesn't but they don't have skin in the game and what you don't want to do is get you know a whole bunch of place systems under leases and then have people you know just say well it went six months it didn't really work out I'm gonna return it and I think there's all sorts of models. I've seen them run at other companies when I was at Edwards, but you do something where you say, hey, we'll give you the box for free, but you have to do X number of procedures. And that all sounds fine and good until you get to the end of the year and they did 70% of what they were supposed to do. And then what do you do? I mean, you can sue your customer for not meeting the terms of their contract, but I read a thing one time that said suing your customers is usually bad so I think that's not a great strategy and so you know it's a contract that you have but it doesn't really have any teeth into it because if people don't meet their procedure numbers what are you going to do take the box back are you going to just fold up on them as a customer and lose the 70 cases instead of 100 so it's just it's just not always a great model you need to make sure if you're going to do leasing that the lease terms work for you and you know I'm you know we eliminated all these discounting practices I'm not against volume based rebates what I'm against is having a be purchase-based and not procedural-based. If a hospital system wants to partner with us and they say we want to make this our procedure of choice, can we get a volume-based rebate for procedure growth? I'll absolutely work with people. I did that my whole career. I'm just not going to pay people for loading up their warehouses and then consuming them for the next two quarters.

I know you touched a little bit on this realign in Salesforce maybe and how that translates to utilization growth. Are there any green shoots you see within either the hydro systems, the systems that have transitioned or upgraded up to hydros or the greenfield opportunities that leave you feeling decently comfortable that utilization growth will be something that ultimately returns to the company either from an account basis or just from the proactive investments that you've made in the field?

Well, I think we sort of, I would say we have three cohorts of systems in the field. We have our legacy AquaBeams, which are performing the lowest right now as a cohort. We have our HydroSystems, which are performing higher. But our highest system performance is ones that we've done under a launch team. So that seems to indicate to me that we can influence utilization by our execution and by our sales plan and creating the right expectations i think you know the reason we invested heavily in the launch teams and the reason why i think that remains our biggest no regrets decision is your best time to create good practices is when you launch they've just spent a lot of money on the robot everybody's excited to see what it can do that's your best time to get resources to get block time to get all those things to set expectations you know you should be doing three cases in in a setting you know not onesies and twosies cases i think in our old launch world i think people you know We're excited to get that first case done, but if you come out and you do one case and everybody takes their picture and puts it on social media, and then they don't do another case for two weeks, that's not a launch system. That's not a feature. We want people to launch and get into a steady cadence of doing cases over and over. I think that discipline is what the launch team has brought to the process. I think as we continue to do that, whether it's greenfield systems or replacement systems, we can create a different level of utilization. and the biggest challenge, and I'll just preempt a question that I get a lot, is, hey, if launch teams are so great, why don't we see it in your numbers? And the reason you don't see it in the numbers is it's just not big enough yet. You know, we did 20% of our systems in Q1 under a launch team. I don't know how many we play, say 40 or 50 or whatever. That's going to be eight to 10 systems. You know, when you have eight to 10 systems that come in the middle of the quarter and you have an installed base of 800, those 8-to-10 systems can't lift the entire field's utilization rate. So once that cohort gets big enough, then you'll be able to really ascertain the lift. But it's got to get big enough for that to be meaningful.

Kevin, maybe remind us on some of the seasonality comments into Q3 and if at all, how you're thinking about those today.

Yeah, I think seasonality is primarily more impactful for procedures in the third quarter as opposed to capital. And what I mean by that, it's typically the quarter where we see a lot of surgeons take vacation. If you look historically, the absolute number of procedures increase in the third quarter, the second quarter has been relatively insignificant. I think that's what our guidance implies for this upcoming third quarter as well. but then what we would plan to see in the fourth quarter is a significant increase in sequential procedures. That's in line with historical averages. I wouldn't suggest that our guidance is dependent in the fourth quarter on a lot of the initiatives really having a material impact. I really don't see that flushing through until 2027, but that would be normal seasonality on the procedure side of the business. On the capital side, Q4 typically is our strongest quarter like like most other capital equipment companies but the timing in general it on capital could be much more variable than I would suggest on procedures but we expect Q4 to be our highest number of capital sales as well maybe on on the the competitive side and as it relates to you know aqua beam penetration in the market, you know, where do you think the next hanging fruit is, right?

I think if you think about the different procedure sets, TURP, of course, is the biggest one. I think the last, you know, publicly available Medicare data that we have suggests that TURP really hasn't moved even though or as aquablation has risen to 15 and 16 percent of the market. So when you think about where the next opportunity for share capture is from, Do you have to drive, you know, that conversion from TURP to get it? Are there still other opportunities in there? If it is on the TURP side, you know, how do you get it?

Well, I mean, I think there's opportunities across the board. TURP's the largest single cohort, and I think there's a lot of attractive reasons why going after TURP makes a lot of sense for us. It's an in-hospital procedure. It generally causes, you know, is an overnight stay. And so I think we're a much better procedure than TURP and much more reliable, much more repeatable, much less physically demanding on the clinician than doing a bunch of TURPs. So I think that is an attractive option for us and the number one place to go. I think there is still places for us to continue to win in some of the other therapies that are already declining. If they're already declining, you know, we're perfectly happy to let them continue to decline and take any of that space. But I think the other part about it is, you know, there are a million men sitting out there who have gotten off their drug therapy and, you know, what's it going to take to get them off the sideline? I think some of it is just a lot of patient education. The real reason that most men don't want a procedure is if you talk to most men and you say, what's the procedure on your prostate look like? They're like, they go right to a radical prostatectomy because that's what their dad had or their grandfather had. And they had a terrible outcome and, you know, it destroyed their sexual function. You know, they had to wear, you know, adult diapers after that. they you know that's a pretty miserable thing for people to sign up for I think once people are educated that we can relieve your symptoms that we can take good care of you and and you know you don't have to give any of those things up and I think that's a that's a game changer but we're gonna have to take that case directly to the patients and that's where we started our patient programs last two maybe in the last 90 seconds we have still on the competitive side you know PAE right curious as to how you're feeling about your competitive position against that product?

It's a question I think a lot of investors ask. And the second one would be on the prostate cancer opportunity. If you could just touch on quickly that, what the timelines are, and how you expect to go from the...

PAE isn't done by the urologist. So that doesn't consume any of our capacity. And we have a lot of patients in the BPH funnel. And so I just don't think PAE is that significant of a headwind for us. Yeah, it's growing, and yeah, it's out there. But we know what's driving it. It's all being driven off of the economics. It's not being driven off of, you know, great things for patients. And so I think a lot of the patients are either patients with very mild symptoms, they're doing it almost preventively. And if there are patients that have severe symptoms, we know the procedure doesn't work very well and their re-intervention rates are really high. So I think those patients will come back. I think the cancer issue is a significant opportunity for us. It leverages our exact therapy. We're running the Water 4 trial. The data comes out, you know, May of next year for the six-month primary endpoint. But, you know, you look at the the choice that men with BPH face it's bad The men the choice that men face with cancer is horrifyingly bad live with the cancer in your body and keep your sexual and urinary function or Get the cancer out of your body and give up your sexual function and take a one in three chance You're gonna lose your urinary function. That is a terrible option and the fastest growing segment of cancer therapy right now is watchful waiting Because men would just rather not have a procedure they'd rather live with the cancer in their body and hope that they're a slow progresser than change. And so I think if our data is positive and we show that we can get the cancer out of your body but not destroy your sexual function, urinary function, I think that's going to be a huge game changer for patients.

You get data in May and then submission, approval, rollout?

Yeah, well, we'll see. We're not contraindicated for cancer now, so if somebody wanted to start doing it, they certainly could. The issue for us is what's the data say? And I think you know, I'm a big believer in the data drives your strategy not the other way around and you know We'll have the six-month data in May and we'll have The one-year data probably in the fall and so I think those two data sets are going to be important for how we lay out our long-term Strategy okay that work definitely over time.

So thanks for joining us. Thanks.

Thank you for here