Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- PROCEPT BioRobotics Corp (PRCT, Financial) reported a strong quarter with total revenue of $53.4 million, representing a 61% growth compared to the same quarter in 2023.
- The company saw a significant increase in US system sales and record international revenues, with a US install base of 400 systems, up 72% from the prior year.
- US handpiece and other consumables revenue grew by 101% compared to the second quarter of 2023, indicating strong utilization and surgeon activity.
- Gross margin for the second quarter of 2024 was 59%, an all-time high and 200 basis points above the guidance provided in May.
- The company has made progress in expanding gross margins and maintaining good operating expense control, reflecting strong operational execution.
Negative Points
- Despite the strong revenue growth, PROCEPT BioRobotics Corp (PRCT) reported a net loss of $25.6 million for the second quarter of 2024, slightly higher than the $25.3 million loss in the same period of the prior year.
- Total operating expenses increased to $58.3 million in the second quarter of 2024, up from $44.1 million in the same period of the prior year.
- The company continues to face challenges in the hospital CapEx environment, although it believes the market is stable to improving.
- There are ongoing concerns about the impact of RAC audits by Medicare, which could affect the utilization of their systems.
- The company is still early in its adoption curve, indicating that there is a long runway ahead before achieving widespread market penetration.
Q & A Highlights
Q: Can you discuss your ability to leverage the business on the gross margin line and OpEx line, and how we should think about the cadence moving forward?
A: Kevin Waters, CFO: The biggest contributor to gross margin expansion is our ability to leverage fixed costs and absorb related overhead on increased revenues. We expect gross margins to expand in the third quarter to around 59.5% to 60%, and exit the year north of 60%. This trajectory gives us confidence in the long-term profitability of the business.
Q: Can you talk about the international expansion opportunities, particularly in the UK and Japan?
A: Reza Zadno, CEO: We are very happy with the strong second quarter international performance, driven primarily by the UK. The NICE endorsement has been a great driver. We also placed two robots in Japan. We expect 2025 to be a great year for Japan and are excited about the future visibility in the UK.
Q: Why does the back half guidance imply a slight deceleration compared to historical trends?
A: Kevin Waters, CFO: The first half was stronger than historical trends. We are managing expectations due to the sensitivity of monthly utilization. We plan to launch almost 100 new accounts in the back half, which takes time to ramp up. There is no slowdown in utilization; it's more about expectation management.
Q: How is the commercial team, especially on the capital side, trending?
A: Sham Shiblaq, Chief Commercial Officer: The team has expanded but the processes are well in place to onboard new employees and get them productive quickly. We are thrilled with the level of talent we bring in. The strategic accounts team is also making good progress, helping to build our pipeline and bring deals to fruition.
Q: Can you comment on the system ASP and the capital outlook?
A: Kevin Waters, CFO: We raised the ASP for the back half of the year to $380,000, coming off a $378,000 ASP in the second quarter. We continue to have productive conversations with hospital CFOs about the ROI on our system, which is leading ASPs to creep higher.
Q: How are you dealing with RAC audits by Medicare and any insurance backdrop updates?
A: Sham Shiblaq, Chief Commercial Officer: RAC audits are common and we started seeing them in late summer of '23. Despite this, we've increased utilization nicely. We are working with surgeons and Medicare to remove the size restriction. The impact on our ability to expand and achieve utilization targets is minimal.
Q: Can you talk about the difference in utilization from accounts less than 12 months old versus those longer than 12 months?
A: Reza Zadno, CEO: It takes about three to four quarters for an account to get to about seven procedures per month. The longer the accounts stay with us, the higher their utilization. Newer cohorts are ramping up faster due to launching accounts with multiple surgeons.
Q: Are you seeing early treatment of prostate cancer with Aquablation, and is this a TAM expanding indication?
A: Reza Zadno, CEO: We are not promoting our product for the treatment of cancer in the prostate. We are running studies and have presented preliminary data. The current market includes patients with cancer, so this is not an expansion for the BPH indication.
Q: Can you explain why a system came out of the install base in Q2?
A: Kevin Waters, CFO: A system did not come out of the install base. We sold 47 systems, but the install base went up by 46 due to an operating lease from Q2 2023 converting to a sale this quarter.
Q: What are your expectations for multisystem purchases by IDNs at the corporate level in 2024?
A: Kevin Waters, CFO: We are not relying on multisystem IDN orders to meet our guidance. We expect multisystem orders to continue but are not reliant on unexpected orders to meet our 2024 guidance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
