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DATE

Wednesday, April 29, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Larry Wood
  • Chief Financial Officer — Kevin Waters

TAKEAWAYS

  • Total Revenue -- $83.1 million, showing 20% year-over-year growth.
  • U.S. Procedure Volume -- Approximately 12,200, representing 30% year-over-year growth.
  • U.S. Handpiece Revenue -- $43 million, up 13% year over year; handpiece sales equaled 95% of procedures.
  • U.S. Hydros Systems Sold -- 49 units (including 2 replacements), with an average selling price of $485,000, a 14% sequential increase from Q4 2025.
  • System Pricing Guidance -- Management now guides new U.S. system average selling prices to $450,000-$460,000 for the remainder of 2026, projecting a full year average at the upper end near $460,000.
  • U.K. Market Entry -- 7 Hydros systems sold in the United Kingdom at an average price over $400,000, initiating European expansion.
  • Gross Margin -- 65%, versus 61% in Q4 2025 and 64% in Q1 2025; guidance for 2026 remains approximately 65% with modest sequential improvement expected each quarter.
  • Operating Expenses -- $86.6 million, up from $71.6 million year over year, attributed to commercial expansion, innovation, and higher WATER IV trial spending.
  • Net Loss -- $31.6 million compared to $24.7 million a year ago.
  • Adjusted EBITDA Loss -- $18.1 million, higher than $15.8 million loss in the prior year period.
  • Cash Balance -- $249 million at quarter end; management expects improved cash usage in coming quarters.
  • 2026 Revenue Guidance -- Maintained at $390 million-$410 million, reflecting 27%-33% projected annual growth.
  • 2026 U.S. Procedure Guidance -- Unchanged at 60,000-64,000, indicating targeted growth of 39%-48%.
  • Regulatory Progress -- Aquablation therapy received a strong recommendation from the European Association of Urology for surgical treatment of BPH with moderate to severe LUTS.
  • Software Advancement -- FDA clearance obtained for FirstAssist AI software, enhancing the Hydros system's image-guided planning capabilities.
  • WATER IV Trial -- Patient enrollment near completion, with full enrollment expected by end of May and primary endpoint data anticipated in spring 2027.

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RISKS

  • Operating Losses -- Net loss increased to $31.6 million and adjusted EBITDA loss worsened to $18.1 million, reflecting higher investment spending and slower transition benefits.
  • Short-Term Disruption -- CEO Wood said, "as expected, resulted in some short-term disruption in the first quarter," with flat sequential procedure growth and some handpiece sales lagging procedures.
  • Tariff Expense -- 2026 gross margin guidance includes an increase to $5 million-$6 million in tariff expense, up from $1.3 million in 2025.

SUMMARY

PROCEPT BioRobotics Corporation (PRCT +18.76%) delivered substantial top-line growth and significant pricing improvement in both U.S. systems and consumables, coupled with the initialization of a U.K. expansion and receipt of a key regulatory endorsement in Europe. Cash resources remain ample to support ongoing investments in commercial infrastructure and clinical development. Management's guidance maintains elevated targets for revenue and procedure volume, emphasizing expectations for accelerating procedure growth and improving margins in the second half of the year.

  • Company finalized a structural commercial realignment, introducing launch teams and regional integration to support rapid system adoption and tighter account management.
  • Management forecasts positive adjusted EBITDA in the fourth quarter of 2026 at both ends of full-year revenue guidance.
  • The company attributes rising U.S. system ASP to broad-based capital demand with no large IDN sales, suggesting potential price flexibility depending on evolving account mix in future quarters.
  • FDA clearance for FirstAssist AI signifies further differentiation of the Hydros platform and could enhance physician engagement for both BPH and future adjacent indications.
  • Early encouraging signs from the Hydros replacement program point to a developing replacement cycle with full impact expected beyond 2026.

INDUSTRY GLOSSARY

  • BPH (Benign Prostatic Hyperplasia): Noncancerous enlargement of the prostate gland causing urinary symptoms, the target condition for Aquablation therapy.
  • Aquablation: A minimally-invasive, robotically guided surgical technique using a water jet to remove prostatic tissue in BPH patients.
  • IDN (Integrated Delivery Network): Large health system or hospital network purchasing on behalf of multiple sites, often impacting medical device pricing and sales cycles.
  • LUTS (Lower Urinary Tract Symptoms): Symptoms such as increased urinary frequency, urgency, or weak stream commonly associated with BPH.
  • AQUABEAM/Hydros system: PROCEPT's proprietary robotic platforms for performing Aquablation procedures.
  • FirstAssist AI: Artificial intelligence software component cleared for use with the Hydros system, intended to improve surgical planning.
  • WATER/WATER II/IV: Clinical trials evaluating safety and efficacy of Aquablation therapy across varying prostate sizes and patient segments.
  • APC (Ambulatory Payment Classification): A Medicare reimbursement category that determines outpatient procedure payments.

Full Conference Call Transcript

Larry Wood: Good afternoon, and thank you for joining us. Over the past 6 months, we have taken decisive actions to reset the organization. We have sharpened our focus on operational excellence, accountability and commercial discipline. Our first quarter performance reflects the early impact of these efforts. We are encouraged by our Q1 results and the momentum we are building, having reported total revenue of $83.1 million, representing an annual growth of 20%. Starting with procedures. We completed approximately 12,200 U.S. procedures in the first quarter of 2026. While our commercial realignment initiatives modestly affected Q1 procedure growth, performance was largely in line with expectations.

The team is adapting well, and we expect the full benefit of these changes to materialize in the second half of 2026. Regarding handpieces, we believe field inventory levels and customer purchasing behavior have normalized with handpieces sold representing approximately 95% of procedures in the first quarter. On a weighted average basis, we continue to expect approximately a 1:1 ratio of handpieces to procedures for the full year. Turning to U.S. systems. We sold 49 Hydros systems, which included 2 replacement systems. We remain confident in our full year system plan and are encouraged by the early positive customer response to the AQUABEAM replacement program.

With regards to pricing, as we emphasized in our last earnings call, establishing price discipline remains fundamental to long-term value creation. In the first quarter of 2026, U.S. Hydros system average selling prices of approximately $485,000. This represents an all-time high and a 14% increase compared to the fourth quarter of 2025 despite what is typically a seasonally challenging quarter for capital. Given our increased pricing discipline across the organization and strong first quarter pricing, we now expect full year 2026 system pricing to be modestly above our initial guidance range. Additionally, U.S. handpiece average selling prices were approximately $3,500, representing a 5% increase compared to the fourth quarter of 2025 and a 10% increase year-over-year.

Now I'll provide an update on our commercial organization. We previously described 2 key changes that we believe are strategically important for long-term performance. First, we realigned our commercial team into an integrated regional structure where our clinical and sales functions now report to a common regional leader. The new structure creates a single point of accountability at the regional level to ensure clinical and commercial activities are coordinated around customer success and procedure growth. Second, we are continuing to advance our dedicated launch team to drive more consistent launches, reduce variability in activation and accelerate procedure volume ramp for customers. We view launches as a key lever for improving downstream utilization and overall performance.

The realignment of the commercial organization and implementation of the launch team was finalized in early Q1 and as expected, resulted in some short-term disruption in the first quarter. We view this as a normal transition period as teams ramp, establish account relationships and standardize new operating processes. Most important, we believe these changes, along with our marketing programs, better position us for sustained high growth. We will continue to manage through the transition thoughtfully, and we expect the benefits to build as the organization settles into the new model. Now let's look at gross margins and how we are progressing towards profitability.

In the fourth quarter of 2025, we reported gross margins of 61% and indicated this level was temporary. We guided to full year 2026 gross margins of approximately 65%, reflecting expected improvement. Driven by increased price discipline and better leverage of our cost structure, we delivered first quarter gross margins of 65%. With this strong start, we expect gross margins to increase modestly on a sequential basis throughout the year. We will also continue to manage operating expenses as we work toward achieving positive adjusted EBITDA in the fourth quarter of 2026. Turning to regulatory and clinical updates.

In March, at the 41st Annual European Association of Urology Congress in London, the EAU updated clinical guidelines to give Aquablation therapy a strong recommendation as a surgical treatment for men with BPH and moderate to severe LUTS, reflecting the high quality of evidence and favorable patient outcomes. The therapy is now recommended as an alternative to TURP, especially for patients seeking to preserve ejaculatory function. This upgrade for prostates 30 to 80 milliliters and the additional notes for treating prostates greater than 80 milliliters is supported by multiple clinical trials, including WATER and WATER 2, all of which demonstrated durable improvements in urinary symptoms, preservation of ejaculatory and urinary function and effectiveness across a wide range of prostate anatomies.

A strong recommendation from one of the most respected global guideline bodies reflects the strength of the clinical evidence supporting Aquablation therapy and reinforces its role as a modern surgical option for physicians seeking to deliver durable symptom relief while preserving quality of life outcomes that matter most to patients. At EAU, we also announced the first international launch of Hydros in the U.K. This milestone marks the beginning of a broader global expansion. Specifically, in the first quarter, we sold 7 new Hydros systems in the United Kingdom at an average selling price of over USD 400,000.

Building on the recent approval and strong clinical momentum, including the rapid adoption at high-volume NHS hospitals, our U.K. capital pipeline continues to grow nicely. We have also received FDA clearance on our second-generation FirstAssist AI software, an advancement in personalized image-guided planning for Aquablation therapy. This milestone further strengthens the capability of the Hydros robotic system and enables more precise identification of prostate anatomy and more complete treatment planning to help surgeons plan with greater confidence and consistency. We remain deeply committed to advancing the standard of care in urology through our continued innovation for the millions of men affected by BPH.

Lastly, we are approaching the completion of patient enrollment in the WATER IV study and based on current trends, expect to be fully enrolled by the end of May. We have been very pleased with the pace of enrollment, which is on track to be completed in less than 18 months. For a clinical trial of WATER IV size and complexity, the speed of enrollment highlights strong surgical interest and a patient willingness to participate, factors we believe will ultimately translate into broader market adoption post approval. Based on current time lines, we expect to present the WATER IV primary endpoint at AUA in the spring of 2027. With that, I will turn the call over to Kevin.

Kevin Waters: Thanks, Larry. Total revenue for the first quarter of 2026 was $83.1 million, representing 20% year-over-year growth. U.S. revenue for the quarter was $72 million, reflecting 19% growth compared to the prior year period. Turning to U.S. procedures. We completed approximately 12,200 U.S. procedures in the first quarter of 2026, representing approximately 30% year-over-year growth. The percentage of handpieces sold to procedure volume was approximately 95% with handpiece average selling price of approximately $3,500. As a result, total U.S. handpiece and other consumable revenue was $43 million in the first quarter of 2026, representing 13% growth compared to the first quarter of 2025. Turning to U.S. systems.

Total U.S. system revenue was $23.4 million in the first quarter, representing 25% year-over-year growth. We sold 49 Hydros systems at an average selling price of approximately $485,000 for new U.S. systems. Additionally, the 49 systems include 2 replacement systems, representing the early stages of what we expect to become a growing replacement cycle. We exited the first quarter of 2026 with a U.S. installed base of 765 systems. International revenue in the first quarter of 2026 was $11.1 million, representing year-over-year growth of 25%. Moving down the income statement. Gross margin for the first quarter of 2026 was 65% compared to 64% in the first quarter of 2025 and 61% in the fourth quarter of 2025.

The improvement was driven by increased pricing, cost discipline and favorable product mix. Total operating expenses for the first quarter of 2026 were $86.6 million compared to $71.6 million in the prior year period. The increase reflects continued investment to support commercial expansion, ongoing innovation across our BPH platform technology and increased funding for our WATER IV prostate cancer trial, positioning us to drive long-term growth and expand our clinical and technology leadership. Net loss for the first quarter of 2026 was $31.6 million compared to a net loss of $24.7 million in the first quarter of 2025.

Adjusted EBITDA was a loss of $18.1 million in the first quarter of 2026 compared to a loss of $15.8 million in the prior year period. Cash, cash equivalents and restricted cash totaled $249 million as of March 31, 2026, providing a strong balance sheet to support our strategic priorities. We expect cash usage to improve throughout the year, driven by greater operating leverage and improvements in working capital. Moving to our 2026 financial guidance. We continue to expect full year 2026 total revenue to be in the range of approximately $390 million to $410 million, representing growth of approximately 27% to 33% compared to 2025.

This guidance range continues to assume international revenue to be in the range of $50 million to $51 million. Additionally, we continue to expect 2026 total U.S. procedures to be in the range of 60,000 to 64,000, representing growth of approximately 39% to 48%. With respect to new U.S. system pricing, we now expect pricing to range between $450,000 and $460,000 for the remainder of the year, depending on customer mix between individual accounts and large IDNs. While first quarter U.S. system revenue and pricing exceeded expectations, and we remain encouraged by both pricing and sales momentum, our focus is on ensuring this performance is sustainable.

Based on current trends, we have strong confidence in our full year total revenue guidance. We will provide further detail on these metrics as the year progresses. Turning to gross margins. We continue to expect full year 2026 gross margin to be approximately 65%. This includes $5 million to $6 million of tariff expense compared to $1.3 million in fiscal 2025. Our gross margin guidance does not reflect any potential benefit from previously paid tariff refunds, which could provide upside to 2026 gross margins. We continue to expect full year 2026 adjusted EBITDA loss to be in the range of $30 million to $17 million.

This guidance reflects positive EBITDA in the fourth quarter of 2026 at both the low and high end of the revenue range. In the second quarter of 2026, we expect total revenue to be in the range of $91 million to $95 million, representing growth of 15% to 20%. I would now like to pass it back to Larry for closing comments.

Larry Wood: Thanks, Kevin. In closing, while we have undergone significant change over the past 6 months, we believe these steps are essential to driving sustainable, high growth and to establishing a clear path to profitability. In summary, while we are mostly complete with our U.S. commercial realignment initiatives and expect more consistent commercial execution over the course of the second quarter as reflected in our total revenue guidance. We have established pricing discipline across the organization, which we believe is critical to our long-term success. The U.S. capital pipeline continues to build, increasing our confidence in the sustainability of higher average selling pricing and the conversion of this pipeline into sales.

Lastly, WATER IV enrollment is ahead of schedule, and we expect to complete enrollment in May. 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. At this point, we will be happy to take questions. Operator?

Operator: [Operator Instructions] And our first question comes from Matthew O'Brien of Piper Sandler.

Matthew O'Brien: The first one is just a broader question kind of on the puts and takes that we saw here in Q1, the strength on the capital side. I'd love just to hear about where that originated plus the ASP benefit that you're getting. And then on the handpiece side, I don't know, Larry, if there's a way to kind of frame up some of the disruption that you saw this quarter and then kind of how long it should linger and when we should be past that? And then I do have a follow-up.

Larry Wood: Yes. Thanks, Matt. I think the capital quarter was pretty broad-based. We didn't really have a lot of large IDN orders or anything like that. So it was pretty broad-based. And I think that also contributed to the ASP upside. But we did certainly implement pricing discipline, much like what we did with handpieces, we implemented that on capital as well. And so that's just an important part of our journey toward profitability. On the handpieces, the realignment of the sales force has been complete. And I think we're just in a very just natural transition phase where we're reestablishing account relationships and backfilling some of the key positions for people that have moved over to the launch teams.

But we expect the momentum on procedures to build throughout the quarter -- sorry, throughout the year. And we remain, I believe, on track related to our guidance, and those are certainly our goals. So we're not where we want to be yet, but I think we've made the changes we need to make and we're building. And I think the team is going to continue to grow into these roles, and I'm excited about what the future looks like.

Matthew O'Brien: Okay. I appreciate that. That's very helpful. And then on the second question on the guide side. Just if I'm looking at the roughly -- I think it was $93 million midpoint of the range for Q2. Just talk about plus all the -- again, the ASP benefit you're going to get on the system side. Just talk about the confidence in the -- especially the back half, it seems like it's a little bit more loaded than normal to get to the midpoint of that range and just the confidence there getting to the midpoint or even higher just again, given the ASP benefit that you're talking about on the system side?

Kevin Waters: Yes, Matt, I'll take that. So regarding Q2, in our prepared remarks, we did say that we are guiding to new systems in the $450,000 to $460,000 range even with the strength that we saw in the first quarter. And I would definitely suggest our confidence in executing within our guidance range this year has increased with our Q1 performance. But we did just feel it's prudent to maintain current expectations as we continue to emerge from the recent commercial realignment. But look, we feel good about the full year across all metrics.

And as I said in my prepared remarks, it will probably be the end of Q2 where we start to formally update some metrics around pricing and volume given what we've seen in the first 6 months here.

Operator: And our next question comes from Nathan Treybeck of Wells Fargo.

Nathan Treybeck: So procedures were flat quarter-over-quarter. Is there any way to quantify how much of this is driven by disruption from the commercial or changes in the inventory destocking? And I guess, have you seen any underlying softening in demand or referral funnels?

Larry Wood: No. I think what we saw in Q1 was just sort of some normal seasonality that we see when we start the year, and that's not uncommon for us. And so I think that was all pretty normal. It's hard to quantify the sales force part of it in terms of people growing into their new roles and just sort of the normal seasonality we see in Q1. But we're going to continue to drive procedures throughout the course of the year. And we had strong system placements and the combination of strong system placements along with our launch teams.

We think [indiscernible] is going to be a contributor to procedures as we get deeper in the year, and we have more launch team systems in the field, and we think that's going to help us.

Nathan Treybeck: Great. And for my follow-up, so handpiece sales were below your target of 1: 1 procedures. You mentioned inventory rightsizing is completed, but can you help us understand how much residual destocking impact there was in Q1? And could handpieces fall below procedures in upcoming quarters?

Larry Wood: Yes. No, we tried to guide that for the full year, we're going to be 1:1 on handpieces, and we still remain very confident that's going to be the case. And I think the bottom line is we have -- if we're 95%, I'm not going to really apologize for it. And if we're 105%, we're not going to brag about it. I think handpiece sales are always going to fluctuate a little bit based on the number of systems we launch and all these other sorts of things. So I think that it's normalized. The number that we're focused on are procedures because eventually, procedures and handpiece sales have to equalize out over time.

It's not going to be about how much inventory people carry. It's going to be how many procedures we drive. So we feel like that is largely normalized now, but we remain confident in the 1:1 full year ratio that we provided at our investor conference.

Operator: And our next question comes from Mike Kratky of Leerink Partners.

Michael Kratky: Maybe just one quick one. You mentioned the $450,000 to $460,000. Was that the full year average? Or was that for the remainder of the year?

Kevin Waters: I would classify that as for the remainder of the year. You could put in -- that puts the full year average more towards the upper end, probably around $460,000 when you average that out, Mike.

Larry Wood: Yes. And just to add to that, part of our thinking on this is we didn't have a lot of big IDN orders in Q1. And when we get larger IDN orders, that can sometimes have a little bit more effect on price. But I think even broader than that, we don't want to get out over our skis on ASP commitments because there are certain places where we want to maintain some flexibility. But we are driving price discipline across the organization, and we're going to continue to do that.

Michael Kratky: Understood. And maybe just as a quick follow-up. But Kevin, totally appreciate your comments on the prudence and maybe some conservatism for now given it's early in the year, but you're reiterating your U.S. systems revenue guidance in the backdrop of the higher ASPs. Is there anything fundamental from a number of units sold perspective that is maybe changing? Or is this really just as usual?

Kevin Waters: Look, I don't think it's changing, but I definitely believe the Q1 performance gives us greater conviction and confidence around achieving our full year guide. That should be implied with our performance. But at the same time, we're just coming off a Q4 shortfall. We're coming off a commercial realignment. And we just want to make sure that we maintain current expectations and not get out over our skis, as Larry mentioned, but our confidence in executing the full year on systems, particularly with the Q1 performance is higher today than it was when we gave guidance in February.

Operator: And our next question comes from Richard Newitter of Truist.

Richard Newitter: Maybe just to start, I'm trying to get a sense for -- of the new initiatives or the kind of the way you're approaching the market and the selling organization that you outlined. Can you highlight where you're seeing or where we should expect to see the proof points or the benefits show up fastest? Like are there -- I think there were 3 main ones that you had. Like where are you seeing the improvements show up most meaningfully and soonest? And I get that you're pointing more to the back half, but I'm just curious where it's most evident that the progress is going the way you want it to be going in the first half?

Larry Wood: Well, I think we have a lot of confidence in our launch teams. I think we moved some of our more senior people over there with a lot of experience. And I think the key thing there is the more systems we put in the field that we do under the launch team model, which is going to build throughout the year that we will continue to see benefit of that. And I think that's one that we have great confidence in. The patient awareness activities, we're running multiple pilots on that. And when those pilots read out, it will help us really prioritize what things are most effective and what things we should be driving.

And I think that's just a prudent way to approach some of these new marketing programs. But I think it's also really important for people to understand that there's always just going to be a lag between driving patient awareness and a patient getting a procedure. It's not that patient gets new information, they get an e-mail, they see something on social media or maybe they hear a radio ad and they show up at a doctor and they get treated the next day. They have to come in, they have to schedule their appointment, they have to go to work up. I think most systems in the country probably schedule people a month out or so.

So there's always going to be a natural lag between some of these initiatives and actually seeing the patients get treated. But we're encouraged by all of the things. I think we spend a lot of time with the sales team, and I think people have good conviction about the changes we've made and the new roles that we have for people. But it still just takes time for people to reestablish account relationships and to get some of the new people trained to backfill some of the launch teams. But I think these are all very natural things.

They're not like -- they're not things that we think are going to be a struggle, but that's why we've always modeled, and we tried to be really clear about this at the investor conference. These things are going to contribute more in the back half of the year than they are in the early part of the year.

Richard Newitter: Got it. That's really helpful. And then just -- this is now the first quarter or the first few months that you've been able to really see how physicians would react to kind of the physician fee payment changes that happen to all respective procedures going down, including yours. I guess what are you hearing and seeing out there? Do you feel better or worse unchanged versus kind of the way you were talking to us before we obviously have these changes in place.

Larry Wood: I think we had pretty much factored those things in, in February when we spoke before. And I don't think anything has remarkably changed from what we talked about in February. I think the economics for all these procedures are what they are. It is really about driving the clinical benefit and making sure patients understand how differentiated our procedure is versus competitive procedures. And I think when physicians understand that as well and patients understand it, I think that's what drives therapy adoption and taking share from competitive procedures. But I don't think anything has meaningfully changed on that.

Operator: And our next question comes from Josh Jennings of TD Cowen.

Joshua Jennings: Nice to see the solid start to the year. I wanted to start off and just follow up on the reimbursement question. And just is there any way you could help us frame up the potential for Aquablation procedure to kind of move up in the APC level as we go through these proposed rules and then final rules over the next couple of months?

Larry Wood: Yes. We haven't built that into our modeling. And I think one of the important things to remember, Josh, is that even when these codes change, they always collect actual costs. Medicare doesn't pay for value, they pay for resource consumption. And so that's just not -- I think if you make our economics the primary part of the story here, you're always going to be sort of chasing those ghost. So what we're focused on is at the current levels of reimbursement exists, how is this an economically solid procedure for hospitals and then how do we drive patients in. And I think the other part about it is how do we help hospitals be efficient with the procedure?

How do we help them be efficient with procedure time? How do we help them be efficient with discharge, be efficient in avoiding complications. And when we do that, I think the economics for this procedure work well. But we haven't factored anything into our guidance about changing APC levels. If that happened, it would be certainly an upside to reimbursement.

Joshua Jennings: And then just a follow-up. Sorry if I missed this in the earlier remarks, but sounds like there was more positive reception than anticipated for replacement systems, Hydros replacements. Any new outlook just in terms of how replacements kind of factor into -- through the rest of 2026? And maybe just remind us why you expect replacements to pick up next year.

Larry Wood: Yes. Thanks, Josh. Yes, I think just in simplest terms, given a typical capital cycle, and we just really launched our replacement program kind of at the beginning of the year, the fact that we got 2 replacements already in, I think we were very encouraged by. And I think we've had a lot of customers now that they realize they can get a trade-in value for their legacy system, which helps them with a replacement strategy. I think we just probably feel confident that replacements are going to be something that we're going to really hone the program in this year. And I think it's going to be a much bigger part of our story in 2027.

But we're encouraged with our early start, and we just got to continue to drive execution on that.

Operator: And our next question comes from Chris Pasquale of Nephron Research.

Christopher Pasquale: Besides all the moving pieces you guys had going on, there was also quite a bit of severe weather during the quarter. These cases are reschedulable if the need arises. Did you see procedures getting pushed from 1Q into 2Q because of that? Or was all of that disruption sort of contained within February and March?

Larry Wood: Yes. Thanks. Chris, I mean certainly, there were some severe weather in the year, and we know that there are some case cancellations and whatnot. How many of those cases came back on the schedule and how many of those patients got something else. I think it would be really difficult for us to say. I think most of that's probably out of the system at this point because most of that happened early in the quarter. I don't think it materially impacted our quarter. And I'm sort of just not really inclined to attribute anything to weather or weather-related issues. Our numbers are our numbers. They have to stand alone.

If there's severe weather and cases get canceled, it's our team job to make sure that they get rescheduled and they get done. So we just don't really make any allowances for that here and just keep people focused on the execution that we control.

Christopher Pasquale: Yes. Fair enough. I'd love to hear a little bit more about the U.K. opportunity and what that looks like. International, small part of the business today has been a consistent outperformer. Can you talk a little bit about sort of what you think the denominator is for that particular market? And are there other areas that you're excited about in terms of next steps internationally?

Larry Wood: Yes. When I stepped into the role, I really felt there's opportunities in international. But international isn't a very homogeneous place. There's a lot of variation, obviously. And so some countries have really solid reimbursement and the capital opportunities there are solid. And so we focus on those places and the U.K. is certainly our biggest place in Europe. We were excited to launch Hydros. I think we had a great showing at the AUA and combined with the latest guidelines, I think it was an overall very positive meeting for us. We continue to evaluate what other markets in Europe that we should be looking at as opportunities, but it's not going to be everywhere.

But I think over time, it's Europe and international is going to become a bigger and bigger part of our story, but that's going to just take time to develop.

Operator: And our next question comes from Stephanie Elghazi of Bank of America Securities.

Stephanie Piazzola: I wanted to ask on Q1 procedures were a little light of the Street and grew 31%, and you're still expecting a ramp in procedures to 50% growth in the second half. So can you remind us what's driving that acceleration and your confidence in that?

Larry Wood: Yes. Thanks for the question. I think we always expected the first half of the year to be slower than the second half of the year. And we always expect to see a little bit of seasonality in Q1, and we certainly did see that, but it was pretty much at expected levels. We implemented all of our organization changes in the sales force early in the year. And so people are growing into those roles and they're reestablishing account management. The launch teams are starting to launch systems under the launch team model. They started in the quarter. But it takes time for those to build and for those to contribute.

So I think it is a combination of people maturing the roles, reestablishing these account relationships. I think in the back half of the year, we start seeing more benefit from some of our patient activation activities. And I think we get the full benefit of all of our newly launched systems this year and those contributing at a higher level than what we've seen historically. But the more systems you place under that model and the better they do, the more that builds for the back half of the year. So that's what's driving that.

Stephanie Piazzola: Got it. And then on the Q2 guidance, the midpoint of $93 million is a little below the Street at $95 million. So maybe could you help us understand that? I'm just curious what's changed on your view of Q2, maybe it's some of what you had just talked about, but is there more lingering disruption from the commercial organization changes than you thought or anything else?

Kevin Waters: No, this is Kevin. Nothing has really changed in our thinking. If anything, as I said earlier, I think we feel more positive in our initial guide today than we did when we provided that a few months ago. And we have never provided Q2 guidance as part of Investor Day. So this is really the first time and really just sticking with the philosophy right now that we think it's prudent to keep expectations reasonable and give us a chance to outperform as opposed to getting out ahead of ourselves. But there's nothing unique or different in Q2, and we continue to feel good about the trajectory on both systems, procedures and our international business.

Operator: And our next question comes from Suraj Kalia of Oppenheimer.

Suraj Kalia: Larry, Kevin, congrats on a good start to the year. So Larry, a lot of commentary on handpieces and procedures. Maybe if I could ask one question slightly differently. So of the 47 (sic) [ 49 ] Hydros systems, right, you've given your site numbers in the U.S. Our rough math, Larry, is suggesting it's around the 17-ish number of procedures per site per quarter, roughly in that ballpark. Maybe if you could talk to what are you seeing in utilization in your sites? Where do you think your share capture is within those sites? And is this the bogey that we should be thinking about as we map out the year and new store same-store sales?

Larry Wood: Yes. Thanks for the question. We talked about this a little bit at the investor conference. Our sites are highly variable. And so trying to create averages and trying to create average utilization, especially when we have a mix of AQUABEAM and a mix of Hydros. And going forward, we're going to have a mix of kind of our launch team launch systems and some of our legacy systems. I just think it's hard to be able to create an average. And I appreciate why everybody wants to do that because it's easy to just plug into a formula. But I think what people should be focused on is just our pure procedure growth.

We put our procedure numbers that we expect to do this year. We put our ASP numbers, we put our system numbers on the board, and that's what we just have to go drive to. So the key for us is showing growth quarter-over-quarter on our procedure growth. And that's what we're going to be driving to. And I think I'm certainly not focusing the team on -- go to our lowest utilization places and trying to bring into the mean. We map out literally every system in the country and say, where are the biggest opportunities, where are their under-usage, where are there share shifts, where are there motivated people. And so that's just our focus.

But I would just continue to focus on procedure growth quarter-over-quarter.

Suraj Kalia: Fair enough. And Larry, one follow-up question on WATER IV. So you'll have a readout in spring '27. Let's assume it's positive, right? Logic tells you there would be a collateral pull-through both on the BPH side and on the prostate cancer side, right? But Larry, should we think about, is it going to be a symmetric payoff? Or do you envision there could be some level of asymmetricity? In other words, let's say, superiority, there is some kink somewhere. Does it impact BPH? So how are you all thinking about that?

Larry Wood: Yes. That question may be about my education level. I'll say like I don't know the WATER IV data. Nobody knows the WATER IV data at this point. And I don't want to speculate about data. But I think just broadly speaking, the more positive that data is, the more disruptive it has the potential for being -- for patients with prostate cancer. And obviously, anybody that already has a system that's already trained would be able to adapt quickly to treating those patients, and we would certainly do everything we could to facilitate that.

But I think it's just going to matter most of the strength of the data and how doctors interpret that as it relates to where this fits in treating patients with prostate cancer. All of those things being said, we think it's a perfect adjacency for us. It's rare that you can get this kind of leverage out of the same exact system, the same exact handpiece and largely the same users, and that gives us leverage all of our sales force as well. So we're just focused on running a great trial and then presenting that data when it comes out at AUA next year. And we're all cautiously optimistic it's going to be positive.

But we'll have a lot more view once the data is public and we can talk about it and be more granular.

Operator: And our next question comes from David Rescott of R.W. Baird.

David Rescott: I wanted to ask on procedure utilization. I think at the -- I recall at the Analyst Day, you had called out different levels of procedure contribution from that class of systems sold pre-'25, those sold in '25 and those expected to be sold in 2026. And so just curious on the progress you've seen so far in Q1, maybe how that level of contribution from the different groups have stacked up relative to your initial expectations? And then what your expectations are through the rest of the year from that segmentation perspective to get to the lower end, the midpoint or upper end of the procedure guide for the year?

Larry Wood: Yes. I'll just say that we're still early in the launch model and the ability of those systems to contribute significantly to our overall total number is just very limited at this point. I will say we remain extremely confident in the launch team model. And I think when we saw the readout from our pilot that we shared at the investor conference, and I think we -- for all the same reasons, we continue to believe that, that's going to be a very important part of our story.

And it really just comes down to making sure as many systems we sell as possible start off great because our view is when they start off great, they tend to stay great. And they tend to get established and they become a huge part of how BPH gets treated in those accounts. But we don't want to get too far ahead of ourselves, and I think it's too early to declare victory on any of our programs yet. We just remain laser-focused on all of them and making sure we're tracking the metrics. We're tracking the progress that we're making, and we're driving our procedure numbers and doing that to the very best of our ability.

So that's our focus now. We're just sort of head down and trying to drive the organizational excellence that we need to get where we need to go.

David Rescott: Okay. And then maybe on this system ASP in the U.S. that you delivered in the quarter and then the subsequent guide through the remainder of the year. You called out this pricing discipline maybe as being a factor for the higher ASPs you saw in the first quarter, but obviously also shows that there clearly is an appetite maybe at least from the centers' perspective of paying a higher price for some of these systems. So maybe can you help reconcile why the guide for the second half of the year -- or sorry, for the remainder of the year would assume an ASP below what you delivered in the first quarter?

And is there a potential for what you saw in Q1 to maybe be a more realistic number as you go through the year from a system ASP perspective?

Larry Wood: Yes. I think as Kevin said earlier, a little bit of it comes down to customer mix. We talked about it a little bit in our Q4 number. We had probably more IDN sales in Q4. And so that took our ASP down a little bit from what we've seen earlier in the year last year, and we had less IDNs in Q1. We are going to continue to drive price discipline, and we're going to continue to try to get the highest ASP that we can, and we think our value proposition is very strong.

But we don't want to react to one quarter and get out over our skis for what the whole year ASP is going to be. So what we're just trying to do is be measured about that. And that's why Kevin covered that we're now thinking that you can model at $450,000 to $460,000 for the remainder of the year, and we think that's a good modeling number. We'll certainly update that quarter or next quarter where we land. And depending on how that quarter lands, I think it will give us a lot more confidence in how durable the pricing ASP is going to be. But I'm very pleased overall with the operational discipline that we're showing.

We guided -- if you go back and look at handpieces, we guided handpieces this year that you should model in $3,500. We were able to achieve that in Q1. And so I think that bodes well for us for the rest of the year. We're going to continue to drive that same sort of transition on systems. But as Kevin and I both said, we just don't want to get out ahead of ourselves.

Operator: And our next question comes from Mason Carrico of Stephens.

Mason Carrico: I'll keep it to one. Could you characterize, I guess, what percentage of the sales funnel today is being driven more by bottoms-up surgeon champion versus top-down admin of these larger systems? Are you seeing the new launch team attract more surgeon champions to deals that are sourced top down today versus, I guess, where you guys were 6 months ago?

Larry Wood: Well, yes, I'll start and then maybe I'll ask Kevin to add a little bit of color because he's very deep on our capital cycle and for some of those things. One of the things that is core to what we're doing on the capital side, though, is we don't want to sell a system to anybody, frankly, if there's not a surgeon champion who's established. We want people to always be standing on the dock waiting for the system. We want to have our launch team ready to go. We want to have patients prescreened and we want to drive that system very, very quickly. And I think historically, we just were much looser on that process.

If somebody wanted to buy a robot and we haven't identified a champion yet, it showed up on the dock, then the team would start working on that process. And now we just have a much more integrated approach on that, of making sure like when we sell a system that there's a home for it and there's a champion who's ready to go, and then we bring the launch team in and we try to drive case excellence from the very first cases we do with that system and try to establish it as a core therapy within their urology program.

And I just think we're just so much tighter about that now organizationally, and we're still building that muscle that's going to be what I think really differentiates the organizational performance as we move through time. I'll ask if Kevin wants to add anything on customer mix or some of these other things.

Kevin Waters: Yes. I'll just add a follow-up point that I think it is a common misconception where we have said and we are seeing great relationships now with the top down with large IDNs. But at the same time, that does not mean we don't have the bottoms-up surgeon support within that IDN network. But historically, we only had the surgeon support, whereas now we're definitely being viewed as a viable technology across a much broader hospital network. And that is what we're seeing. But to remind you, our Q1 results did not have any of those large IDN sales. So that's just another factor as well that gives us confidence in the full year system guidance.

Larry Wood: Yes. I guess just to finish the thought, it's really both. If you have top-level administrative support, you don't have a surgeon champion, you can get the capital sale, but you're not going to get the pull-through on procedures that you want. If you have a surgeon champion that you don't have the administration that's supporting, bringing a new therapy in, then you're going to struggle with the capital sale and that cycle is going to go a lot longer.

And I think what we're just really trying to do is just be super integrated about that and drive to where we have both pieces of those puzzles because when those 2 things come together really strongly, I think that's where we really drive utilization to where we want it to be.

Operator: And our next question comes from Brandon Vazquez of William Blair.

Max Kruszeski: It's Max on for Brandon. I'll just do one quick one as well. First quarter gross margin was 65%. You guys reiterated the full year expectation of about 65%. Can you just walk us through some of the puts and takes given some of the revenue mix and ASP dynamics on the year and how that relates to gross margin and how we should be thinking about cadence for the rest of the year?

Kevin Waters: Yes, I can walk you through the year. Good question. So you pointed out in Q1, we did deliver 65% gross margin. That was driven sequentially by higher handpiece and system pricing and just our overall ability to leverage our overhead expenses. And as we move throughout the year, Q2 and Q3, you should think of very modest expansion in the next 2 quarters, somewhere in the 10 to 20 basis point range over the next 2 quarters. But when you get to the fourth quarter, you have a multitude of factors. You have favorable revenue mix towards higher-margin handpieces. We have improved overhead absorption.

And then just in general, we have total revenues, and we should be exiting the year in the 66-plus percent range, but that will still translate to a full year margin at 65%. And definitely coming off of Q1, landing at our full year guide in Q1 at 65% gives us a greater degree of comfort with our full year margin guidance.

Operator: Thank you. This concludes our question-and-answer session and also today's conference call. Thank you for participating, and you may now disconnect.