PROCEPT BioRobotics Corporation (PRCT) Earnings Call Transcript & Summary

All right. Thanks, everybody, for joining today. I'd like to welcome you guys to the 2026 PROCEPT BioRobotics Analyst Day. Appreciate everybody's flexibility on being here today. I know that there were some challenges with weather on the East Coast and having to shift things around. So I appreciate everybody for being here. And also those that are on the webcast, thank you as well. We'll be making forward-looking statements today, so please refer to those disclosures in the front of the presentation and also we'll be referencing non-GAAP measures, which will -- there are some appendices in the back that everyone can reference as well. With that, I'll like to bring Larry Wood on stage, PROCEPT BioRobotics CEO.

Thanks, Matt. All right. Well, thank you, first of all. I appreciate everybody being here. Obviously, we announced earnings last night. And so I'm glad that we can be in front of you that we can walk through everything. I'm going to talk a little bit about the past, but then I'm really going to try to shift and focus about the future and let you know why we remain excited about our opportunity, why we are excited about what our future looks like, and we think it's really bright. So it starts with the market opportunity. So when you look at where we are, there's about 400,000 patients a year that have actually a procedure done on their prostate. We're only about 10% into that space. And so we have a lot of headroom to grab share without activating any patients, without getting anybody off the sideline, we have the ability to grow and grow significantly. Beyond that, though, there's 8 million men who are seeking therapy for their BPH. They're on drugs. They're seeking therapy. They're not happy with their condition and they're looking for relief from their symptoms. Over 1 million men stop taking their drugs each year because they're either not effective or they don't like the side effects that their drugs give them. So that's another rich opportunity beyond the 400,000 patients that are seeking treatment today. Beyond that, there's about 40 million people that are getting -- that have the condition as well that's going to continue to feed the funnel as they continue to progress with the disease. So it's a large untreated population. And the reason why so much of it is untreated is, frankly, people are concerned about the procedure as much, if not more as they are their condition. So where do we stand in this armamentarium? And what is our strategy? We have a game-changing technology. We have a technology that can absolutely change the course of the disease for these patients. We have all the clinical evidence that we need. We're no longer this brand-new procedure. Our focus for the next chapter is going to be accelerating procedure growth. And I think that's something that we're all aligned on. What everybody needs to see from us is that we can execute in the field, we can drive share shift and then we can grow our procedure volume. We have to become profitable. We have to have a clear path to profitability, and that's a key area of focus for us. And then we continue to advance the evidence and look for additional treatment that we can do, and I'll talk more about that as we go. So, in terms of where we are, we've treated more than 125,000 patients worldwide. Our global installed base is over 900 instruments. So, again, we have a good installed base. We continue to add to that installed base. One of the big things this year is January 1, Category I reimbursement, which is a big milestone for us. It solidifies this. When we were Category III, there was more questions about reimbursement now, and those things have been removed from the narrative. And so we're really excited about what that is. But I'm going to talk a little bit about the changes that we've made to the organization. They obviously impacted the Q4 revenue, but I want to talk about why we made those changes and the impact of those and why I believe those are going to benefit us long term and they are foundational things for us to do. So if you look at handpiece pricing over the years, you can see where the handpiece pricing was, and it was very consistent. We were very flat over the time. When you look at where we were for the first three quarters, we actually saw a little bit of an uptick in pricing. That was pretty much driven by the increased mix of HYDROS versus AquaBeam. But our pricing was very stable when you looked at it quarter-over-quarter, and you saw where we were. But you also look at the handpiece volume compared to procedures. And we'd always been averaging about 115% to 120%, and we were consistently within that range. What we did in Q4 is when I reviewed the practice that we were doing of offering into the quarter volume discounts and incentives for people to stock. As our installed base continued to grow, that just became a bigger and bigger thing and customers were very conditioned to just wait until the end of the quarter, negotiate an incentive or be offered an incentive, they would stock up and they'd order a lot of inventory and then they'd spend the next few months depleting that inventory down and repeating the cycle over and over again. So it was causing very lumpy revenue, and we were doing things at a discount. When I reviewed that practice, I believed strongly that we were just discounting a product today that somebody would have paid full price for two weeks ago, their actual contracted price. So we eliminated that practice. We just said we're not going to do that anymore. We're not offering these sorts of end-of-quarter rebates, and we completely eradicated that. When we did that, it had a much bigger impact on customer ordering behaviors. If you remember on the Q3 call, I talked about inventory levels. I talked about target inventory levels. And my opinion was that there was more inventory in the field than needed to be there. And that was just related to establishing par levels and people carrying the right amount of inventory. In my old world, I live in a consignment world, every account had a par level. When I came to PROCEPT, no accounts had par levels and every customer was just managing their inventory on their own. So we established those par levels for sites, and we thought that would result in a reduction of about 1,000 units, which is what we signaled in Q3. This is a completely separate issue. This was an issue that was driving customer behavior because of the incentives that were being offered, but it was coming at a cost to our ASP. When I look at our path to profitability and when I look at the long-term health of the business, price matters. Our margins matter. That's going to be the critical thing that's going to drive our long-term profitability. So we eliminated that practice. And when we did that, we saw an immediate boost to our ASP, but we saw a change to ordering patterns where people said, hey, if I'm not incentivized to overstock, I'm not going to overstock. And they took their inventories down to whatever their targeted inventory level was. When we look at that for 2026, we're now anticipating that handpiece sales and procedures are going to pretty much fly in formation. Those numbers are going to mirror each other. And the our ASP is going to go up to about $3,500. So about a $300 price increase from historical to where we're going to go this year, which is very meaningful for us, and I think it bodes well for, again, for our long-term health. There were a lot of questions about this 1:1. And there's a lot of questions where people are like, yes, but is there still inventory? Could there still be a drawdown? Are you sure this is all behind you? And here's what I can tell you. What I can tell you is when we look back over the last multiple weeks since we instituted these changes in December, we've seen procedures and handpiece sales pretty much mirroring each other and flying in formation. So if there was more inventory to draw down once the incentives were to be removed, I think we would have seen that over the last six, eight weeks, and we haven't seen that, which gives us confidence that we're on that. Even beyond that, though, we are saying that inventory is going to be flat in the field, but we're still going to add 200-plus systems into the field next year. And all of those systems are going to have to take a stocking order and they're going to have to take inventory. So if people are at their proper inventory level now, and we added those 200 systems, inventory levels would have to go up in the field. This 100% ratio wouldn't actually work. It would have to be higher than that. But there's no value in us right now modeling something higher than that. So we've modeled that at a 1:1, which we think is a conservative way to model it, but I believe there's probably more upside than downside to that. But given everything that's happened, I don't think there's any point in us being aggressive about that or modeling anything higher than that. This is the biggest factor in the change of our guidance year-over-year. If we would have modeled handpiece sales to remain at 110% or 115% of procedure volumes in 2026 like it's been historically, that was worth between $20 million and $30 million. And so when we adjust the guidance, that's the biggest factor that changes our year-over-year guidance. Now we offset a chunk of that, a big chunk of it with our pricing increase, but we don't offset all of it of our pricing increase. And so that's the biggest change that we have in guidance. So the other thing that we've talked about is our change to our sales organization and the process of that and why we made these changes. So I'll talk through historically what we had. Historically, what we had was basically three groups. We had our clinical procedure support group, we had our sales support group and we had our capital team. All of these groups were led by separate management. They all had their own incentives. They all had their own goals, and they were all sort of ran independently. And what that meant was they weren't necessarily integrated and they weren't necessarily aligned and they didn't share a common goal set. And I think that led to some disconnects in our business that didn't optimize our performance. And so when we looked at that, we said, hey, the first thing that we got to go after is the clinical support team and the sales support team. We had people going out supporting cases, doing training, then we had salespeople that were trying to move share and try to do those things, but they weren't doing it in a coordinated effort. We went out and said, not the best way to do that. We integrated these now to where we have a single regional letter leader, the clinical resources and the sales resources all we support after that common person. Now that regional leader can direct all of the resources in that region to optimize. So if there's a site that needs more training, they can do that. If there's a site that says, hey, we need some help with the referral patterns and making sure that our referrals are educated so that we can get more patients in and we can get them to Aquablation. We have our sales support team that can do that, but we can optimize those teams and make sure they're directed. So that's some of the biggest changes that we've made. We also made changes on the capital team as it relates to launches. So here's what used to happen. We had our procedure utilization team, and that was the clinical group and we had the sales group. But when a new system would come into a region, the utilization team had the dual focus of they had to manage their installed base, but then they also had to accommodate these new system launches. So they were sort of pulled in two different directions. Managing an installed base and trying to grow it is a very different skill set than launching a brand-new system and making sure people are trained, making sure people understand how to do the procedure. The other thing about it is the capital team's job is to sell capital. When they would close a PO, oftentimes, the utilization team didn't even know that an instrument was sold that it was coming, and that's when the process would start. I would say in the early days of the company, there was probably already somebody waiting on the other side of this. But as the company has grown and we're in big IDNs and other things, a lot of times an IDN will just say, hey, we want another system. We want another couple of systems to put in our network so we can offer this therapy. But there needs to be a champion at that hospital. There needs to be somebody to catch it. So we've moved launch teams under our capital team. The capital team has a relationship with the hospital. The capital team has the most visibility into when that PO is going to close. And so when we get close to that PO, they're the ones that can say, who's going to be the champion at that site, who's going to be accepting this and start the screening process. Let's get some patients lined up, let's getting procedures lined up. We ran a pilot on this late last year. And when we ran that pilot, we saw significant benefits from this new model. When I look at it now, what we're going to be able to do is in the old world that we had, capital drove procedures. We would install capital and we would look for that to drive new procedures. In the new world, I think it's going to change. I think procedures are what's going to drive capital. But now rather than have this be these handoffs, we have actually an integrated system. When we ran the pilot last year, we saw a 50% reduction in time from the PO to them completing their first 10 cases. And that's the metric that we operate in. It's not time to first case. I think we had a lot of examples where somebody would get a new robot, somebody would do one case, they take a picture, they post on LinkedIn, but it might be weeks before they do their next case. That is not a strategy. And this is something I learned deeply when I was at Edwards and we were doing the TAVR launch. Many of you followed Edwards, many of you followed the TAVR program. One of the things that we learned is when we launched a center, and they got into an immediate cadence of doing two cases a week. They got through the learning curve very quickly. They got their patient referrals, and they became a very healthy center, and they tended to stay healthy. If we had a center that launched poorly, they did one case. They went two or three weeks before they did their next case. They were slower through the learning curve. They tended to have more complications and they tended to be a slower program that almost had to be relaunched at some point in the future. I don't want to be in the business of relaunching programs. I want to be in the business of launching things, launching them with excellence and having them work well. Now the challenge with that is we took some of our most tenured people, some of our most experienced trainers, some of our most experienced clinical people, and we moved them from the procedure team over to the launch team under capital so that they can make sure every new system we launch launches with excellence and they launch in great health. The challenge with that is now we have to go backfill those resources on our procedure team. The other thing is by doing this realignment to the regional system, not everybody is covering the same accounts they used to cover. So there's new relationships that have to be established and new things that have to be done. These are not unusual. They are transient things. They are things that I dealt with throughout my career. As TAVR grew at Edwards, we were continually splitting territories. That meant people were getting new representatives, maybe new clinical specialists, they had to rebuild those relationships and start those. It's nothing unusual, but it is something that does cause disruption. And when you're doing it just onesies and twosies here and there, it's not very disruptive, and it kind of gets buried in the big numbers. But we made a massive shift this time. We realigned all of our territories. We have a lot of people that have new managers, and we have a lot of people that have new accounts. And that is just going to take a little bit of time for it to mature. But it's not a structural challenge thing. It's not going to be a forever headwind. It's just something that's going to be a headwind. We signaled that in Q1. But in the back half of the year, we expect this to pay major benefits to us and drive this. So, as it relates to the capital side, the overwhelming majority of our systems are going to be greenfield placements. I think we plan to do about the same number of greenfield placements in 2026 as we did in 2025. What's new though is we're going to go for a more targeted replacement strategy. So, historically, I think -- and I think the company talked about replacements prior to me joining in this role. But I think there was just sort of a sense that replacements would happen organically. People would just say, hey, we want to upgrade our AquaBeam and we just want to move to HYDROS. It's better technology. We just want to do that. And we didn't really see that happening as people hadn't fully depreciated their systems, the AquaBeam system still is fully functional. People are using it. It just wasn't something that people were just organically going to go do. We have to be much more purposeful about how we do that. And the way that we're going to do that is we're going to work closely with our customers. And one of the things we'll do is based on the age of their system, we will offer them a trading credit. We'll offer them a trading credit, which will be an incentive for them to upgrade. And as these systems get older and they're depreciated off the books, we think there's going to be an attractive replacement cycle that we're going to be able to work closely with our customers and incentivize them. We do believe that as customers upgrade to a HYDROS system, we have data on this that says our utilization is better with HYDROS than it is on AquaBeam. And so we think that's going to be a benefit to us. The other thing is, at some point, we will sunset the original legacy AquaBeam system, and we want to make sure we convert that installed base over to HYDROS before we end up sunsetting that platform. So that's a lot of the work that we're going to do. And then the last thing is we're going to start exploring leasing pilot programs. I don't think that's going to be a big part of our 2026, but there are some customers that just don't want to make the capital expenditure. And if we can improve our installed base by creating leasing programs that are still very favorable for us and they work for us economically, we think that's another opportunity for us to drive procedure growth. But we want to make sure we pilot those things well. We want to make sure we understand how they work, and we want to make sure they're delivering on the economics that we need and the procedure growth that we need. And so those are some things that we have to work out. So again, overwhelmingly, it's going to be greenfield placements, but we are going to begin doing replacements, and we are going to explore the leasing, and that's where we're headed strategically. So what it really comes down to is the clinical case for Aquablation versus the competitive therapies. And I will say we have more evidence on our technology than anybody else has in our space. We have best-in-class evidence. We spent more money probably on research and high-quality trials and registries to understand how our technology works. If you look at how we've been performing against other modern surgical treatments for BPH, you can see how much we've grown and you can see the other procedures are more or less declining, and we're taking share, and we are growing, and we really expect to be the leading procedure amongst these modern therapies in 2026. Our next opportunity is really going to be going after TURP. TURP is literally a 100-year-old procedure. It hasn't really changed that much. It's been out there for a very long time. We believe that we have a meaningful advancement over TURP. We have a lot more precision that we can bring to the table. We have a lot more repeatability that we can bring to the table, and this is the place that we need to go move share. Again, we're only about 10% penetrated into this space. And so converting share from TURP is a huge opportunity for us. But here's what it really comes down to when I talk about making the clinical case. And we talk about all these patients on the sideline that are pursuing therapy and why is that? Well, here's the choice that patients have. They can say, I'm going to do one of these resective procedures. And you know what, I can get a lot of symptom relief. But I'm going to deal with a lot of complications. I'm going to be dealing and complications that are very meaningful for men, incontinence and erectile dysfunction. Those are two things that men absolutely do not want. And in some cases, men feel the cure is worse than the disease they have, and they're going to sit on the sideline and wait. They're going to try everything they can to delay that therapy. So that's the problem if they go with a resective procedure. If they do a nonresective procedure, they can preserve their sexual function, their urinary function, but the procedure doesn't work very well. And it's not very durable and they don't get much symptom relief. So they're sort of left with, do I have something that doesn't really solve my problem very well? Or do I have something that solves my problem, but leaves me with side effects and complications that I absolutely don't want. And this is where we're unique. We can offer the protection of urinary and sexual function of a non-resective procedure with the symptom relief of a resective procedure. And this is the case that we need to take the patients and we need to take clinicians and that we have to make. And this is something, quite frankly, we have not done. And I will say when I joined the company, if I impersonated a BPH patient and I went online and I wanted to see how easy was it for me to get directed to Aquablation as a therapy, the answer was it was virtually impossible. We didn't appear on WebMD. And unless I typed into Aquablation specifically, it was hard to get to patient resources for our procedure. And so all the growth that we have had has pretty much been organic growth by just installing systems and having physicians like the therapy and then drive patients to the therapy. It hasn't been driven by patients or by awareness or by any of these other things, and that's the case that we have to make. And Pooja Sharma is going to talk in a little bit. super excited for you guys to hear what she has to say. She was with me for 20 years at Edwards and was a key part of the growth that we did in TAVR and all of the work that we did there. And so we're excited for what we can do to inform patients in the medical community. So here's the struggle that I think patients have and the mindset that clinicians bring to the table when they're treating BPH. And this is really a fundamental issue. They're going to start with medical management. They're going to start with drug therapy. And I think that makes sense. If you could take a pill and solve your problem, everybody would rather do that than have some invasive procedure. So I think that makes sense. The struggle is what the next step is. And in the clinician's mind, they almost have this hierarchy of less invasive to more invasive in their mind. And so they say, hey, the least invasive thing I can do would be a nonresective procedure. So maybe I'll do a UroLift or I'll do some other procedure. And then if that doesn't work or it turns out not to be very durable, then maybe I'll move to a resective procedure. But they're perfectly comfortable with this concept of a patient having multiple procedures over their treatment course. That might work really, really well for the physician, but it's actually not what matters most to the patient. So when you do patient-centric research and you look at what matters most to patients, here's what matters most. The #1 thing is they want to protect their urinary function. That is the most critical thing to them, and I think that makes sense. The number two thing, minimizing the need for a second procedure. Patients do not want to have a second procedure. And so this is where what patients want runs in direct conflict with the physician treatment algorithm that they're running today. And after that, they want symptom relief and they want to protect their sexual function. It all makes perfect sense from a patient lens, but they want to have one procedure and they want it to solve it. And this whole idea of less invasive versus more invasive, I ask everybody in the room. Once a 24-French device goes through your urethra, tell me how one procedure feels less invasive than another. In the world that I live in cardiac surgery it'd be like saying mitral valve repair is less invasive than mitral valve replacement. To a patient, once you have the sternotomy, the invasiveness feels exactly the same. I think the number of times that a patient should have a 24-French device go through their urethra is zero or one. And patients deserve to have the best procedure that's going to give them the most opportunity to solve their problem and solve it the very first time. And that is not the hierarchy that's being run today for the majority of these patients that are coming through. And I know, look, there's -- we have a plenty of time for Q&A today, and there's going to be a lot of challenges about our ability to grow procedures and do these sorts of things. And I totally get it, especially after we announced earnings yesterday and people are running their procedure models and all of those things. But this is the case that we have to make, and we have to take this to patients and clinicians. We do not have a fundamental problem in this business. We do not have a foundational problem in this business. When you go out and survey doctors, if doctors were telling you, I don't think Aquablation is a very good procedure for my patients. I don't think I get good results with this, and this is why I'm moving to other procedures or doing something different. I don't believe that's what you're hearing, and it's certainly not what I'm hearing. What I hear is the economics of this procedure are better or I can do this procedure in office or this procedure is cheaper for me to do or something like that. Those are things that do not matter to patients. In my entire 40-year career at Edwards, I never met one single patient that said, you're not going to believe the deal my hospital got on my heart valve. We have to make sure that patients are getting treated by what matters to them most. And I will tell you, many of you wrote notes on TAVR back in the day. And one of the things that got in everybody's notes was TAVR is going to have a headwind because the economics of cardiac surgery are better than the economics of TAVR. Hospitals make twice as much money doing open heart surgery as they do doing TAVR. They're going to use TAVR as a loss leader and they're going to convert all their patients to open heart surgery. Remember those notes. Well, the choice for hospitals wasn't whether they going to make $20,000 or whether they were going to make $10,000. The choice for hospitals became are you going to make $10,000 or are you going to make zero because patients weren't indifferent to getting cardiac surgery versus getting TAVR. And if they went to a hospital and the hospital said, yes, we don't want to do TAVR on you. We want to do surgery. The patient said, thank you very much. They got it and left and went to another hospital to find a place that they could get TAVR. We need to create that same dynamic for Aquablation in the treatment of BPH. And that's our job. That's what we have to go do. But when you look at what matters most to patients in that value proposition, it isn't about having it done in office, and they do not care what the economics are for the clinician. They want their problem solved. They want it solved the first time. They want maximum relief of their symptoms, and they want to make sure their urinary and sexual function is preserved. And when you look at the world through that lens, nothing competes with our technology. You look at the durability of our procedure, this one-and-done aspect, here's the data. I know there's a lot of questions about PAE. PAE, the economics may be great. The durability of the procedure is not. When you look at the other competitive therapies that we have, the reason a lot of the therapies kind of show up with a lot of fanfare and they kind of drift away over time, it's because they do not fulfill their durability promise. I will tell you a significant number of procedures we do are redos for patients that have had a UroLift procedure. I've been in those cases. And yes, we can redo them, but having a UroLift before getting an Aquablation does not make the Aquablation procedure easier, okay? We can do them. It's not a problem. People know how to do them, but it would have been much better for the majority of these patients that they would have had an Aquablation first, and that's the case that we need to make. Our innovation portfolio, like we are continuing to invest in evidence and continuing to invest in the technology. Our system is highly differentiated. We use AI to map the prostate. We create an overlay of what the procedure should be. The doctor can customize that overlay to do exactly the procedure that he wants to do. And then the robot delivers the precision to ensure that, that procedure is done exactly as the clinician designed it with precision and repeatability that the other procedures simply do not offer. And when people are trained on this properly and they use our technology, it delivers differentiated outcomes very, very safely. When you look at what we have ahead of us, we expect HYDROS this year to become the majority of our installed base. So we'll cross that this year. We're starting a global expansion. We're going to spend a little bit more time thinking OUS than we've done historically. And we have launched HYDROS already in the U.K., and we'll continue to launch HYDROS outside the U.S. this year. And we continue to invest in new indications and other things that we think are going to be very meaningful. But I do think international is a bit of an untapped opportunity for us that I don't think it's a huge part of our story in terms of 2026, but I think in 2027 and beyond, international will play a larger and larger role in our study. So the next frontier for us, cancer. I will say it is very rare to have an opportunity that we have that's as large as prostate cancer that's an adjacency for us that is done at almost 100% leverage. It leverages our exact system. It leverages our exact handpiece. It leverages our training and it leverages our channel. And it's a whole new opportunity that really bolts on to everything that we've done. And as it relates to prostate cancer, again, it feels very familiar to me than what I dealt with when I was doing TAVR. You had patients that had heart disease. They had severe aortic stenosis. But the procedure was open heart surgery. And even though that that's an excellent procedure, if you go to a good hospital and you have aortic valve replaced and you're a low-risk patient, you have about a 99% chance of having a really great outcome. But the collateral damage that gets done to the body during that procedure was something that made people not want. And so people would delay that therapy as long as possible. They wait until their symptoms got severe and then eventually, they would have the procedure done. But nobody wanted to have open heart surgery. When we developed a catheter-based therapy and people could have the procedure, we didn't do all that collateral damage. It was an absolute game changer in the treatment of valvular heart disease. And the last trial that I ran before I left Edwards was for asymptomatic patients. So we're actually treating patients now before they even develop symptoms and getting ahead of their disease. When we look at prostate cancer, the fastest-growing treatment that patients are taking for prostate cancer is watchful waiting. It is the fastest-growing segment. So a person is diagnosed with prostate cancer. They have cancer in their body. But when faced with the treatment options that exist for them today, they'd rather do nothing than have the procedure and they just hope and pray every day that they're a slow progressor because that is the option that is front of them. Nobody wants to have cancer in their body. People would rather have it taken out. I will say in open heart surgery, it's actually a little bit of a irrational fear when you look at the data because great outcomes. Here, it's not an irrational fear. For men who have radical prostatectomy for the treatment of prostate cancer, the majority of men, the majority end up with severe erectile dysfunction and 25% to 33% end up with urinary incontinence in a year. These are serious complications that no one wants. And so they would rather live with the cancer in their body and just keep an eye on it than have this therapy with those kinds of outcomes. And the thing about it is 60% of them are going to end up getting a radical prostatectomy anyway. So this is where we believe we can change the treatment modality here and we can make a huge difference. We have Barry here today. He's the sun king as it relates to all things technology and the WATER trial and what we're doing in cancer. He's going to bring that to life for everybody, and you're going to see what the opportunity really looks like and why we're so bullish on our therapy being able to play a meaningful role in the treatment of prostate cancer. So we have multiple initiatives. We have a lot of opportunities to grow. It all comes down to our ability to execute. We're only about 10% penetrated into the patient population today that is already seeking a therapy. We believe we can make a meaningful difference there, and there's a group of patients above that. The first group that we go after that is the 1.1 million men who have given up on their drug therapy, but they've already sought therapy for their BPH. We believe that's another group of patients that we can go after. We have to educate patients. We have to create the value proposition for them to where they're coming in and they know what procedure they want and they understand why our procedure is the best procedure for them for the things that matter most to them. And beyond that, we have the opportunity with prostate cancer that I think could provide meaningful growth for us as the data comes out from the WATER IV trial, assuming, of course, that it's a successful trial. So those are the things. That's our strategy. That's what we're trying to do and what we're committed to doing in terms of trying to enter this company into the next chapter and to grow and deliver on the expectations that we have for ourselves. So, with that, I really want to bring to life how we're going to do that. And so with that, I'd like to invite my good friend, Pooja Sharma to the stage.

Thank you so much, Larry. It's a pleasure to be here. Larry and I are good friends indeed. We have known each other, as he said, for almost 20 years. I was with Edwards for almost 20 years within the transcatheter heart valve business unit and had the opportunity to sit on Larry's spectacular leadership team there as we work to transform care for structural heart patients. I joined PROCEPT three months ago. I am very energized to be here and for the opportunity to transform care in the urology space. What I'm going to do is you heard a lot from Larry on our three critical pillars for the next chapter, what are our big strategic focus areas. One is accelerating procedure growth; two is driving our path to profitability; and the third is around advancing evidence and I'm going to get into a little bit more detail around from a marketing perspective, specifically as we talk about accelerating procedure growth, how do we want to go after share capture, specifically with our strong clinical differentiation as well as I know a topic many of you have been interested in around how are we planning to approach targeted and disciplined patient education and engagement. So I'll cover both of those things. And this is an important time to invest in these marketing initiatives because the therapy of Aquablation is now established. We have over 125,000 patients that have been treated worldwide with Aquablation, over 900 robotic systems in our installed base. And as of only 45 days ago, we have Category I reimbursement. The technology and the therapy is also backed by a large maturing clinical body of evidence, and I'm going to talk a lot about that. But it really starts before we get into targeted and disciplined patient education and engagement, it really starts with making sure that we're intentionally building belief of care teams as it relates to Aquablation. And this reflects a lot of lessons that Larry and I learned in TAVR around sequencing. First, you have to establish the therapy, and that's the amazing work that the team at PROCEPT has done to establish Aquablation as a therapy. Then you need to drive that therapy as to the procedure of choice. And then targeted patient education efforts have done strategically, they act as an accelerant. But patients need to encounter physicians and care teams that believe in that differentiation of Aquablation. So let's start with the immediate opportunity, which is around share. You've heard a lot, we're 10% penetrated as of the end of 2025. We're 10% penetrated into a 400,000 patient surgical market, both resective and nonresective procedures. But when you look through the lens of what patients want and you're grounded in the lens of what patients want from their therapy, Aquablation really delivers a complete solution. And again, that is supported by a maturing body of evidence. Our job from a marketing perspective is to position the technology clearly, succinctly and in a compelling way and educate care teams as well as patients around what that positioning and what that narrative looks like. So here's what we're really standardizing as a narrative. Number one, Aquablation delivers complete symptom relief. I'm going to talk a little bit about the most contemporary data in that area. Number two, patients want preserved sexual and urinary function. So we're going to look at what the latest data is in that area. And number three, they want one procedure only. So durability is a big deal, especially in this space. And so again, from a marketing perspective, our positioning is now around Aquablation as a complete solution for BPH patients through the lens of what patients truly want. So let's look at the data itself. As it relates to symptom relief, whether you look across a randomized controlled trial, real-world evidence, meta-analysis, you see consistency in those outcomes. Significant symptom reduction, of course, as measured by the IPSS score. But there's another area here that many of you may be familiar with, but we're going to continue to amplify, which is around post-void residual results. PVR is essentially a measurement of the amount of urine that's left in the bladder after voiding. And BPH, in particular, creates this chronic obstruction that forces the bladder to work harder and harder over time and over a long period of time, can impair bladder function. So what PVR matters because lower rates of PVR mean better bladder emptying and reduce stress on the bladder, reduce risk of infection. Aquablation as a resective treatment, obviously, it removes the obstruction. And this is an area where around symptom relief for IPSS as well as PVR that we are going to continue to educate care teams on the most contemporary data, but patients don't often understand the correlation between their obstruction as well as what's happening with the bladder. So this is an area that we will focus as we talk about our message on complete symptom relief. The unique thing about Aquablation, though, is that symptom relief is not specific to a size of a prostate. So there is now data that, that symptom relief is sustained, first of all, over time, but also you deliver that symptom relief regardless of prostate size and regardless of prostate shape. So that's very compelling. Now patients want that symptom relief, but they want it without the trade-off. They want it without the compromise. So we see a less than 1% rate of incontinence and a less than 1% rate of ED with Aquablation. And based on this data across 70,000 patients real-world evidence that was just recently published, we have a less than 1% transfusion rate. That is even lower than the reference gold standard, legacy gold standard of term. So we're delivering the symptom relief, and we're doing it without the compromise. And then the third key area in this complete solution is around durability. So, first of all, we now have two studies out to five years that demonstrate a 1% -- approximately 1% annual retreatment rate with Aquablation. So just Aquablation as it stands on its own, we now have five-year data with a 1% rate of retreatment annually out to five years. But we also now have contemporary data that compares the therapies. And you can obviously see here that Aquablation delivers durability that is very comparable to the reference standard TURP. And Larry had mentioned this, but many contemporary BPH procedures have really struggled to maintain momentum in the market because they may deliver on one out of three of the areas around complete symptom relief or maybe two complete symptom relief preserved sexual and urinary function and durability, but none of them deliver on all three, which is why our positioning of Aquablation as a complete solution becomes important. The other piece is that, in particular, history shows that therapies that don't have strong long-term durability tend to plateau in the market. So durability is an area where we will be amplifying our message and our narrative around. And we feel really confident, especially because the data supports the positioning. So, then the question is, okay, if the clinical differentiation is so good, why is Aquablation penetration into the surgical market 10%? And I asked the same question before I joined just a few months ago. And from a marketing perspective, there are a couple of barriers that we need to address. One is that there is a misalignment in the assumption of what physicians think patients want out of their BPH therapy and what patients want. And this has been continuously now highlighted in the research that there is a misalignment between those two things. And then the second piece, obviously, is surgeons have comfort with legacy procedures, particularly TURP, and we have a really strong opportunity to differentiate against TURP in particular. So we actually see both of these as opportunities, but also responsibility to educate care teams as well as, of course, patients around. So I talked to you through the data around Aquablation. Now we're going to be much bolder about how we position Aquablation therapy against other competitive procedures, both resective and nonresective. But as Larry mentioned, we have a strong opportunity against TURP. We are -- first of all, there's a lot of headroom with regards to share capture with TURP being such a long-term legacy procedure. And we also have strong clinical differentiation in TURP, especially across sexual function. When you combine our clinical differentiation with the precision and personalization through AI-guided ultrasound that is under the surgeon's control, they get better OR efficiency, better throughput, reduced variability across procedures. And you combine that with the Category I reimbursement that we now have as of 45 days ago, there's both a clinical value proposition and an economic value patients win, clinicians win and the health care system wins as well. So, the first piece that we are focused on right now is standardizing that narrative, being clear with that positioning, being clear about what the clinical differentiation is and standardizing that narrative. The other piece that's very important, and we've learned these lessons through our previous life is to be able to operationalize that message. So we are investing much more in clear selling tools, clear competitive selling tools, clear educational tools for the care teams. We've packaged some of these research insights, a glimpse of what you got today during Larry's presentation around what do patients want. It really helps open the door for educational conversations with as well as care teams on the whole. And we are investing in much stronger peer-to-peer education programs, really activating the KOLs that believe so deeply in this therapy, how do we incorporate them into the training pathway on a local level through case observation, but also through broader webinars and broader educational events. So beyond the misalignment between the assumptions of what physicians think patients want and what patients want, plus surgeon comfort with legacy procedures, there's a third barrier here that we have the opportunity to address from a marketing perspective, which is low patient awareness of Aquablation. So, our research also tells us that right now, the unaided awareness for a BPH patient of Aquablation therapy is 1% to 2% for obvious reasons because PROCEPT has not historically invested in this area. But we want to invest in the area in a very targeted and very disciplined way. And it starts with patients who are at the bottom of the funnel. It starts with patients who are actually trying to make a decision between surgical therapies. And that's where we start. First of all, it's really important that those patients encounter care teams that believe in the differentiation of Aquablation, but we also want to be very targeted and disciplined about our efforts of how do we go educate patients. So it starts at that bottom of the funnel. And our approach right now is to actually build programs around with in-practice education tools, treatment comparison guides, videos for consult rooms. Patient testimonials is something that is very effective in health care. They want to hear from other patients. That's very important, especially as you're trying to balance and make these decisions between surgical therapies. And so again, our disciplined approach to patient education starts at the bottom of the funnel. Now of course, there is a lot of opportunity mid-funnel. There are over 8 million men who are currently managed or have been managed on medication. The unfortunate thing is that over 1 million of them actually discontinue medication and start watchful waiting. And it's not surprising because the medications for BPH are not necessarily benign. So when you have these categories of alpha blockers or 5-ARIs, they have near-term side effects, fatigue, dizziness, sexual function, that sexual function side effects, they sometimes increase over the long term. And a lot of these patients are actually on combination therapies. And what happens in the data with combination therapies is you get the best of both side effects, right? And a lot of these patients, unfortunately, the medication, one is not effective, so they do, do combo therapies. There's also some contemporary -- excuse me, there's also some contemporary literature and studies that are suggesting now that long-term use of BPH medications also can negatively affect mental and psychological effects, dementia, depression. And so the drugs are not benign. And there are a lot of patients who are incredibly frustrated with being on BPH medication who are actively searching for solutions, but they're in that exploration phase. And that's an important target of the population that we do need to address. And so when we're looking at that mid-funnel opportunity, this is about educating those patients that are probably already frustrated with their medication, and they're under existing urologic care. And in that area, our approach becomes digital engagement does play a big and effective role in this area, social media, search engine optimization, educational e-mails, but being thoughtful about how we target geographically those types of programs. So we don't need to go do broad national spend. It's really about targeting those types of programs and making sure we educate patients who are at that point in the journey. And one of the reasons why this is -- we believe this is going to be effective is that, of course, increasingly, patients take a strong role in health care. But in urology, in particular, and with BPH actually, in particular, the research actually supports that they take a particularly strong role in their care. We see that over 20% -- well over 20% of patients will actually request a specific BPH procedure by name. And again, for BPH in particular, over 70% of urologists, self-reported by urologists in the research actually say that they will strongly consider patient requests if they believe that the therapy offers the right efficacy. So we do believe that this is an important part that we need to begin investing in. And again, we're going to do it in a very targeted and very disciplined way. Now long term, after our conversion pathways are proven, then of course, we can go much more broadly and address these 40 million men as a whole. And that looks like broader national awareness campaigns, but that's much further down the road. Right now, we want to focus on the patients that are at the bottom of the funnel and then move systematically through that. So, again, Larry has shown our strategy is really near term around driving procedure growth through improved execution. From a marketing perspective, we're standardizing our narrative now. We're being very clear about how we are positioning the therapy. We are operationalizing that narrative through the field, but we're also starting with some really targeted patient education efforts, specifically for those patients who are trying to balance and figure out which surgical therapy to select and are down funnel. And as I mentioned, we have a strong opportunity to really educate patients mid-funnel that waiting is not winning and figure out how do we do that again in a really targeted way. And there's a lot of efforts that we have going on to make sure that we do that effectively. And then, of course, expanding the applications around prostate cancer. And this engine that we think we can build from a marketing perspective and the infrastructure around BPH, that engine is going to be important because along with Larry's comments around leveraging technology and the commercial sales channel, we can also leverage some of this marketing infrastructure as we expand applications potentially to prostate cancer in the future. So I know that was a glimpse into our efforts. Again, I'm very excited to be here. I'm excited about our opportunity in the future. And with that, I have the pleasure of introducing my new good friend, Barry Templin, who's the Chief Technology Officer, and he'll talk to you a little bit more about prostate cancer.

All right. Thank you, Pooja. All right. Good morning. My name is Barry Templin. I came to PROCEPT 10 years ago. So I've got a little bit of time on both Larry and Pooja. And so I'm excited to share a little bit of a glimpse into the future here around prostate cancer and where it's going to fit in our program as we move forward. So there was a critical decision that we had to make as we embarked on this a little over four years ago, which was we had two doors, door #1, whole gland treatment; door #2, focal treatment where you aim for the disease, hemi-gland ablation. And why does this matter? First, you have to understand the disease. So there was a study done at UCLA that was published a number of years ago. They went back and they looked at the radical prostatectomy population, and they filtered it out as if their baseline condition would set them up for what today you would choose for focal therapy. So, smaller glands, less than 60, PSA less than 20, unilateral disease. So the disease is only confirmed on one side of the gland, both with MRI and biopsy. They then looked at the host radical information, meaning after you do a radical, they take the gland out, they do a home out. And under a microscope, they look to see, is there any other disease in that gland. And what they found was that over 40% of those men had contralateral, meaning disease on the other side that was not seen by MRI and it was missed by biopsy. So with this information out there, we have chosen to be a whole gland treatment because the patient cares that they don't want cancer in their body anymore. They don't care like, oh, you can see it on a lesion, but what about the disease that you can't see. So this has embarked our clinical program and our path as we've gone forward. So door #1, whole gland, door #2, focal. We, as a company, are using our technology for whole gland treatment because we want to treat the cancer as broadly as we can, which is why radical prostatectomy is the gold standard as to efficacy. Okay. So, for four years, we have done a number -- maybe I should move over here. We have done a number of clinical studies, efforts as we compile this information and lead up to our pivotal study called WATER IV, which I'm going to touch on here at the end of the presentation. So where we started first? You have to study safety. So, four years ago, we looked at grade group 1 and 2 patients, and we measured circulating tumor cells. This information was published last year. Probably the #1 question when we started was, are you going to spray prostate cancer cells all over the body? The answer is no. We measured circulating tumor cells before the procedure, right after the procedure, day 2 and day 7. By day 2 and day 7, it looked just like it did at baseline. So that's been published. We've checked that box. There was another study going on at Endeavor Health in Chicago. Part of this initiative was to go against our Medicare policy for BPH, which there was an exclusion for men with known prostate cancer. However, you could be on active surveillance and still have lots and you need to deobstruct the prostate. So they went back and they looked at their data series. I'm going to talk about this a little bit later as to what they saw from an oncologic benefit out for five years there. Then we did the 02 study. This is a smaller study, safety study feasibility. This was a precursor to the WATER IV study. I'm not going to talk about the details today because it did its job. It showed procedural safety and it set us up with FDA to do the WATER IV study. Then we've done a retrospective study with a group of surgeons, which is does Aquablation take off the table if a patient needs to undergo a radical prostatectomy, whether that Aquablation is being done for BPH reasons or whether that Aquablation is being done for cancer reasons. So, in 14 patients, the point here is that radical prostatectomy is a very feasible procedure following Aquablation therapy. So we don't want to remove options for these patients, but we want to be able to treat them as a frontline treatment. PRCT001, you see dot-B or version B. We expanded that original protocol to go up to 125 patients. And this is the data series that I'm going to talk more in depth later on in the presentation and then WATER IV, we just touched on. So, first, let me talk about the procedure and how it's different than BPH. So BPH, you guys have -- we've stood up here for years. We've shown videos. You start in a sagittal view, meaning your bladder on the left. You kind of see this cross-sectional view of the prostate, and then we plan in transverse, meaning this an axial view of the prostate, you can see us doing angle planning there. What does this look like? Before on the left, on the right, you see this unobstructed channel that has now been created. This is the goal of BPH, which is how do you get those durable results? How do you get the dramatic reduction of symptoms? It's because we're removing obstructive tissue. If you look at this in the axial view, again, the green lines show the border or the capsule of the prostate and the inner green line where the dark is, which is representing fluid, this is a deobstructive prostate. This is the goal when a patient comes in and they're retaining fluid in their bladder, they're getting up 4 or 5x at night. This is how you fix that. This is also when you ask a urologist who is not part of our clinical development program, how do you think Aquablation is going to do with prostate cancer and neck. They only treat the transition zone. And most of the cancer is in the peripheral zone. This is why one would draw those conclusions. Now let me walk you through how we do a prostate cancer treatment. So this is kind of the pre-op view. Up at the top, you see a 3D rendering of MRI. This is just for kind of understanding. You can see the green. It looks like an M&M there. That is an MRI visible lesion. There's your prostate, both sagittal and transverse. This is what we see. Again, same view, same system, same approach, what we do. Our approach, though, and our conclusion as to what we get is much different. You see the images on the right now. All you see is a thin layer of a capsule that remains. There is no longer the tissue that's left behind. We're not just deobstructing the prostate. You can see it in transverse and you can see it in sagittal as well. Very different procedure. Instead of a couple of waterjet passes, it could be three, four, five waterjet passes. Do we leave the remnant tissue behind to let it slip off? No. We make sure that, that is removed at the end of the case. Our surgical goals and aims are different when we're treating prostate. Remember, I started at the beginning, which is, are we going to do a whole gland treatment? We are doing a whole gland treatment. This is what excites surgeons about the capability of this procedure. And just to kind of put them side by side, the image on the left here, we're deobstructing. We're helping people's urinary symptoms. This is for BPH. The image on the right is we are going after the whole gland so that we can get all the cancer, whether you can see it or not. And just to confirm what we see at six months, does that cavity remain? This is a six-month MRI of the patient that I just showed. And here, you can see in two different views of MRI, that same void removal of tissue remains. Now let me jump into the data. So we've talked about the 01 feasibility study, if you will. We did this in 2022. As of last month, we have now completed the whole series here. So I'm going to walk into this data and kind of our first interim analysis for that data set. But first, I'm going to talk about the Endeavor Health series that I mentioned at the beginning. So what this group did was they looked at their Grade Group 1, so low-grade disease, active surveillance group. They parsed that information. They said, of that group, which one underwent an Aquablation for BPH. And let's compare it to the active surveillance group only. And let's look at their oncologic, their cancer progression over the course of five years. And what they found was the group that underwent Aquablation for their BPH, which was the original procedure protocol I showed, 44% of them -- there were 44% fewer upgrades at five years compared to active surveillance alone. Again, it's another clinical evidence point of can Aquablation alter the progression of cancer over time. So this was published last month. Again, it's online and available. So very promising results. Now you get into the 01 study. So we completed 124 procedures. You can see 90 of them have reached their 6-month follow-up visit and 37 of them have reached their 12-month visit. So what does this mean? So as time goes on, this data will mature, and we will have patients at all of these time points going out to one year. But we're going to share the data that we have today. 2/3 of the patients had Grade Group 2 or Grade Group 3 disease and 2/3 of these patients had disease in the peripheral zone. This represents a very normal prostate cancer population. This isn't a transition zone only. This isn't just low-grade disease. This is a very typical profile of a patient. Okay. Going to what Larry and Pooja have touched on, which is, okay, radical prostatectomy, whole gland treatment. It's a very good procedure. Why is active surveillance growing as the #1 treatment choice to start with when somebody is diagnosed with prostate cancer. This is the reason. So SHIM score is a 5-question questionnaire that a patient will fill out that identifies how severe your erectile function is. The PROTECT study, the AFU study, very credible studies that have been done, very published or very well published in journals today. And here, you can see a higher score, better erectile function, a lower score, below 7, severe ED. You can see in both of these studies, relatively good erectile function, age, low 60s to mid-60s. You can see after the procedure at one year, you're seeing in the severe ED category. There is no return for this over time. This is a permanent condition. If you have this at one year, this is where it's going to stay for one year. When you look at our data, so this is the first time we've shown our one-year data. You see a stable number from baseline to 6 months to 12 months of the same survey tool of a SHIM score. So, again, our ability is can we break off the balance between a whole gland treatment and the side effect risk that comes with this. So this addresses the erectile function side of things. Now when you look at pad use incontinence, again, you see this rise up, approximately 50% of patients at six months following a radical prostatectomy, but you get some recovery at 12 months. So this is where you get the 25% to 35% risk at one year. When you've looked at our data from this series that we're talking about today from the 01 trial, you can see a very low rise of incontinence here at three months. So we'll continue to monitor this -- or excuse me, at six months, we'll continue to monitor this out to one year. Another benefit of removing this much tissue. This population in this trial, you can see a baseline IPSS score of 17. So they do have lots. So there's -- many men have both prostate cancer and BPH symptoms. And you can see here, we started with a group of moderate score of 17. And then over time, this gets below 6, which again, is right in line with when we do our BPH studies. These are the typical results that you see. And lastly, how do you measure efficacy? Efficacy is measured of do you need another treatment for your cancer because you either missed it at the treatment onset PSA starts to rise, additional imaging, additional biopsy. Here is radical prostatectomy. 6% to 7% of patients at one year will need additional therapy. And it comes in the form of additional radiation therapy, hormone therapy, but these are very good results. If you compare this to what have we observed in this study to date, you can see about a 7% risk of needing something else after their Aquablation procedure. So very comparable to the radical prostatectomy results that have shown in these studies. Now I've just shown you a lot of data. It's gone out to one year. However, in order to change kind of the approach in this field, you have to do a randomized study. That study is not going to be enough on its own. So we've talked about this for the last year, 1.5 years that we've launched the WATER IV study. I'm not going to spend a lot of time going into this, 280 patients randomized against radical prostatectomy for grade group 1 to 3 patients, and it will follow patients out to 10 years. The first primary endpoint is at six months and then annually thereafter for 10 years. As we exited last year, one year to the day yesterday was the first patient we treated in this trial. So it's one year and one day, our aim to enroll and randomize 280 patients. As we exited last year, we had 31 global centers. You can see the little dots on the screen. There, we are averaging less than 60 days from consent of patient to treatment in the OR. Where we're at today, we are on track to finish procedures in this entire study by the middle part of this year, so this summer. So just over 15 months from the day we started, we will have concluded our 280 patients. That's what will set the time frame for primary endpoint, secondary endpoint and so on. So we've been very pleased. We've been very -- great collaboration with surgeons. There's a strong surgeon desire to enter into a randomized clinical study because of the potential of what Aquablation can offer in this field. Now you get into technology. How do we enable this? So a little bit of going back. So, AquaBeam on the backs of AquaBeam, we use that for a little over 10 years, well over 100,000 procedures done on that platform. You can see it was two systems, if you will, a stand-alone ultrasound machine tethered to our robotic platform of AquaBeam. 18 months ago, we launched HYDROS. There's one tower. This is the world of integration. So we've now integrated a number of things. Not only do we do things for the surgeon, meaning AI-assisted ultrasound interpretation, excuse me, the staff. The staff is important for setup, turnover, efficiency in a hospital. This system allows for that. The system is also a platform that we could build upon. So, late last year, we got a clearance from FDA on our second generation of AI. We continue to build on our AI, our ability to be better, have higher predictability with ultrasound, AI reads faster, and we have a platform that we can continue to build on this. And then as I touched on earlier, expanding patient applications and indications, clearly, prostate cancer is the next one that we're going after. So, in conclusion, if there was three things you're going to remember from my talk. Prostate cancer is a multifocal disease requiring a whole gland treatment. Aquablation therapy in a prostate cancer sense is fully capable of doing a whole gland treatment and our growing body of evidence puts us in a position to be considered a frontline treatment for prostate cancer. So, with that, I will turn it over to our CFO, Kevin Waters.

Thanks, Barry. I'm going to be the odd guy that stands behind the podium, I guess, to give my talk. I have four goals that I'm going to go through here today. First, I want to give everyone a brief overview of our 2026 financials. I want to give a walk on our '26 guidance. Larry and I took a lot of questions last night about our ability to achieve our guidance, particularly around procedures given the growth implied in the second half. So I want to do a procedure walk for the group here on a cohort analysis. I would like to discuss our 2027 financials. This is going to be the first time PROCEPT has put a multiyear plan in place. And then lastly, I'm going to hit on just overall profitability, our cash generation, and we'd like to put to bed any concern around our ability to operate the business profitability with the cash we have on hand. So, with that, flipping to just a little bit of our history. You could see here our revenue growth over the last four years has been robust. What is interesting, though, is the mix. And Larry alluded to this, we are really turning into a procedure business. If you go back in time in 2021, over 50% of our revenue was generated by systems. That number in '26 is going to be less than 25%. So this is really moved to a procedure-based business. And with that, you see the expansion in gross margins, which is a nice tailwind when you do more procedures, which are at a higher standard margin. That's also going to be reflected in our 2026 and 2027 guidance. When you look at EBITDA, we've had a significant EBITDA improvement each year. Our '26 guide, while still negative, does assume our EBITDA positive in the fourth quarter, and we're going to show significant improvement in 2027, which I'll get to here in a few slides. So, here's just a procedure walk, how our procedures have trended over time. You can see 60% growth in our installed base exiting 2025 with over 718 systems. Our guidance implies in '26 north of 900 systems in the U.S. And then when you get to the end of 2027, we're not going to guide to an absolute number, but you could be assured that we'll be well north of 1,000 systems in the U.S. And when you think about prostate cancer and the timing around that, particularly around 2028, that's when we'll be able to leverage that installed base to do prostate cancer procedures. So, financial outlook and going through our revenue in both 2026 and 2027 and what that's going to look like. We guided yesterday to $390 million to $410 million. That represents the growth of 27% to 33%. I think we've gone through many of the factors earlier today around ASP, around some of the destocking that impacted the change from the previous guide. But importantly, this is not a business that at our growth, we expect to slow in the near term. So we do expect the growth in 2027 to still be in the 25% to 30% range. That will be a business that's north of $500 million in revenue. You're going to see in a second here. That's going to be a profitable business. And we feel good about our ability, given the procedure nature of the business, given how early we are in the market penetration to continue to have above-market growth rates even at revenue amounts greater than $500 million. So really pleased with that. And when you switch to gross margins and what gross margins looks like, we guided to 65% gross margins in 2026. But in 2027, we could see this number getting as high as 70%. And that's due to a few factors. The biggest being the shift to the procedure-based business and procedures being a much greater portion of our company. And over time, we've done, I would say, very quietly behind the scenes, a very nice job getting the cost of our procedure down to levels that will support company margins at 70% when we really start to be a majority-based procedure business. And how does that translate to EBITDA? You saw our EBITDA guide yesterday, which was a loss of $30 million to $17 million. However, we see up to a $60 million EBITDA improvement in 2027, meaning that when we go positive in Q4 of '26, this isn't a business that's going to bounce around profitability. We see profitability at some pretty substantial amounts in 2027. And I would just remind everybody, Barry just went through kind of a wonderful summary of prostate cancer, none of the financial metrics up here assume any contribution yet from prostate cancer as well, which was another factor why we think the growth rate moving past 2027 is very sustainable. So, what drives this revenue growth? And what is our focus over the next year here? It's all about same facility procedure growth. We are going to focus on growing procedures within our existing accounts, and that is the job of our utilization team. And we're going to do that. We're going to focus on it. We've now bifurcated the launch teams to focus on launches to take that burden off of that team, and we could focus on growing procedures within our existing accounts. Handpiece pricing discipline. Larry has alluded to this. We're guiding to a $3,500 ASP here in 2026. That's up significantly. That's close to a $20 million tailwind. And we are not seeing customer pushback. Larry and I took numerous calls last evening about kind of customer receptivity around this price increase. And I think it's important to remember that we didn't go to customers and raise their price. All we're doing is holding our customers and ourselves accountable to our list price or the price that has been agreed with our customers. Will we still work with customers with volume rebates and pricing and large IDN networks? Of course. That's being a good partner to our customers, and we're going to continue to do that. But the days of giving quarter-end discounts to drive volume are behind us, and that's now being reflected in our ASP. And then operating lease pilots, Larry alluded to this. Obviously, I think in capital equipment, we're all familiar with companies that use this strategy to place systems. I don't think we're anywhere near in our kind of market penetration where these companies are, where this will represent a majority or a large portion of our placements. But there's definitely hospital networks out there that have patients to treat, and we're not accessible to those patients under our current model. And given our strong balance sheet, given the fact that we're marching towards profitability, we can now offer this. Three, four years ago, when we had to raise money, when we did not see profitability on the horizon, this was not an option that was available to the company. So we're now going to leverage our balance sheet to get our technology in the hands of more patients and customers through operating leases starting in 2026. This is a guide walk in terms -- and it's in your slide deck, excuse me, I won't belabor each point. But this is kind of the contribution amongst the different lines in our 2026 guidance. On system revenue, I want to talk about that and how we're going to report system revenue moving forward. We will be reporting our installed base. We will be reporting total system revenue. It's -- the business now is much more complex than it was five years ago. We're going to have replacements. We're going to have second systems. We have relationships with all large 17 IDNs in the United States. The days of just multiplying the number of systems we sold by an average ASP, and that is judging the health of the business. I think we need to think differently. And so we're going to try and reflect that in our guidance here moving forward. And we're going to guide to a total revenue number and installed base. So everybody will be able to back into an average selling price to the if it differs from what we've put forth or what expectations are, of course, we're going to talk about it. Our goal is to be more transparent, not less. I just want everybody to be crystal clear with how we're going to talk about the business. And that started with how we're guiding to procedures. You now see we're giving procedure guidance as well. That's reflected here is 60,000 to 64,000 procedures next year. And as Larry said, our handpiece sales will more closely align with procedures, but there's probably more room for upside than downside in that metric as we move forward and think of customer inventory and what that needs to look like. This is the historical walk on the right here as to what procedures are going to be compared to the 115% to 108% over the previous years. And the next slide here that we're going to talk about -- I'm going to spend some time on this slide. And this is the walk to how would we get to the low end of our procedure guidance. Again, I think a big concern of our shareholders, analysts yesterday were given where Q4 was trending and what our Q1 guide implied, how big is it a stretch to get to the low end of guidance? We're not naive. You don't want to lower guidance twice. We get it. We just lowered guidance. So when we went through the setting the bar of the low end of guidance, we wanted to set a floor that we had a high degree of conviction we weren't going to need to revisit later in the year. And when you look at what this slide implies, these are procedures on the right for 2026, 60,000 would represent the low end of our procedures, 43,000 would represent what we did in 2025. And I'm going to take the blue bar at the bottom. Our 500-plus accounts that were installed prior to 2025 contributed 36,000 procedures in our 2025 results. Pooja and Larry just spent an hour telling you how we're going to drive utilization in that group, why we could be better, how we're going to drive patient awareness, how we're going to drive same-store sales. Our low end of guidance assumes none of those initiatives really take hold. We're expecting those accounts to go from 36,000 to 38,000. That would be less than 0.3 per month per account in our installed base. So the low end of our guidance would suggest that the initiatives that we're implementing really don't bear any fruit in 2026. And then on top of that, when you look at the next segment of customers, those 7,000, those are procedures from accounts we installed in '25. All we're assuming is that the low end of guidance, their run rate stays the same. They do the same number of procedures, and now they have a full year of procedures, and therefore, they're going to do 14,000, which is 2x what they did in 2025. And then when you move forward with the new accounts in '26, we're essentially expecting those accounts to do 8,000 procedures, which is about the same number as our new accounts did in 2025. Yet we just spent time going through launch teams and focus and launching accounts. We showed data about time to first cases, and that's improving. But the low end of our guidance assumes the status quo. And then obviously, at the high end of the guidance, that would be 4,000 more procedures. Even at the high end of our guidance, if you took that bottom bar, that would assume that each account would have to do about half more procedures in any given month in '26 as compared to '25. So I appreciate growth. I appreciate when you look at procedure growth on the surface at the back half is north of 50%. We recognize that, but we also recognize that we're not asking for every initiative that we're launching to bear fruit immediately to hit the numbers. And these are not the numbers the management team at PROCEPT is aspiring to in 2026 either. But we wanted to put guidance out there coming off of Q4 that we felt was achievable and we wouldn't have to reset. A few other factors as to kind of what is the low end and the high end of our guidance imply and why do we have a range? So the low end is essentially the status quo, as I mentioned. But the high end does assume some organic procedure growth in legacy accounts. We do start to initiate a replacement cycle, and that replacement cycle of the $100 million, you're probably looking at a 5% to 10% contribution from the replacement cycle to put it in dollars for the group as to what we're expecting in '26. We really don't start to really get some momentum in the replacement cycle until our 2027. And that makes sense. If you look at the age of our AquaBeam systems, most hospitals will look at our equipment as a 5-year useful life. We really started to accelerate placements in '21 and '22, which would suggest that the replacement cycle really shouldn't start in earnest until the back half of '26 or '27. We are forecasting ASPs now of $3,500. We feel good about that. We're two months into the quarter. And I'm not going to talk a lot about the first quarter, given we're right in the middle of the quarter, but I'll just say that the pricing that we've seen over the last 60 days has informed us as to the guidance that we've put forth here around $3,500. And then again, going to 2027, how are we going to continue to have the sustained growth north of 25%. The growing installed base is definitely a tailwind to procedures. We're going to increase replacement revenue. We see relatively stable handpiece pricing and also relatively stable system pricing. We made some commentary at the end of our third quarter about the capital environment. I think a lot of people took those comments and ran with it, so to speak, that we were trying to signal the capital environment was weak or we were seeing pricing pressure. Capital environment, we feel is stable. We see pricing is stable. The decrease in system ASPs in the fourth quarter were more due to type of customer sales. We had a lot of large IDN sales. They typically get a larger discount than a one-off hospital. That was reflected in the $425. We see that moving back up to the $440 to $450 range in 2026 and feel very good about the funnel. When we think about profitability and longer-term EBITDA expansion and how we're going to get there. We do believe we're going to have operational efficiencies. And I'm going to focus here on R&D and our sales and marketing group in the next few slides. Let's first, before we get there, talk about gross margins. Gross margins going from 65% to 70%. I would say we did not feel two, three years ago that 70% of $500 million, that was going to be a heavy lift, but we've done a good job with operational efficiencies, the cost of our product, the handpiece component of our business and that tailwind to margins is really going to be reflected in 2027. Tariffs, that is an ever-changing topic. I'm sure we could wake up tomorrow morning and the news will be different. But what is factored into our guide today is no impact from what was recently announced, I think it was 48 hours ago. We're obviously aware of that, but we have put into our guide a tariff expense of around $5 million to $6 million in '26 that would assume nothing changes with our exposure. And our exposure to remind everybody, is primarily to our ultrasound supplier in China. But we feel good about our pathway here on margins. And this is, again, going to be -- it's a long pole in the tent for us for profitability because when you get to other areas of the business, we do start to demonstrate significant leverage. Our R&D spend has been heavily influenced in the last 24 months for the WATER IV trial. The majority of that spend really ceases in 2026, where R&D spend in absolute dollars is going to be relatively consistent. But what that does as a percent of revenue is it really gets us down to more of a mid-teens level, which is more reflective of a more mature medical device company. We're innovative. We're robotic. I never see this business being in the 8% to 10%. I think that's too low for a business like ours, but settling somewhere in the mid-teens is something I think folks should expect in perpetuity and will give us plenty of resources as our revenue grows to continue to innovate and do a lot of exciting things in R&D. But that will be a huge source of leverage for us here as we move forward. And how does that translate to adjusted EBITDA? So you have our '26 guide. We're now guiding to 2027 EBITDA in the $25 million to $30 million range positive. So that is a positive $25 million to $30 million, that is a $60 million improvement over 2025 at the high end. And it's the factors we just went through. It's high procedure growth, 68% to 70% gross margins, leveraging R&D and then beginning to leverage our sales force. One thing Larry had mentioned on the call yesterday, we are starting to pilot a hybrid sales model where we will longer term, not be required to be in every case. We're still going to be great partners to our customers. We're still going to support our customers. This does not mean our reps disappear from our accounts. We're a high-touch model. We'll still be there. But at the same time, we do not feel, given kind of where we're at with the clinical results of the product, we need to be in every case, and that's going to be a tremendous source of leverage for us as we move forward. Lastly here on the balance sheet and kind of what does the balance sheet look like? Cash, let's just address it. We never expect our cash to go below $175 million. We are -- we think we're going to be cash flow positive in the fourth quarter of '27, perhaps earlier, perhaps a quarter later, but it's somewhere around the end of 2027 where this business becomes cash flow positive. Working capital, accounts receivable, inventory, we think we have room for improvement there, and we're going to continue to improve on that. And that's going to be a driver to us becoming a cash flow positive company. As a reminder, we require little CapEx. Working capital is the driver of this business. And therefore, as our revenue grows, there's not a lot of CapEx required in this business. We're in a facility that has more than enough capacity for the foreseeable future. And even if we were to consider alternatives in the near term, that would not be a significant outlay for PROCEPT to go do that ourselves. So very small CapEx. And when you translate that to the fourth quarter of '27, that cash flow positive is important because we do have $52 million of debt that becomes mature in '27. We have no plans to refinance that debt. If you look at the terms of that debt, it's probably one of the more favorable debt instruments outstanding right now. We have a great partner. We have no covenants. And we feel good about when that debt were to be maturing in Q4 '27, we'll have many options. And in summary, we're very excited about the trajectory of the business. I, myself, like Barry, have been here. I'm one of the old timers, but now becoming friend with Pooja and Larry as well. And I'll just say it is -- I can't monetize this, but I do believe with the leadership team we brought on board here, while Q4 may be frustrating for folks in the room and investors are frustrating for myself, I've never been more excited about the future and direction of PROCEPT. So, I thank everyone for being here and coming on this journey with us. At this time, I'd like to invite up the management team. We're going to start the moderated Q&A. Matt is going to come up to the podium. So just give us 30 seconds here to get situated, everyone on the web. Thank you.

Okay. So we're going to start Q&A now, but we will be prioritizing those that are in the room. I do have an iPad in front of me right now to monitor the chat. So if you do have questions, please send those through, but we are going to be prioritizing those in the room. So, Chris, go ahead. Is that on? There we go.

Chris Pasquale, Nephron. One question on the cancer opportunity and then I want to follow up on something for Kevin. So, on cancer, what is the key to unlocking that opportunity? Is it specific FDA labeling? Is it publication of a certain length of follow-up? Would just love to sort of level set at what point as you're following these patients for 10 years, when do you think you have what you need to really go out and commercialize for that indication?

Yes. I think the first thing is we have to complete the trial and see the data. For those of you that follow the journey at Edwards, we have great confidence when we start these trials. I think Barry and the team have done a great job designing the trial, but we have to see the trial results and the trial results are going to inform where exactly this resides in the treatment of cancer. I think we're going to present those results at AUA in 2027. Right now, we don't have a contraindication against treating patients today. So patients -- doctors wanted to treat patients, there wouldn't be any obstruction to that. What we do with the labeling and how we approach that with FDA is going to probably depend a lot on the strength of the data, and that's probably going to inform our reimbursement strategy as well. So we'll have to wait to see the data before we'll actually answer that. But I think there's a lot of people that go out and talk to folks and say, and people are a little bit bearish on the role that Aquablation can play in cancer. And so we tried to really bring that to light. But I think part of the disconnect there is people are saying, do I think Aquablation is going to be better than a radical prostatectomy for the treatment of cancer. And I think that's just an absolutely wrong question to ask. That would be like saying is TAVR going to be better than open heart surgery. When you have a procedure that's going to preserve the quality of life in the way that our procedure does, similar to what TAVR was able to do for aortic stenosis patients, the biggest growing segment is watchful waiting. The big thing we have to do is provide a meaningful option for those patients who would rather do nothing and give them an option to treat their cancer. Even we don't know what the data is going to say, I haven't seen the data, I have no idea what it's going to look like. But if we're anywhere comparable to a radical prostatectomy and we can protect people's quality of life, their urinary function and their sexual function, to me, it's just a home run opportunity for these patients because the patients that are sitting the sideline, I don't believe they're sitting on the sideline because they want to have cancer in their body. They're sitting on the sideline because they're unwilling to live with the complications that treatment involves. And if we can provide an answer for them that doesn't have those complications, I don't know why anybody wouldn't choose having that procedure done versus waiting. And that's why I think cancer is such an exciting opportunity for us. But again, it starts with -- we designed a very good clinical trial. The clinical trials in urology coming from a different space are typically registries, the follow-up is a little spotty. They tend to be really small trials. The trial that Barry designed, and he grew up in the cardiovascular space. So we designed a very cardiovascular-like trial. It's randomized, it's very high quality. We've really run that trial very, very carefully, and I really commend the team. And all that work was done before I got here, so I don't get any credit for it, but I can certainly admire it. And they've done a great job with that. I think this is a very robust trial. It's going to be Level 1 evidence that's going to perform this. And we walked through the reasons why we're in that trial. But again, it is also what the patients are doing today and why I believe this is going to be a strong option for patients, assuming the trial is successful.

And then Kevin, you talked about how the drivers of revenue growth are shifting from what was historically more of a capital-driven model to now disposables being the primary driver of growth. Your '26 guidance assumes flat system placements, which is a bit of a change from the company. That number has ticked up over time. On one of your slides, you said you're about 25% penetrated, I think, into the installed base opportunity. Would love to just first confirm, is that where you think you are at the end of '25? Or was that projecting out to '27? And what goes into that? Are you guys still interested in the ASC as an alternative site of care that something could expand your kind of system placement TAM? Or is this just a reflection of some of the priorities that Larry has around really optimizing utilization versus trying to maximize placements?

I'll maybe start on that and then Kevin can certainly weigh in. I think our capital plan for greenfields, I think, is right now the best place for us to make sure that we're preserving price discipline, and we're adding to our installed base in a responsible way. And remember, the other part of that is when you add to the installed base, you have to train them, you have to launch them, you have to get them up to speed. So it's not just the capital team side of it, it's also the utilization team side of it in terms of being able to support these centers. And so we think that is a sweet spot. But remember, the other things that we're adding on to the capital team. In addition to the launch program, we're also adding on introduction of a replacement strategy that we think is going to be a bigger part of our story. It's a small part of our story in '26, but it will be a bigger part in '27. And then we're also going to explore some leases. As it relates to ASCs, like I think that's going to absolutely be part of our future. Right now, though, we feel like there's still a great opportunity in greenfields. And one of the things with ASCs that we have to make sure that we're doing is that we're not just shifting volume. If we install in one of those systems and all somebody does is take their volume from that they're doing in the hospital and move it over to an ASC, that's not going to grow our total procedure volume. So what we have to make sure is any place we go that, that's going to drive incremental volume that we wouldn't have otherwise got and not just shifting from one site of care to another. And so that's the area that I'm really focused on. The metric that drives us, that drives me that I track more closely is what is driving our procedure growth. And that's absolute procedure growth quarter-over-quarter. And I think that's what we need to do. That's what we need to execute on. And I frankly think that's what you guys need to see. That's what our investors need to see to get confidence in our long-term growth thesis, and that's what we're focused on.

The second part of your question on the 25% answer directly, Chris. That's then of 25%. So that would assume there's roughly 2,800 hospitals in the U.S. that do BPH. And then just last on the kind of flat year-over-year on greenfields. We've always known, and I've been in the fourth capital equipment company, procedures drive capital. We get it. But when we first started, we didn't have any procedures. So therefore, we had to sell capital. And I would suggest that as procedure initiatives take hold, that will fuel capital growth year-over-year. Capital growth will be fueled by procedures. We see accounts today that are high volume that want and need second systems. We're starting to see that. We obviously are planning down the road to have another indication that would drive that. So I wouldn't view '26 is how we're viewing the business in perpetuity. We also have a lot of innovation going on that should drive capital in the future. But for '26, for all the reasons we've gone through, it is flat, but I wouldn't suggest that's how we're viewing the business every year for the next five years.

Nathan Treybeck, Wells Fargo. Thank you for putting this together. Kevin, I just wanted to talk about the cohort analysis you put together. If my math is right, it shows kind of the legacy accounts monthly utilization is around six, '25 cohort is about 5.5 and the '26 is going to be less than one. My question is, is the six per month kind of where you max out? And then why does the '25 cohort gather so quickly? And then is most of the upside or most of the upside to the high end of your '26 guidance on the '26 cohort?

Yes. I'll start with that and just what we try to do is just really simplify the procedure walk because I think people are looking at 43,000 to 60,000 plus and saying that seems like a lot of procedure growth. So we want to be really clear where the procedure growth coming from. I know that from an Excel standpoint, looking at utilization per instrument is just a really easy way to model things out. I don't think it's a particularly useful metric because we -- there's just a huge amount of variability in our installed base between what the utilization numbers are across. And so taking an average and applying it just really isn't representative of anything because the spread is so wide. What we're focused on is how are we going to grow procedures quarter-over-quarter on an absolute number. The walk is really just trying to explain how we get to the bottom of the guidance, which is basically saying our installed base is going to do a tiny bit more than what they've been doing, but you're talking about our installed base of 718 systems in the U.S. adding 2,000 cases in total. So not very aspirational. And that would suggest that it's taking longer for a lot of our programs to get traction and do. Now is that our plan? No, that is not our plan is to get traction on those much faster and see more utilization growth there. But that's what's in our model. Then you say and say, okay, our new systems last year that if you just average it out, would have been available for about half the year, they did about 7,000 cases. We'll have a full year of them, but they just kept doing exactly what they were doing, nothing more, that gets you to 14,000. And then on top of that, you say, okay, we're going to install about the same number of systems this year. They did 7,000 cases last year. We have launch teams this year. So we think we'll get a little bit more of those. We'll get 8,000. And that's the walk, and that's how you get from 43,000 to 60,000. And so it's not about trying to move the utilization number by 0.2% per site or any of that sort of stuff. I think it's about us going out and attacking those centers that we think have the best opportunity for growth and driving those and driving to those absolute procedure numbers.

One follow-up. One of the charts you showed, it shows simple prostatectomy and nucleation are actually trending up. I would have thought maybe flat or down with -- that was the Aquablation value proposition that it was going to move a lot of the procedures to Aquablation. I guess what is driving the growth in simple prostatectomy and in enucleation at this point?

Barry, do you want to take that?

Yes. So I think a couple of reasons. I think you got to think about the size of the glands that have happened over the last 20 to 25 years. When patients are put on medical therapy, or a nonresective procedure, it is allowing these prostates to get larger and larger. You get down to it, a prostate over the size of 80 almost is untreatable from a TURP. The older days, they would stage a TURP. You go for one procedure, they would do the left lateral lobe, go home, come back a few months later and do the right side. So you look at simple prostatectomy and nucleation are tools that can be used in large prostate sizes along with Aquablation. And I think that's where you're seeing a lot of the growth, which is the prostate size market. It used to be small. If you look at publications from 20 years ago, the average prostate size was 50. Our global average is 90. And that's because people are delaying resective procedures because of the advent of medical therapy and nonresective procedures.

Suraj Kalia from Oppenheimer. Larry, Kevin, thank you for providing all the information. Three questions, if I could. Larry, for you, I appreciate your commentary about TAVR, but BPH is not life-threatening per se. It's a quality of life issue. And you all are making a certain stance in terms of end-of-quarter purchases and totally appreciate that. What does game theory suggest to you? If you guys do this, what are others going to do? Have you all factored that into your calculus? If they continue their current practices or change, how does that impact you all?

Yes. Well, I mean, there's a lot that goes into it. First of all, there's a lot of people walking around with aortic stenosis that don't believe it's a deadly disease either. And I'm not saying that BPH is a deadly disease, but it really is about symptom tolerance. And I think when you talk to men who have BPH, their quality of life is deteriorating, it's deteriorating significantly. That's why people are banding drugs. They don't like the side effects and the other challenges with that, but the treatment option seems so severe that they're unwilling to do that. In terms of game theory, I'll say one of the things that was surprising me when I joined the company is I was used to competing in the TAVR space with Medtronic, who spent the same amount I did or more, Boston Scientific, who was aggressively trying to enter the space, Abbott, who was aggressively try to enter the space. We don't have anybody -- who are the big strategics that you're going to sit in their meetings where they're spending their whole time talking about BPH. I suspect it's nobody. I mean you look at where UroLift is today, it's been declining year-over-year. I think they just got packaged into some other deal and got sold. But there's nobody really behind TURP. People sell a general use instrument that people are using for this procedure. There's nobody marketing. There's no marketing campaign going on for TURP or any of these other sorts of things. So I don't have all these established competitors all sitting around us that are outspending us that are trying to drive new evidence that are trying to drive anything. It's basically just us. And we have to go execute against historical norms. Look, changing the practice of care is hard. People do what they're used to doing. They're doing what they were trying to do. Every urologist that came through school, learn how to do TURP and they're just used to doing that. We have to change their standard of care, and we have to change their practice. But it's not like I have some competitor on the other side inundating them with brochures on TURP. So where do you -- you spend your time in all over the industry. How many people do you go sit in front of who are sitting here telling you, let me tell you about my game-changing BPH strategy who says, I got a war chest of money that I'm going to go spend to go drive it.

Got it. Kevin, one for you. I appreciate the math you presented step up from 43,000 to 60,000 stratified by sites. To Nathan's question, if I could just turn it a little around, how should we think about these different buckets how many of these sites are in high-volume, medium and low-volume sites and that is -- the math is the math. I get the math. But it is also going to be influenced by where these sites stack up within these high, medium, low volume and then do the sensitivity analysis. Does it really work for these low and medium volume sites to ramp up to this level?

Look, it's a difficult question to answer. I'm not being evasive. There's many types of customers. We have high volume, low volume, medium volume that have all been contemplated. I think what we would like to stress and a big part of the presentation today, Nate, that's how you approached the first question, we don't feel we're nowhere near where we have the right to be even within our high-volume accounts today given the size of the market. That's how we're looking at it. So we don't spend a lot of time looking at accounts that and say, oh, they're doing three to five, they're medium volume, we treat them this way. We view every account as high potential given the market. I mean what we're trying to cannibalize, and that's what we're doing in the near term here, that's table stakes. I mean you look at the slides that we went through today, the 8 million men, the 40 million men, the capacity in the OR, it is there. That's what we're focused on. So, I'm not being evasive, but it's just not how we're managing the business.

Fair enough.

No, I mean it's just along the same lines, a lot of the partners that became giant TAVR partners for us were in giant surgical programs. And so people adopt new therapies if they think it fits in their armamentarium. And I think the fact is because our procedure is much less technique dependent and expertise dependent, we can use the precision of the robot and the mapping of the prostate. We can take this into places that probably wouldn't be that excited about having a large TURP program or we're really excited about having some of these other complicated programs. So, again, I think it's us making our case and driving that. But they're still -- you look at last year, 360,000 patients got a procedure that wasn't ours. And that's the first opportunity that we have to go execute in is moving share from those alternative procedures and moving it to ours. And that's our #1 job.

So some of our highest volume users, if you look at their historical TURP volumes, it's not 1:1 that those were the largest TURP volume users and they convert to Aquablation, they're our highest users. We have many high-volume users that didn't do a lot of BPH prior to having Aquablation because they didn't want to offer the alternatives that were available.

Got it. And very quickly, how much is bleeding and post-op hemostasis needed an issue in terms of patient acceptance or the conversation as far as Aquablation is concerned?

No, good question. As Pooja noted with the 70,000 patient publication that's come out, it's really become a nonissue. To a patient, it's in our research, it doesn't come up. From the surgical protocol that is reproducible and repeatable that we have dialed in, it's just part of the protocol now. And four years, five years ago, yes, it was the talk. We had different protocols going on. Some are having great success, others were confused. We have moved to a world where we have a number of surgeons that are sending patients home the same day. That would not be possible if we hadn't dialed in the hemostasis protocol. So today, it's a nonissue.

I think it's important to understand the history of this. When Aquablation first started, correct me if I have this wrong because you obviously buries the history in here. But people were just doing an Aquablation and they weren't doing any bladder neck cauterization. And when they were doing that, there was more bleeding. And I think that was a lot of the narrative when the technology first came out. Once we protocolize the bladder neck cauterization, then the bleeding issues largely went away once that was standardized and it's really a nonissue. And you look at what the TURP procedure is, I think their transfusion rate is about 3x higher than a modern Aquablation procedure. So there's still a little bit of this lagging narrative that you hear out there. But in terms of fact and in terms of clinical data, it's just not supported by the clinical data with a modern Aquablation procedure in our protocols today. Is that fair, Barry?

Very fair.

Brandon Vazquez from William Blair. I want to focus one on a little bit of near term and then maybe a longer one longer term as a follow-up. On the near term, the procedure disclosures you guys gave were very helpful because you can kind of build from here to understand the visibility that you guys have in the business and where we -- how we get to the '26 guidance. What's harder for us to know, and I hope you talk a little bit about is like what is the reception in the first couple of months? Are the procedure numbers historically going to meaningfully change because you've meaningfully changed the pricing and how the end of quarter pricing promos. So, I guess, again, the question is like, can you talk a little bit about what you have seen so far in the first two months of the quarter as a reaction to this? And then two, what's the visibility you have into the first quarter so far to give a little comfort that like we know that those procedure numbers we can build off for 2026?

So I'll talk a little bit about what we've seen so far. And I think this is a really, really important dynamic. Normally, when somebody is driving this level of ASP increase, it's because they went to their customers and they said, here's -- we're implementing a 10% price increase, your price went from X to Y, and now you got to pay this new price. I launched S3UR in the U.S., and I did a $1,500 price increase. We had to go contract with every single site. They had to sign a new contract. They had to put it on the shelf. They had to do all that. That is a process that's a challenge because shockingly, and I don't mean to surprise anybody, customers don't tend to like price all that much. We didn't really roll out a price increase here. Customers had a contracted price that they were buying our product for. What was happening is we would do like at the end of the quarter, we'd say, hey, we're in a special incentive. Do you want to -- if you bought more than 50 handpieces, we'll give you this discount and do that sort of stuff. So people are like, oh, sure, great. I'll do that discount. I'll stock, I'll do all the sort of stuff. But they were doing something and getting something for less than their contracted price. All we're doing now is saying, yes, we're not running those sorts of promotions anymore. We're not running those incentives anymore. So everybody just goes back to the regular price that they've always paid. And so there was no argument about it because it wasn't like we had to recontract anybody. We didn't have to renegotiate with anybody. We just held them to our pre-agreed upon pricing structure that they had. So it's not like rolling out a big price increase. We just discontinued a discount they were getting that, frankly, we probably should have never been getting people. We were discounting a product today that people would have paid their regular contracted price for two weeks from and it was causing people to take advantage of that. They would run their inventory very, very high, then they spend the next 2.5 months depleting that inventory and then they just repeat the process all over again. So it's causing our revenue to follow that model. And I just -- I'm sorry, I just don't think that's a good way to run a business. And we're just going to discontinue those things. I think ASP is critically important to us. Kevin talked a lot about our path to profitability. Look, I think there's two things that you guys want to see and that our investors want to see. You want to see that we can very durably and consistently grow our procedure volumes, and you want to see that we have a clear path to profitability. And if cancer turns out to be a real adjacency, then it's a whole other leg and it's a whole another growth driver for us. And I think those are the things that drive our future and the driver valuation. And to the degree that you see the world that way, that's exactly how we see the world, and that's what we're going to go try to deliver on. I don't want to talk too much about being in the middle of a quarter, but we try to be thoughtful about this. We gave you guidance for Q1 that factored in all of the factors, all the sales force changes, all the things that we've rolled out, and we try to give you a guide for Q1. But obviously, we're planning to see a procedure growth acceleration, especially in the back half of the year. But again, this is why we try to be very transparent about the walk, where the procedures are coming from, what you have to believe to get to the bottom end of our guidance. And I will just say, on a go forward, we're just going to bring a different level of transparency to this. I think one of the challenges that we're dealing with right now is there wasn't great visibility to actual procedures performed. And so people were making assumptions in their model. And even though it's talked about, it's in our filings, I don't know that everybody always understood the delta between handpiece sales and procedures. All of that stuff is going to be exposed now. You were going to get every quarter, you're going to get what our procedure volume was and you're going to get our handpiece revenue. So those things will be transparent. Everything will be exposed, and you guys will be able to evaluate the health of our business. But for all the drama about the revenue in Q4, the health of our business was never going to be defined by customer ordering patterns. It never is. What is going to define the health of our business is going to be our procedure volume and handpiece revenue is going to follow that, and it's going to track that.

So I think it's important for everybody to understand that reimbursement has gone up to the hospital as well to be able to support these higher prices. And Barry can hold me accountable here, but I think it's close to now $10,000 at the hospital level to where the hospital is actually still getting a little bit more money than we're actually passing on to them in terms of price.

That's helpful. Pooja, maybe one for you. I think this is the first time in PROCEPT's history as a public company, we've gotten a look under the hood of kind of the commercial or the patient generation side. So maybe spend a minute, a lot of good information there. How much of this is new? My understanding was there was some level of DTC happening before, clearly not the level maybe needed. So like what is going to be incrementally new that's coming out in 2026 plus versus what was not being done before?

Yes. It's a great question. So there were some basic fundamental things that were done. I mean, for example, we have a website aquablation.com. I think the -- what we're really trying to do is a couple of things. One is to be very clear about what is the value proposition and what is that narrative. I think there's a lot of variability both in our assets, but also across how we're talking to customers around that and standardizing that narrative, and I talked a little bit about it today is important. The other piece is that in my experience, you have to build a bit of an ecosystem. Just because you have a website, it doesn't mean that people actually know it's there. And so that is also the incremental new for us is really building a much more integrated ecosystem where we're nurturing these journey. If they are at the bottom of the funnel and they're trying to decide between therapies, they're having those conversations with the care team at the center. And so making sure the care team has the right educational materials to be able to engage with those patients, making sure they have things they can take home and think about, and then, of course, as we get into that medically managed population, meeting them where they are. A lot of these people are searching online. A lot of them are getting information through social media. They talk to their peers. Facebook is a pretty powerful peer-to-peer tool for patients. And so while the -- there was some basic content that PROCEPT has invested in, and I give the company a lot of credit for that, I think building a real ecosystem around it and a real infrastructure and doing that in a very strategic way where we're targeting the right markets, that's what we're going to do differently moving forward.

I think the biggest thing for me, and I promise I'm going to stop talking about my experience at Edwards because I don't care. But when we were launching transcatheter heart valves, every surgeon said, we don't need a transcatheter heart valve. We treat everybody with surgery and sternotomies don't hurt. And I was like giving them or getting them. And I think the biggest disconnect we have right now is the physician's lens of what he thinks matters to a patient versus what actually truly matters to a patient. And I think this issue about procedure durability and being able to get one procedure and get complete relief and not needing another procedure is not top of mind for the clinicians that are providing these therapies. And we have to make it top of mind for them, and we have to make it top of for the patients as well and make sure they understand when somebody says, would you like to have this procedure, I can do it in the office and you go home today? Or would you like to have this procedure, but you might require an overnight stay, that's the wrong question. Would you like to have a procedure done in the office that probably means you're going to have another procedure done in the next couple of years? Or would you like to come in, stay one night in the hospital and get a procedure and probably never have to come back and have complete relief of your symptoms and no meaningful side effects for the things that matter most to you? That's a very different question. And we have to make sure that physicians are asking patients the right question and they're looking -- seeing the world through the patient lens, not through the economic lens or through their convenience lens.

Josh Jennings from TD Cowen. I appreciate the Investor Day here and all the downloads. As we're sitting here late February, just thinking about how you guys described the dynamics in the fourth quarter call and just some of the accounts that were relying on bulk purchasing and those discounts at the end of the fourth quarter, assuming the last month, we're heading into the last month of 1Q. Is there anything you can share just in terms of how that phenomenon or that dynamic doesn't repeat itself in 1Q? I know you guys have worked through the inventory so these customers don't have the inventory that they did at the end of 4Q. But is it just the procedure queues? Or any dynamics you can share that gets you guys to that comfort zone for the procedure volume guidance you issued and maybe the revenue growth for -- or revenue contributions for 1Q?

Yes. I mean I think if I don't answer the right question, then please let me know. But I think a lot of the question people have is how do you know the inventory thing really behind you? How have you changed the dynamics? And how do you know it's really behind you in this? We're not going to be sitting around having this conversation again in another quarter or two about more destocking. If you look historically, we've been in that 115% of handpieces to procedures. We're modeling for next year that it's going to be 1:1. If I look at -- since we made the changes in late Q4, and we look at handpiece sales and procedure volumes to current, those two numbers are about flying formation. So I would think if there was more inventory that people are going to take down, there's not any discounting. There's no perverse incentive for somebody to be buying unless they're just doing it to support their procedures. So that's one of the reasons we think that this is largely behind us because we have enough several weeks now where they're flying information. Even beyond that, though, we're saying that if people really have rightsized their inventory, then it would mean there would naturally have to be an upside to the revenue plan that we've modeled because we're going to install 200-plus new systems, and they're all going to require inventory and stocking and everything else. So this assumes that inventory in the field stays flat to procedures year-over-year. And that's, again, what creates the revenue delta between our original guidance and between the guidance where it lands today is we're just not modeling at that 110% or 115%. We're modeling at a 1:1. But frankly, I think it's behove of us to put a conservative model out there. I think it's behove of us to leave ourselves some headroom if there is any more of this, that it's going to be more than absorbed with the 200 additional systems and the inventory they take. And like Kevin said, we had to reset guidance. That's never a comfortable thing to do. We certainly don't want to do it again.

Understood. And I wanted to just follow up on some of the comments, Matt, you just referenced the reimbursement changes in 2026. There are many concerns about the physician fee coming down for this year, last year and -- but the facility fee has gone up. Can you just talk about how that has played out? I mean, is it status quo? Is it an overall positive where the physician fee reduction is being trumped by the facility fee increase? And then just the second part, just thinking about 2027 and reimbursement kind of forecast you guys have, any chance for APC 6 to move to APC 7?

Well, we always look for whether there's opportunities to drive enhanced reimbursement from where we are, and we'll continue to explore those. I think you have it right. The physician payment went down a little bit, but it went down across the board. So it's not like it went down for our procedure and it went up for everybody else and created some dynamic there. Look, physicians are never happy when the payment goes down. But like I said, it wasn't something that was differential for us. It's something that applied sort of equally across the board. Hospital payment actually went up, and it went up in a pretty meaningfully way. For doctors that are employees of the hospital, they get paid on RVUs. The additional hospital payment, the physician payment doesn't really matter to them because it all gets frozen. So when hospitals can net out the two of those numbers, it's a net positive for them. For the physicians that only get the payment side of it, yes, it's a negative for them, but it's not like the alternative procedures got some benefit for it. So I think it's a negative, but it's not a differentiating negative. We factored all of it into our guidance. All of it is factored into our guidance, all of that, all of the intelligence that we have on that. And again, I think the hospital payment ultimately is more beneficial to us than what the physician payment is. But again, we monitor all those things. I live this in the TAVR world as well. As TAVR got better and better, the reimbursement came down, but we were able to protect pricing because we continue to add great economic value for the procedures that we're doing. And I think that's the case we have to make here is the efficiency of a program, the amount of the time and the precision that it takes to do our procedure, the low rates of complications, those sorts of things. We need to continue to make that case for why this is the best procedure for people's patients and why it is a good procedure for them economically.

All right. We're -- I'm getting a flashing red light, but Stephanie, you can be the last.

Stephanie Piazzola from Bank of America. Thanks for putting this together today. Just wanted to follow up on the 2027 guidance that you laid out of the 25% to 30% growth. I think that's a little above what the Street is modeling. And I appreciate the growth drivers that you laid out. But just curious how you're thinking about this being the right level of growth to set up now for 2027 and the breakout you provided for 2026 was helpful with the different cohorts. So any high-level comments of how we can think about that in 2027? What comes from the existing business versus benefit from new initiatives?

Yes. We obviously guided to the total revenue growth and didn't get into the details between systems and replacement disposables. But what I'd suggest is that 25% to 30% growth on the system side does assume we have a more robust replacement cycle. So I'll start with that. It assumes stable pricing. On the procedure business, it is some benefit to the initiatives that we're putting in place in '26 around the launch team, but nowhere near kind of a best case optimized scenario where if everything we do with launch teams and marketing initiatives and patient awareness, I mean, I don't know if -- the slide that Pooja showed where we have 1% to 2% patient awareness, frankly, it was shocking to me when I saw that a month ago. And if we could move the needle there, I wouldn't suggest that 25% to 30% is upper limit. It's informed on what we know today and what we think is achievable, not hoping everything that we're putting in place is a home run.

I'd say '26 is it's a little bit of a build year us. We have to build out these marketing programs. We've established the teams. We're starting to run the replacement pilots and learning about that process, and we're exploring some operational leases and doing those sorts of things. These are all things that we have to sort out that we have to have in place that we have to really create the structure around in 2026. But these are things that are going to be a much bigger part of our story come 2027. And that's also when I think some of the marketing programs, some of our awareness programs really are -- we're going to get a lot more benefit from those programs that we're going to see there. So, I will tell you, internally, we're much more aspirational on 2027, but we want to put guidance out there that I think the biggest thing that I don't want to have in people's minds is that we're going to continue to be on this declining growth curve as we're doing it off a larger base. We see the opportunity in front of us. And again, none of those numbers have factored in cancer at all. So none of that is built into the '27 number or any anybody has modeled beyond that. And that's very intentional for us. We want to set ourselves up for success on a go forward. And I think that's our responsibility now to go execute and go make that story a reality.

And then sorry if there's time for just one quick follow-up on the margin side of things. The EBITDA margin expansion that you're expecting longer term. Just how do you think about the SG&A leverage within that since you're making some increased investments. So if you could just give a little bit more detail of where the leverage is coming from. And then you talked about moving away from the high-touch model with reps and having a rep in every case. So any expectations for the plan there and when we could see that?

So, one of the things I want to be really clear on, and I think Pooja tried to make this point, but the programs that we're doing on marketing, one of the things that's unique about the space compared to sort of my previous world. My previous world is something like 5%, 7% of people over the age of 80 have aortic stenosis, but you have no idea who's who. So you have to go cast this wide net and try to find who those 7% of the people are and treat them. And when you're in the 70-year-olds, it's a much lower percentage. So you have to cast this wide net and kind of go everywhere and then try to talk to people about symptoms and try to filter it out. And we don't have that problem in BPH. The 400,000 people that are getting treated today know they have BPH and they're actually getting a surgical procedure for it. And then there's 1.1 million men above that who have failed drug therapy for. They know they have it. They're looking for relief of their I don't have to go market to the whole world. I can just go target those people, and we know who those people are, and it's not difficult to find in this modern era. So we can be very targeted about these programs. So it doesn't drive this massive SG&A spend. I don't have to do things like we're doing at like target AS or preview or those things. We have a much more targeted market here that we're going to go attack and address. I think we talked about the hybrid support model, and this really is about getting our hospitals, once they're trained and they have the hydro system and their experience with that, we just don't simply need to be there in every case. And we're not walking away from our clinical support model. If a physician wants us there, we're happy to be there. We're going to be in some percentage of cases always on a go forward because we want to make sure that the machine is set up properly and that as nurses are doing it or staff is doing it, that we don't have any degradation or any of those sorts of things. So we'll be there. But if somebody wants to throw a couple of cases on a Friday, I want them to have the capability to do that without having to call and make sure their reps available or any of those sorts of things. And that's why we're going to move to that hybrid model. So I think what we're going to try to do is obviously drive our top line growth. And even on a dollar basis, is SG&A and R&D going to go up? Yes. But on a percent of sales basis, we're going to get leverage out of those and those are going to come down, and that's what's going to drive our margin improvement. But we expect to get leverage out of our sales force, which is the biggest part of our SG&A spend by a sizable amount. And then we'll get it on the R&D side, too. And if we can settle into a 15% to 17% R&D spend as a percent of sales, and we get our SG&A to have the reasonable levers, I think we'll have a really healthy business.

All right. I just want to thank everybody for attending in-person and also being on the webcast. If you guys have any questions, please e-mail me. Kevin and I and Larry will be available, but we will be at Cowen next week and then I believe Leerink the following week after that to meet with all investors.

I just -- lastly, I appreciate everybody coming today. I know we move the day because of the weather and the other things. I appreciate your interest in this. We're not where we want to be right now, but we're doing all of the things fundamentally to get us in a place where I think we can drive that differentiated long-term success that everybody wants to see from us. But make no mistake, it is on us to go execute our plan and earn your trust and your confidence, and that's what we're going to go out and go through. Thank you.