Profound Medical Corp. ($PRN)

Good afternoon, ladies and gentlemen, and welcome to the Profound Medical Q1 2026 Financial Results Conference Call. [Operator Instructions] This call is being recorded on Thursday, May 7, 2026. I would now like to turn the conference over to Stephen Kilmer, Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone. Let me start by pointing out that this conference call will include forward-looking statements within the meaning of applicable securities laws in the United States and Canada. All forward-looking statements are based on Profound's current beliefs, assumptions and expectations and relate to, among other things, any expressed or implied statements or guidance regarding current or future financial performance and position and expectations regarding the efficacy of Profound's technology. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those implied by such statements. No forward-looking statement can be guaranteed. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this conference call. Profound undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, other than as required by law. Representing the company today are Dr. Arun Menawat, Profound's Chief Executive Officer; Rashed Dewan, the company's Chief Financial Officer; Dr. Mathieu Burtnyk, Profound's President; and Tom Tamberrino, our Chief Commercial Officer. With that said, I'll now turn the call over to Rashed.

Good afternoon, everyone, and welcome to our first quarter 2026 conference call. On behalf of the management team and everyone at Profound, I would like to thank you for your ongoing interest in our company. For those of you who are shareholders, we appreciate your continued interest and support. I will turn the call over to Mathieu in a moment to provide clinical updates. However, before I do, I would like to provide a brief summary of our first quarter 2026 financial results. All of the numbers I will refer to have been rounded, so they are approximate. For the 3-month period ended March 31, 2026, the company recorded revenue of $5.3 million, with $2.5 million from recurring revenue and $2.9 million from onetime sale of capital equipment. First quarter 2026 revenue was up 104% from $2.6 million for the same 3-month period a year ago. Gross margin in Q1 2026 was 72%, compared to 71% in Q1 2025. The increase in first quarter 2026 gross margin was primarily due to product mix, whereby more capital equipment was sold, which contains a higher margin. Total operating expenses in the 2026 first quarter were $11.8 million, down 9% from $13 million in the first quarter of 2025. Overall, the company recorded a first quarter 2026 net loss of $7 million or $0.19 per common share, compared to a net loss of approximately $10.7 million or $0.36 per common share in the 3 months ended March 31, 2025. As of March 31, 2026, Profound had cash of $50.3 million. As Arun will discuss later in the call, we believe that we continue to be on a path to profitable growth. In keeping with that, we expect our cash burn to decline and eventually turn cash flow positive as our revenue continue to grow and our margin remains high. We continue to expect full year 2026 gross margin to be 70% or better, as indicated before. With that, I will now turn the call over to Mathieu for an update on the clinical and development activities.

Thank you, Rashed, and good afternoon. Just a few weeks ago, we were joined by Dr. Laurence Klotz, on a conference call to discuss the first clinical outcomes from the Level 1 post-market CAPTAIN trial, comparing the safety and efficacy of the TULSA procedure with robotic radical prostatectomy in men with localized prostate cancer. Rather than going over all that information again, I invite you to see our press release dated March 13 and listen to the associated conference call replay, which is available in the IR calendar posted to our website. The CAPTAIN trial demonstrated that TULSA delivered statistically superior quality of life outcomes compared to radical prostatectomy, achieving its primary safety endpoint with statistically higher preservation of the composite endpoint of urinary continence and erectile function at 6 months. In addition, patients treated with TULSA experienced superior perioperative outcomes, including no blood loss, no overnight hospital stay, less pain and faster recovery, along with statistically significantly fewer serious complications and a faster return to normal activities and paid employment. These positive outcomes from CAPTAIN sit on top of an already solid clinical foundation. TULSA is supported by more than 70 peer-reviewed publications and over 200 scientific conference presentations. Importantly, this body of evidence wasn't built in a single way or for a single use case. Rather, we've supported both sponsored and investigator-initiated trials to demonstrate that TULSA is not only effective but flexible and customizable across whole gland treatment, partial gland treatment, large prostates, salvage settings, combinations of cancer and BPH and patients with BPH alone. Our open international care registry captures the spectrum as any patient treated with TULSA regardless of disease state is eligible to be included. The takeaway is clear. TULSA is not a niche solution. It's a platform that can be applied in many different ways while delivering consistent, predictable and durable outcomes. CAPTAIN completes the final foundational pillar of clinical evidence validating TULSA as a new platform for prostate disease management. From gold standard treatment effect data to TACT durable 5-year outcomes, CAPTAIN now positions us to demonstrate with statistical rigor, TULSA's superior quality of life profile while delivering whole gland treatment efficacy. As Arun will review next, TULSA is solving the debate between focal and whole gland treatment for prostate cancer. I will now turn the call over to Arun.

Thank you, Mathieu, and good afternoon, everyone. While Tom is here to participate in the Q&A as usual, to help streamline things, I will personally cover the business section today. As I discussed in our Q4 call, the dynamics in the prostate disease treatment space continues to change at a decent pace. Whole gland robotic prostatectomy or radiation therapy are the standard of care for treating prostate cancer today. And for BPH, mainstream treatment with transurethral resection of the prostate or TURP has largely been unchanged over the past 100 years. It is our belief that today's standards have plateaued and that we can do better than the clinical outcomes of these standards. The initial CAPTAIN data that Mathieu just talked about is a clear example of the potential of our TULSA technology. As you know, many alternative technologies are competing to try to unseat today's standards. And while we believe it is great to see such innovation, it is also important to present to you how TULSA stands in its capabilities as compared to today's standards as well as multiple focal therapies. I would like to share with you a few of the key unique aspects of the TULSA technology. We publish every quarter the types of patients that are being treated using the TULSA procedure. Starting this quarter, that information has been tabularized for easier review, comparison and follow-up. The commercial data clearly shows that about 91% of TULSA patient prostates are treated either as whole gland or more than 50% of prostate ablations. The remaining 9% are focal therapy cases. We have been publishing this information for the last several quarters, but it is more relevant today than ever before. The point is that TULSA is the most versatile and flexible technology that empowers the urologists to personalize the treatment to fit each patient's situation. This turns the previous paradigm, with urologists having to match the right subset of patients that are the most suitable candidates for a particular treatment modality on its head. We believe that this is a major advantage to drive adoption of TULSA. Another uniqueness of TULSA is what I described in the recent presentation at the Bloom Burton Conference, where I showed a picture of a leading urologist, Dr. Klotz, treating a patient comfortably leaving in his chair with a half-eaten apple in one hand and the TULSA computer mouse in the other. That, frankly, is the future of surgery. Based upon the feedback we are getting, the TULSA procedure is the least stressful procedure of any that a urologist performs today. Another topic that has been discussed in more detail lately relates to the energy source that is deployed by the various alternatives. Since we capture the real-time tissue temperature using the MR, the TULSA technology is tuned to heat the tissue only to 57 degrees centigrade at which point the tissue dies instantly. This is, therefore, a minimal energy deployed for maximum impact. Any other technology in comparison is either heating the tissue to the point of boiling or charring, which has its own side effects or cold cutting the tissue, in which case, the tissue DNA is not dead. The science correlates the TULSA technology to improve safety and clinical outcomes data of the TULSA procedure, based upon evaluation in over 70 publications on a variety of prostates. We believe strongly in the 10% theory that says that we will achieve an inflection point as we convert at least 10% of the patient population. We are growing at a faster pace than the growth rate of prostate cancer. And accordingly, we're clearly advancing towards the 10%. And although we are not there yet, we believe it is only a matter of time. As far as the comparison to alternatives, we believe that while each will find their own sweet spot in time, only TULSA has the true potential of becoming a mainstream treatment modality. One of the pillars of our growth strategy is to continue to demonstrate the flexibility and capability of TULSA. To demonstrate consistent progress of TULSA adoption, you will see 2 tables in our quarterly press releases. The one I just mentioned in the variety of patients where TULSA treatment applies, which is a good indicator of total TAM, and the second one, a new TULSA index table, which will be a good indicator of the growth of same-store sales. We have picked 20 sites to make up the index that has been using TULSA for at least a year and represent what we believe is the appropriate mix of different types of customers, including large hospitals, smaller hospitals and private practice users and which will likely be most reflective of the future installation mix. These are not necessarily the most active sites today. By showing you 5 running quarters, the idea is to show the rate of growth of same-store sales. We will also continue to publish the installed base, which we believe will function as an indicator of future utilization growth. The next point that I would like to talk about is the use of the MR by TULSA as there is a bit of confusion about that. It is true that as we started commercialization, finding compatible MR available time, and convincing urology and radiology to work together to start a TULSA program has been a major hurdle to climb. However, today, TULSA is compatible with an installed base of about 4,000 MRs in the United States and more worldwide, and that number continues to grow. It is, therefore, a lot easier to find an MR and justify TULSA, particularly with the economic proposition as its facility fee is higher than that of any other treatment modality. Our relationship with the MR companies also continues to expand as they see interventional MRs as a growth opportunity for them, too, and we are delighted to be working with these large companies as partners with aligned goals. As we have talked about in the past calls, MRs specifically designed for interventional procedures are now becoming commercially available. These MRs are significantly smaller, lighter and easier to use to the point that even an MR tech is not necessary to operate them. They are also less costly to acquire and maintain and can be placed just about anywhere, since they don't need the same shielding as large magnets. The Siemens Free series, which is a prime example of such an MR is now available and COOK Medical is partnering with them to provide a turnkey iMRI solution to hospitals. We believe that TULSA is the natural king app for the interventional MR as it makes the economic justification of the iMRI suite very compelling. At this point, we anticipate that if all goes well, TULSA will get FDA clearance for integration with the new interventional MR by year-end, and we believe that this will meaningfully contribute to our growth in 2027. Considering all of this, we believe our goal of achieving 200 TULSA sites performing an average of at least 50 cases per year to achieve profitability remains achievable, and we remain committed to this strategy. Finally, we would like to invite you to come visit us at the upcoming American Urological Society meeting that starts on Friday, May 15, in Washington D.C. For the first time, there will be a real Siemens Free Series MR in our booth, and you will be able to see the future firsthand. To summarize, Profound is pioneering iMRI procedures, which enable precise incision-free therapies that improve clinical confidence, procedure control and patient outcomes. By leveraging real-time MRI guidance, Profound's technologies are designed to replace uncertainty with clarity across treatment planning, delivery and confirmation. The TULSA-PRO installed base was 80 at the end of Q1 2026, and we shipped an additional 6 systems during the first quarter that have yet to be installed. In prostate disease, we believe we're now crossing the chasm by transitioning TULSA from early adopter customers to the mainstream market by establishing the technology as a third distinct category that doesn't make surgeons or their patients choose between whole gland or focal therapies because TULSA can do both and anything in between. As we said in today's press release, we are currently projecting total revenue for full year 2026 to be approximately $25 million, which represents 56% growth compared to last year, together with 2026 gross margin of 70% or higher. We continue to believe that we are on the path to profitable growth. This ends our prepared remarks for today. With that, we're happy to take any questions you might have. Operator?

[Operator Instructions] Your first question comes from Ben Haynor with Lake Street Capital Markets.

First off for me, congrats on getting Humana to begin paying for this. Can you share maybe any color on that? Is it the CAPTAIN data that tipped them over? Is there anything specific that led to their coverage decision? And then where do you see kind of some of the other commercial payers in this whole progression?

Ben, thank you very much for the question. This is Tom Tamberrino. So first, thank you for recognizing the tremendous announcement specific to Humana, and there are several others that we were able to gain coverage with here in Q1 of 2026 via the efforts of our health economics and market access team led by Kelly Pertucci and Tracy Davis. They did a phenomenal job. What I can tell you, Ben, is that it is the combination of all of the publications, now 70-plus that are allowing us to get an audience with the medical directors of private insurers here in the United States, and then leverage that data to have a discussion much like the positioning that Arun just stated as to where TULSA-PRO fits in, in the continuum of care for prostate disease. So it's not one specific thing, it's a compilation of all of the work that's been done over the years to put us in the position we are in today. And we're very excited as the rate that we're seeing is roughly 1.5x to 2.5x Medicare as it relates to private insurers, based on the geographically appropriated GPCI rates, which is in line with what most industry standards would be.

Excellent. Then I guess following up a little bit on that. Do the folks that haven't announced, I guess, formal coverage policies, are you still seeing the same sort of general coverage that you have been seeing really up until now?

So obviously, if we go back to January 1, 2025, when Medicare provided coverage for TULSA-PRO, and that has allowed us to begin to have these discussions with the medical directors of the private insurers here in the United States. In combination to that, which should be no surprise, we also have a patient access team led by Stephanie Slater, and we do hand-to-hand combat with the private insurers on a case-by-case basis. We've been very successful winning approximately 80% of the cases that we're involved with. My understanding of industry standard is somewhere between 50% to 60%. Again, I think that speaks to the talent of Stephanie, but also the growing body of evidence that TULSA-PRO is another tool in the armamentarium of physicians to treat prostate disease in between where focal therapy ends and prostatectomy and radiation begins is really where our sweet spot is starting to take hold.

That's great. Lastly for me, just kind of housekeeping on the 6 shipments that were shipped but not installed. Are those -- do we expect those to hit revenue in the current quarter? Or was that something that would have been included in Q1 or half and half? How does that shape out?

Yes. Ben, on that particular point, we're trying to sort of be a bit more granular than we have been. And I just want to clarify exactly what we're doing. So the total number of systems that we sold is 8. So 8 systems were sold. 2 of them were installed. So we increased the installed base to 80. And then 6 of them were shipped, but they're not installed yet, right? And we do recognize revenue when we ship them, but we also realize that they won't be treating patients right away. And that's the reason why we made that distinction.

Your next question comes from Michael Freeman with Raymond James.

Congratulations on the quarter. I wonder if we could talk about the guidance, we appreciate that you did set formal guidance here. I wonder what the -- if you could describe what informed this outlook. I recognize that this seems conservative relative to Street expectations. I wonder if you could just give us a bit more color on how you came to this number.

Yes. Very, very happy to talk about this. So first of all, we are very bullish on our business. And in fact, we've never been more bullish. And Tom can describe more about the pipeline as well. But to me, it is now about discipline. And we're putting a stake in the ground for the first time as proper guidance, right? We have provided targets before, but this is the first time we're putting a proper number at the table. We will continue to work hard as we always do. And if we can drive it faster, we absolutely will. And if that happens, we will most certainly come back and hopefully increase the provided guidance. But I think, as I said, it really is the business is gelling and we feel that we need to provide appropriate discipline and that this -- so look at this as more of a starting point, and we will adjust as we go.

Well, my next question was going to be on the status of the pipeline. So I would appreciate some commentary on your funnel.

Yes. Tom can absolutely describe that.

My pleasure. Thank you. And Michael, thank you for the question. So happy to report that our pipeline remains strong. It's north of triple digits across our verify, negotiate and contracting stages of our sales process. And these pipeline accounts are representative of similar attributes to our Index 20 that we've shared here today, and we'll continue to share in the quarters that follow.

Maybe the last one. I wonder if you could dig into the index a little bit. Maybe describe -- I see that you provide averages of the index for utilization. How would you describe maybe the range on annualized procedures that we see in the index? And how do you plan to maintain this index? And will it be a rebalancing should there be outliers in the future? Any commentary would be helpful.

Sure. So again, we are -- things are cloudy. So we are trying to become as transparent as possible. This is our first shot at it. So let me -- I provide a little bit more context. So what we really did was we said, okay, what are the -- when the company matures and we have a bigger installed base, what are the types of hospitals, large, small, private practice and so on, what would that mix look like? And then we sort of looked at the current installed base, and we segregated the sites that had 1-year experience. So the 20 sites that we have picked are really designed to reflect what we think the future installed base will look like. So if we can demonstrate that the same-store sales in these 20s are increasing quarter-over-quarter, and what we will do is we'll provide this rolling 5 quarters, so you will be able to see the change over -- basically the trend. And then as time goes on, we will go from an index of 20 to index of 30 to 50, to hopefully 200. So that's the idea. This is what we've just started, and it will allow you to sort of see that progress and hopefully, it will mirror the future. Is that helpful?

[Operator Instructions] Your next question comes from Scott McAuley with Paradigm Capital.

I just wanted to check in on the kind of capital sale model, whether or not -- I know you've spoken in the past that, that's kind of the preferred model going forward. Is that still the case you're finding your potential customers interested in acquiring the capital versus more placement or lease model for the system?

Scott, thank you very much for the question. This is Tom answering. So our capital model is very much in line with what I believe the industry standard from my experience is that roughly $100 of capital equals $10 of service, equals $1 of consumables. So when we're speaking with hospital administrators, C-suite, CFO specifically, they totally get the way that we have the capital model situated, and that has been the large majority of the systems that we sold in Q1. We did sell 8 systems, as Arun mentioned, 2 were installed and 6 were shipped that were not installed. Out of those, only one was on the placement model that we spoke about with the bulk purchase. I believe we spoke about it in either Q3 or Q4's earnings call from 2025, and that represents roughly 10% of the recurring revenue for the quarter of Q1.

That's great. I know now you're talking about the guidance, the $25 million in revenue. I know in the past, there have been reference to a target of approximately 120 installations, I believe, for the end of 2026. Is that 120 still representative of the target, and it help informs that $25 million revenue guidance for this year?

Yes. So Scott, there is no change of any sort. We are still shooting for that $120 million. We -- as I said before, we are working hard to be much more disciplined and start to provide quantifiable information in every place we can. And so there's no change in our pipeline. There's no change in our target installed. There's no change in the potential of our company. If anything, as I said, we remain really, really bullish. The number that I provided is just a stake in the ground that we've put in, so that we can anchor it some place and adjust as we go. So hopefully, that addresses your key question.

Yes. Lastly, circling back to the reimbursement. Again, great to see the private payers starting to come in. Any comments on the reimbursement rate that you're getting, if you're happy with that, kind of relative to what Medicare is paying? And if you see kind of the Humana rate as the target going forward as other private payers come online?

Yes. So Scott, as Tom mentioned already, what we are seeing is generally between 1.5 and 2.5 of what Medicare is paying. We are very happy with that range. The typical range is from -- again, from benchmark that we see is closer to 1.5, but we're pretty happy to see that in our case, some of them are actually even paying more than 2.5. So I think over the long haul, that range is a pretty good place to model. Just to provide a little more color on this, Humana is one of the top 5 payers. And so the way this process works, to some extent, as Tom already described, you're working hard to make sure any patient who has been rejected that the appeal process goes on, and we see an 80% success rate in reversing those decisions. And now we have the first major payer that has put the coverage decision. So overall, frankly, we are bullish about other insurance companies that will now start to follow suit from this as well. So I think, generally speaking, it's the hardest to get the first big one. And I think Tom and his team did a great job to get there. And I do think that other insurance companies will follow.

That's great. And if I may squeeze in one last one, I apologize. Just in terms of the guidelines. So I know being included in AUA or other society guidelines is an important driver. I believe there have been some commentary around that being a kind of late '26, early '27 kind of goal or at least seeing momentum there. Any update on that process?

Yes. Thank you for the question. This is Mathieu speaking. So on the guideline front, it's a continuous process, and we described in one of our previous calls that the TULSA procedure is now being named in the NCCN guidelines, which is probably the premier set of guidelines in the space. And so that's already a step in the right direction where TULSA is being named by hand. They're recognizing the value of the TULSA procedure under clinical trial or registry. We do have an international care registry where we invite all of our friends to participate in. So we do see a lot of positive momentum from that. Together with, as Tom and Arun were describing on the Humana side, it does relate to the totality of evidence. It's not just CAPTAIN, it's a totality of evidence. And with the 70 peer-reviewed publications, when insurance companies come to the table and do their literature searches, they do see that those publications come up and help them with their decision-making. So with Humana coming in, we do expect to see other insurance companies coming in based off of that. And as we continue to publish CAPTAIN data, we do anticipate that whether it's the NCCN guidelines, the AUA guidelines, the EU guidelines, they'll start to also recognize TULSA by name and then start to recognize -- start to recommend it for certain population subsets. And over time, we'll anticipate that to grow into larger population subsets as well. So I'm not sure if that answers your question, but that's where we sort of see the progression of the guidelines.

There are no further questions at this time. I will now turn the call over to Dr. Menawat for closing remarks. Please continue.

Thank you. And again, for those of you who can visit us at the American Urological Association Meeting in Washington next week, please do join us, and we will have demos. We'll have the Siemens MR in the booth. We'll be describing how all of this will work together in an integrated fashion. Thank you again, and look forward to seeing you soon.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.