Profound Medical Corp. (PRN) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to Profound Medical's Second Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Stephen Kilmer, Investor Relations.

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 and 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 statements, 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 and Chairman; Dr. Mathieu Burtnyk, Profound's President; and Tom Tamberrino, our Chief Commercial Officer. Also filling in for our CFO due to a scheduling issue is our Corporate Controller, Matthew Sobczyk. With that said, I'll now turn the call over to Matthew.

Good afternoon, everyone, and welcome to the second 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 second quarter 2026 financial results. All of the numbers I will refer to have been rounded, so they are approximate. For the three-month period ended June 30, 2026, the company recorded revenue of $2.5 million with $1.6 million from recurring revenue and $871,000 from capital equipment sales. Second quarter 2026 revenue was up 12% from $2.2 million for the same three month period a year ago. As noted in today's press release, this doesn't fully reflect our sales performance in Q2 2026. Approximately $3.1 million of TULSA product shipments originally anticipated in the final weeks of June were completed in July, affecting the period of revenue recognition. Excluding the shipment timing, second quarter revenue would have been approximately $5.6 million, representing 153% year-over-year growth. Gross margin in Q2 2026 was 78% compared to 73% in Q2 2025. We continue to have confidence that the gross margin for our business will remain above our stated goals of over 70% over the long haul. Total operating expenses in the 2026 second quarter were $13 million, down 16% from the $15.4 million in the second quarter of 2025. Overall, the company recorded a second quarter 2026 net loss of $9.5 million or $0.26 per common share compared to a net loss of approximately $15.7 million or $0.52 per common share in the three months ended June 30, 2025. As of June 30, 2026, Profound had cash of $38.3 million. As Tom and Arun will discuss later in the call, despite the revenue recognition timing issue in the second quarter, based on record order activity, Profound continues to project total revenue for full year 2026 to be approximately $25 million, which represents 56% growth compared to its prior year revenue. With that, I'll now turn the call over to Mathieu Burtnyk for an update on clinical and development activities.

Thank you, and good afternoon. On past calls, I've highlighted the growing body of clinical evidence supporting the TULSA procedure as a new platform for prostate disease management capable of delivering whole-gland treatment efficacy while preserving quality of life. The CAPTAIN trial has already proven that TULSA delivered statistically superior quality of life outcomes compared to robotic radical prostatectomy, achieving its primary safety endpoint with statistically higher preservation of the composite endpoint of urinary incontinence and erectile function at six 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. Most recently, at SRS, we presented positive incremental data from CAPTAIN demonstrating that whole-gland TULSA provided statistically superior penile length preservation compared to robotic prostatectomy. At one month following the TULSA procedure, there was no median change in penile length after TULSA compared with a median 0.65 centimeter reduction in penile length after robotic prostatectomy. To some people, and please pardon the pun, that might not sound like a super big deal, but even modest amounts of penile shortening can contribute meaningfully to patient distress and reduced satisfaction following treatment. This new data points to the greater peace of mind that the TULSA procedure can deliver to patients by gently, safely and precisely ablating prostate tissue while actively protecting surrounding structures such as the prosthetic urethra. As we noted before, one of CAPTAIN's primary objectives is to support broader payer coverage. Randomized controlled trials remain the gold standard for coverage decisions and CAPTAIN continues to generate evidence demonstrating meaningful quality of life advantages that resonate with both patients and payers. In addition to ongoing CAPTAIN readouts and analysis, the clinical value of TULSA is continuing to become sharper as presentations focus more on what specifically make TULSA most versatile. Beyond demonstrating overall efficacy and quality of life benefits, ongoing clinical analyses are increasingly helping physicians understand where TULSA's capabilities may be particularly valuable. Examples include patients with apical cancer where the enhanced visualization of the MR allows urologists to precisely carve out tumor from the boundary of the sphincter muscle that controls continence. These patients almost always end up with urinary incontinence following robotic RP, but whose continence can almost always be saved if treated with TULSA. Secondly, patients with unilateral disease or cancer on one side of the prostate and whose nerves that maintain erectile function can be spared by not ablating the benign side of the prostate. Thirdly, patients where multiparametric MRI provides a clear hot zone that is suspicious of cancer within the prostate and thereby giving surgeons better guidance of what part of the prostate to kill. And patients with very large prostates, where TULSA has demonstrated treatment flexibility without the increased side effect burden often associated with other modalities. I'd like to conclude my remarks by reiterating that from gold standard treatment effect findings, the TACT's durable five year outcomes to CAPTAIN's compelling Level 1 data, the clinical foundation supporting TULSA continues to strengthen. We believe this growing body of evidence increasingly positions TULSA as a differentiated platform capable of delivering whole-gland efficacy, superior quality of life outcomes and expanded reimbursement support. I will now turn the call over to Tom.

Thank you. There is no question that momentum in our business is continuing to build. As Matthew Sobczyk mentioned, we recorded a year-over-year increase of 12%, which would have been 153% absent the $3.1 million shift in Q2 orders that were shipped in July and will be recognized in the current quarter. Speaking of temporary interruptions, you may have also noticed that while same-store sequential quarter-over-quarter growth as measured by our new Index 20 declined by 12%, it grew 39% in the first half of 2026 over the same period in 2025 and 22% year-over-year. The sequential change was mainly attributable to five sites not realizing the expected growth due to short-term issues. For example, one of the sites converted from a placement to a capital model in Q2 and paused treatments during the transition. That site is now back online. Despite these onetime and/or temporary issues, Q2 2026 marked another true commercial inflection point. And so far, we have seen that momentum continue into Q3. We estimate that our qualified sales pipeline, defined as being within one of the verify, negotiate and contracting stages for TULSA-PRO and Sonalleve is now approximately $70 million. While we can't predict the extent and/or timing which that qualified sales pipeline will translate into recognized revenue, it has been growing steadily, which certainly bodes well for the future. We had another monthly record for new orders in July, none of which included any of the shift or rollover from Q2. And SRS 2026 was the most productive medical meeting I have ever been a part of. To put that into perspective, our team's work generated more than 160 qualified leads over the four days of the event. So around four or five new commercial opportunities per hour. Again, it's not possible to predict what number of those will translate into actual sales, but also, again, boding well for the future. Three additional tailwinds helping drive our commercial momentum acceleration are higher and expanding reimbursement. With respect to Medicare, a few weeks ago, CMS released the current year 2027 Hospital Outpatient Prospective Payment System, or OPPPS, and Ambulatory Surgical Center, or ASC proposed rules. Under the OPPPS proposal, TULSA furthers its favorable reimbursement level relative to other treatment modalities. To summarize those proposed changes, TULSA remains at urology APC Level 7 with OPPS payment increasing 14.9% to $15,494 per procedure. That compares to an 11.6% increase for HIFU and Aquablation to $10,797 and $12,300 for robotic RP. So assuming the final rule doesn't change these numbers, starting in January 2027, hospitals will be paid 44% or $4,697 more per procedure for TULSA than HIFU and Aquablation and 26% or $3,194 more per TULSA than robotic RP. Keeping in mind that hospitals can generally perform as many or more TULSA procedures versus those other modalities in a day, our premium there is clearly growing, making our relative profitability for hospitals higher as well. With respect to ASCs, the proposed rule would reduce TULSA to $6,866. However, we don't currently have any active ASC sites, and we believe there may be an opportunity for us to correct the hospital cost reporting that appears to have drove the reduction. On the physician payment schedule side, TULSA is more than holding its ground as well when viewed on an apples-to-apples basis. Adjusting for the fact that TULSA is 0 day, while competitors are 90-day, physicians will be paid $880 for each TULSA procedure compared to $865 for HIFU, $1,064 for robotic RP and $539 for Aquablation. Turning to other payers. Coverage for the TULSA procedure expanded by approximately 18.3 million covered lives during the second quarter. Most of the newly covered lives came through state Medicaid and managed Medicaid and better programs. This follows the addition of 8.5 million covered lives in the first quarter, which included 6.9 million covered lives with Humana. And just today, we announced that the Johns Hopkins and the Prime Healthcare employee health plans together covering more than 105,000 employees, medical staff and family members have become the first ever employer-owned health plans to list the TULSA procedure as a covered service, and we're just getting started. Profound will continue to work collaborative with payers, providers and health systems to expand coverage and streamline patient access pathways for the TULSA procedure. Looking ahead, I'm confident in our ability to further accelerate. We're well positioned to capitalize on the expanding interest in image-guided, incisionless and autonomous robotic surgery. We're anticipating an extended reimbursement premium for TULSA hospitals and physicians. We're growing an already formal body of clinical evidence demonstrating the superiority of our technology, and we're continuing to scale our commercial footprint, both at home and abroad. Thank you for your time. I'll turn the call over to Arun now.

Thanks, Tom, and good afternoon, everyone. As I discussed in our Q1 call, the dynamics in the prostate disease treatment space continue to change at a rapid 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 remains our belief that today's standards have plateaued and that we can do better than the clinical outcomes from these standards. Just a few days ago, at SRS 2026, we saw firsthand that robotic surgeons are beginning to not only understand the potential of TULSA clinically, but also recognize that TULSA is the only prostate treatment system that is MRI guided. TULSA is the only modality that offers the flexibility to treat the prostate gland regionally, meaning with whole or near gland, subtotal, AMI or focal ablation. The time for incision less surgery has come. The most tangible evidence of this is that the new Society of Incision Less Surgery, or SIS, began its activities at SRS 2026 and Profound, HistoSonics and Insightec are among the most prominent founding members of the new society. And TULSA is the only modality that deploys super wide robotic autonomy, meaning it executes predetermined and/or AI-driven tasks independently. This compares to all competitive so-called master/slave robotic systems that rely entirely on direct real-time human hand movement and control. Today, TULSA's autonomous robotics enables surgeons to deliver consistent, highly personalized treatment based on each patient's unique anatomy and disease. In the future, it may also give us an even stronger competitive advantage in incision less surgery advances to its next frontier, including potentially telesurgery. With respect to MRI guidance, I would like to directly address what many of our competitors have tried to use as a mark against TULSA. While it is true that as we first started commercialization, finding compatible MR available time and convincing urology and radiology to work together to adopt a TULSA program was a hurdle to client. But today, TULSA is compatible with an installed base of about 5,000 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 already higher than that of any other treatment modality. And based on the proposed rule for 2027, the TULSA premium is only going to get higher. Our relationship with MR companies also continues to expand as they see interventional MRs as a growth opportunity for them, too. And as we have talked about on 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 larger magnets. The Siemens Free series, which is a prime example of such an MR, Cook Medical has created an iMRI division with the purpose of selling a turnkey interventional MR solution to hospitals that includes the smaller Siemens MR. The idea is that just as cath labs or robotic operating rooms were created in the past, the future is about creating interventional MR suites. We currently anticipate that if all goes well, TULSA will get FDA clearance for integration with the Siemens Free.Max by early next year, and we believe that we will meaningfully contribute to our growth in 2027. And we are stopping TULSA image guidance at MRI. In May, Telix Pharmaceuticals announced a collaboration with us as well as with a competitor that focuses on focal therapy. Telix makes a PSMA PET imaging agent that bonds preferentially to prostate cancer and provides a clear view of the geographic location of cancer within the prostate. Our team is exploring the potential to integrate these types of PSMA images into the TULSA-PRO treatment planning software. Approximately 85% of prostate cancer is multifocal, meaning that there are two or more distinct index lesions and/or satellite lesions present in different areas of the organ. The other 15% is unifocal, meaning there is only one distinct index lesion. It follows that whole-gland and subtotal ablation is likely the most appropriate approach for the vast majority of prostate cancer that is multifocal, while focal ablation may be best for patients with unifocal disease. We are already seeing urologists use TSMA to complement MRI to better define treatment extent with appropriate margins extending to the prostate capsule. So for TULSA, this isn't about patient selection. It's about empowering physicians to plan and deliver the best possible renal ablation from whole-gland to focal and everything in between. To summarize, Profound is pioneering iMRI procedures, which enable precise incision-less therapies that improve clinical confidence, procedural control and patient outcome. By leveraging real-time MRI guidance and autonomous robotics, Profound's technologies are designed to replace uncertainty with consistency and clarity across treatment planning, delivery and confirmation. In prostate cancer, we believe we are now crossing the chasm by transitioning TULSA from early adopter customers to the mainstream market by establishing the technology as a third distinct regional ablation category that doesn't make surgeons or their patients choose between whole-gland or focal treatments because TULSA can do both and anything in between. The TULSA-PRO installed base was 84 at the end of Q2 2026. We estimate that the current aggregate total dollar value of our qualified sales pipeline for TULSA-PRO and Sonalleve is approximately $70 million. We are reiterating our approximate $25 million total revenue outlook for full year 2026, which represents 56% growth compared to 2025, and we also continue to expect full year gross margin to be 70% or higher. Based on CMS proposed rules for 2027, the premium hospitals are reimbursed for TULSA over all competing technologies is expanding. And at the same time, more and more lives are being covered by other payers, including employer-owned health plans. We continue to believe that we are on a 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] Our first question comes from the line of Ben Haynor of Lake Street Capital Markets.

First off for me, just thinking about the $3.1 million that slipped from Q1 to -- Q2 to Q3, is that both capital and consumables? And then just generally speaking, how soon after quarter end did that -- did those units or product shift?

Good question. So it was actually a consolidated shipment that went from Canada. And the only reason it was not recognized is because we did not get all of the delivered receipts within the quarter time frame. So some of them, they were in July. So pretty much everything has been sent. And I think it's sort of back to the second question is like, okay, how do we make sure this kind of stuff does not happen again. And I think that I can certainly provide a little bit of color on that in the sense that we have, since that time, increased our logistics and operating staff. And we are actually in the final stages of bringing a very experienced Vice President level operations person. And so this is part of our growing. And it was -- as I said, it was a consolidated shipment. We didn't get all the receipts. So we didn't recognize it in Q3, but it is most likely will be recognized in Q3.

The $7 million of new orders, maybe you can share what the previous record was. And then obviously, you've had a great conference here recently with the 160 new qualified opportunities. Do you have a sense based upon history kind of how quickly some of those can shake out into actual orders?

Ben, that's a great question, and I appreciate you asking it. As mentioned in the prepared remarks, very difficult to give a definitive answer. But what I can tell you anecdotally is some of those leads have already materialized into deals that were not in our pipeline but are already well down the funnel and into the negotiating and contracting stage, which is extremely exciting. As is often said in the line of medical device sales, deals can take a year to develop and a day to dissolve or they can take a day to develop and a year to complete. So it completely runs the gamut. So it really just time will tell, Ben.

Okay. Fair enough. And then on the penile, I guess unlengthening that you get with the robot, is there a plan to publish that data? And maybe is it possible to characterize the range of outcomes there? I mean, I would think a lot of guys would care about the worst-case scenario rather than an average or median.

Ben, thanks. This is Mathieu on the line. So to answer your question directly, the -- we are preparing that data as part of the broader picture of perioperative outcomes that we have released in the past in Q1 and before that. And so to really package it together as a total sort of patient experience. On the surface, a difference of a few millimeters may not sound like a major outcome. However, for many men undergoing treatment for prostate cancer, literally every millimeter matters. The reason that penile shortening is not just a physical measurement. It can also serve as a constant reminder of both their cancer and the treatment that they underwent, which can affect their confidence, their emotional well-being, their intimate relationships and overall satisfaction with treatment. So we do view this result in the broader context of the CAPTAIN dataset. In and of itself, penile length preservation is not the reason a physician or a patient may choose a treatment. However, when you combine this result with the previously reported superiority in preserving erectile function, urinary incontinence as well as perioperative benefits of the no blood loss, no overnight stay, faster recovery, fewer major complications, it really paints a compelling picture of the overall patient experience. And really together, these outcomes highlight the potential for TULSA to deliver an effective cancer treatment while preserving quality of life. So ultimately, we believe the future prostate cancer treatment will be driven not only by cancer control, but also by quality of life outcomes. And this penile length result is another example of how the TULSA procedure's ability to precisely ablate the prostate tissue while protecting surrounding structures can translate into benefits that matter to patients. And as more of these quality of life data emerge, we do believe that this will increase the influence of patient preference, physician recommendations and overall demand for treatments that do preserve the quality of life. On the topic of sort of the range, I mean, certainly, there was a range. This is a nonconventional endpoint that we did include in the protocol. And so the way that they measure -- made the measurement has a median change and a range around that.

I have just a quick -- I think just a quick anecdote. There was actually a publication at the SRS where effectively, the conclusion was that every millimeter counts for patients.

Yes. I mean it makes sense. I believe there was an Italian study out there that showed some even greater impact for the robot. But I'll leave it that and congrats on the progress.

Our next question comes from the line of Michael Freeman of Raymond James.

A few questions following up on Ben. So I'm curious on the shipment timing challenge, we also saw that there was a shipment timing statement that you guys made in the first quarter, indicating that six Tulsa systems were shipped but not installed by the first quarter end. I noticed that the incremental increase in Tulsa installs was four quarter-to-quarter. Could you tell us just, I guess, what logistically or operationally is happening on these shipments? Like what challenges or delays maybe you're running into? And I know you mentioned that you had hired on some extra staff to manage this. So I wonder if you could just shed some light on this timing challenge.

Michael, I'm happy to do it. So these are actually two different issues. The one related to rep rec in the second quarter is more about shipping the -- to fulfill orders that we have received. And given that we did not get all the receipts, these have been recognized or we're recognizing in Q3. So it's more of a logistics issue from the perspective of shipment and so on. And as I said, we're pretty much fixed it already. So that's sort of an issue of the past. The other one that you're asking is actually once the product is shipped, it is installed, the site gets trained, they schedule patients and so on. So then when we look at the installed base, we're looking at sites actually treating patients. And normally, there's a gap of a minimum of 60 days to 120 days based upon the scheduling at the hospital, the training programs and their ability to start educating the customer population, so on. So that is actually a separate issue. It is more about how do they actually convert the health system into treatment program and confirm all of their reimbursement and so on. So I hope that answers your question from the perspective of the installed base.

Got you. Yes, that is helpful. Now on the -- and maybe a question for Tom. On the pipeline, we have -- earlier, you were quantifying the pipeline in terms of number of TULSA systems. Now we're talking about dollars in aggregate value and also splitting that between TULSA-PRO and Sonalleve. Are you able to give a number of new TULSA systems in your pipeline? And then I guess also shed some light on what proportion of Sonalleve sales might make up that $70 million aggregate value.

Michael, great questions, and thank you for asking them. I'll tackle the last question first and then work my way to the beginning of your commentary. What I can tell you is that in terms of the $70 million that fall within the verify, negotiate and contract categories of the sales funnel, it's roughly a 70%, 30% split between the United States and international in terms of dollars forecasted within those respective categories. And then as it relates to TULSA-PRO versus Sonalleve, it's roughly a 90% TULSA-PRO, 10% Sonalleve split. And the reason that we have moved away from providing what I would consider to be units versus dollars is we want to stay focused on maximizing top line revenue and gross margin and growing TULSA programs and Sonalleve programs versus simply installing systems. And that's one of the major reasons we've obviously introduced Index 20 as well is that we want to get to the point, as we've messaged before, where we have 200 TULSA-PRO systems installed and treating men across the world with an average of 50 men per year, and that would allow us to treat over 10,000 men per year. So I hope that answers the question that you had. And I'm, of course, happy to answer any follow-up questions based on what I just responded with.

Yes. Yes, that is really helpful. Let's see. And then you did, Arun, shed some light on the decline in the utilization index. I wonder if you could just speak more about those sites that ran into temporary issues and then also the trends you're seeing, you mentioned good numbers in July.

Yeah. Tom, since it was in your presentation, if you could just provide more color on that topic.

Of course, Michael, thank you for bringing it up. Obviously, there's a lot being presented within the Index 20, and we're excited to share it. And I just want to reiterate what I stated in the prepared remarks and then provide some more color on that. So while we did see the decline by 12% in terms of sequential quarter-over-quarter growth, we did see an increase of 39% in the first six months of 2026 versus the first six months of 2025 and a 22% increase in Q2 2026 compared to Q2 2025. In terms of the main drivers of that, there were five sites in particular, that did not grow as we expected them to do due to short-term issues. To give some color to the example that was called out in the prepared remarks, in different countries and different independent distribution networks or health systems, they have different policies. For instance, if we're required to come in on a placement model, that placement model normally has a set period of time and a set number of metrics and milestones that need to be completed. And after that point in time, they literally stopped the program until they complete the process of determining whether they're going to acquire the technology. So in this instance, it's actually a high-class problem. We were successful with the placement. The timeline associated with that agreement had come to close, and there was a gap of a certain period of time between when that placement ended and when the capital acquisition actually took place. And with our modeling, it's beneficial to the hospital to go to the capital ownership model because that lowers the cost per procedure as it relates to the TULSA-PRO kits. So all in all, it's a net positive, but clearly not impactful as it relates to speaking to quarter-over-quarter sequential growth.

Our next question comes from Scott McAuley with Paradigm Capital.

Maybe just to circle back on some of Michael's questions. So the installed base versus units sold, so correct me if I have this wrong, but if you have 84 installed as of the end of Q2, there's 80 installed by the end of Q1. So that's net four new in the quarter. But from the end of Q1, there were six units that have been sold but not installed. So does that mean there's still two more from that Q1 period that haven't been kind of installed and up and running yet? And then versus kind of net new sales in Q2, I understand it can be kind of confusing. So just looking for a little more color on some of those numbers.