Profound Medical Corp. Price & Performance (PROF)

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. Relate to, among other things, any expressed or implied statements or guidance regarding current or financial performance and position, the expectations regarding the efficacy of POFOUND's technology in the treatment of prostate cancer, BPH, uterine fibroids, palliative pain treatment and osteoid osteoma and its future revenues financial results. Such statements involve known and unknown risks, uncertainties and other factors, may cause actual results, performance or achievements to be materially different from those implied by such statements. No forward looking statement could 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 [indiscernible] Whether as a result of new information, future events or otherwise, other than as required by law. Representing the company today are Doctor. Arun Benoit, ProFound's Chief Executive Officer Rishad Duane, the company's Chief Financial Officer Doctor. Matthew Burtnick, Perfound's President and Tom Tamberrino, our Chief Commercial Officer.

With that said, I'll now turn the call over to Rashid. Good afternoon, everyone, and welcome to our fourth quarter twenty twenty four 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 Matthew in a moment, to provide updates on Tulsa utilization trends and the Captan clinical trial. However, before I do, I would like to provide a brief summary of our fourth quarter twenty twenty four financial results. To streamline things, all of the numbers I will refer to have been rounded. So they are approximate. For the three month period ended December 31, 2024, the company recorded revenue of $4,200,000 with 2,700,000.0 from recurring revenue and 1,500,000.0 from one time sale of capital equipment Fourth quarter twenty twenty four revenue increased 108% from 2,000,000 from the same period in 2023. Gross margin in Q4 twenty twenty four was 71% compared to 52% in Q4 twenty twenty three, As previously stated, gross margin will vary quarter to quarter due to product mix.

Total operating expenses in the twenty twenty four fourth quarter, which consists of R and D, and SG and A expenses were $11,300,000 compared with 9,800,000.0 in the fourth quarter of twenty twenty three. Overall, the company recorded a fourth quarter twenty twenty four net loss of $4,900,000 dollars or $0.2 per common share. A 45% improvement compared to a net loss of 8,900,000.0 or $0.42 per common share. For the same three month period in 2023. As of 12/31/2024, ProFound had cash of $54,900,000 So to summarize, this was really our best quarter overall so far. We delivered record revenue of $4,200,000 record gross margin of 71% and lowest net loss since the first quarter of twenty twenty.

We also ended the year with a strong balance sheet. With that, I will now turn the call over to Matthew. Thank you, Risend.

In the fourth quarter, there were 17 presentations featuring Sultipro at major society meetings, including the interventional MRI conference in Annapolis, Focal Plus in San Diego, the French Urology Congress in Paris, our SNA in Chicago, and the Society of Urological Oncology in Dallas. These clinical presentations focused on the precision and flexibility of TULSA as the only device that can safely deliver a whole brand ablation for diffuse or multifocal prostate disease and targeted ablation for discrete disease. Precision is a key word here because it is the MRI that gives physicians the precision they need to treat the types of patients they treat. MRI is the unparalleled precision to visualize the prostate. MRI is the real time precision achieved by closed loop thermometry control. Meanwhile, precision is the 1.3 millimeter ablation accuracy proven on whole mouth histopathology for gold standard clinical treatment set study. Precision is the ability to treat to the outer edge of the prostate without injury or leaving cancer behind. This precision is important because the nerve bundles that control erectile function run right along the side of the prostate all within two millimeters from the prostate surface. This precision is important because cancer grows right to the edges of the prostate.

Together with Precision, the flexibility of the Tulsa technology, that was designed to treat any region and any size prostate is what makes it uniquely positioned to become a mainstream treatment option for men with prostate disease.

With all of the other ablative prostate technologies, those in the market, those recently cleared by the FDA, or those that are coming down the pipeline. The fact of the matter is that they are all only well suited for single unifocal tumors. And also only for very specific regions of the prostate.

When we think about these devices, we can associate them with one of two The first is one where they produce high temperature thermal tissue boiling and the second category is non thermal yet high pressure tissue destruction. With tissue boiling, there is so much energy being delivered in the tissue that it limits the actual volume of treatment achievable without starting to cause significant adverse effects.

On the other hand, with high pressure tissue destruction, treating to the outer edge of the prostate treating where cancer is typically located risks perforating the capsule, which then also causes significant adverse effects. Tulsa is neither of these. Tulsa is controlled and gentle heating pixel by pixel, degree by degree. Tulsa is precision heating all the way to the outer edge of the property. And even beyond, which is why we brought to market with the MoBuos Tulsa AI module and response to requests from our physician.

When you compare apples to apples, whole brand to whole brand and focal to focal, Tulsa wins every time. Again due to the precision of the technology and due to the flexibility of the ablation. To put some color to it, we know that HIFU and Aquablation can't get to the interior of the prostate.

Right off the bat, that's thirty percent of cancer patients that don't qualify.

It is also well accepted that only twenty five percent of patients have unifocal cancer suitable for focal therapy.

Then considering the proportion of patients with disease right at the edge of the prostate, which we can conservatively estimate to be about fifty percent of the patients based on the real world usage of our ThermoBOOST Tulsa AI module. We can easily see that in at least two thirds or more of the prostate cancer market, we are unique. If we evaluate on the following three axes, one, how much of the prostate volume you can ablate what kind of prostate disease patients you can treat and three, what range of prostate volumes you can treat. Tulsa is the only technology not just ablative, but of all prostate treatments that can effectively compete on these axes. This is based on the physics and science of Tulsa. Which translates to an opportunity that is unique to us. With an addressable market that is real and substantial which ultimately speaks to the robust adaptability of the technology. Finally, as I'm sure you're all wondering, we are delighted to remain on track with our Kapton randomized trial comparing the Tulsa procedure to robotic radical prostatectomy. As of January 2025, two zero one patients were randomized and one hundred and seventy four patients were treated or scheduled for treatment.

This represents the first randomized trial to have met its enrollment target comparing a new technology to a standard of care treatment for localized spots of cancer.

We are honored and looking forward to the first impactful readout from Kapton at this year's AU8 Annual Meeting in Las Vegas. I will now turn the call over to Tom, to discuss where we stand with respect to planning and building our commercial organization to support growth. Thank you, Matthew. It's a privilege to be here with all of you and thank you for your continued interest in our company. Over the summer of twenty twenty four it had been some time since we last talked following the acquisition of Novodac, from Stryker and Arun had allowed me take extensive time and due diligence while looking at the opportunity to join Profound I had the chance to meet with Matthew, Board members, and many others, including investors and Wall Street analysts, The linchpin for me joining came when I attended the Pro Talk Live event that took place in Las Vegas in September of twenty twenty four And I had the privilege to hear our patient Robert Palmer, gotten Tulsa Pro and was so pleased with the results that he's become an ambassador for the technology After hearing his journey through prostate cancer and his treatment with TULSA Pro, and the reasons why he would only recommend it to other men facing prostate cancer I messaged Darun at that very moment to let him know it would be my privilege and honor to join Profound I started in mid October and in one hundred and twenty days, I am proud to announce that we've done a complete turnaround of the commercial organization on a global scale we have used no recruiters in our build out of the team and everyone is a known entity.

Whether that be from [indiscernible] or Lifesel Corporation the folks that we've been able to bring on the the team are constant professionals and they are world class in sales and marketing and also in business development, As you heard from Rashad, we delivered in the fourth quarter and in the same breath in parallel we've been able to transition from what was a place to model to a capital model. Also as noted within our results from Q4, The individuals that joined us from EndoMag were a team of five, They took that organization's U. S. Sales revenue from $8,000,000 to $32,000,000 in a five year period That organization was recently acquired by Hologic. And the list goes on of other well known brand name entities within the medical device industry whether that be Stryker, Intuitive Surgical, and Beauty, AxoGen, etcetera we have a world class team The organizational structure calls for a Vice President of Sales here in The United States, Adam Milligan, reporting to Adam or two directors of sales, Each director of sales has four Regional Business Directors, and each regional business director has three capital sales executives In parallel, as business need requires, we will layer in clinical sales specialists who will focus on the adoption and drive volume procedures at the centers established by our capital sales executives.

Our commercial strategy specific to The U. S. [indiscernible] prototypical of anyone in the cancer arena, which of course we are, which is to focus on the top 50 many of which are already adopters of TulsaPro. Added to which Regional and bread and butter hospitals will also be in our target We're agnostic to the diagnostics and we have the privilege to partner with Siemens Philips, GE other manufacturers We're also approaching a B2B market and we're looking to go with entities that have established portfolios ambulatory surgical centers as well as LUGPUS The beauty of being here at Profound is that I compare it to my time at Novodac with Arun, we had a sort of an empty chessboard in many ways. We didn't have as many chess pieces as you would like. When going to battle with the likes of a striker and arthrex or stortz Here at Profound, the chessboard is full. Everything is completely aligned. We have reimbursement as of January 1 through CMS. We had clinical data as Matthew just mentioned, not only already in our repertoire, but forthcoming and we are developing a very robust and world class health economics and market access team Our deliverables for 2025 are to create awareness, of Tulsa Pro to create access to Tulsa Pro to drive adoption of Tulsa Pro and subsequently drive advocacy of Tulsa Pro at the physician level at the patient level, at the private payer level.

In terms of our revenue growth, if you look at what we accomplished in 2024, I believe is a great foundation to build on the future I also believe that we will achieve similar or better to what we did in 2024. So something in the seventieth to seventy five ish percentage range in terms of growth And once 2026 comes around, barring any Black Swan events, we should be into the triple digital growth phase where we head up the shaft of the hockey stick. Once again, thank you for your time. It's my privilege to turn the call over to Arun. Thank you, Tom.

And welcome to the company and afternoon, everyone. Overall, 2024 was a good year as we met or exceeded key operating goals including [indiscernible] margin, [indiscernible] introduction of [indiscernible] reimbursement, and Recruitment in the CAPTAIN trial. As you heard from Matthew, our clinical story is crystal clear. LSAS Precision flexibility, and resulting PAM in prostate disease is unmatched by any competing [indiscernible] And Khosla's economic proposition is now clear as well. Our urology APC level seven codes which came into effect at the beginning of twenty twenty five are not only paid at a higher level seven our peers are all at level six But the codes are also applicable in an unrivaled range of treatment settings including hospitals and ASCs imaging centers and office settings, such as large urology practices. So is that a procedure addressing a larger patient population reimbursed at a higher Great. And also in more To be frank, I think it's great to be in 2025 where we can now finally talk about top line growth That's why I asked Tom to join us today and he will be on our calls going forward. As you heard from Tom today, he is already recruiting to add to our team of sales professionals and is also bolstering a sales management organization to prepare for the growth going forward.

We are also increasing our patient education programs to further build awareness of Telstra Procedure, [indiscernible] their caregivers.

At the end of the day, it's all about patients [indiscernible] already know from the feedback that we have received when provided with information about their options, prostate disease patients Elsa every time as their first treatment of choice.

In the interest of time, I'm going to close out our prepared remarks [indiscernible] by summarizing the four key things we're looking forward to delivering This year. [indiscernible] we expect the perioperative data from CAPTAIN to become available at AUA in April. We plan to use the results of this trial health support additional acceptance or reimbursement by private insurance companies and seek of the Tulsa procedure, as a treatment modality in cancer society, [indiscernible] [indiscernible] We are on track to introduce the BPH Tulsa AI module that will allow for customized treatment that is comparable in terms of speed other modalities [indiscernible] We plan to demo the VPH module at AUA in April.

Our BPH application will focus first on those Patients who need a surgical intervention instead of drug intervention. That segment of the market is approximately four hundred thousand patients per year tripling the total opportunity for Tulsa from about two hundred thousand cancer patients to a total of six hundred thousand positive disease [indiscernible] Again, as a reminder, the Tulsa AI DPH module will not require Any hospital stay nor is there any [indiscernible] [indiscernible] [indiscernible] Great. Another major initiative Profound This year, is the introduction of [indiscernible] which stands for selling [indiscernible] [indiscernible] and the Siemens interventional MRI [indiscernible] as a combined Total prostate [indiscernible] This solution streamlines the workflow and has the potential to be available in surgical suite of a hospital, or an ASC or a urology clinic. We plan to launch in the second half of twenty twenty five. And finally, we expect high double digit growth in 2025 with the proverbial hockey stick of Bratisl accelerated [indiscernible] starting in late twenty twenty five, early twenty twenty six, with triple digit in 2026 And beyond As we anticipate, another dynamic year we are laying [indiscernible] a hybrid investor meeting at the AUA to showcase [indiscernible] the new ETH AI module and update investors further on the progress of the Tulsa plus All right.

We'll provide the details as soon as they are available and hope you can join us either in person Four Virtually. This ends our prepared remarks for today. With that, we're happy to take any questions you might have. Operator, Certainly. And our first question comes from the line of Rick Wise from Stifel. Your question please. Hi, Arun and team. This is John on for Rick, Maybe starting off on the commercial side of things, both Arun and Tom, you highlighted a very strong double digit growth this year, 70% triple digit in the following years.

Hope you can talk about what you've seen in the first few months of this post Medicare reimbursement environment that gives you the confidence to talk about such robust growth acceleration in the years ahead? Sure, John. Good question. So I think that's from the perspective of the clinical value of our product, As I've said before, we do not get much of a pushback. And that continues to be the case even more From the perspective of the economics we have put together pretty clear models that we can show to the hospitals as Tulsa can be a more profitable procedure for them with the higher reimbursement that we get And I think that even in Q4, in terms of what that means in terms of results you can clearly see had pretty good quarter in terms of capital sales. Because we did switch to that model And in Q1, we have we've already sold capital sales and So I guess that's about as much color I think I can give you pipeline is pretty good. The sales team is energized Tom, if you have any other comments, please feel free to to mention it.

Absolutely. Thank you, Arun, John. Thanks for the question.

I think you nailed it right on the head Arun specific to the clinical sale. One thing. The financial modeling sale is another And then the last component is the adoption sale. After the technology has been acquired and my estimation from discussions with users who were very much cash pay only is that they have received many inquiries from folks now that there is coverage. They had not been hearing from before, which is a wonderful thing that we've created additional access for more men to be able to afford the Tulsa Pro procedure. And as was mentioned in the prepared remarks, we are taking a firm stance and going after the private payers to ensure the same terms of covered lives with positive payer [indiscernible] So that even more men have an economical way to obtain access to Tulsa Pro and in the same breath it provides a healthy economic model for not only the facility, but also for the physician, So everybody wins. And I think those are the tailwinds that give us the confidence to make the statements we did specific to growth rates for this year and 2026 and beyond.

Great. That's helpful. Just to build on something You mentioned in there, Tom, I just wanted to maybe get a better sense. Arun in the past had talked about reaching 75 sites by the end of twenty twenty five. [indiscernible] If you just had one any update [indiscernible] [indiscernible] And two, in terms of you guys talked about switching the model.

To capital sales.

You were sort of doing a mix of capital and recurring in the past.

Is it all capital now? Or is there still the recurring portion of the business in place as well?

So yes, let me answer the first part, Nava, to cover the second part [indiscernible] In terms of the installed base, as we discussed in the Q3 call, We were not going to get to the 75 target last year. But as you can see from the recurring revenue, we did grow we grew nicely But we did switch to the capital plus recurring model and that is where majority of our sales are. At this point. [indiscernible] I think we will grow the installed base again in Q4. The only reason we decided not to give you the specific number today of what the installed base is or what resetting the target is because I do want to get a couple of quarters under our belt particularly with this new model, so that we have some level of predictability But I think by second half of this year, we will we will start putting those numbers out for you as well. With respect to the you maybe you could address the capital coming.

Yes. Thank you, Arun and John. Thank you again for the question. And happy to do so. I've got a few different comments in response to that inquiry. Number one, Profound Capital Solutions enables customers to obtain ownership of our technology through any number of means, right? Number one, of course, is this a straight purchase order where it's direct from the person taking ownership, entity taking ownership they're going to pay that invoice and paying cash. Any other company would do we offer solutions such as operating leases, capital leases, committed cost per procedure agreements etcetera, to accelerate the adoption in lieu of capital budgeting cycles within your traditional hospital systems. So that's one comment I'll make there. And then I also want to make mention of the fact that the revenue streams that open up because of switching to the capital model is not only the capital infusion of course, at the time of acquisition, not only the disposable revenue that comes from purchasing the kits that are required to complete each procedure but of course, the deferred revenue that will be building up over time specific to the service on those capital agreements in addition to the fact that we will continue to advance the AI capabilities and the software capabilities associated with the technology and that will be a fourth revenue stream that will provide further [indiscernible] the years to come.

Got it. Thanks.

Thank you.

Thank you. And Our next question comes from the line of Michael Freeman from Raymond James. Your question please. Thank you. Good evening, Arun, Rashid, Matthew, Tom.

And Steve. Congrats on a strong finish to the year and thanks for these updates.

One my first question is around the guess the launch and the demo of the BPH product. Nice to hear that you're going to to reveal this thing at AUA. Wondering if one, is there updated timing on the launch of that product And are there any associated regulatory clearances for that for that module that need to clearing before you can launch?

Sure. Matthew, do you want to take [indiscernible] Sure.

Yes. Thank you, Michael, for the question. We are delighted to be in a position to be able to demo the BPH modules with a timeframe of AUA. I think we've been talking about a midyear timeline for launch of the product. So it certainly falls in line with that. And again, these are a set of modules that incorporate AI as well as non AI in order to streamline the procedure for total skin to skin time within an average of about sixty to ninety minutes. So we do think that we're on track From a regulatory standpoint, I don't know if I can comment specifically on that. But we have that as part of our project plan for the launch midyear as discussed.

Okay.

Right, great. Thank you very much for that. I have another question here. I wonder now that you're much of the way through your first quarter, you mentioned that you have had some more placements. I wonder if you could just talk about utilization and talk about uptake among Medicare payers. You mentioned that there was an uptick in inquiries. That you're hearing from your from the doctors in your network.

I wonder if you have seen an uptick in actual payments through Medicare? Your first quarter. [indiscernible] Michael, payments typically take Medicare takes a long time to pay. So I don't have a good data on the actual payment, I don't see any issue with it at all, but I don't think we have a lot of data on the payments itself. I I think based upon the Q4 recurring revenue, you'll see the numbers are certainly is our op. And I think the trend is as Tom described, our are up as well. We are getting sporadic, very early stage data also [indiscernible] in certain centers, Some of the bigger private insurance companies are paying And in some cases, they're paying off their pre authorization In some cases, they have they do provide a number to the patient before the after the procedure and they are pain. And From what we hear sites are happy with what they're getting. We obviously don't know what the exact numbers are, but I I think we generally are hearing satisfied [indiscernible] From that perspective.

Okay. That's great. And then just a quick follow-up to that. With those some of the larger private insurance companies providing payments either with or without [indiscernible] Are these I mean, these seem like obvious targets for first conversations even without the Capsam data.

Do you have, I guess, reimbursement personnel pursuing these specific companies as first targets?

Yes. [indiscernible] I've talked about this before that Given that ablative therapies are [indiscernible] more prevalent [indiscernible] insurance companies have been paying. I think that our job in terms of getting payments is not as insurmountable as if we were the first ablative therapy out there. So I do think that [indiscernible] [indiscernible] Work in progress, it's going to happen Kapton trial results will definitely help significantly But to answer your direct question, [indiscernible] are in Tom's team, we are adding a team that is going to explicitly come develop a strategy of which insurance companies to go after first and prioritize them ultimately, we will get there to to all the major players. How do we make that priority decision will be right in the sense that some of it will be based upon which companies are already paying and how many centers what has been the dialogue. It will also depend on Certain regions where we have a bigger installed base, so it will have an impact. So there are a number of different things that we will look at companies we go after. First. But I think in general, The theme of what you're discussing is is right on.

Our strategy that we have specialized people who are going to be working on this. And we don't expect major issues. The timing is going to be whatever standard timings are for these things, but we don't expect that. To be major issues.

Okay.

Thank you very much. I'll pass it on now.

Thank you. And this does conclude the question and answer session of today's program. I'd like to hand the program back to Doctor. Benoit for any further remarks.

Thank you so much. And we are looking forward to not just Q1, but also hopefully everyone joining us. Provide more details for the virtual or hybrid conference that we will have at the AUA. In April. Thank you.

Thank you. Ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.