PROCEPT BioRobotics Corp. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. The company develops, manufactures, and sells the AquaBeam robotic system and related consumables for Aquablation treatment of benign prostatic hyperplasia (BPH). Its global installed base was 275 systems, including 192 in the U.S.
Financial performance
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $24.4 million | $14.2 million |
| Gross profit / margin | $12.5 million / 51% | $7.7 million / 54% |
| Operating expenses | $40.9 million | $23.4 million |
| Operating loss | $28.4 million | $15.7 million |
| Net loss | $28.5 million | $17.2 million |
| Net loss per share | $0.63 | $0.39 |
| Operating cash flow | $(35.9) million | $(18.2) million |
| Investing cash flow | $(5.3) million | $(0.1) million |
- Revenue rose 72%. Handpieces and other consumables increased 144% to $12.7 million; system sales and rentals rose 21% to $10.2 million; service revenue rose to $1.5 million.
- U.S. revenue was $21.8 million, or 89% of total revenue; international revenue was $2.6 million.
- Cash and cash equivalents were $181.0 million at quarter-end, down from $221.9 million at December 31, 2022. Cash, cash equivalents, and restricted cash totaled $184.8 million. The company reported an accumulated deficit of $377.2 million.
- Long-term debt had a $51.2 million carrying value; the company borrowed $52.0 million under its secured term loan. Current liabilities were $32.5 million and current assets were $245.6 million.
Changes versus prior-year quarter
- Cost of sales grew 83%, faster than revenue, and gross margin declined three percentage points to 51%. Management attributed the margin pressure primarily to increased operations personnel supporting anticipated growth.
- R&D expense more than doubled to $10.7 million, while selling, general and administrative expense increased 64% to $30.1 million. Management cited product development and expansion of commercial and administrative teams.
- Net loss increased by $11.3 million. Operating cash use nearly doubled, reflecting the larger loss and working-capital needs, including inventory and receivables growth.
- Property and equipment purchases were $5.3 million, compared with less than $0.1 million a year earlier. The company also recognized $4.1 million of stock-based compensation, versus $1.6 million.
Outlook, risks, and notable items
- Management expects revenue to increase in absolute dollars in the foreseeable future as system placements and utilization grow, while noting results may fluctuate by quarter. It expects gross margin to improve over the long term with scale, but did not provide numerical quarterly or annual guidance.
- Management believes existing cash, cash equivalents, and anticipated revenue will fund operations and capital requirements for at least 12 months from issuance of the financial statements. It also expects expenses to rise, particularly for sales and marketing, operations, and R&D; future financing may be needed if resources prove insufficient.
- The CIBC term loan matures October 2027, bears interest at SOFR plus 2.25%, and is secured by substantially all company assets, including intellectual property. Interest-only payments apply for the first 36 months after closing, with a possible 12-month extension if specified revenue or EBITDA targets are met. Certain financial covenants apply if available cash falls below $100 million.
- Key business risks include adoption and utilization of the system, reimbursement and coverage, manufacturing scale and costs, product development and regulatory requirements, competition, and international expansion. The company reported no material change to previously disclosed risk factors and no material legal proceedings.
- Operating lease expense was $2.0 million for the quarter. The Redwood City lease was amended, with portions ending in October 2023 and January 2024; a new San Jose facility lease began in July 2022.
Important facts for investors to verify
- Whether system placements and procedure utilization continue to drive recurring handpiece revenue growth.
- Whether gross margins recover as manufacturing scales, given Q1 cost growth exceeded revenue growth.
- The pace of operating cash use and inventory investment relative to management’s stated liquidity runway.
- Loan interest-rate exposure, cash-deposit requirements, and covenant implications if available cash declines below $100 million.
- Whether commercial expansion and R&D spending translate into durable growth without continued acceleration in losses.