PROCEPT BioRobotics Corporation — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparisons are with FY2022. This is an annual filing, not a standalone fourth-quarter report.
Business context
PROCEPT develops, manufactures and sells the AquaBeam Robotic System, which delivers Aquablation therapy for benign prostatic hyperplasia (BPH). Revenue comes mainly from system sales and rentals and recurring single-use handpieces. At year-end, the company reported 418 systems installed globally, including 315 in the United States. The U.S. remains its principal market; it reported Medicare coverage in all 50 states and favorable coverage decisions from many large commercial payors.
Key financial metrics
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Revenue | $136.2 million | $75.0 million | Up 82% |
| Gross profit / margin | $71.0 million / 52% | $37.1 million / 49% | Margin up 3 percentage points |
| Operating expenses | $180.2 million | $117.8 million | Up 53% |
| Operating loss | $(109.2) million | $(80.7) million | Loss widened |
| Net loss | $(105.9) million | $(87.2) million | Loss widened |
| Net loss per share, diluted | $(2.24) | $(1.96) | Loss per share increased |
| Operating cash flow | $(108.0) million | $(80.4) million | Cash use increased |
System sales and rentals were $58.9 million, handpieces and other consumables $69.5 million, and service $7.7 million. U.S. revenue was $124.3 million, approximately 91% of total revenue. R&D expense rose 67% to $48.4 million and selling, general and administrative expense rose 48% to $131.8 million, reflecting increased product-development spending and commercial and corporate infrastructure.
At December 31, 2023, cash and cash equivalents were $257.2 million, total current assets $350.6 million and current liabilities $45.9 million. Long-term debt was $51.3 million carrying value ($52.0 million principal); total liabilities were $124.0 million. The accumulated deficit was $454.6 million. The company reported no positive operating cash flow to date.
Material changes and financing
- Revenue grew substantially, led by higher system placements and handpiece utilization; consumables revenue increased 119% year over year.
- Gross margin improved from 49% to 52% as higher production spread fixed manufacturing overhead across more units, partly offset by higher scrap and warranty costs.
- Net loss increased despite revenue growth, as operating expenses grew faster than gross profit.
- Net cash used in investing activities increased to $25.2 million, primarily for property and equipment, from $2.7 million in FY2022.
- An August 2023 follow-on stock offering generated $161.7 million net proceeds. Financing cash flow was $167.8 million; common shares outstanding increased to 50.8 million from 44.8 million at year-end 2022.
- Cash and cash equivalents increased to $257.2 million from $221.9 million. The company stated its cash and anticipated revenue should fund operations for at least 12 months from the financial-statement issuance date, based on its operating plan and assumptions.
Outlook, risks and unusual items
Management expects revenue to grow as the installed base and system utilization expand, with U.S. growth expected to be greater in absolute dollars. It expects continued investment in sales and marketing, R&D and operations; no specific numerical revenue or earnings guidance is provided. Management anticipates potential long-term margin improvement from manufacturing scale, but results may fluctuate.
Key risks include continued operating losses and cash burn; dependence on AquaBeam systems and handpieces; adoption and utilization uncertainty; potential changes in reimbursement or coverage; competition and pricing pressure; reliance on single-source suppliers and a single San Jose manufacturing facility; regulatory and product-quality requirements; and the need for additional capital if operating assumptions do not hold. The $52.0 million CIBC term loan is secured by substantially all assets, bears interest at SOFR plus 2.25%, and matures in October 2027. Covenants include cash and, when applicable, minimum liquidity or revenue/growth requirements; default could accelerate repayment.
Other notable items: the company moved operations to its San Jose facility in 2023 and exited its former Redwood City facility; the new facility lease extends for 122 months, with annual base rent rising over its term. A 2021 limited-lot handpiece recall is described as remedied. Management reported no material legal proceedings, and the auditor gave an unqualified opinion on the financial statements and concluded internal control over financial reporting was effective.
Important facts for investors to verify
- Whether installed-system growth is translating into sustained procedure volumes and recurring handpiece revenue.
- Whether commercial-payor coverage and reimbursement are broad enough to support hospital adoption and system utilization.
- Whether gross-margin gains continue and whether scrap, warranty and manufacturing costs remain controlled.
- Cash burn, capital spending and financing needs relative to the stated 12-month liquidity assessment.
- Compliance with CIBC cash and financial covenants, including the effects of the floating SOFR-based interest rate.
- Ability to scale manufacturing and manage single-source supplier, product-quality and regulatory risks.