Business Context and Reporting Period
Company: PROCEPT Biorobotics Corp (PRCT)
Filing Type: Form 8-K (Current Report)
Date of Report: October 6, 2022
Event: Entry into a new senior secured term loan facility and termination of a prior loan agreement.
Key Financial Metrics and Debt Structure
- New Debt Facility: $52.0 million senior secured term loan with Canadian Imperial Bank of Commerce (CIBC).
- Use of Proceeds: Full repayment of the prior "Oxford Loan Agreement" ($50.0 million principal) and transaction fees/expenses.
- Interest Rate: SOFR (with a 1.5% floor) plus a 2.25% applicable margin.
- Repayment Terms: Interest-only for the first 36 months. Amortization begins thereafter at 20% of the outstanding principal divided by 12 monthly installments.
- Maturity Date: Fifth anniversary of the Closing Date (October 6, 2027).
- Collateral: Substantially all company assets, including intellectual property, and pledges of equity interests in subsidiaries.
Material Changes Versus Prior Period
The Company replaced its previous financing arrangement with Oxford Finance LLC (the "Old Term Facility") with the new CIBC Loan Agreement. Key changes include:
- Lender Change: Transition from Oxford Finance LLC to Canadian Imperial Bank of Commerce.
- Principal Amount: Increased from $50.0 million (Old Term Facility) to $52.0 million (New Term Facility).
- Interest Rate Structure: Shifted from a fixed rate of 7.17% plus LIBOR spread to a variable SOFR-based rate with a 1.5% floor and 2.25% margin.
- Covenant Structure: Introduction of specific financial covenants tied to cash reserves and revenue growth if available cash falls below $100.0 million.
Guidance, Covenants, and Risks
Financial Covenants: If the Company maintains less than $100.0 million in available cash, it must meet one of the following:
- Minimum Unrestricted Cash Covenant: Maintain cash reserves not less than the greater of (i) $20.0 million, (ii) the absolute value of EBITDA losses for the most recent four-month period, or (iii) the aggregate outstanding principal ($52.0 million).
- Minimum Revenue and Growth Covenant: Revenue for the consecutive twelve-month period must be at least $50.0 million and represent at least 115% of the revenue from the preceding twelve-month period.
Extension Option: The initial 36-month interest-only period may be extended by an additional 12 months if the Company achieves either (i) $200.0 million in revenue for the trailing twelve months or (ii) $0 or greater in EBITDA for the trailing six months.
Liquidity Requirement: The Company is obligated to maintain in deposit accounts at CIBC the lesser of $150.0 million or all of its non-operating cash.
Investor Verification Checklist
- Verify the Company's current available cash balance to determine if financial covenants are currently active.
- Confirm the Company's trailing twelve-month revenue to assess compliance with the $50.0 million minimum and 115% growth covenant.
- Review the impact of the SOFR floor (1.5%) on future interest expense compared to the previous fixed-rate structure.
- Monitor the Company's ability to meet the $200.0 million revenue or positive EBITDA thresholds required to extend the interest-only period.