PROCEPT BioRobotics Corporation — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022; comparisons are with the corresponding 2021 periods. Unaudited results. The company develops and sells the AquaBeam robotic system and consumables for Aquablation therapy, primarily to treat benign prostatic hyperplasia (BPH). It reported a global installed base of 176 systems, including 114 in the U.S., at quarter-end.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $16.7 million | $8.5 million | $30.9 million | $15.7 million |
| Gross profit / margin | $8.5 million / 51% | $3.6 million / 42% | $16.2 million / 52% | $7.1 million / 45% |
| Operating expenses | $26.4 million | $16.8 million | $49.8 million | $31.6 million |
| Operating loss | $17.9 million | $13.2 million | $33.6 million | $24.5 million |
| Net loss | $19.2 million | $14.6 million | $36.4 million | $27.4 million |
| Net loss per share, basic and diluted | $0.43 | $2.60 | $0.82 | $5.25 |
Revenue grew 97% in both the quarter and first half. U.S. revenue drove most of the growth, reflecting higher system and handpiece sales and expanded insurance coverage; international sales were comparatively flat in Q2. In Q2, system sales and rentals rose 63%, handpieces and other consumables rose 158%, and service revenue rose 295% year over year. Management attributed higher gross margins to increased production volumes spreading fixed overhead across more units and higher U.S. selling prices.
Research and development expense increased 50% in Q2 and 30% for the first half, primarily from employee-related costs supporting product development. Selling, general and administrative expense rose 60% and 68%, respectively, as the company expanded its sales, marketing, reimbursement and administrative organizations. The net loss widened despite revenue growth. The lower reported per-share loss versus 2021 should be considered alongside the substantial increase in weighted-average shares following the September 2021 IPO.
Cash, liquidity and debt
- Cash and cash equivalents were $269.8 million at June 30, 2022, down from $304.3 million at December 31, 2021; restricted cash was $3.8 million.
- Operating cash use was $35.4 million for the first half, versus $28.1 million a year earlier. Investing cash use was $0.3 million; financing provided $4.2 million, mainly from employee option exercises and stock purchases. Cash, cash equivalents and restricted cash declined $31.5 million.
- Total assets were $310.9 million and total liabilities were $71.7 million. Accumulated deficit was $297.9 million.
- Debt was approximately $50.5 million carrying value (the filing also cites $50.0 million outstanding). The facility is floating-rate, secured by substantially all company assets, and subject to covenants; the company said it was compliant at quarter-end. Principal amortization was scheduled to begin October 2022 under the amended terms.
- Management expected existing cash, anticipated revenue and available debt financing to fund operations for at least 12 months from the financial-statement issuance date. The company has not generated positive operating cash flow and expects continued losses and higher expenses.
Outlook, risks and notable items
- No specific numerical revenue or earnings guidance was provided. Management expects revenue to increase as it expands system placements and utilization, with U.S. growth expected to be larger in the near term. It expects R&D, SG&A and cost of sales to rise in absolute dollars; long-term gross-margin improvement depends on scale and manufacturing efficiencies.
- Growth depends on hospital adoption and system utilization, continued reimbursement coverage, and successful expansion of the commercial organization. All U.S. local Medicare Administrative Contractors had issued positive coverage determinations; commercial coverage remained an area of active engagement.
- COVID-19-related procedure delays, staffing and travel constraints, and supply-chain or distribution disruption could affect sales, training and system utilization. Management said the duration and impact remained uncertain.
- A new San Jose lease commenced in July 2022 for approximately 158,221 square feet, with a 122-month term, aggregate base rent of $49.2 million and up to $7.9 million in tenant-improvement allowance. The company was assessing its accounting impact at filing.
- The company disclosed no material legal proceedings, no material changes to previously disclosed risk factors, and no off-balance-sheet arrangements. Disclosure controls were deemed effective. Management expected the company to become a large accelerated filer and cease being an emerging growth company as of December 31, 2022, including becoming subject to auditor attestation requirements for internal controls.
Investor facts to verify
- Whether system placements and handpiece utilization continue to support revenue growth, particularly in the U.S., and whether margins improve as management expects.
- Cash burn, the stated 12-month liquidity runway, and the timing and terms of debt principal repayments and any future financing.
- Progress in obtaining commercial-payor coverage and the effect of reimbursement on hospital adoption and procedure volumes.
- The accounting and cash-flow implications of the San Jose lease, including build-out costs and tenant-improvement allowance.
- Exposure to COVID-19 disruptions, supply-chain constraints, and the company’s ability to scale sales, training and manufacturing while losses continue.