PROCEPT BioRobotics Corporation — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparative figures are for FY 2021. The filing is an annual report, not a standalone fourth-quarter report, and does not provide clear standalone Q4 results.
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, single-use handpieces and service. At year-end, the company had 243 systems installed globally, including 167 in the United States. It reported 2022 revenue of $75.0 million and a net loss of $87.2 million.
Key financial metrics
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Revenue | $75.0 million | $34.5 million |
| Gross profit / gross margin | $37.1 million / 49% | $15.9 million / 46% |
| Research and development | $29.0 million | $19.0 million |
| Selling, general and administrative | $88.8 million | $51.0 million |
| Operating loss | $80.7 million | $54.2 million |
| Net loss | $87.2 million | $59.9 million |
| Cash used in operating activities | $80.4 million | $57.3 million |
Revenue rose 118%. System sales and rentals increased 82% to $39.7 million; handpieces and other consumables increased 176% to $31.8 million; service revenue increased 222% to $3.5 million. U.S. revenue was $67.8 million, or about 90% of total revenue. Gross margin improved as higher volumes spread manufacturing overhead across more units and U.S. average selling prices were higher.
Operating expenses grew 68%, faster than gross profit, and the net loss widened by $27.3 million. Net loss per share was $1.96 versus $3.63 in 2021; weighted-average shares increased substantially following the 2021 IPO, so per-share comparisons reflect the larger share base.
At December 31, 2022, cash and cash equivalents were $221.9 million, down from $304.3 million a year earlier. Current assets were $272.6 million and current liabilities $35.3 million. Long-term debt was $51.2 million in carrying value ($52.0 million principal); accumulated deficit was $348.7 million. The company had no positive operating cash flow to date.
Material changes and financing
- Operating cash use increased by $23.0 million year over year, reflecting the larger net loss and higher working-capital investment, including increases in inventory and receivables.
- In October 2022, PROCEPT refinanced its prior facility with a $52.0 million senior secured term loan from CIBC, using the proceeds to repay the previous loan and related costs. The new loan bears interest at SOFR plus 2.25%, has interest-only payments for 36 months and matures in October 2027. A $3.3 million extinguishment loss was recorded.
- The loan is secured by substantially all company assets. If available cash falls below $100 million, financial covenants require the company to satisfy a minimum-cash or revenue-and-growth test. The agreement also restricts certain actions, including additional debt and dividends.
- Capital expenditures were $2.7 million. Financing cash flow was $3.6 million, including new loan proceeds offset by repayment of $50.0 million of prior principal and related fees.
Outlook, risks and unusual items
Management stated that existing cash, cash equivalents and anticipated revenue were expected to fund operations for at least 12 months from the financial-statement issuance date. This is not a formal revenue or earnings forecast. The company expects continued losses and increased investment in sales and marketing, R&D, manufacturing and public-company costs. Its growth plans emphasize expanding system placements and utilization, extending commercial-payer coverage, developing products and evidence, and growing internationally.
- Reimbursement: Medicare local coverage was in place nationwide for eligible patients, but the transitional pass-through payment for the handpiece was extended only through December 31, 2023. After expiry, hospitals may receive a bundled payment, potentially affecting adoption economics. Commercial coverage and reimbursement remain variable.
- Execution and supply: The company relies on numerous largely single-source suppliers and had limited experience at larger manufacturing scale. It planned to move headquarters and manufacturing from Redwood City to a new San Jose facility during 2023; relocation or qualification delays could disrupt production. Limited-lot handpiece recalls occurred in 2019 and 2021; the company said the issues were remedied.
- Commercial and operating risks: Adoption, system utilization, competition, pricing pressure, procedure volumes and the ability to expand the sales organization could affect results. COVID-related procedure backlogs, staffing constraints and broader economic conditions remain potential headwinds.
- Clinical and regulatory: The AquaBeam system is a Class II device with FDA marketing authorization; ongoing quality, reporting and post-market obligations apply. Product liability, regulatory action, reimbursement changes and the need for future clearances are material risks.
- Other items: The company reported no legal proceedings that management believed would have a material adverse effect and no material off-balance-sheet arrangements. The San Jose lease adds long-term occupancy commitments; total future minimum lease payments disclosed were $50.6 million.
Most important facts for investors to verify
- Whether system placements translate into sustained handpiece utilization and recurring revenue, and whether the 2022 growth rate is repeatable.
- How the end of transitional pass-through payment status after 2023 affects hospital economics, procedure volumes and product pricing.
- Cash runway under actual operating cash use, and compliance with CIBC covenants if available cash falls below $100 million.
- Whether the San Jose relocation and manufacturing ramp proceed on schedule without supply interruptions or added costs.
- Whether gross-margin gains persist as volume, geographic mix, manufacturing costs and pricing evolve.