Profound Medical (PROF) Q3 2026 Earnings Call Transcript

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DATE

Thu, Nov. 5, 2026

CALL PARTICIPANTS

• Chief Executive Officer and Chairman - Dr. Arun Menawat
• Chief Financial Officer - Matthew Sobczyk
• Chief Commercial Officer - Thomas Tamberrino
• Chief Technology Officer - Mathieu Burtnyk
• President and Incoming Chief Executive Officer - Richard Fabian

TAKEAWAYS

• Total Revenue -- $9.8 million, representing an 86% increase year over year driven by higher capital equipment sales and recurring revenue.
• Recurring Noncapital Revenue -- $4.1 million, reflecting demand for single-use devices and service warranties.
• Capital Equipment Sales -- $5.7 million, increasing from $1.2 million in the prior year quarter due to system placements.
• Gross Margin -- 78%, up from 74% in the third quarter of 2025 due to a favorable product mix and price discipline.
• Operating Expenses -- $15.5 million, an increase of 21% year over year primarily reflecting higher headcount and commission expenses.
• Net Loss -- $7.7 million, improving from a loss of $8 million in the same period last year.
• Operating Cash Use -- $5 million, a 56% sequential decrease from $11.3 million in the second quarter of 2026.
• Cash Balance -- $33.3 million at the end of September, which management expects will fund operations for at least 12 months.
• Full-Year Revenue Guidance -- At least $25 million, reflecting increased expectations for the remainder of the year.
• Full-Year Gross Margin Guidance -- 70% or higher, based on results through September and anticipated product mix.
• TULSA-PRO Installed Base -- 98 systems at quarter end, supporting the expansion of the company's commercial footprint.
• Utilization Milestone -- 5,000 total TULSA procedures performed as of October, indicating growing clinical adoption.
• Qualified Sales Pipeline -- $79.2 million across TULSA-PRO and Sonalleve, comprising opportunities in the verify, negotiate, or contracting stages.
• Covered Lives Expansion -- 10.7 million lives added in the third quarter alone through commercial and government payers.
• Whole-Gland Treatments -- 42% of procedures, highlighting the technology's application for full organ ablation.
• Sub-total Treatments -- 24% of procedures, involving the ablation of more than half the gland.
• Hemi-gland Ablation -- 22% of procedures, demonstrating the versatility of the TULSA platform.
• Focal Therapy -- 12% of procedures, reflecting use for targeted tissue ablation.
• Sales and Marketing Efficiency -- $0.65 spent to generate $1 of revenue, which management noted is significantly lower than that of industry peers.
• Common Shares Outstanding -- 36,626,844 as of Nov. 5, 2026.

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RISKS

• Tamberrino stated, "The pipeline is a measure of opportunity, and there can be no assurance regarding the extent or timing of its conversion into recognized revenue," noting the uncertainty of sales cycles.
• Fabian warned that as the company adds resources for utilization and sales, the contribution from those investments typically lags by a couple of quarters.

SUMMARY

Profound Medical Corp. (NASDAQ:PROF) reported significant advancements in its commercial infrastructure and financial performance during the third quarter. Management announced a strategic leadership transition where current President Richard Fabian will succeed Dr. Arun Menawat as Chief Executive Officer in Jan. 2027, with Menawat moving to the role of Executive Chairman. The company established a major distribution channel by partnering with Cook Medical to offer TULSA-PRO through an integrated interventional suite program. Management also highlighted a new co-education initiative with Telix Pharmaceuticals and positive developments in Medicare reimbursement policy for ambulatory surgery centers. The company stated that its existing capital resources are sufficient to support operational requirements for at least 12 months.

• CEO Menawat stated, "The market for prostate care is evolving, and we believe we are well positioned for the future in this era of change."
• Management reported that the CMS final rule for 2027 establishes Level 7 reimbursement for the TULSA procedure in hospital outpatient departments and ambulatory surgery centers.
• CEO Menawat indicated that TULSA typically uses approximately 1/10 the energy of HIFU and 1/100 the energy of histotripsy technology to kill tissue.
• The company noted that the agreement with Cook Medical enables a turnkey solution where urologists can acquire dedicated interventional MRI suites.
• The partnership with Telix Pharmaceuticals focuses on using PSMA-PET imaging to improve clinical education and identify multifocal disease for TULSA treatment planning.
• Management expects to present one-year CAPTAIN trial data, including recurrence and side effect metrics, at the RSNA conference in early December 2026.

INDUSTRY GLOSSARY

• TULSA-PRO: A transurethral ultrasound ablation system designed to treat prostate tissue using real-time MRI guidance.
• iMRI: Interventional Magnetic Resonance Imaging, which uses MRI scanners to guide medical procedures.
• PSMA-PET: Prostate-Specific Membrane Antigen Positron Emission Tomography, a molecular imaging technology for prostate cancer.
• HIFU: High-Intensity Focused Ultrasound, a technology that uses ultrasound waves to heat and destroy tissue.
• ASC: Ambulatory Surgery Center, a facility focused on providing same-day surgical care.
• CAPTAIN: The company's randomized clinical trial comparing the TULSA procedure to robotic radical prostatectomy.
• Sonalleve: An MRI-guided therapeutic platform for treating uterine fibroids and providing pain relief for bone metastases.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to Profound Medical Third Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your first speaker today, Stephen Kilmer, Investor Relations.

Stephen Kilmer: Thank you, operator, and good afternoon, everyone. Welcome to Profound Medical's Third Quarter 2026 Conference Call. Let me start by pointing out that this conference call will include forward-looking statements within the meaning of applicable securities laws in the United States and Canada. All forward-looking statements are based on Profound's current beliefs, assumptions and expectations, and relate to, among other things, current or future financial performance and position, our revenue and gross margin outlook, commercialization activities, customer utilization, product development, leadership succession and expectations regarding the efficacy of our technologies. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to differ materially from those expressed or implied.

No forward-looking statement can be guaranteed. Listeners are cautioned not to place undue reliance on these statements, which speak only as of today. Please review the risk factors described in our filings with the U.S. and Canadian securities regulators. Profound undertakes no obligation to publicly update or revise forward-looking statements, except as required by law. Joining us today are Dr. Arun Menawat, Chief Executive Officer and Chairman; Matthew Sobczyk, our Chief Financial Officer; Tom Tamberrino, Chief Commercial Officer; Mathieu Burtnyk, our Chief Technology Officer; and Richard Fabian, our current President and incoming CEO. We have lots to discuss today. Matthew will begin with our financial results, followed by Rich on operational priorities and Tom on commercial progress.

Arun will then provide a strategic update before we open the call to questions. Just a heads up in that regard, Arun is just getting over a bad cold, so his voice might break up a bit here and there. With that, I'll turn the call over to Matthew.

Matthew Sobczyk: Good afternoon, everyone. On behalf of the management team and everyone at Profound, thank you for your continued interest and support. Before turning the call over to Rich for an operational update, I'll briefly review our third quarter 2026 financial results. For the 3 months ended September 30, 2026, Profound recorded total revenue of $9.8 million, up 86% from the third quarter of 2025. Revenue comprised $4.1 million of recurring noncapital revenue from single-use devices and service associated with extended warranties and $5.7 million of capital equipment sales. Gross margin was 78% compared with 74% in the prior year quarter, reflecting a favorable product mix and continued strong price discipline. Operating expenses were $15.5 million, an increase of 21% year-over-year.

The increase primarily reflected increased headcount, increased commission expense driven by our revenue growth, travel expenditures and higher consulting expenditures due to spending on R&D initiatives to reduce product costs and improve efficiencies. These were partially offset by a reduction in the clinical trial costs due to CAPTAIN trial enrollment completion. Our net loss improved by 3% to approximately $7.7 million or $0.21 per common share compared with approximately $8 million or $0.26 per common share in the third quarter of 2025. Cash used in operating activities was $5 million. This was down 56% sequentially from $11.3 million in the second quarter of 2026 and down 48% from $9.6 million in the third quarter of last year.

We ended September with approximately $33.3 million in cash. As of today, we have 36,626,844 common shares outstanding. Based on our results through September and our expectations for the remainder of the year, we are projecting our full 2026 revenue to be at least $25 million and gross margin to be 70% or higher. As we noted in today's press release, we expect existing cash and revenue from product and service sales to be sufficient to fund our operating and capital expenditure requirements for at least the next 12 months.

While we have no immediate plans to raise capital, we will opportunistically evaluate both dilutive and nondilutive financing opportunities that support our path to profitability while balancing our capital needs with shareholder dilution. Our capital allocation priorities are to support commercial execution, improve efficiencies and strengthen the operating capabilities needed as the business grows. We will continue to assess those investments against our financial resources and our goal of building a profitable growth business. With that, I'll turn the call over to Rich.

Richard Fabian: Thank you, Matthew, and good afternoon, everyone. I appreciate the confidence Arun and the Board have placed in me. I look forward to leading Profound as CEO and working with Arun as Executive Chairman beginning in mid-January. Arun has played an invaluable role in guiding TULSA-PRO through FDA clearance, CMS reimbursement and into commercial adoption. We have a platform with an established clinical evidence base, a growing commercial opportunity and the ability to generate recurring revenue as customers perform procedures. My priority is to scale this organization and help translate that into consistent execution. First, we need to convert our commercial pipeline into placements.

That means disciplined management of opportunities, clear customer economics and coordinated work across sales, installation and support. Cook Medical as another key channel, and our job is to make that relationship productive alongside our direct sales activities. Second, we need to help customers increase utilization. Each additional productive system creates an opportunity to grow recurring revenue and strengthen the economics of our business. A placement is the beginning of a customer relationship and the work that follows is critical. We are focused on the practical elements of a successful program, physician engagement, training, scheduling, referral development and coordination within the facility with support available when customers need it, particularly as they begin treating patients.

Third, we need to improve operating efficiencies as we scale. Our engineering investments are directed towards better, faster TULSA Procedures while also creating opportunities to continue to reduce costs further over time. As we plan for 2027, we will assess additional investment in utilization support and program start-up with financial discipline and clear performance expectations. I also see value in continuing to build our relationships across the imaging and physician communities. Interventional MRI is an important part of Profound's strategy. Our immediate task is to make TULSA programs work well for customers today while developing the capabilities that may expand the platform's value in the future.

The third quarter provides an encouraging foundation, higher revenue, strong gross margin and reduced operating cash use. Our focus is to build on the progress and move Profound towards sustainable, profitable growth. Now I am pleased to pass the call over to Tom.

Thomas Tamberrino: Thank you, Rich, and good afternoon. As Rich just discussed, our commercial priorities are to convert qualified opportunities into placements and help each installed customer build a productive TULSA program. At the end of the third quarter, our TULSA-PRO installed base was 98 systems. We also just reached an important existing system utilization milestone with the 5,000 TULSA Procedure performed in October. Our qualified sales pipeline for TULSA-PRO and Sonalleve totaled approximately $79.2 million at quarter end. As on previous calls, qualified opportunities are those in the verify, negotiate or contracting stages. The pipeline is a measure of opportunity, and there can be no assurance regarding the extent or timing of its conversion into recognized revenue.

As Rich mentioned, we added a key new distribution channel for TULSA products under a supply and distribution agreement signed last week with Cook Medical, one of the largest privately held medical device manufacturers in the United States. The structure is important. Cook will purchase TULSA-PRO systems at a predetermined transfer price. Customers who purchase systems through Cook will obtain their disposables and service contracts directly from Profound. This strongly complements our own sales team's continued focus on selling TULSA-PRO for existing 1.5 Tesla and 3 Tesla MRI systems, which are outside the agreement scope while preserving our direct relationships for disposables and service with U.S. customers no matter how they obtain TULSA-PRO systems.

Cook's work in interventional MRI provides a great foundation for the upcoming launch. As some of you may know, among other things, Cook is one of the largest manufacturers of MR-compatible biopsy systems and needles. So our deal perfectly aligns with our view that purpose-built iMRI environments can help expand access to image-guided procedures. We will update investors separately on product integration and regulatory milestones as appropriate. Payer coverage is another important part of making a system productive. In that regard, Profound continued to see meaningful progress in commercial payer engagement for the TULSA procedure. In the third quarter of 2026 alone, there were approximately 10.7 million covered lives added through commercial and government payers.

Of those, approximately 1.8 million were added from commercial and Medicare Advantage programs. Of course, coverage alone does not ensure utilization. Programs also need clear referral pathways, coordinated scheduling and efficient workflows. Our work with payers and providers focuses on expanding coverage where needed and helping customers navigate patient access. We believe we have a strong growth opportunity ahead of us. And as Rich described, we will invest further in our customer support teams as the installed base grows. Our objective is to help customers move more efficiently from installation to initial procedures and then to a sustainable treatment schedule. We will also continue to use clinical education to support adoption.

The growing evidence base, the recent symposium presentations and our co-education partnership with Telix create opportunities to engage physicians on treatment planning and the clinical role of TULSA. To summarize, the commercial opportunity is substantial. Our team is focused on converting interest into customer decisions and helping those customers treat patients consistently. I'll now turn the call over to Arun.

Arun Menawat: Thank you, Tom, and good afternoon, everyone. Today, our company is evolving rapidly. We believe that hurdles to change are dropping and a substantive opportunity to grow is upon us. I'm honored and delighted that Rich has joined us to lead the next phase of growth, and I welcome him on behalf of the Board of the company. Rich, Tom and Matthew already make a AAA level team and give us great confidence in Profound's future. My presentation today is a bit longer than normal. The market for prostate care is evolving, and we believe we are well positioned for the future in this era of change.

I will describe the technical and financial foundation of our company as well as go over the implications of new industry agreements that we have signed in terms of their potential contributions on growth of our company. At the macro level, we believe the competitive landscape continues to favor Profound. New technologies are drawing attention to alternatives to more established treatments, which creates an opportunity for TULSA. Meanwhile, we also see new robotic entrants, including J&J and Medtronic committing substantial resources to the market. In our view, it remains too early to tell how they will differentiate themselves from Intuitive, but we believe clinical differentiation and capital efficiency will matter more over time than the size of the development budget.

I want to start with why we believe TULSA is earning a place in mainstream prostate care. Our message starts with MRI precision, detailed visualization of the cancer and its boundaries, real-time temperature feedback and the ability to assess the treatment delivered at the end of the procedure. In our view, ultrasound imaging does not provide comparable visualization of cancer edges and today's robotics do not provide sufficient precision. This gives TULSA physicians an important advantage in planning and controlling ablation with pixel-by-pixel accuracy. The energy source matters as well. We believe TULSA provides the gentlest energy delivery among these approaches because we heat tissue only to the temperatures needed for cell death.

Based on our internal technical comparisons, TULSA typically uses approximately 1/10 the energy of HIFU and 1/100 the energy of histotripsy technology to kill tissue. Our question with higher energy approaches is where does that additional energy go and what is the potential to damage surrounding tissue? Based on our internal assessment, we believe these limitations of other technologies are increasingly being recognized by physicians and helping by contrast, better understand the clinical value of TULSA's controlled energy delivery. TULSA gets MR feedback and adjust energy during treatment, while the urethra and the rectum are always protected via active cooling. That flexibility is central to our positioning.

A physician can use TULSA for whole-gland ablation, focal ablation or anything in between. We describe this as regional ablation because the treatment can be adopted to the clinical situation across that range. The third quarter utilization data in today's release illustrates this breadth. Whole-gland treatments represent 42% of procedures, sub-total treatments 24%, hemi-gland ablation 22%, and focal therapy 12%. Physicians also used TULSA across a range of prostate conditions and sizes. Cases included prostate cancer alone, patients with both prostate cancer and BPH, recurrent malignant tissue and BPH alone. This experience reinforces our view that the platform's versatility is an important reason for physicians to invest in building a TULSA program.

Putting it all together, TULSA's total available market or TAM in the United States alone is 600,000 patients per year strong, making it larger than that of other technologies. TULSA's TAM is supported strongly by clinical publications that continue to demonstrate our technology's capability to treat a wide variety of patients. As we highlighted on the second quarter call, CAPTAIN met its primary safety endpoint, demonstrating statistically superior preservation of the composite of urinary continence and erectile function at 6 months compared with robotic radical prostatectomy. Additional findings presented in July showed statistically superior preservation of flaccid penile length following whole-gland TULSA. So frankly, TULSA is already ahead clinically.

But to me, the most important finding was that a TULSA patient recovers to 90% of his original state within 24 hours of the procedure, while robotic prostatectomy patients require 14 days to get there. TULSA is not only about no hospital stay, but also about fast recovery, which means dollars and cents to many patients. Looking ahead, we are targeting release of the 1-year CAPTAIN data, including recurrence and side effects at RSNA in early December. We will provide more details as the meeting approaches. Next, I would like to discuss 2 agreements that we have signed recently.

First, Profound supports diagnostic-grade imaging, which gives the physicians a reliable and clear picture of the disease anatomy so that they can plan the treatment with precision. Urologists clearly understand that this new incision-less surgery world requires precision in imaging, and they are eager to get educated on how to use the precision of both MR and PSMA-PET to improve patient care. Telix has a sales team that is 10 or more times bigger than ours, and they are a pharma company with substantial educational resources. The symbiosis is that they can provide resources for education and TULSA provides the clinical justification.

The combined MR and PSMA imaging platform provides the best imaging platform, bar none, so the surgeons can plan treatments with the best possible precision. Alongside working with Telix on physician education programs, we're also proud of the Profound-sponsored Let's Huddle initiative to educate patients. Earlier today, there was -- we sold out live Stretch education event, and we were honored that Montel Williams and Leonard Wheeler led it. The second agreement that we signed recently is with Cook Medical's new iMRI division. The use of MR in intervention is no longer the boogeyman that it used to be.

And our relationships with Siemens and Cook are clear proof that larger companies are now investing in the development and installation of iMRI suites in hospitals. I salute Peter Polverini, who is the Vice President and Leader of Cook's iMRI division for his commitment to what we call the TULSA+ program through which his division will be selling a turnkey solution of MRI plus TULSA to users. We believe that this agreement will provide material growth to TULSA adoption. Our feedback from urologists is that they all want their own iMRI to give them the flexibility to schedule interventions.

As you already know, TULSA HOPD reimbursement is already higher than that of any other technology that is used to treat prostate cancer, which in turn provides a strong financial justification to acquire a new TULSA+ iMRI suite. Simultaneously, our own sales team will continue to sell TULSA-PRO directly to the existing installed base of diagnostic-grade MRs. So let me summarize what we have accomplished so far and why we remain bullish on our company. TULSA TAM is 600,000 patients per year alone in the United States, is large and larger than that of most other technologies.

Physicians want the technology that they can use in a variety of patients, not just in a small subset of men with prostate cancer and/or BPH. Today, we have physicians who have already given up on using any other technology and switch only to using TULSA for all their patients. We don't expect that every urologist will do that, but these early adopters demonstrate the potential of TULSA. Our gross margin is already above 70%. And as the installed base continues to grow, we expect recurring revenue from per patient use of our disposables will ultimately dominate our revenues. However, to get to that enviable position, capital sales matter to build the TULSA installed base.

Our internal analysis also indicates that our gross margin is at least 10% points higher than those of our competitors, while the upfront capital cost of our technology is approximately 20% to 50% lower. We believe that combination creates an attractive and unique economic proposition for both Profound and our customers. CMS granted a higher Level 7 reimbursement through the TULSA Procedure in January 2025, and our revenues grew by around 50% last year. And based on our full year guidance for 2026, we expect to grow by at least 55% this year. We will provide more specific details early next year about what to expect from growth targets in 2027.

But in the meantime, I can say we are pleased with the growth trajectory ahead, and we are even more confident about our success after the signing of the new agreements with Telix and Cook. Our message to investors regarding the leverageability of our business model is equally clear. Even at this early stage, we are spending less than $0.65 in sales and marketing for each dollar of revenue. By contrast, based on internal benchmarking, most of our peers typically spend more than $1 to generate $1 of revenue. We have reached this point with less than $300 million in total investment compared with investment levels that our internal benchmarking indicates are typically over $1 billion for relevant competitors.

We believe this combination of capital efficiency, gross margins, recurring revenue business model and market breadth is the recipe to build profitable growth business. Looking forward ahead, standardization is key to driving better use of AI. TULSA already uses standardized MR images and surgeons already perform the procedure sitting comfortably in front of a computer monitor instead of an operating table. Putting those together, we believe that TULSA is the best suited technology to continue to grow as AI becomes more prolific and interest in new concepts, including telesurgery increases. For customers, our message is that we are not simply selling a product.

We are helping them transition to the future of image-guided incisionless care with support as they become proficient. Although the barriers to establishing this platform have been fairly high, we believe our message is resonating because it is logical and backed by clinical data. After more than a decade at Profound, I believe the challenges ahead are increasingly ones of execution that we understand and can address. I do not underestimate the work, but I have confidence in the experience Rich brings and in the way he, Tom and Matthew are already working together to lead the next phase. The opportunity is substantial, and we are in a strong position to pursue it.

Speaking of the team, before opening the call for Q&A, I would like to highlight the leadership announcements of today's release. Rich will succeed me as Chief Executive Officer, effective January 14, 2027. Rich is not only very experienced in growing business, but what attracts me the most is that he is very thoughtful, even-keeled and driven by his own internal thoughts to succeed. In other words, he is profound. While some of you may be surprised that I'm so old that the change happens to coincide with my 72nd birthday, but as anyone knows me will attest, I still have a strong passion to see this all the way.

So I will transition to Executive Chair, supporting continuity and working with Rich and the team on strategy, Investor Relations and other priorities. We have also appointed Matthew Sobczyk as our permanent Chief Financial Officer. Matthew knows this business well, having joined Profound in 2017 and brings extensive experience in financial strategy, reporting, treasury and capital markets transactions. He will be an important partner as we allocate resources and advance towards profitability. Finally, Jason Mills is joining our Board, succeeding Cynthia Lavoie. Jason's combination of MedTech strategy and capital markets experience will be valuable as we continue to grow. I also want to thank Cynthia for her leadership and contributions to Profound.

To summarize, Profound is pioneering iMRI procedures designed to improve clinical confidence, procedural control and patient outcomes. Real-time MR guidance and autonomous robotics bring consistency and clarity across treatment planning, delivery and confirmation. In prostate cancer, we believe we are crossing the chasm from early adopters to the mainstream market by establishing TULSA as a third distinct category, regional ablation. Physicians and patients can choose whole-gland or focal treatment or anything in between. The TULSA-PRO installed base was 98 at the end of Q3 2026. Our full year revenue outlook has improved from approximately $25 million to at least that level, and we also continue to expect full year gross margin to be 70% or higher.

With CMS final rule for 2027, which was released last evening, the premium users are reimbursed by Medicare for TULSA over competing technologies is expanding across all treatment settings, including hospitals, ASCs and private physician practices. That will be particularly important as our TULSA+ program with Cook starts rolling out in 2027. And at the same time, more and more lives are being covered by other payers. We have assembled a strong leadership team and Board to help us execute over the long term. We continue to believe that we are on the path to profitable growth. That concludes our prepared remarks. We're happy to take your questions. Operator?

Operator: [Operator Instructions] Our first question comes from the line of Ben Haynor with Lake Street Capital Markets.

Benjamin Haynor: First off, for me, it's obviously nice to see CMS get its head on straight with regard to the ASC reimbursement. I also noticed that in the Cook announcement, you had them saying -- talking about additional sites of care. And then on that same topic, you've got the TULSA+ on track to get FDA clearance. At the same time, you're saying that basically all urologists want to have control of their own MRI. So it would seem that office-based labs, ASCs are going to prove to be quite the opportunity for you. Can you talk a little bit about how quickly that can materialize?

Is it kind of an early adopters need to full -- to go on to the kind of the full mainstream market? Or will that go maybe quicker than what you've seen with TULSA so far?

Arun Menawat: Ben, thank you for the question. I hope you can hear me. Yes. I mean I think the fact that CMS has come out with a final rule where they have committed that the reimbursement in ASCs is going to be about 11,400 plus, which is about the same as the reimbursement that robotic surgery gets in hospital setting. So I think the justification for driving a TULSA+ program in ASCs is very clear and very strong. And I think that on the other end of the spectrum, I do believe that ASCs are looking for MRIs. And so I do think we will get quite a bit of receptive audience. Having said that, then we are just getting started.

So I would say by second half of next year, you're going to start to see the impact of this change.

Benjamin Haynor: Is that something you think you'll be able to share what that impact might be when you talk early next year on how you view 2027?

Arun Menawat: Yes. I mean our first step really is working with Cook to really devise a market entry strategy in that space. And then absolutely, as we go, we will keep you informed.

Benjamin Haynor: Okay. Got it. And then I noticed or maybe I didn't notice the Index 20 in the press release. Is that something that you guys have retired? Or what's kind of the thinking and how should folks track kind of the utilization progress as we go forward?

Arun Menawat: Yes. We retired that program. It's just that we tried to put something together. But as Tom mentioned, our -- we've now grown to 98 sites. We'll certainly be well over 100 before the end of this year. And so 20 Index was kind of losing its original purpose. We think we're going to grow with a much more defined pace in the future. And you're going to -- you saw we've treated up 5,000 patients. The usage is growing. And so I just think that, that was more about early-stage thinking. Now we are thinking more like a growth environment and it just makes sense to try something. And then if it didn't work, then let's just move on.

Benjamin Haynor: Okay. Fair enough. And then lastly, maybe one for Matthew. I noticed you had receivables up fairly modestly with the large increase in sales. I guess, going forward, how would you expect cash collections to track as the sales do ramp up?

Matthew Sobczyk: Thanks for the question. Yes. As we continue to grow, we are placing increased focus on working capital management and also the timely conversion of our accounts receivable into cash. So we're taking a proactive approach to collections, which including, one, greater visibility and analysis into our outstanding receivables; two, regular conversations with customers; and three, increased accountability around collections time line. So we're trying to improve the consistency and predictability of the cash collections while also continuing to support our customers and ultimately, the growth of our business.

Benjamin Haynor: Congrats on the new role, Rich and Matthew and the upcoming retirement, Arun.

Operator: Our next question comes from the line of Michael Freeman with Raymond James.

Michael Freeman: And I'm going to start where Ben ended. Arun, congrats on bringing this company as far as you have. It's been a real pleasure to watch alongside. And congratulations to Rich on taking the helm of this company and to Matthew for your permanent appointment. Yes. I think my first question might go to Rich. I would love to hear your view on what operational and commercial changes we might expect in the next 12 months as you seek to scale this company? And what would you see as the principal constraints to scaling and taking market share from here?

Richard Fabian: Yes. Thanks, Michael. As I take a look, we're at a really interesting point where we've made tremendous progress, including Q3 was quite strong. As we take a look at Q4 and beyond, we know that we need to continue to focus on commercial excellence. We heard from Tom about a strong funnel and how do we convert that into sales. But beyond that is increased focus on helping our customers grow procedure volume and utilization. And I'd say the -- I don't want to say final because there's a lot of continued work as you grow and scale an organization like this.

But the back-end operational efficiencies in operations and supply chain to ensure that we are set for the growth that we see to ensure a smooth fulfillment of every order and execution on the operational front is also going to be a high priority for us moving forward.

Michael Freeman: All right. All right. Now recognizing that the TULSA 20 or the Index 20 is retired and I understand how things can change, I think scale or as big scale. I wonder if you could provide a comment on utilization trends in the quarter.

Arun Menawat: Yes. So I would say to start with, once a surgeon has used TULSA, they want to use more of it. So the general trend is certainly that our sites are increasing usage. I think as Rich kind of described that where we see the hurdles are more related to logistics issues and planning the -- converting this from let me treat one patient at a time to creating TULSA Days. I think that is where our goals are. But if you look at growth year-over-year, we're in that mid-double-digit range as we were last year.

And so I think -- we think that as we pay more attention to building a larger utilization team, customer support team, I think you will see utilization grow quite rapidly. As I said, it's not about the clinical data, it's not about reimbursement, it's really about helping them with logistics and workflows to help them get to where they want to go.

Michael Freeman: All right. Perfect. And my last question is on the agreement with Telix. I'm curious if you could describe how partnering with this company and coupling PSMA-PET with MRI, with TULSA, I wonder if you could comment on how this combined solution might impact or increase your -- I guess, become an avenue for market expansion. And if you can discuss the practicality of combining all these modalities, I think that would be helpful for all of us.

Arun Menawat: Yes, absolutely. So as you -- as we've talked about before, prostate cancer is a multifocal disease to start with. And so if you use PSMA-PET, you have the ability to highlight multiple locations where the cancer resides in that prostate. And I think that is a very specific and a key reasons why that partnership makes sense. Because we think as urologists see more of that cancer, we think the sweet spot in terms of treating that prostate is going to be somewhere between 75% of the prostate to 95% of that prostate. And as that begins to become more accepted, we think TULSA will be the right modality to treat the vast majority of the patients.

So it's consistent with our long-term theme that MR is indeed the better platform for intervention. Certainly, it is the key platform for the diagnosis, but better platform for therapeutic side also. But we think by adding this, by being able to show the multifocal disease better, we think it will actually drive additional patients who will become eligible for TULSA. And most certainly, that's certainly the clinical purpose. But the other one that we described in the presentation is that they have a large sales team. They know how to educate. And so by being able to leverage that team, we also think that we can achieve more than just trying to do everything ourselves.

Operator: Our next question comes from the line of Kyle Bauser with Titan Partners.

Kyle Bauser: Congratulations on all the management and Board updates. Maybe just following up on the Cook Medical partnership. It sounds like timing around the material contribution is looking like the back half of next year. Can you talk a little bit about operating margins on that partnership? Obviously, there's a transfer price, but that's more than made up from less OpEx on the capital sales and certainly the recurring revenue stream. Just trying to get a sense of how we should think about margins with that partnership.

Arun Menawat: Yes, Kyle, that is the right way to think about it. The way it is structured, we think that overall, we are targeting that our gross margins will remain in the 70% to 75% range. I think that is still the case with the distribution agreement overall, as Tom and Rich have talked about the fact that the disposable business and the service business will be direct, which does not change anything. So in your modeling, I think staying with the current idea that the gross margins of our company will be in the 70% to 75% range.

Kyle Bauser: Got it. I appreciate that. And maybe just talking about maybe SG&A kind of balancing operating efficiencies with growth. Matthew, any sense around kind of cadence of SG&A and how we should be thinking about that over the next few quarters?

Matthew Sobczyk: So over the next few quarters, I think it's -- again, we're going to be very prudent and just monitoring it. So at this point, I can't really give you any sort of trend that we're expecting, but going to continue to monitor it and ensure that we stay on top of it as much as possible. And just, I guess, focus on the overall business growth that we need to in order to achieve our sales growth as well as the growth within the company.

Arun Menawat: Yes. And I would say, Kyle, we are -- you heard from Tom that we have -- continued to have a very large pipeline that we're working on. And as Rich gets more and more into his new role, what you will see is we're going to grow the business. And so there will be quarter-over-quarter fluctuations where we're going to add people and you may not see such efficiency on a -- in a particular quarter.

But I think over 6 months or over 12-month cycles, you will continue to see we will focus on efficiency, as Rich described, is that this is typical of companies that are growing in the 50% plus range that we're going to add people, we're going to -- and they're not going to be productive on day 1, but then as they become productive, you'll start to see efficiencies. So I expect some fluctuation quarter-over-quarter. But longer term, we are very focused on building not just a growth company but a profitable growth company.

Kyle Bauser: Got it. I appreciate the update. Yes, please.

Richard Fabian: Kyle, it's Rich. I was just going to build on that comment that we'll continue to watch our expenses and be prudent. However, as Arun just mentioned, as we continue to build and scale to our operational priorities, including top line revenue and utilization, often as we add resources, the contribution lags by a couple of quarters, and we'll expect that. However, we'll be adding as responsible a manner as we possibly can as we scale up for the growth and for the market demand.

Operator: Our next question comes from the line of Blake Sommi with Cougar Capital.

Blake Sommi: Congrats on the quarter. I'm just curious, in order to get a better idea of the pacing of utilization, do you guys have a concrete plan of reporting for the next few quarters? I understand the Index 20 you don't feel fits a larger installed base. But the decision-making for this new system, are you going to have more line of sight than the 2 quarters that we got out of the Index 20?

Arun Menawat: Yes, we do quite a bit. And one of the things that -- and Rich, please feel free to chime in about this. The thing is that I think as you heard from Rich already, he's a phenomenal operator. There's a lot of experience building companies with very large revenues. And so I think that what you are seeing at the moment is we're a company that has been in the market, I call it the crossing of the chasm, as we've been going back and forth, we've tried a number of things, right? And so we're now entering that phase where the pipeline is much more reliable and utilization is becoming more reliable.

So I think that Rich has a lot of experience. And you will see us doing -- making much better ability to give you consistent metric on utilization. But I just felt like this is also the right time. If something didn't work, then let's just change it. And I think you will see Rich develop new metrics and absolutely, we'll share it. Rich, please feel free to chime in.

Richard Fabian: Yes, I agree. And Blake, thanks for the question. It's something we think about on a daily basis, probably hourly basis of what's the best way to get the data of sites that are up and running. As you know, even when we first launch a site, we got to get them up, running and productive. And as we add more resources around utilization, how do we take customers that are doing 1 case a week to 2, those doing 2 to 4, help them with all the scheduling, the prioritization.

And then I also think that the Cook element to this where you have dedicated iMRIs, which is more validation that of the value of the MRI in procedural MRI. The next step is going to be to take -- to see where and what that reporting cadence looks like and be transparent with our investment community.

Operator: Our next question comes from the line of Scott McAuley with Paradigm Capital.

Scott McAuley: Rich and Arun, congratulations. Question for me is around systems that have been sold but not installed. I think there was some commentary in the previous quarters where there had been a fair lag of systems that may be sold, but taking some time for them to get installed. And the 98 systems that are installed is fantastic. Are there systems that have been sold but not installed yet? And are you seeing that time line shorten from a sale to getting them up and treating the patient?

Arun Menawat: Yes. Tom, please feel free to...

Thomas Tamberrino: Yes, happy to chime in. Thank you so much for the question. Arun, I'll grab the baton. We are absolutely tightening the time frame between system order and system installation. And as Rich spoke about in his comments earlier about operational efficiencies, a lot of that is coming from the maturity of our organization and the fact that we're getting more reps at it in a more sequential fashion quarter-over-quarter based on the increased system sales. So each repetition, we become more efficient as it relates to not only the delivery, the installation, the training, the launch, the patient selection, the treatment coordination, the follow-up of the procedure, so on and so forth.

And you can appreciate that doing that on a global basis, there are some nuances to what I just mentioned, when we're going first in country, which we had a number of different systems going first in country in Q3 of this year and more to come, in the quarter that we're currently in, and we're excited about our global expansion. As we mature and as Arun alluded to, we look forward to providing more information specific to procedural growth, same-store growth, et cetera.

But where we stand right now in terms of crossing the chasm, right, we're still relatively light in terms of the top line revenue associated with procedural growth, but the team that we're building out will be extremely focused on that, and we'll have a team of program development managers whose sole job is to do exactly what everyone is finding for, which is drive procedural volume. And the great news about that is the large majority of institutions across the world are motivated to do the same. So it's a true partnership in launching the TULSA program, growing the TULSA program and then continuing on from there.

We've got a lot of excitement about potential telesurgery procedures to create ubiquity of access to TULSA and TULSA Procedures across the world. So lots of great stuff to come. Those are more comments and forward-looking projections, but it's all in progress, and we're excited about this quarter and '27 and beyond.

Scott McAuley: That's great. Maybe a clarification. I think you mentioned in that, that there's kind of some installations that were first in country. Is the 98 current installed base, is that just the U.S.? Or is that a global number?

Thomas Tamberrino: That's a global number.

Arun Menawat: It's global, global. Yes.

Scott McAuley: And I don't know if you can characterize what percentage of that or a number that are specifically U.S. based?

Arun Menawat: It's vast majority, I would say, generally speaking, it's a 70-30 ratio, and we think that's probably where it's going to be.

Scott McAuley: That's great. And then maybe just some context on the pipeline. Great to see. I think it was just over $70 million last quarter and now closer to $80 million in that late-stage kind of Verify, Negotiate and Contracting stages. Does that represent mainly the capital associated with the pipeline, the capital equipment? Or does there include some measure of the initial consumable use utilization as part of that dollar figure?

Thomas Tamberrino: That's an excellent question, and there's a few different threads that I'd like to separate as it relates to the pipeline itself. The large majority of the pipeline is focused on systems. But within those systems sales, we normally include some initial consumables orders to go along with that system sale. So there's a little bit of revenue packed into that $79.2 million number that we referenced earlier in the call. I think what's most exciting since we flipped from a placement model to a capital model following the January 1, 2025, Medicare coverage for the TULSA procedure is that we're now getting to the point where we'll be adding additional revenue as it relates to service agreements.

And there's a tremendous upside as it relates to that as we're all familiar with the capital equipment and the associated agreements, whether that be for MRI machines or other capital assets. So the short answer to the question is it's predominantly capital. There's a little bit of consumables, and then there's also service outside of that.

So we're going to be in a position to be able to create multiple revenue streams, capital, consumables, service, software, clinical case coverage, et cetera, and we're moving to the point to be able to monetize the entire operation based on the success that we've had with the TACT study, the CAPTAIN study and now what I would consider real-world results from independent physicians, which we continue to see as abstracts, poster presentations and in publications of peer-reviewed journals across the world with real-world experience matching up, if not better, than what we've seen in our own sponsored studies.

Scott McAuley: That's fantastic. That's great. And just lastly, on the insurance coverage, great to see, I think, just under 11 additional -- 11 million additional lives covered. Do you have a total number of kind of as of today or as of the end of the quarter of the lives covered either through commercial payers or combined commercial and government payers?

Thomas Tamberrino: Sorry about that. I was on mute coming off of it. Arun, do you want to grab it or you like me to?

Arun Menawat: No, no. No, you go ahead, please.

Thomas Tamberrino: Yes. So what I was going to mention there is that we haven't provided a total number. We've been providing quarterly updates. And part of that strategy is that we want to get to the point where we can provide very specific information about certain insurance companies, in particular, larger organizations, which, of course, take time to get to. But we're increasing by a minimum of 10 million a quarter. And if you ask me to give you a total number, I'd tell you right now, it's somewhere between 35 million to 40 million covered lives since we started our health economics and market access efforts.

But the main impetus that I really want to put out there is that with the CAPTAIN results that are going to be projected to be provided at the 1-year mark at RSNA by Dr. Ghanouni from Stanford that first Monday, that will give us additional ammunition to work with the policy writers and the medical directors of insurance providers across the country. So we're extremely excited about the success we've had to date, and it's only going to become more robust with the turn of the calendar page as it relates to the CAPTAIN study.

Scott McAuley: Yes, definitely looking forward to that.

Arun Menawat: Are there any more questions left? Are there any more questions left? Okay.

Stephen Kilmer: Sorry, Arun, I think -- it's Steve here. I think something's happened with the operator. So please just go ahead and there was one more questioner. We'll call him back. Sorry about that.

Arun Menawat: Okay. All the future analyst calls will be led by Rich. So it's going to be next year. And I do want to thank the investor base and particularly the analysts for the support over the last several years. And Rich and Tom and Matthew will continue the leadership and look for a growth company as we go forward. Thank you very much. Have a great evening.

Richard Fabian: Thank you.

Operator: Thank you. This does conclude our program for today. You may now disconnect.

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