EDAP TMS (FOCL) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Nov. 5, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Ryan Rhodes
• Chief Financial Officer - Ken Mobeck

TAKEAWAYS

• Revenue -- $9.8 million, growing 26% year over year driven by Focal One system sales and a 24% increase in treatment-driven revenue.
• U.S. Procedure Volume -- 32% year-over-year growth, more than double the 15% growth rate reported in the third quarter of 2025.
• Focal One System Sales -- seven capital system sales globally, compared to six in the prior-year period.
• Total Installed Base -- 192 systems, consisting of 98 units in the U.S. and 94 units in international markets.
• Gross Margin -- 51.4%, representing a 482 basis point increase due to improved standard costs and higher average selling prices for systems and Focalpaks.
• Operating Expenses -- $12.8 million, reflecting higher headcount-related compensation and increased sales and marketing spending for urology events.
• Operating Loss -- $7.8 million, compared to an operating loss of $6.7 million in the prior-year period.
• Net Loss -- $4.5 million, or $0.10 per share, benefiting from a $2.6 million gain in the fair value of warrants.
• Cash Position -- $56.3 million as of Sept. 30, 2026, following the completion of a public equity offering in August.
• Full-Year 2026 Revenue Guidance -- $50 million to $52 million, narrowed from the previous range of $50 million to $54 million.
• U.S. Hospital Networks -- 16 entities, now operating two or more Focal One systems within their respective networks.
• Foreign Exchange Impact -- $0.5 million in currency exchange gains, which partially offset the reported operating loss.
• Interest Expense -- $0.4 million, related to Tranche A and Tranche B drawdowns.
• HIFUSA Study Enrollment -- 108 patients across 14 centers, with the phase III randomized controlled trial comparing Focal One to active surveillance.
• Treatment-Driven Revenue -- 24% increase year over year, supported by the 32% growth in U.S. procedures.
• Kaiser Permanente Expansion -- two new operating leases, bringing the total to four Focal One systems within the integrated hospital delivery network.
• International Sales -- two capital system sales in Turkey, two in France, and one in Mexico, expanding the global footprint.

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RISKS

• Rhodes noted that third quarter revenue was adversely affected by deal timing challenges where sales cycles ran longer due to hospital committee approval processes and summer seasonality.
• Mobeck stated, "In one instance last quarter, one of the transactions got caught up with the bank at the end of the quarter that we are working on to close here in Q4," regarding a specific capital placement delay.

SUMMARY

EDAP TMS S.A. (NASDAQ:FOCL) reported an expansion of its robotic focal therapy footprint through increased capital placements and procedure volumes despite seasonal procurement delays. Management indicated that anticipated system sales shifted into the fourth quarter because of extended hospital committee approval processes. The company reported a narrowed full-year revenue outlook while highlighting the transition of its financial reporting to isolate the high intensity focused ultrasound business from discontinued operations. Strategic focus remains on deepening penetration within large healthcare networks and advancing clinical programs for expanded medical indications.

• CEO Rhodes stated, "The purchase of additional systems within a hospital network reflects the strong clinical and economic performance they have seen firsthand in their existing Focal One programs."
• Management noted that 16 U.S. hospital networks now utilize multiple systems, indicating a trend of internal expansion following initial technology adoption.
• Universal coverage for Focal One by the French National Health System, effective Jan. 1, 2026, continues to drive capital purchasing activity across Europe.
• The company is advancing a multi-indication platform strategy, with three centers in Europe now treating deep infiltrating endometriosis and an active BPH study ongoing in Chile.
• Rhodes stated, "We believe the trajectory of the CMS payment continues to provide hospitals and physicians with a clear and predictable Medicare pathway."
• Management identified Focal Connect, artificial intelligence, and histotripsy as key components of the technological roadmap for the Focal One platform.
• Following an upgrade in NCCN guidelines, several major commercial payers, including Aetna and United, issued coverage policies for HIFU as a salvage treatment.

INDUSTRY GLOSSARY

• HIFU: High Intensity Focused Ultrasound, a technology that uses ultrasound waves to destroy targeted tissue.
• Focal One: The company's robotic platform for HIFU treatment of prostate cancer and other medical indications.
• Focalpaks: Disposable kits used during Focal One procedures.
• BPH: Benign Prostatic Hyperplasia, a common condition involving the non-cancerous enlargement of the prostate gland.
• NCCN: National Comprehensive Cancer Network, an alliance of cancer centers that publishes clinical practice guidelines for oncology.
• CMS: Centers for Medicare & Medicaid Services, the federal agency that administers U.S. Medicare and Medicaid programs.
• Histotripsy: A non-thermal ultrasound technology that uses acoustic cavitation to mechanically destroy targeted tissue.

Full Conference Call Transcript

Operator: Greetings, and welcome to the FocalTherics third quarter 2026 conference call. As a reminder, this conference call is being recorded. I would now like to turn the call over to Louisa Smith from Gilmartin Group.

Louisa Smith: Good afternoon. Thank you for joining us for the FocalTherics third quarter 2026 financial and operating results conference call. Joining me on today's call are Ryan Rhodes, Chief Executive Officer, and Ken Mobeck, Chief Financial Officer. Before we begin, I would like to remind everyone that management's remarks today may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause actual results to differ materially from those anticipated.

We direct you to the risk factor section of our most recently filed annual report on Form 10-K for the year ended December 31st, 2025, as filed with the Securities and Exchange Commission, as well as our other filings with the SEC for a description of factors that may cause such differences. These statements speak only as of today's date, and we undertake no obligation to update or revise them, except as required by law. Additionally, this call is being recorded and constitutes a public disclosure for purposes of Regulation FD. I would now like to turn the call over to Chief Executive Officer Ryan Rhodes.

Ryan Rhodes: Thanks, Louisa, and thank you all for joining us on today's call. This quarter reflected continued execution against the Focal One growth strategy we set forth for 2026, deepening adoption across leading healthcare systems, expanding reimbursement and access, extending Focal One into new clinical indications, and advancing technology innovation. In the third quarter, we reported HIFU revenue of approximately $9.8 million, an increase of 26% over the prior-year period. Revenue was below what we had anticipated due to the timing of three system sales, which I will cover in more detail shortly. Across the business, we made meaningful progress on commercial priorities that are driving long-term growth trajectory of Focal One.

We also ended the quarter with a strengthened balance sheet following the completion of our public offering in August and are poised to move forward with conviction to deliver on our strategic plan. We recorded seven Focal One capital system sales globally in the third quarter compared to six in the prior-year period. Those sales, along with one net operating lease placement, bring our total worldwide install base to 192 systems, with 98 in the U.S. and 94 internationally, reflecting the continued broadening of our footprint across academic and community hospitals in both established and emerging markets. Our third quarter revenues were adversely affected by deal timing challenges. We anticipated being able to close on three additional Focal One systems.

Sales cycles ran longer due to hospital committee approval processes as a result of the third quarter summer seasonality in hospital capital purchasing activity. These delays account entirely for the gap in our revenue expectations for the quarter. Importantly, they do not indicate a lack of demand for Focal One or competitive market dynamics. Our pipeline remains strong, and we remain focused on the opportunities ahead. Of note, one of our capital sales this quarter included a second system within the Baylor Scott & White Health system placed in Temple, Texas, which reflects the growing desire to expand access to Focal One for their patients following the purchase of their first system.

We now have 16 U.S. hospital networks that have invested in two or more Focal One systems. The purchase of additional systems within a hospital network reflects the strong clinical and economic performance they have seen firsthand in their existing Focal One programs. We also completed a sale to MaineHealth Pen Bay Hospital. This marks our entry into the state of Maine and extends the geographic reach of Focal One further into the New England market. In California, Kaiser Permanente expanded its Focal One program with two new operating leases in Sacramento and San Francisco, bringing the total to four Focal One systems within the large Kaiser-integrated hospital delivery network.

Building on their existing programs in Los Angeles and San Diego, Kaiser is reinforcing its growing commitment to Focal One as a cornerstone technology across their growing focal therapy programs. Internationally, we continue to accelerate the commercial momentum of Focal One. We completed two system sales in Turkey, bringing our total in the country to three. We also completed an additional sale in Mexico, building on the first Focal One system placed earlier this year as we expand across Latin America. In France, we completed two additional capital sales this quarter, growing further on our existing momentum in Europe.

As a reminder, universal coverage of Focal One by the French National Health System became effective on January 1st of this year, and continues to reinforce the business for the capital purchase of Focal One systems across the country. Turning to utilization, U.S. Focal One procedure volumes grew 32% year-over-year, more than double the 15% growth we reported in the third quarter of 2025. This reflects both the growing contribution of established programs, along with new programs added to our install base. These volumes were in line with what we anticipated given the seasonality of the third quarter.

On the reimbursement front, we believe the trajectory of the CMS payment continues to provide hospitals and physicians with a clear and predictable Medicare pathway, which supports the economics of investing in Focal One as the foundation of establishing a prostate cancer focal therapy program. We also continue to focus on prostate cancer patients who have failed radiation therapy. The large prospective multicenter HIFI-2 study published in April of 2026 demonstrates meaningful oncologic control for patients treated with Focal One Robotic HIFU after failure of primary radiation as a treatment. We believe this further strengthens the case for broader payer coverage.

The National Comprehensive Cancer Network recently upgraded its recommendation for HIFU as a treatment option for this underserved patient population to Category 2A. As a result, several commercial payers have since issued coverage policies for HIFU as a salvage treatment. This includes Aetna, Cigna, Humana, United, Highmark, and other regional Blue Cross Blue Shield plans. A number of these policies were issued over the past six to eight months through a combination of strong physician advocacy, updates to the NCCN guidelines, and our active engagement with these large commercial plans. We continue to invest in building awareness of Focal One across the global surgeon community.

In September, during Prostate Cancer Awareness Month, we partnered with the Chicago Urological Society on a sold-out physician symposium dedicated to use of Focal One Robotic HIFU. This event brought together 70 physicians from 35 institutions across 14 states who were interested in adding Focal One to their clinical practice. Additionally, we were active at the Focal Therapy Society Annual Meeting, the FOCAL+ 2026 meeting in San Diego, and the large DGU Congress of the German Society of Urology held in Düsseldorf, Germany. These scientific forums continue to play a pivotal role in physician education, providing hands-on experience with the Focal One system, and fostering peer-to-peer knowledge sharing as experienced users share their clinical insights and expertise.

We believe sustained investment in physician education remains one of the most effective ways to build lasting scalable adoption of focal therapy. Turning to expanding clinical indications on the Focal One platform, we continue to advance our BPH clinical program, building on the active study in Chile, which we are conducting with urologists from the Icahn School of Medicine at Mount Sinai in New York. This important work remains ongoing, demonstrating early encouraging results. We remain positive on the large opportunity to use Focal One as a non-invasive, bloodless procedure for the treatment of BPH, and we look forward to updating you as our program progresses.

We continue to make encouraging progress in expanding the use of Focal One for the treatment of deep infiltrating endometriosis, with three centers in Europe now treating commercial patients. These include two sites in France, along with one in Hungary. This momentum reflects the positive impact of our dedicated CE mark, supported by a growing body of clinical evidence. Beyond these three centers, multiple physicians from other centers across Europe, including the U.K. and France, are going through the training pathway so they can offer this treatment to their endometriosis patients locally. Our focus is to expand selectively, adding key centers as we build on this limited launch.

Finally, in September, we were honored to be awarded the Innovation Champion Award at the European Investment Bank TechEU Equity Summit 2026 in Luxembourg. We believe this recognition as a reflection of the significant progress we are making at FocalTherics to define, build, and lead the category of robotic focal therapy. We believe the third quarter reinforces the growing demand for Focal One across both established and new markets and the depth of commitment we see from leading healthcare systems to select Focal One as the foundational technology platform of their focal therapy programs.

As referenced, we are making continued progress in expanding reimbursement both in France with universal coverage and in the U.S. with commercial payer coverage for salvage treatments. With that, I will now turn it over to Ken to review the financials in more detail. Ken?

Ken Mobeck: Thanks, Ryan, and good afternoon, everyone. As a reminder, this is our second quarter presenting our financial results under our revised reporting structure, in which our HIFU business is presented as continued operations and our ESWL and distribution businesses are presented as discontinued operations. All prior-period comparisons have been recast on this basis, and the recast financials are available in our Form 8-K, which is posted on our website and can also be found on the SEC's website. We believe the structure allows investors to evaluate our HIFU business on its own terms, including its growth rate, margin profile, and the level of investment required to support it. Unless otherwise noted, my commentary refers to our HIFU segment.

Revenue for the third quarter was $9.8 million, an increase of 26% compared to $7.8 million in the third quarter of 2025. The increase was driven by seven Focal One system sales in the third quarter of 2026 versus six in the prior-year period, as well as a 24% increase in Focal One treatment-driven revenue. As mentioned earlier, Focal One procedures in the U.S. grew 32% year-over-year. Revenue from U.S. capital system sales fell below our expectations due to the dynamics that Ryan described previously. The three systems that we had anticipated in the third quarter are now forecasted to revenue in the fourth quarter. Gross margin was 51.4% compared to 46.6% in the third quarter of 2025.

The 482 basis point increase in gross margin was primarily due to improvement in the standard cost of the Focal One system and higher average selling price for our Focal One systems and Focalpaks. Operating expenses were $12.8 million in the third quarter of 2026 compared to $10.3 million in the third quarter of 2025. The increase in operating expenses was driven by incremental headcount-related compensation costs, including stock-based compensation and additional sales and marketing expenses related to various urology meetings and events. Operating loss was $7.8 million compared to an operating loss of $6.7 million in the third quarter of 2025.

Net loss for the quarter was $4.5 million, or $0.10 per share, as compared to a net loss of $5.9 million, or $0.16 per share, in the third quarter of 2025. The decrease in net loss was driven by a favorable non-cash impact of $2.6 million related to the change in fair value of the European Investment Bank warrants and $0.5 million foreign exchange gains, partially offset by incremental operating loss of $1.1 million and $0.4 million of interest expense on the Tranche A and Tranche B drawdowns. Turning to the balance sheet, cash and cash equivalents at the end of the third quarter of 2026 were $56.3 million compared to $21.5 million at the end of the second quarter.

The increase reflects the net proceeds from our equity capital raise in August. With this capital, we remain confident that we are well-positioned financially to execute on the strategic priorities we have outlined. Turning to guidance. Given the dynamics that we experienced during the third quarter, we are narrowing our full-year 2026 revenue guidance to be in the range of $50 million-$52 million, representing 34%-39% growth over 2025, from the prior range of $50 million-$54 million. I will now turn the call back to Ryan for closing comments. Ryan?

Ryan Rhodes: Thanks, Ken. As we enter the final quarter of 2026, our priorities remain consistent with those we set at the start of the year. Looking ahead, our strategy is centered on several areas of execution. In commercial execution, we remain focused on strengthening our presence within existing healthcare systems while entering new ones, both domestically and internationally, as we did this quarter. Regarding indication expansion, we continue to advance our BPH and endometriosis programs from early clinical studies to broader adoption. In technology and innovation, we are making active progress on the Focal One roadmap with investments into Focal Connect, artificial intelligence, and histotripsy.

We also remain focused on generating additional clinical data and evidence through our ongoing studies, which we believe will ultimately drive expanded reimbursement and coverage. Broader market adoption and greater access to Focal One Robotic HIFU treatments. We look forward to closing 2026 and have confidence in our ability to execute on the opportunities in front of us. Our focus remains on the underlying indicators that drive the long-term trajectory of the business. Focal One is a cornerstone for building focal therapy programs within healthcare institutions, and we believe the combination of strong clinical evidence, expanding reimbursement, and a multi-indication platform positions us well for sustained growth and long-term value creation.

I want to thank our employees, physician partners, hospital customers, and shareholders for their continued support. We look forward to seeing many of you at the upcoming UBS Global Healthcare Conference in Florida next week, the Jefferies Global Healthcare Conference in London the week of November 16th, and the Piper Sandler 38th Annual Healthcare Conference in New York the week of November 30th. Operator, you may now open the line for questions.

Operator: Thank you. If you would like to ask a question, press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star one to ask a question. In the interest of time, we ask that you please limit your questions to one question and one follow-up, and we will pause for just a moment to allow everyone a chance to join the queue. We will take our first question from Anthony Petrone with Mizuho Group. Please go ahead. Please go ahead, Anthony. Your line is now open. We will move next to Alex Nowak with Lucid Capital. Please go ahead.

Alex Nowak: All right. Well, good afternoon, everyone. Thanks for the time. Capital placements, those can always ebb and flow from quarter-to-quarter, so I think what you mentioned in the prepared remarks is very explainable for the shortfall this quarter. I was hoping you could provide a bit more detail on the three systems that did slip. Why in particular did they slip out of this quarter? What were the, let us say, the hospital dynamics that were at play there? Then how do you adjust your forecasting and your forecasting systems so you just have better visibility going forward?

Ryan Rhodes: Yeah, Alex. We work through various hospital processes, and in really deal timing, just things were not done by the end of the quarter. The exciting part is we have already closed one of those sales, already completed, and we have also signed two POs. We are on our way already here in Q4. The Q3 timing, when we look at value analysis committee meetings and the closure of decision-making, sometimes there is some delays. This does not take away from the momentum we are building and certainly the momentum already in play for Q4. Ken can comment a little more on the other details on forecasting.

Ken Mobeck: Yeah. The other thing I want to comment on too is obviously we have hospital committees. We also, some of our customers finance their purchases through banks, and in one instance last quarter, one of the transactions got caught up with the bank at the end of the quarter that we are working on to close here in Q4.

Alex Nowak: Anything on the forecasting side? Does anything change here after this quarter? I just have a follow-up question.

Ryan Rhodes: No, no. Our momentum is real into the quarter, and I am excited. I mean, we are into November now, and if you look at our pipeline, we have real strong positive momentum across what we call our active pipeline accounts. So, good momentum both in the U.S. and outside U.S. So, we expect it to finish strong here in Q4, as we typically do, and carry the momentum that we have set forth on the beginning of the year through the rest of the year.

Ken Mobeck: Yeah. As Ryan Rhodes referenced, the active pipeline is very important, right? Inside the company, we are tracking that very closely because that is what yields revenue momentum in the quarter.

Alex Nowak: Yep. No, that makes sense. All right, good. Any update on some of the key studies that we are watching and waiting on? One in particular is HIFUSA. When can we see that data get presented here?

Ryan Rhodes: Yeah. HIFUSA, as stated, this is a phase III randomized controlled trial comparing Focal One to active surveillance. As noted, 14 centers, 108 patients enrolled, and we expect to see the data published early next year. The follow-up on the last enrolled patient will be completed sometime in the first quarter. Again, we are excited for that. As I referenced, the preliminary benefits reported are really unverified, but we see really good positive feedback. My direct discussion with the principal investigator stated that the results that they have seen, the preliminary results are certainly very positive. So we think this is an important landmark study.

It is a randomized controlled trial, and it is specific to Focal One, involving 14 centers. So, that study will be an exciting study to watch for next year.

Alex Nowak: That is perfect. I appreciate the update. Thank you.

Ryan Rhodes: Thank you, Alex.

Operator: Thank you. Once again, if you would like to ask a question, please press the star and one on your keypad now. We will move next to Anthony Petrone with Mizuho Group. Please go ahead.

Anthony Petrone: Thanks, and congrats on a strong execution here for the quarter and for the year. Maybe, Ryan Rhodes, just to sort of look at the momentum both on procedure volumes and capital. We are a month in, we are two months into the quarter here, into the second month for 4Q. I think your implied guide, you tightened it at the upper end of the range. Just anything you can give on the upper end of the range coming in, how much of that was just your capital funnel versus procedure volumes? Then I will have a couple of follow-ups as well. Thanks.

Ken Mobeck: Anthony, just so we are clear, we tightened our guidance range. Our original guidance range was $50 million-$54 million, and our updated guidance range is now $50 million-$52 million.

Anthony Petrone: Yeah. Okay. Yeah, again, on the upper end of that, bringing it down $2 million, is there capital that potentially is slipping into the January quarter, or is that just a reflection of where the funnel sits as we are in November here?

Ken Mobeck: Yeah. Anthony, we are disappointed we did not recognize the revenue of the three systems we had forecasted to deliver in the third quarter. But we just really want to be prudent in our updated guidance, given our current outlook for Q4. But as Ryan Rhodes mentioned, we believe our pipeline is strong, and this gives us the confidence to deliver what we have to in Q4.

Anthony Petrone: And then on the procedure volume side, the data is out there now from the study in France published. 32% was a little bit ahead of our expectation. When you think about some of these systems now that are going to be moving into their second year, I think a handful into their third year of install, it appears we are at somewhat of an inflection, but there is still a lot of white space in front of some of these centers to continue to basically move patients toward HIFU, away from other modalities. When you think about an early expectation for what procedures can look like into 2027, would you be looking at sort of the nine-month trend here?

We are roughly holding it at 30%, or as you get new systems to come in, does that sort of modulate around, and we should be thinking to sort of set our models in 2027, maybe a little bit more conservatively to account for new systems coming into the fold? Thanks.

Ryan Rhodes: Yeah. When we look at procedure growth, it should remain consistent, right, as the contribution of the install base grows, and certainly utilization increases at existing accounts. We have been showing strong growth, but it takes a while to build programs, as we know, and we will be adding more accounts here in the coming quarters. One of the things that was socialized on this call was the coverage that we have received for salvage therapy. We expect it to be more active in that regard as we look into 2027.

I think that is a win for us because there is not a good solution for men who fail primary radiation therapy, and we know that failure rate is anywhere from 15%-30% in the clinical literature. But when we look outward, I think we should see consistent growth in our procedures. Next year, we will also be showing or demonstrating some results as we accumulate our outside U.S. procedure growth. So that will be something we can further discuss as we get into 2027, because we are building programs both in the U.S. and outside the U.S., and that is a number we have not shared in the past. We work through distributors.

We have also had some mobile providers in outside U.S. markets, and we want to be accurate in what we report out to the street. But we are excited. We had good growth through the quarter, as noted year-over-year, and we are motivated here as we close out the end of the year and move into 2027.

Ken Mobeck: Yeah. Anthony, to answer your question directly, I think it is a good practice to ramp-up procedure volumes moderately. Q4 is our biggest year, our biggest quarter of the year, excuse me. Once we get the system in place in the hospital and get everyone trained, it does take a little bit of time. So I definitely would bake that into your models, especially with Q4 being our strongest quarter.

Anthony Petrone: Understood. I will hop back in queue. Thank you.

Operator: Thank you. There are no further questions in queue at this time. I will now turn the meeting back to Ryan Rhodes for his closing remarks.

Ryan Rhodes: Thank you, operator, and thank you all again for joining us today. We look forward to reconnecting you after the close of our fourth quarter.

Operator: This concludes today's meeting. We appreciate your time and participation. You may now disconnect. Thank you.

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