Good day, everyone, and welcome to today's EDAP TMS Fourth Quarter and Full Year 2024 Earnings Conference Call. At this time all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note today's conference is being recorded and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to John Fraunces. Please go ahead.

Good morning. Thank you for joining us for the EDAP TMS fourth quarter and full year 2024 financial and operating results conference call. Joining me on today's call are Ryan Rhodes, Chief Executive Officer; Ken Mobeck, Chief Financial Officer; and Francois Dietsch, Chief Accounting Officer. Before we begin, I'd like to remind everyone that management's remarks today may contain forward-looking statements, which include statements regarding the company's growth and expansion plans. Such statements are based on management's current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in such forward-looking statements. Factors that may cause such a difference include, but are not limited to, those described in the company's filings with the Securities and Exchange Commission. I'd now like to turn the call over to EDAP's Chief Executive Officer, Ryan Rhodes. Ryan?

Thank you, John, and good morning, everyone. I'm pleased to report another strong fourth-order performance which reflects our continued success in establishing Focal One as the leading robotic HIFU technology used by urologists in the management of prostate cancer. But before discussing our strong performance, I would first like to share some very good news that we received just yesterday. As mentioned in today's press release, Focal One Robotic HIFU has just received CE Mark for the treatment of deep infiltrating endometriosis. As a reminder, deep infiltrating endometriosis impacts a notable subset of women diagnosed with endometriosis. More specifically, it is a severe chronic inflammatory disease affecting young women in reproductive age and is also recognized as the most aggressive form of this disease. Deep infiltrating endometriosis is located in the posterior area of the pelvis, infiltrating the rectum and surrounding structures causing chronic symptoms including both pelvic and digestive pain. This disease is also commonly associated with increased risk of fertility disorders. Endometriosis has a profound effect on psychological and social well-being and imposes a substantial economic burden on society. This CE mark represents a significant regulatory milestone that allows us to proceed with a controlled market entry while we continue to work with endometriosis experts and thought leaders to further refine and expand our clinical development efforts for addressing this severe and debilitating disease. We also believe this milestone represents the first step in enabling women to gain access to this important non-invasive treatment alternative to surgical intervention, which is associated with notable complication side effects and extended recovery times. Now turning our attention to our financial performance in the fourth quarter. Our core Focal One HIFU business continued to experience strong growth. We reported HIFU revenues in US dollars of $9.3 million, increasing by 15% year-over-year, reflecting…

Thanks, Ryan, and good morning, everyone. I will briefly review the full year 2024 performance before getting into greater detail on our fourth quarter results. Please note that all figures except for percentages are in euros. For conversion purposes, our average euro dollar exchange rate was $1.058 for the fourth quarter of 2024. EDAP set a calendar year record for revenue in 2024. Total revenue for the full year of 2024 was EUR64.1 million, an increase of 6.1% as compared to total revenue of EUR60.4 million for the full year 2023. The increase in revenue was due to higher revenue in the HIFU segment versus the prior year. Notably, we reported HIFU revenue of EUR23.8 million, representing growth of 15.7% year-over-year, which reflects both an increased number of Focal One placements as well as procedure volumes that grew approximately 51% year-over-year in the US. Now, I will review our fourth quarter results. Total revenue for the fourth quarter of 2024 was EUR20.3 million, an increase of 3.6% as compared to total revenue of EUR19.6 million for the same period in 2023. The increase in revenue was due to higher revenue in the HIFU segment, which grew 17.9% year-over-year. Looking at revenue by division, total revenue in the HIFU business for the fourth quarter of 2024 was EUR8.8 million as compared to EUR7.5 million for the fourth quarter of 2023. The increase was driven by 11 Focal One systems sold in the fourth quarter of 2024 versus 10 systems sold in the fourth quarter of 2023, as well as year-over-year growth in disposable revenues of 28.5%. Total revenue in the ESWL division for the fourth quarter of 2024 was EUR2.4 million as compared to EUR2.3 million for the fourth quarter of 2023. The lithotripsy business experienced nominal growth during the quarter…

Thanks, Ken. With our increasing strategic focus on our higher growth HIFU business, I would now like to provide our outlook for 2025. Following our strong fourth quarter performance, we believe our HIFU business is well positioned for continued growth based on the growing demand for Focal One, continued strong procedure growth, and a strong pipeline of new business opportunities. In 2025, we expect HIFU revenue to grow between 16% and 25% on a year-over-year basis. As previously discussed, given our position of becoming a pure play market leader in therapeutic HIFU, we expect our non-core ESWL and distribution business to decline between 20% and 25% in calendar year 2025. As noted earlier, we continue to see a strong and positive reception of the landmark HIFI study across the urology community, which we expect will further help drive demand for Focal One in 2025 and beyond. It is increasingly clear that Focal One is gaining more recognition as a necessary treatment option for the management of prostate cancers and is now poised to become a mainstream technology that enables a highly efficacious, less invasive, and safer treatment approach for addressing early and intermediate stage prostate cancer. With that, I will now turn the call back over to the operator for questions. Operator?

[Operator Instructions] We'll take our first question from Michael Sarcone with Jefferies. Please go ahead.

Hey, good morning and thanks for taking the questions. I guess just to start, thank you for some of the guidance on the HIFU sales growth. I think you said 15% to 25% year-over-year. Do you think you can give us a little more detail around what's baked in there from a systems placement standpoint and procedure growth standpoint?

Yeah, we will expect to see, again, continued demand for Focal One. As noted, we've had sales both in the US and certainly outside the US markets. Our pipeline has been the strongest and healthiest it's ever been. And again, we'll obviously see continued increase in Focal One system sales, so that's a driver. We do generate recurring revenue both from procedure, so obviously procedure growth. And the other, Michael, is our service revenue based on our install base. So again, further demand on Focal One systems, again, procedures growing across our install base, and then of course service-based revenue. All of that contributing to our projected growth here in 2025.

Got it. Thanks, Ryan. That's helpful. And then just around the, called the non-core ESWL and distribution business, I mean, is the intent that over time these basically phase down to zero? I guess how rapidly do you see these decelerating over time?

Yeah, so when we look at the, you know, we'll call it non-core distribution products, these are legacy regional-based agreements and relationships that we are transitioning over across different timeframes. So again, this impacts down to the subsidiary level. So again, I think we're at the beginning of redirecting our attention, certainly, away from some of these areas of focus. I can't really project if it goes to zero, but certainly, we are winding down some of this business to allow more defined focus on our high growth HIFU business. And again, it's based regionally and it's not necessarily product specific.

Yeah, and Mike, I'll just add another comment. So we talked about our lithotripsy business and we will stop selling units here second half of the year. That business will continue as a service business and from a service perspective in lithotripsy, that margin is actually a little credo versus the system margin. So even though revenue will go down, we will see margin pick up a little bit.

Got it, and then just squeeze one last in there. What kind of impact do you expect this to have on your run rate, OpEx?

Yeah, so, good question. So when I look at OpEx next year, we gave directional guidance here on system revenue. I would see OpEx pick up a little bit in the mid-single-digits but what we're really trying to do is some of those businesses that are ramping off, it will have a positive impact on some labor costs, of which, it'll be nice that we can reallocate some of those dollars to HIFU growth without you know making major investments in the business going forward.

Got it, thank you.

Thank you. And we'll take our next question from Jason Bednar. Please go ahead.

Hey, guys. This is Joe on for Jason. Thanks for taking the questions. Kind of a higher-level question on the capital environment here. Do you mind just walking through how you kind of characterized the capital equipment purchase patterns from hospitals so far during ‘25? Would you say they're improving off 2024 levels and are capital sales cycles and decision-making processes kind of still elongated? Thanks.

Yeah, so again, when we look at our active pipeline accounts, obviously that group of accounts continues to grow amongst our sales teams. The sales cycle times still remain kind of how they are and we've adjusted strategy to be more effective in working through these various processes. Again, they vary by hospital. But I also remind everyone we sell a clinically necessary strategic revenue enhancing service line in the number one cancer diagnosed in men. And I know that's a mouthful, but that means something to a hospital. We're anchored in prostate cancer today with the ability to expand out in the future into new indications. So, again, thinking about our core business today, we've been better adapted to working through [that] (ph) committees and whatnot to be able to close deals in a timely manner. And certainly, it could be an exercise of math, right? You need a larger pipeline to be able to activate accordingly, looking at quarterly sales. And we've really adjusted our strategy as noted. So I feel very confident in the things we're doing out there to build our market, build our business. And again, we expect to see notable growth here throughout 2025.

Great, thanks. And then one more just on the reimbursement side of things. So, as you mentioned, CMS reimbursement was increased when effective, Jan 1. Have you seen, like, any uptick in incremental interest from hospitals from adopting Focal One just since that reimbursement went effective a few months ago? Thanks.

Well, yeah, it certainly helped us. Again, we've been -- the last couple of years, we work effectively with hospitals when they pull together a pro forma analysis, right, looking at adding this important treatment to their cancer-aligned services. So when we go through that process, we do analysis with them and you can imagine the prostate cancer patient is very valuable to a hospital. It's not a patient that they would like to lose. It would be a patient they would like to attract in terms of services. So again, the increase of 5.4%, I think it helps us a lot more in those pro forma analysis. Again, we're at APC level 6. And the bigger story is it allows more patients access to our technology with that reimbursement in place. And if you look at compared to other treatments, we're in a strong position for reimbursement. And again, the increase that went into effect January only helps us. We'll see throughout the calendar year the impact of that. But again, as we noted, or as I noted, we sell something that is clinically necessary today to answer to. That is the growth and acceptance and adoption of focal therapy. And we've got best-in-class technology to offer our customers.

Great. Really appreciate it.

Thank you.

And next we'll go to Swayampakula with H.C. Wainwright.

Thank you very much. Good morning, folks. This is RK from H.C. Wainwright.

Good morning.

Good morning. So I got started on the call a little bit late. I'm just trying to understand your strategy on endometriosis, especially to how soon can you start commercializing on it? What's the strategy there in terms of getting the CE mark?

Yeah, so RK, again, we just got word that and awarded this CE Mark for Focal One for treating deep infiltrating endometriosis. So really, what it really allows us right now, we're continuing to expand our efforts in terms of working with endometriosis experts and very important key thought leaders to really further refine and expand our clinical development efforts as we look at a kind of a Phase 1 launch, call it. And so we're really in that early process now. We expected and anticipated getting CE Mark, but again, here that we're limited in the CE Mark countries, which is a notable number of countries, approximately 26, we have freedom to operate and being able to offer this treatment to women. And I know there is a growing interest of folks out there that want to see this technology advance. And we're working with experts right now. And again, it's early, but it's exciting, because now this doesn't hold us back, receiving the actual formal CE Mark. So we'll be working accordingly with expert physicians. We've got some activity that we've been involved in since we've done our original clinical studies, and we continue to work down that pathway. And we will be able to share more with you in the near future.

Thank you for that. And then when you are talking through the pancreatic tumor study, I know you just started the study, so when do you think we can start seeing some data and also what sort of -- in what geographies are you doing the current, I mean, the PULS trial?

Yeah, so the study is a -- it's a small study of patients who are early in patient recruitment. We have treated, I know, I think we treated at least our first patient because we put that announcement out. We're further working with the institution around patient recruitment. So, I'd say we're early in that process. The study itself is being conducted locally in France with some of our centers that we've worked with in the past. And a lot of the development work in pancreatic cancer, or I should say, solid organ tumor ablation using HIFU, is transcended over a number of years here. And now we're at that study phase. So we're excited for the opportunity to look at another potential new indication. And again, I think on a macro level, HIFU is early in its overall adoption cycle, meaning that we would expect to see HIFU emerge throughout treating other soft tissue disease throughout the body. We know that. And so I think this just gives us another one of those opportunities. And again, I don't have a lot I can comment on other than we're early in this clinical trial or running here locally in France.

Okay, thanks for that. And then, just going back to your guidance on the HIFU revenue of growth of 50% to 25% year-over-year, I'm trying to triangle it that with the increased reimbursement dollars. You said there's about a 5.4% increase in the 2025 rate, plus getting a better -- I mean getting a code on the BPH starting from July 1st, how much of that was taken into account for the revenue growth? Or your expectation is purely on what you're seeing in the pipeline and the needs that you have currently?

Great question. So, it is really directed toward our core business. That is ablation of prostate tissue or focusing on prostate cancer. So it's not taking into consideration BPH and some of the other things we're working on. We see our core business, and we're so early in this market adoption with so much potential upside that, again, we've been conservative in our approach to looking at these models, we want to provide some range of guidance and that's what we've done here. So yeah, it's really really focused kind of on our core business today and really based on a snapshot of our active pipeline. And of course, we're committed throughout the organization both in the US but certainly in outside US markets, building our pipelines as well in those markets. As referenced last quarter, we sold our first systems both in Turkey and Portugal. So, we're entering new markets, and we'll continue to do that, I believe, throughout 2025.

In our case, this is Ken, the other thing I've asked is, as our install base grows, right, and our systems come off the warranty, the contract revenue will kick in and then obviously as doctors build their practice, right, and their customer base grows for the HIFU procedure, that's going to obviously draw more disposable sales which will increase other lines of revenue between system procedures and service.

Okay. Thank you very much, Ryan and Ken, for answering all my questions. Thank you.

Thank you. And that does conclude our question-and-answer session. I'd like to turn the call back over to Ryan Rhodes for any closing remarks.

I want to thank everyone for joining us today on today's call. And we look forward to seeing you at the upcoming AUA Conference or later in the year at the Jefferies Healthcare Conference in June in New York City. Thank you all.

Thank you. Ladies and gentlemen, that does conclude today's conference. We appreciate your participation. You may disconnect at any time.