Good morning, ladies and gentlemen. And welcome to PROCEPT BioRobotics Fourth-quarter earnings conference call. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Matt Bacso from Gilmartin Group for a few introductory comments. Please go ahead.

Thanks, Operator. Good morning, and thank you for participating in today's call. Joining me from PROCEPT BioRobotics are Reza Zadno, CEO, and Kevin Waters, CFO. Earlier today, PROCEPT released financial results for the quarter ended December 31, 2021. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meanings of federal securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. All forward-looking statements, including without limitations to those relating to our sales and operating trends, and future financial performance, expense management, expectations for hiring or growth, market opportunity, revenue guidance, commercial expansion, the impact of COVID-19 on our business, and future product development and approvals are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section of our most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission on November 5th, 2021 and available on Edgar, and in our other public reports filed periodically with the SEC. This conference call contains time-sensitive information and is accurate only as of the live broadcast, March 8th, 2022. PROCEPT BioRobotics disclaims any intention or obligation except as required by law to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. And with that, I will now turn the call over to Reza.

Thanks, Matt. Good morning, and thank you for joining us. For today's call, I will provide opening comments and a business update followed by Kevin, who will provide additional details regarding our quarterly results and initial 2022 guidance before opening the call to Q&A. Before moving to our quarterly results, I want to recognize the outstanding performance of the PROCEPT team. Revenue for the full year was $34.5 million, which is almost at 350% increase over 2020, and was ahead of our expectations coming into the year. 2021 was also a milestone year for PROCEPT, as we became a public company, providing us with the capital to better serve our patients and continue on our mission of becoming the standard of care in the surgical BPH market. All of this accomplished under circumstances that have been unprecedented in my career. These achievements would not be possible without contributions across-the-board, from our employees, our shareholders, and importantly, our customers. I'm truly humbled and just want to thank each and every one of you. Now turning to our quarterly revenue results. Consistent with our pre -announcement on January 11th, total revenue for the fourth quarter of 2021 was $10.1 million, which came in the high-end of the pre -announced range and above our Q4 revenue guidance of $8.7 million to $9 million dollars. In the fourth quarter, U.S. AquaBeam system revenue was $5 million. U.S. handpiece and consumable revenue was $3.4 million, and total international revenue was $1.4 million. Despite some COVID headwinds later in the quarter, we continued to see strong positions interest as we trained more surgeons at existing accounts, resulting in increased utilization. While we are still very early in our commercial launch, we believe our robust clinical data outstanding real-world patient outcomes, supported by our recently published five-year…

Thanks, Reza. As Reza highlighted, PROCEPT's revenue for the fourth quarter of 2021 was $10.1 million. The increase was primarily driven by us revenues, including both systems sales to new hospital customers and increased handpiece revenue. In the U.S., we sold 14 AquaBeam Systems of which 10 were the new customers. AquaBeam System average selling prices were slightly above $350,000, which is flat sequentially and in line with our expectations. Our ending fourth quarter U.S. installed base was 78 AquaBeam Systems. Prior to obtaining Medicare coverage in January 2021, we did place numerous AquaBeam Systems under our evaluation agreements as compared to a direct sale. Of the 78 systems in our installed base, we still have approximately 10 systems under these evaluation arrangements, which is down from 20 as of September 30th, 2021. We are encouraged that roughly 70% of system sales in the fourth quarter were to new accounts that previously did not have an evaluation unit. We expect new accounts to comprise the majority of system sales moving forward, and expect to be near zero systems under our evaluation agreements by the end of March 2022 in the U.S. Turning to handpiece revenue. U.S. hand-piece revenue was $3.4 million compared to $2.2 million in the third quarter of 2021, hand-piece revenue growth was driven primarily by increases in monthly utilization, measured by hand-pieces sold per account, and increased average selling prices. We shipped approximately 1200 hand-pieces in the U.S.. in the fourth quarter, with monthly utilization greater than five hand-pieces sold per account. International revenue for the fourth quarter was $1.4 million, gross margin for the fourth quarter of 2021 was 44.5%. I also want to highlight that our current procedure volumes, hand-piece, gross margins are slightly lower than capital equipment gross margins. Total operating expenses in the…

Thanks, Kevin. In closing, I just want to again, thank our employees customers and shareholders for what we accomplished in 2021. We have made tremendous strides since the pricing of our IPO, and I'm confident, the best is yet to come. It's just a privileged to be a part of a technology that can positively impact the lives of millions of men throughout the world. We look forward to continued growth in 2022, have a great day, and at this point, we will take questions. Operator.

Ladies and gentlemen, if you'd like to ask a question at this time, [Operator instructions]. In the consideration of time we ask that you please limit yourself to one question and one follow-up. Please standby while we compile the Q&A roster. And our first question coming from the line of Craig Bijou with Bank of America. Your line is open.

Good morning, guys. Thanks for taking the questions. Congrats on the great quarter, great finish to the year, and guidance that is above expectations. It's tough in the current environment, congrats on that. I wanted to start with the system placement expectations for '22, and I appreciate your comments about the sequential improvement. But maybe I wanted to dive a little bit deeper into what you're seeing from the pipeline and the confidence that you have. That you can grow system placements sequentially, especially with the focus on the new accounts.

Yeah. Thanks for the comments, Craig, this is Kevin. Given we are fairly far through the First quarter, we are seeing a high degree of confidence in our ability to execute on a sequential increase in capital in the First quarter to the fourth quarter. And importantly, it is that pipeline that we feel very good about with new accounts. Our sales team is highly focused on the over 850 high-volume hospitals in the U.S. And we're seeing a significant number of those in our funnel. And again, given with where we're at in the first quarter, we have a high degree of confidence about a meaningful increase of AquaBeam Robotic sales in the first quarter compared to the fourth. And as I said in the guidance, we do expect that to grow sequentially throughout the year as that sales force doubling that Reza mentioned really comes to fruition in the back-half of the year.

Thanks for that, Kevin. And then maybe following up on some of the insurance coverage comments and the five-year data. So I wanted to ask specifically, you have two big payers that are still out there, I wanted to see if there's any color on any discussions with them, if you expect them potentially to come onboard in '22. And then just to ask, a little bit longer-term, how much of an accelerator to the business are -- would it be to add United and Aetna?

Yes thanks. This is Reza. Yeah, to correct, we cannot have coverage from United and Aetna. But as we mentioned in our comments for 2022 guidance, we do not assume that coverage to be in place in 2022. Like many carriers, United did not specifically indicate their policy and what they were waiting for. We believe the only information left is that five-year data that we -- you have seen, we published, we submitted. So as you know, United is about 45 million covered lives, Aetna is about 22 million covered lives. So from a percentage point of view, as you know, we have said the high-volume hospitals grew about 200 cases per year or 17 per month. So today, with primarily Medicare patients, we have access to roughly half of those, out of 17, 8.5. But by bringing United and Aetna, we will have very close to all those. We will have access to all those 17 per month per account.

Great. Thanks for taking the questions. I'll hop back in queue.

Thanks, Craig.

Our next question coming from the line of Amit Hazan with Goldman Sachs. Your line is open.

Thanks so much. This is Phil Ames for Amit. I was hoping we could circle back to the utilization comments around hand-pieces. I appreciate that such a strong quarter -- I'm hoping Kevin, maybe you can pass out the amount of dilution that's coming from these new system that are coming on versus what's going on at an underlying level for existing accounts. If you could parcel the assumptions that you've made around where existing accounts versus new added accounts from the year are going to end up shaking out.

It's a good question and right now, obviously, we have a limited history of sales accounts. But if you look at our fourth quarter results, you see that the average number of hand-pieces sold per account in our fourth quarter was it was north of 5 and I would say that if you look at the vintage of sales for PROCEPT, the accounts that purchased prior to 2021. And even that account that purchased in Q1 of 2021, those accounts were already doing north of 5 on average. So they’re obviously pulling up the average. And as we bring in all new accounts to our installed base, it does take time for those accounts to get to those utilization levels that can be anywhere from 4 to 5 quarters is our expectation right now. But the primary factor in utilization only being up modestly is that significant expansion to our installed base. And those accounts just building utilization over time.

Okay. That's very helpful. There was -- would you say that there was some level of pre -buying that happened in [Indiscernible] for accountants? It seems like even on average that the numbers should shake out to a little bit more than would and what average utilization was in the quarter.

Yeah. Our procedures track fairly closely to hand pieces sold. We wouldn't call out any large stocking orders in the fourth quarter that drove up the number of hand pieces sold.

Okay. That's really helpful. Thanks for that. And the last one, I'm wondering if the evaluation units have been something of an impediment from a time and investment standpoint for you all in it. As we think about kind of the environment post these evaluation, so some said there might be a bit of a lift just in terms of allocation of resource. Is that a fair comment?

Yeah. I mean, look, the evaluation program had its time and place prior to us having Medicare coverage. And as we've said the last few quarters, we're no longer offering this program. And we do believe that by selling a system, we have the full buy-in of the physician, the reimbursement team, the hospital administration. And we do see utilization in accounts, where we sell a robot significantly greater than when we had a demo unit. And therefore, I wouldn't call it a drag on the organization, but I definitely believe that our selling model moving forward as a straight sale is going to be our preferred method that's resonating with our customers.

That's helpful. Thanks. Thanks on both accounts, Kevin.

Thanks, Phil.

And our next question coming from the line of Chris Pasquale with Guggenheim. Your line is open.

Thanks and congrats on a nice finish to the year guys. I was wondering if you could give an update on how many reps you exited the year with across the robotic and Aquablation groups in the U.S., and where you'd like to be at the end of this year?

Yes. So Chris, we've said I think preliminary in our [Indiscernible] we had 10 robotic reps and 10 Aquablation reps. And Reza's comment indicated a doubling of that sales force, so that'd be the appropriate number to use for where we're entering fiscal 2022. But the other thing I would point out is our OpEx guide of a $105 million does assume that we have the ability to add both incremental robotic and Aquablation sales reps in the back half of the year. We're not going to comment today specifically on those numbers, but we do have an increase built into our plan to add reps in the back half of the year such that we can hit the ground in 2023 with the sales force that's ready to go and capitalize on all the happenings that we expect this year.

Okay. And you mentioned that physicians are getting more comfortable over time using the system on a broader range of prostates. Give me visibility today into what's your average prostate size is in the case that you guys are involved in, or maybe another way just to say it would be the percentage of cases where physicians are reaching for Aquablation because they don't think other approach is available to them are really appropriate for the patient versus really using as a true replacement in patients where TURP would also be an acceptable option?

Thanks. So this is -- I want to mention that to you about accounts have converted most of their resective procedures to Aquablation, and as they use the product, they become more comfortable when they start to use it in -- start with maybe above 70 milliliter or above. But as they become comfortable with the procedure and the technology, they use it in all cases. In fact, we have seen some accounts that the standardized their resective BPH protocols, and that's what's driving our utilization. So it is, again, we have a range of accounts that are using most of their respective procedure. If I had to guess, it would be maybe average 70 milliliters. But again, we have to follow where [Indiscernible] because the outcomes are the same. So the accounts where they uses technology is mostly converted TURP procedure, but because the outcomes as we showed in our FDA trial, whether it is for larger prostate or small prostate, that outcomes are the same. They start using in all sizes.

Great, thanks.

And our next question is coming from the line of Danielle Antalffy with SVB Leerink. Your line is opened.

Hey, this is Anne on for Danielle. Thank you so much for taking our question. I was hoping that you could maybe talk about the IDN agreement in Atlanta. Is this something -- I think you guys mentioned that you're going to continue to focus on that. So I was just wondering if you guys could talk about how you've seen the utilization in that -- in the IDN system.

Yeah. This is Kevin, I'll take that. Northside Atlanta has been a great customer for us. They placed their first system over a year ago, and now have installed for additional robots across their state-of-the-art facilities, as Reza mentioned. And it's a good account. I would suggest that their utilization is anything different than any other high-volume hospital in terms of utilization. But to speak around IDNs, we are working with multiple IDNs. Our guidance in 2022, it's not dependent on a material number of these IDNs being executed. With that said, there are a fair number of IDNs that fall within the 850 high-volume resective hospitals that we're targeting. And I would also point out that on IDN, our ability to sign contracts, that provides us with access to these hospitals. And what it really does is, it makes the sales process much more efficient and much more predictable on the capital side. So it's not as if you sign an IDN and then all of a sudden you're going to sell ten robots within that system. But what it does do, it allows our sales team access to the account, and again, for that process to be much quicker and get through the administration quicker. And really, that's what we're focused on in 2022.

Okay, great. And then I guess just to follow up on that a little bit. Have you guys noticed any trends and with the COVID surges and staffing shortages, have you guys seen any impact in capital sales? I mean, obviously you guys had a strong quarter but wanted to see if you guys had noticed any issues with access or anything like that? Thanks.

Thanks. So definitely we've recognized the macro impact of COVID and start shortage on elective procedures. But that impact in our case was negligible and we were able to exceed our plan. What we have seen the COVID did not have impact on our capital sales. Ending the year around December we saw some headwind from COVID and through maybe January. But really in the last 40 days, we are seeing back to more normal operation mode. So absent of any new variance, we do not believe this will have meaningful impact for us going forward if there's no new variant coming in.

Okay. Great, thanks so much.

And as a reminder, if you'd like to ask a question -- and I'm showing no further questions at this time. I would now like to turn the call back over to Mr. Reza Zadno for any closing remarks.

Well, I want to thank everyone for listening to our earnings call and thanks for the questions and we look forward to providing more information in the future. Have a nice day.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.