Good day, and thank you for standing by. Welcome to the Profound Medical First Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Stephen Kilmer of Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone. 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, expectations regarding the efficacy of the company's treatment technologies, results of future clinical trials, the ability to obtain coding and/or reimbursement from third party payers, anticipated financial performance, business prospects, strategies, regulatory developments, market acceptance, and future commitments. Such statements in both known and unknown risks and uncertainties and other factors that may cause actual results, performance, or achievements to be materially different from those implied by such statements. No forward-looking statement can be guaranteed. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this conference call. Profound undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, other than as required by law. For the benefit of those who are new to the Profound story, I would also like to take a moment to summarize our business. Profound develops and markets customizable, incision-free therapies for the ablation of diseased tissue. We're currently commercialized TULSA-PRO, a technology that combines real-time MRI, robotically -driven transurethral ultrasound and closed-loop temperature feedback control. The technology is designed to provide customizable and predictable, radiation-free ablation of a surgeon-defined prostate volume, while actively protecting the urethra and rectum from -- to help preserve the patient's natural functional abilities. TULSA-PRO is CE marked, Health Canada approved, and 510(k) cleared by the FDA. In the U.S., we employ a pure recurring revenue model for TULSA-PRO, whereby we charge customers around $8,000 on a per-procedure basis for TULSA-PRO consumables, lease of medical devices, and services associated with extended warranties. Outside of the United States, we also primarily deploy a [Indiscernible] procedure model, but we also sell capital and consumable separately if the situation warrants that. We're also commercializing Sonalleve, an innovative therapeutic platform that is CE marked for the treatment of uterine fibroids and palliative pain treatment of bone metastases. Sonalleve has also been approved by The China National Medical Products Administration for the non-invasive treatment of uterine fibroids. And has recently obtained FDA approval under Humanitarian Device Exemption for the treatment of osteoid osteoma. The business model for Sonalleve systems is currently a one-time sale capital equipment. On the call today, representing the company are Dr. Arun Menawat, Profound's Chief Executive Officer, and Rashed Dewan, the Company's Chief Financial Officer. With that said, I'll now turn the call over to Rashed.

Good afternoon, everyone. And welcome to our first-quarter 2022 conference call on behalf of the management team. And everyone at Profound, I would like to thank you for your ongoing interest in our company. For those of you who are shareholders, we appreciate your continued interest and support. I will turn the call over to Arun in a moment for an update on our commercial activities. However, before I do, I would like to provide a brief update on our first-quarter 2022 financial results. To streamline things. All of the numbers we will refer to have been rounded. So they are approximate for the three-month period ended March 31, 2022, the Company recorded revenue of $1.4 million, up 92% from 711,000 711,000 in the first quarter of 2021. Recurring revenue increased a 115% from 477,000 in Q1 2021, while one type equipment sales increased 45% compared to the 234,000 recorded in Q1 2021. Total operating expenses in the 2022 first quarter, which consists of R&D, G&A, and selling and distribution expenses were $7.7 million, an increase of 13% compared with approximately $6.8 million in the first quarter of 2021. Breaking that down further, expenditures for R&D increased 2% on a year-over-year basis to $3.2 million. This was primarily driven by CAPTAIN trial enrollment, traveling for off-site MRI testing, and slight inflation and additional headcount. G&A expenses increased by 10% to $2.3 million due to additional headcount, increased legal, accounting and recruitment fees, increased travel as restrictions continued to be lifted, increased license costs of our enterprise resource planning and customer relationship management software. Finally, selling and distribution expenses increased by 39% to approximately $2.2 million. Overall, the company recorded a first quarter 2022 net loss of $8.2 million or $0.40 per common share, compared with a net loss of $7.5 million or $0.37 per common share for the same three months period in 2021. As of March 31, 2022, Profound had cash of $60.1 million. With that, I will now turn the call over to Arun.

Thank you, Rashed. I talked about our Q1 2022, or achievements and outlook for the rest of the year on like to provide a little more color on resets, financial discussion, and installed base in us has grown to 24. TULSA-PRO system. Just shy of our global of $0.25. And while we said on our last call that we thought some international one-time capital sales with start to trickle in the second half of this year on pleased to report that those sales have already begun, with a 340,000 worth of equipment sales recorded in Q1, 2022. Our worldwide installed base is now 30. We believe that the direct impact of COVID-19 has subsided with respect to our ability to access new U.S. sites to install TULSA pro systems. But we still see some lingering effects in the supply chain, primarily in the form of delayed deliveries of new MRI units to the sites where we have TULSA agreements. The good news is that we expect this to eventually correct itself. And we are seeing the trend to increase utilization in our installed base. Accordingly, independent of future installs, we continue to believe that the pace of utilization will accelerate meaningfully in the second half this year as the newly installed sites get up their learning curves and increase utilization. While we are a medical device company, as you already know, we have chosen to charge on a per patient basis in the United States for bundled services. That include the use of our device, the one-time disposable, and the genius services that we provide to support cases. Because we deploy this unique business model in the U.S. We also want to clarify how we recognize revenues. We recognized no revenue upon installation of the TULSA-PRO system. We recognized part…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Please stand by while we compile the Q&A roster. Question comes from Rahul Sarugaser with Raymond James. Your line is open.

Good afternoon. Arun and Rashed. Thanks so much for taking our questions. So looking at first that at the revenue recognizing that about a million of it was recurring and we saw about a million dollars last quarter of recurring. And given that you're now at 24 installed devices, you're very close to your target, could you give us a sense for how the utilization rates are balancing to provide for that such a similar recurring revenue, quarter-over-quarter? And how should we be thinking about those utilization rates, hopefully increasing to drive that number upward?

Sure Rahul. Good afternoon. So the recurring revenue in Q1 is primarily on the original installed base. The impact of the recurrent, and you over the number of patients treated in the new installed base is still relatively limited. And as I mentioned in the prepared remarks, we defer good even if they have shipped disposables, we still differ a good bit of revenue until the patients have been treated. So it is higher, actually about 5%, 10% higher than last quarter. And I know in rambling off, it may not show up as much, which is fine. But the way I see this, as I mentioned, I mentioned in prior calls, we are building opinion leading site, and I think that UT Southwestern is an example where Bestop start cautiously. We're still in new technology and then they will grow over time. And so I think to answer your question -- first question, the revenue is primarily coming from the revenue installed base, and number two, I think as I said in the last call, I think you should expect at least doubling of those by end of this year or maybe sooner, because this installed base will now produce revenue, then you will see impact in Q2 also. But where you'll definitely see significant improvement. In the second - as these sites do their first in a very questions way, and then they start to expand usage over time.

Okay. That's very helpful. Thank you very much, Arun.

Thank you, Rahul.

And so you started referring to the installed base growing through the remainder of the year. So could you please give us a sense for how the funnel looks for the remainder of 2022?

Yeah. So we have -- still have at least another 10 agreements that we have not installed, in addition to what we have done. And as I mentioned in the prepared remarks, some of these delays relate to the fact that the sites where MRIs already existed, and the hospitals were bottlenecked, those are behind us and we're able to place the systems and they're starting. But there are at least four sites where they had ordered new MRIs, and typical delivery of these MRIs are running about six months behind schedule. So I think that as those MRIs come in, we should be able to continue to see an increase in the rest of this year, and let's say at least another 10 or so this year.

Great. That's very helpful. And then if you don't mind outsets one more question. Recognizing that the FARP trial should hopefully read out sometime this summer, and we're looking forward to those results, do you have a sense for whether on the CAPTAIN trial we may be able tend to stay some interim readouts before the 4Q 2023 readout that you outlined. And that's all for me and I'll get back in the queue after this.

Sure. Yeah. [Indiscernible]. Most certainly, I think the FARP trial should readout in July or August this year. And I think that the CAPTAIN trial is not blinded to us. It is randomized, but because it's a device, it is not blinded given that one patient will undergo a prostatectomy, the other one will undergo go 'cause side is hard to blind. It's impossible to blind it. So if we were to stay completely loyal to the Level 1 concept we would have to wait until all patients are treated. However, as I think we will certainly referred to the job coordinators and the lead offers ultimately. But I do think that given that this is more about adoption and about coverage, fair opportunity presented probably we'll certainly look to do that. The worst case is Q4 20’23, but I hear your point and I think certainly we will discuss it with the investigators who are conducting the trial.

Okay. Great. Thank you very much, and best of luck for the next quarter.

Thank you, Rahul.

Our next question comes from Frank Takkinen with Lake Street Capital. Your line is open.

Hey, Arun, hey, Rashed. Thanks for taking my questions. Just a couple for me today. Wanted to start with the commentary around capital equipment sales and how should we be thinking about that sequentially. I know you -- I heard your comments about some came into the model this quarter, and then it sounds like there's good chance of a ramp in capital equipment sales in the back half of 2022. So any color there would be greatly appreciated.

Yeah. I think a year or two ago, people [Indiscernible], you have a pipeline and is it going to come back. And are you losing that pipeline. We are seeing that the pipeline did not really disappear, and that it is actually coming back. So with the exception of China and to some extent Japan, the pipeline that is in Europe and U.S., we are selling some systems of Sonalleve in U.S. as well because of the research work that is going on in a number of areas. I think that pipeline does look pretty good. And so I think that certainly our primary business is still going to be with building the recurring of [Indiscernible] Our U.S. team is 100% focused on that part of the business. But I am hesitant to give you a specific number. But I am -- I can tell you that I'm more optimistic today than I have been in the prior quarters. I think you will see, for example, more capital revenue even in Q2 as compared to Q1. So -- and I think what we'll do is try to give you color of the following quarter instead of giving you the long-term yet. So I frankly think that Q2 is going to be better even on that side of the equation compared to Q1.

Got it. Okay. That's helpful and wanted to swing back to utilization and ask a little bit more specific on that. I think we got a lot of the elements but wanted to ask little bit more directly. If I remember there really kind of a 40, 60. 100 concept, maybe 40 procedures annualized the first 6, 12 months. Some power users doing 60 and then at scale there was a potential and thought that you can maybe hit a 100 procedures once fully folded into the organization. Is that still an accurate way to think about that? And how have you been seeing that turning with your initial placements in 2022 so far?

Yeah. I think generally speaking, Frank, the way you described it is still the accurate way were looking at it. And I know everybody is anxious to see how quickly we ramp and I think that will happen. And as I -- again, as I described, the UT Southwestern on purpose as a case example, where they were very slow in the very beginning and then they started to see the feedback from their patients and they started to see that cancer was not coming back. And now I think they will expand to that run rate, the 100 run rate, certainly, by second half of this year, I think they will expand to that revenue run rate. So that original hypothesis is generally intact. It might be off by 5% or 10%, but I think generally it is intact.

Okay. Perfect. And then if I could just squeeze one -- last one in here. Of the 24 systems that you have installed to-date, what's the mix of those that are just standalone TULSA versus introduced alongside a broader prostate cancer treatment program, whether that's da Vinci or radiation specifically. Just trying to get a feel if there's some standalones or if they're mostly an add-on to broaden the offering at a specific clinic.

I think I would say pretty much majority of them are in hospital systems where they are adding on. And probably 80% of them are in hospital systems. That's a very good question. And we are also evaluating how the feedback from patients and what -- how many patients are actually asking for TULSA by name. And we are also continuing to see significant increase in that number of patients who are asking for TULSA. So the number of hospitals are certainly getting the message that they need to be able to offer TULSA in addition to what they offer today.

Got it. Okay. That's helpful. I'll stop there. Thanks for taking my questions, and congrats on all the progress.

Thank you, Frank. Thank you so much Frank.

Our next question comes from Josh Jennings with Cowen. Your line is open.

Hi. Good evening. Thanks for taking the questions.

Good evening.

Good evening. I was hoping to ask just about the sales from, I know you had some commentary and you're seeing some momentum, increased demand. But I was hoping that you may be able to give us a little bit of color on two different channels that your team is pursuing the entrepreneurially urology channel, thing in imaging center channel, the academic medical center. Are you seeing differentiated level of demand or success from yourselves team and then either those channels or it seems to be broad-based, but I just wanted to check it on that and get some incremental.

Josh, I think that's a great question. And first of all, I agree with your hyper high level. There's interest in all of the channels that we've talked about historically. The imaging center, I think has been a little bit of a challenged space because they doing this period, they are basically sort of stayed true to the core part of their business. But I do think that in the next three months to six months, you will actually see imaging center channel actually starting to produce quite nicely. And we do have at least three or four system's going into the imaging centers. But the ones that we put in the last quarter or two have been more heavy towards the hospital settings. And I think -- I mean, what are the things that we are very confident is patients want this product and they're willing to pay for this product. And I think the imaging center is because they are only cash pay as compared to hospitals where they do use the free code. The imaging centers have been a little bit cautious during this time, but I think that where it is pretty clear that patient are willing to pay. And so you will see our thesis with respect to those channels really started to blossom by the second half of this year.

Excellent. Thank you. And just thinking about the per-procedure revenue that Profound is capturing. Have there been any change. I think you've talked on the fourth quarter call about a little bit of a lift potentially, but where does that stand now and how of your customers in each of those channels been responding to the current, I guess per-procedure rate that Profound is charging.

Yeah. So we -- our agreement now are typically in the range of $8,300 to $8,500, so there's a little bit better than $8,000. And there is -- first of all, we do not offer any other option. That is the only option and we do not discount on any side -- for any side. So there is a phenomenal consistency in our purchase agreements and our contracts. And that is one of the disciplines that we started with, and we plan to stay with because we think that it is a hard way to build the business that we are doing, but it is working and it will over the long haul, keep our business fairly simple, and that's one of the things we're looking for. And we are increasingly seeing that the hospitals and the imaging centers are not pushing back against this concept.

Excellent. And last question is just, I know you announced way earlier in the year about the hiring. Ken snacks and Chief Commercial Officer. But just wondering if you could help us understand better than the med device space like yourself. And just wondering if you could share and kind of early impacts that he is having on the commercial operations at Profound. Appreciate taking all the questions.

Thank you, Josh. I am very proud of Ken. I'm thrilled with the way he enjoyed us in January. And we spent to his first several weeks really get into more product and the team. He's already been able to bring couple of other season executive. He's already adjusted our sales team to really focus on utilization. And later this week, in fact, you will see the AUA meeting we have coming up, I think you will see a significant presence from our company, and it's related to the upgraded sales and marketing team. So you will definitely see significant impact of the team that will probably in particularly Ken.

Understood. Understood. Thank you so much.

Thank you. [Operator Instructions]. Our next question comes from Scott McAuley with Paradigm Capital. Your line is open.

Hi, gentlemen. Thanks for taking the questions. I just wanted to follow up again on the pipeline. I was looking at the recent deck that I think you presented at the Bloomberg conference. And you specifically mentioned there's about 15 additional POs in place for new systems to go in. And I think you just mentioned that you have signed contracts for about 10 new systems to go in through the rest of the year. Just wanted to dig into that delta, how you define purchase order versus signed contract. And again, what we should be expecting for the balance of 2022.

Sure, Scott. It's not a major issue. It's just that some of the agreements we have are for multiple sites, and not every one of those would be installed in 2022. It's possible in Q4 that we would accelerate, but I think at this point we're feeling like we could probably get to 10 more this year. But certainly in terms of the agreements, we have multi-sign agreements in place. And so that's where that difference is.

Got it. Got it. That definitely helps. And then on the on the reimbursement side, obviously, upcoming potentially appalling that application. And for consideration potentially in the fall. Do you know kind of when the results of that kind of AMA consideration would be made public kind of in advance of it potentially coming into effects kind of early 2024?

Yes. That's part -- we're very excited about that potential. We've had reviews with the society and we believe we will have support from them. So there are a number of milestones. The first one is we will trial by end of June, and so at the next time, next call we will amount the status of that milestone. The AMA meeting is, I believe, on the 27th of September, and that meeting is a public meeting. Typically, you will be able to hear support and so on, and typically, if there is a major problem, you will know on that day. But the official announcement is typically about six weeks after the meeting. So in any event, by middle of November, we will know if we have the code or we do not. And then after that, it's just a cookie cutter stuff that just those on for the following 6 to 9 months, and then by the following September, you will know what the RV are announced, and thereby will have an idea that it is covered what the payments will be. So September we'll know an officially if there's a problem. November will know if it's approved. The following September, we will have -- we'll know if what the likely payments are likely be associated with it. So that's the milestone. Scott, I wanted just to take one more minute. As I said, I'm very excited about it, and I do think that we are actually one year ahead as compared to what we originally thought. But I also don't want to undermine the fact that what gives us this confidence and why we are being so disciplined in the way we're approaching this market. Is that patients are willing to pay. So we do continue to see increase in utilization, increase in recurring revenue even during this period. And most certainly we think obviously CPT1 is a very big step for any company. But we do feel that even without that we are going to show you increase utilization and increased number of site.

That's great. Thanks for calling that out. And just lastly for me in terms of costs. In terms of increased sales and marketing costs as you're retooling the team, and R&D costs with CAPTAIN. Just any color on how you expect the cash burn to increase in the coming quarters.

Yeah. So I think I'll just start from Rashed 's comments, our R&D costs are going to fairly level at this point, there will be incremental increases because of capital but not materially significant. Overhead costs are likely to be fairly stable also. The investment again, as Rashed mentioned, we made into putting the electronic systems or ERP and CRM, so on, is also pretty much behind us and we will have maintenance cost for those things going forward. So the primary increase that you see in our cost side is all in the sales and marketing and we will grow that as the installed base grows. And so I think mapping it linearly to how the record revenue installed base grows is probably fair to think about. And I don't anticipate, I know our revenue total revenues up pretty low, but as you get a little bit higher revenue run rates, which I do believe we will later this year. I don't -- I think you will actually start to see the burn a little bit less than what it is at the moment. So we are really conscious of the burn also. And I don't think you should expect that are will continue to increase our think. It will be pretty much stabilized by the second half of this year. And then hopefully next year will start to see some improvement.

I think that's what we have said, Arun, so thank you for clarifying. As you can see that we have for Q1, R&D was only 2% year-over-year. So that means we're not expecting R&D to increase significantly at half the trial as long as [Indiscernible] before it spread out over a longer period of time, so we will see that the expenses aren't going to significantly increase. For selling and distribution, it will be adjusted as we see fit based on the revenue ramp up. So overall, the burn rate we still expect to be similar to last year.

Thanks, gentlemen. Thanks for taking the questions.

Our next question comes from Brian Gagnon from Gagnon Securities. Your line is open.

Very close. Do you guys hear me okay.

Yes, Brian, please.

It seems as if the number of new contract signings is continuing to outpace your installations. What are you guys doing to prepare for a higher level of installations throughout the balance of this year and as you progress into 2023?

Yes. By the number of contracts, certainly the bottleneck at the moment is in the new MR installation. That's really where the next bottle in [Indiscernible] (ph). But with respect to ability to install, we can really -- we have capability to do twice as much as what we're doing at the moment. We're -- we've been pretty well on that end. And our focus, actually to be honest with you right now, our primary focus is we -- on getting the new [Indiscernible] as fast as possible. So I don't think you will see a bottle of neck from -- on the installation, I think is more on the MR install. And I think where our team is really focused is on getting the utilization of the current [Indiscernible] I don't know if that answers your question completely or not. If I didn't, please ask me again. Brian, can you hear me?

And it looks like we've lost Brian. I would like to turn the call back over to Dr. Menawat for closing remarks.

Thank you so much. And I look forward to -- we look forward to updating you at the Q2 call. And if you are -- if any of you are at the AUA conference, please stop by at our booth. We have a lot to share at the booth. Thank you so much.

Thank you. This [Indiscernible] you may now disconnect.