Procept Biorobotics (PRCT) Q1 2025: Hydros Drives 55% Revenue Growth as IDN Adoption Accelerates
Hydros system adoption and robust handpiece sales powered standout growth, with IDNs and low-to-mid volume hospitals fueling the pipeline. Margin resilience and disciplined international expansion position Procept for continued outperformance, though tariff and capital cycle risks linger. Management’s focus on clinical validation and guideline inclusion signals a multi-year runway for share gains and new indications.
Summary
- IDN and Hydros Momentum: Multi-system IDN deals and rapid Hydros uptake expanded addressable market and install base.
- Margin Durability: Gross margin strength offset tariff risks, with operational levers identified for profitability preservation.
- Guideline and Indication Expansion: New clinical evidence and regulatory wins lay groundwork for BPH standardization and prostate cancer entry.
Performance Analysis
Procept Biorobotics delivered 55% year-over-year revenue growth in Q1, reaching $69.2 million, as both U.S. and international businesses outpaced expectations. The U.S. accounted for the majority of revenue, driven by strong Hydros system placements and handpiece sales, with 43 systems sold and 11,235 handpieces shipped at consistent pricing. Notably, international revenue doubled, with the U.K. leading procedural and capital sales acceleration, reflecting early success of a disciplined global rollout strategy.
Gross margin expanded by 750 basis points year over year to 63.9%, supported by higher average selling prices and operational efficiency. Operating expenses increased 28%, reflecting ongoing investment in commercial infrastructure and R&D. Adjusted EBITDA loss narrowed to $15.8 million from $20.4 million, with management reaffirming a clear path to profitability as scale and pricing leverage improve.
- IDN Bulk Buys Surge: 45% of system sales linked to multi-system IDN deals, a step-change in corporate-level adoption.
- Low-to-Mid Volume Hospital Penetration: Half of Hydros placements targeted historically underpenetrated segments, expanding market reach.
- International Traction: U.K. procedural growth provides a template for future ex-U.S. expansion, with Japan next in focus.
Capital sales cycles remain steady at six to nine months, with no material pipeline attrition or conversion headwinds reported. Management notes that deferred Q4 procedures were offset by early Q1 headwinds, indicating underlying procedural growth is organic and sustainable.
Executive Commentary
"We are seeing multiple factors continue to trend positively, allowing us to execute our long-term strategic plan. The U.S. Hydros launch is gaining momentum with our pipeline and sales funnel growing nicely. We launched significantly more greenfield accounts in the first quarter compared to any other quarter."
Reza Zadno, Chief Executive Officer
"We believe our path to profitability is becoming increasingly clear as reflected in our recent performance. This clarity is driven by our gross margin expansion into the mid-60% range, which is a direct result of our ability to leverage existing overhead at higher revenue levels, along with increased average selling prices for systems and handpieces."
Kevin Waters, Chief Financial Officer
Strategic Positioning
1. Hydros Platform and IDN Penetration
Hydros, Procept’s next-generation robotic system for BPH (benign prostatic hyperplasia), is catalyzing a shift from single-hospital sales to corporate-level, multi-system IDN (integrated delivery network) agreements. This transition expands the addressable market and accelerates standardization, with nearly half of Q1 system sales tied to IDN bulk buys. Hospitals increasingly view robotic surgery as a strategic imperative for revenue growth and patient retention, insulating Hydros from typical capital cycle volatility.
2. Low and Medium Volume Hospital Expansion
Penetration into low- and medium-volume BPH hospitals marks a new phase of growth. Historically, 70% of placements were in high-volume centers, but Q1 saw a balanced split, with evidence that Hydros can convert lower-volume sites into high-utilization programs. This dynamic mirrors the playbook of successful robotic surgery franchises and supports a long runway for install base expansion.
3. Clinical Evidence and Guideline Influence
Recent WATER-3 trial results strengthen the clinical case for aquablation, showing comparable efficacy to laser enucleation with superior safety outcomes and zero transfusion or stress incontinence events. Management expects these data to drive revisions in international urology guidelines, broadening the eligible patient pool and reinforcing the technology’s reproducibility and learning curve advantages.
4. International and New Indication Expansion
Disciplined international expansion prioritizes winning in key markets—notably the U.K., where NICE endorsement and procedural volume growth are providing a blueprint for future country entries. Japan is slated as the next major market, with broader ex-U.S. rollout paced to resource and support wins. Additionally, Procept is leveraging its clinical trial engine to pursue a prostate cancer indication, with FDA IDE (investigational device exemption) approval for a randomized trial against prostatectomy, a first in the field.
5. Margin Management Amid Tariff Risks
Tariff exposure is concentrated in ultrasound components sourced from China, but robust U.S. supply chains and inventory buffers limit near-term impact. Management expects a potential $5 million gross margin headwind in 2025 if tariffs persist, but has identified offsetting operational efficiencies to protect EBITDA and long-term margin objectives.
Key Considerations
Q1 marked an inflection in both commercial execution and clinical validation, positioning Procept for multi-year growth and margin expansion. However, investors should monitor the durability of IDN-driven growth, the pace of international scale, and the evolving reimbursement and tariff landscape.
Key Considerations:
- Hydros Standardization Opportunity: IDN and hospital network interest in standardizing BPH care on Hydros could accelerate install base and utilization rates.
- Margin and Profitability Path: Gross margin expansion to mid-60% range, with EBITDA loss narrowing, signals scale leverage, but tariff volatility remains a watchpoint.
- International Playbook: The U.K. experience demonstrates potential for rapid procedural growth, but disciplined market entry is key to replicating success.
- Clinical and Regulatory Tailwinds: WATER-3 and upcoming prostate cancer data may drive guideline inclusion and open new indications, creating a defensible competitive moat.
- Capital Environment Resilience: Despite broader medtech CapEx caution, hospital demand for robotic platforms remains robust, supporting forward revenue visibility.
Risks
Tariff escalation on Chinese-sourced ultrasound components poses a gross margin risk, with a potential 150 basis point impact if rates persist. While management has identified cost offsets, sustained tariff pressure or broader supply chain disruptions could challenge margin targets. Additionally, the pace of international expansion and IDN-driven adoption may be sensitive to macroeconomic or hospital capital budget shifts, though current momentum appears resilient. Competitive threats from alternative BPH therapies and evolving reimbursement policies remain ongoing watchpoints.
Forward Outlook
For Q2 and Q3 2025, Procept expects:
- Continued strong system and handpiece sales, with utilization rates in line with Q1.
- Operating expenses of approximately $75 million in Q2.
For full-year 2025, management reaffirmed:
- Total revenue guidance of $323 million (44% YoY growth).
- U.S. system sales of ~210 units at $430,000–$440,000 ASP.
- Handpiece sales of ~52,500 units (63% YoY growth).
- International revenue of $34.5 million (44% YoY growth).
- Adjusted EBITDA loss of $35 million, with potential tariff headwinds offset by cost controls.
Management highlighted procedural momentum, robust greenfield account launches, and manageable tariff exposure as key supports for guidance, with a focus on clinical evidence generation and international market wins in the second half.
Takeaways
Procept is executing a dual-pronged strategy of U.S. Hydros expansion and disciplined international growth, with margin structure showing resilience despite tariff pressures.
- Hydros Adoption Fuels Growth: IDN and low-to-mid volume hospital penetration are expanding the install base and driving handpiece utilization, supporting multi-year growth visibility.
- Margin and Profitability Trajectory: Operational leverage and pricing power are improving gross margin, while cost discipline offsets external shocks.
- Clinical and Regulatory Catalysts: New trial data and LCD wins position Procept to influence guidelines and enter new indications, underpinning a defensible market position.
Conclusion
Procept’s Q1 results underscore the strength of its Hydros franchise and the scalability of its commercial model. With clinical evidence building and operational risks managed, the company is well positioned to capture share in both BPH and adjacent urology markets, though vigilance on tariffs and capital cycles remains warranted.
Industry Read-Through
Procept’s performance highlights the enduring appeal of robotic platforms in hospital capital budgets, even amid macro uncertainty and medtech CapEx scrutiny. The shift toward IDN-level standardization, underpinned by robust clinical evidence, signals a broader trend in medtech: winning technologies are those that can drive reproducible outcomes, operational efficiency, and guideline inclusion. The international playbook, especially in the U.K. and Japan, provides a template for other device companies seeking to balance growth with market depth. Finally, tariff and supply chain management will remain central themes for global medtechs as geopolitical risks persist.