Profound Medical (PROF) Q2 2025: Gross Margin Jumps to 73% as Tulsa Pipeline Builds for Year-End Surge

August 14, 2025 | By EarningsIQ Research

Profound Medical’s Q2 revealed a business in operational transition, with strong gross margin expansion and an evolving revenue mix reflecting the shift to a capital sales model. While revenue remained flat, management’s confidence in a back-end loaded year is grounded in a robust Tulsa Pro pipeline and major clinical milestones. Investors should track execution on capital installs, adoption of Tulsa AI for BPH, and the impact of upcoming clinical data on reimbursement and guideline inclusion.

Summary

• Margin Expansion Outpaces Revenue: Gross margin rose sharply, signaling improved product economics even as revenue was flat.
• Sales Model Transition Drives Pipeline Build: Shift to capital sales creates temporary revenue lag but expands future recurring base.
• Clinical Data and AI Module Set Up 2H Inflection: CAPTN trial completion and Tulsa AI launch position the company for accelerated adoption and payer traction.

Performance Analysis

Profound Medical reported Q2 revenue of $2.2 million, flat year-over-year, with $1.6 million from recurring sources and $650,000 from capital equipment sales. While top-line growth stalled, gross margin surged to 73 percent from 64 percent a year ago, reflecting a favorable sales mix and operational leverage as the company transitions away from its placement model. Operating expenses climbed to $15.4 million, up from $9.3 million, driven by R&D and SG&A investments, which pressured the bottom line and resulted in a net loss of $15.7 million. Cash stood at $35.2 million at quarter-end, providing a buffer for ongoing investments and commercial ramp.

Management was candid about the near-term revenue softness, attributing it to short-term delays in Tulsa Pro capital sales and reiterating confidence in a significant second-half rebound. The sales funnel is robust, with 500 prospects at the top and 80 qualified leads deep in the pipeline, supporting the company’s assertion that revenue will be “back-end loaded.” Notably, same-store procedure utilization increased 10 percent sequentially, an early indicator of underlying demand and growing installed base productivity.

• Margin Upside: Gross margin improvement underscores the scalability of the Tulsa Pro platform as the business pivots toward higher-value capital sales.
• Operating Cost Pressure: Elevated expenses reflect strategic investment in salesforce realignment and R&D, but also widen near-term losses.
• Pipeline Depth: Qualified sales opportunities and increased same-store utilization signal a foundation for accelerated recurring revenue in future quarters.

The quarter’s results frame a company in transition, with operational and financial levers being pulled to drive a more durable, higher-margin revenue model.

Executive Commentary

Strategic Positioning

1. Capital Sales Model Transition

Profound is moving from a placement (pay-per-use) model to a capital sales model, which means hospitals now purchase Tulsa Pro systems outright rather than “renting” them per procedure. This shift is expected to deliver more up-front revenue per install while expanding the base for recurring revenue (disposables, service) over time. The transition creates a temporary revenue lag, but management expects capital sales to dominate near-term results before recurring revenue resumes as the primary driver (targeting 70 percent of revenue long-term).

2. Commercial Execution and Salesforce Optimization

The U.S. sales team has been streamlined, eliminating a management layer and focusing on “grit, perseverance, and resiliency” as key attributes, rather than just prior capital sales experience. Clinical and service teams now support the sales process, freeing up sales reps to focus on funnel building and conversion. This organizational leverage is crucial given the complex, multi-departmental nature of hospital capital purchases.

3. Clinical and Reimbursement Catalysts

The CAPTN randomized controlled trial is fully enrolled and completed, with initial perioperative outcomes showing Tulsa Pro delivers less pain, shorter recovery, and no overnight stays compared to robotic surgery. This data is foundational for gaining inclusion in professional society treatment guidelines and securing favorable reimbursement. The pilot launch of the Tulsa AI volume reduction software for BPH (benign prostatic hyperplasia) has begun, with full commercial launch expected in the second half. Early results show procedure times shrinking to 60-90 minutes, enhancing physician economics and operational efficiency.

4. Pipeline and Installed Base Expansion

Active Tulsa Pro sites in the U.S. reached 60, with three more installs underway and a target of at least 75 by year-end. The pipeline includes 500 prospects, with 80 qualified leads at advanced stages. The company is also developing the Tulsa Plus model for use with interventional MRI systems, with hospital partners like Johns Hopkins and Mayo Jacksonville signaling future growth vectors.

5. Strategic Partnerships and Industry Position

Collaboration with imaging and device leaders (Siemens, Cook Medical) on interventional MRI platforms positions Profound to address workflow and multi-departmental barriers in hospital adoption, potentially accelerating future installs and expanding addressable markets.

Key Considerations

Profound’s Q2 highlights a company in transition, balancing near-term revenue headwinds with long-term growth levers tied to sales model evolution, clinical validation, and operational discipline.

Key Considerations:

• Sales Model Shift Timing: The transition to capital sales is expected to “back-end load” revenue into Q3 and Q4, making execution on installs and funnel conversion critical for full-year targets.
• Clinical Data as Commercial Catalyst: CAPTN trial outcomes and upcoming guideline inclusion are likely to drive payer coverage and accelerate adoption, especially as data matures into 2026.
• Recurring Revenue Foundation: As the installed base grows, recurring revenue from disposables and services will become the primary driver, supporting margin expansion and revenue predictability.
• AI Module and BPH Expansion: The Tulsa AI volume reduction software for BPH could move the procedure from niche to mainstream, with early pilot data supporting faster, more efficient workflow and improved physician economics.
• Operational Leverage and Cost Control: Salesforce and process streamlining should yield improved efficiency, but elevated R&D and SG&A will continue to pressure near-term profitability.

Risks

Execution risk remains high, as revenue guidance depends on converting a deep but complex pipeline into capital sales in the second half. Delays in hospital purchasing cycles, multi-departmental contracting, or slower-than-expected adoption of new AI modules could pressure results. Reimbursement and guideline inclusion are not yet fully realized, and competitive BPH procedures may pose headwinds if Tulsa fails to deliver consistent clinical or economic advantages. Cash burn, though expected to moderate, remains a watchpoint.

Forward Outlook

For Q3 and Q4, Profound expects:

• Material acceleration in capital sales and installs, driving a significant revenue ramp in the back half.
• Full commercial launch of Tulsa AI volume reduction software for BPH, expanding addressable market and improving physician workflow.

For full-year 2025, management reiterated guidance for:

• 70 to 75 percent revenue growth over 2024, with a mix shift toward capital sales in the near term and recurring revenue dominance over the long haul.

Management highlighted several factors that support this outlook:

• Robust sales pipeline with 80 qualified leads at advanced stages.
• Early positive impact of reimbursement and guideline momentum expected to accelerate in Q3 and Q4.

Takeaways

Profound Medical’s Q2 underscores the challenges and opportunities of a medtech business pivoting to a capital sales model, with gross margin strength and a robust pipeline setting the stage for a potentially transformative second half.

• Sales Model Execution: The ability to convert pipeline leads to installs will determine if management’s bullish growth targets are met, especially as capital cycles in U.S. hospitals remain unpredictable.
• Clinical and Reimbursement Leverage: CAPTN trial and Tulsa AI module are critical for payer adoption and mainstreaming Tulsa as a standard-of-care option, with initial data supporting a compelling value proposition for hospitals and patients.
• Investor Watchpoint: Monitor recurring revenue build, cash burn trajectory, and competitive BPH procedure dynamics as key indicators of sustained business model viability.

Conclusion

Profound Medical is navigating a pivotal transition, with margin expansion and clinical catalysts offsetting near-term revenue flatness. Execution on capital sales, clinical data maturation, and operational leverage will define the company’s trajectory into 2026.

Industry Read-Through

The Q2 results offer important signals for the broader medtech sector: The shift from placement to capital sales models can create temporary revenue volatility but ultimately supports higher margins and recurring revenue streams. Clinical data and AI-driven workflow enhancements are increasingly essential for payer adoption and hospital economics, especially in complex, multi-specialty procedures like prostate care and BPH. Companies competing in the urology and interventional radiology space should note the growing importance of real-world evidence, streamlined sales processes, and partnerships with imaging giants to overcome workflow and contracting hurdles. Margin expansion—despite flat revenue—highlights the value of product mix optimization and operational discipline in scaling medtech platforms.

PROF Healthcare Medical Devices Recurring Revenue Capital Sales AI Urology