Greetings and welcome to the EDAP TMS fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require Operator assistance during the conference, please press star, zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. John Fraunces of LifeSci Advisors. Thank you, you may begin.

Good morning. Thank you for joining us for the EDAP TMS fourth quarter and full year 2023 financial and operating results conference call. Joining me on today’s call are Ryan Rhodes, Chief Executive Officer, Ken Mobeck, Chief Financial Officer, and François 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 would now like to turn the call over to EDAP’s Chief Executive Officer, Ryan Rhodes. Ryan?

Thank you John and good morning everyone. We are pleased to report strong operating results for the fourth quarter, capping a highly successful year in which we established Focal One robotic HIFU as one of the fastest growing treatment options in the management of prostate cancer. EDAP reported record fourth quarter 2023 total revenue in U.S. dollars of $21.3 million, an increase of 31.4% over the fourth quarter of 2022. Many of the potential deals that had reached an advanced stage of discussion in the third quarter eventually closed in the fourth quarter, which reflects the seasonality of the capital equipment purchasing cycle. More importantly, we believe that the final decision in selecting Focal One was based on a growing recognition amongst hospitals that the Focal One robotic technology platform represents a strategic capital investment to help maintain and attract prostate cancer patients to their facilities. For the full year 2023, EDAP reported record revenues in U.S. dollars of $65.4 million, an increase of 12.9% over 2022. Full year HIFU revenue came in at $22.3 million, an increase of 35.6% over full year 2022, which again reflects an increased number of Focal One system placements and continued strong procedure volumes year-over-year. In the fourth quarter of 2023, we placed a quarterly record of 12 Focal One systems. Demand for Focal One continues to grow in a very balanced manner with placements made in the U.S. and outside the U.S., and across both academic and community urologists. We also secured some notable wins during the quarter, which included a Focal One sale to New York University Langone Hospital, which is ranked number three in urology hospitals in the U.S. News and World Report. According to this same report, Focal One is now in seven of the 10 best hospitals for urology…

Thanks Ryan, and good morning everyone. I will briefly review full year 2023 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 1.0846 for the fourth quarter of 2023. EDAP set a record for calendar year revenue in 2023. Total revenue for the full year was €60.4 million, an increase of 9.6% as compared to total revenue of €55.1 million for the full year 2022. The increase in revenue was due to higher sales of Focal One and Exactvu units versus the prior year. Notably, the HIFU division revenue grew 37.1% year-over-year, reflecting both an increased number of Focal One sales and procedure volumes. With respect to U.S. Focal One procedures, the number of procedures increased 118% year-over-year. Now I will review our fourth quarter results. Total revenue for the fourth quarter of 2023 was also a quarterly record, coming in at €19.6 million, an increase of 24.8% as compared to total revenue of €15.7 million for the same period of 2022. The increase in revenue was due to higher sales of Focal One and Exactvu units versus the prior year period. Looking at revenue by division, total revenue in the HIFU business for the fourth quarter of 2023 was €7.5 million as compared to €5.4 million for the fourth quarter of 2022. The increase was driven by 10 Focal One systems sold in the fourth quarter versus seven systems sold in the fourth quarter of 2022. We also experienced 88.6% year-over-year growth in worldwide disposable-based revenues, reflecting strong procedure growth during the quarter. Total revenue in the LITHO business for the fourth quarter of 2023 was €2.3 million, as compared to €3.6 million for the fourth quarter…

Thanks Ken. In summary, we are pleased with our fourth quarter and full year 2023 performance, and we are excited about the progress we expect to make throughout 2024. It is clear that the ongoing advances in both testing and diagnosis of prostate cancer led to improvements in the ability to better risk stratify patients with their disease. With these advances, we believe the benefits of focal therapy along with the therapeutic utility afforded by Focal One robotic HIFU allows patients another treatment option for management of their cancer without the side effects of radical therapy. Our technology is enabling patients to access a non-invasive, non-surgical procedure that provides excellent oncologic control coupled with the potential for improved outcomes with respect to maintaining sexual function and urinary continence. Looking ahead, we expect our momentum to continue as the number of Focal One HIFU placements and procedures continues to grow. With that, I will now turn the call back over to the Operator for questions. Operator?

Thank you. At this time, we will be conducting a question and answer session. [Operator instructions] Our first question comes from the line of Michael Sarcone with Jefferies. Please proceed with your question.

Hey, good morning, and thanks for taking my questions. Just to start, do you think you can--you know, we’re basically through first quarter this year. Can you talk about or give us any color on how activity has trended so far through this year, and what the sales funnel looks like?

Yes, hi Michael. Again, coming off of 2023, we rolled into 2024 and, as noted, we continue to build our pipeline and continue to see growth in adoption, both obviously in the U.S. and outside the U.S. We can’t really comment on anything too much beyond that, but I’d say we have good market momentum, a lot of great activity in play, and again we’re looking to continue to drive top line growth, top line sales, and procedure adoption as referenced. Again, we’re excited. I know we’re almost through first quarter, but we continue to make notable progress, and I think we’re excited for the rest of the year.

All right, thanks Ryan. Then just on the capital equipment environment, you were pretty clear, talking about--you know, the last time we got an update, no real change but a lot of the 4Q systems were just a result of the normal sales process running its course. Could you just give us an update on what you’re seeing in terms of hospitals’ appetite for capital equipment?

Yes, so I would say there’s certainly an appetite and interest for disruptive capital equipment that is strategic in nature for the hospital. As we’ve stated before, we sell a clinically necessary, strategic revenue-enhancing service line in a very notable cancer space, prostate cancer, so again some hospitals will see that opportunity and seize on it quickly in the beginning, others will take more time to go through their process, looking at economics and looking at the timing of making the investment. We think we’ve got a very strong story and we know--you know, focal therapy has never been more prominent in the treatment of prostate cancer, and as noted, we have a technology with Focal One to lead in the category. However, we do see hospitals obviously taking time to work through their processes, and we lead with a cash sale, notably. Again, we work closely with them and alongside of them as they do pro forma analysis and other, and we believe we’ve got a really great story for them and focal therapies in play today. You know, other than that, cycle times will vary by hospital, by region, type of hospital sometimes looking academic versus community. But yes, I would just say hospitals are definitely spending more time to look and differentiate between operational capital expenses versus strategic capital investments, and we stay close with them in terms of interpreting our story back to them and we see that as part of our strategy as we look out through the rest of 2024 and beyond.

Okay, great. Thanks Ryan. I’ll just squeeze one more in. When you and Ken think about the business and the outlook, you’re not providing guidance today. Where do you want to be in terms of the position of the business before you get more comfortable providing full year guidance?

Yes Michael, I think again, we’re early in the adoption curve for an exciting category, and again I think when we see more predictability in some of the key metrics, I think we’ll be a lot more comfortable of being able to provide some type of outward guidance. I think today, again, we’re early in the market here and that’s a time where there is some seasonality, call it, and some lumpiness in terms of when they buy capital, yes/no, what quarter. Our pipeline remains strong, we continue to grow procedures, and I think we’ll just have to wait a little longer until we’re comfortable.

Michael, just to follow up, because we talk about this all the time, we look back on last year’s performance and the challenging environment we had in Q3, which we made up in Q4, that’s just a good example of why we just need more time to really learn this business, to continue to invest and move up the adoption curve, as Ryan described. That’s going to give us what we need to provide you guys better visibility in the business going forward.

Got it, thank you both.

Thank you Michael.

Thank you. Our next question comes from the line of Frank Takkinen with Lake Street Capital Markets. Please proceed with your question.

Great, thanks for taking the question. Congrats on all the progress. I’m going to also start with one, hopefully, on expectations, at the risk of asking too much. But around placements, I think we’re coming off a year where we did about 25 systems, if I’m looking at it correctly. 2022, I think was high teens - obviously that’s a good growth figure. One piece of commentary you did provide was definitely your anticipation to continue to grow, so maybe not thinking about it from a quarter-to-quarter basis but thinking on it from a year-to-year basis, my assumption is relatively robust growth in the system placement numbers. Obviously there’s moving pieces between a sale and a placement, but is that a fair assumption, that we should see a fair growth number in the system placement expectation for 2024?

Yes Frank - yes, absolutely. I mean, clearly our focus is selling systems. We do place systems, as noted, and most of the time those are driven by the fact that hospitals are working towards their budget cycle and they want to start the program and they don’t want to delay it, but they’re using it as an opportunity for a bridge to purchase, or an operational lease with the goal of bridge to purchase. Again, we would expect growth as referenced. We continue to activate more hospitals in our pipeline and we continue to look at the procedure adoption which I think is also fuelling some of the growth, as noted, and again we’re early in the market but certainly excited for a good performance here in 2024.

Okay, that’s helpful. Then maybe shifting over to some general commentary around the on-boarding process and utilization expectations. My assumption is some of these systems go in and then there’s probably a process of weeks, months or maybe quarters until your treating urologist is comfortable with the system. Maybe walk through the on-boarding process, how long that typically takes and what kind of utilization metrics we can get to at different goal posts, maybe three months, six months, 12 months.

Yes, the on-boarding process, I’d say first of all, we get better and better at this process, and I think part of that is we understand better how to launch the programs, and we sell programs. We also see hospitals starting to book patients sooner for treatment, even in advance of them actually purchasing or finalizing the purchase of the system, so that helps us ramp quicker. We’ve got a training team and an apps team that helps in the on-boarding, and of course our direct clinical sales team, they take an active role in that process. I think how we do it, how we deliver it has become more efficient. We’ll continue to work on that, we do track metrics around this. I think it’s hard to give you a number of procedures in a period of time, but clearly the first few months tend to ramp at a different pace than the latter months, because as they’re looking for patients and patients can come into that favorable intermediate risk category, they may be starting their program with patients that have failed radiotherapy, so they may be looking at a different type of patient. But all in all, I think we’ve gotten better at the process, there are on-boarding metrics that we share internally. We don’t share procedure numbers today outside the company, but I think we’re excited with the momentum and getting better at the on-boarding process and in shortening the cycle time from the period when they get the technology into their facility and they start doing cases. Again, I think as we get better as a company, those on-boarding processes improve over and over. That’s what we can share with you. We’re excited about how we do it today, but we’re always looking for improvements to make that process better and better.

Okay, makes sense. I’ll stop there. Thanks for taking the questions.

Thank you Frank.

Thank you. Ladies and gentlemen, as a reminder, if you’d like to join the question queue, please press star, one on your telephone keypad. Our next question comes from the line of Ramakanth Swayampakula with HC Wainwright. Please proceed with your question.

Thank you. Good morning folks. Ryan, I know you don’t give the number of procedures, but just want to get qualitative commentary from you in terms of how you see the flow in terms of procedures once you have the new reimbursement in place starting from January 1, over the last three months; and also in terms of placements, do you see the number of leads increasing post-January 1 with the new reimbursement in place?

Yes, so I think we shared on the call, RK, that one of the things that we looked at, obviously, is reimbursement continued on in January. We maintained an APC level 6 status within CMS. There was a little increase too, a couple hundred dollars at the facility level - that’s always good, I think, for the hospitals. Again, this is all about providing patient access. When we work with those hospitals, which is common, we look at the pro forma analysis, look at reimbursement which may be very specific to their area. As you know, there’s a calculation, as I referenced in my comments, that there’s an average number but it may be higher, it’s based on facility point of care because that takes into consideration the [indiscernible] labor index for that facility - that’s an average number I shared. The reimbursement has been very favorable. That really helps when hospitals are looking to make the investment, they obviously want to look at the economics because we are a new service line, and we fare well in that process. I think again, maintaining our APC level 6 effective January 1 helps us to continue on the pathway we’re on, hospitals make continued investments, they look at the technology, they look at the opportunity to move first in the market as it relates to focal therapy, and many hospitals want to take advantage and do first mover in their markets, not unlike other technologies or other service lines when they’re early in their adoption. In terms of procedure impact, again I think it certainly helps on the procedure side, but I think more importantly as we place more and more systems, we create a higher level of patient awareness which should lead to more or increased patient demand, and if we can continue on that pathway, our plan obviously is to do more procedures per system, so each facility performing more procedures as we ramp these programs, and that’s over time creating more demand in the market for other hospitals to make the necessary investment in starting a Focal One program.

Thank you for that. You talked about how the Swiss reimbursement has helped get a sale in Switzerland, and you were expecting similar things to happen in France. Are there any other geographies that could also help increase placement throughout 2024? Then a question on endometriosis, I understand the data is going to be coming out in 2024 in the second half. In terms of filing, what else needs to be done, and potentially when could you file on this?

Yes, so RK, a couple of--let me try to answer those questions. When you first talked about markets, we received reimbursement in Switzerland in July of last year, so the Thun placement, Holmat Clinic, was a notable win coming off reimbursement. We see more opportunity in Switzerland, we have placements in other hospitals in Switzerland, so we want to take advantage of that. As far as France and, I would say, another market as noted, is the HAS recommendation from the French authorities, they are going through their review process to come back in reference to reimbursement. We hope to hear something sometime later this year - we’re not sure yet. We’re standing by, as noted, and so it’s going to be important for us to recognize what that reimbursement is and activate on that. Changing over to endometriosis, again the study data, as noted, from the Phase III study, we completed patient enrollment at the end of January. We made a notable press release regarding that. We expect to have data to share in the second half of this year, as we discussed; but more importantly, I think as you were talking toward the end, about our breakthrough designation with the FDA, that allows us the ability to move faster in the conversations back and forth with the FDA, so our goal there is--you know, looking at a data plan that’s acceptable per the standards of the FDA, and being able to work as quickly as we can through that process. I cannot give a timeline right now because we’re so early in the process, but the good news is we have a fast-track process in place to be able to interact with the FDA through getting the clearance at some near future date. Again, we’ll continue to provide updates on an ongoing basis as we get closer to milestones in receiving that clearance, and that’s kind of where we are.

Thank you. Thanks for taking the questions.

Thank you RK.

Thank you. At this time, I’m showing no other questions. I’ll turn the floor back to Mr. Rhodes for final comments.

I want to again thank everyone for joining us on today’s call. We look forward to providing another update for everyone on our first quarter 2024 results in May. Again, thank you.

Thank you. This concludes today’s conference call. You may disconnect your lines at this time. Thank you for your participation.