Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Webb Campbell with Gilmartin Group. Please go ahead.
Good afternoon, and thank you for joining PROCEPT BioRobotics' third quarter 2026 earnings conference call. Presenting on today's call are Larry Wood, Chief Executive Officer, and Kevin Waters, Chief Financial Officer. Before we begin, I'd like to remind listeners that statements made on this conference call that relate to future plans, events, or performance are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. While these forward-looking statements are based on management's current expectations and beliefs, these statements are subject to several risks and uncertainties, assumptions, and other factors that could cause results to differ materially from the expectations expressed on this conference call. These risks and uncertainties are disclosed in more detail in PROCEPT BioRobotics' filings with the Securities and Exchange Commission, all of which are available online at sec.gov.
Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today's date, November 4th, 2026. Except as required by law, PROCEPT BioRobotics undertakes no obligation to update or revise any forward-looking statements to reflect new information, circumstances, or unanticipated events that may arise. During the call, we'll also reference certain financial measures that are not prepared in accordance with GAAP. More information about how we use these non-GAAP financial measures, as well as reconciliations of these measures to their nearest GAAP equivalents, are included in our earnings release. With that, I'd like to turn the call over to Larry.
Good afternoon, and thank you for joining us. This quarter, we continue to execute against the priorities we set at the beginning of the year and delivered total revenue of $98.3 million, reflecting 18% year-over-year growth. We completed over 13,400 U.S. procedures in the quarter, growing 22% year-over-year, led by our HYDROS accounts, where we continue to see strong utilization. With our installed base actively transitioning to HYDROS and our dedicated launch team supporting new systems, we continue to strengthen our foundation for healthy utilization and growth. U.S. handpiece and consumable revenue grew over 21%, with handpieces sold at 106% of procedures, roughly consistent with our full-year projections of a one-to-one ratio and reflecting normalized field inventory. Handpiece pricing remains strong at approximately $3,570, reflecting our continued price discipline. Turning to U.S. systems, we placed 62 HYDROS systems in the quarter, including 20 replacement systems.
We continue to accelerate the upgrade of legacy AquaBeam systems to HYDROS. While the greenfield placements fell short of our expectations for Q3, this was largely a function of timing, and we are seeing healthy overall capital demand continue into the fourth quarter. As Kevin will discuss, we remain on track to overachieve our total system guidance for the year, and we will continue to focus on the substantial greenfield opportunity ahead while meeting strong interest for system upgrades. We believe the current pace of our upgrade cycle validates the benefits and differentiation of HYDROS, as well as the significant underlying interest in AquaBeam. System pricing discipline remains fundamental to our strategy, and our team continues to execute with that discipline in the quarter.
Our U.S. HYDROS system ASP was approximately $495,000 in the third quarter, consistent with our ASP in the second quarter and up from $435,000 for both the third quarter and full year 2025. I would like to provide an update on our commercial organization and the initiatives we put in place this year to strengthen our business for the long term. The foundational work of these initiatives is now complete, and the organization is now fully focused on execution. Our sales representatives are out of routine case coverage and in physician offices driving therapy adoption and referrals. Our launch team now supports the majority of new HYDROS placements, and our replacement program is running ahead of plan. Each of these changes is designed to support future growth.
Last quarter, we discussed that utilization challenges were primarily driven by lower-than-expected performance from our AquaBeam systems, while HYDROS continued to perform within our expectations. To better understand these trends, we conducted a detailed review of account-specific drivers. While several factors contributed, the single biggest factor is surgeon migration from AquaBeam to HYDROS. As more urologists gain access to both platforms across hospital locations, we are seeing them increasingly choose HYDROS for their cases. In the third quarter, procedure volume at HYDROS accounts was more than 35% higher than legacy AquaBeam accounts. This is understandable considering the many benefits of HYDROS, including its enhanced imaging, AI-driven planning, and more efficient workflow. In some of these cases, the procedure is being deferred as the surgeon works to schedule the procedure on the newer platform.
Overall, the ongoing transition of our installed base to HYDROS and the pace of procedures at new accounts, now supported by our dedicated launch team, are what drive our conviction in strong, sustainable growth looking forward. Our replacement strategy will enable us to quickly expand the HYDROS account base as it continues to ramp. We are pleased to have 20 replacements this quarter, bringing the year-to-date total to 36 systems. In addition to the capital sale, each replacement system gives us an opportunity to relaunch the account using our launch team model, which continues to build capacity. During the quarter, approximately 70% of our total systems were launched by the launch team. We remain on track to have the capability to launch 100% of systems by year-end. We continue to see launch team systems have a shorter time to first cases, as well as higher than historic utilization.
We also continue to take Aquablation marketing directly to patients. Our educational campaigns remain active across the U.S. with television, radio, digital, and social media. We believe this has the potential to expand the market by reaching a greater proportion of the millions of men with BPH who are looking for a better treatment option. We continue to see increased web traffic, as well as feedback from sites that patients are proactively asking about Aquablation for their treatment. Turning to our clinical programs, we continue to make progress across our clinical and regulatory initiatives this quarter. Aquablation's clinical foundation has never been stronger. Earlier this year, both the European Association of Urology and the American Urological Association strengthened their recommendations for Aquablation in their BPH treatment guidelines. With approximately 250 peer-reviewed publications, Aquablation remains one of the most extensively studied technologies in BPH.
Looking ahead, we will continue to invest in clinical evidence and technology to maintain our leadership position and expand our growth opportunities. WATER IV, our randomized trial comparing Aquablation therapy to radical prostatectomy in patients with prostate cancer, is fully enrolled with 280 patients. We remain on track to present the primary endpoint results at the AUA annual meeting in May of 2027. We are also advancing WATER IV AS, our second randomized protocol under an FDA-approved IDE, which will evaluate Aquablation against active surveillance in up to 333 men with Grade Group 1 and 2 disease globally. Together, these trials reflect our commitment to building the highest level of clinical evidence. Lastly, I'd like to highlight our international progress. We continue to expand with discipline, focusing on markets with attractive reimbursement and capital dynamics.
The U.K. remains our largest international market, and we continue to see a strong capital pipeline and growing adoption there. We also continue to make progress on the opportunity in Japan. With that, I will turn the call over to Kevin to walk through our financial results and guidance in more detail.
Thanks, Larry. Total revenue for the third quarter of 2026 was $98.3 million, representing 18% year-over-year growth. U.S. revenue totaled $85.8 million, an increase of 16% compared to the third quarter of 2025. Turning to U.S. procedures, we completed more than 13,400 U.S. procedures during the third quarter of 2026, representing approximately 22% year-over-year growth. U.S. handpiece and other consumable revenue totaled $53.9 million, an increase of 21% compared to the third quarter of 2025. Handpiece demand strengthened sequentially with a handpiece-to-procedure ratio of approximately 106% compared to 98% in the prior quarter, along with an increase in handpiece average selling price to approximately $3,570. U.S. system revenue totaled $24.7 million in the third quarter, flat year-over-year. We shipped 62 HYDROS systems with an average selling price of approximately $495,000 for new U.S. system placements, reflecting continued pricing strength and discipline.
Shipments included 20 replacement systems, two systems under operating leases, and three systems for which revenue recognition was deferred pending receipt of payment. We expect to receive those payments in the fourth quarter and will recognize the associated revenue in Q4. As Larry mentioned, several anticipated system placements shifted into the fourth quarter due to shipping timing. We remain on track to surpass our initial guidance for total system revenue for the full year. International revenue in the third quarter of 2026 was a record $12.5 million, representing year-over-year growth of 32%. As Larry mentioned, we continue to see a strong capital pipeline and growing adoption in the U.K. and are advancing successfully toward our growth objectives in Japan. Moving down the income statement, gross margin was 66% in the third quarter compared to 65% in the prior year period.
Total operating expenses for the third quarter of 2026 were $92.5 million compared to $77.2 million in the prior year period. The increase reflects continued investment in our people, product development, clinical studies, and sales and marketing programs. We believe these investments position us for long-term growth while strengthening our clinical and technology leadership. Net loss for the third quarter of 2026 was $26.5 million compared to a net loss of $21.4 million in the third quarter of 2025. Adjusted EBITDA was a loss of $9.8 million compared to a loss of $7.4 million in the prior year period. Cash, cash equivalents, and restricted cash totaled $221.4 million as of September 30th, 2026, providing us with a strong balance sheet to support our strategic priorities. Moving to our 2026 financial outlook.
We continue to expect full year 2026 total revenue to be in the range of $390 million-$410 million, representing growth of approximately 27%-33% compared to 2025. We also continue to expect international revenue of $50 million-$51 million. Turning to procedure guidance. Based on the procedure trends we see today, we expect to land around 54,000 procedures for the year, consistent with our latest guidance of 54,000-56,000 procedures. This outlook implies that we will see the strongest sequential procedure growth for the year in Q4, supported by typical seasonality and a growing proportion of HYDROS systems in our installed base. With respect to new U.S. system pricing, we expect average selling prices to remain relatively consistent with the $495,000 achieved in each of the past two quarters.
Given the strength of our replacement cycle and continued enthusiasm for HYDROS, we now expect 50-60 replacement sales in 2026 at an average selling price of approximately $315,000. Turning to gross margins. We expect fourth quarter gross margins to be approximately 65%. We also expect full year 2026 operating expenses to now be in the range of $359 million-$363 million, reflecting a disciplined increase in commercial investments aligned with our objective of accelerating procedure growth. We continue to expect adjusted EBITDA loss to be in the range of $35 million-$30 million for the full year, meaning we are on track for positive adjusted EBITDA in the fourth quarter of 2026. Looking ahead to 2027, we view approximately 20% year-over-year revenue growth as a starting point for planning, with our initiatives aimed at delivering stronger growth.
We will provide more detail when we issue formal 2027 guidance. With that, I will turn the call back to Larry for some closing remarks.
Thanks, Kevin. We have built a stronger company across every aspect of the organization this year. Disciplined pricing is now embedded across our team and customers. Our installed base is increasingly transitioning to HYDROS, and our dedicated launch team is supporting the majority of new systems, all strengthening our foundation for long-term success. We remain on track to deliver the 2026 revenue and growth guidance we set in February, and to meet or exceed our initial targets for new systems sold. By continuing to upgrade legacy systems and expand into greenfield opportunities, including potentially prostate cancer, we are well-positioned to drive durable, high-quality revenue growth, continued gross margin expansion, and sustainable profitability over time. Most importantly, we are continuing to improve the treatment options available for physicians and reach more men with debilitating conditions of BPH every day, and our commitment to that mission has never been stronger.
With that, I'd like to open it up to questions.
Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. We ask that you please limit to one question and one follow-up. Please stand by. Our first question comes from the line of Josh Jennings of TD Cowen. Your line is now open.
Hi, good afternoon. Thanks, Larry and Kevin. Appreciate the update. Just wanted to punch in and learn how you are experiencing the competitive landscape, whether it is evolving at all. I know there has been some concerns around some federal reimbursement for other BPH procedures, including prostate artery embolization. Maybe just help us understand what you are seeing in the field, what you are facing, if there are any incremental headwinds, or it seems like you are navigating through.
Yeah. Thanks, Josh. No, I don't think the competitive dynamics changed in the quarter or are any different than what we have been seeing. We continue to see strong utilization on our HYDROS system, and that's why we remain focused on our replacement strategy and our launch teams and upgrading those. I don't think there's been any real change in dynamic. I think when we talked about Q3 on the Q2 call, we said that we expected to see a sequential uptick, but at the same time, we anticipated the typical Q3 seasonality with summer vacations and whatnot, and I think the utilization quarter was largely in line with what we had anticipated.
Excellent. Maybe just one follow-up just on profitability and just the march towards EBITDA positivity. Maybe just help us think about just any headwinds or tailwinds as we are moving through for 4Q 2026 and throughout the year in 2027 on a quarter-to-quarter basis, and how we should be thinking about the sustainability of getting to EBITDA positive era. Thank you.
Yeah, thanks, Josh. Regarding Q4, we do believe we are going to be EBITDA positive on both the low and the high end of the guidance. Q4 itself would be somewhere in the +$3 million to +$9 million range, is what our Q4 guidance would imply, and we feel comfortable about meeting that objective given that we're here in the fourth quarter. Regarding 2027, while we did guide to a revenue number, we do believe that that revenue number ultimately could support sustainable profitability. Just to put some metrics behind that, if you look at 2026, we essentially grew operating expenses at about 20%, but our revenue range is somewhere in the 27%-33% range, and we would expect that leverage to improve in 2027, leading to sustained profitability as well.
Appreciate that.
Thank you. Our next question comes from the line of Vijay Kumar of Evercore. Your line is now open.
Hey, this is Nick on for Vijay. You said approximately like 20% of revenue growth is a starting point for 2027. Can you unpack kind of the assumptions around procedures versus capital and what kind of needs to go right to maybe get above that? Thanks.
Sure. Yeah. Thanks for the question. Yeah, we wanted to provide sort of a base case starting point for planning purposes. When we exit Q4, we'll have a lot more visibility into some of our initiatives and some of our other programs, and we'll be able to provide more detailed guidance, but we wanted to provide a starting point. I think what underlies those assumptions is capital probably being similar in 2027 to what we saw in 2026. From a utilization standpoint, it doesn't imply that we'll see huge differences in terms of our patient activation programs and some of the other things, and that's why we call it a base case. There's certainly nothing in there as it relates to cancer or anything else, and we won't be able to provide really any guidance on that until we see the data and engage with FDA.
But we wanted to provide a base case just so people knew a basic starting point.
Great. Thank you.
Thank you. Our next question comes from the line of Samantha Munoz of Piper Sandler. Your line is now open.
Hi. Thanks for taking our question. I guess I wanted to touch on the procedure volumes. They came in a touch light versus what we were expecting this quarter, and it seems like there is a pretty big step-up next quarter, like you mentioned. I guess could you just provide any more color on that? Any more details on what you've seen so far in Q4 to kind of give you that confidence? Thanks.
Yeah. Thank you for the question. I don't want to get too much into Q4. What I can say is about Q3. We saw the typical seasonality that we saw in the summer months with vacations and lightness. September was significantly stronger, and we had a strong September, and we expect that to continue into Q4. Seasonality tends to work in our favor in Q4 as people are getting their elective procedures done before their deductibles reset, and traditionally, we see a step-up, and that's what gives us confidence that we can be around that 54,000 number, which was within our original guidance that we provided.
And if you just look at kind of what the sequential growth implies, it's somewhere in the 14%-29% range sequentially. To support Larry's commentary around seasonality, if you look at historical context, 2025 Q4 procedures grew about 11% sequentially. Q4 of 2024 was about 24%. So it's in line with the normal seasonality we would expect in Q4, remembering that the prior two years didn't have a lot of the sales force initiatives that we have gone through this year as well.
Thank you.
Thank you. Our next question comes from the line of Nathan Treybeck of Wells Fargo. Your line is now open.
Great. Thanks. Larry, just at a high level, can you just touch on some of the key priorities for you for next year?
Sure. Well, I mean, the biggest thing is driving our utilization. We've been very purposeful about upgrading some of our legacy AquaBeam systems and converting them to HYDROS. As we exit this year, we anticipate being able to launch 100% of our system placements next year utilizing the launch team, and we continue to see positive metrics out of our launch team systems, which is certainly encouraging. We have our direct-to-patient programs that are running as well, and we continue to have a lot of early indicators on those that those are positive in terms of our ability to reach patients and activate them to seek Aquablation by name. I think those are our priorities. We need to maintain, obviously, our capital momentum and the other things. Next year, we also have potentially cancer coming.
We'll have our data at AUA in May, and that'll be the first tranche of the primary endpoint, and then we'll have further data coming later in the year. Once we get close to that data and we engage with FDA, we'll be able to provide more detail on that. We're super excited about 2027 and the opportunity it presents.
Okay. Thanks. In terms of the replacements that you're doing, any anecdotal color you could share on, does a replacement lift the utilization within the account and how that works? Does it expand the number of surgeons doing the procedure? Just any color you could give on how the replacements are impacting utilization.
Yeah. Thanks. We've been very pleased with how the replacement cycle has gone. When we started the year, we basically just wanted to try to establish a program, and I think we had guided that we would do maybe 5-10 replacement systems for the full year. There's just been a lot more energy and excitement for hospitals to upgrade their legacy systems, which is very encouraging. I think from our side, it's the opportunity to relaunch the program, and we can bring our launch team in, and we can relaunch it and set a new set of expectations and really make sure people understand the differentiating characteristics of a HYDROS versus a legacy AquaBeam system.
I don't think we've actually installed and have enough experience with replacement systems to provide meaningful metrics, but we're very encouraged overall about the excitement that people have to upgrade their systems and the effectiveness of our launch teams.
Nate, I'd also It was a comment Larry made in the script, but it's worth highlighting. This would include any replacements, not obviously in isolation, but the fact that we are seeing procedure volumes per account at HYDROS accounts being 35% higher than at legacy AquaBeam accounts is just another reason why we're so focused on this. The fact that we're actually seeing year-over-year improvement in utilization in HYDROS is another factor as to why the replacement momentum, it's really meaningful when you look forward to 2027. Exiting the year, HYDROS is going to be over 60% of our installed base, and we'll really not see the drag in 2027 around AquaBeam in totality that we've seen over the last few quarters.
Thanks, Kevin.
Thank you. Our next question comes from the line of Brandon Vazquez of William Blair. Your line is now open.
Hey, guys. Thanks for the questions. Can I just follow up, Kevin? You guys have been talking about how switching the accounts into HYDROS systems have had higher utilization. Can we just spend a minute on what is it about the prior and the legacy system that is kind of thwarting utilization? What is it about HYDROS that's driving incremental utilization? I feel like when HYDROS wasn't here, the legacy system wasn't necessarily an issue, but it feels like there's an urgent, like a need now to upgrade to HYDROS. There's something about that system that can drive incremental use. Maybe just talk a little bit about what that is, and what gives you a little confidence that that can help improve utilization.
Yeah, maybe I'll start, and Kevin can jump in. The HYDROS system is just a much more advanced commercial platform than what we had with AquaBeam. It has all of our most advanced AI. We've made multiple software upgrades to it. It has much better imaging that's completely integrated, which simplifies the workflow and the setup. It has the disposable handpiece rather than a reusable scope, which I think is just easier to set up and has better reliability. I think there's just a lot of things. I think as HYDROS has become an increasing part of the installed base, and physicians have had a choice of either doing procedures at one hospital with a legacy system or using a HYDROS at a different hospital that they practice at, they're preferentially moving their cases over to the HYDROS system.
I think that does become a motivator for people to upgrade some of their legacy systems, but it also gives us an opportunity to relaunch those programs and to introduce it to new physicians. I think it's just much simpler and easier to get somebody started on a HYDROS system than it is to get somebody started on a legacy AquaBeam system.
Okay. And one other one on the system side, maybe for Kevin. There was a couple of operating leases in the quarter. Want to talk a little bit about the operating leases. And if I heard correctly, there were like a couple systems with delayed payments. Just talk a little bit about that. What does that mean and why? I don't think we've heard that before. Thanks, guys.
Yeah. Thanks, Brandon. So the two systems under operating leases, as we had last quarter and we've communicated, where we have health systems that just don't. Their normal mechanism to buy systems are through a rental. These are two operating leases that give us access to a healthcare network that we otherwise wouldn't have access to, where we think there's a tremendous opportunity to expand procedures in that area. And we've been consistent in saying you could expect one or two of these a quarter as we move forward. But the main modality for us is still selling capital for cash, and there's no plan to change that in the future. So that addresses those two. Regarding the other three systems, these are systems that are in our installed base. However, due to various accounting rules, we've deferred the revenue until cash is received.
Therefore, given procedures will be generated in the fourth quarter, we felt it was appropriate to include those in our installed base, but the associated revenue will be recognized in the fourth quarter.
Thank you. Our next question comes from the line of Michael Sarcone of Jefferies. Your line is now open.
Hey, good afternoon, and thanks for taking the question. I guess just to start, you talked about the 20% of the baseline for FY 2027, and exiting the year, you might be at around 60% of HYDROS comprised in the installed base. Was just wondering, for 2027, with that 20% growth, does that contemplate higher year-over-year utilization when we think about that metric on the installed base?
Yeah, it would imply essentially the status quo, as Larry said. It would not imply that we're getting incremental benefit from any of our patient activation initiatives or any of our kind of launch team initiatives that we've launched. So it is essentially the base case. And what's not terribly apparent on the surface, but Larry mentioned it, is again, the fact that HYDROS is 35% higher than AquaBeam. As that installed base starts to shift more heavily towards HYDROS, the growth isn't as dependent on expanding utilization. But obviously, that's what we're working on, and that's why we view 20% as a base case.
Got it. Thanks, Kevin. And maybe looking out to 2027 again, I guess, could you talk about the moving pieces around gross margin and how that might trend through 2027?
Yeah, I mean, we're committed to incremental gross margin improvement. We'll give full guidance in 2027, but we don't think 65%-66% is the threshold. And we've been consistent saying that 100 basis point-200 basis point expansions on a yearly basis is a reasonable place to be.
Great. Thank you.
Thank you. Our next question comes from the line of Stephanie Elghazi of Bank of America. Your line is now open.
Hi. Thanks for taking the question. Just wanted to follow up on the Q3 lighter system sales, which you said was a function of timing, but any more color on maybe why they were pushed from Q3 or how many systems that was? It sounds like you are confident they will come in Q4 and not get pushed further.
Yeah. Thanks for the question, Stephanie. I think capital is always sort of weighted towards the end of the quarter. If you look at Q1 and Q2, I think we were above what expectations were in terms of capital. But we're very disciplined about pricing now, and we don't really make compromises when it gets to the end of the quarter, and sometimes that leads to something shifting one quarter here or there. But it doesn't reflect an overall weakness in capital or demand or our pipeline. We continue to feel good about our ability to achieve or overachieve our capital expectations for the year. I think a little bit of it is just timing from quarter-to-quarter.
Got it. Just wanted to follow up on HYDROS utilization. I guess, what are you seeing in the durability of the higher HYDROS utilization? I guess just trying to understand if there's a higher level at initial launch and how that may compare to utilization over time? Thank you.
Yeah. Well, we definitely see the higher utilization on HYDROS that we spoke about, but it's also improved year-over-year, and that's part of what gives us a lot of confidence in the platform and it being a durable platform and a driver of growth. I think we have enough experience with that. The headwind that we've had has been primarily, almost exclusively driven by the weakness that we've seen in those legacy AquaBeam systems, which gives us the opportunity to upgrade those. Again, our launch team metrics have been really, really positive, so the opportunity not only to replace a legacy AquaBeam system with a HYDROS, but also to relaunch that platform utilizing the launch team, we just see as a great opportunity for us.
Thank you. Our next question comes from the line of David Rescott of Baird. Your line is now open.
Great. Thanks for taking the questions. I wanted to ask on pricing of the handpiece and system placements. I think been several quarters of both of those trending higher on a pricing perspective. Just trying to get a sense, in your mind, what that higher pricing appetite is out there within the end market, and then when you think about 2027, if at all, there is an assumption that these kind of pricing uplift trends continue into next year.
Thanks for the question. The handpiece pricing, I'll just start there. We've talked about it ad nauseam, but we eliminated all the discounting at the end of the quarter for people purchasing in bulk and doing those sorts of things. I think we've just seen the inventory levels stabilize in the field, and now people are just purchasing. I think also HYDROS has a slightly higher ASP than AquaBeam, so as HYDROS becomes a bigger part of our installed base, we get a little bit of a lift from that as well. I think our system pricing at $495,000, I think that's a pretty good spot for us to land at. That's up from $435,000 a year ago for the full year, and so that's a pretty significant uptick.
That is probably a reasonable place for us to land with the HYDROS platform, and I feel pretty good about where we are on that.
I think the only thing I would add is, to your question around 2027, the assumption would be pricing is relatively stable. We are not baking in any large price increase, to Larry's point, in the 20% guide.
On this 106% handpiece to procedure revenue metric, I think last quarter you had flagged that that was potentially going to tick up a little bit, but was wondering if you could unpack that a little bit. Again, I'm assuming the assumption for 2027 is that that ratio kind of moderates or stays around that one-to-one level. Thank you.
Yeah, sure. As we entered the year, we guided and said we thought handpiece to procedures would be about a one-to-one ratio, and we've always felt that that was going to be the case. If you look at the first two quarters, we were slightly less than a one-to-one ratio in terms of handpiece sales. I think it's safe to say that inventory has normalized in the field, and we continue to launch new systems, and so I think that's reflected in the Q3 106%. I think for the year, we're going to be at or above that one-to-one ratio. I think on a go-forward for 2027, because we launch new systems and inventory is normalized in the field, guess that you're going to have handpieces that are going to run slightly above procedures, and that's going to be a long-term thing.
The other thing I'll add is, right now we have people in every case for the most part, and so we have great visibility into procedures. On a go-forward basis, we will start getting sites to do cases autonomously, and we won't have a person in every case, which is going to take away a little of our visibility on procedures. But now that we've normalized the inventory in the field, longer term, handpiece sales are going to be reflective of overall procedure growth.
Thank you. Our next question comes from the line of Richard Newitter of Truist. Your line is now open.
Hi, thanks for taking the questions. Kevin, sorry if I missed it, but as you were talking about 2027 kind of bookends for us as we think about modeling, did you mention, or could you mention if you didn't, the international mix as percentage of total revenue, kind of as your base case? Also anything you can say on OpEx? Then I have a follow-up.
Yeah, I think international growth in our guide would be fairly comparable to where we're at this year. We are not expecting significantly greater contribution from international. It'll settle somewhere probably in that 25%-30% range again, perhaps as low as 20%. At the same time, I don't think that's the long pole in the tent that's going to impact the 20% one way or another. Somewhere around that 25% range, Rich, if you're trying to think about international, is a good run rate just in the markets that we're in. I didn't provide really any other commentary in my prepared remarks around 2027. What I did say, though, on the question a few ago, just to help model OpEx a little bit, our OpEx growth in 2026 is about 20% on roughly 30% revenue growth at the midpoint.
That is an OpEx leverage ratio that we think could improve in 2027, as we made a lot of the initial investments around our commercial initiatives. At the same time, we want to make sure we allow ourselves for investments to continue to drive the top line, and that's the transparent reason for not providing a full guide. We want to get through our planning process and exit the year not foregoing opportunities to continue to drive growth.
Great. Just going back to the HYDROS, 35% higher utilization, I get that the mix towards HYDROS is increasing, and that will naturally help utilization on some level. I guess just relative to the activation initiatives, Larry, that you had kind of outlined at the beginning of the year in great detail, it feels like the strategy has changed a little bit. It's a little bit more about HYDROS and getting just those boxes in place because they get utilized more. I guess what's happening or what have you learned from the activation initiatives themselves, separate from just the HYDROS aspect, that is working or is not working? I'm just curious because it's a little different than kind of what we kind of headed into your strategy in terms of how you would get to an improving procedure situation. Thanks.
Yeah, thanks for your question. I think we've been focused on HYDROS from the beginning of the year with the launch teams and making sure we launched all of our new systems, which are all, by definition, HYDROS. We have been continually focused on that. I think the thing that we've learned throughout the year is, as HYDROS became more available, doctors would shift their procedures from their legacy system over to a new HYDROS system once they had access to one. They would do that even if it meant they had to defer the case for a week or two, just because they would prefer to use that system. I think overall, that was good for us, but it did create a near-term headwind while we upgrade these legacy systems.
I think that's the one issue, and we're trying to obviously aggressively address that with the replacement cycle and getting those installed with the launch team. The second part about it is our patient awareness and activation issues. I think we're pleased with how those are going. I've been out in the field, and I've talked to a number of customers, and they now have patients that are coming into the practice or calling the practice, and they're asking about Aquablation by name. That's something we certainly did not have before. I think we are starting to get the message out with patients and with physicians as well, and we're hearing that anecdotally from the field.
I think the more that we can continue to drive that and expand these programs, I think once patients have access to the data and they can make an informed decision, I think we really truly are the preferred option based on the clinical evidence. That's something we continue to drive.
Thank you. Our next question comes from the line of Mike Kratky of Leerink Partners. Your line is now open.
Hey, everyone. This is Sam on for Mike. Just based on our math, and assuming it's correct, it looks like the U.S. trade-in ASP dipped quite a bit in 3Q. Was just curious on what's the right way to think about the durability of trade-in ASP moving forward, or was there anything specific to call out on this quarter that may have weighed on that?
Yeah, this quarter was right around $315,000, just so everyone has the actual number. That's trended up from $275,000, where we started in the first quarter. We do think that's durable. If you think about any replacement cycle, the older the system, typically the less we would offer a trade-in credit, and thus a higher ASP. I don't want to suggest to put in your model something significantly higher than the $315,000, but at the same time, to answer your question, we think this is definitely durable given the age of the installed base.
Got you. Then, just on the capital side, sorry if I missed it, but how should we be thinking just about greenfield system placements for the rest of the year relative to your prior guidance of, I think it was 210 to 220, and then hitting into 2027, and any color on the expected mix between replacements and greenfields moving forward?
Yeah, so our revised guidance would still apply somewhere around that 210 range, is within our range. So, that's unchanged. If you look at capital revenue for the full year, the midpoint of our guide is somewhere around $115 million, and our initial guidance heading into the year was $95 million-$100 million, recognizing that we probably have about $10 million incremental in replacements. So with Q4, we're essentially right on track where we thought we would be with capital for the full year. Regarding 2027, again, without getting into too many specifics, when we exit this year, we're going to have somewhere between 340 and 350 AquaBeams in the field. So that number alone gives us confidence that the replacement cycle is going to be durable as we head into 2027, but it's too early to comment on an exact number right now.
Got you. Thanks.
Thank you.
Thank you. Our next question comes from the line of Ryan Zimmerman of BTIG. Your line is now open.
Hey, guys. Thanks for taking the questions. When we think about the BPH market, we've seen a lot of new entrants, particularly the stents and so forth come in. Larry, I'm just wondering if you characterize the types of prostates that you're seeing today with HYDROS, given the PAE and the stents, et cetera, is there more segmentation occurring in the market from your perspective? Is there a specific type of prostate that you would say is your sweet spot after you've had the chance now to really hone in with HYDROS?
Yeah. I don't think we've seen any change in the competitive dynamics. I think they've been stable, and I don't think we've seen any difference. I mean, we've talked about PAE before, but I think those are largely patients that aren't going to go forward and have a surgery just because they're not as symptomatic or they're just not ready to have a surgical procedure. I don't think we've seen anything really change in the competitive dynamics, and I think there's still a lot of opportunity for us to take share from legacy procedures, and that continues to be our area of focus.
Understood. Kevin, if you look at the handpiece ASPs, I know we've talked about this, but the price increase did account for maybe 2/3 of the growth relative to third quarter 2025. When you look at the 3570 versus the prior price, what I'm trying to understand is there a difference in the legacy AquaBeam installed base in terms of handpiece pricing? As you do transition and cycle through to HYDROS, does that help lift prices in and of itself, or is it a blanket higher price on handpieces across the installed base? Thanks.
Yeah. Good question. This is something we've answered before, but we do have a price difference between the AquaBeam handpiece and the HYDROS handpiece. We've said it's somewhere in the low single digits. So as we convert the majority of our accounts to HYDROS, there is a natural uplift to handpiece pricing, and that is what you're seeing in the numbers here as we've moved throughout 2026.
Okay. I'll leave it there. Thanks, guys.
Thank you. Our next question comes from the line of Mason Carrico of Stephens. Your line is now open.
Hi. Good afternoon. This is Ben on for Mason. Thanks for taking the question. I appreciate the color that you gave on the relative utilization growth for HYDROS in the quarter. Could you update us on what your guidance assumes in Q4 for the relative utilization across both the AquaBeam and HYDROS installed base? Are you assuming any improvement across either of those, or just stable from here? Thank you.
It's relatively stable. It assumes the decrease year-over-year we've seen in AquaBeam persist into the fourth quarter, and the third quarter decline was relatively consistent with the second quarter, which gives us some confidence there. It just assumes normal seasonality with HYDROS, where procedures per account should be slightly higher in the fourth quarter, but not to a significant extent.
Great. Thanks so much. I'll just keep it to one here.
Thank you.
Thank you. Our next question comes from the line of Suraj Kalia of Oppenheimer. Your line is now open.
Hi, Larry, Kevin. Gentlemen, one question for you, Larry, and one for Kevin. Larry, the increase in replacements, how much of that is pull-through versus push-through? I guess what I am trying to understand is, where does SG&A leverage kick in? We reach a certain threshold procedures per system, and that requires a completely new system at the same site. If you could help us out there, that would be great. I will ask my second question to Kevin. Kevin, for FY 2027, is the right way to think about it, okay, we are exiting 60% installed base for HYDROS. Let us say we factor in another 200, 220 systems for FY 2027. We know the 35% higher utilization. We know the weighted average math, and that sort of implicitly gives us the number of procedures, at least as a starting base for FY 2027.
Am I screwed up in my thought process for FY 2027? Gentlemen, thank you for taking my questions.
Sure. I will start, and that'll give Kevin time to do the mathematics on your question. I think HYDROS is just a much feature-rich system. The ability for the AI to map the prostate and design the procedure, along with the integrated imaging and the disposable handpiece, I think just simplified things greatly for the operators and ultimately give an opportunity to have a much more standardized procedure than our legacy systems. I think, historically, if I go back prior to this year, I think there was just sort of a sense that eventually people would just show up and want to upgrade their systems, and we just did not really see that to be the case. I think hospital systems would say, "We have one, even if it's an older model."
Maybe we don't want to make that total investment to buy a second system. I think once we got more purposeful for it and offered people a trade-in value for their system, we saw excitement that probably exceeded our expectations. That is why our original guidance was 5-10 systems, and I think we're at 36 year-to-date. We have seen a strong uptick in that, and I think that just reflects people want to upgrade to the new system, and once it becomes economically viable for them, they are happy to upgrade to that system. I think also hospital administrators don't want to see physicians who have a choice of doing procedures at their hospital or another hospital going down the street. I think that gives them incentive to upgrade those systems as well.
For us, not only do we put a system in there, but we get the opportunity to relaunch it with a launch team, and that gives us the opportunity to train additional surgeons, to train additional physicians, and to re-educate them and reinvigorate them on the data and the value proposition for our technology versus competing technology. I think all those things are a great opportunity for us, and that is why we are leaning into the replacement opportunity and continue to drive it.
To the second part of your question, I think you're thinking about it the right way, where the 20% baseline is really just a procedure assumption around the mix shifting more to HYDROS, kind of the 60%+, and not us being overly reliant on year-over-year improvements in HYDROS utilization. It is just recognizing that HYDROS is doing significantly more procedures than AquaBeam, and that's really how you get to a 20% baseline.
Thank you.
Thank you. I'm showing no further questions at this time. I'd like to thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.