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So welcome to the 2026 FocalTherics Investor Day. We got a great program this morning, and I'm excited to have you all as our guests. Today's agenda, I'm Ryan Rhodes, CEO. I'll be covering the following topics: our transformation as FocalTherics, our commercial leadership in robotic focal therapy, clinical expansion of our platform into new indications.

And we'll have our physician speaker, Dr. Ehdaie, come up and speak to us followed by Steven Annen, our Executive Vice President, who will discuss innovation in Advanced Technologies; and then Ken Mobeck, our company's CFO, will talk about our financials and how we're well positioned for growth.

Transformation, FocalTherics was announced on Friday. It's really a culmination of the words, focal therapy and therapeutics. Focal, meaning to target, therics or therapy to treat in heal. We are transforming into a high-growth, pure-play robotic focal therapy company with a leading position in both large and growing markets.

If you look at our company revenue over the last several years, though there's been growth, it's been driven primarily by our HIFU business. Our non-core businesses, ESWL and distribution have shown a decline. And so as we looked outward and we look at our growth in the future, it's really about the great story we unlock with robotic HIFU.

As noted here, our growth rate is strong, durable and exciting for the company and its future. FocalTherics, we're the global leader in therapeutic ultrasound and we accomplished this by redefining the treatment of cancer and benign disease through organ-sparing function preserving Focal One therapy.

Our 3 strategic pillars are as follows: scaling commercial execution in prostate cancer, expanding our market opportunity with added new indications on the same Focal One platform and by advancing technological innovation in HIFU and beyond. We offer a noninvasive procedure that requires no surgery no cutting, no use of needles and no radiation.

By combining advanced imaging, proprietary high-intensity focused ultrasound and precise robotic energy delivery, we enable a very effective organ-sparing function preserving treatment for a large patient population. As such, we are defining, building and leading the category of robotic focal therapy.

Turning our attention to addressable markets. starting with prostate cancer. We know prostate cancer is the most common cancer amongst men, nearly 1.4 million newly diagnosed cases globally each year. But that number is expected to double in the next 14 years, as shown on the right. By 2040, there'll be nearly 3 million newly diagnosed cases of prostate cancer around the world. When we turn our attention to the U.S., 330,000 newly diagnosed cases each year in the United States with 3.5 million men walking around and living with their disease.

As we talk about prostate cancer, it's important to talk about radical treatments, starting with surgery. Surgery is a whole gland treatment. Whether it's performed open, laparoscopic or through robotics, it is still a radical prostatectomy. It's an incision into the body. It's cutting, it's burning. It's traction injury, it's reconstruction of the urine channel, and it has its own morbidity profile.

Radiation, whether IMRT or SBRT, generates toxicity in the body, which can sometimes lead to secondary cancers, rectal cancer, bladder cancer. Radiation has a failure rate in the clinical literature anywhere from 15% to 30%. And many of the patients who are treated with radiation may suffer on the functional outcomes.

With robotic focal HIFU ablation, we spare the organ and preserve its function. We can see where the cancer is. We can delineate around that cancer in its boundaries, and we can treat it effectively with targeted robotic HIFU. The prostate cancer patient always has a dilemma. At time of diagnosis, they're balancing in their mind their treatment option versus the outcomes. And we think of the treatment outcome, we're talking about treatments or a protocol in the case of active surveillance or radical treatments such as surgery or radiation.

But as they're thinking about their treatment, they're also thinking about treatment effectiveness, complications and recovery, loss of urinary control, loss of sexual function. Another way to look at it is the patient value equation. On the x-axis on the blow is preserving quality of life, preserving sexual function and urinary and on the y-axis preserving or proving efficacy based on oncologic control. So if we look at the various treatments, starting with active surveillance, which is a monitoring protocol, it scores well on quality of life preservation because there is no treatment. But scores low on efficacy as a treatment.

When we turn to the radical treatments such as surgery and radiation, they score high on efficacy, but many times and most times men are left with an altered quality of life outcome. What is ultimately the patient want? They want high quality of life preservation with an effective oncologic treatment. And that's what we offer with Focal One robotic HIFU.

An important story to understand is the transition from radical treatments to organ-sparing treatments. If you go back in time and look at breast cancer, in the early years, women had a radical mastectomy, the removal of the breast, the pectoral muscle and a very large debilitating axillary dissection under the arm pit that left them disfigured and with chronic lymphedema. It was modified to a modified procedure, modified radical mastectomy but it was still a big surgery.

Today, we're in a new era where many women are offered to lumpectomy. In prostate cancer, similar, prostate cancer has been around surgery specifically for over 100 years. Whether it performed open or robotically it's still a radical prostatectomy. And as such, today, we can offer something as such, Focal One Robotic HIFU to a large majority of patients.

It's important to understand the large gap between no treatment and radical treatment. Remember, prostate cancer is a heterogeneous cancer. It's not one cancer. It's millions, millions of cancers, stratified by risk at time of diagnosis from low-risk intermediate risk and high risk. Previously, there have been no options other than active surveillance or radical treatments to address intermediate risk patients. This is the problem we solve.

Focal One Robotic HIFU bridges the gap. And we cross in and across low and intermediate risk disease with a significant opportunity of a $4 billion total addressable market. There's an emerging paradigm in the shift to treatment options, as stated the past considered surgery, radiation, active surveillance, we're now in this transition to a current market shift with the onset of focal therapy.

But in the very near future, this market will be very large. It will be larger than either the stand-alone categories of surgery or radiation with a growth rate up to 40% of the total market. And what's exciting about this opportunity, the patients are already there today. They are there in front of us to be treated.

If you look at Focal One Transrectal HIFU, we offer superior access, precision and tissue preservation. From a transurethral approach, other technologies and transparent needles, it's important to understand the differences. Transurethral typically requires access to a costly, expensive MRI suite and commonly requires a second position. The energy in most cases, is non-focus. And there's bleeding and urethra and tissue damage. In a transperineal approach, punctures are made through the perineum, manual placement and positioning of these needles and bleeding from surrounding tissue damage.

With Focal One Robotic HIFU, we can perform the operation as a single urologist. We can precisely focus the ultrasound and target the robotic energy delivery. We're in the closest proximity to the target tissue, especially in the region of the posterior area, the prostate where cancer is highly prevalent. We spare the urethra and there is no bleeding. This is Medicare data published over several years and through the recent year of 2025. And what it shows is HIFU is emerging as the fastest-growing focal therapy treatment amongst other treatments. It is now the #1 ablation technology for prostate cancer.

We have strong emerging clinical evidence that supports and favors Focal One Robotic HIFU. There are several landmark studies that show positive clinical outcomes. Starting with the HIFI study, which was HIFU versus radical prostatectomy, a prospective comparative clinical trial, the HIFI-2 study, which was a prospective salvage clinical trial comparing HIFU in a salvage post radiation treatment subset of patients. And the C.G.R.D. International Urology and Nephrology paper in clinical study that reflected HIFU versus radiation and show that HIFU patients demonstrated higher overall survival at 10 years versus radiation.

There are some important other studies that have been completed, presented at scientific meetings and are in the process of being published. FARP focal ablation versus radical prostatectomy, which will be a level 1 evidence clinical study published. And then the HIFUSA clinical study, which is also a randomized study across 14 centers in Europe comparing HIFU to patients with active surveillance where HIFU demonstrated superior progression-free survival compared to active surveillance.

It's important, though, to talk about this HIFI study. Why? Because it's the largest prospective comparative multicenter study ever completed in the treatment of prostate cancer. This study was funded at an amount of nearly $25 million, was not paid for by the company, but is exclusive to FocalTherics HIFU technologies. It involved treating 3,328 patients across 46 centers and involving 80 urologists.

We met our primary endpoint, which was cancer control, patients free from salvage treatment at 30 months as shown here, but we also showed superiority across maintaining urinary continence and control as well as preserving patient erectile function. What this study doesn't show is the amount of complications attributed to surgery. And they're numerous.

Turning our attention to FARP focal ablation versus radical prostatectomy. What's exciting is Level 1 evidence but a randomized controlled trial, looking at patients treated with HIFU or ablation technologies as compared to surgery. And what's interesting about this study is it first validates exactly what we've learned from HIFI that we can provide adequate equivalent oncologic control against the gold standard treatment surgery but the patients will do far better on the functional outcomes equation that is preserving sexual function and urinary control.

I'm important to also note is 25% of the patients who were randomized for surgery refused surgery, refused surgery and chose focal ablation. We have growing adoption of Focal One Robotic HIFU. As shown on this map, more centers, both academic and community hospitals are adopting this technology.

We're now in some of the most respected largest academic centers recognized around the world. Memorial Sloan Kettering Cancer Center, MD Anderson, Mayo Clinic, Cleveland Clinic. We're in every University of California teaching hospital. We're in Kaiser with multiple systems. We're in HCA. We're really just getting going with this exciting story. And our rankings are at the very top as the leading focal therapy. Seven out of the 10 U.S. News World Report ranked hospitals are running Focal One now. We're in 66% of the Society of Urologic Oncology fellowship programs and growing. And we're nearly 60% of the national cancer network participating in hospitals, the most respected hospitals that do research and advancing treatments for cancer.

But what's even more exciting is our pipeline. We have a qualified pipeline we're activating around involving 300 hospitals around the U.S. 11 hospital systems now own more than one Focal One system technology. 11 hospitals invested in more than one Focal One system. When we turn our attention to Europe, it's equally exciting. As noted here in the dark blue dots, these are fixed systems placed throughout Europe. The light blue dots are mobile clinical sites.

And now with the results of the HIFI study, reimbursement has been awarded in France and actually pays a little bit above surgery. We've already shown sales coming in from this last quarter from the conversion based on this new reimbursement.

In closing, FocalTherics has the most established and growing, global commercial adoption of a focal therapy company with an installed base 175 and growing, and we're excited about our near-term opportunities to grow across both academic and community hospitals.

Turning our attention to procedures. Across our 91 accounts today and growing, we've shown 53% year-over-year on a quarterly basis procedure growth. And we've accomplished this by, again, focusing expanding our installed base of leading academic centers, community hospitals and integrated delivery network hospitals growing physician adoption through education, training and clinical evidence and very importantly, driving patient demand because it's out there for a noninvasive, effective and function preserving treatment option.

In the outside U.S. markets, we're growing as well. We've had some recent success as shown here by our direct entry into some key markets the U.K., the Nordic region. We've established the reimbursement in France as mentioned. We're converting a legacy mobile system service model to capital sales and fixed placements. We've now entered into new markets, both in India, as a country, and other areas of Latin America, and we're in the early launch of endometriosis in CE mark countries.

We are executing disciplined commercial growth in a scalable way across targeting, building and scaling. Less than 10% is the penetration currently today for our initial market with focal therapy. So there's tremendous upside in runway. Our goal in targeting, obviously, expanding the installed base through sales to greenfield high-volume centers, prioritizing accounts with multisystem and multi-urologist opportunities. When we shift over to program building 53% procedure growth, there's more capacity out there to do more procedures.

We'll focus on driving increased utilization with physician training, education and clinical evidence and importantly, develop a robust and growing patient pipeline through dedicated hospital marketing and program support. And last, scaling our programs to independents. We build a program. We transition sites to clinically autonomous activities as a program, and we reduced the reliance on clinical staffing as procedures mature. 70% of the procedures performed year-to-date this year 2026, have required no clinical application support.

A great example of our success in building programs is Saint Alphonsus Center in Boise, Idaho, part of Trinity Health. As noted on the left, they rolled out a launch program in combination with our support. They've ramped aggressively their first 4 quarters and performed 100 procedures their first year. This is a small metropolitan statistical area, and we believe that this can be absolutely repeated in multiple areas around the country.

Turning our attention to reimbursement. To remind everyone, we have a Category 1 CPT code payment at APC 6. We have favorable physician reimbursement and growing coverage. Looking at the facility payment. And again, this is a national average adjusted based on the wage labor index at point of care. So in many markets like here in New York, this number would be closer to $14,000. But there's robust reimbursement in place. And I might add, the last 3 years on a consecutive basis, each January, we've had an increase in this reimbursement. January 1st of this year, 2026, reimbursement went up 4.3%.

When we look at the physician payment, it's a great story as well 17.29 work-related RVUs for a procedure that can be formed in any outpatient setting that has optimal choreography and workflow and noted, it's the highest paid focal therapy procedure for a urologist and only a couple of hundred dollars difference for urologists performing a big surgery such as radical prostatectomy.

Turning our attention to commercial coverage. We're expanding patient access. As noted, Medicare coverage is automatic for all patients nationwide. And national local plans may provide individual payment according to their coverage policies and our local arrangements. We've shown payment from all the major payers is here. And we also believe existing and upcoming positive clinical evidence will provide broader and expanded coverage in the near future.

Want to change and talk about the clinical expansion of our platform into new indications, starting with BPH. We know this is a large prevalent disease state that affects many men. Globally, a 100-plus million men are living with BPH conditions on a global level. 13-plus million of newly diagnosed cases happen around the world each year. And within the U.S., 600,000 new cases are diagnosed on an annual basis.

BPH as a treatment is a highly fragmented market. As noted, there is no commercial leader, company leader across these various treatments and gives us ample opportunity to enter this market, and we will be the only noninvasive nonsurgical focal therapy solution.

Where are we? We've got two clinical studies underway, running in parallel. In the U.S., we've now treated through an IRB combined with the local team here at Mount Sinai Hospital, 14 patients in Latin America. We're enrolling under a hospital-sponsored IRB. Now patients to be treated here locally, but we're also running a Phase I/II study in the outside U.S. European market.

We expect data to read out here toward the end of 2026, with the ability to be in a pivotal trial in the early part of 2027. Our solution will be noninvasive, involve no bleeding, no foreign body and no quality of life trade-offs. And of particular importance when we talk about bleeding is that there's a growing number of BPH patients, approximately 30% to 40% of men seeking BPH treatments are on some form of Anticoagulant or Antiplatelet medication, who are at risk of bleeding complications.

We believe that subset of patients would be highly valuable to a Focal One BPH treatment. We're ideally suited to capture significant portion of the BPH market. It's the same Focal One platform, the same installed base that's growing, the same urology call point. And in many cases, the same positions in staff. We also come from a position of strength. We're already familiar with prostate cancer. We're treating those patients today.

Moving to benign disease like BPH will be an easier pathway for us as compared to other technologies referenced here. And those technologies may include water in their treatments. We have freedom to operate today with a Category III CPT code in place today for transrectal HIFU treatment, specifically for BPH. I've shown the regulatory pathway and we're excited for this new opportunity.

Turning our attention to deep infiltrating endometriosis, women's health. There are 38 million women living with deep infiltrating endometriosis globally, of which 783,000 patients are diagnosed with this condition on a global basis. We have 225,000 patients diagnosed here alone in the U.S. market and women that have this condition don't have a lot of good options.

Surgery usually involves a rectal resection, partial reception or even a [ mucosal ] stripping procedure. They're required to have surgery. We can offer something better. And as noted here, current treatment options are lacking and/or limited to hormonal or surgical management offered to the choice. When offered the choice, 91% of women would prefer a nonsurgical option.

So if you look at our indication expansion pipeline on the top here, in the outside U.S., we've completed three studies, and we're in a follow-up phase from our randomized controlled trial and our Phase II study. But while we're following up with those patients soon to be publishing data for these patient series, we have a CE Mark launch in CE Mark countries with a goal for a commercial rollout to come, later in the months ahead. U.S. endometriosis will wait for the data to be presented from these pivotal studies, Phase II and Phase III studies and that will allow us to finalize the strategy for regulatory submission by the end of this year.

Turning our attention to the accounts that we're working on now. I first want to add that this last quarter, three of our sales in CE Mark countries were due to the ability to treat patients not only for prostate cancer but for endometriosis on the same exact machine. We have 11 accounts in our training pathway as outlined here, some on the front end and some already through this training pathway.

We're excited on the momentum building. We know there'll be high patient demand for this treatment, and we're also excited of the value it will bring for women that really don't have options out there to treat such a debilitating disease.

In closing, we have a large growing TAM, starting with prostate cancer, 1.7 million procedures globally. When we add BPH, that number nearly doubles. And on top of that, with endometriosis combined, 4.3 million procedures to go after with our proprietary Focal One technology which would be an opportunity of $10 billion, possibly $10 billion in revenue.

I will stop there, and I want to introduce our physician speak. We're very proud to have Dr. Behfar Ehdaie from Memorial Sun Kettering Cancer Center. A little bit of background on Dr. Ehdaie. He is a trained urologic oncologist. He has a masters in public health from Harvard. He is a highly accomplished clinician, both in the areas of surgery and certainly in the areas of focal therapy as we will discuss today. And a great overall individual, and we're so happy to have him here. So I want to welcome up Dr. Ehdaie.

Thank you for the opportunity to talk this morning and to meet everyone.

I'll still go through a story, a little background about myself. As a disclosure, I'm a surgeon. That's what I do. 90% of my practice at Sloan Kettering, we're probably the highest volume radical prostatectomy hospital in the world. And through my career, my focus has been patient quality of life, and that's been my research, and that's what drove me to doing research in Focal therapy. And it's stories like this.

This was a letter or an e-mail sent to me by one of my patients. This was a couple of years ago. says, "Hello, Dr. Ehdaie. Thank you for getting back to me. I say this every time I see you. Thank you. While I'm in a long line for the men's room and sporting events or theaters, I pee on command, quickly and efficiently like a teenager. I think my friends and husband are jealous listening to other guys, my age, gay and straight. I think I have a better sex slice than they do. I'm never short of amazed about how my quality of life, while different has remained so positive.But I fared so much better than other guys. You remain a man truly made my life better. No need to reply, you're a busy man, see you in a few months."

And I think that's what we do in the research we do and the clinical care we provide is for these types of e-mails, these type of letters. And I think that's where the story of focal therapy begins.

Where is prostate cancer? I think the word cancer is a call to action. Obviously, it concerns us. However, prostate cancer is on a different scale. This was a landmark study done in the U.K. In 2000, it started, it produced its first results in 2012 and it's 15-year outcomes and what it basically did took men who were part of a screening study in the U.K. for prostate cancer, then subsequently enrolled those men and randomized them who are diagnosed with prostate cancer to either surgery, radiation therapy and observation.

And this is before the era of MRI imaging, before any sort of genomic testing for patients. And as since these patients were told, we will monitor you. And if you have bone pain come tell us your PSA really goes up, we'll let you know. And that was basically this study. And you would think this should just make surgery and radiation look so great. But these are the survival curves. And this shook our field.

And in 2010, 2011, when I was finishing my training, it became clear to me that although prostate cancer in many forms is something that needs to be taken seriously treated in a way for curative intent, a very high number of patients would never benefit from radical treatments. And it was from that we launched the concept of active surveillance. Currently now, I probably have the largest clinic that I oversee at Memorial Sloan Kettering for active surveillance over 3,500 men over the past 15 years. But what's interesting about active surveillance. As we look at the probability of undergoing subsequent therapy when they start active surveillance in that cohort of patients in this prospective clinical trial was that within 5 years of monitoring, almost half of these men had to undergo treatment for various reasons, either the change in their grade of their cancer, how organized or disorganized the cells look under a microscope, rise in their PSA or other factors.

And it became clear to me that the goal really should be not only to enrollment into active surveillance that don't need treatment but to try to push this curve out as far as we can. 15 years, 20 years because then you really have competing risk mortality. I want the chance of you dying from cardiac disease or other natural factors to be 20x higher than dying from prostate cancer, but without the side effects of treatment.

Where are we with radical surgery? Well, this is our data from Sloan Kettering. Approximately 10,000 radical prostatectomies over the past 20 years. And if we look at this data, it's very clear that despite advancements in robotic surgery, better patient selection, better management of patients post surgery with regard to urinary function and sexual function. If we look specifically at sexual function, that 6 months and 12 months recovery of sexual function has not changed during that time period for our patients.

This story is mirrored in urinary continence and control. Again, 6 and 12 months, these curves are relatively flat. And I think this really tells the story of why, especially surgeons in my generation, not only adopted active surveillance, but have sought better treatments for their patients from the regards to quality of life.

So your question should be it seems like a no-brainer. We should be doing focal therapy in the past 40 years, 50 years. What took you guys so long? Well, the reality is over 90% of prostate cancer is multifocal. So this is a home out section of radical prostatectomy specimen cut and under pathology and reviewed. And we see the different grades, first of all, regions of interest where there was cancer detected, and we look at these areas under a microscope and look how organized or disorganize the cells are to tell us the grade of the cancer and the grade of a cancer is associated with its risk.

So you would look at a tumor like this 20 years ago, 30 years ago and said, "We can't do focal therapy here. What are you going to treat one side, then treat the other side and then treat up top, might well just treat the whole prostate."

But what I told you about the study before in which Patients were randomized to just observation. The key insight was that patients with low-grade cancers, which we call Pattern 3 predominant cancers, have a nonmalignant natural history. These patients can be effectively monitored. And with that insight, it was clear that what we should be doing focusing on the area with the malignant potential, the area where the cancer can spread. And that unlock the potential of focal therapy.

So in a world, we can think of treating that's either prostate or that core of the prostate and monitoring on active surveillance this [indiscernible] of low-grade cancer.

Another key insight was when you look at these home out sections of prostatectomy specimens, the highest Gleason score, so the area with the most unorganized cells really correlates well with the volume of that area. So if you have a higher volume area, most likely that's the area with the higher grade cancer. And why does that matter?

Because in 2008, 2009, there was a wide adoption and expansion of using MRI in prostate cancer. We're the first center in which the first study started in about 2005, in which MRI was utilized at Sloan Kettering. We would go to meetings and people would say, it's crazy. You guys are a hospital for rich people. That's why you guys can do MRIs on all your patients. This is not the future. 2012, 2013, we realized over half of academic centers are using MRI. And by 2018 and 2020, MRI was incorporated in our guidelines.

Now if you have a diagnosis of an elevation in your PSA, you better get an MRI before you do any biopsies. How are biopsies done before that? We randomly put needles in your prostate, 12, 14, 30. Imagine if I told you we diagnosed breast cancer by randomly putting needles into a breast and hopefully finding some cancer. I mean this concept now looking back seems preposterous, but that's what it was. And now we realize that we can see these tumors on MRI. And those areas now with software that fuses the MRI image of 3D ultrasound, we can target those areas, transforming our diagnostic pathway.

So it's not too much of a leap to think, well, if we can see it and we can diagnose it, why not treat it? And when I told you before, that correlation with tumor volume, highest grade, MRI does a really good job of finding higher tumor volume, hired the highest volume disease. So if you see it on MRI most likely, that's your index lesion. That's a lesion that will provide the malignant phenotype.

So the question is patient selection. Where are we today? And this is a little bit more technical slide, but I want to give you a perspective. Patients with medium risk cancers, so we call them grade group 2 to 3. So these are 3 plus 4, 4 plus 3. So the patterns are 3 to 5, 3 being the most organized looking cells, 5 being the most disorganized, 4 being somewhere in the middle. We look at basically the proportion of these different cell types within the biopsy tissue to give us a grade. So [indiscernible] grade group 2 or 3 is basically predominantly 4s and 3s. Those are our predominant best patients we select for prostate focal therapy.

We believe that you can have grade group 1, low-grade cancers, anywhere else in prostate, totally fine. We'll watch those areas on active surveillance. Like we do today, even if you don't have any other higher-grade cancers. We have PSA, which is a blood test that we check in the blood. That correlates well with the size of the prostate and the aggressiveness of the cancer. And we say there should be no evidence of this cancer outside of the prostate, obviously, they're very aggressive cancers.

In regards to HIFU, there's only 2 limitations across all focal therapy options. Nothing that's on the very top end of the prostate, which fortunately is only less than 5%, 10% of all prostate cancer diagnosed. And we don't want any sort of strange tumors that may stretch across the whole prostate gland from one side to the other. Again, rare but more likely those higher-risk cancers.

So your question should be, give us a ballpark, what percentage of patients is that they are currently being diagnosed. Well, the U.K. provides that answer. They have been pioneers in screening studies for years, for decades. So because they can do screening, they can look at who and what type of patients are currently being diagnosed with prostate cancer?

What's their phenotype? What's their imaging characteristics? What's their PSA? So this study was brilliant. They went through all their 3 large prospective clinical trials looking at things like PSA screening, looking at MRI as a screening tool. And they said, how many of these patients would have been suitable for focal therapy? And it turns out this number really lands about half to almost 70% of patients with the criteria that I just pointed to in the previous slide.

But where are the key trends? Where are we going? Where is this [ spot ] going? I think not only do we have a high proportion of patients that will be diagnosed with prostate cancer, who will be immediately candidates for focal therapy, but remember, I have 3,500 men that I've been watching for 15 years, 30% to 40% of those men may progress.

Their cancers may change. We've argued that about 20% of these patients based on studies we've written will have higher grade cancer detected within 24 months. And like I showed you in the previous slide, it really coincides with the other day that said about 50% of 5 years. These are now the best candidates for focal. Their prostates have been mapped. We've watched them closely. We know where things are located. And these patients aren't jumping from active surveillance to take out my prostate, doctor. They want an intermediate step. This is the population that's really engaged.

What I told you before is we're now using MRI in our diagnostic pathway. So before we would just do the random biopsies, find some cancer. We sell predominantly pattern 4 cells, we would be worried because, hey, we luckily found all these cancer cells. There must be more there. But that's not the case anymore. We're now detecting cancers so early and with such precision that we're actually confident about what we're finding.

So that's led us to do research to transform the entire grading system, which I will predict will occur in the next 5 years. Our current grading system in prostate cancer dates back to 1969. No changes, no updates. Just these proportions of grades and cells.

I argue that the volume of cancer is critical. We're showing that in study after study, and now we have a study of over 36 countries, 40,000 slides within which we're doing machine learning to allow quantification of the actual cancer as a prediction of prognostic significance. That's the future. And if MRI can target it, these proportions go away, our definitions of high risk lowers, medium risk go away, and we start targeting and doing treatments because of that.

This is a really interesting area. Radiation patients. I told you approximately 15% to 30% of patients who get radiation have some level of recurrence. Some cancer cells are radio resistant. These are the hardest cases as surgeons. These patients upfront, we tell them 40% chance of urinary incontinence. Forget about your erections, these -- the tissue inside their pelvis doesn't heal well. These prostates are shrinking down. There's no planes of surgery. These patients oftentimes had very few options. And the way they were followed was just PSAs. Radiation oncologist just do serial PSAs, the PSA keeps rising, they're worried. They send it to a urologist. We do the blind biopsies again. We find some cancer. We take out the prostate and the patients have poor quality of life.

With this, paradigm has shifted. We now do MRIs post radiation in addition to PSAs. We're detecting radiation-resistant cancers locally with MRI target. So what's the next step? Treat those patients. And in fact, radiation oncologists are now some of the biggest proponents of focal therapy options because they can tell their patients if they're cancer returns, we have options, where this discussion was more difficult years ago.

So Ryan went through this slide, so I won't go into it just again to emphasize, within the treatment paradigm of prostate cancer, I think we understand where it can fit in, in the sort of the medium risk prostate cancer patients that we talked about. But I would highlight the fact that I think the growing trend will be the post-radiation setting. We know that 30% to 40% of patients upfront get radiation treatment for their prostate cancer.

Now this has become a really multidisciplinary approach to treatment of prostate cancer in the recurrent setting. Where are we in focal therapy today? Inclusion in guidelines rapid increase in studies and publications and the introduction of this concept in our meetings, our national meetings. The most recent update of the guidelines in both the European guidelines have now basically said we can do focal therapy with HIFU cryotherapy for patients.

So this has been adopted widely in Europe. The most recent update in 2026 has now included HIFU without any clinical trial registry. This is the amount of publications in focal therapy since 2000. I mean when you really want to look at any technology, any trend in medicine, just PubMed it. You'll know where the intention is. And this is fascinating. This is a growth you don't see normally in our field.

And this is the other area of interest. When a technology is introduced or concept introduced has to be initially adopted by our academic physicians has to be normalized in meetings and talk at courses. There's many gateways and medicine to get to this platform. There's key opinion leaders, there's people with biases, there's people with their own agendas that may try to prevent that from happening. But this is us.

Now I can report 4 years straight running at our national meeting we run it, of course, on focal therapy, attendance exceeding 250 participants every single year. So what is my experience with the Focal One system? We introduced our program in 2023 and Memorial Sloan Kettering. I can tell you the advantages. I believe it's the leading technology among the competition in regards to efficiency, and that is defined by the treatment time per patient.

I believe the robotic system allows really highly reproducible treatment planning and subsequent outcomes. Any system that requires hand motion by a physician, requires adjustments constantly during treatment that are manual, having taught both radical prostatectomy to fellows and residents and other physicians and subsequent targeted biopsy using MRIs these are trends in my career that I have been on the forefront of and taught. It's incredibly difficult. And you see learning curves that are quite variable.

But taking away some of those variables in a system that can be standardized, I can't tell you how important that is in our field. Ease of workflow, you don't want a device where a urologist has to speak to his interventional radiologists beg for time in the MRI suite, go to his administrators across street in the hospital beg for time in the MRI, say, "Hey, those brain MRIs and pediatric MRIs can go on hold, I have a 68-year-old guy with a very small focus of cancer, and I need your MRI suite for 4 hours." It doesn't work in hospital system, just doesn't. So having our own ORs, our own OR time to treat patients is the key.

In the state of our art, we'll see it in a video coming up, I think it's real-time treatment and modification, not only adjusting our treatment plans, but watching the treatment happen in real time. And I think the incorporation of MRI with Fusion ultrasound in these systems now, we can now bring in MRIs, more recently, PET scans into these systems, and we can better target, again, simplifying the system, reducing learning curves and standardizing outcomes.

So this is a video from the Focal One team. Just giving you an outline of what's happening. We obviously see the machine over there. This is now an ultrasound image. The probe is in the rectum, which is this dark area, there's rim on the bottom. That's your prostate. It's shadowing above. So you can see the area of the tumors on the left side, I'll show you right here. You basically outlined the tumor, your treatment area, you hit a button and watch and start burning the prostate.

As it's treating, you'll see changes on ultrasound. As you can see as this is fast forwarded, you see what we call cavitation. This is now the cells breaking apart. We really -- an indication of treatment that's occurring to have a technology that gives us real-time feedback of what we're treating is critical for what we do. And as you can see, the treatment goes, it rejects itself moving away from the rectum again, here you're going to see is a new technology, what physicians do is that they will start building up complications.

So a system that initially has safety for first and foremost, is critical, not only to obtain adoption, but also move on and be able to incorporate in our health systems. Here's our initial data. This is unpublished. So I just asked for it to not be distributed on any of our social media platforms, but this will be published, hopefully within the next 3 months. In our first experience, we've now demonstrated that recurrence in the area we're treating is less than 10%.

So 93% of patients have no cancer in the area we treated based on a biopsy MRI and a biopsy of that area, where we see a slight decrease in the whole prostate, you can imagine these multifocal settings when we do another biopsy, there may be another area that we just didn't see or biopsy appropriately as far as our selection of patients. As far as quality of life, I think this is no surprise, but it far exceeds anything we're doing with robotic prostatectomy.

We now know that over 90% of patients maintain erectile function. These are functional erections. From our data at Sloan Kettering, that number after robotic prostatectomy is less than 40%. And no patients in our entire history of treating patients have any incontinence. That number in the best of hands 2% to 3% after robotic prostatectomy.

So in conclusion, I think the data supports offering focal therapy as a viable treatment option for select and growing population of patients with prostate cancer.

I do believe the rapid adoption in academic hospitals enables a pipeline of residents and medical students to be exposed to focal therapy. We're just seeing that tidal wave starting, inclusion of focal therapy in academic meetings, courses research sessions, panels will positively influence specialty and national guideline committees, which is critical for adoption and reimbursement. And I do believe focal therapy has reduced the burden of prostate cancer for our patients. It's why we do what we do, why we do the research we do, and I think it's made a tremendous impact on our field. Thank you very much.

I am Steve Annen, and I lead the innovation and product development teams at FocalTherics. As Ryan said earlier, we are defining and building and leading the category of robotic focal therapy. And what I'm going to do today is overview for you the investments we're making in innovation and advanced technologies. So we have the wonderful lecture of having Dr. Ehdaie here and hearing his voice and that's what we do as a practice at FocalTherics as we listen to our clinicians. And the voice of our clinician is very clear about why they chose Focal One and why they chose our company.

Let me go through that for you. We know these surgeons look at different focal therapy platforms. And they've made a decision to adopt Focal One for certain technological reasons and work with us for certain reasons in terms of the decisions we make in terms of our product road map. So when it really boils it down, there's 3 things here.

Number 1 is accurate treatment targeting. So we have the most compatible system that allows surgeons to bring in patient-specific imaging to drive accurate treatment plans to make the most personalized treatment possible. Number 2 is the recision HIFU energy ablation. That's using our fully robotic control in our electronic beam steering to allow surgeons to shape and conform the targeted ablation around the tumor boundaries of the cancer in 3 dimensions.

The third is the easy-to-use workflow, which Dr. Ehdaie already showed us, and I'll show you some more with treatment versatility. This allows the surgeons to deliver a focal treatment a partial gland treatment or a whole gland treatment depending on the state of the disease and allows during the treatment for the surgeons to adjust and refine the treatment based on the size, the shape and the location of the disease, all being the most flexible platform in robotic focal therapy.

And from another aspect that we hear directly from our clinicians, as they appreciate and they want to work with us because we've demonstrated an ongoing commitment to invest our development dollars into innovations and product development that they tell us are meaningful to them and meaningful to improve their experience and to impact patient outcomes.

So we believe and we know that Focal One is purpose-built for precision focal therapy. What do I mean by that? We offer a natural orifice approach that provides direct access to targeted tissue. As Ryan pointed out, and Dr. Ehdaie pointed out, targeted tissue in the prostate lane. We are the closest technology to where the cancer lives, right?

The -- we also have the Focal One platform has a foundational design, a scalable design. It's a seamless integration of precision robotics, our proprietary dynamic focusing probe high-resolution imaging and a mature software-driven workflow. And this can't be understated. It's very important. We have a long history of a full workflow that guides the surgeon through the treatment. And this really allows surgeons to have to optimize their treatment efficiency.

We look at Focal One as a really scalable platform. And what I'm going to show you today is and go through with you today, the investments we're making in certain areas in advanced imaging, an AI-driven treatment with artificial intelligence, with remote connectivity and with expanding our precision focused ultrasound, namely and specifically, adding nonthermal Histotripsy to the Focal One platform, and I'll get into that a little bit later.

But we believe that we are ideally suited to build and build more capability on the standard platform. We've already demonstrated that today because on this single platform, not only are we treating prostate cancer, but we're treating endometriosis for women on a single platform with multiple indications.

So first, let's talk about advanced imaging. So there's a long history of our company's ability to facilitate importing MRI into the Focal One system, as Dr. Ehdaie spoke about. That was from the very beginning, multi-parametric MRI. In the last few years, we've accelerated our investments.

Several years ago, we now bring in -- we can -- our compatible with several fusion biopsy systems, KOELIS, MIM, and Philips, the DynaCAD Urology for those surgeons that want to use that biopsy data to specifically target the tissue. A couple of years ago, based on clear surgeon feedback, we worked with some companies that have AI-driven algorithms, intelligent algorithms to look at the map of the cancer using AI algorithms, that's unfold AI and OnQ Prostate. And so now surgeons are continuing to use that intelligent mapping of the cancer to drive precision Focal One treatments.

And last year, as part of the Focal One i launch,we integrated the ability to bring in PSMA PET. And PSMA PET is really important, and it's different because it specifically targets where the cancer is it locates the cancer and it lights it up in our system. And later on, we invite all of you to stay for a demonstration and Hugo will show you exactly how the PSMA PET is integrated into the Focal One and drives precision treatment for the patient.

With that success of the PSMA PET, we just recently signed a collaboration agreement with Telix Pharmaceutical. They're a major player and PSMA PET agents and tracers. And what this investment is in this collaboration is demonstrating our commitment to physician education and joint clinical research. We have many mutual customers. We're going to work with those mutual customers to look at best practices and treatment protocols to really bring up in -- bring to importance, the combination of our PSMA PET imaging and our robotic focal therapy. And what we're going to do is capture document and share those best practices and those standards to the whole Focal One surgical community, so it can be further impact and improve patient outcomes and patient treatments.

So let's move on to artificial intelligence. We're taking a very deliberate approach to artificial intelligence. We've worked with clinicians. We've gotten their feedback over many meetings and they're encouraging us to prioritize in these 3 areas.

Number one is continue to provide them with mapping of the cancer and mapping of critical structures so they can do what they can do with Focal One, and that shape the dose [indiscernible] with delineate the cancer and the critical structures and provide a very precise ablation. Number two, there is so much data with the Focal One treatment. We capture all of this image data and all of this treatment data. And what we can do is we can use AI machine learning to really help surgeons monitor the anatomy during the treatment and see how the anatomy changes to give feedback to the surgeon along the way for the most effective treatment.

And the third one is very exciting. We announced last year that we have our next-generation ultrasound. This next-generation ultrasound allows us to tap into the raw data. It allows us to look at signals, ultrasound signals we haven't been able to look before. And this will allow us the ability to assess tissue ablation during the treatment to make sure the surgeon has delivered the most effective treatment before the treatment is over.

So it's a very exciting road map. We're investing in it now. We're making great progress. So we have a very bright future let's talk about remote connectivity. Remote connectivity, I'm very excited to introduce and announce to all of you our initiative called Focal Connect, Focal Connect development initiative. Focal One is uniquely designed for a high fidelity focal therapy telecollaboration. Let me explain what that means.

We have a completely integrated digital platform. There is a surgeon sitting at our system. You can see it right there. Once the probe is positioned, the entire experience is a full digital software interface experience for our -- for the surgeon, okay? That's very unlike some of the focal therapy alternatives that Dr. Ehdaie spoke about and that Ryan spoke about, where there's sort of continuous manual manipulation or adjustments throughout the case.

Even some of these semi robotic systems during the case, you'll have to do manual adjustments. It's just impractically impossible for that kind of technology to be controlled remotely. With our platform with the Focal One platform, you can see everything remotely and you control everything remotely for really the highest fidelity experience.

The other thing that we've proven, and I'll show you our story with Cleveland Clinic is we were able to perform this and have excellent results with leveraging existing hospital networks. Some of you may have seen robotic telesurgery events. What you [ did ] maybe didn't know is there were dedicated infrastructure, dedicated networks that are costly for all that event to take place. We're establishing a capability that we can leverage hospital networks that don't add extra cost and infrastructure to be able to achieve that. And the bottom line is this, we believe that Focal Connect will broaden patient access to Focal therapy and broaden patient access to expert care.

So let me talk about the success we had last year. So working with Cleveland Clinic surgeons, we conducted the world's first transcontinental Focal one HIFU telecollaboration. It was very exciting. So we worked with Cleveland Clinic. This is Dr. Olivares in Cleveland in his office with the interface with the exact interface that we have in the operating room from Cleveland, 7,000 miles away was Dr. [ Hassen ] in the operating room treating the patient with Focal One, okay? And so you can see here from the quote Dr. -- after it was -- the event happened, there was interviews, Dr. Olivares said, after a while, I forget i was doing a remote surgery. And then Dr. [ Hassen ] added, Dr. Olivares was enabled to seamlessly perform the procedure from beginning to end without my intervention, a real major milestone and the ability to perform focal therapy at such a distance.

And again, I will echo I worked personally with the IT teams and the cyber security teams from Cleveland Clinic at these centers. And they had thought maybe we needed special networks. We did this all in standard hospital network which really lays the foundation for this to scale really dramatically, I believe.

So let's talk about what I see as a progression in our Focal Connect development initiative. Number one, let's go back to this. Some of you might recognize this as the da Vinci dual console system. I spent many years in Intuitive of launching exciting products, and this was one of them. The da Vinci dual console. During that experience, we learned a really important lesson and that lesson was no matter if it was telecollaboration or a teaching experience, high fidelity for both surgeon was absolutely critical to be able to visualize what was happening in the procedure and being able to control with the same high fidelity, okay?

In essence, what we're doing is we now have the dual console for the Focal One system. As we look and we talk to our surgeon partners, there are -- we can go beyond the operating room. We're not sort of stuck to a dual console and one operator, and we can break through those walls. And so there are 2 scenarios I'll outline for you here that are real and happening right now.

So in this scenario in the middle, you basically have a surgeon using Focal One in the operating room down in the lower right. Okay? And oftentimes surgeons would like to collaborate, they'll ask advice from another surgeon. Usually, it's a phone call or it's a face time or it's just not very high fidelity, okay?

Today, and as we roll out Focal Connect, that surgeon who got the call is going to be able to just log in from their dual console from their office over the hospital network and immediately see exactly what the surgeon in the OR is seeing be able to take control if that's what they decide will happen, they can swap control. So it will be a much more efficient way to share best practices just on a hospital campus.

The next scenario is very exciting. So we're working with the surgeon [ Kaiser ] in Southern California. And they have created a center of excellence in their L.A. facility. And now is the time where once they create that center of excellence, now they're starting to add other Focal One systems at other hospitals in San Diego in other areas, Riverside and such. And so talking with the surgeon his vision is to be able to use capability like Focal Connect to not only train initially in person side-by-side and then as he goes back to his office, being able to connect with Focal Connect and be with those surgeons. If they want to call, they send a text. He can immediately from his office log in, look over their shoulder, talk about what they're seeing and make a decision collaboratively.

So we really see a lot of promise. And again, it's based on that unlike other focal therapy modalities that have a lot of manual positioning, those would just not be practical to ever be able to control remotely. And with our fully digital software-driven platform, it's very straightforward with Focal Connect.

So I want to go back to Cleveland Clinic. It's important after this event happened last year. Dr. Jihad Kaouk, he's the enterprise chair of Urology at Cleveland Clinic. He said this about the event. This innovative approach with Focal One Robotic HIFU not only allows us to share expertise across Cleveland clinics, locations but also expands access to specialized care for patients no matter where they are. Cleveland Clinic has 5 Focal One programs across the world, 3 in the U.S., 2 outside the U.S. This one event was Cleveland Abu Dhabi. We are now working with clinicians throughout the Cleveland Clinic network to continue to refine and use focal connect, telecollaboration to really make it more commonplace. So we have a study approved to move forward with Cleveland Clinic to further use telecollaboration in Focal Connect.

So I want to move into the last section. And again, I already mentioned this. One of the values of the Focal One system is that it's a scalable platform. And what we can do is as we look at innovation in one area, precision focused ultrasound, we can leverage all of the mature capabilities of all of the others, the robotics, the mature workflow and the advanced imaging.

So in this case, what we're doing here is we're investing in expanding our precision-focused ultrasound to include Histotripsy a nonthermal way to destroy tissue, okay? And one of the things that's -- that we are uniquely qualified for and positioned for at FocalTherics is you might think of us as a long history in high-intensity focused ultrasound, multiple generations of HIFU technology, Ablatherm to Focal One. But there is over 30 years of development in nonthermal Lithotripsy.

So let me explain that, right? Over 30 years over multiple generations of technology over 1,000 systems shipped in the world. So we have a strong background in this nonthermal approach. And what's key here is that Histotripsy just have a brother-sister relationship to Lithotripsy. Lithotripsy, Histotripsy brother, sister relationship. They both use short pulse, high-pressure sound wave, focused sound waves to destroy their targets. In the case of Lithotripsy, it's stones, kidney stones in the case of Histotripsy, it's treating tissue and it's called tissue liquefaction, right, to basically just liquefy the tissue.

So last year, we announced some great progress where we were able to deliver Histotripsy through a Focal One HIFU transducer, part of our Focal One system. We continue to make great progress. As a reminder, on the left-hand side here, this is today's HIFU transducer with the imaging sensor in the middle and then we have these concentric grains.

And this is the probe, the dynamic focusing probe with our electronic beam steering, right, that allows us to deposit HIFU energy at each of these focal points. So you'll see on the right-hand side that is today's HIFU transducer, creating very well-formed Histotripsy bubble clouds in water, again, at these different focal points. So we're, again, as I said, we're leveraging a lot of mature technology and then bringing in Histotripsy to be able to incorporate it into the system.

So let's take it a step further. As Dr. Ehdaie showed, he showed our -- the Focal One basically treatment workflow. This is -- now what we're doing here is we're leveraging our existing mature treatment workflow. And now we're treating -- we're -- we've done a plan, a treatment plan. And each of these green dots is where the surgeon has defined where they want the tissue to be treated and each time it's treated, it turns to red, okay? And so what we're showing you here now is this is -- everything is the same about Focal One. And we basically now are delivering Histotripsy to this tissue.

What we're doing here is just these -- the orange lines right there, that's the rectal wall detector. That's a very important aspect of the Focal One that Dr. Ehdaie spoke about. He talked about all these embedded safety feature that we rely on. This is where that orange line detects where the rectal wall. So each time there's a fire, it detects the rectal wall. It will adjust the system automatically to make sure that the transducer is at the right distance away from the tissue fire to fire slice by slice. What you'll see here on the right as we were able to successfully have tissue liquefaction in our demonstration here.

So let me talk a little bit about how we see this fitting into our portfolio. We believe that it's the combination of HIFU and Histotripsy together. We know today that with HIFU, we have a very proven and effective solution for treating prostate cancer and now endometriosis in Europe. But we believe that the combination can bring incremental value, especially when we're basically treating tissue that's right up against critical structures like the urethra, the rectal wall or neurovascular bundles, -- where we can then continue to look in improving outcomes and patient quality of life.

So again, we see the future and our -- we're investing heavily to look at really the combination of HIFU and Histotripsy. Again, leveraging our mature workflow, leveraging the entire scalable platform and adding both modalities. And as we do this, we are actively developing and filing novel intellectual property covering the unique combination of HIFU and Histotripsy to strengthen our ever -- our strong IP portfolio.

So again, I want to round it out and just talk about this is possible because we have a seamless integration of technology, it's a scalable platform and HIFU and Histotripsy and our precision focused ultrasound category fits right in place. So all of this, we can do innovation simultaneously as we proceed with our investments.

So as I close, I would like to go back to the voice of the clinician. And one of the things that we know is that clinicians have looked at different focal therapy modalities and they have either chosen Focal One or they've switched to Focal One from another modality. And they have certain reasons. And one of them is that, like Dr. Ehdaie said, they just didn't see the consistency. There's too much variability in any sort of system that required a lot of manual manipulation or manual adjustments. And they look to Focal One, for several reasons.

Number one, being the most compatible system with advanced imaging to be able to bring in MRI imaging, now PSMA PET precise energy delivery through our precise delivery with robotic control. The easy -- it's a fully integrated system, that's the easiest to learn, use and teach with minimal OR staffing, a single urologist and a single anesthesiologist can basically the treatment and really providing the shortest treatment times and predictable treatment times.

So these surgeons know exactly the time it will take to perform a treatment. They can schedule a day, their block time for that day, and they can effectively manage their patients and manage their patients that are requesting Focal One treatment. And what the surgeons are also saying is that they really look to the promise of what we're developing. Our voice of clinician is very strong that they love to work with us because we have committed to expanding focal therapy. Again, we are demonstrating that with the advanced imaging with PSMA PET and the collaboration with Telix, the training and telecollaboration that we're pioneering with Focal Connect and working with Cleveland Clinic and Kaiser, the voice that we're hearing and guiding us and prioritizing the artificial intelligence initiatives to bring in AI-assisted treatment and ablation assessment and finally, this ability to expand.

We've demonstrated already going from one indication to a second indication but being able to add Histotripsy to HIFU and a powerful combination to extend that to prostate cancer, endometriosis and BPH. So with that, I'll say thank you, and I'll turn it over to Ken.

Thank you, Steve. The last 2 years have been a time of transition for our company, and now we're at an important inflection point. As Ryan mentioned earlier, our HIFU business has been growing at a very healthy rate the last couple of years. Historically, the HIFU business was approximately 35% of our company's revenue. And as we look forward into 2026 based on the guidance range I gave, that will now be over 60% of the company's revenue.

But when you look at our non-core business, that business has been shrinking over time and is currently now going to be approximately 35% of the company's revenue. So when you look at the net impact of that, we've had a business that's been growing at 7% a year. But when you strip out the non-core piece of the business, the ESW on distribution business, you see a completely different picture.

You see a company that historically has been growing at 32%, it grew in CY '25 by over 41%. And when you take the guidance range we gave going forward, it's going to grow at 40-plus percent. As a result of that, we recently announced our intent to classify our non-core business as part of discontinued operations.

And we feel that's an important next step to really unlock the value on the P&L by putting our discontinued operations below the operating line, we're going to be able to clearly illustrate in our income statement the high growth that HIFU brings, the incremental gross margin dollars as well as the targeted operating expenses it's going to need to really drive this business going forward. And as a result, we are keeping our HIFU guidance range this year between $50 million and $54 million. We're keeping that constant. We're not changing it.

So what happens now that we're propelling our HIFU revenue? What levers are going to really help grow this business forward. When you step back and think about it, it's really in the short term, be continued placements and strong procedure volumes, our primary catalysts. When you look in the U.S., we're going to continue to penetrate untapped markets.

We've also made a lot of investment in our marketing to create customer awareness and patient awareness about our process as well as create doctor awareness and how valuable it is for him to create a program for his practice. We're going to see also, as a result, right, we talked about new indications. So in a couple of years, we're going to start seeing a boost in our procedure volumes given the impact of these new indications.

So -- and finally, on the international front, we recently got reimbursement as France, as Ryan talked about. So we see penetration there. And the other nice thing about our OUS business is given our non-core legacy, we have sales channels already set up in those regions. So now all we need to do is introduce the HIFU product and we have a channel to help penetrate sales in a more efficient manner.

So with this increased focus on HIFU revenue, we're also going to see an increase in our gross margin profile going forward. We're going to maintain good pricing discipline with the increase in our system sales, we're going to see production volumes increase in the factory. That's going to lead to good economies of scale purchasing and a better factory absorption, we're going to see good volumes increasing, both from a procedures.

And historically, our procedure revenue has good incremental gross margin. And we're also going to see bill of material optimization, right? And we did see that, as you recall, in the first quarter, our gross margins in the first quarter were 51%. So we're already putting some of these practices into place.

We had strong price -- we had a BOM cost reduction and our procedure volumes were very strong, which led to higher consumable revenue. And this, in turn, is going to create good operating leverage to invest in our business. The thing Steve talked about today, BPH, artificial intelligence, Histotripsy are good innovation things we need to grow demand for our business.

We're also going to continue to invest in clinical studies, and we're going to continue to put the efforts and resources in place to help grow our global commercialization across the plan okay? And the nice impact you see here is our percentage of revenue. Our operating expenses of operating expenses as a percent of revenue are improving over time.

Finally, so what does this mean to us as we move forward in 2028, right? We believe -- we have a good target range for our business model going forward with revenue growth of approximately 40% a year, targeted gross margins of 60% and that's going to really lead to a good operating model for us, where we can break even on operating income by the end of 2028 and also achieve positive EBITDA as we move forward in 2028. So with that, I'm going to hand it back over to Ryan for closing remarks, and then we'll take some Q&A.

Thanks, Ken. In quick summary, we address a large underserved growing market. We provided updates today on our differentiated technology, leading the category of focal therapy and specifically robotic focal therapy. We have expanding favorable reimbursement. We have robust clinical evidence, some today and even more coming. We have accelerated global commercial execution, both in sales and our procedure growth. And through growing revenue, we have a pathway to profitability. I'd like to now invite Ken and Steve up to join me for some Q&A.

[ Anthony Petrone ] for Mizuho. Great Analyst Meeting, and thanks for the presentation from Dr. Ehdaie as well as the guidance. Maybe to start with the percentage of low volume, high-risk prostate cases that Dr. Ehdaie highlighted, how many of those can actually transition into Focal One therapies when you think of leveraging MRI biopsy. And then you pointed to a next-generation ultrasound as well as leveraging AI models. So really looking at that active surveillance pool, specifically the high-risk, low-volume cases, how many you think are transitioning in today to Focal One treatments? And how many you think over the 3-year here will actually be Focal One cases over time? And I'll have a few follow-ups.

Yes. So we're clearly early in our adoption life cycle. Going back to the recent AUA meeting in Washington, D.C. in the breakout section of the focal therapy society amongst all technologies and thought leaders, they said the market was 4% adopted as a data point. But if you look at what was presented today and look at information even shared with Dr. Ehdaie, this intermediate risk category, including favorable intermediate risk and even down into lower risk is a large market segment for us. And as he said, per the studies in the U.K., 40% of men progress at 5 years off of active surveillance.

So active surveillance has been a great story for many men. We've moved away from over treatment into this new era. And as active surveillance continues to grow, it plays well to our story directly. I also mentioned men who are on active surveillance, have anxiety-induced treatment decision-making. And what does that mean? It means I've got a cancer in my body. I'm scared of radical treatments. Is there something else you can [ offer ] me. So we're really well positioned to capitalize on that market, which is significant in terms of case volumes and potential revenue for the company.

Now we're also, importantly, into the NCCN guidelines as a salvage treatment for failed primary radiation. And to provide more color on that, men and fail radiation, not only don't have a lot of good options, they're commonly put on hormone deprivation therapy. We chemically castrate them or turn off their testosterone to slow down the progression of cancer. We have a great solution. In fact, a lot of hospitals now are embracing use of HIFU as a salvage treatment.

If I can answer that. So yes, this group of men really have very little options. And that was one of the motivations that our clinicians ask us to integrate PSMA PET into the Focal One because that PSMA PET can locate and light up the cancer in those men that have a recurrence. Those men typically don't have very many treatment options and if surgeons do not like to do a salvage prostatectomy. It's very difficult and the outcomes are very poor. So we heard that voice. We implemented the new technology and with the HIFI-2 study that came out, that's really supporting using salvage HIFU with the integration of PSMA Pet, we can bring sort of more tools and technology to these surgeons to treat those men.

Maybe the follow-up would just be on guidelines. You have salvage NCCN guidelines. But the data, for instance, versus radical prostatectomy looks pretty obvious here. You have the 95% cancer control 99% for surgery, but quality of life is like light years ahead of surgical prostatectomy. So when do you think you could see a guideline revisit? And what do you think it looks like for Focal One therapy over time. And I'll pass it on.

Well, that's a great question. I think we're seeing an evolution and change in the guidelines today. Now one thing I have to always remind people my time in tender at Intuitive Surgical, I was instrumental in getting the guideline change for the NCCN for robotic surgery. By the time the guidelines change, the market was 60% adopted.

So guidelines tend to lag here in the U.S. They behave a little differently in Europe. I see progression happening. As we heard today, many of the academic centers now are embracing focal therapy and certainly embracing the use of our technology. So we'll see an evolution to change playing out, I think, over time.

I think at the end of the day, these studies and specifically the HIFI study, which is a landmark study, put a lot of emphasis on the fact that the oncologic control is not inferior to a gold standard treatment that's been around for 10 years surgery. So we're very encouraged. We'll see guidelines evolving and changing.

But nonetheless, they may lag in certain regional markets. But we're well positioned, I think, to see a looming change happen. We're in a new era of treatment and with all the things that Steve mentioned today, we're able to see cancer in a better way, and that opens up the opportunity to treat it differently and reduce the morbidity and overuse of radical treatments.

Mike?

Mike Sarcone from Jefferies. I guess just first one for me. You highlighted your account, Saint Alphonsus and Boise, Idaho. And I think you said they reached 100 procedures in the first year. Can you just give us some context for how that compares with your average account? Is there anything special about them kind of typically or I guess, how reproducible is that to some of your other accounts?

Great question. Why that's a great example. It's not necessarily a large metropolitan markets such as here in New York. But when you launch it as a program, in fact, today, when we see a lot of our programs -- they already have a bolus of patients ready to treat in advance of even receiving their Focal One machine. So that's good news. There is a patient population already out there today, underserved that we can go after.

So one question comes back is, can we reproduce this in other accounts? And the answer is yes, we can. And we've gotten better ourselves -- but I think also doctors are realizing that, look, I want to get ahead of this. And in some cases, hospitals say, we want to enjoy first-mover market advantage. We want to be out front. We know that the prostate cancer patient is very valuable to us. And in the course of that, we want to keep that patient under our care and be able to even attract the incremental patients out of our attachment market.

So we'll see more of this activity coming. What I think is really powerful is the patient or consumer message is really strong. We're not cutting into the body. We're not prescribing radiation. We can do this operation in a total treatment time commonly and running machine time under an hour. It's an outpatient procedure, a single treatment, you go home and you're back to your quality of life.

Great. Thanks, Ryan. And then I guess just a follow-up on the Histotripsy section. Can you just give us any outline for regulatory time lines, commercial time lines? Like what do you need to be offering Histotripsy on the Focal One System?

Well, again, we're investing. I can't really go into time lines, but we're investing -- again, we feel like we have a real advantage because we can leverage the existing platform where basically the -- our transducer is closest to where the disease lives in the posterior part of the prostate gland. But I think it's early to talk about time lines, but we'll continue to share our progress as we move forward.

Just a quick follow-up there. What you have to run a clinical trial for this and go to regulate?

Yes, we'll have to go through the product development, the preclinical labs, it's the classic preclinical labs and then the clinical labs. So -- but we think we have a big advantage because again, if you are bringing a new market -- a new product to market, the FDA, the CE Mark will require lots of things about safety and cyber security and all of these things.

We check all those boxes, okay? So we're just talking about how we actually treat the tissue. So that's why we feel our system with all of its components that are mature and just changing sort of one aspect of the technology will give us an advantage and we'll streamline that process.

[indiscernible].

Yes. So good questions. So when you look at new indications, right, those are in that target model we put together, those are very back-end loaded, and we're just basically factoring in procedure volumes in 2028. And based on the total procedure volumes, it will be a very small 10% to 15%. As we grow the business going forward, what I see is growth in OUS markets, but our premier growth driver will still be the U.S. as we go forward.

Great. And then I'll put into one question here. Kind of piggybacking on that, are there any assumptions you're making on the macro backdrop in order to hit your '28 targets that we should be considering?

Can you repeat the question?

Any assumptions on the macro you're making within your longer-term framework? And then one other one I'll just throw in now on the gross margin side. Just kind of what drives your confidence there expansion -- just given solid growth in HIFU revenue, but just some compression on that line.

Yes. So when you look at our gross margin and historically, our -- our HIFU gross margin when we had it embedded with -- all 3 segments has always been the highest. What I think is really going to propel gross margin are pretty much the things I mentioned earlier, right, procedure volumes, right? When you look at our gross margin profile for HIFU business. Our procedures are always accretive to that margin. And then we're just doing a lot of work, Steve and I and how we can streamline our cost structure, look at ways to make things more efficient from a manufacturing perspective. And then factored in there, we still have to keep our eye on the tariff picture, right? But those tariffs right now for this year, as I've mentioned in the earnings calls, it's going to cost us about $2 million in gross margin. So as we move out in time to I hopefully going to see those get reduced.

[ Jas Jane ] from TD Cowen. Appreciate you guys hosting the event, a very informative educational. I wanted to just ask about one of your slides, Ryan, where you talked about, I think, ablation being less than 10% of localized prostate cancer, interventions today going to 40% and it seems like most of the share gains are assumed between surgery and [indiscernible] radiation.

You've got the active surveillance opportunity as well as well as those cannibalizing those 2 categories. Maybe just talk about how you see kind of the ramp? Is it a blend between taking capturing surgical and radiation cases today and active surveillance is one bucket bigger than the other? I just have a follow-up on the active surveillance opportunity.

Yes, great question. I see certainly a reduction in the radical treatments, both surgery and radiation. So there is a share shift there. But I would also say that for men, it can't, in some cases, stay on active surveillance as we discussed, 40% progressive 5 years or they decide that they want to treat something in their body then that's a good audience of patients for us to obviously go after with HIFU.

So I haven't thought about it in the actual percentages, but the market is there today, which is exciting, I think, for all of us men are being diagnosed somewhere today that are better prescribed with focal therapy than they would be prescribed a radical treatment. And we know the morbidity is real.

It is real for these radical treatments and you live forever with those outcomes. So to offer these men something better that's efficacious, has good cancer control and maintains their quality of life. And when I think about it is a lot of these academic programs have large patients or a large subset of patients on active surveillance, which is really good for the story.

And if I look at back in the era when I was at Intuitive Surgical, there was not very many active programs that really had good active surveillance protocols in place, we're in a new era today. And I think with AI coming in early testing, genomic testing, all these things are going to play really, really well into our story and the story for adoption of focal therapy and specifically HIFU.

Great. And I was going to add to that. I have experience on robotic surgery and radiation therapy and now Focal One Robotic focal therapy. And I think it's important to know that when a patient looks for different treatment alternatives, most of them in the United States when they talk to a radiation oncologist -- when they say, "I think I'm going to consider radiation therapy."

It means 20 to 45 visits to a hospital every day, every business day, could be 9 weeks. It could be 6 weeks, okay? And so as more patients as more hospitals adopt Focal One and go out and do patient outreach and patient education as more patients understand. I think they're going to say, "Oh, this is different now. My alternatives are different." And they're going to look at the impact to their life, the impact to their family who has to sort of take care of them. And I think we're going to see more patients demanding this approach.

And one follow-up on this topic. Just wanted to punch and I should know this myself, but are there any mechanical or just I mean coverage issues with the active surveillance patient today? Or is it that they get offered a shared decision-making process, if they're inactive surveillance candidate, they could move forward with radiation surgery or Focal One today? Are there any coverage changes or decisions that need to be made to open up that patient opportunity more fully.

Yes. That's a great point, Josh. What's saddening is to think that there's men today with low-grade cancers, Gleason 3+3, who would be prescribed active surveillance but they have in their mindset that they want something to treat their disease. And what shocks me is how many men who have low-grade cancers would move and jump over to radical treatments, such as surgery or radiation. And if you go back to the U.S. preventative task force D recommendation in 2012, that D recommendation was to turn off the Spigot, call it, of overtreatment.

Now it was the wrong thing to do as they found out later because they were prescribing against PSA testing. And then because of that, we now patients went through an aero patients with more higher-risk cancers. But I think when we think about it in this context that we now have a solution for patients and a large audience of patients and if they ever needed a radical treatment down the road, you don't burn the bridge. That's what's so beautiful about focal therapy. It's a repeatable thing.

In fact, with Focal One in HIFU, there's no toxicity. You can you want to repeat it, the treatment you can, 3 years out at 10 years out or something along that line or just by chance a small subset and then progress on to a more aggressive cancer, you can go surgically remove it. And by the way, a surgically removed prostate post HIFU is a very different type of surgery than a post radiation treatment, as Dr. Ehdaie mentioned.

One just last one on just that patient group that has concomitant BPH localized prostate cancer? Is that an opportunity for Focal One to take some share there. Are you seeing cases already being done? And with the prostate cancer indication? And how do you size that up and view your positioning there?

Yes, that's a very good point. So One of the reasons we're pursuing BPH is many of these thousands of patients we've treated for cancer, their urinary symptoms scores improved. They improved. And it would make sense. We're ablating inside the prostate gland in a safe prescribed manner, we're relaxing the pressure on the prostatic urethra and the urinary symptom scores improve.

So that led us, obviously, down the path of let's go after this BPH indication. And by the way, it's an easier thing than what we do with cancer. And so I think here, we're really in a new opportune time to capitalize on this.

Now with the code, there is a CPT III code for BPH. We have heard anecdotally, and I can't describe by name of a hospital being able to maybe potentially build for both. But our thinking is, look, we have a labeling of ablation of prostate tissue today. And with that opportunity in labeling, we can quickly get into this BPH market.

Now we've got to do the studies and all that, but we want a labeling claim so we can market this. And our approach would be highly unique. There will be no bleeding. And as we talked about men on anticoagulant therapy, there's a real advantage there. But I think there'll be other advantages, too, with this type of treatment, as noted with Focal One.

Maybe just a couple of follow-ups on prostate, [ Anthony, Mizuho ]. You mentioned some data coming at the end of the year. I know you have the Phase I/II study that's ongoing. So how many patients from that study, are you going to show at the end of the year? Is that going to be a press release or will you present that data at a clinical meeting? And then maybe what are the bars there for sexual dysfunction for catheter utilization after BPH therapy bleed rates, how do you kind of level set just the bars on the BPH study?

Okay. So I want to make sure I'm clear. Were you talking about the Endometriosis study is a the presentation show BPH...

Okay. Yes. Yes.

So we've got 3 kind of studies going on concurrently. One group of patients being treated in Latin America, soon to be a group of patients here treated locally here in New York under an IRB protocol. And then we have a combined Phase I/II study Europe. So part of this is to get the data in front of us that we can submit and have a conversation with the FDA. So we set up the study design correctly for a pivotal study in early part of 2027. So that's kind of where we're at today.

Now we've treated patients, and the early results have been very promising to the fact that our principal investigator is now openly said we're activating on our approved protocol, and we'll start the active recruitment now through the rest of this year. Now the great thing about it is, if there were more centers interested, we have a large growing installed base of Focal One customers, and I'm sure there would be no shortage of hospitals that would want to participate in a multicenter study. And because we're not going after a cancer indication, it's -- we believe we're coming from cancer going to BPH. We're in a more optimal position for an accelerated approach into this new indication. Yes, Michael.

Mike Sarcone from Jefferies again. Just one for you, Ken, talked about 1,200 basis points of gross expansion to 28. Any color on how you're thinking about the cadence? Would that be evenly distributed? Or what should we look for in that year?

So I think you're going to see it in a couple of different forms. So when you look at our system gross margin, right, we're going to continue to see improvement there, okay? And then like I mentioned earlier, when you just run rate out our procedure volumes increasing over time. That margin is accretive to the gross margin of the HIFU business.

So between those 2 levers, you're also going to see service margins increase a few basis points over the next couple of years as our quality improves with our product and reliability. And we're doing a lot of things behind the scenes and service to get our operating expenses more in order. We're looking to do some automation features, et cetera, remote diagnostics, as Steve talked about, all those levers will help to increase the margin. So it's pretty much across the board.

[ Lou Charles Wallace ] from [ H.C. Wainwright ] here for [ RK ]. So maybe a question for Ken. So now that you've reclassified the non-core business as discontinuing operations. Does this kind of accelerate the time line as you kind of ramp down that business?

So by putting it in discontinued operations, right, we're going to continue to look at ways to monetize that business. All right? There's a framework for going through it and classifying in discontinued operations. So as I said, we're just undergoing that process. But truth be told, we are looking to monetize that business, right? Whatever we can do to create revenue generation for the company.

Our intent is not to write it off. Our intent is to monetize. So we're going to take our time. We have a year window and actually could go a little longer for certain circumstances but we are going to look to monetize that business.

All right. I don't see any other questions. We have a demonstration set up, up here, and I would highly invite all of you to participate and view the demonstration that Hugo will run. We've got set up some PSMA PET imaging, just showing the newer capabilities with the Focal One i platform.

So again, I want to thank everyone -- and for those who want to stay around or talk to us when or where, we're happy to answer questions as noted. Thank you.

Greetings, and welcome to the EDAP TMS First Quarter 2026 Conference Call. As a reminder, this conference call is being recorded. I would now like to turn the call over to Louisa Smith from Gilmartin Group. Please go ahead.

Good morning. Thank you for joining us for the EDAP TMS First Quarter 2026 Financial and Operating Results Conference Call. Joining me on today's call are Ryan Rhodes, Chief Executive Officer; Ken Mobeck, Chief Financial Officer; and Francois Dietsch, Chief Accounting Officer.

Before we begin, I would like to remind everyone that management's remarks today may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause actual results to differ materially from those anticipated. We direct you to the Risk Factors section of our most recently filed annual report on Form 10-K for the year ended December 31, 2025, as filed with the Securities and Exchange Commission as well as our other filings with the SEC for a description of factors that may cause such differences. These statements speak only as of today's date, and we undertake no obligation to update or revise them, except as required by law. Additionally, this call is being recorded and constitutes a public disclosure for purposes of Regulation FD.

I would now like to turn the call over to Chief Executive Officer, Ryan Rhodes.

Thank you, Louisa, and good morning, everyone. As announced this morning, we delivered a strong first quarter. We reported record first quarter total revenue for the company of $17.8 million, led by record first quarter Focal One Robotic HIFU revenue of $11.6 million, further reinforcing the momentum we highlighted on our previous fourth quarter call. Today, I will provide additional color on new system placements, growing utilization trends and our ongoing indication expansion efforts before turning the call over to Ken to review our financial results.

Before discussing the quarter in more detail, I would like to remind everyone that effective January 1 of this year, EDAP becomes a U.S. domestic issuer. As a result, beginning this quarter, we will report all financial results in U.S. dollars on a go-forward basis.

Now turning to our first quarter results. Our HIFU business continues to demonstrate strong and sustained momentum. We have now delivered 7 consecutive quarters of year-over-year growth in this segment, reflecting increasing physician adoption, expanding utilization and growing global demand for Focal One Robotic HIFU technology.

We delivered record revenue across our core HIFU business driven by strong growth in both system placements and procedure volumes across U.S. and international markets. During the quarter, we recorded 11 capital sales and 10 total net placements, further reinforcing the strength and growing visibility of our Focal One pipeline.

In the quarter, we continued to expand adoption across many of the most prestigious academic cancer centers in the United States. As noted, University of Pittsburgh Medical Center, UPMC, converted to a cash sale and Moffitt Cancer Center became the 10th Focal One system installed in the state of Florida. These placements further validate Focal One's emergence as a leading robotic focal therapy platform being adopted and utilized by top-ranked institutions nationwide.

We also placed a second Focal One system within the Mass General Brigham Healthcare Network. With this addition, 11 U.S. hospital and health networks have now invested in and launched 2 or more Focal One robotic HIFU programs, underscoring the growing utilization, confidence and long-term commitment we are seeing from major health care systems.

Internationally, we achieved a record 6 capital sales in the first quarter, reflecting the continued expansion of our global commercial reach, supported by our established and growing sales channel infrastructure. Performance in Europe was particularly strong. In France, we completed our first cash sale following the French National Health System's decision to provide universal coverage for the Focal One HIFU procedure. As a reminder, this coverage decision was supported by results from the landmark HIFI study, a large prospective comparative trial that demonstrated positive efficacy outcomes for Focal One robotic HIFU as compared with radical prostatectomy in the treatment of prostate cancer.

This quarter also marked the first time our Focal One capital sales were driven by demand across 2 clinical indications, prostate cancer and deep infiltrating endometriosis. Further highlighting the value of Focal One as both a multi-specialty and multi-indication treatment platform. In the United Kingdom, Cleveland Clinic London converted to a cash sale supported by strong engagement from global thought leaders in both urology and gynecology departments, which plan to utilize Focal One Robotic HIFU for the treatment of both prostate cancer and endometriosis.

In Eastern Europe, we achieved our first Focal One cash sale in Hungary, driven by the hospital's strategic initiative to expand treatment capabilities for both prostate cancer and endometriosis. These placements are important as they recognize Focal One robotic HIFU as the only multi-indication focal therapy platform to deliver broad clinical utility across both men's and women's health. In the Americas, we delivered our first Focal One system in Mexico, further expanding our growing clinical regional footprint, which now includes Brazil, Argentina, Chile, Panama and Mexico. This is a result of our growing and expanding sales channel throughout this region.

Turning to utilization. U.S. procedure volumes increased 53% year-over-year. This significant growth was driven by physicians and hospital systems that increasingly recognize the importance of offering Focal One as a cornerstone focal therapy treatment within a comprehensive prostate cancer program. As we continue to expand the clinical applications of Focal One Robotic HIFU and bring meaningful value to a broader population of prostate cancer patients, we also remain focused on the significant unmet need in patients who experience recurrence following failed radiation therapy.

Radiation therapy failure rates reported in the clinical literature remains significant and treatment options for these patients are extremely limited, often consisting primarily of hormone deprivation therapy, which can carry debilitating long-lasting side effects that materially impact the patient's quality of life.

Our recent announcement regarding the peer-reviewed publication of the HIFI-2 study further strengthens our global leadership position in focal therapy. This study is significant for several reasons. First, it represents the largest prospective study ever conducted, enrolling more than 500 patients evaluating salvage treatment following recurrence after failed radiation therapy.

Second, HIFI-2 is the largest prospective study assessing the use of Focal One robotic HIFU within this important patient population. Importantly, the study demonstrated clinically meaningful oncologic control with 71% of the overall patient population avoiding hormone deprivation therapy at 30 months. Additionally, in a rigorously selected subgroup of patients, 84% avoided hormone deprivation therapy within the same follow-up time period. These positive results show promise for use of Focal One HIFU as a breakthrough treatment for this important population of men who have previously been left with limited options that result in negative long-lasting side effects. It is also important to note that the National Comprehensive Cancer Network guidelines already recommend HIFU as a treatment option for patients with prostate cancer recurrence following failed radiation therapy, and both Medicare and commercial payers currently provide reimbursement coverage for the use of Focal One robotic HIFU in this clinical setting.

In summary, the publication of the HIFI 2 study further reinforces Focal One's unique position as a noninvasive organ-sparing and function-preserving treatment option for a patient population that has historically faced limited therapeutic alternatives beyond palliative care.

In urology and moving beyond prostate cancer, we continue to invest in expanded clinical indications for Focal One. We are currently accelerating clinical studies evaluating the use of Focal One for the treatment of benign prostatic hyperplasia or BPH. In early March, our clinical team collaborated with urologists from the New York Icahn School of Medicine at Mount Sinai to treat patients in Chile as part of an ongoing clinical research study.

Based on encouraging early outcomes, the trial will continue with plans to enroll and to treat a second cohort of patients over the coming months. In addition, a separate IRB-approved study will be conducted at Mount Sinai in New York following patient evaluations from the Chile study. Together, these initiatives reflect our broader strategy to expand the clinical utility of Focal One and to further strengthen the body of evidence supporting its expanded use across additional urologic applications. Within gynecology, our commercial rollout in endometriosis continues to gain momentum across Europe. As mentioned earlier, multiple hospitals have now invested in Focal One Robotic HIFU to support the treatment of both prostate cancer and endometriosis, reinforcing the platform's growing multi-specialty clinical utility.

During the quarter, we actively participated in 2 major scientific meetings, the European Endometriosis Congress and the British Society for Gynecological Endoscopy Annual Scientific Meeting. Our Focal One sponsored symposium at the European Endometriosis Congress in Bologna, Italy, attracted more than 400 attendees and generated strong engagement from leading clinicians and specialists across key international markets.

On the clinical front, Croix-Rousse Hospital in Lyon, France remains central to our expansion strategy, serving both as a high-volume treatment center and as our primary physician training hub for endometriosis. In parallel, Focal One robotic HIFU endometriosis programs are beginning to launch and enroll patients. We are pleased to confirm that first patient treatments at several newly established clinical centers are expected to begin in the coming weeks, representing an important milestone as these programs transition from physician training into active clinical adoption.

At these recent scientific meetings, investigators also presented positive long-term follow-up data from the Phase II and Phase III randomized controlled trial, demonstrating effective and durable outcomes that remain consistent across all patient cohorts. These findings further reinforce our confidence in the long-term clinical value of this treatment approach. Importantly, we believe the growing body of clinical evidence establishes a strong foundation to support the advancement along the regulatory pathway. Collectively, these commercial and clinical developments further strengthen our conviction that endometriosis represents a significant long-term growth opportunity for Focal One. As we mentioned on our last call in March, we collaborated with the leadership team from the NYU Langone Department of Urology to host the inaugural International Symposium on Robotic Focal therapy in New York City. This event attracted physicians from both the U.S. and international markets who are either developing or actively evaluating focal therapy programs centered around Focal One Robotic HIFU. The strong attendance and overall success of this educational program further highlights the growing momentum we continue to see throughout the global urology community. Building on the success of the NYU symposium and in response to increasing demand from urologists seeking to integrate Focal One technology into their practices, we will be sponsoring a CME accredited physician training course at Memorial Sloan Kettering Cancer Center on Thursday, May 14.

MSKCC is ranked as the leading urology-focused comprehensive cancer center in the United States and is a leading and highly experienced user of Focal One robotic HIFU globally. Looking ahead, we will deliver a strong presence at the upcoming Annual Meeting of the American Urological Association in Washington, D.C. starting on May 15. The AUA meeting represents the largest global gathering of urologists and serves as a premier forum where the latest advances in urology are presented and translated into clinical practice.

Throughout the conference, we will host multiple educational and clinical engagement activities, including booth presentations, semi-live Focal One procedures, panel discussions and hands-on Focal One simulation sessions led by key clinical thought leaders. In addition, we will be hosting numerous analyst and investor meetings throughout the scientific program. And finally, we are excited to announce that we will host an Investor Day on June 1 at the NASDAQ MarketSite in New York City. During this event, we will provide important updates on our commercial growth strategy, clinical indication expansion and product innovation road map as we continue to build increased momentum across our business. We believe the opportunity ahead of us has never been greater, and we look forward to sharing our vision for the next phase of growth. We hope you will join us in New York.

With that, I would now like to turn the call over to Ken to review our financial results.

Thank you, Ryan, and good morning, everyone. As a reminder, all figures will now be reported in U.S. dollars. As Ryan mentioned earlier, our record revenue performance for the first quarter of 2026 was driven by continued strength in our core HIFU business, which grew 78% compared to the first quarter of 2025. Growth in our HIFU business was partially offset by expected continued decline in our noncore distribution and ESWL businesses, which declined by 20% in Q1 2026 versus Q1 2025.

Total company-wide revenue for the first quarter was $17.8 million, an increase of 25% as compared to total revenue of $14.3 million for the same period in 2025. Total HIFU revenue for the first quarter was $11.6 million as compared to $6.5 million for the first quarter of 2025. The 78% year-over-year increase in HIFU revenue was driven by 11 Focal One capital sales in the first quarter of 2026 versus 6 capital sales in the prior year period as well as a 30% year-over-year increase in Focal One treatment-driven revenue.

As mentioned earlier, Focal One procedures in the U.S. grew 53% year-over-year. Gross profit for the first quarter was $8.1 million compared to $6 million for the prior year period. Gross margin was 45.7% in the first quarter compared to 42% for the first quarter of 2025. The 370 basis points increase in gross margin year-over-year was primarily due to the strategic shift to our higher-margin HIFU business segment, which had gross margins of 51.4% for the first quarter compared to 48.6% for the first quarter of 2025.

Operating expenses were $15.5 million for the first quarter compared to $12.3 million for the same period in 2025. The increase in operating expenses was driven by higher sales expense related to increased system sales as well as incremental costs associated with our transition to a U.S. domestic filer. Operating loss for the first quarter was $7.4 million as compared to $6.3 million in the first quarter of 2025.

Net loss for the first quarter was $9.1 million or $0.24 per share as compared to a net loss of $7.4 million or $0.20 per share in the prior year period. The increase in net loss was driven by incremental operating loss of $1.1 million as well as a $1.7 million non-cash charge related to warrants and interest expense on the European Investment Bank Cante drawdown. This was partially offset by $1.1 million positive currency impact versus the prior year period.

Turning to the balance sheet. Inventory increased $13.3 million at the end of the first quarter as compared to $12.8 million at the end of Q4 2025. This sequential increase in inventory was due to a higher level of HIFU-related inventory to meet the increased demand for Focal One systems as our business momentum continues to grow. Cash and cash equivalents at the end of the first quarter were $15 million compared to $20.5 million at the end of Q4 2025. The sequential decrease was driven primarily by cash used in operating activities to support our strategic investments in accelerating HIFU growth.

Subsequent to the end of the first quarter, on April 20, we received the second tranche from the European Investment Bank credit facility totaling approximately $14 million, which will further strengthen our balance sheet and will be reflected in our Q2 financial statements. The tariff impact on the first quarter P&L and balance sheet was approximately $400,000. We are reiterating our full year 2026 guidance. We continue to expect core HIFU revenue in the range of $50 million to $54 million, representing 34% to 45% growth over 2025 and combined noncore revenue in the range of $22 million to $26 million.

I will now turn it back to Ryan for closing remarks. Ryan?

Thanks, Ken. As we execute through 2026, our priorities remain clear: commercial execution and continuing to deepen penetration across leading centers, indication expansion and advancing our endometriosis and BPH programs, technology and innovation positioning Focal One as a leader in the space with the most advanced robotic focal therapy platform. Q1 was a great start, and we are confident in our ability to deliver on our 2026 priorities.

Operator, please open the line for questions.

[Operator Instructions] We'll take our first question from Michael Sarcone with Jefferies.

Just to start, the U.S. HIFU procedure growth, 53%, really impressive, and that's a nice acceleration. Maybe you can just talk a little bit more about what you're seeing in terms of utilization and what's driving that growth? And then, I guess, secondly, how sustainable is that level of growth in your opinion?

Yes, Michael. So first off, yes, we had good procedure growth and again, on a quarter-over-quarter basis, double-digit growth. And so again, we're seeing increased demand for non-radical treatments, obviously, focal therapy being the discussion point. So I see -- we see a couple of things. One is our installed base customers continue to evolve with their programs. We've expanded training to additional doctors. So that has a direct input to increased volume of procedures. But also, we're getting better at ramping programs.

And so obviously, selling more capital creates more capacity to treat more patients. So I think it's really a combination of a number of things. I think the patient audience, as we know, prostate cancer is a heterogeneous cancer. So patients are now doing more research. They're really looking at their options closely. And if they're really not a candidate for radical treatments, then they should ideally be on active surveillance or they should be a target for focal therapy. So we see very good engagement from the centers that have our technology and certainly more centers looking to adopt it. And so again, I would -- we have a dedicated sales force on the clinical side that's doing an excellent job of advancing the programs. And again, we sell and build a program. So we feel very confident that we'll continue to grow our procedures. It's a very important metric for us. And of course, it's important to driving increased margin as well as overall revenue.

That's helpful. And I guess just to follow up on that. When you think about your U.S. accounts, in particular, for Focal One, I mean, can you give us some sense of what's the average number of surgeons using the system at accounts today? And maybe talk about how that's evolved over the past few quarters.

Yes. So very good question. So some of our earlier programs, we had individual surgeons or urologists that drove deals. And of course, as we described it as a program, a program may involve a number of urologists. So we've moved from kind of that 1.5 number of trained doctors to nearly 2 per site, 2 or more. We have some sites where we have as many as 6 urologists trained to access Focal One and more in the queue to be trained in coming quarters and including weeks.

So we're a little more prescriptive now as we've matured in our business. We want to train more urologists. It really depends -- it varies by institution, academic centers versus community hospitals. But we're in that kind of 2 or more range is our goal. And certainly, in some instances, as I referenced, we have up to 6 or 7 urologists trained and now starting to access Focal One. So that's really positive for us. And we'll continue to do -- continue to focus on that as we launch new programs.

All right. And then if I could just squeeze in one more. Just on the endometriosis side, it sounds like some really solid momentum overseas. I guess just a 2-parter here. How are you thinking about financial contribution as you start to see endometriosis application grow? And then secondly here, any update on what's going on with your U.S. efforts in endometriosis?

Yes. So as we talked about, we had some great wins in the quarter with gynecologists weighing in on endometriosis. So again, bringing in a second specialty, we're not only a urology company in men's health, but we're also becoming a women's health company. So I think what you're seeing there is certainly more activity on the capital sales side. In the short term, we'll see that. I think we'll see more of that coming because we can do more procedures on the same platform, Focal One. So it may be too early to say in our models, we'll have more that we can share in future updates of how that may play into the overall revenue number, including recurring revenue, right, on disposables or consumables.

As far as the U.S., we -- as noted, we're still waiting for published data from the randomized controlled trial that has now follow-up out to 24 months, coming up on 24 months. And then there was a subset of patients who are part of the sham arm who were treated and were coming up to 12 months follow-up. We're expecting that data to be published likely sometime this year. That data will be very important for us to revisit our strategy with the FDA in the U.S.

So the good news is some of this data has been recently discussed and presented at the 2 meetings I referenced in Europe. And there seems to be very good engagement from the thought leaders who specialize in endometriosis. So -- but when these -- when the new data is presented, I think that will be an opportunity again to take that and that will play directly back into the conversations that we'll have with the FDA.

We'll take our next question from Jason Bednar with Piper Sandler.

Congrats on the quarter here. I wanted to start on the HIFU business here in the U.S. Your placements are doing well globally. That's obviously put a really good growth here in the quarter. A lot of that can be attributed to this international expansion that you're touching on. I know we're a few years into this more focused commercial initiative around HIFU in the U.S. as well, though. Can you take us around through how you're thinking about the U.S. market? What does that runway look like in the U.S.? And when we think about opportunities in HIFU, are they just simply greater now outside the U.S., and that's why we're seeing more emphasis and growth from -- again, from kind of your ex U.S. markets?

Yes. So what -- again, we sell what we believe and clearly have demonstrated a clinically necessary strategic revenue-enhancing service line in the #1 diagnosed cancer in men. So prostate cancer, obviously, is an anchor point in men's health. So looking at the system sales, we have a strong pipeline, and that pipeline is building. I think hospitals are also starting to recognize the need to answer to the call of offering focal therapy.

Focal therapy is emerging as a treatment category, as we know, but it is a necessity to be a comprehensive offering in a hospital. And we are looking at our system sales, we're really early in this adoption life cycle. I mean, we're growing here, but the upside is significant for the company and looking at total numbers of potential sales for the future, and I'm talking about the U.S. So again, we continue to focus on building our active pipelines. As you can see, we continue to sell in academic centers, but also growing more rapidly in community hospitals. And that's important, and we've had some notable wins as we look across our installed base.

In the outside U.S., I think the important thing to understand is our legacy history in urology as a company in extracorporeal shockwave lithotripsy, we already have an established sales channel. So now we're fully activating on that sales channel. A number of us came from Intuitive Surgical, and we know the playbook, and we're applying that playbook like we did back in the early days of radical prostatectomy. And so I think we're seeing those results play out now. So the outside U.S. market continues to gain traction as we continue to move the U.S. market.

And to add to that, as we look at our mix for the year, it will still be predominantly in the U.S. when it comes to unit sales. And as a reminder, we sell direct in the U.S. so we can demand a higher ASP, both on our systems and on our consumable products.

Okay. So just to clarify, Ken, you're saying that embedded in the guidance for the rest of this year, what's implied is that U.S. accounts for a disproportionate amount of the mix of system sales?

Correct.

Okay. Perfect. Maybe next one on -- obviously have the biggest conference coming up here with AUA. Is there anything quantitative you're prepared to talk about in terms of sessions, meetings exposure? I know, Ryan, you mentioned a lot of those that are -- that you have planned, but how this year's conference compares to the last few years as you look to broaden your exposure and deepen your relationships?

Yes. So a couple of good things for this year. The meeting is in Washington, D.C. next week. And as communicated on the call, we have a course going on with Memorial Sloan Kettering Cancer Center. So that's on the front end of AUA, the day before, and then we're going to be directly in Washington, D.C. with the scientific program of AUA.

So as we look at it, we will have a very strong showing at this meeting, a lot of busy activity at our booth. We have presentations where we have the ability to do case simulations, which are really important for new customers that get to get on the Focal One platform and go through an actual treatment. They see how easy it is to set up the treatment and what the robotic platform can do for them. Beyond that, I would just say there a scattering of different scientific presentations throughout the meeting, abstracts either presented orally or in some of the poster sessions or even some discussion on the growth of focal therapy. I think the biggest thing that we see is focal therapy is becoming more of a household word in the treatment category of prostate cancer. As it continues to evolve, we're in a new era of treatment. So we'll see some of that going on out in the scientific sessions. We have a number of presentations from key thought leaders at our booth. We'll have a dinner event that's already sold out, and we're excited about that. That will be on Saturday night. So we'll have a lot of great activity. And of course, we have a very large booth in the main focused area of the exhibit hall. While we're there, we're entertaining a number of discussions with key investors and key analysts. We believe we're a breakout story. So we want to have those conversations and continue the momentum we're building.

All right. Very good. Last one for me and maybe just shortly after the AUA, you've got your Investor Day coming up. Should we be prepared for a long-range plan at the Investor Day? Is that something you're going to be prepared to discuss?

Yes. On our Investor Day, really, we're really at an inflection point of our business. So we want to provide a number of key updates. So there will be some updates on our financial models. We'll be talking about kind of the wrap around our commercial strategy. Of course, we'll be talking about some of the new indications and what we're focusing on there. And I think there'll be a technology element, something we haven't discussed or shown before that will be of interest to all attendees. We're investing in some new innovations as it relates to Focal One, but even beyond Focal One. So I think there'll be a lot there for people to learn and understand, and we look forward to sharing those updates accordingly.

At this time, there are no further questions.

I will now turn the meeting back to Ryan Rhodes.

As discussed on this quarter's call, Focal One Robotic HIFU continues to emerge as a market-leading focal therapy technology being adopted by more and more physicians and hospitals around the world. Focal One requires no surgery cutting or use of radiation, thus allowing physicians to perform a noninvasive precise robotic targeted ablation that treats only the intended disease areas while preserving the patient's healthy tissue. Its focus as an organ-sparing and function-preserving treatment aligns with the direction of modern medicine. Importantly, Focal One is not just a device. It's a foundation of program building within health care institutions. We believe this multi-specialty multi-indication strategy positions us well for sustained growth and long-term value creation.

I want to thank everyone for joining us on today's call. We look forward to seeing you at the upcoming Annual Meeting of the American Urological Association next week and at our Investor Day and the Jefferies Healthcare Conference, both taking place in New York City in early June. Thank you.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Greetings, and welcome to the EDAP TMS Fourth Quarter and Year-End 2025 Conference Call. As a reminder, this conference call is being recorded. I would now like to turn the call over to Louisa Smith from Gilmartin Group. Thank you. You may begin.

Good morning. Thank you for joining us for the EDAP TMS Fourth Quarter and Full Year 2025 Financial and Operating Results Conference Call. Joining me on today's call are Ryan Rhodes, Chief Executive Officer; Ken Mobeck, Chief Financial Officer; and Francois Dietsch, Chief Accounting Officer.

Before we begin, I would like to remind everyone that management's remarks today may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause actual results to differ materially from those anticipated. We direct you to the Risk Factors section of our annual report on Form 10-K for the year ended December 31, 2025, to be filed with the Securities and Exchange Commission as well as our other filings with the SEC for a description of factors that may cause such differences. These statements speak only as of today's date, and we undertake no obligation to update or revise them, except as required by law. Additionally, this call is being recorded and constitutes a public disclosure under Regulation FD.

I would now like to turn the call over to EDAP's Chief Executive Officer, Ryan Rhodes. Ryan?

Thank you, Louisa, and good morning, everyone. 2025 was a transformative year for our company, highlighted by 39% revenue growth in our core HIFU business and record commercial performance for Focal One. Importantly, much of this growth was driven by accelerated adoption in the U.S., where we delivered record system placements and strong procedure growth. As our installed base continues to expand, we are also seeing increased utilization across hospitals, emphasizing the positive recurring revenue opportunity created by each Focal One system placement. Today, we will begin with our fourth quarter results, then reflect on our achievements, including our financial performance, and we will close the call by outlining our strategic priorities for 2026.

The fourth quarter was the strongest quarter in the company's history for HIFU revenue, representing an increase of 34% over the same period last year. This growth was led by capital sales and treatment-driven revenues, which continue to be the driving force of our ongoing commercial success. We achieved a record 15 Focal One placements worldwide, including 14 cash sales, representing our strongest quarter-to-date in both placements and cash sales. Performance was driven by the U.S. market, which delivered 10 cash sales, its highest quarterly total on record.

Beyond the headline numbers, the profile of our customers continues to be led by the expanding adoption of Focal One amongst leading academic centers in major community hospitals. Notably, we achieved our first Focal One placement in the state of Wisconsin at Aurora St. Luke's Medical Center, part of Advocate Health, a major integrated health care delivery network spanning 18 hospitals across the states of Wisconsin and Illinois. In total, we achieved 4 new Focal One placements in the state of Pennsylvania during the quarter, further strengthening our presence in this region. The University of Pennsylvania, a member of the National Comprehensive Cancer Network and a National Cancer Institute designated Comprehensive Cancer Center, converted their existing HIFU program to Focal One. With the addition of University of Pennsylvania, Focal One now has been adopted by 55% of NCCN member institutions.

The University of Pittsburgh Medical Center, UPMC, a Society of Urologic Oncology Approved Fellowship program was also added to our Focal One installed base this quarter, bringing our penetration to 63% of the prestigious SUO group of teaching hospitals in the U.S. Of noted importance after the recent placements at 2 additional Cleveland Clinic hospitals in the U.S. during the fourth quarter, there are now 5 Focal One systems within the global Cleveland Clinic Hospital network.

As hospitals see increasing patient demand, they are expanding across multiple locations. We now have 10 leading U.S. health care systems with 2 or more Focal One programs. We also continue to see existing competitive HIFU programs converting to Focal One technology. During the quarter, 3 major focal therapy programs converted from use of legacy HIFU technology to Focal One, including the University of Pennsylvania, Penn State Health as well as Lakewood Ranch Medical Center in Florida.

Notably, at Lakewood Ranch Medical Center, Dr. Stephen Scionti, a high-volume focal therapy expert, has transitioned to the Focal One i platform. Dr. Scionti is widely recognized as one of the most experienced HIFU experts in the U.S., having treated 2,000 prostate cancer patients in over 20 years using a legacy HIFU platform. His decision to adopt our latest technology further validates our strategy of ongoing innovation and reflects Focal One i's advanced imaging and robotic precision.

Internationally, our Focal One capital sales momentum also continues to expand in existing regions as well as new emerging markets. During the quarter, we achieved 4 cash sales outside the U.S., including the first Focal One system in India and the first Focal One system in Argentina. The sale to Ruby Hall Clinic, a top-tier institution in Pune, India, represents a key commercial milestone in a large and underpenetrated market. Additionally, the sale at the Argentinian Institute of Diagnostics and Treatment in Buenos Aires expands our South American footprint, adding to other existing Focal One sites in Brazil and Chile. Finally, our momentum continues to build across Southern Europe with additional new Focal One system sales in both Italy and Spain. While we were encouraged by this strong momentum, we believe we are early in the overall adoption life cycle of Focal One Robotic HIFU in this large and growing addressable market.

Turning our attention to utilization. U.S. Focal One procedure volumes reached the highest quarterly level, growing 28% as compared to Q4 2024. This procedure growth is driven by a combination of newly launched programs as well as increased patient demand with existing programs. This was consistent across the different geographic market segments to include hospitals in large metropolitan statistical areas as well as hospitals in smaller communities. Complementing our commercial success, we achieved an important regulatory milestone during the fourth quarter.

On November 20, we received FDA clearance for the latest evolution of Focal One Robotic HIFU, introducing advanced ultrasound imaging and streamlined treatment planning. This next-generation ultrasound imaging engine provides real-time visualization and supports the future development of AI-driven algorithms designed to assist surgeons with tissue ablation visualization and treatment evaluation. These combined advancements along with the launch of Focal One i earlier in 2025, further strengthens our leadership position in focal therapy while providing incremental sales momentum into 2026.

Turning our attention to reimbursement. The landscape continues to move in a favorable direction for Focal One. TMS finalized the 2026 outpatient prospective payment system rule awarding a national facility payment average of $9,671, representing a 4.6% increase versus 2025. This new rate went into effect January 1. As it relates to the physician payment, Focal One is also supported by favorable economics. In the 2026 final rule of the physician fee schedule, TMS has set the total facility RVUs at 26.33 for the HIFU procedure. This compares favorably to alternative ablative treatments for prostate cancer for a single urologist under the same setting and patient conditions. In short, the Focal One HIFU procedure provides a physician from 28% to 67% higher RVUs than an alternative ablative treatments in 2026.

Beyond prostate cancer, we continue to advance our clinical strategy to expand new indications with use of the Focal One Robotic HIFU platform. As endometriosis awareness month comes to a close here in March, we continue our commitment to advance new innovative treatment options while raising visibility on the unmet need for a new noninvasive treatment option for women suffering from this highly debilitating condition.

Claude University Hospital in Lyon, France is treating patients and hosting training programs for leading European endometriosis specialists, including physicians from Cleveland Clinic London, who recently observed Focal One procedures. Regarding BPH, our combined Phase I/II study continues in Europe according to our outlined protocol. Simultaneously, we initiated a new clinical trial in South America in collaboration with the Mount Sinai Health System in New York with several patients already treated in early March by a team of local and U.S. BPH experts. This represents another positive step towards broadening the addressable market for use of Focal One Robotic HIFU.

Transitioning to surgeon education, our activities continue to build growing awareness across the urological community. We recently attended the 41st Annual Congress of the European Association of Urology in London, U.K. This is the second largest scientific meeting dedicated to urology in the world with more than 12,000 attendees from 124 countries. In front of this year's EAU meeting, we collaborated with Cleveland Clinic London to host a sold-out urology peer-to-peer educational event dedicated to learning and understanding the clinical value and applications delivered by Focal One Robotic HIFU in the treatment of prostate cancer. This coming weekend, the world-renowned urology team at NYU Langone in New York City, we will host the first international symposium on robotic focal therapy. This large inaugural event entirely dedicated to Focal One will offer attendees lectures, hands-on training, detailed video case reviews and semi-life Focal One procedures led by top U.S. and international experts.

I will now turn the call over to Ken, who will review our financial results.

Thanks, Ryan, and good morning, everyone. Before I begin, I want to note that all 2025 figures are reported in euros, our functional and reporting currency. For conversion purposes, our average euro-dollar exchange rate was $1.16 for the fourth quarter 2025. Beginning with our Q1 2026 results, we will report in U.S. dollars, reflecting our transition to a domestic issuer.

Turning to full year 2025 performance. EDAP set a calendar year record for HIFU revenue in 2025. HIFU revenue for the full year 2025 was EUR 33.1 million, an increase of 39% as compared to HIFU revenue of EUR 23.8 million for the full year 2024. The increase in HIFU segment revenue versus the prior year was due to a 59% increase in the number of Focal One system units sold and a 19% year-over-year increase in treatment-driven revenue.

Total revenue for full year 2025 was EUR 62.4 million, a decrease of 3% compared to EUR 64.1 million for the full year 2024. The year-over-year decrease was driven by a 27% decline in our noncore distribution and ESWL businesses, which offset the 39% growth in core HIFU business, as I just outlined. This is consistent with our strategy of focusing resources on the higher-margin HIFU business while managing the legacy businesses through their natural decline.

Now turning to the fourth quarter. Q4 2025 was a record quarter for HIFU revenue. HIFU revenue was EUR 11.7 million, a notable increase of 34% as compared to HIFU revenue of EUR 8.8 million for the same period in 2024. The increase in revenue was due to continued significant strength in our Focal One HIFU business driven by 14 Focal One capital sales in the quarter versus 11 capital sales in the prior year period as well as a 22% year-over-year increase in Focal One treatment-driven revenue. As mentioned earlier, Focal One procedures in the U.S. grew 28% year-over-year.

Total revenue for the quarter was EUR 18.9 million, a decrease of 7% compared to EUR 20.3 million for the same period in 2024. The decrease was primarily driven by a 38% decline in our noncore distribution and ESWL businesses in the quarter versus Q4 2024, offsetting the 34% year-over-year growth in HIFU business. We continue to expect our noncore segments to decline as a percentage of total revenue over time, consistent with our strategic focus.

Regarding gross margin, gross margin for the quarter was EUR 8.1 million compared to EUR 9.1 million for the same period in 2024. Gross margin on net sales was 42.6%, down from 44.8% for the same period in 2024. This decline was primarily driven by 2 items: tariffs on imports of finished goods from France and an inventory reserve related to legacy parts. Excluding these items, underlying gross margin performance was in line with the prior year. We continue to actively monitor the tariff environment.

Operating expenses were EUR 13.2 million for the quarter compared to EUR 12.8 million for the same period in 2024. The increase in operating expenses was primarily due to focused investments in our HIFU business. Operating loss for the quarter was EUR 5.2 million compared to an operating loss of EUR 3.7 million in the fourth quarter of 2024. Net loss for the quarter was EUR 8.2 million or EUR 0.22 per share as compared to a net loss of EUR 1.9 million or EUR 0.05 per share in the same period a year ago. The increase was driven by 2 items below the operating line, a EUR 2.5 million noncash charge related to warrants and interest expense on the European Investment Bank Tranche A drawdown and a EUR 2 million negative currency impact versus the prior year period.

Turning to the balance sheet. Inventory decreased to EUR 10.9 million at quarter end as compared to EUR 13.8 million at the end of Q3. This reduction was driven by the high volume of capital system sales in the quarter and disciplined inventory management. Total cash and cash equivalents were EUR 17.4 million at quarter end, up from EUR 10.6 million at the end of Q3, primarily reflecting the EIB Tranche A drawdown.

Finally, on to our 2026 outlook. As previously announced in January, we expect core HIFU revenue to be in the range of USD 50 million to USD 54 million, representing 34% to 45% growth over 2025. Combined noncore revenue is expected in the range of USD 22 million to USD 26 million. This guidance reflects our confidence in the capital placement momentum Ryan described, our expanding installed base and the continued ramp of procedure volumes across our growing network of Focal One programs.

I would like to now turn the call back to Ryan for closing comments.

Thanks, Ken. In closing, 2025 was a year of record performance, expanding clinical validation and technological advancement. As we enter 2026 with accelerating commercial momentum, we are executing with discipline against 3 high-impact priorities designed to drive durable growth and long-term shareholder value.

First, commercial execution. We are expanding our penetration across leading academic centers, community hospitals and integrated delivery networks with significant runway ahead as we remain early in the adoption life cycle of this large underpenetrated market in prostate cancer.

Second, clinical indication expansion. Beyond prostate cancer, we are unlocking incremental growth opportunities for Focal One across new indications. We are making meaningful progress on our BPH clinical and regulatory pathway and accelerating commercialization in endometriosis.

Third, technology and innovation. We are advancing AI-driven treatment planning and next-generation imaging capabilities to strengthen Focal One's leadership as the most advanced robotic focal therapy platform in the market. The combination of these priorities, commercial execution, indication expansion and continued technology innovation and leadership underpins our confidence in our 2026 outlook and beyond.

In closing, we are confident in our ability to deliver sustainable growth and create long-term shareholder value. With that, I will now turn the call back over to the operator for questions. Operator?

[Operator Instructions] We'll take our first question from Mike Sarcone with Jefferies.

I guess just to start, can you give us a little more color? I know you're reiterating the 2026 guidance, but particularly on the HIFU side, any color on kind of splitting out growth in procedures versus capital sales would be helpful.

Yes, Michael. So again, we see pipelines building and being strong both in the U.S., but importantly, also in the outside U.S. markets. We continue to execute around global regions. So as we've talked about in the past, pipeline development and a growing pipeline in the U.S., but equally in the outside U.S., and some of that was demonstrated certainly with our results here at the end of the year as -- and we're already into 2026. Procedure growth, again, we saw a notable increase Q4, 28% over prior year. We see double-digit growth from quarter-to-quarter if we measured ourselves Q4 versus Q3 of last year. And I think we're, again, seeing more and more centers actively looking to expand to a broader audience of patients. Again, each program ramps differently. But I think overall, we look outward and see a strong year for us, both in terms of capital sales as well as procedure growth.

And Michael, as we move forward to, as Ryan referenced, with 35 Focal One sales in 2025, that is going to lead down the road to procedure growth as well as service growth when those expire. With our installed base now at 165 units, that's also going to lead to disposable sales growth and service growth as well. Capital sales will lead the way again on a percentage basis, but we do see the procedure and service revenue volumes picking up as a total percentage of revenue for HIFU.

Great. That's all very helpful. And then maybe just my follow-up. What have you seen so far 1Q to date in terms of procedures in the U.S. and globally? And particularly in the U.S., have you seen any impact from some of the storms in the Northeast and along the East Coast?

No impact that I can point to. I would say, generally, we see a nice ramp developing. We came off of Q4, a strong quarter. But again, Q1 is ramping as planned. Nothing holding us back from growing appropriately per the guidance we've given in procedure growth and revenue.

We will move next to Joseph Downing with Piper Sandler.

Yes. So I guess the HIFU guide was reiterated here. And I'm just thinking how should investors be thinking about the first half, second half split within the HIFU guide given the seasonality with 4Q? And then specifically, what's a reasonable baseline for 1Q HIFU revenue given typical hospital CapEx sensitivity? And then just at a higher level, are you embedding any cushion for lumpiness throughout the year of the capital sales line? Do you think that should kind of flatten out a little bit over the course of this year? Or should we expect more of the similar from the previous few years there?

Yes. So thanks for the question. So when we look at this year's revenue 2026, we're going to see the following patterns, very consistent with prior years. We anticipate Q4 to be the highest growth quarter, revenue-wise and our biggest dollar-wise quarter. And the lowest quarter will be in Q3. That's very consistent with Q4 capital budgets spending and Q3 summer slowdowns. So we see a little less than 50% of the business in the first half of the year, and I'd say a little more on the second half.

Great. I appreciate that, Ken. And then just on the noncore wind-down trajectory, obviously, implies another step down from last year's figure in 2026. Curious if you could just break out how much of that is ESWL versus the distribution business? And then at what point does noncore revenue effectively reach a de minimis level? I guess, said a little differently, when does the revenue mix shift kind of become clean enough that investors should evaluate EDAP purely on HIFU metrics?

Yes. So when you look at the noncore, ESWL is roughly 20% to 25% of the noncore okay? And the way we're looking at the business going forward is as follows, okay? Our ESWL business now is service-only business, okay? So we're going to continue to serve that and look at ways to monetize that business. And the way to look at the distribution business going forward, it's just like I explained last year. When these agreements expire, our annual distribution agreements, we're taking a look at each agreement. Is it material to revenue and is it accretive to gross margin? And then we're making executive decisions on should we ramp that business going forward. So I would still see that business sticking around in the short term.

Our next question comes from Swayampakula Ramakanth.

This is RK from H.C. Wainwright. A couple of quick questions for me. The first one being on the margins, you cited a normalized margin of 46.9%. I understand some of that is being hit by the Section 232 tariff stuff. What percentage of your revenue gets impacted by that? And then what's the strategy going forward if this -- if there is stickiness to that 232 tariffs?

Yes. So RK, as you know, we manufacture our product in Lyon, France. So the pieces of the business that are impacted are when we ship the finished goods from Lyon, France to the United States. So it's basically our U.S. revenue that's an impact to those dollars today. We're monitoring the situation closely. We have budgeted about $2.5 million in tariffs in 2026 to be conservative, and we're just going to continually monitor what everything is happening from the government regarding those. The offset to the tariff is we do have our new ultrasound engine. As we anticipated and told you last year, we were transitioning to this engine. It's going to have better functionality and also lower cost. So that will help offset some of the tariff impact.

Okay. Then Ryan, just about a high-level thought here. I know for quite a bit of '24 and the early part of '25, you are concerned about cash sales. You closed out 2025 with 14 cash sales and 1 lease. So does that mean some of those concerns regarding cash sales have mitigated quite a bit. And so you're comfortable going into '26. And also, if there was any price increase taken in early part of 2026, just trying to understand what could be the potential levers or the full push on the revenue guidance that you just gave us?

Yes, RK. So again, as I tell people, we sell a clinically necessary strategic revenue-enhancing service line in the #1 diagnosed cancer in men. So it puts us in a position to be strategic in nature. And with that, hospitals need to invest in the technology, and that means purchase the technology. So we've been leading with the cash sale. We believe our platform is best-in-class in the market. It brings immediate tangible value when we launch our programs. So a cash sale makes total sense, plus the reimbursement that's in place today. So cash sales will be our lead theme going forward. In the past, we have offered some time-based operational leases or bridge to budget or bridge to purchase. We don't need to do that as much anymore. I think people realize that Focal One is a key anchor point to their overall focal therapy program. So we showed excellent sales and cash sales here in Q4. Our theme going forward will be leading with cash sales as notably.

In terms of a price increase, we took a price increase last year with the launch of Focal One i. And as you heard in the past, we made notable advancements in this new platform, both hardware and software. And we're not done. We will continue to innovate on the platform. We've made improvements in a number of areas, and we're never satisfied. So we have a price increase that went in place last year. We haven't changed our pricing strategy at the beginning of this year, and we see our average selling prices tend to hold or even slightly increase. So I'm proud of the work our commercial teams are doing in the field.

And at this time, there are no further questions in queue. I will turn the meeting back to Ryan Rhodes for closing remarks.

I want to thank everyone again for joining us on today's call. We look forward to seeing you in Washington, D.C. at the upcoming Annual Meeting of the American Urological Association in May and our important Investor Day being held in New York City on June 1, along with the Jefferies Healthcare Conference also taking place in New York City at the beginning of June. Thank you, everyone.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Hello, and welcome, everyone, joining today's EDAP TMS Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this call is being recorded. [Operator Instructions]

It is now my pleasure to turn the meeting over to John Fraunces with LifeSci Advisors. Please go ahead.

Good morning. Thank you for joining us for the EDAP TMS Third Quarter 2025 Financial and Operating Results Conference Call. Joining me on today's call are Ryan Rhodes, Chief Executive Officer; Ken Mobeck, Chief Financial Officer; and Francois Dietsch, Chief Accounting Officer.

Before we begin, I would 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.

Now I'd like to turn the call over to EDAP's Chief Executive Officer, Ryan Rhodes. Ryan?

Thank you, John, and welcome, everyone.

The third quarter of 2025 marked another strong quarter for EDAP as we continue to execute on our mission to make Focal One the standard of care for localized prostate cancer. With global revenues of USD 16.1 million, this is the second consecutive quarter with record overall quarterly revenue for the respective period.

Additionally, this is also a record for HIFU revenue for the third quarter, which reflects consistent commercial execution, expanding clinical adoption and growing recognition of the value Focal One Robotic HIFU brings to patients, physicians and hospitals.

During the quarter, our HIFU revenue reached USD 7.7 million, representing a 57% increase compared to the third quarter of last year. This is consistent with our previously announced strategy of focusing our investments in the company's core HIFU business. We recorded 8 Focal One placements, including 6 capital sales and 2 operating leases. This represents growth of 167% as compared to the same period 1 year ago, reflecting the growing confidence hospitals have in adopting Focal One Robotic HIFU as an integral cornerstone of their prostate cancer program.

With new placements this quarter at the University of Virginia and the University of Michigan, Focal One has now been integrated within 21 of the 35 Society of Urologic Oncology, or SUO approved fellowship programs, representing 60% of all such academic centers nationwide. Our growing presence across these leading urology centers is instrumental in training the next generation of urologists, while accelerating clinical awareness and adoption of HIFU focal therapy as a mainstream treatment option for prostate cancer.

Focal One procedures in the U.S. grew more than 15% year-over-year, making a return to double-digit growth. This acceleration reflects the growing clinical adoption of Focal One combined with the impact of our sustained investment in market access initiatives. We are seeing meaningful progress in reimbursement coverage with commercial payers, particularly among Medicare Advantage providers, which is driving broader patient access and stronger hospital economics.

On the clinical front, an important peer-reviewed scientific study was recently published in the Journal of International Urology and Nephrology. This study concluded that HIFU delivered non-inferior 10-year oncological outcomes as compared to external beam radiation therapy in patients with Stage II prostate cancer. Both the overall survival and cancer specific survival rates were higher in the HIFU group with a statistically significant overall survival benefit favoring HIFU in early-stage disease.

This is an important addition to the growing body of evidence supporting HIFU in the treatment of prostate cancer. While both the HIFI and FARP, or FARP studies, are already showing strong midterm cancer control as compared to surgery, this new publication further validates HIFU with favorable long-term follow-up data compared to radiation therapy. Together, these results continue to strengthen the clinical foundation for the Focal One platform and HIFU's role in the treatment of localized prostate cancer.

On the reimbursement front, the latest hospital and physician payment rules released by the Center for Medicare and Medicaid Services, or CMS, continue to reinforce the important use case of HIFU, thus providing hospitals and physicians with a clear and predictable Medicare reimbursement pathway. In addition, several commercial payers, both local and national, has started to routinely approve individual claims around the country, particularly within Medicare Advantage plans, further reinforcing the positive economics driving adoption.

I will now briefly touch on our development in focused areas to expand into new clinical indications. We are making meaningful progress in our benign prosthetic hyperplasia, or BPH clinical development program, which represents another major growth opportunity for the company. While our combined Phase I/II multicenter study is progressing to plan in Europe, we are proud to report Institutional Review Board, or IRB approval for the U.S. BPH clinical study in partnership with the Icahn School of Medicine at Mount Sinai in New York City, a prestigious academic hospital and recognized leader in urology innovation.

This study will evaluate use of Focal One Robotic HIFU for the treatment of BPH, building further on our clinical experience in Europe. Our goal is to demonstrate that Focal One's precision and image-guided approach can offer an effective noninvasive tissue-sparing alternative to conventional treatment options. We expect the first patient to be enrolled in this study before the end of the year.

I would now like to provide a brief update on our endometriosis clinical evidence and commercialization progress. Starting first with clinical evidence. On October 20th, Professor Dubernard, the principal investigator of the Phase III randomized controlled trial, previewed the latest clinical data in the plenary session on endometriosis at the Annual Meeting of the European Society for Gynecological Endoscopy, or ESGE. As previously announced, the double-blind Phase III RCT compared patients treated in the HIFU group with patients assigned to a sham treatment group.

Patients treated in the HIFU group reported a significant improvement across their various symptom scores at 3 months. Such improvements were maintained at the 1-year follow-up. Over the same period, the majority of the patients in the sham group returned to baseline symptom levels, similar to when they were enrolled in the beginning of the study.

After unblinding, over 85% of the patients from the sham group when given the option, elected to undergo a Focal One HIFU procedure to treat their condition. As noted at 3 and 6 months post HIFU treatment, this group reported a significant improvement of their symptoms. These patients continue to be monitored as part of a long-term follow-up clinical study.

On the commercial front, we are actively working with leading European centers in a limited launch phase. The goal is to establish a solid foundation to enable the expanded adoption of Focal One HIFU as a noninvasive treatment option for women suffering from deep infiltrating endometriosis.

Finally, during the quarter, our teams maintained a strong visible presence across multiple global scientific urology meetings. These meetings allow us to showcase our latest Focal One i Robotic HIFU platform as the leading focal therapy technology. Urologists were able to attend numerous compelling presentations from world-renowned academic users on both the positive clinical benefits and the supporting scientific outcomes.

Of particular importance was the World Congress of Endourology and Uro-Technology, or WCET meeting held in Phoenix, Arizona. This meeting featured a Focal One master class led by expert users as well as a semi-live Focal One procedure. During this event, Focal One received the 2025 Industry Award for innovations in Endourological Instrumentation. This prestigious international award given by the Endourological Society acknowledges our innovation leadership in Robotic HIFU technology. Focal One is the first focal therapy technology to receive this distinguished award.

I will now turn the call over to Ken to review our third quarter results.

Thank you, Ryan, and good morning, everyone.

For conversion purposes, our average euro-dollar exchange rate was $1.16 for the third quarter of 2025. As Ryan mentioned earlier, our record revenue for the third quarter was driven by significant strength in our core HIFU business, which grew 49% over the third quarter of 2024. Growth in our HIFU business was offset by expected continued decline in our noncore distribution and ESWL businesses, which declined by 16% in Q3 2025 versus Q3 2024.

Total revenue for the third quarter of 2025 was EUR 13.9 million, an increase of 6% as compared to total revenue of EUR 13.1 million for the same period in 2024. Total HIFU revenue for the third quarter of 2025 was EUR 6.7 million as compared to EUR 4.5 million for the third quarter of 2024. The 49% year-over-year increase in HIFU revenue was driven by 6 Focal One capital sales in the third quarter of 2025 versus 3 capital sales in the prior year period as well as a 26% year-over-year increase in Focal One treatment-driven revenue.

As mentioned earlier, Focal One procedures in the U.S. grew 15% year-over-year. For the 9 months ending September 30, 2025, HIFU revenue was EUR 21.3 million, an increase of 42% over the same period in 2024. Total revenue for the 9 months ending September 30, 2025, was EUR 43.5 million compared to total revenue of EUR 43.8 million for the same period in 2024.

Gross profit for the third quarter of 2025 was EUR 6 million compared to EUR 5.2 million for the same period a year ago. Gross margin was 43% in the third quarter of 2025 compared to 39.4% for the same period a year ago. The increase in gross margin year-over-year was primarily due to the strategic shift to our high-margin HIFU business segment.

Gross profit for the 9 months ending September 30, 2025, was EUR 18.5 million compared to EUR 17.5 million for the same period in the prior year. Gross margin was 42.5% for the 9 months ending September 30, 2025, versus 39.9% for the same period in the prior year.

Operating expenses were EUR 10.9 million for the third quarter of 2025 compared to EUR 11 million for the same period in 2024. Operating expenses were EUR 35.2 million for the 9 months ending September 30, 2025, compared to EUR 34.3 million for the same period in 2024. Operating loss for the third quarter of 2025 was EUR 4.9 million, approximately EUR 1 million lower as compared to the operating loss of EUR 5.8 million in the third quarter of 2024.

Operating loss for the 9 months ending September 30, 2025, was EUR 16.7 million compared to an operating loss of EUR 16.8 million for the 9 months ending September 30, 2024. Excluding the impact of noncash share-based compensation, operating loss for the third quarter would have been EUR 4.1 million compared to an operating loss of EUR 5 million in Q3 2024.

Net loss for the third quarter of 2025 was EUR 5 million or EUR 0.13 per share, a EUR 1.4 million improvement as compared to a net loss of EUR 6.4 million or EUR 0.17 per share in the same period a year ago. Net loss for the 9 months ending September 30, 2025, was EUR 17.7 million or EUR 0.47 per share as compared to a net loss of EUR 17.1 million or EUR 0.46 per share for the 9 months ending September 30, 2024.

Turning to the balance sheet. Inventory decreased to EUR 13.8 million in Q3 as compared to EUR 15.5 million in the prior quarter. The sequential decrease in inventory was due to continued efforts and focus on just-in-time inventory management. Total cash and cash equivalents at the end of Q3 2025 were EUR 10.6 million as compared to EUR 16.3 million in the prior quarter. The sequential decrease was driven primarily by the cash used in operating activities to support strategic investments in HIFU.

As announced earlier, we closed the credit facility with the European Investment Bank, which further strengthens our balance sheet. We are pleased to report that the first tranche of EUR 11 million, approximately USD 13 million was received and will be reflected in our Q4 and full year 2025 financial statements.

I will now provide a brief update on tariffs. Based on the latest information, we are still forecasting a 15% tariff impact for all goods transferred between France and the U.S. On a year-to-date basis, the tariff impact to our business has been approximately EUR 300,000, and we are currently estimating a full year impact of EUR 900,000. We continue to monitor the potential impact of U.S. tariff policies on a go-forward basis.

In closing, during the quarter, we improved manufacturing efficiencies, optimized supply chain performance and managed our operational spend. We are also making significant progress in our transition to a new supplier regarding our ultrasound imaging scanner and expect to see the cost reduction impact in the upcoming calendar year. These achievements lay the foundation for future growth.

I would now like to turn the call back to Ryan for closing comments.

Thank you, Ken.

With respect to guidance, we are maintaining our financial guidance for 2025. Our core HIFU business revenue is expected to grow within the range of 26% to 34% year-over-year and our combined noncore ESWL and distribution business revenue is expected to decline within the range of 25% to 30% year-over-year.

As we progress through the fourth quarter, our priorities remain clear: first, accelerate adoption and utilization across our Focal One installed base; second, continue expanding market access and reimbursement coverage; and third, maintain a disciplined investment approach specific to market growth opportunities.

With the return to double-digit U.S. procedure growth and expanding presence at top academic centers as well as leading community hospitals and the recent recognition of our innovative Robotic HIFU technology, we drive forward in Q4 2025 with strong momentum and clear visibility for continued growth across our HIFU business.

With that, I will now turn the call over to the operator for questions. Operator?

[Operator Instructions] We'll take our first question from Charles Wallace with H.C. Wainwright.

This is Charles on for RK. So, I guess the first question I had was on the EIB deal. Could you maybe give a little bit more color on how these proceeds are going to be used and what was the kind of the main reason to do this? Was it just to provide more financial flexibility? And do you plan to use these funds strictly for the U.S. business or also in the international business?

Yes, great question. With EIB, we've been open about our investment strategy, both in various areas to include product development which is inclusive of R&D, but also in clinical development as we're working on expanding new indications. And so really, it's more in those operating areas. And some, obviously, in the commercial domain, we make appropriate investments where needed. But really, it's across those 3 areas: product development, inclusive of R&D; clinical development; and some additional focus in commercial growth. But it is centered around our HIFU core business.

And to follow up, to answer the second part of your question, why the EIB. We did a lot of research and analysis. And given where the stock has been trading over the last 180 days, we thought this was the most attractive financing option to really allow us to further invest in HIFU, as Ryan mentioned, with no short-term dilution to the stock.

Great. And then I guess you mentioned the double-digit increase in U.S. Focal One procedures. Can you comment on how many of these procedures were covered? And then also, as you work to expand coverage, do you expect the procedure volume to grow?

Yes. So again, we have a Category 1 CPT code. Some of these cases are obviously Medicare patients. Some are also noted in, as I referenced, Medicare Advantage plan patients and some are commercial patients. So it's a little bit of a mix. I think the one area that I commented on was the fact that we saw improvement across the payers that represent Medicare Advantage plans. And that was a positive sign and a positive trend we've been on. And again, we believe looking forward, we will continue to drive momentum and activity across Medicare Advantage plans.

Great. And maybe one more question, if I can squeeze in. Could you remind us -- I think the third quarter is typically seasonally soft. Can you remind us what you expect in the fourth quarter?

So when we look to the fourth quarter, as Ryan mentioned, we're reiterating our guidance for the year. And given what Ryan talked to you about, our guidance remains between $58 million and $62 million for CY '25. So our -- where we don't give quarterly guidance, we feel confident that our Q4 number will be in that range to help us hit those year-end targets.

There are no further questions in the queue. I will now turn the call back over to Ryan Rhodes for any additional or closing remarks.

In closing, I want to thank everyone again for joining us on today's call, and we look forward to seeing you at the upcoming global investor conferences. These include the UBS Global Healthcare Conference being held next week in West Palm Beach, Florida; the Jefferies Global Healthcare Conference in London being held the week of November 17th, and the Piper Sandler 37th Annual Healthcare Conference being held the week of December 1st in New York City. Thank you.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.