Matt Bacso: Yes, thanks. I’ll first address our Q1 performance. The majority of the upside did come from us operating more efficiently at our new facility. We had increased production, we had reduced scrap, and we had improved fixed cost absorption, particularly compared to the fourth quarter, which we talked about on our last call being viewed as one-time items and I think the first quarter kind of proved that out. And we do expect this trend to continue to improve as we increase revenue. You also do see some pricing favorability in our revised guidance. We now believe we’re going to be solidly in the 370 range on systems. You see handpiece ASPs going up about $40 to 3,200, and all of that is helping kind of drive confidence and predictability in our growth margins.
Regarding specificity around Q4, I mean, we didn’t guide a particular number. I did say that we do expect the second quarter to be approximately 57% and improving from there, which by definition would mean that Q4 has to be 60% plus to get to that full-year guide of 58% to 59%.
Operator: Our next question comes from Josh Jennings with TD Cowen. Your line is open.
Joshua Jennings : Thanks for taking the questions and it’s great to see the strong start here in 2024. Wanted to follow up on just some of these profitability questions and thinking about the operating expense guidance for ‘24 and the leverage. And I think, you’ve called out, I guess two times revenue growth over OpEx growth in ‘24 versus 1.5 times in 2023, as we think about 2025 and not, you’re not issuing guidance for the out years, but is that the right kind of pace of leverage improvement to think about as we’re moving into 2025 and 2026 as we’re updating our models?
Kevin Waters : Yeah, we’re not going to guide specifically to ‘25, so I’ll make a few comments. I’ve been consistent in saying that I do think that two to one OpEx leverage is a good leverage that will get this business to profitability, and something we’re, we’re striving to achieve for on future years of the company and we did demonstrate something better than that in the first quarter and those are the numbers, but what I can say, just the mentality of the company, and I’ve now been here kind of five plus years and where previously revenue growth was, I don’t want to say the sole focus, but it was definitely the internal focus of the management team and making sure that we could prove to the market that we have a technology that has the ability to become the standard of care and that took a lot of investment to do.
I now feel this, the mentality has changed internally where this pathway to profitability and commitment to profitability, understanding that now with our revenue growth, we need to ultimately show profits to our shareholders. That’s been embraced by the whole team at — and we’re just operating in a, I would say, much more disciplined fashion than we have previously in the first quarter’s only one quarter. But I feel good about kind of the direction the business is heading in.
Joshua Jennings : Understood. And then maybe another follow-up on or different follow-up on the ASC channel and I guess was hoping you could share just the pace of or the algorithm centers are using the discharge protocol. Are there more centers that are discharging patients to the hospital outpatient department, I guess scheduled on the same day, and just, are these patients being sent home with a catheter and coming back in for a check? And just additionally, I mean, is that same-day discharge attractive for centers? Is that algorithm kind of drive increased profitability for Aquablation treatment and is that a something that the team can market to drive even stronger adoption trends? Thanks a lot.
Reza Zadno : Thanks, Josh. Same-day discharge. We have many accounts that at the hospital setting started that COVID that we’re implementing a protocol that allows same-day discharge. So at the ASC setting that also happens. Sham do you want to add anything about this particular account?
Sham Shiblaq: Yeah. Hi, Josh. So the uptake of same-day surgery in a hospital setting has significantly improved over the years, to a point now where we have a very large percentage of surgeons that discharge patients the same day. Obviously, in an ASC setting, you don’t have a standard inpatient environment where you keep patients over, you could in many situations, but you choose most of the time to send them home the same day. And so when you do an Aquablation in an ASC setting, in a physician-owned ASC setting, your intent is to have that patient go on the same day. You’ll see at the AUA this year and other publications that there are multiple centers now, one outside the US and one in the US that are routinely doing patients in the ASC and comfortably sending patients home the day of the surgery, which goes, going back to your question as far as the discharge.
You wouldn’t do that as a surgeon if you did not have ultimate confidence in your ability to treat the patient and send them home the same day. So you would never do a patient in ASC without that confidence. And so that speaks to the clinical improvement that’s happened over the last five years. It speaks to the confidence our surgeons have and the safety of our product. And so all of those things only happen in an ASC when you have, all those boxes checked from a clinical and safety perspective. As far as the profitability of the procedure, the reimbursements established, we feel like this is an opportunity for surgeons to take this site of care, patients desire to be in environments like the A SC. And so we think there’s a large opportunity for us, in the future to go into ASCs. But like I said, this is a market.
We’re focusing in the hospital. We think about when we think about the ASC for us as a market expansion opportunity, in the sense that there’s a lot of patients that are on the sidelines that don’t desire to go to a hospital. And we think this is an opportunity for us to expand the market beyond the hospital environment.
Joshua Jennings : Thank you.
Operator: One moment for our next question. Our next question comes from Richard Newitter with Truist Securities. Your line is open.
Richard Newitter: Hi, thanks for taking the questions, and congrats on a great start to the year. Several from me, maybe just starting on the IDN Strategic Account team. Good to see that in place. Seems like it’s coming right at a time when you have good visibility into all of the kind of the corporate C-suite level, IDN contracts in place. What does this really do for you, in terms of, if you could talk to your visibility into the funnel conversion? Does this just give you a better line of sight to timing of the existing funnel, and when that can transit to revenue? I’m also just wondering if perhaps it does something for your visibility into pricing, now that you’re putting a firm stake in the ground for a $370,000 ASP, that’s tended to fluctuate and you’ve always said to brace for that. So is any anything changed there? And I have a follow-up.
