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Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press star zero and a member of our time team will be happy to help you. ¶¶ ¶¶

¶¶ © transcript Emily Beynon © transcript Emily Beynon

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© transcript Emily Beynon ¶¶ ¶¶ © transcript Emily Beynon Thank you for watching! Thank you for your continued patience.

Your meeting will begin shortly. If you need assistance at any time, please press star zero, and a member of our team will be happy to help you. Greetings and welcome to the Focal Therix third 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.

Good afternoon. Thank you for joining us for the Focal Therix third quarter 2026 financial and operating results conference call. Joining me on today's call are Ryan Rhodes, Chief Executive Officer, and Ken Mobeck, Chief Financial 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 31st, 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.

Thanks, Felicia, and thank you all for joining us on today's call. This quarter reflected continued execution against the Focal One growth strategy we set forth for 2026. Evening adoption across leading health care systems, expanding reimbursement and access, extending focal one into new clinical indications, and advancing technology innovation. In the third quarter, we reported HIFU revenue of approximately $9.8 million, an increase of 26% over the prior year period. Revenue was below what we had anticipated due to the timing of three system sales, which I will cover in more detail shortly. Across the business, we made meaningful progress on commercial priorities that are driving long-term growth trajectory of Focal One. We also ended the quarter with a strengthened balance sheet following the completion of our public offering in August and are poised to move forward with conviction to deliver on our strategic plan. We recorded seven Fogel 1 capital system sales globally in the third quarter compared to six in the prior year period. Those sales along with one net operating lease placement bring our total worldwide install base to 192 systems with 98 in the U.S. and 94 internationally, reflecting the continued broadening of our footprint across academic and community hospitals in both established and emerging markets. Our third quarter revenues were adversely affected by deal timing challenges. We anticipated being able to close on three additional focal one systems. Sales cycles ran longer due to hospital committee approval processes as a result of the third quarter summer seasonality in hospital capital purchasing activity. These delays account entirely for the gap in our revenue expectations for the quarter. Importantly, they do not indicate a lack of demand for Focal One or competitive market dynamics. Our pipeline remains strong, and we remain focused on the opportunities ahead. Of note, one of our capital sales this quarter included the second system within the Baylor, Scott, and White health system placed in Temple, Texas, which reflects the growing desire to expand access to focal one for their patients following the purchase of their first system. We now have 16 US hospital networks that have invested in two or more focal one systems. The purchase of additional systems within a hospital network reflects the strong clinical economic performance they have seen firsthand

in their existing Focal One programs.

We also completed a sale to Maine Health Penn Bay Hospital. This marks our entry into the state of Maine and extends the geographic reach of Focal One further into the New England market. In California, Kaiser Permanente expanded its Focal One program with two new operating leases in Sacramento and San Francisco, bringing the total to four Focal One systems within the large Kaiser integrated hospital delivery network. Building on their existing programs in Los Angeles and San Diego, Kaiser is reinforcing its growing commitment to Focal One as a cornerstone technology across their growing focal therapy programs. Internationally, we continue to accelerate the commercial momentum of Focal One. We completed two system sales in Turkey, bringing our total in the country to three. We also completed an additional sale in Mexico, building on the first Focal One system placed earlier this year as we expand across Latin America. And in France, we completed two additional capital sales this quarter, growing further on our existing momentum in Europe. As a reminder, universal coverage of FOCAL-1 by the National Health System became effective on January 1st of this year and continues to reinforce the business for the capital purchase of FOCAL-1 systems across the country.

Turning to utilization, U.S. FOCAL-1 procedure volumes grew 32% year over year.

More than double the 15% growth we reported in the third quarter of 2025. This reflects both the growing contribution of established programs along with new programs added to our install base. These volumes were in line with what we anticipated given the seasonality of the third quarter. On the reimbursement front, we believe the trajectory of the CMS payment continues to provide hospitals and physicians with a clear and predictable Medicare pathway, which supports the economics of investing in focal one as the foundation of establishing a prostate cancer focal therapy program. We also continue to focus on prostate cancer patients who have failed radiation therapy. The large prospective multi-center HIFI-2 study published in April of 2026 demonstrates meaningful oncologic control for patients treated with FOCAL-1 robotic HIFU after failure of primary radiation as a treatment. We believe this further strengthens the case for broader payer coverage. The National Comprehensive Cancer Network recently upgraded It's recommendation for HIFU as a treatment option for this underserved patient population to category 2A. And as a result, several commercial payers have since issued coverage policies for HIFU as a salvage treatment. This includes Aetna, Cigna, Humana, United, Highmark, and other regional Blue Cross Blue Shield plants. A number of these policies were issued over the past six to eight months through a combination of strong physician advocacy, updates to the NCCN guidelines, and our active engagement with these large commercial plans.

We continue to invest in building awareness of FOCA-1 across the global surgeon community.

In September during Prostate Cancer Awareness Month, we partnered with the Chicago Urological Society on a sold-out physician symposium dedicated to use of FOCAL-1 robotic HIFU. This event brought together 70 physicians from 35 institutions across 14 states who were interested in adding FOCAL-1 to their clinical practice. Additionally, we were active at the Focal Therapies Society annual meeting, the Focal Plus meeting in San Diego, and the large DGU Congress of the German Society of Urology held in Dusseldorf, Germany. These scientific forums continue to play a pivotal role in physician education, providing hands-on experience with the Focal One system and fostering peer-to-peer knowledge sharing as experienced users share their clinical insights and expertise. We believe sustained investment in physician education remains one of the most effective ways to build lasting, scalable adoption of focal therapy. Turning to expanding clinical indications on the FOCAL1 platform, we continue to advance our BPH clinical program building on the active study in Chile, which we are conducting with urologists from the Icahn School of Medicine at Mount Sinai in New York. This important work remains ongoing, demonstrating early encouraging results. We remain positive on the large opportunity to use FOCAL-1 as a non-invasive, bloodless procedure for the treatment of BPH

and we look forward to updating you as our program progresses.

We continue to make encouraging progress in expanding the use of FOCA-1 for the treatment of deep infiltrating endometriosis with three centers in Europe now treating commercial patients. These include two sites in France along with one in Hungary. This momentum reflects the positive impact of our dedicated CE mark supported by a growing body of clinical evidence. Beyond these three centers, multiple physicians from other centers across Europe, including the UK and France, are going through the training pathway so they can offer this treatment to their endometriosis patients locally. Our focus is to expand selectively, adding key centers as we build on this limited launch. Finally, in September, we were honored to be awarded the Innovation Champion Award at the European Investment Bank TechEU Equity Summit in Luxembourg. We believe this recognition as a reflection of the significant progress we are making at FocalTherics to define, build, and lead the category of robotic focal therapy. We believe the third quarter reinforces the growing demand for Focal One across both established and new markets and the depth of commitment we see from leading healthcare systems to select Focal One as the foundational technology platform of their focal therapy programs. As referenced, we are making continued progress in expanding reimbursement both in France with universal coverage and in the U.S. with commercial payer coverage for salvage treatments. With that, I will now turn it over to Ken to review the financials in more detail. Ken?

Thanks, Ryan, and good afternoon, everyone. As a reminder, this is our second quarter of presenting our financial results under our revised reporting structure in which our HIFU business is presented as continued operations and our ESWL and distribution businesses are presented as discontinued operations. All prior period comparisons have been recast on this basis and the recast financials are available in our form 8K, which is posted on our website and can also be found on the SEC's website. We believe the structure allows investors to evaluate our HIFU business on its own terms including its growth rate, margin profile, and the level of investment required to support it. Unless otherwise noted, my commentary refers to our Haifu segment. Revenue for the third quarter was $9.8 million, an increase of 26% compared to $7.8 million in the third quarter of 2025. The increase was driven by seven Focal One system sales in the third quarter of 2026 versus six in the prior year period, as well as a 24% increase in FOCAL 1 treatment-driven revenue. As mentioned earlier, FOCAL 1 procedures in the U.S. grew 32% year over year. Revenue from U.S. capital system sales fell below our expectations due to the dynamics that Ryan described previously. The three systems that we had anticipated in the third quarter are now forecasted to revenue in the fourth quarter. Gross margin was 51.4% compared to 46.6% in the third quarter of 2025. The 482 basis point increase in gross margin was primarily due to improvement in the standard cost of the focal one system and higher average selling price for our Focal One systems and Focal Peps. Operating expenses were $12.8 million in the third quarter of 2026 compared to $10.3 million in the third quarter of 2025. The increase in operating expenses was driven by incremental headcount-related compensation costs, including stock-based compensation, and additional sales and marketing expenses related to various urology meetings and events. Operating loss was $7.8 million compared to an operating loss of $6.7 million in the third quarter of 2025. Net loss for the quarter was $4.5 million or 10 cents per share as compared to a net loss of $5.9 million or 16 cents per share in the third quarter of 2025. The decrease in net loss was driven by a favorable non-tax impact of $2.6 million related to the change in fair value of the European Investment Bank warrants and $0.5 million foreign exchange gains partially offset by incremental operating loss of $1.1 million and $0.4 million of interest expense on the tranche A and tranche B draw deals. Turning to the balance sheet, cash and cash equivalents at the end of the third quarter of 2026 were $56.3 million, compared to $21.5 million at the end of the second quarter. The increase reflects the net proceeds from our equity capital raise in August. With this capital, we remain confident that we are well positioned financially to execute on the strategic priorities we have outlined. Turning to guidance, given the dynamics that we experienced during the third quarter, we are narrowing our full year 2026 revenue guidance to be in the range of 50 to $52 million, representing 34 to 39% growth over 2025, from the prior range of 50 to $54 million. I will now turn the call back to Ryan for closing comments. Ryan? Thanks, Ken.

As we enter the final quarter of 2026, our priorities remain consistent with those we set at the start of the year. Looking ahead, our strategy is centered on several areas of execution. In commercial execution, we remain focused on strengthening our presence within existing healthcare systems while entering new ones, both domestically and internationally, as we did this quarter. Regarding indication expansion, we continue to advance our EPH and endometriosis programs from early clinical studies to broader adoption. In technology and innovation, we are making active progress on the FOCAL-1 roadmap with investments into FOCAL Connect, artificial intelligence, and histotripsy. We also remain focused on generating additional clinical data and evidence through our ongoing studies, which we believe will ultimately drive expanded reimbursement and coverage, broader market adoption, and greater access to focal one robotic high food treatments. We look forward to closing 2026 and have confidence in our ability to execute on the opportunities in front of us. Our focus remains on their underlying indicators that drive the long-term trajectory of the business. FocalOne is a cornerstone for building focal therapy programs within healthcare institutions, and we believe the combination of strong clinical evidence, expanding reimbursement, and a multi-indication platform positions us well for sustained growth and long-term value creation. I want to thank our employees, physician partners, hospital customers, and shareholders for their continued support. We look forward to seeing many of you at the upcoming UBS Global Healthcare Conference in Florida next week, the Jefferies Global Healthcare Conference in London the week of November 16th, and the Piper Sandler 38th Annual Healthcare Conference in New York the week of November 30th.

Operator, you may now open the line for questions.

Thank you. If you'd like to ask a question, press star 1 on your keypad. To leave the queue at any time, press star 2. Once again, that is star 1 to ask a question. In the interest of time, we ask that you please limit your questions to one question and one follow-up. And we'll pause for just a moment to allow everyone a chance to join the queue.

And we will take our first question from Anthony Petroni with Mizuho Group. Please go ahead. Please go ahead, Anthony. Your line is now open.

And we will move next to Alex Nowak with Lucid Capital. Please go ahead.

All right. Well, good. Good afternoon, everyone. Thanks for the time. You know, capital placement, those can always ebb and flow from quarter to quarter. So I think what you mentioned in the prepared remarks is very explainable for the shortfall this quarter. I was hoping you could provide a bit more detail on the three systems that did slip. Why in particular did they slip out of this quarter? What were the hospital dynamics that were at play there? And then how do you adjust your forecasting and your forecasting systems so you just have better visibility going forward?

Yeah, Alex. So, you know, again, we work through various hospital processes and it really deal timing just things were not done by the end of the quarter. The exciting part is we've already closed one of those sales already completed and we've also signed two POs. So we're on our way already here in Q4. Again, you know, the Q3 timing is You know, when we look at value analysis committee meetings and, you know, the closure of decision making, sometimes there's some delay. So this does not take away from the momentum we're building and certainly the momentum already in play for Q4. Ken can comment a little more on the other details on forecasting.

Yeah, so, you know, the other thing I want to comment on, too, is obviously we have hospital committees. We also, you know, some of our customers finance their purchases through banks. And in one instance last quarter, one of the transactions got caught up with the bank at the end of the quarter that we're working on to close here in Q4.

And then just anything on the forecasting side. Does anything change here after this quarter?

And then I just have a follow-up question.

No, no. Our momentum is real into the quarter, and I'm excited. I mean, we're into November now, and if you look at our pipeline, we have real strong positive momentum across what we call our active pipeline accounts. So good momentum both in the U.S. and outside U.S. So We expect to finish strong here in Q4, as we typically do, and carry the momentum that we've set forth on at the beginning of the year through the rest of the year.

Yeah, and as Ryan referenced, the active pipeline is very important, right? Inside the company, we're tracking that very closely, because that's what yields revenue momentum in the quarter. Yep, that makes sense. All right, good. And then just any update on some of the key studies that we're watching and waiting on. One in particular is HYFUSA. When can we see that data get presented here?

Yeah, so HYFUSA, as stated, this is a phase three randomized control trial comparing focal one to active surveillance. And as noted, 14 centers, 108 patients enrolled. and we expect to see the data published early next year. The follow up on the last enrolled patient will be completed sometime in the first quarter. And so again, we're excited for that as I referenced, The preliminary benefits reported are really unverified, but we see really good positive feedback. My direct discussion with the principal investigator stated that the results that they've seen, the preliminary results are certainly very positive. So we think this is an important landmark study. It is a randomized control trial, and it is specific to FOCAL 1 involving 14 centers. That study will be an exciting study to watch for next year.

That's perfect. I appreciate the update. Thank you. Thank you, Alex.

Thank you. And once again, if you would like to ask a question, please press the star and one on your keypad now. And we will move next to Anthony Petroni with Mizuho Group. Please go ahead.

Thanks and congrats on a strong execution here for the quarter and for the year. Maybe Ryan, just to sort of look at the momentum both on procedure volumes and capital. We're two months into the quarter here, into the second month for 4Q. I think your implied guide, you tightened it at the upper end of the range. Just anything you can give on the upper end of the range coming in, how much of that was just your capital funnel versus procedure volumes? and then I'll have a couple of follow-ups as well, thanks.

So Anthony, just so we're clear, we've tightened our guidance range, our original guidance range was 50 to 54 million and our updated guidance range is now 50 to 52 million.

Yeah. Okay. Yeah, again, on the upper end of that, bringing it down 2 million, Is there capital that potentially is slipping into the January quarter? Or is that just, you know, a reflection of, you know, where the funnel sits as we are in November here?

Yeah. So, Anthony, you know, we are disappointed we didn't recognize the three, the revenue of the three systems we had forecasted to deliver in the third quarter. But we just really want to be prudent in our updated guidance given our current outlook for Q4. but as Ryan mentioned, we believe our pipeline is strong and this gives us the confidence to deliver what we have to in Q4.

And then on the procedure volume side, the data's out there now from the study in France, published, 32% was a little bit ahead of our expectation. When you think about some of these systems now that are going to be moving into their second year, I think a handful into their third year of install, it appears we're at somewhat of an inflection, but there's still a lot of white space in front of some of these centers to continue to basically move patients toward HIFU away from other modalities. And so when you think about an early expectation for what procedures can look like in two Thank you.

Yeah, so when we look at procedure growth, it should remain consistent as a contribution of the install base grows. And certainly utilization increases at existing accounts. We've been showing strong growth. It takes a while to build programs, as we know, and we'll be adding more accounts here in the coming quarters. One of the things that was socialized on this call was the coverage that we've received for salvage therapy. We expect it to be more active in that regard as we look into 2027. I think that's a win for us because there's there's not a good solution for men who fail primary radiation therapy and we know that failure rate is anywhere from 15 to 30 percent in the clinical literature so but when we look outward I think you know we should see consistent growth in our procedures we you know next year will also be showing or demonstrating some results as we accumulate our outside U.S. procedure growth, so that'll be something we can further discuss as we get into 2027, because we're building programs both in the U.S. and outside the U.S., and that's a number we haven't shared in the past. We work through distributors. We've also had some mobile providers in outside U.S. markets, and we want to be accurate in what we report out to the street. But we're excited. We had good growth through The quarter, as noted, year over year, and we're motivated here as we close out the end of the year and move into 2027.

Yeah, and Anthony, to answer your question directly, you know, I think it is a good practice to, you know, ramp up procedure volumes moderately. You know, Q4 is our biggest year, our biggest quarter of the year, excuse me. And, you know, once we get the system in place in the hospital and get everyone trained, It does take a little bit of time, so I definitely would bake that into your models, especially with Q4 being our strongest quarter.

Understood.

I'll hop back in queue. Thank you.

Thank you. And there are no further questions in queue at this time. I will now turn the meeting back to Ryan for his closing remarks.

Thank you, operator, and thank you all again for joining us today.

We look forward to reconnecting you after the close of our fourth quarter.

This concludes today's meeting. We appreciate your time and participation.

You may now disconnect. Thank you.