Executive Summary

Q2 2025 delivered a clean beat: revenue $79.182M (+48% YoY; +14.5% QoQ) and diluted EPS of -$0.35 vs Street -$0.41; gross margin expanded to 65.4% on higher ASPs and efficiencies . Revenue beat consensus ($76.239M*) by ~$2.94M and EPS beat by $0.06* .
FY25 guidance raised: revenue to $325.5M (+45% YoY), gross margin ~64.5% with reduced tariff headwind ($1–$2M vs prior $5M), OpEx to ~$302M, Adj. EBITDA loss maintained at ~$($35.0)M .
Execution drivers: robust U.S. handpiece growth (Q2 U.S. handpieces revenue $43.130M, +58% YoY), continued IDN traction, record international revenue ($9.597M; UK strength; progress in Japan/Korea), and expanding installed base (U.S. 595 systems) .
Strategic catalysts: Category I CPT code effective Jan 1, 2026 (proposed 16.14 RVUs), CEO transition to Larry Wood (Edwards pedigree), and WATER IV prostate cancer study enrollment; management reiterated path to profitability as margins trend mid-60s% .

What Went Well and What Went Wrong

What Went Well

Broad-based strength with 48% YoY revenue growth; U.S. handpieces +58% YoY and record international revenue; gross margin reached 65.4% (“mid-sixties”) on improved efficiencies and higher system ASPs .
IDN momentum and pipeline visibility: “we have a ton of visibility into deals currently in the funnel” and “starting to form great relationships at the top” with a strategic accounts team working top-down across ~17 large IDNs (≈30% of U.S. resective procedures) .
Procedural utilization and surgeon engagement: ~1,300 surgeons performed Aquablation in Q2; Q2 U.S. handpieces ~12,750 (+59% YoY units); accounts being launched with multiple surgeons and multi-patient days to accelerate ramp .
Quote (CEO): “Gross margins expanding into the mid sixties range, establishing a clearer path to profitability” .
Quote (CFO): “We feel really good about our ability to continue to expand margins here with operational efficiencies and higher volumes” .

What Went Wrong

Operating expenses rose to $73.935M (+26.7% YoY) on commercial expansion, R&D and G&A; FY25 OpEx guidance raised to ~$302M (from $300M) .
U.S. system revenue FY25 trimmed to ~$$93.5M (from $95.0M) as focus shifts to greenfield placements and replacements are de-emphasized in H2; Q3 greenfield units guided to ~52 at ~$440k ASP .
Tariff headwind persists (albeit reduced): FY25 gross margin headwind now ~$1–$2M (was ~$5M), with modest margin decline expected in 2H vs 1H; dependency on China-based ultrasound supply (onshoring under evaluation) .
Physician fee schedule (professional fees) won’t impact until 2026; surgeon feedback characterized as “fairly neutral” today—near-term volumes driven primarily by clinical outcomes and stable facility reimbursement (APC level 6) .

Financial Results

Core P&L vs Prior Quarters and Estimates

Metric	Q4 2024	Q1 2025	Q2 2025	Q2 2025 Consensus
Revenue ($USD Millions)	$68.236	$69.162	$79.182	$76.239*
Diluted EPS ($USD)	$(0.35)	$(0.45)	$(0.35)	$(0.41)*
Gross Margin %	64%	64%	65.4%	—
Total Operating Expenses ($USD Millions)	$63.382	$71.599	$73.935	—
Net Loss ($USD Millions)	$(18.856)	$(24.737)	$(19.578)	—
Adjusted EBITDA ($USD Millions)	$(10.335)	$(15.808)	$(7.994)	—

Values retrieved from S&P Global for consensus estimates (*).

Segment and Geography Breakdown

Revenue Line ($USD Millions)	Q2 2024	Q1 2025	Q2 2025
U.S. System Sales & Rentals	$17.819	$18.687	$22.082
U.S. Handpieces & Consumables	$27.260	$38.011	$43.130
U.S. Service	$2.589	$3.596	$4.373
Total U.S. Revenue	$47.668	$60.294	$69.585
OUS System Sales & Rentals	$3.078	$3.853	$2.945
OUS Handpieces & Consumables	$2.271	$4.477	$6.002
OUS Service	$0.336	$0.538	$0.650
Total OUS Revenue	$5.685	$8.868	$9.597
Total Revenue	$53.353	$69.162	$79.182

KPIs

KPI	Q1 2025	Q2 2025
U.S. Installed Base (systems)	547	595
U.S. Systems Sold (quarter)	43	51 (press release)
U.S. Systems Sold (detail)	—	~48 new Hydros + replacements (CFO)
U.S. Handpieces Units (quarter)	—	~12,750
Greenfield System ASP ($USD)	—	~$455,000
Handpiece ASP ($USD)	—	~$3,200 (FY25 assumption)
International Revenue ($USD Millions)	$8.868	$9.597
Gross Margin %	64%	65.4%
Adjusted EBITDA ($USD Millions)	$(15.808)	$(7.994)

Note: Q2 press release cites 51 U.S. systems sold; CFO remarked ~48 new Hydros plus replacements—difference likely reflects classification timing; management guided Q3 greenfield ~52 units at ~$440k ASP .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Revenue ($USD Millions)	FY 2025	$323.0	$325.5	Raised
Gross Margin (%) and Tariff Headwind	FY 2025	~64.5% with ~$5.0M headwind	~64.5% with ~$1.0–$2.0M headwind	Improved (lower headwind)
Total Operating Expense ($USD Millions)	FY 2025	$300.0	$302.0	Raised
Adjusted EBITDA ($USD Millions)	FY 2025	$(35.0)	$(35.0)	Maintained
U.S. System Revenue ($USD Millions)	FY 2025	~$95.0 (prior commentary)	~$93.5	Lowered

Additional detail: handpieces guided to ~53,000 units (+64% YoY); Q3 greenfield systems ~52 at ~$440k ASP; U.S. service revenue guided to ~$17M; international revenue to ~$36M; interest & other income ~$9M; Q4 Adj. EBITDA approaching breakeven .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
AI/Technology (HYDROS)	FDA 510(k) clearance of HYDROS; launch building momentum (Q4/Q1)	Positive reception; simpler setup; single-use and first AI assist highlighted	Strengthening adoption narrative
Supply Chain/Tariffs	Q4 saline shortage impacted procedures; tariff exposure noted	Tariff headwind reduced to $1–$2M; margin H2 slightly lower vs H1	Improving risk profile
Medicare Reimbursement	Facility APC level stable; FY25 commentary	Category I CPT proposed for 2026 (16.14 RVUs); surgeon feedback neutral until implementation	Long-term positive catalyst
Product Performance	Q1 U.S. handpieces +61% YoY; IDN multi-unit orders ~45% of placements	U.S. handpieces +58% YoY; ~12,750 units; ASPs higher; record OUS	Sustained momentum
Regional Trends	OUS revenue Q4 $7.847M; Q1 $8.868M	Q2 OUS $9.597M; strength in UK; progress in Japan/Korea	Building
R&D/Clinical	WATER IV PCa initiated; IDE approved	Enrollment progressing; same-day discharge ASC cases reported	Advancing
IDN Strategy	Q1: 45% U.S. placements from corporate IDN orders	Top-down strategic accounts team; robust IDN pipeline	Scaling relationships

Management Commentary

Prepared remarks (CEO): “We expect to exit 2025 with an estimated installed base of 715 systems… gross margins expanding into the mid sixties range, establishing a clearer path to profitability” .
Prepared remarks (CFO): “Gross margin for the [Q2 2025] was 65.4%, representing an increase of 640 basis points year over year… driven by improved operational efficiencies and higher average selling prices” .
International: “Upside… primarily related to UK demand… starting to see progress in both Japan and Korea… ~70% of all international sales from UK/Japan/Korea” .
Reimbursement: “OPPS continues to recognize Aquablation therapy at APC level six… 2026 OPPS proposed hospital-based reimbursement $9,765, +5.6% vs $9,247 in 2025” .
Category I CPT (professional fees): “Assigned 16.14 total RVUs… Category I code will reduce administrative burdens and ensure consistent reimbursement” .

Q&A Highlights

Guidance confidence amid leadership changes: Management emphasized field execution, pipeline visibility, and elective procedure scheduling stability; reiterated raised FY revenue guidance and detailed component updates (systems, handpieces, service, OUS) .
Replacement cycle timing: Focus on greenfield accounts; replacements “immaterial” in H2 2025; cycle expected to become more robust starting 2026 given 5–7 year useful life and 2021–2022 cohort aging .
Tariffs and margins: Headwind reduced to ~$1–$2M; positioned to manage margins/profitability; expecting modest H2 margin decline vs H1 but guiding to ~64.5% for FY25 .
Capital environment: Management sees a “relatively stable” environment; hospitals value Aquablation’s ability to recruit/retain surgeons and standardize practice, offsetting macro concerns .
ASC potential and Hydros value prop: Early ASC same-day discharge cases in WATER IV; Hydros reception strong (setup, single-use, AI assist), with utilization data expected to be clearer by end of 2025 .

Estimates Context

Q2 2025 vs consensus: Revenue $79.182M vs $76.239M* (beat ~3.9%); EPS -$0.35 vs -$0.41* (beat $0.06). Estimate counts: 11 (revenue), 10 (EPS)* .
Forward consensus snapshot: FY25 revenue ~$326.467M*, EPS -$1.51*; Q3 revenue ~$80.768M*, EPS -$0.42* (management guided Q3 greenfield units ~52 at ~$440k ASP; U.S. handpieces ~13,350) .