PROCEPT BioRobotics Corp

1. Organization

Description of Business

PROCEPT BioRobotics Corporation, or the Company, was incorporated in the state of California in 2007 and its headquarters are located in San Jose, California. In April 2021, the Company re-incorporated in the state of Delaware. The Company received U.S. Food and Drug Administration clearance in December 2017 to market its AquaBeam® Robotic System, an automated surgical robot providing tissue removal for the treatment of benign prostatic hyperplasia, a prostate gland enlargement condition. On August 20, 2024, the Company received 510(k) clearance from the FDA for its next generation robot system, HYDROS® Robotic System.

2. Summary of Significant Accounting Policies

Basis of Preparation

The condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, and pursuant to the rules and regulations of the United States Securities and Exchange Commission or SEC. These condensed consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.

Unaudited Interim Financial Statements

The accompanying balance sheet as of September 30, 2025, the statements of operations and comprehensive loss and cash flows for the three and nine months ended September 30, 2025 and 2024, and the statements of stockholders’ equity as of September 30, 2025 and 2024, are unaudited. The financial data and other information disclosed in these notes to the financial statements related to September 30, 2025, and the three and nine months ended September 30, 2025 and 2024, are also unaudited. The accompanying balance sheet as of December 31, 2024 has been derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K (“Annual Report”) filed with the Securities and Exchange Commission.

The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to a fair statement of the Company’s financial position as of September 30, 2025, and the results of its operations and cash flows for the three and nine months ended September 30, 2025 and 2024. The results for the three and nine months ended September 30, 2025, are not necessarily indicative of results to be expected for the year ending December 31, 2025, or for any other interim period or for any future year and should be read in conjunction with the annual consolidated financial statements included in the Company’s Annual Report.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in the condensed consolidated financial statements. Management uses significant judgment when making estimates related to its allowance for credit losses, excess and obsolete inventory reserves, stock-based compensation expense, right-of-use lease asset, lease liability, as well as certain accrued liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.

Recent Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for all public entities for fiscal years beginning after December 15, 2024. The ASU should be applied either prospectively or retrospectively. The Company plans to adopt the ASU and related updates in the year ending December 31, 2025. The adoption of this ASU is not expected to have a material impact on its financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. In January 2025, the FASB issued ASU 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. The ASUs require public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. The Company is evaluating the impact this ASU will have on its financial statement disclosures.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. ASU 2025-05 provides a practical expedient and, if applicable, an accounting policy election to simplify the measurement of credit losses for certain receivables and contract assets. The amendments are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted in any interim or annual period in which financial statements have not yet been issued or made available for issuance. The adoption of this ASU is not expected to have a material impact to the Company’s financial statements.

In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The ASU removes all references to prescriptive and sequential software development stages (referred to as “project stages”) and requires companies to start capitalizing software costs when both of the following occur: (1) management has authorized and committed to funding the software project, and (2) it is probable that the project will be completed and the software will be used to perform the function intended (referred to as the “probable-to complete recognition threshold”). ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, an interim reporting periods within those annual reporting periods. Early adoption is permitted. The adoption of this ASU is not expected to have a material impact to the Company’s financial statements.

3. Fair Value Measurements

The following is a summary of assets and liabilities measured at fair value on a recurring basis (in thousands):

Cash equivalents consist primarily of money market deposit funds.

The carrying value of the Company’s long-term debt approximates fair value as the debt bears interest at variable SOFR rates at September 30, 2025 and 2024, which is observable at commonly quoted intervals for the full term of the loan, and therefore, is considered a Level 2 item in the fair value hierarchy.

4. Balance Sheet Components

Allowance for credit losses (in thousands):

Inventory (in thousands):

Property and equipment, net, (in thousands):

Deferred commission costs, (in thousands):

5. Long-Term Debt

Term Loan Facility

In October 2022, the Company entered into a loan and security agreement (as amended, “the Agreement”) with Canadian Imperial Bank of Commerce, or CIBC. The Agreement provides for a senior secured term loan facility in the aggregate principal amount of $52.0 million (the "Term Loan Facility") which was borrowed in full.

The Term Loan Facility is scheduled to mature on the fifth anniversary of the closing date (the “Maturity Date”). The Company has the option to prepay the Term Loan Facility without any prepayment charge or fee.

The loan borrowed under the Term Loan Facility bears interest at an annual rate equal to the secured overnight financing rate or SOFR (calculated based on an adjustment of.10%,.15% and.25%, respectively, for one-month, three-month or six-month term SOFR as of a specified date, subject to a floor of 1.5%) plus an applicable margin of 2.25%. The weighted-average interest rate for the periods ending September 30, 2025 and 2024 were 6.7%, and 7.7%, respectively.

The obligations under the Agreement are secured by substantially all of the Company's assets, including its intellectual property and by a pledge all of the Company's equity interests in its U.S. subsidiaries and 65% of the Company's equity interests in its non-U.S. subsidiaries that are directly owned by the Company.

In August 2025, the Company entered into a second amendment to the Agreement (the “Second Amendment”), which, among other things, modified the repayment terms such that the entire principal amount outstanding is now due on the Maturity Date, replacing the prior repayment schedule of interest-only payments followed by monthly principal amortization payments. Additionally, the Second Amendment modified the Company’s minimum cash holdings requirement at CIBC as follows: (a) if the Company’s cash and cash equivalents is less than $50.0 million, then the Company is required to maintain 100% of its cash and cash equivalents at CIBC; or (b) if the Company’s cash and cash equivalents is greater than or equal to $50.0 million, then the Company is required to maintain the greater of $50.0 million or 50% of its cash and cash equivalents at CIBC, with amounts exceeding $50.0 million permitted to be held outside of CIBC in collateral accounts managed by CIBC.

Under the Loan Agreement, if the Company maintains less than $100.0 million in available cash, then the Company is required to meet either one of two financial covenants: a minimum unrestricted cash covenant or a minimum revenue and growth covenant. If the Company maintains at least $100.0 million in available cash, then it is not required to meet such financial covenants. As of September 30, 2025, the Company was in compliance with all debt covenants.

Future minimum annual debt repayments are as follows (in thousands):

Loan Facility Liability

In connection with the Company’s previous loan facility, the Company is obligated to pay a fee upon the earlier occurrence of a defined liquidity event, including but not limited to, a merger or sale of our assets or voting stock, or achieving a $200.0 million trailing 12 months revenue target, in each case, by September 2029. At December 31, 2024, the Company achieved the 12 months revenue target. As a result, the loan facility liability became due and will no longer be revalued. The outstanding balance was paid in full during the second fiscal quarter of 2025.

6. Leases

Facility Lease

In December 2021, the Company entered into a lease fortwo existing buildings, comprising approximately 158,221 square feet of space, located in San Jose, California. The lease commenced in July 2022, and will continue for 122 months following thereafter, withtwo five year options to extend the term of the lease.

Rent expense recognized under the lease, including additional rent charges for utilities, parking, maintenance, and real estate taxes, was $1.8 million and $2.0 million for the three months ended September 30, 2025 and 2024, and $4.9 million and $5.4 million for the nine months ended September 30, 2025 and 2024.

Future minimum annual operating lease payments are as follows (in thousands):

As of September 30, 2025 and December 31, 2024, the Company’s security deposit is in the form of, and recorded as, restricted cash.

Lessor Information for Robotic Systems

Contractual maturities of gross lease receivables as of September 30, 2025 are as follows (in thousands):

The components of income from sales-type leases are as follows:

Leases receivable relating to sales-type lease arrangements are presented on the Company’s consolidated balance sheets as follows (in thousands):

7. Stock-Based Compensation

Total stock-based compensation recognized, before taxes, are as follows (in thousands):

On September 1, 2025, the Company’s former CEO retired, which resulted in accelerated vesting of certain stock-based awards, in accordance with original grant terms, as well as cash severance. As a result, the Company recorded compensation expense of $3.7 million during the three and nine months ended September 30, 2025, in selling, general and administrative expenses.

Stock Options

The Company had 8.2 million shares available for grant as of September 30, 2025 under the 2021 Equity Incentive Award Plan, or 2021 Plan.

A summary of the Company’s stock option activity and related information are as follows (options in thousands):

As of September 30, 2025 and December 31, 2024, the aggregate pre-tax intrinsic value of options outstanding and exercisable was $79.8 million and $239.7 million, respectively, and the aggregate pre-tax intrinsic value of options outstanding were $79.8 million and $261.7 million, respectively. The aggregate pre-tax intrinsic value of options exercised was $24.1 million and $47.2 million during the nine months ended September 30, 2025 and 2024, respectively.

As of September 30, 2025, there was a total of $13.9 million of unrecognized stock-based compensation expense related to stock options.

The fair value of the options granted to employees or directors was estimated as of the grant date using the Black-Scholes model assuming the weighted-average assumptions listed in the following table:

Restricted Stock Units

A summary of the Company’s restricted stock unit, or RSU, activity and related information are as follows (RSUs in thousands):

As of September 30, 2025, there was a total of $91.6 million of unrecognized stock-based compensation expense related to RSUs.

Performance Stock Units

The 2021 Plan provides for issuance of performance stock units, or PSUs. PSUs granted are contingent upon the achievement of predetermined market, performance, and service conditions. PSUs are awarded to executives of the Company and generally time vest over a period of up tothree years. Vesting is also generally contingent upon achievement of applicable performance metrics. PSU expense is recognized over the requisite service period.

During the nine months ended September 30, 2025, the Company awarded PSU shares with both a performance and service condition.

A summary of the Company’s PSU activity and related information are as follows (PSUs in thousands):

As of September 30, 2025, total unrecognized stock-based compensation related to unvested PSUs was $4.0 million.

Employee Stock Purchase Plan

As of September 30, 2025, there was approximately $2.0 million of unrecognized cost related to the Employee Stock Purchase Plan, or ESPP. This cost is expected to be recognized over a weighted average period of 0.6 years. As of September 30, 2025, a total of 1.9 million shares were available for issuance under the ESPP.

The fair value of the options granted to employees was estimated as of the grant date using the Black-Scholes model assuming the weighted-average assumptions listed in the following table:

8. Net Loss Per Share

Net loss per share was determined as follows (in thousands, except per share amounts):

The following potentially dilutive securities outstanding have been excluded from the computations of weighted-average shares outstanding because such securities have an antidilutive impact due to losses reported (in common stock equivalent shares, in thousands):

9. Revenue

The following table presents revenue disaggregated by type and geography (in thousands):

During the three and nine months ended September 30, 2025, the Company recognized $4.2 million and $8.3 million of revenue, respectively, that was included in the deferred revenue balance as of June 30, 2025 and December 31, 2024. During the three and nine months ended September 30, 2024, the Company recognized $2.6 million and $5.2 million of revenue, respectively, that was included in the deferred revenue balance as of June 30, 2024 and December 31, 2023.

10. Income Taxes

In July 2025, new federal tax legislation was enacted, introducing significant changes to U.S. income tax law, including provisions affecting the deductibility and capitalization of research and development expenditures, as well as changes to various international tax rules. The Company analyzed the impact of this legislation and determined that the legislation did not have a material impact due to the Company’s full valuation allowance applied on its deferred tax assets and liabilities.

11. Segment, Geographical, and Customer Concentration

The Company operates as a single operating segment. The Company’s chief operating decision maker, or CODM, its Chief Executive Officer, reviews the Company’s forecast, as well as budget to actual financial information, as key inputs to making decisions on resource allocation and assessing the performance of the business. The CODM monitors budget versus actual results using income (loss) from operations and net income (loss).

Significant expenses within income from operations, as well as within net income (loss), include cost of goods sold, research and development expenses, and selling, general and administrative expenses, which are each separately presented on the Company’s consolidated statements of operations. Other segment items within net income (loss) include interest expense, and interest and other income, net on an aggregate basis for the purposes of allocating resources and evaluating financial performance.

The Company’s assets are primarily based in the United States.

No customers accounted for more than 10% of revenue during the nine months ended September 30, 2025 and 2024.

No customer accounted for more than 10% of accounts receivable at September 30, 2025 and December 31, 2024.

The following table presents revenue by significant geographical locations for the periods indicated:

No individual country outside the United States accounted for more than 10% of the Company’s revenue for the periods presented.

12. Commitments and Contingencies

Guarantees and Indemnifications

In the normal course of business, the Company enters into agreements that contain a variety of representations and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future. To date, the Company has not paid any material claims or been required to defend any action related to its indemnification obligations. As of September 30, 2025 and December 31, 2024, the Company does not have any material indemnification claims that were probable or reasonably possible and consequently has not recorded related liabilities.

Legal Contingencies

From time to time, the Company may be involved in legal proceedings arising in the ordinary course of our business. The Company is not presently a party to any legal proceedings that, in the opinion of management, would have a material adverse effect on the business. Regardless of outcome, litigation can have an adverse impact on the Company due to defense and settlement costs, diversion of management resources, negative publicity and reputation harm, and other factors.

A liability and related charge to earnings are recorded in the financial statements for legal contingencies when the loss is considered probable and the amount can be reasonably estimated. The assessment is re-evaluated each accounting period and is based on all available information.

13. Defined Contribution Plan

The Company has a defined contribution retirement savings plan under Section 401(k) of the Internal Revenue Code. This plan allows eligible employees to defer a portion of their annual compensation on a pre-tax basis. Employer contributions were $0.7 million and $0.5 million for the three months ended September 30, 2025 and 2024, and $2.4 million and $1.8 million for the nine months ended September 30, 2025 and 2024.