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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes are included elsewhere in this report. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed in the section titled “Risk Factors” and elsewhere in this report. Please also see the section titled “Cautionary Note Regarding Forward-Looking Statements.”

The following generally compares our results of operations for the years ended December 31, 2024 and 2023. A detailed discussion comparing our results of operations for the years ended December 31, 2023 and 2022 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023.

Overview

We are a surgical robotics company focused on advancing patient care by developing transformative solutions in urology. We develop, manufacture and sell the AquaBeam Robotic System and HYDROS Robotic System, which are advanced, image-guided, surgical robotic systems for use in minimally invasive urologic surgery, with an initial focus on treating benign prostatic hyperplasia, or BPH. BPH is the most common prostate disease and impacts approximately 40 million men in the United States. Each of our robotic systems employs a single-use disposable handpiece to deliver our proprietary Aquablation therapy, which combines real-time, multi-dimensional imaging, personalized treatment planning, automated robotics and heat-free waterjet ablation for targeted and rapid removal of prostate tissue. We designed our robotic systems to enable consistent and reproducible BPH surgery outcomes. We believe that Aquablation therapy represents a paradigm shift in the surgical treatment of BPH by addressing compromises associated with alternative surgical interventions. We designed Aquablation therapy to deliver effective, safe and durable outcomes for males suffering from lower urinary tract symptoms, or LUTS, due to BPH that is independent of prostate size and shape, and delivers resection independent of surgeon experience. We have developed a significant and growing body of clinical evidence, which includes nine clinical studies and over 150 peer-reviewed publications, supporting the benefits and clinical advantages of Aquablation therapy. As of December 31, 2024, we had an install base of 647 AquaBeam Robotic Systems and HYDROS Robotic Systems globally, including 505 in the United States.

Our U.S. pivotal trial, the WATER study, is the only FDA pivotal study randomized against transurethral resection of prostate, or TURP, which is the historical standard of care for the surgical treatment of BPH. In this study, Aquablation therapy demonstrated superior safety and non-inferior efficacy compared to TURP across prostate sizes between 30 ml and 80 ml, and superior efficacy in a subset of patients with prostates larger than 50 ml. We have established strong relationships with key opinion leaders, or KOLs, within the urology community and collaborated with key urological societies in global markets. This support has been instrumental in facilitating broader acceptance and adoption of Aquablation therapy. As a result of our strong KOL network and our compelling clinical evidence, Aquablation therapy has been added to clinical guidelines of various professional associations, including the American Urological Association.

In the United States, we sell our products to hospitals. We target approximately 2,700 hospitals that perform resective BPH procedures in the United States. Over time, we expect to gradually expand our focus to also include mid- and low-volume hospitals. These customers in turn bill various third-party payors, such as commercial payors and government agencies, for treatment payment of each patient. Effective in 2021, all local Medicare Administrative Contractors, or MACs, which represent 100% of eligible Medicare patients, issued final positive local coverage determinations to provide Medicare beneficiaries with access to Aquablation therapy in all 50 states. We also have favorable coverage decisions from many large commercial payors. We plan to leverage these successes in our active discussions with all commercial payors to establish additional positive national and regional coverage policies. Outside of the United States, we have ongoing efforts in key markets to expand established coverage and improve payment which we believe will expand patient access to Aquablation therapy.

We manufacture the robotic systems, the single-use disposable handpiece, integrated scope and other accessories at our facility in San Jose, California. This includes supporting the supply chain distribution and logistics of the various components. Components, sub-assemblies and services required to manufacture our products are purchased from numerous global suppliers. Each robotic system is shipped to our customers with a third-party manufactured ultrasound system and probe. We utilize a well-known third-party logistics provider located in the United States and the Netherlands to ship our products to our customers globally.

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We generated revenue of $224.5 million and $136.2 million, for the years ended December 31, 2024 and 2023, respectively, and incurred a net loss of $91.4 million and $105.9 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $546.0 million.

Factors Affecting Our Performance

We believe there are several important factors that have impacted and that we expect will impact our operating performance and results of operations for the foreseeable future. While these factors may present significant opportunities for us, they also pose significant risks and challenges that we must address. See the section titled “Risk Factors” for more information. These factors include:

•Grow our install base of robotic systems: As of December 31, 2024, we had an install base of 647 robotic systems globally, including 505 in the United States. In the United States, we are initially focused on driving adoption of Aquablation therapy among urologists that perform hospital-based resective BPH surgery. We target approximately 2,700 hospitals that perform resective BPH procedures in the United States. To penetrate these hospitals, we expect to continue to increase our direct team of capital sales representatives, who are focused on driving system placement within hospitals by engaging with key surgeons and decision makers to educate them about the compelling value proposition of Aquablation therapy. As we increase our install base of robotic systems, we expect our revenue to increase as a result of the system sale and resulting utilization.

•Increase system utilization: Our revenue is significantly impacted by the utilization of our robotic systems. Once we place a system within a hospital our objective is to establish Aquablation therapy as the surgical treatment of choice for BPH. Within each hospital we are initially focused on targeting urologists who perform medium-to-high volumes of resective procedures and converting their resective cases to Aquablation therapy. To accomplish this, we will continue expanding our team of highly trained Aquablation representatives and clinical specialists who are focused on driving system utilization within the hospital, providing education and training support and ensuring excellent user experiences. As urologists gain experience with Aquablation therapy we expect to leverage their experiences to capture more surgical volumes and establish Aquablation therapy as the surgical standard of care.

•Reimbursement and coverage decisions by third-party payors. Healthcare providers in the United States generally rely on third-party payors, principally federal Medicare, state Medicaid and private health insurance plans, to cover all or part of the cost of procedures using our robotic system. The revenue we are able to generate from sales of our products depends in large part on the availability of sufficient reimbursement from such payors. Effective in 2021, all local MACs, representing 100% of eligible Medicare patients, issued final positive local coverage determinations to provide Medicare beneficiaries with access to Aquablation therapy in all 50 states. We believe that these favorable coverage decisions have been a catalyst for hospital adoption of our robotic systems. We believe our strong body of clinical evidence and support from key societies, supplemented by the momentum from Medicare coverage, have led to favorable coverage decisions from many large commercial payors. We plan to leverage these successes in our active discussions with commercial payors to establish additional positive national and regional coverage policies. We believe that additional commercial payor coverage will contribute to increasing utilization of our system over time. Outside of the United States, we have ongoing efforts in key markets to expand established coverage and further improve patient access to Aquablation therapy.

•Cost of sales. The results of our operations will depend, in part, on our ability to increase our gross margins by more effectively managing our costs to produce our robotic Systems and single-use disposable handpieces, and to scale our manufacturing operations efficiently. We anticipate that as we expand our sales and marketing efforts and drive further sales growth, our purchasing costs on a per unit basis may decrease, and in turn improve our gross margin. As our commercial operations continue to grow, we expect to continue to realize operating leverage through increased scale efficiencies.

•Investment in research and development to drive continuous improvements and innovation. We are currently developing additional and next generation technologies to support and improve Aquablation therapy to further satisfy the evolving needs of surgeons and their patients as well as to further enhance the usability and scalability of our robotic systems. We also plan to leverage our treatment data and software development capabilities to integrate artificial intelligence and machine learning to enable computer-assisted anatomy recognition and improved treatment planning and personalization. Our future growth is dependent on these continuous improvements which require significant resources and investment.

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Components of Our Results of Operations

Revenue

We generate our revenue primarily from the sales and rentals of our robotic systems, sales of our single-use disposable handpieces that are used during each surgery performed with our system, and related accessories. Additionally, we also derive revenue from service and repair and extended service contracts with our existing customers. We expect our revenue to increase in absolute dollars for the foreseeable future as we continue to focus on driving adoption of Aquablation therapy, and increased system utilization, though it may fluctuate from quarter to quarter.

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

Year Ended December 31,

United States 89 % 91 %

Outside the United States 11 % 9 %

We expect that both our United States and international revenue will increase in the near term as we continue to expand the install base of our robotic systems and increase the related single-use disposable handpieces sold. We expect our increase in revenues in absolute dollars to be larger in the United States.

Cost of Sales and Gross Margin

Cost of sales consists primarily of manufacturing overhead costs, material costs, warranty and service costs, direct labor, scrap and other direct costs such as shipping costs. A significant portion of our cost of sales currently consists of manufacturing overhead costs. These overhead costs include compensation for personnel, including stock-based compensation, facilities, equipment and operations supervision, quality assurance and material procurement. We expect our cost of sales to increase in absolute dollars for the foreseeable future primarily as, and to the extent, our revenue grows, or we make additional investments in our manufacturing capabilities, though it may fluctuate from period to period.

We calculate gross margin percentage as gross profit divided by revenue. Our gross margin has been and will continue to be affected by a variety of factors, primarily, product and geographic mix and the resulting average selling prices, production volumes, manufacturing costs and product yields, and to a lesser extent the implementation of cost reduction strategies. We expect our gross margin to increase over the long term as our production volume increases and as we spread the fixed portion of our manufacturing overhead costs over a larger number of units produced, thereby significantly reducing our per unit manufacturing costs, though it may fluctuate from quarter to quarter. Our gross margins can fluctuate due to geographic mix. To the extent we sell more systems and handpieces in the United States, we expect our margins will increase due to the higher average selling prices as compared to sales outside of the United States.

Operating Expenses

Research and Development

Research and development, or R&D, expenses consist primarily of engineering, product development, regulatory affairs, consulting services, clinical trial expenses, materials, depreciation and other costs associated with products and technologies being developed. These expenses include employee and non-employee compensation, including stock-based compensation, supplies, materials, quality assurance expenses, consulting, related travel expenses and facilities expenses. We expect our R&D expenses to increase in absolute dollars for the foreseeable future as we continue to develop, enhance and commercialize new products and technologies, though it may fluctuate from quarter to quarter. However, we expect our R&D expenses as a percentage of revenue to vary over time depending on the level and timing of initiating new product development efforts.

Selling, General and Administrative

Selling, general and administrative, or SG&A, expenses include compensation for personnel, including stock-based compensation, related to selling, marketing, clinical affairs, professional education, finance, information technology, and human resource functions. SG&A expenses also include commissions, training, travel expenses, promotional activities, conferences, trade shows, professional services fees, audit fees, legal fees, insurance costs and general corporate expenses including allocated facilities-related expenses. We expect our SG&A expenses to increase in absolute dollars for the foreseeable future as we expand our commercial infrastructure and incur additional fees associated with operating as a public company, including legal, accounting, insurance, compliance with the rules and regulations of the SEC and those of

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any stock exchange on which our securities are traded, investor relations, and other administrative and professional services expenses, though it may fluctuate from quarter to quarter. However, over time, we expect our SG&A expenses to decrease as a percentage of revenue.

Interest and Other Income (Expense), Net

Interest Expense

Interest expense consists primarily of interest expense from our long-term debt.

Interest and Other Income, Net

Interest and other income, net, consists primarily of interest income from our cash and cash equivalents balances, and fair value adjustments from our loan facility derivative liability.

Loss on loan extinguishment

Loss on loan extinguishment was a result of our acquisition price of our new debt exceeded the carrying amount of our existing debt during the fiscal year ended December 31, 2022.

Results of Operations

Comparison of Years Ended December 31, 2024 and 2023

The following table shows our results of operations for the years ended December 31, 2024 and 2023:

Year EndedDecember 31, Change

(in thousands, except percentages)

Gross margin 61 % 52 %

Operating expenses:

Revenue

Year EndedDecember 31, Change

(in thousands, except percentages)

Revenue increased $88.3 million, or 65%, to $224.5 million during the year ended December 31, 2024, compared to $136.2 million during the year ended December 31, 2023. The growth in revenue was primarily attributable to an increase

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of $31.4 million and $51.9 million in revenues from higher sales volumes of both our robotic systems and our single-use disposable handpieces.

Cost of Sales and Gross Margin

Cost of sales increased $22.3 million, or 34%, to $87.4 million during the year ended December 31, 2024, compared to $65.1 million during the year ended December 31, 2023. The increase in cost of sales was primarily attributable to the growth in the number of units sold.

Gross margin increased to 61% during the year ended December 31, 2024, compared to 52% for the year ended December 31, 2023. The increase in gross margin was primarily attributable to the growth in unit sales, which allowed us to spread the fixed portion of our manufacturing overhead costs over more production units, and decreases in scrap and warranty costs.

Research and Development Expenses

R&D expenses increased $13.9 million, or 29%, to $62.3 million during the year ended December 31, 2024, compared to $48.4 million during the year ended December 31, 2023. The increase in R&D expenses was primarily due to employee-related expenses from increased headcount of our R&D organization, as well as increases in third-party product development costs. These expenses support ongoing product improvements and the development of additional and next generation technologies.

Selling, General and Administrative Expenses

SG&A expenses increased $39.6 million, or 30%, to $171.4 million during the year ended December 31, 2024, compared to $131.8 million during the year ended December 31, 2023. The increase in SG&A expenses was primarily due to employee-related expenses of our sales and marketing organization and administrative organizations as we expanded our infrastructure to drive and support our growth in revenue.

Interest Expense

Interest expense of $4.2 million during the year ended December 31, 2024 remained relatively flat compared to fiscal 2023.

Interest and other income, net, increased $2.1 million to $9.4 million during the year ended December 31, 2024 compared to $7.3 million during the year ended December 31, 2023. The increase in interest and other income, net was primarily due to higher interest rates earned on our cash equivalents.

Liquidity and Capital Resources

Overview

We completed a follow-on offering of common stock in October 2024, which raised $164.5 million in proceeds to us, net of issuance costs. Previously, our primary sources of capital have been from our initial public offering, private placements of redeemable convertible preferred securities and debt financing agreements.

As of December 31, 2024, we had cash and cash equivalents of $333.7 million, an accumulated deficit of $546.0 million, and $52.0 million outstanding on our loan facility. We expect our expenses will increase for the foreseeable future, as we continue to make substantial investments in sales and marketing, operations and research and development. Moreover, we expect to incur additional expenses as a result of operating as a public company, including legal, accounting, insurance, compliance with the rules and regulations of the SEC and those of any stock exchange on which our securities are traded, investor relations, and other administrative and professional services expenses. Our future funding requirements will depend on many factors, including:

•the degree and rate of market acceptance of our products and Aquablation therapy;

•the scope and timing of investment in our sales force and expansion of our commercial organization;

•the scope, rate of progress and cost of our current or future clinical trials and registries;

•the cost of our research and development activities;

•the cost and timing of additional regulatory clearances or approvals;

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•the costs associated with any product recall that may occur;

•the costs associated with the manufacturing of our products at increased production levels;

•the costs of attaining, defending and enforcing our intellectual property rights;

•whether we acquire third-party companies, products or technologies;

•the terms and timing of any other collaborative, licensing and other arrangements that we may establish;

•the emergence of competing technologies or other adverse market developments; and

•the rate at which we expand internationally.

Based on our operating plan, we currently believe that our existing cash and cash equivalents and anticipated revenue will be sufficient to meet our capital requirements and fund our operations through at least the next twelve months from the issuance date of the financial statements. We have based this estimate on assumptions that may prove to be wrong, and we may need to utilize additional available capital resources. If these sources are insufficient to satisfy our liquidity requirements, we may seek to sell additional public equity or debt securities or obtain an additional credit facility. The sale of equity and convertible debt securities may result in dilution to our stockholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. Additional financing may not be available at all, or in amounts or on terms unacceptable to us. If we are unable to obtain additional financing, we may be required to delay the development, commercialization and marketing of our products.

Indebtedness

In October 2022, we entered into a loan and security agreement with Canadian Imperial Bank of Commerce. The Agreement provides for a senior secured term loan facility in the aggregate principal amount of $52.0 million, which was borrowed in full. Proceeds from the term loan facility were used to repay and terminate our previous loan facility, transaction fees, and related expenses.

The term loan facility is scheduled to mature on October 6, 2027, the fifth anniversary of the Closing Date (the “Maturity Date”). The loan and security agreement provides for interest-only payments on the term loan facility for the first thirty-six months following the Closing Date (the “Initial Interest-Only Period”). The Initial Interest-Only Period will be extended to an additional twelve months if we achieve either (i) $200.0 million or greater in revenue in any twelve-month period or (ii) $0 or greater in EBITDA in any six-month period. Thereafter, amortization payments on the Term Loan Facility will be payable monthly until the Maturity Date in monthly installments equal to 20% of the then outstanding principal amount of the Term Loan Facility divided by 12 plus any accrued and unpaid interest. We have the option to prepay the Term Loan Facility without any prepayment charge or fee. We achieved the twelve-month revenue target as of December 31, 2024.

The loan borrowed under the Term Loan Facility bears interest at an annual rate equal to the secured overnight financing rate ("SOFR") (calculated based on an adjustment of 0.10%, 0.15% and 0.25%, 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 obligations under the loan and security agreement are secured by substantially all of our assets, including its intellectual property and by a pledge all of our equity interests in its U.S. subsidiaries and 65% of our equity interests in its non-U.S. subsidiaries that are directly owned by us. We are obligated to maintain in deposit accounts held at the lender equal to at least the lesser of (i) $100.0 million or (ii) all of our non-operating cash.

The loan and security agreement contains certain customary representations and warranties, affirmative and negative covenants, and events of default. Under the loan and security agreement, if we maintain less than $100.0 million in available cash, then we are required to meet either one of two financial covenants: a minimum unrestricted cash covenant or a minimum revenue and growth covenant. The minimum unrestricted cash covenant requires that we to maintain cash reserve not less than the greater of (i) $20.0 million, (ii) the absolute value of EBITDA losses (if any) for the most recent consecutive four-month period then ended or (iii) the aggregate outstanding principal amount of $52.0 million. The minimum revenue and growth covenant requires our revenue, for the consecutive twelve-month period as of each measurement date, of not less than $50.0 million and of at least 115% as of the last day of the consecutive twelve-month

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period of the immediately preceding year. If we maintain at least $100.0 million in available cash, then it is not required to meet such financial covenants.

Cash Flows

The following table summarizes our cash flows for the years ended December 31, 2024, 2023, and 2022:

Year EndedDecember 31,

(in thousands)

Net cash provided by (used in):

Net Cash Used in Operating Activities

During the year ended December 31, 2024, net cash used in operating activities was $99.2 million, consisting primarily of a net loss of $91.4 million and an increase in net operating assets of $47.3 million, partially offset by non-cash charges of $39.5 million. The cash used in operations was primarily due to our net loss due to the increase in operating expenses to support our commercialization and development activities. The expansion of our commercialization resulted in increases in inventory, accounts receivable, prepaid expenses and other current assets along with long-term assets, a decrease in accounts payable, partially offset by an increase in accrued compensation, deferred revenue, lease liabilities, and accrued interest expense. Non-cash charges consisted primarily of stock-based compensation, accruals for excess and obsolete inventory and depreciation.

During the year ended December 31, 2023, net cash used in operating activities was $108.0 million, consisting primarily of a net loss of $105.9 million and an increase in net operating assets of $26.2 million, partially offset by non-cash charges of $24.1 million. The cash used in operations was primarily due to our net loss due to the increase in operating expenses to support our commercialization and development activities. The expansion of our commercialization resulted in an increase in inventory, accounts receivable, and long-term assets, a decrease in other accrued liabilities, partially offset by a decrease in prepaid expenses and other current assets, and increases in accounts payable, deferred revenue, lease liabilities, accrued compensation and accrued interest expense. Non-cash charges consisted primarily of stock-based compensation, and depreciation.

Net Cash Used in Investing Activities

During the year ended December 31, 2024, net cash used in investing activities was $4.4 million, consisting of purchases of property and equipment.

During the year ended December 31, 2023, net cash used in investing activities was $25.2 million, consisting of purchases of property and equipment.

Net Cash Provided by Financing Activities

During the year ended December 31, 2024, net cash provided by financing activities was $180.1 million, consisting primarily of proceeds from the issuance of common stock of $164.5 million, net of issuance costs, and proceeds of $11.1 million from the exercise of stock options.

During the year ended December 31, 2023, net cash provided by financing activities was $167.8 million, consisting primarily of proceeds from the issuance of common stock of $161.7 million, net of issuance costs, and proceeds of $2.5 million from the exercise of stock options.

Contractual Commitments and Contingencies

The information included in Note 12 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K is incorporated herein by reference.

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Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have any off-balance sheet arrangements, such as structured finance, special purpose entities or variable interest entities.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of the financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, expenses and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material.

While our significant accounting policies are more fully described in Note 2 of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult, subjective and complex judgments.

Revenue Recognition

Revenue is derived primarily from the sales of the AquaBeam Robotic Systems and HYDROS Robotic Systems, along with handpieces that are for one-time use during each surgery using our robotic systems. Each of our robotic systems contains both software and non-software components that are delivered together as a single product and generally contain a one-year warranty.

To determine revenue recognition for arrangements that we determine are within the scope of Accounting Standards Codification, or ASC, Topic 606, “Revenue from Contracts with Customers,” or ASC 606, we perform the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when, or as, we satisfy the performance obligations. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct based on the contract.

The contracts are typically in the form of an agreement and an ordering document from our customer. Sales generally contain multiple products and services and can include a combination of the following performance obligations: robotic system, handpieces and consumables, and service.

We determine the transaction price we expect to be entitled to in exchange for transferring the promised product to our customer, which is based on the invoiced price for the products. All prices are at fixed amounts per the contract with the customer. We have granted rebates on a limited basis and have been historically immaterial. Rebates are recorded as a reduction to revenue at time of sale.

For multiple-element arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are based on observable prices at which we separately sell the products or services. If a standalone selling price is not directly observable, then we estimate the standalone selling price considering market conditions and entity-specific factors including, but not limited to, features and functionality of the products and services, geographies, and type of customer. We regularly review standalone selling prices and update these estimates as necessary.

We recognize revenue as the performance obligations are satisfied by transferring control of the product or service to our customer. We generally recognize revenue for the performance obligations at the following points in time:

AquaBeam Robotic Systems and HYDROS Robotic Systems

End user sales - For systems (including system components and system accessories) sold directly to end user customers, revenue is recognized when we transfer control to our customer, in accordance with agreed upon shipping terms. We have determined in these type of arrangements the end user is our customer.

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Intermediary sales - For systems sold to distributors or to leasing companies, revenue is recognized when we transfer control to our intermediary, in accordance with agreed upon shipping terms. We have determined in these type of arrangements the intermediary our customer.

Robotic system arrangements generally do not provide a right of return, however, we have granted a right of return on a case-by-case basis. We estimate returns at contract inception based on historical return amounts.Return estimates are recorded as a reduction to revenue. Historical returns have been immaterial.

Additionally, given the release of the HYDROS Robotic System, on a case-by-case basis, we have granted our customers a contractual right to exchange a previously purchased AquaBeam Robotic System for a HYDROS Robotic System where consideration exchanged for the AquaBeam Robotic System is recorded at fair value.The consideration is recognized when the exchange is considered probable.We estimate exchanges at contract inception, based on historical exchange amounts.The fair value of consideration for the AquaBeam Robotic System is recorded as a reduction to revenue. Historical exchanges have been immaterial. The robotic systems are generally covered by a one-year service agreement included in the warranty. The service agreements are typically recognized as deferred revenue and amortized over the one-year service period.

Hand pieces and other consumables - Revenue from sales of handpieces and other consumables is recognized when control is transferred to the customers, in accordance with agreed upon shipping terms.

Service - Service revenue, inclusive of the amounts associated with the robotic system warranties or extended service agreements, is recognized over the term of the service period, as the customer benefits from the services throughout the service period.

We determined that certain promises in the multiple-element arrangements, such as installation, training and certain ancillary products, are immaterial, and do not represent separate performance obligations for which transaction price is allocated.

We must make significant assumptions regarding the future collectability of amounts receivable from customers to determine whether revenue recognition criteria have been met. If collectability is not assured at the time of shipment, we defer revenue until such criteria have been met.

Stock-Based Compensation

We account for stock options granted to employees and directors under the fair value recognition provision of ASC 718, Compensation - Stock Compensation. Stock-based compensation expense is recognized over the requisite service period in the statements of operations and comprehensive loss. We use the straight-line method for expense attribution.

The valuation model used for calculating the fair value of awards for stock options is the Black-Scholes option pricing model. The Black-Scholes option pricing model requires us to make assumptions and judgments about the variables used in the calculation, including the following:

Expected Term. The expected term of stock options represents the weighted-average period that the stock options are expected to remain outstanding. We estimated the expected term based on the simplified method, which is the average of the weighted-average vesting period and contractual term of the option.

Expected Volatility. Since there has been limited public market for our common stock and limited company specific historical volatility, we have determined the share price volatility for options granted based on an analysis of the volatility of a peer group of publicly traded companies. In evaluating similarity, we consider factors such as industry, stage of life cycle and size.

Risk-Free Interest Rate. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of the grant for zero-coupon U.S. Treasury notes with remaining terms similar to the expected term of the options.

Expected Dividend Rate. We assumed the expected dividend rate to be zero as we have never paid dividends and have no current plans to do so.

See Note 8 to our consolidated financial statements included elsewhere in this Annual Report Form 10-K for information concerning certain of the specific assumption we used in applying the Black-Scholes option pricing model to determine the fair value of our stock options granted in the years ended December 31, 2024 and 2023. If factors change and

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we employ different assumptions, stock-based compensation expense may differ significantly from what we have recorded in the past. If there are any modifications or cancellations of the underlying unvested securities, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense.

Loan Facility Derivative Liability

We have determined that our obligation to pay success fees to a lender upon a successful liquidation event or achieving a revenue target represents freestanding financial instruments. The instrument is classified as a current liability in the consolidated balance sheets and is subject to remeasurement at each consolidated balance sheet date. Any change in fair value is recognized through other income (expense) in the consolidated statements of operations and comprehensive loss. We adjust the carrying values of the loan facility derivative liability for changes in fair value and will continue to do so until the earlier of cash payment or expiration. The assumptions used in determining the fair value of the obligation require significant judgment.

Recent Accounting Pronouncements

A discussion of recent accounting pronouncements is included in Note 2 to our financial statements contained in this Annual Report on Form 10-K.

Item 7A. Quantitative and Qualitative Disclosures

Interest Rate Risk

Cash and cash equivalents of $333.7 million as of December 31, 2024, consisted of securities carried at quoted market prices with an original maturity of three months or less and therefore, there is minimal risk associated with fluctuating interest rates. We do not currently use or plan to use financial derivatives in our investment portfolio.

In addition, as described above under the subsection titled “Indebtedness,” amounts outstanding under our loan facility bears interest at an annual rate equal to the secured overnight financing rate ("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%. As a result, we are exposed to risks from changes in interest rates. We do not believe that a hypothetical 100 basis point increase or decrease in interest rates or 30-day SOFR would have had a material impact on our financial statements included elsewhere in this Annual Report on Form 10-K.

Credit Risk

We maintain our cash and cash equivalents with multiple financial institutions in the United States, and our current deposits are in excess of insured limits. We have reviewed the financial statements of these institutions and believe it has sufficient assets and liquidity to conduct its operations in the ordinary course of business with little or no credit risk to us.

Our accounts receivable primarily relate to revenue from the sale or rental of our products. No customers accounted for greater than 10% of accounts receivable at December 31, 2024. We believe that credit risk in our accounts receivable is mitigated by our credit evaluation process, relatively short collection terms and diversity of our customer base.

Foreign Currency Risk

A portion of our net sales and expenses are denominated in foreign currencies, most notably the Euro. Future fluctuations in the value of the U.S. Dollar may affect the price competitiveness of our products outside the United States. For direct sales outside the United States, we sell in both U.S. Dollars and local currencies, which could expose us to additional foreign currency risks, including changes in currency exchange rates. Our operating expenses in countries outside the United States, are payable in foreign currencies and therefore expose us to currency risk. We do not believe that a hypothetical 10% increase or decrease in the relative value of the U.S. dollar to other currencies would have had a material impact on our financial statements included elsewhere in this Annual Report on Form 10-K.

We do not currently maintain a program to hedge exposures to non-U.S. dollar currencies.

Effects of Inflation

Inflation generally affects us by increasing our cost of labor and research and development contract costs. We do not believe that inflation had a material effect on our financial statements included elsewhere in this Annual Report on Form 10-K.

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Item 8. Financial Statements - Audited Financial Statements

PROCEPT BioRobotics Corporation

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024, and 2023 and 2022

Page

Report of Independent Registered Public Accounting Firm (PCAOB Firm ID 238) F-2

Consolidated Financial Statements:

Consolidated Balance Sheets F-4

Consolidated Statements of Operations and Comprehensive Loss F-5

Consolidated Statements of Stockholders’ Equity F-6

Consolidated Statements of Cash Flows F-7

Notes to Consolidated Financial Statements F-8

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of PROCEPT BioRobotics Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of PROCEPT BioRobotics Corporation and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidatedstatements of operations and comprehensive loss, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the “consolidatedfinancial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as ofDecember 31, 2024and 2023, and the results of its operations and its cash flows for each of the three years in the period endedDecember 31, 2024in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework(2013)issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidatedfinancial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidatedfinancial statements included performing procedures to assess the risks of material misstatement of the consolidatedfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidatedfinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidatedfinancial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to theconsolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidatedfinancial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Robotic Systems Revenue Recognition

As described in Notes 2 and 11 to the consolidated financial statements, for the year ended December 31, 2024, the Company recognized system sales and rentals revenue of $90.3 million, which the majority relates to Robotic Systems. The Company’s Robotic Systems sales generally contain multiple products and services and can include a combination of the following performance obligations: robotic system, handpieces and consumables, and service. The Company recognizes revenue as the performance obligations are satisfied by transferring control of the product or service to a customer. For Robotic Systems (including system components and system accessories) sold directly to end users or intermediaries, revenue is recognized when the Company transfers control to the end users or intermediaries, in accordance with agreed upon shipping terms.

The principal considerations for our determination that performing procedures relating to the Robotic Systems revenue recognition is a critical audit matter are the high degree of effort in performing procedures and evaluating audit evidence related to the Robotic Systems revenue recognition.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process. These procedures also included, among others, (i) evaluating revenue transactions by testing the issuance and settlement of invoices and credit memos, (ii) tracing transactions not settled to a detailed listing of accounts receivable, (iii) confirming a sample of outstanding customer invoice balances at year end and obtaining and inspecting source documents, including invoices, sales contracts, and shipping documents for unpaid invoices, and obtaining subsequent cash receipt for paid invoices, where applicable, for confirmations not returned, and (iv) testing the completeness and accuracy of data provided by management.

/s/ PricewaterhouseCoopers LLP

San Jose, California

February 27, 2025

We have served as the Company’s auditor since2020.

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PROCEPT BioRobotics Corporation

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

December 31,

Assets

Current assets:

Prepaid expenses and other current assets 8,453 5,213

Operating lease right-of-use assets, net 18,941 20,241

Liabilities and Stockholders' Equity

Current liabilities:

Loan facility derivative liability 2,000 1,886

Other non-current liabilities 324 517

Commitments and contingencies (Note 12)

Stockholders’ equity:

Preferred stock, $0.00001 par value;

Issued and outstanding shares: none at December 31, 2024 and 2023 — —

Common stock, $0.00001 par value;

Accumulated other comprehensive gain 114 84

Total liabilities and stockholders’ equity $ 534,017 $ 404,717

The accompanying notes are an integral part of these consolidated financial statements.

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PROCEPT BioRobotics Corporation

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share data)

Year Ended December 31,

Operating expenses:

Loss on loan extinguishment — — (3,258)

Net loss per share, basic and diluted $ (1.75) $ (2.24) $ (1.96)

Weighted-average common shares used to

compute net loss per share attributable to

Other comprehensive gain (loss):

Unrealized gain on cash equivalents 30 90 48

The accompanying notes are an integral part of these consolidated financial statements.

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PROCEPT BioRobotics Corporation

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

Shares Amount

Issuance of common stock under stock plans 1,152 — 6,417 — — 6,417

Stock-based compensation expense — — 10,670 — — 10,670

Unrealized gain on cash equivalents — — — 48 — 48

Issuance of common stock under stock plans 858 — 6,090 — — 6,090

Stock-based compensation expense — — 21,692 — — 21,692

Unrealized gain on cash equivalents — — — 90 — 90

Stock-based compensation expense — — 32,726 — — 32,726

Unrealized gain on cash equivalents — — — 30 — 30

The accompanying notes are an integral part of these consolidated financial statements.

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PROCEPT BioRobotics Corporation

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Year Ended December 31,

Cash flows from operating activities:

Adjustments to reconcile net loss to cash used in operating activities:

Change in fair value in derivative liability 114 107 283

Provision for credit losses 840 — —

Loss on loan extinguishment — — 3,258

Changes in operating assets and liabilities:

Prepaid expenses and other current assets (3,211) 1,051 (1,880)

Cash flows from investing activities:

Cash flows from financing activities:

Proceeds from issuance of common stock, net of issuance costs 164,523 161,705 —

Proceeds from issuance of long-term debt, net of issuance costs — — 51,195

Payment of principal on long-term debt — — (50,000)

Payment of final payment fee — — (3,000)

Payment of prepayment fee — — (1,000)

Cash, cash equivalents and restricted cash

Reconciliation of cash, cash equivalents and restricted cash to balance sheets:

Supplemental cash flow information

Non-cash investing and financing activities

The accompanying notes are an integral part of these consolidated financial statements.

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PROCEPT BioRobotics Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization

Description of Business

PROCEPT BioRobotics Corporation (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.

Liquidity

As of December 31, 2024, the Company had cash and cash equivalents of $333.7 million and an accumulated deficit of $546.0 million. Since its inception, the Company has financed its operations with a combination of debt and equity financing arrangements. In October 2024, the Company completed a public offering of common stock, which raised $164.5 million, net of issuance costs. The Company expects its cash and cash equivalents, and revenue will be sufficient to fund its operations through at least the next twelve months from the issuance date of these consolidated financial statements. The Company has not achieved positive cash flow from operations to date and expects to continue incurring losses for the foreseeable future as it focuses on growing its business.

2. Summary of Significant Accounting Policies

Basis of Preparation

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

Use of Estimates

The preparation of 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 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, the valuations of the loan facility derivative 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.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents consist of cash in banks highly liquid securities determined to be cash equivalents, which are readily convertible into cash and mature within 90 days or less from the original date of purchase. Cash and cash equivalents include money market funds and U.S. treasury bills.

Cash equivalents are considered available-for-sale marketable securities and are recorded at fair value, based on quoted market prices. Unrealized gains and losses are recorded in other comprehensive gain (loss) and included as a separate component of stockholders’ equity.

Restricted cash is related to the Company’s letter of credit for the lease of its San Jose, CA location.

Fair Value of Financial Instruments

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including cash and cash equivalents, and accounts receivable, accounts payable and accrued liabilities, which approximate fair value due to their relatively short maturities as well as the loan facility derivative liability. Fair value is an exit price, representing the

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amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

Level 1-Observable inputs such as quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2-Other inputs that are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be derived from observable market data.

Level 3-Unobservable inputs that are supported by little or no market activities, which would require the Company to develop its own assumptions.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents and, to a lesser extent, accounts receivable and leases receivable. The Company believes that credit risk in both accounts receivable and lease is mitigated by its credit evaluation process, relatively short collection terms and diversity of its customer base.

No customers accounted for more than 10% of revenue during the year ended December 31, 2024, 2023 and 2022. No customers accounted for more than 10% of accounts receivable at December 31, 2024 and 2023.

The Company’s investment policy limits investments to certain types of debt securities issued by the U.S. government, its agencies, and institutions with investment-grade credit ratings, as well as corporate debt or commercial paper issued by the highest quality financial and non-financial companies, and places restrictions on maturities and concentration by type and issuer. The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash and cash equivalents and issuers of investments to the extent recorded on the balance sheets.

We depend upon third-party suppliers, including contract manufacturers and single source suppliers, making us vulnerable to supply shortages and price fluctuations that could negatively affect our business, financial condition and results of operations.

Allowance for Credit Losses

The Company’s expected loss allowance methodology is developed using its historical collection experience, current and future economic market conditions and a review of the current aging status and financial condition of its customers. Specific allowance amounts are established to record the appropriate allowance for customers that have a known risk of default. Balances are written off when they are ultimately determined to be uncollectible. The Company has not experienced significant credit losses. Credit losses have not been material for periods presented.

Inventory

Inventory, which primarily consists of raw materials, labor and overhead related to work in process and sub-assemblies, are valued at the lower of cost, computed on a first-in, first-out basis, or net realizable value. The allocation of production overhead to inventory costs is based on normal production capacity. Abnormal amounts of idle facility expense, freight, handling costs, and consumption are expensed as incurred, and not included in overhead. The Company maintains provisions for excess and obsolete inventory based on management’s estimates of forecasted demand and, where applicable, product expiration.

Property and Equipment and Intangible Assets

Property and equipment and intangible assets are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization for property and equipment are determined using the straight-line method over the estimated useful lives of the respective assets, generally three to five years. The Company reclassifies inventory used at customer sites for evaluation purposes to property and equipment due to a limited history of sales of evaluation units. Amortization of intangible assets are determined using the straight-line method over the estimated useful lives, generally through the

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patent expiration date. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the term of the lease. Maintenance and repairs are charged to operating expenses as incurred.

Impairment of Long-Lived Assets

Long-lived assets consist primarily of property and equipment and intangible assets, net, and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require that a long-lived asset be tested for possible impairment, the Company compares the undiscounted cash flows expected to be generated by the asset group to the carrying amount of the asset group. If the carrying amount of the long-lived asset is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. The Company determines fair value using the income approach based on the present value of expected future cash flows or other appropriate measures of estimated fair value. The Company’s cash flow assumptions consider historical and forecasted revenue and operating costs and other relevant factors. No impairment losses were incurred in the periods presented.

Deferred Revenue

The timing of revenue recognition may differ from the timing of invoicing to customers. The Company records deferred revenue when revenue will be recognized subsequent to invoicing. Service agreements are generally invoiced annually at the beginning of each coverage period and recorded as deferred revenue and recognized as revenue ratably over the coverage period. Deferred revenue that will be recognized during the 12 months following the balance sheet date is recorded as the current portion of deferred revenue, and the remaining portion, if any, would be recorded as non-current.

During the year ended December 31, 2024, the Company recognized $5.9 million of revenue that was included in the deferred revenue balance as of December 31, 2023. During the year ended December 31, 2023, the Company recognized $2.9 million of revenue that was included in the deferred revenue balance as of December 31, 2022.

Loan Facility Derivative Liability

In connection with the Company’s previous loan facility (Note 6), 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. The fee is calculated at the time of the liquidity event occurrence to be $1.0 million if only the first installment has been drawn, $2.0 million if the first two installments have been drawn, $2.4 million if the first three installments have been drawn, or $3.0 million if all four installments have been drawn, in each case, upon the occurrence of the liquidity event. At the time of extinguishment, the Company has drawn on the first two installments. The Company has determined this fee is a freestanding derivative instrument. The $2.0 million fair value of this loan facility derivative was initially recorded as a debt discount and a current liability on the date of issuance in connection with obtaining additional financing as applicable and will be revalued every reporting period until the earlier occurrence of a defined liquidity event or achieving a revenue target by September 2029 or termination of such fee arrangement. At December 31, 2024, the Company achieved the 12 month revenue target. As a result, the loan facility derivative became due and will no longer be revalued. The Company has recorded the amount due as a current liability in the Company’s consolidated balance sheets.

Leases

The Company accounts for leases under the guidance of ASC 842,Leases.

Operating Leases-Lessee. For agreements with a term of more than 12 months, the Company determines if the agreement contains a lease at inception. Operating lease liabilities represent an obligation to make lease payments arising from the lease agreement. Operating lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the remaining lease term. In determining the present value of lease payments, the Company estimates its incremental borrowing rate as the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term, of an amount equal to the lease payments in a similar economic environment. Operating lease liabilities are included in the Company’s consolidated balance sheet. Right-of-use assets represent our right to use an underlying asset for the lease term and are classified as non-current assets. Lease expense is recognized on a straight-line basis over the expected lease term in the Company’s consolidated statements of operations and comprehensive loss.

The Company has not elected to separate lease and non-lease components for any leases within its existing classes of assets. The Company records a right-of-use asset and lease liability based on the present value of the future minimum lease payments over the term at commencement date. Variable lease payments are expensed as incurred. The Company has also

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elected to not apply the recognition requirement to any leases within its existing classes of assets with a term of 12 months or less and does not include an option to purchase the underlying asset that the Company is reasonably certain to exercise.

Lessor. For leases in which the Company is the lessor and classifies the lease as a sales-type lease, revenue is recognized at the commencement of the lease term. Leasing arrangements generally only include a robotic system. Customers are provided with the right to purchase the leased system at the end of the lease term. Lease terms are typically 48 months and are usually collateralized by a security interest in the underlying robotic system. Selling profit is recognized at the lease commencement date as the difference between the fair value of the leased asset and the carrying amount of the asset at the lease commencement date. Interest income is recognized over the lease term.

In determining whether a transaction should be classified as a sales-type or operating lease, the Company considers the following terms at lease commencement: (1) whether title of the system transfers automatically or for a nominal fee by the end of the lease term; (2) whether the present value of the minimum lease payments equals or exceeds substantially all of the fair value of the leased system; (3) whether the lease term is for the major part of the remaining economic life of the leased system; (4) whether the lease grants the lessee an option to purchase the leased system that the lessee is reasonably certain to exercise; and (5) whether the underlying system is of such a specialized nature that it is expected to have no alternative use to the Company at the end of the lease term.

The Company invoices its leasing customers on a monthly basis. Leases receivable are reported in accounts receivable within the Company’s consolidated balances sheets.

In addition, the Company evaluates each sales-type lease for whether the collectibility of lease payments is reasonably assured and whether there are any significant uncertainties related to the costs yet to be incurred. The Company also assesses whether the lease term includes any renewal or extension options that would impact the revenue recognition pattern.

Revenue Recognition

Revenue is derived primarily from the sales of the AquaBeam Robotic Systems and HYDROS Robotic Systems, along with handpieces that are for one-time use during each surgery using the Company’s robotic systems. The Company’s robotic systems contain both software and non-software components that are delivered together as a single product and generally contain a one-year warranty.

To determine revenue recognition for arrangements that the Company determines are within the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company performs the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when, or as, the Company satisfies the performance obligations. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determined those that are performance obligations and assess whether each promised good or service is distinct based on the contract.

The contracts are typically in the form of an agreement and an ordering document from the customer. The Company’s HYDROS Robotic System and AquaBeam Robotic System sales generally contain multiple products and services and can include a combination of the following performance obligations: robotic system, handpieces and consumables, and service.

The Company determines the transaction price it expects to be entitled to in exchange for transferring the promised product to the customer, which is based on the invoiced price for the products. All prices are at fixed amounts per the contract with the customer.

For multiple-element arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are based on observable prices at which the Company separately sells the products or services. If a standalone selling price is not directly observable, then the Company estimates the standalone selling price considering market conditions and entity-specific factors including, but not limited to, features and functionality of the products and services, geographies, and type of customer. The Company regularly reviews standalone selling prices and updates these estimates as necessary.

The Company has determined that certain promises in the multiple-element arrangements, such as installation, training and certain ancillary products, are immaterial, and do not represent separate performance obligations for which transaction price is allocated.

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The Company’s typical payment terms are between 30 to 90 days. All shipping and handling costs are expensed as incurred, and are recorded in cost of sales as a fulfillment activity. In those cases where shipping and handling costs are billed to customers, the Company classifies the amounts billed as a component of revenue. Taxes collected from customers and remitted to governmental authorities are excluded from revenue.

Robotic system arrangements generally do not provide a right of return, however, the Company has granted a right of return on a case-by-case basis. The Company estimates returns at contract inception based on historical return amounts. Return estimates are recorded as a reduction to revenue. Returns have not been material for periods presented.

The Company has granted rebates on a limited basis. Rebates are recorded as a reduction to revenue at time of sale. Rebates have not been material for periods presented.

Given the release of the next generation robotic system, HYDROS Robotic System, for a limited period and on a case by case basis, the Company has on a limited basis entered into arrangements with existing customers to sell a HYDROS Robotic System with an exchange of a previously purchased AquaBeam Robotic System for additional consideration. Exchanges have not been material for periods presented.

Sales commissions are considered incremental and recoverable costs of acquiring customer contracts. These costs are deferred and amortized over a straight-line basis when the estimated benefit period is greater than one year. The Company applies the practical expedient to expense costs to obtain a contract as incurred when the amortization period would have been one year or less. The amortization expense is reported in selling, general and administrative expense in the statements of operations and comprehensive loss.

The Company utilizes the practical expedient under ASC 606 and does not disclose unsatisfied performance obligations for service contracts as these contracts generally have an original duration of less than one year. For those contracts with an original duration exceeding one year, the aggregate amount of transaction price allocated to the performance obligations unsatisfied at December 31, 2024 was not material.

The Company recognizes revenue as the performance obligations are satisfied by transferring control of the product or service to a customer. The Company generally recognizes revenue for the performance obligations as follows:

AquaBeam Robotic Systems and HYDROS Robotic Systems

End user sales - For systems (including robotic system components and robotic system accessories) sold directly to end users, revenue is recognized when the Company transfers control to the end user, in accordance with agreed upon shipping terms. The Company has determined in these type of arrangements the end user is the Company’s customer.

Intermediary sales - For systems sold to distributors or to leasing companies (intermediary), revenue is recognized when the Company transfers control to the intermediary, in accordance with agreed upon shipping terms. The Company has determined in these type of arrangements the intermediary is the Company’s customer.

Hand pieces and other consumables

Revenue from sales of handpieces and other consumables is recognized when the Company transfers control to the customer, in accordance with agreed upon shipping terms.

Service

Service revenue, inclusive of the amounts associated with the AquaBeam Robotic System and HYDROS Robotic System warranties or extended service agreements, is recognized over the term of the service period, as the customer benefits from the services throughout the service period.

Cost of Sales

Cost of sales consists primarily of manufacturing overhead costs, material costs and direct labor, including stock-based compensation. These overhead costs include the cost of quality assurance, material procurement, inventory control, facilities, equipment and operations supervision and management. Cost of sales also includes depreciation expense for

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production equipment, warranty, and field service costs, and purchased intangibles and certain direct costs such as shipping costs.

Research and Development

Research and development costs are expensed as incurred. Research and development costs consist primarily of engineering, product development, and regulatory affairs, consulting services, materials, depreciation and other costs associated with products and technologies being developed, including employee and non-employee compensation, stock-based compensation, supplies, quality assurance expenses, related travel expenses and facilities expenses.

Stock-Based Compensation

The Company accounts for stock options granted to employees and directors under the fair value recognition provision of ASC 718, Compensation - Stock Compensation. Stock-based compensation expense is recognized over the requisite service period in the statements of operations and comprehensive loss. The Company uses the straight-line method for expense attribution.

The Company estimates the fair value of stock options on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes model determines the fair value of stock-based payment awards based on the fair market value of the Company’s common stock on the date of grant and is affected by assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the fair market value of the Company’s common stock, volatility over the expected term of the awards and actual and projected employee stock option exercise behaviors. The Company has opted to use the “simplified method” for estimating the expected term of options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option. Due to the Company’s limited operating history and limited company specific historical and implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. When selecting these public companies on which it has based its expected stock price volatility, the Company generally selected companies with comparable characteristics to it, including enterprise value, stages of clinical development, risk profiles, position within the industry and with historical share price information sufficient to meet the expected life of the stock-based awards. The historical volatility data was computed using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the share-based payments. The Company will continue to analyze the historical stock price volatility and expected term assumptions as more historical data for the Company’s common stock becomes available. The risk-free rate assumption is based on the U.S. Treasury instruments with maturities similar to the expected term of the Company’s stock options. The expected dividend assumption is based on the Company’s history of not paying dividends and its expectation that it will not declare dividends for the foreseeable future. The Company has elected to account for forfeitures when they occur.

The Company accounts for the fair value of restricted stock units (“RSUs”) using the closing market price of the Company’s common stock on the date of the grant. Stock-based compensation cost for RSUs is measured at the grant date based on the estimated fair value of the award and is recognized as expense over the requisite service period (generally the vesting period), net of forfeitures.

The Company accounts for the fair value of performance stock units (“PSUs”) using the closing market price of the Company’s common stock on the date of the grant. include predefined performance and market conditions. The Company estimates the number of awards with performance conditions that will ultimately vest based on the probability of achievement each quarter to determine the amount of compensation expense to recognize each reporting period.

Advertising Expenses

The Company expenses the costs of advertising, including promotional expenses, as incurred. Advertising expenses for the years ended December 31, 2024, 2023, and 2022 were $0.5 million, $0.3 million, and $0.1 million respectively.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. Valuation allowances against deferred tax assets are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Currently, the Company has recorded a full valuation allowance against its deferred tax assets and there is no provision for income taxes, as the Company has incurred operating losses to-date. The Company’s policy is to record

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interest and penalties related to uncertain tax positions as a component of income tax expense in the statement of operations. To date, there have been no interest or penalties charged in relation to the unrecognized tax benefits.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and common stock equivalent shares from dilutive stock options and common stock warrants outstanding during the period. Because the Company has reported a net loss for all periods presented, diluted net loss per share is the same as basic net loss per share for those periods as all potentially dilutive securities were antidilutive in those periods.

Comprehensive Gain (Loss)

Comprehensive gain (loss) consists of unrealized gains and losses on cash equivalents and foreign currency translation adjustments.

Segment Information

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.

For the year ended December 31, 2024 and 2023, substantially all of the Company’s long-lived assets are held in the United States.

Recently Adopted Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board or FASB, issued Accounting Standards Update, or ASU, 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, that requires disclosure of significant segment expenses that are regularly reviewed by the chief operating decision maker and included within each reported measure of segment profit or loss. The standard also requires disclosure of the composition of other segment items included in the measure of segment profit or loss that are not separately disclosed. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-07 for the fiscal year ended December 31, 2024, for the fiscal year ending December 31, 2024, on a retrospective basis. The adoption did not have a material effect on the Company’s consolidated financial statements.

Recent Accounting Pronouncements

In December 2023, the FASB issued 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. Early adoption is permitted and should be applied either prospectively or retrospectively. The Company plans to adopt the ASU and related updates with 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, requiring 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 of this ASU will have on its financial statement disclosures.

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3. Fair Value Measurements

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

December 31,

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Cash and cash equivalents:

Loan facility derivative liability $ — $ — $ — $ — $ — $ — $ 1,886 $ 1,886

The carrying amounts of the Company’s cash, accounts receivable, accounts payable, and loan facility derivative liability approximate their fair values due to their short maturities. The carrying value of the Company’s long-term debt approximates fair value, as the Company’s variable rate is approximate to the stated rate.

There were no transfers in and out of Level 3 during the years ended December 31, 2024 and 2023.

Loan facility derivative liability

The following table sets forth a summary of the changes in the estimated fair value of the Company’s loan facility derivative liability, classified as Level 3 (for the year ended December 31, 2023) (in thousands):

Year Ended December 31,

The fair value of the loan facility derivative liability was determined using a discounted cash flow calculation discounted at 6%.

4. Composition of Certain Consolidated Financial Statement Items

Allowance for credit losses consisted of the following (in thousands):

December 31,

Beginning balance $ —

Net changes during the period 840

Ending balance $ 840

For the years ended December 31, 2023 and 2022, the Company did not have an allowance for credit losses.

Inventory (in thousands):

December 31,

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The Company reclassified $4.9 million associated with sub-assemblies from raw materials to work-in process in the December 31, 2023 balances to conform with current year presentation.

Property and Equipment, Net (in thousands):

December 31,

Less: accumulated depreciation and amortization (7,830) (3,669)

Total property and equipment, net $ 26,709 $ 28,748

Deferred Commission Costs (in thousands):

December 31,

Reported as:

Prepaid expenses and other current assets $ 357 $ 60

Other Current Liabilities (in thousands):

December 31,

Asset retirement obligation — 232

Total other current liabilities $ 8,089 $ 6,318

Interest and Other Income (Expense), net (in thousands):

Year Ended December 31,

Change in fair value of loan facility derivative liability (114) (107) (283)

5. Intangible Assets

In March 2019, the Company entered into a license agreement with HydroCision, Inc. This agreement grants the Company an exclusive, perpetual, irrevocable, worldwide, fully paid-up license to develop, manufacture and

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commercialize products in the field of urology using the patented technology and know-how controlled by HydroCision as of the effective date and as well as new patented technology developed by HydroCision that cover certain activities and improvements that relate to the use of fluid jet technology in connection with the licensed products during the period commencing on the effective date and ending on the earlier of the date that the Company ceases to use HydroCision’s existing contract manufacturers and the third anniversary of the effective date. Also included is the right to utilize HydroCision’s contract manufacturers, if desired. The consideration paid was a one-time upfront payment of $2.5 million, as well as allowing HydroCision (a reciprocal license) to use any new patented technology and know-how developed by the Company relating to the HydroCision patented technology and know-how in the field of urology for HydroCision use outside the field of urology. HydroCision will pay for any patent maintenance fees on HydroCision’s licensed patents. As of December 31, 2024 and 2023, accumulated amortization was $1.6 million and $1.3 million, respectively, and the net carrying amount is expected to be amortized at a rate of $0.3 million per year until fully amortized.

Amortization expense for intangible assets for each of the years ended December 31, 2024, 2023, and 2022 was $0.3 million.

6. Long-Term Debt

In October 2022, the Company entered into a loan and security agreement (“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 was used to repay and terminate the Company's previous loan facility, transaction fees, and related expenses.

The Term Loan Facility is scheduled to mature on the fifth anniversary of the Closing Date (the "Maturity Date"). The Agreement provides for interest-only payments on the Term Loan Facility for the first thirty-six months following the Closing Date (the "Initial Interest-Only Period"). The Initial Interest-Only Period will be extended to an additional twelve months if the Company achieves either (i) $200.0 million or greater in revenue in any twelve-month period or (ii) $0 or greater in EBITDA in any six-month period. Thereafter, amortization payments on the Term Loan Facility will be payable monthly until the Maturity Date in monthly installments equal to 20% of the then outstanding principal amount of the Term Loan Facility divided by 12 plus any accrued and unpaid interest. The Company has the option to prepay the Term Loan Facility without any prepayment charge or fee. The Company achieved the twelve-month revenue target as of December 31, 2024.

The loan borrowed under the Term Loan Facility bears interest at an annual rate equal to the secured overnight financing rate ("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 December 31, 2024, 2023, and 2022 were 7.60%, 7.32%, and 6.12%, respectively.

The obligations under the Loan 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 June 2023, the Term Loan Facility was amended to lower the amount the Company is obligated to maintain in deposit accounts held at the lender to the lesser of (i) $90.0 million or (ii) all of its non-operating cash and allow the Company to maintain cash or cash equivalents in excess of that amount with other financial institutions. The Agreement also contains a minimum unrestricted cash requirement and minimum revenue growth financial covenants, along with other covenants customary for loan facilities. As of December 31, 2024, the Company was in compliance with all debt covenants.

The Company recorded a loss on loan extinguishment in the amount of $3.3 million in its consolidated statements of operations and comprehensive loss for the period ended December 31, 2022. The loss was attributed to the acquisition price of the CIBC debt exceeded the carrying amount of the Company’s previous loan facility.

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

Fiscal Year Amount

Total minimum payments 52,000

Less: amount representing unamortized debt discount (528)

Present value of future payments $ 51,472

7. Leases

Facility Leases

The Company previously leased a facility located in Redwood City, California. In September 2023, the Company exited the facility. In October 2023, the lease expired and was not renewed.

In December 2021, the Company entered into a lease for two 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, with twofive year options to extend the term of the lease.

The Company began operations at this facility in September 2023. The lease provides for annual base rent of $4.3 million for the first year, which increases on a yearly basis up to $5.5 million for the tenth year, for an aggregate of $49.2 million. Under the terms of the lease, the Company received an allowance of up to $7.9 million from the landlord to be applied to the Company’s construction of tenant improvements following the landlord’s delivery of the two buildings to the Company. During the year ended December 31, 2022, the Company recorded both a right-of-use asset and liability of $22.7 million related to the lease. The lease agreement provides for an escalation of rent payments each year and the Company records rent expense on a straight-line basis over the term of the lease. Rent is payable monthly. Rent expense recognized under the leases, includes additional rent charges for utilities, parking, maintenance and real estate taxes.

The following table presents supplemental lease information (in thousands, except for weighted-average amounts):

Year Ended December 31,

Weighted-average lease term 8.2 years 9.2 years 9.4 years

Weighted-average discount rate 8.6% 8.5% 8.7%

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

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Fiscal Year Amount

Total minimum payments 40,780

Less: amount representing interest/tenant improvement allowance (12,002)

Present value of future payments $ 28,778

As of December 31, 2024 and 2023, 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 December 31, 2024 are as follows (in thousands):

Fiscal Year Amount

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

December 31,

Reported as:

Accounts receivable $ 157 $ 157

Net investment in sales-type leases $ 1,671 $ 417

December 31,

Unearned interest income (426) (53)

Net investment in sales-type leases $ 1,671 $ 417

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

December 31,

Sales-type lease revenue $ 1,357 $ 417 $ —

Interest income $ 28 $ — $ —

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8. Stock-Based Compensation

2021 Equity Incentive Award Plan

In September 2021, the Company adopted the 2021 Equity Incentive Award Plan (the “2021 Plan”), which allows for the granting of stock options and stock purchase rights to the employees, members of the board of directors, and consultants of the Company. A total of 10,267,301 shares of common stock were reserved for issuance under the 2021 Plan. Options granted under the 2021 Plan may be either incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”). ISOs may be granted only to the Company’s employees, including officers and directors who are also employees. NSOs may be granted to employees and consultants.

Options under the 2021 Plan may be granted for periods of up to 10 years and at prices no less than 100% of the estimated fair value of the shares on the date of grant as determined by the board of directors, provided, however, that the exercise price of an ISO and NSO granted to a 10% shareholder shall not be less than 110% of the estimated fair value of the shares on the date of grant.

Granted options for newly hired employees usually vest over four years monthly with a one-year cliff vesting, and follow-on options vest monthly over four years with no cliff vesting. Options granted to consultants have various vesting schedules depending on the underlying consulting arrangement and anticipated period of service. Granted restricted stock units usually vest over four years annually. As of December 31, 2024, there were 6.8 million shares available for grant and 2.7 million awards outstanding under the 2021 Plan.

2008 Stock Plan

The Company ceased making awards under the 2008 Stock Plan upon the effective date of the Company’s IPO. In 2008, the Company adopted the 2008 Stock Plan (the “2008 Plan”), which allows for the granting of stock options and stock purchase rights to the employees, members of the board of directors, and consultants of the Company. Options granted under the 2008 Plan may be either incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”). ISOs may be granted only to the Company’s employees, including officers and directors who are also employees. NSOs may be granted to employees and consultants. Options granted under the 2008 Plan started expiring in August 2021. Options outstanding under the 2008 Plan will expire upon forfeiture. As of December 31, 2024, 3.1 million options were outstanding under the 2008 Plan.

2021 Employee Stock Purchase Plan

In September 2021, the Company adopted the 2021 Employee Stock Purchase Plan (the “2021 ESPP”). The 2021 ESPP became effective on the effective date of the IPO. A total of 412,988 shares were initially reserved for issuance under the 2021 ESPP. Additionally, the number of shares of common stock reserved for issuance under the 2021 ESPP will increase automatically each year, beginning on January 1, 2022, and continuing through and including January 1, 2031, by the lesser of (1) 1% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year; or (2) such lesser number as determined by the Company’s board of directors. The number of shares that may be issued under the 2021 ESPP shall not exceed a total of 10,526,315 shares. As of December 31, 2024, approximately 400,000 shares have been issued under the 2021 ESPP. As of December 31, 2024, there were 1.4 million shares available for grant under the 2021 ESPP.

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

Year Ended December 31,

Stock-based compensation capitalized in inventory (3,910) (2,558) (333)

Stock Options

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

Year Ended

Options Weighted Average Exercise Price

Outstanding, beginning of period 5,215 $ 9.42

The weighted-average grant date fair value of options granted during the years of December 31, 2024 and 2023 was $28.52 and $21.02, respectively. As of December 31, 2024, the aggregate pre-tax intrinsic value of options outstanding and exercisable was $239.7 million and options outstanding were $261.7 million. The aggregate pre-tax intrinsic value of options exercised was $92.1 million and $15.4 million during the years ended December 31, 2024 and 2023, respectively. The aggregate pre-tax intrinsic value was calculated as the difference between the exercise prices of the underlying options and the estimated fair value of the common stock on the date of exercise. The total fair value of options vested was $5.6 million and $5.8 million during the years ended December 31, 2024 and 2023, respectively.

As of December 31, 2024, total unrecognized stock-based compensation related to unvested stock options was $8.5 million, which the Company expects to recognize over a remaining weighted-average period of 2.2 years.

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:

Year Ended December 31,

Expected life (years) 6.0 6.0 5.9

Expected volatility 57 % 57 % 55 %

Risk-free interest rate 4.1 % 4.0 % 2.5 %

Expected dividend rate — % — % — %

Restricted Stock Units

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

Year Ended

Restricted Stock Units Weighted-AverageFair Value

Unvested, beginning of period 1,565 $ 36.27

The weighted-average grant date fair value of RSUs granted during the years of December 31, 2024 and 2023 was $53.31 and $36.16, respectively.

As of December 31, 2024, the aggregate pre-tax intrinsic value of RSUs outstanding was $152.5 million, calculated based on the closing price of the Company’s common stock at the end of the period.

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As of December 31, 2024, total unrecognized stock-based compensation related to unvested RSUs was $67.7 million, which the Company expects to recognize over a remaining weighted-average period of 2.8 years.

Performance Stock Units

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

Year Ended

Performance Stock Units Weighted-AverageFair Value

Unvested, beginning of period — $ —

Canceled/forfeited — —

Vested — —

Unvested, end of period 81 73.20

As of December 31, 2024, the aggregate pre-tax intrinsic value of PSUs outstanding was $6.5 million, calculated based on the closing price of the Company’s common stock at the end of the period.

As of December 31, 2024, total unrecognized stock-based compensation related to unvested RSUs was $5.5 million, which the Company expects to recognize over a remaining weighted-average period of 1.3 years.

Employee Stock Purchase Plan

As of December 31, 2024, there was approximately $1.1 million of unrecognized cost related to employee stock purchases under the 2021 ESPP. This cost is expected to be recognized over a weighted average period of 0.5 years. As of December 31, 2024, a total of 1.4 million shares were available for issuance under the 2021 ESPP.

The fair value of the options granted under the 2021 ESPP to employees was estimated as of the grant date using the Black-Scholes model assuming the weighted-average assumptions listed in the following table:

Year Ended December 31,

Expected life (years) 0.8 0.7 0.7

Expected volatility 55 % 53 % 56 %

Risk-free interest rate 5.0 % 5.1 % 4.2 %

Expected dividend rate — % — % — %

9. Income Taxes

The Company did not record an income tax provision for the periods presented.

Reconciliation between the tax provision computed at the federal statutory income tax rate and the Company's actual effective income tax rate are as follows:

Year Ended December 31,

Federal statutory tax rate 21 % 21 % 21 %

R&D tax credit 2 1 2

Stock-based compensation 9 (1) 2

Other permanent differences (1) — —

Change in valuation allowance (31) (21) (25)

Total — % — % — %

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The Company’s income taxes are accounted for in accordance with authoritative guidance, which requires the use of the asset and liability method. Under this method, deferred income tax assets and liabilities are determined based upon the difference between the consolidated financial statement carrying amounts and the tax basis of assets and liabilities and are measured using the enacted tax rate expected to apply to taxable income in the years in which the differences are expected to be reversed.

Significant components of net deferred tax assets are as follows (in thousands):

December 31,

Deferred tax assets:

Deferred tax liabilities:

Total deferred tax liabilities (4,655) (4,957)

Net deferred tax assets $ — $ —

The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on the Company's history of operating losses, the Company has concluded that it is more likely than not that the benefit of its deferred tax assets will not be realized. The valuation allowance increased by $34.7 million during the year ended December 31, 2024, and increased by $27.4 million during the ended December 31, 2023. The valuation allowance increased by $16.0 million during the year ended December 31, 2022.

As of December 31, 2024 and 2023, the Company has U.S. federal net operating loss (“NOL”) carryforwards of approximately $391.9 million and $326.3 million, respectively, expiring beginning 2028. As of December 31, 2024 and 2023, the Company has U.S. state and local NOL carryforwards of approximately $242.2 million and $194.0 million, respectively, expiring beginning 2028.

As of December 31, 2024 and 2023, the Company has federal research and development credit carryforwards of approximately $10.6 million and $7.5 million, respectively, available to reduce future taxable income, if any. As of December 31, 2024 and 2023, the Company has California research and development credit carryforwards of approximately $8.3 million and $6.0 million, respectively, available to reduce future taxable income, if any.

The federal research and development credit carryforwards expire beginning 2028 and California research and development credit carryforwards are indefinite.

Internal Revenue Code section 382 places a limitation (the “Section 382 Limitation”) on the amount of taxable income that can be offset by net operating carryforwards after a change in control of a loss corporation. Generally, after a change in control, a loss corporation cannot deduct operating loss carryovers in excess of the Section 382 limitation. The Company has not performed an analysis to determine if a limitation applies and whether the limitation would cause the net operating losses to expire un-utilized.

The Company files federal, state, and foreign income tax returns. The tax periods 2008 through 2024 remain open in most jurisdictions. In addition, any tax losses that were generated in prior years and carried forward may also be subject to examination by respective authorities. The Company is not currently under examination by federal, state or foreign income tax authorities.

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On August 16, 2022, former President Biden signed the Inflation Reduction Act of 2022 ( the Inflation Act) into law. The Inflation Act contains certain tax measures, including a corporate alternative minimum tax of 15% on some large corporations and an excise tax of 1% on corporate stock buy-backs. The various provisions of the Inflation Act did not have an impact on the Company’s consolidated financial statements and related notes.

A reconciliation of the change in the unrecognized tax benefit during the year is as follows (in thousands):

December 31,

Additions for tax positions related to:

Prior years — (150) —

As of December 31, 2024, the Company had a total of $4.7 million of gross unrecognized tax benefits, none of which would affect the effective tax rate upon realization. The Company currently has a full valuation allowance against its U.S. net deferred tax assets which would impact the timing of the effective tax rate benefit should any of these uncertain tax positions be favorably settled in the future.

The Company does not expect the unrecognized tax benefits to change significantly over the next 12 months. The Company will recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of December 31, 2024, the Company has not accrued interest or penalties related to uncertain tax positions.

10. Net Loss Per Share

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

Year Ended December 31,

Net loss per share, basic and diluted $ (1.75) $ (2.24) $ (1.96)

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):

December 31,

Employee stock purchase plan 56 80 110

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11. Geographical Information

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

Year Ended December 31,

U.S.

Outside of U.S.

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 claims or been required to defend any action related to its indemnification obligations. As of 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.

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 $2.4 million, $1.5 million, and $0 for the year ended December 31, 2024, 2023, and 2022, respectively.

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