Procept Biorobotics - checking in on Larry's strategy
"I'm building this thing with a multiyear plan in place, not an individual quarter" / "I think we’ll have a really healthy business"
Friends of NFTBC.
When I sent my PRCT post last month, my intention had been to publish it with ample time for you to read it before the 2025 results as well the previously announced Investor Day - both took place this week. I was particularly interested in the Investor Day where new CEO Larry Wood was to outline his strategy. I highlighted the possibility of jitters:
Perhaps the bigger concerns in 2026 are 1) the possibility of a growth slowdown while Larry puts into effect his strategy adjustment and 2) impact from increased investments. Larry has already hinted at the possibility of both. While it’s possible that such things are already priced in, headwinds do not seem to be well-tolerated in the current stock market environment even when underpinned by a sound strategy. Something to watch out for then as a dislocation may create buying opportunities for investors with longer time horizons.
And jitters is exactly what we got. At one stage on Thursday the shares were down more than 25%. Stock price violence of this magnitude used to be quite rare, but we’re all used to these sorts of things now - welcome to the Beauty Contest.
I promised you an update following the Investor Day, and that’s the purpose of this post. This will be slightly longer than a typical earnings update, given its nature as a validation event following the deep dive. But with around three hours of conference call this week, two press releases, a 100 page slide deck and a 10K, I’m not going to cover every detail here. My intention is to focus on: 1) those areas where PRCT is doing what they said they would (execution), 2) those areas where they’ve departed from my previous expectations and 3) what all this could mean for the future. When it comes to PRCT’s future, I think there are really two issues of standout concern:
Sustainability of growth
Operating leverage
We’ll talk about both here. Consensus numbers remain pretty cautious on both counts, and not unreasonably so. Hypergrowth always fades eventually, while PRCT has shown relatively slow progress on operating leverage so far. Even fast growing companies have to demonstrate that they can make money in the end - what’s the point otherwise? But Larry is proposing to run the company in a different way than in the past - if he gets it right then there’s no particular reason why we shouldn’t see growth remain at a relatively high level for while and see margins shoot up faster than expected. The proof will be in the pudding, as they say.
You can find the 2025 earnings release here and the Investor Day press release and slide deck here and here.
Let’s get going.
[NFTBC does not give advice - please do your own research. I currently own shares in PRCT].
