Q1 2023 LENSAR Inc Earnings Call
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Good morning ladies and gentlemen and welcome to the Lancer Inc. first quarter 2023 financial results conference call. At this time all lines are in a listen only mode. Following the presentation we will conduct a question and answer session. If at any time during this call you need assistance, please press star 0 for the operator.
This call is being recorded on Monday, May 15, 2023. I would now like to turn the conference over to Lee Ross of Burns & McClellan. Please go ahead.
Thanks, Pam. Good morning, everyone. And once again, welcome to the LensR first quarter 2023 financial results conference call.
Earlier this morning, we issued a press release providing an overview of our financial results for the quarter ended March 31, 2023. This release is available in the investor relations section of the company's website at www.lensar.com.
Joining me on today's call is Nick Curtis, Chief Executive Officer, who will review the company's recent business and operational progress.
Following his remarks, Tom Staub, Chief Financial Officer of Lenzar, will provide an overview of the company's financial highlights before turning the call back over to the operator to facilitate answering any questions you may have.
Before we begin, I'd like to remind you that today's call will contain forward-looking statements, including those statements regarding future results, unaudited, and forward-looking financial information, as well as information on the company's future performance and door achievements.
These statements are subject to known and unknown risks and uncertainties which may cause our actual results, performance or achievements to be materially different from any future results or performance expressed or implied during this presentation. You should not place any undue reliance on these forward-looking statements.
For additional information, including a detailed discussion of the risk factors, please refer to the company's documents filed with the Securities and Exchange Commission, which can be accessed on the website.
In addition, this call contains time sensitive information. Accurate only is of the date of this live broadcast Monday, May 15, 2023. Lens are under face no obligation to a reviser otherwise update any forward looking statements to reflect events or circumstances after the date of this live call.
With that said, it's now my pleasure to turn the call over to Nick Curtis. Nick? Thank you, Lee, and good morning to everyone listening. Thank you for joining us on our first quarter 2023 conference call. I'm proud to say that Lensar has hit the ground running in 2023, having installed five Ally systems in the first quarter and four more since the beginning of the year.
Procedure volumes in the US increased nicely when compared with the first quarter of last year, driven in part by the small but growing number of Ally users. As we reflect on the first several months of Ally's commercial availability, it's evident that the ophthalmic community has a great deal of enthusiasm for our new technology, and we've been successful in executing our...
This represents an increase of 100 basis points over the second quarter of 2022, the time we received FDA clearance for Ally. This growth clearly demonstrates the adoption of Ally as an important catalyst not only for Lenzar, but for the entire industry. In fact, among users of our previous generation, LLS,
Importantly, the U.S. represents the largest premium procedure market in the world and is critical to our continued market share growth as we expand Allies Reach in 2023 and beyond. As you can tell from the data I just mentioned, feedback from our surging customers continues to be extremely positive, particularly from users who have made the transition from previous
capable, their awkward sizing makes them more difficult to integrate into the practice. There are countless other advantages that Ally brings and we are pleased with the reception in the early days of its commercial availability. Evident from the backlog of 13 systems, demand for Ally has been consistently high and continues to grow since launch.
And we've maintained an active presence at the major ophthalmic congresses. This month we attended the annual American Society of Counteracting Refractive Surgery meeting in San Diego. In addition to the ten posters highlighting Ally's improved productivity and superior outcomes, we completed a record number of demos with non-Lenzar customers. Again, we are thrilled to have Ally as our customer representative.
agreements with several facilities and are working on additional multi-system contracts, which at this early stage of our launch is a pleasant surprise. We initially anticipated this level of demand to begin materializing 12 to 18 months following the product launch. The fact that we have been able to secure these multi-system agreements ahead of schedule is a testament to the trust and confidence.
there's much more than what meets the eye. Overall procedure volumes were down 19% compared to procedure volumes in the first quarter of 2022. However, this decrease was driven by the South Korean market where challenges between ophthalmic surgical practices and third-party payers have essentially eliminated procedure purchases for the time being.
revenue attributable to South Korea, revenue for the first quarter of 2023 would have increased 5% compared to the first quarter 2022. Today we also announced the closing of a private placement which provides 20 million dollars in gross proceeds which significantly extends our cash runway in which we believe will fund our operations in the future.
that has been shown and continues to grow. Now let me turn the call over to Tom to cover our financial highlights for the quarter. Tom. Thank you, Nick. Our first quarter 2023 financial results are included in our press release issued earlier this morning, but there are a few items I'd like to discuss in further detail.
Revenue was $8.3 million in the first quarter of 2023 compared to $9.3 million in the first quarter of 2022. As Nick mentioned, this decrease was primarily driven by an approximate $1.5 million decrease in revenue generated from South Korea associated with the ongoing cataract reimbursement challenges in that market.
The decrease in South Korea procedure volume and related reduction in revenue was somewhat offset by an increase in procedure volume in the United States and Europe , which generally carry a higher gross margin.
Procedure volume in the U.S. and Europe increased approximately 13% and 5% respectively, as compared to procedure volume in the first quarter of 2022.
901 procedures sold in the first quarter of 2022.
not the 9,900 procedures. Gross margin for the quarter was $4.3 million, representing a gross margin of 52%, compared to 4.7 million and 50% realized in the first quarter of 2022. Although revenue decreased associated with a significant reduction in South Korean procedures, our gross margin increased 210 basis points. Our gross margin for the first quarter of 2023 is consistent with the gross margin expectations we have discussed in previous calls of approximately 50%.
Supply chain issues that have created higher inventory costs and inefficiencies in ally production seem to be easing as we are now seeing greater availability of raw materials. Accordingly, we expect to see more fluid and efficient ally manufacturing in the remainder of 2023. Total operating expenses for the first quarter of 2023 are $2.5 million.
second quarter of 2022, including the inclusion of approximately $2.4 million of inventory costs charged to research and development in the first quarter of 2022.
Although we continue to innovate and invest in Ally in research and development, we do not expect our R&D expenditures to fluctuate significantly from the first quarter of 2023, and expect our 2023 annual investment in research and development to approximate $7 million.
Net loss for the quarter was $4.3 million or 40 cents loss per share and decreased as compared to the $6.7 million loss and 67 loss per share in the first quarter of 2022. As of March 31, 2023, we had cash and cash equivalents of $8 million as compared to $14.7 million in December 31, 2022.
Cash utilized in the quarter was $6.7 million, and the first quarter is expected to represent the largest consumption of cash within 2023, as the company generally utilizes the largest amount of cash in the first quarter of each year.
As mentioned in our press release in our Form K associated with the transaction, we are pleased to have completed a significant private placement financing, bringing in gross proceeds of $20 million, and we estimate net proceeds of $19.1 million after deducting transaction costs.
As Nick said, with these proceeds, we will invest more extensively in the Ally launch and our commercial organization to capitalize on the early success of Ally and to continue to increase our market share in the premium cataract surgery market. Now I'd like to turn the call back over to Pam, and we look forward to your questions. Thank you.
Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request. If you are using a speakerphone, please let the handset before pressing any keys.
This question comes from Ryan Zimmerman at BTIG. Please go ahead.
Hi Nick Tom, this is Izzy on for Ryan. Thanks for taking the questions. Hi Izzy. Hi. So in terms of the Ally launch, what are you seeing in productivity improvements and what insights have you guys gained from the early install base?
Yeah, that's a really good question. What we've seen in terms of productivity improvements are, is that when you look at quotes from people like Jim Kotobekasch from Beverly Hills and Kerry Solomon over in South Carolina, they've been able to save somewhere between $1,000 and $1,000 a month. So, that's a really good question.
because they can add, depending on the center, three to four cases over the course of the day or more, help some work through the backlog, or, quite frankly, they can reduce overhead and they finish their day early with the number of cases and they leave. Also, I think it's encouraging that when comparing...
on the procedure volume in those early LLS convert to ally users, those are pretty significant productivity numbers there. And it's early. I think the other thing that is worth noting is seeing several accounts that have added.
to acquire Ally Systems through leases or just outright sales? And if it is leases, what do you guys see in terms of utilization over the life of the lease? Do you get more cases as a result? That's a good question. So we've been primarily, you know, we've been working hard to particularly, you know, as a small company that's invested heavily in this technology.
as other customers moving right to the purchase rather than an operating lease. And it really depends on the practice, their accounting practices, whether they have access to Section 179. There's a variety of different things that would dictate whether a practice moves towards an operating lease or whether they would move towards a capital purchase.
from the per procedure fee. In terms of increasing the number of procedures, some of these accounts are new accounts to Lenzar, and so we don't have an operating history. They're telling us that through the increased productivity and the savings of, again, an hour to two hours a day in surgery that it's resulting in their ability.
with the IOL Master 700, let's say from ZEISS, and the ability to route the data from IOL Master through their veracity to LENZAR, for instance in the case of South Carolina, and from our count here in Sarasota, has been pretty significant. So those are resulting in...
more cases because they get a certain number of patients into the practice and as they get more confidence with the results that they're getting and they see they're getting result improvements, it helps the staff, the staff is more confident, the doctors feel more confident, and therefore the patients can feel that.
fashion. Got it. That's great to hear. And so given the strong demand you guys are seeing and the order pipeline, do you still expect the 20% revenue growth the right way to think about 2023? You know, so we're contemplating this, you know, in terms of guidance, you know, part of that.
in the United States right now. So when you look at the business, which was about 50% of the US, a little more than 50% of the US, and 50% globally, there's a drag from South Korea, which we've said is gonna continue, and we'll have at least that 20% growth, which actually represents a net growth rate of.
Got it. In terms of margins, they came in better than we were expecting this quarter. What can you attribute this to? Are you servicing and providing systems better for the increased demand? I know that there were some supply issues going on last year. Tom, do you want to comment on that?
Sure Nick. So Izzy, thanks for the question. It's a good one. A couple things going on there. We had to purchase a decent amount of inventory and expensive to R&D as we mentioned before, so that has an impact on margin. And we're just coming out as both Nick and I said in our prepared remarks.
We're just coming out of some of the supply chain limitations and difficulties that we've occurred that significantly reduce the amount of Ally systems we can produce, as well as causing the raw materials and wages to go up associated with the production of Ally. So we guided
in the low 50s or around 50 because of those two conflicting factors. Supply chain driving costs up and driving inefficiencies up versus charging some of the raw materials in the early systems that we were able to manufacture for Ally where a piece of the system had already been expensed. So going forward what I think
I would still look around the 50 to low 50s for margin going forward in 23 and then as we totally come out of a supply chain malaise and some of those limitations I think you can expect those gross margins to continue to increase as quantities go up much higher.
Got it, thank you. And then last one for me, how do you guys think about your cash runway given the $20 million private placement now complete? I look at it as exciting. I think that given where we are right now and the
as we go forward. I'm excited.
Maybe I can add something to Lizzy that...
As Nick and I have said in conflict calls before, because of COVID supply chain issues, we really put a governor on building some of the commercial organization. So this was a really important financing for the company to allow us not only to build launch stock, which we've been doing already, and you can see our inventory balance is going up. coin.
but more importantly investing in the commercial organization to get more of the message out there, reach physicians and really tout the significant benefits of Ally. And Nick and the commercial team have done a herculean job thus far because there's been sort of a governor on things. And so you know hopefully with this money coming in.
we'll be able to invest in Ally Launch like we have always said we were going to, but have really not done much of that today.
Thanks, Tom. That was helpful. I want to make one other comment. The commercial infrastructure is also really important. One of the things that LENSAR is known for, and because we're focused on this product, is that we maintain and we monitor this every month, the uptime percentages of our system, number one.
that we can make the practices feel good about the system and get them trained sooner rather than later, the sooner they become productive, which is good for them and good for Lenzar, and the service organization, which is incredibly important so that we protect the asset here and the customer is able to do surgery.
challenge with the system and not only can we diagnose it but many times we can push the fix through. And so these are all important sort of, let's say, technological advantages that we have that these proceeds will help us in building of this infrastructure to help support.
Thank you. The next question comes from Chris Bolster at ProPAL Advisory. Please go ahead.
Yes, thank you. Congratulations on what sounds like a great quarter on the sales front. The private placement obviously lowers liquidity risk and allows you to do some investment in sales.
But dilution is obviously a concern given the size. Can you provide a little bit of color on the terms and why you chose to do it now given you know where the stock is and did you look at any alternatives like receivables factoring or other approaches to get
So, you know, the question around dilution, I think is a fair question. The environment today is not an easy environment for fundraising, particularly in micro-cap stocks, as you're probably well aware, and some of the alternative.
a pretty good process all over looking at what the various alternatives might be. The fact is that one of the largest shareholders stepped forward and partnered with us and put a proposal on the table.
given the timing, this was probably the best opportunity to bite the bullet, take the delusion, substantially finance the company, and believe that given the opportunities that we have with Allon.
turn the call back over to Nick Curtis for closing comments. So I'd like to thank everybody for joining our call today and obviously your continued interest in LUNZAR. We look forward to updating you as we make further progress in the exciting remainder of 2023. Stay tuned. Ladies and gentlemen, this concludes the conference call for...